With an annual profit of CHF 47.8 million, the Jungfrau Railway Group again increased its earnings significantly in 2018.

The Jungfrau Railway Group generated a total operating income of CHF 212.8 million, which corresponds to an increase of CHF 19.0 million. The most important source of income is still transport, which amounted to CHF 153.8 million in the reporting year – 7.0% or CHF 10.0 million above the previous year’s record amount. Operating expenses increased by 11.0% to CHF 117.7 million. Accordingly, EBITDA rose by 8.4% to CHF 95.1 million and cash flow (from operating activities) by 25.6% to CHF 79.9 million. Depreciation and amortisation amounted to CHF 34.1 million. EBIT increased by 15.0% to CHF 61.0 million, which corresponds to an EBIT margin of 28.6%. After a virtually balanced financial result and after taxes, the annual accounts show an annual profit of CHF 47.8 million, 15.0% above the previous year.

In July 2018, the long-awaited construction of the V-Cableway began. By the end of 2018, significant progress had been made on the various sites. In total, the investment volume of the Jungfrau Railway Group amounted to CHF 63.6 million last year, of which CHF 40.8 million was attributable to the V-Cableway project. In recent years, the company has invested CHF 160 million or 50% of the estimated total costs in the generation project, which includes the already completed rolling stock renewals at the Wengernalp and Jungfrau railways, in addition to the core elements of the Eigerexpress, Grindelwald Terminal and car park.

In addition to the V-Cableway, the first steps in the renewal programme of the Lauterbrunnen-Mürren mountain railway, the acquisition of a neighbouring property at the First Railway valley station, the rebuilding of the Wengen railway tracks, the start of the extension of the arrival hall on the Jungfraujoch – Top of Europe, the renewal of the power supply and tunnel lighting as well as the further development of our own distribution system were the focus of our investment activity. Except for CHF 5.6 million in interest-free infrastructure loans from the public authorities for the Lauterbrunnen-Wengen and Lauterbrunnen-Mürren routes, the investments were fully financed from cash flow.

As at 31 December 2018, the consolidated balance sheet shows a solidly funded company with an equity ratio of 79.7%. It continues to operate without interest-bearing debts and has cash and cash equivalents of CHF 87.4 million. The Jungfrau Railway Group is therefore well prepared for the intensive investment phase of the next two years until the completion of the V-Cableway project with the planned commissioning of the Eigerexpress in December 2020.

The most important segment of Jungfraujoch – Top of Europe achieved net sales of CHF 139.2 million. The renewed increase of 8.2% is based in particular on the long-standing, intensive and successful development of the Asian markets. Best results were again achieved, both in terms of visitor numbers and transport income. With 1,067,000 visitors, more than a million guests travelled to the Jungfraujoch – Top of Europe in the reporting year, for the third time following 2015 and 2017. The transport income increased by 4.3% to CHF 111.8 million. Noteworthy is the simultaneous increase in average yield of 1.8% to CHF 104.80 per guest. The mix of guests, higher guest numbers and the shop opened in Interlaken for the first time all year round had a positive effect on the turnover of the Top of Europe shops, which also set a new record at CHF 8.8 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to CHF 67.5 million, accounting for 71.0% of Group EBITDA.

Significantly better than in the previous year, but still significantly weaker than in the best years, was winter sports. Despite turbulent weather conditions in January and often unfavourable weather on the weekends of the high season, business activity from the beginning of the year until the end of the season in spring 2018 was satisfactory due to good snow conditions. Unfortunately, the start of the winter season 2018/2019 was sluggish. The number of skier visits across the Jungfrau Ski Region rose by 5.4% year-on-year to 987,000, and the Group's share of the transport business revenue rose by 6.7% to CHF 22.1 million. With net sales of CHF 28.1 million, the segment achieved an EBITDA of CHF 0.3 million. The winter sports segment continues to make a significant contribution to the other divisions.

The strongest developments were with the Experience Mountains. All participating railways – the Harder Railway, First Railway and the Lauterbrunnen-Mürren Mountain Railway – achieved new records again in transport revenue. Overall, this increased by 26.7% to CHF 20.2 million. The Experience Mountains benefited from the long-lasting, beautiful summer and autumn weather. In addition, the independent positioning of all Experience Mountains is paying off. The sales increase of 40% to CHF 3.4 million in the adventure offers in the Grindelwald-First area and the increase in traffic revenue to over CHF 5 million at the Harder Railway are noteworthy. Overall, segment sales for the Experience Mountains increased by 24.9% to CHF 27.4 million and led to an EBITDA increase of 41.2% to CHF 14.5 million.

The strategic financial objectives of the Jungfrau Railway Group reflect the orientation towards long-term goals and the policy of a value-oriented company (value stock). The profit and free cash flow targets also determine the financial planning of the Group.

In order to meet the objectives of self-financing and investment in relation to cash flow, the long-term average applies when it comes to the assessment. Due to the high investment requirements of the V-Cableway project, the investment / cash flow objective cannot be met temporarily.

In 2018, the Jungfrau Railway Group exceeded its targets with the exception of the investment/cash flow indicator. The return on sales amounted to 22.5%, the EBIT margin reached 28.6%. With the proposed dividend increase of 16.7% to CHF 2.80 per share (previous year CHF 2.40), the payout ratio at 34.1% is within in the defined target range. Investments in the reporting year accounted for 79.6% of cash flow. For 2018, this resulted in a free cash flow of CHF 16.3 million. The accumulated free cash flow for the 2014–2023 target period at the end of 2018 therefore amounts to CHF 73.5 million. At the end of the reporting year, the level of self-financing was 79.7%.

In the context of risk management, Jungfrau Railways deals with possible events that could jeopardise the achievement of strategic and associated financial objectives. Accordingly, we assess these based on their probability of occurrence and their impact on EBIT. Events may include commercial success, partnerships, reputation, organisation (including, but not limited to, personal safety, material vulnerability, availability, integrity and confidentiality of data and the assurance of know-how), finances, as well as governance and compliance. Both opportunities and risks are identified. Strategic risks are regularly discussed as part of the update of the Management Board's SWOT analysis. In the management report, we focus heavily on the commercial challenges (see Message from the company management / opportunities and risks).

Jungfrau Railways has an internal control system (ICS) that meets legal requirements. This tool is used to check compliance in the particularly sensitive area of finances and to ensure the correctness and reliability of the reporting.

The IT security policy of Jungfrau Railways pursues a best-practice approach. The rules are defined in the IT security policy, the IT security guidelines for employees, and the IT password guidelines / user authorisation concept. In addition, special service levels are defined for all business-relevant applications and the change process is monitored by a specialist group in a risk-based manner. The internal data protection officer oversees the 60 or so data files with sensitive personal data, advises those responsible regarding handling and reports to the management at least once a year on the concerns of data protection and the results and recommendations from his examinations. The Jungfrau Railways are based on the General Data Protection Regulation (GDPR) of the EU, although the Swiss legislation is not yet in force. The necessary adjustments data collections with an international reference were treated with priority.

The risk management process is embedded in the existing process landscape. Process organisation regulates responsibilities and ensures that the relevant measures are planned and implemented. The risk index (risk catalogue) forms the central basis for the formal risk process. The risks are assessed according to financial impact and probability of occurrence and positioned based on their importance for the company (risk profile). The risk catalogue of Jungfrau Railways provides an overview of the operational risks and is revised annually. The Management Board discusses and supplements the strategic risks when necessary, but at least once a year. The external and internal audit activities are closely linked to risk management. In addition to internal audits, which are used by the Executive Board to check certain areas, Jungfrau Railways is regularly externally audited by the Swiss Federal Office of Transport, Suva and the certification body for the ISO 9001/2015 quality management certificate.

The Management Board is explicitly reintroducing the increasing density of regulation, which is accompanied by a public awareness of compliance, into the SWOT analysis. This results in efforts to continuously develop compliance. The focus remains on the safety of our employees and customers. However, more and more companies are affected by regulations in various areas. As a small listed company, it is a challenge to meet all the rules correctly, even to set standards in some areas, but not to let the costs explode and not to hinder innovation.

The failure of projects is a significant risk position in the catalogue of a naturally investment-driven transport company that must maintain and modernise cable cars and railways. At present, the major V-Cableway project poses corresponding challenges to project management. This is carried out by a board formed especially by representatives of the Jungfrau Railways and Gondelbahn Grindelwald-Männlichen AG. Every three months, it reports to the Board of Directors of Jungfraubahn Holding AG, Berner Oberland-Bahnen AG and Gondelbahn Grindelwald-Männlichen AG. In addition to the cost control, the schedule and the monitoring of the necessity and added value of any project adjustments, the safety, allocation of work, preparation of the handover as well as the quality and specific risks of the construction are discussed. The internal reporting is supplemented by a report from an independent expert.

Accounting principles

General information

The consolidated financial statements are prepared on the basis of commercial operating values and in accordance with accounting recommendations (Swiss GAAP FER) and the Swiss Stock Corporation Act. They provide a true and fair view of the Group's net assets, financial position and results of operations. Consolidation is based on audited and unified financial statements prepared by the Group companies.

The financial statements of Jungfraubahn Holding AG and the consolidated financial statements of the Jungfraubahn Group were approved by the Board of Directors on 27 March 2019.

Closing date

The uniform closing date for all companies included in the consolidation is 31 December. The associated company Skilift Bumps AG is an exception to this rule (30 June). As in previous years, Skilift Bumps AG due to the lesser importance of the company does not have to prepare interim financial statements as at 31 December.

Scope of consolidation

The consolidated financial statements include the financial statements of Jungfraubahn Holding AG and its holdings. The holdings of the Group can be seen in the comment «0 Scope of consolidation» below. The holdings are broken down as follows:

Group companies
Group companies are companies in which Jungfraubahn Holding AG has a direct or indirect share of more than 50 per cent.

Associated companies
Associated companies are companies in which Jungfraubahn Holding AG holds 20 to 50 per cent.

Non-consolidated holdings
Non-consolidated holdings (up to 20 per cent) are reported under «financial assets».

Consolidation method

Group companies
Assets and liabilities, as well as expenses and income, are 100 per cent accounted for according to the full consolidation method. Capital consolidation is carried out according to the Anglo-Saxon method (purchase method). Goodwill paid in connection with a share acquisition is usually depreciated over 5 years, in justified cases over 20 years. A passive difference (badwill) is credited to the income statement in the financial year.

The minority interests in equity and income are shown separately on the balance sheet and the income statement. Receivables, liabilities as well as deliveries and services between group companies, including resulting profits, are eliminated.

Associated companies
These companies are included in the consolidated financial statements using the equity method less value adjustments necessary for economic reasons.

Non-consolidated holdings
The non-consolidated participations reported in the «financial investments» are valued at the acquisition cost less value adjustments necessary for economic reasons.

Valuation principles

Balance sheet items are valued according to uniform guidelines. The valuation is based on the acquisition or production costs (principle of historical costs). The most important rules for the various items are set out below:

Foreign currencies
The conversion of positions in foreign currencies is carried out according to the closing rate method. The effects from foreign currency adjustments are recorded in the period result.

Receivables
Receivables are stated at the nominal value less value adjustments necessary for economic reasons.

Inventories
In particular, articles sold in souvenir shops and inventories of restaurants  are included in this item. The valuation is carried out at acquisition cost or - if this is lower - at the realisable disposal value. Any discounts are recorded as a reduction in acquisition costs. Consumables and operating materials are reported as «deferred accruals» in the sense of prepaid expenses.

Tangible assets
Property, plant and equipment and spare parts are recognised at acquisition or production values and amortised using the straight-line method over the estimated period of their use (spare parts corresponding to the period of the related property, plant and equipment). Land is not amortised. The planned useful lives for:

Impairment
On each balance sheet date, an assessment is made as to whether there are any signs of impairment of the book values of the Jungfraubahn Group's assets. If there are any signs, the recoverable value of the assets is determined. An impairment loss is recognised in profit or loss.

Financial assets
Financial assets are stated at acquisition costs, less value adjustments necessary for economic reasons.

Intangible assets
Intangible assets (software, concessions and rights as well as goodwill) are recognised at cost and depreciated over the estimated or contractually determined useful lives. The planned useful lives for:

Liabilities
Liabilities are stated at their nominal value.

Provisions
Provisions are probable obligations that are based on events in the past, the amount and / or maturity of which is uncertain but can be estimated. The valuation is based on uniform business management criteria.

Sales realisation

The revenues of the Jungfraubahn Group stem mainly from the sale of travel tickets (transport income), other important sources of income are the compensation received from government and energy sales. Transport income is realised with the completion of the sales transaction in the sales system and posted in the corresponding period. Proceeds from long-term travel tickets are deferred on a monthly basis and are settled over the entire duration of the travel tickets.

Taxes

Current taxes on profits are deferred on the basis of the business results reported in the reporting year according to the principle of current-year measurement.

For deferred taxes, all differences between tax rates and group values are measured at full tax rates and reported in the balance sheet (comprehensive liability method). The currently applicable tax rate for each company is used for the calculation of the deferred tax burden. Deferred tax assets on tax-deductible losses carried forward are not capitalised but shown in the Notes.

Employee pension funds

The employees of the Jungfraubahn Group extept the Jungfrau Gastronomie AG are insured by the legally independent personnel pension fund of Jungfrau Railways. The employees oft the Jungfrau Gastronomie AG are insured by the GastroSocial pension fund. The purpose of both funds is to insure the employees against the economic consequences of age, death and disability. All workers aged over 17 are insured.

The assets of both foundation are not included in the consolidated financial statements. In the statement of income, the contributions demarcated for the period are presented as personnel expenses. The balance sheet includes the corresponding deferred tax assets or liabilities as well as liabilities arising from contractual, regulatory or legal principles. It is assessed annually whether there is an economic benefit or an economic obligation from the organisation's perspective. The annual accounts of the pension funds, which are prepared in Switzerland in accordance with Swiss GAAP FER 26, and other calculations which represent the financial situation, the existing excess cover or shortfall under the actual circumstances, serve as a basis.

Transactions with related parties

Business relationships with related parties are settled under market conditions. This applies in particular to business transactions with BEKB | BCBE, Gebäudeversicherung Bern, Garaventa AG, Graf AG, Hoch- & Tiefbau, Holzbau, as well as with associated companies and personnel services.

Segment information

Comments

0 Scope of consolidation

There were no changes in the scope of consolidation in the reporting year.

The following companies are included in the scope of consolidation as of 31 December 2018:

The uncovered costs of the transport service ordered by the public authorities (Federation and Canton of Bern) on the routes Lauterbrunnen–Mürren and Lauterbrunnen–Wengen are paid by the purchaser. The corresponding compensation must be negotiated in advance.

The compensation paid to the Management booked under personnel expenses is shown in the remuneration report of Jungfraubahn Holding AG.

Management insurance is maintained for members of management and extended management. Expenses for the companies amounted to kCHF 239 in 2018 and kCHF 150 in 2017.

General expenses mainly include administrative costs, fees and duties as well as various sponsorship and cost contributions. The compensation paid to Board members as a general expense is disclosed in the remuneration report of Jungfraubahn Holding AG.

21 Financial income 

Financial income for 2018 includes a badwill of kCHF 6, which resulted from the purchase of shares in subsidiaries. There was a badwill of kCHF 9 in 2017.

The Group's average income tax rate is based on the weighted average tax rate resulting from the profit or loss before tax as well as the tax rate of each individual company.

With the companies Firstbahn AG, Bergbahn Lauterbrunnen-Mürren AG, Grindelwald Grund Infrastruktur AG, Jungfrau Gastronomie AG as well as Mürrenbahn AG there are tax-deductible losses carried forward totalling kCHF 4,492 (previous year kCHF 2,657). The resulting non-capitalised deferred tax claim is kCHF 985 (previous year kCHF 583).

23 Equity

Share capital

The share capital of Jungfraubahn Holding AG is fully paid up, amounting to CHF 8,752,500 at 31 December 2018 and is divided into 5,835,000 registered shares with a nominal value of CHF 1.50. Rights and restrictions related to the shares are explained in Section 6 of the Corporate Governance report.

Treasury shares

At 31 December 2018, the company held 3,018 registered treasury shares with a nominal value of CHF 1.50 each (previous year 3,593 registered treasury shares).

In the reporting year, 20,000 (previous year: 20,005) of the Company's registered treasury shares were purchased at an average price of CHF 145.88 (previous year: CHF 111.86) and 20,575 (previous year 21,116) registered treasury shares were sold at an average price of CHF 139.91 (previous year CHF 128.94).

Since 2005, the employees of the Jungfrau Railway Group as well as the administrative boards of Jungfraubahn Holding AG have been given the option of voluntarily purchasing a limited number of registered shares of Jungfraubahn Holding AG at a preferential price. In the reporting year, this price was CHF 43.00 per registered share (previous year CHF 33.00). The difference between the preferential price and the exchange rate, determined according to circular no. 37 of the Federal Tax Administration, was recognised in the income statement under personnel expenses. In this way 20,294 registered treasury shares were sold in the reporting year (previous year 20,975).

The share ownership of the Board members and management is shown in the annexe to the financial statements of Jungfraubahn Holding AG.

Reserves

The non-distributable, statutory or legal reserves amounted to kCHF 26,279 at 31 December 2018 (previous year kCHF 24,917).

25 Events after the balance sheet date

Since the balance sheet date of 31 December 2018, no events have occurred which affect the meaningfulness of the consolidated financial statements for 2018.

The object of the official annual report of Jungfraubahn Holding AG is the management report (with segment reporting) and the financial report, which contains the consolidated financial statements for 2018 and the financial statements for 2018 of the holding company. The auditor's reports are also included in this part of the annual report. The printout of the annual report in German, available at the registered offices of the company during the invitation period to the General Meeting of Jungfraubahn Holding AG, is binding and has been audited. Thus no audit reports were drawn up in English. You can download a PDF document with the same content from the online annual report Download Centre. The accompanying report and the download file also contain the 2018 remuneration report and corporate governance information.