Notes to the consolidated financial statements

1. Liquid assets

Liquid assets amounted to EUR 136.4 million (previous year: EUR 106.3 million), whereas interest-bearing financial liabilities reached EUR 13.2 million (previous year: EUR 9.9 million). At year end, net liquidity¹ amounted to EUR 123.2 million (previous year: EUR 96.4 million).

¹ See Alternative performance measures in the consolidated financial statements in this Financial Report.

2. Trade accounts receivable and other receivables

Due to the housing crisis in China and the resulting decline in the credit ratings of various Chinese construction groups, the value adjustments on trade receivables were increased to EUR 14.5 million (previous year: EUR 4.9 million).

As well as bad debt operating allowances for receivable risks that are specifically identifiable, additional general allowances are made for the following overdue periods:

3. Inventories

4. Development of non-current assets

Property, plant and equipment

Financial assets

For further details on reserves for employer contribution, please refer to item 14. Employer contribution reserves and pension fund liabilities in these notes to the consolidated financial statements.

Intangible assets

Intangible assets include software licences amounting to EUR 1.2 million (previous year: EUR 0.8 million), patents amounting to EUR 0.1 million (previous year: EUR 0.1 million) and land use rights amounting to EUR 1.7 million (previous year: EUR 2.1 million).

5. Financial liabilities

Financial liabilities consists of:

Financial lease liabilities have the following maturity structure:

Total financial liabilities have the following maturities and currencies:

Short-term loans are at average interest rates of 2.0% (previous year: 2.3%). Long-term loans are at average interest rates of 3.2% (previous year: 3.3%).

6. Provisions

Tax provisions include deferred as well as other tax provisions in accordance with item “9. Provisions” of the Accounting and valuation principles in the consolidated financial statements in this Financial Report.

The discount rate for German pension obligations was 1.3% (previous year: 1.0%).

Other provisions include provisions for warranties, earn-out for acquisitions made, pending legal cases as well as personnel-related provisions.

7. Equity capital

At the balance sheet date, the equity ratio was 66% (previous year: 66%). The factors that contributed to changes in con­solidated equity are presented in the consolidated statement of changes in equity.

As in the previous year, the share capital totalled CHF 0.6 million, corresponding to EUR 0.4 million at the exchange rate of 1 January 2003. It is made up of 9,756,000 registered shares A with a par value of CHF 0.05 each and 9,900,000 ­registered shares B with a par value of CHF 0.01 each.

Statutory and legal reserves and those not available for distribution amounted to EUR 8.0 million (previous year: EUR 4.2 million).

The transferred shares were sold at a discount of 30% to management staff participating in a stock ownership plan and issued to members of the Board of Directors as part of their fee (see item 22. Shares granted in these notes to the consolidated financial statements).

Of the total shares acquired, 79,300 shares were repurchased via the second trading line on the SIX Swiss Exchange as part of the share buyback programme started on 24 March 2021.

8. Contingent liabilities

At year end, there were guarantee obligations and contingent liabilities vis-à-vis third parties totalling EUR 18.3 million (previous year: EUR 1.9 million).

The following contingent liabilities exist in connection with the acquisitions of Zhongshan Fortuneway Environmental Technology Co., Ltd. and Caladair International SAS:

• The Zehnder Group owns 51% of Zhongshan Fortuneway Environmental Technology Co., Ltd. The Zehnder Group has agreed on the conditions of the potential transfer of the additional 25% stake in Zhongshan Fortuneway Environmental Technology Co., Ltd. with the current owner. On the one hand, the Zehnder Group has received call options on the remaining 49% stake in Zhongshan Fortuneway Environmental Technology Co., Ltd. On the other hand, the Zehnder Group has issued put options on 25% stake in Zhongshan Fortuneway Environmental Technology Co., Ltd.
• The Zehnder Group owns 75% of Caladair International SAS. Zehnder Group has agreed on the conditions of the potential transfer of the remaining 25% stake of Caladair International SAS with the current owner. On the one hand, the Zehnder Group has received call options on the remaining 25% stake of Caladair International SAS. On the other hand, the Zehnder Group has issued put options on 25% stake Caladair International SAS.

Both options rights are currently not exercisable. As the options do not meet the recognition criteria for an asset or a liability, they are not recognised in the balance sheet.

9. Pledged assets

Of the Group’s total assets, EUR 8.0 million served as collateral (previous year: EUR 20.3 million). The pledged assets were exclusively land and buildings.

10. Liabilities to pension funds

At 31 December 2021, there were liabilities to pension funds of EUR 0.6 million (previous year: EUR 0.6 million). These are included in other short-term liabilities.

11. Transactions with related parties

In the reporting year, as was the case in the previous year, no products were sold to companies that were not fully consolidated and there were no receivables due from companies that were not fully consolidated.

In the year under review, as per the previous year, the Zehnder Group did not complete any major transactions with shareholders and there were no receivables or obligations.

The Zehnder Group completed no major transactions with minority shareholders of subsidiaries in either the current or prior year and there were no receivables or obligations at the balance sheet date with minority shareholders.

12. Derivative financial instruments

13. Operating leasing not recognised in the balance sheet

Current operating leasing contracts expire as follows:

14. Employer contribution reserves and pension fund liabilities

Employer contribution reserve (ECR)

No interest was paid on the employer contribution reserve in either year.

Economic benefits/economic liabilities and pension expenses

Please refer to item “10. Pension funds” of the Accounting and valuation principles in the consolidated financial statements and to the pension commitments in item 6. Provisions in these notes to the consolidated financial statements.

15. Segment reporting

In accordance with Swiss GAAP FER 31/8, segment reporting used by the top management level for corporate management is disclosed. The Zehnder Group is an indoor climate system supplier. With the two segments, Europe and China & North America, the Group is classified according to geographical regions. These are managed independently from one another and their business performance is assessed separately. The regions of China and North America are reported together on grounds of materiality. Each of them only accounts for 8% (previous year: 8%) of total sales.

The Europe segment comprises a total of 44 production, sales and management companies in 18 European countries. The largest locations are in Germany, France, the UK, Switzerland and the Netherlands.

The China & North America segment is comprised of a total of 13 production, sales and management companies in China and North America. These sites are located in China, the US and Canada.

16. Sales

Consolidated sales were EUR 697.1 million (previous year: EUR 617.7 million), an increase of 12.9%. Organically¹ sales increased by 11.6%.

Sales include EUR 2.6 million (previous year: EUR 1.4 million) recognised on long-term contracts.

Sales by region and business area are classified as follows:

For sales by segment, please refer to the item 15. Segment reporting.

¹ See Alternative performance measures in the consolidated financial statements in this Financial Report.

17. Other operating income

Other income is classified as follows:

The main sources of miscellaneous operating income are income generated by the sale of scrap materials, rental income from third parties and payments from insurance claims.

18. Other operating expense

Other operating expenses are classified as follows:

19. Financial result

20. Income taxes

The tax ratio (=taxes as a percentage of earnings before taxes) was 12% (previous year: 16%).

The Zehnder Group anticipates that losses of EUR 10.9 million (previous year: EUR 34.8 million) can be utilised against future taxable profits. The deferred tax assets on these losses amount to EUR 2.4 million (previous year: EUR 5.7 million).

The differences between the expected income tax expense, based on the expected income tax rate and the effective income tax expense shown in the income statement, is explained by the following factors. The expected income tax rate of the Group is based on the profit/loss before taxes and the applic­able tax rate in the tax year for the Group companies.

The effect of tax incentives includes a deferred tax asset that was recorded in the tax balance sheet as a result of the tax reform measures introduced in Switzerland and the resulting step-up.

The other effects can be largely attributed to changes resulting from tax provisions.

21. Net profit per registered share

The undiluted net profit per registered share A is calculated by dividing the net profit excluding minority shares by the total nominal value adjusted shares, less the average number of own shares held by Zehnder Group AG.

The shares eligible for the share-based compensation plan (LTI) are also held as own shares. The shares allocated will be included proportionately, resulting in a dilution of the net profit per registered share A.

The undiluted/diluted net profit excluding minority interests per registered share B amounts to one fifth of the undiluted/diluted net profit excluding minority interests per registered share A.

22. Shares granted

The Zehnder Group introduced an employee investment plan in 2001. This plan allows operating unit managers and members of Group management to acquire registered shares A. The shares are issued at a discount to the persons entitled to receive them. The registered shares A issued also include the Board of Directors’ shares. Half of the fee that the members of the Board of Directors receive is made up of registered shares A. 

In 2019, Zehnder Group introduced a long-term, variable compensation element (long-term incentive or LTI). This is granted as part of a long-term investment plan in which rights to shares are awarded under certain conditions. The general contractual basis and exercise conditions are explained under item 4.3 Variable long-term compensation element (long-term incentive, LTI) in the Compensation Report.

The value of shares issued at the time of allocation is equal to the current value. The current value is determined as the closing rate on the day of allocation.

The difference between the current value at the time of allocation and the issue price is recognised in personnel expenses.

Shares granted

23. Acquisitions

The following acquisitions were made in the year under review:

• Completion of the acquisition of the 51% stake in Zhongshan Fortuneway Environmental Technology Co., Ltd. on 28 April 2021 in China. The purchase price is dependent on future profitability. At the end of 2021, EUR 2.6 million was paid. The remaining price will be settled by means of an earn-out within the next 12 months. As a result of the purchase, the Zehnder Group has acquired net assets of EUR 1.1 million. The goodwill recognised amounted to EUR 5.2 million. The transaction resulted in an increase in minority interests in equity of EUR 1.0 million. In the reporting period, Zhongshan Fortuneway Environmental Technology Co., Ltd. contributed EUR 7.3 million to the Group’s sales.
• As of 28 October 2021, the Zehnder Group acquired a majority share of 75% in French companies Caladair International SAS and 100% of the shares in Calihce SCI for EUR 16.3 million. As a result, the Group acquired net assets amounting to EUR 1.0 million. These included liquid assets of EUR 2.8 million, other current assets of EUR 3.3 million, non-current assets of EUR 4.0 million and liabilities of EUR 8.7 million. Net outflow of liquid assets resulting from the acquisition was EUR 13.2 million in 2021, and another EUR 0.3 million was accrued for the final payment in 2022. The resulting goodwill amounted to EUR 6.3 million and was offset against equity. The transaction resulted in an increase in minority interests in equity of EUR 0.4 million. During the reporting period, Caladair Group contributed EUR 1.5 million to the Group’s sales.

No acquisitions were made in the previous year.

24. Goodwill

In accordance with the consolidation principles, the Zehnder Group directly nets acquired goodwill against equity at the time of first consolidation.

If the parts of the acquired goodwill that could be capitalised had been capitalised and written down over a period of five years, the following figures would have resulted:

Impact of theoretical capitalisation of goodwill on balance sheet

Impact of theoretical capitalisation of goodwill on results

25. Disclosure of compensation paid to the Board of Directors and the Group Executive Committee

The total compensation for the Board of Directors and Group Executive Committee is shown in the table below.

Please also refer to the items 5.1 Compensation to the Board of Directors in the business year 2021 and 5.2 Compensation of the Group Executive Committee in the business year 2021 in the Compensation Report.

26. Events after the balance sheet date

On 18 February 2022, the Zehnder Group announced the acquisition of the ventilation company Airia Brands Inc. in Canada. The company has approximately 150 employees, and in 2021, it generated revenue of around CAD 55 million (EUR 38 million).

The 2021 financial statements were approved by the Board of Directors on 18 February 2022.