WashTec AG — Interim / Quarterly Report 2022

Oct 27, 2022

Revenue increased by 10.5% to new nine-month record

EBIT margin slightly improved on preceding quarter

Q1–Q3
		Q1–Q3	Q1–Q3	Change
		2022	2021	absolute	in %
Revenue	€m	338.6	306.3	32.3	10.5
EBIT	€m	22.6	33.0	–10.4	–31.5
EBIT margin	in %	6.7	10.8	–4.1	–
EBT	€m	22.1	32.4	–10.3	–31.8
Net income	€m	14.8	22.9	–8.1	–35.4
Employees at reporting date	people	1,823	1,773	50	2.8
Number of shares	units	13,382,324	13,382,324	0	0
Earnings per share	€	1.10	1.71	–0.61	–35.4
Free cash flow*	€m	0.8	19.4	–18.6	–95.9
Capital expenditure	€m	4.0	1.5	2.5	166.7
Equity ratio	in %	27.0	34.0	–7.0	–

* including the repayment of lease liabilities

Q3
		Q3 2022	Q32021	Change
				absolute	in %
Revenue	€m	118.6	111.3	7.3	6.6
EBIT	€m	9.7	15.0	–5.3	–35.3
EBIT margin	in %	8.2	13.5	–5.3	–
EBT	€m	9.6	14.8	–5.2	–35.1
Net income	€m	6.7	10.9	–4.2	–38.5
Number of shares	units	13,382,324	13,382,324	0	0
Earnings per share	€	0.50	0.82	–0.32	–38.5

Figures in this report are rounded. Because of this, individual figures may not add up to the stated totals and percentages may not precisely correspond to the absolute figures they relate to.

Revenue increased in all product segments and all regions – up 10.5% overall

WashTec set a new record with revenue of €338.6m in the first nine months of the year. Significant 10.5% increase on prior year (€306.3m). Third quarter revenue up 6.6% to €118.6m (prior year: €111.3m).

EBIT continues to be significantly impacted by cost increases; price adjustments slowly taking effect: EBIT margin of 8.2% in Q3 2022 above EBIT margin of 7.0% in Q2 2022

Group EBIT of €22.6m as of September down on prior year (€33.0m); decrease in third quarter to €9.7m (prior year: €15.0m) with 8.2% EBIT margin.

Free cash flow down on prior year, due among other things to planned increase in inventories

Free cash flow (including repayment of lease liabilities) at €0.8m, down on prior year (€19.4m) largely due to planned increase in inventories to safeguard delivery capability.

Revised guidance for full year 2022 confirmed

Significant revenue growth of 10%–12% with an EBIT margin of 8%–9%.

Contents

Quarterly Statement for the period January 1 to September 30, 2022

	Business performance	5
	1. Group revenue and earnings	5
2.	Revenue and earnings by region	8
3.	Group financial position and cash flows	9
4.	Outlook .	10
	Guidance	10
	Opportunities and risks	10

Selected financial Information for the period January 1 to September 30, 2022

Consolidated Income Statement .	12
Consolidated Balance Sheet13
Consolidated Cash Flow Statement .	15
Contact .	16

Financial calendar .	16

Highlights and key figures Q1–Q3 2022

Business performance

Earnings, Q1–Q3
in €m	Q1–Q3 2022	Q1–Q32021	Change
			absolute	in %
Revenue	338.6	306.3	32.3	10.5
EBIT	22.6	33.0	–10.4	–31.5
EBIT margin in %	6.7	10.8	–4.1	–
EBT	22.1	32.4	–10.3	–31.8
Net income	14.8	22.9	–8.1	–35.4

Earnings, Q3

in €m	Q3 2022	Q32021	Change
			absolute	in %
Revenue	118.6	111.3	7.3	6.6
EBIT	9.7	15.0	–5.3	–35.3
EBIT margin in %	8.2	13.5	–5.3	–
EBT	9.6	14.8	–5.2	–35.1
Net income	6.7	10.9	–4.2	–38.5

1. Group revenue and earnings

The WashTec Group generated revenue of €338.6m as of September 30, 2022, a significant increase of €32.3m or 10.5% on the prior year (€306.3m). This is a new record for the first nine months of a fiscal year. Largely due to movements in the US dollar exchange rate, the year-on-year revenue growth at constant exchange rates was 7.6%.

All product segments contributed to this revenue growth. Partly due to the implemented price increases, the Equipment and Service segment in particular improved significantly compared with the first nine months of the prior year. This success was largely due to the positive performance of key account business. Chemicals and the direct sales business likewise performed positively.

Revenue Q1–Q3 in €m, in a multi-year comparison

Revenue also increased in the third quarter, by 6.6% (2.7% at constant exchange rates) to €118.6m (prior year: €111.3m). This is due to the Equipment and Service segment. As in the preceding quarter, the increase was mainly attributable to key account business, while direct sales business remained stable. It should be emphasized that this revenue growth was achieved despite customer-side capacity shortfalls in the construction of carwash buildings. After a strong first half year, Chemicals revenue was slightly down on the prior year. Long heat waves through July and August in Southern Europe, summer drought in France with carwashing bans and unfavorable carwash weather in September led to a fall in wash numbers with a corresponding effect on chemical revenue.

Revenue by product, Q1–Q3

in €m	Q1–Q3 2022	Q1–Q3 2021	Change
			absolute	in %
Equipment and service	290.9	263.2	27.7	10.5
Chemicals	43.5	38.2	5.3	13.9
Others	4.2	4.9	–0.7	–14.3
Total	338.6	306.3	32.3	10.5

Revenue by product, Q3

in €m	Q32022	Q32021	Change
			absolute	in %
Equipment and service	105.4	97.2	8.2	8.4
Chemicals	12.0	12.4	–0.4	–3.2
Others	1.2	1.7	–0.5	–29.4
Total	118.6	111.3	7.3	6.6

Orders received in the third quarter were slightly down on the prior year. In the first nine months, orders received were down year on year on an exchange rate adjusted basis. The decrease related to key account business, whereas orders received were up slightly in direct sales business. As was already the case at the end of the first half year, the order backlog was significantly higher at the end of September than a year earlier.

Gross profit as of September, at €91.8m, was down on the prior year (€94.4m). The gross profit margin fell from 30.8% to 27.1%. Impacts of the Ukraine war and Covid lockdowns in China continue to cause shortages on procurement markets, with material costs, procurement costs and energy costs rising significantly as a result. The WashTec Group meets the challenges in material procurement firstly with increased flexibility in production and higher inventory levels. As a result, the Company retained its delivery capability at all times during the past nine months. Secondly, the Company is responding with price adjustments. With order lead times of four to six months, it has not yet been possible to fully pass on the procurement market price increases.

The price adjustments made in several steps during the year began to have a positive effect during the third quarter in all regions and product segments.

Functional costs – the sum of research and development expenses, selling expenses and administrative expenses – amounted to €71.1m in the first nine months of the fiscal year (prior year: €64.7m). This included a planned 5.0% increase in research and development expenses. Among other things, WashTec has invested in further product optimization. Selling expenses as a percentage of revenue were slightly higher than in the prior year, at 13.7% (prior year: 13.4%). This reflects, among other things, higher trade fair costs, the normalization of travel activities and the volume- and price-related increase in outbound freight. At €14.0m, administrative expenses were slightly higher than in the prior year (€13.6m). As a percentage of revenue, they fell slightly from 4.4% to 4.1%. The net balance of other income and expenses decreased to €1.9m (prior year: €3.4m), mainly due to the positive non-recurring item from a government support program in North America in the prior year.

In total, Group EBIT decreased in the first nine months to €22.6m (prior year: €33.0m). The EBIT margin was 6.7% (prior year: 10.8%). In the third quarter, the EBIT of €9.7m (prior year: €15.0m) and the EBIT margin of 8.2% (prior year: 13.5%) were likewise significantly lower than in the prior year. Relative to the preceding quarter, the EBIT margin improved by 1.2%.

2018 33.2 2019 20.3 2020 12.5 2021 33.0 2022 22.6

EBIT Q1–Q3 in multi-year comparison in €m

2. Revenue and earnings by region

In the Europe region, revenue rose in the first nine months by 5.6%, from €251.3m to €265.4m. The revenue growth cuts across all product groups, although the increase in Equipment and Service is due to key account business. Equipment and Service revenue increased in the third quarter by a further 2.7% relative to the prior-year period. The slight weakening in the direct sales business seen in the second quarter continued here, whereas revenue in key account business remained strong. The weather-related decline in chemicals business also slowed growth in the third quarter.

Particularly noteworthy is the positive revenue performance in North America. At €71.4m, revenue as of September was a significant 38.4% higher than in the prior year. Adjusted for exchange rates, revenue increased by 22.4%. All product and customer segments contributed with double-digit growth. Revenue growth was slightly slower in the third quarter than in the first half of the year. The revenue growth compared to the same quarter of the previous year was nevertheless substantial at 23.8% (5.6% adjusted for exchange rates). Direct sales business made a particularly large contribution here, while key account business was slightly down.

In the Asia/Pacific region, revenue showed a slight increase in the first nine months to €12.5m (prior year: €12.3m). China's zero Covid strategy and the associated lockdowns continue to impact business. This is countered by the positive revenue performance in Australia. Revenue in the third quarter remained at the same level as in the prior-year quarter. For the reasons outlined in the first section, EBIT in the Europe region, at €24.1m as of

Q1–Q3 2022	Q1–Q3 2021
		absolute	in %
265.4	251.3	14.1	5.6
71.4	51.6	19.8	38.4
12.5	12.3	0.2	1.6
–10.8	–8.9	–1.9	–
338.6	306.3	32.3	10.5
			Change

in €m	Q3 2022	Q3 2021	Change
			absolute	in %
Europe	90.6	88.2	2.4	2.7
North America	27.6	22.3	5.3	23.8
Asia/Pacific	4.7	4.7	0	0
Consolidation	–4.3	–3.9	–0.4	–
Total	118.6	111.3	7.3	6.6

September, was down a significant 15.7% on the prior year (€28.6m). Third quarter EBIT came to €9.8m (prior year: €11.5m). Compared with the second quarter, the EBIT margin increased slightly from 10.6% to 10.8%.

In the North America region, too, EBIT after nine months, at €–1.2m, was likewise down on the prior year (€3.9m). It should be noted here that the prior-year EBIT included a €2.7m positive non-recurring item resulting from the recognition in profit or loss of a loan under a government support program. EBIT in the third quarter was at break-even level (prior year: €3.3m), whereas the second quarter had still shown a loss of €1.0m.

Due to the pandemic situation in China, the Asia/Pacific region saw an EBIT decline as of September from €0.9m to €0.4m. Third quarter EBIT was €–0.1m (prior year: €0.4m).

EBIT by region, Q1–Q3
in €m	Q1–Q3 2022	Q1–Q3 2021	Change
			absolute	in %
Europe	24.1	28.6	–4.5	–15.7
North America*	–1.2	3.9	–5.1	–130.8
Asia/Pacific	0.4	0.9	–0.5	–55.6
Consolidation	–0.6	–0.4	–0.2	–
Total	22.6	33.0	–10.4	–31.5

*EBIT in 2021 includes a positive non-recurring item in the amount of €2.7m resulting from a government support program.

EBIT by region, Q3
in €m	Q3 2022	Q3 2021	Change
			absolute	in %
Europe	9.8	11.5	–1.7	–14.8
North America*	0.0	3.3	–3.3	–100.0
Asia/Pacific	–0.1	0.4	–0.5	–125.0
Consolidation	0.0	–0.2	0.2	–
Total	9.7	15.0	–5.3	–35.3

*EBIT in 2021 includes a positive non-recurring item in the amount of €2.7m resulting from a government support program.

3. Group financial position and cash flows

Net operating working capital (trade receivables + inventories – trade payables – prepayments on orders) increased relative to December 31, 2021, rising €17.6m or 20.3% from €86.9m to €104.5m. Relative to September of the prior year, the figure increased by €16.5m (prior year: €88.0m). The increase was mainly due to higher stocks to safeguard delivery capability and the higher value of materials as a result of material cost increases. Trade receivables were reduced relative to September of the prior year, despite the increase in revenue.

Equity decreased, mainly due to the €38.8m dividend payout, to €78.1m as of September 30, 2022 (December 31, 2021: €98.4m). Compared with the 2021 year-end, the equity ratio went down from 36.9% to 27.0%.

The cash inflow from operating activities (net cash flow) decreased significantly to €11.6m as of September (prior year: €26.9m), mainly due to the lower earnings before taxes and the higher net operating working capital.

The cash outflow from investing activities more than doubled year on year in the first nine months to €4.0m (prior year: €1.5m), among other things due to capital expenditure on new laser welding equipment to optimize the metalworking process.

Free cash flow including repayment of lease liabilities (net cash flow – cash outflow from investing activities – repayment of lease liabilities) consequently amounted to €0.8m (prior year: €19.4m).

In total, cash funds went down significantly relative to December 31, 2021 by €36.8m to €–32.3m.

4. Outlook

Guidance

The Company regards the third quarter performance as confirmation of the revised guidance issued on July 21, 2022 for the Group's onward business development in 2022. The Company continues to expect revenue growth of 10%–12% and an EBIT margin in the 8%–9% range.

This guidance is subject to uncertainties.

Opportunities and risks

The WashTec Group's opportunity and risk management is described in the Annual Report 2021. Individual risks were adjusted as of June 30, 2022. Details on this can be found in the Report on the First Half Year 2022 (pages 14 to 15). The risks described there have increased further as of September 30, 2022, in particular with regard to the following aspects:

• Due to rising inflation, especially in Europe and the USA, the global economic outlook continued to deteriorate up to the time this report was published. In China, local lockdowns due to the country's zero Covid strategy continue to delay economic development.
• In Europe, in addition to uncertainties surrounding energy supplies and the sharp rise in energy costs, existing and expected interest rate hikes are having a negative impact on industry and capital expenditure.
• Existing difficulties relating to material availability have been further exacerbated by uncertainties surrounding energy supplies and the sharp rise in energy costs.
• Shortages of materials and resources at our customers' construction sites are delaying the completion of work to install equipment at carwash buildings and consequently also delaying revenue recognition.
• In addition, there may be further additional costs and production disruptions due to Covid-19 infection waves in the fourth quarter.

As already described in the Annual Report 2021, the low volume of business transacted in Russia and Ukraine means that the war has not had any material direct financial impact on the business performance of the WashTec Group. The Company is clearly noticing the indirect impacts of the war on material prices and availability, the uncertainties surrounding energy supplies and costs together with inflation as described above.

Selected Financial Information Q1–Q3 2022

Consolidated Income Statement

in €k	Q1–Q3 2022	Q1–Q3 2021	Q3 2022	Q3 2021
Revenue	338,561	306,311	118,611	111,280
Cost of sales	–246,743	–211,912	–86,126	–77,791
Gross profit	91,818	94,399	32,485	33,489
Research and development expenses	–10,576	–10,078	–3,446	–3,418
Selling expenses	–46,472	–41,110	–15,391	–13,951
Administrative expenses	–14,047	–13,559	–4,417	–3,982
Other income	5,697	5,750	1,502	3,551
Other expenses	–3,816	–2,402	–1,025	–678
EBIT	22,604	32,999	9,707	15,011
Financial income	63	60	53	19
Financial expenses	–547	–668	–201	–271
Financial result	–484	–608	–148	–251
EBT	22,120	32,391	9,559	14,760
Income taxes	–7,342	–9,508	–2,851	–3,850
Net income	14,778	22,883	6,708	10,910
Average number of shares in units	13,382,324	13,382,324	13,382,324	13,382,324
Earnings per share (basic = diluted) in €	1.10	1.71	0.50	0.82

Consolidated Balance Sheet Assets

in €k	Sept 30, 2022	Dec 31, 2021
Property, plant and equipment	24.935	24.966
Goodwill	42.312	42.312
Intangible assets	6.094	6.212
Right-of-use assets	18.486	19.275
Non-current trade receivables	4.135	4.211
Other non-current financial assets	286	199
Other non-current non-financial assets	524	520
Deferred tax assets	4.992	4.753
Non-current assets	101.763	102.449
Inventories	85.366	57.083
Current trade receivables	65.463	67.236
Tax receivables	13.067	18.699
Other current financial assets	2.015	1.617
Other current non-financial assets	4.278	1.836
Cash and cash equivalents	17.361	18.085
Current assets	187.549	164.555
Assets	289.313	267.004

Consolidated Balance Sheet Equity and Liabilities

in €k	Sept 30, 2022	Dec 31, 2021
Subscribed capital	40,000	40,000
Capital reserves	36,463	36,463
Treasury shares	–13,177	–13,177
Other reserves and currency translation effects	–1,363	–5,074
Profit carried forward	1,426	9,158
Net income	14,778	31,077
Equity	78,127	98,448
Non-current lease liabilities	9,823	12,803
Provisions for pensions	8,531	10,196
Other non-current provisions	3,904	4,297
Other non-current financial liabilities	177	203
Other non-current non-financial liabilities	1,527	1,073
Non-current contract liabilities	1,828	1,901
Deferred tax liabilities	1,051	1,299
Non-current liabilities	26,841	31,773
Interest-bearing loans	49,618	13,547
Current lease liabilities	9,191	7,444
Trade payables	24,269	16,123
Income tax liabilities	5,786	5,436
Other current financial liabilities	25,424	20,574
Other current non-financial liabilities	26,121	29,169
Other current provisions	9,151	10,902
Current contract liabilities	34,784	33,589
Current liabilities	184,345	136,783
Equity and liabilities	289,313	267,004

Consolidated Cash Flow Statement

in €k	Q1–Q3 2022	Q1–Q3 2021
EBT	22,120	32,391
Amortization, depreciation and impairment	10,875	10,794
Gain/loss from disposals of non-current assets	–410	–197
Other gains/losses	–1,842	–752
Financial income	–63	–60
Financial expenses	547	668
Movements in provisions	–2,357	–113
Income tax paid	–2,566	–8,825
Gross cash flow	26,304	33,907
Increase/decrease in trade receivables	3,591	–6,141
Increase/decrease in inventories	–26,129	–17,149
Increase/decrease in trade payables	7,379	10,276
Increase/decrease in prepayments on orders	–386	6,699
Increase/decrease in net operating working capital	–15,546	–6,315
Changes in other net working capital	846	–728
Net cash inflow from operating activities (net cash flow)	11,604	26,864
Purchase of property, plant and equipment (without leases)	–4,533	–2,297
Proceeds from sale of property, plant and equipment	505	767
Net cash outflow from investing activities	–4,028	–1,530
Dividend payout	–38,809	–30,779
Interest received	63	60
Interest paid	–547	–665
Repayment of lease liabilities	–6,756	–5,936
Net cash outflow from financing activities	–46,049	–37,320
Net increase/decrease in cash and cash equivalents	–38,473	–11,987
Net foreign exchange difference	1,678	550
Cash and cash equivalents at January 1	4,538	765
Cash and cash equivalents at September 30	–32,258	–10,672
Composition of cash and cash equivalents for cash flow purposes:
Cash and cash equivalents	17,361	15,227
Interest-bearing loans	–49,618	–25,898
Cash and cash equivalents at September 30	–32,258	–10,672

Contact

WashTec AG Telefon +49 821 5584-0 Argonstraße 7 www.washtec.de 86153 Augsburg washtec@washtec.com

Financial Calendar

Nov 28–30, 2022 Equity Forum, Frankfurt