Quarterly Report • Nov 7, 2023
Quarterly Report
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Company subject to management and co-ordination by Rossini Holdings S.à.r.l.
Registered Office: 1, Via Matteo Civitali, Milan
Fully paid up share capital: € 26,140,644.50
Tax identification number and Milan Company Registration No. 00748210150
| CONTENTS | ||
|---|---|---|
| Page | ||
| DIRECTORS' REPORT ON THE DISTRIBUTION OF AN INTERIM DIVIDEND TO THE SHAREHOLDERS OF RECORDATI S.P.A. |
||
| - | Directors' considerations on the distribution of an interim dividend |
4 |
| - | Operating and financial review of Recordati S.p.A. in the first nine months of 2023 |
6 |
| - | Business outlook for Recordati S.p.A. | 9 |
| INTERIM FINANCIAL STATEMENTS OF RECORDATI S.P.A. FOR THE PERIOD ENDED 30TH SEPTEMBER 2023 | ||
| - | Income statement | 11 |
| - | Balance sheet | 12 |
| - | Statement of comprehensive income | 14 |
| - | Statement of changes in equity | 15 |
| - | Cash flow statement | 16 |
| - | Notes to the financial statements | 18 |
| CERTIFICATION IN RESPECT OF THE FINANCIAL STATEMENTS UNDER ARTICLE 154-BIS, PARAGRAPH 2 OF LEGISLATIVE DECREE 58/1998 |
53 |
An interim dividend may be distributed if the conditions specified in the relative legislation (Art. 2433-bis of the Italian Civil Code) are met.
Recordati S.p.A. ("Recordati") is in possession of the requirements to exercise that right for the following reasons:
The distribution of the dividend must be approved by the Board of Directors on the basis of financial statements and a report showing that the capital, operating and financial position of the Company would allow that distribution to be made. Additionally, an opinion of the external auditors on those documents must be obtained.
Art. 2433-bis of the Italian Civil Code also states that the amount of an interim dividend cannot be greater than the lower of the net income earned at the end of the previous financial year, less the amounts allocated to the statutory or by-law reserves, and the reserves available for distribution.
In Recordati's case, because net income for the period ended 30th September 2023 was lower than both the net income and available reserves reported as at and for the period ended 31st December 2022, amounting to € 219,234 thousand and € 327,986 thousand respectively, the distribution of the interim dividend has been determined on the basis of the accounts as at 30th September 2023 for the nine-month period then ended, prepared according to IAS 34 "Interim Financial Statements" endorsed by the European Union.
The available reserves resulting from the accounts as at 30th September 2023 amounted to € 420,577 thousand, while the net income available as at 30th September 2023 amounted to € 202,515 thousand consisting of the net income earned, since an amount equal to one fifth of the share capital had already been allocated to the statutory reserve and no other obligations for allocations to reserves existed.
A summary of the relevant data for determining the amount of the interim dividend distributable is given in the following table:
| net income for the period ended 30th September 2023 |
€ 202,515 thousand |
|---|---|
| net income available |
€ 202,515 thousand |
| reserves available as at 30th September 2023 |
€ 420,577 thousand |
Therefore, in accordance with Art. 2433-bis, paragraph 4 of the Italian Civil Code, the maximum interim dividend distributable for the financial year 2023 is € 202,515 thousand, equivalent to € 0.96 per share calculated on total shares representing the share capital.
Having taken account of the facts outlined above, and in light of the information reported in the following pages concerning the operating, capital and financial performance of Recordati S.p.A. as at 30th September 2023, the Board of Directors intends to distribute an interim dividend for the financial year 2023 amounting to € 0.57 on each share outstanding to be paid through authorised intermediaries from 22nd November 2023, on coupon No. 32, with ex dividend date 20th November 2023 and record date 21st November 2023.
Milan, 7th November 2023
On behalf of the Board of Directors the Chief Executive Officer Robert Koremans
The income statement included in the financial statements of Recordati S.p.A. as at and for the period ended 30th September 2023 shows net income of € 202,515 thousand.
The income statement reclassified by function is given below, showing the relative percentage of net revenue for each item and the change compared with the first nine months of the previous year. This presentation is different from that used for the full financial statements, in which the items are classified by nature.
| € (thousands) | First nine | % of | First nine | % of | Changes | |
|---|---|---|---|---|---|---|
| months | revenue | months | revenue | 2023/2022 | % | |
| 2023 | 2022 | |||||
| Net revenue (1) | 410,005 | 100.0 | 377,801 | 100.0 | 32,204 | 8.5 |
| Cost of sales | (176,012) | (42.9) | (157,613) | (41.7) | (18,399) | 11.7 |
| Gross profit | 233,993 | 57.1 | 220,188 | 58.3 | 13,805 | 6.3 |
| Selling expenses | (60,757) | (14.8) | (53,199) | (14.1) | (7,558) | 14.2 |
| R&D expenses | (37,190) | (9.1) | (32,825) | (8.7) | (4,365) | 13.3 |
| G&A expenses | (37,163) | (9.1) | (29,660) | (7.8) | (7,503) | 25.3 |
| Other income (expense), net | (1,178) | (0.3) | (16,604) | (4.4) | 15,426 | (92.9) |
| Operating income | 97,705 | 23.8 | 87,900 | 23.3 | 9,805 | 11.2 |
| Dividends | 173,245 | 42.3 | 120,026 | 31.7 | 53,219 | 44.3 |
| Financial income (expense), net | (65,961) | (16.1) | (31,490) | (8.3) | (34,471) | 109.5 |
| Pre-tax income | 204,989 | 50.0 | 176,436 | 46.7 | 28,553 | 16.2 |
| Taxes | (2,474) | (0.6) | (11,873) | (3.1) | 9,399 | (79.2) |
| Net income | 202,515 | 49.4 | 164,563 | 43.6 | 37,952 | 23.1 |
(1) The net revenue reported in the reclassified income statement includes other income of € 145 thousand (€ 108 thousand in 2022), relating in particular to training grants and rents, which in the statutory balance sheet are classified under the item Other revenue and income.
Revenue in the first nine months of 2023 was € 410,005 thousand, an increase of € 32,204 thousand compared with the same period of the previous year. We report good sales performance in the pharmaceutical sector in Italy due to the rollout of a new "Go-To-Market" model in January 2023, centred on a key-account management strategy. This had a positive impact on most products, but especially in the neurology and cardiology treatment areas.
The increase in the cost of sales as a percentage of net revenue, which rose from 41.7% to 42.9%, was a result of the impact of inflation on product costs as well as a change in the mix of sales revenues compared with the same period last year.
Selling expenses increased by € 7,558 thousand (14.2%), due in particular to a stronger management support structure for sales development, to higher training costs, to greater advertising expenses and to an increase in royalties payable, especially for sales of Eligard®.
R&D expenses came to € 37,190 thousand accounting for 9.1% of net revenue, up 13.3% compared with the first nine months of the previous year, due above all to higher depreciation in relation to the new Eligard® device following the positive conclusion of the regulatory approval process in accordance with the contract and also to
costs relating to a new distribution agreement signed in July with GSK for the marketing of Avodart® (dutasteride) Combodart®/Duodart® (ditasteride/tamsulosin) in 21 countries (see note 15 for greater details).
General and administrative expenses rose by € 7,503 thousand (25.3%), due to costs incurred for improvements to the general co-ordination of operations designed to manage an increasingly complex portfolio and in particular to support the management of new corporate products.
Other net income and expense recorded a net expense of € 1,178 thousand, which was due primarily to corporate reorganisation costs. The expense in the same period of the previous year, amounting to € 16,604 thousand, was mainly attributable to non-recurring costs of € 10.2 million in relation to the acquisition of Eusa Pharma (UK) Limited and to organisational restructuring costs totalling € 5.2 million.
Operating income of € 97,705 thousand accounted for 23.8% of net revenue, compared with 11.2% in the first nine months of the previous year.
Dividends from subsidiaries amounted to € 173,245 thousand, up € 53,219 thousand compared with the first nine months of 2022.
Net financial expenses amounted to € 65,961 thousand, up € 34,471 thousand compared with the first nine months of 2022. This significant change was due to both a rise in debt to meet the costs of extraordinary operations (see discussion of the net financial position) and an increase in interest rates.
The reduction in taxation of € 9,399 thousand, against an increase in taxable income compared with the same period in the previous year, is due in particular to an increase in dividends from subsidiaries as a percentage of pre-tax income.
Net income was € 202,515 thousand, accounting for 49.4% of net revenue, up from 43.6% in the first nine months of the previous year.
The net financial position as at 30th September 2023 was debt of € 2,223 million, up € 233 million compared with debt of € 1,990 million as at 31st December 2022.
Details of the item and changes during the period are shown in the table below.
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Current account sight deposits and other cash and cash equivalents | 28,027 | 50,249 | (22,222) |
| Short-term receivables from Group companies | 96,594 | 114,010 | (17,416) |
| Cash and cash equivalents and other short term receivables | 124,621 | 164,259 | (39,638) |
| Short-term liabilities to banks | (41,165) | (79,564) | 38,399 |
| Borrowings - due within one year |
(358,115) | (254,317) | (103,798) |
| Short-term payables to Group Companies | (641,426) | (632,547) | (8,879) |
| Current debt | (1,040,706) | (966,428) | (74,278) |
| Net current financial position (1) | (916,085) | (802,169) | (113,916) |
| Loans and receivables – due after one year |
37,881 | 88,653 | (50,772) |
| Borrowings – due after one year (2) | (1,345,018) | (1,276,545) | (68,473) |
| Net financial position | (2,223,222) | (1,990,061) | (233,161) |
(1) This includes the current portion of medium to long-term borrowings
(2) Including the recognition at fair value of derivative instruments to hedge foreign exchange rate risk (cash flow hedges).
We report the following during the period: dividend payments of € 129.1 million; the payment of € 245.0 million in July following a marketing agreement concluded with GSK (see Note 15 for further details); a milestone payment of € 70.0 million to Tolmar International Ltd. for the successful conclusion of the regulatory approval process for the new Eligard® device; the purchase of treasury shares for € 6.5 million and the sale of these due to the exercise of stock options with a net cash in-flow of € 19.7 million.
In view of the importance of Recordati S.p.A. within the results achieved by the Group, it is considered that an exhaustive report on operating performance and financial analysis can be obtained from the section "Management Review" in the half-year financial report of the Recordati Group as at and for the period ended 30th June 2023, published on 28th July 2023, to which reference is made.
Company is subject to management and co-ordination by Rossini Luxembourg S.àr.l, in accordance with Art. 2497 and following of the Italian Civil Code.
Key figures from the financial statements for the year ended 31st December 2022 approved by the company that exercises management and co-ordination are furnished in Attachment 5.
The financial results for the first nine months of the year were in line with expectations and enabled us to confirm expectations for 2023, notwithstanding inflationary pressures.
Considering the sector to which the Company belongs and recent operating performance, no specific significant events were observed subsequent to 30th September 2023 which might require modifications to be made to the value of assets and liabilities recognised in the balance sheet or which might affect the positive performance in the first nine months of the year for the achievement of the results forecast for 2023.
Lastly, the results expected for the financial year 2023 are forecast to be greater than the interim dividend currently being approved.
Milan, 7th November 2023
on behalf of the Board of Directors the Chief Executive Officer Robert Koremans
INCOME STATEMENTS FOR THE PERIODS ENDED 30TH SEPTEMBER 2023 AND 30TH SEPTEMBER 2022
| Amounts in euro | Notes | First nine months 2023 |
First nine months 2022 |
|---|---|---|---|
| Net revenue | 3 | 409,859,669 | 377,692,536 |
| Other income | 4 | 3,218,193 | 3,049,777 |
| Total income | 413,077,862 | 380,742,313 | |
| Raw materials costs | 5 | (111,179,572) | (123,513,824) |
| Personnel costs | 6 | (73,591,901) | (65,872,839) |
| Depreciation and amortisation | 7 | (23,372,749) | (20,735,993) |
| Other operating expenses | 8 | (109,867,960) | (101,751,779) |
| Changes in inventories | 9 | 2,639,300 | 19,031,693 |
| Operating income | 97,704,980 | 87,899,571 | |
| Income from investments | 10 | 173,244,746 | 120,025,691 |
| Financial income (expense), net | 11 | (65,961,016) | (31,488,997) |
| Pre-tax income | 204,988,710 | 176,436,265 | |
| Income taxes | 12 | (2,473,929) | (11,872,865) |
| Net income | 202,514,781 | 164,563,400 |
| Basic | 0.985 | 0.800 |
|---|---|---|
| Diluted | 0.968 | 0.787 |
Basic earnings per share are calculated on average shares outstanding in the relative periods, consisting of 205,530,042 shares in 2023 and 205,637,085 in 2022. The figures are calculated net of average treasury stock held, which amounted to an average of 3,595,114 in 2023 and 3,488,071 in 2022.
Diluted earnings per share are calculated taking into account stock options granted to employees.
BALANCE SHEETS as at 30TH SEPTEMBER 2023 and 31ST DECEMBER 2022
| Amounts in euro | Notes | 30th September 2023 |
31st December 2022 |
|---|---|---|---|
| Non-current assets | |||
| Property, plant and equipment | 13 | 93,582,867 | 83,735,980 |
| Goodwill | 14 | 16,944,333 | 16,944,333 |
| Intangible assets | 15 | 586,197,388 | 349,777,776 |
| Investments | 16 | 1,841,843,882 | 1,846,135,716 |
| Other non-current financial assets | 17 | 37,965,445 | 88,652,954 |
| Deferred tax assets | 18 | 9,085,540 | 9,866,448 |
| 2,585,619,455 | 2,395,113,207 | ||
| Total non-current assets | |||
| Current assets | |||
| Inventories | 19 | 102,478,042 | 99,838,743 |
| Trade receivables | 20 | 116,379,407 | 110,680,050 |
| Other receivables | 21 | 30,824,203 | 24,793,277 |
| Other current assets | 22 | 3,883,210 | 1,873,199 |
| Derivatives measured at fair value | 23 | 18,162,042 | 23,010,340 |
| Other short-term financial receivables | 24 | 96,593,762 | 114,010,618 |
| Cash and cash equivalents | 25 | 28,027,198 | 50,249,300 |
| Total current assets | 396,347,864 | 424,455,527 |
BALANCE SHEETS as at 30TH SEPTEMBER 2023 and 31ST DECEMBER 2022
| Amounts in euro | Notes | 30th September 2023 |
31st December 2022 |
|---|---|---|---|
| Equity | |||
| Share capital | 26 | 26,140,645 | 26,140,645 |
| Additional paid-in capital | 26 | 83,718,523 | 83,718,523 |
| Treasury stock | 26 | (126,985,814) | (149,559,248) |
| Statutory reserve | 26 | 5,228,129 | 5,228,129 |
| Other reserves | 26 | 262,359,701 | 288,602,052 |
| Revaluation reserve | 26 | 2,602,229 | 2,602,229 |
| Interim dividend | 26 | - | (112,979,037) |
| Net income | 26 | 202,514,781 | 219,234,026 |
| Total equity | 455,578,194 | 362,987,319 | |
| Non-current liabilities | |||
| Borrowings – due after one year |
27 | 1,341,630,439 | 1,278,883,866 |
| Employee benefit obligations | 28 | 3,777,447 | 4,555,877 |
| Total non-current liabilities | 1,345,407,886 | 1,283,439,743 | |
| Current liabilities | |||
| Trade payables | 29 | 77,647,778 | 71,577,325 |
| Other current payables | 30 | 35,893,203 | 109,234,079 |
| Tax liabilities | 31 | 8,589,152 | 5,785,613 |
| Other current liabilities | 32 | 238,637 | 381,818 |
| Provisions | 33 | 4,811,292 | 4,568,958 |
| Derivatives measured at fair value | 34 | 13,094,995 | 15,166,056 |
| Borrowings - due within one year |
35 | 358,115,181 | 254,317,108 |
| Short-term liabilities to banks | 36 | 41,165,465 | 79,563,782 |
| Other short-term liabilities | 37 | 641,425,536 | 632,546,933 |
| Total current liabilities | 1,180,981,239 | 1,173,141,672 | |
| Total equity and liabilities | 2,981,967,319 | 2,819,568,734 |
STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIODS ENDED 30TH SEPTEMBER 2023 AND 30TH SEPTEMBER 2022
| € (thousands) | First nine months 2023 |
First nine months 2022 |
|---|---|---|
| Net income | 202,515 | 164,563 |
| Gains/(losses) on cash flow hedges, net of tax | 440 | 4,168 |
| Adjustment to investments in listed companies, net of tax | (8,599) | (6,402) |
| Other changes, net of tax | (106) | (106) |
| Other items recognised in equity | (8,265) | (2,340) |
| Comprehensive income | 194,250 | 162,223 |
| Data per share (in €) | ||
| Basic | 0.945 | 0.789 |
| Diluted | 0.929 | 0.776 |
| Share capital |
Additional paid-in capital |
Treasury stock |
Statutory reserve |
Other reserves | Revaluation reserves |
Interim dividend |
Net (loss)/income for the period |
Total | |||
|---|---|---|---|---|---|---|---|---|---|---|---|
| € (thousands) | Sundry reserves |
Reserve for derivative instruments |
Stock option reserve and/or other IAS reserves |
||||||||
| Balance as at 31st December 2021 | 26.141 | 83.718 | (126.982) | 5.228 | 144.593 | (973) | 156.537 | 2.602 | (109.329) | 219.109 | 400.644 |
| Allocation of 2021 net income as per shareholders' resolution of 26.05.2022 |
|||||||||||
| Dividend distribution Retained earnings |
(7.429) | 109.329 | (219.109) | (117.209) - |
|||||||
| Sales of treasury stock | 16.337 | (7.188) | 9.149 | ||||||||
| Repurchase of treasury stock | (39.137) | (39.137) | |||||||||
| Merger surplus reserve | - | ||||||||||
| Comprehensive income | (106) | 4.168 | (6.402) | 164.563 | 162.223 | ||||||
| Stock option valuation reserve | 7.043 | 7.043 | |||||||||
| Balance as at 30th September 2022 | 26.141 | 83.718 | (149.782) | 5.228 | 129.870 | 3.195 | 157.178 | 2.602 | - | 164.563 | 422.713 |
| Balance as at 31st December 2022 | 26.141 | 83.718 | (149.560) | 5.228 | 120.993 | 5.249 | 162.360 | 2.602 | (112.979) | 219.234 | 362.987 |
| Allocation of 2022 net income as per shareholders' resolution of 21.04.2023 |
|||||||||||
| Dividend distribution | (16.984) | 112.979 | (219.234) | (123.239) | |||||||
| Retained earnings | |||||||||||
| Sales of treasury stock | 29.057 | (9.375) | 19.682 | ||||||||
| Repurchase of treasury shares | (6.483) | (6.483) | |||||||||
| Merger surplus reserve | |||||||||||
| Comprehensive income | (106) | 440 | (8.599) | 202.515 | 194.250 | ||||||
| Stock option valuation reserve | 8.382 | 8.382 | |||||||||
| Balance as at 30th September 2023 | 26.141 | 83.718 | (126.986) | 5.228 | 94.528 | 5.689 | 162.143 | 2.602 | - | 202.515 | 455.578 |
CASH FLOW STATEMENTS FOR THE PERIODS ENDED 30TH SEPTEMBER 2023 AND 30TH SEPTEMBER 2022
| € (thousands) | 30th September 2023 |
30th September 2022 |
|---|---|---|
| OPERATING ACTIVITIES | ||
| Net income | 202,515 | 164,563 |
| Income taxes | 2,474 | 11,873 |
| Net interest | 69,076 | 21,407 |
| Income from investments | (173,245) | (120,026) |
| Depreciation of property, plant and equipment | 7,540 | 7,324 |
| Amortisation of intangible assets | 15,833 | 13,412 |
| Equity-settled share-based payment transactions | 3,009 | 2,464 |
| Other non-cash items | 2,825 | (2,001) |
| Changes in other assets and other liabilities | (75,253) | 3,391 |
| Cash flow from/(used in) operating activities before changes in working capital |
54,774 | 102,407 |
| Change in inventories | (2,639) | (19,032) |
| Change in trade receivables | (5,699) | (5,565) |
| Change in trade payables | 6,070 | 1,727 |
| Change in working capital | (2,268) | (22,870) |
| Interest received | 1,541 | 1,568 |
| Interest paid | (55,525) | (16,288) |
| Income taxes paid | - | (3,090) |
| Cash flow from/(used in) operating activities | (1,479) | 61,727 |
| INVESTING ACTIVITIES | ||
| Investments in property, plant and equipment | (11,801) | (11,926) |
| Disposals of property, plant and equipment | 560 | - |
| Investments in intangible assets | (252,253) | 409 |
| Business acquisition | - | (43,082) |
| Investments in subsidiaries | - | (749,083) |
| Dividends received | 173,245 | 66,084 |
| Loans received from/(granted to) subsidiaries |
32,732 | 17,555 |
| Changes in other short-term receivables | 34,899 | 29,464 |
| Cash flow from/(used in) investing activities | (22,619) | (690,579) |
| € (thousands) | 30th September 2023 |
30th September 2022 |
|---|---|---|
| FINANCING ACTIVITIES | ||
| New loans | 348,320 | 875,000 |
| Repayment of loans | (186,305) | (191,747) |
| Payment of lease liabilities | (1,211) | (922) |
| Change in short-term liabilities to banks and other lenders | (42,579) | (3,629) |
| Loans received from/(repaid to) subsidiaries | (49,118) | 46,232 |
| Changes in other short-term payables | 48,642 | 76,344 |
| Dividends paid | (129,071) | (120,017) |
| Repurchase of treasury stock | (6,483) | (39,138) |
| Sales of treasury stock | 19,681 | 9,150 |
| Cash flow from/(used in) financing activities | 1,875 | 651,273 |
| Change in cash and cash equivalents | (22,223) | 22,421 |
| Net cash and cash equivalents at beginning of year | 50,249 | 60,356 |
| Cash and cash equivalents at year-end | 28,027 | 82,777 |
These financial statements, available at the headquarters of our Company, have been prepared by Recordati Industria Chimica e Farmaceutica S.p.A. (hereinafter the Company), with registered office at 1, Via Matteo Civitali, Milan and they were approved by the Board of Directors on 7th November 2023, which authorised their publication. The separate interim financial statements at 30th September 2023 comprise the income statement, the balance sheet, the statement of comprehensive income, the statement of changes in equity, the cash flow statement and these notes to the interim financial statements.
Details of the accounting standards adopted by the Company are given in note 2 to the financial statements.
The presentation adopted by the Company for the income statement in these interim financial statements classifies revenues and expenses by nature. The distinction between the principle of current and non-current has been adopted for the presentation of assets and liabilities in the balance sheet.
These interim financial statements are presented in euro (€) and all amounts in the notes to the statements are rounded to the nearest thousand euro unless otherwise stated.
The Company's only operating segment is the specialty and primary care segment. Furthermore, the pharmaceutical chemicals business is considered an integral part of the specialty and primary care segment because from an organisational and strategic viewpoint it is involved principally in the production of the active ingredients required to produce pharmaceuticals.
These interim financial statements as at and for the period ended 30th September 2023 have been prepared in condensed form, in compliance with IAS 34 "Interim financial reporting". The interim financial statements do not therefore include all the information required of annual financial statements and must be read in conjunction with the annual report for the full year ended 31st December 2022, prepared in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB), and endorsed by the EU in accordance with Regulation No. 1606/2002.
The preparation of the interim financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities at the reporting date of the interim financial statements. If in the future such estimates and assumptions, which are based on management's best judgement, differ from the actual circumstances, they will be modified in accordance with the changes in the circumstances. Account has been taken of the impacts, and also the potential impacts, resulting from the Russian-Ukraine crisis when making estimates and the related assumptions required to draft this financial report. The Group constantly monitors developments in the conflict, as well as possible developments in the geopolitical environment and their consequences on business strategies in order to adopt mechanisms to safeguard its competitiveness, investments, performance and resources. The same attention is also paid to the geopolitical situation in Israel where, however, the company has no investments.
Some measurement activities, and especially the more complex calculations such as those required to measure impairment loss, are carried out in depth only for the preparation of the year-end financial statements, except when there is an indication that an asset has suffered an impairment loss which would require an immediate estimate of the loss.
IFRS 13 requires the fair value of financial instruments to be measured by classifying them on the basis of a hierarchy of levels laid down by the standard itself, which reflects the degree of observability of the market inputs used in the calculation of the fair value. The following levels are identified:
The accounting standards adopted for the preparation of these financial statements are consistent with those used for the preparation of the financial statements for the year ended 31st December 2022, except for the adoption of new standards and amendments effective from 1st January 2023. The Company has not adopted any new standard, interpretation or amendment in advance that has been issued, but is not yet in force.
Various amendments and interpretations are applicable for the first time in 2023, but have not had any impact on the financial statements of the Company for the period ended 30th September 2023
In May 2017 the IASB issued IFRS 17 - Insurance Contracts, a new accounting standard for insurance contracts that considers recognition, measurement, presentation and disclosure.
IFRS 17 replaces IFRS 4 - Insurance Contracts issued in 2005. IFRS 17 applies to all types of insurance contracts (e.g. life, non-life, direct insurance and reinsurance), regardless of the type of entity that issues them, as well as to certain guarantees and financial instruments with discretionary participation features. Some exceptions apply with regard to the scope of application. The overall objective of IFRS 17 is to provide a more useful and consistent accounting model for insurance contracts for insurers. Unlike the requirements of IFRS 4, which are largely based on maintaining previous local accounting standards, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. IFRS 17 is based on a general model, supplemented by:
The amendments to IAS 8 clarify the distinction between changes in estimates, changes in accounting policies and error correction. They also clarify how entities use measurement techniques and inputs to measure accounting estimates.
The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and examples to assist entities in applying materiality judgements to accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their "material" accounting policies with a requirement to disclose their "relevant" accounting policies and adding guidance on how entities apply the concept of materiality in making accounting policy disclosure decisions.
The amendments to IAS 12 Income Taxes narrow the scope of the exception to initial recognition so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases and decommissioning liabilities.
In the first nine months of 2023 net revenue came to € 409,860 thousand (€ 377,693 thousand in the same period of 2022) and was composed as follows:
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Net sales | 391,152 | 365,061 | 26,091 |
| Royalties and up-front payments | 3,475 | 1,916 | 1,559 |
| Revenue from service provison |
15,233 | 10,716 | 4,517 |
| Total | 409,860 | 377,693 | 32,167 |
Revenue from net sales by geographical area was as follows:
| First nine | First nine | Changes | |
|---|---|---|---|
| € (thousands) | months 2023 |
months 2022 |
2023/2022 |
| Europe | 377,165 | 354,099 | 23,066 |
| of which Italy | 162,679 | 137,105 | 25,574 |
| Asia and Oceania | 21,499 | 11,501 | 9,998 |
| America | 9,853 | 10,023 | (170) |
| Africa | 1,343 | 2,070 | (727) |
| Total | 409,860 | 377,693 | 32,167 |
Revenue for royalties and up-front payments, amounting to € 3,475 thousand, included € 3,332 thousand for royalties receivable from subsidiaries and € 143 thousand in relation to the adoption of the accounting standard IFRS 15 for up-front payments resulting from contracts for the licensing and distribution of portfolio products received in prior years.
Other income in the first nine months of 2023 amounted to € 3,218 thousand, compared with € 3,050 thousand in the first nine months of 2022.
The item mainly includes non-recurring income, tax receivables, grants for training courses and sundry employee chargebacks. No significant differences were recorded compared with the first nine months of the previous year.
Costs for raw materials and goods amounted to € 111,180 thousand in the first nine months of 2023 (€ 123,514 thousand in the same period of 2022) and were composed as follows:
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Raw materials | 98,028 | 111,503 | (13,475) |
| Packaging materials | 7,945 | 6,217 | 1,728 |
| Others and consumables | 5,207 | 5,794 | (587) |
| Total | 111,180 | 123,514 | (12,334) |
The fall in the period was due to greater purchases of raw materials at the end of 2022, in anticipation of further inflationary trends expected in 2023, net of the increase in costs for the period.
Personnel costs, which amounted to € 73,592 thousand in the first nine months of 2023 (€ 65,873 thousand in the same period of 2022), were composed as follows:
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Wages and salaries | 50,162 | 44,802 | 5,360 |
| Social security payments | 15,582 | 14,027 | 1,555 |
| Salary resulting from incentive plans | 3,971 | 3,471 | 500 |
| Other costs | 3,877 | 3,573 | 304 |
| Total | 73,592 | 65,873 | 7,719 |
The expense for incentive plans is a result of the application of IFRS 2, which requires the measurement of those instruments as a component of the wages of the beneficiaries and recognition of the cost calculated in that way through profit and loss. In addition to the existing stock option plans, which resulted in a cost of € 2,366 thousand, the Company adopted a new long-term incentive plan during the first half of 2023 named the "2023-2025 Performance Shares Plan" in favour of certain Group employees. The cost to the Company of the new plan for the reporting period, calculated in accordance with IFRS 2, was € 643 thousand.
During the course of 2019, some employees of the Group were designated as beneficiaries of an incentive scheme with a vesting period of five years under which they had purchased shares of Rossini Luxembourg S.à r.l., an indirect shareholder of Recordati S.p.A., and they will benefit from a return at the end of the life of the scheme. On the basis of the accounting standard IFRS 2, recognition of this in the accounts for the period ended 30th September 2023 resulted in an expense in the income statement of € 962 thousand.
Other costs include the portions of the leaving indemnity charges for the period destined to pension funds in accordance with the legislation introduced by Law No. 296 of 27th December 2006.
Depreciation and amortisation amounted to € 23,373 thousand in the first nine months of 2023 (€ 20,736 thousand in the same period of 2022), of which € 15,833 thousand was amortisation of intangible assets and € 7,540 thousand was depreciation of tangible assets, as reported below:
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Patent rights and marketing authorisations | 7,034 | 7,034 | - |
| Distribution, licenses, trademarks and similar rights | 8,799 | 6,378 | 2,421 |
| Total intangible amortisation | 15,833 | 13,412 | 2,421 |
The increase is mainly due to greater amortisation in relation to Reagila®, the new Eligard® device, following the positive conclusion of the regulatory approval process in accordance with the contract and also to costs relating to a new distribution agreement signed in July with GSK (see note 15 for more details).
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Industrial buildings | 1,035 | 1,084 | (49) |
| General plant | 442 | 447 | (5) |
| Accelerated depreciation machinery | 2,728 | 2,466 | 262 |
| Normal depreciation machinery | 1,031 | 1,067 | (36) |
| Miscellaneous laboratory equipment | 881 | 881 | 0 |
| Office furnishings and machines | 65 | 73 | (8) |
| Electronic equipment | 382 | 371 | 11 |
| Vehicles for internal transport | - | 3 | (3) |
| Rights of use (IFRS 16) | 976 | 932 | 44 |
| Total depreciation of property, plant equipment | 7,540 | 7,324 | 216 |
Other operating expenses amounted to € 109,868 thousand in the first nine months of 2023 (€ 101,751 thousand in the same period of 2022). They were composed as follows:
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Services | 79,276 | 58,343 | 20,933 |
| Use of group company assets | 873 | 823 | 50 |
| Lease expenses | 22,582 | 19,888 | 2,694 |
| Sundry expenses | 7,137 | 22,697 | (15,560) |
| Total | 109,868 | 101,751 | 8,117 |
The change in expenses for services is mainly attributable to increases in energy utility costs and outsourced processing costs, in addition to rises in transport costs, travel expenses, company canteen costs and personnel training costs as a result of the removal of restrictions and precautions still in place in 2022 as a consequence of the Covid 19 pandemic. Service expenses also include costs incurred for scientific meetings and publications, market research, expenses for medical and scientific information, advertising, clinical and drugs trials, professional advice and sanitisation services.
The item "leased assets" mainly includes royalties payable, which increased by € 2.1 million compared with the first nine months of 2022. This item also includes car hire charges.
Finally, "sundry expenses" recorded a substantial fall because in the first nine months of 2022 the item included non-recurring costs in relation to the acquisition of EUSA Pharma (UK) Limited totalling € 10.2 million and organisational restructuring costs totalling € 5.2 million.
Changes in inventories recorded a net increase of € 2,639 thousand in the first nine months of 2023 (a positive balance of € 19,032 thousand in the same period of 2022). The item was composed as follows:
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Raw materials | (14) | (3,882) | 3,868 |
| Stocks | 82 | (380) | 462 |
| Intermediates and work-in-process | 1,915 | (6,034) | 7,949 |
| Finished products | (4,622) | (8,736) | 4,114 |
| Total | (2,639) | (19,032) | 16,393 |
Income from investments amounted to € 173,245 thousand in the first nine months of 2023 (€ 120,026 thousand in the same period of 2022) and related entirely to dividends from subsidiaries. In detail, dividends were recorded from Recordati Rare Diseases S.a.r.l. (€ 128,240 thousand), Casen Recordati S.L. (€ 29,393 thousand), Bouchara Recordati S.a.s. (€ 14,000 thousand) and Recordati Romania Srl (€ 1,612 thousand).
Net financial income (expense) recorded net expense of € 65,961 thousand for the first nine months of 2023 (net expense of € 31,490 thousand in the same period of 2022). The item was composed as follows:
| € (thousands) | First nine | First nine | Changes |
|---|---|---|---|
| months 2023 |
months 2022 |
2023/2022 | |
| Foreign exchange gains (losses) | 3,965 | (8,244) | 12,209 |
| Interest income from subsidiaries | 2,666 | 3,301 | (635) |
| Interest expense payable to subsidiaries | (21,034) | (5,681) | (15,353) |
| Interest expense on long-term loans | (53,765) | (19,125) | (34,640) |
| Net interest on short-term financial positions | 4,200 | 3 | 4,197 |
| Bank charges | (1,699) | (1,667) | (32) |
| Costs for adjustment of employee benefit | (117) | (34) | (83) |
| provisions (IAS 19) | |||
| Interest expense on lease liabilities (IFRS16) | (177) | (43) | (134) |
| Total | (65,961) | (31,490) | (34,471) |
The item recorded an overall net loss of €34,471 thousand mainly due to a combinaton of the following factors:
Interest income from subsidiaries, amounting to € 2,666 thousand, relates to interest of € 2,221 thousand on loans granted to subsidiaries and of € 445 thousand from the centralised cash pooling system in operation at the Parent Company since 2007, on the basis of which monthly interest receivable and payable is recognised at market rates.
Interest expense payable to subsidiaries, totalling € 21,034 thousand, consisted of € 2,191 thousand on loans granted by subsidiaries and of € 18,843 thousand relating to the centralised cash pooling system.
Interest expense in respect of personnel leaving indemnities (Italian trattamento fine rapporto scheme) relates to the interest cost component of the adjustment to the relative provision in compliance with IAS 19.
Income taxes recognised in the income statement in the first nine months of 2023 amounted to € 2,474 thousand (€ 11,873 thousand in the same period of 2022). The item was composed as follows:
| € (thousands) | First nine months 2023 |
First nine months 2022 |
Changes 2023/2022 |
|---|---|---|---|
| Current taxation: | |||
| IRES (corporate income tax) | 3,542 | 8,391 | (4,849) |
| IRAP (regional tax on production) | 639 | 2,926 | (2,287) |
| "Patent Box" tax relief | (2,620) | 0 | (2,620) |
| Prior year taxation | 166 | 179 | (13) |
| Total current taxation | 1,727 | 11,496 | (9,769) |
| Deferred taxation: | |||
| Provision for deferred tax assets/liabilities, net | (879) | (586) | (293) |
| Use of prior year deferred tax assets/liabilities | 6,866 | 6,618 | 248 |
| "Patent Box" tax relief | (5,240) | (5,655) | 415 |
| Total deferred tax liabilities | 747 | 377 | 370 |
| Total | 2,474 | 11,873 | (9,399) |
Provisions for taxes were made on the basis of estimated taxable income.
In 2019 the Parent concluded a preliminary agreement with the tax authorities to establish the methods and criteria for the calculation of the economic contribution in the event of the direct use of intangible assets subject to tax relief with effect for the tax years 2015 to 2019. On the other hand, for the tax year 2020 Recordati S.p.A. opted for the "self-assessment" regime for the same assets as those in the previous five-year period (except for expired patents and brands which in the meantime had been excluded from the objective scope of the tax relief). It applied for the option in its tax return for the year until the expiry of the five-year period of validity of the option (2020-2024). Subsequently, on 21st October 2021 the Company filed an application to use the preliminary agreement procedure for the use of intangible assets for the remaining period 2021-2024, indicating the same methods and criteria for calculating the economic contribution used in previous periods.
Operating therefore on the same basis as in previous years the Company calculated the tax benefit for the first nine months of 2023, recognised as a reduction in current and deferred taxes totalling € 7,860 thousand.
Property, plant and equipment, net of accumulated depreciation, amounted to € 93,583 thousand as at 30th June 2023 (€ 83,736 thousand as at 31st December 2022).
The table below, which also includes the value of right-of-use lease assets in application of IFRS 16, shows the items of which the overall balance is composed and the changes that occurred in the reporting period.
| € (thousands) | Land and buildings |
Plant and machinery |
Other equipment |
Construction in progress |
Total |
|---|---|---|---|---|---|
| Cost of acquisition | |||||
| Balance as at 31.12.22 | 46,927 | 182,187 | 46,360 | 40,160 | 315,634 |
| Additions | 5,466 | 27 | 853 | 11,600 | 17,946 |
| Disposals | (782) | (28) | (876) | - | (1,686) |
| Reclassifications | 143 | 7,258 | 1,461 | (8,862) | - |
| Balance as at 30.09.23 | 51,754 | 189,444 | 47,798 | 42,898 | 331,894 |
| Accumulated depreciation | |||||
| Balance as at 31.12.22 | 36,541 | 156,531 | 38,826 | - | 231,898 |
| Depreciation for the period | 1,234 | 4,387 | 1,918 | - | 7,539 |
| Disposals | (221) | (28) | (877) | - | (1,126) |
| Reclassifications | - | - | - | - | - |
| Balance as at 30.09.23 | 37,554 | 160,890 | 39,867 | - | 238,311 |
| Carrying amount | |||||
| 30th September 2023 | 14,200 | 28,554 | 7,931 | 42,898 | 93,583 |
| 31st December 2022 | 10,386 | 25,656 | 7,534 | 40,160 | 83,736 |
In the first nine months of 2023 additions of € 17,946 thousand and gross disposals of € 1,686 thousand were recorded as follows:
Depreciation for the period, amounting to € 7,539 thousand, was calculated on all depreciable assets using rates held to be representative of the estimated useful life of the assets.
The table below shows the amounts for right-of-use lease assets in accordance with accounting standard IFRS 16.
| € (thousands) | Land and buildings |
Plant and machinery |
Other equipment |
Total |
|---|---|---|---|---|
| Cost of acquisition | ||||
| Balance as at 31.12.22 | 701 | 1,211 | 3,395 | 5,307 |
| Additions | 5,457 | - | 688 | 6,145 |
| Disposals | (701) | - | (634) | (1,335) |
| Reclassifications | - | - | - | - |
| Balance as at 30.09.23 | 5,457 | 1,211 | 3,449 | 10,117 |
| Accumulated depreciation | ||||
| Balance as at 31.12.22 | 176 | 560 | 1,715 | 2,451 |
| Depreciation for the period | 199 | 186 | 591 | 976 |
| Disposals | (200) | - | (635) | (835) |
| Reclassifications | - | - | - | - |
| Balance as at 30.09.23 | 175 | 746 | 1,671 | 2,592 |
| Carrying amount | ||||
| 30th September 2023 | 5,282 | 465 | 1,778 | 7,525 |
| 31st December 2022 | 525 | 651 | 1,680 | 2,856 |
The item goodwill, amounting to € 16,944 thousand, was unchanged compared with 31st December 2022.
As already reported, goodwill arose from the acquisition on 21st December 2022 from V.I.M. G. Ottaviani S.p.A. of a business unit related to the pharmaceutical speciality Telefil®, indicated for the treatment of erectile dysfunction and benign prostatic hyperplasia.
Intangible assets, net of accumulated amortisation, amounted to € 586,197 thousand as at 30th September 2023 (€ 349,778 thousand as at 31st December 2022). The table below shows the items of which the overall balance is composed and the changes that occurred during the reporting period.
| € (thousands) | Patent rights and marketing authorisations |
Distribution, licences, trademarks and similar rights |
Other | Assets under construction and advances |
Total |
|---|---|---|---|---|---|
| Cost of acquisition | |||||
| Balance as at 31.12.22 | 212,204 | 192,717 | 13,231 | 82,268 | 500,420 |
| Additions | - | 78,007 | - | 174,245 | 252,252 |
| Disposals | - | - | - | - | - |
| Reclassifications | - | 75,695 | - | (75,695) | - |
| Balance as at 30.09.23 | 212,204 | 346,419 | 13,231 | 180,818 | 752,672 |
| Accumulated | |||||
| amortisation/write-downs | |||||
| Balance as at 31.12.22 | 80,737 | 56,674 | 13,231 | - | 150,642 |
| Amortisation for the period | 7,034 | 8,799 | - | - | 15,833 |
| Disposals | - | - | - | - | - |
| Reclassifications | - | - | - | - | - |
| Balance as at 30.09.23 | 87,771 | 65,473 | 13,231 | - | 166,475 |
| Carrying amount | |||||
| 30th September 2023 | 124,433 | 280,946 | - | 180,818 | 586,197 |
| 31st December 2022 | 131,467 | 136,043 | - | 82,268 | 349,778 |
In the first nine months of 2023, total increases of €252,252 thousand were recorded, related mainly (€245,000 thousand) to an agreement with GSK for the marketing of Avodart® (dutasteride) and Combodart®/Duodart® (ditasteride/tamsulosin) in 21 countries, mainly in Europe, except for those where GSK already has distribution agreements in place. Avodart® and Combodart®/Duodart® are products marketed as an oral formulation (capsules) and indicated for the treatment of moderate to severe symptoms of benign prostatic hyperplasia (BPH) and for reducing the risk of acute urinary retention (RUA) and surgery in patients with moderate to severe symptoms of BPH.
The most significant other investments consisted of € 4,422 thousand for the implementation of an S/4 Hana management software app and of € 1,306 thousand on works and improvements carried out on a building acquired under a lease agreement during the reporting period. The remaining increase was due to the development and improvement of computer apps used for various business purposes.
Investments as at 30th September 2023 stood at € 1,841,844 thousand (€ 1,846,136 thousand as at 31st December 2022).
Reference is made to the following:
The decrease compared with 31st December 2022 is mainly due to the following changes:
Other non-current financial assets amounted to € 37,966 thousand as at 30th September 2023 (€ 88,653 thousand as at 31st December 2022) and related almost completely to the non-current portion of a loan granted by the Company to the subsidiary Recordati AG (€ 37,881 thousand). The remaining amount relates to security deposits.
Deferred tax assets amounted to € 9,086 thousand as at 30th September 2023 (€ 9,866 thousand as at 31st December 2022), a decrease of € 780 thousand in the reporting period.
Inventories amounted to € 102,478 thousand as at 30th September 2023 (€ 99,839 thousand as at 31st December 2022). Details and changes in the period are shown below:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Raw materials, ancillary materials, consumables and supplies |
26,004 | 26,071 | (67) |
| Intermediates and work-in-process | 28,620 | 30,535 | (1,915) |
| Finished products and goods | 47,854 | 43,233 | 4,621 |
| Total inventories | 102,478 | 99,839 | 2,639 |
Trade receivables amounted to € 116,379 thousand as at 30th September 2023 (€ 110,680 thousand as at 31st December 2022), as detailed below:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|
|---|---|---|---|---|
| Trade receivables from subsidiaries | 50,718 | 66,703 | (15,985) | |
| Trade receivables from others: | 66,679 | 45,008 | 21,671 | |
| Italy | 54,702 | 31,172 | 23,530 | |
| Abroad | 11,977 | 13,836 | (1,859) | |
| 117,397 | 111,711 | 5,686 | ||
| Allowance for doubtful accounts | (1,018) | (1,031) | 13 | |
| Total trade receivables | 116,379 | 110,680 | 5,699 |
The allowance for doubtful accounts fell by € 13 thousand in the first nine months of 2023, due to additions made of € 110 thousand and uses of € 123 thousand in the period.
The total amount of the allowance is considered appropriate in relation to potential insolvency risks.
Other receivables amounted to € 30,824 thousand as at 30th September 2023 (€ 24,793 thousand as at 31st December 2022). The composition is given in the table below.
| Total other receivables | 30,824 | 24,793 | 6,031 |
|---|---|---|---|
| Other | 4,969 | 2,779 | 2,190 |
| Advances to employees and agents | 1,918 | 916 | 1,002 |
| From subsidiaries | 11,057 | 3,256 | 7,801 |
| Tax income | 12,880 | 17,842 | (4,962) |
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
Tax income, totalling € 12,880 thousand, was composed of € 8,268 thousand for VAT receivables to be recovered, € 2,180 thousand for tax receivables and € 2,432 thousand in IRAP (regional tax on production) receivables.
The aggregate decrease of € 4,962 thousand compared with 31st December 2022 was mainly due to lower IRES (corporate income tax) and IRAP receivables (-€ 5,991 thousand), partially offset by higher tax credits (+€ 1,052 thousand).
Receivables from subsidiaries, totalling Euro €11,057 thousand, were composed of €10,504 thousand of tax consolidation receivables from the subsidiaries Italchimici S.p.A. (€6,780 thousand) and Natural Point S.r.l. (€ 3,724 thousand), while the remainder consisted of further receivables from Italchimici S.p.A. The increase of € 7,801 thousand compared with the previous year is mainly due to greater receivables from the tax consolidation.
Other current assets as at 30th September 2023 amounted to € 3,883 thousand (€ 1,873 thousand as at 31st December 2022). This item consists exclusively of prepaid expenses comprised of payments made in advance for various services and of insurance premiums also paid in advance.
As at 30th September 2023, the value of derivative instruments classified within this item stood at € 18,162 thousand (€ 23,010 thousand as at 31st December 2022).
The market value (fair value) as at 30th September 2023 of the currency swaps entered into by the Company to hedge a bond issued for \$ 75 million on 30th September 2014, totalled € 9,197 thousand. That value represents the potential benefit resulting from a lower value of the future cash flows in United States dollars in terms of principal and interest, due to an appreciation of the foreign currency with respect to the time of finalising the loan and acquiring the hedge instruments. More specifically, the fair value of the derivative to hedge the \$ 50 million tranche of the loan granted by Mediobanca was positive by € 5,628 thousand, while that of the instrument to hedge the \$ 25 million tranche of the loan granted by Unicredit was positive by € 3,569 thousand.
The market value (fair value) as at 30th September 2023 of the interest rate swaps to hedge the medium and long-term loans gave rise to a total asset of € 8,455 thousand, which represents the unrealised benefit of paying the currently expected variable rates for the duration of the loans instead of the rates agreed.
The market value (fair value) as at 30th September 2023 of forward contracts entered into to hedge currency risks on loans with the company Recordati Rare Diseases Japan (€ 510 thousand) was recognised through profit or loss.
The fair value of these hedging derivatives is measured at level 2 of the hierarchy set out in financial reporting standard IFRS 13. The fair value is equal to the present value of the estimated future cash flows. The estimated future cash flows at a floating interest rate are based on listed interest-rate swaps, futures prices and interbank rates. The estimated cash flows are discounted using a yield curve which reflects the reference interbank rate applied by market participants for the measurement of interestrate swaps.
Other short-term receivables as at 30th September 2023 amounted to € 96,594 thousand (€ 114,011 thousand as at 31st December 2022). This item includes only the short-term portion of loans from subsidiaries and receivables arising from the centralisation of treasury balances at the Company (i.e. cash pooling).
Interest is paid on these loans and on positive cash pooling balances at short-term market rates.
Cash and cash equivalents amounted to € 28,027 thousand as at 30th September 2023 (€ 50,249 thousand as at 31st December 2022) and consisted mainly of current account sight deposits, as reported in the table below.
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Current-account sight deposits | 27,612 | 49,488 | (21,876) |
| Petty cash | 3 | 2 | 1 |
| Proceeds from derivative instruments | 412 | 759 | (347) |
| Cash and cash equivalents | 28,027 | 50,249 | (22,222) |
A summary of the changes in the equity accounts is reported in the relative statement. Following the entry into force of Legislative Decree No. 6/2003, which amended the Italian Civil Code, the table contained in Attachment 4 was introduced, which gives the composition of reserves on the basis of availability for use and distribution.
The share capital as at 30th September 2023, amounting to € 26,141 thousand, was fully paid up and consisted of 209,125,156 ordinary shares with a par value of € 0.125 each. It remained unchanged over the first nine months of 2023.
Additional paid-in capital amounted to € 83,718 thousand as at 30th September 2023 and was unchanged compared with 31st December 2022.
The adoption of international accounting standards resulted in the elimination of revaluation reserves amounting to € 68,644 thousand. The tax obligation on these (untaxed – taxation suspended) was transferred to the additional paid-in capital reserve.
The treasury stock reserve amounted to € 126,986 thousand as at 30th September 2023 (€ 149,559 thousand as at 31st December 2022), and represents the value of the 3,132,802 treasury shares held in portfolio (3,684,033 as at 31st December 2022).
The change during the period was due to the sale of 716,750 shares for € 29,056 thousand at the service of the 2014-2018 and 2018-2022 stock option plans and to the purchase of 165,519 shares for € 6,483 thousand.
The statutory reserve as at 30th September 2023 amounted to € 5,228 thousand and remained unchanged compared with 31st December 2022 because the limit set by Art. 2430 of the Italian Civil Code had been reached.
Other reserves as at 30th September 2023 totalled € 262,360 thousand (€ 288,603 thousand as at 31st December 2022). The composition and changes in this item are shown below:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Gain on merger | 30,204 | 30,204 | - |
| Extraordinary reserve | 42,885 | 69,351 | (26,466) |
| Reserve under Art.13 par.6 Legislative Decree No 124/1993 |
99 | 99 | - |
| Extraordinary VAT concession reserve | 517 | 517 | - |
| Research and investment grants | 17,191 | 17,191 | - |
| Non-distributable reserve for investments in southern Italy |
3,632 | 3,632 | - |
| International accounting standards reserve | 162,143 | 162,360 | (217) |
| Total | 256,671 | 283,354 | (26,683) |
| Fair value of derivative instruments | 5,689 | 5,249 | 440 |
| Total other reserves | 262,360 | 288,603 | (26,243) |
The merger gain reserve as at 30th September 2023 amounted to € 30,204 thousand and was unchanged since 31st December 2022.
The extraordinary reserve as at 30th September 2023 amounted to € 42,855 thousand (€ 69,351 thousand as at 31st December 2022). The decrease of € 26,466 thousand compared with the previous year is a result of the following:
This amounted to € 99 thousand as at 30th September 2023 and was unchanged compared with 31st December 2022.
This reserve (Laws 675/1977, 526/1982, 130/1983 and 64/1986), amounting to € 517 thousand, relates to special VAT allowances on investments and is unchanged compared with 31st December 2022.
This reserve amounted to € 17,191 thousand and was unchanged compared with 31st December 2022. The grants will be subject to taxation if they are used for purposes other than to cover losses, which, however, is not planned by the Company. The assets corresponding to the grants received from the Ministry of Industry and Commerce (formerly Asmez) have been depreciated.
This reserve amounted to € 3,632 thousand and remained unchanged compared with 31st December 2022.
The international accounting standards reserve amounted to € 162,143 thousand as at 30th September 2023 (€ 162,360 thousand as at 31st December 2022). The composition and changes in this item are as follows:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Reversal of fixed asset revaluations | 40,479 | 40,479 | - |
| Revaluation of investments | 43,054 | 43,054 | - |
| Inventories | 463 | 463 | - |
| Employee benefit obligations | 105 | 105 | - |
| Incentive plans | 30,706 | 27,698 | 3,008 |
| Adjustment to investments for incentive plans | 30,148 | 25,736 | 4,412 |
| Stock options – Rossini Luxembourg S.à r.l. incentive plan |
4,742 | 3,78 | 962 |
| Reserve to adjust entries for merged companies | 24 | 24 | - |
| Financial instrument adjustment reserve | 12,422 | 21,021 | (8,599) |
| Total | 162,143 | 162,36 | (217) |
We report the following with regard to the individual items that changed during the reporting period:
In accordance with the provisions of IFRS 9, this reserve is comprised of the following: the balancing entry of the amounts for the assets resulting from measurement at market value of cross currency swaps of a cash flow nature, the balancing entry of the amount recognised through profit or loss to offset movements in the exchange rate at the end of the year relating to a hedged loan in foreign currency and the liabilities resulting from the measurement at the market value of interest rate swap transactions also of a cash flow hedge nature. The amount as at 30th September 2023, net of tax, was positive by € 5,689 thousand.
The revaluation reserve as at 31st December 2022 amounted to € 2,602 thousand. The item includes revaluation balances pursuant to Law No. 413/1991.
Three stock option plans were in place in favour of certain Group employees as at 30th September 2023: the 2014- 2018 plan with options granted on 29th July 2014 and 13th April 2016, the 2018-2022 plan, with options granted on 3rd August 2018 and the 2021-2023 plan with options granted on 6th May 2021, 1st December 2021 and 24th February 2022.
The strike price of the options is the average of the company's listed share price during the 30 days prior to the grant date. The options vest in four tranches over five years, starting in the second year for the earliest grants and three years, in one lump sum, for the 2021 grant and will expire if not exercised by the end of the eighth year following the year granted.
Options cannot be exercised if the employee leaves the Company before they are vested.
| Grant date | Strike price (€) |
Options outstanding as at 1.1.2023 |
Options exercised during 2023 |
Options cancelled and expired |
Options outstanding as at 30.09.2023 |
|---|---|---|---|---|---|
| 13th April 2016 | 21.93 | 899,500 | (266,500) | - | 633,000 |
| 3rd August 2018 | 30.73 | 2,620,500 | (450,250) | (24,500) | 2,145,750 |
| 6th May 2021 | 45.97 | 2,614,500 | - | (52,000) | 2,562,500 |
| 1st December 2021 | 56.01 | 130,000 | - | - | 130,000 |
| 24th February 2022 | 47.52 | 3,520,000 | - | (273,000) | 3,247,000 |
| Total | 9,784,500 | (716,750) | (349,500) | 8,718,250 |
Details of stock options outstanding as at 30th September 2023 are given in the table below.
Starting in 2019, certain Group employees have been designated as beneficiaries of an incentive plan, with a vesting period of five years, granted and fully financed by Rossini Luxembourg S.à r.l., an indirect shareholder of Recordati S.p.A.. They will benefit from a return at the end of the plan and if the performance goals are met. Recognition, in accordance with IFRS 2, resulted in a charge recognised in the income statement of € 962 thousand, which also includes the incentive plan granted by Rossini Luxembourg S.à r.l. to the CEO of the Recordati group.
In the first half of 2023, the Company adopted a new long-term incentive plan named the "2023-2025 Performance Shares Plan" in favour of certain Group employees. The plan involves involves three grants of rights to receive shares in the Company free of charge, one for each year covered by the plan. The grant scheduled for the current year was made on 27th June and consisted of a total of 440,485 rights which, after a three-year vesting period, will result in the receipt by the grantees of shares in the Company which may reach up to 175% of the original grant, depending on the achievement of certain key performance indicators. These rights, however, will lapse if employees leave the company before the end of the vesting period.
Loans outstanding as at 30th September 2023 and 31st December 2022 are summarised in the table below.
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Bond subscribed in dollars by the investor Pricoa Capital Group (Prudential) |
48,546 | 60,941 | (12,395) |
| Bond subscribed in euro by the investor Pricoa Capital Group (Prudential) |
125,000 | 125,000 | - |
| Loan granted by Mediobanca at a floating interest rate repayable in semi-annual instalments by 2023 |
21,429 | 42,857 | (21,428) |
| Loan granted by a pool of banks with Mediobanca as the agent at a floating interest rate repayable in semi-annual instalments by 2024 |
171,150 | 214,300 | (43,150) |
| Loan granted by Allied Irish Bank at a floating interest rate repayable in semi-annual instalments starting from 2022 and by 2026 |
34,000 | 38,000 | (4,000) |
| Loan granted by a pool of national and international lenders, led by Mediobanca, at a floating interest rate repayable in a single payment in 2026 |
180,000 | 180,000 | - |
| A syndicated loan at a floating interest rate repayable in semi annual instalments commencing on 31st March 2023 and repayable by 2nd February 2027 |
692,400 | 800,000 | (107,600) |
| Bond subscribed in euro by the investor Pricoa Capital Group (Prudential) |
75,000 | 75,000 | - |
| Loan granted by Cassa Depositi e Prestiti at a floating interest rate and repayable in semi-annual instalments starting from October 2025 for 70% and from April 2033 for the remaining 30% |
50,000 | - | 50,000 |
| Loan agreement signed with a pool of national and international lenders, led by Mediobanca, at a floating interest rate repayable in increasing semi-annual instalments, commencing from 2024 and to be fully repaid by May 2028 |
300,000 | - | 300,000 |
| Total amortised cost of loans | 1,697,525 | 1,536,098 | 161,427 |
| Portion due within one year | (357,119) | (253,356) | (103,763) |
| Portion due after one year | 1,340,406 | 1,282,742 | 57,664 |
| Expenses relating to loans | (5,634) | (5,817) | 183 |
| Portion due after one year, net of costs | 1,334,772 | 1,276,925 | 57,847 |
| Long-term lease liabilities (IFRS 16) | 6,858 | 1,959 | 4,899 |
| Total | 1,341,630 | 1,278,884 | 62,746 |
The item long-term lease liabilities includes long-term liabilities resulting from the application of the financial reporting standard IFRS 16 amounting to € 6,858 thousand (€ 1,959 thousand as at 31st December 2022), which represents an obligation to make payments under existing lease contracts.
a) A bond subscribed by the Company on 30th September 2014 for a total of \$ 75 million, divided into two tranches: \$ 50 million at a fixed rate, repayable semi-annually from 30th March 2022 and maturing on 30th September 2026 and \$ 25 million, again at a fixed rate, repayable semi-annually from 30th March 2023 and maturing on 30th September 2029.
During the period, \$ 10 million of the first tranche and \$ 3.6 million of the second tranche were repaid and the total remaining debt as at 30th September 2023 amounted to \$ 51.4 million.
The conversion of the debt as at 30th September 2023 (totalling € 48,546 thousand) resulted in a net decrease of the liability by € 12,395 thousand compared with 31st December 2022, less than the instalment repaid due to an appreciation of the United States dollar against the Company's accounting currency.
The loan was hedged at the same time by two cross currency swap transactions, which transformed the original debt into a total of € 56.0 million (€ 38.4 million as at 30th September 2023), of which € 37.3 million (€ 22.4 million as at 30th September 2023) at a lower fixed interest rate for the tranche maturing in 12 years and € 18.7 million (€ 16.0 million as at 30th September 2023) again at a lower fixed interest for that maturing in 15 years.
The measurement of the hedging instruments at fair value at 30th September 2023, was positive on aggregate by € 9,197 thousand and was recognised directly as an increase in equity and an increase in the asset item "Fair value of hedging derivatives " (see note 23).
The bond is subject to covenants and failure to comply with them may result in the immediate call of the bond.
The financial covenants subject to measurement on a quarterly basis are as follows:
Those conditions were fulfilled.
b) A bond was issued by the Company in May 2017 for a total of € 125.0 million, at a fixed rate, repayable annually from 31st May 2025 and maturing on 31st May 2032.
The bond is subject to covenants and failure to comply with them may result in the immediate call of the bond.
The financial covenants subject to measurement on a quarterly basis are as follows:
Those conditions were fulfilled.
c) A loan agreement for € 150.0 million signed by the Company in November 2018 with Mediobanca, at a floating interest rate equal to the 6-month Euribor plus a spread, floating on the basis of a step up mechanism as a function of changes in leverage ratio, with quarterly payments of interest and a life of 5 years with semi-annual repayments of principal starting from November 2020 and until November 2023. The remaining debt as at 31st December 2023 totalled € 21.4 million. The loan was hedged by an interest rate swap (a cash flow hedge), which transformed the whole debt to a fixed interest rate. The measurement at fair value of the derivative instrument as at 30th September 2023 gave a positive result of € 367 thousand and this was recognised directly as an increase in equity and an increase in the asset item "Fair value of hedging derivatives" (see note
23).
The loan contract contains financial covenants which, if not complied with, may result in the immediate call of the loan. The financial covenants subject to measurement on an annual basis are as follows:
Those conditions were fulfilled.
d) In June 2019 the Company negotiated a loan for € 400.0 million, designed to support the Group's growth strategy. This financing, initially underwritten by Mediobanca, Natixis and Unicredit was subsequently syndicated with the involvement of a pool of national and international banks. The main terms and conditions are a floating interest rate equal to the 6-month Euribor (with a zero floor) plus a spread, floating on the basis of a step up mechanism as a function of changes in the leverage ratio, and a life of five years, with repayments of the principal in semi-annual instalments starting from 30th June 2020 and continuing until June 2024. Disbursement, net of up-front commissions, took place on 30th July 2019. The remaining debt as at 30th September 2023 amounted to € 171.1 million. The loan contract contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants subject to measurement on a semi-annual basis are as follows:
Those conditions were fulfilled.
e) A loan agreement for € 40.0 million signed by the Company on 30th March 2021 with Allied Irish Bank at a floating interest rate equal to the 6-month Euribor (with a zero floor) plus a spread, floating on the basis of a step up/step down mechanism as a function of changes in the leverage ratio, with semi-annual payment of interest and principal, again on a semi-annual basis, starting from March 2022 and continuing until March 2026. The remaining debt as at 30th September 2023 amounted to € 34.0 million. The loan contract contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants subject to measurement on a semi-annual basis are as follows:
Those conditions were fulfilled.
f) A loan agreement for € 180.0 million was negotiated by the Company in May 2021, provided by a consortium of domestic and international lenders led by Mediobanca. The main terms and conditions of the loan are a floating interest rate equal to the 6-month Euribor (with a zero floor) plus a fixed spread and a life of five years with repayment of the principal in a single instalment. Disbursement, net of structuring and up-front fees, took place on 21st May 2021.
The loan contract contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants subject to measurement on a semi-annual basis are as follows:
Those conditions were fulfilled.
g) Loans totalling € 800.0 million were negotiated by the Company in two different stages.
On 3rd February 2022, the Company took out a loan of € 200.0 million for the acquisition of EUSA Pharma (UK) Limited. It was granted by a consortium of domestic and international lenders consisting of Mediobanca, JP Morgan, UniCredit and Banca Nazionale del Lavoro.
The main terms and conditions are a floating interest rate equal to the 6-month Euribor (with a zero floor) plus a spread, floating on the basis of a step up/step down mechanism as a function of changes in the leverage ratio, and a life of five years, with repayments of the principal in semiannual instalments starting from 31st March 2023, with the last instalment payable on 3rd February 2027. Disbursement, net of structuring and up-front fees, took place on 15th March 2022. Again on 3rd February 2022, the Company signed a bridge facility agreement totalling € 450.0 million and again to finance the acquisition of EUSA Pharma (UK) Limited. The lenders are Mediobanca, which also acts as agent, and JP Morgan with a € 157.5 million share each and UniCredit with € 67.5 million, Banca Nazionale del Lavoro with € 54.0 million, and BNP Paribas with € 13.5 million. The maximum term of the loan is 12 months, which may be extended at the Company's discretion for a further six months, in order to allow it to enter into final loan agreements in the meantime. The main terms and conditions are a floating interest rate equal to the Euribor for the period of its use (with a zero floor) plus a variable spread. The disbursement, net of fees and commissions, took place on 15th March 2022. In the second quarter the Company finalised the negotiation of a syndicated loan for the repayment of the bridge facility. Significant interest was shown by both the Company's customary banks and new international credit institutions. It was therefore possible to raise an additional € 150.0 million. That operation was formally finalised on 28th June 2022 when an "amendment and restatement" agreement for the € 200.0 million loan negotiated in February 2022 was signed. This amendment increased the value of the loan by € 600.0 million, of which € 450.0 million came from the replacement of the bridge facility and € 150 million was additional. The main terms and conditions of the loan remained substantially the same as the original terms and conditions, with a floating interest rate equal to the 6-month Euribor (with a zero floor) plus a spread, floating on the basis of a step up/step down mechanism as a function of changes in the leverage ratio, and a life of five years, with repayments of the principal in semiannual instalments starting from 31st March 2023, with the last instalment payable on 3rd February 2027.
The remaining debt as at 30th September 2023 amounted to € 692.4 million. The loan was partially hedged in the second half of 2022 by an interest rate swap (a cash flow hedge), which converted the hedged portion to a fixed interest rate. The measurement of the derivatives at fair value at 30th September 2023 was positive by € 8,088 thousand and was recognised directly as an increase in equity and an increase in the asset item "Fair value of hedging derivatives " (see note 23).
The loan contract contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants subject to measurement on a semi-annual basis are as follows:
Those conditions were fulfilled.
h) A bond issued by the Company on 12th September 2022 totalling € 75.0 million was placed privately and fully with companies belonging to the Prudential group. The main terms and conditions are a fixed interest rate with semi-annual interest payments and a term of 12 years, with repayment of the principal in five annual instalments starting in September 2030 and ending on 12th September 2034. This transaction, designed to continue with the acquisition of medium to long-term funds to support the Group's further growth, enabled it to benefit from attractive market conditions. It has standard terms and conditions, common to the US private placement market, substantially in line with those of a bond issued by the Company in 2017. The loan contract contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants subject to measurement on a semi-annual basis are as follows:
Those conditions were fulfilled.
i) A loan of € 50.0 million taken out by the Company in April 2023 with Cassa Depositi e Prestiti. The main terms and conditions are a floating interest rate equal to the 6-month Euribor (with a zero floor) plus a spread, semi-annual payment of interest and a life of 10 years with semi-annual repayments at constant rates starting in October 2025 for 70% of the principal and repayment in April 2033 for the remaining 30%. The disbursement took place on 18th May 2023. The loan contract contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants subject to measurement on a semi-annual basis are as follows:
Those conditions were fulfilled.
j) A loan agreement totalling € 400.0 million was signed on 16th May 2023 by Recordati S.p.A. with a pool of eight national and international lenders, which included Mediobanca in the role of lead coordinator, with an individual quota of € 50.0 million. The loan consists of two independent loans of €300.0 million and €100.0 million each, both at an interest rate equal to the 6-month Euribor (with zero floor), plus a floating step up/step down spread based on changes in the leverage ratio with semi-annual interest payments and a term of five years. The largest loan was disbursed on 14th June 2023 and will be repaid in semi-annual instalments in increasing amounts starting in April 2024 with full repayment in May 2028. It was partially hedged with an interest rate swap (a cash flow hedge), which transforms the hedged portion to a fixed interest rate. The fair value of the derivative as at 30th September 2023 was essentially neutral. The € 100.0 million loan consists of a "Capex Line" that can be used to finance specific investments, with guaranteed availability of disbursements for 18 months, of which no drawdown has been made so far, with repayments in equal semi-annual instalments starting in October 2025 for half of the principal and in May 2028 for the remaining half.
The loan contract contains covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants subject to measurement on a quarterly basis are as follows:
the ratio of consolidated net debt to consolidated EBITDA (for a period of twelve
consecutive months) must be less than 3.00 to 1.00;
the ratio of consolidated EBIT to consolidated net interest expense (for a period of twelve consecutive months) must exceed 3.00 to 1.00.
Those conditions were fulfilled.
The balance as at 30th September 2023 was € 3,777 thousand (€ 4,556 thousand as at 31st December 2022) down by € 779 thousand.
Trade payables amounted to € 77,648 thousand as at 30th September 2023 (€ 71,577 as at 31st December 2022). The item also includes end-of-period provisions for invoices to be received and is composed as follows:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Suppliers, subsidiaries | 15,084 | 16,711 | (1,627) |
| Suppliers, others | 62,564 | 54,866 | 7,698 |
| Total trade payables | 77,648 | 71,577 | 6,071 |
There were no concentrations of large debts to a single or a small number of suppliers.
Other current liabilities as at 30th September 2023 amounted to € 35,893 thousand (€ 109,234 thousand as at 31st December 2022). The composition and changes in the individual items are as follows:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Payables to Tolmar for Eligard | - | 70,000 | (70,000) |
| Payables to third parties for the acquisition of Opalia Pharma S.A. |
3,644 | 3,539 | 105 |
| Employees | 16,531 | 17,815 | (1,284) |
| Social security | 7,149 | 7,560 | (411) |
| Commissions to agents | 521 | 840 | (319) |
| Payables to AIFA (Italian Medicines Agency) | 1,552 | 872 | 680 |
| Payables to shareholders for dividends to be paid | 390 | 6,222 | (5,832) |
| Other | 6,106 | 2,386 | 3,720 |
| Total other current payables | 35,893 | 109,234 | (73,341) |
The large decrease in this item was mainly due to a milestone payment due to Tolmar in August 2023, for the debt recognised in 2022, following the approval in some countries of the new Eligard® (leuprelin acetate) device.
Payables to non-Group parties regard the acquisition of a further 10% of the share capital of Opalia Pharma S.A., reclassified into short-term liabilities on the basis of contractually agreed call and put options. The fair value of this purchase option is measured at level 2 because the valuation model considers the present value of the expected payments.
Amounts due to employees include amounts accrued and not paid, vacations accruing and not taken and bonuses for presence and for achieving objectives. The decrease compared with 31st December 2022 is mainly due to the payment in 2023 of bonuses for objectives achieved in 2022.
In addition to including contribution charges related to the aforementioned accruals, social security payables include the debt to pension institutions accrued in September.
Amounts payable to agents include € 113 thousand in commissions for foreign agents.
The debt to AIFA (Italian Medicines Agency) relates to the payback provision (1.83 %) for the first nine months of 2023.
Other payables mainly include payables to subsidiaries for charges to be received (€ 4,359 thousand) and for credit notes to be issued (€ 1,000 thousand). The remaining amount is comprised of sundry debts, including contributions due in Bulgaria and Hungary for Eligard®, local taxes and various charges to be received.
Tax liabilities as at 30th September 2023 amounted to € 8,589 thousand (€ 5,786 thousand as at 31st December 2022). The composition and changes in this item are as follows:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Liabilities for current taxation | 3,616 | - | 3,616 |
| VAT liabilities | 3,049 | 1,552 | 1,497 |
| Liabilities for employee withholding taxes | 1,820 | 4,089 | (2,269) |
| Liabilities for self-employed withholding taxes |
104 | 145 | (41) |
| Total tax liabilities | 8,589 | 5,786 | 2,803 |
The increase in this item compared with the previous year is mainly due to net payables for current taxation, which amounted to € 3,616 thousand as at 30th September 2023. It should be noted that as at 31st December 2022 the Company had a credit for current taxation, as the advances paid were higher than the tax provisions made.
Other current liabilities, amounting to € 239 thousand as at 30th September 2023 (€ 382 thousand as at 31st December 2022), include up-front payments resulting from licence and distribution agreements received in prior years but accruing at a later date.
Provisions for liabilities and charges as at 30th September 2023 amounted to € 4,812 thousand (€ 4,568 thousand as at 31st December 2022). The composition and changes in this item are as follows:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| For taxes | 144 | 176 | (32) |
| For agent customer indemnities | 1,474 | 1,717 | (243) |
| For other risks | 3,194 | 2,675 | 519 |
| Total provisions | 4,812 | 4,568 | 244 |
The provision for taxes arises from the merger of the former parent company FIMEI S.p.A. and is maintained on the balance sheet to cover any liabilities related to it.
The provision for other risks was recognised to cover risks for returns from Assinde (€ 1,629 thousand), reductions in National Health Service spending (€ 1,260 thousand), legal expenses (€ 200 thousand) and for labour litigation disputes (€ 105 thousand).
As at 30th September 2023 the value of derivative instruments classified within this item stood at € 13,095 thousand (€ 15,166 thousand as at 31st December 2022).
The market value (fair value) as at 30th September 2023 of the forward contract entered into to hedge currency risks on the loan to the company Recordati AG for CHF €135,977 thousand nominal was negative by € 12,936 thousand and the change was recognised through profit and loss.
The market value (fair value) of forward contracts entered into to hedge currency risks on the smaller loans to Recordati AG and Recordati Rare Diseases Mexico was negative by € 106 thousand and € 53 thousand respectively.
The fair value of these hedging derivatives is measured at level 2 of the hierarchy set out in financial reporting standard IFRS 13 (see note 2). The fair value is equal to the present value of the estimated future cash flows. The estimated future cash flows at a floating interest rate are based on listed interestrate swaps, futures prices and interbank rates. The estimated cash flows are discounted using a yield curve which reflects the reference interbank rate applied by market participants for the measurement of interest-rate swaps.
The short-term portions of loans outstanding as at 30th September 2023, totalling € 358,115 thousand (€ 254,317 thousand as at 31st December 2022) are reported as follows:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Bond subscribed in dollars by the investor Pricoa Capital Group (Prudential) |
12,809 | 12,723 | 86 |
| Loan granted by Mediobanca at a fixed and floating interest rate repayable in semi-annual instalments by 2023 |
21,406 | 42,733 | (21,327) |
| Loan granted by a pool of banks with Mediobanca as the agent at a floating interest rate repayable in semi-annual instalments by 2024 |
170,604 | 86,300 | 84,304 |
| Loan granted by Allied Irish Bank at a floating interest rate repayable in semi-annual instalments starting from 2022 and by 2026 |
6,000 | 4,000 | 2,000 |
| A syndicated loan at a floating interest rate repayable in semi-annual instalments commencing on 31st March 2023 and repayable by 2nd February 2027 |
123,800 | 107,600 | 16,200 |
| Loan agreement signed with a pool of national and international lenders, led by Mediobanca, at a floating interest rate repayable in increasing semi-annual instalments, commencing from 2024 and to be fully repaid by May 2028 |
22,500 | - | 22,500 |
| Total loans due within one year | 357,119 | 253,356 | 103,763 |
| Current portion of lease liabilities (IFRS 16) | 996 | 961 | 35 |
| Total | 358,115 | 254,317 | 103,798 |
This item includes short-term liabilities resulting from the application of the financial reporting standard IFRS 16, amounting to € 996 thousand (€ 961 thousand as at 31st December 2022), which represent an obligation to make payments under existing lease contracts.
Short-term liabilities to banks amounted to € 41,165 thousand as at 30th September 2023 (€ 79,564 thousand as at 31st December 2022 ). The composition and changes in this item are as follows:
| € (thousands) | 30.09.2023 | 31.12.2022 | Changes 2023/2022 |
|---|---|---|---|
| Current account overdrafts | 3,942 | 166 | 3,776 |
| Expenses on derivative instruments | 98 | 373 | (275) |
| Interest on loans | 11,118 | 7,316 | 3,802 |
| Interest on bond debt | 1,007 | 1,709 | (702) |
| Drawings on short-term credit facilities | 25,000 | 40,000 | (15,000) |
| Revolving credit facility | - | 30,000 | (30,000) |
| Total | 41,165 | 79,564 | (38,399) |
The decrease compared with the previous period is due mainly to less use of credit facilities.
Other short-term liabilities as at 30th September 2023 amounted to € 641,426 thousand (€ 632,547 thousand as at 31st December 2022).
The item includes payables to subsidiaries only, of which € 615,682 thousand related to payables arising from centralised treasury activities (cash pooling) and € 25,744 thousand to loans payable.
The Company is party to certain minor legal actions, the outcomes of which are not expected to result in any significant liability.
The amount for contingent liabilities, currently considered "possible", is not significant, partly due to guarantees in contracts and insurance agreements with third parties. Some licence agreements involve future milestone payments when specified conditions are met, the materialisation of which are still uncertain, with the result that the contractually agreed payments are currently merely potential.
As at 30th September 2023, the Company had a total net debt position of € 464,619 thousand towards group companies, with credit positions of € 196,250 thousand and debt positions of € 660,869 thousand.
The nature of these receivables and payables are summarised as follows:
Sales, services and royalties supplied to Group companies in the first nine months of 2023 amounted to € 238,022 thousand.
Dividends payable to the company were declared during the period by the following: Recordati Rare Diseases S.a.r.l. (€ 128,240 thousand), Casen Recordati S.L. (€ 29,393 thousand), Bouchara Recordati S.a.s. (€ 14,000 thousand) and Recordati Romania Srl (€ 1,612 thousand).
At the date of preparing the financial statements no corporate events had occurred after the end of the period which might require modifications to be made to the value of assets and liabilities and the amounts in the income statement.
As concerns the geopolitical situation in Israel, where, however, the Company has no investments, no financial effects with a negative impact on the Group are currently foreseeable.
| € (thousands) | Balance as at 31st December 2022 |
Mergers | Fair value measurement |
IFRS 2 Incentive plan measurement |
Balance as at 30th September 2023 |
|---|---|---|---|---|---|
| Investments in subsidiaries | |||||
| Casen Recordati S.L. – Spain | 274,268 | - | - | 722 | 274,990 |
| Innova Pharma S.p.A. – Italy | 10,566 | - | - | 2 | 10,568 |
| Bouchara Recordati S.a.s. – France | 58,906 | - | - | 492 | 59,398 |
| Recordati Pharmaceuticals Ltd. – United Kingdom | 11,709 | - | - | 44 | 11,753 |
| Recordati Hellas Pharmaceuticals S.A. – Greece | 5,035 | - | - | 43 | 5,078 |
| Herbacos Recordati S.r.o. – Czech Republic | 19,989 | - | - | 65 | 20,054 |
| Recordati Polska Sp. z.o.o. – Poland | 20,493 | - | - | 248 | 20,741 |
| Italchimici S.p.A. – Italy | 106,294 | - | - | 106,294 | |
| Natural Point s.r.l. – Italy | 83,623 | - | - | 15 | 83,638 |
| Recordati AG – Switzerland | 206,515 | - | - | 492 | 207,007 |
| Recordati Rare Diseases Canada Inc. – Canada | 245 | - | - | 245 | |
| Recordati Rare Diseases Inc. – United States | 4,426 | - | - | 1,083 | 5,509 |
| Recordati Rare Diseases S.A. de C.V. – Mexico | 922 | - | - | 19 | 941 |
| Recordati Rare Diseases Comercio Medicamentos Ltda – Brazil | 234 | - | - | 19 | 253 |
| Recordati Ireland Ltd – Ireland | 1,792 | - | - | 160 | 1,952 |
| Recordati Orphan Drugs S.A.S. – France | 55,454 | (55,454) | - | - | |
| Opalia Pharma S.A.– Tunisia | 19,982 | - | - | 19,982 | |
| Recordati Romania Srl – Romania | 1,663 | - | - | 42 | 1,705 |
| Recordati Pharma GMBH – Germany | 87,889 | - | - | 138 | 88,027 |
| Accent LLC – Russian Federation | 66,707 | - | - | 66,707 | |
| Tonipharm S.A.S. – France | 72,636 | - | - | 72,636 | |
| Recordati Bulgaria Ltd – Bulgaria | 44 | - | - | 11 | 55 |
| Recordati (Beijing) Pharmaceutical Co., Ltd – China | 827 | - | - | 20 | 847 |
| Eusa Pharma | 707,204 | - | - | 230 | 707,434 |
| Recordati Rare Diseases S.a.r.l. - France | - | 55,454 | - | 567 | 56,021 |
| 1,817,423 | - | - | 4,412 | 1,821,835 | |
| Investments in other companies: | |||||
| Sifir S.p.A. – Reggio Emilia | - | - | - | - | - |
| Consorzio Dafne – Reggello (Florence) | 2 | - | - | - | 2 |
| Consorzio Nazionale Imballaggi – Rome | - | - | - | - | - |
| DGT – United States | - | - | - | - | - |
| PureTech Health p.l.c. – United Kingdom | 28,709 | - | (8,706) | - | 20,003 |
| Miacomet Inc. | - | - | - | - | - |
| Fluidigm Corp. – United States | 2 | - | 3 | - | 5 |
| 28,713 | - | (8,703) | - | 20,010 | |
| TOTAL | 1,846,136 | - | (8,703) | 4,412 | 1,841,844 |
| € (thousands) | Balance as at 30th September 2023 |
Percentage ownership | Number of shares or quotas possessed |
|---|---|---|---|
| Investments in subsidiaries | |||
| Casen Recordati S.L. – Spain | 274,990 | 100.00 | 2,389,660 |
| Innova Pharma S.p.A. – Italy | 10,568 | 100.00 | 960,000 |
| Bouchara Recordati S.a.s. – France | 59,398 | 100.00 | 10,000 |
| Recordati Pharmaceuticals Ltd. – United Kingdom | 11,753 | 100.00 | 15,000,000 |
| Recordati Hellas Pharmaceuticals S.A. – Greece | 5,078 | 100.00 | 1,005,000 |
| Herbacos Recordati S.r.o. – Czech Republic | 20,054 | 100.00 | 2,560 |
| Recordati Polska Sp. z.o.o. – Poland | 20,741 | 100.00 | 90,000 |
| Italchimici S.p.A. – Italy | 106,294 | 100.00 | 7,646,000 |
| Natural Point s.r.l. – Italy | 83,638 | 100.00 | 1 |
| Recordati AG – Switzerland | 207,007 | 100.00 | 150,000 |
| Recordati Rare Diseases Canada Inc. – Canada | 245 | 100.00 | 1,000 |
| Recordati Rare Diseases Inc. – United States | 5,509 | 100.00 | 100 |
| Recordati Rare Diseases S.A. de C.V. – Mexico | 941 | 100.00 | 49,999 |
| Recordati Rare Diseases Comercio Medicamentos Ltda – Brazil | 253 | 100.00 | 166 |
| Recordati Ireland Ltd – Ireland | 1,952 | 100.00 | 200,000 |
| Opalia Pharma S.A.– Tunisia | 19,982 | 90.00 | 612,000 |
| Recordati Romania Srl – Romania | 1,705 | 100.00 | 500,000 |
| Recordati Pharma GMBH – Germany | 88,027 | 55.00 | 1 |
| Accent LLC – Russian Federation | 66,707 | 100.00 | 1 |
| Tonipharm S.A.S. – France | 72,636 | 100.00 | 2,577 |
| Recordati Bulgaria Ltd – Bulgaria | 55 | 100.00 | 50 |
| Recordati (Beijing) Pharmaceutical Co., Ltd – China | 847 | 100.00 | 1 |
| Eusa Pharma UK Limited | 707,434 | 100.00 | 10 |
| Recordati Rare Diseases S.a.r.l. - France | 56,021 | 84.00 | 4,580 |
| 1,821,835 | |||
| Investments in other companies: | |||
| Sifir S.p.A. – Reggio Emilia | - | 0.04 | 1,304 |
| Consorzio Dafne – Reggello (Florence) | 2 | 1.16 | 1 |
| Consorzio Nazionale Imballaggi - Rome | - | n.s. | 1 |
| DGT – United States | - | n.s. | n.s. |
| PureTech Health p.l.c. – United Kingdom | 20,003 | 3.30 | 9,554,140 |
| Miacomet Inc. | - | n.s | n.s |
| Fluidigm Corp. – United States | 5 | n.s | 1,698 |
| 20,010 | |||
TOTAL 1,841,844
COMPARISON BETWEEN THE CARRYING AMOUNT OF DIRECT INVESTMENTS IN SUBSIDIARIES AND THE CORRESPONDING PRO-RATA EQUITY
| € (thousands) | Share capital |
30.09,2023 Equity |
30.09.2023 Net income (loss) |
Percentage ownership |
Corresponding pro-rata equity (A) |
Carrying amount (B) |
|---|---|---|---|---|---|---|
| Investments | ||||||
| Casen Recordati S.L. – Spain | 238,966 | 452,673 | 25,048 | 100.00% | 452,673 | 274,990 |
| Innova Pharma S.p.A. – Italy | 1,920 | 11,259 | 2,290 | 100.00% | 11,259 | 10,568 |
| Bouchara Recordati S.a.s. – France | 4,600 | 29,234 | 15,483 | 100.00% | 29,234 | 59,398 |
| Recordati Pharmaceuticals Ltd. – United Kingdom | 17,349 | 15,224 | 1,762 | 100.00% | 15,224 | 11,753 |
| Recordati Hellas Pharmaceuticals S.A. – Greece | 10,050 | 7,283 | 552 | 100.00% | 7,283 | 5,078 |
| Herbacos Recordati S.r.o. – Czech Republic | 1,052 | 17,248 | 1,923 | 100.00% | 17,248 | 20,054 |
| Recordati Polska Sp. z.o.o. – Poland | 972 | 15,925 | 3,162 | 100.00% | 15,925 | 20,741 |
| Italchimici S.p.A. – Italy | 7,646 | 84,258 | 11,843 | 100.00% | 84,258 | 106,294 |
| Natural Point s.r.l. – Italy | 10 | 74,956 | 8,397 | 100.00% | 74,956 | 83,638 |
| Recordati AG – Switzerland | 67,225 | 388,225 | 65,085 | 100.00% | 388,225 | 207,007 |
| Recordati Rare Diseases Canada Inc. – Canada | 246 | 2,629 | 820 | 100.00% | 2,629 | 245 |
| Recordati Rare Diseases Inc. – United States | 11,307 | 396,858 | 51,073 | 100.00% | 396,858 | 5,509 |
| Recordati Rare Diseases S.A. de C.V. – Mexico | 878 | 2,847 | 1,236 | 100.00% | 2,847 | 941 |
| Recordati Rare Diseases Comercio Medicamentos Ltda – Brazil | 0 | 1,866 | 453 | 100.00% | 1,866 | 253 |
| Recordati Ireland Ltd – Ireland | 200 | 152,137 | 45,067 | 100.00% | 152,137 | 1,952 |
| Opalia Pharma S.A.– Tunisia | 2,881 | 25,939 | 3,153 | 90.00% | 23,345 | 19,982 |
| Recordati Romania Srl – Romania | 1,005 | 13,426 | 6,451 | 100.00% | 13,426 | 1,705 |
| Recordati Pharma GMBH – Germany | 600 | 131,053 | 33,674 | 55.00% | 72,079 | 88,027 |
| Accent LLC – Russian Federation | 0 | 341 | 1 | 100.00% | 341 | 66,707 |
| Tonipharm S.A.S. – France | 258 | 19,226 | 2,187 | 100.00% | 19,226 | 72,636 |
| Recordati Bulgaria Ltd – Bulgaria | 26 | 153 | 25 | 100.00% | 153 | 55 |
| Recordati (Beijing) Pharmaceutical Co., Ltd – China | 738 | 591 | 60 | 100.00% | 591 | 847 |
| Eusa Pharma UK Limited | 0 | 210,231 | 81,439 | 100.00% | 210,231 | 707,434 |
| Recordati Rare Diseases S.a.r.l. - France | 420 | 323,656 | 42,445 | 84.00% | 271,871 | 56,021 |
| 368,350 | 2,377,328 | 403,628 | 2,263,885 | 1,821,835 |
Where applicable the carrying amount of the investment has not been adjusted to bring it into line with the corresponding pro-rata equity because the difference was not considered an indicator of impairment.
| € (thousands) | Amount | Availability for use |
Amount available |
Amount distributable without tax effects |
Amount distributable with tax effects |
Replenish | Summary of uses over the preceding three years |
Notes |
|---|---|---|---|---|---|---|---|---|
| ment of losses |
Other Uses | |||||||
| Share capital | 26,141 | |||||||
| Additional paid-in capital reserve |
83,718 | A B C | 83,718 | 15,074 | 68,644 | 1 | ||
| Revaluation reserve | 2,602 | A B C | 2,602 | - | 2,602 | |||
| Statutory reserve | 5,228 | B | - | - | - | |||
| Treasury stock reserve | (126,986) | (126,986) | (126,986) | - | ||||
| Other reserves | ||||||||
| Gain on merger | 30,204 | A B C | 30,204 | 30,204 | - | |||
| Extraordinary reserve | 42,885 | A B C | 42,885 | 42,885 | - | (54,017) | 2 | |
| Reserve under Art. 13 Par. 6 of Legislative Decree 124/1993 |
99 | A B C | 99 | - | 99 | |||
| Research and investment grants |
17,191 | A B C | 17,191 | 1,227 | 15,964 | 3 | ||
| Extraordinary VAT concession reserve |
517 | A B C | 517 | - | 517 | |||
| Southern Italy investment fund |
3,632 | |||||||
| IAS reserve | 167,832 | A B C | 167,832 | 167,832 | - | |||
| Net income (loss) for the period |
202,515 | A B C | 202,515 | 202,515 | - | |||
| Total equity | 455,578 | 420,577 | 332,751 | 87,826 | (54,017) |
A for share capital increase
B to replenish losses
C to distribute to shareholders
Notes:
1 The additional paid-in capital reserve may be distributed when the statutory reserve has reached one fifth of the share capital.
2 The decrease is due to the difference between the amount paid by Group employees who exercised options under the stock option plan and the value of treasury shares recognised in the financial statements in the last three years.
3 The research and investment grant reserve has already been taxed in the amount of € 1,227 thousand
SUMMARY OF THE LATEST FINANCIAL STATEMENTS APPROVED BY THE COMPANY THAT EXERCISES MANAGEMENT AND COORDINATION
| Annual financial statements of the company Rossini Luxembourg S.àr.l. |
Amounts in euro 31/12/2022 |
Amounts in euro 31/12/2021 |
|---|---|---|
| INCOME STATEMENT | ||
| REVENUE | - | |
| OPERATING EXPENSES | (92,354) | (94,572) |
| FINANCIAL INCOME (EXPENSES) | (136) | |
| TAXES | (5,385) | (4,815) |
| NET LOSS FOR THE YEAR | (97,875) | (99,387) |
| ASSETS | ||
| NON-CURRENT ASSETS | 1,098,330,981 | 1,099,028,000 |
| CURRENT ASSETS | 1,695,107 | 1,095,884 |
| TOTAL ASSETS | 1,100,026,088 | 1,100,123,884 |
| EQUITY AND LIABILITIES | ||
| EQUITY | ||
| Share capital | 1,108,568 | 1,108,568 |
| Reserves | 1,099,417,178 | 1,099,417,178 |
| Prior year (losses) | (419,763) | (320,376) |
| Net loss for the year | (97,875) | (99,387) |
| TOTAL EQUITY | 1,100,008,108 | 1,100,105,983 |
| LIABILITIES | ||
| CURRENT LIABILITIES | 17,980 | 17,901 |
| TOTAL LIABILITIES | 17,980 | 17,901 |
| TOTAL EQUITY AND LIABILITIES | 1,100,026,088 | 1,100,123,884 |
The manager appointed to prepare the corporate accounting documents, Luigi La Corte, declares, in accordance with paragraph 2 Article 154-bis of the Consolidated Finance Law, that the accounting information contained in this financial report corresponds to the amounts shown in the Company's accounts, books and records.
Milan, 7th November 2023
Luigi La Corte Manager appointed to prepare the corporate accounting documents
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