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AVTECH Sweden AB (publ) INTERIM REPORT January - September 2019

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  • AVTECH Group's sales for the third quarter of 2019 amounted to MSEK 4.0 (3.1).
  • Operating profit before depreciation for the third quarter of 2019 was MSEK +1.5 (+1.0)
  • Net profit for the third quarter of 2019 amounted to MSEK +0.6 (-0.2) or SEK 0.02 (0.01) per share and for the nine-month period +1.1 (-2.0).
  • Cash flow from operating activities for the third quarter of 2019 was SEK + 0.1 (-0.1) million. The Group's cash and cash equivalents at the end of the period amounted to SEK 13.3 million (15.7 at the previous year-end). Increased market and development efforts of approximately SEK 2.2 million have affected liquidity during January - September.
  • Equity at the end of the period amounted to SEK 29.2 M (28.1 at the previous year-end) or SEK 0.51 (0.50) per share. The Group's equity ratio was 98.0 (96.0) percent.

During the third quarter of the financial year, several additional development projects were completed.

Several features have been integrated into our proFLIGHT App, and a requested addition to AVENTUS Full Flight in the form of a significantly improved optimization of the flight path has recently been presented to the market. These supplements have been received with great interest. 

Our previously decided investments in marketing and sales continue. At the end of the summer period, two more people were recruited to our market group. The market group's focus during the quarter has been to generate interest, contacts and meetings with the airlines.

The increased product range and the successively increased interest in tools that support the airlines' increasing need to save fuel, become more environmentally responsible and avoid turbulence during the flight mean that our product range seems to attract more and more airlines.

Unfortunately, we can see that the time from interest to decision is still illogically long. The third quarter did not entail any further new contract, although we have, as previously announced, more airlines testing our products. Every new customer seems to want to conduct tests in their own operations so far. The time for preparation of tests, conducting tests of at least 3 months, analysis of results and contract negotiations is a process that so far has never been less than a calendar year. However, with an increased number of airline users, we generally expect that the test period with new customers should be shortened.

There seems to be increasing concern in the airline industry, caused by, among other things, uncertainty about the effects of global warming in aviation. An expected global economic downturn as well as signs that more airlines are moving towards a period of lower profitability is another contributing factor. Continued uncertainty about the 737 MAX flight stop will also affect the focus of several of AVTECH's current and future customers. Despite these factors, we can see a growing interest in our products.  

Events after the end of the period

  • The trial period with Eurowings, one of the airlines within the Lufthansa Group, continues according to plan and will be completed during the fourth quarter in a final analysis and decision phase. More airlines within the Lufthansa Group will be involved in this performance evaluation. Another European airline is expected to start a longer paid test period, which was previously communicated. This test period is expected to be completed during the second quarter of 2020. 
  • The continued grounding of 737 MAX has created several time-consuming re-schedules for Southwest Airlines. Because of this, our planned meeting on extended collaboration on more of AVTECH's products will probably only be possible during the first quarter of 2020. This time is good because we also have further experience from using our new services such as proFLIGHT, full-flight optimization and turbulence alerts. These products have generated an interest in testing by Southwest Airlines.
  • On September 12, AVTECH conducted an online webinar as a launch of the flight segment's optimization service. This generated a great deal of interest with over 70 people from more than 40 airlines participating.

The entire content of the webinar is available on AVTECH's YouTube channel (link on the website). The content of the webinar provides an informative description of our new optimization product developed in collaboration with Norwegian. The aircraft type Boeing 737, the most flown aircraft model in the world, has a computer on board that is powerful in comparison to other aircraft computers but lacks the features to plan for more than one flight level at a time. In these aircraft, one should be able to obtain a significantly greater benefit than in other aircraft models for utilizing our new optimization solution. For this reason, the first phase of the deployment of our new optimization solution will focus on the airlines operating many B737s in their fleet.

  • In Chicago during the last week of September, IATA conducted a seminar on "Turbulence Aware Data", real-time reporting of measured turbulence. More than 70 people from the major airlines in the world attended the seminar. AVTECH was invited to present our ambitions with this project. Bo Redeborn, our Chairman of the Board, presented the results of our recently completed integration of IATA's turbulence data reporting in proFlight.
     
    • The turbulence information comes from the aircraft's sensors during flights. Only observed turbulence at a given altitude, time and position gives limited information on whether turbulence is best avoided by, for example, climbing or descending. If many aircraft are in the same airspace at about the same time, an excellent tool is created to confirm or correct existing turbulence forecasts. The combination of observations and forecasts gives the overall picture of what the turbulence looks like and how it can be effectively avoided.

Judging from the reactions from the presentation, AVTECH is the first company in the world to be able to have both of these complementary systems coordinated in a user-friendly format. The presentation, from Chicago, of proFLIGHT with a data warehouse that handles IATA turbulence reports can be listened to through a link on our website. The image below shows the different layers of weather information that together provide pilots with critical information to effectively avoid turbulence.

  • At the time of writing, proFLIGHT is used by more than 500 pilots from 87 different airlines. The number of users seems to increase faster as proFLIGHT becomes known. Recently the weather information was supplemented with two weather layers:
     
      • Real-time CB data (thunderstorms)
      • IATA turbulence observations

This information is also available in SIGMA for the aircraft that have used ACARS as a form of communication. In these cases, you get the information in real time during the flight and get an update every time the pilot wishes.

  • Before the end of the year, we expect EASA (European Union Aviation Safety Agency) to have approved and verified proFLIGHT. During Q1, the plan is to introduce a paid version of proFLIGHT for pilots who will not have the fee paid by an airline. With proFLIGHT, pilots can get a graphical overall solution containing AVTECH's Aventus Full Flight, cruise optimization and the weather warning system SIGMA. This means that aircraft equipped with WiFi, or satellite communications, can receive real-time information either through this form of communication or via ACARS. We believe that a significantly higher price level will be accepted by our customers than the current one based on the product improvements that have recently been launched.
     
  • An important part of our marketing plan is participation in trade fairs and conferences for the aviation industry. AVTECH together with Met Office plans to participate in:
    • Electronic Flight Bag User Forum, 5-7nd Nov, Madrid
      During this fair, proFLIGHT will be presented by one of our aviators.
       
    • 13th Annual Flight Operations Conference 3-4 Dec, London
      During this fair will be the project manager for the optimization project in the Norwegian presenting the results of the trial period.

Met Office and AVTECH have also decided to increase joint marketing efforts by designing customer-specific mini-seminars. The joint assessment is that the market is gradually beginning to realize the advantages of 10K based weather forecasts, processed in Aventus Full Flight form, can achieve. More customer-specific information meetings are planned to be implemented in the coming six-month period.

  • The ambition is to deliver a service for monitoring flight through volcanic ash within a six-month period in order to optimize engine maintenance. The service is considered to be of interest to more airlines. At the moment, Met Office is working on finalizing a first version of the product content.
      
  • The maximum effect of AVTECH's product portfolio will be achieved by the full introduction of Time Based Operations. This requires increased cooperation between airlines, airports and air traffic management. Under current plans, implementation of TBO will take place in the 2020s. 
     
  • The discussion with Gatwick regarding Target Time Arrival Manager (TTAM) continues.    
  • On 1/10 it was announced that David Rytter will succeed the current CEO Christer Fehrling. The Board of Directors believes that the company's financial conditions are good, the product range is promising for the future and that AVTECH needs a knowledgeable and driven leader with growth as the main focus. David Rytter, is currently the technical director of the company and will take up his CEO position no later than 1/1 2020. Christer Fehrling will continue to be a board member and together with the chairman Bo Redeborn work on two strategically important issues for the company - strategic alliances and the concept of TBO (Time Based Operations)

Kista, October 16, 2019 AVTECH Sweden AB (publ), the Board of Directors. This report has not been reviewed by the company's auditors.

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For further information, please contact
Christer Fehrling, President and CEO, +46 (0) 8 544 104 80
Britt-Marie Lodenius, Chief Financial Officer, +46 (0) 8 544 104 80
or visit the company's website www.avtech.aero, https: / /www.avtech.aero/report#content
AVTECH Sweden AB (publ), corporate identity number 556568-3108, has its registered office in Stockholm municipality.
Postdress: Färögatan 33, 24 tr, 164 51 KISTA, Sweden.
The company's B-share (short-term AVT B) has been traded on the NASDAQ First North Growth Market since February 2012. The company's A-share is not traded on any marketplace. Certified Adviser is Redeye AB (www.redeye.se), tel: 08-121 576 90, e-mail address certifiedadviser@redeye.se. For explanation of technical terms, see glossary on page 73 of the Company's New Issue Prospectus 2011. 0 The information was submitted, through the above contact person's provision, for publication on October 16, 2019 at CET 08:30 AM

ABOUT AVTECH Group
AVTECH develops products and services for digital air traffic management systems. Customers are players in the global aviation industry such as airlines, airports, air traffic management suppliers, technology companies and aircraft manufacturers. With the company's products and services, every single flight or entire flight operation can be optimized in terms of finances, noise and emissions, efficiency, capacity, punctuality and safety. The head office is located in Stockholm, Kista. For more information, see www.avtech.aero.

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