The Management Board of Conergy AG has imple- mented an internal management control system that provides for groupwide planning, managing and re- porting processes with the aim of enabling value- orientated control and ensuring the development of both the Group and its individual companies. Achiev- ing profitable growth, increasing operational efficien- cy, optimising tied-up capital, ensuring liquidity and achieving a healthy capital structure are the elements of this management control system. This system also helps to coordinate the activities of the Group’s sub- sidiaries and thus strengthen operations.
Budgets and forecasts are an integral part of the rel- evant information systems. The forecasts cover a pe- riod of three years and are revised annually as part of a comprehensive planning process. The groupwide reporting system requires all subsidiaries to prepare monthly IFRS financial statements that are consoli- dated for the purposes of both management reporting and the Company’s published quarterly and annual fi- nancial statements. Likewise, the subsidiaries provide their own assessments of current business trends and the expected profit for the year at regular intervals. Key Performance Indicator (KPI) reports assist man- agement in controlling segments and regions, individ- ual subsidiaries as well as operating processes. Sales and gross profit serve as the key performance indica- tors for determining corporate success. Conergy al- so uses the gross profit margin, which shows gross profit relative to sales. The Company’s performance is measured based on earnings before interest, tax- es, depreciation and amortisation (EBITDA) and earn- ings before interest and taxes (EBIT). Conergy uses EBIT and EBITDA to measure the success of individual business units. In addition to these two parameters, the Group also utilises both the EBIT and the EBIT- DA margin that present these earnings measures as a ratio of sales. These relative performance indicators make it possible to compare the profitability of profit- oriented divisions of various sizes.
Reportable segments (short version)
Segments Europe Asia Pacific and Americas Holding Reconciliation Continuing operation
EUR million 2011 2011 2011 2011 2011
External sales 543.7 210.4 – – 754.1 Intersegment sales 55.1 0.1 – – 55.2 –
Segment sales (total) 598.8 210.5 – – 55.2 754.1
Segment result (EBIT) – 141.3 – 28.1 – 14.0 0.6 – 182.8 Depreciation/amortisation – 93.6 – 2.3 – 2.8 – – 98.7 Thereof impairment losses – 72.5 – 1.6 – 0.2 – – 74.3
Management Board and Supervisory Board
Consolidated Financial Statements
Further Information Group | Internal Indicators |
The table below shows the KPI that are monitored on a continuous basis and constitute the core of the Group’s optimisation efforts:
Key performance indicators 2011 2010
Sales EUR million 754.1 913.5
Germany EUR million 199.0 384.0 Abroad EUR million 555.1 529.5
Gross profit EUR million 127.3 216.9 Gross profit margin in percent 16.9 23.7 EBITDA EUR million – 84.1 30.1 EBITDA margin in percent – 11.2 3.3 EBIT EUR million – 182.8 – 13.8 EBIT margin in percent – 24.2 – 1.5
* includes the export operations of Conergy Deutschland GmbH and der Mounting
Systems GmbH
The Conergy Group’s controlling system has a partic- ularly important role to play in that the annual variable compensation paid to the top management for the 2011 financial year was linked to the aforementioned earn- ings-based performance indicators, notably EBITDA. Conergy was able to lower the amount of tied-up capi- tal through efficient working capital management es- pecially in the 2011 financial year. Hence the amount of capital tied up in receivables, liabilities and invento- ries was further optimised. The Management Board is of the opinion, that this is a key prerequisite for being able to prevail in the currently difficult market environ- ment for photovoltaic systems. Working capital is de- fined as the total of inventories and trade accounts re- ceivable less trade accounts payable and presented as a ratio relative to the sales of the comparative period.
Working capital development 31.12.2011 31.12.2010 *
Sales EUR million 754.1 913.5
Inventories EUR million 86.4 169.5 Trade receivables EUR million 83.2 103.2 Trade payables EUR million 88.2 161.7
Working Capital EUR million 81.4 111.0 Working Capital/
Sales in percent 10.8 12.2
* previous year incl. voltwerk electronics GmbH which was classified as discontinued
operation in 2011
In addition to bringing about a sustained increase in the enterprise value, managing the finances of the Conergy Group is also aimed at maintaining an ade- quate capital structure. Gearing thus serves as an ad- ditional financial ratio in Conergy’s management con- trol system. It is defined as the ratio of net liabilities (borrowings less liquid funds) to equity. Repaying bor- rowings as well as boosting the equity base through
retained earnings and/or capital increases serve as controlling instruments. Conergy aims to achieve a gearing of 100 percent in the medium term, i. e. a 1:1 ratio of equity to net liabilities. Gearing developed as follows in the reporting period:
Net liabilities to equity 31.12.2011 31.12.2010
Borrowings EUR million 141.3 291.6 Liquid funds EUR million 23.8 36.7
Net liabilities EUR million 117.5 254.9
Equity EUR million 20.9 71.4
Gearing in percent 562.2 357.0 The gearing ratio as at 31 December 2011 was 562.2 percent (previous year: 357.0 percent). Whilst Conergy succeeded in substantially lowering its bor- rowings compared to the previous year by refinancing its existing loan liabilities through a mixed cash and non-cash capital increase, which was adopted at the Extraordinary General Meeting on 25 February 2011 (2011 Syndicated Loan Agreement), this positive de- velopment was hampered by the consolidated net loss posted in 2011, which depressed equity. The contin- ued drop in prices for PV modules by about 40 percent in the 2011 financial year had a major impact on the development of business and thus on earnings. As a result, the gross profit declined substantially year-on- year despite higher unit sales. A number of significant extraordinary expenses also depressed earnings. In response to the increasingly difficult market situation Conergy has changed its focus to module production at its Frankfurt (Oder) factory. For further information on the 2011 results we refer to the comments on profit or loss in the Group management report.
For the particulars of the new syndicated loan agree- ment (2011 Syndicated Loan Agreement), please see the description of its terms and conditions in the risk and opportunity report of the Group management report. As before, it is our foremost economic goal in the 2012 financial year to improve the indicators EBITDA and cash flow.