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As filed with the Securities and Exchange Commission on September 16, 2021

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Keter Group SA

(Exact name of registrant as specified in its charter)

 

 

 

Grand Duchy of Luxembourg   2834   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

Zone Industrielle, Hahneboesch

L-4587 Differdange

Grand Duchy of Luxembourg

+352 584545215

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Keter US, Inc.

6435 S Scatterfield Rd

Anderson, IN

46013-9619

(765) 298 6800

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

Joshua N. Korff

Tim Cruickshank

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

(212) 446-4800

 

François Warken

Arendt & Medernach SA

41A avenue JF Kennedy L-2082

Luxembourg

+352 4 0787 81

 

Stelios G. Saffos

Erika L. Weinberg

Latham & Watkins LLP

1271 Avenue of the Americas

New York, NY 10020

(212) 906-1200

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

 

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities to be Registered
 

Proposed

Maximum
Aggregate

Offering Price(1)

  Amount of
Registration Fee

Ordinary shares, par value €0.01 per share

  $100,000,000.00   $10,910.00

 

 

(1)

Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes the additional ordinary shares that the underwriters have the option to purchase.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it’s not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted

 

SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 2021

PRELIMINARY PROSPECTUS

             Ordinary Shares

 

 

LOGO

Keter Group SA

 

 

This is the initial public offering of Keter Group SA. Prior to this offering, there has been no public market for our ordinary shares. We are selling                 ordinary shares. We expect our initial public offering price will be between $         and $         per ordinary share.

We intend to apply to list our ordinary shares on the New York Stock Exchange, or NYSE, under the symbol “KETR.”

Each ordinary share will be entitled to one vote per share.

We are a “foreign private issuer” as defined under the United States Securities and Exchange Commission, or SEC, rules and will be subject to reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Our Business—Implications of Being a Foreign Private Issuer.” Affiliates of BC Partners are currently our majority shareholders. Following this offering, affiliates of BC Partners will own                  ordinary shares, which will represent approximately     % of our total outstanding ordinary shares and approximately    % of the combined voting power of our ordinary shares outstanding immediately after this offering. Upon completion of this offering, we will be a “controlled company” as defined under the corporate governance rules of the NYSE.

 

 

Our business and an investment in our ordinary shares involves a high degree of risk. See “Risk Factors” beginning on page 32 of this prospectus.

 

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

     PER
ORDINARY
SHARE
     TOTAL  

Public offering price

   $                    $                

Underwriting discounts and commissions(1)

   $        $    

Proceeds to us, before expenses

   $        $    

 

(1)

See “Underwriting (Conflicts of Interest)” for additional information regarding underwriting compensation.

We have granted the underwriters an option to purchase up to an additional                  ordinary shares from us at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus, solely to cover overallotments.

Delivery of the ordinary shares is expected to be made on or about                 , 2021.

 

 

Joint Global Co-coordinators and Joint Bookrunners

 

Goldman Sachs International   J.P. Morgan
BofA Securities   Jefferies
    Joint Bookrunners     
RBC Capital Markets   BC Partners
Baird    Oppenheimer & Co.    Piper Sandler    Truist Securities
    Co-manager     
    BNP PARIBAS     

 

 

Prospectus dated                 , 2021


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LOGO

Keter Shaping what’s next for a better day

 

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LOGO

At Keter, we’re driven to invent. We create lifestyle solutions for in and around the home in ways only we can. We design with the most innovative technologies and build with sustainable materials to create products that enhance people’s spaces and elevate their experiences. We’re constantly looking for the new to shape what’s next – relentless in our pursuit of solving for the needs of today while designing for tomorrow, At Keter, we’re shaping what’s next for a better day. keter

 

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LOGO

We invent what’s new and next.

 

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LOGO

We create solutions for the global marketplace.

 

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LOGO

We design with people in mind.

 

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LOGO

We build in a sustainable manner.

 

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LOGO

Our DNA

 

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LOGO

At a Glance

 

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TABLE OF CONTENTS

 

About this Prospectus

     iii  

Presentation of Financial and Other Information

     iii  

Trademarks

     vi  

Market and Industry Data

     vi  

Prospectus Summary

     1  

The Offering

     26  

Summary Consolidated Financial Data

     28  

Risk Factors

     32  

Use of Proceeds

     69  

Dividend Policy

     70  

Capitalization

     71  

Dilution

     72  

Selected Consolidated Financial Data

     74  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     76  

Business

     100  

Management

     129  

Principal Shareholders

     139  

Related Party Transactions

     141  

Description of Share Capital and Articles of Association

     144  

Ordinary Shares Eligible for Future Sale

     159  

Material United States and Luxembourg Income Tax Considerations

     162  

Enforceability of Judgments

     172  

Underwriting (Conflicts of Interest)

     175  

Expenses of the Offering

     182  

Legal Matters

     183  

Experts

     183  

Where You Can Find More Information

     183  

Index to Financial Statements

     F-1  

Neither we nor the underwriters have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we may have referred you. Neither we nor the underwriters take any responsibility for, or provide any assurance as to the reliability of, any other information that others may give you. Neither we nor the underwriters are making an offer to sell the ordinary shares in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the ordinary shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

 

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For investors outside the United States:

Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ordinary shares and the distribution of this prospectus outside the United States.

This prospectus has been prepared on the basis that all offers of ordinary shares will be made pursuant to an exemption under the Regulation (EU) 2017/1129, or the Prospectus Regulation, and the relevant implementing measures in member states of the European Economic Area, or EEA, from the requirement to produce a prospectus for offers of the ordinary shares. Accordingly, any person making or intending to make any offer within the EEA of ordinary shares which are the subject of the offering contemplated in this prospectus should only do so in circumstances in which no obligation arises for us or any of the underwriters to produce a prospectus for such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of ordinary shares through any financial intermediary, other than offers made by the underwriters which constitute the final offering of ordinary shares contemplated in this prospectus.

 

 

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ABOUT THIS PROSPECTUS

Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “Keter,” the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to (i) Krona Holding (Luxembourg) I SARL, a société à responsabilité limitée, incorporated and existing under the laws of the Grand Duchy of Luxembourg, registered with the Luxembourg Trade and Companies Register under number B209182, having its registered office at Zone Industrielle, Hahneboesch, L - 4587 Differdange, Grand Duchy of Luxembourg, or Krona Holding, together with its subsidiaries, prior to the acquisition by Keter Group SA of all of the assets and operations of Krona Holding by way of contribution by Krona Acquisition SARL of all of its shares in Krona Holding to Keter Group SA, a société anonyme incorporated and existing under the laws of the Grand Duchy of Luxembourg, registered with the Luxembourg Trade and Companies Register under number B255799, having its registered office at Zone Industrielle, Hahneboesch, L - 4587 Differdange, Grand Duchy of Luxembourg, which will occur prior to consummation of this offering, and (ii) Keter Group SA together with its subsidiaries after giving effect to the contribution of all of the shares of Krona Holding to Keter Group SA, which will occur prior to consummation of this offering. In addition, prior to consummation of this offering, Krona Management SA, an entity through which certain of our current and former employees indirectly own equity interests in Krona Holding, will be contributed to Keter Group SA in connection with the issuance of ordinary shares of Keter Group SA to such current and former employees. At the time of this contribution, Krona Management SA will not have any material assets or liabilities other than equity interests in a parent of Krona Holding.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

We report under International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB. None of the consolidated financial statements in this prospectus were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. We present our consolidated financial statements in euros. We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them, and percentage calculations using these adjusted figures may not result in the same percentage values as are shown in this prospectus.

Unless otherwise indicated, all references in this prospectus to “€,” “euro,” “EUR” or “cents” are to the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the treaty establishing the European Community, as amended. All references to “$,” “U.S.$” or “U.S. dollars” are to the lawful currency of the United States.

Solely for the convenience of the reader, certain euro amounts herein have been translated into U.S. dollars at the rate of €1.00 to $1.2271, the average exchange rate quoted as of December 31, 2020 by the European Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange rate as at that or any other date.

This prospectus contains the historical financial statements and other financial information of Krona Holding. Prior to the consummation of this offering, Keter Group SA will acquire all of the assets and operations of Krona Holding by way of contribution by Krona Acquisition S.à r.l. of all of its shares in Krona Holding to Keter Group SA. Keter Group SA’s ordinary shares are being offered hereby. Keter Group SA is a newly incorporated company incorporated for the purpose of acquiring by way of contribution all of the shares of Krona Holding and effecting this offering and has not engaged in any activities except those incidental to its formation, the acquisition of Krona Holding and the initial public offering of our ordinary shares. Keter Group SA is currently a wholly-owned subsidiary of Keter Group Holding S.à r.l., has no assets, liabilities or contingent liabilities and will have no assets, liabilities or contingent liabilities until the completion of the acquisition by Keter Group SA of all of the assets and operations of Krona Holding by way of contribution by Krona Acquisition SARL of all of its shares in Krona Holding to Keter Group SA. Following the acquisition by way of contribution of all of the shares of Krona Holding, Keter Group SA will become the holding company of our

 

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Company. In addition, prior to consummation of this offering, Krona Management SA, an entity through which certain of our current and former employees indirectly own equity interests in Krona Holding, will be contributed to Keter Group SA in connection with the issuance of ordinary shares of Keter Group SA to such current and former employees. At the time of this contribution, Krona Management SA will not have any material assets or liabilities other than equity interests in a parent of Krona Holding.

Results reported for the twelve months ended June 30, 2021 are calculated as results for the six months ended June 30, 2021, plus results for the year ended Dec 31, 2020, less results for the six months ended June 30, 2020.

Use of Non-IFRS financial measures

This prospectus contains non-IFRS financial measures, including Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, IFRS and our calculations thereof may not be comparable to similarly titled measures reported by other companies.

We define Adjusted EBITDA as loss for the year excluding depreciation and amortization, income tax expense (benefit), finance costs, finance income, other finance (gains) losses, net, impairment charges, plant closure costs, business transformation costs, loss (gain) on disposal of assets, share-based payment expense, and certain other non-routine items that management believes are not indicative of the core performance of our business, each as described in footnote (a) in the section entitled “Prospectus Summary—Summary Consolidated Financial Data.” The most directly comparable IFRS measure to Adjusted EBITDA is our loss for the year. For a reconciliation of loss for the year to Adjusted EBITDA, please see footnote (a) in the section entitled “Prospectus Summary—Summary Consolidated Financial Data.”

We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue for the period, expressed as a percentage.

We believe that Adjusted EBITDA and Adjusted EBITDA Margin are indicators of the operating performance of our underlying business. We believe Adjusted EBITDA and Adjusted EBITDA Margin, as defined above, are useful to investors and are used by our management for measuring profitability and allocating resources, because they eliminate certain items that affect period-over-period comparability and provide consistency with past financial performance and additional information about underlying results and trends by excluding certain items that may not be indicative of our business, results of operations or outlook. We believe that utilizing Adjusted EBITDA and Adjusted EBITDA Margin allows for a more meaningful comparison of operating fundamentals between companies within our industry by eliminating the impact of capital structure and taxation differences between the companies.

Additionally, we believe that Adjusted EBITDA measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to us, many of which present an Adjusted EBITDA-related performance measure when reporting their results.

Adjusted EBITDA and Adjusted EBITDA Margin are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. You should exercise caution in comparing Adjusted EBITDA and Adjusted EBITDA Margin as reported by us to Adjusted EBITDA and Adjusted EBITDA Margin as reported by other companies. Adjusted EBITDA and Adjusted EBITDA Margin are unaudited and have not been prepared in accordance with IFRS.

Adjusted EBITDA and Adjusted EBITDA Margin are not measures of performance under IFRS and you should not consider Adjusted EBITDA or Adjusted EBITDA Margin as an alternative to loss for the year, operating profit (loss), or other financial measures prepared in accordance with IFRS.

Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools, and you should not consider them in isolation. Some of these limitations are:

 

   

they do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

 

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although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect any cash requirements that would be required for such replacements;

 

   

some of the items we eliminate in calculating Adjusted EBITDA and Adjusted EBITDA Margin reflect cash payments that have less bearing on our core operating performance, but that impact our operating results for the applicable period; and

 

   

the fact that other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, which limits their usefulness as comparative measures.

Accordingly, prospective investors should not place undue reliance on Adjusted EBITDA or Adjusted EBITDA Margin.

 

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TRADEMARKS

All trademarks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the symbols ® and , but such references should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

MARKET AND INDUSTRY DATA

The information in this prospectus that has been sourced from third parties has been accurately reproduced and, as far as we are aware and able to ascertain from the information published by that third-party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Industry publications generally state that their information is obtained from sources they believe reliable but that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on a number of significant assumptions. Although we believe these sources to be reliable, as we do not have access to the information, methodology and other bases for such information, we have not independently verified the information.

In this prospectus, we make certain statements regarding the markets and the competitive position in the sectors and geographies in which we compete. We believe these statements to be true based on data from our internal research which we believe to be reasonable, as well as independent consultancy reports, market data and industry statistics which are in the public domain, but have not independently verified the information.

 

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus carefully, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated financial statements and the notes thereto, included elsewhere in this prospectus, before deciding to invest in our ordinary shares.

Unless the context otherwise requires, we use the terms “Keter,” “the Company,” “we,” “us” and “our” in this prospectus to refer to Keter Group SA and, where appropriate, our consolidated subsidiaries.

Our Business

Keter Snapshot: Shaping What’s Next for a Better Day

For over 70 years, Keter has inspired people to create amazing spaces in and around the home through an innovative, industry-leading portfolio of durable indoor and outdoor lifestyle solutions.

Our balanced and diversified portfolio of categories, brands and products, which is unmatched by our competition in terms of design, functionality, quality, breadth or global reach, is defended by an intellectual property portfolio of approximately 1,500 registered patents, as of September 5, 2021, and decades of accumulated know-how. Our products are distributed in approximately 100 countries through a network of blue-chip, omnichannel retail partners, with Keter having a superior presence in the e-commerce channel, compared to the broader home and garden solutions industry. We believe the breadth, depth and quality of our product offering makes us a preferred partner and one-stop shop for customers, who often consider us a category captain in resin-based products, and to whom we provide innovative, sustainable and cost-efficient products. In the year ended December 31, 2020, we generated €1,235.7 million in revenue, a loss for the year of €(76.8) million and €194.4 million in Adjusted EBITDA. In the six months ended June 30, 2021, we generated €855.0 million in revenue, a profit for the period of €2.4 million and €149.3 million in Adjusted EBITDA.

 

 

LOGO

Keter primarily serves large, resilient and growing markets for lifestyle products used in and around the home. We believe our total addressable market, or TAM, is estimated to have generated retail sales of approximately $27.8 billion across North America and Europe in 2020, and is fueled by secular tailwinds, including increased at-home activities, growing home improvement spend and a shift toward suburban


 

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living. The most attractive market segment within this large TAM, resin-based solutions, is estimated to have generated retail sales of approximately $9.7 billion in 2020 and is expected to grow at a CAGR of 4.4% between 2020 and 2023, nearly twice the pace of products made of other materials.

At twice the size of its closest competitor, we believe Keter is best positioned to enjoy this accelerated growth in large part due to our compelling value proposition for consumers. Keter’s global leadership position enables us to leverage the strength and scale of our business to derive significant and durable competitive advantages:

 

   

Leading Global Platform in Durable Consumer Products and Solutions with Significant Scale Advantage: Keter is often seen as a category captain for durable consumer products, with our relative global market share in resin-based solutions being nearly double that of our nearest competitor across our market. We believe that we have no direct competitors with product portfolios or operational footprints that rival our reach, scale and breadth of product offering, which we believe is a distinct competitive advantage.

 

   

Innovation-Driven Approach to Growth: We have a long-established track record of leading our industry in innovation. Products developed between 2017 and 2020 represented approximately 30% of net sales in 2020.

 

   

Long-Standing Relationships with Blue-Chip Retail Partners: Our products are sold in over 70% of the top 50 hardline retailers in Europe and North America. We maintain strong relationships with our retail partners, with the average relationship length being approximately 20 years across our top 20 partners, which includes retailers such as The Home Depot, Walmart, Amazon, Kingfisher, Costco and others.

 

   

Growing Omnichannel Business Suited to Online Expansion: We believe we are well-positioned to benefit from our outsized presence in the fast-growing e-commerce channel. We estimate that our total online penetration is approximately 30%, which compares to online penetration of approximately 15% on average for home and garden solutions globally.

 

   

Leading Brand Portfolio: The Keter and Curver brands, our leading proprietary brands in our Outdoor and Indoor segments, respectively, are broadly recognized after being in the market for over 70 years. Keter is among the top two most recognized brands in Europe in the resin-based outdoor storage and outdoor furniture categories and is well-positioned in the United States, while Curver ranks amongst the top five most recognized brands in resin-based home organization.

 

   

Well-Invested Global Manufacturing Footprint: Our operating model and manufacturing footprint allows us to optimize production across markets based on local supply and demand dynamics. Over 65% of the production is performed locally, mitigating the risks of potential global supply chain disruptions.

 

   

Industry Leader in Sustainability, Corporate Social Responsibility and Environmental, Social and Governance, or ESG, Issues: We aim to lead our industry on the topic of sustainability, corporate social responsibility and ESG. Our beautiful and durable consumer products are 99.9% recyclable at the end of their useful lives. We have increased the share of recycled content in total production from 21% in 2016 to 38% in 2018 and 40% in 2020, and are aiming to achieve 55% recycled content by 2025.

 

   

Efficient and Effective Organization: Our “glocal” operating model delivers a high level of service to our clients and gathers evolving consumer insights. Our decentralized local manufacturing, sales and marketing operations are supported by effective global corporate functions, with a best-in-class international management team benefiting from decades of accumulated experience, driving the growth strategy of the business.


 

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Keter has multiple levers to drive superior growth, underpinned by robust strategic priorities. We are maximizing opportunities within our existing business through our innovation, channel penetration, brand building potential and strength of our portfolio. Further, we believe our recent investments in sales and marketing, and product innovation, position us to continue the trend of profitable above-market growth. We also have additional growth opportunities, providing our business with significant optionality, including the opportunity to penetrate category adjacencies, geographic expansion and business model innovation. Finally, as a natural consolidator in a fragmented industry, we are able to accelerate our development through selective and complementary acquisitions.

Company Overview

Founded as a family business in Israel in 1948, Keter has experienced significant growth and global expansion to become a market leader in indoor and outdoor durable lifestyle solutions. Throughout its over 70-year history, Keter has ascended to the forefront of the industry in design, functionality and the use of advanced engineering capabilities across product categories. Since the funds advised by BC Partners acquired a controlling stake in Keter in 2016, the business has been transformed from a family-owned company to a global consumer products leader by strengthening the organization, investing in innovation, rationalizing the portfolio, developing a digital footprint, focusing on sustainability, optimizing global operations and executing on the consolidation opportunity through acquisitions.

Our product portfolio is unmatched by our competition in terms of breadth and depth, and is balanced across most outdoor living and home solutions, positioning us as a category captain to many customers in resin based products and the partner of choice for blue-chip retailers. Our portfolio is also well balanced in terms of global presence, and is supported by well recognized brands across our categories in Europe and North America.

 

 

LOGO

We operate in two segments, with solutions meeting most consumer indoor and outdoor lifestyle needs.

Outdoor Segment

 

   

Our Outdoor segment is anchored by the global equity of our Keter brand and comprises three main product solutions: outdoor furniture and planters, sheds and buildings and deck boxes and leisure. Keter has been behind many of the major innovations in the category—notably through the recent introduction of the DUOTECH and EVOTECH technologies featuring the natural look and feel of traditional wood products. Our outdoor furniture and planters business comprises decorative and weather-resistant products for a range of outdoor lifestyles and activities, including lounge sets, deck chairs, dining sets and tables, as well as raised garden beds, planters and pots. In our sheds and buildings business, we produce a range of innovative, beautifully designed and highly durable garden sheds and outdoor buildings. Our deck boxes and leisure business is comprised of practical and aesthetic outdoor storage solutions such as patio coolers.


 

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We are the leading resin-based player across deck boxes and leisure and outdoor furniture and planters sub-categories in both Europe and the United States. In sheds and buildings, we are the leading resin-based player in Europe and the number two resin-based player in the United States, with sale estimates of over one million sheds globally in 2020. Overall, our market share across Europe and North America in resin-based products across our Outdoor segment is approximately three times larger than the next competitor.

 

   

Our Outdoor segment benefits from consumers’ sustained and growing investment in their outdoor spaces and the appeal of our products, which combine highly aesthetic designs with significantly greater durability, lower maintenance and greater value, compared to products manufactured with traditional materials such as wood, rattan or metal. We believe our global leadership and innovative capabilities uniquely position us to further drive resin penetration and capitalize on the growing demand in outdoor living. We also anticipate future opportunities to expand into adjacencies (e.g., “livable sheds”) as homeowners and renters look for alternative or additional living spaces.

Indoor Segment

 

   

Our Indoor segment is led by our Curver brand and comprises four main product solutions: home storage and organization, tool storage, cabinets and shelving and totes and medical containers. Our home storage and organization business includes storage boxes and baskets, bathroom storage solutions, kitchenware and pet accessories. We provide aesthetically pleasing solutions that bring storage from the closet into the living room with our unique range of 3D and surface finishes, including weave, knit, beton and jute. Our tool storage business features a ground-breaking system approach targeted at both professional contractors and DIYers. These innovative tool storage solutions are designed, manufactured and distributed by Keter and marketed under exclusive third-party specialized brands, including the leading and fast-growing brands Milwaukee, Ridgid and Hart. Our cabinets and shelving business provides a range of storage solutions for the home and office, and the medical storage business, marketed under our AP Medical brand, provides safe medical containers for the disposal of general or sharp waste in hospitals and medical facilities.

 

   

We are the leading resin-based home storage and organization player in Europe, enjoying market share approximately two times larger than the next competitor, and we are also well-positioned in North America. In high-growth resin-based tool storage solutions, we maintain the number one and number two market share position in the United States and Europe respectively, and have increased our market share in the overall tool storage market across North America and Europe from 6% in 2015 to 9% in 2020. In cabinets and shelving, we are the leading resin-based player in Europe and among the top three players in the United States.

 

   

These categories benefit from the continued strength of the housing market and increasing spend on home improvement, renovation and restoration activity and the growing interest in home decoration and organization. Keter is well-positioned within the market to capitalize on these trends by offering differentiated branded solutions focused on design, high quality and durability, including those made of recycled resin.

Today, innovation underpins everything Keter does and this capacity for innovation is a core competitive advantage, a fundamental part of Keter’s corporate culture and a key driver of future success. We take a market-led approach to understanding and anticipating the needs of consumers across our various product categories and geographies to create solutions that are functional, beautifully designed, durable and accessible to a broad consumer base.


 

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LOGO

Due to our scale, we are able to invest substantial resources behind this strategic effort. We have a global team of nearly 70 designers and engineers exclusively focused on product innovation, working across four dedicated research and development hubs which are closely connected to our sales and marketing teams, locally based across our key regions. We have invested in excess of €60 million in capital expenditures related to new product molds in total in the last three years and operate a portfolio of intellectual property assets including approximately 1,500 registered patents globally, with approximately 216 additional patents pending, as of September 5, 2021. New products launched between 2017 and 2020, comprised approximately 30% of our total sales in 2020. We believe our recent investments in innovation and pipeline of new products, supported by other business initiatives, position us to experience continued growth.

For example, Keter’s DUOTECH solutions, leveraging our unique know-how in resin science and surface finishes, are a breakthrough in outdoor storage products due to the combination of innovative technology, smart engineering, and distinctive materials. Our DUOTECH products feature the natural look and feel of traditional wood products, are easily customized and have solid design and resistance to all weather conditions. We have similarly redefined the tool storage market, with the fast-growing family of storage solutions introduced under the Milwaukee PACKOUT brand, which revolutionizes the transportation, storage and organization of tools for both professional contractors and DIYers. Built from impact-resistant polymer, its patented multi-footprint system allows users to stack and lock boxes, organizers and crates in any configuration. Its design has given Keter a top mark in product innovation, resulting in recognition as a finalist for the prestigious Innovation Award from The Home Depot.

We have defined our brand strategy to maximize our market presence and drive our profitable growth across markets and categories. Consumers are increasingly relying on online search to make informed purchases, whether through physical retail channels or through e-commerce sites, and we continue to invest in brand recognition to capitalize on this trend. Our portfolio is primarily marketed under our range of proprietary brands and under exclusive licenses with widely recognized third-party brands. Our branded offering is tactically supplemented by store-branded product lines, which we undertake in collaboration with select retail partners based on a set of strict criteria related to volume, growth potential and profitability.


 

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Our proprietary brands

 

   

In 2020, 74% of our sales were generated by products under our proprietary brands, and our portfolio is anchored by two brands with strong recognition across key consumer segments and categories. Keter is our leading brand in the Outdoor segment, which for over 70 years has been inspiring people to create amazing spaces in their homes and gardens with innovative, high-quality products. Curver, our leading brand in the Indoor segment, was created in 1949 and stands for intelligent, beautiful and innovative solutions for home organization.

 

   

We are continuing to invest in our brands—the Keter and Curver brands sit among the top three recognized brands across resin-based outdoor storage, outdoor furniture and home organization in Europe, and are well-positioned in the United States and feature strong net promoter scores, or NPS, relative to direct competitors across regions and categories.

 

   

These two anchor brands are complemented by a portfolio of local and regional brands which we strategically and tactically use in certain regions and product categories. These brands include Adams and Allibert in our Outdoor segment and KIS in our Indoor segment.

Partnerships with third-party brands

 

   

In 2020, 9% of our sales were generated by products sold under market-leading third-party brands. We selectively partner with global brands to promote our products in certain categories where such partnerships can create a competitive advantage and bolster product recognition.

 

   

Historically, we have partnered with brands such as Disney on a range of kids’ storage solutions, as well as a number of brands owned by Techtronic Industries Company Limited, or Techtronic, an operator of some of the most successful and recognized brands in power tools and outdoor power equipment in the world. Our partnership with Techtronic has been a driver of the success and growth of our tool storage business. In 2018, we redefined the tool storage market with the launch of Milwaukee PACKOUT, a multi-unit system with patented stackable parts and customizable layouts aimed at professional contractors and serious DIYers, and we recently expanded the relationship with the launch of Hart tool storage systems. We believe our significant investments into our tool storage business positions us to further grow in this strategic and attractive category.

Retail partnerships

 

   

In 2020, 17% of our sales were generated by private label products co-developed in partnership with our largest strategic retailers. We believe this approach provides us with a distinct competitive advantage in delivering value to our retail partners, and also provides an avenue for us to optimize our branded assortment within a channel and increase our overall share of spend with each customer.

 

   

We are focused on growing profitably with these strategic partners by offering a range of value-added innovations, and well-designed and high-quality products, combined with high production volumes to capture benefits from scale. This collaboration has been key to our relationship with such retailers as The Home Depot, with whom we have been working on product lines for the Husky and HDX brands for over 25 years, and IKEA, with whom we also have been partnering for over 25 years to create innovative home solutions.

We are focused on the attractive North America and Europe markets where our products are sold in over 70% of the top 50 hardline retailers. However, we bring our products to market through a diverse and powerful group of retail partners in approximately 100 countries around the world. We have long-established partnerships with most of Europe and North America’s largest retailers across the key home improvement, mass, club and


 

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specialist channels, including The Home Depot, Lowe’s, Costco, Walmart, Target, B&Q, Leroy Merlin, Castorama, IKEA, Action and many others. We also have a fast-growing digital presence, including through e-commerce pure players such as Amazon and Wayfair, and through the e-commerce websites of many of our retail partners pursuing omnichannel strategies. Across our entire distribution network, we estimate that approximately 30% of our sales in 2020 were to consumers through an online platform, whether pure-play or omnichannel. Sales from pure-play and trackable omnichannel retailers have increased at a CAGR of 21% from 2018 to 2020. We believe we are well-positioned to benefit from the increasing penetration of online shopping given the appeal of our brands and products, our global infrastructure and significant scale.

Keter has an organization of over 5,000 employees working across regional business units in regional business units, local sales and marketing teams and 18 manufacturing sites across Western Europe, North America and Israel. While our global organization aims to deliver scale benefits across critical functions, our operating principles are based on a nimble and entrepreneurial culture with lean and effective central oversight. This “glocal” approach relies on strong local sales and marketing teams, with decades of in-market experience building customer relationships and collecting consumer insights. We believe our local, on-the-ground presence acts as a key competitive advantage and a strong barrier to entry, strengthens our market penetration and ensures agility and elevated service levels. This local presence is complemented by the benefits we derive from our global scale, which represent a significant and durable competitive advantage in a market where competition is largely comprised of smaller, less capitalized companies. Our scale allows us to invest meaningfully in innovation and product development, in our brands and in our manufacturing setup and our supply chain, all while offering the opportunity to optimize our global marketing effort and operations. Our large and global scale also allows us to leverage expertise across various technologies, including traditional and innovative injection molding, extrusion processes, mold design, process automation and surface finishes. In addition, our scale and the quality of our supply chain are essential to supporting fast-growing omnichannel strategies and leading e-commerce players, which has allowed us to establish ourselves at the forefront of our industry with regard to sustainability and the use of recycled materials or waste in our production processes.

We are proud of having established Keter as a thought leader on sustainability and corporate and social responsibility in our industry. While our focus on profitable growth is essential, we are also deeply committed to being part of the solution for a better planet by delivering highly durable products that are made with recycled content and that are themselves 99.9% recyclable, and by operating in an efficient, sustainable manner throughout our value chain. Our goal is to create products that are truly durable and recyclable while being functional, aesthetically appealing and affordable compared to products manufactured with alternative materials. Reducing our environmental footprint also includes leading our industry when it comes to incorporating post-industrial and post-consumer plastics as a raw material in manufacturing process and promoting circular economy and recycling initiatives. In 2019, we formalized a strategy to further drive our positive impacts on people, society and the planet, while accelerating a reduction in our environmental footprint by publishing our first Sustainability Report. These goals include increasing the amount of recycled content in production, continued zero production of single-use plastic consumer products, achieving zero waste to landfill from production, implementing product end-of-life programs in all regions and a reduction of greenhouse gas emissions from production, among other goals. As an example, we have increased the usage of recycled materials in our production process from 21% in 2016 to 38% in 2018 and 40% in 2020 and have set ourselves the goal of 55% by 2025. Keter is an industry leader in sustainability initiatives, and we believe our leadership will expand Keter’s competitive advantage as consumers become increasingly focused on the environmental footprint of their purchasing decisions.

The growing demand for our products is evidenced by our net sales growth from €1,119.8 million in 2018 to €1,433.2 million in the twelve months ended June 30, 2021, representing a CAGR of 10.4%, on the back of continued favorable market tailwinds, successful new product developments, strong sales execution and strategic acquisitions. During this time, we significantly improved the quality of our revenues rationalizing our portfolio


 

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and disposing of a non-core subsidiary. In the same period, our loss for the year decreased from €(762.3) million in 2018 to €(55.6) million in the twelve months ended June 30, 2021 and our Adjusted EBITDA increased from €93.4 million in 2018 to €231.6 million in the twelve months ended June 30, 2021, representing a CAGR of 44.0%, as we have driven margin expansion through a focus on value-add innovation and building an efficient and scalable organization. Our business was also highly resilient during the COVID-19 pandemic. While we experienced some order cancellations from retail partners across March and April 2020, we were able to successfully refocus our nimble organization on in-demand categories and growing channels, such as e-commerce and DIY, in order to return to strong growth in the second half of 2020. This strong momentum continued into 2021, with revenue in the first half of 2021 up 30% compared to the first half of 2020, driven by strong performance across both our Outdoor and Indoor segments.

 

 

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The growth rate for the first half of 2019 as compared to the first half of 2018 is calculated pro forma excluding the revenue contribution from Adams (acquired in September 2018) and Hovac (disposed of in November 2018) from both the second half of 2018 and the second half of 2019. Reported growth rate for the first half of 2019 as compared the first half of 2018 was 7.2%.

Industry Overview

Keter primarily serves large, resilient and growing markets for lifestyle products used in and around the home. In the Outdoor market segment, categories span outdoor furniture and planters, sheds and buildings and deck boxes and leisure. In the Indoor market segment, categories span home storage and organization, tool storage, cabinets and shelving and totes. Based on industry data, we estimate that our core categories generated total retail sales of $27.8 billion in North America and Europe in 2020. Across these categories, Keter is a market leader and is considered by many of its customers as a category captain for resin-based solutions. Keter has 17% market share in indoor and outdoor resin-based categories across North America and Europe. We benefit from growing spend on home improvement, renovation and restoration, as well as home decoration and consumers’ growing investment in their homes and outdoor spaces. Across all categories, consumers are increasingly investing in and prefer aesthetically appealing, well-designed, functional, durable and sustainable solutions over traditional products or materials, such as wood or metal. These trends are further amplified by the shift toward suburban living, which is evident, for example, in the 44% increase in suburban home sales in the greater New York City area in 2020. In addition, the trend toward at-home outdoor activities, which was further accelerated by COVID-19, is expected to continue to have long-term effects. For example, according to a consumer survey, 24% of consumers surveyed in the U.S., 58% in the U.K. and 47% in France said that they are considering moving to a residence with outdoor living space. Additionally, 37%, 38% and 35% of consumers answered that they expect to increase their spend on outdoor storage, furniture and home organization products, respectively, in the next 12 months, while only 17%, 17% and 15% said that they expect to decrease their spend on these


 

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categories. According to the same survey, limited demand was pulled forward as only 4% of consumers reported that had COVID-19 not occurred, they would have delayed the purchase by more than 12 months. As the market leader, we believe Keter is uniquely positioned to disproportionately benefit from these trends as a result of our innovative product portfolio, brands, retail relationship and global reach and scale.

Resin-based solutions represent 35% of our total addressable market, or $9.7 billion total retail sales in North America and Europe in 2020. Resin-based solutions have outperformed the growth of products made from other materials over the 2015 to 2020 period by nearly two times, and are expected to continue to outpace the broader market through 2023.

 

 

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Consumer demand for resin-based solutions continues to expand, with surveys indicating that 44% of consumers would consider resin-based outdoor furniture and outdoor storage products for their next purchase, higher than for wood or metal products, and this number is as high as 67% for home organization products. We believe this shift toward resin-based products is being driven by product innovations, improved affordability, and relative functionality, convenience and durability compared to products made from traditional materials. Additionally, consumers are becoming increasingly environmentally conscious when making purchasing decisions, with approximately 70% of consumers indicating sustainability is a factor in their decision-making process. This is particularly true of millennials, who we estimate will drive more than 50% of the demand for home products by 2025, with millennials expressing willingness to pay a premium for sustainable brands. As such, we expect resin penetration to increase in the coming years, with every 1% increase in resin penetration equating to an increase of approximately $278 million in our current addressable market.

Outdoor

Across Europe and North America, the Outdoor market segment, which comprises outdoor furniture and planters, sheds and buildings and deck boxes and leisure, generated total sales of $13.9 billion in 2020, after growing at a CAGR of 3.7% from 2015 to 2020. The total market is expected to grow at a CAGR of 3.9% from 2020 to 2023. Growth in our outdoor categories is being driven by ongoing consumer investment in outdoor spaces and shifting preferences to e-commerce introducing new customers to the channel, long-term trends that were further accelerated by COVID-19 and that we expect to continue for years to come. Outdoor living continues to be the top focus area for consumers looking to add features to their homes. For example,


 

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approximately one-third of consumers expect to increase their outdoor activities in the future, and between approximately 20% to 60% of consumers who do not have outdoor space, depending on where they are located, are considering moving to a residence with outdoor space in the next two years. Furthermore, a number of Outdoor market categories display a low penetration of addressable households, which are defined as households with outdoor space. This low addressable household penetration provides significant space for new consumers to enter the market and a subsequent runway for market growth. For instance, deck boxes and leisure’s estimated addressable household penetration across North America and Europe is 17%, while sheds and buildings’ is only 5%.

 

 

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Growth in resin-based products outpaced the broader market during the period from 2015 to 2020. Resin penetration in our outdoor categories was 29% in 2020, having increased from 27% in 2015, and is driven by the same secular tailwinds we benefit from in the total market. Resin-based products in our outdoor categories grew at an estimated CAGR of 5.4% from 2015 to 2020, and the CAGR is expected to increase to 5.7% for the period from 2020 to 2023.

 

 

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Keter is a leading player in resin-based products across our outdoor categories, with an estimated market share of 26.4% in Europe and 15.3% in North America in 2020, which has increased from 20.6% and 10.6%, respectively, in 2015, through a combination of organic growth and acquisitions. We believe Keter’s global leadership and innovative capabilities position us to further drive resin penetration and disproportionately benefit from the growing demand in outdoor living.

Indoor

Across Europe and North America, the Indoor market segment, which comprises home storage and organization, tool storage and cabinets and shelving and totes, generated total sales of $13.9 billion in 2020. The market for our indoor categories experienced growth in sales at a CAGR of 1.8% from 2015 to 2020 and is expected to grow at a CAGR of 2.0% from 2020 to 2023. Growth in our indoor categories is being driven by ongoing spend on home improvement and renovation and restoration, with home improvement spend estimated to increase by 25% by 2025, which will drive approximately 15 to 30% of demand across our categories. Additionally, there is an increasing preference to continue working from home longer-term, with approximately 70% of workers expressing a desire to continue to work from home post-pandemic, alongside a shift toward suburban living and growing consumer interest in home organization, evidenced by a 263% increase in mentions of #organization on social media from 2018 to 2019.

 

 

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As in our outdoor categories, growth in resin-based products within our core indoor categories has historically exceeded the broader market and is expected to continue to do so. Resin-based products in our indoor categories grew at a CAGR of 3.1% from 2015 to 2020, and are expected to grow at a CAGR of 3.5% from 2020 to 2023. Resin penetration in our indoor categories was 41% in 2020, having increased from 39% in 2015.


 

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LOGO

Keter is a leading player in resin-based products across our indoor categories, with an estimated market share of 19.9% and 12.1% in Europe and North America, respectively, in 2020, which has increased from 12.1% and 9.5%, respectively, in 2015. As a result, we believe we are well-positioned to disproportionately benefit from the attractive trends in the indoor market segment by offering differentiated products focused on aesthetic design, quality, durability and sustainability.

The Keter Difference

We believe there are several key attributes that define and differentiate Keter, and position us to continue to win in the attractive markets we operate in.

Leading Global Platform in Durable Consumer Products and Solutions with Significant Scale Advantage

We are the global leader in innovative, durable, resin-based consumer lifestyle solutions for inside and outside the home. We design, manufacture and distribute our products globally through a diversified network of retailers across 100 countries with a focus on large, well-developed markets in North America and Europe. We are often considered a category captain in resin-based products, as demonstrated by our relative global market share, approximately double that of our largest competitor in this category. We believe that we have no direct competitors with product portfolios or operational footprints that rival our reach, scale and breadth of product offering.

The scale of our platform also lets us make investments in the future growth of our business. For example, we have invested over €60 million in capital expenditures related to new product molds in total in the last three years, which represents a commitment that smaller, less capitalized competitors are unable to replicate. We leverage our scale to make considerable investments in innovation and new product development, in our brand awareness and equity and in sustainability and the use of recycled materials.

Our scale, combined with our “glocal” approach, provides us with flexibility and optionality within our business, allowing us to customize and tailor our supply chain to respond to demand trends that may be different across our product lines and geographies. Our global manufacturing and logistics platform has notably been a critical success factor that has enabled us to develop our omnichannel expertise with large retailers, as well as to better serve leading e-commerce players, including Amazon and Wayfair. In addition to providing us with greater stability and resilience through scale and diversification, as well as better position ourselves to meet the specific requirements of the various channels we serve, our significant size allows us to generate operational efficiencies and increase our bargaining power with both suppliers and retail customers.

Innovation-Driven Approach to Growth

Throughout our company history, we have had a long-established track record of leading our industry in innovation. Over the years, Keter has been a pioneer in innovation, introducing many innovative products and


 

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expanding into new manufacturing techniques, including long core injection and 16mm extruded panels (multi-wall wood look) in the 1990s, premium in-mold lamination, or IML, finish for resin-based home products in the 2000s and new surface finishes that imitate natural and other materials in the 2010s.

Innovation is fundamental to Keter’s strategy and central to the culture of our organization. Our ability to constantly innovate is core to our growth model. As a result, products developed between 2017 and 2020 represented approximately 30% of net sales in 2020. Our innovation efforts are executed through our four global research and development centers located in Israel, Italy, the Netherlands and the United States, and our dedicated team of nearly 70 design and engineering professionals specialized in product design, ergonomics and material science, as well as process engineers. These innovation centers are closely connected with our local sales and marketing teams and our clients, who are valuable sources of consumer insight, allowing us to identify or anticipate changes in consumers’ needs or behaviors.

 

 

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Relevant examples of our innovation in the Outdoor segment include the Darwin line of sheds introduced in 2020, featuring EVOTECH panels to create a wood-like surface that drives material conversion and market share from existing wood-based products. This shed is not only aesthetically pleasing, but it also offers all the advantages of resin-based solutions, such as compact packaging which is especially relevant in the e-commerce channel, all-weather durability and lower costs of ownership. We have also introduced the Party Cooling Cart as a breakthrough leisure solution, with a cast iron look and feel and the strength, sturdiness and weather resistance of resin. This innovative product offers a great consumer experience at a very competitive price while also leveraging recycled materials, good for the environment. In our Indoor segment, we have redefined the tool storage market with our PACKOUT system, a customizable, multi-unit tool storage system developed under the Milwaukee brand. Since the introduction of this line in 2018, we have expanded our range and today we have over 20 different offerings that are part of the system. Also in our Indoor segment, we have continued our strategy of developing decorative storage solutions with innovative surface finishes. We have a history of success in this segment of the market with innovative product lines like Knit and Y-weave, and in 2018 we expanded the line with the innovative 3D Jute pattern.


 

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We have invested over €60 million in capital expenditures related to new product molds in total in the last three years. We protect our intellectual property through a combination of approximately 1,500 registered patents with approximately 216 additional patents pending and 337 registered trademarks, in each case as of September 5, 2021, and continually take steps to enforce and protect our intellectual property portfolio.

Long-Standing Relationships with Blue-Chip Retail Partners

Our products are available through retail partners in approximately 100 countries worldwide and our products are sold in over 70% of the top 50 hardline retailers in Europe and North America. Considered a category captain by many of our customers, we are a preferred and long-term partner in resin-based consumer categories for large retailers that sell hardline products, including The Home Depot, Lowe’s, Costco, Walmart, Target, B&Q, Leroy Merlin, Castorama, IKEA, Action and many others. We maintain close relationships with our retail partners, and in many cases we have been working collaboratively with our clients for decades, our business expanding and growing alongside theirs. The average relationship length is approximately 20 years across our top 20 retail partners.

 

 

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We have a balanced representation across all relevant channels of distribution that sell consumer durable lifestyle products. Home improvement retail is our largest distribution channel globally. We have also consistently increased our market presence in other distribution channels, including discount, club and mass retail. Across these channels, Keter is the partner of choice for blue-chip retailers thanks to the unmatched breadth and depth of our product offering, the reputation of our brands and the overall appeal and quality of our products. We combine sophisticated sales and marketing resources, including merchandising and category


 

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management capabilities, with elevated service levels. We believe the breadth of our portfolio, which consists of more than 3,500 products, enables us to serve market-specific consumer needs—for example, Keter’s “Store-it Out” in the UK, or our range of Adirondack chairs in the U.S.—as well as offer product exclusivities and serve competing retailers. We deliver solutions to promote and manage omnichannel activities and other inherent operational complexities. In addition, we have initiated programs to encourage a circular economy through store-based recycling activities with select retail partners.

We see significant white space for our products to expand across all retail channels, with opportunity to grow our partnerships with existing retailers through continuous merchandising efforts or joint development initiatives, as well as opportunities to develop new retail relationships across the globe.

Growing Omnichannel Business Suited to Online Expansion

Our products are well-suited to serve fast-growing omnichannel activities of traditional retailers and pure e-commerce players. Traditional brick-and-mortar retail previously tended to display only a selection of products in-store for certain portion of the year, whereas the full range of our products is now available online all year round. In addition, certain categories within our product portfolio, such as sheds, patio sets and outdoor storage boxes, are well suited to purchasing online and home delivery given their specialized nature, physical dimensions, and, in some instances, need for installation. Today, outdoor solutions are increasingly purchased online and shipped directly to consumers or picked up in-store through a click and collect model, and we operate the necessary global infrastructure to serve consumers across multiple channels, including large-scale fast delivery and drop-shipping.

Our scale and the quality of our supply chain are essential to support fast-growing omnichannel strategies and leading e-commerce players, and our objective is to grow our online business across all regions and expand the range of our products available through this channel. We believe we are well-positioned to benefit from our highly visible and dominant presence in the fast-growing e-commerce channel, which we estimate represents approximately 30% of our sales compared to 15% on average for home and garden solutions globally. Our online sales through pure-play online-only retailers and trackable online sales through omnichannel retailers increased at a CAGR of 21% from 2018 to 2020. We have been highly successful on Amazon, with our sales on Amazon increased at a CAGR of approximately 30% from 2018 to 2020, reaching approximately €75 million in 2020. On Amazon in the United States, Keter has the leading share of the best-seller list in storage sheds and deck boxes.

We have a well-defined omnichannel strategy underpinned by robust marketing initiatives and continuous product innovation. Through this tactical approach, we are able to directly engage consumers, control brand experience and collect consumer insights. As a result, we have a high share of online mentions and positive online reviews relative to peers. This recognition through our global brands has allowed us to become increasingly relevant, as a growing share of offline sales begin with an online product search.

Leading Brand Portfolio

We operate a portfolio of reputable brands across all our categories. In our Outdoor segment, we lead with our Keter brand, which has been on the market since 1948. The Keter brand is among the top two most recognized brands in Europe in the outdoor storage and outdoor furniture categories. It is well-positioned in the United States and features strong NPS compared to direct competitors across these markets. In our Indoor segment, our product offering is led by the Curver brand, which was established in Denmark in 1987 and acquired by Keter from Rubbermaid in 2005. The Curver brand is among the top five most recognized brands in Europe, with a strong NPS compared to direct competitors in the home organization market and social media


 

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engagement leads. In addition, we tactically deploy our portfolio of regional brands in order to complement our market-leading brands, allowing us to optimize our market presence and maximize access to distribution and consumers.

In tool storage, we recognize the value of partnerships with leading power tool brands and have successfully launched a complete family of innovative products in partnership with a number of the leading power tool brands, including Milwaukee, Ridgid and Hart. We are exploring further opportunities to expand our tool storage business through new partnerships with leading power tool brands. In addition, we closely collaborate in co-design and co-development with our largest retail partners to create innovative product solutions across different categories, which complement branded offerings and enable further growth of share of wallet at strategic retail partners.

We understand the power of brands in developing authority in product segments and winning at the point of sale, especially in an environment where online search is a powerful driver of consumer behavior. We believe the symbiosis between our culture of innovation and the relevance and reputation of our brands in the marketplace are fundamental to our success. No competitor to Keter can claim to have such a powerful combination.

Well-Invested Global Manufacturing Footprint

Our global supply chain platform ensures productivity, reactivity and elevated service levels. We have a robust and well-invested manufacturing footprint of 18 plants across 10 countries and a connected network of over 765 injection machines. Our scale allows us to deliver high efficiency, as reflected by our Overall Equipment Effectiveness of 75% in 2020. However, through a degree of plant specialization, our operating model and manufacturing footprint allow us to optimize production capacity to different markets based on local supply and demand dynamics, as over 65% of the production is performed locally. Our scale gives us operating leverage by spreading fixed costs and assets over many products, and allows us to efficiently amortize our innovation investments across different geographic markets.

Over time, we have made significant investments in our global manufacturing capabilities, including investing €168.3 million from 2018 to 2020; approximately 65% of this sum was devoted to creating significant room for growth within our existing manufacturing capacity. Our total effective equipment performance, or TEEP, stands at 57% in 2020.

Over time, we have implemented lean practices and process automations. In addition, over the last three years, we have consolidated plants into fewer, larger manufacturing hubs and consequently benefit from improved performance and lower fixed costs. Maintaining operational excellence is a focus throughout our organization and we have a clearly defined roadmap of cost savings initiatives, including portfolio rationalization and footprint optimization projects across the entire group.

Our global footprint with a degree of plant specialization, combined with substantial historical investments and focus on best practices and automation implementation, have provided us with a significant competitive moat in an industry that is fragmented, with a number of our competitors narrowly focused on a single category or a single geographic region and with lower access to capital.

Industry Leader in Sustainability, Corporate Social Responsibility and ESG

We aim to lead our industry on the topic of sustainability, corporate social responsibility and ESG, and our investments into the efficiency, sustainability and resilience of our operations, employees, suppliers, clients and consumers, which we believe are unmatched by our competitors. With consumers increasingly focused on both the environmental footprint of their purchasing decisions, and on ethical and socially responsible business practices, our focus on ESG issues combined with our scale represents an important competitive advantage.


 

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We create beautiful and durable consumer products which are 99.9% recyclable at the end of life. We further promote circular economy initiatives through local municipality partnerships, and we are in discussion with several retailers to initiate take back programs. We are recognized as a partner of choice by our clients as a result of our strong focus on sustainability. For example, our Curver brand received Tesco’s 2020 Sustainability Award for its high recycled content, Blue Angel label and other environmentally friendly attributes.

In 2019, we formalized a strategy in our inaugural Sustainability Report to reach several goals by 2025, including to increase the share of recycled content in total production to 55%, produce zero single-use plastic consumer products, achieve zero waste to landfill from production, implement product end-of-life programs in all regions and reduce greenhouse gas emissions from production, among others. The increasing use of recycled content in our products leads to improvement in our operating margins, reduced reliance on virgin resin and a drastic reduction in environmental impact. We have made strong progress toward these targets and are on track to achieve these goals.

Our commitment to sustainability is also anchored in our operations. We reduced greenhouse gas emissions per metric ton of output by 10% from 2018 to 2020. We have also increased recycled content in our products from 21% in 2016 to 38% in 2018 and 40% in 2020, and process both post-industrial and post-consumer plastics as a raw material. In addition, 98% of internal scrap material was recycled and reused in the production of our products in 2020. We believe that we can further increase the amount of recycled materials used in our products, notably through proprietary production processes and research in the field of material science. In 2020, we used approximately 130 kilotons of recycled materials in our production process, up 155% from 50 kilotons in 2016. According to the Association of Plastic Recycles, as compared to virgin polypropylene, recycled polypropylene reduces the amount of energy required to produce our products by 88%, greenhouse gas pollution by 71%, and water by 46% according to the Association of Plastic Recyclers. In 2020, Keter used approximately 130 kilotons of recycled polypropylene in place of virgin polypropylene which is equivalent to saving 8.5 million GJ of energy and 170 kilotons of CO2e.

In addition to reducing our environmental impact, we take measures to protect our factories and critical assets. We have obtained physical climate risk assessments at each of our sites that model potential changes in sea level, rainfall, wind, drought, temperature and wildfires out to the year 2050, and will be incorporating these projections into long-term planning. Such enhancements strengthen the operational practices and infrastructure we have in place to monitor and prepare for extreme weather events and other potential disruptions to our business.

Our Better Business strategic pillar seeks to create value for all our stakeholders including our employees, our customers, our suppliers and society as a whole through ethical conduct, an engaged workforce, community involvement and a commitment to diversity, equity and inclusion. Across our global business, women comprised 28% of our total workforce and 29% of our managers in 2020. Our 2025 targets focus specifically on enhancing gender diversity in our organization, aiming to achieve 35% of women in management and leadership roles.

Safety, health and wellbeing are of prime importance when it comes to caring for our employees at work and for the communities in which we operate. We strive to provide workplaces that are free from hazards, encourage a culture of safe working and offer support for employees to look after their own wellbeing. We also aim to achieve an improvement in employee health and wellbeing with our target of 90% employee participation in a new global Keter wellbeing program by 2025. This commitment was demonstrated in our response to COVID-19; we immediately ceased all business travel, implemented remote working and maintained job security for all our employees with paid time off for employees who were not able to work from home. Additionally, Keter manufactured more than one million face shields and donated more than 55,000 to communities since 2020.


 

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Furthermore, we are deeply committed to the health, vitality and equality of the communities in which we live and work. In Israel, we maintain an ongoing partnership with Ha’Meshakem to employ dozens of persons with disabilities in our factories each year, including through the pandemic in 2020. In the UK, we are organizing a 2021 group-wide challenge that encourages employees to “reach for the moon” and walk a total of 240,000 miles in aid of MIND, the UK charity that offers support and advice to people with mental health problems. Across the U.S., we run numerous programs including partnering with Life’sWork of Western PA, a non-profit organization whose mission is to increase the quality of life of persons with disabilities and others with barriers to employment through productive employment opportunities.

Keter is also committed to abiding by sound corporate governance principles. Our company policies include strong codes of conduct for employees and our suppliers, anti-corruption policies and a global IT policy that includes strict guidelines and underlying programming around data protection and cybersecurity. Our Board of Directors, or our Board, receives an annual report from the Global Sustainability Steering Committee on the company’s ESG programming, performance and progress toward goals.

Efficient and Effective Organization

While our global organization aims at delivering scale benefits across critical functions, our operating principles are based on a nimble and entrepreneurial culture controlled by a lean and effective central oversight. This “glocal” approach relies on strong local sales and marketing functions, with local management teams being empowered to make key business decisions and pursue the most attractive go-to-market strategies. With several decades of market presence, these local business units have developed significant local expertise, including strong relationships with national and regional retailers and critical insights into clients and consumers. This accumulated know-how is essential to driving profitable growth, but also contributes to our innovation process by representing an intangible, yet critical, competitive advantage and acting as a strong barrier to entry.

As it relates to our operations, the scale of our platform allows us to invest significantly across strategic functions, including innovation and product development, process optimization and operational improvement projects, such as process automation, as well as sustainability. We notably benefit from significant revenues to support the costs associated with sales or local customer service teams and our scale plays a role in our ability to procure materials at attractive terms. These benefits, derived from our scale, represent significant and durable competitive advantages in a market where our competition is largely comprised of smaller, less capitalized companies.

Our decentralized organizational structure is supported by lean and effective global corporate functions that are primarily focused on the overall strategy of the business, capital allocation decisions, assessing performance and finding and retaining the best talent. In geographical regions and across our two segments, we have a deep bench of talented managers, led by Alejandro Pena, our Chief Executive Officer, who has 25 years of experience in the industry. Our global leadership team, comprised of top six managers, on average have more than 20 years of industry experience. Our strong management team is well-positioned to effectively manage and grow the business into the future.

Our Growth Strategy

Our growth strategy is built around several pillars that we believe position us to drive profitable, above-market growth in the markets we serve. We believe that there are over $1 billion of organic growth opportunities in the markets where we operate by 2023, which we have the potential to supplement with strategic acquisitions.

Leverage Our Leadership in Innovation to Penetrate and Expand our Market

We have a proven track record of developing innovative, category-defining products. We are able to identify or anticipate new trends in consumer demand thanks to decades of market presence and accumulated insights on


 

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consumers’ needs and respond to them with our new product development and design capabilities. Over 2020, approximately 30% of our sales came from products launched between 2017 and 2020, and we expect to continue driving topline growth through industry-leading innovation. Our current new product pipeline consists of products across multiple categories, including Darwin, our new line of wood-like outdoor storage solutions based on our EVOTECH technology. We estimate the size of the market for EVOTECH Darwin Sheds to be $2.4 billion in Europe and North America, with significant opportunity to further drive resin penetration which was 30% in the year ended December 31, 2020.

In our Outdoor segment, we have developed a new range of resin-based materials with appealing aesthetics and textures that we are applying across multiple categories, like sheds, deck boxes and leisure products. Innovative resin-based materials, like DUOTECH and EVOTECH, are more durable, affordable and have lower ongoing cost of ownership, which we believe will lead further material conversion in the category away from traditional materials like wood and metal. In addition, our new materials are light and efficient for packaging, positioning us well for accelerated e-commerce penetration.

 

LOGO

 

In our Indoor segment, we have an exciting pipeline of new products, which will provide fashionable pieces for the home in durable, flat-packaged formats. Specifically, in tool storage, we have a promising pipeline of new products to add to the successful Milwaukee PACKOUT product line, including drawers, XL toolboxes, coolers, job boxes and organizers. We estimate the size of the market for the Packout system to be $2.5 billion in Europe and North America, and we are already seeing strong commercial success with over 1.5 million units purchased globally. We have also recently expanded our partnership with Techtronic with the launch of a new family of modular systems sold exclusively in Walmart under the Hart brand, targeting casual DIY consumers.

Enhance Our Digital Capabilities to Accelerate Growth in E-commerce Channel

We estimate that Keter leads the market across its categories with regard to online penetration with approximately 30% of sales made online, including both sales through pure-play online retailers and online sales of our omnichannel retail partners. We estimate our overall online penetration is approximately two times greater than the broader home and garden solutions industry. We see significant growth opportunity through this channel


 

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as our products are particularly well-suited to online sales, for example, our deconstructible trash cans save approximately 85% of shipping space versus non flat-packed alternatives, and we plan to continue to extend the range of products available for online purchase.

We are also investing in our brands and online presence in order to become more digitally relevant, as consumer decisions are increasingly being informed by online search. For instance, based on surveys, it is estimated that 80% to 90% of purchases are planned across most categories, with a third of consumers using search engines to research products prior to purchase. This trend is particularly pronounced in the outdoor category given the larger product size. A 2018 study by Kantar estimates that approximately 60% of consumers originated their product search online when buying an outdoor shed, and 87% of consumers used online platforms at some point during their purchasing journey. Our brand investments and investments in building a strong, engaging digital presence using inspiration-led content will continue to position Keter to grow share in the online environment, and increase our overall brand visibility and equity.

Additionally, as we continue to invest in our omnichannel business, we have recently launched a number of initiatives to establish a direct-to-consumer, or DTC, channel. We see the development of our DTC channel as an opportunity to provide authentic, differentiated brand experiences and customer engagement, as well as a useful way to collect direct customer feedback to enhance our product development capabilities while providing a new avenue for growth. Therefore, we believe that a well-established direct-to-consumer channel could serve as a significant growth lever for the company.

Invest in Our Leading Brands to Shape Consumer Purchase Decision and Experience

Our flagship brands, Keter and Curver, have over 30 years of history and are globally recognized by consumers, standing for high quality, durability and great value across our Indoor and Outdoor segments. We plan to accelerate investment in our brands, in order to increasingly win the consideration and purchase decision of consumers in markets in which we participate. We believe that the strong equity of our brands, combined with innovation, assortment, quality and affordability, positions us to increase market share across regions and categories.

We focus our marketing and branding priorities on categories where consumers are invested, and where brand halo can form across several categories, for example across outdoor storage and furniture categories. We specifically use targeted advertising, digital marketing and targeted in-store activities to strengthen awareness and recognition of our brands. Across Europe, we already have the number one aided brand awareness in home organization and number one or number two aided brand awareness based on geography in Outdoor. We also intend to bolster our communication around the sustainability of our brands and products toward consumers for whom these attributes are becoming increasingly important.

In certain areas of our business, such as our tool storage business, we will continue to leverage the strength of the brands we partner with to grow our business and maintain our leadership in innovation. We will selectively pursue new opportunities for brand partnerships across specific categories where we see opportunity to create competitive advantage, and these partnerships provide opportunity for additional accretive and sustainable growth.

Expand Our Platform to Attractive New Geographies

Our products are currently available in approximately 100 countries worldwide, although at various degrees of market presence. While our market presence is currently strong in North America and Europe, we plan to continue expanding our geographic presence and penetration within new markets. Our near-term goals are to establish presences in Russia and Mexico, and to broaden our presence in Australia, as we believe that each of


 

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these countries represents significant untapped potential for our products. For example, the potential addressable market for Keter in Russia, Mexico, Australia, Japan, China and Brazil was approximately $6 billion in 2020. Geographic expansion will be pursued organically, including through leveraging current relationships with international retailers, and can be accelerated through M&A.

Expand our Platform to Attractive Adjacent Categories

We have significant opportunity to utilize our innovation capabilities in order to expand our product offering and we are constantly assessing opportunities to enter adjacent product verticals or by creating products using new materials in order to improve functionality, visual appeal or other qualities of our existing products. We estimate that close adjacencies into new categories like livable sheds and smart storage represent an additional $6 billion in global addressable market size in 2020.

For example, Keter has developed a unique expertise in the shed and buildings category, with our sales in the category growing at an approximately 14% CAGR from 2018 to 2020. Following that growth, we now have an estimated 6% and 14% market share in the United States and Europe, respectively, within the total market, and an estimated 21% and 47% in the United States and Europe, respectively, within the resin-based market. We are now assessing entry into the ‘livable sheds’ market, a fast-growing market as homeowners and renters are increasingly looking for additional living spaces for home offices, home yoga studios, game rooms and the like. Livable sheds are a natural extension of our outdoor shed business, with much of the infrastructure already in place today. We are also working to develop a high-density material which we would be able to use in our outdoor furniture ranges to compete in the more premium segment of the market.

Leverage Our Scale and M&A Experience to Drive Consolidation, Market Entry and Broaden Our Technology

Keter is a proven consolidator with a track record of value accretive acquisitions. Over the past 30 years, we have completed 15 acquisitions in the United States, the United Kingdom, or the UK, Italy, France, the Netherlands, Germany, Israel and Denmark, and we intend to pursue additional acquisitions to complement our organic growth and achieve our strategic objectives.

We operate in a very fragmented market where many of our direct competitors are either local or regional players. As such, we estimate that players generating less than $50 million of annual sales account for more than 50% market share in the resin-based market segment of our addressable market in Europe and North America. We have identified over 50 potential strategic opportunities, spanning opportunities to consolidate our presence in existing markets, and to diversify into new technologies, categories and geographies.

We are pursuing multiple strategic avenues to create value through M&A by:

 

   

Consolidating existing markets by acquiring new assets to bolster our positioning and capabilities as well as extract substantial synergies,

 

   

Expanding into adjacent categories through new brands and/or technology, and

 

   

Entering into new geographies to establish local presence and brands.

In September 2021, we signed a definitive agreement to acquire Casual Living Unlimited and certain of its affiliates (“Casual Living”). Casual Living is a US-based vertically integrated manufacturer and distributor of specialty recycled poly-resin outdoor furniture and accessories. The acquisition brings a premium, high-quality portfolio in an attractive market that complements Keter’s current offering and presence, as well as post-consumer resin recycling capabilities to further strengthen Keter’s sustainability initiatives. Casual Living


 

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generated revenue of approximately $12 million during the year ended December 31, 2020. The acquisition is subject to customary closing conditions and is expected to close in the fourth quarter of 2021. There can be no assurance that the acquisition will close within the time period expected or at all.

Our team has extensive experience in executing and integrating acquisitions and we plan to utilize M&A tactically and strategically to gain access to new markets, complement Keter’s brand portfolio, generate synergies with in-market acquisitions or acquire additional capabilities and new technologies. For example, our recent acquisitions of ABM Italia in 2017, and Adams Manufacturing in 2018 have moved us into leading positions in several of our important geographic markets, including Italy and Canada, which we believe reinforces our market presence in the United States. Through these acquisitions, we have demonstrated our ability to successfully integrate businesses, and extract synergies and strategic benefits, including manufacturing and operational efficiencies. Our scale, industry leadership position, geographic footprint and ability to integrate acquisitions makes us the buyer of choice for many of our potential targets and gives us an advantage over competing potential acquirers. As a result, we have historically been able to achieve attractive multiples in primarily bilateral transactions.

Execute Our Playbook to Drive Margin Expansion and Maintain Margin Resilience

As our topline continues to grow, we have several levers under our control to help drive margin expansion and margin resilience.

Introduction of innovative products will continue to enable us to optimize our product mix, and continue to target higher price point segments. In recent years, we have actively pursued a strategy to replace lower margin products with differentiated, higher margin product lines. As an illustration, products introduced between 2017 and 2020 represented approximately 30% of our sales in 2020 and products introduced over the last two years have a 3.5% higher contribution margin compared to the average of our product portfolio in 2020. As illustrated by the successful execution of our first product rationalization program in 2020, we continuously review our product mix in order to identify less profitable products and to focus on higher priority profitable growth opportunities.

Pricing discipline is essential to our business model. We leverage our relationships with key retailers and our competitive positioning to maintain our prices in deflationary input cost environments and to pass-through price increases in inflationary input cost environments. As an example, we implemented or are implementing annualized price increases of approximately 12% to 22% across most major customers in 2021—a material portion of these price increases becoming effective over the course of the second half of 2021.

We also believe there is an opportunity for significant improvement in our margins as we continue to invest in and expand our recycling capabilities. Recycled materials represented 40% of our mix of raw materials in 2020, compared to 21% in 2016. Going forward, we aim to reach 55% by 2025. From 2018 to 2020, cost of regrind on a per kilogram basis was approximately 22% lower on average than cost of virgin resin, and illustratively, we estimate that if we are able to reach 50% of recycled resin in our mix of raw materials in 2023, we would achieve savings of approximately €10 million.

Maintaining operational excellence is a focus throughout our organization. In addition to running our operations efficiently, we have a clearly defined roadmap of cost savings initiatives, including footprint optimization and automation projects across the entire group. These projects are being implemented and will deliver substantial cost savings in the foreseeable future. Over the last three years, we have built a track-record at executing on such initiatives as notably highlighted by the closure of four manufacturing plants and 34 warehouses during the same period. Finally, a material portion of our cost base is fixed, and we expect favorable operating leverage as Keter’s growth outpaces investments in our fixed costs.


 

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Risks Associated with Our Business

Our business is subject to a number of risks of which you should be aware of before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include, but are not limited to, the following:

 

   

Demand for our products is significantly influenced by general economic conditions and trends in consumer spending on indoor and outdoor living spaces and home exteriors, and adverse trends in, among other things, the health of the economy, consumer confidence, discretionary spending and institutional funding constraints;

 

   

risks related to competition in our industry and our ability to develop new and improved products;

 

   

risks related to maintaining (i) our manufacturing capabilities and (ii) our supply chain;

 

   

dependence on key customers and sales channels and credit and non-payment risks of our key distributors and customers;

 

   

risks related to the global nature of our business;

 

   

our ability to attract and retain key personnel;

 

   

risks related to acquisitions or joint ventures;

 

   

our dependence on the strength of our brands and the third-party brands that we sell;

 

   

the increased expenses associated with being a public company;

 

   

risks related to product liability claims or product recalls;

 

   

risks related to compliance with environmental, anti-corruption and other regulations;

 

   

our ability to protect our intellectual property rights;

 

   

risks related to our substantial indebtedness; and

 

   

other risks and uncertainties, including those described under “Risk Factors.”

Corporate Information

Keter Group SA was incorporated under the laws of the Grand Duchy of Luxembourg as a public limited liability company (société anonyme) on May 20, 2021. Prior to the consummation of this offering, Keter Group SA will acquire all of the assets and operations of Krona Holding by way of contribution by Krona Acquisition SARL of all of its shares in Krona Holding to Keter Group SA.

Our principal executive offices are located at Zone Industrielle, Hahneboesch, L - 4587 Differdange, Grand Duchy of Luxembourg. Our telephone number is +352 584545215.

Our principal website is www.keter.com. The information contained on, or accessible from, or hyperlinked to, our website is not a part of this prospectus and you should not consider information on our website to be part of this prospectus.

Our Principal Shareholder

BC Partners is a leading international private equity firm with advised funds of over $42 billion. Established in 1986, the firm operates as an integrated team through offices in Europe and North America to acquire and develop businesses and create value in partnership with management. Since inception, BC Partners has


 

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completed 121 acquisitions with a total enterprise value of approximately $186 billion, demonstrating discipline in buoyant markets and an ability to invest in attractive opportunities amidst turbulence and recession. BC Partners’ investment philosophy is to support outstanding management teams in industry-leading businesses as they execute against opportunities in large and growing markets.

Implications of Being a Foreign Private Issuer

Upon the consummation of this offering, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. So long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including, but not limited to:

 

   

the rules under the Exchange Act requiring domestic filers to issue financial statements prepared under U.S. GAAP;

 

   

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

 

   

the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;

 

   

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial information and other specific information, or current reports on Form 8-K, upon the occurrence of specified significant events; and

 

   

Regulation Fair Disclosure, or Regulation FD, which regulates selective disclosures of material information by issuers.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as (i) more than 50% of our outstanding voting securities are held by U.S. residents and (ii) any of the following three circumstances applies: (a) the majority of our executive officers or directors are U.S. citizens or residents, (b) more than 50% of our assets are located in the United States or (c) our business is administered principally in the United States.

Foreign private issuers are also exempt from certain more stringent executive compensation disclosure rules. Thus, we will continue to be exempt from the more stringent compensation disclosures required of domestic issuers and will continue to be permitted to follow our home country practice on such matters.


 

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Our Corporate Structure

The following diagram reflects a simplified summary of our organizational structure immediately following this offering (assuming no exercise of the underwriters’ option to purchase additional ordinary shares). Prior to the consummation of this offering, Keter Group SA will acquire all of the assets and operations of Keter Group Holding S.à r.l. by way of contribution of all of the assets and operations of Krona Holding by way of contribution by Krona Acquisition SARL of all of its shares in Krona Holding to Keter Group SA. Keter Group SA’s ordinary shares are being offered hereby. See “Presentation of Financial and Other Information.”

 

 

LOGO


 

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THE OFFERING

 

Ordinary shares offered by us

             ordinary shares.

 

Option to purchase additional ordinary shares

We have granted the underwriters an option to purchase up to an additional              ordinary shares from us within 30 days of the date of this prospectus.

 

Ordinary shares to be outstanding after this offering

             ordinary shares (or                  ordinary shares if the underwriters exercise in full their option to purchase additional ordinary shares).

 

Use of proceeds

We estimate that we will receive net proceeds of approximately $         million (€         million) (or approximately $         million (€         million) if the underwriters exercise in full their option to purchase additional ordinary shares), at an assumed initial public offering price of $         per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

  We currently expect to use the net proceeds from this offering to repay outstanding indebtedness and for general corporate purposes.

 

  See “Use of Proceeds.”

 

Conflicts of Interest

Affiliates of BC Partners beneficially own in excess of 10% of our issued and outstanding common stock. Because BC Partners Securities LLC, an Underwriter in this offering, is an affiliate of BC Partners, BC Partners Securities LLC is deemed to have a “conflict of interest” under Rule 5121 (“Rule 5121”) of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, this offering is being made in compliance with the requirements of FINRA Rule 5121. Pursuant to that rule, the appointment of a “qualified independent underwriter” is not required in connection with this offering as the members primarily responsible for managing the public offering do not have a conflict of interest. See “Underwriting (Conflicts of Interest).”

 

Stock Exchange Listing

We intend to apply to list our ordinary shares on the NYSE under the symbol “KETR.”

 

Risk factors

See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider before deciding to invest in our ordinary shares.

The number of our outstanding ordinary shares after this offering is based on              ordinary shares outstanding as of                , 2021 and excludes ordinary shares available for future issuance under our 2021 Incentive Award Plan (the “2021 Plan”).


 

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Unless otherwise indicated, all information contained in this prospectus also reflects and assumes:

 

   

the amendment and restatement of our articles of association, which will be in effect on the completion of this offering;

 

   

no exercise by the underwriters of their option to purchase additional shares; and

 

   

an assumed initial public offering price of $                per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus.

 

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables present the summary consolidated financial and other data for Krona Holding and its subsidiaries. The summary consolidated statement of comprehensive income data for the three years ended December 31, 2020 and summary statement of financial position data as of December 31, 2020 and 2019 presented below, as applicable, have been derived from Krona Holding’s audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statement of comprehensive income data for the three and six months ended June 30, 2021 and 2020 and the summary consolidated statement of financial position data as of June 30, 2021, have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. In the opinion of management, our unaudited interim condensed consolidated financial statements were prepared on the same basis as our audited consolidated financial statements and include all adjustments necessary for a fair presentation of the financial information set forth in those statements. We maintain our books and records in euros, and we prepare our consolidated financial statements under IFRS as issued by the IASB.

Historical results are not necessarily indicative of the results expected for any future period and our results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or any other period. You should read the summary consolidated financial data below together with our unaudited interim condensed consolidated financial statements and our audited consolidated financial statements and related notes thereto, as well as the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other information appearing elsewhere in this prospectus.

The historical financial and other data of Keter Group SA have not been presented since it is a newly incorporated entity formed with nominal capital.

During the six months ended June 30, 2021, Keter commenced preparation for an initial public offering, or IPO. As of June 30, 2021, related costs of approximately €8.7 million have been incurred by Keter Group Holding S.à r.l, and will ultimately be recorded in the financial statements of Keter Group S.A., the registrant. Transaction costs directly related to the issuance of new shares for raising capital will be initially recorded as a deferred charge until recognized directly in equity upon IPO. There is no current obligation or intent of Krona Holding and its subsidiaries to directly or indirectly reimburse such costs incurred by Keter Group Holding S.à r.l., and therefore these costs are not recognized in the financial statements of Krona Holding. All other IPO related costs (i.e. costs that are not directly related to the issuance of new shares) will be recharged to the subsidiaries of Krona Holding, and therefore are recognized by Krona Holding as an expense as incurred. For the three and six months ended June 30, 2021, IPO related costs of €5.2 million and €5.5 million, respectively, have been recognized by Krona Holding.

 

    Three months ended
June 30,
    Six months ended
June 30,
    Fiscal year ended December 31,  
    2021     2020     2021     2020     2020     2019     2018  
( in millions, except share and per
share data
)
                                         

Consolidated Statements of Comprehensive Income Data:

             

Revenue

  444.3     328.9     855.0     657.5     1,235.7     1,206.9     1,119.8  

Cost of Sales

    294.3       216.1       559.4       435.7       818.2       868.2       834.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

    150.1       112.8       295.6       221.8       417.5       338.7       285.6  

Selling and distribution expenses

    85.9       67.8       165.4       135.8       272.7       275.8       256.1  

Research and development expenses

    2.1       1.4       4.2       2.7       5.5       5.8       5.2  

General and administrative expenses

    36.0       23.8       66.2       47.7       108.0       99.3       102.6  

Impairment of goodwill

    —         —         —         —         —         —         614.3  

Gain on sale and leaseback transaction

    —         —         —         —         —         11.0       —    

Other operating income, expenses, gains and losses, net

    0.1       —         0.3       0.2       0.6       0.9       0.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

    26.2       19.8       60.1       35.9       31.9       (30.2     (692.3

 

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    Three months ended
June 30,
    Six months ended
June 30,
    Fiscal year ended December 31,  
    2021     2020     2021     2020     2020     2019     2018  
( in millions, except share and per
share data
)
                                         

Finance income

    —         —         —         —         0.1       0.1       —    

Finance costs

    27.6       27.2       54.1       54.4       109.3       107.4       94.5  

Other finance gains (losses), net

    (2.2     (2.1     1.5       (3.4     (10.8     (7.1     0.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (Loss) before tax

  (3.6   (9.4   7.4     (21.9   (88.1   (144.6   (786.7

Income tax (expense) benefit

    (1.1     1.9       (5.0     3.2       11.3       7.2       24.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (Loss) for the period

    (4.7     (7.5     2.4       (18.8     (76.8     (137.4     (762.3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings (loss) per share

    (0.01     (0.02     0.01       (0.06     (0.24     (0.43     (2.39
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares

    319,501,352       319,501,352       319,501,352       319,501,352       319,501,352       319,501,352       319,406,660  

As adjusted earnings / (loss) per share attributable to ordinary shareholders, basic and diluted (unaudited)(1)

             

As adjusted weighted average shares used in computing pro forma earnings / (loss) per share attributable to ordinary shareholders, basic and diluted (unaudited)(1)

             

 

(1)

As adjusted earnings / (loss) per share is computed by dividing the loss for the year of Krona Holding by the weighted average ordinary shares outstanding of Krona Holding. For these periods, no effect has been given to potentially dilutive securities because they are antidilutive. As adjusted data gives effect to the following transactions as if they were consummated at the beginning of the referenced period: (a) the issuance and sale of                  ordinary shares by us in this offering at a price equal to $         per share, the mid-point of the range on the cover of this prospectus, and (b) the use of our net proceeds from this offering to redeem in full the aggregate amount outstanding under our PIK Facility Agreement (as defined herein) and, to the extent of any remaining net proceeds, for general corporate purposes, including acquisitions and debt repayment. See “Use of Proceeds.” As adjusted data does not include adjustments for the estimated expenses of this offering. The weighted average number of ordinary shares outstanding includes ordinary shares of Keter Group SA sold in this offering and ordinary shares of Keter Holding held by the existing owners.

The computation of as adjusted basic and diluted earnings / (loss) per share is set forth below:

 

     Three months
ended June 30,
     Six months
ended June 30,
     Fiscal year ended
December 31,
 
     2021      2021      2020  
( in millions, except share and per share data)    (unaudited)      (unaudited)      (unaudited)  

Numerator:

        

Profit (Loss) for the period, as reported

   (4.7)      2.4      (76.8)  

Adjustment for redemption of PIK facility

        
  

 

 

    

 

 

    

 

 

 

As adjusted profit (Loss) for the period attributable to ordinary shareholders

        
  

 

 

    

 

 

    

 

 

 

Denominator:

        

Weighted average ordinary shares used in computing basic loss per ordinary share

     319,501,352        319,501,352        319,501,352  

Adjustment for ordinary shares assumed issued in this offering

        

As adjusted weighted average ordinary shares used in computing basic loss per ordinary share

        
  

 

 

    

 

 

    

 

 

 

As adjusted earnings/(loss) per share

        
  

 

 

    

 

 

    

 

 

 

 

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     As of
June 30,
    

As of

December 31,

 
     2021      2020      2019  
(€ in millions)              

Consolidated Statement of Financial Position Data:

        

Cash and cash equivalents

   116.1      79.7      34.1  

Total assets

     1,594.7        1,475.0        1,549.1  

Total liabilities

     1,907.5        1,805.9        1,812.7  

Total equity

     (312.8      (331.0      (263.5

 

    

Three months ended

June 30,

    Six months ended
June 30,
    Fiscal year ended
December 31,
 
     2021     2020     2021     2020     2020     2019     2018  
( in millions, except for percentages)                               

Other data:

              

Profit (Loss) for the period

     (4.7     (7.5     2.4       (18.8     (76.8     (137.4     (762.3

Profit (Loss) margin(2)

     (1.1 )%      (2.3 )%      (0.3 )%      (2.9 )%      (6.2 )%      (11.4 )%      (68.1 )% 

Adjusted EBITDA(3)

     73.1       56.7       149.3       112.1       194.4       131.2       93.4  

Adjusted EBITDA Margin(3)

     16.5     17.2     17.5     17.1     15.7     10.9     8.3

 

(2)

Profit (Loss) Margin is defined as profit (loss) for the period divided by revenue for the period, expressed as a percentage.

(3)

We define Adjusted EBITDA as profit (loss) for the period excluding depreciation and amortization, income tax expense (benefit), finance cost, finance income, other finance (gains) losses, net, impairment charges, plant closure costs, (gain) loss on disposal of assets, share-based payment expense, and certain other non-routine items that management believes are not indicative of the core performance of our business. See “Presentation of Financial and Other Information” for non-IFRS measure.

We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue for the period, expressed as a percentage. See “Presentation of Financial and Other Information” for a description of this non-IFRS measure.

The following table presents a reconciliation of profit (loss) to Adjusted EBITDA for the periods presented:

 

   

Three months
ended

June 30,

   

Six months
ended

June 30,

   

Twelve months
ended

June 30

   

Fiscal year ended

December 31,

 
    2021     2020     2021     2020     2021     2020     2019     2018  
( in millions)                                    

Profit (loss) for the period

  (4.7   (7.5   2.4     (18.8   (55.6   (76.8   (137.4   (762.3

Depreciation and amortization

    34.6       35.9       69.6       72.6       142.0       145.0       146.0       141.6  

Income tax expense (benefit)

    1.1       (1.9     5.0       (3.2     (3.1     (11.3     (7.2     (24.3

Finance cost

    27.6       27.2       54.1       54.4       109.0       109.3       107.4       94.5  

Finance income

    —         —         —         —         (0.1     (0.1     (0.1     —    

Other finance (gains) losses, net

    2.2       2.1       (1.5     3.4       5.9       10.8       7.1       (0.1

Impairment of goodwill

    —         —         —         —         —         —         —         614.3  

Impairment of property, plant and equipment

    —         —         0.5       0.2       5.6       5.3       14.4       8.3  

Plant closure costs(i)

    0.6       0.3       1.1       1.6       4.7       5.2       5.3       6.8  

Business transformation costs(ii)

    —         0.6       —         1.7       2.5       4.2       5.4       10.3  

(Gain) loss on disposal of assets(iii)

    (0.1     (0.1     (0.3     (0.1     (0.6     (0.4     (10.4     (1.0

Share-based payment expense(iv)

    6.5       0.1       12.9       0.2       15.5       2.8       0.3       0.2  

IPO related costs(v)

    5.2       —         5.5       —         5.5       —         —         —    

Other(vi)

    —         —         —         0.1       0.3       0.4       0.4       5.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  73.1     56.7     149.3     112.1     231.6     194.4     131.2     93.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 


 

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  (i)

Represents costs related to our closure of various production facilities, including logistics and transportation of equipment, building closure and valuation costs.

  (ii)

Represents consulting costs related to operational transformation and rationalization of non-profitable products of €0.6 million, €1.7 million, €4.2 million, €3.4 million and €3.0 million for the three months ended June 30, 2020, the six months ended June 30, 2020 and the years ended December 31, 2020, 2019 and 2018, respectively, €2.5 million of consulting costs for the year ended December 31, 2018 related to ABM integration and improvement in our ERP systems, and severance costs paid to employees of €2.0 million and €4.8 million for the years ended December 31, 2019 and 2018, respectively.

  (iii)

Represents net gains on disposals of property, plant and equipment, including a gain of €10.9 million in 2019 relating to the sale and leaseback of our land and building in Milton, Canada.

  (iv)

Represents expenses related to share-based awards granted to employees under our management incentive program, which vary from period to period depending on type and timing of awards, and changes to valuation inputs and assumptions.

  (v)

Represents indirect costs incurred in connection with our proposed initial public offering for the three and six months ended June 30, 2021.

  (vi)

Represents (i) acquisition costs related to Adam’s Manufacturing of €0.1 million and €1.1 million for the years ended December 31, 2019 and 2018, respectively, as well as €0.1 for the year ended December 31, 2018 relating to the acquisition of ABM Italia; (ii) management fees paid to BC Partners of €1.4 million and €0.2 million for the years ended December 31, 2019 and 2018, respectively; (iii) amounts relating to onerous contract provisions including a €0.4 million charge, a €1.1 million credit, and a €1.6 million charge for the years ended December 31, 2020, 2019 and 2018, and (iv) a fair value purchase accounting adjustment to inventory of €2.1 million upon the acquisition of Adams Manufacturing during the year.


 

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RISK FACTORS

An investment in our ordinary shares involves risks. You should carefully consider the following information about these risks, together with the other information contained in this prospectus, before investing in our ordinary shares. Any of the following risks could have an adverse effect on our business, results of operations, financial condition or prospects and could cause the trading price of our ordinary shares to decline, which would cause you to lose all or part of your investment. Our business, results of operations, financial condition, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Risks Related to Our Business and Industry

The currently evolving situation related to the COVID-19 pandemic could once again adversely affect our business, financial condition and results of operations.

In January 2020, the World Health Organization, or the WHO, declared the COVID-19 outbreak to be a public health emergency and, in March 2020, the WHO declared the outbreak to be a pandemic. The COVID-19 pandemic has caused severe global economic and societal disruptions and uncertainties. In response to the virus, countries and local governments instituted policies and measures to curtail the spread of the virus, including “stay at home” orders, travel restrictions and restrictions on the operation of non-essential businesses and services. Companies have also taken precautions, such as requiring employees to work remotely and temporarily closing or minimizing operations. Although some initial restrictions have been relaxed, some restrictions have also been re-imposed and the current restrictions and future prevention and mitigation measures imposed by governments and private companies are likely to continue to have a severe adverse impact on global economic conditions and consumer confidence and spending.

In response to these measures, and due to the fact that many of our customers significantly reduced and/or canceled orders, in mid-March 2020, we temporarily reduced our manufacturing production by 31%, which negatively impacted our sales and results of operations. Although by May 2020 we had resumed manufacturing production at almost full capacity, we expect that the COVID-19 pandemic may continue to negatively impact our sales and results of operations by causing or contributing to, among other things, the following:

 

   

Significant disruptions to our manufacturing, distribution and supply operations, including closure of our significant manufacturing and distribution facilities. See also “—Supply chain issues as a result of a reliance on a limited base of warehousing and transportation services may result in product shortages or disruptions to our business or increased prices.”

 

   

Cessation or significant reductions in the operations of significant third-party suppliers, vendors, external manufacturers and other business or commercial partners, or the inability or significant disruptions in the ability of, such third-parties to meet obligations to us, which may be caused by their business, operational or financial difficulties, among other reasons.

 

   

Significant decreases in sales of or demand for, or significant volatility in sales of or demand for, one or more of our significant products due to, among other things, closure or reduction in operating hours of our key customers and distributors; the temporary inability of consumers to purchase our products due to prolonged inventory shortages, illness or government-implemented closures, quarantine or other restrictions; changes in consumer behavior or preference, including as a result of shortages in any of our products; any negative impact to our reputation resulting from an adverse perception of our response to the pandemic, perceived price gouging effected by third parties that we do not control or product recommendations by public health officials; the modification by retailers or distributors of their restocking or fulfillment practices; or the worldwide, regional and local adverse economic and financial market conditions.

 

   

Significant disruptions to our business operations due to, among other things, unavailability of key employees, including our senior management team, as a result of illness to themselves or their families;

 

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cancellation or other disruptions of sales and marketing events; disruptions to trade promotion initiatives; and any delays or modifications to any significant strategic initiatives;

 

   

Additional or renewed significant governmental actions, including closures, quarantines or other restrictions on the ability of our employees to travel or perform necessary business functions or our ability to manufacture, ship, distribute, market or sell our products; changes in commodity costs associated with governmental actions or general economic trends; or other limitations or restrictions on our ability to manufacture, distribute, market or sell our products or the ability of our suppliers, customers, distributors or third-party partners to effectively run their operations, which may negatively impact our ability to manufacture, distribute, market and sell our products.

In addition, we have experienced higher costs in certain areas as a result of COVID-19, such as transportation and logistics and increased labor costs, as well as incremental costs associated with newly added health screenings and enhanced cleaning and sanitation protocols to protect our employees at our facilities, which we expect will continue and could increase. Furthermore, difficult economic conditions may have a negative impact on our ability to access capital markets and other funding sources, on acceptable terms or at all, should we seek any such financing in the future.

The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic and our continued ability to manufacture and distribute our products, as well as any future government actions affecting consumers and the economy generally, all of which are uncertain and difficult to predict, especially in light of the rapidly evolving social and political situations in response to the pandemic. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by local, state or federal authorities or that we determine are in the best interests of our employees, consumers, customers or business partners. Although the potential effects that COVID-19 may have on us are not clear, such impacts could materially adversely affect our business, financial condition and results of operations.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening other risks described in this “Risk Factors” section, such as those relating to our liquidity.

An interruption of our production capability at one or more of our manufacturing facilities from pandemics, accidents, calamities or other causes or events affecting the global economy, could adversely affect our business, financial condition and results of operation.

Operations at our facilities are subject to disruption for a variety of reasons, including work stoppages, pandemics, accidents, calamities, climate change or other causes or events affecting the global economy. A catastrophic loss of the use of one or more of our manufacturing facilities due to pandemics, including the COVID-19 pandemic, accidents, fires, explosions, labor issues, tornados, other weather conditions, natural disasters, condemnation, cancellation or non-renewals of leases, terrorist attacks or other acts of violence or war or otherwise could have a material adverse effect on our production capabilities.

In particular, the COVID-19 pandemic may negatively affect our business by causing or contributing to significant disruptions to our manufacturing, distribution and supply operations, including closure of our significant manufacturing and distribution facilities. Such significant disruptions could be due to, among other things, the loss or disruption of the timely availability of adequate supplies of essential raw materials or other manufacturing components; a decrease in our workforce or in the efficiency of our workforce; transportation and logistical challenges; and the loss or disruption of other manufacturing, distribution and supply capabilities.

In addition, unexpected failures, including as a result of power outages or similar disruptions outside of our control, of our equipment and machinery could result in production delays or the loss of raw materials or

 

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products in the equipment or machinery at the time of such failures. Any of these events could result in substantial revenue loss and repair costs. An interruption in our production capabilities could also require us to make substantial capital expenditures to replace damaged or destroyed facilities or equipment. There are a limited number of manufacturers that make some of the equipment we use in our manufacturing facilities, and we could experience significant delay in replacing manufacturing equipment necessary to resume production. An interruption in our production capability, particularly if it is of significant duration, could result in a permanent loss of customers who decide to seek alternate products.

Demand for our products is significantly influenced by general economic conditions and trends in consumer spending on indoor and outdoor living spaces and home exteriors, and adverse trends in, among other things, the health of the economy, consumer confidence, discretionary spending and institutional funding constraints could have a material adverse effect on our business.

Demand for our products is significantly influenced by a number of economic factors affecting our customers and consumers. Demand for our products depends in part on the level of residential improvement and consumer spending, and in particular, the amount of spending on indoor and outdoor living spaces and home exteriors. Home improvement is affected by, among other things, interest rates, consumer confidence and spending habits, demographic trends, unemployment rates, tariffs, industrial production levels and general economic conditions. Negative trends in any of these economic factors could have a material adverse effect on our business, financial condition and results of operations.

Sales of our products also depend on lifestyle and design trends and the extent to which consumers prioritize spending to enhance indoor or outdoor living spaces for their homes. While we believe consumer preferences have increased spending on indoor and outdoor living and home exteriors in recent years, the level of spending could decrease in the future. Decreased spending on indoor and outdoor living spaces and home exteriors, generally or as a percentage of home improvement activity, may decrease demand for our products and could have a material adverse effect on our business, financial condition and results of operations.

Additionally, our tool storage products and organization solutions are partially dependent upon the home improvement and professional construction and repair industry and demand for construction equipment and tools. The construction and repair industry is cyclical and is often dependent upon general economic conditions, prevailing interest rates, spending patterns, consumer confidence and other factors beyond our control. Prolonged downturns in the construction and repair industry could have a material adverse effect on sales of our tool storage products and organizational solutions.

The markets in which we compete are competitive and include numerous other brands, suppliers and retailers that offer a wide variety of products that compete with our products. If we fail to compete effectively, we could lose our market position.

The markets in which we compete are competitive. Numerous other brands, suppliers and retailers offer a variety of products that compete with our products, including our storage and outdoor furniture and lifestyle products. Competition in these product markets is based on a number of factors including product quality, performance, durability, styling, brand image and recognition and price. We believe that we have been able to compete successfully largely on the basis of our brand, superior design capabilities and product development, as well as on the breadth of our retail partners and geographic reach.

Our competitors may develop and market superior products (on a price-to-value basis or otherwise) or may adapt more quickly to customer requirements and expectations. In addition, as we expand into new product categories we may face different competition. If we are not able to overcome these potential competitive challenges, effectively market our current and future products, and otherwise compete effectively against our current or potential competitors, our prospects, results of operations and financial condition could be harmed.

 

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If we fail to develop new and improved products successfully, or if we fail to effectively manage the introduction of new products and the supply of our ongoing product assortment, our business, financial condition and results of operations could suffer.

Our continued success depends on our ability to identify or predict the products that will appeal to the changing preferences of our customers and consumers, such as homeowners, and to continue to innovate and introduce improved products into existing product lines as well as in new product categories. We may not be successful in anticipating these needs or preferences or in developing new and improved products. Additionally, our success is dependent on our ability to predict demand for and manage the supply of our ongoing product assortment. If we do not respond effectively to changing market trends, demands and preferences and to actions by competitors by introducing competitive new products, our business, financial condition and results of operations would suffer.

Even if we introduce new products, consumers may not choose our new products over existing products. In addition, competitors may introduce new or improved products that could replace or reduce demand for our products or develop proprietary changes in manufacturing technologies that may render our products too expensive to compete effectively. In addition, when we introduce new products, we must effectively anticipate and manage the effect of new product introductions on sales of our existing products. If new products displace sales of existing products more broadly or rapidly than anticipated, we may have excess inventory of existing products and be required to reduce prices on such products, which could adversely affect our results of operations.

Moreover, we may introduce new products with initially lower gross margins with the expectation that the gross margins associated with those products may improve over time as we improve our manufacturing efficiency for those products. If we are unable to improve manufacturing efficiency and achieve satisfactory gross margins on new products, our results of operations would be adversely affected.

In the past we have devoted, and in the future we expect to continue to devote, significant resources to developing new products. However, we cannot be sure that we will successfully complete the development and testing of new products and be able to release the products when anticipated or at all. From time to time, we may make investments in the development of products we ultimately determine not to release resulting in write-downs of inventory and related assets.

Dependence on key customers and sales channels could adversely affect our business, financial condition and results of operations.

Our operations depend upon our ability to maintain our strong relationships with our network of customers and distributors. Our top ten customers collectively accounted for approximately 48% of our revenues for each of the years ended December 31, 2020 and 2019, respectively.

While we have long-standing business relationships with many of our key customers, our business is based primarily upon individual sales orders, and we typically do not enter into long-term contracts with our customers or distributors. In addition, our larger customers are typically not obligated to purchase a minimum amount of our products. Our contracts with larger customers are also typically non-exclusive and terminable by our customers without significant notice periods. Accordingly, in the future, customers could reduce their purchasing levels or cease buying products from us at any time and for any reason. If we do not effectively respond to the demands of our key customers or distributors, including as a result of inventory management issues, they could decrease their purchases from us, causing our revenues and gross profit to decline. Furthermore, unfavorable market conditions or competitive pressures may cause our customers to reevaluate the number and mix of brands they sell, resulting in lower purchases of our products by these customers. In addition, some of our key customers and distributors may in the future experience declining financial performance, which could affect their ability to pay amounts due to us on a timely basis or at all. If we do not forecast and plan production effectively to

 

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manufacture sufficient products to meet demand or if we experience delays in our ability to manufacture products, dealers may seek alternative products, including those of our competitors. Failure to meet demand requirements on a timely basis may cause customers or distributors to build up inventory as a precautionary measure, rapidly shift their product mix away from our products, harm our long-term relationships with customers and distributors, harm our brand and reduce, or increase the variability of, our revenues.

We must continue to provide product offerings at price points that meet the needs of customers and consumers and that they perceive to be competitive with the products on the market. If our key customers and distributors are unwilling to continue to sell our products at existing or higher levels, or if they desire to sell competing products alongside our products, our ability to maintain or increase our sales could suffer. If a key customer or distributor were to terminate its relationship with us or reduce purchases of our products, we may not be able to replace that relationship with a relationship with a new customer in a timely manner or at all. In addition, any such new relationship may take time to develop and may not be as favorable to us as the relationship it is replacing. The loss of, or a reduction in orders from, any significant customer or an adverse change in our relationship with one or more of our significant customers for any reason may have a material adverse effect on our business, financial condition or results of operations.

Additionally, our customers service consumers by stocking and displaying our products, explaining our product attributes and sharing our brand story. Our relationships with these retail partners are important to the authenticity of our brand and the marketing programs we continue to deploy. Our failure to maintain these relationships with our retail partners or financial difficulties experienced by these retail partners could harm our business, financial condition or results of operations.

Shortages in supply, price increases or deviations in the quality of raw materials used to manufacture our products could adversely affect our sales and operating results.

The primary raw materials used in our products are various resins (mainly polypropylenes), colors/pigments, additives and modifiers. Our contracts with key suppliers are typically short term in nature, with terms generally ranging from one to three years. We obtain certain raw materials from a single or a limited number of suppliers. In particular, we rely on a single supplier for most metal components. If one or more suppliers were unable to satisfy our requirements for particular raw materials, we could experience a disruption to our operations as alternative suppliers are identified and qualified and new supply arrangements are entered into, and we cannot be sure we will be able to identify alternative sources of supply rapidly, without incurring significant costs or at all.

In the event of an industry-wide general shortage of our raw materials, a shortage affecting or discontinuation in providing any such raw materials by one or more of our suppliers or a supplier’s declaration of force majeure, we may not be able to arrange for alternative sources of such materials on a timely basis or on equally favorable terms. We have also recently significantly increased the use of reclaimed polyethylene and PVC material in our products. As we increase our use of such materials and introduce new materials into our manufacturing processes, we may be unable to obtain adequate quantities of such new raw materials in a timely manner. Any such shortage may materially adversely affect our production process as well as our competitive position as compared to companies that are able to source their raw materials more reliably or at lower cost.

In addition, significant increases in the cost of the raw materials used to manufacture our products could adversely affect our operating results. The cost of some of the raw materials we use in the manufacture of our products is subject to significant price volatility. We have not entered into hedges of our raw material costs, and our supply contracts with our major vendors do not contain obligations to sell raw materials to us at a fixed price. Our results of operations have been affected in the past by changes in the cost of resins, and we expect that our results of operations in the future will continue to be affected by changes in resin costs. In the event of an increase in the cost of resins or other raw materials, we may not be able to recover the increases through corresponding increases in the prices of our products. Even if we are able to increase prices over time, we may

 

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not be able to increase prices as rapidly as the increase in our costs. If we are unable to increase our prices or experience a delay in our ability to increase our prices or to recover such increases in our costs, our gross profit will suffer. In addition, increases in the price of our products to compensate for increased costs of raw materials may reduce demand for our products and adversely affect our competitive position as compared to products made of other materials, such as wood and metal, that are not affected by changes in the price of resins and some of the other raw materials that we use in the manufacture of our products.

We depend on third parties for transportation services, and the lack of availability and/or increases in the cost of transportation could have a material adverse effect on our business and results of operations

Our business depends on the transportation of both finished goods to our distributors and other customers and the transportation of raw materials to us primarily through the use of flatbed trucks and rail transportation. We rely on third parties for transportation of these items. The availability of these transportation services is subject to various risks, including those associated with supply shortages, change in fuel prices, work stoppages, operating hazards and interstate transportation regulations. In particular, a significant portion of our finished goods are transported by flatbed trucks, which are occasionally in high demand (especially at the end of calendar quarters) and/or subject to price fluctuations based on market conditions and the price of fuel.

If the required supply of transportation services is unavailable when needed, we may be unable to sell our products when they are requested by our customers. In that event, we may be required to reduce the price of the affected products, seek alternative and, potentially more costly, transportation services or be unable to sell the affected products. Similarly, if any of these transportation providers were unavailable to deliver raw materials to us in a timely manner, we may be unable to manufacture our products in response to customer demand. In addition, a significant increase in transportation rates or fuel surcharges could adversely affect our profitability. Any of these events could have a material adverse effect on our business and results of operations.

Supply chain issues as a result of a reliance on a limited base of warehousing and transportation services may result in product shortages or disruptions to our business or increased prices.

Our operations are dependent upon the availability of warehousing space and transportation services on reasonable terms and at reasonable prices, which are subject to availability and price fluctuations influenced by changes in demand, supply shortages, changes in fuel prices, work stoppages, operating hazards and interstate transportation and workplace safety and operating regulations. We could experience material disruptions in production and other supply chain issues, including as a result of supply chain dependencies, which could result in out-of-stock conditions, and our results of operations and relationships with customers could be adversely affected if we are unable to contract with warehouses and transportation suppliers at the quantity and price levels needed for our business, if any of our key warehouses or transportation suppliers become insolvent, ceases or significantly reduces its operations or experiences financial distress, as a result of the COVID-19 pandemic or otherwise, or if any environmental, economic or other outside factors impact our supply chain and operations.

Increases in labor costs, potential labor disputes and work stoppages or an inability to hire skilled manufacturing, sales and other personnel could adversely affect our business.

An increase in labor costs, work stoppages or disruptions at our facilities or those of our suppliers or transportation service providers, or other labor disruptions, could decrease our sales and increase our expenses. In addition, although our employees are not represented by a union, our labor force may become subject to labor union organizing efforts, which could cause us to incur additional labor costs and increase the related risks that we now face.

The competition for skilled manufacturing, sales and other personnel can be intense in the regions in which our manufacturing facilities are located. A significant increase in the salaries and wages paid by competing employers could result in a reduction of our labor force, increases in the salaries and wages that we must pay or

 

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both. If we are unable to hire skilled manufacturing, sales and other personnel, our ability to execute our business plan, and our results of operations, would suffer.

We may not be able to maintain or negotiate favorable lease terms.

We lease substantially all of our locations in Israel, the United States and Europe. The terms of our leases vary in length from approximately a one-year term to a ten-year term. We may not be able to terminate a particular lease if or when we would like to do so, which could prevent us from closing or relocating certain underperforming locations. If we decide to close locations, we generally are required to continue paying rent and operating expenses for the balance of the lease term, or to pay to exercise rights to terminate, and the performance of any of these obligations may be expensive. Accordingly, we are subject to the risks associated with leasing locations, which can have a material and adverse effect on us. If we are unable to renew, renegotiate or replace our leases or enter into leases for new locations on favorable terms, our growth and profitability could be harmed, which could have a material and adverse effect on our business, financial condition and results of operations.

Credit and non-payment risks of our key distributors and customers could have a material adverse effect on our business.

We extend credit to part of our distributors and customers, based on an evaluation of their financial condition, and we generally do not require collateral to secure these extensions of credit. The financial health of many of such distributors and customers may be affected by changes in the economy and the cyclical nature of the building industry. The effects of the COVID-19 pandemic and the related economic downturn or protracted or severe economic declines and cyclical downturns from other causes in the building industry may in the future cause our customers to be unable to satisfy their payment obligations, including their debts to us. Additionally, we conduct periodic reviews of our key distributors and customers’ financial health and may, where appropriate, modify such distributors and customers’ credit limits, which may adversely impact our relationships with them, our future sales and cash flow.

The global nature of our Company’s operations subjects it to political and economic risks that could adversely affect its business, results of operations or financial condition.

Over 60% of our revenues are derived from customers outside the North America, and we currently operate in approximately 100 countries.

The risks inherent in our global operations include:

 

   

fluctuation and volatility in currency exchange rates, including those related to the euro and the United States dollar, among others;

 

   

price controls, exchange controls and limitations on repatriation of earnings;

 

   

transportation delays and interruptions;

 

   

political, social and economic instability and disruptions, including acts of terrorism;

 

   

the impact of widespread public health crises, such as the COVID-19 pandemic;

 

   

government embargoes or foreign trade restrictions;

 

   

the imposition of duties, tariffs and other trade barriers and retaliatory countermeasures;

 

   

government actions impacting international trade agreements such as the withdrawal of the United Kingdom from the European Union;

 

   

changes in trade policies, including new or additional increases in duties or tariffs, and additional retaliatory actions by the countries in which our trade partners operate;

 

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import and export controls;

 

   

labor unrest and current and changing regulatory environments;

 

   

difficulties in staffing and managing multi-national operations;

 

   

limitations on our ability to enforce legal rights and remedies, including with regard to our intellectual property; and

 

   

potentially adverse tax consequences.

As we continue to expand our business into new geographies, the risks inherent in our global operations will be amplified. If we are unable to successfully manage these and other risks associated with managing and expanding our international businesses, our business, results of operations or financial condition could be materially adversely affected.    

Our business would suffer if we do not effectively manage changes in our manufacturing processes resulting from growth of our business, cost savings and integration initiatives and the introduction of new technologies and products.

We continually review our manufacturing operations in an effort to achieve increased manufacturing efficiencies, to integrate new technologies and to address changes in our product lines, including the introduction of new products, and in market demand. Periodic manufacturing integrations, realignments and cost-savings programs, including the addition of manufacturing lines and the consolidation, integration and upgrading of facilities, functions, systems and procedures, and other changes could involve substantial planning, often require capital investments and could adversely affect our operating efficiency and results of operations during the periods in which such programs are being implemented. Our ability to achieve cost savings or other benefits within the time frames we anticipate is subject to many estimates and assumptions, a number of which are subject to significant economic, competitive and other uncertainties. If these investments and other changes are not effectively integrated into our manufacturing processes, we may suffer from production delays, lower efficiency and manufacturing yields, increased costs and reduced revenues.

We expect our business to experience significant growth in the short-, medium-, and long-term due to continuing demand for our existing products and the introduction of new products into our product offerings. We continually work to address changes in our product lines and market demand. For example, we have recently made substantial investments to expand our tool storage business, including our manufacturing capacity. As we increase our manufacturing capacity to meet market demand or to manufacture new products, we may face unanticipated manufacturing challenges as production volume increases or new technologies are introduced. For instance, we could experience delays in launching new products at scale, or new products may initially be more costly to produce than existing products. Additionally, our continued growth may also place stress on our ability to adequately manage our operations, quality of products, safety and regulatory compliance. Any inability to effectively manage our growth, changes in our manufacturing processes and enhance efficiencies may adversely affect our business, financial condition and results of operations. Additionally, because we heavily invest in our business to support our significant expected growth, if the growth of our business in the short-, medium- or long-term is less than anticipated, it may have an adverse effect on our business, financial condition and results of operations.

The loss of, or inability to attract, key personnel could adversely impact our business.

Our success depends, in part, on our ability to retain key personnel, including our management team. The unexpected loss or unavailability of one or more of our key employees could disrupt our business. Our success also depends, in part, on our continuing ability to identify, hire, develop and retain other highly qualified personnel, including identifying and hiring qualified personnel for new facilities as we continue to expand our operations. Competition for these employees can be intense, and our employees may be targeted and recruited by

 

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other companies. As we expand into new categories or markets, we will also require personnel with relevant training and experience in such categories or markets. We may not be able to attract or retain qualified personnel in the future, and our failure to do so or the compensation costs of doing so could adversely affect us.    

Acquisitions or joint ventures we may pursue may be unsuccessful.

We have in the past, and may in the future, acquire businesses that complement or expand our existing business as part of our ongoing growth strategy. However, in the future, we may not be able to identify and successfully negotiate suitable strategic transactions at attractive prices. In addition, an increase in regulatory restrictions or continued market volatility could hinder our ability to execute strategic business activities including any acquisitions or investments. All potential acquisitions and investments entail numerous risks, including risks relating to our ability to:

 

   

identify attractive acquisition candidates or complete the acquisition of any identified candidates at favorable prices and upon advantageous terms and conditions;

 

   

successfully arrange financing for the acquisition on acceptable terms and conditions;

 

   

successfully integrate acquired companies, brands, products, technologies, systems or personnel into our existing business operations in an effective, timely and cost efficient manner;

 

   

maintain uniform standards, controls, procedures and policies throughout acquired companies, including effective integration of acquired companies into our internal control over financial reporting;

 

   

minimize any potential interruption to our or the acquired company’s ongoing business;

 

   

successfully enter categories and markets in which we may have limited or no prior experience;

 

   

achieve expected synergies and obtain the desired financial or strategic benefits from acquisitions within the anticipated time periods, if at all;

 

   

identify and manage any legal or reputational risks that may predate or be associated with a transaction, which could negatively impact us following the consummation of such transaction; and

 

   

manage other unanticipated problems or liabilities.

Acquired companies or operations or investments may not be profitable or may not achieve sales levels, profitability and cash flow expectations. Furthermore, acquisitions or investments could also result in potentially dilutive issuances of equity securities, the incurrence of debt, the assumption of contingent liabilities, such as those relating to advertising claims, environmental issues and litigation, an increase in expenses related to certain assets and increased operating expenses, all of which could adversely affect our financial condition and results of operations. In addition, to the extent that the economic benefits associated with any of our acquisitions or investments diminish in the future, we may be required to record impairment charges related to goodwill, intangible assets or other assets associated with such transactions, which could adversely affect our financial condition and results of operations.

In addition, any potential future acquisitions or investments may divert the attention of management and resources from other business priorities.

The occurrence of any of these risks or uncertainties with regard to any acquisitions or investments may have a material adverse effect on our business, financial condition and results of operations.

We sell proprietary brand offerings, as well as third-party brands, which could expose us to various risks.

We rely on the strength of our brands, which we consider important to our business. If we fail to maintain our brands’ image due to actual or perceived product or service quality issues, adverse publicity, governmental investigations or litigation, or other reasons, our brand and reputation could be damaged and our business may be harmed.

 

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Although we believe that our proprietary brand products offer significant value to our customers at each price point and provide us with higher gross margins than sales of comparable third-party branded products, expanding our proprietary brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as:

 

   

potential mandatory or voluntary product recalls in the event of product defects or other issues;

 

   

the measures we take may not effectively or sufficiently protect and/or maintain the proprietary rights associated with our products and business;

 

   

we may be required to heavily invest in marketing such proprietary branded products;

 

   

we may be unable to successfully innovate and obtain, maintain, protect and enforce our proprietary rights (including defending against counterfeit, knock-off, grey-market, infringing or otherwise unauthorized goods);

 

   

we may be unable to successfully navigate and avoid claims related to the proprietary rights of third parties, which, if successful, could force us to modify or discontinue products, pay significant damages, enter into expensive licensing arrangements with the prevailing party, or subject us to other harms, including to our reputation or financial results; and

 

   

we may be unable, including as a result of events out of our control, to act in accordance with the licensing arrangements which govern our third-party branded products.

Our failure to adequately address some or all of these risks could have a material adverse effect on our business, results of operations and financial condition.

Our business depends on strong and trusted brands, and any failure to maintain, protect or enhance our brand awareness and integrity, including failure to maintain product quality and product performance and including as a result of events outside our control, could materially adversely affect our business.

Our brands are an important component of our value proposition and serve to distinguish our products from those of our competitors. We believe that our success depends, in part, on maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our customers through the support of their marketing initiatives. Real or perceived quality issues, including those arising in connection with deficiencies or defects in the design or manufacture of our products, an inability to maintain high-quality products at acceptable manufacturing costs and yields, product liability lawsuits, warranty claims or recalls, could also result in adverse publicity, which could harm our brands and reputation and cause our sales to decline rapidly. Additionally, as we regularly modify our product lines and introduce changes to our manufacturing processes or incorporate new raw materials, we may encounter unanticipated issues with product quality or production delays. Unanticipated product quality or performance issues may be identified after a product has been introduced and sold. Any such product issues or declines in our brand reputations may reduce demand for our products and could have a material adverse effect on our business, brand, financial condition and results of operations. In addition, any such issues may be seized on by competitors in efforts to increase their market share.

In recent years, there has been a marked increase in the use of social media platforms and other forms of internet-based communications that provide individuals with access to broad audiences, and the availability of information on social media platforms is virtually immediate, as can be its impact. Many social media platforms immediately publish the content their participants post, often without filters or checks on accuracy of the content posted. Information concerning us, regardless of its accuracy, may be posted on such platforms at any time and may materially harm our brand, reputation, performance, prospects and business, and such harm may be immediate and we may have little or no opportunity to respond or to seek redress or a correction.    

 

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We provide product warranties and, if our product warranty obligations were significantly in excess of our reserves, our business, financial condition and results of operations could be materially and adversely affected.

We provide various warranties on certain of our products, such as our sheds, certain other outdoor products and tool storage products. These warranties vary depending on the type of product and are subject to various limitations. Warranties for certain of our other products are provided directly by the retailer to the consumer. If consumers have poor experiences with the retailers’ warranties, it could have a negative impact on our brand or reputation.

In addition, we have recently increased our use of recycled materials in the manufacturing of our products. While we performed extensive testing in connection with the utilization of such materials, the use of recycled materials represents a recent and significant change in our business and the use of such materials may result in unanticipated product quality or performance issues and an increase in warranty claims for certain of our products. A high number of warranty claims could have a material adverse effect on our business, brand, financial condition and results of operations.    

The estimates and forecasts of market opportunity and market growth included in this prospectus may prove to be inaccurate, and we cannot assure you our business will grow at similar rates, or at all.

Estimates and forecasts of market size and opportunity and of market growth are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and forecasts in this prospectus of the size of the markets that we may be able to address and the growth in these markets are subject to many assumptions and may prove to be inaccurate. We expect that the COVID-19 pandemic may in the future materially affect the growth of various of the markets discussed in this prospectus, and we cannot predict the extent to which those estimates will be affected. Further, we may not be able to address fully the markets that we believe we can address, and we cannot be sure that these markets will grow at historical rates or the rates we expect for the future. Even if we are able to address the markets that we believe represent our market opportunity and even if these markets experience the growth we expect, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the estimates and forecasts of market size and opportunity and of market growth included in this prospectus may not be indicative of our future growth.

Our internal controls over financial reporting currently do not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or SOX, and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of SOX could impair our ability to produce timely and accurate financial statements or comply with applicable regulations and have a material adverse effect on our business.

As a public company, we will have significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that will require us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements, and harm our operating results. In addition, we will be required, pursuant to Section 404 of SOX, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting in the second annual report on Form 20-F following the completion of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and

 

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require significant documentation, testing, and possible remediation through the implementation of new internal controls and procedures and hiring accounting or internal audit staff. Testing and maintaining internal controls may divert management’s attention from other matters that are important to our business. Beginning with our second annual report on Form 20-F following the completion of this offering, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting on an annual basis. If we are not able to complete our initial assessment of our internal controls and otherwise implement the requirements of Section 404 of SOX in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the adequacy of our internal controls over financial reporting and may issue a report that is adverse, in the event it is not satisfied with the level at which our controls are documented, designed or operating.

Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby be required to restate our financial statements or otherwise be subject to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, which may result in a breach of the covenants under existing or future financing arrangements. If we fail to meet our public reporting obligations, investors could lose confidence in us and the reliability of our financial statements, which could have a negative effect on the trading price of our stock. Confidence in the reliability of our financial statements also could suffer if we report or our independent registered public accounting firm reports a material weakness in our internal controls over financial reporting. This could materially adversely affect us and lead to a decline in the market price of our ordinary shares.

Subjective estimates and judgments used by management in the preparation of the financial statements, including estimates and judgments that may be required by new or changed accounting standards, may impact our financial condition and results of operations.

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses including the accounting for legal claims, deferred tax assets, pension and other pots-employment benefits, revenue recognition - estimating variable consideration for volume rebates, share-based payments, write-down of inventories, impairment of non-financial assets and useful lives of customer relationships. We have based assumptions and estimates on parameters available when the consolidated financial statements were prepared; however, due to the inherent uncertainty in making these and other estimates, results reported in future periods may be affected by changes in estimates reflected in our financial statements for earlier periods. From time to time, there may be changes in the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some instances, we could be required to apply a new or revised standard retrospectively. If the estimates and judgments we use in preparing our financial statements are subsequently found to be incorrect or if we are required to restate prior financial statements, our financial condition or results of operations could be significantly affected.

Legal and Regulatory Risks Related to our Business    

Product liability claims or product recalls could harm our reputation and could adversely affect our business, financial condition and results of operations.

We have in the past been subject to and may in the future face the risk of exposure to pending or threatened legal actions, government investigations by entities such as the U.S. Consumer Product Safety Commission, and proceedings, relating to product liability or other claims, including class action lawsuits, in the event our products are, or are alleged to be, defective or have resulted in harm to persons or to property. We may in the future incur significant liabilities if product liability lawsuits against us are successful. We have in the past and may in the future also have to recall and/or replace defective products, which would also result in adverse publicity and loss of sales, and would result in us incurring costs connected with the recall, which could be material. Although we maintain product liability insurance coverage, potential product liability claims may be subject to a deductible, exceed the amount of insurance coverage or be excluded under the terms of the policies. Any losses not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

 

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We may be subject to compliance costs as well as liabilities under environmental, health and safety laws and regulations, including workplace safety laws, which could materially and adversely affect our business, financial condition and results of operations.

Our past and present operations, assets and products are subject to regulation by extensive international, national, regional, state and local environmental laws and regulations. These laws regulate, among other things, air emissions, the discharge or release of materials into the environment, the handling and disposal of wastes, remediation of contaminated sites, worker health and safety and the impact of products on human health and safety and the environment. Under some of these laws, liability for contaminated property may be imposed on current or former owners or operators of the property or on parties that generated or arranged for waste sent to the property for disposal. Liability under these laws may be joint and several and may be imposed without regard to fault or the legality of the activity giving rise to the contamination. Our facilities are located on sites that have been used for manufacturing activities for an extended period of time, which increases the possibility that contamination is present and that currently unknown or unanticipated soil or groundwater contamination could be discovered and result in significant liabilities and costs. Despite our efforts to comply with applicable requirements for the handling and disposal of hazardous materials and to minimize our impact on the environment, we may still face material liability, limitations on our operations or fines or penalties for violations of environmental, health and safety laws and regulations, including for releases of regulated materials and contamination by us or previous occupants at our current or former properties or at offsite disposal locations we use.

Additionally, we are subject to workplace safety laws and regulations in the operations of our manufacturing facilities by national, regional, state and local governmental entities, such as the U.S. Occupational Safety and Health Administration. Although we believe we are in compliance with all workplace safety laws and regulations, we cannot predict or prevent all accidents or injuries. We have in the past been and may in the future be subject to liabilities, claims, investigation, remediation or other costs related to workplace accidents and injuries.

We are also subject to licensing and permitting requirements under certain environmental, health and safety laws and regulations applicable in the jurisdictions in which we operate. The various licensing and permitting requirements in the jurisdictions in which we operate obligate us to obtain permits from one or more governmental agencies in order to conduct our operations. The requirements for such permits vary depending on the location where our regulated activities are conducted. As with all governmental permitting processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit to be issued and the conditions that may be imposed in connection with the granting of the permit. Any failure to obtain or delay in obtaining a permit required for our operations, or the imposition of onerous conditions in any such permits, could adversely affect our business, financial condition and operations.

Applicable environmental, health and safety laws and regulations, and any changes to them or in their enforcement, may require us to make material expenditures with respect to ongoing compliance with, or remediation under, these laws and regulations or require that we modify our products or processes in a manner that increases our costs and/or reduces our profitability. For example, additional pollution control equipment, process changes or other environmental control measures may be needed at our facilities to meet future requirements. Accordingly, although we believe that we are presently in compliance with applicable environmental, health and safety laws and regulations, future costs of compliance with, or liability under, environmental, health and safety laws and regulations could adversely affect our business, financial condition and results of operations.     

 

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We operate in non-United States markets and are subject to the United States Foreign Corrupt Practices Act, or the FCPA, as well anti-corruption laws and regulations in other countries, in addition to laws and regulations relating to export controls and economic sanctions. Violations of these laws and regulations could have a material adverse effect on our business, financial condition and results of operations.

We are subject to various United States and non-U.S. anti-corruption laws, collectively, the Anti-Corruption Laws, including the FCPA. These laws generally prohibit companies and their intermediaries from engaging in bribery or making other improper payments of cash (or anything else of value) to government officials and other persons in order to obtain or retain business. Our business operations also must be conducted in compliance with applicable export control and economic sanctions laws and regulations, collectively, the Trade Controls, including rules administered by the United States Department of the Treasury’s Office of Foreign Assets Control, the United States Department of State, the United States Department of Commerce, the United Nations Security Council and other relevant authorities.

We strive to conduct our business activities in compliance with applicable Anti-Corruption Laws and Trade Controls, and we are not aware of issues of historical noncompliance. However, we cannot guarantee full compliance currently or in the future. Further expansion outside the United States would likely increase our future legal exposure. Violations of Anti-Corruption Laws or Trade Controls, or even allegations of such violations, could result in civil or criminal penalties, as well as adversely affect our business, financial condition and results of operations. Further, changes to the applicable laws and regulations, and/or significant business growth, may result in the need for increased compliance-related resources and costs.

We may be subject to legal proceedings that could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources.

We have in the past, and may in the future, be involved in lawsuits, claims and proceedings incident to the ordinary course of our business. Litigation is inherently unpredictable. Any claims against us, whether meritorious or not, could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources. There has been a rise in the number of lawsuits against companies like us regarding consumer protection, false advertising, data breach, and e-commerce-related patent infringement. From time to time, we have been subject to these types of lawsuits and are currently the subject of some of these types of lawsuits. The cost of defending against these types of claims or the ultimate resolution of any such claims against us, whether by settlement or adverse court decision, may harm our business and operating results. In addition, the increasingly regulated business environment may result in a greater number of enforcement actions by government agencies and private litigation. This could subject us to increased exposure to stockholder lawsuits and potential penalties related to regulatory inquiries. Additionally, in recent years there has been an increase in the number of employment claims and, in particular, discrimination and harassment claims. Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims have had a significant negative impact on some businesses. Certain companies that have faced employment- or harassment-related lawsuits have had to terminate management or other key personnel, and have suffered reputational harm that has negatively impacted their business.

Risks Related to our Intellectual Property and Information Technology    

Our business operations could suffer if we fail to adequately protect our intellectual property rights, and we may experience claims by third parties that we are violating their intellectual property rights.

We rely on trademark, patent, design, copyright, trade secret and other intellectual property laws, as well as unfair competition laws and contractual provisions, such as confidentiality clauses, to establish and protect our intellectual property and other proprietary rights, including in our brands (and the trademark rights thereto) and our proprietary designs, technologies and information. These laws are subject to change at any time and certain agreements may not be fully enforceable, which could restrict our ability to protect our intellectual property rights, including in our brands and our proprietary designs, technologies and information. Such means may also

 

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afford only limited protection of our intellectual property and may not: (i) prevent others from independently developing products or services similar to, or duplicative of, ours; (ii) prevent our competitors from gaining access to our proprietary information and technologies; or (iii) permit us to gain or maintain a competitive advantage. While it is our policy to protect and defend our intellectual property, we cannot be sure that the actions we have taken to establish and protect our trademarks and other proprietary rights will be adequate to protect us, and if our existing intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, the coverage of such intellectual property rights afforded our brands, products and services could be impaired. Such impairment could impede our ability to market our products and services, negatively affect our competitive position, and harm our business and operating results.

Our success depends in large part on our brand image and, in particular, on the strength of our Keter and Curver marks. We rely on trademark protection to protect our brands, and we have registered or applied to register many of these trademarks. While we have registered our material trademarks in many of our most important markets, we have not registered all of our marks in all of the jurisdictions in which we currently conduct or intend to conduct business. Further, if we seek to register these trademarks, we cannot be sure that our trademark applications for registration of such trademarks will be successful, and they could be challenged or opposed by third parties. In the event that our trademarks are successfully challenged and we lose the rights to use those trademarks, we could be forced to rebrand our products, requiring us to devote resources to advertising and marketing new brands.

In addition, we rely on utility and design patents, as well as registered designs, to protect our products and designs. We have also applied for, and expect to continue to apply for, additional patent and design protection relating to proprietary aspects of existing and proposed products, processes and services. We cannot be sure that any of our patent or design applications will result in issued patents or registered designs, or that any patents issued as a result of our patent applications will be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. While a presumption of validity exists with respect to U.S. patents issued to us, there can be no assurance that any of our issued patents or registered designs will not be challenged, invalidated, circumvented or rendered unenforceable. If we fail to obtain issuance of patents, or our patent claims or other intellectual property rights are rendered invalid or unenforceable, or narrowed in scope, the coverage of patents and other intellectual property rights afforded our products, products, processes and services could be impaired. Such impairment could impede our ability to market our products and services, negatively affect our competitive position and harm our business and operating results, including, potentially, forcing us to, among other things, rebrand or re-design our affected products or services. Moreover, our issued patents and patent applications may cover particular aspects of our products, products, processes and services, and competitors and other third parties may be able to circumvent or design around our patents. Competitors may develop and obtain patent protection for more effective designs, methods, processes or other technologies. There can be no assurance that third parties will not create new products, processes or other technologies that achieve similar or better results without infringing upon patents we own. If these developments were to occur, it could have an adverse effect on our sales or market position. Third parties have challenged, and may continue to challenge, the validity and enforceability of certain of our patents, including through patent office ex parte reexamination, inter partes review or post-grant proceedings. Regardless of outcome, such challenges may result in substantial legal expenses and diversion of management’s time and attention from our other business operations. In some instances, our patent claims could be substantially narrowed or declared invalid or unenforceable. Any significant adverse finding by a patent office or adverse verdict of a court as to the validity, enforceability, or scope of certain of our patents could adversely affect our competitive position and otherwise harm our business.

We additionally seek to maintain the confidentiality of certain trade secrets and other proprietary information to preserve our position in the market. We employ various methods to protect such intellectual property, such as entering into confidentiality agreements with certain third parties and our employees, and controlling access to, and distribution of, our proprietary information. No assurance can be given that these efforts will be effective in controlling access to our proprietary information, or that we will have adequate

 

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remedies for the misappropriation of such information. Furthermore, even if we successfully maintain the confidentiality of our trade secrets and other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own.

Even if we successfully maintain our intellectual property rights, we cannot guarantee that we will be able to successfully enforce those rights against third parties. While we generally seek to protect and enforce our intellectual property rights, including through litigation if necessary, monitoring for unauthorized use, infringement, misappropriation or other violations of our intellectual property rights can be expensive, and we are unlikely to be able to detect all instances of such violations. Furthermore, if we do litigate, litigation, regardless of merit, is inherently uncertain and we cannot guarantee we will be successful. Any litigation could be lengthy, time-consuming, and result in substantial costs and diversion of our resources and could have a material adverse effect on our business and results of operations regardless of its outcome. If we are unsuccessful in enforcing our intellectual property rights, third parties may be able to offer competitive products at lower prices, and we may not be able to effectively compete against these companies. In addition, if any third party copies or imitates our products in a manner that affects customer or consumer perception of the quality of our products, our reputation and sales could suffer whether or not these violate our intellectual property rights.

Additionally, we have licensed, and may license in the future, patents, trademarks, trade secrets and other intellectual property rights from third parties, and the licenses we receive to such intellectual property rights may not provide exclusive or unrestricted rights in all fields of use and in all territories in which we may wish to develop or commercialize our products in the future and may restrict our rights to offer certain products in certain markets or impose other obligations on us in exchange for our rights to the licensed intellectual property. If we violate the terms of any of our license agreements, such as by failing to make specified royalty payments or failing to comply with quality control standards, a licensor may have the right to terminate our license. Even if we comply with all the terms of a license agreement, we cannot guarantee that we will be able to renew an agreement when it expires even if we desire to do so. The failure to maintain or renew our material license agreements could result in a loss of revenue and negatively impact our results of operations. We also grant licenses to third parties which allow third parties the right to use certain of our intellectual property in a restricted capacity. While we attempt to ensure that our intellectual property rights are protected when entering into business relationships, third parties may take actions that could materially and adversely affect our rights in or the value of our intellectual property rights.

From time to time, we may face claims that we are infringing, misappropriating, or otherwise violating third parties’ intellectual property rights. Any such claim, even if it is without merit, could be expensive and time-consuming to defend and could divert the time and attention of our management. While we believe that our products and technologies do not infringe or otherwise violate, in any material respect, any valid intellectual property rights of third parties, we cannot be certain that we would be successful in defending against any such claims in litigation or other proceedings. An intellectual property claim against us that is successful could cause significant monetary damages and cause us to cease making or selling products that incorporate the disputed intellectual property, require us to rebrand or redesign our products, which may not be feasible or cost effective, or require us to enter into costly royalty or licensing arrangements, any of which could have a material adverse effect on our business, financial condition and results of operations.

As we expand our product lines and the geographic scope of our sales and marketing, we may face additional intellectual property challenges. Certain foreign countries do not protect intellectual property rights as fully as they are protected in the United States and, accordingly, intellectual property protection may be limited or unavailable in some foreign countries where we choose to do business. It may therefore be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in these countries, which could diminish the value of our brands or products and cause our competitive position and growth to suffer. Filing, prosecuting and defending our intellectual property in all countries throughout the world may be prohibitively expensive. The lack of adequate legal protections of intellectual property or failure of legal remedies for related actions in jurisdictions outside of the United States could have an adverse effect on our business, results of operations, and financial condition.

 

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Failure to effectively utilize information technology systems and implement new technologies could disrupt our business or reduce our sales or profitability.

We rely extensively on various information technology, or IT, systems, including data centers, hardware and software and applications to manage many aspects of our business, including recording and processing transactions and managing our operations. These various systems are substantially operated by our global IT team and our service providers and we rely on them for efficient and consistent operations of these systems. We are dependent on the integrity, security and consistent operations of these systems and related back-up systems. Our computer and IT systems and the third-party systems we rely on are also subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; computer viruses, malware, phishing or distributed denial-of-service attacks; security breaches; cyber-attacks; catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes; acts of war or terrorism and design or usage errors by our associates or contractors.

Compromises, interruptions or shutdowns of our systems, including those managed by third parties, whether intentional or inadvertent, could lead to delays in our business operations and, if significant or extreme, affect our results of operations.

From time to time, our systems require modifications and updates, including by adding new hardware, software and applications; maintaining, updating or replacing legacy programs; and integrating new service providers, and adding enhanced or new functionality. Although we are actively selecting systems and vendors and implementing procedures to enable us to maintain the integrity of our systems when we modify them, there are inherent risks associated with modifying or replacing systems, and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented. Potential issues associated with implementation of these technology initiatives could reduce the efficiency of our operations in the short term. In addition, any interruption in the operation of our websites or systems could cause us to suffer reputational harm or to lose sales if customers are unable to access our site or purchase merchandise from us during such interruption. The efficient operation and successful growth of our business depends upon our IT systems. The failure of our IT systems and the third party systems we rely on to perform as designed, or our failure to implement and operate them effectively, could disrupt our business or subject us to liability and thereby harm our profitability.

Unauthorized disclosure of personal data or other sensitive or confidential information, whether through a breach of our computer system or other security incident or otherwise, could result in significant liability or reputational harm and cause us to incur increasing costs in an effort to mitigate against such risks.

We rely extensively on our IT systems, including cloud-based systems, to record and process transactions and manage our operations, among other matters, and for the secure storage and transmission of personal and other sensitive and proprietary or confidential information regarding our customers, employees, third-party suppliers, vendors, external manufacturers, other business or commercial partners and others. We also sell online directly to consumers in a limited number of jurisdictions. As a result, we collect, process, transmit and store large amounts of data about our customers, suppliers and others, including credit card information and personally identifiable information, as well as other sensitive, confidential and/or proprietary information. We also employ third-party service providers for a variety of reasons, including storing, processing and transmitting proprietary, personal and confidential information on our behalf. While we rely on solutions, such as tokenization, licensed from third parties for purposes of payment processing, including credit card numbers, advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of these technology solutions to protect proprietary, confidential, or personal information from breach or compromise.

We and/or third parties with which we do business, have experienced, and may in the future experience, failures of, or disruptions to, our IT systems and may be subject to cyber-attacks or data breaches. For example,

 

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in April 2020, a number of our peripheral applications and limited human resources data stored on such applications were the subject of a ransomware attack. Additionally, we have been subject to phishing attacks that resulted in the sharing of certain customers’ names and email addresses with the attacker. We notified affected customers and made no payment to the attacker. Despite the security measures we have in place, our facilities and systems, and those of third parties with which we do business, may be vulnerable to similar incidents, including additional security breaches, acts of vandalism and theft, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. Cyber-attacks on us or our third-party suppliers, vendors, external manufacturers, service providers or other business or commercial partners, can vary in scope and intent from economically-driven attacks to malicious attacks targeting our key operating systems with the intent to disrupt, disable or otherwise cripple our operations. This can include any combination of phishing attacks, malware and/or viruses targeted at our key systems. A successful cyber-attack may target us directly, or indirectly target or impact us through our third-party suppliers, vendors, external manufacturers, service providers, or other business or commercial partners. The breadth and scope of this threat has grown over time, and the techniques and sophistication used to conduct cyber-attacks, as well as the sources and targets of the attacks, change frequently, are constantly evolving and often are not recognized until after being launched against a target, and accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures and there may be a significant delay between the initiation of an attack on our information technology systems and our recognition of the attack. Given the unpredictability of the timing, nature and scope of cyber-attacks and other security incidents, we cannot guarantee that the technologies we use will adequately secure the data we maintain, including confidential information and personal information, against such attacks, and we cannot entirely eliminate the risk of improper or unauthorized access to or disclosure of such data, or other security incidents that impact the integrity or availability of such data, or our systems and operations. Further, several recent, highly publicized data security breaches at other companies have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of third parties with which we do business.

In addition, data security breaches, cyber-attacks, and other security incidents can also occur as a result of a breach experienced by persons with whom we have commercial relationships that result in the unauthorized or unlawful access, alteration, destruction, loss, and/or release of personal information or other sensitive, proprietary or other confidential information. In addition to our own databases, we use third-party service providers to store, process and transmit personal information, or other sensitive, proprietary or other confidential information confidential or sensitive information on our behalf. A data security breach, cyber-attack, and other security incident could occur in the future either at their location or within their systems that could affect our personal or confidential information.

In the case of a cyber-attack, other security incident or other IT failure, on the part of us or third parties with which we do business, as well as a failure to promptly remedy any security incidents events should they occur, we may suffer compromise or interruption of or damage to our key systems and/or experience interruption in our services and tele-conference and tele-communications platforms, misappropriation of personal information regarding our customers and loss of critical data that could interrupt our operations, adversely impact our reputation and brand and expose us to increased risks of governmental investigation and enforcement actions, private litigation and other liability, any of which could adversely affect our business. Furthermore, responding to such an attack or IT systems failure and mitigating the risk of future attacks or IT systems failures has resulted, and could in the future result, in additional operating and capital costs in systems technology, personnel, monitoring and other investments.

An attempted or actual data security breach, cyber-attack, or other security incident may expose us to a risk of loss or misuse of personal, confidential or sensitive information, and has and could in the future result in significant costs to us, which may include, among others, fines and penalties, costs related to remediation, potential costs and liabilities arising from governmental, regulatory or third-party investigations, proceedings or litigation, diversion of management attention and harm to our reputation.

 

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Our collection, use and disclosure of personal information is subject to data privacy and security laws and regulations, including in the United States, the European Economic Area, or the EEA, the United Kingdom, Canada and Israel and our failure to comply with those laws and regulations could result in significant liability or reputational harm.

The international regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements, which could cause us to incur substantial costs. For example, in the EEA we are subject to the General Data Protection Regulation (EU 2016/679) as implemented by countries in the EEA, or the GDPR, and in the UK, we are subject to the UK data protection regime consisting primarily of the UK General Data Protection Regulation, or the UK GDPR, and the UK Data Protection Act 2018, in each case in relation to our collection, control, processing, sharing, disclosure and other use of data relating to an identifiable living individual, or personal data. The GDPR and UK GDPR both apply extra-territorially and impose a strict data protection compliance regime with onerous requirements on controllers and processors of personal data, either with an establishment in the UK/EU (as applicable), or which offer goods or services to UK/EU (as applicable) data subjects or monitor UK/EU (as applicable) data subjects’ behaviour within the UK/EU (as applicable), including, for example: (i) accountability and transparency requirements (detailed disclosures about how personal data is collected and processed), and enhanced requirements for obtaining valid consent (or demonstrating that another appropriate legal basis is in place or otherwise exists to justify data processing activities); (ii) obligations to and implement consider data protection requirements as any new products or services are developed and to limit the amount of personal data processed; (iii) obligations to comply with data protection rights of data subjects (including the right to access and the right to be “forgotten”); (iv) reporting of personal data breaches to the supervisory authority without undue delay (and no later than 72 hours); and (v) complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit.

The GDPR and UK GDPR each prohibit the international transfer of personal data from the EEA and the UK, respectively, to countries outside of the EEA and the UK, respectively, unless made to a country deemed to have adequate data privacy laws by the European Commission or the Government of the UK (as applicable) or where a data transfer mechanism has been put in place. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data. On 16 July 2020, the Court of Justice of the European Union, or the CJEU, issued its landmark judgment in Data Protection Commissioner v Facebook Ireland Limited, Maximillian Schrems (Case C-311/18), or Schrems II, which invalidated the EU-U.S. Privacy Shield with immediate effect, while upholding the European Commission’s standard contractual clauses, or SCCs, for controller-to-processor transfers. Whilst the use of such SCCs was upheld, the CJEU held that compliance with the SCCs must be closely monitored by parties and the data exporter relying on them must perform a case-by-case assessment as to whether the laws of the country of importation of personal data provide adequate protection, as under EU data protection laws. The decision in Schrems II is likely to impact our current and planned business activities which involve transfers of personal data outside of the EEA (both intra-group and to third parties) and will require ongoing monitoring of the latest legal and regulatory developments and as such, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we operate our business and could harm our business, financial condition and results of operations. In addition, on June 4, 2021, the European Commission published revised standard contractual clauses for data transfers from the EEA: the revised clauses must be used for any relevant new data transfers from September 27, 2021; existing standard contractual clauses must be migrated to the revised clauses by December 27, 2022 (or earlier, if the data processing activities under any existing standard contractual clauses change, upon which the revised clauses will need to adopted). There is some uncertainty with respect to whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to importers subject to the GDPR. We currently rely on the standard contractual clauses to transfer personal outside the EEA and the UK to non-adequate countries, including to the US, and we will therefore need to migrate our standard contractual clauses onto the revised clauses to ensure we comply with the GDPR’s data export conditions.

 

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In addition, the dual data protection regimes that exist following the UK’s withdrawal from the EU may lead to an increase in data protection compliance costs for us, although as the UK GDPR is (for the time being) substantially similar to the GDPR (but with necessary national variations), such compliance costs may not be significant in the short term. On June 28, 2021, the European Commission adopted an adequacy decision in favor of the UK, enabling data transfers from the European Union and from the other countries that have been granted adequacy by the European Commission, including Israel to the UK without additional safeguards. However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews or extends that decision and it remains under review by the European Commission during this period. The relationship between the UK and the European Union in relation to certain aspects of data protection law remains unclear and it is unclear how the UK GDPR will develop in the medium to longer term and how data transfers to and from the UK will be regulated in the long-term. The UK’s Information Commissioner’s Office launched a public consultation on its drafted revised data transfers mechanisms in August 2021. We are monitoring the outcome of this and we may be required to implement new or revised documentation and processes in relation to our data transfers subject to the UK GDPR within the relevant time frames. To the extent that the UK GDPR and GDPR begin to diverge, and if a more permanent solution is not implemented to secure the free flow of personal data from the EEA to the UK following the expiry of the adequacy decision, these changes may require us to find alternative solutions for the compliant transfer of personal data into the UK from the EEA and from Israel and we could face substantial additional data protection compliance costs in the long term (e.g., in the form of a greater dual regulatory compliance burden and the costs of implementing data transfer safeguards).

We depend on a number of third parties in relation to the operation of our business, a number of which process personal data on our behalf. With each such relevant provider we attempt to mitigate the associated risks by entering into contractual arrangements to ensure that providers only process personal data according to our instructions, and that they have sufficient technical and organizational security measures in place. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws by our third party processors could have a material adverse effect on our business and result in the fines and penalties outlined below.

We are subject to the supervision of local data protection authorities in those EEA and UK jurisdictions where we are established or otherwise subject to the GDPR. Fines for certain breaches of the GDPR and the UK GDPR are significant (e.g., up to the greater of €20 million / £17.5 million or 4% of total global annual turnover, depending on the type and severity of the breach). In addition to the foregoing, a breach of the GDPR or UK GDPR could result in regulatory investigations, reputational damage, orders to cease or change our processing of our data, enforcement notices, and/or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm.

Additionally, in the United States, various laws and regulations apply to the collection, processing, disclosure and security of certain types of data, including the Federal Trade Commission Act, Electronic Communications Privacy Act, the Computer Fraud and Abuse Act and various state laws relating to privacy and data security, including the California Consumer Privacy Act, or the CCPA, which took effect on January 1, 2020 and became enforceable by the California Attorney General on July 1, 2020, along with related regulations which came into force on August 14, 2020. The CCPA created new individual privacy rights for California residents, and placed increased data privacy and security obligations on entities handling certain personal information of California consumers and households. The CCPA requires covered companies to provide new disclosures to consumers about such companies’ data collection, use and sharing practices, provide such consumers with expanded rights to access and delete their personal information and to opt-out of certain sales or transfers of personal information. The CCPA also allows the California Attorney General to impose civil penalties for violations and offers the possibility to a consumer to recover statutory damages for certain violations and imposed a private right of action for certain security breaches. The CCPA may impact our collection of data

 

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obtained through our business activities and exemplifies the vulnerability of our business to the evolving regulatory environment related to health-related and other personal information.

Laws, regulations and industry standards (including, for example, the Payment Card Industry Data Security Standard, or PCI-DSS) relating to privacy, data protection, marketing and advertising, and consumer protection are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, standards, requirements and obligations. Any failure or perceived failure by us to comply with laws, regulations, policies, industry self-regulatory principles, industry standards or codes of conduct, or regulatory guidance relating to data privacy or information security may result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity, and could cause our business or commercial partners, customers and consumers to lose trust in us, which could have an adverse effect on our reputation and business.

Changes in legislative, judicial, or regulatory landscapes relating to information collection, use and processing may limit our ability to collect, use and process data, including personal information. Such developments could also limit our ability to operate our business, increase our risk of liability or additional costs, cause revenue to decline and adversely affect the demand for our products and services.

We are also subject to evolving EU and UK privacy laws on cookies and eMarketing. In the EU and the UK, data protection regulatory authorities are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and the current national laws that implement the ePrivacy Directive are highly likely to be replaced by the EU Commission’s Regulation on Privacy and Electronic Communications, or the ePrivacy Regulation, which aims to reinforce trust and security in the digital single market by updating the legal framework regarding the “right to a private life” for users of electronic communications and the ePrivacy Regulation which will significantly increase fines for non-compliance. In the EU and the UK, informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. The latest draft text of the ePrivacy Regulation is in the process of being finalised by the Council of the European Union (with support from the Committee of Permanent Representatives); however, it is not expected to reach agreed form until late 2021, at the earliest. After such time, the ePrivacy Regulation will become subject to trilogue negotiations (between the Council of the European Union, the European Parliament and the European Commission) and is therefore not expected to enter into force before 2023. A compulsory grace period of a maximum of two years will then apply to allow European Union Member States to implement the ePrivacy Regulation before it is brought into effect. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. If regulators start to enforce the strict approach in recent guidance, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities. Regulation of cookies and similar technologies, and any decline of cookies or similar online tracking technologies as a means to identify and potentially target users, may lead to broader restrictions and impairments on our marketing and personalization activities and may negatively impact our efforts to understand users.

Additionally, the California Privacy Rights Act, or the CPRA, was voted into law by ballot measure in November 2020, which will take effect on January 1, 2023. The CPRA significantly modifies the CCPA, including by imposing additional data privacy and protection obligations on covered companies and expanding consumer rights with respect to certain sensitive personal information. It also created a new California data protection agency specifically tasked to enforce the law, which will likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security. Further, Virginia has adopted a new state data protection act referred to as the Virginia Consumer Data Protection Act, which is set to take effect on January 1, 2023. Similar laws have been proposed in other states and at the federal level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging, as well as potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply.

 

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In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact additional new laws or regulations or issue revised rules or guidance regarding privacy, data protection, consumer protection, and advertising, and as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and changing requirements applicable to our business. Each privacy, security, and data protection law and regulation, and any changes or new laws or regulations, could impose significant limitations, require changes to our business, or restrict our use or storage of personal information and other sensitive information, which may increase our compliance expenses and make our business more costly or less efficient to conduct and failure to comply with such laws and regulations could result in significant penalties and damages, each of which could materially and adversely affect our business and financial condition.

Risks Related to Our Financial Position

We have a substantial amount of debt, which could adversely affect our financial position and our ability to raise additional capital and prevent us from fulfilling our obligations under our credit agreements.

As of June 30, 2021, on an as adjusted basis after giving effect to the offering, we would have had total outstanding indebtedness of approximately $            million consisting of outstanding borrowings under our credit facilities. Additionally, we would have had $             million of availability under our revolving credit facility. Our substantial indebtedness may:

 

   

make it difficult for us to satisfy our financial obligations, including with respect to our indebtedness;

 

   

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

 

   

require us to use a substantial portion of our cash flow from operations to make debt service payments instead of other purposes, thereby reducing the amount of cash flow available for future working capital, capital expenditures, acquisitions or other general business purposes;

 

   

expose us to the risk of increased interest rates as certain of our borrowings, including under our secured credit facilities, are at variable rates of interest;

 

   

limit our ability to pay dividends;

 

   

limit our flexibility to plan for, or react to, changes in our business and industry;

 

   

place us at a competitive disadvantage compared with our less-leveraged competitors;

 

   

increase our vulnerability to the impact of adverse economic, competitive, and industry conditions; and

 

   

increase our cost of borrowing.

In addition, the credit agreements governing our credit facilities contain, and the agreements governing our future indebtedness may contain, restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. These restrictive covenants include, among others, limitations on our ability to pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock, prepay, redeem, or repurchase certain debt, make acquisitions, investments, loans, and advances, or sell or otherwise dispose of assets. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our debt.

Furthermore, we may be able to incur substantial additional indebtedness in the future. The terms of the credit agreements governing our indebtedness limit, but do not prohibit, us from incurring additional indebtedness, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions will also not prevent us from incurring obligations that do not constitute “Indebtedness” as defined in the agreements governing our indebtedness. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

 

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Any failure to comply with the restrictions of the credit facility and revolving credit facility, and any subsequent financing agreements, including as a result of events beyond our control, may result in an event of default under these agreements, which in turn may result in defaults or acceleration of obligations under these agreements and other agreements, giving our lenders and other debt holders the right to terminate any commitments they may have made to provide us with further funds and to require us to repay all amounts then outstanding. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments. In addition, we may not be able to refinance or restructure the payments on the applicable debt. Even if we were able to secure additional financing, it may not be available on favorable terms.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our existing and potential products or technologies.

We may seek additional funding through a combination of equity offerings, debt financings and/or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of our ordinary shares. The incurrence of indebtedness and/or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt and/or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, issuance of additional equity securities, or the possibility of such issuance, may cause the market price of our ordinary shares to decline. In the event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third-party on unfavorable terms our rights to technologies, existing products or product candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements when we might be able to achieve more favorable terms. Additional funding may not be available to us on acceptable terms, or at all. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail certain of our operations or cease operations altogether.

We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments due on our debt obligations or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic, industry, and competitive conditions and to certain financial, business, legislative, regulatory, and other factors beyond our control, including those discussed elsewhere in this “Risk Factors” section. We may be unable to maintain a level of cash flow sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flow and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to implement any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreements governing our secured credit facilities restrict, and the agreements governing our future indebtedness may restrict, our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

If we cannot make payments on our debt obligations, we will be in default and all outstanding principal and interest on our debt may be declared due and payable, the lenders under our secured credit facilities could terminate their commitments to loan money, our secured lenders (including the lenders under our secured credit

 

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facilities) could foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation. Additionally, where our indebtedness is secured by our intellectual property, a default could result in a loss of our intellectual property. In addition, any event of default or declaration of acceleration under one debt instrument could result in an event of default under one or more of our other debt instruments.

Change in our credit ratings could adversely impact our operations and lower our profitability.

Credit rating agencies continually revise their ratings for the companies that they follow, including us. Credit rating agencies also evaluate our industry as a whole and may change their credit ratings for us based on their overall view of our industry. Failure to maintain our credit ratings on long-term and short-term indebtedness could increase our cost of borrowing, reduce our ability to obtain intra-day borrowing, which we may need to operate our business, and adversely impact our results of operations.

Our tax liability may be materially different from what is reflected in our income tax provisions and related balance sheet accounts.

We are subject to taxation in Israel, various countries in the European Union, the United States and other jurisdictions in which we do business. Additionally, we participate in substantial inter-company trade. Our future effective income tax rate will be impacted by a number of factors, including the geographic composition of our worldwide taxable income and our ability to allocate debt and expenses effectively. If legislators, tax authorities or government agencies in the jurisdictions in which we operate were to change applicable tax laws and regulations (for example, as a result of the various global, regional and local initiatives to reform the international tax framework, such as the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development and anti-tax avoidance measures proposed by the European Committee) or successfully challenge the manner in which our income taxes are currently recognized or calculated or the transfer pricing policies employed by us (including policies set forth in any advance pricing agreements entered into with any taxing authorities), our effective income tax rate could increase, which would adversely impact our cash flow and profitability. Furthermore, in many of these jurisdictions, the tax laws and regulations are very complex and are open to different interpretations and application. The final determination of tax by means of an assessment or an audit could be materially different from our tax provisions and accruals and may negatively impact our financial results.

Exchange rate fluctuations could negatively affect our financial condition.

Although we operate globally, our consolidated financial statements are presented in euros. In addition to conducting business in the European Union, we also operate relatively large operations in North America, the UK and Israel. Therefore, we have revenues and expenses denominated in euros, U.S. dollars, British pound sterling and Israeli New Shekel, among others. As a result, our business and share price may be affected by fluctuations between the euro and the Israeli New Shekel, the euro and the U.S. dollar and the euro and the British pound sterling, which may have a significant impact on our reported results of operations and cash flows from period to period. As we continue to expand our business into new geographies, this risk may be amplified.

Interest rate fluctuations may affect our results of operations and financial condition.

Because a portion of our debt is variable-rate debt, fluctuations in interest rates could have a material effect on our business. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. We currently utilize, and may in the future utilize, derivative financial instruments such as interest rate swaps to hedge some of our exposure to interest rate fluctuations, but such instruments may not be effective in reducing our exposure to interest fluctuations, and we may discontinue utilizing them at any time. As a result, we may incur higher interest costs if interest rates increase. These higher interest costs could have a material adverse impact on our financial condition and the levels of cash we maintain for working capital.

 

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In addition, certain of our variable rate indebtedness uses EURIBOR as a reference rate, but also allows us to draw at the London Interbank Offered Rate, or LIBOR, for debt denominated in U.S. dollars or British pound sterling. LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on U.S. dollar-denominated loans globally. EURIBOR is a basic rate of interest used in lending between Eurozone banks and is widely used as a reference for setting the interest rate on Euro-denominated loans globally.

The LIBOR benchmark has been the subject of national, international and other regulatory guidance and proposals to reform. In July 2017, the UK Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. These reforms may cause LIBOR to perform differently than it has in the past, and LIBOR may ultimately cease to exist after 2021. Alternative benchmark rates may replace LIBOR and could affect our debt securities, debt payments and receipts. At this time, it is not possible to predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates. Any new benchmark rate will likely not replicate LIBOR exactly, which could impact our contracts that terminate after 2021. There is uncertainty about how applicable law and the courts will address the replacement of LIBOR with alternative rates on variable rate retail loan contracts and other contracts that do not include alternative rate fallback provisions. If LIBOR ceases to exist after 2021, the interest rates on our variable rate indebtedness will be based on the Base Rate or an alternative benchmark rate, which may result in higher interest rates. In addition, any changes to benchmark rates may have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our business, results of operations and cash flows. Uncertainty as to the nature of such potential changes may also adversely affect the trading market for our ordinary shares.

The European Money Markets Institute (the authority that administers EURIBOR) has undertaken a number of reforms in response to the EU Benchmark Regulation, which was first published in June 2016 and requires only benchmarks published by “authorized administrators” to be used in new financial contracts beginning on 1 January 2022. It is unclear whether new methods of calculating EURIBOR will be established such that it continues to exist after 2021, or if alternative rates or benchmarks will be adopted. Changes in the method of calculating EURIBOR, or the replacement of EURIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing costs. This could materially and adversely affect our business, financial condition and results of operations. We cannot predict the effect of the potential changes to EURIBOR or the establishment and use of alternative rates or benchmarks. If changes are made to the method of calculating EURIBOR or EURIBOR ceases to exist, we may need to amend certain contracts and cannot predict what alternative rate or benchmark would be negotiated. This may result in an increase to our interest expense.

Risks Related to this Offering and Our Ordinary Shares     

The ownership of our ordinary shares is concentrated and your interests may conflict with the interests of our significant shareholders.

Following this offering, affiliates of BC Partners will own                 ordinary shares, which will represent approximately    % of our total outstanding ordinary shares and approximately    % of the combined voting power of our ordinary shares outstanding immediately after this offering. Our principal shareholder will have the ability to control the outcome of most matters requiring shareholder approval, including:

 

   

the election of our Board and, through our Board, decision making with respect to our business direction and policies, including the appointment and removal of our officers;

 

   

mergers, de-mergers and other significant corporate transactions;

 

   

changes to our articles of association; and

 

   

our capital structure.

 

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This voting control and influence may discourage transactions involving a change of control of the Company, including transactions in which you, as a holder of our ordinary shares, might otherwise receive a premium for your shares.

We will be a “controlled company” within the meaning of the rules of the NYSE upon completion of this offering and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Upon completion of this offering, BC Partners will continue to control a majority of the voting power of our outstanding ordinary shares. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE upon completion of this offering. Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

   

the requirement that a majority of the board of directors consist of independent directors;

 

   

the requirement that our nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

   

the requirement that our compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement for an annual performance evaluation of our corporate governance and compensation committees.

Upon completion of this offering, we intend to rely to each of these exemptions. While we are a “controlled company” within the meaning of the corporate governance standards of the NYSE, we may rely on some or all of these exemptions. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

A significant portion of our ordinary shares may be sold into the public market in the near future, which could cause the market price of our ordinary shares to drop significantly, even if our business is doing well.

Future sales of our ordinary shares in the public market after this offering and the availability of ordinary shares for future sale could adversely affect the market price of our ordinary shares prevailing from time to time. Certain of our ordinary shares currently outstanding will not be available for sale shortly after this offering due to contractual restrictions on transfers of our ordinary shares under certain lock-up agreements. Upon the expiration of these lock-up agreements,                ordinary shares will be eligible for sale 180 days after the date of this prospectus, provided that ordinary shares held by our affiliates will remain subject to volume, manner of sale, and other resale limitations set forth in Rule 144, or Rule 144, under the Securities Act of 1933, as amended, or the Securities Act (in the case of our affiliates). Furthermore, under our Articles of Association that will be effective upon the consummation of this offering, we will be authorized to issue up to                 ordinary shares, of which                shares will be outstanding following this offering. 180 days following the date of this prospectus, we would no longer be restricted under the terms of our lock-up agreement from issuing or offering additional ordinary shares. Sales of substantial numbers of ordinary shares, or the perception that these sales could occur, could adversely affect prevailing market prices for our ordinary shares and could impair our future ability to raise equity capital.

In addition, the ordinary shares subject to our equity incentive plans and the ordinary shares reserved for future delivery under such plans will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. Following this offering, we intend to file one or more registration statements on Form S-8 with the SEC, covering our ordinary shares available for future issuance under our equity incentive plans. Upon effectiveness of such registration statements, any ordinary shares subsequently issued under such plans will be eligible for sale in the public market, except to the extent that they are restricted by the lock-up agreements referred to above and subject to compliance with Rule 144 in the case of our affiliates. Sales of a large number of the

 

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ordinary shares issued under these plans in the public market could have an adverse effect on the market price of our ordinary shares. If these additional ordinary shares are sold, or if it is perceived that they will be sold in the public market, the trading price of our ordinary shares could decline substantially.

Shareholders may not be able to exercise preferential rights to subscribe for ordinary shares and, as a result, may experience substantial dilution upon future issuances of ordinary shares.

In the event of an issuance of our ordinary shares, subject to certain exceptions, each shareholder will have a pro rata preferential right to subscribe for ordinary shares in proportion to the capital represented by the ordinary shares held by such holder. This preferential right to subscribe for ordinary shares may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. The articles of association may also permit, where the subscribed capital of a company having several share classes is increased by issuing new shares in only one of these classes, the preferential right of shareholders of the other classes to be exercised only after the exercise of that right by the shareholders of the class in which the new shares are being issued. Prior to the closing of this offering, our Board will be authorized, for a period of five years after the date of creation of the authorized share capital to issue shares or grant rights to subscribe for shares up to our authorized share capital from time to time and to limit or exclude preferential rights to subscribe for ordinary shares in connection therewith. This could cause existing shareholders to experience substantial dilution of their interest in us.

We do not currently intend to pay dividends on our securities and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our ordinary shares. In addition, any distribution of dividends must be in accordance with the rules and restrictions applying under Luxembourg law.

We have not declared or paid any cash dividends on our ordinary shares since our incorporation and do not currently intend to pay cash dividends on our ordinary shares in the foreseeable future. We expect to retain all earnings, if any, generated by our operations for the development and growth of our business. In addition, our ability to pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur. Therefore, you are not likely to receive any dividends on your ordinary shares for the foreseeable future and the success of an investment in our ordinary shares will depend upon any future appreciation in our value. Consequently, investors may need to sell all or part of their holdings of ordinary shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment. There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which our shareholders have purchased our ordinary shares. Investors seeking cash dividends should not purchase ordinary shares.

Additionally, under the laws of Luxembourg, at least 5% of our net profits per year must be allocated to the creation of a legal reserve until such reserve has reached an amount equal to 10% of our issued share capital. The allocation to the legal reserve becomes compulsory again when the legal reserve no longer represents 10% of our issued share capital. Our legal reserve is not available for distribution.

In addition, exchange rate fluctuations may affect the amount of euros that we are able to distribute, and the amount in United States dollars that our shareholders receive upon the payment of cash dividends or other distributions we declare and pay in euros, if any. These factors could harm the value of our ordinary shares, and, in turn, the United States dollar proceeds that holders receive from the sale of our ordinary shares.

The rights of shareholders in companies subject to Luxembourg corporate law differ in material respects from the rights of shareholders of corporations incorporated in the United States.

The Company’s corporate affairs are governed by the Company’s articles of association and the laws of Luxembourg, including the Luxembourg Company Law (loi du 10 août 1915 concernant les sociétés commerciales, telle qu’elle a été modifiée). The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the United States. For example, under Delaware law, the board of directors of a Delaware corporation bears the ultimate responsibility for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation and its shareholders. Luxembourg law imposes a duty on directors of a Luxembourg company to: (i) act in good faith with a view to the best interests of a company; and

 

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(ii) exercise the care, diligence, and skill that a reasonably prudent person would exercise in a similar position and under comparable circumstances. Additionally, under Delaware law, a shareholder may bring a derivative action on behalf of a company to enforce a company’s rights. Under Luxembourg law, the board of directors has sole authority to decide whether to initiate legal action to enforce a company’s rights (other than, in certain circumstances, an action against members of our Board, which may be initiated by the general meeting of the shareholders, or, subject to certain conditions, by minority shareholders holding together at least 10% of the voting rights in the company). See “Description of Share Capital and Articles of Association—Differences in Corporate Law” for an additional explanation of the differences.

Further, under Luxembourg law, there may be less publicly available information about us than is regularly published by or about U.S. issuers. In addition, Luxembourg laws governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg laws and regulations in respect of corporate governance matters might not be as protective of minority shareholders as are state corporation laws in the United States. Therefore, our shareholders may have more difficulty in protecting their interests in connection with actions taken by our directors, officers or principal shareholders than they would as shareholders of a corporation incorporated in the United States. As a result of these differences, our shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. issuer.    

U.S. investors may have difficulty enforcing civil liabilities against our company and directors and senior management and the experts named in this prospectus.

The Company is organized under the laws of Luxembourg. Most of the members of our Board, our senior management and the experts named in this prospectus reside outside of the United States and a substantial portion of their assets are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon these individuals or upon us or to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. securities laws against us in the United States. Awards of punitive damages in actions brought in the United States or elsewhere are generally not enforceable in Luxembourg and penalty clauses and similar clauses on damages or liquidated damages are allowed to the extent that they provide for a reasonable level of damages and the courts of Luxembourg have the right to reduce or increase the amount thereof if it is unreasonably high or low.

The United States and Luxembourg are currently not bound by a treaty providing for reciprocal recognition and enforcement of judgments, other than arbitral awards rendered in civil and commercial matters. Therefore, an enforceable judgment for the payment of monies rendered by any U.S. Federal or state court based on civil liability, whether or not predicated solely upon the U.S. securities laws, would not directly be enforceable in Luxembourg. However, a party who received such favorable judgment in a U.S. court may initiate enforcement proceedings in Luxembourg (exequatur) by requesting enforcement of the U.S. judgment by the District Court (Tribunal d’Arrondissement) pursuant to Section 678 of the New Luxembourg Code of Civil Procedure. The District Court will authorize the enforcement in Luxembourg of the U.S. judgment if it is satisfied that all of the following conditions are met:

 

   

the U.S. judgment is enforceable (exécutoire) in the United States;

 

   

the U.S. court awarding the judgment has jurisdiction to adjudicate the applicable matter under applicable U.S. Federal or state jurisdictions rules, and the jurisdiction of the U.S. court is recognized by Luxembourg private international and local law;

 

   

the U.S. court has applied the substantive law as designated by Luxembourg conflict of laws rules according to certain Luxembourg case law, it is admitted that Luxembourg courts which are asked to grant an exequatur do not have to verify whether the substantive law actually applied by the U.S. court awarding the judgment was the law which would have been thus designated;

 

   

the U.S. judgment does not contravene international public policy or order as understood under the laws of Luxembourg;

 

   

the U.S. court has acted in accordance with its own procedural laws;

 

   

the U.S. judgment was granted following proceedings where the counterparty had the opportunity to appear, and if it appeared, to present a defense; and

 

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the U.S. judgement was not granted pursuant to an evasion of Luxembourg law (fraude à la loi luxembourgeoise).

In addition, actions brought in a Luxembourg court against us, the members of our Board, our officers or the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions. In particular, Luxembourg courts do generally not award punitive damages. It is possible that awards of damages made under civil liabilities provisions of the U.S. federal securities laws or other laws (for example, fines or punitive damages) would be classified by Luxembourg courts as being of a penal or punitive nature and would not be recognized by Luxembourg courts. Ordinarily an award of monetary damages would not be considered as a penalty, but if the monetary damages include punitive damages, such punitive damages may be considered as a penalty.

Derivative actions are generally not available to shareholders under Luxembourg law. However, minority shareholders holding securities entitled to 10% of the voting rights at the general meeting that resolved on the granting of discharge to the directors may bring an action against the directors on behalf of the company. Minority shareholders holding at least 10% of the voting rights of a company may also ask the directors questions in writing concerning acts of management of the company or one of its subsidiaries, and if the company fails to answer these questions within one month, these shareholders may apply to the Luxembourg courts to appoint one or more experts instructed to submit a report on these acts of management. This provision of Luxembourg law does not apply to claims under the U.S. federal securities laws. Furthermore, consideration would be given by a Luxembourg court in summary proceedings to acts that are alleged to constitute an abuse of majority rights against the minority shareholders.

Litigation in Luxembourg also is subject to rules of procedure that differ from the U.S. rules, including with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in Luxembourg would have to be conducted in the French or German language, and all documents submitted to the court would, in principle, have to be translated into French or German.

There is no published case law in Luxembourg in relation to the recognition of limited recourse provisions by which a party agrees to limit its recourse against the other party to the assets available at any given point in time with such other party. Additionally, there is no published case law in Luxembourg in relation to the recognition of foreign law governed subordination provisions whereby a party agrees to subordinate its claims of another party. If a Luxembourg court had to analyze the enforceability of such provisions, it is likely that such a court would consider the position taken by Belgian and Luxembourg legal scholars according to which limited recourse provisions are enforceable against the parties thereto but not against third parties.

A contractual provision allowing the service of process against a party to a service agent could be overridden by Luxembourg statutory provisions allowing the valid serving of process against a party subject to and in accordance with the laws of the country where such party is domiciled.

For these reasons, it may be difficult for a U.S. investor to bring an original action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against us, the members of our Board, our executive officers and the experts named in this prospectus. In addition, even if a judgment against us, the non-U.S. members of our Board, senior management or the experts named in this prospectus based on the civil liability provisions of the U.S. federal securities laws is obtained, a U.S. investor may not be able to enforce it in U.S. or Luxembourg courts.

Luxembourg and European insolvency and bankruptcy laws are substantially different than U.S. insolvency laws and may offer our shareholders less protection than they would have under U.S. insolvency and bankruptcy laws.

As a company organized under the laws of Luxembourg and with its registered office in Luxembourg, the Company is subject to Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against us including, among other things, Council and European Parliament Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast). If courts in another European country determine that the insolvency and bankruptcy laws of that country apply to us in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against us. Insolvency

 

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and bankruptcy laws in Luxembourg or the relevant other European country, if any, may offer our shareholders less protection than they would have under U.S. insolvency and bankruptcy laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency and bankruptcy laws.

Dividends paid by us to our shareholders may be subject to withholding tax.

Under current Luxembourg tax law, dividends distributed by us to an individual or an entity, which is not eligible for the participation exemption regime (described below under “Material United States and Luxembourg Income Tax Considerations—Luxembourg Tax Consequences”), are subject to a 15% withholding tax, unless a reduced treaty rate applies. Whether a shareholder may benefit from a double tax treaty concluded by Luxembourg must be analyzed on a case-by-case basis.

In the event that the withholding tax is paid, its amount may in principle be creditable against the income tax paid by the shareholder in his/her state of residence. Nevertheless, prospective shareholders should consult their local advisor concerning the foreign tax consequences associated with a withholding tax paid in Luxembourg on dividends distributed by us.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NYSE’s corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the NYSE’s corporate governance listing standards.

We are a “foreign private issuer,” as defined in the SEC’s rules and regulations. The NYSE’s Listing Rules include certain accommodations in the corporate governance requirements that allow foreign private issuers to follow “home country” corporate governance practices in lieu of the otherwise applicable corporate governance standards of the NYSE. The application of such exceptions requires that we disclose the NYSE’s Listing Rules that we do not follow and describe the Luxembourg corporate governance standards in lieu of the relevant NYSE corporate governance standard. If and when our ordinary shares are listed on the NYSE, we intend to continue to follow Luxembourg corporate governance practices in lieu of the corporate governance requirements of the NYSE in certain respects. Certain corporate governance practices in Luxembourg may differ significantly from the NYSE’s Listing Rules.

For an overview of our corporate governance principles, see “Description of Share Capital and Articles of Association.” Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to these NYSE requirements.

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

We will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of annual reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

 

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We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

While we currently qualify as a foreign private issuer, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. In the future, we would lose our foreign private issuer status if we to fail to meet the requirements necessary to maintain our foreign private issuer status as of the relevant determination date. For example, if more than 50% of our securities are held by U.S. residents and more than 50% of either our directors or executive officers are residents or citizens of the United States, we could lose our foreign private issuer status.

The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We would be required under current SEC rules to prepare our financial statements in accordance with U.S. GAAP, rather than IFRS. Such conversion of our financial statements to U.S. GAAP would involve significant time and cost, and we would still be required to prepare financial statements in accordance with IFRS as required by Luxembourg law. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers such as the ones described above and exemptions from procedural requirements related to the solicitation of proxies.

We have broad discretion in the use of the net proceeds from the offering and may not use them effectively.

Our Board will have broad discretion in applying the net proceeds of this offering and investors will be relying on our judgment regarding the application of the net proceeds of this offering. See “Use of Proceeds.” Pending their use, we may invest the net proceeds from the offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.

Based on our planned use of the net proceeds of the offering and our current cash, cash equivalents and current financial assets, we estimate that such funds will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through at least the next 12 months from the date of this prospectus. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect. The failure by our management to apply these funds effectively could harm our business and financial condition.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, we will incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE and other applicable securities rules and regulations impose various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We expect that we will need to hire additional accounting, finance and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company and our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. These requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that the rules and regulations applicable to us as a public company may make it more difficult and more expensive for us to obtain director and officer liability insurance, which could make it more difficult for us to attract and retain qualified members of our Board. We are currently evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.    

 

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Our management has limited experience in operating a public company.

Our current management team has limited experience in managing a public company. We have not historically had the resources typically found in a public company. Our internal infrastructure may not be adequate to successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Our limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of Keter. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. We may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our lack of experience or employees. In order to fulfill public company obligations, we may have to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.

If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group (if any). If our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations, regardless of whether we are treated as a controlled foreign corporation (although recent regulations significantly limit the application of these rules). A United States shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. Failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult its advisors regarding the potential application of these rules to an investment in the ordinary shares.

There can be no assurance that we will not be a passive foreign investment company for U.S. federal income tax purposes, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. investors.

Under the United States Internal Revenue Code of 1986, as amended, or the Code, we will be a passive foreign investment company, or a PFIC, for any taxable year in which, after the application of certain look-through rules with respect to subsidiaries, either (i) 75% or more of our gross income consists of “passive income,” or (ii) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, “passive income.” Passive income generally includes dividends, interest, certain non-active rents and royalties, and capital gains. Based on the nature of our business, our financial statements, our expectations about the nature and amount of our income, assets and activities and the expected price of our ordinary shares in this offering, we do not believe we were a PFIC in 2020 and we do not expect to be a PFIC for our current taxable year or in the foreseeable future. Whether we or any of our subsidiaries will be a PFIC in

 

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2021 or any future year is a factual determination that must be made annually at the close of each taxable year, and, thus, is subject to significant uncertainty, because (i) a determination of whether a company is a PFIC must be made annually after the end of each taxable year and will depend on the composition of our income and assets and the market value of our assets from time to time and (ii) we will hold a substantial amount of cash following this offering, we cannot assure you that we will not be a PFIC for the current or any future taxable year.

If we are a PFIC for any taxable year during which a U.S. Holder (as defined in “Material United States and Luxembourg Income Tax Considerations—Material U.S. Federal Income Tax Considerations to U.S. Holders”) holds our ordinary shares, we generally would continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding years during which the U.S. Holder holds our ordinary shares even if we ceased to meet the threshold requirements for PFIC status, unless certain exceptions apply. Such a U.S. Holder may be subject to adverse U.S. federal income tax consequences, including (i) the treatment of all or a portion of any gain on disposition as ordinary income, (ii) the application of a deferred interest charge on such gain and the receipt of certain dividends and (iii) with the application of certain reporting requirements. In addition, if we are a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares and any of our non-U.S. subsidiaries are also PFICs, such U.S. Holder will be treated as owning a proportionate amount (by value) of the shares of each such non-U.S. subsidiary classified as a PFIC for purposes of the application of these rules. There is no assurance that we will provide information that will enable investors to make a qualified electing fund election, also known as a QEF Election, which could mitigate the adverse U.S. federal income tax consequences should we be classified as a PFIC.

For further discussion, see “Material United States and Luxembourg Income Tax Considerations— Material U.S. Federal Income Tax Considerations to U.S. Holders.”

General Risk Factors

There has been no prior public market for our ordinary shares and an active and liquid market for our ordinary shares may fail to develop, which could harm the market price of our ordinary shares.

Prior to this offering, there has been no public market for our ordinary shares. Although we anticipate our ordinary shares being approved for listing on the NYSE, an active trading market for our ordinary shares may never develop or be sustained following this offering. The initial public offering price of our ordinary shares will be based and determined through negotiations between us and the underwriters. This initial public offering price may not be indicative of the market price of our ordinary shares after this offering. In the absence of an active trading market for our ordinary shares, investors may not be able to sell their ordinary shares at or above the initial public offering price or at the time that they would like to sell. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or assets by using our shares as consideration.

You will incur immediate and substantial dilution as a result of this offering.

If you purchase ordinary shares in this offering, you will incur immediate and substantial dilution of $        per ordinary share, after giving effect to the sale by us of the ordinary shares offered by us in the offering and assuming an initial public offering price of $        per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and our as further adjusted net tangible book value estimated at December 31, 2020 would have been approximately €        million, representing €        per ordinary share. This represents an immediate increase in as adjusted net tangible book value of €        per ordinary share to existing shareholders and an immediate dilution in as further adjusted net tangible book value of €        per ordinary share to new investors purchasing ordinary shares in this offering. Dilution for this purpose represents the difference between the price per ordinary share paid by these purchasers and as further adjusted net tangible book value per ordinary share immediately after the completion of the offering. As a result of the dilution to investors purchasing ordinary shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. For more information on the dilution you may suffer as a result of investing in this offering, see the section of this prospectus titled “Dilution.”

 

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Our operating results and share price may be volatile, and the market price of our ordinary shares after this offering may drop below the price you pay.

Our quarterly operating results are likely to fluctuate in the future as a publicly traded company. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operating performance. You may not be able to resell your shares at or above the initial public offering price or at all. Our operating results and the trading price of our ordinary shares may fluctuate in response to various factors, including:

 

   

market conditions in the broader stock market;

 

   

actual or anticipated fluctuations in our quarterly financial and operating results;

 

   

introduction of new products or services by us or our competitors;

 

   

issuance of new or changed securities analysts’ reports or recommendations;

 

   

changes in debt ratings;

 

   

results of operations that vary from expectations of securities analysts and investors;

 

   

guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;

 

   

strategic actions by us or our competitors;

 

   

announcement by us, our competitors, or our vendors of significant contracts or acquisitions;

 

   

sales, or anticipated sales, of large blocks of our stock;

 

   

additions or departures of key personnel;

 

   

regulatory, legal, or political developments;

 

   

public response to press releases or other public announcements by us or third parties, including our filings with the SEC;

 

   

litigation and governmental investigations;

 

   

changing economic conditions;

 

   

changes in accounting principles;

 

   

default under agreements governing our indebtedness; and

 

   

other events or factors, including those from natural disasters, pandemic, pet disease, war, acts of terrorism, or responses to these events.

These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our ordinary shares to fluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful indication of future results, fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares and may otherwise negatively affect the market price and liquidity of our shares. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes brought securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

 

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If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us, our business or our market, if they adversely change their recommendations regarding our ordinary shares, or if our operating results do not meet their expectations or any financial guidance we may provide, the trading price or trading volume of our ordinary shares could decline.

The trading market for our ordinary shares will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over independent analysts. If we obtain independent securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our ordinary shares, changes their opinion of our ordinary shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our ordinary shares could decrease and we could lose visibility in the financial markets, which could cause our ordinary shares and trading volume to decline. In addition, we have provided and expect to continue to provide various measures of financial guidance, possibly including guidance related to non-GAAP financial measures, and, if we do not meet any financial guidance that we may provide to the public, if we do not meet expectations of securities analysts or investors, or if our guidance is misunderstood by securities analysts or investors, the trading price of our ordinary shares could decline significantly. Our operating results may fluctuate significantly from period to period as a result of changes in a variety of factors affecting us or our industry, many of which are difficult to predict. As a result, we may experience challenges in forecasting our operating results for future periods.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains certain statements that are or may be forward-looking statements with respect to us, our industry and our business that involve substantial risks and uncertainties. All statements other than statements of historical factors contained in this prospectus, including statements regarding our future financial condition, results of operations and/or business achievements, including, without limitation, statements containing the words “believe,” “anticipate,” “expect,” “estimate,” “may,” “could,” “should,” “would,” “will,” “intend” and similar expressions are forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Such forward-looking statements involve unknown risks, uncertainties and other factors which may cause our actual results, financial condition, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

 

   

demand for our products is significantly influenced by general economic conditions and trends in consumer spending on indoor and outdoor living spaces and home exteriors, and adverse trends in, among other things, the health of the economy, consumer confidence, discretionary spending and institutional funding constraints;

 

   

risks related to competition in our industry and our ability to develop new and improved products;

 

   

risks related to maintaining (i) our manufacturing capabilities and (ii) our supply chain;

 

   

dependence on key customers and sales channels and credit and non-payment risks of our key distributors and customers;

 

   

risks related to the global nature of our business;

 

   

our ability to attract and retain key personnel;

 

   

risks related to acquisitions or joint ventures;

 

   

our dependence on the strength of our brands and the third-party brands that we sell;

 

   

the increased expenses associated with being a public company;

 

   

risks related to product liability claims or product recalls;

 

   

risks related to compliance with environmental, anti-corruption and other regulations;

 

   

our ability to protect our intellectual property rights;

 

   

risks related to our substantial indebtedness; and

 

   

other risks and uncertainties, including those described under “Risk Factors.”

You should refer to the section of this prospectus titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act do not protect any forward-looking statements that we make in connection with this offering.

In addition, statements that “we believe” and other similar statements reflect our belief and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus,

 

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and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $            million (€            million) (or approximately $            million (€            million) if the underwriters exercise in full their option to purchase additional ordinary shares), based on an assumed initial public offering price of $            per ordinary share, which is the midpoint of the estimated initial offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

We currently expect to use the net proceeds from this offering as follows:

 

   

the redemption of all of the €            million aggregate principal amount of indebtedness outstanding under our PIK Facility Agreement, dated as of October 29, 2016, among Krona Holding (Luxembourg) II SARL and the other parties named therein, or our PIK Facility Agreement, and to pay related fees and expenses; and

 

   

for general corporate purposes, including acquisitions and debt repayment.

The loans under the PIK Facility Agreement mature on October 31, 2024 and accrue interest at a rate of (a) 11.5% per annum; or (b) 11.0% per annum, if and to the extent interest is paid in cash.

Our expected use of the net proceeds from this offering represents our current intentions based upon our present plans and business conditions, which could change in the future as our plans and business conditions evolve. We cannot predict with certainty all of the particular uses for the net proceeds to be received upon the consummation of this offering or the amounts that we will actually spend on the uses set forth above. As a result, our Board will have broad discretion in applying the net proceeds of this offering and investors will be relying on our judgment regarding the application of the net proceeds of this offering.

Each $1.00 (€         ) increase or decrease in the assumed initial public offering price of $          (€         ) per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease our net proceeds from this offering by $              (€             ), assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. We may also increase or decrease the number of ordinary shares we are offering. Each increase or decrease in the number of ordinary shares offered by us would increase or decrease the net proceeds to us from the sale of the ordinary shares we are offering by $              (€             ), assuming that the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions. Each increase in the number of ordinary shares offered by us together with a concomitant $1.00 (€         ) increase in the assumed initial public offering price would increase the net proceeds to us from the sale of the ordinary shares we are offering by $             (€             ), after deducting underwriting discounts and commissions. Each decrease in the number of ordinary shares offered by us together with a concomitant $1.00 (€         ) decrease in the assumed initial public offering price would decrease the net proceeds to us from the sale of the ordinary shares we are offering by $             (€             ), after deducting underwriting discounts and commissions. The information on net proceeds payable to us discussed above is illustrative only and will adjust based on the actual public offering price, the actual number of ordinary shares offered by us and other terms of the offering determined at pricing.

 

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DIVIDEND POLICY

We do not anticipate declaring or paying any cash dividends to holders of our ordinary shares in the foreseeable future. We currently intend to retain future earnings, if any, to finance the growth of our business.

Our future dividend policy is within the discretion of our Board and will depend upon then-existing conditions, including our results of operations, financial condition, capital requirements, investment opportunities, statutory restrictions on our ability to pay dividends and other factors our Board may deem relevant. Please read “Risk Factors—Risks Related to this Offering and Our Ordinary Shares—We do not currently intend to pay dividends on our securities and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our ordinary shares. In addition, any distribution of dividends must be in accordance with the rules and restrictions applying under Luxembourg law.” Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources,” for descriptions of restrictions on our ability to pay dividends.

 

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CAPITALIZATION

The table below sets forth our cash and cash equivalents and our total capitalization as of June 30, 2021:

 

   

on an actual basis for Krona Holding;

 

   

on an as adjusted basis for Keter Group SA to give effect to (i) the acquisition by Keter Group SA of all of the assets and operations of Krona Holding by way of contribution by Krona Acquisition SARL of all of its shares in Krona Holding to Keter Group SA, (ii) the sale of ordinary shares by us in the offering, at an assumed initial public offering price of $         (€         ) per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus and (iii) the use of proceeds from this offering as described herein.

You should read this table together with our consolidated financial statements and related notes including in this prospectus, as well as the sections of this prospectus titled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this prospectus.

 

     As of June 30, 2021  
     Actual     As Adjusted  
     (€)  

Cash and cash equivalents

     116.1                         
  

 

 

   

 

 

 

Debt:

    

PIK Loans

     236.7    

Senior loan facility agreement

     1,087.0    

Revolving credit facility

     0.3    

Asset-backed facilities

     31.0    

Other short-term loans

     65.2    

Total debt

     1,420.2    
  

 

 

   

 

 

 

Equity:

    

Ordinary shares, €1 par value; 319,501,352 shares outstanding, actual; no shares outstanding, as adjusted

     766.4    

Ordinary shares, €0.01 par value; no shares outstanding, actual;                  shares outstanding, as adjusted

     —      

Other reserves

     19.5    

Accumulated other comprehensive income

     (2.1  

Accumulated deficit

     (1,096.6  
  

 

 

   

 

 

 

Total equity

     (312.8  
  

 

 

   

 

 

 

Total capitalization

     1,107.4    
  

 

 

   

 

 

 

The number of our outstanding ordinary shares after this offering is based on              ordinary shares outstanding as of                 , 2021, and excludes ordinary shares available for future issuance under our equity incentive plan. See “Management—2021 Equity Incentive Plan.”

Unless otherwise indicated, all information contained in this prospectus also reflects and assumes:

 

   

the amendment and restatement of our articles of association, which will be in effect on the completion of this offering;

 

   

no exercise by the underwriters of their option to purchase additional shares; and

 

   

an assumed initial public offering price of $        per ordinary share, which is the midpoint of the estimated initial offering price range set forth on the cover page of this prospectus.

 

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DILUTION

If you invest in our ordinary shares, your ownership interest will be diluted to the extent of the difference between the initial public offering price per ordinary share and the net tangible book value per ordinary share immediately after the consummation of this offering.

At June 30, 2021, we had a net tangible book value of €             , ($             ), corresponding to a net tangible book value of €         ($        ) per ordinary share. Historical net tangible book value per ordinary share represents the amount of our total tangible assets less our total liabilities, divided by the total number of our ordinary shares outstanding as of such date.

Our pro forma net tangible book value as of June 30, 2021 was €         , ($         ), or €         ($         ) per ordinary share. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, divided by the total number of ordinary shares outstanding as of such date.

After giving further effect to the sale by us of the ordinary shares offered by us in the offering and the use of proceeds as described in “Use of Proceeds,” and assuming an initial public offering price of $         per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at June 30, 2021 would have been approximately €              ($             ), representing €         ($         ) per ordinary share. This represents an immediate increase in as adjusted net tangible book value of €         ($         ) per share to existing shareholders and an immediate dilution in net tangible book value of €         ($         ) per share to new investors purchasing ordinary shares in this offering. Dilution for this purpose represents the difference between the price per ordinary share paid by these purchasers and the pro forma as adjusted net tangible book value per ordinary share immediately after the consummation of the offering.

The following table illustrates this dilution:

 

Assumed initial public offering price per ordinary share

      $    

Historical net tangible book value per ordinary share as of June 30, 2021

     

Increase per ordinary share attributable to the pro forma adjustments described above

     
  

 

 

    

Pro forma net tangible book value per share at June 30, 2021

     

Increase in net tangible book value per share attributable to new investors

                                       
  

 

 

    

 

 

 

Pro forma as adjusted net tangible book value per share after the offering

     
     

 

 

 

Dilution per ordinary share to new investors

      $    
     

 

 

 

If the underwriters exercise their option to purchase additional ordinary shares in full, pro forma the as adjusted net tangible book value per ordinary share after the offering would be €         ($         ) per ordinary share, the increase in the as adjusted net tangible book value per ordinary share would be €         ($         ) per ordinary share and the dilution to new investors purchasing ordinary share in this offering would be €         ($         ) per ordinary share.

Each $1.00 (€             ) increase or decrease in the initial assumed public offering price of $         (€        ) per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value by €             ($             ) and the dilution to investors in the offering by €         ($         ) per ordinary share, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of ordinary shares we are offering. The dilution information discussed above is illustrative only and will adjust based on the actual initial public offering price, the actual number of ordinary shares offered by us and other terms of the offering determined at pricing.

 

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The following table sets forth, pro forma on as adjusted basis, as of June 30, 2021 consideration paid to us in cash for ordinary shares purchased from us by our existing shareholders and by new investors for ordinary shares purchased in the offering, based on an assumed initial public offering price of $         per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, and before deducting underwriting discounts and commissions and estimated offering expenses payable by us:

 

     Ordinary shares     Total consideration     Average
price per
ordinary
share
 
     Amount      Percentage     Amount      Percentage  

Existing shareholders

                                                                     

New investors

                              
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

        100                   100    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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SELECTED CONSOLIDATED FINANCIAL DATA

The following tables present the selected consolidated financial and other data for Krona Holding and its subsidiaries. The selected consolidated statement of comprehensive income data and selected consolidated statement of cash flows data for the three years ended December 31, 2020 and the selected statement of financial position data as of December 31, 2020 and 2019 presented below, as applicable, have been derived from Krona Holding’s audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of comprehensive income data for the three and six months ended June 30, 2021 and 2020, the selected consolidated statement of cash flows data for the six months ended June 30, 2021 and 2020 and the selected consolidated statement of financial position data as of June 30, 2021 have been derived from Krona Holding’s unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. In the opinion of management, our unaudited interim condensed consolidated financial statements were prepared on the same basis as our audited Consolidated Financial Statements and include all adjustments necessary for a fair presentation of the financial information set forth in those statements. We maintain our books and records in euros, and we prepare our consolidated financial statements under IFRS as issued by the IASB.

Historical results are not necessarily indicative of the results expected for any future period. You should read the selected consolidated financial data below together with our unaudited interim condensed consolidated financial statements and our audited consolidated financial statements and related notes thereto, as well as the sections titled “Summary Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other information appearing elsewhere in this prospectus.

The historical financial and other data of Keter Group SA have not been presented since it is a newly incorporated entity formed with nominal capital, has had no business transactions or activities to date and had no assets or liabilities during the periods presented in this section.

During the six months ended June 30, 2021, Keter commenced preparation for an initial public offering, or IPO. As of June 30, 2021, related costs of approximately €8.7 million have been incurred by Keter Group Holding S.à r.l., and will ultimately be recorded in the financial statements of Keter Group S.A., the registrant. Transaction costs directly related to the issuance of new shares for raising capital will be initially recorded as a deferred charge until recognized directly in equity upon IPO. There is no current obligation or intent of Krona Holding and its subsidiaries to directly or indirectly reimburse such costs incurred by Keter Group Holding S.à r.l., and therefore these costs are not recognized in the financial statements of Krona Holding. All other IPO related costs (i.e. costs that are not directly related to the issuance of new shares) will be recharged to the subsidiaries of Krona Holding, and therefore are recognized by Krona Holding as an expense as incurred. For the three and six months ended June 30, 2021, IPO related costs of €5.2 million and €5.5 million, respectively, have been recognized by Krona Holding.

 

     Three months ended
June 30,
     Six months ended
June 30,
     Fiscal year ended
December 31,
 
     2021      2020      2021      2020      2020      2019      2018  
( in millions)                     

Consolidated Statements of Comprehensive Income Data:

                    

Revenue

   444.3      328.9      855.0      657.5      1,235.70      1,206.90      1,119.80  

Cost of Sales

     294.3        216.1        559.4        435.7        818.2        868.2        834.1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross Profit

     150.1        112.8        295.6        221.8        417.5        338.7        285.6  

Selling and distribution expenses

     85.9        67.8        165.4        135.8        272.7        275.8        256.1  

Research and development expenses

     2.1        1.4        4.2        2.7        5.5        5.8        5.2  

General and administrative expenses

     36.0        23.8        66.2        47.7        108.0        99.3        102.6  

Impairment of goodwill

     —          —          —          —          —          —          614.3  

 

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     Three months ended
June 30,
   

Six months ended

June 30,

    Fiscal year ended
December 31,
 
     2021     2020     2021     2020     2020     2019     2018  
( in millions)                   

Gain on sale and leaseback transaction

   —       —       —       —       —       11.0     —    

Other operating income, expenses, gains and losses, net

     0.1       —         0.3       0.2       0.6       0.9       0.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

     26.2       19.8       60.1       35.9       31.9       (30.2     (692.3

Finance income

     —         —         —         —         0.1       0.1       0  

Finance costs

     27.6       27.2       54.1       54.4       109.3       107.4       94.5  

Other finance gains (losses), net

     (2.2     (2.1     1.5       (3.4     (10.8     (7.1     0.1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) before tax

     (3.6     (9.4     7.4       (21.9     (88.1     (144.6     (786.7

Income tax (expense) benefit

     (1.1     1.9       (5.0     3.2       11.3       7.2       24.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit (loss) for the period

     (4.7     (7.5     2.4       (18.8     (76.8     (137.4     (762.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     As of
June 30,
     As of
December 31,
 
     2021      2020      2019  
( in millions)              

Consolidated Statement of Financial Position Data:

        

Cash and cash equivalents

   116.1      79.7      34.1  

Total assets

     1,594.7        1,475.0        1,549.1  

Total liabilities

     1,907.5        1,805.9        1,812.7  

Total equity

     (312.8      (331.0      (263.5

 

     Six months ended
June 30,
    Fiscal year ended
December 31,
 
     2021     2020     2020     2019     2018  
( in millions)                   

Consolidated Statement of Cash Flows Data:

          

Net cash provided by (used in):

          

Operating activities

   59.8     92.3     144.0     18.6     27.1  

Investing activities

   (17.1   (13.0   (43.1   (14.9   (127.5

Financing activities

   (7.9   (56.2   (52.6   (26.8   105.4  

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes included elsewhere in this prospectus. The following discussion contains forward-looking statements that involve certain risks and uncertainties. Our actual results could differ materially from those discussed in these statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly under the “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” sections.

Our audited consolidated financial statements are prepared pursuant to IFRS as issued by IASB. Our unaudited interim condensed consolidated financial statements are prepared in accordance with IFRS IAS 34 Interim Financial Reporting, or IAS 34, as issued by IASB. As permitted by the rules of the SEC for foreign private issuers, we do not reconcile our financial statements to U.S. GAAP.

Overview

For over 70 years, Keter has inspired people to create amazing spaces in and around the home through an innovative, industry-leading portfolio of durable indoor and outdoor lifestyle solutions. Our balanced and diversified portfolio of categories, brands and products, which is unmatched by our competition in terms of design, functionality, quality, breadth or global reach, is defended by an intellectual property portfolio of approximately 1,500 registered patents as of September 5, 2021, and decades of accumulated know-how. Our products are distributed in approximately 100 countries through a network of blue-chip, omnichannel retail partners, with Keter having a superior presence in the e-commerce channel, compared to the broader household products industry. We believe the breadth, depth and quality of our product offering makes us a preferred partner and one-stop shop for customers, who often consider us a category captain, and to whom we provide innovative, sustainable and cost-efficient products. In the year ended December 31, 2020, we generated €1.2 billion in revenue, a loss for the year of €76.8 million and €194.4 million in Adjusted EBITDA. In the six months ended June 30, 2021, we generated €855.0 million in revenue, €2.4 million in profit for the period and €149.3 million in Adjusted EBITDA.

Keter primarily serves large, resilient and growing markets in and around the home. Our TAM is estimated to have generated retail sales of approximately $27.8 billion across North America and Europe in 2020, and is fueled by secular tailwinds, including increased at-home activities, growing home improvement spend and a shift toward suburban living. The most attractive market segment within this large TAM, resin-based solutions, is estimated to have generated retail sales of approximately $9.7 billion in 2020 and is expected to grow at a CAGR of 4.4% between 2020 and 2023, nearly twice the pace of products made of other materials. As the leading player in resin-based products at twice the size of its closest competitor, we believe Keter is best positioned to enjoy accelerated growth in large part due to our compelling value proposition for consumers and innovation pipeline.

Innovation underpins everything Keter does and this capacity for innovation is a core competitive advantage, a fundamental part of Keter’s corporate culture and a key driver of future success. We take a market-led approach to understanding and, at times, anticipating the needs of consumers across our various product categories and geographies to create solutions that are functional, beautifully designed, durable and accessible to a broad consumer base.

Our portfolio is primarily marketed under our range of proprietary brands and under exclusive licenses with widely recognized third-party brands. Our branded offering is tactically supplemented by store-branded product lines, which we undertake in collaboration with select retail partners based on a set of strict criteria related to volume, growth potential and profitability.

We bring our products to market through a diverse and powerful group of retail partners in approximately 100 countries around the world, with a focus on the attractive North America and Europe markets where our products are sold in more than 70% of the top 50 hardlines retailers. We have long-established partnerships with

 

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most of Europe and North America’s 50 largest retailers across the key home improvement, mass, club and specialist channels, including The Home Depot, Lowe’s, Costco, Walmart, Target, B&Q, Leroy Merlin, Castorama, IKEA, Action and many others. We also have a fast-growing digital presence, including through e-commerce pure players such as Amazon and Wayfair, and through the e-commerce websites of many of our retail partners pursuing omnichannel strategies including home delivery and click and collect. Across our entire distribution network, we estimate that approximately 30% of our sales in 2020 were to consumers through an online platform, whether pure-play or omnichannel.

We report our results in two segments, Outdoor and Indoor:

 

   

Our Outdoor segment is led by our proprietary brand Keter. The segment comprises three main product solutions: outdoor furniture and planters, sheds and buildings and deck boxes and leisure. Our Outdoor segment benefits from consumers’ growing investment in their outdoor spaces and the appeal of our products, which combine highly aesthetic designs with significantly greater durability, lower maintenance and greater value, compared to products manufactured with traditional materials such as wood, rattan or metal.

 

   

Our Indoor segment is led by our proprietary Curver brand and comprises four main product solutions: home storage and organization, tool storage cabinets and shelving and totes and medical containers. As a leading player across most of our indoor product categories, Keter capitalizes on long-term, favorable trends with a differentiated product portfolio focused on design innovation and quality. These categories benefit from the continued strength of the housing market and increasing spend on home improvement, renovation and restoration activity, and the growing interest in home decoration and organization.

Key Factors Affecting Our Results of Operations

Factors Driving Demand for our Products

Our business is largely impacted by the demands of our customers, which is itself affected by the following items:

 

   

General economic conditions: Demand for our products is subject to a number of macro-economic factors impacting our customers and consumers. At a high level, demand for our products depends in part on the level of consumer spending and residential improvement, in particular, the amount of spending on indoor and outdoor living spaces. Home improvement is affected by, among other things, consumer confidence and spending habits, demographic trends, unemployment rates, interest rates, tariffs, industrial production levels and other general economic conditions. Changes in these economic conditions can impact the revenue generated from our products sold during any given period.

 

   

Lifestyle and design trends: Demand for our products is affected by a number of lifestyle and design trends and the extent to which consumers prioritize spending to enhance indoor or outdoor living spaces for their homes. We believe consumer preferences have increased spending on indoor and outdoor living and home exteriors in recent years.

 

   

Product innovation: Our success depends on our ability to adapt, anticipate and respond to changes in consumer preferences. We focus our efforts on introducing innovative solutions that are functional, beautifully designed, durable and accessible to a broad consumer base in order to differentiate and, especially in the case of our Outdoor segment, influence the progressive shift in consumer preference from traditional materials, such as wood and metal, towards more durable and sustainable materials and as such expand our markets. We believe that new products will enhance our ability to compete at a variety of price points and contribute to margin expansion, and we expect to continue to devote significant resources to developing innovative new products. Additionally, we continue to focus on innovating sustainable products as consumers are increasingly environmentally conscious when making purchasing decisions, with approximately 70% of consumers indicating sustainability is a

 

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factor in their decision-making process. The sales generated from our products sold during a given period will depend in part on our ability to successfully introduce new products that generate additional demand.

 

   

Sales and marketing activities: Our success depends on our ability to expand and enhance the awareness of our brands as well as effectively communicate on the benefits of our products and our latest innovations. Demand for our products also depends on our ability to strengthen partnerships with existing retailers and develop new relationships to increase our market presence and overall visibility. In every market, we leverage our brands, innovation and the unrivaled breadth of our portfolio to strengthen our market positions with our retail partners and drive growth. We believe that our products are particularly well-suited to serve fast-growing omnichannel activities of traditional retailers and pure e-commerce players. In addition, an increasingly large share of offline sales start with a purchase decision made by consumers online, allowing us to engage with consumers directly and build brand visibility and equity. We have a well-defined omnichannel strategy underpinned by online marketing, product innovation and a tactical approach to engage consumers directly in order to control brand experience and to collect consumer insights.

 

   

Pricing strategy: While our products are accessible to a broad consumer base, we aim to price our products with confidence and at a premium relative to competing solutions based on the value proposition they provide, including degree of innovation, design, quality, performance and brand recognition. Our prices are determined taking into consideration market dynamics, and such factors described above, as well as recent or anticipated changes in input costs. Frequency of pricing amendment is ultimately guided by any changes in the above parameters.

Product Mix

We offer a wide variety of products across numerous product lines within our Indoor and Outdoor segments. These products might generate different profit margins as they are sold at different prices, are composed of different materials and involve varying levels of manufacturing and logistics complexity. For example, Direct Contribution margin of our Outdoor segment slightly exceeds the Direct Contribution margin of our Indoor Segment. In addition to the impacts attributable to product mix as between Outdoor and Indoor segments, our results of operations are impacted by the relative margins associated with individual products. In particular, products recently introduced in the marketplace are typically generating higher margins. Similarly, proactive portfolio management and rationalization may impact favorably our overall profitability as we continue to focus on profitable growth and discontinue lower profitability products.

Cost of Materials

The cost of materials represents the majority of our cost of sales. The primary raw materials used in our products are various petrochemical resins, primarily polypropylene, both in virgin and recycled forms, as well as various additives, including modifiers and pigments. We also purchase metal components, packaging, and cushions.

The cost of petrochemical resins used in our manufacturing processes has historically varied significantly and has notably been affected by regional changes in supply and demand and by the price of crude oil. Most of our resins are purchased under supply contracts that are negotiated annually. Prices are typically linked to an industry benchmark price index and are therefore variable. In addition, we also purchase resin through spot market purchases that are negotiated on a continuous basis in-line with current market prices. We do not hedge our petrochemical resin exposure at this time, but we may choose to enter into such hedges in the future.

We seek to mitigate the impact of resin prices on our business using six main strategies: (i) introducing margin accretive innovative products, (ii) aiming at passing through input cost in an inflationary environment whilst aiming to maintain the pricing of our product portfolio in a deflationary environment, (iii) increasing the

 

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use of recycled resins with lower cost than virgin resins, (iv) driving operational leverage and delivering further operational efficiencies, (v) continuously identifying, optimizing and sometimes voluntarily discontinuing less profitable products and (vi) leveraging our regional footprint to broaden our supplier base and optimize pricing through local purchasing.

We have long-standing relationships with our suppliers, having worked with many for over 10 years. We have a well-diversified supplier base that effectively mitigates any concentration risk and have not historically experienced any significant interruptions to supply. Except for metals, which are primarily sourced from Asia, our raw materials are dual-sourced, and suppliers are predominantly located close to our operations, thereby limiting the risk of potential supply chain disruption.

COVID-19

Since the onset of the COVID-19 pandemic, we have been focused on protecting our employees’ health and safety, meeting our customers’ needs as they navigate an uncertain financial and operating environment, working closely with our suppliers to protect our ongoing business operations and rapidly adjusting our short-, medium- and long-term operational plans to proactively and effectively respond to the current and potential future public health crises. The COVID-19 pandemic has, in the past, had an effect on our business and results of operations. For example, we experienced significant disruptions to our business during the successive lockdowns affecting our end-markets, notably in March and April 2020. While the COVID-19 pandemic continues to present serious concerns for our business and operations, our employees and their families, our customers and our suppliers, we believe that we have adapted well to the wide ranging changes that the global economy is currently undergoing, and we remain confident that we will continue to maintain business continuity, produce and sell our products safely and in compliance with applicable laws and governmental orders and mandates, maintain our robust and flexible supply chains and be in a strong position to maintain financial flexibility even in the event of a potentially extended economic downturn. This discussion and analysis includes periods prior to the outbreak of the COVID-19 pandemic. The ultimate impact of the COVID-19 pandemic on the global economy and on our business, financial, condition and results of operations will depend in part on future developments, such as the possibility that quarantines, shelter-in-place and other travel and business restrictions may be reinstated in the locations in which we operate. We will continue to monitor the situation closely. As the COVID-19 pandemic continues, it may also have the effect of heightening many of the risks described in “Risk Factors” in this prospectus. See “Risk Factors” and Note 1.3 to our audited consolidated financial statements included elsewhere in this prospectus for a further discussion of the adverse impacts of the COVID-19 pandemic on our business.

Acquisitions

Throughout our history, we have made selected acquisitions, such as our acquisitions of ABM Italia and Stewart Garden in 2017 and Adams Manufacturing in 2018. We expect to continue to strategically pursue acquisitions to enhance our market position, supplement our product and technology portfolios and increase the diversity of our business.

Our acquisition of 100% of the issued share capital of Adams Manufacturing, a Pennsylvania-based manufacturer and distributor of outdoor consumer resin products in the US was completed on September 4, 2018. Adams’ product range is mainly focused on garden furniture, but also includes planters and other decorative products. Adams is a well-established player in the attractive garden furniture market in the US. The acquisition was accounted for as a business combination. Adams contributed €65.2 million to revenue for the year ended December 31, 2019, the first full year of operation under our ownership.

Dispositions

In November 2018, we signed an asset purchase agreement to sell our Hovac product line in Belgium which was focused on manufacturing products for storing food and drink. As part of the transaction, we sold the related

 

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customer contracts, samples and brand for consideration of €1.5 million, and recognized a gain on disposal of €1.4 million. The transaction closed in December 2018, although we continued to complete our performance obligations on open customer orders (which were not transferred in the sale to the buyer) in early 2019.

Competitive Environment

We operate in a market influenced by large retailers with negotiating power over their suppliers. We also face competition from existing competitors and new entrants to our markets, although none of our competitors possess product portfolios or operational footprints that rival our reach, scale and breadth of product offering. See “Business—Competition” for more detail on our competitors.

Key Financial Data

We measure our business using the following financial metrics to assess the near-term and long-term performance of our overall business, including identifying trends, formulating financial projections, making strategic decisions, assessing operational efficiencies and monitoring our business.

 

(€ in millions,
except for
percentages)

  Three months ended
June 30,
    2021-2020
% Change
    Six months ended
June 30,
    2021-
2020 %
Change
    Fiscal Years     2020-2019
% Change
    2019-2018
% Change
 
  2021     2020     2021     2020     2020     2019     2018  

Revenue

    444.3       328.9       35.1     855.0       657.5       30     1,235.7       1,206.9       1,119.8       2.4     7.8

Profit (Loss) for the period

    (4.7)       (7.5)       (37.5)     2.4       (18.8)       (112.9)     (76.8)       (137.4)       (762.3)       44.2     82.0

Profit (Loss) Margin*

    (1.05)     (2.3)     (53.8)     (0.3 %)       (2.9)      (109.9)     (6.2)     (11.4)     (68.1)     45.6     83.3

Adjusted EBITDA**

    73.1       56.7       28.9     149.3       112.1       33.2     194.4       131.2       93.4       48.2     40.5

Adjusted EBITDA margin**

    16.5     17.2     (4.6)     17.5     17.1     2.4     15.7     10.9     8.3     44.0     31.3

 

*

Profit (Loss) margin is defined as profit (loss) for the period divided by revenue for the period, expressed as a percentage.

 

**

Adjusted EBITDA and adjusted EBITDA margin are non-IFRS financial measures. See “Presentation of Financial and Other Information” and “Prospectus Summary—Summary Consolidated Financial Data” for additional information on non-IFRS financial measures and a reconciliation to the most comparable IFRS measures.

Adjusted EBITDA and Adjusted EBITDA Margin

We believe that adjusted EBITDA and adjusted EBITDA margin are indicators of the operating performance of our underlying business. We believe adjusted EBITDA and adjusted EBITDA margin are useful to investors and are used by our management for measuring profitability and allocating resources, because they eliminate certain items that affect period-over-period comparability and provide consistency with past financial performance and additional information about underlying results and trends by excluding certain items that may not be indicative of our business, results of operations or outlook. We believe that utilizing adjusted EBITDA and adjusted EBITDA margin allows for a more meaningful comparison of operating fundamentals between companies within our industry by eliminating the impact of capital structure and taxation differences between the companies.

 

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We define adjusted EBITDA as loss for the year excluding depreciation and amortization, income tax expense (benefit), finance cost, finance income, other finance (gains) losses, net, impairment charges, plant closure costs, business transformation costs, (gain) loss on disposal of assets, share-based payment expense, and certain other non-routine items that management believes are not indicative of the core performance of our business. We define adjusted EBITDA margin as adjusted EBITDA divided by revenue for the period, expressed as a percentage. See the sections titled “Presentation of Financial and Other Information” for information regarding our use of adjusted EBITDA and adjusted EBITDA margin, and “Prospectus Summary—Summary Consolidated Financial Data” for a reconciliation of loss for the year to adjusted EBITDA.

Results of Operations

The following tables summarize certain financial information relating to our operating results that have been derived from our audited consolidated financial statements for the years ended December 31, 2020, 2019 and 2018, and from our unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2021 and 2020.

Three and Six Months Ended June 30, 2021, Compared with Three and Six Months Ended June 30, 2020

 

(€ in millions)

  Three months
ended June 30,
    Three months
ended June 30,
2021-2020 variance
    Six months
ended June 30,
    Six months ended
June 30, 2021-2020
variance
 
  2021     2020    
Variance
    %
Variance
    2021     2020    
Variance
    %
Variance
 

Revenue

    444.3       328.9       115.5       35     855.0       657.5       197.5       30

Cost of Sales

    (294.3     (216.1     (78.2     36     (559.4     (435.7     (123.7     28

Gross Profit

    150.1       112.8       37.3       33     295.6       221.8       73.8       33

Selling and distribution expenses

    (85.9     (67.8     (18.1     27     (165.4     (135.8     (29.7     22

Research and development expenses

    (2.1     (1.4     (0.7     51     (4.2     (2.7     (1.5     56

General and administrative expenses

    (36.0     (23.8     (12.2     51     (66.2     (47.7     (18.6     39

Other operating income, expenses, gains and losses

    0.1       —         0.1       (336 )%      0.3       0.2       0.1       51

Operating profit (loss)

    26.2       19.8       6.4       32     60.1       35.9       24.2       67

Finance costs

    (27.6     (27.2     (0.4     2     (54.1     (54.4     0.3       (1 )% 

Other finance gains (losses), net

    (2.2     (2.1     (0.1     5     1.5       (3.4     4.9       (143 )% 

Profit (Loss) before tax

    (3.6     (9.4     5.8       (62 )%      7.4       (21.9     29.4       (134 )% 

Income tax (expense) benefit

    (1.1     1.9       (3.0     (157 )%      (5.0     3.2       (8.2     (258.8 )% 

Profit (Loss) for the period

    (4.7 )     (7.5     2.8       (37.5 )%      2.4       (18.8     21.2       (112.9 )% 

Adjusted EBITDA

    73.1       56.7       16.4       28.9     149.3       112.1       37.2       33.2

Revenue

Revenue for the three months ended June 30, 2021 increased by €115.5 million, or 35%, to €444.3 million, from €328.9 million for the three months ended June 30, 2020. The increase was solely attributable to organic sales growth. This revenue growth is attributed to the strong performance of both the Indoor and Outdoor segments across all regions, in particular in Europe and Northern America.

Revenue for the six months ended June 30, 2021 increased by €197.5 million, or 30%, to €855.0 million, from €657.5 million for the six months ended June 30, 2020. The increase was solely attributable to organic sales growth. This revenue growth is attributed to the strong performance of both the Indoor and Outdoor segments across all regions, in particular in Europe and Northern America.

 

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Cost of Sales

Cost of sales for the three months ended June 30, 2021 increased by €78.2 million, or 36%, to €294.3 million from €216.1 million for the three months ended June 30, 2020, primarily due to an increase in variable costs such as raw materials costs and wages, driven by higher sales for the period. As a percentage of revenue, the cost of sales remained broadly stable as it increased from 65.7% in the three months ended June 30, 2020 to 66.2% in the three months ended June 30, 2021 despite inflation on raw material cost as a result of price increases as well as leverage on fixed cost base.

Cost of sales for the six months ended June 30, 2021 increased by €123.7 million, or 28%, to €559.4 million from €435.7 million for the six months ended June 30, 2020, primarily due to an increase in variable costs such as raw materials costs and wages, driven by higher sales for the period. As a percentage of revenue, the cost of sales showed improvement as it decreased from 66.3% in the six months ended June 30, 2020 to 65.4% in the six months ended June 30, 2021, despite inflation on raw material cost as a result of price increases as well as leverage on fixed cost base.

Selling and distribution expenses

Selling and distribution expenses increased by €18.1 million, or 27%, to €85.9 million, for the three months ended June 30, 2021 from €67.8 million for the three months ended June 30, 2020, essentially driven by the increase in sales for the period. As a percentage of revenue, selling and distribution expenses showed a decrease to 19.3% of revenue for the three months ended June 30, 2021, from 20.6% of revenue for the three months ended June 30, 2020, primarily through operating leverage on warehousing costs between the two periods.

Selling and distribution expenses increased by €29.7 million, or 22%, to €165.4 million, for the six months ended June 30, 2021 from €135.8 million for the six months ended June 30, 2020, essentially driven by the increase in sales for the period. As a percentage of revenue, selling and distribution expenses showed a decrease to 19.4% of revenue for the six months ended June 30, 2021, from 20.6% of revenue for the six months ended June 30, 2020, primarily through operating leverage on warehousing costs between the two periods.

Research and development expenses

Research and development expenses increased by €0.7 million, or 51%, to €2.1 million, for the three months ended June 30, 2021 from €1.4 million for the three months ended June 30, 2020, primarily due to an increase in employee benefits and related expenses, and an increase in product development costs.

Research and development expenses increased by €1.5 million, or 56%, to €4.2 million, for the six months ended June 30, 2021 from €2.7 million for the six months ended June 30, 2020, primarily related to employee benefits and related expenses, and an increase in product development costs.

General and administrative expenses

General and administrative expenses increased by €12.2 million, or 51%, to €36.0 million, for the three months ended June 30, 2021 from €23.8 million for the three months ended June 30, 2020. The increase was primarily attributable to an increase in employee related expenses largely impacted by a share based payment grant in November 2020 as well as a change in the estimate of the timing of vesting which resulted in an acceleration of expense in 2021, combined with an increase in IPO related costs that are not directly related to the issuance of new shares and therefore, recognized as an expense as these are incurred of €5.2 million. A share-based payment expense of €6.5 million was recognized for the three months ended June 30, 2021 compared to €0.1 million for the three months ended June 30, 2020. IPO related costs of €5.2 million were recognized for the three months ended June 30, 2021 compared to nil for the three months ended June 30, 2020.

General and administrative expenses increased by €18.6 million, or 39%, to €66.2 million, for the six months ended June 30, 2021 from €47.7 million for the six months ended June 30, 2020. The increase was primarily attributable to an increase in employee related expenses largely impacted by a share based payment

 

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grant in November 2020 as well as a change in the estimate of the timing of vesting which resulted in an acceleration of expense in 2021, combined with an increase in IPO related costs that are not directly related to the issuance of new shares and therefore, recognized as an expense as these are incurred of €5.5 million. A share-based payment expense of €12.9 million was recognized for the six months ended June 30, 2021 compared to €0.2 million for the six months ended June 30, 2020. IPO related costs of €5.5 million were recognized for the six months ended June 30, 2021 compared to nil for the six months ended June 30, 2020.

Other operating income, expenses, gains and losses

Other operating income, expenses, gains and losses increased by €0.1 million, to €0.1 million from €36.0 thousand for the three month periods ended June 30, 2021 and 2020, respectively.

Other operating income, expenses, gains and losses increased by €0.1 million, to €0.3 million from €0.2 million for the six month periods ended June 30, 2021 and 2020, respectively.

Finance income

Finance income was immaterial for the three months ended June 30, 2021 and 2020.

Finance income was immaterial for the six months ended June 30, 2021 and 2020.

Finance cost

Finance cost increased by €0.4 million or 2%, to €27.6 million for the three months ended June 30, 2021 from €27.2 million for the three months ended June 30, 2020, primarily driven by an increase in interest accrued on the PIK loans, the senior loan facility agreement and the asset-backed facility and an increase in other finance costs, partially offset by a decrease in interest on the revolving credit facility due to lower usage.

Finance cost decreased by €0.3 million or 1%, to €54.1 million for the six months ended June 30, 2021 from €54.4 million for the six months ended June 30, 2020, primarily driven by lower usage of the revolving credit facility and a decrease in interest on lease liabilities, partially offset by an increase in interest accrued on the PIK loans, the senior loan facility agreement and the asset-backed facility and an increase in other finance costs.

Other finance gains (losses), net

Other finance gains (losses), net increased by a loss of €0.1 million, to a net loss of €2.2 million for the three months ended June 30, 2021 from a net loss of €2.1 million for the three months ended June 30, 2020. This increase was largely driven by an increase in net loss of €1.7 million from fair value changes on derivatives, offset by a net gain of €1.6 million from exchange rate differences, primarily due to the revaluation of the PIK loans denominated in US (resulting in a loss of €2.4 million) and of intercompany loans (resulting in a net gain of €4.2 million).

Other finance gains (losses), net changed by a net gain of €4.9 million, to a net gain of €1.5 million for the six months ended June 30, 2021 from a net loss of €3.4 million for the six months ended June 30, 2020. This increase was largely driven by a net gain of €6.6 million from exchange rate differences, primarily due to the revaluation of intercompany loans (resulting in a net gain of €12.2 million) and of the PIK loans denominated in US (resulting in a loss of €6.8 million), offset by an increase in net loss of €1.7 million from fair value changes on derivatives.

Income Tax Expense/Benefit

Income tax expense increased by €3 million to an expense of €1.1 million for the three months ended June 30, 2021 from a benefit of €1.9 million for the three months ended June 30, 2020, driven by our generation of taxable income during the second quarter of 2021.

 

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Income tax expense increased by €8.2 million to an expense of €5 million for the six months ended June 30, 2021 compared to a tax benefit of €3.2 million for the six months ended June 30, 2020, driven by our generation of taxable income during the first half of 2021.

Profit (Loss) for the period

Loss for the period decreased by €2.8 million to a loss of €4.7 million for the three months ended June 30, 2021 compared to a loss of €7.5 million for the three months ended June 30, 2020, as a result of the various changes described above.

Profit for the period increased by €21.2 million to a profit of €2.4 million for the six months ended June 30, 2021 compared to a loss of €18.8 million for the six months ended June 30, 2020, as a result of the various changes described above.

Years Ended December 31, 2020, December 31, 2019 and December 31, 2018

 

(€ in millions)

   Years ended December 31,     2020-2019 variance     2019-2018 variance  
   2020     2019     2018    
Variance
    %
Variance
   
Variance
    %
Variance
 

Revenue

     1,235.7       1,206.9       1,119.8       28.7       2.4     87.2       7.8

Cost of Sales

     818.2       868.2       834.1       (50.1     (5.8 %)      34.1       4.1

Gross Profit

     417.5       338.7       285.6       78.8       23.3     53.1       18.6

Selling and distribution expenses

     272.7       275.8       256.1       (3.1     (1.1 %)      19.7       7.7

Research and development expenses

     5.5       5.8       5.2       (0.2     (4.1 %)      0.5       9.9

General and administrative expenses

     108.0       99.3       102.6       8.7       8.8     (3.3     (3.2 %) 

Impairment of goodwill

     —       —         614.3       —         N/M     (614.3     N/M

Gain on sale and leaseback transaction

     —         11.0       —         (11.0     N/M     11.0       N/M

Other operating income, expenses, gains and losses

     0.6       0.9       0.2       (0.3     (37.6 %)      0.7       275.2

Operating profit (loss)

     31.9       (30.2     (692.3     62.1       (205.8 %)      662.0       (95.6 %) 

Finance income

     0.1       0.1       0.0       0.0       18.3     0.0       66.7

Finance costs

     109.3       107.4       94.5       1.9       1.7     12.9       13.7

Other finance gains (losses), net

     (10.8     (7.1     0.1       3.7       52.2     (7.2     N/M

Profit (Loss) before tax

     (88.1     (144.6     (786.7     56.6       39.1     642.0       81.6

Income tax (expense) benefit

     11.3       7.2       24.3       4.1       57.3     (17.1     (70.4 %) 

Profit (Loss) for the period

     (76.8     (137.4     (762.3     60.7       44.2     624.9       82.0

Adjusted EBITDA

     194.4       131.2       93.4       63.2       48.2     37.8       40.5

 

*

N/M indicates the variance as a percentage is not meaningful.

Year Ended December 31, 2020, Compared with Year Ended December 31, 2019

Revenue

Revenue for the year ended December 31, 2020 increased by €28.7 million, or 2.4%, to €1,235.7 million, from €1,206.9 million for the year ended December 31, 2019. The increase was primarily attributable to organic sales growth, partly offset by the rationalization of non-profitable products during the year ended December 31, 2020 as part of a wider efficiency program. Products voluntarily discontinued during the year ended December 31, 2020, which comprised predominantly Indoor products in North America, contributed €12.8 million and €45.4 million to revenue for the years ended December 31, 2020 and 2019, respectively. Excluding these amounts relating to discontinued products, revenue for the year ended December 31, 2020 increased by €61.4 million, or 5.3%, to €1,222.9 million from €1,161.5 million for the year ended December 31, 2019. This revenue growth, excluding the contribution of discontinued products, is attributed to the performance

 

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of both the Indoor and Outdoor segments across Europe and North America, and was achieved despite significant disruptions to our business during the successive lockdowns affecting our end-markets, notably in March and April 2020.

Cost of sales

Cost of sales for the year ended December 31, 2020 decreased by €50.1 million, or 5.8%, to €818.2 million from €868.2 million for the year ended December 31, 2019. As a percentage of revenue, the cost of sales decreased from 71.9% in the year ended December 31, 2019 to 66.2% in the year ended December 31, 2020. This reduction was driven by several factors, including and primarily lower raw material costs combined with our pricing discipline and ability to maintain the pricing of our product portfolio as well as improved operational efficiency notably through further consolidation of our manufacturing footprint. This favorable trend was partially offset by an increase in subcontracting costs in the latter half of 2020 due to higher-than-anticipated growth in demand for our products. In addition, cost of sales in the year ended December 31, 2020 benefited from lower impairment of plant, property and equipment as compared to the year ended December 31, 2019.

Selling and distribution expenses

Selling and distribution expenses decreased by €3.1 million, or 1.1%, to €272.7 million, for the year ended December 31, 2020 from €275.8 million for the year ended December 31, 2019. As a percentage of revenue, selling and distribution expenses reduced to 22.1% of revenue, for the year ended December 31, 2020 from 22.8% of revenue, for the year ended December 31, 2019. This decrease was primarily driven by a reduction in warehouse rent costs in Europe as a result of consolidation of our logistics footprint.

Research and development expenses

Research and development expenses decreased by €0.2 million, or 4.1%, to €5.5 million, or 0.4% of revenue, for the year ended December 31, 2020 from €5.8 million, or 0.5% of revenue, for the year ended December 31, 2019.

General and administrative expenses

General and administrative expenses increased by €8.7 million, or 8.8%, to €108.0 million, or 8.7% of revenue, for the year ended December 31, 2020 from €99.3 million, or 8.2% of revenue, for the year ended December 31, 2019. The increase was primarily attributable to an increase in employee related expenses which was primarily driven by an increase in bonuses compared to 2019.

Gain on sale and leaseback transaction

The gain on sale and leaseback of €11.0 million for the year ended December 31, 2019 resulted from an agreement to sell our land and building in Milton, Canada. There were no sale and leaseback transactions during the year ended December 31, 2020.

Other operating income, expenses, gains and losses

Other operating income, expenses, gains and losses decreased by €0.3 million to €0.6 million during the year ended December 31, 2020 from €0.9 million during the year ended December 31, 2019.

Finance income

Finance income has remained flat at €0.1 million between the years ended December 31, 2020 and December 31, 2019.

 

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Finance cost

Finance cost increased by €1.9 million or 1.7%, to €109.3 million for the year ended December 31, 2020 from €107.4 million for the year ended December 31, 2019. Finance costs increased primarily due to compounding of payment-in-kind, or PIK loan interest.

Other finance gains (losses), net

Other finance net losses increased by €3.7 million to €10.8 million for the year ended December 31, 2020 from €7.1 million for the year ended December 31, 2019. This increase was largely driven by the year end revaluation of the PIK loans denominated in the U.S. dollar, and the weakening of the US Dollar against the Euro compared to 2019.

Income tax benefit

Income tax benefit increased by €4.1 million to €11.3 million for the year ended December 31, 2020 compared to €7.2 million for the year ended December 31, 2019. The increase was primarily driven by additional tax benefits relating to change in tax legislation in Italy during the year ended December 31, 2020.

Loss for the year

Loss for the year decreased by €60.7 million to a loss of €76.8 million for the year ended December 31, 2020 compared to a loss of €137.4 million for the year ended December 31, 2019, as a result of the various changes described above.

Year Ended December 31, 2019, Compared with Year Ended December 31, 2018

Revenue

Revenue for the year ended December 31, 2019 increased by €87.2 million, or 7.8%, to €1,206.9 million from €1,119.8 million for the year ended December 31, 2018. The increase was attributable to a combination of organic and inorganic growth. Adams Manufacturing, which was acquired in September 2018, contributed €65.2 million to revenue for the year ended December 31, 2019 while it contributed €8.7 million to revenue for the year ended December 31, 2018. Hovac, disposed of in December 2018, contributed €1.2 million to revenue for the year ended December 31, 2019 while it contributed €9.6 million to revenue for the year ended December 31, 2018. Excluding the amounts relating to Adams Manufacturing and Hovac, revenue for the year ended December 31, 2019 increased by €39.1 million, or 3.5%, to €1,140.5 million from €1,101.5 million for the year ended December 31, 2018. The revenue growth was mainly attributable to the Outdoor segment across all regions and to the Indoor segment in North America.

Cost of sales

Cost of sales for the year ended December 31, 2019 increased by €34.1 million, or 4.1%, to €868.2 million from €834.1 million for the year ended December 31, 2018. This was largely driven by the acquisition of Adams Manufacturing which comprised €49.8 million of our cost of sales for the year ended December 31, 2019 versus only €6.2 million in cost of sales during the year ended December 31, 2018, or €43.6 million of the increase between periods. Excluding the impact of Adam’s Manufacturing, our cost of sales for the year ended December 31, 2019 decreased by €9.5 million to €818.4 million from €827.9 million for the year ended December 31, 2018 primarily as a result of a reduction in subcontracting costs and depreciation and amortization in addition to lower raw material costs while we demonstrated pricing discipline through our ability to maintain the pricing of our product portfolio.

Selling and distribution expenses

Selling and distribution expenses increased by €19.7 million, or 7.7%, to €275.8 million, or 22.8% of revenue, for the year ended December 31, 2019 from €256.1 million, or 22.9% of revenue, for the year ended

 

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December 31, 2018. This increase in selling and distribution expenses was primarily attributable to higher freight costs resulting from increased sales during the year and incorporation of selling and distribution expenses from Adams Manufacturing for the full year in 2019.

Research and development expenses

Research and development expenses increased by €0.5 million, or 9.9%, to €5.8 million, or 0.5% of revenue, for the year ended December 31, 2019 from €5.2 million, or 0.5% of revenue, for the year ended December 31, 2018 due to continued investment in product innovation activities.

General and administrative expenses

General and administrative expenses decreased by €3.3 million, or 3.2%, to €99.3 million, or 8.2% of revenue, for the year ended December 31, 2019 from €102.6 million, or 9.2% of revenue, for the year ended December 31, 2018. The decrease was primarily attributable to reduction in salaries and related costs from €67.7 million in 2018 to €64.9 million in 2019 in relation to our initiative to simplify and redesign our organization, partially offset by an increase in Adams Manufacturing salaries due to full year impact in the year ended December 31, 2019.

Impairment of goodwill

Following our annual goodwill impairment review for the year ended December 31, 2018, a charge of €614.3 million was recorded based on future cash flow projections at that time, a higher pre-tax discount rate and reflective of lower profitability compared to the previous year (see Note 10.3 to our audited consolidated financial statements included elsewhere in this prospectus). There was no goodwill impairment charge for the year ended December 31, 2019.

Gain on sale and leaseback transaction

The gain on sale and leaseback of €11.0 million for the year ended December 31, 2019 resulted from an agreement to sell our land and building in Milton, Canada. There were no sale and leaseback transactions during the year ended December 31, 2018.

Other operating income, expenses, gains and losses

Other operating income, expenses, gains and losses increased by €0.7 million to €0.9 million during the year ended December 31, 2019 from €0.2 million during the year ended December 31, 2018.

Finance income

Finance income increased by €0.02 million or 66.7%, to €0.06 million for the year ended December 31, 2019 from €0.04 million for the year ended December 31, 2018.

Finance cost

Finance cost increased by €12.9 million or 13.7%, to €107.4 million for the year ended December 31, 2019 from €94.5 million for the year ended December 31, 2018. Finance cost increased for the year ended December 31, 2019 primarily due to recognizing a full year of interest charges on the additional €95.0 million Senior Facilities Agreement, or SFA, assumed in September 2018 to finance the purchase of Adams Manufacturing, and compounding of PIK loan interest, and finance costs related to non-reclaimable value-added tax related to loans and borrowings.

 

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Other finance gains (losses), net

For the year ended December 31, 2018, Other finance gains (losses), net resulted in a gain of €0.1 million. For the year ended December 31, 2019, Other finance gains (losses), net resulted in a loss of €7.1 million, representing an increase in the net loss of €7.2 million during the year ended December 31, 2019. This change was largely driven by the impact of foreign currency exchange rates, primarily due to the weakening of the euro, partially mitigated by foreign exchange forward contracts.

Income tax benefit

Income tax benefit decreased by €17.1 million to €7.2 million for the year ended December 31, 2019 compared to €24.3 million for the year ended December 31, 2018. The decrease was primarily driven by a significant reduction in loss before tax from €786.7 million for the year ended December 31, 2018 to €144.6 million for the year ended December 31, 2019. We recognized deferred tax income of €15.0 million on tax loss carryforwards in the year ended December 31, 2018, primarily related to losses incurred in North America.

Loss for the year

Loss for the year decreased by €624.9 million to a loss of €137.4 million for the year ended December 31, 2019 compared to a loss of €762.3 million for the year ended December 31, 2018, as a result of the various factors described above.

Segment Results of Operations

We report our results in two segments: Outdoor and Indoor. The key segment measures used by our chief operating decision maker in deciding how to evaluate performance and allocate resources to each of the segments are Segment Revenue and Segment Direct Contribution. Segment Revenue and Segment Direct Contribution are determined as disclosed in our consolidated financial statements included elsewhere in this prospectus. Depending on certain circumstances, Segment Revenue may be calculated differently, from time to time, from our consolidated group Revenue, for example by excluding revenue relating to disposed businesses or product lines. Segment Direct Contribution, our measure of segment profitability, is defined as gross profit less distribution expenses, measured consistently with the consolidated financial statements, and adjusted for depreciation and amortization, impairment, the impact of applying lease accounting, restructuring costs and other items that are not reflective of the segments’ core underlying performance. See Note 3 to our unaudited interim condensed consolidated financial statements and Note 4 to our audited consolidated financial statements included elsewhere in this prospectus for further information about our segments, including a reconciliation of Segment Direct Contribution to our IFRS results.

Outdoor

The following table summarizes certain financial information relating to the Outdoor segment results that have been derived from our unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2021 and 2020.

 

(€ in millions)

  Three months
ended June 30,
    Three months ended
June 30,
2021-2020 variance
    Six months
ended June 30,
    Six months ended
June 30,
2021-2020 variance
 
  2021     2020    
Variance
    %
Variance
    2021     2020     € Variance     % Variance  

Revenue

  245.3     189.0     56.3       29.8   464.1     365.0     99.1       27.1

Segment Direct Contribution

    63.7       44.4       19.3       43.5     127.3       87.6       39.8       45.4

Segment Direct Contribution Margin*

    26.0     23.5     N/A       10.6     27.4     24.0     N/A       14.4

 

*

Segment Direct Contribution Margin is defined as Segment Direct Contribution divided by Segment Revenue, expressed as a percentage.

 

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The following table summarizes certain financial information relating to the Outdoor segment results that have been derived from our audited consolidated financial statements for the years ended December 31, 2020, 2019 and 2018.

(€ in millions)

  Years ended December 31,     2020-2019 variance     2019-2018 variance  
    2020         2019         2018      
Variance
    %
Variance
   
Variance
    %
Variance
 

Revenue

  580.0     544.4     464.5     35.6       6.5   79.9       17.2

Segment Direct Contribution

    138.2       106.9       81.4       31.3       29.3     25.5       31.3

Segment Direct Contribution Margin*

    23.8     19.6     17.5     4.2     21.4     2.1     12.0

 

*

Segment Direct Contribution Margin is defined as Segment Direct Contribution divided by Segment Revenue, expressed as a percentage.

Segment Revenue

Revenue of the Outdoor segment for the three months ended June 30, 2021 increased by €56.3 million, or 29.8%, to €245.3 million from €189.0 million for the three months ended June 30, 2020. The increase was solely attributable to organic sales growth across all regions, in particular in North America and Europe.

Revenue of the Outdoor segment for the six months ended June 30, 2021 increased by €99.1 million, or 27.1%, to €464.1 million from €365.0 million for the six months ended June 30, 2020. The increase was solely attributable to organic sales growth across all regions, in particular North America and Europe.

Revenue of the Outdoor segment for the year ended December 31, 2020 increased by €35.6 million, or 6.5%, to €580.0 million from €544.4 million for the year ended December 31, 2019. Products voluntarily discontinued during the year ended December 31, 2020, contributed €1.7 million and €6.4 million to revenue for the years ended December 31, 2020 and 2019, respectively. Excluding these amounts relating to discontinued products, revenue for the year ended December 31, 2020 increased by €40.3 million, or 7.5%, to €578.3 million from €537.9 million for the year ended December 31, 2019. The increase was primarily attributable to commercial momentum in Europe despite significant disruptions to our business during the successive lockdowns affecting our end-markets, notably in March and April 2020.

Revenue of the Outdoor segment for the year ended December 31, 2019 increased by €79.9 million, or 17.2%, to €544.4 million from €464.5 million for the year ended December 31, 2018. The increase was attributable to a combination of organic and inorganic growth. Adams Manufacturing, which was acquired in September 2018, contributed €65.2 million to revenue for the year ended December 31, 2019 while it contributed €8.7 million to revenue for the year ended December 31, 2018. Excluding amounts relating to Adams Manufacturing, revenue for the year ended December 31, 2019 increased organically by €23.4 million, or 5.1%, to €479.2 million from €455.8 million for the year ended December 31, 2018. The organic revenue growth was notably attributable to strong commercial momentum across all regions.

Segment Direct Contribution

Segment Direct Contribution of the Outdoor segment for the three months ended June 30, 2021 increased by €19.3 million, or 43.5%, to €63.7 million from €44.4 million for the three months ended June 30, 2020. The increase was primarily attributable to an increase in segment revenue driven by an increase in demand for our products combined with price increases passed through to our customers as well as operating leverage on our fixed cost base. The above increases more than offset the impact of inflation in raw material prices.

Segment Direct Contribution of the Outdoor segment for the six months ended June 30, 2021 increased by €39.8 million, or 45.4%, to €127.3 million from €87.6 million for the six months ended June 30, 2020. The increase was primarily attributable to an increase in segment revenue as well as operating leverage on our fixed cost base.

 

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Segment Direct Contribution of the Outdoor segment for the year ended December 31, 2020 increased by €31.3 million, or 29.3%, to €138.2 million from €106.9 million for the year ended December 31, 2019. The increase was primarily attributable to an increase in segment revenue, lower raw material costs combined with our pricing discipline and ability to maintain the pricing of our product portfolio as well as improved logistics efficiency.

Segment Direct Contribution of the Outdoor segment for the year ended December 31, 2019 increased by €25.5 million, or 31.3%, to €106.9 million from €81.4 million for the year ended December 31, 2018. The increase was primarily attributable to a significant increase in revenue on both an organic and inorganic basis (including the impact of the Adam’s Manufacturing acquisition). Adams Manufacturing contributed €9.2 million to the segment direct contribution. Excluding the impact of Adams Manufacturing, the segment direct contribution increased by €16.3 million and was attributable to an increase in segment revenue combined with a reduction in costs of sales as a percentage of revenue and partially offset by an increase in freight costs.

Indoor

The following table summarizes certain financial information relating to the Indoor segment results that have been derived from our unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2021 and 2020.

 

(€ in millions)    Three months
ended

June 30,
                             Three months
ended June
30, 2021-2020
variance
    Six months
ended
June 30,
     Six months
ended

June 30,
2021-2020
variance
 
     2021     2020    
Variance
     %
Variance
    2021     2020    
Variance
     %
Variance
 

Revenue

   199.1     139.9     59.2        42.3   390.9     292.4     98.5        33.7

Segment Direct Contribution

     34.8       28.9       5.9        20.4     70.3       59.2       11.1        18.7

Segment Direct Contribution Margin*

     17.5     20.7     N/A        (15.4 %)      18.0     20.2     N/A        (11.2 %) 

 

*

Segment Direct Contribution Margin is defined as Segment Direct Contribution divided by Segment Revenue, expressed as a percentage.

The following table summarizes certain financial information relating to the Indoor segment results that have been derived from our audited consolidated financial statements for the years ended December 31, 2020, 2019 and 2018.

 

(€ in millions)

  Years ended December 31,     2020-2019 variance     2019-2018 variance  
    2020         2019         2018      
Variance
    %
Variance
   
Variance
    %
Variance
 

Revenue

  655.7     661.3     645.6     5.6       0.9   15.7       2.4

Segment
Direct Contribution

    137.4       96.2       87.8       41.2       42.8     8.4       9.6

Segment Direct Contribution Margin*

    20.9     14.5     13.6     6.4     44.0     1.0     7.0

 

*

Segment Direct Contribution Margin is defined as Segment Direct Contribution divided by Segment Revenue.

Segment Revenue

Revenue of the Indoor segment for the three months ended June 30, 2021 increased by €59.2 million, or 42.3%, to €199.1 million from €139.9 million for the three months ended June 30, 2020. The increase was solely attributable to organic sales growth from all regions, in particular North America and Europe.

 

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Revenue of the Indoor segment for the six months ended June 30, 2021 increased by €98.5 million, or 33.7%, to €390.9 million from €292.4 million for the six months ended June 30, 2020. The increase was solely attributable to organic sales growth from all regions, in particular North America and Europe.

Revenue of the Indoor segment for the year ended December 31, 2020 decreased by €5.6 million, or 0.9%, to €655.7 million from €661.3 million for the year ended December 31, 2019. Products voluntarily discontinued during the year ended December 31, 2020, contributed €11.1 million and €39.0 million to revenue for the years ended December 31, 2020 and 2019, respectively. Excluding these amounts relating to discontinued products, revenue for the year ended December 31, 2020 increased by €22.3 million, or 3.6%, to €644.6 million from €622.3 million for the year ended December 31, 2019. The increase in revenue was attributable to the positive performance across all regions despite significant disruptions to our business during the successive lockdowns affecting our end-markets, notably in March and April 2020.

Revenue of the Indoor segment for the year ended December 31, 2019 increased by €15.7 million, or 2.4%, to €661.3 million from €645.6 million for the year ended December 31, 2018. This revenue growth was notably attributable to North America as a result of strong commercial momentum.

Segment Direct Contribution

Direct Contribution of the Indoor segment for the three months ended June 30, 2021 increased by €5.9 million, or 20.4%, to €34.8 million from €28.9 million for the three months ended June 30, 2020. The increase was primarily attributable to an increase in segment revenue driven by an increase in demand for our products combined with price increases passed through to our customers, as well as operating leverage on our fixed cost base. Such increases are partially offset by the impact of inflation in raw material prices.

Direct Contribution of the Indoor segment for the six months ended June 30, 2021 increased by €11.1 million, or 18.7%, to €70.3 million from €59.2 million for the six months ended June 30, 2020. The increase was primarily attributable to an increase in segment revenue.

Direct Contribution of the Indoor segment for the year ended December 31, 2020 increased by €41.2 million, or 42.8%, to €137.4 million from €96.2 million for the year ended December 31, 2019. The increase was primarily attributable to lower raw material costs combined with our pricing discipline and ability to maintain the pricing of our product portfolio as well as the consolidation of our manufacturing footprint in North America.

Direct Contribution of the Indoor segment for the year ended December 31, 2019 increased by €8.4 million, or 9.6%, to €96.2 million from €87.8 million for the year ended December 31, 2018. The increase was primarily attributable to an increase in segment revenue, reduction in costs of sales as a percentage of revenue while we maintained the pricing of the products of our portfolio and partially offset by an increase in freight costs.

Liquidity and Capital Resources

Overview

Prior to this offering, our principal sources of liquidity to finance our operating and investing activities have been our borrowings under our credit facilities and cash flows generated by operations.

Our cash requirements within the next 12 months are to fund working capital, capital expenditures and interest payments on our indebtedness. We believe that our current cash and cash equivalents, the proceeds from this offering, borrowings under our Revolving Credit Facility and our anticipated net cash flows from operating activities will be sufficient to meet these anticipated obligations for at least the 12 months from the date of this prospectus. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

 

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Additionally, we regularly evaluate opportunities to enhance our financial flexibility through a variety of methods. Following this offering, we may decide to enhance our liquidity or increase our cash reserve for future operations and investments through additional debt or equity financings. The issuance and sale of additional equity would result in further dilution to our shareholders. In addition to increasing our outstanding indebtedness, the additional debt financing could require us to comply with covenants that would further restrict our operations. There can be no assurance that such debt or equity financing will be available in amounts or on terms acceptable to us, if at all.

As of June 30, 2021, our cash and cash equivalents were €116.1 million. As of December 31, 2020, our cash and cash equivalents were €79.7 million.

As of June 30, 2021, we had outstanding borrowings (consisting of bank borrowings and loans from related parties) of €1,420.2 million, and €129.7 million available for additional borrowings under our Revolving Credit Facility and our Asset-backed Facility. As of December 31, 2020, we had outstanding borrowings of €1,390.5 million and €124.2 million available for additional borrowings under our Revolving Credit Facility and our Asset-backed Facility. We intend to use the net proceeds of this offering to repay indebtedness under our PIK facility and a portion of the senior loans.

Cash Flows

The following table shows our net cash flows from operating activities, investing activities and financing activities for the stated periods:

 

(€ in millions)

   Six
months ended June 30,
    Years ended
December 31,
 
   2021     2020     2020     2019     2018  

Net cash flow from operating activities

     59.8       92.3       144.0       18.6       27.1  

Net cash flow from investing activities

     (17.1     (13.0     (43.1     (14.9     (127.5

Net cash flow from financing activities

     (7.9     (56.2     (52.6     (26.8     105.4  

Cash and cash equivalents at the end of the period

     116.1       56.4       79.7       34.1       56.7  

Six months ended June 30, 2021, compared with six months ended June 30, 2020

Net Cash Flow from Operating Activities

Net cash flow from operating activities was a cash inflow of €59.8 million and €92.3 million for the six months ended June 30, 2021 and 2020, respectively. The net cash flow decreased by €32.5 million primarily as a result of a €20.2 million decrease in cash generated from operations for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, which comprised a €48.9 million decrease in the change in operating assets and liabilities (i.e. working capital) and a €21.2 million increase in profit (loss) for the period. The change in operating assets and liabilities for the six months ended June 30, 2021 included an increase in trade and other receivables of €64.7 million and an increase in inventories of €37.3 million, which were partially offset by an increase in trade and other payables of €62.8 million. These changes were driven by high demand for Keter products during the first half of 2021. The net cash inflow position for the six months ended June 30, 2021 was also impacted by a €14.0 million decrease in net income taxes received (paid) during the period, owing primarily to tax refunds received in Israel during the six months ended June 30, 2020.

Net Cash Flow from Investing Activities

Net cash outflow from investing activities was €17.1 million and €13.0 million for the six months ended June 30, 2021 and 2020, respectively. The €4.1 million increase in cash outflow in 2021 compared to 2020 was primarily attributable to an increase of €7.4 million in cash outflow for purchases of property, plant and equipment, partially offset by €3.9 million of changes in bank deposit accounts.

 

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Net Cash Flow from Financing Activities

Net cash flow from financing activities was a cash outflow of €7.9 million for the six months ended June 30, 2021 compared to a cash outflow of €56.4 million for the six months ended June 30, 2020. This €48.3 million change in net cash flow from financing activities in the six months ended June 30, 2021 was primarily attributable to the €45.6 million repayment of short-term bank borrowing that occurred during the six months ended June 30, 2020.

Year Ended December 31, 2020, Compared with Year Ended December 31, 2019

Net Cash Flow from Operating Activities

Net cash inflow from operating activities was €144.0 million and €18.6 million for the years ended December 31, 2020 and 2019, respectively. The net cash flow position improved primarily as a result of a €105.2 million increase in cash generated from operations for the year ended December 31, 2020 due to a combination of a €60.7 million reduction in net loss and a €26.6 million increase in the change in operating assets and liabilities (i.e. working capital). The change in operating assets and liabilities for the year ended December 31, 2020 comprised an increase in trade and other payables of €43.0 million and a decrease in inventories of €21.7 million, which was partially offset by an increase in trade and other receivables of €48.0 million. These changes were driven by higher demand overall during 2020 as well as more focus on proactively managing payment timing against payment terms. This was combined with increased management focus to optimize inventory levels amidst increased demand. The net cash flow position for the year ended December 31, 2020 also improved as a result of a €19.8 million decrease in net income taxes paid, in part due to a tax benefit from a change in tax legislation in Italy.

Net Cash Flow from Investing Activities

Net cash outflow from investing activities was €43.1 million and €14.9 million for the years ended December 31, 2020 and 2019, respectively. Cash outflows from purchases of property, plant and equipment were relatively similar between the two periods. The €28.2 million increase in cash outflow in 2020 compared to 2019 was primarily attributable to the sale-leaseback transaction of our land and building in Milton, Canada, which generated proceeds of €28.6 million during the year ended December 31, 2019.

Net Cash Flow from Financing Activities

Net cash outflow from financing activities was €52.6 million and €26.8 million for the years ended December 31, 2020 and 2019, respectively. The increase in cash outflow in the year ended December 31, 2020 was primarily driven by repayment of short-term borrowings of €28.4 million compared to €7.2 million in 2019, and repayment of lease liabilities of €24.0 million compared to €19.6 million in 2019.

Year Ended December 31, 2019, Compared with Year Ended December 31, 2018

Net Cash Flow from Operating Activities

Net cash inflow from operating activities was €18.6 million and €27.1 million for the years ended December 31, 2019 and 2018, respectively. The net cash flow position decreased by €8.5 million primarily as a result of a €1.8 million decrease in cash generated from operations and a €7.7 million increase in interest paid, partially offset by a €1.0 million decrease in income taxes paid.

Net Cash Flow from Investing Activities

Net cash outflow from investing activities was €14.9 million and €127.5 million for the years ended December 31, 2019 and 2018, respectively. This €112.6 million decrease was primarily driven by a decrease in capital expenditure of €29.2 million (€45.8 million in the year ended December 31, 2019 versus €75.0 million in the year ended December 31, 2018), proceeds from the sale of the Milton property of €28.6 million in 2019, and acquisition-related cash outflows in 2018 of €25.0 million relating to further contingent consideration paid for the 2016 acquisition of the Company, and a €33.1 million cash outflow related to the acquisition of Adams Manufacturing.

 

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Net Cash Flow from Financing Activities

Net cash flow from financing activities was an outflow of €26.8 million and an inflow of €105.4 million for the years ended December 31, 2019 and 2018, respectively. This change in 2019 was primarily attributable to the absence of cash inflows received during the year ended December 31, 2018 relating to our senior loan facility (€85.4 million) and related party loan from our parent company (€28.3 million), as well as an increase in the repayment of lease liabilities of €6.1 million (€19.6 million for the year ended December 31, 2019, increased from €13.5 million for the year ended December 31, 2018).

Indebtedness

Senior Facilities Agreement

We have an SFA which provides for term loans in an aggregate principal amount of €1,105 million. The loan facility bears quarterly interest at EURIBOR plus a margin based on our senior net leverage ratio, with a EURIBOR floor of 1%. The interest rate on the SFA as of June 30, 2021, December 31, 2020 and December 31, 2019 was 5.25%. The loan principal is repayable upon maturity on October 31, 2023. The total loan outstanding at June 30, 2021 was €1,087 million compared to €1,081.6 million as of December 31, 2020 and €1,071.8 million as of December 31, 2019. The loan facility is subject to compliance with financial covenants, which requires that the senior net leverage ratio does not exceed 6.90 should the cash drawings under the revolving facility and any ancillary facility established thereunder exceeds 35% of the total revolving facility commitments. We were in compliance with the covenants in the SFA as at June 30, 2021.

Revolving Credit Facility

We have a €110 million revolving credit facility, or RCF and, together with the SFA, the Senior Secured Credit Facilities. The RCF bears interest of EURIBOR plus 4.25% with a EURIBOR floor of 0%(4.25% as of June 30, 2021 and December 31, 2020 and 2019), and the unutilized amount bears interest of 1.4875%. As of June 30, 2021, the amount available under the facility was €110 million. The amount drawn on this facility as of June 30, 2021 and December 31, 2020 was €nil and €40.0 million at December 31, 2019. In February 2021, we extended the expiration date of €100 million of this facility from October 31, 2022 to July 31, 2023.

Asset-backed Facility

We have a €31.0 million asset-backed facility, or ABF, secured by pledges on trade receivables and inventories of certain of our subsidiaries. The ABF bears interest of EURIBOR plus 2.25% with a EURIBOR floor of 0%. Unutilized amounts bear interest of 0.5%. The interest rate on the ABF was 2.25% at June 30, 2021, December 31, 2020 and December 31, 2019. In February 2021, we extended the expiration date of this facility from September 30, 2021 to September 30, 2022. The amount drawn on this facility as at June 30, 2021 was €31.0 million, as compared to €27.2 million at December 31, 2020 and €18.4 million at December 31, 2019.

PIK Loans

We entered a PIK facility agreement in relation to the acquisition of Keter Group on October 31, 2016. PIK loans received under the facility are repayable in full on October 31, 2024 and bear an annual interest rate, payable every six months, of 11% when the interest is paid in cash at our option, or of 11.5% when the interest is accrued, and added to the outstanding principal. We have not made cash interest payments on the PIK loan since 2016. The total loan outstanding as of June 30, 2021 was €236.7 million, as compared to €216.3 million as of December 31, 2020 and €209.1 million as of December 31, 2019. We intend to repay the PIK loans in full with the net proceeds of this offering.

Other short-term loans

We have a short-term loan from Bank Leumi in Israel which bears interest at a rate of 1.40% and is renewed every three months at its scheduled maturity. This loan matures on October 21, 2021. The total loan amount as of June 30, 2021 was €65.2 million, as compared to €65.1 million as at December 31, 2020, and €60.1 million as of December 31, 2019.

 

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Certain Covenants

The Senior Secured Credit Facilities include certain covenants that, subject to certain limited exceptions, limit our ability to, among other things:

 

   

sell, lease, convey, transfer, assign, license or otherwise of or deal with all or any material part of our property, assets or undertaking;

 

   

sell, assign transfer or otherwise dispose of any assets that are subjects to liens under the Loan Agreement, any of our material assets or any share therein;

 

   

incur or allow to remain outstanding any indebtedness;

 

   

create or permit to subsist any liens; and

 

   

declare and/or make or agree to make any distribution by way of dividend or otherwise unless certain conditions, as provided in the Senior Secured Credit Facilities, as applicable, are met.

Off-Balance Sheet Arrangements

Aside from our debt guarantees, we have no other material non-cancellable guarantees or commitments, and no material special purpose entities or other off-balance sheet obligations.

Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2020:

 

(€ in millions)

   Total      Less than
1 year
     1 to 5
years
     More than
5 years
 

Loans and borrowings from banks

   1,372.8      151.5      1,221.2      —    

Lease liabilities

     116.0        24.2        68.4        23.4  

Loans from related parties

     339.8        —          339.8        —    

Trade and other payables

     191.5        188.8        2.7        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations

     2,020.0        364.5        1,632.1        23.4  
  

 

 

    

 

 

    

 

 

    

 

 

 

Between December 31, 2020 and June 30, 2021, contractual obligations on loans from related parties increased by €10.6 million and contractual obligations on trade and other payables increased by €62.6 million. There was no other significant change in our contractual obligations between December 31, 2020 and June 30, 2021 except that, as of June 30, 2021, we entered into contractual obligations to purchase property, plant and equipment of more than €30 million.

This table does not include information on our recurring purchases of materials for use in production, as our raw materials purchase contracts do not require fixed or minimum quantities.

Capital Expenditures

We define capital expenditures as cash and non-cash expenditures on property, plant and equipment and intangible assets. We made capital expenditures of €27.6 million and €13.6 million for the six-month periods ended June 30, 2021 and 2020, respectively. We made capital expenditures of €47.5 million, €45.8 million and €75.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. In these periods, our capital expenditures were primarily used to acquire new machines and molds for purchase of plants and machinery to support our innovation strategy, to increase production in order to meet increased demand and improve our overall operational efficiency. Our capital expenditures for the next year will be focused on increasing capacity and continuing to improve efficiency and quality. Such capital expenditures are expected to be financed through cash generation from operating performance, our Revolving Credit Facility and our Asset backed Facility. To the extent the proceeds of this offering and cash from our business activities are insufficient to fund future capital requirements, including potential future acquisitions, we may need to seek equity or debt financing in the future. We will continue to make capital expenditures to support the expected growth of our business.

 

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Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk (including interest rate risk, foreign currency risk and commodity risk), credit risk and liquidity risk. Our management manages each risk as discussed below. See Note 21 to our audited consolidated financial statements included elsewhere in this prospectus for a further discussion of these risks.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Our exposure to the risk of changes in market interest rates relates primarily to our debt obligations with floating interest rates. We have historically managed our interest rate risk using interest rate swaps. However, in the current negative interest rate environment, we have not entered into any interest rate derivatives. We will revisit this strategy if there is a change in the market. The senior loan facility bears interest of EURIBOR plus a margin with a EURIBOR floor of 1%, therefore a reasonably possible change in the EURIBOR will not have an impact on our results. This is only sensitive to EURIBOR increases on the revolving credit facility and the asset-backed facility because the interest rates are not reduced when the EURIBOR is negative.

Foreign Currency Risk

We are exposed to foreign currency risk to the extent that there is a mismatch between the currencies in which sales, purchases, receivables and borrowings (primarily intercompany debt and to the U.S. dollar denominated PIK loans) are denominated and the respective functional currencies of our subsidiary companies. We use foreign exchange forward contracts and option deals to manage some of our non-euro denominated profit or loss and cash flow exposures. Our profit before tax is most sensitive to changes in the U.S. dollar, Israeli new shekel and British pounds sterling exchange rates, with all other variables held constant. The impact on our results is due to changes in carrying amounts of monetary financial assets and liabilities. Our exposure to foreign currency changes for all other currencies is not material. See Note 21 to our audited consolidated financial statements for further details.

Commodity Risk

Our performance is subject to the risk of volatility in commodity prices, more specifically polypropylene prices. We manage this risk by entering into longer term contracts and fixing the contract price, however currently there is no market to enter into financial hedges to reduce this risk. We review the market on an ongoing basis to identify opportunities to enter into tailored contracts with counterparties.

Credit Risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument leading to a financial loss. We are exposed to credit risk primarily from receivables from customers and to a lesser extent from deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Customer credit risk is managed by each business unit and is subject to our established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an assessment performed by a credit insurance company which also insures our trade receivables. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by credit insurance and additional letters of credit or other forms of credit insurance. We evaluate the concentration of risk with respect to trade receivables as low, as our customers are located in several jurisdictions and operate in largely independent markets. An impairment analysis is performed at each reporting date on an individual basis for all customers. We do not hold collateral as security. We write off financial assets for which we believe the likelihood of collection is nil, for example in situations in which the borrower is in liquidation or bankruptcy proceedings.

Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and available funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the dynamic nature of our

 

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underlying businesses, we maintain flexibility in funding with availability under committed credit lines. We monitor rolling forecasts of our liquidity both at local level, in accordance with practice and limits set by management, and at the global level. In addition, we operate a cash pool arrangement, which allows flexibility in terms of liquidity needs and prevents the cash pool participants from having overdraft balances. Our liquidity management process includes full year cash flow projections, assessing the level of liquid assets necessary to meet these projections, monitoring internal and external liquidity ratio requirements, and maintaining debt financing plans. See Note 21.4 to our audited consolidated financial statements the maturity profile of the Group’s non-derivative financial liabilities based on contractual undiscounted payments.

Capital Management

Our objective when managing capital is to safeguard our ability to continue as a going concern, so that we can continue to provide returns to shareholders and other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust our capital structure, we may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. We define capital as equity disclosed in the consolidated statement of financial position and is maintained in the context of the Group. Considering the nature of our activities, the extent of debt and the capital level as at the end of the reporting period is deemed adequate by the Group.

Critical Accounting Estimates and Judgments

A discussion of our significant accounting policies and significant accounting estimates and judgments is presented in the Summary of Significant Accounting Policies in the Notes to our audited Consolidated Financial Statements included elsewhere in this prospectus. Throughout the preparation of the financial statements, we make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. We have no significant accounting judgements not involving estimations. We have based assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

Legal Claims

In estimating the likelihood of the outcome of legal claims filed against us, we rely on the opinion of our legal counsel. These estimates are based on the legal counsel’s best professional judgment, taking into account the stage of proceedings and legal precedents in respect of the different issues. Since the outcome of the claims will be determined in courts, the results could differ from these estimates.

Deferred Tax Assets

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

Pension and Other Post-Employment Benefits

The liability in respect of post-employment defined benefit plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about, among others, the discount rate, future salary increases and employee turnover rate. The carrying amount of the liability may be highly sensitive to changes in these estimates.

 

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Impairment of Non-Financial Assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a Discounted cash flow model (DCF). The cash flows are derived from the budget and forecasts and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful lives. The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in Note 10.3 to our consolidated financial statements.

Share-Based Payments

In order to determine the fair value of services provided, we estimate the fair value of the ordinary shares of the indirect shareholder whose shares or share options are granted to the employees as at each grant date using an option pricing model. The model considers the following factors:

 

   

the prices, rights, preferences and privileges of ordinary and preferred shares and the related impact on the valuation of the ordinary shares;

 

   

current business conditions and projections;

 

   

the Group’s stage of development;

 

   

the likelihood of an ‘exit event’ for the shares, such as an initial public offering or sale of the Group, given prevailing market conditions, considering both the impact on the value and the vesting period given that certain of the shares vest based upon an exit event;

 

   

any adjustments necessary due to the lack of marketability of the ordinary shares; and

 

   

the market performance and volatility of the share prices of comparable publicly traded companies.

The key parameters used in the model are risk free interest rates, time to liquidation event, dividend yield and share price volatility derived from share price volatility of similar companies. These inputs are considered to be highly complex and subjective. Because the shares granted have not been historically publicly traded, there is not sufficient company-specific historical and implied volatility information for its shares. Therefore, we estimate expected share price volatility based on the historical volatility of publicly traded peer companies. The fair value of the ordinary shares has been determined under both an option pricing model and a market scenario. Then a weighted average of these values based on their relative probabilities was applied in order to calculate the weighted fair value of the ordinary shares. Because the awards vest upon an exit event, we have also applied our best estimate of the period over which the services will be provided to such exit event and have used that as the period over which to recognize the expense.

In 2021, management determined that the vesting period for all awards should be accelerated to reflect the expectation of an exit event in late 2021. As a result, share based payment expenses will increase in the first three quarters of 2021 such that all expenses will be recognized by September 30, 2021.

Write-Down of Inventories

Inventories are carried at lower of cost and net realizable value, or NRV. In estimating NRV, we use estimates related to fluctuations in inventory levels, planned production, customer purchasing behavior, obsolescence, future selling orders, seasonality and costs necessary to sell the inventory.

 

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Revenue recognition—estimating variable consideration for volume rebates

We estimate variable consideration to be included in the transaction price for sales to customers that are entitled to volume rebates. Our expected volume rebates are analyzed on a per customer basis for contracts that are subject to a single volume threshold. Determining whether a customer will be likely entitled to rebate will depend on the customer’s historical rebates entitlement and accumulated purchases to date. The variable consideration is furthermore subject to renegotiation, which also requires management judgment to estimate. Estimates of expected volume rebates are sensitive to changes in circumstances and our past experience regarding rebate entitlements may not be representative of customers’ actual rebate entitlements in the future.

Useful Lives of Customer Relationships

The customer relationships of the Group were acquired as part of business combinations that occurred in October 2016, March 2017 and September 2018. They were recognized at their fair value at the date of acquisition and are subsequently amortized on a straight-line basis based on the timing of projected cash flows of the customer relationships over their estimated useful lives. However, the actual useful life may be shorter or longer than estimated, depending on commercial obsolescence, competition and demand.

As at December 31, 2020, the carrying amount of certain customer relationships acquired in October 2016 is €259,667 thousand (2019: €297,667 thousand). We review the amortization period and the amortization method of the customer relationships at the end of each reporting period. We estimated the useful life of these customer relationships to be eleven years based on expected cash flows using “the excess earnings method.” As at December 31, 2020, their remaining useful life is nearly seven years. However, if it were shorter (longer) by two years, the future annual amortization charge would increase (decrease) by €15.8 million (€8.6 million).

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that are relevant to us, but not yet effective, is included in Note 2.21 to our audited consolidated financial statements included elsewhere in this prospectus.

 

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BUSINESS

Our Business

Keter Snapshot: Shaping What’s Next for a Better Day

For over 70 years, Keter has inspired people to create amazing spaces in and around the home through an innovative, industry-leading portfolio of durable indoor and outdoor lifestyle solutions.

Our balanced and diversified portfolio of categories, brands and products, which is unmatched by our competition in terms of design, functionality, quality, breadth or global reach, is defended by an intellectual property portfolio of approximately 1,500 registered patents as of September 5, 2021 and decades of accumulated know-how. Our products are distributed in approximately 100 countries through a network of blue-chip, omnichannel retail partners, with Keter having a superior presence in the e-commerce channel, compared to the broader home and garden solutions industry. We believe the breadth, depth and quality of our product offering makes us a preferred partner and one-stop shop for customers, who often consider us a category captain in resin-based products, and to whom we provide innovative, sustainable and cost-efficient products. In the year ended December 31, 2020, we generated €1,235.7 million in revenue, a loss for the year of €(76.8) million and €194.4 million in Adjusted EBITDA. In the six months ended June 30, 2021, we generated €855.0 million in revenue, a profit for the period of €2.4 million and €149.3 million in Adjusted EBITDA.

 

LOGO

 

Keter primarily serves large, resilient and growing markets for lifestyle products used in and around the home. We believe our TAM is estimated to have generated retail sales of approximately $27.8 billion across North America and Europe in 2020, and is fueled by secular tailwinds, including increased at-home activities, growing home improvement spend and a shift toward suburban living. The most attractive market segment within this large TAM, resin-based solutions, is estimated to have generated retail sales of approximately $9.7 billion in 2020 and is expected to grow at a CAGR of 4.4% between 2020 and 2023, nearly twice the pace of products made of other materials.

At twice the size of its closest competitor, we believe Keter is best positioned to enjoy this accelerated growth in large part due to our compelling value proposition for consumers. Keter’s global leadership position enables us to leverage the strength and scale of our business to derive significant and durable competitive advantages:

 

   

Leading Global Platform in Durable Consumer Products and Solutions with Significant Scale Advantage: Keter is often seen as a category captain for durable consumer products, with our relative global market share in resin-based solutions being nearly double that of our nearest competitor across

 

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our market. We believe that we have no direct competitors with product portfolios or operational footprints that rival our reach, scale and breadth of product offering, which we believe is a distinct competitive advantage.

 

   

Innovation-Driven Approach to Growth: We have a long-established track record of leading our industry in innovation. Products developed between 2017 and 2020 represented approximately 30% of net sales in 2020.

 

   

Long-Standing Relationships with Blue-Chip Retail Partners: Our products are sold in over 70% of the top 50 hardline retailers in Europe and North America. We maintain strong relationships with our retail partners, with the average relationship length being approximately 20 years across our top 20 partners, which includes retailers such as The Home Depot, Walmart, Amazon, Kingfisher, Costco and others.

 

   

Growing Omnichannel Business Suited to Online Expansion: We believe we are well-positioned to benefit from our outsized presence in the fast-growing e-commerce channel. We estimate that our total online penetration is approximately 30%, which compares to online penetration of approximately 15% on average for home and garden solutions globally.

 

   

Leading Brand Portfolio: The Keter and Curver brands, our leading proprietary brands in our Outdoor and Indoor segments, respectively, are broadly recognized after being in the market for over 70 years. Keter is among the top two most recognized brands in Europe in the resin-based outdoor storage and outdoor furniture categories and is well-positioned in the United States, while Curver ranks amongst the top five most recognized brands in resin-based home organization.

 

   

Well-Invested Global Manufacturing Footprint: Our operating model and manufacturing footprint allows us to optimize production across markets based on local supply and demand dynamics. Over 65% of the production is performed locally, mitigating the risks of potential global supply chain disruptions.

 

   

Industry Leader in Sustainability, Corporate Social Responsibility and ESG Issues: We aim to lead our industry on the topic of sustainability, corporate social responsibility and ESG. Our beautiful and durable consumer products are 99.9% recyclable at the end of their useful lives. We have increased the share of recycled content in total production from 21% in 2016 to 38% in 2018 and 40% in 2020, and are aiming to achieve 55% recycled content by 2025.

 

   

Efficient and Effective Organization: Our “glocal” operating model delivers a high level of service to our clients and gathers evolving consumer insights. Our decentralized local manufacturing, sales and marketing operations are supported by effective global corporate functions, with a best-in-class international management team benefiting from decades of accumulated experience, driving the growth strategy of the business.

Keter has multiple levers to drive superior growth, underpinned by robust strategic priorities. We are maximizing opportunities within our existing business through our innovation, channel penetration, brand building potential and strength of our portfolio. Further, we believe our recent investments in sales and marketing, and product innovation, position us to continue the trend of profitable above-market growth. We also have additional growth opportunities, providing our business with significant optionality, including the opportunity to penetrate category adjacencies, geographic expansion and business model innovation. Finally, as a natural consolidator in a fragmented industry, we are able to accelerate our development through selective and complementary acquisitions.

Company Overview

Founded as a family business in Israel in 1948, Keter has experienced significant growth and global expansion to become a market leader in indoor and outdoor durable lifestyle solutions. Throughout its over 70-year history, Keter has ascended to the forefront of the industry in design, functionality and the use of

 

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advanced engineering capabilities across product categories. Since the funds advised by BC Partners acquired a controlling stake in Keter in 2016, the business has been transformed from a family-owned company to a global consumer products leader by strengthening the organization, investing in innovation, rationalizing the portfolio, developing a digital footprint, focusing on sustainability, optimizing global operations and executing on the consolidation opportunity through acquisitions.

Our product portfolio is unmatched by our competition in terms of breadth and depth, and is balanced across most outdoor living and home solutions, positioning us as a category captain to many customers in resin based products and the partner of choice for blue-chip retailers. Our portfolio is also well balanced in terms of global presence, and is supported by well recognized brands across our categories in Europe and North America.

 

 

LOGO

We operate in two segments, with solutions meeting most consumer indoor and outdoor lifestyle needs.

Outdoor Segment

 

   

Our Outdoor segment is anchored by the global equity of our Keter brand and comprises three main product solutions: outdoor furniture and planters, sheds and buildings and deck boxes and leisure. Keter has been behind many of the major innovations in the category—notably through the recent introduction of the DUOTECH and EVOTECH technologies featuring the natural look and feel of traditional wood products. Our outdoor furniture and planters business comprises decorative and weather-resistant products for a range of outdoor lifestyles and activities, including lounge sets, deck chairs, dining sets and tables, as well as raised garden beds, planters and pots. In our sheds and buildings business, we produce a range of innovative, beautifully designed and highly durable garden sheds and outdoor buildings. Our deck boxes and leisure business is comprised of practical and aesthetic outdoor storage solutions such as patio coolers.

 

   

We are the leading resin-based player across deck boxes and leisure and outdoor furniture and planters sub-categories in both Europe and the United States. In sheds and buildings, we are the leading resin-based player in Europe and the number two resin-based player in the United States, with sale estimates of over one million sheds globally in 2020. Overall, our market share across Europe and North America in resin-based products across our Outdoor segment is approximately three times larger than the next competitor.

 

   

Our Outdoor segment benefits from consumers’ sustained and growing investment in their outdoor spaces and the appeal of our products, which combine highly aesthetic designs with significantly greater durability, lower maintenance and greater value, compared to products manufactured with traditional materials such as wood, rattan or metal. We believe our global leadership and innovative capabilities uniquely position us to further drive resin penetration and capitalize on the growing demand in outdoor living. We also anticipate future opportunities to expand into adjacencies (e.g., “livable sheds”) as homeowners and renters look for alternative or additional living spaces.

 

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Indoor Segment

 

   

Our Indoor segment is led by our Curver brand and comprises four main product solutions: home storage and organization, tool storage, cabinets and shelving and totes and medical containers. Our home storage and organization business includes storage boxes and baskets, bathroom storage solutions, kitchenware and pet accessories. We provide aesthetically pleasing solutions that bring storage from the closet into the living room with our unique range of 3D and surface finishes, including weave, knit, beton and jute. Our tool storage business features a ground-breaking system approach targeted at both professional contractors and DIYers. These innovative tool storage solutions are designed, manufactured and distributed by Keter and marketed under exclusive third-party specialized brands, including the leading and fast-growing brands Milwaukee, Ridgid and Hart. Our cabinets and shelving business provides a range of storage solutions for the home and office, and the medical storage business, marketed under our AP Medical brand, provides safe medical containers for the disposal of general or sharp waste in hospitals and medical facilities.

 

   

We are the leading resin-based home storage and organization player in Europe, enjoying market share approximately two times larger than the next competitor, and we are also well-positioned in North America. In high-growth resin-based tool storage solutions, we maintain the number one and number two market share position in the United States and Europe respectively, and have increased our market share in the overall tool storage market across North America and Europe from 6% in 2015 to 9% in 2020. In cabinets and shelving, we are the leading resin-based player in Europe and among the top three players in the United States.

 

   

These categories benefit from the continued strength of the housing market and increasing spend on home improvement, renovation and restoration activity and the growing interest in home decoration and organization. Keter is well-positioned within the market to capitalize on these trends by offering differentiated branded solutions focused on design, high quality and durability, including those made of recycled resin.

Today, innovation underpins everything Keter does and this capacity for innovation is a core competitive advantage, a fundamental part of Keter’s corporate culture and a key driver of future success. We take a market-led approach to understanding and anticipating the needs of consumers across our various product categories and geographies to create solutions that are functional, beautifully designed, durable and accessible to a broad consumer base.

 

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Due to our scale, we are able to invest substantial resources behind this strategic effort. We have a global team of nearly 70 designers and engineers exclusively focused on product innovation, working across four dedicated research and development hubs which are closely connected to our sales and marketing teams, locally based across our key regions. We have invested in excess of €60 million in capital expenditures related to new product molds in total in the last three years and operate a portfolio of intellectual property assets including approximately 1,500 registered patents globally, with approximately 216 additional patents pending, as of September 5, 2021. New products launched between 2017 and 2020, comprised approximately 30% of our total sales in 2020. We believe our recent investments in innovation and pipeline of new products, supported by other business initiatives, position us to experience continued growth.

For example, Keter’s DUOTECH solutions, leveraging our unique know-how in resin science and surface finishes, are a breakthrough in outdoor storage products due to the combination of innovative technology, smart engineering, and distinctive materials. Our DUOTECH products feature the natural look and feel of traditional wood products, are easily customized and have solid design and resistance to all weather conditions. We have similarly redefined the tool storage market, with the fast-growing family of storage solutions introduced under the Milwaukee PACKOUT brand, which revolutionizes the transportation, storage and organization of tools for both professional contractors and DIYers. Built from impact-resistant polymer, its patented multi-footprint system allows users to stack and lock boxes, organizers and crates in any configuration. Its design has given Keter a top mark in product innovation, resulting in recognition as a finalist for the prestigious Innovation Award from The Home Depot.

We have defined our brand strategy to maximize our market presence and drive our profitable growth across markets and categories. Consumers are increasingly relying on online search to make informed purchases, whether through physical retail channels or through e-commerce sites, and we continue to invest in brand recognition to capitalize on this trend. Our portfolio is primarily marketed under our range of proprietary brands and under exclusive licenses with widely recognized third-party brands. Our branded offering is tactically supplemented by store-branded product lines, which we undertake in collaboration with select retail partners based on a set of strict criteria related to volume, growth potential and profitability.

 

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Our proprietary brands

 

   

In 2020, 74% of our sales were generated by products under our proprietary brands, and our portfolio is anchored by two brands with strong recognition across key consumer segments and categories. Keter is our leading brand in the Outdoor segment, which for over 70 years has been inspiring people to create amazing spaces in their homes and gardens with innovative, high-quality products. Curver, our leading brand in the Indoor segment, was created in 1949 and stands for intelligent, beautiful and innovative solutions for home organization.

 

   

We are continuing to invest in our brands—the Keter and Curver brands sit among the top three recognized brands across resin-based outdoor storage, outdoor furniture and home organization in Europe, and are well-positioned in the United States and feature strong NPS relative to direct competitors across regions and categories.

 

   

These two anchor brands are complemented by a portfolio of local and regional brands which we strategically and tactically use in certain regions and product categories. These brands include Adams and Allibert in our Outdoor segment and KIS in our Indoor segment.

Partnerships with third-party brands

 

   

In 2020, 9% of our sales were generated by products sold under market-leading third-party brands. We selectively partner with global brands to promote our products in certain categories where such partnerships can create a competitive advantage and bolster product recognition.

 

   

Historically, we have partnered with brands such as Disney on a range of kids’ storage solutions, as well as a number of brands owned by Techtronic, an operator of some of the most successful and recognized brands in power tools and outdoor power equipment in the world. Our partnership with Techtronic has been a driver of the success and growth of our tool storage business. In 2018, we redefined the tool storage market with the launch of Milwaukee PACKOUT, a multi-unit system with patented stackable parts and customizable layouts aimed at professional contractors and serious DIYers, and we recently expanded the relationship with the launch of Hart tool storage systems. We believe our significant investments into our tool storage business positions us to further grow in this strategic and attractive category.

Retail partnerships

 

   

In 2020, 17% of our sales were generated by private label products co-developed in partnership with our largest strategic retailers. We believe this approach provides us with a distinct competitive advantage in delivering value to our retail partners, and also provides an avenue for us to optimize our branded assortment within a channel and increase our overall share of spend with each customer.

 

   

We are focused on growing profitably with these strategic partners by offering a range of value-added innovations, and well-designed and high-quality products, combined with high production volumes to capture benefits from scale. This collaboration has been key to our relationship with such retailers as The Home Depot, with whom we have been working on product lines for the Husky and HDX brands for over 25 years, and IKEA, with whom we also have been partnering for over 25 years to create innovative home solutions.

We are focused on the attractive North America and Europe markets where our products are sold in over 70% of the top 50 hardline retailers. However, we bring our products to market through a diverse and powerful group of retail partners in approximately 100 countries around the world. We have long-established partnerships with most of Europe and North America’s largest retailers across the key home improvement, mass, club and specialist channels, including The Home Depot, Lowe’s, Costco, Walmart, Target, B&Q, Leroy Merlin, Castorama, IKEA, Action and many others. We also have a fast-growing digital presence, including through e-commerce pure players such as Amazon and Wayfair, and through the e-commerce websites of many of our retail partners pursuing omnichannel strategies. Across our entire distribution network, we estimate that

 

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approximately 30% of our sales in 2020 were to consumers through an online platform, whether pure-play or omnichannel. Sales from pure-play and trackable omnichannel retailers have increased at a CAGR of 21% from 2018 to 2020. We believe we are well-positioned to benefit from the increasing penetration of online shopping given the appeal of our brands and products, our global infrastructure and significant scale.    

Keter has an organization of over 5,000 employees working across regional business units in regional business units, local sales and marketing teams and 18 manufacturing sites across Western Europe, North America and Israel. While our global organization aims to deliver scale benefits across critical functions, our operating principles are based on a nimble and entrepreneurial culture with lean and effective central oversight. This “glocal” approach relies on strong local sales and marketing teams, with decades of in-market experience building customer relationships and collecting consumer insights. We believe our local, on-the-ground presence acts as a key competitive advantage and a strong barrier to entry, strengthens our market penetration and ensures agility and elevated service levels. This local presence is complemented by the benefits we derive from our global scale, which represent a significant and durable competitive advantage in a market where competition is largely comprised of smaller, less capitalized companies. Our scale allows us to invest meaningfully in innovation and product development, in our brands and in our manufacturing setup and our supply chain, all while offering the opportunity to optimize our global marketing effort and operations. Our large and global scale also allows us to leverage expertise across various technologies, including traditional and innovative injection molding, extrusion processes, mold design, process automation and surface finishes. In addition, our scale and the quality of our supply chain are essential to supporting fast-growing omnichannel strategies and leading e-commerce players, which has allowed us to establish ourselves at the forefront of our industry with regard to sustainability and the use of recycled materials or waste in our production processes.

We are proud of having established Keter as a thought leader on sustainability and corporate and social responsibility in our industry. While our focus on profitable growth is essential, we are also deeply committed to being part of the solution for a better planet by delivering highly durable products that are made with recycled content and that are themselves 99.9% recyclable, and by operating in an efficient, sustainable manner throughout our value chain. Our goal is to create products that are truly durable and recyclable while being functional, aesthetically appealing and affordable compared to products manufactured with alternative materials. Reducing our environmental footprint also includes leading our industry when it comes to incorporating post-industrial and post-consumer plastics as a raw material in manufacturing process and promoting circular economy and recycling initiatives. In 2019, we formalized a strategy to further drive our positive impacts on people, society and the planet, while accelerating a reduction in our environmental footprint by publishing our first Sustainability Report. These goals include increasing the amount of recycled content in production, continued zero production of single-use plastic consumer products, achieving zero waste to landfill from production, implementing product end-of-life programs in all regions and a reduction of greenhouse gas emissions from production, among other goals. As an example, we have increased the usage of recycled materials in our production process from 21% in 2016 to 38% in 2018 and 40% in 2020 and have set ourselves the goal of 55% by 2025. Keter is an industry leader in sustainability initiatives, and we believe our leadership will expand Keter’s competitive advantage as consumers become increasingly focused on the environmental footprint of their purchasing decisions.

The growing demand for our products is evidenced by our net sales growth from €1,119.8 million in 2018 to €1,433.2 million in the twelve months ended June 30, 2021, representing a CAGR of 10.4%, on the back of continued favorable market tailwinds, successful new product developments, strong sales execution and strategic acquisitions. During this time, we significantly improved the quality of our revenues rationalizing our portfolio and disposing of a non-core subsidiary. In the same period, our loss for the year decreased from €(762.3) million in 2018 to €(55.6) million in the twelve months ended June 30, 2021 and our Adjusted EBITDA increased from €93.4 million in 2018 to €231.6 million in the twelve months ended June 30, 2021, representing a CAGR of 44.0%, as we have driven margin expansion through a focus on value-add innovation and building an efficient and scalable organization. Our business was also highly resilient during the COVID-19 pandemic. While we experienced some order cancellations from retail partners across March and April 2020, we were able to

 

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successfully refocus our nimble organization on in-demand categories and growing channels, such as e-commerce and DIY, in order to return to strong growth in the second half of 2020. This strong momentum continued into 2021, with revenue in the first half of 2021 up 30% compared to the first half of 2020, driven by strong performance across both our Outdoor and Indoor segments.

 

 

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The growth rate for the first half of 2019 as compared to the first half of 2018 is calculated pro forma excluding the revenue contribution from Adams (acquired in September 2018) and Hovac (disposed of in November 2018) from both the second half of 2018 and the second half of 2019. Reported growth rate for the first half of 2019 as compared the first half of 2018 was 7.2%.

Industry Overview

Keter primarily serves large, resilient and growing markets for lifestyle products used in and around the home. In the Outdoor market segment, categories span outdoor furniture and planters, sheds and buildings and deck boxes and leisure. In the Indoor market segment, categories span home storage and organization, tool storage, cabinets and shelving and totes. Based on industry data, we estimate that our core categories generated total retail sales of $27.8 billion in North America and Europe in 2020. Across these categories, Keter is a market leader and is considered by many of its customers as a category captain for resin-based solutions. Keter has 17% market share in indoor and outdoor resin-based categories across North America and Europe. We benefit from growing spend on home improvement, renovation and restoration, as well as home decoration and consumers’ growing investment in their homes and outdoor spaces. Across all categories, consumers are increasingly investing in and prefer aesthetically appealing, well-designed, functional, durable and sustainable solutions over traditional products or materials, such as wood or metal. These trends are further amplified by the shift toward suburban living, which is evident, for example, in the 44% increase in suburban home sales in the greater New York City area in 2020. In addition, the trend toward at-home outdoor activities, which was further accelerated by COVID-19, is expected to continue to have long-term effects. For example, according to a consumer survey, 24% of consumers surveyed in the U.S., 58% in the U.K. and 47% in France said that they are considering moving to a residence with outdoor living space. Additionally, 37%, 38% and 35% of consumers answered that they expect to increase their spend on outdoor storage, furniture and home organization products, respectively, in the next 12 months, while only 17%, 17% and 15% said that they expect to decrease their spend on these categories. According to the same survey, limited demand was pulled forward as only 4% of consumers reported that had COVID-19 not occurred, they would have delayed the purchase by more than 12 months. As the market leader, we believe Keter is uniquely positioned to disproportionately benefit from these trends as a result of our innovative product portfolio, brands, retail relationship and global reach and scale.

 

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Resin-based solutions represent 35% of our total addressable market, or $9.7 billion total retail sales in North America and Europe in 2020. Resin-based solutions have outperformed the growth of products made from other materials over the 2015 to 2020 period by nearly two times, and are expected to continue to outpace the broader market through 2023.

 

 

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Consumer demand for resin-based solutions continues to expand, with surveys indicating that 44% of consumers would consider resin-based outdoor furniture and outdoor storage products for their next purchase, higher than for wood or metal products, and this number is as high as 67% for home organization products. We believe this shift toward resin-based products is being driven by product innovations, improved affordability, and relative functionality, convenience and durability compared to products made from traditional materials. Additionally, consumers are becoming increasingly environmentally conscious when making purchasing decisions, with approximately 70% of consumers indicating sustainability is a factor in their decision-making process. This is particularly true of millennials, who we estimate will drive more than 50% of the demand for home products by 2025, with millennials expressing willingness to pay a premium for sustainable brands. As such, we expect resin penetration to increase in the coming years, with every 1% increase in resin penetration equating to an increase of approximately $278 million in our current addressable market.

Outdoor

Across Europe and North America, the Outdoor market segment, which comprises outdoor furniture and planters, sheds and buildings and deck boxes and leisure, generated total sales of $13.9 billion in 2020, after growing at a CAGR of 3.7% from 2015 to 2020. The total market is expected to grow at a CAGR of 3.9% from 2020 to 2023. Growth in our outdoor categories is being driven by ongoing consumer investment in outdoor spaces and shifting preferences to e-commerce introducing new customers to the channel, long-term trends that were further accelerated by COVID-19 and that we expect to continue for years to come. Outdoor living continues to be the top focus area for consumers looking to add features to their homes. For example, approximately one-third of consumers expect to increase their outdoor activities in the future, and between approximately 20% to 60% of consumers who do not have outdoor space, depending on where they are located, are considering moving to a residence with outdoor space in the next two years. Furthermore, a number of Outdoor market categories display a low penetration of addressable households, which are defined as households with outdoor space. This low addressable household penetration provides significant space for new consumers to

 

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enter the market and a subsequent runway for market growth. For instance, deck boxes and leisure’s estimated addressable household penetration across North America and Europe is 17%, while sheds and buildings’ is only 5%.

 

 

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Growth in resin-based products outpaced the broader market during the period from 2015 to 2020. Resin penetration in our outdoor categories was 29% in 2020, having increased from 27% in 2015, and is driven by the same secular tailwinds we benefit from in the total market. Resin-based products in our outdoor categories grew at an estimated CAGR of 5.4% from 2015 to 2020, and the CAGR is expected to increase to 5.7% for the period from 2020 to 2023.

 

 

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Keter is a leading player in resin-based products across our outdoor categories, with an estimated market share of 26.4% in Europe and 15.3% in North America in 2020, which has increased from 20.6% and 10.6%, respectively, in 2015, through a combination of organic growth and acquisitions. We believe Keter’s global leadership and innovative capabilities position us to further drive resin penetration and disproportionately benefit from the growing demand in outdoor living.

 

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Indoor

Across Europe and North America, the Indoor market segment, which comprises home storage and organization, tool storage and cabinets and shelving and totes, generated total sales of $13.9 billion in 2020. The market for our indoor categories experienced growth in sales at a CAGR of 1.8% from 2015 to 2020 and is expected to grow at a CAGR of 2.0% from 2020 to 2023. Growth in our indoor categories is being driven by ongoing spend on home improvement and renovation and restoration, with home improvement spend estimated to increase by 25% by 2025, which will drive approximately 15 to 30% of demand across our categories. Additionally, there is an increasing preference to continue working from home longer-term, with approximately 70% of workers expressing a desire to continue to work from home post-pandemic, alongside a shift toward suburban living and growing consumer interest in home organization, evidenced by a 263% increase in mentions of #organization on social media from 2018 to 2019.

 

 

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As in our outdoor categories, growth in resin-based products within our core indoor categories has historically exceeded the broader market and is expected to continue to do so. Resin-based products in our indoor categories grew at a CAGR of 3.1% from 2015 to 2020, and are expected to grow at a CAGR of 3.5% from 2020 to 2023. Resin penetration in our indoor categories was 41% in 2020, having increased from 39% in 2015.

 

 

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Keter is a leading player in resin-based products across our indoor categories, with an estimated market share of 19.9% and 12.1% in Europe and North America, respectively, in 2020, which has increased from 12.1% and 9.5%, respectively, in 2015. As a result, we believe we are well-positioned to disproportionately benefit from the attractive trends in the indoor market segment by offering differentiated products focused on aesthetic design, quality, durability and sustainability.

The Keter Difference

We believe there are several key attributes that define and differentiate Keter, and position us to continue to win in the attractive markets we operate in.

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