Rational AG - Statement on the first quarter of 2019

Landsberg am Lech, 7 May 2019

Rational AG - Successful start to fiscal year 2019

- 12 percent sales revenue growth

- Good development for both product groups

- Growth drivers Germany, North America and Asia

- 24 percent EBIT margin

- Outlook confirmed

12 percent sales revenue growth
In total, Rational generated sales revenues of 194.3 million euros in the first quarter of 2019. The reported 12 percent increase in sales revenue brings the company's expansion above its own long-term growth targets in the high single-digit range. Catch-up effects resulting from the brand merger in 2018, the announcement of a price adjustment in the home market of Germany and positive currency effects had a significant positive impact. In addition, the product mix helped to push up sales revenues.

The largest single factor was exchange rate movement: the strong depreciation of the euro - against almost all currencies relevant to Rational - compared with the same quarter of the previous year had a considerable impact on sales revenues in the first quarter of 2019. In particular, the rise of the US dollar (+8 percent), pound sterling (+2 percent), the Canadian dollar (+4 percent), the Japanese yen (+6 percent), the Chinese yuan (+2 percent) and the Mexican peso ( 5 percent) had a significant positive impact on sales revenues.

Adjusted for these effects, Rational sales revenues worldwide increased by 10 percent and is thus at the upper end of our expectations.

Good development for both product groups
The combi-steamer product group, which represents the production and sale of the SelfCookingCenter^(R) and the CombiMaster^(R) Plus, experienced growth in sales revenues of
12 percent in the first quarter of 2019 to 178.6 million euros (2018: 160.0 million euros). The VarioCookingCenter^(R) product group experienced growth in sales revenues of 17 percent to
15.7 million euros (2018: 13.4 million euros).

Growth drivers Germany, North America and Asia
In our home market of Germany, Rational experienced growth of just under 16 percent in the first three months of the current fiscal year. The reason for this strong business performance was the non-recurring anticipatory effect of an announcement that the prices of both combi-steamers and the VarioCookingCenter^(R) would be adjusted as from April 2019, which made customers bring forward purchases. An important contribution to growth in this regard came from the VarioCookingCenter^(R), whose sales revenues increased by 32 percent.

In Europe (excluding Germany), sales revenues were up by 6 percent. Performance in France was positive, which was supported by very good trade fair business. Another growth driver was Italy, where the VarioCookingCenter^(R) made an above-average contribution to sales revenue growth.

Sales revenues in North America in the first three months were 26 percent above the previous year. This is mainly attributable to growth in Canada, which was considerably above average, and the positive impact of the sharply higher US dollar and the higher Canadian dollar. Without currency effects, the North America region experienced growth of around 18 percent.

Latin America, where sales revenues increased by almost 7 percent, also made a positive contribution to business performance. The region's key growth driver was Mexico, where relatively moderate expansion in the previous year was followed by significant growth in the first three months of the current fiscal year.

Rational likewise got off to a very good start to the year in Asia with sales growth of just under
17 percent compared with the previous year. China was once again the main driver of this growth. Business development in India and the Asean Business Development region was also very healthy. Without currency effects, the region experienced growth of around 14 percent.

Sales revenues in the Rest of the world region were 3 percent higher than the previous year.

Gross margin at previous year's level
In the first quarter of 2019, Rational generated a gross profit of 114.8 million euros (2018: 102.7 million euros). This equates to an increase of 12 percent compared with the previous year. At 59.1 percent, the gross margin remained at the previous year's level (2011: 59.2 percent).

24 percent EBIT margin
Earnings before financial result and income taxes (EBIT) amounted to 46.7 million euros, 14 percent up on the previous year (2018: 40.8 million euros). The EBIT margin (ratio of EBIT to sales revenues) reached 24.0 percent (2018: 23.5 percent). The increase in EBIT and higher EBIT margin were mainly due to the positive currency effects described and translation effects on foreign currency positions as at the balance sheet date. The EBIT margin after adjustment for exchange rate movements was 22.2 percent.

Operating costs rose compared to the first quarter of 2018 by 14 percent to 70.0 million euros (2018: 61.6 million euros). The increase in costs was largely attributable to sales and service, which saw a rise of 5.6 million euros to 50.3 million euros (2018: 44.7 million euros). Research and development costs rose by 14 percent to 10.3 million euros compared with the previous year (2018: 9.0 million euros). After three months, general administration expenses amounted to 9.3 million euros, up 19 percent over the previous year (2018: 7.8 million euros).

76 percent equity ratio - cash flow from operating activities up
On 31 March 2019, the equity ratio was at the usual high level of 76 percent (2018: 80 percent). The year-on-year decline is largely attributable to lease accounting under IFRS 16. The equity ratio will noticeably decrease again with the planned dividend distribution in May (proposed dividend of 9.5 euros per share, which equates to 108.0 million euros).

In the first three months of the current fiscal year, cash flow from operating activities was 24.2 million euros (2018: 14 thousand euros). The rise was mainly driven by higher earnings.

The cash flow from investing activities includes investments in property, plant and equipment and in intangible assets. In the first quarter, these investments amounted to 9.2 million euros (2018: 17.2 million euros), a decrease of 8.0 million euros on the previous year.

The cash flow from financing activities reflects repayments of principal and interest on loans. There was an outflow of 3.4 million euros (2018: 0.7 million euros). The change is primarily the result of payments of principal and interest on lease liabilities.

On 31 March 2019, in addition to cash and cash equivalents of 169.5 million euros (2018: 178.7 million euros), Rational held financial assets in fixed-term deposits and a special fund amounting to 74.3 million euros (2018: 72.6 million euros). The lower liquidity compared with the previous year is mainly attributable to high investments made during the previous year and the past quarter.

More than 50 new employees hired
There was continued focus in 2019 on further expansion of the global sales and service organisation. 53 new employees were added in the first quarter of 2019, almost half of them in Germany. Most of the new jobs were in sales and sales-related areas, with the remainder mostly in supporting functions. As at 31 March 2019, the Rational Group employed 2,166 people.

Outlook confirmed
The large majority of our customers are so satisfied with the products and services that they would be happy to purchase them again at any time and also recommend them to friends and colleagues. This assessment was confirmed again in the latest customer satisfaction survey. Given the high market potential and the close association with the basic human need for food, the Executive Board of Rational AG believes the company is well placed to keep on growing successfully.

As a result of the special effect described above, which led to sales revenue growth of 12 percent and a higher EBIT margin than in the previous year, performance in the first quarter of 2019 was above the Company's expectations. Given the high base effect of strong growth of 17 percent in the second quarter of 2018 and the above-mentioned anticipatory effects in the quarter under review, the Company does not expect any significant expansion in the next quarter. Given the current customer structure and business model, we strongly believe that business performance guided purely by short-term quarterly results is not in line with our Company's management approach.

Given this, the Rational AG Executive Board confirms the outlook provided for fiscal year 2019, in other words, sales revenue growth in the high single-digit range and an EBIT margin of around 26 percent.

Contact:
Rational AG
Stefan Arnold / Head of Investor Relations
Tel. +49 (0)8191 327-2209
Fax +49 (0)8191 327-72 2209
E-Mail: [email protected]
www.rational-online.com

Editorial note:

The Rational Group is the global market and technology leader for thermal preparation of food in professional kitchens. The company, founded in 1973, employs around 2,200 people, over 1,100 of whom are in Germany. Rational was floated in the Prime Standard of the German stock market in 2000 and is currently represented in the SDAX.

The company's principal objective is to offer maximum customer benefit at all times. Rational is committed to the principle of sustainability, which is expressed in its corporate policies on environmental protection, leadership, job security and social responsibility. Numerous international awards bear witness to the high quality of the work done by Rational's employees year for year.

Disclaimer

This quarterly statement contains forward-looking statements that are based on assumptions and expectations at the time the statement is published. They are subject to risks and uncertainties and the actual results may differ significantly from those in the forward-looking statements. Many of these risks and uncertainties are determined by factors that are outside the influence of Rational AG and cannot be assessed reliably at present. They include future market conditions and economic trends, the actions of other market players, and legal and political decisions. Rational AG is also not obligated to publish revisions to these forward-looking statements in order to reflect events or circumstances that have occurred after they were published.