AVTECH Sweden () : INTERIM REPORT January - September 2020

AVTECH SWEDEN AB (publ)

INTERIM REPORT 2020

JANUARY - SEPTEMBER

CEO COMMENT

The closure of air traffic as a measure to reduce the spread of viruses continues to affect the entire aviation industry globally. The third quarter was initially characterized by a restart with increased air traffic following the heavy flight stoppage during the second quarter. However, despite the desire for a restart, air traffic was again reduced in the latter part of the quarter in connection with the increasing spread of infection. Eurocontrol's traffic forecast for Europe, which previously showed a slow return in quarter 3 and 4, was updated in September

and now shows a levelling of about 40 to 50% of traffic volumes before the crisis. Similar figures also apply to aviation in the United States. Intercontinental passenger traffic is effectively eliminated due to political decisions. The statistics here show aircraft movements, but it is worth noting that the decline on the passenger side is even worse.

The uncertainty as to when a return can be expected and what it might look like remains high and entirely dependent on the continued spread of the virus and the effectiveness of the remedial measures taken. The major change is however likely to occur in connection with the roll-out of an active vaccine, which looks to take place at the earliest in the first part of 2021.

There is a pent-up need to travel, both for private and for business, which is currently being prevented by political restrictions imposed to contain the pandemic. When these restrictions are lifted, travel is likely to pick up with the recovery of travellers' confidence. It is now clear that a recovery will not pick up before the end of the year.

The greatly reduced flying continued during the third quarter to lower the use of AVTECH's services and thus also the company's turnover compared to the same period in 2019. At the same time, our reduction in working hours continued with the aim of saving costs and maintaining staff until air travel recovers to more normal levels. All in all, this led to a negative net result for the period. Delays in the flow of payments from customers have negatively affected our liquidity and increased our accounts receivable during the period. Most of these outstanding unpaid invoices have been paid during October.

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Sadly, the result and liquidity of the quarter were also burdened by the Nasdaq Disciplinary Board's decision on a penalty payment of SEK 0.4 million, mainly due to a small delay in information disclosure.

We believe in the future. Our portfolio of services that reduce fuel consumption and environmental impact without requiring investment in new hardware is now particularly interesting for all those airlines that want to emerge from the crisis with a more efficient operation and better environmental profile. After nearly a year of completed flights with our Cruise Optimizer, Norwegian can conclude that the service allows for a fuel saving in excess of 1.5%. The doubts that have previously existed among some airlines who have not yet tried our systems should therefore be eliminated. We will in the future offer new customers a trial period with a result guarantee.

The long-term trend is in a clear direction towards increased efficiency and reduced environmental impact. A development likely to be further accelerated by the current crisis. Several airlines that have received financial support from the State have also committed to certain levels of emission reduction within a number of years. AVTECH's service offering is an opportunity for these airlines to easily credit 1.6% emission reduction by flying more efficiently. However, ongoing organizational changes in most airlines have resulted in extended decision-making processes and in many cases made it more difficult to identify the right customer contact person.

Now that we can offer 1.6% fuel savings and a free trial with a savings guarantee, we are just missing a long line-up of interested airlines. We are therefore in the coming last months of the year increasing our staffs worktimes and investing in direct sales efforts directed towards high-profile customer groups such as airlines with an environmental profile, low-cost airlines, freighters and airlines that are part of the IATA cooperation. Even if growth in the airline industry as a whole would be slow in the coming years, AVTECH's growth could be faster. Currently we talk to several interested airlines and have four airlines in line to begin testing of our Cruise Optimizer.

Most of our existing contracts are now related to the customer's current traffic volume. This means that our turnover automatically increases with increased air traffic. When the effects of the current pandemic subside, we are well positioned to grow and deliver services that increase efficiency and comfort and reduce fuel costs and carbon dioxide emissions.

Thank you for your continued interest in AVTECH.

David Rytter

CEO

AVTECH SWEDEN AB (PUBL) | INTERIM REPORT JAN-SEPT 2020	3

KEY FIGURES AND EVENTS
		2020	2020	2019
	MSEK	Quarter 3	Quarter 2	Quarter 3
	Net turnover	2.7	3.3	4.0
	Operating profit before depreciation	-0.2	+0.7	+1.5
	Net profit	-0.6	+0.3	+0.6
	Net profit per share, SEK	-0.011	+0.005	+0.011
	Cash flow	-2.6	+0.5	+0.1
	Cash and cash equivalents	10.2	12.8	13.4
	Equity	28.1	28.8	29.2
	Equity per share, SEK	0.50	0.51	0.52
	Equity ratio, %	94.4%	91.6%	98.1%

• During the third quarter, sales decreased significantly as a result of the sharp reductions in air traffic during the Covid-19 pandemic.
• A new agreement was signed in September with TUI airlines. The agreement covers the Aventus Full-flight service and is retroactively effective from December 2019.
• During the period, the Nasdaq Disciplinary Board decided on a penalty for AVTECH of SEK 0.4 million. The basis for this decision can be found in the press release published 2020-08-31.
• The negative net profit for the period is largely due to the penalty from the Disciplinary Board of the Exchange.
• The increased negative cash flow for the period is largely due to late customer payments, which resulted in increased trade receivables. This is explained by temporary delays in the flow of payments from customers. Most of these outstanding unpaid invoices were paid during October
• A new rental agreement for office premises was signed in September and will take effect from the end of the year. The agreement is 5-year and involves an approximately 30% cost reduction and that AVTECH stays at the same address with slightly less office space.
• Lars Lindberg, board member and founder of AVTECH Sweden AB, chose at his own request in September to resign from the board. Lars has lived in Spain since 2014 and has in recent years been increasingly busy with activities outside the aviation industry.
• The good cooperation with Met Office UK continues and during the period it has been decided to continue joint work on both the weather side as well as with sales and marketing efforts. An example of such a cooperation area is high-resolution airport forecasts as an important component of an airport optimisation project.
• During the period, all staff have mainly continued to work from home, as recommended by the Public Health Agency for reducing the spread of infection.
• The reduction in working time has continued during the period and has led to reduced costs for both development, marketing and administration. This gives us a stronger opportunity to retain staff and skills in the face of the situation turning.

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