Chairman's Statement & Strategy

Guillaume Robin

After a year of record sales volumes in 2021, we were expecting a return to normality early 2022. Unfortunately, Russia’s invasion of sovereign Ukrainian soil caused a global shockwave, the many and sudden knock-on effects of which are still with us today and will probably be felt for decades to come. Some have directly affected our business.

First of all, this fresh crisis has once again put our staff to the test. We thank them for their agility, commitment, resilience and loyalty.

Secondly, it represents a further catalyst to an existing situation of underlying inflation. We had to pass on a 10.8% price increase to our customers.

On the upside, the end of cheap electricity and the prospect of possible shortages have put savings and frugality centre-stage, especially in the area of energy efficiency in the home. The success of our ranges of solar water heaters, heat pump and solid fuel boiler accessories has not waned and has catapulted our subsidiary Thermador past the €100 million turnover mark.

Finally, the risk of further armed conflicts in areas where we have suppliers will inevitably lead our organisations to seek alternatives, if possible in Europe.

In this general state of turmoil, we seized an opportunity to add public works to our product ranges by acquiring DPI (see page 121 of our Universal Registration Document).

Finally, Our consolidated trunover finished the year at €554 million, our operating profit 14.2% and our net profit 10.5%.

We thank them for their agility, commitment, resilience and loyalty.

Our stock level decreased to 192 days of purchases consumed, compared to 201 days at the end of December 2021. Our consolidated operating working capital requirement finished the year at 39.7% of sales.

We have taken out two new fixed-rate bank loans totalling €31m over 7 years to finance the acquisition of DPI. As the probability of meeting the conditions required for the payment of an earn-out of €5,160,000 was very high, we made a provision for the full amount.

At December 31, 2022, our cash position was €16m, our bank debt €46.6m and our equity after allocation of profit, €299.7m. Our financial structure remains very sound. We maintain ten-year targets based on an average annual turnover growth of 7%, respecting the environment and our stakeholders (see pages 10, 11 and 21). For more details, we invite you to read our extra-financial performance statement on page 59.

We go into 2023 with the certainty of having to pass on an average price increase in excess of 4%. For the time being, we cannot assess the extent of the impact of inflation on volumes and on investment. In the construction market, we expect renovation to offset the expected decline in new housing starts. In parallel with the gradual onboarding of DPI, we will focus on possible synergies with the public works sector. In industry and internationally, where our development potential is high, we will seek to grow market share. Finally, we anticipate a difficult year for consumer-facing business as a direct consequence of the decline in purchasing power of the French population.

In December 2022, institutional investors held 49.1% of the group’s capital, private shareholders 37.8% and our active or retired employees, 7%. We are committed to a policy of distributing dividends to our shareholders, and therefore propose a 4% increase in the dividend to €2.08, or 32.5% of net earnings per share.

Our AGM will be held in Lyon on April 3, 2023 at 5pm at the Théâtre des Célestins. We count on your presence or your votes to once again get past the 73% attendance mark.

We will also hold an information meeting in Paris on April 6, 2023 at 4pm at Salons Hoche.

Our strategy

Challenges 2023-2028

HUMAN RESOURCESAttract and retain talent at all levels of the Group.
Promote parity in all governance bodies.
SUSTAINABLE DEVELOPMENTMeet our objectives as set out on page 21 of this document.
Encourage and support internal initiatives for the protection of
the environment.
BUSINESSBetter understand and meet the expectations of our customers’ customers.
Increase international activity in a proportionate manner.
Continue the integration process of recently-acquired companies.
Increase our sales via digital channels.
DIGITAL TRANSFORMATIONDevelop our skills and digital tools to gain operational efficiency.
Ensure the integrity of our information systems.

All about strategy

Thermador Groupe owns, controls, groups together and drives companies distributing:

• materials and accessories for fluid circulation in buildings and industry,

• large tooling for the retail and pro markets.

Over 10 years, our objective is to maintain an average annual growth rate of over 7% while respecting our people, shareholders, customers, suppliers, other stakeholders and the environment.

We continue to prioritise trust, transparency, simplicity, sobriety and conviviality in human relations, whilst continuing to be highly demanding and alert to the best possible efficiencies. We ask everybody to work well and do things properly, to ‘get it right first time’, so as not to have to do them again.

We want to offer our staff excellent working conditions and coherent, fixed earnings. Some of the profits are shared in the subsidiaries. The Thermador Groupe FCPE (mutual fund) is the Group’s incentive tool.

We expect our executives to perform highly, to be exemplary, communicate effectively and be primarily driven by the collective interest.

Our choice of opening up our capital very broadly imposes upon us the obligation of satisfying our shareholders through exemplary communication, management and behaviour, regular results and dividends, a high level of transparency and flawless accountability. We continue to pursue a determined policy to ensure that our employees and executives own a substantial share of capital.

Our model

Our model involves a high-performance information system, large amounts of stock and suitable buildings we are able to own thanks to our very solid financial structure, which we must continue to defend.

We seek to increase our sales and logistics efficiency by:

• the continued improvement of our information systems by increasing our degree of autonomy and development capacity,

• the collection, storage, analysis and exploitation of data useful to our business by adding appropriate algorithms to our information systems,

• the gradual introduction of mechanised storage systems.

The model relies on specialist commercial subsidiaries performing sales, marketing and logistics in their geographical areas, and with the customers and distribution channels agreed with their manufacturing partners. Their purchasing price and cost control policies ensure good profitability whilst keeping them competitive.

They are differentiated by:

• the stability, quality and commitment of their staff,
• taking customer satisfaction into account at every turn,
• the breadth, depth and incessant adjustment of product ranges,
• permanent, high-performance sourcing,
• product expertise in after-sales service,
• efficiency and consistency in after-sales service,
• excellence of logistics and operational processes,
• mastery of digital tools at their disposal,
• the pertinence of information sent to the market to effectively feed the digital channels,

• an ability to adapt and innovate.

Executives have substantial autonomy as to the conduct of their business activities and man-management.

Our growth

We can act on several levers to ensure our growth.

Organic growth. Each subsidiary acts on three levers to develop sales through:

• the development of market share for product ranges where it is below 30%,

• the price increases where market conditions allow it,
• extension of product ranges without ever competing with another subsidiary of the Group.

International. From France, we focus on markets that are accessible to our logistics organisation and product ranges for which we have a competitive advantage. Subsidiaries physically present abroad apply the conventional levers of organic growth.

Creation of subsidiaries. This is possible in a segment that is close to what we do already, as long as we can find the men and women to lead the project and the industrial partners to provide the basic offer.

External growth. We study opportunities, with a preference for companies located in Europe and outside France in order to better balance our domestic and export sales, laying down a few prerequisites: distribution companies close to our business model and market, a proven strategic interest, a reasonable price acceptable to our shareholders, the honesty, professionalism and involvement of the managers and management teams, control over 100% of the capital in the long term, and upholding operational excellence in the medium term.