Report of the Supervisory Board of RATIONAL AG for fiscal year 2019.
As it has in the past few years, RATIONAL AG successfully continued on its growth path in the 2019 fiscal year. The focus in the year under review remained on the stability of the Company as a whole as well as the sustained improvement of the quality of the business.
Dialogue and communication as a basis for advice and monitoring.
In fiscal year 2019, we performed the tasks incumbent upon the Supervisory Board by law and by the Articles of Association. We regularly advised the Executive Board on the management of the Company and monitored its activities. The Supervisory Board was directly involved in all decisions of strategic importance to the RATIONAL Group. Cooperation between the Executive Board and the Supervisory Board was characterised by comprehensive, timely and regular communication, both written and verbal. The Executive Board also reported on major transactions outside the regular meetings. The Supervisory Board received monthly and quarterly reports on market developments, the competitive situation, and the Company’s marketing, sales and profit trends. In addition, the Supervisory Board and the Chairman of the Supervisory Board took steps to ensure that at all times it was informed about the current business situation, significant transactions and important decisions by the Executive Board. With this aim in mind, the Supervisory Board was in close and regular contact with all members of the Executive Board to exchange information and ideas.
Where called for by law, the Articles of Association and rules of procedure, the Supervisory Board voted, following detailed consultation and scrutiny, on the reports and draft resolutions of the Executive Board. All operations requiring consent were approved. In fiscal 2019 and in 2020 to date, this related in particular to decisions concerning product development, expansion and optimisation of the sales and marketing organisation, further development of the management structure, global HR development, risk management, and planning and approval of investments and construction work at the Landsberg am Lech and Wittenheim locations.
Consultations in the Supervisory Board.
The Supervisory Board held twelve meetings in 2019. In 2020, one further meeting was held before the meeting of the Supervisory Board on 26 February 2020 to adopt the financial statements. The members of the Supervisory Board also consulted each other in writing and by telephone, and held eleven other internal meetings and four meetings of the Audit Committee in fiscal 2019. All the members of the Supervisory Board and the Audit Committee took part in these meetings. Where applicable, the Supervisory Board also passed resolutions outside the ordinary meetings. During the past fiscal year, the Supervisory Board regularly examined and further improved the efficiency of its activities, in particular the procedures and the timely provision of sufficient information. According to a review carried out by the Supervisory Board itself, its members are, as a whole, familiar with the sector in which the Company is active.
Key areas of consultation.
The consultations with the Executive Board and the internal discussions in the Supervisory Board dealt with all relevant aspects of the development of the business, including financial, investment and HR planning, business trends, the economic situation of the Company and of the consolidated Group, the risk situation, risk management, and last but not least, the current cost and earnings position. In addition, numerous individual topics were on the agenda of the Supervisory Board meetings, and were discussed in depth. These included:
- Business planning for fiscal year 2020
- Further networking of the sales activities for combi-steamers and the VarioCookingCenter®
- Further development, business model and structure of service worldwide
- Key points in product development
- The construction and expansion projects at the Landsberg and Wittenheim locations
- The development strategy for new markets
- The definition of a target quota for women on the Supervisory Board
- Enhancement of the medium-term strategy, including the product portfolio and sales and marketing strategy
- The selection of candidates for enlarging the Supervisory Board
- The election of the Chairman of the Supervisory Board and his deputy
- The appropriation of earnings and proposed dividend
- The departure of the previous CFO Dr Axel Kaufmann at the end of 2019
- Resolution to make a special U.i.U.® payment
At the Supervisory Board meeting to adopt the financial statements on 26 February 2020, the principal topics included not only the audit and adoption or approval of the annual and consolidated financial statements but also, in particular, the draft resolutions to be proposed to the 2020 General Meeting of Shareholders.
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, will be proposed as auditors for the 2020 fiscal year. We also adopted the remaining draft resolutions for the ordinary General Meeting of Shareholders.
Our duties in 2019, and, in particular, at the meeting held on 26 February 2020 to adopt the financial statements included not only the audit plus the entire accounting process in RATIONAL AG and the Group but also the monitoring of the internal control system and the effectiveness of the internal audit and the risk management system.
The Audit Committee, comprising Mr Walter Kurtz, Dr Hans Maerz and Mr Erich Baumgärtner, met four times in the 2019 fiscal year. At its meetings, it dealt in particular with the Halfyear Report and the annual and consolidated financial statements, as well as the monitoring of accounting, the accounting processes, the effectiveness of the internal control system, of the risk management system and the internal audit system, and the selection and independence of the auditors. The Audit Committee reported regularly to the Supervisory Board.
Changes in the Executive Board.
Dr Axel Kaufmann resigned from his Executive Board position by mutual agreement as at 31 December 2019. The Supervisory Board would like to thank Dr Kaufmann for his successful work during the last four years. Dr Peter Stadelmann assumed responsibility for the area of finance as of January 2020.
During fiscal year 2019, the Supervisory Board of RATIONAL AG was enlarged from three to seven members. In fiscal year 2019, the composition of the Supervisory Board of RATIONAL AG fully complied with the German Corporate Governance Code recommendation that the Supervisory Board should include what it considers to be an adequate number of independent members.
No conflicts of interest in respect of individual Supervisory Board members occurred in the 2019 reporting year in connection with consultations, draft resolutions and the audit engagement.
On 9 March 2017, the German government passed the implementing act that transposes the European CSR Directive (2014/95/EU) into national law. The act takes retrospective effect as of 1 January 2017. As a result, non-financial reporting in accordance with sections 289b and 315d of the Handelsgesetzbuch (HGB, German Commercial Code) has been mandatory since the 2017 fiscal year. RATIONAL AG will publish the 2019 sustainability report, including the disclosures required in this regard, in time for the deadline of the end of April 2020.
The last amendment to the German Corporate Governance Code entered into force on 24 April 2017. Together with the Executive Board, an account was provided for the fiscal year 2019 in the Corporate Governance Report and Declaration of Corporate Governance pursuant to sections 289f and 315d of the HGB. RATIONAL AG largely complies with the recommendations and suggestions set out in the German Corporate Governance Code. This resulted in the submission of the declaration of conformity of February 2020. This was resolved at the meeting of the Supervisory Board on 29 January 2020 pursuant to section 161 of the Aktiengesetz (AktG, German Stock Corporation Act) and published in the 2019 Annual Report. The declarations of conformity of recent years can also be found under “Investor Relations” on the RATIONAL website (www.rational-online.com).
Audit of the annual financial statements and consolidated financial statements.
As proposed by the Supervisory Board and elected by the General Meeting of Shareholders on 15 May 2019, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, audited the financial statements of RATIONAL AG and of the Group for fiscal year 2019. The audit contract was awarded by the Supervisory Board. Prior to the proposal for election, the Supervisory Board obtained a declaration of independence from the auditors. There were no apparent reasons to doubt the independence of the auditors. The auditors were additionally obliged to immediately provide information about any circumstances which could result in a lack of impartiality on their part and, where appropriate, to notify us of services which they have performed in addition to the audit. With regard to the audit reform, the Supervisory Board is adhering to the existing in-house rule on the strict separation of consulting and auditing services. The Supervisory Board and the Audit Committee reported prior to and during the audit in discussions with the auditor on the latter’s approach to the audit and the progress of the audit.
The annual financial statements for the fiscal year from 1 January to 31 December 2019, prepared by the Executive Board in accordance with the provisions of the Handelsgesetzbuch (HGB, German Commercial Code), and the Company’s management report, which also refers to the Declaration of Corporate Governance on the Company’s website, were audited by the auditors and given an unqualified audit opinion. The Executive Board prepared consolidated financial statements for the Group in accordance with the International Financial Reporting Standards (IFRSs), supplemented by the commercial law provisions applicable under section 315a (1) of the HGB. In addition, a Group management report was prepared. The auditors audited the consolidated financial statements and the Group management report and issued an unqualified audit opinion.
The annual financial statements, the consolidated financial statements, the management reports, the auditors’ reports, and the Executive Board’s proposal on the appropriation of unappropriated profits were forwarded in good time to the Audit Committee and all Supervisory Board members for examination. They were the subject of intensive deliberations at the meeting of the Supervisory Board held on 26 February 2020. In particular, the Supervisory Board concerned itself directly with, and thoroughly examined, the findings of the audit by the auditors.
The auditors took part in the discussion of the Company’s annual financial statements and the consolidated financial statements. They reported on the results of the audits, in particular on the points on which it was agreed the audit would focus, and were available to the Supervisory Board for questions and supplementary information. One area on which the auditors’ explanations concentrated was the assessment of the accounts-related internal control and risk management system. Both the Executive Board and the auditors answered all our questions comprehensively and to our satisfaction.
The Supervisory Board raises no further objections to its own final results of the deliberations and its own examination. The Supervisory Board approves the results of the audit. At its meeting held on 26 February 2020, the Supervisory Board approved the annual financial statements, prepared by the Executive Board, for RATIONAL AG as of 31 December 2019, including the certified version, dated 25 February 2020, of the management report for fiscal year 2019, as well as the consolidated financial statements as of 31 December 2019 and the certified version, dated 25 February 2020, of the Group management report for fiscal year 2019.
After 26 February 2020, the Executive Board of RATIONAL AG decided to review the forecast for fiscal year 2020 due to the worldwide spread of the coronavirus and the increasingly noticeable negative effects on the food service sector. At the start of March, the sharp deterioration in the economic outlook led to an amendment of the sales revenue and profit forecast in the management report and the Group management report of RATIONAL AG for fiscal year 2019. Accordingly, the information on events after the balance sheet date in the notes for the annual financial statements had to be updated.
The auditor issued the audit opinion for the amended annual financial statements and management report as well as the consolidated financial statements and Group management report on 10 March 2020 after completing the supplementary audit relating to the amendment to the forecast reporting and the notes. The Supervisory Board examined the amended annual financial statements and consolidated financial statements as well as the amended management report and the Group management report. In its resolution of 13 March 2020, the Supervisory Board annulled the resolutions on the annual financial statements and consolidated financial statements of 25 February 2020 and approved the respective audited versions of the annual financial statements and consolidated financial statements dated 10 March 2020. After a review, the Supervisory Board also approved the amendments in the forecast report for the management report and the Group management report.
The 2019 annual financial statements for RATIONAL AG, including the management report, are thereby adopted in accordance with section 172 sentence 1 of the AktG.
Dependent company report.
The dependent company report, prepared by the Executive Board pursuant to section 312 of the AktG, on RATIONAL AG’s relations with affiliated and associated companies was examined by the auditors. The auditors issued the following audit opinion:
“Based on our statutory audit and our judgement, we confirm that the actual information in the report is correct and the consideration the Company paid for the legal transactions listed in the report was not inappropriately high.”
The auditors’ report on the dependent company report was made available to all members of the Supervisory Board in good time before the meeting to approve the financial statements and was examined by the Supervisory Board and discussed in detail with the auditors present. Following its own examination, the Supervisory Board concluded that there were no objections either to the report on relations with affiliated and associated companies or to the final statement by the Executive Board contained therein.
Appropriation of profits.
After consideration of the operating environment, the situation on the global financial and capital markets, and the financial position of the Company, we approved the appropriation of profits proposed by the Executive Board. From RATIONAL AG’s net retained profits of 377.9 million euros, a dividend of 10.70 euros per share or a total of 121.7 million euros should be distributed and the remainder carried forward to new account. The Supervisory Board would like to thank all managers for their close and constructive cooperation, and for the trust they have placed in us. But our very special thanks go to all employees. Once again in 2019, they succeeded in convincing our customers of the high added value of RATIONAL’s products and services, and thus in making outstanding use of the market opportunities open to us.
Landsberg am Lech, 13 March 2020
Chairman of the Supervisory Board of RATIONAL AG
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