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1
RAWLPLUG GROUP
MANAGEMENT REPORT ON GROUP
OPERATIONS
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
WROCŁAW, 29.08.2019
2
Contents
1. BASIS FOR THE PREPARATION OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS AND PERIOD COVERED. RULES USED IN PREPARING THE FINANCIAL
STATEMENTS ................................................................................................................................................ 4
2. DESCRIPTION OF GROUP OPERATIONS ................................................................................................... 4
2.1. DESCRIPTION OF THE GROUP ............................................................................................................... 4
2.1.1. Group parent ........................................................................................................................................ 4
2.1.2. Composition of the Group .................................................................................................................... 5
2.1.3. Changes in Group structure .................................................................................................................. 5
2.2. CHANGES IN THE MAIN PRINCIPLES OF GROUP MANAGEMENT................................................. 6
2.3. GROWTH DIRECTIONS ............................................................................................................................ 6
2.4. PARENT'S AUTHORITIES ......................................................................................................................... 7
2.4.1. Management Board .............................................................................................................................. 7
2.4.2. Supervisory Board ................................................................................................................................ 7
2.4.3. Shares held by the Parent's Management Board or Supervisory Board Members ............................... 7
2.5. SHAREHOLDING STRUCTURE, INCLUDING SHAREHOLDERS DIRECTLY OR INDIRECTLY
HOLDING AT LEAST 5% OF GENERAL MEETING VOTES ................................................................ 8
3. FACTORS SIGNIFICANT TO GROUP DEVELOPMENT IN H1 2019, INCLUDING THREATS
AND RISKS, AND GROWTH PERSPECTIVES ............................................................................................ 9
3.1. EXTERNAL FACTORS .............................................................................................................................. 9
3.1.1. Macroeconomic situation and conditions in the industry ..................................................................... 9
3.1.1.1. Construction and fixings industry ............................................................................................... 9
3.1.1.2. Industrials sector ....................................................................................................................... 10
3.1.2. Employment conditions; prices of products and intermediates imported from the Far East .............. 10
3.1.3. Exchange rates ................................................................................................................................... 10
3.1.4. Interest rates ....................................................................................................................................... 11
3.2. INTERNAL FACTORS ............................................................................................................................. 11
3.3. SUSTAINABLE GROWTH STRATEGY ................................................................................................. 11
3.4. GROWTH PERSPECTIVES ...................................................................................................................... 13
3.5. GROUP STRATEGY ................................................................................................................................. 13
4. SEASONALITY OF SALES .......................................................................................................................... 13
5. INVESTMENTS AND R&D .......................................................................................................................... 13
5.1. INVESTMENTS ......................................................................................................................................... 13
5.2. R&D............................................................................................................................................................ 14
5.3. PLANS FOR 2019 ...................................................................................................................................... 15
6. HUMAN RESOURCES ................................................................................................................................. 15
7. RELATED-PARTY TRANSACTIONS EXECUTED ON TERMS OTHER THAN MARKET TERMS ..... 15
8. OFF-BALANCE SHEET ITEMS ................................................................................................................... 16
8.1. Information on issue by the Issuer or one of its subsidiaries of sureties for loans or borrowings,
or issue of guarantees – to a single entity or subsidiary of such entity, if the total value of existing
sureties or guarantees is significant ............................................................................................................ 16
8.2. OTHER OFF-BALANCE SHEET ITEMS ................................................................................................ 16
9. SIGNIFICANT PROCEEDINGS IN PROGRESS BEFORE A COURT, ARBITRATION BODY
OR PUBLIC ADMINISTRATION AUTHORITY ......................................................................................... 16
10. SIGNIFICANT INFORMATION FOR ASSESSMENT OF THE COMPANY ............................................. 16
10.1. DIVIDEND ............................................................................................................................................ 16
10.2. INFORMATION SIGNIFICANT TO ASSESSING THE GROUP'S AND COMPANY'S FINANCIAL
SITUATION, INCLUDING ITS ABILITY TO PAY LIABILITIES .................................................... 16
10.3. EVENTS AFTER THE END OF THE REPORTING PERIOD ............................................................ 17
11. GROUP FINANCIAL RESULTS................................................................................................................... 18
11.1. CONSOLIDATED STATEMENT OF PROFIT AND LOSS ................................................................ 18
11.2. ASSET AND LIABILITY STRUCTURE IN THE CONSOLIDATED STATEMENT
OF FINANCIAL POSITION ................................................................................................................. 18
11.3. RAWLPLUG GROUP'S REVENUE FROM SALES............................................................................ 19
11.3.1. Domestic sales.................................................................................................................................... 20
11.3.2. Foreign sales ...................................................................................................................................... 20
11.3.3. Product structure ................................................................................................................................ 20
11.3.4. Supply sources ................................................................................................................................... 20
11.4. SELLING COSTS AND ADMINISTRATIVE EXPENSES ................................................................. 20
11.5. FINANCING ACTIVITIES ................................................................................................................... 21
11.6. PROFITABILITY RATIOS ................................................................................................................... 22
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11.7. LIQUIDITY RATIOS ............................................................................................................................ 22
11.8. DEBT RATIOS ...................................................................................................................................... 22
11.9. PROGRESS VERSUS PREVIOUSLY PUBLISHED GUIDANCE ..................................................... 23
11.10. FACTORS AND EXTRAORDINARY EVENTS HAVING AN IMPACT ON FINANCIAL
RESULTS ................................................................................................................................................. 23
4
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
1. BASIS FOR THE PREPARATION OF THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS AND PERIOD COVERED. RULES
USED IN PREPARING THE FINANCIAL STATEMENTS
These condensed consolidated interim financial statements of RAWLPLUG Group cover the six months ended 30 June 2019
and are prepared in accordance with the Ordinance of the Minister of Finance of 29 March 2018 (Polish Journal of Laws of 2018,
item 757) on current and periodic information disclosed by issuers of securities (...) and IAS 34 Interim Financial Reporting.
The condensed consolidated interim financial statements do not include all of the information disclosed in annual financial
statements, as prepared in accordance with IFRS, therefore they should be read in conjunction with the Group's consolidated
financial statements for 2018.
The condensed separate semi-annual financial statements of the Parent, RAWLPLUG S.A., constitute an attachment to the
condensed consolidated interim financial statements and have been prepared in accordance with the Polish Accounting Act of
29 September 1994 (Polish Journal of Laws of 2019, item 351, as amended) and the Ordinance of the Minister of Finance of 29
March 2018 (Polish Journal of Laws of 2018, item 757) on current and periodic information disclosed by issuers of securities
(...).
The presentation and functional currency for these condensed consolidated interim financial statements is PLN, and all amounts
are expressed in PLN 000s (unless stated otherwise). Financial statements of the entities comprising the Group were translated
into the presentation currency based on the principles specified in IAS 21.
These condensed consolidated interim financial statements have been prepared in accordance with the accounting principles
presented in the Group's most recent consolidated financial statements, for the year ended 31 December 2018, except
amendments resulting from the application of IFRS 16 Leases, effective from 1 January 2019. These changes are described in
note 46 in the Consolidated Semi-Annual Report.
2. DESCRIPTION OF GROUP OPERATIONS
2.1. DESCRIPTION OF THE GROUP
2.1.1. GROUP PARENT
RAWLPLUG S.A., formerly: KOELNER S.A. (Company or RAWLPLUG) was registered on 20 December 1999 in division B
of the commercial register under no. 9101. Currently, the Company is registered under KRS number 33537. The Company was
founded by: Krystyna Koelner, Przemysław Koelner and Radosław Koelner. The Company's main economic activities of are:
design, manufacture and sale, mostly through wholesale distribution channels, of products from the following assortment groups:
✓ construction fixings,
✓ hand tools and power tools,
✓ screws and related accessories.
5
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
2.1.2. COMPOSITION OF THE GROUP
Entities in RAWLPLUG Group (RAWLPLUG Group, Group) as at 30 June 2019:
* Companies not subject to consolidation (in accordance with point 31 IAS 1) as of 30 June 2019.
** This is a jointly controlled entity, which for the purposes of these consolidated financial statements is measured using the equity method.
1 - the company has a branch in Łańcut.
2.1.3. CHANGES IN GROUP STRUCTURE
On 18 February 2018, an agreement was executed between RAWLPLUG S.A. and an existing shareholder of subsidiary Koelner
Centrum Sp. z o.o. in Pabianice, pursuant to which RAWLPLUG S.A. purchased a 49% stake in Koelner Centrum Sp. z o.o.,
which constitutes 245 shares with nominal value of PLN 1 thousand each and total nominal value of PLN 245 thousand. The
purchase price was PLN 1 555.9 thousand. As a result of the transaction, RAWLPLUG S.A. became the owner of 100% of shares
in Koelner Centrum Sp. z o.o. The two companies were subsequently merged, therefore on 27 February 2019 a merger plan was
agreed and signed by the merging entities' management boards. On 23 April 2019, an Extraordinary General Meeting of
RAWLPLUG S.A. approved the companies' merger. The merger took place pursuant to art. 492 § 1 point 1 of the Polish
Commercial Companies Code, i.e. through the transfer of all of the assets of Koelner Centrum Sp. z o.o., as the acquired
company, to RAWLPLUG S.A., as the acquiring company. Due to the fact that the sole shareholder of the acquired company,
Koelner Centrum Sp. z o.o., was the acquiring company, i.e. RAWLPLUG S.A., the merger was carried out in a simplified
procedure pursuant to art. 516 § 6 of the Polish Commercial Companies Code, i.e. without:
✓ drafting by the management boards of the companies being merged of the reports referred to in art. 501 § 1 of the
Polish Commercial Companies Code,
✓ disclosure of the information referred to in art. 501 § 2 of the Polish Commercial Companies Code and
✓ audit of the merger plan by a statutory auditor and drafting of an audit opinion.
RAWLPLUG S.A.
-> Koelner Polska Sp. z o. o. - 100%
-> Koelner Rawlplug IP Sp. z o.o.1 - 100%--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------
-> Rawlplug Ltd - 100%
-> Koelner Hungária Kft - 51%
-> Koelner CZ s.r.o. - 100%
-> Koelner Deutschland GmbH - 100% -------------> Stahl GmbH - 100%
-> Rawlplug Middle East FZE - 100% -------------> Rawlplug Building and Construction Material Trading LLC - 100%
-> Rawlplug Ireland Ltd - 100% -------------> Rawlplug Ireland (Export) Ltd* - 100%
-> Koelner Vilnius UAB - 100%
-> Rawl France SAS - 100%
-> Rawl Scandinavia AB - 100%
-> Koelner Slovakia s.r.o. - 100%
-> Koelner Ltd - 100%
-> Koelner-Ukraine LLC * - 60%
-> Koelner Trading KLD LLC* - 100%
-> Koelner - Inwestycje Budowlane Sp. z o.o.* - 100%
-> Rawlplug Inc.* - 100%
-> Rawlplug Singapore PTE. LTD* - 100%
-> Rawlplug Shanghai Trading Co., Ltd.* - 100%
-> Rawl India Services Private Limited* - 100%
-> Koelner Kazakhstan Ltd* - 70%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------> Rawlplug Portugal LDA *-100%
-> Rawl Africa (Pty) Ltd* - 100%
-> RAWLPLUG-TMAX Corporation Limited** - 51%
99%
1%
6
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
On 31 May 2019 the merger was entered into the National Court Register, Koelner Centrum Sp. z o.o. will be removed from the
register of companies without liquidation. The merger plan was publicly disclosed on the website of RAWLPLUG S.A.
www.rawlplug.pl and on the website of the acquired company: www.koelnercentrum.pl.
The merger marks the next stage in a process to simplify RAWLPLUG Group's organisational structure, which should translate
into higher efficiency of commercial activities in Poland. The Company communicated the process in current report 2/2019 and
current reports 4/2019, 6/2019 and 10/2019.
In the first half of 2019, RAWLPLUG Group's structure was not subject to any further changes as a result of mergers, de-mergers,
restructurings or discontinued operations.
2.2. CHANGES IN THE MAIN PRINCIPLES OF GROUP MANAGEMENT
RAWLPLUG Group's key accounting principles are not expected to change, except as described in point 2.3.
2.3. GROWTH DIRECTIONS
The first half of 2019 saw no significant changes in the directions of the Group's development. A sustainable growth strategy
was continued in all operating areas. Particular emphasis was placed on the systematising of the sales offering and further
development of the strategic RAWLPLUG brand, particularly on export markets. The strategy is reflected in the further
development of sales companies in Singapore, China and India as well as our production company's in Thailand.
The Management Board focused in the reporting period on optimising all processes within the Group in order to fully utilise all
of its resources, reduce costs and achieve optimal synergy effects. RAWLPLUG Group is currently implementing SAP. The
main objective of replacing the existing ERP systems is to substantially improve management information and introduce Master
Data Management. Four implementations have been successfully completed: SAP B1 is deployed at Dubai-based companies
(Rawlplug Middle East FZE and Rawlplug Building&Construction Material Trading LLC), at the U.K. company (Rawlplug Ltd)
and in Ireland (Rawlplug Ireland Ltd). SAP S/4HANA has been implemented at Koelner Rawlplug IP Sp. z o.o. In H1 2019,
SAP B1 was also implemented at the Thailand-based company (RAWLPLUG-TMAX Corporation Limited) and will be
deployed in the second half of 2019 at the Swedish company (Rawl Scandinavia AB) and in France (Rawl France SAS), while
additional SAP S/4HANA modules will be implemented at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o.
The first half of 2019 also saw activities intended to improve Group management and simplify the Group's structures as regards
economic activities in Poland. The re-organisation of the Group involves a reduction in the number of its constituent companies.
These changes will bring considerable cost savings related to certain redundant functions and jobs as well as cost savings related
to direct services for these companies. Moreover, given the smaller number of entities in the Group, the number of transactions
between the companies is decreasing, which has a positive impact on the transparency of intra-Group operations.
As part of these activities, the Management Board of RAWLPLUG S.A. made a decision to merge:
✓ Koelner Centrum Sp. z o.o. (acquired company) and RAWLPLUG S.A. (acquiring company). As a result of the
merger, the entire assets of Koelner Centrum Sp. z o.o. and its functions have been transferred to RAWLPLUG
S.A., and Koelner Centrum Sp. z o.o. has been removed from the register of companies at the National Court
Register.
This operation had no impact on RAWLPLUG Group's consolidated results in H1 2019.
7
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
2.4. PARENT'S AUTHORITIES
2.4.1. MANAGEMENT BOARD
On 24 May 2019, the Company's Supervisory Board appointed the following Management Board Members for a new joint term:
Radosław Koelner - President of the Management Board
Marek Mokot - Vice-President of the Management Board
Piotr Kopydłowski - Member of the Management Board responsible for finance
Composition of RAWLPLUG S.A.'s Management Board as at 30 June 2019:
Radosław Koelner - President
Marek Mokot* - Vice-President
Piotr Kopydłowski - Member, responsible for finance
* Mr. Marek Mokot was appointed Vice-President of RAWLPLUG S.A.'s Management Board on 29 March 2019.
2.4.2. SUPERVISORY BOARD
Composition of RAWLPLUG S.A.'s Supervisory Board as at 30 June 2019:
Krystyna Koelner - Chairperson
Tomasz Mogilski - Deputy Chairperson
Włodzimierz Frankowicz - Member
Janusz Pajka - Member
Zbigniew Pamuła - Member
Zbigniew Stabiszewski - Member
2.4.3. SHARES HELD BY THE PARENT'S MANAGEMENT BOARD OR SUPERVISORY BOARD MEMBERS
As per the Company's knowledge, members of RAWLPLUG S.A.'s Management Board and Supervisory Board held shares as
follows:
Management Board Number of shares at
report date
Number of shares at
date on which the Q1
2019 consolidated
quarterly report was
published
Radosław Koelner - President 2 744 750 2 744 750
Marek Mokot - Vice-President of the Management
Board
- -
Piotr Kopydłowski - Member, responsible for finance 29 344 29 344
8
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
Supervisory Board Number of shares at
report date
Number of shares at
date on which the Q1
2019 consolidated
quarterly report was
published
Krystyna Koelner - Chairperson - -
Tomasz Mogilski - Deputy Chairperson 100 000 100 000
Włodzimierz Frankowicz - Member - -
Janusz Pajka - Member - -
Zbigniew Pamuła - Member - -
Zbigniew Stabiszewski - Member - -
The nominal amount of one share in RAWLPLUG S.A. is PLN 1.
2.5. SHAREHOLDING STRUCTURE, INCLUDING SHAREHOLDERS DIRECTLY OR INDIRECTLY
HOLDING AT LEAST 5% OF GENERAL MEETING VOTES
As per the Company's knowledge, on the date of the Q1 2019 consolidated report members of RAWLPLUG S.A.'s shareholders
were as follows:
Shareholder Number of
shares
% in share capital
Number of votes
at the general
meeting
% of votes at the
general meeting
Amicus Poliniae Sp. z o.o. 16 902 750 51.91 16 902 750 51.91
Radosław Koelner 2 935 915 9.02 2 935 915 9.02
PKO BP Bankowy PTE S.A. 2 933 639 9.01 2 933 639 9.01
Nationale Nederlanden PTE S.A. 2 842 138 8.73 2 842 138 8.73
Quercus TFI S.A.
(including Quercus Parasolowy SFIO)
1 705 831
(1 645 263)
5.24
(5.053)
1 705 831
(1 645 263)
5.24
(5.053)
Other 5 239 727 16.09 5 239 727 16.09
TOTAL 32 560 000 100.00 32 560 000 100.00
On 28 June 2019, RAWLPLUG S.A. received a notification from Towarzystwo Funduszy Inwestycyjnych S.A. (Quercus TFI
S.A.) pursuant to art. 69 of the Act of 29 July 2005 on Public Offerings and the Terms for Introducing Financial Instruments to
an Organised Trading System and on Public Companies. According to the notification, QUERCUS Parasolowy SFIO decreased
its stake in the Company's votes to below the 5% threshold.
As per the Company's knowledge, on the date of this report RAWLPLUG S.A.'s shareholding structure was as follows:
Shareholder Number of
shares
% in share capital
Number of votes
at the general
meeting
% of votes at the
general meeting
Amicus Poliniae Sp. z o.o. 16 902 750 51.91 16 902 750 51.91
Radosław Koelner 2 935 915 9.02 2 935 915 9.02
PKO BP Bankowy PTE S.A. 2 933 639 9.01 2 933 639 9.01
Nationale Nederlanden PTE S.A. 2 842 138 8.73 2 842 138 8.73
Quercus TFI S.A.
(including Quercus Parasolowy SFIO)
1 705 831
(1 543 207)
5.24
(4.74%)
1 705 831
(1 543 207)
5.24
(4.74%)
Other 5 239 727 16.09 5 239 727 16.09
TOTAL 32 560 000 100.00 32 560 000 100.00
There are no limitations on the exercise of RAWLPLUG S.A.'s voting rights.
The Company is not aware of any agreements pursuant to which there may be a change in the proportions of shares held by the
current shareholders.
9
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
3. FACTORS SIGNIFICANT TO GROUP DEVELOPMENT IN H1 2019,
INCLUDING THREATS AND RISKS, AND GROWTH PERSPECTIVES
3.1. EXTERNAL FACTORS
3.1.1. MACROECONOMIC SITUATION AND CONDITIONS IN THE INDUSTRY
3.1.1.1. CONSTRUCTION AND FIXINGS INDUSTRY
In the first half of 2019, the Group recorded 9% growth in sales in comparison to the same period last year, which also exceeded
sales plans. The key factors in generating good sales results were the continuing good economic situation, continuous
improvements in the widely understood sales offering (products, services, Rawlplug Academy) and sales through new
distribution channels as well as a continuous drive to expand the customer base and markets where RAWLPLUG Group is
present.
In 2016-2018, RAWLPLUG Group focused on optimising its sales offering. Although new products, new technical
documentation, better product parameters and marketing support started to bear fruit in the first half of 2018, their positive impact
on business development is still visible in 2019. RAWLPLUG Group's offering became very competitive in comparison with
the largest players in the industry, allowing it to secure new sales contracts and retain the existing customer base.
A training programme and marketing support for subsidiaries and official distributors translated into higher sales of high-margin
products produced at production facilities. Services made available at www.rawlplug.com such as "RTH - Rawlplug Technical
Helpdesk," "BIM Rawlplug" (Building Information Modelling Rawlplug) and new EasyFix calculation modules - are increasing
the appeal of RAWLPLUG Group's offering.
Marketing campaigns had a very positive impact on sales results in H1 2019. Markets where advertising campaigns were run in
press, outdoor and social media, and especially where workshops were organised in our mobile training centre (RawlTruck),
noted higher sales growth (Rawlplug Ltd +17%, Rawl France Slr +12%, Koelner Polska Sp. z o.o. +12%) than the average of
+10% for RAWLPLUG Group. Rawlplug Academy Training Center was launched in London Reading on 31 May 2019. Guests
invited to the RATC opening were considerably impressed by RAWLPLUG's offering. This event was an opportunity to present
product novelties and new services to existing customers and present the RAWLPLUG brand to guests who had not been the
Group's customers before. Guests included companies not just from Europe but also from Africa, among other places.
A new gas-actuated tool for concrete and steel turned out to be a huge commercial success, exceeding the annual sales of the
previous model in just two months from the launch.
A re-design of the sales offering was intensified, consisting of withdrawing slow-rotating products or low-margin products,
especially private label, partially replacing these with new high-quality products.
Demand in the domestic construction and fixings industry in the first half of 2019 remained high, and sales grew by 12.3%
(+5.6% in the same period of 2018). Sales growth was achieved despite work continuing on re-building the sales offering by
gradually reducing third-party brand sales, limiting private label production and stopping lowest-margin assortment lines.
Good conditions also prevailed on European markets in H1 2019. The Group recorded significant sales growth in these markets,
largely under the RAWLPLUG brand, which contributes to margin building.
Of particular note is the Hungary-based company, Koelner Hungária Kft, whose sales turnover has been growing at over 10%
for the past several years on a year-on-year basis, exceeding PLN 41 million in H1 2019. These figures place the company as
the third largest sales entity at RAWLPLUG Group. Strong sales growth dynamics have also been recorded at the British
company Rawlplug Ltd (up by 17% compared to the same period last year), which is the effect of implementing a new strategy
in 2018 and changing the company's organisational structure. Its result is particularly notable in light of the significant political
turmoil in Great Britain in the first quarter of 2019.
10
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
The largest growth was recorded by the Germany-based companies (Koelner Deutschland GmbH and Stahl GmbH), i.e. 46%,
compared to the previous year. This is due to several large contracts in Germany, Austria and Switzerland. The German
companies have been working on some of these contracts for three years.
In the Middle East, sales in Dubai brew by nearly 12% in comparison with the same period last year. Improving sales results in
the region, especially in India, Qatar and Saudi Arabia, is one of our key strategic objectives for the second half of 2019.
Sales in countries where RAWLPLUG Group does not have a subsidiary went up by 14% in comparison to the previous year.
The Group is taking steps to appoint exclusive distributors in additional countries, where sales so far have been rather fragmented.
This is due to very satisfactory results of working relationships with exclusive distributors. Sales in this model have gone up by
41% y/y.
3.1.1.2. INDUSTRIALS SECTOR
Revenue from sales generated in H1 2019 at the Łańcut branch of Koelner Rawlplug IP was 13.5% higher than in the same
period last year.
In the first half of 2019, domestic sales were 15% higher than those achieved in the preceding year. The growth in domestic sales
was caused by a partial change in product portfolio, from standard to specialist products, which are more technologically
advanced. Currently, all efforts of our domestic salesforce continue to be directed at acquiring clients from the special products
segment - retaining the level of sales from before the removal of duty will be largely dependent on the development of new
market segments.
Growth in the sales of screw products abroad results from a growing share of high-margin products with varied protective coating
systems. Export sales of screw products in the first half of 2019 went up by 13% compared to H1 2018. Growth in foreign sales
is largely the effect of an increasingly large share of high-margin goods sales, with varied margins, as well as sales volume
growth. Currently, exports account for over 89% of the company's sales. The Łańcut-based factory intends to continue with its
existing development strategy based on growing the share of special products for the automotive segment and less focusing on
standard products. This strategy allows it to invest in a modern machine park making it possible to both expand assortment and
production volumes thus increasing its share in the European market for screw products.
Owing to the fact that the Group has very high product availability, rich offering and excellent customer service, sales in H2
2019 will largely depend on the industry maintaining demand. Unfortunately, factors such as the political instability in Great
Britain, trade war between USA and China and stagnating industry in Western Europe may cause a temporary slowdown in sales
growth on certain markets.
3.1.2. EMPLOYMENT CONDITIONS; PRICES OF PRODUCTS AND INTERMEDIATES IMPORTED FROM THE FAR EAST
In H1 2019, commodity markets remained stable, which led to a slight improvement in margins. Constantly rising labour costs,
especially on the domestic market, are having a negative impact on commodity markets.
3.1.3. EXCHANGE RATES
In terms of global cash flows, the Group is exposed to EURUSD. Given the specific nature and territorial scope of its operations,
the Group has an excess of EUR (sales mostly in EUR) and shortage of USD (imports from the Far East). The current volume
of conversion for EUR to USD is relatively small (about EUR 600 thousand a month).
On 18 December 2018, RAWLPLUG S.A. executed a forward contract with BNP Paribas Bank Polska S.A. (formerly Bank
BGŻ BNP Paribas S.A.) for GBPPLN 1 000 thousand with a delivery date of 21 June 2019. After settling these transactions, the
Group posted an aggregate gain of PLN 36 thousand, which was recognised as finance income in the statement of profit and
loss.
In measuring balance sheet items, the Management Board aims to balance out foreign-currency items through natural hedging
in as far as practicable.
11
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
3.1.4. INTEREST RATES
Given the substantial share of bank borrowing in RAWLPLUG Group's financing structure, interest rates have a direct impact
on financial performance. The most recent interest rate change in Poland took place on 5 March 2015, and no further moves are
expected in the coming months.
3.2. INTERNAL FACTORS
The organisation has been properly prepared for fully efficient operations. Product portfolio analysis, a focus on those product
groups that enable maximum competitive advantages, alongside deployment of management solutions for sales and marketing
(merchandising, POS system for RAWLPLUG) as well as the introduction of the latest SAP solutions - these are the main tasks
which were commenced in 2018 and is continuing. Four implementations have been successfully completed by the end of June
2019: SAP in Great Britain (Rawlplug Ltd), Ireland (Rawlplug Ireland Ltd), Dubai (Rawlplug Middle East FZE and Rawlplug
Building&Construction Material Trading LLC) and Thailand (RAWLPLUG-TMAX Corporation Limited). By the end of 2019,
SAP will also be deployed in France (Rawl France SAS) and Sweden (Rawl Scandinavia AB), while additional SAP modules
will be implemented at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o.
On 31 December 2018, Koelner Łańcucka Fabryka Śrub Sp. z o.o. and Koelner Rawlplug IP Sp. z o.o. were formally merged
and operate as Koelner Rawlplug IP Sp. z o.o. since. On 31 May 2019 the merger of RAWLPLUG S.A. and Koelner Centrum
Sp. z o.o. was entered into the National Court Register, Koelner Centrum Sp. z o.o. was removed from the register of companies.
The main objective was to simplify RAWLPLUG Group's structure, which is having a positive impact on optimisation and
synergies of operational and cost processes. Moreover, these merger are simplifying and harmonising numerous management
tasks at both of the companies, which will certainly be of importance when it comes to knowledge and information sharing and
thus business awareness. In addition, harmonised terminology that takes into account the RAWLPLUG name will have a positive
impact on the effectiveness of efforts in the area of brand awareness and image.
The changes carried out in recent years aimed at better organising sales, production and marketing allow us to achieve optimal
effectiveness and maximally use the Group's potential. Substantial capex on machinery, particularly as regards the production
facility at Rawlplug S.A. as well as at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o. have increased productivity, which
translated into better product availability and higher pricing competitiveness, alongside an upgraded product offering.
The streamlining of the sales portfolio is an important efficiency driver. Withdrawing low-margin assortment and a substantial
part of third-party brands will make it possible to further improve service for own brands (RAWLPLUG, KOELNER,
MODECO), which in turn will enhance RAWLPLUG Group's positive image as a supplier of high-quality products for the
building industry. This is a subsequent step towards our strategic objective of becoming a first-choice supplier.
3.3. SUSTAINABLE GROWTH STRATEGY
RAWLPLUG Group's sustainable growth is being implemented based on three pillars: value-based management, care for the
environment and social engagement. The key events in each of these areas in H1 2019 were as follows:
✓ Value-based management
On 21 February 2019, Radosław Koelner, CEO of RAWLPLUG S.A. signed a framework cooperation agreement with the Rector
of the Wrocław University of Economics, professor Andrzej Kaleta. The agreement will concern the scope of joint educational,
development and commercial projects. In practice, cooperation will consist of working on shaping teaching plans and programs
in existing EU majors and specialisations and creating new ones so that the knowledge and skills of graduates correspond to
market needs; participation in and performance of open lectures, minutes and seminars; organisation of student internships;
inspiring research and development work topics as well as organising joint scientific and popular science undertakings (seminars,
scientific conferences, cyclical discussion meetings) in order to exchange information on innovative organisational solutions and
good practices in business at national and international level.
12
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
In March 2019, 11 students from Spain began their internships at RAWLPLUG S.A. as part of Erasmus. The programme
participants were assigned to the following divisions: Operations Maintenance, Tools and Research and Development, where
they are able to gain their first professional experiences. Cooperation with the organisations intermediating in student internships
also includes annual visits by professors from the programme's universities - in effect, they get an opportunity to personally
inspect the quality of our student internships. Looking at quantitative data on programme participant submissions, RAWLPLUG
S.A.'s opinion is decidedly positive: this year, according to data covering the period until May only, 35 people applied, and the
number of applications is constantly growing. 31 people participated in 2018.
On 13 April 2019, an edition of the nationwide Runmageddon race was held at the Wrocław race track Partynice.
RAWLPLUG Group employees once again participated in the race this year, totalling 80 people. This year's run was special
because of numerous attractions prepared for celebrations of Rawlplug's 100th anniversary. For all participants and spectators,
RAWLPLUG S.A. prepared a special exhibit zone, which include attractive contests and product showcases. A daughter of a
RAWLPLUG S.A. employee received a scholarship to support her musical career.
In the period from mid-March to the end of April 2019, RAWLPLUG S.A. held a series of workshops for Shift Leaders in the
Production and Warehouse divisions. Overall, 28 people participated in the Management Programme. Five training themes,
selected in order to measurably raise the participants' qualifications, were completed. These were: Production leader's attitude,
role and tasks; Team leadership: four management areas, setting SMART objectives, providing feedback; Team leadership:
determining professional relations, communicating with the team, Paul Hersey's and Ken Blanchard's situational management;
Development of employee potential and delegating tasks; Motivating employees and conducting briefings and short employee
meetings. The Management Programme was mainly intended to raise and/or improve management competences and reduce
production staff turnover (especially in the period June-September) by placing emphasis on factors that determine it (such as:
promoting a partnership-based organisational culture, increasing employee satisfaction in relations with superiors - which
constitute a factor that strongly affects departure decisions, caring about production employees' development and proper relations
within the team).
The Wrocław University of Technology held its Career Office Gala on 6 June 2019, where RAWLPLUG S.A.'s representatives
were invited as a supporting partner. The yearly activities of the Career Office were summarised during the ceremony and its
plans for the nearest future were unveiled. The "My ideal employer" student survey is an interesting project run by the Career
Office. It showed which companies are the most valued by students as potential employers. RAWLPLUG Group placed 201st
out of 501 businesses. Importantly, the surveyed students entered companies by themselves - meaning that students are well
aware of RAWLPLUG Group's brand as employer.
✓ Social engagement
Koelner Rawlplug IP Sp. z o.o. lent support to the 27th National Finale of the Great Orchestra of Christmas Charity, providing
items that included advertising gadgets such as cups, polo shirts, t-shirts, umbrellas and hats that were exchanged into financial
support at the auction. In effect, the Orchestra's local staff in Kobyla Góra collected PLN 67 thousand, which was used to
purchase medical equipment for Polish hospitals.
Koelner Polska Sp. z o.o. in January 2019 supported a local youth sports association - a football club for boys in Łódź. The club's
activities are financed by the parents as well as contributions from the municipality and sponsors as well as amounts collected
during charity campaigns. Koelner Polska Sp. z o.o. auctioned off Modeco power tools during a charity ball organised by the
club. The entire proceeds were used for the club's statutory objectives - purchase of two free-standing changing rooms with
bathrooms.
In April 2019, RAWLPLUG S.A. organised a donation drive amongst its employees to help the daughter of one of them, who
has acute leukaemia. The long-term disease made it necessary for the girl to have special sterile living conditions that her family
could not afford. After promoting the initiative amongst employees, donations were made to a special bank account.
In June 2019, as part of its sustainable development policy's social engagement element, RAWLPLUG S.A. established
cooperation with the Saint Albert Help Association - Wrocław Branch. As a result, the company is participating in a project
entitled "Active without barriers," which intends to stimulate people who are at risk of social exclusion and to support them in
13
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
returning to the labour market. These activities started in 2018, however in June this year the number of people participating in
the programme doubled, from 2 in 2018 to 4 in 2019.
3.4. GROWTH PERSPECTIVES
The key directions of changes being continued in 2019 as regards logistics and sales solutions are as follows: optimisation of the
product offering, effective promotion of product novelties, brand promotion across all available media, improvement in the
quality of distribution, along with effective sales support, especially in new markets and sales channels. On the 100th anniversary
of the RAWLPLUG brand, local events and workshops and seminars are being organised, including the mobile training centre
RawlTruck, which is attracting considerable interest.
3.5. GROUP STRATEGY
The main strategic objective for 2018 is reinforcement of RAWLPLUG Group's position in markets where it is already present.
This strategy consists of further activities aimed at strengthening the market position of RAWLPLUG Group's foreign companies
through restructuring, introducing new high-margin products and developing business via new distribution channels, such as
DIY and OEM or ecommerce. At the same time, the Group is focusing on entry into new markets, especially in Europe and Asia.
RAWLPLUG Group's main strategic objective for 2019 is a consistent focus on technologically advanced products groups,
where the Group has high production competences. The Group aims to distribute its products through all available sales channels,
which will be operated by either RAWLPLUG S.A. or its subsidiaries, depending on local requirements. The Group invariably
considers European markets as key, but is also expanding in the Middle East, Australia, South America, Central and Eastern
Asia and Africa.
4. SEASONALITY OF SALES
Given the fact that the main customer group for RAWLPLUG Group's products and goods is the construction sector, sales are
subject to seasonality. The Group generates the largest portion of its revenue from sales in the third quarter and the smallest in
the fourth quarter. Considering that sales of hand tools and power tools - which are subject to lesser seasonality than construction
fixings - are increasing their share in the Group's overall sales structure, the seasonality effect is decreasing. Seasonality of sales
is characteristic for both Poland as well as RAWLPLUG Group's foreign sales markets.
5. INVESTMENTS AND R&D
5.1. INVESTMENTS
RAWLPLUG Group's expenditures on property, plant and equipment and intangible assets in the first half of 2019 reached PLN
28 539 thousand. This concerned in particular expanding production capacities, especially for the automotive sector, at the Łańcut
branch of Koelner Rawlplug IP Sp. z o.o. as well as at RAWLPLUG S.A. In addition, capital expenditures concerned R&D,
software and means of transport.
At 30 June 2019, RAWLPLUG Group's had no bank deposits.
14
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
5.2. R&D
R&D activities in H1 2019 were mainly conducted at RAWLPLUG S.A. and the Łańcut branch of Koelner Rawlplug IP
Sp. z o.o.
RAWLPLUG S.A. conducted R&D work on construction fixings. In the areas of bonded anchors, mechanical anchors and plastic
fixings: facade insulation, frame fixings and others. In addition, research and development activities focused on approval
processes and process optimisation in manufacturing divisions.
The key achievements in H1 2019 include:
✓ completion of implementation stage for innovative technology to produce bonded anchors at the production
division,
✓ completion of implementation stage for new packaging,
✓ completion of implementation stage in BIM for bonded anchors,
✓ completion of prototyping stage and commencement of approval process for new frame fixing with short wedge
area.
✓ completion of implementation stage for new bonded anchor R-KEX-I,
✓ European Technical Approval for R-KEX-I,
The following R&D activities were performed at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o. in H1 2019:
✓ In rolling processes
The product portfolio was extended by 130 new product groups, of which approx. 80% were for the automotive industry. Being
able to maintain high quality made it possible to prepare full documentation for the approval of 177 products in accordance with
automotive standards (VDA 2, AIAG PPAP). The approved products also include the highest quality and control safety products.
This shows a growing trust on the part of OEM clients, who approve such products individually.
In H1 2019, the company introduced a new product segment intended for coating with plastic. One of these products went to the
automotive industry. Improving forging technology made it possible to efficiently manufacture these products and develop the
production of several types of new products.
Research and analysis continued on optimising the production of flange screws. The first effects are visible in improved quality
by the stabilisation of dimension parameters and reduction of unit costs. This process is in its initial stage and work for all flange
product groups will continue for over a dozen months.
Further works on the optimisation of material use by optimising technology led to a decrease in the use of material, which
reduced production costs.
Work was also continued on another group of products for the automotive industry, this time used in the assembly of crankshaft
systems. This several months-long project has resulted in stable manufacture of these products.
Cooperation on the local market was continued with aviation and automotive firms, which resulted in new projects to produce
fasteners that will be used in advanced gear box designs and other sub-sets of the drive system. This contributed to implementing,
at the prototyping stage, a product with entirely new technology that does not require machining and leads to substantial savings.
These products will now be tested by the final customer.
Work also continued on optimising the thread rolling process by improving changeovers (SMED analysis) and improving tool
management by introducing a system for complete and clear documentation.
15
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
✓ Koelner Rawlplug IP Sp. z o.o. (branch in Łańcut)
Following approval of our quality system for the production of products with extended mechanical properties in classes 10.9 and
12.9 for Volkswagen, we are now able to produce and deliver these products to the customer.
Becoming a supplier for Volkswagen is not only a prestigious confirmation of the high quality of processes but it also brings the
factory into the elite group of producers of fixings and a standard for other clients.
A project to implement for production and sales a set of screws for compressed fastening used in advanced building structures
was initiated in 2018 and continued in H1 2019. It should be noted that these processes and the involvement of employees and
the Management Board have resulted in successful certifications on first attempt.
5.3. PLANS FOR 2019
In 2019, RAWLPLUG Group plans about PLN 66 million in investment expenditures.
The key investment projects are continuing:
✓ Reorganisation and replacement of machine park at Wrocław-based production facility - 3-year programme worth
approx. PLN 30 million;
✓ Continued expansion of the machine park at the Łańcut factory towards further development of production for
specialised screw products for export markets,
✓ Deployment of SAP in additional Group companies.
✓ E-commerce system implementation at Rawlplug Ltd.
RAWLPLUG Group's investments are financed using own funds and leasing.
6. HUMAN RESOURCES
As at 30 June 2019, RAWLPLUG Group employed 1 886 people.
RAWLPLUG Group employment
30.06.2019
Polish companies 1 414
Foreign companies 472
TOTAL 1 886
7. RELATED-PARTY TRANSACTIONS EXECUTED ON TERMS OTHER
THAN MARKET TERMS
All transactions between related parties were executed on market terms.
16
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
8. OFF-BALANCE SHEET ITEMS
8.1. INFORMATION ON ISSUE BY THE ISSUER OR ONE OF ITS SUBSIDIARIES OF SURETIES FOR LOANS OR BORROWINGS,
OR ISSUE OF GUARANTEES – TO A SINGLE ENTITY OR SUBSIDIARY OF SUCH ENTITY, IF THE TOTAL VALUE OF
EXISTING SURETIES OR GUARANTEES IS SIGNIFICANT
In H1 2019, RAWLPLUG S.A. and subsidiaries did not issue loan or borrowing sureties and did not issue guarantees the total
value of which is significant.
8.2. OTHER OFF-BALANCE SHEET ITEMS
As at 30 June 2019, RAWLPLUG Group did not have any material off-balance-sheet items.
9. SIGNIFICANT PROCEEDINGS IN PROGRESS BEFORE A COURT,
ARBITRATION BODY OR PUBLIC ADMINISTRATION AUTHORITY
At 30 June 2019, there were no proceedings on-going before a court or other authority, the object of which was a material payable
or liability.
10. SIGNIFICANT INFORMATION FOR ASSESSMENT OF THE COMPANY
10.1.DIVIDEND
On 28 June 2019, the Company's Ordinary General Meeting adopted a resolution on the payment of a dividend from the net
profit for financial year 2018.
In accordance with this resolution, the Ordinary General Meeting set the amount of dividend at PLN 10 744 800.00,
i.e. PLN 0.33 per share.
The dividend applied to all 32 560 000 shares of RAWLPLUG S.A.
The Company's Ordinary General Meeting also decided as follows:
✓ ex-dividend date - 8 August 2019,
✓ dividend payment date - 23 August 2019.
10.2.INFORMATION SIGNIFICANT TO ASSESSING THE GROUP'S AND COMPANY'S
FINANCIAL SITUATION, INCLUDING ITS ABILITY TO PAY LIABILITIES
On 22 February 2019, RAWLPLUG S.A. signed an annex to a Multi-Product Agreement of 3 March 2014 with ING Bank Śląski
S.A., as referred to in current reports 3/2014 of 4 March 2014, 3/2015 of 7 April 2015 and 23/2015 of 23 December 2015. The
annex increased RAWLPLUG S.A.'s limit to PLN 70 million and extended the repayment deadline to 27 February 2022. The
Annex was announced by the Company in current report 3/2019 of 22 February 2019.
17
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
On 25 March 2019, RAWLPLUG S.A. signed annex to a credit agreement executed on 26 June 2003 between Bank BGŻ BNP
Paribas S.A. and RAWLPLUG S.A. The annex consolidated RAWLPLUG S.A.'s liabilities towards BGŻ BNP Paribas S.A. and
the acquired Raiffeisen Bank Polska S.A. and extends the credit repayment period. Pursuant to the annex, PLN 19 million from
the existing PLN 84 million limit with Raiffeisen Bank Polska S.A. was transferred to a separate contract to be used as reverse
factoring. At the same time, this limit, in a separate agreement, was increased to USD 6 million. The existing credit limit available
at BNP Paribas S.A. (prior to the Banks' merger) did not change and remains at PLN 40 million. Thus, the total debt in accordance
with the provisions of the annex amounts to PLN 105 million. Aside from RAWLPLUG S.A. and Koelner Rawlplug Sp. z o.o.,
Koelner Rawlplug IP Sp. z o.o. became a co-borrower. In addition, based on the contract, collateral in the form of RAWLPLUG
S.A. shares held by Amicus Poliniae Sp. z o.o. was released. The credit facility can be used in PLN, USD, EUR and CHF. The
credit repayment deadline has been extended to 30 April 2022. The Annex was announced by the Company in current report
9/2019 of 3 April 2019.
10.3.EVENTS AFTER THE END OF THE REPORTING PERIOD
On 23 August 2019, the Supervisory Board of RAWLPLUG S.A. adopted the "Management Board and Supervisory Board
remuneration policy at RAWLPLUG S.A. in Wrocław." This document contains a summary of general assumptions with regard
to remuneration for members of the Company's Management Board and Supervisory Board. Detailed remuneration rules are set
in accordance with commonly applicable laws and the Company's internal regulations, especially its Articles of Association.
18
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
11. GROUP FINANCIAL RESULTS
The following alternative measures of results are presented to comprehensively depict the Group's financial situation.
RAWLPLUG Group presents these specific alternative measures of results because they are standard measures and ratios
commonly used in financial analysis. They provide important information on financial situation, operational efficiency,
profitability and cash flows. Selection of alternative measures of results is preceded by analysis in order to provide investors
with useful information on the Group's financial situation, cash flows, and they provide an ultimate way to evaluate the Group's
financial results.
11.1. CONSOLIDATED STATEMENT OF PROFIT AND LOSS
RAWLPLUG Group
01-06.2019 01-06.2018 % change
Revenue from sales 424 834 384 871 10.4
Cost of sales ( 283 783) ( 252 966) 12.2
Gross profit on sales 141 051 131 905 6.9
Selling costs ( 80 509) ( 70 087) 14.9
Administrative expenses ( 24 784) ( 24 050) 3.1
Profit on sales 35 758 37 768 ( 5.3)
Other operating revenues 4 844 4 594 5.4
Other operating expenses ( 7 329) ( 6 374) 15.0
Operating profit 33 273 35 988 ( 7.5)
Finance income 1 799 887 102.8
Finance costs ( 6 137) ( 5 592) 9.7
Share of the net profit (loss) of equity-accounted entities ( 112) - 0.0
Gross profit 28 823 31 283 ( 7.9)
Income tax ( 5 390) ( 6 851) ( 21.3)
Net profit 23 433 24 432 ( 4.1)
Depreciation 15 704 13 061 20.2
EBITDA 48 977 49 049 ( 0.1)
Consolidated revenue from sales in H1 2019 was PLN 424 834 thousand, up 10.4% on the same period the previous year.
Operating profit reached PLN 33 273 thousand (down by 7.5% from the previous year), while EBITDA was PLN 48 977
thousand, i.e. 0.1% lower than in H1 2018. RAWLPLUG Group generated PLN 23 433 thousand in net profit in the first six
months of 2019 (vs. PLN 24 432 thousand in H1 2018, denoting a 4.1% decrease).
11.2. ASSET AND LIABILITY STRUCTURE IN THE CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Selected items from RAWLPLUG Group's consolidated statement of financial position
30.06.2019 30.06.2018 Change
TOTAL ASSETS 998 191 971 464 26 727
Non-current assets, including: 511 970 465 364 46 606
Intangible assets 79 553 78 246 1 307
Property, plant and equipment 307 263 285 769 21 494
Investment properties 3 401 3 401 -
Investments in associates
1 067 - 1 067
Non-current financial assets 65 068 35 023 30 045
19
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
30.06.2019 30.06.2018 Change
Non-current receivables and prepayments 6 219 4 691 1 528
Deferred income tax assets 49 399 58 234 ( 8 835)
Current assets, including: 486 221 506 100 ( 19 879)
Inventories 255 059 251 402 3 657
Receivables and prepayments 186 446 180 547 5 899
Current financial assets 4 103 34 972 ( 30 869)
Cash and cash equivalents 38 897 38 914 ( 17)
TOTAL EQUITY AND LIABILITIES 998 191 971 464 26 727
Equity 469 013 446 854 22 159
Liabilities 529 178 524 610 4 568
Non-current liabilities, including: 255 051 158 400 96 651
Loans and borrowings 219 978 123 308 96 670
Current liabilities, including: 274 127 366 210 ( 92 083)
Loans and borrowings 61 632 152 936 ( 91 304)
Trade and other payables 159 906 179 059 ( 19 153)
30.06.2019 30.06.2018
Share of non-current assets 51.3% 47.9%
Share of current assets 48.7% 52.1%
Share of inventories in current assets 52.5% 49.7%
Share of receivables in current assets 38.3% 35.7%
During the past 12 months, i.e. from 30 June 2018 to 30 June 2019, the balance sheet total increased by PLN 26 727 thousand.
On the asset side, tangible assets and intangible assets grew by PLN 22 801 thousand, current receivables by PLN 5 899 thousand
and inventories by PLN 3 657 thousand. On the asset side, certain long-term loans were reclassified from short-term to long-
term (amount of PLN 30 045 thousand).
On the equity and liabilities side, equity went up by PLN 22 159 thousand, while loan and borrowing liabilities increased by
PLN 5 366 thousand and trade and other payables declined by PLN 19 153 thousand.
11.3. RAWLPLUG GROUP'S REVENUE FROM SALES
30.06.2019 30.06.2018 % change
Revenue from sales 424 834 384 871 10.4
Cost of sales ( 283 783) ( 252 966) 12.2
Gross profit on sales 141 051 131 905 6.9
Margin I 33.2% 34.3%
Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018
Revenue from sales 216 337 208 497 184 581 206 049 206 647 178 224
Cost of sales ( 144 213) ( 139 570) ( 123 008) ( 135 329) ( 133 411) ( 119 555)
Gross profit on sales 72 124 68 927 61 573 70 720 73 236 58 669
Margin I 33.3% 33.1% 33.4% 34.3% 35.4% 32.9%
Consolidated revenue from sales in H1 2019 was PLN 424 834 thousand, up 10.4% on the same period the previous year.
This resulted from higher export sales, development of the RAWLPLUG brand and sales of specialist screws for the electric
machinery and automotive industries, which is gradually replacing the sales of low-margin assortment and third-party brands.
In H1 2019, gross margin was 33.2%, compared with 34.3% in H1 2018. On a quarterly basis, gross margin in the second quarter
of 2019 was 33.3% and was lower than in Q2 2018 (35.4%).
20
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
RAWLPLUG Group sales
01-06.2019 01-06.2018 Change
Sales location PLN 000s % share PLN 000s % share PLN 000s %
Domestic 132 399 31.2% 122 726 31.9% 9 673 7.9%
Export 292 435 68.8% 262 145 68.1% 30 290 11.6%
Total 424 834 100.0% 384 871 100.0% 39 963 10.4%
11.3.1. DOMESTIC SALES
In the first half of 2019, domestic sales came to PLN 132 399 thousand, a level 7.9% higher than that achieved in the preceding
year. The growth in domestic sales was caused by a partial change in product portfolio, from standard to specialist products,
which are more technologically advanced. Currently, all efforts of our domestic salesforce continue to be directed at acquiring
clients from the special products segment - retaining the level of sales from before the removal of duty will be largely dependent
on the development of new market segments.
11.3.2. FOREIGN SALES
RAWLPLUG Group's H1 2019 foreign sales reached PLN 292 435 thousand, up by 11.6% thousand from H1 2018. The Group
recorded growth in foreign sales largely due to new high-margin RAWLPLUG-branded products as well as a substantial increase
in screw product sales on Western European markets. The sales growth in foreign markets largely took place in Western European
markets (Great Britain, France, Germany) and Central Europe (Hungary in particular). RAWLPLUG Group's export sales
currently accounts for 68.8% of total sales and is growing (68.1% in the preceding year).
11.3.3. PRODUCT STRUCTURE
Assortment 01-06.2019 01-06.2018 Change
PLN 000s % share PLN 000s % share PLN 000s %
Products 265 429 62.5% 231 022 60.0% 34 407 14.9%
Goods and materials 157 901 37.2% 152 540 39.6% 5 362 3.5%
Services 1 504 0.4% 1 309 0.3% 194 14.8%
Total 424 834 100.0% 384 871 100.0% 39 963 10.4%
In the first half of 2019, we continued our strategy of changing the product portfolio, which consisted of dropping low-margin
products and trademarks (third-party labels) and focusing on higher-margin products. As a result, these products accounted for
62.5% of total sales.
11.3.4. SUPPLY SOURCES
Goods for resale as well as materials and goods for further processing that RAWLPLUG Group purchases are either low-
processed (e.g. plastics, steel), medium-processed (e.g. bolts, screws, simple tools) or highly-processed (power tools). They are
procured on an on-going basis from domestic, European and Asian (Taiwan, Malaysia, China) suppliers. RAWLPLUG Group
does not have any suppliers that would have exclusive rights to any assortment. There is an alternative supplier for each product
and material, resulting from the Group's long-term strategy, No supplier exceeded 10% in the purchasing structure, however
RAWLPLUG Group strives to maximise purchasing volumes, which go through its own purchasing company in China, Rawlplug
Shanghai Trading Ltd.
11.4. SELLING COSTS AND ADMINISTRATIVE EXPENSES
30.06.2019 30.06.2018 % change
Selling costs 80 509 70 087 14.9
Administrative expenses 24 784 24 050 3.1
Operating expenses 105 293 94 137 11.9
Share of costs in sales 24.8% 24.5%
21
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018
Selling costs 41 671 38 838 41 542 37 218 36 582 33 505
Administrative expenses 12 706 12 078 14 314 12 279 12 655 11 395
Operating expenses 54 377 50 916 55 856 49 497 49 237 44 900
Share of costs in sales 25.1% 24.4% 30.3% 24.0% 23.8% 25.2%
In the first six months of 2019, RAWLPLUG Group recorded 11.9% growth in selling costs and administrative expenses
(comparing with the same period last year), although their share in sales remained almost unchanged at 24.8%. The cost increase
is driven by expenditures on developing export sales, mainly in Far Eastern markets and in Africa, which given their early stage
of development are not yet generating significant sales volumes and thus significant profits.
The Management Board continues to work on reducing costs. The aim is to closely match costs to the level of revenue so as to
avoid losses when sales stall.
11.5. FINANCING ACTIVITIES
30.06.2019 30.06.2018 % change
Finance income 1 799 887 102,8
Finance costs ( 6 137) ( 5 592) 9,7
Result on financing activities ( 4 338) ( 4 705) ( 7.8)
Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018
Finance income 907 892 327 261 571 316
Finance costs ( 2 970) ( 3 167) ( 4 111) ( 2 767) ( 3 056) ( 2 536)
Result on financing activities ( 2 063) ( 2 275) ( 3 784) ( 2 506) ( 2 485) ( 2 220)
In the first half of 2019, RAWLPLUG Group generated PLN 1 799 thousand in finance income and incurred PLN 6 137 thousand
in finance costs.
Finance income comprised (in PLN 000s):
01-06.2019 01-06.2018
Interest on loans and borrowings granted 741 630
Gains on exchange differences 946 210
Other interest 23 38
Measurement of derivatives 36 -
Other 53 9
1 799 887
Finance costs comprised (in PLN 000s):
01-06.2019 01-06.2018
Interest on loans, borrowings and leases 4 121 3 553
Other interest 390 247
Commissions 1 012 922
Impairment of financial assets 14 13
Sureties and guarantees 134 233
Other 466 624
6 137 5 592
On 18 December 2018, RAWLPLUG S.A. executed a forward contract with BNP Paribas Bank Polska S.A. (formerly Bank
BGŻ BNP Paribas S.A.) for GBPPLN 1 000 thousand with delivery date of 21 June 2019. After settling these transactions, the
Group posted an aggregate gain of PLN 36 thousand, which was recognised as finance income in the statement of profit and
loss.
22
Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
The Management Board continues to prioritise cost optimisation in both operating and financing activities. This will result in
more streamlined processes within the Group and use of natural hedging for foreign currency-denominated balance sheet items
in as far as practicable.
11.6. PROFITABILITY RATIOS
Group profitability ratios 30.06.2019 30.06.2018
Gross sales margin 33.2% 34.3%
Operating margin 7.8% 9.4%
Net margin 5.5% 6.3%
Return on assets 2.3% 2.5%
Return on equity 5.0% 5.5%
EBITDA margin 11.5% 12.7%
Ratio methodology:
✓ Gross sales margin = gross profit on sales / revenue from sales
✓ Operating margin = operating profit / revenue from sales
✓ Net margin = net profit / revenue from sales
✓ Return on assets = net profit / total assets
✓ Return on equity = net profit / equity
✓ EBITDA margin = EBITDA / revenue from sales
Profitability ratios slightly declined in H1 2019, comparing with the same period last year.
11.7. LIQUIDITY RATIOS
Group's liquidity ratios 30.06.2019 30.06.2018
Current ratio 1.77 1.38
Liquidity ratio 0.84 0.70
Ratio methodology:
✓ Current ratio = current assets / current liabilities
✓ Quick ratio = (current assets - inventories) / current liabilities
At the end of the first half of 2019, liquidity ratios increased and are at safe levels.
11.8. DEBT RATIOS
Group's debt ratios 30.06.2019 30.06.2018
Debt ratio 53.0% 54.0%
Financial leverage 112.8% 117.4%
Equity to non-current assets 91.6% 96.0%
Long-term debt ratio 25.6% 16,3%
Non-current liabilities to liabilities 48.2% 30.2%
The debt ratio deceased from 54.0% to 53.0%, while debt to equity declined from 117.4% to 112.8%.
Ratio methodology:
✓ Debt ratio = current and non-current liabilities / total assets
✓ Financial leverage = current and non-current liabilities / equity
✓ Equity to assets = equity / total assets
✓ Long-term debt ratio = non-current liabilities / total assets
✓ Non-current liabilities to liabilities = non-current liabilities to liabilities
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Management report on the operations of
RAWLPLUG GROUP
for the period 1 January - 30 June 2019 (data in PLN 000s)
11.9. PROGRESS VERSUS PREVIOUSLY PUBLISHED GUIDANCE
The Management Board did not publish a financial forecast for 2019.
11.10. FACTORS AND EXTRAORDINARY EVENTS HAVING AN IMPACT ON FINANCIAL RESULTS
In the first half of 2019, there were no extraordinary events that would have an impact on financial results.
Radosław Koelner - President of the Management Board
..………………………………………………
Marek Mokot - Vice-President of the Management Board
..………………………………………………
Piotr Kopydłowski - Member of the Management Board responsible for finance
...…….………………………………………..
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RAWLPLUG S.A. ul. Kwidzyńska 6 51-416 Wrocław
tel. +48 71 32 60 100
fax +48 71 37 26 111
e-mail: [email protected]
www.rawlplug.pl