INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD JANUARY 1ST JUNE 30TH

2 CONTENTS I. General information... 4 II. Key financial data translated into the euro... 7 III. Statement of compliance... 9 IV. Authorisation of the financial statements... 9 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SUPPLEMENTARY INFORMATION TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.. 19 I. Compliance with International Financial Reporting Standards II. Going concern assumption and comparability of accounts III. Basis of consolidation IV. Applied accounting policies, including methods of measurement of assets, equity and liabilities, income and expenses V. Material judgements and estimates VI. Changes in accounting policies NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. REVENUE Note 2. OPERATING SEGMENTS Note 3. OTHER INCOME AND EXPENSES Note 4. FINANCE INCOME AND COSTS Note 5. EARNINGS PER SHARE Note 6. PROPERTY, PLANT AND EQUIPMENT Note 7. INTANGIBLE ASSETS Note 8. IMPAIRMENT LOSSES ON ASSETS Note 9. INVENTORIES Note 10. DIVIDENDS PROPOSED OR APPROVED BY THE DATE OF AUTHORISATION OF THESE FINANCIAL STATEMENTS Note 11. GOODWILL Note 12. LONG-TERM CONTRACTS Note 13. CAPITAL COMMITMENTS Note 14. LOANS AND OTHER FINANCIAL ASSETS Note 15. DERIVATIVE FINANCIAL INSTRUMENTS Note 16. OTHER SHORT-TERM RECEIVABLES Note 17. OTHER CURRENT LIABILITIES Note 18. MATERIAL ERROR CORRECTIONS Note 19. OFF-BALANCE-SHEET ITEMS Note 20. SETTLEMENTS RELATED TO COURT CASES Note 21. MATERIAL INFORMATION ON RELATED PARTIES Note 22. OTHER PROVISIONS Note 23. FAIR VALUE HIERARCHY Note 24. SEASONALITY OR CYCLICALITY OF BUSINESS IN THE REPORTING PERIOD Note 25. EVENTS NON-TYPICAL DUE TO THEIR NATURE, SCALE OR FREQUENCY Note 26. MATERIAL EVENTS WHICH OCCURRED AFTER THE END OF THE REPORTING PERIOD AND ARE NOT DISCLOSED IN THESE FINANCIAL STATEMENTS Note 27. DISCONTINUED OPERATIONS INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS INTERIM CONDENSED SEPARATE STATEMENT OF COMPREHENSIVE INCOME INTERIM CONDENSED SEPARATE STATEMENT OF FINANCIAL POSITION INTERIM CONDENSED SEPARATE STATEMENT OF CASH FLOWS

3 INTERIM CONDENSED SEPARATE STATEMENT OF CHANGES IN EQUITY NOTES TO THE INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS Note 1. OTHER INCOME AND EXPENSES Note 2. FINANCE INCOME AND COSTS Note 3. PROPERTY, PLANT AND EQUIPMENT Note 4. INVESTMENTS IN SUBSIDIARIES, JOINTLY CONTROLLED ENTITIES AND ASSOCIATES Note 5. IMPAIRMENT LOSSES ON ASSETS Note 6. DIVIDENDS PROPOSED OR APPROVED BY THE DATE OF AUTHORISATION OF THESE FINANCIAL STATEMENTS Note 7. CAPITAL COMMITMENTS Note 8. RELATED PARTY TRANSACTIONS Note 9. PRESENTATION ADJUSTMENTS MADE Note 10. SEASONALITY OR CYCLICALITY OF BUSINESS IN THE REPORTING PERIOD Note 11. EVENTS NON-TYPICAL DUE TO THEIR NATURE, SCALE OR FREQUENCY Note 12. MATERIAL EVENTS WHICH OCCURRED AFTER THE END OF THE REPORTING PERIOD AND ARE NOT DISCLOSED IN THESE FINANCIAL STATEMENTS Note 13. ISSUE, REDEMPTION AND REPAYMENT OF DEBT AND EQUITY SECURITIES Note 14. REMUNERATION OF THE SUPERVISORY BOARD AND MANAGEMENT BOARD

4 I. General information 1. Parent The Parent of the SECO/WARWICK Group (the Group or the SECO/WARWICK Group ) is SECO/WARWICK Spółka Akcyjna of Świebodzin (the Company ). The Company was incorporated on January 2nd 2007 and registered by the District Court for Zielona Góra, 8th Commercial Division of the National Court Register, in the Register of Businesses of the National Court Register under No. KRS Name: Legal form: SECO/WARWICK S.A. Joint-stock company (spółka akcyjna) Registered offices: ul. Sobieskiego 8, Świebodzin, Poland Principal business according to the Polish Classification of Business Activities (PKD): 28,21,Z Manufacture of ovens, furnaces and furnace burners Manufacture of fabricated metal products, except machinery and equipment Repair, maintenance, and assembly of machinery and equipment 46 Wholesale trade, except motor vehicles and motorcycles 49 Land transport and transport via pipelines 52 Warehousing and support activities for transportation 62 Computer programming, consultancy and related activities 71 Architectural and engineering activities; technical testing and analysis 72 Scientific research and development 64,20,Z Activities of financial holding companies National Court Register No. KRS Industry Identification Number (REGON) Duration of the Group SECO/WARWICK S.A. and other entities of the Group were incorporated to operate for an unlimited period of time, except SECO/WARWICK Retech Thermal Equipment Manufacturing Tianjin Co. Ltd. established on May 5th 2010 for a period of 27 years, and SECO/WARWICK France established on April 8th 2015 for a period of 15 years. 3. Presented periods These interim condensed consolidated financial statements have been prepared for the period January 1st June 30th Comparative data is presented: 4

5 as at December 31st 2017 in the case of the consolidated statement of financial position, for the period from January 1st to June 30th 2017 in the case of the interim consolidated statement of comprehensive income and the interim consolidated statement of cash flows, for the periods from January 1st to June 30th 2017 and from January 1st to December 31st 2017 in the case of the interim consolidated statement of changes in equity and consolidated statement of changes in equity, respectively. The interim profit/loss may not fully reflect the realisable profit/loss for the full financial year. 4. Composition of SECO/WARWICK S.A. s governing bodies As at the date of issue of these financial statements, June 30th 2018 and December 31st 2017, the SECO/WARWICK S.A. Management Board was composed of: Paweł Wyrzykowski President of the Management Board Sławomir Woźniak Vice President of the Management Board Bartosz Klinowski Member of the Management Board As at the date of issue of these financial statements and June 30th 2018, the SECO/WARWICK S.A. Supervisory Board was composed of: Andrzej Zawistowski Chairman of the Supervisory Board Henryk Pilarski Deputy Chairman of the Supervisory Board Jeffrey Boswell Member of the Supervisory Board Marcin Murawski Member of the Supervisory Board Jacek Tucharz Member of the Supervisory Board As at December 31st 2017, the SECO/WARWICK S.A. Supervisory Board was composed of: Andrzej Zawistowski Chairman of the Supervisory Board Henryk Pilarski Deputy Chairman of the Supervisory Board Jeffrey Boswell Member of the Supervisory Board James A. Goltz Member of the Supervisory Board Marcin Murawski Member of the Supervisory Board Paweł Tamborski Member of the Supervisory Board. Changes in the composition of the Management Board: In the period from January 1st 2018 to the date of issue of these financial statements, there were no changes in the composition of the Management Board. Changes in the composition of the Supervisory Board: Mr Paweł Tamborski tendered his resignation from the Supervisory Board effective February 16th On April 11th 2018, Mr James A. Goltz was removed from the Supervisory Board by Resolution No. 10 of the Extraordinary General Meeting of SECO/WARWICK S.A., while Mr Jacek Tucharz was appointed to the Supervisory Board by Resolution No. 18 of the Extraordinary General Meeting of SECO/WARWICK S.A. 5. Audit firm Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością spółka komandytowa Rondo ONZ Warsaw, Poland 6. Significant holdings of shares Shareholders holding over 5% of the total voting rights as at June 30th 2018 are listed in the table below. 5

6 Shareholder Number of shares Ownership interest (%) Number of voting rights % of total voting rights SW Holding 3,387, % 3,387, % Spruce Holding Limited Liability Company (USA) 1,123, % 1,123, % Aviva Otwarty Fundusz Emerytalny Aviva BZ WBK 1,046, % 1,046, % Bleauhard Holdings LLC 637, % 637, % Nationale-Nederlanden Otwarty Fundusz Emerytalny 600, % 600, % Metlife OFE 577, % 577, % The data is based on notifications received from the shareholders. SECO/WARWICK S.A. holds 598,500 treasury shares, representing 5.81% of the share capital. The Company does not exercise voting rights in respect of its treasury shares. 7. Subsidiaries SECO/WARWICK S.A. is the parent of the following subsidiaries: SECO/WARWICK Corporation, SECO/WARWICK Rus, Retech Systems LLC, SECO/WARWICK Retech Thermal Equipment Manufacturing Tianjin Co. Ltd., SECO/WARWICK GmbH, SECO/WARWICK Germany GmbH, SECO/WARWICK Allied Pvt. Ltd. Mumbai (India), ALLIED FURNACES PVT. LTD., ACE THERMAL TECHNOLOGIES PRIVATE LIMITED, SECO/WARWICK France, SECO/WARWICK Services Sp. z o.o., SECO/WARWICK of Delaware, Inc., Retech Tianjin Holdings LLC, SECO WARWICK USA HOLDING LLC, SECO VACUUM TECHNOLOGIES LLC. SECO/WARWICK Systems and Services India PVT. Ltd. Changes in the composition of the Group: In H1 2018, no other changes took place in the organisational structure of the Group s business, including changes resulting from merger, acquisition or loss of control of subsidiaries and long-term investments, demerger, restructuring or discontinued operations. 6

7 8. Associates OOO SCT (Solnechnogorsk) Russia, in which SECO/WARWICK S.A. holds a 50% interest, conferring the right to 50% of the total voting rights in the company. 9. Organisational chart of the Group and the associate II. Key financial data translated into the euro The table below presents average EUR/PLN exchange rates quoted by the National Bank of Poland for the periods covered by these financial statements: Reporting period Jun Dec Jun Average exchange rate for the period* Exchange rate effective for the last day of the period *) Average of the exchange rates effective for the last day of each month in the period. Items of assets, equity and liabilities in the interim condensed consolidated statement of financial position have been translated using the EUR/PLN exchange rates quoted by the National Bank of Poland for the last day of the period. Items of the interim condensed consolidated statement of comprehensive income and statement of cash flows have been translated using the exchange rates calculated as the arithmetic means of the EUR/PLN mid market rates quoted by the National Bank of Poland as effective for the last day of each month in the reporting period. The table below presents key items of the interim condensed consolidated statement of financial position, statement of comprehensive income and statement of cash flows disclosed in the interim condensed consolidated financial statements and the comparative data, translated into the euro: 7

8 H1 YTD from Jan 1 to Jun 30 Consolidated financial highlights (PLN 000) (EUR 000) Revenue 268, ,328 63,220 57,760 Cost of sales -211, ,453-49,935-50,961 Operating profit/(loss) 14,966-12,902 3,530-3,038 Profit/(loss) before tax 13,259-7,467 3,128-1,758 Net profit/(loss) attributable to owners of the parent 10,255-12,992 2,419-3,059 Net cash flows from operating activities -14,113-21,848-3,329-5,144 Net cash flows from investing activities -10,794 6,160-2,546 1,450 Net cash flows from financing activities 2,799 11, ,726 Jun Dec 31 Dec 31 Jun Total assets 506, , , ,041 Total liabilities 311, ,653 71,379 71,844 Including current liabilities 277, ,875 63,691 63,505 Equity 161, ,190 37,059 36,249 Share capital 3,616 3, The table below presents the key items of the interim condensed separate statement of financial position, statement of comprehensive income and statement of cash flows presented in these financial statements, together with the relevant comparative data, translated into the euro: H1 YTD from Jan 1 to Jun 30 Financial highlights (PLN 000) (EUR 000) Revenue 141, ,089 33,266 30,392 Cost of sales -110, ,494-26,140-25,779 Operating profit/(loss) 14,184 3,614 3, Profit/(loss) before tax 11,834 10,845 2,791 2,553 Net profit/(loss) 9,186 8,041 2,167 1,893 Net cash flows from operating activities -1,358-7, ,710 Net cash flows from investing activities -9,453-15,059-2,230-3,545 Net cash flows from financing activities -4,233 21, ,029 Jun Dec Jun Dec Total assets 347, ,257 79,687 84,696 Total liabilities 174, ,628 39,939 44,505 8

9 Including current liabilities 150, ,082 34,451 38,620 Equity 173, ,629 39,748 40,190 Share capital 3,616 3, III. Statement of compliance Pursuant to the requirements laid down in the Regulation of the Minister of Finance on current and periodic information to be published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state, dated March 29th 2018 (the Regulation ), the Management Board of the Parent represents that to the best of its knowledge these interim condensed consolidated financial statements and the relevant comparative data have been prepared in compliance with the accounting standards applicable to the Group and give an accurate, fair and clear view of the Group s assets, financial condition and financial results, and that the Directors Report for H presents a true picture of the development, achievements and standing of the Group, including a description of the main threats and risks. These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as endorsed by the European Union, and the Regulation. The Management Board represents that the auditing firm which reviewed these interim condensed consolidated financial statements and the interim condensed separate financial statements was appointed in compliance with the applicable laws, and that both the auditing firm and the qualified auditors who performed the review met the conditions required to issue an impartial and independent auditor s review report, in accordance with the applicable laws and professional standards. Pursuant to the corporate governance standards adopted by the Management Board, the auditor was appointed by the Supervisory Board under Resolution No. 14/2018 of April 26th 2018 on appointment of the auditor. The Supervisory Board appointed the auditor with due regard for the impartiality and objectivity of the selection process as well as of the performance of the auditor s tasks. IV. Authorisation of the financial statements The Parent s Management Board authorised these interim condensed consolidated financial statements for issue on September 11th Date: September 11th 2018 Paweł Wyrzykowski Sławomir Woźniak Bartosz Klinowski President of the Management Board Vice President of the Management Board Member of the Management Board 9

10 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD JANUARY 1ST JUNE 30TH

11 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (PLN 000) Note Jan 1 Jun Jan 1 Jun (unaudited) (unaudited, restated) Revenue from sale of finished goods and services 261, ,159 Revenue from sale of merchandise and materials 6,723 4,169 Revenue 1 268, ,328 Cost of finished goods sold and services rendered -205, ,115 Cost of merchandise and materials sold -6,224-3,338 Cost of sales -211, ,453 Gross profit/(loss) 56,320 28,875 Other income 3 3,039 4,018 Distribution costs -18,210-20,066 Administrative expenses -25,101-24,622 Impairment of receivables and contract assets Other expenses Operating profit/(loss) 14,966-12,902 Finance income 4 2,655 7,820 Finance costs 4-4,400-2,416 Share of net profit/(loss) of associates Profit/(loss) before tax 13,259-7,467 Income tax -2,950-3,114 Net profit/(loss) from continuing operations 10,310-10,580 Profit/(loss) from discontinued operations - -2,367 Net profit/(loss) 10,310-12,947 Net profit/(loss) attributable to Owners of the parent 10,255-12,992 Non-controlling interests OTHER COMPREHENSIVE INCOME: Items that will not be reclassified to profit or loss: Actuarial gains/(losses) on a defined benefit pension plan Income tax on other comprehensive income Items that may be reclassified to profit or loss: Valuation of cash flow hedging derivatives 15-5,107 4,556 Exchange differences on translating foreign operations 3,418-8,859 Income tax on other comprehensive income

12 Total other comprehensive income, net ,309 Total comprehensive income 10,077-18,256 Total comprehensive income attributable to Owners of the parent 10,082-18,338 Non-controlling interests EARNINGS PER SHARE: 5 - basic earnings/(loss) per share attributable to owners of the parent - diluted earnings/(loss) per share attributable to owners of the parent - basic earnings/(loss) per share from continuing operations, attributable to owners of the parent - diluted earnings/(loss) per share from continuing operations, attributable to owners of the parent Date: September 11th 2018 Piotr Walasek Paweł Wyrzykowski Sławomir Woźniak Bartosz Klinowski Chief Financial Officer President of the Management Board Vice President of the Management Board Member of the Management Board 12

13 INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (PLN 000) Note Jun Dec (unaudited) (audited) Non-current assets Property, plant and equipment 6 80,029 78,184 Investment property Goodwill 11 38,686 36,019 Intangible assets 7 41,245 36,755 Long-term receivables 3,866 4,532 Other financial assets ,000 Deferred tax assets , ,040 Current assets Inventories 9 59,209 41,357 Trade receivables 65,969 69,071 Income tax assets Other short-term receivables 16 21,424 17,008 Cash and cash equivalents 30,526 52,077 Other financial assets ,333 5,328 Other non-financial assets 2,341 3,949 Contract settlement , , , ,803 Assets held for sale 33,835 33,154 TOTAL ASSETS 506, ,997 13

14 INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (PLN 000) Note Jun Dec (unaudited) (audited) Equity Share capital 3,616 3,616 Statutory reserve funds 193, ,142 Other components of equity 11,383 10,088 Hedging reserve -2,031 2,106 Retained earnings / accumulated losses -44,716-40,705 Equity attributable to owners of the parent 161, ,248 Non-controlling interests , ,190 Non-current liabilities Borrowings 4,855 8,055 Other financial liabilities 15 4,169 3,296 Deferred tax liabilities 9,467 7,814 Provision for retirement and similar benefits 2,241 2,820 Deferred income 12,801 12,793 33,532 34,778 Current liabilities Borrowings 79,653 70,184 Other financial liabilities 15 4,159 1,560 Trade payables 51,998 59,981 Income tax payable Taxes, customs duties and social security payable 4,809 6,048 Other current liabilities 17 21,845 9,879 Provision for retirement and similar benefits 9,658 10,330 Other provisions 22 21,164 5,420 Deferred income 1,054 1,015 Contract settlement 12 83, , , ,875 Liabilities directly related to discontinued operations 33,835 33,154 TOTAL EQUITY AND LIABILITIES 506, ,997 Date: September 11th 2018 Piotr Walasek Paweł Wyrzykowski Sławomir Woźniak Bartosz Klinowski Chief Financial Officer President of the Management Board Vice President of the Management Board Member of the Management Board 14

15 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (PLN 000) Jan 1 Jun Jan 1 Jun (unaudited) (unaudited) OPERATING ACTIVITIES Profit/(loss) before tax from continuing operations 13,259-9,833 Profit/(loss) before tax from discontinued operations - - Profit/(loss) before tax 13,259-9,833 Total adjustments: -27,104-17,986 Share of net profit of associates Depreciation and amortisation 5,048 5,519 Foreign exchange gains/(losses) 604-3,935 Interest and profit distributions (dividends) 1,214 1,906 Gain/(loss) on investing activities ,420 Balance-sheet valuation of derivative instruments 4,511-7,510 Change in provisions 7,166-3,376 Change in inventories -19,808-3,657 Change in receivables 3, Change in current liabilities (other than financial liabilities) ,145 Change in accruals, deferrals and contracts -30,649-19,425 Other adjustments 1, Income tax (paid)/refunded ,971 Net cash from operating activities -14,113-21,848 INVESTING ACTIVITIES Cash provided by investing activities 1,257 15,494 Proceeds from disposal of intangible assets and property, plant and equipment 1,182 8,660 Other inflows from financial assets 74 6,834 Cash used in investing activities 12,050 9,334 Investments in intangible assets, property, plant and equipment, and investment property 12,048 9,274 Other cash used in investing activities 2 59 Net cash from investing activities -10,794 6,160 FINANCING ACTIVITIES Cash provided by investing activities 8,341 29,945 Borrowings 8,341 29,903 Other inflows 0 42 Cash used in investing activities 5,542 18,369 Repayment of borrowings 3,340 15,987 Other cash used in financing activities 3 - Other financial liabilities 0 11 Payment of finance lease liabilities 1, Interest paid 1,180 1,903 15

16 Net cash from financing activities 2,799 11,576 Total net cash -22,107-4,112 Net change in cash, including: -21,626 13,868 - effect of exchange rate fluctuations on cash held Cash at beginning of period 52,369 41,334 Cash at end of period 30,526 37,222 Date: September 11th 2018 Piotr Walasek Paweł Wyrzykowski Sławomir Woźniak Bartosz Klinowski Chief Financial Officer President of the Management Board Vice President of the Management Board Member of the Management Board 16

17 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PLN 000) Share capital Statutory reserve funds Hedging reserve Other components of equity Exchange differences Retained earnings / accumulated losses Equity attributable to owners of the parent Equity attributable to non-controlling interests Equity as at January 1st , ,143 2,106 10,088 17,439-58, , ,190 Effect of IFRS Equity as at January 1st 2018 following the application of IFRS 15 3, ,143 2,106 10,088 17,439-59, , ,266 Profit/(loss) for the period ,255 10, ,310 Other comprehensive income ,136-3, Total comprehensive income for the year ,136-3,478 10,741 10, ,077 Management stock options , ,295-1,295 Distribution of profit (dividend) Transfer of retained earnings to statutory reserve funds - 17, , Equity as at June 30th 2018 (unaudited) 3, ,449-2,031 11,384 20,917-65, , ,639 Total equity Equity as at January 1st , ,429-2,313 9,284 27,029-19, , ,731 Profit/(loss) for the period ,992-12, ,947 Other comprehensive income - - 3, , , ,309 Total comprehensive income for the year - - 3, ,896-13,132-18, ,256 Management stock options Distribution of profit (dividend) ,947-4, ,947 Coverage of loss brought forward with statutory reserve funds - -6, , Accounting for increase of control at SWR Equity as at June 30th 2017 (unaudited) 3, ,143 1,377 9,686 18,134-31, , ,931 17

18 Share capital Statutory reserve funds Hedging reserve Other components of equity Exchange differences Retained earnings / accumulated losses Equity attributable to owners of the parent Equity attributable to non-controlling interests Equity as at January 1st , ,429-2,313 9,284 27,029-19, , ,731 Profit/(loss) for the year ,860-41, ,843 Other comprehensive income - - 4, ,590 2,581-2, ,555 Total comprehensive income for the year - - 4, ,590-39,279-44, ,399 Dividend ,947-4, ,947 Management stock options Coverage of loss brought forward - -6, , Accounting for increase of control at SECO/WARWICK Retech Equity as at December 31st , ,143 2,106 10,088 17,439-58, , ,190 Total equity Date: September 11th 2018 Piotr Walasek Paweł Wyrzykowski Sławomir Woźniak Bartosz Klinowski Chief Financial Officer President of the Management Board Vice President of the Management Board Member of the Management Board 18

19 SUPPLEMENTARY INFORMATION TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30TH

20 I. Compliance with International Financial Reporting Standards These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as endorsed by the European Union, and the Regulation of the Minister of Finance on current and periodic information to be published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state, dated March 29th 2018 (the Regulation ). These interim condensed consolidated financial statements do not include all the information and disclosures required to be included in full-year financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended December 31st 2017, authorised for issue on April 26th II. Going concern assumption and comparability of accounts These interim condensed consolidated financial statements have been prepared on the assumption that the Group will continue as a going concern for the 12 months after the end of the most recent reporting period, that is June 30th As at the date of authorisation of these financial statements, the Parent s Management Board was aware of no facts or circumstances that would involve a threat to the Group s continuing as a going concern for the 12 months after the end of the reporting period, as a result of intended or forced discontinuation or material limitation of the existing business. By the date of preparation of these interim condensed consolidated financial statements for H1 2018, no events occurred which have not but should have been disclosed in the accounting records for the reporting period. In these financial statements no material events related to prior years have been disclosed. III. Basis of consolidation In the six months ended June 30th 2018, there were no changes in the Group s composition relative to December 31st 2017 or in the basis of consolidation. IV. Applied accounting policies, including methods of measurement of assets, equity and liabilities, income and expenses These interim condensed consolidated financial statements have been prepared based on a historical cost approach, except with respect to financial derivatives, which are measured at fair value. These interim condensed consolidated financial statements are presented in the złoty ( PLN ), and unless specified otherwise, all amounts are given in thousands of PLN. Exchange differences on translating items of the statement of financial position are calculated as differences between the exchange rates applicable to the opening and closing balance. The accounting policies applied in the preparation of these interim condensed consolidated financial statements are consistent with the policies applied in the preparation of the Group s full-year consolidated financial statements for the year ended December 31st 2017, except for the application of new or amended standards and interpretations effective for annual periods beginning on or after January 1st The Group applied for the first time IFRS 15 Revenue from Contracts with Customers ( IFRS 15 ) and IFRS 9 Financial Instruments ( IFRS 9 ). In accordance with IAS 34 Interim Financial Reporting, in Section VI hereof the Group has disclosed the nature and effect of changes in its accounting policies. The Management Board does not expect the implementation of these standards and interpretations to have a material effect on the Group s accounting policies. The Group did not elect to early adopt any of the standards, interpretations or amendments that have been published but are not effective as not yet endorsed by the European Union. 20

21 The Management Board is currently analysing the potential effect of those amendments on the accounting policies applied by the Group. However, the Management Board does not expect the implementation of these standards to have a material effect on the Group. V. Material judgements and estimates Material judgements made by the Management Board in applying the Group s accounting policies and key sources of estimation uncertainty are the same in these interim condensed consolidated financial statements as those presented in Section VIII of the 2017 consolidated financial statements. VI. Changes in accounting policies Save for the below described changes resulting from the introduction of new standards effective for reporting periods beginning on or after January 1st 2018, the same accounting policies as described in the consolidated financial statements prepared as at and for the year ended December 31st 2017 were applied by the Group in the preparation of these interim condensed consolidated financial statements. IFRS 15 Revenue from Contracts with Customers IFRS 15 Revenue from Contracts with Customers was issued on May 28th 2014 and is effective for reporting periods beginning on or after January 1st The standard was endorsed by the European Union on September 22nd The standard applies to almost all contracts with customers and replaces IAS 18 Revenue, IAS 11 Construction Contracts as well as numerous interpretations related to revenue recognition. The main principle of the standard is that revenue is to be recognised when control of a good or product is passed to the customer at a certain point in time. In line with IFRS 15, revenue from sales of finished goods, merchandise, materials and services, net of VAT, discounts and rebates, is recognised when the entity has transferred to the buyer the significant risks and rewards incidental to their ownership. Any goods or services that are sold in bundles that are separately identifiable as part of a contract concluded with a customer should be recognised separately, and any discounts and rebates on the transaction price should be allocated to the specific bundle items. IFRS 15 introduces a new five-step model to determine the method of revenue measurement and recognition, whereby revenue should be recognised in an amount which reflects consideration to which the entity expects to be entitled, when (or as) the Group satisfies a performance obligation and transfers the goods. Depending on the fulfilment of the criteria specified in the standard, revenue may be recognised either on a one-off basis, at the point in time when control of goods or services is transferred to the customer, or over time, reflecting the performance of the obligation. The Group analysed individual categories of revenue and contracts in terms of the effect of applying IFRS 15 on the revenue recognition method, including in particular in terms of the timing of recognition and the recognised amount of revenue; the Group also verified the correctness of presentation of individual revenue categories. Following the application of IFRS 15, retained earnings of PLN -0.9m (net effect) were recognised as a result of separation of costs of potential warranty repairs from contract settlement and their recognition under provisions for warranty repairs and a change in the timing of revenue recognition for some contracts. The Group applied the standard using the modified retrospective method of adoption in which the cumulative effect of first-time adoption of the standard is recognised as an asset while contractual obligations, work in progress, provisions for warranty repairs and liabilities arising from advances received in correspondence with retained earnings as at the first day of application of the standard, i.e. January 1st

22 Dec effect of IFRS 15 Jan ASSETS Non-current assets Property, plant and equipment 78,184 78,184 Investment property Goodwill 36,019 36,019 Intangible assets 36,755 36,755 Investments in associates - 0 Long-term receivables 4,532 4,532 Other financial assets 2,000 2,000 Deferred tax assets , ,183 Current assets Inventories 41,357 10,289 51,647 Trade receivables 69,071 69,071 Income tax assets Other short-term receivables 17,008 17,008 Cash and cash equivalents 52,077 52,077 Other financial assets 5,328 5,328 Other non-financial assets 3,949 3,949 Contract settlement 103,780 6, , ,803 17, ,069 Assets held for sale 33,154 33,154 TOTAL ASSETS 483,997 17, ,407 Dec effect of IFRS 15 Jan EQUITY AND LIABILITIES Equity Share capital 3,616 3,616 Statutory reserve funds 176, ,142 Other components of equity 10,088 10,088 Hedging reserve 2,106 2,106 Retained earnings / accumulated losses -40, ,628 Equity attributable to owners of the parent 151, ,324 Non-controlling interests , ,266 Non-current liabilities Borrowings 8,055 8,055 Other financial liabilities 3,296 3,296 Trade payables

23 Other non-current liabilities 0 0 Deferred tax liabilities 7,814 7,814 Provision for retirement and similar benefits 2,820 2,820 Other provisions - 0 Deferred income 12,793 12,793 Current liabilities 34, ,778 Borrowings 70,184 70,184 Other financial liabilities 1,560 1,560 Trade payables 59,981 59,981 Income tax payable Taxes, customs duties and social security payable 6,048 6,048 Other current liabilities 9,879 17,945 27,824 Provision for retirement and similar benefits 10,330 10,330 Other provisions 5,420 15,779 21,198 Deferred income 1,015 1,015 Contract settlement 100,271-15,390 84,881 Liabilities directly related to discontinued operations 264,875 18, ,209 33,154 33,154 TOTAL EQUITY AND LIABILITIES 483,997 17, ,407 IFRS 9 Financial Instruments IFRS 9 defines three categories of financial assets based on the entity s business model for managing a given asset and the asset s contractual cash flow characteristics: - assets measured at amortised cost after initial recognition if financial assets are held under a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of those financial assets give rise to cash flows that are solely payments of principal and interest; - assets measured at fair value through other comprehensive income after initial recognition if financial assets are held under a business model whose objective is achieved by both holding financial assets in order to collect contractual cash flows and selling the assets, and the contractual terms of those financial assets give rise to cash flows that are solely payments of principal and interest; - assets measured at fair value through profit or loss all other financial assets. IFRS 9 does not require any changes in the classification of the Company s financial liabilities. IFRS 9 replaces the incurred credit losses model with the expected credit losses model. The Group establishes an allowance for expected credit losses in the amount equal to expected credit losses over the lifetime of trade receivables, cash and cash equivalents and contract assets. The difference between the carrying amount of trade receivables measured in accordance with IAS 39 and the new carrying amount measured in accordance with IFRS 9 as at January 1st 2018 was immaterial. IFRS 9 necessitated a consequential amendment to IAS 1 Presentation of Financial Statements, requiring the Company to present impairment of receivables and contract assets as a separate item of the statement of profit or loss. The comparative data in the statement of profit or loss for the six months ended June 30th 2017 has been adjusted accordingly, without an effect on operating profit. Previously, the Company presented such costs as other expenses. 23

24 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30TH

25 Note 1. REVENUE If one of the following criteria specified in IFRS is met: a) the customer simultaneously receives and consumes the benefits provided by the entity s performance as the entity performs; or b) the entity s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced; or c) the entity s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date, revenue from long-term contracts is recognised over time. Otherwise, revenue is recognised when control of a good is passed to the external customer at a certain point in time. The percentage of completion is determined by reference to costs incurred to date in comparison with total contract costs determined in accordance with the Group s best estimate. At the end of each reporting period, the Group estimates the result on each contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is immediately recognised in the statement of profit or loss as a provision for future costs of contract performance. The amount of such loss is determined irrespective of whether or not work has commenced on the contract, the stage of contract completion, or the amount of profits expected to arise on other contracts. Revenue recognised over time is revenue guaranteed under the original contract, adjusted to account for any subsequent amendments (annexes). Changes in contract revenue are recognised when it is certain or at least when it is highly probable that the customer will accept the changes and the amounts of revenue resulting from those changes, and when the value of that revenue can be measured reliably. Revenue as at the end of the reporting period is determined based on the percentage of contract completion, net of any revenue which affected the financial result in previous reporting periods. For contracts denominated in a currency other than the functional currency, the revenue at the end of the reporting period is calculated first of all based on the exchange rate used for partial invoicing, pro rata to the percentage of contract completion. In order to determine the exchange rate applicable to advance payments, the transaction date is the date of initial recognition of the advance payment as an asset or liability. If there are multiple advance payments or receipts, the transaction date is determined for each such payment or receipt. Estimated contract revenue attributable to a given reporting period is recognised as revenue from sale of finished goods for the period, and disclosed under assets in the statement of financial position as receivables under settlement of contracts. Any excess of prepayments received under a contract over the estimated revenue attributable to a given reporting period is recognised under liabilities as prepayments received for deliveries. Up to the amount of the estimated contract revenue, prepayments reduce the receivables under settlement of long-term contracts. Any excess of invoiced amounts over revenue is recognised under liabilities related to settlement of contracts. Any excess of revenue over invoiced amounts is recognised as an asset related to settlement of contracts. Revenue from sale of finished goods in the six months ended June 30th 2018 amounted to PLN 261m (in the six months ended June 30th 2017: PLN 241m), up 8% year on year. Revenue from sale of merchandise and materials in the six months ended June 30th 2018 amounted to PLN 7m (in the six months ended June 30th 2017: PLN 4m), up 61% year on year. Note 2. OPERATING SEGMENTS The operations of the SECO/WARWICK Group are divided into five main business segments: Vacuum Furnaces aluminium heat treatment systems (Aluminium Process + Controlled Atmosphere Brazing), 25

26 Atmosphere Furnaces (Thermal) Melting Furnaces, Aftersales. Vacuum furnaces (Vacuum) Vacuum furnaces have multiple applications in a number of industries, including machine tool, aviation, power, electrical engineering, medical equipment, automotive and specialised industries. Vacuum furnaces may be used in a wide variety of processes, such as heat treatment of steel and alloys, brazing, sintering, and degassing. Melting furnaces Vacuum melting furnaces are used in the metallurgical industry for consolidation, smelting and refining of specialty metals, including reactive metals (e.g. titanium, zirconium) and heat-resistant metals (e.g. tantalum). Their physical properties require processing in technologically advanced equipment and in high vacuum conditions. A separate group of melting furnaces are melting and holding furnaces used for the manufacture of precision castings (such as components of jet engines, power turbines and medical implants). Melting furnaces may also be used as an element of the globally-unique processes involving disposal of hazardous waste (such as nuclear by-products). Thermal Atmosphere furnaces are widely used in the process of thermal and thermochemical treatment of steel and metals in protective atmospheres for improved hardness. Atmosphere furnaces designed for thermochemical treatment are used for gas carburising, gas nitriding and in other processes. Such furnaces are used chiefly in the automotive and metal industries, including for the manufacturing of roller bearings, as well as in commercial hardening plants and specialty industries. Aluminium heat treatment systems (Aluminium Process) The Aluminium Process solutions offered by the Group are used in the manufacturing of aluminium sheet for the automotive and aviation industries, as well as for the manufacturing of packaging foil for multiple applications. Aluminium Process systems are also used to heat treat aluminium castings. CAB systems are used primarily in the automotive industry for brazing of heat exchangers mounted in passenger cars and heavy goods vehicles (charge air coolers, air conditioning evaporators and condensers, oil coolers, etc.). Outside the automotive industry, CAB processes are used in the manufacture of IC radiators, steam condensers for CHP plants, exhaust gas heat exchangers for power generators, etc. Aftersales The Aftersales Segment offers conversion, upgrades and modification of customer-owned equipment, including equipment manufactured by third parties. This segment also includes sale of spare parts and all aftersale services. The segments financial data includes only segment revenue, expenses, and profit or loss. It is impracticable for the Group to allocate assets to particular segments as its plant and equipment (including buildings and structures) is shared by all segments. 26

27 H Vacuum Furnaces Atmosphere Furnaces (Thermal) Continuing operations Aluminium Process Melting Furnaces Aftersales Total segment revenue 71,428 34,981 38,948 81,275 41, , ,019 Sales to customers accounting for % or more of revenue Total segment expenses -55,928-27,332-28,856-70,566-28, , ,699 Gross profit/(loss) 15,499 7,650 10,092 10,709 12,842 56, ,320 Total Other Total H Vacuum Furnaces Atmosphere Furnaces (Thermal) Continuing operations Aluminium Process Melting Furnaces Aftersales Total segment revenue 63,131 23,660 78,156 42,491 37, , ,328 Sales to customers accounting for , ,467 10% or more of revenue Total segment expenses -50,605-22,852-63,763-51,933-25, ,994-1, ,453 Gross profit/(loss) 12, ,392-9,441 11,912 30,197-1,322 28,875 Total Other Total 27

28 Note 3. OTHER INCOME AND EXPENSES OTHER INCOME Jan 1 Jun Jan 1 Jun Reversal of provisions Gain on disposal of property, plant and equipment Penalties and compensation/damages received 433 2,941 Income from lease of tangible assets and investment property Grant for development work Other Total other income 3,039 4,018 OTHER EXPENSES Jan 1 Jun Jan 1 Jun Loss on disposal of property, plant and equipment 1 53 Court expenses, compensation/damages, penalties 69 6 Cost of lease of tangible assets Donations 7 40 Provision for damages - 2 Liquidation of tangible assets Other Total other expenses Note 4. FINANCE INCOME AND COSTS FINANCE INCOME Jan 1 Jun 30 Jan 1 Jun Interest income Net gain/(loss) on derivative instruments - 7,789 Net foreign exchange gains 2,592 - Other 31 - Total finance income 2,655 7,820 FINANCE COSTS Jan 1 Jun 30 Jan 1 Jun Interest on bank borrowings 1,930 1,378 Net gain/(loss) on derivative instruments 2,334 - Net foreign exchange losses Other Total finance costs 4,400 2,416 28

29 Note 5. EARNINGS PER SHARE Item Jun Jun Net profit from continuing operations attributable to shareholders 10,255-10,625 Profit(loss) from discontinued operations attributable to shareholders 0-2,367 Net profit attributable to owners of the parent 10,255-12,992 Interest on redeemable preference shares convertible into ordinary shares - - Net profit attributable to holders of ordinary shares used to calculate diluted earnings per share 10,255-12,992 Weighted average number of outstanding ordinary shares used to calculate basic earnings per share 10,298,554 10,298,554 Earnings per share Dilutive effect: Number of potential subscription warrants - - Number of potential shares issued at market price - - Adjusted weighted average number of ordinary shares used to calculate diluted earnings per share - - Diluted earnings per share Note 6. PROPERTY, PLANT AND EQUIPMENT As at June 30th 2018, net property, plant and equipment were PLN 80,029 thousand, up PLN 1,845 thousand on December 31st In the six months ended June 30th 2018, gross property, plant and equipment increased by PLN 4,647 thousand, mainly on account of acquisitions (PLN 3,646 thousand) and lease contracts (PLN 805 thousand). Gross property, plant and equipment decreased by PLN 1,632 thousand, mainly as a result of sale (PLN 1,199 thousand) and liquidation (PLN 433 thousand). Depreciation for the six months ended June 30th 2018 was PLN 3,616 thousand. Accumulated depreciation of property, plant and equipment decreased by PLN 937 thousand as a result of sale or liquidation. Exchange differences amounted to PLN 1,222 thousand in the six months ended June 30th Tangible assets under construction rose by PLN 286 thousand compared with December 31st 2017, to PLN 5,983 thousand as at June 30th In the six months ended June 30th 2017, gross property, plant and equipment increased by PLN 5,562 thousand on account of acquisitions. Gross property, plant and equipment decreased by PLN 15,028 thousand, primarily as a result of sale (PLN 11,410 thousand), liquidation (PLN 976 thousand) and reclassification to assets for sale (PLN 2,366 thousand). Depreciation for the six months ended June 30th 2017 was PLN 4,214 thousand. Accumulated depreciation of property, plant and equipment decreased by PLN 4,358 thousand as a result of sale. In the six months ended June 30th 2017, PLN 1,540 thousand was reversed from impairment losses on property, plant and equipment. In the six months ended June 30th 2017, exchange differences were PLN 4,306 thousand. Tangible assets under construction were PLN 5,697 thousand as at December 31st Tangible assets under construction 29

30 Tangible assets under construction as at Jan Expenditure incurred during the period Buildings, premises and civil engineering structures Accounting for the expenditure Machinery and equipment Vehicles Other As at Jun ,697 4,767 1,375 2, ,983 Tangible assets under construction as at Jan Expenditure incurred during the period Buildings, premises and civil engineering structures Accounting for the expenditure Machinery and equipment Vehicles Other As at Dec ,738 8,604 1,328 2, ,312 5,697 Note 7. INTANGIBLE ASSETS As at June 30th 2018, net intangible assets were PLN 41,245 thousand, up PLN 4,490 thousand on December 31st In the six months ended June 30th 2018, gross intangible assets increased by PLN 5,883 thousand on account of acquisitions. Amortisation for the six months ended June 30th 2018 was PLN 1,432 thousand. Accumulated amortisation of intangible assets increased by PLN 14 thousand. In the six months ended June 30th 2018, no impairment losses on intangible assets were recognised. Exchange differences amounted to PLN 53 thousand. In the six months ended June 30th 2017, gross intangible assets increased by PLN 4,223 thousand on account of acquisitions. Amortisation for the six months ended June 30th 2017 was PLN 1,059 thousand. Accumulated amortisation of intangible assets increased by PLN 14 thousand. In the six months ended June 30th 2017, no impairment losses on intangible assets were recognised. Exchange differences amounted to PLN -176 thousand. Note 8. IMPAIRMENT LOSSES ON ASSETS Impairment losses on Jun Dec Trade receivables 4,769 4,502 Goodwill 44,946 44,946 Inventories 2,130 3,326 Tangible assets 854 1,008 IMPAIRMENT LOSSES ON TRADE RECEIVABLES Jun Dec As at beginning of the period 4,502 18,508 Increase Use (-) Assets designated as assets for sale - -13,916 Net exchange differences on translating financial statements into presentation currency As at end of the period 4,769 4,502 30