Interim / Quarterly Report • Aug 26, 2022
Interim / Quarterly Report
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Period ended June 30, 2022
Registered office: Franklin Rooseveltlaan 172-174 8790 Waregem, België Registratienummer: 0671.974.626
| 1. | DECLARATION REGARDING THE INFORMATION PROVIDED IN THIS REPORT3 | |
|---|---|---|
| 2. | KEY FIGURES 4 | |
| 3. | MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS5 | |
| 3.1. | GROUP FINANCIAL HIGHLIGHTS 5 | |
| 3.2. | BUSINESS UPDATE5 | |
| 3.3. | CYRILLE RAGOUCY, CEO AND CHAIRMAN OF THE BOARD OF BALTA SAID,5 | |
| 4. | OPERATING REVIEW PER SEGMENT 6 | |
| 4.1. | REVENUE AND ADJUSTED EBITDA PER SEGMENT 6 | |
| 4.1.1. | Q2 20226 | |
| 4.1.2. | H1 2022 6 | |
| 4.2. | EUROPE7 | |
| 4.3. | UNITED STATES 7 | |
| 5. | OTHER FINANCIAL ITEMS REVIEW8 | |
| 5.1. | INTEGRATION AND RESTRUCTURING EXPENSES FOR CONTINUING OPERATIONS 8 | |
| 5.2. | NET FINANCING EXPENSES FOR CONTINUING OPERATIONS8 | |
| 5.3. | TAXATION FOR CONTINUING OPERATIONS8 | |
| 5.4. | EARNINGS PER SHARE FOR CONTINUING OPERATIONS8 | |
| 5.5. | EARNINGS PER SHARE FOR DISCONTINUED OPERATIONS 8 | |
| 5.6. | CASHFLOW AND NET DEBT8 | |
| 6. | RISK FACTORS 8 | |
| 7. | CONSOLIDATED INTERIM FINANCIAL STATEMENTS9 | |
| 7.1. | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 9 | |
| 7.2. | CONSOLIDATED STATEMENT OF FINANCIAL POSITION10 | |
| 7.3. | CONSOLIDATED STATEMENT OF CASH FLOWS 11 | |
| 7.4. | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY12 | |
| 7.5. | DISCONTINUED OPERATIONS 13 | |
| 7.6. | SELECTED EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 15 | |
| 7.6.1. | SIGNIFICANT ACCOUNTING POLICIES15 | |
| 7.6.2. | SEGMENT REPORTING16 | |
| 7.6.3. | INTEGRATION AND RESTRUCTURING EXPENSES17 | |
| 7.6.4. | GOODWILL 17 | |
| 7.6.5. | NET DEBT RECONCILIATION17 | |
| 7.6.6. | RELATED PARTY TRANSACTIONS 17 | |
| 7.6.7. | COMMITMENTS18 | |
| 7.6.8. | EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE18 | |
| 8. | GLOSSARY: ALTERNATIVE PERFORMANCE MEASURES 19 |
We, the undersigned declare that, to the best of our knowledge, the condensed financial statements for the six-months period ended June 30, 2022, which have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole, and that the half-year report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements, together with a description of the principal risks and uncertainties for the remaining six months of the financial year.
| Andy Rogiest | Chief Financial Officer |
|---|---|
| Cyrille Ragoucy | Chairman of the Board and Chief Executive Officer |
| (€ thousands) | H1 2022 | H1 2021 (1) |
|---|---|---|
| Results from continuing operations | ||
| Revenue | 164,181 | 132,059 |
| Adjusted EBITDA | 16,946 | 20,602 |
| Adjusted EBITDA Margin | 10.3% | 15.6% |
| Integration and restructuring expenses | (1,301) | (6,124) |
| EBITDA | 15,645 | 14,478 |
| Depreciation / amortisation | (8,471) | (8,377) |
| Operating profit / (loss) for the period | 7,174 | 6,101 |
| Net finance expenses | (11,603) | (15,290) |
| Income tax benefit / (expense) | (2,764) | 635 |
| Profit/(loss) for the period from continuing operations | (7,193) | (8,554) |
| Cash flow | ||
| 51,394 | 104,440 | |
| Cash, cash equivalents and bank overdrafts at the beginning of the period from continuing operations |
||
| Net cash generated / (used) by operating activities | 872 | 9,461 |
| Net cash used by investing activities | 158,624 | (4,373) |
| Net cash generated / (used) by financing activities | (175,054) | (20,089) |
| Financing and cash transactions between continued and discontinued | ||
| operations | 363 | (4,233) |
| Cash, cash equivalents and bank overdrafts at the end of the period | ||
| from continuing operations | 36,198 | 85,206 |
(1) Restated for the impact of the Discontinued Operations in accordance with IFRS 5
In relation to Balta's financing agreements, the documentation provides for the effect of changes in accounting standards to be neutralized. As such, the application of IFRS 16 had no consequence for the Group's financing.
| (€ thousands) | H1 2022 | H1 2021 |
|---|---|---|
| Net debt1 | 118,381 | 260,274 |
| Leverage | 3.6 | 3.0 |
Note 1: IFRS 16 effect is excluded from the leverage comparison (see glossary).
Balta Group nv continues to be faced with a challenging macro-economic environment creating strongly inflated raw materials, energy and transportation costs. Multiple price increases have been implemented across all lines of the business in response to these input cost increases. In Europe, where cost inflation is continuing at high rates, more pricing action is required and is being implemented.
Our US Division, which now represents approximately 50% of our business, saw its strong market position in H1 translated into sales and EBITDA growth.
"H1 2022 marked a new and important chapter in the history of the company with the closing of the Transaction with Victoria PLC and transformation of Balta Group nv into a more focused and resilient business.
During H1, we experienced a strong order book in our US business, with higher costs that were promptly passed on to our customers. In our European business, we suffered from the significant headwinds caused by unprecedented and sudden cost increases which require further commercial action and recently lower footfall in shops in many of our Residential markets."
1 Adjusted for residual anticipated payments on the Transaction
2 As defined in the SSN facility agreements, excluding IFRS16 impact but including sale and leasebacks
| Q2 | Q2 | o/w organic | o/w | ||
|---|---|---|---|---|---|
| (€ million, unless otherwise mentioned) | 2022 | 2021 | % Change | growth | FX |
| Europe | 42.4 | 35.9 | 17.9% | ||
| US | 46.8 | 30.9 | 51.6% | ||
| Consolidated Revenue | 89.2 | 66.8 | 33.4% | 25.7% | 7.8% |
| Europe | 1.4 | 5.3 | (74.4)% | ||
| US | 9.6 | 6.2 | 54.4% | ||
| Consolidated Adjusted EBITDA | 10.9 | 11.5 | (5.0)% | (14.1)% | 9.0% |
| Europe | 3.2% | 14.8% | |||
| US | 20.5% | 20.1% | |||
| Consolidated Adjusted EBITDA Margin | 12.3% | 17.2% |
| (€ million, unless otherwise mentioned) | H1 2022 |
H1 2021 |
% Change | o/w organic growth |
o/w FX |
|---|---|---|---|---|---|
| Europe | 82.9 | 70.8 | 17.1% | ||
| US | 81.3 | 61.2 | 32.7% | ||
| Consolidated Revenue | 164.2 | 132.1 | 24.3% | 18.6% | 5.7% |
| Europe | 1.3 | 9.6 | (86.0)% | ||
| US | 15.6 | 11.0 | 42.5% | ||
| Consolidated Adjusted EBITDA | 17.0 | 20.6 | (17.6)% | (24.6)% | 7.0% |
| Europe | 1.6% | 13.6% | |||
| US | 19.2% | 17.9% | |||
| Consolidated Adjusted EBITDA Margin | 10.3% | 15.6% |
Our Europe division realized H1 2022 revenue of €82.9m, up 17.1% versus the first half of 2021. While on a like for like basis, the volumes for the semester are flat, the revenue increase is mainly driven by the several price increases that were implemented and trading of some PP products to end-customers in specific markets3. The European Commercial Tiles business showed more resilience in demand than the European Broadloom business.
Adjusted EBITDA in H1 2022 was €1.3m, down from €9.6m in H1 2021. The disappointing H1 performance was largely driven by the high input cost pressure and timing delays in passing these on to customers especially in the beginning of the year.
Our US division realized an H1 2022 revenue of €81.3m, up 32.7% versus the first half of 2021. This is the combined effect of sales volumes recovering, sales price increases to offset the increased input costs as well as favorable FX translation. Sales volumes have however not yet fully reached pre-COVID 19 levels in H1.
Adjusted EBITDA in H1 2022 was €15.6m, up from 11.0m in H1 2021. Adjusted EBITDA margin increased from 17.9% in H1 2021 to 19.2% in H1 2022 reflecting the volume growth while fully offsetting increased input costs.
Following the closure of the Transaction a number of changes in the executive committee took place:
Jan-Christian Werner has left the Group and was immediately succeeded as Chief Financial Officer by Andy Rogiest. Andy Rogiest has joined the company on 6 June after having held several senior Finance positions at Ontex, Imperial Meat Products and Home Health Products Group.
Emmanuel Rigaux, Managing Director Commercial & Residential Europe, decided to pursue opportunities outside of the Group and has left the organisation on 30 June. A search for his replacement is underway while the division is being directly managed by Cyrille Ragoucy in the interim.
3 These were not recorded in the division's prior year's comparator
Non-recurring expenses for integration and restructuring over the first six months of 2022 amounted to €1.3m, as compared to €6.1m in the same period last year. The expense in the current period is mainly driven by the one-off cost for attracting and retaining employees to Balta Group nv after the Disposal.
Net finance expenses for the first six months of 2022 are €11.6m, as compared to €15.3m in the same period last year. This decrease is mainly driven by the lower financing cost of the group since the debt repayments after the Disposal.
There is an income tax expense of €2.8m for the six months ended 30 June 2022, as compared to an income tax benefit of €0.6m in the same period last year. The H1 2022 net expense results from taxing the strong results of our US division. The normalized effective tax rate of the Group is around 25%.
The first six months of 2022 resulted in a loss of €0.20 per share, compared to a loss of €0.24 per share for the same period last year.
The first six months of 2022 resulted in a loss of €1.53 per share, compared to a gain of €0.15 per share for the same period last year. The loss is caused by the mandatory recycling of currency translation adjustments (CTA) of the discontinued operations at the moment of loss of control which are recycled over the income statement as detailed in note 7.5.
Pro forma Net Debt at the end of June 2022 was €153.4m, versus €330.7m at the end of December 2021. The decrease in Net Debt was mainly driven by the sale of the discontinued operations (pro forma Net Debt H1 2022 of €153.4m includes €30.5m of IFRS16 impact).
There are no material changes related to the risks and uncertainties for the Group as explained in the section "Summary of main risks" of the 2021 annual report.
| (€ thousands) | H1 2022 | H1 2021 (2) |
|---|---|---|
| I. CONSOLIDATED INCOME STATEMENT | ||
| Revenue | 164,181 | 132,059 |
| Raw material expenses | (84,675) | (52,180) |
| Changes in inventories | 14,415 | 4,107 |
| Employee benefit expenses | (39,313) | (32,609) |
| Other income | (31) | (237) |
| Other expenses | (37,633) | (30,538) |
| Depreciation/ amortization | (8,471) | (8,377) |
| Adjusted Operating Profit (1) | 8,475 | 12,225 |
| Integration and restructuring expenses | (1,301) | (6,124) |
| Operating profit / (loss) (1) | 7,174 | 6,101 |
| Finance income | 7 | (0) |
| Finance expenses | (11,610) | (15,290) |
| Net finance expenses | (11,603) | (15,290) |
| Profit / (loss) before income taxes | (4,429) | (9,189) |
| Income tax benefit / (expense) | (2,764) | 635 |
| Profit / (loss) for the period from continuing operations | (7,193) | (8,554) |
| Profit/ (loss) for the period from discontinued operations | (55,083) | 5,232 |
| Profit/(loss) for the period | (62,276) | (3,322) |
| Attributable to: | ||
| Equity holders | (62,276) | (3,322) |
| Non-controlling interest | - | - |
| II. CONSOLIDATED OTHER COMPREHENSIVE INCOME | ||
| Items in other comprehensive income that may be subsequently reclassified to P&L |
||
| Exchange differences on translating foreign operations | 13,984 | 3,496 |
| Changes in fair value of hedging instruments qualifying for cash flow hedge | 152 | (69) |
| accounting Items in other comprehensive income that will not be reclassified to P&L |
||
| Changes in deferred taxes | 242 | (74) |
| Changes in employee defined benefit obligations | (288) | 275 |
| Other comprehensive income for the period, net of tax for continuing | 14,089 | 3,628 |
| operations | ||
| Other comprehensive income for the period, net of tax for | (1,762) | (3,616) |
| discontinued operations | ||
| Total comprehensive income for the period | (49,949) | (3,310) |
| Basic and diluted earnings per share attributable to the ordinary | ||
| equity holders of the company | (1.73) | (0.09) |
(2) Restated for the impact of the Discontinued Operations in accordance with IFRS 5
(1) Adjusted Operating Profit / Operating profit/(loss) are non-GAAP measures. Adjusted EBITDA is calculated as Adjusted Operating Profit (Loss) adjusted for depreciation and amortization charges.
| (€ thousands) | 30 June 2022 | 31 Dec 2021 |
|---|---|---|
| Property, plant and equipment | 106,197 | 105,943 |
| Of which IFRS 16 related right-of-use assets (excluding sale-and- | 27,973 | 28,892 |
| Land and buildings | 51,492 | 52,390 |
| Plant and machinery | 47,730 | 47,134 |
| Other fixtures and fittings, tools and equipment | 6,975 | 6,420 |
| Goodwill | 105,550 | 101,110 |
| Other intangible assets | 6,209 | 6,424 |
| Deferred income tax assets | 5,798 | 5,027 |
| Trade and other receivables | 519 | 537 |
| Total non-current assets | 224,273 | 219,041 |
| Inventory | 81,786 | 62,812 |
| Trade and other receivables | 37,246 | 23,745 |
| Current income tax assets | 5 | 9 |
| Cash and cash equivalents | 36,198 | 51,394 |
| Assets from discontinued operations | - | 329,983 |
| Total current assets | 155,235 | 467,943 |
| Total assets | 379,508 | 686,984 |
| Share capital | 252,950 | 252,950 |
| Share premium | 65,660 | 65,660 |
| Other comprehensive income | 9,253 | (4,836) |
| Retained earnings | (185,743) | (15,140) |
| Elements of comprehensive income from discontinued operations | - | (162,767) |
| Other reserves | (39,876) | (39,876) |
| Total equity | 102,244 | 95,991 |
| Senior Secured Notes | 128,408 | 233,744 |
| Bank and Other Borrowings | 43,159 | 43,687 |
| Of which IFRS 16 related lease liabilities (excluding sale-and-leaseback) | 25,421 | 25,620 |
| Deferred income tax liabilities | 9,094 | 8,459 |
| Provisions for other liabilities and charges | 2,220 | 2,025 |
| Employee benefit obligations | 507 | 762 |
| Total non-current liabilities | 183,388 | 288,678 |
| Senior Secured Notes | 1,373 | 6,714 |
| Bank and Other Borrowings | 7,069 | 60,393 |
| Of which IFRS 16 related lease liabilities (excluding sale-and-leaseback) | 5,040 | 5,514 |
| Derivative financial instruments | - | (0) |
| Other payroll and social related payables | 11,869 | 14,638 |
| Trade and other payables | 71,905 | 42,729 |
| Income tax liabilities | 1,660 | 622 |
| Liabilities from discontinued operations | - | 177,218 |
| Total current liabilities | 93,876 | 302,314 |
| Total liabilities | 277,264 | 590,992 |
| Total equity and liabilities | 379,508 | 686,984 |
| (€ thousands) | H1 2022 | H1 2021 (3) |
|---|---|---|
| I. CASH FLOW FROM OPERATING ACTIVITIES | ||
| Net profit / (loss) from the period for continuining operations | (7,193) | (8,554) |
| Adjustments for: | ||
| Income tax expense/(income) | 2,764 | (635) |
| Finance income | (7) | - |
| Financial expense | 11,610 | 15,290 |
| Depreciation, amortisation | 8,471 | 8,377 |
| (Gain)/loss on disposal of non-current assets | (2) | 3 |
| Movement in provisions and deferred revenue | 3,295 | (2,193) |
| Expense recognised in respect of equity-settled share-based payments | (66) | - |
| Fair value of derivatives | 125 | 45 |
| Cash generated before changes in working capital | 18,997 | 12,333 |
| Changes in working capital: | ||
| Inventories | (22,037) | (5,737) |
| Trade receivables | (6,249) | (3,506) |
| Trade payables | 20,565 | 10,761 |
| Other working capital | (7,830) | (66) |
| Cash generated after changes in working capital | 3,446 | 13,785 |
| Net income tax (paid) | (2,574) | (4,324) |
| Net cash generated / (used) by operating activities | 872 | 9,461 |
| II. CASH FLOW FROM INVESTING ACTIVITIES | ||
| Acquisition of property, plant and equipment | (4,951) | (4,327) |
| Acquisition of intangibles | (42) | (152) |
| Proceeds from divested business | 163,618 | 107 |
| Net cash used by investing activities | 158,624 | (4,373) |
| IIII. CASH FLOW FROM FINANCING ACTIVITIES | ||
| Interest and other finance charges paid, net | (15,590) | (12,512) |
| Repayments of Senior Secured Notes | (102,818) | (243) |
| Repayments of borrowings with third parties | (56,646) | (7,335) |
| Net cash generated / (used) by financing activities | (175,054) | (20,089) |
| NET INCREASE/ (DECREASE ) IN CASH AND BANK OVERDRAFTS | (15,558) | (15,001) |
| Cash, cash equivalents and bank overdrafts at the beginning of the | ||
| period from continuing operations | 51,394 | 104,440 |
| Financing and cash transactions between continued and discontinued | ||
| operations | 363 | (4,233) |
| Cash, cash equivalents and bank overdrafts at the end of the period | ||
| from continuing operations | 36,198 | 85,206 |
| Cash, cash equivalents and bank overdrafts at the end of the period from | ||
| discontinued operations | - | 2,263 |
(3) Restated for the impact of the Discontinued Operations in accordance with IFRS 5
| Share capital |
Share premium |
Other comprehensive income |
Retained earnings |
Other reserves |
Total | Elements of comprehensive income from discontinued |
Total equity |
|
|---|---|---|---|---|---|---|---|---|
| (€ thousands) | operations | |||||||
| Balance at 31 December 2020 | 252,950 | 65,660 | (13,632) | 1,373 | (39,876) | 266,475 | (40,006) | 226,469 |
| Profit / (loss) for the period | - | - | - | (16,526) | - | (16,526) | (112,712) | (129,238) |
| Other comprehensive income | ||||||||
| Exchange differences on translating foreign operations |
- | - | 8,804 | - | - | 8,804 | (10,375) | (1,571) |
| Changes in fair value of hedging instruments qualifying for cash flow hedge accounting |
- | - | (117) | - | - | (117) | - | (117) |
| Cumulative changes in deferred taxes | - | - | (17) | - | - | (17) | (116) | (133) |
| Cumulative changes in employee defined benefit obligations |
- | - | 125 | - | - | 125 | 442 | 568 |
| Total comprehensive income for the period |
- | - | 8,796 | (16,526) | - | (7,730) | (122,761) | (130,491) |
| Equity-settled share-based payment plans | - | - | - | 13 | - | 13 | - | 13 |
| Balance at 31 December 2021 | 252,950 | 65,660 | (4,836) | (15,140) | (39,876) | 258,759 | (162,767) | 95,991 |
| Adoption of accounting policies | - | - | - | - | - | - | - | - |
| Balance 1 January 2022 | 252,950 | 65,660 | (4,836) | (15,140) | (39,876) | 258,759 | (162,767) | 95,991 |
| Profit / (loss) for the period | - | - | - | (7,193) | - | (7,193) | (55,083) | (62,276) |
| Other comprehensive income Exchange differences on translating foreign operations |
- | - | 13,984 | - | - | 13,984 | 54,863 | 68,847 |
| Changes in fair value of hedging instruments qualifying for cash flow hedge accounting |
- | - | 152 | - | 152 | - | 152 | |
| Cumulative changes in deferred taxes | - | - | 242 | - | - | 242 | 158 | 399 |
| Cumulative changes in employee defined | - | - | (288) | - | - | (288) | (565) | (853) |
| benefit obligations | ||||||||
| Total comprehensive income for the | - | - | 14,089 | (7,193) | - | 6,896 | (627) | 6,269 |
| period | ||||||||
| Change in scope (4) | - | - | - | (163,394) | - | (163,394) | 163,394 | - |
| Equity-settled share-based payment plans | - | - | - | (16) | - | (16) | - | (16) |
| Balance at 30 June 2022 | 252,950 | 65,660 | 9,253 | (185,743) | (39,876) | 102,244 | - | 102,244 |
(4) Change in scope reflects the transfer of the elements of comprehensive income from discontinued operations to retained earnings of the group at completion date of the divestment without currency translation adjustments which are recycled over the income statement
On 4 April 2022, Balta Group nv announced the completion of the sale of its Rugs, Residential polypropylene (PP) and Non-Woven businesses (the Discontinued Operations), together with the Balta brand, to Victoria PLC (the Transaction). As a result, discontinued operations are shown as one line in the financial statements as detailed below.
Intercompany transactions between the continued and discontinued operations have been eliminated.
| (€ thousands) | Q1 2022 | H1 2021 |
|---|---|---|
| Consdensed income statement of discontinued operations | ||
| Revenue | 96,729 | 186,247 |
| Raw material expenses | (45,541) | (90,597) |
| Changes in inventories | 291 | 7,882 |
| Employee benefit expenses | (25,763) | (52,886) |
| Other income | 1,879 | 2,264 |
| Other expenses | (20,455) | (29,311) |
| Depreciation / amortisation | (10,857) | |
| Adjusted Operating Profit 1 | 7,140 | 12,743 |
| Loss on sale of the Disposal (2) | (915) | |
| Integration and restructuring expenses | (4,035) | (4,846) |
| Operating profit / (loss) | 2,190 | 7,897 |
| Finance income | 36 | 0 |
| Finance expenses | (58,197) | (421) |
| Net finance expenses | (58,161) | (420) |
| Profit / (loss) before income taxes | (55,971) | 7,477 |
| Income tax benefit / (expense) | 888 | (2,245) |
| Profit / (loss) for the period from discontinued operations | (55,083) | 5,232 |
| Attributable to: | ||
| Equity holders | (55,083) | 5,232 |
| Non-controlling interest | - | - |
| II. CONSOLIDATED OTHER COMPREHENSIVE INCOME | ||
| Items in other comprehensive income that may be subsequently reclassified to P&L | ||
| Exchange differences on translating foreign operations | (1,632) | (3,546) |
| Changes in fair value of hedging instruments qualifying for cash flow hedge accounting | 8 | |
| Items in other comprehensive income that will not be reclassified to P&L | ||
| Changes in deferred taxes | 41 | 8 |
| Changes in employee defined benefit obligations | (178) | (79) |
| Other comprehensive income for the period, net of tax, from discontinued | (1,762) | (3,616) |
| Total comprehensive income for the period | (56,845) | 1,615 |
| Basic and diluted earnings per share from discontinued operations attributable to | ||
| the ordinary equity holders of the company | (1.53) | 0.15 |
| (2) Details of the sale on the Disposal | ||
| Total disposal consideration | 163,671 | |
| Carrying amount of net asses sold | 164,586 | |
| Loss on sale before reclassification of foreign currency translation reserve | (915) | |
| Reclassification of foreign currency translation reserve | (56,496) | |
| Loss of sale on the Disposal | (57,410) |
| (€ thousands) | Note | Q1 2022 | H1 2021 |
|---|---|---|---|
| Condensed cashflow statement of discontinued operations | |||
| Net cash generated / (used) by operating activities | 2,838 | 7,931 | |
| Net cash used by investing activities | (5,209) | (8,563) | |
| Net cash generated / (used) by financing activities | (1,176) | (3,187) | |
| NET INCREASE/ (DECREASE) IN CASH AND BANK OVERDRAFTS | (3,547) | (3,820) | |
| Cash, cash equivalents and bank overdrafts at the beginning of the period | 3,909 | 1,849 | |
| Exchange gains/(losses) on cash and cash equivalents | - | ||
| Financing and cash transactions between continued and discontinued operations | (363) | 4,233 | |
| Cash, cash equivalents and bank overdrafts at the end of the period | - | 2,263 |
These consolidated condensed interim financial statements for the six months ended June 30, 2022 have been prepared in accordance with IAS 34 Interim financial reporting. They do not include all the notes that are normally included in an annual report. Accordingly, this report is to be read in conjunction with the annual report for the year ended December 31, 2021 and any public announcements made by the Balta Group during the interim reporting period.
The amounts in this document are presented in thousands of euro, unless otherwise stated. Rounding adjustments have been made in calculating some of the financial information included in these consolidated condensed interim financial statements.
The accounting policies are consistent with those of the previous financial year and corresponding interim period, except for the adoption of new and amended standards as set out below.
The following new standards, amendments and interpretations to standards have been issued, but have not been endorsed by the European Union or are considered to have a limited impact on the financial statements of 2022. The Group intends to adopt these standards and interpretations if they have a material impact and when they become effective.
Segment information is presented in respect of the Company's business segments. The performances of the segments is reviewed by the chief operating decision maker, which is the Management Committee.
Following the completion of the Transaction the management structure has been changed to one management team for the United States and another separate management team for Europe, with significantly less central functions. Both management teams have the following main functions: production, procurement, HR, product development, supply chain and finance. The economic characteristics, the growth trends, supply chain evolutions and key value drivers differ significantly in Europe and US. In Europe, the two plants, Tielt and Zele, are operationally managed together under the same leadership, for resource allocation, capital expenditure, supply chain and manufacturing to produce carpet tiles and broadlooms for our European Commercial and Residential businesses (including exports to the rest of the world). Based on this analysis and starting immediately, our reporting will follow the management of the company and will now be Europe and United States vs Commercial and Residential previously.
| Previous | ||||
|---|---|---|---|---|
| reported | ||||
| (€ thousands) | H1 2022 | figures (1) | ||
| Revenue by segment for continuing operations | 164,181 | 132,059 | ||
| Europe | 82,912 | 70,826 | ||
| US | 81,270 | 61,233 | ||
| Discontinued Operations | 96,729 | 186,247 | ||
| Revenue by geography for continuing operations | 164,181 | 132,059 | ||
| Europe | 69,705 | 56,971 | ||
| North America | 83,859 | 63,943 | ||
| Rest of World | 10,618 | 11,145 | ||
| Discontinued Operations | 96,729 | 186,247 | ||
| Adjusted EBITDA by segment (1) for continuing operations | 16,946 | 20,602 | ||
| Europe | 1,329 | 9,644 | ||
| US | 15,617 | 10,958 | ||
| Discontinued Operations | 7,140 | 23,601 | ||
| Net Capital expenditure by segment for continuing operations | 5,076 | 4,373 | ||
| Europe | 2,747 | 3,354 | ||
| US | 2,329 | 1,019 | ||
| Discontinued Operations | 5,209 | 8,602 | ||
| Net inventory by segment for continuing operations | 81,786 | 62,812 | ||
| Europe | 51,231 | 40,966 | ||
| US | 30,556 | 21,846 | ||
| Discontinued Operations | - | 114,987 | ||
| Trade receivables by segment for continuing operations | 29,761 | 23,961 | ||
| Europe | 10,446 | 7,518 | ||
| US | 19,316 | 16,443 | ||
| Discontinued Operations | - | 25,556 |
Note 1: For Revenue, Adjusted EBITDA and Capital Expenditure, the previous reporting period refers to June 30, 2021. The previous reported period for Net Inventory and Trade Receivables refers to December 31, 2021.
The following table sets forth integration and restructuring expenses for the period ended June 30, 2022 and 2021. This comprises various items which are considered by management as non-recurring or unusual by nature.
| (€ thousands) | H1 2022 | H1 2021 |
|---|---|---|
| Integration and restructuring expenses | 1,301 | 6,124 |
| Corporate restructuring | 1,301 | 6,157 |
| Other | - | (32) |
Integration and restructuring expenses for the continuing operations over the first six months of 2022 amounted to €1.3m, as compared to €6.2m in the same period last year. The expense in the current period is mainly driven by the one-off cost for attracting and retaining employees to Balta Group nv after the Disposal.
The goodwill increased by €4.5m from €101.1m as of December 31, 2021 to €105.6m as of June 30, 2022. The increase in goodwill reflects the changes in foreign exchange rate from the US dollar to euro in relation to the acquisition of Bentley. The related foreign exchange fluctuations are presented in other comprehensive income.
The company performed an impairment analysis in line with the new CGU's which did not trigger the need for a goodwill adjustment.
The following table reconciles the net cash flow to movements in net debt:
| Liabilities from financing activities for continuing operations | Cash and Cash equivalents |
Cash and Cash equivalents |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Senior Secured Notes due after 1 year |
Senior Secured Notes due within 1 year |
Lease liabilities due after 1 year |
Lease liabilities due within 1 year |
Super Senior RCF |
Bentley RCF | Total gross financial debt continuing operations |
Cash and Cash equivalents continuing operations |
Total net financial debt continuing operations |
Total gross financial debt discontinued operations |
Cash and Cash equivalents discontinued operations |
Total net financial debt discontinued operations |
Total net financial debt | |
| (€ thousands) | |||||||||||||
| Net debt as at 31 December 2021 Changes in accounting policies |
(234,657) | (7,169) | (44,026) | (7,336) | (45,090) | (7,960) | (346,239) | 51,394 | (294,845) | (39,758) | 3,909 | (35,848) | (330,693) |
| Net debt as at 1 January | - | - | - | - | - | - | |||||||
| 2022 | (234,657) | (7,169) | (44,026) | (7,336) | (45,090) | (7,960) | (346,239) | 51,394 | (294,845) | (39,758) | 3,909 | (35,848) | (330,693) |
| Cashflows | - | - | - | - | - | - | - | (15,195) | (15,195) | - | 570 | 570 | (14,625) |
| Proceeds of borrowings with third parties Change in scope |
- | - | - | - | - | - | - | - | - | - | - | - | - |
| - | - | - | - | - | - | - | - | - | 38,643 | (4,480) | 34,164 | 34,164 | |
| Repayments of borrowings with third parties Non- cash movements |
102,818 | 2,504 | - | 3,448 | 45,090 | 8,107 | 161,968 | - | 161,968 | 1,114 | - | 1,114 | 163,082 |
| (including FX) | - | 1,329 | 1,182 | (3,102) | (31) | (147) | (770) | - | (770) | - | - | (770) | |
| Net debt as at 30 June 2022 | (131,839) | (3,337) | (42,844) | (6,990) | (31) | - | (185,040) | 36,198 | (148,842) | (0) | - | (0) | (148,842) |
The net debt at the end of H1 2022 amounts to €148.8m, compared to €330.7 per Q4 2021. The main movements are explained by repayments with the proceeds of the Disposal and debt items transferred to the buyer. The table above does not include the movements in capitalized financing fees or the interest paid.
The related party transactions with shareholders and parties related to the shareholders have not substantially changed in nature and impact compared to the year ended December 31, 2021 and hence no updated information is included in this interim report.
The remuneration of key management is determined on an annual basis, for which reason no further details are included in this interim report.
There is no significant evolution to report in terms of commitments. Please refer to Note 35 'Commitments' in the IFRS Financial Statements of the 2021 annual report.
No subsequent events occurred which could have a significant impact on the interim condensed financial statements of the Group per June 30, 2022.
The following alternative performance measures (non-IFRS) have been used as management believes that they are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. The alternative performance measures may not be comparable to similarly titled measures of other companies, have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results, our performance or our liquidity under IFRS.
Organic Growth is defined as growth excluding (i) FX impact, which comprises the translation of key foreign entities and (ii) M&A impact.
Adjusted EBITDA is defined as operating profit / (loss) adjusted for (i) the impact of the purchase price allocation mainly on change in inventories, (ii) gains on asset disposals, (iii) integration and restructuring expenses, (iv) depreciation / amortization and (v) impairment and write-off.
Adjusted EBITDA margin is defined as the Adjusted EBITDA as a percentage of revenue.
Adjusted Operating Profit/Loss is defined as operating profit/(loss) adjusted for (i) the impact of the purchase price allocation mainly on changes in inventory, (ii) gains on assets disposals, (iii) integration and restructuring expenses and (iv) impairment and write-off.
Gross Debt is defined as (i) Senior Secured Notes adjusted for the financing fees included in the carrying amount and (ii) Bank and other borrowings adjusted for capitalized financing fees.
Net Debt is defined as (i) Senior Secured Notes adjusted for the financing fees included in the carrying amount, (ii) Bank and other borrowings adjusted for capitalized financing fees and less cash and cash equivalents.
Net-investment or net-CAPEX is defined as of the sum of all investments in tangible and intangible fixed assets adjusted for proceeds from sales of fixed assets.
Leverage is defined as the ratio of Net Debt to Adjusted EBITDA (both excluding IFRS16 impact as per financing documentation, except for sale-and-leaseback transactions).
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