Brødrene A & O Johansen A/S : AO - H1 2021

Interim Financial Report

for the Period

1 January - 30 June 2021

Brødrene A & O Johansen A/S

Rørvang 3 * DK-2620 Albertslund * Denmark

Tel: [phone] * Fax: [phone] * www.ao.dk

CVR (Central Business Register) No.: 58 21 06 17

Company Announcement No. 10/2021

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Brødrene A & O Johansen A/S

Interim financial report for H1 2021

Contents

Highlights for the second quarter and first half of 2021...............................................	page 3
Financial and operating data for the AO Group ..........................................................	page 6
Management's review ................................................................................................	page 7-10
Management's statement ..........................................................................................	page 11
Income statement and statement of comprehensive income .....................................	page 12
Balance sheet as at 30 June 2021 .............................................................................	page 13-14
Cash flow statement...................................................................................................	page 15
Statement of changes in equity ..................................................................................	page 16
Notes..........................................................................................................................	page 17-18

Company Announcement No. 10/2021

2/18

Brødrene A & O Johansen A/S

Interim financial report for H1 2021

Today the Board of Directors has approved the Group's interim financial report for the period 1 January - 30 June 2021.

Highlights for the second quarter and first half of 2021

• Consolidated revenue for the second quarter of 2021 was DKK 1,188.8 million, which is DKK 186.5 million, or 18.6%, more than for the second quarter of 2021. The second quarter of 2021 had one more working day than the corresponding quarter a year ago. Consolidated revenue for the first half of 2021 was DKK 2,419.4 million, which is DKK 446.8 million, or 22.6%, more than for the same period last year. The first half of 2021 had the same number of working days as the year-earlier period.
• Operating profit (EBIT) for the second quarter of 2021 was DKK 76.5 million, corresponding to a profit margin of 6.4%, against DKK 54.3 million and 5.4% for the second quarter of 2020. Operating profit (EBIT) for the first half of 2021 was DKK 158.6 million, corresponding to a profit margin of 6.6%, against DKK 106.1 million and 5.4% for the first half of 2020. The earnings growth is attributable to increased sales, whereas the increased profit margin is due to higher efficiency. The gross profit margin for the first half of 2021 is unchanged compared with last year.
• Profit before tax for the second quarter of 2021 was DKK 79.2 million, which is DKK 24.7 million more than in the second quarter of last year. Profit before tax for the first half of 2021 amounted to DKK 160.7 million, which is DKK
• 1. million more than last year.
• As at 30 June 2021, the Group's total assets amounted to DKK 2,593.5 million, which is DKK 300.8 million more than at 30 June 2020. The increase is mainly attributable to a rise in receivables and inventories due the growth in sales and a higher level of non-current assets driven by investment in the central warehouse of the future and acquisitions.
• As at 30 June 2021, the Group's equity of DKK 1,114.5 million, equalling a solvency ratio of 43.0%, was DKK
• 1. million higher than for the same period last year.
• Cash flow from operating activities was DKK 26.9 million for the second quarter of 2021 and DKK 132.8 million for the first half of 2021, which is DKK 89.9 million and DKK 15.2 million less than for the same periods last year. Investments for the second quarter of 2021 totalled DKK 82.5 million and DKK 120.4 million for the first half of 2021, compared with DKK 21.1 million and DKK 32.1 million in 2020.

Other highlights for the first half of 2021:

• As described in the 2020 annual report under 'Outlook', sales growth was extraordinarily high in the first quarter of 2021. The general high level of activity in the building and construction industry increased even more due to enhanced digital commerce following the lockdown of physical DIY stores in part of the quarter. As expected, the growth in sales slowed in the second quarter but remains at a high level. More moderate growth is expected in the second half of 2021.
• On 29 April 2021, Brødrene A & O Johansen A/S entered into an agreement to acquire the business of Complet VVS A/S (CompletVVS.dk), CVR number (Danish company registration number) 78864028), which is a web shop selling plumbing, heating, and sanitary ware products. The acquisition of Complet VVS A/S was effective as of 1 May 2021.
• AO won the Danish E-commerce Award for "Best B2B Company", where sound business practice, growth, customer service, innovation capability, and sustainable initiatives are taken into account. In addition, AO came in second in the category of "Best Omnichannel Business. This award is given to companies that are best at driving sales and loyalty through a coherent customer experience across sales channels.

Company Announcement No. 10/2021

3/18

Brødrene A & O Johansen A/S

Interim financial report for H1 2021

Expectations for the year

When the first quarter results were announced, growth was expected to slow to a more moderate level than in 2020. Growth in the second quarter was at a somewhat higher level than anticipated in the most recent revision of the expectations for the year. As revenue and earnings for the second quarter were higher than anticipated, the Group increases its pre-tax profit expectations for the year from DKK 260-280 million, as announced in the interim financial report for the first quarter of 2021, to DKK 290-310 million as announced in Company Announcement No. 9-2021 of 7 July 2021.

In 2020, Brødrene A & O Johansen A/S recorded a pre-tax profit of DKK 220.8 million.

The above expectations are based on assumptions of moderate growth and that there will be no more lockdowns due to COVID-19 restrictions. The acquisition of Complet VVS A/S is expected to have a limited impact on the Group's net profit for the year.

The expansion of the Albertslund central warehouse decided upon in 2020 is in progress. The expansion is expected to be completed in the first half of 2022, and it is estimated to amount to approximately DKK 200 million, of which approximately DKK 150 million is expected to be recognised in 2021.

Update of financial objectives and capital resources policy

At today's Board meeting, the Board of Directors discussed the financial objectives, the capital resources policy, and the future IR strategy of Brødrene A & O Johansen A/S and decided the following:

Financial objectives

AO's previous four financial objectives were reached on 30 June 2021, and consequently, the Board of Directors set the following new objectives:

1. An annual growth that exceeds the growth of the market. This growth is to take place through a combination of investments in organic growth and acquired growth.
2. A profit margin that equals an EBITDA of 10%. The increase in the profit margin is to take place primarily via continuous economies of scale achieved through increased sales.
3. A cash flow from operating activities that equals 7.5% of revenue.
4. Solid capital resources that are compliant with the adopted capital resources policy.

Company Announcement No. 10/2021

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Brødrene A & O Johansen A/S

Interim financial report for H1 2021

AO's policy on capital resources and capital allocation is as follows:

It is Brødrene A & O Johansen A/S' policy to ensure and maintain robust capital resources with a solvency ratio of at least 40% and an indicative financial gearing of 0.5 to 1.5. Financial gearing can be increased in connection with acquisitions.

In compliance with the capital resources policy, AO wants to allocate the free cash flow in the following order of priority:

1. Reduction of the interest-bearing debt if AO is above the financial gearing target.
2. Investment in profitable growth, both investment in the existing business and acquisitions, where acquisitions, including synergies, are expected to generate a return on the invested capital before tax of at least 15%.
3. Allocation to shareholders in the form of ordinary dividends defined as 33-50% of the profit for the year after tax.
4. Excess liquidity is used for additional allocation to shareholders in the form of extraordinary dividends, share buy-back programmes, etc.

AO's Board of Directors may deviate from the above-mentioned policy, if it is deemed necessary out of consideration for future market conditions, acquisitions, or other conditions.

Investor Relations initiatives

At today's Board meeting, the Board of Directors decided on the following initiatives regarding Investor Relations:

1. AO will host webcasts, including investor presentations, in connection with the publication of all annual and quarterly reports, beginning after the release of the 2021 annual report.
2. AO will expand its current reporting on segments, beginning with the annual report for 2021.

Share split

The Board of Directors will recommend that a share split in the ratio of 1:10 be approved by the Annual General Meeting in March 2022.

	Albertslund, 20 August 2021
Niels A. Johansen	Per Toelstang
CEO	CFO

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