Z Beta S.à.r.l. INTERIM CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS For the periods ended June 30, 2014 and 2013

Transcription

1 INTERIM CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS For the periods ended June 30, 2014 and 2013

2 2

3 CONTENTS page Interim condensed unaudited consolidated Financial Statements 4 Interim condensed Notes of unaudited consolidated Financial Statements 10 3

4 INTERIM CONDENSED CONSOLIDATED BALANCE SHEET For the periods ended June 30, 2014 and December 31, 2013 In thousands of Euros Notes As of As of June 30, 2014 December 31, 2013 (* restated) ASSETS Net Tangible assets 6 75,401 77,807 Net Intangible assets 7 8,636 7,647 Goodwill , ,133 Other investments Deferred Tax Assets 8,341 8,341 Other Non Current Assets 1,181 1,015 TOTAL NON CURRENT ASSETS 296, ,548 Net Inventories 8 31,619 32,115 Commercial External Receivables 9 64,752 61,657 Income Tax Receivable 3,257 2,654 Other Receivables 30,045 9,119 Cash and Banks 10 41,884 41,584 TOTAL CURRENT ASSETS 171, ,129 TOTAL ASSETS 467, ,677 EQUITY AND LIABILITIES Share Capital 14,000 14,000 Reserves 231, ,771 Retained Earnings (79,494) (79,245) Currency Translation Reserve (1,447) (2,463) Profit (loss) of the period 465 1,876 TOTAL EQUITY attributable to the OWNERS of the company , ,939 Non controlling - interest Capital and Reserves 3,270 2,771 Non controlling - interests profit (loss) of the period TOTAL EQUITY OF NON CONTROLLING INTERESTS 3,374 3,267 TOTAL EQUITY 168, ,206 Long Term Loans 10 1,141 1,302 Shareholders Loan Other Non Current Financial Liabilities , ,440 Deferred Tax Liabilities 16,922 16,922 Restructuring Contingency Reserve Employee Termination Benefits 2,648 2,657 Other Non Current Liabilities - 1,428 TOTAL NON CURRENT LIABILITIES 194, ,749 Commercial External Payables 66,456 61,164 Income Tax Payables - - Restructuring Contingency Reserve ,341 Deferred Tax Liabilities - Current - - Other Payables 32,097 13,468 Current Portion on Loans 10 6,346 6,379 Bank Overdrafts TOTAL CURRENT LIABILITIES 105,533 82,722 TOTAL LIABILITIES 299, ,471 TOTAL EQUITY & LIABILITIES 467, ,677 (*) Certain amounts shown here do not correspond to the annual consolidated financial statements as at 31 December 2013 and reflect adjustment made as detailed in Note 2.1 4

5 INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT For the periods ended June 30, 2014 and 2013 In thousands of Euros Notes Three Months ended Three Months ended Six Months ended Six Months ended June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013 NET SALES ,651 86, , ,375 Cost of sales ,389 68, , ,886 GROSS PROFIT 17,261 17,350 31,680 34,489 Gross Profit % 23.1% 20.1% 22.1% 19.7% Overhead ,721 6,914 13,004 13,162 Other Expense/(Income) (281) (485) (736) (1,074) EBITDA BEFORE NON-RECURRING TRANSACTIONS 10,822 10,921 19,413 22,401 Ebitda before non recurring transactions % 14.5% 12.7% 13.6% 12.8% Depreciation, amortization and write-downs 3,536 3,624 7,022 7,710 EARNINGS BEFORE INTEREST & TAXES & NON RECURRING TRANSACTIONS 7,286 7,297 12,391 14,691 Ebit before non recurring transactions % 9.8% 8.5% 8.7% 8.4% Cost (Income) from Non-recurring transactions , , Restructuring Costs EARNINGS BEFORE INTEREST & TAXES 5,477 6,919 10,507 14,106 Financial (Income)/Expenses ,964 3,656 8,594 8,892 PROFIT BEFORE TAXES 1,513 3,263 1,912 5,214 Income Tax 893 2,152 1,344 3,801 PROFIT (LOSS) for the PERIOD 619 1, ,413 Profit (loss) for the period % 0.8% 1.3% 0.4% 0.8% Attributable to: Owners of the Company Non - controlling interests EARNING PER SHARE (In Euros) Basic (Euro) Diluted (Euro)

6 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the periods ended June 30, 2014 and 2013 In thousands of Euros Notes Three Months Three Months ended ended Six Months ended Six Months ended June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013 PROFIT (LOSS) for the PERIOD 619 1, ,413 OTHER COMPREHENSIVE INCOME Net (loss)/gain on cash flow hedges Income tax effect Exchange differences on translation of foreign operations 1,266 (1,024) 1, Net other comprehensive income to be reclassified to profit or 1,266 (1,024) 1, Actuarial gains/(losses) on defined benefit plans Income tax effect Net other comprehensive income not to be reclassified to profi TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, N 1, ,588 2,285 Attributable to: Owners of the Company 1, ,481 1,726 Non-controlling interests 55 (136)

7 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY As of and In thousands of Euros Share Capital Share Premium and other Reserves (* restated) Legal Reserve Retained Earnings (* restated) Foreign Currency Transl. Reserve (* restated) Cash Flow Hedge Reserve Profit/(Loss) for the Period Total Equity pertaining to the owners Non - controlling interests Total Equity Ending Balance as of December 31, , ,341 1,400 (59,723) 24 - (16,001) 164,041 8, ,606 (Loss)/profit of the year ,413 Destination (Loss)/profit (16,001) , Employee benefits differences Currency translation differences (49) 872 Cash flow hedge reserve differences Other movements Total comprehensive income (16,001) ,806 1, ,285 Dividend distribution Equity increase/(decrease) Change in consolidation area (819) (819) (1,605) (2,423) Total contribution by and distribution to owners of the Company recognized directly in Equity (819) (819) (1,605) (2,423) Ending Balance as of June 30, , ,341 1,400 (76,542) ,949 7, ,468 Ending Balance as of December 31, , ,371 1,400 (79,245) (2,463) - 1, ,939 3, ,206 (Loss)/profit of the year Destination (Loss)/profit ,125 - (249) - - (1,876) Employee benefits differences Currency translation differences , , ,019 Cash flow hedge reserve differences Total comprehensive income - 2,125 - (249) 1,016 - (1,411) 1, ,588 Dividend distribution Equity increase/(decrease) Change in consolidation area Other movements - (629) (629) - (629) Total contribution by and distribution to owners of the Company rognised directly in Equity - (629) (629) - (629) Ending Balance as of June 30, , ,867 1,400 (79,494) (1,447) ,791 3, ,165 (*) Certain amounts shown here do not correspond to the annual consolidated financial statements as at 31 December 2013 and reflect adjustments made as detailed in Note 2.1 7

8 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW As of and In thousands of Euros Notes Six Months Six Months ended ended June 30, 2014 June 30, 2013 EARNINGS BEFORE INTEREST & TAXES & NON RECURRING TRANSACTIONS 10,507 14,691 Depreciation and Amortization 6,982 7,710 Restructuring Costs & Other Non Recurring ,884 (585) Other Non-Cash Provisions (656) 1,183 (A) TOT- CASH INFLOW 18,716 22,998 Inventories (inc)/dec 8 1, Trade Receivables (inc)/dec (3,377) (4,954) Trade Payables inc/(dec) 3,748 (8,930) Other Working Capital (inc)/dec (4,969) (1,211) (B) TOT. WORKING CAPITAL CHANGE (3,149) (14,703) (C) Income Tax (Paid) / Reimbursed (1,947) (3,478) (D) = (A+B+C) OPERATING CASH FLOW 13,621 4,816 Fixed Intangible Assets (1,219) 2,205 Fixed Tangible Assets 6,783 4,570 (E) TOT. NET CAPITAL EXPENDITURES 5,564 6,776 (F) Other L/T Liabilities Movements - 68 (G) Investments - - (H)=(D-E+F-G) CASH FLOW GENERATED 8,057 (1,892) Total Interest and Other Financial Costs Paid (7,664) (1,546) Currency Translation Effect 1, Minority Acquisition - (2,423) Capital Received/ (Dividend Paid) - - Other Non Financial Movements (233) 978 (I) FINANCIAL MOVEMENTS (6,879) (2,120) (L) BANK & LOANS MOVEMENTS (877) 5,554 (M)=(H+I+L) TOT. NET CASH FLOW IN/(OUT) 300 1,543 Cash and Bank beginning of the year 10 41,584 28,364 Cash and Bank year end 10 41,884 29,907 Variation 300 1,543 8

9 1) INTRODUCTION Z Beta S.à r.l. (hereinafter the Company and, together with its subsidiaries, the Group ) is a Luxembourg holding company incorporated on October 11, 2006 as a société à responsabilité limitée for an unlimited period of time, subject to general company law. It is controlled by Z Alpha S.A., a Luxembourg holding company incorporated on October 11, The registered office of the Company is 28, Boulevard Royal, L-2449 Luxembourg. Z Beta S.à.r.l., is included in the consolidated accounts of DH Z S.à r.l, a Luxembourg holding company incorporated on November 15, 2006 as a société à responsabilité limitée for an unlimited period of time, subject to general company law. The registered office of DH Z. S.à r.l. is 28, boulevard Royal, L-2449 Luxembourg and the consolidated accounts for the year ended December 2012 and 2011 can be obtained at such address. The Group is a leading global supplier of air care and insecticide devices and it primarily sells its products to fast-moving consumer goods companies. The Group operates as a "one-stop-shop," offering its customers global solutions and services covering the entire value chain from product innovation and development to manufacturing and delivery. The Group leverages a common technology platform relating to dispensing devices, such as electric plug-ins and aerosol devices, across its product categories. 2) SUMMARY OF ACCOUNTING POLICIES 2.1. Basis of preparation These Interim Condensed Consolidated Financial Statements as of and for the periods ended June 30, 2014 and 2013 have been prepared in accordance with IAS 34 Interim Financial Reporting, which governs interim financial reporting. IAS 34 permits a significantly lower amount of information to be included in interim financial statements from what is required for annual financial statements by IFRS requirements (as under International Financial Reporting Standards issued by the International Accounting Standards Board and approved by the European Union), given that the entity has prepared financial statements compliant with IFRS for the previous financial year. The June 2014 Interim Condensed Consolidated Financial Statements are prepared in condensed form and should be read in conjunction with the Group Consolidated Financial Statements as of December 31, The Interim Unaudited Condensed Consolidated Financial Statements as of and for the periods ended June 30, 2014 include the consolidated statement of financial position as of June 30, 2014 and December 31, 2013, the consolidated income statement and the consolidated statement of comprehensive income for the three and six month periods ended June 30, 2014 and 2013, the consolidated statement of change in shareholders equity and the consolidated statement of cash flow for the six months ended June 30, 2014 and 2013 and the related condensed explanatory notes. They are presented in thousands of Euros, unless otherwise stated. The consolidated statement of financial position as of June 30, 2014 and December 31, 2013 is presented in the format of current/non-current, based on the expectation of the realisation of the asset or extinction of the liability within the normal business operating cycle, assumed to be 12 months from the balance sheet date. The Consolidated Income Statements for the three and six months ended June 30, 2014 and 2013 are presented so that costs are classified by destination and the consolidated statement of cash flow for the six months ended June 30, 2014 and 2013 is presented using the indirect method. The Unaudited Interim Condensed Consolidated Financial Statements as of and for the periods ended June 30, 2014 have been prepared under the historical cost convention, except for financial assets and liabilities, including derivative instruments, if any, where fair value measurement is mandatory. The main accounting principles applied in the preparation of the Unaudited Interim Condensed Consolidated Financial Statements as of and for the periods ended June 30, 2014 are consistent with those used in the 9

10 preparation of the consolidated financial statements of the Company as of and for the year ended December 31, 2013, except for the adoption of new standards and interpretations effective and mandatory as of 1 January 2014 and for some reclassifications and restatements in December 31, 2013 Net Equity made with the purpose to be consistent with the June 30, 2014 financial statements presentation. These Interim condensed consolidated Financial Statements are prepared for the periods ended June 30, 2014 and were approved by the Board of the Company on August 27, New and revised accounting standards, interpretations and amendments issued by IASB/IFRIC adopted by the Group Several new standards and amendments apply for the first time in However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group. The nature and the impact of each new standard/amendment is described below: Amendment to IAS 32, Financial instruments: Presentation, on asset and liability offsetting These amendments clarify some of the requirements for offsetting financial assets and financial liabilities. Specifically, the amendments clarify the meaning of currently has a legally right of set-off and simultaneous realization and settlement. Amendment to IAS 36, Impairment of assets on recoverable amount disclosures This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. Financial Instruments: Recognition and Measurement Amendment to IAS 39 Novation of derivatives This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counter party meets specified criteria. IFRS 9, Financial instruments IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entity s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit and loss in its consolidated and separate financial statements. Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entities. IFRIC 21, Levies This interpretation sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when should a liability be recognized. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. 10

11 2.3. Basis and scope of consolidation, business combination occurring during the interim period The consolidation criteria and methodology adopted for the purposes of the preparation of the June 30, 2014 Unaudited Interim Condensed Consolidated Financial Statements are the same as those utilized for the purposes of the preparation of the Consolidated Financial Statements for the period ended December 31, During this interim period the Group didn t change its composition, including business combinations, obtaining or losing control of subsidiaries and long-term investments, restructuring and discontinued operations and acquisition of non-controlling interests Accounting estimates and assumptions The preparation of Unaudited Interim Condensed Consolidated Financial Statements required management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. These estimates affect mainly provisions, goodwill impairment tests, employee benefits obligations, allowance for doubtful receivables and taxes. Revision to accounting estimates are recognized in the period in which the estimates are revised if the revision and future periods of the revision effect only that period or in the period of the revision and future periods if the revision effects both current and future periods. In preparing these June 30, 2014 Unaudited Interim Condensed Consolidated Financial Statements, the significant judgments made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to Consolidated Financial Statements for the period ended December 31, Estimate of fair value The Group measures financial instruments, such as, derivatives, and non-financial assets such as investment properties, at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable 11

12 Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above Translation of financial statements in currencies other than the functional currency Average Exchange rates used for translation of financial statements in foreign currencies other than Euro for the periods ended June 30, 2014 and 2013 and December 31, 2013 and 2012 are shown below: Currency Average exchange rate as of June 30, 2014 Average exchange rate as of December 31, 2013 Average exchange rate as of June 30, 2013 Average exchange rate as of December 31, 2012 USD US Dollar MXN Mexican Peso BRL Brazilian Real HKD - Hong Kong Dollar RMB Renminbi INR Indian Rupee BGN Bulgarian Lev Exchange rates used for translation of financial statements in foreign currencies other than Euro for the periods ended June 30, 2014 and 2013 and December 31, 2013 and 2012 are shown below: Currency Exchange rate as of June 30, 2014 Exchange rate as of December 31, 2013 Exchange rate as of June 30, 2013 Exchange rate as of December 31, 2012 USD US Dollar MXN Mexican Peso BRL Brazilian Real HKD - Hong Kong Dollar RMB Renminbi INR Indian Rupee BGN Bulgarian Lev Going concern In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The financial performance of the Group can be impacted by many factors, including market conditions, exchange rates, weather conditions and overall demand from key customers. Management has determined that there are no circumstances which would indicate that the Company could not continue to operate as a going concern for at least the twelve months from the balance sheet date. 3) OPERATING SEGMENT INFORMATION 3.1. Operating segments The Board of Directors is the Group s chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board of Directors for the purposes of allocating resources and assessing performance, as follows: 12

13 Air fresheners; Insecticide. The Board of Directors assesses the performance of the operating segments based on gross profit. Specifically, management believes that gross profit provides an important measure of the Group s operating performance. The following table presents revenue and profit information regarding the Group s operating segments for the six months ended June 30, 2014 and In thousands of Euros For the six months ended June 30, 2014 AIR FRESHENER (*) INSECTICIDE TOTAL NET SALES 98,709 44, ,133 Cost of Sales 77,647 33, ,453 GROSS PROFIT 21,061 10,619 31,680 Gross profit % on net sales 21.3% 23.9% 22.1% EBITDA before non recurring transactions 19,413 EBITDA before non recurring transactions % on total net sales 13.6% EARNINGS BEFORE INTEREST & TAXES & NON RECURRING TRANSACTIONS 12,391 Ebit % on total net sales 8.7% EARNINGS BEFORE INTEREST & TAXES 10,507 PROFIT BEFORE TAXES 1,912 PROFIT (LOSS) OF THE OWNERS OF THE COMPANY 465 * Air Freshener also includes other products In thousands of Euros For the six months ended June 30, 2013 AIR FRESHENER (*) INSECTICIDE TOTAL NET SALES 122,950 52, ,375 Cost of Sales 101,045 39, ,886 GROSS PROFIT 21,905 12,584 34,489 Gross profit % on net sales 17.8% 24.0% 19.7% EBITDA before non recurring transactions 22,401 EBITDA before non recurring transactions % on total net sales 12.8% EARNINGS BEFORE INTEREST & TAXES & NON RECURRING TRANSACTIONS 14,691 Ebit % on total net sales 8.4% EARNINGS BEFORE INTEREST & TAXES 14,106 PROFIT BEFORE TAXES 5,214 PROFIT (LOSS) OF THE OWNERS OF THE COMPANY 805 * Air Freshener also includes other products Refer to Note 14.1 for the analysis of sales by geographical area Seasonality of operations On an annual basis demand for pest control products is relatively stable due to the non-discretionary nature of the product; however local weather conditions can cause significant fluctuations in sales. Production of pest control products is seasonal, and peak demand occurs during the spring and the summer when insects and other pests are most active; however changes in weather conditions from year to year can have a substantial impact on insect populations in different geographic regions which directly impacts demand for pest control products. The Group s financial results for any individual quarter are typically sensitive to seasonality, however, results for interim periods are not necessarily indicative of results that may be expected for any other interim periods or for a full year. 13

14 4) DISCONTINUED OPERATION, BUSINESS COMBINATION AND ACQUISITION OF NON CONTROLLING INTERESTS OCCURRING DURING THE INTERIM PERIOD 4.1. Discontinued operation and business combination During the interim period ended June 30, 2014, the Group did not change its composition, including business combinations, obtaining or losing control of subsidiaries and long-term investments, restructuring and discontinued operations Acquisition of non-controlling interests During the interim period ended June 30, 2014, the Group did not acquire non-controlling interests. 5) IMPAIRMENT At the balance sheet date of June 30, 2014, there were no signs which might indicate possible reductions in the value of tangible fixed assets, and therefore, in compliance with IAS 16, no impairment has been considered necessary at that date. At the same date, there were no signs which might indicate possible reductions in the value of intangible fixed assets, and therefore, in compliance with IAS 36, no impairment has been considered necessary at that date. 6) TANGIBLE FIXED ASSETS 6.1 Property, plant and equipment: acquisitions and disposals During the six months ended June 30, 2014, the Group acquired fixed assets with a cost of 6,783 thousand (the six months ended June 30, 2013: 4,570 thousand) mainly represented by machinery and equipment acquired by Zobele Mexico S.A. de C.V., Zobele Holding S.p.a. Zobele Bulgaria Eood and Zobele Asia Pacific Ltd. Asset disposals were not material. See Note 16 for capital commitments. Certain of the Group s tangible fixed assets are secured in favor of Secured Parties of the Indenture and Revolving Credit Facility agreements as described in the following Note 10. 7) INTANGIBLE FIXED ASSETS 7.1. Development costs The Group capitalized 1,850 thousand in development costs incurred during the six months ended June 30, 2014, compared to 1,929 thousand during the six months ended June 30, Goodwill Reconciliation of carrying amount The residual value of goodwill was equal to 202,057 thousand. The following table summarizes the movement of the Goodwill in the last two reporting periods: 14

15 In thousands of Euros Net Balance at December 31, ,060 Additions - Impairment - Other movement - Exchange difference 73 Net Balance at December 31, ,133 Additions - Impairment - Other movement - Exchange difference (76) Net Balance at June 30, , Impairment test The carrying value of goodwill is sensitive to the projected value of the following assumptions: Sales growth; First Margin & EBITDA levels, net of tax impact; Cash Flow generated; Capital expenditure and Working Capital variance. On an annual basis, Management calculates the forecasted financial performance of the CGU s in order to test if any Goodwill impairment exists. The analysis considers a five year forecasted period. More in detail, the impairment test of the Goodwill, consistent with last year, is based on the following assumptions: the analyses have been performed on Enterprise Value level and have been based on the approach of Value in Use; the identified CGUs (Air Freshener and Insecticide) are the smallest identifiable group of assets that generate cash inflows from continuing use, and are largely independent of the cash inflows from other assets or groups of assets; the CGUs are in line with last year; and the Value in Use has been determined using the Discounted Cash Flow (DCF) methodology, which states that the economic value of the invested capital is equal to the present value of the following components: sum of net operating cash flows generated in each year of the explicit forecast period; the terminal value, understood as the cash flows the company will be able to generate beyond the explicit forecast period; and WACC (weighted average cost of capital) has been used as a discount rate for both CGUs. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Management believes that no reasonable change in any of the CGU s key assumptions would cause the carrying value to materially exceed its recoverable amount. 15

16 Therefore, both CGUs were not tested for impairment because there were no impairment indicators as of June 30, Other intangible fixed assets Certain of the Group s Intellectual Property intangible fixed assets are secured in favour of Secured Parties of the Indenture and Revolving Credit Facility agreements as described in the following Note 10. 8) NET INVENTORIES The following table sets forth a breakdown of Net inventories as of June 30, 2014 and as of December 31, 2013: In thousands of Euros As of As of June 30, 2014 December 31, 2013 Raw materials & Consumables 17,749 19,422 Semi-finished Goods 6,447 5,923 Finished goods 10,683 11,033 Inventory Obsolescence Reserve (3,260) (4,263) Total Net Inventories 31,619 32,115 The following table sets forth the movements during the six months ended June 30, 2014 and the twelve months ended December 31, 2013 in the Inventory obsolescence reserve as follows: In thousands of Euros Reserve for raw and Reserve for work and Reserve for Total inventory consumable materials contract work in progress finished goods obsolescence reserve Inventory obsolescence reserve at December 31, 2012 (1,632) - (1,562) (3,193) Used Addition (1,561) - (498) (2,059) Exchange differences Inventory obsolescence reserve at December 31, 2013 (2,380) - (1,883) (4,263) Used 269-1,073 1,342 Addition (198) - (160) (358) Exchange differences Inventory obsolescence reserve at June 30, 2014 (2,310) - (951) (3,260) 9) COMMERCIAL EXTERNAL RECEIVABLES The following table sets forth a breakdown of Commercial external receivables as of June 30, 2014 and as of December 31, 2013: In thousands of Euros As of As of June 30, 2014 December 31, 2013 Trade receivables 65,984 62,773 Bad debt provision (2,621) (2,326) Total commercial external receivables 63,362 60,447 Receivables from ZALPHA S.A. 1,390 1,210 Total commercial receivables 64,752 61,657 16

17 Commercial external receivables are recorded net of the provision for doubtful receivables. As of June 30, 2014 the Group had used without-recourse factoring facility for a total amount of 21,525 thousand ( 18,457 thousand as of December 31, 2013). Receivables from Z Alpha S.A. are cash advances from Z Beta S.a.r.l.to its parent. The following table sets forth a breakdown of movements in the bad debt provision: In thousands of Euros As of As of June 30, 2014 December 31, 2013 Bad debt provision at the beginning of the period (2,326) (1,483) Used - - Additions (295) (843) Bad debt provision at the end of the period (2,621) (2,326) 10) NET FINANCIAL POSITION 10.1 Cash and Banks The balances as of June 30, 2014 and as of December 31, 2013 include cash in hand and temporary availability in bank current accounts. The following table sets forth the net financial position of the Group as of June 30, 2014 and as of December 31, 2013: In thousands of Euros As of As of June 30, 2014 December 31, 2013 A. Cash 41,884 41,584 B. Cash equivalent - - C. Trading securities - - D. Liquidity (A) + (B) + ( C) 41,884 41,584 E. Current financial receivables - - F. Current bank debt - - G. Current portion of non current debt (1) (6,346) (6,379) H. Other current financial debt (8) (370) I. Current financial debt (F) + (G) + (H) (6,354) (6,748) J. Net current financial indebtedness (I) + (E) + (D) 35,530 34,836 K. Non current bank loans and leasing agreement (1,141) (1,302) L. Senior Secured Notes (173,366) (172,440) M. Other non current loans - - N. Non current financial indebtedness (K) + (L) + (M) (174,507) (173,742) O. Net financial position (J) + (N) (138,977) (138,907) (1) Including accrued interests from February 1, 2014 up to June 30, 2014 on Senior Secured Notes Financial liabilities The following sets forth a breakdown of Financial liabilities as of June 30, 2014 and December 31, 2013: 17

18 In thousands of Euros As of June 30, 2014 As of December 31, 2013 Total Current Non current Total Current Non current Bank Loan Senior Secured Notes 179,334 5, , ,408 5, ,440 Total long term loans 179,334 5, , ,408 5, ,440 Revolving credit facility Leasing liabilities 1, ,134 1, ,302 Other financing Total bank overdraft 1, ,141 2, ,302 Total financial liabilities 180,861 6, , ,491 6, , Senior Secured notes On January 31, 2013, the Group, through its Italian subsidiary Zobele Holding S.p.A, issued Senior Secured Notes for an amount of 180 million for the purposes of re-financing the existing bank debt. The Notes are admitted to trading on the Euro MTF Market of the Luxembourg Stock Exchange. The Notes mature on February 1, 2018 and bear interest at a fixed annual rate of 7.875% payable semiannually in arrears on February 1 and August 1 of each year, beginning on August 1, The Notes are guaranteed on a senior basis by each of: Z Beta S.à r.l., Z Gamma B.V., Zobele International B.V., Zobele España, S.A., Zobele México, S.A. de C.V. and Zobele Bulgaria EooD., Palma Electronic S.r.l., Zobele Asia Pacific L.t.d. The obligations of the Group under the Notes will be secured by the following collateral: a pledge over the shares of the Company by Z Alpha S.A.; a pledge over the shares of Z Gamma B.V, Zobele Holding S.p.A., Zobele International B.V; a pledge over certain intellectual property rights of Zobele Holding S.p.A; a special moveables pledge granted by Zobele Bulgaria EooD; a shares and receivables pledge over the shares of Zobele Bulgaria EooD ; a pledge over 95% of the shares of Zobele México, S.A. de C.V. by Zobele International B.V.; a pledge (without transfer of possession) over all movable assets owned by Zobele México, S.A. de C.V.; a pledge over the shares of Zobele Asia Pacific (Hong Kong) Limited; a pledge over the shares of Palma Electronic S.r.l.; a pledge over the shares of Zobele España, S.A.; and a pledge by Z Gamma B.V. over certain intra-group receivables between Z Gamma B.V. and Zobele Holding S.p.A.. Prior to the expiration date, the Group may, at its option, redeem all or a portion of the Notes at a redemption price variable from a minimum of 100% to a maximum of 107,875% of the amount thereof, plus accrued and unpaid interest and additional amounts, if any. This call option has the features of an embedded derivative in the debt host contract, that for the purposes of IAS 39 has been considered closely related to the host contract and therefore was accounted for as a single combined debt instrument. The Group used the net proceeds from the issue of the Notes for the repayment of all amounts outstanding as of January 31, 2013 under its Existing Senior Facilities Agreement, which was terminated as of January 31, In order to finance the needs of the general consolidated working capital, on January 31, 2013 the Group also entered into a Revolving Credit Facility agreement for a total amount of 30 million ending six months 18

19 before the expiry of the Notes. This credit line has economic condition in line with market condition and is secured by substantially the same Collateral as the Notes. As of June 30, 2014 the Revolving Credit Facility was completely undrawn. Based on the results of Consolidated Financial Statements for the year ended December 31, 2013, one of these covenants was partially met. By way of remedy, the Group had only been required to provide additional guarantees to those already provided. The Group completed the necessary actions to ensure full compliance to its undertakings according to the terms and conditions set forth by the Revolving Credit Facility Agreement, within June 10, ) EQUITY Capital and reserves attributable to the owners of the company The subscribed capital, amounting to 14 million is represented by 560,000 shares with a nominal value of 25 fully paid and fully owned by Z Alpha S.A. Movements in shareholders equity are reported in the Interim condensed consolidated statement of changes in shareholders equity. All the shares of Z Beta S.à.r.l. are pledged in favor of Secured Parties of the Indenture and Revolving Credit Facility agreements pursuant to a Share pledge agreement dated January 31, 2013 described in the above Note ) RESTRUCTURING CONTINGENCIES The following table sets forth the movements during the six months ended June 30, 2014 and the twelve months ended December 31, 2013 in the Restructuring Contingencies as follows: In thousands of Euros As of As of June 30, 2014 December 31, 2013 Restructuring contingencies at the beginning of the period 1,341 - Uses (948) 2,038 Reversals - (696) Additions Restructuring contingencies at the end of the period 626 1,341 During 2013 the Group closed the manufacturing operations in the factory in Verona Italy and transferred the production to the larger plant of Trento. The closure involved redundancies and various costs connected with the production transfer. The Indian operations were restructured with a new management team and operations set up. Activities in Spain were also restructured with the closure of invoicing activities previously carried out there. 19

20 13) FINANCIAL INSTRUMENTS: CATEGORY OF RISK AND FAIR VALUE The following table sets forth a breakdown of the Group s financial assets and liabilities by category Carrying Amount Fair value (*) In thousands of Euro Total Financial Assets Loans Held-to-maturity Available for Other Year end at fair value trough and investments sale financials Level 1 (**) Level 2 Level profit or losses Receivables assets Other non current assets 1,015-1, Non current assets 1,015-1, Commercial external receivables 61,657-61, Income tax receivables 2, , Other receivables 9,119-9, Cash and banks 41,584-41, Current assets 115, , , In thousands of Euro Total Financial Assets Loans Held-to-maturity Available for Other Year end at fair value trough and investments sale financials Level 1 (**) Level 2 Level profit or losses Receivables liabilities Long term loans and Leasing 173, , , , Shareholder's loan Other non current liabilities 1, , Non current liabilities 175, , , , Commercial external payables 61,164-61, Other payables 13, , Current portion on Loans, Bank Overdraft and Leasing 6, , Current liabilities 81,380-61, , (*) The Group has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of their fair values (**) The amount showed represents the fair value of the Senior Notes based on the market price as at December 31,

21 Carrying Amount Fair value (*) In thousands of Euro Total Financial Assets Loans Held-to-maturity Available for Other As of June at fair value trough and investments sale financials Level 1 (**) Level 2 Level 3 30, 2014 profit or losses Receivables assets Other non current assets 1,181-1, Non current assets 1,181-1, Commercial external receivables 64,752-64, Income tax receivables 3, , Other receivables 30,045-30, Cash and banks 41,884-41, Current assets 139, , , In thousands of Euro Total Financial Assets Loans Held-to-maturity Available for Other As of June at fair value trough and investments sale financials Level 1 (**) Level 2 Level 3 30, 2014 profit or losses Receivables liabilities Long term loans and Leasing 174, , , , Shareholder's loan Other non current liabilities Non current liabilities 174, , , , Commercial external payables 66,456-66, Other payables 32, , Current portion on Loans, Bank Overdraft and Leasing 6, , Current liabilities 104,907-66, , (*) The Group has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of their fair values (**) The amount showed represents the fair value of the Senior Notes based on the market price as at June 30,

22 14) INCOME STATEMENT INFORMATION Net Sales Net Sales for the three month periods ended June 30, 2014 and 2013 The following table provides a breakdown of Net sales by market and geographic area for three months ended June 30, 2014 and 2013: In thousands of Euros Three Months ended June 30, % change Net Sales by Product Category Air Care 47,214 53,431 (11.6%) Pest Control 25,318 29,939 (15.4%) Home, Health and Personal Care 2,118 2,929 (27.7%) Total net sales 74,651 86,299 (13.5% ) In thousands of Euros Three Months ended June 30, % change Net Sales by Geographic area Europe 33,170 34,624 (4.2%) North America 27,704 34,961 (20.8%) South America 2,578 3,548 (27.3%) Africa-Middle East 3,103 2, % Asia Pacific 8,096 10,545 (23.2%) Total net sales 74,651 86,299 (13.5% ) Net Sales for the six month periods ended June 30, 2014 and 2013 The following table provides a breakdown of Net sales by market and geographic area for the six months ended June 30, 2014 and 2013: 22

23 In thousands of Euros Six Months ended June 30, % change Net Sales by Product Category Air Care 93, ,455 (18.6%) Pest Control 44,424 52,422 (15.3%) Home, Health and Personal Care 4,737 7,498 (36.8%) Total net sales 143, ,375 (18.4% ) In thousands of Euros Six Months ended June 30, % change Net Sales by Geographic area Europe 61,866 70,283 (12.0%) North America 53,799 72,804 (26.1%) South America 5,294 7,226 (26.7%) Africa-Middle East 6,080 5, % Asia Pacific 16,094 19,572 (17.8%) Total net sales 143, ,375 (18.4% ) Cost of Sales Cost of Sales for three month periods ended June 30, 2014 and 2013 The following table provides a breakdown of Cost of sales for the three months ended June 30, 2014 and 2013: In thousands of Euros Three Months ended Three Months ended June 30, 2014 June 30, 2013 Materials 43,722 53,922 Direct Labor Cost 6,575 6,632 Subcontractor Power Indirect Manufacturing 2,291 1,880 Maintenance 1,139 1,212 Logistic and Purchases 2,151 3,024 Quality Control Commissions Total Cost of Sales 57,389 68, Cost of Sales for the six month periods ended June 30, 2014 and 2013 The following table provides a breakdown of Cost of sales for the six months ended June 30, 2014 and 2013: 23

24 In thousands of Euros As of As of June 30, 2014 June 30, 2013 Materials 84, ,824 Direct Labor Cost 12,856 14,537 Subcontractor 962 1,655 Power 1,440 1,599 Indirect Manufacturing 4,094 3,700 Maintenance 2,365 2,403 Logistic and Purchases 4,609 5,994 Quality Control Commissions Total Cost of Sales 111, , Overheads Overhead for the three month periods ended June 30, 2014 and 2013 The following table sets forth a breakdown of Overhead for the three months ended June 30, 2014 and 2013: In thousands of Euros Three Months ended Three Months ended June 30, 2014 June 30, 2013 General and Administration 4,414 4,009 Sales & Marketing 1,420 2,113 R&D Operation Other (income)/expenses Total Overhead 6,721 6, Overhead for the six month periods ended June 30, 2014 and 2013 The following table sets forth a breakdown of Overhead for the six months ended June 30, 2014 and 2013: In thousands of Euros As of As of June 30, 2014 June 30, 2013 General and Administration 8,376 7,870 Sales & Marketing 2,890 3,725 R&D Operation Other (income)/expenses Total Overhead 13,004 13,162 R&D costs represent the amount of research costs incurred as of June 30, In line with IAS 38, development costs of 1,9 million were capitalized as of June 30, 2014 ( 1,9 million as of June 30, 2013). 24

25 14.4. Costs/(Income) from non-recurring transactions Costs/(Income) from non-recurring transactions for the three month periods ended June 30, 2014 and 2013 The following table sets forth a breakdown of Non recurring transactions for the three months ended June 30, 2014 and 2013: In thousands of Euros Three Months ended Three Months ended June 30, 2014 June 30, 2013 Mexico customs costs 1,577 - Restructuring personnel severance Other restructuring costs One-off project consultancies Others minor Total financial income 1, Non-recurring costs incurred for the three months ended June 30, 2014 were 1,8 million and mainly related to costs incurred in Mexico where exceptional legal, tax and penalty costs were accrued to cover customs and tax issues related to past years Costs/(Income) from non-recurring transactions for the six month periods ended June 30, 2014 and 2013 The following table sets forth a breakdown of Non recurring transactions for the six months ended June 30, 2014 and 2013: In thousands of Euros Six Months ended Six Months ended June 30, 2014 June 30, 2013 Mexico customs costs 1,577 - Restructuring personnel severance Other restructuring costs One-off project consultancies Others minor Total 1, Non-recurring costs incurred for the six months ended June 30, 2014 were 1,9 million and mainly related to exceptional costs incurred in Mexico where exceptional legal, tax and penalty costs were accrued to cover customs and tax issues related to past years. 25

26 14.5. Financial (Income)/Expenses Financial (Income)/Expenses for the three month periods ended June 30, 2014 and 2013 The following table sets forth a breakdown of Financial income and expense for the three months ended June 30, 2014 and 2013: In thousands of Euros Three Months ended Three Months ended June 30, 2014 June 30, 2013 Interest Income (3) 6 Other financial income 0 0 Total financial income (2) 6 Interest expenses - Bank Overdraft (178) 0 Interest expenses - Long Term Loan (4,388) (4,147) Interest expenses - Shareholders Loan 0 (0) Interest expenses on leasing and other 130 (558) Total financial expenses (4,436) (4,705) Exchange Gain/(Losses) on Financial Activities 474 1,043 Total financial Income/(Expenses) (3,964) (3,656) Financial (Income)/Expenses for the six month periods ended June 30, 2014 and 2013 The following table sets forth a breakdown of Financial income and expense for the six months ended June 30, 2014 and 2013: In thousands of Euros Six Months ended Six Months ended June 30, 2014 June 30, 2013 Interest Income 2 10 Other financial income 1 0 Total financial income 3 10 Interest expenses - Bank Overdraft (179) (86) Interest expenses - Long Term Loan (8,431) (8,077) Interest expenses - Shareholders Loan 0 (0) Interest expenses on leasing and other (308) (924) Total financial expenses (8,918) (9,087) Exchange Gain/(Losses) on Financial Activities Total financial Income/(Expenses) (8,594) (8,892) 15) RELATED PARTY TRANSACTIONS All intercompany transactions are conducted at arm s length, including transactions with subsidiaries having minority shareholdings. In addition, transactions with related parties outside of the Group are conducted at arm s length. Related Parties transactions were the following as of June 30, 2014 and 2013: In thousands of Euros As of As of Related Parties Type of transaction June 30, 2014 December 31, E (HK) Limited Trade Balance Enthofin S.r.l. Purchase 20% Zobele Asia Pacific LTD - 3, ,262

27 These transactions were made at arm's length in the ordinary course of business and, in the reasonable determination of members of our Board of Directors, on terms as favourable as might reasonably have been obtained from an unaffiliated third party. 16) COMMITMENTS AND GUARANTEES As of June 30, 2014 the Group has financial obligations arising from rental and operating lease agreements for a total amount of 10,429 thousand, of which 2,312 thousand are due within one year. At the same date the Revolving Credit Facility was undrawn for the total amount committed of 30 million. Capital expenditure commitments as of June 30, 2014 were 3,813 thousand. As described in Note 10, the Senior Secured Notes are secured and pledged on certain Group assets and shares. There are no other significant legal or arbitration proceedings which the Group believes could have a significant impact on its financial and economic results. 17) SUBSEQUENT EVENTS TO THE INTERIM REPORTING DATE There are no significant events after the reporting period that will impact the financial statements. Approved by Director Mr. Cedric Stébel Approved by Chief Executive Officer Mr. Roberto Schianchi Date Date August 27 th, 2014 August 27 th,