Having regard to the text of Rule II.Z.10.1 of 'Best Practice for GPW Listed Companies 2017', the Management Board of Amica Spółka Akcyjna publishes the text of the report of Amica's Supervisory Board on the Brief Assessment of the Company's Position in 2017 (the assessment in question has been adopted by voting of the Supervisory Board of Amica Spółka Akcyjna held on 29 - 31 May 2018, on the text of the resolution on adoption of the document entitled 'Brief Assessment of the Position of Amica Spółka Akcyjna in 2017').
'Dear Business Partners,
The Supervisory Board of Amica S.A., bearing in mind the principles of corporate governance set out in the 'Best Practices of WSE Listed Companies' and upon review and analysis of the Management Board's Report on the Company's Activities for 2017, the Financial Statements for the Financial Year 2017 and the Independent Statutory Auditor's Report on the Company's Financial Statements for the Financial Year 2017, hereby presents a brief assessment of the position of Amica S.A. Group.
BRIEF ASSESSMENT OF THE POSITION
OF AMICA SPÓŁKA AKCYJNA GROUP IN 2017
The year 2017 was another year of continued implementation of the objective to systematically build the Group's value, as adopted under the HIT-2023 Strategy. Unlike in the previous years, the Group achieved the highest result in its history only in the category of total sales revenue, which amounted to over PLN 2.6 billion. Despite the undertaken organic and acquisition activities as well as the implementation of various austerity measures, the Group did not manage to exceed the remaining financial results obtained in 2016.
In 2017, the operating profit margin decreased by less than a percent as compared to the result for 2016 (5.4% vs. 6.3%). Similarly, the gross profit margin did not reach the value from the previous year (4.6% vs. 5.6%). A similar comparison applies to the EBITDA margin (7.2% vs. 8.1%). A significantly higher net profit margin compared to 2016 (5.7% vs. 4.4%) is
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to a significant extent the result of including a non-cash tax asset attributable to potential tax
benefits stemming from the investments carried out at the Special Economic Zone.
In the reporting year, the Group recorded an increase in foreign sales mainly in the
western region (by over PLN 150 million), on the eastern markets (by nearly PLN 43 million)
and in the southern countries (by nearly PLN 18 million). In the first of the aforesaid regions,
the acquisition of Sideme on the French market proved to be a significant contribution to the
development of the scale of operations. To a relatively small extent, as compared to 2016, sales
in the northern region decreased (by nearly PLN 13 million). A decrease in sales in 2017 was
reported also on the Polish market (by over PLN 32 million).
Amica Group has been consistently strengthening its market position in various
segments and categories of goods and products, both home and abroad. The process was
supported by a reasonable brand policy tailored to particular local markets. The systematically
implemented regional and product diversification has contributed to increased safety and
stability of business operations and performance of the Company.
The Group's balance sheet for the reporting period has shown the increase in fixed
assets, driven mainly by various forms of investment. The working capital grew as well. Despite
a slight decrease, the profitability ratios achieved in 2017 demonstrate the Group's satisfactory
ability to generate profit. Current, quick and cash liquidity ratios remained at a good level. The
same applies to the levels of the financing and debt structure ratios.
While providing the Shareholders each year with a brief assessment of the Group's
position in the reporting year, the Supervisory Board also formulates predictions about its
prospective development in the following year. The key criteria for defining Amica Group
companies' development prospects include the identified potential threats and opportunities
for achieving the strategic objectives. The main threats originate from the external
environment. These are associated with increases in the prices of raw and ancillary materials
worldwide, the risk of significant fluctuations of the exchange rates for Polish zloty against
foreign currencies and the mutual relations of foreign currencies used as transaction
currencies in the sales and purchases on foreign markets as well as unpredictable political and
economic events and their consequences for the Group's major markets. The Polish market is
experiencing a drop in demand for household appliances caused by the reduction in the
number of selling days at shopping centres. Internal risks, especially at the production
company, are associated with possible further pressure to increase wages. In this sphere of
risks, attention can also be paid to the problem of personnel fluctuations and the risk of cyber
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attacks. The opportunities include a relatively stable growth of the market for home appliances
in European countries. To leverage this growth, the Group must be able to react flexibly to
changes in the near and distant market surroundings. This ability to react stems from the longterm
developed key structural characteristics of the Group companies' operations and
performance, facilitating the effective implementation of the assumptions adopted under the
HIT 2023 Strategy. These characteristics include: the systematically increasing competitive
range of products and goods featuring innovative technologies and original design; market
diversification in Europe designed to strengthen the stability of operations and performance
of the Group; high visibility of the brands Amica, Gramand Hansa in various regions; synergybased
ability to combine organic activities and acquisitions to improve the Group's valuation;
high-quality management processes; effective exchange rate hedging policies; disciplined
financial policy within the Group; highly competent staff.
These features of Amica Group's operations form a strong foundation for its capacity to
flexibly respond to the rapidly changing market conditions. Like in the previous years, they
offer a credible opportunity for the effective implementation of the adopted business and
strategic objectives and increasing the Group's valuation.
In the course of their work in 2017, Members of the Supervisory Board dealt with the
most important aspects of activities of the Company and of Amica Group, focusing primarily
on the internal and external risk areas, both on the financial and operational levels. The
Supervisory Board Members reviewed the opinions and comments of the Management Board,
analysed in detail the materials presenting the current economic and financial situation of the
Company, as submitted by the Management Board, assessed its further evolution and
information on the initiated adaptation processes, while formulating their own comments,
opinions, insights and recommendations.
The area of special interest to the Supervisory Board, in particular the Audit Committee,
was the functioning, objectives and results of the internal control system. It was recommended
to systematically improve the organizational and substantive sphere of the internal control
process, which is of extreme importance for the ability to diagnose real threats in a timely
manner. The Audit Committee of the Supervisory Board systematically monitored the process
of financial reporting and financial audit as well as the methods for reporting the results.
In the past reporting year, the Supervisory Board's Operations Committee focused on
identifying potential risks related to the Group's implementation of personnel policy and
organizational changes, integration of the product policy in its development strategy, project
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management processes, adaptation processes in the goods purchasing strategy and
implementation of the marketing strategy. Particular attention was paid to the evaluation of
potential risks stemming from the acquisition processes.
In the opinion of the Supervisory Board, the Management Board made sound decisions
throughout the reporting period and initiated appropriate remedial mechanisms based on the
performed analysis and reviews of various risk areas. The Supervisory Board, also in the
framework of the Audit Committee and the Operating Committee, collaborated with the key
executives in mutual understanding of the need for joint endeavours to ensure the optimal
implementation of the overarching objectives and functioning of the Company and the Group.
Wronki, 25/05/2018 For the Supervisory Board of AMICA SPÓŁKA AKCYJNA
Chairman of the Supervisory Board
/ - /
Tomasz Rynarzewski '