H+H International A/S : Interim financial report Q1 2017

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Date:

18 May 2017

• Revenue for the first quarter of 2017 increased by 6% in local currencies (organic growth) and increased by 2% in DKK to DKK 376.5 million (2016: DKK 367.9 million).

• EBITDA before special items for the first quarter of 2017 was DKK 36.9 million (2016: DKK 36.6 million).

• EBIT before special items for the first quarter of 2017 was DKK 17.9 million (2016: DKK 15.9 million). EBIT margin before special items for the first quarter of 2017 was 4.8% (2016: 4.3%).

• Net profit for the first quarter of 2017 was DKK 1.7 million (2016: DKK 1.1 million).

• Investments for the first quarter of 2017 was DKK 23.0 million (2016: DKK 10.6 million).

• Free cash flow for the first quarter of 2017 was DKK (94.6) million (2016: (41.3) million).

• Net interest-bearing debt at 31 March 2017 was DKK 483.3 million (31 March 2016: DKK 489.7 million). A new loan agreement with Danske Bank was concluded, running until April 2020.

• H+H reiterates its outlook for 2017: Revenue growth is expected to be 5-7% (measured in local currencies), and EBITDA before special items is expected to be DKK 220-240 million. Special items of approximately DKK 25 million cost are expected to be incurred as a result of the Borough Green factory upgrade and resulting need to import products from Poland. The increased transportation cost will be expensed at the point of sale and treated as a special item. Investments excluding acquisitions and divestments are expected to be in the region of DKK 120 million.

Quote:

"We are very pleased to see continuous improvements in the market, and despite adverse impact from currency development, we are able to deliver a result in line with last year" says CEO Michael T. Andersen. "Organic growth enables us to deliver a Q1 result on par with last year. We are now in a situation where we are getting closer to capacity constraints in all markets except Russia."

For further information please contact:

Michael T Andersen, CEO, or Bjarne Pedersen, Vice President, Business Development & IR, on telephone +45 35 27 02 00.

Interim financial report Q1 2017

Key figures - H+H Group

Amounts in DKK million

*The solvency ratio for Q1 2016 and full-year 2016 is adjusted reflecting a reclassification in the balance sheet of payable customer rebates and bonusses.

Revenue for the first quarter of 2017 increased by 6% in local currencies (organic growth) and by 2% in DKK to DKK 376.5 million. The increase in sales compared to the same period last year was driven by higher prices.

The gross margin in the first quarter of 2017 was 22.6%, against 23.6% in 2016. The higher sales prices were partly offset by higher unit costs, partly because of additional transport costs incurred in the UK due to import of products from Poland. Adjusted for the special items, gross margin would have been 24.1%.

The first-quarter results include negative special items of DKK 5.6 million arising from the sale of imported Polish products in the UK to support stock building in relation to the Borough Green factory upgrade.

EBITDA before special items was DKK 36.9 million and DKK 31.3 million after special items (2016: EBITDA before special items was DKK 36.6 million and DKK 35.3 million after special items).

The organic growth compensates for the adverse impact from currency development, which is approx. DKK (4.6) million.

Operating profit before special items for the first quarter of 2017 was DKK 17.9 million, against DKK 15.9 million in 2016, a change of DKK 2.0 million.

Operating profit for the first quarter of 2017 was DKK

12.3 million in 2017, against DKK 14.6 million in 2016, a change of DKK (2.3) million.

First-quarter profit before tax from continuing operations was DKK 7.2 million, against a profit of DKK

9.1 million in 2016, a change of DKK (1.9) million.

Profit before tax from continuing operations

Q1 Amounts in DKK million 2017 2016

Unallocated items amounted to DKK (10.3) million in the first quarter of 2017, a change of DKK (7.7) million against 2016, mainly due to gain on sale of assets in 2016.

Due to material changes in assumptions used to assess the value of the UK pension plan, an adjustment of DKK

24.1 million has been made to total comprehensive income for the first quarter of 2017.

The total comprehensive income for the first quarter of 2017 of DKK 43.6 million comprises the profit for the period of DKK 1.7 million, foreign exchange adjustments of DKK 17.8 million and actuarial losses less deferred tax of DKK 24.1 million.

Please refer to note 6 "Pension obligations" for further comments on the adjustment of the UK pension obligation.

Tax for the first quarter of 2017 was DKK (5.1) million, against DKK (7.3) million in 2016. The lower tax expenses are due to the decline in the GBP exchange rate.

Please refer to note 8 "Discontinued operations and assets held for sale" for further comments.

Cash flow from operating activities in the first quarter of 2017 was DKK (71.7) million, against DKK (35.1) million in the same period last year. This is mainly due to higher debtor value. Further, there is an adverse impact from stock building in the UK as a result of the Borough Green factory upgrade. This is expected to continue throughout the year.

First-quarter free cash flow was DKK (94.6) million, against DKK (41.3) million in the same period last year.

Investments of DKK 23.0 million were made during the first quarter of 2017. In the first quarter of 2016, investments totalled DKK 10.6 million; adjusted for asset sale the net investment was DKK 6.1 million.

Investments

Q1 Amounts in DKK million 2017 2016

SEGMENTS

Revenue

Q1 Amounts in DKK million 2017 2016

The investment programme is running to schedule and consists mainly of the Borough Green factory upgrade programme in the UK.

Net interest-bearing debt totalled DKK 483.3 million at 31 March 2017, up DKK 96.7 million since the beginning of the year and down DKK 6.4 million on 31 March 2016.

First-quarter net financials totalled DKK 5.1 million in 2017, against DKK 5.5 million in 2016. Besides interest expenses and foreign exchange adjustments, the figure includes amortisation of borrowing costs, payments for an unused committed credit facility, realised and unrealised gain/losses on foreign exchange hedges and expenses for the pension scheme in the UK.

H+H's equity increased by DKK 44.0 million in the first quarter of 2017 of which profit for the period contributed DKK 1.7 million, foreign exchange adjustments of investments in subsidiaries DKK 17.8 million, value adjustment of UK pension DKK 24.1 million less deferred tax and other adjustments of DKK

0.4 million.

Equity

Q1 Q1 Amounts in DKK million 2017 2016

First-quarter revenue in Western Europe increased by 4.4% in local currencies (organic growth) and decreased by (1.7%) in DKK to DKK 287.6 million.

Decrease in revenue in the first quarter of 2017 in Western Europe was primarily driven by lower revenue in the UK due to the decrease in GBP exchange rate.

Revenue in the first quarter of 2017 increased in the Nordic region and the Benelux countries, while Germany remained on the same level as in the first quarter of 2016.

First-quarter EBITDA was DKK 34.8 million, against DKK

40.1 million in 2016, a decrease of DKK (5.3) million. The underlying profit is favourable but has been adversely impacted by exchange rates; DKK (4.5) million and special items DKK (5.6) million.

First-quarter profit before tax was DKK 21.1 million, against DKK 26.0 million in 2016, a change of DKK (4.9) million.

First-quarter revenue in Eastern Europe increased by 13.1% in local currencies (organic growth) and by 17.9% in DKK to DKK 88.9 million.

In Poland, sales volumes and prices in the first quarter of 2017 were higher than in the same period last year.

In Russia, the market conditions remain fragile and visibility is low. We have increased prices over the first quarter last year and, as a consequence, lost market share.

First-quarter EBITDA was a DKK 6.1 million, against DKK (1.7) million in 2016, an increase of DKK 7.8 million.

The first quarter of 2017 brought a loss before tax of DKK (3.6) million, against a loss of DKK (14.3) million in 2016, an increase of DKK 10.7 million.