Letter by the Management Board
4
Group Management Report
5
Focus on high-margin segments 5
International network – a key success factor 6
Development of the forfaiting portfolio 6
Net assets, financial position and result of operations 7
Performance of DF Deutsche Forfait shares 9
The risks of future development 9
Outlook 10
Responsibility Statement by the management board 11
Consolidated Balance Sheet – Assets
12
Consolidated Balance Sheet – Equity and Liabilities
13
Consolidated Income Statement – Q2 comparison
14
Consolidated Income Statement – H1 comparison
15
Consolidated Cash flow Statement
16
Development of consolidated equity capital
17
Corporate Notes
18
DF Deutsche Fortfait AG Kattenbug 18 – 24 50667 Köln Phone +49 (0) 221 973 76 – 0 Fax +49 (0) 221 973 76 – 76 E-Mail [email protected] Internet www.dfag.de2007 2006 Change
in EUR million (unless otherwise noted) Q1 Q2 Mid-Year Q1 Mid-Year
Forfaiting portfolio 229.7 230.3 460.0 455.7 1 %
Gross result including financial results 2.9 3.6 6.5 5.4 22 %
Forfaiting margin including financial results 1.3 % 1.6 % 1.4 % 1.2 % 17 %
Administrative costs 1.2 1.8 3.1 2.3 31 %
Earnings before income taxes 1.7 1.8 3.5 3.1 14 %
Consolidated profit 1.0 1.2 2.2 1.9 17 %
Earnings per share in EUR 0.20 0.21 0.41 0.37 11 %
H1/2006 H1/2007 H1/2006 H1/2007 H1/2006 H1/2007 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0 8.0 0 100
Gross result inc. financial results
(in EUR million)
Forfaiting portfolio
(in EUR million)
Consolidated profit
(in EUR million)
200 300 400 500 455.7 460.0 5.4 1.9 2.2 6.5 0.5 2.5 2.0 1.5 1.0 0
The successful IPO in May of this year laid the foundation for the further profitable growth of the DF Deutsche Forfait Group. Our improved equity position allows us to conduct forfaiting business that was previously out of our reach and that offers attractive income potential. Thanks to the additional equity and the associated rise in bank credit lines, we have significantly increased our key refinancing capacity.
The development in the first six months of 2007 was very successful. The gross result including financial results – the key control and measure of the company's success – has
risen significantly. The key figure has improved by around 21 % as against the same period of the previous year to EUR 6.5 million. The forfaiting margin including financial results increased from 1.2 % to 1.4 %, highlighting the positive development of business. At EUR 460 million, the forfaiting portfolio was up slightly over the same period of the previous year. Given the positive effects of the additional equity, the considerable growth of our refinancing capability and the traditionally strong fourth quarter, we are anticipating that our successful performance will continue in the second half of the year.
The positive earnings development in the first half of the year reflects the continuing robust condition of the market. The need for risk hedging and finance solutions in global export business is constant, as is the demand among institutional investors for structured receivables. This is not something to be changed by the negative developments in the sub-prime loans sector, as investors in this asset class are not typically
customers of the DF Deutsche Forfait Group.
We feel that our shares have considerable value potential as the strong profitability of the DF Group and its good, long-term development prospects are not yet reflected in the price of our shares. In the coming months, we will be working intensively to convince the capital market of the attractiveness of our business model and of the DF Deutsche Forfait share.
Sincerely,
Your Management Board
Ulrich Wippermann Marina Attawar Jochen Franke
The first half of 2007 was again very successful for the DF Deutsche Forfait Group (referred to hereafter as the "DF Group"). At EUR 6.5 million, the gross result including financial results was up significantly on the previous year's figure of EUR 5.4 million thanks to a rise in the forfaiting margin. The forfaiting portfolio increased slightly to EUR 460 million after EUR 456 million in the first six months of 2006. The consolidated net profit grew from EUR 1.9 million to around EUR 2.2 million, an increase of 17 % year-on-year.
As a result of the IPO of DF Deutsche Forfait AG in May of this year, the DF Group increased its equity by EUR 13.5 million less costs to EUR 21.7 million, creating a foundation for further growth. Since 24 May 2007, DF Deutsche Forfait shares have been listed in the Prime Standard of the Frankfurt stock exchange. At EUR 7.50, the shares were issued at the upper end of the price range of EUR 7.00 to EUR 7.50.
Focus on high-margin segments
The DF Group specialises in the non-recourse purchase and sale of receivables – the forfaiting business – and the assumption of risks through purchase commitments. In recent decades, forfait-ing has established itself as a fixed component of the instruments of export finance. The forfaiter acquires a receivable from an exporter, which improves the exporter's liquidity and its balance
sheet structure and the exporter transfers the risks associated with the receivable to the purchaser. In a purchase commitment only the country and counterparty risks are transferred.
The DF Group conducts forfaiting as trade with the aim of reselling the receivables acquired shortly thereafter. Purchase commitments issued are hedged and outplaced by way of bank guarantees, mutual liability agreements with third parties or credit insurance benefiting the DF Group. Receivables that cannot be resold are added to the DF Group's portfolio.
In traditional forfaiting business, receivables secured by banks are forfaited from countries with mid-range country risks, such as Turkey. As a result of declining margins, this market segment has become considerably less attractive in recent years. However, the DF Group specialises in business with higher risks, particularly in emerging markets and develop-ing countries as well as transactions with complex documentation requirements.
Positioning of the DF group
Risk
Complexity high
high low
Acceptable to high margins Very high margins
Acceptable to high margins Low margins
The competition in these market segments is considerably less and the margins possible are generally higher. In addition, the DF Group also trades in risks from western industrialised nations provided that such transactions offer attractive income potential. The transactions purchased and structured by the DF Group are placed with banks and forfaiting companies primarily originating from western industrialised nations and the Gulf region (e.g. Kuwait and the United Arabic Emirates).
The key income component in the DF Group's forfaiting business is the discount retained when purchasing receivables. In addition, the Company generates income from commitments and other fees. The discount is calculated from money and capital market interest rates with matched maturities (e.g. 1Y LIBOR) and a risk margin directly dependent on the risk of the individual transaction. When disposing of the receivables, expenses that correspond to the categories of income are incurred.
Given the varying structure of individual forfaiting business transactions and the differences in appraisals by market participants in terms of the risks associated with a receivable, there is only a price range rather than a uniform market price. The DF Group takes advantage of this fact when carrying out its transactions to maximise its income.
International network – a key success
factor
One of the DF Group's key competitive advantages is its international network. Thanks to its wholly owned subsidiaries DF Deutsche Forfait Americas Inc. based in Miami and DF Deutsche Forfait s.r.o. in Prague, offices in Helsinki and Paris and cooperation partner in Dubai, Cairo and London, the DF Group has a regional presence that provides it with direct access to local markets on the buying side. The receivables are primarily placed through the office in Cologne where the Company's central divisions are also located. The various trading locations guarantee a local presence in key regional markets. In the current year, the Company is planning to open a new office in Pakistan, a market with a great deal of potential.
Development of the
forfaiting portfolio
Currently the share o emerging market risks as part of global exports is increasing. Therefore the need for risk hedging and finance solutions tailored to local markets and their specific structures increases.
This development is the foundation of DF Deutsche Forfait's growth. The Company aims to constantly identify new and attractive regions for forfaiting business that will further increase the income potential of the forfaiting portfolio.
In the first half of 2007, the market was marked by continuing high demand for forfaiting solutions. In total, the DF Group generated a forfaiting portfolio – measured at the nominal value of the receivables on which the transactions are based – of EUR 460.0 million in the first half of the year as against EUR 455.7 million in the same period of the previous year. Around EUR 230.0 million each related to the first and sec-ond quarter of 2007. The following picture shows the breakdown of the forfaiting portfolio by country:
largest share at 29 %. As anticipated, this share declined significantly in the first half of 2007 though business did not come to a complete standstill. In the first quarter of 2007, the volume with Iran declined to 15 %, though this figure rose back to 21 % by the half-year mark. In line with expectations, this development was compensated by a rise in the forfaiting portfolio of other countries, specifically Mexico and the United Arab Emirates.
Net assets, financial position
and result of operations
The DF Group manages its business in terms of earnings and not volume. Its goal is to maximise net profit for the year and thereby its return on equity. Profits from the forfaiting business come from the gross result and financial results. Interest income and interest expenses relate directly to the forfaiting business. Interest expenses are incurred during the receivables’ refinancing period, between the payout for the purchase and the incoming payment for the sale or repayment of the respective receivable. The corresponding income figure is the discount income when acquiring the receivable, which is included in the gross result.
The DF Group increased its gross result including financial results from EUR 5.4 million in the first half of 2006 to EUR 6.5 million in the first half of 2007. While the forfaiting portfolio remained constant as
Breakdown of the forfaiting portfolio by
region in the period 01-01 to 30-06-2007
16%
25%
21%
17% 15%
United Arab Emirates Brazil Other Mexico Iran UK 6%
The composition of the forfaiting portfolio changed from the previous year and the first quarter of 2007. In the 2006 financial year, Iran accounted for the
against the previous year at EUR 460.0 million, the forfaiting margin including financial results in-creased by 0.2 % to 1.4 % in the reporting period. This was due to the change in the structure of the forfaiting portfolio. The share of transactions with higher margins increased partly as a result of the expansion of credit insurance business. Here, receivables are additionally hedged by credit insurance with a deductible, which crucially reduces the risk of the component with credit insurance and increases the marketability of the receivable. The insured component of the receivable is sold on the secondary market, while the deductible is retained by the DF Group. The credit insurance premiums incurred are generally more then compensated by a reduced discount expense on account of the better risk when selling the receivable. This development is responsible for both the rise in discount earnings from EUR 7.6 million in the first half of 2006 to EUR 8.9 million in the reporting period and the increase in credit insurance premium expenses from EUR 1.0 million to EUR 2.1 million.
Administrative costs rose by 31 % year-on-year to EUR 3.1 million. This includes variable expenses for bonuses of EUR 0.3 million. The increase was also due to additional costs for the Company's IPO. Despite the rise in expenses, earnings before income tax were up EUR 0.4 million on the figure for the previous year at EUR 3.5 million. The consolidated net profit also improved significantly from EUR 1.9 million in the first half of 2006 to EUR 2.2 million in the reporting period.
Total assets rose considerably by EUR 64.4 million as against 31 December 2006 to EUR 107.3 million. The primary reasons for this were the rise in trade receivables of EUR 47.7 million and in cash and cash equivalents of EUR 17.2 million. The trade receiv-ables also include the forfaiting business. Due to a change in the mix of transactions, the average refinancing period has been extended which led to an increase in total assets. In particular, the rise was financed by an increase in equity of EUR 10.6 million and amounts due to banks of EUR 46.8 million. As at the end of the year, total assets will have significantly declined again due to the seasonality of the business experienced in the past.
The surge in trade receivables also impacted the cash flow in the first half of 2007, which stood at EUR -36.8 million. This was financed by net cash from financing activities of EUR 55.3 million. Cash flow will improve again significantly by the end of 2007 as a result of the disposal of receivables. Given the current development, there are no obstacles to a possible dividend payment.
Performance of
DF Deutsche Forfait shares
At the end of August the price of DF Deutsche Forfait shares (DF shares) has performed negatively since being listed on 24 May 2007. At 29 June 2007 the closing price in Frankfurt was at EUR 7,45 just slightly below the issue price of EUR 7,50 but 13 %
lower than the closing price on the first day of dealing.
After the end of the reporting period, problems affecting some banks in connection with mortgage loans in the US triggered a negative price performance among financial securities. Although there is no connection between this asset class and the DF Group's business, the price of DF shares was also affected by this development and dropped to EUR 6,85 on 22 August 2007.
invest in the mortgage loans asset class. Also, the DF Group has never been involved in business with this asset class.
However, even before this crisis broke on the financial securities market, the price of DF shares was not performing to the management's satis-faction. The good earnings figures and the positive development opportunities have not yet been rewarded by price increases. DF Deutsche Forfait will intensifying its efforts to build trust on the capital market with professional investor relations work. The management still feels that there are excellent foundations for DF shares to perform positively in the coming months.
The risks of future development
A detailed risk report can be found in the Group management report for financial year 2006. Generally, the most significant risks for forfaiting business are as follows:
Documentary risk
Risks can arise in forfaiting business as a result of deficient documentary diligence or errors in contract preparation, particularly as the seller is generally responsible for the legal validity of receivables when reselling them (moral hazard). This risk is countered by a well trained and well-manned contract settlement team.
In recent weeks, management has reported in a number of talks with investors and in press releases that forfaiting business purchasers do not typically 100 105 Index figures 95 90 85 80 75 70
Source: Deutsche Börse
24-05-2007 22-08-2007
DFAG SDAX Prime Financial Services
DFAG-share compared to relevant indices
Country and counterparty risk
In a national crisis, debtors can be prevented from paying their due receivables. Cash cannot be transferred on account of political restrictions (transfer risk) or cannot be converted into a different currency (convertibility risk). Counterparty risk refers to the risk that a debtor could default on a receivable on account of, for example, insolvency; the provider of collateral (e.g. a bank or credit insurance) can also default. The undertaking of country and counterparty risks is regulated in detail by a limit system. As a trading house, the DF Group reduces this risk by selling the receivables quickly. When this transaction is sold, the risks are trans-ferred to the buyer. Sufficient risk provisions have been made for the country and counterparty risks.
In terms of income, the biggest risks lie in a global economic crisis which would cause a decline in the international exchange of goods, particularly within the emerging markets. The export to the emerging markets is at a high level this year and there are no indications of a notable decline. Another material risk is a global crisis in the finance markets that would extend to the forfaiting market, which belongs to the trade finance market segment. At present, there are no indications that the financial crisis that was triggered by the problems with sub-prime mortgages in the USA will spread to the for-faiting market. The trade finance market segment is based on the flow of good from exporters to importers.
Of the risks described above, none are currently acute.
Outlook
The forfaiting market is still in good shape on both the buying and selling side. Exports to the emerging markets are at a high level. The current crisis affecting some financial markets has not yet spread to the forfaiting market – including the buying and selling side and the credit insurance market for forfaiting. The management of the DF Group projects that even in case of a market decline it will still meet its profit forecast for the year of EUR 4.8 million.
The aim of the IPO was to strengthen the equity position to secure the future growth of the DF Group. In the first few months after going public, the additional funds opened up further refinancing opportunities in particular and raised the internal limits for expanding forfaiting business. The increase of existing and the generation of additional credit lines are a key component for the Company's further growth. Based on past experience, the management projects that it will be able to increase refinancing capacity significantly before the end of this year.
In addition, staff capacity will be increased in the coming months, particularly in sales. New offices are intended to give direct access to additional local markets. The Company is already preparing to open an office in Pakistan and will do so by the end of
the year. It is also planning to expand trading activities in Cologne.
In addition to these operating issues, we will also be focusing particularly on building trust and boosting awareness of DF Deutsche Forfait on the capital market in the coming months. With efficient and effective investor relations work, we intend to satisfy the information requirements of our current and potential new investors to guarantee the appreciation of DF shares in line with the positive development of business.
Responsibility Statement by the
management board
“To the best of our knowledge and in accordance with the applicable accounting principles for the interim reporting, the consolidated interim financial statements give a true and fair view of the assets, liabilities, financial position and the profit or loss of the Group. The Group management report includes a fair review of the business development and the position of the Group together with the principal opportunities and risks associated with the expected development of the Group in the remaining months of the fiscal year.”
Cologne, August 2007 The Management Board
A. Long-term assets
Total assets 107,297,226.64 42,871,419.38
I. Intangible assets 4,113.01 3,386.00
II. Tangible assets 185,070.97 208,460.75
III. Financial assets
Securities 1,100,000.00 1,100,000.00
1,299,792.60 1,505,630.88
IV. Other long-term assets 10,608.62 193,784.13
B. Short-term assets
I. Trade accounts receivable (8) 80,514,980.88 32,853,532.05
II. Other short-term assets 66,348.50 298,975.67
III. Liquid funds (9) 25,416,104.66 8,213,280.78
105,997,434.04 41,365,788.50
A. Liabilities
Total equity and liabilities 107,297,226.64 42,871,419.38
I. Subscribed capital 6,800,000.00 5,000,000.00
II. Capital reserve 11,112,717.24 0.00
III. Statutory reserve 500,000.00 500,000.00
(10) 21,572,996.94 10,935,857.51
IV. Other revenue reserves 979,827.44 697,861.85
V. Adjustment item from the currency conversion – 6,660.98 6,030.07
VI. Consolidated profit 2,187,113.24 4,731,965.59
B. Long-term liabilities
295.038,59 126.964,96
1. Other long-term liabilities 0,00 5.160,00
2. Deferred taxes 295.038,59 121.804,96
C. Short-term liabilities
85,429,191.11 31,808,596.91
1. Liabilities to banks (11) 56,390,950.35 9,543,317.87
Contingent liabilities
Liabilities under warranties (12) 0.00 576,296.93
2. Short-term provisions 480,242.00 480,242.00
3. Tax liabilities 1,403,696.05 1,193,174.95
4. Trade accounts payable 24,816,643.56 18,615,552.26
5. Personnel expenses
a) Wages and salaries 1.060.304,61 575.608,16
b) Social security contributions and expenditure for pensions
and social welfare 145,690.15 166,058.13
11. Income tax
a) Income and earnings tax 497,854.05 783,215.58
b) Deferred taxes 173,233.63 15,484.89
6. Depreciation on tangible and intangible assets 26,200.02 32,062.02
16,291,307.23 18,233,598.24
4. Other operating income 43,399.48 61,362.99
7. Other operating expenditure 609,960.25 459,466.60
8. Interest income 332,351.46 117,429.12
9. Interest paid 1,086,090.64 615,637.33
Average number of shares 5,791,209 5,000,000
10. Result before income tax 1,835,389.47 2,006,096.75
12. Consolidated profit 1,164,301.79 1,207,396.28
3. Gross result 4,387,884.20 3,676,136.88
1. Typical forfaiting income
a) Discounts earned 11,754,259.87 15,076,982.83
b) Commission income 1,498,783.17 1,325,589.79
c) Income from additional interest charged 306,570.79 94,701.45
d) Exchange profits 2,731,693.40 1,736,324.17
e) Income from the reduction of value adjustments on receivables and from the writing back of provisions
for forfaiting and purchase commitments 0.00 0.00
11,903,423.03 14,557,461.36
2. Typical forfaiting expenditure
a) Discounts paid 6,222,652.09 10,234,994.41
b) Commissions paid 1,577,278.80 1,885,999.58
c) Interest paid – 27,545.05 6,237.56
d) Exchange losses 2,598,789.61 1,750,279.01
e) Credit insurance premiums 1,382,247.58 529,950.80
f) Depreciation and value adjustments on receivables as well as additions to provisions for forfaiting
5. Personnel expenses
a) Wages and salaries 1,625,700.32 1,144,576.30
b) Social security contributions and expenditure for pensions
and social welfare 253,114.86 284,671.30
11. Income tax
a) Income and earnings tax 1,173,793.94 1,227,129.35
b) Deferred taxes 173,233.63 11,765.81
6. Depreciation on tangible and intangible assets 51,557.00 64,117.36
(4) 29,115,922.13 28,648,019.72
4. Other operating income 70,537.79 66,251.29
7. Other operating expenditure (7) 1,123,947.62 832,661.45
8. Interest income 863,867.06 230,089.45
9. Interest paid 2,353,663.19 1,064,871.06
Average number of shares 5,397,790 5,000,000
10. Result before income tax 3,534,140.81 3,105,852.02
12. Consolidated profit 2,187,113.24 1,866,956.86
3. Gross result (6) 8,007,718.95 6,200,408.75
1. Typical forfaiting income
a) Discounts earned 20,958,047.54 23,249,183.40
b) Commission income 3,672,007.60 2,866,643.01
c) Income from additional interest charged 768,513.98 406,185.49
d) Exchange profits 3,717,353.01 2,126,007.82
e) Income from the reduction of value adjustments on receivables and from the writing back of provisions
for forfaiting and purchase commitments 0.00 0.00
(5) 21,108,203.18 22,447,610.97
2. Typical forfaiting expenditure
a) Discounts paid 12,082,536.82 15,655,327.87
b) Commissions paid 2,977,896.84 3,291,979.63
c) Interest paid 29,621.51 65,720.17
d) Exchange losses 3,579,330.47 2,143,530.79
e) Credit insurance premiums 2,138,817.54 991,052.51
f) Depreciation and value adjustments on receivables as well as additions to provisions for forfaiting
Cashflow
Profit for the year 2,187 1,867
+ Depreciation on tangible and intangible assets 52 64
+ Expenses for income tax 1,347 1,239
+ Interest paid 2,354 1,065
- Interest income -864 -230
+/- Result from disposal of long-term assets 1 0
+/- Other transactions not affecting payments -570 -951
+/- Changes in accounts receivable -47,661 -28,599
+/- Changes to other assets (working capital) 416 -519
+/- Change to provisions 0 26
+/- Change to accounts payable 6,201 4,271
+/- Change to other liabilities (working capital) 740 808
- Paid taxes on profits -958 -323
= Operative Cash flow -36,756 -21,282
- Paid interest -2,141 -1,051
+ Retained interest 810 199
= Outflow from current business (Total 1) -38,087 -22,134
- Payments for investments in long-term assets -29 -35
+ Incoming payments from disposals of long-term assets 17 0
= Outflow from investment activity (Total 2) -12 -35
+/- Change to short-term financial liabilities 46,848 26,477
- Payment of dividends -4,450 -2,100
+ Incoming payments from capital market transactions 12,913 0
= Inflow from finance activity 55,310 24,377
Changes in financial resources affecting payments 17,211 2,208
+ Financial resources at start of period 8,213 5,593
Difference Subscribed Capital Statutory Revenue from currency
capital reserves reserves reserves conversion Total
in EUR Balance 1 January 2006 5,000,000.00 – 177,033.00 3,120,828.85 6,744.58 8,304,606.43 Profit appropriation 322,967.00 (322,967.00) Consolidated profit 1,872,558.78 1,872,558.78 Currency conversion (10,236.21) (10,236.21) Dividend payment (2,100,000.00) (2,100,000.00)
Allocation to the reserves – – –
Balance 30 June 2006 5,000,000.00 – 500,000.00 2,570,420.63 (3,491.63) 8,066,929.00
Difference Subscribed Capital Statutory Revenue from currency
capital reserves reserves reserves conversion Total
in EUR Balance 1 January 2007 5,000,000.00 – 500,000.00 5,429,827.44 6,030.07 10,935,857.51 Profit appropriation – – Consolidated profit 2,187,113.24 2,187,113.24 Currency conversion (12,691.05) (12,691.05) Dividend payment (4,450,000.00) (4,450,000.00) Capital increase 1,800,000.00 11,112,717.24 12,912,717.24
Allocation to the reserves – – –
Balance 30 June 2007 6,800,000.00 11,112,717.24 500,000.00 3,166,940.68 (6,660.98) 21,572,996.94
(1) Basic principles
The shortened consolidated interim financial statements were prepared on a reduced scale compared to the consolidated financial statements as of 31 December 2006, in accordance with the rules of IAS 34. The interim financial statements as of 30 June 2007 use the same financial reporting and valuation methods as the consolidated annual financial statements for the 2006 financial year. The half-year financial statements were subjected to an audit inspection and ensure a fair view of the assets, financial and profit situation from the point of view of the management. The group currency is demonstrated in euros. All amounts are stated in thousands of euros (EUR 000), unless otherwise stated.
The legal form of DF Deutsche Forfait AG is that of a stock corporation. The company's registered office is in Cologne, Germany, according to its Articles of Association. The company's address is Kattenbug 18-24, 50667 Cologne, Germany. It is listed under the number HRB 32949 at Cologne Local Court. DF Deutsche Forfait AG is a forfaiting company and, as such, a finance company within the meaning of §1, section 3 of the German Banking Act (KWG).
The shortened consolidated profit and loss account has been prepared using the total cost method. Pursuant to IFRS 7 ("Financial Instruments: Disclosures"), income and expenses are grouped according to type and the sum total of the main types of income. Expenditures are stated so as to take account of the special features of a forfaiting company. The shortened consolidated balance sheet corresponds to the classification rules of IAS 1.
(2) Consolidated companies
As at 31 December 2006, the subsidiaries DF Deutsche Forfait s.r.o., Prague/Czech Republic, and DF Deutsche Forfait Americas, Inc., Miami/USA are still included in the consolidated interim financial statements.
(3) Currency conversion
The financial statements prepared in foreign currency of the included group companies are converted on the basis of the concept of functional currency (IAS 21, "The Effects of Changes in Foreign Exchange Rates") according to the modified closing rate method.
The functional currency of the subsidiaries is basically identical to the company's respective national currency. Therefore, in the consolidated interim financial statements, the expenditure and income arising from the financial statements of subsidiaries which are prepared in foreign currency are converted at the annual average rate, while assets and liabilities are converted at the closing rate.
(4) Typical forfaiting income
Sales revenue is generated by the following activities:
Closing rate Average rate
30-06-2007 31-12-2006 H1 2007 H2 2006
Czech koruna 0.03485 0.03645 0.03557 0.03513 US dollar 0.74070 0.75800 0.75260 0.81409
Discount income 20,958 23,249
Typical forfaiting income in TEUR 01-01 to 30-06-2007 01-01 to 30-06-2006
Commission income 3,672 2,867
Income from additional interest charged (loan agreements) 769 406
Exchange profits 3,717 2,126
Total 29,116 28,648
Discount expenses 12,083 15,655
Typical forfaiting expenditure in TEUR 01-01 to 30-06-2007 01-01 to 30-06-2006
Commission expenses 2,978 3,292
Interest expenses (loan agreements) 29 66
Exchange losses 3,579 2,144
Credit insurance premiums 2,139 991
Depreciation and value adjustments on receivables as well as additions to
provisions for forfaiting and purchase commitments 300 300
Total 21,108 22,448
(5) Typical forfaiting expenditure Typical forfaiting expenditure is as follows:
(6) Gross result
The gross result is calculated as the difference between the typical forfaiting income and expenditure.
Net discount income 8,875 7,594
Gross result in TEUR 01-01 to 30-06-2007 01-01 to 30-06-2006
Net commission income 694 425
Net interest income (loan agreement) 740 340 Net income from exchange profits and losses 138 18 Net valuation income from forfaiting business (300) (300)
minus credit insurance premiums (2,139) (991)
Total 8,008 6,200
10,147 7,191
Cost of premises (rents and cleaning costs) 150 143
Other operating expenses in TEUR 01-01 to 30-06-2007 01-01 to 30-06-2006
Fees for payment transactions 141 121
Travel expenses 163 92
Vehicle costs 35 45
Administrative expenses/cooperation partners 12 53 Legal, consultants' and acquisition fees 381 81 Costs for telephone, postage and internet connections 82 44
Other taxes - 1
Remaining other expenses 160 253
Total 1,124 833
Financial results must also be considered to assess the performance of forfaiting business as it is generated almost exclusively from the refinancing of forfaiting transactions (see the section "Assets, financial and profit situation" in the management report). Compared to the first half of 2006, the negative financial result changed from EUR 835,000 to EUR 1,490,000 in the first half of 2007.
(7) Other operating expenses
The sharp rise in legal and consulting fees compared to the corresponding period of last year can be attributed to the preparation for and performance of the IPO of DF Deutsche Forfait AG.
(8) Accounts receivable
The accounts receivable include the forfaiting transactions that are primarily intended to be sold. They also include the deductibles on receivables with credit insurance that the company is not permitted to sell on account of insurance terms. The rise of accounts receivable compared to the consolidated financial statements as of 31 December 2006 from EUR 32,854,000 to EUR 80,515,000 is due to the expansion of business and the associated rise of receivables in the first half of a financial year after a scheduled reduction in the portfolio at year-end. This is typical to the DF Group. The receivables portfolio is again expected to undergo a significant reduction at the end of the year on account of the seasonal nature of forfaiting business.
The maximum credit risk on the purchased accounts receivable developed as follows as of the respective balance sheet date:
Nominal values of accounts receivable 84,748 35,276
in TEUR 30-06-2007 30-06-2007
- Deferred discount (3,098) (2,390)
+ Other receivables 524 1,308
= Gross book values prior to value adjustments 82,174 34,194
- Individual value adjustments (83) (83) - Country value adjustments (1,576) (1,276)
= Book values = maximum credit risk 80,515 32,835
- Securities (76,389) (24,963)
= Unsecured maximum credit risk 4,126 7,872
Within the scope of risk control, these credit risks are actively controlled by means of country and address limits.
(9) Liquid funds
Liquid funds are almost exclusively cash in banks which are due within three months. Primarily as a result of the capital increase in May as part of the IPO and a cash inflow shortly before the reporting date of 30 June 2007, the DF Group had a large amount of liquid funds, rising from EUR 8,213,000 as at 31 December 2006 to EUR 25,416,000. On account of currency-matched refinancing, the liquid funds received in euros could not be used to pay off foreign currency liabilities.
(10) Equity capital
The change in the equity of the DF Group is demonstrated by the development of the group equity capital. Dividends amounting to EUR 4,450,000 were paid from the profits generated during the financial year 2006.
The group's capital stock increased by EUR 1,800,000 to EUR 6,800,000 following a capital increase in May as part of an initial public offering (IPO). This share capital is broken down into 6,800,000 no-par value bearer shares. The stock capital was increased against cash contributions to the exclusion of subscription rights. The new shares were issued above nominal value generating liquid funds of EUR 13,500,000 for the group. Including the costs of the capital increase of EUR 587,000 offset against the capital reserves, the group now has capital reserves of EUR 11,113,000. In total, the DF Group's equity capital increased from EUR 10,936,000 as of 31 December 2006 to EUR 21,573,000 as of 30 June 2007.
(11) Liabilities to banks
Primarily as a result of refinancing the increase in accounts receivables, liabilities to banks increased from EUR 9,543,000 on the financing front as of 31 December 2006 to EUR 56,391,000 as of 30 June 2007; this was offset by the high level of liquid funds.
(12) Contingent liabilities
As of 31 December 2006, obligations exist from the reversed liability towards Atradius Kreditversicherung AG in the context of ABS transactions. These are warranty risks arising from liability for creditors' payments within the scope of the agreed "first loss" rule: The last remaining reversed liability has expired as a result of the proper payment of the receivable in May of this year. As a result, there are no longer any such contingent liabilities:
Deductible from ABS transaction 0 576
(13) Other financial obligations
In addition to liabilities, provisions and contingent liabilities, other financial obligations exist, particularly from forfaiting and purchase commitments. The other financial obligations are as follows:
from forfaiting commitments 57,278 29,605
from purchase commitments 13,528 24,319
from insurance deductible 0 576
Total 70,806 54,500
Other financial obligations at nominal value 70,806 53,924
Securities in TEUR 30-06-2007 31-12-2006
- Receivables sold: the receivable is sold on after being purchased by the DF Group. The buyer already has a legal obligation to the DF Group to
purchase the receivable. 45,934 24,849 - The underlying receivable was paid or the sale was invoiced. – –
- Credit insurance 8,933 4,614
- Securities provided by the bank (e.g. guarantees) 8,347 17,581
- Cash securitisation 5,060 –
- Provider of securities is a company
(e.g. reversed liability of forfaiting companies) 324 5,801
Other financial obligations after deducting securities calculated
at nominal value 2,208 1,079
- Other securities – –
= Securities 68,598 52,845
The other financial obligations arising from forfaiting and purchase commitments are secured to a large extent. Below, the securities calculated at nominal value have been compared with other financial obligations, also at the nominal value:
(14) Related parties report
In the reporting period, M.M. Warburg & CO KGaA, Hamburg, was a company with a material influence on the DF Group as defined by IAS 24. For information on the previous year, please see the consolidated financial statements dated 31 December 2006.
The transactions and balances reported resulted exclusively from ordinary operations at standard market conditions. The following tables provide an overview of the outstanding balances and expenditure and income from transactions with companies with a material influence:
M.M. Warburg & CO KGaA
Typical forfaiting expenditure – –
Interest and similar income 110 3
Interest and similar expenses (422) (114)
Total (312) (111)
Income and expenses from transactions with related parties 01-01 to 30-06-2007 01-01 to 30-06-2006
M.M. Warburg & CO KGaA
Cash in banks 10,992 3,907
Liabilities to banks 5,335 1,068
Outstanding net amounts towards related parties 30-06-2007 31-12-2006
The expenses and income shown here have been included in the financial results. The rise in the reporting period was analogous to the development of the financial results.
(15) Significant events after the end of the period under review There were no significant events after the end of the second quarter.
Cologne, 22 August 2007 The Management Board
