Information on risks

4.1 Risk factors

The company performed a review of risks potentially having a substantial unfavourable impact on its business, financial situation and profits. The different risks are classified according to their potential impact and probability of occurrence. This risk mapping reflects Thermador Groupe’s exposure and therefore includes control measures introduced so as to limit probability and impact.


4.1.1 Risks linked to the business

Unforeseen weather events

Risk identification and description
A rainy winter would inevitably cause a drop in watering pumps sales, a market on which we are a significant player in the professional and retail channels.
Potential impact on the group
Decline in turnover. In 2013, we saw a very rainy spring, we lost approximately €2.5m turnover over the first half year.
Risk control and limitation
Our best sellers are stable products. Unsold products from a very poor season can perfectly well be sold during the following season.
Rainy springs are very often followed by drier summers, and such cycles have always allowed us to catch up some of the sales lost to end-June.
Over the last 10 years, good years have broadly compensated for bad ones. Also, our high stock levels allow us to make the very best of years of high demand.


Dependency on the cyclical new-build housing market in France

Risk identification and description
We are exposed to the cyclical building market and, more particularly, the number of new-build housing starts.

49% of our consolidated turnover comes from fluid circuits in buildings. Of that 49%, only 20% is from the new-build sector; the remaining 80% is renovation market turnover.
Potential impact on the group
Our exposure to the new-build market is limited to 9% of our consolidated turnover. For example, in 2009, during the last major crisis in this sector, our consolidated turnover fell 5.5%.

In 2019, organic growth was even recorded in the business activity of the subsidiaries concerned, in spite of a documented drop in housing starts.
Risk control and limitation
The share of our turnover from the construction market has fallen from 55% to 49% since 2009. This rebalancing is primarily due to our strong progression in the industrial market, which today concerns 6 of our subsidiaries.

Also, Ets Edouard Rousseau, acquired on December 31, 2018, sells taps from its sanitation range, the vast majority of which are for the renovation market.


Concentration of our major customers in the DIY market

Risk identification and description
Like the ADEO group (Leroy Merlin) and Kingfisher (Castorama) group, our major DIY customers today have very large market shares. Thus, they have very strong positions at Ets Edouard Rousseau, Dipra, Mecafer and Domac.
Potential impact on the group
A de-referenced range in the past has been known to result in a loss of €600,000 of gross margin over a year.
Risk control and limitation
Every year, we win and lose bids. The idea is to win more than we lose.

Rousseau, Dipra, Mecafer and Domac are present in several ranges and in several departments of DIY stores. Any de-referencing is therefore only ever partial.
We regularly launch new products and sometimes take on new markets.
We diversify our customer base and target alternative trading networks which are looking for differentiated, excellent quality retail products.
We also target food retail, auto distribution, garden centres and agricultural distribution.
We relentlessly improve our service and brand recognition to obtain customer and user loyalty through criteria other than price.
We create bespoke products for e-commerce platforms and market places.


Dependency on the domestic market

Risk identification and description
We do 83.6% of our business in France. We therefore run the risk of growing at the same pace of the country’s economy, i.e. slowly.
Potential impact on the group
Stagnation of turnover, as in 2013 and 2014.
Risk control and limitation
Our market share in France ranges from 0 to 30%, the latter being for certain ranges that we have sold for several decades via our oldest subsidiaries. 0% is for recently launched products where our development focus lies today. Thus, our organic growth in France is often greater than the growth

of the market itself.
Numerous ideas on market niches still have to be developed. We even often have to make choices and discard certain projects to avoid becoming dispersed.
Also, we completed 10 acquisitions between 2015 and 2020, which brought in around €165.6m of turnover in 2021, €42.4m of which in export sales.


Emergence of e-commerce giants in our professions

Risk identification and description
The big e-commerce players have very quickly shaken up certain business areas. Are they becoming new competitors to Thermador Groupe subsidiaries, or even making our business model obsolete?

These platforms can allow users to short-circuit middlemen.
Potential impact on the group
Greater tension on margins because of the transparency of prices

The emergence of new competition in the form of e-merchants or e-platforms which could see us drifting ‘out of the picture’.
Web sales account for between 0% and 20% of our business. It is impossible to assess this precisely, because some of our major customers are multi-channel players who do not wish to communicate a break-down of their sales channels.
Risk control and limitation
Many of our products constitute market niches which offer little attraction to the giants of e-commerce. Furthermore, they require a lot of human resources in specifiers and after-sales.

For simpler products, we have been working to develop this new distribution channel for several years., Amazon and Cdiscount are examples of customers of some of our subsidiaries who are involved in the retail markets.
Also, we accompany our historic customers who wish to sell on the web or to become players on the major e-commerce platforms such as ManoMano. We supply them with qualified product data and the logistics they need.
We train our teams to increase their proficiency in handling data and using digital marketing.
We test new logistics solutions, invest in modern websites and regularly scan the web to control our pricing policies.
We are honing the skills of our after-sales service, a key element for gaining user loyalty and improving brand recognition.
Over the past 5 years, we have measured the progress of our e-commerce and ‘marketplace’ customers. We choose not to disclose turnover achieved with those customers.



4.1.2 Operational risks

Difficulties integrating recently-acquired companies

Risk identification and description
Since 2015, we have made ten acquisitions of very different sizes. Experience shows that it is more difficult to onboard companies whose turnover is more than €15m (5 of the 10).

We run into difficulties because of divergent views with the management, different cultures, geographical distance, and different IT systems.
Potential impact on the group
Non-achievement of expected synergies, non-completion of business plans, loss of productivity.
Operating profits from these 5 companies (€9.1m in 2021) could have a negative impact on the consolidated operating profit and damage the return on invested capital.
Goodwill is €39.9m and is an asset on the group’s books. Recurrent poor results could reduce the value of that asset.
The relocation of FGinox’s logistics planned for early 2022 will require additional real estate investments.
Risk control and limitation
Our Board is balanced: 5 independent Board members, 5 not free of interests, and an employee Board member. None of the 5 major acquisitions made since 2015 have been decided without a majority vote in favour.
The operational managers of the group are personally implicated in the integration processes.
Two executives of the companies we have acquired have been replaced.
We have strengthened IT and internal audit teams.
Our monthly reporting delivers fast reaction times.
We announced a break in 2020 and 2021 on operations that are time consuming or above €5m so that our resources can be dedicated to implementing synergies and operational efficiencies.



4.1.3 Social risks

Loss of knowledge and recruitment difficulties

Risk identification and description
Greater instability amongst staff and difficulties in filling certain posts could be an obstacle to our growth.

The average length of service in the group fell from 11 years in 2016 to 9.8 years in 2020.
Potential impact on the group
We believe that a complete and highly experienced team delivers a 3% better performance. The opposite would therefore lead to a loss of performance of the same magnitude. On average, that could represent €1m turnover episodically for one or two of our subsidiaries.
Risk control and limitation
Responsibility for the social relations climate and managing human resources is delegated to executives from the subsidiaries which are themselves human-sized companies. We constantly work to improve quality of life at work by testing with anonymous questionnaires. We implement very practical initiatives to protect the environment, which is very important to the younger generations. We accompany long-term illness employees with a great deal of attention. We promote and practise transparency of salaries within our subsidiaries. We are working on our employment contracts to empower managers and teams in terms of compulsory rest times and effective working times. We are transparent as to financial results and share them within each of our subsidiaries. We have created a collaborative platform designed to be accessible to all group employees. Job vacancies are published internally on the collaborative platform. We promote and facilitate access to capital. We promote respect, conviviality and simplicity in our social relations. We encourage and help managers and supervisors to improve their management skills.
We diversify recruitment channels enormously: agencies, social media, APEC (job agency for managers), personal networks, etc.



4.1.4 Financial risks

Euro-Dollar exchange rate

Risk identification and description
The group sells in euros in France and abroad. We buy from all over the world: around 34% of our merchandise is purchased in US dollars.

This exposes us to the volatility of the Euro-Dollar exchange rate.
Potential impact on the group
Currency variations against the euro (primarily $US) can increase the price we pay for merchandise and thereby hurt the group’s profits.
The actual purchase price is incorporated into our cost price and passed on as much as possible to the customer.
Mathematically, a 10% variation in the US dollar rate would have a €12m impact on our commercial margin.
Risk control and limitation
Since January 1, 2018, Thermador Groupe has had centralised dollar cash management to cover the needs of all its subsidiaries. This ability to keep ahead of the exchange rate gives those subsidiaries greater visibility in terms of selling price, and better control over their margins.



4.1.5 Geopolitical risks

Temporary blockage of the Chinese and Italian economies

Risk identification and description
35% of our purchases of finished products come from China and Taiwan, 35% from Italy. A political, social or health crisis could temporarily block one of those country’s economies.
Potential impact on the group
In the face of such events, we could be confronted with stock-outs. It is today however impossible to assess this risk since we have not recently experienced this type of situation.
Risk control and limitation
Our stock levels are generally higher than those of our competitors. We have stable and even-handed relationships with our suppliers. This makes decision-making easier in crisis situations and makes us a priority customer for them. We are active in seeking and developing suppliers in France, Spain, Germany, Belgium, Turkey, Brazil, Hungary, India, Poland, South Korea, Slovakia, Finland, Portugal, Austria, England and Holland.



4.1.6 Pandemic risks

Temporary economic blockage in the wake of a pandemic

Risk identification and description
Like the Covid-19 crisis in the first half of 2020, a global pandemic could block the economy.
Potential impact on the group
Large numbers of the group’s employees falling ill, based in France, Belgium, the Netherlands, Spain and China.
Loss of productivity due to home-working.
Blocking of supplies.
Sharp drop in sales.
Difficulties controlling stock variations.
Weakening of certain customers and suppliers.
Longer customer payment periods.
Insufficient cash to finance the business.
Loss of shareholder confidence and collapse of share value.
We believe that in 2020, we lost an opportunity for 4% organic growth, or approximately €15 million in revenue.
Risk control and limitation
Our devolved organisation, consisting of small structures, enables us to take health safety measures extremely quickly. 3/4 of our workforce can work remotely. The remaining quarter, our logistics teams, showed their resilience and commitment in 2020 and 2021. Our suppliers are spread around the world and our stocks are traditionally high, which protects us from shortages. In addition, our long-standing relationships and regularity of settlement make us a priority customer from the outset. Each subsidiary monitors its receivables and communicates payment incidents in real time. Our very solid financial structure is reassuring for our bankers. Our prompt and effective communication with our shareholders is reassuring for all stakeholders.



4.1.7 Climate change risks

Impact of climate change on certain assets or markets

Risk identification and description
Rising sea levels in coastal areas.
Ban on the sale of certain polluting products.
Explosion of the cost-per-tonne of CO2.
Potential impact on the group
Flooded warehouses.
Suppliers’ factories flooded.
Need to finance relocation.
Drop in turnover.
Rapid drop in the Group’s profit to offset CO2 emissions.
Risk control and limitation
Rising water levels: our logistics facilities are not at risk. On the other hand, from 2022 onwards, we will begin an exhaustive analysis to map all the production sites of our 712 suppliers and quantify those that could be affected in the medium term.
Our product ranges are highly diversified. On the other hand, none of our strategic ranges is currently threatened by a ban.
On a more positive note, many of our products are useful and necessary in businesses linked to the energy renovation of buildings and water management.
With a degree of uncertainty of 30%, Thermador Groupe emitted 207 kT equivalent CO2 in 2020 and 225 kT equivalent CO2 in 2021 (page 80), 95% of which is related to product life cycle (PLC). Thus, if we were to compensate financially for the totality, a hypothetical operating deficit would be recorded on the basis of a per-tonne-of-CO2 cost of €325 (2021 operating profit = €73.2m). However, we remain sceptical about this simplistic approach, since the responsibility for PLC must be shared between the various stages of the product’s life: extraction and transformation of raw materials, manufacturing, assembly, transport, storage, installation, use, repair and recycling.



4.2 Insurance and coverage of risks

All the Group’s companies are covered by an overarching insurance policy against the following risks: damage and operating losses, civil liability and transport. All subsidiaries use the guarantees set up and negotiated at Group level with the exception of Sodeco. They kept their existing insurance policies in 2021 given their geographical specificities (Belgium, Germany, Netherlands and Switzerland for Sodeco).

Group-negotiated insurance policies provide a high level of cover and seek first and foremost to guard against the biggest possible incidents that could have a substantial negative impact on the group’s financial situation.

Cover for damage and operating losses risks was renegotiated on January 1, 2019 for a period of two years. In 2019, all our sites in Saint-Quentin-Fallavier (Isère) were visited by our insurer as part of an audit on preventative maintenance and protection procedures. The outcome was ‘highly satisfactory’ for the insurer.

Cover for transport risks was also renegotiated on January 1, 2019. Our transport insurance policy covers transport risks for both purchasing and selling. It is €1.5m whatever the means of transport (sea, land, air, etc.).

The civil liability contract was renegotiated on January 1, 2019 for a period of two years on the basis of a flat-rate premium, not linked to turnover as was the case previously. This premium was reduced given the substantial decline in claims.

The guarantees signed up to as part of the product civil liability programme are as follows:

• €10m per claim and per year.

•€2m per claim and per year for recall costs and disassembly / reassembly expenses.

Our operations civil liability guarantees are:

• €10m per claim and per year.

• €6m for inexcusable error.

• €1.5m for sudden accidental impacts on the environment.

The group has also taken out an employee mission insurance policy to cover all professional travel for our staff, nationally and internationally. Group insurance policies are updated at least every two years to follow changes to group scope and to control industrial risks.

The group’s policies are with major insurance companies with a global profile.


2022 Annual Report

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