Geberit Group 2016 Summary Report
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Key Figures in CHF million Net sales 2,809.0 Change in % +8.3 Adjusted operating cashflow (EBITDA) 794.9 Change in % +14.6 Margin in % of net sales 28.3 Adjusted operating profit (EBIT) 686.5 Change in % +16.2 Margin in % of net sales 24.4 Adjusted net income 584.0 Change in % +18.4 Margin in % of net sales 20.8 Adjusted earnings per share (CHF) 15.85 Change in % +19.8 Free cashflow 563.9 Change in % +16.5 Net debt 461.2 Equity 1,635.2 Equity ratio in % 45.4 Adjusted return on invested capital (ROIC) in % 21.5 Number of employees 11,592
Main developments in 2016 Net sales + 6. 4% organic, currency-adjusted growth Adjusted earnings per share (in CHF) 15.85 +19.8% versus prior year Company Sanitec integration proceeding according to plan Capacity expansion at the logistics centre in Pfullendorf (DE) on track Share price with new all-time high of CHF 434 Consolidation of the position as the leading supplier of sanitary products in Europe Sale of the Koralle Group Products New innovative products such as the building drainage system Silent-Pro, the new urinal system and the bathroom series Glow Finance Increase in net sales of 6.4% in organic, currency-adjusted terms Adjusted operating cashflow margin of 28.3% (previous year 26.7%) Adjusted earnings per share of CHF 15.85 (+19.8%) Free cashflow of CHF 563.9 million (+16.5%) Dividend increase of 19.0% to CHF 10.00 proposed
At a glance Net sales development 2007 2016 (in CHF million) EBIT, EBITDA, Net income Earnings per share (EPS) 2014 2016 (in CHF million) (EPS: in CHF) 3 000 800 2 18 2 500 2 000 700 600 500 1 2 3 4 1 2 3 4 1 3 4 16 14 12 1 500 400 10 1 000 300 8 200 6 500 100 4 0 07 08 09 10 11 12 13 14 15 16 0 14 15* 16* 1 EBIT 2 EBITDA 3 Net income 4 EPS * Adjusted for acquisition, divestment and integration costs and income in connection with the Sanitec acquisition 2 2016 net sales by markets/regions 1 Germany (30.7%) 2 Nordic Countries (10.9%) 3 Switzerland (10.0%) 4 Central/Eastern Europe (9.1%) 5 Benelux (7.8%) 6 Italy (6.6%) 7 France (6.1%) 8 Austria (5.2%) 9 United Kingdom/Ireland (4.4%) 10 Iberian Peninsula (0.7%) 11 America (3.3%) 12 Far East/Pacific (2.8%) 13 Middle East/Africa (2.4%) 7 6 8 5 11 10 12 13 9 2 1 4 3
Added value by design The name Geberit stands for superior sanitary technology and perfectly designed bathroom equipment. Geberit is a system provider. In other words, every product is developed and optimised within its overall context. This applies to the sanitary technology behind the wall such as installation, piping and flushing systems as well as to the products in front of the wall, such as the bathroom series with their ceramic sanitary appliances, bathroom furniture, mirror cabinets and so on. This systems thinking is based on decades of experience and the know-how of proven specialists and scientists. No other company in the sanitary industry invests as many resources in the research and development of new technologies and products each year as Geberit. Learn more: www.geberit.com/annualreport Competences
To our shareholders The 2016 financial year was shaped by a positive environment in the construction industry and the integration of the ceramics business. The sales growth was attributable to convincing developments in many markets and to sales synergies from the integration of the ceramics business that were achieved earlier than expected. The very good development of the operating margins was supported by synergies derived from the integration of the Sanitec business, volume growth and lower raw material prices. The excellent results allowed Geberit to further consolidate the position as the leading supplier of sanitary products in Europe. Convincing developments in European markets Cumulative net sales in 2016 increased by 8.3% to CHF 2,809.0 million. Total growth comprised organic growth in local currencies of 6.4%, a foreign currency effect of +0.7% and an acquisition- and divestment-related increase of 1.2%. The following changes in net sales in the markets and product areas relate to currencyadjusted, organic developments. The biggest region, Europe, grew by 6.8%. Austria (+12.3%), the Nordic Countries (+11.1%) and Central/Eastern Europe (+10.4%) posted double-digit growth. The other European markets/countries also reported convincing growth, with +7.9% for the Benelux Countries, +6.5% for the Iberian Peninsula, +6.4% for Switzerland, +5.4% for United Kingdom/Ireland, +4.8% for France, +4.7% for Germany and +3.9% for Italy. Far East/Pacific (+4.3%), Middle East/Africa (+3.5%) and America (+0.2%) posted below-average growth compared to the European markets. Net sales for the Sanitary Systems product area amounted to CHF 1,263.5 million, corresponding to growth of 9.2%. The Piping Systems product area recorded an increase of 2.5% to CHF 823.8 million. As in the previous year, growth for this product area lagged behind Sanitary Systems. The Sanitary Ceramics product area posted growth of 6.5% to CHF 721.7 million. Measured for the year as a whole (inclusive of Sanitec s sales for January 2016), currency-adjusted growth was 4.9%. Improved profitability In the 2016 financial year, the results of the Geberit Group were once again impacted by acquisition, divestment and integration costs, and income related to the Sanitec acquisition albeit much lower than in the previous year. For better comparability, adjusted figures are shown and commented on. The adjusted operating cashflow (adj. EBITDA) rose by 14.6% to CHF 794.9 million, its highest ever level in Geberit s history. The adjusted EBITDA margin came to 28.3% compared with 26.7% in the previous year. Foreign currency developments did not have any material impact on the adjusted EBITDA margin. The adjusted operating profit (adj. EBIT) rose by 16.2% to CHF 686.5 million, and the adjusted EBIT margin reached 24.4% (previous year 22.8%). The very good devel- 4
opment of the operating margins was supported by synergies derived from the integration of the Sanitec business, volume growth and in spite of an increase in the second half of the year lower raw material prices. Adjusted net income improved by 18.4% to CHF 584.0 million, which led to an adjusted return on sales of 20.8% (previous year 19.0%). The adjusted earnings per share were up by 19.8% to CHF 15.85 (previous year CHF 13.23). This above-average increase when compared with the operating results is explained by an improved financial result and a slightly smaller number of shares. The negative special effects arising from the Sanitec acquisition/integration amounted to CHF 10 million as regards EBITDA, CHF 46 million as regards EBIT, and CHF 36 million as regards net income. The non-adjusted figures were CHF 785.2 million for EBITDA, CHF 640.1 million for EBIT, CHF 548.2 million for net income, and CHF 14.88 for earnings per share. Increase in free cashflow The considerably higher operating cashflow (EBITDA) and an improved financial result on the one hand and higher absolute tax expenditure on the other led to an increase in net cashflow of 17.2% to CHF 699.0 million. A slight decline in the investments in pro perty, plant and equipment and negative effects of the change in net working capital resulted in an increase in free cashflow of 16.5% to CHF 563.9 million. Free cashflow was used to pay distributions of CHF 309.3 million to shareholders, to repay debts of net CHF 172.8 million and, as part of the last phase of the share buyback programme, to buy back shares for CHF 50.7 million. Solid financial foundation Once again, the substantial contribution from free cashflow allowed the attractive dividend policy and the share buyback programme to be continued while also maintaining the very healthy financial foundation of the Group. Total assets increased from CHF 3,553.8 million to CHF 3,601.1 million. Liquid funds increased from CHF 459.6 million to CHF 509.7 million. In addition, the Group had access to undrawn operating credit lines for the operating business of CHF 340.6 million. Debts were reduced to CHF 970.9 million (previous year CHF 1,139.2 million). This resulted in a reduction in net debt by CHF 218.4 million to CHF 461.2 million at the end of 2016. The equity ratio reached a very solid 45.4% (previous year 41.7%). Based on average equity, the adjusted return on equity (ROE) was 38.3% (previous year 32.2%). The adjusted return on invested capital (ROIC) was 21.5% (previous year 20.1%). Again higher distribution The Board of Directors wishes to let the shareholders participate in the excellent development of the business and will maintain the attractive distribution policy of previous years. Therefore, a dividend of CHF 10.00 will be proposed at the General Meeting, which is 19.0% higher than in the previous year. The payout ratio of 63.4% of adjusted net income is in the upper range of the 50% to 70% corridor defined by the Board of Directors. 5
Slightly lower investments In 2016, investments in property, plant and equipment and intangible assets amounted to CHF 139.1 million, CHF 8.2 million or 5.6% less than in the previous year. As a percentage of net sales, the investment ratio was 5.0% (previous year 5.7%). All larger investment projects were carried out as planned. The bulk of investments went toward machinery, building conversions and new building projects, and the procurement of tools and moulds for new products. The biggest project was the expansion of the Logistics Centre in Pfullendorf (DE), which will commence operations in spring 2017. Additionally, investments were made in important development projects and the further optimisation of production processes. Decreasing number of employees At the end of 2016, the Geberit Group employed 11,592 staff worldwide, which is 534 employees or 4.4% less than in the previous year. This is mainly due to fewer people employed in the ceramics plants, synergies as a result of the consolidation of functions and efficiency-enhancing measures, as well as the sale of the Koralle Group. Outlook 2017 The construction industry should develop favourably in 2017. However, the individual regions/markets and construction sectors will carry on performing very differently. In Europe, the recovery that began in the previous year should continue. Overall, a favour able market environment is expected for Germany, the Nordic Countries, Switzerland, Austria, France, the Benelux Countries and the countries of Eastern Europe. The situation in Italy should stabilise, while the uncertainty in the United Kingdom will continue as a result of Brexit. In North America, stagnation is predicted in the public sector construction industry, which is important to Geberit s business in the USA, along with moderate growth in residential construction. In the Far East/ Pacific region, the Chinese residential con struction sector should stabilise, while the business climate in Australia and India is expected to be positive. In terms of the Middle East/Africa region, the outlook in South Africa remains sound, whereas the construction industry in the Gulf countries will continue to see low activity due to the depressed oil price. Fluctuations in the Swiss francs compared to other important currencies used by the Geberit Group will continue to affect sales and earnings. In the first half of 2017, raw material prices are likely to exceed their prior-year level driven mainly by higher prices for industrial metals and, to a lesser extent, for plastics. The Geberit Group s 2017 financial year will see further progress with the integration of the ceramics business. A focus will be on continuing to consolidate the sales teams in the countries; another emphasis will be on the further harmonisation of systems and processes, further development of the product range, and continuous improvements in the ceramics manufacturing. However, Geberit will pay just as much attention to its daily business. The objective will be to perform strongly in all markets and, as in previous 6
years, to gain market shares. There will be concerted marketing of the new products that have been introduced in recent years, focusing on greater penetration of markets in which Geberit products or technologies are still under-represented, and on further expansion of the very promising shower toilet business. In line with the Geberit strategy, these measures shall be accompanied by efforts to continuously optimise business processes. The Board of Directors and the Group Executive Board are convinced that the company is very well equipped for the upcoming opportunities and challenges. The opportunities offered as a result of combining technical know-how in sanitary technology behind the wall and design expertise in front of the wall will be firmly seized. Experienced and highly motivated employees, a number of promising products that have been launched in recent years and product ideas for the more distant future, a lean and market-oriented organisation, an established cooperation based on trust with our market partners in both commerce and trade, and the Group s continued solid financial foundation are vital to our future success. we also wish to express our gratitude, esteemed shareholders, for your continued confidence in our company. Yours sincerely, Albert M. Baehny Chairman Christian Buhl CEO Thank you We owe the good results in 2016 and the successful integration of the Sanitec activities to the high degree of motivation and professionalism of our employees. We wish to express our thanks and appreciation for their exemplary performance. Our customers in the commercial and trade sectors again deserve special thanks for their trust and constructive collaboration. Last but not least, 7
Consolidated Balance Sheets 31.12.2015 31.12.2016 Assets Current assets Cash and cash equivalents 459.6 509.7 Trade accounts receivable 130.6 174.4 Other current assets and current financial assets 90.7 111.0 Inventories 279.9 275.6 Total current assets 960.8 1,070.7 Non-current assets Property, plant and equipment 715.4 726.5 Deferred tax assets 95.7 96.7 Other non-current assets and non-current financial assets 24.8 26.1 Goodwill and intangible assets 1,757.1 1,681.1 Total non-current assets 2,593.0 2,530.4 Total assets 3,553.8 3,601.1 8
31.12.2015 31.12.2016 Liabilities and equity Current liabilities Short-term debt 3.7 4.2 Trade accounts payable 105.5 112.3 Tax liabilities and tax provisions 108.5 120.0 Other current liabilities 217.0 263.5 Current provisions 31.6 37.7 Total current liabilities 466.3 537.7 Non-current liabilities Long-term debt 1,135.5 966.7 Accrued pension obligations 300.8 325.8 Deferred tax liabilities 128.0 89.7 Other non-current liabilities 10.1 11.2 Non-current provisions 30.9 34.8 Total non-current liabilities 1,605.3 1,428.2 Equity Capital stock 3.8 3.7 Reserves 1,912.5 2,084.9 Cumulative translation adjustments -434.1-453.4 Total equity 1,482.2 1,635.2 Total liabilities and equity 3,553.8 3,601.1 9
Consolidated Income Statements 2015 2016 Net sales 2,593.7 2,809.0 Cost of materials 784.4 774.9 Personnel expenses 671.6 702.0 Depreciation 95.9 102.0 Amortisation of intangible assets 37.5 43.1 Other operating expenses, net 506.0 546.9 Total operating expenses, net 2,095.4 2,168.9 Operating profit (EBIT) 498.3 640.1 Financial expenses -20.1-13.5 Financial income 1.2 1.9 Foreign exchange loss (-)/gain -4.6 2.3 Financial result, net -23.5-9.3 Profit before income tax expenses 474.8 630.8 Income tax expenses 52.4 82.6 Net income 422.4 548.2 Attributable to shareholders of Geberit AG 422.4 548.2 EPS (CHF) 11.33 14.88 EPS diluted (CHF) 11.31 14.85 10
Consolidated Statements of Comprehensive Income 2015 2016 Net income according to the income statement 422.4 548.2 Cumulative translation adjustments 1-203.7-19.0 Taxes 0.3-0.3 Cumulative translation adjustments, net of tax -203.4-19.3 Cashflow hedge accounting 71.5 0.0 Taxes -10.2 0.0 Cashflow hedge accounting, net of tax 61.3 0.0 Total other comprehensive income to be reclassified to -142.1-19.3 the income statement in subsequent periods, net of tax Remeasurements of pension plans -14.8-20.8 Taxes 2.7 4.5 Remeasurements of pension plans, net of tax -12.1-16.3 Total other comprehensive income not to be reclassified to the income statement in subsequent periods, net of tax -12.1-16.3 Total other comprehensive income, net of tax -154.2-35.6 Total comprehensive income 268.2 512.6 Attributable to shareholders of Geberit AG 268.2 512.6 1 2015: The Swiss National Bank abandoned the minimum exchange rate of CHF 1.20 per euro on 15 January 2015. This decision triggered currency fluctuations and led to an appreciation of the Swiss franc against all other key currencies. As Geberit is exposed to currency risks on both the assets and liabilities side, this contributed significantly to the negative translation effect of CHF 203.7 million. 11
Consolidated Statements of Cashflows Cash provided by operating activities 2015 2016 Net income 422.4 548.2 Depreciation and amortisation 133.4 145.1 Financial result, net 23.5 9.3 Income tax expenses 52.4 82.6 Other non-cash income and expenses 22.6 18.5 Operating cashflow before changes in net 654.3 803.7 working capital and taxes Income taxes paid -82.6-98.6 Changes in trade accounts receivable 20.8-29.4 Changes in inventories 9.7-2.6 Changes in trade accounts payable -17.2 13.4 Changes in other positions of net working capital 27.1 28.7 Net cash from/used (-) in operating activities 612.1 715.2 Cash from/used (-) in investing activities Acquisitions of subsidiaries -1,185.4 0.0 Sales of subsidiaries 0.0 32.8 Purchase of property, plant & equipment and intangible assets -147.3-139.1 Proceeds from sale of property, plant & equipment 6.3 6.2 and intangible assets Interest received 1.3 0.9 Other, net -0.1-0.5 Net cash from/used (-) in investing activities -1,325.2-99.7 12
2015 2016 Cash from/used (-) in financing activities Proceeds from borrowings 1,985.5 50.3 Repayments of borrowings -1,033.6-223.1 Interest paid -3.5-6.2 Distribution -310.7-309.3 Share buyback programme -159.8-50.7 Purchase (-)/Sale of treasury shares -44.5-22.2 Financing cost paid -14.5-0.4 Other, net -1.2-1.3 Net cash from/used (-) in financing activities 417.7-562.9 Effects of exchange rates on cash and cash equivalents 5.3-2.5 Net increase/decrease (-) in cash and cash equivalents -290.1 50.1 Cash and cash equivalents at beginning of year 749.7 459.6 Cash and cash equivalents at end of year 459.6 509.7 13
Consolidated Statements of Changes in Equity Ordinary shares Attributable to shareholders of Geberit AG Reserves Treasury shares Pension plans Hedge accounting Cum. transl. adjustments Total equity Balance at 31.12.2014 3.8 2,235.0-78.3-151.4-61.3-230.7 1,717.1 Net income 422.4 422.4 Other comprehensive income -12.1 61.3-203.4-154.2 Distribution -310.7-310.7 Share buyback programme -167.6-167.6 Purchase (-) /Sale of treasury shares 7.6-30.6-23.0 Management option plans -1.8-1.8 Balance at 31.12.2015 3.8 2,352.5-276.5-163.5 0.0-434.1 1,482.2 Net income 548.2 548.2 Other comprehensive income -16.3-19.3-35.6 Distribution -309.3-309.3 Share buyback programme -42.9-42.9 Purchase (-) /Sale 7.0-8.0-1.0 of treasury shares Capital reduction -0.1-247.9 248.0 0.0 Management option plans -6.4-6.4 Balance at 31.12.2016 3.7 2,344.1-79.4-179.8 0.0-453.4 1,635.2 14
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Balance Sheets Geberit AG 31.12.2015 31.12.2016 Assets Current assets Cash 5.7 0.0 Accounts receivable 63.0 22.0 Prepaid expenses 3.6 2.6 Total current assets 72.3 24.6 Non-current assets Loan to group companies 300.0 300.0 Investments 920.8 996.9 Total non-current assets 1,220.8 1,296.9 Total assets 1,293.1 1,321.5 Liabilities Current liabilities 14.2 7.0 Total current liabilities 14.2 7.0 Bonds 300.0 300.0 Total long term interest-bearing liabilities 300.0 300.0 Shareholders equity Capital stock 3.8 3.7 Legal reserves 98.0 105.9 Free reserves 777.1 511.3 Treasury shares -205.0 0.0 Retained earnings 305.0 393.6 Total shareholders equity 978.9 1,014.5 Total liabilities and shareholders equity 1,293.1 1,321.5 16
Income Statements Geberit AG 2015 2016 Income Dividends from Group companies 300.0 388.1 Financial income and other operating income 8.0 7.4 Total income 308.0 395.5 Expenses Administrative expenses 3.8 3.8 Financial expenses 3.2 1.6 Direct tax expenses 0.1 0.3 Total expenses 7.1 5.7 Net income 300.9 389.8 17
Appropriation of available earnings of Geberit AG Proposal by the Board of Directors to the General Meeting: 2015 2016 CHF CHF Available earnings Net income 300,924,316 389,770,714 Withdrawal from free reserves 10,000,000 0 Balance brought forward 4,036,493 3,812,822 Total available earnings 314,960,809 393,583,536 Transfer to free reserves 0 20,000,000 Proposed/paid dividend 311,147,987 370,414,270 Balance to be carried forward 3,812,822 3,169,266 Total appropriation of available earnings 314,960,809 393,583,536 18
Time schedule Ordinary General Meeting Dividend payment Interim report first quarter Half-year report Interim report third quarter 2017 5 April 11 April 2 May 17 August 31 October First information on the year 2017 Results full year 2017 Ordinary General Meeting Dividend payment Interim report first quarter 2018 18 January 13 March 4 April 10 April 3 May Subject to minor changes 19
This summary report and the online annual report 2016 are published in English and German. The German online version of the annual report is binding. The consolidated financial statements of the Geberit Group are created in accordance with the International Financial Reporting Standards (IFRS). Additional information is available at www.geberit.com/annualreport > financial report. The statements in this review relating to matters that are not historical facts are forward-looking statements that are not guarantees of future performance and involve risks and uncertainties, including but not limited to: future global economic conditions, foreign exchange rates, regu - la tory rules, market conditions, the actions of competitors and other factors beyond the control of the company. 20
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