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Notes to the consolidated financial statements as of March 31, 2020

1. Basis for preparation

1.1 Corporate information

The Sonova Group (the “Group”) specializes in the design, development, manufacture, worldwide distribution and service of technologically advanced hearing systems for adults and children with hearing impairment. The Group operates worldwide and distributes its products in over 100 countries through its own distribution network and through independent distrib­utors. The ultimate parent company is Sonova Holding AG, a limited liability company incorporated in Switzerland. Sonova Holding AG’s registered office is located at Laubis­rütistrasse 28, 8712 Stäfa, Switzerland.

1.2 Basis of consolidated financial statements

The consolidated financial statements of the Group are based on the financial statements of the individual Group companies at March 31, which are prepared in accordance with uniform accounting policies. The consolidated financial statements were prepared under the historical cost convention except for the revaluation of certain financial assets at market value, which were prepared in accordance with International Financial Reporting Standards (IFRS), including International Accounting Standards (IAS) and Interpretations issued by the International Accounting Standards Board (IASB). The consolidated financial statements were approved by the Board of Directors of Sonova Holding AG on May 14, 2020, and are subject to approval by the Annual General Shareholders’ Meeting on June 11, 2020.

The consolidated financial statements are presented in millions of Swiss Francs (CHF) and rounded to the nearest hundred thousand. Due to rounding, numbers presented throughout this report may not add up precisely to the totals provided. All ratios and variances are calculated using the underlying amount rather than the presented rounded amounts.

The consolidated financial statements include Sonova Holding AG as well as the domestic and foreign subsidiaries over which Sonova Holding AG exercises control. A list of the significant consolidated companies is given in Note 7.6.

Accounting policies of relevance for an understanding of the consolidated financial statements are set out in the specific notes to the financial statements.

1.3 Significant accounting judgments and estimates

Preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. This includes estimates and assumptions in the ordinary course of business as well as non-operating events such as the outcome of pending legal disputes. The estimates and assumptions are continuously evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable. Actual results may differ from these estimates and assumptions.

The main estimates and assumptions with a significant risk of resulting in a material adjustment are described in the following notes:

Description

 

Further information

Allocation of the transaction price to performance obligations

 

Note 2.3: Revenue

Renewal options in leases

 

Note 3.4: Leases

Capitalization of development costs

 

Note 3.5: Intangible assets

Impairment test

 

Note 3.5: Intangible assets

Provisions for warranty, returns and product liabilities

 

Note 3.7: Provisions

Deferred tax assets

 

Note 5.1: Taxes

Business combinations

 

Note 6.1: Acquisitions/disposals of subsidiaries

Defined benefit plans

 

Note 7.3: Employee benefits

The current economic crisis and uncertainties resulting from the COVID-19 pandemic required management to make estimates and assumptions that significantly affected the financial statements for the financial year 2019/20. In particular, it affected cash flow projections in the goodwill impairment testing (described in Note 3.5) and allowances on receivables (described in Note 3.1 and Note 4.7). Furthermore, it also led to a suspension of the Group’s share buyback program (described in Note 4.6) and additional financing requirements (described in Note 4.5 and Note 7.5).

1.4 Changes in accounting policies

The Group has adopted IFRS 16 “Leases” beginning April 1, 2019 as described in Note 7.8.

In addition, in 2019/20 the Group adopted the following minor amendments to existing standards and interpretations, without having a significant impact on the Group’s result and financial position:

  • Prepayment Features with Negative Compensation – Amendments to IFRS 9
  • Long-term Interests in Associates and Joint Ventures – Amendments to IAS 28
  • Annual Improvements to IFRS Standards 2015 – 2017 Cycle
  • Plan Amendment, Curtailment or Settlement – Amendments to IAS 19
  • Interpretation 23 Uncertainty over Income Tax Treatments

The Group has assessed the expected impacts of the various new and revised standards and interpretations that will be effective for the financial year starting April 1, 2020 and beyond. These standards are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

2. Operating result

2.1 Income statement reconciliation

The Group presents the “Consolidated income statement” based on a classification of costs by function and is continuously amending its business portfolio with acquisitions, resulting in acquisition-related intangibles (see section “Intangible assets” in Note 3.5) and related amortization charges. To calculate EBITA1), which is the key profit metric for internal (refer to Note 2.2) as well as external purposes, acquisition-related amortization is separated from the individual functions as disclosed below.

April 1 to March 31, CHF million

 

2019/20

 

 

Income statement as reported

 

Acquis. related amortization

 

Income statement EBITA separation

Sales

 

2,916.9

 

 

 

2,916.9

Cost of sales

 

(833.3)

 

 

 

(833.3)

Gross profit

 

2,083.6

 

 

 

2,083.6

Research and development

 

(167.0)

 

0.9

 

(166.1)

Sales and marketing

 

(1,074.3)

 

43.5

 

(1,030.8)

General and administration

 

(309.0)

 

 

 

(309.0)

Other income/(expenses), net

 

(23.4)

 

 

 

(23.4)

Operating profit before acquisition-related amortization (EBITA) 1)

 

 

 

 

 

554.3

Acquisition-related amortization

 

 

 

(44.4)

 

(44.4)

Operating profit (EBIT) 2)

 

510.0

 

 

 

510.0

April 1 to March 31, CHF million

 

2018/19

 

 

Income statement as reported

 

Acquis. related amortization

 

Income statement EBITA separation

Sales

 

2,763.2

 

 

 

2,763.2

Cost of sales

 

(797.0)

 

 

 

(797.0)

Gross profit

 

1,966.2

 

 

 

1,966.2

Research and development

 

(149.4)

 

1.0

 

(148.4)

Sales and marketing

 

(1,015.7)

 

45.4

 

(970.3)

General and administration

 

(269.3)

 

 

 

(269.3)

Other income/(expenses), net

 

4.4

 

 

 

4.4

Operating profit before acquisition-related amortization (EBITA) 1)

 

 

 

 

 

582.5

Acquisition-related amortization

 

 

 

(46.3)

 

(46.3)

Operating profit (EBIT) 2)

 

536.2

 

 

 

536.2

1) Earnings before financial result, share of profit/(loss) in associates/joint ventures, taxes and acquisition-related amortization (EBITA).

2) Earnings before financial result, share of profit/(loss) in associates/joint ventures and taxes (EBIT).

2.2 Segment information

Information by business segments

The Group is active in the two business segments, hearing instruments and cochlear implants, which are reported separately to the Group’s chief operating decision maker (Chief Executive Officer). The financial information that is provided to the Group’s chief operating decision maker, which is used to allocate resources and to assess the performance, is primarily based on the sales analysis as well as the consolidated income statements and other key financial metrics for the two segments. The Group uses EBITA as key metric to measure profit or loss for both segments (refer to Note 2.1). Transactions between segments are based on market terms.

Hearing instruments:

This operating segment includes the activities of the design, development, manufacture, distribution and service of hearing instruments and related products. Research and development is centralized in Switzerland while some supporting activities are also performed in Canada, Sweden and Germany. Production of hearing instruments is concentrated in three production centers located in Switzerland, China, and Vietnam. Technologically advanced production processes are performed in Switzerland, whereas standard assembly of products is conducted in Asia. Most of the marketing activities are steered by the brand marketing departments in Switzerland, Canada, the United States, Germany and Sweden. The execution of marketing campaigns lies with the sales organizations in each market. Product distribution is done through sales organizations in the individual markets. The distribution channels of the Group vary in the individual markets depending on the sales strategy and the characteristics of the countries. The distribution channels can be split broadly into a retail business where Sonova operates its own store network and sells directly to end consumers and a hearing instruments business, reflecting the wholesale sales to independent audiologists, 3rd party retail chains, multinational and government customers.

Cochlear implants:

This operating segment includes the activities of the design, development, manufacture, distribution and service of hearing implants and related products. The segment consists of Advanced Bionics and the related sales organizations. Research and development as well as marketing activities of Advanced Bionics are centralized predominantly in the United States and Switzerland while production resides in the United States. The distribution of products is effected through sales organizations in the individual markets.

CHF million

 

2019/20

 

2018/19

 

2019/20

 

2018/19

 

2019/20

 

2018/19

 

2019/20

 

2018/19

 

 

Hearing Instruments

 

 

 

Cochlear Implants

 

 

 

Corporate/ Eliminations

 

 

 

Total

 

 

Segment sales

 

2,700.7

 

2,527.2

 

233.5

 

241.1

 

 

 

 

 

2,934.1

 

2,768.3

Intersegment sales

 

(14.5)

 

(2.4)

 

(2.7)

 

(2.7)

 

 

 

 

 

(17.2)

 

(5.0)

Sales

 

2,686.2

 

2,524.8

 

230.7

 

238.4

 

 

 

 

 

2,916.9

 

2,763.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At point in time

 

2,530.0

 

2,361.1

 

222.3

 

230.6

 

 

 

 

 

2,752.4

 

2,591.8

Over time

 

156.2

 

163.7

 

8.4

 

7.8

 

 

 

 

 

164.5

 

171.5

Total sales

 

2,686.2

 

2,524.8

 

230.7

 

238.4

 

 

 

 

 

2,916.9

 

2,763.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit before acquisition-related amortization (EBITA)

 

601.6

 

563.1

 

(46.2)

 

19.7

 

(1.1)

 

(0.2)

 

554.3

 

582.5

Depreciation, amortization and impairment

 

(171.5)

 

(107.2)

 

(28.6)

 

(20.4)

 

 

 

 

 

(200.1)

 

(127.6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

4,018.3

 

3,921.0

 

613.0

 

632.3

 

(810.5)

 

(792.6)

 

3,820.9

 

3,760.7

Unallocated assets 1)

 

 

 

 

 

 

 

 

 

 

 

 

 

665.6

 

531.8

Total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

4,486.5

 

4,292.5

1) Unallocated assets include cash and cash equivalents, other current financial assets (excluding loans), investments in associates/joint ventures and deferred tax assets.

Reconciliation of reportable segment profit CHF million

 

2019/20

 

2018/19

EBITA

 

554.3

 

582.5

Acquisition-related amortization

 

(44.4)

 

(46.3)

Financial costs, net

 

(10.0)

 

(8.7)

Share of gain in associates/joint ventures, net

 

2.4

 

2.1

Income before taxes

 

502.4

 

529.6

Entity-wide disclosures

Sales by business CHF million

 

2019/20

 

2018/19

Hearing Instruments business

 

1,613.0

 

1,474.7

Audiological Care business

 

1,073.2

 

1,050.1

Total Hearing Instruments segment

 

2,686.2

 

2,524.8

Cochlear Implant systems

 

163.9

 

178.9

Upgrades and accessories

 

66.8

 

59.5

Total Cochlear Implants segment

 

230.7

 

238.4

Total sales

 

2,916.9

 

2,763.2

Sales and selected non-current assets by regions CHF million

 

2019/20

 

2018/19

 

2019/20

 

2018/19

Country/region

 

Sales 1)

 

 

 

Selected non-current assets 2)

 

 

Switzerland

 

29.5

 

31.5

 

283.8

 

274.1

EMEA (excl. Switzerland)

 

1,514.9

 

1,489.5

 

1,755.1

 

1,585.7

USA

 

877.6

 

746.7

 

706.7

 

674.3

Americas (excl. USA)

 

220.9

 

228.5

 

167.0

 

150.4

Asia/Pacific

 

274.0

 

267.0

 

118.4

 

116.5

Total Group

 

2,916.9

 

2,763.2

 

3,031.1

 

2,800.9

1) Sales based on location of customers.

2) Total of property, plant & equipment, right-of-use assets, intangible assets and investments in associates/joint ventures.

As common in this industry, the Sonova Group has a large number of customers. There is no single customer who accounts for more than 10% of total sales.

2.3 Revenue

The Group generates revenue primarily from the sale of hearing instruments, cochlear implants and related services. A disaggregation of revenue from contracts with customers is included in Note 2.2. The following provides information about the Groups revenue recognition policies, performance obligations and related contract assets and liabilities.

The following table summarizes the contract assets and contract liabilities related to contracts with customers:

Contract balances CHF million

 

31.3.2020

 

31.3.2019

Contract assets

 

9.3

 

9.4

Contract liabilities

 

318.4

 

332.7

Contract liabilities relate to advance consideration received from customers for the Group’s various services, such as extended warranties, loss and damage and battery plans. In addition to the contract liabilities, the Group also recognizes contract assets that relate to loss and damage services. Contract assets are presented within other operating assets (refer to Note 3.6) in the consolidated balance sheets.

Significant changes in the contract liabilities during the period are as follows:

Movement in contract liabilities CHF million

 

2019/20

 

2018/19

Balance April 1

 

332.7

 

335.0

Changes through business combinations

 

0.8

 

(0.2)

Increase due to advance consideration received in the period

 

169.5

 

175.9

Decrease due to revenue recognized in the period that,

 

 

 

 

– was included in the contract liabilities at the beginning of the period

 

(132.8)

 

(105.9)

– relates to consideration received in the period

 

(33.2)

 

(65.6)

Exchange differences

 

(18.4)

 

(6.6)

Balance March 31

 

318.4

 

332.7

 

 

 

 

 

Expectation on timing of revenue recognition:

 

 

 

 

Within 1 year

 

105.6

 

106.5

Within 2 years

 

95.7

 

120.6

Within 3 years

 

56.9

 

51.3

Within 4 years

 

26.5

 

21.0

More than 4 years

 

33.6

 

33.2

No material revenue was recognized in the current period from performance obligations satisfied in previous periods.

Accounting policies

The Group recognizes revenue at point in time when ownership of the products is transferred to the buyer, mainly upon delivery. The transaction price is adjusted for any variable elements, such as rebates and discounts. For audiological care customers, revenue recognition usually occurs after fitting of the device or when the trial period lapses. For hearing instruments sold in bundled packages (i.e. including accessories and services), the transaction price is allocated to each performance obligation on the basis of the relative stand-alone selling price of all performance obligations in the contract.

For cochlear implants, sales are generally recognized at point in time when ownership of the products is transferred to the buyer (mainly hospitals), either at delivery or after surgery.

When the customer has a right to return the product within a given period, the amount of revenue is adjusted for expected returns, which are estimated based on historical product return rates. A return provision for the expected returns is recognized as an adjustment to revenue. In addition, an asset for the right to recover returned goods is recognized, measured by reference to the carrying amount, which is presented as part of other current operating assets.

The Group also offers various services, such as extended warranties, loss and damage and battery plans. Revenue for these services is predominantly recognized on a straight-line basis over the service period. In the majority of countries in which the Group operates, the standard warranty period is two years and the extended warranty covers periods beyond the second year. Loss and damage is offered in some, but not all countries, in which the Group operates. This service assures replacement of hearing instruments that are not covered by the warranty. In some countries, the Group reinsures loss and damage. Insurance costs are capitalized as contract assets and are recognized as cost of sales over the loss and damage service period.

Payment terms vary significantly across countries and also depend on whether the customer is a private or public customer.

Accounting judgements and estimates

In order to allocate the transaction price to each performance obligation in a contract, management estimates the standalone selling price of the products and services at contract inception. Mostly, the standalone selling price is based on established price lists. For loss and damage services, management considers the likelihood of a customer claim in the calculation of the standalone selling price.

If the sum of the standalone selling prices of a bundle of goods or services exceeds the consideration in a contract, the discount is allocated proportionally to all of the performance obligations in the contract unless there is observable evidence that the discount relates to only one or some of the performance obligations.

2.4 Other income/expenses, net

“Other income/expenses, net” in the 2019/20 financial year shows net costs of CHF 23.4 million (previous year income of CHF 4.4 million). The regular and systematic assessment of the provision for product liabilities in the cochlear implants segment in relation to the voluntary recall of cochlear implant products in 2006 led to a release of CHF 0.8 million (previous year CHF 4.1 million). In addition, as announced on February 18, 2020, the group informed of a voluntary field corrective action by its US subsidiary Advanced Bionics LLC (AB). For potential product liability claims in connection with this voluntary field corrective action, a provision in the amount of CHF 24.1 million has been set up and the respective costs have been considered as “other expenses” (for further information refer to Note 3.7 “Provisions”). In the 2018/19 financial year, the divestment of audiological care stores in the USA led to a gain of CHF 0.3 million. 

2.5 Earnings per share

Basic earnings per share

 

2019/20

 

2018/19

Income after taxes (CHF million)

 

483.2

 

454.1

Weighted average number of outstanding shares

 

63,511,720

 

65,066,736

Basic earnings per share (CHF)

 

7.61

 

6.98

Diluted earnings per share

 

2019/20

 

2018/19

Income after taxes (CHF million)

 

483.2

 

454.1

Weighted average number of outstanding shares

 

63,511,720

 

65,066,736

Adjustment for dilutive share options

 

356,738

 

268,205

Adjusted weighted average number of outstanding shares

 

63,868,458

 

65,334,941

Diluted earnings per share (CHF)

 

7.57

 

6.95

Accounting policies

Basic earnings per share is calculated by dividing the income after taxes attributable to the ordinary equity holders of the parent company by the weighted average number of shares outstanding during the year.

In the case of diluted earnings per share, the weighted average number of shares out­standing is adjusted assuming all outstanding dilutive options will be exercised. The weighted average number of shares is adjusted for all dilutive options issued under the stock option plans which have been granted in 2013 through to 2020 and which have not yet been exercised. Options that are out-of-the-money (compared to average share price) are not considered. The calculation of diluted earnings per share is based on the same income after taxes for the period as is used in calculating basic earnings per share.

3. Operating assets and liabilities

3.1 Trade receivables

CHF million

 

31.3.2020

 

31.3.2019

Trade receivables

 

434.0

 

559.6

Loss allowance for doubtful receivables

 

(51.9)

 

(39.0)

Total

 

382.1

 

520.6

As is common in this industry, the Sonova Group has a large number of customers. There is no significant concentration of credit risk. In the context of the COVID-19 impacts as of March 31, 2020, the allowance for doubtful receivables has been significantly increased. For further information on the process of the re-assessment of the allowance at the end of the financial year and for information about the aging of the trade receivables and related allowances please refer to Note 4.7.

During 2019/20, the Group utilized CHF 6.4 million (previous year CHF 2.2 million) of the loss allowance for doubtful receivables to write-off receivables.

The carrying amounts of trade receivables are denominated in the following currencies:

CHF million

 

31.3.2020

 

31.3.2019

BRL

 

10.9

 

18.2

CAD

 

15.8

 

22.4

CHF

 

12.5

 

20.9

EUR

 

155.5

 

203.3

GBP

 

11.1

 

22.0

USD

 

122.4

 

164.2

Other

 

53.9

 

69.8

Total trade receivables, net

 

382.1

 

520.6

Accounting policies

Trade receivables are initially recorded at original invoice amount and subsequently measured at amortized cost using the effective interest method, less loss allowance. The Group applies the IFRS 9 simplified approach to measuring credit losses, which uses a lifetime expected loss allowance for trade receivables. This approach considers historical credit loss experience as well as forward-looking factors (see Note 4.7). The charges to the income statement are included in general and administration costs. Due to the short-term nature of trade receivables, their carrying amount is considered to approximate their fair value.

3.2 Inventories

CHF million

 

31.3.2020

 

31.3.2019

Raw materials and components

 

34.6

 

49.6

Work-in-process

 

110.9

 

96.6

Finished products

 

167.1

 

172.6

Allowances

 

(47.1)

 

(36.8)

Total

 

265.4

 

282.1

The “cost of sales” corresponding to the carrying value of inventory (which excludes freight, packaging, logistics as well as certain overhead cost) amounted in 2019/20 to CHF 700.0 million (previous year CHF 666.0 million). The Group recognized write-downs of CHF 45.7 million (previous year CHF 29.4 million) on inventories in cost of sales.

Accounting policies

Purchased raw materials, components and finished goods are valued at the lower of cost or net realizable value. To evaluate cost, the standard cost method is applied, which approximates historical cost determined on a first-in first-out basis.

Manufactured finished goods and work-in-process are valued at the lower of production cost or net realizable value. Standard costs take into account normal levels of materials, supplies, labor, efficiency, and capacity utilization. Standard costs are regularly reviewed and, if necessary, revised in the light of current conditions. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion (where applicable) and selling expenses.

Allowances are established for slow moving, phase out and obsolete stock.

3.3 Property, plant and equipment

CHF million

2019/20

 

 

Land & buildings

 

Machinery & technical equipment

 

Room installations & other equipment

 

Advance payments & assets under construction

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

199.0

 

306.0

 

357.2

 

9.8

 

872.1

Changes through business combinations

 

 

 

0.6

 

0.6

 

 

 

1.2

Additions

 

8.6

 

27.0

 

36.9

 

16.3

 

88.7

Disposals

 

(0.1)

 

(14.2)

 

(9.7)

 

 

 

(24.0)

Transfers

 

1.7

 

(8.5)

 

16.3

 

(9.6)

 

 

Exchange differences

 

(3.5)

 

(10.5)

 

(18.2)

 

(0.6)

 

(32.7)

Balance March 31

 

205.7

 

300.4

 

383.2

 

15.9

 

905.3

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(79.2)

 

(226.1)

 

(242.0)

 

 

 

(547.2)

Additions

 

(5.8)

 

(26.3)

 

(34.1)

 

 

 

(66.2)

Disposals

 

0.1

 

13.5

 

8.5

 

 

 

22.1

Transfers

 

0.1

 

6.2

 

(6.3)

 

 

 

 

Exchange differences

 

1.5

 

7.3

 

10.2

 

 

 

18.9

Balance March 31

 

(83.3)

 

(225.4)

 

(263.7)

 

 

 

(572.4)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

119.8

 

79.9

 

115.3

 

9.8

 

324.9

Balance March 31

 

122.4

 

75.0

 

119.6

 

15.9

 

332.8

CHF million

2018/19

 

 

Land & buildings

 

Machinery & technical equipment

 

Room installations & other equipment

 

Advance payments & assets under construction

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

195.5

 

294.3

 

343.8

 

10.6

 

844.2

Changes through business combinations

 

 

 

0.6

 

1.4

 

 

 

2.0

Additions

 

4.8

 

28.8

 

35.4

 

8.1

 

77.0

Disposals

 

 

 

(16.3)

 

(20.0)

 

 

 

(36.4)

Transfers

 

 

 

1.3

 

7.4

 

(8.7)

 

 

Exchange differences

 

(1.3)

 

(2.6)

 

(10.7)

 

(0.1)

 

(14.7)

Balance March 31

 

199.0

 

306.0

 

357.2

 

9.8

 

872.1

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(74.0)

 

(220.0)

 

(234.7)

 

 

 

(528.7)

Additions

 

(5.8)

 

(25.5)

 

(31.5)

 

 

 

(62.8)

Disposals

 

 

 

15.3

 

19.3

 

 

 

34.6

Transfers

 

 

 

2.5

 

(2.5)

 

 

 

 

Exchange differences

 

0.6

 

1.6

 

7.4

 

 

 

9.7

Balance March 31

 

(79.2)

 

(226.1)

 

(242.0)

 

 

 

(547.2)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

121.5

 

74.3

 

109.1

 

10.6

 

315.5

Balance March 31

 

119.8

 

79.9

 

115.3

 

9.8

 

324.9

Accounting policies

Property, plant and equipment is valued at purchase or manufacturing cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the expected useful lifetime of the individual assets or asset categories. Where an asset comprises several parts with different useful lifetimes, each part of the asset is depreciated separately over its applicable useful lifetime.

The applicable useful lifetimes are 25 – 40 years for buildings and 3 – 10 years for production facilities, machinery, equipment, and vehicles. Land is not depreciated. Leasehold improvements are depreciated over the shorter of useful life or lease term.

Subsequent expenditure on an item of tangible assets is capitalized at cost only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Expenditure for repair and maintenance, which do not increase the estimated useful lifetimes of the related assets are recognized as an expense in the period in which they are incurred.

The Group assesses at each reporting date, whether there is any indication, that an asset may be impaired. If any such indication exists, the recoverable amount of the asset is estimated. If the recoverable amount is lower than carrying amount, an impairment loss is recognized.

3.4 Leases

Right-of-use assets CHF million

2019/20

 

 

Properties

 

Vehicles

 

Other assets

 

Total

Cost

 

 

 

 

 

 

 

 

Balance April 1

 

 

 

 

 

 

 

 

Effect on initial application of IFRS 16 "Leases"

 

269.3

 

7.5

 

1.3

 

278.1

Changes through business combinations

 

0.7

 

 

 

 

 

0.7

Additions

 

81.5

 

2.3

 

0.4

 

84.1

Exchange differences

 

(38.4)

 

(1.0)

 

(0.2)

 

(39.6)

Balance March 31

 

313.1

 

8.7

 

1.5

 

323.3

Accumulated depreciation

 

 

 

 

 

 

 

 

Balance April 1

 

 

 

 

 

 

 

 

Additions

 

(63.8)

 

(1.8)

 

(0.3)

 

(65.9)

Exchange differences

 

3.1

 

0.1

 

0.0

 

3.2

Balance March 31

 

(60.7)

 

(1.7)

 

(0.3)

 

(62.7)

Net book value

 

 

 

 

 

 

 

 

Balance April 1

 

 

 

 

 

 

 

 

Balance March 31

 

252.4

 

7.0

 

1.2

 

260.6

Lease liabilities CHF million

 

2019/20

Balance April 1

 

 

Effect on initial application of IFRS 16 "Leases"

 

285.0

Changes through business combinations

 

0.7

Additions

 

84.1

Interest expense

 

4.0

Payments

 

(68.3)

Exchange differences

 

(36.5)

Balance March 31

 

269.0

thereof short-term

 

61.2

thereof long-term

 

207.8

The maturity analysis of lease liabilities are disclosed in Note 4.7

Lease disclosures CHF million

 

2019/20

Expenses relating to short-term leases

 

13.4

Expenses relating to leases of low-value assets (excluding short-term leases of low-value assets)

 

0.6

Expenses relating to variable lease payments

 

0.3

The total cash outflow for leases in the financial year 2019/20 amounted to CHF 68.3 million and is included in the cash flow from financing activities. 

The Group has various lease contracts that as of March31, 2020, have not yet commenced. The future lease payments for these non-cancellable lease contracts amount to CHF 17.2 million. The future lease payments relating to variable lease payments amount to CHF 0.3 million.

Accounting policies

The group leases properties for retail stores as well as for office, laboratory, manufacturing and storage use. The leasing terms vary significantly across countries. The leases of office space typically run for a period of up to 10 years, and leases of retail stores typically for a period of 3 to 5 years. Leases of vehicles and other assets have an average lease term of 3.5 years. Some leases include an option to renew the lease for an additional period after the end of the contract term.

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and, subsequently at cost less accumulated depreciation and impairment losses and also includes adjustments for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date and are discounted using the Group’s incremental borrowing rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment made. It is remeasured when there is a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Accounting judgements and estimates

The Group uses judgement to determine the lease term for some lease contracts which include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term which significantly affects the amount of lease liabilities and right-of-use assets recognized. Extension options and termination options are re-assessed only when a significant event or change in circumstances occurs that is within the control of the Group and affects whether it is reasonably certain to exercise an option.

3.5 Intangible assets

CHF million

2019/20

 

 

Goodwill

 

Intangibles relating to acquisitions 1)

 

Capitalized development costs

 

Software and other intangibles

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

2,116.7

 

636.0

 

195.5

 

91.9

 

3,040.1

Changes through business combinations

 

97.4

 

17.1

 

 

 

0.0

 

114.6

Additions

 

 

 

 

 

28.8

 

11.3

 

40.1

Disposals

 

0.0

 

(0.4)

 

 

 

(1.5)

 

(2.0)

Exchange differences

 

(113.9)

 

(37.2)

 

(0.5)

 

(1.1)

 

(152.7)

Balance March 31

 

2,100.2

 

615.5

 

223.9

 

100.5

 

3,040.1

Accumulated amortization and impairments

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(153.4)

 

(296.8)

 

(59.2)

 

(67.5)

 

(576.9)

Additions

 

 

 

(44.4) 2)

 

(16.1)

 

(7.4)

 

(67.9)

Disposals

 

 

 

0.0

 

 

 

1.4

 

1.4

Exchange differences

 

4.6

 

18.5

 

 

 

0.6

 

23.6

Balance March 31

 

(148.8)

 

(322.7)

 

(75.3)

 

(73.0)

 

(619.8)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

1,963.3

 

339.1

 

136.3

 

24.4

 

2,463.2

Balance March 31

 

1,951.4

 

292.7

 

148.5

 

27.5

 

2,420.2

1) Intangibles relating to acquisitions consists of customer relationships (CHF 178.1 million), trademarks (CHF 106.8 million) and R&D in process (CHF 7.8 million).

2) Relates to research and development (CHF 0.9 million) and sales and marketing (CHF 43.5 million).

CHF million

2018/19

 

 

Goodwill

 

Intangibles relating to acquisitions 1)

 

Capitalized development costs

 

Software and other intangibles

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

2,094.4

 

645.3

 

165.1

 

84.9

 

2,989.7

Changes through business combinations

 

55.4

 

22.3

 

0.0

 

0.1

 

77.8

Additions

 

0.0

 

0.0

 

30.4

 

10.5

 

40.9

Disposals

 

(0.3)

 

(6.5)

 

0.0

 

(3.2)

 

(10.0)

Exchange differences

 

(32.9)

 

(25.2)

 

0.1

 

(0.4)

 

(58.4)

Balance March 31

 

2,116.7

 

636.0

 

195.5

 

91.9

 

3,040.1

Accumulated amortization and impairments

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(147.2)

 

(264.2)

 

(47.0)

 

(64.9)

 

(523.3)

Additions

 

 

 

(46.3) 2)

 

(12.3)

 

(6.2)

 

(64.8)

Disposals

 

 

 

4.3

 

0.0

 

3.1

 

7.4

Exchange differences

 

(6.1)

 

9.4

 

0.0

 

0.5

 

3.8

Balance March 31

 

(153.4)

 

(296.8)

 

(59.2)

 

(67.5)

 

(576.9)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

1,947.2

 

381.1

 

118.1

 

20.0

 

2,466.4

Balance March 31

 

1,963.3

 

339.1

 

136.3

 

24.4

 

2,463.2

1) Intangibles relating to acquisitions consists of customer relationships (CHF 221.7 million), trademarks (CHF 115.1 million) and R&D in process (CHF 2.3 million).

2) Relates to research and development (CHF 1.0 million) and sales and marketing (CHF 45.4 million).

Based on the impairment tests performed, there was no need for the recognition of any impairment of goodwill for the 2019/20 and 2018/19 financial years.

The cash flow projections used for impairment testing, were based on the most recent business plan, and considers impacts from COVID-19 and from the voluntary field corrective action as announced on February 18, 2020. The business plan was projected over a five year period.

Hearing instruments

As of March 31, 2020, the carrying amount of the goodwill, expressed in various currencies, amounted to an equivalent of CHF 1,639.9 million (prior year CHF 1,642.4 million).

Cash flows beyond the projection period were extrapolated with a long-term growth rate of 2.1% (prior year 2.2%) that represents the projected inflation rate. For the calculation, a pre-tax weighted average discount rate of 8.3% (prior year 8.4%) was used. The Group performed a sensitivity analysis, which shows that changes to the main input parameters (increase of discount rate +1%, or long-term growth rate –1%) would not result in an impairment of goodwill.

Cochlear implants

As of March 31, 2020, the carrying amount of the goodwill, expressed in various currencies, amounted to an equivalent of CHF 311.5 million (prior year CHF 320.9 million).

Cash flows beyond the projection period were extrapolated with a long-term growth rate of 2.3% (prior year 2.4%) that represents the projected inflation rate. For the calculation, a pre-tax weighted average discount rate of 9.0% (prior year 8.7%) was used. The Group performed a sensitivity analysis, which shows that changes to the main input parameters (increase of discount rate +1%, or long-term growth rate –1%) would not result in an impairment of goodwill.

The capitalized development costs are reviewed on a regular basis. In the current financial year 2019/20, this review did not lead to any valuation adjustments. The capitalized development costs are included in the reportable segment “cochlear implants” disclosed in Note 2.2.

Accounting policies

Goodwill

Goodwill is recognized for any difference between the cost of the business combination and the net fair value of the identifiable assets, liabilities, and contingent liabilities (refer to accounting policies in Note 6.1). Goodwill is not amortized, but is assessed for impairment annually, or more frequently if events or changes in circumstances indicate that its value might be impaired. For the purpose of impairment testing, goodwill is allocated to the cash-generating unit, which is expected to benefit from the synergies of the corresponding business combination. For the Group, a meaningful goodwill allocation can only be done at the level of the segments, hearing instruments and cochlear implants. This also reflects the level that the goodwill is monitored by management. For both of the two cash-generating units, the recoverable amount is compared to the carrying amount. The carrying amount is determined based on a value-in-use calculation considering a five-year cash flow projection period and extrapolated using a terminal value for cash flows beyond the planning period. The cash flow projections are estimated on the basis of the strategic plan approved by the Board of Directors. Future cash flows are discounted with the Weighted Average Cost of Capital (WACC) including the application of the Capital Asset Pricing Model (CAPM).

Intangibles, excluding goodwill

Purchased intangible assets such as software, licenses and patents are measured at cost less accumulated amortization (applying the straight-line method) and any impairment in value. Software is amortized over a useful lifetime of 3 – 5 years. Intangibles relating to acquisitions of subsidiaries (excluding goodwill) consist generally of technology, client relationships, customer lists, and brand names, and are amortized over a period of 3 – 20 years. Other intangible assets are generally amortized over a period of 3 – 10 years. For capitalized development costs in the cochlear implants segment, amortization starts when the capitalized asset is ready for use, which is generally after receipt of approval from regulatory bodies. These assets are amortized over the estimated useful lifetime of 2 – 7 years applying the straight-line method. For in-process capitalized development costs, these capitalized costs are tested annually for impairment. Except for goodwill, the Sonova Group has no intangible assets with an indefinite useful life.

Research costs are expensed as incurred. Development costs are capitalized only if the identifiable asset is commercially and technically feasible, can be completed, its costs can be measured reliably and will generate probable future economic benefits. Group expenditures, which fulfill these criteria are limited to the development of tooling and equipment as well as costs related to the development of cochlear implants. All other development costs are expensed as incurred. In addition to the internal costs (direct personnel and other operating costs, depreciation on research and development equipment and allocated occupancy costs), total costs also include externally contracted development work. Such capitalized intangibles are recognized at cost less accumulated amortization and impairment losses.

Accounting judgements and estimates

Goodwill

The recoverable amount from cash-generating units is measured on the basis of value-in-use calculations and as such is significantly impacted by the projected cash flows, the discount rate, and the long-term growth rate, which are subject to management judgment. Actual cash flows as well as other input parameters could vary significantly from these estimates.

Capitalized development costs

The Group capitalizes costs relating to the development of cochlear implants. The capitalized development costs are reviewed on a regular basis as a matter of a standard systematic procedure. In determining the commercial as well as the technical feasibility, management judgment may be required.

3.6 Other operating assets

Other current operating assets CHF million

 

31.3.2020

 

31.3.2019

Other receivables

 

57.6

 

69.0

Prepaid expenses

 

31.5

 

32.0

Contract assets

 

2.9

 

2.9

Right to recover products

 

9.9

 

10.4

Total

 

101.9

 

114.3

 

 

 

 

 

Other non-current operating assets CHF million

 

31.3.2020

 

31.3.2019

Contract assets

 

6.4

 

6.5

Total

 

6.4

 

6.5

The largest individual items included in other receivables are recoverable value added taxes and deposits. Prepaid expenses mainly consist of advances to suppliers. Contract assets relate to reinsurance of loss and damage services and rights to recover returned goods relate to hearing instrument sales with a right of return (refer to Note 2.3).

3.7 Provisions

CHF million

2019/20

 

 

Warranty and returns

 

Reimbursement to customers

 

Product liabilities

 

Other provisions

 

Total

Balance April 1

 

111.3

 

7.7

 

100.9

 

32.2

 

252.1

Effect on initial application of IFRS 16 "Leases"

 

 

 

 

 

 

 

(6.9)

 

(6.9)

Changes through business combinations

 

 

 

 

 

 

 

1.2

 

1.2

Amounts used

 

(71.6)

 

(5.3)

 

(1.2)

 

(10.8)

 

(89.0)

Reversals

 

(3.3)

 

(1.2)

 

(0.9)

 

(1.9)

 

(7.4)

Increases

 

82.4

 

4.2

 

24.6

 

19.2

 

130.5

Present value adjustments

 

0.0

 

 

 

0.6

 

 

 

0.6

Exchange differences

 

(7.2)

 

(0.3)

 

(3.5)

 

(1.5)

 

(12.5)

Balance March 31

 

111.6

 

5.0

 

120.4

 

31.5

 

268.6

thereof short-term

 

85.6

 

5.0

 

11.1

 

23.5

 

125.2

thereof long-term

 

26.0

 

 

 

109.3

 

8.0

 

143.4

CHF million

2018/19

 

 

Warranty and returns

 

Reimbursement to customers

 

Product liabilities

 

Other provisions

 

Total

Balance April 1

 

125.6

 

9.2

 

118.4

 

31.3

 

284.5

Effect on initial application of IFRS 15

 

(19.8)

 

 

 

 

 

 

 

(19.8)

Changes through business combinations

 

 

 

0.0

 

 

 

0.8

 

0.8

Amounts used

 

(71.2)

 

(4.3)

 

(19.0)

 

(13.3)

 

(107.8)

Reversals

 

(3.2)

 

(2.3)

 

(4.1)

 

(5.0)

 

(14.5)

Increases

 

80.8

 

5.0

 

 

 

18.9

 

104.7

Present value adjustments

 

0.0

 

 

 

0.7

 

 

 

0.7

Exchange differences

 

(1.0)

 

0.1

 

4.8

 

(0.4)

 

3.5

Balance March 31

 

111.3

 

7.7

 

100.9

 

32.2

 

252.1

thereof short-term

 

87.6

 

7.7

 

15.0

 

19.0

 

129.2

thereof long-term

 

23.7

 

 

 

85.9

 

13.3

 

122.9

Warranty and returns

The provision for warranty and returns considers any costs arising from the warranty given on products sold. In general, the Group grants a 12 to 24 months warranty period for hearing instruments and related products and up to 10 years on cochlear implants. The calculation is based on turnover, past experience and projected number and cost of warranty claims and returns. In the 2018/19 financial year, the decrease in provision for warranty was due to the implementation of IFRS 15 as of April 1, 2018. Under IFRS 15, extended warranty is treated as a separate performance obligation with revenue being allocated to contract liabilities.

Reimbursement to customers

The provision for reimbursement to customers considers commitments to provide volume rebates. The provision is based on expected volumes. The large majority of the cash outflows are expected to take place within the next 12 months.

Product liabilities

The provision for product liabilities considers the expected cost for claims in relation to the voluntary recall of cochlear implant products of Advanced Bionics in 2006 and Advanced Bionics voluntary field corrective action regarding cochlear implant products, as announced on February 18, 2020.

For the claims regarding the voluntary recall of AB products in 2006, the calculation of this provision is based on past experience regarding the number and cost of current and future claims and is estimated based on a financial model. The model used to calculate the provision for the end of the 2019/20 financial year is consistent to the prior year. It covers the cost of replacement products, medical expenses, compensation for actual damages as well as legal fees. The provision is reassessed on a regular and systematic basis. Further improvements in the expected number and cost of current and future claims led to a slight reduction of CHF 0.8 million (previous year CHF 4.1 million) in “other income/(expense), net”. As per March 31, 2020 the product liability in relation to the voluntary recall amounts to CHF 96.3 million (previous year CHF 100.9 million). The timing of the cash outflows corresponding to the said provision for product liabilities is uncertain since it will largely depend on the outcome of administrative and legal proceedings. Considering periods of limitation, claims will have to be filed until 2026 in most jurisdictions. However, depending on the length of proceedings and negotiations, further years may pass until all claims are settled. We expect the main cash outflow relating to this provision to occur within the next 7 years. 

For potential claims regarding the voluntary field corrective action as announced on February 18, 2020, the calculation follows a similar financial model as applied for the voluntary recall of AB products in 2006 and is estimated based on an expected number and cost for potential future claims. It covers the cost of replacement products, medical expenses, compensation for actual damages as well as legal fees. As per March 31, 2020 the product liability in relation to the voluntary field corrective action amounts to CHF 24.1 million. The timing of the cash outflows corresponding to the said provision for product liabilities is uncertain since it will largely depend on the outcome of administrative and legal proceedings. We expect the main cash outflow relating to this provision to occur within the next 10–15 years.

Other provisions

Other provisions include provisions for specific business risks such as litigation and restructuring costs, which arise during the normal course of business. The timing of cash outflows for the other provisions is expected to take place within the next two years.

Accounting policies

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources will be required to settle the obligation, and where a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows.

Accounting judgements and estimates

Provisions are based upon management’s best estimate, taking into consideration past experience regarding the number and cost of claims. Management believes that the provisions are adequate based upon currently available information. However, given that judgment has to be applied, the actual costs and results may differ from these estimates.

3.8 Other operating liabilities

Other short-term operating liabilities CHF million

 

31.3.2020

 

31.3.2019

Other payables

 

72.9

 

74.2

Accrued expenses

 

224.2

 

221.7

Deferred income

 

0.4

 

0.1

Total

 

297.5

 

296.0

 

 

 

 

 

Other long-term operating liabilities CHF million

 

31.3.2020

 

31.3.2019

Retirement benefit obligations

 

73.5

 

26.0

Total

 

73.5

 

26.0

Other payables include amounts to be remitted for withholding taxes, value added taxes, social security payments and employees’ income taxes deducted at source. Accrued expenses include salaries, social expenses, vacation pay, bonus and incentive compensation as well as accruals for outstanding invoices from suppliers.

The retirement benefit obligation relates to defined benefit plans. For details refer to Note 7.3.

3.9 Contingent assets and liabilities

Guarantees

At March 31, 2020 and 2019, there were no pledges given to third parties other than in relation to bank loans and mortgages.

Deposits in the amount of CHF 1.8 million (previous year CHF 5.1 million) have been pledged in relation to bank guarantees. Mortgages are secured by properties in the amount of CHF 0.1 million (previous year CHF 0.1 million). The net book value of these properties amounts to CHF 0.7 million at March 31, 2020 (previous year CHF 0.8 million). Open purchase orders as of March 31, 2020 and 2019, were related to recurring business activities.

Lawsuits and disputes

In 2007, the Alfred E. Mann Foundation for Scientific Research (AMF) initiated a lawsuit claiming patent infringement by Cochlear Ltd. on two patents. Advanced Bionics LLC had exclusively licensed the patents in question from AMF and joined AMF as a plaintiff. On November 4, 2018, a U.S. District Court reinstated a jury verdict from 2014 and awarded damages of USD 268 million. Cochlear’s appeal of the District Court judgement was dismissed in March 2020, and Cochlear has announced that it will seek an ‘en banc’ review by the Court of Appeals. Advanced Bionics expects that such review will be concluded in the first half of 2020. Advanced Bionics will be entitled to a portion of any damages awarded once the verdict is final. 

On October 4, 2018 MED-EL Elektronische Geräte GmbH and MED-EL Corporation, US, filed a complaint against Advanced Bionics LLC in the US federal court for the district of Delaware for alleged patent infringement of two MED-EL patents related to a recently launched product. Advanced Bionics believes the complaint has no merits and is vigorously defending its position and intellectual property.

On January 20, 2020, Advanced Bionics Corporation (“AB”), Delaware, received a subpoena from the Office of the Inspector General at the U.S. Department of Health and Human Services, (the “HHS-OIG”). The subpoena requests documents relating to AB’s testing of radio frequency emissions of its devices and AB’s reporting of those test results in submissions to the U.S. Food and Drug Administration from 2010 to the present. AB is cooperating fully with the HHS-OIG and the U.S. Department of Justice in connection with this subpoena and is currently unable to predict the timing or outcome of this investigation.

4. Capital structure and financial management

4.1 Cash and cash equivalents

CHF million

 

31.3.2020

 

31.3.2019

Cash on hand

 

0.9

 

1.2

Current bank accounts

 

448.5

 

312.2

Term deposits

 

0.8

 

61.4

Total

 

450.2

 

374.8

Bank accounts and term deposits are mainly denominated in CHF, EUR and USD. The assessment on the credit risk related to cash and cash equivalents is disclosed in Note 4.7.

Accounting policies

Cash and cash equivalents includes cash on hand and cash at banks, bank overdrafts, term deposits and other short-term highly liquid investments with original maturities of three months or less. The consolidated cash flow statement summarizes the movements in cash and cash equivalents.

4.2 Financial income/expenses, net

CHF million

 

2019/20

 

2018/19

Interest income

 

2.5

 

1.6

Other financial income

 

0.4

 

1.8

Total financial income

 

2.9

 

3.4

Interest expenses

 

(2.1)

 

(1.7)

Interest expenses on lease liabilities

 

(4.0)

 

 

Unwinding of the discount on provisions

 

(0.6)

 

(0.7)

Foreign exchange hedge costs

 

(3.4)

 

(6.3)

Other financial expenses

 

(2.7)

 

(3.4)

Total financial expenses

 

(12.9)

 

(12.1)

Total financial income/expenses, net

 

(10.0)

 

(8.7)

Other financial expenses in 2019/20 include, amongst other items, primarily the fair value adjustments of financial instruments.

4.3 Dividend per share

At the Annual General Shareholders’ Meeting in June 2020, the Board of Directors will propose a stock dividend. This would be met from shares bought back under the recent share buyback program, which have not yet been canceled. Each shareholder would be entitled to receive one Sonova share for 150 existing Sonova shares with fractions paid out in cash. In the financial year 2019/20 a cash dividend in the amount of CHF 2.90 was paid out. 

4.4 Other financial assets

Other current financial assets

CHF million

 

31.3.2020

 

31.3.2019

 

 

Financial assets at amortized cost

 

Financial assets at fair value through profit or loss

 

Total

 

Financial assets at amortized cost

 

Financial assets at fair value through profit or loss

 

Total

Marketable securities

 

 

 

0.2

 

0.2

 

 

 

0.0

 

0.0

Positive replacement value of forward foreign exchange contracts

 

 

 

2.3

 

2.3

 

 

 

0.3

 

0.3

Loans to third parties

 

5.3

 

 

 

5.3

 

10.6

 

 

 

10.6

Total

 

5.3

 

2.5

 

7.7

 

10.6

 

0.3

 

11.0

The Group regularly hedges its net exposure from foreign currency balance sheet positions with forward contracts. Such contracts are not qualified as cash flow hedges and are, therefore, not accounted for using hedge accounting principles. Gains and losses on these transactions are recognized directly in the income statement (refer to Note 4.7).

Other non-current financial assets

CHF million

 

31.3.2020

 

31.3.2019

 

 

Financial assets at amortized cost

 

Financial assets at fair value through profit or loss

 

Total

 

Financial assets at amortized cost

 

Financial assets at fair value through profit or loss

 

Total

Loans to associates

 

4.5

 

 

 

4.5

 

9.3

 

 

 

9.3

Loans to third parties

 

20.0

 

 

 

20.0

 

14.2

 

 

 

14.2

Rent deposits

 

3.8

 

 

 

3.8

 

3.7

 

 

 

3.7

Other non-current financial assets

 

 

 

1.7

 

1.7

 

 

 

1.8

 

1.8

Total

 

28.3

 

1.7

 

30.0

 

27.2

 

1.8

 

29.0

The loans are primarily denominated in CAD, CHF, EUR, GBP, JPY and USD. Loans to third parties consist mainly of loans to customers. As of March 31, 2020, the respective repayment periods vary between one and nine years and the interest rates vary generally between 1% and 5%. 

Other non-current financial assets mainly consist of certain minority interests in patent and software development companies specific to the hearing aid industry.

Accounting policies

Financial assets are classified into the following three categories:

  • Financial assets at amortized cost
  • Financial assets at fair value through profit or loss (FVPL)
  • Financial assets at fair value through other comprehensive income (FVOCI).

The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will be recorded either in the income statement or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The Group reclassifies debt investments when and only when its business model changes for managing those assets.

At initial recognition, the Group measures a financial asset at its fair value. In the case of financial assets at amortized cost and FVOCI the fair value includes transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset.

Financial assets at amortized cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in the income statement.

Financial assets at fair value through profit or loss (FVPL)

Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognized in the income statement in the period in which it arises.

Financial assets at fair value through other comprehensive income (FVOCI) and equity instruments

The Group currently holds no financial assets at fair value through other comprehensive income (FVOCI) and no has not elected to account for equity instruments in this category.

4.5 Financial liabilities

During the 2019/20 financial year, the Group had the following bonds outstanding:

  • A three year fixed-rate bond with a nominal value of CHF 250 million (ISIN CH0340912143) issued at 100.15% with a 0.00% interest rate. The bond was repaid on October 11, 2019.
  • A five year fixed-rate bond with a nominal value of CHF 360 million (ISIN CH0340912150) issued at 100% with interest of 0.01% p.a. and maturity on October 11, 2021. Interests will be paid on an annual basis. 
  • A 10 year fixed-rate bond with a nominal value of CHF 100 million (ISIN CH0419041592) issued at 100% with a 0.00% interest rate and maturity on October 11, 2029. 
  • A 15 years fixed-rate bond with a nominal value of CHF 100 million (ISIN CH0419041600) issued at 100% with interest of 0.40% p.a. and maturity on October 11, 2034. Interests will be paid on an annual basis.

During the 2019/20 financial year, the Group entered into an agreement for a syndicated credit facility in the amount of CHF 150 million with an option to increase to CHF 250 million. The option to increase the credit facility was exercised in March 2020 and the increased credit facility will become available in May 2020. The agreement ends on June 30, 2022 with an additional option to extend until August 31, 2024. As of March 31, 2020 CHF 150 million of the credit facility was drawn.

The Group maintains further uncommitted credit facilities from various lenders. The credit facilities are denominated in CHF and can be cancelled at short notice. As of March 31, 2020 CHF 80 million were drawn with a one to three months maturity.

Furthermore, in the context of the COVID-19 impacts, in April 2020 the Group has obtained additional financing and new credit lines (refer to Note 7.5).

Current financial liabilities

CHF million

 

31.3.2020

 

31.03.2019

 

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Financial liabilities at FVOCI

 

Total

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Total

Bank debt

 

230.2

 

 

 

 

 

230.2

 

0.3

 

 

 

0.3

Bond

 

 

 

 

 

 

 

 

 

250.0

 

 

 

250.0

Deferred payments and contingent considerations

 

8.0

 

4.1

 

10.0

 

22.1

 

0.5

 

5.5

 

6.0

Other current financial liabilities

 

 

 

2.6

 

 

 

2.6

 

 

 

0.1

 

0.1

Total

 

238.2

 

6.7

 

10.0

 

254.9

 

250.7

 

5.6

 

256.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unused borrowing facilities

 

 

 

 

 

 

 

111.0

 

 

 

 

 

36.2

Non-current financial liabilities

CHF million

 

31.3.2020

 

31.03.2019

 

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Financial liabilities at FVOCI

 

Total

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Total

Bank debt

 

0.0

 

 

 

 

 

0.0

 

0.0

 

 

 

0.0

Bonds

 

559.1

 

 

 

 

 

559.1

 

359.5

 

 

 

359.5

Deferred payments and contingent considerations

 

9.9

 

1.2

 

19.1

 

30.2

 

7.4

 

1.4

 

8.8

Other non-current financial liabilities

 

0.1

 

2.5

 

 

 

2.6

 

0.2

 

4.1

 

4.2

Total

 

569.1

 

3.7

 

19.1

 

591.8

 

367.1

 

5.5

 

372.6

Besides the bonds, financial liabilities mainly consist of contingent considerations (earn-out agreements) and deferred payments from acquisitions.

Other non-current financial liabilities mainly consist of amounts due in relation to the share appreciation rights (SARs) (refer to Note 7.4).

Analysis of non-current financial liabilities by currency

Analysis by currency CHF million

 

31.3.2020

 

31.3.2019

 

 

Bank debt

 

Bonds

 

Other non-current financial liabilities

 

Total

 

Bank debt

 

Bonds

 

Other non-current financial liabilities

 

Total

CHF

 

 

 

559.1

 

13.9

 

573.0

 

 

 

359.5

 

10.0

 

369.5

USD

 

 

 

 

 

0.7

 

0.7

 

 

 

 

 

0.5

 

0.5

EUR

 

 

 

 

 

15.9

 

15.9

 

 

 

 

 

0.1

 

0.1

Other

 

0.0

 

 

 

2.2

 

2.2

 

0.0

 

 

 

2.5

 

2.6

Total

 

0.0

 

559.1

 

32.7

 

591.8

 

0.0

 

359.5

 

13.1

 

372.6

Reconciliation of liabilities arising from financing activities

Liabilities from financing activities CHF million

 

 

 

 

 

 

 

 

 

 

 

2019/20

 

 

Bank debt

 

Bonds

 

Deferred payments and contingent considerations

 

Lease liabilities

 

Other financial liabilities

 

Total

Balance April 1

 

0.3

 

609.5

 

14.8

 

 

 

4.3

 

628.9

Effect on initial application of IFRS 16 "Leases"

 

 

 

 

 

 

 

285.0

 

 

 

285.0

Changes through business combinations

 

 

 

 

 

40.6

 

0.7

 

 

 

41.3

Additions to lease liabilities

 

 

 

 

 

 

 

84.1

 

 

 

84.1

Proceeds from borrowings

 

230.0

 

198.1

 

 

 

 

 

5.7

 

433.8

Repayment of borrowings

 

 

 

(249.8)

 

 

 

 

 

 

 

(249.8)

Repayment of lease liabilities – principal portion

 

 

 

 

 

 

 

(64.3)

 

 

 

(64.3)

Repayment of lease liabilities – interest portion

 

 

 

 

 

 

 

(4.0)

 

 

 

(4.0)

Exchange differences

 

 

 

 

 

(0.9)

 

(36.5)

 

 

 

(37.4)

Other

 

(0.1)

 

1.3

 

(2.1)

 

4.0

 

(4.8)

 

(1.8)

Balance March 31

 

230.2

 

559.1

 

52.3

 

269.0

 

5.2

 

1,115.8

thereof short-term

 

230.2

 

 

 

22.1

 

61.2

 

2.6

 

316.1

thereof long-term

 

0.0

 

559.1

 

30.2

 

207.8

 

2.6

 

799.7

Liabilities from financing activities CHF million

 

 

 

 

 

 

 

 

 

2018/19

 

 

Bank debt

 

Bonds

 

Deferred payments and contingent considerations

 

Other financial liabilities

 

Total

Balance April 1

 

0.1

 

759.3

 

17.2

 

4.1

 

780.7

Repayments

 

0.2

 

(150.0)

 

(1.7)

 

0.9

 

(150.6)

Exchange differences

 

(0.0)

 

 

 

0.2

 

0.0

 

0.2

Other

 

 

 

0.2

 

(0.9)

 

(0.7)

 

(1.4)

Balance March 31

 

0.3

 

609.5

 

14.8

 

4.3

 

628.9

thereof short-term

 

0.3

 

250.0

 

6.0

 

0.1

 

256.4

thereof long-term

 

0.0

 

359.5

 

8.8

 

4.2

 

372.6

Accounting policies

Financial liabilities are classified as measured at amortized cost, at fair value through profit or loss (FVPL) or at fair value through other comprehensive income (FVOCI). A financial liability is classified as at FVPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognized in the income statement. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in the income statement.

Derivative financial instruments are initially recognized in the balance sheet at fair value and are remeasured as to their current fair value at the end of each subsequent reporting period.

Bonds are initially measured at fair value and direct transaction costs included. In subsequent accounting periods, they are remeasured at amortized costs applying the effective interest method.

Accounting policies for lease liabilities are included in Note 3.4.

4.6 Movement in share capital

Issued registered shares

 

Issued registered shares

 

Treasury shares 1)

 

Outstanding shares

Balance April 1, 2018

 

65,330,887

 

(3,622)

 

65,327,265

Purchase of treasury shares

 

 

 

(368,000)

 

(368,000)

Sale/transfer of treasury shares

 

 

 

338,048

 

338,048

Purchase of shares intended to be cancelled 2)

 

 

 

(932,750)

 

(932,750)

Balance March 31, 2019

 

65,330,887

 

(966,324)

 

64,364,563

 

 

 

 

 

 

 

Purchase of treasury shares

 

 

 

(437,421)

 

(437,421)

Sale/transfer of treasury shares

 

 

 

343,537

 

343,537

Cancellation of treasury shares 3)

 

(932,750)

 

932,750

 

 

Purchase of treasury shares from share buyback

 

 

 

(1,843,090)

 

(1,843,090)

Balance March 31, 2020

 

64,398,137

 

(1,970,548)

 

62,427,589

 

 

 

 

 

 

 

Nominal value of share capital CHF million

 

Share Capital

 

Treasury shares 1)

 

Outstanding share capital

Balance March 31, 2020

 

3.2

 

(0.1)

 

3.1

Each share has a nominal value of CHF 0.05.

1) Treasury shares are purchased on the open market and are not entitled to dividends.

2) Shares purchased by the Group as part of the share buyback program.

3) The Annual General Shareholders’ Meeting of June 13, 2019, approved the proposed cancellation of 932,750 treasury shares, resulting in a reduction of share capital of 46,637.50 Swiss francs, retained earnings and other reserves of CHF 157.8 million offset by changes in treasury shares of CHF 157.9 million. This cancellation has been executed on September 24, 2019.

On August 31, 2018, Sonova Holding AG announced that its Board of Directors approved a new share buyback program of up to CHF 1.5 billion (but for a maximum of 11,759,560 registered shares). The shares were planned to be repurchased for the purpose of a capital reduction, subject to approval by future Annual General Shareholders’ Meetings. The program started in October 2018 and will run up to 36 months. As of March 31, 2020 2,775,840 shares were purchased as part of the share buyback program.

Effective March 16, 2020, Sonova Holding AG suspended the Group’s current share buyback program. This precautionary measure reflects the short-term uncertainties regarding the financial impact of the global spread of the novel coronavirus (COVID-19).

At the Annual General Shareholders’ Meeting on July 7, 2005, the conditional share capital of CHF 264,270 (5,285,400 shares) has been increased by CHF 165,056 (3,301,120 shares) to CHF 429,326 (8,586,520 shares). Consistent with the prior year, 5,322,133 shares remain unissued as of March 31, 2020. These shares are reserved for long-term incentive plans (2,021,013 shares) as well as for initiatives to increase the company’s financial flexibility (3,301,120 shares).

Accounting policies

Ordinary shares are classified as equity. Dividends on ordinary shares are recorded in equity in the period in which they are approved by the parent companies’ shareholders.

In case any of the Group companies purchase shares of the parent company, the consideration paid is recognized as treasury shares and presented as a deduction from equity. Any consideration received from the sale of own shares is recognized in equity.

4.7 Risk management

Group risk management

Risk management at Group level is an integral part of business practice and supports the strategic decision-making process. The assessment of risk is derived from both “top-down” and “bottom-up” and covers corporate, all business segments, and all consolidated Group companies. This approach allows for the Group to examine all types of risk exposures caused by internal and external impacts and events, from financial, operational processes, customer and products, management and staff. The risk exposures are managed by specific risk mitigating initiatives, frequent re-evaluations, communication, risk consolidation and prioritization.

The responsibility for the process of risk assessment and monitoring is allocated to the corporate risk function. The Management Board, in addition to Group companies and functional managers, supports the annual risk assessment and is responsible for the management of the risk mitigating initiatives. The Board of Directors discusses and analyzes the Group’s risks at least once a year in the context of a strategy meeting.

Financial risk management

Due to Sonova Group’s worldwide activities, the Group is exposed to a variety of financial risks such as market risks, credit risks and liquidity risks. Financial risk management aims to limit these risks and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses selected financial instruments for this purpose. They are exclusively used as hedging instruments for cash in- and outflows and not for speculative positions. The Group does not apply hedge accounting.

The fundamentals of Sonova Group’s financial risk policy are periodically reviewed by the Audit Committee and carried out by the Group finance department. Group finance is responsible for implementing the policy and for ongoing financial risk management.

Market risk

Exchange rate risk

The Group operates globally and is therefore exposed to foreign currency fluctuations, mainly with respect to the US dollar and the Euro. As the Group uses Swiss francs as presentation currency and holds investments in different functional currencies, net assets are exposed to foreign currency translation risk. Additionally, a foreign currency transaction risk exists in relation to future commercial transactions, which are denominated in a currency other than the functional currency.

To minimize foreign currency exchange risks, forward currency contracts are entered into. The Group hedges its net foreign currency exposure based on future expected cash in- and outflows. The hedges have a duration of between 1 and 6 months. No hedge accounting has been applied to these hedges.

Positive replacement values from hedges, which do not qualify for hedge accounting, are recorded as financial assets at fair value through profit or loss whereas negative replacement values are recorded as financial liabilities at fair value through profit or loss.

As of March 31, 2020, the Group engaged in forward currency contracts amounting to CHF 337.3 million (previous year CHF 271.4 million). The open contracts on March 31, 2020 as well as on March 31, 2019 were all due within one year.

Notional amount of forward contracts CHF million

31.3.2020

 

31.3.2019

 

 

Total

 

Fair value

 

Total

 

Fair value

Positive replacement values

 

119.3

 

2.3

 

132.2

 

0.3

Negative replacement values

 

218.0

 

(2.3)

 

139.2

 

(0.1)

Total

 

337.3

 

0.0

 

271.4

 

0.2

Foreign currency sensitivity analysis

CHF million

 

2019/20

 

2018/19

 

2019/20

 

2018/19

 

 

Impact on income after taxes 1)

 

 

 

Impact on equity

 

 

Change in USD/CHF +5%

 

2.8

 

4.4

 

13.2

 

13.8

Change in USD/CHF –5%

 

(2.8)

 

(4.4)

 

(13.2)

 

(13.8)

Change in EUR/CHF +5%

 

3.0

 

3.6

 

21.3

 

16.1

Change in EUR/CHF –5%

 

(3.0)

 

(3.6)

 

(21.3)

 

(16.1)

1) Excluding the impact of forward currency contracts.

Interest rate risk

The Group has only limited exposure to interest rate changes. The most substantial interest exposure on assets relates to cash and cash equivalents with an average interest-bearing amount for the 2019/20 financial year of CHF 574 million (previous year CHF 402 million). If interest rates during the 2019/20 financial year had been 1% higher, the positive impact on income before taxes would have been CHF 3.2 million. If interest rates had been 1% lower, the income before taxes would have been negatively impacted by CHF 4.9 million.

Other market risks

Risk of price changes of raw materials or components used for production is limited. A change in those prices would not result in financial effects being above the Group’s risk management tolerance level. Therefore, no sensitivity analysis has been conducted.

The Group aims to ensure cost effective sourcing, while at the same time managing the risk of supply shortages that could lead to a failure to deliver certain products at the quantities required. Wherever feasible, critical components are sourced from multiple suppliers in order to mitigate this risk.

The relationship with suppliers is governed by Sonova’s Group Supplier Principles (SGSP). We regularly audit and visit suppliers and inspect their management capabilities through employee interviews and on-site inspections. Suppliers have to follow all applicable laws and regulations, ensure a healthy and safe working environment and are prohibited from using child labor.

Through its multiple manufacturing sites around the globe, the Group maintains effective options to rebalance its production capacity between different facilities and to shift production where necessary to avoid delivery shortages and to adapt to potential changes of the operating or general environment.

Credit risk

Financial assets, which could expose the Group to a potential concentration in credit risk, are principally cash and bank balances, receivables from customers and loans.

Core banking relations are maintained with at least “BBB+” rated (S & P) financial institutions. As of March 31, 2020, the largest balance with a single counterparty amounted to 51% (previous year 27%) of total cash and cash equivalents. 

The Group performs continuous credit checks on its receivables. Due to the customer diversity, there is no single credit limit for all customers, however, the Group assesses its customers based on their financial position, past experience, and other factors. Due to the fragmented customer base (no single customer balance is greater than 10% of total trade accounts receivable), the Group is not exposed to any significant concentration risk. The same applies to loans to third and related parties. As part of the normal process, management held the regular Expected Credit Loss (ECL) Committee meeting to review the expected credit loss rates on an annual basis in March 2020. Given the current uncertainties in the markets, the ECL rates have been significantly increased. In addition, customer specific reviews were performed to consider the increased credit risk caused by COVID-19. Furthermore, subsequent to March 31, 2020, management also considered any late developments in the markets and the overall risk position from a group perspective based on macro-economic considerations and the revised business outlook for the financial year 2020/21.

Impairment of financial assets

Impairment losses on financial assets are calculated based on the expected credit loss (ECL) model of IFRS 9. The Group’s loss allowances on financial assets other than trade receivables are not material.

Accounting policies

The Group applies the IFRS 9 simplified approach for measuring expected credit losses (ECLs) for trade receivables, which uses a lifetime expected loss allowance for trade receivables at each reporting date. To measure ECLs, trade receivables are grouped based on regions and the days past due. ECLs are calculated separately for state and non-state customers considering historical credit loss experience as well as forward-looking factors. Data sources in determining ECLs include actual historical losses, credit default swaps, country specific risk ratings, development of the customer structure and change in market performance and trends. 

The following table provides information about the exposure to credit risk and ECLs for trade receivables:

CHF million

 

 

 

 

 

 

 

31.3.2020

 

 

 

 

 

 

 

31.3.2019

State customers

 

Expected loss rate

 

Gross carrying amount

 

Loss allowance

 

Net carrying amount

 

Expected loss rate

 

Gross carrying amount

 

Loss allowance

 

Net carrying amount

Not overdue

 

0.5%

 

63.2

 

(0.3)

 

62.9

 

0.4%

 

81.4

 

(0.3)

 

81.1

Overdue 1–90 days

 

1.2%

 

24.5

 

(0.3)

 

24.2

 

0.7%

 

28.4

 

(0.2)

 

28.2

Overdue 91–180 days

 

6.5%

 

3.1

 

(0.2)

 

2.9

 

6.7%

 

3.0

 

(0.2)

 

2.8

Overdue 181–360 days

 

23.3%

 

3.0

 

(0.7)

 

2.3

 

9.1%

 

2.2

 

(0.2)

 

2.0

Overdue more than 360 days

 

97.3%

 

3.7

 

(3.6)

 

0.1

 

86.5%

 

5.2

 

(4.5)

 

0.7

Total

 

5.2%

 

97.5

 

(5.1)

 

92.4

 

4.5%

 

120.2

 

(5.4)

 

114.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHF million

 

 

 

 

 

 

 

31.3.2020

 

 

 

 

 

 

 

31.3.2019

Non-state customers

 

Expected loss rate

 

Gross carrying amount

 

Loss allowance

 

Net carrying amount

 

Expected loss rate

 

Gross carrying amount

 

Loss allowance

 

Net carrying amount

Not overdue

 

6.1%

 

218.6

 

(13.4)

 

205.2

 

0.8%

 

314.2

 

(2.6)

 

311.6

Overdue 1–90 days

 

10.9%

 

72.6

 

(7.9)

 

64.7

 

4.2%

 

77.9

 

(3.3)

 

74.6

Overdue 91–180 days

 

33.6%

 

13.1

 

(4.4)

 

8.7

 

25.9%

 

13.5

 

(3.5)

 

10.0

Overdue 181–360 days

 

48.5%

 

13.0

 

(6.3)

 

6.7

 

49.7%

 

14.9

 

(7.4)

 

7.5

Overdue more than 360 days

 

76.7%

 

19.3

 

(14.8)

 

4.5

 

88.9%

 

19.0

 

(16.9)

 

2.1

Total

 

13.9%

 

336.6

 

(46.8)

 

289.8

 

7.7%

 

439.5

 

(33.7)

 

405.8

The closing loss allowances for trade receivables as at March 31, 2019 reconcile to the closing loss allowance as at March 31, 2020 as follows:

CHF million

 

2019/20

 

2018/19

Loss allowance for doubtful receivables, April 1

 

(39.0)

 

(37.0)

Changes through business combinations

 

(0.0)

 

(0.2)

Utilization

 

6.4

 

2.2

Reversal

 

2.6

 

4.2

Additions

 

(24.7)

 

(8.9)

Exchange differences

 

2.9

 

0.6

Loss allowance for doubtful receivables, March 31

 

(51.9)

 

(39.0)

Trade receivables are written off when there is no reasonable expectation of recovery. Impairment losses on trade receivables and subsequent recoveries are included in general and administration costs.

The additions to the loss allowance for doubtful receivables in 2019/20 relate to an increase in the expected credit loss (ECL) rates and the increased credit risk caused by COVID-19 as described above.

Liquidity risk

Group finance is responsible for centrally managing the net cash/debt position and to ensure that the Group’s obligations can be settled on time. The Group aims to grow further and wants to remain flexible in making time-sensitive investment decisions. This overall objective is included in the asset allocation strategy. A rolling forecast based on the expected cash flows is conducted and updated regularly to monitor and control liquidity.

Visibility over the lion’s share of bank accounts is provided by central treasury organization. Cash pools are automated and daily SWIFT balance tracking is applied where feasible.

In the context of the COVID-19 impacts, the Group has obtained additional financing and new credit lines (refer to Note 7.5) and continues to actively pursue appropriate measures to secure liquidity.

The following table summarizes the contractual maturities of financial liabilities as of March 31, 2020 and 2019:

CHF million

31.3.2020

 

 

Due less than 3 months

 

Due 3 months to 1 year

 

Due 1 year to 5 years

 

Due more than 5 years

 

Total

Short-term debt

 

80.0

 

150.2

 

 

 

 

 

230.2

Other current financial liabilities

 

14.7

 

10.0

 

 

 

 

 

24.7

Trade payables and other short-term liabilities

 

246.9

 

158.7

 

 

 

 

 

405.6

Total current financial liabilities

 

341.6

 

318.9

 

 

 

 

 

660.5

 

 

 

 

 

 

 

 

 

 

 

Current lease liabilities

 

21.6

 

39.6

 

 

 

 

 

61.2

 

 

 

 

 

 

 

 

 

 

 

Bonds

 

 

 

 

 

359.7

 

199.4

 

559.1

Other non-current financial liabilities

 

 

 

 

 

32.8

 

 

 

32.8

Total non-current financial liabilities

 

 

 

 

 

392.5

 

199.4

 

591.9

 

 

 

 

 

 

 

 

 

 

 

Non-current lease liabilities

 

 

 

 

 

146.9

 

60.9

 

207.8

 

 

 

 

 

 

 

 

 

 

 

Total financial liabilities

 

363.2

 

358.5

 

539.4

 

260.3

 

1,521.4

 

 

 

 

 

 

 

 

 

 

 

CHF million

31.3.2019

 

 

Due less than 3 months

 

Due 3 months to 1 year

 

Due 1 year to 5 years

 

Due more than 5 years

 

Total

Bonds

 

 

 

250.0

 

 

 

 

 

250.0

Other current financial liabilities

 

3.3

 

3.1

 

 

 

 

 

6.4

Trade payables and other short-term liabilities

 

240.3

 

158.5

 

 

 

 

 

398.8

Total current financial liabilities

 

243.6

 

411.6

 

 

 

 

 

655.2

 

 

 

 

 

 

 

 

 

 

 

Bonds

 

 

 

 

 

359.5

 

 

 

359.5

Other non-current financial liabilities

 

 

 

 

 

12.6

 

0.5

 

13.1

Total non-current financial liabilities

 

 

 

 

 

372.1

 

0.5

 

372.6

 

 

 

 

 

 

 

 

 

 

 

Total financial liabilities

 

243.6

 

411.6

 

372.1

 

0.5

 

1,027.8

Capital risk management

It is the Group’s policy to maintain a strong equity base and to secure a continuous “investment grade” rating. The Group’s strong balance sheet and earnings tracking provides for additional debt capacity.

The company aims to return excess cash to shareholders as far as not required for organic and acquisition related growth, and amortization of debt. In the context of the COVID-19 impacts, the Group aims to maintain a higher cash balance.

4.8 Financial instruments

This note discloses the categorization of financial instruments measured at fair value based on the fair value hierarchy.

Accounting policies

Financial instruments measured at fair value are allocated to one of the following three hierarchical levels:

Level 1:

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date.

Level 2:

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques are based on observable market data, where applicable. If all significant inputs required to value an instrument are observable, the instrument is included in level 2.

Level 3:

If a significant amount of inputs is not based on observable market data, the instrument is included in level 3. For this level, other techniques, such as ­discounted cash flow analysis, are used to determine fair value.

During the reporting period, there were no reclassifications between the individual levels.

The following table summarizes the financial instruments of the Group and the valuation method for financial instruments at fair value through profit and loss.

CHF million

 

31.3.2020

 

 

Notes

 

Carrying amount

 

Fair value 1)

 

Level 1

 

Level 2

 

Level 3

Financial assets at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

4.1

 

450.2

 

 

 

 

 

 

 

 

Other financial assets

 

4.4

 

33.6

 

 

 

 

 

 

 

 

Trade receivables

 

3.1

 

382.1

 

 

 

 

 

 

 

 

Other receivables

 

3.6

 

57.6

 

 

 

 

 

 

 

 

Total

 

 

 

923.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

Other financial assets

 

4.4

 

4.2

 

4.2

 

 

 

 

 

4.2

Total

 

 

 

4.2

 

4.2

 

 

 

 

 

4.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

Bank debt

 

4.5

 

230.2

 

 

 

 

 

 

 

 

Bond

 

4.5

 

559.1

 

538.9

 

538.9

 

 

 

 

Deferred payments

 

4.5

 

17.9

 

 

 

 

 

 

 

 

Other financial liabilities

 

4.5

 

0.1

 

 

 

 

 

 

 

 

Trade payables

 

 

 

104.3

 

 

 

 

 

 

 

 

Other short-term operating liabilities

 

3.8

 

297.5

 

 

 

 

 

 

 

 

Total

 

 

 

1,209.1

 

538.9

 

538.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

Contingent considerations

 

4.5

 

5.3

 

5.3

 

 

 

 

 

5.3

Negative replacement value of forward foreign exchange contracts

 

4.7

 

2.3

 

2.3

 

 

 

 

 

2.3

Other financial liabilities

 

4.5

 

2.8

 

2.8

 

 

 

 

 

2.8

Total

 

 

 

10.4

 

10.4

 

 

 

 

 

10.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Contingent considerations

 

4.5

 

29.1

 

29.1

 

29.1

 

 

 

 

Total

 

 

 

29.1

 

29.1

 

29.1