FORTEC Elektronik : Financial report FY 2022/2023

FINANCIAL REPORT 2023

2 Annual Report 2023

Financial Report 2023

Table of contents

Foreword	04
Group management report
Consolidated balance sheet	07
Consolidated statement of comprehensive income	24
Consolidated statement of changes in equity	26
Consolidated cash flow statement	27
Notes to the consolidated financial statements	28
	29
Responsibility statement
Auditors' report	86
	86

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Foreword

Ladies and Gentlemen, Dear Shareholders, Dear Employees,

FORTEC Elektronik AG was once again able to close the 2022/2023 financial year with a record result despite ongoing global uncer- tainties. Thanks to the exceptional commitment and dedication of our entire FORTEC Group team, we were able to achieve strong results and further strengthen our position in the market. Group turnover increased purely organically by around 19% to EUR 105.9 million and Group EBIT by more than 26% to EUR 10.7 million. We thus exceeded the revenue forecast of EUR 91.0 million to EUR

97.0 million in the last Group Management Report and met the forecast adjusted in May 2023 in the optimistic range. This positive development in the two most important financial indicators for FORTEC, revenue and EBIT, show that the decisions made and mea- sures implemented in our "Grow-Together 2025" strategy are having a sustainable profitable effect and are favouring further growth.

The external conditions were by no means easy. The past business year continued to be marked by pandemic-related supply bottlenecks for primary products and disruptions in the supply chain, which were further exacerbated by the outbreak of war in Ukraine. Despite the geopolitical and global economic risks, rising inflation rates and the increasing cost of energy supply, we succeeded in increasing our EBIT margin from 9.5% in the previous year to 10.1% in the reporting year. The consolidated net profit for the year thus improved to EUR 7.6 million after EUR 6.3 million in the previous year. Earnings per share increased by 21 % to EUR 2.32 (previous year: EUR 1.92). We would like to thank all our employees for their extraordinary commitment in these times, which made it possible to master the above-mentioned challenges with flying colours.

Thanks to the excellent result, the Executive Board will propose an increase in the dividend distribution to EUR 0.85 per share (pre- vious year: EUR 0.70 per share) at the upcoming Annual General Meeting. We are thus continuing our continuity-oriented dividend policy of the past years and are proud that you, dear shareholders, can once again participate in the growing success of our company. Based on the share price (EUR 28.30) as of 30 June 2023, the dividend distribution corresponds to a yield of 3.0%.

The Data Visualisation segment contributed EUR 68.0 million (previous year: EUR 56.3 million) to Group sales, the Power Supplies

segment EUR 37.9 million (previous year: EUR 32.7 million). We are confident of achieving long-term, sustainable growth in both segments with the expanded mix of Distribution, Development and Production & Solutions. As a system supplier of industrial high- tech products, we are ideally positioned and are increasingly establishing ourselves as a strategic partner for our customers. We are consistently pursuing our vision of creating added value for our customers by intelligently linking power supplies, display technology and embedded computers. Orders on hand in the Group totalled EUR 83.0 million at the end of the 2022/2023 financial year, down 11.2 % on the previous year.

For more than 39 years, FORTEC has always generated excellent returns with the business model tested in several cycles. Thanks

to our conservative financing policy, we have a very robust balance sheet structure with an equity ratio of 72.1 % (PY: 70.4

%). In addition, we managed to successfully overcome the operational challenges in the supply chains in the past financial year and to adapt the prices of our products to the new market conditions as far as possible. With increased activity in the design of complete (sub)systems based on our own technologies, we are making ourselves more independent and competitive in a global environment.

After the excellent business and earnings development in the 2022/2023 business year, the growth in the 2023/2024 business year is expected to be moderate due to the many economic uncertainties and rising costs. We expect an increase in Group turnover in the range of EUR 106.0 million to EUR 116.0 million and in Group EBIT between EUR 9.5 million and EUR 11.0 million compared to the previous year.

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The Management Board as well as the entire team of the FORTEC Group would like to take this opportunity to express its sincere appreciation and deep gratitude to Mr Bernhard Staller. In the course of his retirement this year for reasons of age as a former member of the Management Board of FORTEC Elektronik AG and long-standing Managing Director of Distec GmbH, we would like to pay tribute not only to his contributions to the past financial year 2022/2023, but rather to his tireless entrepreneurial commitment to the FORTEC Group.

Mr. Staller, as co-founder of Distec GmbH, has steered the fortunes of the company over a period of three decades with outstanding commitment and comprehensive expertise and contributed to the steady growth within the Group. We wish Mr Staller all the best, happiness and health for the coming years and look back together with pleasure on the achievements made.

Dear shareholders, the Management Board of FORTEC Elektronik AG would like to thank you for the trust you have placed in us. Thanks to your support, it is possible for us to successfully develop the future of our company in a sustainable manner and to consistently leverage business potential.

Sandra Maile

Chair of the Management Board

Sandra Maile	Ulrich Ermel
(Chair of the Management Board)	(Management Board)

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Financial Report 2023 Contents of the group management report

Fundamentals of the Group	08
Control system	09
Research and development	09
Financial report	09
Business development	10
Profit situation	10
Asset situation	12
Financial and liquidity position	13
Forecast report	14
Risk and opportunity report	15
Further information in accordance with section 315a of the German Commercial Code	20

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Group management report: 1. Fundamentals of the Group

Over the past years, FORTEC as a group has gradually transformed itself from a trading company into a system supplier of industrial high-tech products, and is now part of the international added value chain. Acting as a link between various production plants of internationally active suppliers, in particular from the Far East, as well as European and American customers, FORTEC occupies an attractive growth niche and is constantly expanding its position as a supplier of customer-specific product solutions for industrial use, for example through its own software and hardware developments, as well as the expansion of its own production services.

Target customers are companies with long-term positioning, primarily in the high-growth areas of industrial automation, information technology, security technology, medical technology and the field of automotive engineering. Attractive niche markets such as railway and transportation are also focal areas. FORTEC's success is founded on a large number of long-standing customer relationships. The aim of our sales activities is to build strategic partnerships with top customers who are leaders in their own market sectors, as well as with customers with smaller and medium-sized order volumes. Due to ever-greater complexity, orders are increasingly commonly long-term projects and the companies of the FORTEC Group - as suppliers - are becoming long-term, strategic partners to their customers.

For over 39 years now, FORTEC has consistently generated excellent returns with its business model, which has been tested in multiple cycles. With increased activity in the design of complete (sub)systems based on in-house technologies, the Group is gaining in autonomy and becoming increasingly competitive in a global environment.

The Group has several regional offices in Germany that provide local customer support. FORTEC is represented by a sales office in Austria and by its wholly owned sales subsidiary

ALTRAC in Switzerland. Further to this, FORTEC is represented in the Benelux states with a shareholding in the Dutch trading company Advantec Electronics and through the foreign subsidiaries Display Technology in Great Britain, Apollo Display Technologies in the USA, and ALLTRONIC - a subsidiary of AUTRONIC - in the Czech Republic.

The Group occupies two attractive sectors of the high-quality electronics market. FORTEC is one of the market leaders in German-speaking countries in the fields of data visualisation (display and embedded computer technology) and industrial power supplies. Furthermore, FORTEC has established good positioning on the Anglo-American market with its subsidiaries.

By linking the product areas of Display Technology and Embedded Computer Technology to form a data visualisation system, FORTEC also offers complex solutions for an innovative market. The Group's fields of competence range from the delivery of system-tested standard kits, to support services in the area of hardware and software for the sale of standard devices (for example, for professional display systems for industry or digital signage as well as complete monitors), right up to customer- specific developments and product solutions. The FORTEC Group's portfolio also includes TFT controller and drive solutions developed in-house, as well as the latest generation of optical bonding technology.

In the product area of power supplies, FORTEC covers the complete product range of power supplies and DC/DC converters, from standard products from the Far East, through series devices modified in Germany, right to customer-specific developments for niche markets realised by the subsidiary company AUTRONIC.

In this successful segment, FORTEC continues to concentrate on the pure distribution business. Stock availability of the right products forms the basis for success here. The Group can fall back on its own high storage capacities in the power supply sector. Distribution in Great Britain and the USA is undergoing consistent expansion via the foreign subsidiaries there.

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Group management report: 2. Control system

As a group listed on the stock exchange, FORTEC has well- established control systems that enable it to maintain a constant overview of important group activities. The Management Board receives monthly reports on the control and monitoring of the companies. The Supervisory Board in turn receives quarterly financial reports and monthly information on certain key figures. Furthermore, the board members maintain regular contact with the companies at local level.

In order to fully utilise synergies, reporting is partially carried out on an inter-company basis according to segments. Such aspects as incoming orders, the contribution margin (CM I = gross margin), turnover and EBIT serve as relevant key performance indicators. The Group considers turnover and EBIT to be the most important financial performance indicators.

Group management report: 3. Research and development

The FORTEC Group is mainly active as a system provider in the data visualisation segment to provide its customers with added value and differentiate them from the competition thanks to innovative applications and procedures. The Group is therefore investing continuously and sustainable in its own development competence and maintains a development department with 24 (previous year: 26) employees and invests both in traditional product development (e.g. video converters and network IoT products) and in the further development

of production technologies with an annual expenditure of around EUR 2.4 million (previous year: EUR 1.8 million). In 2022/2023, the focus was once again on the development of "obsolescence management" for components and redesigning current platforms to maintain delivery capability. A further focus was on completing the development of a new flagship monitor series and planning the migration of large screens from Full HD to 4K/UHD resolution.

Group management report: 4. Economic report

Macroeconomic and sector-specific framework conditions

The global economic environment continued to be shaped by the war in Ukraine, the recovery from the COVID-19 pandemic, the prolonged adherence to the zero-covid policy in China, a persistently tense situation of global supply and logistics chains, and general geopolitical and economic uncertainty. Of particular importance for the industrial economy were the soaring energy prices, especially for natural gas, which continued well into 2023. Overall, the world's gross domestic product (GDP) will expand by 2.1 % in 2023, according to the ifo Institute, following on from an increase of 2.8 % last year.1

The euro zone economy recorded a slight decline in GDP in the winter half-year of 2022 due to energy price-driven inflation.

According to assumptions by the ifo Institute, GDP in the euro zone will increase by just 0.6 % in 2023 compared to the previous year and will only accelerate again to 1.3 % in the following year.2

The German economy suffered a severe setback during the winter months. As a result of high inflation, demand weakened noticeably. Following consecutive negative developments in the fourth quarter of 2022 and the first quarter of 2023, GDP is starting to recover. The ifo Institute expects GDP to decline by 0.4 % in 2023. The seasonally adjusted S&P Global/BME Germany Manufacturing PMI reduced from 49.3 points in July 2022 to 38.8 points in July 2023 and therefore reached its lowest level for almost three years.4

1) https://de.statista.com/themen/1181/weltwirtschaft/#dossierKeyfigures

2 ) https://www.ifo.de/fakten/2022-06-15/ifo-konjunkturprognose-sommer-2022-inflation-lieferengpaesse-und-krieg-bremsen

1. https://www.bundesfinanzministerium.de/Monatsberichte/2021/04/Inhalte/Kapitel-6-Statistiken/6-4-05-reales-bruttoinlandsprodukt.html
2. https://www.ifo.de/fakten/2022-06-15/ifo-konjunkturprognose-sommer-2022-inflation-lieferengpaesse-und-krieg-bremsen

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Group management report: 4. Economic report

According to the association of German electrical and electronic manufacturers (ZVEI), new orders in the German electrical and digital industry fell by 1.9 % year-on-year from January to May 2023.5 The ifo Institute forecasts a gradual end to supply

bottlenecks and an expansion of production due to the high order backlogs accumulated over the course of the pandemic.

Group management report: 5. Business development

FORTEC's business performance in the 2022/2023 financial year was characterised by tight material availability and supply bottlenecks in a dynamic economic environment as well as high inflation, which led to price increases in all areas.

Despite this challenging environment, the Group was able to achieve another record year, increasing Group turnover by 19 % to EUR 105.9 million and Group EBIT by 26 % to EUR 10.7 million. The results were above the forecast range from the previous year's group management report (previous year: Group revenue between EUR 91.0 million and EUR 97.0 million, and a Group EBIT between EUR 8.0 million and EUR 9.0 million), and in the optimistic range of the values most recently forecast in May 2023 with a revenue target of EUR 97.0 million to EUR 110.0 million and a Group EBIT of EUR 10.0 million to EUR 11.0 million. The reasons behind the positive development were high demand

from customers, optimisation of ordering processes and warehousing, as well as good price implementation, which meant that the gross margin could even be slightly increased with rising volumes.

In summary, we succeeded in achieving the forecast for the past business year with pinpoint accuracy. In this respect, the 2022/2023 business year can be described as positive.

Due to the high demand for products with simultaneous decreasing delivery bottlenecks for preliminary products on the part of suppliers, the order backlog in the Group fell to EUR 83.0 million at the end of the 2022/2023 financial year, and was therefore 11 % down on the previous year.

Group management report: 6. Profit situation

Group turnover, a key financial performance indicator, stood at EUR 105.9 million (previous year: EUR 89.0 million) and therefore within the optimistic range of the forecast raised in May 2023. As such, turnover growth in the business year was 19 % compared to the previous year.

The increase mainly results from the dynamic data visualisation segment with high-margin solutions (including industrial monitors) and turnover achieved in the power supplies segment with products for demanding applications. Furthermore, new

products and projects were well received by the market, and the general price level and shortage of materials allowed price increases on the procurement side to be passed on to customers.

Other operating income remained unchanged at EUR 2.5 million. Currency gains increased by EUR 673 thousand, while the remaining other income compensated for the increase in currency gains due to lower insurance reimbursements and the no longer existing special effect from the initial consolidation of ALLTRONIC in the previous year.

1. https://www.ifo.de/fakten/2022-06-15/ifo-konjunkturprognose-sommer-2022-inflation-lieferengpaesse-und-krieg-bremsen
2. https://www.bme.de/news/emi-nachfrageeinbruch-drueckt-im-juni-deutsche-industrieproduktion-nach-unten
3. https://www.zvei.org/konjunktur-maerkte/aktuelles?showPage=3210936&cHash=bde07e21d2702997eb65364db99a4723

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