WORK SERVICE GROUP. H1 16 Results Management Presentation E X P E R T A N D S T R AT E G I C H R A D V I S O R 1

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1 WORK SERVICE GROUP H1 16 Results Management Presentation E X P E R T A N D S T R AT E G I C H R A D V I S O R 1

2 EXECUTIVE SUMMARY E X P E R T A N D S T R AT E G I C H R A D V I S O R 2

3 Management Board Commitments May 2016 and beyond 1 TOPLINE growth commitment +25% 2 FY EBIT commitment EBIT restructuring commitment Mainly Germany and Poland E X P E R T A N D S T R AT E G I C H R A D V I S O R 3

4 Key Topline Growth Contributors Revenue [m PLN] COMMENTS % -10,0 Acquisitions (Q4 15) contributed 40% ofthe growth in YoY revenues ,2 27,0 13,7 Core flexible employment markets of Work Service Poland and Work Service Hungary contributed additional 42% of the growth in YoY revenues ,8 High margin, specialized companies i.e. Exact Systems and IT Kontrakt added 27% of the growth in YoY revenues ,9 All others represent: In plus: WSCzech and Slovakia, Antal and Work Service Express (+13,7m PLN), In minus: WS Germany and WS Russia (-10,0m PLN) ,8 42% 1203 The difference between bridge analysis and consolidated sales is the result of inter copany charges not reflected in disegregated business units % Revenues [m PLN] WS PL WS HU WS DE WS RU WS CZ WS SK Exact Systems IT Kontrakt Antal Work Express H1'15 313,4 160,4 152,4 36,2 26,7 17,5 80,2 64,1 16,0 117,7 850 H1'16 370,3 198,1 150,2 28,0 27,0 22,6 114,4 91,1 17,9 123,9 DYNAMIC 118% 124% 99% 77% 101% 130% 143% 142% 112% 105% 800 Consolidated H1'15 Acquisitions WS Poland WS Hungary Exact Systems IT Kontrakt All Others Consolidated H1'16 Source: The Company E X P E R T A N D S T R AT E G I C H R A D V I S O R 4

5 Restructuring Germany Actions taken and first results TOPLINE INITIATIVES: New management, commercially oriented setup, including experienced external advisors and a professional sales executive. Increased sales firepower, as sales staff has been changed/hired. Operations Managers get proactive sales responsibility to better utilize labor resources. Introduced Sales Performance Management. Taking over 65% of competitor s business in 5 Fiege locations with an impact of 0,7m EUR EBIT still in FY16. New minimum wage level increase introduced by Federal Government as of June 1st: (+2.3% West / +3.0% East). MARGIN IMPROVEMENT: External staff efficiency is clear focus area for the whole organization. New conditions introduced for advance notice of employment changes (<20FTE 5 days, 20-40FTE 10 days, >40FTE 20 days). Rules for bookings and cancelations introduced, with an impact on efficiency. Introduced price increase on Fiege and non-fiege customers (i.e. BASF). Margin improved by 1.3pp compared to H1 15. BOTTOM LINE INITIATIVES: Development costs of Enloyd DE to be minimized as of H2 16 (c.a. 1m PLN loss in H1 16). Stabilized situation in critical location: Fiege Dieburg. Branch office back in black in H2 16. Decision to close other loss making branches of Fiege Fiege Buerstadt and Fiege ICD (impact already visible on FTE levels, however not reflected in H1 16 results as restructuring costs to be covered). E X P E R T A N D S T R AT E G I C H R A D V I S O R 5

6 Restructuring Poland Actions taken and first results TOPLINE EFFICIENCY FACTORS: 1. Non-invoiced services are being corrected and invoiced properly according to binding contractual agreements. 2. Low profitability contracts are in the process of renegotiation/withdrawal. 3. Major project of annual price indexation and new trade terms for 2017 has been launched (Jul 16). 4. Increasing share of high margin contracts based on Ukraine sourcing, new sales margin higher than average. CANDIDATE CARE EFFICIENCY FACTORS: 1. Centralized call center to handle candidates/employees is to be launched as of Sep B2C Mobile Application under development, to be deployed as of Oct Re-launch of WWW with clear focus on candidate care, Oct New standard of Candidate Management in front offices (new procedures). INTERNAL PROCESSES EFFICIENCY FACTORS: 1. Merger of sales and operations structures. 2. Lean optimization and automatization: i.e. digital/remote employment contracts signature, digitalization of archive, new employee handling procedure. 3. Internal Headcount reduction by 78FTE til end of June, planned additional 20FTEs to be dismissed by the end of the year (~15% of internal staff). E X P E R T A N D S T R AT E G I C H R A D V I S O R 6

7 FINANCIALS E X P E R T A N D S T R AT E G I C H R A D V I S O R 7

8 P&L Statement H1 16 vs. H1 15 Comments Specification [t PLN] H1'15 H1'16 Net revenues from sales of products and services Source: The Company Dynamic 2016/ ,1% Cost of products, goods and materials sold ,3% Gross profit (loss) on sales ,6% Selling costs ,4% General and administration costs ,3% Profit (loss) on sales ,1% Other operating revenues ,9% Other operating expenses ,1% Profit (loss) on operating activities ,2% Financial revenues ,2% Financial expenses ,9% Gross profit (loss) ,0% Income tax ,2% Net profit (loss) ,3% Revenues grew by 23%, and gross profit from sales increased by almost 31%. Gross profit margin increased by 0.6 pp compared to H1 15 driven by positive market environment and changes in product/customer mix. Increase in costs is driven mainly by: impact of consolidated costs of acquired entities (mainly CRS & Balkans) = 10,1m PLN, additional costs of integration and restructuring projects in Germany and Poland 6,2m PLN. Specification [t PLN] H1'15 H1' /2015 % change Revenues (organic) ,9% Indirect Costs (organic) excl. Transformation Costs ,7% After 6 months excluding impact of acquisitions and additional transformation costs Revenue growth is 3.2pp higher than Indirect Costs growth. EBIT value affected by a writedown (non-cash) of receivables in Germany. Adjusted EBIT (excluding write-off) increased by 7% compared to H1 15. Net Profit decreased by 64% due to higher level of financial expenses (due to higher utilisation of loans) and income tax expense. E X P E R T A N D S T R AT E G I C H R A D V I S O R 8

9 Capital Group Results Revenue and EBITDA Revenue [m PLN] EBITDA [m PLN] ,8 515,6 548,8 488,3 611,3 269,5 502,6 187,9 238,8 390,0 186,1 182,8 221,4 345,9 474,5 591,9 170,6 188, Q4 Q3 Q2 Q ,4 38,8 28,3 23,6 19,9 15,7 18,3 19,5 19,6 12,5 9,4 9,6 9,6 18,0 19,0 20,4 8,6 10, Q4 Q3 Q2 Q1 Comments Cumulative 23% sales growth, is the result of a very strong dynamic in both the organic growth of the core, as well as in the consolidated entities acquired in the period. Organic growth remains a solid engine of growth with 14% better like-for-like topline. Growth once again exceeds the expected market value growth in CY2016. Core business Work Service Poland grew organically by 19% year-on-year. Revenues growth (YoY) champions are Exact Systems (+43%), IT Kontrakt (+42%) and Work Service Hungary (+24%). Source: The Company E X P E R T A N D S T R AT E G I C H R A D V I S O R 9

10 Scale of Our Operations Comments Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 WESTERN EUROPE (UK, BG) BALKANS (TR, CRO, SLO, RO) CENTRAL EUROPE (CZ, SK, HU) RUSSIA GERMANY POLAND Total Group employment level again exceeded FTE, mainly driven by the strong growth on core domestic market. Poland represents 2/3 of Group FTEs, growing by 5% QoQ and 20% YoY. Central Europe (CZ,SK,HU) stays strong and stable, contributing 25% of Group FTEs. Average Group employment level in H1 16 is 9% higher than in whole FY2015 and 14% higher v. H1 15. Drops of employment levels in Germany and Russia are the effect of organizational restructuring of Work Service Business Units in Germany and Russia. E X P E R T A N D S T R AT E G I C H R A D V I S O R 10

11 Country/Region Split Revenue and Gross Profit Revenue [m PLN] Gross Profit [m PLN] % +19% 180 Comments Group Gross Profit grew by 19% YoY following Revenues which grew by 23%. Key Gross Profit growth contributors are Poland and Central Europe Region (Czech, Slovakia and Hungary). Germany due to the restructuring project registered a 6% drop in revenues vs. previous year but its Gross Profit remained stable. This resulted in a Gross Profit improvement in Work Service Germany of 1.3pp (18,8 %-> 20,2%). 0 H1'15 POLAND RUSSIA BALKANS H1'16 GERMANY CENTRAL EUROPE WESTERN EUROPE 0 H1'15 POLAND RUSSIA BALKANS H1'16 GERMANY CENTRAL EUROPE WESTERN EUROPE Gross Profit Margin is diluted by the enormous growth of mass margin businesses (Work Service Poland and Hungary), which grew even faster than high margin Business Units growth. Source: The Company E X P E R T A N D S T R AT E G I C H R A D V I S O R 11

12 Financial Ratios H1 16 vs. H1 15 Financial ratios H1'15 H1'16 Profitability ratios Change Comments Gross Margin 2.92% 2.66% -0.26% EBIT Margin 3.37% 2.67% -0.70% EBITDA Margin 3.94% 3.33% -0.61% NP Margin 1.35% 0.67% -0.68% ROA 1.43% 0.71% -0.72% ROE 3.88% 2.33% -1.55% Liquidity ratios Cash conversion cycle Turnover ratios Turnover of receivables ratio Turnover of liabilities ratio Debt ratios Net Debt / EBITDA Lower level of profitability ratios due to consolidated costs of recent acquisitions, set up of new structures, as well as lower profitability ratios in Germany. Increase of G&A costs. EBIT & EBITDA margin affected by one-off receivable written of in Germany Higher debt utilization drives financial costs increase. Receivables turnover ratio remained stable while revenue increase by 23%. Increase of net debt/ebitda ratio is mainly a result of continued M&A activity and significant organic growth of the Group which requires additional sources of financing Source: The Company E X P E R T A N D S T R AT E G I C H R A D V I S O R 12

13 Balance Sheet H1 16 vs. H2 15 As at [t PLN] Dec 31st 2015 Jun 30th 2016 FIXED ASSETS Intangible assets Goodwill Tangible fixed assets Real property investments Other financial assets Other long-term assets Other long-term financial assets Deferred tax assets Prepayments CURRENT ASSETS Inventory Trade and other receivables Other financial assets Other short-term assets Cash and other pecuniary assets Prepayments TOTAL ASSETS Total assets remained stable in comparison to y.e Fixed assets at the similar level as a result of : No significant acquisitions in H1 16 (no incremental goodwill recognized), Amortization of intangible assets with no major new investments in H Trade and other receivables decreased even though total revenue increased by 23%. As at [t PLN] Dec 31st 2015 Jun 30th 2016 EQUITY Share capital Supplementary capital Capital from the valuation of options Net profit (loss) Exchange rates balance Minority Interest LIABILITIES AND PROVISIONS FOR LIABILITIES Long-term liabilities Long-term credits and loans Deferred income tax liabilities Other provisions Other liabilities Short-term liabilities Trade and other liabilities Short-term credits and loans Other provisions TOTAL LIABILITIES Equity remained similar to y.e and increased mainly as a result of net profit for the period result increased the value of supplementary capital. Decrease of long term liabilities is mainly a result of the transfer of 20m PLN bond liability which has now became a short term liability. No other significant fluctuations in equity or liabilities. Source: The Company E X P E R T A N D S T R AT E G I C H R A D V I S O R 13

14 Cash Flow Statement H1 16 vs. H1 15 As at Jun 30th [t PLN] Net profit (loss) Total adjustments Cash flows from operating activities Inflows Outflows Cash flows from investing activities Inflows Outflows Cash flows from financing activities Increase (decrese) of cash and its net equivalents Cash balance at the begining of the period Cash balance at the end of the period Comments Positive inflows from operating activites are mainly the result of continuous process of increasing Sales Margin and improvement in cash management. Lower level of outflows on investing activities are the result of no significant amounts of M&A outflows v H1 15 (which mainly Prohuman and Work Express) Outflows in H1 16 from financing activities are mainly the result of a decrease in the utilization of credit at the end of 1H as well as higher interest expense payments due to higher utilisation of credit intra-period. Source: The Company E X P E R T A N D S T R AT E G I C H R A D V I S O R 14

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