WashTec AG — Interim / Quarterly Report 2018

Apr 30, 2018

Financial Statement Q1 2018

Business performance as expected in first quarter of 2018

• Revenue €91.5m (prior year: €101.2m); EBIT €5.4m (prior year: €12.1m)
• Revenue and EBIT decrease in comparison to atypically strong Q1 2017 with 32% revenue growth
• Dividend of €2.45 per share to be proposed at Annual General Meeting
• Guidance for 2018 confirmed: Full-year revenue growth of around three percent with significant improvement in EBIT

1st quarter		Q1 2018	Q1 2017		Change
(rounding differences may occur)				absolute	in %
Revenue	€ m	91.5	101.2	–9.7	–9.6
EBITDA	€ m	7.9	14.5	–6.6	–45.5
EBIT	€ m	5.4	12.1	–6.7	–55.4
EBIT margin	in %	5.9	12.0	–6.1	–
EBT	€ m	5.3	12.0	–6.7	–55.8
Employees at reporting date	persons	1,830	1,768	62	3.5
Average number of shares	units	13,382,324	13,382,324	0	0
Earnings per share1	€	0.20	0.64	–0.44	–68.8
Free cash flow2	€ m	–3.0	10.8	–13.8	–127.8
Capital expenditure	€ m	2.2	3.0	–0.8	–26.7
Capital ratio at reporting date3	in %	40.9	42.7	–1.8	–
ROCE	in %	25.6	32.4	–6.8	–

1 Basic = diluted

2 Net cash flow – net cash flow from investing activities

3 Equity capital/balance sheet total

Content

Highlights and Key Figures for Q1 2018

	1. Overall revenue and earnings development
	in the quarter	5
2.	Report on economic position .	6
2.1	Dividend .	6
2.2	Earnings .	6
2.3	Net assets and financial position .	7
3.	Outlook, opportunities and risk report .	8
3.1	Outlook	8
3.2	Opportunities and risks for group development .	8
4.	WashTec shares and investor relations .	8
4.1	Share price performance .	8
4.2	Shareholder structure .	9
4.3	Annual General Meeting on April 30, 2018 .	9

Selected Financial Information for Q1 2018

Consolidated Income Statement	11
Consolidated Balance Sheet	12
Consolidated Statement of Changes in Equity	13
Consolidated Cash Flow Statement	14
Consolidated Segment Reporting	15
Reconciliation Consolidated Balance Sheet as of Dec 31, 2017	16

Contact 17
Financial Calendar 17

Quarterly Statement

1. Overall revenue and earnings development in the quarter

First quarter revenue €91.5m

Revenue through to March 2018, at €91.5m (prior year: €101.2m), was 9.6% down on the prior year, adjusted for exchange rate effects 6.9%. It must be noted in this connection that business performance in the first quarter of 2017 was particularly strong due to orders from major customers. Growth was 32% compared with 2016. This resulted in lower revenue in Equipment and Service compared with the prior year. In Chemicals, lower numbers of car washes due to weather conditions caused a decrease in revenue during the first two months of the year, whereas March saw a return to double-digit growth.

The table below shows the sustained positive trend in revenue growth, which continues in 2018.

Revenue Q1 (with share of annual turnover) in € m, IFRS

Mainly as a result of the revenue performance, EBIT decreased in the first quarter of 2018 by €6.7m to €5.4m (prior year: €12.1m). The table below shows the sustained positive EBIT improvement.

Adjusted for currency effects, the shortfall on the order backlog was almost fully made up by the end of the first quarter, with the order backlog still only slightly below its prior-year level. New orders from direct sales showed double-digit growth in the first quarter compared with the prior year.

WashTec successfully participated in the CIAACE trade fair in Beijing, presenting innovative solutions for state-of-the-art operating and payment systems.

Mr. Rainer Springs left the Company as of February 28, 2018. He is to be succeeded as Chief Financial Officer from July 1, 2018 by Mr. Axel Jaeger (51), working for Zeiss Group, most recently as member of the Management Board and CFO of the Business Group Semiconductor Manufacturing Technologies.

2. Report on economic position

2.1 Dividend

Dividend of € 2.45 per share

The Management Board and Supervisory Board will be proposing a dividend of €2.45 per eligible share at this year's Annual General Meeting on April 30, 2018. This equals a total distribution of €32.8m. This corresponds to a dividend ratio for shareholders of some 89% of net income. Based on the share price of €77.90 on March 31, 2018, the dividend yield is 3.1%.

2.2 Earnings

2.2.1 Earnings and expense items

Earnings, Q1
in € m, IFRS (rounding differences may occur)	Q1 2018	Q1 2017	Change absolute	Change in %
Gross profit*	53.5	58.6	–5.1	–8.7
EBITDA	7.9	14.5	–6.6	–45.5
EBIT	5.4	12.1	–6.7	–55.4
EBIT margin in %	5.9	12.0	–6.1	–
EBT	5.3	12.0	–6.7	–55.8

* Revenue plus change in inventory minus cost of materials

The gross profit margin increased on account of the altered product and customer mix to 58.4%, compared with 57.9% in the prior year.

Despite the larger workforce and wage increases relative to the prior-year quarter, personnel expenses went up by €1.2m to €33.3m (prior year: €32.1m). The Group had 62 (3.5%) more employees at the end of March than a year earlier. The size of the workforce has held constant for the last six months.

Other operating expenses (including other taxes) decreased by €0.3m to €13.7m (prior year: €14.0m).

Special emphasis is being placed throughout fiscal year 2018 on strict cost management and the realization of efficiency gains.

2.2.2 Revenue and earnings by products and segments

Revenue by segment, Q1
in € m, IFRS (rounding differences may occur)	Q1 2018	Q1 2017	Change absolute	Change in %
Europe	77.2	78.4	–1.2	–1.5
North America	12.9	21.9	–9.0	–41.1
Asia/Pacific	3.7	3.2	0.5	15.6
Consolidation	–2.3	–2.3	0.0	0.0
Total Group	91.5	101.2	–9.7	–9.6

As expected, first quarter revenue performance was driven by a decrease in revenue in North America (by 41.1% or €9.0m), where orders from major customers had led to exceptionally strong revenue growth in the first quarter of 2017. In local currency, revenue in North America was USD 15.8m (prior year: USD 23.4m).

Revenue in Europe remained largely stable. It fell slightly by 1.5%.

In the Asia/Pacific region, revenue increased by 15.6% compared with the prior-year quarter. Revenue was increased both in China and Australia.

Revenue by product, Q1
in € m, IFRS (rounding differences may occur)	Q1 2018	Q1 2017	Change absolute	Change in %
Equipment and Service	77.4	85.0	–7.6	–8.9
Chemicals	11.1	12.6	–1.5	–11.9
Operations business and others	3.0	3.6	–0.6	–16.7
Total Group	91.5	101.2	–9.7	–9.6

Both in Chemicals and the Operations Business, weather conditions in the first two months resulted in lower numbers of car washes and thus lower revenue. Both businesses generated growth in March.

EBIT by segments, Q1
in € m, IFRS (rounding differences may occur)	Q1 2018	Q1 2017	Change absolute	Change in %
Europe	7.8	10.3	–2.5	–24.3
North America	–2.2	2.2	–4.4	–200.0
Asia/Pacific	–0.1	–0.2	0.1	50.0
Consolidation	–0.1	–0.2	0.1	–

Lower revenue in North America and Europe led, as expected, to a reduction in EBIT in the two regions. In the Asia/Pacific segment, EBIT improved as a result of higher revenue.

Total Group 5.4 12.1 –6.7 –55.4

2.3 Net assets and financial position

Net operating working capital (trade receivables + inventories – trade payables – prepayments on orders) decreased, mainly due to a significant reduction in receivables, from €86.7m as of December 31, 2017 to €82.9m.

The cash inflow from operating activities (net cash flow) decreased to €–0.8m (prior year: €13.7m). In the first quarter of 2018, the Company made a €7.9m prepayment for investment income tax. A refund of payments made in the prior year is expected to have a positive impact in the second half of the year. In 2017, both the prepayment and the refund came in the first quarter. The downpayment on a regular order from major customers for 2018 was, in contrast to prior year, already made at the end of 2017.

The cash outflow from investing activities decreased by €0.8m to €2.1m (prior year: €2.9m). For the full year, the Company expects that capital expenditure will be down on the prior year.

The Company has negotiated an increase in the credit line with the syndicate banks by €20.0m to €70.0m.

3. Outlook, opportunities and risk report

3.1 Outlook

The Company confirms that it aims for revenue growth of around three percent for the full year 2018 with a significant increase in EBIT.

The outlook given in the Annual Report 2017 continues to apply. The outlook is subject to uncertainties.

Digital innovation "EasyCarWash" to be presented at Uniti trade fair in May

The Uniti expo trade fair takes place in Stuttgart from May 15–17, 2018. WashTec will be presenting the digital innovation »EasyCar-Wash« for the business model of our customers. With a view to higher sales in all weathers, »EasyCarWash« is a business model similar to Spotify, Netflix and other systems based around unlimited consumption for a fixed fee.

3.2 Opportunities and risks for group development

The WashTec Group's opportunity and risk management system is described in the Annual Report 2017.

4. WashTec shares and investor relations

The Management Board communicated with shareholders, journalists and the financial community on an ongoing basis through the first quarter. As part of the Company's investor relations activities, Management took part in investor conferences and held road shows in Frankfurt, Sydney, Melbourne, London and Lyon.

4.1 Share price performance

The WashTec share price was €77.40 on March 31, 2018. That marks a slight decrease of 1.67% on the prior year-end closing price of €78.70 as of December 30, 2017. The SDAX improved by only 0.34% since the beginning of the year.

WashTec AG is currently covered by Hauck & Aufhäuser, HSBC Trinkaus & Burkhardt, MM Warburg and Bankhaus Lampe. The price target given by all analysts is at least €70.30 and ranges up to €90.00 (as of March 2018).

4.2 Shareholder structure

In the first quarter of 2018, there were the following changes in the shareholder structure, which were reported to the Company in the form of voting rights announcements in accordance with the German Securities Trading Act (Wertpapierhandelsgesetz):

Stable shareholder structure

Dr. Kurt Schwarz notified WashTec AG that his share of the voting rights on January 8, 2018 was now 6.82%.

Wellington Management Group LLP, Boston, Massachusetts, USA, notified WashTec AG that its share of the voting rights crossed above the 3.00% notification threshold on February 2, 2018 and was now 3.03%. Wellington Management Group LLP is attributed the shares of Wellington Management Company LLP.

Manager Transactions

There were no manager transactions during the reporting period.

Shareholding in %	31 Mar 2018
Axxion S.A.	9.99
EQMC Europe Development Capital Fund plc.	9.78
Kempen Oranje Participaties N.V.	9.60
Dr. Kurt Schwarz1	6.82
Investment AG für langfristige Investoren TGV	5.43
Paradigm Capital Value Fund2	4.58
Treasury shares	4.25
Diversity Industrie Holding AG	4.00
Wellington Management Group LLP3	3.03
Free float	42.52

1 Leifina GmbH & Co. KG et al.

2 Carne Global Fund Managers (Luxembourg) S.A.

3 Wellington Management Company LLP

Based on notifications made pursuant to the WpHG

4.3 Annual General Meeting on April 30, 2018

The Annual General Meeting of WashTec AG takes place in Augsburg on April 30, 2018. The venue this year is once again the Chamber of Industry and Commerce (IHK) for Augsburg and Swabia. The term of office of the current Supervisory Board members Dr. Günter Blaschke and Ulrich Bellgardt is due to end at the close of the Annual General Meeting. Both are available for reelection. It is intended, in the event of their re-elections to the Supervisory Board, for Dr. Blaschke to be proposed as candidate for chairmanship and for Mr. Bellgard to be proposed as deputy chairman of the Supervisory Board. The Management Board and Supervisory Board are proposing a dividend of €2.45 per voting share at the Annual General Meeting.

On March 29, 2018, the Company received a request to add an item to the agenda from shareholder Paradigm Capital Value SICAV; the request was published in the Bundesanzeiger (Federal Gazette) on April 4, 2018. The request proposes a continuation of the Longterm Incentive Program (LTIP) for the Supervisory Board. The Management Board has endorsed the request.

Selected Financial Information Q1 2018

Consolidated Income Statement

Rounding differences may occur.	in €k	Q1 2018	Q1 2017
	Revenue	91,524	101,216
	Other operating income	843	1,075
	Capitalized development costs	583	987
	Change in inventory	1,664	2,433
	Total	94,614	105,712
	Cost of raw materials, consumables and supplies and of purchased material	31,817	35,853
	Cost of purchased services	7,918	9,234
	Cost of materials	39,735	45,088
	Personnel expenses	33,306	32,136
	Amortization, depreciation and impairment of tangible and intangible assets	2,472	2,388
	Other operating expenses	13,466	13,794
	Other taxes	212	198
	Total operating expenses	89,192	93,603
	EBIT	5,423	12,109
	Financial income	36	7
	Financial expenses Financial result	132 –96	107 –99
	EBT	5,327	12,010
	Income taxes	2,619	3,436
	Consolidated net income	2,708	8,573
	Weighted average number of outstanding shares in units	13,382,324	13,382,324
	Earnings per share (basic = diluted) in €	0.20	0.64

Consolidated Balance Sheet*

Rounding differences
may occur.

*As a presentation improvement, the structure of the balance sheet was restated for the actual year and the prior year. For reconciliation, please see page 16.

Assets		Mar31,2018 Dec31,2017
in €k
Non-current assets
Property, plant and equipment	39,946	40,603
Goodwill	42,312	42,312
Intangible assets	9,702	9,423
Trade receivables	9,195	9,024
Other assets	590	593
Deferred tax assets	4,165	3,922
Total non-current assets	105,910	105,877
Current assets
Inventories	44,886	40,847
Trade receivables	58,390	66,238
Tax receivables	13,559	7,928
Other assets	4,674	3,246
Cash and cash equivalents	7,121	9,786
Total current assets	128,630	128,045
Total assets	234,540	233,922

Equity and Liabilities in €k		Mar31,2018 Dec31,2017
Equity
Subscribed capital	40,000	40,000
Contingent capital	8,000	8,000
Capital reserves	36,463	36,463
Treasury shares	–13,177	–13,177
Other reserves and currency translation effects	–6,095	–5,585
Profit carried forward	35,923	–427
Consolidated net income	2,708	36,916
	95,823	94,191
Non-current liabilities
Finance lease liabilities	1,788	2,150
Provisions for pensions	10,212	10,247
Other non-current provisions	3,794	3,927
Other non-current liabilities	1,451	1,168
Non-current contract liabilities	1,227	2,638
Deferred tax liabilities	3,600	3,826
Total non-current liabilities	22,072	23,956
Current liabilities
Interest-bearing loans	14,320	13,726
Finance lease liabilities	1,153	1,058
Trade payables	14,053	14,612
Tax provisions	4,138	5,752
Other current liabilities	44,312	43,374
Other current provisions	9,783	9,932
Current contract liabilities	28,886	27,322
Total current liabilities	116,646	115,775
Total equity and liabilities	234,540	233,922

Consolidated Statement of Changes in Equity

Rounding differences	in €k	Number	Subscribed	Capital	Treasury	Other reserves	Profit	Total
may occur.		of shares	capital	reserves	shares	and currency	carried
*Adjustment as of Jan 1,		(in units)				translation	forward
						effects
2018 due to the first-time
application of IFRS 9	As of January 1, 2018	13,382,324	40,000	36,464	–13,177	–5,586	36,490	94,191
Financial Instruments.
	Adjustment as of Jan 1, 2018*						–566	–566
	Income and expenses recognized directly in equity					–538		–538
	Taxes on transactions recognized directly in equity					28		28
	Consolidated net income						2,708	2,708
	As of March 31, 2018	13,382,324	40,000	36,464	–13,177	–6,095	38,632	95,823

in €k	Number	Subscribed	Capital	Treasury	Other reserves	Profit	Total
	of shares	capital	reserves	shares	and currency	carried
	(in units)				translation	forward
					effects
As of January 1, 2017	13,382,324	40,000	36,464	–13,177	–3,550	27,677	87,413
Income and expenses recognized directly in equity					–86		–86
Taxes on transactions recognized directly in equity					16		16
Consolidated net income						8,573	8,573
As of March 31, 2017	13,382,324	40,000	36,464	–13,177	–3,619	36,250	95,916

Consolidated Cash Flow Statement

Rounding differences

may occur.

in €k	Q1 2018	Q1 2017
EBT	5,327	12,010
Amortization, depreciation and impairment of tangible and intangible assets	2,472	2,388
Gain/loss from disposals of non-current assets	–10	–28
Other gains/losses	–1,306	–189
Financial income	–36	–7
Financial expenses	132	107
Movements in provisions	–296	–431
Income tax paid	–10,315	–11,766
Gross cash flow	–4,033	2,081
Increase/decrease in trade receivables	6,500	4,952
Increase/decrease in inventories	–4,419	–6,446
Increase/decrease in trade payables	–485	6,940
Increase/decrease in prepayments on orders	723	4,947
Increase/decrease in net operating working capital	2,319	10,393
Changes in other net working capital	873	1,239
Net cash flow from operating activities	–841	13,713
Purchase of property, plant and equipment (excluding finance leases)	–2,165	–3,000
Proceeds from sale of property, plant and equipment	38	94
Net cash flow from investing activities	–2,127	–2,906
Free cash flow	–2,968	10,807
Interest received	36	7
Interest paid	–125	–89
Repayment of finance lease liabilities	–272	–355
Net cash flow from financing activities	–361	–438
Net increase/decrease in cash and cash equivalents	–3,329	10,369
Net foreign exchange difference	70	–54
Cash and cash equivalents at January 1	–3,941	–1,504
Cash and cash equivalents at March 31	–7,200	8,811
Composition of cash and cash equivalents for cash flow purposes:
Cash and cash equivalents	7,121	9,300
Interest-bearing loans	–14,320	–489
Cash and cash equivalents at March 31	–7,200	8,811

Consolidated Segment Reporting

Rounding differences may occur.

Q1 2018	Europe	North	Asia/	Conso	Group
in €k		America	Pacific	lidation
Revenue	77,209	12,891	3,729	–2,305	91,524
with third parties	74,965	12,830	3,729	0	91,524
with other divisions	2,244	61	0	–2,305	0
EBIT	7,848	–2,234	–126	–66	5,423
EBIT margin in %	10.2	–17.3	–3.4	–	5.9
Financial income					36
Financial expenses					132
EBT					5,327
Income taxes					2,619
Consolidated net income					2,708

Q1 2017	Europe	North	Asia/	Conso	Group
in €k		America	Pacific	lidation
Revenue	78,396	21,918	3,239	–2,336	101,216
with third parties	76,094	21,883	3,239	0	101,216
with other divisions	2,301	35	0	–2,336	0
EBIT	10,323	2,225	–223	–215	12,109
EBIT margin in %	13.2	10.2	–7.2	–	12.0
Financial income					7
Financial expenses					107
EBT					12,010
Income taxes					3,436
Consolidated net income					8,573

Reconciliation Consolidated Balance Sheet as of Dec 31, 2017 due to a presentation improvement

Rounding differences

may occur.

Assets		Dec31,2017 Restatement Dec31,2017
in €k			after
			amendments
			in presenta
			tion
Non-current assets
Property, plant and equipment	40,603		40,603
Goodwill	42,312		42,312
Intangible assets	9,423		9,423
Trade receivables	9,024		9,024
Other assets	593		593
Deferred tax assets	3,922		3,922
Total non-current assets	105,877		105,877
Current assets
Inventories	40,847		40,847
Trade receivables	66,238		66,238
Tax receivables	7,928		7,928
Other assets	3,246		3,246
Cash and cash equivalents	9,786		9,786
Total current assets	128,045		128,045

Total assets 233,922 233,922

Equity and Liabilities		Dec31,2017 Restatement Dec31,2017
in €k			after
			amendments
			in presenta
			tion
Equity
Subscribed capital	40,000		40,000
Contingent capital	8,000		8,000
Capital reserves	36,463		36,463
Treasury shares	–13,177		–13,177
Other reserves and currency translation effects	–5,585		–5,585
Profit carried forward	–427		–427
Consolidated net income	36,916		36,916
	94,191		94,191
Non-current liabilities
Finance lease liabilities	2,150		2,150
Provisions for pensions	10,247		10,247
Trade payables	7	–7	0
Other non-current provisions	3,927		3,927
Other non-current liabilities	1,161	+7	1,168
Non-current contract liabilities	0	+2,638	2,638
Deferred income	2,638	–2,638	0
Deferred tax liabilities	3,826		3,826
Total non-current liabilities	23,956		23,956
Current liabilities
Interest-bearing loans	13,726		13,726
Finance lease liabilities	1,058		1,058
Prepayments on orders	14,795	–14,795	0
Trade payables	14,612		14,612
Taxes and levies	6,806	–6,806	0
Liabilities for social security	1,536	–1,536	0
Tax provisions	5,752		5,752
Other current liabilities	38,713	+4,661	43,374
Other current provisions	9,932		9,932
Current contract liabilities	0	+27,322	27,322
Deferred income	8,846	–8,846	0
Total current liabilities	115,775		115,775
Total equity and liabilities	233,922		233,922

Contact

86153 Augsburg www.washtec.de

WashTec AG Phone +49 821 5584-0 Argonstrasse 7 Fax +49 821 5584-1135 washtec@washtec.de

Financial Calendar July 27, 2018 Q2 Report 201 Oct 26, 2018 Q3 Report 201

April 30, 2018 Annual General Meeting 2018 8 Sep 24–27, 2018 Baader Bank Investment Conference, Munich 8 Nov 26–28, 2018 Equity Capital Forum, Frankfurt

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