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Polygon: Interim Report January - March 2016


· Somewhat soft top line, 1.5% lower than in the same period last
year. However, underlying organic growth showed a positive trend,
increasing by 3.3% excluding the closure of the PDR activities in the
US and currency effects. Additionally, the UK market saw some effects
from flooding but most of the invoicing is expected to come in Q2.

· Order intake for the quarter was slightly lower than last year's
but was impacted by some large loss orders that came in just after
the quarter cut-off date. Despite this, the underlying business
remains a bit slow after another mild winter.

· Adjusted EBITA amounted to EUR 6.1 million (4.4), an increase of
39% compared to the previous year. The main result improvement came
from continental Europe driven by Germany which, along with the US,
is continuing to perform well following the restructuring activities
last year.

· Operating profit before amortization (EBITA) was EUR 5.8 million
(4.4), an increase of 32%. Non-recurring items were on a low level in
both 2016 and 2015.

· Cash flow from operating activities of EUR 0.7 followed the
seasonal pattern. Net debt was EUR 100.8 million (107.4).

· The Board of Directors was further strengthened in January 2016
with the addition of Ole Skov.

Group Key Figures
For Group Key Figures table, please refer to attached file below.

Comments from the CEO

Polygon off to a strong start in 2016

The restructuring programmes that were executed during the second half
of 2015 continue to deliver a strong contribution to our Q1

Both Germany and the US show impressive improvements in their results
and together represent a large part of the total adjusted EBITA
increase of 39% for the Group. The German business continues to pick
up pace under the new leadership, in combination with a much lower
cost structure. The decision to focus on Temporary Climate Solutions
in the US has paid off with a significant increase in gross margin,
whilst reducing overheads. Polygon Group now has stable country
management teams in place and we are seeing the positive effects of
their strong leadership cascade down into the country organizations.
The double-digit improvement compared to an already strong quarter
last year was achieved in challenging market conditions and is a
direct result of a well functioning organization. The investment in
creating a clear and simple structure, in combination with a strong
company culture that has been built over the last two years, are the
key drivers for the improved performance.

We have, as mentioned before, worked hard and diligently on getting
the basics in place. We have seen a consistent improvement in
performance in terms of both profitability and customer satisfaction.
The results of our annual employee survey have again improved
compared to the previous year and are well above the average for
comparable service companies. Our philosophy of continuously
investing in leadership skills and taking care of our people first
has contributed to a highly motivated and engaged workforce, which in
turn has led to satisfied customers and healthy results!

The most important side effect of our strong platform is that it
enables us to focus on improving our service delivery processes to
improve gross margins, whilst at the same time starting to prepare
for growth in new service lines and bolt-on acquisitions in our most
mature countries. The expected improvement in cash flow from
increasing profits, substantially reduced restructuring and
continuous control of working capital, can be used to finance
acquisitions as and to reduce our net debt.

Looking more closely at the results, we also need to conclude that we
face a lower growth rate than we were aiming for, in spite of some
positive effects from major flooding in the UK. The closure of
projects from the UK event is slow and invoicing is expected to occur
during Q2. The closing down of the Property Damage Restoration
services in the US also had a negative effect on volumes compared to
the previous year. Adjusted for currency and the aforementioned US
effects, organic growth amounts to 3.3%. Due to warm winter
conditions and a general lack of damage, the reported "business as
usual" claim level, continues to be low. Efficiencies, with regard to
both direct costs resulting in improved gross margins and indirect
savings from restructuring projects last year, are the main drivers
behind the improved results. Nine out of our 13 countries show
increased profitability compared to last year.

Preparations for the introduction of our new field force system are
still in progress and pilots are expected to take place in Austria
and the Netherlands during Q3. The rollout to the remaining countries
will take place once the system has been successfully piloted and is
expected to further enhance our service delivery process, resulting
in continued gross margin improvements.

Short-term outlook

The effects of business optimization projects and the strategy shift
in the US should contribute positively in 2016. Weather-related
events in 2016 are expected to contribute positively, as 2015 was a
year with almost no weather events.

Market development

There are several market trends in the property damage restoration
market that are benefiting larger players like Polygon, such as
procurement centralization, the customer preference for
one-stop-shops and the more complex requirements for front-end IT
systems. Global warming is gradually increasing rainfall levels and
extreme weather conditions, which will consequently increase water

Net sales and profit for the first quarter of 2016

Consolidated sales amounted to EUR 109.4 million, a decrease of 1.5%
compared to the same quarter of last year. The main reason behind the
decrease is the closure of the PDR business in the US. Organic
growth, excluding the effect in the US and currency effects, was
positive at 3.3%. Continental Europe, driven by Germany, showed
growth of close to 5%. The Nordic area continued to suffer from the
mild winter weather with some local exceptions. In North America,
sales in local currency were down by 34% due to the shift to only TCS
activities in the US and the continued impact on Canada from a slow
market and structural changes. On a like-for-like basis, excluding
the PDR business, the US revenues increased by 15%.

Order intake was lower than last year but orders from the flooding in
late December in the UK and large loss orders gained during the
initial days of Q2 will have a positive impact in Q2.

Adjusted EBITA of EUR 6.1 million (4.4) improved by 39%. The impact of
last year's restructuring and structural improvement, resulting in
lower indirect expenses and increased efficiency in several
countries, is behind the development. The main improvement is in
Continental Europe driven by Germany and strong development in
Austria. Non-recurring costs amounted to EUR 0.3 million (0.0).
Operating profit before amortization (EBITA) was EUR 5.8 million

Net financial expenses for the period amounted to EUR 2.7 million
(positive: 0.8) of which EUR 2.0 million refers to interest expenses
and EUR 0.7 million refers to exchange rate losses. In the first
quarter of 2015, interest expenses amounted to EUR 1.8 million while
exchange rate gains amounted to EUR 2.6 million resulting in a
positive financial net of EUR 0.8 million.

Profit before tax amounted to EUR 1.8 million (3.8) and net profit was
EUR 1.7 million (3.7).

Cash flow and financing

Cash flow from operating activities during the first quarter was EUR
0.7 million (0.6) which followed the normal seasonal pattern with a
working capital increase. Working capital was below last year's level
both in number of days as well as in absolute numbers.

Total interest-bearing net debt amounted to EUR 100.8 million
(December 2015: 96.2).

Equity amounted to EUR 44.2 million (December 2015: 42.3).

The Group's liquidity buffer amounted to EUR 31.6 million (December
2015: 36.5), consisting of cash and cash equivalents of EUR 22.0
million (December 2015: 26.5) and unutilized contracted loan
commitments of EUR 9.6 million. (December 2015: 10.0)

Capital expenditure

Capital expenditure was driven by focus on TCS and amounted to EUR 4.0
million (2.5).

Parent Company

The consolidated figures in this report are presented at the
consolidated level for Polygon AB. The Parent Company, Polygon AB
(corporate identity number 556816-5855), directly and indirectly
holds 100% of the shares in all subsidiaries in the Group, except for
the company in Denmark, in which the non-controlling interest is
24.2%. The net loss for Polygon AB for the first quarter amounted to
EUR 50 thousand (63).

Significant risks and uncertainties

Around 75% of Polygons business consists of property damage control,
which follows a seasonal pattern of predictable demand. The remaining
25% is related to more extreme and less predictable events caused by
weather and fire. The frequency of property damage can vary depending
on circumstances beyond Polygon's control, the outdoor temperature
and the weather. Since part of Polygon's cost structure is fixed, the
proceeds of the operations are unpredictable to some degree and vary
from time to time.

Polygon is to a large extent dependent on its key customers, the
insurance companies, and must maintain mutually beneficial
relationships with them in order to compete effectively. Our top ten
customers represent about 30% of Polygon's sales, with the newest
customer on the top-ten list having a seven-year relationship.

For further details about the Group's risks and uncertainties, please
refer to the 2015 Annual Report.

Polygon's view is that there have not been any significant changes
during the reporting period with regard to the risks and
uncertainties that were presented in the Annual Report.

Related party transactions

The Group is under the controlling influence of Polygon Holding AB,
the Parent Company of Polygon AB. Polygon Holding AB is under the
controlling influence of MuHa No2 LuxCo S.á.r.l. There have been no
material transactions with companies in which MuHa No2 LuxCo S.á.r.l
has significant or controlling influence.


The Board of Directors of Polygon AB (publ) or any of its subsidiaries
may from time to time resolve to purchase notes issued by Polygon AB
(publ), which are listed on Nasdaq Stockholm, on the market or in any
other manner. Any purchase of notes will be made in accordance with
the terms and conditions of the notes and the applicable laws and

Accounting policies

The interim report for the Group...

Författare WKR

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