Ideal Standard International S.A. Interim Financial ...
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Ideal Standard International S.A. Interim Financial Information
for the six-month period ended 30 June 2021
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
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This is the Report of Ideal Standard International S.A., 15 Boulevard F.W. Raiffeisen, L-2411 Luxembourg, the
issuer of €325,000,000 6.375% senior secured notes due 2026 (the “Notes”).
The following Report is a report as required by Section 4.12 of the indenture that governs the Notes.
Information Regarding Forward-Looking Statements
Certain statements in this Report are not historical facts and are “forward-looking” within the meaning of US securities laws. These statements include, but are not limited to, statements related to our expectations
regarding the performance of our business, our financial results, our liquidity and capital resources, the impact of COVID-19 and other non-historical statements. This document contains certain forward-looking statements
and includes statements about our intentions, beliefs or current expectations regarding our future financial results, plans, liquidity, prospects, growth, strategy and profitability, as well as the general economic conditions
of the industry and country in which we operate. We may from time to time make written or oral forward-
looking statements in other communications. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future sales or performance, capital expenditures, financing
needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses and our business strategy and the trends we anticipate in the industries and the economic, political and legal environment in
which we operate and other information that is not historical information.
Words such as “believe,” “anticipate,” “estimate,” “continue,” “expect,” “suggest,” “target,” “intend,” “predict,”
“project,” “ongoing,” “should,” “would,” “could,” “may,” “will,” “forecast,” “potential,” “seek,” “plan” and similar expressions or phrases or, in each case, their negative or other variations or comparable terminology, are
intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will
not be achieved. You should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking
statements. These factors include, but are not limited to the following: • adverse changes in global economic conditions and/or tightening of credit markets;
• continuing effects of the COVID-19 pandemic;
• our inability to continue to reduce our fixed costs; • our ability to effectively compete in our highly competitive industry;
• our ability to effectively identify and address consumer preferences; • our reliance on third parties for our logistics arrangements;
• our failure to successfully implement our restructuring plans;
• increased price, or decreased availability, of raw materials and commodities we use to produce our products;
• challenges with importation or raw materials and export of our products into our end markets. • disruption in our supply chain;
• fluctuations in currency exchange rates; • our ability to adapt to changes in our distribution channels;
• exposure to local business risk in many different countries;
• reputation of, and value associated with, our brand names; • unfunded liabilities in our pension plans and other post-retirement benefit plans;
• disruption caused by labor disputes; • business risk with our joint ventures;
• distribution arrangements with unaffiliated third parties;
• our ability to retain or attract key personnel; • our ability to successfully integrate future acquisitions and joint ventures;
• disruptions in our information technology systems; • the United Kingdom’s withdrawal from the European Union;
• our ability to successfully manage future growth; • our failure to comply with current or existing government regulations;
• infringement or misappropriation of our intellectual property;
• costs arising from warranty and product liability claims; • our failure to comply with current or existing environmental laws and health and safety regulations;
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
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• additional taxes or penalties that we may be required to pay; and
• legal proceedings we may be involved in.
New risks emerge from time to time and it is not possible for us to predict all such risks; nor can we assess the
impact of all such risks on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and
uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual
results. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Report may
not be accurate or occur at all. Accordingly, prospective investors should not place undue reliance on these forward-looking statements, which speak only as of the date on which the statements were made.
We undertake no obligation, and do not intend, to update or revise any forward-looking statement, whether as a result of new information, future events or developments or otherwise. All subsequent written and oral
forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements referred to above.
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Ideal Standard International S.A.
Financial Information 30 June 2021
Table of Contents
Unaudited Interim Consolidated Statement of Income ........................................................................................ 4
Unaudited Interim Consolidated Statement of Financial Position ....................................................................... 5
Unaudited Interim Consolidated Statement of Cash Flow................................................................................... 6
Notes to the Unaudited Interim Financial Information ......................................................................................... 7
1. General information ................................................................................................................................... 7
2. Basis of preparation of the Interim Financial Information .......................................................................... 7
3. Operating Segments .................................................................................................................................. 8
4. Borrowings ................................................................................................................................................. 9
5. Finance (expense) / income .................................................................................................................... 11
6. Off-balance sheet arrangements ............................................................................................................. 11
7. Events after the balance sheet date ........................................................................................................ 12
8. Contingencies .......................................................................................................................................... 12
9. Related-party transactions ....................................................................................................................... 13
Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................ 14
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Unaudited Interim Consolidated Statement of Income
For the six month period ended 30 June 2021 30 June 2020
Million euro Unaudited Unaudited
Revenues 371.5 276.4
Cost of sales (239.1) (194.8)
Gross profit 132.4 81.6
Distribution expenses (27.9) (22.9)
Sales and marketing expenses (45.7) (36.2)
Administrative expenses (20.4) (17.7)
Restructuring expenses (1.0) (1.6)
Other operating expenses (11.7) (7.0)
Operating profit / (loss) 25.7 (3.8)
Finance expense (175.9) (135.2)
Finance income 0.1 16.3
Finance expense, net (175.8) (118.9)
Loss before income taxes (150.1) (122.7)
Income tax expense (2.7) (2.5)
Loss for the period (152.8) (125.2)
Attributable to:
Owners of Ideal Standard International (153.9) (125.9)
Non-controlling interests 1.1 0.7
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
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Unaudited Interim Consolidated Statement of Financial Position
As at 30 June 2021 31 December 2020
Million euro Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 153.4 150.9
Right of use assets 39.7 41.6
Goodwill 1.6 1.6
Intangible assets 394.4 397.3
Investments in associates 1.5 1.5
Deferred tax assets 32.1 31.0
Employee benefits 48.4 46.3
Trade and other receivables 4.3 4.2
675.4 674.4
Current assets
Inventories 139.1 113.3
Trade and other receivables 166.1 138.7
Derivative financial instruments 0.2 0.2
Cash and cash equivalents 89.4 104.2
Assets held for sale - 0.2
394.8 356.6
Total assets 1,070.2 1,031.0
Equity and Liabilities
Equity attributable to equity holders of Ideal Standard Int. (2,711.3) (2,551.0)
Non-controlling interests 51.5 48.6
(2,659.8) (2,502.4)
Non-current liabilities
Preferred equity certificates 1,817.1 1,758.7
Interest-bearing loans and borrowings 1,340.5 1,218.3
Lease liabilities 33.4 35.8
Employee benefits 166.2 167.9
Trade and other payables 2.4 2.7
Provisions 1.2 1.4
Deferred tax liabilities 30.4 29.2
3,391.2 3,214.0
Current liabilities
Interest-bearing loans and borrowings 97.4 95.4
Lease liabilities 10.6 10.6
Income tax payables 5.3 8.7
Trade and other payables 220.5 199.1
Provisions 5.0 5.6
338.8 319.4
Total liabilities 1,070.2 1,031.0
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Unaudited Interim Consolidated Statement of Cash Flow
(a) Includes interest element on leases since first time adoption of IFRS 16
For the six month period ended 30 June 2021 30 June 2020
Million euro Unaudited Unaudited
Operating activities
Net profit (152.8) (125.2)
Adjusted for:
Depreciation and impairment on tangible fixed assets 14.1 13.8
Amortization 8.4 8.2
Restructuring expenses 1.0 1.6
Losses from disposal of Property, Plant & Equipment - 0.1
Foreign exchange losses / (gain) 34.3 (16.2)
Net interest expense (a) 141.5 135.1
Income tax expense 2.7 2.5
Other non-cash items included in profit (3.7) 0.2
Cash flow from operations before changes in working capital
and provisions45.5 20.1
Decrease / (increase) in trade and other receivables (24.6) 21.6
Decrease / (increase) in inventories (25.2) 22.4
(Decrease) / increase in trade and other payables 18.1 (27.0)
(Decrease) / increase in provisions, employee benefits and other (2.0) (33.7)
Net cash generated from operations 11.8 3.4
Interest paid (a) (2.0) (1.9)
Income tax paid (6.3) (1.5)
Cash flow from operating activities 3.5 0.0
Investing activities
Proceeds from sale of property, plant and equipment 0.2 2.5
Acquisition of property, plant and equipment (8.5) (5.6)
Acquisition of intangible assets (1.4) (1.2)
Development expenditure (3.3) (3.3)
Cash flow from investing activities (13.0) (7.6)
Financing activities
Proceeds from borrowings, net of fees paid 4.3 37.9
Repayment of borrowings (4.8) (23.9)
Principal elements of lease payments (6.3) (5.0)
Cash flow from financing activities (6.8) 9.0
Net increase / (decrease) in cash and cash equivalents (16.3) 1.4
Exchange rate effects 1.5 (0.3)
Cash and cash equivalents at beginning of period 104.2 42.0
Cash and cash equivalents at end of period 89.4 43.1
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Notes to the Unaudited Interim Financial Information
1. General information
Ideal Standard International S.A. (‘the Company’) was incorporated for an unlimited period of time under the
laws of Luxembourg on 7 April 2011 as a holding company. Its registered office is located 15 Boulevard F.W. Raiffeisen, L-2411 Luxembourg.
On 27 March 2018, Ceramo (Lux) S.à r.l., an entity managed and advised by Anchorage Capital Group, L.L.C.,
and CVC Credit Partners Global Enhanced Loan EUR S.à r.l., an entity managed and advised by CVC Credit Partners, acquired full control of the Group and are now the shareholders of the Company.
On 27 March 2018, the Company declared an event of default under the 2014 Senior Secured Notes Indenture that led to the appropriation of the Luxembourg Assets (i.e. all the shares in the Company, the Preferred Equity
Certificates (Series 2-6), the interest bearing loan from parent, the interest bearing (subordinated) loan from
parent and payables owed to Ideal Standard International Equity S.A. (the former parent of the Company)) by the Security Agent (Wilmington Trust (London) Limited) to the holder of all Series AAA, AA and A Senior Secured
Notes, Ceramo (Lux) S.à r.l. In consideration for the Luxembourg Assets, Ceramo (Lux) S.à r.l. transferred all Series AAA, AA and A Senior Secured Notes to the Security Agent. Afterwards, the Security Agent transferred all these Series AAA, AA and A Senior Secured Notes to the Company.
The Security Agent released the Series B, C and Original Senior Secured Notes and the Series B, C and Original Senior Secured Notes were subsequently cancelled.
2. Basis of preparation of the Interim Financial Information
The consolidated unaudited Interim Financial Information for the six-month period ended 30 June 2021 has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ and includes the result of Ideal Standard International S.A. and its subsidiaries (the ‘Group’).
This Interim Financial Information should be read in conjunction with the audited financial statements of Ideal
Standard International S.A., for the year ended 31 December 2020, which have been prepared in accordance with IFRS as adopted by the European Union.
Seasonality of operations
The activity of the Group is not subject to significant seasonality throughout the year. Therefore, the additional disclosure of financial information for the 12-month period ended on the interim reporting date, encouraged in IAS 34, is not provided.
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3. Operating Segments
As of 30 June 2021, we operated our business in more than 20 countries. For reporting purposes, we split our results of operations into two different geographical segments:
• Europe that includes the United Kingdom, Italy, Germany, France, Eastern Europe, and other Europe
• MENA is the geographical segment that includes our businesses in the Middle East and North Africa (including the Egyptian activities). The Group has 60% of economic interests in MENA.
Following tables show the contribution of MENA and European Division to total consolidated Operating profit for the six-month period ended 30 June 2021 and 30 June 2020 respectively:
For the six month period ended 30 June 2020
Million euro MENA Europe Eliminations Total
Revenues 48.0 245.8 (17.4) 276.4
Third party 41.1 235.3 - 276.4
Inter-company 6.9 10.5 (17.4) -
Cost of sales (35.7) (176.5) 17.4 (194.8)
Gross profit 12.3 69.3 (0.0) 81.6
Gross profit (%) 27.0% 32.4% 33.5%
Sales and distribution expenses (5.5) (53.6) - (59.1)
Administrative expenses (2.9) (14.8) - (17.7)
Restructuring expenses - (1.6) - (1.6)
Other operating expenses (1.5) (5.5) - (7.0)
Operating profit / (loss) 2.4 (6.2) (0.0) (3.8)
Finance expense, net (1.1) (117.8) 0.0 (118.9)
Profit / (loss) before income taxes 1.3 (124.0) (0.0) (122.7)
Income tax (expense) / credit (0.3) (2.2) (2.5)
Profit / (loss) for the period 1.0 (126.2) (0.0) (125.2)
For the six month period ended 30 June 2021
Million euro MENA Europe Eliminations Total
Revenues 56.1 337.9 (22.5) 371.5
Third party 44.7 326.8 - 371.5
Inter-company 11.4 11.1 (22.5) -
Cost of sales (41.5) (220.1) 22.5 (239.1)
Gross profit 14.6 117.8 - 132.4
Gross profit (%) 26.0% 34.9% 35.6%
Sales and distribution expenses (6.1) (67.5) - (73.6)
Administrative expenses (2.7) (17.7) - (20.4)
Restructuring expenses - (1.0) - (1.0)
Other operating expenses (2.6) (9.1) - (11.7)
Operating profit 3.2 22.5 - 25.7
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
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4. Borrowings
The changes in borrowings, except other borrowings, for the six month period ended 30 June 2021 are mainly
driven by (i) the drawing on the syndicated loan, (ii) the scheduled instalments for a total of €1.2 million on the
Bulgarian credit linked to sales and lease back, (iii) the partial repayment of €1.4 million on the Interest bearing (subordinated) loan from parent, (iv) interests accruing on the various notes and loans and (v) the revaluation of the debt held in currencies other than the euro.
Please see Note 7. ‘Events after the balance sheet date’ for additional information.
As at 30 June 2021
Million euro
Carrying
amounts
Fair value
adjustments
Amounts
before fair
value
adjustments
Preferred equity certificates (series 2-6) 1,817.1 - 1,817.1
Interest bearing loan from parent 1,158.4 - 1,158.4
Interest bearing (subordinated) loan from parent 175.5 - 175.5
Syndicated loan 65.0 - 65.0
Bulgarian credit linked to sales and lease back 9.0 - 9.0
Other borrowings 30.0 - 30.0
3,255.0 - 3,255.0 -
Current portion 97.4 - 97.4 -
Non-current portion 3,157.6 - 3,157.6 -
Due:
- in less than 12 months 97.4
- in 1 to 5 years 1,158.4
- in more than 5 years 1,999.2
3,255.0
As at 31 December 2020
Million euro
Carrying
amounts
Fair value
adjustments
Amounts
before fair
value
adjustments
Preferred equity certificates (series 2-6) 1,758.7 - 1,758.7
Interest bearing loan from parent 1,038.7 - 1,038.7
Interest bearing (subordinated) loan from parent 171.8 - 171.8
Syndicated loan 64.9 - 64.9
Bulgarian credit linked to sales and lease back 10.2 - 10.2
Other borrowings 28.1 - 28.1
3,072.4 - 3,072.4
Current portion 95.4 - 95.4
Non-current portion 2,977.0 - 2,977.0
Due:
- in less than 12 months 95.4
- in 1 to 5 years 1,038.7
- in more than 5 years 1,938.3
3,072.4
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
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Preferred Equity Certificates (Series 2-6)
PECs Series 2 to 6 were issued in April 2011 and have a mandatory redemption date of 28 April 2041 (30 years
from the date of issuance) at a redemption price equal to the sum of the par value for each outstanding PEC
and the unpaid earned yield accrued through the mandatory redemption date, subject to certain restrictions. The PECs are redeemable at the discretion of the Company at their call price equal to the par value plus unpaid yield accrued at the early redemption date.
As of 30 June 2021, the value of the PECs Series 2 to 6 amounts to €1,817.1 million (31 December 2020: €1,758.7 million), reflecting the fair value of these floating rate instruments.
Interest bearing loan from parent
In March 2021, the Company and the lenders amended the ‘Interest bearing loan from parent’: the advances
(together with all accrued but unpaid interest at the date of repayment) shall be repayable in whole or in part
on 31 March 2024 (carrying value, including accrued interests, of €1,158.4 million as of 30 June 2021, €1,038.7 million as of 31 December 2020).
Interest bearing (subordinated) loan from parent
The interest-bearing subordinated loan from parent repayable in 2040 or earlier as per term of loan. This loan
bears partly a fixed interest rate of 8.06% and partly a floating rate (Euribor + 2.44%). The interest is accruing in line with agreed rate. As of 30 June 2021, the carrying value of this loan amounts to €175.5 million including
accrued interest (31 December 2020: €171.8 million) reflecting their fair value and subsequent measurement at amortised cost. In February 2021 interest accrued under the line paying a fixed 8.06% have been partially paid to the lender for a total amount of EUR 1.37million.
Syndicated Loan
The Syndicated loan accrue interest at a rate of Euribor +1.50% p.a. maximum and is secured exclusively by Bulgarian assets. The Syndicated loan is a twelve-month rolling facility guaranteeing 6 month of financing
following cancellation. As of 30 June 2021, the loan was drawn in the amount of €65.0 million (31 December
2020: €64.9 million).
Covenants
Two covenants are determined on consolidated level (a maximum leverage ratio of 3.5x (Net Debt / EBITDA) and a coverage ratio of minimum 1.3x (Inventory and Trade receivables / utilised amount under the Syndicated
loan). In addition, the Bulgarian subsidiary’ balance sheet is subject to certain covenants such as minimum
equity, liquidity ratio, inventory and trade receivable coverage, maximum Days Sales Outstanding and Days
Inventory.
Financial covenants are tested quarterly on a rolling twelve-month basis by reference to our consolidated annual financial statements and our consolidated quarterly financial statements. All the applicable financial covenants
have been fully complied with until and as of 30 June 2021.
Bulgarian credit linked to sales and lease back
We entered into sales and lease back transactions in Bulgaria that are recognized as per IFRS 9 for a value of
€9.0 million as of 30 June 2021 (€10.2 million as of 31 December 2020).
Other borrowings
Other borrowings as of 30 June 2021 mainly reflect the drawing of the Egyptian local credit lines for a total of
€17.0 million (€12.9 million as of 31 December 2020), the Italian factoring facility for €3.2 million (€2.7 million as of 31 December 2020), French factoring facility for €0.3 million (€0.3 million as of 31 December 2020), UK factoring facility for €9.5 million (€12.2 million as of 31 December 2020).
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5. Finance (expense) / income
Exchange losses are mainly impacted by debt borrowed in USD and GBP. Changes in conversion rates of
these currencies over the six-month period ended 30 June 2021 has been unfavorable and generated a loss of €34.3 million (€16.2 income for the six-month period ended 30 June 2020).
6. Off-balance sheet arrangements
As of 30 June 2021, we had no off-balance sheet arrangements.
For the six month period ended 30 June 2021 30 June 2020
Million euro Unaudited Unaudited
Interest expense (142.1) (134.9)
Net foreign exchange losses on financing activities (34.3) -
Net interest on net defined benefit liabilities (0.4) (0.2)
Other financial costs 0.9 (0.1)
Finance expense (175.9) (135.2)
Interest income 0.1 0.1
Net foreign exchange gains on financing activities - 16.2
Finance income 0.1 16.3
Finance expense, net (175.8) (118.9)
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7. Events after the balance sheet date
In July 2021, we completed a recapitalization whereby we issued €325,000,000 6.375% senior secured notes
due 2026 and entered into a new committed revolving credit facility in an amount of €15.0 million. The Notes
will be guaranteed by Ideal Standard International Holding, Ideal Standard International (German Holdco) S.à r.l., Ideal Standard International NV, Ideal Standard Holdings (BC) UK Ltd, Armitage Shanks Ltd, Ideal Standard
(UK) Ltd, Ideal Standard (Ireland) Limited, IS Sanitaryware Holding Limited, Ideal Standard France SAS, American Standard French Holdings SAS, Ideal Standard Industriale S.r.l., Ideal Standard Holdings (BC) Italy
S.r.l., Ideal Standard Italia S.r.l., Venborgh Holding B.V., Ideal Standard Nederland B.V., Ideal Standard Holdings (BC) Netherlands B.V., Ideal Standard Holdings (BC) Germany GmbH, Ideal Standard Produktions-
GmbH and Ideal Standard GmbH. The Notes will be secured by share pledges, pledges of material bank accounts
and intra-group receivables and material IP held by Ideal Standard International NV.
The following table illustrates the approximate sources and uses of the proceeds with respect to the Notes.
Sources of funds (in millions of Euros)
Uses of funds (in millions of Euros)
Notes offered hereby(1) .................................... 321.6 Refinancing of Bulgarian Facility(2) .................... 64.6
Redemption or repayment of certain subordinated obligations held by the Issuer’s shareholders(3)
................................................................ 243.5
Estimated fees and expenses and certain other amounts related to or made in connection with the Offering(4) ............................................ 13.5
Total sources ............................................... 321.6 Total uses .................................................... 321.6
(1) Reflects issuance of Notes at 98.95% issue price (2) On the issue date of the Notes, €64.6 million of the net proceeds shall be placed into an escrow account and will only be released to
facilitate a repayment of an equivalent amount under the Bulgarian facility by no later than 1 November 2021. (3) To be distributed to our direct shareholders through a repayment or redemption of preferred equity certificates and/or shareholder
loans. (4) Represents estimated fees and expenses in connection with the Transactions, including advisory and other fees, transaction costs,
financing costs, and professional expenses related to the Transactions, as well as an amount of £3.0 million (converted using the Pound Sterling to Euro exchange rate published by the European Central Bank on July 8, 2021 of £1 to €1.1610) which the Group has agreed to contribute into its UK pension schemes in connection with the offering within 30 days of the issue date of the Notes.
8. Contingencies
The Group has certain contingencies in respect of certain legal claims arising in the ordinary course of business for which appropriate provisions have been made.
Ideal Standard International N.V., received in 2020 and 2021 tax notices with respect to the withholding tax on certain loans from Luxembourg and France. In addition, cash pool arrangements between the Group companies
is being challenged by the Belgian tax authority. The Group disclaims this liability and is defending the action. Though the financial impact of the assessment is difficult to predict, however, the Directors have been advised
by their tax advisors that it is not probable that this would have a material adverse effect on the Group’s financial
position as of 30 June 2021. Accordingly, no provision for such liability has been recognized for neither the financial statements for the year ended 31 Dec 2020 nor the Condensed interim consolidated financial
statements for the six-month period ended 30 June 2021. As additional information becomes available, the Group will reassess the position and will ascertain the financial
impact.
In prior years, the tax authority in Bulgaria issued various assessments to Ideal Standard Vidima AD. Ideal Standard Vidima appealed the tax assessments and exhausted all judicial instances in the Bulgarian
Administrative Court and Supreme Court. So far, The Supreme Administrative Court rejected all the final appeals.
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Consequently, the Company recognized the full exposure of withholding taxes and corporate tax. The provision
amounts to €5.4 million as of 30 June 2021 and 31 December 2020.
9. Related-party transactions
The Group has no new material related party transactions compared to the ones disclosed, in accordance with
IAS 24, in the annual financial statements for the year ended 31 December 2020.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion includes certain forward-looking statements, which although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those expressed or implied by the forward-looking statements. See “Information Regarding Forward-Looking Statements”.
Result of operations
We present below the consolidated financial information for the three- and six-month periods ended 30 June 2021 of Ideal Standard International S.A.
The unaudited interim consolidated financial information for the three- and six-month periods ended 30 June
2021 and 30 June 2020 included in this report are prepared based on International Financial Reporting Standards (IFRS).
The following table presents certain information related to our income statement:
Q2'21 Q2'20 H1'21 H1'20
Million euro
Revenues 186.4 112.7 371.5 276.4
Cost of sales (118.7) (85.9) (239.1) (194.8)
Gross profit 67.7 26.8 132.4 81.6
Gross profit % 36.3% 23.8% 35.6% 29.5%
Sales & distribution expenses (37.8) (23.9) (73.6) (59.1)
Administrative expenses (10.6) (8.5) (20.4) (17.7)
Restructuring expenses (0.3) (0.7) (1.0) (1.6)
Other operating expenses (7.3) (1.8) (11.7) (7.0)
Operating profit/(Loss) 11.7 (8.0) 25.7 (3.8)
Finance expense (61.2) (67.0) (175.9) (135.2)
Finance income 0.1 16.3 0.1 16.3
Finance expense, net (61.1) (50.7) (175.8) (118.9) - -
Loss before income taxes (49.4) (58.7) (150.1) (122.7)
Income tax expense (1.2) (1.0) (2.7) (2.5)
Loss for the period (50.6) (59.7) (152.8) (125.2)
Attributable to:
Owners of the Group (50.9) (59.6) (153.9) (125.9)
Non-controlling interests 0.3 (0.1) 1.1 0.7
Adjusted EBITDA 25.0 2.8 51.3 20.1
Of which:
Europe 21.8 1.1 44.8 14.7
MENA 3.2 1.7 6.5 5.4
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
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Revenue
Our total revenue increased by €95.1 million or 34.4% from €276.4 million in the six months ended 30 June
2020 to €371.5 million in the six months ended 30 June 2021.
Revenue by Geography
Europe
Revenue in Europe increased by €91.5 million or 38.9% from €235.3 million in the six-month period ended 30
June 2020 to €326.8 million in the six-month period ended 30 June 2021. This increase was driven by performance across all markets, reflecting a recovery from the impact of COVID-19, as well as stronger results
from certain sales channels.
Our four largest markets were United Kingdom, Germany, France and Italy, which together represented 62.1%
of total revenues in the six-month period ended 30 June 2020 compared to 67.4% of total revenues in the six-
month period ended 30 June 2021.
Revenue in the United Kingdom increased by €30.7, or 60.8%, from €50.5 million in the six-month period ended
30 June 2020 to €81.2 million in the six-month period ended 30 June 2021. This increase was driven by high
order intake across all channels.
Revenue in Germany increased by €10.8 million, or 17.5%, from €61.7 million in the six-month period ended 30 June 2020 to €72.5 million in the six-month period ended 30 June 2021. This increase was driven by private
label and internet sales, up by 21.6% and 32.4 % compared to the prior year.
Revenue in France increased by €16.6 million, or 50.9%, from €32.6 million in the six-month period ended 30 June 2020 to €49.2 million in the six-month period ended 30 June 2021. This increase was driven by the
improvement in economic conditions following the negative impact of COVID-19 on our revenues in France
which impacted all channels.
Revenue in Italy increased by €20.4 million, or 75.6%, from €27.0 million in the six-month period ended 30
June 2020 to €47.4 million in the six-month period ended 30 June 2021. This increase was driven by by the
improvement in economic conditions following the negative impact of COVID-19 in 2020.
Revenues in the Eastern Europe and Other Europe regions in the six-month period ended 30 June 2021 have also increased by 26.7% compared to 30 June 2020. This increase was driven by growth in Bulgaria, Russia
and Denmark up 30.9%, 32.3% and 27.3% respectively.
MENA
Revenue in MENA increased by €3.6 million, or 8.8%, from €41.1 million in the six-month period ended 30 June
2020 to €44.7 million in the six-month period ended 30 June 2021. This increase was mainly driven by Egypt.
Q2'21 Q2'20 H1'21 H1'20
Million euro 2021 2020 2021 2020
United Kingdom 40.4 16.8 81.2 50.5
Germany 34.2 27.4 72.5 61.7
France 24.6 12.6 49.2 32.6
Italy 25.8 12.2 47.4 27.0
Other Europe 22.7 15.6 44.1 38.6
Eastern Europe 16.8 10.8 32.4 24.9
EUROPE 164.5 95.4 326.8 235.3
MENA 21.9 17.3 44.7 41.1
Total 186.4 112.7 371.5 276.4
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
16
Revenue by Category
Revenues for ceramics and Furniture and Accessories increased by €48.2 million, or 37.3%, from €129.3 million
in the six-month period ended 30 June 2020 to €177.5 million in the six-month period ended 30 June 2021, mainly driven by strong demand experienced in the six-month period ended 30 June 2021 in the UK, France
and Italy as compared to the six-month period ended 30 June 2020 which was impacted by the effects of COVID-19.
Revenues for Fittings increased by €36.4 million, or 32.6%, from €111.7 million in the six-month period ended 30 June 2020 to €148.1 million in the six-month period ended 30 June 2021. The increase was driven by
increased sales in all markets and led by UK +66.4%, Germany +18.5% and France +56.2%.
Revenues for Bathing & Wellness increased by €10.5 million, or 29.7%, from €35.4 million in the six-month period ended 30 June 2020 to €45.9 million in the six-month period ended 30 June 2021, mainly driven
by strong demand experienced in the six-month period ended 30 June 2021 in the UK, France and Italy as
compared to the six-month period ended 30 June 2020 which was impacted by the effects of COVID-19.
Cost of sales
Cost of sales includes raw material costs, purchased parts and direct labor, research and development
expenditure, manufacturing overheads, energy and depreciation. The primary raw materials are clay, copper, zinc, brass and MMA for acrylic bathroom products. The primary components of purchased parts are brass and plastic materials.
Cost of sales increased by €44.3 million, or 22.7%, from €194.8 million in the six-month period ended 30 June 2020 to €239.1 million in the six-month period ended 30 June 2021.
Q2'21 Q2'20 H1'21 H1'20
Million euro 2021 2020
Ceramics and Furniture and Accessories 91.0 51.1 177.5 129.3
Fittings 73.0 47.5 148.1 111.7
Bathing & Wellness 22.4 14.1 45.9 35.4
Total 186.4 112.7 371.5 276.4
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
17
Gross profit
Gross profit by Category
Gross profit, expressed as a percentage of sales, increased from 29.5% in the six-month period ended 30 June
2020 to 35.6% in the six-month period ended 30 June 2021, driven by improved overhead recovery due to volume, improved manufacturing productivity and cost optimization projects of the group partially offset by commodity inflation.
Sales and distribution expenses
Sales and distribution expenses increased by €14.5 million, or 24.5%, from €59.1 million in the six-month period ended 30 June 2020 to €73.6 million in the six-month period ended 30 June 2021, due to increased activity.
Administrative expenses
Administrative expenses increased by €2.7 million, or 15.3%, from €17.7 million in the six-month period ended 30 June 2020 to €20.4 million in the six-month period ended 30 June 2021, driven by increased activity.
Restructuring expenses
Restructuring expenses decreased by €0.6 million, from €1.6 million in the six-month period ended 30 June
2020 to €1.0 million in the six-month period ended 30 June 2021. These expenses include the restructuring
costs in relation to organizational changes, running costs of closed plants, costs for process improvement and supply chain projects.
Other operating expenses
Other operating expenses increased by €4.7 million, from €7.0 million in the six-month period ended 30 June
2020 to €11.7 million in the six-month period ended 30 June 2021. These expenses are largely related to employee incentives, amortization of intellectual property, professional fees incurred in connection with specific projects.
Net finance expenses
Net finance expense for six-month period ended June 30, 2021 amounted to €175.8 million, compared to net
finance expense of €118.9 million for the in the six-month period ended 30 June 2021 ended June 30, 2020.
Gross profit by Category Q2' 21 Q2' 20 H1' 21 H1' 20
Million euro 2021 2020 2021 2020
Ceramics and Furniture and Accessories 34.7 7.9 65.2 34.5
Fittings 25.5 15.0 51.8 36.8
Bathing & Wellness 7.5 3.9 15.5 10.4
Total 67.7 26.8 132.4 81.6
Gross profit margin by Category Q2' 21 Q2' 20 H1' 21 H1' 20
Ceramics and Furniture and Accessories 38.2% 15.5% 36.7% 26.7%
Fittings 34.9% 31.5% 35.0% 32.9%
Bathing & Wellness 33.5% 27.7% 33.7% 29.3%
Total 36.3% 23.8% 35.6% 29.5%
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
18
The finance expense mainly reflects the interest expense on debt, interest on net defined benefit liabilities and
unrealized impact of the revaluation of the debt held in other currencies than the Euro. Changes in conversion
rates of other currencies at the end of the six-month period ended June 30, 2021 have been unfavorable and generated a loss of €34.3 million (€16.2 million gain for the six-month period ended June 30, 2020).
Income tax expense
In the six-month period ended 30 June 2021, there is a net income tax expense of €2.7 million compared to €2.5 million for the six-month period ended June 30, 2020.
EBITDA, EBITDA plus restructuring and related costs, Adjusted EBITDA and Pro Forma Adjusted EBITDA
EBITDA is defined as (loss)/profit for the period and adding back (a) depreciation, (b) amortization, (c) income tax expense, (d) net foreign gains or (losses) on financing activities, and (e) finance expense /
(gain) net.
EBITDA plus restructuring and related costs is defined as EBITDA adding back restructuring and related
costs that represent charges related to restructuring programs.
Adjusted EBITDA is defined as EBITDA plus restructuring and related costs and adding back (a) costs associated with operational improvement programs that primarily represent professional fees associated with
strategic business and process initiatives during this period, and (b) professional and other fees incurred for special projects during the relevant period.
(a) Excluding net foreign exchange (gains) or losses on financing activities. (b) EBITDA plus restructuring and related costs represents EBITDA and adding back charges related to restructuring programs and
includes impairment of non-financial assets. The charges related to our restructuring programs include charges incurred in relation to our manufacturing footprint optimization and production optimization.
(c) Operational improvement programs primarily represent professional fees associated with strategic business and process initiatives (d) Other represents financing and transaction expenses for our special projects during the year, pension administration costs and
MENA profit sharing costs.
Pro Forma Adjusted EBITDA is defined as Adjusted EBITDA as further adjusted to include certain adjustments for (a) estimated cost savings related to manufacturing productivity improvements implemented
or in-progress as of 30 June 2021, (b) estimated cost savings related to procurement initiatives implemented
or in-progress as of 30 June 2021, and (c) estimated cost savings related to supply chain productivity improvements implemented or in-progress as of 30 June 2021.
Q2' 21 Q2' 20 H1' 21 H1'20
Million euro Unaudited Unaudited Unaudited Unaudited
Loss for the period (50.6) (59.7) (152.8) (125.2)
Depreciation 7.1 6.8 14.1 13.8
Amortization 4.2 4.1 8.4 8.2
Income tax expense 1.2 1.0 2.7 2.5
Net foreign exchange losses on financing activities (11.4) (17.2) 34.3 (16.2)
Finance expense / (gain), net (a) 72.5 67.9 141.5 135.1
EBITDA 23.0 2.9 48.2 18.2
Restructuring and related costs 0.3 0.6 1.0 1.6
EBITDA plus restructuring and related costs (b) 23.3 3.5 49.2 19.8
Operational improvement programs (c) 0.2 0.1 0.4 0.5
Other (d) 1.5 (0.8) 1.7 (0.2)
Adjusted EBITDA 25.0 2.8 51.3 20.1
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
19
(e) Represents the effect of estimated total cost savings from implemented and ongoing initiatives to improve manufacturing
productivity through waste reduction and increase in automation, as well as direct and indirect labor efficiency improvements across all of our plants. We have also focused on energy reduction and reducing scrap rates in our plants.
(f) Represents the effect of estimated total increased procurement savings from implemented and ongoing initiatives to improve vendor management, component sourcing from Asia and the implementation of value engineering. We have centralized our procurement functions in order to leverage scale and buy efficiently.
(g) Represents the effect of estimated total cost savings from implemented and ongoing initiatives to improve supply chain productivity, the layout and optimization of our spokes and the optimization of our outbound and inbound lanes. We have also improved packaging and direct delivery options with our customers.
Each of EBITDA, EBITDA plus restructuring and related costs, Adjusted EBITDA and Pro Forma Adjusted EBITDA
are non-IFRS measures (“Non-IFRS Measures”). We use Non-IFRS Measures as measures of our operating cash flow generation and the liquidity of our business. Non-IFRS Measures are not measures of financial
performance calculated in accordance with IFRS and should not be viewed as a supplement to, not a substitute for, our results of operations presented in accordance with IFRS. Non-IFRS Measures should not be considered
as alternatives to other indicators of our operating performance, cash flows or any other measure of
performance derived in accordance with IFRS. Non-IFRS Measures as presented in this Report may differ from and may not be comparable to similarly titled measures used by other companies and differ from “Consolidated
EBITDA” contained in the indenture governing the Notes. We present Non-IFRS Measures for informational purposes only. This information includes the pro forma impact of ongoing operational improvement programs
and contains certain assumptions as to cost savings we expect to realize from our cost saving initiatives. We
cannot assure that these initiatives will realize these expected cost savings and that our financial results will not differ from the illustrative information we present. Our actual results may differ significantly from those
reflected in foregoing for a number of reasons, including, but not limited to, our failure to achieve our cost savings, differences in assumptions or estimates used to prepare such illustrative financial information. This
information does not represent the results we would have achieved had each of the operational improvement
programs and other transactions for which an adjustment is made, as applicable, occurred at the dates indicated. There is no assurance that items we have identified for adjustment as non-recurring will not recur in
the future or that similar items will not be incurred in the future. These amounts have not been, and, in certain cases, cannot be, audited, reviewed or verified by any independent auditors. This information is inherently
subject to risks and uncertainties. It may not give an accurate or complete picture of the financial condition or results of operations of the transactions for the periods presented, may not be comparable to our consolidated
financial statements or the other financial information included in this Offering Memorandum and should not be
relied upon when making an investment decision. We present EBITDA, Adjusted EBITDA and Pro Forma Adjusted EBITDA because we believe they are helpful to investors as measures of our operating performance
and ability to service our debt. EBITDA, Adjusted EBITDA and Pro Forma Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results
as reported under IFRS.
Last
For the year
endedH1' H1'
Twelve
months
Million euro Dec 31, 2020 2021 2020 June 30, 2021
Adjusted EBITDA 69.2 51.3 20.1 100.4
Pro Forma Manufacturing Productivity (e) 6.8
Pro Forma Procurement Savings (f) 4.4
Pro Forma Supply Chain Productivity (g) 1.9
Pro Forma Adjusted EBITDA 113.5
Pro Forma Adjusted EBITDA Margin 15.84%
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
20
Liquidity and capital resources
The following summarizes our cash flows in the periods presented:
Cash flows from operating activities
For the six-month period ended June 30, 2021, cash used in operating activities was €3.5 million driven by a
cash inflow from operations of €11.8 million and tax and interest payments of €8.3 million. For the six-month period ended June 30, 2020, cash generated by operating activities was €0.0 million driven by a cash inflow from operations of €3.4 million and tax and interest payments of €3.4 million.
Cash flows from investing activities
For the six-month period ended 30 June 2021, cash used in investing activities was €13.0 million compared to €7.6 million for the six-month period ended 30 June 2020 mainly reflecting (i) acquisitions of equipment, (ii) spend of software and product.
Cash flows from financing activities
For the six-month period ended 30 June 2021, cash outflow from financing activities was €6.8 million compared to €9.0 million inflow in the six-month period ended 30 June 2020, which mainly reflects the proceeds from our Egyptian credit lines and a net decrease in drawings on our factoring lines.
Net cash flow
As a result of the above, our net cash outflow for the six-month period ended 30 June 2021 was a €16.3 million outflow compared to a €1.4 million inflow in the six-month period ended 30 June 2020.
For the six month period ended 30 June 2021 30 June 2020
Million euro Unaudited Unaudited
Cash flow from operating activities 3.5 0.0
Cash flow from investing activities (13.0) (7.6)
Cash flow from financing activities (6.8) 9.0
Net increase / (decrease) in cash and cash equivalents (16.3) 1.4
Exchange rate effects 1.5 (0.3)
Cash and cash equivalents at beginning of period 104.2 42.0
Cash and cash equivalents at end of period 89.4 43.1
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
21
Working Capital
Working capital is calculated as the sum of inventories plus trade and other receivables less trade and other
payables less provisions:
Our working capital increased by €32.4 million from €47.3 million for the year ended 31 December 2020 to
€79.7 million in the six-month period ended 30 June 2021. Our operating working capital increased by €36.0 million from €67.7 million for the year ended 31 December 2020 to €103.7 million in the six-month period ended
30 June 2021. This increase is due to the high level of activity over the the six-month period ended 30 June
2021.
Liquidity arrangements
We seek to manage liquidity risk by maintaining sufficient cash, maintaining available funding through an adequate amount of committed credit facilities, factoring lines and use of trade supplier credit terms.
As of 30 June 2021, we had cash and cash equivalents of €89.4 million, debtor factoring arrangements in each of UK, Italy and France whereby cash is made available to our Group in consideration for certain trade receivables generated by our business in these countries, overdraft facilities in Egypt and Bulgaria.
As of 30 June 2021, our overdraft facilities in Egypt were drawn for €17.0 million (€12.9 million as of 31
December 2020); our syndicated loan was drawn for €65.0 million (€64.9 million as of 31 December 2020); our recourse factoring facilities were drawn by €13.0 million (€15.2 million as of 31 December 2020); amounts
outstanding linked to sales and lease back arrangements amounted to €9.0 million (€10.2 million as of
December 2020).
As part of the offering of the Notes, certain of the proceeds of the notes will be used to repay our syndicated
loan in Bulgaria and have escrowed a portion of the proceeds of the Notes for that purpose. In addition, as part of the transaction offering the Notes, we have entered into a new revolving credit facility in an amount of
€15.0 million.
Capital expenditure
Capital expenditure is generally required to maintain our infrastructure, implement productivity programs, develop new products, enhance manufacturing facilities, improve health and safety equipment, create moulds
and tools, implement flexible manufacturing capabilities and develop software. We review all the needed capital
expenditure projects on a centralized basis through an investment committee, which allows us to monitor and control project-specific capital expenditures. Prior to the procurement decision, we analyse the capital
expenditure financing options available, so we have the funds necessary to maintain our operations, complete projects underway and achieve our stated objectives.
Our capital expenditure for the six months ended 30 June 2021 represents 3.6% of revenues.
As at
Million euro 30 June 2021 31 December 2020
Inventories 139.1 113.3
Trade and other receivables 166.1 138.7
Trade and other payables (220.5) (199.1)
Provisions (5.0) (5.6)
Working capital 79.7 47.3
Adjustments:
Non-recourse factoring 21.7 17.2
Restructuring provisions reported as 'current provisions' 2.3 3.2
Operating working capital 103.7 67.7
Ideal Standard International S.A. – Interim Financial Information for the six-month period ended 30 June 2021
22
Pension obligations
As of 30 June 2021, liabilities arising from employee benefits amounted to €166.2 million (€167.9million as of 31 December 2020).
In connection with the offering of the Notes, we have agreed to contribute certain additional amounts into our
United Kingdom pension schemes as follows: £3.0 million within 30 days of issuance of the Notes and thereafter
an additional £2.0 million on the first anniversary of the first payment, £2.0 million on the second anniversary of the first payment and £3.0 million on the third anniversary of the first payment. These amounts may not be
paid subject to certain conditions being met in the next three years. We will not create an escrow or similar account for these amounts which are expected to be paid out of operating cashflows. We have signed a
memorandum of understanding with the pension trustees and will implement these arrangements as soon as practicable. These pension obligations will be in addition to any contributions payable by us pursuant to the schedule of contributions relating to our United Kingdom pension plan.
Off-balance sheet arrangements
As of 30 June 2021, we had no off-balance sheet arrangements.