Notes to the financial statements
1.1 General
These annual financial statements were prepared in accordance with the provisions of the Swiss accounting law (Title 32 of the Swiss Code of Obligations). The main valuation principles applied that are not prescribed by law are described below.
Georg Fischer Ltd, Schaffhausen (Switzerland), reports its consolidated financial statements on the basis of a recognized standard (Swiss GAAP FER) and has therefore, in accordance with the legal provisions, decided not to provide notes on the audit fees, to issue a cash flow statement or report on the business situation.
1.2 Securities with market price
Short-term securities are valued at the market price on the balance sheet date. No equalization reserve has been created.
1.3 Loans to Corporate Companies and other financial assets
Loans to Corporate Companies and other financial investments in foreign currencies are valued at the market rate on the actual closing date. Unrealized currency losses are recognized, whereas unrealized gains are not recognized (imparity principle). The valuation is carried out at nominal values, taking into account any value adjustments required.
1.4 Investments
Investments are valued according to the principle of individual valuation. In addition, further flat-rate value adjustments can be made.
1.5 Dividend income
Dividend income is recognized when paid out.
1.6 Share-based compensation
More information about share-based compensation is available in the Compensation Report as well as in note 6.
1.7 Long-term interest-bearing liabilities
Interest-bearing liabilities are recognized at nominal value.
1.8 Treasury shares
Treasury shares are recognized at cost and deducted from shareholder’s equity. The gain or loss from the sale or transfer of treasury shares is recognized in shareholder’s equity as an increase or reduction in retained earnings.
2.1 Dividend income
The dividend income for the year under review was CHF 174 million (previous year: CHF 156 million).
2.2 Income from services provided to Corporate Companies
The income from Corporate Companies consisted primarily of licensing income for the use of the corporate brand +GF+ as well as income for services provided.
2.3 Financial income
The financial income includes interest income on the loans granted to Corporate Companies and related parties.
2.4 Commission income from Corporate Companies
This position contains commission income from Corporate Companies for issued guarantees.
2.5 Value adjustment on investments
This position includes value adjustments of investments held by Georg Fischer Ltd. The principles for the valuation of investments are found in note 1.4.
2.6 Financial expenses
This position includes interest expense for the bond of CHF 200 million issued in the previous year as well as losses on foreign currencies. More information on the bond can be found in note 3.8.
2.7 Other operating expenses
The main expense items related to external consulting services, marketing expenses, fees for the Board of Directors, and IT costs.
2.8 Direct taxes
This position includes the income taxes of Georg Fischer Ltd, but also the corporation taxes of Georg Fischer BV & Co KG, Singen (Germany), acting as the German fiscal unity parent of GF. Georg Fischer Ltd, as the associate of Georg Fischer BV & Co KG, is liable for German corporation taxes.
3.1 Cash and cash equivalents and short-term investments with a quoted market price
This balance sheet item consists of bank balances. In the previous year, securities in the amount of CHF 3.1 million were included.
3.2 Other current receivables due from Corporate Companies
This balance sheet item includes short-term receivables and loans to Corporate Companies and items from cash pooling with Corporate Companies. These are reported as a gross amount under “Other current receivables due from Corporate Companies” and “Short-term interest-bearing liabilities due to Corporate Companies”.
3.3 Loans to Corporate Companies
The activities of Corporate Companies are, whenever possible and suitable, financed by loans from the Corporation instead of credit facilities from local banks.
3.4 Other financial assets
Other financial assets include loans to related parties of CHF 66 million (previous year: CHF 0 million). CHF 47 million of these loans to related parties are subordinated loans.
3.5 Investments
Direct and indirect investments in Corporate Companies of Georg Fischer Ltd include the companies listed in note 4.2 in the consolidated financial statements.
3.6 Short-term interest-bearing liabilities due to Corporate Companies
This balance sheet item includes short-term liabilities and loans from Corporate Companies and items from cash pooling with Corporate Companies. These are reported as a gross amount under “Other current receivables due from Corporate Companies” and “Short-term interest-bearing liabilities due to Corporate Companies”.
3.7 Accrued expenses and deferred income
Accrued expenses and deferred income comprises variable compensation for employees and fees for the Board of Directors as well as other deferred items.
3.8 Long-term interest-bearing liabilities
On 20 April of the previous year, Georg Fischer Ltd issued a bond of CHF 200 million on the Swiss capital market. The bond has a duration of 10 years and carries a coupon of 1.05%.
3.9 Long-term provisions
This provision mainly concerns currency risks.
3.10 Share capital
As of 31 December 2019, the share capital amounted to 4’100’898 registered shares at a par value of CHF 1, unchanged from the previous year.
Conditional capital: As of 31 December 2019, the conditional capital amounted to CHF 0.6 million and can be created by exercising conversion or option rights granted in connection with debenture loans or similar bonds of Georg Fischer Ltd or its Corporate Companies that were issued on the capital markets.
Authorized capital: In accordance with the resolution of the Annual General Meeting of 18 April 2018, the Board of Directors is authorized to increase the share capital, until no later than 17 April 2020, by a maximum amount of CHF 0.6 million, by issuing a maximum of 600’000 fully paid-in registered shares with a nominal value of CHF 1 each. The increase may be made in partial amounts.
The maximum amount of the authorized or conditional capital is reduced by the amount that authorized or conditional capital is created through the issue of bonds or similar debt instruments or new shares.
3.11 Treasury shares
Georg Fischer Ltd held 7’173 own shares (previous year: 7’568 own shares) on the balance sheet date. The principles for the valuation of treasury shares are found in note 1.8.
4.1 Full-time equivalents
As of 31 December 2019, Georg Fischer Ltd employed 78 people including trainees (previous year: 76).
4.2 Contingent liabilities
CHF 1'000 |
|
2019 |
|
2018 |
|
|
|
|
|
Guarantees and pledges to Corporate Companies in favor of third parties |
|
1'633'445 |
|
1'490'080 |
Guarantees to related parties in favor of third parties |
|
74'433 |
|
125'251 |
Guarantees to third parties |
|
4'740 |
|
|
Guaranteed maximum amount |
|
1'712'618 |
|
1'615'331 |
Thereof utilized |
|
721'532 |
|
811'479 |
In addition, Georg Fischer Ltd bears joint liability with regard to the Swiss Federal Tax Administration for the amounts due of value-added tax of all the Swiss Corporate Companies.
4.3 Pension fund obligations
At year-end 2019, pension fund obligations amounted to CHF 1.1 million (previous year: CHF 4.2 million).
4.4 Significant shareholders
An overview can be found in the chapter Corporate Governance (GF share and shareholders).
4.5 Shareholdings of members of the Board of Directors, Executive Committee, or persons related to them
Information on the shareholdings of members of the Board of Directors, Executive Committee, or persons related to them is provided in note 4.3 in the consolidated financial statements.
There were no events between 31 December 2019 and 20 February 2020 that would require an adjustment to the carrying amounts of assets and liabilities and equity or would need to be disclosed under this heading.
Board of Directors
The Members of the Board of Directors received cash compensation of CHF 1.143 million in the year under review (previous year: CHF 1.159 million). In addition, a total of 1’501 GF registered shares with a total market value of CHF 1.472 million were allocated (previous year: 1’500 GF shares with a market value of CHF 1.180 million). Together with other benefits, the total compensation paid to the Board of Directors in 2019 amounted to CHF 2.735 million (previous year: CHF 2.449 million).
The detailed disclosure of compensation to the Board of Directors is as follows:
Compensation of the members of the Board of Directors 2019
|
|
Compensation |
|
|
|
|
|
|
||||||
|
|
Cash compensation |
|
Share-based compensation |
|
|
|
|
|
|
||||
|
|
Basis fee 1 |
|
Committee fees |
|
Number of shares |
|
Share-based compensation 2 |
|
Other benefits 3 |
|
Total compensation 2019 4 |
|
Total compensation 2018 4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andreas Koopmann |
|
70 |
|
200 |
|
300 |
|
295 |
|
24 |
|
589 |
|
528 |
Chairman Board of Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman Nomination Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hubert Achermann |
|
70 |
|
80 |
|
150 |
|
147 |
|
12 |
|
309 |
|
279 |
Chairman Audit Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerold Bührer 5 |
|
21 |
|
16 |
|
45 |
|
44 |
|
3 |
|
84 |
|
251 |
Vice Chairman Board of Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member Audit Committee |
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roman Boutellier |
|
70 |
|
20 |
|
150 |
|
147 |
|
9 |
|
246 |
|
216 |
Member Compensation Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Riet Cadonau |
|
70 |
|
20 |
|
150 |
|
147 |
|
12 |
|
249 |
|
219 |
Member Nomination Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger Michaelis |
|
93 |
|
30 |
|
150 |
|
147 |
|
14 |
|
284 |
|
254 |
Member Audit Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eveline Saupper |
|
70 |
|
40 |
|
150 |
|
147 |
|
13 |
|
270 |
|
240 |
Chairwoman Compensation Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yves Serra 6 |
|
49 |
|
21 |
|
106 |
|
104 |
|
7 |
|
181 |
|
- |
Vice Chairman Board of Directors 7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Member Audit Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jasmin Staiblin |
|
70 |
|
20 |
|
150 |
|
147 |
|
12 |
|
249 |
|
219 |
Member Compensation Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhiqiang Zhang |
|
93 |
|
20 |
|
150 |
|
147 |
|
14 |
|
274 |
|
243 |
Member Nomination Committee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
676 |
|
467 |
|
1’501 |
|
1’472 |
|
120 |
|
2’735 |
|
2’449 |
(all in CHF 1'000 and stated in gross amounts, except column "Number of shares")
1 The basis fees include reimbursements for international travel amounting to CHF 22'500 for Mr. Roger Michaelis and for Mr. Zhiqiang Zhang.
2 The share-based compensation consists in the allocation of a fixed number of shares. The amount of the share-based compensation is calculated based on the share value on 31 December 2019, i.e. CHF 983.00.
3 Other benefits represent employer contributions to social insurance funds.
4 The total compensation includes the cash compensation, the share-based compensation and the contribution to social insurance funds.
5 Board of Director until 17 April 2019
6 Board of Director as of 18 April 2019
7 As of 18 April 2019, the additional fee for Board Vice-Chairmanship was discontinued
The compensation paid to the Board of Directors for the year 2019 was higher compared to previous year. The increase results from the difference in the value of the shares (CHF 983.00 on 31 December 2019 compared to CHF 786.50 on 31 December 2018) only. The compensation system for the Board of Directors remained unchanged compared to previous year.
At the 2018 Annual Shareholders’ Meeting, shareholders approved a maximum aggregate compensation amount of CHF 3.750 million (based on a share value of CHF 1’600.00) for the Board of Directors for the compensation period from the 2018 Annual Shareholders’ Meeting until the 2019 Annual Shareholders’ Meeting. For this period, the effective compensation amounted to CHF 2.540 million (based on a share value of CHF 786.50 for the period in 2018 and CHF 983.00 for the period in 2019) and is thus within the approved limits.
At the 2019 Annual Shareholders’ Meeting, shareholders approved a maximum aggregate compensation amount of CHF 3.750 million for the Board of Directors for the compensation period from the 2019 Annual Shareholders’ Meeting until the 2020 Annual Shareholders’ Meeting. This compensation period is not yet completed, a conclusive assessment will be provided in the 2020 Compensation Report.
In the reporting year, no further compensation was paid to Members of the Board of Directors and no compensation was paid to parties closely related to Members of the Board of Directors.
Executive Committee
The Members of the Executive Committee received cash, share-based compensation, social security and pension contributions amounting to CHF 7.488 million for the year under review (previous year: CHF 8.417 million) compared to a total amount of CHF 10.531 million approved by the shareholders at the 2018 Annual Shareholders’ Meeting.
Under the LTI plan, 1’644 performance shares with a total value at grant of CHF 1.628 million were granted to Members of the Executive Committee for the year under review (previous year: 1’752 performance shares with a total value of CHF 1.378 million).
The detailed disclosure of compensation to the Executive Committee in accordance with the Swiss “Ordinance against excessive pay in stock exchange listed companies” is as follows:
Compensation of the members of the Executive Committee 2019
|
|
Fixed salary in cash |
|
Short-term incentive (STI) in cash 2 |
|
EPS dependent performance shares PS(EPS) |
|
rTSR dependent performance shares PS(rTSR) |
|
Share-based remuneration (LTI) 3 |
|
Social insurance funds 4 |
|
Pension funds 5 |
|
Total compensation 2019 6 |
|
Total compensation 2018 7 |
Executive Committee 1 |
|
2’788 |
|
1’858 |
|
822 |
|
822 |
|
1’628 |
|
395 |
|
819 |
|
7’488 |
|
8’417 |
Of whom Andreas Müller, CEO (highest individual compensation) 6 |
|
673 |
|
547 |
|
248 |
|
248 |
|
488 |
|
110 |
|
188 |
|
2’006 |
|
3’197 |
(all in CHF 1'000 and stated in gross amounts, except columns "EPS dependent performance shares" and "rTSR dependent performance shares")
1 The compensation of the Executive Committee includes the compensation for Yves Serra as Member of the Executive Committee until 17 April 2019. His compensation as Member of the Board of Director, since 18 April 2019, is disclosed in the table Compensation Members of the Board of Directors 2019. The compensation of the Executive Committee also includes the compensation for Mads Joergensen (Executive Committee member since 18 April 2019).
2 The STI is based on the STI plan. The STI for the 2019 business year was approved by the Board of Directors on 20 February 2020. Payment will be made in March 2020.
3 The share-based compensation is based on the LTI plan. The disclosed value corresponds to the grant value of the 2019 LTI (that is granted on 1 January 2020) and is calculated based on the share value on 31 December 2019, i.e. CHF 983.00. The value of the share-based compensation for Yves Serra as CEO is calculated based on the share value on the date of his retirement from the Executive Committee (17 April 2019), i.e. CHF 1'036.00.
4 The social insurance funds expenses represent employer contributions to social security. The amounts indicated are based on the compensation amounts disclosed in the table (including the value at grant of the share-based remuneration).
5 The pension funds expenses represent employer contributions to pension funds.
6 The total compensation includes the fixed salary, the STI, the share-based compensation, as well as social and pension contributions.
7 Total compensation 2019 indicates total compensation for Andreas Müller as acting CEO in 2019. Total compensation 2018 indicates total compensation for Yves Serra as acting CEO in that year.
The total compensation for the CEO and the other Members of the Executive Committee in 2019 was lower than in 2018, which can be explained by the following factors:
- Fixed salary: The changes in the composition of the Executive Committee, with the appointment of Andreas Müller as the new CEO (replacing Yves Serra), and of Mads Joergensen as the new CFO (replacing Andreas Müller) as of 18 April 2019, lead to a decrease of the fixed salary amounts.
-
STI: The financial performance of the Corporation and the divisions was lower in 2019 than in 2018, which resulted in a lower STI payout (see details in chapter Performance in 2019).
For the year under review, the STI payout for Andreas Müller was CHF 547’000 which corresponds to 89% of target and 59% of the maximum STI (STI for the CEO in 2018 was CHF 1.247 million which corresponds to 131% of target and 87% of maximum STI).
For the other Members of the Executive Committee, the STI ranged from 64% to 130% of target (93% to 139% in 2018). -
LTI: The number of PS granted to the CEO was reduced from 750 to 600 per year compared to previous year. The number of PS granted to each other Member of the Executive Committee remained unchanged compared to previous year.
Despite a lower number of PS granted to the CEO, the increase in the share price from CHF 786.50 in 2018 to CHF 983.00 in 2019 resulted in an increase in the compensation amount disclosed. - Please note that a significant portion of the social security payments of the employer to the Swiss social security system represents a solidarity payment as the individuals will never get any return or benefit due to these payments.
The ratio between fixed and awarded variable compensation in 2019 was as follows:
CEO Compensation 2019
Amounts in CHF 1’000
Executive Committee Compensation 2019
Amounts in CHF 1’000
For a former Executive Committee member a compensation amounting to CHF 543’323 was paid in the year 2019, reflecting the compensation for the remainder of the notice period (not included in the figures above).
No compensation was paid to parties closely related to Members of the Executive Committee.
Performance in 2019
Short-term incentive 2019
The achievement of the business objectives for the 2019 short-term incentive is as follows:
|
|
Strategic goal |
|
Hurdle 1 |
|
Achievement/ payout factor 2 |
Business Objectives |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation level |
|
|
|
|
|
73% |
Organic sales growth |
|
3-5% |
|
1% |
|
0% |
EBIT margin |
|
9-10% |
|
6% |
|
96% |
ROIC |
|
20-24% |
|
14% |
|
86% |
|
|
|
|
|
|
|
Division level |
|
|
|
|
|
|
Organic sales growth |
|
Not disclosed 3 |
|
Not disclosed 3 |
|
0%-9% |
EBIT margin |
|
Not disclosed 3 |
|
Not disclosed 3 |
|
70%-148% |
ROIC |
|
Not disclosed 3 |
|
Not disclosed 3 |
|
0%-150% |
1 Achievements below the hurdle result in zero payout for the respective business objective; for the organic sales growth objective, the payout for reaching the hurdle starts at 0%, while it starts at 50% for reaching the hurdle for the objectives EBIT margin and ROIC.
2 Adjusted for items relating to structural measures in the division GF Casting Solutions
3 Those targets and hurdles are not disclosed as they are considered commercially sensitive and confidential
Shareholdings of members of the Board of Directors, Executive Committee, or persons related to them
Related persons and companies are defined as family members and persons or companies over which a significant influence can be exercised. Transactions with related persons and companies must be settled on prevailing market terms.
Apart from the compensation paid to the Board of Directors and the Executive Committee and the regular contributions to the various pension fund institutions, no transactions with related persons or companies took place.
Shareholdings Board of Directors
|
|
|
|
|
Number of Georg Fischer registered shares as of 31 Dec. 2019 |
|
Number of Georg Fischer registered shares as of 31 Dec. 2018* |
|
|
|
|
|
|
|
|
Andreas Koopmann |
|
Chairman Board of Directors Chairman Nomination Committee |
|
|
3’059 |
|
2’759 |
Yves Serra 1 |
|
Vice Chairman Board of Directors Member Audit Committee |
|
|
8’488 |
|
|
Hubert Achermann |
|
Chairman Audit Committee |
|
|
856 |
|
706 |
Roman Boutellier |
|
Member Compensation Committee |
|
|
3’388 |
|
3’238 |
Riet Cadonau |
|
Member Nomination Committee |
|
|
555 |
|
405 |
Roger Michaelis |
|
Member Audit Committee |
|
|
1’156 |
|
1’006 |
Eveline Saupper |
|
Chairwoman Compensation Committee |
|
|
1’217 |
|
1’067 |
Jasmin Staiblin |
|
Member Compensation Committee |
|
|
1’334 |
|
1’184 |
Zhiqiang Zhang |
|
Member Nomination Committee |
|
|
2’376 |
|
2’226 |
Total Directors |
|
|
|
|
22’429 |
|
12’591 |
* The number of Georg Fischer registered shares amounted to 15'752 in 2018 and included the number of registered shares of Gerold Bührer (Vice Chairman Board of Directors and Member Audit Committee until 17 April 2019) of 3'161.
1 Vice Chairman Board of Directors and Member Audit Committee since the Annual Shareholders' Meeting 2019 (since 18 April 2019).
Shareholdings Executive Committee
|
|
|
|
|
Number of Georg Fischer registered shares as of 31 Dec. 2019 |
|
Number of Georg Fischer registered shares as of 31 Dec. 2018* |
|
|
|
|
|
|
|
|
Andreas Müller |
|
CEO, Head of Corporate Development |
|
|
410 |
|
410 |
Mads Joergensen 1 |
|
CFO, Head of Corporate Finance & Controlling |
|
|
410 |
|
0 |
Joost Geginat |
|
President of GF Piping Systems |
|
|
100 |
|
100 |
Carlos Vasto |
|
President of GF Casting Solutions |
|
|
112 |
|
63 |
Pascal Boillat |
|
President of GF Machining Solutions |
|
|
750 |
|
1’000 |
Total Executive Committee |
|
|
|
|
1’782 |
|
1’573 |
* The number of Georg Fischer registered shares amounted to 8'758 in 2018 and included the number of registered shares of Yves Serra (Member Executive Committee until 17 April 2019) and Josef Edbauer (Member Executive Committee until 31 August 2018) of 5'003 and 2'182.
1 Member Executive Committee since 18 April 2019.
The registered shares transferred as part of share-based compensation to the Executive Committee are blocked for at least five years.
As of 31 December 2019, members of the Senior Management registered a total of 20’781 shares of Georg Fischer Ltd. A total of 44’992 Georg Fischer shares were held by the Board of Directors, the Executive Committee, and the Senior Management as of 31 December 2019, corresponding to 1.10% of issued shares.
Neither Georg Fischer Ltd nor its Corporate Companies granted any guarantees, loans, advances, or credit facilities to members of the Executive Committee or the Board of Directors or related parties.
Compensation has not involved the allocation of options to current or past members of the Executive Committee or Board of Directors. Neither they nor any related persons possess option rights allocated by GF. As of 31 December 2019, the members of the Executive Committee held no option rights for Georg Fischer registered shares.
In 2019, GF did not make any severance payments to members of the Board of Directors or Executive Committee who left the company in the period under review or earlier.