Notes to the Group Account
1. Consolidation and valuation principles
Introduction
The present group accounts are based on the individual financial statements for the group companies, drawn up according to uniform guidelines as per 31 December 2017 and stated in Swiss francs (CHF). The consolidated annual accounts are based on the following principles:
1.1. Accounting and valuation principles
The consolidated annual accounts of MCH Group Ltd. comply with the specialist recommendations for accounting (Swiss GAAP FER) and thus fulfil the requirements of the SIX Swiss Exchange Directives for the “Swiss Reporting Standard” segment. They present a true and fair view of the group's assets, financial assets and earnings and have been drawn up on the assumption that the corporate activity will be continued. The group accounts are based on the principle of individual valuation for assets and liabilities, and historical acquisition costs, with the exception of the financial instruments that are available for sale, which are assessed at their current values.
1.2. Consolidation principles
The group accounts include the annual accounts of MCH Group Ltd. as well as all the group companies, in accordance with the following principles:
- Companies in which MCH Group Ltd. holds, either directly or indirectly, more than half of the voting rights or which are controlled by MCH Group Ltd. are fully consolidated. It is possible for MCH Group Ltd. to exercise control over a company even without holding half of the voting rights. In this case, 100% of the assets, liabilities, income and expenses are included. Any shares of minority shareholders in the equity and profits of the consolidated companies are stated separately in the group balance sheet and the group income statement.
- Companies in which MCH Group Ltd. holds, either directly or indirectly, between 20% and 49.9% of the voting rights and which are not controlled by MCH Group Ltd. are included on the basis of the equity method. The share of equity held is stated under “Investments” in the group accounts. The pro-rata result for the year is stated under “Result of associated organisations” in the group income statement.
- Companies in which the MCH Group Ltd. holds less than 20% of the voting rights are included on the consolidated balance sheet at acquisition price minus any value adjustment necessary for business reasons.
Initial consolidation is performed from the date on which control is transferred to MCH Group Ltd.. The book values of the holdings are eliminated by offsetting them with the equity at the time of acquisition, as stipulated by the Swiss GAAP FER. Transaction costs are recorded as expenditure at the time they are incurred. The assets and liabilities of the company acquired are valued at their current value at this point in time, applying uniform group principles. Any difference remaining between the purchase price and the equity of the company acquired following this re-evaluation is directly charged against or credited to the retained earnings as goodwill.
In performing full consolidation, 100% of the assets, liabilities, income and expenditure are included. Any shares of minority shareholders in the equity and profits of the consolidated companies are stated separately in the group balance sheet and the group income statement. Intragroup assets and liabilities, and also expenditure and income from intragroup transactions and relations between intragroup companies are eliminated, as are profits from intragroup transactions. Changes in a parent company’s ownership share in a subsidiary, which do not lead to the parent company losing control of the subsidiary, are treated as an equity transaction (i.e. as transactions with owners in their capacity as owners). When selling shares to minority shareholders, the difference between the selling price and the sold pro-rata book value of the net assets is entered via the retained earnings.
1.3. Foreign currency conversion
Annual accounts for consolidated companies in foreign currencies are converted as follows: current assets, non-current assets and liabilities at end-of-year rates (reporting date rate); shareholders’ equity at historical rates. The income statement and cash flow statement are converted at the average rate for the year. The resultant currency translation differences are recognised in equity without affecting the operating result.
Items kept in foreign currencies are converted applying the reporting date exchange rate method. All assets and liabilities are converted at the exchange rate prevailing on the balance sheet date. The effects of foreign currency adjustments are included in the income statement. Unrealised exchange gains are similarly recognised with an effect on net income.
Transactions in foreign currencies (where VAT can be charged or for intercompany sales) are converted at the Swiss Federal Tax Administration’s official average rate for the month in which the transaction took place. Other transactions in foreign currencies can also be converted at the current rate.
1.4. General posting concepts
The annual accounts are drawn up on the basis of correct period accrual. The impact of business transactions and other occurrences is thus reported at the time they take place and not at the time cash and cash equivalents are received or paid. This means inter alia that expenses and income are assigned to and recognised in the relevant periods. A check is carried out on all assets at the end of the year to establish whether there are any signs that the book value of the asset is in excess of the realisable value (value impairment). If an impairment can be demonstrated, the book value is reduced to the realisable value, with the impairment being charged to the result for the period in question.
1.5. Valuation and accounting principles
Income
The MCH Group achieves its income with exhibitions, events and stand construction projects. The income and associated expenditure for exhibitions and events are recognised, affecting net income, at the time at which the event is held. Profit from stand construction projects is realised at the time of the event, or when the benefits and risks of the delivery and/or service pass to the purchaser. Deposits received from customers or paid to suppliers for projects in future business years are entered as prepayments and deferred income in the balance sheet.
Cash and cash equivalents
Cash and cash equivalents include cash holdings and cash at banks and the Post Office, as well as short-term fixed deposits (remaining term less than 90 days). They are stated at their nominal value.
Accounts receivable for deliveries and services
Receivables are stated at their net value, i.e. after deduction of any appropriate impairment (bad debt provision). Specific provisions are created as required. Furthermore, a general provision is created, based on historic experience, without allowance for the country of origin, as follows:
Due date of invoice and value adjustment as a % of sum invoiced:
- > 360 days: 100%
- 181 – 360 days: 50%
- 91 – 180 days: 30%
- 61 – 90 days: 15%
- 31 – 60 days: 5%
- 00 – 30 days: 2%
- Not due: 2%
Inventories and work in progress
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Inventories
Inventories are valued at the lower of acquisition or production cost and their net realisable value. Production costs include all the directly attributable material and manufacturing costs as well as overheads that have been incurred in conveying the inventories to their current location and converting them into their current state. If the acquisition and production costs are higher than the net market value, a value adjustment (expenditure) must be made for the amount of this difference. This value is determined on the basis of the current market price on the sales market. Discounts granted are deducted from the cost of goods as a reduction in the purchase price. Advance payments to suppliers are stated under inventories (as a reduction in the inventories held) and disclosed in the explanations given in the notes to the balance sheet. Measurement subsequent to initial recognition is performed using the average method. -
Work in progress
Work in progress relates to long-term projects for stand construction, which is recognised and valued using the completed contract method, since the conditions for the percentage of completion method are not cumulatively fulfilled. The project expenses incurred during stand production are capitalised as work in progress. The long-term project is only recognised, affecting net income, when the delivery and performance risk has been transferred. Any losses are recognised immediately with an impact on net income. Advance payments received are recognised without affecting net income. These are offset against the corresponding long-term projects for which the advance payment has been made.
Other receivables and loans granted to others
Other receivables (including fixed deposits with a remaining term in excess of 90 days) and loans granted to others are stated at their nominal value minus any impairment.
Prepayments, accruals and deferrals
Prepayments, accruals and deferrals are valued according to the principles that apply for receivables and liabilities. The prepayments and accrued income include both third-party and own work entered into the books for exhibitions and events taking place in the following year (with the exception of work in progress on stand construction) and any sales for the reporting year that have not yet been invoiced. The accrued expenses and deferred income take in already-invoiced income from exhibitions, events and stand construction for the following year, as well as supplier invoices that have not yet arrived for goods and services already received. The accruals for current income tax are also stated under accrued expenses and deferred income.
Tangible fixed assets
Tangible fixed assets are included in the balance sheet at acquisition or production cost and measured with allowance for the scheduled straight-line depreciation and any impairment. Depreciation of tangible fixed assets commences as of the first day of their use. Assets under construction are thus not depreciated. The depreciation period corresponds to the estimated useful life and is as follows:
- Land: no depreciation
- Buildings: 40 years
- Various investments in extensions to buildings and systems: 10 – 20 years
- Furniture and fittings: 3 – 10 years
- Vehicles: 5 – 8 years
- Sound and lighting equipment: 5 – 10 years
- Hardware: 3 – 5 years
If it is ascertained that the useful life of a fixed asset is changing, especially as a result of technical progress, the state of the asset or the market, the residual book value of the asset will be depreciated over its new envisaged remaining useful life.
Services provided by our own employees in creating tangible fixed assets are not included as assets on account of the type of activity involved (general planning). Interest expenditure during the construction phase of a tangible fixed asset is included on the balance sheet as acquisition or production costs.
Intangible assets
Intangible assets are non-monetary assets without physical substance. At the MCH Group, only acquired immaterial assets are capitalised, employing the following categories (including the estimated useful life):
- Acquired exhibitions and events: 3 – 5 years
- Software: 3 – 5 years
Intangible assets developed by the group itself (exhibitions, events, software and other intangible assets) are not included as assets.
Liabilities and loans taken up
Liabilities and loans taken up are stated at their nominal value. A liability or loan taken up is deemed to be short-term if it:
- is to be fulfilled within 12 months of the balance sheet date or
- an outflow of funds is to be expected in the operating activities on account of it.
All other liabilities are long-term.
Derivative financial instruments
A derivative is included on the balance sheet if it meets the definition of an asset or a liability. The group employs currency futures and swaps for hedging currency risks. Use is made of cash flow hedges, in particular, for foreign currency hedging in order to reduce foreign currency risks for highly probable future cash flows from sales in foreign currencies. All open positions from cash flow hedges on the balance sheet date are disclosed in the notes and are recognised in equity via the hedging reserve.
Pension benefit obligations
All Swiss companies in the MCH Group belong to the group’s own pension fund (MCH Group Pension Fund), have their own, legally independent pension fund or have opted for a BVG (Occupational Pensions Act) full insurance solution. Any economic benefit is not capitalised in the MCH Group balance sheet. If freely available employer contribution reserves exist, these are included as assets. Both those currently in employment and former employees can receive benefits from the pension fund and an old-age pension. In respect of the application of Swiss GAAP FER 16 “Pension benefit obligations”, we refer readers to Note 11.
The pension scheme for MC2 insures all employees with permanent contracts who do not belong to a trade union organisation. The employees in the scheme can pay in part of their taxable income as a contribution once they have worked for the company for at least a year.
Current and former employees receive different benefits and old-age pensions from the pension fund, which are established in accordance with the statutory provisions.
Provisions
Provisions are established to cover all the identifiable risks of loss and obligations existing at the time the balance sheet is drawn up. Provisions are stated on the balance sheet if a probable obligation exists towards third parties which is attributable to an event that took place in the past (prior to the balance sheet date) and if the level of the obligation can be estimated. The extent of the provision is based on the expected outflow of funds to settle the obligation, which is re-evaluated each year. The level of the provision is determined through an analysis of the event in question which took place in the past, as well as on the basis of events that have occurred subsequent to the balance sheet date, insofar as these contribute towards clarifying the situation. Obligating events after the balance sheet date have an impact on provisions if it becomes clear that they are caused by circumstances originating prior to the balance sheet date.
Goodwill
In the case of an acquisition, the net assets acquired are valued at current values. The goodwill results from purchasing costs that are higher than the corresponding equity of the acquired company. Goodwill is offset directly against the equity at the time of acquisition. This is permissible under Swiss GAAP FER insofar as the impact of theoretical capitalisation and theoretical amortisation on the equity and the goodwill is set out separately in the equity statement and in the notes. The goodwill is amortised on a theoretical basis over a period of 5 years. In the event of any impairment of the goodwill, this will be stated in the notes.
Own shares
Own shares are valued at acquisition cost. They are included as a negative item under shareholders’ equity.
Taxes
In stating current and deferred income tax consequences, a distinction is made between the establishment of current and deferred income tax. Current income tax is calculated in accordance with the tax regulations for the calculation of profits and is stated as expenditure. Current income tax is included under accrued expenses. Deferred taxes result from valuation differences between the group’s values and the decisive values for tax purposes and are included as deferred items accordingly. The recognition of deferred income tax is based on a balance-sheet approach and fundamentally takes into account all future income tax consequences. The deferred tax liability is calculated on the basis of the actual future tax rates to be expected and is shown under the long-term provisions. Deferred tax assets from losses carried forward can be recognised if it is considered likely that sufficient tax profits will be achieved in future against which the tax losses carried forward can be offset.
Subsidies
In the context of the “Messe Basel New Buildings” project, various subsidies were granted from the public purse (Cantons of Basel-Stadt, Basel-Landschaft and Zurich and also the City of Zurich); these included investments à fonds perdu. In the 2012 business year, MCH Swiss Exhibition (Basel) Ltd. received a non-repayable loan, secured by a mortgage, of CHF 50.0 million from the Canton of Basel-Stadt, as a financing contribution à fonds perdu. This is to run for 20 years and incurs the obligation to continue operating the Congress Center Basel (CCB) for 20 years. This loan is written off by a sum of CHF 2.5 million every year (for the first time in the 2013 financial year) as the equivalent of the annual subsidy of CHF 2.5 million.
2. Cash and cash equivalents
3. Accounts receivable for deliveries and services
4. Inventories and work in progress
5. Liabilities from deliveries and services
6. Prepayments, accruals and deferrals
The level of prepayments, accruals and deferrals is influenced primarily by the frequency of the individual exhibitions. As per 31 December 2017, this essentially relates to the following exhibitions in 2018: Swissbau, Baselworld, muba, Giardina and SWISS - MOTO. Own work for exhibitions and events totalling CHF 12.1 million (previous year CHF 9.2 million) is included under prepayments and accrued income.
7. Loans granted
8. Tangible and intangible fixed assets
The group’s outstanding mortgages at the Zurich location are CHF 32.5 million (previous year CHF 32.5 million) and at the Basel location CHF 37.5 million (previous year CHF 40.0 million). The corresponding book values of the mortgaged buildings are CHF 46.0 million (previous year CHF 48.5 million) in Zurich and CHF 14.0 million (previous year CHF 20.9 million) in Basel.
In accordance with the decision of the Cantonal Parliament of 12 March 2008 relating to the financing concept for the new Messe Basel complex (formerly the Exhibition Center Basel 2012), security was provided for the non-repayable loan of CHF 50.0 million, secured by a mortgage, that MCH Swiss Exhibition (Basel) Ltd. received as a financing contribution (à fonds perdu) through the issue of a mortgage note for this same amount, charged to the two buildings of the Congress Center Basel and the Musical Theater Basel.
The value impairment on buildings and fixed installations and also on the remaining fixed assets and intangible assets is due to the audit conducted of the valuation of the facilities in Basel. An audit conducted of the valuation of the exhibition halls in Basel for purposes of the 2017 annual accounts showed that a value adjustment is required due to the downscaling of Baselworld 2018. The value reduction is attributable to the expected course of business at the Basel location in future years.
9. Investments
The book value of the investments consolidated by the equity method is made up as follows:
Change in scope of consolidation
On 1 August 2016, MCH Swiss Exhibition (Basel) Ltd. acquired a majority holding of 60.3% in Seventh Plane Networks Pvt. Ltd., New Delhi, India, and took over control of the company at the same time. This was therefore the date taken for initial consolidation. Seventh Plane Networks Pvt. Ltd. organises the annual India Art Fair in New Delhi. As per the date of acquisition in the 2016 business year, Seventh Plane Networks Pvt. Ltd., New Delhi, India, had cash and cash equivalents of CHF 0.2 million, other current receivables of CHF 1.4 million, fixed assets of CHF 0.1 million and liabilities of CHF 1.1 million. The net assets acquired, valued at their market value, are thus CHF 0.6 million as per 1 August 2016. MCH Swiss Exhibition (Basel) Ltd. is entitled to acquire further shares in Seventh Plane Networks Pvt. Ltd.
On 1 January 2017, MCH Swiss Exhibition (Basel) Ltd. acquired a 25.1% share in the capital of art.fair International GmbH, Cologne (Germany). art.fair International GmbH stages the annual ART DÜSSELDORF art fair. MCH Swiss Exhibition (Basel) Ltd. is entitled to successively increase its minority holding.
On 30 April 2017, MCH US Corp. acquired 100% of the shares in MC2, New York (USA) and, at the same time, took over control of the company. In a further step, 2% of the shares were sold to the local management. As per the date of acquisition, MC2 had cash and cash equivalents of CHF 1.3 million, other current receivables of CHF 38.4 million, fixed assets of CHF 4.0 million and liabilities of CHF 23.2 million. The net assets acquired, valued at their market value, are thus CHF 20.5 million as per 30 April 2017. MCH Group Ltd. has a repurchasing right permitting it, as of 30 April 2020, to buy back, indirectly via the intermediate company, the shares in Creative Management Services LLC that are held by the management. MCH Group Ltd. can similarly be obliged by anyone on the management to buy back their share in Creative Management Services LLC indirectly via the intermediate company.
MCH Swiss Exhibition (Basel) Ltd. acquired 67.5% of the shares in Masterpiece London Ltd. on 30 November 2017 and, at the same time, took over control of the company. As per the date of acquisition, Masterpiece London had cash and cash equivalents of CHF 0.5 million, other current receivables of CHF 0.8 million, fixed assets of CHF 0.0 million and liabilities of CHF 0.7 million. The net assets acquired, valued at the market value, are thus CHF 0.6 million as per 30 November 2017. MCH Swiss Exhibition (Basel) Ltd. is entitled to acquire the remaining shares following the registration of the 2023 audited annual accounts for Masterpiece London Ltd.
10. Provisions
CHF 0.8 million (previous year CHF 0.8 million) are provided for contractual obligations entered into in conjunction with the repairs to the parking spaces for exhibition use at the Zurich location. A sum of CHF 0.2 million plus indexed inflation is paid into the renovation fund for Theater 11 each year. This fund is used to finance maintenance work on the Theater 11. This obligation results from the agreements concluded with the person granting the building rights, which stipulate that the amount remaining in the renovation fund upon reversion of the building rights will go back to the person who has granted the building rights.
The restructuring costs for a subsidiary of the Exhibitions/Venues division, which were set aside in the 2014 financial year and used up in part during the 2015 to 2017 financial years already, include the expected costs of the redundancy plan. As part of the structural and organisational optimisation in the national exhibition and event business, a provision of CHF 17.7 million has additionally been created. The provisions have been discounted with a risk-weighted interest rate of 6.1%.
The other provisions include contract penalties in the event of stand constructions not being able to be brought into operation on time of CHF 0.3 million (previous year CHF 1.3 million).
In the 2016 financial year, a provision of CHF 0.9 million had to be created on account of the late handing over of an event structure; it was possible to reverse this provision in the course of the financial year. The provision for claims made (previous year CHF 0.8 million) was similarly reversed.
The other provisions result from funding shortfalls for pension funds (CHF 0.6 million), general provisions for potential reimbursement claims (CHF 4.0 million) and miscellaneous provisions totalling CHF 3.3 million (previous year CHF 0.8 million).
11. Employee pension funds
The employee pension funds of the MCH Group (named as pension fund) is independent of the group. The pension fund is financed by employee and employer contributions as a matter of principle. Membership of the pension fund is compulsory for all employees with permanent contracts at MCH Group Ltd., MCH Swiss Exhibition (Basel) Ltd., MCH Swiss Exhibition (Zurich) Ltd., Expomobilia AG, Techno Fot AG, Rufener events Ltd., Winkler Livecom AG, Oceansalt LLC and MCH Global AG. Members are entitled to benefits which include an old-age pension, disability pension and benefits in the event of death. Since 1 January 2012, the pension fund has operated as a defined contribution scheme.
The companies affiliated to the fund make an overall contribution of 150% of the contributions paid by the members. Expenditure in the 2017 financial year totalled CHF 5.9 million (previous year CHF 5.7 million). An actuarial balance sheet is drawn up by an expert at least once every three years, which is currently based on the 2015 Occupational Pensions Act (2.0%). The last actuarial balance sheet was drawn up on 1 January 2015. The mathematical reserve is calculated on an annual basis. The funded status in respect of the net assets of the pension fund is 119.0% as per 31 December 2017 (previous year 116.9%). The total employer contribution reserve as per 31 December 2017 is CHF 0.8 million (previous year CHF 0.8 million).
The semi-autonomous pension fund, Caisse de pension en faveur du personnel de Beaulieu Exploitation SA, is a defined contribution scheme and insures all employees with permanent contracts. Members are entitled to benefits which include an old-age pension, disability pension and benefits in the event of death. MCH Beaulieu Lausanne SA, as the sole company affiliated to the fund, makes an overall contribution amounting to 150% (previous year 200%) of the contributions paid by the members.
Expenditure in the 2017 financial year totalled CHF 0.5 million (CHF 0.3 million as per the regulations, CHF 0.2 million as a recapitalisation contribution (previous year CHF 0.6 million). The 2015 Occupational Pensions Act (2.0%) is taken as the technical basis for the annual calculation of the funded status, which is 98.8% as per 31 December 2017 (previous year 95.0%). On the basis of a decision taken by the Foundation's Board of Trustees, the pension fund was switched to a defined contribution scheme on 1 January 2016 and the technical interest rate reduced to 2.75% at the same time. On the basis of a decision taken by the Foundation’s Board of Trustees on 31 January 2018, the employer paid a recapitalisation contribution of CHF 160 000 for the 2017 reporting year.
The employees of Reflection Marketing AG, Wallisellen, have a full-insurance solution. The employees of Exhibit & More AG have a full-insurance solution with AXA-Winterthur. Both pension solutions have a funded status of 100%.
MC2 contributes to multi-employer pension plans under collective bargaining agreements which provide retirement benefits for its various union employees.
The plans contributions were less than 5% of each such plan's in FY 2017. The Company has a kCHF 0.5 salary savings plan for substantially all nonunion full-time employees. The most recent Pension Protection Act zone status available is for the plan's year-end at December 31, 2017. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The "FIP/RP Status Pending or Implemented" column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. Information for significant multi-employer pension plans in which the Company participates is included in the table below.
The risks of participating in multi-employer plans are different from single employer plans as assets contributed are available to provide benefits to employees of other employers and unfunded obligations from an employer that discontinues contributions are the responsibility of all remaining employers. In addition, in the event of a plan's termination or the Company's withdrawal from a plan, the Company may be liable for a portion of the plan's unfunded vested benefits. The Company has withdrawn from the Central States Southeast and Southwest Areas Pension fund for which a demand of 0.5 m CHF has been served. The Company is requesting that the Fund provide the basis used to determine the amount of the demanded liability of 0.5 m CHF and has recorded a reserve of 0.2 m CHF pending an actuary review. The Company does not anticipate withdrawal from any other plans, nor is the Company aware of any expected plan terminations.
At December 31, 2017, approximately 16% of the Company's payroll is for a union workforce which is represented under 12 collective bargaining agreements which are active 2018 through 2021. Upon such dates the agreements renew or are renegotiated.
As per 31 December 2017, liabilities of CHF 0.0 million (previous year CHF 0.8 million) exist to the pension funds.
12. Income by divisions and geographical markets
No relevant Swiss or international direct competitor currently discloses their segment results or is required to disclose the figures and segment results in a comparable manner. For this reason, the MCH Group is dispensing with the presentation of its segment results, since detailed reporting of the company's cost and earnings structure could produce competitive disadvantages compared with competitors.
13. Human resources
For the provision of services, additional temporary staff are employed as cashiers, cloakroom attendants, guards and office workers, etc.
The full-time jobs are calculated proportionally, MC2 eight months and Masterpiece London one month.
14. Financial result
The interest on capital relates to the financing costs for the operational loans and various other interest expenditure.
15. Taxes
The average tax rate applied in respect of the result from ordinary activities is -2.0% (previous year 6.2%).
Due to a tax agreement with the Canton of Basel-Stadt, the income tax payable by MCH Swiss Exhibition (Basel) Ltd. is negligible. No special tax arrangements exist for other companies in the group. As of 2021, the exhibition business in Basel that has been partially exempted from taxation will similarly be subject to tax. The time at which the tax regime is being changed has been coordinated with the repayment of the loans granted to MCH Swiss Exhibition (Basel) Ltd. by the Canton of Basel-Stadt for the new Messe Basel hall complex built in the 2013 financial year.
In each of the companies (with the exception of MCH Messe Basel), deferred tax is calculated with the effectively applicable tax rate of 18 – 21%. In the 2017 financial year, the tax loss carry forward decreased by CHF 3.1 million to CHF 13.8 million.
As per 31 December 2017 and 2016, no deferred tax credits were capitalised from loss carry forwards.
16. Goodwill
In accordance with the consolidation principles, MCH Group offsets the goodwill acquired directly against the equity at the time of initial consolidation or the time of acquisition.
The theoretical net book value of the goodwill originates from the acquired companies of Asian Art Fairs Limited, Reflection Marketing AG, Seventh Plane Networks Pvt. Ltd., Creative Management Services, Inc. (MC2 subgroup), art.fair International, Düsseldorf and Masterpiece London Ltd.
If the goodwill had been capitalised, assuming an amortisation period of 5 years, the following values would have been obtained:
17. Off-balance-sheet transactions
18. Derivative financial instruments
Forward transactions (currency instruments) were concluded in order to hedge future sales income in foreign currencies.
19. Loans taken up
The net debt (short and long-term loans taken up minus cash and cash equivalents) increased to CHF 130.7 million (previous year CHF 69.1 million).
20. Further details
20.1. Transactions with related parties
As an organiser of exhibitions and various other events, the MCH Group maintains a wide range of business relationships with its most important shareholders, the Cantons of Basel-Stadt, Basel-Landschaft and Zurich and the City of Zurich, in the context of its ordinary business activity.
The Canton of Basel-Stadt has made most of the land required by MCH Swiss Exhibition (Basel) Ltd. available with a building lease.
The Canton and City of Zurich have granted MCH Swiss Exhibition (Zurich) Ltd. loans of CHF 16.0 million and CHF 16.5 million respectively, both subject to 2% interest. In addition, the City of Zurich has made the land required by MCH Swiss Exhibition (Zurich) Ltd. available with a building lease.
In the context of the financing concept for the “Messe Basel New Buildings” for CHF 350 million (including some CHF 40 million from the increase in share capital in 2011), the following transactions were made or prepared between MCH Swiss Exhibition (Basel) Ltd. and the public-sector entities. As the parent company, MCH Group Ltd. guarantees the fulfilment of the contracts (investment contributions and loans earmarked for a specific purpose) with the public-sector entities (the Cantons of Basel-Stadt, Basel-Landschaft and Zurich and also the City of Zurich) by means of an abstract payment guarantee. The financing concept additionally provides for a maximum dividend payment of 5% over the full financing term.
The interest-free loan for CHF 60 million granted by the Cantons of Basel-Stadt and Basel-Landschaft (CHF 30 million each), has reduced the interest to be paid by MCH Swiss Exhibition (Basel) Ltd. in the 2017 financial year by CHF 0.6 million taking a reference interest rate of 0.92% (previous year CHF 0.7 million with an interest rate of 1.15%). As of 2020, these loans will be amortised with a total of CHF 6 million each year (CHF 3 million per loan and canton).
In the 2012 business year, MCH Messe Basel received a non-repayable loan, secured by a mortgage, of CHF 50.0 million from the Canton of Basel-Stadt, as a financing contribution à fonds perdu. This is to run for 20 years and incurs the obligation to continue operating the Congress Center Basel (CCB) for 20 years. This loan is reduced by a sum of CHF 2.5 million every year. The reduction in the corresponding interest to be paid is CHF 0.4 million (previous year CHF 0.5 million).
MC2 has a future outflow of funds to related parties equivalent to CHF 1.7 million for rental contracts.
20.2. Contingent liabilities
On 31 December 2017, MCH Swiss Exhibition (Zurich) Ltd. has contingent liabilities of CHF 0.7 million (previous year CHF 0.7 million) in respect of Theater 11 and the renovation of exhibition restaurants.
To ensure the obligations taken on by Expomobilia AG in the context of a work contract, MCH Group Ltd. provided guarantees totalling CHF 3.0 million on 31.12.2017 (previous year CHF 3.0 million).
20.3. Exchange rates
20.4. Risk management
The MCH Group has implemented a risk management process. On the basis of a risk identification conducted by the Executive Board each year, the key risks for the group are rated according to the probability of their occurrence and their impact. These risks are avoided, reduced or passed on by means of appropriate measures decided on by the Board of Directors. The risks borne by the group itself are consistently monitored. The last risk assessment conducted by the Board of Directors was adopted on 30 November 2017. To allow the group to respond flexibly to changes in the risk environment, the Executive Board is entitled to commission in-depth risk clarifications on an ad-hoc basis.
20.5. Approval of the annual accounts
The Board of Directors of MCH Group Ltd. approved the consolidated annual accounts on 16 March 2018.
