Annual / Quarterly Financial Statement • Mar 15, 2021
Annual / Quarterly Financial Statement
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Draft of the 2020 separate and consolidated financial statements approved by Board of Directors
Amaro (UD), 15 March 2021
Today, the Board of Directors of Eurotech S.p.A. reviewed and approved the Draft Separate and Consolidated Financial Statements as at 31 December 2020, which will be submitted to the Ordinary Shareholders' Meeting.
The Chief Executive Officer, Roberto Siagri, commented: "2020 was a difficult year which temporarily halted our growth but in which we demonstrated to be flexible, closing in any case the year without losses. The pandemic has not changed our strategy, despite the inevitable repercussions on the balance sheet figures of the global economic crisis. I believe that the pandemic will only accelerate the process of digitization and renovation of enterprises. With the return to a new normal, we all expect an acceleration of investments in remote control and remote operations, and consequently, we expect to be in a position to fully express the potential accumulated in the IoT and HPEC domains."
At the start of last year almost nobody could have imagined that the year 2020 could have had such a forceful effect on the various aspects of people's lives, on social dynamics, on the global economy and on the way
companies do business. In our case, after a record year such as 2019, when Eurotech had exceeded the €100 million turnover threshold, 2020 was distinctly marked by the impacts of the pandemic on the real economy and in particular on the investments of companies in new projects and new products. Our more marked presence on the industrial and transport markets, and a more limited one in the medical market, has resulted in a greater exposure to the economic effects of the health crisis. The Covid-19 pandemic determined for us a marked contraction in the order intake compared to our forecasts at the end of 2019, as it effectively froze all investment decisions of customers with whom we already had design-wins. In some cases the pandemic forced companies to make rapid tactical changes, with the immediate shifting of budgets towards expenditure items deemed to be more defensive.
Existing customers we were already supplying also adopted more prudent policies in terms of order release, reducing the coverage period of the same to the essential minimum and so reducing visibility in the mediumlong term.
In 2020 all geographical areas suffered a reduction in turnover, for reasons directly or indirectly related to the pandemic. With reference to the breakdown of turnover by location of operating activities, net of intercompany transactions, sales decreased by 46.9% in the American area compared to the same period the year before, in Europe the reduction was 27.5%, while in Japan the decrease was only 10.3%.
For the American area, already at the end of 2019 the order book and turnover distribution for the 2020 quarters appeared to be different than in the previous year. The delay in orders from new customers has not allowed us to offset the reduction in turnover in particular from one customer which, with a tenderbased business model subject to fluctuations, had already recorded a temporary reduction of business for 2020. The uncertainty of the economic landscape generated by the health crisis and – In the specific case of the USA – also in part by the presidential elections, almost completely froze the conversion into orders of the existing design-wins, with an order intake much below the pre-pandemic potential.
The European area was strongly affected by the various lockdowns throughout the year 2020. Even though the area is very receptive and interested in high performance embedded computing (HPEC) systems for the new Deep Learning and Artificial Intelligence sectors, the uncertainty deriving from the pandemic has slowed down the start of some projects we were working on at the start of 2020 in the hope of a rapid activation which did not, however, materialise. Interest remains high for our offer of IoT products: many of our customers are well advanced with testing our IoT technologies and products, but volumes still remain subdued pending the start of mass production that the pandemic has delayed.
The Japanese area was the one that proved most resilient in terms of turnover and the one that most benefited from the work carried out in the previous year, when we had managed to sell higher profitability products. The customer base still consists of significant local companies that find Advanet a highly specialised development centre of high performance computing subsystems.
The difficulties encountered in 2020 have not allowed the consolidated turnover in the IoT area to grow, but it did not suffer the marked drop recorded in the embedded computers business line.
Even at the peak of the pandemic we continued to operate along the planned strategic path, with a particular focus on the creation of the ecosystem around our technologies. During 2020 three important targets were reached: 1) entry in the IBM Edge Ecosystem, the partner ecosystem created by IBM to help industrial and telecommunication companies to accelerate the transition towards Edge Computing in the 5G and Artificial Intelligence era. The partnership with Nvidia as Preferred OEM Partner should also be read in this light; 2) the AWS IoT Core certification for Everyware Software Framework (ESF), with which ESF becomes an enabling framework for all manufacturers of devices wishing to connect them to the Amazon AWS infrastructure for the collection and analysis of data; 3) entry in the Arm Cassini Project, which has the objective of accelerating the development of Edge computing platforms optimised and based on Arm processors, for which Eurotech's IoT Edge components are the perfect match, also considering the robustness in terms of cybersecurity that characterizes Eurotech components.
In spite of the unfavourable scenario, we managed also in 2020 to close the year with a profit, a result that demonstrates that the fixed costs structure is lean and that Eurotech has a low break-even point with great potential operating leverage.
Group revenues in the twelve months of 2020 totalled €69.26 million, down by 32.1% compared to the same period in 2019 when turnover was €101.97 million. At constant exchange rates, the decrease in turnover would be 31.6%.
The gross profit margin for the year amounted to €36.52 million, or 52.7% of turnover, up on the figure of 50.9% last year. Gross profit is an important index to monitor in order to reach the desired profitability and to activate the operating leverage in consideration of the levels of costs. Furthermore, gross profit highlights how the mix of products sold is aligned with the company's strategy and demonstrates how the innovation of our products is recognised by our customers.
The operating costs before adjustments for internal increases amounted to €33.75 million (48.7% as a percentage of revenues), with a decrease of 3.6% compared to the €35.00 million (34.3% as a percentage of revenues) in 2019. At constant exchange rates, the decrease would have been 3.1%. The net decrease of operating costs is related in part to the lower turnover and in part to the prudence in the management of costs. The greater impact of operating costs on turnover highlights how the Group cost structure is largely fixed, and with an increase of revenues a significant operating leverage can be shown.
EBITDA amounted to €6.63 million, compared with €20.53 million in 2019. EBITDA in 2020 as a percentage of revenues was 9.6%, compared with 20.1% in 2019.
EBIT was also significantly impacted by the drop in turnover and amounted to €2.44 million compared to €16.61 million in 2019, after having included amortisation/depreciation and write-downs of the property, plant and equipment and intangible assets of €4.19 million compared to amortisation/depreciation and write-downs of €3.92 million in 2019. EBIT as a percentage of revenues amounted to 3.5% in 2020 compared to 16.3% in 2019. The increase in amortisation/depreciation is mainly due to the inclusion under this item of some development projects and part of our new ERP system.
In 2020, including the exchange rate effects, financial management recorded a loss of €0.67 million, compared with a loss of €0.49 million in 2019.
The pre-tax profit for 2020 was €1.83 million compared with €16.12 million in 2019. This reduction mainly reflects the EBIT trend.
The Group net profit was €0.13 million, compared to €19.24 million in 2019. This performance not only reflects the pre-tax profit, but is due to the influence of the tax effect on the individual Group companies, and to the non-recognition during the year of deferred tax assets on tax losses generated in the period.
The Group's financial position at 31 December 2020 shows a positive net cash of €8.55 million, compared with €12.25 million at 31 December 2019. These values include the effects of the IFRS 16 "Leases" standard, which at 31 December 2020 amounted to €3.00 million, compared to €4.00 million at 31 December 2019.
Group cash and cash equivalents were €41.22 million at 31 December 2020, while they were €30.69 million at the end of 2019.
Net working capital at 31 December 2020 came to €15.83 million, an increase of €0.94 million compared with 31 December 2019. This increase is the result of the combined effect of increased current assets and a minor increase in current liabilities. More specifically, on the one hand there were increases in trade receivables not balanced by a proportional reduction in invetories, and on the other a decrease in the liabilities relating to trade payables and income tax payables, as well as a substantial increase in other current liabilities. The impact of net current assets on turnover, due to the effect of the reduced turnover, was 22.9%, compared to 14.6% at the end of 2019.
Group shareholders' equity was €118.9 million (€124.7 million at 31 December 2019).
Management is constantly monitoring the development of the global scenario and the effects of the continuation of the Covid-19 pandemic on the Group's business. It is too early to draw conclusions on how the year will progress and much will depend on the duration of the restrictions and on the extent companies
will regain their confidence in the future. In February we recorded a sign of improvement in the order intake in the American area, a first encouraging sign which we hope will be confirmed also in the next few months.
Regardless of the dynamics to resolve the pandemic, Eurotech will continue to operate and invest in the strategic direction laid out, with the purpose of retaining our competitive positioning in the field of Embedded Computers, and to exploit the technological advantage achieved thanks to the first-mover strategy in the Industrial IoT sector on the one hand and in the emerging sector of High Performance Edge Computers on the other.
The revenues of Parent Company Eurotech S.p.A. decreased by 34.4% and totalled €19.33 million, compared to €29.48 million in 2019. EBIT for the year amounted to - €2.11 million compared to €3.29 million in 2019. The net loss for the year is €3.00 million (in 2019: profit of €8.38 million). The shareholders' equity of Eurotech S.p.A. at 31 December 2020 was €147.10 million, compared to €149.72 million in 2019. In 2020, the Parent Company posted a net financial position, i.e. net cash, of €29.00 million, compared to €39.03 million in 2019.
The Board of Directors will propose to the Shareholders' Meeting that the loss for the year of €3,005,820 be carried forward.
The Financial Reporting Manager Sandro Barazza certifies, pursuant to article 154-bis, paragraph 2 of the Consolidated Finance Act, that the accounting information contained in this press release corresponds to the company's documents, books and accounting records.
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Moreover, the Board approved the Corporate Governance Report which also contains information on the ownership structure pursuant to article 123-bis of the Consolidated Law on Finance, which will be published within the deadlines and in the manner required by current regulations.
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In accordance with the new provisions of paragraphs 1 and 1-bis of article 154-ter of the Consolidated Law on Finance, the annual financial report including the separate financial statements, consolidated financial statements, Report on Operations, Corporate Governance Report, and the certification of the Financial Reporting Manager, together with the reports of the independent auditors and the Board of Statutory Auditors, will be published no later than 31 March 2021.
Eurotech (ETH:IM) is a multinational that designs, develops and supplies Edge Computers and Internet of Things (IoT) solutions, complete with services, software and hardware, to system integrators and enterprises. By adopting Eurotech solutions, customers have access to components and software platforms for IoT, Edge Gateways to enable the monitoring of assets and High-Performance Edge Computers (HPECs) for applications including Artificial Intelligence (AI). In order to offer increasingly complete solutions, Eurotech has partnered leading companies in their field of action, in this way creating a global ecosystem that allows to develop "best in class" solutions for the Industrial Internet of Things. For more information about Eurotech: www.eurotech.com.
Investor Relations Andrea Barbaro Tel. +39 0433 485411 e-mail: [email protected] Communications Office Giuliana Vidoni Tel. +39 0433 485411 e-mail: [email protected]
| change (b-a) | |||||||
|---|---|---|---|---|---|---|---|
| (€ '000) | FY 2020 (b) | % | FY 2019 (a) | % | amount | % | |
| Sales revenue | 69,259 | 100.0% | 101,973 | 100.0% | (32,714) | -32.1% | |
| Cost of material | (32,741) | -47.3% | (50,022) | -49.1% | (17,281) | -34.5% | |
| Gross profit | 36,518 | 52.7% | 51,951 | 50.9% | (15,433) | -29.7% | |
| Services costs | (12,150) | -17.5% | (13,204) | -12.9% | (1,054) | -8.0% | |
| Lease & hire costs | (404) | -0.6% | (338) | -0.3% | 66 | 19.5% | |
| Payroll costs | (20,095) | -29.0% | (20,383) | -20.0% | (288) | -1.4% | |
| Other provisions and costs | (1,099) | -1.6% | (1,077) | -1.1% | 22 | 2.0% | |
| Other revenues | 3,862 | 5.6% | 3,586 | 3.5% | 276 | 7.7% | |
| EBITDA | 6,632 | 9.6% | 20,535 | 20.1% | (13,903) | -67.7% | |
| Depreciation & Amortization | (4,042) | -5.8% | (3,914) | -3.8% | 128 | 3.3% | |
| Asset impairment | (151) | -0.2% | (10) | 0.0% | 141 | n.s. | |
| EBIT | 2,439 | 3.5% | 16,611 | 16.3% | (14,172) | -85.3% | |
| Subsidiaries management | 61 | 0.1% | 0 | 0.0% | (61) | n/a | |
| Finance expense | (1,461) | -2.1% | (1,002) | -1.0% | 459 | 45.8% | |
| Finance income | 793 | 1.1% | 516 | 0.5% | 277 | 53.7% | |
| Profit before tax | 1,832 | 2.6% | 16,125 | 15.8% | (14,293) | -88.6% | |
| Income tax | (1,700) | -2.5% | 3,117 | 3.1% | 4,817 | -154.5% | |
| Net profit (loss) of continuing operations before minority interest |
132 | 0.2% | 19,242 | 18.9% | (19,110) | -99.3% | |
| Minority interest | - | 0.0% | - | 0.0% | - | n/a | |
| Group net profit (loss) for period | 132 | 0.2% | 19,242 | 18.9% | (19,110) | -99.3% | |
| Base earnings per share | 0.004 | 0.554 | |||||
| Diluted earnings per share | 0.004 | 0.554 | |||||
| (€'000) | at December 31, 2020 |
at December 31, 2019 |
|---|---|---|
| ASSETS | ||
| Intangible assets | 86,775 | 88,905 |
| Property, Plant and equipment | 6,468 | 6,565 |
| Investments in other companies | 533 | 162 |
| Deferred tax assets | 7,478 | 7,981 |
| Medium/long term borrowing allowed to affiliates companies and other Group companies |
57 | 89 |
| Other non-current assets | 661 | 665 |
| Total non-current assets | 101,972 | 104,367 |
| Inventories | 17,393 | 21,256 |
| Trade receivables | 16,441 | 11,707 |
| Income tax receivables | 900 | 269 |
| Other current assets | 1,665 | 2,115 |
| Other current financial assets | 125 | 108 |
| Cash & cash equivalents | 41,222 | 30,687 |
| Total current assets | 77,746 | 66,142 |
| Total assets | 179,718 | 170,509 |
| LIABILITIES AND EQUITY | ||
| Share capital | 8,879 | 8,879 |
| Share premium reserve | 136,400 | 136,400 |
| Other reserves | ( 26,415) | ( 20,623) |
| Group shareholders' equity | 118,864 | 124,656 |
| Equity attributable to minority interest | - | - |
| Total shareholders' equity | 118,864 | 124,656 |
| Medium-/long-term borrowing | 23,874 | 11,590 |
| Employee benefit obligations | 2,918 | 2,604 |
| Deferred tax liabilities | ||
| Other non-current liabilities | 3,166 | 3,097 |
| Total non-current liabilities | 1,342 31,300 |
1,060 18,351 |
| Trade payables | 10,647 | 11,562 |
| Short-term borrowing | 8,901 | 7,001 |
| Derivative instruments | 81 | 44 |
| Income tax liabilities | 810 | 1,182 |
| Other current liabilities | 9,115 | 7,713 |
| Total current liabilities | 29,554 | 27,502 |
| Total liabilities | 60,854 | 45,853 |
| Total liabilities and equity | 179,718 | 170,509 |
| (€'000) | Share capital Legal reserve | Share premium reserve |
Conversion reserve |
Other reserves |
Cash flow hedge reserve |
Actuarial gains/(losses) on defined benefit plans reserve |
Exchange rate differences reserve |
Treasury shares |
Profit (loss) for period |
Group shareholders' equity |
Equity attributable to Minority interest |
Total shareholders' equity |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at December 31, 2019 | 8,879 | 1,776 | 136,400 | 14,224 | ( 58,907) | ( 44) | ( 531) | 4,650 | ( 1,033) | 19,242 | 124,656 | - | 124,656 |
| 2019 Result allocation | - | - | - | - | 19,242 | - | - | - | - | ( 19,242) | - | - | - |
| Profit (loss) as at December 31, 2020 | - | - | - | - | - | - | - | - | - | 132 | 132 | - | 132 |
| Comprehensive other profit (loss): | |||||||||||||
| - Hedge transactions | - | - | - | - | ( 37) | - | - | - | - | ( 37) | - | ( 37) | |
| - Actuarial gains/(losses) on defined benefit plans for employees |
- | - | - | - | - | - | ( 109) | - | - | - | ( 109) | - | ( 109) |
| - Foreign balance sheets conversion difference | - | - | - | ( 2,767) | - | - | - | - | ( 2,767) | - | ( 2,767) | ||
| - Exchange differences on equity investments in foreign companies |
- | - | - | - | - | - | - | ( 3,453) | - | - | ( 3,453) | - | ( 3,453) |
| Total Comprehensive result | - | - | - | ( 2,767) | - | ( 37) | ( 109) | ( 3,453) | - | 132 | ( 6,234) | - | ( 6,234) |
| - Performance Share Plan | - | - | - | - | 91 | - | - | - | 351 | - | 442 | - | 442 |
| Balance as at December 31, 2020 | 8,879 | 1,776 | 136,400 | 11,457 | ( 39,574) | ( 81) | ( 640) | 1,197 | ( 682) | 132 | 118,864 | - | 118,864 |
| (€'000) | at December 31, 2020 |
at December 31, 2019 |
|
|---|---|---|---|
| Cash flow generated (used) in operations | A | 3,388 | 20,909 |
| Cash flow generated (used) in investment activities | B | ( 5,092) | ( 4,307) |
| Cash flow generated (absorbed) by financial assets | C | 13,456 | 844 |
| Net foreign exchange difference | D | ( 1,217) | 45 |
| Increases (decreases) in cash & cash equivalents | E=A+B+C+D | 10,535 | 17,491 |
| Opening amount in cash & cash equivalents | 30,687 | 13,196 | |
| Cash & cash equivalents at end of period | 41,222 | 30,687 |
| at December | at December | ||
|---|---|---|---|
| (€'000) | 31, 2020 | 31, 2019 | |
| Cash & cash equivalents | A | ( 41,222) | ( 30,687) |
| Cash equivalent | B=A | ( 41,222) | ( 30,687) |
| Other current financial assets | C | ( 125) | ( 108) |
| Derivative instruments | D | 81 | 44 |
| Short-term borrowing | E | 8,901 | 7,001 |
| Short-term financial position | F=C+D+E | 8,857 | 6,937 |
| Short-term net financial position | G=B+F | ( 32,365) | ( 23,750) |
| Medium/long term borrowing | H | 23,874 | 11,590 |
| Medium-/long-term net financial position | I=H | 23,874 | 11,590 |
| (NET FINANCIAL POSITION) NET DEBT | |||
| pursuant to CONSOB instructions | J=G+I | ( 8,491) | ( 12,160) |
| Medium/long term borrowing allowed to | |||
| affiliates companies and other Group | K | ( 57) | ( 89) |
| (NET FINANCIAL POSITION) NET DEBT | L=J+K | ( 8,548) | ( 12,249) |
| at December 31, 2020 |
at December 31, 2019 |
Changes | |
|---|---|---|---|
| (€'000) | (b) | (a) | (b-a) |
| Inventories | 17,393 | 21,256 | (3,863) |
| Trade receivables | 16,441 | 11,707 | 4,734 |
| Income tax receivables | 900 | 269 | 631 |
| Other current assets | 1,665 | 2,115 | (450) |
| Current assets | 36,399 | 35,347 | 1,052 |
| Trade payables | (10,647) | (11,562) | 915 |
| Income tax liabilities | (810) | (1,182) | 372 |
| Other current liabilities | (9,115) | (7,713) | (1,402) |
| Current liabilities | (20,572) | (20,457) | (115) |
| Net working capital | 15,827 | 14,890 | 937 |
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