Applus Services S A : 3655 28/07/2020 Applus+ 2020 First Half Results Presentation

Applus+ Group

H1 2020

Results Presentation

28 JULY 2020

Disclaimer

This document may contain statements that constitute forward looking statements about Applus Services, SA ("Applus+" or "the Company"). These statements are based on financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations, which refer to estimates regarding, among others, future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the Company.

Such forward looking statements, by its nature, are not guarantees of future performance and involve risks and uncertainties, and other important factors that could cause actual developments or results to differ from those expressed or implied in these forward looking statements. These risks and uncertainties include those discussed or identified in fuller disclosure documents filed by Applus+ with the relevant Securities Markets Regulators, and in particular, with the Spanish Market Regulator, the Comisión Nacional del Mercado de Valores.

Applus+ does not undertake to publicly update or revise these forward-looking statements even if experience or future changes make it clear that the projected performance, conditions or events expressed or implied therein will not be realized.

This document contains summarised information or information that has not been audited. In this sense this information is subject to, and must be read in conjunction with other publicly available information including if necessary any fuller disclosure document published by Applus+.

Nothing in this presentation should be construed as a profit forecast.

2

Results Presentation H1 2020

HIGHLIGHTS

FINANCIAL REVIEW

BUSINESS REVIEW

SUMMARY & OUTLOOK

Fernando Basabe

Chief Executive Officer

Highlights

• Coronavirus impacted every division but recovery is under way
• Q2 revenue down 29% with a good June improvement and with tight cost control delivered a small adjusted operating profit
• Strong cash generation, Net Debt reduced with available liquidity remaining high
• Significant new awards in Energy & Industry division
• Auto Aragon in Spain contract renewed for 10 years on same terms
• Government of Catalonia preparing to tender new 20 year concession for IDIADA
• Acquisition process resumed

4

Highlights

• H1 2020 Results:
• • Revenue of €741.2 million down 15.4%
  • Operating profit1 of €34.5 million down 64.9%
  • Operating profit1 margin of 4.7% (11.2% H1 2019)
  • Adjusted Net profit €2.1 million (€54.1m H1 2019)
  • Adjusted1 free cash flow of €86.9 million (€66.5m H1 2019)
  • Net debt/EBITDA ratio of 2.4x and liquidity of €666 million
  • Impairment2 of €148 million linked to a challenging Oil & Gas and Auto OEM end markets and COVID-19
  1. Adjusted for Other Results, amortisation of acquisition intangibles and impairment
  2. Net of deferred tax liabilities

5

Results Presentation H1 2020

HIGHLIGHTS

FINANCIAL REVIEW

BUSINESS REVIEW

SUMMARY & OUTLOOK

Joan Amigó

Chief Financial Officer

H1 2020. Revenue Bridge

EUR Million

Q1 & Monthly Revenue at constant rates(1)

Peak coronavirus impact in April-May

0.4%

Q1

APR

MAY

JUN

(12.4)%

(37.9)% (34.6)%

(1) Year on Year change	7

H1 2020. Adjusted Operating Profit Bridge

EUR Million

Margin impact reduced following cost initiatives

8

H1 2020. Summary of Income Statement information

EUR Million

		H1 2020			H1 2019
		Other (1)	Statutory				+/- % Adj.
EUR Million	Adj. Results		Adj. Results		Results
results	results
Revenue	741.2		741.2		875.8		(15.4)%
Operating Profit	34.5	(196.4)	(161.9)		98.2		(64.9)%
Net financial expenses	(11.6)		(11.6)		(11.5)
Profit Before Taxes	22.9	(196.4)	(173.6)		86.7
Income Tax	(13.8)	24.5	10.7		(21.5)
Non controlling interests	(7.0)		(7.0)		(11.1)
Net Profit	2.1	(171.9)	(169.9)		54.1
EPS, in Euros	0.01		(1.19)		0.38

(1) Other results within Operating Profit includes an impairment of €165 million plus the PPA amortisation of €29.2 million and others

9

H1 2020. Cash Flow

EUR Million

		H1
2020	2019	Change

Adjusted EBITDA (1)	85.4	146.7	(61.4)	(41.8)%	 Strong cash flow driven by
Change in Working Capital	19.6	(30.1)			working capital inflows,
Capex - Operational	(14.5)	(24.8)
		reduced spending on capex
Capex - Net new vehicle stations	1.9	(0.4)
Adjusted Operating Cash Flow	92.4	91.3	1.0	1.1%	and lower tax payments
Taxes	(0.3)	(19.6)
Interest	(5.2)	(5.2)
Adjusted Free Cash Flow	86.9	66.5	20.4	30.7%
Extraordinaries & Others	(2.6)	0.7
Dividends to Minorities	(3.4)	(6.0)
Operating Cash Generated	80.9	61.2	19.7	32.2%
Acquisitions	(4.5)	(13.3)
Cash b/Changes in Financing & FX	76.4	47.9
Payments of lease liabilities (IFRS 16)	(26.9)	(27.3)
Other Changes in financing	137.5	(23.9)
Currency translations	(3.8)	0.2
Cash increase	183.1	(3.1)

1. Adjusted EBITDA is stated as Operating Profit before depreciation, amortization, impairment and Other results

10

Leverage and Liquidity at 30 June

EUR Million

Net Debt at 30 June	Due Date	Drawn
(€ Million)
Term Loan (€200m)	27/06/2025	200.0
RCF (€400m)	27/06/2025	250.0
USPP- 7 Years	27/06/2025	150.0
USPP- 10 Years	27/06/2028	80.0
Bilateral Facility	20/04/2023	50.0
Other Debt		28.1
TOTAL GROSS DEBT		758.1
Cash		(331.6)
TOTAL NET DEBT b/ IFRS 16(1)		426.6
IFRS 16		181.2
TOTAL NET DEBT		607.8
LTM EBITDA b/ IFRS 16		180.2
Net Debt / Ebitda(2)		2.4x
Liquidity
Cash at 30 June 2020 (1)		331.6
Undrawn facilities		334.6
Available liquidity		666.2

• Net debt reduced by €47 Million in H1 2020
• Syndicate facility of €600 million extended one year to 2025 at no cost
• Leverage Covenant set at 4.0x b/IFRS 16, tested in June and December
• • Net debt /EBITDA 2.4x at June
• Undrawn facilities include new €100 million bilateral.

1. Stated at annual average rates and excluding IFRS 16 as defined by bank covenant
2. Leverage including IFRS 16 2.6x

11

Results Presentation H1 2020

HIGHLIGHTS

FINANCIAL REVIEW

BUSINESS REVIEW

SUMMARY & OUTLOOK

Fernando Basabe

Chief Executive Officer

H1 2020. Splits by Division, End Market and Geography

	Revenue by Division				Revenue By Geography
						Middle East &
	Labs 5%
	Energy &				Africa 11%	Spain 22%
*5%
Industry 62%	*10%	*22%
	IDIADA 14%
	*59%				Asia Pacific
*13%		12%
			*11%
						LatAm
			11%
			*11%
	Auto 19%					North	Rest of
*23%					America	Europe
			19%	25%
			*18%	*28%
	Adj. Op. Profit by Division				Revenue By End Market
		Energy &				Others 16%	O&G Opex 25%
	Labs 8%	*14%
	*25%
	Industry 30%
*5%			Aerospace 3%
	IDIADA 8%	*35%	*3%

*14%

Construction 6%

*4%

Power 8%

*9%

	Automotive OEM	O&G Capex 9%
	14%
Auto 54%	*9%
*13%
*46%		Statutory Vehicle
		Inspection 19%
* H1 2019		*23%

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Energy & Industry Division					30%
				Revenue		Adj.Op.
					62%	Profit
	EUR Million
	Financial Highlights			Q1 & Monthly Revenue at constant rates (1)

3.9%
Q1	APR	MAY	JUN
			(18.3)%
	(23.6)%
		(29.3)%

• Results impacted by COVID-19 and low oil price, with improvement in June
• Growth retained in Construction, Mining and Renewables with Oil & Gas and Nuclear down. All regions continue to be impacted
• Cost reductions across the division based on activity levels.
• Significant new awards:
• • O&G - LNG Canada Capex and Abu Dhabi Opex inspection on offshore pipelines
  • Power - Canada nuclear refurbishment and global MSA for testing new wind towers
  • Construction - Portugal railway line construction services

(1) Year on Year change	14

Automotive Division

Revenue

Adj.Op.

EUR Million

Financial Highlights

19%Profit

54%

Q1 & Monthly Revenue at constant rates (1)

13.1%

Q1

APR

MAY

JUN

(10.2)%

(52.5)%

(78.5)%

• Q2 heavily impacted by COVID-19 with nearly all stations closed in April. Re-opening started mid-May and by June revenue was up
• New health and safety requirements, compensated by extending opening hours where possible
• Spain, Costa Rica, Uruguay, US, Denmark and Finland recovering well. Argentina, Chile and Ecuador still significantly impacted
• Ireland will be fully open from the end of July and is now under new contract conditions
• Aragon concession (€5M annual revenue) has been extended until 2030 on same terms

(1) Year on Year change	15

IDIADA Division

EUR Million

Financial Highlights

14%8%

Adj.Op.

RevenueProfit

(1)

Q1 & Monthly Revenue at constant rates

0.8%

Q1

APR

MAY

JUN

(25.7)%

(30.7)%

(35.4)%

• Q2 impacted by COVID-19 with small improvement in June.
• Proving Ground and crash testing business most impacted by restrictions on international customers mobility to Spain. The transition from combustion to electric vehicles continues with an increasing number of EV crash testing contracts being negotiated
• Government of Catalonia preparing to tender new 20 year concession for IDIADA

(1) Year on Year change	16

Laboratories Division

EUR Million

Financial Highlights

5%8%

Adj.Op.

Revenue

Profit

Q1 & Monthly Revenue at constant rates(1)

8.9%

Q1	APR	MAY	JUN
			(0.4)%

(26.6)%

(34.4)%

• Q2 impacted by COVID-19 with severe lock down in Spain (70% of division revenue).
• Improvement in June supported by the success of remote working
• Most end markets recovering. Aerospace (15%) and Automotive EMC (13%) remain most impacted

(1) Year on Year change	17

Results Presentation H1 2020

HIGHLIGHTS

FINANCIAL REVIEW

BUSINESS REVIEW

SUMMARY & OUTLOOK

Fernando Basabe

Chief Executive Officer

Summary & Outlook 2020

Summary of H1 2020

• From the April low, gradual monthly recovery driven by the Automotive division
• Strong cash flow and liquidity with reduction in net debt
• Significant new awards in Energy & Industry, Auto Aragon concession renewed and increasing EV work in IDIADA
• Well positioned to win the expected new 20 year IDIADA tender

Outlook for H2 2020 (assuming no further severe lockdowns)

• Continued gradual recovery expected led by the Automotive division
• H2 margin expected to be higher than H1
• Cash flow expected to be positive in H2
• M&A process resumed

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www.applus.com

H1 2020. Adjustments to Statutory results

EUR Million

		H1 2020				H1 2019
		Other	Statutory			Other	Statutory		+/- % Adj.
EUR Million	Adj. Results		Adj. Results		Results
results	results		results	results
Revenue	741.2	0.0	741.2		875.8	0.0	875.8		(15.4)%
Ebitda	85.4	0.0	85.4		146.7	0.0	146.7		(41.8)%
Operating Profit	34.5	(196.4)	(161.9)		98.2	(30.6)	67.7		(64.9)%
Net financial expenses	(11.6)	0.0	(11.6)		(11.5)	0.0	(11.5)
Profit Before Taxes	22.9	(196.4)	(173.6)		86.7	(30.6)	56.2		(73.6)%
Current Income tax	(13.8)	7.5	(6.3)		(21.5)	6.7	(14.8)
Extraordinary Income tax	0.0	17.0	17.0				0.0
Non controlling interests	(7.0)	0.0	(7.0)		(11.1)	0.0	(11.1)
Net Profit	2.1	(171.9)	(169.9)		54.1	(23.9)	30.3		(96.1)%
Number of Shares	143,018,430		143,018,430		143,018,430		143,018,430
EPS, in Euros	0.01		(1.19)		0.38		0.21		(96.1)%
Current Income Tax/PBT	(60.3)%		3.6%		(24.8)%		(26.3)%

21

H1 2020. Impairment

• Due to the current challenging Oil & Gas, Auto OEM end markets situation and COVID-19, the company has updated the business plans of the Cash Generating Units
• Based on that, the following impairment has been registered:

	E&I :	137.1	M€
	Idiada:	27.9	M€
GROSS IMPAIRMENT	165.0 M€
	Tax Liability:	(17.0)	M€
TOTAL Impairment	148.0 M€

22

H1 2020. Revenue and Ad. Op. Profit by Division

EUR Million

				Growth
Revenue	ACTUAL 2020	Organic	Acquisitions	Disposals	FX	Total	ACTUAL 2019
Energy & Industry	456.2	(11.6)%	0.8%	(0.1)%	(0.6)%	(11.5)%	515.2
Laboratories	40.7	(10.7)%	3.3%	0.0%	(0.0)%	(7.4)%	44.0
Auto	144.0	(26.6)%	0.6%	0.0%	(1.1)%	(27.1)%	197.5
Idiada	100.3	(15.3)%	0.0%	0.0%	(0.5)%	(15.8)%	119.1
Total Revenue	741.2	(15.5)%	0.8%	(0.0)%	(0.7)%	(15.4)%	875.8
				Growth
Adj. Op. Profit	ACTUAL 2020	Organic	Acquisitions	Disposals	FX	Total	ACTUAL 2019
Energy & Industry	14.2	(65.8)%	2.5%	(0.1)%	(0.1)%	(63.5)%	38.8
Laboratories	3.8	(36.9)%	2.5%	0.0%	(0.1)%	(34.5)%	5.8
Auto	25.8	(50.5)%	0.3%	0.0%	0.2%	(50.0)%	51.6
Idiada	4.0	(75.1)%	0.0%	0.0%	0.1%	(75.0)%	15.9
Holding	(13.2)	(4.3)%	0.0%	0.0%	0.1%	(4.3)%	(13.9)
Total Adj. OP. Profit	34.5	(66.2)%	1.1%	(0.0)%	0.2%	(64.9)%	98.2

23

Q1 & Q2 2020. Revenue by Division and Adj. Op. Profit

EUR Million

Q1

Q2

				Growth
Revenue	ACTUAL 2020	Organic	Acquisitions	Disposals	FX	Total	ACTUAL 2019
Energy & Industry	248.3	3.3%	0.8%	(0.1)%	0.2%	4.2%	238.2
Laboratories	22.3	2.7%	6.2%	0.0%	0.3%	9.2%	20.4
Auto	88.1	(10.1)%	0.0%	0.0%	(0.9)%	(11.0)%	99.0
Idiada	58.2	0.8%	0.0%	0.0%	(0.1)%	0.7%	57.8
Total Revenue	416.9	(0.3)%	0.8%	(0.1)%	(0.1)%	0.3%	415.4
Adj. Op. Profit	27.7	(29.7)%	1.3%	0.0%	0.4%	(28.0)%	38.4
				Growth
Revenue	ACTUAL 2020	Organic	Acquisitions	Disposals	FX	Total	ACTUAL 2019
Energy & Industry	207.9	(24.7)%	0.9%	0.0%	(1.1)%	(24.9)%	277.0
Laboratories	18.4	(22.4)%	0.8%	0.0%	(0.2)%	(21.8)%	23.5
Auto	55.9	(43.3)%	1.3%	0.0%	(1.2)%	(43.2)%	98.5
Idiada	42.1	(30.6)%	0.0%	0.0%	(0.7)%	(31.3)%	61.3
Total Revenue	324.3	(29.3)%	0.8%	0.0%	(1.0)%	(29.5)%	460.3
Adj. Op. Profit	6.8	(89.6)%	1.0%	0.0%	0.0%	(88.6)%	59.8

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Q1, Q2 & H1 2020. Summary Income Statement

EUR Million

		Q1
	2020	2019	Change
Revenue	416.9	415.4	0.3%
Adj. Operating Profit	27.7	38.4	(28.0)%
Adj.Op.Profit margin	6.6%	9.3%	-262 bps
PPA Amortisation	(14.6)	(14.8)
Impairment	0.0	0.0
Other results	(0.4)	(0.2)
Operating profit	12.6	23.5	(46.2)%
Finance result	(6.2)	(5.4)
Profit before tax	6.5	18.1	(64.4)%
Income taxes
Net Profit
Minorities
Net Profit Group
Adjusted Net Profit Group

Q2

2020	2019	Change
324.3	460.3	(29.5)%
6.8	59.8	(88.6)%
2.1%	13.0%	-1088 bps
(14.5)	(14.8)
(165.0)	0.0
(1.9)	(0.8)
(174.6)	44.2	(495.2)%
(5.4)	(6.1)
(180.0)	38.0	(573.2)%

H1

2020	2019	Change
741.2	875.8	(15.4)%
34.5	98.2	(64.9)%
4.7%	11.2%	(65,594.9)%
(29.2)	(29.5)
(165.0)	0.0
(2.2)	(1.0)
(161.9)	67.7	(339.3)%
(11.6)	(11.5)
(173.6)	56.2	(409.0)%

10.7 (14.8)

(162.9)	41.4	(493.6)%
(7.0)	(11.1)
(169.9)	30.3	(661.1)%
2.1	54.1	(96.1)%

EPS in €

Adjusted EPS in €

(1.19)	0.21	(661.1)%
0.01	0.38	(96.1)%

25

H1 2020. Currency Exposure

% Revenue by Actual Currency

21%	21%
4%	4%
4%	4%	(2)
26%	24%		OTHER
	AUD
			CAD
	47%		USD (1)
45%		EUR

H1 2020

H1 2019

1. Includes currencies pegged to USD
2. None above 4%

	Average FX Exchange rates vs Euro
	JAN - JUN JAN - JUN	Change		JAN - DEC
	2020	2019		2019
USD	1.101	1.129	2.5%		1.120
CAD	1.503	1.506	0.2%		1.486
AUD	1.679	1.599	(4.8)%		1.610

26

H1 2020. Statutory Cash Flow

EUR Million

		H1
	2020	2019
Profit Before taxes	(173.6)	56.2
Non cash items	254.6	90.9
Increase in working capital	19.8	(30.6)
Taxes Paid	(0.3)	(19.6)
Operating Cash Flow	100.5	96.8
Capex	(17.3)	(25.3)
Asset sales	4.7	0.0
Business combination	1.5	1.0
Acquisitions/Disposals of subsidiaries	(4.5)	(13.3)
Cash Flow from Investing activities	(15.6)	(37.6)
Dividends to Minorities	(3.4)	(6.0)
Interest paid	(5.2)	(5.2)
Changes in financing	110.5	(51.2)
Capital increase	0.0	0.0
Cash Flow from Financing activities	102.0	(62.5)
Currency translations	(3.8)	0.2
Cash Increase / (Decrease)	183.1	(3.1)

27

H1 2020. Balance Sheet

EUR Million

EUR Million

	H1 2020	FY 2019			H1 2020	FY 2019
Goodwill	529.9	609.3		Equity	642.4	824.5
Other intangible assets	373.1	474.3		Long Term Provisions	28.4	26.9
PPA	309.5	406.3		Bank borrowings	721.6	545.9
Other intangible assets	63.6	68.0		Leasing Liabilities	136.0	124.5
Rights of use	164.8	152.9		Other financial liabilities	24.5	26.0
Tangible assets	217.4	226.7		Deferred Tax Liabilities	115.7	137.4
Investments accounted for using the equity method	0.6	0.7
	Deferred Tax Liabilities PPA	75.3	100.0
Non current Financial Assets	16.0	30.0
	Deferred Tax Liabilities Others	40.4	37.4
Deferred Tax Assets	70.5	65.5		Other non current liabilities	32.6	29.5
Total Non-Current Assets	1,372.3	1,559.4		Total Non-Current Liabilities	1,058.8	890.2
				Short term provisions	2.8	2.5
Inventories	9.2	8.5		Bank borrowings	19.2	59.2
Trade & Other receivables	368.7	424.1		Leasing Liabilities	45.2	45.7
Corporate Income Tax assets	13.8	23.4		Trade & Other payables	300.8	330.0
Current financial assets	3.3	11.9		Income Tax Liabilities	19.0	13.8
Cash & Cash equivalents	328.3	145.2		Other current liabilities	7.4	6.6
Total Current Assets	723.3	613.1		Total Current Liabilities	394.4	457.8
Total Assets	2,095.6	2,172.5		Total Equity & Liabilities	2,095.6	2,172.5

28

Alternative Performance Metrics

Applus' financial disclosures contain magnitudes and metrics drafted in accordance with International Financial Reporting Standards (IFRS) and others based on the Group's disclosure model referred to as Alternative Performance Metrics

• EBITDA, measure of earnings before interest, taxes, depreciation and amortisation
• Operating Profit, measure of earnings before interest and taxes
• Adjusted measures are stated before other results
• Other results are those impacts corrected from the relevant measures to provide a better understanding of the underlying results of the Group, for example: amortisation of acquisition intangibles, restructuring, impairment and transaction & integration costs
• PPA correspond to the Purchase Price Allocation referred to acquisitions, allocated to intangible assets and amortised
• Capex, realized investments in property, plant & equipment or intangible assets
• Operating Cash Flow, operating cash generated after capex investment and working capital variation

29

Alternative Performance Metrics

• Free Cash Flow, operating cash generated after capex investment, working capital variation and tax & interest payments
• Net Debt, current and non current financial debt, other institutional debt less cash. As per bank covenant definition, calculated at annual average exchange rates
• Leverage, calculated as Net Debt/LTM Ebitda as per bank covenant definition
• AOP, Adjusted Operating Profit
• EPS, Earnings per share
• NDT, Non destructive testing
• P.A., per annum
• FX, Foreign exchange
• LTM, Last twelve months

30