Interim / Quarterly Report • Aug 30, 2017
Interim / Quarterly Report
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Balta Group NV
Period Ended June 30, 2017
Balta Group NV
Registration number: 0671.974.626
Registered office: Wakkensteenweg 2, 8710 Sint-Baafs-Vijve, Belgium
| 1. | STATEMENT FROM MANAGEMENT3 | |
|---|---|---|
| 2. | GENERAL INFORMATION4 | |
| 3. | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 5 | |
| 4. | CONSOLIDATED STATEMENT OF FINANCIAL POSITION6 | |
| 5. | CONSOLIDATED STATEMENT OF CASH FLOWS 7 | |
| 6. | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 8 | |
| 7. | NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS 9 | |
| Note 1. Basis of preparation 9 | ||
| Note 2. Accounting policies 10 | ||
| Note 3. Non-GAAP measures 11 | ||
| Note 4. Critical accounting estimates and judgements 11 | ||
| Note 5. Segment Reporting 12 | ||
| Note 6. Initial Public Offering and listing on Euronext Brussels 13 | ||
| Note 7. Business Combinations 13 | ||
| Note 8. Integration and restructuring expenses 17 | ||
| Note 9. Income tax benefit / expense 17 | ||
| Note 10. Share capital and share premium 18 | ||
| Note 11. Preferred Equity Certificates 18 | ||
| Note 12. Other reserves 19 | ||
| Note 13. Property, plant and equipment 19 | ||
| Note 14. Inventories 19 | ||
| Note 15. Trade and other receivables 19 | ||
| Note 16. Derivative financial instruments 20 | ||
| Note 17. Senior Secured Notes 20 | ||
| Note 18. Bank and other borrowings 21 | ||
| Note 19. Additional disclosures on financial instruments 22 | ||
| Note 20. Financial risk management 23 | ||
| Note 21. Employee benefit obligations 23 | ||
| Note 22. Other payroll and social related payables 23 | ||
| Note 23. Trade and other payables 23 | ||
| Note 24. Dividends per share 23 | ||
| Note 25. Earnings per share 24 | ||
| Note 26. Contingencies 24 | ||
| Note 27. Commitments 24 | ||
| Note 28. Seasonality of operations 24 | ||
| Note 29. List of consolidated companies 25 | ||
| Note 30. Related party transactions 25 | ||
| Note 31. Subsequent events 26 |
The undersigned declare that:
Tom Gysens Chief Financial Officer Tom Debusschere Chief Executive Officer
Balta Group NV (the "Company") is a Belgian company and was incorporated on 1 March 2017. The address of the Company's registered office is Wakkensteenweg 2, 8710 Sint-Baafs-Vijve, Belgium. The Company is registered under trade registration number 0671.974.626.
The financial statements of the Company for the period 1 January 2017 to 30 June 2017 comprise the Company and its subsidiaries (together referred to as the "Group" and individually as "Group entities").
In June 2017, the Company became the parent of the Group by the contribution of the entire issued and outstanding share capital of LSF9 Balta Issuer S.à r.l as a capital contribution in kind. The capital contribution has been accounted for as a capital reorganization under common control and measured at the IFRS historical carrying values of LSF9 Balta Issuer S.à r.l. (the previous parent of the Group). The consolidated condensed interim financial statements are therefore presented as if the Company had been the parent company of the Group throughout the periods presented (including 2016). Any reference in these financial statements to the 2016 annual financial statements is to the 2016 financial statements of LSF9 Balta Issuer S.A.. LSF9 Balta Issuer S.A. changed its name into LSF9 Balta Issuer S.à r.l. on 16 June 2017. All references to LSF9 Balta Issuer S.A. have been replaced to LSF9 Balta Issuer S.à r.l. in this document for clarity purposes.
The Company started trading its shares on Euronext Brussels on 14 June 2017, following an Initial Public Offering (IPO). The settlement of the IPO took place on 16 June 2017 (IPO settlement date).
The Group is one of the leading European manufacturers of soft flooring, which includes rugs for the consumer home furnishing market as well as broadloom and carpet tiles for the residential and commercial markets. In 2017 and 2016, the Group believes it was the largest manufacturer in Europe of machine-made rugs, as well as the largest manufacturer in Europe of residential broadloom in each case by volume, and the second largest manufacturer worldwide of machine-made rugs by volume. In 2017 and 2016, the Group was also the third largest manufacturer in Europe of commercial carpet tiles by volume. In March 2017, the Group acquired Bentley, one of the leading providers of premium carpet tile and broadloom carpet in the United States, providing a platform for expansion in the US commercial segment.
| For the six months ended |
|||
|---|---|---|---|
| (€ thousands) | Note | June 30, 2017 |
June 30, 2016 |
| I. CONSOLIDATED INCOME STATMENT | |||
| Revenue Note 5 | 333,931 | 290,158 | |
| Raw material expenses | (162,075) | (142,353) | |
| Changes in inventories | 12,650 | 12,629 | |
| Employee benefit expenses | (77,723) | (67,819) | |
| Other income | 4,050 | 3,022 | |
| Other expenses | (64,297) | (53,743) | |
| Depreciation / amortization | Note 3 | (15,516) | (14,302) |
| Adjusted Operating Profit (1) |
31,020 | 27,593 | |
| Gain on asset disposals | - | 1,610 | |
| Integration and restructuring expensesNote 8 | Note 3 | (2,634) | (2,189) |
| Operating profit / (loss) (1) |
28,386 | 27,014 | |
| Finance income | 17 | 37 | |
| Finance expenses | (21,572) | (14,059) | |
| Net financial expenses | (21,555) | (14,022) | |
| Profit / (loss) before income taxes | 6,831 | 12,992 | |
| Income tax benefit / (expense) Note 9 | (3,356) | 2,866 | |
| Profit / (loss) for the period | 3,475 | 15,858 | |
| Attributable to: | |||
| Equity holders of Balta Group NV Non-controlling interest |
3,441 34 |
15,858 - |
|
| II. CONSOLIDATED OCI | |||
| Items in OCI that may be reclassified to P&L | |||
| Exchange diff. on translating foreign operations | (5,053) | (596) | |
| Changes in fair value of hedging instruments qualifying for cash flow hedge accounting | Note 16 | 1,170 | 1,486 |
| Items in OCI that will not be reclassified to P&L | |||
| Changes in deferred tax | (172) | 481 | |
| Changes in employee defined benefit obligations | 525 | (1,467) | |
| OCI for the period, net of tax | (3,530) | (96) | |
| Total comprehensive income for the period | (55) | 15,761 | |
| Basic and diluted earnings per share from continuing operations attributable to the ordinary equity holders of the company |
Note 25 | 0.10 | 0.93 |
(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.
The accompanying notes form an integral part of these consolidated condensed interim financial statements.
| (€ thousands) | As of June 30 |
As of December 31 |
|
|---|---|---|---|
| Note | 2017 | 2016 | |
| Property, plant and equipment | |||
| Land and buildings Note 13 | 166,466 | 169,203 | |
| Plant and machinery Note 13 | 129,180 | 115,016 | |
| Other fixtures and fittings, tools and equipment Note 13 | 18,692 | 15,019 | |
| Goodwill Note 7 | 205,720 | 124,673 | |
| Intangible assets | 4,819 | 2,376 | |
| Deferred income tax assets Note 9 | 19,434 | 18,950 | |
| Trade and other receivablesNote 1 5 | 936 | 138 | |
| Total non-current assets | 545,247 | 445,375 | |
| Inventories Note 14 | 173,344 | 135,320 | |
| Derivative financial instruments Note 16 | 1,053 | 46 | |
| Trade and other receivablesNote 1 5 | 69,537 | 54,930 | |
| Current income tax assets Note 9 | 23 | 34 | |
| Cash and cash equivalents | 35,879 | 45,988 | |
| Total current assets | 279,836 | 236,318 | |
| Total assets | 825,083 | 681,693 | |
| Share capital Note 10 | 252,420 | 171 | |
| Share premium Note 10 | 65,660 | 1,260 | |
| Preferred equity certificatesNote 11 | - | 138,600 | |
| Other comprehensive income Note 16 | (10,593) | (7,063) | |
| Retained earnings Note 12 | 6,793 | 3,351 | |
| Other reserves Note 12 | (39,878) | - | |
| Total equity | 274,402 | 136,319 | |
| Senior Secured Notes Note 17 | 252,077 | 279,277 | |
| Bank and Other Borrowings Note 18 | 14,210 | 15,388 | |
| Deferred income tax liabilities Note 9 | 70,812 | 69,775 | |
| Provisions for other liabilities and charges | 1,916 | - | |
| Employee benefit obligations Note 21 | 4,829 | 5,079 | |
| Total non-current liabilities | 343,844 | 369,519 | |
| Senior Secured Notes Note 17 | 11,670 | 4,234 | |
| Bank and Other Borrowings Note 18 | 3,901 | 2,614 | |
| Provisions for other liabilities and charges | 64 | 64 | |
| Derivative financial instruments Note 16 | - | 162 | |
| Other payroll and social related payables Note 22 | 34,941 | 31,246 | |
| Trade and other payables Note 23 | 151,452 | 131,562 | |
| Income tax liabilities Note 9 | 4,809 | 5,974 | |
| Total current liabilities | 206,837 | 175,856 | |
| Total liabilities | 550,681 | 545,374 | |
| Total equity and liabilities | 825,083 | 681,693 |
| Period | Period | ||
|---|---|---|---|
| Note | ended June 30, 2017 |
ended June 30, 2016 |
|
| (€ thousands) | |||
| CASH FLOW FROM OPERATING ACTIVITIES | |||
| Net profit / (loss) for the period | 3,475 | 15,858 | |
| Adjustments for: | |||
| Income tax expense / (income)Note 9 | 3,356 | (2,866) | |
| Finance income | (17) | (37) | |
| Finance expense | 21,572 | 14,059 | |
| Depreciation, amortisation Note 13 | 15,517 | 14,302 | |
| (Gains)/losses on asset disposals | - | (1,610) | |
| Fair value of derivativesNote 16 | - | 808 | |
| Cash generated before changes in working capital | 43,901 | 40,514 | |
| Changes in working capital: | |||
| InventoriesNote 14 | (22,089) | (16,239) | |
| Trade receivables Note 15 | 1,489 | (3,039) | |
| Trade payables Note 23 | 7,925 | 10,760 | |
| Other working capital | (5,972) | (7,948) | |
| Cash generated after changes in working capital | 25,254 | 24,047 | |
| Net income tax (paid) | (4,565) | (109) | |
| Net cash generated / (used) by operating activities | 20,690 | 23,937 | |
| CASH FLOW FROM INVESTING ACTIVITIES | |||
| Acquisition of property, plant and equipment Note 13 | (21,272) | (18,857) | |
| Acquisition of intangibles | (484) | (728) | |
| Proceeds from the sale of non-current assetsNote 13 | 655 | 1,728 | |
| Acquisition of subsidiary, net of cash acquired Note 7 | (69,654) | ||
| Net cash used by investing activities | (90,753) | (17,857) | |
| CASH FLOW FROM FINANCING ACTIVITIES Interest and other finance charges paid, netNote 18 |
(17,477) | (15,189) | |
| IPO proceedsNote 10 | 145,000 | - | |
| Incremental costs paid directly attributable to IPONote 6 | (8,170) | - | |
| Proceeds from borrowing with third parties Note 18 | 76,227 | - | |
| Proceeds from capital contributionNote 10 | 1,343 | - | |
| Repayments of Senior Secured NotesNote 6,17 | (21,228) | - | |
| Repayments of borrowings with third partiesNote 6,18 | (115,740) | (1,168) | |
| Net cash generated / (used) by financing activities | 59,955 | (16,357) | |
| NET INCREASE / (DECREASE) IN CASH AND BANK OVERDRAFTS | (10,109) | (10,276) | |
| Cash, cash equivalents and bank overdrafts at the beginning of the period | 45,988 | 45,462 | |
| Cash, cash equivalents and bank overdrafts at the end of the period | 35,879 | 35,185 | |
The accompanying notes form an integral part of these consolidated condensed interim financial statements.
| (€ thousands) | Share capital |
Share premium |
PECs | Other comprehensive income |
Retained earnings |
Other reserves |
Total | Non controlling interest |
Total equity |
|---|---|---|---|---|---|---|---|---|---|
| 171 | 1,260 | 138,600 | (7,063) | 3,351 | 136,319 | - | 136,319 | ||
| Balance at January 1, 2017 | |||||||||
| Profit / (loss) for the period | - | - | - | - | 3,442 | - | 3,442 | 33 | 3,475 |
| Other comprehensive income Exchange differences on translating foreign operations Changes in fair value of hedging |
- | - | - | (5,053) | - | - | (5,053) | - | (5,053) |
| instruments qualifying for cash flow hedge accounting |
- | - | - | 1,170 | - | - | 1,170 | - | 1,170 |
| Cumulative changes in deferred taxes | - | - | - | (172) | - | - | (172) | - | (172) |
| Cumulative changes in employee defined benefit obligations |
- | - | - | 525 | - | - | 525 | - | 525 |
| Total comprehensive income for the period |
- | - | - | (3,530) | 3,442 | - | (88) | 33 | (55) |
| Incorporation of founders' share | 62 | - | - | - | - | - | 62 | - | 62 |
| Capital contribution Bentley Management Buy-out |
1,343 | - | - | - | - | - | 1,343 | (33) | 1,310 |
| Contribution in kind of LSF9 Balta Issuer S.à r.l. |
331,250 | - | - | - | - | - | 331,250 | - | 331,250 |
| Transfer of share capital to other reserves | (150,000) | - | - | - | - | 150,000 | - | - | - |
| Cancellation of founders' share | (62) | - | - | - | - | - | (62) | - | (62) |
| Contribution of net proceeds from the Primary Tranche of the IPO |
79,340 | 65,660 | - | - | - | - | 145,000 | - | 145,000 |
| IPO expenses attributed to the Primary Tranche of the IPO |
(8,170) | - | - | - | - | - | (8,170) | - | (8,170) |
| Capital reorganisation under common control |
(1,514) | (1,260) | (138,600) | - | - | (189,878) | (331,252) | - | (331,252) |
| Total transactions with the owners | 252,249 | 64,400 | (138,600) | - | - | (39,878) | 138,171 | (33) | 138,138 |
| Balance at June 30, 2017 | 252,420 | 65,660 | - | (10,593) | 6,793 | (39,878) | 274,402 | - | 274,402 |
We refer to note 9 for more information about the total transactions with the owners.
| (€ thousands) | Share capital | Share premium |
PECs | Other comprehensive income |
Retained earnings |
Total | Non-controlling interest |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Balance at January 1, 2016 | 171 | 1,260 | - | 1,664 | (21,995) | (18,900) | - | (18,900) |
| Recognition of PECs as equity instrument | - | - | 138,600 | - | - | 138,600 | - | 138,600 |
| Profit / (loss) for the period | - | - | - | - | 25,345 | 25,345 | - | 25,345 |
| Other comprehensive income Exchange differences on translating foreign operations Changes in fair value of hedging instruments qualifying for cash flow hedge accounting |
- - |
- - |
- - |
(8,013) (116) |
- - |
(8,013) (116) |
- - |
(8,013) (116) |
| Cumulative changes in deferred taxes Cumulative changes in employee defined |
- - |
- - |
- | 285 (882) |
- - |
285 (882) |
- - |
285 (882) |
| benefit obligations Total comprehensive income for the period |
- | - | - | (8,727) | 25,345 | 16,618 | - | 16,618 |
| Balance at December 31, 2016 | 171 | 1,260 | 138,600 | (7,063) | 3,351 | 136,319 | - | 136,319 |
The accompanying notes form an integral part of these consolidated condensed interim financial statements.
These consolidated condensed interim financial statements for the six months ended June 30, 2017 have been prepared in accordance with IAS 34 'Interim financial reporting'. The consolidated condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2016, for LSF9 Balta Issuer S.A. (now LSF9 Balta Issuer S.à r.l.), which have been prepared in accordance with IFRS as adopted by the European Union ("IFRS"). 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.
Any events and/or transactions significant to an understanding of the changes since December 31, 2016 have been included in these notes to the consolidated condensed interim financial statements and mainly relate to the Initial Public Offering (IPO) of the Group in 2017 as mentioned under caption "1. General information" and relate to the acquisition of the Bentley Mills Group of companies which was completed on March 22, 2017.
In preparation of the IPO of the Group in 2017, Balta Group NV (the "Parent") was incorporated on March 1, 2017 for the purpose of acquiring LSF9 Balta Issuer S.à r.l and its subsidiaries, which occurred on May 30, 2017 through a contribution in kind in the Share Capital of the Company. Balta Group NV was established by the same shareholders as those of LSF9 Balta Issuer S.à r.l. Since the shareholders of LSF9 Balta Issuer S.à r.l before the reorganization have the same absolute and relative interest in the net assets of the group and the new group immediately before and after the reorganization, the transactions for the IPO constitute a capital reorganization under common control. Consequently, these transactions are recognized in the financial statements using the predecessor value method.
This means:
These condensed consolidated interim financial statements have been authorized for issue by the Board of Directors on 29 August 2017.
The accounting policies adopted are consistent with those of the previous financial year as applied by LSF9 Balta Issuer S.à r.l. (previously LSF9 Balta Issuer S.A.). This accounting policies can be found in the financial statements of LSF9 Balta Issuer S.A. for the year ended 31 December 2016 which are available in the prospectus.
LSF9 Balta Issuer S.à r.l. acquired Bentley Mills Group in 2017. The acquisition is a transaction under a common control, and the accounting policy election was made to account for such a transaction in accordance with IFRS 3.
Amendments to IFRS standards effective for the financial year ending December 31, 2017 are not expected to have a material impact on the Group.
The new standards and interpretations effective as of 1 January 2017 include the following:
However, they do not impact the annual consolidated financial statements of Balta or the interim condensed consolidated financial statements of the Group.
The following new standards and amendments to standards have been issued, but are not mandatory for the first time for the financial year beginning 1 January 2017 and have been endorsed by the European Union:
The revenue is currently recognized when the goods are delivered which is the point in time at which the customer accepts the goods and the related legal title, i.e. when risks and rewards of the ownership are transferred. Revenue is only recognized at this moment after other requirements are also met, such as, no continuing management involvement with goods, revenue and costs can be reliably measured and probable recovery of the considerations. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods. Based on the initial assessment, the Company did not identify material differences between the transfer of control and the current transfer of risk and rewards. As such, at this stage the Company does not anticipate material difference in the timing of revenue recognition for the sale of products. Volume discounts and rebates are currently accrued over the year based on the sales realized per customer and taking into account the expected yearly volumes per customer. There are no any other significant incremental contract costs. Consequently the Company does not expect any material impact under IFRS 15. In general the Group has not any material contracts that include separate performance obligations nor any special transactions such as consignment, bill and hold arrangements, warranty programs, upfront payments or any third party involvement.
Operating Profit (Loss), Adjusted Operating Profit (Loss), Adjusted EBITDA are measures utilized by the Group to demonstrate the Group's underlying performance.
Operating Profit (Loss) is calculated as profit (loss) for the period from continuing operations, adjusted for income tax benefits (expenses), finance income and finance expenses.
Adjusted Operating Profit (Loss) is calculated as Operating Profit (Loss) adjusted for gains from disposal of assets and integration and restructuring expenses.
Adjusted EBITDA is calculated as Adjusted Operating Profit (Loss) adjusted for depreciation and amortization charges.
The non-GAAP measures are included in these consolidated financial statements because management believes they are useful to many investors, securities analysts and other interested parties as additional measures of performance.
The Group presents non-IFRS measures in addition to financial measures determined in accordance with IFRS. Non-IFRS measures as reported by the Group may differ from similar measures presented by other companies.
The preparation of consolidated condensed interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these consolidated condensed interim financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that have been applied to the consolidated financial statements for the year December 31, 2016 of LSF9 Balta Issuer S.A..
| Six months ended June |
Previous reported |
|
|---|---|---|
| (€ thousands) | 30, 2017 | figures |
| Revenue by segment (1) | 333,931 | 290,158 |
| Rugs | 126,379 | 112,218 |
| Residential | 121,353 | 123,633 |
| Commercial | 72,475 | 40,482 |
| Non Woven | 13,723 | 13,825 |
| Revenue by geography (1) | 333,931 | 290,158 |
| Europe | 221,381 | 218,385 |
| North America | 80,742 | 44,229 |
| Rest of World | 31,808 | 27,544 |
| Adjusted EBITDA by segment (1) | 46,536 | 41,895 |
| Rugs | 23,246 | 19,356 |
| Residential | 11,416 | 14,953 |
| Commercial | 10,359 | 5,990 |
| Non Woven | 1,515 | 1,595 |
| Capital expenditure by segment (1) | 21,100 | 17,857 |
| Rugs | 7,771 | 8,665 |
| Residential | 7,033 | 6,069 |
| Commercial | 5,846 | 2,734 |
| Non Woven | 447 | 388 |
| Net inventory by segment (2) | 173,344 | 135,320 |
| Rugs | 70,334 | 63,642 |
| Residential | 62,577 | 52,718 |
| Commercial | 35,847 | 15,346 |
| Non Woven | 4,586 | 3,614 |
| Trade receivables by segment (2) | 53,253 | 41,326 |
| Rugs | 13,492 | 17,263 |
| Residential | 18,190 | 16,502 |
| Commercial | 20,232 | 6,149 |
| Non Woven | 1,339 | 1,411 |
In 2017, the Company and its shareholders initiated a process to actively explore a new capital structure to support future growth, which resulted in an IPO and listing on Euronext Brussels on 14 June 2017. During the IPO, the total number of shares sold was 15,365,802 of which 10,943,396 new shares and 4,422,406 existing shares. At a final offer price of €13.25 per share, this represents a total offering size of €203.6 million. The gross proceeds for Balta Group NV resulting from the new shares sold are approximately €145 million and the net proceeds were approximately €136.8 million. These net proceeds have been used to repay gross debt.
The IPO of Balta Group NV impacts the financial statements of the Company in the following manner:
Equity of the Group has increased from €136.3 million at December 31, 2016 to €274.4 million at June 30, 2017. This increase by €138.0 million is driven by (i) capital increase of €145.0 million, from which €8.2 million transaction expenses have been deducted, (ii) €1.3 million increase resulting from the Bentley management buyout, and (iii) (€0.1) million impact of net comprehensive result for the period.
Further details on the breakdown of movements within equity can be found in Note 10.
The net proceeds of the IPO have been used to reduce gross debt. The debt that has been repaid includes (i) repayment in full of a term loan at the level of Bentley for an amount of \$33.0 million plus accrued interest (€29.4 million of capital repayment when converted at a rate of \$1.1222 per Euro), (ii) partial repayment of a revolving credit facility at the level of Bentley for an amount of \$11.1 million plus accrued interest (€9.9 million when converted at a rate of \$1.1222 per Euro), (iii) repayment in full of the Senior Term Loan for an amount of €75 million plus accrued interest, and (iv) partial repayment of €21.2 million of the Senior Secured Notes plus accrued interest and redemption premium of 3%.
Further details on the movement in bank borrowings can be found in Note 18.
All fees and expenses related to the IPO have been divided pro rata between the Company and the Selling Shareholder based on the respective sizes of the Primary Tranche and Secondary Tranche. The total expense for the Company is equal to €9.2 million. Transaction costs that are incremental and directly attributable to the issue of new shares as a result of the IPO have been recognized as a deduction of share capital (€8.2 million net of taxes). The costs incurred in relation to the listing of the existing shares (€0.2 million) have been expensed as part of integration and restructuring expenses in the income statement (see Note 8).
For the purpose of this disclosure, amounts in USD have been converted to EUR at a rate of 1.0691 USD/EUR which is the closing rate per 31 March 2017. Where used herein "Bentley" refers to Bentley Mills, Inc. or where the context requires, the Bentley group of companies.
On December 1, 2016, Lone Star Fund IX agreed to acquire Bentley, a leader in premium commercial tiles and broadloom carpets for commercial interior in the US market, from Dominus Capital, L.P. The acquisition was completed on February 1, 2017. Lone Star Fund IX acquired 98.39% of the class A unit voting rights whilst Bentley Management acquired the remaining 1.61% of the class A unit voting rights. On 22 March LSF9 Balta Issuer S.à r.l. acquired 98.39% from Lone Star Fund IX.
Balta NV, a member of the Balta Group subsequently acquired the remaining 1.61% of the Class A unit voting rights from Bentley Management on May 31, 2017 which results in a 100% ownership as per May 31, 2017.
The consideration paid to share and option holders was equal to €89.2 million (\$95.4 million). In order to finance (i) the consideration paid, (ii) the repayment in full of legacy debt at the level of Bentley and (iii) the payment of transaction fees and expenses, the following sources of financing were raised:
The holding structure for this investment included a limited partnership LSF9 Renaissance Bermuda Partners, L.P. (not having legal personality under Bermuda law), essentially to manage the investment relation with the management of Bentley, who retained an equity stake in Bentley.
On March 22, 2017, LSF9 Balta Issuer S.à r.l. acquired from LSF9 Renaissance Super Holdings, L.P. its partnership interests in LSF9 Renaissance Bermuda Partners, L.P., which in turn owned the membership interests in LSF9 Renaissance Holdings LLC and LSF9 Renaissance Acquisitions LLC.. LSF9 Renaissance Holdings LLC is the new ultimate holding company of Bentley. This acquisition was originally financed by the issuance of a Senior Term Loan for an amount of €75.0 million at the level of LSF9 Balta Issuer S.à r.l. (see Note 19 for a description hereof). Subsequently, on March 23, 2017, Balta NV replaced LSF9 Balta Issuer S.à r.l. as a limited partner in LSF9 Renaissance Bermuda Partners, L.P. and as a result acquired the interest in LSF9 Renaissance Holdings LLC. As a result of these transactions, Balta NV currently controls Bentley.
On May 31, 2017, Balta NV acquired the remaining class A unit voting shares of LSF9 Renaissance Bermuda Partner, L.P. from LSF9 Balta Holdco S.à r.l. which indirectly acquired the minority stake from Bentleys management. The related party debt which resulted from this transaction was subsequently contributed in the capital of LSF9 Balta Issuer S.à r.l.. As a result of this transaction, Balta NV gained a 100% control over Bentley.
Balta will continue to support the Bentley brand, and will make use of Bentley's sale force and market power to accelerate the growth of its European Modulyss carpet tiles in the USA. Additionally, Bentley's line of premium carpet tiles will be sold worldwide through Balta's distribution network.
The acquisition made by LSF9 Balta Issuer S.à r.l. is a transaction under a common control, and the accounting policy election was made to account for such a transaction in accordance with IFRS 3. Therefore,
previous goodwill was reversed in order to calculate the net assets, and goodwill was recognized as difference between the consideration paid and such net assets.
The purchase price allocation required under IFRS 3 Business Combinations has not yet been performed and is not reflected in the condensed interim financial statements. The purchase price allocation has not yet been performed because the acquisition of Bentley was only completed on March 22, 2017 and therefore management of the Balta Group has only recently had full access to all information of BPS Parent Inc. and its subsidiaries and has not yet been able to complete a fair value analysis of the identifiable assets and liabilities acquired before issuance of this consolidated condensed interim financial statement. As such, the fair value of the identifiable assets, liabilities and contingent liabilities acquired and the goodwill are provisional. The purchase price allocation exercise will be performed at a later stage and may result in adjustments to provisional values as a result of completing the initial accounting from the acquisition date. We mainly expect differences in valuation of intangible assets, property, plant and equipment and inventory.
The initial purchase price paid in cash was equal to €68.3 million, as compared to a net asset value of Bentley of (€11.5) million at Acquisition Date, of which (€12.6) million attributable to LSF9 Balta Issuer S.à r.l. and €1.0 million attributable to the non-controlling interest held by Bentley management. Consequently, the provisional goodwill – before purchase price allocation - was equal to €80.9 million.
The non-controlling interest held by Bentley management was acquired per May 31, 2017 for an amount of €1.3 million having a corresponding net asset value at that time of €1.2 million. Consequently the provisional goodwill paid for the Bentley Group of companies – before purchase price allocation – increased with 0.2 million as from May 31, 2017 and is finally equal to €81.0 million.
Initial goodwill determination as per March 22, 2017
The initial goodwill allocation as per March 22, 2017 including minority interest is mentioned below.
| Carrying value | |
|---|---|
| of net assets at | |
| Acquisition | |
| Date before | |
| allocation | |
| In € thousands | goodwill |
| Assets acquired | 47,546 |
| Property, plant & equipment 14,267 | |
| Intangible assets | 2,726 |
| Trade and other receivables 744 | |
| Total non-current assets 17,737 | |
| Inventories | 15,935 |
| Trade and other receivables 13,874 | |
| Cash and cash equivalents - | |
| Total current assets | 29,809 |
| Liabilities assumed | (59,079) |
| Bank and other borrowing (38,471) s | |
| Deferred income tax liabilities (485) | |
| Provisions for other liabilities and charges (2,045) | |
| Employee Benefit Obligations (347) | |
| Total non-current liabilities (41,348) | |
| Bank and Other Borrowing (1,325) s | |
| Other payroll and social related payables (1,685) s | |
| Trade and other payables (1) (13,190) | |
| Current income tax liabilities (1,531) | |
| Total current liabilities (17,731 ) | |
| Purchase Price Paid in Cash | 68,310 |
| Total identifiable assets, liabilities and contingent liabilities | (11,533) |
| Of which: attributable to LSF9 Balta Issuer S.à r.l | (12,560) |
| Of which: attributable to non-controlling interest 1,027 | |
| Goodwill 80,870 |
(1) The trade and other payables are €0.2 million higher than per reporting per March 31, 2017 as a result of some late adjustments detected after reviewing the figures of Bentley Mills.
Additional goodwill determination as per May 31, 2017
The non-controlling portion is acquired per May 31, 2017 and gives following effect on the goodwill:
| Purchase Price Paid in Cash for Minority stake | 1,343 |
|---|---|
| Total identifiable assets, liabilities and contingent liabilities per May 31, 2017 | |
| attributable to non-controlling interest 1,165 | |
| Goodwill in relation to acquisition minority stake 177 i |
After acquisition of the minority stake, the total goodwill -before purchase price allocation- relating to the Bentley acquisition amounts to €81 million.
| Total Goodwill Bentley Mills acquisition | 81,047 | |
|---|---|---|
| Initial goodwill recognition (98,39%) 80,870 | ||
| Goodwill attributable to acquisition non-controlling interest (1,61%) 177 ( |
The Goodwill of €81.0 million still needs to be allocated. Following this allocation, the remaining goodwill arising from the acquisition will mainly consist of the synergies and the economies of scale expected from combining the operations of Bentley and Balta.
None of the Goodwill recognized is expected to be deductible for income tax purposes.
The non-current and current trade and other receivables acquired from Bentley per March 2017 amounted to €14.6 million and relate to trade receivables (€13.4 million), other receivables (€0.9 million) and accruals and deferrals (€0.3 million). The trade receivables included a bad debt provision of €0.3 million to cover for receivables assumed difficult to be collected.
The amount of non-controlling interest recognized per March 2017 amounted to €1.0 million at the acquisition date and represented the 1.61% stake management owns in the net assets of Bentley.
The non-controlling interest disappeared as a result of the acquisition of the remaining share portion per May 31, 2017 by the Balta Group. The Profit/ (Loss) for the period which was attributed to the Non-controlling interest for the period March 23, 2017 until May 31, 2017 amounted to €34 thousand.
The acquisition of Bentley by Balta was completed on March 22, 2017. Because the closing date was near the end of the first quarter, management believes that the amount of revenue and profit or loss of the acquiree since the acquisition date to be included in the consolidated statement of comprehensive income for the reporting period is not material. As a result, the comprehensive income of Bentley was taken into account as of April 1, 2017 and only covers 3 months in the six months ended June 30, 2017 figures.
Had Bentley been consolidated from January 1, 2017, Bentley would have contributed €57.0 million of revenue. The Profit of the period from continuing operations would have been equal to €0.2 million on a pro
forma basis, i.e. taking into account the effects of the new capitalization structure of the Group and after elimination of transaction expenses incurred by Bentley.
Initial accounting for a business combination is incomplete, and the amounts recognized in the financial statements for the business combination have been determined only provisionally as required by IFRS 3. The purchase price allocation has not yet been performed because the acquisition of Bentley Mills was only completed on March 22, 2017 and therefore management of the Balta Group has only recently had full access to all information of Bentley. At the date of approval of these consolidated condensed interim financial statements, management has not been able to complete a fair value analysis of the identifiable assets and liabilities acquired.
The fair value of the identifiable assets and liabilities acquired will be measured at a later stage and will result in an adjustment of the goodwill presented. We mainly expect differences in valuation of intangible assets, Property plant and equipment and inventory.
Regarding Contingent Liabilities, based on BPS Parent, Inc. disclosures and the preliminary analysis performed by Bentley Mills Management, the Balta Group has not identified any material legal claims, tax dispute or environmental risk that would lead us to believe material contingent liabilities would need to be recognized in the statement of financial position. However, as our analysis continues, recognition of such contingent liabilities may be identified and recognized in accordance with the requirements of IFRS3 Business Combinations.
The following table sets forth integration and restructuring expenses for the period ended June 30, 2017 and 2016. This comprises various items which are considered by management as non-recurring or unusual by nature.
| For the six months | ||
|---|---|---|
| (€ thousands) | June 30, 2017 |
June 30, 2016 |
| Integration and restructuring expenses | 2,634 | 2,189 |
| Corporate restructuring | 330 | 1,228 |
| Business restructuring | - | 490 |
| Acquisition related expenses | 1,376 | - |
| Idle IT costs | 776 | - |
| Strategic advisory services | 300 | 78 |
| Other | (148) | 393 |
Acquisition related expenses amount to €1.4 million and have been incurred in relation to the acquisition of Bentley in March 2017. Incremental (idle) IT costs in relation to a legacy IT system used for a limited number of activities within the Group amounted to €0.8 million.
During the six months ended June 30, 2016, €2.2 million of integration and restructuring expenses were incurred. This was driven by €1.8 million of cash expenses incurred in relation to the restructuring of the Management Committee, a fee paid to terminate an agency agreement and advisory fees for tax and legal services.
Income tax expense is recognized based on management's estimate of the weighted average estimated effective income tax rate for the full financial year applied to the interim period pre-tax income of each jurisdiction. The estimated average annual tax rate for the year remains unchanged compared to last year. The fluctuation of the income tax expense is mainly attributable to deferred income taxes.
Income tax expenses are equal to €3.4 million for the six months ended June 30, 2017, as compared to an income tax benefit of €2.9 million in the same period last year. The tax charge of €3.4 million in the first half of 2017 corresponds to an effective tax rate of approximately 30% when excluding one-off financing fees. Note that the reduction of external debt in June has also impacted the internal company financing agreements. The company is currently assessing the impact of these changes. This assessment will be completed by the end of the year which may result in changes in deferred tax assets positions in the coming quarters.
For the period ended June 30, 2016, a net tax benefit was recognized of €2.9 million as a result of the recognition of tax credits for which the recognition criteria were previously not met.
Share capital and share premium has increased from €1.4 million to €318.1 million as a result of the following events:
LSF9 Balta Issuer S.à r.l has historically been funded by the issuance of preferred equity certificates (PECs). LSF9 Balta Holdco S.à r.l., the former holder of the PECs issued by LSF9 Balta Issuer S.à r.l has contributed its PECs into the equity (increase in share capital without the issuance of new shares) of LSF9 Balta Issuer S.à r.l prior to the IPO.
The other reserve at June 30, 2017 is equal to (€39.9) million and comprises two elements. First, it contains €150.0 million of distributable reserves created as a result of the capital reduction described earlier. Next, it contains (€189.9) million which is the difference between the nominal value of shares issued by the Company (€331.3 million) and the book value of the share capital, share premium and PECS received (€141.4 million) from LSF9 Balta Issuer S.à r.l., sometimes referred to as "merger difference").
During the six months ended June 30, 2017, property, plant and equipment and intangibles (excluding goodwill) increased by €17.5 million. The increase mainly relates to the acquisition of Bentley which owns €16.2 million of property, plant and equipment and intangibles (€0.7 million land and buildings, €10.3 million plant and machinery, €2.8 million other fixtures and fittings, tools and equipment, €2.4 million intangible assets).
A total net depreciation expense of €15.5 million has been charged in the line "Depreciation, amortisation" in the statement of comprehensive income, which mainly relates to property, plant and equipment.
The Group leases various industrial buildings, plant and machinery under non-cancellable finance lease agreements. The lease terms are between 5 and 15 years, and ownership of the assets lie within the Group. The leasehold improvements are amortized using the straight-line method over the lessor of the term of the respective lease or the life of the asset.
Inventories increased by €38.0 million as compared to December 31, 2016, of which €15.3 million is driven by the acquisition of Bentley and €22.7 million is due to an increase of inventory owned by the Group. The €15.3 million inventory contributed by Bentley consists of €2.6 million finished products, €5.8 million work in progress and €6.9 million raw materials and consumables.
Current trade and other receivables increased by €14.6 million to €69.5 million as of June 30, 2017, compared to €54.9 million as of December 31, 2016. This increase is mainly driven by the acquisition of Bentley. Trade receivables owned by Bentley amount to €13.8 million. Excluding the impact of the acquisition, current trade and other receivables increased by €2.6 million.
Cash flow hedge accounting has been initiated on June 1, 2016. Therefore, changes in fair value of the forward contracts before this date have been recorded directly in P&L. The changes in fair value of the forward contracts have been presented in other comprehensive income as from June 1, 2016. The changes in fair value for the six months ended are recognized through OCI for an amount of €1.2 million.
The movement schedule below summarizes the amounts recorded into the cash flow hedge reserve and the portion that was recognized in the income statement in relation to contracts that were settled during the reporting period.
| (€ thousands) | June 30, 2017 |
December 31, 2016 |
|---|---|---|
| Opening Balance | (116) | - |
| Amounts recorded in the cash flow hedge reserve 928 | 2,190 | |
| Amounts recognized in the income statement 242 | (2,307) | |
| Cash flow hedge reserve, ending balance | 1,053 | (116) |
| (€ thousands) | June 30, 2017 |
December 31, 2016 |
|---|---|---|
| Total Senior Secured Notes | 263,747 | 283,510 |
| Non-Current portion | 252,077 | 279,277 |
| Of which: gross debt Of which: capitalised financing fees |
261,000 (8,923) |
290,000 (10,723) |
| Current portion | 11,670 | 4,234 |
| Of which: gross debt | 7,772 | - |
| Of which: accrued interest Of which: capitalised financing fees |
6,018 (2,120) |
6,618 (2,384) |
LSF9 Balta Issuer S.à r.l. issued €290.0 million aggregate principal amount of Senior Secured Notes with an interest rate of 7.75% due 2022 as part of the financing of the acquisition of Balta Finance. The Indenture is dated August 3, 2015 and the principal amount was released from the escrow account at Completion Date. The maturity date of the Senior Secured Notes is September 15, 2022.
Interest on the Senior Secured Notes accrue at the rate of 7.75% per annum and are payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2016.
Costs related to the issuance of Senior Secured Notes have been included in the carrying amount and are amortized into profit or loss over the term of the debt in accordance with the effective interest method. It follows that the amount of capitalized financing fees expensed during the first six months of 2017 is equal to €2.1 million. This amount contains €0.9 million of financing fees that were recycled to the income statement in direct relation to the partial repayment of the Senior Secured Notes in June 2017.
The current portion of the debt associated with the Senior Secured Notes relates to accrued interest payables at the next interest payment date and the portion of the capitalized financing fee that will be amortized into profit or loss over the next 12 months.
In July 2017, the Group performed a partial repayment of the Senior Secured Notes for €7.8 million. As a result, this portion of the gross debt and the related capitalised financing fees (€0.1 million) have been transferred from non-current to the current portion of the gross debt and related capitalised financing fees respectively.
The table below sets forth the breakdown of the bank and other borrowings as at June 30, 2017 and December 31, 2016 .
| June 30, 2017 |
December 31, 2016 |
|---|---|
| 18,111 | 18,002 |
| 14,210 14,210 |
15,388 15,388 |
| 3,901 | 2,614 |
| 1,227 | 120 -- 2,494 |
| Non-Current portion Finance leases Current portion 200 2,474 |
On March 16, 2017, LSF9 Balta Issuer S.à r.l and certain of its subsidiaries entered into a senior term loan agreement (the "Senior Term Loan Agreement"), which provides for a €75.0 million senior term loan facility (the "Senior Term Loan") and, subject to the restrictions on debt incurrence set out therein, uncommitted financing which ranks pari passu with or junior to such initial facility. The proceeds of the initial drawings of the Senior Term Loan were used to repay certain subordinated loans incurred by the Issuer to finance the acquisition of Bentley and to pay related fees and expenses.
The Senior Term Loan was repaid in full in June 2017 using a portion of the proceeds of the primary tranche of the IPO.
BPS Parent, Inc. and other subsidiaries entered into a \$51.0 million syndicated credit facility (the "Fifth Third Credit Agreement") with Fifth Third Bank and other financial institutions (the "Lenders") on February 1, 2017. The credit facilities under the Fifth Third Credit Agreement consist of: (i) a five year revolving credit facility of \$18.0 million which will be due and payable on January 31, 2022, and availability is governed by a borrowing base, and (ii) a five year term loan facility of \$33.0 million ("Bentley Term Loan"), also scheduled to mature on January 31, 2022, requiring quarterly payments. Obligations under the Fifth Third Credit Agreement are secured by a security interest on substantially all assets of BPS Parent, Inc. and its subsidiaries in favor of the Lenders. The Fifth Third Credit Agreement contains affirmative and negative covenants with respect to BPS Parent, Inc. and its subsidiaries and other payment restrictions. Certain of the covenants limit indebtedness and investments of BPS Parent, Inc. and its subsidiaries and require the maintenance of certain financial ratios defined in the Fifth Third Credit Agreement.
In June 2017, a portion of the proceeds of the primary tranche of the IPO were used to (i) fully repay the five year Fifth Third Credit agreement, and (ii) to partially reduce the amounts drawn under the five year revolving credit facility.
A partial repayment of the Bentley debt of €39.0 million has been performed with the net proceeds of the IPO and the capitalized financing fees have been completely released through the income statement in finance expenses.
The finance lease liabilities have decreased from €17.9 million as of December 31, 2016 to €16.7 million as of June 30, 2017. No material new financial lease contracts have been signed during the period.
Bank overdrafts mainly relate to uncleared cheques and reflects the amount of uncleared cheques for which no cash is available on the cash and cash equivalent accounts at June 30, 2017. Per June 30, 2017 the amount of uncleared cheques was less than the amount available on cash and cash equivalents and as a result no bank overdraft liabilities are presented.
The commitment fees payable increased with €0.1 million to €0.2 million as at June 30, 2017, mainly due to commitment of €0.1 million fees at the level of Bentley.
The carrying amounts and fair values of the trade and other receivables, cash and cash equivalents, the borrowings, the finance lease liabilities, the derivatives and the trade and other payables are summarized in the following table:
| (€ thousands) | Fair value hierarchy |
June 30, 2017 Carrying amount |
June 30, 2017 Fair value |
December 31, 2016 Carrying amount |
December 31, 2016 Fair value |
|---|---|---|---|---|---|
| Assets as per statement of financial positions | 107,405 | 107,405 | 101,102 | 101,102 | |
| Loans and receivables 106,352 106,352 | 101,056 | 101,056 | |||
| Trade and other receivables | 70,473 | 70,473 | 55,068 | 55,068 | |
| Cash and cash equivalents | Level 1 | 35,879 |
35,879 | 45,988 | 45,988 |
| Assets at fair value through OCI1,053 1,053 | 46 | 46 | |||
| Foreign exchange derivative financial instruments Level 2 | 1,053 | 1,053 | 46 | 46 | |
| Liabilities as per statement of financial positions | 433,310 | 453,688 | 433,237 | 468,726 | |
| Financial liabilities measured at amortised cost | 433,310 | 453,688 | 433,075 | 468,564 | |
| Senior Secured Notes | Level 1 | 263,747 284,125 | 283,511 | 319,000 | |
| Bank and other borrowings Level 2 | 18,111 | 18,111 | 18,001 | 18,001 | |
| Trade and other payables | 151,452 | 151,452 | 131,562 | 131,562 | |
| Financial liabilities measured at fair value through OCI0 0 . | 162 | 162 | |||
| Foreign exchange derivative financial instruments Level 2 0 0 | 162 | 162 |
The different levels of valuation method have been defined as follows:
The fair value of the Senior Secured Notes is based on a Level 1 estimate. The fair value of all other financial instruments, with the exception of cash and cash equivalents, has been determined using Level 2 estimates. The fair value of the forward foreign exchange contracts have been determined using forward exchange rates that are quoted in an active market. The effects of discounting are generally insignificant for Level 2 derivatives. For trade and other receivables, as well as trade and other payables, the carrying amount is considered to be a good estimate of the fair value, given the short term nature of these items.
There were no changes in valuation techniques during the period.
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, fair value interest rate risk, cash flow interest rate risk and commodity price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The objective is to identify, quantify, manage and then monitor events or actions that could lead to financial losses. Derivative financial instruments are used to hedge certain risk exposures at Group level.
There have been no changes in the risk management function or in any risk management policies since the year-end.
Our primary sources of liquidity consist of cash flows from operations, non-recourse factoring agreements, the Senior Secured Notes, the Bentley Revolving Credit facilities. Our debt service obligations consist primarily of interest payments on the Notes and on amounts drawn under the Revolving Credit Facilities and the capital lease obligations.
We refer to note 17 and 18 for a detailed description of the changes which occurred between December 31, 2016 and June 30, 2017. As of June 30, 2017 the Company has a net debt of €256.8 million.
Employee benefit obligations decreased from €5.1 million as of December 31, 2016 to €4.8 million at June 30, 2017.
The decrease was partly offset by the acquisition of Bentley, which generated an increase of the employee benefit obligations of €0.3 million.
Other payroll and social related payables increased from €31.2 million as of December 31, 2016 to €34.9 million at June 30, 2017.
The increase mainly relates to other payroll and social related payables in relation to the acquisition of Bentley (€2.9 million). The remaining amount of €0.8 million can be allocated to the Balta Group.
The outstanding trade and other payables increased from €131.6 million as of December 31, 2016 to €151.5 million as of June 30, 2017. This increase is partly driven by the acquisition of Bentley and by the transactions costs relating to the IPO which partly remained unpaid per June 30, 2017. Trade and other payables due in Bentley amount to €12.0 million at June 30, 2017.
The Group did not declare any dividends to shareholders for the period ended December 31, 2016 and June 30, 2017.
| For the six months ended | ||
|---|---|---|
| (€ thousands) | June 30, 2017 |
June 30, 2016 |
| Basic earnings per share | ||
| Net result from continuing operations | 3,475 | 15,858 |
| Percentage of net result from continuing operations attributable to holders of ordinary shares (1) | 100% | 1% |
| Net result from continuing operations attributable to holders of ordinary shares (1) | 3,475 | 159 |
| Net result from discontinued operations attributable to holders of ordinary shares (1) | - | - |
| Weighted average number of ordinary shares outstanding (in thousands) | 35,943 | 171 |
| Net result per share attributable to holders of ordinary shares (1) (in €) | 0.10 | 0.93 |
(1) June 30, 2016 concerns LSF9 Balta Issuer S.à r.l. and June 30, 2017 concerns Balta Group nv.
The acquisition of Balta Finance has been partially funded by the issuance of PECs. Each PEC was entitled to receive a return which is mainly driven by any income derived by LSF9 Balta Issuer S.à r.l. from its investment in LSF9 Balta Investments S.à.r.l., it being understood that the LSF9 Balta Issuer S.à r.l. shall retain a 1% margin on annual basis on its financing activities. It follows that the vast majority of the net result are attributable to the holders of the PECs and not to the holders of the ordinary shares.
As a result of the capital reorganization these PECs have been converted into the share capital of LSF9 Balta Issuer S.à r.l.. As such 100% of the net result from continuing operations is attributable to the holders of the ordinary shares as from June 30, 2017.
The number of shares outstanding did increase from 171 to 35,943 thousand which results in a decrease of the net result per share.
Since the publication of the last annual report, no material changes were noted in the contingencies for the Group. It is not anticipated that any material liabilities will arise from the contingent liabilities other than those provided for.
There have been no material changes in the commitments compared to December 31, 2016.
The Group has very limited seasonality impact on operations.
The subsidiaries and jointly controlled entities of Balta Group NV , the Group's percentage of interest and the Group's percentage of control are presented below.
| June 30, 2017 | ||
|---|---|---|
| % of interest | % of control | |
| Belgium | ||
| Balta NV | 100% | 100% |
| Balta Industries NV | 100% | 100% |
| Balta Trading Comm.V | 100% | 100% |
| Modulyss NV | 100% | 100% |
| Balta Oudenaarde NV | 95% | 100% |
| Balta M BVBA | 100% | 100% |
| Balfid BVBA | 100% | 100% |
| Luxembourg | ||
| LSF9 Balta Issuer S.à r.l. (name change from S.A. to S.à r.l. on June 16, 2017) | 100% | 100% |
| Balfin Services S.à r.l | 100% | 100% |
| LSF9 Balta Luxembourg S.à r.l. (incorporated December 1, 2016) | 100% | 100% |
| LSF9 Balta Investments S.à r.l | 100% | 100% |
| Turkey | ||
| Balta Orient Tekstil Sanayi Ve Ticaret A.S 100% | 100% | |
| Balta Floorcovering Yer Dös¸emeleri San.ve Tic A.S¸ 100% | 100% | |
| Bermuda | ||
| LSF9 Renaissance GP (Bermuda) 100% | 100% | |
| LSF9 Renaissance Bermuda Partners LP (*) . 100% |
100% | |
| USA | ||
| Balta USA Inc. 100% | 100% | |
| LSF9 Renaissance Holdings LLC | 100% | 100% |
| LSF9 Renaissance Acquisitions LLC | 100% | 100% |
| BPS Parent, Inc. | 100% | 100% |
| Bentley Prince Street Holdings, Inc. | 100% | 100% |
| Bentley Mills, Inc | 100% | 100% |
| Prince Street, Inc | 100% | 100% |
(*) During the second quarter of 2017 the remaining minority equity stake of 1.61% (owned by Bentley management) was acquired by the group, resulting in 100% ownership of LSF9 Renaissance Bermuda Partners LP as at June 30, 2017, compared to 98.39% as at March 31, 2017 .
Balta Holdco S.à r.l. contributed 100% of the shares of LSF9 Balta Issuer S.à r.l to the share capital of Balta Group NV by means of a contribution in kind in exchange for 25 million shares. This contribution was described in an agreement dated May 30, 2017 and was subject to the IPO as being described in Note 6.
The following table sets forth the ownership of the shares after the closing of the IPO as at July 20, 2017:
| Number of shares | % | |
|---|---|---|
| Total | 35,943,396 | 100% |
| LSF9 Balta Holdco S.à r.l. | 20,303,957 | 56.5% |
| Management | 273,637 | 0.8% |
| Public | 15,365,802 | 42.8% |
The following transactions were carried out with related parties:
As described in note 10, LSF9 Balta Holdco S.à r.l. contributed €1.3 million in the share capital of LSF9 Balta Issuer to integrate the former Bentley Management equity stake in the group prior to the IPO.
As described in Note 11, the Preferred equity certificates (PECs) issued by LSF9 Balta Issuer S.à r.l. and owned by LSF9 Balta Holdco S.à r.l. were contributed in the share capital of LSF9 Balta Issuer S.à r.l. for an amount of €152.9 million prior to the IPO.
Key management means the Group's Executive Committee, which consists of the people having authority and responsibility for planning, directing and controlling the activities of the Group. Key management compensation includes all fixed and variable remuneration and other benefits which are presented in other expenses.
Key management compensation is in line with FY2016 and will be further updated in the annual report of 2017.
Certain members of the Management Committee are entitled to a share related bonus payment pursuant to a phantom share bonus scheme with Balta NV.
| (€ thousands) | June 30, 2017 |
December 31, 2016 |
|---|---|---|
| Other payables to related parties 185 | 54 |
The balances mainly arise from current accounts positions at year end and quarter end as a result of payments which have been performed on behalf of the Group entities. These current accounts are respectively reflected in the trade and other receivables and in trade and other payables. The increase compared to December 31, 2016, mainly relates to a prepayment received from LSF9 Balta Holdco S.à r.l. in relation to IPO related expenses.
On 18 July 2017, Balta announced that it has renegotiated and obtained more favorable commercial terms in respect of its European super senior revolving credit facility, including a reduction of the margin from the original 3.75% p.a. in August 2015 to an average margin below 1.80% p.a. at current leverage. At the same time, the facility was increased from €45 million to €68 million.
On 28 July 2017, the Company announced the partial redemption of €7.8 million of the Notes, reducing the aggregate principal amount to €261.0 million.
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