1. Group Profile


Billions of people rely on technology produced by Giesecke+Devrient (G+D) in their personal, professional, and digital lives. Around the world, demand is rising for easy-to-use physical and digital solutions that make modern interactions more secure. G+D’s portfolio of products and services is designed to help protect and support society in these key areas.

Technology and services from G+D make cash, electronic, and mobile payment processes more secure, thus creating confidence in the reliability of transactions. In modern societies, citizens’ identities require special protection. G+D safeguards and manages these identities in the form of passports, driver’s licenses, and ID documents, for example, and also as digital identities online. In a constantly connected world, connectivity for mobile applications also presents huge challenges. Through its products, solutions, and services, G+D ensures that connections are fast, secure, and available at all times. Lastly, the increasing complexity of the digital world calls for innovative IT and data security solutions, which G+D provides to its customers both in the state sector and in industry.

These four fields of activity, which together make up the Giesecke+Devrient portfolio, unite the various organizational areas of the Group. G+D has identified three strategic domains within these fields that offer significant growth opportunities and are thus a key focus for its operations. G+D is actively driving development of these domains within its markets.

Intelligent automation

G+D is creating new value by helping customers from a wide range of industries automate their processes and systems. Through its products, solutions, and services, G+D supports intelligent automation in the context of manufacturing processes, identities, and the Internet of Things.

Digital transformation

Billions of devices and systems communicate with each other via the Internet. G+D is driving digitalization within its own organization and also for its customers in the state sector and in industry. Advanced digital interfaces with customers, end-to-end processes, and new digital business models are the main focuses here.

Cyber security

In an increasingly digital world, cyber security is more important than ever. G+D helps its customers protect their IT infrastructure, data, and digital identities against unauthorized access and abuse. A wide range of companies and public authorities rely on products and consulting from G+D to enhance their cyber security.

G+D employs approximately 11,600 people across 32 countries. In January 2017, G+D was restructured as a holding company, giving the business sectors greater entrepreneurial freedom and responsibility as legally independent subgroups. By creating G+D Currency Technology, G+D Mobile Security, Veridos, and secunet, G+D has established four entities with strong capabilities and greater proximity to their markets and customers.

G+D Currency Technology
provides products and solutions for secure payment to central and commercial banks, banknote printers, security paper manufacturers, security transport companies, and casinos around the world. The portfolio includes banknote paper, banknotes, security features, banknote processing machines, and complete cash center solutions. G+D is an international leader in the currency technology field.

Banks, cell phone companies, car manufacturers, and growing numbers of other companies rely on the industry solutions supplied by G+D Mobile Security. These solutions safeguard data, identities, and a wide range of digital transactions. The portfolio includes solutions for eSIM management, secure HCE/cloud payment, and cyber security. Data and project management are also part of the offering, as are SIM, bank, ID, and healthcare cards and tokens.

Veridos is a joint venture between G+D and Bundesdruckerei, offering customers secure and pioneering identification and identity solutions. The product range covers traditional printed documents as well as electronic ID documents, such as e-passports and eID cards. Highly secure travel documents, ID systems, and healthcare cards can be used for conventional identification purposes as well as for authentication and protection in digital business processes.

secunet Security Networks AG is a leading German provider of high-quality cyber security solutions and an IT security partner to the Federal Republic of Germany. It offers an extensive portfolio of products and consulting services around the protection of data and infrastructures and for the transmission, storage, and processing of information. This includes encryption technology up to the highest security level (Top Secret). secunet ensures public authorities, organizations, and companies are reliably protected against cyber attacks, espionage, and sabotage.

The Corporate Center is responsible for the overall direction of the G+D Group and actively supports strategic development of the subgroups. It is tasked with issues of strategic importance, such as G+D advance52, which was established in April 2017 as a legally independent subsidiary and is intended to serve as the Group’s catalyst for new digital technologies and business models. The Corporate Center also delivers a range of services for the Group as a whole.

Management Structure


Information on key aspects of our research and development activity can be found in section 2.1.2.



2. Business Performance


The global economy continued to stabilize across the board in 2017. Asia remained the region with the highest relative growth. In the first half-year in particular, markets in Japan, Russia, and certain Asian and European countries performed better than expected. The emerging markets in Latin America, the Arab world, and (sub-Saharan) Africa also showed signs of recovery. The struggle for independence in Catalonia and the UK’s upcoming exit from the EU (Brexit) led to uncertainty that held back growth in the eurozone. Additional risks for the global economy arose from trade policy, with increasing talk of protectionism.

As an international specialist for security technology in the fields of payment, identities, connectivity, and IT and data, G+D again achieved moderate sales growth in 2017.

2.1. Group Business Performance

The key financial performance indicators used in Group management remained unchanged in fiscal 2017. The Group is managed on the basis of net sales, earnings before interest and taxes (EBIT), earnings before interest, taxes, depreciation, and amortization (EBITDA), capital expenditure, average working capital intensity , free cash flow, and return on capital employed (ROCE) 2.

Strategic investment in equity interests enables G+D to tap into attractive markets and technologies. G+D made the following notable acquisitions during the reporting year: By acquiring 100% of the shares in German company Procoin GmbH, G+D Currency Technology added coin processing to its portfolio and consolidated its role as a one-stop provider of cash cycle solutions. The acquisition of 16.29% of the shares in Hansol Secure Co., Ltd. of South Korea gives G+D Mobile Security access to an excellent platform for collaboration in innovative business areas, such as the Internet of Things and connected cars. The partners are also pooling their expertise to develop attractive mobile communication, security, and connectivity solutions for the Asian market. Furthermore, G+D Mobile Security strengthened its strategic involvement in the payment card market in France by acquiring full ownership of bank card personalization company C.P.S. Technologies S.A.S. Through the acquisition of a 40% stake in NetSeT Global Solutions d.o.o., Serbia, Veridos strategically expanded its core expertise in the field of software development for electronic ID systems.


1 Ratio of 12-month average of working capital in reporting year to annual sales; working capital = customer receivables + inventories − liabilities − advances received

2 Ratio of EBIT to average capital employed (year-end value in each case); capital employed = intangible assets + property, plant and equipment + financial investments accounted for under the equity method + inventories + accounts receivable trade − accounts payable trade

2.1.1. Results of Operations

In fiscal 2017, G+D continued to build on the high sales volume of the previous year and exceeded its planned target. Following the Group’s strategic realignment, strong growth of approximately 10% was recorded in the solutions and services business in the reporting year, while traditional product business saw moderate growth. Sales performance varied across the subgroups.

Sales by Subgroup

EUR million20172016ChangeChange (absolute)
Currency Technology1,016.5927.69.6%88.9
Mobile Security812.3863.3–5.9%(51.0)
Consolidation¹(18.0)0.0> 100%(18.0)


Excluding exchange rate effects, sales grew by EUR 56.8 million.

There was a significant surge in sales in Currency Technology, with revenues exceeding EUR 1 billion for the first time in G+D’s history. This growth was primarily achieved in the Currency Management Solutions division, where all product areas helped drive the increase over the previous year. Sales generated by the Banknote Solutions division remained at the same high level as the previous year despite difficult market conditions.

In a challenging market environment, Mobile Security was unable to repeat the success of previous years. Despite an 8% volume increase in sales of cards and modules, revenues declined due to a further significant fall in prices. The important US market for payment cards incorporating the EMV standard also weakened. Mobile Security made a positive contribution to growth in the fields of eSIM management and mobile payment.

In the previous year, the performance of Veridos was boosted by completion of a major project. The company was unable to maintain this level of success in 2017, and sales were down compared with prior-year figures. Encouragingly, a wider customer base successfully reduced dependence on individual customers.

The high-quality, reliable cyber security solutions produced by secunet continued to meet customer needs in 2017. In addition to strong sales growth for the SINA product family, more consulting services were sold, enabling the company to generate record sales and achieve the best results in its history.

To improve comparability of expenditure and earnings, the consolidated income statement has been adjusted to take account of special effects. The table has been standardized as follows: the 2016 figures have been adjusted to exclude the cost of closing down EPC and the 2017 figures to exclude closure costs for Giesecke+Devrient Mobile Security Slovakia (GDSK). Profit from the sale of real estate has also been eliminated. These adjustments have an impact on various expenditure items in the income statement, including EBIT.

Consolidated Income Statement (IFRS)

EUR million20172016ChangeChange (absolute)
Net sales2,136.42,089.02.3%47.4
Gross profit ¹618.8589.25.0%29.6
Gross margin ¹ (% of sales)29.0%28.2%2.8%+0.8 pp
Selling, R&D, and general administrative expenses ¹(495.6)(467.0)6.1%(28.6)
Other operating income and expenses ¹14.76.3> 100%8.4
Operating profit ¹137.9128.57.3%9.4
Financial income / (expenses)(8.1)(3.3)> 100%(4.8)
EBIT (adjusted)129.8125.23.7%4.6
EBIT margin (adjusted) (% of sales)6.1%6.0%1.7%+0.1 pp
Interest income2.22.3–4.3%(0.1)
Interest expense(19.6)(23.1)–15.2%3.5
Earnings before income taxes (EBT)112.898.414.6%14.4
Income taxes(45.8)(45.9)–0.2%0.1
Net income67.052.527.6%14.5
Reconciliation to EBITDA
EBIT (adjusted)129.8125.23.6%4.6
plus depreciation and amortization (adjusted) ²104.6107.0–2.3%(2.4)
EBITDA (adjusted)234.4232.20.9%2.2

The gross margin increased to 29.0% despite ongoing pressure on prices. Alongside efficiency gains, an improved order situation also had a positive impact, particularly in Currency Technology and at Veridos.

Structural costs − i.e. selling, research and development, and general administrative expenses − rose by approximately 6.1% and thus at a higher rate than sales. The increase in selling costs to EUR 219.9 million (up 6.4% on the previous year) is mainly related to the more expensive offer stage of attractive customer projects, which will only start to generate sales in subsequent years. This primarily applies to Currency Technology and Veridos. G+D is reinforcing its excellent market position through targeted research activities in the fields of digitalization, intelligent automation, banknote security features, and cyber security. Consequently, research and development costs also rose by 12.7% to EUR 125.7 million. General administrative expenses of EUR 150.0 million remained almost unchanged compared with the previous year (up 0.7%).

Other operating income and expenses rose by EUR 8.4 million, largely as a result of higher licensing revenues and an antitrust compensation payment.

Financial income was significantly impacted in 2017 by steady appreciation of the euro against foreign currencies that are important for G+D, especially the US dollar and the Chinese renminbi. Effects on earnings from foreign currency transactions and currency hedging costs totaled EUR −18.5 million; in the previous year, the impact on earnings was EUR −4.1 million. Income from securities was strong, making a positive contribution of EUR +5.5 million (previous year: EUR −0.4 million). Investments in consolidated companies carried at equity contributed a further EUR 3.5 million to financial income.

EBIT (adjusted) increased from EUR 125.2 million in 2016 to EUR 129.8 million in the reporting year. All operational business sectors made a positive contribution to Group EBIT (adjusted). Currency Technology and secunet, in particular, exceeded the previous year’s figures and the planned target.

Due to price pressure and excess capacity in the smartcard sector, G+D has decided to optimize the global production landscape via a gradual process, working in close coordination with customers. Accordingly, the facility in Slovakia will be closed by the end of 2018. This decision led to costs of EUR −15.0 million in 2017, which had a negative impact on EBIT. The 2018 result will also be impacted by these measures, except where it has been possible to create provisions. By contrast, the sale of a piece of land at the Group’s headquarters in Munich had a positive effect in the reporting year. The income contribution from this trans­action was EUR 15.4 million after deduction of consulting costs. In the previous year, G+D recorded a provision in the consolidated financial statements for expenses relating to closure of the EPC subsidiary in the amount of EUR 6.0 million.

Without these adjustments, EBIT increased by EUR 11.0 million, from EUR 119.2 million to EUR 130.2 million. The aim of maintaining constant EBIT was thus substantially exceeded. In particular, the performance of CT, secunet, and Veridos was above target.

G+D took advantage of favorable interest rates to restructure debts and increased interest income to EUR −17.4 million, up EUR 3.4 million compared with the previous year. This includes interest of EUR 11.4 million on pension obligations (previous year: EUR 12.9 million). Interest expense for financial and other liabilities totaled EUR 8.0 million (previous year: EUR 10.2 million).

Income tax expenditure amounted to EUR 45.8 million in the reporting year, thus remaining at the same level as the previous year. The tax rate fell from 46.6% to 40.6%. Tax expenditure was impacted by the derecognition of deferred tax assets in 2016.

In the year under review, G+D again achieved significantly positive net income that exceeded the prior-year level by 27.6%.

At EUR 234.4 million, EBITDA (adjusted) was also higher than the previous year and exceeded the planned target (constant EBITDA). Unadjusted EBITDA was EUR 240.8 million and reflects EBIT of EUR 130.2 million and depreciation/amortization of EUR 110.6 million. It includes unscheduled depreciation/amortization of EUR 6.0 million associated with the closure of GDSK.

2.1.2. Research and Development

Research and development is crucial to G+D’s success as an innovative, customer-focused technology company. In the reporting year, total spending on research and development exceeded the previous year’s level, rising to EUR 159.0 million. After deducting customer-specific development costs and capitalization, pure R&D expenditure amounted to EUR 125.7 million. This increased spending is a clear indication of G+D’s capacity for innovation.

Research and Development

20172016ChangeChange (absolute)
Number of R&D employeesFTE1,1551,181–2.2%(26)
Percentage of total employees%10.0%10.5%–4.8%–0.5 pp
Spending on R&DEUR million159.0143.510.8%15.5
of which pure R&D expenditureEUR million125.7111.512.7%14.2
R&D ratio% of sales5.9%5.3%11.3%+0.6 pp
of which cost of goods soldEUR million22.422.30.4%0.1
of which capitalizable costsEUR million10.99.712.4%1.2
Capitalization ratio%8.7%8.7%0.0%0 pp
Amortization of capitalized development costsEUR million6.84.938.8%1.9
Number of active patents7,5587,4561.4%102
New patent applications147171–14.0%(24)


As a market leader for end-to-end cash management, Currency Technology aims to further expand its market presence. Ongoing innovation allows us to offer customers attractive solutions that improve their value chains. Our offering extends beyond the provision of substrates, banknotes, security features, and banknote processing machines and is continually being adapted to meet emerging market demands through research and development. G+D provides comprehensive software and automation solutions as part of its digital agenda. These solutions add value for our customers by boosting cash center productivity while continuing to meet the highest security requirements. A further area of innovation is the use of big data technologies. Solutions developed by G+D gather data at every stage of the cash cycle, thus enabling precise forecasting by central banks and other cash cycle providers. Connecting deployed products (Industry 4.0) and developing new, modular options in response to changes in the banknote verification and sorting market are further core focus areas of our research and development activities. We are also continuously improving our banknote security features with regard to threads, foils, and pigments. The design awards we have received for our products in recent years are clear proof of G+D’s ability to deliver projects that combine advanced functionality, cutting-edge industrial design, and attractive product costs.

The global R&D activities undertaken in the Mobile Security segment are focused on three main areas, with the aim of providing products and solutions for the Financial Solutions, Connectivity & Devices, and Cyber Security divisions. In the field of eSIM management, we successfully implemented a variety of customer-specific solutions for a large global customer base consisting of mobile network operators (MNOs) and original equipment manufacturers (OEMs), clearly demonstrating our expertise as a technology leader. Secondly, we offer standardized, comprehensive development platforms as a basis for future products, both for embedded technology and for client/server applications. Our third key objective involves improving international cooperation and establishing uniform processes and methods (governance) across all our international development sites. To this end, we are pursuing an approach based on the internationally recognized Capability Maturity Model Integration (CMMI) methodology. The first locations to be successfully certified in line with CMMI are Pune (India) and Beijing (China). Certification of the development sites in Barcelona, Stockholm, and Munich is planned for 2018.

Veridos continues to drive forward the development of ID documents and complex system solutions. In the software and operating systems field, we enhanced the connectivity of the Java platform through integration of the applet suite with the relevant certifications. In addition to platforms, Veridos also advanced its development of highly secure ID documents, such as mobile driver’s licenses. With its solutions for highly secure digital identities, the IMAGO ID platform, and the VeriGO® border control platform, Veridos now offers a wide range of solutions that extend all the way from applying for an ID document through to having it checked at border control points.

The research and development activities of secunet focus on improvements and innovations in processes, products, and solutions. In this regard, secunet is responding to its customers’ growing need for tighter security in existing infrastructures and for solutions to threats in new technical environments. In the past, operational research and development activity at secunet was almost exclusively carried out on behalf of customers, with the corresponding expenditure mainly charged to the contracting party. Innovative efforts at secunet are focused on three strategic areas: promoting a culture of innovation; cooperating and partnering with customers, universities, and industry associations; and concentrating expertise via product managers who support development projects from the innovation management stage through to the creation of market-ready products.

The legally independent G+D advance52 subsidiary, which was established in April 2017 as the catalyst for new digital technologies and business models, developed a complete ID management system for UHF chips (i-SiD) in its very first year. The system enables encryption in line with the ISO 29167-19 standard as well as cloud-based administration. This means the technology can be deployed efficiently in various settings, such as applications in the automotive sector or access systems. The company also developed a digital distribution channel for G+D’s proprietary hardware (e-shop).

The changes in the number of active patents and new patent applications are within the industry’s normal range of fluctuation.

2.1.3. Capital Expenditure

Investment totaled EUR 94.9 million in 2017. The investment budget – which was slightly increased compared with the prior year – was not fully exhausted due to a deliberate decision to restrain capital spending, particularly in the second half of the year. The investment ratio as a percentage of fixed assets was 15.1% across the Group and thus below the previous year’s level of 15.6%.

With regard to property, plant and equipment, both Currency Technology and Mobile Security invested predominantly in optimizing and upgrading production facilities and expanding the global network of personalization centers. At the Veridos subsidiary in Greece, facilities for the production and personalization of ID cards and polycarbonate data pages for passports were set up or expanded. This will make the value chain more flexible and efficient. Modernization works began on offices in all departments at the Munich headquarters. Investment in property, plant and equipment (including advance payments) stood at EUR 69.8 million overall. Investment in intangible assets (up EUR 25.2 million) primarily relates to capitalized R&D expenses and capitalized software solutions (e.g. ID service platform).

Capital Expenditure and Depreciation/Amortization

EUR million20172016ChangeChange (absolute)
Group sales2,136.42,089.02.3%47.4
Capital expenditure94.9101.7–6.7%(6.8)
Investment ratio (% of fixed assets²)15.1%15.6%–0.5 pp

There are no significant investment commitments for 2018.

2.1.4. Assets and Liabilities

Current assets increased by EUR 42.8 million. The increase in inventories (up EUR 31.8 million) is mainly associated with the increase in inventories in China and with higher business volumes. Due to particularly strong sales in the fourth quarter, current receivables increased as of the balance sheet date (up EUR 27.5 million). A detailed analysis of the change in cash and cash equivalents is provided in section 2.1.5.

Non-current assets declined by EUR 10.7 million as of December 31, 2017. The drop in property, plant and equipment can be partly explained by the volume of investment, which remained below depreciation/amortization overall, and by the unscheduled depreciation/amortization of EUR 6.0 million associated with the closure of the production site in Slovakia. Other non-current assets increased in particular due to the newly acquired stakes in Hansol Secure Co., Ltd. and NetSeT Global Solutions d.o.o. in 2017. In addition, the non-current portion of customer receivables increased in connection with project business at Veridos.

A significant portion of current financial liabilities was replaced by a long-term loan with a low interest rate.

The use of the provision for closure costs relating to EPC and the overall lower level of warranty provisions led to a reduction in provisions compared with the previous year. Trade accounts payable rose at the end of the year due to higher sales, particularly in the last quarter, and longer payment terms.

G+D reduced current and non-current financial liabilities (including leases) by EUR 6.6 million, primarily due to scheduled repayments. This includes a new long-term loan from the European Investment Bank (EIB) of EUR 80.0 million for research and development projects.

Provisions for pensions increased by EUR 7.2 million, which is largely attributable to full consolidation of EPC for the first time (pension provisions of EUR 5.2 million as of December 31, 2017).

DThe equity ratio rose to 20.6% and was thus 1.2 percentage points above the prior year’s level.

Average working capital intensity reached 22.3%, contrary to the projected slight decline. In the previous year, G+D averaged a lower level of inventories and higher customer prepayments, meaning that the figure was slightly lower at 21.5%.

At 12.1%, the ROCE, calculated using (adjusted) EBIT, remained at the same level as the previous year and on target.

No significant effects are expected from off-balance-sheet liabilities. Please see note 31 of the consolidated financial statements in this regard.


1 Investment in intangible assets and fixed assets, plus associated advance payments


Balance Sheet Summary (IFRS)

EUR million201720162017 % of total assetsChange (absolute)
Current assets1,283.01,240.259.9%42.8
of which inventories426.2394.419.9%31.8
of which current receivables488.1460.622.8%27.5
of which cash and cash equivalents210.7243.69.8%(32.9)
Non-current assets859.1869.740.1%(10.6)
of which property, plant and equipment471.2495.922.0%(24.7)
of which intangible assets155.7158.07.3%(2.3)
of which other non-current assets232.1215.810.8%16.3
of which other non-current assets2,142.12,109.932.2
Current liabilities803.4831.837.5%(28.4)
of which currentofinancial liabilities75.5127.03.5%(51.5)
of which current lease liabilities3.22.60.1%0.6
of which provisions97.0121.04.5%(24.0)
of which trade payables456.8419.821.3%37.0
of which trade payables896.8869.841.9%27.0
of which non-currentofinancial liabilities250.6203.111.7%47.5
of which non-current lease liabilities0.13.30.0%(3.2)
of which pensions and similar liabilities594.0586.827.7%7.2

2.1.5. Financial Position

In 2017, G+D achieved cash flow from operating activities of EUR 77.7 million. The increase in working capital as of the balance sheet date had a negative impact here. The Group’s investments were fully financed from its own resources, also making use of the proceeds from the real estate transaction less consulting costs. Free cash flow was therefore balanced in the reporting year. Compared with projections, higher working capital in particular had a negative impact on free cash flow as of the balance sheet date, which meant that – despite the relatively subdued level of investment – the planned target of significantly positive free cash flow was not achieved.

A low-interest, long-term loan of EUR 80.0 million for research and development projects was provided by the European Investment Bank (EIB) in July 2017. In addition to scheduled repayments of long-term loans in the amount of EUR 51.3 million, G+D also reduced its short-term debt and borrowings by EUR 39.0 million. Please refer to note 13 of the consolidated financial statements for information on approved but unused credit lines and on the capital structure. A dividend payment of EUR 14.2 million was made to shareholders in the reporting year.

Cash and cash equivalents fell by EUR 32.9 million to EUR 210.7 million in 2017.

Change in Cash and Cash Equivalents


2.1.6. Employees

Following reductions in the preceding two years, G+D slightly increased the number of employees overall in 2017 as planned. More people were employed in production and in sales, in particular as a result of acqui­sitions and to support sales growth. The increase in administrative staff is largely due to global implemen­tation of the holding company structure. Personnel expenses increased to EUR 658.0 million (up 2.2%) in the reporting year.

Number of Employees

FTE at reporting date20172016ChangeChange (absolute)
Research and development1,1551,181–2.2%(26)

2.1.7. Declaration on Management and Governance

In accordance with the German law on equal participation of women and men in leadership positions in the private and public sectors (FüPoG), the Supervisory Board set itself the target in 2015 of ensuring that at least 30% of its members should be women. This target has already been exceeded: women currently make up 41.7% of the Supervisory Board, with Astrid Meier, Verena von Mitschke-Collande, Gabi Dreo Rodosek, Claudia Scheck, and Monika Wächter all serving as members. As expected, no women had been appointed to the Management Board as of June 30, 2017. G+D slightly exceeded its target of women occupying 10% of positions in the top tier of management below Board level by June 30, 2017. 18% of positions in the second management tier are filled by women, meaning that G+D only narrowly missed its target of 20% here. The Management Board has now decided on the new objective of increasing the proportion of women in the top tier of management to 17% and in the second tier to 30%. The existing targets for women on the Supervisory Board and Management Board were confirmed by the Supervisory Board. Giesecke & Devrient GmbH aims to meet these quotas by March 31, 2022.

2.2. Overall Assessment of Economic Situation

G+D again increased sales and achieved higher earnings in the reporting year. Before non-recurring expenses for restructuring, all operational business sectors contributed to positive EBIT, which slightly exceeded the level of the previous year, in line with planning.

Currency Technology achieved record sales, thus significantly exceeding expectations. The Banknote Solutions division benefited from high sales volumes as in the previous year, despite challenging market conditions. The Currency Management Solutions division achieved significant growth in fiscal 2017. Both product business and solutions business contributed to this growth. There was also an increase on the service side.

The extent of the slump in EMV card business in the US came as a surprise to all providers, including G+D Mobile Security. Thanks to growth in the eSIM management, automotive, and mobile payment sectors, G+D Mobile Security was able to compensate for some of the shortfall in sales compared with the previous year and the planned target.

Veridos managed to replicate the success of the previous year as expected, despite difficult market conditions and major geopolitical challenges. The slight decline in sales is typical of the projects market, but Veridos remains on a long-term growth trajectory.

Exceptional results were achieved by secunet, which upgraded its sales and earnings forecasts several times in the course of fiscal 2017. secunet’s impressive cyber security solutions meet the demanding requirements of German public authorities and provide a platform for sustained growth.

Due to the improvement in (adjusted) EBIT, (adjusted) EBITDA also exceeded the prior-year value and the constant EBITDA target.

3. Opportunities and Risk Report

Including Risk Reporting on the Use of Financial Instruments


As a global enterprise, G+D has to find the right balance between opportunity and risk when carrying out its diverse business activities. Failure to identify and manage risk satisfactorily could jeopardize individual business sectors or even threaten the Group’s existence. Effective risk management forms part of responsible and sustainable corporate governance. At G+D, the objective of risk management is to recognize risk as early as possible, properly assess it, and then counter it by taking appropriate action. This is intended to minimize any potential impact on the Group’s net assets, financial position, and profitability, to safe- guard the ongoing existence of G+D as an independent business, to strengthen its market position, and to achieve real increases in enterprise value.

3.1. Risk Management System

The risk management system incorporates all the process and organizational guidelines needed to identify, analyze, assess, and manage the Group’s overall risk situation. This system is embedded into strategy, planning, and controlling mechanisms across the entire Group. While operating and financial risks are dealt with on an ongoing basis whenever necessary in the course of day-to-day business management and assessed during the quarterly performance reviews, strategic risks are subject to an annual review as part of the strategy process and therefore to separate reporting. Compliance risks are likewise managed via our own compliance organization and are also subject to separate reporting, including notification of Corporate Controlling in the event of financial implications.

Corporate Controlling compiles a Group risk report on a quarterly basis, which provides information on the current status of risks. The risk report is provided to members of the Supervisory Board and Advisory Board as part of quarterly reporting. The Group accounting department incorporates all accounting practices and valuation methods into the Group’s standard accounting policy and updates this policy when new IFRS standards are published or existing ones amended. Employees in finance are regularly informed of the latest issues related to financial reporting and of the relevant dates in the accounting and planning process. In order to evaluate all risks in connection with accounting (e.g. inventory valuation, credit default risks with regard to receivables, valuation of provisions), the Group accounting department has defined standard requirements for the Group. External experts are consulted to help assess special areas, such as pension obligations. Variance analysis is included in the monthly reports to the Management Board. Significant changes and the breakdown of individual items are analyzed at the Group, subgroup, and subsidiary level.

3.2 Compliance Management

The purpose of the compliance management system (CMS) is to maintain customer confidence in G+D. At the same time, it safeguards the Group’s ongoing existence. The compliance management system is continually updated to satisfy new legal requirements and also to reflect G+D’s current risk profile. Following the establishment of a holding company structure, the compliance management system was modified accordingly to continue meeting these objectives. In the G+D Currency Technology subgroup, the suitability, implementation, and effectiveness of the CMS with regard to anti-corruption and antitrust law were examined by an auditor in 2017 in line with Assurance Standard 980 of the German Institute of Public Auditors (IDW). This process will also be carried out in the G+D Mobile Security and Veridos subgroups in 2018.

The Compliance Offices regularly report on activities in the core compliance areas of prevention, detection, and response.

Compliance Management


Individual events are reported separately and directly to the Chairman of the relevant Management Board, who takes appropriate measures in conjunction with the other Board members. External consultants are used as necessary to examine and advise on compliance matters.

G+D Currency Technology, a co-founder of the Banknote Ethics Initiative (BnEI), was subjected to a regular audit in 2017 and accredited for three more years as a member of the organization. The Banknote Ethics Initiative was established in May 2013 with the aim of promoting ethical business practices. Its focus is on preventing corruption and antitrust law violations in the banknote industry.

On behalf of the Management Board, the Group auditing department (Corporate Auditing) conducts regular checks to assess the implementation and effectiveness of Group management and monitoring processes. The main aspects looked at are risk management, the internal control system, legal regulations, and internal corporate guidelines. The Group auditing department was certified by KPMG in accordance with the requirements of the Deutsches Institut für Interne Revision e.V. / The Institute of Internal Auditors in 2011. Recertification was carried out in March 2018 by Ernst and Young. In fiscal 2017, Corporate Auditing carried out a total of 19 audits. Findings are reported to the Management Board and managers of the audited entity. Corporate Auditing checks that measures arising from these investigations are implemented appropriately.

3.3. Strategic Risks

To maintain our competitiveness, we need to develop new products, services, and solutions. This also entails establishing complete ecosystems and implementing the associated business models, which can change the liability situation. Developing the right technology at the right time and having the necessary organizational structures in place is crucial here. We seek to shape market developments through care- fully targeted investment in research and development. If activities are started too soon, this can result in idle costs, while starting too late can lead to loss of market share. Changes in strategy can result in substantial restructuring costs. We counter this risk by reviewing strategy in each subgroup and at the wider Group level on an annual basis.

Targeted acquisitions, which tie up capital, are sometimes necessary to support corporate strategy and expand our portfolio of products and services. Implementing the associated business plan and necessary measures to integrate the acquired organization into the Group entails considerable risk. Failure to meet objectives may cause the value of assets to fall and thus impact results.

3.4 Operating Risks and Opportunities

All identified operating risks are regularly assessed by the risk owners in the subsidiaries. This involves an analysis of the probability of occurrence, the potential damage, and the effectiveness of the measures employed to mitigate the risk. 

3.4.1. Risk Analysis

G+D carries out comprehensive risk analysis, extending from contract initiation right through to the expiry of any warranty period. Where the relevant undertaking comes under the operational responsibility of a Group company and this company receives technical, logistical, or other specialist support or supplies from a different Group company, joint risk analysis must be performed for all Group companies involved.

G+D distinguishes the following main categories of operating risks: production risks, supplier risks, IP risks, IT risks, political risks, financial risks, tax risks. A number of individual risks may be associated with any project or venture. These may be cumulative or mutually exclusive.

3.4.2. Operating Risks and Their Assessment

Operating risks are risks that may occur anywhere along the value chain and can jeopardize the achievement of near-term corporate objectives. The individual risks must be assessed separately and also aggregated for the project or venture in question to provide a useful indicator of overall risk. The risks identified (individual risks and overall risk) are evaluated using the gross and net methods. Gross risk is defined as the potential damage that might result if no measures or controls were in place to mitigate the risk. Net risk is the risk remaining when mitigating actions are taken into account. The probability of occurrence is multiplied by the net risk to obtain the risk value.

The probability of occurrence indicates the estimated likelihood of the identified risk occurring, which is classified as follows:

DescriptionProbability of occurrence
Expected to occur80% < x
Probable50% < x ≤ 80%
Not probable10% < x ≤ 50%
Possible, but largely theoreticalx ≤ 10%

As of December 31, 2017, 43 overall operating risks had been reported to the Management Board and the Supervisory Board via the risk report. If the probability of a risk occurring is greater than 50%, the provision or impairment corresponds to 100% of the net risk value1.


1 Net risk value = gross risk value after countermeasures, before provision


The diagram below shows the individual risks in terms of impact (net risk) and probability of occurrence.

Risk Impact and of Occurrence


These risks have been taken into consideration in these financial statements and in the forecast, in accordance with the Group’s accounting policy. If the risks for which no provisions have been made due to the low probability of occurrence do occur, this would have a negative impact on our net assets, financial position, and results of operations. If all of the risks were to occur together, serious damage would result. If the risks covered by provisions occur, there would also be a cash outflow.

For further analysis, the individual risks are combined using the above-mentioned risk categories.


Risk Categories

Overall Risk Situation

After careful analysis, the Group-wide risks are not deemed existential in nature, either individually or overall. Thanks to G+D’s strong market positioning, capacity for technological innovation, globally standardized processes, and committed employees, the Management Board is confident that the Group is again well equipped to meet the challenges posed by these risks in 2018 and to leverage the opportunities that arise.

Financial Risks

G+D is subject to typical liquidity risk, counterparty credit risk, and market risks stemming from changes to exchange rates, interest rates, and share prices. These risks are primarily managed as part of the Group’s ongoing business and financing activities. Additionally, financial risks affecting the G+D Group and its operating subsidiaries are identified centrally on the basis of written guidelines and their management is also handled by G&D GmbH. Financial risk forms part of the monthly risk reports submitted to the Management Board and is also included in regular reporting to the Supervisory and Advisory Boards.

The relatively high net risk value of EUR 35.7 million gives a risk value of EUR 10.9 million when the probability of occurrence is taken into account. Provisions and impairments of EUR 0.8 million were recorded with regard to this risk as of the balance sheet date of December 31, 2017.

If necessary, derivative financial instruments are deployed in relation to foreign currency and interest rates to hedge underlying transactions. In accordance with risk management standards applying to international banks, all trading activity is subject to financial monitoring that is independent of the Group’s treasury department.

In accordance with IAS 19, G+D is required to recognize actuarial gains and losses arising from pension obligations fully and immediately in equity. This leads to high volatility of equity in response to changes in capital market interest rates.

For further details on financial risk, please see note 22 of the consolidated financial statements.

IP Risks

It is crucial to protect, license, and acquire intellectual property (IP) rights as part of our R&D activities. Third parties may accuse us of breaching their intellectual property rights. This could result in compensation payments for damages and a ban on using certain technologies. The Group’s patent department works with external law firms to register and monitor patents.

The risk value of the IP risks is EUR 3.5 million. Provisions of EUR 3.3 million were made for this risk as of the balance sheet date of December 31, 2017.

IT Risks

G+D is not completely immune to cyber security risks, whether in the form of economic or industrial espionage, or of cyber attacks by specific countries or competitors. These risks could lead to unintentional sharing of confidential information or intellectual property, product damage, supply difficulties, loss of production, or compromised (personal) data. We may also be faced with threats from individuals who gain unauthorized access to buildings or systems and misuse, steal, or damage information or assets. We have taken a range of technical and organizational precautions to minimize this risk. These include IT security measures, identity management, multi-level access control and entry systems, camera surveillance, deployment of a Group security service, and raising employee awareness through regular training sessions on compliance and security issues. We have implemented a security and control system that enables us to identify and respond promptly to risk.

In total, a sum of EUR 25.3 million was identified as the net risk for IT. Due to the low cumulative probability of occurrence, no risk value is attributed to the IT risks.

Supplier Risks

At G+D, supply chain management is organized individually in each of the business sectors, but in accordance with uniform guidelines contained in the procurement manual. Any disruptions, such as delivery delays on the supplier side or an increase in prices for raw materials (particularly semiconductors and cotton), may have adverse effects on the availability, quality, and cost of G+D products and therefore impact sales and earnings.

When selecting external partners, care must be taken to ensure that they abide by internal rules and applicable laws and regulations, as well as supplying our customers with high-quality products. When contractual relationships end, legal disputes may arise, in which claims could be brought against G+D.

The risk value of supplier risks is EUR 0.5 million. Provisions of EUR 0.2 million were made for this risk as of the balance sheet date of December 31, 2017.

Production Risks

G+D offers its customers high-quality products and services. Its employees are crucial to the success of the company. There is a risk that, due to demographic trends, vacant positions might not be filled by employees with the appropriate skills. Through initiatives such as global hackathons and think tanks, G+D highlights its attractiveness as an employer, in particular to young professionals. These activities are accompanied by an integrated program to nurture talent, which is designed to foster staff loyalty. In addition to employees, proper utilization of production capacity is essential to success. Additional capacity must be maintained to safeguard continuous production. We aim to ensure optimum machine utilization and back-up capacity by means of production planning and management. Ineffectual staff management or the stoppage of machinery would have serious consequences for our net assets, financial position, and results of operations.

Machines that are outdated or no longer meet the latest technical standards could lead to a loss of production capacity, resulting in partial or complete failure to produce the planned quantities. Problems of this kind can result in project delays or late delivery of products to end customers. If G+D is late in delivering products, we could face contractual penalties for failing to comply with delivery deadlines, for example. Prompt investment in replacement machinery is intended to prevent these issues. Capital expenditure is managed by the business sectors at G+D and closely monitored by the project controlling team.

Statutory requirements can also impact production, for instance if emissions limits are regulated more tightly. Environmental considerations are becoming increasingly important for businesses. We seek to counter risks in this area by means of our environmental management system and our approach to corporate responsibility (CR). Details of the measures taken can be found in the section “Our Responsibility”. 

Unrecognized defects and quality problems or the delayed introduction of new products could result in higher costs for G+D and have an adverse impact both on demand for our products and on our reputation. To counter this, ongoing and efficient development of our quality management system is essential, with a corresponding focus on customer needs. In relation to product development, timely implementation of preventive measures is especially important in order to achieve the warranted product quality and avoid substantial additional costs during the subsequent commercialization phase. Our underlying approach is that “quality is everybody’s business.” Making this attitude a reality requires processes, organizational interfaces, tasks, and responsibilities to be clearly defined and communicated. Each employee therefore needs to be fully aware of the contribution they can make within their role.

The replacement of existing products in a region may mean that spare parts inventories can no longer be used. We counter this risk by periodically revising our phase-out and sales planning. In addition, inventories are regularly subjected to impairment testing during the preparation of financial statements.

The risk value of production risks is EUR 10.0 million. Provisions and impairments of EUR 6.8 million were recorded for this risk as of the balance sheet date of December 31, 2017.

Political Risks

Some Middle Eastern countries are currently affected by political uncertainty. Contracts with customers from these regions could be impacted by extreme developments that make it impossible for the parties to fulfill the contract due to force majeure or shortages.

We counter this risk by continually monitoring economic and political developments in our key markets, aided by the strong regional focus of G+D’s sales organization. Production and capital expenditure are managed centrally, enabling a rapid response in the event of any economic slowdown.

The risk value of political risks is EUR 4.8 million. Provisions of EUR 3.0 million were made for this risk as of the balance sheet date of December 31, 2017.

Tax Risks

G+D’s business activities are subject to the usual risks associated with international operations. These include the incompatibility of different tax regimes, possible tax obstacles that make business more difficult, and import/export regulations. Intercompany netting may be challenged by the tax authorities, which can entail lengthy negotiations and the need to produce extensive documentation.

We seek to counter these risks by continually adapting our internal processes to changing requirements and taking advice from auditors, lawyers, and tax consultants in the countries concerned.

During the process of introducing the holding structure, additional potential risks arose from the carve- out and establishment of legally independent local companies. Where possible, the risk position was minimized by gathering binding information from the relevant local tax authorities.


3.4.3. Operating Opportunities

Dynamic market conditions mean new business opportunities are opening up all the time. Maintaining an extensive vertical and horizontal portfolio of products and solutions allows the Group to diversify risk and take advantage of these market opportunities.

In our dynamic market environment, it may occasionally be the case that customers are no longer able to meet their payment obligations. If a customer has filed for bankruptcy, impairment adjustments need to be made to these receivables in the accounts. The 2017 financial statements include impaired customer receivables totaling EUR 14.3 million. If, contrary to expectations, it becomes possible for the customer to settle the outstanding receivables, the derecognition would be reversed. This would positively impact our net assets, financial position, and results of operations by the corresponding amount

We see hard-to-quantify opportunities in the following areasG+D is a technology leader in the fields of digitalization, cyber security, and intelligent automation, all of which have huge market potential. If these trends gain in importance over the short term in industry, the public sector, or the private sphere and the corresponding change processes take place more quickly, opportunities for solutions provided by G+D could emerge and our sales and earnings forecasts could increase.

In a dynamic market environment, G+D strikes a balance between effectively meeting the current needs of customers and investing in promising new products and solutions. If the vertical and horizontal expansion of our value-adding activities proves more rapid and extensive than currently anticipated and awareness of security issues in the digital world results in an even greater need for security technology than expected, we could see a faster rise in demand for new and improved products. This could have a positive impact on our net assets, financial position, and results of operations and allow an upward revision of existing forecasts.

Finally, legal requirements could also lead to an increase in sales and earnings. Our forecasts could be revised upward if the use of a technology that we are involved in developing or that is contained in our products were to be made mandatory, for instance.

Provisions of EUR 16.5 million were made for the operating risks described in section 3.4.2. Should the probability of occurrence of these risks decline or the risk be eliminated entirely, or the potential loss be reduced further by appropriate countermeasures, this would have a positive impact on our assets and results due to the corresponding reversal of provisions.

Overall, opportunities and risks are well balanced.

4. Forecast


G+D started the current fiscal year with a significant order backlog of around EUR 1.2 billion. The forward order book covers a period of 6.8 months. One of the largest contracts in the company’s history is good cause for a positive outlook: in the first half of 2018, we expect the Central Bank of Egypt to commission G+D with the planning and construction of a banknote printing plant and automated cash center. The project is worth approximately EUR 260 million and will take two years. It will involve cutting-edge IT and security infrastructure and also include setting up further regional centers

G+D aims to slightly increase sales in 2018 compared with the reporting year, provided that exchange rates remain largely unchanged.

G+D Currency Technology is expected to maintain the exceptionally high level of sales seen in 2017. After two extremely successful years with regard to sales of banknotes and security solutions, we expect further growth in 2018, particularly in the projects business, plant engineering, and the sale of banknote processing machines. Additional momentum is being created by ever-increasing digitalization of the cash cycle. The market in which G+D Currency Technology operates is characterized by particularly strong competition, so this unit expects a slight decline in EBIT.

G+D Mobile Security is expecting a market recovery and sales are likely to increase slightly. The aim is also to improve earnings somewhat in 2018. Accordingly, we are continually optimizing our production pro- cesses and focusing on the solutions market here. In the medium term, closure of the production facility in Slovakia will also have a positive effect on the business sector’s profitability.

Veridos is aiming for significant sales growth, which is set to be mainly driven by solutions projects and services. These projects generally extend from planning right through to operation of facilities and offer strong sales potential over the longer term. Earnings are expected to remain at the same level as the previous year.

After a record year in 2017, Group subsidiary secunet is expecting demand for cyber security solutions to return to normal. The level of sales and earnings is therefore expected to be slightly below that of the exceptionally successful previous year.

EBIT and EBITDA are expected to be slightly lower for G+D overall than the high levels recorded in 2017.

In 2018, working capital intensity is expected to fall slightly below the 2017 level.

After subdued investment activity over the past few years, all business sectors anticipate a slight rise in capital expenditure, which is set to exceed depreciation and amortization in 2018. Currency Technology is concentrating on innovations in security solutions here. Mobile Security is focusing on digitalization of its service portfolio and on managed services. All units are additionally investing in improving the efficiency of existing facilities, while Veridos will also expand its passport production plant in Athens.

Free cash flow is expected to be positive in 2018 and to significantly exceed that of 2017, with working capital playing a major role. As the build-up of working capital is smaller compared with the previous year, significantly less liquidity should be tied up.

G+D intends to make targeted additions to its employee headcount in growth markets during 2018, meaning that a modest increase at the Group level is expected.

ROCE is expected to be similar to that achieved in 2017.

Actual results may, of course, vary from expected performance.