22. Further details
22.1. Capital increase 2020
Transaction costs from the capital increase in 2020 which had not been paid the previous year were paid during the 2021 financial year for an amount of CHF 2.1 million.
22.2. Transactions with related parties
In the financial year, MC2 had no further cash outflows to related parties for rental contracts (previous year the equivalent of CHF 0.8 million).
During the financial year, Masterpiece London Ltd. placed a stand construction order with a related company for the Masterpiece London show, for a value of a few thousand Swiss francs (previous year CHF 0.2 million). The contract was awarded on the basis of an ordinary tendering process.
22.3. Contingent liabilities and receivables
On 31.12.2021, MCH Swiss Exhibition (Zurich) Ltd. has contingent liabilities of CHF 0.5 million (previous year (C HF 0.6 million) in respect of the Theater 11 and the renovation of exhibition restaurants.
By way of security for obligations taken on by MCH Live Marketing Solutions AG in the context of a work contract, MCH Group Ltd. on 31.12.2021 provided guarantees totaling CHF 0.9 million (previous year CHF 5.1 million). In addition, there are bank guarantees with the possibility of recourse amounting to CHF 0.4 million (previous year CHF 0.6 million). To secure a rent guarantee for MC2, a guarantee of CHF 2.3 million (USD 2.5 million) (previous year 2.2 million, USD 2.5 million) was issued.
In July 2020, a warehouse fire destroyed fixed assets of MCH Swiss Exhibition (Basel) Ltd. in an external warehouse. The warehouse operator's insurance company has acknowledged a right of claim for MCH Swiss Exhibition (Basel) Ltd., but has not yet quantified it. Since all the assets concerned had already been fully depreciated before the fire, no impairment was required.
22.4. Risk management
MCH Group has implemented a risk management system. 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 19.11.2021. 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.
22.5. Influence of the Covid-19 pandemic on the financial year
Review of 2021
As in the previous year, 2021 was strongly marked by the Covid-19 pandemic. In the 2021 financial year, the pandemic had a considerable negative impact on business activity and the financial results. The period from January to August 2021 was marked by the continuing measures imposed by governments and public authorities, with severe restrictions still imposed on freedom of travel and the holding of meetings and events, where these were permitted at all.
In the first eight months of 2021, business activity came virtually to a standstill, with the exception of a considerably smaller Art Basel in Hong Kong and a small number of activities in the Experience Marketing division. Numerous exhibitions planned for the first half of the year, including SWISS-MOTO, Giardina, Baselworld, IFAS and Powertage, had to be postponed or canceled. In summer 2021, the restrictions were relaxed in a large number of European countries, including in Switzerland, and MCH Group was able to successfully stage exhibitions in the autumn within the scope of the imposed conditions. Art Basel in Basel and Art Basel in Miami Beach in December were both held with a large number of galleries and visitors. A number of Swiss events, such as Ilmac, Smart Swiss, Digital Festival in Zurich, which had been newly acquired with its Hackathon in 2021, and the careers fairs in Zurich and Lausanne were staged with a record number of visitors in some cases. Igeho and the Wine Festival that had been planned for the autumn had to be canceled, however.
The business field Experience Marketing has also experienced a notable upswing in business activity since the summer, including with the World Expo that opened in Dubai in October, where the Live Marketing Solutions division was able to construct a number of country pavilions, and also with the preparations for a number of key exhibitions and events staged in the USA at the end of 2021 and the start of 2022. Positive Covid-19 case numbers unfortunately increased significantly again at the end of 2021, and renewed restrictions were imposed by governments and authorities in many countries. Since this only occurred after all the major events had been held, however, this development had no further negative impact on the 2021 financial year.
The Swiss companies were able to receive the following non-repayable amounts under the federal Covid 19 hardship programs: Canton of Basel-Stadt CHF 0.8 million (no conditions, not subject to the federal Covid-19 hardship ordinance of 25.11.2020, as only the cantonal share was distributed) and Canton of Zurich CHF 9.8 million (subject to the federal Covid-19 hardship ordinance of 25.11.2020, and thus its Art. 6 on restriction of use).
In the United States, the Paycheck Protection Program (PPP) loans received last year, which were directly related to the coverage of operational costs incurred due to the Covid-19 pandemic, were unconditionally forgiven in the amount of USD 6.1 million (CHF 5.8 million) due to local regulations.
Outlook for 2022 and following years
The high case numbers are unfortunately continuing at the beginning of 2022. Despite this, in the light of the latest developments MCH Group remains optimistic that the situation will gradually return to normal and that the exhibitions and events planned for 2022 will take place in most cases. A significant rise in the number of inquiries is also being recorded for the Live Marketing Solutions division. MCH Group will thus experience a pronounced increase in its business activity in 2022 and achieve an improvement in its operating results. Despite this, the situation must be continuously assessed for any negative developments and their corresponding impact on MCH Group.
Despite the strong negative impact of the pandemic, MCH Group has cash and cash equivalents of CHF 113 million gross at the end of 2021. Together with a return to normal of business activities, this forms the basis for the successful further development of the group.
On the basis of the strategy, which was revised by the Board of Directors in its new composition in 2021, and the medium-term plan for the group, the management and Board of Directors have concluded that the liquidity and also the equity base of MCH Group have sufficient reserves to ensure the company’s continued existence beyond 2022.
In May 2023, the refinancing of the outstanding CHF 100 million bond is due. The Board of Directors is in the process of examining all possible options for refinancing this bond. For the refinancing, the two anchor shareholders of the Canton of Basel-Stadt and Lupa Investment Holdings LP have an obligation to provide a backstop (refinancing obligation if refinancing of the bond is not or only partially possible). The focus is on strengthening the capital base with downstream renewal of debt financing. The Board of Directors will be taking these decisions in the first few months of 2022.
As a result, the Board of Directors sees no relevant uncertainty for the future of MCH Group and its group companies.
22.6. Canceled exhibitions with event cancelation insurance
MCH Group has taken out an overall cancelation insurance program for several events in the art sector, which covers certain risks in connection with possible losses of sales. The events canceled in the 2020 financial year (Art Basel in Hong Kong, Masterpiece in London, Art Basel in Basel and Art Basel in Miami Beach) were reported to the insurance company.
In the 2020 financial year, insurance benefits of CHF 22.0 million were recognized as other operating income, of which CHF 19.3 million were already received in the reporting year. In the 2021 financial year, further insurance benefits totaling CHF 15.0 million were received. At the end of the reporting year, the total insurance benefits of CHF 34.3 million had been received. No further payments will be made within the scope of this insurance limit.
22.7 Events subsequent to the balance sheet date
In December 2021, Messe Basel was informed by the Health Department of the Canton of Basel-Stadt that the authorization to hold Swissbau in January 2022 had been revoked. As a result, it was decided after consultation with the exhibitors that the trade fair would be postponed until May 2022. It was already clear at that time, however, that a number of exhibitors would not be able to participate at the later date or did not wish to do so. In January 2022, the decision thus had to be taken to stage Swissbau in a smaller and more compact format as “Swissbau Compact”.
The ultimate downsizing of Swissbau is a direct consequence of the corona pandemic and the revocation of the authorization granted by the Canton of Basel-Stadt for the trade fair to be held in January 2022. It thus constitutes an adjusting event for the present annual accounts. The expected loss of CHF 4.1 million (value adjustment of capitalized costs CHF 3.9 million, provisions CHF 0.2 million) resulting from the downsizing of the event has been taken into consideration.
Giardina in Zurich should have been staged in March 2022. After the trade fair had had to be cancelled in 2020 and 2021 already, Messe Zürich kept to its plan to hold the fair in 2022 for as long as possible. When the corona case numbers dramatically increased in December 2021, Messe Zürich received the first cancellations from major customers already. At that point in time, MCH Swiss Exhibition (Zurich) Ltd was still cautiously optimistic that it would be possible to hold Giardina 2022 after all. When the situation failed to improve in January and the Swiss government took the decision to provisionally extend the Covid measures up until the end of March 2022, Giardina 2022 had to be definitively canceled.
The ultimate cancellation of Giardina is a direct result of the deteriorating corona situation in December 2021. The decision to cancel Giardina thus constitutes an adjusting event for the present annual accounts; the expected loss of CHF 0.7 million (value adjustment of capitalized costs CHF 0.4 million, provisions CHF 0.3 million) incurred through the cancelation of the event has been taken into consideration.
No other significant events occurred after the balance sheet date and prior to the adoption of the annual accounts by the Board of Directors which could affect the information value of the 2021 financial account and are therefore required to be disclosed here.
22.8. Equal pay analysis
The revised Gender Equality Act, which came into force in Switzerland on 01.07.2020, obliges employers with more than 100 employees to conduct a formal review of pay equity for men and women. The MCH Group carried out a corresponding equal pay analysis for the companies MCH Live Marketing Solutions AG and MCH Swiss Exhibition (Basel) Ltd. in February 2021 and April 2021 respectively, in accordance with the requirements of the Confederation, and had it audited by KPMG AG. There are no significant pay differences between the genders within these companies.
22.9. Approval of the annual accounts
The Board of Directors of MCH Group Ltd. approved the consolidated annual accounts on 24.03.2022.