Waberer International : Consolidated Annual Report - 2023

CONTENTS OF BUSINESS REPORT

The official consolidated financial statements of Waberer's International Plc are published in ESEF format in Hungarian. This document in pdf format is the unofficial English translation of the consolidated financial statements in ESEF format, but cannot be considered as an official document.

1. Message from the CEO
2. Management Report

4 About Waberer's Group

1. Key operational indicators
2. Presentation of the company structure
3. Strategy
4. Contract logistics segment

1. Transportation and freight forwarding
2. Insurance
3. Business Environment & results
4. Economic environment
5. Revenue

1. Net income
2. Cash flow
3. Debt
4. Main Events in 2023
5. Ownership structure

Capital market performance, Investor relations

1. Shareholder structure
2. Capital market performance

1. Compliance
2. CSR activities

1. Human resources
2. Corporate governance and corporate bodies

1. Board of Directors
2. Chief Executive Officer
3. The presentation of the management
4. Supervisory Board
5. Audit Committee

1. Nomination and Remuneration Committee
2. Internal controls and risk management

1. System of internal controls
2. Risk management framework

1. Financial risk factors
2. Operational risk factors
3. Risk factors specific to insurance

1. Fight against corruption and bribery
2. Independent audit report

1. Consolidated financial statements

1. Notes

In 2023, we updated Waberer's Group's medium-term business and ESG strategy, which will guide and shape our activities in the coming years. Based on this strategy, we intend to grow Wa- berer's Group into the leading complex

REGIONAL CONTRACT LOGISTICS (RCL) SEGMENT:

Market-leading Hungarian complex logistics service provider with an integrated service portfolio tailored to industry needs and customers (distribution, warehousing, home delivery, production support logis- tics, container transport, fresh goods lo- gistics, etc.)

INTERNATIONAL TRANSPORT

SEGMENT (ITS):

One of Europe's leading FTL (Full-Truck Load) transport service providers, with own fleet and subcontractor operations, as well as rail and intermodal services (combination of rail and road transport), focusing on Europe's main industrial centres (UK, Germany, France, Italy, Spain, Poland, Hungary, Slovakia) and Central and Eastern Europe.

INSURANCE SEGMENT:

Insurance business focusing on non-life insurance products, with a focus on Hun- gary. Specialist in passenger and commercial vehicle insurance (MTPL, CASCO, CRM) with a significant market share.

At the end of 2023, the segment provided warehousing and warehouse manipulation services on an area of nearly 230,000 m2. Current warehousing activity is mainly performed in leased warehouses and concentrated in the Budapest area.

demand for these low environmental footprint distribution services is growing radi- cally. In response, we have built up our capabilities to offer tailor-made solutions to meet these unique customer needs, giving

In 2022, we started the development of our first modern, company-owned warehouse in Ecser, along the M0 ring road bypassing Budapest. The close to 47,000 sqm warehouse will be completed in the first half of 2024, after which the warehouse space used by the segment will increase to approximately 300,000 m2, and at the same time, the cost level of warehousing -related activities will decrease, as owning warehouse capacity will result in a significant cost reduction compared to leasing warehouses. In line with the indus- trialisation efforts in rural areas, we plan to further expand owned warehouse capacity in major industrial centres in the near future. As a first step in our development plans, in 2023 we acquired a plot of land in Debrecen suitable for the development of a logistics centre, on which we plan to build a 20,000 m2 logistics centre in 2025, which will be able to serve the logistics

needs of manufacturing companies in the region and further increase the efficiency of our national distribution activities. In the coming years, we plan to expand our warehousing capacity in more non-Buda- pest cities, in line with market demand and the pace of industrial production capacity expansion.

The segment carries out its domestic distribution activity with nearly 800 vehi- cles. For 3 years in a row now, we have been providing our customers with a distribution service with low environmental footprint using alternative powertrain vehicles, mainly LNG and electric. Given the current technological limitations (800- 900 km range for LNG and 2-300 km range for electric vehicles), these vehicles can be integrated into our domestic distribution activities with greater efficiency compared to long-distance international freight transport activities. Our customers'

us a significant competitive advantage. In line with our corporate and ESG strategy, we intend to further increase the share of alternative powertrain vehicles in our fleet and maintain Waberer's leading position in green logistics services. In addition to the technologies currently in use and being tested, we are paying particular attention to the emergence of hydrogen-powered vehicles, we expect this technology to play a significant role in the long-distance freight transport industry in the long term, and we intend to start testing this technology within the period covered by our strategy, for which we have entered into a strategic alliance with other potential users and green hydrogen production companies in Hungary.

In the contract logistics segment, we aim to focus sales on activities that can provide the biggest added-value to customers, require the highest expertise and accuracy from the logistics provider, and can become an addition to the existing service portfolio to foster deeper customer relationships.

Accordingly, we would like to further expand our portfolio of customer-facingin-house logistics services, which support the customers' existing manufacturing processes in the automotive, oil and chemical industries, and which are to be carried out at the customers' site. We also want to increase our fulfilment and home delivery capabilities to support online trade.

The basis of own-fleet international transport is the existence of a fleet that can be operated efficiently and ensures reliable availability. As a result of replacing the elements of our fleet over the past 2

years, the Group has reached its strategic target of having an average fleet age of

2.5 years. In the coming years, we intend to maintain this average age and contin- ue the process of ongoing fleet renewal,

while we do not plan to make any significant changes to the size of the fleet, fine-tuning it in line with the results of current tenders

In the international transport segment, a turning point is brought about by the shift to key account focused operations. The transport service offered by Waber- er's can provide a competitive service to customers who expect outstanding ser-

vice quality, availability of additional services (e.g. tracking, special cargo, flexible capacity allocation, alternative fuels, etc.) and customer-oriented operation. Ac- cordingly, we intend to further increase the weight of key account customers and

the ratio of freights requiring additional services within the operation, which we aim to increase to 60% by 2027 through the active management of the customer portfolio and sales focus.

In international freight forwarding, Waberer's has to date focused on road transport and, to a lesser extent, inter- modal transport, which can be considered a combination of road and rail transport. There is a growing expectation from both regulators and customers to significantly reduce the environmental footprint of long-distance transport. This objective can be supported by carrying out these transport tasks by rail. Recognising this, Waberer's Group signed a share purchase agreement in 2023 to acquire a majority stake in PSP (Petrolsped) Group, a company with significant infrastructure and experience in rail logistics. The transaction was successfully closed in 2024. We plan to use PSP (Petrolsped) Group as basis for the future transformation of our services to rail, and through this acquisition Waberer's will be able to enter the market for the transport of bulk goods that are already predominantly transported by rail (construction materials, grain, oil

products, etc.). In addition to the rail logistics market, in 2023 we also entered the maritime logistics services market, further strengthening our multimodal capabilities

and enabling us to provide intercontinental transport services.

INSURANCE

When the insurance business was set up as part of the Group, the primary objective was to efficiently manage the insurance of the Company's own fleet. Over the past 10 years, the insurance company has successfully expanded first in the commercial vehicle market and then in the passenger car market, becoming one of the top 3 insurers in the MTPL and CASCO market, with nearly 90% of its revenue and profit generated from third-party customers.

strategic alliances to expand our sales channels. In order to achieve our diversification objectives, we are also continuously exploring the possibility of participating in the market consolidation process.

As a result of implementing the above strategy, we plan to nearly double the Group's consolidated EBIT generation capacity of 2022 to EUR 61 million, with sales of over EUR 1.1 billion. To implement

The lowest operating costs in the Hun- garian insurance market form the basis of growth and profitability. This has been highly digitalised and based on efficient internal processes from the very start. The strategic objective of our Insurance segment is the ongoing digitalisation of back-office and customer relationship

processes, which will ensure a low operating cost level providing a competitive advantage in the long term. In addition, in the spirit of further diversification, we intend to enter new market segments where Gránit Biztosító's operating model (e.g. in the home insurance market) can also provide a competitive advantage, and to build

the strategy, we expect incremental investment of more than EUR 100 million in the period until 2027, of which almost 50% is already secured.