WashTec AG — Interim / Quarterly Report 2020

Apr 28, 2020

Financial Statement Q1 2020 Smart Intelligence

Effects of COVID-19 pandemic clearly noticeable at the end of the first quarter

• Revenue at €87.3m (prior year: €92.3m) significantly down on prior year, due to impact of COVID-19 pandemic in EU countries
• Costs reduced by 3.8% in first-quarter 2020 relative to prior year excl. currency effects
• EBIT at €1.7m (prior year: €2.6m) despite cost reductions, down on prior year due to lower revenue
• Order backlog still above prior year
• Free cash flow up €10.8m to €1.4m (prior year: €–9.4m)
• Guidance for 2020 retracted due to unforeseeable business impact of COVID-19 pandemic

	1st quarter
--	-------------	--

rounding differences may occur	Q1 2020		Q12019	Change
				absolute	in %
Revenue	€m	87.3	92.3	–5.0	–5.4
EBIT	€m	1.7	2.6	–0.9	–34.6
EBIT margin	in %	1.9	2.8	–0.9	–
EBT	€m	1.6	2.5	–0.9	–36.0
Consolidated net income	€m	–0.2	0.5	–0.7	–140.0
Employees at reporting date	people	1,856	1,885	–29	–1.5
Average number of shares		units 13,382,324 13,382,324		0	0
Earnings per share1	€	–0.02	0.04	–0.06	–140.0
Free cash flow2	€m	1.4	–9.4	10.8	114.9
Capital expenditure	€m	0.6	2.7	–2.1	–77.8
Equity ratio at reporting date3	in %	31.0	36.9	–5.9	–
ROCE	in %	17.6	26.4	–8.8	–

1 Basic = diluted

2 Net cash flow – net cash flow from investing activities

3 Equity/balance sheet total

Contents

Highlights and Key Figures for Q1 2020

	1. Overall revenue and earnings development 5
2.	Report on economic position 6
2.1	Earnings 6
2.2	Net assets and financial position 8
3.	Outlook, opportunities and risk report 8
3.1	Outlook 8
3.2	Opportunities and risks for group development 9

4.	WashTec shares and investor relations 9
4.1	Share price performance 9
4.2	Shareholder structure 10
4.3	Annual General Meeting 202010

Selected Financial Information for Q1 2020

Consolidated Income Statement	12
Consolidated Balance Sheet 13
Consolidated Statement of Changes in Equity	15
Consolidated Cash Flow Statement	16
Consolidated Segment Reporting	17
Contact 18
Financial Calendar 18

Highlights and Key Figures

1.Overall revenue and earnings development

Corona crisis impacts revenue performance

First-quarter revenue, at €87.3m (prior year: €92.3m), was 5.4% or €5.0m down year-on-year. On an exchange rate adjusted basis, revenue was 5.6% down on the prior year.

Revenue performance in the first quarter was affected by the spreading COVID-19 pandemic. While performance on the Chinese market was hit particularly hard in January, the effects spread to Europe as the quarter progressed. In particular as a result of the very weak March in the European countries most severely affected by the crisis – Italy, Spain, France and Austria – first-quarter revenue was down 24% on the prior year. The Chinese market is recovering again, but revenue there was nevertheless about 40% below expectations.

Revenue on the North American market was not yet affected by the crisis in the first quarter. As the crisis also started to spread rapidly there at the end of the quarter, however, the first cancellations of already placed orders began to be received, and the Company reacted with extensive immediate measures.

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

EBIT fell by €0.9m to €1.7m in the first three months of 2020 (prior year: €2.6m) due to the negative revenue trend. Despite a 3.8% reduction in costs* on a currency-adjusted basis relative to the prior year, it was not possible to offset the lost earnings contribution because of the lower revenue.

EBIT performance also affected by COVID-19 pandemic

EBIT Q1 (with share of annual earnings) in €m

The order backlog at the end of the first quarter showed an increase on the prior year. Unlike in previous years, however, the order backlog provides little indication as to business development in the months ahead. In the current situation, this is determined less by the size of the order backlog and to a far greater extent by the situation-driven stipulations in the various countries and consequently the ability to install carwashes.

2. Report on economic position

2.1 Earnings

2.1.1 Earnings and expense items

Earnings, Q1
in €m,	Q1 2020	Q12019	Change
rounding differences may occur			absolute	in %
Gross profit*	51.2	53.7	–2.5	–4.7
EBIT	1.7	2.6	–0.9	–34.6
EBIT margin in %	1.9	2.8	–0.9	–
EBT	1.6	2.5	–0.9	–36.0

* Revenue plus change in inventory minus cost of materials

The gross profit margin increased, mainly due to the altered product mix, to 58.6%, compared to 58.2% in the prior year.

Due to the lower number of employees and to the severance payment included in the prior year following a change on the Management Board, personnel expenses decreased by €0.9m to €34.8m (prior year: €35.7m). As of March 31, 2020, the Group had 29 (or 1.5%) fewer employees than a year earlier.

Other operating expenses* fell by €0.1m to €13.2m (prior year: €13.3m). Within this figure, losses from exchange rate differences on the measurement of balance sheet items increased by €0.9m. Adjusted for this increase, other operating expenses fell by €1.0m or 7.5%.

In total, exchange rate differences on the measurement of balance sheet items resulted in a gain of €0.7m (prior year: €0.4m).

*Relating to personnel expenses, amortization, depreciation and impairment, other operating expenses including impairment loss of trade receivables and other taxes adjusted by the increase of foreign currency valuation.

* Including expense from impairments of trade receivables and other taxes

2.1.2 Revenue by regions and products

Revenue by region, Q1
in €m	Q1 2020	Q1 2019	Change
rounding differences may occur			absolute	in %
Europe	72.2	79.0	–6.8	–8.6
North America	15.0	11.9	3.1	26.1
Asia/Pacific	3.3	4.0	–0.7	–17.5
Consolidation	–3.2	–2.5	–0.7	–
Total Group	87.3	92.3	–5.0	–5.4

Revenue in largest region, Europe, decreased sharply by 8.6% or €6.8m relative to the prior-year period. The key factor here was the revenue trend in countries hit particularly hard by the COVID-19 pandemic.

In local currency, revenue in the North America region was USD 16.5m (prior year: USD 13.6m), some 21% higher than the prior-year figure.

Revenue in the Asia/Pacific region fell by 17.5% compared to the prior-year quarter. This was mainly due to the revenue performance in China falling short of expectations because of the COVID-19 pandemic.

Revenue by product, Q1
in €m,	Q1 2020	Q1 2019	Change
rounding differences may occur			absolute	in %
Equipment and Service	72.5	78.7	–6.2	–7.9
Chemicals	13.0	11.6	1.4	12.1
Carwash management
business and others	1.9	2.0	–0.1	–5.0
Total Group	87.3	92.3	–5.0	–5.4

Equipment and Service revenue was down, mainly because of postponed installations and a lack of service calls due to the local restrictions in the various regions. In Chemicals, revenue increased by 12.1%, mainly due to the regaining of a contract with a key account in North America and a number of restocking orders from key accounts in Europe.

2.1.3 Earnings by regions

EBIT by regions, Q1
in €m	Q1 2020	Q1 2019	Change
rounding differences may occur			absolute	in %
Europe	5.1	5.8	–0.7	–12.1
North America	–2.6	–2.9	0.3	10.3
Asia/Pacific	–0.5	–0.4	–0.1	–25.0
Consolidation	–0.3	0.1	–0.4	–
Total Group	1.7	2.6	–0.9	–34.6

EBIT performance in Europe was affected by the negative revenue trend due to the COVID-19 pandemic.

In North America, EBIT improved by 10.3% despite a negative exchange rate effect of about €0.5m (prior year: exchange rate gain of €0.2m). Adjusted for this effect, the increase in operating earnings was approximately 34%.

In Asia/Pacific, EBIT went down slightly due to the lower revenue.

Revenue at €87.3m

2.2 Net assets and financial position

Net operating working capital (trade receivables + inventories − trade payables − prepayments on orders) decreased by €10.1m due to the slower start of business in the first quarter than in the preceding quarter, falling from €96.2m as of December 31, 2019 to €86.1m. In particular, as a result of payments received for the fourth quarter of 2019, trade receivables decreased by a substantial €19.0m compared to December 2019.

The cash inflow from operating activities (net cash flow) in-

creased to €2.0m (prior year: €-6.7m). This was mainly due to the reduction in net operating working capital (NOWC). The net cash flow figure also includes a €5.3m prepayment of tax on investment income. A refund of the prior-year prepayment will come in the second quarter.

The cash outflow from investing activities decreased by €2.1m to €0.6m (prior year: €2.7m). This is due to the Group-wide capital expenditure freeze due to uncertainty about the future development of the business because of the COVID-19 pandemic. At present, capital expenditure is restricted to absolutely necessary strategic projects and essential maintenance expenditure on production equipment.

Free cash flow (net cash flow – cash outflow from investing activities) increased significantly, rising by €10.8m to €1.4m (prior year: €-9.4m).

In total, cash funds went down relative to December 31, 2019 by €1.7m to €-36.4m.

For the purposes of safeguarding the Company's liquidity in connection with the current uncertainty due to the spread of the corona crisis, credit facilities have been increased by a further €35m to €122.5m (December 2019: €87.5m).

3. Outlook, opportunities and risk report

3.1 Outlook

On April 3, 2020, the Company retracted the guidance for the 2020 fiscal year that it provided in the Annual Report 2019 published on March 18, 2020 (pages 72 to 74).

In view of the rapid global spread of the COVID-19 pandemic in recent weeks in particular, related crisis measures taken by the various countries and their severe economic impact and the development of orders received for the second quarter, it is not possible to reliably estimate our business development in fiscal year 2020.

In the current rapidly changing situation, hence it is impossible to provide an updated forecast. Compared to the prior year, the Company presumably anticipates an unforeseeable decline in revenue and EBIT. WashTec has responded to the crisis with extensive measures in addition to the existing cost reduction program. These include establishing contingency plans and forward-looking measures to safeguard the Company's liquidity. In this connection, WashTec is also reviewing its March 11, 2020 dividend proposal.

3.2 Opportunities and risks for group development

The WashTec Group's opportunity and risk management system is described in the Annual Report 2019.

The risk with regard to overall economic development due to the spread of the coronavirus arose during the last weeks of March and is having a significant impact on the development of the Group's business activities. It is not currently possible to provide a more accurate estimate of the resulting effects. Binding restrictions in individual countries have led to installations being halted at short notice and to a collapse in carwash volumes together with service and chemical revenue in the affected markets for the duration of the restrictions. While the Company expects that installations will largely be able to continue once the restrictions are eased, it will not be possible to make up the losses in the service and chemicals business. In addition, the Company is observing a reluctance to commit to capital expenditure both among key accounts and among direct sales customers. It is not currently possible to predict how long this will go on for or the size of the reduction in capital spending planned for this year.

Supplier risk has also risen. WashTec procures various production materials from countries that are currently severely affected. While there are no supply shortages so far, difficulties in material procurement could result if the current situation persists for a substantial period of time.

The remaining opportunities and risks in the 2019 report remain largely unaltered.

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, London, Paris and Lyon.

4.1 Share price performance

The WashTec share price was €36.15 on March 31, 2020. This is 32.68% down on the prior year-end closing price of €53.70 on December 30, 2019. The negative impacts of the COVID-19 pandemic were also reflected strongly in the performance of the share price indices. The SDAX fell by a substantial 26.09%.

WashTec AG is currently covered by Hauck & Aufhäuser, HSBC Trinkaus & Burkhardt, MM Warburg and Bankhaus Lampe. The price targets given by analysts are at least €57.00 and range up to €70.00 (as of March 2020).

4.2 Shareholder structure

WashTec AG did not receive any voting rights notifications under the Securities Trading Act (Wertpapierhandelsgesetz) in the first quarter of 2020.

Stable shareholder structure

Shareholding in %	31 Mar 2020
Axxion S.A.	9.99
Kempen Oranje Participaties N.V.	9.60
EQMC Europe Development Capital Fund plc.1	7.43
Dr. Kurt Schwarz2	6.82
Bank of America Corporation3	6.27
Investment AG für langfristige Investoren TGV	5.43
Paradigm Capital Value Fund4	4.58
Treasury shares	4.25
Diversity Industrie Holding AG	4.00
Wellington Management Group LLP	3.06
Free float	38.57

1 Alantra EQMC Asset Management, SGIIC, S.A. (as investment management function) 2 Leifina GmbH & Co. KG et al.

3 BofA Securities Europe SA (6.22% voting rights) 4 Carne Global Fund Managers (Luxembourg) S.A.

Based on notifications made pursuant to the WpHG

Manager Transactions

On February 11, 2020, Dr. Ralf Koeppe, Chief Executive Officer, acquired 1.200 shares.

4.3 Annual General Meeting 2020

WashTec AG has decided to postpone the 2020 Annual General Meeting planned for April 28, 2020 to a later date during 2020. The new date will be announced in due course.

This decision was made in light of the rapid spread of coronavirus infections (the COVID-19 pandemic). In this situation, the health of shareholders and of the employees of WashTec AG and its service providers involved in organizing the Annual General Meeting has absolute priority.

Selected Financial Information Q1 2020

Consolidated Income Statement

Revenue	87,330	92,340
Other operating income	2,484	1,406
Capitalized development costs	46	629
Change in inventory	8,031	4,718
Total	97,891	99,094
Cost of raw materials, consumables and supplies and of purchased material	36,418	35,628
Cost of purchased services	7,778	7,734
Cost of materials	44,196	43,362
Personnel expenses	34,805	35,732
Amortization, depreciation and impairment	3,964	4,081
Other operating expenses	12,397	12,965
Impairment loss of trade receivables	520	40
Other taxes	313	283
Total operating expenses	96,195	96,462
EBIT	1,696	2,631
Financial income	31	40
Financial expenses	164	171
Financial result	–133	–130
EBT	1,562	2,501
Income taxes	1,801	1,955
Consolidated net income	–239	546
Average number of shares in units	13,382,324	13,382,324
Earnings per share (basic = diluted) in €	–0.02	0.04

Consolidated Balance Sheet – Assets

in €k	Mar 31, 2020	Dec 31, 2019
Non-current assets
Property, plant and equipment	31,984	33,238
Goodwill	42,311	42,312
Intangible assets	12,066	12,251
Right-of-use assets	21,265	21,488
Non-current trade receivables	7,225	7,313
Other non-current financial assets	184	240
Other non-current non-financial assets	486	486
Deferred tax assets	4,124	3,740
Total non-current assets	119,646	121,069
Current assets
Inventories	50,402	38,097
Current trade receivables	65,196	84,041
Tax receivables	20,946	15,244
Other current financial assets	1,474	1,335
Other current non-financial assets	3,230	2,737
Cash and cash equivalents	8,440	12,426
Total current assets	149,687	153,880
Total assets	269,333	274,949

Consolidated Balance Sheet – Equity and Liabilities

in €k	Mar 31, 2020	Dec 31, 2019
Equity
Subscribed capital	40,000	40,000
Capital reserves	36,463	36,463
Treasury shares	–13,177	–13,177
Other reserves and currency translation effects	–6,278	–5,445
Profit carried forward	26,635	4,385
Consolidated net income	–239	22,251
	83,405	84,478
Non-current liabilities
Non-current lease liabilities	13,901	14,224
Provisions for pensions	10,978	10,938
Other non-current provisions	3,902	3,904
Other non-current financial liabilities	44	57
Other non-current non-financial liabilities	523	1,431
Non-current contract liabilities	1,807	2,118
Deferred tax liabilities	4,542	4,486
Total non-current liabilities	35,696	37,158
Current liabilities
Interest-bearing loans	44,843	47,132
Current lease liabilities	7,634	7,467
Trade payables	22,296	20,783
Income tax liabilities	4,720	4,886
Other current financial liabilities	17,206	18,475
Other current non-financial liabilities	22,876	25,120
Other current provisions	9,100	9,625
Current contract liabilities	21,556	19,825
Total current liabilities	150,231	153,313
Total equity and liabilities	269,333	274,949

Consolidated Statement of Changes in Equity

in €k	Number	Subscribed	Capital	Treasury	Other reserves	Profit	Total	Rounding differences
	of shares	capital	reserves	shares	and currency	carried		may occur.
	(in units)				translation	forward
					effects
As of January 1, 2020	13,382,324	40,000	36,463	–13,177	–5,445	26,635	84,478
Income and expenses recognized directly
in equity					–804		–804
Taxes on transactions recognized directly
in equity					–29		–29
Consolidated net income						–239	–239
As of March 31, 2020	13,382,324	40,000	36,463	–13,177	–6,278	26,396	83,405

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, 2019	13,382,324	40,000	36,463	–13,177	–5,057	37,171	95,401
Income and expenses recognized directly
in equity					316		316
Taxes on transactions recognized directly
in equity					–21		–21
Consolidated net income						546	546
As of March 31, 2019	13,382,324	40,000	36,463	–13,177	–4,762	37,717	96,242

Consolidated Cash Flow Statement

in €k	Q1 2020	Q1 2019
EBT	1,562	2,501
Amortization, depreciation and impairment	3,964	4,081
Gain/loss from disposals of non-current assets	15	–41
Other gains/losses	–791	–1,351
Financial income	–31	–40
Financial expenses	164	171
Movements in provisions	–423	547
Income tax paid	–8,056	–7,191
Gross cash flow	–3,596	–1,323
Increase/decrease in trade receivables	18,310	8,453
Increase/decrease in inventories	–12,566	–8,023
Increase/decrease in trade payables	1,506	–3,272
Increase/decrease in prepayments on orders	2,130	–1,444
Increase/decrease in net operating working capital	9,379	–4,286
Changes in other net working capital	–3,797	–1,066
Net cash inflow from operating activities	1,986	–6,675
Purchase of property, plant and equipment (without leases)	–602	–3,196
Proceeds from sale of property, plant and equipment	46	455
Net cash outflow from investing activities	–556	–2,742
Free cash flow	1,430	–9,416
Interest received	31	40
Interest paid	–164	–171
Repayment of lease liabilities	–1,993	–2,340
Net cash outflow from financing activities	–2,126	–2,470
Net increase/decrease in cash and cash equivalents	–696	–11,887
Net foreign exchange difference	–1,000	–229
Cash and cash equivalents at January 1	–34,706	–7,111
Cash and cash equivalents at March 31	–36,402	–19,227
Composition of cash and cash equivalents for cash flow purposes:
Cash and cash equivalents	8,440	11,744
Interest-bearing loans	–44,843	–30,971
Cash and cash equivalents at March 31	–36,402	–19,227

Consolidated Segment Reporting

Q1 2020 in €k Europe North America Asia/ Pacific Consolidation Group Revenue 72,209 14,791 3,320 –3,170 87,330 with third parties 69,074 14,936 3,320 0 87,330 with other divisions 3,135 35 0 –3,170 0 EBIT 5,054 –2,579 –484 –295 1,696 EBIT margin in % 7.0 –17.2 –14.6 – 1.9 Financial income 31 Financial expenses 164 EBT 1,562 Income taxes 1,801

Consolidated net income –239

Q1 2019	Europe	North	Asia/	Conso	Group
in €k		America	Pacific	lidation
Revenue	78,996	11,913	3,954	–2,523	92,340
with third parties	76,491	11,895	3,954	0	92,340
with other divisions	2,505	18	0	–2,523	0
EBIT	5,839	–2,898	–396	87	2,631
EBIT margin in %	7.4	–24.3	10.0	–	2.8
Financial income					40
Financial expenses					171
EBT					2,501
Income taxes					1,955
Consolidated net income					546

Contact

WashTec AG Phone +49 821 5584-0 Argonstrasse 7 Fax +49 821 5584-1135 86153 Augsburg www.washtec.de washtec@washtec.de

Financial Calendar

Jul 28, 2020 Financial Statement H1 2020 Oct 27, 2020 Financial Statement Q3 2020 Nov 16–18, 2020 Equity Forum, Frankfurt