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1

Notes to the consolidated financial statements as of March 31, 2021

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 AGʼs 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) 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 12, 2021, and are subject to approval by the Annual General Shareholdersʼ Meeting on June 15, 2021.

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 7.7.

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-recurring 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

Impact of the Covid-19 pandemic

The global health and economic crisis resulting from the COVID-19 pandemic is affecting the hearing care market and with it the Groupʼs business activities. Audiology stores, the primary consumer channel for hearing care products and services, were partially closed or operating with reduced hours during most of the financial year 2020/21. The Cochlear Implants business was also significantly affected, as healthcare providers have in part deferred non-essential surgeries. In this context, Sonova had implemented strict cost-saving programs, and temporary government-subsidized work time reductions in a number of countries. Refer to Note 7.5 for government support received worldwide in financial year 2020/21.

The uncertainties resulting from the COVID-19 pandemic required management to make estimates and assumptions that significantly affected the financial statements for the financial year 2020/21 and 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 Groupʼs share buyback program (described in Note 4.6) and additional financing requirements (described in Note 4.5).

1.4 Changes in accounting policies

In 2020/21 the Group adopted the following minor amendments to existing standards and interpretations, without having a significant impact on the Groupʼs result and financial position:

  • Amendments to IFRS 3 Definition of a Business
  • Amendments to IFRS 7, IFRS 9, IAS 39 Interest Rate Benchmark Reform (Phase 1)
  • Amendments to IAS 1 and IAS 8 Definition of Material
  • Conceptual Framework for Financial Reporting

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, 2021 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.

1

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

 

2020/21

 

 

Income statement as reported

 

Acquis. related amortization

 

Income statement EBITA separation

Sales

 

2,601.9

 

 

 

2,601.9

Cost of sales

 

(728.3)

 

 

 

(728.3)

Gross profit

 

1,873.5

 

 

 

1,873.5

Research and development

 

(204.8)

 

0.9

 

(203.9)

Sales and marketing

 

(924.1)

 

42.9

 

(881.2)

General and administration

 

(250.9)

 

 

 

(250.9)

Other income/(expenses), net

 

125.8

 

 

 

125.8

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

 

 

 

 

 

663.3

Acquisition-related amortization

 

 

 

(43.8)

 

(43.8)

Operating profit (EBIT) 2)

 

619.5

 

 

 

619.5

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).

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

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 Groupʼs chief operating decision maker (Chief Executive Officer). The financial information that is provided to the Groupʼs 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

 

2020/21

 

2019/20

 

2020/21

 

2019/20

 

2020/21

 

2019/20

 

2020/21

 

2019/20

 

 

Hearing Instruments

 

 

 

Cochlear Implants

 

 

 

Corporate/ Eliminations

 

 

 

Total

 

 

Segment sales

 

2,425.8

 

2,700.7

 

186.2

 

233.5

 

 

 

 

 

2,612.0

 

2,934.1

Intersegment sales

 

(8.4)

 

(14.5)

 

(1.7)

 

(2.7)

 

 

 

 

 

(10.2)

 

(17.2)

Sales

 

2,417.3

 

2,686.2

 

184.5

 

230.7

 

 

 

 

 

2,601.9

 

2,916.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At point in time

 

2,273.1

 

2,530.0

 

179.5

 

222.3

 

 

 

 

 

2,452.6

 

2,752.4

Over time

 

144.2

 

156.2

 

5.0

 

8.4

 

 

 

 

 

149.2

 

164.5

Total sales

 

2,417.3

 

2,686.2

 

184.5

 

230.7

 

 

 

 

 

2,601.9

 

2,916.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit before acquisition-related amortization (EBITA)

 

580.6

 

601.6

 

82.4

 

(46.2)

 

0.3

 

(1.1)

 

663.3

 

554.3

Depreciation, amortization and impairment

 

(173.3)

 

(171.5)

 

(49.4)

 

(28.6)

 

 

 

 

 

(222.7)

 

(200.1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

4,035.7

 

4,018.3

 

593.3

 

613.0

 

(716.0)

 

(810.5)

 

3,913.0

 

3,820.9

Unallocated assets 1)

 

 

 

 

 

 

 

 

 

 

 

 

 

2,012.6

 

665.6

Total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

5,925.6

 

4,486.5

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

 

2020/21

 

2019/20

EBITA

 

663.3

 

554.3

Acquisition-related amortization

 

(43.8)

 

(44.4)

Financial costs, net

 

(21.0)

 

(10.0)

Share of profit/(loss) in associates/joint ventures, net

 

1.9

 

2.4

Income before taxes

 

600.4

 

502.4

Entity-wide disclosures

Sales by business CHF million

 

2020/21

 

2019/20

Hearing Instruments business

 

1,463.9

 

1,613.0

Audiological Care business

 

953.5

 

1,073.2

Total Hearing Instruments segment

 

2,417.3

 

2,686.2

Cochlear Implant systems

 

129.3

 

163.9

Upgrades and accessories

 

55.2

 

66.8

Total Cochlear Implants segment

 

184.5

 

230.7

Total sales

 

2,601.9

 

2,916.9

Sales and selected non-current assets by regions CHF million

 

2020/21

 

2019/20

 

2020/21

 

2019/20

Country/region

 

Sales 1)

 

 

 

Selected non-current assets 2)

 

 

Switzerland

 

30.9

 

29.5

 

259.0

 

283.8

EMEA (excl. Switzerland)

 

1,385.7

 

1,514.9

 

1,759.8

 

1,755.1

USA

 

732.2

 

877.6

 

696.6

 

706.7

Americas (excl. USA)

 

178.2

 

220.9

 

193.7

 

167.0

Asia/Pacific

 

275.0

 

274.0

 

129.2

 

118.4

Total Group

 

2,601.9

 

2,916.9

 

3,038.4

 

3,031.1

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 Groupʼs 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

 

31.3.2021

 

31.3.2020

Contract assets

 

9.3

 

9.3

Contract liabilities

 

302.0

 

318.4

Contract liabilities relate to advance consideration received from customers for the Groupʼs 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

 

2020/21

 

2019/20

Balance April 1

 

318.4

 

332.7

Changes through business combinations

 

0.4

 

0.8

Increase due to advance consideration received in the period

 

132.4

 

169.5

Decrease due to revenue recognized in the period that,

 

 

 

 

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

 

(137.1)

 

(132.8)

– relates to consideration received in the period

 

(21.0)

 

(33.2)

Exchange differences

 

8.9

 

(18.4)

Balance March 31

 

302.0

 

318.4

 

 

 

 

 

Expectation on timing of revenue recognition:

 

 

 

 

Within 1 year

 

101.5

 

105.6

Within 2 years

 

104.2

 

95.7

Within 3 years

 

50.9

 

56.9

Within 4 years

 

16.4

 

26.5

More than 4 years

 

29.1

 

33.6

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 control 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 control 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

In the 2020/21 financial year, the net result of other income and expense amounts to CHF 125.8 million (previous year: CHF –23.4 million). The income primarily relates to Advanced Bionics which was awarded damages in a patent infringement lawsuit of CHF 124.4 million (for further Information refer to Note 3.9 “Contingent assets and liabilities”). The remaining other income and expenses primarily relate to the regular and systematic assessment of the provision for product liabilities in the cochlear implants segment (reversal of CHF 10.8 million recorded in “Other income” and increase of CHF 9.8 million recorded in “Other expenses”). In prior year the net cost amounted to CHF 23.4 million (reversal of CHF 0.8 million recorded in “other income” and increase of CHF 24.1 million related to potential product liability claims towards Advanced Bionics LLC (AB) in connection with a voluntary field corrective action recorded in “Other expenses”). For further information refer to Note 3.7 “Provisions”. 

2.5 Earnings per share

Basic earnings per share

 

2020/21

 

2019/20

Income after taxes (CHF million)

 

581.0

 

483.2

Weighted average number of outstanding shares

 

62,967,588

 

63,511,720

Basic earnings per share (CHF)

 

9.23

 

7.61

Diluted earnings per share

 

2020/21

 

2019/20

Income after taxes (CHF million)

 

581.0

 

483.2

Weighted average number of outstanding shares

 

62,967,588

 

63,511,720

Adjustment for dilutive share options

 

255,916

 

356,738

Adjusted weighted average number of outstanding shares

 

63,223,504

 

63,868,458

Diluted earnings per share (CHF)

 

9.19

 

7.57

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 2014 through to 2021 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.

1

3. Operating assets and liabilities

3.1 Trade receivables

CHF million

 

31.3.2021

 

31.3.2020

Trade receivables

 

473.3

 

434.0

Loss allowance for doubtful receivables

 

(34.5)

 

(51.9)

Total

 

438.8

 

382.1

As is common in this industry, the Sonova Group has a large number of customers. There is no significant concentration of credit risk. 

Following the heavy impacts from the COVID-19 pandemic at the end of the last financial year 2019/20, business recovered well over the course of the current financial year 2020/21, which improved the situation on the recoverability of the trade receivables. As a result, the allowance for doubtful receivables was significantly decreased. For further information on the process of the re-assessment of the allowance and for information about the aging of the trade receivables and related allowances, please refer to Note 4.7.

During 2020/21, the Group utilized CHF 7.8 million (previous year CHF 6.4 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

 

31.3.2021

 

31.3.2020

BRL

 

11.1

 

10.9

CAD

 

19.4

 

15.8

CHF

 

11.2

 

12.5

EUR

 

166.3

 

155.5

GBP

 

11.2

 

11.1

USD

 

147.9

 

122.4

Other

 

71.7

 

53.9

Total trade receivables, net

 

438.8

 

382.1

Accounting policies

Trade receivables are initially recorded at the transaction price 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

 

31.3.2021

 

31.3.2020

Raw materials and components

 

36.2

 

34.6

Work-in-process

 

134.8

 

110.9

Finished products

 

185.1

 

167.1

Allowances

 

(53.8)

 

(47.1)

Total

 

302.3

 

265.4

The “cost of sales” corresponding to the carrying value of inventory (which excludes freight, packaging, logistics as well as certain overhead cost) amounted in 2020/21 to CHF 582.8 million (previous year CHF 700.0 million). The Group recognized write-downs of CHF 28.3 million (previous year CHF 45.7 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

2020/21

 

 

Land & buildings

 

Machinery & technical equipment

 

Room installations & other equipment

 

Advance payments & assets under construction

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

205.7

 

300.4

 

383.2

 

15.9

 

905.3

Changes through business combinations

 

 

 

0.1

 

0.6

 

 

 

0.7

Additions

 

7.6

 

15.5

 

27.0

 

13.6

 

63.8

Disposals

 

(0.7)

 

(35.2)

 

(73.7)

 

(1.0)

 

(110.6)

Transfers

 

3.9

 

5.7

 

4.9

 

(14.5)

 

 

Exchange differences

 

2.4

 

4.4

 

13.2

 

0.3

 

20.2

Balance March 31

 

218.9

 

290.9

 

355.1

 

14.4

 

879.4

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(83.3)

 

(225.4)

 

(263.7)

 

 

 

(572.4)

Additions

 

(6.3)

 

(25.2)

 

(32.8)

 

 

 

(64.3)

Disposals

 

0.4

 

34.9

 

70.1

 

 

 

105.3

Exchange differences

 

(1.1)

 

(3.1)

 

(8.4)

 

 

 

(12.6)

Balance March 31

 

(90.4)

 

(218.9)

 

(234.8)

 

 

 

(544.1)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

122.4

 

75.0

 

119.6

 

15.9

 

332.8

Balance March 31

 

128.5

 

72.0

 

120.3

 

14.4

 

335.3

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

 

0.0

 

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

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 does 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

2020/21

 

 

Properties

 

Vehicles

 

Other assets

 

Total

Cost

 

 

 

 

 

 

 

 

Balance April 1

 

313.1

 

8.7

 

1.5

 

323.3

Changes through business combinations

 

0.2

 

 

 

 

 

0.2

Additions

 

60.5

 

2.0

 

0.6

 

63.1

Disposals

 

(17.7)

 

(0.6)

 

(0.2)

 

(18.4)

Exchange differences

 

9.4

 

0.3

 

0.1

 

9.8

Balance March 31

 

365.5

 

10.4

 

2.0

 

377.9

Accumulated depreciation

 

 

 

 

 

 

 

 

Balance April 1

 

(60.7)

 

(1.7)

 

(0.3)

 

(62.7)

Additions

 

(63.7)

 

(2.9)

 

(1.3)

 

(67.9)

Disposals

 

17.7

 

0.6

 

0.2

 

18.4

Exchange differences

 

(4.0)

 

(0.1)

 

(0.0)

 

(4.1)

Balance March 31

 

(110.7)

 

(4.1)

 

(1.5)

 

(116.3)

Net book value

 

 

 

 

 

 

 

 

Balance April 1

 

252.4

 

7.0

 

1.2

 

260.6

Balance March 31

 

254.8

 

6.3

 

0.5

 

261.6

Right-of-use assets CHF million

2019/20

 

 

Properties

 

Vehicles

 

Other assets

 

Total

Cost

 

 

 

 

 

 

 

 

Balance April 1

 

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

 

269.3

 

7.5

 

1.3

 

278.1

Balance March 31

 

252.4

 

7.0

 

1.2

 

260.6

Lease liabilities CHF million

 

2020/21

 

2019/20

Balance April 1

 

269.0

 

285.0

Changes through business combinations

 

0.2

 

0.7

Additions

 

62.2

 

84.1

Interest expense

 

4.0

 

4.0

Payments

 

(70.6)

 

(68.3)

Exchange differences

 

6.5

 

(36.5)

Balance March 31

 

271.3

 

269.0

thereof short-term

 

58.9

 

61.2

thereof long-term

 

212.4

 

207.8

The maturity analysis of lease liabilities are disclosed in Note 4.7

Lease disclosures CHF million

 

2020/21

 

2019/20

Expenses relating to short-term leases

 

5.1

 

13.4

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

 

0.4

 

0.6

Expenses relating to variable lease payments

 

5.8

 

0.3

The total cash outflow for leases in the financial year 2020/21 amounted to CHF 81.9 million (prior year CHF 82.6 million). 

The Group has various lease contracts that as of March 31, 2021, have not yet commenced. The future lease payments for these non-cancellable lease contracts amount to CHF 0.1 million (prior year CHF 17.2 million). The future lease payments relating to variable lease payments amount to CHF 5.8 million (prior year 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 Groupʼs incremental borrowing rate if the interest rate implicit in the lease is not readily determinable. 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

2020/21

 

 

Goodwill

 

Intangibles relating to acquisitions 1)

 

Capitalized development costs

 

Software and other intangibles

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1 2)

 

2,064.5

 

615.5

 

223.9

 

100.5

 

3,004.3

Changes through business combinations

 

20.0

 

8.3

 

 

 

0.0

 

28.3

Additions

 

 

 

 

 

15.9

 

9.6

 

25.5

Disposals

 

 

 

(6.7)

 

(25.3)

 

(8.8)

 

(40.9)

Exchange differences

 

58.8

 

25.8

 

(0.3)

 

1.1

 

85.3

Balance March 31

 

2,143.3

 

642.8

 

214.1

 

102.4

 

3,102.6

Accumulated amortization and impairments

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(148.8)

 

(322.7)

 

(75.3)

 

(73.0)

 

(619.8)

Additions

 

 

 

(42.5) 3)

 

(12.9)

 

(8.5)

 

(63.9)

Disposals

 

 

 

6.7

 

25.3

 

8.6

 

40.7

Impairment

 

 

 

(1.3)

 

(25.3)

 

 

 

(26.6)

Exchange differences

 

3.6

 

(13.4)

 

 

 

(1.3)

 

(11.1)

Balance March 31

 

(145.2)

 

(373.2)

 

(88.3)

 

(74.1)

 

(680.8)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1 2)

 

1,915.6

 

292.7

 

148.5

 

27.5

 

2,384.4

Balance March 31

 

1,998.0

 

269.7

 

125.9

 

28.2

 

2,421.8

1) Intangibles relating to acquisitions consists of customer relationships (CHF 153.6 million), trademarks (CHF 108.8 million) and R&D in process (CHF 7.3 million).

2) The balance April 1 for Goodwill was adjusted by CHF 35.8 million as disclosed in Note 6.1.

3) Relates to research and development (CHF 0.9 million) and sales and marketing (CHF 41.6 million).

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).

Based on the impairment tests performed, there was no need for the recognition of any impairment of goodwill for the 2020/21 and 2019/20 financial years.

The cash flow projections used for impairment testing, were based on the most recent business plan, and considered 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, 2021, the carrying amount of the goodwill, expressed in various currencies, amounted to an equivalent of CHF 1,694.1 million (prior year CHF 1,639.9 million).

Cash flows beyond the projection period were extrapolated with a long-term growth rate of 2.0% (prior year 2.1%) which represents the projected inflation rate. For the calculation, a pre-tax weighted average discount rate of 9.0% (prior year 8.3%) 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, 2021, the carrying amount of the goodwill, expressed in various currencies, amounted to an equivalent of CHF 303.9 million (prior year CHF 311.5 million).

Cash flows beyond the projection period were extrapolated with a long-term growth rate of 2.2% (prior year 2.3%) which represents the projected inflation rate. For the calculation, a pre-tax weighted average discount rate of 9.3% (prior year 9.0%) 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. Due to a revision of the Cochlear implants product roadmap in the 2020/21 financial year, Sonova has identified the need of valuation adjustments on certain R&D projects. As a result, an impairment of previously capitalized development costs was recorded, resulting in a write-off amounting to CHF 25.3 million. The amount is included in the income statement in the function “Research and development”. 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

 

31.3.2021

 

31.3.2020

Other receivables

 

54.4

 

57.6

Prepaid expenses

 

28.5

 

31.5

Contract assets

 

3.1

 

2.9

Right to recover products

 

10.6

 

9.9

Total

 

96.6

 

101.9

 

 

 

 

 

Other non-current operating assets CHF million

 

31.3.2021

 

31.3.2020

Contract assets

 

6.2

 

6.4

Total

 

6.2

 

6.4

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

2020/21

 

 

Warranty and returns

 

Reimbursement to customers

 

Product liabilities

 

Other provisions

 

Total

Balance April 1

 

111.6

 

5.0

 

120.4

 

31.5

 

268.6

Changes through business combinations

 

 

 

 

 

 

 

0.4

 

0.4

Amounts used

 

(72.8)

 

(4.1)

 

(4.8)

 

(19.3)

 

(101.0)

Reversals

 

(10.0)

 

(2.5)

 

(11.0)

 

(3.4)

 

(26.9)

Increases

 

94.4

 

4.4

 

9.8

 

42.1

 

150.6

Present value adjustments

 

 

 

 

 

0.5

 

 

 

0.5

Exchange differences

 

2.7

 

 

 

(3.0)

 

0.9

 

0.5

Balance March 31

 

125.9

 

2.8

 

111.9

 

52.3

 

292.8

thereof short-term

 

92.2

 

2.8

 

15.3

 

37.8

 

148.1

thereof long-term

 

33.7

 

 

 

96.6

 

14.5

 

144.7

CHF million

2019/20

 

 

Warranty and returns

 

Reimbursement to customers

 

Product liabilities

 

Other provisions

 

Total

Balance April 1

 

111.3

 

7.7

 

100.9

 

25.3

 

245.2

Changes through business combinations

 

 

 

0.0

 

 

 

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

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. 

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.

The provision is reassessed on a regular and systematic basis and follows for both cases a similar financial model which is applied consistently. The calculation of this provision is based on past experience regarding the number and cost of current and future claims. While further improvements in the expected number of cost of current and future claims led to a reduction of CHF 10.8 million (previous year CHF 0.8 million) in regards to the assessment of potential claims for the voluntary recall of AB products in 2006, the reassessment of potential claims regarding the voluntary field corrective action in February 2020 led to an increase of CHF 9.8 million (prior year CHF 24.1 million). The impact of the reassessment of the legal provisions is considered in the income statement in the lines “Other income” or “Other expenses”. As per March 31, 2021 the provision for product liabilities amounts to CHF 111.9 million. The timing of the cash outflows is uncertain since it will largely depend on the outcome of administrative and legal proceedings. In the case of the voluntary recall of AB products in 2006, 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 6 years. In the case of potential claims in regards to the voluntary field corrective action in 2020, 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 (CHF 21.6 million) and restructuring costs (CHF 15.3 million) which arise during the normal course of business, respectively relate to intensified restructuring activity in financial year 2020/21. While the timing of the cash outflow from the restructuring provisions is expected to take place within the next 12 months, the cash outflows for the remainder of 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 managementʼs 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

 

31.3.2021

 

31.3.2020

Other payables

 

54.8

 

72.9

Accrued expenses

 

282.4

 

224.2

Deferred income

 

1.0

 

0.4

Total

 

338.2

 

297.5

 

 

 

 

 

Other long-term operating liabilities CHF million

 

31.3.2021

 

31.3.2020

Retirement benefit obligations

 

21.3

 

73.5

Total

 

21.3

 

73.5

Other payables include amounts to be remitted for withholding taxes, value added taxes, social security payments and employeesʼ 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, 2021 and 2020, there were no pledges given to third parties other than in relation to bank loans and mortgages.

Deposits in the amount of CHF 1.7 million (previous year CHF 1.8 million) have been pledged in relation to bank guarantees. Open purchase orders as of March 31, 2021 and 2020, were related to recurring business activities.

Lawsuits and disputes

The patent infringement lawsuit by the Alfred E. Mann Foundation for Scientific Research (AMF) and Advanced Bionics LLC (AB) v. Cochlear was concluded in 2020. As a co-plaintiff, AB was ultimately entitled to a share of the damages awarded, after deduction of certain costs for the proceedings. The verdict resulted in a total amount of CHF 124.4 million in cash for damages, pre-trial interest and attorney fees. This one-time income is reported in “other income” in the financial year 2020/21.

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 products launched in 2018. While the ultimate outcome of the dispute remains open, Advanced Bionics continues to believe the complaint has no merit 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 ABʼs testing of radio frequency emissions of its devices and ABʼs reporting of those test results in submissions to the U.S. Food and Drug Administration from 2010 to the present. AB is continuing to cooperate fully with the HHS-OIG and the U.S. Department of Justice in connection with this subpoena, and remains unable to predict the further timing or outcome of this investigation.

1

4. Capital structure and financial management

4.1 Cash and cash equivalents

CHF million

 

31.3.2021

 

31.3.2020

Cash on hand

 

1.3

 

0.9

Current bank accounts

 

419.8

 

448.5

Term deposits

 

1,351.1

 

0.8

Total

 

1,772.2

 

450.2

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

 

2020/21

 

2019/20

Interest income

 

1.8

 

2.5

Other financial income

 

3.2

 

0.4

Total financial income

 

5.0

 

2.9

Interest expenses

 

(13.1)

 

(2.1)

Interest expenses on lease liabilities

 

(4.0)

 

(4.0)

Unwinding of the discount on provisions

 

(0.5)

 

(0.6)

Foreign exchange hedge costs

 

(1.5)

 

(3.4)

Other financial expenses

 

(6.9)

 

(2.7)

Total financial expenses

 

(26.0)

 

(12.9)

Total financial income/expenses, net

 

(21.0)

 

(10.0)

Other financial income and financial expenses in 2020/21 include, amongst other items, primarily the fair value adjustments of financial instruments.

4.3 Dividend per share

The Board of Directors of Sonova Holding AG proposes to the Annual General Shareholdersʼ Meeting, to be held on June 15, 2021, that a dividend of CHF 3.20 shall be distributed. In the financial year 2019/20 a stock dividend was distributed. Each shareholder was entitled to receive one Sonova share for 150 existing Sonova shares with fractions paid out in cash.

4.4 Other financial assets

Other current financial assets

CHF million

 

31.3.2021

 

31.3.2020

 

 

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

 

 

 

0.2

 

0.2

Positive replacement value of forward foreign exchange contracts

 

 

 

0.3

 

0.3

 

 

 

2.3

 

2.3

Loans to third parties

 

6.3

 

 

 

6.3

 

5.3

 

 

 

5.3

Total

 

6.3

 

0.5

 

6.8

 

5.3

 

2.5

 

7.7

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

 

31.3.2021

 

31.3.2020

 

 

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

 

3.3

 

 

 

3.3

 

4.5

 

 

 

4.5

Loans to third parties

 

22.8

 

 

 

22.8

 

20.0

 

 

 

20.0

Rent deposits

 

3.6

 

 

 

3.6

 

3.8

 

 

 

3.8

Other non-current financial assets

 

 

 

9.2

 

9.2

 

 

 

1.7

 

1.7

Total

 

29.7

 

9.2

 

38.9

 

28.3

 

1.7

 

30.0

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, 2021, 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 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 Groupʼs 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

As of March 31, 2021, the Group has the following bonds/US Private Placement outstanding:

Financial liabilities

 

Currency

 

Nominal value

 

Interest rate

 

Maturity

Fixed-rate bond

 

CHF

 

360

 

0.01%

 

October 11, 2021

Fixed-rate bond

 

CHF

 

330

 

0.55%

 

April 6, 2022

US Private Placement

 

USD

 

180

 

2.84%

 

July 14, 2025

Fixed-rate bond

 

CHF

 

200

 

0.50%

 

October 6, 2025

Fixed-rate bond

 

CHF

 

300

 

0.75%

 

October 6, 2028

Fixed-rate bond

 

CHF

 

100

 

0.00%

 

October 11, 2029

Fixed-rate bond

 

CHF

 

100

 

0.40%

 

October 11, 2034

On April 6, 2020, the Group issued a CHF 330 million two year fixed-rate bond with an interest rate of 0.55% and a maturity date of April 6, 2022. The bond was issued at 100.084% for the first tranche of CHF 260 million and at 100.139% for the second tranche of CHF 70 million.

On May 26, 2020, the Group issued a CHF 200 million fixed-rate bond with an interest rate of 0.50% and a maturity date of October 6, 2025 and a CHF 300 million fixed-rate bond with an interest rate of 0.75% and a maturity date of October 6, 2028. The bonds were issued at 100.402% and 100.084%, respectively. This bond issuance terminated/replaced the CHF 300 million revolving bridge facility (unused) with three of its relationship banks which the Group entered on May 15, 2021.

On July 14, 2020, the Group entered into a USD 180 million five year fixed-rate US Private Placement with an interest rate of 2.84% and a maturity on July 14, 2025.

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, 2021 the Group did not make use of credit facilities. During the financial year 2020/21, the Group repaid credit facilities in the amount of CHF 230 million.

Current financial liabilities

CHF million

 

31.3.2021

 

31.3.2020

 

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Total

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Financial liabilities at FVOCI

 

Total

Bank debt

 

0.1

 

 

 

0.1

 

230.2

 

 

 

 

 

230.2

Bond

 

364.6

 

 

 

364.6

 

 

 

 

 

 

 

 

Deferred payments

 

7.0

 

 

 

7.0

 

8.0

 

 

 

 

 

8.0

Contingent considerations

 

 

 

2.9

 

2.9

 

 

 

4.1

 

10.0

 

14.1

Other current financial liabilities

 

 

 

1.1

 

1.1

 

 

 

2.6

 

 

 

2.6

Total

 

371.7

 

4.0

 

375.7

 

238.2

 

6.7

 

10.0

 

254.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unused borrowing facilities

 

 

 

 

 

366.2

 

 

 

 

 

 

 

111.0

Non-current financial liabilities

CHF million

 

31.3.2021

 

31.3.2020

 

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Total

 

Financial liabilities at amortized cost

 

Financial liabilities at fair value through profit or loss

 

Financial liabilities at FVOCI

 

Total

Bonds/US Private Placement

 

1,197.8

 

 

 

1,197.8

 

559.1

 

 

 

 

 

559.1

Deferred payments

 

3.0

 

 

 

3.0

 

9.9

 

 

 

 

 

9.9

Contingent considerations

 

 

 

1.3

 

1.3

 

 

 

1.2

 

19.1

 

20.3

Other non-current financial liabilities

 

0.0

 

6.8

 

6.8

 

0.1

 

2.5

 

 

 

2.6

Total

 

1,200.8

 

8.1

 

1,208.9

 

569.1

 

3.7

 

19.1

 

591.8

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

 

31.3.2021

 

31.3.2020

 

 

Bonds/US Private Placement

 

Deferred payments and contingent considerations

 

Other non-current financial liabilities

 

Total

 

Bonds

 

Deferred payments and contingent considerations

 

Other non-current financial liabilities

 

Total

CHF

 

1,028.7

 

 

 

6.3

 

1,035.0

 

559.1

 

11.8

 

2.1

 

573.0

USD

 

169.1

 

 

 

0.0

 

169.1

 

 

 

0.7

 

0.0

 

0.7

EUR

 

 

 

2.9

 

 

 

2.9

 

 

 

15.9

 

 

 

15.9

BRL

 

 

 

0.3

 

 

 

0.3

 

 

 

0.3

 

 

 

0.3

Other

 

 

 

1.1

 

0.5

 

1.6

 

 

 

1.5

 

0.4

 

1.9

Total

 

1,197.8

 

4.3

 

6.8

 

1,208.9

 

559.1

 

30.2

 

2.6

 

591.8

Reconciliation of liabilities arising from financing activities

Liabilities from financing activities CHF million

 

 

 

 

 

 

 

 

 

 

 

2020/21

 

 

Bank debt

 

Bonds/US Private Placement

 

Deferred payments and contingent considerations

 

Lease liabilities

 

Other financial liabilities

 

Total

Balance April 1 1)

 

230.2

 

559.1

 

22.0

 

269.0

 

5.2

 

1,085.5

Changes through business combinations

 

 

 

 

 

(3.7)

 

0.2

 

 

 

(3.5)

Additions to lease liabilities

 

 

 

 

 

 

 

62.2

 

 

 

62.2

Proceeds from borrowings

 

 

 

999.7

 

 

 

 

 

2.8

 

1,002.5

Repayment of borrowings

 

(230.0)

 

 

 

 

 

 

 

 

 

(230.0)

Repayment of lease liabilities – principal portion

 

 

 

 

 

 

 

(66.7)

 

 

 

(66.7)

Repayment of lease liabilities – interest portion

 

 

 

 

 

 

 

(4.0)

 

 

 

(4.0)

Exchange differences

 

 

 

(1.8)

 

 

 

6.5

 

 

 

4.7

Other

 

(0.1)

 

5.4

 

(4.1)

 

4.2

 

(0.1)

 

5.2

Balance March 31

 

0.1

 

1,562.4

 

14.2

 

271.3

 

7.9

 

1,856.0

thereof short-term

 

0.1

 

364.6

 

9.9

 

58.9

 

1.1

 

434.6

thereof long-term

 

 

 

1,197.8

 

4.3

 

212.4

 

6.8

 

1,421.3

1) The balance April 1 for deferred payments and contingent considerations was adjusted by CHF 30.3 million as disclosed in Note 6.1.

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

 

285.0

 

4.3

 

913.9

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

 

 

 

559.1

 

30.2

 

207.8

 

2.6

 

799.7

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, 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 2)

 

(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

 

 

 

 

 

 

 

Purchase of treasury shares

 

 

 

(40,100)

 

(40,100)

Sale/transfer of treasury shares

 

 

 

238,074

 

238,074

Stock dividend 3)

 

 

 

417,110

 

417,110

Balance March 31, 2021

 

64,398,137

 

(1,355,464)

 

63,042,673

 

 

 

 

 

 

 

Nominal value of share capital CHF million

 

Share Capital

 

Treasury shares 1)

 

Outstanding share capital

Balance March 31, 2021

 

3.2

 

(0.1)

 

3.2

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) 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.

3) The Annual General Shareholder’s Meeting of June 11, 2020, approved the proposed distribution of a stock dividend, resulting in a reduction of retained earnings and other reserves of CHF 100.4 million and changes in treasury shares of CHF 100.2 million.

Share buyback program

On August 31, 2018, Sonova Holding AG announced that its Board of Directors approved a share buyback program of up to CHF 1.5 billion (but for a maximum of 11,759,560 registered shares). The program started in October 2018 for a period of up to 36 months. The shares were planned to be repurchased for the purpose of a capital reduction, subject to approval by future Annual General Shareholdersʼ Meetings. Effective March 16, 2020, Sonova Holding AG suspended the Groupʼs share buyback program. This precautionary measure reflected the uncertainties from the COVID-19 pandemic. On May 19, 2020, the Board of Directors decided to amend the purpose of the share buyback, allowing the re-use of these treasury shares. The stock dividend (417,110 shares) distributed in financial year 2020/21 was sourced from Sonova shares which were repurchased by Sonova under the share buyback program 2018 – 2021. A further 200,000 shares bought under the share buyback program were used for the transfer and sale of treasury shares in connection with the Executive Equity Award Plan (EEAP) programs. The remaining 1,225,980 treasury shares as of March 31, 2021, initially bought under the share buyback program, are intended to be cancelled (proposal to the Annual Shareholdersʼ Meeting June 15, 2021).

In the financial year 2019/20, transaction costs related to the share buyback program in the amount of CHF 4.7 million were deducted from equity.

Authorized capital

The 2020 Annual General Shareholdersʼ Meeting authorized the Board of Directors to increase the share capital at any time until June 11, 2022 by a maximum amount of CHF 321,990.65 by issuing a maximum of 6,439,813 registered shares that are to be fully paid up, each with a nominal value of CHF 0.05. Increases in partial amounts shall be permissible. The Board of Directors did not make use of this authorized capital in financial year 2020/21.

Conditional capital

At the Annual General Shareholdersʼ 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, 2021. These shares are reserved for long-term incentive plans (2,021,013 shares) as well as for initiatives to increase the companyʼs 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 companiesʼ 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 Groupʼs risks at least once a year in the context of a strategy meeting.

Financial risk management

Due to Sonova Groupʼs 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 Groupʼs 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 Groupʼs 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 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.

Positive replacement values from forward contract hedges 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, 2021, the Group engaged in forward currency contracts amounting to CHF 280.0 million (previous year CHF 337.3 million). The open contracts on March 31, 2021 as well as on March 31, 2020 were all due within one year.

Notional amount of forward contracts CHF million

31.3.2021

 

31.3.2020

 

 

Total

 

Fair value

 

Total

 

Fair value

Positive replacement values

 

96.7

 

0.3

 

119.3

 

2.3

Negative replacement values

 

183.3

 

(0.6)

 

218.0

 

(2.3)

Total

 

280.0

 

(0.3)

 

337.3

 

0.0

Exchange rate risk CHF million

 

2020/21

 

2019/20

 

2020/21

 

2019/20

 

 

Impact on income after taxes 1)

 

 

 

Impact on equity

 

 

Change in USD/CHF +5%

 

2.7

 

2.8

 

9.6

 

13.2

Change in USD/CHF –5%

 

(2.7)

 

(2.8)

 

(9.6)

 

(13.2)

Change in EUR/CHF +5%

 

3.1

 

3.0

 

16.9

 

21.3

Change in EUR/CHF –5%

 

(3.1)

 

(3.0)

 

(16.9)

 

(21.3)

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 2020/21 financial year of CHF 1,364.6 million (previous year CHF 574 million). If interest rates during the 2020/21 financial year had been 1% higher, the positive impact on income before taxes would have been CHF 6.8 million. If interest rates had been 1% lower, the income before taxes would have been negatively impacted by CHF 12.1 million. The Groupʼs long-term financial liabilities are fixed rate instruments not subject to interest rate risk.

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 Groupʼs 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 Sonovaʼs 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, 2021, the largest balance with a single counterparty amounted to 29% (previous year 51%) 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 February 2021.

Impairment of financial assets

Impairment losses on financial assets are calculated based on the expected credit loss (ECL) model of IFRS 9. The Groupʼs 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

 

 

 

 

 

 

 

31.3.2021

 

 

 

 

 

 

 

31.3.2020

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

 

0.3%

 

85.0

 

(0.3)

 

84.7

 

0.5%

 

63.2

 

(0.3)

 

62.9

Overdue 1–90 days

 

0.9%

 

14.4

 

(0.1)

 

14.3

 

1.2%

 

24.5

 

(0.3)

 

24.2

Overdue 91–180 days

 

3.7%

 

2.7

 

(0.1)

 

2.6

 

6.5%

 

3.1

 

(0.2)

 

2.9

Overdue 181–360 days

 

19.0%

 

2.9

 

(0.5)

 

2.3

 

23.3%

 

3.0

 

(0.7)

 

2.3

Overdue more than 360 days

 

98.5%

 

3.2

 

(3.2)

 

0.0

 

97.3%

 

3.7

 

(3.6)

 

0.1

Total

 

3.9%

 

108.2

 

(4.2)

 

103.9

 

5.2%

 

97.5

 

(5.1)

 

92.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHF million

 

 

 

 

 

 

 

31.3.2021

 

 

 

 

 

 

 

31.3.2020

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

 

1.2%

 

279.9

 

(3.5)

 

276.5

 

6.1%

 

218.6

 

(13.4)

 

205.2

Overdue 1–90 days

 

4.7%

 

43.4

 

(2.0)

 

41.3

 

10.9%

 

72.6

 

(7.9)

 

64.7

Overdue 91–180 days

 

21.1%

 

11.2

 

(2.4)

 

8.8

 

33.6%

 

13.1

 

(4.4)

 

8.7

Overdue 181–360 days

 

53.1%

 

10.2

 

(5.4)

 

4.8

 

48.5%

 

13.0

 

(6.3)

 

6.7

Overdue more than 360 days

 

83.2%

 

20.4

 

(17.0)

 

3.4

 

76.7%

 

19.3

 

(14.8)

 

4.5

Total

 

8.3%

 

365.1

 

(30.3)

 

334.9

 

13.9%

 

336.6

 

(46.8)

 

289.8

The closing loss allowances for trade receivables as at March 31, 2020 reconcile to the closing loss allowance as at March 31, 2021 as follows:

CHF million

 

2020/21

 

2019/20

Loss allowance for doubtful receivables, April 1

 

(51.9)

 

(39.0)

Utilization

 

7.8

 

6.4

Reversal

 

16.5

 

2.6

Additions

 

(6.0)

 

(24.7)

Exchange differences

 

(1.0)

 

2.9

Loss allowance for doubtful receivables, March 31

 

(34.5)

 

(51.9)

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 in financial year 2019/20 related to an increase in the expected credit loss (ECL) rates due to the increased credit risk caused by COVID-19. During the financial year 2020/21 credit risk ratings significantly improved resulting in a reversal of loss allowances.

Liquidity risk

Group finance is responsible for centrally managing the net cash/debt position and to ensure that the Groupʼs 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 lionʼs 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 4.5). The following table summarizes the Groupʼs financial liabilities as of March 31, 2021 and 2020 based on contractual undiscounted payments. Bonds include the notional amount as well as interest payments.

CHF million

31.3.2021

 

 

Due less than 1 year

 

Due 1 year to 5 years

 

Due more than 5 years

 

Total

Bank debt

 

0.1

 

 

 

 

 

0.1

Trade payables

 

103.2

 

 

 

 

 

103.2

Lease liabilities

 

58.9

 

159.8

 

52.5

 

271.2

Bonds/US Private Placement

 

370.3

 

731.1

 

509.1

 

1,610.5

Other financial liabilities

 

11.0

 

11.1

 

 

 

22.1

Total financial liabilities

 

543.6

 

902.1

 

561.5

 

2,007.2

 

 

 

 

 

 

 

 

 

CHF million

31.3.2020

 

 

Due less than 1 year

 

Due 1 year to 5 years

 

Due more than 5 years

 

Total

Bank debt

 

230.2

 

 

 

 

 

230.2

Trade payables

 

104.3

 

 

 

 

 

104.3

Lease liabilities

 

61.2

 

146.9

 

60.9

 

269.0

Bonds

 

0.4

 

361.6

 

203.8

 

565.9

Other financial liabilities

 

24.7

 

32.8

 

 

 

57.5

Total financial liabilities 1)

 

420.8

 

541.3

 

264.7

 

1,226.8

1) Excludes "Other short-term liabilities", which were disclosed in this table in the last annual report, and considers interests on bonds.

Capital management

It is the Groupʼs policy to maintain a strong equity base and to secure a continuous “investment grade” rating. The Groupʼs 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 maintains 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

 

31.3.2021

 

 

Notes

 

Carrying amount

 

Fair value 1)

 

Level 1

 

Level 2

 

Level 3

Financial assets at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

4.1

 

1,772.2

 

 

 

 

 

 

 

 

Other financial assets

 

4.4

 

36.1

 

 

 

 

 

 

 

 

Trade receivables

 

3.1

 

438.8

 

 

 

 

 

 

 

 

Total

 

 

 

2,247.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

Other financial assets

 

4.4

 

9.7

 

9.7

 

7.4

 

 

 

2.3

Total

 

 

 

9.7

 

9.7

 

7.4

 

 

 

2.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

Bank debt

 

4.5

 

0.1

 

 

 

 

 

 

 

 

Bonds/US Private Placement

 

4.5

 

1,562.4

 

1,590.0

 

1,590.0

 

 

 

 

Deferred payments

 

4.5

 

10.0

 

 

 

 

 

 

 

 

Other financial liabilities

 

4.5

  </