Stabilus SA Annual Report 2017

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FY2017 Annual Report · Stabilus SA

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NEXT
IGNITION

A N N U A L R E P O R T

2 0 1 7

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

KEY FIGURES

Year ended Sept 30,

IN EUR MILLIONS

Revenue

EBIT

Adjusted EBIT

Profit for the period

Capital expenditure

Free cash flow (FCF)

Adjusted FCF

EBIT as % of revenue

Adjusted EBIT as % of revenue

Profit in % of revenue

Capital expenditure as % of revenue

FCF in % of revenue

Adjusted FCF in % of revenue

Net leverage ratio

CHANGE

% CHANGE

172.5

41.8

39.9

31.2

8.6

316.2

20.5

23.4%

54.6%

40.8%

65.0%

(16.0%)

<(100.0)%

35.8%

2017

910.0

118.4

137.6

79.2

(45.1)

77.8

13.0%

15.1%

8.7%

5.0%

8.5%

1.5x

2016

737.5

76.6

97.7

48.0

(53.7)

(238.4)

57.3

10.4%

13.2%

6.5%

7.3%

(32.3%)

7.8%

2.5x

REVENUE BY REGION
(LOCATION OF STABILUS COMPANY)

REVENUE BY MARKETS

1 1

50%
39%
11%

Europe
NAFTA
Asia / Pacific and RoW

0 3
1

6
4

64%
37%
27%

36%
23%
10%
3%

Automotive Business
Automotive Gas Spring
Automotive Powerise

Industrial Business
Industrial / Capital Goods
Vibration & Velocity Control
Commercial Furniture

S T A B I L U S N E X T I G N I T I O N

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S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

NEXT LEVEL
MOTION
CONTROL

As one of the world’s leading providers of gas springs, dampers
and electromechanical drivers, we have been showing our prow-
ess for eight decades – in the automobile industry, mechanical
engineering, shipping, aviation, renewable energies and a host of
other sectors such as the furniture segment and building services
engineering. With our gas springs, dampers and electromechanical
Powerise drives, we optimize opening, closing, lifting, lowering
and adjusting actions from deep sea to outer space.

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

m
a

w
a

OUR
UNITS

A Sto

g H

g
hto

n, M
eig
hts, MI

A Sterlin
A Farmington Hills, MI
A Schau
A Mia
burg, IL
USA Gastonia, NC
misburg, O

Mexico Ramos Arizpe

Brazil Itajubá

r
i

A FT A

EUROPE

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

R
o
m
a
n

B
r
a
s
o
v

R
u
s
s
i
a
M
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s
c
o
w

EUROPE

Production Powerise

Production Gas Springs

Production Vibration & Velocity Control

Sales office / Representation

Stabilus S.A.

P R O D U C T I O N

S I T E S

A FT A

C hin a C han gzh o u
S o u th K o re a Uiw a n g
a B u s a n
hin a S h a n g h ai
n Y o k o

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J a

e S i n

S i n

S
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W
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R
L
D

New Zealand Auckland
Australia Dingley

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S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

CONTENTS

TO OUR SHAREHOLDERS

CONSOLIDATED FINANCIAL STATEMENTS

06 Letter from the Chief Executive Officer
08 Report of the Supervisory Board
10
International Management Team
12 Next Level Motion Control
32 Stabilus Share

COMBINED MANAGEMENT REPORT

37 General
37 Strategy
39 Business and General Environment
41 Results of Operations
45 Development of Operating Segments
46 Financial Position
48 Liquidity
51

Statutory Results of Operations and
Financial Position of Stabilus S.A.

51 Risks and Opportunities
57 Corporate Governance
60 Subsequent Events
60 Outlook

63 Consolidated Statement of Comprehensive Income
64 Consolidated Statement of Financial Position
66 Consolidated Statement of Changes in Equity
67 Consolidated Statement of Cash Flows
68 Notes to the Consolidated Financial Statements
130 Responsibility Statement
131 Management Board of Stabilus S.A.
132 Supervisory Board of Stabilus S.A.
133 Independent Auditor’s Report

ANNUAL ACCOUNTS

140 Balance Sheet
142 Profit and Loss Account
143 Notes to the Annual Accounts
151 Independent Auditor’s Report

ADDITIONAL INFORMATION

158 Financial Calendar
158 Disclaimer
159 Table Directory
161 Information Resources

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
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S T A B I L U S N E X T I G N I T I O N

TO OUR
SHARE
HOLDERS

CHAPTER

0 5 – 3 4

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

LETTER FROM THE
CHIEF EXECUTIVE
OFFICER

D I E T M A R S I E M S S E N

Dear Shareholders, Customers,
Business Partners, Employees,
Ladies and Gentlemen,

We can look back on a new record-breaking
fiscal year in which we increased our revenue by
more than 23% to around €910 million. In all
regions, we posted strong and profitable growth,
both organically and with our purchases made in
2016. With the successful integration of ACE,
Hahn Gasfedern, Fabreeka and Tech Products, we
have shown that we can grow both organically
and through significant value-enhancing acquisi-
tions.

2017 was another successful fiscal year for
us, and it saw early attainment of most of the tar-
gets for the 2020 fiscal year that were set in 2011
in our long-term plan STAR 2020. These include
breaking the €800 million revenue barrier as well
as establishing a balanced international position-
ing and a well-stocked innovation pipeline.

Against this background, we have updated
our targets and entrenched them in our STAR 2025
strategy, which we will be explaining in further
detail in this annual report. Our vision is to become
the world’s leading company for motion-control
solutions by 2025.

Maintaining profitable growth is a key target
here. Accordingly, we are aiming for average
annual revenue growth of at least 6% up to 2025.
We firmly believe in the strong market potential of
our products. Consequently, we expect to at least
double the consolidated revenue of €737.5 million
generated in the 2016 fiscal year in the long
term. We therefore remain ambitious in our pursuit
of growth.

With the three global megatrends of demo-
graphic change, higher standards of living and
greater demand for convenience as well as rising
health and safety requirements, the fundamental
growth drivers for Stabilus remain intact in the
long term. In addition, increasing digitalization –
which often goes hand in hand with growing auto-
mation of motion sequences – and autonomous
driving present us with major opportunities.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

» Our vision is
to become
the world’s
leading company
for motion-
control solutions
by 2025. «

current average USD / EUR exchange rate of 1.15 $ / €.
It is anticipated that the adjusted EBIT margin will
stand at around 15.5 percent.

I would like to take this opportunity to thank
our shareholders for the confidence they have
shown in Stabilus. On behalf of the entire manage-
ment team, I also thank our employees for their
consistently hard work and their team spirit, which
they have demonstrated in the integration of the
purchased companies. Last but by no means least,
many thanks are also due to our customers for
their loyalty and commitment to quality, and to our
business partners for the strong partnership we
enjoy, which dates back many years in some cases.

We look forward to continuing on our growth

path with you in the 2018 fiscal year.

Yours sincerely,

Dietmar Siemssen
C E O

Global demand for our products remains
high: We made substantial gains in all three
regions (Europe +25.3%, NAFTA +21.3% and
Asia / Pacific and RoW +22.2%). In terms of
income, we increased adjusted EBIT by around
40.8% to €137.6 million in the 2017 fiscal year,
while net income rose from €48 million in the
2016 fiscal year to €79.2 million in the 2017 fiscal
year. We want our shareholders to participate in
this positive development and will propose a divi-
dend of €0.80 per share to the forthcoming Annual
General Meeting, after €0.50 in the previous year.

Investment in our growth will remain the
backbone of our success in the future. In the 2017
fiscal year, our investment (CAPEX) totaled more
than €45 million. Among other investment activi-
ties, we purchased land in Romania for future
expansion of our Powerise production there,
extended the capacity of our gas-spring and Pow-
erise production in various countries, and capital-
ized research and development costs of more than
€11 million, as major R&D projects were con-
cluded. In addition, we significantly increased R&D
expenses from 3.6% of sales in fiscal year 2016 to
4.2% in fiscal year 2017. Digitalization provides us
with a host of opportunities to continue our suc-
cess story by developing future-oriented, innova-
tive and, increasingly, intelligent solutions.

For the 2018 financial year, we are expecting
organic revenue growth of approx. 7 percent to
EUR 975 million – assuming a, compared to the
previous FY, constant average USD/EUR exchange
rate in FY2018 of 1.10 $ / €. We would expect
revenues of some EUR 960 million assuming the

Our planning up to 2025 has four focal
points: Gaining new customers for current prod-
ucts, even better penetration of existing markets,
tapping into new markets and regions, and prod-
uct innovations. Innovative applications in the
industrial sector will make our company’s position
as a supplier to many branches of industry even
stronger. Stabilus’ conventional business with gas
springs and dampers will be just as crucial here as
the marketing of existing Powerise® solutions and
a new electromechanical one.

With regard to the 2017 fiscal year, our auto-
mobile and industrial operations recorded revenue
growth: Revenue in the automobile business rose
by 13.3% to €583.7 million, while the industrial
business posted growth of 46.8% to €326.3 million.

The ongoing trend towards SUVs and
Powerise® sales were again major growth drivers
in the automobile segment. Along with strong
organic growth in the industrial segment, the com-
panies acquired in June 2016 particularly contrib-
uted to the growth in revenue compared with the
previous year.

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REPORT OF THE
SUPERVISORY
BOARD

U D O S T A R K

Dear Shareholders,

During the reporting period from October 1,
2016 to September 30, 2017, the Supervisory
Board of Stabilus S.A. performed its tasks and
monitored the activities of the Management
Board in accordance with legal requirements and
the Articles of Association of Stabilus S.A. The
Management Board and the Supervisory Board
maintained close and regular contacts. The
Supervisory Board advised the Management
Board in regard to strategic and operational deci-
sions as well as governance topics and decided
on matters requiring supervisory approval.

Cooperation with the Management Board

The Management Board reported regularly,
promptly and extensively in verbal and written
form to the Supervisory Board regarding the cur-
rent status and performance of the Company and
the Stabilus Group, including its commercial posi-
tion as well as its relevant financial data. Further-
more, the Management Board informed the
Supervisory Board on a regular basis concerning
the future business policy, including the strategic
and organizational direction of the Group.

The Supervisory Board held in total seven
meetings during the last fiscal year and so far
three in the current fiscal year. In all meetings, all
of the Supervisory Board members were present.

The Supervisory Board was involved in the
main projects of Stabilus. In particular, the Man-
agement Board informed about the integration of
the recently acquired entities ACE, Hahn, Fab-
reeka and Tech Products. Based on a smooth inte-
gration process, the new Stabilus companies are
meanwhile significantly contributing to Stabilus’
corporate development and economic results.
Furthermore, the Management Board informed
the Supervisory Board in regard of growth activi-
ties and opportunities – both, organic growth
and potential M&A opportunities.

The Management Board further discussed in
detail with the Supervisory Board developments
for new products / markets – like powered vehicle
doors or power units for height-adjustable tables.
Stabilus expects that these applications will have
a potential for fast growth in future years.

A further subject of discussion and decision
was the simplification of the legal structure of the
Stabilus Group which was undertaken in the
course of last fiscal year. In total, five sub-holding
companies which were established in Stabilus’
private equity history have now been eliminated

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S T A B I L U S N E X T I G N I T I O N

» Based on a
smooth integration
process, the new
Stabilus companies
are significantly
contributing to
Stabilus’ corporate
development and
economic results. «

to approve both the Company’s annual accounts
and the consolidated financial statements for
fiscal year 2017. The auditor issued unqualified
audit opinions on December 13, 2017.

On behalf of the Supervisory Board, I would
like to thank the Stabilus Management for excel-
lent achievements throughout the last fiscal year
and for the open and effective collaboration. I
want to thank the Stabilus employees for their
remarkable contributions to the Company’s suc-
cess as well as our shareholders for the highly
valued trust which they place in Stabilus.

Luxembourg, December 13, 2017

On behalf of the Supervisory Board of Stabilus S.A.

Udo Stark
C H A I R M A N O F T H E

S U P E R V I S O R Y B O A R D

five meetings and two meetings since the begin-
ning of the current fiscal year. In all meetings, all
of the Audit Committee members were present.

Remuneration and general Board matters
were discussed by the Remuneration Committee.
During the reporting period, the Remuneration
Committee held four meetings and one meeting
since the beginning of the current fiscal year. In
all meetings, all of the Remuneration Committee
members were present.

Drawing up of the Financial Statements

The Supervisory Board examined the Com-
pany’s stand-alone annual accounts, the consoli-
dated financial statements and the management
report for the fiscal year ending on September 30,
2017. Representatives of the auditor KPMG Lux-
embourg Société Coopérative attended the meet-
ings of the Audit Committee on November 22,
2017 and on December 13, 2017 at which the
financial statements were examined. The repre-
sentatives of the auditor reported extensively on
their findings, provided a written presentation
and were available to give additional explana-
tions and opinions.

The Supervisory Board did not raise objec-
tions to the Company’s annual accounts or to the
consolidated financial statements drawn up by
the Management Board for the fiscal year ending
on September 30, 2017 and to the auditors’ pres-
entation. According to the recommendation of
the Audit Committee, the Supervisory Board
agreed to the proposal of the Management Board

by way of merger into other Stabilus entities.
Thereby, the complexity of the Stabilus Group has
been reduced significantly. The Management
Board provided regular reports about Stabilus’
business performance in the various geographic
markets (operating segments). Major investments
of the Group companies, in particular invest-
ments for capacity extensions in key markets and
a new software system supporting Stabilus’ qual-
ity processes were presented to and approved by
the Supervisory Board. The Management Board
reported also about cost and quality matters as
well as other operational topics related to Stabilus’
products.

Audit Committee and Remuneration Committee

Material questions concerning auditing,
accounting, risk management and compliance
and respective controls and systems have been
treated within the Audit Committee. The Audit
Committee discussed in particular the Quarterly
Reports, the relationship with investors, the inter-
nal audit program 2017 / 18 and the audit assign-
ment to KPMG Luxembourg Société Coopérative
including the focus areas of their audit. During
the reporting period, the Audit Committee held

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INTERNATIONAL
MANAGEMENT
TEAM

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
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S T A B I L U S N E X T I G N I T I O N

01
P i n k , J o h a n n e s
Vice President
Global Operations

05
R o l a n d , J ü r g e n
Vice President Business Unit
Vibration & Velocity Control

09
W i d m e r, M a r t i n a
Vice President
Global HR

13
S a b e t , D a v i d
Vice President
Business Unit Powerise

02
T i a n , X u e f e n g ( A l e x )
Country Head
China

03
K a d e n b a c h , E k k e h a r d
Vice President
Global Purchasing

04
L e e, J o o n g - H o ( J a m e s )
Country Head
Korea

06
B a l m e r t , J o a c h i m
Vice President
Quality Management

10
S i e m s s e n , D i e t m a r
Chief Executive Officer

14
H a b a , A n t h o n y
Regional Head
NAFTA

07
S a n d e r, K a r s t e n
Vice President
Business Unit Automotive

11
H ä r i n g , F r e d
Vice President
Business Unit Swivel Chair

15
H i n c k , M i c h a e l
Country Head
Japan

08
W i l h e l m s, M a r k
Chief Financial Officer

12
H u b e r, R a l p h
Vice President
Business Unit Industrial

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S T A B I L U S N E X T I G N I T I O N

NEXT
LEVEL
MOTION
CONTROL

Stabilus is at the forefront of developing new ways to control motion. Gas
springs, dampers, electromechanical drives and other solutions from Stabilus
optimize opening, closing, lifting, lowering as well as adjusting actions and pro-
tect against vibration in a large variety of industries. Having started out as a
single component supplier, Stabilus today provides complete systems that improve
the way many millions of people interact with everyday objects.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

»We implemented
the STAR process
to unleash the full
potential of the
company and im-
plement our learn-
ings from the
2008/2009 eco-
nomic crisis.«

Mark Wilhelms
C F O

Targeted Expansion of the Product Range

With the acquisition of ACE, Hahn Gasfedern,
Fabreeka and Tech Products in summer 2016,
Stabilus substantially broadened its product range.
At the same time, the foundations were laid for
developing an even more diverse array of motion-
control solutions in the future.

By rigorously implementing STAR 2020 through-
out the company, Stabilus managed to attain the
relevant targets set for the 2020 fiscal year at the
start of the STAR process as early as the 2017
fiscal year. These include breaking the €800 mil-
lion revenue barrier as well as establishing a bal-
anced international positioning and a well-stocked
innovation pipeline.

Against this background, Stabilus recently
updated the targets set in STAR 2020 and launched
the STAR 2025 strategy process. Now, the compa-
ny’s vision is to become the world’s leading com-
pany for motion-control solutions by 2025.

Since Stabilus gas springs went into series
production in 1962, more than three billion
devices have been produced. Laid out end to end,
they would stretch roughly three times the dis-
tance from Earth to the Moon. This success has
been possible because over the decades, Stabilus
has consistently taken changed and enhanced user
requirements into account with new potential
applications for its products. For instance, the
importance of adjustable height of office chairs to
workplace ergonomics and employee health was
still unrecognized in 1962. These days, all office
chairs have continuous height adjustment – mostly
with the use of a gas spring. In modern automobile
engineering, new uses for gas springs and damp-
ers regularly enable extra comfort and safety fea-
tures. For example, bonnet dampers make opening
and closing easier. At the same time, the bonnet is
more in tune with the overall design, and the vehi-
cle design looks more dynamic and elegant. In
addition, seats and seating groups can be moved
more easily and safely, for example in order to
enlarge the vehicle’s load compartment.

Powerise® – A Success Story

The Powerise® electromechanical spindle drive
has generated huge growth momentum for Stabilus
in recent years. It now sets benchmarks in the
automobile industry as a drive for vehicle tailgates,
and is used in most vehicle types.

While market penetration in the automobile
industry has increased, Stabilus Powerise® drives
are now also being more widely used in areas out-
side the automobile sector.

Clear Milestones on the Road to Success

When the economic climate was dramatically
altered following the financial and economic crisis
2008/2009, Stabilus responded to these changes
by developing the STAR strategy process. STAR
stands for Stabilus Reloaded, to fully capture all
the strategic improvements we are implementing.
It sets our vision for 2020 by defining our targets
for 2020. Based on this, individual targets and pro-
jects were derived for all regions and functions as
well as for sales and application development. Each
department devised the key aspects with which it
does it utmost to ensure attainment of the compa-
ny’s targets.

Along with profitable growth, the targets of
STAR 2020 focused on internal processes and
improvements in quality. Through rigorous imple-
mentation of the STAR process in all segments
and at all levels, the vision and the long-term
targets were quickly communicated to the entire
Stabilus workforce. Employees were enthused by
the notion of growth. With great flair and crea-
tive ideas, in the years since 2011, they have
been instrumental in a more than twofold increase
in revenue from €412 million to €910 million
between 2011 and 2017.

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

THE NEXT
STEP
STAR 2025

Long-term planning and the setting of ambitious
targets have proved their worth for Stabilus. Five targets
form the key pillars of further company development.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

INTERNATIONALIZATION

SUSTAINABLE GROWTH

EXCELLENCE

INNOVATION

ONE STABILUS

Sustainable Growth

Stabilus aims to keep on outperforming the market,
and has set an annual revenue growth target aver-
aging at least 6%. This is to be attained by gaining
new customers, introducing product innovations
and tapping into new and existing markets. The
company is also keen to carry on exploring selected
external growth opportunities. These growth ambi-
tions are driven by global developments and mega-
trends.

Globalization

Stabilus intends to further expand its global pres-
ence in a targeted way and is committed to
growth in the respective markets. In doing so,
Stabilus is living out its “in the region for the
region” approach, under which regional develop-
ment and sales expertise is built up locally in the
target markets. Orders from a region are to be pro-
duced largely in that same region in the medium
to long term.

pany is investing in a growing number of develop-
ment projects. These are all aimed at shortening
innovation cycles, establishing a culture of innova-
tion in the company and continuously filling the
innovation pipeline with new products and appli-
cations. The company derives its growth potential
from global megatrends.

One Stabilus

Lasting corporate success is built on the targeted
performance of all employees. A corporate culture
that promotes innovations and change is another
success factor. In addition to further organizational
and structural integration, this also requires a
Group-wide team spirit and togetherness, which
Stabilus fosters with corresponding values and
managerial guidelines. With these measures, Stabi-
lus aims to ensure that employees identify strongly
with the company’s targets

Excellence

Stabilus’ excellence initiative involves more than
just excellence in terms of production and product
quality. The initiative aims at ensuring that all
employees continuously pursue excellence in all of
their actions. Every single process and operation
inside the company, from recruitment through to
customer contact, is to be steadily and progres-
sively improved. In short, our guiding principle is
excellence in everything we do.

Innovation

Bringing innovations to market maturity and set-
ting market standards have long been strengths of
Stabilus. To cement its leading position, the com-

S T A B I L U S N E X T I G N I T I O N
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STAR 2025

SUSTAINABLE
GROWTH

2 0 11

2 0 1 2

2 0 13

2 01 4

2 0 1 5

2 0 16

2 0 17

€ 412 MILLION

€ 443 MILLION

€ 460 MILLION

€ 507 MILLION

€ 611 MILLION

€ 738 MILLION

€ 910MILLION

The foundations for Stabilus’ growth were laid with STAR 2020.
With STAR 2025, Stabilus is now set to remain on its ambitious and
profitable growth path in the future.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

PRODUCED GAS SPRINGS

3,000,000,000

S I N C E 1 9 6 2

PRODUCED POWERISE

13,000,000

S I N C E 2 0 1 1

SALES GROWTH SINCE 2011

€ 498,000,000

+121%

» We have more
than doubled our
revenues since
2011 – long term,
we see potential
to remain on
this ambitious
and profitable
growth path. «

Dietmar Siemssen
C E O

Maintaining profitable growth remains
a key target for Stabilus. Accordingly,
the company is aiming for average
annual revenue growth of at least 6% up to 2025.
On account of the strong market potential for
Stabilus products, the Management Board also
expects to be able to at least double the consoli-
dated revenue of €737.5 million generated in
2016 in the long term. Therefore, the company
remains ambitious in its pursuit of growth. As well
as gaining new customers for current products and
even better penetration of existing markets, prod-
uct innovations and tapping into new and existing
markets are also key success factors. To this end,
Stabilus is continuously expanding its range of rel-

long term. Innovative applications in the industrial
sector will make the company’s role as a supplier to
many branches of industry even stronger. Stabilus’
conventional business with gas springs and dampers
will be just as crucial here as the marketing of
existing Powerise® solutions.

In 2017 we re-defined the scope of our Busi-
ness Development department to provide more
focus on the early identification of M&A and mar-
ket opportunities. The systematic monitoring and
analysis of relevant targets will provide extra long-
term growth potential for Stabilus.

evant products and systems. The application engi-
neers in the five business segments and the central
Research and Development department work
closely together to achieve this.

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

STAR 2025

GLOBALIZATION

A S I A A N D R O W

N AF T A

E U R OP E

With 17 production locations around the world,
Stabilus is close to its customers.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

» With our ability
to identify global
trends, we are in a
position to advise
our clients and
jointly create inno-
vative products. «

Michael Hinck
C O U N T R Y H E A D J A P A N

» Fast responses
and an under-
standing of the
market and con-
sumers matter to
our customers. «

Xuefeng Tian
C O U N T R Y H E A D C H I N A

» It is imperative
that we have
a global presence
combined with
regional strength –
just like our
customers. «

Joong-Ho Lee
C O U N T R Y H E A D K O R E A

Stabilus will continue to heed its guid-
ing principle “in the region for the
region” in its future growth. Orders
from a region are to be fulfilled largely in that
same region. Regional expertise and local applica-
tion engineers who can respond to customer
requirements immediately are essential to this. For
instance, the desired kinematics of modules and
optimization of gas springs, dampers and electro-
mechanical drives in line with requirements are
developed in conjunction with customers. At the

end of the process, there is a solution that enables
controlled motion of product parts such as lids,
doors and system components or even the com-
plete product, e.g. a driving simulator, and means
greater comfort and safety for end users.

All over the world, product cycles are getting
ever shorter in many industries, while the number
of model variants is rising. Manufacturers are thus
responding to their customers’ increasingly diverse
requirements. Against this background, with its
balanced regional presence, Stabilus aims to be
engaged by customers as a development partner
at an early stage so that the company can provide
the best possible advice and service. With its
approach of strengthening the regions, Stabilus is
ideally placed to benefit from the global trend
towards product differentiation.

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

STAR 2025

EXCELLENCE

+ 50

Y O U N G
M A N A G E R S
C O A C H E D
F O R O N E Y E A R

TRAINING COURSES

350

P E R Y E A R

F O R E M P L O Y E E S
F R O M F O R E I G N
L O C A T I O N S C A R R I E D
O U T I N K O B L E N Z

The pursuit of excellence is a powerful tool in corporate management. It requires
employees to question their own actions in an innovative way each day, and
encourages a positive no-blame culture in the company. That way, products,
processes and services are continuously improved. Employees can help to shape
their working environment, which is an important factor in staff retention.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

» We want to de-
light our customers
with excellent
services and the
highest level of
product quality. «

Joachim Balmert
V I C E P R E S I D E N T
Q U A L I T Y M A N A G E M E N T

The Stabilus Group pursues maximum
excellence. This relates to all activities
in the company and therefore, of
course, to products, production processes and
procedures. Stabilus has its roots in the automo-
bile industry, where quality standards are among
the most demanding in the world. Accordingly,
Stabilus is committed to top product quality, and
as a supplier to many sectors, feels a special
respon sibility to ensure that everyday items work
reliably and safely.

This commitment applies to everything we
make, from Stabilus gas springs in automobiles to
dampers in solar parks to special structures, such
as safety dampers that protect floodgates in the
event of collisions with incoming ships.

For continuous improvement of its product
quality, Stabilus uses established methods world-
wide, including Kaizen, 5S and 6 Sigma. In addition,
the company defines its own standards in order to
establish robust processes across the board. These
standards make key performance indicators more
comparable across countries and departments and
enable decisions to be taken even at short notice by
means of management tools.

Stabilus has the ability to manufacture products of consistently high quality in both
small and large batch sizes.

With this in mind, a uniform product-creation
process underpinned by project-management soft-
ware was introduced throughout the Group in the
2017 fiscal year, thus improving transparency
across all regions, functions and business units.

Above and beyond product development and
production, the content and structure of all other
corporate functions are also geared towards
supporting further growth. For instance, the HR
department bolsters Stabilus’ position as an
employer in the competition for talent with corre-
sponding programs and initiatives. Marketing and
Sales are other departments where working meth-
ods are constantly honed and geared even more
closely towards the needs of international custom-
ers with a view to attaining excellence.

» Our solid
financing structure
and excellence in
finance processes
contribute to
the overall success
of Stabilus. «

Andreas Sievers
D I R E C T O R G R O U P
A C C O U N T I N G A N D S T R A T E G I C
F I N A N C E P R O J E C T S

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

STAR 2025

INNOVATION

Industrial shock absorbers are
customized innovations
designed for specific applications.

Innovative Powerise® drives can
open and close side doors.

Powerise® drives for tailgates have
enabled additional convenience
functions for passenger cars.

Stabilus believes that innovations are crucial to further sales growth.
To ensure that the innovation pipeline remains continuously stocked in the future,
the company is expanding its strong and vibrant innovation culture. Even greater
use is to be made of the knowledge and experience of its often long-serving
employees in the future.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

» Global
megatrends such
as autonomous
driving and
digitalization are
the inspiration for
innovation at
Stabilus. «

David Sabet
V I C E P R E S I D E N T
B U S I N E S S U N I T P O W E R I S E

Double-stroke gas springs, gas tension
springs and new blockable gas springs
supplement the product range and allow
Stabilus to develop
new solutions.

The combination of gas springs and
an oil brake allows for the construction
of the innovative sliding-door damper, a
damping element particularly intended for
heavy doors, windows and slide-in units.

Throughout its history, Stabilus has
constantly demonstrated the compa-
ny’s outstanding capacity for innova-
tion. Many successful products and solutions now
clearly show how well-placed the company is to
develop market-ready products from innovations
and establish them successfully as market stand-
ards. This success is particularly built on powerful
production technologies that Stabilus develops
to this day.

Nothing demonstrates the innovation capac-
ity of Stabilus in the recent past more than the
Powerise® technology. Thanks to its outstanding
product properties, this electromechanical system,
developed for automatic opening and closing of
tailgates in the automobile sector, is now “the”
solution for automatic operation of vehicle tail-
gates. The success of Powerise® is clearly apparent
from the development of unit sales. While just a

million units were ordered in total in the first two
years of series production up to 2012, more than
13 million Powerise® drives have now been sold to
date. In addition, the Powerise® technology is no
longer used solely in the automobile segment, but
also increasingly in the industrial sector. It is also
being constantly enhanced for new potential appli-
cations.

Many industries face major changes driven
by trends such as digitalization, the Internet of
Things, e-mobility and autonomous driving. The
sharing economy and modern, flexible office envi-
ronments with no permanently assigned worksta-
tions place new demands on the product develop-
ers of vehicle seats and office furniture. Stabilus
sees all this as a huge opportunity. As a kinematics
specialist with a diverse range of motion-control
solutions, Stabilus will provide the right options for
its customers. For instance, Stabilus is developing
smart control technologies for its electromechani-
cal spindles in order to extend their scope of appli-
cation.

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

STAR 2025

ONE
STABILUS

I T P R O C E S S E S

C O DE - S

I N T E G R A T I O N

D I G I T A L I Z A T I O N

The Stabilus Group now has more than 6,000 employees,
almost twice as many as in 2011. Our Group-wide team spirit
as well as globally joined-up thinking and action form the
basis for our past and future success.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

» The STAR
process has
enabled smooth
integration
into the
Stabilus Group. «

Jürgen Roland
V I C E P R E S I D E N T
B U S I N E S S U N I T
V I B R A T I O N & V E L O C I T Y
C O N T R O L

» Our unique
corporate
culture and
global positioning
make us more
attractive
as an employer. «

Martina Widmer
V I C E P R E S I D E N T
H U M A N R E S O U R C E S

» Standardized
organizational
structures as well
as digital procure-
ment processes
have resulted in
substantial effi-
ciency gains. «

Ekkehard Kadenbach
V I C E P R E S I D E N T
G L O B A L P U R C H A S I N G

Capacity for integration is a key suc-
cess factor for a globally fast-growing
company. Stabilus will continue to
grow in the future, while also moving closer
together at organizational level, for instance
through Group-wide simplification of processes
and the IT infrastructure, as well as at team level.
After all, Stabilus particularly relies on talented,
motivated employees, and lasting success is
based on all employees working together. To
make even better use of the available potential,
Stabilus has therefore devised across-the-board
corporate values and embedded them throughout
the Group under the name “CODE-S”.

rate culture is designed with this in mind, as well
as openness and dialog across all departments
and hierarchy levels.

The Stabilus brand will be a crucial binding
element here. Across the world, it stands for a
company that is committed to an ambitious
growth path and further challenging targets.
Wide-ranging services for employees and the
opportunity to help shape ongoing success in a
changing company complete the picture of Stabilus
as an attractive employer.

These values serve as a guide for day-to-day
activities and help to reinforce the existing sense
of togetherness in the company, thus boosting
global team spirit. In every cultural milieu, it is
important for employees to experience respect
from colleagues and managers. The Stabilus corpo-

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

STABILUS
OUR
VALUES

CO
DE

O P E N

E T HI C A L

C O M MI T ME NT

D E L IG H T

Four corporate values have been set out under the name CODE-S.
They form an identification framework and describe the attitude
with which all employees are expected to act at Stabilus. As a
result, they forge identity and act as a guide for the various decisions
that are made in day-to-day business.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

» Commitment is
what makes a goal
become reality -
the very successful
development of
our NAFTA
activities since
2011 is proof
of this. «

Anthony Haba
R E G I O N A L H E A D
N A F T A

» Ethical conduct
for Stabilus means
that we treat our
customers and
suppliers with fair-
ness, integrity
as well as respect
and our employees
as part of our
Stabilus family. «

Xuefeng Tian
C O U N T R Y H E A D
C H I N A

» Delight to our
customers starts
with our people
and their pride in
our products, ideas
and processes. «

David Sabet
V I C E P R E S I D E N T
B U S I N E S S U N I T P O W E R I S E

However, as well as being important in deal-
ings among colleagues and with customers, value
orientation is also an essential success factor for
Stabilus. After all, clear and well-formulated values
are the foundation for further fast and successful
integration of future acquisitions. The letters CODE
represent the initials of our corporate values:

Open

We are open to new ideas and promote
diversity in our company as well as a good flow of
information. All employees are important to the
company and contribute to its success through
dedicated cooperation and ideas.

Ethical

Commitment

Delight

This value expresses reliability and is charac-
teristic of us according to internal surveys and
numerous discussions with various stakeholders
such as customers, employees, investors and busi-
ness partners. Internally, the value embodies dedi-
cation, application and duty, or in short: I keep
promises and make every effort to meet our targets.

Enthusiasm describes the excellence with
which we work and always aim to impress custom-
ers, partners and colleagues by giving that little bit
extra. The value also emphasizes our service qual-
ity as well as our enjoyment and persistence when
it comes to finding the best solution.

Our actions are typified by fairness and
respect for each other. We operate within the law
and in a spirit of trust, reliability and collegiality.
With our current code of conduct, our employee
programs and our extensive measures to protect
the environment and resources, we have created
the structural framework for systematically assess-
ing this challenging aspiration and continuously
improving our specific services.

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

GROUP
CONVENTION
2017

Change process require lots of communication and clarity regarding
visions and targets. At the end of August 2017, Stabilus therefore
held a global management conference, the “Group Convention”, for the
first time. Around 140 participants met at the world-famous Ehrenbreitstein
Fortress in Koblenz. CEO Dietmar Siemssen and CFO Mark Wilhelms
aroused their enthusiasm in the STAR 2025 strategy.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

One aim of the conference was to inform the
entire management level of the Stabilus Group of
the new targets and forthcoming projects. To this
end, the participants became key ambassadors for
taking their enthusiasm for the new direction into
the Group’s locations. Following the Group Con-
vention, they reported to their team members
about the forthcoming projects and the corporate
values, thus instigating the crucial change process
for the organization at all Stabilus locations
around the world.

Stabilus’ success in the years since 2011 is
based on rigorous implementation of the STAR
2020 strategy process, which spurred the employ-
ees to produce outstanding performance. Many of
the targets defined in STAR 2020 were met ahead
of schedule in 2017. Therefore, the challenge
now is to raise enthusiasm for STAR 2025 among
the 6,000-plus employees of the more diversified
Stabilus Group. The wealth of experience and the
confidence that employees will gain from the strategy
process in the years ahead are another source of
motivation for maximum performance: They will
help Stabilus to reinvent itself again while remain-
ing a reliable partner for its stakeholders, con-
stantly focused on its customers’ requirements.

The teams that showed particularly
outstanding performance were
recognized with the STAR Award.

Team spirit and an
understanding of colleagues’
tasks are strengths of Stabilus.

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

The corporate functions and business units
presented their respective targets and strategies.
As a result, the participants gained a shared
understanding of the targets and projects up to 2025.

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

In his speech, CEO Dietmar
Siemssen stressed that all
participants have great
responsibility. He underlined
that the Stabilus teams
positively stand out from other
companies with their high level
of initiative and willingness to
cooperate.

During the Group Convention, the
Innovation Lab encouraged
sharing of expertise and
constructive discussion regarding
new ideas for products and
production.

S T A B I L U S N E X T I G N I T I O N

STABILUS
SHARE

+48.5%

Stabilus’ share price up by 48.5% in FY2017.

Stabilus share data

Ticker symbol

Bloomberg ticker symbol

Reuters ticker symbol

STM

STM:GR

STAB.DE

ISIN

LU1066226637

German security
identification number (WKN)

A113Q5

Number of shares
outstanding (Sept 30, 2017)

24,700,000

Type of shares

Capital stock

(Sept 30, 2017)

Dematerialized
shares with a
nominal value
of €0.01

€247,000

Stabilus share price up by 48.5%

Shareholder Structure
in % as of September 30, 2017

Stabilus‘ share price increased by 48.5% over
the course of the fiscal year 2017 (stock exchange
trading days: Oct. 4, 2016 - Sept. 29, 2017) and
once again substantially outperformed the peer
indices: SDAX, DAXsector All Automobile and
DAXsector Industrial.

Shareholder structure

According to the voting rights notifications
received until September 30, 2017, Marathon
Asset Management LLP, London, UK and Black-
Rock, Inc., Wilmington, DE, USA each hold more
than 5% of Stabilus shares. Stabilus management,
i.e. members of the Management Board and of the
Supervisory Board, hold 0.5% of the total shares.

The aforementioned and all other voting-right
notifications are published on www.ir.stabilus.com.

7.1%

5.0%

0.5%

87.4%

7.1 5.0

Marathon Asset
Management LLP

BlackRock, Inc.

Management

Other institutional
and private investors

S T A B I L U S N E X T I G N I T I O N

Closing price
Sept 29, 2017
€76.79

60%

50%

40%

30%

20%

10%

Opening price
Oct 4, 2016
€51.70

– 10%

– 20%

Oct

Dec

Feb

Apr

June

Aug

Stabilus SDAX (Price index) DAXsector All Automobile (Price index) DAXsector Industrial (Price index)

€0.80

The Management Board and Supervisory Board
propose a dividend of €0.80 per share for FY2017.

Annual General Meeting

Dividend proposal of €0.80 per share

Approximately 56% of equity capital was rep-
resented at our Annual General Meeting which was
held on February 15, 2017 in Luxembourg. Each of
the agenda points proposed by the company’s man-
agement has been approved by a large majority of
the shareholders. Among other things, the Articles of
Association were amended and the share form was
changed from bearer shares to dematerialized shares
in accordance with Luxembourg Law on dematerial-
ized shares dated April 6, 2013. All of the docu-
ments and information regarding the Annual Gen-
eral Meeting can be found at www.ir.stabilus.com.

The Management Board and the Supervisory
Board have resolved to propose a dividend distri-
bution of €0.80 per share for FY2017 to the
Annual General Meeting to be held in Luxem-
bourg on February 14, 2018. In case the AGM
approves
total
the dividend proposal,
dividend will thus amount to €19.8 million
(PY: €12.4 million) and the distribution ratio will
be 24.9% of the consolidated profit attributable
to the Stabilus shareholders.

the

Share price performance
S T A B I L U S N E X T I G N I T I O N

Development of Stabilus share price since IPO

First trading day
May 23, 2014
€22.75

Closing price
Sept 29, 2017
€76.79

€80

€75

€70

€65

€60

€55

€50

€45

€40

€35

€30

€25

€20

Jul

Sept

Nov

Jan
2015

Mar

May

Jul

Sept

Nov

Jan
2016

Mar

May

Jul

Sept

Nov

Jan
2017

Mar

May

Jul

Sept

Regular dialog with investors and analysts

In fiscal year 2017 we continued to pursue
our goal of providing all market participants with
relevant and reliable information. We conducted
ten roadshows in Europe’s and North America’s
major financial centers and participated in the fol-
lowing international conferences:

Oddo Forum, Lyon

Commerzbank German Investment
Seminar, New York
Kepler Cheuvreux 16th German Corporate
Conference, Frankfurt am Main
Bankhaus Lampe Deutschlandkonferenz,
Baden-Baden
UBS Pan European Small and Mid-Cap
Conference, London
Commerzbank Mid Cap Investment
Conference, Boston and New York

Warburg Highlights Conference, Hamburg

Berenberg European Conference
USA, Tarrytown

Societe Generale Nice Conference, Nice
Quirin Champions, Frankfurt am Main

J.P. Morgan 5th Annual Auto Conference,
London
Commerzbank Sector Conference,
Frankfurt am Main
Berenberg Goldman Sachs Sixth German
Corporate Conference, Munich

Baader Investment Conference, Munich
Berenberg Madrid Seminar

In addition, in fiscal 2017, we hosted eight
investor plant visits at the company’s operational
headquarters in Koblenz, Germany.

The number of equity analysts which publish
regular assessments and recommendations on
Stabilus stock increased from nine as of Septem-
ber 2016 to twelve as of September 2017.

Research coverage

Bankhaus Lampe

Christian Ludwig

Berenberg

Philippe Lorrain, Simon Toennessen

Commerzbank

Yasmin Steilen

Equinet Bank

Manuel Tanzer, Stefan Augustin

Hauck & Aufhäuser

Christian Glowa

J.P. Morgan

Jose M Asumendi, Akshat Kacker

Kepler Cheuvreux

Hans-Joachim Heimbürger

Macquarie

MainFirst

Oddo Seydler

Christian Breitsprecher

Florian Treisch

Michael Junghans

Societe Generale

Stephen Reitman, Erwann Dagorne

Warburg Research

Alexander Wahl

S T A B I L U S N E X T I G N I T I O N

COMBINED
MANAGEMENT
REPORT

CHAPTER

3 5 – 6 0

S T A B I L U S N E X T I G N I T I O N

COMBINED
MANAGEMENT
REPORT

as of and for the fiscal year ended September 30, 2017

37 GENERAL

37 STRATEGY

BUSINESS AND GENERAL
ENVIRONMENT

41 RESULTS OF OPERATIONS

DEVELOPMENT OF
OPERATING SEGMENTS

48 LIQUIDITY

STATUTORY RESULTS OF
OPERATIONS AND FINANCIAL
POSITION OF STABILUS S. A.

51 RISKS AND OPPORTUNITIES

57 CORPORATE GOVERNANCE

60 SUBSEQUENT EVENTS

46 FINANCIAL POSITION

60 OUTLOOK

S T A B I L U S N E X T I G N I T I O N

GENERAL

spring solutions, especially in the industrial business through new

applications and selected add-on acquisitions and (iv) maintain

and strengthen the Company’s cost and quality leadership.

Stabilus S. A., Luxembourg, hereafter also referred to as “Stabilus”

or the “Company” is a public limited liability company (société

D R I V E P R O F I TA B L E A N D C A S H G E N E R AT I N G

anonyme) incorporated in Luxembourg and governed by Luxem-

G R O W T H I N A L L R E G I O N A L S E G M E N T S A N D

bourg law. The registered office is 2, rue Albert Borschette, L-1246

A C R O S S E N D M A R K E T S

Luxembourg, Grand Duchy of Luxembourg.

The Stabilus Management aims to continue to increase revenue,

Stabilus S. A. is the parent company of the Stabilus Group. The

profits and cash flows across all business segments by further

Group is organized and managed primarily on a regional level.

focusing on regions and sectors where the Stabilus Group has

The three reportable operating segments of the Group are Europe,

room to grow, by entering new markets and by strengthening the

NAFTA as well as Asia / Pacific and Rest of World (RoW). Stabilus’

Group with selected add-on acquisitions.

fiscal year is not a calendar year but a twelve-month period from

October 1 until September 30 of the following year.

Automotive Gas Spring & Powerise®: Focus on rapidly

growing regions and increased comfort

The Stabilus Group is a leading manufacturer of gas springs, damp-

Stabilus intends to continue to further expand its international

ers as well as electromechanical tailgate opening systems (motion

presence in rapidly growing markets, in particular in Asia, which

control solutions). The products are used in a wide range of appli-

has become a significant growth driver for the automotive sector

cations in the automotive and the industrial sector, including furni-

and where the Company’s market share still lags behind the market

ture applications. Typically the products are used to aid the lifting

share in Europe and NAFTA. Management seeks to increase reve-

and lowering or dampening of movements. As world market leader

nue from Asian OEMs in the automotive business, supported by

for gas springs, the Group manufactures for all key vehicle produc-

new targeted investments in additional production capacity in this

ers. A broad spectrum of industrial customers diversify the Group’s

region. To achieve this goal, management has implemented a tar-

customer base. Around 36% of Group’s revenue in fiscal 2017

geted sales strategy and is further strengthening engineering capa-

were achieved with industrial customers.

bilities in China, which has already secured orders from several

STRATEGY

local Chinese OEMs.

Increased demand for SUVs, crossovers and hatchback cars will pro-

vide a strong foundation for increased Powerise® sales. Powerise®,

our automatic opening and closing system for vehilce tailgates fullfills

the increased comfort requirements across all regions. The Company

The Stabilus Group is a leading supplier of gas springs to automo-

is in the process of adding further capacities at its three Powerise®

tive and industrial customers. In addition, the Company has suc-

production plants.

cessfully expanded into the production and sale of automatic open-

ing and closing systems, primarily used in vehicle tailgates. With

Industrial: Increase regional coverage

the acquisition of Hahn Gasfedern, ACE and Fabreeka / Tech Prod-

While Stabilus has a large industrial market share in certain Euro-

ucts in fiscal 2016 the Group expanded its product offering. The

pean countries in which the Company has a strong commercial

Company offers now a broad range of solutions for motion control,

presence, the Group believes that there is still potential to increase

which contains additional damping solutions including vibration

market share in Asia and North America, where the Company’s

insulation. Stabilus’ strategic aim is to further extend its leadership

market coverage is comparatively less strong. Management has

positions. The key focus areas of its strategy STAR are to: (i) drive

identified regions and countries in which the Company has the

profitable and cash-generating growth, (ii) benefit from meg-

opportunity to repeat the successful strategies from markets where

atrends, such as increased standard of living, increasing comfort

Stabilus has a high share, by improving market coverage with the

requirements and aging population, (iii) focus on innovative gas

objective of strengthening the local sales footprint. In addition,

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

Stabilus intends to duplicate its production, application engineer-

F O C U S O N I N N O VAT I V E C O M P O N E N T S A N D

ing and sales know-how from Europe and NAFTA to the Asia / Pacific

S YS T E M S TO TA K E A D VA N TA G E O F G L O B A L

region, to strengthen the Group’s footprint there. The Company is

I N D U S T RY T R E N D S

increasing its presence in China. Stabilus has extended its Chinese

production capabilities and set up local application engineering,

The products of Stabilus are at the forefront of innovation in motion

sales and project management teams. In China the Company has

control. The Company employs 329 people in R&D across its three

set up the first production line for industrial products, which will

regional segments as of September 30, 2017. Stabilus is focused

help gain additional local market shares. The Stabilus management

on designing and manufacturing highly-engineered components,

believes that a strong local presence in China will further strengthen

modules and system solutions that address key global trends in the

the Group’s position in the Asia / Pacific region.

automotive and industrial sectors. The Company aims to adapt to

these trends by continuously improving its existing technology, in

Commercial furniture: Supplying high quality products

particular the requirement for ergonomic solutions as well as auto-

As the only non-Asian producer of gas springs for high quality com-

mated opening and closing systems. Management believes that

mercial furniture, Stabilus is in an excellent position to gain further

actively addressing these key trends reinforces the Company’s abil-

market share in Europe and NAFTA being the only non-Asian pro-

ity to maintain its market share and profitability.

ducer. Management has successfully turned around the commercial

furniture business and increased profitability and stabilized revenues.

In the industrial sector, the Company continues to develop products

Stabilus expects this positive momentum to continue.

for enhanced safety and comfort. For example, it is selling a seat

application based on the Bloc-O-Lift® system for use in airplane

B E N E F I T F R O M M E G AT R E N D S, S U C H A S

seats. In addition, dampers manufactured by Stabilus are increas-

I N C R E A S I N G C O M F O R T R E Q U I R E M E N T S A N D

ingly used in suntracking solar parcs. Our dampers protect the

A G I N G P O P U L AT I O N

modules by reducing wind induced vibration.

Stabilus continues to adapt its product offerings towards meg-

Management expects that recent and continued wins at / from key

atrends, such as comfort requirements. The Powerise® solution

clients for Powerise® solutions due to the superior technology fea-

enhances comfort through automatically opening and closing car

tures of the Company’s products will be a key growth driver for

tailgates and trunk lids. In addition, the Company’s gas springs

Stabilus. While Powerise® systems were in the past deployed only

offer more comfortable opening and closing solutions as well as

in the luxury and SUV car segments, Powerise® has recently suc-

increased comfort in commercial furniture and industrial applica-

cessfully gained market shares with mid-class vehicles such as the

tions, such as airplane seats.

VW Passat and Ford Mondeo. The Company is working on and

The global population of older people is growing considerably

drive technology to further reduce noise, weight and cost. In

faster than the population as a whole. Stabilus focuses on capital-

addition, Stabilus is exploring new industrial applications for its

investing in improving and further developing its current spindle

izing on this megatrend. It is inevitable that an aging consumer

Powerise® systems.

base requests more movement support and more automated sys-

tems in their vehicles and in other aspects of their daily lives. The

M A I N TA I N A N D S T R E N G T H E N C O S T A N D

Group intends to benefit from this megatrend as it has a leading

Q U A L I T Y L E A D E R S H I P

position as a system provider of automatic opening and closing

systems which will continue to experience an increasing demand.

Build on the Group’s global footprint and

proximity to customers

Based on Stabilus guiding strategy “in the region, for the region”,

it has established its facilities in close proximity to the Group’s cus-

tomers and has done so continuously over the past years e.g. the

US, in China, South Korea, Mexico. It is the Company’s goal to con-

tinue to provide a comprehensive product and service offering to

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

current and new customers globally. The Group seeks to fully glo-

For the coming years, management expects to continue on this path

balize its product portfolio and to provide an even broader range

with productivity improvements, a range of initiatives to profitability

of components and systems to each customer.

backed by a high level of business which has already been locked

in. Due to the Company’s production know-how and long-standing

Continue to optimize cost base

client relationships backed by Stabilus’ quality leadership, manage-

Stabilus continuously implements operational improvements relat-

ment is confident that it can protect the Group’s market shares in

ing to plant and overhead, which includes productivity improve-

gas springs in Europe and NAFTA and gain further market shares

ments, overhead optimization and the rollout / implementation of

for gas springs in the Asia / Pacific region, especially with local cus-

local sourcing, to improve the Company’s operating cost.

tomers. An increasing market share in Powerise® supports the posi-

tive outlook.

BUSINESS AND GENERAL
ENVIRONMENT

Stabilus Group operates in automotive and in industrial markets.

Macroeconomic development

In the industrial markets, we supply customers in a large number of

According to the latest figures published by the International Mon-

sub-industries, e.g. industrial production equipment, automation,

etary Fund (IMF), the global GDP growth in the calendar year 2017

construction machinery, transportation (aircraft, truck and buses,

is expected to be 3.6% (2016: 3.2%). Advanced economies experi-

marine), agriculture machinery, medial applications, renewable

enced persistent stagnation in the last years and currently show a

energy (in particular solar, wind). Hence, our revenue development

change for the better: the increase of the established economies’

in the industrial business depends to a certain degree on the mac-

GDP is expected to be 2.2% in 2017 and 2.0% in 2018, compared

roeconomic development, i.e. the growth rate of the gross domestic

to 1.7% in calendar year 2016. The developing economies are still

product (GDP) in the countries and regions we operate in.

experiencing higher growth rates as last year. The growth rate of

developing countries’ GDP is expected to be 4.6% in 2017 and

In the automotive market, an important driver of our revenue growth

4.9% in 2018, compared to 4.3% in 2016.

is the global production volume of light vehicles (which comprise

passenger cars and light commercial vehicles weighing less than

six tons) and ultimately the number of vehicles sold, e.g. the regis-

tration of new vehicles as an indicator of car sales. The average

content of Stabilus products per vehicle differs with the car body

configurations (for instance, hatchbacks and SUVs have generally a

higher content per car). Hence, the demand and popularity of certain

vehicle body configurations should be considered as an additional

variable in a revenue forecast model.

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

Latest growth projections for selected economies

% Y E A R - O N - Y E A R C H A N G E I N T H E C A L E N D A R Y E A R

World

Advanced economies

Euro Area

United Kingdom

United States

Canada

Japan

Developing economies (emerging markets)

Emerging and developing Europe

Russia

China

Mexico

Brazil

Source: IMF, October 2017 World Economic Outlook.
* Projections.

2016

3.2%

1.7%

1.8%

1.5%

1.0%

4.3%

3.1%

(0.2)%

6.7%

2.3%

(3.6)%

2017*

3.6%

2.2%

2.1%

1.7%

2.2%

3.0%

1.5%

4.6%

4.5%

1.8%

6.8%

2.1%

0.7%

T_001

2018*

3.7%

2.0%

1.9%

1.5%

2.3%

2.1%

0.7%

4.9%

3.5%

1.6%

7.4%

1.9%

1.5%

Development of vehicle markets

2016) in Europe and around 17.2 million vehicles (– 3.3% versus

17.8 million units in 2016) in the NAFTA region.

The global production of light vehicles in the last twelve months

developed positively. According to IHS forecasts as of October 2017,

Estimations of the German Association of the Automotive Industry

the global production is expected to increase from 93.0. million

(VDA), as of October 2017, show a global year-on-year increase of

units in calendar year 2016 to approximately 95.1 million vehicles

new car registrations in calendar year 2017 amounting to approxi-

in 2017 which corresponds to a growth rate of 2.2% in 2017. Thus,

mately 2%. The development varies significantly in the world’s

in 2017, the output of new passenger cars and light commercial

regions: +10% in Eastern Europe, +2% in Mexico, +2% in China,

vehicles is forecast to reach around 55.6 million vehicles (+3.5%

+3% in Western Europe, – 4% in the USA, + 10% in Russia and

versus 53.7 million units in 2016) in Asia / Pacific and RoW, approx-

+5% in Brazil.

imately 22.3 million vehicles (+3.7% versus 21.5 million units in

Production of light vehicles

T_002

I N M I L L I O N S O F U N I T S P E R C A L E N D A R Y E A R

Europe

NAFTA

Asia / Pacific and RoW

Worldwide production of light vehicles*

Source: IHS
* Passenger cars and light commercial vehicles (<6t)
** IHS forecast as of October 2017

2013

19.5

16.2

49.0

84.7

2014

20.1

17.0

50.2

87.4

2015

21.0

17.5

50.3

88.8

2016

21.5

17.8

53.7

93.0

2017**

2018**

22.3

17.2

55.6

95.1

22.7

17.5

56.4

96.6

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Sport utility vehicles (SUV), multi-purpose vehicles (MPV), crosso-

ber 2017, the registrations of new SUVs in Germany increased by

vers, as well as station wagons and hatchbacks continue to be

18.4% and the registrations of new off-road vehicles by 3.6%,

favored by an increasing number of end customers – not only in

compared to the respective period of the previous year.

North America and Europe, but increasingly in Asia / China. For

instance: the German Department of Motor Vehicles (Kraftfahrt-

Bundesamt, KBA), a government agency administering vehicle reg-

istrations, publishes monthly statistics of new passenger car regis-

trations on its website – classified by car models and vehicle

segments. According to these statistics for 2016, registrations of

RESULTS OF OPERATIONS

new SUVs in Germany increased by 20.1% in a year-on-year com-

The table below sets out Stabilus Group’s consolidated income

parison and off-road vehicles by 10.4% – i.e. more strongly than

statement for the fiscal year 2017 in comparison to the fiscal

other vehicle segments and total new car registrations which

year 2016:

increased by 4.5%. In the ten-month period from January to Octo-

Income statement

I N € M I L L I O N S

Revenue

Cost of sales

Gross profit

Research and development expenses

Selling expenses

Administrative expenses

Other income

Other expenses

Profit from operating activities (EBIT)

Finance income

Finance costs

Profit / (loss) before income tax

Income tax income/ (expense)

Profit / (loss) for the period

Year ended Sept 30,

2017

910.0

(637.2)

272.9

(38.2)

(80.4)

(35.3)

12.8

(13.3)

118.4

22.3

(29.8)

110.9

(31.7)

79.2

2016

737.5

(547.7)

189.8

(26.6)

(55.5)

(33.9)

12.0

(9.2)

76.6

2.6

(13.3)

65.9

(18.0)

48.0

T _ 003

Change

% change

172.5

(89.5)

83.1

(11.6)

(24.9)

(1.4)

0.8

(4.1)

41.8

19.7

(16.5)

45.0

(13.7)

31.2

23.4%

16.3%

43.8%

43.6%

44.9%

4.1%

6.7%

44.6%

54.6%

>100.0%

68,3%

76.1%

65,0%

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

Revenue

Group’s total revenue developed as follows:

Revenue by region

I N € M I L L I O N S

Europe1)

NAFTA1)

Asia / Pacific and RoW 1)

Revenue1)

1) Revenue breakdown by location of Stabilus company (i. e. “billed-from view”).

Revenue by markets

I N € M I L L I O N S

Automotive Gas Spring

Automotive Powerise

Automotive business

Industrial / Capital Goods

Vibration & Velocity Control

Commercial Furniture

Industrial business

Revenue

Year ended Sept 30,

2017

456.3

350.7

103.0

910.0

2016

364.2

289.0

84.3

737.5

T _ 004

Change

% change

92.1

61.7

18.7

172.5

25.3%

21.3%

22.2%

23.4%

T _ 005

Year ended Sept 30,

2017

340.5

243.2

583.7

204.4

93.9

28.0

326.3

910.0

2016

320.0

195.3

515.3

171.0

22.5

28.6

222.2

737.5

Change

% change

20.5

47.9

68.4

33.4

71.4

(0.6)

104.1

172.5

6.4%

24.5%

13.3%

19.5%

>100.0%

(2.1%)

46.8%

23.4%

Total revenue of €910.0 million in fiscal year 2017 increased by

NAFTA´s revenue increased by 21.3% from €289.0 million in fiscal

23.4% compared to the fiscal year 2016. The entities acquired in

2016 to €350.7 million in fiscal 2017. ACE, Fabreeka and Tech

June 2016 (ACE, Hahn Gasfedern, Fabreeka and Tech Products)

Products contributed €37.0 million in fiscal 2017 and €9.0 million

contributed €117.6 million in fiscal year 2017 and €27.3 million in

in fiscal 2016 to NAFTA´s revenue. The Powerise® business grew by

fiscal 2016. The contribution of the entities acquired in June 2016

€25.1 million or 22.3%. Approximately €2.0 million of NAFTA’s

in fiscal 2016 reflects only the revenue starting from the date of

revenue increase was due to the stronger US dollar, i.e. due to the

acquisition, i.e. July 2016 to September 2016 (3 months or Q4 / 16).

currency translation of NAFTA’s revenue from US dollar to euro

(average rate per €1: $1.10 in FY17 versus $1.11 in PY).

In fiscal year 2017, revenue of our European entities increased by

25.3% from €364.2 million in fiscal 2016 to €456.3 million in fis-

Revenue of our entities in Asia / Pacific and RoW increased by

cal 2017. The entities acquired in June 2016 contributed €75.9 mil-

22.2% from €84.3 million in fiscal 2016 to €103.0 million in fiscal

lion in fiscal year 2017 and €17.4 million in fiscal 2016 to Europe´s

2017. This is essentially due to new customer wins and a recover-

revenue. The Powerise® business grew by €18.4 million or 22.5%.

ing of the business in South America. The entities acquired in June

2016 contributed €4.7 million in fiscal 2017 and €1.0 million in

fiscal 2016 to the revenue increase in Asia / Pacific and RoW.

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Revenue in the Automotive business increased by €68.4 million or

points to 4.2% (PY: 3.6%). The capitalization of R&D expenses

13.3% to €583.7 million (PY: €515.3 million). This is particularly

decreased from €(12.6) million in fiscal 2016 to €(11.4) million in

due to our Powerise® business. The increase in the Powerise® business

fiscal 2017.

by 24.5% is mainly the result of further new OEM platform wins

and the subsequent launch of new Powerise® programs for a num-

S E L L I N G E X P E N S E S

ber of key vehicle OEMs. In addition, the share of end customers

(buyers of new vehicles) opting for this extra equipment continues

Selling expenses increased from €(55.5) million in fiscal 2016 by

to rise as well.

44.9% to €(80.4) million in fiscal 2017 generally due to increased

revenue. As a percentage of revenue, the selling expenses increased

Revenue in the Industrial business increased by €104.1 million or

to 8.8% (PY: 7.5%). This reflects the variable cost elements in selling

46.8% to €326.3 million (PY: €222.2 million). This is especially

expenses and the relativly higher selling expense to sales ratio of the

due to the acquisition in June 2016. ACE, Fabreeka and Tech Prod-

entities acquired in June 2016 relative the other entities of the

ucts form the new business unit Vibration & Velocity Control with

Group. The acquired entities are active in the industrial market which

€93.9 million revenue in fiscal 2017 (PY: €22.5 million). Hahn Gas-

tends to have higher selling expense ratios compared to the automo-

federn is part of the business unit Industrial / Capital Goods and

tive business.

contributed further €23.7 million (PY: €4.8 million) revenue. Com-

mercial Furniture (formerly: Swivel Chair) revenue decreased by 2.1%

A D M I N I S T R AT I V E E X P E N S E S

from €28.6 million in fiscal 2016 to €28.0 million in fiscal 2017.

Cost of sales and overhead expenses

essentially due to the entities acquired in June 2016. In fiscal 2016

Administrative expenses increased from €(33.9) million in fiscal

2016 by 4.1% to €(35.3) million in fiscal 2017. This increase is

C O S T O F S A L E S

non-recurring transaction cost of €(3.9) million relating to the

acquisition were recognized. Overall payroll inflation and full year

cost of the entities acquired in June 2016 explain the year-over-

Cost of sales increased from €(547.7) million in fiscal 2016 by

year increase in administrative expenses. As a percentage of reve-

16.3% to €(637.2) million in fiscal 2017 and this is generally driven

nue, administrative expenses decreased by 70 basis points to

by increased revenue. The cost of sales increase (16.3%) is less

3.9% (PY: 4.6%).

than the increase in revenue (23.4%). Consequently the cost of

sales as a percentage of revenue decreased to 70.0% (PY: 74.3%)

OT H E R I N C O M E A N D E X P E N S E

and the gross profit margin improved to 30.0% (PY: 25.7%). This

reflects a stronger gross profit margin of the companies acquired in

Other income increased from €12.0 million in fiscal 2016 by €0.8 mil-

June 2016 and a better fixed cost absorption due to economies of

lion to €12.8 million in fiscal 2017. This mainly comprises foreign

scale. The companies acquired in June 2016, Hahn Gasfedern, ACE

currency translation gains from the operating business.

and Fabreeka / Tech Products, are active in the industrial market and

offer custom made products with small lot sizes combined with

Other expense increased from €(9.2) million in fiscal 2016 by

short lead times. This market approach provides the mentioned

€(4.1) million to €(13.3) million in fiscal 2017. This mainly comprises

stronger gross profit margins to Stabilus. At the same time this

foreign currency translation losses from the operating business.

approach drives higher overhead cost and requires a different man-

ufacturing approach, relative to the Automotive business.

F I N A N C E I N C O M E A N D C O S T S

R & D E X P E N S E S

Finance income is substantially due to the adjustment of the carrying

value of the euro term loan facility amounting to €22.1 million. This

R&D expenses (net of R&D cost capitalization) increased by 43.6%

reflects the decrease in the margin based on the improved net lever-

from €(26.6) million in fiscal 2016 to €(38.2) million in fiscal 2017.

age ratio of the Group with an amount of €17.5 million and the

As a percentage of revenue, R&D expenses increased by 60 basis

extension of the term by one year with an amount of €4.6 million.

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

Finance costs increased from €(13.3) million in fiscal 2016 to

I N C O M E TA X E X P E N S E

€(29.8) million in fiscal 2017. This is primarily due to higher net

foreign exchange losses in fiscal 2017.

Driven essentially by higher pre-tax profit of €110.9 million in

fiscal 2017 (PY: €65.9 million), the income tax expense grew from

The net foreign exchange loss is substantially due to the weaker

€(18.0) million in fiscal 2016 to €(31.7) million in fiscal 2017.

USD (closing rate per €1: $1.12 as at September 30, 2016 versus

The tax rate in fiscal 2017 is 28.6% (PY: 27.3%). This increase

$1.18 as at September 30, 2017) relevant for the translation of

reflects income taxes on dividend payments within the

intragroup loans and the portion of the euro term loan facility

Stabilus Group.

(€157.5 million) held by an US entity until September 29, 2017.

Interest expenses on financial liabilities include ongoing interest

expenses of €(9.6) million (PY: € 8.9 million) related to the euro

The following table shows a reconciliation of EBIT (earnings before

term loan facility. Thereof, an amount of €(2.4) million (PY: €(2.6) mil-

interest and taxes) to adjusted EBIT for the fiscal years 2017

R E C O N C I L I AT I O N O F E B I T TO A D J U S T E D E B I T

lion) is due to the amortization of debt issuance cost and the amor-

and 2016:

tization of the adjustment of the carrying value by using the effec-

tive interest rate method. Furthermore the prepayments of the euro

Adjusted EBIT represents EBIT, adjusted for exceptional non-recur-

term loan facility lead to a derecognition of unamortized debt issu-

ring items (e.g. restructuring or one-time advisory costs) and depre-

ance cost and unamortized adjustment of the carrying value with a

ciation / amortization of fair value adjustments from purchase price

total amount of €(3.1) million (PY: €(3.8) million).

allocations (PPAs).

Reconciliation of EBIT to adjusted EBIT

T _ 006

I N € M I L L I O N S

Profit from operating activities (EBIT)

Advisory

PPA adjustments

Total adjustments

Adjusted EBIT

Year ended Sept 30,

2017

118.4

–

19.2

137.6

2016

76.6

3.9

17.1

21.0

97.7

Change

% change

41.8

(3.9)

2.1

(1.8)

39.9

54.6%

(100.0)%

12.3%

(8.6)%

40.8%

Adjusted EBIT is presented because we believe it is a useful indica-

The adjustment of advisory expenses amounting to €3.9 million

tor of the Group’s operating performance before items which are

in fiscal 2016 relates to the acquisition of ACE, Hahn Gasfedern,

considered exceptional and not relevant to an assessment of our

Fabreeka and Tech Products.

operational performance.

In fiscal year 2017, the definition of adjusted EBIT has been slightly

(PY: €12.7 million) related to the April 2010 PPA and €8.4 million

modified as interest cost on pensions recognized in EBIT will not be

(PY: €4.4 million) to the June 2016 PPA.

The PPA adjustments in the current year contain €10.8 million

adjusted out anymore. The presentation of prior periods has been

changed accordingly, i.e. the adjusted EBIT reported in our annual

report for the fiscal year 2016 was €1.1 million higher.

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

DEVELOPMENT OF
OPERATING SEGMENTS

Stabilus Group is organized and managed primarily on a regional

The table below sets out the development of our operating seg-

level. The three reportable operating segments of the Group are

ments for the fiscal years 2017 and 2016.

Europe, NAFTA, Asia / Pacific and RoW.

Operating segments

I N € M I L L I O N S

Europe

External revenue1)

Intersegment revenue1)

Total revenue1)

Adjusted EBIT

as % of total revenue

as % of external revenue

NAFTA

External revenue1)

Intersegment revenue1)

Total revenue1)

Adjusted EBIT

as % of total revenue

as % of external revenue

Asia / Pacific and RoW

External revenue1)

Intersegment revenue1)

Total revenue1)

Adjusted EBIT

as % of total revenue

as % of external revenue

Year ended Sept 30,

2017

2016

Change

% change

T _ 007

456.3

30.4

486.7

68.0

14.0%

14.9%

350.7

24.7

375.4

55.1

14.7%

15.7%

103.0

0.7

103.7

14.5

14.0%

14.1%

364.2

28.0

392.2

52.9

13.5%

14.5%

289.0

9.6

298.5

33.4

11.2%

11.6%

84.3

0.8

85.1

11.3

13.3%

13.4%

92.1

2.4

94.5

15.1

61.7

15.1

76.9

21.7

18.7

(0.1)

18.5

3.2

25.3%

8.6%

24.1%

28.5%

21.3%

>100.0%

25.8%

65.0%

22.2%

(12.5)%

21.7%

28.3%

1) Revenue breakdown by location of Stabilus company (i. e. “billed-from view”).

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

The external revenue generated by our European companies increased

to NAFTA’s revenue. In addition a €25.1 million revenue increase

by 25.3% from €364.2 million in fiscal 2016 to €456.3 million in

was generated by our Powerise® business. NAFTA’s organic revenue

fiscal 2017. A significant portion of the revenue growth, i.e. €58.5 mil-

growth without the entities acquired in June 2016 is 11.3% (currency

lion (PY: €17.4 million), was contributed by the entities acquired in

adjusted). The adjusted EBIT of the NAFTA segment increased by

June 2016. Hahn Gasfedern which is part of our Industrial / Capital

65.0% or €21.7 million and the adjusted EBIT margin, i.e. adjusted

Goods business unit contributed €18.9 million in fiscal 2017 (PY:

EBIT in percent of external revenue, increased by 410 basis points

€4.8 million) and ACE, Fabreeka and Tech Products which form the

to 15.7% in fiscal 2017 (PY: 11.6%).

business unit Vibration & Velocity Control contributed €52.2 million

in fiscal year 2017 (PY: €12.6 million) to Europe’s revenue. In addi-

The external revenue of our companies located in the Asia / Pacific

tion, €18.4 million revenue increase was generated by our Powerise®

and RoW region increased from €84.3 million in fiscal 2016 by

business. Europe’s organic revenue growth without the entities

22.2% to €103.0 million in fiscal 2017. An amount of €3.7 million

acquired in June 2016 is 9.7%. The adjusted EBIT of the European

was contributed by the entities acquired in June 2016. ACE, Fab-

segment increased by 28.5% or €15.1 million and the adjusted EBIT

reeka and Tech Products contributed €4.7 million in fiscal year 2017

margin, i.e. adjusted EBIT in percent of external revenue, increased by

(PY: €1.0 million) to Asia / Pacific and RoW. In addition an €8.8 million

40 basis points to 14.9% in fiscal 2017 (PY: 14.5%).

revenue increase was generated by our Automotive Gas Spring

business and another €4.4 million by our Powerise® business.

The external revenue of our companies located in the NAFTA region

Asia / Pacific and RoW organic revenue growth without the entities

increased from €289.0 million in fiscal 2016 by 21.3% to €350.7 mil-

acquired in June 2016 is 18.0%. The adjusted EBIT of the Asia / Pacific

lion in fiscal 2017. An amount of €28.0 million was contributed by

and RoW segment increased by 28.3% or €3.2 million and the

the entities acquired in June 2016. ACE, Fabreeka and Tech Prod-

adjusted EBIT margin, i.e. adjusted EBIT in percent of external reve-

ucts contributed €37.0 million in fiscal year 2017 (PY: €9.0 million)

nue, increased by 70 basis points to 14.1% in fiscal 2017 (PY: 13.4%).

FINANCIAL POSITION

Balance sheet

I N € M I L L I O N S

Assets

Non-current assets

Current assets

Total assets

Equity and liabilities

Total equity

Non-current liabilities

Current liabilities

Total liabilities

Total equity and liabilities

T _ 008

2017

2016

Change

% change

647.8

282.2

930.0

336.4

430.8

162.8

593.6

930.0

671.9

265.6

937.4

262.9

522.4

152.1

674.5

937.4

(24.1)

16.6

(7.4)

73.5

(91.6)

10.7

(80.9)

(7.4)

(3.6)%

6.2%

(0.8)%

28.0%

(17.5)%

7.0%

(12.0)%

(0.8)%

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

TOTA L A S S E T S

mainly from the profit for the period amounting to €79.2 million

that was generated in the fiscal year 2017 and from other compre-

The Group’s balance sheet total decreased slightly from €937.4. mil-

hensive income of €6.6 million that comprises unrealized actuarial

lion as of September 30, 2016 by (0.8%) to €930.0 million as of

gains on pensions (net of tax) and unrealized foreign currency

September 30, 2017.

translation gains. In the second quarter of fiscal 2017 dividends

amounting to €(12.4) million were paid to our shareholders and

N O N - C U R R E N T A S S E T S

led to a corresponding decrease of the equity balance.

Our non-current assets decreased from €671.9 million as of Sep-

N O N - C U R R E N T L I A B I L I T I E S

tember 30, 2016 by (3.6%) or €(24.1) million to €647.8 million as

of September 30, 2017. This reduction is mainly attributable to the

Non-current liabilities decreased from €522.4 million as of Septem-

€(26.9) million decrease of other intangible assets that results from

ber 30, 2016 by €91.6 million to €430.8 million as of September

the ongoing amortization of intangible assets from the purchase

30, 2017. This decrease is mainly due to three prepayments of the

price allocations 2010 and 2016, but also to foreign exchange

term loan facility amounting to €(62.5) million and to adjustments

rate-related carrying value adjustments, e.g. a decrease in goodwill

of the carrying amount of the euro term loan facility by €(22.1) mil-

of €(3.3) million. This decrease was partly offset by ongoing capac-

lion reflecting the margin decrease due to the improved net lever-

ity expansion projects.

C U R R E N T A S S E T S

age ratio of the Group and the extension of the term by one year.

In addition, the pension liability decreased by €(5.5) million. This is

substantially the effect of an increased discount rate (1.35% as at

September 30, 2016 versus 1.87% as at September 30, 2017).

Current assets increased from €265.6 million as of September 30, 2016

by 6.2% or 16.6 million to €282.2 million as of September 30, 2017.

C U R R E N T L I A B I L I T I E S

This is essentially the consequence of an increase in inventories

of €10.6 million and trade accounts receivables of €7.5 million

Current liabilities increased from €152.1 million as of September 30,

that reflect our ongoing revenue growth. This is partly offset by a

2016 by €10.7 million to €162.8 million as of September 30, 2017.

decrease of €(6.9) million in cash and cash equivalents reflecting

This is primarily due to the increase in current financial liabilities

three prepayments of the term loan facility with a total amount of

by €5.0 million reflecting the increase in expected prepayments

€(62.5) million and €(12.4) million dividend payments. These pay-

of the euro term loan facility in the next twelve months and the

ments are substantially covered by the strong free cash flow and

increase of current tax liabilities by €4.7 million based on higher

thus only lead to a slight decrease in the cash balance.

taxable income.

E Q U I T Y

The Group’s equity as of September 30, 2017 increased from

€262.9 million as of September 30, 2016 by €73.5 million to

€336.4 million as of September 30, 2017. This increase results

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

LIQUIDITY

C A S H F L O W F R O M O P E R AT I N G A C T I V I T I E S

C A S H F L O W F R O M F I N A N C I N G A C T I V I T I E S

Cash flow from operating activities increased by €11.5 million from

Cash flow from financing activities decreased from a cash inflow of

€110.4 million in fiscal 2016 to €121.9 million in fiscal 2017. This

€276.1 million in fiscal 2016 to an outflow of €(83.7) million in

increase is mainly due to the strong revenue and earnings growth

fiscal 2017. The current year cash outflow resulted primarily from

and partly offset by higher net working capital as a consequence of

the €(62.5) million prepayments of the euro term loan facility, the

the continuing growth and shorter payment cycles for trade payables.

€(12.4) million dividend payments made to our shareholders in

February 2017 and €(8.3) million interest payments.

C A S H F L O W F R O M I N V E S T I N G A C T I V I T I E S

The prior year cash inflow mainly results from the issuance of a new

Cash outflow for investing activities decreased from €(348.8) mil-

€455.0 million euro term loan facility and €159.1 million proceeds

lion in fiscal 2016 to €(44.1) million in fiscal 2017. The prior year

from the capital increase that were used to refinance the Group´s

figures include the cash outflow of €(302.5) million (net of cash

previous term loan facility amounting to €267.5 million and for the

acquired) for the acquisition of ACE, Hahn Gasfedern, Fabreeka and

acquisition of ACE, Hahn Gasfedern, Fabreeka and Tech Products in

Tech Products. The capital expenditures, i.e. the purchase of prop-

June 2016. The prior year receipts under the senior facilities also

erty plant and equipment and intangible assets, decreased from

comprised an equity bridge facility amounting to €115.0 million that

€(53.7) million in fiscal 2016 to €(45.1) million in fiscal 2017. See

was settled after the capital increase in July 2016. See Consoli-

Consolidated Statement of Cash Flows for further details.

dated Statement of Cash Flows for further details.

Excluding the cash outflow for the acquisition of €(302.5) million and

The payments for interest increased from €(7.0) million in fiscal

corresponding currency hedging proceeds of €6.8 million in fiscal 2016,

2016 to €(8.3) million in fiscal 2017. This is generally reflects the

the cash outflow for investing activities decreased from €(53.1) million

increase in financial liabilities following the acquisition in June 2016,

in fiscal 2016 to €(44.1) million in fiscal 2017.

but due to the lower interest rates this only slightly increases the

interest payments.

Cash flows

I N € M I L L I O N S

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Net increase / (decrease) in cash

Effect of movements in exchange rates on cash held

Cash as of beginning of the period

Cash as of end of the period

Year ended Sept 30,

2017

121.9

(44.1)

(83.7)

(5.9)

(1.0)

75.0

68.1

2016

110.4

(348.8)

276.1

37.7

(2.1)

39.5

75.0

T _ 009

Change

% change

11.5

304.7

10.4%

(87.4%)

(359.8)

<(100.0)%

(43.6)

<(100.0)%

1.1

35.5

(6.9)

(52.4%)

89.9%

(9.2%)

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

F R E E C A S H F L O W ( F C F )

Free cash flow (FCF) is defined as the total of cash flow from oper-

ating and investing activities. The following table sets out the com-

position of FCF.

Free cash flow

I N € M I L L I O N S

Cash flow from operating activities

Cash flow from investing activities

Free cash flow

A D J U S T E D F R E E C A S H F L O W

Excluding the cash outflow of (302.5) million for the acquisition of

ACE, Hahn Gasferdern, Fabreeka and Tech Products in June 2016,

adjusted free cash flow increased from €57.3 million in fiscal 2016

to €77.8 million in fiscal 2017. See the following table.

Year ended Sept 30,

2017

121.9

(44.1)

77.8

2016

110.4

(348.8)

(238.4)

T _ 010

Change

% change

11.5

304.7

316.2

10.4%

(87.4)%

<(100.0)%

Adjusted FCF

T _ 011

I N € M I L L I O N S

Cash flows from operating activities

Cash flows from investing activities before acquisitions

Adjusted FCF 1)

1) Adjusted FCF = FCF before acquisitions

Year ended Sept 30,

2017

121.9

(44.1)

77.8

2016

110.4

(53.1)

57.3

Change

% change

11.5

9.0

20.5

10.4%

(16.9)%

35.8%

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

N E T L E V E R A G E R AT I O

The net leverage ratio is presented because we believe it is a useful

indicator to evaluate the Group’s debt leverage and financing structure.

The net leverage ratio is defined as net financial debt divided by

adjusted EBITDA.

The net leverage ratio decreased from 2.5x in fiscal 2016 to 1.5x in

fiscal 2017. See the following table.

Net financial debt is the nominal amount of financial debt, i.e.

current and non-current financial liabilities, less cash and cash

equivalents. Adjusted EBITDA is defined as adjusted EBIT before

depreciation and amortization.

Net leverage ratio

I N € M I L L I O N S

Financial debt

Cash and cash equivalents

Net financial debt

Adjusted EBITDA

Net leverage ratio

Year ended Sept 30,

2017

342.5

(68.1)

274.4

179.5

1.5x

2016

405.0

(75.0)

330.0

133.3

2.5x

Change

(62.5)

6.9

(55.6)

46.2

T _ 012

% change

(15.4%)

(9.2%)

(16.8%)

34.7%

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

STATUTORY RESULTS
OF OPERATIONS AND
FINANCIAL POSITION
OF STABILUS S. A.

The Company’s capital and reserves increased from €602.4 million

as of September 30, 2016 to €619.9 million as of September 30, 2017

due to the profit for the period amounting to €29.9 million which

is partially offset by the dividend payment of €12.4 million.

For the statutory annual accounts of Stabilus S. A., please refer

to Chapter D.

Results of operations

The Company’s income results from services provided to Stabilus

Group entities based on service-level-agreements in the amount of

RISKS AND
OPPORTUNITIES

Risk management and control over
financial reporting in the Stabilus Group

€3.5 million (PY: €12.9 million) and income from affiliate undertak-

The Company considers Risk Management (RM) to be a key part of

ings of €47.2 million (PY: €0 million), which relates to the dividend

effective management and internal control. The Company strives for

distribution of Servus III (Gibraltar) Limited.

effective RM and financial navigation to safeguard the assets of

the Company and to proactively support the Company’s strategic

Other external expenses decreased from €19.0 million in fiscal 2016

and compliance initiatives. The goal of RM is to help the Company

to €2.1 million in fiscal 2017 basically related to one-off consulting

to operate more effectively in a dynamic environment by providing

fees incurred in fiscal 2016.

a framework for a systematic approach to risk management and

exploring opportunities with an acceptable level of risk. The Super-

Value adjustments in respect of financial assets were recorded in

visory Board and the Management Board regularly discuss the

the amount of €17.2 million (PY: €0.1 million) which resulted from

operational and financial results as well as the related risks.

the merger of interim holdings in the course of the simplification of

the Group’s legal structure.

Risk Management covers financial, strategic, compliance as well

as operational aspects. Operational risk is the risk of direct or indi-

The profit for fiscal 2017 amounted to €29.9 million (PY: loss of

rect loss arising from a wide variety of causes associated with the

€7.8 million).

Financial position

Group’s processes, personnel, technology and infrastructure, and

from external factors other than credit, market and liquidity risks

such as those arising from legal and regulatory requirements and

generally accepted standards of corporate behavior. These opera-

Total assets increased from €623.3 million as of September 30, 2016

tional risks arise from all of the Group’s operations. The Group’s

to €629.8 million as of September 30, 2017.

objective is to manage operational risk in a way to balance the

avoidance of financial losses and damage to the Group’s reputa-

Fixed assets essentially comprise shares in affiliated undertakings

tion with overall cost effectiveness, as well as avoiding control pro-

which increased from €461.7 million as of September 30, 2016 to

cedures that restrict initiative and creativity. The Company’s policy

€628.4 million as of September 30, 2017. This is in substance due

on managing financial risks seeks to ensure effective liquidity and

to a capital increase in Stable II S.à r. l. amounting to €149.6 million.

cash flow management and protection of Group equity capital

against financial risks. As part of its evolution, the Company imple-

Current assets mainly comprise receivables from other debtors

ments continuous improvements in its risk management and internal

amounting to €0.5 million (PY: €0.2 million) and receivables from

control system.

affiliated undertakings. These receivables decreased from €160.6 mil-

lion as of September 30, 2016 to €0.2 million as of September 30,

2017 due to the capital increase in Stable II S.à r. l.

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT
S T A B I L U S N E X T I G N I T I O N

Our accounting control system is designed to ensure all business

Although the global economy has recovered a lot from the severe

transactions are correctly and promptly accounted for and that

downturn in 2008 and 2009, the recent volatility of the financial

reliable data on the Company’s financial situation is available. It

markets and also the slower than expected economic growth in

ensures compliance with legal stipulations, accounting standards

Asia show that there can be no assurance that any recovery is sus-

and accounting rules. By separating financial functions and through

tainable or that there will be no recurrence of the global financial

ongoing review, we ensure that potential errors are identified on

and economic crisis or similar adverse market conditions.

a timely basis and accounting standards are complied with.

Stabilus manages these risks and opportunities by operating in dif-

Our internal control system is an integral component of the risk

ferent regions and markets for local and global customers.

management. The purpose of our internal control system for account-

ing and reporting is to ensure its compliance with legal stipulations,

W E O P E R AT E I N C Y C L I C A L I N D U S T R I E S

the principles of proper accounting, the rules on the International

Financial Reporting Standards as adopted by the EU and with Group

Our business is characterized by high fixed costs. Should our facilities

standards. In addition, we perform assessments to help identify and

be underutilized, this could result in idle capacity costs, write-offs of

minimize any risk with a direct influence on our financial reporting.

inventories and losses on products due to falling average sale prices.

We monitor changes in accounting standards and enlist the advice

Furthermore, falling production volumes cause declines in revenue

of external experts to reduce the risk of accounting misstatements

and earnings. On the other hand, our facilities might have insufficient

in complex issues.

capacity to meet customer demand if the markets in which we are

active grow faster than we have anticipated.

The Company and individual entity financial statements are subject

to external audits which act as an independent check and monitor-

Our automotive business, from which we generated 64% of our rev-

ing mechanism of the accounting system and its output. The princi-

enue in the fiscal year ended September 30, 2017, sells its products

pal risks that could have a material impact on the Group are set

primarily to automotive original equipment manufacturers (“OEMs”)

out in the Note 32 of the Consolidated Financial Statements and

in the automotive industry. These sales are cyclical and depend,

are summarized below.

Risks and opportunities related to the
markets in which we operate

among other things, on general economic conditions as well as on

consumer spending and preferences, which can be affected by a num-

ber of factors, including employment, consumer confidence and

income, energy costs, interest rate levels and the availability of con-

sumer financing. Given the variety of such economic parameters influ-

encing the global automotive demand, the volume of automotive pro-

We are exposed to risks and opportunities associated with the

duction has historically been, and will continue to be, characterized

performance of the global economy and the performance of the

by a high level of fluctuation, making it difficult for us to accurately

economy in the jurisdictions in which we operate.

predict demand levels for our products aimed at automotive OEMs.

Due to our global presence, we are exposed to substantial risks

We generated, in the aggregate, 36% of our revenue in the fiscal

and opportunities associated with the performance of the global

year ended September 30, 2017, from sales to our industrial custom-

economy. In general, demand for our products is dependent on the

ers. We sell our products to customers in diverse industries, including

demand for automotive products as well as for commercial vehicles,

agricultural machines, renewable energy (in particular solar, wind),

agricultural machinery, medical equipment, renewable energy (in

railway, aircraft applications, commercial vehicles, marine applica-

particular solar, wind), aerospace, marine and furniture components,

tions, furniture, health care and production equipment. These sales

which in turn is directly related to the strength of the global econ-

depend on the industrial production level in general as well as on

omy. Therefore, our financial performance has been influenced, and

the development of new products and technologies by our custom-

will continue to be influenced, to a significant extent, by the gen-

ers, which include our products as component parts. Stabilus man-

eral state and the performance of the global economy.

ages these opportunities and risks by operating in different regions

and markets for the local and global customers.

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

The business environment in which we operate is characterized by

ventures; changes in laws or regulations and unpredictable or

strong competition, which affects some of our products and markets,

unlawful government actions; the difficulty of enforcing agreements

which could reduce our revenue or put continued pressure on our

and collecting receivables through foreign legal systems; variations

sales prices.

in protection of intellectual property and other legal rights; potential

nationalization of enterprises or other expropriations; and political or

The markets in which we operate are competitive and have been

social unrest or acts of sabotage or terrorism. As personnel costs

characterized by changes in market penetration, increased price

have a significant effect on our business, we are also exposed to the

competition, the development and introduction of new products,

risks of labor cost inflation and limited employment contract flexi-

product designs and technologies by significant existing and new

bility in the countries in which our production facilities are located

competitors. The majority of gas springs and electromechanical lift-

and where we have sales personnel. Any of these risks could have a

ing and closing systems manufactured globally are used for either

material adverse effect on our business, financial condition and

automotive, industrial or commercial furniture applications, which

results of operations.

are core markets for us. Our competitors are typically regional com-

panies and our competition with them is generally on a regional

W E A R E E X P O S E D TO O P P O R T U N I T I E S A N D R I S K S

scale. We compete primarily on the basis of price, quality, timeliness

A S S O C I AT E D W I T H M A R K E T T R E N D S A N D D E V E L-

of delivery and design as well as the ability to provide engineering

O P M E N T S

support and service on a global basis. Should we fail to secure

the quality of our products and the reliability of our supply in the

There can be no assurance that (i) we will be successful in develop-

future, then more and more of our customers could decide to pro-

ing new products or systems or in bringing them to market in a

cure products from our competitors.

timely manner, or at all; (ii) products or technologies developed by

others will not render our offerings obsolete or non-competitive;

Our efforts to expand in certain markets are subject to a variety of

(iii) our customers will not substitute our products with competing

business, economic, legal and political risks.

products or alternate technologies (such as third arm systems,

hydraulic drives or hinge / direct drives); (iv) the market will accept

We manufacture our products in several countries and we market

our innovations; (v) our competitors will not be able to produce our

and sell our products worldwide. We are actively operating and

non-patented products at lower costs than we can; and (vi) we will

expanding our operations in various markets, with a focus on the

be able to fully adjust our cost structure in the event of contraction

rapidly growing and emerging markets in the Asia / Pacific region,

of demand.

where we have production plants in China and South Korea, operate

a wide network of representative sales offices and employ our own

The Company develops appropriate strategies as a response to

sales force and distribution network. We plan to expand our Asian

these or similar market trends and to enhance existing products,

production capacities to meet growth expectations and supplement

develop new products or keep pace with developing technology, to

demand with our other regional productions as needed.

counter loss of growth opportunities, pressure on margins or the

loss of existing customers. We devote resources to the pursuit of

Potential social, political, legal, and economic instability may pose

new technologies and products. In addition, technological advances

significant risks to our ability to conduct our business and expand

and wider market acceptance of our Powerise® automatic drive sys-

our activities in certain markets. Inherent in our international opera-

tems (or the development and wider market acceptance of similar

tions is the risk that any number of the following circumstances

automatic lid drive systems by our competitors) could result in can-

could affect our operations: underdeveloped infrastructure; lack of

nibalization of our gas spring applications.

qualified management or adequately trained personnel; currency

exchange controls, exchange rate fluctuations and devaluations;

changes in local economic conditions; governmental restrictions on

foreign investment, transfer or repatriation of funds; protectionist

trade measures, such as anti-dumping measures, duties, tariffs

or embargoes; prohibitions or restrictions on acquisitions or joint

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

Risks and opportunities related to our
business

L E G A L , TA X AT I O N A N D E N V I R O N M E N TA L R I S K S

A N D O P P O R T U N I T I E S

We are exposed to fluctuations in prices of prefabricated materials

We are exposed to warranty and product liability claims.

and components.

As a manufacturer, we are subject to product liability lawsuits and

We procure large quantities of prefabricated materials and compo-

other proceedings alleging violations of due care, violation of war-

nents from third-party suppliers. The prices of prefabricated materi-

ranty obligations, treatment errors, safety provisions and claims aris-

als, components and manufacturing services we purchase from our

ing from breaches of contract (like delivery delays), recall actions or

suppliers depend on a number of factors, including to a limited

fines imposed by government or regulatory authorities in relation to

extent the development of prices of raw materials used in these

our products. Any such lawsuits, proceedings and other claims could

products, such as steel, copper, rubber and water, as well as energy,

result in increased costs for us. Additionally, authorities could pro-

which have been volatile in the past.

hibit the future sale of our products, particularly in cases of safety

concerns. The aforementioned scenarios could result in loss of market

So far, this has not resulted in a general increase in the cost of pre-

acceptance, loss of revenue and loss of customers, in particular

fabricated materials and components we procure for the manufac-

against the background that many of our products are components

ture of our products. However, it cannot be excluded that this vola-

which often have a major impact on the overall safety, durability and

tility may result in a cost increase in the future. If we are not able

performance of our customers’ end-product.

to compensate for or pass on our cost increases to customers, such

price increases could have a material adverse impact on our financial

The risks arising from such warranty and product liability lawsuits,

results. Even to the extent that we are successful in compensating

proceedings and other claims are insured as we consider economi-

for or passing on our increased costs to our customers by increasing

cally reasonable, but the insurance coverage could prove insufficient

prices on new products, the positive effects of such price increases

in individual cases. Any major defect in one of our products could

may not occur in the periods in which the additional expenses have

also have a material adverse effect on our reputation and market

been incurred, but in later periods. If costs of raw materials and

perception, which in turn could have a significant adverse effect on

energy rise, and if we are not able to undertake cost saving meas-

our revenue and results of operations.

ures elsewhere in our operations or increase to an adequate level

the selling prices of our products, we will not be able to compen-

In addition, vehicle manufacturers are increasingly requiring a contri-

sate such cost increases, which could have a material adverse effect

bution from, or indemnity by, their suppliers for potential product

on our business, financial condition and results of operations. The

liability, warranty and recall claims and we have been subject to con-

long-term increase of our costs (and resultant increase in the price

tinuing efforts by our customers to change contract terms and condi-

of our products) may also negatively impact demand for our products.

tions concerning warranty and recall participation.

Our future business success depends on our ability to maintain the

Furthermore, we manufacture many products pursuant to OEM cus-

high quality of our products and processes. For customers, one of

tomer specifications and quality requirements. If the products manu-

the determining factors in purchasing our components and systems

factured and delivered by us are deemed not to be fit for use by our

is the high quality of our products and manufacturing processes. A

OEM customers at the agreed date of delivery, production of the rel-

decrease in the actual and perceived quality of these products and

evant products is generally discontinued until the cause of the prod-

processes could damage our image and reputation as well as those

uct defect has been identified and remedied. Furthermore, our OEM

of our products. Any errors or delays caused by mistakes or miscal-

customers could potentially bring claims for damages on the basis of

culations in our project management could negatively affect our

breach of contract, even if the cause of the defect is remedied at a

customers’ own production processes, resulting in reputational

later point in time. In addition, failure to perform with respect to quality

damage to us as supplier as well as to the affected customer as

requirements could negatively affect the market acceptance of our

manufacturer. In addition, defective products could result in loss of

other products and our market reputation in various market segments.

sales, loss of customers and loss of market acceptance.

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

We are and may become party to certain disadvantageous contracts

to pay compensation or damages for infringements or could be

pursuant to which we are required to sell certain products at a loss

forced to purchase licenses to make use of technology from third

or to agree to broad indemnities. For example, we may enter into a con-

parties. This could have a material adverse effect on our business,

tract at an agreed price and production costs may end up exceeding

financial condition and results of operations.

what was assumed in the development phase. If the assumptions on

which we rely in contract negotiations turn out to be inaccurate, this

We are subject to risks from legal, administrative and arbitration

could have an adverse effect on our revenue and results of operations.

proceedings.

We are exposed to certain risks and opportunities with regards to

We are involved in a number of legal and administrative proceed-

our intellectual property, its validity and the intellectual property of

ings related to products, patents and other matters incidental to

third parties.

our business and could become involved in additional legal, admin-

istrative and arbitration proceedings in the future. These proceed-

Our products and services are highly dependent upon our technolo-

ings or potential proceedings could involve, in particular in the

gical know-how and the scope and limitations of our proprietary

United States, substantial claims for damages or other payments.

rights therein. We have obtained or have applied for a number of

Based on a judgment or a settlement agreement, we could be obli-

intellectual property rights, which can be difficult, lengthy and expen-

gated to pay substantial damages. Our litigation costs and those

sive to procure. Furthermore, patents may not provide us with mean-

of third parties could also be significant.

ingful protection or a commercial advantage. In addition, where we

incorporate an individual customer’s input to create a product that

Due to our high market share, we may be exposed to legal risks

responds to a particular need, we face the risk that such customer

regarding anti-competition fines and related damage claims.

will claim ownership rights in the associated intellectual property.

Our market share in most of the markets in which we operate is

Our competitors, suppliers, customers and other third parties also

high, which may induce competition authorities to initiate proceed-

submit a large number of intellectual property protection applica-

ings or third parties to file claims against us alleging violation of

tions. Such other parties could hold effective and enforceable intel-

competition laws. A successful anti-competition challenge could

lectual property rights to certain processes, methods or applications

adversely affect us in a variety of ways. For example, it could result in

and consequently could assert infringement claims (including illegiti-

the imposition of fines by one or more authorities and / or in third

mate ones) against us.

parties (such as competitors or customers) initiating civil litigation

claiming damages caused by anti-competitive practices. In addition,

A major part of our know-how is not patented and cannot be pro-

anti-competitive behavior may give rise to reputational risk to us. The

tected through intellectual property rights. Consequently, there is a

realization of this risk could have a material effect on our business,

risk that third parties, in particular competitors, may utilize our

financial condition and results of operations.

know-how without incurring any expenses of their own. Our intellec-

tual property is often discovered by and during the course of our

Interest carry-forwards may be forfeited in part or in full as a result

employees’ employment. As a result, there is a risk that we have

of subsequent share sales.

failed or will fail to properly utilize inventions of our employees. Pres-

ent or former employees who made or make employee inventions

Some Stabilus subsidiaries have significant interest carry-forwards as

might continue to be the owners of the valuable rights to inventions

a result of the application of the statutory interest ceiling rules that

if we fail to claim the invention in a timely manner.

limit the deduction of net interest expenses for tax purposes. The

The realization of any of these risks could give rise to intellectual

quent assessment periods the then current interest expenses do not

property claims against us. Such claims, if successful, could require us

reach the interest ceiling applicable to the relevant assessment

to cease manufacturing, using or marketing the relevant technolo-

period, and, thus, reduce the tax payable by the relevant subsidiary.

interest carry-forward may be deducted to the extent that in subse-

gies or products in certain countries or be forced to make changes to

manufacturing processes or products. In addition, we could be liable

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

However, the interest carry-forward will be forfeited on a pro rata

therefore be exposed to related damage claims in the future. Even if

base or in full if more than a defined percentage of the shares in

we have contractually excluded or limited our liability in connection

entities are directly or indirectly transferred to a new shareholder,

with the sale of such properties, we could be held responsible for

persons related to such shareholder or a group of shareholders act-

currently unknown contamination on properties which we previously

ing in the same interest, or in case of similar transactions (such as a

owned or used.

capital increase) that result in a change of the shareholder structure.

Such forfeiture would increase the tax payable by the relevant sub-

The in-house legal department monitors these risks continuously and

sidiary if without the forfeiture the interest carry-forward could have

reports regularly to Group management and the Supervisory Board.

been used in part or in full.

We could be held liable for soil, water or groundwater contamination

or for risks related to hazardous materials.

Risks and opportunities related to our
capital structure

Many of the sites at which we operate have been used for industrial

Due to our high level of debt we face potential liquidity risks.

purposes for many years, leading to risks of contamination and the

resulting site restoration obligations. In addition, we could be held

Our cash from operating activities, current cash resources and

responsible for the remediation of areas adjacent to our sites if these

existing sources of external financing could be insufficient to meet

areas were potentially contaminated due to our activities. Ground-

our further capital needs, especially if our sales decrease signifi-

water contamination was discovered at a site in Colmar, Pennsylva-

cantly. Disruptions in the financial markets, including the bank-

nia operated by us from 1979 to 1998. In June 2012, the U.S. Envi-

ruptcy, insolvency or restructuring of a number of financial institu-

ronmental Protection Agency (“EPA”) issued an administrative order

tions, and restricted availability of liquidity could adversely impact

against our U.S. subsidiary and determined requirements in respect

the availability and cost of additional financing for us and could

of the remedy and the remedy cost. Our subsidiary, together with the

adversely affect the availability of financing already arranged or

other responsible parties, is requested to reimburse the EPA for past

committed. Our liquidity could also be adversely impacted if our

and current expenses and to bear the remediation costs. If additional

suppliers tighten terms of payment as the result of any decline in

contamination is discovered in the future, the competent authorities

our financial condition or if our customers were to extend their

could assert further claims against us, as the owner or tenant of the

normal payment terms.

affected plots, for the examination or remediation of such soil or

groundwater contamination, or order us to dispose of or treat con-

Stabilus has set an appropriate liquidity risk management frame-

taminated soil excavated in the course of construction. We could also

work for the management of the Group’s short, medium and long-

be required to indemnify the owners of plots leased by us or of other

term funding and liquidity requirements. The Group manages

properties, if the authorities were to pursue claims against the rele-

liquidity risk by regular reviews, maintaining certain cash reserves,

vant owner of the property and if we caused the contamination.

as well as open credit lines.

Costs typically incurred in connection with such claims are generally

difficult to predict. Also, if any contamination were to become the

We are exposed to risks and opportunities associated with changes

subject of a more intense public discussion, there is a risk that our

in currency exchange rates.

reputation or relations with our customers could be harmed.

We operate worldwide and are therefore exposed to financial risks

Furthermore, at some of the sites at which we operate, or at which

that arise from changes in exchange rates. Currency exchange fluc-

we operated in the past, small quantities of hazardous materials

tuations could cause losses if assets denominated in currencies

were used in the past, such as asbestos-containing building materi-

with a falling exchange rate lose value, while at the same time

als used for heat insulation. While we consider it unlikely, it cannot

liabilities denominated in currencies with a rising exchange rate

be ruled out that the health and safety of third parties (such as for-

appreciate. In addition, fluctuations in foreign exchange rates could

mer employees) may have been affected due to the use of such haz-

enhance or minimize fluctuations in the prices of materials, since

ardous materials or that other claims may be asserted and we could

we purchase a considerable part of the prefabricated materials

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

which we source from foreign currencies. As a result of these fac-

tors, fluctuations in exchange rates could affect our results of oper-

ations. External and internal transactions involving the delivery of

CORPORATE GOVERNANCE

products and services to and / or by third parties result in cash

As a Luxembourg société anonyme, the Company is subject to the

inflows and outflows which are denominated in currencies other

corporate governance regime as set forth in particular in the law of

than the functional currency of our respective Group member.

August 10, 1915 on commercial companies. As a Company whose

Among other factors, we are particularly exposed to fluctuations of

shares are listed on a regulated market, the Company is further

net inflows in U.S. dollar (surplus) and net outflows in Romanian

subject to the law of May 24, 2011 on the exercise of certain share-

leu (demand). To the extent that cash outflows are not offset by

holder rights in listed companies.

cash inflows resulting from operational business in such currency,

the remaining net foreign currency exposure is not hedged as of

As a Luxembourg société anonyme whose shares are exclusively

September 30, 2017.

listed on a regulated market in Germany, the Company is not

required to adhere to the Luxembourg corporate governance

Although we may enter into certain hedging arrangements in the

regime applicable to companies that are traded in Luxembourg or

future, there can be no assurance that hedging will be available or

to the German corporate governance regime applicable to stock

continue to be available on commercially reasonable terms. In

corporations organized in Germany. The Company has decided to

addition, if we were to use any hedging transactions in the future

set up own corporate governance rules as described in the follow-

in the form of derivative financial instruments, such transactions

ing paragraphs rather than to confirm such corporate governance

may result in mark-to-market losses. In addition, we are exposed to

regimes in order to build up a corporate governance structure

foreign exchange risks arising from internal loan agreements,

which meets the specific needs and interests of the Company.

which result from cash inflows and outflows in currencies other

than the functional currency of our respective Group member. As of

The internal control systems and risk management for the estab-

the September 30, 2017, these foreign exchange risks are not

lishment of financial information is described in the section

hedged against by using derivative financial instruments. Our net

“Risk management and control over financial reporting in the

foreign investments are generally not hedged against exchange

Stabilus Group”.

rate fluctuations. In addition, a number of our consolidated compa-

nies report their results in currencies other than the Euro, which

According to the Articles of Incorporation of the Company, the

requires us to convert the relevant items into Euro when preparing

Management Board must be composed of at least two Management

our consolidated financial statements. Translation risks are gener-

Board members, and the Supervisory Board must be composed of

ally not hedged.

at least three Supervisory Board members. The Supervisory Board

has set up the following committees in accordance with the Articles

The Management Board does not see any individual or aggregate

of Incorporation: Audit Committee and Remuneration Committee.

risk that could endanger the future of Stabilus in any material way.

The Audit Committee is responsible for the consideration and eval-

uation of the auditing and accounting policies and its financial con-

trols and systems. The Remuneration Committee is responsible for

making recommendations to the Supervisory Board and the Manage-

ment Board on the terms of appointment and the benefits of the

managers of the Company. Further details on the composition and

purpose of these committees and of the Management Board and

the Supervisory Board is described in the section “Management and

Supervisory Board of Stabilus S. A.”.

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

The Annual General Meeting shall be held at such time as specified

D) The control rights of any shares issued in connection with

by the Management Board and the Supervisory Board in the con-

employee share schemes are exercised directly by the respective

vening notice. The Management Board and Supervisory Board may

employees.

convene extraordinary general meetings as often as the Company’s

E) The Articles of Incorporation of the Company do not contain any

interests so require. An extraordinary general shareholders’ meet-

restrictions on voting rights.

ing must be convened upon the request of one or more sharehold-

F) There are no agreements with shareholders which are known to

ers who together represent at least one tenth of the Company’s

the Company and may result in restrictions on the transfer of

share capital.

securities or voting rights within the meaning of Directive 2004

/ 109 / EC (Transparency Directive).

Each share entitles the holder to one vote. The right of a share-

G) Rules governing the appointment and replacement of Manage-

holder to participate in a General Meeting and to exercise the vot-

ment Board members and the amendment of the Articles of

ing rights attached to his shares are determined with respect to the

Incorporation:

shares held by such shareholder the 14th day before the General

– The Management Board members are appointed by the

Meeting. Each shareholder can exercise his voting rights in person,

Supervisory Board by the majority of the votes of the mem-

through a proxyholder or in writing (if provided for in the relevant

bers present or represented (abstention or non-participation

convening notice).

being taken into account as a vote against the appoint-

ment), or in the case of a vacancy, by way of a decision of

The information required by Article 10.1 of Directive 2004 / 25 / EC

the remaining Management Board members for the period

on takeover bids which has been implemented by Article 11 of the

until the next Supervisory Board Meeting.

Luxembourg Law on Takeovers of May 19, 2006 (the “Law on Take-

– Management Board members serve for the following terms:

overs”) is set forth here below under “Disclosure Regarding Article

Chief Executive Officer four years, Chief Financial Officer

11 of the Law on Takeovers of May 19, 2006”.

three years and other Board members one year. Manage-

ment Board members are eligible for re-appointment.

D I S C L O S U R E S P U R S U A N T TO A R T I C L E 1 1

– Management Board members may be removed at any time

O F T H E L U X E M B O U R G L A W O N TA K E O V E R S

with or without cause by the Supervisory Board by a simple

O F M AY 1 9 , 2 0 0 6

majority of the votes.

– Resolutions to amend the Articles of Incorporation may be

A) For information regarding the structure of capital, reference is

adopted by a majority of two thirds of the votes validly cast,

made to Note 21 of the Consolidated Financial Statements.

without counting the abstentions, if the quorum of half of

B) The Articles of Incorporation of the Company do not contain any

the share capital is met. If the quorum requirement of half

restrictions on the transfer of shares of the Company.

of the share capital of the Company is not met at the

C) According to the voting rights notifications received in fiscal

Annual General Meeting, then the shareholders may be

year 2017, the following shareholders held more than 5% of

re-convened to a second General Meeting. No quorum is

total voting rights attached to Stabilus shares as of September

required in respect of such second General Meeting and the

30, 2017: Marathon Asset Management LLP, London, UK (direct:

resolutions are adopted by a supermajority of

1,745,599 voting rights attached to shares or 7.07% of total

two-thirds of the votes validly cast, without counting the

voting rights, indirect: 1,459,614 voting rights attached to

abstentions.

shares or 5.91% of total voting rights) and BlackRock, Inc.,

H) Powers of the Management Board:

Wilmington, DE, USA (indirect: 1,233,141 voting rights attached

– The Company is managed by a Management Board under

to shares or 4.99% of total voting rights; 2,096 voting rights or

the supervision of the Supervisory Board.

0.01% of total voting rights, through financial instruments

– The Management Board is vested with the broadest powers

according to Art. 13(1)(a) of Directive 2004 / 109 / EC and

to perform or cause to be performed any actions necessary

668,013 voting rights or 2.70% of total voting rights, according

or useful in connection with the purpose of the Company.

to Art. 13(1)(b) of Directive 2004 / 109 / EC.

– All powers not expressly reserved by the Luxembourg Com-

panies Act or by the Articles of Incorporation to the General

COMBINED MANAGEMENT REPORT
S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Meeting or the Supervisory Board fall within the authority of

advise the Management Board or to make recommendations

the Management Board.

to the Management Board and / or, as the case may be, the

– Certain transactions and measures are subject to the prior

General Meeting, the members of which may be selected

approval of the Supervisory Board on the terms set out in

either from among the members of the Management Board

the Articles of Incorporation.

or not, to the exclusion of any member of the Supervisory Board.

– The Management Board may appoint one or more persons,

– The Management Board does not have currently any author-

who may be a shareholder or not, or who may be a member

ity to issue shares in the Company under the Articles of

of the Management Board or not, to the exclusion of any

Incorporation.

member of the Supervisory Board, who shall have full

– The Management Board does not have currently any author-

authority to act on behalf of the Company in all matters

ity to buy back shares under the Articles of Incorporation or

pertaining to the daily management and affairs of the

a buy-back program.

Company.

I) There are no significant agreements to which the Company is

– The Management Board is also authorized to appoint a per-

party and which take effect, alter or terminate upon a change of

son, either a director or not, to the exclusion of any member

control of the Company following a takeover bid.

of the Supervisory Board, for the purposes of performing

J) There are no agreements between the Company and its Manage-

specific functions at every level within the Company.

ment Board members or employees providing for compensation if

– The Management Board may also appoint committees and

they resign or are made redundant without valid reason or if

sub-committees in order to deal with specific tasks, to

their employment ceases because of a takeover bid.

COMBINED MANAGEMENT REPORTCOMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

SUBSEQUENT EVENTS

Considering our product markets we aim to outperform the growth

rate of the worldwide light-vehicle production (+2.2%) and the

growth rate of the global economy (GDP growth: 3.6% in 2017)

As of December 13, 2017, there were no further events or develop-

respectively.

ments that could have materially affected the measurement and pres-

entation of Group’s assets and liabilities as of September 30, 2017.

We intend to grow our automotive and industrial business in all

OUTLOOK

operating segments, i.e. in Europe, NAFTA as well as Asia / Pacific

and RoW. At constant exchange rates, i.e. assuming an average

exchange rate of 1.10 $ / € for FY2018, the revenue is expected to

grow by approximately 7.1%. In Europe and NAFTA we estimate a

revenue growth rate of around 5% to 7%. As a result of our initia-

tives in China, we aim to grow in Asia / Pacific and RoW with a

As last year the global economic environment continues to remain

double digit revenue growth rate.

challenging, but the IMF in substance predicts improved growth

rates in contrast to last year’s expected stagnation in several coun-

Assuming an average currency rate of 1.15 $ / €, we expect total

tries. The IMF essentially expects stronger growth rates in nearly

revenue of approximately €960 million or a revenue growth of

all country groups, as reflected in the October 2017 World Economic

around 5.5% and an adjusted EBIT margin of around 15.5% for

Outlook. The overall growth rate is projected to be 3.6% in 2017

FY2018. The revenue growth at constant rates, i.e. based on the

and 3.7% in 2018, compared to a growth rate of 3.2% in 2016.

average rate from FY2017 of 1.10 $ / €, is estimated to be around 7.1%.

This is driven by increased projected growth rates in advanced econ-

omies, especially in the Euro Area, as well as strong projected growth

A five dollar cent lower currency rate assumption (1.10 $ / €) would

rates in China and some developing economies and emerging markets.

lead to a €15 million higher revenue expectation (approximately

IHS Markit, an information services and automotive forecasts

(1.20 $ / €) would lead to a €15 million lower revenue expectation

provider, expects the worldwide production of light vehicles to

(approximately €945 million).

€975 million). A five dollar cent higher currency rate assumption

increase to around 95.1 million units in calendar year 2017

(+2.2% y / y) and around 96.6 million units in calendar year 2018

(+1.6% y / y). See table T_002 on page 40 for further details.

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

CONSOLIDATED
FINANCIAL
STATEMENTS

CHAPTER

6 1 – 1 3 8

COMBINED MANAGEMENT REPORT S T A B I L U S N E X T I G N I T I O N

CONSOLIDATED
FINANCIAL
STATEMENTS

for the fiscal year ended September 30, 2017

63 CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME

64 CONSOLIDATED STATEMENT
OF FINANCIAL POSITION

66 CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY

67 CONSOLIDATED STATEMENT

OF CASH FLOWS

68 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

68 1 General Information
69 2 Basis for presentation
78 3 Accounting policies
86 4 Revenue
87 5 Cost of sales, research and develop-

ment, selling and administrative
expenses

88 6 Other income
88 7 Other expenses
89 8 Finance income
89 9 Finance costs
90 10 Income tax expense
93 11 Earnings per share
94 12 Property, plant and equipment
95 13 Goodwill
97 14 Other intangible assets
98 15 Other financial assets
99 16 Other assets
99 17 Inventories
100 18 Trade accounts receivable
100 19 Current tax assets

101 20 Cash and cash equivalents
101 21 Equity
103 22 Financial liabilities
104 23 Other financial liabilities
104 24 Provisions
107 25 Pension plans and similar obligations
110 26 Trade accounts payable
110 27 Current tax liabilities
111 28 Other liabilities
111 29 Leasing
113 30 Contingent liabilities and other
financial commitments

114 31 Financial instruments
116 32 Risk reporting
119 33 Capital management
120 34 Notes to the consolidated statement

of cash flows
120 35 Segment reporting
124 36 Share-based payments
128 37 Auditor’s fees
128 38 Related party relationships
129 39 Remuneration of key management

personnel
129 40 Subsequent events

130 RESPONSIBILITY STATEMENT

131 MANAGEMENT BOARD OF

STABILUS S.A.

132 SUPERVISORY BOARD OF

STABILUS S.A.

133 INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED FINANCIAL STATEMENTS

S T A B I L U S N E X T I G N I T I O N

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME

for the fiscal year ended September 30, 2017

Consolidated statement of comprehensive income

T _ 013

I N € T H O U S A N D S

Revenue

Cost of sales

Gross profit

Research and development expenses

Selling expenses

Administrative expenses

Other income

Other expenses

Profit from operating activities

Finance income

Finance costs

Profit / (loss) before income tax

Income tax income / (expense)

Profit / (loss) for the period

thereof attributable to non-controlling interests

thereof attributable to shareholders of Stabilus

Other comprehensive income / (expense)

Foreign currency translation difference 1)

Unrealized actuarial gains and losses 2)

Cash flow hedges – effective portion of changes in fair value1)

Cash flow hedges – reclassified to profit or loss

Other comprehensive income / (expense), net of taxes

Total comprehensive income / (expense) for the period

thereof attributable to non-controlling interests

thereof attributable to shareholders of Stabilus

Earnings per share (in €):

basic

diluted

Year ended Sept 30,

N OT E

2017

2016

910,016

737,501

(637,164)

(547,700)

272,852

(38,194)

(80,380)

(35,343)

12,765

(13,311)

118,389

22,323

(29,799)

110,913

(31,670)

79,243

(12)

79,255

3,328

3,306

–

6,634

85,877

(12)

85,889

189,801

(26,590)

(55,462)

(33,881)

12,074

(9,300)

76,644

2,556

(13,261)

65,938

(17,951)

47,987

47,971

(8,858)

(5,490)

6,798

(6,798)

(14,348)

33,639

33,623

3.21

2.21

1) Item that may be reclassified (‘recycled’) to profit and loss at a future point in time when specific conditions are met.
2) Item that will not be reclassified to profit and loss.
The accompanying Notes form an integral part of these Consolidated Financial Statements.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

CONSOLIDATED STATEMENT OF
FINANCIAL POSITION

as of September 30, 2017

Consolidated statement of financial position

T _ 014

I N € T H O U S A N D S

Assets

Property, plant and equipment

Goodwill

Other intangible assets

Other assets

Deferred tax assets

Total non-current assets

Inventories

Trade accounts receivable

Current tax assets

Other financial assets

Other assets

Cash and cash equivalents

Total current assets

Total assets

N OT E

Sept 30, 2017

Sept 30, 2016

169,659

194,184

268,911

2,951

12,083

647,788

85,262

105,147

5,802

5,155

12,718

68,123

282,207

929,995

167,569

197,457

295,815

3,267

7,743

671,851

74,681

97,600

1,160

3,160

13,923

75,037

265,561

937,412

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Consolidated statement of financial position

T _ 014

I N € T H O U S A N D S

Equity and liabilities

Issued capital

Capital reserves

Retained earnings

Other reserves

Equity attributable to shareholders of Stabilus

Non-controlling interests

Total equity

Financial liabilities

Other financial liabilities

Provisions

Pension plans and similar obligations

Deferred tax liabilities

Other liabilities

Total non-current liabilities

Trade accounts payable

Financial liabilities

Other financial liabilities

Current tax liabilities

Provisions

Other liabilities

Total current liabilities

Total liabilities

Total equity and liabilities

The accompanying Notes form an integral part of these Consolidated Financial Statements.

N OT E

Sept 30, 2017

Sept 30, 2016

247

225,848

139,440

(29,198)

336,337

336,380

311,951

1,830

3,771

53,236

60,036

–

430,824

79,073

10,000

9,613

15,612

33,061

15,432

162,791

593,615

929,995

247

225,848

72,535

(35,832)

262,798

262,892

396,095

2,314

3,781

58,738

60,634

879

522,441

80,389

5,000

9,399

10,904

30,898

15,489

152,079

674,520

937,412

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY

for the fiscal year ended September 30, 2017

Consolidated statement of
changes in equity

I N € T H O U S A N D S

N OT E

Issued
capital

Capital
reserves

Retained
earnings

Other
reserves

Balance as of Sept 30, 2015

207

73,091

24,871

(21,484)

47,971

–

Profit / (loss) for the period

Other comprehensive
income / (expense)

Total comprehensive income
for the period

Dividends

Change in non-controlling interest

–

Capital increase

152,757

Profit / (loss) for the period

Other comprehensive
income / (expense)

Total comprehensive income
for the period

Dividends

Receipts from non-controlling interest

–

Balance as of Sept 30, 2016

247

225,848

72,535

(35,832)

Equity
attributable to
shareholders
of Stabilus

Non-
controlling
interests

76,685

47,971

T _ 015

Total
equity

76,709

47,987

–

(14,348)

–

(14,348)

47,971

(14,348)

33,623

–

(307)

–

79,255

–

(307)

152,797

262,798

79,255

6,634

(12,350)

–

85,889

(12,350)

–

(78)

133

–

33,639

(78)

(174)

152,797

262,892

(12)

79,243

(12)

(54)

85,877

(12,404)

336,380

–

6,634

–

6,634

Balance as of Sept 30, 2017

247

225,848

139,440

(29,198)

336,337

The accompanying Notes form an integral part of these Consolidated Financial Statements.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

CONSOLIDATED STATEMENT OF CASH FLOWS

for the fiscal year ended September 30, 2017

Consolidated statement of cash flows

I N € T H O U S A N D S

Profit / (loss) for the period

Income tax expense

Net finance result

Interest received

Depreciation and amortization (incl. impairment losses)

Gains / losses from the disposal of assets

Changes in inventories

Changes in trade accounts receivable

Changes in trade accounts payable

Changes in other assets and liabilities

Changes in provisions

Income tax payments

Cash flow from operating activities

Proceeds from disposal of property, plant and equipment

Purchase of intangible assets

Purchase of property, plant and equipment

Acquisition of assets and liabilities within the business combination,
net of cash acquired

Proceeds from currency hedging related to the business combination

Cash flow from investing activities

Receipts from contributions of equity

Receipts under senior facilities

Receipts from non-controlling interests

Payments for redemption of senior facilities

Payments for finance leases

Payments of transaction costs

Dividends paid

Dividends paid to non-controlling interests

Payment for acquisition of non-controlling interests

Payments for interest

Cash flow from financing activities

Net increase / (decrease) in cash and cash equivalents

Effect of movements in exchange rates on cash held

Cash and cash equivalents as of beginning of the period

Cash and cash equivalents as of end of the period

1) The prior-year figures have been adjusted in accordance with the current structure.
The accompanying Notes form an integral part of these Consolidated Financial Statements.

N OT E

8/9

12/14

T _ 016

Year ended Sept 30,

2017

79,243

31,670

7,476

230

61,102

(49)

(10,581)

(7,547)

(1,316)

(7,716)

1,504

(32,090)

121,926

980

(11,552)

(33,497)

2016 1)

47,987

17,951

10,705

49,285

162

277

(23,596)

7,615

384

13,190

(13,599)

110,449

543

(13,783)

(39,895)

–

(302,478)

6,798

(44,069)

(348,815)

–

159,070

570,000

–

(62,500)

(432,500)

(547)

–

(12,350)

(54)

–

(8,280)

(83,716)

(5,859)

(1,055)

75,037

68,123

(471)

(12,788)

–

(78)

(174)

(6,984)

276,075

37,708

(2,145)

39,473

75,037

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS

as of and for the fiscal year ended September 30, 2017

1 General information

Stabilus S. A., Luxembourg, hereinafter also referred to as “Stabilus” or the “Company” is a public lim-

ited liability company (société anonyme) incorporated in Luxembourg and governed by Luxembourg

law. The Company is registered with the Luxembourg Trade and Companies Register (Registre de Com-

merce et des Sociétés Luxembourg) under No. B0151589 and its registered office is located at 2, rue

Albert Borschette, L-1246 Luxembourg, Grand Duchy of Luxembourg. The Company was founded under

the name Servus HoldCo S.à r. l. on February 26, 2010.

The Company´s fiscal year is from October 1 to September 30 of the following year (twelve-month

period). The consolidated financial statements of Stabilus S. A. include Stabilus and its subsidiaries

(hereafter also referred to as “Stabilus Group” or the “Group”).

The Stabilus Group is a leading manufacturer of gas springs and dampers, as well as electric tailgate

opening and closing equipment. The products are used in a wide range in automotive and industrial

applications, as well as in the furniture industry. Typically the products are used to support the lifting

and lowering or dampening of movements. As world market leader for gas springs, the Group ships to

all key vehicle manufacturers. Various Tier 1 suppliers of the global car industry as well as large techni-

cal focused distributors further diversify the Group’s customer base.

The consolidated financial statements are prepared in euro (€) rounded to the nearest thousand. Due

to rounding, numbers presented may not add up precisely to totals provided.

The consolidated financial statements of Stabilus and its subsidiaries have been prepared in accord-

ance with International Financial Reporting Standards (IFRS), as adopted by the EU.

The consolidated financial statements were authorized for issue by the Management Board on Decem-

ber 13, 2017.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

2 Basis for presentation

P R E PA R AT I O N

In the statement of financial position assets and liabilities are classified as non-current and current.

They are reported as current if the remaining term is less than one year and as non-current if the

remaining term is over one year. Deferred tax assets and liabilities, as well as provisions for defined

benefit pension plans and similar obligations are reported as non-current. The consolidated statement

of comprehensive income is presented using the cost of sales method.

M E A S U R E M E N T

The consolidated financial statements have been prepared on historical cost basis, except for certain

items, that are measured at fair value, like derivative financial instruments. The exceptions are

described below.

U S E O F E S T I M AT E S A N D J U D G M E N T S

The preparation of financial statements requires estimates that involve complex and subjective judg-

ments and the use of assumptions for matters that are uncertain and are subject to change. Estimates

can change from period to period and can have a material impact on financial positions, income and

expenses. Management regularly reviews estimates and assumptions. These are updated if necessary.

Impairment of non-financial assets

Stabilus monitors whether there are indications that its non-financial assets may be impaired. Goodwill

and development cost under construction are tested for impairment annually. Further tests are carried

out if there are indications for impairment. Other non-financial assets are tested for impairment if there

are indications that the carrying amount may not be recoverable. If the fair value less costs of disposal

is calculated, management must estimate the expected future cash flows from the asset or the cash-

generating unit and select an appropriate discount rate in order to determine the present value.

Trade and other receivables

The allowance for doubtful accounts requires management judgment and review of individual receiva-

bles based on individual customer creditworthiness, current economic trends and analysis of historical

allowances. Please also refer to Note 18.

Deferred tax assets

The valuation of deferred tax assets is based on mid-term business plans of the entities carrying the

deferred tax asset. The mid-term business plans range from three to five years and include various

assumptions and estimates relating to the business development, strategic changes, cost optimization

and business improvement and also general market and economic development. Deferred tax assets

are recognized to the extent that sufficient taxable profit will be available for the utilization of the

deductible temporary differences. Stabilus recognizes a valuation allowance for deferred tax assets

when it is unlikely that sufficient future taxable profit will be available. Please also refer to Note 10.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Provisions

Significant estimates are required in the determination of provisions related to pensions and other obliga-

tions, contract losses, warranty costs and legal proceedings. Please also refer to Notes 24 and 25.

R I S K S A N D U N C E R TA I N T I E S

The Group’s net assets, financial position and results of operations are subject to risks and uncertain-

ties. Actual results can vary from expectations due to changes in the overall economy, evolvement of

price-aggressive competitors, significant price changes for raw materials and overall purchase costs.

Furthermore quality issues may result in significant costs for the Group. The Group financing is based

on variable interest rates and is subject to risks and uncertainties due to the development of the

Euribor and the net leverage level of the Company. The term of the loan agreement ends June 2022.

G O I N G C O N C E R N

These consolidated financial statements have been prepared under the going concern assumption.

S C O P E O F C O N S O L I DAT I O N

The consolidated financial statements include the financial statements of Stabilus S. A. and all subsidi-

aries, which are directly or indirectly controlled by Stabilus. Control exists if the Company has the deci-

sion-making power over the relevant activities of an entity and it participates in positive and negative

variable returns from that entity and it can affect these returns by its decision-making power.

Non-controlling interests represent the portion of profit and loss and net assets not held by the Com-

pany. They are presented separately in the consolidated statement of comprehensive income and the

consolidated statement of financial position.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated

statement of comprehensive income from the date of acquisition or until the date of disposal, as

appropriate.

Next to Stabilus S. A., 38 (PY: 41) subsidiaries (see following list), are included in the consolidated

financial statements as of September 30, 2017.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Subsidiaries

N A M E O F T H E C O M PA N Y

Registered office
of the entity

Interest and control held by

Holding in %

T _ 017

Consolidation
method

Servus III (Gibraltar) Limited

Gibraltar

Stabilus S.A.

Blitz F10-neun GmbH i.L.

Koblenz, Germany

Stabilus S.A.

Stable II S.à r.l.

Luxembourg

Stabilus S.A.

Stable Beteiligungs GmbH

Koblenz, Germany

Stable II S.à r.l.

Stable HoldCo Inc.

Wilmington, USA

Stable Beteiligungs GmbH

Stable II S.à r.l.

Stable HoldCo Australia Pty. Ltd.

Dingley, Australia

Stable II S.à r.l.

LinRot Holding AG i.L.

Zurich, Switzerland

Stable II S.à r.l.

Stabilus UK Ltd.

Banbury, United Kingdom Stable Beteiligungs GmbH

Stable UK HoldCo Ltd.

Banbury, United Kingdom Stabilus UK Ltd.

Stabilus GmbH

Koblenz, Germany

Stable Beteiligungs GmbH

Stabilus Powerise GmbH i.L.

Melle, Germany

LinRot Holding AG

Stabilus Pty. Ltd.

Stabilus Ltda.

Stabilus Espana S.L.

Stabilus Co. Ltd.

Stabilus S.A. de C.V.

Stabilus Inc.

Stabilus Limited

Dingley, Australia

Stable HoldCo Australia Pty. Ltd.

Itajubá, Brazil

Lezama, Spain

Stabilus GmbH

Busan, South Korea

Stabilus GmbH

Ramos Arizpe, Mexico

Stabilus GmbH

99.9998%

Stabilus UK Ltd.

Gastonia, USA

Stable HoldCo Inc.

Auckland, New Zealand

Stabilus GmbH

Stabilus Japan Corp.

Yokohama, Japan

Stable Beteiligungs GmbH

Stabilus France S.à r.l.

Poissy, France

Stabilus GmbH

Stabilus Romania S.R.L.

Brasov, Romania

Stable Beteiligungs GmbH

Stabilus (Jiangsu) Ltd.

Wujin, China

Stabilus GmbH

Stabilus Mechatronics Service Ltd.

Shanghai, China

Stabilus (Jiangsu) Ltd.

Orion Rent Imobiliare S.R.L.

Brasov, Romania

Stable Beteiligungs GmbH

Stabilus UK Ltd.

Stabilus US Holding Corp.

Wilmington, USA

Stable II S.à r.l.

Stabilus Motion Controls GmbH

Langenfeld, Germany

Stable II S.à r.l.

Fabreeka Group Holdings, Inc.

Stoughton, USA

Stabilus US Holding Corp.

ACE Controls Inc.

Farmington Hills, USA

Stabilus US Holding Corp.

ACE Controls International Inc.

Farmington Hills, USA

Stabilus US Holding Corp.

Fabreeka International Holdings Inc.

Stoughton, USA

Fabreeka Group Holdings Inc.

Fabreeka International Inc.

Stoughton, USA

Fabreeka International Holdings Inc.

Tech Products Corporation

Miamisburg, USA

Fabreeka International Holdings Inc.

Fabreeka GmbH Deutschland

Büttelborn, Germany

Fabreeka International Holdings Inc.

Fabreeka GB Inc.

Stoughton, USA

Fabreeka International Holdings Inc.

ACE Controls Japan L.L.C.

Farmington Hills, USA

ACE Controls Inc.

ACE Stoßdämpfer GmbH

Langenfeld, Germany

Stabilus Motion Controls GmbH

HAHN-Gasfedern GmbH

Aichwald, Germany

Stabilus Motion Controls GmbH

Stabilus Actio GmbH

Langenfeld, Germany

Stabilus Motion Controls GmbH

Stable II S.à r.l.

100.00%

50.00%

100.00%

0.0002%

100.00%

80.00%

100.00%

3.01%

96.99%

100.00%

98.00%

2.00%

100.00%

94.90%

5.10%

100.00%

70.00%

Full

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The decrease of subsidiaries is due to the ongoing simplification of the legal structure of the Stabilus

Group. In fiscal year 2017, five subsidiaries were liquidated and / or merged into other group compa-

nies and two new subsidiaries were founded. This had no material effect on the Group’s consolidated

financial statements.

P R I N C I P L E S O F C O N S O L I DAT I O N

The assets and liabilities of domestic and foreign entities included in the consolidated financial state-

ments are accounted for in accordance with the uniform accounting policies of the Stabilus Group.

Receivables and liabilities or provisions between the consolidated entities are eliminated. Intragroup

revenue and other intragroup income and the corresponding cost and expenses are eliminated. Inter-

company gains and losses on intragroup delivery and service transactions are eliminated through profit

or loss, unless they are immaterial.

B U S I N E S S C O M B I N AT I O N

Business combinations are accounted for using the acquisition method as of the acquisition date,

which is the date on which control is obtained by the Group. Goodwill is measured as:

•

the fair value of the consideration transferred, plus

the recognized amount of any non-controlling interests in the acquiree, less

the net recognized amount (generally the fair value) of the identifiable assets acquired and

liabilities assumed.

The consideration transferred does not include amounts related to the settlement of transactions exist-

ing before the business combination. Such amounts are generally recognized in profit or loss. Costs

related to the acquisition, other than those associated with the issue of debt or equity securities that

the Group incurs in connection with the business combination are expensed as incurred.

Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries consist of

the value of those interests at the date of the original business combination and their share of changes

in equity since that date.

F O R E I G N C U R R E N C Y T R A N S L AT I O N

The consolidated financial statements are presented in euro (€).

For each entity in the Group its functional currency is determined, which is the currency of the primary

economic environment in which the entity operates. Items included in the financial statements of each

entity are measured using the functional currency. Transactions in foreign currency are initially trans-

lated into the functional currency using the exchange rate at the date of the transaction. Monetary

assets and liabilities denominated in foreign currency are translated into the functional currency using

the exchange rate at the balance sheet date. These foreign currency exchange gains or losses are rec-

ognized in profit and loss.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Non-monetary items in a foreign currency that are measured at historical cost are translated using the

exchange rates as of the date of the initial transaction. Non-monetary items in foreign currency meas-

ured at fair value are translated using the exchange rate at the date when the fair value is determined.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the

carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities

of the foreign operation and translated at the historic rate.

Assets and liabilities of foreign subsidiaries with a functional currency other than euro (€) are trans-

lated using the exchange rates as at the balance sheet date, while their income and expenses are

translated using the average exchange rates during the period.

Foreign currency exchange gains and losses on operating activities are included in other operating

income and expense. Foreign currency gains and losses on financial receivables and debts are included

in interest income and expense.

Translation adjustments arising from exchange rate differences are recognized directly in shareholder’s

equity and are presented as a separate component of equity. On disposal of a foreign entity, the trans-

lation adjustment relating to that particular foreign operation is recognized in profit or loss.

Exchange differences from foreign currency loans that are part of a net investment in a foreign opera-

tion are recognized directly in equity.

The exchange rates of the significant currencies of non-euro countries used in the preparation of the

consolidated financial statements were as follows:

Exchange rates

T _ 018

C O U N T RY

Australia

Brazil

China

South Korea

Mexico

Romania

USA

Closing rate Sept 30,

Average rate for the
year ended Sept 30,

2017

1.5075

3.7635

7.8534

2016

1.4627

3.6208

7.4854

2017

1.4512

3.5306

7.5209

2016

1.5098

4.0300

7.2606

1,351.8300

1,234.2600

1,266.6493

1,293.7400

21.4614

21.8853

21.1129

19.9038

4.5993

1.1806

4.4523

1.1223

4.5461

1.1041

4.4853

1.1110

I S O C O D E

AUD

BRL

CNY

KRW

MXP

RON

USD

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

C H A N G E S I N A C C O U N T I N G P O L I C I E S / N E W S TA N DA R D S I S S U E D

The accounting policies applied in the consolidated financial statements comply with the IFRSs required

to be applied in the EU as of September 30, 2017. In financial year 2017, the following new and revised

standards and interpretations had to be applied for the first time in the Group’s financial statements:

New standards, interpretations and amendments in the financial year

T _ 019

S TA N D A R D / I N T E R P R E TAT I O N

Amendments to IFRS 10, IFRS
12 and IAS 28

Amendments to IAS 27

Amendments to IAS 1

Amendments to IAS 16
and IAS 38

Amendments to IFRS 11

Investment Entities – Applying the Consolidation
Exception
(issued on December 18, 2014)

Equity Method in Separate Financial Statements
(issued on August 12, 2014)

Disclosure Initiative
(issued on December 18, 2014)

Clarification of Acceptable Methods of Depreciation
and Amortization
(issued on May 12, 2014)

Accounting for Acquisitions of Interests in Joint
Operations
(issued on May 6, 2014)

Effective date
stipulated
by IASB

Effective date
stipulated
by EU

Impact on Stabilus
financial statements

January 1, 2016

No impact

January 1, 2016

No impact

January 1, 2016

Immaterial

January 1, 2016

No impact

January 1, 2016

No impact

Amendments to IAS 16
and IAS 41

Bearer Plants
(issued on June 30, 2014)

January 1, 2016

No impact

Annual Improvements

Annual Improvements to IFRSs 2012 – 2014 Cycle
(issued on September 25, 2014)

January 1, 2016

Immaterial

The effective date presented above is the date of mandatory application in annual periods beginning on or after that date.

Standards and interpretations issued and endorsed by the EU (not yet adopted)

T _ 020

S TA N D A R D / I N T E R P R E TAT I O N

IFRS 9

IFRS 15

IFRS 16

Amendments to IAS 12

Financial Instruments
(issued on July 24, 2014)

Revenue from Contracts with Customers
(issued on May 28, 2014)
including amendments to IFRS 15: Effective
date of IFRS 15 (issued on September 11, 2015)

Leases
(issued on January 13, 2016)

Recognition of Deferred Tax Assets for Unrealised
Losses
(issued on January 19, 2016)

Amendments to IAS 7

Disclosure Initiative
(issued on January 29, 2016)

Amendments to IFRS 4

Clarifications to IFRS 15

Applying IFRS 9 Financial Instruments
with IFRS 4 Insurance Contracts
(issued on September 12, 2016)

Revenue from Contracts with Customers
(issued on April 12, 2016)

Effective date
stipulated
by IASB

Effective date
stipulated
by EU

Impact on Stabilus
financial statements

January 1, 2018

Evaluating

January 1, 2018

Evaluating

January 1, 2019

Evaluating

January 1, 2017

Evaluating

January 1, 2017

Evaluating

January 1, 2018

No impact

January 1, 2018

Evaluating

The effective date presented above is the date of mandatory application in annual periods beginning on or after that date.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

I F R S 9 F I N A N C I A L I N S T R U M E N T S

IFRS 9 Financial Instruments introduces a universal approach to the classification and measurement of

financial assets and financial liabilities. In accordance with IFRS 9, all financial assets and liabilities are

measured at amortized cost or fair value. The classification of financial assets to one of the two measure-

ment categories is based on how an entity manages its financial instruments (so-called business model)

and the contractual cash flow characteristics of the financial assets. Furthermore, IFRS 9 adds a new

expected loss impairment model that is based on the concept of providing for expected losses at inception

of a contract, except in the case of purchased or originated credit-impaired financial assets, where expected

credit losses are incorporated into the effective interest rate. In addition, IFRS 9 establishes a new hedging

model that represents a substantial overhaul of hedge accounting that will enable entities to better reflect

their risk management activities in their financial statements. Finally, extensive disclosures are required.

The new Standard is applicable to annual reporting periods beginning on or after January 1, 2018. In

general IFRS 9 must be applied retrospectively, but various transition options are allowed.

I F R S 1 5 R E V E N U E F R O M C O N T R A C T S W I T H C U S TO M E R S

IFRS 15 Revenue from Contracts with Customers provides a single, principles-based five-step model for the

determination and recognition of revenue to be applied to all contracts with customers. The new Standard

replaces the existing guidance on revenue recognition, including IAS 18 Revenue, IAS 11 Construction

Contracts and the relevant interpretations (IFRIC 13, IFRIC 15, IFRIC 18 and SIC-13). The core principle of

IFRS 15 is that revenue will be recognized in an amount that corresponds to the consideration that the

entity expects to receive. A so-called “5-step model” is used to determine at which point in time or over

which period of time revenue is to be recognized and in what amount. IFRS 15 also adds the items “Con-

tract Assets” and “Contract Liabilities” to the balance sheet. Furthermore, the standard includes detailed

guidance and extended disclosure requirements. The new Standard is applicable to annual reporting periods

beginning on or after January 1, 2018. The Stabilus Group is planning to apply the modified retrospective

transition method, according to which the cumulative effects of the conversion to the opening balance as

of October 1, 2017 must be recorded.

I F R S 1 6 L E A S E S

IFRS 16 Leases changes the regulations for the recognition, measurement, presentation and disclosure of

leases. IFRS 16 supersedes the previous standard for lease accounting (IAS 17 Leases) and the relating

interpretations (IFRIC 4, SIC-15 and SIC-27). The objective of the new leasing standard is to recognize all

leases and their associated contractual rights and obligations in the balance sheet. Therefore, the previous

distinction between finance and operating lease is eliminated from the perspective of a lessee. Apart from

short-term and low-value leases, IFRS 16 introduces a methodology for all lease contracts similar to that

previously applied for finance leases, i.e. alongside a right-of-use asset a corresponding lease liability is

also recognized upon initial recognition. Both items are updated as appropriate. When accounting for leases,

lessors are still required to perform a review to classify leases as operating or finance leases. IFRS 16 will

basically make it necessary to recognize all leases in the balance sheet in future financial years. For the

financial statements of the Stabilus Group, this relates in particular to those rental agreements previously

classified as operating leases, which are disclosed as financial commitments in the notes. As a result,

non-current assets and financial debt will both increase in future financial years. Furthermore, the classification

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

of expenses in the income statement will change. To date, rental payments in connection with operating

lease agreements were included as expenses within operating expenses. In future financial years, these

expenses will be split into depreciation and interest expenses and recognized accordingly.

A M E N D M E N T S TO I A S 1 2 : R E C O G N I T I O N O F D E F E R R E D TA X A S S E T S F O R

U N R E A L I Z E D L O S S E S

The Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealized Losses clarify that unre-

alized losses on debt instruments measured at fair value result in deductible temporary differences. It

also clarifies that an assessment must be made for the aggregate of all deductible temporary differences

as to whether it is probable that sufficient taxable income will be available in future, to allow the tem-

porary differences to be used and recognized. Rules and examples supplementing IAS 12 clarify how

future taxable income is to be determined for recognition of deferred tax assets.

A M E N D M E N T S TO I A S 7 : D I S C L O S U R E I N I T I AT I V E

Amendments to IAS 7: A Disclosure Initiative requires that entities provide disclosures that enable

users of financial statements to evaluate changes in liabilities arising from financing activities. The

amendments are intended to expand the disclosure of components of changes in liabilities arising

from financing activities for the purpose of reconciliation. Therefore, the amendments are expected to

have an impact on the disclosures of the statement of cash flows in the notes.

The Stabilus Group is currently assessing how the application of IFRS 9, IFRS 15, IFRS 16, the Amend-

ments to IAS 7 as well as the Amendments to IAS12 will affect the presentation of the assets, liabili-

ties, financial position and profit or loss. The assessment has not yet been completed, thus it has not

yet been possible to make a statement on or further quantification of the impact of the new standards

on the assets, liabilities, financial position and profit or loss.

The IASB published new standards and amendments, whose application is not yet compulsory in financial

year 2017 or which have not yet been endorsed by the EU. The Group is not planning an early application

of these standards and amendments.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Standards and interpretations issued but not yet endorsed by the EU

T_021

IFRS 14

IFRS 17

Amendments to IFRS 2

Amendments to IAS 40

Annual Improvements

IFRIC Interpretation 22

IFRIC Interpretation 23

Amendments to IFRS 9

Amendments to IAS 28

Regulatory Deferral Accounts
(issued on January 30, 2014)

Insurance Contracts
(issued May 18, 2017)

Classification and Measurement of
Share-based Payment Transactions
(issued on June 20, 2016)

Transfers of Investment Property
(issued on December 8, 2016)

Effective date
stipulated by IASB

Effective date
stipulated by EU

Impact on Stabilus
financial statements

January 1, 2016

No adoption

No impact

January 1, 2021

Pending

No impact

January 1, 2018

Pending

No impact

January 1, 2018

Pending

No impact

Annual Improvements to IFRSs 2014-2016 Cycle
(issued on December 8, 2016)

January 1, 2018 /
January 1, 2017

Pending

No impact

Foreign Currency Transactions and Advance
Consideration
(issued on December 8, 2016)

Uncertainty over Income Tax Treatments
(issued on June 7, 2017)

Prepayment Features with Negative
Compensation
(issued on 12 October 2017)

Long-term Interests in Associates
and Joint Ventures
(issued on 12 October 2017)

January 1, 2018

Pending

No impact

January 1, 2019

Pending

Evaluating

January 1, 2019

Pending

Evaluating

January 1, 2019

Pending

No impact

The effective date presented above is the date of mandatory application in annual periods beginning on or after that date.

I F R I C 2 3 U N C E R TA I N T Y O V E R I N C O M E TA X T R E AT M E N T S

IFRIC 23 Uncertainty over Income Tax Treatments clarifies the accounting for uncertainties in income

taxes with regard to current and deferred tax assets and liabilities. Such uncertainties in income taxes

arise if the application of the tax law on a specific translation is uncertain and is therefore dependent

on how its interpretation by the relevant tax authority, which is not known to the entity at the time the

consolidated financial statements are prepared. An entity takes these uncertainties into account in the

tax profit (tax losses) only if it is probable that the relevant tax amounts will be paid or reimbursed.

A M E N D M E N T S TO I F R S 9 P R E PAY M E N T F E AT U R E S W I T H N E G AT I V E

C O M P E N S AT I O N

The International Accounting Standards Board (IASB) has published amendments to International

Financial Reporting Standards (IFRS) 9, Financial Instruments that allow companies to measure particular

prepayable financial assets with negative compensation at amortized cost or at fair value through other

comprehensive income (FVOCI) – instead of measuring them at fair value through profit or loss (FVTPL).

The Stabilus Group is currently assessing how the application of IFRIC 23 as well as the Amendments

to IFRS 9 will affect the presentation of the assets, liabilities, financial position and profit or loss. The

assessment has not yet been completed, thus it has not yet been possible to make a statement on or

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

further quantification of the impact of the new standards on the assets, liabilities, financial position

and profit or loss. The Stabilus Group is planning to conclude the detailed analyses during the course

of financial year ending on September 30, 2018.

3 Accounting policies

R E V E N U E

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group

and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration

received, excluding discounts, rebates, and other sales taxes or duty. Revenue from the sale of goods is

recognized when significant risks and rewards of ownership have been transferred to the customer, a

price is agreed or can be determined and when the payment is probable. Revenue from a contract to pro-

vide services is recognized according to the stage of completion, if the amount of the revenue can be

measured reliably and it is probable that the economic benefits will flow to the Group.

C O S T O F S A L E S

Cost of sales comprises costs for the production of goods and for merchandise sold. In addition to

directly attributable material and production costs, indirect production-related overheads like produc-

tion and purchase management, warranty expenses, depreciation on production plants and amortiza-

tion of intangible assets are included. Cost of sales also includes write-downs on inventories to the

lower net realizable value.

R E S E A R C H E X P E N S E S A N D N O N - C A P I TA L I Z E D D E V E L O P M E N T E X P E N S E S

Research expenses and non-capitalized development expenses are recognized in profit or loss as incurred.

S E L L I N G E X P E N S E S

Selling expenses include costs for sales personnel and other sales-related costs such as marketing and

travelling. Shipping and handling costs are expensed within selling expenses as incurred. Fees charged

to customers are shown as sales. Advertising costs (expenses for advertising, sales promotion and

other sales-related activities) are expensed within selling expenses as incurred.

B O R R O W I N G C O S T S

Borrowing costs are expensed as incurred, unless they are directly attributable to the acquisition, con-

struction or production of a qualifying asset and therefore form part of the cost of that asset.

I N T E R E S T I N C O M E A N D E X P E N S E

The interest income and expense include the interest expenses from liabilities and the interest income

from the investment of cash. The interest components from defined benefit pension plans and similar

obligations are reported within personnel expenses.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

OT H E R F I N A N C I A L I N C O M E A N D E X P E N S E

The other financial result includes all remaining income and expenses from financial transactions that

are not included in the interest income and expense.

I N C O M E TA X E S

Income tax expense comprises current and deferred tax.

Current tax comprises the expected tax payable or receivable for the year and any adjustment related

to previous years and is measured using tax rates enacted or substantively enacted at the reporting

date. Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax is recognized on temporary differences between the carrying value of assets and liabilities

under IFRS and their tax base, except for temporary differences arising from goodwill or from the initial

recognition, other than in a business combination, of assets and liabilities in a transaction that affects

neither taxable nor accounting profit.

Deferred tax assets are recognized for deductible temporary differences, tax loss carry-forwards and tax

credits to the extent that it is probable that future taxable profits will be available against which

they can be utilized. Deferred tax assets are reviewed at each reporting date to determine whether it is

probable that the related tax benefit will be realized. The carrying value is adjusted accordingly.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences

when they reverse, based on tax rates enacted or substantively enacted at the reporting date. The

measurement of deferred tax reflects the tax consequences that would follow from the manner in

which Stabilus expects to recover or settle the carrying amount of its assets and liabilities. Deferred

tax assets and liabilities are offset only if certain criteria are met.

G O O D W I L L

Goodwill is measured at cost less any accumulated impairment losses and is not amortized. It is tested

for impairment at least annually and if an indication for impairment exists.

The Group tests goodwill for impairment by comparing its recoverable amount with its carrying

amount. For this purpose at the acquisition date goodwill is allocated to cash-generating units (CGU)

that are expected to benefit from the business combination. Goodwill is tested for impairment at the

lowest level within the Group at which goodwill is being managed.

An impairment loss on goodwill is recognized if the recoverable amount of the cash-generating unit

is below its carrying amount. Impairment losses are recognized in profit or loss. Impairment losses on

goodwill are not reversed.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

OT H E R I N TA N G I B L E A S S E T S

Purchased intangible assets are measured at acquisition cost and internally generated intangible

assets at production cost less any accumulated amortization and impairment losses. Internally gener-

ated intangible assets are only recognized when the criteria in accordance with IAS 38 are met.

Intangible assets with finite useful lives are amortized on a straight-line basis over their useful eco-

nomic life and tested for impairment if there is an indication that the intangible asset may be impaired.

The estimated useful life and the amortization method are reviewed at the end of each reporting

period. The effect of changes in the estimate is being accounted for on a prospective basis. Intangible

assets with indefinite useful lives are not amortized and are tested for impairment at least annually

and if an indication for impairment exists.

The following useful lives are used in the calculation of amortization: Software (3 to 5 years), patented

technology (16 years), customer relationships (20-24 years), unpatented technology (6 to 10 years)

and trade names (7 years).

R E S E A R C H A N D D E V E L O P M E N T E X P E N S E S

Development costs are capitalized when the criteria in accordance with IAS 38 are met, otherwise

expensed as incurred.

To meet the recognition criteria of IAS 38, Stabilus has to demonstrate the following: (1) the technical

feasibility of completing the intangible asset so that it will be available for use or sale; (2) the inten-

tion to complete the intangible asset and use or sell it; (3) the ability to use or sell the intangible asset;

(4) how the intangible asset will generate probable future economic benefits; (5) the availability of

adequate technical, financial and other resources to complete the development and to use or sell the

intangible asset; and (6) the ability to measure reliably the expenditure attributable to the intangible

asset during its development.

Capitalized development costs comprise all costs directly attributable to the development process and

are amortized systematically from the start of production over the expected product cycle of three to

fifteen years depending on the lifetime of the product.

P R O P E R T Y, P L A N T A N D E Q U I P M E N T

Property, plant and equipment is measured at cost less accumulated depreciation and impairment

losses.

Cost for property, plant and equipment include the purchase price, costs directly attributable to bring-

ing the asset to the location and condition necessary to be capable of operating in the manner

intended. This also applies for self-constructed plant and equipment taking into account the cost of

production.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Subsequent costs are capitalized only if they increase the future economic benefits embodied in the

specific asset to which they relate.

Depreciation on property, plant and equipment is recognized on a straight-line basis over the estimated

useful lives of the assets. The residual values, depreciation methods and useful lives are reviewed

annually and adjusted, if necessary.

Depreciation is primarily based on the following useful lives: Buildings (40 years), machinery and

equipment (5 to 10 years) and other equipment (5 to 8 years).

Stabilus recognizes government grants when there is reasonable assurance that the conditions attached

to the grants are complied with and the grants will be received. Government grants related to the pur-

chase or the production of fixed assets are generally offset against the acquisition or production costs of

the respective assets so that the grant is recognized in profit or loss over the life of the asset through

reduced depreciation expense.

L E A S I N G

Leases are all arrangements that transfer the right to use a specified asset for a stated period of time

in return for a payment.

Leases that transfer substantially all risks and rewards associated with the ownership to Stabilus are

classified as finance leases. The leased asset and a corresponding liability is initially measured at fair

value or the lower present value of the minimum lease payments. Assets are depreciated on a straight-

line basis over the estimated useful life of the asset or the shorter term of the lease. Lease payments

resulting from finance leases are divided into repayments of the principal and interest payments.

Other leases are classified as operating leases. The corresponding lease payments are recognized as

an expense in profit or loss on a straight-line basis over the lease term.

I M PA I R M E N T O F N O N - F I N A N C I A L A S S E T S

Stabilus assesses at each reporting date whether there is an indication that an asset may be impaired.

If such indication exists Stabilus estimates the recoverable amount of the asset. Goodwill and intangi-

ble assets under construction are tested annually for impairment.

The recoverable amount is determined for individual assets, unless an asset does not generate cash

inflows that are largely independent of those from other assets or groups of assets (cash-generating units).

The recoverable amount is the higher of its fair value less costs of disposal and its value in use. Stabilus

determines the recoverable amount as fair value less costs of disposal and compares this with the car-

rying amounts (including goodwill). The fair value less costs of disposal is measured by discounting

future cash flows using a risk-adjusted interest rate. The future cash flows are estimated on the basis

of the operative planning (five-year window). Periods not included in the business plans are taken into

account by applying a residual value which considers a growth rate of 1.0%. If the fair value less costs

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

of disposal cannot be determined or is lower than the carrying amount, the fair value less costs of dis-

posal is calculated. If the carrying amount exceeds the recoverable amount an impairment loss has to

be recognized.

The calculation of the value in use and the fair value less costs of disposal is most sensitive to the fol-

lowing assumptions: (1) Gross margins are based on average values achieved in the last two years

adopted over the budget period for anticipated efficiency improvements. (2) Discount rates reflect the

current market assessments of the risks of the cash-generating unit. The rate was estimated based on

the average percentage of a weighted average cost of capital for the industry. (3) Estimates regarding

the raw materials price developments are obtained by published indices from countries in which the

resources are mainly bought. Forecast figures (mainly in Europe and the US) and past price develop-

ments have been used as an indicator for future developments. (4) Management notices that the

Group’s position continues to strengthen, as customers shift their purchases to larger and more stable

companies. Therefore there is no need for any doubt regarding the assumption of market share. (5)

Revenue growth rates are estimated based on published industry research.

At each reporting date an assessment is made to determine whether there is any indication that

impairment losses recognized in earlier periods no longer exist. In this case, Stabilus recognizes a

reversal of the impairment loss. Impairment losses on goodwill are not reversed.

I N V E N TO R I E S

Inventories are measured at the lower of cost and net realizable value using the average cost method.

Production costs include all direct costs of material and labor and an appropriate portion of fixed and

variable overhead expenses. Net realizable value is the estimated selling price less all estimated costs

of completion and costs necessary to make the sale. Borrowing costs for the production period are not

included. Provisions are set up on the basis of the analysis of stock moving and / or obsolete stock.

F I N A N C I A L I N S T R U M E N T S

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial

liability or an equity instrument of another entity. Financial instruments recorded as financial assets or

financial liabilities are generally reported separately. Financial instruments are recognized as soon as

the Stabilus Group becomes a party to the contractual provisions of the financial instrument. Financial

instruments comprise financial receivables or liabilities, trade accounts receivable or payable, cash and

cash equivalents and other financial assets or liabilities.

Financial instruments are initially measured at fair value. For the purpose of subsequent measurement,

financial instruments are allocated to one of the categories defined in IAS 39 “Financial Instruments:

Recognition and Measurement”. The measurement categories relevant for Stabilus are loans and

receivables, financial assets at fair value through profit or loss and financial liabilities measured at

amortized costs.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. Examples include trade accounts receivable and loans originated by

the Group. After initial recognition, loans and receivables are subsequently carried at amortized cost

using the effective interest rate method less impairment losses. Gains and losses are recognized in profit

or loss when the loans and receivables are derecognized or impaired. Interest from using the effective

interest rate method is similarly recognized in profit or loss. Loans and receivables bearing no or lower

interest rates compared to market rates with a maturity of more than one year are discounted.

F I N A N C I A L A S S E T S

In addition to financial instruments assigned to a measurement category, financial assets also include

cash and cash equivalents. Cash and cash equivalents consist primarily of cash on hand, checks and

deposits at banks. The Group considers all highly liquid investments purchased with an original matu-

rity of three months or less to be cash equivalents. Cash and cash equivalents correspond with the

classification in the consolidated statement of cash flows. Interest received on these financial assets is

generally recognized in profit or loss applying the effective interest rate method. Dividends are recog-

nized in profit or loss when legal entitlement to the payment arises.

I M PA I R M E N T O F F I N A N C I A L A S S E T S

At each reporting date the carrying amounts of the financial assets, except those measured at fair value

through profit or loss, are investigated to assess whether objective evidence of impairment (such as

the debtor’s inability to meet its current obligations or significant changes in the technological, eco-

nomic, legal or the market environment of the debtor) exists. For equity instruments a significant or

prolonged decline in fair value is considered to be objective evidence for impairment. Stabilus has

defined criteria for the significance and duration of a decline in fair value.

Loans and receivables

If there is objective evidence that an impairment loss on assets carried at amortized cost has been

incurred, the amount of the loss is measured as the difference between the asset’s carrying amount

and the present value of estimated future cash flows (excluding future expected credit losses that have

not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective

interest rate computed at initial recognition). The carrying amount of the asset is reduced through use

of an allowance account. The amount of the loss is recognized in profit or loss. If, in a subsequent

period, the amount of the impairment loss decreases and the decrease can be related objectively to an

event occurring after the impairment was recognized, the previously recognized impairment loss is

reversed, to the extent that the carrying value of the asset does not exceed its amortized cost at the

reversal date. Any subsequent reversal of an impairment loss is recognized in profit or loss. In relation

to trade accounts receivable, a provision for impairment is made when there is objective evidence (such

as the probability of insolvency or significant financial difficulties of the debtor) that the Group will be

unable to collect all of the amounts due under the original terms of the invoice. The carrying amount of

the receivable is reduced through use of an allowance account. Impaired debts are derecognized when

they are assessed as uncollectible.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S

As of September 30, 2017 and September 30, 2016, the Stabilus does not have derivative financial

instruments.

In the prior year, on June 21, 2016, Stabilus entered into four forward exchange transactions to hedge

the foreign exchange risk related to the US dollar payment of the purchase price for the acquired SKF

Group entities that had to be paid on June 30, 2016. Such derivative financial instruments were settled

on June 30, 2016. The effective portion of changes in fair value of cash flow hedges in the year ended

June 30, 2016 amounted to €6,798 thousand and the amount reclassified as basis adjustment amounted

to €(6,798) thousand. Stabilus designated the forward exchange transactions as a hedging instrument

to the US dollar purchase price, i.e. as cash flow hedge.

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in

the fair value is recognized in other comprehensive income and the ineffective portion is recognized in

profit and loss. The amount recognized in other comprehensive income is reclassified when the hedged

transaction occurs. Stabilus considers the hedge related to a business combination as a hedge of a

non-financial item and recognizes the gain or loss from the hedging instrument recognized in other

comprehensive income as an adjustment to goodwill.

F I N A N C I A L L I A B I L I T I E S A N D E Q U I T Y I N S T R U M E N T S

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with

the substance of the contractual arrangement.

E Q U I T Y I N S T R U M E N T S

An equity instrument is any contract that evidences a residual interest in the assets of an entity after

deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of transac-

tion costs.

F I N A N C I A L L I A B I L I T I E S

Financial liabilities primarily include a term loan, trade accounts payable and other financial liabilities.

Financial liabilities measured at amortized cost

Financial liabilities measured at amortized cost include a term loan.

After initial recognition the financial liabilities are subsequently measured at amortized cost applying

the effective interest method. Gains and losses are recognized in profit or loss through the amortiza-

tion process or when the liabilities are derecognized.

Financial liabilities at fair value through profit or loss

As of September 30, 2017 and 2016, the Group does not measure any financial liabilities at fair value

through profit or loss.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

P E N S I O N S A N D S I M I L A R O B L I G AT I O N S

The contributions to our pension plans are recognized as an expense when the entity consumes the eco-

nomic benefits arising from the services provided by the employees in exchange for employee benefits.

For defined benefit pension plans the projected unit credit method is used to determine the present value

of a defined benefit obligation.

For the valuation of defined benefit plans, differences between actuarial assumptions used and actual

developments as well as changes in actuarial assumptions result in actuarial gains and losses, which have

a direct impact on the consolidated statement of financial position and on other comprehensive income.

OT H E R P R O V I S I O N S

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of

a past event, it is probable that the Group will be required to settle the obligation and a reliable esti-

mate can be made of the amount of the obligation. All cost elements that are relevant flow into the

measurement of other provisions – in particular those for warranties and potential losses on pending

transactions. Non-current provisions with a residual term of more than one year are recognized at the

balance sheet date with their discounted settlement amount. The amount recognized as a provision is

the best estimate of the consideration required to settle the present obligation at the balance sheet

date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is

measured using the cash flows estimated to settle the obligation, its carrying amount is the present

value of those cash flows. When some or all of the economic benefits required to settle a provision are

expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually cer-

tain that reimbursement will be received and the amount of the receivable can be measured reliably.

A restructuring provision is recognized when the Group has developed a detailed formal plan for the

restructuring and has raised a valid expectation in those affected that it will carry out the restructuring

by starting to implement the plan or announcing its main features to those affected by it. The measure-

ment of a restructuring provision includes only the direct expenditures arising from the restructuring,

which are those amounts that are both necessarily entailed by the restructuring and not associated

with the ongoing activities of the entity.

Termination benefits are granted if an employee is terminated before the normal retirement age or if

an employee leaves the company voluntarily in return for the payment of a termination benefit. The

Group records termination benefits if it is demonstrably committed, without realistic possibility of with-

drawal, to a formal detailed plan to terminate the employment of current employees or if it is demon-

strably committed to pay termination benefits if employees leave the company voluntarily.

Provisions for warranties are recognized at the date of sale of the relevant products, at the manage-

ment’s best estimate of the expenditure required to settle the Group’s obligation.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

4 Revenue

The Group’s revenue developed as follows:

Revenue by region

I N € T H O U S A N D S

Europe

NAFTA

Asia / Pacific and RoW

Revenue

Revenue by markets

I N € T H O U S A N D S

Automotive Gas Spring

Automotive Powerise

Automotive business

Industrial / Capital Goods

Vibration & Velocity Control

Commercial Furniture

Industrial business

Revenue

Group revenue results from sales of goods. Stabilus operates in automotive and industrial markets.

The Automotive Gas Spring and Automotive Powerise units service our automotive customers, whereas

Industrial / Capital Goods, Vibration & Velocity Control as well as Commercial Furniture (formerly: Swivel

Chair) units supply our industrial customers.

T _ 022

Year ended Sept 30,

2017

456,306

350,737

102,973

910,016

2016

364,195

288,988

84,318

737,501

T _ 023

Year ended Sept 30,

2017

340,475

243,210

583,685

204,408

93,920

28,003

326,331

910,016

2016

320,030

195,314

515,344

171,015

22,540

28,602

222,157

737,501

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

Cost of sales, research and development,
selling and administrative expenses

Expenses by function

I N € T H O U S A N D S

Capitalized development cost

Personnel expenses

Material expenses

Depreciation and amortization

Other

Total

I N € T H O U S A N D S

Capitalized development cost

Personnel expenses

Material expenses

Depreciation and amortization
(incl. impairment losses)

Other

Total

Year ended 30, 2017

Cost of
sales

–

(156,151)

(429,810)

(30,692)

(20,511)

Research &
development
expenses

11,405

(19,054)

(6,004)

(15,770)

(8,771)

Selling
expenses

–

(30,877)

(11,356)

(12,006)

(26,141)

T _ 024

Total

11,405

Adminis-
trative
expenses

–

(34,350)

(240,432)

(5,266)

(2,634)

6,907

(452,436)

(61,102)

(48,516)

(637,164)

(38,194)

(80,380)

(35,343)

(791,081)

Year ended Sept 30, 2016

Selling
expenses

Administrative
expenses

Cost of sales

–

(132,752)

(358,128)

(30,351)

(26,469)

Research &
development
expenses

12,592

(16,313)

(5,000)

(11,120)

(6,749)

(547,700)

(26,590)

–

(19,575)

(10,383)

(5,874)

(19,630)

(55,462)

The expense items in the statement of comprehensive income include following personnel expenses.

Personnel expenses

I N € T H O U S A N D S

Wages and salaries

Compulsory social security contributions

Pension cost

Other social benefits

Personnel expenses

Total

12,592

–

(30,777)

(199,417)

(3,106)

(376,617)

(1,940)

1,942

(49,285)

(50,906)

(33,881)

(663,633)

T _ 025

Year ended Sept 30,

2017

2016

(172,819)

(139,127)

(42,694)

(15,061)

(9,858)

(34,566)

(14,931)

(10,793)

(240,432)

(199,417)

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The following table shows the Group’s average number of employees.

Number of employees

Wage earners

Salaried staff

Trainees and apprentices

Average number of employees

6 Other income

Other income

I N € T H O U S A N D S

Foreign currency translation gains

Gains on sale / disposal of assets

Income from the release of other accruals

Miscellaneous other income

Other income

7 Other expenses

Other expenses

I N € T H O U S A N D S

Foreign currency translation losses

Losses on sale / disposal of tangible assets

Miscellaneous other expenses

Other expenses

Year ended Sept 30,

2017

4,523

1,341

100

5,964

T _ 026

2016

3,925

1,042

5,062

T _ 027

Year ended Sept 30,

2017

8,817

276

287

3,385

12,765

2016

9,795

–

2,237

12,074

T _ 028

Year ended Sept 30,

2017

(12,202)

(227)

(882)

2016

(8,422)

(162)

(716)

(13,311)

(9,300)

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

T _ 029

2016

2,169

–

340

2,556

Year ended Sept 30,

2017

185

–

22,093

22,323

T _ 030

Year ended Sept 30,

2017

(12,853)

(16,471)

(69)

(406)

2016

(12,756)

–

(105)

(400)

(29,799)

(13,261)

8 Finance income

Finance income

I N € T H O U S A N D S

Interest income on loans and financial receivables not measured at fair value through profit and loss

Net foreign exchange gain

Gains from changes in carrying amount of financial liabilities

Other interest income

Finance income

Finance income is substantially due to the adjustment of the carrying value of the euro term loan

facility reflecting the decrease in the margin based on the improved net leverage ratio of the Group

with an amount of €17,485 thousand and the extension of the term by one year with an amount

of €4,608 thousand.

9 Finance costs

Finance costs

I N € T H O U S A N D S

Interest expense on financial liabilities not measured at fair value through profit and loss

Net foreign exchange loss

Interest expenses finance lease

Other interest expenses

Finance costs

The interest expense on finance liabilities not measured at fair value through profit and loss include

ongoing interest expenses of €9,612 thousand (PY: € 8,906 thousand) related to the euro term loan

facility. Thereof an amount of €2,358 thousand (PY: €2,576 thousand) is due to the amortization of

debt issuance cost and the amortization of the adjustment of the carrying value by using the effective

interest rate method. Furthermore the prepayments of the euro term loan facility lead to a derecogni-

tion of unamortized debt issuance cost and unamortized adjustment of the carrying value with a total

amount of €3,091 thousand (PY: €3,848 thousand).

The net foreign exchange loss is primarily due to the weaker USD (closing rate per €1: $1.12 as at Sep-

tember 30, 2016 versus $1.18 as at September 30, 2017) relevant for the translation of intragroup

loans and the portion of the euro term loan facility (€157.5 million) held by a US entity until Septem-

ber 29, 2017.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Income tax expense

Income taxes comprise current taxes on income (paid or owed) in the individual countries and deferred

taxes. The tax rates which are applicable on the reporting date are used for the calculation of current

taxes. Tax rates for the expected period of reversal, which are enacted or substantively enacted at the

reporting date, are used for the calculation of deferred taxes. Deferred taxes are recognized as deferred

tax expenses or income in the statement of comprehensive income, either through profit or loss or

other comprehensive income, depending on the underlying transaction.

Income tax expense

I N € T H O U S A N D S

Current income taxes

Deferred taxes

Income tax expense

The respective local rates have been used to calculate the deferred taxes. The current income taxes

comprise prior year taxes amounting to €(1.793) thousand (PY: €16 thousand).

The actual income tax expense of €(31,670) thousand deviates in the amount of €1,603 thousand

from the expected tax expense of €(33,273) thousand that results from applying the expected income

tax rate of 30% to the Group’s profit or loss before income taxes. The individual items that reconcile

the expected income tax expense to the actual income tax expense are disclosed in the table below.

Tax expense reconciliation (expected to actual)

I N € T H O U S A N D S

Profit / (loss) before income tax

Expected income tax expense

Foreign tax rate differential

Tax-free income

Non-deductible expenses

Prior year taxes

Change of the valuation allowance on deferred tax assets

Tax rate changes

Other

Actual income tax expense

Effective tax rate

T _ 031

Year ended Sept 30,

2017

(37,893)

6,223

(31,670)

2016

(29,961)

12,010

(17,951)

T _ 032

Year ended Sept 30,

2017

110,913

(33,273)

5,677

3,292

(5,958)

(1,793)

518

(230)

2016

65,938

(19,781)

2,767

(2,251)

(16)

564

652

(31,670)

(17,951)

28.6%

27.2%

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

The tax effect reported as a foreign tax rate differential reflects the difference between the expected tax rate

of 30% and the actual tax rates that are applicable to the individual subsidiaries. The tax effect of non-de-

ductible expenses consists primarily of expenses that are non-deductible in the determination of the taxable

profits in Germany. The tax effect of non-capitalized deferred taxes on domestic losses is calculated with the

local tax rates on the basis of the negative earnings before taxes (EBTs) of the respective companies.

The deferred tax assets (DTA) and deferred tax liabilities (DTL) in respect of each type of the temporary

difference and each type of unused tax losses are as follows:

Deferred tax assets and liabilities

Sep 30, 2017

Sep 30, 2016

I N € T H O U S A N D S

Intangible assets

Property, plant & equipment

Inventories

Receivables

Other assets

Provisions and liabilities

Tax and interest losses

Subtotal

Netting

Total

DTA

165

3,000

3,255

493

584

14,511

14,606

36,614

DTL

(71,393)

(7,522)

(83)

(1,124)

(3,401)

(1,044)

–

Total

(71,228)

(4,522)

3,172

(631)

(2,817)

13,467

14,606

(84,567)

(47,953)

DTA

224

2,766

2,515

1,476

838

15,470

17,502

40,791

DTL

(78,492)

(8,136)

(101)

(1,868)

(4,701)

(384)

–

(24,531)

24,531

–

(33,048)

33,048

–

12,083

(60,036)

(47,953)

7,743

(60,634)

(52,891)

(93,682)

(52,891)

T _ 033

Total

(78,268)

(5,370)

2,414

(392)

(3,863)

15,086

17,502

Deferred tax assets and deferred tax liabilities have been offset if they relate to income taxes levied by

the same tax authorities and if there is a right to offset current tax assets against current tax liabilities.

As of September 30, 2017, the Group has unused tax loss carry-forwards (including German interest

loss carry-forwards) of €59,949 thousand (PY: €74,144 thousand).

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The following table provides a detailed overview of the tax loss and interest carry-forwards and the

expiration dates.

Tax loss and interest carry-forwards

T _ 034

I N € T H O U S A N D S

Germany

Spain

USA

Great Britain

Brazil

Total

I N € T H O U S A N D S

Germany

Spain

USA

Great Britain

Brazil

Total

Year ended Sept 30, 2017

Tax loss and
interest
carry-forward

Tax rate

Deferred tax
asset (gross)

Valuation
allowance

Deferred tax
asset (net)

47,693

27 – 30%

12,872

5,192

5,666

273

1,125

59,949

28.0%

36.2%

22.0%

34.0%

1,454

2,049

383

16,818

(2,212)

14,606

(698)

(1,454)

–

(60)

–

12,175

–

Expiration date

Indefinite

2,049 Within 20 years

–

383

Indefinite

Year ended Sept 30, 2016

Tax loss and
interest
carry-forward

Tax rate

Deferred tax
asset (gross)

Valuation
allowance

Deferred tax
asset (net)

65,756

27.0 – 30.0%

5,671

1,143

321

1,253

74,144

28.0%

37.0%

22.0%

34.0%

17,724

1,588

423

426

(647)

(1,588)

(423)

(71)

–

17,076

–

Expiration date

Indefinite

– Within 20 years

–

426

Indefinite

20,231

(2,729)

17,502

The interest carry-forward comes from our German entities and amounts to €45,031 thousand with a

gross deferred tax asset of €12,091 thousand of which a deferred tax assets of €12,091 thousand was

shown in the balance sheet. The unused tax loss carry-forward comprises €14,918 thousand relating to

corporate tax and trade tax. The amount recognized as a deferred tax asset is calculated under consid-

eration of the actual corporate planning and its utilization within the planning period.

Tax loss carry-forwards in Luxembourg are not considered, as it is not likely that these carry-forwards

will be utilized.

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

11 Earnings per share

The weighted average number of shares used for the calculation of earnings per share in the fiscal

years ended September 30, 2017 and 2016 is set out in the following table:

Weighted average number of shares

D AT E

September 30, 2015

October 1, 2015

July 6, 2016

September 30, 2016

October 1, 2016

September 30, 2017

Number of days

Transaction

Change

Total shares

T _ 035

Total shares
(time-weighted)

279

20,723,256

15,797,236

Capital increase

3,976,744

24,700,000

5,871,311

365

24,700,000

21,668,547

24,700,000

The earnings per share for the fiscal years ended September 30, 2017 and 2016, were as follows:

Earnings per share

Profit / (loss) attributable to shareholders of the parent (in € thousands)

Weighted average number of shares

Earnings per share (in €)

T _ 036

Year ended Sept 30,

2017

79,255

2016

47,971

24,700,000

21,668,547

3.21

2.21

Basic and diluted earnings per share are calculated by dividing the profit attributable to the shareholders

of the Company by the weighted average number of shares outstanding.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS
S T A B I L U S N E X T I G N I T I O N

12 Property, plant and equipment

Property, plant and equipment are presented in the following table.

Property, plant and equipment

I N € T H O U S A N D S

Gross value

Balance as of Sept 30, 2015

Additions from business combination

Foreign currency difference

Additions

Disposals

Reclassifications

Balance as of Sept 30, 2016

Foreign currency difference

Additions

Disposals

Reclassifications

Land,
equivalent
rights to
real property

Buildings
and land
improve-
ments

Technical
equipment
and
machinery

Other
tangible
equipment

Construc-
tion in pro-
gress

T _ 037

Total

37,966

133,006

36,918

26,334

245,150

10,926

2,662

(2)

–

13,586

(181)

2,817

9,887

(242)

2,016

(71)

1,516

51,072

(1,307)

744

(1,179)

(1,987)

–

526

7,726

(4,364)

27,495

(957)

7,656

170,562

(4,976)

11,886

(1,719)

13,986

1,872

(295)

4,358

(634)

1,892

44,111

(1,759)

6,317

(2,226)

2,032

48,475

970

(353)

6,360

(335)

(11,064)

21,912

(315)

11,972

(833)

(16,544)

16,192

23,117

(5,256)

40,229

(1,997)

–

301,243

(8,538)

33,736

(7,944)

–

318,497

Balance as of Sept 30, 2017

15,043

49,048

189,739

Accumulated depreciation

Balance as of Sept 30, 2015

Foreign currency difference

Depreciation expense

Thereof impairment loss

Disposal

Reclassifications

Balance as of Sept 30, 2016

Foreign currency difference

Depreciation expense

Thereof impairment loss

Disposal

Reclassifications

Balance as of Sept 30, 2017

Carrying amount

Balance as of Sept 30, 2016

Balance as of Sept 30, 2017

–

(9,684)

(76,851)

(23,844)

(819)

(111,198)

(30)

1,874

222

(3,064)

(16,284)

(6,540)

–

(3)

–

760

–

533

–

2,066

(25,888)

–

1,346

–

(12,728)

(90,500)

(29,627)

(819)

(133,674)

579

3,031

(2,620)

(16,769)

–

1,648

–

(389)

1,630

(3)

1,326

(7,005)

(5)

2,197

(13,121)

(102,611)

(33,106)

–

819

–

4,936

(26,394)

(394)

6,294

–

(148,838)

13,586

15,043

38,344

35,927

80,062

87,128

14,484

15,369

21,093

16,192

167,569

169,659

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Property, plant and equipment include assets resulting from two finance lease contracts with a carrying

amount of €3,767 thousand (PY: €4,133 thousand).

In fiscal year 2017, Stabilus Group has not received government grants (PY: €201 thousand). Prior

years government grants are linked to the installation of our third Powerise production line in Roma-

nia. For the entitlement to this grant Stabilus Romania S.R.L. has to meet certain thresholds (head-

count and quantity of products) over a five-year period. If such thresholds were not met, the grant

would have to be paid back.

Contractual commitments for the acquisition of property, plant and equipment amount to €5,775 thou-

sand (PY: €5,397 thousand).

The Group recognized impairment losses on Property, plant and equipment amounting to €394 thou-

sand (PY: €0 thousand) in the actual year.

The total depreciation expense for tangible assets is included in the consolidated statement of compre-

hensive income in the following line items:

Depreciation expense for property, plant and equipment

T _ 038

I N € T H O U S A N D S

Cost of sales

Research and development expenses

Selling expenses

Administrative expenses

Depreciation expense

Year ended Sept 30,

2017

2016

(23,599)

(23,485)

(955)

(468)

(741)

(374)

(1,372)

(1,288)

(26,394)

(25,888)

Prepayments by the Stabilus Group for property, plant and equipment and intangible assets of

€507 thousand (PY: €746 thousand) are included in other non-current assets. Larger prepayments

are typically secured by a bank guarantee or an in-depth check of the relevant supplier.

13 Goodwill

The first-time consolidation of Stable II S.à r. l., Luxembourg as of April 8, 2010, resulted in goodwill of

€51.1 million and the first-time consolidation of Orion Rent Imobiliare S.R.L, Bucharest, Romania resulted

in goodwill of €0.4 million. The first-time consolidation of ACE, Hahn Gasfedern and Fabreeka / Tech Prod-

ucts as of June 30, 2016, resulted in goodwill of €146.9 million. The acquisition of a small niche business

in New Zealand resulted in a goodwill of €0.2 million. These acquisitions resulted in total goodwill of

€198.6 million (PY: €51.5 million). On the relevant acquisition date goodwill is allocated to the operating

segments (CGUs) based on their relative fair values. As such €112.4 million have been allocated to Europe,

€73.3 million to NAFTA and €12.9 million to Asia / Pacific and Rest of World (RoW).

The foreign currency difference on goodwill is €(3.3) million (PY: €(1.1) million).

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The fair value less cost of disposal for each cash-generating unit as the smallest identifiable group of

assets that generates cash inflows that are largely independent of the cash inflows from other assets

or other groups of assets is measured by discounting the future cash flows generated from the contin-

uing use of the unit and was based on the following key assumptions: the underlying cash flow fore-

casts are based on the five-year medium term plan (“MTP”) approved by the Management Board and

Supervisory Board. The cash flow planning takes into account price agreements based on experience

and anticipated efficiency enhancements (e.g. relocation from high cost to low cost countries, higher

automation, etc.) as well as average total sales growth of approximately 1.8% (PY: 5.0%) for Europe,

2.6% (PY: 5.2%) for NAFTA and 16.1% (PY: 18.2%) for Asia / Pacific and RoW on compound average

based on the strategic outlook leading to an average higher growth rate for the free cash flow. The

higher free cash flow growth rate is also impacted by the product mix effects and the assumed stable

gross margins and improved fixed costs absorption. While the overall economic outlook is very volatile,

the Group believes that its market-orientated approach and leading edge products and services allow

for some revenue growth. Cash flows after the five-year period were extrapolated by applying a 1%

(PY: 1%) growth rate. This growth rate was based on the expected consumer price inflation for the

countries included in the respective cash generating units, adjusted for expected technological pro-

gress and efficiency gains in the overall economy. The discount rate applied to cash flow projections is

8.9% (PY: 8.8%) for Europe, 8.6% (PY: 8.5%) for NAFTA and 8.8% (PY: 8.4%) for Asia / Pacific and

RoW. The pre-tax discount rates are 11.8% (PY: 11.5%) for Europe, 12.9% (PY: 12.5%) for NAFTA and

11.6% (PY: 11.0%) for Asia / Pacific and RoW.

The following table shows the input data to selected key figures required for the respective recoverable

amounts to equal the carrying amount. In management’s view this change is not reasonably possible.

Goodwill sensitivity analysis

T _ 039

I N P E R C E N T

Discount rate

Budgeted gross margin reduction to plan

Sustainable growth rate after 5-year period

Sept. 30, 2017

Input data required for carrying amount to
equal recoverable amount

Europe

6.5

4.1

(7.1)

NAFTA

17.6

11.5

(68.9)

RoW

13.2

8.9

(45.1)

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

14 Other intangible assets

Other intangible assets are presented in the following table.

Intangible assets

T _ 040

Develop-
ment cost
under
construc-
tion

Develop-
ment cost

Software

Patents

Customer
relation-
ship

Tech-
nology

Trade
name

Total

I N € T H O U S A N D S

Gross value

Balance as of Sept 30, 2015

67,828

25,940

7,050

1,238

83,683

58,132

13,246

257,117

Additions from business
combination

Foreign currency difference

Additions

Disposals

–

(62)

3,463

(57)

–

9,428

–

Reclassifications

12,727

(12,911)

1,099

865

(236)

105

–

123,568

11,625

3,616

139,908

(24)

(802)

(103)

(23)

–

(977)

13,783

(293)

–

Balance as of Sept 30, 2016

83,899

22,492

8,885

1,320

206,449

69,654

16,839

409,538

Additions from business
combination

–

Foreign currency difference

(1,155)

–

764

Additions

Disposals

1,773

7,583

(14,287)

–

Reclassifications

14,332

(15,659)

–

(867)

2,401

(666)

1,327

–

(13)

–

(2,327)

(406)

–

(65)

–

(4,069)

11,760

(14,953)

–

Balance as of Sept 30, 2017

84,562

15,180

11,080

1,310

204,122

69,248

16,774

402,276

Accumulated amortization

Balance as of Sept 30, 2015

(31,693)

Foreign currency difference

Amortization expense

(10,213)

Thereof impairment loss

(741)

Disposals

Reclassifications

–

Balance as of Sept 30, 2016

(41,858)

Foreign currency difference

497

Amortization expense

(14,628)

Thereof impairment loss

Disposals

Reclassifications

(2,390)

13,537

–

Balance as of Sept 30, 2017

(42,452)

Carrying amount

–

(4,517)

(1,078)

(19,177)

(30,130)

(4,047)

(90,642)

(4)

(1,321)

–

234

(23)

(48)

–

(5,335)

(5,616)

(865)

(23,398)

–

(741)

239

–

(5,631)

(1,079)

(24,498)

(35,745)

(4,912)

(113,723)

108

(2,127)

(76)

638

–

(78)

–

228

891

(10,859)

(5,765)

(1,251)

(34,708)

–

(2,466)

14,175

–

(7,012)

(1,145)

(35,129)

(41,478)

(6,149)

(133,365)

Balance as of Sept 30, 2016

42,041

22,492

Balance as of Sept 30, 2017

42,110

15,180

3,254

4,068

241

165

181,951

33,909

11,927

295,815

168,993

27,770

10,625

268,911

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Additions to intangible assets in the fiscal year 2017 amounted to €11,760 thousand (PY: €13,783 thou-

sand) and mainly comprised capitalized development cost amounted to €9,356 thousand (PY: €12,891

thousand) (less related customer contributions).

Amortization of capitalized internal development projects amounted to €14,628 thousand (PY: €9,472 thou-

sand). The borrowing costs capitalized during the period amounted to €208 thousand (PY: €299 thousand).

A capitalization rate was used to determine the amount of borrowing costs. The capitalization rate used

from October 2016 to April 2017 was 2.0%, and from May to September 2017 was 1.5% (PY: 2.0%).

The total amortization expense and impairment loss for intangible assets is included in the consoli-

dated statements of comprehensive income in the following line items:

Amortization expense for intangible assets

I N € T H O U S A N D S

Cost of sales

Research and development expenses

Selling expenses

Administrative expenses

T _ 041

Year ended Sept 30,

2017

(7,093)

(14,628)

(11,537)

(1,450)

2016

(6,867)

(10,379)

(5,500)

(652)

Amortization expense (incl. impairment loss)

(34,708)

(23,398)

Amortization expenses on development costs include impairment losses of €2,390 thousand (PY: €741 thou-

sand) due to the withdrawal of customers from the respective projects. The impairment loss is included

in the research and development expenses.

Contractual commitments for the acquisition of intangible assets amount to €1,686 thousand

(PY: €3,214 thousand).

15 Other financial assets

Other financial assets

Sept 30, 2017

Sept 30, 2016

I N € T H O U S A N D S

Other miscellaneous

Other financial assets

Current

Non-current

5,155

–

Total

5,155

Current

Non-current

3,160

–

T _ 042

Total

3,160

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

OT H E R M I S C E L L A N E O U S

Other miscellaneous financial assets in the fiscal year 2017 mainly comprise assets related to the sale

of trade accounts receivable (€27.6 million (PY: €23.3 million)) amounting to €3,657 thousand (PY:

€3,160 thousand) and a receivable amounting to €1,498 thousand from the sale of the land and

building of Stabilus Spain, where the activity was shut down in 2011.

16 Other assets

Other assets

I N € T H O U S A N D S

VAT

Prepayments

Deferred charges

Other miscellaneous

Other assets

Sept 30, 2017

Sept 30, 2016

Current

Non-current

Current

Non-current

3,570

3,062

4,274

1,812

12,718

–

507

–

2,444

2,951

Total

3,570

3,569

4,274

4,256

5,698

2,925

3,178

2,122

15,669

13,923

–

746

–

2,521

3,267

Non-current prepayments comprise prepayments on property, plant and equipment.

Inventories

I N € T H O U S A N D S

Raw materials and supplies

Finished products

Work in progress

Merchandise

Inventories

Inventories that are expected to be turned over within twelve months amounted to €85,262 thousand

(PY: €74,681 thousand). Write-downs on inventories to net realizable value amounted to €8,482 thou-

sand (PY: €6,545 thousand). In the reporting period raw materials, consumables and changes in fin-

ished goods and work in progress recognized as cost of sales amounted to €429,810 thousand (PY:

€358,128 thousand).

The Stabilus Group’s prepayments for inventories amounting to €1,607 thousand (PY: €1,457 thou-

sand) are included in prepayments in other current assets.

T _ 043

Total

5,698

3,671

3,178

4,643

17,190

T _ 044

Sept 30, 2017

Sept 30, 2016

39,876

22,095

14,203

9,088

85,262

38,076

17,103

12,616

6,886

74,681

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

18 Trade accounts receivable

Trade accounts receivable include the following items:

Trade accounts receivable

I N € T H O U S A N D S

Trade accounts receivable

Allowance for doubtful accounts

Trade accounts receivable

T _ 045

Sept 30, 2017

Sept 30, 2016

107,693

(2,546)

105,147

99,827

(2,227)

97,600

Trade accounts receivable increased in the fiscal year ended September 30, 2017 mainly due to the

higher sales partly compensated by the additional sale of receivables to factors.

The Group provides credit in the normal course of business and performs ongoing credit evaluations on

certain customers’ financial condition, but generally does not require collateral to support such receiv-

ables. The Group established an allowance for doubtful accounts based upon factors such as the credit

risk of specific customers, historical trends and other information.

The allowances for doubtful accounts developed as follows:

Allowance for doubtful accounts

T _ 046

I N € T H O U S A N D S

Allowance for doubtful accounts as of beginning of fiscal year

Additions from buisness combination

Foreign currency differences

Increase in the allowance

Decrease in the allowance

Sept 30, 2017

Sept 30, 2016

(2,227)

(2,196)

–

(460)

(170)

(35)

(211)

385

Allowance for doubtful accounts as of fiscal year-end

(2,546)

(2,227)

19 Current tax assets

Current tax assets are measured at the amount expected to be recovered from the taxation authorities

when the amount already paid in respect of current and prior periods exceeds the amount due for

those periods.

100

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

20 Cash and cash equivalents

Cash and cash equivalents include cash on hand and in banks, i.e. liquid funds and demand deposits.

As of September 30, 2017, it amounted to €68,123 thousand (PY: €75,037 thousand). Cash in banks

earned marginal interest at floating rates based on daily bank deposit rates.

21 Equity

The development of the equity is presented in the statement of changes in equity.

Issued capital

Issued capital as of September 30, 2017 amounted to €247 thousand (September 30, 2016 €247 thou-

sand) and was fully paid in. It is divided into 24,700,000 shares each with a nominal value of €0.01.

The authorized capital of the Company is set at €315 thousand represented by a maximum of

31.5 million shares, each with nominal value of €0.01.

Capital reserves

Capital reserves as of September 30, 2017 amounted to €225,848 thousand (September 30, 2016

€225,848 thousand).

Retained earnings

Retained earnings as of September 30, 2017 amounted to €139,440 thousand (September 30, 2016

€72,535 thousand) and included the Group’s net result in the fiscal year 2017 amounting to

€79,255 thousand.

Dividends

In the second quarter of fiscal 2017, a dividend amounting to €12.35 million (PY: -) was paid to our

shareholders and a dividend amounting to €54 thousand (PY: €78 thousand) was paid to a non-con-

trolling shareholder of a Stabilus subsidiary.

The Management Board and the Supervisory Board have resolved to propose a dividend distribution of

€0.80 per share to the Annual General Meeting to be held in Luxembourg on February 14, 2018. The

total dividend will thus amount to €19.76 million (PY: €12.35 million) and the distribution ratio will be

24.9% of the consolidated profit attributable to the Stabilus shareholders. As this dividend is subject

to shareholder approval at the Annual General Meeting, no liability has been recognized in the consoli-

dated financial statements as of September 30, 2017.

101

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSUnrealized gains/
(losses)
from foreign
currency translation

Unrealized actuarial
gains and losses

Cash flow hedges 1)

S T A B I L U S N E X T I G N I T I O N

Other reserves

Other reserves comprise all foreign currency differences arising from the translation of the financial

statements of foreign operations and unrealized actuarial gains and losses. The following table shows the

changes in other reserves recognized in equity through other comprehensive income as well as the

income tax recognized in equity through other comprehensive income.

Other comprehensive income / (expense)

I N € T H O U S A N D S

Balance as of Sept 30, 2015

Before tax

Tax (expense) / benefit

Other comprehensive income / (expense),
net of taxes

Non-controlling interest

Balance as of Sept 30, 2016

Before tax

Tax (expense) / benefit

Other comprehensive income / (expense),
net of taxes

Non-controlling interest

(12,767)

(8,858)

–

(8,858)

–

(21,625)

3,328

–

3,328

–

(8,717)

(7,841)

2,351

(5,490)

–

(14,207)

4,591

(1,285)

3,306

–

Balance as of September 30, 2017

(18,297)

(10,901)

1) See also consolidated statement of comprehensive income above

Cash flow hedges in the table above, with a net amount of zero, relate to four forward exchange trans-

actions the Company entered into on June 21, 2016 to hedge the foreign exchange risk related to the

US dollar purchase price for the acquired SKF Group entities that had to be paid on June 30, 2016.

Stabilus designated the forward exchange transactions as a hedging instrument to the US dollar pur-

chase price, i.e. as a cash flow hedge. The effective portion of changes in fair value of cash flow hedges

in the year ended September 30, 2016 amounted to €6,798 thousand and the amount reclassified as

basis adjustment amounted to €(6,798) thousand. See also Consolidated Statement of Comprehensive

Income and further details regarding accounting treatment of cash flow hedges in Note 2 above. During

the year ended September 30, 2017, there was no derivative qualifying for cash flow hedge accounting.

102

T_047

Total

(21,484)

(16,699)

2,351

(14,348)

–

(35,832)

7,919

(1,285)

6,634

–

(29,198)

–

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

22 Financial liabilities

The financial liabilities comprise following items:

Financial liabilities

Sept 30, 2017

Sept 30, 2016

I N € T H O U S A N D S

Senior facilities

Financial liabilities

Current

10,000

Non-current

Total

Current

Non-current

311,951

321,951

5,000

396,095

T _ 048

Total

401,095

On June 7, 2016, Stabilus entered into a €640.0 million senior facilities agreement with, among others,

Commerzbank Aktiengesellschaft, Crédit Agricole Corporate and Investment Bank, Landesbank Hessen-

Thüringen Girozentrale and UniCredit Bank AG as mandated lead arrangers and UniCredit Luxem-

bourg S. A. as facility and security agent. The agreement comprises a term loan facility of €455.0 million,

an equity bridge facility of €115.0 million and a revolving credit facility of €70.0 million. The term loan

facility and the revolving credit facility originally mature on June 29, 2021. The duration of the senior

facilities (other than the equity bridge facility) has been extended by one additional year at the Compa-

ny’s request to June 29, 2022 and can be extended by a second year, at the Company’s request until

June 29, 2018.

The term loan facility has to be repaid in full on the termination date June 29, 2022.

The expected semi-annual prepayments of €5.0 million on March 31 and September 30, 2018 are pre-

sented as current financial liabilities.

Stabilus repaid €50.0 million on August 31, 2016, €10.0 million on December 31, 2016, €2.5 million on

March 31 and €50.0 million on September 30, 2017 and reduced the outstanding nominal amount to

€342.5 million as at September 30, 2017.

The Group´s liability under the senior facility agreement (the remaining €342.5 million term loan) is meas-

ured at amortized cost under consideration of transaction costs and the adjustment of the carrying value

using the effective interest rate method. The adjustment of the carrying value of the euro term loan facil-

ity reflects the change in estimated future cash flows discounted with the original effective interest rate

due to a decreased margin based on the improved net leverage ratio of the Group and the extension of

the maturity by one year.

As at September 30, 2017, the Group had no liability under the committed €70.0 million revolving

credit facility. The Group utilized €3.5 million out of the €70.0 million revolving credit facility to secure

existing guarantees.

103

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

23 Other financial liabilities

Other financial liabilities

Sept 30, 2017

Sept 30, 2016

I N € T H O U S A N D S

Current

Non-current

Liabilities to employees

Social security contribution

Finance lease obligation

Other financial liabilities

6,796

2,514

303

9,613

–

1,830

Total

6,796

2,514

2,133

11,443

Current

Non-current

6,648

2,440

311

9,399

–

2,314

The finance lease obligation relates to leasing contracts for land and buildings for the production

facility in Romania.

24 Provisions

Provisions

Sept 30, 2017

Sept 30, 2016

Current

Non-current

Total

134

2,662

–

12,099

11,050

1,469

2,868

111

12,984

4,505

36,832

415

1,521

115

12,227

5,534

30,898

2,599

–

990

–

131

3,781

I N € T H O U S A N D S

Current

Non-current

Anniversary benefits

Early retirement contracts

Employee-related costs

Environmental protection

Other risks

Legal and litigation costs

Warranties

Other miscellaneous

Provisions

811

12,099

2,868

111

12,984

4,111

33,061

105

1,851

–

1,421

–

394

3,771

104

T _ 049

Total

6,648

2,440

2,625

11,713

T _ 050

Total

2,635

11,050

1,405

1,521

115

12,227

5,665

34,679

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The non-current provisions developed as follows:

Changes of non-current provisions

I N € T H O U S A N D S

Balance as of Sept 30, 2015

Additions from business combination

Reclassifications

Foreign currency differences

Costs paid

Release to income

Additions

Balance as of Sept 30, 2016

Reclassifications

Foreign currency differences

Costs paid

Release to income

Additions

Balance as of Sept 30, 2017

Anniversary
benefits

–

(3)

–

105

Early
retirement

860

–

1,739

2,599

–

(1)

–

(747)

–

1,851

EPA
provision

Other
miscellaneous

–

990

–

(24)

–

455

1,421

172

–

(41)

–

131

–

234

394

T _ 051

Total

1,032

–

(41)

–

2,729

3,781

–

(747)

736

3,771

The discount rate used for the calculation of non-current provisions as of September 30, 2017 was

0.0% (PY: 0.0%).

105

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The development of current provisions is set out in the table below:

Changes of current provisions

I N € T H O U S A N D S

Employee-
related
costs

Environ-
mental
protection
measures

Legal and
litigation
costs

Anniver-
sary
benefits

Other
risks

Early
retire-
ment Warranties

Other
miscella-
neous

T _ 052

Total

Balance as of Sept 30, 2015

9,082

376

1,035

Additions from business
combination

Foreign currency differences

Reclassifications

Costs paid

Release to income

Additions

Balance as of Sept 30, 2016

Foreign currency differences

Reclassifications

Costs paid

Release to income

Additions

1,178

(808)

–

(9,038)

(133)

10,769

11,050

972

–

176

(2)

–

(669)

(19)

1,000

415

1,521

–

230

–

(8,970)

(371)

(1,085)

(837)

9,785

–

(229)

2,431

–

115

(4)

–

Balance as of Sept 30, 2017

12,099

2,868

111

659

7,938

935

20,128

–

(1,132)

–

1,210

(131)

–

2,650

(2,048)

–

(13)

(623)

(5,253)

(2,076)

(17,672)

–

(2)

–

(10)

(162)

10,588

6,106

28,502

12,227

5,534

30,898

–

375

–

(388)

(158)

1,187

(59)

(42)

(4,594)

(3,649)

(18,711)

–

817

811

(332)

5,308

12,984

(169)

(1,567)

2,941

4,111

21,313

33,061

The provision for employee-related expenses comprises employee bonuses and termination benefits.

The provision for environmental protections measures relate to the 1985 vacated former Stabilus Inc. US

site in Colmar, PE, USA at the North Penn Area 5. In the meantime this North Penn Area 5 has been iden-

tified by the United States Environmental Protection Agency (EPA) as an area requiring environ mental

remediation. In 2011, the EPA contacted seven companies in the North Penn Area 5 as potential respon-

sible parties for cost sharing, Stabilus being one of them. The Group is currently unable to develop a rea-

sonable estimate of its share of the ultimate obligation as cost apportionment method of the EPA and

Stabilus insurance reimbursement are unclear at this point in time. As such, no liability for an EPA

re imbursement has been reflected in the balance sheet as of September 30, 2017. For the correspond-

ing ongoing long-term bioremediation a current provision of €48 thousand (PY: €415 thousand) and

a non-current provision of €1,421 thousand (PY: €990 thousand) has been recorded as of Septem-

ber 30, 2017.

The provision for other risks from purchase and sales commitments represents expected sales dis-

counts, expected losses from pending deliveries of goods and other sales-related liabilities.

The provision for legal and litigation costs represents costs of legal advice and notary charges as well

as the costs of litigation.

106

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The provision for warranties represents the accrued liability for pending risks from warranties offered

by the Group for their products. The Group issues various types of contractual warranties under which

it generally guarantees the performance of products delivered and services rendered. The Group accrues

for costs associated with product warranties at the date products are sold. This also comprises accruals

that are calculated for individual cases. Insurance reimbursements related to individual cases are pre-

sented in other financial assets if the recognition criteria are met.

25 Pension plans and similar obligations

Liabilities for the Group’s pension benefit plans and other post-employment plans comprise the following:

Pension plans and similar obligations

T _ 053

I N € T H O U S A N D S

Principal pension plan

Deferred compensation

Pension plans and similar obligations

Sept 30, 2017

Sept 30, 2016

52,081

1,155

53,236

57,422

1,316

58,738

D E F I N E D B E N E F I T P L A N S A N D D E F E R R E D C O M P E N S AT I O N

Defined benefit plan

The Stabilus Group granted post-employment pension benefits to employees in Germany. The level of

post-employment benefits is generally based on eligible compensation levels and / or ranking within the

Group hierarchy and years of service.

In order to mitigate future liquidity risk, the Group’s pension policies for one major plan granted to

employees, who joined the Group prior to January 1, 2006, were amended as of December 21, 2010 and

the title earned in the former defined benefit plan was frozen. Going forward no additional defined bene-

fit titles can be earned except for certain older employees. At the same time, the Group introduced a

defined contribution plan in which direct payments to an external insurer are made.

Liabilities for principal pension plans amounting to €52,081 thousand (PY: €57,422 thousand) result

from unfunded accumulated benefit obligations.

The weighted average duration of the defined benefit obligations in the fiscal year 2017 is 16.5 years

(PY: 16.4 years).

Deferred compensation

The deferred compensation is a form of retirement pay which is financed by the employees, where,

based on an agreement between the Group and the employees, part of their income is retained by

the Group and paid to the respective employees after retirement.

107

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The total deferred compensation as of September 30, 2017 amounts to €1,155 thousand (PY:

€1,316 thousand).

The unfunded status is as follows:

Unfunded status

I N € T H O U S A N D S

Present value of defined benefit obligations

Less: Fair value of plan assets

Unfunded status

The present value of the defined benefit obligation developed as follows:

Present value of defined benefit obligations

I N € T H O U S A N D S

Present value of defined benefit obligations as of beginning of fiscal year

Value of defined benefit obligations from business combinations

Service cost

Interest cost

Financial assumptions

Experience assumptions

Actuarial (gains) / losses

Pension benefits paid

Present value of defined benefit obligations as of fiscal year-end

The pension cost in the consolidated statement of comprehensive income includes the following

expenses for defined benefit plans:

Pension cost for defined benefit plans

I N € T H O U S A N D S

Service cost

Interest cost

Pension cost for defined benefit plans

108

T _ 054

Year ended Sept 30,

2017

53,236

–

2016

58,738

–

53,236

58,738

T _ 055

Year ended Sept 30,

2017

58,738

–

233

785

(4,825)

234

(4,591)

(1,929)

53,236

2016

47,989

2,877

1,133

8,932

(1,055)

7,877

(1,206)

58,738

T _ 056

2016

1,133

1,201

Year ended Sept 30,

2017

233

785

1,018

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The present value of the defined benefit obligation and the experience adjustments arising on the plan

liabilities are as follows:

Present value of the defined benefit obligation and the experience adjustments
on the plan liabilities

T _ 057

I N € T H O U S A N D S

Sept 30, 2013

Sept 30, 2014

Sept 30, 2015

Sept 30, 2016

Sept 30, 2017

Defined benefit
obligation

Experience
adjustments

39,123

48,353

47,989

58,738

53,236

(213)

914

(205)

(1,055)

234

Generally, the measurement date for Group’s pension obligations is September 30. The measurement date

for Group’s net periodic pension cost generally is the beginning of the period. Assumed discount rates,

salary increases and long-term return on plan assets vary according to the economic conditions in the

country in which the pension plan is situated.

Following assumptions (measurement factors) were used to determine the pension obligations:

Significant factors for the calculation of pension obligations

T _ 058

I N % P. A .

Discount rate

Inflation

Salary increases

Pension increases

Turnover rate

Year ended Sept 30,

2017

1.87%

1.50%

0.00%

1.50%

4.00%

2016

1.35%

0.00%

1.50%

4.00%

The discount rates for the pension plans are determined annually as of August 31 on the basis of

first-rate, fixed-interest industrial bonds with maturities and values matching those of the pension

payments.

S E N S I T I V I T Y A N A LYS I S

If the discount rate were to differ by + 0.5% / – 0.5% from the interest rate used at the balance sheet

date, the defined benefit obligation for pension benefits would be an estimated €4,076 thousand

lower or €4,642 thousand higher. If the future pension increase used were to differ by + 0.2% / – 0.2%

from management’s estimates, the defined benefit obligation for pension benefits would be an esti-

mated €1,328 thousand higher or €1,279 thousand lower. The reduction / increase of the mortality

rates by 1 years results in an increase / deduction of life expectancy depending on the individual age of

109

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

each beneficiary. The effects on the defined benefit obligation (the “DBO”) as of September 30, 2017

due to a 1 year reduction / increase of the life expectancy would result in an increase of €1,994 thou-

sand or a decrease of €2,029 thousand.

When calculating the sensitivity of the DBO to significant actuarial assumptions, the same method

(present value of the DBO calculated with the projected unit credit method) has been applied as when

calculating the post-employment benefit obligation recognized in the Consolidated Statement of

Financial Position. Increases and decreases in the discount rate or the rate of pension progression

which are used in determining the DBO do not have a symmetrical effect on the DBO due to the com-

pound interest effect created when determining the net present value of the future benefit. If more

than one of the assumptions is changed simultaneously, the combined impact due to the changes

would not necessarily be the same as the sum of the individual effects due to the changes. If the

assumptions change at a different level, the effect on the DBO is not necessarily in a linear relation.

Expected pension benefit payments for the fiscal year 2018 will amount to €1,882 thousand

(PY: €2,018 thousand).

D E F I N E D C O N T R I B U T I O N P L A N S

The expenses incurred under defined contribution plans are primarily related to government-run

pension plans. Expenses for these plans in the reporting period amounted to €14,084 thousand

(PY: €13,263 thousand).

26 Trade accounts payable

Trade accounts payable amount to €79,073 thousand (PY: €80,389 thousand) as of the end of the

fiscal year. The full amount is due within one year. The liabilities are measured at amortized cost. For

information on liquidity and exchange rate risks for trade accounts payable, please see Note 32.

27 Current tax liabilities

The current tax liabilities relate to income and trade taxes.

110

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

28 Other liabilities

The following table sets out the breakdown of Group’s other current and non-current liabilities:

Other liabilities

Sept 30, 2017

Sept 30, 2016

Total

2,807

3,396

6,517

2,472

240

Current

Non-current

1,353

3,329

6,964

3,619

224

879

–

15,432

15,489

879

16,368

T _ 059

Total

2,232

3,329

6,964

3,619

224

I N € T H O U S A N D S

Current

Non-current

Advanced payments received

Vacation expenses

Other personnel related
expenses

Outstanding costs

Miscellaneous

Other liabilities

2,807

3,396

6,517

2,472

240

15,432

–

29 Leasing

O P E R AT I N G L E A S E

The Group entered into non-cancellable operating leases for IT hardware, cars and other machinery

and equipment with lease terms of 2 to 6 years. The future minimum lease payments relating to leas-

ing agreements during the basic rental period when they cannot be terminated are as follows:

Operating lease

I N € T H O U S A N D S

Within one year

After one year but not more then five years

More than five years

Total

T _ 060

Minimum lease payments in
the year ended Sept 30,

2017

6,677

15,886

165

22,728

2016

5,702

17,988

23,785

The increase in total minimum lease payments for one year is primarily due to the expansion of the

rented production facilities in China and Mexico and the decrease after one year but not more than

five years is due to favorable amendments of leasing contracts.

Current period expense for operating leases amounts to €8,358 thousand (PY: €7,387 thousand).

111

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

F I N A N C E L E A S E

Finance lease

I N € T H O U S A N D S

Within one year

After one year but not later than five years

More than five years

Total

T _ 061

Sept 30, 2017

Sept 30, 2016

Minimum lease
payments
(MLP)

Present value
of MLP

Minimum lease
payments
(MLP)

Present value
of MLP

613

2,990

3,665

555

2,854

3,469

628

2,763

942

4,333

601

2,223

733

3,557

As of September 30, 2017, there are two real estate lease contracts regarding a production facility in

Romania recorded as finance lease.

Production facility:

Orion Rent Imobiliare S.R.L, Brasov, entered into a non-cancellable real estate finance lease agreement

on December 31, 2010 (prior to Stabilus Group taking over a controlling interest in this company) with

a term of 144 months prior to the Stabilus Group becoming a controlling shareholder of Orion Rent

Imobiliare S.R.L. The agreement contains a purchase option starting at the end of the third year of the

contract, for a purchase price amounting to the capital that remains to be paid up to the expiry of the

contract less early payment fee (between 2.75% and 4.75% of the remaining capital to be paid). The

net carrying amount of the finance lease obligation at the balance sheet date is €846 thousand (PY:

€916 thousand). The lease term started on January 1, 2011. The leasing fees are settled in euro, but

payable in new Romanian lei. They include a variable component of the total funding cost with

3-month Euribor as the reference basis.

Stabilus Romania S.R.L. entered into a real estate lease agreement which was classified as a finance

lease starting March 1, 2015. On July 1, 2016, Stabilus Romania S.R.L. renewed the real estate lease

agreement to extend the existing production facility for the production of gas springs and dampers.

The underlying interest rate amounts to 4.75% (PY: 4.75%). The net carrying amount of the finance

lease obligation at the balance sheet date was €1,287 thousand (PY: €1,709 thousand). The contract

has duration of 75 months and can be extended.

The payments for finance leases in the fiscal year ended September 30, 2017 amounted to €547 thou-

sand (PY: €471 thousand). No contingent rents have been recognized as an expense during the period.

112

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Contingent liabilities and other financial commitments

C O N T I N G E N T L I A B I L I T I E S

Contingent liabilities are uncertainties for which the outcome has not been determined. If the outcome

is probable and estimable, the liability is shown in the statement of financial position.

In regards to a potential contingent obligation in the EPA Colmar, please see Note 24.

G U A R A N T E E S

On October 11, 2005, Stabilus Romania S.R.L., Brasov, (“STRO”) entered into a rental agreement with

ICCO SRL (ICCO) for a production facility used for production facilities with an area of 8,400 square

meters for STRO in Brasov, Romania. The initial rental agreement has a contract period of seven years

which has been extended to support production space, requirements for the transfer of certain produc-

tion steps to Romania. STAB Dritte Holding GmbH, Koblenz, merged into Stable Beteiligungs GmbH,

Koblenz, a wholly owned subsidiary of the Company, issued a bank guarantee for €600 thousand (PY:

€600 thousand), in the event that STRO will be unable to pay. Stabilus GmbH, Koblenz, issued a letter

of support for the event that STRO will be unable to pay.

On September 22, 2005, Stabilus S. A. de C. V. (“STMX”) entered into a lease agreement with Deutsche

Bank Mexico, S. A., and Kimex Industrial BEN, LLC, for a production facility with an area of 28,951 square

meters of land and 5,881 square meters of construction buildings in Ramos Arizpe, State of Coahuila,

Mexico. The lease agreement has a contract period of ten years and will be extended. Stabilus GmbH,

Koblenz, issued a letter of support for the event that STMX will be unable to pay.

On June 7, 2016, the Group entered into a senior facilities agreement. Certain material subsidiaries of

the Group are guarantors, as defined in the senior facilities agreement, give a credit guarantee in favor

of the financing parties. The guarantees are subject to limitations, including being limited to the extent

that otherwise the guarantee would amount to unlawful financial assistance and other jurisdic-

tion-specific tests (e.g. net assets).

Given a normal course of the economic development as well as a normal course of business, manage-

ment believes these guaranties should not result in a material adverse effect for the Group.

OT H E R F I N A N C I A L C O M M I T M E N T S

The nominal value of the other financial commitments as of September 30, 2017 amounted to €30,575 thou-

sand (PY: €32,396 thousand).

113

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Nominal values of other financial commitments are as follows:

Financial commitments

I N € T H O U S A N D S

Capital commitments for fixed and other intangible assets

Obligations under rental and leasing agreements

Total

I N € T H O U S A N D S

Capital commitments for fixed and other intangible assets

Obligations under rental and leasing agreements

Total

31 Financial instruments

Sept 30, 2017

1 to 5 years

More than
5 years

–

15,886

–

165

Sept 30, 2016

1 to 5 years

More than
5 years

–

17,988

–

Less
than 1
year

7,847

6,677

14,524

Less
than 1
year

8,611

5,702

14,313

T _ 062

Total

7,847

22,728

30,575

Total

8,611

23,785

32,396

The following table shows the carrying amounts and fair values of the Group’s financial instruments. The fair value is the price that would

be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Financial instruments

I N € T H O U S A N D S

Trade accounts receivables

Cash

Other financial assets

Total financial assets

Financial liabilities

Trade accounts payable

Finance lease liabilities

Total financial liabilities

Sept 30, 2017

Sept 30, 2016

Measurement
category
acc. to IAS 39

LaR

FLAC

–

Carrying
amount

105,147

68,123

5,155

178,425

321,951

79,073

2,133

Fair value

105,147

68,123

5,155

178,425

321,435

79,073

3,469

Carrying
amount

97,600

75,037

3,160

175,797

401,095

80,389

2,625

T _ 063

Fair value

97,600

75,037

3,160

175,797

376,191

80,389

3,557

403,157

403,977

484,109

460,137

Aggregated according to categories in IAS 39:

Loans and receivables (LaR)

178,425

175,797

Financial liabilities measured at amortized cost
(FLAC)

401,024

400,508

481,484

456,580

114

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The following table provides an overview of the classification of financial instruments presented above

in the fair value hierarchy, except for financial instruments with fair values corresponding to the carry-

ing amounts (i.e. trade accounts receivable and payable, cash and other financial liabilities).

Financial instruments

T _ 064

I N € T H O U S A N D S

Financial liabilities

Senior facilities

Finance lease liabilities

Sept 30, 2017

Sept 30, 2016

Total

Level 11)

Level 22)

Level 33)

Total

Level 11)

Level 22)

Level 33)

321,435

3,469

–

321,435

–

376,191

–

3,469

3,557

–

376,191

–

3,557

1) Fair value measurement based on quoted prices (unadjusted) in active markets for these or identical instruments.
2) Fair value measurement based on inputs that are observable on active markets either directly (i. e. as prices) or indirectly (i. e. derived from prices).
3) Fair value measurement based on inputs that are not observable market data.

The fair value is the price that would be received to sell an asset or paid to transfer the liability in an

orderly transaction between market participants at the measurement date. The following methods and

assumptions were used to estimate the fair values in the previous fiscal year:

• The fair value of the quoted senior secured notes is based on price quotations at the reporting date.

• The valuation technique used for the determination of the obligations under finance leases is the

discounted cash flow method. The valuation model considers the present value of expected payments,

discounted using a risk-adjusted dj11iscount rate depending on the maturity of the payment. The

expected payments are determined by considering contractual redemption payments and interest

payments with the currently agreed interest rate. Significant unobservable inputs are the risk-

adjusted discount rates, which range from 7.5% to 10.1%, and the forecasted interest payments.

Therefore, the fair value would change if the risk-adjusted discount rate or the interest rate changed.

• The fair value of embedded derivative instruments is calculated using a standard option pricing

model. For the valuation, the credit spread used is calibrated such that the model reproduces the

current market of the notes quoted on the Luxembourg Stock Exchange at the reporting date.

The finance lease contracts include fixed-interest rates. Therefore, the fair value of finance lease liabili-

ties (categorized as Level 3 in the fair value hierarchy table) are not exposed to interest risk through

fluctuation.

The net gains and losses on financial instruments result in the fiscal year ended September 30, 2017

from the currency translation and changes in the estimate of future cash flows of loans and receivables

and financial liabilities measured at amortized cost, as well as gains from changes in fair value of

derivative instruments. They are set out in Notes 8 and 9. The net foreign exchange loss amounted to

€16,471 thousand (PY: gain €2,169 thousand).

Total interest income and expense from financial instruments is reported in Notes 8 and 9.

115

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The value of the embedded derivatives was affected by the interest of the comparable market instru-

ment on each potential exercise date and will rise if the relevant interest rate declines and vice versa.

32 Risk reporting

I N T E R N A L R I S K M A N A G E M E N T

The Group employs within the budgeting process an integrated system for the early identification and

monitoring of risks specific to the Group, in order to identify changes in the business environment and

deviations from targets at an early stage and to initiate countermeasures in advance. This includes

monthly short and medium-term analysis of the order intake and the sales invoicing behavior. Control

impulses for the individual companies are derived from this. Customer behavior is ascertained and ana-

lyzed continuously and the information obtained from this serves as an early warning indicator for pos-

sible changes in demand patterns.

In addition, significant KPIs (order intake, sales and EBIT, staffing level, quality indicators) are reported

monthly by all Group companies and are assessed by Group management.

F I N A N C I A L R I S K S

The Group’s Corporate Treasury function provides services to the business, co-ordinates access to

domestic and international financial markets, and monitors and manages the financial risks relating to

the operations of the Group. These risks include credit risk, liquidity risk and market risk (including cur-

rency risk and fair value interest rate risk).

The Group seeks to minimize the effects of financial risks by using derivative financial instruments to

hedge these exposures wherever useful. The use of financial derivatives is governed by the Group’s pol-

icies approved by the Management Board, which provide principles on foreign currency risk, interest

rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the

investment of excess liquidity. The Group does not enter into or trade financial instruments, including

derivative financial instruments, for speculative purposes. The Group does not have any derivative

financial instruments as of September 30, 2017.

C R E D I T R I S K S

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in

financial loss to the Group. The Group has adopted a policy of dealing only with creditworthy counter-

parties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of

financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are moni-

tored and the aggregate value of transactions concluded is spread amongst approved counterparties.

Trade accounts receivable consist of a large number of customers, spread across diverse industries and

geographical areas. Credit evaluation is performed on the financial condition of accounts receivable

and, where viewed appropriate, credit guarantee insurance cover is purchased. Besides this, commer-

cial considerations impact the credit lines per customer.

116

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The maximum exposure to credit risk of financial assets is the carrying amount as follows:

Credit risks included in financial assets

T _ 065

I N € T H O U S A N D S

Financial assets

Trade accounts receivable

Other miscellaneous

Total

I N € T H O U S A N D S

Financial assets

Trade accounts receivable

Other financial assets

Total

Sept 30, 2017

Neither past
due nor
impaired

< 30 days

30 – 60
days

60 – 90
days

90 – 360
days

> 360 days

Total

98,509

5,155

4,821

–

103,664

4,821

965

–

965

190

–

190

620

–

620

–

105,147

5,155

110,302

Neither past
due nor
impaired

< 30 days

30 – 60
days

60 – 90
days

90 – 360
days

> 360 days

Total

Sept 30, 2016

88,026

3,160

91,186

7,016

–

7,016

958

–

958

598

–

598

404

–

404

598

–

598

97,600

3,160

100,760

Credit risk of other financial assets of the Group, which comprise cash and cash equivalents, and mis-

cellaneous financial assets, arises from default of the counterparty, with a maximum exposure equal to

the carrying amount of these instruments.

The Group does not have any critical credit risk exposure to any single counterparty or any group of

counterparties having similar characteristics. The credit risk on liquid funds is limited because the coun-

terparties are banks with high credit ratings assigned by international credit rating agencies and are

also typically lenders to the Group. Therefore, credit quality of financial assets which are neither past

due nor impaired is assessed to be good.

In fiscal year 2017, the Group had three customers which accounted for at least 12% of total external

revenue. The revenue with these customers was €109,304 thousand (PY: €82,069 thousand), €88,062 thou-

sand (PY: €81,559 thousand) and €80,272 thousand (PY: €78,344 thousand), respectively. In fiscal year

2017 and 2016, such revenue was generated in all three operating segments.

L I Q U I D I T Y R I S K S

The Management Board has established an appropriate liquidity risk management framework for the

management of the Group’s short, medium and long-term funding and liquidity management require-

ments. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve

borrowing facilities and by monitoring forecast cash flows at regular intervals.

117

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The following maturities summary shows how cash flows from the Group’s liabilities as of Septem-

ber 30, 2017 will influence its liquidity situation. The summary describes the course of the undiscounted

principal and interest outflows of the financing liabilities and the undiscounted cash outflows of the

trade accounts payable. The undiscounted cash outflows are subject to the following conditions: If the

counterparty can request payment at different dates, the liability is included on the basis of the earliest

payment date. The underlying terms and conditions are described in Note 22.

Liquidity outflows for liabilities

I N € T H O U S A N D S

Senior facility

Finance lease

2018

2019

2020

2021

2022

After 2022

Total

Trade accounts
payable

79,073

–

T _ 066

Total

93,256

14,080

13,981

14,131

305,747

13,570

13,465

13,360

13,255

304,869

–

613

615

621

876

878

358,519

3,665

79,073

441,257

The senior facilities give planning stability over the next years. At the balance sheet date, the Group

has undrawn committed facilities of €70.0 million (PY: €70.0 million) to reduce liquidity risks.

F I N A N C E M A R K E T R I S K S

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange

rates (see below) and interest rates (see below). As of September 30, 2017, the Group has not entered

into any derivative financial instruments. The Group monitors closely its exposure to interest rate risk

and foreign currency risk and regularly checks the opportunities of entering into a variety of derivative

financial instruments.

Exchange rate risk

Due to its subsidiaries, the Group has significant assets and liabilities outside the Eurozone. These

assets and liabilities are denominated in local currencies. When the net asset values are converted into

euro, currency fluctuations result in period to period changes in those net asset values. The Group’s

equity position reflects these changes in net asset values. The Group does not hedge against these

structural currency risks.

The Group also has transactional currency exposures which arise from sales or purchases in currencies

other than the functional currency and loans in foreign currencies. In order to mitigate the impact of

currency exchange rate fluctuations for the operating business, the Group continually assesses its expo-

sure and attempts to balance sales revenue and costs in a currency to thus reduce the currency risk.

Besides the balance sheet the Group’s revenue and costs are also impacted by currency fluctuations.

118

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

An 1% increase / decrease in value of US dollar compared to Euro would lead to an increase / decrease

of EBIT of approximately €0.5 million.

Interest rate risk

The Group is exposed to interest rate risks, which mainly relate to debt obligations, as the Group

financing is based on Euribor-related credit agreements.

The interest rate risk is monitored by using the cash flow sensitivity of the Group’s cash flows due to

floating interest loans.

An 1% increase of floating interest rates (Euribor) would lead to an increase of financial expense of

approximately €3.4 million. As the Euribor is below 0% as of September 30, 2017 a decrease has no

effect on financial expenses.

33 Capital management

The Stabilus Group’s capital management covers both equity and liabilities. A further objective is to

maintain a balanced mix of debt and equity.

Due to the broad product range and the activities on global markets, the Stabilus Group generates

under normal economic conditions predictable and sustainable cash flows.

The equity ratio as of September 30, 2017 is calculated as follows:

Equity ratio

I N € T H O U S A N D S

Equity

Total assets

Equity ratio

T _ 067

Year ended Sept 30,

2017

336,380

929,995

36.2%

2016

262,892

937,412

28.0%

The Stabilus Group is not subject to externally imposed capital requirements.

The ratio of net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization),

which is also used as a covenant in the senior facilities agreement, is an important financial ratio (debt

ratio) used in the Stabilus Group. The objective is to improve the debt ratio in the future. The Company

does not expect a breach of this covenant.

119

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Notes to the consolidated statement of cash flows

The statement of cash flows is prepared in compliance with IAS 7. The statement of cash flows of the

Stabilus Group shows the development of the cash flows from operating, investing and financing activ-

ities. Inflows and outflows from operating activities are presented in accordance with the indirect

method and those from investing and financing activities by the direct method.

The cash funds reported in the statement of cash flows comprise all liquid funds, cash balances and

cash at banks reported in the statement of financial position.

Interest payments of €8,280 thousand (PY: €6,984 thousand) are reflected in cash outflows from

financing activities. Income tax payments of €32,090 thousand (PY: €13,599 thousand) are recognized

in cash flows from operating activities

Segment reporting

The Stabilus Group is organized and managed primarily on a regional level. The three reportable oper-

ating segments of the Group are Europe, NAFTA and Asia / Pacific including RoW. The product portfolio

is largely similar in these three regional segments.

The Group measures the performance of its operating segments through a measure of segment profit or

loss (key performance indicator) which is referred to as “adjusted EBIT”. Adjusted EBIT represents EBIT,

adjusted for exceptional non-recurring items (e.g. restructuring or one-time advisory costs) and deprecia-

tion / amortization of fair value adjustments resulting from purchase price allocations (PPA).

120

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Segment information for the fiscal years ended September 30, 2017 and 2016 is as follows:

Segment reporting

T _ 068

I N € T H O U S A N D S

External revenue1)

Intersegment revenue1)

Total revenue1)

Depreciation and amortization
(incl. impairment losses)

EBIT

Adjusted EBIT

I N € T H O U S A N D S

External revenue1)

Intersegment revenue1)

Total revenue1)

Depreciation and amortization
(incl. impairment losses)

EBIT

Adjusted EBIT

Europe

NAFTA

Asia / Pacific and RoW

Year ended Sept 30,

2017

456,306

30,418

486,724

2016

364,195

28,038

392,233

2017

350,737

24,689

375,426

2016

2017

288,988

102,972

9,556

653

298,544

103,625

(32,426)

(24,384)

(12,721)

63,015

67,963

46,026

52,920

51,806

55,142

(7,877)

32,066

33,423

(5,155)

14,368

14,526

2016

84,318

758

85,076

(4,346)

11,230

11,318

Total segments

Other / Consolidation

Stabilus Group

Year ended Sept 30,

2017

910,016

55,760

965,776

(50,302)

129,189

137,631

2016

737,501

38,352

775,853

(36,607)

89,322

97,661

2017

–

(55,760)

(10,800)

–

2016

–

(38,352)

(12,678)

–

2017

2016

910,016

737,501

–

910,016

737,501

(61,103)

118,389

137,631

(49,286)

76,644

97,661

1) Revenue breakdown by location of Stabilus company (i.e. “billed-from view”).

The column “Other / Consolidation” includes among others the effects from the purchase price alloca-

tion for the April 2010 business combination. The effects from the purchase price allocation for the

June 2016 business combination are included in the regions.

The EBIT of operating segment Europe in the fiscal year ended September 30, 2017 includes impairment

losses of €(2,860) thousand (PY: €(741) thousand). The amounts presented in the column “Other / Con-

solidation” above include the elimination of transactions between the segments and certain other

corporate items which are related to the Stabilus Group as a whole and are not allocated to the seg-

ments, e.g. depreciation from purchase price allocations.

121

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The following table sets out the reconciliation of the total segments’ profit (adjusted EBIT) to profit

before income tax.

Reconciliation of the total segments’ profit to profit / (loss) before income tax

T _ 069

I N € T H O U S A N D S

Total segments’ profit (adjusted EBIT)

Other/ consolidation

Group adjusted EBIT

Adjustments to EBIT

Profit from operating activities (EBIT)

Finance income

Finance costs

Profit / (loss) before income tax

In fiscal year 2017, the definition of adjusted EBIT has been slightly modified as interest cost on pen-

sions recognized in EBIT will not be adjusted out anymore. The presentation of prior periods has been

changed accordingly, i.e. the adjusted EBIT reported in our annual report for the fiscal year 2016 was

€1.1 million higher.

The information about geographical areas is set out in the following tables:

Geographical information: Revenue by country

I N € T H O U S A N D S

Germany

Romania

Europe

Mexico

USA

NAFTA

China

South Korea

Brazil

Australia

Japan

New Zealand

Asia / Pacific and RoW

Revenue

122

Year ended Sept 30,

2017

137,631

–

137,631

(19,242)

118,389

22,323

(29,799)

110,913

2016

97,661

–

97,661

(21,017)

76,644

2,556

(13,261)

65,938

T _ 070

Year ended Sept 30,

2017

331,964

119,829

4,513

456,306

185,154

165,583

350,737

67,410

12,855

7,561

6,643

6,511

1,993

102,973

910,016

2016

262,546

100,508

1,141

364,195

169,985

119,003

288,988

53,741

11,751

5,181

6,760

5,273

1,612

84,318

737,501

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Geographical information: Non-current assets by country

T _ 071

I N € T H O U S A N D S

Germany

Romania

Spain

Luxembourg

Switzerland

France

Goodwill

Europe

USA

Mexico

Goodwill

NAFTA

China

South Korea

Brazil

Australia

Japan

New Zealand

Goodwill

Asia / Pacific and RoW

Total

Year ended Sept 30,

2017

233,998

26,496

910

647

6,325

111,921

380,385

95,356

28,170

69,649

193,175

35,328

8,967

1,875

975

1,277

444

12,613

61,479

2016

246,838

24,269

2,542

720

6,827

112,081

393,362

106,238

25,188

72,572

203,998

37,888

10,373

1,961

1,005

1,484

462

12,804

65,977

635,039

663,337

The non-current assets above exclude financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts.

123

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Share-based payments

The Group established share-based payment arrangements for members of the Management Board

(Matching Stock Program) and for senior management employees (Phantom Stock Program).

M AT C H I N G S TO C K P R O G R A M

The variable compensation for the members of the Management Board includes a matching stock pro-

gram. The matching stock program (the “MSP”) provides for four annual tranches granted each year during

the financial year ending September 30, 2014 until September 30, 2017. Participation in the matching

stock program requires Management Board members to invest in shares of the Company. The invest-

ment has generally to be held for the lock-up period.

As part of the matching stock program A (the “MSP A”) for each share the Management Board invests

in the Company in the specific year (subject to general cap), the Management Board members receive

a certain number of fictitious options to acquire shares in the Company for each tranche of the matching

stock program. The amount of stock options received depends upon a factor to be set by the Supervisory

Board (Remuneration Committee) annually in a range between 1.0 and 1.7 times for a certain tranche.

Thus, if a Management Board member were to buy 1,000 shares under the MSP A in the Company, he

would receive 1,000 to 1,700 fictitious options for a certain tranche. The fictitious options are subject to a

lock-up period of four years and may be exercised during a subsequent two-year exercise period.

As part of matching stock program B (the “MSP B”) for each share the Management Board holds in

the Company in the specific year (subject to a general cap), the Management Board members receive a

certain number of fictitious options to acquire shares in the Company for each tranche of the matching

stock program. The amount of stock options received depends upon a factor to be set by the Supervi-

sory Board (Remuneration Committee) annually which will be in a range between 0.0 and 0.3 times for

a certain tranche. Thus, if a Management Board member were to be holding 1,000 shares under the

MSP B in the Company, he would receive 0 to 300 fictitious options for a certain tranche.

The fictitious options are subject to a lock-up period of four years and may be exercised during a sub-

sequent two-year exercise period. The options may only be exercised if the stock price of the Company

exceeds a set threshold for the relevant tranche, which the Supervisory Board will determine at the

time of granting the options, and which needs to be between 10% and 50% growth over the base

price, which is the share price on the grant date. If exercised, the fictitious options are transformed into

a gross amount equaling the difference between the option price and the relevant stock price multi-

plied by the number of exercised options. The Company plans a cash settlement. The maximum gross

amounts resulting from the exercise of the fictitious options of one tranche in general is limited in

amount to 50% of the base price. Reinvestment of IPO proceeds from previous equity programs is not

taken into account for MSP A.

124

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

P H A N TO M S TO C K P R O G R A M

The Group initiated for 2015 and 2016 a Phantom Stock Program for ten senior management employees

excluding Stabilus S. A. directors. To participate in the program, the employees have to invest a certain

amount in Stabilus shares. The employee receives options in a ratio of two for each self-investment,

capped at an investment level of €10,000 per program year. The fictitious options are subject to a

lock-up period of four years and may be exercised during a subsequent two-year exercise period. The

exercise is triggered by the sale of the underlying shares. The payout price is triggered by the price of

the share sales in the exercise period. The payout is capped at 500% of the invested amount.

M E A S U R E M E N T O F FA I R VA L U E S

The fair value of the share-based payments of the MSP has been measured by using a binomial simulation.

The inputs used in the measurement of the fair values at the grant date and the measurement date of the

MSP include market conditions and were as follows. The expected volatility has been based on the historical

volatility of the 3-year period to September 30, 2017.

Input parameters for fair value measurement of MSP

T_072

VA L UAT I O N D AT E

MSP B (2014)

Fair value

Share price

Expected annual volatility

Expected annual dividend yield

Expected remaining duration (timing of exercise)

Risk-free annual interest rate

Exercise price

MSP A/B (2015)

Fair value

Share price

Expected annual volatility

Expected annual dividend yield

Expected remaining duration (timing of exercise)

Risk-free annual interest rate

Exercise price

MSP A/B (2016)

Fair value

Share price

Expected annual volatility

Expected annual dividend yield

Expected remaining duration (timing of exercise)

Risk-free annual interest rate

Exercise price

Sept 30, 2017

Sept 30, 2016

Sept 30, 2015

€12.41

€76.79

27.0%

1.00%

€8.72

€50.10

37.0%

1.00%

€8.78

€32.25

31.0%

1.50%

1.0 years

2.0 years

3.0 years

(0.76)%

€24.82

(0.72)%

€24.82

(0.20)%

€24.82

€14.14

€76.79

32.0%

1.00%

€7.83

€50.10

33.0%

1.00%

2.0 years

3.0 years

(0.73)%

€31.08

(0.72)%

€31.08

€14.12

€76.79

34.0%

1.00%

3.0 years

(0.63)%

€48.64

–

125

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

In the fiscal year 2017 options for the MSP A and B were issued.

Number of share options

T_073

MSP B (2014)

MSP A/B (2015)

MSP A/B (2016)

Number of
options

Exercise price

Number of
options

Exercise price

Number of
options

Exercise price

Outstanding as at October 01, 2014

–

Granted during the year

Forfeited during the year

Exercised during the year

19,721

€24.82

–

Outstanding as at September 30, 2015

19,721

€24.82

Exercisable as at September 30, 2015

–

Outstanding as at October 01, 2015

19,721

€24.82

–

Granted during the year

Forfeited during the year

Exercised during the year

–

133

–

35,911

€24.82

–

916

–

€31.08

–

Outstanding as at September 30, 2016

19,588

€24.82

34,995

€31.08

Exercisable as at September 30, 2016

–

Outstanding as at October 01, 2016

19,588

€24.82

34,995

€31.08

–

Granted during the year

Forfeited during the year

Exercised during the year

–

27,449

€48.64

–

Outstanding as at September 30, 2017

19,588

€24.82

34,995

€31.08

27,449

€48.64

Exercisable as at September 30, 2017

–

126

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

The Phantom Stock Program is measured by using a binomial stimulation and accrued over the vesting time.

Input parameters for fair value measurement of PSP

T_074

VA L UAT I O N D AT E

Phantom Stock Program 2014/15

Fair value

Share price

Expected annual dividend yield

Exercise price

Phantom Stock Program 2015/16

Fair value

Share price

Expected annual dividend yield

Exercise price

Phantom Stock Program options

Outstanding as at 01 October 2014

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as at 30 September 2015

Exercisable as at 30 September 2015

Outstanding as at 01 October 2015

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as at 30 September 2016

Exercisable as at 30 September 2016

Outstanding as at 01 October 2016

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as at 30 September 2017

Exercisable as at 30 September 2017

Sept 30, 2017

Sept 30, 2016

Sept 30, 2015

€76.28

€76.79

1.00%

–

€75.52

€76.79

1.00%

–

€49.27

€50.10

1.00%

–

€48.78

€50.10

1.00%

–

€32.25

–

€32.25

–

T_075

Phantom Stock
Program 2014/15

Phantom Stock
Program 2015/16

Number of
options

Exercise
price

Number of
options

Exercise
price

–

5,642

–

5,642

–

5,642

–

5,642

–

3,217

–

3,217

–

3,217

–

3,217

–

127

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTST _ 076

2016

920

–

732

–

1,652

Year ended Sept 30,

2017

797

–

152

–

949

S T A B I L U S N E X T I G N I T I O N

E X P E N S E R E C O G N I Z E D I N P R O F I T O R L O S S

An amount of €673 thousand (PY: €200 thousand) was recognized in the related employee benefit

expenses and an amount of €1,003 thousand (PY: €330 thousand) in provisions for employee- related

expenses.

37 Auditor’s fees

Auditor’s fees

I N € T H O U S A N D S ( E X C L U D I N G VAT )

Audit fees

Thereof for the prior year

Audit-related fees

Tax fees

Other fees

Total

For fiscal year ended September 30, 2017, a global fee (excluding VAT) of €797 thousand (PY: €920 thou-

sand) was agreed with the group auditors for the audit of the consolidated and annual financial state-

ments of the Stabilus entities. These fees are included in the Group’s administrative expenses.

In addition, KPMG Luxembourg Société cooperative, Luxembourg, and other member firms of the

KPMG network, billed audit related fees amounting to €0 thousand (PY: €732 thousand) and tax ser-

vice fees amounting to €152 thousand (PY: €0 thousand) to the Stabilus Group. Tax services comprise

the preparation of tax filings and the provision of tax advice.

38 Related party relationships

In accordance with IAS 24, persons or entities that control or are controlled by the Stabilus Group shall

be disclosed, unless they are included in consolidation as a consolidated entity.

The disclosure obligation under IAS 24 furthermore extends to transactions with persons who exercise

a significant influence on the financial and business policies of the Stabilus Group, including close fam-

ily members or interposed entrepreneurs. A significant influence on the financial and business policies

of the Stabilus Group can hereby be based on a shareholding of 20% or more in Stabilus, a seat on the

Management Board of Stabilus or another key position.

128

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Remuneration of key management personnel

The key management personnel are the members of the Management Board Dietmar Siemssen (CEO),

Mark Wilhelms (CFO), Andreas Schröder (Director Group Financial Reporting) and Andreas Sievers

(Director Group Accounting and Strategic Finance Projects).

The total remuneration paid to key management personnel of the Group is calculated as the amount of

remuneration paid in cash, benefits in kind and expenses for share-based payments. Benefits in kind

primarily comprise the provision of company cars and pensions.

The total remuneration of the above-mentioned key management personnel at the various key Stabilus

Group affiliates during the reporting period amounted to €2,710 thousand (PY: €1,975 thousand),

thereof €2,434 thousand (PY: €1,865 thousand) is classified as short-term employee benefits, and

€276 thousand (PY: €111 thousand) classified as share-based payments.

The compensation of the Management Board members for fiscal year 2017 was split in a fixed com-

pensation of €1,383 thousand (PY: €959 thousand) and a variable compensation of €1,051 thousand

(PY: €906 thousand).

The total remuneration to the members of the Supervisory Board amounts to €359 thousand (PY:

€365 thousand).

Members of the Management and Supervisory Board have direct interest in Stabilus S. A. of about

jointly 0.5% of the total shares.

40 Subsequent events

As of December 13, 2017, there were no further events or developments that could have materially

affected the measurement and presentation of Group’s assets and liabilities as of September 30, 2017.

Luxembourg, December 13, 2017

Stabilus S. A.

Management Board

129

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

RESPONSIBILITY STATEMENT

We, Dietmar Siemssen (Chief Executive Officer), Mark Wilhelms (Chief Financial Officer), Andreas

Schröder (Director Group Financial Reporting) and Andreas Sievers (Director Group Accounting and

Strategic Finance Projects), confirm, to the best of our knowledge, that the consolidated financial

statements which have been prepared in accordance with the International Financial Reporting

Standards as adopted by the European Union, give a true and fair view of the assets, liabilities,

financial position and profit or loss of Stabilus S. A. and the undertakings included in the consolida-

tion taken as a whole and that the management report includes a fair review of the development

and performance of the business and the position of Stabilus S. A. and the undertakings included in

the consolidation taken as a whole, together with a description of the principal risks and uncertain-

ties that they face.

Luxembourg, December 13, 2017

Dietmar Siemssen

Mark Wilhelms

Andreas Schröder

Andreas Sievers

Management Board

130

CONSOLIDATED FINANCIAL STATEMENTS
S T A B I L U S N E X T I G N I T I O N

MANAGEMENT BOARD OF STABILUS S. A.

The Management Board comprises four members:

Andreas Schröder is the Group Financial Reporting Director and

was appointed to the Management Board in 2014. Mr. Schröder

Dietmar Siemssen (Chairman) is the Chief Executive Officer and

joined Stabilus in 2010. Prior to that, he worked for several years

was appointed to the Management Board in 2014 as well as the

in assurance and advisory business services at Ernst & Young. He

Chairman of the Management Board. With 20 years of experience

holds a degree in business administration. Mr. Schröder also holds

in the automotive industry, Mr. Siemssen joined Stabilus in 2011

further management positions within the Stabilus Group.

following a 19-year career in various management positions at

Continental AG. He holds a degree in mechanical engineering and

Andreas Sievers is the Director Group Accounting and Strategic

business administration. Mr. Siemssen also holds further manage-

Finance Projects of the Stabilus Group. Mr. Sievers joined Stabilus

ment positions within the Stabilus Group.

in 2016. From 2010 to 2015 he worked for the Schaeffler Group

as Vice President Accounting Excellence and External Reporting

Mark Wilhelms is the Chief Financial Officer and was appointed

and Vice President Accounting Projects. Prior to that he served as a

to the Management Board in 2014. With 25 years of experience in

German and U.S. Certified Public Accountant including positions at

the automotive industry, Mr. Wilhelms joined Stabilus in 2009 from

PricewaterhouseCoopers AG and Deloitte GmbH. He holds a

FTE Automotive, where he served as Chief Financial Officer for six

degree in business administration and passed exams as a U.S and

years. From 2007, he was also head of the NAFTA region at FTE.

German Certified Public Accountant in 2002 and 2004, respec-

Prior to that, he held various management positions in finance, plant

tively. Mr. Sievers also holds further management positions within the

and marketing at various locations over his 17-year career at Ford.

Stabilus Group.

He holds a degree in process engineering as well as a degree in

economics. Mr. Wilhelms also holds further management positions

within the Stabilus Group.

131

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

SUPERVISORY BOARD OF STABILUS S. A.

The Supervisory Board comprises four members:

Udo Stark serves as a member of the Supervisory Board since 2014

Dr. Joachim Rauhut serves as a member of the Supervisory Board

as well as the Chairman of the Supervisory Board. He was Chairman of

since May 12, 2015. He was a member of the Executive Board of Wacker

the Executive Board of MTU Aero Engines AG until 2007. From 1991

Chemie AG until October 31, 2015. He joined the Management Board

until 2000, Mr. Stark led the listed plant construction and machinery

of Wacker-Chemie GmbH in 2001 and supported Wacker Chemie’s

group Agiv AG. Subsequently, he became Chairman of the Shareholder

initial public offering in 2006. Previously, he served in various leading

Committee at Messer Griesheim GmbH, Chairman of the Executive

corporate positions, including posts at Mannesmann AG and Krauss-

Board of mg technologies AG and CEO of MTU Aero Engines AG. From

Maffei AG. He is a member of the Supervisory Board of MTU Aero

2008 to 2013, Mr. Stark served as a member of the Supervisory Board

Engines AG and B. Braun Melsungen AG, member of the Advisory

of MTU Aero Engines AG. Until May 2016, he was a member of the

Counsel of J. Heinrich Kramer Holding GmbH and member of the Advi-

Supervisory Board of Bilfinger SE and until September 2015 he was

sory Board of the Region South of COMMERZBANK Aktiengesellschaft.

the Chairman of the Audit Committee of Bilfinger SE. Until Decem-

ber 2015, he was a member of the Advisory Board of Barmenia

Dr. Ralf-Michael Fuchs serves as a member of the Supervisory

Versicherungen and since September 2014, he is Chairman of the

Board since 2015. He was member of the Dürr Senior Executive

Advisory Board of Arvos Group.

Board and Chief Executive of Division Measuring and Process Sys-

tems until 2017. He served as Chairman of the board of various

Dr. Stephan Kessel serves as a member of the Supervisory Board

Dürr companies and as Chairman of the management board of Carl

since 2014. He was Chief Executive of Continental AG until 2002.

SCHENCK AG. Before he joined Dürr AG in 2000, he held various

Since then Dr. Kessel has taken up a number of board positions at

leading positions at IWKA AG and Agiv AG. Since 2004 he is mem-

European companies including Stabilus. From 2008 through 2010,

ber of the Board of Directors of Nagahama Seisakusho Ltd., Japan.

Dr. Kessel was Chairman of the Board of the former holding company

of the Operating Stabilus Group. Currently he serves as Chairman on

the Boards of Novem Car Interior GmbH and Dayco Products L.L.C.

132

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of

Stabilus S. A.

2, rue Albert Borschette,

L-1246 Luxembourg

Report of the réviseur d’entreprises agréé

R E P O R T O N T H E A U D I T O F T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S

Opinion

We have audited the consolidated financial statements of Stabilus S. A. and its subsidiaries (the

“Group”), which comprise the consolidated statement of financial position as at 30 September 2017,

and the consolidated statements of comprehensive income, changes in equity and cash flows for the

year then ended, and notes to the consolidated financial statements, including a summary of signifi-

cant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the

consolidated financial position of the Group as at 30 September 2017, and of its consolidated financial

performance and its consolidated cash flows for the year then ended in accordance with International

Financial Reporting Standards (IFRSs) as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016

on the audit profession (the “Law of 23 July 2016”) and with International Standards on Auditing

(ISAs) as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (the

“CSSF”). Our responsibilities under those Regulation, Law and standards are further described in the «

Responsibilities of “Réviseur d’Entreprises agréé” for the audit of the consolidated financial statements

» section of our report. We are also independent of the Group in accordance with the International

Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the “IESBA

Code”) as adopted for Luxembourg by the CSSF together with the ethical requirements that are rele-

vant to our audit of the consolidated financial statements, and have fulfilled our other ethical responsi-

bilities under those ethical requirements. We believe that the audit evidence we have obtained is suffi-

cient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in

our audit of the consolidated financial statements of the current period. These matters were addressed

in the context of the audit of the consolidated financial statements as a whole, and in forming our

opinion thereon, and we do not provide a separate opinion on these matters.

133

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Goodwill

a) Why the matter was considered to be one of most significance in our audit of the consolidated

financial statements of the current period?

As at 30 September 2017, the Group's goodwill represents EUR 194,2 million or 20.9% of the Group's

total assets.

The Group conducted an impairment assessment of the goodwill on all its cash-generating units

(“CGUs”) to identify if the recoverable amount is less than the carrying amount.

The Group determined the recoverable amount of CGUs using the “fair value less cost of disposal”

model based on discounted cash flow approach considering a business plan with five-year projections

and a terminal value. Due to the inherent uncertainty of forecasting, derivation of the discount rate

and respective assumptions, e.g. beta factor or market risk premium, the fair value derivation underlies

a significant area of judgment and is typically focused by capital market participants.

For CGUs where the difference between fair value less cost of disposal and the carrying amount is rela-

tively small, the risk of a goodwill impairment is generally higher. The risk of a goodwill impairment

depends on the CGUs’ fair value which is most sensitive to estimates of future cash flows and other

key assumptions. Therefore, a risk exists that information disclosed in connection with the goodwill

impairment test (e.g. pre-tax WACC, sensitivity calculations) would not be appropriate.

b) How the matter was addressed in our audit

Our procedures included the assessment of the Group’s Goodwill impairment-testing process, key con-

trols and the assumptions and financial and capital market data used.

We tested key assumptions forming the Group’s fair value less cost of disposal calculations, the cash

flow projections and discount rates. We reconciled the managements’ future cash flow forecasts to the

financial budget approved by the Supervisory Board.

We evaluated the reasonableness of cash flow projections and compared key inputs, such as the dis-

count rates and growth rates, to externally available financial, economic and industry data, and the

Group’s performance history and accuracy of the forecasting figures retrospectively.

With the assistance of our own valuation specialists, we critically assessed the underlying assumptions

and methodologies used to determine the fair values less cost of disposal for those CGUs where signif-

icant goodwill was found to be sensitive to changes in those assumptions.

Additionally, we also reconciled the aggregate fair value less cost of disposal of the CGUs determined

by the Group to its market capitalization.

We considered whether the Group’s disclosures of the application of judgment in estimating key

assumptions and the sensitivity of the results of those estimates adequately reflect the risk associated

with goodwill impairment.

134

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

Warranty provisions

a) Why the matter was considered to be one of most significance in our audit of the consolidated

financial statements of the current period?

As at 30 September 2017, the Group's provision for warranties amounts to EUR 13,0 million or 4.8%

of the Group's total operating liabilities (total liabilities without total financial liabilities), respectively

1.4% of total Equity & Liabilities. Warranties are provided as stipulated under each sale contract. The

identification and reporting of specific warranty cases have to be handled in a transparent and central-

ized process supported by the chief council. Specific provisions are assessed and determined by the

management based on their experience of the likelihood of claims and risks arising from contracts cov-

ered by warranty. This considered the individual circumstances of each case. For contracts that do not

specifically indicate any warranty provision, warranties are provided based on a percentage of sales.

Determining the amount of both specific and general warranties involves judgement and the uncer-

tainty of the estimates.

b) How the matter was addressed in our audit

In relation to provisions for specific known issues, our procedures include challenging the basis of the

Group’s calculations by reference to the Group’s risk assessment, the status of discussions with the

relevant customer (determined by inspecting relevant correspondence) and the cost estimates for recti-

fication work. In performing these procedures we have regard to past experience in addressing such

matters.

In relation to unidentified issues, we assess and challenge the Group’s methodology for determining

the level of provision required taking into account the key assumptions such as historical accuracy of

provisioning, the levels of expense incurred over time together with current information on product

quality experience. We also assess the adequacy of the Group’s disclosures in relation to the significant

judgements in relation to warranty provisioning and related contingent liabilities or insurance reim-

bursements, if relevant.

Our procedures included, amongst others, the assessment of the Group’s wide process of reporting of

customer complaint and the evaluation of the key assumptions and data applied in determining the

Group's warranties provision individually and on lump–sum basis. This included a comparison of the

provision for warranties to the historical amounts being utilized, to determine whether the Group's

estimation techniques are reasonable.

Other information

The Management Board is responsible for the other information. The other information comprises the

information stated in the annual report including the management report and the Corporate Govern-

ance Statement but does not include the consolidated financial statements and our report of “Réviseur

d’Entreprises agréé” thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do

not express any form of assurance conclusion thereon.

135

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

In connection with our audit of the consolidated financial statements, our responsibility is to read the

other information and, in doing so, consider whether the other information is materially inconsistent

with the consolidated financial statements or our knowledge obtained in the audit or otherwise

appears to be materially misstated. If, based on the work we have performed, we conclude that there

is a material misstatement of this other information we are required to report this fact. We have

nothing to report in this regard.

Responsibility of the Management Board and Those Charged with Governance for the

consolidated financial statements

The Management Board is responsible for the preparation and fair presentation of the consolidated

financial statements in accordance with IFRSs as adopted by the European Union, and for such internal

control as the Management Board determines is necessary to enable the preparation of consolidated

financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Management Board is responsible for assessing

the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless the Management Board either intends

to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Responsibility of the Réviseur d’Entreprises agréé for the audit of the consolidated

financial statements

The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to issue

a report of “Réviseur d’Entreprises agréé” that includes our opinion. Reasonable assurance is a high

level of assurance, but is not a guarantee that an audit conducted in accordance with the EU Regula-

tion N° 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will

always detect a material misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in the aggregate, they could reasonably be expected to influ-

ence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 and

with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain

professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The

risk of not detecting a material misstatement resulting from fraud is higher than for one resulting

from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or

the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit proce-

dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion

on the effectiveness of the Group’s internal control.

136

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the Management Board.

• Conclude on the appropriateness of Management Board’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists

related to events or conditions that may cast significant doubt on the Group’s ability to continue as

a going concern. If we conclude that a material uncertainty exists, we are required to draw atten-

tion in our report of “Réviseur d’Entreprises agréé” to the related disclosures in the consolidated

financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions

are based on the audit evidence obtained up to the date of report of “Réviseur d’Entreprises agréé”.

However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the under-

lying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities and

business activities within the Group to express an opinion on the consolidated financial statements.

We are responsible for the direction, supervision and performance of the Group audit. We remain

solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and to communicate with them all relationships and

other matters that may reasonably be thought to bear on our independence, and where applicable,

related safeguards.

From the matters communicated with those charged with governance, we determine those matters that

were of most significance in the audit of the consolidated financial statements of the current period and

are therefore the key audit matters. We describe these matters in our report unless law or regulation

precludes public disclosure about the matter or when, in extremely rare circumstances, we determine

that a matter should not be communicated in our report because the adverse consequences of doing

so would reasonably be expected to outweigh the public interest benefits of such communication.

R E P O R T O N OT H E R L E G A L A N D R E G U L ATO RY R E Q U I R E M E N T S

We have been appointed as “Réviseur d’Entreprises agréé” by the Annual General Meeting of the

Shareholders on 15 February 2017 and the duration of our uninterrupted engagement, including previous

renewals and reappointments, is four years.

The management report is consistent with the consolidated financial statements and has been pre-

pared in accordance with applicable legal requirements.

The Corporate Governance Statement is included in the management report. The information required

by Article 68bis paragraph (1) letters c) and d) of the law of 19 December 2002 on the commercial and

137

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

companies register and on the accounting records and annual accounts of undertakings, as amended,

is consistent with the consolidated financial statements and has been prepared in accordance with

applicable legal requirements.

We confirm that the audit opinion is consistent with the additional report to the audit committee or

equivalent.

We confirm that the prohibited non-audit services referred to in the EU Regulation No 537/2014, on

the audit profession were not provided and that we remain independent of the Group in conducting

the audit.

OT H E R M AT T E R

The Corporate Governance Statement includes, when applicable, information required by Article 68bis

paragraph (1) points a), b), e), f) and g) of the law of 19 December 2002 on the commercial and com-

panies register and on the accounting records and annual accounts of undertakings, as amended.

Luxembourg, December 13, 2017

KPMG Luxembourg Société coopérative

Cabinet de révision agréé

T. Feld

138

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

ANNUAL
ACCOUNTS

CHAPTER

1 3 9 – 1 5 6

139

CONSOLIDATED FINANCIAL STATEMENTS S T A B I L U S N E X T I G N I T I O N

BALANCE SHEET

as of September 30, 2017

Balance sheet

I N € T H O U S A N D S

Assets

Fixed assets

Intangible assets

Concessions, patents, licenses, trade marks and similar rights and assets, if they
were acquired for valuable consideration and need not be shown under C.I.3

Tangible assets

Other fixtures and fittings, tools and equipment

Financial assets

Shares in affiliated undertakings

Current assets

Debtors

Amounts owed by affiliated undertakings

becoming due and payable within one year

Other debtors

becoming due and payable within one year

Cash at bank and in hand

Prepayments

Total assets

T_077

N OT E

Sept 30, 2017

Sept 30, 2016

628,451

461,744

628,444

965

643

461,715

161,108

160,746

186

160,547

458

322

348

199

362

441

629,764

623,293

140

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

Balance sheet

I N € T H O U S A N D S

Liabilities

Capital and reserves

Subscribed capital

Share premium account

Reserves

Legal reserve

Other reserves, including the fair value reserve

Profit or loss brought forward

Profit or loss for the financial year

Provisions

Provisions for taxation

Creditors

Trade creditors

becoming due and payable within one year

Amounts owed to affiliated undertakings

becoming due and payable within one year

Other creditors

Tax authorities

Social security authorities

Other creditors

becoming due and payable within one year

Total liabilities

T_077

N OT E

Sept 30, 2017

Sept 30, 2016

619,935

602,426

247

419,801

4,836

165,171

29,860

810

9,018

4,836

185,281

(7,759)

800

20,067

695

2,374

7,499

17,009

813

674

629,764

623,293

141

ANNUAL ACCOUNTSANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

PROFIT AND LOSS ACCOUNT

for the fiscal year ended September 30, 2017

Profit and loss account

I N € T H O U S A N D S

Other operating income

Raw materials and consumables and other external expenses

Other external expenses

Staff costs

Wages and salaries

Social security on salaries and wages

Value adjustments

in respect of formation expenses and tangible and intangible fixed assets

Other operating expenses

Income from participating interests

derived from affiliated undertakings

Other interest receivable and similar income

derived from affiliated undertakings

Value adjustments and fair value adjustments on financial current assets

(17,236)

Interest payable and similar expenses

concerning affiliated undertakings

Other interest and similar financial expenses

Tax on profit or loss

Profit or loss after taxation

(66)

–

(66)

(179)

29,860

142

T_078

Year ended Sept 30,

N OT E

2017

3,496

(2,145)

(722)

(644)

(78)

(22)

(477)

47,211

–

2016

12,872

(18,960)

(906)

(547)

(359)

(22)

(1,291)

–

689

(59)

(81)

–

(81)

(2)

(7,759)

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

NOTES TO THE ANNUAL ACCOUNTS

for the year ended September 30, 2017

1 General

Stabilus S. A., Luxembourg, hereafter also referred to as “Stabilus” or the “Company” is a public lim-

ited liability company (société anonyme) incorporated in Luxembourg and governed by Luxembourg

law. The registered office of the Company is 2, rue Albert Borschette, L-1246 Luxembourg, Grand

Duchy of Luxembourg. The trade register number is B0151589. The Company was founded under the

name of Servus HoldCo S. à r. l. on February 26, 2010.

The Company is managed by a Management Board under the supervision of the Supervisory Board.

The Company is formed for an unlimited duration.

The purpose of the Company is (i) the acquisition, holding and disposal, in any form, by any means,

whether directly or indirectly, of participations, rights and interests in, and obligations of, Luxembourg

and foreign companies, including but not limited to any entities forming part of the Stabilus group, (ii)

the acquisition by purchase, subscription, or in any other manner, as well as the transfer by sale,

exchange or in any other manner of stock, bonds, debentures, notes and other securities or financial

instruments of any kind (including notes or parts or units issued by Luxembourg or foreign mutual

funds or similar undertakings) and receivables, claims or loans or other credit facilities and agreements

or contracts relating thereto, and (iii) the ownership, administration, development and management of

a portfolio of assets (including, among other things, the assets referred to in (i) and (ii) above).

The Company’s financial year starts on October 1 and ends on September 30 each year.

The Company has no parent company which prepares consolidated financial statements including the

Company as a subsidiary.

The Company prepares consolidated financial statements in accordance with EU regulation 1606/2002.

The copies of the consolidated financial statements are available at the registered office of the Com-

pany at 2, rue Albert Borschette, L-1246 Luxembourg or on www.stabilus.com.

143

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

2 Summary of significant valuation and accounting policies

B A S I S O F P R E S E N TAT I O N

The annual accounts are prepared in accordance with Luxembourg company law and generally

accepted accounting principles applicable in Luxembourg. The accounting policies and valuation

principles are, apart from those enforced by law, determined by the Management Board.

The annual accounts have been prepared on a going concern basis and in accordance with current

legal requirements and generally accepted accounting principles in the Grand Duchy of Luxembourg.

By adopting the law of December 18, 2015, amending the Commercial Code of August 10, 2015 and

the law of December 19, 2002, the structure and headings of the balance sheet and of the profit or

loss account have been changed. Some comparative figures have been changed accordingly.

F O R E I G N C U R R E N C Y T R A N S L AT I O N

The Company maintains its books and records in euro (€). The balance sheet and the profit and loss

account are expressed in this currency.

Formation expenses, intangible, tangible and financial fixed assets denominated in currencies other

than € are translated at the historical exchange rates.

Cash at bank denominated in currencies other than € are translated at the exchange rates prevailing at

the date of the balance sheet.

Current assets and liabilities denominated in currencies other than € (having an economic link and similar

characteristics) are recorded globally at the exchange rates prevailing at the date of the balance sheet.

Long term debts denominated in currencies other than € having an economic link with receivables

recorded in financial assets (and having similar characteristics) are translated at the historical

exchange rates (loans “back to back”).

As a result, realized exchange gains and losses and unrealized exchange losses are recorded in the

profit and loss account. Unrealized exchange gains are not recognized.

I N TA N G I B L E A N D TA N G I B L E A S S E T S

Intangible and tangible assets are used for business purposes and are measured at cost less accumu-

lated value adjustments. Depreciation on intangible and tangible assets is recorded on a straight-line

basis in accordance with its utilization and based on the useful life of the asset. The residual value,

depreciation methods and useful life are reviewed annually and adjusted, if necessary.

144

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

F I N A N C I A L A S S E T S

Shares in affiliated undertakings, participating interests and securities held as fixed assets are stated

at acquisition cost. Write-downs are recorded if a permanent reduction in the fair value is expected.

The impairment analysis is done individually for each investment.

Loans to affiliated undertakings are recorded at their nominal value. Loans are written down to their

recoverable amount if there is a permanent impairment.

These value adjustments may not be continued if the reasons for which the value adjustments were

recognized have ceased to exist.

D E B TO R S

Current receivables are recorded at their nominal value. Current receivables are written down to their

recoverable amount if there is a permanent impairment.

These value adjustments may not be continued if the reasons for which the value adjustments were

recognized have ceased to exist.

P R O V I S I O N S

Provisions are intended to cover losses or debts, the nature of which is clearly defined and which, at

the date of the balance sheet, are either likely to be incurred or certain to be incurred but uncertain as

to their amount or the date on which they will arise.

C R E D I TO R S

Debts are recorded at their reimbursement value. Where the amount repayable on account is exceeding

the amount received, the difference is shown as an asset and is written off over the period of the debt.

145

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

3 Movements in fixed assets

Fixed assets schedule

I N € T H O U S A N D S

Gross value

Balance as of Sept 30, 2016

Additions

Disposals

Balance as of Sept 30, 2017

Accumulated value adjustments

Balance as of Sept 30, 2016

Additions

Disposals

Balance as of Sept 30, 2017

Carrying amount

Balance as of Sept 30, 2016

Balance as of Sept 30, 2017

4 Financial assets

Shares in affiliated
undertakings

I N € T H O U S A N D S

Blitz F10 neun GmbH i. L.,
Wallersheimer Weg 100,
56070 Koblenz, Germany

Servus III (Gibraltar) Limited,
57/63 Line Wall Road, Gibraltar

Stable II S.à r. l.,
2, rue Albert Borschette,
1246 Luxembourg, Luxembourg

Total

Intangible
assets

Tangible
assets

–

(13)

(8)

–

(21)

–

(24)

(14)

–

(38)

Shares in
affiliated
undertakings

461,715

628,416

T_079

Total

461,781

628,416

(461,687)

628,444

628,510

–

(37)

(22)

–

(59)

461,715

628,444

461,744

628,451

Proportion of
capital held

Year end date

100%

31.12.2016

100%

30.09.2016

100%

30.09.2016

T_080

Equity as at
year end
(including result)

Profit or loss for
the year ended

(13)

6,046

(23)

964

382,631

5,477

Shares in
affiliated
undertakings
as at Sept 30,
2017

–

628,416

628,444

In fiscal year 2017, the Stabilus Group simplified its legal structure. In this context, the Company’s

previously held subsidiaries Servus Sub S.à r. l. and Servus Luxembourg S.à r. l. were dissolved leading

to a disposal of € 456,525 thousand. All assets and liabilities held by Servus Sub S.à r. l. and Servus

146

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

Luxembourg S.à r. l. were transferred to Stabilus comprising among others the 94.9% share held in

Stable II S. à r. l. In addition the Company purchased the remaining 5.1% share in Stable II S. à r. l. for

€54,199 thousand.

The Company also increased its investment in Stable II S. à r. l. by contributing an amount of €149,634 thou-

sand in kind with effect from October 1, 2016 to the capital surplus account of Stable II S. à r. l. Parts

of the capital surplus account of Stable II S. à r. l. have been repaid with a net effect of €18,466 thou-

sand. As of September 30, 2017, Stabilus holds 100% of the shares in Stable II S. à r. l.

The investment in Servus III (Gibraltar) Limited as per September 30, 2016 of € 5,162 thousand is

reduced to €0 thousand in September 2017 due to a repayment of the capital reserve of Servus III

(Gibraltar) Limited amounting to € 4,224 thousand (see note 12) and a transfer of the net assets of

Servus III (Gibraltar) Limited as final liquidation distribution in kind.

Blitz F10 neun GmbH i. L. and Servus III (Gibraltar) Limited are inactive and in the process of final

liquidation.

5 Debtors

5 . 1 A M O U N T S O W E D B Y A F F I L I AT E D U N D E R TA K I N G S

The amount of €186 thousand is a receivable from affiliated undertakings for providing management

services. The majority of prior year receivables owed by affiliated undertakings, substantially related to

cash pool receivables, was contributed into the capital surplus account of Stable II S. à r. l. as contribu-

tion in kind.

5 . 2 OT H E R D E B TO R S

The amount mainly consists of a VAT receivable (€449 thousand).

6 Prepayments

Prepayments mainly relate to insurance contracts.

7 Capital and reserves

Issued capital as of September 30, 2017 amounted to €247 thousand (September 30, 2016 €247 thou-

sand) and was fully paid in. It is divided into 24,700,000 shares each with a nominal value of €0.01.

The authorized capital of the Company is set at €315 thousand represented by a maximum of 31.5 mil-

lion shares, each with nominal value of €0.01.

The Annual General Meeting on February 15, 2017 approved the distribution of a dividend of €0.50

per share with a total amount of € 12,350 thousand out of profit brought forward and to set off the

loss from fiscal year 2016 amounting to €7,759 thousand from profit brought forward.

147

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

Under Luxembourg law, the Company is required to allocate annually at least 5% of its statutory net

profit to a legal reserve until the aggregate reserve equals 10% of the subscribed share capital. The

reserve is not available for distribution. In financial year 2017, no additional amount was allocated to

the legal reserve.

8 Amounts owed to affiliated undertakings

The amount of €7,499 thousand (PY: €17,009 thousand) consists of cash pool liabilities owed to affili-

ated undertakings.

9 Other operating income

The other operating income mainly includes reimbursements for management services provided by

Stabilus S. A. to other Stabilus Group companies amounting to €3,488 thousand (PY: €2,304 thou-

sand). In fiscal year 2016, the other operating income also included €10,300 thousand reimburse-

ments of refinancing and acquisition cost.

10 Other external expenses

Other external expenses

I N € T H O U S A N D S

Administration fees

Consulting fees

Audit fees

Group insurance

Legal and professional fees

Bank charges

Total

11 Staff costs

The Company employs 7 employees as of September 30, 2017 (PY: 5). The average number of employees

in the financial year 2017 was 6 (PY: 5).

Income from participating interests

In February 2017, Servus III (Gibraltar) Limited distributed a dividend in kind to its sole shareholder

Stabilus S. A. with an amount of €51,435 thousand. Thereof €47,211 thousand relates to the distribu-

tion of retained earnings of Servus III (Gibraltar) Limited and is recognized in income from participating

interests. The remaining €4,224 thousand are mainly a repayment of the capital reserve of Servus III and

as such reduce the investment in Servus III (Gibraltar) Limited.

148

T_081

Year ended Sept 30,

2017

296

1,038

361

172

233

2016

133

17,978

396

207

228

2,145

18,959

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

Value adjustments in respect of financial assets and of
investments held as current assets

The value adjustments in respect of financial assets and of investments held as current assets substan-

tially comprise the result of the simplified dissolution without liquidation of the former subsidiaries

Servus Sub S. à r. l. and Servus Luxembourg S. à r. l. in May 2017. The net assets of these two entities

have been transferred to Stabilus S. A., and the investments have been derecognized. The difference

between the net assets received and the investment is recognized as a value adjustment in respect of

financial assets with an amount of €17,147 thousand.

14 Taxation

The Company is subject to Luxembourg company tax law.

15 Related parties

The remuneration of the members of the Management Board amounts to €353 thousand

(PY: €343 thousand). The remuneration of the members of the Supervisory Board amounts to

€359 thousand (PY: €365 thousand).

As of September 30, 2017, members of the Management and Supervisory Board held about 0.5%

of the total shares in Stabilus S. A.

16 Share-based payments

The variable compensation for the members of the Management Board includes a matching stock pro-

gram. The matching stock program (the “MSP”) provides for four annual tranches granted each year

during the financial year ending September 30, 2014 until September 30, 2017. Participation in the

matching stock program requires Management Board members to invest in shares of the Company. The

investment has generally to be held for the lock-up period.

As part of the matching stock program A (the “MSP A”) for each share the Management Board invests

in the Company in the specific year (subject to general cap), the Management Board members receive

a certain number of fictitious options to acquire shares in the Company for each tranche of the match-

ing stock program. The amount of stock options received depends upon a factor to be set by the Super-

visory Board (Remuneration Committee) annually in a range between 1.0 time and 1.7 times for a cer-

tain tranche. Thus, if a Management Board member were to buy 1,000 shares under the MSP A in the

Company, he would receive 1,000 to 1,700 fictitious options for a certain tranche. The fictitious options

are subject to a lock-up period of four years and may be exercised during a subsequent two-year exer-

cise period.

As part of matching stock program B (the “MSP B”) for each share the Management Board holds in

the Company in the specific year (subject to a general cap), the Management Board members receive a

certain number of fictitious options to acquire shares in the Company for each tranche of the matching

stock program. The amount of stock options received depends upon a factor to be set by the Supervisory

149

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

Board (Remuneration Committee) annually which will be in a range between 0.0 and 0.3 times for

a certain tranche. Thus, if a Management Board member were to be holding 1,000 shares under the

MSP B in the Company, he would receive 0 to 300 fictitious options for a certain tranche.

The fictitious options are subject to a lock-up period of four years and may be exercised during a sub-

sequent two-year exercise period. The options may only be exercised if the stock price of the Company

exceeds a set threshold for the relevant tranche, which the Supervisory Board will determine at the

time of granting the options, and which needs to be between 10% and 50% growth over the base

price, which is the share price on the grant date. If exercised, the fictitious options are transformed into

a gross amount equaling the difference between the option price and the relevant stock price multiplied

by the number of exercised options. The Company plans a cash settlement. The maximum gross amounts

resulting from the exercise of the fictitious options of one tranche in general is limited in amount to

50% of the base price. Reinvestment of IPO proceeds from previous equity programs are not taken into

account for MSP A. In fiscal year 2017, 12,418 options were issued for MSP A and 15,031 for MSP B.

The exercise price is €48.64.

17 Commitments, contingencies and pledges

In fiscal year 2016, the Company and other affiliated companies entered into a senior term loan facility

with a total amount of €640,000 thousand made up of a €455,000 thousand senior A facility, an equity

bridge facility commitment of €115,000 thousand and a €70,000 thousand revolving facility. The equity

bridge facility commitment has already been repaid per September 30, 2016. The original term of the

senior term loan was June 29, 2021 and was extended to June 29, 2022 in August 2017. The Company

is guarantor of the senior term loan facility.

In relation with the simplification of the Group structure the Company became sole owner of 100%

shares in Stable II S.à r. l. and the sole pledgor in accordance with the Confirmation Transfer and Amend-

ment Agreement dated May 16, 2017 under the Share Pledge Agreement dated January 27, 2017.

The Company has signed a rent contract for its office starting November 1, 2013 and terminating Jan-

uary 31, 2018. The rental payments for the financial year 2018 will be €57 thousand. On November

20, 2017 the rent contract has been extended until October 31, 2019.

The Company issued a bank guarantee amounting to €100 thousand for the above mentioned office

lease.

18 Subsequent events

There were no events or developments that could have materially affected the measurement and pres-

entation of the Company’s assets and liabilities as of September 30, 2017.

150

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of

Stabilus S. A.

2, rue Albert Borschette,

L-1246 Luxembourg

Report of the réviseur d’entreprises agréé

R E P O R T O N T H E A U D I T O F T H E A N N U A L A C C O U N T S

Opinion

We have audited the annual accounts of Stabilus S.A. (the “Company”), which comprise the balance

sheet as at 30 September 2017, and the profit and loss account for the year then ended, and notes to

the annual accounts, including a summary of significant accounting policies.

In our opinion, the accompanying annual accounts give a true and fair view of the financial position of

the Company as at 30 September 2017, and of the results of its operations for the year then ended in

accordance with Luxembourg legal and regulatory requirements relating to the preparation and pres-

entation of the annual accounts.

Basis for Opinion

We conducted our audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016

on the audit profession (“Law of 23 July 2016”) and with International Standards on Auditing (“ISAs”)

as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (“CSSF”). Our

responsibilities under those Regulation, Law and standards are further described in the « Responsibili-

ties of “Réviseur d’Entreprises agréé” for the audit of the annual accounts » section of our report. We

are also independent of the Company in accordance with the International Ethics Standards Board for

Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) as adopted for Luxembourg

by the CSSF together with the ethical requirements that are relevant to our audit of the annual accounts,

and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that

the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in

our audit of the annual accounts of the current period. These matters were addressed in the context of

the audit of the annual accounts as a whole, and in forming our opinion thereon, and we do not pro-

vide a separate opinion on these matters.

151

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

Group restructuring

a) Why the matter was considered to be one of most significance in our audit of the annual accounts

of the current period?

Refer to note 4 of the annual accounts. We identified the group restructuring as a key audit matter as

related transactions required audit focus due to the magnitude of transactions.

Transactions subject to audit focus were:

– Dissolution of subsidiaries including transfer of all assets and liabilities previously held by the

dissolved subsidiaries to the Company;

– Increase of the carrying amount for financial assets by a contribution in kind of a receivable of

€149,634 thousand with effect from 1 October 2016 to the capital surplus account of Stable II

S.à r. l., partly offset by repayment of €18,466 thousand,

– Acquisition of remaining 5.1% share in Stable II S.à r. l. for €54,199 thousand.

b) How the matter was addressed in our audit

We obtained and inspect the key supporting documentation such as minutes and resolutions taken to

resolve and approve the transactions, Sales and Purchase Agreement and other supporting information.

For each transaction, we understood the nature of the transaction and assessed the proposed account-

ing treatment in relation to the Company’s accounting policies and Luxembourg legal and regulatory

requirements.

We involved our tax specialist to evaluate potential tax risks in the context of the dissolution of the

subsidiaries including transfer of all assets and liabilities to the Company.

Consideration in relation to the acquisition was agreed with the settlement of the purchase price with

intercompany balances, and transferred assets and liabilities as per closing balance sheet of the sub-

sidiaries were reconciled to the accounts of the Company.

Other information

The Management Board is responsible for the other information. The other information comprises the infor-

mation stated in the annual report including the management report and the Corporate Governance State-

ment but does not include the annual accounts and our report of “Réviseur d’Entreprises agréé” thereon.

Our opinion on the annual accounts does not cover the other information and we do not express any

form of assurance conclusion thereon.

In connection with our audit of the annual accounts, our responsibility is to read the other information

and, in doing so, consider whether the other information is materially inconsistent with the annual

accounts or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,

based on the work we have performed, we conclude that there is a material misstatement of this other

information we are required to report this fact. We have nothing to report in this regard.

152

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

Responsibility of the Management Board and Those Charged with Governance for the

annual accounts

The Management Board is responsible for the preparation and fair presentation of the annual accounts in

accordance with Luxembourg legal and regulatory requirements relating to the preparation and presenta-

tion of the annual accounts, and for such internal control as the Management Board determines is neces-

sary to enable the preparation of annual accounts that are free from material misstatement, whether due

to fraud or error.

In preparing the annual accounts, the Management Board is responsible for assessing the Company’s

ability to continue as a going concern, disclosing, as applicable, matters related to going concern and

using the going concern basis of accounting unless the Management Board either intends to liquidate the

Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Responsibility of the Réviseur d’Entreprises agréé for the audit of the annual accounts

The objectives of our audit are to obtain reasonable assurance about whether the annual accounts

as a whole are free from material misstatement, whether due to fraud or error, and to issue a report

of “Réviseur d’Entreprises agréé” that includes our opinion. Reasonable assurance is a high level

of assurance, but is not a guarantee that an audit conducted in accordance with the EU Regulation

N° 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will

always detect a material misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in the aggregate, they could reasonably be expected to influ-

ence the economic decisions of users taken on the basis of these annual accounts.

As part of an audit in accordance with the EU Regulation N° 537/2014, the Law of 23 July 2016 and

with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain

professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the annual accounts, whether due to fraud

or error, design and perform audit procedures responsive to those risks, and obtain audit evi-

dence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting

a material misstatement resulting from fraud is higher than for one resulting from error, as fraud

may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal

control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the Management Board.

• Conclude on the appropriateness of Management Board’s use of the going concern basis of account-

ing and, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Company’s ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in our

report of “Réviseur d’Entreprises agréé” to the related disclosures in the annual accounts or, if such

153

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence

obtained up to the date of our report of “Réviseur d’Entreprises agréé”. However, future events or

conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the annual accounts, including the dis-

closures, and whether the annual accounts represent the underlying transactions and events in a

manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and to communicate with them all relationships and

other matters that may reasonably be thought to bear on our independence, and where applicable,

related safeguards.

From the matters communicated with those charged with governance, we determine those matters that

were of most significance in the audit of the annual accounts of the current period and are therefore

the key audit matters. We describe these matters in our report unless law or regulation precludes pub-

lic disclosure about the matter or when, in extremely rare circumstances, we determine that a matter

should not be communicated in our report because the adverse consequences of doing so would rea-

sonably be expected to outweigh the public interest benefits of such communication.

R E P O R T O N OT H E R L E G A L A N D R E G U L ATO RY R E Q U I R E M E N T S

We have been appointed as “Réviseur d’Entreprises agréé” by the Annual General Meeting of the

Shareholders on 15 February 2017 and the duration of our uninterrupted engagement, including

previous renewals and reappointments, is four years.

The management report is consistent with the annual accounts and has been prepared in accordance

with applicable legal requirements.

The Corporate Governance Statement is included in the management report. The information required by

Article 68bis paragraph (1) letters c) and d) of the law of 19 December 2002 on the commercial and com-

panies register and on the accounting records and annual accounts of undertakings, as amended, is con-

sistent with the annual accounts and has been prepared in accordance with applicable legal requirements.

We confirm that the audit opinion is consistent with the additional report to the audit committee or

equivalent.

We confirm that the prohibited non-audit services referred to in the EU Regulation No 537/2014, on

the audit profession were not provided and that we remain independent of the Company in conducting

the audit.

154

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

OT H E R M AT T E R

The Corporate Governance Statement includes, when applicable, information required by Article 68bis

paragraph (1) points a), b), e), f) and g) of the law of 19 December 2002 on the commercial and com-

panies registerand on the accounting records and annual accounts of undertakings, as amended.

Luxembourg, December 13, 2017

KPMG Luxembourg Société coopérative

Cabinet de révision agréé

T. Feld

155

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

156

ANNUAL ACCOUNTS S T A B I L U S N E X T I G N I T I O N

ADDITIONAL
INFORMATION

CHAPTER

1 5 7 – 1 6 1

157

S T A B I L U S N E X T I G N I T I O N

FINANCIAL CALENDAR

Financial calendar

D AT E 1 ) 2 )

December 15, 2017

February 5, 2018

February 14, 2018

May 7, 2018

August 6, 2018

November 16, 2018

December 14, 2018

T _ 082

P U B L I C AT I O N / E V E N T

Publication of full year results for fiscal year 2017 (Annual Report 2017)

Publication of the first-quarter results for fiscal year 2018 (Interim Report Q1 FY18)

Annual General Meeting

Publication of the second-quarter results for fiscal year 2018 (Interim Report Q2 FY18)

Publication of the third-quarter results for fiscal year 2018 (Interim Report Q3 FY18)

Publication of preliminary financial results for fiscal year 2018

Publication of full year results for fiscal year 2018 (Annual Report 2018)

1) We cannot rule out changes of dates. We recommend checking them on our website in the Investor Relations/ Financial Calendar section (www.ir.stabilus.com).
2) Please note that our fiscal year (FY) comprises a twelve-month period from October 1 to September 30 of the following calendar year. e.g. the fiscal year

2018 comprises a year ended September 30, 2018.

DISCLAIMER

Forward-looking statements
This annual report contains forward-looking statements that relate to the current plans,
objectives, forecasts and estimates of the management of Stabilus S.A. These state-
ments take into account only information that was available up and including the date
that this annual report was prepared. The management of Stabilus S.A. makes no guar-
antee that these forward-looking statements will prove to be right. The future develop-
ment of Stabilus S.A. and its subsidiaries and the results that are actually achieved are
subject to a variety of risks and uncertainties which could cause actual events or results
to differ significantly from those reflected in the forward-looking statements. Many of
these factors are beyond the control of Stabilus S.A. and its subsidiaries and therefore
cannot be precisely predicted. Such factors include, but are not limited to, changes in
economic conditions and the competitive situation, changes in the law, interest rate or
exchange rate fluctuations, legal disputes and investigations, and the availability of

funds. These and other risks and uncertainties are set forth in the combined manage-
ment report. However, other factors could also have an adverse effect on our business
performance and results. Stabilus S.A. neither intends to nor assumes any separate obli-
gation to update forward-looking statements or to change these to reflect events or
developments that occur after the publication of this annual report.

Rounding
Certain numbers in this annual report have been rounded up or down. There may there-
fore be discrepancies between the actual totals of the individual amounts in the tables
and the totals shown as well as between the numbers in the tables and the numbers
given in the corresponding analyses in the text of the annual report. All percentage
changes and key figures in the combined management report were calculated using
the underlying data in millions of euros to one decimal place (€ millions).

158

ADDITIONAL INFORMATIONADDITIONAL INFORMATION S T A B I L U S N E X T I G N I T I O N

TABLE DIRECTORY

D E S C R I P T I O N

Latest growth projections for selected economies

Production of light vehicles

Income statement

Revenue by region

Revenue by markets

Reconciliation of EBIT to adjusted EBIT

Operating segments

Balance sheet

Cash flows

Free cash flow

Adjusted FCF

Net leverage ratio

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Subsidiaries

Exchange rates

New standards, interpretations and amendments in the financial year

Standards and interpretations issued and endorsed by the EU (not yet adopted)

Standards and interpretations issued but not yet endorsed by the EU

Revenue by region

Revenue by markets

Expenses by function

Personnel expenses

Number of employees

Other income

Other expenses

Finance income

Finance costs

Income tax expense

Tax expense reconciliation (expected to actual)

Deferred tax assets and liabilities

Tax loss and interest carry-forwards

Weighted average number of shares

Earnings per share

Property, plant and equipment

Depreciation expense for property, plant and equipment

Goodwill sensitivity analysis

Intangible assets

Amortization expense for intangible assets

Other financial assets

Other assets

Inventories

Trade accounts receivable

Allowance for doubtful accounts

Other comprehensive income / (expense)

159

N U M B E R

PA G E

100

102

ADDITIONAL INFORMATIONADDITIONAL INFORMATION S T A B I L U S N E X T I G N I T I O N

D E S C R I P T I O N

Financial liabilities

Other financial liabilities

Provisions

Changes of non-current provisions

Changes of current provisions

Pension plans and similar obligations

Unfunded status

Present value of defined benefit obligations

Pension cost for defined benefit plans

Present value of the defined benefit obligation and the experience adjustments on the plan liabilities

Significant factors for the calculation of pension obligations

Other liabilities

Operating lease

Finance lease

Financial commitments

Financial instruments

Credit risks included in financial assets

Liquidity outflows for liabilities

Equity ratio

Segment reporting

Reconciliation of the total segments’ profit to profit / (loss) before income tax

Geographical information: Revenue by country

Geographical information: Non-current assets by country

Input parameter for fair value measurement of MSP

Number of share options

Input parameters for fair value measurement of PSP

Phantom Stock Program options

Auditor’s fees

Balance sheet

Profit and loss account

Fixed assets schedule

Shares in affiliated undertakings

Other external charges

Financial calendar

N U M B E R

PA G E

103

104

105

106

107

108

109

111

112

114

115

117

118

119

121

122

123

125

126

127

128

140

142

146

148

158

160

ADDITIONAL INFORMATIONADDITIONAL INFORMATION S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N

S T A B I L U S N E X T I G N I T I O N
S T A B I L U S N E X T I G N I T I O N

INFORMATION RESOURCES

Further information including news, reports and publications can be found in the investor relations
section of our website at www.ir.stabilus.com.

Investor Relations

Phone: +352 286 770 21
+352 286 770 99
Fax:
investors@stabilus.com
Email:

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