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| Annual Report 2016 |
Financial Statement 2016 Combined Management Report 2016 is part of the Annual Report 2016
Report of the Supervisory Board
Explanatory Report by the Management Board in accordance with section 289(4) German Commercial Code (HGB)
Part of Annual Report page 87
|Explanatory Report by the Management Board in accordance with section 315(4) German Commercial Code (HGB)|
Part of Annual Report page 87
|Information on the Rights of Shareholders ||Download PDF|
|Template Power of Attorney||Download PDF|
We still see opportunities for FP to grow in the franking systems segment. Our franking systems are distinguished by a customer-friendly design and ease of use. We will continue to invest in franking systems. From our perspective, the USA and France are clear target markets. While FP has a market share of a little over 10%, practically the rest of the whole market is split among the company’s major competitors. Given the considerable shift away from franking systems for larger mail volumes towards franking systems for medium to low mail volumes, we also envisage some pleasing opportunities for growth in this regard.
The French market is a good example. It was not that many years ago that we set up operations in France and we are gradually acquiring an installed base in the country. We had a major dealer summit in the USA at the start of the year where we primarily presented our new solutions, the PostBase 100 featuring dynamic scales and the PostBase One, to existing dealers. This was a great success, as the sales results so far have shown. The dealer support team in the USA is constantly working to acquire new dealers, and the extensive dealer network of over 150 dealers is a testament to their efforts.
We are also working on supplementary solutions and services for our customers. Parcel shipping is one area worthy of mention. We are testing our small solution capabilities in Canada, for example. However, when it comes to larger providers, we do not currently see ourselves as a partner, because most of these providers already have their own solutions. Which is why we will focus on our target group of small and medium-sized companies in the parcel shipping segment as well.
We do not currently envisage consolidations in the franking market business. In the mail services segment encompassing business areas involved in outsourcing printing and inserting services, there have been various consolidations in the past – and will continue to be in the future. We are keeping a very close eye on these markets and we have – and will continue to – examine our options. This is a strategic initiative relating to the digital market, which comes under the scope of ACT.
We have a two-pronged approach. We are developing our own software, such as FP Sign. But we are also looking at the entire customer journey to see whether we can intelligently reconnect various software solutions that already exist on the market to generate added value for our customers. However, we are also observing various trends, markets and companies providing solutions and products that would potentially be a good fit with FP and its competencies and be well received by customers. If they seem appealing, we will work together with the relevant partners to develop a concept of how we can optimise the development of this product.
We will never see complete standardisation of digitalisation; certain standards will prevail; but we cannot and do not want to prevent various new trends and technologies from emerging and replacing outdated versions.
elDAS is a new European regulation on the use and application of electronic signatures. The industry has not defined any other standards, and we do not expect any others to be developed other than elDAS. This is currently the highest common denominator that private industry can refer to regarding the use of electronic signatures. This standardisation of regulations at European level makes using signatures in international business easier and more reliable. National regulations, which previously restricted the cross-border use of signatures, are now being sidelined with the entry into force of elDAS.
Over the past few months, we have stepped up our activities geared towards universities. This recently culminated in a joint hackathon with the University of Applied Sciences for Engineering and Economics involving an app development. Regarding the Internet of Things (IoT), we are in direct contact with various partner networks of renowned companies from the spheres of logistics, retail and IT. In the future, we will cooperate intensively with these institutions and also with partner networks, as we are doing currently for the development of our customer portals.
It is difficult for us to predict future basic interest rate developments. The Management Board does not really anticipate any further risks. The programme has been closed, which means there will be no new commitments. And, going forward, interest rates are not likely to fall much further, but may perhaps even rise. As in the previous year, we calculated the interest rate based on an assessment by our independent actuary. It is based on the interest rate for government bonds with a Triple A rating in Europe. The underlying interest rate was lowered considerably to 1.42% (2.38%).
FP is constantly striving, on the one hand to ensure a clear calculation basis for currency exchange rates in the long term, and, on the other hand, to pro-actively leverage short-term market opportunities. In this regard, over the course of the year the company actively tracks exchange rate developments for key currencies relevant to FP, for example, and takes action where necessary. Work was started in 2016 to set up a treasury department within the framework of the ACT strategy. Similar to the other measures, we are intending to use this initiative to enhance our implementation expertise and efficiency in this area. In 2016 and already over the course of 2017, we have used currency futures to hedge our expected cash flows in US dollars and British pound sterling at attractive levels.
The independence of the auditor is ensured by a number of appropriate controls on the auditor’s end and on FP’s end. Mr Günther did not mention any problems in this regard. According to his statement, we primarily sought a greater level of consultation in association with reducing the tax rate, which was an advantageous move for all. Additional consultation was also required in the context of the ACT strategy.
The requirements of the EU Audit Regulation and Directive were adopted by the FP Supervisory Board with effect from 1 January 2017. In accordance with this, all non-assurance services are assessed by the FP legal department as part of a control process and approved by the Supervisory Board. The services carried out do not compromise the auditor’s independence because a self-review is precluded. A cap on non-assurance services of 70% of average audit fees paid over the past three years will apply from fiscal year 2020.
In relation to performance, an overarching approach for auditing and tax consulting is beneficial for a listed mid-sized company like FP. Separating IFRS accounting, HGB accounting and tax law accounting into silos frequently leads to sub-optimal results and higher costs. Regardless, the Management Board endeavours not to entrust all activities to a single provider that is also the current auditor. Where efficient, it tries to enlist the services of other competitors as well.
Audit costs increased only slightly compared with the previous year. The rise in tax consulting expenditure was caused by one-off circumstances, in particular measures taken to optimise the Group tax rate, restructuring under corporate law and several ongoing audits as well as mutual agreement procedures involving our foreign subsidiaries. There is a close correlation between the rise in other services and our ACT strategy. Part of the strategy is to make FP fit for the future. In connection with this strategy, we were given quality assurance support with the revised IFRS accounting guidelines for risk reporting and our financial reporting.
We do have a stock option programme in place. It is called SOP 2015. Members of the Management Board and executives qualify for stock allocations under this programme. 380,000 stock options are held by Management Board members. These are fully allocated. We are going to review the remuneration structure. We have already started our assessment of the remuneration system.