Balta : FY 2020 Results 10/03/2021Balta Group

Press Release

Sint-Baafs-Vijve, 10 March 2021, 7:00 a.m. CET Regulated information

For immediate publication

Balta FY 2020 and Q4 2020 Results

Group Highlights

• • Q4 2020 consolidated Revenue of €151.1m (-8.0% YoY), with Adjusted EBITDA of €27.9m (+40.9% YoY) - one of the strongest quarterly Adjusted EBITDA performances since the IPO - and an Adjusted EBITDA margin of 18.5%, well above Q4 2019 of 12.1%.

• • FY2020 consolidated Revenue of €561.8m (-16.3% YoY) as COVID-19 subdued demand

  • o Rugs -14.2%, Commercial -19.2%, Residential -11.9%

  • o Organic revenue declined YoY by 16.0% with an FX impact of -0.3%

• • FY2020 Adjusted EBITDA of €68.0m (-8.6% YoY) and Adjusted EBITDA margin of 12.1% (11.1% FY2019)

  • o Solid growth in Residential +26.0% and Rugs +4.3%, while Commercial is yet to recover from the impact of COVID-19 and fell by 24.2%

• • Net Debt significantly reduced by €30.5m to €283.2m at FYE 2020 from €313.7m at FYE 2019, driven by strong cash generation from reduced working capital and the rigorous focus on cost management. Leverage1 decreased to 4.2x from 4.7x at the end of Q3 2020, driven by the impact of our strong Q4 2020 on LTM Adjusted EBITDA.

• • Total available liquidity amounted to €113.7m at FYE 2020, comprising cash of €106.3m and a further €7.4m headroom to draw under the US revolving credit facility.

• • The exchange offer for Senior Secured Notes due September 2022 successfully concluded on 3 March 2021, with €234.9m replacement notes maturing in December 2024. As a result, the €61m European super senior revolving credit facility further extends to June 2024.

• • The Board will not propose a dividend for the year.

Business Update

• • The strong recovery after the COVID-19 related downturn in Q2 2020 continued in Q4 2020, delivering an H2 2020 Adjusted EBITDA improvement of 34% YoY at an Adjusted EBITDA margin of 16.8% (vs 11.6% in H2 2019). The improvements were driven by stronger YOY revenue and plant utilization in Residential and Rugs, as well as NEXT initiatives, continued fixed cost reductions and lower raw material prices.

• • Despite full year revenue impacted by COVID-19, these strong margin improvements improved FY2020 Adjusted EBITDA margin by 1.0% to 12.1%.

1 Excluding IFRS 16 impact

• • In January 2021, we saw Q4 2020 trends broadly continue and we have a solid order book. We remain vigilant as new pandemic restrictions have been imposed in most of our markets and together with other market distortions, such as capacity constraints of raw material supplies and freight congestion, are leading to cost increases.

Cyrille Ragoucy, CEO and Chairman of the Board of Balta said,

"2020 was an unprecedented year due to COVID-19 disruption and its material challenges to our industry. Throughout the pandemic, Balta's first focus was on the safety and health of its employees and other stakeholders. In the second half of the year, we recovered revenues in Rugs and Residential. Commercial is taking somewhat longer to return to more normal levels.

Despite depressed volume due to COVID-19 restrictions, our full year Adjusted EBITDA margin still ended above last year, reflecting the strong margin upside of NEXT initiatives, continued cost savings and lower raw material prices.

Thanks to strong cash flow generation, we reduced Balta's net debt at FYE 2020 to the lowest level since the IPO in 2017. Helped by this performance, we refinanced and extended the European super senior revolving credit facility and our senior secured notes into 2024 with strong support from our banks and bondholders, which substantially improved our debt maturity profile.

The Management Team is committed to continue the transformation of Balta by improving operating performance, prudent cost management and executing our NEXT strategy."

Key Group Financial Figures

(€ million)	FY 2020	FY 2019	% Change

Revenue	561,8	671,2	(16,3%)
Adjusted EBITDA	68,0	74,4	(8,6%)
Adjusted EBITDA Margin	12,1%	11,1%	102 bps
Adjusted Operating Profit	28,0	34,8	(19,6%)
Operating Profit	20,2	28,1	(28,2%)
Profit for the period	(12,6)	10,4	(221,0%)

Q4 2020 Revenue and Adjusted EBITDA per segment

YTD Q4 2020

YTD Q4 2019

% Changeo/w organic growth

o/w FX

(€ million, unless otherwise mentioned)

Rugs

Commercial Residential Non-Woven Consolidated Revenue

50,2 45,5 51,3 4,1 151,1

49,7

• 60,8 (25,2)%

46,7 6,9

• 164,1 (8,0)%

  (6,7)%

  (1,3)%

• Rugs

  Commercial Residential Non-Woven

  9,5 9,6 8,6 0,1

  5,0

  90,7%

• 10,7 (10,6)%

3,7 0,4

136,5% (66,6)%

Consolidated Adjusted EBITDA

27,9 19,8

40,9%

43,0%

(2,1)%

Rugs

Commercial Residential Non-Woven

19,0% 10,1%

21,1% 17,6%

16,9% 7,8%

3,5% 6,2%

Consolidated Adjusted EBITDA Margin

18,5% 12,1%

Full Year 2020 Revenue and Adjusted EBITDA per segment

FY 2020

FY 2019

% Changeo/w organic growtho/w FX

(€ million, unless otherwise mentioned)

Rugs

Commercial Residential Non-Woven Consolidated Revenu

182,9 190,5 171,2 17,3 561,8

• 213,0 (14,2)%

• 235,6 (19,2)%

• 194,4 (11,9)%

• 28,1 (38,4)%

• 671,2 (16,3)%

  (16,0)%

  (0,3)%

• Rugs

  Commercial Residential Non-Woven

  17,5 30,7 19,0 0,9

  16,8

  4,3%

• 40,5 (24,2)%

15,1 2,1

26,0% (58,3)%

Consolidated Adjusted EBITDA

68,0 74,4

(8,6)%

(8,0)%

(0,6)%

Rugs

Commercial Residential Non-Woven

9,6% 7,9%

16,1% 17,2%

11,1% 7,7%

5,0% 7,4%

Consolidated Adjusted EBITDA Margin

12,1% 11,1%

Business Review

Performance in 2020

Following a strong start in the first two months of 2020, the disruptive impact of COVID-19 began in March 2020. Balta took swift and decisive measures to protect its employees and other stakeholders, to reduce its operating costs and to manage its cash flows. In the second quarter, 6 of our 8 plants were temporarily shut down on a voluntary basis to manage costs, senior staff took voluntary reductions in pay, the vast majority of staff were put into temporary unemployment programmes and all non-essential expenditure was deferred. Despite the voluntary closures, we retained the flexibility to resume partial production at our facilities to satisfy demand and service customer orders. As a precautionary measure, to address our short-term liquidity and working capital needs, revolving credit facilities were fully drawn and covenants renegotiated.

Throughout the second half of 2020, all plants were operational, while fixed and variable cost saving measures were still in place. We prepared for the market re-opening, with procurement, inventory and other working capital items well managed. Starting in July, revenues began to recover to normal levels in Rugs and Residential. Commercial rebounded less strongly and volumes are still to recover.

NEXT, the three-year program designed to deliver a significant improvement in earnings, delivered strong results in the first two months of 2020. As of July, the NEXT programme initiatives resumed. Although delayed, a material part of our margin improvement in the second half of 2020 was achieved through NEXT enhancements.

The focus on cost savings, cash preservation, the benefit of lower raw material costs and the recovery in H2 2020 resulted in positive net cash flow and comfortable liquidity throughout the year. The year ended with cash and cash equivalents of €106.3m, with a further €7.4m available to draw under the US revolving credit facility. The total available liquidity amounted to €113.7m at year-end 2020.

In October 2020, Balta amended and extended its existing European super senior revolving credit facility. The maturity date has now extended to 30 June 2024, following the successful exchange offer for our Senior Secured Notes which are now due 31 December 2024.

Strategic priorities

Balta identified three strategic priorities, which will drive the long-term value of its businesses:

NEXT:2

Operational savings are on track, albeit slightly delayed due to our decision to postpone capital expenditure until early July. In July, we resumed investment in Lean, supply chain and procurement initiatives across our 8 plants. In 2020, NEXT initiatives achieved €7m of incremental Adjusted EBITDA versus 2019 and contributed to the cash generating reduction of inventory. We continue to have a strong pipeline of NEXT cost initiatives.

Despite subdued demand and the overall revenue decline due to COVID-19, we achieved material revenue from our e-commerce channel initiative in Rugs, our direct route-to-market approach at Modulyss and the launch of sustainable products in all divisions. At the end of 2020, top-line NEXT initiatives remain on track with €68m of cumulative incremental revenue since we started, and €43m of incremental revenue in 2020 versus 2019.

• • In Rugs e-commerce, we continued to penetrate the US and European markets through our dedicated fulfilment centre in the US and our European partnerships with leading digital platforms. E-commerce revenue has more than doubled in 2020 and now represents 17% of North-American revenue. Fulfilment performance improved as well and same-day shipping in the US reached 95% for e-commerce products.

2 See Glossary for definition of NEXT Key Assumptions and Impacts