Applus Services S A : 283012 30/10/2019 Applus+ 2019 Third Quarter Results Announcement

Third Quarter 2019 Results Announcement

30 October 2019

Applus Services, S.A. ("Applus+" or "the Group"), one of the world's leading and most innovative companies in Testing, Inspection and Certification, today announces the results for the third quarter ("quarter" or "Q3") and nine month period ("period" or "YTD Q3") ended 30 September 2019.

Highlights

• Good organic revenue growth and margin improvement trend continues
• Strong cash generation
• First nine months double digit organic revenue growth in IDIADA and Labs and mid single digit in Energy & Industry and Auto divisions
• Acquisition of LEM in Chile with €8 million of revenue and margin accretive
• YTD Q3 Results:

1. • Revenue of €1,329.9 million up 6.8% (organic1 +6.0%)
   • Operating profit2 of €148.5 million up 11.3% (organic1 +9.3%)
   • Operating profit2 margin of 11.2%, up 45 bps (organic1 +34 bps)
   • Adjusted2 free cash flow of €117.4 million up 22.9%
2. Organic is at constant exchange rates and based on prior year proforma figures including IFRS16
3. Adjusted for Other results and amortisation of acquisition intangibles and based on prior year proforma figures including IFRS16 (page 3)

Fernando Basabe, Chief Executive Officer of Applus+, said:

"I'm pleased to report the Group continues to perform well, with all four divisions contributing to the good revenue growth in the period. The margin increased in the quarter and the nine month period leading to strong profit growth and cash generation.

IDIADA and Labs divisions performed particularly well delivering double digit organic revenue growth for the period in favourable market conditions. Energy & Industry and Auto divisions also saw continued good growth, though at a slightly lower level than in the first half and delivering mid-single digits organic revenue growth for the period.

I am also pleased to announce that we have recently made an acquisition in Chile of a company engaged in testing and inspection of materials to support civil engineering projects in mining, construction and the industrial sector. This acquisition will be integrated within the Energy & Industry division which has complementary services and presence.

Following these results and the expectation of sustained strong performance in the last quarter from IDIADA, Labs and Auto and despite a tough year on year comparative for Energy & Industry, we remain on track to deliver mid-single digits

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organic revenue growth at constant exchange rates with an increase in the margin of at least 30 basis points."

Webcast

There will be a webcast and conference call presentation on these results today at

2.00 pm Central European Time. To access the webcast, use the link:

https://edge.media-server.com/mmc/p/9h3jhgvdor via the company website at www.applus.comunder Investor Relations/Financial Reports. To listen by telephone dial one of the numbers below quoting the access code 3377179.

Spain [phone]

UK [phone]

France [phone]

Germany [phone]

US [phone]

Standard International Line [phone]

Applus+ Investor Relations:
Aston Swift	+34	93 5533 111	[e-mail]
Media - Kreab, Madrid:
Francisco Calderón	+34	91 7027 170	[e-mail]
Equity Advisory, Europe - Barclays Bank PLC, London:
Justin Shinebourne	+44	203 134 8028	[e-mail]

About Applus+ Group

Applus+ is one of the world's leading and most innovative companies in the Testing, Inspection and Certification sector. It provides solutions for customers in all types of industries to ensure that their assets and products meet quality, health & safety and environmental standards and regulations.

Headquartered in Spain, Applus+ operates in more than 70 countries and employs approximately 22,800 people. Applus+ operates through four global divisions, all of which operate under the Applus+ brand name. For the full year of 2018, Applus+ recorded revenue of €1,676 million and adjusted operating profit of €171 million.

Applus+ is listed on the Barcelona, Bilbao, Madrid and Valencia stock exchanges. The total number of shares is 143,018,430.

ISIN: ES0105022000. Symbol: APPS-MC

For more information go to www.applus.com/en

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THIRD QUARTER REPORT 2019

Overview of Performance

The financial performance of the Group is presented in an "adjusted" format alongside the statutory ("reported") results. The adjustments are made in order that the underlying financial performance of the business can be viewed and compared to prior periods by removing the financial effects of other results.

Where stated, organic revenue and profit is adjusted for acquisitions or disposals in the prior twelve month period and is stated at constant exchange rates, taking the current year average rates used for the income statements and applying them to the results in the prior period.

On 1 January 2019, a new accounting standard, IFRS 16 Leases, took effect and this has had an impact on the presentation of the financial results. It supersedes IAS 17 and related interpretations. As a lessee, the main concept behind it is the recognition of all leases under a single balance sheet model similar to that in existence for finance leases. In summary it is the booking of the asset and the corresponding financial liability in the balance sheet and applying depreciation and a finance cost instead of an operating lease cost in the profit and loss account. There is a de-minimis limit where this does not apply. The Group has not restated prior periods but instead shows the comparative figures after the application of this standard (Proforma YTD Q3 2018) to allow a meaningful comparison to be made.

In the table below the adjusted results are presented alongside the statutory results with an additional column showing the comparative third quarter 2018 figures after the application of IFRS 16 Leases (Proforma YTD Q3 2018). The percentage increase of the YTD Q3 2019 results to the Proforma YTD Q3 2018 results are shown in the final column.

		YTD Q3 2019			YTD Q3 2018
EUR Million	Adj.	Other	Statutory		Adj. Results	Other	Statutory
Results	results	results		results	results
Revenue	1,329.9		1,329.9		1,245.1	0.0	1,245.1
Ebitda	221.9	0.0	221.9		164.3	0.0	164.3
Operating Profit	148.5	(46.8)	101.7		127.4	(45.8)	81.6
Net financial expenses	(16.8)	0.0	(16.8)		(12.8)	(3.9)	(16.7)
Profit Before Taxes	131.7	(46.8)	85.0		114.6	(49.8)	64.9

Proforma +/- % Adj.

YTD Q3 Results

2018 PROF

1,245.1 6.8%

203.1 9.3%

133.4 11.3%

(18.6)

114.8 14.8%

The figures shown in the table above are rounded to the nearest €0.1 million.

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Other results of €46.8 million (2018: €45.8m) in the Operating Profit represent

amortisation of acquisition intangibles of €44.3 million (2018: €44.4m) plus €2.4

million of transaction costs and other items (2018: €1.5m).

In the prior nine month period, there was a charge of €3.9 million in Other results within net financial expenses which were the write-off of the brought forward un- amortised portion of arrangement fees for the previous debt that was refinanced in July last year.

Revenue

Revenue increased by 6.8% to €1,329.9 million in the nine month period ended 30 September 2019 compared to the same period in the prior year.

The revenue growth bridge in € million for the period is shown below alongside the performance of the third quarter.

The total revenue increase of 6.8% for the period was made up of an increase in organic revenue of 6.0%, the benefit of acquisitions made in the last twelve months of 0.8% offset by disposals of 1.0% and a positive currency translation impact of 1.0%.

All four divisions contributed to the period revenue growth, with double digit organic revenue growth in IDIADA and Labs and mid single digit in Energy & Industry and Auto divisions.

For the third quarter, organic revenue was up 4.8% and reported revenue was up 5.0% to €454.1 million. Revenue from acquisitions added 0.5% offset by disposals of 0.9% and a positive currency translation impact of 0.6%.

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Adjusted Operating Profit

Adjusted operating profit for the first nine months of the year, increased by 11.3% to €148.5 million from an equivalent Proforma prior year period (Proforma YTD Q3 2018) of €133.4 million. The operating profit growth bridge for the period, including the impact of the IFRS 16 Leases accounting change, in € million is shown below.

The adjusted operating profit as previously reported for the nine month period in 2018 (YTD Q3 2018) was €127.4 million but with the application of IFRS16 to the prior period, the adjusted operating profit would have been €5.9 million higher to a Proforma YTD Q3 2018 of €133.4 million.

The adjusted operating profit increase of 11.3% on a proforma basis for the period was made up of an increase in organic of 9.3%, the benefit of acquisitions made in the last twelve months of 1.6% reduced by disposals of 0.3% and a positive currency translation impact of 0.7%.

For the third quarter, the adjusted operating profit was €50.3 million, up 6.7% on the proforma of the prior year third quarter result (Proforma Q3 2018) made up of an organic adjusted operating profit increase of 6.1% plus 1.3% benefit from acquisitions reduced by disposals of 0.4% and a negative currency translation impact of 0.3%.

The resulting adjusted operating profit margin including the impact of IFRS 16, was 11.2% for the nine month period, which was higher than the prior period

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