Annual Report 2016

Notes to the Consolidated Financial Statements

1. Basic information and principles of the report

2. Changes in Group structure

Sale of the Koralle Group

The Group sold the Koralle Group to AFG Arbonia-Forster-Holding AG on July 1, 2016. The sales price was MEUR 33.0 plus net cash and cash equivalents. The Koralle Group companies are Bekon Koralle AG, Koralle Sanitärprodukte GmbH, Baduscho Dusch- und Badeeinrichtungen Produktions- und Vertriebsgesellschaft mbH and Servico Gesellschaft für Sanitärtechnik mbH. The Koralle Group was acquired as part of the Sanitec acquisition in 2015. The provider of shower enclosures primarily operates in the Swiss, German and Austrian markets and employed 240 people as of June 30, 2016. The Koralle Group contributed MCHF 22.6 to the Geberit Group’s net sales, MCHF 2.1 to the EBIT, and MCHF 1.7 to the net income as of June 30, 2016. In 2015 (11 months), the Koralle Group contributed MCHF 42.2 to the Geberit Group’s net sales, MCHF 2.4 to the EBIT, and MCHF 1.9 to the net income. On June 30, 2016, the Koralle Group had current assets of MCHF 17.1, non-current assets of MCHF 33.7, current liabilities of MCHF 7.3, and non-current liabilities of MCHF 7.3.

In addition there were various changes to the legal structure of the Group mainly in connection with the integration of the Sanitec Group but with no effect on the consolidated results.

Acquisition of the Sanitec Group

Geberit AG submitted a takeover bid to the shareholders of Sanitec Oyj, Helsinki, Finland (Sanitec) on October 14, 2014, to acquire all Sanitec shares at a price of SEK 97 per share in cash. The Sanitec shares were listed on the NASDAQ Stockholm stock exchange. Sanitec is a leading European producer and supplier of bathroom ceramics. The Group achieved net sales of MEUR 689 and an EBIT margin of 11.4% in 2014. The company employed 6,200 people in 18 production facilities and 24 sales units. Sanitec sold its products primarily in Europe under 14 leading brands that are firmly established in their local markets. For Geberit, the acquisition of Sanitec represents an expansion of its product range. Its portfolio will be enhanced with the addition of the Sanitary Ceramics area. The new company will be the European market leader for sanitary products and will, in particular, strengthen its position in those European markets in which Geberit had not yet gained a firm foothold, i.e. the Nordic Countries, France, UK and Eastern Europe. It combines technical know-how in sanitary technology “behind the wall” with design expertise “in front of the wall”. The acquisition also bolsters the Group's key sales and earnings drivers.

The relevant competition authorities granted all the required approvals in late January 2015. At the end of the acceptance period on February 2, 2015, 99.27% of the Sanitec shares had been tendered to Geberit. The purchase/sale of these shares was effected on February 10, 2015 and was financed by Geberit using its own funds as well as new debt. Following an extended offer period, Geberit held 99.77% of the shares, with a squeeze-out process instigated for the remaining shares and completed successfully in September 2015.

The purchase price for the Sanitec Group in cash amounted to MCHF 1,203.5 plus additional transaction costs of MCHF 22. Of the latter, MCHF 10 is attributable to consultation fees (of which MCHF 3 was already incurred in 2014) and MCHF 12 was incurred in connection with the financing. Of the financing costs, MCHF 6 is recognised in the 2015 income statement and a further MCHF 6 is being amortised over the term of the financing instruments. In addition debt of MCHF 184 had to be refinanced.

The acquisition was financed by means of bond issuance, bank loans and from own funds. Geberit issued the following three bonds: a bond for MCHF 150 with a term of four years and a coupon of 0.05%, a bond for MCHF 150 with a term of eight years and a coupon of 0.3%, and a bond for MEUR 500 with a term of six years and a coupon of 0.688%. A bridge facility in the form of a syndicated bank loan amounting to MCHF 900 was available for the period between the closing of the transaction and the issuance of the bonds. In addition, a second syndicated bank loan (“term loan facility”) amounting to MEUR 325 was drawn on and existing funds of MCHF 247 were used.

The instruments for hedging the foreign exchange risks were released on the closing and reflected in the acquisition price. The corresponding effect is contained in the “Cashflow hedge accounting” item in the consolidated statements of comprehensive income.

As the first consolidation of the Sanitec Group took place in February 2015, the consolidated income statement for the previous year included the Sanitec Group’s figures for 11 months only. No subsequent changes were made to the already disclosed values in the annual report 2015. Additional information of the acquisition is disclosed in the 2015 annual report (Note 2).

Further changes in the Group structure for 2015 were as follows:

  • Geberit Service AB, Bromölla (newly founded)
  • Keramag Service GmbH & Co. KG, Pfullendorf (newly founded)
  • Contura Steel AB, Bromölla (sold)

3. Summary of significant accounting policies

4. Risk assessment and management

5. Management of capital

6. Trade accounts receivable

7. Other current assets and current financial assets

8. Inventories

9. Property, plant and equipment

10. Other non-current assets and non-current financial assets

11. Goodwill and intangible assets

12. Short-term debt

13. Other current liabilities and provisions

14. Long-term debt

15. Financial instruments

16. Retirement benefit plans

17. Participation plans

18. Deferred tax assets and liabilities

19. Other non-current liabilities and provisions

20. Contingencies

21. Capital stock and treasury shares

22. Earnings per share

23. Other operating expenses, net

24. Financial result, net

25. Income tax expenses

26. Operating Leasing

27. Research and development cost

28. Cashflow figures

29. Segment reporting

30. Related party transactions

31. Foreign exchange rates

32. Subsequent events

33. Group companies as of December 31, 2016