ECONOMIC REPORT
Financial position
Aims of financial management
The financial management of the MLP Group is performed by the central Treasury department in cooperation with the Controlling and Risk Management departments. Our primary objective here is to secure the liquidity of the Group at all times, control the risks involved using the various financial instruments and optimise Group-wide cash management. To this end, we employ a system of rolling liquidity planning with a time frame of 15 to 18 months.
No significant liabilities or receivables in foreign currencies
There were no significant liabilities or receivables in foreign currencies during the reporting period, as we generate almost 100% of total income in the eurozone. It is therefore not necessary for us to hedge net items in foreign currencies by means of hedging instruments. You can find details on the financial risks in the notes to the consolidated financial statements in the “Financial risk management” chapter.
Financing analysis
The MLP business model is comparatively low in capital intensity and generates high cash flows. However, increased capital has been budgeted for the next few years in order to meet the revised definition of equity and stricter requirements of Basel III.
Equity ratio at 22.0%
The Group’s equity capital backing and liquidity remain good. Shareholders’ equity increased to € 385.8 million (€ 376.8 million) in the reporting period. This was mainly influenced by Group net profit for the financial year 2015 of € 19.8 million, as well as the aforementioned capital increase in exchange for non-cash contributions in August of this year with a volume of € 6.0 million. However, this was counteracted by the dividend payment of € 18.3 million for the financial year 2014. Due to the higher balance sheet total, the equity ratio declined from 23.2% to 22.0%. The regulatory equity ratio was 14.3% on the balance sheet date. The reduction in the ratio can essentially be attributed to the intangible assets (please also refer to Note 6 “Disclosures on company acquisitions”), which increased as a result of the acquisition of the DOMCURA Group. This effect is softened by the capital increase in exchange for non-cash contributions performed in the third quarter.
At present, we are not using any borrowed funds in the form of securities or promissory note bond issues to finance the Group long-term. Our non-current assets are financed by non-current liabilities. Current liabilities due to clients and banks in the banking business represent further refinancing funds that are generally available to us in the long term. Total liabilities due to clients and financial institutions in the banking business of € 1,125.7 million (€ 1,025.1 million) essentially comprise client deposits, which have no financing function for the Group. These liabilities are offset on the assets side of the balance sheet by € 1,143.0 million (€ 1,054.9 million) in receivables from clients and financial institutions in the banking business.
Since provisions only account for 4.9% (5.7%) of the balance sheet total, they have no significant financing function for the Group. Other liabilities increased to € 140.2 million (€ 117.8 million) on the balance sheet date. This increase can essentially be attributed to the first-time inclusion of the DOMCURA Group and is a result of liabilities from the underwriting business, whereby current liabilities increased to € 137.2 million (€ 115.5 million). These are essentially liabilities from operating activities. Current liabilities are offset on the assets side of the balance sheet by cash and cash equivalents of € 77.5 million (€ 49.1 million), largely influenced by incorporation of the DOMCURA Group as well as financial investments of € 147.9 million (€ 145.3 million) and other current assets of € 99.3 million (€ 104.2 million).
On the balance sheet date of December 31, 2015 there were financial commitments from rental and leasing agreements amounting to € 15.8 million (€ 14.5 million). These mainly constitute liabilities from the renting of our branch offices, as well as leasing of motor vehicles and office equipment. They can result in potential total liabilities of € 70.4 million (€ 59.6 million) by the year 2021. This is essentially due to incorporation of the DOMCURA Group, as well as the establishment of new consulting centres.
Liquidity analysis
Cash flow from operating activities increased to € 58.8 from € 32.3 million in the same period of the previous year. Here, significant cash flows result from the deposit business with our clients and from the investment of these funds.
Cash flow from investing activities changed from € -4.3 million to € -18.0 million. A higher volume of new investments in time deposits were made in the reporting period than in the same period of the previous year.
Condensed statement of cash flow
| All figures in € million | 2015 | 2014 |
| Cash and cash equivalents at beginning of period | 72.1 | 61.4 |
| Cash flow from operating activities | 58.8 | 32.3 |
| Cash flow from investing activities | -18.0 | -4.3 |
| Cash flow from financing activities | -18.3 | -17.3 |
| Change in cash and cash equivalents | 22.4 | 10.8 |
| Cash and cash equivalents at end of period | 94.5 | 72.1 |
As of the balance sheet date, December 31, 2015, the MLP Group has access to cash holdings of around € 174 million. A good level of liquid funds therefore remains available. There are sufficient cash reserves available to the MLP Group. Alongside cash holdings, free lines of credit are also in place. In 2015, the MLP Group was capable of meeting its payment obligations at all times.
Capital expenditure analysis
MLP generally finances capital expenditures from cash flow. As forecast, the total investment volume in intangible assets and property, plant and equipment decreased in the last financial year to € 12.8 million (€ 15.4 million). This drop can essentially be attributed to the previous year’s higher capital expenditure for IT systems to support sales, as well as operating and office equipment, in particular hardware.
Capital expenditure
| All figures in € million | 2015 | 2014 | 2013 | 2012 | 2011 |
| Intangible assets | 7.9 | 8.9 | 19.5 | 7.8 | 4.3 |
| Goodwill | – | – | – | – | – |
| Software (developed in house) | 0.4 | 0.4 | 0.4 | 0.4 | 0.4 |
| Software (purchased) | 0.4 | 1.1 | 0.6 | 0.4 | 0.2 |
| Other intangible assets | – | – | 0.0 | 0.0 | – |
| Payments on account and assets under construction | 7.1 | 7.4 | 18.5 | 7.0 | 3.6 |
| Property, plant and equipment | 4.8 | 6.6 | 2.9 | 6.7 | 3.5 |
| Land, leasehold rights and buildings | 0.7 | 0.4 | 0.4 | 0.4 | 0.2 |
| Other fixtures, fittings and office equipment | 3.1 | 4.2 | 1.8 | 5.4 | 3.2 |
| Payments on account and assets under construction | 1.0 | 2.0 | 0.8 | 0.9 | 0.0 |
| Total capital expenditures | 12.8 | 15.4 | 22.5 | 14.5 | 7.8 |
At € 11.2 million, the overwhelming majority of capital expenditure in the last financial year was related to investments in the financial services segment. These investments were made in operating and office equipment and here in particular in sales-supporting IT systems. They contribute to the continuous improvement of consulting support and client service. Alongside these capitalisable investments, we also use other intensive resources for these projects which are recognised as expenses in the income statement. Capital expenditure of € 0.8 million recorded in the FERI segment last year reflected investments in operating & office equipment, as well as intangible assets. Capital expenditure in the DOMCURA segment was € 0.5 million, focusing primarily on operating and office equipment.
Capital expenditure by segment
| Total capital expenditure | Change in % | ||
| All figures in € million | 2015 | 2014 | |
| Financial services | 11.2 | 13.6 | -17.6% |
| FERI | 0.8 | 1.1 | -27.3% |
| DOMCURA | 0.5 | – | – |
| Holding | 0.3 | 0.7 | -57.1% |
| Total | 12.8 | 15.4 | -16.9% |
