CONCENTRIC INTERIM REPORT JANUARY – JUNE 2016

SECOND QUARTER

• Net sales: MSEK 522 (620) – down 11% y-o-y, after adjusting for currency (–5%)
• Operating income: MSEK 89 (88), generating an operating margin of 17.0% (14.2) – comparative for Q2 2015 includes one-off expenses of MSEK 14 recognised following the acquisition of GKN Pumps
• Earnings after tax: MSEK 63 (62); basic EPS of SEK 1.52 (1.45)
• Strong cash flow generated from operating activities: MSEK 132 (114) driven by reduction in working capital, which represented 3.4% (3.9) of annual sales
• Group’s net debt: MSEK 686 (455); gearing ratio of 112% (49) following the recognition of further pension remeasurement losses of MSEK 136 (gains 244), a dividend payout of MSEK 134 (127) and own share buy-backs of MSEK 47 (42) during the second quarter

FIRST SIX MONTHS

• Net sales: MSEK 1,040 (1,243) – down 13% y-o-y, after adjusting for currency (–3%)
• Operating income: MSEK 174 (205), generating an operating margin of 16.7% (16.5) – comparative for 2015 includes negative goodwill of MSEK 15 and one-off expenses of MSEK 14, both associated with the acquisition of GKN Pumps
• Earnings after tax: MSEK 123 (151); basic EPS of SEK 2.98 (3.55)
• Solid cash flow generated from operating activities: MSEK 196 (177)

The group’s sales for the second quarter and the first six months were down year-on-year by 11% and 13% respectively in constant currency. The primary reason for the fall in sales year-on-year continues to be the lower US volumes in the Class 8 heavy duty truck market, down by over 30% in both the second quarter and the first six months, following a peak in the replacement cycle during the second half of 2015 and a subsequent correction of inventory levels. Conversely, the European truck market has shown steady year-on-year growth for the sixth consecutive quarter. Off-highway sectors in both North America and Europe have remained soft as a result of low commodity pricesand dealers having to de-stock inventory. Overall, Concentric's sales for the first six months were broadly in line with published market indices.

Concentric Business Excellence (“CBE”) has been key in our ability to adapt operations to lower demand and thereby defend our margins. All parts of the business participate in this programme, driving continuous improvement in customer service levels, employee motivation and operational excellence.

The successful implementation of this model has continued to strengthen the consolidated results in spite of the market headwinds, ensuring that the underlying EBIT margin for both the second quarter and the first six months improved to 17.0% and 16.7% respectively. In addition, we have continued to protect and enhance our sales and engineering resources to support the organic growth objectives that we set out at our Capital Markets Day back in 2014.

We also continue to explore acquisition opportunities for enabling technologies that will enhance our solutions for variable displacement pumps and provide us with an even greater presence alongside our global customers.

Outlook
The referendum on the UK’s future in the EU resulted in a win for the leave campaign. At this point it is difficult to determine what the impact of this decision will be or what the new trade agreements will look like. However, as a global business with a strong manufacturing footprint and R&D focus in the UK, Concentric is well positioned to face the challenges that lay ahead.

Looking forward, the orders received, and expected to be fulfilled during the third quarter of 2016, were slightly behind the sales levels of the second quarter of 2016. Our continued focus on business excellence will help us respond to these challenging market conditions as we prepare for the positive demand trend for European medium and heavy duty trucks to flatten out in the second half of 2016. North and South America will remain challenging for both on- and off-highway sectors. Market indices have been revised during the second quarter and now suggest that production volumes blended to Concentric’s end-markets and regions will remain soft during the second half of 2016, down 7% year-on-year for the full year 2016. Concentric remains well positioned both financially and operationally, to fully leverage our market opportunities.

For further information, please contact:
David Woolley (President and CEO) or David Bessant (CFO) at Tel: +44 121 445 6545 or E-mail: info@concentricab.com

This information is information that Concentric AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 CET on 22 July 2016.