Financial Report – Consolidated financial statements

Consolidation scope and principles

Consolidation scope

The consolidated financial statements are presented in euros and include all domestic and foreign com­panies which Zehnder Group AG controls directly or indirectly by either holding more than 50% of the voting rights or by otherwise having the power to control their operating and financial policies. Assets and liabilities as well as revenues and expenses are included at 100% in accordance with the full consolidation method. Minority interests in equity and in net profit of fully consolidated companies are recognised separately.

Holdings with a voting interest of between 20 and 49% (associated companies) are included in accordance with the equity method. Consolidated equity and the financial result for the period are accounted for proportionately.

The following changes were made in the consolidation scope compared to the previous year:

• Liquidation of Zehnder Group Lenham Ltd on 22 February 2022 in the UK;
• Purchase of Airia Brands Inc. as of 21 February 2022 in Canada;
• Purchase of the Filtech Group with headquarters and a production site in the Netherlands and two further production sites in France and Switzerland on 29 April 2022;
• Renaming of  Recair B.V. to Core Production Waalwijk B.V. in the Netherlands;
• Renaming of Paul dPoint Technologies GmbH to Core Energy Recovery Solutions GmbH in Germany.

Adjustment of segment reporting

In accordance with Swiss GAAP FER 31/8, segment reporting used by the top management level for corporate management is disclosed. In the past, this was divided into the geographical regions of Europe, China and North America. In connection with the increased share of ventilation sales in total sales due to acquisitions and in line with the “Growth for ventilation – harvest for radiators” strategy, the Group is also reorganising itself according to business areas in North America. The segment reporting has been adjusted accordingly. The new segments – ventilation and radiators – were reported for the first time in the Six-month Report 2022.

The ventilation segment covers the three product lines for ventilation, heat exchangers and clean air solutions. The radiator segment contains two product lines: radiators and climate ceilings.

The sales by region and segment table also provides information on the regions in which the sales were generated. Whereas in the past sales were allocated to the region in which the corresponding sales company had its legal domicile, sales are now allocated to the region to which the products and systems were sold. In order to better reflect the global activities of the Zehnder Group, the regions have been expanded accordingly to EMEA (Europe, Middle East and Africa), Asia-Pacific and North America.

The previous year’s figures have been adjusted to the new segments and regions for better comparability.

Error correction

In previous years, deferred taxes amounting to EUR 2.0 million were incorrectly reported in the balance sheet. Due to the local tax treatment of goodwill and certain property, plant and equipment from acquisitions, a tax asset of EUR 0.7 million resulted (within financial assets), while a deferred tax liability of EUR 1.3 million was reported (within provisions). The error was corrected retrospectively as of 1 January 2021, the opening balances of equity capital (item offset goodwill) for the comparative period will be increased accordingly by the shortfall.

This correction has no impact on the income statements 2022 and 2021. It also does not affect liquidity in either reporting year.

Consolidation principles

General

Zehnder Group prepares its financial statements in accordance with the existing guidelines of Swiss GAAP FER (Swiss Accounting and Reporting Recommendations).

The consolidated balance sheet and income statement are based on the financial statements of the companies as defined in the consolidation scope for the year ended 31 December.

The data presented in the consolidated financial statements are based on uniform accounting and valuation principles which apply to all Group companies.

Intergroup receivables and payables as well as revenues and expenses are eliminated in the consolidated statements. Intermediate profits in inventories are eliminated as well.

Foreign currency translation

For the year under review, the financial statements of subsidiaries which report in currencies other than the euro were translated into euros (EUR) as follows:

• Balance sheet figures at year-end exchange rates;
• Income statement figures at average exchange rates for the year;
• Cash flow statement figures at average exchange rates for the year.

Differences arising from applying these disparate exchange rates as well as foreign exchange differences on long-term loans of an equity nature to Group companies were booked to the cumulative translation differences of the consolidated equity capital. Foreign currency differences arising from repayments of long-term loans of an equity nature are also booked to consolidated equity capital and are not transferred to the income statement until such time as a disposal takes place.

The principal rates of exchange used for consolidation are shown in the table below.

Capital consolidation

Capital is consolidated to show equity capital as if the Group were one single company. To do this, it is necessary to offset the net worth of consolidated companies against the capital allotted to them.

Capital consolidation is based on the purchase method, whereby the acquisition cost of a Group company is eliminated at the time of acquisition against the fair value of net assets acquired, with the remainder recorded as goodwill that is subsequently offset against equity of the Group.

In a gradual acquisition, where the investment in shares in an associated company is increased so that takeover of control occurs, the values of participations held to date are initially posted as an outflow, taking any goodwill into account. The fair value of this outflow is determined by the terms of acquisition at the time of takeover of control. Any resulting profit or loss is reflected in the result from associated companies. ­A revaluation of the entire shareholding in accordance with the terms of acquisition at the time of takeover of control is subsequently carried out as if it were a new acquisition.