Leifheit : Financial report for the first half year

Financial report for the first half-year ending 30 June 2021

Leifheit Group      Financial report for the first half-year ending 30 June 2021

At a glance

• Group turnover grows by almost 20% in the first half of the year
• Domestic market of Germany sees turnover growth of 30.5%
• Group EBIT climbs by 55% to m€ 13.6
• Significant rise in free cash flow to m€ 10.4
• Forecast for 2021 remains unchanged

Key figures of the Group as at 30 June

			2020		2021		Change
Turnover
Group		m€	130.4		156.3		19.9%
Household		m€	105.8		126.3		19.4%
Wellbeing		m€		11.4		13.8		20.5%
Private Label		m€	13.2		16.2		23.2%
Foreign share	%	58.9		55.2		- 3.7 pps
Profitability
Gross margin	%	44.1		43.9		- 0.2 pps
Cash flow from operating activities		m€		- 0.2		13.2		> 100%
Free cash flow		m€		- 2.5		10.4		> 100%
Foreign currency result		m€		- 0.1		0.5		> 100%
EBIT		m€		8.8		13.6		54.9%
EBIT margin	%	6.8		8.7		1.9 pps
EBT		m€	8.3		13.3		59.6%
Net result for the period		m€	6.0		9.5		57.6%
Earnings per share		€	0.63		1.00		58.7%
Employees
Group (average)		people	1,100		1,118		1.6%
Investments		m€	2.4		2.9		20.5%

001

report for the first half-year ending 30 June 2021

Foreword

Dear Shareholders,

The Leifheit Group showed a positive business development in the first half of 2021, successfully continuing on its growth course. We were able to significantly improve earnings before interest and taxes (EBIT) year-on-year from m€ 8.8 to m€ 13.6 in the first six months of 2021. The m€ 11.2 increase in gross profit to m€ 68.7 from the sharp rise in turnover and positive product and customer mix effects played a major part in this performance and was largely the result of the contribution margins.

We increased Group turnover by a significant margin of almost 20% to m€ 156.3 in the first six months of 2021. This marks the fourth quarter of double-digit turnover growth in succession. Leifheit's domestic market (Germany) has experianced a turn­ around, evolving into a growth market with turnover growth of 30.5%. Central Europe also made a significant contribution to the company's success with turnover growth of 16.5%. Performance in the key markets Italy and France was particularly positive. Successful TV campaigns in Italy and the announcement of similar measures in France saw demand soar and the distribution network expand further. We also managed to generate turnover growth of 7.0% in the Eastern Europe region. Efforts to step up marketing activities, particularly in the Czech Republic, led to double-digit turnover growth in the region's highest-turnover market.

We increased our investment in consumer advertising for our Leifheit and Soehnle brand products in the first two quarters of 2021 as part of our Scaling up Success growth strategy. Selected Soehnle products were also advertised for the first time on TV with great success, allowing us to turn Soehnle into a successful brand with double-digit growth figures on a par with our core brand of

turnover growth of 20.5% overall. Demand for Soehnle air purifiers, which remove allergens from the air and combat viruses and bacteria, remained high among consumers against the backdrop of the COVID-19 pandemic. Accordingly, turnover in the air product group rose substantially by around 150%. The Soehnle Airfresh Clean 400, which recently finished first in a test conducted by "Haus & Garten Test" magazine, has also been contributing to this trend since the first quarter. The air purifier filters out 99.95%1 of particles such as allergens, viruses and pollutants through its high-performancefour-stage cleaning system, HEPA filter and UV-C light.

We will continue to present our consumers with a select range of products that have been awarded "very good" test results on account of their excellent quality as the year goes on. We even have a two-time test winner in our product range in the shape of the CLEAN TWIST system, which came top in the "Haus & Garten Test" magazine test in both the flat mop and mop categories.

Our initiatives to improve working capital are proving fruitful. In the first half of 2021, we were able to generate free cash flow of m€ 10.4, which was primarily the result of an increase in cash inflow from operating activities. This item stood at m€ 13.2, up from cash outflow of m€ 0.2 in the previous year, due to the rise in the net result for the period and the significantly lower rise in working capital compared to the previous-year period. We will continue to focus on reducing full-year working capital compared to the previous year and improving our cash flow.

The Leifheit Group continues to face challenges in the supply chain, production and logistics due to the pandemic. With the availability of freight capacity and containers low, and raw materials scarce, we are taking a proactive approach to preventing bottlenecks in supply. At the same time, freight and raw material prices are spiralling out of control with no end in sight. What is more, the renewed rise in COVID-19 infection rates shows that the pandemic is by no means over, meaning that the impact of the pandemic on overall economic development and the business activities of the Leifheit Group remains difficult to evaluate.

Despite these difficult circumstances, we will continue our strategic initiatives in the interests of all of our shareholders to optimise the Group cost structure, enhance our product ranges and win over even more consumers with our multiple award-winning products. That is our mission! We continue to anticipate Group turnover growth of at least 5% compared to the corresponding previous- year figure and Group EBIT of between m€ 20 and m€ 24 in financial year 2021. We also continue to expect free cash flow of around m€ 10 to m€ 14 in financial year 2021.

We greatly appreciate your loyalty to the Leifheit Group on this exciting journey.

The Board of Management

Henner Rinsche

Igor Iraeta Munduate

Marco Keul

Group      Financial

Leifheit. Turnover from heavily advertised bathroom and kitchen scales rose by 21.0%, with the Wellbeing segment posting strong

1 Efficiency of particle filter material tested externally in accordance with EN 1822. HEPA H13 filter material used. Aerosol removal tested by the Institute of Fluid Mechanics and Aerodynamics at the Universität der Bundeswehr München; with aerosol particles (Ø 0.4 µm) in a room with a capacity of approximately 60 m³ at performance level 4.

Leifheit

002

Unaudited interim management report as at 30 June

Group      Financial report for the first half-year ending 30 June 2021

Foundations of the Group

The Leifheit Group is one of the leading European brand suppliers of household items. The company offers high-quality and innovative products and solutions that make everyday life at home easier and more convenient.

There were no significant changes in the foundations of the Leifheit Group in the first half of 2021. For detailed information on the company's structure, business and strategy - as well as on the control system, innovation and product development - please see the annual financial report 2020, which is available on the website at financial-reports.leifheit-group.com.

Following the end of the reporting period (30 June 2021), there were no events at the Leifheit Group which can be expected to have a material influence on the net assets, financial position and results of operations of the company.

Economic environment

Europe/World

In its July 2021 report, the International Monetary Fund (IMF) forecasts an economic growth of 6.0% for 2021. The driving forces are the USA and China.

For the euro zone, the IMF assumes economic growth of 4.6% for 2021. This is 0.2 percentage points more than assumed in April.

According to the EU Commission's 2021 summer forecast, positive growth of 4.8% - a faster-than-anticipated upswing in the European economy - can be expected this year. The European economy is likely to return to its pre-crisis level by the end of 2021. The Commission forecasts inflation of 2.2% in the EU in 2021.

Germany

In Germany, the second wave of infection in the past winter half year played a pivotal role in the development of the economy in 2021, although there are clear discrepancies depending on the particular industry or service segment. The sharp decline in private consumer spending in 2020 is reflected negatively in the forecasts for 2021. However, with incoming orders from abroad for exports in the first half of 2021 noticeably higher than before the crisis, the joint forecast of the five leading economic research institutes anticipates growth of 3.7% in the German economy this year. The further development of the pandemic remains the most important downside risk for the forecast.

The IMF foresees a similar development in its July 2021 report, which predicts economic growth of 3.6% in 2021. The ifo Institute also expects to see economic recovery through to the end of the year. However, according to the economic forecast issued by the Munich-based economists, global bottlenecks in the delivery of primary products are likely to have a dampening effect. As a result, the ifo Institute expects Germany's gross domestic product to rise by 3.3% in 2021, or 0.4 percentage points less than anticipated in March.

The ifo Institute's Business Climate Index, a leading indicator of economic development in Germany, fell from 101.7 points in June to 100.8 points in July (seasonally adjusted), suggesting a notice­ able fall in optimism regarding the months ahead. Bottlenecks in the supply of primary products and concerns about a renewed increase in the number of infections are weighing heavily on the German economy. In the manufacturing sector, the indicator fell for the fourth time in a row. The cautious optimism observed in the retail sector over the past few months has worsened.

In its June 2021 economic forecast, IfW Kiel predicted gross domestic product growth of 3.9% in 2021. However, the industrial sector's recovery is being impeded by supply issues, the institute writes, resulting in an increase in price pressure as well. This has caused prices for raw materials, intermediate goods and transport services to rise across the board recently. At the same time, the increase in value added tax and the German government's climate package are also helping to drive up prices. The Kiel-based researchers expect consumer prices to rise by a significantly higher rate of 2.6% in 2021.

According to the consumer research organisation Gesellschaft für Konsumforschung (GfK), consumer sentiment took a breather following significant improvement in recent months due to a renewed increase in the number of infections and price hikes. The GfK expects the consumer climate to stand at - 0.3 points in August, the same level recorded in July. After climbing to a 10-year high of 58.4 points in June, expected economic development was somewhat more modest in July, falling by 3.8 points to 54.6. Income expectations also saw a moderate decline, losing

5.1 points to stand at 29.0. By contrast, propensity to buy increased slightly by 1.4 points, climbing to 14.8. Consumer optimism is not unclouded, according to the GfK's experts, as rules on mask wearing and social distancing prevent a fully carefree shopping experience at the present time.

Leifheit

003

    Financial report for the first half-year ending 30 June 2021

Foreign currencies

The euro lost value against the US dollar overall in the first half of 2021. The exchange rate stood at USD 1.22 to the euro at the start of trading this year before rapidly falling to USD 1.17 to the euro by the end of March. However, the euro rebounded to USD 1.23 by 25 May 2021, only to close the first half of the year at a lower rate of USD 1.19. The euro is expected to remain relatively strong throughout 2021, assuming that there are no changes in the monetary policy framework, such as the US Federal Reserve's unprecedented decision to lower the benchmark interest rate last year. The average Reuters bank forecast puts the exchange rate at USD 1.21 to the euro at the end of 2021.

The euro also lost value against the Chinese renminbi (yuan) in the first half of 2021. After starting the year at around CNY 8.00 to the euro on 4 January 2021, the euro lost ground as the first half of the year progressed and closed the period at CNY 7.65. The US dollar and the euro could gain value against the renminbi if the US maintains its tough stance in its economic dealings with China and US economic growth continues to pick up speed in the second half of the year. The average Reuters bank forecast for the end of 2021 stands at CNY 7.74 to the euro.

Net assets, financial position and results of operations

Business performance

The Leifheit Group's turnover rose significantly by 19.9% from m€ 130.4 in the first half of 2020 to m€ 156.3 in the first six months of financial year 2021, despite continued restrictions related to COVID-19. This marked the fourth quarter in succession of double- digit turnover growth. Leifheit's domestic market (Germany) has experianded in a turnaround, evolving into a growth market with an increase of 30.5%. Soehnle has joined the core Leifheit brand as a successful brand with double-digit growth figures on the back of efforts to expand marketing activities in the first two quarters of 2021.

Group turnover by region

Turnover for the first six months of financial year 2021 was divided by region as follows: Germany accounted for 44.8% of Group turnover (previous year: 41.1%), Central Europe excluding Germany 41.2% (previous year: 42.4%), Eastern Europe 11.3% (previous year: 12.6%) and the rest of the world 2.7% (previous year: 3.9%).

• Germany

In its domestic market of Germany, the Leifheit Group generated turnover of m€ 70.1 in the first half of 2021 (previous year: m€ 53.6), corresponding to a significant year-on-year rise of 30.5%. Successful TV campaigns for selected best-selling Leifheit and Soehnle products were the main driving forces behind this growth. However, it should also be noted that key bricks-and- mortar sales channels in Germany were closed for several months in the previous-year period during the first coronavirus lockdown and that online retail was unable to fully compensate for the losses in early 2020.

Group turnover by region

in m €
80		70.1	64.4
60	53.6		55.3
40
20				16.5	17.6	5.0
						4.2
0	Germany	Central	Eastern	Rest of
			Europe	Europe	the World
6M 2020	6M 2021

The amount of turnover generated abroad also climbed significantly, by 12.5% to m€ 86.2 (previous year: m€ 76.8), pushing the share of turnover generated abroad in the first half of 2021 to 55.2%.

• Central Europe

Turnover of m€ 64.4 (previous year: m€ 55.3) was generated in Central Europe in the first six months of the year, equivalent to an increase of 16.5%. The development of the key markets Italy and France was particularly positive. The Leifheit Group was able to boost demand significantly and further expand its distribution network in both countries, after successful TV campaigns in Italy and the announcement of similar campaigns in France. Turnover in these regions rose sharply as a result. Markets in Austria and Belgium also developed positively. By contrast, turnover in the Netherlands declined year-on-year following the excellent first half of 2020.

Leifheit Group 

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Group      Financial report for the first half-year ending 30 June 2021

• Eastern Europe

In the Eastern Europe sales region, the Leifheit Group increased its turnover by 7.0% to m€ 17.6 (previous year: m€ 16.5). Double- digit growth was able to be achieved in the Czech Republic - the highest-turnover market in the region - after the Leifheit Group intensified its marketing activities there. Turnover development was also positive in Ukraine and Romania in the first half of 2021. In Poland, Russia and Slovakia, on the other hand, turnover declined in comparison to the previous year.

• Rest of the world

Turnover in non-European markets declined overall, falling by 14.3% in the reporting period to m€ 4.2 (previous year: m€ 5.0). This trend was primarily due to a sharp rise in online business in the US in the previous-year period caused by COVID-19-related store closures. However, this effect no longer applied in the current reporting period, leading to a decline in turnover in the US market. Turnover was also down year-on-year in the Middle East and the Far East. Australia and South America, on the other hand, recorded positive turnover trends.

Group turnover by segment

Reporting segments are divided as follows: Household, Wellbeing and Private Label.

Broken down by the three segments, turnover was distributed as follows in the first six months of 2021: The Household segment, which is by far the largest of the three and home to the Leifheit brand, generated 80.8% of turnover (previous year: 81.1%). The Leifheit Group generated 8.8% (previous year: 8.8%) of its turnover in the Wellbeing segment, with its Soehnle brand, whereas the Private Label segment, which is primarily marketed in France with the French subsidiaries Birambeau and Herby, contributed 10.4% (previous year: 10.1%) of turnover.

Group turnover by segment

in m €
180
				156.3
150		130.4		16.2
			13.8
		13.2
120
	11.4
90
60		105.8		126.3
30
0		6M 2020		6M 2021
Household		Wellbeing		Private Label

• Household

In the Household segment, the Leifheit Group generated turnover of m€ 126.3 in the first half of 2021 (previous year: m€ 105.8), which equates to significant growth of 19.4%. The main factor in this extremely positive development was the expansion of TV campaigns, which caused a sharp increase in demand for cleaning (+ 29.8%) and laundry care (+ 11.7%) products, especially in Germany. Stepping up marketing activities had a marked impact on sales figures, as did the increase in the need for good hygiene among the general population as a result of the COVID-19 pandemic. The kitchen category benefited from the fact that consumers cooked at home more frequently during the lockdown, which boosted demand for quality kitchen products and appliances.

• Wellbeing

In the Wellbeing segment, the Leifheit Group generated further strong growth of 20.5%. Turnover came to m€ 13.8, up from m€ 11.4 in the previous year. Just as in the Household segment, increased marketing activities also had a positive impact in the Wellbeing segment, particularly in relation to heavily marketed bathroom and kitchen scales, with a marked increase of 21.0% in turnover. Demand for Soehnle air purifiers, which remove allergens from the air and combat viruses and bacteria, remained high among consumers against the backdrop of the COVID-19 pandemic. Turnover in the air product group rose accordingly by around 150%.

• Private Label

Turnover in the Private Label segment was up again in the reporting period following recent declines, rising by 23.2% to m€ 16.2 (previous year: m€ 13.2). This turnaround came as the result of the positive turnover trend reported at the subsidiaries Birambeau and Herby, as tight restrictions had been imposed on French retail during the COVID-19 lockdown in spring 2020 but had been lifted by the reporting period. In addition, Brand Business was also able to achieve growth in the first half of 2021 as a result of pipeline filling effects caused by distribution expansion and the acquisition of new customers.

Leifheit

005