“AUDIT CERTIFICATE OF THE INDEPENDENT AUDITOR OF THE FINANCIAL STATEMENTS
To MAX Automation SE, Dusseldorf
NOTE ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND THE GROUP MANAGEMENT REPORT
We have audited the consolidated financial statements of MAX Automation SE, Dusseldorf, and its subsidiaries (the Group) - consisting of the consolidated balance sheet as of 31 December 2019, the consolidated statement of comprehensive income, the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the fiscal year from 1 January to 31 December 2019, and the notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the consolidated management report of MAX Automation SE, which is combined with the management report of the Company, for the fiscal year from 1 January to 31 December 2019. In accordance with German legal requirements, we have not audited the content of the components of the Group Management Report mentioned in the "Other Information" section of our audit opinion.
In our opinion, based on the findings of our audit
the attached consolidated financial statements comply in all significant respects with IFRS, as applicable in the EU and the German statutory regulations to be additionally applied Section 315e (1) HGB and give a true and fair view of the net assets and financial position of the Group as of 31 December 2019 and of its results of operations for the fiscal year from 1 January to 31 December 2019 in accordance with these requirements; and
overall, the attached Group management report provides a true and fair view of the Group's position. In all significant matters, this Group management report is consistent with the consolidated financial statements, complies with German statutory regulations and appropriately presents the opportunities and risks of future development. Our opinion relating to the Group management report does not include the content of the components of the Group management report referred to in the section "Other information".
Pursuant to Section 322 (3) sentence 1 HGB, we declare that our audit has not led to any objections to the proper nature of the consolidated financial statements and the Group management report.
Basis for the audit opinions
We conducted our audit of the consolidated financial statements and the Group management report in accordance with Section 317 HGB and the EU Auditor Regulation (No. 537/2014; hereinafter „EU-APrVO“), taking into account the German proper accounting principles as established by the Institute of Public Auditors in Germany (IDW). Our responsibility according to these regulations and principles is described in more detail in the section "Responsibility of the auditor for the audit of the consolidated financial statements and the Group management report" in our audit opinion. We are independent of the Group companies in compliance with European law and German commercial law and professional regulations and have fulfilled our other German professional obligations in accordance with these requirements. Moreover, pursuant to Article 10 (2) (f) EU-APrVO we declare that we have not rendered any prohibited non-audit services pursuant to Article 5 (1) EU-APrVO. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements and the Group management report.
Audit issues of particular importance in the audit of the consolidated financial statements
Matters of particular importance are those matters which in our opinion, based on our audit, are most relevant to our audit of the consolidated financial statements for the financial year from 1 January to 31 December 2019. These matters have been considered in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon; we do not issue a separate audit opinion on these matters.
In our opinion, the following matters were most significant in our audit:
Impairment of goodwill
Application of the so-called cost-to-cost method for revenue recognition within the context of long-term contract manufacturing.
We have structured our presentation of these particularly important audit matters as follows:
Facts and problem definition
Auditing approach and findings
Reference to further information
In the following, we present the particularly important audit issues:
Impairment of goodwill
In the consolidated financial statements of the company, goodwill totaling mEUR 46.2 (13.9% of the balance sheet total) is reported separately under non-current assets. Goodwill is subject to an impairment test by the company once a year or as and when required in order to determine a possible need for amortization. The impairment test is performed at the level of the groups of cash-generating units to which the respective goodwill is allocated. As part of the impairment test, the carrying amount of the respective cash-generating units including goodwill is compared with the corresponding recoverable amount. The recoverable amount is generally determined on the basis of the value in use. The basis of measurement is regularly the present value of future cash flows from the respective group of cash-generating units. The present values are determined using discounted cash flow models. The Group's approved medium-term planning forms the starting point, which is extrapolated using assumptions of long-term growth rates. Expectations of future market developments and assumptions regarding the development of macroeconomic factors are also taken into account. Discounting is based on the weighted average cost of capital of the cash-generating units or a respective group thereof. As a result of the annual impairment test, which was also carried out for a cash-generating unit taking into account a purchase price indication, there was no need for impairment. As of 30 September 2019, the Company has recognized an impairment loss on the goodwill of the IWM Automation Group in the total amount of mEUR 2.7.
The results of the respective valuations depend to a large extent on the assessment of the legal representatives with regard to the future cash inflows of the respective group of cash-generating units, the discount rate used, the growth rate and other assumptions and are therefore subject to considerable uncertainty. Against this background and due to the complexity of the valuation, this issue was of particular importance in the context of our audit.
Within the scope of our audit, we have, among other things, assessed the methodical procedure for carrying out the impairment test. In addition, we assessed the content of the derivation of future cash inflows discounted in the context of calculating the values in use. For this purpose, we checked the plausibility of the medium-term planning relevant for the respective cash-generating unit against the background of industry-specific market expectations, among other things. In addition, we also assessed whether the costs of corporate functions were properly taken into account. With the knowledge that even relatively small changes in the discount rate used can have significant impacts on the amount of the enterprise value determined in this manner, we have intensively studied the parameters used to determine the discount rate used and have reconstructed the calculation scheme. In order to account for the existing forecast uncertainties, we have reproduced the sensitivity analyses prepared by the Company and performed our own sensitivity analyses for the groups of cash-generating units with low excess cover (carrying amount compared to recoverable amount).
The valuation parameters and assumptions applied by the legal representatives are, in our opinion, acceptable overall and lie within reasonable ranges.
The Information provided by the Company on goodwill is stated in the section entitled "Goodwill" and in Notes 3 and 33 to the consolidated financial statements.
Application of the so-called cost-to-cost method for revenue recognition in the context of long-term manufacturing contracts
In the consolidated financial statements of the Company as of 31 December 2019, the income statement shows sales revenues of mEUR 425.5, which were mainly realized on a pro-rata basis. The balance sheet as of 31 December 2019 includes contract assets in the amount of mEUR 41.0 and contract liabilities in the amount of mEUR 18.6. Revenue from customer-specific contracts is recognized over a period of time when an asset is created that does not provide the Company with alternative uses and a legal right to receive payment for services already rendered. Even if an asset is created or improved and the customer gains control of the asset during this time, revenue is still recognized over the period. In the case of revenue recognition over a period of time, revenue is recognized on the basis of the stage of completion, which is determined as the ratio of the actual contract costs incurred to the expected total costs. In view of the complex production processes involved, the recognition of revenue over a specific period requires, in particular, an effective internal budgeting and reporting system, including concurrent project costing, and a functioning internal control system.
Against this background, the correct application of the accounting standard for revenue recognition must be regarded as complex and is partially based on estimates and assumptions by the legal representatives. The matter was therefore of particular importance for our audit.
Taking into account the knowledge that there is an increased risk of misstatements in the financial statements due to the complexity of the issues involved and the estimates and assumptions to be made, we have assessed the processes and controls put in place by the Group to recognize revenue from customer-specific contracts. Our specific audit approaches included examination of controls and evidence-gathering procedures, primarily
Assessment of the process of properly identifying the performance obligations and classifying the performance rendered after a certain period of time or at a certain point in time.
Assessment of the cost accounting system, as well as other relevant systems supporting the accounting of customer-specific contracts.
Assessment of the proper recording and allocation of direct costs and the amount and allocation of overheads.
Assessment of the project calculations on which the customer-specific contracts are based and the determination of the percentage of completion.
We were able to satisfy ourselves that the systems, processes and controls in place are adequate and that the estimates and assumptions made by the legal representatives are sufficiently documented and justified to ensure proper revenue recognition from customer-specific contracts.
The Company's disclosures on revenue recognition in connection with long-term manufacturing contracts are explained in the sections "Contract assets" and "Contract liabilities" and in Notes 11, 22 and 29 to the consolidated financial statements.
The legal representatives are responsible for other information. Other information includes the following components of the management report which have not been audited:
the corporate governance statement in accordance with Section 289f HGB and Section 315d HGB contained in the „Corporate Governance Statement (Section 289f and Section 315d HGB)“ section of the Management Report
the separate non-financial consolidated report in accordance with section 315b (3) HGB.
Other information also includes the remaining parts of the financial report - without further cross-references to external information - with the exception of the audited consolidated financial statements, the audited Group management report and our audit opinion.
Our audit opinion on the consolidated financial statements and the Group management report does not extend to the other information, and accordingly we do not express an audit opinion or any other form of conclusion thereon.
Within the context of our audit, we have a responsibility to read the other information and assess as to whether the other information
shows material inconsistencies with the annual financial statements, the management report or the knowledge gained from our audit, or
appear to be substantially misrepresented elsewhere.
Management and the Supervisory Board' Responsibility for the Consolidated Financial Statements and the Group Management Report
The legal representatives are responsible for the preparation of the consolidated financial statements and the Group management report, which comply in all material respects with IFRSs as adopted by the EU and the additional requirements of German law pursuant to Section 315e (1) HGB and that the consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. Furthermore, the legal representatives are responsible for the internal controls that they have determined to be necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.
In preparing the consolidated financial statements, the legal representatives are responsible for assessing the Group's ability to continue operations as a going concern. They are also responsible for disclosing, where relevant, information about the Group's ability to continue as a going concern. They are also responsible for accounting for continuing operations in accordance with the going concern principle unless the Group is to be wound up or discontinued, or there is no realistic alternative but to liquidate the Group or to cease operations.
Moreover, the legal representatives are responsible for the preparation of the Group management report, which as a whole provides an appropriate view of the Group's position and appropriately presents the opportunities and risks of future development. Furthermore, the legal representatives are responsible for the precautions and measures (systems) which they have deemed necessary to enable the preparation of a Group management report in compliance with the applicable German statutory regulations and to provide sufficient appropriate evidence for the statements made in the Group management report.
The Supervisory Board is responsible for monitoring the Group's accounting process for the preparation of the consolidated financial statements and the Group management report.
Auditor's Responsibility for the Audit of the Consolidated Financial Statements and the Group Management Report
Our objective is to obtain reasonable assurance as to whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, whether the Group management report as a whole provides an appropriate understanding of the Group's position and appropriately presents the opportunities and risks of future developments in all material respects in accordance with the consolidated financial statements and the findings of our audit, as well as to issue an audit opinion containing our audit opinions on the consolidated financial statements and the Group management report.
Sufficient certainty refers to a high degree of certainty but does not guarantee that an audit conducted in accordance with § 317 HGB and Regulation EU-APrVO and in compliance with the German proper auditing principle for the audit of financial statements promulgated by the Institute of Public Auditors (IDW) will always reveal a significantly erroneous presentation. Misrepresentations can result from violations or inaccuracies and are considered significant if it could reasonably be expected that they could individually or collectively influence the economic decisions of addressees made on the basis of these consolidated financial statements and the Group management report.
In performing the audit, we exercise professional judgement and maintain a critical attitude. Beyond that
we identify and assess the risks of significant erroneous presentation of the consolidated financial statements and the Group management report, whether due to fraud or error, plan and perform the audit procedures in response to these risks and obtain audit evidence sufficient and appropriate to provide a basis for our audit opinion. The risk that significant erroneous presentations will not be detected is greater for violations than for misstatements, due to the fact that violations may involve fraudulent interactions, falsification, intentional omissions, misrepresentations, or the disabling of internal controls.
we obtain an understanding of the internal control system relevant to the audit of the consolidated financial statements and the procedures and measures relevant to the audit of the Group management report in order to plan audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of these systems.
we evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
we draw conclusions on the appropriateness of the accounting policies adopted by the legal representatives regarding the going concern principle and, based on the audit evidence obtained, whether there is any significant uncertainty relating to events or conditions that may cast significant doubt upon the Group's ability to continue as a going concern. If we conclude that a significant uncertainty exists, we are obliged to draw attention in our audit opinion to the related disclosures in the consolidated financial statements and the Group management report or, if these disclosures are inappropriate, to modify our respective audit opinion. We draw our conclusions on the basis of the audit evidence obtained up to the date of our audit opinion. However, future events or circumstances may result in the Group being unable to continue its operations.
we assess the overall presentation, structure and content of the consolidated financial statements, including the disclosures and whether the consolidated financial statements present the underlying transactions and events in such a way that the consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with IFRS as adopted by the EU and the additional requirements of German law pursuant to Section 315e (1) HGB.
we obtain sufficient appropriate audit evidence for the accounting information of the companies or business activities within the Group to enable us to express an opinion on the consolidated financial statements and the Group management report. We are responsible for instructing, monitoring and performing the audit of the consolidated financial statements. We are solely responsible for our audit opinions.
we assess the consistency of the Group management report with the consolidated financial statements, its legal compliance and the picture of the Group's situation thereby conveyed.
we perform audit procedures on the future-oriented statements in the Group management report presented by the legal representatives. On the basis of sufficient appropriate audit evidence, we verify in particular the significant assumptions underlying the forward-looking statements made by the legal representatives and assess the appropriate derivation of the forward-looking statements from these assumptions. We do not express an independent audit opinion on the forward-looking statements or the underlying assumptions. There is a significant unavoidable risk that future events could differ significantly from the forward-looking statements.
Among other things, we discuss with those responsible for monitoring the planned scope and timing of the audit as well as significant audit findings, including any deficiencies in the internal control system that we identify during our audit.
We make a declaration to those responsible for monitoring that we have complied with the relevant independence requirements and discuss with them any relationships or other matters that could reasonably be expected to affect our independence and the safeguards put in place to protect it.
Of the matters that we have discussed with those responsible for supervision, we have identified those matters that were most significant in the audit of the consolidated financial statements for the current reporting period and are therefore the most significant matters. We describe these matters in our audit opinion, unless laws or regulations preclude public disclosure of the matters.
OTHER STATUTORY AND OTHER LEGAL REQUIREMENTS
Other information required by Article 10 EU-APrVO
We were elected as auditors of the consolidated financial statements by the Annual General Meeting on 17 May 2019. We were commissioned by the Audit Committee on 12 November 2019. We have been the auditors of MAX Automation SE, Dusseldorf, since fiscal year 2019.
We declare that the audit opinions contained in this audit report are consistent with the additional report to the Audit Committee pursuant to Article 11 EU-APrVO (audit report).
Dr. Andreas Focke is the auditor responsible for the audit.”
Dusseldorf, 13 March 2020
PricewaterhouseCoopers GmbH Audit Company
Dr. Andreas Focke
ppa. Mirsad Grizovic