Management Presentation | April 27th 2018 · 610,8 666,1 684,1 -500,0 1 000,0 1 500,0 2 000,0 2...

PRACUJEMY DLA CIEBIE / LET US WORK FOR YOU

Work Service FY 2017Management Presentation | April 27th 2018

LET US WORK FOR YOU 1


`

LET US WORK FOR YOU

Disclaimer

This presentation was prepared by Work Service S.A. (The „Company”) for informative purpose only. It’s presentingselected data of Work Service Capital Group, and by any mean should not be treated as investment advise, offer ofpurchasing or sale of any shares or other financial instruments issued on behalf of Work Service Group, or undertake anycommercial activity with The Company and it’s affiliated subsidiaries.

The presentation was prepared with preservative of due diligence, however The Company does not guarantee accuracyand completeness of contained information. It’s advised that any person intending to decide to invest in any financialinstruments issued by The Company base it’s decision on officially issued reports prepared in accordance with effectivelegal regulations.

Work Service S.A. and it’s subsidiaries is not being liable for any effects of decisions based on information and content ofthis presentation. Presentation may also consists some statements related to the future, especially expected financialresults and/or performance indicators. All statements related to the future are burden with known and unknown risks,uncertainties and other factors which may influence that future results, performance or achievements of Work ServiceS.A. may substantively deviate from presented assumptions.

2

PRACUJEMY DLA CIEBIE / LET US WORK FOR YOULET US WORK FOR YOU

Agenda

1

3

2

2017 Key Events

FY17 Financial Results

2018 Plans and Strategic Perspective

4 Summary | Q&A

3


2017 Key Events



53% | 47%revenues split

domestic vs. international

>37.500 FTE employed on average

~2.659mPLN

revenue

+9,7%YoY growth on

continued business 7 countries

flexible employment forms core business

>10.000 cross borded employees

~6%Group revenues

Work Service Group



2017 Key Events

Acquisition of APT Romania. Expansion on very promising market with #4 temp staffing

agency

Debt and earn-out liabilities decreased by

~50 mPLN

Clear Focus on core business and

development of cross border employment

services

Exiting from investments in IT Kontrakt and Work Service Russia. Strategic

decision to sale Exact Systems Group

ENTERING NEW MARKET

DEBT DELEVERAGING

NEW DEVELOPMENT STRATEGY

DISINVESTMENTS



Sale of IT Kontrakt

- Execution of Work Service WS2020 Strategy to Focus on core business of flexible employment forms in CEE and to deleverage

the Company

- Transaction closed on July 1st 2017, purchaser Cornerstone/Oaktree

- Purchase price 146,9 mPLN

- Part of the funds raised by the Company from the sale of Shares will be used for the early redemption of the U series bonds

issued by the Company with a nominal value of PLN 80 million

- The operation and early redemption of the U series bonds issued by the Company are part of the reduction of debt and the

implementation of optimization of the Company's financial policy



Scale of Group Operations

23.064

1.4071.074

1.827

1.060

6.3471.688

FTE (full time equivalent) is personnelservices industry standard KPI to measureand benchmark business volumes. It’sbased on total number of working hoursdivided by 168 hours.

FTE number has direct impact on revenuesand margin as it’s fully correlated withtopline metrics.

Data represents average monthly FTE infiscal year 2017.



Crossborder Achievements

9

Ukraine – Poland:From ~2.000 in Jan’17 to

~4.000 employees in Jan’18

NEW! Serbia – Slovakia:

320 employees placed in 2017

NEW! Poland – Czech:

From zero to more than 1.000employees recruited in 2017,currently >800 employed

Hungary – Austria:

~250 employees on-going, newcontracts to take off in 2018

Poland – Germany:

More than 2.000 employeesrecruited in 2017


Revenue [m PLN]

Record high FY with historic 2.5 bPLNexceeded.

Topline growth of 9,7% (comparabledata, no IT Kontrakt and WS Russiaincluded) is in line with market growth,however Group dynamic is diluted bydecreased sales in WS Germany (95%vs. YA).

Domestic core business of flexibleemployment forms proves strongperformance with 10% growth year-on-year.

Bottom line results diminished inQ4’17 due to non-cash accountingauditor’s corrections in amount of c.a.24.4 mPLN.

Capital Group ResultsRevenue and EBIT

EBIT [m PLN]

Source: The Company

188,7 345,9

474,5 591,9 655,1 221,4

390,0

502,6

611,3 686,4

238,8

488,3

548,8

616,0

633,6

269,5

515,6

610,8

666,1

684,1

-

500,0

1 000,0

1 500,0

2 000,0

2 500,0

3 000,0

2013 2014 2015 2016 2017

Q1 Q2 Q3 Q4

9,1 16,2 16,3 16,7

25,2 8,5

16,2 16,6 15,5

11,5

11,2

21,1 25,3

22,9 15,2

19,2

35,6 33,3

8,0

-8,4

-20,0

-

20,0

40,0

60,0

80,0

100,0

2013 2014 2015 2016 2017

Q1 Q2 Q3 Q4



111%

112% Work Service subsidiaries

(flexible employment forms)

110% Antal

(permanent recruitment)

124% Exact Systems Group

(quality control outsourcing)

Topline 2017 vs. 2016

11

Work Service Core Business Subsidiaries

Based on new structure of assets: excluding IT Kontrakt and Work Service Russia

116%

131%102%

105% New market!

95%112% Work Service Group


2017 Revenues and EBIT

12

7,3%

11,5%

13,8%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

consolidation based excl. IT Kontrakt excl. IT Kontrakt andWS Germany

Work Service Group Topline Dynamic2017 vs. 2016

EBIT 2017:

68.0 mPLN Prognosis

67.9 mPLN Operational EBIT

--------------------------------------------------------------------

24.4 mPLN Auditors corrections

--------------------------------------------------------------------

43.5 mPLN after Auditors corrections

REVENUES 2017:

2.659 mPLN consolidation based

Non of auditor’s corrections is related to 2017 core business operational activity. Corrections relate mainly to capitalized costs from previous years.


Key Market Trends

Migracje zarobkowe

MINIMUM WAGE CANDIDATE MARKET

LABOR MIGRATIONS Migracje zarobkoweREGULATORY CHANGES

Insight:

Impact:

Minimum wage salary is being regulatory increased every 12 months, having an effect on overall labor costs on the whole market.

One of the industry Key Business Drivers having a positive impact on personnel services market value, operators revenue and margins. Due to regulations any labor costs increases are being fully covered by temp staffing customers (end user).

Insight:

Impact:

With historical low unemployment rates and historical high employment rates in the Region, market is in favor of Candidates/Employees. Labor demand stays strong while there are still fundamental competence and demographic gaps.

Market dynamic is working in favor of specialized and sizable personnel services operators, which broad service is keeping customers operational. It’s also a driver of margin increase.

Insight:

Impact:

Market demand stays strong and there are locations where there is no free workforce avaiblabe. In that case most efficient and quickest solution is to provide employees from abroad.

Share of cross border employment solution is growing, impacting average revenue per employee (due to more working hours and additional costs) as well as increasing average margin (due to more complex services of employment legalization and added value services of employees accommodation and transportation).

Insight:

Impact:

Governments of the countries in the region are undertaking efforts to quicken and simplify employment of foreigners, EU and non-EU citizens. Possitive public debate about cross border employment.

Regulatory changes are improving convenience and overall feasibility of employing foreigners. Strong demand is meeting high level of cross border solutions acceptance by customers as well as public opinion.



2017 Highlights Summary

Dynamic Topline Growth Cross Border Achievements Deleveraging the Company

12%2017 vs. 2016

>10.000Candidates found a job abroad in

2017 thanks to Work Service

~50 net mPLNSpend already in 2017 on

deleveraging the Company

• All CEE core markets growing double digit and above the expected market growth

• Specialized entities growing double digit with tremendous run of Exact Systems Group

• Work Service Germany on declining trend due to decreasing business with key customer and JV Partner –Fiege Logistic

• Dynamic growth of Ukraine to Poland cross-border line, almost doubled #FTE in 12 months

• New cross-border lines established: Poland to Czech and Serbia to Slovakia

• Stable but very prospectus cross-border line from Poland to Germany

• Decreasing Bonds debt financing level by c.a. 68 mPLN

• Decreasing earn-out liabilities toward German and Hungarian Partners by c.a. 38 mPLN

• Increasing Bank Loan financing facility by 55 mPLN

14

ITK, Russia, ExactStrategic Focus on core markets

• Based on disinvestment strategy The Company expects more than 350 mPLN in 2017/2018 proceedings from sale of it’s subsidiaries

• Vast majority of net proceedings is meant to be spend on further optimizing of Group financing by decreasing of debts and earn-out liabilities

Group Structure Changes


FY17 Financial Results

15


Statement of Comprehensive Income2017 vs. 2016

Source: The CompanyContinued business refers to consolidation based net of disinvestments in ITKontrakt and Work Service Russia. Relates to all following slides.


CONSOLIDATION BASED [t PLN] FY16 FY17Dynamic

2017/2016

Revenues 2 485 233 2 659 165 7,0%

Net revenues from sales of products 2 479 725 2 665 150 7,5%

Variation in stocks of products 5 487 -5 985

Net income on sale of goods and materials 21

Operating costs 2 420 971 2 606 365 7,7%

Depreciation 16 145 17 484 8,3%

Consumption of materials and energy 10 957 17 728 61,8%

Outside services 363 847 393 129 8,0%

Taxes and charges 5 298 4 330 -18,3%

Remuneration 1 598 361 1 727 150 8,1%

Social insurance and other benefits 384 592 403 607 4,9%

Other generic expenses 41 770 42 936 2,8%

Value of goods and materials sold

Profit (loss) on sales 64 261 52 800 -17,8%

Other operating incomes 22 195 27 113 22,2%

Other operating costs 23 407 36 429 55,6%

Profit (loss) on operating activities 63 049 43 485 -31,0%

Profit from sale of ITK Kontrakt 78 589 n/a

Net loss from revaluation of the ProService Group to fair value -158 924 n/a

Net loss from sale of other assets -1 867 n/a

Financial incomes 2 923 4 040 38,2%

Financial costs 35 072 40 344 15,0%

Gross profit (loss) 30 900 -75 021

Income tax 15 398 11 712 -23,9%

Net profit (loss) 15 501 -86 732

CONTINUED BUSINESS [t PLN] FY16 FY17Dynamic

2017/2016

Revenues 1 944 243 2 132 798 9,7%

Net revenues from sales of products 1 941 595 2 137 864 10,1%

Variation in stocks of products 2 648 -5 066 -291,3%

Net income on sale of goods and materials

Operating costs 1 933 532 2 126 685 10,0%

Depreciation 10 031 10 823 7,9%

Consumption of materials and energy 5 769 5 906 2,4%

Outside services 156 040 238 488 52,8%

Taxes and charges 4 049 2 909 -28,2%

Remuneration 1 383 991 1 487 730 7,5%

Social insurance and other benefits 341 871 356 353 4,2%

Other generic expenses 31 781 24 478 -23,0%

Value of goods and materials sold

Profit (loss) on sales 10 711 6 112 -42,9%

Other operating incomes 18 359 24 353 32,7%

Other operating costs 19 712 26 188 32,9%

Profit (loss) on operating activities 9 358 4 277 -54,3%

Financial incomes 1 979 3 734 88,7%

Financial costs 30 428 34 813 14,4%

Gross profit (loss) -19 091 -26 802 40,4%

Income tax 6 404 6 427 0,4%

Net profit (loss) -25 495 -33 229 30,3%


Statement of Cash Flow2017 vs. 2016

Comments

• Cash flows from operating activities decreaseddue to lower level of factoring utilization.

• Outflows from investing activities are mainlyrelated to Fiege JV (Work Service Germany) 2ndearn out tranche payment in Q1’17 andHungarian acquisitions earn outs payments inQ2’17.

• Inflow from investing activities is purely closingITKontrakt disposal transaction in June 2017.

• Negative cash flow from financing activities ismainly result of +55m PLN new debt facility fromPKO BP and 100m PLN redemption of bonds.

Source: The Company


As at Dec 31st [t PLN] 2016 2017


Total adjustments 81 369 76 550

Cash flows from operating activities 83 786 -19 741

Inflows 2 302 129 772

Outflows 30 453 125 978

Cash flows from investing activities -28 151 3 794

Inflows 110 000 92 580

Outflows 118 925 120 133

Cash flows from financing activities -8 925 -27 553

Increase (decrese) of cash and its net

equivalents 46 711 -43 500

Cash balance at the begining of the period 57 904 104 615

Cash balance at the end of the period 104 615 61 115


Balance Sheet2017 vs. 2016

Source: The Company


As at [t PLN] Dec 31st 2016 Dec 31st 2017

FIXED ASSETS 669 786 440 695

Intangible assets 61 126 44 887

Goodwill 549 644 354 334

Tangible fixed assets 31 207 16 997

Real property investments 1 615 2 690

Other financial assets 25 30

Other long-term assets 4 309 1 051

Other long-term financial assets 2 893 204

Deferred tax assets 18 157 20 348

Prepayments 811 154

CURRENT ASSETS 631 101 493 204

Inventory 28 342 16 702

Trade and other receivables 432 903 385 753

Other financial assets 29 236 30 812

Other short-term assets 9 351 1 238

Cash and other pecuniary assets 104 615 50 824

Prepayments 26 653 7 873

ASSETS CLASSIFIED FOR SALE 177 269

TOTAL ASSETS 1 300 887 1 111 167

As at [t PLN] Dec 31st 2016 Dec 31st 2017

EQUITY 357 297 144 974

Share capital 6 509 6 509

Supplementary capital 330 652 232 874

Capital from the valuation of options -53 774 -53 774


Exchange rates balance -5 277 -15 785

Minority Interest 76 769 71 440

LIABILITIES AND PROVISIONS FOR LIABILITIES 943 590 878 782

Long-term liabilities 342 551 84 037

Long-term credits and loans 125 543 931

Deferred income tax liabilities 3 033 2 266

Other provisions 1 762 1 786

Other liabilities 212 212 79 055

Short-term liabilities 601 039 794 745

Trade and other liabilities 472 498 495 235

Short-term credits and loans 96 183 271 966

Other provisions 32 358 27 543

LIABILITIES CLASSIFIED FOR SALE 87 411

TOTAL LIABILITIES 1 300 887 1 111 167


2018 Plans and Strategic Perspective

19


The past

2012 2013 2014 2015 2016 2017

14.310 18.828 30.575 37.262 39.213 37.500

39,1 48,0 89,1 91,5 63,1 43,5

-53,1 -44,9 -127,0 -176,7 -28,2 +54,0*

MERGE & INTETGRATION

727m918m

1.739m

2.136m

2.479m

2.700m

FTE

EBIT

INVEST. CF

NET DEBT

REVENUE

100,2 76,0 94,6 294,9 255,0 212,0*

CAPITAL INCREASE

ACQUISITIONS

INVESTMENTS EXITS

IPO PineBridge Investment SPO

CAGR 2012-2017 = 133%

Antal (PL)Fiege JV (DE)

ProHuman (HU)

Naton (SLO)WorkExpress (PL)

CRS (PL, BE)

Leverage the scale and focus on topline

IT Kontrakt, WS Russia, Exact Systems

* H1’17

20


demography `

LET US WORK FOR YOU

Strengths Opportunities

1. Positive brand recognition and strong market equity

2. Strong network of customers, client’s intimacy

3. Dense coverage of offices and branches, excellent operational capabilities

4. Proven cross-border and foreign recruitment competences

5. Operational capabilities and organizational know-how on magnificent staffing

projects

6. End-to-end solution in cross-border employees exchange, one stop shop for

candidates and employees

7. Flexibility and entrepreneur spirit combined with decisional agility

Undergoing a employment mobility paradigm shift and accelerating change of employment habits:

1. Demography driven workforce demand higher than employees

supply

2. Dynamical growth of employment and flexible employment

forms in particular

3. Unique geographical situation, being natural bridge between East

and West

4. Increasing candidates mobility due to attractive salary arbitrage

and political/social situation in Central and Eastern Europe

5. Growing importance of foreign workforce for the regional

economies (gainful immigration)

6. Overall positive climate for employees mobility and secondment

solutions

21


The past

Value Created

What is Needed to

Succeed

Addressable Market

Business Issues

Pre 2000 - 2005 2005 - 2009 2009 - 2016 Emerging/ongoing

Speed and Business Capability

Flexibility and Business Continuity / Security

Cost Optimization and Efficiency

Resources Availability

<800m EUR <1.400m EUR >5.000m EUR

Cycle 1 „Make life easier” Cycle 2 „On Demand” Cycle 3 „Painkillers” Cycle 4 „Employee Market”

EntrepreneurshipOperational networkLocal candidates touch

Resources managementReliability and responsivenessMarket Equity

Know-howFlexibility and creativity

ScaleSkillsCost efficiency

Customers relationsEffective candidates sourcing

Extreme cost focus

Readiness for new business model with external HR

partner

Keep my business running! Demographic, competence and

infrastructural GAP on labor market. Transformation pressure

Shift from fix to flexible costs, capital intensive growth

2.500m+ EUR

22


Work Service wants to be a Regional Champion, holding undisputable

market share leader position in Central Europe personnel services market,

hence #1-#3 market player on each geographical market the Company operates on.

Work Service Group ambition is to keep double digit and above the market revenues

growth , yet exceeding the industry average profitability by the end of

FY2020.

LET US WORK FOR YOU

Our vision



Key value proposition

To be successful in key value proposition of

employees availability it requires four complementary components:

Scale & Skills

Customer Relations

Agility &Cost Efficiency

Effective Candidates

Sourcing

Trusted transformation partner to lead through market paradigm shift

Capability and competence to manage large scale personnel services projects

Work Service is leading customers through accelerating change, helping them harness candidates market conditions counter balanced with effective candidates sourcing.

Lean organization to stay price competitive yet being profitable

Reliable solutions to meet customers quality expectations and volume demand

24


Where to play?

1 = 8 = 4Mass of margin

Due to significant value creation and salary arbitrage, margin on Ukraine cross-border employee to Poland is up to two times higher than domestic one.

For the same reasons, employee seconded to Germany generates margin up to eight times higher than domestic employment.

25


How to win?

Capture the market opportunity window by being transformation agent from domestic to domestic/cross-border business model.

Leverage customers network and relations with clear Focus on international key accounts.

x 1.500x 10.000

3.000Customers

26


Our strategic priorities

1

3

2

Scale across large customers base, focusing on international blue chips development where energized go to market strategy is already showing momentum

Invest in unique end-2-end solutions of cross border employee exchange and foreign recruitment. Capabilities on scale with own candidates sourcing channels

Drive the levers of value creation: stable revenue growth, sustainable margin expansion, sound financing, streamlined organization and disciplined overhead

27


Drive levers of value creation

Stable revenue growth Sustainable margin expansion Sound financingStreamlined organization and

disciplined overhead

10% to 12%on a yearly basis

20 – 30 bpsIncrease in EBIT margin

<2.5Net Debt / EBITDA

<10%Indirect Costs Ratioby the end of 2020

• Focus on Key Value Proposition in industries with high growth potential

• Focus on large accounts leveraging network of international KAM across the Group

• Scale cross-border and foreign recruitment offering to international blue chip customers segment

• Enter new market segments (BPO/SSC) and higher skill levels of external employees

• Shift business mix toward cross-border offerings for better 1st margin

• Capitalize operational leverage based on scale effect, indirect to grow slower than margin

• Tailored bank financing with right fit to business model and decreased financing costs

• Earn out liabilities decreased to zero, no minorities*

• Optimize tax rate

* Potentially except Germany JV

• Optimize internal headcount vs. external employees as a key cost driver

• Further process optimization via digitalization

• Reduce complexity by simplifying structure of entities and business units

28


2017 2020

DOMESTIC BUSINESS CROSS BORDER BUSINESS

Dynamic and accelerating topline

growth to double its share in

portfolio mix, stable margin

Dynamic growth but decreasing margin due to

growing importance of blue collar recruitment

Stable revenues growth in line with

market growth, progressive

increase of our gross margin

2020 2020 2020

FLEXIBLE EMPLOYMENT

domestic

CROSS BORDERsecondement & sourcing

PERMANENT RECRUITMENT

domestic

~15%

~30%

>3 Billion PLN revenue by 2020

To triple cross border solutions revenue till 2020,

domestic business still 70%

Gross Margin %

GROUP REVENUES (on continued business)


~50%


Key messages Work Service have undergone successful transformational journey

Labor market is undergoing a employment mobility paradigm shift that has strategic implications for employers (customers) and service providers

Work Service will be regional leading HR services company with best employees availability

Our vision is to produce greater value for clients, candidates and shareholders, leading the labor market through accelerating change of employment habits

Our strategic priorities:1. Scale across large customers base, focusing on international blue chips development where energized go to market

strategy is already showing momentum2. Invest in unique end-2-end solutions of cross border employee exchange and foreign recruitment, capabilities on

scale with own candidates sourcing channels3. Drive the levers of value creation: stable revenue growth, sustainable margin expansion, sound financing, streamlined

organization and disciplined overhead

30

Management Presentation | April 27th 2018 · 610,8 666,1 684,1 -500,0 1 000,0 1 500,0 2 000,0 2...

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