Annual Report 2011

2011GESCHÄFTSBERICHT ANNUAL REPORT Consolidated Financial Statements for Fiscal Year 2011 (January 1 to December 31, 2011) IMPORTANT KEY FIGURES IMPORTANT KEY FIGURES 01/01 - 12/31/2011 01/01 - 12/31/2010 1 Change Consolidated revenues 1,2 EUR mn 1,077.6 743.6 44.9% Consolidated revenues (annualized) 2 ² EUR mn 1,157.6 1,083.8 6.8% EBITDA 1,2 EUR mn 64.8 226.8 -71.4% Consolidated profit/loss EUR mn -63.9 138.8 -146.0% Earnings per share Basic 1,2 EUR -5.94 17.18 -134.6% Diluted 1,2² EUR -5.93 17.15 -134.6% Cash flow from operating activities 1 EUR mn 52.6 130.0 -59.5% Cash flow from investment activities 1 EUR mn -36.9 -64.2 42.5% Free cash flow 1 EUR mn 15.7 65.8 -76.1% 12/31/2011 12/31/2010 Change Assets EUR mn 943.6 1,060.1 -11.0% thereof cash and cash equivalents EUR mn 154.4 177.2 -12.9% Liabilities EUR mn 661.1 706.0 -6.4% thereof financial liabilities EUR mn 185.7 187.9 -1.2% Equity 3² EUR mn 282.5 354.1 -20.2% Equity ratio 3² in % 29.9 33.4 -10.5% Employees at the reporting date 6,631 6,803 -2.5% 1 Prior-year figures have been adjusted for comparison purposes, in accordance with the requirements of IFRS 5. 2 From continuing operations. 3 Including non-controlling interests. 2 I AURELIUS ANNUAL REPORT CONTENTS CONTENTS TO OUR SHAREHOLDERS 04 Letter to shareholders 06 The Executive Board 07 Report of the Supervisory Board 11 The Supervisory Board 14 Corporate Governance Report 19 The AURELIUS share GROUP MANAGEMENT REPORT OF AURELIUS AG 22 Summary of fiscal 2011 23 Business operations and general economic conditions 27 Reports on the portfolio companies 48 Financial performance, cash flows and financial position 52 Acquisition-related disclosures 54 Research and development 55 Employees 55 Significant events after the reporting date 56 Report on risk and opportunities 64 Outlook CONSOLIDATED FINANCIAL STATEMENTS 68 Consolidated Statement of Comprehensive Income 70 Consolidated Statement of Financial Position 72 Consolidated Statement of Changes in Equity 74 Consolidated Cash Flow Statement 76 Notes to the consolidated financial statements 194 Auditor’s Report 195 Imprint/ Contact AURELIUS ANNUAL REPORT I 3 LETTER TO THE SHAREHOLDERS LETTER TO THE SHAREHOLDERS Dear shareholders, employees and friends of our company: It was not an easy year for investors in 2011. The gyrations on the international capital markets in the second half of the year revealed weaknesses in our economic system. Macroeconomic variables like sovereign debt and money supply are currently affecting the valuation of equity capital more heavily than the operating performance of companies themselves. So it gives us all the more pleasure to inform you that your investment in the AURELIUS Group was once again successful in the last financial year. The AURELIUS share con- cluded 2011 up 36 percent. Furthermore, the Executive Board and Supervisory Board will propose to the annual general meeting being held on May 25, 2012 that the retained earnings of AURELIUS AG be used to distribute a dividend of EUR 2.00 per share, an increase of 54 percent. This comprises a basic dividend raised from EUR 1.30 in 2010 to EUR 1.50 and a one-time, special dividend of EUR 0.50 made possible by the successful disposals in recent months. With a few exceptions, our portfolio companies enjoyed a good financial year 2011 The Executive Board of AURELIUS AG on the operational side as well, including a number of successful transactions. We sold our Book Club from the left: Associates Ltd. subsidiary to the UK-based Webb Group in the first quarter of 2011. We had acquired the Ulrich Radlmayr, Donatus Albrecht, Dr. Dirk Markus, Gert Purkert) biggest British mail-order book distributor from Bertelsmann in 2008. We succeeded in selling our Irish subsidiary Wellman International Ltd. to the Thailand-based Indorama Group in the fourth quarter in what is the biggest exit to date in the company’s history. The specialist in PET recycling had been part of AURELIUS since 2007 and structurally and operationally reorganized with great success. This included installing a more efficient controlling system and a new quality management framework, revising the product portfolio and making future-looking investments in production and logistics. Moreover, we again enjoyed success on the acquisitions side, benefiting from our reputation as a good home for companies with potential for development. The biggest deal in the past year was the acquisition of a 72.91 percent interest in HanseYachts AG in November 2011. Set up in 1990, the Greifswald-based company has established itself as the third-biggest serial manufacturer of yachts in the world. Further add-on acquisitions have served to reinforce the market position of our portfolio companies connectis, Blaupunkt and LD Didactic. connectis expanded its core business by acquiring Grouptec AG, a provider of complex communications solutions in the field of Unified Communication & Collaboration. Blaupunkt acquired KWest GmbH, a specialist in embedded systems, with a view to expanding its development competence and capacity. LD Didactic acquired the photonics activities from a manufacturer of laser systems. In short, 2011 can be described as a good operating year for AURELIUS. For the most part, our portfolio companies performed well. The AURELIUS Group increased its consolidated revenues by 45 percent to EUR 1,077.6 million (2010: EUR 743.6 million) in financial year 2011. Whereas the operating performance of the portfolio companies was positive with a few exceptions, the consolidated profit was depressed by restructuring and non-recurring effects and impairments on intangible assets and property, plant and equipment, notably at the portfolio company SECOP. 4 I AURELIUS ANNUAL REPORT LETTER TO THE SHAREHOLDERS The recognized earnings from continuing operations before interest, taxes, depreciation and amortiza- tion (EBITDA) totaled EUR 64.8 million (2010: EUR 226.8 million) in financial year 2011. The difference between the two years results from the fact that the EBITDA in 2010 contained income of EUR 98.4 million from the reversal of negative goodwill (bargain purchase income). Such income totaled only EUR 3.2 million in the reporting period, arising from the acquisition of a 72.91 percent interest in HanseYachts AG in November 2011. Furthermore, the 2010 total included income of EUR 59.4 million from the acquisition of loans at below nominal value which was not repeated in 2011. The partial closure and capacity reduc- tions at the SECOP (Slovenian plant) and ISOCHEM (Pont de Claix plant) subsidiaries led to impairments on intangible assets and property, plant and equipment at these subsidiaries and, together with a write- down on the minority interest in the France-based Bank Compagnie de Gestion et des Prêts, depressed the net profit. As a result of this, the consolidated loss of EUR 63.9 million was clearly negative. With cash and cash equivalents of EUR 154.4 million (December 31, 2010: EUR 177.2 million) and a consolidated equity ratio of 30 percent (2010: 33%), the AURELIUS Group continues to have a solid foundation for future growth. We will remain true to our strategy of acquiring and permanently enhancing companies that in many cases demonstrate operational weaknesses, enabling us to increase the value of the company. In acquiring the activities of the IT service provider Getronics in Europe and Asia/Pacific and the Spain-based IT consultancy Thales CIS, and selling our Consinto subsidiary, we have successfully demonstrated this in the first quarter of 2012, making a good start to the current financial year. Furthermore, we expect to carry out further company acquisitions in the first half of the year. We are also optimistic for our portfolio companies in the current year. Assuming that the economy continues to develop positively, we expect most of our subsidiaries to record higher revenues and a further improvement in operating results in 2012. We would be delighted if you continued to accompany us on our exciting, eventful journey. Best regards, The Executive Board of AURELIUS AG Munich, March 2012 Dr. Dirk Markus Gert Purkert Donatus Albrecht Ulrich Radlmayr AURELIUS ANNUAL REPORT I 5 THE EXECUTIVE BOARD THE EXECUTIVE BOARD Dr. Dirk Markus CEO Dr. Dirk Markus studied business administration in St. Gallen, Switzerland, and Copenhagen, Denmark, and was awarded a Ph.D by the University of St. Gallen and Harvard University, Boston, United States. Dr. Markus has been involved with the restructuring and further development of companies for more than 15 years, starting as a consultant with McKinsey & Company and then with an exchange-listed industrial holding company. During this time, he has been responsible for more than 40 corporate transactions, including the acquisition and restructuring of Tesion Telekom, the baby carriage manufacturer Teutonia, the TV station RTL Shop, the SKW Stahl-Metallurgie Group and the Blaupunkt Group. Gert Purkert After studying physics in Leipzig and Lausanne, Gert Purkert worked for McKinsey & Company, where he gathered experience in process improvements, cost reduction programs and strategic restructuring programs. After that, he co-founded equinet AG in Frankfurt, an investment bank with about 120 employees today, advising mainly small to medium-sized enterprises. As a member of the Executive Board of the Group’s portfolio company, he was responsible for conducting numerous M&A transactions and managing the portfolio companies. Ulrich Radlmayr Ulrich Radlmayr studied law in Hamburg, Aix-en-Provence, France, and Munich, Germany. After serving his required legal internship with the Free State of Bavaria, he worked for five years as a lawyer with P+P Pöllath + Partners, specializing in private equity and M&A.

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