Dieser Abschnitt ist nur in englischer Sprache verfügbar.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2023

Notes to the consolidated financial statements
as of March 31, 2023

1. Basis for preparation

1. Basis for preparation

1.1 Corporate information

The Sonova Group (the “Group”) is a global leader in innovative hearing care solutions: from personal audio devices and wireless communication systems to audiological care services, hearing aids and cochlear implants. The Groupʼs globally diversified sales and distribution channels serve an ever growing consumer base in more than 100 countries. 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 10, 2023 and are subject to approval by the Annual General Shareholdersʼ Meeting on June 12, 2023.

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

Fair value of financial liabilities at fair value through profit or loss

 

Note 4.8: Financial instruments

Deferred tax assets

 

Note 5.1: Taxes

Business combinations

 

Note 6.1: Acquisitions/disposals of subsidiaries

Defined benefit plans

 

Note 7.3: Employee benefits

1.4 Changes in accounting policies

In 2022/23 the Group adopted the following amendments to existing standards and interpretations, without having a significant impact on the Groupʼs result and financial position:

  • Reference to the Conceptual Framework – Amendments to IFRS 3
  • Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
  • Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
  • Annual Improvements to IFRS Standards 2018 – 2020

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, 2023 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. 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

 

2022/23

 

 

Income statement as reported

 

Acquis. related amortization

 

Income statement EBITA separation

Sales

 

3,738.4

 

 

 

3,738.4

Cost of sales

 

(1,101.0)

 

 

 

(1,101.0)

Gross profit

 

2,637.4

 

 

 

2,637.4

Research and development

 

(244.6)

 

1.6

 

(243.0)

Sales and marketing

 

(1,316.4)

 

53.3

 

(1,263.1)

General and administration

 

(330.2)

 

 

 

(330.2)

Other income/(expenses), net

 

0.6

 

 

 

0.6

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

 

 

 

 

 

801.6

Acquisition-related amortization

 

 

 

(54.9)

 

(54.9)

Operating profit (EBIT) 2)

 

746.7

 

 

 

746.7

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

 

2021/22

 

 

Income statement as reported

 

Acquis. related amortization

 

Income statement EBITA separation

Sales

 

3,363.9

 

 

 

3,363.9

Cost of sales

 

(903.3)

 

 

 

(903.3)

Gross profit

 

2,460.7

 

 

 

2,460.7

Research and development

 

(230.5)

 

0.6

 

(230.0)

Sales and marketing

 

(1,137.6)

 

42.4

 

(1,095.3)

General and administration

 

(320.9)

 

 

 

(320.9)

Other income/(expenses), net

 

(11.5)

 

 

 

(11.5)

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

 

 

 

 

 

802.9

Acquisition-related amortization

 

 

 

(42.9)

 

(42.9)

Operating profit (EBIT) 2)

 

760.0

 

 

 

760.0

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 sales analysis as well as consolidated income statements and other key financial metrics for the two segments. The Group uses EBITA as a 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, as well as wireless headsets, speech-enhanced hearables and audiophile headphones. 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 – with technologically advanced production processes being performed in Switzerland and standard product assembly being located in Asia -, whereas the production of consumer hearing devices is based in Germany, Ireland, Romania and the USA. 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 for hearing instruments and through 21 sales subsidiaries and long-established trading partners for consumer hearing products. 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

 

2022/23

 

2021/22

 

2022/23

 

2021/22

 

2022/23

 

2021/22

 

2022/23

 

2021/22

 

 

Hearing Instruments

 

 

 

Cochlear Implants

 

 

 

Corporate/ Eliminations

 

 

 

Total

 

 

Segment sales

 

3,461.4

 

3,089.5

 

293.0

 

282.3

 

 

 

 

 

3,754.4

 

3,371.7

Intersegment sales

 

(10.0)

 

(5.4)

 

(6.1)

 

(2.4)

 

 

 

 

 

(16.0)

 

(7.8)

Sales

 

3,451.5

 

3,084.0

 

286.9

 

279.9

 

 

 

 

 

3,738.4

 

3,363.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At point in time

 

3,289.0

 

2,949.3

 

274.2

 

268.0

 

 

 

 

 

3,563.2

 

3,217.4

Over time

 

162.5

 

134.7

 

12.7

 

11.9

 

 

 

 

 

175.2

 

146.5

Total sales

 

3,451.5

 

3,084.0

 

286.9

 

279.9

 

 

 

 

 

3,738.4

 

3,363.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit before acquisition-related amortization (EBITA)

 

771.4

 

782.9

 

30.1

 

19.7

 

0.0

 

0.4

 

801.6

 

802.9

Depreciation, amortization and impairment

 

(206.7)

 

(173.2)

 

(33.0)

 

(37.8)

 

 

 

 

 

(239.7)

 

(211.1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

4,976.1

 

4,831.4

 

578.8

 

568.2

 

(686.0)

 

(686.9)

 

4,869.0

 

4,712.6

Unallocated assets 1)

 

 

 

 

 

 

 

 

 

 

 

 

 

683.5

 

875.6

Total assets

 

 

 

 

 

 

 

 

 

 

 

 

 

5,552.5

 

5,588.2

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

 

2022/23

 

2021/22

EBITA

 

801.6

 

802.9

Acquisition-related amortization

 

(54.9)

 

(42.9)

Financial costs, net

 

(34.9)

 

(34.9)

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

 

3.9

 

3.0

Income before taxes

 

715.6

 

728.2

Entity-wide disclosures

Sales by business CHF million

 

2022/23

 

2021/22

Hearing Instruments business

 

1,809.3

 

1,838.4

Consumer Hearing business

 

284.3

 

8.8

Audiological Care business

 

1,357.8

 

1,236.8

Total Hearing Instruments segment

 

3,451.5

 

3,084.0

Cochlear Implant systems

 

185.4

 

175.8

Upgrades and accessories

 

101.5

 

104.1

Total Cochlear Implants segment

 

286.9

 

279.9

Total sales

 

3,738.4

 

3,363.9

Sales and selected non-current assets by regions CHF million

 

2022/23

 

2021/22

 

2022/23

 

2021/22

Country/region

 

Sales 1)

 

 

 

Selected non-current assets 2)

 

 

Switzerland

 

44.0

 

30.8

 

231.5

 

238.4

EMEA (excl. Switzerland)

 

1,824.2

 

1,745.1

 

1,708.2

 

1,765.9

USA

 

1,150.0

 

1,009.8

 

1,052.7

 

1,021.5

Americas (excl. USA)

 

274.0

 

244.6

 

241.3

 

217.5

Asia/Pacific

 

446.2

 

333.6

 

502.3

 

360.6

Total Group

 

3,738.4

 

3,363.9

 

3,736.1

 

3,603.9

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 audio devices, 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

 

31.3.2023

 

31.3.2022

Contract assets

 

9.5

 

8.8

Contract liabilities

 

299.8

 

294.1

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 sheet.

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

Movement in contract liabilities CHF million

 

2022/23

 

2021/22

Balance April 1

 

294.1

 

302.0

Changes through business combinations

 

 

 

9.3

Increase due to advance consideration received in the period

 

191.6

 

143.4

Decrease due to revenue recognized in the period that,

 

 

 

 

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

 

(136.8)

 

(102.6)

– relates to consideration received in the period

 

(39.1)

 

(41.7)

Reversals

 

(0.1)

 

(2.3)

Exchange differences

 

(9.9)

 

(14.1)

Balance March 31

 

299.8

 

294.1

 

 

 

 

 

Expectation on timing of revenue recognition:

 

 

 

 

Within 1 year

 

115.8

 

106.7

Within 2 years

 

93.6

 

88.4

Within 3 years

 

49.8

 

52.3

Within 4 years

 

19.1

 

21.9

More than 4 years

 

21.5

 

24.7

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 2022/23 financial year, the net result of other income and expense amounts to CHF 0.6 million (previous year: CHF – 11.5 million).

In the prior year, the expense primarily related to costs in relation to a settlement agreement in principle with the US Department of Justice and ongoing patent litigation in the Cochlear Implants segment. For further information refer to Note 3.9 “Contingent assets and liabilities”.

2.5 Earnings per share

Basic earnings per share

 

2022/23

 

2021/22

Income after taxes (CHF million)

 

647.5

 

649.0

Weighted average number of outstanding shares

 

60,224,264

 

62,270,275

Basic earnings per share (CHF)

 

10.75

 

10.42

Diluted earnings per share

 

2022/23

 

2021/22

Income after taxes (CHF million)

 

647.5

 

649.0

Weighted average number of outstanding shares

 

60,224,264

 

62,270,275

Adjustment for dilutive share awards

 

208,862

 

440,731

Adjusted weighted average number of outstanding shares

 

60,433,126

 

62,711,006

Diluted earnings per share (CHF)

 

10.72

 

10.35

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 awards from share participation plans will be exercised. For the option plans, the weighted average number of shares is adjusted for all dilutive options issued under the stock option plans which have been granted in 2016 through to 2023 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. Operating assets and liabilities

3.1 Trade receivables

CHF million

 

31.3.2023

 

31.3.2022

Trade receivables

 

556.1

 

505.6

Loss allowance for doubtful receivables

 

(31.5)

 

(31.3)

Total

 

524.7

 

474.3

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

For further information on the aging of the trade receivables and related allowances, please refer to Note 4.7.

During 2022/23, the Group utilized CHF 1.7 million (previous year CHF 3.1 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

 

31.3.2023

 

31.3.2022

BRL

 

19.0

 

19.1

CAD

 

21.5

 

17.5

CHF

 

14.0

 

19.4

EUR

 

217.5

 

182.8

GBP

 

19.6

 

15.6

USD

 

155.3

 

144.2

Other

 

77.7

 

75.7

Total trade receivables, net

 

524.7

 

474.3

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

 

31.3.2023

 

31.3.2022

Raw materials and components

 

93.9

 

64.2

Work-in-process

 

124.3

 

147.0

Finished products

 

252.7

 

254.0

Allowances

 

(51.7)

 

(52.5)

Total

 

419.1

 

412.7

The “cost of sales” corresponding to the carrying value of inventory (which excludes freight, packaging, logistics as well as certain overhead cost) amounted in 2022/23 to CHF 887.7 million (previous year CHF 736.2 million). The Group recognized write-downs of CHF 18.0 million (previous year CHF 25.9 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

2022/23

 

 

Land & buildings

 

Machinery & technical equipment

 

Room installations & other equipment

 

Advance payments & assets under construction

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

221.4

 

315.9

 

381.3

 

21.7

 

940.3

PPA finalization 1)

 

 

 

0.1

 

 

 

 

 

0.1

Changes through business combinations

 

 

 

0.6

 

2.3

 

0.0

 

2.9

Additions

 

2.7

 

25.5

 

45.7

 

23.0

 

96.9

Disposals

 

 

 

(12.4)

 

(22.6)

 

 

 

(35.0)

Transfers

 

 

 

3.5

 

10.7

 

(14.6)

 

(0.4)

Exchange differences

 

(2.8)

 

(7.4)

 

(15.4)

 

(0.4)

 

(26.0)

Balance March 31

 

221.3

 

325.7

 

402.1

 

29.7

 

978.8

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(96.2)

 

(238.8)

 

(246.4)

 

 

 

(581.4)

Additions

 

(6.9)

 

(28.6)

 

(37.8)

 

 

 

(73.3)

Disposals

 

 

 

12.0

 

19.3

 

 

 

31.3

Transfers

 

 

 

0.2

 

(0.2)

 

 

 

0.0

Exchange differences

 

1.4

 

5.1

 

9.3

 

 

 

15.7

Balance March 31

 

(101.7)

 

(250.2)

 

(255.8)

 

 

 

(607.7)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

125.2

 

77.0

 

134.9

 

21.7

 

358.9

Balance March 31

 

119.6

 

75.4

 

146.3

 

29.7

 

371.1

1) Relates to finalization of purchase price allocation Sennheiser Consumer Division (refer to Note 6.1).

CHF million

2021/22

 

 

Land & buildings

 

Machinery & technical equipment

 

Room installations & other equipment

 

Advance payments & assets under construction

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

218.9

 

290.9

 

355.1

 

14.4

 

879.4

Changes through business combinations

 

2.9

 

7.8

 

9.3

 

1.8

 

21.9

Additions

 

1.9

 

23.6

 

37.3

 

16.7

 

79.5

Disposals

 

(0.3)

 

(6.0)

 

(11.7)

 

 

 

(18.0)

Transfers

 

 

 

3.5

 

7.1

 

(10.6)

 

 

Exchange differences

 

(2.0)

 

(3.9)

 

(15.8)

 

(0.6)

 

(22.3)

Balance March 31

 

221.4

 

315.9

 

381.3

 

21.7

 

940.3

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(90.4)

 

(218.9)

 

(234.8)

 

 

 

(544.1)

Changes through business combinations

 

 

 

(0.4)

 

(0.6)

 

 

 

(1.0)

Additions

 

(6.9)

 

(27.0)

 

(31.8)

 

 

 

(65.7)

Disposals

 

0.1

 

4.9

 

10.9

 

 

 

15.9

Exchange differences

 

1.0

 

2.6

 

9.9

 

 

 

13.5

Balance March 31

 

(96.2)

 

(238.8)

 

(246.4)

 

 

 

(581.4)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

128.5

 

72.0

 

120.3

 

14.4

 

335.3

Balance March 31

 

125.2

 

77.0

 

134.9

 

21.7

 

358.9

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 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

2022/23

 

 

Properties

 

Vehicles

 

Other assets

 

Total

Cost

 

 

 

 

 

 

 

 

Balance April 1

 

352.1

 

9.3

 

1.7

 

363.1

Changes through business combinations

 

13.5

 

 

 

 

 

13.5

Additions

 

95.4

 

3.0

 

0.2

 

98.6

Disposals

 

(117.1)

 

(3.7)

 

(0.3)

 

(121.1)

Exchange differences

 

(15.7)

 

(0.5)

 

(0.0)

 

(16.3)

Balance March 31

 

328.2

 

8.1

 

1.6

 

337.9

Accumulated depreciation

 

 

 

 

 

 

 

 

Balance April 1

 

(84.6)

 

(3.5)

 

(1.3)

 

(89.4)

Additions

 

(71.0)

 

(2.3)

 

(0.2)

 

(73.4)

Disposals

 

117.1

 

3.7

 

0.3

 

121.1

Exchange differences

 

(7.5)

 

(0.2)

 

(0.0)

 

(7.8)

Balance March 31

 

(46.0)

 

(2.2)

 

(1.2)

 

(49.5)

Net book value

 

 

 

 

 

 

 

 

Balance April 1

 

267.5

 

5.8

 

0.4

 

273.8

Balance March 31

 

282.2

 

5.8

 

0.4

 

288.4

Right-of-use assets CHF million

2021/22

 

 

Properties

 

Vehicles

 

Other assets

 

Total

Cost

 

 

 

 

 

 

 

 

Balance April 1

 

365.5

 

10.4

 

2.0

 

377.9

Changes through business combinations

 

30.7

 

 

 

 

 

30.7

Additions

 

58.4

 

1.5

 

0.4

 

60.3

Disposals

 

(84.5)

 

(2.1)

 

(0.5)

 

(87.2)

Exchange differences

 

(18.0)

 

(0.5)

 

(0.1)

 

(18.6)

Balance March 31

 

352.1

 

9.3

 

1.7

 

363.1

Accumulated depreciation

 

 

 

 

 

 

 

 

Balance April 1

 

(110.7)

 

(4.1)

 

(1.5)

 

(116.3)

Additions

 

(63.0)

 

(1.6)

 

(0.4)

 

(65.0)

Disposals

 

84.5

 

2.1

 

0.5

 

87.2

Exchange differences

 

4.6

 

0.1

 

0.0

 

4.7

Balance March 31

 

(84.6)

 

(3.5)

 

(1.3)

 

(89.4)

Net book value

 

 

 

 

 

 

 

 

Balance April 1

 

254.8

 

6.3

 

0.5

 

261.6

Balance March 31

 

267.5

 

5.8

 

0.4

 

273.8

Lease liabilities CHF million

 

2022/23

 

2021/22

Balance April 1

 

284.3

 

271.3

Changes through business combinations

 

13.5

 

30.7

Additions

 

99.0

 

60.1

Interest expense

 

5.2

 

3.6

Payments

 

(81.1)

 

(67.7)

Exchange differences

 

(24.0)

 

(13.7)

Balance March 31

 

296.9

 

284.3

thereof short-term

 

73.4

 

68.8

thereof long-term

 

223.5

 

215.5

The maturity analysis of lease liabilities is disclosed in Note 4.7

Lease disclosures CHF million

 

2022/23

 

2021/22

Expenses relating to short-term leases

 

16.7

 

11.2

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

 

0.5

 

0.3

Expenses relating to variable lease payments

 

6.8

 

5.7

The total cash outflow for leases in the financial year 2022/23 amounted to CHF 105.1 million (prior year CHF 84.9 million).

The Group has various lease contracts that as of March 31, 2023 have not yet commenced. The future lease payments for these non-cancellable lease contracts amount to CHF 3.0 million (prior year CHF 1.7 million). The future lease payments relating to variable lease payments amount to CHF 6.8 million (prior year CHF 5.7 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 3.4 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

2022/23

 

 

Goodwill

 

Intangibles relating to acquisitions 1)

 

Capitalized development costs

 

Software and other intangibles

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

2,440.6

 

892.7

 

224.2

 

117.9

 

3,675.5

PPA finalization 2)

 

(14.9)

 

9.8

 

 

 

(0.2)

 

(5.3)

Changes through business combinations

 

198.5

 

49.3

 

 

 

1.2

 

249.0

Additions

 

 

 

 

 

18.0

 

39.3

 

57.4

Disposals

 

 

 

(0.3)

 

 

 

(1.2)

 

(1.5)

Transfers

 

 

 

 

 

 

 

0.4

 

0.4

Exchange differences

 

(82.0)

 

(31.9)

 

(1.2)

 

(1.7)

 

(116.8)

Balance March 31

 

2,542.2

 

919.6

 

241.1

 

155.7

 

3,858.5

Accumulated amortization and impairments

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(142.2)

 

(386.4)

 

(115.6)

 

(82.4)

 

(726.6)

Additions

 

 

 

(54.9) 3)

 

(26.4)

 

(11.7)

 

(92.9)

Disposals

 

 

 

0.1

 

 

 

1.2

 

1.3

Exchange differences

 

1.4

 

14.7

 

0.2

 

1.3

 

17.6

Balance March 31

 

(140.8)

 

(426.5)

 

(141.8)

 

(91.5)

 

(800.7)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

2,298.4

 

506.3

 

108.6

 

35.6

 

2,948.9

Balance March 31

 

2,401.3

 

493.1

 

99.3

 

64.2

 

3,057.9

1) Intangibles relating to acquisitions consists of customer relationships (CHF 295.3 million), trademarks (CHF 185.3 million) and technology (CHF 12.5 million).

2) Relates to finalization of purchase price allocation Sennheiser Consumer Division (refer to Note 6.1).

3) Relates to research and development (CHF 1.6 million) and sales and marketing (CHF 53.3 million).

CHF million

2021/22

 

 

Goodwill

 

Intangibles relating to acquisitions 1)

 

Capitalized development costs

 

Software and other intangibles

 

Total

Cost

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

2,143.3

 

642.8

 

214.1

 

102.4

 

3,102.6

Changes through business combinations

 

393.8

 

295.4

 

 

 

1.5

 

690.8

Additions

 

 

 

 

 

10.7

 

16.4

 

27.1

Disposals

 

0.0

 

(13.2)

 

 

 

(0.7)

 

(13.9)

Exchange differences

 

(96.4)

 

(32.4)

 

(0.6)

 

(1.7)

 

(131.1)

Balance March 31

 

2,440.6

 

892.7

 

224.2

 

117.9

 

3,675.5

Accumulated amortization and impairments

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

(145.2)

 

(373.2)

 

(88.3)

 

(74.1)

 

(680.8)

Changes through business combinations

 

 

 

(0.6)

 

0.0

 

(0.0)

 

(0.7)

Additions

 

 

 

(42.9) 2)

 

(27.4)

 

(10.2)

 

(80.5)

Disposals

 

 

 

13.2

 

 

 

0.6

 

13.9

Exchange differences

 

3.0

 

17.1

 

 

 

1.3

 

21.4

Balance March 31

 

(142.2)

 

(386.4)

 

(115.6)

 

(82.4)

 

(726.6)

Net book value

 

 

 

 

 

 

 

 

 

 

Balance April 1

 

1,998.0

 

269.7

 

125.9

 

28.2

 

2,421.8

Balance March 31

 

2,298.4

 

506.3

 

108.6

 

35.6

 

2,948.9

1) Intangibles relating to acquisitions consists of customer relationships (CHF 298.8 million), trademarks (CHF 193.0 million) and technology (CHF 14.5 million).

2) Relates to research and development (CHF 0.6 million) and sales and marketing (CHF 42.4 million).

Based on the impairment tests performed, there was no need for the recognition of any impairment of goodwill for the 2022/23 and 2021/22 financial years.

The cash flow projections used for impairment testing, were based on the most recent business plan. The business plan was projected over a five year period.

Hearing instruments

As of March 31, 2023, the carrying amount of goodwill, expressed in various currencies, amounted to an equivalent of CHF 2,106.5 million (prior year CHF 2,000.7 million) and for intangible assets with indefinite useful lives to CHF 102.7 million (prior year: CHF 100.6 million). The intangible assets with indefinite useful lives relates to the brand value that was acquired as part of the acquisition of the Consumer Division from Sennheiser in financial year 2021/22 as disclosed in Note 6.1. It has been determined to have an indefinite useful life as there is no intention to abandon the brand name. It has existed for many years and the Group has the ability to maintain its brand value for an indefinite period of time. Thus, the brand is not amortized but is assessed for impairment annually.

Cash flows beyond the projection period were extrapolated with a long-term growth rate of 1.9% (prior year 2.0%) which represents the projected inflation rate. For the calculation, a pre-tax weighted average discount rate of 10.8% (prior year 9.4%) 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, 2023, the carrying amount of the goodwill, expressed in various currencies, amounted to an equivalent of CHF 294.8 million (prior year CHF 297.7 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 11.7% (prior year 10.2%) 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 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 (except for the Sennheiser brand name as disclosed above). 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.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable.

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 of 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

 

31.3.2023

 

31.3.2022

Other receivables

 

73.9

 

98.1

Prepaid expenses

 

48.5

 

37.7

Contract assets

 

3.8

 

3.0

Right to recover products

 

12.2

 

10.2

Total

 

138.3

 

148.9

 

 

 

 

 

Other non-current operating assets CHF million

 

31.3.2023

 

31.3.2022

Contract assets

 

5.7

 

5.8

Total

 

5.7

 

5.8

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

2022/23

 

 

Warranty and returns

 

Reimbursement to customers

 

Product liabilities

 

Other provisions

 

Total

Balance April 1

 

135.3

 

4.1

 

94.4

 

50.4

 

284.2

PPA finalization 1)

 

 

 

 

 

 

 

(0.1)

 

(0.1)

Changes through business combinations

 

 

 

 

 

 

 

1.3

 

1.3

Amounts used

 

(39.5)

 

(4.9)

 

(36.5)

 

(33.9)

 

(114.7)

Reversals

 

(9.7)

 

(0.2)

 

(0.5)

 

(10.8)

 

(21.1)

Increases

 

59.2

 

11.9

 

 

 

30.1

 

101.1

Present value adjustments

 

 

 

 

 

0.5

 

(0.0)

 

0.5

Exchange differences

 

(5.7)

 

(0.2)

 

0.6

 

(0.7)

 

(5.9)

Balance March 31

 

139.7

 

10.7

 

58.5

 

36.3

 

245.2

thereof short-term

 

101.5

 

10.7

 

17.4

 

24.5

 

154.0

thereof long-term

 

38.1

 

 

 

41.2

 

11.9

 

91.2

1) Relates to finalization of purchase price allocation Sennheiser Consumer Division (refer to Note 6.1).

CHF million

2021/22

 

 

Warranty and returns

 

Reimbursement to customers

 

Product liabilities

 

Other provisions

 

Total

Balance April 1

 

125.9

 

2.8

 

111.9

 

52.3

 

292.8

Changes through business combinations

 

9.0

 

1.3

 

 

 

5.2

 

15.5

Amounts used

 

(62.6)

 

(1.4)

 

(15.3)

 

(25.7)

 

(105.0)

Reversals

 

(13.5)

 

(1.7)

 

(0.3)

 

(9.1)

 

(24.6)

Increases

 

81.7

 

3.2

 

 

 

30.8

 

115.6

Present value adjustments

 

 

 

 

 

0.5

 

 

 

0.5

Transfers

 

 

 

 

 

 

 

(1.3)

 

(1.3)

Exchange differences

 

(5.2)

 

(0.1)

 

(2.4)

 

(1.6)

 

(9.3)

Balance March 31

 

135.3

 

4.1

 

94.4

 

50.4

 

284.2

thereof short-term

 

98.3

 

4.1

 

11.8

 

37.5

 

151.6

thereof long-term

 

37.0

 

 

 

82.6

 

12.9

 

132.6

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 audio devices, 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 costs 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 provisions for product liabilities consider 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 for product liabilities are reassessed on a regular and systematic basis and follow a financial model which is consistently applied. The calculation of the provision is based on past experience regarding the number and cost of current and future claims. In the 2022/23 financial year, changes in the assessment of the expected number and cost of current and future claims led to reversals of CHF 0.5 million (previous year reversals of CHF 0.3 million). The impact of the reassessment of the legal provisions are considered in the income statement in the lines “Other income” or “Other expenses”. As per March 31, 2023 the provision for product liabilities amount to CHF 58.5 million (previous year CHF 94.4 million). The timing of future 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 until 2026 to be filed 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 the provision for product liabilities to occur within the next 6 years.

Other provisions

Other provisions include provisions for specific business risks such as litigation CHF 5.7 million (prior year CHF 21.2 million) and restructuring costs CHF 5.0 million (prior year CHF 11.3 million) which arose during the normal course of business. 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

 

31.3.2023

 

31.3.2022

Other payables

 

92.9

 

111.5

Accrued expenses

 

279.9

 

325.2

Deferred income

 

1.1

 

0.8

Total

 

373.9

 

437.5

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.

3.9 Contingent assets and liabilities

Guarantees

At March 31, 2023 and 2022, there were no pledges given to third parties other than in relation to bank loans and mortgages.

Deposits in the amount of CHF 1.6 million (previous year CHF 1.6 million) were pledged in relation to bank guarantees. Open purchase orders as of March 31, 2023 and 2022, were related to recurring business activities.

Lawsuits and disputes

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. In a very recent opinion the US court has granted a summary judgment of non-infringement of the asserted MED-EL patents. On March 8, 2022, the Regional Court of Mannheim in Germany has reached a judgment in the first instance in a patent infringement lawsuit brought by MED-EL Elektromedizinische Geräte GmbH (“Med-El”) against its German subsidiary Advanced Bionics GmbH and Swiss subsidiary Advanced Bionics AG (“AB”) based on the German part of a respective EP patent of MED-EL. AB believes the complaint has no merit and has therefore appealed the judgment with the Higher Regional Court of Karlsruhe. The first instance Mannheim judgment included an injunction. Med-El enforced the injunction, thus prevented further sales of the HiRes Ultra 3D cochlear implant in and from Germany. On September 29, 2022 the Technical Board of Appeal at the European Patent Office ruled that Med-Elʼs European patent is maintained only in a very restricted version. The Higher Regional Court of Karlsruhe then suspended the enforcement until its decision on ABʼs appeal. A hearing in the appeal proceedings is not yet scheduled. In related proceedings in the Netherlands, the non-infringement of Med-Elʼs narrowed patent has been confirmed by the first instance court and is now under appeal. In the UK, MED-ELʼs UK part of the EP patent has been revoked and is now also under appeal.

Advanced Bionics LLC (“AB”) entered into settlement agreements (“Agreements”) with the U.S. Department of Justice in December 2022 and with various state Medicare agencies in March 2023. AB also entered into a Corporate Integrity Agreement (“CIA”) with the Office of the Inspector General at the U.S. Department of Health and Human Services (the “HHS-OIG”). The Agreements, pursuant to which AB agreed to pay USD 12.6 million, and the CIA concluded the government investigation, which began with a January 2020 HHS-OIG subpoena and stemmed from a False Claims Act (“FCA”) action filed by a former employee. The FCA action was dismissed in March 2023 by the court as part of the settlement. AB has denied the allegations made in the FCA action and investigation.

4. Capital structure and financial management

4. Capital structure and financial management

4.1 Cash and cash equivalents

CHF million

 

31.3.2023

 

31.3.2022

Cash on hand

 

1.3

 

1.2

Current bank accounts

 

412.1

 

458.9

Term deposits

 

0.5

 

150.4

Total

 

413.9

 

610.5

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

 

2022/23

 

2021/22

Interest income

 

1.5

 

1.4

Other financial income

 

13.5

 

0.3

Total financial income

 

15.0

 

1.7

Interest expenses

 

(16.9)

 

(17.4)

Interest expenses on lease liabilities

 

(5.2)

 

(3.6)

Interest and present value adjustments

 

(1.3)

 

(0.6)

Other financial expenses

 

(26.4)

 

(14.9)

Total financial expenses

 

(49.9)

 

(36.5)

Total financial income/expenses, net

 

(34.9)

 

(34.9)

Other financial income includes primarily fair value adjustments of financial instruments of CHF 10.9 million (previous year: none). Other financial expenses includes foreign exchange gains and losses from the management of foreign currencies as well as net losses from the hedging of foreign exchange exposures of CHF 20.3 million (previous year CHF 1.4 million) and valuation adjustments on financial instruments of CHF 5.2 million (previous year CHF 13.4 million).

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 12, 2023, that a dividend of CHF 4.60 per share shall be distributed (previous year CHF 4.40).

4.4 Other financial assets

Other current financial assets

CHF million

 

31.3.2023

 

31.3.2022

 

 

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

 

 

 

0.7

 

0.7

 

 

 

1.3

 

1.3

Loans to third parties

 

10.1

 

 

 

10.1

 

6.9

 

 

 

6.9

Total

 

10.1

 

0.9

 

11.0

 

6.9

 

1.5

 

8.4

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

 

31.3.2023

 

31.3.2022

 

 

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

 

1.4

 

 

 

1.4

 

3.8

 

 

 

3.8

Loans to third parties

 

39.9

 

 

 

39.9

 

25.6

 

 

 

25.6

Rent deposits

 

2.8

 

 

 

2.8

 

2.8

 

 

 

2.8

Other non-current financial assets

 

 

 

2.8

 

2.8

 

 

 

4.0

 

4.0

Total

 

44.1

 

2.8

 

46.9

 

32.2

 

4.0

 

36.2

The loans are primarily denominated in CAD, CHF, EUR, GBP, JPY, PLN and USD. Loans to third parties consist mainly of loans to customers. As of March 31, 2023, 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 has not elected to account for equity instruments in this category.

4.5 Financial liabilities

As of March 31, 2023, the Group has the following bonds/US Private Placement outstanding:

Financial liabilities

 

Currency

 

Nominal value

 

Interest rate

 

Maturity

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

 

200

 

1.05%

 

February 19, 2029

Fixed-rate bond

 

CHF

 

100

 

0.00%

 

October 11, 2029

Fixed-rate bond

 

CHF

 

200

 

1.95%

 

December 12, 2030

Fixed-rate bond

 

CHF

 

250

 

1.40%

 

February 19, 2032

Fixed-rate bond

 

CHF

 

100

 

0.40%

 

October 11, 2034

The Group maintains uncommitted credit facilities from various lenders. The credit facilities are denominated in CHF and can be cancelled at short notice. As of March 31, 2023 the Group did not make use of these credit facilities.

Current financial liabilities

CHF million

 

31.3.2023

 

31.3.2022

 

 

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

 

Total

Bank debt

 

0.4

 

 

 

0.4

 

0.4

 

 

 

0.4

Bond

 

4.8

 

 

 

4.8

 

334.7

 

 

 

334.7

Deferred payments

 

1.1

 

 

 

1.1

 

23.8

 

 

 

23.8

Contingent considerations

 

 

 

13.8

 

13.8

 

 

 

13.8

 

13.8

Other current financial liabilities

 

 

 

2.1

 

2.1

 

 

 

1.6

 

1.6

Total

 

6.3

 

15.9

 

22.2

 

358.8

 

15.3

 

374.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Unused borrowing facilities

 

 

 

 

 

365.7

 

 

 

 

 

366.1

Non-current financial liabilities

CHF million

 

31.3.2023

 

31.3.2022

 

 

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

 

Total

Bonds/US Private Placement

 

1,512.7

 

 

 

1,512.7

 

864.9

 

 

 

864.9

Deferred payments

 

2.4

 

 

 

2.4

 

2.6

 

 

 

2.6

Contingent considerations

 

 

 

72.1

 

72.1

 

 

 

81.5

 

81.5

Other non-current financial liabilities

 

0.0

 

4.4

 

4.4

 

0.1

 

10.8

 

10.9

Total

 

1,515.1

 

76.5

 

1,591.6

 

867.5

 

92.4

 

959.9

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

 

31.3.2023

 

31.3.2022

 

 

Bonds/US Private Placement

 

Deferred payments and contingent considerations

 

Other non-current financial liabilities

 

Total

 

Bonds/US Private Placement

 

Deferred payments and contingent considerations

 

Other non-current financial liabilities

 

Total

CHF

 

1,347.4

 

 

 

4.0

 

1,351.4

 

699.1

 

 

 

10.4

 

709.5

USD

 

165.3

 

1.0

 

 

 

166.3

 

165.8

 

4.0

 

0.0

 

169.8

EUR

 

 

 

63.5

 

 

 

63.5

 

 

 

76.4

 

 

 

76.4

CNY

 

 

 

7.0

 

 

 

7.0

 

 

 

 

 

 

 

 

AUD

 

 

 

2.1

 

 

 

2.1

 

 

 

2.1

 

 

 

2.1

BRL

 

 

 

0.3

 

 

 

0.3

 

 

 

1.3

 

 

 

1.3

Other

 

 

 

0.6

 

0.4

 

1.0

 

 

 

0.3

 

0.5

 

0.8

Total

 

1,512.7

 

74.5

 

4.4

 

1,591.6

 

864.9

 

84.1

 

10.9

 

959.9

Reconciliation of liabilities arising from financing activities

Liabilities from financing activities CHF million

 

 

 

 

 

 

 

 

 

 

 

2022/23

 

 

Bank debt

 

Bonds/US Private Placement

 

Deferred payments and contingent considerations

 

Lease liabilities

 

Other financial liabilities

 

Total

Balance April 1

 

0.4

 

1,199.6

 

121.6

 

284.3

 

12.5

 

1,618.4

PPA finalization 1)

 

 

 

 

 

(1.3)

 

 

 

 

 

(1.3)

Changes through business combinations

 

 

 

 

 

(22.8)

 

13.5

 

 

 

(9.3)

Additions to lease liabilities

 

 

 

 

 

 

 

99.0

 

 

 

99.0

Proceeds from borrowings

 

 

 

649.2

 

 

 

 

 

 

 

649.2

Repayment of borrowings

 

 

 

(330.0)

 

 

 

 

 

 

 

(330.0)

Repayment of lease liabilities – principal portion

 

 

 

 

 

 

 

(75.9)

 

 

 

(75.9)

Repayment of lease liabilities – interest portion

 

 

 

 

 

 

 

(5.2)

 

 

 

(5.2)

Exchange differences

 

 

 

(1.7)

 

(3.8)

 

(24.0)

 

 

 

(29.5)

Other

 

0.0

 

0.4

 

(4.3)

 

5.2

 

(5.9)

 

(4.6)

Balance March 31

 

0.4

 

1,517.5

 

89.4

 

296.9

 

6.5

 

1,910.7

thereof short-term

 

0.4

 

4.8

 

14.9

 

73.4

 

2.1

 

95.6

thereof long-term

 

 

 

1,512.7

 

74.5

 

223.5

 

4.4

 

1,815.1

1) Relates to finalization of purchase price allocation Sennheiser Consumer Division (refer to Note 6.1).

Liabilities from financing activities CHF million

 

 

 

 

 

 

 

 

 

 

 

2021/22

 

 

Bank debt

 

Bonds/US Private Placement

 

Deferred payments and contingent considerations

 

Lease liabilities

 

Other financial liabilities

 

Total

Balance April 1

 

0.1

 

1,562.4

 

14.2

 

271.3

 

7.9

 

1,856.0

Changes through business combinations

 

 

 

 

 

108.9

 

30.7

 

 

 

139.5

Additions to lease liabilities

 

 

 

 

 

 

 

60.1

 

 

 

60.1

Repayment of borrowings

 

0.0

 

(360.0)

 

 

 

 

 

 

 

(360.0)

Repayment of lease liabilities – principal portion

 

 

 

 

 

 

 

(64.0)

 

 

 

(64.0)

Repayment of lease liabilities – interest portion

 

 

 

 

 

 

 

(3.6)

 

 

 

(3.6)

Exchange differences

 

 

 

(3.5)

 

0.2

 

(13.7)

 

 

 

(17.0)

Other

 

0.3

 

0.7

 

(1.6)

 

3.5

 

4.6

 

7.5

Balance March 31

 

0.4

 

1,199.6

 

121.6

 

284.3

 

12.5

 

1,618.4

thereof short-term

 

0.4

 

334.7

 

37.5

 

68.8

 

1.6

 

443.0

thereof long-term

 

 

 

864.9

 

84.1

 

215.5

 

10.9

 

1,175.4

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, 2021

 

64,398,137

 

(1,355,464)

 

63,042,673

Purchase of treasury shares

 

 

 

(250,000)

 

(250,000)

Sale/transfer of treasury shares

 

 

 

307,451

 

307,451

Cancellation of treasury shares 2)

 

(1,225,980)

 

1,225,980

 

 

Purchase of treasury shares from share buyback

 

 

 

(2,012,438)

 

(2,012,438)

Balance March 31, 2022

 

63,172,157

 

(2,084,471)

 

61,087,686

 

 

 

 

 

 

 

Purchase of treasury shares

 

 

 

(180,000)

 

(180,000)

Sale/transfer of treasury shares

 

 

 

218,680

 

218,680

Cancellation of treasury shares 3)

 

(2,012,438)

 

2,012,438

 

 

Purchase of treasury shares from share buyback

 

 

 

(1,532,910)

 

(1,532,910)

Balance March 31, 2023

 

61,159,719

 

(1,566,263)

 

59,593,456

 

 

 

 

 

 

 

Nominal value of share capital CHF million

 

Share Capital

 

Treasury shares 1)

 

Outstanding share capital

Balance March 31, 2023

 

3.1

 

(0.1)

 

3.0

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 Shareholder’s Meeting of June 15, 2021, approved the proposed cancellation of 1,225,980 treasury shares, resulting in a reduction of share capital of 61,299 Swiss francs, retained earnings and other reserves of CHF 277.5 million offset by changes in treasury shares of CHF 277.5 million. This cancellation was executed on September 2, 2021.

3) The Annual General Shareholder’s Meeting of June 15, 2022, approved the proposed cancellation of 2,012,438 treasury shares, resulting in a reduction of share capital of 100,621.90 Swiss francs, retained earnings and other reserves of CHF 702.7 million offset by changes in treasury shares of CHF 702.8 million. This cancellation was executed on September 2, 2022.

Share buyback program

On March 29, 2022, Sonova Holding AG announced that its Board of Directors approved a share buyback program of up to CHF 1.5 billion. The program started in April 2022 and is expected to run over a period of up to 36 months. During financial year 2022/23, 1,532,910 treasury shares were bought under the share buyback program and are intended to be cancelled (proposal to the Annual Shareholdersʼ Meeting June 12, 2023). 

In the financial year 2022/23, transaction costs related to the share buyback program in the amount of CHF 1.7 million (prior year CHF 3.5 million) were deducted from equity.

Authorized capital

The 2022 Annual General Shareholdersʼ Meeting authorized the Board of Directors to increase the share capital at any time until June 15, 2024 by a maximum amount of CHF 305,798.59 by issuing a maximum of 6,115,971 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 2022/23.

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, 2023. 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 risk mitigation progress is reviewed by the Audit Committee on a quarterly basis. 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, 2023, the Group engaged in forward currency contracts amounting to CHF 422.9 million (previous year CHF 296.6 million). The open contracts on March 31, 2023 as well as on March 31, 2022 were all due within one year.

Notional amount of forward contracts CHF million

31.3.2023

 

31.3.2022

 

 

Total

 

Fair value

 

Total

 

Fair value

Positive replacement values

 

115.7

 

0.7

 

111.4

 

1.3

Negative replacement values

 

307.2

 

(2.1)

 

185.2

 

(1.5)

Total

 

422.9

 

(1.4)

 

296.6

 

(0.3)

Exchange rate risk CHF million

 

2022/23

 

2021/22

 

2022/23

 

2021/22

 

 

Impact on income after taxes 1)

 

 

 

Impact on equity

 

 

Change in USD/CHF +5%

 

(7.3)

 

(5.9)

 

7.6

 

7.8

Change in USD/CHF –5%

 

7.3

 

5.9

 

(7.6)

 

(7.8)

Change in EUR/CHF +5%

 

6.2

 

2.6

 

14.8

 

18.4

Change in EUR/CHF –5%

 

(6.2)

 

(2.6)

 

(14.8)

 

(18.4)

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 2022/23 financial year of CHF 317.1 million (previous year CHF 1,298.7 million). If interest rates during the 2022/23 financial year had been 1% higher, the positive impact on income before taxes would have been CHF 2.0 million. If interest rates had been 1% lower, the income before taxes would have been negatively impacted by CHF 2.0 million. The Groupʼs long-term financial liabilities are fixed rate instruments and thus 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, 2023, the largest balance with a single counterparty amounted to 17% (previous year 29%) of total cash and cash equivalents.

The Group performs frequent credit checks on its receivables. Due to 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 January 2023.

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

 

 

 

 

 

 

 

31.3.2023

 

 

 

 

 

 

 

31.3.2022

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%

 

106.4

 

(0.3)

 

106.2

 

0.4%

 

96.6

 

(0.4)

 

96.3

Overdue 1–90 days

 

1.2%

 

7.8

 

(0.1)

 

7.7

 

0.9%

 

9.1

 

(0.1)

 

9.0

Overdue 91–180 days

 

4.0%

 

2.7

 

(0.1)

 

2.6

 

4.1%

 

3.5

 

(0.1)

 

3.4

Overdue 181–360 days

 

24.2%

 

1.6

 

(0.4)

 

1.2

 

28.2%

 

2.3

 

(0.6)

 

1.6

Overdue more than 360 days

 

98.6%

 

2.9

 

(2.9)

 

0.0

 

98.9%

 

3.9

 

(3.8)

 

0.0

Total

 

3.1%

 

121.4

 

(3.8)

 

117.7

 

4.4%

 

115.4

 

(5.1)

 

110.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHF million

 

 

 

 

 

 

 

31.3.2023

 

 

 

 

 

 

 

31.3.2022

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

 

1.0%

 

342.1

 

(3.5)

 

338.5

 

1.3%

 

294.3

 

(3.9)

 

290.5

Overdue 1–90 days

 

7.9%

 

56.6

 

(4.5)

 

52.1

 

3.6%

 

57.3

 

(2.0)

 

55.2

Overdue 91–180 days

 

20.4%

 

11.2

 

(2.3)

 

8.9

 

16.2%

 

12.4

 

(2.0)

 

10.4

Overdue 181–360 days

 

36.3%

 

11.6

 

(4.2)

 

7.4

 

34.8%

 

12.1

 

(4.2)

 

7.9

Overdue more than 360 days

 

99.6%

 

13.3

 

(13.3)

 

0.1

 

99.9%

 

14.1

 

(14.1)

 

0.0

Total

 

6.4%

 

434.8

 

(27.8)

 

407.0

 

6.7%

 

390.2

 

(26.2)

 

364.0

The closing loss allowance for trade receivables as at March 31, 2022 reconciles to the closing loss allowance as at March 31, 2023 as follows:

CHF million

 

2022/23

 

2021/22

Loss allowance for doubtful receivables, April 1

 

(31.3)

 

(34.5)

Utilization

 

1.7

 

3.1

Reversal

 

2.5

 

2.7

Additions

 

(5.3)

 

(3.8)

Exchange differences

 

0.9

 

1.1

Loss allowance for doubtful receivables, March 31

 

(31.5)

 

(31.3)

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.

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 majority of bank accounts is provided by central treasury organization. Cash pools are automated and daily SWIFT balance tracking is applied where feasible.

The following table summarizes the Groupʼs financial liabilities as of March 31, 2023 and 2022 based on contractual undiscounted payments. Bonds include the notional amount as well as interest payments.

CHF million

31.3.2023

 

 

Due less than 1 year

 

Due 1 year to 5 years

 

Due more than 5 years

 

Total

Bank debt

 

0.4

 

 

 

 

 

0.4

Trade payables

 

192.9

 

 

 

 

 

192.9

Lease liabilities

 

73.4

 

138.2

 

85.3

 

296.9

Bonds/US Private Placement

 

17.8

 

420.8

 

1,179.8

 

1,618.4

Deferred payments

 

1.1

 

2.4

 

 

 

3.5

Contingent considerations

 

13.8

 

41.8

 

63.1

 

118.7

Other financial liabilities

 

2.1

 

4.4

 

 

 

6.5

Total financial liabilities

 

301.5

 

607.6

 

1,328.2

 

2,237.3

 

 

 

 

 

 

 

 

 

CHF million

31.3.2022

 

 

Due less than 1 year

 

Due 1 year to 5 years

 

Due more than 5 years

 

Total

Bank debt

 

0.4

 

 

 

 

 

0.4

Trade payables

 

189.2

 

 

 

 

 

189.2

Lease liabilities

 

68.8

 

140.4

 

75.0

 

284.3

Bonds/US Private Placement

 

338.4

 

390.2

 

506.4

 

1,235.0

Deferred payments

 

23.8

 

2.6

 

 

 

26.4

Contingent considerations

 

13.8

 

39.5

 

69.8

 

123.1

Other financial liabilities

 

0.0

 

10.8

 

 

 

10.9

Total financial liabilities

 

634.4

 

583.5

 

651.2

 

1,869.1

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.

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

 

31.3.2023

 

 

Notes

 

Carrying amount

 

Fair value 1)

 

Level 1

 

Level 2

 

Level 3

Financial assets at amortized cost