Table of Contents
Phoenix Solar AG in Figures 3
Group Structure and Business Activities 4
Letter to our Shareholders 5
Phoenix SonnenAktie ® (share of Phoenix Solar AG) 6
Interim Management Report 10
Interim Consolidated Financial Statements 21
Notes to the Interim Consolidated Financial Statements 26
Affirmation by the Legally Authorised Representatives 42
Phoenix Solar AG in Figures
Reporting date / period
01/01/ – 31/03/2009 01/01/ – 31/03/2008 Balance sheet (1) Total assets in k€ 154,049 115,489 Equity in k€ 83,528 48,254 Equity ratio % 54.22 41.78 Return on equity % – 6.70 1.31 Results
Total sales revenue in k€ 36,743 41,584
EBIT in k€ – 7,437 359
EBIT margin % – 20.24 0.86
Result for the period in k€ – 5,982 622
Employees (1)
Employees (m/f) (2) number 219 160
Sales per capita (3) in k€ 179 283
Phoenix SonnenAktie ®(1)
No-par bearer shares units 6,684,500 6,077,000
Earnings per share (basic) in € – 0.89 0.10
Earnings per share (diluted) in € – 0.89 0.10
Closing price in € 34.00 35.69
Market capitalisation in k€ 227,273 216,888
(1) at the end of the period
(2) average employee number, including part-time and temporary staff (3) full-time equivalent
Group Structure and Business Activities
as at 31/03/2009 Phoenix Solar AG Sulzemoos Germany 100 % 100 % 100 % 100 % 75 % 100 % Phoenix Solar Energy Investments AG Sulzemoos Germany Phoenix Solar S.L. Madrid Spain Phoenix Solar S.r.l. Rome Italy Phoenix Solar E.P.E. Athens Greece Phoenix Solar Pte. Ltd. Singapore Phoenix Solar Pty Ltd Adelaide Australia 100 % 100 % 100 % Phoenix Solar Fonds Verwaltung GmbH Sulzemoos Germany TPC Photoenergy srl Eppan a. d. W. Italy Scarlatti Srl. Eppan a. d. W. Italy General partner Phönix SonnenFonds GmbH & Co. KG B1 Sulzemoos Germany 31.2 %Phoenix Solar AG is a leading international photovoltaic system integrator listed on the TecDAX. Phoenix Solar AG plans, builds and undertakes the operation of large photovoltaic plants and is a specialist wholesaler for complete power plants, solar modules and accessories.
Dear Shareholders,
The solar sector looks back on an extremely difficult first quarter 2009. Apart from the financial and economic crisis, which continues to cause problems for solar companies as well in respect of securing financing for their growth and projects, a hard and long winter through to the end of March hampered the expediting of projects. Sales in the sector were correspondingly low.
Another burdening factor is the cap of 0.5 gigawatt peak output (GWp) in total on new photovoltaic plants intro-duced from 2009 onwards in Spain, which is the world’s largest solar market. Around 2.4 GWp were installed in this country in 2008. This enormous slump of around 2 GWp will be difficult for the other markets in Europe and abroad to compensate, despite their growth. We therefore assume that 2009 will see virtual stagnation in the global photovoltaic market.
This demand will be accompanied by a large production capacity which has been steadily ramped up in recent years. The long expected oversupply of solar modules has now become reality and is exerting pressure on prices and margins. For Phoenix Solar AG, this transition from a seller to a buyer market, among other factors, will mean that we will be in a position to offer both large and small photovoltaic systems with attractive returns. Nonetheless, the negative environment has had an impact on our performance in the first quarter. Revenues fell in a quarter-on-quarter comparison for the first time since the start of 2007, and Phoenix Solar has had to disclose its first quarterly loss in two years.
Despite the “re-occurrence of a weak first quarter”, Phoenix Solar can also report on positive signs: the German market in 2009, for instance, is set to become the largest in the world again and, in our opinion, will experience strong growth. The fact that we have always attributed special importance to our home market and given our best support to our customers in Germany is now likely to pay off, flanked by consistent improvements in our sales network and our service. The success of these activities is already reflected in the revenues of the Components & Systems segment: despite the most adverse circumstances, this segment’s revenues rose 14 percent in the first quarter of 2009 as against the previous year.
Another bright spot is the level of our order book at the end of the first quarter where Phoenix Solar has set as higher level compared to the previous year. This is evidence of robust demand, above all from the German market, and shows that our growth prospects remain good. Accordingly, obtaining credit for customers of large photovoltaic power plants has improved. Whereas, in the period between January and March, revenues in the Power Plants segment fell by 50 percent in a year-on-year comparison, we now have the first financing commitments and power plant construction went ahead again at the start of April.
In view of the unabated faith in photovoltaics as a future-oriented source of energy, the Board of Directors of Phoenix Solar AG looks ahead to the year 2009 and its expected difficulties with confidence. The guidance released in January which specifies a revenues target of around EUR 520 million and an EBIT of around EUR 31 million still applies. With sunny greetings,
Dr. Andreas Hänel
Phoenix SonnenAktie
® (share of Phoenix Solar AG)STOCK MARKET ENVIRONMENT
The consequences of the economic and financial crisis continued to exert a great impact on Germany’s economy at the start of 2009 as well. Topics such as the partial nationalisation of the Commerzbank and the emergency intervention of the German government to bail out Hypo Real Estate played a major part in influencing events on the stock exchanges, as did the attempt of Opel to disengage from General Motors or discussions about Infineon’s bankruptcy. In January, the German government approved a second economic stimulus package to bolster the German economy. The European Central Bank lowered the key rate by another 50 basis points to 1.5 percent in the first quarter.
SHARE PRICE PERFORMANCE
In the first three months of 2009, Germany’s DAX and TecDAX lost around 18 and 9 percent respectively of their value. Solar equities also declined further. Counter to these trends, the Phoenix SonnenAktie® proved to be relatively robust and recorded a share price increase of more than 35 percent. Price performance in January was driven by the early release of revenues and EBIT guidance for the current financial year as well as a long-term outlook with a horizon up until 2013. The share rose by almost 26 percent in this month alone. Having trended side-ways in February, it reached its lowest point for the quarter on 6 March at EUR 23.91. Share prices within the sector as a whole tumbled, a development triggered by the announcement of extremely weak preliminary annual results of a large solar company. On 5 and 6 March the share of Phoenix Solar AG lost more than 20 percent. On the following trading day, however, the share was able to make up the decline and reached its peak for the first quarter at EUR 35.18 on the 27 March.
The closing price of the Phoenix SonnenAktie® stood at EUR 34.00 on the reporting date. Owing to the increase in the number of shares in April 2008, market capitalisation as per 31 March 2009 posted EUR 227 million, thereby exceeding the previous year’s figure of EUR 217 million.
B.I.R.D. AWARD
The magazine Börse Online commended Phoenix Solar AG in the TecDAX category by awarding it the B.I.R.D. (Best Investor Relations – Germany) 2008 prize in the TecDAX category for its investor relations work done for private investors. In the overall assessment encompassing the DAX, MDAX, SDAX and TecDAX indices Phoenix Solar AG came sixth among a total of 160 listed companies.
SHAREHOLDER STRUCTURE
In the first quarter of 2009, the company received a number of notifications made pursuant to Sections 21 et. seq. of the German Securities Trading Act (WpHG) in which shareholders indi-cated that they had reached, exceeded or fallen below the statutory thresholds for reporting. The resulting shareholder structure as per 31 March 2009 was as follows:
INVESTOR RELATIONS
As in preceding years, the Board of Directors presented Phoenix Solar AG to investors and analysts at a series of dedicated conferences in the spring. Conferences included the 4th HSBC Small/Mid Cap SRI Conference organised by HSBC Trinkaus & Burkhardt in Frankfurt am Main, the Fourth Annual Clean Technology and Renewables Conference of the investment bank Piper Jaffray in New York and the Growth & Responsibility Conference 2009 organised by the Commerzbank in Frankfurt am Main. A number of road shows, accompanied by different brokers, took place in New York, Boston and Paris. Numerous investors and analysts took the opportunity of arranging individual meetings at company headquarters Sulzemoos, particularly in March during a special photovoltaics conference held in Munich. London’s Barclays Capital published an analyst report on Phoenix Solar AG in February, which marked the start of the first individual analyst coverage for the company from the financial centre of London.
SHAREHOLDER STRUCTURE %
Data including share voting rights assigned pursuant to Section 22 of the German Securities Trading Act
Allianz SE 3.74
Pioneer Asset Management S.A. 3.93
JPMorgan 4.57
M.M. Warburg LuxInvest S.A. 5.16 Board of Directors & Supervisory Board 7.49 Further free fl oat 75.11
KEY FINANCIAL DATA Q1 2008 2008 Q1 2009
Number of shares units 6,077,000 6,684,500 6,684,500 Market capitalisation in € 216,888,130 167,981,485 227,273,000
Closing price (XETRA) in € 35.69 25.13 34.00
High in € 41.29 52.65 35.18
Low in € 23.71 19.61 23.91
Trading volume units 4,014,810 17,341,739 2,889,440 Revenues in € 131,431,665 626,681,819 84,151,198
Dividend in € – 0.30 (1) –
Earnings per share (EPS) in € 0.10 3.63 (2)
3.62 (3) – 0.89 (2) – 0.89 (3) (1) dividend proposal (2) basic EPS (3) diluted EPS
KEY DATA
Securities identifi cation number A0BVU9 International securities identifi cation
number
DE000A0BVU93
Ticker symbol PS4
Share class No-par bearer share Number of shares as per 31/03/2009 6,684,500 units Share capital on 31/03/2009 € 6,684,500 Stock market segment Offi cial Market Transparency standard Prime Standard
Indices TecDAX, ÖkoDAX, CDAX, HDAX, DAX International 100, Midcap Market, Technology All Share, Prime All Share, various DAX sub-indices
Stock markets Frankfurt am Main (Prime Standard), Munich (M:access), Stuttgart, Berlin / Bremen, Dusseldorf, Hamburg, Hannover, XETRA
Sector / industry sector Industrial goods / Renewable energies Designated sponsor HSBC Trinkaus & Burkhardt AG
PRICE PERFORMANCE IN COMPARISON TO TECDAX 1 January to 31 March 2009 %
1 2 3 160 140 120 100 80 60 40 20 Lowest price 06/03/2009 € 23.91
Highest price 27/03/2009 € 35.18 Rate %TecDAX %
Interim Management Report
of Phoenix Solar Aktiengesellschaft, Sulzemoos, on the IFRS Interim Consolidated Financial Statements for the period from 1 January to 31 March 2009
1
G E N E R A L CO N D I T I O NS A N D M A R K E T S
( N AT I O N A L A N D I N T E R N AT I O N A L)
As approved by German Federal Parliament in the year 2008, tariffs in Germany for feeding into the grid fell by eight percent for plants of dimensions below 100 kilowatt peak output (kWp) and by ten percent for power plants of over 100 kWp, and thus also for ground-mounted systems, as from 1 January 2009. The decrease of 25 percent in the feed-in tariff for roof-mounted systems with a peak output of more than one megawatt (MWp) was clearly dispro-portionately high. The tariffs for solar electricity fed into the grid in Germany therefore ranges from 43.01 cent per kilowatt hour (ct/kWh) for roof-mounted systems smaller than 30 kWp up to 31.94 ct/kWh for electricity generated by ground-mounted systems.
The impact of the global financial and economic crisis on the development of the German photovoltaic market filtered through in its full force in the first quarter of 2009. Whereas the financing of small and mid-sized photovoltaic systems, undertaken as in the past by German savings banks, commercial credit co-operatives (Volksbank/Raiffeisenbank) and a few banks specialising in renewable energies financing, was apparently little affected, the financing of large power plants in dimensions of more than one MWp was extremely problematic in the first quarter.
The photovoltaic business in Germany is a typically seasonal business which, against the back-ground of the lowering of feed-in tariffs at the start of the year, results in a year-end rally. Weather conditions also have a great impact on the seasonal nature of business, as winter weather in the first quarter hinders construction work on photovoltaic power plants or halts it all together. The hard, long winter of 2008/2009 exerted a great impact on installation activi-ties and thus on the volume of sales and earnings achievable.
Alongside the economic crisis and weather conditions, there was a third aspect which made for a generally difficult quarter in the solar sector: the long-expected transition from a seller to a buyer market, and the associated decline in the price of solar modules, both on the procure-ment and on the sales side. The price downtrend caused reticence on the part of buyer customers, as they were hoping for further price reductions.
Some of the most important photovoltaic markets in Europe are in southern Europe in par-ticular. Whereas, in 2008, the Spanish market grew by 2.44 gigawatt peak output (GWp) to take its place as the world’s largest market with a volume way above that of the German market, its importance in 2009 is set to fall significantly. A new Royal Decree which has intro-duced an annual cap of 500 MWp may mean that Italy could advance to become the second most important market in Europe, after Germany. Along with the Southern European markets, there are other markets which are growing in importance. These markets include, for instance, France and Belgium and other countries in Eastern Europe, headed by the Czech Republic and Bulgaria.
A common denominator in these new markets is the still relative lack of experience with photovoltaic systems, above all of the banks in questions of financing and the regulatory bodies and grid operators. This causes a reluctance to buy which has been exacerbated by insecurity brought about by the financial and economic crisis. The other European markets were not even close to compensating for the weakness in the German market in the first quarter.
Outside Europe there is most assuredly new stimulus identified for the photovoltaic market. The Japanese government has extended its subsidy program and China has launched its first programme to promote solar energy. Australia has planned a new set of amendments for its government-supported programme expected at mid-year, with an improvement in the status of roof-mounted systems. Canada saw the introduction of a government subsidy program in the federal-state of Ontario in the first quarter of 2009.
Since the election of the new president, there are great expectations in the USA for the devel-opment of framework conditions for renewable energies. Although there are already the first local incentive programs for the building of photovoltaic systems such as, for instance, the introduction of a municipal feed-in tariff in Gainesville, Florida, there are as yet no reforms to the existing framework programmes at a national level.
2
B USI N E SS PE R F O R M A N CE
2.1 GENERAL DEVELOPMENT
Phoenix Solar was also unable to the couple from the impact of the financial and economic crisis in the first quarter of 2009. Financing problems experienced in respect of large solar parks meant that construction on only one ground-mounted power plant was begun in the first quarter. The only project to be finished in the first quarter was a roof-mounted project begun in 2008 and not completed owing to the early advent of winter.
The demand for small and mid-sized photovoltaic systems, serviced by the Components & Systems trading segment, ran at a high level. This positive development is reflected in the increase in the order book as against the previous year’s period. However, the winter period which lasted through to the end of March hindered delivery and therefore the realisation of revenues in this segment.
In expectation of tumbling purchase prices of crystalline modules, the company had already suspended the procurement of additional volumes of this type of module which exceed existing framework agreements by the third quarter of 2008. Nonetheless, inventories had not been reduced to the desired extent by the end of the year, primarily due to financing problems in respect of large power plants and the early start to winter in November 2008. There was there-fore a need for downward valuation at the end of 2008. At the end of the first quarter as well, more downward adjustments had to be made as the prices continued to fall and modules were not sold or delivered primarily due to the long winter season. These downward valuations had sustained impact on the earnings situation.
The combination of numerous factors exerting a negative impact on business made the first quarter of 2009 one of the most difficult in the company’s history.
2.2 EARNINGS, FINANCIAL AND NET WORTH POSITION
The overall performance of the Phoenix Solar Group came to EUR 36.7 million (Q1/2008: EUR 41.6 million), which is a decline of 11.6 percent. The Components & Systems segment contributed EUR 28.5 million to total revenues (Q1/2008: EUR 25.1 million) and the Power Plant segment EUR 8.2 million (Q1/2008: EUR 16.5 million). The percentage share in total reve-nues was attributable as follows: 77.7 percent to the Components & Systems segment (Q1/2008: 60.3 percent) and 22.3 percent to the Power Plants segment (Q1/2008: 39.7 percent).
In the period under review, the share of international business in consolidated revenues came to 5.4 percent as compared with the year-earlier figure of 16.0 percent. The foreign subsidiaries contributed 2.7 percent to total revenues in the first quarter (Q1/2008: 6.6 percent).
As against the previous year’s period, personnel expenses rose from EUR 2.5 million to EUR 3.7 million. This increase was directly attributable to the consistent implementation of the Group’s growth strategy. The number of the Group’s employees climbed to 221, which is an increase of 38.1 percent as against the previous year’s quarter.
In the first quarter, earnings before interest and taxes (EBIT) stood at EUR – 7.4 million (Q1/2008: EUR 0.4 million).
The Phoenix Solar Group’s total assets advanced from EUR 115.5 million to EUR 154.0 million in a year-on-year comparison. This increase was primarily the result of items comprised under current assets, such as inventories, which climbed to EUR 108 million, up from EUR 55 million. In the reporting period, part of inventories was also a power plant project already completed with a revenue potential of around EUR 17 million which was only sold to an investor at the start of the second quarter. Owing to the business volume envisaged, first and foremost for power plant projects, and the time delay in project realisation, the volume of inventories held was significantly higher in the first quarter of 2009. The increase in inventories brought the cash flow from operating activities to EUR – 38.2 million on 31 March 2009. This figure came to EUR – 14.7 million in the previous year’s period. The equity ratio as per the quarterly reporting date had nonetheless risen from the 2008 figure of 41.8 percent to 54.2 percent in the current year.
3
SEG M E N T S
3.1 COMPONENTS & SYSTEMS (DOMESTIC AND INTERNATIONAL)
The Components & Systems segment is still focused on Germany. In Italy, Belgium, France, Spain and Greece there are other markets for small and mid-sized photovoltaic systems. The Phoenix Solar Group is present in these markets through its regional partners. In Spain in partic-ular, there are new prospects for this segment owing to the amendment to the Royal Decree and the relatively favourable conditions for small to mid-sized roof-mounted systems.
All in all, the revenues of the Components & Systems segment climbed from the previous year’s figure of EUR 25.1 million to EUR 28.5 million in the first quarter, which corresponds to a growth of 13.6 percent. In Germany, revenues soared by 33.7 percent in a year-on-year comparison.
Orders on hand of the Components & Systems segment posted EUR 154.2 million as per 31 March 2009 as compared with EUR 88.0 million on 31 March 2008. Revenues from domestic business came to EUR 152.9 million, which is 101 percent higher than the previous year’s level. The order book for International business stood at EUR 1.3 million on the reporting date (Q1/2008: EUR 12.2 million).
3.2 POWER PLANTS (DOMESTIC AND INTERNATIONAL)
Other than in previous years, the Power Plants segment was exposed to a series of factors hampering business including the hard winter, the new Spanish legislation on feed-in tariffs and the impact of the global financial crisis on project financing. In comparison to the previous year’s quarter, there was a significant reduction in the total capacity installed in Germany due to the long and hard winter. Along with the scheduled completion of a large roof-mounted project of 2.3 MWp, started in 2008, which, due to the weather in January and February, presented a special challenge, construction work started on another ground-mounted project in March. In addition, remaining work on and the trial operation of a number of power plants were concluded and these plants were taken into operation before the end of the year 2008. Total revenues of EUR 7.9 million were generated in Germany under these conditions (Q1/2008: EUR 14.8 million).
In all other European countries where Phoenix Solar operates the banks have been most hesi-tant to grant financing over the period since October 2008 up until the end of the first quarter of 2009. This hesitancy caused an investment backlog, especially in Spain, Italy and Greece. Interest by investors is still great but project completion is being delayed due to unclarified issues affecting financing.
There are already a number of project orders in domestic business or on the threshold of completion in the second quarter. For this reason, capacity utilisation in respect of power plant construction can be expected to have improved as against the first quarter of 2009.
Overall, segment revenues stood at EUR 8.2 million in the first quarter of 2009 compared with EUR 16.5 million in the first three months of 2008, which corresponds to a decline of 50.4 percent.
Orders on hand in the domestic business of the Power Plants segment came to EUR 87.7 million as per 31 March 2009, which is considerably higher than the previous year’s level of EUR 29.4 million. The order book for international projects stood at EUR 6.5 million (Q1/2008: EUR 113.2 million), which is a decline of 94.3 percent.
4
G RO U P CO M PA N I E S
4.1 PHOENIX SOLAR ENERGY INVESTMENTS AG
In close cooperation with the Power Plants segment, Phoenix Solar Energy Investments AG (PSI) concentrates on the development of large-scale photovoltaic power plants and on selling them to institutional investors. The focus of PSI’s activities were on Germany and southern Europe in the reporting period. General contractor agreements on projects with a volume of around eleven MWp were negotiated and concluded on behalf of the Phoenix Solar AG in Germany. New regions are being developed in order to promote the strategic expansion of business with institutional investors, most particularly southern Europe and France. The company is conducting negotiations, among other activities, in these regions with project developers, potential inves-tors and financial institutions, also with the aim of acquiring project rights.
4.2 PHOENIX SOLAR S.L., SPAIN
The year 2008 saw photovoltaic plants with an output of around 2.4 GWp installed in the Spanish market which, in 2009, will be limited to a maximum of only 500 MWp. Of this amount, 66 percent has been allocated to roof-mounted systems in respect of which the market still needs to be developed and sales structures built up. Another burdening factor is that the approval procedure has not yet been conclusively regulated.
The in-depth expertise of the Spanish subsidiary’s employees whose experience, also in selling roof-mounted photovoltaic systems, and good contacts in the market will ensure that the company will be able to hold its ground in a smaller market as well.
4.3 PHOENIX SOLAR PTE LTD, SINGAPORE
Since the decision of the Singaporean government in May 2008 to promote photovoltaic systems for individuals and industry, the planning of new buildings of all sizes has taken increasing account of photovoltaic systems. In the wake of the financial crisis, however, deci-sion processes at banks for granting loans have slowed in Singapore as well. This caused the delay to the start of numerous projects in 2008 which were postponed to the beginning of 2009. The considerably higher level of orders in comparison to the first quarter of 2008 suggests that the prospects of growth in respect of the project capacity utilisation of this Group subsid-iary are good.
4.4 PHOENIX SOLAR S.R.L., ITALY
Following the renaming of the company, formerly known as RED 2002 S.r.l., as Phoenix Solar S.r.l. in January 2009, the Italian subsidiary is now present in the market under the uniform corporate name. In March 2009, a new managing director took over from the former managing directors who withdrew, as planned, for reasons of age. The new managing director has given fresh impetus to the alignment of the subsidiary’ sales operations. The year-earlier revenues were also not achieved in the reporting quarter owing to weather conditions and the impact of the financial crisis on lending by banks in Italy. Revenues fell 44 percent as against the previous year’s quarter.
4.5 PHOENIX SOLAR E.P.E., GREECE
Since the subsidiary’s founding in June 2008, it has concentrated its business activities on building up sales structures and its internal organisation. In the meantime, personnel has been hired for the key functions and the company is now forging ahead with expanding its trading in components and systems.
4.6 PHOENIX SOLAR PTY LTD, AUSTRALIA
Phoenix Solar is channelling activities into building up a sales structure for components and systems. First successes were made at the start of 2009 with the supply and delivery of turn-key roof-mounted systems for houses in one kWp output class to a newly founded consumer initi-ative in the federal state of South Australia.
A restructuring of the subsidy programme in Australia has been scheduled for mid-year 2009. Government subsidy programme will be withdrawn in favour of roof-mounted photovoltaic systems and replaced by Renewable Energy Certificates (REC’s). These are freely tradable certif-icates which, among other purposes, are intended to serve as proof that the Australian climate protection goals have been reached. Protracted application processes for subsidies, as is currently required, will therefore no longer apply. This measure is expected to stimulate the market.
A number of Australian federal states have already introduced local feed-in tariffs (South Australia, Queensland, Australian Capital Territory) or announced the introduction of similar tariffs. This legislation on feeding into the grid currently still excludes large projects. Incorpo-rating direct subsidies by the government, there is, however, the possibility of implementing large projects on a financially viable basis.
5
PRO C U R E M E N T A N D PU RCH A SI N G
The growth targets of the Phoenix Solar Group determine its procurement strategy for the most part. This strategy is geared toward achieving a balanced product portfolio which covers the entire range of existing module technologies at market-oriented prices. Modules are destined for use in both the Components & Systems and in the Power Plants segments. This enables the Group to switch its sales and distribution channels rapidly. The implementation of this strategy ensures the requisite supply, accompanied by annual price reductions. To this end, contracts are signed with selected suppliers and stringent quality criteria established.
The transition in the photovoltaic market from a supply to demand market, of which there were already signs in the last quarter of 2008, became reality at the start of the current year. This sea change is being fuelled by an excess availability of modules, both in thin-film and crystalline technologies. Module manufacturers are responding to this situation by considerably reducing prices but are meeting with only hesitant recovery in demand. The need for modules is currently determined more by known brands and quality suppliers which enable higher returns on projects to be achieved.
The procurement activities of the Phoenix Solar Group have been increasingly exposed to the impact of the global financial crisis. At an earlier stage and before the first signs of the crisis, the procurement selection procedure was supplemented in close cooperation with risk manage-ment to include the stringent monitoring of supplier liquidity and credit standing.
Concepts for reducing inventories and shortening delivery times and routes are developed and optimised on an ongoing basis together with suppliers and the Group’s own sales operations. Among other aspects, the timing of sourcing modules is coordinated more closely with the dates when sales are realised. Phoenix Solar AG has laid the cornerstone for steady growth by concluding long-term agreements. Discernible risk resulting from the potential price down-trend in respect of long-term agreements is compensated through ongoing, subsequent nego-tiations. In such subsequent negotiations, manufacturers have as yet proven to be reliable and responsible partners.
The Phoenix Solar Group has always paid special attention to securing the currency risk in procurement and its impact on buying prices. A long-term currency hedging strategy and discussions with suppliers held in good time have served to counteract potential disadvantages for the Group at an early stage.
6
O PP O R T U N I T I E S A N D R ISK S R E P O R T
6.1 RISK MANAGEMENT SYSTEM
The Phoenix Group has based its definition of “risk” on the definition under the German Accounting Standard (DRS) which sees risk as the possibility of negative future developments in the financial position of the company. In the opinion of management, risks also harbour inherent opportunities which can be turned to the advantage of the company.
The risk management system of the Group serves to identify, control and manage risks which occur. Above and beyond risks to the company as a going concern, activities, events and devel-opments are recorded by the system if they might exert a significant influence on the success of the company’s business in the future.
6.2 SPECIFIC RISKS/MATERIAL OPPORTUNITIES AND RISKS
Alongside the individual opportunities and risks described in detail in the Annual Report 2008, explicit reference must be made at this point that, from today’s standpoint, there are the following opportunities and risks:
There is also a certain risk inherent in the ongoing dependency of national photovoltaic markets on government subsidy measures for the Phoenix Solar Group as, without the requisite govern-ment subsidies for customers and investors, investgovern-ments in a photovoltaic system will not deliver sufficient return, especially in view of the fact that the costs of electricity generated by conven-tional suppliers not producing in the field of renewable energies are still lower at present. Limitations imposed by the new Spanish Royal Decree on feed-in tariffs have reduced the market volume of this country to a considerable extent, especially for a growth-oriented company such as Phoenix Solar AG. As this applies to all competitors operating in the Spanish market in 2008, fiercer competition can be expected, especially in the German market. This gives rise to a crowding-out risk for Phoenix Solar and its competitors.
In its business of wholesale trading in components and systems, the Phoenix Group is active in a market environment where barriers to market entry are considered to be relatively low. The number of competitors may therefore rise, also through foreign companies entering the market. Fierce competition, as emerges with the better availability of modules, is often accompanied by a decline in the prices which can be commanded. This may exert a considerable impact on the volume growth, sales revenue and the success of the company.
The potential loss of recourse in guarantee claims asserted in the event of potential supplier insolvency may give rise to additional financial burdens for Phoenix Solar AG.
At present, potential investors interested in large photovoltaic power plants are also feeling the effects of the financial crisis. While the attitude of banks to financing projects is becoming appreciably reticent, there are delays in the realisation of planned projects. Accordingly, the search for suitable investors can be expected to become more difficult and more time-consuming in the future.
The company practices stringent liquidity controlling and, upon the signing of a syndicated loan with a three-year term, has secured financing for the Group in the medium term. The granting of the syndicated loan is contingent upon fulfilling covenants. If these covenants are not filled, this may result in the syndicated credit line being withdrawn. There is therefore a risk that growth envisaged may not be achieved owing to financing shortfalls. This requires the permanent monitoring of a sufficient equity ratio in order to secure the necessary preconditions for obtaining loans.
On the one hand, the harbingers of a module oversupply were evident in the last quarter of 2008 and, on the other, the spreading financial crisis and module buyers’ growing expectancy of falling prices caused general demand to slow. If the weightings in the market shift through the ramping up of production capacities accompanied by declining demand, the result is an excess supply of modules, falling prices and excess inventories which continue to lose their value.
To ensure its own supply and to stabilise prices, Phoenix Solar has used the option of signing long-term delivery agreements with module manufacturers. In times when the photovoltaic market was determined by shortfalls in modules this was an effective instrument of exploiting market and growth opportunities. With the first signs of a module oversupply long-term contracts restrict the ability to respond swiftly in the event of price slumps to ensure that prices are aligned with the market. They raise the risk of excessive stockpiling through obligations to take delivery, associated with the risk of downward valuations to inventories. The company is responding to this risk, on the one hand, through active control and management and coordi-nation of all sales activities in both its core segments as well as, on the other hand, by conducting procurement negotiations with suppliers. In the selection of partners for this type of long-term agreement, Phoenix Solar has placed special importance on qualitative aspects as well as on the willingness to cooperate and the adjustability of terms to changing market conditions and attractive prices through price digression.
More extensive currency risks caused by the spreading financial crisis, especially in the case of deliveries denominated in US dollars (USD) or Japanese yen (JPY), have always been covered by the Group by a currency hedging strategy based on the underlying and a broad product and supplier portfolio which gives it other options at short notice.
Forging ahead with expansion abroad, in particular with project development and the construc-tion of photovoltaic power plants abroad, is subject to higher risks in respect of development costs and times to completion as well as completion itself than in Germany. Particularly in the case of stepping up efforts to develop new markets, the occurrence of delays and higher costs as against the original, consciously conservative planning cannot be entirely discounted.
The implementation of a new Enterprise Resource Planning (ERP) system, adjusted to meet current and future requirements, is intended to help link up all areas and functions of the company more closely with one another and to optimise information flows and processing. At present, there is an additional workload affecting a number of process workflows owing to the setting up and maintaining of interfaces between existing data processing systems. Before sustainable synergy effects can be released from the new group-wide ERP system, however, the process of introduction will claim and bind existing resources, in addition to daily business. A general tax audit has already been announced by the financial authority responsible for mid-year 2009. Along with the general entrepreneurial risks, financial risks for the Group may also arise from this audit.
In addition, given a market with dynamic growth such as the photovoltaic market, the Phoenix Group is exposed to a range of different risks which are not discernible at present or which have currently been estimated low risk.
6.3 OVERALL RISK/RISK OF GOING CONCERN
Taking a comprehensive view of the overall risk situation of the Group it becomes evident that the risks are restricted and manageable from today’s standpoint and that they do not consti-tute a threat to the Group as a going concern.
7
SI G N I FI C A N T E V E N T S A F T E R T H E R E P O R T I N G DAT E
Since the start of the second quarter of 2009, the financing backlog in respect of large power plants has started to ease slowly, in line with expectations. Along with the German savings banks, which embarked on financing solar parks themselves only during the course of the crisis, a number of Landesbanks and major commercial banks provided financing commitments again at the start of the second quarter. At the beginning of April, therefore, Phoenix Solar was able to start construction work on two major projects in Germany.
In the meantime, the investor has submitted financing commitments for the Hasborn project, mentioned in the 2008 Annual Report. Accordingly, the project was fully invoiced in April 2009.
All in all, April 2009 saw an increase in the deliveries of the Components & Systems segment which recorded revenues above those of the year earlier quarter. At the same time, selling prices appear to be stabilising, which is also likely to have a positive impact on the demand situation.
8
G U I DA N CE
The guidance provided in the 2008 Annual Report still applies. Based on performance to date and expectations of developments in the market, in Germany in particular, the Board of Direc-tors stands by its guidance for 2009, released in January, which estimates consolidated revenues at around EUR 520 million and EBIT at around EUR 31 million.
Given the momentum in the photovoltaic market, as viewed by the Board of Directors, it is possible that future results may diverge from today’s expectations.
Sulzemoos, 14 May 2009 Phoenix Solar Aktiengesellschaft The Board of Directors
Dr. Andreas Hänel Sabine Kauper
(Chief Executive Officer) (Chief Financial Officer)
Dr. Murray Cameron Manfred Bächler Ulrich Reidenbach
in k€ Notes C. 31/03/200901/01/ – 31/03/200801/01/ –
Revenues (1) 36,778 41,223
Increase / decrease in the level of contracts in process – 35 361
Overall performance 36,743 41,584
Other operating income 309 341
Cost of materials (2) 36,160 36,752
Personnel expenses (3) 3,717 2,479
Depreciation and amortisation 132 83
Other operating expenses (4) 4,479 2,253
Operating result – 7,436 358
Result from associated companies – 1 1
EBIT – 7,437 359
Financial income 25 703
Finance costs 718 142
Financial result (5) – 693 561
Consolidated net income before income taxes (EBT) – 8,130 920
Income taxes (6) – 2,148 332
Consolidated net income for the period – 5,982 588
– of which due to minority interest 0 – 34
– of which due to majority shareholders – 5,982 622
Earnings per share
Earnings per share (basic) (7) – 0.89 0.10
Earnings per share (diluted) (7) – 0.89 0.10
in k€
01/01/ – 31/03/2009
01/01/ – 31/03/2008
Consolidated net income for the period – 5,982 588
– of which due to minority interest 0 – 34
– of which due to majority shareholders – 5,982 622
Changes in value recognised directly under equity – 16 – 2
Differences from currency translation
– of which due to minority interest – 4 0
– of which due to majority shareholders – 12 – 2
Income taxes recognised directly under equity 0 0
Overall performance – 5,998 586
– of which due to minority interest – 4 – 34
– of which due to majority shareholders – 5,994 620
CO NSO L I DAT ED S TAT EM EN T O F CO M PR E H E NSI V E I N CO M E
ASSETS
in k€ Notes D. 31/03/2009 31/12/2008
Non-current assets
Intangible assets 531 547
Goodwill 535 533
Property, plant and equipment 1,973 1,651
Investments in associated companies 435 436
Other participating interests 160 160
Non-current receivables 822 490
Deferred tax assets (6) 1,640 99
Other fi nancial assets 1,329 1,417
Total non-current assets 7,425 5,333
Current assets
Inventories (8) 108,019 75,975
Prepayments 3,009 1,444
Receivables from long-term construction contracts (9) 4,082 735
Trade receivables 12,505 24,849
Other fi nancial assets 1,931 2,514
Other non-fi nancial assets (10) 12,044 9,368
Actual tax claims 497 10
Cash and cash equivalents 4,537 7,535
Total current assets 146,624 122,430
LIABILITIES AND SHAREHOLDERS' EQUITY
in k€ Notes D. 31/03/2009 31/12/2008
Equity
Subscribed capital (11) 6,685 6,685
Capital reserve (12) 40,650 40,433
Accumulated other equity (11) 36,197 42,191
Share of majority shareholders in consolidated equity 83,532 89,309
Share of minority interest in consolidated equity – 4 2
Total equity 83,528 89,311
Non-current liabilities and provisions
Non-current fi nancial liabilities 29 0
Non-current provisions 1,795 1,773
Deferred tax liabilities (6) 120 534
Total non-current liabilities and provisions 1,944 2,307
Current liabilities and provisions
Current fi nancial liabilities (13) 35,665 53
Liabilities from long-term construction contracts (9) 0 0
Trade payables (14) 18,220 14,644
Other fi nancial liabilities (15) 3,698 4,793
Other non-fi nancial liabilities (16) 1,237 4,538
Current provisions 797 1,217
Actual tax liabilities (6) 8,960 10,900
Total current liabilities and provisions 68,577 36,145
in k€ C. & D.Notes Subscribed capital Capital reserve Accumulated other equity Share of majority shareholders in consoli-dated equity Share of minority interest in consolidated equity Total capital As per 1 January 2008 6,077 20,309 20,856 47,242 84 47,326 First-time consolidation of
Phoenix Solar S.r.l., Rome 0 0 0 0 302 302
Reserve for share options (12) 0 41 0 41 0 41
Differences from currency
translation (11) 0 0 – 2 – 2 – 1 – 3
Consolidated net income in 2008 0 0 622 622 – 34 588
As per 31 March 2008 6,077 20,350 21,476 47,903 351 48,254
As per 1 January 2009 6,685 40,433 42,191 89,309 2 89,311
Purchase of remaining shares in
project company Scarlatti Srl., Italy 0 0 0 0 – 2 – 2
Reserve for share options (12) 0 217 0 217 0 217
Difference from currency
translation (11) 0 0 – 12 – 12 – 4 – 16
Consolidated net income in 2009 0 0 – 5,982 – 5,982 0 – 5,982
in k€ Notes C.& D. 31/03/200901/01/ – 31/03/200801/01/ –
Net income before taxes – 8,130 920
Depreciation and amortisation 132 83
Other non-cash income (–) and expenses (+)
(incl. result from associated companies) 2,062 – 56
Financial income (5) – 25 – 703
Finance costs (5) 718 143
Sub-total 5.243 387
Increase / decrease in provisions
(net of discounting effects and non-cash releases) – 403 1,214
Increase / decrease in inventories (8) – 34,258 – 29,825
Increase / decrease in prepayments – 1,566 – 6,276
Increase / decrease in receivables
from long-term construction contracts (9) –3,347 – 634
Increase / decrease in trade receivables
(excl. non-cash transactions) 12,439 7,600
Increase / decrease in assets (10) – 2,338 – 3,305
Increase / decrease in liabilities (14) (15) – 720 16,572
Funds generated by operating activities – 35.436 – 14,267
Interest paid (5) – 406 – 93
Income taxes paid (6) – 2,317 – 362
Cash fl ow from operating activities – 38,159 – 14,722
Purchase of intangible assets and property,
plant and equipment – 504 – 94
Cash fl ow from investing activities – 504 – 94
Payments in connection with fi nancial liabilities (13) 35,640 19,373
Interest income (5) 25 0
Cash fl ow from fi nancing activities 35,665 19,373
Changes in cash and cash equivalents – 2,998 4,557
Currency-induced changes in cash and cash equivalents 0 – 5 Consolidation-related changes in cash and cash equivalents 0 3
Net changes in cash and cash equivalents – 2,998 4,555
Cash and cash equivalents at the start of the period 7,535 14,000 Cash and cash equivalents at the end of the period 4,537 18,555
Notes to the Interim Consolidated Financial Statements
of Phoenix Solar Aktiengesellschaft, Sulzemoos, to the IFRS Interim Consolidated Financial Statements for the period from 1 January to 31 March 2009
A .
G E N E R A L
As per 31 March 2009, the Group of Phoenix Solar Aktiengesellschaft (hereinafter also called Phoenix Group) was made up of ten companies with 221 employees (Q1/2008: 160). The parent company of the Group is Phoenix Solar Aktiengesellschaft (hereinafter called Phoenix Solar AG) with its principal place of business in Hirschbergstraße 8, 85254 Sulzemoos, Germany; the company is registered with the District Court of Munich under the number HRB 129117. The business purpose of the parent company is the development, production, sale and distri-bution, alongside the operation and management of components and systems for generating energy from renewable energy sources, as well as the assembly and maintenance of these systems.
The parent company has belonged to the German TecDAX since 25 March 2008. The TecDAX is part of the Prime Standard segment of Deutsche Börse AG and comprises 30 of the 35 largest technology companies below the DAX measured by market capitalisation and order book turn-over.
The International Accounting Standards Board (IASB) revised the International Financial Reporting Standard (IFRS) and published it on 5 March 2009, with mandatory application for the annual periods starting on 1 January 2009 or thereafter.
• Amendments to IFRS 7 “Financial Instruments: Disclosures”: The amendments bear the title “Improving Disclosures about Financial Instruments – Amendments to IFRS 7” and also include more minor amendments to IFRS 4. The amendments to IFRS 7 pertain to disclosures on the calculation of fair values and liquidity risk. Specifications on the disclo-sure of fair value calculation entail the preparation of a spreadsheet breakdown for each class of financial instruments based on the known, three-level fair value hierarchy, and require that the scope of reportable information be extended. Furthermore, disclosures on liquidity risk are clarified and extended. To this end, maturities must be disclosed sep-arately divided up into non-derivative and derivative financial liabilities, and the associ-ated qualitative disclosures on the management of liquidity risk have been amended. In the first year of applying the standard, a company is not required to deliver comparative information. Earlier application is permitted. For the purpose of the applicability of this
amendment within the European Union (EU), recognition through the standard EU process is still outstanding.
Furthermore, on 12 March 2009, the IASB published amendments to International Accounting Standard (IAS) 39 as well as the corresponding publication by the International Financial Reporting Interpretations Committee (IFRIC), to be applied with retrospective effect to reporting periods ending on 30 June 2009 or thereafter:
• Amendments to IFRIC 9 “Reassessment of Embedded Derivatives” and IAS 39 “Financial Instruments: Recognition and Measurement”: through these amendments, the IASB clar-ifies the process of how the reclassifications of certain financial instruments in the cate-gory of “fair value through profit or loss” and their embedded derivatives are to be meas-ured and, if required, recorded separately in the financial statements. These assessments must be made on the basis of circumstances prevailing when an entity first becomes con-tractual partner to the financial instrument or, if concon-tractual amendments are carried out at a later date with material effect on cash flows, on the basis of circumstances prevail-ing at this later point in time. If the fair value of the derivative cannot be reliably ascer-tained, the whole hybrid financial instrument must remain in the “fair value through profit or loss” category.
The International Financial Reporting Interpretations Committee (IFRIC) published an IFRIC on 29 January 2009, with mandatory application from 1 July 2009 at the earliest:
• IFRIC 18, “Transfers of Assets from Customers”, clarifies the requirements of IFRS on agreements under which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a net-work or to provide the customer with ongoing access to a supply of goods or services. Cases which are to be treated similarly are those in which an entity receives cash from a customer that must be used only to acquire or construct one of the aforementioned assets. IFRIC 18 is to be applied respectively to transfers of assets by customers on or after 1 July 2009. Earlier application is permitted under certain circumstances.
The financial statements are to be released on 14 May 2009. Approval will be given by the Board of Directors.
B .
ACCO U N T I N G , VA LUAT I O N A N D CO NSO L I DAT I O N
M E T H O DS
Pursuant to the provisions set out under Section 37x para. 3 of the German Securities Trading Act (WpHG), the Quarterly Report of the Phoenix Group comprises a Group Interim Report and an Interim Management Report. The Group Interim Report was drawn up in accordance with the IFRS standards on interim reporting, as applicable within the EU. The Interim Management Report was prepared in accordance with the provisions set forth under the German Securities Trading Act.
The Group Interim Report was drawn up as per 31 March 2009 in accordance with the stand-ards prescribed by IAS 34. All interpretations of the International Financial Reporting Standstand-ards Interpretations Committee (IFRIC) valid for the financial year 2009 and the earlier interpreta-tions of the Standing Interpretainterpreta-tions Committee (SIC) were adhered to. All figures from previous periods have been calculated by applying the same principles.
As against the financial statements as at 31 December 2008, there have been no changes in material accounting, valuation and consolidation methods apart from the methods described below: For this reason, the Interim Report is to be read in conjunction with the Consolidated Financial Statements as at 31 December 2008.
The following new standards have led to a break in the consistency of accounting methods. • The first-time application of IFRS 8, “Operating Segments” has led to changes in the
presentation of the former segment report. The implementation of the Management Approach required by IFRS 8 is reflected by the matrix organisation used for the purpose of managing the company and which consists, on the one hand, of business (operating) segments and, on the other, of regional markets. The implementation of new standards has led to an extension in the number of reportable segments. The corresponding data from previous years has been adjusted to the new reporting format.
• The first-time application of IAS one (new version), “Presentation of Financial State-ments” has led to the following main changes in comparison with the preceding version: all non-owner changes in equity (i.e. “accumulated other equity”) must be disclosed in two statements (a separate income statement and a statement of comprehensive income). Components of accumulated other equity are not disclosed in the statement of changes in shareholders’ equity. Furthermore, in respect of each component of other comprehen-sive income, the income tax incurred on these components and the income tax-related effect for adjustments made owing to reclassification of equity in respect of components of other comprehensive income must be disclosed separately.
The group of consolidated companies of the Phoenix Solar Group has remained unchanged in comparison to 31 December 2008. The following companies belonged to the group of consol-idated companies of Phoenix Solar AG as per 31 March 2009:
On 13 January 2009, the remaining 44.444 percent of the shares in Scarlatti Srl., Eppan an der Weinstraße, were taken over from the minority shareholders. The purchase price of the minority interest is contingent and linked to certain project-related events. The acquisition cost of minority interest subject to contingency may amount to up to EUR 13.3 million provided that all conditions have been fulfilled within the next 24 months.
The following company has been included at equity in the group of consolidated companies, as before:
Company Consolidation type Share in capital
Phönix SonnenFonds GmbH & Co. KG B1, Sulzemoos At equity 31.2 %
The Group Interim Report consists of a consolidated income statement and a statement of comprehensive income, a consolidated balance sheet, a consolidated statement of changes in shareholders’ equity, a consolidated cash flow statement and summarised notes to the consol-idated financial statements.
C .
SE L EC T E D N OT E S TO T H E CO NSO L I DAT E D
I N CO M E S TAT E M E N T
(1) REVENUES
As against the previous year’s period, revenues fell by kEUR 4,445 in the first three months of 2009. Aside from higher revenues generated in business with components and systems, the amount of kEUR – 8,315 was attributable to slow business in power plant construction.
Company Consolidation type Share in capital
Phoenix Solar Energy Investments AG, Sulzemoos Full consolidation 100 % Phoenix Solar Fonds Verwaltung GmbH, Sulzemoos Full consolidation 100 %
Phoenix Solar E.P.E., Athens Full consolidation 100 %
Phoenix Solar S.L., Madrid Full consolidation 100 %
Phoenix Solar Pte. Ltd., Singapore Full consolidation 75 %
Phoenix Solar S.r.l., Rome Full consolidation 100 %
Phoenix Solar Pty Ltd, Adelaide Full consolidation 100 %
TPC Photoenergy srl, Eppan an der Weinstraße Full consolidation 100 % Scarlatti Srl., Eppan an der Weinstraße Full consolidation 100 %
(2) COST OF MATERIALS
Compared with first three months of 2008, the cost of materials has declined by kEUR 592, mainly owing to the lower level of activity in power plant construction which compensated for the increase in the Components & Systems segment.
Moreover, the corresponding increase in value of inventories of kEUR 2,214 (Q1/2008: kEUR 0) was recorded through profit and loss.
(3) PERSONNEL EXPENSES
The rise in personnel costs was caused in particular by the necessity of hiring new staff and takes appropriate account of expected revenue growth in sales and processing operations, as well as in administration.
As from the 1 July 2008, the company offers all employees a company pension through defined contributions from deferred compensation. The company will make additional payments on the contributions of participating employees within the framework of provisions under German tax and social security law.
(4) OTHER OPERATING EXPENSES
The increase in Other operating expenses, which came to kEUR 2,226, resulted mainly from the valuation of forward exchange transactions for the hedging of merchandise deliveries denomi-nated in a foreign currency. Unrealised losses from the valuation of such financial instruments posted kEUR 1,309 as per the reporting date (Q1/2008: kEUR 0).
(5) FINANCIAL RESULT
The contribution of the financial result was burdened, on the one hand, by drawdowns and, on the other, by the marking to market of interest hedging transactions at kEUR 307 (Q1/2008: kEUR 0).
(6) INCOME TAX
Receivables and provisions for deferred taxes in an amount of kEUR 20 and kEUR 115 respec-tively were formed on the difference between the carrying amount of assets and liabilities under IFRS and their tax base (Q1/2008: kEUR 183 and kEUR 3,892). In addition, taking account of the taxable separate results anticipated in 2009, deferred tax assets of kEUR 1,615 (Q1/2008: kEUR 99) were formed.
(7) EARNINGS PER SHARE
The granting of share option rights necessitates the calculation of the diluted portion of shares, which was as follows on the reporting date:
Pursuant to IAS 33.66, basic and diluted earnings per share are to be disclosed underneath the Consolidated income statement.
D.
SE L EC T E D N OT E S TO T H E CO NSO L I DAT E D
B A L A N CE S H E E T
(8) INVENTORIES
Inventories comprise mainly merchandise (in particular solar modules and converters). In as much as, with shipments by suppliers, the risks have passed to Phoenix solar AG, this merchan-dise is also disclosed under inventories. As per 31 March 2009, an amount of kEUR 13,089 was capitalised for floating consignments (31/12/2008: kEUR 7,739).
This item also comprises uncompleted buildings on land and property owned by third parties which do not qualify for accounting under IAS 11. If, on the reporting date, the net realisable value does not cover the cost of production, a lower value is recognised in the balance sheet by way of a measurement at the lower of cost or net realisable value. As per the reporting date, “contracts in process” of this type have been capitalised in an amount of kEUR 16,872 (31/12/2008: kEUR 17,101).
(9) RECEIVABLES AND LIABILITIES FROM LONG-TERM CONSTRUCTION CONTRACTS
In principle, receivables from long-term construction contracts are customer orders placed and not fully completed. Under IAS 11, construction orders are to be valued according to the percentage-of-completion method under certain circumstances. Accordingly, contract revenue is recognised as profit in the income statement in the period as and when work is completed. Revenue from fixed-price contracts is also recognised as profit in accordance with the stage of completion. Revenue is calculated for each contract according to the percentage of the internal and external expenses incurred by the reporting date of the estimated total expense (cost-to-cost method).
In cases where the contract revenue cannot be reliably estimated (e.g. prepayments of contracts expected), they are capitalised in the amount of the costs in as much as coverage of these costs by the value of the contract can be expected (zero profit method). The contracts are disclosed under Receivables or liabilities from long-term construction contracts. If the accumulated payments (contract costs incurred and gains disclosed) exceed advance payments in the indi-vidual case, the construction contracts are disclosed on the assets side. A negative balance
Diluted number of shares 31/03/2009 31/03/2008
Basic number of shares 6,684,500 6,077,000
Diluting number of options 0 8,423
resulting from deduction of prepayments is disclosed on the liabilities side. Losses anticipated from contracts are recorded in their full amount; they are calculated taking account of discern-able risk.
As per 31 March 2009, there were receivables from long-term construction contracts of kEUR 4,082 (31/12/2008: kEUR 735). Prepayments of kEUR 580 (31/12/2008: kEUR 4,715) received on these construction contracts as per 31 March 2009 are disclosed under liabilities from long-term construction contracts if they exceed the respective receivables from such contracts. As in the previous year, there were no liabilities from long-term construction contracts to disclose as per 31 March 2009.
The consolidated order book on 31 March 2009 came to EUR 248.4 million (31/12/2008: EUR 112.3 million).
Contract revenue for partial recognition of profit pursuant to IAS 11, comprised under contract revenue from long-term construction contracts for the period from the 1 January to 31 March 2009, stood at kEUR 3,872 (31/12/2008: kEUR 16,511). This figure includes costs of kEUR 3,492 (31/12/2008: kEUR 13,602) and income of kEUR 380 (31/12/2008: kEUR 2,909).
(10) OTHER NON-FINANCIAL ASSETS
In connection with replenishing inventories, the Group has accumulated larger VAT claims which amount to kEUR 9,821 (31/12/2008: kEUR 9,368). These amounts will be deducted from sales tax liabilities accruing from current business in the context of regular tax declarations.
(11) EQUITY
Upon the first-time application of IAS 1 (new version), “Presentation of Financial Statements”, a new differentiation was made in equity.
On the one hand, a strict differentiation is made in consolidated equity between the equity capital portion of majority shareholders and minority interest; on the other, the equity capital components of majority shareholders are differentiated depending on the respective source of capital. For this reason, the equity capital portion of majority shareholders comprises capital resulting from direct transactions with shareholders and fundamentally destined to remain within the company (subscribed capital and capital reserve). Moreover, the new “Accumulated other equity” item, which is the aggregation of all transactions resulting from standards applied on recognition and changes in value pertaining to transactions recognised directly under equity and from the amount of accumulated consolidated net income, is to be disclosed. The equity movements which are non-shareholder related (i.e. “Accumulated other equity”) are shown in two statements, namely the consolidated income statement and the consolidated statement of comprehensive income, and are therefore not disclosed as individual items in the context of the consolidated statement of changes in shareholders’ equity.
The only item attributable to transactions directly recognised under equity in accordance with standards on recognition and changes in value is a currency translation reserve.
(12) SHARE OPTION SCHEME
A share option scheme for executives of the company was approved by the Annual General Meeting of Shareholders held on 7 July 2006, and contingent capital of kEUR 552 was created. In total, two tranches with 109,750 options were issued, of which 10,750 had expired by the reporting date through employees leaving the company. The remaining amount of options therefore came to 99,000 on the reporting date. The fair value of the options was calculated by way of (Monte-Carlo) simulation. The relevant parameters, which have remained unchanged, are set out in the Annual Report 2008.
The volatility was calculated as historical volatility from the share price performance of the company over the period from 19 November 2004 until 13 July 2007 (Tranche I) and from 1 July 2005 to 12 September 2008 (Tranche II). The risk-free rate was calculated using the Svensson method. Using this method, the value of an option was calculated at EUR 10.177 (Tranche I) and EUR 20.174 (Tranche II) respectively. The sum total of the 99,000 options to be valued comes to kEUR 1,727.
Owing to the distribution of expenses over the period from the grant date until expiry of the vesting period, the expenses incurred by share-based payment came to kEUR 217 in the first quarter of 2009 (31/12/2008: kEUR 41).
(13) FINANCIAL LIABILITIES
In view of the delivery agreements for solar modules not pertaining to any specific project, the financing of inventories was partly carried out by drawing on the financing lines made available by syndicate member banks. The lines are always utilised short term.
(14) TRADE PAYABLES
As per the reporting date, part of the inventories had been acquired on credit. Payment is always made within the discount period granted.
(15) OTHER FINANCIAL LIABILITIES
In order to counteract the operational currency risks from payments planned in connection with the procurement of modules, the company uses forex forwards, swaps and currency options. As per 31 March 2009, there were forex forwards with a nominal volume of a converted kEUR 22,309 (31/12/2008: kEUR 3,235). The difference between the forward rate and the attributable fair value, which came to kEUR – 1,309 (31/12/2008: kEUR 84), was recognised through profit and loss.
Moreover, the Phoenix Solar Group uses interest rate derivatives to even out the fundamentally variable cost of financing payments inherent in procuring modules. As per the reporting date, there were therefore interest rate swaps in a nominal volume of kEUR 19,218 (31/12/2008: kEUR 0) which also have a negative fair value of kEUR – 307 (31/12/2008: kEUR 0).
(16) OTHER NON-FINANCIAL LIABILITIES
The increasing internationalisation of business has led to an growing amount of liabilities subject to sales tax in European countries. The sales tax liabilities in the financial year ended have been remitted. Otherwise, the fact that inventories are currently being replenished and that there is therefore an offset amount of VAT claims is taken account of (see Note (10)).
(17) CONTINGENT LIABILITIES AND OTHER FINANCIAL LIABILITIES
There were no contingent receivables or contingent liabilities as per 31 March 2009 (unchanged from the status on the previous year’s reporting date).
Purchase commitments for buying materials came to kEUR 42,540 (31/12/2008: kEUR 21,107).
Obligations to take delivery of materials purchased (mainly solar modules) in relation to frame-work contracts came to kEUR 1,113,964 (31/12/2008: kEUR 1,170,821).
The purchase of the shares in Scarlatti Srl., Eppan an der Weinstraße, Italy, which took place in January 2009, includes a contingent purchase price. This is linked to certain project-related events which had not yet occurred by the reporting date, and is therefore classified as an item under Other financial liabilities. The acquisition cost of minority interest subject to contingency may amount to up to EUR 13.3 million provided that all conditions have been fulfilled within the next 24 months and the Group does not assert its right to rescind.
E .
SE A SO N A L I N FLU E N CE S
The course of business of companies in the photovoltaic sector is subject to strong seasonal fluc-tuations. The results of the last two quarters of a financial year are generally higher than those of the first two quarters. Given the increasing internationalisation of business and the accom-panying widening of the geographical scope of activities, limitations caused by the seasons of the year lose their impact on business activities and the results generated.
The regular course of business is now increasingly influenced by regional environmental condi-tions and national initiatives by the legislator in the field of renewable energies and their struc-turing in the form of, for instance, regulations governing feed-in tariffs, along with the lowering of tariffs staggered at intervals or the capping of government subsidies.