solutions for demanding business Asseco Group Results Q1-Q3 2013

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Bartholomew Barnett
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2 Asseco Group Results Q1-Q Warsaw, 14 November

3 Sales Revenue (Q1-Q3 2013) PLN 4,188 m Sales revenue +5% Poland 29% +5% 67% 1,430 Sales PLN 4,188 m +5% PLN 3,282 m Proprietary software and services +7% Foreign markets 71% +5% Sales of proprietary software and services (in PLN millions and as percentage of total sales) 73% 77% 78% 2,571 3,078 3,282 Q1-Q Q1-Q Q1-Q Q1-Q Execution of sales plans in line with the objectives Stable situation in the markets of Poland and Israel and a slight recovery in Western Europe More difficult business conditions in the Slovak and Balkan markets BUSINESS OUTLOOK Unfreezing of public projects in the Czech Republic and Slovakia Continuation of our internal reorganization, which aims to increase sales in the Balkans and Western Europe 3

4 Operating Results and Margins (Q1-Q3 2013) PLN 623 m EBITDA 0% PLN 483 m EBIT -3% PLN 262 m Net profit -6% Maintaining a stable level of operating profit Clients make no significant investments in new projects and remain under pressure for cost savings Poland 52% -8% EBIT PLN 483 m -3% Foreign markets 48% +4% Increasing share of sales of own services in relation to new license revenues BUSINESS OUTLOOK Expansion into emerging markets An increase in new license revenues Operating profit margin High cost discipline Q1-Q Q1-Q Change 11.52% 12.40% (0.9) pp 4

5 Cooperation with Clients Number of contracts (cumulative *) Asseco Poland more than 1,000 Asseco Group more than 100,000 PLN 5,537m Orders backlog ** +5% 792 1,108 1,426 Q Q1-Q Q1-Q Enterprises Public administration Banking and finance Number of clients 3,326 new projects Over 70% of our business comes from continued and recurring projects Signing new long-term contracts with our existing clients Orange Poland VC2 project ZUS maintenance and development agreement Solid orders backlog for this year BUSINESS OUTLOOK Maintenance and development agreements with new clients Building our position as a strategic IT partner *) Asseco Group, excluding retail products. The figures include contracts, orders and annexes. **) As at 6 November

Product Development def3000 New system modules are being prepared Offers submitted to several foreign clients AUMS

system for a telecommunications company Shortlisted by a client in Africa AMMS The most advanced management system

Implementation for Kraft Turkey (presently Mondelēz) Highly evaluated in the Gartner report for SFA BUSINESS

6 Product Development def3000 New system modules are being prepared Offers submitted to several foreign clients AUMS Successful completion of the centralized system for billing of business customers at Tauron Implementation of the system for a telecommunications company Shortlisted by a client in Africa AMMS The most advanced management system for hospitals Agreement for implementation of the Subcarpathian Medical Information System Mobile Touch Implementation for Kraft Turkey (presently Mondelēz) Highly evaluated in the Gartner report for SFA BUSINESS OUTLOOK Maintenance and further development of products as well as system upgrades for existing clients Expansion into foreign markets 6

7 IT Infrastructure 7

8 Competencies of partners solutions for demanding business Our Competitive Advantages Focusing on business needs of our clients: high expertise in business sectors proprietary software and accompanying services comprehensive services to ensure the construction, maintenance and development of IT infrastructure close cooperation and partnering with major providers of IT technologies and solutions Business applications Business applications Computer systems Databases and middleware Operating and management systems Hardware and infrastructure IT services Key competencies of Asseco Objective: LEADING DESIGNER AND PROVIDER OF IT INFRASTRUCTURE 8

9 IT Trends What Companies and Institutions Are and Will Be Investing In Building of private clouds, virtualization/consolidation of servers and mass storage Data exchange buses Use of external cloud services Backup and auxiliary environments More efficient and secure corporate networks Multimedia communication, collaboration, remote access Business Analytics (especially for Big Data) Regional broadband networks Customer/enquirer service solutions (e.g. central systems and next-generation portals) 9

10 Positive Outlook for the IT Infrastructure Business New needs New needs New functionalities New functionalities New needs higher efficiency of systems higher bandwidth of networks more data better reliability greater security 10

11 Engaging in the IT Infrastructure Business as a Non-Manufacturer The role of a system integration company Customers do not want to rely on just one technology, either for commercial or technical reasons 1 Provide objective adviceto clients on which technologies will best suit their specific requirements. 2 Design, build and take responsibility for a solution that is made up of components delivered by different manufacturers. 3 Act as a middleman (on a contract basis) between less-flexible global technology manufacturers and customers. 11

12 Engaging in the IT Infrastructure Business as a Non-Manufacturer What conditions must be fulfilled by a system integration company? Knowing and understanding the client's business Relations in many places and at different levels of the client's organization Knowledge of the client's technical, organizational and commercial factors Expertise in state-of-the-art technologies and IT trends Competence and capabilities of design, implementation and maintenance Market position Presence close to customers (geographical structure) Reliable (trustworthy) partner for clients Suitable partner for manufacturers What IT solutions are or may be needed by or useful to the client? 12

13 Strong and Unique Position of Asseco as a System Integrator We cooperate with major global producers of ICT technologies We know how to design, implement and service the IT infrastructure solutions We are most important partners for each producer - ability to obtain special prices and conditions due to the economies of scale We are a very large and powerful company with unquestionable potential, expertise and market reputation Hundreds of satisfied customers and hundreds of successfully completed projects We know and understand the customers' business and needs as we have worked together for many years First of all, as a provider of business applications as well as a provider of infrastructure solutions Asseco-delivered infrastructure for Asseco-developed software 13

14 Financial Information 14

15 Own Product Revenue Grow by 7% EBIT Remains Stable Q1-Q Q1-Q Q1-Q Δ Q Q Δ Sales revenue 4, , % 1, , % Proprietary software and services 3, , % 1, , % Gross profit (loss) on sales 1, , % % Gross profit margin 26.0% 27.2% -1.2 pp 25.4% 27.6% -2.2 pp Distribution costs % % General administrative expenses % % Other operating activities % Operating profit % % Operating profit margin 11.5% 12.4% -0.9 pp 11.0% 12.1% -1.1 pp Operating profit non-ifrs % % Operating profit margin non-ifrs 13.3% 14.3% -1.0 pp 12.7% 14.1% -1.4 pp EBITDA % % EBITDA margin 14.9% 15.6% -0.7 pp 14.5% 15.5% -1.0 pp Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 15

16 Strong Growth in Revenue from Proprietary Software and Services Q1-Q / Change Q1-Q vs Q1-Q Sales revenue Proprietary software and services Operating profit (non-ifrs) Polish market 1, % % % Israeli market* 1, % 1, % % Slovak market % % % Balkan market % % % Eastern European market Western European market 46.6 n/a 32.4 n/a 2.8 n/a % % % Total ** 4, % 3, % % * Figures for 2012 include the financial results of Sapiens as from February ** Figures after consolidation eliminations Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 16

17 Actual for Q1-Q Polish market Israeli market Slovak market Balkan market Eastern European market Western European market Adjustment Actual for Q1-Q solutions for demanding business EBIT Margin non-ifrs Q1-Q vs. Q1-Q % -0.6pp 14% -0.3pp 13% 0.0pp -0.2pp 0.0pp +0.2pp 0.0pp 12% 14.3% 13.3% 11% 10% 17

18 Reconciliation of Operating Profit and Net Profit Q1-Q IFRS Q1-Q IFRS Δ IFRS Q1-Q non-ifrs Q1-Q non-ifrs Δ non-ifrs Operating profit % % Interest expense Foreign currency transactions Other of which: result of transactions associated with company acquisitions regained control over Sapiens Int Pre-tax profit % % Income tax % % Share in profits/losses of associates % % Net profit % % Net profit attributable to shareholders of the parent company % % Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 18

19 Reconciliation of Operating Profit and Net Profit Q IFRS Q IFRS Δ IFRS Q non-ifrs Q non-ifrs Δ non-ifrs Operating profit % % Interest expense % % Foreign currency transactions Other % of which: result of transactions associated with company acquisitions regained control over Sapiens Int. Pre-tax profit % % Income tax % % Share in profits/losses of associates % % Net profit % % Net profit attributable to shareholders of the parent company % % Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 19

20 Generated Cash Flows Asseco Group Asseco Poland Q1-Q Q1-Q Q1-Q Q1-Q CFO CAPEX Free cash flow Cash conversion* 61% 68% 46% 40% * Free cash flow / non-ifrs EBIT Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 20

21 Stable Liquidity Position (Asseco Poland) As at 30 September 2013 ST LT Cash and financial assets 44.7 Debt and finance lease: Bank loans Assets serving as bank loan collateral* Finance lease liabilities Net debt (ST) Net operating assets (ST) Available bank loan facilities Figures in PLN millions * The book value of real estate serving as security for a bank loan: PLN million; the amount of loan secured with real estate: PLN million 21

22 Appendix 22

23 Consolidated Sales Revenue by Products and Sectors Q1-Q % Q1-Q % Proprietary software and services 3, % 3,078 4,188 11% 11% Third-party software and services % 432 Hardware and infrastructure % 476 Other sales 8-3.4% 9 Sales revenues 4, % 3,995 36% Banking and Finance 1, % 1,332 25% 4,188 39% Enterprises 1, % 1,710 Public Institutions 1, % 954 Sales revenues 4, % 3,995 Figures in PLN millions 23

24 Consolidated Orders Backlog for 2013 In comparison to the orders backlog presented in November 2012 Sales revenues +5% Proprietary software and services +7% 5,289 5,537 4,057 4, Figures in PLN millions; Orders backlog for 2012 as at 7 November 2012; Orders backlog for 2013 as at 6 November

25 Financial Results of Subsidiaries* Sales revenue Operating profit Net profit Q1-Q Q1-Q Q1-Q Q1-Q Q1-Q Q1-Q Poland** 1, , Asseco Poland Asseco Business Solutions Other Consolidation eliminations Formula Group 1, , Matrix IT 1, , Magic Software Sapiens Int Asseco Central Europe Group Asseco South Eastern Europe Group Western Europe Eastern Europe * Financial results for the periods consolidated by Asseco Poland. ** Net profit excluding dividends to be recognized as income of Asseco Poland. 25

26 Own Product Revenues Grow by 7% EBIT Remains Stable (non-ifrs) solutions for demanding business 13.2: costs of equity-settled employee payment transactions 60.3: amortization charges on intangible assets recognized from a business combination 13.2: costs of equity-settled employee payment transactions 56.7: amortization charges on intangible assets recognized from a business combination 18.9: costs of equity-settled employee payment transactions 18.9: costs of equity-settled employee payment transactions Q1-Q IFRS adjustment Q1-Q non-ifrs Q1-Q IFRS adjustment Q1-Q non-ifrs Δ IFRS Δ non- IFRS Sales revenue 4, , , , % +5% Proprietary software and services 3, , , , % +7% Gross profit (loss) on sales 1, , % Gross profit margin 26.0% 27.2% -1.2 pp Distribution costs % General administrative expenses % Other operating activities % Operating profit % -3% Operating profit margin 11.5% 13.3% 12.4% 14.3% -0.9 pp -1.0 pp EBITDA % -1% EBITDA margin 14.9% 15.2% 15.6% 16.1% -0.7 pp -0.9 pp Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 26

27 Own Product Revenues Grow by 6% EBIT Remains Stable (non-ifrs) solutions for demanding business 4.1: costs of equity-settled employee payment transactions 20.7: amortization charges on intangible assets recognized from a business combination 4.1: costs of equity-settled employee payment transactions 19.8: amortization charges on intangible assets recognized from a business combination 6.4: costs of equity-settled employee payment transactions 6.4: costs of equity-settled employee payment transactions Q IFRS Q non-ifrs Q IFRS adjustment adjustment Q non-ifrs Δ IFRS Δ non- IFRS Sales revenue 1, , , , % +6% Proprietary software and services 1, , , , % +6% Gross profit (loss) on sales % Gross profit margin 25.4% 27.6% -2.2 pp Distribution costs % General administrative expenses % Other operating activities Operating profit % -4% Operating profit margin 11.0% 12.7% 12.1% 14.1% -1.1 pp -1.4 pp EBITDA % -2% EBITDA margin 14.5% 14.8% 15.5% 16.0% -1.0 pp -1.2 pp Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 27

28 Reconciliation of Operating Profit and Net Profit Q1-Q IFRS Q1-Q non-ifrs Q1-Q IFRS adjustment adjustment Q1-Q non-ifrs Operating profit % -3% Interest expense Foreign currency transactions Other Δ IFRS Δ non- IFRS of which: result of transactions associated with company acquisitions regained control over Sapiens Int Pre-tax profit % -7% Income tax % +6% Share in profits/losses of associates % -1% Net profit % -9% Net profit attributable to shareholders of the parent company % -2% Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 28

29 Reconciliation of Operating Profit and Net Profit Q IFRS Q non-ifrs Q IFRS adjustment adjustment Q non-ifrs Operating profit % -4% Interest expense % -31% Foreign currency transactions Other % Δ IFRS Δ non- IFRS of which: result of transactions associated with company acquisitions regained control over Sapiens Int Pre-tax profit % -4% Income tax % +2% Share in profits/losses of associates % -17% Net profit % -5% Net profit attributable to shareholders of the parent company % +2% Figures in PLN millions Non-IFRS figures include adjustments for amortization charges on intangible assets recognized from a business combination, and for the costs of equity-settled employee payment transactions 29

30 Thank you 30

solutions for demanding business Asseco Group Results H1 2013

solutions for demanding business Asseco Group Results H1 2013 Asseco Group Results H1 2013 Warsaw, 26 August 2013 2 Consolidated Financial Highlights for H1 2013 PLN 2,784 m Sales revenues +4% PLN 2,182 m Proprietary software and services +7% PLN 420 m EBITDA +1%