Profitability remains impressive
In the 2015 financial year, the results of the Geberit Group were influenced by various special effects in connection with the Sanitec acquisition. For better comparability, adjusted figures1 are shown and commented on.
Operating margins were positively influenced by beneficial volume and product mix effects, as well as lower raw material prices. The 10% currency rebate in the Swiss market, negative currency effects, higher personnel and pension costs as well as the generally lower margins of the Sanitec business had a negative effect.
The adjusted operating cashflow (adj. EBITDA) rose by 5.5% to CHF 693.5 million, its highest ever level in Geberit's history. The adjusted EBITDA margin came to 26.7% compared with 31.5% in the previous year, due mainly to the aforementioned dilution of margins as a result of the integration of the Sanitec business. Over the last decade, average EBITDA growth of 4.3% was marginally better than the corresponding increase in net sales of 4.2%. The negative influence of currency developments explains why the previous year's operating results were not significantly bettered despite the Sanitec integration. Adjusted EBITDA was negatively impacted by the currency trend by CHF 69 million or 10.4%; the corresponding effect on the adjusted EBITDA margin was -0.4 percentage points.
The adjusted operating profit (adj. EBIT) rose by 2.4% to CHF 590.9 million, and the adjusted EBIT margin reached 22.8% (previous year 27.6%). Adjusted net income fell by 1.1% to CHF 493.1 million, which led to an adjusted return on sales of 19.0% (previous year 23.9%). The adjusted earnings per share came to CHF 13.23 (previous year CHF 13.28). The fall of 0.4%, which is disproportionately small compared with adjusted net income, was due to the lower average shareholding as a consequence of the ongoing share buyback programme.
Operating expenses under control
Total adjusted operating expenses increased by 32.4% in 2015 to CHF 2,002.8 million. As a percentage of net sales, this equates to 77.2% (previous year 72.4%). The increase in total adjusted operating expenses as well as all subitems was attributable to the integration of Sanitec's activities. In contrast, foreign currency effects had a reducing effect.
Overall, the adjusted cost of materials increased by 25.1% to CHF 756.0 million and rose slightly from 28.9% of net sales in the previous year to 29.1%. Falling raw material prices had the effect of reducing expenditure on both industrial metals and plastics. Adjusted personnel expenses grew by 35.2% to CHF 654.2 million, which equates to 25.2% of net sales (previous year 23.2%). Adjusted for the acquisition, the adjusted personnel expenses decreased in absolute terms. The largely tariff-related salary increases and rise in staff numbers, see also Business and financial review, employees were more than offset by exchange rate effects. Adjusted depreciation rose by 24.5% to CHF 95.9 million; in organic terms, it would have fallen. The adjusted amortisation of intangible assets amounted to CHF 6.7 million (previous year CHF 3.2 million). Adjusted other operating expenses increased by 42.5% to CHF 490.0 million; in organic terms, a decline would have been posted.
The adjusted net financial result came to CHF -17.2 million, which is a minus of CHF 15.5 million compared to the previous year. This development can be explained by higher interest expenditure in connection with the financing of the Sanitec acquisition, the amortisation of acquisition-related financing charges and foreign currency losses. Adjusted tax expenses grew by CHF 4.0 million to CHF 80.6 million. This resulted in a slightly higher adjusted tax rate compared with 2014 of 14.0% (previous year 13.3%), which was attributable to completed amortisation that had an impact on taxes.
Significant acquisition and integration costs in the income statement
The negative special effects2 arising from the Sanitec acquisition amounted to CHF 62 million as regards EBITDA, CHF 93 million as regards EBIT and CHF 71 million as regards net income. The reported values amounted to CHF 631.7 million for the EBITDA (EBITDA margin 24.4%), CHF 498.3 million for the EBIT (EBIT margin 19.2%), CHF 422.4 million for net income (return on sales 16.3%) and CHF 11.33 for earnings per share.
Increase in free cashflow
The slightly lower operating cashflow (EBITDA) and various special effects resulting from the Sanitec acquisition, the majority of which are mutually compensating, led to a decline in net cashflow of 2.0% to CHF 596.3 million. When calculating free cashflow, higher investments in property, plant and equipment were more than offset by positive effects of the change in net working capital. Consequently, an increase of 5.1% to CHF 484.0 million was achieved in free cashflow. Free cashflow was largely used to pay distributions of CHF 310.7 million to shareholders and to repurchase shares totalling CHF 159.8 million.
1 Adjusted: adjusted for costs in connection with the Sanitec acquisition (transaction, integration, and one-off financing costs as well as the amortisation of intangible assets and one-off costs resulting from the inventory revaluation)
2 Transaction, integration, and one-off financing costs as well as the amortisation of intangible assets and one-off costs resulting from the inventory revaluation