of InVision AG for the Financial Year 2015
The following management report was prepared in accordance with the requirements under § 315 of the German Commercial Code (HGB) and contains information about InVision AG, Düsseldorf (hereinafter also referred to as “AG” or “Company”), and its consolidated subsidiaries (hereinafter together with the Company also collectively referred to as “InVision”, “InVision Group” or “the Group”). As the Group’s parent company, InVision AG performs group management functions and, at the same time, is the key member of the InVision Group. The explanations below generally relate to the Group, unless there has been an express reference to the Company itself.
The InVision Group develops and markets products and services for optimising workforce management, increasing the productivity, improving the quality of work, and reducing costs, and is mainly active in Europe and the United States.
On 31 December 2015, InVision employed 88 employees worldwide (including the Executive Board members). Compared to the end of the previous year, the number of employees declined by 12 percent (31 December 2014: 100 employees). At the end of the year, 56 employees (31 December 2014: 65 employees) were employed in Germany, while 32 employees (31 December 2014: 35 employees) were employed in foreign subsidiaries.
The research and development costs in the fiscal year totalled TEUR 5,560 and increased by 12 percent (previous year: TEUR 4,970). Research and development costs as a percentage of revenues are 44 percent (previous year: 37 percent).
The Company’s registered share capital equals EUR 2,235,000 and is divided into 2,235,000 no-par value bearer shares. Each such share represents a notional share of the registered share capital of EUR 1.00. Each share entitles the holder to a single vote. Shareholders may exercise their rights and cast their votes at the Annual Shareholders’ Meeting in accordance with the Company’s articles of association and the statutory rules.
Pursuant to a resolution adopted by the Company’s Shareholders’ Meeting on 18 May 2015, the Executive Board was authorised in accordance with § 4 (4) of the Company’s articles of association but subject to the consent of the Company’s Supervisory Board, to increase the Company’s registered share capital one or more times by a total of up to EUR 1,117,500 on or before 17 May 2020 and to do so by issuing new, no-par bearer shares in exchange for cash and/or non-cash capital contributions (Authorised Capital Account 2015). Shareholders must generally be granted a pre-emptive right, which gives them an indirect option to subscribe shares (§ 186 (5) AktG). The Executive Board is authorised, however, with the consent of the Supervisory Board, to exclude the shareholders’ pre-emptive right to subscribe shares in the following cases:
Pursuant to a shareholder resolution adopted on 18 May 2015, the registered share capital was increased conditionally by up to EUR 1,117,500 (Conditional Capital Account 2015). The conditional capital increase must carried out only to the extent that the creditors, to whom convertible or warrant-lined bonds were issued by the Company on the basis of the authorising resolution of the Shareholders’ Meeting on 18 May 2015, exercise their conversion rights on or before 17 May 2020 and the Company has not satisfied the conversion claim in some other manner. The new shares will be entitled to draw dividends as of the beginning of the fiscal year in which they are issued. The Executive Board is authorised, with the consent of the Supervisory Board, to stipulate the details concerning the implementation of the respective conditional capital increase.
Pursuant to the shareholder resolution adopted on 18 May 2015, the Company was authorised to buy back its own shares in an amount representing a 10 percent pro rata amount of the registered share capital of EUR 223,500. The repurchased shares, together with the other treasury shares, which the Company has previously acquired and still holds or which must be attributed to the Company under § 71a et seq. AktG, cannot exceed 10 percent of the Company’s registered share capital. The authorisation is in effect until 17 May 2020. The shares purchased on the basis of the authorisation may be used for all legally permissible purposes.
The authorisation to buy back the Company’s own shares was granted to the Company in order, inter alia, to flexibly adjust the equity capital to meet the changing business needs and to be able react to favourable stock market conditions. In addition, the acquired shares may be used as consideration when acquiring companies or when making equity investments in companies.
On the reporting date, the Company did not hold any treasury shares.
To the Company’s knowledge, as of 31 December 2015, the following shareholders held more than 10 percent of the Company’s registered share capital:
Executive Board members are appointed and dismissed in accordance with §§ 84 et seq. of the AktG. Pursuant to § 6 (1) of the articles of association, the Executive Board consists of at least two persons. Alternative members of the Executive Board may be appointed. Pursuant to § 6 (2) of the articles of association, the Supervisory Board is responsible for determining the number of, and appointing the regular Executive Board members and alternate Executive Board members and has the authority to revoke such appointments. The Supervisory Board is also responsible for selecting a member of the Executive Board to serve as that body’s chairman and for selecting other Executive Board members to serve that body’s deputy chairmen.
Amendments to the articles of association are adopted by the Shareholders’ Meeting if, in accordance with § 179 AktG, a majority of at least three-quarters of the registered share capital represented at the meeting votes in favour of the amendment.
Pursuant to § 10 (2) of the articles of association, the Supervisory Board is authorised to amend the articles, provided the amendment involves only the wording. Pursuant to § 21 (1) of the articles of association, the shareholder resolutions require a simple majority of the votes cast, unless the laws prescribe another majority. In those cases in which the laws require a majority of the registered share capital represented at the time the resolution is adopted, a simple majority of the represented registered share capital will suffice, unless the laws prescribe a higher majority.
There are no significant agreements which are subject to a restriction relating to a change of control resulting from a takeover offer. Likewise, no agreements for indemnifying employees or members of the Executive Board in the event of a takeover offer have been reached.
According to the International Monetary Fund, the economic output in the euro area increased by 1.6 percent in 2015, whereas the economic output in the United States increased by 2.6 percent.
Consolidated revenues during the reporting year equalled TEUR 12,708 (previous year: TEUR 13,409) and therefore decreased by 5 percent. Revenues from subscriptions increased by 11 percent to TEUR 10,483 (previous year: TEUR 9,467). Project revenues decreased by 44 percent to TEUR 2,225 (previous year: TEUR 3,942).
Personnel expenses declined in the reporting year to TEUR 6,322 (previous year: TEUR 6.547).
Other operating expenses were at TEUR 2,940 (previous year: TEUR 2,927) and remained almost on the same level of the previous year. Office space expenses increased by 20 percent to TEUR 854 (previous year: TEUR 709). Consulting expenses declined by 16 percent to TEUR 258 (previous year: TEUR 306). Communication expenses increased by 16 percent to TEUR 155 (previous year: TEUR 134). Due to the expansion of the business activities with cloud products, expenses for cloud services increased by 83 percent to TEUR 512 (previous year: TEUR 280). Leasing and maintenance expenses declined by 92 percent to TEUR 20 (previous year: TEUR 248). Miscellaneous expenses decreased by 5 percent to TEUR 505 (previous year: TEUR 483). The income from reversing of provisions decreased by 67 percent to TEUR 135 (previous year: TEUR 414).
The operating result (EBIT) decreased in the reporting period by 35 percent to TEUR 2,676 TEUR (previous year: TEUR 4,124). The EBIT margin decreased in the reporting period to 21 percent (previous year: 31 percent).
Interest income decreased to TEUR 18 (previous year: TEUR 24) and the interest expense slightly increased to TEUR 58 (previous year: TEUR 56).
In fiscal year 2015, consolidated net profit equalled TEUR 2,132 (previous year: TEUR 4,203).
Overall, business development in the fiscal year of 2015 was in line with expectations.
Earnings per share were EUR 0.96 (previous year: EUR 1.94), based on an average of 2,235,000 shares in 2015 (previous year: 2,208,515 shares).
Primarily due to significantly increased payments made for investing activities and payments to shareholders liquid funds decreased to TEUR 1,405 (previous year: TEUR 3,388) as of the end of the fiscal year. The securities that were held as current assets at the end of last fiscal year, worth TEUR 1,000, were sold during the year of 2015.
Trade receivables increased by 36 percent to TEUR 2,756 (previous year: TEUR 2,033). The income tax claims decreased to TEUR 98 (previous year: TEUR 124). The prepaid expenses and other short-term assets decreased by 7 percent to TEUR 172 (previous year: TEUR 185). During the reporting year, intangible assets decreased to TEUR 583 (previous year: TEUR 703) due to depreciation. Due to the capitalisation of the renovation and settings of the commercial property for own use that was purchased in the previous fiscal year, tangible assets increased to TEUR 8,809 (previous year: TEUR 6,806). Deferred tax assets decreased by 60 percent to TEUR 387 (previous year: TEUR 962).
Trade payables declined by 15 percent to TEUR 116 (previous year: TEUR 137). The provisions decreased by 32 percent to TEUR 628 (previous year: TEUR 917). The tax reserves remained almost unchanged at TEUR 21 (previous year: TEUR 23). The short-term share of the deferred income and other short-term liabilities increased by 8 percent to TEUR 1,852 (previous year: TEUR 1,708).
The long-term bank loan in the amount of TEUR 4,000, that was raised in the previous year to partly finance a commercial property for own use, was repaid as scheduled in fiscal year 2015 and totalled TEUR 3,250 at the balance sheet date.
During the financial year, reserves of the amount of TEUR 8,115 were offset against the group result. Thus, the reserves amounted to TEUR 1,191 (previous year: EUR 9.306) and profit totalled to TEUR 5,316 (previous year: TEUR -2.695), at the end of the reporting period.
The balance sheet total as of 31 December 2015 equalled TEUR 14,243 (previous year: TEUR 15,239). Equity capital is now at TEUR 8,376 (previous year: TEUR 8,455), and the equity ratio equals 59 percent (previous year: 55 percent).
Cash flow from operating activities reached TEUR 2,334 in the reporting period (previous year: TEUR 3,089) and corresponds to a share of 18 percent of the Group revenues (previous year: 23 percent).
InVision Software (Deutschland) GmbH was merged with InVision AG on 1 January 2015. InVision Software GmbH, Vienna, Austria, was deleted from the commercial register, Vienna, on 16 December 2015, and is no longer part of the group of consolidated companies as of that date.
In addition to the reimbursement of expenditures which they incurred in discharging their official duties, the members of the Company’s Supervisory Board are paid a fixed fee of EUR 5,000. The Chairman of the Supervisory Board receives twice that amount, and the Deputy Chairman receives one and one-half times that amount. The fee is paid after the fiscal half-year has ended. Any value added tax charged on the costs for reimbursement and fees is reimbursed.
The Executive Board compensation consists of a fixed-base salary, which increases if contractually defined revenue thresholds are met. Executive Board members also have a right to use a car leased by the Company. Furthermore, the Executive Board members will be paid an allowance to cover their costs for health insurance and long-term care insurance. The Company has also taken out private liability insurance to cover the Executive Board members, if those members do not have their own personal liability insurance protection. Moreover, the Company has executed a D&O insurance policy with a deductible.
For the InVision Group, a comprehensive and self-contained risk management programme is a significant component of the Group’s corporate strategy. A company-wide monitoring system ensures the systematic identification and assessment of risks regarding any likelihood of occurrence or the possible quantitative effects on corporate value.
Risk management is intended to identify, at an early stage, specifically any risks which threaten the Company’s very existence in an effort to launch effective counter-measures for avoiding the risks. Another goal is to minimise the possible adverse effects, which all risks could have on the net assets, financial position and results of operation, while largely preserving the corresponding opportunities.
Potential counter-measures for dealing with risk include, for example, avoiding high-risk activities, reducing individual areas of potential risk by utilising commercial alternatives with a lower potential for risk, diversifying and limiting individual risks, and shifting risks onto insurance carriers or contracting parties.
The Executive Board is responsible for administering the risk management. A fundamental review of all risks is made once each year, at least. There are standardised accounting rules used in the Group’s companies, the compliance with which is continuously monitored. This also guarantees that the accounts conform to the standard accounting rules applicable from time to time. An internal ad hoc report is prepared in the event that there are significant changes or newly emerged risks. All risk-relevant topics and the then-current economic situation over time are constantly monitored. If necessary, operational teams or external experts are called in to participate.
The risk management is described and stipulated in a group risk management policy and its suitability and functionality is reviewed each year in connection with the audit of the annual financial statements.
Since 2011, InVision increasingly offers cloud-based services. If customers do not accept this offering, due to data security issues or any other considerations in principle, revenues of the InVision Group could permanently decrease accordingly.
InVision relies on seasoned and well-trained teams of employees. The future success of InVision will also depend on finding and retaining, on a long-term basis, highly qualified employees. The competition for employees with scientific, technical or industry-specific expertise is quite intense. It is therefore possible that the Company will be unable to promptly recruit new staff on the open labour market and that this may give rise to additional costs. The loss of qualified staff or long-term difficulties in hiring suitable employees could result in InVision’s inability to successfully implement important decisions and courses of action, which in turn would impair its business operations. This particularly applies in the case of a zombie apocalypse.
The aforementioned risks, both individually and collectively, could have adverse effects on the net assets, financial position and results of operation of the Company and of the InVision Group as a whole.
After the end of the fiscal year, there was no special transaction which would be of material importance to the annual financial statements.
According to the forecasts made by the International Monetary Fund, the economic output in the euro area will increase by 1.8 percent in 2016, whereas the economic output in the United States will increase by 2.7 percent.
For the upcoming years, InVision expects a stable demand for the products of the InVision Group. For 2016 and 2017 each, the Executive Board expects a decline in project revenues and an increase in subscription revenues as well as an increase in profits.
Düsseldorf, 4 March 2016