Annual Report • Mar 25, 2022
Annual Report
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Untitled A Window of Opportunity Annual Report 2021 Annual Report 2021 2 We see multiple windows of opportunity before us. A chance to create a sustainable future for our children and the generations that follow. Are you with us? Chapter 3 01 02 03 04 05 Annual Report 20214 5 Annual Report 20216 7 Index 1 2021 at a glance 1.1 Message from the Chairman and CEO 10 1.2 Key Figures 2021 16 1.3 Milestones 2021 20 2 Report of the Board of Directors 2.1 Who we are 30 2.2 Mission 46 2.3 Products and Innovations 50 2.4 Risk and Governance 58 2.4.1 Internal Control and Risk Management 52 2.4.2 Corporate Governance Statement 68 2.5 Sustainability 108 2.5.1 The World We Operate in 108 2.5.2 Sustainability Strategy 112 2.5.3 People 116 2.5.4 Planet 123 2.5.5 Community 142 2.6 Financial Performance 150 2.6.1 Deceuninck Consolidated 152 2.6.2 Financial Statements and Notes 155 2.6.3 Deceuninck NV 240 2.6.4 External Auditor’s Report 243 2.6.5 Management Responsibility Statement 251 Deceuninck Shares 252 Addresses 254 Glossary 260 GRI Index 262 8 Annual Report 2021 1. 2021 at a glance 1.1 Message from the Chairman and CEO 1.2 Key Figures 2021 1.3 Milestones 2021 9 Annual Report 202110 2021 at a glance Marcel, your name is associated with Deceuninck since more than 10 years, rst as independent director and later as Chairman of the Board. How did you see the company evolve? Marcel: I came on board in the middle of the nancial crisis, when the global economy was severely impacted. During that period, Deceuninck has proven to be a very resilient company. Management acted with a lot of agility implementing the required restructuring, including the closure of factories and raising the required capital to strengthen its nancial structure. The entry of new share- holders in 2014 gave the company extra nancial strength allowing it to do targeted investments to further develop the global growth plan, improve brand awareness and, very importantly, to develop the recycling technology to drive sustainability. During the recent pandemic, Deceuninck showed once more its resilience. In this crisis also, management re- acted fast and decisively, resulting in strong protable growth when the economy started to pick up. Over the past few years, it has become clear to me that we are operating in a very stable and growing market. All new building and renovation projects require high quality Interview with our former Chairman, Marcel Klepsch, our former CEO and new Chairman, Francis Van Eeckhout and our new CEO, Bruno Humblet 1.1 Message from the Chairman and CEO windows and doors. Our products and technologies deliver the best results in terms of insulation, which becomes increasingly important to help meet the climate objectives. Francis, under your leadership Deceuninck acceler- ated its global expansion while improving its prota- bility. Francis: In order to grow as a business, it was necessary to improve protability rst. This was more dicult than I expected. Certain structures are fairly xed and dicult to change in the short term, but I think I can say that, over the past 5 years, we have been successful in spite of the turbulent times. Protability has evolved nicely in recent years and our debt has reduced to a comfortable level. That created room to invest, which we did: in our brand, in our recycling activities, in growth of both geographi- cally in — amongst others — Emerging Markets and via a renewed product range in the mature markets. Is the return of those investments visible already in the 2021 gures? Francis: I am very satised with the 2021 gures: despite COVID-19, we achieved very good results for the second Message from the Chairman and CEO 11 “By working together, we can achieve our objective to build a sustainable home creating value for all our stakeholders, our people, our customers, the society we operate in and our shareholders.” Bruno Humblet, CEO 2021 at a glance Annual Report 202112 13 Message from the Chairman and CEO year in a row. Despite the disrupted supply of raw materi- als, we managed to achieve a volume growth of 13%. This is indeed the result of focused eorts. In order to avoid production interruptions caused by a lack of raw materials, we were forced to accept higher purchase prices month by month, which forced us to raise our selling prices several times. On top, we saw ination in our labor costs, transport costs and energy prices. With some delay, we largely succeeded in passing on those higher costs. That enabled us to limit the impact on the prot in euro, but we did see a dilution in the prot margin. Apart from the numbers, I regret to say that we did not always succeed in meeting our delivery deadlines to our customers, due to the exceptionally strong demand combined with raw material scarcity. This impact was seen across the whole sector, but we are working hard across all our plants globally to improve the delivery performance. Because of the fall of the Turkish lira, a lot of attention was probably also paid to the Turkish business? Francis: Turkey is a country with short-term volatility but long-term proven strong growth potential. In the long run, the growth trend in turnover and prot remains intact. Thanks to our state-of-the-art factories, strong market position, strong local management and solid local brands, we manage to absorb a lot of this volatility. In ad- dition, with every crisis in Turkey, we gain market share as smaller competitors with weaker balance sheets regress. I am proud of the results we achieve in that region. And how do you assess the results of the other regions? Francis: In Europe, we see a solid growth with protabili- ty that is much more robust than in the past. The region is also on schedule with the commercial roll-out of Elegant. Everywhere this new series is launched, customers and architects are thrilled about its look and feel. Thanks to its sleek design, no one can tell the dierence from alumi- num proles. Francis Van Eeckhout, former CEO and new Chairman “Protability has evolved nicely in recent years and our debt has reduced to a comfortable level. That created room to invest, which we did: in our brand, in our recycling activities, in growth of both geographically in Emerging Markets and via a renewed product range in the mature markets.” 2021 at a glance Annual Report 202114 In the US, demand exceeds supply. The labor shortage aected us also in 2021. We have enough machines, but are struggling to nd enough people to man them. Bruno, you have been a Board member since 2020 and you are Deceuninck’s new CEO since 1st January. Have you been able to settle in yet? Where will you put your main focus? Bruno: Deceuninck is a great company that oers many opportunities. Over the past few months, I have had the opportunity to visit dierent locations and to meet the local teams. Our motivated people, all over the world, are proud of their work, our products, our mission. They live our values: Candor, Top Performance and Entrepreneur- ship. By working together, we can achieve our objective to build a sustainable home creating value for all our stakeholders, our people, our customers, the society we operate in and our shareholders. I also rmly believe in our sustainability discourse: in the coming years, we will drastically reduce the carbon emis- sions resulting from our own activities. We are currently nalizing concrete plans and setting challenging targets to reduce our environmental impact. Thanks to our investments in recycling, we will also be able to incor- porate more and more recycled PVC in our products. As recycling PVC requires 90% less energy than producing new PVC, this will further signicantly reduce emissions. Finally, our products have superior insulation values and will therefore play an important role in the renovation wave that will come to meet the global climate objectives. As Francis mentioned, an important point of attention in the short term is the shortening of delivery times to our customers. The availability of materials and labor will remain a problem, but we are optimizing to handle those impacts better. Finally, we will remain focused on ensuring we drive protable growth in order to be able to further invest in sustainable growth. In the given circumstances, our gross operating margin of 11.7% is a very good result, but in the longer term, we must dare to aim higher. Marcel Klepsch, former Chairman “During the recent pandemic, Deceuninck showed once more its resilience. In this crisis also, management reacted fast and decisive, resulting in strong protable growth when the economy started to pick up.” 15 Message from the Chairman and CEO Annual Report 202116 2021 at a glance 1.2 Key gures 2021 KEY FIGURES (IN €MILLION) 2019 2020 2021 EVOLUTION 20202021 Consolidated Income Statement (in € million) Sales 633.8 642.2 838.1 31% Adjusted Ebitda 60.6 86.0 97.7 14% Ebit 11.2 45.9 54.3 18% Net Prot (14.7) 25.6 37.2 45% Consolidated Balance Sheet (in € million) Equity 233.1 246.3 258.9 5% Net Debt 140.2 55.5 61.9 12% Total Assets 589.7 599.4 675.1 13% Capital Expenditure 35.5 23.5 43.6 85% Working Capital 94.5 74.2 84.3 14% Capital Employed 416.3 347.4 354.9 2% Ratios Net Prot On Sales (2.3%) 4.0% 4.4% - Adjusted Ebitda / Sales 9.6% 13.4% 11.7% - Net Debt / Adjusted Ebitda 2.31 0.64 0.63 - Ebit / Capital Employed 2.7% 13.2% 15.3% - Headcount Total Full Time Equivalents (Fte) 3,754 3,660 3,709 - KEY FIGURES PER SHARE 2019 2020 2021 Number of shares as at 31 December 136,732,506 136,795,123 138,040,929 Market capitalisation as at 31 December (in € million) 280.3 264.0 463.8 Net prot per share as at 31 December (in €) (0.11) 0.19 0.27 Book value per share (in €) 1.70 1.80 1.88 Gross dividend per share (in €) - 0.05 0.06 Share price at 31 December (in €) 2.05 1.93 3.36 * Definitions: See glossary 17 Key Figures 2021 SALES (IN €MILLION) SALES 2020 PER REGION (IN €MILLION) 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 633.8 642.2 838.1 60.6 86.0 97.7140.2 55.5 61.9 35.5 23.5 43.6 INVESTMENTS (IN €MILLION) SALES 2021 PER REGION (IN €MILLION) ADJUSTED EBITDA (IN €MILLION)NET DEBT (IN €MILLION) 159.6 165.3 183.2 243.5 317.3 411.4 Turkey & Emerging Markets Turkey & Emerging Markets Europe Europe North America North America Annual Report 202118 2021 at a glance Mission: Building a Sustainable Home ReliabilitySustainabilityInnovation Polish IRBS Award for Thermofibra Austrian “Innovation” and “Sustainability” Recognition Awards for Elegant Awards 2021 Key Figures 2021 19 Latest Innovations Phoenix / Eos / Zenith ISO14001 certified in production facilities Belgium, Turkey and UK Our reporting framework Global Reporting Initiative (GRI) Some of our Sustainability Achievements 23,500 tonnes recycled in our recycling factory 15% recycled materials in our products 32,500 tCOe emissions avoided through the use of own PVC recyclate Commitment to the Science Based Targets Initiative VinylPlus Product Label for Elegant, Elegant Thermofibra, Zendow, Zendow#neo and Twinson in Europe Annual Report 202120 2021 at a glance 1.3 Milestones 2021 January Deceuninck welcomes Serge Piceu as new CFO Group. February Deceuninck Belgium partners up with #DASGENIAAL, a partnership between 18 international companies and local organizations with one common goal: to make youngsters passionate about science, technology, engineering, mathematics, production and design (“STEM”). Deceuninck Australia moves to its new 5,500m² Melbourne warehouse. It is the largest PVC supplier warehouse in Australia and services Deceuninck fabricators across Australia and New Zealand. April Deceuninck auction of the Deceuninck-Quick Step riders’ jerseys brought in € 9,733.78, which was donated to the Belgian association Kom Op Tegen Kanker. Deceuninck’s ThermoFibra technology receives the Polish IRBS award. 04 21 Milestones 2021 April Deceuninck auction of the Deceuninck-Quick Step riders’ jerseys brought in € 9,733.78, which was donated to the Belgian association Kom Op Tegen Kanker. Deceuninck’s ThermoFibra technology receives the Polish IRBS award. June Deceuninck Germany wins two recognition awards at the Vienna Window Convention in the categories “Innovation” and “Sustainability” with the Elegant window range. 08 04 06 2 awards for Innovation and Sustainability August Deceuninck Russia announces the appointment of Evgeny Pchelintsev as its new General Manager. Annual Report 202122 2021 at a glance November Deceuninck announces the sponsorship deal with the ProTeam Alpecin-Fenix as of 2022. Deceuninck Poland is awarded a triple distinction at the prestigious Building Creator 2021 nals in Warsaw. Deceuninck Germany wins the Training Company Award of the District of Straubing- Bogen for companies that excel in training and apprenticeships. October Deceuninck Turkey receives the rst Passive House Component Certication for PVC Windows in Turkey with the Winsa-Revotech window range from the German Passive House Institute. September Deceuninck announces a leadership transition starting 1 January 2022: Bruno Humblet is appointed as new CEO Group, Marcel Klepsch steps down as Chairman and remains independent director and Francis Van Eeckhout is appointed as Executive Chairman. Deceuninck welcomes Paul Van Oyen as new independent director. 09 10 11 23 Milestones 2021 December Deceuninck NV is committing to set science- based emissions reduction targets in line with the SBTi Criteria and Recommendations, to submit them to the SBTi for validation and to publish its approved targets within a maximum of 24 months. Deceuninck renews and extends the VinylPlus ® Product Label for the product families Elegant, Elegant Thermobra, Zendow, Zendow #neo and Twinson in Europe. November Deceuninck announces the sponsorship deal with the ProTeam Alpecin-Fenix as of 2022. Deceuninck Poland is awarded a triple distinction at the prestigious Building Creator 2021 nals in Warsaw. Deceuninck Germany wins the Training Company Award of the District of Straubing- Bogen for companies that excel in training and apprenticeships. SUSTAINABILITY MILESTONES 11 12 We believe that great people deliver great results. Our ambition is to attract and retain talent by encouraging our people to learn and develop themselves, by investing in enhancing their health and safety and by protecting their fundamental rights. 01 Annual Report 202124 We believe that great people deliver great results. Our ambition is to attract and retain talent by encouraging our people to learn and develop themselves, by investing in enhancing their health and safety and by protecting their fundamental rights. 02 03 04 05 25 Annual Report 202126 2021 at a glance “Deceuninck Group understands the value of the HR function on the business’ ability to reach its objectives.” Lytia Watson VP of HR Deceuninck North America 27 Who we are Annual Report 202128 2. Report of the Board of Directors 2.1 Who we are 2.2 Mission 2.3 Products and Innovations 2.4 Risk and Governance 2.5 Sustainability 2.6 Financial Performance 29 Annual Report 202130 Report of the Board of Directors 1937 The origins of the Group go back to 1937. Benari Deceuninck, father of Roger Deceuninck, started a small company in Beveren-Roeselare to manufacture all kinds of buttons, buckles, combs, etc. from plastic sheets. 1960s In the 1960s, the Group chose to explore a new direction in plastic production by extruding PVC granules for the manufacture of proles for the building industry. 2.1 Who we are How the story began 1970s After the successful introduction of the products in the neighbouring countries of France, the Netherlands and the United Kingdom in the early 1970s, the rst commercial subsidiary was established in France with local storage capacity and local oces. This was soon followed by a subsidiary in the United Kingdom and in Spain. As local demand boomed in the mid-1980s, particularly in France and the UK, Deceuninck decided to start producing locally and created two new production sites: one in Roye (France) and one in Calne (United Kingdom). 1980s On 11 June 1985, Deceuninck was listed on the Brussels Stock Exchange. During the second half of the 1980s, Deceuninck mainly focused on the vertical integration of its processes, including the start of the printing and coating activities, followed by the start of the compounding activities in the early 1990s in Diksmuide (Belgium). 1990s In the mid-1990s, Deceuninck set up sales oces and local warehouses in Poland and the Czech Republic. This was quickly followed by the start of extrusion activities in Poznan (Poland) in 1995. The rst steps in the US market were made with the acquisition of Acro Extrusions in Wilmington, Delaware in 1995. The acquisition of American Dayton Technologies from the Alcoa Group in Monroe, Ohio followed in 1997, giving Deceuninck a leading position in the American market for non- integrated PVC window systems. 31 Who we are 2000s At the beginning of the 21st century, Deceuninck decided to acquire Ege Prol. Turkey had become the second largest market for PVC windows in Europe. In June 2003, the German company Thyssen Polymer was acquired from the Thyssen Krupp Group. At that time, the company was half the size of Deceuninck and had a major extrusion plant in Germany and two production plants in the United States. At the end of 2004, the Group acquired the company Winsa. Thanks to its presence in Turkey, Deceuninck was able to benet not only from the growth of the local Turkish market, but also from the success of its Turkish subsidiaries in developing sales in the Middle East, the Maghreb countries in North Africa and in Asia. Deceuninck was one of the pioneers in introducing wood composite products to Western Europe. The product line for terraces and facades uses a specic PVC-based formula under the Twinson brand name. At the end of 2008, the global nancial crisis had an impact on global construction activities, forcing Deceuninck in the rst half of 2009 to further adapt its business activities to the new economic reality. Indirect personnel was cut back signicantly worldwide, and in all branches direct personnel was brought in line with the volume. In September 2009, Deceuninck implemented a nancial restructuring. 2010-today Early 2011, Deceuninck launched its new vision "Building a Sustainable Home" based on the pillars Innovation - Ecology - Design and linked to the Group’s three core values: Candor, Top Performance and Entrepreneurship. From 2010 onwards, the Group further expanded in the Emerging Markets of Asia, Africa and Latin- America. In 2014, the Turkish listed company Pimas was acquired. On the site of its existing compounding plant in Diksmuide, the Group built a high-tech recycling plant. The recycling line aims to process the increasing ow of rst-generation windows in a qualitative manner. The line is equipped with the most modern recycling techniques that can also recycle glass bre. The line has been fully operational since December 2018. In 2017, the Group launched Decalu and Tunal, expanding the product range with aluminum windows and doors, ventilation and sun protection, next to the IQ Aluminum line that already existed in Turkey. In 2019, the Group announced its One Europe strategy under one global brand, Deceuninck. In the same year, Deceuninck's latest window series Elegant won the prestigious Red Dot Award. Elegant is Deceuninck’s ultimate window concept. It is 100% recyclable and the best performing steelless window and door solution available. It is the rst of many window designs powered by Deceuninck’s new universal platform iCOR. Despite the COVID-19 pandemic, the Group was able to resume its protable growth track with results reaching their highest levels ever. Annual Report 202132 3,709 Report of the Board of Directors production facilities customers employees worldwide (full time equivalent) Deceuninck in numbers 33 Who we are since countriesin subsidiaries global player within our industry Hooglede-Gits, Belgium T P 3 Annual Report 202134 Annual Report 202134 Report of the Board of Directors 3535 Who we are Designer, Manufacturer, Recycler The Group is active as designer, manufacturer and recycler of multi-material (PVC, aluminum and wood composite) window, door and building solutions. The window and door solutions include a wide range of window and door system proles, complemented by the residential screening product range. The building solutions include products for exterior applications, roong, cladding and interior applications. The basic technology used by the Group is extrusion of PVC. Deceuninck's integrated production process includes compounding, tooling, extrusion of seals and proles, printing, adhesion of decorative foil and recycling. Activities What is extrusion? The Group’s main business activity is the transformation of a PVC dryblend (powder) into a rigid PVC prole. PVC resins are produced from two components derived from natural raw materials, being ethylene (oil, gas) (43%) and chlorine (salt) (57%). Unlike other plastics, PVC resins are only partially derived from fossil raw materials. Three basic processes are used in PVC resin production, resulting in suspension PVC (S-PVC), emulsion PVC (E-PVC) and bulk polymerisation. Our commitment to the circular economy Our commitment to close the loop is clear by the investments we made in the state-of-the art recycling plant in Diksmuide (Belgium), making us one of the largest u-PVC recyclers of Western-Europe. Annual Report 202136 Degradation Recycling Annual Report 202136 Report of the Board of Directors 37 Who we are Compound Processing Extrusion 37 Recycling When the old windows and doors arrive at our recycling site, they contain many other materials. Through these 4 steps we transform your old window into raw material to produce a new window: • Pre-sorting: the material is crushed and mainly metal and mineral fractions are removed • Grinding and washing: the material is washed to separate the remaining dirt from the PVC • Re-sorting: we mainly remove rubbers, wood and the last metals present and sort the ow by colour • Granulation: the smallest contaminations are removed before we make granulate that is used as a high-quality raw material. Degradation By working together with local partners, we separate and collect post-consumer PVC materials as much as possible at source. This requires a lot of eort, but ensures that we get these materials at our recycling site at the highest possible quality and the lowest possible economic and ecological cost. Report of the Board of Directors Annual Report 202138 39 Who we are Compound The PVC resin is mixed with additives in a mixing tower to form a homogeneous and dry powder. Each mixing tower consists of a number of oors for the storage of the additives, for weighing the components, for intensive mixing into a PVC powder and for cooling. No chemical reaction takes place, the production process only involves physical mixing. The PVC powders are transported to the stock silos and to the 'nished product' silos after sieving. They are then transported to the various sites of the group. Extrusion The PVC compound is melted in the extruder and forced through a mold that determines the shape. The prole is kept in the right shape in calibers, cooled by cooling water and cut to length. In addition to classic extrusion lines, we have co-extrusion to mix recycled material with new raw material, foam, thermal reinforcements (with steel wire) and corex (with berglass) lines. Processing The proles get a lacquer layer using a classic paint spraying process or are covered with a foil by means of a hot melt adhesive, which gives the prole a structure. Annual Report 202140 Report of the Board of Directors The geographical spread of the Group’s turnover is one of its strongest assets. The Group serves customers in more than 90 countries worldwide. The largest number of customers within the Group are window manufacturers (business-to-business model), who assemble the window solutions into a window according to the assembly and installation instructions of Deceuninck. Deceuninck has a balanced customer base of small, medium, and large window manufacturers. The latter category is equipped with highly automated machines for the manufacture of windows. Customers and Markets Building solutions are delivered to professional building material dealers. The professional building material dealers sell Deceuninck products to the professional construction and renovation market or directly to the end consumer. The assembly of the product is mainly done by independent specialised installers. Deceuninck’s customer base is divided into three geographical regions: 1. Europe 2. Turkey & Emerging Markets (Australia, Brazil, Chile, Colombia, India, MEA, Mexico, Thailand) 3. North America Production, distribution & sales Distribution & sales 41 Who we are Supporting + 4,000 customers in + 90 countries across the world Annual Report 202142 Report of the Board of Directors Group Leadership CEO: Bruno Humblet COO: Luc Vankemmelbeke CFO: Serge Piceu General Counsel and HR Director Group: Ann Bataillie Daily managers 43 Who we are Europe Turkey & Emerging MarketsNorth America CEO: Stijn Vermeulen 8 2 7 8 8 CEO: Joren Knockaert CEO: Ergün Cicekci Production, distribution & sales Production, distribution & sales Production, distribution & sales Distribution & sales Distribution & sales Annual Report 2021 01 02 The geographical spread of the Group is one of its strongest assets. In order to serve the local markets’ needs, we strive to be an agile organization with an ecient and exible production footprint. An important point of attention is the shortening of delivery times to our customers. The availability of resources will remain critical and requires exibility in order to maintain our customers’ condence as their true partner. 44 03 04 05 The geographical spread of the Group is one of its strongest assets. In order to serve the local markets’ needs, we strive to be an agile organization with an ecient and exible production footprint. An important point of attention is the shortening of delivery times to our customers. The availability of resources will remain critical and requires exibility in order to maintain our customers’ condence as their true partner. 45 Annual Report 202146 Report of the Board of Directors 2.2 Mission Building a Sustainable Home The Group’s “Building a Sustainable Home” mission is based on ve pillars: • Developing an innovative product range that meets key customers’ needs, supported by a strong brand • Having the most sustainable product and production process • Encouraging an entrepreneurial spirit to create an agile organization, with an efficient and flexible production footprint to serve the local market needs • Fostering the best team in the industry with a focus on safety, quality and sustainability • Keeping a healthy financial structure to support long term vision Why: Innovation, Sustainability and Reliability Innovation, Sustainability and Reliability are the cornerstones of our business. Through innovative designs and production processes, we deliver the most sustainable window, door and building solutions for today’s and tomorrow’s customers. How: Candor, Top Performance, Entrepreneurship Candor, Top Performance and Entrepreneurship are our core values. We strive to deliver top performance for all our stakeholders. Our candor approach combined with our entrepreneurial spirit allow us to stay focused realizing our goals. What: The preferred solutions provider for sustainable window, door and building products Our goal is to be a global design and technology leader with focus on sustainability, a top 3 world player, and the preferred place to work. – 47 Mission How we create value in order to create Value For Our People Job creation Talent acquisition and retention Learning and development Safe working environment For Our Planet Use of recycled material in our products and products with optimal thermal insulation Recycling of post-consumer waste Energy and water management in production Use of renewable electricity For Prosperity Financial sustainability Top 3 global player Shareholder return For Our Community Health & Safety of our products in use-phase Business ethics and compliance Community engagement We build on Resources Human Our people 3,709 FTE Our customers +4,000 Our suppliers Materials Raw materials 229,138 tonnes of PVC extruded Recycled materials 15% recycled materials in our products Know-How 0.8% of sales spent on R&D Financial € 37.2m net prot Legal and Ethics 49 key suppliers signed our Supplier Code of Conduct to provide our sustainable Products and Services Research & Product Development Window and door solutions Cladding and decking Multi-material: pvc, aluminum, wood composites Manufacturing Logistics & Supply Technical Support Marketing Investor Relations Annual Report 202148 Report of the Board of Directors 49 Mission Annual Report 202150 Report of the Board of Directors Windows and (sliding) doors What denes our PVC and aluminum windows and doors: superior thermal and acoustic performance com- bined with the lowest possible material consumption. Energy-ecient and with a stylish design, they are the perfect nishing touch for any facade. After passing strin- gent tests, we achieved top performance also in terms of safety. In addition, our innovative Thermobra technology provides extra performance in terms of stability, strength and insulation. With our sliding doors you bring the world outside into your home. Protecting your home We ensure a comfortable, clean and healthy living en- vironment thanks to our special solutions for sun pro- tection, shutters and ventilation. Full home protection is possible thanks to our roller shutter platform. Controlled airow is assured thanks to our surface-mounted high- tech window ventilation systems: a constant ow of fresh air guaranteed. 2.3 Products and Innovations Multi-material window, door and building solutions 51 Products and Innovations Roof nishing and cladding Aesthetic elegance and durability are the two main re- quirements that our roof nishing and cladding solutions also fully meet. Our claddings are available in Twinson wood composite, aluminum and PVC for the highest durability. The list of benets is endless: our cladding solutions oer excellent weather resistance, are light- weight and easy to install. They are also rot-resistant and fully recyclable. Outdoor living We continue to invest in high-quality wood composite materials and technologies. The result: the natural look of wood and the easy maintenance of PVC. The Twinson range oers both hollow and solid terrace boards, in various colors and textures. Our wood composite deck- ing solutions are slip and crack resistant. All materials are fully recyclable and, due to their natural look, t perfectly into the surrounding environment. Annual Report 202152 Report of the Board of Directors Elegant The Elegant range is Deceuninck’s ultimate window concept. It is 100% recyclable and the best performing steelless window and door solution available. It is the rst of many window designs powered by Deceuninck’s new universal platform iCOR. This modular approach allows for process standardization, resulting in a substantial complexity reduction. The remarkable technology of Thermobra replaces the steel reinforcement in window and door proles by structural glass bres. Elegant’s design and 100% recyclability have already been internationally awarded with a German Innovation Award, German Design Award and Red Dot Award. eos Window System Deceuninck North America’s innovative eos window system leads the way in residential, replacement markets. This product line has seen unprecedented growth in 2021 with homeowners looking to improve the energy eciency, aesthetics and safety of their homes. It is designed to outperform Energy Star requirements. Patio Door (ADA sill) The eos patio door system is a versatile, high-performing product used in residential and light commercial remodeling and new construction applications. It was enhanced in 2021, with the design of a new sill that meets the most recent Americans with Disabilities (ADA) standards. Innovations Zenith and Slim Slide Deceuninck Turkey’s Zenith features a unique and intelligent design which provides signicant thermal properties on the window. The Slim Slide concept was developed and used in a new sliding frame without sill, in order to ease access for people with disabilities. – “The Elegant range for windows and doors, based on the uniquely developed iCOR principle, is the result of our putting our core product design values into practice.” Products and Innovations 53 Annual Report 202154 Report of the Board of Directors “Through 2020 and 2021, COVID-19 raged through the world disrupting markets, customers and teams but the management at Deceuninck held fast and stood behind us like a rock. Always encouraging and supporting the team, preparing us for the future.” Satish Kumar Business Development Manager Asia & Australia Deceuninck India 55 Products and Innovations Annual Report 2021 Annual Report 2021 56 01 02 03 Cutting-edge thinking has always been in our DNA, but we want to take it a step further. We develop our products and use our know- how so as to combine design and eciency with superior insulation, contributing to both increasing comfort standards and global warming objectives. The award-winning Elegant platform is the perfect illustration of what the future has got in store. Annual Report 202156 Chapter 57 04 05 Cutting-edge thinking has always been in our DNA, but we want to take it a step further. We develop our products and use our know- how so as to combine design and eciency with superior insulation, contributing to both increasing comfort standards and global warming objectives. The award-winning Elegant platform is the perfect illustration of what the future has got in store. 57 Annual Report 202158 Report of the Board of Directors Risk framework Taking calculated risks is an integral part of operational management. The purpose of risk management is to identify and to manage the risks. The Group selected the ISO 31000 standard as framework for its risk management system. The following steps can be distinguished within this framework: • Establishing the context In order to detect risks, it is important to have a clear understanding of the context in which the Group operates. On the one hand, there is the ever-changing external context which includes our social, cultural, political, legal, legislative, nancial, technological, economical, natural and competitive environment. On the other hand, there is the internal context in which the objectives of Deceuninck as a Group, as well as the objectives of each individual entity, need to be dened. • Risk assessment • Risk identication Risk identication is the rst step within the risk assessment process. The risks that might have an impact on the achievement of objectives are identied in various brainstorming sessions, and subsequently summarized in the Risk Register. • Risk analysis Risk analysis is the process that seeks to identify the possibility that the risk will occur and what the possible impact will be on achieving the objectives. For this, we consider the impact on the core objectives i.e. people, planet, quality, service and cost. • Risk evaluation Risks are evaluated and ranked on the basis of the likelihood that they will occur and the impact they will have. The outcome of this is summarized in a Risk Matrix. • Risk treatment The risk management process is a continuous eort and the dierent phases continuously have to be reviewed and monitored. Internal Audit maintains the Risk Register and Risk Matrix for all risks which are relevant at Group and regional level, as well as a list of actions which have been agreed to treat these Risks. Actions are assigned to cross regional teams and overseen by an Executive Team member. These are reviewed twice a year by the Executive Management, to ensure completeness of the Risk Register and to ensure that agreed actions are implemented. Once a year, there is a similar review with the Audit Committee of the Board, typically during a dedicated risk management session or as a separate agenda item during the scheduled meetings of the Audit Committee. Internal Audit applies a risk- based internal audit approach which aims to identify potential new risks during their audits at legal entity level. This helps to ensure completeness. 2.4 Risk and Governance Internal control and risk management system Risk and Governance 59 Risks can be treated in four possible ways: • To avoid the risk completely by changing or stopping the activity • To act so as to reduce the probability (prevention) or to lower the impact (protection) • To transfer the risk through insurance or through other contracts with third parties • To accept the risk without further action. Main features of the Group’s internal control and risk management systems The most important features of the Group’s internal control and risk management system, including nancial reporting, can be summarized as follows: • Dening targets for permanent follow-up of operating priorities as well as operational and nancial performance of the Group and the individual companies • Continuously analyzing historical nancial results and regularly updating mid-term nancial forecasts. Follow up of exchange rate risks and mitigating actions. • Dening the company’s policies and procedures for compliance with applicable laws and regulations • Dening procedures clarifying authorization levels and segregation of duties, reviewed for compliance by the internal audit department. • Ensuring business continuity and access control of IT systems. • Discussing internal audit reports with the Internal Auditor and, if required, further consultation for additional information and clarication as well as taking measures in order to implement and be compliant with the recommendations. • Constantly monitoring raw material prices. • Requesting conrmation from local management teams to ensure that they comply with applicable laws and regulations and internal procedures of the company. • Monitoring and regularly discussing litigations that could be of material signicance with the legal department. Risk structure Two dimensions The Group structures its risks along two dimensions: operational and generic risks. The operational dimension is split into the following categories: innovation, operations, sales, sourcing, inventory, logistics, people, nance, ICT and legal risks. The generic dimension is split into economic, political, regulatory, climate change and reputational risks. Risk rating The risks listed below were scored as part of the risk assessment exercise and were scored highest amongst all risks included in the Risk Register. Establishing the context Monitoring & Review Communication & Consultation Risk Identication Risk Analysis Risk Evaluation Risk Treatment Risk Assessment Annual Report 202160 Report of the Board of Directors More detailed explanation of the risk categories • Economic climate As most companies, the Group is exposed to the risks of an economic recession, the volatility on the credit and capital market and the economic and nancial situation in general. These factors have a negative inuence on product demand. The Group primarily manufactures window proles destined for the residential construction sector and related products. Consequently, our future results will mainly depend on the evolution of these markets. Against this background the current nancial and economic situation has a considerable impact on the economy in general and inuences all markets in which we operate. The Group cannot predict how the markets will evolve in the short term. Although the authorities of some geographical markets in which we operate have taken policy measures to stimulate economic growth, the Group cannot guarantee that these measures will suce in order to achieve this eect. Also, the measures that were taken can be withdrawn or adjusted. The markets in which the Group operates are subject to strong competition. We compete with other companies based on dierent factors, such as quality and service: (i) knowledge of and access to new technologies and new production processes, (ii) the ability to launch new products that oer improved functionality or that are less expensive than the existing range, (iii) completeness of the solutions that are oered, (iv) reputation and vision, (v) geographical presence, (vi) distribution network and (vii) prices. Furthermore, competition can increase by consolidation or by new competitors oering similar products that enter the market. Strong competition can cause market overcapacity and price pressure. In addition, contracting parties, customers or other parties that operate in the Group’s market can change their operational model in a Category / Business area Risk description Operations Failure key projects (e.g. SAP) for various reasons resulting in poor overall quality or service Operations Product availability Operations Time to market for new innovations Operations High volatility in customer demand Operations Business continuity (e.g. breakdown of critical infrastructure, incl. Policy, BCP, BIA, disaster recovery) Sourcing Shortage of raw and/or recyclable material Sourcing Raw material price uctuation Sourcing Inability to push through increases in raw material prices / transport / labor costs People Availability of skilled workers People Shortage of people People Employee uctuation / attrition Finance FX risks IT Breakdown of critical IT infrastructure IT IT security breach (e.g. cyber security, data protection, etc.) Legal Non-compliance with rules and regulations (antitrust custom and trade, etc.) 61 Risk and Governance matter that inuences our activities. In other words, the Group’s success depends on its capacity to maintain competitiveness as the market structure changes. Although the Group was able to do so by adjusting to the market structure changes, future changes could have a considerable impact on its activities, operating prot or nancial position. The activities, operating prot and nancial position of the Group uctuate according to the general economic climate. The decision whether or not to buy capital goods, which would enable the Group’s customers to integrate its products, entails a high level of investment. Such a decision on investment can among other things be associated with the general economic climate. The decision by end users of our products to invest in real estate can also be associated with the general economic climate and credit access. The renovation market is less sensitive to economic uctuations than new construction. • Operations The Group’s compound factories are considered to be a critical infrastructure that deliver compound to most of the Group’s extrusion factories. They are situated in a limited number of countries (Germany, Belgium, Poland, the United States, Russia and Turkey). Although no considerable problems arose in the past, an activity interruption at one of the compound factories could substantially interrupt the production process of the extrusion facilities, as it is dicult to ship compounds under commercially attractive conditions. Such unavailability could substantially inuence our activities, operating prot and nancial position. Furthermore, sudden and signicant increases in customer demand can result in deteriorating service levels due to product availability problems. In such case, where delivery lead times are increasing it is key to have the actual cost price of the products reected in the sales price. As such, regular price increases to reect rising raw materials prices are vital to prevent margin erosion. • Sourcing Future protability of the Group is partly determined by changes regarding the purchase prices of raw materials (especially PVC resins and additives), components, capital goods, salaries and other corporate services, as well as by sales prices the Group can charge for its products and services. For most of these components there are no hedging possibilities. If the increase of raw material prices is substantial and long-lasting, experience shows that charging higher raw material prices to the market takes about 3 to 6 months’ time, with large dierences between sales territories. • People The success of the Group will depend to a large extent on its ability to attract and retain skilled sta and managers who have a thorough knowledge of and are familiar with its markets, technology and products. The Group is active in a competitive labor market and therefore no assurance can be given that it will be able to retain its key personnel. If we fail to attract or retain Annual Report 202162 Report of the Board of Directors skilled persons, this could have a material adverse eect on the Group’s business or results of operations. • Finance As an international operating Group with production plants and sales organizations in the Americas, Europe and Turkey it is evident that FX risks are inherent to the business. FX positions are closely monitored and risks are reduced where possible. • IT IT risks are becoming more and more important. Security breaches as well as disruptions of IT infrastructure have a direct impact on the continuity of business operations. Therefore, cyber security and IT infrastructure are top priorities for the IT department in order to safeguard corporate information and IT infrastructure. • Legal Intellectual Property. The Group relies on a combination of trademarks, trade names, trade secrets, patents and knowhow to dene and protect its intellectual property rights of its products and operational processes. It is of the utmost importance that the Group is able to continue to use its intellectual property and to suciently protect all valuable intellectual property by acting against violations of its intellectual property rights, by maintaining trade secrets and by using the available legal means such as trademarks, patents and design registrations. Although there are no important disputes, the company cannot exclude judicial procedures in order to protect its rights. In case the above-mentioned methods cannot suciently protect the Group’s intellectual property rights in its most important markets or in case the protection is no longer valid, third parties (competitors included) could commercialize its innovations or products or use its knowhow, which could aect our activities and/or operating results. We cannot guarantee that all trademarks and patents that are applied for will be approved in the future, nor can we exclude the risk that certain of our trademark and patent registrations will expire should we not succeed in extending such trademark and patent registrations. In certain geographical markets, it might be more dicult for the Group to obtain property rights. The Group’s success will partially depend on its ability to exercise its activities without infringing third parties’ property rights, or without unlawfully appropriating those rights. Although there are currently no important claims against the Group regarding the violation of intellectual property rights, the Group cannot guarantee that it will not (unintentionally) infringe third parties’ patents from time to time. The Group might be obliged to spend a lot of time and eorts or might incur judicial costs should the company have to deal with legal claims on intellectual property rights, irrespective of their justiability. If the Group indeed infringes or has infringed patents or other 63 Risk and Governance intellectual property rights of third parties, it can be subject to substantial insurance claims that could impact the Group’s cash ow, activities, nancial situation or operating results. The Group might also be required to put a halt to the development, use or sales of the product or process concerned. It might also need to obtain a license in order to be able to use the disputed rights, which is not available at commercially reasonable conditions or not available at all. To reduce probability of such a violation, management implemented a process to continuously examine possible infringements of patents and intellectual property rights. Product liability. The Group’s activities are subject to possible product liability risks that are characteristic to the production and distribution of its products. Product liability can also apply to new products that will be manufactured or distributed in the future. A possible insuciency of the product liability insurance to cover product liability claims could substantially inuence the company’s activities, nancial situation and operating results. Furthermore, defense against such claims can exert considerable pressure on the management, considerable damages can be claimed or the Group’s reputation can be inuenced negatively, even if the company’s defense against such claims regarding the products they put on the market is successful. Compliance. Violations of applicable laws and regulations, as well as of the Group’s Code of Conduct, by employees of the Group can have a material adverse eect on the Group’s business or nancial position. Within an international company, individual employee actions can lead to non-compliance. This can have a negative impact on the image of the company, on the activities and on the value of the share. Despite internal training and the Group’s Code of Conduct (dealing with a.o. human rights, anti-bribery, anti-corruption), the Group cannot avoid that some employees would commit individual breaches of applicable laws and regulations or the Group’s Code of Conduct. Environmental requirements. The Group operates in markets with dierent strict and evolving environmental requirements. Compounding and storage of hazardous industrial products always involves an environmental risk. Although the Group has taken all necessary measures to mitigate this risk and no signicant problems have occurred in the past, environmental liability cannot be excluded, especially as environmental legislation and regulations can provide for a system of strict liability by which the Group becomes liable, regardless of whether the Group has been negligent or has committed any other oense. Failure to comply with existing or future environmental legislation and regulations may result in criminal or administrative penalties, which could have a material adverse eect on the Group’s business results. _ Annual Report 202164 Report of the Board of Directors 65 Who we are Annual Report 202166 Report of the Board of Directors “The real story is not only about my career with the company, but about being and feeling part of the Deceuninck family.” Elena Marica Plant and Supply Chain Manager Deceuninck Romania 67 Annual Report 202168 Report of the Board of Directors Deceuninck complies with the Belgian Corporate Gov- ernance Code 2020 (the “Code”). The Board subscribes to the principles of corporate governance and trans- parency as set out in the Code and applies the Code as reference code. In its Corporate Governance Charter (together with the appendices, the “Charter”), the Company sets out the main aspects of its governance policy, such as its govern- ance structure, the terms of reference of the Board and its committees, the general meeting, conict of interest regime and measures to prevent market abuse. The inter- nal regulations are included as an annex to the Charter. The Charter should be read in addition to the provisions applicable to the Company and on which it is based, in particular (i) its Articles of Association, (ii) the Belgian Code on Companies and Associations (the “BCA”), and (iii) the Code. The application of Deceuninck’s corporate governance policy in 2021 is further set out in this Corporate Governance Statement. The aim of the Board is to comply as much as possible with the principles of the Code. However, Deceuninck deviates from the Code as follows: Corporate Governance Statement Setting the scene Principle Explain Principles 2.0 and 2.3 The Board believes that having at any time a plan for succession of the CEO is dicult to achieve given the complexity of the business and the industry. The Board believes that having at any time a list of candidates for succession of all board members is dicult to achieve. Such list should have candidates available with a variety of competences to comply with the requirements of diversity within the Board. Principle 7.6 The non-executive Board members may receive subscription rights upon approval by the General Meeting. For that reason, it was decided not to implement the principle of remunerating the non-executive Board members partly in shares. Principle 7.9 Although it was decided not to set a minimum threshold, the members of the Executive Management are recommended to hold shares in the Company. Principle 9.2 The Board decides not to apply this principle; instead, there are exit interviews with directors leaving the Board and Board evaluation in general 69 Risk and Governance Annual Report 202170 Report of the Board of Directors In 2020, the Board adopted the one-tier board structure as the new governance structure of the Company. This structure consists of the Board, which is authorized to perform all acts that are necessary or useful for the reali- zation of the object of the Company, except for those for which the General Meeting is authorized by law. At least once every ve years, the Board will evaluate whether the chosen governance structure is still suitable, and if not, it will propose a new governance structure to the General Meeting. The Board established an Audit Committee and a Re- muneration and Nomination Committee, which have an advisory, supervisory and preparatory role for certain decisions the Board must make. The authority to make decisions rests with the Board as a whole. The Board also established a management committee consisting of the CEO, the CFO, the General Counsel and the COO (the “DirCo”). The members of the DirCo were delegated the day-to-day management of the Company in accordance with article 7:121 BCA. Together with the three regional CEO’s, they are the Executive Manage- ment of the Company. Finally, the Board granted a special power of attorney to the new CEO in its Board meeting of 16 December 2021, to be published in the Annexes to the Belgian Ocial Gazette. Governance structure 71 Risk and Governance Composition of the Board The Board currently consists of seven Directors. One member is Executive Director (“CEO”) and four members are In- dependent Directors in accordance with the Code. Two Directors were appointed on the recommendation of important shareholders. Function Name Membership committees Latest renewal mandate Mandate expiry Executive Director CEO Humblebee Partners BV, represented by Bruno Humblet AGM 202 AGM 2025 Non-Executive Directors Executive Chairman Beneconsult BV represented by Francis Van Eeckhout Audit Committee (member) Remuneration and Nomination Committee (Chairman) AGM 209 AGM 2023 Independent Director Marcel Klepsch SAS represented by Marcel Klepsch Remuneration and Nomination Committee (member) Audit Committee (member) AGM 202 AGM 2025 Vice Chairwoman Venture Consult BV represented by Benedikte Boone Remuneration and Nomination Committee (member) AGM 209 AGM 2023 Vice Chairman Independent Director Homeport Investment Management BV, represented by Wim Hendrix Audit Committee (Chairman) AGM 208 AGM 2022 Independent Director Alchemy Partners BV, represented by Anouk Lagae Remuneration and Nomination Committee (member) AGM 202 AGM 2025 Independent Director Paul Van Oyen Remuneration and Nomination Committee (member) Coopted by the Board on 4/09/202 AGM 2022 The Board and its Committees Annual Report 202172 Report of the Board of Directors Changes in the composition of the Board and its Committees in 2021 At the Annual General Meeting of 2021, Marcel Klepsch SAS, represented by Marcel Klepsch, and Alchemy Partners BV, represented by Anouk Lagae, were reappointed as Independent Directors until the AGM of 2025. At the same meeting, Humblebee Partners BV, represented by Bruno Humblet, was appointed as Independent Director until the AGM of 2025 and the cooptation and appointment until the AGM of 2025 of Venture Consult BV, represented by Benedikte Boone, was conrmed. The mandate of Momentum BV, represented by Chris Lebeer, as Independent Director came to an end at the Annual General Meeting of 2021. On September 14, 2021, the Board coopted Paul Van Oyen as Independent Director until the Annual General Meeting of 2022, where his appointment will be ocially submitted to the shareholders. Evedec BV, represented by Ms. Evelyn Deceuninck, resigned as Director on 13 September 2021. Changes in the composition of the Board and its Committees in 2022 On 6 September 2021, Deceuninck announced a leadership transition that became eective January 1, 2022. Marcel Klepsch, representative of Marcel Klepsch SAS, announced his intention to step down as Chairman of the Board at the end of 2021. The Board appointed Francis Van Eeckhout, representative of Beneconsult BV, as Executive 73 Risk and Governance Chairman (Non-Executive Director) as of 1 January 2022. At the same time, Bruno Humblet, representative of HumbleBee Partners BV, was appointed as the new CEO of the Group, taking over the responsibilities from Mr. Van Eeckhout as of 1 January 2022. In his role as Executive Chairman, Beneconsult BV, represented by Francis Van Eeckhout, will be assigned the following specic projects: aluminum and recycling business. The Board carefully considered the implications of appointing its former CEO as the new Chairman. The Board was convinced that the required autonomy of the new CEO would not be hampered. The reappointment of Homeport Investment Management BV, represented by Wim Hendrix, will be submitted for approval to the Annual General Meeting of 2022. Other Deceuninck’s honorary Directors are † Pierre Alain Baron De Smedt, Arnold Deceuninck and Willy Deceuninck. The Secretary of the Board is Ann Bataillie, representative of Bakor BV, General Counsel. – Annual Report 202174 Report of the Board of Directors Resumes of the Members of the Board Beneconsult BV, represented by Francis Van Eeckhout (1968), Executive Chairman • Education: Master of Commercial Engineering (KUL 1990) • Professional experience: 1994-2011: managing director of Van Eeckhout NV (concrete), VVM NV (cement) • Current other mandates: Independent board member of Pollet Watergroup; Chairman of Cemminerals NV Humblebee Partners BV, represented by Bruno Humblet (1965), CEO • Education: Master in Commercial Engineering (1988 Solvay Business School – VUB) • Professional experience: CEO Bridon Bekaert Ropes Group Ltd (UK); CFO Bekaert NV; Executive Vice President Latin America Bekaert NV; Executive Vice President Window Film Division Bekaert NV; Director Treasury EMEA and Global Cash Pool Procter & Gamble Inc.; Director Internal Audit Procter & Gamble Inc.; • Current other mandates: Executive Chairman Mankind (Belgium), Board member Schréder 75 Risk and Governance Marcel Klepsch SAS, represented by Marcel Klepsch (1951), Independent Director • Education: Master of Commercial Engineering (University of Antwerp) • Professional experience: 2009: Chief Restructuring Ocer at Deceuninck NV, former member of the board of directors of Nybron Flooring International Switzerland, Chief Executive Ocer at Ilford Imaging, member of the DirCo at Vickers Plc, Chief Financial Ocer of BTR Power Drives and Chairman of the board of directors of Pack2Pack and Chairman of the board of Volution in the UK; Management Advisory Board of Tower Brook in London and Chairman of GSE Group in France • Current other mandates: none Venture Consult BV, represented by Benedikte Boone (1971), Vice Chairwoman, Non-Executive Director • Education: Master of Applied Economic Sciences (KUL 1994) • Professional experience: she has held positions at Creyf’s Interim and Avasco Industries • Current other mandates: member of the board of directors at Lotus Bakeries since 2012, director in various family companies (Bene Invest BV, Holve NV and Harpis NV) Annual Report 202176 Report of the Board of Directors Homeport Investment Management BV, represented by Wim Hendrix (1967), Vice Chairman, Independent Director • Education: Master of Commercial Engineering (KU Leuven 1990), Master of Business Administration (Washington University St. Louis, Missouri, USA 1993), Master Wealth Management (Wharton Business School, Pennsylvania, USA 2011) • Professional experience: Gamma België NV, Siemens NV, Begos, Corelio, Homeport Investment Management • Current other mandates: Chairman of the Board at XIX-Invest NV; Board Member at Capricorn Sustainable Chemistry Fund Alchemy Partners BV, represented by Anouk Lagae (1975), Independent Director • Education: Master in Business and Engineering (Solvay Management School), Kellogg School of Management, Northwestern University in Chicago, USA • Professional experience: Coca Cola (Brussels, London and Sydney), Unilever (Brussels), Business Unit President, Core Europe at Duvel Moortgat • Current other mandates: CEO Accent Belgium, Member of the Advisory Board of Make Sense 77 Risk and Governance Paul Van Oyen (1961), Independent Director • Education: Master Geology/Mineralogy (KUL 1982), Business Administration (KUL 1990), Strategic R&D Management (INSEAD 1998), Strategy and Execution (London Business School 2015) • Professional experience: CEO and Managing Director of Etex Group (2015-2021) • Current other mandates: none Annual Report 202178 Report of the Board of Directors Composition of the Committees General The Board has set up specialized Committees to deal with specic matters and to give advice to the Board. The Committees have an advisory role. The ultimate decision- making responsibility lies with the Board. Audit Committee The current Audit Committee consists of three members, all of which are Non-Executive Directors. Two members of the Audit Committee are considered independent as set out in the Code: • Homeport Investment Management BV, represented by Wim Hendrix, Chairman • Marcel Klepsch SAS, represented by Marcel Klepsch • Beneconsult BV, represented by Francis Van Eeckhout The Audit Committee members as a whole have competence relevant to the sector in which Deceuninck is operating and at least one member has competence in accounting and auditing. The CEO is invited to the meetings of the Audit Committee. Remuneration and Nomination Committee The current Remuneration and Nomination Committee consists of ve members, all of which are Non-Executive 79 Risk and Governance Activity Report of the Board and Committee meetings in 2021 Board The Board convened seven times, mainly discussing the following topics: • managing the COVID-19 pandemic: monitoring, taking the necessary measures, mitigating impact • approval of sustainability report • approval of budget 2022 • issuance of new Subscription Rights Plan 2021 • proposal of new members of the Board and leadership transition 2022 • long-term strategy, • monitoring innovation projects and the technology strategy, • monitoring and deciding on investment and divestment opportunities, • approval of investment les, • monitoring of the business plans of the various regions, • nancial reporting, • continuous monitoring of the debt and liquidity situation of the Group, • monitoring the organizational structure of the Group and the management succession planning, • preparation of the statutory and consolidated nancial statements and annual report, • governance, risk and compliance • remuneration and long-term incentives for the new CEO and members of the Executive Management • preparation of the Annual General Meeting • the assignments of the Executive Chairman Directors. Three members of the Remuneration and Nomination Committee are considered independent as set out in the Code: • Beneconsult BV, represented by Francis Van Eeckhout, Chairman • Marcel Klepsch SAS, represented by Marcel Klepsch • Venture Consult BV, represented by Benedikte Boone • Alchemy Partners BV, represented by Anouk Lagae • Paul Van Oyen Taking into account their education and professional experience, the members have the necessary expertise in the eld of remuneration policy. The CEO is invited to the meetings of the Remuneration and Nomination Committee. Annual Report 202180 Report of the Board of Directors Board Audit Committee Remuneration and Nomination Committee TOTAL meetings held in 2021 7 8 3 Beneconsult BV, represented by Francis Van Eeckhout 7 - - Marcel Klepsch SAS, represented by Marcel Klepsch 7 8 3 Venture Consult BV, represented by Benedikte Boone 7 - 3 Homeport Investment Management BV, represented by Wim Hendrix 7 8 - Evedec. BV, represented by Evelyn Deceuninck (until 13/09/2021) 5 - (until 13/09/2021) 1 Alchemy Partners BV, represented by Anouk Lagae 7 - 2 Momentum BV, represented by Chris Lebeer (until 27/04/2021) 3 - - HumbleBee Partners BV, represented by Bruno Humblet 7 8 - Paul Van Oyen (as of 14/09/2021) 2 - (as of 14/09/2021) 2 Furthermore, the Board also took note of the reports and proposed resolutions of the Audit Committee and the Remuneration and Nomination Committee and, when necessary, made decisions based on the recommendations of these Committees. Audit Committee The Audit Committee convened eight times. It assisted the Board in the execution of its responsibilities in the broadest sense and it mainly dealt with the following topics: • providing advice with respect to the appointment of the internal auditor; • monitoring of audit activities, along with the systematic verication of signed missions by the statutory auditor; • assessing the reliability of nancial information; • supervising the internal audit system; • assessing the internal control and the risk management systems, and • controlling of the accounts and monitoring the budget. Remuneration and Nomination Committee The Remuneration and Nomination Committee convened three times, mainly dealing with the following topics: • the transition of leadership: appointment of a new CEO and Executive Chairman • the remuneration policy and the remuneration of the Directors and the DirCo; • the policy with regard to the appointment of Directors and members of the DirCo; • the structure and composition of the Committees; • the resignation and appointment of members of the Board; • the revision of the structure and composition of the DirCo. 81 Risk and Governance Beneconsult BV, represented by Francis Van Eeckhout, attended the meetings of the Remuneration and Nomination Committee except when the appointment and remuneration of Venture Consult BV, represented by Benedikte Boone, and of himself were discussed. Main features of the evaluation process of the Board, its Committees and the Directors The Board is responsible for a regular evaluation of its own performance with a view to constantly improving the management of the Group. To this end, the Board, led by its Chairman, carries out an evaluation of its scope, composition, activities and interaction with the DirCo, preferably every three years. The Board also assesses the functioning of the Committees and the individual Directors. The evaluation process has four objectives: • to assess the functioning and activities of the Board and of the relevant Committees; • to check whether important issues are thoroughly prepared and discussed; • to evaluate the actual contribution of the Board; and • to assess the current composition of the Board or the Committees in light of the desired composition of the Board or the Committees. On the basis of the results of the evaluation, the Chairman provides the Board with a report describing the weaknesses and strengths and, if necessary, proposes the appointment of a new Director or the non-renewal of a Director’s mandate to the Remuneration and Nomination Committee. The planned performance evaluation in 2020 was postponed until 2022 due to COVID-19. _ Annual Report 202182 Report of the Board of Directors 83 Risk and Governance The Executive Management Current composition The Executive Management of Deceuninck consists of the DirCo and the regional CEO’s. The DirCo consists of the following members: The DirCo supports the CEO in the day-to-day operational management of the Group and the execution of its responsibilities in accordance with the values, strategies, policies, plans and budgets that are determined by the Board. The members of the DirCo Name Function HumbleBee Partners BV, represented by Bruno Humblet CEO Group, Chairman of the DirCo Emveco BV, represented by Serge Piceu CFO Group Value Coaching BV, represented by Luc Vankemmelbeke COO Group (started on 1 February 2022) Bakor BV, represented by Ann Bataillie General Counsel and HR Director Group Secretary of the Board Name Function Ergun Cicekci CEO Turkey & Emerging Markets Déve Consulting BV, represented by Stijn Vermeulen CEO Europe Joren Knockaert CEO USA were delegated the day-to-day management of the Company in accordance with article 7:121 BCA. The other members of the Executive Management, who have an advisory role, are: Annual Report 202184 Report of the Board of Directors Diversity policy Criteria Deceuninck aims for both diversity and complementarity in the composition of the Board and the DirCo. The diversity criteria relate to gender, age, educational/ professional background, geographical provenance, (international) experience and expertise/know-how, taking into account the rules and generally accepted principles of non-discrimination. Implementation The Remuneration and Nomination Committee nominates one or more candidates for appointment as member of the Board, considering the needs of Deceuninck, the appointment procedures and selection criteria of the Board. Board members are appointed by the General Meeting, to whom the relevant resumes are disclosed. Other than that, Deceuninck does not provide detailed information about diversity criteria and objectives to its shareholders. The members of the DirCo are appointed by the Board on the proposal of and after consultation with the CEO and the Remuneration and Nomination Committee. Results • Gender: Deceuninck complies with the rules on gender diversity in the composition of the Board and the DirCo. In accordance with the Law of 28 July 2011, at least one-third of the Board’s members must be of a dierent gender than the other members. On 31 December 2021, two women and ve men sat on the Board, while the DirCo consisted of one female and two male members. 85 Risk and Governance Transactions between the Company and its Directors, not covered by the legal provisions governing conicts of interest Deceuninck’s policy regarding transactions and other contractual relations between the Company (including its aliated companies) and its Directors, not covered by the conict of interest rules set out in articles 7:96 and 7:97 BCA is incorporated in the Charter. The Charter provides that every transaction between the Company (or any of its subsidiaries) with any Director must be approved in advance by the Board, whether or not such a transaction is subject to applicable legal rules. Such a transaction can only take place based on terms in accordance with market practices. • Age: The age of the Board members ranges between 46 and 70 years of age. The youngest DirCo member is 46 years and the oldest member is 63 years of age. • Educational/professional background: The members of the Board and the DirCo have various backgrounds, in (a.o.) economics, law, engineering, geology, marketing, nance, IT, people, business administration. • Geographical provenance: Currently, one member of the Board has the Dutch nationality; the other members are Belgian citizens. One Board member lives in France. The DirCo consists of Belgian citizens. • (international) Experience: Most of the Board and DirCo members have studied and/or worked abroad. • Expertise/know-how: Given their educational and/or professional backgrounds, the expertise and know-how of the Board and DirCo members fulls Deceuninck’s aim for diversity and complementarity. _ Annual Report 202186 Report of the Board of Directors Policy for the prevention of market abuse Remuneration Report The Board has drawn up a dealing code regulating transactions and the disclosure of such transactions in shares of Deceuninck or in derivatives or other nancial instruments linked to them carried out for their own account by persons discharging managerial responsibilities and certain key employees. The principles of Deceuninck’s Dealing Code have been annexed to the Charter. Remuneration policy The Company’s remuneration policy for 2021 was approved by the shareholders at the Annual General Meeting of 27 April 2021. It is published on the Company’s website. For 2022, an amended remuneration policy will be submitted to the shareholders for approval at the Annual General Meeting of 26 April 2022. The proposed changes will be: • To amend the targets for short-term variable remuneration of the members of the Executive Management as follows: 87 Risk and Governance For 2022, the evaluation criteria for the CEO and the other members of the Dirco are as follows: REBITDA Group (40%), Adjusted Free Cash Flow Group (40%) and non-nancial criteria (20%). For the other members of the Executive Management: REBITDA Group (10%), REBITDA Region (30%), Adjusted Free Cash Flow Group (10%), Adjusted Free Cash Flow Region (30%) and non- nancial criteria (20%). The non-nancial criteria relate to the contribution to greater sustainability and to the Executive Management members' living the Group's values Candor, Top Performance and Entrepreneurship. The short-term variable remuneration amounts in principle to 40% of the annual xed remuneration for the members of the Executive Management (excl. CEO) and 75% of the annual xed remuneration for the CEO. This percentage may be exceeded in terms of company performance, but should not exceed 50% (for members of the Executive Management) or 93.75% (for the CEO). The variable remuneration related to the business objectives is only awarded if 90% or more of the predetermined nancial targets have been achieved. • To add the terms and conditions for deviation of the remuneration policy during the nancial year, in accordance with the BCA. – Annual Report 202188 Report of the Board of Directors Total remuneration of the Non-Executive Directors in 2021 (including former members) Non-Executive Directors receive a xed amount as remuneration for the execution of their mandate and a xed amount for each Board meeting attended, limited to a maximum amount. The amount of remuneration is dierent for the Chairman, the Vice-Chairman and the other Non-Executive Directors. If the Non-Executive Directors are also members of a Committee, their remuneration will be increased by a xed amount per FIXED REMUNERATION IN € Min/year Max/year Chairman 40,000 80,000 Vice-Chair(wo)man 30,000 60,000 Director 20,000 40,000 ATTENDANCE FEE IN € Chairman Member Board of Directors 3,000 1,500 Audit Committee 2,000 1,000 Remuneration and Nomination Committee 1,000 1,000 meeting of the relevant Committee. If Directors are assigned special tasks and projects, they may receive an appropriate remuneration. Performance-based remuneration such as bonuses and fringe benets are excluded. No termination compensation or compensation for pension expenses are provided for Non-Executive Directors. The xed allowance for the Audit Committee was raised to € 2,000 for the Chairman of the Audit Committee. The other xed remuneration remained unchanged in 2021. _ 89 Risk and Governance The total remuneration (gross) paid to the non-executive members of the Board in the nancial year 2021 amounted to € 422,153.88. In deviation of the Code, Non-Executive Directors may receive subscription rights upon approval of the General Meeting. The Annual General Meeting of 2021 approved the granting of subscription rights under the Warrant Plan 2021 to the Non-Executive Directors as follows: 30,000 to the Chairman and 15,000 to each of the Non- Executive Directors (with the exception of the future CEO and the coopted Non-Executive Director). The price of the subscription rights under Warrant Plan 2021 amounts to € 3.07. The subscription rights were to be accepted by 15 February 2022. The exercise period runs from 2025 until 2031 (each year in May and September). In 2025, 1/3 of the subscription rights will vest, in 2026: 2/3 and in 2027: 3/3. In 2021, no subscription rights were exercised by Board members. In 2021, nor the Company nor any aliated Company of the Group granted any loans to any of the Directors, nor are there any outstanding repayments owed by the Directors to the Company or any aliated Company of the Group. The member of the DirCo who also sat on the Board as Executive Director, Beneconsult BV, represented by Francis Van Eeckhout, did not receive a xed remuneration nor any attendance fees. – Annual Report 202190 Report of the Board of Directors Board Audit Committee Remuneration and Nomination Committee Fixed remuneration Variable remuneration Total gross remuneration and proportion xed/variable Marcel Klepsch SAS, represented by Marcel Klepsch € 21,000 € 8,000 € 3,000 € 40,000 € 72,000 100% xed 0% variable Homeport Investment Management BV, represented by Wim Hendrix € 10,500 € 16,000 € 30,000 € 56,500 100% xed 0% variable Venture Consult BV, represented by Benedikte Boone € 10,500 € 3,000 € 30,000 € 43,500 100% xed 0% variable Evedec. BV, represented by Evelyn Deceuninck (until 13/09/21) € 7,500 € 1,000 € 15,000 € 23,500 100% xed 0% variable Alchemy Partners BV, represented by Anouk Lagae € 9,000 € 2,000 € 20,000 € 31,000 100% xed 0% variable Momentum BV, represented by Chris Lebeer (until 27/04/21) € 4,500 € 6,667 € 11,167 100% xed 0% variable HumbleBee Partners BV, represented by Bruno Humblet € 10,500 € 8,000 € 20,000 € 38,500 + € 135,987.21 special assignment 100% xed 0% variable Paul Van Oyen (as of 14/09/21) € 3,000 € 2,000 € 5,000 € 10,000 100% xed 0% variable Beneconsult BV, represented by Francis Van Eeckhout Total € 76,500 € 32,000 € 11,000 € 166,667 - € 422,153.88 91 Risk and Governance Total remuneration of the members of the DirCo and the other members of the Executive Management in 2021 (including former members) Main principles The total remuneration of the Executive Management consists of the following elements: the xed remuneration, the short-term variable remuneration and the long-term variable remuneration. The remuneration package aims to be competitive and is aligned with the role and responsibilities of each Executive Management member, in a globally operating industrial group. • Fixed remuneration The xed remuneration is determined according to their individual responsibilities and skills. It is awarded independently of any result. Part of this xed remuneration may be used, at the discretion of the management member, for pension or insurance contributions. • Short-term variable remuneration In order to align the interests of the Company and its shareholders with the interests of the management members, part of the remuneration package is linked to Company performance with objectives related to the annual business plan. For 2021, the evaluation criteria for the former CEO and the other members of the Dirco were as follows: REBITDA Group (60%), Adjusted Free Cash Flow Group (35%) and non-nancial criteria (5%). For the other members of the Executive Management: REBITDA Group (15%), REBITDA Region (45%), Adjusted Free Cash Flow Group (10%), Adjusted Free Cash Flow Region (25%) and non-nancial criteria (5%). The non-nancial criteria dier per region and relate to their contribution to greater sustainability. For Europe, North America and Russia, this was the use of recycled material (with the understanding that the objectives dier per region). Turkey and Emerging Markets were measured by reducing total waste (not PVC) per ton of proles produced. Annual Report 202192 Report of the Board of Directors The short-term variable remuneration in 2021 amounts in principle to 40% of the annual xed remuneration for the members of the Executive Management (excl. CEO) and 75% of the annual xed remuneration for the former CEO. This percentage may be exceeded in terms of company performance, but should not exceed 50% (for members of the Executive Management) or 93.75% (for the former CEO). The variable remuneration related to the business objectives is only awarded if 85% or more of the predetermined nancial targets have been achieved. The basis for the variable remuneration is the remuneration earned during the nancial year. Payment is made in February of the following year. There is no spread over time of the variable remuneration. The Extraordinary General Meeting of December 16, 2011 decided that the Company is not bound by the restrictions regarding the spread over time of the variable remuneration of the directors, the CEO and the other members of the Executive Management. • Long term variable incentive Stock options and warrants The Company also oers options and/or warrants on shares of the Company. The purpose of this kind of remuneration is to motivate and retain employees who (can) have a signicant impact on the Company results in the medium-term. When granting options and/or warrants, due account is taken of the strategic impact of the function that the employee performs and his/her future (growth) potential. The underlying philosophy is to raise Deceuninck’s value to the maximum extent in the long term, by linking the interests of the warrant holders to those of shareholders, and to strengthen the long-term vision of the management. In this context, the exercise period of an option and warrant is max. 10 years. The stock options and warrants can only be exercised the 3rd year following the year in which the options and warrants were oered. If they are not exercised at the end of the exercise period, they are, ipso facto, reduced to zero, and lose all value. One third of the warrants/options are each time released for exercise in the fourth, in the fth and in the 93 Risk and Governance sixth calendar year after the year in which the granting has been made up to the end of the term. In the event of involuntary dismissal (except in case of termination of contract for cause), the accepted and exercisable stock options/ warrants can only be exercised during the rst exercise period following the date of the termination of contract. The options/ warrants that are not exercisable shall be cancelled. In the event of involuntary dismissal for cause, the unexercised, accepted stock options and warrants are cancelled, whether or not they were exercisable. These terms and conditions relating to the acquisition and exercise of options and warrants in the event of voluntary or involuntary dismissal can be applied without prejudice to the competence of the Board to make changes to these stipulations to the advantage of the beneciary, based on objective and relevant criteria. If the employment agreement ends due to legal retirement or end of career, the warrants/ options shall remain exercisable. The shares that may be acquired in connection with the exercise of the options/warrants are listed on Euronext Brussels; they are of the same type and have the same rights as the existing ordinary Deceuninck shares. Members of the DirCo In 2021, the former CEO received a fixed remuneration of € 551,250 and a variable remuneration of € 247,884 (45%). The CFO received a fixed remuneration of €264,000 and a variable remuneration of €63,314 (24%). The General Counsel received a fixed remuneration of €273,941 and a variable remuneration of €65,699 (24%). The remuneration package awarded to the members of the DirCo does not include a long-term cash bonus. The fixed remuneration is an aggregate amount, part of which can be contributed for pension plans or for insurance, at the sole discretion of the members of the DirCo. The Remuneration and Nomination Committee evaluated the achievement of the 2021 objectives for the members of the DirCo and proposed to the Board to pay a short-term variable remuneration based on the 2021 performance criteria that were met. Annual Report 202194 Report of the Board of Directors Given the fact the current members of the DirCo act through a management company, no company car is provided. The total amount of the remuneration of the members of the DirCo is in accordance with the Company’s remuneration policy and contributes to the strategic objectives of the Company. Other members of the Executive Management The other members of the Executive Management together received a fixed remuneration of €898,854 and a variable remuneration of €201,462 (22%). The remuneration package awarded to the other members of the Executive Management does not include a long-term cash bonus. The fixed remuneration is an aggregate amount, part of which can be contributed for pension plans or for insurance, at the sole discretion of the other members of the Executive Management. The Remuneration and Nomination Committee evaluated the achievement of the 2021 objectives for the members of the Executive Management and proposed to the Board to pay a short-term variable remuneration based on the 2021 performance criteria that were met. No company car is provided to the other members of the Executive Management. The total amount of the remuneration of the other members of the Executive Management is in accordance with the Company’s remuneration policy and contributes to the strategic objectives of the Company. Shares, stock options and other rights to acquire Deceuninck shares that were granted, exercised or that have lapsed during 2021 Stock options The Extraordinary General Meeting of October 2006 approved a stock option plan on existing shares under which the Board is authorized to allocate 75,000 options on existing shares each year. 95 Risk and Governance In 2021, no stock options were granted to the members of the Executive Management, no stock options were exercised, and 1,000 stock options lapsed. Subscription rights On 29 October 2020, the Board approved a new subscription rights plan (“Warrant Plan 2020”) of 1,500,000 subscription rights. On 23 December 2020, 350,000 subscription rights of Warrant Plan 2020 were offered to the former CEO and 60,000 subscription rights were offered to each of the General Counsel, CEO Europe, CEO Turkey and CEO USA. The price of the subscription rights amounts to € 1.78. The subscription rights were all accepted by 16 February 2021. The exercise period runs from 2024 until 2030 (each year in May and September). In 2024, 1/3 of the subscription rights will vest, in 2025 another 1/3 and in 2026 another 1/3. On 29 June 2021, the Board approved a new subscription rights plan (“Warrant Plan 2021”) of 3,000,000 subscription rights. On 16 December 2021, 350,000 subscription rights of Warrant Plan 2021 were offered to the former CEO, 50,000 subscription rights were offered to the new CEO and 60,000 subscription rights were offered to each of the CFO, General Counsel, CEO Europe, CEO Turkey and CEO USA. The price of the subscription rights amounts to € 3.07. The subscription rights were to be accepted by 15 February 2022. The exercise period runs from 2025 until 2031 (each year in May and September). In 2025, 1/3 of the subscription rights will vest, in 2026 another 1/3 and in 2027 another 1/3. In 2021, the following members of the Executive Management exercised subscription rights: Ann Bataillie May 2021: 27,500 @ € 1.79 27,500 @ € 1.76 Sept 2021: 38,330 @ € 2.4 Ergun Cicekci May 2021: 27,500 @ € 1.79 18,334 @ € 1.76 9,167 @ € 1.17 Annual Report 202196 Report of the Board of Directors Right of recovery Although the Board is entitled to introduce recovery clauses, the stipulations of the agreements between the Company and the CEO and the members of the Executive Management currently do not contain such clauses. Severance payments paid in 2021 No severance payments were paid in 2021. Evolution of remuneration: Year Total annual CEO remuneration Total annual Executive Management remuneration (excl. CEO) Total annual Non-Executive Director Remuneration Average sta remuneration (FTE) Sales EBITDA 2016 € 646,934 € 2,521,475 (8 members) € 259,500 € 44,958 € 670.9m € 65.1m (REBITDA) 2017 € 460,080 € 2,046,940 (7 members) € 263,500 € 47,102 € 687.2m € 66.7m (REBITDA) 2018 € 923,185 € 2,147,577 (7 members) € 253,500 € 45,985 € 674.2m € 72.4m (Adj.) 2019 € 525,000 € 598,570 (2 DirCo members) € 267,000 € 47,090 € 633.8m € 60.6m (Adj.) 2020 € 965,781 € 821,038 (2 DirCo members) € 296,833 € 48,417 € 642.2m € 86m (Adj.) 2021 € 799,134 € 666,954 (2 DirCo members) € 422,153.88 € 49,027 € 838.1m € 97.7m (Adj.) Pay ratio The pay ratio between the highest remuneration in the Executive Management (CEO remuneration) and the lowest remuneration of the staff members is 25.36. 97 Risk and Governance General Each Director and each member of the DirCo are encouraged to arrange their personal and business interests so that there is no direct or indirect conflict of interest with the Company. Deceuninck has no knowledge of any potential conflict of interest affecting the members of the Board and the DirCo between any of their duties to the Company and their private and/or other duties. Directors’ conicts of interest The conflict of interest settlement procedure of article 7:96 of the BCA was applied once in 2021. On 29 June 2021, the Board convened to approve a new subscription rights plan (“Warrant Plan 2021”). Before the meeting, Beneconsult BV, represented by Francis Van Eeckhout, informed the Board of his potential patrimonial interest as an Executive Director conflicting with the agenda of the Board, as he would be a beneficiary of PwC Bedrijfsrevisoren BV with its registered office at Culliganlaan 5, 1831 Diegem (Machelen), with enterprise number 0429.501.944, represented by Lien Winne, was appointed as the Company’s statutory auditor in 2020 for a period of three years, until the closing of the Annual General Meeting of 2023. External audit Transactions between related parties Annual Report 202198 Report of the Board of Directors the new Warrant Plan 2021. The executive Director left the meeting and did not deliberate nor decide on the approval of the new Warrant Plan 2021. Also the statutory auditor was informed of this potential patrimonial conflict of interest. In accordance with the legal provisions, this annual report contains an extract of the board minutes (translated from Dutch for information purposes): “Before starting the discussion on this point, the private company “BENECONSULT”, with permanent representative Mr. VAN EECKHOUT Francis, both aforementioned, being the executive director of the Company, represented as foreseen, announces that in on its grounds, a conflict of interest of a proprietary nature may exist with regard to the decisions that the board of directors will take with a view to approving the “Warrant Plan 2021”, as it is also a beneficiary thereof. The board of directors has taken note of this conflict of interest and of the fact that this was also reported by the director concerned to the statutory auditor of the company. In accordance with Article 7:96 of the Companies and Associations Code, the director concerned, represented as foreseen, cannot participate in the deliberations of the board of directors on these transactions or decisions, nor in the voting in that regard. As a result, the director concerned, represented as foreseen, did not participate in the deliberations or the vote. The grounds for justification regarding the aforementioned conflict of interest are: The initiative taken by the board of directors on the proposal of the remuneration and nomination committee to launch the Warrant Plan 2021 aims to encourage certain employees of the Company and its subsidiaries, who will be invited to participate to this Warrant Plan 2021, to contribute to the growth of the Deceuninck Group and to promote their loyalty towards the Deceuninck Group. It is important for the Company to issue a new subscription rights plan. After all, the Company believes that the work, initiative and entrepreneurial spirit of each of the beneficiaries of the Warrant Plan makes an important contribution to the development of the Company’s activities and results. It therefore wishes 99 Risk and Governance to give the beneficiaries the opportunity to acquire (additional) shares of the Company at a predetermined subscription price, so that they can participate financially in the added value and growth of the Company. After all, the experience of the past years has shown that stock options, subscription rights and participation in the shareholding of the employees are an important element of motivation and commitment towards the company. After all, the aim of such a plan is to promote the long- term commitment and motivation of staff members, so that their commitment contributes to the realization of growth and, if necessary, of restructuring. The Company intends to continue to grant subscription rights to shares annually. The offering of these new subscription rights will not constitute a waiver on the part of the beneficiaries of previous options and / or subscription rights on shares accepted by them. As such, the proposed issue is in the interests of the Company and the board of directors considers the cancellation of the preferential subscription right of the existing shareholders to be justified. The proprietary consequences are the following: The proprietary consequences for the company arising from the fact to grant subscription rights to the executive director are minimal, taking into account on the one hand the total number of securities to which this transaction relates and on the other hand the fact that the exercise price of the subscription rights is based on the current market price of the shares. The board of directors declares that no conflict of interest exists for the other directors of the Company, being the non-executive directors of the Company, as the “Warrant Plan 2021” provides that the possible grant of the subscription rights created on their behalf will be the result of a decision to be taken by the general meeting of the Company.” Transactions with aliated companies The conflict of interest settlement procedure of article 7:97 of the BCA was not applied in 2021. _ Annual Report 2021100 Report of the Board of Directors Article 34 of the Belgian Royal Decree of 14 November 2007 Capital structure on 31 December 2021 The share capital (€ 54,441,352.14) was fully paid up and was represented by 138,040,929 shares without nominal value. Restrictions on transferring securities as laid down by law or the Articles of Association The Company offers stock options and subscription rights on shares of the Company. Stock options and subscription rights are assigned personally and are not transferable, except in case of decease of the holder. Holders of any securities with special control rights None Systems of control of any employee share scheme where the control rights are not exercised directly by the employees None Restrictions on exercising voting rights as laid down by law or the Articles of Association The voting rights attached to the shares held by Deceuninck and its direct and indirect subsidiaries are suspended. At 31 December 2021, these rights were suspended for 69,769 shares (0.05% of the shares in circulation at that time). Shareholder agreements known to Deceuninck NV that could restrict the transfer of securities and/or the exercise of voting rights None Rules governing the appointment and replacement of Board members and the amendment of the Articles of Association of Deceuninck NV The members of the Board are appointed by the General Meeting. Their initial term of office lasts maximum four years (based on the Charter) but can be renewed. The Remuneration and Nomination Committee presents one or more candidates, considering the needs of the Company and the nomination and selection criteria established by the Board. In the composition of the Board an appropriate balance is sought, based on (a.o.) gender, skills, experience and knowledge (see above “Diversity Policy”). The age limit for Directors is 75 years at the time of the (re)appointment. In principle, a Director’s mandate ends after the Annual General Meeting, at which moment his or her mandate can be considered ended. The amendment of Deceuninck’s Articles of Association 101 Risk and Governance is to be executed in accordance with legal provisions of the BCA. Powers of the Board with regard to the issue and repurchase of treasury shares At the Extraordinary General Meeting of 28 April 2020, it was decided to grant the Board the authority to acquire treasury shares, by purchase or exchange, directly or by intervention of a person who acts in his own name but at the expense of the Company at a minimum price of € 1.00 and at a maximum price of the average share price of the 30 days prior to the decision of the Board raised by 30%, provided that by doing so, not for a moment the Company possesses treasury shares whose nominal value is higher than 20% of the Company’s subscribed capital. No preceding decision by the General Meeting is necessary in case the acquisition of shares occurs in order to offer them to the Company’s staff. Furthermore, the Board is authorized to sell these shares without being bound to above-mentioned price and time limitations. This authorization is valid for a period of five years starting on 15 May 2020 and can be renewed in accordance with article 7:215 of the BCA. During the financial year 2021, no treasury shares were purchased. At the Extraordinary General Meeting of 28 April 2020, it was also decided to grant the Board the authority to acquire or sell treasury shares, profit-sharing bonds or certificates which relate to these bonds, according to articles 7:215 and the following of the BCA, when the acquisition or alienation is necessary to avoid threatening serious damages to the Company. This authorization is valid for a period of three years as from its publication in the Annexes to the Belgian Official Gazette and can be renewed in accordance with article 7:215 of the BCA. Authorised capital The Board is authorized, for a period of 5 years starting from 15 May 2020, to increase the Company’s issued capital on one or several occasions to a maximum amount of € 53,925,310.12. This capital increase can take place in conformity with the conditions determined by the Board by a cash contribution, a contribution in kind, an incorporation of the reserves or share premiums, with or without the issuance of new shares, as well as by issuing debt securities that can be converted to shares on one or several occasions, debt securities with subscription rights or subscription rights that whether or not are linked to other stocks. However, the capital increase as decided by the Board cannot be reimbursed by shares without indication of nominal value issued below accountable par value of the old shares. The Extraordinary General Meeting of 28 April 2020 authorized the Board, for a period of 3 years, under the conditions and within the limitations of article 7:202 of the BCA, to use the authorised capital in case of notification by the Financial Services and Markets Authority (FSMA) of a public takeover bid on the Company’s shares. The Board determines the data and conditions of the instructed capital increases in Annual Report 2021102 Report of the Board of Directors application of the foregoing, including the possible payment of issue premiums. If the foregoing occurs (including for the issuance of convertible debt securities or subscription rights), the Board determines, in accordance with articles 7:191 and following of the BCA, the term and other conditions concerning the exercise of the shareholder’s preferential rights as assigned by the law. Furthermore, it can, in accordance with articles 7:191 and following of the BCA, in the Company’s interest and under the conditions determined by law, limit or cancel the shareholder’s preferential rights in favour of one person or several people that are selected, no matter whether or not these people are part of the Company’s or its subsidiaries’ staff. If an issue premium is paid as a consequence of a capital increase, it is transferred by right to an unavailable account named “issue premiums” which can only be used under the conditions required for the capital decrease. It can, however, always be added to the instructed capital; this decision can be taken by the Board as stated above. Furthermore, said Extraordinary General Meeting of the Company authorized the Board, considering the coordination of the Articles of Association, as soon as the authorized capital or a part of it is converted into instructed capital, to amend the relevant article of the Articles of Association. In 2021, there were no capital increases within the authorized capital, other than two confirmatory capital increases within the framework of the authorized capital as a result of the exercise of subscription rights (on 3 June 2021 and on 4 October 2021), resulting in an authorised capital of € 53,409,268. Signicant agreements to which Deceuninck NV is a party and which take eect, alter or terminate upon a change of control of Deceuninck NV following a public takeover bid 1. The 2015 issuance of bonds with a 7-year duration (maturity 8 December 2022) and a gross coupon of 3.75%, for the maximum amount of € 100,000,000. 2. The € 60,000,000 Sustainability Linked Revolving Facility Agreement of 9 July 2019 for Deceuninck NV, with KBC Bank NV (as Coordinating Bookrunning Mandated Lead Arranger) and ING Belgium NV/ SA and Commerzbank Aktiengesellschaft, Filiale Luxemburg (as Bookrunning Mandated Lead Arrangers) and Belfius Bank NV/SA (as Mandated Lead Arranger) and with ING Bank NV (as Facility Agent) Agreements between Deceuninck NV and its Directors or employees providing for compensation if the directors resign or are made redundant, or if employees are made redundant, without valid reason following a public takeover bid None _ 103 Risk and Governance Annual Report 2021104 Report of the Board of Directors 105 Risk and Governance Shareholder structure Every shareholder holding a minimum of 3% of the voting rights needs to comply with the law of 2 May 2007 in respect of the notication of signicant investments, the Royal Decree of 14 February 2008 and the BCA. The involved parties need to submit a notication to the Financials Services and Markets Authority (FSMA) and to the Company. In application of the Law of 2 May 2007, the latest report of participations that have been received shows the following breakdown of shareholders on 31 December 2021: 1 Holding controlled by Francis Van Eeckhout Shareholders Number of shares Percentage Gramo BV 1 24,043,470 17.42 Holve NV 16,067,809 11.64 H.P. Participaties Comm.V. 10,400,000 7.53 Frank Deceuninck 7,092,237 5.14 Treasury shares 69,769 0.05 Others 80,367,644 58.22 Total 138,040,929 100.00 Annual Report 2021 Increasing shortage of raw materials and climate change are the drivers of our circular economy commitment. Recycling PVC, designing 100% recyclable products and investing in the collection of end-of-life products will help us reducing CO emissions and will increase our independence from virgin raw materials. 01 02 03 04 106 Increasing shortage of raw materials and climate change are the drivers of our circular economy commitment. Recycling PVC, designing 100% recyclable products and investing in the collection of end-of-life products will help us reducing CO emissions and will increase our independence from virgin raw materials. 05 107 Annual Report 2021108 Report of the Board of Directors Global trends impact our current and future operations and create both risks and opportunities for our business. Below, we summa- rize some of the most important trends and their possible impact on our business model and sustainability strategy, now and in the next decade. 2.5 Sustainability 2.5.1 The World We Operate in Climate Change The European Union wants to be climate neutral by 2050 (European Green Deal). As a consequence, companies are increasingly being expected to take effects on carbon emissions into consideration, while using energy, water and affecting biodiversity. These effects are increasingly being regulated. On the climate adaptation side, climate change already impacts the type of housing in some regions (ex. stilt and movable houses) and, due to increasing physical effects of climate change, will increasingly do so in the future. Impact on Our Business Our products with a superior quality and long lifespan ensure energy savings thanks to their optimal thermal insulation characteristics. Because we recycle PVC we save potential CO emissions by avoiding to source virgin raw material. Carbon reduction targets in alignment with the Science Based Targets. 109 Sustainability Increasing shortages of raw materials The world has been confronted with unprecedented shortages of raw materials which led to record high prices in many sectors, amongst which also ours. In combination with a high market demand, these effects have also affected our production and logistics and remain a critical point of attention in the future. Impact on Our Business Investments in our own recycling facility and collection of end-of-life products. Reputation of Plastics Plastics have come under fire in the societal debate because too much plastic waste ends up in the environment. All too often however, no distinction is made between single used plastics and more durable use of plastics in products such as the ones we produce. Impact on Our Business More proactive communication on the positive characteristics of our products and our efforts to invest in a circular economy. Environmental, Health and Safety Impacts of Products We see rising expectations of policy makers and consumers regarding the environmental performance of products and exposure to potentially harmful chemical substances in products. Simultaneously, they expect more transparency and information on these subjects. A risk-based approach towards exposure to potential hazardous substances during use which ensures that our products can be safely used. Impact on Our Business Investments in systems and procedures to track environmental performance of products during production and their lifetime. Talent Attraction and Retention Companies face increased competition to attract and retain a skilled workforce. Answering the pressure on the labor market, it is not only important to attract more people, but also to attract a more diverse range of talents. The need for on-the-job training increases in the fast-moving working environment. Impact on Our Business HR focus on employee engagement and an employee training programme which focuses on a welcome package and on-the-job training. A diverse workforce with gender equality as an essential part of our DNA. Demography and Urbanisation Global population growth leads to an increasing demand for housing. At the same time, it affects regulation in some regions, for example building bans on new grounds which favorably impacts renovation of existing housing. Noise-isolating characteristics of housing becomes increasingly important in an urbanization context. Impact on Our Business The building renovation wave is expected to positively impact our sales in the coming years. Our products have optimal acoustic characteristics and superior thermal insulation. Annual Report 2021110 Report of the Board of Directors 111 Sustainability Our Stakeholders The impact of these trends has created a strategic imperative to address the expectations of a broad range of stakeholders in creating long-term value. Achieving our aspiration of building a sustainable home cannot be done without considering the interests and expectations of our stakeholders. Stakeholder Expectations Interactions Actions Employees Health, safety and well-being Career development Employee rights and benets Annual performance review Deceuninck Intranet Code of Conduct for Employees Safety training and awareness programs Talent management Remuneration benchmarks Teambuilding activities Diversity policy Customers Qualitative products Service and technical support Information sharing Data security Solid nancial performance Circular product solutions Customer service Preferred Partnerships Customer training programs Commercial fairs Develop and manufacture products that meet the highest quality standards Customer delivery service and dedicated technical support teams Digital transformation Data availability on product circularity Investors Economic growth Risk management Information sharing ESG performance and transparency Annual General Meeting Investor road shows Press releases Dedicated webpage Solid nancial performance Integrated reporting Climate reduction strategy and CDP reporting Suppliers Fair trade Shared growth and innovation Sustainable product oering Daily contacts in the eld Deceuninck Group trainings Supplier Code of Conduct Supplier audits Partnerships (ex: to reduce carbon emissions linked to raw materials) Local Community and Neighbors Local recruitment Local environment protection Charity Social and other media Local recruitment campaigns Charity events Regulator, Governments, Experts Compliance with regulations Knowledge and experience sharing Health and environmental performance of our products Climate change Corporate governance Participation in working groups and consultative bodies Ad-hoc dialogue with local government Cooperation with experts on R&D projects Building a compliance culture with policies, trainings and awareness programs Communicate how our products contribute to the Green Deal objectives Climate reduction strategy The Group cares about their needs and keeps an open dialogue. In May 2021 we have organized interviews with a selection of key stakeholders in our Belgian market. The input we received served our sustainability strategy. It is our intention to intensify the stakeholder interaction on sustainability in 2022, focusing at first instance on stakeholders in Belgium. _ Annual Report 2021112 Report of the Board of Directors Materiality Analysis The Group has a clear commitment to act with respect for people, society and the environment. Sustainability is an integral part of our business model and thus our sustainability strategy is an integral part of our corporate strategy. To deliver our sustainability ambition and to have our voice in the market, a solid financial performance and substantial market share is key. People, Planet and Community are the three main pillars of our sustainability strategy. We have defined an overall mission statement for each pillar and linked it to the most relevant material topics. The material topics for our business have been defined taking into consideration the following input information: the global trends, analysis of the sustainability frameworks, the expectations of our stakeholders, our risk assessment and a peer review. The sustainability frameworks which served as inspiration to define the material topics are: "UN Sustainable Development Goals" (SDG’s), ""Sustainability Accounting Standards Board" 2.5.2 Sustainability strategy Chemical Standard (SASB), and the "Global Reporting Initiative" (GRI). We have defined how the material topics contribute to the United Nations Sustainable Development Goals. The SDGs consist of 17 global goals to reach by 2030. Our approach is to focus on the — 11 — goals where we can have the most impact. In addition, SDG 17 (global partnerships for sustainable development) is to us an overarching aim to reach our ambition. The main change compared to the materiality analysis of 2020 consists of a stronger emphasis on climate change. During 2022 and in line with our reporting framework GRI we will engage with our stakeholders to further assess the significance and priorities of the material topics we have identified, including the targets and performance. We will also assess the 'double materiality' consideration in our materiality exercise in preparation of the upcoming CSRD (Corporate Sustainability Reporting Directive). – 113 Sustainability People Planet Community Our Mission We build a sustainable ‘home’ for our people, based on our core values. We create the conditions for a good working environment and an inclusive workplace. Our people are active in training and personal development. We help to build an energy ecient home. We create long lasting, low maintenance building products with top insulating properties. Our products are created with the lowest ecological footprint and can be fully recycled at end-of-life. We invest in lowering the ecological footprint of our operations. We deliver added value to our customers and end- consumers through our solutions and services. We oer top performance in quality and service through trusted customer partnerships. We uphold the highest health and safety product standards. Our employees and suppliers respect ethical working standards. Our Priorities Employment Talent management Health & safety Diversity Materials and recycling Product design and lifecycle management Energy management Water management Waste management Greenhouse gas emissions Health & safety of the end-user Business ethics Human rights in the supply chain Community engagement Related UN SDG'S Annual Report 2021114 Report of the Board of Directors The Executive Management determines strategy, approves targets and monitors execution Governance Our governance system is based on a clear definition of roles and responsibilities between the following actors. • The Board oversees and approves the sustainability commitments. Environmental, social and community related risks and opportunities are an integral part of the risk management process and are reviewed by the Audit Committee. • The Executive Management determines the strategy, approves the targets and monitors the execution. The CEO has executive responsibility over the sustainability related performance, which showcases the strategic imperative of sustainability. • In 2021, we have appointed a sustainability manager with the clear task to further define and deploy our sustainability strategy. The sustainability manager serves as a single point of contact on sustainability topics and coordinates the integration of sustainability into the organisation. Ultimately, sustainability should be embedded in every employees’ role and responsibility. During 2022, we aim to further develop the sustainability governance and management system with, amongst others, a roadmap to enhance the integration of sustainability in every entity of our organisation. EU Taxonomy The EU Action Plan on Financing Sustainable Growth led to the creation of the ‘EU Taxonomy’, a classification system for sustainable economic activities. Through transparency the EU Taxonomy wants to contribute to the redirection of resources towards the European Green Deal. It is in essence a classification system that defines which activities are environmentally sustainable (“green”) and how to calculate the “greenness” of a company’s turnover, CAPEX and OPEX. The EU Taxonomy encompasses a step-by-step analysis. In line with legal requirements, the Group is currently reporting the first step: the eligibility on the basis of the Taxonomy Climate Delegated Act. From 2022 onwards, we will expand the Taxonomy assessment to the alignment with the Climate Delegated Act with a more detailed analysis of the Technical Screening, the Do No Significant Harm and the Minimal Social Safeguard criteria, as well as the other environmental objectives of the EU Taxonomy. The Board of Directors oversees & approves the sustainability commitments The Sustainability Manager denes and deploys the sustainability strategy together with the business Since 2021 Governance System 115 Sustainability Reporting Framework and Scope The report is drafted with reference to the GRI Standards. Building a sustainable home is a continuous journey. We are committed to continuously improve our reporting. During 2022-23, we will review our targets, KPI’s, data collection and risk assessment in the context of the upcoming CSRD (Corporate Sustainability Reporting Directive) taking effect in 2024 and the European standard for sustainability reporting which will be published in 2022. Eligibility analysis of activities of the Group that are contributing substantially to Climate Change Mitigation for the EU Taxonomy: Deceuninck activity Taxonomy Eligible activity Climate Change Mitigation Sorting and processing of separately collected waste streams from post-consumer windows and doors into secondary raw materials involving a mechanical transformation process. Macro sector 5. Water Supply; sewerage, waste management and remediation activities Activity: 5.9. Material recovery from non-hazardous waste Eligibility analysis Total (million €) Proportion of Taxonomy eligible economic activities (%) Proportion of Taxonomy non- eligible economic activities (%) Turnover 838.1 4.6% 95.4% Capex 43.6 4.1% 95.9% Opex 132.3 4.9% 95.1% Turnover includes the intra- and intercompany sales of recycled PVC of our recycling plant in Diksmuide (Belgium). The proportion is a calculation of the recycled volume versus the total volume sold. Capex and Opex numbers are related to the recycling activities of the recycling plant. Deceuninck activity Taxonomy Non-eligible activity Climate Change Mitigation Manufacture of the windows and doors at the best available techniques for energy ecient equipment for buildings and their key components Macro sector: 3. Manufacture Activity: 3.5 Manufacture of energy eciency equipment for buildings Our activities are non-eligible with the Taxonomy activities, due to the Technical Screening Criteria, more specically the U-values (Uwindow/door) not being in line with the U-values we as a system house apply (Uframe). We understand that the indicated U-values are meant to apply to full windows, whereas U-values for window components have not been dened. We are willing to further analyse if the available U-values can be updated to the Taxonomy required U-values, but at the moment this has not proven possible. As a consequence, nancial numbers are not available. This analysis can alter over time, when the European Commission provides more guidance or updated U-values. Results for People (with the exception of Employment) are provided for Europe, Turkey (i.e. without Emerging Markets) and North America. Results for Planet are provided for Europe, Turkey, North America and Colombia. Numbers for the reference years 2020 and 2019 are provided when data tracking has proven feasible. Because we have adopted some new KPI’s and calculation methods in 2021, comparability with previous years is not always possible as yet. Annual Report 2021116 Report of the Board of Directors Ambition The success of our company depends on our ability to attract and retain skilled staff who have a thorough knowledge of and are familiar with our markets, technology and products. We want our people to thrive, to feel well and safe while working at our premises. We must ensure respect towards each other and we expect everyone to handle in accordance with our business values: Candor, Top Performance and Entrepreneurship. Candor: We say what we mean, we mean what we say. That is our authenticity. Top Performance: We say what we do and do what we say. That is our accountability and discipline. Entrepreneurship: We think like an owner. We make decisions and take ownership. Our ambition is to attract and retain talent by encouraging our people to learn and develop themselves, by investing in enhancing their health and safety and by protecting their fundamental rights. We want to create an inclusive workplace that embraces the diversity of our people. Results and Targets 2.5.3 People Employment 2021 2020 2019 Number of employees 3,709 3,660 3,754 New employee hires 1,577 1,153 481 Employee turnover rate 39.7% 30.9% - Temporary employees 173 - - Talent Management 2021 Percentage of white-collar employees who received a formal, automated performance review 70% The Group turnover rate is strongly influenced by the general market circumstances in the U.S. We aim at creating a culture of excellence by establishing a tangible link between learning, performance and compensation, succession planning and knowledge 117 Sustainability Health & Safety 2021 2020 2019 High-consequence work- related injuries Number: Rate: 1 0.16 0 0 - Work-related injuries Number: Rate: 110 17.4 87 14.4 - Number of lost days 1,808 1,260 2,044 Number of fatalities 0 0 0 “Our people are the driver of our activities. We believe that great people deliver great results.” transfer, by arranging for and providing training that supports strategic organizational objectives and by fostering a culture of continuous improvement that values organizational learning. New joiners and long-time employees, technicians and sales people… everyone should receive tailor-made trainings throughout his or her career at the Group. We organise technical trainings, safety trainings and language trainings. In terms of personal development, we encourage internal and international mobility, enabling employees to move to other countries to pursue their ambitions within the Group. In 2022, we will evaluate the performance review process and tools. External recognitions: • Deceuninck Germany won the Training Company Award of the District of Straubing-Bogen for companies that excel in training and apprenticeships • Deceuninck UK was awarded the Investors In People (IIP) Silver accreditation in recognition of the measures it has implemented to further reward and support the workforce. Data availability note: although our employees do follow trainings, we do not structurally track the training hours in a comparable way across the Group. We will track and report the average hours of training per employee as from 2022. Building a sustainable home can only be done in a healthy and safe working environment. Our success is measured by our ability to offer a healthy and safe workplace and embed a safety culture in our workforce. By investing in prevention, training and making available the necessary monitoring and reporting tools, we get closer to achieving our aspirational goal of zero accidents. Annual Report 2021118 Report of the Board of Directors Our EHS management system includes a clear governance structure on regional and site level, coordinated by EHS managers and with management involvement in the regular EHS and management meetings to review preventive and corrective actions and define targets. In addition, Deceuninck Turkey applies the ISO 45001 Occupational Health and safety management system and in our US plants the Federal & State Occupational Safety & Health Administration Standards are applied. Risk assessment is a central element of our EHS management system. Potential risks are assessed annually. A risk assessment report contains risks and their corrective and preventive actions, linked to for example electricity, chemicals, moving parts of machines, loading and unloading of hazardous products or ergonomics. Every employee should take the necessary precautions to prevent an accident, injury or unsafe situation by reporting unsafe or unhealthy situations and taking steps to correct them immediately. EHS managers on site-level give safety training to all workers and contractors. New, temporary and intern workers receive an EHS training during the initial phase of their employment. Other elements of the EHS management system are: periodic training of emergency situations, controls of electricity risks, subcontractors work permits, occupational hygiene, ambient measurements (noise, dust, lightning, VOC). Accidents that caused injuries in 2021 were saw cut- related accidents, forklift-related accidents and accidents due to slipping. Several actions have been taken in 2021 and will be taken in 2022 to eliminate these hazards and minimize risks: adapation and replacement of machinery, training to operators and temporary workers, specific monitoring, an awareness campaign, safety lights on forklifts and an automatic forklift slowdown project. Apart from our aspirational target of zero accidents, every site has specific targets linked to frequency and severity rate. In 2021 as well, the Group had to deal with the COVID-19 pandemic. The main focus was the protection of our employees’ health and wellbeing and the prevention of outbreaks in our production facilities. Thanks to a swift and strict management approach and a large number of mandatory preventive rules and measures, our employees were able to continue to work safely, both from their homes as from their workplace. “In 2021 as well, we had to deal with the COVID-19 pandemic. The main focus was the protection of our employees’ health and wellbeing and the prevention of outbreaks.” 119 Sustainability We respect cultural differences. We believe that diversity of people and ideas provides the Group with a business advantage. An inclusive workplace also gives access to the labour market to its fullest extent. We value and respect the unique character and contribution of each person. Treating each other with dignity, respect and fairness is the foundation of good business. Discriminating against any employee or person with whom we do business on the basis of age, race, colour, religion, gender, disability, national origin, sexual orientation is not permitted. The recruitment, Data availability note: we do not track amount of nationalities on Group level. Diversity 2021 2020 Percentage of employees per gender Women 14% 16% Men 86% 84% Percentage of employees per age group Under 30 years old 22% - 30-50 years old 58% - Over 50 years old 20% - remuneration, application of employment conditions, training, promotion and career development of our employees are based on professional qualifications only. We have a zero-tolerance policy against discrimination and harassment. Today, employees can confidentially report any Code of Conduct violation through an internal procedure. In 2022, the internal whistleblower procedure is enhanced via an online tool. Every occurrence is investigated and a remediation procedure is foreseen, if applicable. Our ambition is to increase diversity in terms of age (meaning having employees represented in all age categories), gender and nationality. We also invest in the inclusion of our diverse workforce, for example by offering language and culture trainings. Annual Report 2021120 Report of the Board of Directors “At Deceuninck, I feel I can always be myself. The warehouse is a place where work is to be done, but also a place where we can have a laugh.” Axeli Vancraynest Warehouse Operative Maintenance Deceuninck Belgium 121 Sustainability Annual Report 2021122 Report of the Board of Directors It is a strategic priority of the Group to keep employees engaged and connected to our company and each other. We understand that a good employee engagement is an enabler to a good working culture, reduction of turnover, increase of productivity and better relations with stakeholders. An employee survey is a means to measure and monitor employee satisfaction and take targeted action where needed. In 2021, we did not organize a survey in every region within every part of the Group. However, we aim to increase the frequency of employee surveys as of 2022. Engagement includes information exchange and negotiations with labor unions. 31% of our employees worldwide are represented by independent trade union representations or collective bargaining agreements, these employees are located in Europe. In Turkey, regular meetings are held with employees, especially blue-collar representatives, to discuss and find solutions for diverse issues. When employees or their close family members encounter exceptional, serious economic and/or health difficulties, we support them by providing the necessary assistance. In Belgium, we organized an employee survey mid- 2021, which allowed us to be up to date on the impact of COVID-19 on employee engagement. The key take-aways were that on average we are performing in line with the benchmark against other companies, our employees have a lot of variety in their work and feel secure about their job, we should improve internal communications and take the workload into consideration. _ 123 Sustainability Ambition We understand that we have an impact on the environment in which we operate. Our planet gives us food, fresh air, clean water, etc., but the strain on natural resources has a negative impact. The world continues to experience increasing concentrations of greenhouse gases, extreme weather conditions, rising sea levels and waste landfilling. As we affect climate change through our operations and products, and climate change might affect our business continuity, we have a responsibility to minimize the environmental impact of our operations. Historically, our focus has primarily been on designing and developing innovative products with high insulation levels, in order to reduce energy loss and minimize carbon footprint in the use-phase, in combination with major investments in recycling. In the coming months and years, we will combine this focus with a carbon reduction strategy linked to the production processes (energy efficiency and renewable energy) and the sourcing of raw materials. We accelerate towards a circular market for our building products, by carefully managing how we source materials, how we design products, how we produce, how we deliver our products to our clients and how — and how much — they are recycled at the end of 2.5.4 Planet their long lifetimes. We operate in markets with different strict and evolving environmental requirements. The compound and storage of hazardous industrial materials involves an environmental risk, especially as environmental legislation and regulations change over time. Failure to comply with existing or future environmental legislation and regulations may result in criminal or administrative penalties, which could have a material adverse effect on our financial results and operations. Results and Targets Our Recycling Activities 2021 2020 2019 Weight of waste handled (tonnes) 23,500 22,000 20,000 Weight of PVC material recycled (tonnes) 17,400 14,000 12,000 Annual Report 2021124 Report of the Board of Directors We invest in embedding the principles of a circular economy as the heartbeat of all our operations, through advanced recycling technologies of additional collection schemes. Our sector leadership in circular economy is clear by the investment in the state-of-the art recycling plant in Diksmuide (Belgium). Centrally located in Europe, we supply recycled PVC to our extrusion plants with the lowest possible transportation impact. Recycling post-industrial materials of our own production facilities and customers is what we have been doing since 2012. All our facilities grind their scrap materials as much as possible locally and re-used it on the production site. As such, we avoid transport to Diksmuide or other local recyclers. A circular economy goes further than recycling post- industrial waste and closes the loop of post-consumer PVC profiles, coming from demolition or renovation works. By increasing the post-consumer PVC share, Deceuninck strives to further increase the recycling volumes. • We expect the inflow of PVC to increase significantly over the coming years, because the EU Green Deal results in more renovation projects which will lead to more PVC materials becoming available for recycling. We directly contribute to preventing this PVC from going to incineration or landfill. • We continue our strategy of cooperation with partners, such as waste management companies, container parks, demolition companies, window fabricators. We are continuously looking to set up new strategic partnerships to ensure the inflow. • The high-tech fully automated line enables an optimal sorting of the materials and as such to process old PVC profiles at superior efficiency and quality. Quality is a key requirement to be able to use the post- consumer materials 1 on 1 in the production of new profiles. We realize that our recycling activities have an environmental impact, although the positive impacts are much larger than the negative impacts. Our recycling factory is fully part of our carbon reduction strategy. Our recycling activities are independently audited by EuCertPlast. This certification aims at environmentally optimal plastics recycling processes. As such, we “Our vision on circularity: we design products which are 100% recyclable, we recycle in a closed loop system at superior eciency and we manufacture long-lasting, low-maintenance products with less virgin material.” 125 Sustainability contribute to the Recovinyl and Vinyl Plus 2030 European recycling objectives. For the waste fractions for which we have not found a circular solution yet, we set up pilot projects with universities and other partners to investigate how we can valorise those materials flows. Deceuninck committed in 2020 with other industrial partners and University of Ghent in the ‘PoCoWaste’ project to further reduce the waste of the recycling process and, upcycle and reuse significant volumes as new raw material for PVC applications. The Group recycled 23,500 tonnes of post-industrial and post-consumer rigid PVC waste in 2021, resulting in 17,400 tonnes of high-quality raw material we use one-on-one in our production facilities. Unfortunately, we did not reach our ambitious target of 30,000 tonnes input recycled material in 2021. Investments in additional capacity were planned to be operational during the year, but due to the global supply chain crisis resulting in increasing lead times on machinery, we were not able to increase capacity as planned. In 2022, we will keep investing in our recycling activities to be upgraded towards a capacity of 27,750 tonnes per year making us one of the largest u-PVC recyclers of Western-Europe. We are confident we will reach this target in 2022 if no major disruptions take place. The ongoing focus on the existing waste fractions will result in a growing yield, which enables us to process more recycled raw material with the same inflow. _ 126 Annual Report 2021 Report of the Board of Directors 17,400 tonnes Use of recycled PVC in production in 2021 127 avoided = annual CO emissions of 4,400 Europeans 32,500 tCOe Annual Report 2021128 Report of the Board of Directors Product design to be 100% recyclable is one of the key principles of our circular economy commitment. PVC is a valuable material that can be recycled up to 10 times without losing its mechanical characteristics. Installed for around 35 years, it has a potential lifecycle of up to 350 years. In the design process of our new window systems, the use of recycled materials is a one of the main design criteria used by our R&D teams. Our design teams apply the Design for Recycling guidelines of EPPA, the European Trade Association of PVC Window System Suppliers. The guidelines were updated in 2021 with the spirit to be converted into a European Standard at a later stage. The quality of the recycled material to ensure the quality of the end-product is paramount. Therefore, we invest in fully automated recycling processes that eliminate other waste streams from the PVC fraction. Our recycling activities are complemented with investments in co- extrusion production lines that combine virgin with recycled PVC in our product manufacturing. All recycled materials we use comply with the applicant quality certifications. In 2021, on average 14.9% recycled PVC material was used in production. Calculated against the total virgin material used, this is a combination of post-consumer waste — mainly sourced from our own recycling plant — and post-industrial waste, partly originating from our own production, partly from our customers. Deceuninck North America is certified for the recycled content in window lineals via the external certification agency GreenCircle. As such, we are the only North American PVC window lineal supplier. Our GreenCircle product certification covers claims for recycled content, in accordance with US criteria for recycled content of building products. Product Design and Lifecycle Management 2021 2020 2019 Share of recyclable products 100% 100% 100% Share of recycled input PVC materials used 14.9% 13.3% 10.6% “Product design to be 100% recyclable is one of the key principles of our circular economy commitment.” 129 Sustainability The Elegant product range for windows and doors contains high levels of recycled content, between 15% and 30%. Phoenix is the newest addition to the Elegant product range, available since January 2022 in the BENELUX. Phoenix windows and doors profiles consist of 100% recycled material — so far, our strongest circular product achievement. The Phoenix range scores as highly in terms of shape retention, resistance and thermal insulation values as our other profiles. The minimalist 'Infinity' design from the Elegant window range was selected for the design of the Phoenix range. This ensures a contemporary look for the circular window and door profiles. Breakdown of materials used in production Raw materials (tonnes) PVC resin 200,000 Calcium carbonate 23,000 Impact modier 7,000 Titaan dioxide 7,000 Decorative foil 2,000 Reinforcement materials (tonnes) Steel 21,000 Fiberglass 1,000 Steel wire 600 “The new Phoenix range makes optimal use of recovery and recycling, and thus represents the rebirth of old materials. Like a phoenix rising from its own ashes, we process windows and doors that have reached the end of their lives into new, 100% recycled proles.” Annual Report 2021130 Report of the Board of Directors PVC building products are lightweight, require low maintenance and provide superior insulation. Our PVC products save energy and reduce CO emissions. Studies show that 40% of fossil fuels in Europe are used for heating buildings, which represents 36% of energyrelated greenhouse gas emissions. The Group’s mission is to reduce the energy and carbon share of heating or cooling buildings. We are continuously developing PVC and composite products that help reduce the energy that escapes from buildings through windows and walls. PVC and PVC composite products are the most economical solution for insulation. The use of new PVC windows at least halves energy consumption, assuming that a 30-year-old window is replaced leading the house to comply with passive house standards. National building codes are gradually introducing stricter insulation and ventilations targets to meet insulation legislation, for example the Energy Performance of Buildings Directive in the EU which introduces Energy performance certificates (EPCs) for buildings and regulations to ensure that from the end of the decade only nearly zero energy buildings (NZEBs) are built. We design products with optimal insulation values. Our design teams constantly innovate on building products with improved energy performance at an even lower weight. Thermal properties of windows and doors are calculated according to parameters of thermal transmission of PVC frame (Uf) and glazing (Ug). For us, as system owner, the critical parameter is the Uf, which is determined during the design phase. Based on this, we have several Passive House Components Certifications: in the EU for the Zendow#neo, Elegant Infinity and Elegant ThermoFibra Infinity systems (climate zone warm). Deceuninck Turkey received the first Passive House Component Certification for PVC Windows in Turkey with the Winsa-Revotech window range from the German Passive House Institute. Environmental Product Declarations (EPD) present the results of a life cycle assessment (LCA) carried out on a product to quantify its environmental impacts. EPDs are prepared according to strict rules defined by the EPD Programme Operators. The EPDs which EPPA (European Trade Association of PVC Window System Suppliers) published for double- 131 Sustainability glazed windows and triple-glazed PVC windows, summarize the environmental impact of PVC window profile systems available on the EU market. Deceuninck is participating in the working group that is currently revising the EPD’s which will be compliant with ISO 14025 and EN 15804+A2. The EPDs will be published in the first half of 2022. We are currently finalizing EPDs for the French market, and work has also been initiated to update the EPD on Twinson massive decking profile. Establishing an EPD for the complete Twinson product range (terrace and claddings) is foreseen in 2022. In 2021, Deceuninck renewed its VinylPlus product label. The voluntary label is the sustainability quality mark for PVC building and construction profiles. It was put into place by VinylPlus, BRE and the Natural Step and was originated to make it easier for customers and markets to choose the most sustainable, high-performance PVC products. The external audit certifies the policies, processes, products and performance on the following criteria: • Responsible Sourcing – traceability of raw materials • Controlled Loop Management – reduce waste and increase use of recycled material • Organo-chlorine Emissions – PVC sourced from ECVM chartered suppliers • Sustainable use of additives – cadmium and leadfree products, additives used contribute to lower ecological footprint • Energy and climate stability – energy efficiency improvement and use of renewable energies above national legal requirements The VinylPlus label is applicable for our product ranges Elegant, Elegant Thermofibra, Zendow, Zendow#neo and Twinson in Europe. The label gives evidence that our products and processes are applying to the highest quality, performance and sustainability standards. 2 European Commission: A Renovation Wave for Europe – greening our buildings, creating jobs, improving lives (2020) 3 QKE/EPPA Environmental Product Declaration (2017) 132 Annual Report 2021 Report of the Board of Directors energy consumption 90% than producing less energy uses up to r e c y c l i n g P V C 133 PVC PVC recycled virgin 90% less energy 2 tonnes of COe emissions avoided per ton recycled PVC uses up to r e c y c l i n g P V C Annual Report 2021134 Report of the Board of Directors As part of our commitment to sustainability and climate change mitigation, we strive to continuously improve the environmental performance of our operations, with efficient use of energy and renewable energy as key parts of this. Energy efficient production processes as well as sourcing and producing renewable energy have an impact on the carbon footprint directly. It also is an opportunity for the optimization of manufacturing processes and energy cost reduction. Energy consumption is continuously monitored at all sites. The bigger contributors are additionally encouraged to develop energy efficiency projects. This is logically the case for our extrusion plants, which amount for the highest use of electricity due to the production characteristics. In 2021, several energy efficiency projects were executed: renewal of pumps and motors, insulation of buildings, LED relighting, power savings through water cooling, etc. We also started a more systematic energy efficiency analysis on Group level based on detection of energy flows and evaluation of the potential of energy efficiency, focused at energy-consuming equipment (extrusion systems, injection moulding machines, laminating machines, compound mixing, heating, cooling and compressed air supply), forklifts and lighting in production and warehousing. Our production facility in Bogen is ISO 50001 certified. The energy management system specifies the requirements for establishing, implementing, maintaining and improving an energy management system. Our production sites in Belgium, Turkey and the United Kingdom are ISO 14001 certified. The Plan-Do- Check-Act approach of ISO 14001 results in continuous “In 2021, we started a more systematic energy eciency analysis based on detection of energy ows and evaluation of the potential of energy eciency.” Energy Management 2021 2020 2019 Total electricity consumption (MWh) 186,386 173,413 169,619 Total natural gas consumption (MWh) 94,074 87,626 82,210 Total fuel oil consumption (MWh) 5,580 4,170 7,461 Total energy consumption (MWh) 286,041 265,209 259,303 Energy intensity (MWh/tonnes) 1.25 1.28 1.32 Percentage of electricity use from renewable sources 16% 17% 16% 135 Sustainability improvements of the environment performance based on procedures and instructions. The two Belgian sites are part of the energy efficiency covenant ‘EBO’. The share of renewables in the energy mix can mainly be attributed to the trigeneration power system (combined heat and power) in one of the Turkish plants. 1% of the total consumption is produced by PV panels, located on our plants in Belgium, Turkey and Germany. We intend to actively pursue an increase in the share of renewables in our purchased energy mix in the coming years. We will do so starting with sourcing of renewable energy through Renewable Energy Certificates (REC) as well as with increasing our own production of renewables. As of 2022, the increased focus on energy efficiency will lead to a decrease of energy consumption per processed kg and a shift from use of natural gas and fuel oil to (green) electricity. Water Management 2021 2020 2019 Total water withdrawal (m) 230,514 216,927 239,426 Water intensity: total water withdrawal/production volume (m/tonnes) 1.01 1.05 1.15 Total water withdrawal per subcategory (m) Rainwater 17,684 - - Groundwater and surface water 30,140 - - Drinking water 182,690 - - Responsible water management is another aspect of our efforts to make our production processes more environmentally friendly. Water is becoming a more valuable commodity due to physical effect of climate change and overuse. Water is an inherent part of extrusion processes, as it is used to cool the PVC material upon completion of extrusion. We therefore must use it responsibly, especially in water stress regions. We monitor our water consumption, we are implementing measures to reduce water usage by investing in filtration systems and water reuse, we Annual Report 2021136 Report of the Board of Directors In line with our dedication to a circular economy, an effective waste management in our operations is a key priority for Deceuninck. Reducing waste streams is not only good for the environment but also for business, as fewer raw materials are required to produce. We have a waste management policy and processes in place by which we monitor and assess waste streams, minimize waste volumes and seek to close the loop for the remaining waste fractions originating from our production processes. The waste management hierarchy, central to our waste management approach, prioritizes waste prevention, followed by recovery operations that divert waste from being sent to disposal: • We check if we can reduce or eliminate the waste stream. • We focus on the re-use of waste streams as raw material in our own production. • We process it with a third party in most environmental neutral way, which means in order of priority: recycling / incineration with energy recovery / incineration without energy recovery. • We avoid and eliminate landfilling. In 2021, several projects were initiated to avoid and re-use waste streams. For example, some packaging Waste Management 2021 2020 2019 Total volume of waste(kg) 14,136,121 14,545,714 13,044,574 Waste intensity 61,7 70,3 63,1 avoid the use of drinking water and maximise the use of rainwater. We also take preventive water treatment measures against soil and ground water contamination. At the recycling plant in Diksmuide, investments in a rain water well and a water treatment installation to enable reuse of process water back in the recycling process was done in 2021. This has led to 40% less drinking water use in 2021 in the plant. Following our sustainability strategy, in the coming years, we will intensify the organization’s management approach on responsible water use, notably reuse of wastewater in extrusion processes, focused on the plants located in water stress regions. 137 Sustainability from to save 2.3 million old windows landll or incineration Our ambition: recycled materials have been removed from the pallets. Deceuninck engages in the voluntary initiative Operation Clean Sweep where we pledge to prevent resin pellet, flake and powder loss. Our dedication for waste management continues in 2022. Several projects are in the pipeline in line with the waste hierarchy mentioned above. We keep focusing on re-use of raw materials on-site, we will actively monitor and assess waste treatment methods at the waste processors with which we cooperate and we continue efforts to reduce packaging materials. Annual Report 2021138 Report of the Board of Directors Following our ambition expressed in the Annual Report 2020, we have calculated the carbon footprint of the Group in 2021. The results have proven insightful for the analysis of where our direct and indirect impacts, linked to operations and the supply chain, lay. The greenhouse gas emissions reported are carbon dioxide (CO) and Hydrofluorocarbons (HFCs). To calculate their impact on climate change, greenhouse gas emissions are converted to the CO equivalent using the Global Warming Potential, following the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. Unsurprisingly, the impact of the indirect emissions in the supply chain is very large, as two main feedstocks are needed to manufacture PVC (polyvinylchloride): chlorine and ethylene. The ethylene is mainly derived from non-renewable fossil fuels, either crude oil or natural gas (and also shale gas). Even though worldwide, PVC uses less than 1% of fossil fuels consumed, it largely influences our total carbon emissions. Raw materials (Scope 3) contribute to 88% of our total carbon footprint, of which 71% is due to virgin PVC resin. The other biggest contributors are Steel, Impact Modifier and Calcium Carbonate. The second largest contributor comes from the energy consumption in our operations (11%), Scope 1 and 2 emissions together. The use of electricity accounts for the largest share (9%), followed by natural gas use (2%). Other contributors to energy consumption is fuel oil. Energy needs increased due to increased production. Logistics (6%) represent the third main source of COe emissions, largely influenced by road transportation and to a lesser extent by sea freight. Carbon Management 2021 2020 2019 tCOe emissions Scope 1 20,887 19,875 19,148 tCOe emissions Scope2 (location based) 55,602 53,155 54,679 tCOe emissions Scope2 (Market based) 54,659 52,720 54,146 tCOe emissions Scope3 2021 570,418 510,072 470,903 Total tCOe emissions 645,964 582,668 544,197 Carbon emissions Intensity Scope1 & 2 2.82 2.82 2.76 CDP score D - - 139 Sustainability Company cars, commuting and business travel all together represent < 1% of our climate impact. The same counts for waste, with the following breakdown (from high to low): plastics, residual, metals, wood. Fluctuations per site directly reflects the quantities of raw materials processed. Monroe (US) and our two Turkish plants are the plants with the biggest climate impact which represent together 50% of our total footprint. Emissions have increased by 11% between 2021 and 2020 and by 4% between 2019 and 2020. These increases are linked to the increases in processed raw materials. Production and related activities have been impacted by COVID-19 in 2020 and much less in 2021. The increase in carbon emissions is especially high in the Scope 3 emissions. CDP is an international not-for-profit organisation which runs a global disclosure system that enables companies, cities, states and regions to measure and manage their environmental impacts and issues ratings. The Group participated to the CDP rating system for the first time in 2021 and received a D-score. We intend to improve our scoring year by year by developing a targeted approach on the key elements targets, strategy, governance and risks. The Group has committed to set near- and long-term emission reduction targets in line with science-based net-zero of the Science Based Targets initiative (SBTi) and is preparing to submit targets for validation in 2022. Our ambition is to reduce the carbon emissions in Scope 1 & 2 by minimum 42% and in Scope 3 by 25% by 2030, compared to baseline year 2021. By 2050 we are aiming at 90% overall reduction of carbon emissions compared to our baseline year. The carbon emission reduction plan includes investments in energy efficiencies in infrastructure and equipment in operations, electrification and renewable energy sourcing and production. Targets for Scope 3 emissions will be developed in 2022, linked to cooperation with suppliers to source bio-based PVC, intensifying our own recycling efforts and efficiencies in logistics. “Responding to the SBTi’s call for corporate climate action illustrates our strong commitment to sustainability. The science-based targets provide a framework for us to evaluate key business decisions from a climate mitigation point of view.” Annual Report 2021140 Report of the Board of Directors 141 Sustainability “Everyone in this company is a valuable asset and is given real opportunities to grow and learn, personally and as a team. I am also very proud to be part of a company that respects the environment and takes important actions in recycling and sustainability.” Jonathan Ortiz Country Manager Chile Deceuninck Chile Annual Report 2021142 Report of the Board of Directors Ambition We want to be a reliable partner to both our customers and our suppliers. Our daily driver is to produce exquisite, innovative, sustainable and safe window, door and building solutions, while playing an active role in the communities we operate in, upholding the highest ethical business standards and expecting the same from our business partners. Our activities are subject to possible liability risks related to our products and related to our supply chain (human rights violations, bribery, corruption). Any act of non- compliance can have a negative impact on the reputation of the company, on the activities and on the value of the share. We have taken measures to protect our customers on the one hand and to ensure not only our employees but also our business partners act in accordance with applicable laws, as well as the highest standards of integrity and ethical practice. 2.5.5 Community Results and Targets Health and safety potential impacts are an area of growing concern especially in Europe, driven by evolving European legislation. We cooperate in this policy making process by sharing knowledge and experience in the most transparent way. Health And Safety of the End-User 2021 2020 2019 Number of incidents of non-compliance with health & safety regulations and voluntary labels 0 0 0 It is critical for the Group to manufacture window, door and building solutions that ensure top quality over their entire lifetime. Health and safety are essential quality elements, meaning that we do not tolerate that our products harm the end-users during their lifetime. Products must be designed, produced and serviced to the Group’s product standards and should comply with applicable regulations and contractual obligations. Depending on the product group we adopt several quality standards and labels as a guideline for the design and manufacturing. 143 Sustainability We provide voluntary quality labels against the applicable standards for all our products in our company labs. The tests cover a range of potential impacts, for example weather and reaction to fire, compliance with REACH and VOC regulation, throughout all product lifecycle stages and are based on national quality standards, such as ATG (Belgium), KOMO (The Netherlands), NF-CSTB (France), RAL (Germany). The assessment is successful only when the product passes on each requirement and the test reports are approved by external certification partners. Our PVC cladding products in Europe are subject to CE marking. PVC profiles are not subject to CE marking, unlike PVC windows and doors. The CE marking of those finished products is provided by the window manufacturer, based on reports provided by Deceuninck. The CE mark signifies that products sold in the European Economic Area have been assessed to meet high safety, health, and environmental protection requirements. It covers seven basic requirements: mechanical resistance and stability, safety in case of fire, hygiene, health and environment (dangerous substances, VOC, …), safety and accessibility in use, protection against noise, energy economy and heat retention, sustainable use of natural resources. The safety and performance of our PVC cladding products are officially stated in a Declaration of Performance, published on our website and directly available to customers. Deceuninck participates in the SCIP database, launched in 2021. This EU database, established under the EU Waste Framework Directive, is intended to support consumers in making safer choices on the articles they buy and support waste managers in identifying Substances of Very High Concern containing products (SVHC) when they are present in a concentration above 0.1% weight by weight (w/w) on the EU market. The PVC profiles containing post-consumer recycled material we put on the market in the EU are consultable in the SCIP database. Lead free test reports for virgin compound are available for every product. In the context of the European REACH legislation, the EU Commission has proposed a ban to use the heavy metal lead in PVC products with a conditional derogation for the recycled rigid PVC. We are, with our industry association EPPA, closely following the discussions at European level. The proposal is currently being discussed by the EU Parliament, next steps will follow in 2022. “Health and safety potential impacts are an area of growing attention especially in Europe, driven by evolving legislation.” Annual Report 2021144 Report of the Board of Directors The elements ‘Responsible use of additives’, ‘Health and safety’ and ‘Material traceability down the supply chain’ are part of the externally audited VinylPlus product label, which has been nenewed in 2021 (see above). Business Ethics 2021 2020 2019 Rate of new joiners (white collars) who completed the Code of Conduct e-learning 85% 79% 85% Number of incidents of non-compliance 0 0 0 The policies and procedures for this are set out in our Human Rights Policy and our Code of Conduct for Employees. To make sure that all of our employees have the same understanding of the Code of Conduct principles, an e-learning program was launched in 2017. The aim of the e-learning program is to explain the main principles and rules of the Code of Conduct. It covers topics such as anti-bribery and corruption, ethics, data protection, quality and sustainability. New joiners automatically get to complete the e-learning training as part of the onboarding process. The training is currently only available for white collars. Due to technical issues, it has not yet been rolled out to our blue-collar workers. We plan to extend the training to all employees in 2022. In order to combat fraud and corruption, the Authorized Signatories List (“ASL”) was revisited and rolled out in 2021. For the approval and monitoring of expenses, the Group implemented a workflow based expense note management system. The Group considers respect for business ethics as an integral component of sustainable business behaviour. Our reputation and financial success depend on the conduct of our employees when dealing with business partners, company assets, information, etc. The Group wants to foster a stimulating work environment in which every person is treated fairly. The Group places an emphasis on respect, the need to apply the highest standards of professional behaviour, safety and security and the rejection of all kinds of discrimination. 145 Sustainability Business Ethics in The Supply Chain 2021 2020 Number of suppliers who signed the Code of Conduct 49 18 Data Protection 2021 2020 Number of security breaches or loss of data reported 0 0 Being in a production environment, the Group’s main activity is not the processing of personal data. However, in the interest of our company, our employees and our business partners, the Group is committed to do the utmost to protect personal data against unauthorized users and operates in accordance with the applicable rules and legislation. Non-compliance could lead to privacy claims and loss of reputation. Since the entry into force of the General Data Protection Regulation, the Group has implemented the necessary policies and procedures and organized trainings and awareness campaigns through its Intranet, targeting in particular Sales and Marketing and HR departments. In 2021, no security breaches of privacy or loss of data were reported. We expect our suppliers to comply with the same ethical standards as we do with regard to non-discrimination, anti-bribery and anti-corruption and human rights, in particular in high-risk countries. This is fundamental to our long-term future and company reputation. The principles, policies and procedures are set out in the Supplier Code of Conduct and the Human Rights Policy. It includes the commitments expected from suppliers and subcontractors in terms of ethics, human rights, respect for the environment. All suppliers with whom we work must adhere to the ILO Declarations on Fundamental Principles and Rights at Work, take responsibility to the environment, strive for ethical behaviour and take measures to protect personal data. Our European resin suppliers must follow the VinylPlus voluntary commitments and must follow an environmental and health and safety management system. The suppliers’ location is a criterion on which the Annual Report 2021146 Report of the Board of Directors As a Group active in more than 90 countries all over the world, we believe we have a role to play in society. We want to ensure that more people can participate in and benefit from a prospering society regardless of their backgrounds. We therefore support charity projects worldwide, both bigger and smaller ones, hoping to make a difference for each and everyone involved. Apart from the monetary sponsorships, we also support a variety of causes in-kind. We mainly focus on projects in the field of education and health: • health research initiatives enable scientists to improve the prevention and quality of healthcare. • education helps children and young people to grow towards independency, opens opportunities on the labour market, and is a key to breaking the vicious circle of poverty. Community Engagement 2021 Project support for health and education: € 42,000 supplier is being evaluated in the decision making. In 2022–23, our ambition is to start the preparations to develop a due diligence to identify, prevent and mitigate potential human rights and environmental impacts in our supply chain by conducting a risk and spend analysis. Currently, we focus on getting our new suppliers to sign the Supplier Code of Conduct as part of their new contract. This is integrated in the procurement process. Existing suppliers are screened and, in a first phase, the most important suppliers in terms of ‘spend’ are asked to sign the Supplier Code of Conduct or at least to provide proof of their own internal ethical standards and policies. A high-level risk screening of our suppliers showed that the large majority of the suppliers operate in low-risk countries within the EU. 147 Sustainability A selection of projects we supported in 2021: The Deceuninck C3 Compassion for Community and Causes programme in US: sponsorship of Wreaths Across America, local youth baseball, high school football …. YouthStart: YouthStart stimulates self-confidence among young people seeking opportunities and offers them the opportunity to pursue their ambitions. They provide a qualitative education and the necessary support to become an independent and self-sufficient individual. De Kouter Kids: The association aims to provide support in the broadest sense to children living in a difficult home situation. De Kouter Kids tries to make sports and culture accessible to those young people. In addition, at the age of 18, they get assistance in their first independent steps in society (e.g. by sponsoring the driver’s license exam). Annual Report 2021 The further improvement of prot margins remains a priority in order to be able to further invest in sustainable growth. Global population growth and climate change aect the need and the type of sustainable houses. With our investments in recycling and the superior thermal insulation of our products, we expect the building renovation wave to positively impact our sales in the coming years. 01 02 03 04 05 148 The further improvement of prot margins remains a priority in order to be able to further invest in sustainable growth. Global population growth and climate change aect the need and the type of sustainable houses. With our investments in recycling and the superior thermal insulation of our products, we expect the building renovation wave to positively impact our sales in the coming years. 149 150 Annual Report 2021 2.6 Financial Performance 2.6.1 Deceuninck Consolidated 2.6.2 Financial Statements and Notes 2.6.3 Deceuninck NV 2.6.4 External Auditor’s Report 2.6.5 Management Responsibility Statement 151 Annual Report 2021152 Report of the Board of Directors Income statement Consolidated sales in 2021 increased to a new record of €838.1 million, up 30.5% from €642.2 million in 2020. Continued strong demand in all regions from the residential construction market resulting in higher volumes and price increases to mitigate the effect of higher raw material costs, inflation and FX have been the main drivers for this increase. The Adj. EBITDA for the year increased to €97.7 million (+13.6% vs 2020), which is the highest number in the history of the company. Higher sales volumes have been the main driver for this record Adj. EBITDA. The Adj. EBITDA-margin decreased from 13.4% in 2020 to 11.7% in 2021, which is still well above the historical performance. The reasons for this margin erosion are diverse. Firstly, there is an (unavoidable) delay of about three months in the pass-through of higher raw material prices into higher selling prices. Secondly, labour shortages and supply chain disruptions have led to inefficiencies in production and logistics. Next, the Adj. EBITDA-margin in H2 2020 was high because of the exceptionally low prices of raw materials purchased in Q2 2020 and reflected in the result of H2 2020. And finally, the pass-through of higher costs into higher selling prices to protect margins in absolute numbers has a dilutive effect on the margin percentage. Adj. EBITDA-items (difference between EBITDA and Adj. EBITDA) amount to €4.9 million (vs €0.6 million in 2020) and include mainly costs related to the transition to the iCOR platform. The financial result improved slightly from €(15.4) million in 2020 to €(14.6) million in 2021 thanks to a lower financial debt resulting in lower interest charges. One-off FX gains in H1 2021 were offset in H2 2021 by higher hedging costs and FX losses related to the sharp devaluation of the Turkish lira in November and December 2021. Despite higher Earnings before Taxes (€39.7 million up 30.1% from €30.5 million in 2020), Income taxes are lower (€2.5 million in 2021 vs €4.9 million in 2020) because of the recognition of additional deferred tax assets. Net profit increased from €25.6 million in 2020 to €37.2 million in 2021 (+45.4%). Consequently, Earnings per Share increased from €0.18 to €0.25. The Board will propose to the General Assembly to pay out a dividend of €0.06 per share (vs €0.05 for the year 2020). Cash ow and Balance Sheet The Net Financial Debt increased from € 55.5 million end 2020 to € 61.9 million end 2021. Leverage remained unchanged though at 0.6x as the higher debt has been compensated by a higher Adj. EBITDA. This annual report needs to be read together with the audited consolidated financial statements of Deceuninck Group, referred to as the Group, and the notes to the financial statements. These audited consolidated financial statements were authorized by the Board on 22 February 2022. 2021 Results 2.6.1 Deceuninck consolidated 153 Financial Performance Non-nancial information Research and Development (R&D) Events after the balance sheet date Other circumstances The non-financial information of the Group is described in the section Sustainability of this annual report. The research and development activities of the Group are described in the section Products and Innovations of this annual report. Please refer to Note 26 of the consolidated financial statements. Besides the circumstances included in the paragraph on risk management, no other circumstances should be disclosed that had a significant influence on the Group’s situation. Negative cash impact from working capital movements in absolute numbers was € +32.7 million, driven by higher sales and higher raw material prices. However, in relative terms, working capital improved from 11.6% on sales end 2020 to 10.1% end 2021. After being low in 2020 (€ 23.5 million) because of COVID-19, capex increased again in 2021 to € 43.6 million. Besides an amount of about € 30 million for maintenance and growth, the most important capital expenditure was the purchase of a warehouse in Kartepe (TR) for about € 10 million. Annual Report 2021 Annual Report 2021 154 Deceuninck Group: key gures KEY FIGURES (IN €MILLION) 2019 2020 2021 EVOLUTION 20202021 Consolidated Income Statement (in € million) Sales 633.8 642.2 838.1 31% Adjusted Ebitda 60.6 86.0 97.7 14% Ebit 11.2 45.9 54.3 18% Net Prot (14.7) 25.6 37.2 45% Consolidated Balance Sheet (in € million) Equity 233.1 246.3 258.9 5% Net Debt 140.2 55.5 61.9 12% Total Assets 589.7 599.4 675.1 13% Capital Expenditure 35.5 23.5 43.6 85% Working Capital 94.5 74.2 84.3 14% Capital Employed 416.3 347.4 354.9 2% Ratios Net Prot On Sales (2.3%) 4.0% 4.4% - Adjusted Ebitda / Sales 9.6% 13.4% 11.7% - Net Debt / Adjusted Ebitda 2.31 0.64 0.63 - Ebit / Capital Employed 2.7% 13.2% 15.3% - Headcount Total Full Time Equivalents (Fte) 3,754 3,660 3,709 - 155 Financial Performance 2.6.2 Financial statements and notes FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER (IN € THOUSAND) NOTES 2020 2021 Sales 2 642,189 838,099 Cost of goods sold 3 (438,639) (608,440) Gross prot 203,550 229,658 Marketing, sales and distribution expenses 3 (110,182) (128,577) Research and development expenses 3 (6,908) (6,711) Administrative and general expenses 3 (42,063) (43,198) Other net operating result 3 4,508 3,106 Share of the result of a joint venture 8 (3,018) - Operating prot (EBIT) 3 45,887 54,278 Costs related to the derecognition of accounts receivable 3 (3,887) (3,545) Interest income (expense) 3 (5,889) (4,862) Foreign exchange gains (losses) 3 (4,515) (5,744) Other nancial income (expense) 3 (1,092) (446) Prot / (loss) before taxes (EBT) 30,505 39,682 Income taxes 4 (4,927) (2,503) Net prot / (loss) 25,578 37,179 THE NET PROFIT / LOSS IS ATTRIBUTABLE TO: (IN € THOUSAND) 2020 2021 Shareholders of the parent company 24,242 33,990 Non-controlling interests 1,336 3,189 EARNINGS PER SHARE DISTRIBUTABLE TO THE SHAREHOLDERS OF THE PARENT COMPANY IN €: 2020 2021 Basic earnings per share 0.18 0.25 Diluted earnings per share 0.17 0.24 Deceuninck consolidated income statement Annual Report 2021 Annual Report 2021 156 FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER IN € THOUSAND 2020 2021 Net prot / (loss) 25,578 37,179 Currency translation adjustments (27,937) (22,449) Net other comprehensive income / (loss) potentially to be reclassied to prot or loss in subsequent periods (27,937) (22,449) Changes due to remeasurements of post employment benet obligations 248 2,364 Income tax impact (16) (640) Net other comprehensive income / (loss) not to be reclassied to prot or loss in subsequent periods 232 1,724 Other comprehensive income (+) / loss (-) for the period after tax impact (27,705) (20,725) Total comprehensive income (+) / loss (-) for the period (2,128) 16,454 THE TOTAL COMPREHENSIVE INCOME + / LOSS OF THE PERIOD IS ATTRIBUTABLE TO: IN € THOUSAND 2020 2021 Shareholders of the parent company (1,821) 16,916 Non-controlling interests (307) (462) Deceuninck consolidated statement of comprehensive income 157 Financial Performance Annual Report 2021 Annual Report 2021 158 Deceuninck consolidated balance sheet IN € THOUSAND NOTES 2020 2021 ASSETS Intangible xed assets 6 2,252 1,849 Goodwill 7 10,601 10,571 Tangible xed assets 9, 20 254,274 246,826 Financial xed assets 9 9 Investment in a joint venture 8 - - Deferred tax assets 4 5,174 9,792 Long-term receivables 10 829 1,508 Non-current assets 273,139 270,555 Inventories 11 112,907 169,589 Trade receivables 12 69,301 90,756 Other receivables 12 37,159 69,959 Cash and cash equivalents 13 105,623 72,885 Non-current assets held for sale 14 1,244 1,346 Current assets 326,235 404,535 Total Assets 599,373 675,089 159 Financial Performance IN € THOUSAND NOTES 2020 2021 EQUITY AND LIABILITIES Issued capital 15 53,950 54,441 Share premiums 15 88,310 90,213 Retained earnings 228,334 256,263 Remeasurements of post employment benet obligations 16 (7,409) (5,690) Treasury shares 15 (75) (75) Currency translation adjustments 15 (123,764) (142,418) Equity excluding non-controlling interests 239,348 252,735 Non-controlling interests 6,937 6,184 Equity including non-controlling interests 246,284 258,919 Interest-bearing loans including lease liabilities 18 137,022 13,002 Other long-term liabilities 676 580 Employee benet obligations 16 22,305 18,779 Long-term provisions 17 3,485 3,287 Deferred tax liabilities 4 1,788 1,544 Non-current liabilities 165,275 37,192 Interest-bearing loans including lease liabilities 18 24,069 121,765 Trade payables 19 107,963 176,009 Tax liabilities 8,275 6,421 Employee related liabilities 14,422 15,439 Employee benet obligations 16 1,158 1,212 Short-term provisions 17 3,212 249 Other liabilities 19 28,715 57,883 Current liabilities 187,815 378,978 Total equity and liabilities 599,373 675,089 Annual Report 2021 Annual Report 2021 160 IN € THOUSAND Issued Capital Share premiums Retained earnings Changes in remeasurements of post employment benet obligations Treasury shares Treasury shares held in subsidiaries Currency translation adjustments Total equit y attributable to shareholders of the parent company Non-controlling interests Total As per 31 December 2019 53,925 88,261 200,427 (7,640) (75) (454) (103,783) 230,661 2,443 233,104 Net income / (loss) for the current period 24,242 24,242 1,336 25,578 Other comprehensive income (+) / loss (-) 232 (26,294) (26,063) (1,643) (27,705) Total comprehensive income (+) / loss (-) - - 24,242 232 - - (26,294) (1,821) (307) (2,128) Capital increase 25 49 74 - 74 Own shares purchased 454 454 157 611 Transactions with non-controlling interests 2,953 6,333 9,286 4,626 13,912 Share based payments 712 712 712 Dividends paid - - Transfer (19) (19) 19 - As per 31 December 2020 53,950 88,310 228,334 (7,409) (75) - (123,764) 239,348 6,937 246,284 Transactions with non-controlling interests relate to the sale of 7.41% of the outstanding shares of Ege Prol Ticaret ve Sanayi AS while retaining control. The ownership percentage of the Group in Ege Prol Ticaret ve Sanayi AS has subsequently changed from 95.88% to 88.47%. Deceuninck consolidated statement of changes in equity IN € THOUSAND Issued Capital Share premiums Retained earnings Changes in remeasurements of post employment benet obligations Treasury shares Treasury shares held in subsidiaries Currency translation adjustments Total equit y attributable to shareholders of the parent company Non-controlling interests Total As per 31 December 2020 53,950 88,310 228,334 (7,409) (75) - (123,764) 239,348 6,937 246,284 Net income / (loss) for the current period 33,990 33,990 3,189 37,179 Other comprehensive income (+) / loss (-) 1,718 (18,793) (17,074) (3,651) (20,725) Total comprehensive income (+) / loss (-) - - 33,990 1,718 - - (18,793) 16,916 (462) 16,454 Capital increase 491 1,903 2,395 2,395 Transactions with non-controlling interests 216 138 355 115 470 Share based payments 559 559 559 Dividends paid (6,836) (6,836) (407) (7,243) As per 31 December 202 54,441 90,213 256,263 (5,690) (75) - (142,418) 252,735 6,184 258,919 Transactions with non-controlling interests relate to the sale of 0.15% of the outstanding shares of Ege Prol Ticaret ve Sanayi AS while retaining control. The ownership percentage of the Group in Ege Prol Ticaret ve Sanayi AS has subsequently changed from 88.47% to 88.32%. 161 Financial Performance IN € THOUSAND Issued Capital Share premiums Retained earnings Changes in remeasurements of post employment benet obligations Treasury shares Treasury shares held in subsidiaries Currency translation adjustments Total equit y attributable to shareholders of the parent company Non-controlling interests Total As per 31 December 2019 53,925 88,261 200,427 (7,640) (75) (454) (103,783) 230,661 2,443 233,104 Net income / (loss) for the current period 24,242 24,242 1,336 25,578 Other comprehensive income (+) / loss (-) 232 (26,294) (26,063) (1,643) (27,705) Total comprehensive income (+) / loss (-) - - 24,242 232 - - (26,294) (1,821) (307) (2,128) Capital increase 25 49 74 - 74 Own shares purchased 454 454 157 611 Transactions with non-controlling interests 2,953 6,333 9,286 4,626 13,912 Share based payments 712 712 712 Dividends paid - - Transfer (19) (19) 19 - As per 31 December 2020 53,950 88,310 228,334 (7,409) (75) - (123,764) 239,348 6,937 246,284 Transactions with non-controlling interests relate to the sale of 7.41% of the outstanding shares of Ege Prol Ticaret ve Sanayi AS while retaining control. The ownership percentage of the Group in Ege Prol Ticaret ve Sanayi AS has subsequently changed from 95.88% to 88.47%. IN € THOUSAND Issued Capital Share premiums Retained earnings Changes in remeasurements of post employment benet obligations Treasury shares Treasury shares held in subsidiaries Currency translation adjustments Total equit y attributable to shareholders of the parent company Non-controlling interests Total As per 31 December 2020 53,950 88,310 228,334 (7,409) (75) - (123,764) 239,348 6,937 246,284 Net income / (loss) for the current period 33,990 33,990 3,189 37,179 Other comprehensive income (+) / loss (-) 1,718 (18,793) (17,074) (3,651) (20,725) Total comprehensive income (+) / loss (-) - - 33,990 1,718 - - (18,793) 16,916 (462) 16,454 Capital increase 491 1,903 2,395 2,395 Transactions with non-controlling interests 216 138 355 115 470 Share based payments 559 559 559 Dividends paid (6,836) (6,836) (407) (7,243) As per 31 December 202 54,441 90,213 256,263 (5,690) (75) - (142,418) 252,735 6,184 258,919 Transactions with non-controlling interests relate to the sale of 0.15% of the outstanding shares of Ege Prol Ticaret ve Sanayi AS while retaining control. The ownership percentage of the Group in Ege Prol Ticaret ve Sanayi AS has subsequently changed from 88.47% to 88.32%. Annual Report 2021 Annual Report 2021 162 FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER IN € THOUSAND NOTES 2020 2021 Prot (+) / loss (-) 25,578 37,179 Depreciations and impairments 6,7,9,14 39,604 38,553 Net nancial charges 3 15,299 14,597 Income taxes 4 4,927 2,503 Inventory write-o (+ = cost / - = inc) 11 2,866 3,262 Trade AR write-o (+ = cost / - = inc) 12 4,438 (1,937) Movements in provisions (+ = cost / - = inc) (4,046) (1,149) Gain / loss on disposal of (in)tang. FA (+ = cost / - = inc) 3 (2,850) (565) Fair value adjustments in equity - 559 Share of the result of a joint venture 8 3,018 - Gross operating cash ow 88,835 93,002 Decr / (incr) in inventories (17,131) (69,380) Decr / (incr) in trade AR (6,219) (41,669) Incr / (decr) in trade AP 27,174 78,308 Decr / (incr) in other operating assets/liabilities 4,662 (2,646) Income taxes paid (-) / received (+) 4 (2,697) (7,585) Cash ow from operating activities 94,624 50,030 Purchases of (in)tangible FA (-) 6,9,14 (23,543) (43,556) Investment in nancial FA (+) (1) - Proceeds from sale of (in)tangible FA (+) 15,680 961 Proceeds from sale of shares of Group companies (+) 15,390 506 Cash ow from investment activities 7,526 (42,090) Capital increase (+) / decrease (-) - 2,395 Dividends paid (-) / received (+) (143) (7,243) Interest received (+) 2,585 2,826 Interest paid (-) (8,200) (7,621) Net nancial result, excl interest (4,684) (310) New long-term debts 13,091 10,801 Repayment of long-term debts (14,362) (21,140) New short-term debts 15,285 51,644 Repayment of short-term debts (39,757) (60,819) Cash ow from nancing activities (36,185) (29,467) Net increase / (decrease) in cash and cash equivalents 65,965 (21,527) Cash and cash equivalents as per beginning of period 13 52,799 105,623 Impact of exchange rate uctuations (13,033) (11,211) Transfers (108) - Cash and cash equivalents as per end of period 13 105,623 72,885 Deceuninck consolidated statement of cash ows 163 Financial Performance Annual Report 2021 Annual Report 2021 164 1. Signicant accounting principles The consolidated financial statements have been prepared in accordance with the ‘International Financial Reporting Standards’ (IFRS), as endorsed by the European Union. The consolidated financial statements were authorised by the Board on 22 February 2022. The dividend as included in the financial statements is subject to change as this is subject to approval during the General Meeting of Deceuninck NV, which is scheduled to be held on 26 April 2022. Basis of presentation The consolidated financial statements are presented in € thousand, unless noted otherwise. The consolidated financial statements present the financial position on 31 December 2021. They have been prepared prior to the distribution of profits proposed by the parent company at the Annual General Meeting of Shareholders. The consolidated financial statements of the Group contain comparative information with respect to the previous period. Please note that numbers in certain tables in the financial statements may not add up due to rounding. Consolidation principles The consolidated financial statements include the individual financial statements of Deceuninck NV and its subsidiaries (‘the Group’). The Group controls a subsidiary if, and only if, the Group has: • Power over the subsidiary (i.e., existing rights that give it the current ability to direct the relevant activities of the subsidiary); • Exposure, or rights, to variable returns from its involvement with the subsidiary; • The ability to use its power over the subsidiary to affect its returns. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • The contractual arrangement(s) with the other vote holders of the investee • Rights arising from other contractual arrangements • The Group’s voting rights and potential voting rights The acquisition of subsidiaries is accounted for under the acquisition method. The annual reporting date of subsidiaries is identical to that of the parent company, apart from Deceuninck Profiles India Private Limited. For consolidation purposes, the financials over the 12-month period ending 31 December 2021 of Deceuninck Profiles India Private Limited have been used. The same valuation principles apply to their financial statements. The Group has an interest of 28.77 % in Solardec CV which is fully consolidated, as the company has two directors that are both appointed by Deceuninck NV and the Group therefore holds the majority on the Board of the company. Furthermore, the Group has an interest of 48.95 % in Asia Profile Holding Co. Ltd which is fully Notes 165 Financial Performance consolidated as the other shareholder, holding 51.05 % of the shares, has signed a proxy which allows the Group to exercise the voting rights of the remaining 51.05 % of the shares and this allows the Group to decide upon the major operational decisions for the company. The Group acquired 50% interest in So Easy Belgium BV. This has been classified as joint venture. The Group’s interest in this joint venture is accounted for using the equity method in the consolidated financial statements. Use of estimates and assumptions In order to produce the annual financial statements in accordance with the IFRS standards, management has to use a number of estimates and assumptions that have an impact on the amounts disclosed in the financial statements. The estimates made on the reporting date reflect the existing conditions on this date, such as market prices, interest rates and foreign exchange rates. Even though management makes these assumptions and estimates based on its best possible knowledge of current business transactions, and of the transactions the Group may undertake, the actual results can vary in relation to these estimates. USE OF ASSUMPTIONS In accordance with the Group’s accounting principles, the following assumption has been made: Provision for early retirement The Company considers it has a constructive obligation in Belgium in relation to the early retirement plan and the relating collective labour agreement because it will be renewed on an ongoing basis. For this reason, the Group is accounting for this plan as a post-employment defined benefit plan. Restructuring provisions The Group recognizes provisions for restructuring programs when the criteria for recognition under IAS 37 are met. Provision amounts are determined based on individual payroll data and assumptions of the number of employees and workers that will leave the Group. USE OF ESTIMATES The most important estimates that are likely to have a significant influence on the net carrying value of assets and liabilities for the coming year due to the uncertainty surrounding these estimates relate to: Impairment of goodwill Goodwill relating to business combinations is assessed on an annual basis by means of an impairment test. This test requires an estimate of the value in use of cash- generating units, to which the goodwill is allocated. The estimation of the value in use requires an estimate of expected future cash flows of the cash-generating units and the choice of an appropriate discount rate in order to determine the present value of these cash flows. For more details on this subject, please see Note 7. Employee benefits – Post-employment benefit plans The costs of the granted pension schemes and the current value of the pension obligations are determined on the basis of an actuarial calculation. The actuarial calculation uses assumptions with regard to the discount Annual Report 2021 Annual Report 2021 166 rate, future increases in compensation, mortality tables and future increases in pensions. All the assumptions are reassessed on the reporting date. Further details with regard to these assumptions are disclosed in Note 16. Employee benefits – Share-based payments The Group values the cost of the stock option plans granted to employees on the basis of the fair value of the instruments, on the date they are granted. The estimation of the fair value of compensations in shares requires an adapted valuation model, which depends on the condition under which the grant is made. The valuation model also requires adapted input data, such as the expected life of the option, the volatility of the share price and the dividend yield. The assumptions and the valuation model used for the estimation of the actual value of compensations in shares are explained in Note 21. Deferred tax assets Deferred tax assets related to tax losses carry forward are only recognized if it is probable that sufficient taxable profits will be generated in the future. Significant estimates are required from management in order to determine the amount of the deferred tax assets, based on the time period and the level of future taxable profits. More details on this subject are provided in section Income Taxes and in Note 4. Loss allowance In estimating the loss allowance the Group makes significant estimates by assessing the amount of the expected cash flow that it will recuperate which included, for example, credit insurance limits and guarantees received. Detailed guidance on the effective credit loss model for trade receivables is included in the accounting policies under section Financial instruments - Trade receivables. Foreign currencies The Group applies a monthly average exchange rate to convert the income statements of the subsidiaries outside the Eurozone. Foreign currencies TRANSACTIONS IN FOREIGN CURRENCIES Transactions in foreign currencies are accounted for using the end of month exchange rate (exchange rate on the last working day of the preceding month) or the exchange rate on the date the transaction occurs or a periodic monthly average exchange rate, which approximates the exchange rates applicable on the transaction date. Monetary assets and liabilities in foreign currencies are converted using the exchange rate on the balance sheet date. All profits and losses resulting from conversion of monetary assets and liabilities in foreign currencies into the local currency of the entity are recognized in the consolidated income statement as Foreign exchange gains / (losses). Non-monetary assets and liabilities are converted into the local currency of the entity using the historic exchange rate. TRANSLATION OF FOREIGN ENTITIES The Group’s reporting currency is the euro. Assets and liabilities from subsidiaries outside the Eurozone are converted to euro on balance sheet date, using the exchange rates applicable on that date. The income statements of these subsidiaries are converted into euro at a periodic monthly average exchange rate, 167 Financial Performance 1 EUR is equal to Closing rate Closing rate Average rate Average rate 2020 2021 2020 2021 AUD 1.5896 1.5615 1.6541 1.5745 BAM 1.9558 1.9558 1.9558 1.9558 BGN 1.9558 1.9558 1.9558 1.9558 BRL 6.3735 6.3101 5.8130 6.3749 CLP 870.6251 964.4132 901.9301 895.2084 COP 4,212.2999 4,508.5663 4,198.5935 4,423.3108 CZK 26.2420 24.8580 26.4372 25.6434 GBP 0.8990 0.8403 0.8887 0.8598 HRK 7.5519 7.5156 7.5382 7.5290 INR 89.6604 84.2290 84.4331 87.4636 LTL 3.4528 3.4528 3.4528 3.4528 MXN 24.4160 23.1438 24.3608 23.9843 PLN 4.5597 4.5969 4.4413 4.5636 RON 4.8683 4.9490 4.8378 4.9208 RSD 117.5779 117.5820 117.5726 117.5705 RUB 90.6824 84.0696 81.9347 87.1393 SEK 10.0343 10.2503 10.4838 10.1444 THB 36.7270 37.6530 35.6641 37.8003 TRY 9.0079 15.0867 7.9133 10.2391 UAH 34.7396 30.9226 31.0166 32.1978 USD 1.2271 1.1326 1.1396 1.1829 which approximates the exchange rates applicable on the transaction date. The components of equity are converted at their historic exchange rate. Exchange rate differences, caused by the conversion of equity into euro at the closing rate applicable on the balance sheet date, are disclosed as ‘currency translation adjustments’ under the heading ‘Equity’. Exchange rate differences resulting from the translation of foreign currency intra-group current accounts, loans or trade receivables and payables are recognized in the consolidated income statement as Foreign exchange gains / (losses). Exception to this accounting treatment is when the intra-group loans are considered as part of an entity’s net investment in a foreign operation. Then the exchange difference is recognized in other comprehensive income and accumulated in a separate component of equity until the disposal of the foreign operation. EXCHANGE RATES The following exchange rates were used when preparing the financial statements: Annual Report 2021 Annual Report 2021 168 Intangible fixed assets other than goodwill PATENTS AND LICENSES Expenditure for acquired patents and licenses are capitalized at their cost price and are subsequently amortized over their estimated useful life using the straight- line method, or over the term of the contract, if this should be shorter. The useful life is usually estimated at 3 years. TRADE NAMES Trade names acquired as part of a business combination are measured at fair value at acquisition-date. The subsequent measurement depends on whether the Group assessed the useful lives of the trade names as indefinite or finite. Trade names with indefinite useful lives are not amortised but are tested for impairment annually and when there is an indication that the asset may be impaired. The Group believes that the most acquired and used trade names have indefinite useful lives because they contribute directly to the Group’s cash flows as a result of recognition by the customer of these trade names’ characteristics in the marketplace. Furthermore, these brands serve as the base brands in Turkey, included in the ‘Turkey & Emerging markets’ segment, and this is also defined as their cash-generating unit. RESEARCH AND DEVELOPMENT Research expenditure, incurred with the purpose of acquiring new scientific or technological knowledge, is included in the income statement. The cost of development activities, for which the results are applied in a plan or a design for the production of new or substantially improved products and processes, are capitalized if and only if all the criteria defined in IAS 38 are met. Such capitalized costs include directly attributable costs of creating, producing or making ready for use assets (such as raw materials and direct labour costs) less the accumulated amortization and impairment. The incurred and capitalized costs are allocated to the relevant asset classes by means of a transfer as from the moment that the asset is available for use. SUBSEQUENT EXPENDITURES Expenditures relating to intangible fixed assets, subsequent to their purchase or completion are only capitalized if they increase the future economic benefits specific to the asset they relate to. All other expenditures are considered as costs. Business combinations The Group applies the purchase method of accounting to account for acquisitions of businesses. The cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred and equity instruments issued. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date. The determination of the fair values of the acquired identifiable assets and assumed liabilities is based on various assumptions requiring management judgment. Acquisition-related costs are expensed as incurred. 169 Financial Performance Assets Buildings 40 years Building xtures and furniture 10-20 years External infrastructure 20-40 years Machinery and equipment 8-20 years Small equipment 5 years Screws and cylinders 2 - 6 years Dies and calibrators (tool sets) 5 years Installations 10-25 years Oce equipment 4-10 years Logistics equipment 8 years Furniture 10 years Vehicles 4-5 years Goodwill Goodwill is the positive difference between the cost of the business combination and the share of the Group in the fair value of the acquired identifiable net assets of a subsidiary or associated company at the moment of acquisition. Goodwill is not amortized, but is subject to an annual impairment test. Goodwill is expressed in the functional currency of the acquired company and is converted into euro at the closing exchange rate on the balance sheet date except for the goodwill relating to EgePen (amount: €9.3 million) which is denominated in EUR despite being a Turkish subsidiary. The entity was acquired in 2000. Deceuninck first adopted IFRS in 2002 when the standards allowed an option (IAS 21.33.b, IAS 21 version effective as from 1 January 1995) to consider goodwill as assets of the reporting entity and consider it as non-monetary foreign currency item which is reported using the exchange rate at the date of the transaction. Bargain Purchase If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in the income statement. Tangible fixed assets Tangible fixed assets are measured at historic cost price, less accumulated depreciation and impairment. Historic cost is the initial purchase price plus any other directly attributable acquisition costs (such as non-recoverable taxes and transportation costs). The cost price of fixed assets produced by the company itself (such as tool sets) includes the cost price of materials, direct labour costs and a proportion of production related overhead costs. Subsequent expenditure is only capitalized, if it increases the future economic benefits of the fixed assets it relates to. Repair and maintenance costs, which do not increase future economic benefits, are expensed as incurred. The expected economic useful life is determined as follows: Annual Report 2021 Annual Report 2021 170 Depreciation is calculated using the straight-line method, starting from the first date of use over the entire duration of their expected useful life. Land, which is deemed to have an infinite useful life, is not depreciated. Non-current assets held for sale Assets held for sale relate to assets or groups of assets that are available for immediate sale in its present condition and the sale is highly probable. These assets are valued at the lower of carrying value or fair value less costs to sell. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the consolidated balance sheet. The same valuation principle applies for business units held for sale. Investment in joint ventures A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in its joint venture are accounted for using the equity method. Under the equity method, the investment in a joint venture is initially recognized at cost, which includes acquisition related expenses. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is not tested for impairment separately. For determining the goodwill, the Group elected to apply a 12-month measurement period similar to business combinations in case it is unable to finalise the process in the year of acquisition. The statement of profit or loss reflects the Group’s share of the results of the joint venture. Any change in OCI of the joint ventures is presented as part of the Group’s OCI. In addition, when there has been a change recognized directly in the equity of the joint venture, the Group recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture. As the joint venture is considered as an integral vehicle through which the Group conducts its operations and its strategy, the aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss inside operating profit and represents profit or loss after tax and non- controlling interests in the joint venture. Considering the relevant considerations that there are no contractual or 171 Financial Performance constructive obligations covering for unlimited losses, the recognition of the Group’s share of the results of the joint venture is limited to the extent of original recognized amount of the investment. All subsequent Group’s shares of the profits are not recognized by the Group until the historically non-recognized Group’s share of the results of the joint venture are covered. The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and it carrying value, and then recognizes the loss within ‘Share of the result of a joint venture’ in the consolidated income statement. Upon loss of the joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognized in profit or loss. Leasing The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. i) Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right- of use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. The Group elected to present the right-of-use assets as a separate asset classes of the Tangible fixed assets and provide the relevant disclosures in the notes. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. Annual Report 2021 Annual Report 2021 172 The right-of-use assets are also subject to impairment. ii) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. The Group presents the lease liabilities on the line items current and non-current interest-bearing loans. iii) Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term. iv) General lease terms and Subleases The Group has lease contracts for various items of buildings, vehicles, machines and other equipment used in its operations. Leases of buildings and machinery generally have lease terms between 2 and 5 years and a contract with a term of 10 years, while motor vehicles and other equipment generally have lease terms between 2 and 4 years. The Group’s obligations under its leases are secured by the lessor’s title to the leased assets. Generally, the Group is restricted from assigning and subleasing the leased assets and some contracts require the Group to maintain certain financial ratios. v) Extension and termination options The Group has several lease contracts that include 173 Financial Performance extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised. Most of the extension and termination options are related to lease contracts for cars and have a limited value due to the shorter lease periods, lower lease payments and due to the fact that the Group generally replaces the ending contract with a new asset. Financial instruments CRITERIA RELATING TO THE INITIAL RECOGNITION OR DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES Financial instruments are recognized initially when the Group becomes party to the contractual provisions of the instrument. Purchases and sales of financial assets are recognized on the settlement date. Financial assets (or parts thereof) are derecognized, when the Group’s rights to receive cash flows from the asset have expired or the Group has transferred its rights to receive cash flows from the asset or has retained the right to receive the cash flows but assumed to pay those cash flows in a pass-through arrangement to another recipient. Financial liabilities (or parts thereof) are derecognized, if the obligation stipulated in the contract is withdrawn, cancelled or expired. CRITERIA FOR OFFSETTING FINANCIAL ASSETS AND LIABILITIES A financial asset and a financial liability are offset and the net amount is presented on the balance sheet, if there is a legally enforceable right to offset the recognized amounts, and if there is an intention to settle the liability and simultaneously realize the asset or to settle the liability on a net basis. CRITERIA FOR CLASSIFYING FINANCIAL ASSETS Financial assets are classified, at initial recognition, as subsequently measured at amortised cost (AC), fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVPL). The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15. In order for a financial asset to be classified and measured at AC or FVOCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is Annual Report 2021 Annual Report 2021 174 performed at an instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial fixed assets The Group presents under this caption the equity instruments for which it has elected to present the change in fair value through other comprehensive income. The election to classify equity instruments into this category is made on an instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as financial income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. Financial assets valued at fair value through the income statement Financial assets valued at fair value through the income statement consist of financial assets that are held for trading purposes or financial assets that are initially recognized at fair value through the income statement. Financial assets held for trading purposes are those acquired with the objective of selling them in a short-term notice. This category also contains derivative financial instruments, which do not fulfil the criteria of IFRS 9 for ‘hedge accounting’. Unrealized profits or losses, resulting from the changes in the fair value of financial assets held for trading, are directly booked in the income statement. Trade receivables Trade receivables meet the condition of AC classification if they are carried at their nominal value and are subject to impairment. The Group recognizes an allowance for expected credit losses (ECLs). ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. For trade receivables, the Group applies a simplified approach in calculating ECLs based on lifetime expected credit losses. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical observed default rates, adjusted for forward looking factors specific to the debtors and the economic environment reflecting the customers’ abilities to pay (based on geographical region, type of customer, delinquency status, credit insurance, other guarantees...). In addition to this general approach, the Group includes individually managed exposures on a case by case basis if not covered by the ECL model, also reflecting additional risk factors into the ECL model if not yet included. Other receivables Checks received from Turkish customers as advance payments which can be discounted or used for payments without any preconditions are presented as other receivables and other liabilities as from the moment they are received from a customer and can be used for other purposes. 175 Financial Performance Cash and cash equivalents Cash and cash equivalents consist mainly of cash in hand, short-term deposits and short-term investments (maturing within three months after their acquisition date) which are readily convertible into cash and which are subject to a limited risk of changes in value. Within the cash flow statement, cash and cash equivalents include bank balances (current and deposit accounts). Any negative cash position is presented as short-term debts with financial institutions (‘bank overdrafts’). Interest bearing loans Interest-bearing loans are initially valued at the fair value of the amounts received minus any costs related to the transaction. After the initial recognition interest- bearing financial debts are valued at their amortized cost. The difference between the amortized cost and the repayment value is expensed over the duration of the loan based on the effective interest rate method or until the debt is no longer held. DERIVATIVE FINANCIAL INSTRUMENTS The Group uses derivative financial instruments (mainly FX forward contracts) in order to limit the risks associated with exchange rate fluctuations. The Group’s policy prohibits the use of these instruments for speculative purposes. Derivative financial instruments are classified as either ‘fair value’ hedges, if these instruments hedge changes in the fair value of recognized assets and liabilities, or as ‘cash flow’ hedges, if they cover cash flow variations associated with a specific risk in relation to a recognized asset or liability or an expected highly probable transaction. For ‘fair value’ hedges, profits or losses resulting from the revaluation of ‘fair value’ hedging instruments are directly recorded through the income statement. Gains or losses on the hedged position lead to an adjustment of the book value of the hedged position and should be recorded through the income statement. If the adjustment is associated with the book value of an interest-bearing financial debt, it is amortized through profit or loss until it is entirely amortized upon maturity. Financial instruments, not meeting the special requirements for recognition as a hedging transaction, are valued at their fair value, and any profit or loss resulting from a change in the fair value of the instrument is directly recognized in the income statement. Inventories Inventories are valued at the lower of cost price or net realizable value. The net realizable value is defined as the estimated selling price under normal operating conditions net of any estimated costs for handling and selling the product. Costs incurred in bringing each product to its current location and conditions are recorded as follows: • Raw materials and consumables – purchase price, based on the FIFO principle; • Finished goods and work in process – direct material and labour costs, plus a part of the general production costs, based on normal production capacity and on the FIFO principle; • Trade goods – purchase price, based on the FIFO principle. Annual Report 2021 Annual Report 2021 176 Treasury shares The amount paid, including any directly attributable expenses, for treasury shares acquired by the company is deducted from equity. Impairments The Group’s assets, excluding inventories and deferred tax assets, are assessed for impairment indicators at each balance sheet date except for goodwill and intangible assets with indefinite useful lives for which impairment is mandatory on annual basis. If impairment indicators are present, the recoverable amount of the asset is estimated. An impairment is recognized, if the carrying value of an asset, or that of the cash-generating unit to which it belongs, is higher than its recoverable amount. Impairments are recorded in the income statement. The recoverable amount of other than financial assets is the higher of their fair value less cost to sell or its value in use of the corresponding assets. In order to determine the value in use, the net present value of expected future cash flows is calculated using a pre-tax discount rate, which reflects both current market rates and the asset’s specific inherent risks. When an asset does not generate cash flows, that are largely independent of the other assets, the recoverable amount of the cash-generating unit to which this asset belongs, is determined. Impairments relating to goodwill are not reversed. Impairments of other assets are reversed, if a change takes place in the estimates used to determine the recoverable amount. An increase in the carrying value of an asset, resulting from the reversal of an impairment, cannot be higher than the carrying value (after depreciation) that would have been obtained, if no impairments had been recorded for this asset in previous years. Provisions Provisions are accounted for whenever the Group has to settle a legal or constructive obligation resulting from a past event, when it is probable that a cash outflow will be required to settle these obligations, and to the extent that these can be reliably estimated. When the Group expects that all or part of the expenditure, which is required to settle legal obligations, will be reimbursed by another party, the amount to be reimbursed will only be recognized as an asset if it is virtually certain that they will be effectively collected. A warranty provision is established for all products under warranty, based on historical data relating to repairs and returns of goods. Employee benefits PENSIONS The Group participates primarily in defined contribution plans, and has defined benefit plans in Belgium, Germany and Turkey. The funds of these plans consist of employer and employee contributions. The Group treats the employer and employee contributions for the defined contribution plans as expenses for the year in which they were made, except for Belgian defined contribution plans which are accounted for as defined benefit plans. In Belgium, the Group also accounts for its early retirement plan and the provision covers the 177 Financial Performance employees for which there exists a plan and expected employees to retire by an early retirement scheme the next coming four years based on the collective labor agreement. For defined benefit plans, the pension obligation is estimated by using the projected unit credit method. Remeasurements, comprising of actuarial gains and losses and the return on plan assets (excluding net interest), are recognized immediately in the consolidated balance sheet with a corresponding debit or credit through other comprehensive income (OCI) in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods. Past service costs are recognized in profit or loss on the earlier of: Past service costs are recognized in profit or loss on the earlier of: • the date of the plan amendment or curtailment, and • the date that the Group recognises restructuring- related costs Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognizes the service costs, comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements, in the financial statement lines in the Consolidated Income Statement based on the function and activities of the related personnel. If the related personnel are no longer active within the Group, the cost is recognized in the section Other under Other operating costs. Net interest expense or income is included in the Consolidated Income Statement as financial result. Where applicable, the current service cost is considered for the inventory valuation. SHARE-BASED PAYMENTS Various stock option, warrant programs and performance share plans enable the staff members, senior management members and members of the Executive Management to acquire company shares. The exercise price for options or warrants is equal to the lowest of (i) the average price of the share on the stock exchange during the 30-day period preceding the offer, and (ii) the latest closing price preceding the day of the offer. When such plans are exercised they are exchanged for own shares or capital is increased by the amounts received or the exercise price. The cost of share-based payment transactions is valued at fair value on the grant date. The fair value is determined by an expert, using a binominal tree structure. The cost of share-based payment transactions and at the same time as the corresponding increase in equity, is recognized over the vesting period. If the conditions of equity-settled share-based payment transactions are modified, the minimal cost equals the cost as if the conditions had not been changed. An additional cost is recognized for any modification which increases the fair value of share-based payment transaction or includes a benefit for the employee as of the date of modification (IFRS 2.28). When a share-based payment is cancelled, this is considered as a compensation that was granted on the date of cancellation and the relating unamortized cost is immediately recognized. However, if a new share-based payment is granted as a replacement for the cancelled compensation and if this is recorded as a replacement compensation on the grant date, then the cancelled and the new compensations are treated as a modification Annual Report 2021 Annual Report 2021 178 of the original share-based payment transaction, as described in the preceding paragraph. BONUSES Contractual bonuses are granted based on planned key financial objectives and personal performances. The estimated amount of the bonus is recognized as a cost, based on an estimate as of the balance sheet date. Sales The Group adopted IFRS 15 using the modified retrospective method of adoption. The Group is in the business of delivering window and door systems, building products and other goods to customers. As part of its commercial relationship, the Group typically grants payment term between 15-120 days but offers under certain conditions discounts for prompt payment. The payment terms differ substantially between the regions in which the Group operates. SALE OF GOODS The Group’s contracts with customers for the sale of goods include one performance obligation. The Group has concluded that revenue from sale of goods should be recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the product. (i) Consideration paid The consideration paid or payable by the Group represents incentives given by the entity to attract the customer to purchase, or continue purchasing, its goods or services. This may include considerations paid to customers to compensate for investments made to adjust IT systems or production processes to be able to use our products in their production facilities. The consideration paid or payable is accounted for as a reduction of revenue for the amount in excess of the fair value of the distinct good or service received from the customer. The recognition of the reduction of revenue is done when (or as) the later of either of the following events occurs: • Recognition of revenue for the transfer for the related goods or services; • Payment or promise to pay the consideration (even if the payment is conditional on a future event). A diversity in practice exists today for this area. The Transition Resource Group for Revenue Recognition has issued a staff paper of the FASB on this topic: Payments to Customer. There is no consensus reached by the Task Force on this issue, consequently no explicit GAAP exists for the accounting for upfront payments to customers today. Accordingly, companies should evaluate the facts and circumstances of the nature of the payment and apply professional judgement to determine the accounting method. When the contract does not include contractual committed future volumes and there are no signed sales orders at the time the payment is made, we conclude that there is no current revenue contract with the customer at the moment of the payment, consequently the entire upfront payment will be recognized in the income statement when the payment is made. 179 Financial Performance ii) Cash discounts given and received The Group recognizes the cash discounts given to customers as a deduction on revenue. Similarly, the cash discounts received from the suppliers are deducted from the costs. iii) Warranty obligations The Group typically provides warranties for general repairs of defects that existed at the time of sale. These assurance-type warranties are accounted for as warranty provisions as they do not represent a separate performance obligation of the Group. Government grants Government grants are recognized at their fair value, when there is reasonable assurance that they will be received and that the Group will fulfil all of the conditions attached to them. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income. Income taxes Income taxes include current and deferred taxes. Taxes are recognized in the income statement, unless they are associated with items that are booked immediately to equity or other comprehensive income. In that case, the corresponding tax is recognized directly against equity or other comprehensive income. Current taxes include the expected amount payable on taxable earnings for the period, along with adjustments of fiscal liabilities for previous years. A taxable earnings calculation for the year is based on the tax rates applicable on the reporting date. Deferred taxes are calculated in accordance with the liability method, for all temporary differences between the tax base of assets and liabilities and their carrying amount for financial reporting purposes. The calculation is based on rates of taxation for which the legislative process has been considered as enacted or substantively enacted on the reporting date. Under this method, the Group also has to calculate deferred taxes on the difference between the fair value of the net assets acquired and their tax base as a result of a new acquisition. Deferred tax assets are only recognized if it is probable that sufficient (i) taxable profits will be generated in the future in order to use the tax benefit or the tax losses or (ii) taxable temporary difference will be available to use those deferred tax assets. Two elements are considered to assess the likelihood of future taxable profits: 1. the profitability in the past, at least two consecutive years of profitability is needed and 2. The expected profitability of the next five years according to the detailed budget of next year and the higher-level business plan of the following four years. The recoverability of deferred income tax assets on tax losses carried forward and other tax credits is assessed including a prudency factor reflecting forecast uncertainties. The carrying amount of a deferred tax asset is reduced, when it becomes unlikely that the relating tax benefit will be realized. Financial income/charges Interest income includes interest earned on bank deposits or received from customers as compensation for extended payment terms, and interest charges include interest due on loans contracted by the Group. Annual Report 2021 Annual Report 2021 180 Recorded interest is based on the ‘effective interest’ method. Costs related to derecognition of accounts receivable consist of incurred factoring fees. Other financial income (costs) include recorded gains or losses due to a revaluation of the fair value of financial derivatives, which are considered as ‘fair value’ hedging instruments if the hedged risks are of a financial nature, or if financial instruments do not meet the special ‘hedge accounting’ requirements. Non-GAAP measures 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. EBITDA is defined as operating profit / (loss) adjusted for depreciations / amortizations and impairment of fixed assets. Adjusted EBITDA is defined as operating profit / (loss) adjusted for (i) depreciations / amortizations and impairment of fixed assets, (ii) integration & restructuring expenses, (iii) gains & losses on disposal of consolidated entities, (iv) gains & losses on asset disposals, (v) impairment of goodwill and impairment of assets resulting from goodwill allocation. EBIT is defined as Earnings before interest and taxes (= operational result). EBT is defined as Earnings before taxes. EPS (non-diluted) are the non-diluted earnings per share and is defined as Earnings attributable to ordinary shareholders over the weighted average number of ordinary shares. EPS (diluted) are the diluted earnings per share and is defined as Earnings attributable to ordinary shareholders over the sum of weighted average number of ordinary shares and the weighted average number of ordinary shares which would be issued upon conversion into ordinary shares of all exercisable warrants leading to dilution. Net debt is defined as the sum of interest-bearing borrowings current and non-current minus cash and cash equivalents. Working capital is calculated as the sum of trade receivables and inventories minus trade payables. Capital employed (CE) is defined as the sum of non- current assets and working capital. Leverage is defined as the ratio of Net debt to Adjusted EBITDA. 181 Financial Performance Changes in accounting policies and disclosures The entity applied the same IFRSs as those adopted in the previous years, except for the new IFRSs and interpretations the entity adopted as of 1st January 2021. New and amended standards and interpretations The following amendments to standards are mandatory for the first time for the financial year beginning 1 January 2021, and have been endorsed by the European Union, but do not have a significant impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. • Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9; • Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16); • Amendment to IFRS 16 Leases COVID-19-Related Rent Concessions The following standard is mandatory since the financial year beginning 1 January 2016 (however, not yet subjected to EU endorsement). The European Commission has decided not to launch the endorsement process of this interim standard but to wait for the final standard: • IFRS 14, ‘Regulatory deferral accounts’, effective 1 January 2016. The following new amendments have been issued, are not mandatory for the first time for the financial year beginning 1 January 2021, but have been endorsed by the European Union: • Amendment to IFRS 16 Leases COVID 19-Related Rent Concessions beyond 30 June 2021 • Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets as well as Annual Improvements? Standards issued, but not yet effective The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards and interpretations, if applicable, when these become effective. • Amendments to IAS 1, Classification of liabilities as current or non-current, effective 1 January 2023; • IFRS 17 Insurance Contracts, effective 1 January 2023; • Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction, effective 1 January 2023; • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies, effective 1 January 2023; • Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates, effective 1 January 2023; • Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information. Annual Report 2021 Annual Report 2021 182 2. Segment information An operating segment is a separate component of the Group (a) that engages in business activities from which it may earn revenues and incur expenses, (b) for which discrete financial information is available, and (c) its results are regularly reviewed by the Chief Operating Decision Maker (CODM) in order to decide how to allocate resources and in assessing performance. Three segments have been defined based on the location of legal entities. They include the following entities: 1. Europe: Benelux, Bosnia, Bulgaria, Croatia, Czech Republic, France, Italy, Germany, Poland, Romania, Russia, Spain and the United Kingdom; 3. North America: Canada & the United States; 4. Turkey & Emerging Markets: Australia, Brazil, Chile, Colombia, India, Mexico, Thailand and Turkey. There are no segments aggregated in order to establish the above segments. Transfer prices between the operational segments are based on an ‘at arm’s length basis’ equal to transactions with third parties. The accounting policies for the operational segments are equal to these of the consolidated financial statements. The Group identified the Executive Management as its Chief Operating Decision Maker. The segments have been defined based on the information provided to the Executive Management. The Executive Management monitors the performance of its operational segments based on sales and adjusted EBITDA per segment, and make decisions about resource allocation on this geographical segmentation basis. Segment information provided to the CODM includes the results, assets and liabilities that can be attributed directly to those segments, as stated in tables further below. NORTH AMERICA Canada and the United States MX BR CH CO US WEST US EAST 183 Financial Performance EUROPE Benelux, Bosnia, Bulgaria, Croatia, Czech Republic, France, Germany, Italy, Poland, Romania, Russia, Spain and the United Kingdom TURKEY & EMERGING MARKETS Australia, Brazil, Chile, Colombia, India, Mexico, Thailand and Turkey RU TR AU IN TH IT CR BG BH BEN FR SP UK PL D RO Annual Report 2021 Annual Report 2021 184 FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER IN € THOUSAND Europe North-America Turkey & Emerging Markets Intersegment Eliminations Consolidated 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 External Sales 317,267 411,396 159,641 183,160 165,252 243,542 - - 642,159 838,097 Intercompany Sales 750 4,763 627 1,729 8,313 17,647 (9,659) (24,137) 29 2 Total sales 318,017 416,159 160,267 184,889 173,565 261,189 (9,660) (24,137) 642,189 838,099 EBITDA 33,130 34,931 20,258 10,919 32,515 47,613 (411) (631) 85,491 92,832 Adjusted EBITDA 33,177 39,838 20,764 10,919 32,515 47,613 (411) (631) 86,045 97,739 Adj EBTIDA items (47) (4,907) (506) - - - - - (553) (4,907) Financial Result (3,781) (1,267) (2,229) (1,189) (9,288) (8,828) - (3,313) (15,299) (14,597) Taxes - Current & Deferred (108) 4,360 (1,731) 724 (3,043) (7,611) (44) 24 (4,927) (2,503) Depreciations and Impairments 22,613 21,225 10,093 11,494 7,635 6,381 (737) (547) 39,604 38,553 Capital expenditures (Capex) (10,725) (15,691) (9,828) (10,549) (3,562) (18,220) 571 903 (23,543) (43,556) Reconciliation of total segment assets and total Group assets: The difference between the adjusted EBITDA and EBITDA of € 4.9 million includes the following non-recurring income and expenses as recognized in other operating result: • Costs related to the one-off product platform migration € (4.7) million in Europe; • One-off restructuring costs in Europe € (0.2) million * Out of which € 102.3 relating to Belgium * Out of which € 167.2 relating to Belgium IN € THOUSAND Consolidated 31 DEC 2020 31 DEC 2021 Europe 269,964 314,433 North America 95,986 109,656 Turkey & Emerging Markets 151,045 191,330 Intersegment assets 516,995 615,419 Cash and cash equivalents 105,623 72,885 Intersegment eliminations (23,245) (13,214) Total Group Assets 599,373 675,089 185 Financial Performance FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER IN € THOUSAND Europe North-America Turkey & Emerging Markets Intersegment Eliminations Consolidated 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 External Sales 317,267 411,396 159,641 183,160 165,252 243,542 - - 642,159 838,097 Intercompany Sales 750 4,763 627 1,729 8,313 17,647 (9,659) (24,137) 29 2 Total sales 318,017 416,159 160,267 184,889 173,565 261,189 (9,660) (24,137) 642,189 838,099 EBITDA 33,130 34,931 20,258 10,919 32,515 47,613 (411) (631) 85,491 92,832 Adjusted EBITDA 33,177 39,838 20,764 10,919 32,515 47,613 (411) (631) 86,045 97,739 Adj EBTIDA items (47) (4,907) (506) - - - - - (553) (4,907) Financial Result (3,781) (1,267) (2,229) (1,189) (9,288) (8,828) - (3,313) (15,299) (14,597) Taxes - Current & Deferred (108) 4,360 (1,731) 724 (3,043) (7,611) (44) 24 (4,927) (2,503) Depreciations and Impairments 22,613 21,225 10,093 11,494 7,635 6,381 (737) (547) 39,604 38,553 Capital expenditures (Capex) (10,725) (15,691) (9,828) (10,549) (3,562) (18,220) 571 903 (23,543) (43,556) Reconciliation of total segment liabilities and total Group liabilities: IN € THOUSAND Consolidated 31 DEC 2020 31 DEC 2021 Europe 97,984 109,509 North America 34,371 41,002 Turkey & Emerging Markets 96,778 149,149 Intersegment liabilities 229,133 299,660 Equity including non-controlling interests 246,278 258,919 Long-term interest-bearing loans 137,022 13,002 Other long-term liabilities 676 580 Current portion of interest bearing loans 12,711 119,149 Intersegment eliminations (26,446) (16,223) Total group liabilities 599,373 675,089 Annual Report 2021 Annual Report 2021 186 FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER 2020 Europe North-America Turkey & Emerging Markets Consolidated IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % Window & Doors 252,783 79.7% 159,640 100,0% 157,499 95,3% 570,218 88,8% Outdoor Living 38,250 12.1% - 0,0% 97 0,1% 37,950 5,9% Home protection 26,234 8.3% - 0,0% 7,656 4,6% 33,990 5,3% Total 317,267 100.0% 159,640 100.0% 165,252 100.0% 642,159 100.0% FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER 2021 Europe North-America Turkey & Emerging Markets Consolidated IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % Window & Doors 343,598 83.5% 183,160 100,0% 233,605 95,9% 759,902 90,7% Outdoor Living 37,437 9.1% - 0,0% 97 0,0% 37,798 4,5% Home protection 30,361 7.4% - 0,0% 9,839 4,0% 40,396 4,8% Total 411,396 100.0% 183,160 100.0% 243,542 100.0% 838,097 100.0% External sales by product group is presented in the table below (in EUR and in %): There is no significant concentration of sales (>10%) with one or a limited number of customers. 187 Financial Performance FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER 2020 Europe North-America Turkey & Emerging Markets Consolidated IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % Window & Doors 252,783 79.7% 159,640 100,0% 157,499 95,3% 570,218 88,8% Outdoor Living 38,250 12.1% - 0,0% 97 0,1% 37,950 5,9% Home protection 26,234 8.3% - 0,0% 7,656 4,6% 33,990 5,3% Total 317,267 100.0% 159,640 100.0% 165,252 100.0% 642,159 100.0% FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER 2021 Europe North-America Turkey & Emerging Markets Consolidated IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % IN € THOUSAND % Window & Doors 343,598 83.5% 183,160 100,0% 233,605 95,9% 759,902 90,7% Outdoor Living 37,437 9.1% - 0,0% 97 0,0% 37,798 4,5% Home protection 30,361 7.4% - 0,0% 9,839 4,0% 40,396 4,8% Total 411,396 100.0% 183,160 100.0% 243,542 100.0% 838,097 100.0% Annual Report 2021 Annual Report 2021 188 3. Revenues and expenses For a high-level analysis of revenue and costs we refer to the section “2021 results” at the start of these financial statements. INCOME STATEMENT BY NATURE IN € THOUSAND 2020 2021 Sales 642,189 838,099 Material costs (301,261) (456,745) Operating costs (113,382) (132,354) Personnel costs (144,012) (160,399) Depreciation on (in)tangible xed assets (39,136) (37,428) Other net operating result 4,508 3,106 Share of the result of a joint venture (3,018) - Operating prot (EBIT) 45,887 54,278 Costs related to the derecognition of accounts receivable (3,887) (3,545) Interest income (expense) (5,889) (4,862) Foreign exchange gains (losses) (4,515) (5,744) Other nancial income (expense) (1,092) (446) Prot / (loss) before taxes (EBT) 30,505 39,682 Income taxes (4,927) (2,503) Net prot / (loss) 25,578 37,179 189 Financial Performance The increase in operating costs compared to 2020 is mainly driven by higher transport costs, maintenance costs, services and communications, partially offset by lower increase of allowances on doubtful debtors and inventory. The increase of the payroll costs is mainly explained by an increase in gross salaries. OPERATING COSTS IN € THOUSAND 2020 2021 Transport (32,762) (44,722) Maintenance (17,022) (20,576) Services (19,120) (22,277) Energy (14,987) (16,529) Rent (1,890) (2,155) Communication (9,174) (12,400) Local taxes and nes (3,796) (4,442) Travel (2,146) (2,807) Marketing and sales support (1,092) (1,112) Insurance (2,521) (2,565) Loss on the realization of trade debtors (1,227) (878) (Increase) / decrease of allowances on doubtful debtors & inventory (7,304) (1,323) Other (342) (566) Total (113,382) (132,354) PAYROLL COSTS AND OTHER SOCIAL BENEFITS IN € THOUSAND 2020 2021 Wages and salaries (109,127) (121,683) Social security contributions (25,025) (26,880) Contributions to dened contribution plans (5,772) (6,646) Other (4,088) (5,191) Total (144,012) (160,399) Annual Report 2021 Annual Report 2021 190 The number of FTE’s remained broadly stable in 2021. HEADCOUNT TOTAL FULL TIME EQUIVALENTS FTE BY CATEGORY 2020 2021 Blue-collar workers 2,654 2,663 White-collar workers 1,006 1,047 Total 3,660 3,709 The other operating income decreased mainly due to a one-off sale of land lot in Hooglede-Gits, Belgium in 2020 (€ 3,427 thousand) partly offset by an increase in the line Other. The other operating costs remained broadly stable compared to 2020. OTHER OPERATING INCOME IN € THOUSAND 2020 2021 Grants received 2,066 1,850 Decrease of provisions 357 54 Gains on disposal of tangible xed assets 3,675 606 Other 2,612 4,794 Total 8,709 7,305 OTHER OPERATING COSTS IN € THOUSAND 2020 2021 Integration costs (1,825) (1,713) Impairments (468) (1,125) Loss on disposal of tangible xed assets (191) (41) Result realized on disposal of a sales entity (867) - Other (850) (1,320) Total (4,201) (4,199) 191 Financial Performance INTEREST INCOME / EXPENSE IN € THOUSAND 2020 2021 Interest income 2,605 2,732 Interest expense (8,493) (7,594) Total (5,889) (4,862) COST RELATED TO THE DERECOGNITION OF ACCOUNTS RECEIVABLE IN € THOUSAND 2020 2021 Cost related to the derecognition of accounts receivable (3,887) (3,545) OTHER FINANCIAL GAINS / LOSSES IN € THOUSAND 2020 2021 Other nancial income (expense) (1,092) (446) Foreign exchange gains and losses include the FX gains and losses on monetary balance sheet items in foreign currency as well as the FX gains and losses on hedging transactions. Also, the ‘cost of hedging’, defined as the difference between the spot and forward rate of hedging contracts, is included in the foreign exchange result. The higher total foreign exchange loss is mainly explained by higher hedging costs as a result of higher exposures being hedged and higher interest rates in Turkey. Lower net interest charges are the result of the lower financial debt throughout the year, partially offset by higher interest rates. The lower cost related to the derecognition of accounts receivable is mainly due to the lower use of factoring and other trade finance solutions. Other financial gains and losses mainly include bank charges and the result on the share liquidity program with KBC Securities. The latter resulted in 2021 in a gain, whereas in 2020 the share liquidity program resulted in a loss. FOREIGN EXCHANGE GAINS / LOSSES IN € THOUSAND 2020 2021 Realized foreign exchange gains 2,002 8,300 Realized foreign exchange losses (1,879) (3,875) Unrealized foreign exchange gains 619 4,032 Unrealized foreign exchange losses (5,257) (14,200) Total (4,515) (5,744) Annual Report 2021 Annual Report 2021 192 4. Income taxes INCOME TAXES RECOGNIZED IN THE INCOME STATEMENT IN € THOUSAND 2020 2021 Current income taxes (4,919) (8,809) Relating to current year (5,154) (9,210) Relating to previous years 237 703 Other (1) (301) Deferred income taxes (7) 6,307 Relating to temporary dierences - current year 399 255 Relating to temporary dierences - adjustment previous years (114) (147) Recognition of deferred income tax asset on tax losses of current year 68 1,559 Utilization of deferred income tax asset on tax losses of previous years (3,119) (2,737) Recognition of deferred income tax asset on tax losses of previous years - (25) Impairment (-)/reversal of impairment (+) of deferred income tax asset on tax losses of previous years 2,842 6,850 Recognition of deferred tax assets on tax incentives 1,971 2,071 Utilization of deferred tax assets on tax incentives (2,106) (1,519) Other 53 - Income taxes recognized in the income statement (4,927) (2,503) The breakdown of the income tax charge for 2020 and 2021 is presented as follows: 193 Financial Performance RECONCILIATION BETWEEN EARNINGS BEFORE TAX EBT IFRS AND INCOME TAXES IN € THOUSAND 2020 2021 Earnings before tax - IFRS 30,505 39,682 Statutory tax rate of the parent company 25% 25% Income taxes calculated at the statutory tax rate of the parent company (7,626) (9,920) Tax eect of: Dierence between local tax rate and statutory tax rate of the parent company 632 (184) Non-deductible items (1,065) (1,728) Government grants and other exempted income 364 335 Use of tax losses carried forward for which no deferred income tax asset has been recognized 11 257 Current income taxes relating to previous years 59 705 Deferred taxes on temporary dierences relating to previous years - adjustments (98) (195) Non-recognition of deferred income taxes on current years losses and deductable temporary (1,429) (144) (De)recognition of deferred income tax assets on tax losses of previous years 2,697 6,723 (De)recognition of deferred income tax assets on tax incentives 1,971 1,895 Other (443) (246) Income taxes recognized in the income statement (4,927) (2,503) Eective rate rate 16.15% 6.31% The following table provides a reconciliation between the Earning before tax and the income taxes as per 31 December 2020 and 2021: Annual Report 2021 Annual Report 2021 194 In 2021, the Group recognized deferred income tax assets for tax losses carried forward and tax incentives, for which utilization depends on future taxable profits. The total amount of this deferred income tax asset amounted to € 23,663 thousand at the end of 2021 (end 2020: € 17,435 thousand). The outlook provides adequate assurance that the company will generate sufficient taxable profits in the near future in order to utilize the deferred income tax assets recognized. As per 31 December 2021, the Group did not recognize deferred income tax assets on a total amount of tax credits of € 63,082 thousand (2020: € 90,218 thousand), mainly in Belgium, the United Kingdom and Russia. DEFERRED TAX MOVEMENT SCHEDULE IN € THOUSAND 2020 Charged/ credit to PL Charged / credited to equity Transfers Translation adjustments Total 2021 DEFERRED INCOME TAX ASSETS BY TYPE OF TEMPORARY DIFFERENCE: Tax losses carried forward & tax incentives 17,435 6,516 - - (288) 23,663 Tangible xed assets 198 648 - - (6) 840 Provisions 4,545 1,309 (640) 532 24 5,770 Inventories 1,065 1,080 - - (291) 1,854 Interest bearing loans 10 8 - - - 19 Other assets 4,052 (1,047) - (532) (365) 2,109 Deferred income tax assets 27,305 8,515 (640) - (926) 34,254 DEFERRED INCOME TAX LIABILITIES BY TYPE OF TEMPORARY DIFFERENCE: Tax losses carried forward & tax incentives - - - - - - Tangible xed assets 23,192 780 - - 499 24,471 Provisions 12 (12) - - - - Inventories 698 (358) - - (302) 38 Interest bearing loans - 42 - - (42) - Other assets 18 1,755 - - (276) 1,497 Deferred income tax liabilities 23,920 2,208 - - (121) 26,006 Net deferred income taxes 3,386 6,307 (640) - (805) 8,248 195 Financial Performance 5. Earnings per share Basic earnings per share is calculated by dividing the net profit for the year, attributable to ordinary shareholders by the weighted average number of ordinary shares, excluding ordinary shares purchased by the Group and held as treasury shares. This results in a net profit per share of € 0.25. IN € THOUSAND 2020 2021 Earnings attributable to ordinary shareholders 24,242 33,990 Weighted average number of ordinary shares (in thousands) 136,748 137,476 Basic earnings per share (in €) 0.18 0.25 IN € THOUSAND 2020 2021 Earnings attributable to ordinary shareholders 24,242 33,990 Weighted average number of ordinary shares (in thousands) 136,748 137,476 Dilution eect of non-exercised warrants (in thousands) 6,194 6,312 Weighted average number of shares after dilution (in thousands) 142,942 143,789 Basic earnings per share (in €) 0.17 0.24 Diluted earnings per share are calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year increased with the weighted average number of ordinary shares which would be issued upon conversion into ordinary shares of all exercisable warrants leading to dilution. The potential dilution arises from warrants granted to staff members, senior management members and members of the Executive Management. The diluted earnings per share amount to € 0.24 per share. Annual Report 2021 Annual Report 2021 196 6. Intangible xed assets, other than goodwill Amortization of intangible assets other than goodwill are, where applicable, allocated to the cost of inventories and subsequently recognized in cost of goods sold. Based on the use of the intangible assets, amortizations, other than described above, are allocated within the relevant financial statement line items in the consolidated income statement by function. As per 31 December 2021, the intangible assets with indefinite useful lives were tested for impairment, based on the same methodology and assumptions as described in Note 7 – Goodwill. The intangible assets with indefinite useful lives mainly relate to the trade names Winsa and Pimapen (within Turkey & Emerging markets segment). For this kind of assets there is no foreseeable end of the cash-generating period. The net carrying value of these assets is € 645 thousand. The impairment test of these assets is included in the goodwill impairment test for Turkey (see Note 7 – Goodwill) and did not result in the recognition of an impairment on 31 December 2021. 2020 IN € THOUSAND Development Licences IT and similar right Customer value Trade names Total COST At the beginning of this year 1,258 17,970 1,389 4,690 25,307 Additions - 338 - - 338 Disposals - - - - - Transfers - 197 - - 197 Translation adjustments (23) (98) (94) (688) (902) At the end of this year 1,235 18,407 1,296 4,003 24,940 DEPRECIATIONS AND IMPAIRMENTS At the beginning of this year (1,222) (15,936) (1,182) (3,285) (21,625) Additions to depreciations (10) (1,502) (15) (84) (1,611) Additions to impairments - - - - - Disposals - - - - - Transfers - 2 - - 2 Translation adjustments 23 92 67 364 546 At the end of this year (1,210) (17,344) (1,130) (3,004) (22,688) INTANGIBLE FIXED ASSETS Cost 1,235 18,407 1,296 4,003 24,940 Accumulated depreciations and impairments (1,210) (17,344) (1,130) (3,004) (22,688) Net Carrying Value 25 1,063 166 998 2,252 197 Financial Performance 2021 IN € THOUSAND Develop- ment Licences IT and similar right Customer value Trade names Assets under construction Total COST At the beginning of this year 1,235 18,407 1,296 4,003 - 24,940 Additions - 463 - - 36 499 Disposals - (2) - - - (2) Transfers - 333 - - - 333 Translation adjustments 21 5 (106) (345) - (427) At the end of this year 1,255 19,206 1,189 3,657 36 25,343 DEPRECIATIONS AND IMPAIRMENTS At the beginning of this year (1,210) (17,344) (1,130) (3,004) - (22,688) Additions to depreciations (10) (805) (12) (47) - (874) Additions to impairments - - - - - - Disposals - 2 - - - 2 Transfers - 53 - - - 53 Translation adjustments (21) (12) 83 (38) - 13 At the end of this year (1,241) (18,107) (1,058) (3,089) - (23,494) INTANGIBLE FIXED ASSETS Cost 1,255 19,206 1,189 3,657 36 25,343 Accumulated depreciations and impairments (1,241) (18,107) (1,058) (3,089) - (23,494) Net Carrying Value 14 1,099 132 568 36 1,849 Annual Report 2021 Annual Report 2021 198 7. Goodwill IN € THOUSAND 2020 2021 COST At the beginning of 63,423 60,014 Additions - - Disposals - - Transfers - - Translation adjustments (3,409) 3,246 At the end of 60,014 63,260 CASHGENERATING UNIT IN € THOUSAND 2020 2021 Turkey 9,354 9,324 Belgium 1,247 1,247 Net Carrying Value 10,601 10,571 IMPAIRMENTS At the beginning of (52,795) (49,413) Additions - - Disposals - - Transfers - - Translation adjustments 3,382 (3,277) At the end of (49,413) (52,690) GOODWILL Cost 60,014 63,260 Accumulated depreciations and impairments (49,413) (52,690) At the end of 10,601 10,571 The application of IFRS 3 ‘Business combinations’ stipulates that all identifiable assets and liabilities should be recognized at their fair value at the moment of acquisition. All differences between the cost of the business combination and the fair value defined at the time of the acquisition should be attributed to goodwill. The net carrying value of goodwill is allocated as follows: 199 Financial Performance In accordance with IAS 36, goodwill is not amortized, but is subject to an annual impairment test. This test is always performed at year-end or whenever there is an indication of a possible impairment. The test consists of comparing the recoverable amount of each cash-generating unit with it carrying amount. An impairment loss is recognized whenever the recoverable amount is lower than the net book value. The Group carried out the annual impairment test at 31 December 2021, consistent with previous years. This goodwill impairment assessment also did not reveal any impairment issues. Impairment test goodwill Turkey CASH GENERATING UNIT The cash generating unit is Ege Profil, which holds the brands Ege Pen Deceuninck, Winsa and Pimas, following the merger of Ege Profil and Pimas in 2017. DISCOUNT RATE The pre-tax discount rate is based on the risk-free rate of the currency region zone where the activities are deployed and current market assessment of the risks specific to the Group. The pre-tax discount rate was estimated based on the weighted average cost of capital (WACC) and is 26.9% for 2021 (2020: 18.2 %). ASSUMPTIONS FOR 2022-2025 For EBITDA of 2022, management has worked out a target based on detailed plans and actions. For the period 2023-2025 the EBITDA estimate is based on longer term plans, considering reasonable growth levels in line with country specific evolutions of the building industry. For subsequent years a terminal growth rate of 3% is assumed. SENSITIVITY ANALYSIS One scenario with reasonable growth expectations has been worked out with a sufficient headroom under the base case assumptions. There is no need for a detailed sensitivity analysis as no reasonable possible change in a key assumption on which management has based its determination of the cash-generating unit’s recoverable amount would cause the unit’s carrying amount to exceed its recoverable amount. CONCLUSION No need for impairment of goodwill. Impairment test goodwill Belgium CASH GENERATING UNIT The goodwill has been tested at the operating segment ‘Europe’ level because this is the lowest level at which management monitors the related goodwill as reasonable. DISCOUNT RATE The pre-tax discount rate is based on the risk-free rate of the currency region zone where the activities are deployed and current market assessment of the risks specific to the Group. The pre-tax discount rate was estimated based on the weighted average cost of capital (WACC) and is 9.2% for 2021 (2020: 6.0%). ASSUMPTIONS FOR 2022-2025 For EBITDA of 2022, management has worked out a target based on detailed plans and actions. For the period 2023-2025 the EBITDA estimate is based on longer term plans, considering reasonable growth levels in line with country specific evolutions of the building industry. For subsequent years a terminal growth rate of 2% is assumed. SENSITIVITY ANALYSIS One scenario with reasonable growth expectations has been worked out with a sufficient headroom under the base case assumptions. There is no need for a detailed sensitivity analysis as no reasonable possible change in a key assumption on which management has based its determination of the cash-generating unit’s recoverable amount would cause the unit’s carrying amount to exceed its recoverable amount. Annual Report 2021 Annual Report 2021 200 CONCLUSION No need for impairment of goodwill. 8. Interest in a joint venture The Group acquired a 50% interest in So Easy Belgium BV. The investment has been classified as joint venture and is involved in production of aluminium systems for window and doors manufacturing. The Group’s interest in this joint venture is accounted for using the equity method in the consolidated financial statements. Summarized financial information of the joint venture, based on its IFRS financial statements on a 100% basis, and reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below: FOR THE 12 MONTH PERIOD ENDED 31 DECEMBER IN € THOUSAND 2020 2021 Sales 9,311 15,643 Cost of goods sold (7,593) (11,517) Gross prot 1,717 4,126 Marketing, sales and distribution expenses (2,657) (3,055) Administrative and general expenses (2,879) (2,349) Other net operating result (1,920) 523 Operating prot / (loss) after impairment on goodwill (5,738) (755) Financial charges (2,056) (1,206) Financial income 216 170 Prot / (loss) before taxes (EBT) (7,578) (1,791) Income taxes 549 41 Net prot / (loss) (7,029) (1,750) Group's share of prot / (loss) for the year (3,514) (875) IN € THOUSAND 2020 2021 Group's carrying amount of the investment at the beginning of 2,924 - Group's share of prot / (loss) for the year (3,514) (875) Translation adjustments 95 - Non recognized group's share of prot / (loss) for the year 495 875 Group's carrying amount of the investment at the end of - - * The Group has taken into account the relevant considerations that there are no contractual or constructive obligations covering for unlimited losses, the recognition of the Group’s share of the results of the joint venture is limited to the extent of original recognized amount of the investment. All subsequent Group’s share of the profits are not recognized by the Group until the historically non recognized Group’s share of the results of the joint venture are covered. 201 Financial Performance The Group performed a limited purchase price allocation exercise in the first year to determine the fair value of the net assets of the So Easy Group to calculate goodwill which was partly allocated to the existing customer relationships acquired. So Easy Belgium BV cannot distribute its profits without the consent from the two venture partners. IN € THOUSAND 2020 2021 ASSETS Intangible xed assets 1,474 1,004 Tangible xed assets 6,104 5,666 Non-current assets 7,581 6,669 Inventories 2,042 2,355 Trade receivables 1,038 5,077 Other receivables 1,030 3,706 Cash and cash equivalents 381 700 Current assets 4,491 11,837 Total assets 12,072 18,506 EQUITY AND LIABILITIES Equity (7,420) (9,100) Interest-bearing loans 12,552 14,249 Deferred tax liabilities 84 50 Non-current liabilities 12,636 14,299 Trade payables 1,501 5,109 Other liabilities 5,355 8,199 Current liabilities 6,856 13,308 Total equity and liabilities 12,072 18,506 IN € THOUSAND 2020 2021 Equity (7,420) (9,100) Goodwill - - Goodwill after purchase price allocation 3,214 3,214 Allocated losses (3,214) (3,214) Non recognized losses (496) (1,336) Group's carrying amount of the investment - - Annual Report 2021 Annual Report 2021 202 9. Tangible xed assets 2020 IN € THOUSAND Land & buildings Machinery & equipment Furniture and vehicles Other tangible xed assets Assets under construction Total COST At the beginning of this year 186,567 500,001 18,367 138 15,215 720,289 Additions 622 10,835 432 - 11,746 23,634 Disposals (14,359) (3,276) (350) - - (17,986) Transfers 13,335 9,370 258 - (14,284) 8,679 Translation adjustments (12,580) (26,717) (778) - (1,632) (41,706) At the end of this year 173,585 490,213 17,928 138 11,046 692,910 DEPRECIATIONS AND IMPAIRMENTS At the beginning of this year (75,472) (360,306) (12,957) (70) - (448,804) Additions to depreciations (4,372) (24,852) (1,105) (11) - (30,339) Additions to impairments (219) (170) (1) - - (390) Disposals 1,815 3,235 354 - - 5,404 Transfers 10 6 17 - - 34 Translation adjustments 2,747 16,122 557 - - 19,426 At the end of this year (75,490) (365,964) (13,134) (81) - (454,670) INTANGIBLE FIXED ASSETS Cost 173,585 490,213 17,928 138 11,046 692,910 Accumulated depreciations and impairments (75,490) (365,964) (13,134) (81) - (454,670) Net Carrying Value 98,094 124,248 4,794 57 11,046 238,240 203 Financial Performance 2021 IN € THOUSAND Land & buildings Machinery & equipment Furniture and vehicles Other tangible xed assets Assets under construction Total COST At the beginning of this year 173,585 490,213 17,928 138 11,046 692,910 Additions 10,727 18,004 1,257 - 12,460 42,448 Disposals - (9,734) (143) - (21) (9,898) Transfers 1,235 11,986 111 - (13,289) 42 Translation adjustments (8,352) (3,992) (704) - (487) (13,535) At the end of this year 177,195 506,477 18,449 138 9,708 711,967 DEPRECIATIONS AND IMPAIRMENTS At the beginning of this year (75,490) (365,964) (13,134) (81) - (454,670) Additions to depreciations (4,460) (24,634) (1,218) (11) - (30,324) Additions to impairments - (1,012) - - - (1,012) Disposals - 9,131 162 - - 9,292 Transfers (11) (341) (7) - - (359) Translation adjustments (332) 1,606 312 - - 1,587 At the end of this year (80,294) (381,214) (13,885) (92) - (475,484) INTANGIBLE FIXED ASSETS Cost 177,195 506,477 18,449 138 9,708 711,967 Accumulated depreciations and impairments (80,294) (381,214) (13,885) (92) - (475,484) Net Carrying Value 96,901 125,263 4,564 47 9,708 236,483 The transfers from assets under construction in both 2020 and 2021 mainly related to finalized investments in machinery, tools and infrastructure works for buildings. The Group has € 9.6 million fixed asset related commitments spread over the next year which are mainly related to machinery and tools. Tangible fixed assets under construction are further broken down in the table below. These are mainly related to tools and machinery. IN € THOUSAND 2020 2021 Land & Buildings 807 348 Machinery & equipment 8,694 7,706 Other 1,545 1,654 Total 11,046 9,708 Annual Report 2021 Annual Report 2021 204 In 2021 the Group has recognized impairments on tangible fixed assets for € 1,012 thousand (2020: € 390 thousand). These impairments mainly relate to tools and have been included in other operating costs. The right-of-use assets are further detailed in Note 20. During 2021 a net amount of € 3,262 thousand was recorded as an increase in the allowance related to the write-down on inventory (in 2020: € 2,866 thousand increase). These costs are included in Marketing, sales and distribution expenses. The cost of inventories recognized as cost of goods sold during 2021 amounted to € 608,440 The other receivables consist mainly of a long-term receivable towards So Easy Belgium BV. The table below shows an overview of transfers between intangible fixed assets, tangible fixed assets, assets held for sale and right-of use assets. The transfers in 2020 mainly related to the execution of the purchase option of leased real estate in Fernley (USA). thousand (2020: € 438,639 thousand). No inventories were pledged as security for liabilities (2020: idem). IN € THOUSAND 2020 2021 Intangible xed assets 197 387 Tangible xed assets 8,713 (317) Assets held for sale 7 - Right-of-use assets (8,917) (70) Total - - IN € THOUSAND 2020 2021 Trade receivables 326 - Other receivables 503 1,508 Total 829 1,508 IN € THOUSAND 2020 2021 Raw materials and consumables 32,603 51,503 Finished goods 67,098 100,177 Trade goods 12,666 17,908 Total 112,907 169,589 10. Long-term receivables 11. Inventories 205 Financial Performance Net trade receivables increased € 21,455 thousand due to higher sales, lower factoring levels and a decrease in the impairment allowance, partially offset by translation adjustments resulting mainly from TRY devaluation. Total factoring amounted to € 23.3 million at 31 December 2021 (2020: € 30.8 million). The increase in Other receivables is mainly driven by an increase in Advance checks received, which results from higher sales activities in 2021 vs 2020 in Turkey. Days sales outstanding (DSO) decreased year-on-year from 38 days in 2020 to 37 days in 2021. The factoring and related cost for 2021 amounts to €3,545 thousand (2020: €3,887 thousand). The effect of the factoring agreement is shown as a decrease in trade receivables, as substantially all risks and rewards relating to the trade receivables are transferred to the factor company (non-recourse factoring). The gross trade receivables consist of invoiced sales, an accrual for invoices to be issued, an accrual for credit notes to be received, exchange rate differences and advance payments made. The advance checks mainly consist of checks which have been received from customers in Turkey, to guarantee orders that will be executed in a later stage. This is a IN € THOUSAND 2020 2021 Gross trade receivables 84,149 100,747 Impairments allowance (14,848) (9,991) Trade receivables 69,301 90,756 VAT and other taxes 5,289 7,194 Derivative nancial instruments 520 3,278 Prepaid charges 3,400 3,057 Short-term warranties 269 218 Advance checks received 23,246 52,308 Other 4,435 3,903 Other receivables 37,159 69,959 12. Trade receivables and other receivables common practice in the local construction industry. These checks are considered as advance payments and can be discounted or used for payments without any preconditions. Before finalisation of these orders, the advance checks are presented gross as both ‘other receivables’ and as ‘other liabilities’ as disclosed in Note 19. Upon delivery and invoicing, these checks are netted. The corresponding trade receivable is presented as such and will be settled at the expiry date of the check. An analysis of the trade receivables is provided below, which shows the ageing of both gross outstanding trade receivables and impairment allowances on these trade receivables. Annual Report 2021 Annual Report 2021 206 The impact of COVID-19 on the expected credit loss model (ECL) has been reassessed. Forward-looking assumptions have been adjusted to reflect the increased credit risk resulting from the COVID-19 pandemic. The loss rates per geographical region and type of customers have been reviewed which resulted into an additional expected loss rate between 2 and 5 % for the Europe, North America and Turkey region (2020: between 5 and 20 %). For Emerging markets, the loss rates range between 5 to 15 % (2020: between 25 and 50 %), considering the specific local COVID-19 related impact on the type of customers and projects in which they are active. This results into an additional loss allowance of €2,193 thousand compared to the calculation based on the expected credit loss rates as applied in the ECL model excluding these COVID-19 assumptions (2020: €4,600 thousand). This additional provision reflects anticipated liquidity problems and increase in insolvencies as estimated by external experts 1 and takes into account the Group’s measures to limit the credit losses are described under section 25 Risk management – Credit risk. A sensitivity analysis has been performed and an increase / decrease of 1% of the ranges described above would result into an adjustment to the impairment allowance of + €314 thousand / - €314 thousand. As per 31 December 2021 an amount of €9,991 thousand (2020: €14,848 thousand) is recorded as impairment allowance on trade receivables. The movements during the last 2 financial years are presented in the following table: AGING ANALYSIS OF TRADE RECEIVABLES IN € THOUSAND Total Not due < 30 days 31 - 60 days 61 - 90 days 91 - 120 days > 120 days Gross trade receivables per 31 December 2021 100,747 81,679 5,155 1,379 533 2,368 9,634 Impairments allowance per 31 December 2021 (9,991) (310) (210) (51) (121) (931) (8,367) Net carrying value per 31 December 2021 90,756 81,369 4,945 1,328 411 1,437 1,267 Net carrying value per 31 December 2020 69,301 60,283 5,908 668 511 310 1,621 IMPAIRMENT ALLOWANCE (IN € THOUSAND) 2020 2021 At the beginning of (11,716) (14,848) Additions (6,214) (1,171) Reversals 558 3,258 Utilizations 683 28 Transfers - - Translation adjustments 1,841 2,742 At the end of (14,848) (9,991) 1 Allianz Research October 2021: Insolvencies: We’ll be back / Coface October 2021: Supply chain and inflation headwnds hamper the global recovery 207 Financial Performance Cash and cash equivalents have decreased due to the repayment of loans, higher working capital and capital expenditures. The cash and cash equivalents balances The non-current assets held for sale mainly relate to apartments in Turkey and land held for sale in Poland. All assets are available for immediate sale in its present condition and the sale is highly probable. Necessary As per 31 December 2021, issued capital is set at €54,441 thousand and is composed of 138,041 thousand shares without a nominal value. are mainly concentrated in Belgium, Turkey and the United States. actions have been taken in order to place these assets on the market and sales are expected during 2022. Following the reclassification to non-current assets held for sale, these assets are no longer depreciated. (IN € THOUSAND) 2020 2021 Cash and current bank accounts 66,813 36,489 Short term deposits 38,810 36,396 Total 105,623 72,885 NONCURRENT ASSETS HELD FOR SALE IN € THOUSAND 2020 2021 Cost 1,336 1,436 Accumulated depreciations and impairments (92) (90) Net Carrying Value 1,244 1,346 ISSUED CAPITAL 2020 2021 Amount (in € thousand) 53,950 54,441 Number of shares (without nominal value) 136,795,123 138,040,929 13. Cash and cash equivalents 15. Issued capital and reserves Issued capital 14. Non-current assets held for sale Annual Report 2021 Annual Report 2021 208 SHARE PREMIUMS 2020 2021 Amount (in € thousand) 88,310 90,213 Share premiums Treasury shares TREASURY SHARES 2020 2021 Amount (in € thousand) (84) (75) Number of shares (without nominal value) 69,769 69,769 CURRENCY TRANSLATION ADJUSTMENTS (IN € THOUSAND) 2020 2021 USD (15,410) (8,434) TRY (89,727) (117,298) RUB (11,166) (10,722) PLN (4,284) (4,501) GBP (3,123) (2,071) CZK (3) 668 Other (51) (59) Total (123,764) (142,418) On 31 December 2021, the Group held 69,769 treasury shares to fulfil its commitments with respect to stock option plans. Currency translation adjustments Currency translation adjustments include all exchange rate differences resulting from the conversion of the financial statements of subsidiaries into euro. The total currency translation adjustments amount to €(142,418) thousand at 31 December 2021. An overview of the currency translation adjustments by currency is given in the table above. 209 Financial Performance Defined benefit plans and other post-employment benefits Deceuninck NV (Belgium) For Deceuninck NV, the provisions for post-employment benefits relate to the early retirement obligation and Belgian pension plans. According to IAS19, Belgian defined contribution plans that guarantee a specified return are defined benefit plans, as the employer has to cover the investment risk until the applicable legal minimum rates. The returns guaranteed by the insurance company are in most cases lower, as a result the Group has not fully hedged its risk and a provision needs to be accounted for. Deceuninck NV has a number of defined contribution plans, applicable to different categories of personnel. Those pension plans have been set up by Deceuninck NV and are thus not multi-employer plans. All plans are funded through group insurances with an insurance company. Contributions are made by the employer and employee. Deceuninck NV operates an early retirement plan under the legal framework in Belgium and allows that employees reaching the legal pre-pension age (currently 62 years with certain additional conditions linked to the length of career) can benefit from an early pension and retire before the legal pension age (currently 65 years). The elderly employees accepting such offers will receive a temporary supplement paid by Deceuninck NV until their legal retirement age on top of the unemployment allowance. The provision covers the employees for which there exists a plan and the expected employees to retire by an early retirement scheme the next coming 4 years based on the collective labor agreement. The plan is available for all employees meeting the requirements. It is unfunded and administered by Deceuninck NV. In accordance with IFRS, the actuarial present value of the defined pension benefit plans must be calculated, as that value represents the total of the amounts that can currently be allocated to each participant in the plan. The actuarial present value was calculated based on the mortality tables IA/BE (age correction -1 years) and the following actuarial assumptions: 16. Provisions for post-employment employee benets NET LIABILITY ASSET RECONCILIATION IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Deceuninck NV (Belgium) Ege Prol AS (Turkey) Other Total As per 31 December 2020 16,107 4,726 2,192 438 23,463 Pension cost recognized in income statement 152 1,019 741 144 2,056 Remeasurements recognized in OCI (1,340) (1,083) 16 43 (2,364) Benets paid directly (508) (1,047) (634) (1) (2,190) Transfers - - - - - Translation adjustments - - (910) (64) (974) As per 31 December 2021 14,411 3,617 1,405 559 19,991 Non-current 13,902 2,922 1,405 550 18,779 Current 509 695 - 8 1,212 Annual Report 2021 Annual Report 2021 210 DECEUNINCK NV (BELGIUM) - PRINCIPAL ACTUARIAL ASSUMPTIONS 2020 2021 Discount rate 0.50% 1.00% Increase in compensations - white collar 2.35% 2.65% Increase in compensations - blue collar 2.35% 2.65% Increases in social security 2.35% 2.65% Increases in pensions N/A N/A Ination 1.60% 1.90% DECEUNINCK GERMANY AND PRODUKTIONS GMBH (GERMANY) - PRINCIPAL ACTUARIAL ASSUMPTIONS 2020 2021 Discount rate 0.40% 0.90% Increase in compensations - white collar 3.00% 3.00% Increase in compensations - blue collar 3.00% 3.00% Increases in social security 3.00% 3.00% Increases in pensions 1.50% 1.70% Ination 1.50% 3.00% EGE PROFIL AS (TURKEY) - PRINCIPAL ACTUARIAL ASSUMPTIONS 2020 2021 Discount rate 13.60% 16.45% Increase in compensations - white collar 9.50% 9.50% Increase in compensations - blue collar 9.50% 9.50% Increases in social security 9.50% 9.50% Increases in pensions N/A N/A Ination N/A N/A The main risks for Deceuninck NV relate to future salary increases. Deceuninck Germany GmbH and Deceuninck Germany Produktions GmbH & Co KG (Germany) For Deceuninck Germany GmbH and Deceuninck Germany Produktions GmbH & Co KG, the provisions for employee benefits refer to the provision for pensions which is unfunded. Ege Profil AS (Turkey) The company is required to pay a termination indemnity The pension plan entitles the beneficiary to a lump sum amount at the start of their pension. The plan was available to all employees started to work for Deceuninck Germany GmbH before 1999. For one manager there is an individual pension plan which provides an annuity payment after retirement. The plan is based on the collective agreement of IGBCE and the respective company agreement. The actuarial present value was calculated based on the following assumptions: upon the date of retirement. This plan is legally required for all employees and is unfunded. The actuarial present value was calculated based on the following assumptions: 211 Financial Performance Annual Report 2021 Annual Report 2021 212 COMPONENTS OF PENSION COST 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Current service cost 92 482 779 1,353 89 523 998 1,610 Interest cost 137 268 90 495 63 219 21 303 Recognized in income statement 229 750 869 1,848 152 741 1,019 1,913 AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Present value of dened benet obligation 16,107 2,192 11,806 30,104 14,411 1,405 11,313 27,129 Fair value of plan assets - - (7,079) (7,079) - - (7,696) (7,696) Net liability (asset) 16,107 2,192 4,727 23,025 14,411 1,405 3,617 19,433 Other These provisions for employee benefits refer to local pension regulations. The current service cost is included in the financial statement lines in the consolidated income statement based on the function and activities of the related personnel. If the related personnel are no longer active within the Group, the cost is recognized in the section The tables below provide an overview of the pension costs included in the consolidated income statement, and the amounts recognized in the balance sheet position for the defined pension plan of Deceuninck Germany GmbH, Deceuninck Produktions GmbH & Co. KG, Ege Profil AS and the Belgian subsidiaries of the last two years: Other under Other operating costs. The interest cost is included in Other financial result. Where applicable, the current service cost is considered for the inventory valuation. 213 Financial Performance COMPONENTS OF PENSION COST 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Current service cost 92 482 779 1,353 89 523 998 1,610 Interest cost 137 268 90 495 63 219 21 303 Recognized in income statement 229 750 869 1,848 152 741 1,019 1,913 AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Present value of dened benet obligation 16,107 2,192 11,806 30,104 14,411 1,405 11,313 27,129 Fair value of plan assets - - (7,079) (7,079) - - (7,696) (7,696) Net liability (asset) 16,107 2,192 4,727 23,025 14,411 1,405 3,617 19,433 Annual Report 2021 Annual Report 2021 214 CHANGE IN PENSION BENEFIT OBLIGATIONS 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total At the beginning of 15,460 2,821 13,217 31,498 16,107 2,192 11,806 30,104 Current service cost 92 482 838 1,412 89 523 998 1,610 Interest cost 137 268 90 495 63 219 54 336 Plan participants contributions - - 191 191 - - 193 193 Actuarial (gain) / loss 944 (504) (691) (251) (1,340) 16 (1,083) (2,407) Arising from changes in nancial assumptions 1,329 (240) (277) (884) (503) (817) Experience adjustments (385) (264) (414) (456) 316 (266) Arising from demographic assumptions - - - - 92 - Changes in the eect of asset ceiling - - - - 110 - Benets paid directly (527) (122) (1,840) (2,489) (508) (634) (656) (1,798) Exchange rate dierences - (754) - (754) - (910) - (910) At the end of 16,107 2,192 11,806 30,104 14,411 1,405 11,313 27,129 CHANGE IN FAIR VALUE OF PLAN ASSETS 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) TOTAL Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total At the beginning of 7,967 7,967 7,079 7,079 Interest income on plan assets 59 59 33 33 Actuarial (gain) / loss 92 92 - Return on plan asset 92 Employer contributions 610 610 790 790 Plan participants contributions 191 191 193 193 Benets paid directly (1,840) (1,840) (399) (399) At the end of - - 7,079 7,079 - - 7,696 7,696 215 Financial Performance CHANGE IN PENSION BENEFIT OBLIGATIONS 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total At the beginning of 15,460 2,821 13,217 31,498 16,107 2,192 11,806 30,104 Current service cost 92 482 838 1,412 89 523 998 1,610 Interest cost 137 268 90 495 63 219 54 336 Plan participants contributions - - 191 191 - - 193 193 Actuarial (gain) / loss 944 (504) (691) (251) (1,340) 16 (1,083) (2,407) Arising from changes in nancial assumptions 1,329 (240) (277) (884) (503) (817) Experience adjustments (385) (264) (414) (456) 316 (266) Arising from demographic assumptions - - - - 92 - Changes in the eect of asset ceiling - - - - 110 - Benets paid directly (527) (122) (1,840) (2,489) (508) (634) (656) (1,798) Exchange rate dierences - (754) - (754) - (910) - (910) At the end of 16,107 2,192 11,806 30,104 14,411 1,405 11,313 27,129 CHANGE IN FAIR VALUE OF PLAN ASSETS 2020 2021 IN € THOUSAND Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) TOTAL Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Total At the beginning of 7,967 7,967 7,079 7,079 Interest income on plan assets 59 59 33 33 Actuarial (gain) / loss 92 92 - Return on plan asset 92 Employer contributions 610 610 790 790 Plan participants contributions 191 191 193 193 Benets paid directly (1,840) (1,840) (399) (399) At the end of - - 7,079 7,079 - - 7,696 7,696 Annual Report 2021 Annual Report 2021 216 OTHER 2021 (IN € THOUSAND) Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Contributions Expected contribution to the plan for the next annual reporting period 197 N/A 631 Maturity prole Duration jubilee benets N/A N/A N/A Duration prepensions N/A N/A 3.3 Duration DC pension plans 17,0/25,0 N/A 15.1 Duration other long term benets N/A 9.0 N/A Expected payments from the dened benet plan within CashFlow Year 1 509 148 185 CashFlow Year 2 507 74 5 CashFlow Year 3 506 32 50 CashFlow Year 4 499 50 156 CashFlow Year 5 511 23 712 CashFlow Year 6-10 2,636 185 2,847 AS PER 31 DECEMBER 2021 Deceuninck Germany and Produktions GmbH (Germany) Ege Prol AS (Turkey) Deceuninck NV (Belgium) Change in discount rate (0.20%) 0.20% (0.20%) 0.20% (0.20%) 0.20% Impact on present value of dened benet obligation (in € thousand) 497 (472) 20 (19) 328 (316) Change in pension increase rate (0.50%) 0.50% NA NA NA NA Impact on present value of dened benet obligation (in € thousand) (512) 980 Change in longevity -one year life expectancy + one year life expectancy -one year life expectancy + one year life expectancy -one year life expectancy + one year life expectancy Impact on present value of dened benet obligation (in € thousand) (595) 621 - 1 37 (39) Sensitivity analysis shows the following impacts: 217 Financial Performance 17. Provisions IN € THOUSAND Restructuring Warranties Claims Other Total As per 31 December 2020 3,292 1,030 759 1,616 6,697 Additions - 176 479 73 729 Utilizations (3,106) - (230) 178 (3,159) Reversals (32) (12) (76) (268) (388) Transfers - - - - - Translation adjustments - (126) 17 (235) (343) As per 31 December 2021 154 1,068 948 1,365 3,536 Non-current - 1,021 901 1,365 3,287 Current 154 47 48 - 249 Restructuring provisions are recognized when conditions of IAS 37 are fulfilled, and represent in 2020 and 2021 the restructuring provision for the strategic repositioning of Europe region. Provisions for warranties are based on historical data of the cost incurred for repairs and returns. The provisions for claims mainly relate to claims for quality issues of products sold. The other provisions include a large number of items such as provisions for legal disputes. Annual Report 2021 Annual Report 2021 218 18. Interest-bearing debts Long-term interest-bearing loans mainly consist of amortizing working capital loans from Turkish commercial banks with final maturity date in 2027 and a small bullet loan (€ 1.0 million) from the European Bank for Reconstruction and Development (EBRD) due in 2025. The long-term leasing contracts mainly consist of agreements for the leasing of cars, equipment or buildings. See further note 20. Short term interest-bearing loans mainly consist of the € 100 million retail bond issued in 2015 and coming to maturity on 8 December 2022. Also part of the short-term loans is the remainder (€ 6.8 million) of the loan entered The following tables provide an overview of the interest-bearing debts of the Group at year end: into in 2015 with the EBRD for the construction of the new factory in Menemen (TR). Finally, the table of short- term loans below also includes (the short-term part of) the working capital loans from Turkish commercial banks becoming due in the course of 2022. The 5-year amortizing loan of initially $ 12 million entered into in 2020 to refinance the real estate lease set up in 2015 to finance the construction of the factory in Fernley, NV (US) has been paid back in the course of 2021. Also, the € 5.0 million short-term loan guaranteed by the French government (“Prêt garanti par l’Etat”) as part of the French government’s COVID-19 support measures in 2020 has been paid back in the course of 2021. LONGTERM INTERESTBEARING DEBTS IN € THOUSAND 2020 2021 Loans from nancial institutions 25,357 6,625 Leasing 11,751 6,378 Retail Bond 3.75% - 08 Dec 2022 99,913 - Long-term interest-bearing debts 137,022 13,002 SHORTTERM INTERESTBEARING DEBTS IN € THOUSAND 2020 2021 Loans from nancial institutions 17,985 16,712 Leasing 6,083 5,094 Retail Bond 3.75% - 08 Dec 2022 - 99,959 Short-term interest-bearing debts 24,069 121,765 Non-cash changes INTEREST BEARING DEBTS IN € THOUSAND 2019 Cash Flows Capitalised Interest Foreign Exchange revaluation in (prot) or loss IFRS 16 New Leases / Disposals Transfers Foreign exchange translation 2020 Loans from nancial institutions 64,283 (18,684) 114 2,837 - 9,061 (14,268) 43,343 Leasing 28,802 (7,076) - 1,507 7,044 (9,061) (3,381) 17,835 Retail Bond 3.75% - 08 Dec 2022 99,866 - 46 - - - - 99,913 Interest bearing debts 192,951 (25,760) 160 4,344 7,044 - (17,649) 161,090 219 Financial Performance The transfers in 2020 from ‘Leasing’ liabilities to ‘Loans from financial institutions’ concerned the refinancing of the real estate leasing of the plant in Fernley (US) after execution of the purchase option. As of 31 December 2021, only € 2.9 million of the € 60 million committed credit facility entered into in 2019 with a group of selected banks was drawn, leaving about € 57 million of that credit facility available for future drawdowns. All interest-bearing debt of Deceuninck is unsecured. Usual financial covenants (Leverage, Interest Cover, ...) are applicable to the committed credit facility, the retail bond and the EBRD loan. As per 31 December 2021 and at all preceding testing dates throughout 2021, the Group has met all its covenants. The following table provides a summary of the outstanding debts by currency, the average interest rates and maturity profile as per 31 December 2021: Non-cash changes INTEREST BEARING DEBTS IN € THOUSAND 2020 Cash Flows Capitalised Interest Foreign Exchange revaluation in (prot) or loss IFRS 16 New Leases / Disposals Transfers Foreign exchange translation 2021 Loans from nancial institutions 43,343 (13,163) 96 4,857 - - (11,796) 23,336 Leasing 17,835 (6,386) - 173 1,635 - (1,785) 11,472 Retail Bond 3.75% - 08 Dec 2022 99,913 - 46 - - - - 99,959 Interest bearing debts 161,090 (19,549) 142 5,030 1,635 - (13,581) 134,767 TERMS AND MATURITY PROFILE IN € THOUSAND Interest % Due within 1 year Due between 1 and 5 years Due after 5 years Total Financial liabilities (excl leasing liabilities) 17,985 125,270 - 143,256 Leasing liabilities 6,674 12,183 216 19,074 2020 24,660 137,453 216 162,329 Financial liabilities (excl leasing liabilities) 116,671 6,625 - 123,296 Leasing liabilities 5,237 7,284 143 12,664 2021 121,908 13,909 143 135,960 Of which EUR 3.66% 111,745 4,014 16 115,775 TRY 11.95% 7,470 7,179 - 14,649 USD 5.92% 1,422 218 - 1,640 Other foreign currencies 5.56% 1,272 2,498 127 3,897 Annual Report 2021 Annual Report 2021 220 19. Trade payables and other liabilities 20. Leasing IN € THOUSAND 2020 2021 Trade Debts 107,963 176,009 Derivative nancial instruments 980 650 Guarantees from Customers 887 830 Accrued interest 990 843 Accrued charges 736 125 Deferred income 494 1,713 Advance checks received 23,246 52,308 Other 1,400 1,414 OTHER LIABILITIES 28,734 57,883 The conditions for the above-mentioned trade debts and other debts are as follows: • Trade debts do not bear interest and are usually paid on the basis of payment terms that can vary depending on the market. On average, these payment terms fluctuate between 45 and 65 days from the end of the month in which the debt is incurred. In Turkey this can be up to one year after the invoice date. • For the conditions with regard to the financial instruments, we refer to Note 25. Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period • The guarantees from customers do not bear any interest and are immediately payable, as soon as the contractual obligations of the customer have been fulfilled. Trade debts include, besides the invoiced purchases also a provision for invoices to be received, a provision for credit notes to be issued and foreign currency translation differences. The other payables mainly consist of advance checks as referred to in Note 12. IN € THOUSAND Buildings Cars Machinery & equipment Other Total As per 31 December 2019 21,021 3,044 3,601 1 27,667 Additions 2,629 1,745 2,969 - 7,343 Disposals (267) (79) (31) - (377) Depreciations (3,657) (1,875) (1,694) - (7,226) Transfers (8,917) - - - (8,917) Translation adjustments (1,987) (142) (326) - (2,455) As per 3 December 2020 8,821 2,694 4,519 - 16,034 221 Financial Performance The € 8.9 million transfer in 2020 concerned the refinancing of the real estate leasing of the plant in Fernley (US) after execution of the purchase option. The maturity analysis of lease liabilities is disclosed in Note 18. Set out below are the carrying amounts of lease liabilities (included under interest-bearing loans and borrowings) and the movements during the period: IN € THOUSAND Buildings Cars Machinery & equipment Total As per 3 December 2020 8,821 2,694 4,519 16,034 Additions 2,474 1,704 1,186 5,364 Disposals (3,396) (92) - (3,487) Depreciations (2,836) (1,813) (1,523) (6,173) Transfers (70) - - (70) Translation adjustments (202) (242) (880) (1,324) As per 3 December 2021 4,792 2,250 3,301 10,343 LEASE LIABILITY IN € THOUSAND 2020 2021 Opening balance 28,802 17,835 Additions 7,343 5,364 Disposals (377) (3,729) Accreation of interests 1,477 867 Payments (8,476) (7, 252) Transfers (9,061) - Translation adjustments (1,874) (1,612) Closing balance 17,835 11,472 Current 6,083 5,094 Non-current 11,751 6,378 The following are the amounts recognized in profit or loss: IN € THOUSAND 2020 2021 Depreciation expense of right-of-use-assets (7,226) (6,173) Interest expense on lease liabilities (1,477) (867) Expenses relating to short-term leases and low-value assets (1,890) (2,155) Total amount recognized in prot or loss (10,593) (9,194) Annual Report 2021 Annual Report 2021 222 21. Share-based payments The Group offers the possibility to staff members, senior management members and the members of the Executive Management to register for stock option and warrant agreements. The purpose for such a decision is to motivate the staff members, senior management and the members of the Executive Management, by enabling them to acquire shares in the company under relatively advantageous terms, thereby increasing and improving their commitment to the company. IFRS 2 has a total negative impact of €559 thousand on the results of 2021 (2020: €720 thousand) as recognized in ‘Other payroll expenses’ in Note 3. Revenue and costs are split up as below: • Warrant plan: €516 thousand in 2021 (€654 thousand in 2020) • Performance share plan: €43 thousand in 2021 (€56 thousand in 2020) • Stock option plans: No impact in 2021 (no impact in 2020) Stock option plans, warrant plans and performance share plans were valued on the basis of the binominal tree structure. Volatility was determined on the basis of historical data. Stock option plans The balance of outstanding options (Plans 2004-2010) at the end of December 2021 is 30,750. One option entitles the holder to buy one Deceuninck NV share at a fixed exercise price. All options relating to the stock option plans granted in 2004, 2005, 2008, 2009 and 2010 have been exercised, forfeited or expired. The options expire if they are not exercised on the last day of the last exercise period. The options can be exercised for the first time after the end of the third calendar year, following the year in which the offer has taken place. The exercise period, relating to the plans of 2004, 2005 and 2007, was extended with 5 years in 2009. The exercise price of an option will be equal to the lowest of (i) the average price of the share on the stock exchange during the 30-day period preceding the offer, or (ii) the latest closing price preceding the day of the offer. STOCK OPTIONS OVERVIEW 2004 2005 2007 2008 2009 2010 Total Grant date 23/12/04 22/12/05 19/12/07 12/12/08 27/10/09 23/12/10 To be accepted by 21/02/05 20/02/06 17/02/08 11/02/09 26/12/09 22/02/11 N° of beneciaries at grant date 33 53 74 68 2 4 Exercise price (EUR) 22.7 22.81 15.54 2.95 1.36 1.7 Granted 49,000 66,250 70,750 70,750 75,000 75,000 470,750 Accepted 35,375 64,250 64,500 64,150 75,000 75,000 425,775 Exercised - - - 1,250 73,102 70,000 144,352 Forfeited 12,750 25,250 33,750 29,650 - 5,000 121,400 Expired 22,625 39,000 - 33,250 1,898 - 129,273 Outstanding 31/12/2021 - - 30,750 - - - 30,750 Excercisable 31/12/2021 - - 30,750 - - - 30,750 Exercise periods 2008-2014 2009-2015 2011-2017 2012-2018 2013-2019 2014-2020 Extension of exercise periods 2015-2019 2016-2020 2018-2022 N/A N/A N/A 223 Financial Performance OPTIONS MOVEMENTS IN 2020 2004 2005 2007 2008 2009 2010 Total Weighted average exercise price Outstanding 2019 - 39,000 31,750 - - - 70,750 19.55 Accepted - - - - - - - N/A Exercised - - - - - - - N/A Forfeited - - - - - - - N/A Expired - (39,000) - - - - (39,000) 22.81 Outstanding 2020 - - 31,750 - - - 31,750 15.54 OPTIONS MOVEMENTS IN 2021 2004 2005 2007 2008 2009 2010 Total Weighted average exercise price Outstanding 2020 - - 31,750 - - - 31,750 15.54 Accepted - - - - - - - N/A Exercised - - - - - - - N/A Forfeited - - (1,000) - - - (1,000) N/A Expired - - - - - - - N/A Outstanding 2021 - - 30,750 - - - 30,750 15.54 Annual Report 2021 Annual Report 2021 224 WARRANTS Plan 2010 Plan 2010 Plan 2011 Plan 2011 Plan 2011 Plan 2013 Plan 2013 Plan 2013 Plan 2015 Plan 2015 Plan 2015 Plan 2017 Plan 2018 Plan 2018 Plan 2018 Plan 2018 Plan 2020 Plan 2021 Total Grant date 31/12/09 23/12/10 21/12/2011 21/12/2012 21/12/2012 17/12/2013 17/12/2013 17/12/2014 16/12/2015 21/12/2016 21/12/2016 21/12/2017 21/12/2018 21/12/2018 21/12/2019 21/12/2019 17/12/2020 23/12/2021 Acceptance date 28/02/10 22/02/11 15/02/2012 17/02/2013 17/02/2013 14/02/2014 14/02/2014 16/02/2015 15/02/2016 21/02/2017 21/02/2017 19/02/2018 19/02/2019 19/02/2019 01/02/2020 01/02/2020 16/02/2021 14/02/2022 Number of beneciaries at grant date 16 37 42 49 1 59 9 66 78 8 66 55 57 57 43 14 59 67 Exercise price (in €) 1.46 1.70 0.73 1.17 1.18 1.71 1.76 1.79 2.40 2.40 2.23 3.06 1.82 1.97 1.82 1.97 1.50 3.07 Share price on acceptance date (in €) 1.31 1.88 1.22 1.35 1.35 2.19 2.19 1.88 2.08 2.22 2.22 2.88 2.18 2.18 1.98 1.98 2.39 2.85 Granted 285,000 607,500 490,000 485,000 350,000 332,500 570,000 910,000 630,000 710,000 524,000 1,334,000 700,000 755,000 546,500 828,500 1,183,000 1,302,000 12,543,000 Accepted 240,000 562,500 487,500 482,500 350,000 332,500 570,000 892,500 607,500 710,000 524,000 1,233,500 577,000 755,000 546,500 798,500 1,145,000 680,000 11,494,500 Exercised 150,000 404,999 344,999 333,331 350,000 169,992 496,666 640,826 138,330 40,000 115,998 20,000 - - - - - - 3,205,141 Forfeited 75,000 122,501 135,001 141,669 - 122,506 73,334 195,838 260,000 60,000 209,000 257,000 47,000 60,000 15,000 73,500 15,000 - 1,862,349 Expired 15,000 35,000 7,500 7,500 - - - - - - - - - - - - - - 65,000 Outstanding 31/12/2021 - - - - - 40,002 - 55,836 209,170 610,000 199,002 956,500 530,000 695,000 531,500 725,000 1,130,000 680,000 6,362,010 Exercisable 31/12/2021 - - - - - 40,002 - 55,836 139,447 203,333 66,334 - - - - - - - 504,952 Exercise periods 2013-2019 2014-2019 2015-2021 2016-2021 2016-2021 2017-2023 2017-2023 2018-2023 2019-2025 2020-2024 2020-2024 2021-2027 2022-2028 2022-2028 2023-2028 2023-2028 2024-2030 2025-2031 Assumptions Volatility 40% 40% 40% 40% 40% 45% 45% 45% 45.00% 40.00% 40.00% 30.00% 30.00% 30.00% 24.80% 24.80% 27.70% 34.74% Risk-free interest 3.51% 3.51% 2.49% 0.99% 0.99% 0.99% 0.99% (0.03%) (0.28%) (0.32%) (0.32%) 0.13% (0.12%) (0.12%) 0.02% 0.02% (0.24%) 0.12% Dividend as from 2021 (in €) 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.05 Early exercised - Minimum gain 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% Early exercised - Probability to exercise 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% Warrant plans The balance of the outstanding warrants at the end of December 2021 is 6,362,010. One warrant entitles the holder to buy one Deceuninck NV share at a fixed exercise price. Within the scope of the warrant plans, 1,245,806 warrants were exercised in the course of 2021. The warrants expire if they have not been exercised at the last day of the last exercise period. The warrants can be exercised for the first time at the end of the third calendar year of the grant. The exercise price of a warrant will be fixed by the Remuneration Committee on the date of offer and will be equal to the lowest of (i) the average price of the share on the stock exchange during the 30-day period preceding the offer, and (ii) the latest closing prices preceding the day of the offer. 225 Financial Performance WARRANTS Plan 2010 Plan 2010 Plan 2011 Plan 2011 Plan 2011 Plan 2013 Plan 2013 Plan 2013 Plan 2015 Plan 2015 Plan 2015 Plan 2017 Plan 2018 Plan 2018 Plan 2018 Plan 2018 Plan 2020 Plan 2021 Total Grant date 31/12/09 23/12/10 21/12/2011 21/12/2012 21/12/2012 17/12/2013 17/12/2013 17/12/2014 16/12/2015 21/12/2016 21/12/2016 21/12/2017 21/12/2018 21/12/2018 21/12/2019 21/12/2019 17/12/2020 23/12/2021 Acceptance date 28/02/10 22/02/11 15/02/2012 17/02/2013 17/02/2013 14/02/2014 14/02/2014 16/02/2015 15/02/2016 21/02/2017 21/02/2017 19/02/2018 19/02/2019 19/02/2019 01/02/2020 01/02/2020 16/02/2021 14/02/2022 Number of beneciaries at grant date 16 37 42 49 1 59 9 66 78 8 66 55 57 57 43 14 59 67 Exercise price (in €) 1.46 1.70 0.73 1.17 1.18 1.71 1.76 1.79 2.40 2.40 2.23 3.06 1.82 1.97 1.82 1.97 1.50 3.07 Share price on acceptance date (in €) 1.31 1.88 1.22 1.35 1.35 2.19 2.19 1.88 2.08 2.22 2.22 2.88 2.18 2.18 1.98 1.98 2.39 2.85 Granted 285,000 607,500 490,000 485,000 350,000 332,500 570,000 910,000 630,000 710,000 524,000 1,334,000 700,000 755,000 546,500 828,500 1,183,000 1,302,000 12,543,000 Accepted 240,000 562,500 487,500 482,500 350,000 332,500 570,000 892,500 607,500 710,000 524,000 1,233,500 577,000 755,000 546,500 798,500 1,145,000 680,000 11,494,500 Exercised 150,000 404,999 344,999 333,331 350,000 169,992 496,666 640,826 138,330 40,000 115,998 20,000 - - - - - - 3,205,141 Forfeited 75,000 122,501 135,001 141,669 - 122,506 73,334 195,838 260,000 60,000 209,000 257,000 47,000 60,000 15,000 73,500 15,000 - 1,862,349 Expired 15,000 35,000 7,500 7,500 - - - - - - - - - - - - - - 65,000 Outstanding 31/12/2021 - - - - - 40,002 - 55,836 209,170 610,000 199,002 956,500 530,000 695,000 531,500 725,000 1,130,000 680,000 6,362,010 Exercisable 31/12/2021 - - - - - 40,002 - 55,836 139,447 203,333 66,334 - - - - - - - 504,952 Exercise periods 2013-2019 2014-2019 2015-2021 2016-2021 2016-2021 2017-2023 2017-2023 2018-2023 2019-2025 2020-2024 2020-2024 2021-2027 2022-2028 2022-2028 2023-2028 2023-2028 2024-2030 2025-2031 Assumptions Volatility 40% 40% 40% 40% 40% 45% 45% 45% 45.00% 40.00% 40.00% 30.00% 30.00% 30.00% 24.80% 24.80% 27.70% 34.74% Risk-free interest 3.51% 3.51% 2.49% 0.99% 0.99% 0.99% 0.99% (0.03%) (0.28%) (0.32%) (0.32%) 0.13% (0.12%) (0.12%) 0.02% 0.02% (0.24%) 0.12% Dividend as from 2021 (in €) 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.05 Early exercised - Minimum gain 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% Early exercised - Probability to exercise 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% Annual Report 2021 Annual Report 2021 226 WARRANTS MOVEMENTS IN 2020 Plan 2011 Plan 2011 Plan 2011 Plan 2013 Plan 2013 Plan 2013 Plan 2015 Plan 2015 Plan 2015 Plan 2017 Plan 2018 Plan 2018 Plan 2018 Plan 2018 Plan 2020 Total Weighted average exercise price Outstanding 2019 7,500 40,837 51,783 100,841 306,669 650,639 430,000 710,000 373,000 1,135,500 545,000 755,000 - - - 5,106,769 2.25 Accepted - - - - - - - - - - - - 546,500 798,500 648,500 1,993,500 1.77 Exercised - 10,834 51,783 - - - - - - - - - - - - 62,617 1.18 Forfeited - 4,168 - 8,334 - 33,334 45,000 30,000 39,000 84,000 - 60,000 - 73,500 - 377,336 2.29 Expired - - - - - - - - - - - - - - - - N/A Outstanding 2020 7,500 25,835 - 92,507 306,669 617,305 385,000 680,000 334,000 1,051,500 545,000 695,000 546,500 725,000 648,500 6,660,316 2.12 WARRANTS MOVEMENTS IN 2021 Plan 2011 Plan 2011 Plan 2013 Plan 2013 Plan 2013 Plan 2015 Plan 2015 Plan 2015 Plan 2017 Plan 2018 Plan 2018 Plan 2018 Plan 2018 Plan 2020 Plan 2021 Total Weighted average exercise price Outstanding 2020 7,500 25,835 92,507 306,669 617,305 385,000 680,000 334,000 1,051,500 545,000 695,000 546,500 725,000 648,500 - 6,660,316 2.12 Accepted - - - - - - - - - - - - - 496,500 680,000 1,176,500 2.28 Exercised - 18,335 50,005 306,669 556,469 138,330 40,000 115,998 20,000 - - - - - - 1,245,806 1.92 Forfeited - - 2,500 - 5,000 37,500 30,000 19,000 75,000 15,000 - 15,000 - 15,000 - 214,000 2.45 Expired 7,500 7,500 - - - - - - - - - - - - - 15,000 0.95 Outstanding 2021 - - 40,002 - 55,836 209,170 610,000 199,002 956,500 530,000 695,000 531,500 725,000 1,130,000 680,000 6,362,010 1.87 227 Financial Performance WARRANTS MOVEMENTS IN 2020 Plan 2011 Plan 2011 Plan 2011 Plan 2013 Plan 2013 Plan 2013 Plan 2015 Plan 2015 Plan 2015 Plan 2017 Plan 2018 Plan 2018 Plan 2018 Plan 2018 Plan 2020 Total Weighted average exercise price Outstanding 2019 7,500 40,837 51,783 100,841 306,669 650,639 430,000 710,000 373,000 1,135,500 545,000 755,000 - - - 5,106,769 2.25 Accepted - - - - - - - - - - - - 546,500 798,500 648,500 1,993,500 1.77 Exercised - 10,834 51,783 - - - - - - - - - - - - 62,617 1.18 Forfeited - 4,168 - 8,334 - 33,334 45,000 30,000 39,000 84,000 - 60,000 - 73,500 - 377,336 2.29 Expired - - - - - - - - - - - - - - - - N/A Outstanding 2020 7,500 25,835 - 92,507 306,669 617,305 385,000 680,000 334,000 1,051,500 545,000 695,000 546,500 725,000 648,500 6,660,316 2.12 WARRANTS MOVEMENTS IN 2021 Plan 2011 Plan 2011 Plan 2013 Plan 2013 Plan 2013 Plan 2015 Plan 2015 Plan 2015 Plan 2017 Plan 2018 Plan 2018 Plan 2018 Plan 2018 Plan 2020 Plan 2021 Total Weighted average exercise price Outstanding 2020 7,500 25,835 92,507 306,669 617,305 385,000 680,000 334,000 1,051,500 545,000 695,000 546,500 725,000 648,500 - 6,660,316 2.12 Accepted - - - - - - - - - - - - - 496,500 680,000 1,176,500 2.28 Exercised - 18,335 50,005 306,669 556,469 138,330 40,000 115,998 20,000 - - - - - - 1,245,806 1.92 Forfeited - - 2,500 - 5,000 37,500 30,000 19,000 75,000 15,000 - 15,000 - 15,000 - 214,000 2.45 Expired 7,500 7,500 - - - - - - - - - - - - - 15,000 0.95 Outstanding 2021 - - 40,002 - 55,836 209,170 610,000 199,002 956,500 530,000 695,000 531,500 725,000 1,130,000 680,000 6,362,010 1.87 Annual Report 2021 Annual Report 2021 228 PERFORMANCE SHARE PLAN PLAN 2018 Grant date 31/01/18 Acceptance date 30/06/18 Number of beneciaries at grant date 8 Share price at date of grant 3.05 Granted 474,394 Accepted 474,394 Exercised - Forfeited 147,499 Expired 326,895 Outstanding 31/12/2021 - Exercisable 31/12/2021 - Exercise periods 2021 Assumptions Volatility 25% Risk-free interest (0.30%) Performance share plan The balance of the outstanding Performance Share Rights granted to the members of the Executive Management (“Beneficiaries”) is zero. PERFORMANCE SHARE PLAN MOVEMENTS 2020 Outstanding 2019 441,691 Accepted - Exercised - Forfeited (114,459) Expired - Outstanding 2020 327,232 Risk-free interest (0.30%) PERFORMANCE SHARE PLAN MOVEMENTS 2021 Outstanding 2020 327,232 Accepted - Exercised - Forfeited - Expired (327,232) Outstanding 202 - Risk-free interest (0.30%) 229 Financial Performance 22. Related parties During 2021, the Group made purchases of €26 thousand (€58 thousand in 2020) and no sales (no sales in 2020), under normal market conditions, from or to companies to which Directors of the Group, owning shares of the Group, are related to. The purchases mainly relate to repair and maintenance of cars. Furthermore, during 2021, the Group made no purchases (€17 thousand in 2020) and sales of €1,053 thousand (€639 thousand in 2020), under normal market conditions, from or to So Easy Belgium BV or related companies. Both the purchases and the sales mainly related to the cross-charge of incurred costs and provided services. At year-end, there is an outstanding receivable position of €4,998 thousand (€2,756 thousand in 2020) and an outstanding payable position of €166 thousand (€15 thousand in 2020) with So Easy Belgium BV or related companies. The outstanding receivable position is mainly related to working capital financing. Total remuneration of members of the Board in 2021 amounted to € 422 thousand (€297 thousand in 2020). This amount includes additional remunerations granted to Directors for their involvement in Board Committees. These remunerations are granted by the General Meeting and are included in general expenses. Directors charged with special missions and projects can receive appropriate remuneration. In 2021, the former CEO received a total remuneration (fixed + variable) in the amount of € 799 thousand (in 2020 a total remuneration of €966 thousand). The other members of the DirCo (management committee consisting of the CEO, the CFO and the General Counsel) excluding the former CEO received total remunerations (fixed + variable) of € 667 thousand (in 2020 a total remuneration of €821 thousand). The other members of the Executive Management received total remunerations (fixed + variable) of € 1,100 thousand (in 2020 a total remuneration of 1,607 thousand). The split of the remuneration is further disclosed in the section Corporate Governance Statement of this annual report. The evaluation criteria for the performance of the former CEO and the other members of the DirCo were: REBITDA Group (60%), Adjusted Free Cash Flow Group (35%) and non-financial criteria (5%). For the other members of the Executive Management: REBITDA Group (15%), REBITDA Region (45%), Adjusted Free Cash Flow Group (10%), Adjusted Free Cash Flow Region (25%) and non-financial criteria (5%). Options and/or subscription rights on the shares of the company are granted to members of the Executive Management. On 29 June 2021, the Board approved a new subscription rights plan (“Warrant Plan 2021”) of 3,000,000 subscription rights. On 16 December 2021, 350,000 subscription rights of Warrant Plan 2021 were offered to the former CEO, 50,000 subscription rights were offered to the new CEO and 60,000 subscription rights were offered to each of the CFO, General Counsel, CEO Europe, CEO Turkey and CEO USA. These warrant plans are not related to the performance of the Group. Annual Report 2021 Annual Report 2021 230 23. Services provided by the external auditor 24. Going concern 25. Risk management During 2021 the following charges of the external auditor were included in the Group’s income statement: There are no indicators of circumstances that might question the continuity of the activities. The most important financial risks for the Group are exchange rate risk, interest rate risk, credit risk and liquidity risk. Exchange rate risk The exchange rate risk of the Group can be split into two categories: translation risk and transaction risk. TRANSLATION RISK Translation risk arises from the conversion of financial figures of foreign subsidiaries outside the Eurozone into the Group’s reporting currency, the euro. The currencies most susceptible for this kind of risk are the US dollar and the Turkish lira. This kind of exchange rate risk is not hedged. TRANSACTIONAL EXCHANGE RATE RISK Transactional exchange rate risk arises when an entity of the Group enters into a transaction which will be settled in a currency which is not the functional currency of that entity. Transactional exchange rate risk within the Group can be of operational or financial nature. When this risk is associated with sales and purchases in foreign currencies as a result of the commercial activities of the Group, it is denominated as operational. The most Audit related services € 531,770 Other services € 35,700 We refer to the additional disclosures as included in Note 25 Risk management – Credit risk & liquidity risk. important transactional exchange rate risks of operational nature originate from purchases of raw materials in euro and US dollar by the Turkish subsidiary Ege Profil. Sales in euro by this subsidiary mitigate to some extent this risk. When transactional exchange rate risk is associated with cash or loans in foreign currencies it is denominated as financial. The most important risks of this nature originate from loans and leases in euro and US dollar taken by the Turkish subsidiary Ege Profil. It is important to note that loans in euro and US Dollar on the balance sheet of Ege Profil are to some extent ‘naturally hedged’ by the net position of trade receivables and payables in euro and US dollar on the same local balance sheet. Any remaining exposure is hedged financially with forward contracts. See also further below. Some intercompany loans for which repayment is neither planned nor likely in the foreseeable future have been designated as ‘Net Investment in Foreign Operations’. As such, the exchange results on these intercompany loans are recognized directly in Other Comprehensive Income and accumulated in a separate component of equity until the disposal of the foreign operation. RECOGNIZED ASSETS AND LIABILITIES The Group aims to minimize the impact of exchange rate fluctuations on the monetary assets and liabilities 231 Financial Performance recognized on the balance sheet. These exchange rate risks are hedged as much as possible by offsetting monetary assets in one currency (for example trade receivables) against monetary liabilities (for example trade debts) in the same currency (‘natural hedging’). The remaining exchange rate risk, after the optimization of natural hedging, is hedged with financial instruments (‘financial hedging’) if the cost is considered as reasonable. The most important financial instruments used by the Group for the hedging of foreign exchange rate risks are forward contracts. FUTURE TRANSACTIONS Future transactions imply future purchases and sales that are not recognized yet as monetary assets or liabilities on the balance sheet. Normally these transactions are not hedged, but if opportunities arise on the foreign exchange markets, a part of the future purchases in euro or US dollar in Turkey might be hedged. It is the policy of the Group to protect its subsidiaries as much as possible from exchange rate risks. Therefore, these risks are centralized as much as possible at the parent company Deceuninck NV and are primarily managed at Group level. Exchange rate risks at the Turkish subsidiary Ege Profil are monitored closely by Corporate Treasury, but are hedged by the Turkish subsidiaries through local banks. The table below provides an overview of the existing FX forward contracts, grouped by currency, at the end of December 2021: ESTIMATED SENSITIVITY FOR EXCHANGE RATE FLUCTUATIONS As required by IFRS 7, ‘Financial instruments: Disclosures’, a sensitivity analysis was carried out on the evolution of the exchange rates. Based on the volatility of the relevant currencies, we have estimated the impact of the possible exchange rate movements on our financial result as follows: PURCHASE OR SALE Currency Amount Maturity Date MTM 202 Forward sales BRL 16,099,878 Q1 2022 (4,585) CLP 6,214,699,628 Q1 2022 (26,878) HRK 53,629,384 Q1 2022 (4,217) INR 432,915,525 Q1 2022 (91,905) PLN 54,000,000 Q1 2022 (74,630) MXN 28,024,750 Q1 2022 (45,215) RUB 851,384,000 Q1 2022 316,380 TRY 320,640,300 Q1 2022 2,522,674 USD 3,414,000 Q1 2022 (80,820) Forward purchases CZK 335,000,000 Q1 2022 281,417 GBP 138,000 Q1 2022 3,333 TRY 75,950,000 Q1 2022 (167,446) Annual Report 2021 Annual Report 2021 232 SENSITIVITY ANALYSIS ON THE POSITION IN FOREIGN CURRENCIES AS PER 3 DECEMBER 202 Currency Amount (in € thousand) Closing rate 31/12/2021 Possible volatility of the exchange rate ** Rate used for the sensitivity analysis Eect on revaluation (in € thousand) USD 430 1.1326 2.65% 1.1626 1.1026 (10) 10 GBP 28 0.8403 2.63% 0.8624 0.8182 (1) 1 PLN 1,183 4.5969 2.68% 4.7201 4.4737 (7) 7 CZK 9,429 24.8580 1.99% 25.3527 24.3633 (7) 8 TRY 17,998 15.0867 21.04% 18.2609 11.9125 (207) 318 RUB 8,668 84.0696 5.07% 88.3318 79.8072 (5) 6 Total (237) 349 * Balance sheet exposure after financial hedging (net-exposures) ** 3 month volatility If the euro would have weakened/strengthened during 2021 in line with the above-mentioned possible rates, the profit of the financial year would have been about € 349 thousand higher / € 237 thousand lower. Interest rate risk Most of the financial debt outstanding on 31 December 2021 is at a fixed interest rate. Only a small part (€ 2.9 million) is at a variable interest rate (Euribor + margin). An increase of the interest rates by 1.00% would therefore have a short-term impact on our financial results of about € 29 thousand. The impact of higher interest rates could however gradually increase when loans have to be refinanced upon their maturity. Credit risk The products of the Group are used almost exclusively in the construction industry. Hence, the exposure to credit risk is highly dependent on the performance of the building industry and the general economic conditions. In order to minimize the credit risk, we are closely monitoring the payment behaviour of each debtor. The Group uses credit insurance to mitigate the credit risk related to trade receivables. Two credit insurance policies have been taken out with two different insurers. Commercial limits, based on financial information and on business knowledge, can deviate from the insured credit limits. However, since the COVID-19 pandemic we have done many efforts to lower our commercial limits and have them match the amounts covered by the insurance company as much as possible in order to further reduce our credit risk. In cases where the insured limit is not sufficient we tried to obtain extra guarantees from our customers (e.g. bank guarantees, promissory notes, letters of credit or pledges on customers assets (machinery, buildings, land plots, etc.). In view of the increased uncertainty caused by the COVID-19 pandemic the Group has applied a very strict credit management throughout 2021 in order to limit the potential losses due to customer defaults. Payment behaviour of our customers has been monitored very closely and unpaid invoices have resulted immediately in a blocking of all open orders from day one. Throughout the year, the Group also helped customers by informing them about available government support measures for which they might qualify. Liquidity risk and risks linked The Group holds sufficient cash, cash equivalents and committed credit facilities for the funding of its operating activities and there are no factors that cast doubts on whether going concern assumption is appropriate. Although there is no indication of this, liquidity problems could arise if the €100 million retail bond could not be 233 Financial Performance refinanced on or before its maturity date. The company is currently evaluating different refinancing alternatives, but no decision has been made yet. Liquidity problems could arise at Restricted Group level if an event of default would occur under the syndicated loan agreement or the retail bond which is not remedied within the foreseen remedy period. In that case, the outstanding amounts under the syndicated loan agreement and the retail bond might become immediately due and payable, which would jeopardize the liquidity situation of the Group. For the Turkish subsidiary Ege Profil, liquidity problems could arise if loans becoming due could not be refinanced through local Turkish banks. However, thanks to the excellent reputation and solid financials of Ege Profil, Turkish banks are still eager to grant loans to it. In order to detect possible events of default as a consequence of non-compliance with financial covenants at an early stage and to enable the Group to take corrective measures, a mid-term financial forecast is kept up to date and resulting impact on covenants is simulated. The Group uses the following hierarchical classification in determining and explaining the fair value of financial instruments by valuation technique: • Level 1: quoted (not adjusted) prices in active markets for identical assets or liabilities. • Level 2: other techniques for which all inputs which In addition to the above-mentioned risk of non- compliance with the financial covenants, the liquidity risk is also linked to the evolution of the working capital of the Group, which is highly subject to seasonal fluctuations and the capital expenditure level of the Group. This is therefore closely monitored. Simulations have been made throughout the year and during budgeting process to assess the impact of COVID-19 on the liquidity position of the Group. These do not indicate any liquidity issues. In addition, all covenants have been met with sufficient headroom. Hierarchical classification of fair value A comparison is provided below between the net carrying value and the fair value of financial instruments, which have been included in the financial statements. The fair value of the loans was calculated by defining the expected future cash flows, and by discounting these on common, accepted interest rates. have a significant effect on the recorded fair value are observable, either directly or indirectly. • Level 3: techniques that use input with a significant impact on the recorded fair value that is not based on observable market data. FINANCIAL INSTRUMENTS IN €THOUSAND Net carrying value Fair value 2020 2021 2020 2021 Financial assets Cash and cash equivalents 105,623 72,885 105,623 72,885 Long-term trade receivables 326 - 326 - Trade receivables 69,301 90,756 69,301 90,756 Financial xed assets 10 9 10 9 Derivative nancial instruments 520 3,278 520 3,278 Financial liabilities Loans with a variable interest rate 9,290 2,706 9,276 2,706 Loans with a xed interest rate 133,966 120,590 135,466 122,795 Financial leasing liabilities 17,835 11,472 17,835 11,472 Derivative nancial instruments 980 650 980 650 Annual Report 2021 Annual Report 2021 234 During the reporting period ending 31 December 2021, there were no transfers between Level 1 and Level 2 fair value measurements and no transfers into and out of Level 3 fair value measurements. The values as determined under ‘Level 2’ are based on the ‘mark-to-market’ calculations by the financial institutions providing the financial instruments. As per 31 December 2020 the Group had the following financial instruments. As per 31 December 2021 the Group has the following financial instruments. DERIVATIVE FINANCIAL INSTRUMENTS HIERARCHICAL CLASSIFICATION OF FAIR VALUE IN € THOUSAND 2020 Level 1 Level 2 Level 3 FX forward contracts 520 - 520 - Assets at fair value 520 - 520 - FX forward contracts 980 - 980 - Liabilities at fair value 980 - 980 - DERIVATIVE FINANCIAL INSTRUMENTS HIERARCHICAL CLASSIFICATION OF FAIR VALUE IN € THOUSAND 2021 Level 1 Level 2 Level 3 FX forward contracts 3,278 - 3,278 - Assets at fair value 3,278 - 3,278 - FX forward contracts 650 - 650 - Liabilities at fair value 650 - 650 - 26. O-balance sheet commitments 27. Events after the balance sheet 28. List of subsidiaries The Group has the following off-balance sheet commitments as per 31 December 2021: • Capital expenditure commitments for €9.6 million; • Purchase commitments for raw material for an equivalent of €250.2 million for the period 2021 to No significant events have occurred after the balance sheet date. All financial periods close on 31 December 2021, apart from Deceuninck Profiles India Private Limited, as disclosed in Note 1. Fully consolidated subsidiaries: 2025 to secure sourcing in the coming years; • No export commitments; • Purchase commitments resulting from derivative forward agreements: see detailed information as included in Note 25 Risk management. 235 Financial Performance NAME OF THE COMPANY REGISTERED OFFICE Ownership percentage 2020 2021 AUSTRALIA Deceuninck Pty. Ltd. Warehouse B 88-106 Kyabram Street VIC 3048 Coolaroo 100.00 100.00 BELGIUM Solardec CV Bruggesteenweg 360 8830 Hooglede-Gits 28.77 28.77 Plastics Deceuninck NV Bruggesteenweg 360 8830 Hooglede-Gits 100.00 100.00 Tunal NV Bruggesteenweg 360 8830 Hooglede-Gits 100.00 100.00 BOSNIA AND HERZEGOVINA Deceuninck d.o.o Prvi mart bb 75270 Zivinice 100.00 100.00 BRAZIL Deceuninck do Brazil Rua da Barra 242 Parque Rincão CEP 06705 420 Cotia – São Paulo 100.00 100.00 BULGARIA Deceuninck Bulgaria EOOD 41 Sankt Peterburg Blvd 4000 Plovdiv 100.00 100.00 CHILE Deceuninck Importadora Limitada El Otoño 472 Lampa 9390306 Santiago 99.99 99.99 CROATIA Inoutic d.o.o. Industrijska ulica 3 10370 Dugo Selo (Zagreb) 100.00 100.00 Deceuninck d.o.o. Kipišće 13 10434 Strmec Samoborski 100.00 100.00 CZECH REPUBLIC Deceuninck Spol. s r.o Tuřanka 1519/115a 627 00 Brno-Slatina 100.00 100.00 COLOMBIA Deceuninck S.A.S. Zona France Parque Central - Variante Turbaco CII 1 Cra 2-5 DUP 1 Bdg 15 Turbaco - Colombia 100.00 100.00 FRANCE Deceuninck S.A.S. Zone Industrielle – Impasse des Bleuets 80700 Roye 100.00 100.00 GERMANY Deceuninck Germany GmbH Bayerwaldstrasse 18 94327 Bogen 100.00 100.00 Deceuninck Germany Produktions GmbH & Co KG Bayerwaldstrasse 18 94327 Bogen 100.00 100.00 Annual Report 2021 Annual Report 2021 236 NAME OF THE COMPANY REGISTERED OFFICE Ownership percentage 2020 2021 Deceuninck Holding Germany GmbH Bayerwaldstrasse 18 94327 Bogen 100.00 100.00 INDIA Ege Prol Tic, ve San. A.S. (branch) Mannur Village No 523 B Block Mannur Village – Sriperumbudur Taluk 631203 Chennai 88.47 88.32 Deceuninck Proles India Private Limited Building 09. Casa Grande Distripark Satharai Village. Thiruvallur Taluk Thiruvallur Thiruvallur TN 631203 88.47 88.44 ITALY Deceuninck Italia S.r.l. Via Padre Eugenio Barsanti. 1 56025 Pontedera (PI) 100.00 100.00 LITHUANIA Deceuninck Baltic UAB (in liquidation) Saltoniskiu str. 29/3 08105 Vilnius 100.00 100.00 MEXICO Deceuninck de Mexico Huajuapan No. 809 Int 2 C. Coronango 72680 Puebla 100.00 100.00 POLAND Deceuninck Poland Sp. z o.o. Jasin. Ul Poznanska 34 62-020 Swarzedz 100.00 100.00 ROMANIA Deceuninck Romania SRL Sos. De Centura nr. 13A Complex Key Logistics Center 077040 Chiajna town Jud.Ilfov 100.00 100.00 RUSSIA Deceuninck Rus OOO Butlerova str., 17, room 5106 117342 Moscow 100.00 100.00 THAILAND Deceuninck (Thailand) Co. Ltd. 2/3 Bangna Towers A 17 RM 1704B Bangna-Trad. Km 6.5 Bangkaew. Bangplee Samutprakarn 10540 74.00 74.00 Asia Prole Holding Co. Ltd. 2/3 Bangna Towers A 17 RM 1704B Bangna-Trad. Km 6.5 Bangkaew. Bangplee Samutprakarn 10540 48.95 48.95 THE NETHERLANDS Deceuninck Kunststof BV Basisweg 10 1043AP Amsterdam 100.00 100.00 TURKEY Ege Prol Ticaret ve Sanayi A.Ş Atatürk Plastik OSB Mahallesi. 5. Cadde No: 4 Menemen/İZMİR 35660 IZMIR 88.47 88.32 237 Financial Performance NAME OF THE COMPANY REGISTERED OFFICE Ownership percentage 2020 2021 Ege Pen A.Ş Atatürk Plastik OSB Mahallesi. 5. Cadde No: 4 Menemen/İZMİR 35660 IZMIR 99.99 100.00 UNITED KINGDOM Deceuninck Ltd. 2 Temple Back East Temple Quay Bristol BS1 6EG 100.00 100.00 Status Systems PVCU Ltd. 2 Temple Back East Temple Quay Bristol BS1 6EG 100.00 100.00 Range Valley Extrusions Ltd. 2 Temple Back East Temple Quay Bristol BS1 6EG 100.00 100.00 Deceuninck Holdings (UK) Ltd. 2 Temple Back East Temple Quay Bristol BS1 6EG 100.00 100.00 UNITED STATES Deceuninck North America Inc. 351 North Garver Road Monroe. 45050 Ohio 100.00 100.00 Deceuninck North America. LLC 351 North Garver Road Monroe. 45050 Ohio 100.00 100.00 NAME OF THE COMPANY REGISTERED OFFICE Ownership percentage 2020 2021 BELGIUM So Easy Belgium BV Stokkelaar 13 9160 Lokeren 50.00 50.00 POLAND So Easy System Sp. Z.o.o. ul. Dunska 4 05-152 Czosnow 50.00 50.00 Decalu Solutions Sp. z.o.o. ul. Dunska 4 05-152 Czosnow 51.00 51.00 Winco Sp. z.o.o.* ul. Dunska 4 05-152 Czosnow 50.00 Equity investees, refer to Note 8: * Winco Sp. Z.o.o. merged into So Easy System Sp. Z.o.o. Annual Report 2021238 Report of the Board of Directors Deceuninck NV–Belgium Australia Deceuninck PTY. Ltd. 100% Belgium Plastics Deceuninck NV 100% Tunal NV 99.81% Solardec CV 9.59% So Easy Belgium BV 50% Poland So Easy System Sp. Z o.o. 100% Brazil Deceuninck Do Brazil 99.99% Bulgaria Deceuninck Bulgaria Eood 100% Chile Deceuninck Importadora Limitada 99.99% Colombia Deceuninck Sas 100% Croatia Deceuninck D.o.o. 100% / Inoutic D.o.o. 100% Czech Republic Deceuninck Spol. S R. O. 100% France Deceuninck Sas 100% Germany Deceuninck Holding Germany Gmbh 100% Italy Deceuninck Italia S.R.L. 100% Lithuania Deceuninck Baltic Uab In Liquidation 100% Mexico Deceuninck De Mexico 98% Poland Deceuninck Poland Sp. Z o.o. 100% Decalu Solutions Sp. Z o.o. 51% 0.19% 9.59% 9.59% 239 Financial Performance Romania Deceuninck Romania SRL 100% Russia Deceuninck Rus OOO 100% Spain Branch Deceuninck NV Succursal En España 100% The Netherlands Deceuninck Kunststof BV 100% India Deceuninck Proles India Private Limited 1% Branch Ege Prol Tic. V. Sa AS (India) 100% Turkey Ege Prol AS 88.32% Ege Pen AS 100% United Kingdom Deceuninck Holdings UK Ltd. 100% United Kingdom Deceuninck Ltd. 100% United Kingdom Range Valley Extrusions Ltd. 100% United Kingdom Status Systems PVCU Ltd. 100% United States Deceuninck North America Inc. 100% United States Deceuninck North America Inc. 100% Germany Deceuninck Germany Gmbh 100% Germany Deceuninck Germany Productions Gmbh & Co KG 99.99% Bosnia Deceuninck D.O.O. 100% Thailand Asia Prole Holding CO. Ltd. 48.95% Deceuninck (Thailand) CO. Ltd. 49% 0,01% 99% 100% Annual Report 2021 Annual Report 2021 240 2.6.3 Deceuninck NV The following pages are extracts from the annual report and financial statements of Deceuninck NV. The complete version of the financial statements and the annual report will be available on request and via the Deceuninck website, at the times stipulated by the Belgian Code on Companies. The annual financial statements and the annual report are prepared in The operating revenues have increased due to an increase in sales volumes. Higher raw materials prices led consequently to higher selling prices and thus also supported operating revenues. The operating costs increased due to an unfavorable evolution of the raw material prices, higher energy prices and higher payroll expenses. Where payroll expenses were impacted in 2020 by the COVID-19 pandemic (which resulted into accordance with Belgian legal requirements, which differ considerably from the IFRS accounting principles that are applied to the consolidated financial statements. The External Auditor has issued an unqualified opinion regarding the 2021 annual financial statements of Deceuninck NV. lower plant production levels and the use of temporary unemployment government measures), activities in 2021 were much less interrupted because of the pandemic. The financial income mainly consists of intercompany dividends and interests while the financial costs are related to interests and foreign exchange results. Income statement The income statement for 2021 is presented below: INCOME STATEMENT IN € THOUSAND 2020 2021 Operating revenues 196,056 267,800 Operating costs (184,204) (260,148) Operating Prot 11,852 7,652 Financial income 45,498 9,838 Financial costs (58,216) (10,326) Prot (+) / Loss (-) For The Financial Year Before Taxes (866) 7,164 Income taxes (678) (259) Prot (+) / Loss (-) For The Financial Year (1,544) 6,905 Prot (+) / Loss (-) For The Financial Year Available For Appropriation (1,544) 6,905 241 Financial Performance The most important fluctuations are: • The intangible and tangible fixed assets remain stable because the new investments represent almost the same value as the 2021 depreciation totals; • The increase in financial fixed assets mainly results from a capital increase (contribution in kind of a long- term loan) in the Polish subsidiary. • The decrease in non-current other receivables is due to the contribution in kind mentioned above and a transfer of an intercompany receivable to current other receivables. • Increase in inventories due to general price increases and to respond to increased demand; • Increase in trade receivables linked to increased revenue; • The increase in current other receivables is mainly due to transfer of intercompany receivable from non- current other receivables; • Decrease in cash and cash equivalents due to increased working capital; • Move of the retail bond facility with expiry date December 2022 from long-term debts to short-term debts; • Increase in trade payables due to increased operating costs. Income statement BALANCE SHEET IN € THOUSAND 2020 2021 Intangible xed assets 3,146 2,292 Tangible xed assets 31,907 31,438 Financial xed assets 199,289 210,471 Other receivables 72,951 53,884 Non-current assets 307,293 298,085 Inventories 27,505 38,258 Trade receivables 36,400 48,598 Other receivables 23,392 29,333 Cash and cash equivalents 25,229 8,194 Other current assets 4,846 3,788 Current assets 117,372 128,171 TOTAL ASSETS 424,665 426,256 Issued capital 53,950 54,441 Share premiums 92,591 94,494 Reserves 15,466 15,520 Retained earnings 55,760 54,333 Equity 217,767 218,788 Provisions and deferred taxes 866 777 Long-term debts 100,000 - Short-term debts 104,521 205,597 Other liabilities 1,511 1,094 Liabilities 206,032 206,691 TOTAL EQUITY AND LIABILITIES 424,665 426,256 Annual Report 2021 Annual Report 2021 242 APPROPRIATION OF THE RESULTS OF DECEUNINCK NV IN € THOUSAND 2020 2021 Prot / (loss) from the scal year for appropriatoin (1,544) 6,905 Prot carried forward from previous year 64,141 55,760 Prot to be appropriated 62,597 62,665 Dividend 6,836 8,278 Prot to be carried forward 55,760 54,387 TOTAL 62,596 62,665 Result appropriation The Board of Deceuninck NV will propose to the General Assembly to distribute a gross dividend of 0.06 euro per share. 243 Financial Performance 2.6.4 External auditor’s report We present to you our statutory auditor’s report in the context of our statutory audit of the consolidated accounts of Deceuninck NV (the “Company”) and its subsidiaries (jointly “the Group”). This report includes our report on the consolidated accounts, as well as the other legal and regulatory requirements. This forms part of an integrated whole and is indivisible. We have been appointed as statutory auditor by the general meeting d.d. 28 April 2020, following the proposal formulated by the board of directors and following the recommendation by the audit committee and the proposal formulated by the works’ council. Our mandate will expire on the date of the general meeting which will deliberate on the annual accounts for the year ended 31 December 2022. We have performed the statutory audit of the Company’s consolidated accounts for 2 consecutive years. Report on the consolidated accounts Unqualified opinion We have performed the statutory audit of the Group’s consolidated accounts, which comprise the consolidated balance sheet as at 31 December 2021, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated accounts, including a summary of significant accounting policies and other explanatory information, and which is characterised by a consolidated balance sheet total of EUR ‘000 675,089 and a net profit attributable to the shareholders of the parent company of EUR ‘000 33,990. In our opinion, the consolidated accounts give a true and fair view of the Group’s net equity and consolidated financial position as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Basis for unqualified opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Belgium. Furthermore, we have applied the International Standards on Auditing as approved by the IAASB which are applicable to the year-end and which are not yet approved at the national level. Our responsibilities under those standards are further described in the “Statutory auditor’s responsibilities for the audit of the consolidated accounts” section of our report. We have fulfilled our ethical responsibilities in accordance with the ethical requirements that are relevant to our audit of the consolidated accounts in Belgium, including the requirements related to independence. We have obtained from the board of directors and Company officials the explanations and information necessary for performing our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Statutory auditor's report to the general shareholders’ meeting on the consolidated accounts for the year ended 31 December 2021 23 February 2022 Annual Report 2021 Annual Report 2021 244 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated accounts of the current period. These matters were addressed in the context of our audit of the consolidated accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Expected Credit Loss (ECL) for trade receivables - Note12 Description of key audit matter The allowance for expected credit losses on trade receivables amounts to EUR ‘000 9,991 as on 31 December 2021. The Group has applied the simplified approach in IFRS 9 ‘Financial Instruments’ to measure ECL for trade receivables, which allows for lifetime expected credit losses to be recognised at initial recognition of the receivables. The Group determines the expected credit losses on trade receivables by using a provision matrix that is based on historical observed default rates, adjusted for forward-looking factors specific to the debtors and the economic environment reflecting the customers' abilities to pay based on geographical region, type of customer, delinquency status, credit insurance, and other guarantees. In addition to this general approach, the Group includes individually managed exposures on a case by case basis if not covered by the ECL model. The allowance for trade receivables is important to our audit due to the magnitude of the gross trade receivables amount (EUR ‘000 100,747) and related allowance, the increased credit risk resulting from the COVID-19 pandemic, and because the calculation of the allowance involves management’s judgement in assessing the recoverability of the trade receivables of the Group based on the elements described above. How our audit addressed the key audit matter We have, amongst others, performed following procedures: • Evaluating the appropriateness of the accounting policies and obtaining an understanding of the process relating to the allowance for credit losses of trade receivables; • Evaluating the reasonableness of the key judgments and estimates relating to the calculation of probability of default and forward-looking factors made in the expected credit loss model; • Evaluating the completeness, accuracy and relevance of data used in the expected credit loss model and checking the mathematical accuracy of the calculations; • Testing on a sample basis whether individual trade receivables were classified appropriately in the accounts receivable ageing balance and in the reports presenting credit insured trade receivables; • Testing for a statistical sample of trade receivable balances on 31 December 2021, their existence and valuation through external confirmation procedures, subsequent cash collections, or reconciliation with delivery notes proving delivery to the customer effectively took place in 2021; • Assessing the adequacy of the disclosures in Note 12 (Impairment allowance on trade receivables) and Note 25 (Credit risk) of the consolidated accounts. We found management’s judgments in respect of the ECL model to be within an acceptable range of reasonable estimates. Responsibilities of the board of directors for the preparation of the consolidated accounts The board of directors is responsible for the preparation of consolidated accounts that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable 245 Financial Performance in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated accounts that are free from material misstatement, whether due to fraud or error. In preparing the consolidated accounts, the board of directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Statutory auditor’s responsibilities for the audit of the consolidated accounts Our objectives are to obtain reasonable assurance about whether the consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated accounts. In performing our audit, we comply with the legal, regulatory and normative framework applicable to the audit of the consolidated accounts in Belgium. A statutory audit does not provide any assurance as to the Group’s future viability nor as to the efficiency or effectiveness of the board of directors’ current or future business management at Group level. Our responsibilities in respect of the use of the going concern basis of accounting by the board of directors are described below. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors; • Conclude on the appropriateness of the board of directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our statutory auditor’s report to the related disclosures in the consolidated accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our statutory auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern; • Evaluate the overall presentation, structure and content of the consolidated accounts, including the disclosures, and whether the consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation; • Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an Annual Report 2021 Annual Report 2021 246 opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the consolidated accounts of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Other legal and regulatory requirements Responsibilities of the board of directors The board of directors is responsible for the preparation and the content of the directors’ report on the consolidated accounts, the separate report on non- financial information and the other information included in the annual report on the consolidated accounts. Statutory auditor’s responsibilities In the context of our engagement and in accordance with the Belgian standard which is complementary to the International Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify, in all material respects, the directors’ report on the consolidated accounts, the separate report on non-financial information and the other information included in the annual report on the consolidated accounts and to report on these matters. Aspects related to the directors’ report on the consolidated accounts and to the other information included in the annual report on the consolidated accounts In our opinion, after having performed specific procedures in relation to the directors’ report on the consolidated accounts, this directors’ report is consistent with the consolidated accounts for the year under audit and is prepared in accordance with article 3:32 of the Companies' and Associations' Code. In the context of our audit of the consolidated accounts, we are also responsible for considering, in particular based on the knowledge acquired resulting from the audit, whether the directors’ report on the consolidated accounts is materially misstated or contains information which is inadequately disclosed or otherwise misleading. In light of the procedures we have performed, there are no material misstatements we have to report to you. The non-financial information required by virtue of article 3:32, §2 of the Companies' and Associations' Code is included in the directors’ report on the consolidated accounts. The Company has prepared the non-financial information, based on the reference framework Global Reporting Initiative (GRI) Standards. However, in accordance with article 3:80, §1, 5° of the Companies' and Associations' Code, we do not express an opinion as to whether the non-financial information has been prepared in accordance with the Global Reporting Initiative (GRI) Standards as disclosed in the directors’ report on the consolidated accounts. 247 Financial Performance Statement related to independence • Our registered audit firm and our network did not provide services which are incompatible with the statutory audit of the consolidated accounts, and our registered audit firm remained independent of the Group in the course of our mandate. • The fees for additional services which are compatible with the statutory audit of the consolidated accounts referred to in article 3:65 of the Companies' and Associations' Code are correctly disclosed and itemized in the notes to the consolidated accounts. European Uniform Electronic Format (“ESEF”) In accordance with the standard on the draft verification of the compliance of the financial statements with the European Uniform Electronic Format (hereinafter “ESEF”), we must verify whether the ESEF format is in accordance with the regulatory technical standards established by the European Delegate Regulation No. 2019/815 of 17 December 2018 (hereinafter: “Delegated Regulation”). The board of directors is responsible for the preparation, in accordance with ESEF requirements, of the consolidated financial statements in the form of an electronic file in ESEF format (hereinafter “digital consolidated financial statements”) included in the annual financial report. Our responsibility is to obtain sufficient appropriate evidence to conclude that the format and marking language of the digital consolidated financial statements comply in all material respects with the ESEF requirements under the Delegated Regulation. The digital consolidated financial statements have not yet been submitted to us at the date of this report. If, in our audit of the digital consolidated financial statements, we determine that there is a material misstatement, we will be required to report the matter to the board of directors and request the latter to make any necessary changes. If this does not happen, we will be forced to adjust this report due to the fact that the format of and the marking of information in the digital consolidated financial statements included in the annual financial statements report of Deceuninck NV conform in all material respects with the ESEF requirements under the Delegated Regulation. Other statements This report is consistent with the additional report to the audit committee referred to in article 11 of the Regulation (EU) N° 537/2014. Ghent, 23 February 2022 The statutory auditor PwC Reviseurs d'Entreprises SRL / PwC Bedrijfsrevisoren BV Represented by Lien Winne Réviseur d’Entreprises / Bedrijfsrevisor Annual Report 2021 Annual Report 2021 248 Mission In accordance with Article 4 of the Transparency Direc- tive, the statutory auditors’ mission is to report on the compliance of the form and the XBRL marking language of the digital consolidated nancial statements in the form of an electronic le (hereinafter “digital con- solidated nancial statements”) in accordance with the ESEF requirements and taxonomy (more specically the provisions in force as laid down in the ESEF Regulatory Technical Standard, “ESEF RTS”) applicable to the digital consolidated nancial statements as at 31 December 2021. The Board of Directors responsibility The board of directors is responsible for the preparation of the digital consolidated nancial statements in accor- dance with the ESEF requirements and taxonomy (i.e. the provisions in force as set out in the ESEF Regulatory Technical Standards (ESEF Regulatory Technical Stan- dard, “ESEF RTS”) applicable to the digital consolidated nancial statements as at 31 December 2021). This responsibility includes the selection and application of the most appropriate methods to prepare the digital consolidated nancial statements. In addition, the responsibility of the board of directors includes design- ing, implementing and maintaining systems and processes relevant to the preparation of the digital con- solidated nancial statements that are free from material misstatement resulting from of fraud or errors. The board of directors should verify that the digital consolidated nancial statements are consistent with the user- readable consolidated nancial statements. Statutory Auditor’s responsibility Our responsibility is to express a conclusion as to whether the marking language XBRL of the digital con- solidated nancial statements of Deceuninck NV per 31 December 2021 complies in all material respects with the ESEF technical regulatory standards based on the work we perform. We conducted our work in accordance with Inter- national Standard on Assurance Engagements (ISAE) 3000 (Revised) “Assurance Engagements other than Audits or Reviews of Historical Financial Information”. This standard requires that we comply with ethical requirements and that we plan and perform the engage- ment to obtain reasonable assurance about whether nothing has come to our attention that causes us to believe that the digital consolidated nancial statements are, in all materiality, in that respect would not have been prepared in accordance with the ESEF technical regula- tory standards applied by the Company. The selection of the procedures performed depends on our judgment and assessment of the risk of material mis- Statutory auditor's report to the general shareholders’ meeting, in accordance with article 4 of the transparency directive, regarding the compliance of the consolidated financial statements in the form of an electronic file of Deceuninck nv as at 31 December 2021 with the ESEF requirements and taxonomy under the delegated regulation (EU) 2018/815. 249 Financial Performance statement in the digital consolidated nancial statements and in the statements of the board of directors. The entirety of the work performed by us consisted of, among other things, the following procedures: • Verify if the digital consolidated nancial statements are prepared in accordance with article 3 of the Trans- parency Directive; • Obtain an understanding of the processes of the Company's practice in the XBRL marking language of its digital consolidated nancial statements and of the controls relevant to the certication, in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the eectiveness of controls to provide reasonable assurance about whether the XBRL marking language of the digital consolidated nancial statements complies in all material respects with the ESEF regulatory technical standards; • Obtaining sucient appropriate audit evidence about the eective operation of controls relevant to the XBRL marking language of the digital consolidated nancial statements of Deceuninck NV per 31 December 2021; • Reconciliation of the marked data with the audited consolidated nancial statements of Deceuninck NV per 31 December 2021; • Assessing the completeness of the marking language of the digital consolidated nancial statements pre- pared by the Company; • Assessing the appropriateness of the Company's use of the iXBRL elements of the ESEF taxonomy and assessing the creation of the extension taxonomy. Our independence and quality control We have complied with the independence requirements and other ethical requirements of the legislation and regulations in force in Belgium that apply in the context of our assignment. These are founded on the fundamen- tal principles of integrity, objectivity, professional com- petence and due care, condentiality and professional behavior. Our audit rm applies International Standard on Quality Control (ISQC) n°1 and maintains a comprehensive sys- tem of quality control including documented policies and procedures regarding compliance with ethical require- ments, professional standards, and applicable legal and regulatory requirements. Our Conclusion Based on the procedures performed, we conclude that the XBRL marking language of the digital consolidated nancial statements of Deceuninck NV per 31 December 2021 complies in all material respects with the ESEF requirements and taxonomy (more specically the pro- visions in force as laid down in the ESEF regulatory technical standards (“ESEF RTS”) applicable to the digital Annual Report 2021 Annual Report 2021 250 consolidated nancial statements as at 31 December 2021. We do not express an audit opinion, a review conclusion or any other assurance conclusion on the consolidated nancial statements themselves in this report. Our audit opinion on the Group's consolidated nancial statements is set out in the statutory auditor's report dated 23 Febru- ary 2022. Other matter The consolidated nancial statements of Deceuninck NV (the “Company”) and its subsidiaries (jointly “the Group”) have been prepared by the board of directors of the Company on 23 February 2022 and has been subject to a statutory audit. Our statutory auditor's report (signed on 23 February 2022) includes an unqualied opinion on the true and fair view of the Group's equity and consolidated nancial position as of 31 December 2021, as well as its consolidated results and its consolidated cash ows for the year then ended, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium. Ghent, 24 March 2022 The statutory auditor PwC Reviseurs d'Entreprises SRL / PwC Bedrijfsrevisoren BV Represented by Lien Winne Réviseur d’Entreprises / Bedrijfsrevisor 251 2.6.5 Management Responsibility Statement The undersigned declare that: • the annual financial statements have been prepared in conformity with the applicable standards for financial statements, and that they give a fair view of equity position, of the financial condition and of the results of the Company, including those companies that have been included in the consolidated figures; • the annual report gives a true overview of the developments and results of the Company and of companies that have been included in the consolidated figures, also providing a true description of the most important risks and insecurities with which it is confronted, as defined in the Royal Decree of 14 November 2007 on the obligations of issuers of financial instruments admitted to trading on a regulated market. Beneconsult BV represented by Francis Van Eeckhout Executive Chairman HumbleBee Partners BV represented by Bruno Humblet CEO Financial Performance Annual Report 2021 Annual Report 2021 252 Deceuninck Group Share Deceuninck NV (ticker DECB, ISIN BE0003789063) has been listed on Euronext Brussels since 1985. Being listed provides the Group with alternative forms of financing, enhances visibility and ensures compliance and transparency. Number and types of shares The company capital amounts to €54,441,352.14 euro is represented by 138,040,929 shares. There are 88,839,385 dematerialised shares and 49,201,544 registered shares. The Group holds 69,769 treasury shares as at 31 December 2021. Quotation on the stock exchange Deceuninck NV shares are listed under the code DECB and are traded on the Continuous segment of Euronext Brussels. DECB is part of the BEL Mid® index. ICB sectorial classification: 2353 Building materials & fixtures. Evolution of the Deceuninck Group share price The closing price of the Deceuninck Group share increased from €1.93 on 31 December 2020 to €3.36 on 31 December 2021. The Volume Weighted Average Price (VWAP) for 2021 was €3.20. The lowest closing price was €2.01 on 6 January 2021 and the highest closing price was €4.14 on 25 August 2021. The average number of shares traded per day in 2021 was 150,379 versus 66,743 in 2020. Dividends At the Annual General Meeting scheduled on 26 April 2022, the Board will propose to pay a dividend of €0.06 per share for the financial year 2021. 140% 250,000 200,000 4.50 DECB BEL All-Share 120% 4.00 100% 3.50 80% 3.00 60% 150,000 2.50 40% 100,000 2.00 20% 50,000 1.00 1.50 31/20 31/20 31/03 31/03 30/06 30/06 30/09 30/09 31/12 31/12 0% 0% 0.50 0.00 0 50,000 100,000 150,000 200,000 250,000 decnovoktsepaugjuljunmeiaprmrtfebjan JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 202120202019 253 Deceuninck Shares Institutional investors and nancial analysts Deceuninck Group continuously and consistently informed the financial community about the evolution of the Group. Press releases with the annual and half year results were issued at scheduled intervals before stock exchange opening and published on the Investors page on our website (www.deceuninck.com/Investors) and on the website of the FSMA. A comprehensive press release on the FY 2021 results is released on 24 February 2022. Institutional investors at home and abroad were informed by the Group during several virtual conferences. Sell side financial analysts covering the Group: Kris Kippers (Degroof Petercam), Maxime Stranart (ING), Alexander Craeymeersch (Kepler Cheuvreux) and Wim Hoste (KBC Securities). Investor relations contact Investor relations: Bert Castel Telephone: +32 (0) 51 239 204 E-mail: [email protected] Website: http://www.deceuninck.com/investors Address: Deceuninck NV, Bruggesteenweg 360, 8830 Hooglede-Gits, Belgium On the Investors page of the Deceuninck Group corporate website (http://www.deceuninck.com/ investors) you can register to receive financial press releases per e-mail. Financial calendar 2022 24 February 2022 ↓ FY 2021 Results 26 April 2022 ↓ General Meeting 17 August 2022 ↓ H1 2022 Results Annual Report 2021 Annual Report 2021 254 AUSTRALIA Deceuninck Pty. Ltd. Warehouse B 88-106 Kyabram Street VIC 3048 Coolaroo T +61 3 9357 5033 – F +61 3 9357 5611 [email protected] BELGIUM Deceuninck NV Plastics Deceuninck NV Bruggesteenweg 360 8830 Hooglede-Gits T +32 51 239 211 – F +32 51 227 993 www.deceuninck.com [email protected] Deceuninck NV - Divisie Compound Cardijnlaan 15 8600 Diksmuide T +32 51 502 021 – F +32 51 504 948 Tunal NV Bruggesteenweg 360 8830 Hooglede-Gits T +32 51 239 211 – F +32 51 227 993 BOSNIA AND HERZEGOVINA Deceuninck d.o.o. Prvi mart bb 75270 Zivinice T +387 35 773313 – F +387 35 773312 www.deceuninck.ba [email protected] BRAZIL Deceuninck do Brazil Rua da Barra 242 Parque Rincão CEP 06705 420 Cotia – São Paulo Brazil T +55 11 2338 9190 [email protected] www.deceuninck.com.br BULGARIA Deceuninck Bulgaria EOOD 41 Sankt Peterburg Blvd. 4006 Plovdiv T +359 32 63 72 95 – F +359 32 63 72 96 [email protected] CHILE Deceuninck Importadora Limitada El Otoño 472 Lampa 9390306 Santiago T +562 32750800 CHINA Rep. Office Deceuninck NV China (Qingdao) 8 Dong Chuan Lu (5#-2-404 Bo Yue Lan Ting) 266000 Licang, Qingdao, Shandong T +86 532 858 903 57 [email protected] Addresses 255 Addresses COLOMBIA Deceuninck S.A.S. Zona Franca Parque Central - Variante Turbaco Cll 1 Cra 2-5 DUP 1 - Bdg 15 Turbaco – Colombia +57 5 6517017 [email protected] www.deceuninck.co Deceuninck S.A.S. Barrio Bocagrande, Cl 7 Cr 1 – 63 Turbaco – Colombia [email protected] www.deceuninck.co CROATIA Inoutic d.o.o. Industrijska ulica 3 10370 Dugo Selo (Zagreb) T +385 1 278 1353 – F +385 1 278 1351 Deceuninck d.o.o Kipišće 13 10434 Strmec Samoborski T +385 1 278 1353 – F +385 1 278 1351 [email protected] www.deceuninck.hr CZECH REPUBLIC Deceuninck Spol. s r.o Tuřanka 1519/115a 627 00 Brno-Slatina T +420 547 427 777 [email protected] www.inoutic.cz FRANCE Deceuninck SAS Zone Industrielle – Impasse des Bleuets 80700 Roye T +33 3 22 876 666 [email protected] www.deceuninck.fr GERMANY Deceuninck Holding Germany GmbH Deceuninck Germany Produktions GmbH & Co KG Deceuninck Germany GmbH Bayerwaldstraße 18 94327 Bogen T +49 94 22 821 0 – F +49 94 22 821 379 Deceuninck Germany GmbH Warehouse Industriestrasse 2-4 94336 Hunderdorf T +49 94 22 821 0 – F +49 94 22 821 379 www.inoutic.com [email protected] INDIA Deceuninck Profiles India Private Limited Building 09. Casa Grande Distripark Satharai Village. Thiruvallur Taluk 631203 Chennai T +91 87 54 57 40 63 Deceuninck Profiles India Private Limited Plot No. 46 Sector Ecotech-12, Greater Noida UP 201310 Noida T +91 87 54 55 01 65 Annual Report 2021 Annual Report 2021 256 Sales offices Deceuninck Profiles India Private Limited Srishiti Plaza Sakhi Vihar Road Andheri ( D) 400072 Mumbai +91 87 54 55 06 45 Deceuninck Profiles India Private Limited 3157 Indira Nagar Double Road, Apparddipalya Indira Nagar, Bengaluru 560008 Bengaluru T +91 93 84 66 73 25 [email protected] www.deceuninck.in ITALY Deceuninck Italia S.r.l. Via Padre Eugenio Barsanti 1 56025 Pontedera (Pl) T +39 0587 484426 – F +39 0587 54432 [email protected] www.deceuninck.it MEXICO Deceuninck Mexico SA de CV Huajuapan No. 809 Int 2 C. Coronango 72680 Puebla [email protected] www.deceuninck.com.mx THE NETHERLANDS Deceuninck Kunststof BV Basisweg 10 1043AP Amsterdam POLAND Deceuninck Poland Sp. Z o.o. Jasin, Ul. Poznanska 34 62-020 Swarzedz T +48 61 81 87000 – F +48 61 81 87001 [email protected] www.deceuninck.pl Deceuninck Poland Sp. Z o.o. EMABO Waldemar Ślebioda, ul. Parkowa 3 Sepno 64-060 Wolkowo Deceuninck Poland Sp. Z o.o. Imperial Logistics, ul. Rabowicka 13 62-020 Swarzedz Deceuninck Poland Sp. Z o.o. Bud-Rental Investment - Bugay, ul. Kobylnicka 52 62-007 Biskupice Deceuninck Poland Sp. Z o.o. Lech Fabrics - ul. Krajowa 17 62-025 Kostrzyn ROMANIA Deceuninck Romania SRL Soseaua de Centura 13A Complex KLC 077040 Chiajna town, judetul ILFOV T +40 21 327 49 52 – F +40 213 191733 [email protected] www.deceuninck.ro 257 Addresses RUSSIA Deceuninck Rus OOO Butlerova str., 17, room 5106 117342 Moscow +7 (499) 110-05-22 Deceuninck Rus OOO pr. Naumova 5 Moscow region 142281 Protvino Deceuninck Rus OOO Chapaeva str. 39a Sverdlov region 623704 Berezovsky T +7 (499) 110-05-22 [email protected] www.deceuninck.ru SPAIN Deceuninck NV Sucursal en España Avda. de la Industria 1007 Pol. Ind. Antonio del Rincón 45222 Borox – Toledo T +34 925 527 241 www.deceuninck.es [email protected] THAILAND Deceuninck (Thailand) Co.Ltd 79/74 Moo 12, Bangna-Trad Rd Bangkaew Bangplee 10540 Samutprakarn T +66 2 751 9544 5 [email protected] Deceuninck (Thailand) Co.Ltd 79/81 Moo 12, Bangna-Trad Rd Bangkaew Bangplee 10540 Samutprakarn T +66 2 751 9544 5 [email protected] TURKEY Ege Profil Tic.ve San.A.Ş Atatürk Plastik OSB Mahallesi, 5. Cadde No. 4 Menemen – 35660 İzmir T +90 232 398 98 98 – F +90 232 376 71 63 [email protected] Ege Profil Tic.ve San.A.Ş Sarımeşe Mah. Suadiye Cad. Winsa İdari Bina Apt. No. 5 Kartepe – 41400 İzmir T +90 262 371 57 27 – F +90 262 371 57 28 [email protected] Ege Profil Tic.ve San.A.Ş Çepni Mah. Bağdat Cad. No. 35 Suadiye Kartepe – 41400 İzmir T +90 262 371 57 27 – F +90 262 371 57 28 [email protected] Ege Profil Tic.ve San.A.Ş Atatürk Plastik OSB Mahallesi, 1. Cadde No. 5 Menemen – 35660 İzmir T +90 232 398 98 98 – F +90 232 376 71 63 [email protected] Sales offices Ege Profil Tic.ve San.A.Ş Kızılırmak Mah. 1446 Sk. No. 12/17 Çukurambar Çankaya – 06530 Ankara T +90 312 442 83 60 – F +90 312 442 71 11 [email protected] Annual Report 2021 Annual Report 2021 258 Ege Profil Tic.ve San.A.Ş İçerenköy mah. Çayır Yolu Sok. No. 5 Bay Plaza Kat. 3 Ataşehir – 34752 Istanbul T +90 216 537 13 60 – F +90 216 537 13 64 [email protected] Ege Profil Tic.ve San.A.Ş Yeni Mahalle 87071 Sok. Bozkurtlar Rezidans No. 50 K.3D.3 Seyhan – 01200 Adana T +90 322 247 23 90 – F +90 322 247 23 85 [email protected] Ege Profil Tic.ve San.A.Ş Kızılırmak Mah, 1446 Cad. Alternatif Plaza No. 12/26 Çukurambar Çankaya – 06530 Ankara T +90 312 440 16 15 – F +90 312 441 11 18 [email protected] Ege Profil Tic.ve San.A.Ş Yeni Mahalle 87071 sk. No. 50-1 Bozkurtlar Recidance Kat. 3 Daire: 2 Seyhan – 01200 Adana T +90 322 247 23 80 – F +90 322 247 23 81 [email protected] Ege Profil Tic.ve San.A.Ş Beylikbağı mah. İstanbul Cad, No. 29 Gebze – 41400 Kocaeli T +90 262 371 57 27 – F +90 262 371 28 38 [email protected] Ege Profil Tic.ve San.A.Ş Yeni Mah. 87071 Sok. Bozkurtlar Rezidans K. 12 No. 20 Seyhan – 01200 Adana T +90 322 233 52 13-14 – F +90 322 233 52 15 [email protected] Ege Profil Tic.ve San.A.Ş İçerenköy Mah. Çayır Cad. No. 5 Bay Plaza K. 12 Ataşehir – 34752 Istanbul T +90 216 807 01 70 – F +90 216 469 55 71 [email protected] Ege Profil Tic.ve San.A.Ş İçerenköy Mah. Çayır Cad. No. 5 Bay Plaza K. 9 Ataşehir – 34752 Istanbul [email protected] Ege Profil Tic.ve San.A.Ş Beştepe Mahallesi Yaşam Caddesi No. 13 A/74 Merkez Yenimahalle – 06560 Ankara T +90 312 441 73 98 – F +90 312 440 14 04 [email protected] UNITED KINGDOM Deceuninck Holdings UK Ltd. Deceuninck Ltd. Range Valley Extrusions Ltd. Status Systems PVCU Ltd. Unit 2. Stanier Road Porte Marsh Calne – Wiltshire SN11 9PX T +44 1249 816 969 – F +44 1249 815 234 Deceuninck Ltd. - warehouse Beversbrook Industrial Estate Porte Marsh Calne – Wiltshire SN11 9PX T +44 1249 816 969 – F +44 1249 815 234 www.deceuninck.com [email protected] 259 Addresses UNITED STATES Deceuninck North America LLC Deceuninck North America Inc. 351 North Garver Road 45050 Monroe, Ohio T 001 513 539 4444 – F 001 513 539 5404 Deceuninck North America LLC 203 North Garver Road 45050 Monroe, Ohio T 001 513 539 4444 – F 001 513 539 5404 Deceuninck North America Inc. 240 Nevada Pacific Parkway 89408 Fernley, Nevada T 001 513 539 4444 – F 001 513 539 5404 [email protected] www.deceuninck-americas.com Annual Report 2021 Annual Report 2021 260 Glossary EBITDA EBITDA is defined as operating profit / (loss) adjusted for depreciation / amortizations and impairment of fixed assets. 2020 2021 Operating profit 45,887 54,278 Depreciations & impairments (39,604) (38,553) EBITDA 85,491 92,832 Adjusted EBITDA Adjusted EBITDA is defined as operating profit / (loss) adjusted for (i) depreciations, amortizations and impairment of fixed assets, (ii) integration & restructuring expenses, (iii) gains & losses on disposal of consolidated entities, (iv) gains & losses on asset disposals, (v) impairment of goodwill and impairment of assets resulting from goodwill allocation. 2020 2021 EBITDA 85,491 92,832 Integration & restructuring expenses 1,825 4,907 Result realized on disposal of a sales entity 866 - Gains on assets disposals (3,427) - Impairment of intangible fixed assets arising from goodwill allocation 1,289 - Adjusted EBITDA 86,045 97,739 EBIT EBIT is defined as Earnings before interests and taxes (operational result). 2020 2021 EBITDA 85,491 92,832 Depreciations & impairments (39,604) (38,553) EBIT 45,887 54,278 EBT EBT is defined as Earnings before taxes. EPS (non-diluted) EPS (non-diluted) are the non-diluted earnings per share and is defined as Earnings attributable to ordinary shareholders over the weighted average number of ordinary shares. EPS (diluted) EPS (diluted) are the diluted earnings per share and is defined as Earnings attributable to ordinary shareholders over the sum of weighted average number of ordinary shares and the weighted average number of ordinary shares which would be issued upon conversion into ordinary shares of all exercisable warrants leading to dilution. 261 Glossary Net debt Net debt is defined as the sum of current and non-current interest- bearing borrowings minus cash and cash equivalents. 2020 2021 Interest-bearing loans – non-current 137,022 13,002 Interest-bearing loans - current 24,069 121,765 Cash and cash equivalents (105,623) (72,885) Net debt 55,468 61,882 Working capital Working capital is calculated as the sum of trade receivables and inventories minus trade payables. 2020 2021 Trade receivables 69,301 90,756 Inventories 112,907 169,589 Trade payables (107,963) (176,009) Working capital 74,245 84,336 Capital employed (CE) The sum of non-current assets and working capital. 2020 2021 Working capital 74,245 84,336 Non-current assets 273,139 270,555 Capital employed (CE) 347,384 354,890 Subsidiaries Companies in which the Group owns a participation in excess of 50 % or companies over which the Group has control. MTM Mark-to-Market. Headcount (FTE) Total Full Time Equivalents including temporary and external staff. Restricted Group The Restricted Group consists of all entities of the Group excluding Turkish subsidiaries and their subsidiaries. Leverage Leverage is defined as the ratio of Net debt to LTM (Last Twelve Months) Adjusted EBITDA. 2020 2021 Net debt 55,468 61,882 LTM Adjusted EBITDA 86,045 97,739 Leverage 0.6 0.6 Annual Report 2021 Annual Report 2021 262 GENERAL DISCLOSURES 2021 Topic Disclosure Reference 1. The organization and its reporting practices 2-1 Organizational details Legal and organizational structure 2-2 Entities includes in the organizations' sustainability reporting Reporting framework and scope 2-3 Reporting period, frequency, contact point 01/01/2021-31/12/2021. Annual. Publicationdate: 24 February 2022, contact: [email protected] 2-4 Restatements of information No restatements 2-5 External assurance No external assurance 2. Activities and workers 2-6 Activities, value chain and other business relationships What we do How we create value 2-7 Employees People; Methodology: FTE 2-8 Workers who are not employees People (temporary employees) 3. Governance 2-9 Governance structure and composition The Board and its Committees - Composition of the Board - Compositionof its committees 2-10 Nomination and selection of the highest governance body Article 34 of the Belgian Royal Decree of 14 November 2007 - Rules governing the appointment and replacement of Board members and the amendment of the Articles of Association of Deceuninck NV Diversity Policy - Criteria 2-11 Chair of the highest governance body The Board and its Committees - Composition of the Board 2-12 Role of the highest governance body in overseeing the management of impacts Sustainability - Governance 2-13 Delegation of responsibility for managing impacts Information unavailable/incomplete 2-14 Role of the highest governance body in sustainability reporting Sustainability - Governance 2-15 Conicts of interest Transactions betweenrelated parties + Transactions between the Company and its Directors, not covered by the legal provisions governing conicts of interest GRI Index 263 GRI Index GENERAL DISCLOSURES 2021 Topic Disclosure Reference 2-16 Communication of critical concerns Information unavailable/incomplete 2-17 Collective knowledge of the highest governance body Information unavailable/incomplete 2-18 Evaluation of the performance of the highest governance body The Board and its Committees - mainfeatures of the evaluation process 2-19 Remuneration policies Remuneration report 2-20 Process to determine remuneration Remuneration report 2-21 Annual total compensation ratio Information unavailable/incomplete 4. Strategy, policies and practices 2-22 Statement on sustainable development strategy Message from the Chairman and the CEO 2-23 Policy commitments Code of Conduct (signed by employees): Community - Business ethics Supplier Code of Conduct (signed by suppliers): Community - Business ethics in the supply chain 2-23 Level at which each of the policy commitments was approved within the organization Executive Management 2-24 Embedding policy commitments Information unavailable/incomplete 2-25 Processes to remediate negative impacts Information unavailable/incomplete 2-26 Mechanisms for seeking advice and raising concerns Reporting via e-mail to the trust persons, the compliance ocer or Chairman of the Audit Committee 2-27 Compliance with laws and regulations Number of non-compliances: 0 2-28 Membership associations EPPA, Esscencia 5. Stakeholder management 2-29 Approach to stakeholder engagement Our sustainability strategy - MaterialityAnalysis 2-30 Collective bargaining agreements 31% Annual Report 2021 Annual Report 2021 264 GRI TOPICSPECIFIC DISCLOSURES Topic Disclosure Reference to the Sustainability Report Anti-corruption GRI 205 1. Communication and training about anti- corruption policies and procedures Community - Results and Targets - Business Ethics 2. Conrmed incidents of corruption and actions taken Environment GRI 301 1. Materials used by weight or volume Planet - Results and Targets - Product Design and Lifecycle Management 2. Recycled input materials used GRI 302 1. Energy consumption within and outside the organization Planet - Results and Targets - EnergyManagement 3. Energy intensity GRI 303 1. Water withdrawal by source Planet - Results and Targets - WaterManagement GRI 305 1. Direct (Scope 1) GHG emissions Planet - Results and Targets - CarbonManagement 2. Energy indirect (Scope 2) GHG emissions 3. Other indirect (Scope 3) GHG emissions 4. Reduction of GHG emissions GRI 306 1. Waste generated Planet - Results and Targets - WasteManagement 2. Waste diverted from disposal 3. Waste directed to disposal Social GRI 405 1. Diversity of governance bodies and employees Corporate Governance Statement - Diversity Policy People - Resultsand argets - Diversity GRI 416 1. Assessment of the customer health and safety impacts of product and service categories Community - Results and Targets - Healthand Safety of the End-user 2. Incidents of non-compliance concerning the health and safety impacts of products and services GRI 417 1. Environmental requirements for product and service information and labeling Planet - Results and Targets - Product Design and Lifecycle Management GRI 401 1. New employee hires and employee turnover People - Results and Targets - Employment GRI 403 1. Occupational health and safety management system People - Results and Targets - Health andSafety 9. Work-related injuries GRI 404 3. Percentage of employees receiving regular performance and career development reviews People - Results and Targets - Talent Management GRI 412 3. Signicant investment agreements and contracts that include human rights clauses or that underwent human rights screening Community - Results and Targets - Business Ethics in the Supply Chain 265 GRI Index Building a sustainable home, Deceuninck, Dorado, Ege Pen Deceuninck, Ege Profil, Forthex, iCOR, Innergy, Pimapen, PROtex, ThermoFibra, Tunal, Twinson Click, Winsa, Zendow are (a.o.) registered trademarks of Deceuninck NV and its subsidiaries. This annual report is available in Dutch and English. Dit jaarrapport is verkrijgbaar in het Nederlands en het Engels. Responsible editor Serge Piceu Representative of Emveco BV CFO Creation Focus Advertising Copyright © 2022 Deceuninck NV – All rights reserved Registered office & business address: Deceuninck NV Bruggesteenweg 360 – 8830 Hooglede-Gits (Belgium) VAT BE405.548.486 – RPR GHENT, DIVISION COURTRAI Deceuninck nv - Benelux · Bruggesteenweg 360 · BE-8830 Hooglede-Gits T +32 51 239 272 · [email protected] · www.deceuninck.be 549300R6YGQQ24P6WW722020-01-012020-12-31549300R6YGQQ24P6WW722021-01-012021-12-31549300R6YGQQ24P6WW722020-12-31549300R6YGQQ24P6WW722021-12-31549300R6YGQQ24P6WW722019-12-31ifrs-full:IssuedCapitalMember549300R6YGQQ24P6WW722019-12-31ifrs-full:SharePremiumMember549300R6YGQQ24P6WW722019-12-31ifrs-full:RetainedEarningsMember549300R6YGQQ24P6WW722019-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300R6YGQQ24P6WW722019-12-31DEC:TreasurySharesNotHeldInSubsidiariesMember549300R6YGQQ24P6WW722019-12-31DEC:TreasurySharesHeldInSubsidiariesMember549300R6YGQQ24P6WW722019-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300R6YGQQ24P6WW722019-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R6YGQQ24P6WW722019-12-31ifrs-full:NoncontrollingInterestsMember549300R6YGQQ24P6WW722019-12-31549300R6YGQQ24P6WW722020-01-012020-12-31ifrs-full:IssuedCapitalMember549300R6YGQQ24P6WW722020-12-31ifrs-full:IssuedCapitalMember549300R6YGQQ24P6WW722020-01-012020-12-31ifrs-full:SharePremiumMember549300R6YGQQ24P6WW722020-12-31ifrs-full:SharePremiumMember549300R6YGQQ24P6WW722020-01-012020-12-31ifrs-full:RetainedEarningsMember549300R6YGQQ24P6WW722020-12-31ifrs-full:RetainedEarningsMember549300R6YGQQ24P6WW722020-01-012020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300R6YGQQ24P6WW722020-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300R6YGQQ24P6WW722020-01-012020-12-31DEC:TreasurySharesNotHeldInSubsidiariesMember549300R6YGQQ24P6WW722020-12-31DEC:TreasurySharesNotHeldInSubsidiariesMember549300R6YGQQ24P6WW722020-01-012020-12-31DEC:TreasurySharesHeldInSubsidiariesMember549300R6YGQQ24P6WW722020-12-31DEC:TreasurySharesHeldInSubsidiariesMember549300R6YGQQ24P6WW722020-01-012020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300R6YGQQ24P6WW722020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300R6YGQQ24P6WW722020-01-012020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R6YGQQ24P6WW722020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R6YGQQ24P6WW722020-01-012020-12-31ifrs-full:NoncontrollingInterestsMember549300R6YGQQ24P6WW722020-12-31ifrs-full:NoncontrollingInterestsMember549300R6YGQQ24P6WW722021-01-012021-12-31ifrs-full:IssuedCapitalMember549300R6YGQQ24P6WW722021-12-31ifrs-full:IssuedCapitalMember549300R6YGQQ24P6WW722021-01-012021-12-31ifrs-full:SharePremiumMember549300R6YGQQ24P6WW722021-12-31ifrs-full:SharePremiumMember549300R6YGQQ24P6WW722021-01-012021-12-31ifrs-full:RetainedEarningsMember549300R6YGQQ24P6WW722021-12-31ifrs-full:RetainedEarningsMember549300R6YGQQ24P6WW722021-01-012021-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300R6YGQQ24P6WW722021-12-31ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember549300R6YGQQ24P6WW722021-01-012021-12-31DEC:TreasurySharesNotHeldInSubsidiariesMember549300R6YGQQ24P6WW722021-12-31DEC:TreasurySharesNotHeldInSubsidiariesMember549300R6YGQQ24P6WW722021-01-012021-12-31DEC:TreasurySharesHeldInSubsidiariesMember549300R6YGQQ24P6WW722021-12-31DEC:TreasurySharesHeldInSubsidiariesMember549300R6YGQQ24P6WW722021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300R6YGQQ24P6WW722021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300R6YGQQ24P6WW722021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R6YGQQ24P6WW722021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300R6YGQQ24P6WW722021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember549300R6YGQQ24P6WW722021-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:EURiso4217:EURxbrli:shares
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