Notes to the consolidated financial statements

SFS Group is a limited company according to Swiss law, incorporated and domiciled in Heerbrugg, municipality of Widnau/SG (Switzerland). SFS Group AG is the parent company of all SFS Group companies and therefore the ultimate holding company of the SFS Group. It is listed on the SIX Swiss Stock Exchange AG in Zurich with the security code symbol SFSN.

All amounts are in CHF million unless otherwise stated.

These unaudited and condensed half-year consolidated financial statements have been prepared in accordance with Swiss GAAP FER 31 para 9 to 12 Interim Reporting. These half-year consolidated financial statements need to be considered in conjunction with the consolidated financial statements 2023 and have been prepared using the same accounting and valuation methods with the exception of the following accounting standards that have been applied since January 1, 2024:

• Swiss GAAP FER 28 “Government grants”
• Swiss GAAP FER 30 “Consolidated financial statements”

The application of the above-mentioned new and revised standards did not have a material impact on the consolidated financial statements.

Recognized critical accounting estimates and judgments and the financial risk management used in the consolidated financial statements 2023 have remained unchanged in the first half of the year 2024. Similarly, there are no material changes in the financial risk.

Due to seasonal variations in the segments, higher net sales and a higher operating profit are typically achieved in the second half of the year. The strongest characteristics results from the end-user markets of the electrical and electronics industry and the construction industry. In the electrical and electronics industry, the second half of the year sees the launch of new products from important end customers and higher sales due to the holiday season. The construction industry generally benefits from the seasonally strong autumn months. In other end markets, sales are more balanced throughout the year.

SFS Group is divided into the three segments Engineered Components, Fastening Systems and Distribution & Logistics.

As of January 1, 2024, the Industrial and Medical divisions were merged into one new division called Medical & Industrial Specials, which is part of the Engineered Components segment. The Riveting division, which was part of the Fastening Systems segment, was allocated to the Automotive and Medical & Industrial Specials divisions as of January 1, 2024. Therefore the disclosure, monitoring and assessment of the financial results of the former Riveting division will be included in the Engineered Components segment from 2024.

The previous year’s figures have been restated for better comparability.

Detailed information about the segments are presented in the “Engineered Components”, “Fastening Systems” and “Distribution & Logistics” section of the Half-Year Report.

In addition to the elimination of intercompany transactions, the segment “Corporate” contains corporate data relating to Technology, Corporate Services and Corporate IT & Finance.

Reconciliation of segment results to income statement and balance sheet

In these half-year consolidated financial statements, the income taxes have been recorded on the basis of local tax rates.

The dividend distribution for fiscal year 2023 of CHF 2.50 per share was approved at the annual general meeting and paid out in the total amount of CHF 97.2 million in May 2024.

Marketable securities and financial assets are measured at market value through profit or loss. In the absence of a market value, marketable securities and financial assets are measured at historical costs less any impairment. “Investments” include investments in associates, joint ventures and immaterial subsidiaries that are not included in the scope of consolidation.

In connection with the financing of the Hoffmann SE acquisition and the corresponding issuance of two bonds with a volume of CHF 400 million (refer to note 12), SFS Group has entered into two cross-currency-swaps (CHF/EUR) in 2022 with the same volume and maturity. The cross-currency-swaps (designated as hedging instruments) are used to hedge the foreign currency exposure which arises from the translation of net investments in foreign entities (designated as hedged items) into the Group’s presentation currency. Changes in the fair values of the cross-currency-swaps (net investment hedges) are recognized in equity and reversed through profit and loss upon disposal of the entity. As of June 30, 2024, the fair values of the cross-currency-swaps amount to CHF 42.5 million, thereof CHF 24.4 million are disclosed as other current receivables and CHF 18.1 million are disclosed as financial assets (fair values December 31, 2023: CHF 50.3 million).

In connection with the financing of the Hoffmann SE acquisition, SFS Group issued two bonds in June 2022 for a total of CHF 400 million. The first bond of CHF 250 million has a coupon of 1.00% and a maturity of three years (maturity date June 6, 2025) and the second bond of CHF 150 million has a coupon of 1.45% and a maturity of five years (maturity date June 8, 2027). Bonds are recognized in the balance sheet at nominal value. Deviations from the nominal value in the case of below- or above-par issues are offset with the emission costs and recognized as accruals and deferrals, and afterwards reversed on a straight-line basis over the term of the bonds. Due to the acquisition, the existing loan contract was prematurely renewed and two additional banks were included in the syndicate. The new contract term, after execution of the second extension option, is for five years and ends on May 10, 2029. The committed and uncollateralized revolving credit line amounts to CHF 600 million. It may be increased by a maximum amount of an additional CHF 100 million, provided the lenders agree to the request of SFS Group. The option to increase the maximum amount can be used up to three months before the final maturity date.

As of May 1, 2024, SFS Group acquired Etanco S.A.U., a Spanish distributor of fasteners, fixings, and accessories to the building envelope. The acquisition of Etanco will strengthen the market position of the Construction division in Spain and Portugal. With about ten employees, Etanco generated sales of approximately EUR 4 million in 2023. Contract clauses do not include any contingent consideration (earnout). The purchase price allocation used in these half-year consolidated financial statements is provisional and is expected to be finalized in the second half of 2024.

The Board of Directors approved the half-year consolidated financial statements on July 17, 2024. SFS is not aware of any events that occurred after the balance sheet date that could have a material impact on these consolidated financial statements.