5 Development and Situation of SinnerSchrader AG
SinnerSchrader AG is the managing holding company of the SinnerSchrader Group. As in the previous year, its business activities mainly comprise guiding, controlling and financing the operative companies in the Group, administering and controlling Group liquidity, managing the German tax integration, providing and administering the infrastructures jointly used by the Group companies (in particular the office space), providing centralised administrative services and performing central Group tasks, such as investor relations work.
There are direct or indirect profit and loss transfer agreements between SinnerSchrader AG and the German subsidiaries, SinnerSchrader Deutschland GmbH, SinnerSchrader Neue Informatik GmbH, SinnerSchrader Studios GmbH and SinnerSchrader Studios Frankfurt GmbH. This means that the profits and losses from operating business are also reflected in the individual result of the AG for the relevant year of the report, in each case as income from transfers of profits or as expenditure from transfers of losses.
With respect to the provision of infrastructure and the central provision of administrative services, SinnerSchrader AG is in a direct business relationship with the German subsidiaries; it charges them for the services rendered and earns its own revenue from this.
The annual result of the AG, determined according to German accounting principles, amounted to € 3.5 million in the 2005/2006 financial year. As in the previous year, the result greatly exceeded the net income in the Group.
The difference of approximately € 2.4 million between the net income in the financial statements of the AG and the Consolidated Financial Statements is mainly due to the fact that the AG has to write up the value of its participation in SinnerSchrader Deutschland GmbH, in which the entire operating business of the SinnerSchrader Group is bundled, up to the original acquisition value in the event of increases in value. Due to the operating result of the financial year and the strengthening of the positive outlook, the value determination for SinnerSchrader Deutschland GmbH resulted in a value increase of € 2.5 million to a new value of € 14.0 million on the basis of the discounted cashflow method. The value recovery as of 31 August 2006 correspondingly resulted in other operating income in the AG’s statement of operations.
In the previous year, value recovery in the amount of € 3.5 million was achieved. This difference, and the disappearance of the one-off income from the sale of treasury stock in the amount of € 1 million, largely explains why the previous year’s net income of € 5.6 million could not be reached again in the year of the report.
The AG’s further revenue, income and expenditure items developed stably in the 2005/2006 financial year in comparison to the previous year. Revenue from services provided for the subsidiaries grew by € 0.1 million to € 2.4 million. Thanks to the profit and loss transfer agreement with the subsidiaries, income of € 1.6 million flowed into the AG. In contrast with the operating results according to IFRS, the income to be paid was € 0.2 million below that of the previous year. This is due to the differences between international and German accounting principles with regard to revenue and income realisation from projects.
The income of around € 0.2 million earned by the AG from investing liquid funds, balanced with interest and interest-like expenses, was comparable to that of the previous year.
The total operating costs of nearly € 3.3 million, comprising expenditure on material, personnel, depreciations and other operating expenditure, hardly changed in the 2005/2006 financial year in comparison to the previous year. A slight increase in personnel costs was compensated for by the reduction of depreciations and other operating expenses.
Once again, there was no income tax in the year of the report. The pre-tax profit, adjusted for non-taxable value recovery and other non-taxable profit components, could not be completely offset against existing loss carry-forwards in the domestic tax group.
In accordance with Article 58 paras 2 and 2a of the German Stock Corporation Act (“Aktiengesetz”), in conjunction with the Statutes of SinnerSchrader AG, an amount of almost € 3.3 million from the net income was posted in the other reserves, which thus amounted to € 9.5 million on 31 August 2006. The remaining share of the net income increased the balance sheet profit to around € 0.8 million. On the balance sheet date, the equity thus totalled € 24.6 million.
On the liabilities side of the balance sheet, the increase in equity was accompanied by a reduction of the other reserves by € 0.3 million to € 0.5 million and a reduction of other liabilities by almost € 0.5 million to € 0.1 million. These changes were associated with the termination of the tenancy of the former office space in Hamburg by moving to new premises at the end of July 2006. On the one hand, the existing pending loss reserves for the unoccupied old premises were completely used up, and on the other hand, when the old premises were vacated, compensation payments became due that had been posted as other liabilities when termination was issued in the previous year.
The rise in the balance sheet total in the year of the report was correspondingly around € 0.7 million lower than the rise in equity. As a result, the equity ratio rose further and reached a value of 97 % on 31 August 2006 compared with 94 % at the end of the previous year.
The corresponding increase in assets largely took place in the shares in associated companies, which were upgraded by € 2.5 million. Furthermore, the liabilities vis-à-vis Group subsidiaries increased by around € 0.4 million. By contrast, the level of liquid funds and securities fell slightly by € 0.1 million.
Within securities, the value of treasury stock rose slightly, but the 131,347 shares of treasury stock were not increased by further buy-backs. Due to the development of the closing price of the SinnerSchrader share from € 1.39 on 31 August 2005 to € 1.53 on 31 August 2006, the value adjustment to treasury stock made in the previous year was reversed.