RAWLPLUG GROUP · 1 rawlplug group management report on group operations for the period from 1 january 2019 to 30 june 2019 wrocŁaw, 29.08.2019

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RAWLPLUG GROUP

MANAGEMENT REPORT ON GROUP

OPERATIONS

FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019

WROCŁAW, 29.08.2019

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Contents

1. BASIS FOR THE PREPARATION OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL

STATEMENTS AND PERIOD COVERED. RULES USED IN PREPARING THE FINANCIAL

STATEMENTS ................................................................................................................................................ 4

2. DESCRIPTION OF GROUP OPERATIONS ................................................................................................... 4

2.1. DESCRIPTION OF THE GROUP ............................................................................................................... 4

2.1.1. Group parent ........................................................................................................................................ 4

2.1.2. Composition of the Group .................................................................................................................... 5

2.1.3. Changes in Group structure .................................................................................................................. 5

2.2. CHANGES IN THE MAIN PRINCIPLES OF GROUP MANAGEMENT................................................. 6

2.3. GROWTH DIRECTIONS ............................................................................................................................ 6

2.4. PARENT'S AUTHORITIES ......................................................................................................................... 7

2.4.1. Management Board .............................................................................................................................. 7

2.4.2. Supervisory Board ................................................................................................................................ 7

2.4.3. Shares held by the Parent's Management Board or Supervisory Board Members ............................... 7

2.5. SHAREHOLDING STRUCTURE, INCLUDING SHAREHOLDERS DIRECTLY OR INDIRECTLY

HOLDING AT LEAST 5% OF GENERAL MEETING VOTES ................................................................ 8

3. FACTORS SIGNIFICANT TO GROUP DEVELOPMENT IN H1 2019, INCLUDING THREATS

AND RISKS, AND GROWTH PERSPECTIVES ............................................................................................ 9

3.1. EXTERNAL FACTORS .............................................................................................................................. 9

3.1.1. Macroeconomic situation and conditions in the industry ..................................................................... 9

3.1.1.1. Construction and fixings industry ............................................................................................... 9

3.1.1.2. Industrials sector ....................................................................................................................... 10

3.1.2. Employment conditions; prices of products and intermediates imported from the Far East .............. 10

3.1.3. Exchange rates ................................................................................................................................... 10

3.1.4. Interest rates ....................................................................................................................................... 11

3.2. INTERNAL FACTORS ............................................................................................................................. 11

3.3. SUSTAINABLE GROWTH STRATEGY ................................................................................................. 11

3.4. GROWTH PERSPECTIVES ...................................................................................................................... 13

3.5. GROUP STRATEGY ................................................................................................................................. 13

4. SEASONALITY OF SALES .......................................................................................................................... 13

5. INVESTMENTS AND R&D .......................................................................................................................... 13

5.1. INVESTMENTS ......................................................................................................................................... 13

5.2. R&D............................................................................................................................................................ 14

5.3. PLANS FOR 2019 ...................................................................................................................................... 15

6. HUMAN RESOURCES ................................................................................................................................. 15

7. RELATED-PARTY TRANSACTIONS EXECUTED ON TERMS OTHER THAN MARKET TERMS ..... 15

8. OFF-BALANCE SHEET ITEMS ................................................................................................................... 16

8.1. Information on issue by the Issuer or one of its subsidiaries of sureties for loans or borrowings,

or issue of guarantees – to a single entity or subsidiary of such entity, if the total value of existing

sureties or guarantees is significant ............................................................................................................ 16

8.2. OTHER OFF-BALANCE SHEET ITEMS ................................................................................................ 16

9. SIGNIFICANT PROCEEDINGS IN PROGRESS BEFORE A COURT, ARBITRATION BODY

OR PUBLIC ADMINISTRATION AUTHORITY ......................................................................................... 16

10. SIGNIFICANT INFORMATION FOR ASSESSMENT OF THE COMPANY ............................................. 16

10.1. DIVIDEND ............................................................................................................................................ 16

10.2. INFORMATION SIGNIFICANT TO ASSESSING THE GROUP'S AND COMPANY'S FINANCIAL

SITUATION, INCLUDING ITS ABILITY TO PAY LIABILITIES .................................................... 16

10.3. EVENTS AFTER THE END OF THE REPORTING PERIOD ............................................................ 17

11. GROUP FINANCIAL RESULTS................................................................................................................... 18

11.1. CONSOLIDATED STATEMENT OF PROFIT AND LOSS ................................................................ 18

11.2. ASSET AND LIABILITY STRUCTURE IN THE CONSOLIDATED STATEMENT

OF FINANCIAL POSITION ................................................................................................................. 18

11.3. RAWLPLUG GROUP'S REVENUE FROM SALES............................................................................ 19

11.3.1. Domestic sales.................................................................................................................................... 20

11.3.2. Foreign sales ...................................................................................................................................... 20

11.3.3. Product structure ................................................................................................................................ 20

11.3.4. Supply sources ................................................................................................................................... 20

11.4. SELLING COSTS AND ADMINISTRATIVE EXPENSES ................................................................. 20

11.5. FINANCING ACTIVITIES ................................................................................................................... 21

11.6. PROFITABILITY RATIOS ................................................................................................................... 22

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11.7. LIQUIDITY RATIOS ............................................................................................................................ 22

11.8. DEBT RATIOS ...................................................................................................................................... 22

11.9. PROGRESS VERSUS PREVIOUSLY PUBLISHED GUIDANCE ..................................................... 23

11.10. FACTORS AND EXTRAORDINARY EVENTS HAVING AN IMPACT ON FINANCIAL

RESULTS ................................................................................................................................................. 23

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Management report on the operations of

RAWLPLUG GROUP

for the period 1 January - 30 June 2019 (data in PLN 000s)

1. BASIS FOR THE PREPARATION OF THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS AND PERIOD COVERED. RULES

USED IN PREPARING THE FINANCIAL STATEMENTS

These condensed consolidated interim financial statements of RAWLPLUG Group cover the six months ended 30 June 2019

and are prepared in accordance with the Ordinance of the Minister of Finance of 29 March 2018 (Polish Journal of Laws of 2018,

item 757) on current and periodic information disclosed by issuers of securities (...) and IAS 34 Interim Financial Reporting.

The condensed consolidated interim financial statements do not include all of the information disclosed in annual financial

statements, as prepared in accordance with IFRS, therefore they should be read in conjunction with the Group's consolidated

financial statements for 2018.

The condensed separate semi-annual financial statements of the Parent, RAWLPLUG S.A., constitute an attachment to the

condensed consolidated interim financial statements and have been prepared in accordance with the Polish Accounting Act of

29 September 1994 (Polish Journal of Laws of 2019, item 351, as amended) and the Ordinance of the Minister of Finance of 29

March 2018 (Polish Journal of Laws of 2018, item 757) on current and periodic information disclosed by issuers of securities

(...).

The presentation and functional currency for these condensed consolidated interim financial statements is PLN, and all amounts

are expressed in PLN 000s (unless stated otherwise). Financial statements of the entities comprising the Group were translated

into the presentation currency based on the principles specified in IAS 21.

These condensed consolidated interim financial statements have been prepared in accordance with the accounting principles

presented in the Group's most recent consolidated financial statements, for the year ended 31 December 2018, except

amendments resulting from the application of IFRS 16 Leases, effective from 1 January 2019. These changes are described in

note 46 in the Consolidated Semi-Annual Report.

2. DESCRIPTION OF GROUP OPERATIONS

2.1. DESCRIPTION OF THE GROUP

2.1.1. GROUP PARENT

RAWLPLUG S.A., formerly: KOELNER S.A. (Company or RAWLPLUG) was registered on 20 December 1999 in division B

of the commercial register under no. 9101. Currently, the Company is registered under KRS number 33537. The Company was

founded by: Krystyna Koelner, Przemysław Koelner and Radosław Koelner. The Company's main economic activities of are:

design, manufacture and sale, mostly through wholesale distribution channels, of products from the following assortment groups:

✓ construction fixings,

✓ hand tools and power tools,

✓ screws and related accessories.

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RAWLPLUG GROUP


2.1.2. COMPOSITION OF THE GROUP

Entities in RAWLPLUG Group (RAWLPLUG Group, Group) as at 30 June 2019:

* Companies not subject to consolidation (in accordance with point 31 IAS 1) as of 30 June 2019.

** This is a jointly controlled entity, which for the purposes of these consolidated financial statements is measured using the equity method.

1 - the company has a branch in Łańcut.

2.1.3. CHANGES IN GROUP STRUCTURE

On 18 February 2018, an agreement was executed between RAWLPLUG S.A. and an existing shareholder of subsidiary Koelner

Centrum Sp. z o.o. in Pabianice, pursuant to which RAWLPLUG S.A. purchased a 49% stake in Koelner Centrum Sp. z o.o.,

which constitutes 245 shares with nominal value of PLN 1 thousand each and total nominal value of PLN 245 thousand. The

purchase price was PLN 1 555.9 thousand. As a result of the transaction, RAWLPLUG S.A. became the owner of 100% of shares

in Koelner Centrum Sp. z o.o. The two companies were subsequently merged, therefore on 27 February 2019 a merger plan was

agreed and signed by the merging entities' management boards. On 23 April 2019, an Extraordinary General Meeting of

RAWLPLUG S.A. approved the companies' merger. The merger took place pursuant to art. 492 § 1 point 1 of the Polish

Commercial Companies Code, i.e. through the transfer of all of the assets of Koelner Centrum Sp. z o.o., as the acquired

company, to RAWLPLUG S.A., as the acquiring company. Due to the fact that the sole shareholder of the acquired company,

Koelner Centrum Sp. z o.o., was the acquiring company, i.e. RAWLPLUG S.A., the merger was carried out in a simplified

procedure pursuant to art. 516 § 6 of the Polish Commercial Companies Code, i.e. without:

✓ drafting by the management boards of the companies being merged of the reports referred to in art. 501 § 1 of the

Polish Commercial Companies Code,

✓ disclosure of the information referred to in art. 501 § 2 of the Polish Commercial Companies Code and

✓ audit of the merger plan by a statutory auditor and drafting of an audit opinion.

RAWLPLUG S.A.

-> Koelner Polska Sp. z o. o. - 100%

-> Koelner Rawlplug IP Sp. z o.o.1 - 100%--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------

-> Rawlplug Ltd - 100%

-> Koelner Hungária Kft - 51%

-> Koelner CZ s.r.o. - 100%

-> Koelner Deutschland GmbH - 100% -------------> Stahl GmbH - 100%

-> Rawlplug Middle East FZE - 100% -------------> Rawlplug Building and Construction Material Trading LLC - 100%

-> Rawlplug Ireland Ltd - 100% -------------> Rawlplug Ireland (Export) Ltd* - 100%

-> Koelner Vilnius UAB - 100%

-> Rawl France SAS - 100%

-> Rawl Scandinavia AB - 100%

-> Koelner Slovakia s.r.o. - 100%

-> Koelner Ltd - 100%

-> Koelner-Ukraine LLC * - 60%

-> Koelner Trading KLD LLC* - 100%

-> Koelner - Inwestycje Budowlane Sp. z o.o.* - 100%

-> Rawlplug Inc.* - 100%

-> Rawlplug Singapore PTE. LTD* - 100%

-> Rawlplug Shanghai Trading Co., Ltd.* - 100%

-> Rawl India Services Private Limited* - 100%

-> Koelner Kazakhstan Ltd* - 70%

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------> Rawlplug Portugal LDA *-100%

-> Rawl Africa (Pty) Ltd* - 100%

-> RAWLPLUG-TMAX Corporation Limited** - 51%

99%

1%

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RAWLPLUG GROUP


On 31 May 2019 the merger was entered into the National Court Register, Koelner Centrum Sp. z o.o. will be removed from the

register of companies without liquidation. The merger plan was publicly disclosed on the website of RAWLPLUG S.A.

www.rawlplug.pl and on the website of the acquired company: www.koelnercentrum.pl.

The merger marks the next stage in a process to simplify RAWLPLUG Group's organisational structure, which should translate

into higher efficiency of commercial activities in Poland. The Company communicated the process in current report 2/2019 and

current reports 4/2019, 6/2019 and 10/2019.

In the first half of 2019, RAWLPLUG Group's structure was not subject to any further changes as a result of mergers, de-mergers,

restructurings or discontinued operations.

2.2. CHANGES IN THE MAIN PRINCIPLES OF GROUP MANAGEMENT

RAWLPLUG Group's key accounting principles are not expected to change, except as described in point 2.3.

2.3. GROWTH DIRECTIONS

The first half of 2019 saw no significant changes in the directions of the Group's development. A sustainable growth strategy

was continued in all operating areas. Particular emphasis was placed on the systematising of the sales offering and further

development of the strategic RAWLPLUG brand, particularly on export markets. The strategy is reflected in the further

development of sales companies in Singapore, China and India as well as our production company's in Thailand.

The Management Board focused in the reporting period on optimising all processes within the Group in order to fully utilise all

of its resources, reduce costs and achieve optimal synergy effects. RAWLPLUG Group is currently implementing SAP. The

main objective of replacing the existing ERP systems is to substantially improve management information and introduce Master

Data Management. Four implementations have been successfully completed: SAP B1 is deployed at Dubai-based companies

(Rawlplug Middle East FZE and Rawlplug Building&Construction Material Trading LLC), at the U.K. company (Rawlplug Ltd)

and in Ireland (Rawlplug Ireland Ltd). SAP S/4HANA has been implemented at Koelner Rawlplug IP Sp. z o.o. In H1 2019,

SAP B1 was also implemented at the Thailand-based company (RAWLPLUG-TMAX Corporation Limited) and will be

deployed in the second half of 2019 at the Swedish company (Rawl Scandinavia AB) and in France (Rawl France SAS), while

additional SAP S/4HANA modules will be implemented at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o.

The first half of 2019 also saw activities intended to improve Group management and simplify the Group's structures as regards

economic activities in Poland. The re-organisation of the Group involves a reduction in the number of its constituent companies.

These changes will bring considerable cost savings related to certain redundant functions and jobs as well as cost savings related

to direct services for these companies. Moreover, given the smaller number of entities in the Group, the number of transactions

between the companies is decreasing, which has a positive impact on the transparency of intra-Group operations.

As part of these activities, the Management Board of RAWLPLUG S.A. made a decision to merge:

✓ Koelner Centrum Sp. z o.o. (acquired company) and RAWLPLUG S.A. (acquiring company). As a result of the

merger, the entire assets of Koelner Centrum Sp. z o.o. and its functions have been transferred to RAWLPLUG

S.A., and Koelner Centrum Sp. z o.o. has been removed from the register of companies at the National Court

Register.

This operation had no impact on RAWLPLUG Group's consolidated results in H1 2019.

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RAWLPLUG GROUP


2.4. PARENT'S AUTHORITIES

2.4.1. MANAGEMENT BOARD

On 24 May 2019, the Company's Supervisory Board appointed the following Management Board Members for a new joint term:

Radosław Koelner - President of the Management Board

Marek Mokot - Vice-President of the Management Board

Piotr Kopydłowski - Member of the Management Board responsible for finance

Composition of RAWLPLUG S.A.'s Management Board as at 30 June 2019:

Radosław Koelner - President

Marek Mokot* - Vice-President

Piotr Kopydłowski - Member, responsible for finance

* Mr. Marek Mokot was appointed Vice-President of RAWLPLUG S.A.'s Management Board on 29 March 2019.

2.4.2. SUPERVISORY BOARD

Composition of RAWLPLUG S.A.'s Supervisory Board as at 30 June 2019:

Krystyna Koelner - Chairperson

Tomasz Mogilski - Deputy Chairperson

Włodzimierz Frankowicz - Member

Janusz Pajka - Member

Zbigniew Pamuła - Member

Zbigniew Stabiszewski - Member

2.4.3. SHARES HELD BY THE PARENT'S MANAGEMENT BOARD OR SUPERVISORY BOARD MEMBERS

As per the Company's knowledge, members of RAWLPLUG S.A.'s Management Board and Supervisory Board held shares as

follows:

Management Board Number of shares at

report date

Number of shares at

date on which the Q1

2019 consolidated

quarterly report was

published

Radosław Koelner - President 2 744 750 2 744 750

Marek Mokot - Vice-President of the Management

Board

- -

Piotr Kopydłowski - Member, responsible for finance 29 344 29 344

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RAWLPLUG GROUP


Supervisory Board Number of shares at

report date

Number of shares at

date on which the Q1

2019 consolidated

quarterly report was

published

Krystyna Koelner - Chairperson - -

Tomasz Mogilski - Deputy Chairperson 100 000 100 000

Włodzimierz Frankowicz - Member - -

Janusz Pajka - Member - -

Zbigniew Pamuła - Member - -

Zbigniew Stabiszewski - Member - -

The nominal amount of one share in RAWLPLUG S.A. is PLN 1.

2.5. SHAREHOLDING STRUCTURE, INCLUDING SHAREHOLDERS DIRECTLY OR INDIRECTLY

HOLDING AT LEAST 5% OF GENERAL MEETING VOTES

As per the Company's knowledge, on the date of the Q1 2019 consolidated report members of RAWLPLUG S.A.'s shareholders

were as follows:

Shareholder Number of

shares

% in share capital

Number of votes

at the general

meeting

% of votes at the

general meeting

Amicus Poliniae Sp. z o.o. 16 902 750 51.91 16 902 750 51.91

Radosław Koelner 2 935 915 9.02 2 935 915 9.02

PKO BP Bankowy PTE S.A. 2 933 639 9.01 2 933 639 9.01

Nationale Nederlanden PTE S.A. 2 842 138 8.73 2 842 138 8.73

Quercus TFI S.A.

(including Quercus Parasolowy SFIO)

1 705 831

(1 645 263)

5.24

(5.053)

1 705 831

(1 645 263)

5.24

(5.053)

Other 5 239 727 16.09 5 239 727 16.09

TOTAL 32 560 000 100.00 32 560 000 100.00

On 28 June 2019, RAWLPLUG S.A. received a notification from Towarzystwo Funduszy Inwestycyjnych S.A. (Quercus TFI

S.A.) pursuant to art. 69 of the Act of 29 July 2005 on Public Offerings and the Terms for Introducing Financial Instruments to

an Organised Trading System and on Public Companies. According to the notification, QUERCUS Parasolowy SFIO decreased

its stake in the Company's votes to below the 5% threshold.

As per the Company's knowledge, on the date of this report RAWLPLUG S.A.'s shareholding structure was as follows:

Shareholder Number of

shares

% in share capital

Number of votes

at the general

meeting

% of votes at the

general meeting

Amicus Poliniae Sp. z o.o. 16 902 750 51.91 16 902 750 51.91

Radosław Koelner 2 935 915 9.02 2 935 915 9.02

PKO BP Bankowy PTE S.A. 2 933 639 9.01 2 933 639 9.01

Nationale Nederlanden PTE S.A. 2 842 138 8.73 2 842 138 8.73

Quercus TFI S.A.

(including Quercus Parasolowy SFIO)

1 705 831

(1 543 207)

5.24

(4.74%)

1 705 831

(1 543 207)

5.24

(4.74%)

Other 5 239 727 16.09 5 239 727 16.09

TOTAL 32 560 000 100.00 32 560 000 100.00

There are no limitations on the exercise of RAWLPLUG S.A.'s voting rights.

The Company is not aware of any agreements pursuant to which there may be a change in the proportions of shares held by the

current shareholders.

http://www.koelner.com.pl/index.php?module=htmlpages&func=display&pid=30

http://www.koelner.com.pl/index.php?module=htmlpages&func=display&pid=30

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RAWLPLUG GROUP


3. FACTORS SIGNIFICANT TO GROUP DEVELOPMENT IN H1 2019,

INCLUDING THREATS AND RISKS, AND GROWTH PERSPECTIVES

3.1. EXTERNAL FACTORS

3.1.1. MACROECONOMIC SITUATION AND CONDITIONS IN THE INDUSTRY

3.1.1.1. CONSTRUCTION AND FIXINGS INDUSTRY

In the first half of 2019, the Group recorded 9% growth in sales in comparison to the same period last year, which also exceeded

sales plans. The key factors in generating good sales results were the continuing good economic situation, continuous

improvements in the widely understood sales offering (products, services, Rawlplug Academy) and sales through new

distribution channels as well as a continuous drive to expand the customer base and markets where RAWLPLUG Group is

present.

In 2016-2018, RAWLPLUG Group focused on optimising its sales offering. Although new products, new technical

documentation, better product parameters and marketing support started to bear fruit in the first half of 2018, their positive impact

on business development is still visible in 2019. RAWLPLUG Group's offering became very competitive in comparison with

the largest players in the industry, allowing it to secure new sales contracts and retain the existing customer base.

A training programme and marketing support for subsidiaries and official distributors translated into higher sales of high-margin

products produced at production facilities. Services made available at www.rawlplug.com such as "RTH - Rawlplug Technical

Helpdesk," "BIM Rawlplug" (Building Information Modelling Rawlplug) and new EasyFix calculation modules - are increasing

the appeal of RAWLPLUG Group's offering.

Marketing campaigns had a very positive impact on sales results in H1 2019. Markets where advertising campaigns were run in

press, outdoor and social media, and especially where workshops were organised in our mobile training centre (RawlTruck),

noted higher sales growth (Rawlplug Ltd +17%, Rawl France Slr +12%, Koelner Polska Sp. z o.o. +12%) than the average of

+10% for RAWLPLUG Group. Rawlplug Academy Training Center was launched in London Reading on 31 May 2019. Guests

invited to the RATC opening were considerably impressed by RAWLPLUG's offering. This event was an opportunity to present

product novelties and new services to existing customers and present the RAWLPLUG brand to guests who had not been the

Group's customers before. Guests included companies not just from Europe but also from Africa, among other places.

A new gas-actuated tool for concrete and steel turned out to be a huge commercial success, exceeding the annual sales of the

previous model in just two months from the launch.

A re-design of the sales offering was intensified, consisting of withdrawing slow-rotating products or low-margin products,

especially private label, partially replacing these with new high-quality products.

Demand in the domestic construction and fixings industry in the first half of 2019 remained high, and sales grew by 12.3%

(+5.6% in the same period of 2018). Sales growth was achieved despite work continuing on re-building the sales offering by

gradually reducing third-party brand sales, limiting private label production and stopping lowest-margin assortment lines.

Good conditions also prevailed on European markets in H1 2019. The Group recorded significant sales growth in these markets,

largely under the RAWLPLUG brand, which contributes to margin building.

Of particular note is the Hungary-based company, Koelner Hungária Kft, whose sales turnover has been growing at over 10%

for the past several years on a year-on-year basis, exceeding PLN 41 million in H1 2019. These figures place the company as

the third largest sales entity at RAWLPLUG Group. Strong sales growth dynamics have also been recorded at the British

company Rawlplug Ltd (up by 17% compared to the same period last year), which is the effect of implementing a new strategy

in 2018 and changing the company's organisational structure. Its result is particularly notable in light of the significant political

turmoil in Great Britain in the first quarter of 2019.

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RAWLPLUG GROUP


The largest growth was recorded by the Germany-based companies (Koelner Deutschland GmbH and Stahl GmbH), i.e. 46%,

compared to the previous year. This is due to several large contracts in Germany, Austria and Switzerland. The German

companies have been working on some of these contracts for three years.

In the Middle East, sales in Dubai brew by nearly 12% in comparison with the same period last year. Improving sales results in

the region, especially in India, Qatar and Saudi Arabia, is one of our key strategic objectives for the second half of 2019.

Sales in countries where RAWLPLUG Group does not have a subsidiary went up by 14% in comparison to the previous year.

The Group is taking steps to appoint exclusive distributors in additional countries, where sales so far have been rather fragmented.

This is due to very satisfactory results of working relationships with exclusive distributors. Sales in this model have gone up by

41% y/y.

3.1.1.2. INDUSTRIALS SECTOR

Revenue from sales generated in H1 2019 at the Łańcut branch of Koelner Rawlplug IP was 13.5% higher than in the same

period last year.

In the first half of 2019, domestic sales were 15% higher than those achieved in the preceding year. The growth in domestic sales

was caused by a partial change in product portfolio, from standard to specialist products, which are more technologically

advanced. Currently, all efforts of our domestic salesforce continue to be directed at acquiring clients from the special products

segment - retaining the level of sales from before the removal of duty will be largely dependent on the development of new

market segments.

Growth in the sales of screw products abroad results from a growing share of high-margin products with varied protective coating

systems. Export sales of screw products in the first half of 2019 went up by 13% compared to H1 2018. Growth in foreign sales

is largely the effect of an increasingly large share of high-margin goods sales, with varied margins, as well as sales volume

growth. Currently, exports account for over 89% of the company's sales. The Łańcut-based factory intends to continue with its

existing development strategy based on growing the share of special products for the automotive segment and less focusing on

standard products. This strategy allows it to invest in a modern machine park making it possible to both expand assortment and

production volumes thus increasing its share in the European market for screw products.

Owing to the fact that the Group has very high product availability, rich offering and excellent customer service, sales in H2

2019 will largely depend on the industry maintaining demand. Unfortunately, factors such as the political instability in Great

Britain, trade war between USA and China and stagnating industry in Western Europe may cause a temporary slowdown in sales

growth on certain markets.

3.1.2. EMPLOYMENT CONDITIONS; PRICES OF PRODUCTS AND INTERMEDIATES IMPORTED FROM THE FAR EAST

In H1 2019, commodity markets remained stable, which led to a slight improvement in margins. Constantly rising labour costs,

especially on the domestic market, are having a negative impact on commodity markets.

3.1.3. EXCHANGE RATES

In terms of global cash flows, the Group is exposed to EURUSD. Given the specific nature and territorial scope of its operations,

the Group has an excess of EUR (sales mostly in EUR) and shortage of USD (imports from the Far East). The current volume

of conversion for EUR to USD is relatively small (about EUR 600 thousand a month).

On 18 December 2018, RAWLPLUG S.A. executed a forward contract with BNP Paribas Bank Polska S.A. (formerly Bank

BGŻ BNP Paribas S.A.) for GBPPLN 1 000 thousand with a delivery date of 21 June 2019. After settling these transactions, the

Group posted an aggregate gain of PLN 36 thousand, which was recognised as finance income in the statement of profit and

loss.

In measuring balance sheet items, the Management Board aims to balance out foreign-currency items through natural hedging

in as far as practicable.

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RAWLPLUG GROUP


3.1.4. INTEREST RATES

Given the substantial share of bank borrowing in RAWLPLUG Group's financing structure, interest rates have a direct impact

on financial performance. The most recent interest rate change in Poland took place on 5 March 2015, and no further moves are

expected in the coming months.

3.2. INTERNAL FACTORS

The organisation has been properly prepared for fully efficient operations. Product portfolio analysis, a focus on those product

groups that enable maximum competitive advantages, alongside deployment of management solutions for sales and marketing

(merchandising, POS system for RAWLPLUG) as well as the introduction of the latest SAP solutions - these are the main tasks

which were commenced in 2018 and is continuing. Four implementations have been successfully completed by the end of June

2019: SAP in Great Britain (Rawlplug Ltd), Ireland (Rawlplug Ireland Ltd), Dubai (Rawlplug Middle East FZE and Rawlplug

Building&Construction Material Trading LLC) and Thailand (RAWLPLUG-TMAX Corporation Limited). By the end of 2019,

SAP will also be deployed in France (Rawl France SAS) and Sweden (Rawl Scandinavia AB), while additional SAP modules

will be implemented at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o.

On 31 December 2018, Koelner Łańcucka Fabryka Śrub Sp. z o.o. and Koelner Rawlplug IP Sp. z o.o. were formally merged

and operate as Koelner Rawlplug IP Sp. z o.o. since. On 31 May 2019 the merger of RAWLPLUG S.A. and Koelner Centrum

Sp. z o.o. was entered into the National Court Register, Koelner Centrum Sp. z o.o. was removed from the register of companies.

The main objective was to simplify RAWLPLUG Group's structure, which is having a positive impact on optimisation and

synergies of operational and cost processes. Moreover, these merger are simplifying and harmonising numerous management

tasks at both of the companies, which will certainly be of importance when it comes to knowledge and information sharing and

thus business awareness. In addition, harmonised terminology that takes into account the RAWLPLUG name will have a positive

impact on the effectiveness of efforts in the area of brand awareness and image.

The changes carried out in recent years aimed at better organising sales, production and marketing allow us to achieve optimal

effectiveness and maximally use the Group's potential. Substantial capex on machinery, particularly as regards the production

facility at Rawlplug S.A. as well as at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o. have increased productivity, which

translated into better product availability and higher pricing competitiveness, alongside an upgraded product offering.

The streamlining of the sales portfolio is an important efficiency driver. Withdrawing low-margin assortment and a substantial

part of third-party brands will make it possible to further improve service for own brands (RAWLPLUG, KOELNER,

MODECO), which in turn will enhance RAWLPLUG Group's positive image as a supplier of high-quality products for the

building industry. This is a subsequent step towards our strategic objective of becoming a first-choice supplier.

3.3. SUSTAINABLE GROWTH STRATEGY

RAWLPLUG Group's sustainable growth is being implemented based on three pillars: value-based management, care for the

environment and social engagement. The key events in each of these areas in H1 2019 were as follows:

✓ Value-based management

On 21 February 2019, Radosław Koelner, CEO of RAWLPLUG S.A. signed a framework cooperation agreement with the Rector

of the Wrocław University of Economics, professor Andrzej Kaleta. The agreement will concern the scope of joint educational,

development and commercial projects. In practice, cooperation will consist of working on shaping teaching plans and programs

in existing EU majors and specialisations and creating new ones so that the knowledge and skills of graduates correspond to

market needs; participation in and performance of open lectures, minutes and seminars; organisation of student internships;

inspiring research and development work topics as well as organising joint scientific and popular science undertakings (seminars,

scientific conferences, cyclical discussion meetings) in order to exchange information on innovative organisational solutions and

good practices in business at national and international level.

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RAWLPLUG GROUP


In March 2019, 11 students from Spain began their internships at RAWLPLUG S.A. as part of Erasmus. The programme

participants were assigned to the following divisions: Operations Maintenance, Tools and Research and Development, where

they are able to gain their first professional experiences. Cooperation with the organisations intermediating in student internships

also includes annual visits by professors from the programme's universities - in effect, they get an opportunity to personally

inspect the quality of our student internships. Looking at quantitative data on programme participant submissions, RAWLPLUG

S.A.'s opinion is decidedly positive: this year, according to data covering the period until May only, 35 people applied, and the

number of applications is constantly growing. 31 people participated in 2018.

On 13 April 2019, an edition of the nationwide Runmageddon race was held at the Wrocław race track Partynice.

RAWLPLUG Group employees once again participated in the race this year, totalling 80 people. This year's run was special

because of numerous attractions prepared for celebrations of Rawlplug's 100th anniversary. For all participants and spectators,

RAWLPLUG S.A. prepared a special exhibit zone, which include attractive contests and product showcases. A daughter of a

RAWLPLUG S.A. employee received a scholarship to support her musical career.

In the period from mid-March to the end of April 2019, RAWLPLUG S.A. held a series of workshops for Shift Leaders in the

Production and Warehouse divisions. Overall, 28 people participated in the Management Programme. Five training themes,

selected in order to measurably raise the participants' qualifications, were completed. These were: Production leader's attitude,

role and tasks; Team leadership: four management areas, setting SMART objectives, providing feedback; Team leadership:

determining professional relations, communicating with the team, Paul Hersey's and Ken Blanchard's situational management;

Development of employee potential and delegating tasks; Motivating employees and conducting briefings and short employee

meetings. The Management Programme was mainly intended to raise and/or improve management competences and reduce

production staff turnover (especially in the period June-September) by placing emphasis on factors that determine it (such as:

promoting a partnership-based organisational culture, increasing employee satisfaction in relations with superiors - which

constitute a factor that strongly affects departure decisions, caring about production employees' development and proper relations

within the team).

The Wrocław University of Technology held its Career Office Gala on 6 June 2019, where RAWLPLUG S.A.'s representatives

were invited as a supporting partner. The yearly activities of the Career Office were summarised during the ceremony and its

plans for the nearest future were unveiled. The "My ideal employer" student survey is an interesting project run by the Career

Office. It showed which companies are the most valued by students as potential employers. RAWLPLUG Group placed 201st

out of 501 businesses. Importantly, the surveyed students entered companies by themselves - meaning that students are well

aware of RAWLPLUG Group's brand as employer.

✓ Social engagement

Koelner Rawlplug IP Sp. z o.o. lent support to the 27th National Finale of the Great Orchestra of Christmas Charity, providing

items that included advertising gadgets such as cups, polo shirts, t-shirts, umbrellas and hats that were exchanged into financial

support at the auction. In effect, the Orchestra's local staff in Kobyla Góra collected PLN 67 thousand, which was used to

purchase medical equipment for Polish hospitals.

Koelner Polska Sp. z o.o. in January 2019 supported a local youth sports association - a football club for boys in Łódź. The club's

activities are financed by the parents as well as contributions from the municipality and sponsors as well as amounts collected

during charity campaigns. Koelner Polska Sp. z o.o. auctioned off Modeco power tools during a charity ball organised by the

club. The entire proceeds were used for the club's statutory objectives - purchase of two free-standing changing rooms with

bathrooms.

In April 2019, RAWLPLUG S.A. organised a donation drive amongst its employees to help the daughter of one of them, who

has acute leukaemia. The long-term disease made it necessary for the girl to have special sterile living conditions that her family

could not afford. After promoting the initiative amongst employees, donations were made to a special bank account.

In June 2019, as part of its sustainable development policy's social engagement element, RAWLPLUG S.A. established

cooperation with the Saint Albert Help Association - Wrocław Branch. As a result, the company is participating in a project

entitled "Active without barriers," which intends to stimulate people who are at risk of social exclusion and to support them in

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RAWLPLUG GROUP


returning to the labour market. These activities started in 2018, however in June this year the number of people participating in

the programme doubled, from 2 in 2018 to 4 in 2019.

3.4. GROWTH PERSPECTIVES

The key directions of changes being continued in 2019 as regards logistics and sales solutions are as follows: optimisation of the

product offering, effective promotion of product novelties, brand promotion across all available media, improvement in the

quality of distribution, along with effective sales support, especially in new markets and sales channels. On the 100th anniversary

of the RAWLPLUG brand, local events and workshops and seminars are being organised, including the mobile training centre

RawlTruck, which is attracting considerable interest.

3.5. GROUP STRATEGY

The main strategic objective for 2018 is reinforcement of RAWLPLUG Group's position in markets where it is already present.

This strategy consists of further activities aimed at strengthening the market position of RAWLPLUG Group's foreign companies

through restructuring, introducing new high-margin products and developing business via new distribution channels, such as

DIY and OEM or ecommerce. At the same time, the Group is focusing on entry into new markets, especially in Europe and Asia.

RAWLPLUG Group's main strategic objective for 2019 is a consistent focus on technologically advanced products groups,

where the Group has high production competences. The Group aims to distribute its products through all available sales channels,

which will be operated by either RAWLPLUG S.A. or its subsidiaries, depending on local requirements. The Group invariably

considers European markets as key, but is also expanding in the Middle East, Australia, South America, Central and Eastern

Asia and Africa.

4. SEASONALITY OF SALES

Given the fact that the main customer group for RAWLPLUG Group's products and goods is the construction sector, sales are

subject to seasonality. The Group generates the largest portion of its revenue from sales in the third quarter and the smallest in

the fourth quarter. Considering that sales of hand tools and power tools - which are subject to lesser seasonality than construction

fixings - are increasing their share in the Group's overall sales structure, the seasonality effect is decreasing. Seasonality of sales

is characteristic for both Poland as well as RAWLPLUG Group's foreign sales markets.

5. INVESTMENTS AND R&D

5.1. INVESTMENTS

RAWLPLUG Group's expenditures on property, plant and equipment and intangible assets in the first half of 2019 reached PLN

28 539 thousand. This concerned in particular expanding production capacities, especially for the automotive sector, at the Łańcut

branch of Koelner Rawlplug IP Sp. z o.o. as well as at RAWLPLUG S.A. In addition, capital expenditures concerned R&D,

software and means of transport.

At 30 June 2019, RAWLPLUG Group's had no bank deposits.

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RAWLPLUG GROUP


5.2. R&D

R&D activities in H1 2019 were mainly conducted at RAWLPLUG S.A. and the Łańcut branch of Koelner Rawlplug IP

Sp. z o.o.

RAWLPLUG S.A. conducted R&D work on construction fixings. In the areas of bonded anchors, mechanical anchors and plastic

fixings: facade insulation, frame fixings and others. In addition, research and development activities focused on approval

processes and process optimisation in manufacturing divisions.

The key achievements in H1 2019 include:

✓ completion of implementation stage for innovative technology to produce bonded anchors at the production

division,

✓ completion of implementation stage for new packaging,

✓ completion of implementation stage in BIM for bonded anchors,

✓ completion of prototyping stage and commencement of approval process for new frame fixing with short wedge

area.

✓ completion of implementation stage for new bonded anchor R-KEX-I,

✓ European Technical Approval for R-KEX-I,

The following R&D activities were performed at the Łańcut branch of Koelner Rawlplug IP Sp. z o.o. in H1 2019:

✓ In rolling processes

The product portfolio was extended by 130 new product groups, of which approx. 80% were for the automotive industry. Being

able to maintain high quality made it possible to prepare full documentation for the approval of 177 products in accordance with

automotive standards (VDA 2, AIAG PPAP). The approved products also include the highest quality and control safety products.

This shows a growing trust on the part of OEM clients, who approve such products individually.

In H1 2019, the company introduced a new product segment intended for coating with plastic. One of these products went to the

automotive industry. Improving forging technology made it possible to efficiently manufacture these products and develop the

production of several types of new products.

Research and analysis continued on optimising the production of flange screws. The first effects are visible in improved quality

by the stabilisation of dimension parameters and reduction of unit costs. This process is in its initial stage and work for all flange

product groups will continue for over a dozen months.

Further works on the optimisation of material use by optimising technology led to a decrease in the use of material, which

reduced production costs.

Work was also continued on another group of products for the automotive industry, this time used in the assembly of crankshaft

systems. This several months-long project has resulted in stable manufacture of these products.

Cooperation on the local market was continued with aviation and automotive firms, which resulted in new projects to produce

fasteners that will be used in advanced gear box designs and other sub-sets of the drive system. This contributed to implementing,

at the prototyping stage, a product with entirely new technology that does not require machining and leads to substantial savings.

These products will now be tested by the final customer.

Work also continued on optimising the thread rolling process by improving changeovers (SMED analysis) and improving tool

management by introducing a system for complete and clear documentation.

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RAWLPLUG GROUP


✓ Koelner Rawlplug IP Sp. z o.o. (branch in Łańcut)

Following approval of our quality system for the production of products with extended mechanical properties in classes 10.9 and

12.9 for Volkswagen, we are now able to produce and deliver these products to the customer.

Becoming a supplier for Volkswagen is not only a prestigious confirmation of the high quality of processes but it also brings the

factory into the elite group of producers of fixings and a standard for other clients.

A project to implement for production and sales a set of screws for compressed fastening used in advanced building structures

was initiated in 2018 and continued in H1 2019. It should be noted that these processes and the involvement of employees and

the Management Board have resulted in successful certifications on first attempt.

5.3. PLANS FOR 2019

In 2019, RAWLPLUG Group plans about PLN 66 million in investment expenditures.

The key investment projects are continuing:

✓ Reorganisation and replacement of machine park at Wrocław-based production facility - 3-year programme worth

approx. PLN 30 million;

✓ Continued expansion of the machine park at the Łańcut factory towards further development of production for

specialised screw products for export markets,

✓ Deployment of SAP in additional Group companies.

✓ E-commerce system implementation at Rawlplug Ltd.

RAWLPLUG Group's investments are financed using own funds and leasing.

6. HUMAN RESOURCES

As at 30 June 2019, RAWLPLUG Group employed 1 886 people.

RAWLPLUG Group employment

30.06.2019

Polish companies 1 414

Foreign companies 472

TOTAL 1 886

7. RELATED-PARTY TRANSACTIONS EXECUTED ON TERMS OTHER

THAN MARKET TERMS

All transactions between related parties were executed on market terms.

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RAWLPLUG GROUP


8. OFF-BALANCE SHEET ITEMS

8.1. INFORMATION ON ISSUE BY THE ISSUER OR ONE OF ITS SUBSIDIARIES OF SURETIES FOR LOANS OR BORROWINGS,

OR ISSUE OF GUARANTEES – TO A SINGLE ENTITY OR SUBSIDIARY OF SUCH ENTITY, IF THE TOTAL VALUE OF

EXISTING SURETIES OR GUARANTEES IS SIGNIFICANT

In H1 2019, RAWLPLUG S.A. and subsidiaries did not issue loan or borrowing sureties and did not issue guarantees the total

value of which is significant.

8.2. OTHER OFF-BALANCE SHEET ITEMS

As at 30 June 2019, RAWLPLUG Group did not have any material off-balance-sheet items.

9. SIGNIFICANT PROCEEDINGS IN PROGRESS BEFORE A COURT,

ARBITRATION BODY OR PUBLIC ADMINISTRATION AUTHORITY

At 30 June 2019, there were no proceedings on-going before a court or other authority, the object of which was a material payable

or liability.

10. SIGNIFICANT INFORMATION FOR ASSESSMENT OF THE COMPANY

10.1.DIVIDEND

On 28 June 2019, the Company's Ordinary General Meeting adopted a resolution on the payment of a dividend from the net

profit for financial year 2018.

In accordance with this resolution, the Ordinary General Meeting set the amount of dividend at PLN 10 744 800.00,

i.e. PLN 0.33 per share.

The dividend applied to all 32 560 000 shares of RAWLPLUG S.A.

The Company's Ordinary General Meeting also decided as follows:

✓ ex-dividend date - 8 August 2019,

✓ dividend payment date - 23 August 2019.

10.2.INFORMATION SIGNIFICANT TO ASSESSING THE GROUP'S AND COMPANY'S

FINANCIAL SITUATION, INCLUDING ITS ABILITY TO PAY LIABILITIES

On 22 February 2019, RAWLPLUG S.A. signed an annex to a Multi-Product Agreement of 3 March 2014 with ING Bank Śląski

S.A., as referred to in current reports 3/2014 of 4 March 2014, 3/2015 of 7 April 2015 and 23/2015 of 23 December 2015. The

annex increased RAWLPLUG S.A.'s limit to PLN 70 million and extended the repayment deadline to 27 February 2022. The

Annex was announced by the Company in current report 3/2019 of 22 February 2019.

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RAWLPLUG GROUP


On 25 March 2019, RAWLPLUG S.A. signed annex to a credit agreement executed on 26 June 2003 between Bank BGŻ BNP

Paribas S.A. and RAWLPLUG S.A. The annex consolidated RAWLPLUG S.A.'s liabilities towards BGŻ BNP Paribas S.A. and

the acquired Raiffeisen Bank Polska S.A. and extends the credit repayment period. Pursuant to the annex, PLN 19 million from

the existing PLN 84 million limit with Raiffeisen Bank Polska S.A. was transferred to a separate contract to be used as reverse

factoring. At the same time, this limit, in a separate agreement, was increased to USD 6 million. The existing credit limit available

at BNP Paribas S.A. (prior to the Banks' merger) did not change and remains at PLN 40 million. Thus, the total debt in accordance

with the provisions of the annex amounts to PLN 105 million. Aside from RAWLPLUG S.A. and Koelner Rawlplug Sp. z o.o.,

Koelner Rawlplug IP Sp. z o.o. became a co-borrower. In addition, based on the contract, collateral in the form of RAWLPLUG

S.A. shares held by Amicus Poliniae Sp. z o.o. was released. The credit facility can be used in PLN, USD, EUR and CHF. The

credit repayment deadline has been extended to 30 April 2022. The Annex was announced by the Company in current report

9/2019 of 3 April 2019.

10.3.EVENTS AFTER THE END OF THE REPORTING PERIOD

On 23 August 2019, the Supervisory Board of RAWLPLUG S.A. adopted the "Management Board and Supervisory Board

remuneration policy at RAWLPLUG S.A. in Wrocław." This document contains a summary of general assumptions with regard

to remuneration for members of the Company's Management Board and Supervisory Board. Detailed remuneration rules are set

in accordance with commonly applicable laws and the Company's internal regulations, especially its Articles of Association.

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RAWLPLUG GROUP


11. GROUP FINANCIAL RESULTS

The following alternative measures of results are presented to comprehensively depict the Group's financial situation.

RAWLPLUG Group presents these specific alternative measures of results because they are standard measures and ratios

commonly used in financial analysis. They provide important information on financial situation, operational efficiency,

profitability and cash flows. Selection of alternative measures of results is preceded by analysis in order to provide investors

with useful information on the Group's financial situation, cash flows, and they provide an ultimate way to evaluate the Group's

financial results.

11.1. CONSOLIDATED STATEMENT OF PROFIT AND LOSS

RAWLPLUG Group

01-06.2019 01-06.2018 % change

Revenue from sales 424 834 384 871 10.4

Cost of sales ( 283 783) ( 252 966) 12.2

Gross profit on sales 141 051 131 905 6.9

Selling costs ( 80 509) ( 70 087) 14.9

Administrative expenses ( 24 784) ( 24 050) 3.1

Profit on sales 35 758 37 768 ( 5.3)

Other operating revenues 4 844 4 594 5.4

Other operating expenses ( 7 329) ( 6 374) 15.0

Operating profit 33 273 35 988 ( 7.5)

Finance income 1 799 887 102.8

Finance costs ( 6 137) ( 5 592) 9.7

Share of the net profit (loss) of equity-accounted entities ( 112) - 0.0

Gross profit 28 823 31 283 ( 7.9)

Income tax ( 5 390) ( 6 851) ( 21.3)

Net profit 23 433 24 432 ( 4.1)

Depreciation 15 704 13 061 20.2

EBITDA 48 977 49 049 ( 0.1)

Consolidated revenue from sales in H1 2019 was PLN 424 834 thousand, up 10.4% on the same period the previous year.

Operating profit reached PLN 33 273 thousand (down by 7.5% from the previous year), while EBITDA was PLN 48 977

thousand, i.e. 0.1% lower than in H1 2018. RAWLPLUG Group generated PLN 23 433 thousand in net profit in the first six

months of 2019 (vs. PLN 24 432 thousand in H1 2018, denoting a 4.1% decrease).

11.2. ASSET AND LIABILITY STRUCTURE IN THE CONSOLIDATED STATEMENT OF FINANCIAL

POSITION

Selected items from RAWLPLUG Group's consolidated statement of financial position

30.06.2019 30.06.2018 Change

TOTAL ASSETS 998 191 971 464 26 727

Non-current assets, including: 511 970 465 364 46 606

Intangible assets 79 553 78 246 1 307

Property, plant and equipment 307 263 285 769 21 494

Investment properties 3 401 3 401 -

Investments in associates

1 067 - 1 067

Non-current financial assets 65 068 35 023 30 045

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RAWLPLUG GROUP


30.06.2019 30.06.2018 Change

Non-current receivables and prepayments 6 219 4 691 1 528

Deferred income tax assets 49 399 58 234 ( 8 835)

Current assets, including: 486 221 506 100 ( 19 879)

Inventories 255 059 251 402 3 657

Receivables and prepayments 186 446 180 547 5 899

Current financial assets 4 103 34 972 ( 30 869)

Cash and cash equivalents 38 897 38 914 ( 17)

TOTAL EQUITY AND LIABILITIES 998 191 971 464 26 727

Equity 469 013 446 854 22 159

Liabilities 529 178 524 610 4 568

Non-current liabilities, including: 255 051 158 400 96 651

Loans and borrowings 219 978 123 308 96 670

Current liabilities, including: 274 127 366 210 ( 92 083)

Loans and borrowings 61 632 152 936 ( 91 304)

Trade and other payables 159 906 179 059 ( 19 153)

30.06.2019 30.06.2018

Share of non-current assets 51.3% 47.9%

Share of current assets 48.7% 52.1%

Share of inventories in current assets 52.5% 49.7%

Share of receivables in current assets 38.3% 35.7%

During the past 12 months, i.e. from 30 June 2018 to 30 June 2019, the balance sheet total increased by PLN 26 727 thousand.

On the asset side, tangible assets and intangible assets grew by PLN 22 801 thousand, current receivables by PLN 5 899 thousand

and inventories by PLN 3 657 thousand. On the asset side, certain long-term loans were reclassified from short-term to long-

term (amount of PLN 30 045 thousand).

On the equity and liabilities side, equity went up by PLN 22 159 thousand, while loan and borrowing liabilities increased by

PLN 5 366 thousand and trade and other payables declined by PLN 19 153 thousand.

11.3. RAWLPLUG GROUP'S REVENUE FROM SALES

30.06.2019 30.06.2018 % change

Revenue from sales 424 834 384 871 10.4

Cost of sales ( 283 783) ( 252 966) 12.2

Gross profit on sales 141 051 131 905 6.9

Margin I 33.2% 34.3%

Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018

Revenue from sales 216 337 208 497 184 581 206 049 206 647 178 224

Cost of sales ( 144 213) ( 139 570) ( 123 008) ( 135 329) ( 133 411) ( 119 555)

Gross profit on sales 72 124 68 927 61 573 70 720 73 236 58 669

Margin I 33.3% 33.1% 33.4% 34.3% 35.4% 32.9%

Consolidated revenue from sales in H1 2019 was PLN 424 834 thousand, up 10.4% on the same period the previous year.

This resulted from higher export sales, development of the RAWLPLUG brand and sales of specialist screws for the electric

machinery and automotive industries, which is gradually replacing the sales of low-margin assortment and third-party brands.

In H1 2019, gross margin was 33.2%, compared with 34.3% in H1 2018. On a quarterly basis, gross margin in the second quarter

of 2019 was 33.3% and was lower than in Q2 2018 (35.4%).

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RAWLPLUG GROUP


RAWLPLUG Group sales

01-06.2019 01-06.2018 Change

Sales location PLN 000s % share PLN 000s % share PLN 000s %

Domestic 132 399 31.2% 122 726 31.9% 9 673 7.9%

Export 292 435 68.8% 262 145 68.1% 30 290 11.6%

Total 424 834 100.0% 384 871 100.0% 39 963 10.4%

11.3.1. DOMESTIC SALES

In the first half of 2019, domestic sales came to PLN 132 399 thousand, a level 7.9% higher than that achieved in the preceding

year. The growth in domestic sales was caused by a partial change in product portfolio, from standard to specialist products,

which are more technologically advanced. Currently, all efforts of our domestic salesforce continue to be directed at acquiring

clients from the special products segment - retaining the level of sales from before the removal of duty will be largely dependent

on the development of new market segments.

11.3.2. FOREIGN SALES

RAWLPLUG Group's H1 2019 foreign sales reached PLN 292 435 thousand, up by 11.6% thousand from H1 2018. The Group

recorded growth in foreign sales largely due to new high-margin RAWLPLUG-branded products as well as a substantial increase

in screw product sales on Western European markets. The sales growth in foreign markets largely took place in Western European

markets (Great Britain, France, Germany) and Central Europe (Hungary in particular). RAWLPLUG Group's export sales

currently accounts for 68.8% of total sales and is growing (68.1% in the preceding year).

11.3.3. PRODUCT STRUCTURE

Assortment 01-06.2019 01-06.2018 Change

PLN 000s % share PLN 000s % share PLN 000s %

Products 265 429 62.5% 231 022 60.0% 34 407 14.9%

Goods and materials 157 901 37.2% 152 540 39.6% 5 362 3.5%

Services 1 504 0.4% 1 309 0.3% 194 14.8%

Total 424 834 100.0% 384 871 100.0% 39 963 10.4%

In the first half of 2019, we continued our strategy of changing the product portfolio, which consisted of dropping low-margin

products and trademarks (third-party labels) and focusing on higher-margin products. As a result, these products accounted for

62.5% of total sales.

11.3.4. SUPPLY SOURCES

Goods for resale as well as materials and goods for further processing that RAWLPLUG Group purchases are either low-

processed (e.g. plastics, steel), medium-processed (e.g. bolts, screws, simple tools) or highly-processed (power tools). They are

procured on an on-going basis from domestic, European and Asian (Taiwan, Malaysia, China) suppliers. RAWLPLUG Group

does not have any suppliers that would have exclusive rights to any assortment. There is an alternative supplier for each product

and material, resulting from the Group's long-term strategy, No supplier exceeded 10% in the purchasing structure, however

RAWLPLUG Group strives to maximise purchasing volumes, which go through its own purchasing company in China, Rawlplug

Shanghai Trading Ltd.

11.4. SELLING COSTS AND ADMINISTRATIVE EXPENSES

30.06.2019 30.06.2018 % change

Selling costs 80 509 70 087 14.9

Administrative expenses 24 784 24 050 3.1

Operating expenses 105 293 94 137 11.9

Share of costs in sales 24.8% 24.5%

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RAWLPLUG GROUP


Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018

Selling costs 41 671 38 838 41 542 37 218 36 582 33 505

Administrative expenses 12 706 12 078 14 314 12 279 12 655 11 395

Operating expenses 54 377 50 916 55 856 49 497 49 237 44 900

Share of costs in sales 25.1% 24.4% 30.3% 24.0% 23.8% 25.2%

In the first six months of 2019, RAWLPLUG Group recorded 11.9% growth in selling costs and administrative expenses

(comparing with the same period last year), although their share in sales remained almost unchanged at 24.8%. The cost increase

is driven by expenditures on developing export sales, mainly in Far Eastern markets and in Africa, which given their early stage

of development are not yet generating significant sales volumes and thus significant profits.

The Management Board continues to work on reducing costs. The aim is to closely match costs to the level of revenue so as to

avoid losses when sales stall.

11.5. FINANCING ACTIVITIES

30.06.2019 30.06.2018 % change

Finance income 1 799 887 102,8

Finance costs ( 6 137) ( 5 592) 9,7

Result on financing activities ( 4 338) ( 4 705) ( 7.8)

Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018

Finance income 907 892 327 261 571 316

Finance costs ( 2 970) ( 3 167) ( 4 111) ( 2 767) ( 3 056) ( 2 536)

Result on financing activities ( 2 063) ( 2 275) ( 3 784) ( 2 506) ( 2 485) ( 2 220)

In the first half of 2019, RAWLPLUG Group generated PLN 1 799 thousand in finance income and incurred PLN 6 137 thousand

in finance costs.

Finance income comprised (in PLN 000s):

01-06.2019 01-06.2018

Interest on loans and borrowings granted 741 630

Gains on exchange differences 946 210

Other interest 23 38

Measurement of derivatives 36 -

Other 53 9

1 799 887

Finance costs comprised (in PLN 000s):

01-06.2019 01-06.2018

Interest on loans, borrowings and leases 4 121 3 553

Other interest 390 247

Commissions 1 012 922

Impairment of financial assets 14 13

Sureties and guarantees 134 233

Other 466 624

6 137 5 592

On 18 December 2018, RAWLPLUG S.A. executed a forward contract with BNP Paribas Bank Polska S.A. (formerly Bank

BGŻ BNP Paribas S.A.) for GBPPLN 1 000 thousand with delivery date of 21 June 2019. After settling these transactions, the

Group posted an aggregate gain of PLN 36 thousand, which was recognised as finance income in the statement of profit and

loss.

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RAWLPLUG GROUP


The Management Board continues to prioritise cost optimisation in both operating and financing activities. This will result in

more streamlined processes within the Group and use of natural hedging for foreign currency-denominated balance sheet items

in as far as practicable.

11.6. PROFITABILITY RATIOS

Group profitability ratios 30.06.2019 30.06.2018

Gross sales margin 33.2% 34.3%

Operating margin 7.8% 9.4%

Net margin 5.5% 6.3%

Return on assets 2.3% 2.5%

Return on equity 5.0% 5.5%

EBITDA margin 11.5% 12.7%

Ratio methodology:

✓ Gross sales margin = gross profit on sales / revenue from sales

✓ Operating margin = operating profit / revenue from sales

✓ Net margin = net profit / revenue from sales

✓ Return on assets = net profit / total assets

✓ Return on equity = net profit / equity

✓ EBITDA margin = EBITDA / revenue from sales

Profitability ratios slightly declined in H1 2019, comparing with the same period last year.

11.7. LIQUIDITY RATIOS

Group's liquidity ratios 30.06.2019 30.06.2018

Current ratio 1.77 1.38

Liquidity ratio 0.84 0.70

Ratio methodology:

✓ Current ratio = current assets / current liabilities

✓ Quick ratio = (current assets - inventories) / current liabilities

At the end of the first half of 2019, liquidity ratios increased and are at safe levels.

11.8. DEBT RATIOS

Group's debt ratios 30.06.2019 30.06.2018

Debt ratio 53.0% 54.0%

Financial leverage 112.8% 117.4%

Equity to non-current assets 91.6% 96.0%

Long-term debt ratio 25.6% 16,3%

Non-current liabilities to liabilities 48.2% 30.2%

The debt ratio deceased from 54.0% to 53.0%, while debt to equity declined from 117.4% to 112.8%.

Ratio methodology:

✓ Debt ratio = current and non-current liabilities / total assets

✓ Financial leverage = current and non-current liabilities / equity

✓ Equity to assets = equity / total assets

✓ Long-term debt ratio = non-current liabilities / total assets

✓ Non-current liabilities to liabilities = non-current liabilities to liabilities

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RAWLPLUG GROUP


11.9. PROGRESS VERSUS PREVIOUSLY PUBLISHED GUIDANCE

The Management Board did not publish a financial forecast for 2019.

11.10. FACTORS AND EXTRAORDINARY EVENTS HAVING AN IMPACT ON FINANCIAL RESULTS

In the first half of 2019, there were no extraordinary events that would have an impact on financial results.

Radosław Koelner - President of the Management Board

..………………………………………………

Marek Mokot - Vice-President of the Management Board

..………………………………………………

Piotr Kopydłowski - Member of the Management Board responsible for finance

...…….………………………………………..

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RAWLPLUG S.A. ul. Kwidzyńska 6 51-416 Wrocław

tel. +48 71 32 60 100

fax +48 71 37 26 111

e-mail: [email protected]

www.rawlplug.pl

mailto:[email protected]

http://www.rawlplug./

Documents

RAWLPLUG GROUP · 1 rawlplug group management report on group operations for the period from 1 january 2019 to 30 june 2019 wrocŁaw, 29.08.2019