Waberer International : THIRD QUARTER 2020 FINANCIAL REPORT

THIRD QUARTER 2020 FINANCIAL REPORT

Positive recurring EBIT, secured long-term financing, new strategic owner at Waberer's

Budapest, 6 November 2020 - WABERER'S INTERNATIONAL Nyrt. today reports its financial results for the three months ended 30 September 2020.

Highlights Q3 2020

• Recovery from COVID-19was quick in all segments of the Group in the third quarter of 2020 due to the immediate reaction of the Company to the COVID-19 crisis and improving economic environment. Most financial and operational KPIs showed significant uplift compared to previous quarters with recurring EBIT evolving to a level unseen in the past two years
• Recently announced new strategic owner (change of ownership is subject to customary anti-trust clearance), coupled with the recovery in operative efficiency, provides a stable environment for further improvement in profitability
• 5-yearagreement on financing guarantees the financial stability of the Group provides support for the next phase of ongoing ITS turnaround
• Revenue decreased by 19.3% to EUR 137 million in the third quarter of 2020 compared to third quarter of 2019 as a result of reduction in the size of the trucking fleet in the International Transportation Segment (ITS) partially offset by the growth through successful client acquisitions in the Regional Contract Logistics segment (RCL). Compared to Q2 revenue increased EUR 21.5 million which is 18.6% growth.
• Recurring EBIT turned positive in the third quarter to EUR 1.2 million marking a EUR 3 million improvement compared to same period of last year. Compared to the previous quarter recurring EBIT increased by EUR 4 million.
• Recurring Net income increased to EUR -1.1 million (EUR +0.1m adjusted by non-cash unrealized FX losses), showing a EUR 4.5 million improvement compared to third quarter of 2019 as a result of the higher EBIT and lower tax. Recurring Net income increased by EUR 10.4 million compared to the previous quarter.
• Net financial indebtedness decreased by EUR 15.8 million in the third quarter to EUR 160.5 million, with net leverage ratio remaining stable at 2.9x EBITDA. Net debt decrease is driven by the fleet size reduction at ITS and the improving cash generation capability of the Group.
• Management believes that
• • Based on the measures implemented during the first wave of the COVID-19, a possible lockdown in second wave of the pandemic and currently unseen outcome of Brexit are also manageable at modest operational and financial risk
  • The Trade Lane model introduced in the ITS segment successfully met the preliminary expectations. Organizational and operational transformation was smooth and successful. Operations and margins are expected to be further enhanced by the full application of the new model in the coming quarters
  • The share of RCL and Other (third party insurance services) segment - with more favourable financial performance - within the Group is set to increase further
  • Net financial indebtedness will further decrease in the coming months as a result of the finalisation of the fleet size reduction programme in ITS. The decrease will be partly offset by increase due to IFRS16 related capitalization of warehouse renting cost at RCL

|Key figures1 (EUR mn unless otherwise stated)

	Q3	Q3	Better
	2020	2019	(worse)3
Revenue	137.0	169.8	(19.3%)
EBITDA (recurring)	14.0	15.3	(8.8%)
EBIT (recurring)	1.2	(1.7)
Net income (recurring)	(1.1)	(5.6)	79.7%
EBITDA margin (recurring)	10.2%	9.0%	1.2 pp
EBIT margin (recurring)	0.9%	(1.0%)	1.9 pp
Net income margin (recurring)	(0.8%)	(3.3%)	2.5 pp
Net financial indebtedness2	160.5	290.6	44.8%
Net leverage ratio2	2.9	5.4	45.9%

Q2		Better			9M	9M 2019	Better
2020		(worse)3		2020		(worse)
115.5		18.6%		426.3	524.6		(18.7%)
9.9		41.4%		39.3	42.5		(7.6%)
(2.7)				(1.4)	(10.4)		86.3%
(11.5)		90.1%			(15.2)		(19.1)		20.7%
8.6%		1.6 pp		9.2%	8.1%		1.1 pp
(2.4%)		3.3 pp		(0.3%)	(2.0%)		1.6 pp
(10.0%)		9.1 pp		(3.6%)	(3.6%)		0.1 pp

176.3 9.0%

3.1 6.7%

1 Management updated non-recurring classification in 2020 and one-of cost of ITS restructuring is categorised as non-recurring for all 2020. Please see details on page 9. For the definitions of non-IFRS measures, please refer to the Glossary on page 15. Due to rounding, numbers presented throughout this document may not add up precisely

to the totals provided and percentages may not precisely reflect the absolute figures.

1. As of end of the period
2. Compared to Q3 2020 figures

This report may contain forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore should not have undue reliance placed upon them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors are described in, among other things, the Annual Report 2019 dated 30 April 2020, which is available on our website for investors at https://www.waberers.com/files/document/document/1034/WABERERS%20ANNUAL%20REPORT%202019_ENG.PDF.

Barna Erdélyi, CEO of WABERER'S INTERNATIONAL Nyrt. commented: "After an extremely challenging second quarter with parts of Europe under lockdown, the Company managed to establish the long-termstability for the Group in third quarter of 2020 with the support of its major stakeholders.

As result of the quick reaction of the Management to the once-in-a-lifetimepandemic-hit market circumstances and slowly improving macroeconomic environment, the Company significantly outperformed both the previous quarter and last year's financial results in the third quarter of 2020. Recurring EBIT turned positive in the third quarter of 2020 and reached EUR 1.2 million, a level not seen since the second quarter of 2018.

Starting in July, we successfully launched the new "Trade Lane" business model at ITS. Despite the challenging environment (both on the market and internally), the model change was smooth and met our initial expectations both on internal organizational level and in our daily operation for serving our Tier 1 customers at the major European industrial zones. Our Poland-based operation already introduced the Trade Lane model as a pilot project with concentrated geographical focus in the second half of 2019 and we already reached the turnaround point. Based on the inhouse experiences in the pilot project and the first results of Trade Lane model in ITS, we are confident that turnaround is achievable in the coming quarters in ITS, too.

As a result of the well-diversified customer portfolio in the Regional Customer Logistics segment, its EBIT outperformed both the previous quarter and the third quarter of 2019. Serving Tier 1 customers in retail, FMCG and pharmaceutical sectors and supporting the Government at the logistics of antiseptics, masks and other protective equipment, offset the temporary decrease in the demand for logistics services at clients at more cyclical industries (such as automotive). In the third quarter, RCL experienced the recovery of segments that were severely affected by the lockdown in early spring. We are confident that the stable performance of RCL segment is secured even in case of severe second wave of the pandemic crisis.

The Other segment - covering third party insurance service - results also improved compared to third quarter of 2019. Revenue level increased by 6% despite of significant number of key clients from the Hungarian transportation segment temporarily terminated their operations as a result of lower demand driven by the pandemic. Moreover, margins improved as we managed to keep damage cost flat despite the increase in revenue.

Our majority shareholder (Mid Europa Partners) announced that it agreed to sell 24% of its shares at Waberer's to Indotek Group (change of ownership is subject to customary anti-trust clearance). At the time of the announcement, Indotek Group also announced that acquisition of Waberer's shares was driven by their long term strategy to diversify their operations and to exploit synergies between Indotek's existing assets and Waberer's Group expertise and customer base in international transportation and contract logistics services. Indotek Group also confirmed its support of the current strategy of Management in changing the business model of ITS.

The Group managed to reach an agreement with the consortium of our financing partners on a 5-year long financing plan covering all relevant aspects of financing the Group, including fleet financing, working capital financing facilities and the effect of Hungarian government mandated leasing and debt moratorium. Indotek Group also supports the new agreement.

In the middle of the second wave of the pandemic, we believe that we proved during the last 3-6 months that we were able to protect our colleagues' health and managed to improve our performance in all our segments parallelly. The long-term commitment of our new owner and our financing partners will provide the required stability of Waberer's Group to be able to fully concentrate on serving our customers during peak season and on progressing with the ITS turnaround in the coming quarters."

Management analysis

Group result for the period
|Income Statement1 (EUR mn)
		Q3 2020	Q3 2019		Better			9M 20204	9M 2019		Better
			(worse)				(worse)
Revenue		137.0	169.8		(19.3%)			426.3	524.6		(18.7%)
Direct costs		(108.8)	(140.3)		22.5%			(347.1)	(439.4)		21.0%
Gross profit (recurring)		28.2	29.4		(4.1%)			79.2	85.2		(7.1%)
OPEX		(14.2)	(14.1)		(1.0%)			(39.9)	(42.6)		6.5%
EBITDA (recurring)		14.0	15.3		(8.8%)			39.3	42.5		(7.6%)
Depreciation and Amortisation		(12.8)	(17.1)		25.4%			(40.7)	(52.9)		23.1%
EBIT (recurring)		1.2	(1.7)					(1.4)	(10.4)		86.3%
Financial result	(2.2)	(2.5)		12.1%		(10.6)	(5.1)
Taxes		(0.2)	(1.3)		88.0%		(3.2)	(3.7)		13.2%
Net income (recurring)		(1.1)	(5.6)		79.7%			(15.2)	(19.1)		20.7%
Non-recurring items		(3.4)	(2.9)		(19.5%)			(6.8)	(0.5)
Gross margin (recurring)	20.6%	17.3%		3.3 pp		18.6%	16.2%		2.3 pp
EBITDA margin (recurring)	10.2%	9.0%		1.2 pp		9.2%	8.1%		1.1 pp
EBIT margin (recurring)	0.9%	(1.0%)		1.9 pp		(0.3%)	(2.0%)		1.6 pp
Net income margin (recurring)	(0.8%)	(3.3%)		2.5 pp		(3.6%)	(3.6%)		0.1 pp
Average number of trucks	2 814	3 965		(29.0%)		3 082	4 178		(26.2%)
Average number of employees	6 431	7 516		(14.4%)		7 287	7 692		(5.3%)
Average number of truck drivers	3 535	5 411		(34.7%)		4 123	5 584		(26.2%)

1 Figures adjusted for better comparability, re-categorising the effect of insurance-related provisions, an OPEX item, as Direct Costs. EBITDA is not affected. For exact figures on the effect on the re-categorisation, please refer to page 10.

Economic environment

In the third quarter of 2020, European economic indicators showed a significant improvement compared to the pandemic-hit second quarter of 2020, however, industrial production is still significantly below 2019 Q3 level.2 The year-on-year fall in industrial production amounted to 7% and 6% in July and August, respectively. Retail trade in the EU already exceeded its 2019 level with 1% and 6% improvement in July and August in the non-food products segment on year- on-year level. In Hungary, the recovery of the industry was faster than in the EU: industrial production level in August 2020 already reached August 2019 output. Retail trade figures in Hungary in July and August were also roughly on 2019 levels (+0.5% in July and -0.8% in August year-on-year).3

Revenue

Revenue decreased by 19.3% year-on-year in the third quarter of 2020 to EUR 137 million. Compared to the third quarter of last year, revenue was 36.3% lower in the International Transportation Segment (ITS) as a result of the fleet reduction programme and weaker economic performance in the EU. In the Regional Contract Logistics (RCL) segment, revenue grew by 21.7% due to the launch of a large automotive inhouse-logistics operation at the end of last year.

As a result of the strategic reallocation of resources among the segments, the revenue share of growing and higher-margin RCL and Other segments within the Group increased to 46% in third quarter of 2020 compared to 32% in same period of 2019

| Revenue (top) and recurring EBITDA (bottom) split by segments in Q3 2020 (EUR mn)

ITS RCL Other

18.3

75.9

44.6

2.53.2

8.3

Notes: Revenue not filtered for inter-segment

eliminations. ITS: International Transportation

Segment; RCL: Regional Contract Logistics segment;

Other: All other activities including mainly 3rd party insurance services.

1. Data for September 2020 is not available at the time of publication of the current report.
2. Source: Eurostat seasonally and calendar day adjusted data for the Eurozone and Hungary. Percentage figures denote the change compared to the same period in the previous year.
3. Please see details of updated non-recurring classification on page 9.

THIRD QUARTER FINANCIAL REPORT, 6 NOV 2020

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Headcount

Despite the significant year-on-year headcount increase in RCL as a result of new customer acquisition in December 2019, the Group level total headcount decreased by 14% to 6,431. The headcount decrease in third quarter was driven by lower demand for drivers due to decreased ITS fleet size and the resizing of indirect headcount.

Gross profit, EBITDA and EBIT

In the third quarter of 2020, recurring gross profit was 4.1% lower than last year's, with gross margin higher by 3.3 percentage points at 20.6%. The improvement of gross profit margin was due to the increasing share of the RCL segment with highest gross profit margin level in the Group and segment level efficiency improvement in the ITS and Other segments.

Recurring EBITDA decreased by 8.8% in the third quarter year-on-year, resulting in an EBITDA margin of 10.2%, marking a 1.2 percentage points improvement on a year-on-year basis. The increase in EBITDA margin is partly due to higher gross margin and partly due to savings in indirect wages as a result of extraordinary measures

Recurring EBIT increased by EUR 3.0 million and turned to the positive range with the value of EUR 1.2 million. Depreciation and Amortisation (D&A) decreased by EUR 4.3 million year-on-year to EUR 12.8 million. D&A decrease is due to the 36% fleet size decrease in ITS on year-on-year basis. Despite the lease payment moratorium, D&A calculation was not affected. However, we reclassified to non-recurring items the D&A of those vehicles that are set for sale but still included in the books.

Net income

Financial result showed EUR 2.2 million loss in the third quarter of 2020, which is 12.1% lower compared to the loss in the same period last year. Interest paid decreased by EUR 0.5 million in third quarter year-on-year as a result of the fleet size decrease. Despite the moratorium, interest is booked and accrued in the P&L. The value of non-cash unrealized FX losses (due to the revaluation of the assets and liabilities in subsidiaries that do not use the Euro as their functional currency) was EUR 1.2 million in the third quarter of 2020 that is EUR 0.6 million higher than the loss in third quarter of 2019.

Tax expenses, which include corporate income tax as well as revenue-based local taxes and also non-cash deferred tax, amounted to EUR 0.2 million in the quarter, EUR 1.2 million lower than in the third quarter of last year. Change in deferred tax was the major driver of year-on-year improvement.

Recurring net income showed a loss of EUR 1.1 million for the quarter compared to a loss of EUR 5.6 million last year.

Group cash flow and debt

Cash flow
|Cash Flow Statement (EUR mn)
			Q3 2020	Q3 2019	9M 2020	9M 2019
Net cash flows from operations	14.8	4.4			36.5	21.9
of which: change in working capital	1.9	(8.1)			1.5	(27.8)
Net cash flows from investing and financing activities		(12.3)	(5.5)			(42.5)	(37.1)
Change in cash and cash equivalents	2.5	(1.1)			(5.9)	(15.2)
Free cash flow	2.6	2.8			2.1	0.1
CAPEX	(0.7)	(2.1)			(2.8)	(6.9)

Net cash flows from operations in third quarter of 2020 increased to EUR 14.8 million that is EUR 10.4 million higher cash generation on year-on-year level. Improvement compared to last year is mostly due to strict working capital management.

Net cash flows from investing and financing activities showed a net outflow of EUR 12.3 million in the third quarter of 2020, EUR 6.8 million lower than the last year's value. The reason for differences are: (i) decrease in borrowings in third quarter of 2020 as a result of more favourable cash position due to moratorium while borrowing increased in third quarter of 2019 (ii) despite moratorium, leasing instalments were paid for vehicles sold (iii) due to market conditions and number of vehicles sold, achievable sale price was lower.

The cash position improved by EUR 2.5 million during the quarter.

Free cash flow, which incorporates cash flow from operations, capital expenditures, and all elements of the lease-based financing of the fleet, slightly changed to an inflow of EUR 2.6 million in the third quarter of 2020 compared to an inflow of EUR 2.8 million in the third quarter of 2019.

THIRD QUARTER FINANCIAL REPORT, 6 NOV 2020

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