Attached files
file | filename |
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EX-99.2 - EX-99.2 - NOVANTA INC | novt-ex992_7.htm |
EX-23.1 - EX-23.1 - NOVANTA INC | novt-ex231_6.htm |
8-K/A - 8-K/A - NOVANTA INC | novt-8ka_20170703.htm |
Consolidated financial statements as of and for the year ended
31 December 2016
1
Consolidated statement of profit and loss and other comprehensive income
EUR ‘000 |
Notes |
2016 |
Revenue |
5 |
74.494 |
Changes in finished and unfinished products |
13 |
699 |
Other operating income |
6 |
1.402 |
Cost of materials |
|
-31.683 |
Personnel expenses |
|
-21.146 |
Other expenses |
6 |
-12.240 |
Depreciation and amortization |
10, 11 |
-2.538 |
Earnings before interest and taxes (EBIT) |
|
8.988 |
Finance income |
7 |
12 |
Finance costs |
7 |
-200 |
Net finance costs |
|
188 |
Earnings before income taxes (EBT) |
|
8.800 |
Income taxes |
8 |
-2.767 |
Profit for the year |
|
6.033 |
|
|
|
Other comprehensive income |
|
|
Exchange differences on translating foreign operations (will be reclassified subsequently to profit or loss when specific conditions are met) |
15 |
70 |
|
|
|
Total comprehensive income |
|
6.103 |
Total comprehensive income for the period is attributable to: Owners of W.O.M. World of Medicine GmbH Non-controlling interests |
|
6.103 0 |
2
Consolidated statement of financial position
EUR ‘000 |
Notes |
31.12.2016 |
Assets |
|
|
Non-current assets |
|
|
Goodwill |
9 |
207 |
Other intangible assets, net |
10 |
1.577 |
Property, plant and equipment, net |
11 |
15.192 |
Other financial assets |
12 |
1 |
Deferred tax assets |
8 |
670 |
Trade and other receivables |
12 |
55 |
Total non-current assets |
|
17.703 |
Current assets |
|
|
Inventories |
13 |
8.142 |
Trade and other receivables |
12 |
11.299 |
Cash and cash equivalents |
12 |
2.316 |
Total current assets |
|
21.757 |
|
|
|
Total assets |
|
39.459 |
|
|
|
EUR ‘000 |
Notes |
31.12.2016 |
Equity and liabilities |
|
|
Capital and reserves |
|
|
Share capital |
14 |
5.000 |
Capital reserve |
14 |
5.915 |
Retained earnings |
16 |
14.815 |
Other Reserves |
15 |
158 |
Total equity |
|
25.888 |
Non-current liabilities |
|
|
Provisions |
17 |
83 |
Borrowings |
12 |
1.987 |
Other liabilities |
18 |
181 |
Deferred tax liabilities |
8 |
330 |
Total non-current liabilities |
|
2.581 |
Current liabilities |
|
|
Provisions |
17 |
1.064 |
Tax Liabilities |
17 |
1.628 |
Borrowings |
12 |
1.612 |
Trade payables |
12 |
3.583 |
Other liabilities |
18 |
3.103 |
Total current liabilities |
|
10.990 |
|
|
|
Total equity and liabilities |
|
39.459 |
3
Consolidated statement of changes in equity
EUR ‘000 |
Share capital |
Capital reserve |
Retained earnings |
Other reserves |
Total equity |
Balance at 01 January 2016 |
5.000 |
5.915 |
12.782 |
88 |
23.785 |
Profit for the year |
- |
- |
6.033 |
- |
6.033 |
Other comprehensive income for the year |
- |
- |
- |
70 |
70 |
Payment of dividends |
- |
- |
-4.000 |
- |
-4.000 |
Balance at 31 December 2016 |
5.000 |
5.915 |
14.815 |
158 |
25.888 |
4
Consolidated statement of cash flows
EUR ‘000 |
2016 |
Cash flows from operating activities |
|
Profit for the year |
6.033 |
Adjustments for: |
|
Income tax expense recognized in profit or loss |
2.767 |
Finance cost recognized in profit or loss |
188 |
Depreciation and amortization of assets |
2.538 |
Income taxes paid |
-1.516 |
Interest paid |
-201 |
Movements in working capital: |
|
Increase in inventories |
-173 |
Increase in trade and other receivables |
-2.568 |
Decrease in deferred tax assets |
49 |
Increase in current provisions |
1.316 |
Increase in trade payables |
1.025 |
Increase in other payables (excl. financial liabilities) |
382 |
Net cash generated by operating activities |
9.842 |
|
|
Cash flows from investing activities |
|
Purchases of intangible assets |
-558 |
Purchases of property, plant and equipment |
-4.409 |
Net cash used in investing activities |
-4.967 |
|
|
Cash flows from financing activities |
|
Dividends paid |
-4.000 |
Cash repayments financial liabilities to banks |
-280 |
Cash repayments financial liabilities to shareholders/affiliates |
-1.000 |
Cash repayments financial liabilities for finance leases |
-81 |
Net cash used in financing activities |
-5.361 |
|
|
Net decrease in cash and cash equivalents |
-486 |
Cash and cash equivalents at the beginning of the year |
2.802 |
Cash and cash equivalents at end of the year |
2.316 |
5
W.O.M. World of Medicine (“WOM” or ”the Company”) and subsidiaries (“the Group”) is a company with limited liability (“GmbH”) incorporated in Berlin, Germany and its registered office situated at Salzufer 8, 10587 Berlin, Germany. Its parent and ultimate holding company is ATON GmbH, incorporated in Munich, Germany.
The Group produces medical technology and is one of the precursors of minimally invasive surgery. As partner of OEM, WOM develops insufflators and camera systems which ensure secure “key-hole”-surgery.
The reporting period of the Group is from 1 January 2016 to 31 December 2016. The Group’s functional currency is Euro. All values are rounded to thousands (TEUR; ‘000), except when indicated otherwise.
The consolidated financial statements of WOM have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB).
2.2 New and revised IFRSs in issue but not yet effective
The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective:
Title |
Key requirements |
Effective Date |
Expected impact |
IFRS 9 Financial instruments |
IFRS 9 replaces the multiple classification and measurement models in IAS 39 with a single model that has initially two classification categories: amortized cost and fair value |
01 January 2018 |
See below |
IFRS 15 Revenue from contracts with customers (and clarifications) |
The new standard for the recognition of revenue will replace IAS 18 and IAS 11. It is based on the principle that revenue is recognized when control of a good or service transfers to a customer. |
01 January 2018 |
See below |
IFRS 16 Leases |
IFRS 16 will affect primarily the accounting by lessees and will result in the recognition of almost all leases on balance sheet. The standard removes the current distinction between operating and financing leases. |
01 January 2019 |
See below |
Disclosure Initiative – Amendments to IAS 7 |
Entities will be required to explain changes in their liabilities arising from financing activities. |
01 January 2017 |
Currently the Group does not expect a material impact to the consolidated financial statements. |
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The annual improvements clarify certain matters in the following standards: IFRS 1, IFRS 12 and IAS 28 |
01 January 2018 / 01 January 2017 |
Currently the Group does not expect a material impact to the consolidated financial statements. |
|
IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration |
IFRIC 22 clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. |
01 January 2018 |
Currently the Group does not expect a material impact to the consolidated financial statements. |
Recognition of Deferred Tax Assets for Unrealized Losses – Amendments to IAS 12 |
The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. |
01 January 2017 |
Currently the Group does not expect a material impact to the consolidated financial statements. |
The newly issued IFRS 9, Financial Instruments, will replace IAS 39, Financial Instruments: Recognition and Measurement. The standard implements new regulations on the classification and measurement of financial assets and a new loss allowance model that also takes expected losses into account in the calculation of loss allowances. The Group expects no material effects in the classification and measurement of financial instruments.
IFRS 15, Revenue from Contracts with Customers was issued by the IASB in 2014 and replaces the standards IAS 18 and IAS 11. With IFRS 15, a uniform model of revenue recognition is established, which is based on a five-step model to help determine the amount and timing of revenue recognition. Changes can potentially arise as a result of the new requirements for revenue recognition on transfer of control, multi-element transactions with revenue recognized over the period of performance and extended disclosures in the notes. WOM is currently reviewing the specific implications of IFRS 15 for the Group. At this time, minor changes in the amount and timing of revenue recognition are expected. However, the Group does not expect a material effect on the results of operations.
IFRS 16, Leases was issued in January 2016 and will replace IAS 17 Leases. A new accounting model based on the right to use an asset for leases in the lessee’s financial statements is established under IFRS 16. The new standard does not distinguish between finance and operating leases. As for lessees, all leases will be presented “on-balance sheet”. Hence, lessees will recognize a right of use asset and a lease liability for all leases. WOM is currently reviewing the implications of the standard. It is expected that the recognition of existing operating leases will result in an increase in total assets and liabilities. The Group has not yet made a decision on whether or not to apply the exception for low-value assets. As at the reporting date, the group has non-cancellable operating lease commitments of 8.077 TEUR, see Note 20. Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under IFRS 16. Overall, the effects on results of operations are currently expected to be immaterial.
3. Significant accounting policies
7
The consolidated financial statements have been prepared solely for the purpose of complying with the rules and regulations of the Securities and Exchange Commission under Rule 03-05 of Regulation S-X, and do not represent a complete set of financial statements. As the consolidated financial statements have been prepared for this purpose, the consolidated financial statements does not present comparative periods.
Except for the omission of comparative financial information as discussed in the preceding paragraph, the consolidated financial statements of W.O.M World of Medicine GmbH and its subsidiaries have been prepared in conformity with IFRS as issued by the IASB.
3.2 General measurement principles
The consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period and explained in the accounting policies below.
In general, historical cost is based on the fair value of the consideration given in exchange for goods and services.
The fair value of an asset or a liability is the price that would be received to sell the asset or paid to transfer the liability, respectively, in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
For financial reporting purposes, fair value measurements are categorized into three levels based on the degree to which the inputs to the fair value measurement are observable and the significance of the inputs to the fair value measurement in its entirety, described as follows:
|
• |
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date; |
|
• |
Level 2 inputs are inputs that are observable for the asset or liability, either directly or indirectly, other than quoted prices included within Level 1; and |
|
• |
Level 3 inputs are unobservable. |
The principal accounting policies are set out below.
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. According to IFRS 10, Consolidated Financial Statements, control is achieved when the Company has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns.
If facts and circumstances indicate that there are changes to one or more of the three elements of control listed above, the company reassesses whether or not it still controls an investee.
Consolidation of a subsidiary begins when WOM obtains control over the subsidiary and ceases when WOM loses control of the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests.
8
All intercompany assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full upon consolidation.
Changes in the Group’s ownership interests in subsidiaries not resulting in the Group losing control are accounted for as equity transactions. The carrying amounts of the Group’s interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, VAT, rebates and similar allowances.
In accordance with IAS 18, revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all of the following conditions are satisfied:
|
• |
the Group has transferred to the buyer the significant risks and rewards of ownership in the goods; |
|
• |
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; |
|
• |
the amount of revenue can be measured reliably; |
|
• |
it is probable that the economic benefits associated with the transaction will flow to the Group; and |
|
• |
the costs incurred or to be incurred in respect of the transaction can be measured reliably. |
When the Group provides services, revenue is recognized by reference to the stage of completion of the contract. Servicing fees included in the price of products sold are recognized by reference to the proportion of the total cost of providing the servicing for the product sold.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income is reliably measurable. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, being the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets to that asset’s net carrying amount on initial recognition.
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.5.1 Current Tax
The basis for the tax currently payable is the taxable profit for the year. The taxable profit differs from “profit before tax” as reported in the consolidated statement of profit and loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
3.5.2 Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which those deductible temporary differences can be utilized. Therefore, such deferred tax assets or liabilities are not recognized if the
9
temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are also not recognized if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantive enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
3.6 Business Combinations and goodwill
Acquisitions of businesses are accounted for using the acquisition method according to IFRS 3, Business Combinations. The consideration transferred in a business combination is measured at fair value, calculated as the sum of the fair values at the date of the acquisition of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Costs related to the acquisition are generally recognized in profit and loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:
|
• |
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12, Income Taxes and IAS 19, Employee Benefits respectively; |
|
• |
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2, Share-based payments; and |
|
• |
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard. |
Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at fair value as of the acquisition-date and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration qualifying as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments arising from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
10
If changes in the fair value of the contingent consideration do not qualify as measurement period adjustments, the subsequent accounting depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, Financial instruments, or IAS 37, Provisions, Contingent Liabilities and Contingent Assets as appropriate, with the corresponding gain or loss being recognized in profit and loss.
If the initial accounting for a business combination is incomplete by the end of the respective reporting period, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (which cannot exceed one year from the acquisition date), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.
If the acquisition of a business results in the recognition of goodwill, it is carried at cost as established at the date of acquisition less accumulated impairment losses, if any.
Impairment tests on goodwill are conducted at least once per year, and more frequently in the presence of a triggering event. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGUs) (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. In case the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line bases over their estimated useful lives. At each reporting date, the amortization method and estimated useful lives are reviewed and the effect of any changes in estimate are accounted for on a prospective basis. The following useful lives are used in the calculation of amortization.
Concessions, patents and other rights |
2 - 8 years |
Software |
1 - 5 years |
Capitalized cost of development |
4 - 8 years |
Expenses for amortization are presented in a separate line item within the statement of profit and loss and comprehensive income.
Internally-generated intangible assets
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development is recognized if, and only if, all the following have been demonstrated:
|
• |
the technical feasibility of completing the intangible asset so that it will be available for use or sale; |
|
• |
the intention to complete the intangible asset and use or sell it; |
11
|
• |
how the intangible asset will generate probable future economic benefits; |
|
• |
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and |
|
• |
the ability to measure reliably the expenditures attributable to the intangible asset during its development. |
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in profit and loss in the period in which it is incurred.
Subsequently, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Derecognition of intangible assets
When no future benefits are expected from use or disposal of an intangible asset or it is being disposed, the asset will be derecognized. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in profit or loss when the asset is derecognized.
3.8 Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses.
Properties, in the course of construction for production purposes are carried at cost, less any recognized impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.
Depreciation is recognized using the straight-line method. The estimated useful lives and residual values are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The buildings are depreciated under application of the component approach according to IAS 16.
The following useful lives are used in the calculation of depreciation.
Buildings |
1 - 100 years |
Machinery and equipment |
1 - 16 years |
Fixtures and fittings |
1 - 23 years |
Expenses for depreciation and amortization are presented in a separate line item within the statement of profit and loss and comprehensive income.
Assets held under finance leases are depreciated over the shorter of the lease term and their estimated useful lives if there is no reasonable certainty that ownership will be obtained by the end of the lease term.
When an item of property, plant and equipment is disposed or no future economic benefits are expected to arise from the continued use of the asset, it is derecognized. Any gain or loss arising on the disposal or retirement is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit and loss.
12
3.9 Impairment of Tangible and Finite Live Intangible Assets other than Goodwill
The Group conducts impairment tests at the end of each reporting period. Thereby, the carrying amounts of its tangible and finite live intangible assets are reviewed for impairment indicators to identify those assets that have suffered an impairment loss. If such indicators are being identified, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss, if any. If the Group is unable to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.
Intangible assets not yet available for use are tested for impairment at least annually, and whenever there is a triggering event.
The recoverable amount is defined as the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the estimated recoverable amount of an asset or CGU is less than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognized immediately in profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
Inventories are presented at the lower of cost and net realizable value. Costs of inventories are determined on a weighted average price basis. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to realize the sale.
Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Directly attributable transaction costs are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial instruments at fair value through profit and loss are recognized immediately in profit and loss.
Under IFRS financial assets are classified into specified categories, as follows: Financial assets at fair value through profit and loss (FVTPL), held-to-maturity investments, available-for-sale (AFS) financial assets and loans and receivables. The classification is depending on the nature and purpose of the financial assets and is determined at initial recognition. Regular way purchases, defined as purchases or sales of financial assets that require delivery of assets within the time frame established by
13
regulation or convention in the marketplace, and are recognized and derecognized on a trade date basis.
Income for debt instruments other than those financial assets classified as at FVTPL is recognized on an effective interest basis. The effective interest method is used to calculate the amortized cost of a debt instrument and to allocate interest income over the relevant period. Thereby, the effective interest rate is the rate that discounts estimated future cash receipts through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
3.11.2 Loans and receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Among others, WOM recognizes trade and other receivables and cash and cash equivalents as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method less any impairment. Interest income is recognized by application of the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts, if any, are presented within borrowings in current liabilities in the statement of financial position.
3.11.3 Available-for-sale (AFS) financial assets
Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable payments, and management intends to hold them for the medium to long-term. Financial assets that are not classified into any of the other categories (at FVPL, loans and receivables or held-to-maturity investments) are also included in the available-for-sale category.
3.11.4 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Generally, financial assets are considered to be impaired when there is objective evidence that, as a result of events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For trade receivables, WOM assesses impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with debtors, analyses of a potential increase in the number of delayed payments in the portfolio, as well as current events in national or local economic matters that correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such a resulting impairment loss will not be reversed in subsequent periods.
14
An impairment loss directly reduces the carrying amount of the financial asset, with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.
When AFS financial assets are deemed to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.
For financial assets carried at amortized cost, the reversal of a previously recognized impairment loss is made through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
3.11.5 Derecognition of Financial Assets
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit and loss.
3.12 Equity Instruments and Financial Liabilities
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.12.1 Financial Liabilities
Under IFRS, financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. The Group does not hold financial liabilities at FVTPL.
3.12.1.1 Other Financial Liabilities
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter term, to the net carrying amount on initial recognition.
3.12.1.2 Derecognition of Financial Liabilities
The Group derecognizes financial liabilities when, and only when, the Group’s obligation are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
The Group recognizes a provision when it has a present obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
15
The provision is recognized in an amount which is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties related to the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
If the Group is virtually certain that a reimbursement by a third party of some or all of the benefits required to settle a provision will be received and it is able to measure it reliably, a receivable is recognized.
Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is defined as a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
Provisions for the expected costs of warranty obligations under local sale of goods legislation are recognized at the date of sale of the relevant products, at the Groups’ best estimate of the expenditure required to settle the obligation.
According to IAS 17, leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of the ownership to the lessee. All other leases are deemed operating leases.
In finance leasing transactions where WOM is the lessee, the assets are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so that a constant rate of interest on the remaining balance of the liability is achieved. Finance expenses are recognized immediately in profit and loss, unless they are attributable to qualifying assets.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
If lease incentives are received to enter into operating leasing arrangements, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
The reporting currency of WOM is Euro. WOM holds subsidiaries abroad with deviating functional currencies. Hence, the currency is converted using the modified balance sheet date method. Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.
Assets and liabilities of the Group’s foreign operations are translated into Euro using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income and accumulated in equity.
Payments to defined contribution plans are recognized as an expense when employees have rendered service entitling them to the contributions.
16
The Group recognizes a liability for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
4. Critical accounting judgements and key resources of estimation uncertainty
Applying the Group’s accounting policies, described in Note 3, requires the Group to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The Group will determine estimates and associated assumptions from historical experience and other factors that are deemed to be relevant. However, actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
4.1 Critical judgements in applying accounting policies
The following critical judgements have been made in the process of applying the Group’s accounting policies and have the most significant effect on the amounts recognized in the consolidated financial statements.
WOM capitalizes development costs when the requirements in IAS 38 are met. The assessment of the recognition criteria for internally generated intangible assets requires judgement. The Group continuously reviews its assessments.
4.2 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities with the next financial year.
4.2.1 Impairment of goodwill
Estimations regarding the value in use of cash-generating units to which goodwill has been allocated are necessary when determining whether goodwill is impaired. In order to calculate the value in use, the Group is required to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate to calculate present value. When the actual future cash flows are less than estimated, a material impairment loss may arise. Future cash flows are estimated based on a forecast for five years and a CGU-specific growth rate.
4.2.2 Useful lives of property, plant and equipment and intangible assets
The Group reviews the estimated useful lives of property, plant and equipment and intangible assets at the end of each reporting period (see 3.6 and 3.7). Particularly, the Group’s ability to derive use from internally generated intangible assets as well as specialized machinery and other equipment on a long-term basis requires estimates regarding the future. The medicine technology sector is characterized by short innovation cycles that require the Group to closely monitor its estimates regarding the useful lives of such assets.
The reduction of the useful life of an asset would result in increased depreciation or amortization expenses, recognized in profit and loss.
17
The recognition of provisions is based on the Group’s best estimate regarding the probability of future expenditures required to settle a present obligation. Both, the amount of the expenditures and the probability for realization, involve assumptions based on the knowledge of the circumstances as of the end of the reporting period.
The actual expenditures may differ from the initially recognized amount.
4.2.4 Deferred tax assets
Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which those deductible temporary differences can be utilized.
The carrying amount of deferred tax assets is being reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
The actual future taxable profits may deviate from the estimate as at the end of the reporting period.
5. Revenue
The following is a breakdown of the Group’s revenue for the year.
EUR ‘000 |
2016 |
Revenue from the sale of goods |
70.995 |
Revenue from the rendering of services |
3.284 |
Other |
215 |
Total |
74.494 |
6. Other operating income & other expenses
The following is a breakdown of the Group’s other expenses:
EUR ‘000 |
2016 |
Legal, consultancy and other fees |
-1.210 |
Research and development costs |
-1.315 |
Maintenance costs |
-1.071 |
Lease and rental charges |
-1.451 |
Sales and Marketing costs |
-963 |
Administration costs |
-774 |
Subcontracting and recruiting costs |
-931 |
Cleaning and incidental rental costs |
-656 |
Addition to provisions |
-726 |
Foreign exchange losses |
-654 |
Travel expenses |
-508 |
Losses from disposal of assets |
-301 |
Education and training costs |
-320 |
Insurances |
-198 |
Other operating expenses |
-1.162 |
Total |
-12.240 |
18
EUR ‘000 |
2016 |
Foreign exchange gains |
1.100 |
Other gains |
302 |
Total |
1.402 |
Other gains include gains from the disposal of assets in an amount of 46 TEUR.
EUR ‘000 |
2016 |
Finance income |
|
Interest from affiliates |
7 |
Interest from third parties |
5 |
Total finance income |
12 |
Finance costs |
|
Interest to affiliates |
-130 |
Interest to third parties |
-60 |
Interest share from finance leases |
-10 |
Total finance costs |
-200 |
Net finance costs |
-188 |
EUR ‘000 |
2016 |
Current tax |
|
In respect of the current year |
-2.867 |
In respect of prior years |
31 |
Total current tax expense |
-2.836 |
|
|
Deferred income tax |
|
In respect of the current year |
69 |
Total deferred tax expense |
69 |
Income tax expense |
-2.767 |
There has not been any income tax expense related to items shown in other comprehensive income and no income tax expense has been directly recognized in equity or other comprehensive income. Furthermore, deferred tax has not been reclassified from equity to profit or loss, there were no adjustments to deferred tax attributable to changes in tax rates or laws and no write-downs of deferred tax assets occurred.
8.2 Numerical reconciliation of income tax expense to prima facie tax payable
EUR ‘000 |
2016 |
Earnings before income taxes |
8.800 |
|
|
19
8.3 Deferred tax balances
The following is the analysis of deferred tax assets and deferred tax liabilities presented in the consolidated statement of financial position:
EUR ‘000 |
31.12.2016 |
01.01.2016 |
Deferred tax assets |
670 |
719 |
Deferred tax liabilities |
-330 |
-448 |
|
340 |
271 |
2016
EUR ‘000 |
Opening balance |
Recognized in profit or loss |
Recognized in other comprehensive income |
Recognized directly in equity |
Closing balance |
Deferred tax assets/liabilities in relation to: |
|
|
|
||
Intangible assets |
-292 |
24 |
- |
- |
-267 |
Property, plant and equipment |
527 |
61 |
- |
- |
589 |
Inventories |
119 |
-51 |
- |
- |
68 |
Receivables and other assets |
-61 |
-2 |
- |
- |
-63 |
Other provisions |
-8 |
8 |
- |
- |
- |
Other liabilities |
-88 |
88 |
- |
- |
- |
Tax loss carryforward |
72 |
-59 |
- |
- |
13 |
Total |
271 |
69 |
- |
- |
340 |
8.4 Unrecognized deductible temporary differences, unused tax losses and unused tax credits
As at 31.12.2016 and 01.01.2016 there were no deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognized. Furthermore, there were no taxable temporary differences in relation to investments in subsidiaries for which deferred tax liabilities have not been recognized.
The Group’s recognized goodwill, stated at 207 TEUR, has been allocated in full to the CGU W.O.M. World of Medicine Produktions-GmbH. The goodwill has been recognized in course of the acquisition of a business from the company Welscher GmbH Kunststoff-Formteile i. L. i. It is related to synergy effects.
20
The recoverable amount of the CGU W.O.M. World of Medicine Produktions-GmbH has been based on a value in use calculation. That calculation uses cash flow projections based on financial budgets approved by management covering a five-year period, and pre-tax discount rate of 8,0 per cent. The discount rate has been determined using an average capital cost rate for a peer group of companies in the medical sector. This data is based on external sources of information. A market risk premium of 6,0 per cent was applied, in accordance to the recommendation of the Institut der Wirtschaftsprüfer (IDW). Thereby, the pre-tax discount rate of 8,0% represents the weighted average cost of capital before tax for WOM Group. Cash flows beyond the five-year period have been extrapolated using a steady 1,0 per cent growth rate. This growth rate does not exceed the long-term average growth rate for the market in which the WOM Production GmbH operates. The estimated growth rate for revenues and material costs in the five-year detailed planning periods are 10 %. Management believes that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause WOM Production’s carrying amount to exceed its recoverable amount.
Management estimates that an increase of the discount rate by 10,0 % would, ceteris paribus, still not cause the carrying amount to exceed its recoverable amount. Likewise, a decrease in growth rate to 0% would not cause the carrying amount to exceed its recoverable amount.
EUR ‘000 |
31.12.2016 |
01.01.2016 |
Carrying amounts |
|
|
Concessions, patents and other rights |
328 |
407 |
Software |
541 |
420 |
Capitalized cost of development |
708 |
788 |
Total |
1.577 |
1.615 |
Cost
EUR ‘000 |
Concessions, patents and other rights |
Software |
Capitalized cost of development |
Total |
Balance at 01 January 2016 |
3.428 |
2.038 |
2.621 |
8.087 |
Additions |
- |
342 |
216 |
558 |
Disposals |
-1.988 |
-3 |
- |
-1.991 |
Effect of foreign currency exchange differences |
- |
7 |
- |
7 |
Balance at 31 December 2016 |
1.440 |
2.384 |
2.837 |
6.661 |
Accumulated amortization and impairment
EUR ‘000 |
Concessions, patents and other rights |
Software |
Capitalized cost of development |
Total |
Balance at 01 January 2016 |
3.021 |
1.618 |
1.833 |
6.472 |
Amortization expense |
79 |
222 |
296 |
597 |
Disposals |
-1.988 |
-3 |
- |
-1.991 |
Effect of foreign currency exchange differences |
- |
6 |
- |
6 |
Balance at 31 December 2016 |
1.111 |
1.844 |
2.129 |
5.084 |
|
|
|
|
|
21
11. Property, plant and equipment
EUR ‘000 |
31.12.2016 |
01.01.2016 |
Carrying amounts |
|
|
Real estate, land rights and buildings |
6.466 |
6.742 |
Machinery and equipment |
4.835 |
3.875 |
Fixtures and fittings |
2.356 |
1.814 |
Work in progress |
1.535 |
871 |
Total |
15.192 |
13.302 |
The line item “Real estate, land rights and buildings” encompasses the production plant in Ludwigsstadt, Germany and a business property in Orlando, USA.
Work in progress mainly pertains the expansion of production facilities currently under construction.
Cost or valuation.
EUR ‘000 |
Real estate, land rights and buildings |
Machinery and equipment |
Fixtures and fittings |
Work in Progress |
Total |
Balance at 01 January 2016 |
9.975 |
9.615 |
5.891 |
871 |
26.352 |
Additions |
29 |
1.050 |
1.299 |
1.696 |
4.074 |
Disposals |
- |
-545 |
-245 |
-397 |
-1.187 |
Reclassification from non-current assets held for sale |
- |
346 |
- |
- |
346 |
Transfers |
- |
625 |
10 |
-635 |
0 |
Effect of foreign currency exchange differences |
35 |
1 |
10 |
- |
46 |
Balance at 31 December 2016 |
10.039 |
11.092 |
6.965 |
1.535 |
29.631 |
Accumulated depreciation and impairment.
EUR ‘000 |
Real estate, land rights and buildings |
Machinery and equipment |
Fixtures and fittings |
Work in Progress |
Total |
Balance at 01 January 2016 |
3.234 |
5.740 |
4.076 |
- |
13.050 |
Depreciation expense |
317 |
915 |
709 |
- |
1.941 |
Disposals |
-1 |
-400 |
-182 |
- |
-583 |
Effect of foreign currency exchange differences |
23 |
1 |
7 |
- |
31 |
Balance at 31 December 2016 |
3.573 |
6.257 |
4.609 |
- |
14.439 |
The following table gives an overview of property, plant and equipment that the Group recognizes where it is a lessee under a finance lease. The Group mainly leases production equipment:
22
31.12.2016 |
01.01.2016 |
|
Leased assets |
|
|
Cost |
734 |
379 |
Accumulated depreciation |
-324 |
-175 |
Balance at 31 December |
410 |
204 |
12. Financial assets and financial liabilities
This note provides information about the Group’s financial instruments, including an overview of all financial instruments held by the Group and specific information about each relevant type of financial instrument.
The Group holds the following financial instruments:
Financial assets EUR ‘000 |
Financial assets at amortized cost |
31 December 2016 |
|
Trade and other receivables |
11.355 |
Available-for-sale financial assets |
1 |
Cash and cash equivalents |
2.316 |
Total |
13.672 |
|
|
01 January 2016 |
|
Trade and other receivables |
8.787 |
Available-for-sale financial assets |
0 |
Cash and cash equivalents |
2.802 |
Total |
11.589 |
Financial liabilities EUR ‘000 |
Liabilities at amortized cost |
31 December 2016 |
|
Trade and other payables |
3.583 |
Borrowings |
3.599 |
Total |
7.182 |
01 January 2016 |
|
Trade and other payables |
2.557 |
Borrowings |
4.656 |
Total |
7.213 |
The Group’s exposure to various risks associated with the financial instruments is discussed in note 23. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.
12.1 Trade and other receivables
EUR ‘000 |
31.12.2016 |
Trade receivables 3rd Parties |
9.799 |
Trade receivables affiliates |
58 |
Other receivables |
1.431 |
Prepayments |
67 |
Total |
11.355 |
23
Trade receivables are current in their entirety.
Other receivables include tax receivables in an amount of 1.232 TEUR.
Prepayments pertain to advance payments made to third parties.
The average credit period on sales of goods is 30 days. The Group negotiates payment specifics individually with its customers. The Group does not charge interest on trade receivables. It is the Group’s policy to assess collectability of receivables individually and recognize impairments when deemed necessary. As at the end of the reporting period, none of the receivables was impaired. The Group deemed all amounts to be recoverable.
Before accepting any new customers, the Group assesses the counterparty’s credit quality.
When determining the recoverability of a trade receivable, the Group takes any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period into account.
Of the trade receivables balance at the end of the year an amount of 4.728 TEUR (48%) is due from the companies Stryker and Surgiquest, the Group’s largest customers. This imposes a certain credit risk concentration for the Group.
Age of receivables that are past due but not impaired.
EUR ‘000 |
31.12.2016 |
30-60 days |
6 |
61-90 days |
7 |
91-180 days |
189 |
181-360 days |
3 |
more than 360 days |
184 |
Total |
389 |
24
12.2 Cash and cash equivalents
EUR ‘000 |
31.12.2016 |
Cash at bank and in hand |
2.316 |
The above figure reconciles to the amount of cash shown in the statement of cash flows at the end of the financial year. None of the deposits are subject to any restrictions.
The Group presents trade payables in an amount of 3.583 TEUR as of 31 December 2016. All trade payables as of 31 December 2016 are classified as current as they are all payable within one year.
Financial risk management policies and liquidity management systems are in place to ensure that all payables are paid within the given credit terms.
EUR ‘000 |
31.12.2016 |
Loans from: |
|
- Banks |
1.890 |
- Related parties |
500 |
Finance lease obligations |
429 |
Cash Pooling ATON |
780 |
Total |
3.599 |
- Non-current |
1.987 |
- Current |
1.612 |
Maturity analysis as of 31 December 2016:
EUR ‘000 |
Less than 1 year |
1 – 5 years |
More than 5 years |
Loans from banks |
280 |
1.610 |
- |
Loans from related parties |
500 |
- |
- |
Finance lease obligations |
52 |
377 |
- |
Cash pooling Aton |
780 |
|
|
Total |
1.612 |
1.987 |
- |
12.4.1 Secured liabilities and assets pledged as security
In 2013, the Group pledged its ownership of land and buildings in Ludwigsstadt, Germany as mortgage property for the bank loan. The pledge has an amount of 2.800 TEUR. The loan is expected to be fully paid back in 2021.
Lease liabilities are effectively secured as the rights to the leased assets recognized in the consolidated financial statements revert to the lessor in the event of default.
Loans from related parties are unsecured.
12.4.2 Compliance with loan covenants
The Group has complied with the covenants of its borrowing facilities during the reporting period.
25
The Group leased fixtures and fittings under finance leases. The average lease term is 4 years. The Group does not have options to purchase the equipment for a nominal amount at the end of the lease terms. The Group’s obligations under finance leases are secured by the lessor’s title to the leased assets. Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging from 2,42% to 7,25% per annum.
The following table presents the minimum lease payments with regard to the finance leases:
EUR ‘000 |
|
31.12.2016 |
Not later than one year |
|
59 |
Later than one year and not later than five years |
|
385 |
Later than five years |
|
- |
Total |
|
444 |
- Less: future finance charges |
|
-15 |
Present value of minimum lease payments |
|
429 |
The Group conducted a formal assessment of the carrying amount of its bank loan in comparison to its fair value and deemed the carrying amount to be a reasonable approximation of its fair value. Therefore, there is no separate disclosure of fair values. All other financial assets and instruments of the Group are of a short-term nature (cash, trade receivables and payables). Hence, the carrying amounts of these assets and liabilities are reasonable approximations for their fair values.
EUR ‘000 |
31.12.2016 |
Raw materials and consumables |
4.371 |
Work in progress |
1.541 |
Finished goods and goods of merchandise |
2.230 |
Total |
8.142 |
The cost of inventories recognized as an expense in respect of write-downs to net realizable value during the year was 544 TEUR.
The ordinary share capital of the Group is 5.000 TEUR. The ordinary shares are fully paid and each share represent 1 EUR of the issued capital.
Furthermore, the Group holds additional paid-in capital in an amount of 5.915 TEUR.
The Group recognizes a reserve for foreign currency translation in equity. Exchange differences arising on translation of the foreign subsidiaries are recognized in other comprehensive income as shown in the development of equity and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. Exchange differences recognized in other comprehensive income are presented net of tax. As at the reporting date, there were no tax effects related to such items.
26
The following table shows the development of the retained earnings:
EUR ‘000 |
31.12.2016 |
Balance at beginning of year |
12.782 |
Profit attributable to owners of the Company |
6.033 |
Payment of dividends |
-4.000 |
Balance at end of year |
14.815 |
17. Provisions & Tax Liabilities
EUR ‘000 |
Archiving costs |
Taxes |
Personnel expenses |
Warranties |
Other |
Balance at 01 January 2016 |
102 |
756 |
4 |
565 |
180 |
Consumption |
- |
-129 |
-4 |
- |
-185 |
Reversal |
- |
-11 |
- |
-413 |
-2 |
Additions |
- |
1.013 |
161 |
656 |
70 |
Balance at 31 December 2016 |
102 |
1.628 |
161 |
808 |
76 |
Except for non-current provisions for archiving costs in an amount of 83 TEUR (2015: 83 TEUR), all provisions are current.
Other provisions include provisions for legal disputes in an amount of 44 TEUR (2015: 150 TEUR).
The provision for warranty claims represent the present value of the Group’s best estimate of the future outflow of economic benefits that will be required for the Group’s obligations for warranties under local sale of goods legislation as well as given guarantees that exceed the legislation. The estimate has been made on the basis of historical warranty trends and may vary as a result of new materials, altered manufacturing processes and newly introduced product lines.
EUR ‘000 |
31.12.2016 |
Deferred income |
502 |
Liabilities to employees |
2.447 |
Other |
335 |
Total |
3.284 |
- Non-current |
181 |
- Current |
3.103 |
The Group recognizes deferred income related to non-current guarantee obligations in its US business. As of 31 December 2016 these were stated at 181 TEUR.
Employee related liabilities include liabilities for bonus payments in an amount of 1.344 TEUR, liabilities from current payrolls in an amount of 650 and liabilities for overtime and flextime credit in an amount of 183 TEUR.
27
The item “Other” includes payments received on account for orders in an amount of 59 TEUR and liabilities for other taxes in an amount of 255 TEUR.
19. Retirement benefit plans – Defined contribution plans
The employees of the Group in Germany are members of a state-managed retirement benefit plan operated by the government of Germany. The Group is required to contribute a specified percentage of payroll costs to the retirement benefits scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.
The total expense recognized in profit or loss of 122 TEUR represents contributions payable to these plans by the Group at rates specified in the rules of the plans.
20. Operating lease arrangements
The Group’s operating leases relate to leases of property, machinery and equipment as well as fixtures and fittings. The Group does not have the option to purchase the property after the expiry of the lease periods. The leases have varying terms and renewal rights. On renewal, the terms of the leases are generally renegotiated.
Non-cancellable operating lease commitments.
EUR ‘000 |
31.12.2016 |
Not later than one year |
1.470 |
Later than one year and not later than five years |
5.317 |
Later than five years |
1.290 |
Total |
8.077 |
Payments recognized as an expense.
EUR ‘000 |
2016 |
Minimum lease payments |
1.451 |
Total |
1.451 |
21. Commitments for expenditure
Significant capital expenditures contracted at the end of the reporting period but not recognized as liabilities is as follows:
EUR ‘000 |
31.12.2016 |
Unconditional PPE purchase commitments |
39 |
Other commitments to third parties |
174 |
Total |
213 |
22. Notes to the statement of cash flows
For the purpose of the statement of cash flows, the Group’s cash and cash equivalents includes cash on hand and in banks, net of outstanding bank overdrafts (0 TEUR), over the reporting period as a result of cash effective in- and outflows. Cash flows are shown separately for operating, investing and financing activities and are divided according to their source and utilization. The cash flow from operating activities is derived indirectly from the profit for the year. Cash flows from investing and financing activities are calculated directly.
28
In the course of its operational activities, WOM is subject to the following financial risks:
|
- |
Credit risk |
|
- |
Liquidity risk |
|
- |
Market risk |
Market risks also encompass risks from the alteration of interest rates and foreign exchange risks.
The following remarks describe these risks and the related processes of the Group’s risk management. WOM employs a central approach to identify, measure and manage financial risks. The Group continuously monitors the appropriateness of its risk management processes by comparing its performance against suitable benchmarks.
Additionally, the Group faces capital risks. WOM manages its capital with the objective to ensure that entities in the Group will be able to continue as going concerns while providing reliable returns for its stakeholders. Another objective is to sustain a top-class credit rating with its banks to have continuous access to financing at low costs.
The Group mainly focuses on the optimization of the debt and equity balance.
The capital structure of the Group consists of net debt (financial debt offset by cash and bank balances) and equity of the Group (encompassing issued capital, reserves and retained earnings). The Group is not subject to any externally imposed capital requirements.
23.2 Financial risk management
The Group’s board of directors has the overall responsibility for the establishment and oversight of the risk management framework. The Senior Vice President regularly assesses WOM’s risk exposure in various areas and adjusts the implemented risk management measures, if deemed necessary.
The finance department has the operational responsibility for the implementation of the risk management. It develops and maintains risk management policies to identify and analyze the risks faced by WOM, and assigns the risks into certain risk groups, depending on the potential impact on the Group. Subsequently, each partial risk is assessed regarding its probability of occurrence in order to estimate the risk exposure of the Group. Thereby, existing risks can be continuously monitored and responded to by implementing appropriate counter-measures. The status of the implementation of new risk management policies and measures is closely monitored and documented.
The Group is committed to maintain a disciplined and constructive control and risk management environment and supports this through regular trainings for its employees. Guidelines and the communication of risk management reports ensure that all employees understand their roles and obligations.
In the reporting period, WOM introduced a risk-related early warning system, in order to enable the Group to react to potential risks in a timely manner.
The policies for management of financial risk, such as foreign exchange risk, interest rate risk, credit risk and use of derivative financial instruments are approved by the board of directors and managed by the finance department.
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Credit risks is defined as the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Therefore, the risk exposure is limited to the carrying value of trade and other receivables.
The Group closely monitors the creditworthiness of its counterparties on a continuous basis.
For the trade receivables that have not been impaired as of 31 December 2016, there were no indication for potential defaults.
As shown in note 12.1, WOM as an OEM provider faces a comparably high concentration of credit risk. About half of the trade receivables as of the end of the reporting period were from the Group’s two largest clients. WOM maintains close relationships to its key accounts and continuously monitors creditworthiness.
23.2.2 Liquidity risk
Liquidity risk is defined as the risk that due to a shortage in liquidity, the Group becomes unable to meet its financial commitments. To mitigate that risk, the Group established an appropriate liquidity risk management framework for the management of the Group’s short-, medium- and long-term funding and liquidity requirements. WOM maintains adequate reserves, banking facilities and reserve borrowing facilities to manage the liquidity risk. Furthermore, a continuous monitoring of forecast and actual cash flows supports the risk mitigation. Additionally, WOM is integrated into the Cash Pooling of its ultimate parent, ATON, to provide sufficient reserve borrowing facilities.
23.2.3 Market risk
The Group’s activities in the USA and Asia expose it to the financial risk of changes in the foreign currency exchange rates.
23.2.3.1 Foreign currency risk management
The Group undertakes transactions denominated in foreign currency and is consequently exposed to exchange rate fluctuations.
The following gives an overview of the Groups exposure to foreign currency risk:
EUR ‘000 |
31.12.2016 |
01.01.2016 |
||
|
USD |
HKD |
USD |
HKD |
Trade Receivables |
7.248 |
457 |
4.231 |
430 |
Trade Payables |
-379 |
-1.314 |
-298 |
-1.841 |
Cash equivalents |
52 |
0 |
51 |
0 |
As shown in the table above, the Group is exposed to changes in USD/EUR and HKD/EUR exchange rates. The sensitivity of profit or loss to changes in the exchange rates arises from US-Dollar and HK-Dollar denominated financial instruments.
EUR ‘000 |
Impact on profit or loss |
|
2016 |
USD/EUR exchange rate - increase 10% |
-629 |
USD/EUR exchange rate - decrease 10% |
769 |
HKD/EUR exchange rate - increase 10% |
78 |
HKD/EUR exchange rate - decrease 10% |
-95 |
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The Group uses derivative financial instruments to hedge foreign currency risk, when deemed necessary. WOM does not use those instruments for speculative purposes. As of 31 December 2016, the Group does not hold any derivative instruments.
23.2.3.2 Interest risk
The Group is not exposed to material interest rate risk because it merely borrows funds at long-term fixed interest rates. Borrowed funds with floating interest rates do not exist.
Current receivables and payables are not subject to interests and therefore not exposed to interest rate risk.
23.2.3.3 Other price risk
The Group is not exposed to other market risks besides foreign currency and interest risk. Particularly, the Group does not hold any equity instruments with related price risk.
The following table presents details of the Group’s subsidiaries at the end of the reporting period. All subsidiaries are fully consolidated.
Name |
Place of incorporation |
Proportion of ownership interest and voting power held by the Group |
|
|
|
31.12.2016 |
01.01.2016 |
W.O.M. World of Medicine USA, Inc. |
Orlando, USA |
100% |
100% |
W.O.M. WORLD OF MEDICINE Produktions-GmbH |
Ludwigsstadt, Germany |
100% |
100% |
W.O.M. World of Medicine Lemke GmbH1 |
Berlin, Germany |
Nil |
100% |
Clyxon Laser GmbH1 |
Berlin, Germany |
Nil |
100% |
W.O.M. WORLD OF MEDICINE ASIA Limited |
Hong Kong |
100% |
100% |
1 As of 08 July 2016, the subsidiaries W.O.M. World of Medicine Lemke GmbH and Clyxon Laser GmbH have been merged to W.O.M. World of Medicine GmbH (WOM). Formerly, WOM held 100% of ownership interest in both entities.
25. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are further disclosed here:
WOM has identified related parties in accordance with IAS 24. The related party transactions in the reporting period occurred in the ordinary course of business and were carried out in accordance with the arm’s length principle.
Goods and services provided to related parties give rise to receivables of 58 TEUR and payables arising from goods and services received from related parties are nil. Purchased services from a related party incurred expenses in an amount of 135 TEUR and other sales yielded expenses of 76 TEUR.
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The Group is integrated into the cash pooling of its ultimate parent, ATON GmbH. As of the end of the reporting period, payables for cash pooling are 780 TEUR. The loan in an amount of 500 TEUR as of 01 January 2016 provided by ATON GmbH has been fully repaid in the reporting period. The Group incurred interest expenses related to ATON GmbH in an amount of 54 TEUR.
Furthermore, the Group has been provided with a loan by the related party ATON Group Finance GmbH in 2014 in an amount of 2.500 TEUR of which TEUR 2.000 are already repaid. The loan is unsecured and stated as current as at 31 December 2016 as it had been repaid in 2017. The loan has an interest rate of 5,00%. Additionally, other liabilities related to ATON Group Finance GmbH are stated at 4 TEUR. The Group incurred interest expenses from provided financing by ATON Group Finance GmbH in an amount of 69 TEUR.
The members of the management board were identified as related parties of WOM in accordance with the principles in IAS 24. Members of the management board are Dr. Clemens Scholz and Oliver Kupka. In the reporting period, the members of the management board received total remuneration in an amount of 1.039 TEUR. The remuneration of key management personnel comprises solely short-term employee benefits.
26. Events after the reporting period
The loan provided by the related party ATON Group Finance in an amount of 500 TEUR as of 31.12.2016 has been repaid in full in advance during February 2017.
On 6 June 2017 the shareholders of the Group entered in to a share and purchase agreement with Novanta Inc. Closing of the transaction is expected in the third quarter of 2017.
27. Approval of financial statements
The financial statements were approved by the board and authorized for issue on 23 June 2017.
The Management Board
W.O.M. WORLD OF MEDICINE GmbH
Dr. Clemens ScholzOliver Kupka
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To the shareholders of W.O.M. World of Medicine GmbH, Berlin
We have audited the accompanying consolidated financial statements of W.O.M. World of Medicine GmbH (the "Company"), which comprise the consolidated statement of financial position as of December 31, 2016, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows, for the year then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Qualified Opinion
International Accounting Standard 1, Presentation of Financial Statements, requires that comparative financial information shall be disclosed in respect of the previous period for all amounts reported in the financial statements, except when a Standard or Interpretation permits or requires otherwise. These consolidated financial statements have been prepared solely for the purpose of meeting the requirements of Rule 3-05 of Regulation S-X of the Securities and Exchange Commission. Consequently, no comparative financial information is presented. The omission of comparative financial statements and related information results in an incomplete presentation of the consolidated financial statements.
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In our opinion, except for the omission of comparative financial information as described in the Basis for Qualified Opinion paragraph, such consolidated financial statements present fairly, in all material respects, the financial position of W.O.M. World of Medicine GmbH as at December 31, 2016, and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
June 23, 2017
/s/ Deloitte GmbH
Wirtschaftsprüfungsgesellschaft
34