4iG PLC. INTERIM MANAGEMENT REPORT ON THE COMPANY S Q ACTIVITIES

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Dinah Bates
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1 4iG PLC. ON THE COMPANY S Q ACTIVITIES 4iG Public Limited Company H-1037 Budapest, Montevideo street 8. 4iG Plc. Telephone: Fax:

2 Contents 1. Executive Summary IFRS consolidated, unaudited quarterly financial statements Consolidated comprehensive income statement Consolidated balance sheet Consolidated statement on the changes in equity Consolidated Cash Flow Statement General Information on the Issuer Information on shares Ownership structure Officers Company Management Remuneration of officers iG Share Ownership of Senior Executives Authorized Signatories of the Report Subsidiaries Major events of the period (in chronological order) Conclusion of a share option contract Changes in shareholding by senior officers High-value contract of a subsidiary High-value contracts of a subsidiary Disclaimer /13

3 1. Executive Summary 4iG Plc. In Q the 4iG Group s profitability (EBITDA) slightly exceeded the figure of that of the previous year. The profit content of projects implemented so far this year decreased, the increase in revenue is substantially higher with practically the same EBITDA content. However, there is a reason to be optimistic because the Group subsidiaries are considerably charged with projects, including the two outstanding projects obtained which derive from EU transfers. (see paragraphs 9.3 and 9.4) The executive management s fundamental goal is to put the Group, which was strengthened by the internal reorganisations of 2016, on a path to growth in order to close a successful financial year in The objective is to retain the existing customer base while conquering new market segments and strengthening the position on the growing IT market. The target is to further increase performance indicators through the implemented restructuring and cost-efficiency measures. Besides improving the collateralisation level, an important task in 2017 is to increase the sales revenue coming from the competitive sector. It is essential to be able to keep newly acquired customers and to further increase our market shares in the for-profit sector. An international trade strategy summarizing the foundations for international expansion has been developed. Key areas and services as well as the countries where these can achieve real results have been identified. The management is prepared to carry out the necessary changes in terms of organization and resources. In Q the Group s IFRS consolidated sales revenues amounted to HUF 3.7 billion which was 36% higher than in the same period of the previous year. The Group s profitability (EBITDA) was HUF 48 million. This is 2% more than the Q1 figure in 2016, i.e. an increase of HUF 1 million. This moderate increase is due to the fact that the Group companies have already tied up the material and human resources necessary for increasing sales revenues but the costs of resources adjusted to a bigger turnover have not yet returned as expected. We are increasing our staff in anticipation of further dynamic growth. The Group s closing headcount increased from 377 to 392 as of 31 March The Group continues to pay particular attention to research and development activities, from 2 January 2017 the technical implementation of the National Innovation Oncogenomics and Precision Oncotherapy Program has been started. The Company continued to follow a conservative exchange rate policy hedging its manufacturing import payment obligations and its major accounts receivable from buyers outstanding in foreign currency with forward foreign exchange transactions. The financial position of the Company continues to be stable and can adequately serve the achievement of higher rates of profitability. The growing turnover was financed from bankers loans. 3/13

4 The Q1 average stock market price of 4iG shares (HUF 2,785) was 40.2% higher than the average figure of Q1 2016; the closing price was HUF 2,790 on 31 March 2017 which is 36.3% higher than the closing price at the end of March The market capitalization of 4iG on 31 March 2017 was HUF 5.2 billion. The Interim Management Report contains unaudited data consolidated according to IFRS principles, given in thousand Hungarian forint unless otherwise indicated. The data in brackets indicate negative values. The following table shows the key financial ratios of the 4iG Plc. consolidated in accordance with the international accounting standards. Description Q Q Change +/- in % Net sales revenues 3,710,141 2,722, % Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 48,076 47, % Earnings before interest and taxes (EBIT) (74,529) (38,512) n.a. Profit after tax (PAT) (110,198) (114,184) n.a. Total comprehensive income (110,198) (114,184) n.a. Headcount* % Net sales revenue per employee*** 9,275 7, % Average number of employees % Stock market indices Stock exchange closing price of share* (in HUF) 2,790 1, % Stock exchange average price of shares (in HUF) 2,785 2, % Market capitalization of 4iG Plc. (in billion HUF) % Per share EBITDA** % Net earnings per share (EPS)** (60) (61) n.a. Diluted EPS index** (59) (61) n.a. Shareholders' Equity** 1,578 1,852 (14.79)% * at the end of the period ** in HUF *** per average headcount 4/13

5 2. IFRS consolidated, unaudited quarterly financial statements 4iG Plc. 2.1 Consolidated comprehensive income statement data in thousand HUF unless otherwise indicated 31 March March 2016 Net sales revenues 3,710,141 2,722,559 Other operating income 38, ,323 Total income 3,748,416 2,827,882 Costs of goods and services sold 2,642,004 1,811,582 Operating expenses 292, ,666 Personnel expenses 764, ,949 Other expenses 1,959 1,639 Operating costs 3,700,340 2,780,836 Earnings Before Interest, Taxes, Depreciation and 48,076 47,046 Amortization (EBITDA) Depreciation and impairment 122,604 85,558 Earnings before Interest and Taxes (EBIT) (74,528) (38,512) Financial income 35,039 19,128 Financial expenses 37,829 43,574 Profit before taxes (PBT) (77,318) (62,958) Income taxes 32,880 51,226 Profit / Loss after Tax (110,198) (114,184) Other comprehensive income - - Total comprehensive income (110,198) (114,184) Earnings per share (HUF) Base (60) (61) Diluted (59) (61) From profit after tax: Parent company s share (110,198) (114,184) External shareholders share 0 0 From the total comprehensive income: Parent company s share (110,198) (114,184) External shareholders share 0 0 5/13

6 2.2 Consolidated balance sheet data in thousand HUF unless otherwise indicated 31 March March 2016 ASSETS Over-one-year assets Tangible assets 233, ,071 Intangible Assets 1,128, ,954 Deferred Tax Assets 49,585 14,597 Goodwill 859, ,146 Other investments 119, ,193 Over-one-year assets total 2,391,500 2,576,961 Current assets Cash and cash equivalents 402, ,981 Accounts receivable from buyers 2,487,530 2,221,250 Other receivables, accrued income/prepaid expenses 271, ,391 Actual income tax assets 81,348 72,029 Securities 492, ,882 Inventory 1,195, ,756 Total current assets 4,931,734 4,010,289 Total assets 7,323,234 6,587,250 LIABILITIES Shareholders' equity Subscribed capital 1,880,000 1,880,000 Repurchased own share (45,950) Capital reserves 1,026,251 1,074,500 Retained earnings 106, ,789 Total Shareholders' Equity of the Parent Company 2,966,870 3,482,289 Non-controlling interest - - Total Shareholders' Equity: 2,966,870 3,482,289 Long-term Liabilities Provisions 94,203 Deferred tax liabilities 0 Finance lease liabilities 20,505 46,667 Total Long-term Liabilities 20, ,870 Short-term Liabilities Accounts payable to suppliers 2,173,915 1,381,766 Short-term credits and loans 1,443, ,001 Other short-term liabilities, accrued expenses/deferred 699, ,862 income Dividend liability 0 0 Finance lease liabilities 18,817 15,462 Total Short-term Liabilities 4,335,859 2,964,091 Liabilities and Total Shareholders' Equity Total 7,323,234 6,587,250 6/13

7 2.3 Consolidated statement on the changes in equity data in thousand HUF unless otherwise indicated Subscribed capital Own shares Capital reserves Retained earnings Total Shareholders' Equity of the Parent Company Non-controlling interest Total Shareholders' Equity Balance as at 31 December ,880, ,074, ,973 3,596,473-3,596,473 Own shares (45,950) (48,249) (94,199) (94,199) Modifications for the previous years (131,274) (131,274) (131,274) Dividend (183,405) (183,405) (183,405) Total comprehensive income (110,527) (110,527) (110,527) Balance as at 31 December ,880,000 (45,950) 1,026, ,767 3,077,068-3,077,068 Own shares - Dividend Total comprehensive income (110,198) (110,198) - (110,198) Rounding difference Balance as at 31 March ,880,000 (45,950) 1,026, ,569 2,966,870-2,966,870 7

8 2.4 Consolidated Cash Flow Statement data in thousand HUF unless otherwise indicated Cash flow from operating activities 4iG Plc. 31 March March 2016 Profit/Loss after tax (110,198) (114,184) Adjustments: Depreciation and impairment in the reporting year 122,604 85,558 Impairment booked for buyers - - Provisions (94,203) (25,152) Deferred tax (34,988) 25,182 Changes of the working capital Change of accounts receivable from buyers and others (266,280) 1,212,159 Change in inventory (410,203) (363,236) Change accounts payable to suppliers 792,149 (969,543) Change in finance lease (26,162) 12,373 Change in other liabilities 60,064 (127,689) Net cash flow from operating activities 32,783 (264,532) Cash-Flow from investments Tangible assets sold (purchased) 233,215 (216,254) Purchase of intangible assets (520,947) 137,099 Securities purchased (142,718) 340 Additional capital contribution to project companies Acquisition of interests 2,550 Net cash flow from investing activities (427,900) (78,815) Cash flow from financing activities Borrowing of long-term loans - - Banker s loans raised (repaid) 624,503 (119,998) Financial leasing raised (repaid) (18,840) (18) Issued/repurchased own shares - - Dividend payment - - Net cash flow from financing activities 605,663 (120,016) Net change of cash and cash equivalents 210,546 (463,363) Year start balance of cash and cash equivalents 191, ,344 Periodical balance of cash and cash equivalents 402, ,981 8/13

9 3. General Information on the Issuer 4iG Plc. Name of the company: 4iG Public Limited Company (previously FreeSoft Plc.; previously Fríz 68 Szolgáltató és Kereskedelmi Inc.) Legal form of the company: Public Limited Company Registered office: H-1037 Budapest, Montevideo Street 8. Branches: H-8000 Székesfehérvár, Seregélyesi Road 96. H-8230 Balatonfüred, Fürdő Street 17/B. Company registration number: Tax number: Statistical code: Share capital: HUF 1,880,000,000 Date founded: 8 January 1995 Date of transformation: 2 April 2004 Date of admission to the stock exchange: 22 September Information on shares Type of shares: registered dematerialized ordinary shares Nominal value of shares: Number of shares: HUF 1,000/unit 1,880,000 unit ISIN code of the shares: HU Share class: "A Serial number of shares: Repurchased own shares: 45,950 pcs 5. Ownership structure The Company s ownership structure looked as follows: 31 March March 2016 István Fehér 15.24% 12.32% Dr. Gábor Móricz 13.01% 11.59% KAPTÁR Investment Plc. 6.38% 9.51% Vilmos Vaspál n.a. 6.09% Béla Zsolt Tóth* 5.71% n.a. Edit Vincze n.a. 5.77% HS Board Ltd. 5.67% 5.67% Tief Terra Építőipari és Szolgáltató Ltd. n.a. 6.21% Dániel Móricz n.a. 5.27% Free float* 55.78% 37.57% Total % % 9/13

10 *Béla Zsolt Tóth has a total share package of 107,266 pieces, of which 35,525 pieces (1.89%) are owned indirectly through HS Board Ltd. which must be excluded with respect to free float (it has been added). On 31 March 2017, 4iG Plc. had 45,950 pieces of treasury share. 6. Officers Senior officers of 4iG Plc. during the 1 Jan March 2017 period were as follows: 6.1 Company Management Board of Directors: Supervisory Board Audit Committee: Dr. Gábor Felső - President of the Board of Directors Judit Hegedűs - Member of the Board of Directors Béla Zsolt Tóth - Member of the Board of Directors István Fehér - Member of the Board of Directors Dr. Zsolt Kovács - Member of the Board of Directors Attila Zoltán Merényi - Member of the Board of Directors Dr. Csaba Kerekes - President of the SB Ágnes Rátkainé Fehér - Member of the SB Dr. Júlia Kishegyi - Member of the SB Dr. Ildikó Andriskáné Ernöházai - Member of the SB Dr. Judit Bakó - Member Dr. Csaba Kerekes - President of the AC Dr. Júlia Kishegyi - Member of the SB Dr. Judit Bakó - Member 6.2 Remuneration of officers Remuneration of the Members of the Board of Directors, Supervisory Board and Audit Committee in this period has been determined as follows. The General Meeting decided by Resolution no. 37./2014 (10.27) that each Member of the Board of Directors shall receive a HUF 175,000/month honorarium, while the President of the Board is entitled to receive a honorarium of HUF 200,000/month. Members of the Board of Directors employed by 4iG Plc. or any of its subsidiaries (Dr. Gábor Felső, Judit Hegedűs, István Fehér, Béla Tóth, Attila Zoltán Merényi) renounced their honorariums. The General Meeting decided by its Resolution no. 42./2014 (10.27) that each Member of the Supervisory Board shall receive a honorarium of HUF 155,000/month, while the President of the Supervisory Board is entitled to HUF 175,000/month. Members of the Audit Committee shall not receive remuneration for their work in the Audit Committee. The Company has issued its Remuneration Policy Statement for 2016 on 6 April /13

11 6.3 4iG Share Ownership of Senior Executives Name Senior officer Number of shares as at 31 March 2017 Ownership rate (%) Direct Indirect Direct and Direct and indirect Function ownership ownership indirect István Fehér Member of the Board of Directors 288, , % Béla Zsolt Tóth Member of the Board of Directors 69,244 38, , % Tamás Kornél Koppány Deputy CEO, Economy ,522 36, % Dr. Csaba Kerekes Chairperson of the SB and the AC % 7. Authorized Signatories of the Report According to the resolutions of the Extraordinary General Meeting of the Company held on 21 January 2013, the Report may be signed by Dr. Gábor Felső, President of the Board of Directors independently, or by any two Members of the Board of Directors together. 8. Subsidiaries Name of subsidiary Registered office: Ownership rate HUMANsoft Ltd. H-1037 Budapest, Montevideo street % % Axis Rendszerház Ltd. H-1037 Budapest, Montevideo Street % % BankSoft Ltd. H-1037 Budapest, Montevideo Street % % Subsidiary of HUMANsoft Ltd.: Mensor 3D Ltd. H-6782 Mórahalom, Röszkei Road % % 11/13

12 9. Major events of the period (in chronological order) 4iG Plc. 9.1 Conclusion of a share option contract 4iG Plc. (seat: 1037 Budapest, Montevideo Street 8.; registration number: ) hereby notifies the participants of the money and capital market that it has concluded a share option contract on 18 January 2017 in Budapest for the buying of 30,000 pc. (that is thirty pieces) of registered 4IG dematerialised common share with a nominal value of HUF 1, (that is one thousand forints) each, with the ISIN code HU According to the contract, the option holder 4iG Plc. may exercise the buying option until 29 October 2017 at a buying price of HUF 2, per share. 9.2 Changes in shareholding by senior officers Member of the Board of Directors István Fehér purchased 1,861 pieces of ordinary share with a nominal value of HUF 1,000 each in a stock-exchange transaction on 18 January 2017 with the mediation of MKB Bank Plc. at an average price of HUF 2,783/pc. As a result of the sale and purchase transaction, Mr. István Fehér s shares in the Company have increased from 15.24% (286,496 pieces of common share) to 15.34% (288,357 pieces of common share), the voting threshold value has not been exceeded. 9.3 High-value contract of a subsidiary On 27 February 2017, 4iG Plc s fully owned subsidiary, HUMANsoft Ltd. concluded a contract with the Ministry of Interior to implement the EU-subsidised priority project titled Development and Implementation of a Local Public Service Information System (IKIR), as a result of an open public procurement procedure. With the development of the IKIR system, the data provided to the sectoral systems become available on a platform in an integrated form, in order to provide decision support related to local public services (complex information base, data warehouse, evaluation and analysis methodologies) for municipal users. Thus, the further development of the established, taskbased financing system of local governments will be carried out, and the methodology to continuously optimize task financing will be developed. Value of the contract: HUF 2 billion 467 million + VAT. 9.4 High-value contracts of a subsidiary 4iG Plc s fully owned subsidiary, HUMANsoft Ltd. concluded a contract with the General Directorate of Water Management (OVF) to implement the EU-subsidised priority project titled Agricultural Water Use Information and Control Framework (VIZEK), as a result of the first part of an open public procurement procedure. The VIZEK project supports water law authorization procedures related to irrigation, as well as water management, maintenance, administrative, taxation and research statistical tasks related to agricultural irrigation. With the introduction of the system, the burdens of data providers can be reduced, the speed of data flow can be enhanced and accelerated, and the institutional network, data providers, agricultural producers, professional organisations and citizens can be provided with additional and targeted information. The system will help the General Directorate of 12/13

13 Water Management to obtain more information on irrigated areas and water abstraction points. Value of the contract: HUF 958,234,100 + VAT. HUMANsoft Ltd. concluded a contract with the Research Institute of Agricultural Economics (AKI) to implement the EU-subsidised priority project titled Agricultural Water Use Information and Control Framework (VIZEK), as a result of the second part of the open public procurement procedure. The VIZEK project supports water law authorization procedures related to irrigation, as well as water management, maintenance, administrative, taxation and research statistical tasks related to agricultural irrigation. The irrigation efficiency calculation method will be developed and the Irrigation Efficiency Basic Database (ÖGA) system necessary for that will be established, which supports the irrigation efficiency modelling and analytical activities and contributes to the implementation of the VIZEK project by creating the analytical data markets and the analytical platform. Value of the contract: HUF 272,138,800 + VAT. 10. Disclaimer The Issuer declares that the Interim Management Report gives a true and fair view of the development and performance of the Company, the data and statements provided in this report are accurate, and do not conceal any facts that are relevant in terms of the evaluation of the Issuer. Pursuant to Section 57 (1) of the Act on the Capital Market, the Issuer shall be liable for any damage caused by its failure to disclose the statutory information or by any misleading content of the same. I take full responsibility for the numerical figures and the true content of analyses and conclusions included in present Q Interim Management Report. Budapest, 17 May 2017 [illegible signature] Dr. Gábor Felső chairperson of the Board of Directors 13/13

4iG PLC. MANAGEMENT REPORT ON THE COMPANY S H ACTIVITIES

4iG PLC. MANAGEMENT REPORT ON THE COMPANY S H ACTIVITIES 4iG PLC. ON THE COMPANY S H1 2017 ACTIVITIES 4iG Public Limited Company H-1037 Budapest, Montevideo Street 8. 4iG Plc. Telephone: +36-1-371-2910 Fax: +36-1-371-2911 http://www.4ig.hu 1/24 Contents 1. Executive