Quarterly Report • May 14, 2018
Quarterly Report
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Share Capital: Euro 31,809,451 fully paid-up Tax Code and Register of Companies no.: 08531760158 Certified email: [email protected] Tel. +39 0524 598511 Fax +39 0524 598232 www.si-servizitalia.com
| 1 | Company officers and corporate information 3 | |
|---|---|---|
| 2 | Group Structure 4 | |
| 3 | Directors' report 5 | |
| 4 | Accounting schedules 11 | |
| 5 | Notes 13 | |
| 5.1 Introduction 13 |
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| 5.2 Performance by business segment and geographical area 13 |
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| 5.3 Notes on the main changes in the statement of financial position 15 |
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| 5.4 Notes on the main changes in the income statement 19 |
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| 5.5 Net financial position 22 |
Board of Directors (in office until approval of the Financial Statements as at 31 December 2020)
| Name and Surname | Position |
|---|---|
| Roberto Olivi | Chairman |
| Enea Righi | Vice-Chairman and CEO |
| Ilaria Eugeniani | Director |
| Michele Magagna | Director |
| Umberto Zuliani | Director |
| Antonio Paglialonga | Director |
| Lino Zanichelli | Director |
| Antonio Aristide Mastrangelo | Independent Director |
| Paola Schwizer (1)-(2)-(3) | Independent Director |
| Romina Guglielmetti (1)-(2) | Independent Director |
| Chiara Mio (1)-(2) | Independent Director |
(1) Member of the Nomination and Remuneration Committee; (2) Member of the Control and Risks Committee; (3) Lead Independent Director
Board of Statutory Auditors (in office until approval of the Financial Statements as at 31 December 2019)
| Name and Surname | Position |
|---|---|
| Gianfranco Milanesi | Chairman |
| Anna Maria Fellegara | Statutory auditor |
| Simone Caprari | Statutory auditor |
| Chiara Ferretti | Alternate auditor |
| Paolo Alberini | Alternate auditor |
| Name and Surname | Position |
|---|---|
| Veronica Camellini | Chairwoman |
| Laura Verzellesi | Member |
| Francesco Magrini | Member |
Independent Auditors (in office until approval of the Separate Financial Statements as at 31 December 2023)
Deloitte & Touche S.p.A. - Via Tortona, 25 - 20144 Milan
Servizi Italia S.p.A. Via S. Pietro, 59/b – 43019 Castellina di Soragna (PR) – Italy Tel.+390524598511, Fax+390524598232, website: www.si-servizitalia.com; Share Capital: Euro 31,809,451 fully paid-up Tax Code and Parma Register of Companies no.: 08531760158; Certified email: [email protected] Founded: 1986 Stock market listing: Borsa Italiana S.p.A. Mercato Telematico Azionario (MTA, electronic stock market), STAR segment Ordinary Share ISIN codes: IT0003814537, BLOOMBERG: SRI IM, REUTERS: SRI.MI
LEI Code: 815600C8F6D5ACBA9F86
Giovanni Manti (IR) - Innocenti Luigi e-mail: [email protected] – Tel. +390524598511, Fax +390524598232
Servizi Italia S.p.A., registered offices in Castellina di Soragna (PR), listed in the STAR segment of the Borsa Italiana S.p.A. MTA stock exchange, is the leading Italian operator in the supply of integrated services for the wash-hire and sterilisation of textile materials and surgical instruments for hospital facilities. With a technologically advanced production platform broken down into laundering facilities, textile sterilisation centres, surgical instrument sterilisation centres and numerous wardrobes, the Company and its Italian and overseas subsidiaries forming the Servizi Italia Group, mainly provide their broad and diversified range of services for public and private healthcare facilities in central and northern Italy, in the state of São Paulo in Brazil, in Turkey, India, Albania and Morocco.
| Company name | Registered office | Share capital | Interest | |
|---|---|---|---|---|
| Parent Company and Subsidiaries | of equity investments |
|||
| Servizi Italia S.p.A. | Castellina di Soragna (Parma) - Italy | EUR | 31,809,451 | Parent |
| SRI Empreendimentos e Participações L.t.d.a. |
City of São Paulo, State of São Paulo - Brazil |
R\$ | 154,769,102 | 100% |
| Steritek S.p.A. | Malagnino (CR)- Italy | EUR | 134,500 | 70% |
| Se.Sa.Tre. S.c.r.l. in liquidation | Genoa - Italy | EUR | 20,000 | 60% |
| San Martino 2000 S.c.r.l. | Genoa - Italy | EUR | 10,000 | 60% |
| Lavsim Higienização Têxtil S.A. | São Roque, State of São Paulo - Brazil | R\$ | 550,000 | 100% (*) |
| Maxlav Lavanderia Especializada S.A. | Jaguariúna, State of São Paulo - Brazil | R\$ | 2,825,060 | 50.1% (*) |
| Vida Lavanderias Especializada S.A. | Santana de Parnaíba, State of São Paulo - Brazil |
R\$ | 3,600,000 | 50.1% (*) |
| Aqualav Serviços De Higienização Ltda | Vila Idalina, Poá, State of São Paulo - Brazil |
R\$ | 15,400,000 | 100% (*) |
| Ankateks Turizm İnşaat Tekstil Temizleme Sanayi ve Ticaret Ltd Şirketi |
Ankara – Turkey | TRY | 5,000,000 | 55% |
| Ergülteks Temizlik Tekstil Ltd. Sti. | Smirne - Turkey | TRY | 1,700,000 | 57.5% (**) |
As at 31 March 2018, the Servizi Italia Group included the following Companies:
(*) Held through SRI Empreendimentos e Participações Ltda
| Company name Associates and Jointly-controlled Companies |
Registered office | Share capital | % holding |
|---|---|---|---|
| Arezzo Servizi S.c.r.l. | Arezzo - Italy | EUR 10,000 |
50% |
| PSIS S.r.l. | Padua - Italy | EUR 10,000,000 |
50% |
| Ekolav S.r.l. | Lastra a Signa (FI) - Italy | EUR 100,000 |
50% |
| Steril Piemonte S.c.r.l. | Turin - Italy | EUR 4,000,000 |
50% |
| AMG S.r.l. | Busca (CN) - Italy | EUR 100,000 |
50% |
Servizi Italia Group – Interim Management Report as at 31 March 2018 Page 4 of 22
| Iniziative Produttive Piemontesi S.r.l. | Turin - Italy | EUR | 2,500,000 | 37.625% |
|---|---|---|---|---|
| Piemonte Servizi Sanitari S.c.r.l. | Turin - Italy | EUR | 10,000 | 30% (ˆ) |
| SE.STE.RO. S.r.l. in liquidation | Castellina di Soragna (PR) - Italy | EUR | 400,000 | 25% |
| CO.SE.S S.c.r.l. | Perugia - Italy | EUR | 10,000 | 25% |
| SAS Sterilizasyon Servisleri A.Ş. | Istanbul - Turkey | TRY | 3,502,000 | 51% |
| Shubhram Hospital Solutions Private Ltd. | New Delhi - India | INR | 305,171,720 | 51% |
| Finanza & Progetti S.p.A. | Vicenza - Italy | EUR | 550,000 | 50% |
| Brixia S.r.l. | Milan - Italy | EUR | 10,000 | 23% |
| Saniservice Sh.p.k. | Tirana – Albania | LEK | 2,745,600 | 30% |
| Servizi Sanitari Integrati Marocco S.a.r.l. | Casablanca - Morocco | MAD | 122,000 | 51% |
| Sia Lavanderias S.A. | Manaus, State of Amazonas - Brazil |
R\$ | 5,000,000 | 51% (*) |
(ˆ) Indirect shareholding of 15.05% through Iniziative Produttive Piemontesi S.r.l.
(*) Held through SRI Empreendimentos e Participações Ltda
This Interim Report as at 31 March 2018 includes the condensed consolidated financial statements as at 31 March 2018. The Group's main financial highlights as at 31 March 2018 are shown below along with the comparative information. The figures were prepared in compliance with IAS/IFRS.
The consolidated subsidiaries are San Martino 2000 S.c.r.l., Se.Sa.Tre. S.c.r.l. in liquidation, Steritek S.p.A., SRI Empreendimentos and Participações Ltda (parent company of companies: Lavsim Higienização Têxtil S.A., Maxlav Lavanderia Especializada S.A., Vida Lavanderias Especializada S.A., Aqualav Serviços De Higienização Ltda) and Ankateks Turizm İnşaat Tekstil Temizleme Sanayi ve Ticaret Ltd Şirketi (parent company of the company: Ergülteks Temizlik Tekstil Ltd. Sti). In order to allow for a better evaluation of the economic and financial performance, the following summary tables show some "Alternative performance indicators", not provided by the IFRS International Accounting Standards. The footnotes of said tables indicate the calculation method used and the composition of these ratios, in line with the guidelines of the European Securities and Market Authority (ESMA).
The table below presents a comparison of the main consolidated income statement figures as at 31 March 2018 with the results as at 31 March 2017 (in thousands of Euros):
| (thousands of Euros) | 31 March 2018 | 31 March 2017 | Change | Chg. % |
|---|---|---|---|---|
| Revenues | 62,973 | 62,912 | 61 | 0.1% |
| EBITDA (a) | 17,033 | 17,720 | (687) | -3.9% |
| EBITDA % | 27.0% | 28.2% | ||
| Operating profit (EBIT) | 4,599 | 4,343 | 256 | 5.9% |
| Operating profit (EBIT)% | 7.3% | 6.9% | ||
| Net profit | 3,542 | 4,136 | (594) | -14.4% |
(a) The Company management has defined EBITDA as the difference between the value of sales and services and operating costs before depreciation, amortisation, write-downs, impairment and provisions.
The table below presents a comparison of the main consolidated statement of financial position figures as at 31 March 2018 with the figures as at 31 December 2017 and 31 March 2017 (in thousands of Euro):
| (thousands of Euros) | 31 March 2018 | 31 December 2017 | 31 March 2017 |
|---|---|---|---|
| Net operating working capital (a) | 10,626 | 10,934 | 15,151 |
| Other current assets/liabilities (b) | (8,366) | (12,000) | (10,691) |
| Net working capital | 2,260 | (1,066) | 4,460 |
| Non-current assets - medium/long-term provisions | 219,451 | 218,353 | 218,320 |
| Invested capital | 221,711 | 217,287 | 222,780 |
| Shareholders' equity (B) | 142,598 | 141,639 | 142,536 |
| Net financial debt (d) (A) | 79,113 | 75,648 | 80,244 |
| Invested capital (c) | 221,711 | 217,287 | 222,780 |
(a) Net operating working capital is not an accounting measurement under the IFRSs endorsed by the European Union. The Company management has defined net operating working capital as the algebraic sum of inventories, trade receivables and trade payables.
(b) Other current assets/liabilities are calculated as the difference between other current assets, current tax receivables, current tax payables and other current liabilities.
(c) The Company management has defined invested capital as the sum of Shareholders' equity and net financial debt.
(d) The management has defined net financial debt as the sum of amounts Due to banks and other lenders net of Cash and cash equivalents and Current financial receivables.
The consolidated revenues for the first quarter of 2018 amount to the overall sum of 62,973 thousand Euro, up by 2.2% at constant exchange rates and essentially unchanged at current exchange rates compared to the first quarter of the previous year. The composition of the revenue is influenced by the organic growth in the Brazilian sector (+0.9%), while the acquisitions in Turkey and Italy have contributed by 4.0%. The heavy depreciation in the average Real/Euro exchange rate has produced a negative effect of 2.1% on the turnover for the period.
The consolidated EBITDA has gone from Euro 17,720 thousand in the first quarter of 2017 to Euro 17,033 thousand in the first quarter of 2018, diminishing revenue by 27.0% compared to 28.2% of the previous period and 27.2% with a constant perimeter. In spite of a considerable reduction in the consumption of raw materials and finished products (-0.5%), it is worth noting that the Italian area has witnessed increases in the cost of personnel owing to retirement incentives of Euro 404 thousand and the hiring of new personnel, in particular at the surgical equipment sterilisation centres which started production in the second half of 2017. The Brazilian area experienced instead a drop in personnel cost, equal to Euro 530 thousand, mainly due to the effects of the Real/Euro devaluation compared to the same period of the previous year.
The consolidated operating profit (EBIT) has increased from Euro 4,343 thousand to Euro 4,599 thousand after recognising depreciation, amortisation, and write-downs for Euro 12,434 thousand, with an impact on revenues of 7.3%, with an increase of 5.9% over the corresponding period of 2017. This progress is ascribable to a drop in depreciation, amortisation, write-downs and impairment in relative terms of 1.5% compared to the same period of the previous year. The decrease in absolute value by 7.0% has been caused in particular by the reduction of the depreciation of client portfolios, the closure in 2017 of the non-competition agreement with the previous Managing Director, the liquidation of the limited consortium company Se.Sa.Tre. S.c.r.l and the concomitant transfer of ownership of the systems, machinery and surgical equipment to the ULSS n. 2 Marca Trevigiana Company, following the allocation and start from the month of January of the new contract. The financial management has witnessed a drop in financial income since in the compared statement there was an entry related to exchange profits amounting to Euro 415 thousand related to the calculation of the final price for the purchase of the Turkish group, while the financial expenses have increased compared to the same period of the previous year mainly owing to the consolidation of the Turkish companies. The outcome was also negatively affected by the result of the affiliated companies assessed based on their Shareholders' equity. Therefore, the consolidated intermediate financial statements as at 31 March 2018 closed with a net profit of Euro 3,542 thousand, down compared to the same period of the previous year.
On 19 January 2018 and 31 January 2018 respectively, the Company provided information on the resignation presented by a Director and a Manager with strategic responsibilities. For further information, reference should be made to the documentation available on the Company's website.
On 29 March, Servizi Italia communicated that it had set up a company under Brazilian law Sia Lavanderias S.A. to provide wash-hire services to public and private health facilities in the State of Amazonas, with the strategic goal of further consolidating the Group's presence in new geographic areas in Brazil. The company was set up as a joint venture with the Bringel Group, a local industrial partner operating diversified services on the Brazilian health market. Servizi Italia holds 51.0% of SIA Lavanderia S.A. via its subsidiary SRI Empreendimentos e Participações L.t.d.a. For further information, reference should be made to the documentation available on the Company's website.
The main characteristics of the awarded contracts, which have an annual contract value of more than Euro 50 thousand, are provided below:
| Customer | Service provided | Duration years |
Contract value per year (thousands of Euros) |
|---|---|---|---|
| Kos Care Srl | Linen and professional garment rental wash hire services |
3.5 | 2,800 |
| ASL ROMA 4 and 5 | supply of TTR sterile sets | 1 | 812 |
On 20 April, the Shareholders' Meeting approved the financial statements as at 31 December 2017 and the distribution of a gross single dividend of Euro 0.17 per share outstanding on the coupon date, excluding treasury shares. The dividend is to be paid as from 3 May 2018, with ex-dividend date on 30 April 2018 (record date 2 May 2018) and will be paid to the shares, which were in circulation as of the ex-dividend date. The Shareholders' Meeting also appointed the members of the Board of Directors for the years 2018-2019- 2020, and established the related remuneration.
The Shareholders' Meeting authorised the Board of Directors to purchase and sell treasury shares, subject to revocation of the resolution dated 20 April 2017. The treasury share purchase and placement plan, among other things, meets the need to gain access to opportunities for the efficient investment of company liquidity and to have the possibility of using the purchased treasury shares for strategic transactions and/or to complete subsequent share purchase and sale transactions, to the extent allowed by permitted market practices. The plan will have a maximum duration of 18 months as from 20 April 2018, date of issue of the authorisation by the Shareholders' Meeting and the purchases can be made at any time, in one or two instalments. The treasury shares will be purchased at a minimum purchase price of no less than 20% of the weighted average of official share prices recorded by Borsa Italiana in the 3 days preceding each individual transaction and at a maximum purchase price of no higher than 20% of the weighted average of official share prices recorded by Borsa Italiana in the 3 days preceding each individual transaction. The definition of the volumes and the unit purchases prices shall be made according to the conditions pursuant to art. 3 of the Delegated (EU) Regulation 2016/1052. The purchases and sales of treasury shares will be carried out on the organised market, in compliance with the applicable legislative and regulatory provisions, according to the operating formalities established by Article 132 of the CFL, Article 144 bis of the Issuers' Regulations, in compliance with the EC Regulation 2273/2003 dated 22 December 2003 and in observance of the shareholders' meeting resolution dated 20 April 2018. Treasury shares will be purchased for a maximum equivalent value that can be covered by distributable profits and available reserves as set forth in the latest duly approved financial statements. The share purchase programme shall be coordinated by an approved broker who shall make the negotiation decisions in relation to the timing of the purchase of Servizi Italia shares, with full independence from the Company but within the limitations decided by the Shareholder's Meeting. The intermediary appointed to carry out the purchase of own shares is Intermonte Sim S.p.A.
The Board of Directors meeting, held on 20 April 2018, has appointed the Vice President and CEO of the Company, as well as the members of the Control and Risk Committee and the Nomination and Remuneration Committee, the Lead Independent Director and the Director responsible for Internal control and risk management. The Board of Directors has further reached a resolution on the start, on 23 April 2018, of a programme of treasury share purchases that aim to set up a "security warehouse", in order to implement the decision reached by the Ordinary Shareholder's Meeting.
On 14 May 2018, the Company announced that until 11 May 2018 it had acquired 15,550 treasury shares on the market regulated and managed by Borsa Italiana, equal to 0.0489% of the share capital.
The results achieved in the first quarter of 2018 confirm the estimates of both the income statement and the cash flow projections set forth in the plan. The Group, for the year 2018, expects to strengthen its positioning in Brazil and in other areas of the countries where it operates; as well as recording a favourable evolution of revenues and of the main profitability indicators. These objectives shall be through thanks to investments designed to increase production capacity and to promote organic growth, pursuing the constant focus on management and organisational execution.
The Company shares have been traded in the STAR segment of the Borsa Italiana S.p.A. screen-based stock market (MTA) since 22 June 2009.
The main share and stock exchange data as at 31 March 2018 is disclosed below along with share volume and price trends:
| Share and stock exchange data | 31-Mar-2018 |
|---|---|
| No. of shares making up the share capital | 31,809,451 |
| Price at IPO: 04 April 2007 | 8.50 |
| Price as at 31 March 2018 | 5.24 |
| Maximum price during the period | 6.82 |
| Minimum price during the period | 5.24 |
| Average price during the period | 6.06 |
| Volumes traded during the period | 26,318 |
| Average volumes during the period | 1,658,050 |
Share volume and price, 1 January - 31 March 2018
During the period, the investor relations team held several individual and group meetings with analysts and investors and also organised guided tours of the production sites of sterilisation centres and industrial laundering sites for shareholders and potential investors who so requested. During the reference period, the Company met with investors at the "STAR Conference" event in Milan organised by Borsa Italiana.
Pursuant to annex B, point 26 of Italian Legislative Decree No. 196/2003 on the Personal data protection code, the directors acknowledge that the Company has worked to uphold personal data protection measures, also in light of the provisions introduced by Italian Legislative Decree No. 196/2003 and Italian Decree Law No. 207 of 30 December 2008, published in Official Gazette No. 300 of 31 December 2008. The company is also engaged in a project to ensure - within the deadlines set by the regulations - company compliance with the provisions of the Regulations (GDPR, General Data Protection Regulation).
Servizi Italia S.p.A., pursuant to article 3 of the Consob Resolution no. 18079 of 20 January 2012, decided to join the out-put regime set forth in articles 70, paragraph 8, and 71, paragraph 1-bis, of the Consob Regulations n. 11971/99 (as amended), availing itself of the right to derogate from the obligation to publish the information documents as set forth in annex 3B of the above mentioned Consob Regulations when carrying out significant merging, demerging, share capital increases through contributions in kind, acquisitions and transfer operations.
With reference to the changes made in 2016 to the regulatory framework, Servizi Italia S.p.A. will publish the additional periodical information notwithstanding the obligations set forth for the issuers listed in the STAR segment, as specified in article 2.2.3, par. 3, of the Regulations of the Markets organised and managed by Borsa Italiana S.p.A. and in the notice no. 7578 issued by Borsa Italiana on 21 April 2016.
| (thousands of Euros) | 31 March 2018 | 31 December 2017 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Property, plant and equipment | 126,397 | 124,172 |
| Intangible assets | 4,502 | 4,638 |
| Goodwill | 69,398 | 70,784 |
| Equity-accounted investments | 22,168 | 22,257 |
| Equity investments in other companies | 3,612 | 3,612 |
| Financial receivables | 6,987 | 6,987 |
| Deferred tax assets | 2,047 | 2,112 |
| Other assets | 5,114 | 5,281 |
| Total non-current assets | 240,225 | 239,843 |
| Assets held for sale | - | 334 |
| Current assets | ||
| Inventories | 5,926 | 5,915 |
| Trade receivables | 75,379 | 74,539 |
| Current tax receivables | 1,717 | 1,972 |
| Financial receivables | 7,562 | 7,946 |
| Other assets | 12,998 | 10,703 |
| Cash and liquidity | 8,674 | 7,999 |
| Total current assets | 112,256 | 109,074 |
| TOTAL ASSETS | 352,481 | 349,251 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Group shareholders' equity | ||
| Share capital | 31,799 | 31,799 |
| Other reserves and Retained earnings | 104,873 | 93,506 |
| Profit (loss) for the period | 3,321 | 13,770 |
| Total shareholders' equity attributable to shareholders of the parent | 139,993 | 139,075 |
| Total shareholders' equity attributable to non-controlling interests | 2,605 | 2,564 |
| TOTAL SHAREHOLDERS' EQUITY | 142,598 | 141,639 |
| LIABILITIES | ||
| Non-current liabilities | ||
| Due to banks and other lenders | 33,883 | 40,210 |
| Deferred taxes liabilities | 2,631 | 2,645 |
| Employee benefits | 10,209 | 10,322 |
| Provisions for risks and charges | 2,374 | 2,447 |
| Other financial liabilities | 5,560 | 6,076 |
| Total non-current liabilities | 54,657 | 61,700 |
| Current liabilities | ||
| Due to banks and other lenders | 61,466 | 51,383 |
| Trade payables | 70,679 | 69,854 |
| Current tax payables | 156 | 157 |
| Employee benefits | - | 877 |
| Other financial liabilities | 4,363 | 5,176 |
| Other payables | 18,562 | 18,465 |
| Total current liabilities | 155,226 | 145,912 |
| TOTAL LIABILITIES | 209,883 | 207,612 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 352,481 | 349,251 |
| (thousands of Euros) | 31 March 2018 | 31 March 2017 |
|---|---|---|
| Sales revenues | 62,973 | 62,912 |
| Other income | 1,257 | 875 |
| Raw materials and consumables | (6,224) | (6,550) |
| Costs for services | (19,215) | (18,934) |
| Personnel expense | (21,380) | (20,337) |
| Other costs | (378) | (246) |
| Depreciation, amortisation, write-downs, impairment and provisions | (12,434) | (13,377) |
| Operating profit | 4,599 | 4,343 |
| Financial income | 488 | 912 |
| Financial expenses | (703) | (462) |
| Income/(expense) from equity investments in other companies | - | - |
| Revaluation/impairment of equity-accounted investments | (166) | 330 |
| Profit before tax | 4,218 | 5,123 |
| Income taxes | (676) | (987) |
| Profit (loss) for the period | 3,542 | 4,136 |
| of which: Attributable to shareholders of the parent | 3,321 | 4,118 |
| Attributable to non-controlling interests | 221 | 18 |
| (thousands of Euros) | 31 March 2018 |
31 March 2017 |
|---|---|---|
| Profit (loss) for the period | 3,542 | 4,136 |
| Other comprehensive income that will not be reclassified to the Income Statement | ||
| Actuarial gains (losses) on defined benefit plans | - | - |
| Income taxes on other comprehensive income | - | - |
| Other comprehensive income that may be reclassified to the Income Statement | ||
| Gains (losses) from translation of foreign financial statements | (2,262) | 522 |
| Portion of comprehensive income of the investments measured using the equity method | (150) | - |
| Income taxes on other comprehensive income | - | - |
| Total other comprehensive income after taxes | (2,412) | 522 |
| Total comprehensive income for the period | 1,130 | 4,658 |
| of which: Attributable to shareholders of the parent | 1,034 | 4,633 |
| Attributable to non-controlling interests | 96 | 25 |
| (thousands of Euros) | 31 March 2018 | 31 December 2017 | 31 March 2017 |
|---|---|---|---|
| Cash and cash equivalents in hand | 41 | 49 | 31 |
| Cash at bank | 8,633 | 7,950 | 4,777 |
| Cash and liquidity | 8,674 | 7,999 | 4,808 |
| Current financial receivables | 7,562 | 7,946 | 8,126 |
| Current liabilities to banks and other lenders | (61,466) | (51,383) | (52,636) |
| Current net financial debt | (53,904) | (43,437) | (44,510) |
| Non-current liabilities to banks and other lenders | (33,883) | (40,210) | (40,542) |
| Non-current net financial debt | (33,883) | (40,210) | (40,542) |
| Net financial debt | (79,113) | (75,648) | (80,244) |
The Interim Report as at 31 March 2018 has been prepared in compliance with Art. 154-ter of the Consolidated Law on Finance.
The accounting principles and criteria adopted to prepare this Interim Report as at 31 March 2018, which has not been audited, are the same as those used to prepare the annual financial statements. As required by Consob Communication No. DEM/5073567 dated 4 November 2005, the Company has exercised the option to provide less detail than is required under IAS 34 (Interim Financial Reporting).
The subsidiaries San Martino 2000 S.c.r.l., Se.Sa.Tre. S.c.r.l. in liquidation, Steritek S.p.A., SRI Empreendimentos e Participações Ltda, Lavsim Higienização Têxtil S.A., Maxlav Lavanderia Especializada S.A., Vida Lavanderias Especializada S.A., Aqualav Serviços De Higienização Ltda, Ankateks Turizm İnşaat Tekstil Temizleme Sanayi ve Ticaret Ltd Şirketi and Ergülteks Temizlik Tekstil Ltd. Sti are all consolidated line-by-line.
The estimation criteria used to prepare the Interim Report are basically the same as those applied in the Annual Financial Statements.
This Interim Report is approved by the Board of Directors on 14 May 2018.
The revenue from sales and services of Servizi Italia Group is shown below divided by business line for the periods ending 31 March 2018 and 2017.
| (thousands of Euros) | 31 March 2018 | % | 31 March 2017 | % | Changes |
|---|---|---|---|---|---|
| Wash-hire | 45,758 | 72.7% | 47,987 | 76.3% | -4.6% |
| Linen sterilisation (STERIL B) | 5,730 | 9.1% | 4,898 | 7.8% | 17.0% |
| Surgical instrument sterilisation (STERIL C) | 11,485 | 18.2% | 10,027 | 15.9% | 14.5% |
| Sales revenues | 62,973 | 100.0% | 62,912 | 100.0% | 0.1% |
Revenues from wash-hire services have gone from Euro 47,987 thousand in the first quarter of 2017 to Euro 45,758 thousand in the first quarter of 2018. In relative terms, comparing the figure to the total of revenues from sales and services, the wash-hire segment at 31 March 2018 amounts to 72.7%, down by 4.6% compared to the same period of the previous year. The wash-hire line was negatively affected, in the Brazilian area, by the devaluation of the average Real/Euro exchange rate compared to the same period of the previous year, while the Italian area was affected by the redefinition of the technical-economic conditions of portfolio contracts and the end of a few contracts. One should however note the growth in turnover brought about by the consolidation of Ankateks Turizm İnşaat Tekstil Temizleme Sanayi ve Ticaret Ltd Şirketi worth Euro 2,132 thousand.
Revenue from linen sterilisation services increased by 17.0% to Euro 5,730 thousand, accounting for 9.1% of total sales.
There was a 14.5% growth in turnover from surgical instrument sterilisation line compared to the same quarter of last year, on a like-for-like basis, the increase was equal to 11.0%. This growth is ascribable to the consolidation of Steritek S.p.A., the revenue from new clients, in particular Siram S.p.A. for the services provided to the ASST Papa Giovanni XXIII in Bergamo, and the increase in customer portfolio invoicing such as the Careggi Hospital Centre in Florence, the ULSS 2 Marca Trevigiana Hospital Centre and the ASST Sette Laghi.
The table below shows revenue from sales and services of the Servizi Italia Group, broken down by geographical area, for the periods ending on 31 March 2018 and 31 March 2017:
| (thousands of Euros) | 31 March 2018 | % | 31 March 2017 | % | Changes |
|---|---|---|---|---|---|
| Revenues - Italy | 53,428 | 84.8% | 54,735 | 87.0% | -2.4% |
| Revenues - Turkey | 2,132 | 3.4% | - | - | - |
| Revenues - Brazil | 7,413 | 11.8% | 8,177 | 13.0% | -9.3% |
| Sales revenues | 62,973 | 100.0% | 62,912 | 100.0% | 0.1% |
Changes in property, plant and equipment and the associated accumulated depreciation are shown in the table below.
| (thousands of Euros) | Land and buildings |
Plant and machinery |
Returnable assets |
Equipment | Other assets |
Assets under construction |
Total |
|---|---|---|---|---|---|---|---|
| Historical cost | 6,356 | 129,852 | 39,110 | 62,383 | 129,449 | 3,124 | 370,274 |
| Accumulated depreciation | (1,887) | (84,223) | (25,842) | (44,377) | (88,150) | - | (244,479) |
| Balance as at 01 January 2017 | 4,469 | 45,629 | 13,268 | 18,006 | 41,299 | 3,124 | 125,795 |
| Translation differences | (91) | (1,525) | (201) | (37) | (589) | (156) | (2,599) |
| Change in the scope of consolidation | 728 | 1,669 | 1 | 88 | 386 | 720 | 3,592 |
| Increases | 35 | 5,696 | 1,755 | 3,803 | 36,088 | 1,813 | 49,190 |
| Decreases | - | (212) | (1) | (112) | (706) | (51) | (1,082) |
| Depreciation | (201) | (8,237) | (3,616) | (5,737) | (33,097) | - | (50,888) |
| Write-downs (reinstatements) | - | 164 | (2) | - | - | 2 | 164 |
| Reclassifications | - | 2,222 | 822 | 86 | 24 | (3,154) | - |
| Balance as at 31 December 2017 | 4,940 | 45,406 | 12,026 | 16,097 | 43,405 | 2,298 | 124,172) |
| Historical cost | 7,088 | 131,312 | 32,137 | 62,106 | 136,051 | 2,298 | 370,992 |
| Accumulated depreciation | (2,148) | (85,906) | (20,111) | (46,009) | (92,646) | - | (246,820) |
| Balance as at 31 December 2017 | 4,940 | 45,406 | 12,026 | 16,097 | 43,405 | 2,298 | 124,172 |
| Translation differences | (47) | (405) | (46) | (14) | (215) | (7) | (734) |
| Increases | 9 | 839 | 131 | 916 | 11,528 | 3,075 | 16,498 |
| Decreases | (1) | (60) | - | (99) | (1,116) | (195) | (1,471) |
| Depreciation | (50) | (1,910) | (622) | (1,342) | (8,144) | - | (12,068) |
| Reclassifications | - | 250 | 10 | 5 | 53 | (318) | - |
| Balance as at 31 March 2018 | 4,851 | 44,120 | 11,499 | 15,563 | 45,511 | 4,853 | 126,397 |
| Historical cost | 7,041 | 131,566 | 32,206 | 61,961 | 143,605 | 4,853 | 381,232 |
| Accumulated depreciation | (2,190) | (87,446) | (20,707) | (46,398) | (98,094) | - | (254,835) |
| Balance as at 31 March 2018 | 4,851 | 44,120 | 11,499 | 15,563 | 45,511 | 4,853 | 126,397 |
Servizi Italia Group – Interim Management Report as at 31 March 2018 Page 15 of 22
The translation difference refers to the variations in exchange rates for Brazilian companies Lavsim Higienização Têxtil S.A., Maxlav Lavanderia Especializada S.A., Vida Lavanderias Especializada S.A. and SRI Empreendimentos e Participações Ltda. and Aqualav Serviços De Higienização Ltda) and Turkish ones (Ankateks Turizm İnşaat Tekstil Temizleme Sanayi ve Ticaret Ltd Şirketi e Ergülteks Temizlik Tekstil Ltd. Sti.).
The investments in property, plant and equipment during the first quarter of 2018, equal to Euro 16,498 thousand, were mainly related to assignable works and plants still under construction at the end of the quarter (Euro 3,075 thousand), the purchase of linen (Euro 10,884 thousand), surgical equipment (Euro 426 thousand) and plants and machinery (Euro 839 thousand).
In particular, current investments have been undertaken for the construction of the new surgical instrument sterilization centre within the ASST of the Olona Valley for the Hospital Agency of Busto Arsizio (equal to Euro 1,041 thousand), the requalification of the Castellina di Soragna plant (Euro 542 thousand), the installation of new washing lines for the Brazilian companies Lavsim Higienização Têxtil S.A (for Euro 146 thousand) and Aqualav Serviços De Higienização Ltda (Euro 860 thousand).
Furthermore, one has to note that investments for plant and machinery undertaken in Italy (for Euro 410 thousand) and in Brazil (for Euro 422 thousand) are designed to increase production capacity and improve plant safety.
Goodwill is allocated to the Servizi Italia Group's cash generating units identified on the basis of geographical area, which reflects the areas of operation of the companies acquired over the years. The change in value of goodwill in the area is attributable to differences from the translation into Euros brought about following the acquisitions in Brazil and Turkey.
At the date of approval of this interim report, no facts or events have taken place that may indicate an impairment loss in the goodwill recognised and tested for impairment at the end of 2017.
This item shows the following movements:
| (thousands of Euros) | Movements as at 31 March 2018 | |||||
|---|---|---|---|---|---|---|
| 1 Jnauary 2018 | Increases | Decreases | Revaluations | Write-downs | 31 March 2018 | |
| Associates and jointly-controlled companies | ||||||
| Saniservice Sh.p.k. | (45) | - | - | 346 | - | 301 |
| Finanza & Progetti S.p.A. | 9,250 | - | (150) | - | (232) | 8,868 |
| Brixia S.r.l. | 2,990 | - | - | - | (41) | 2,949 |
| Arezzo Servizi S.c.r.l. | 5 | - | - | - | - | 5 |
| CO.SE.S S.c.r.l. | 3 | - | - | - | - | 3 |
| PSIS S.r.l. | 3,898 | - | - | - | (12) | 3,886 |
| Ekolav S.r.l. | 115 | - | - | 17 | - | 132 |
| Steril Piemonte S.c.r.l. | 1,973 | - | - | - | - | 1,973 |
| AMG S.r.l. | 2,395 | - | - | 32 | - | 2,427 |
| Iniziative Produttive Piemontesi S.r.l. | 1,154 | - | - | - | (1) | 1,153 |
|---|---|---|---|---|---|---|
| SE.STE.RO. S.r.l. in liquidazione | 114 | - | - | - | - | 114 |
| Piemonte Servizi Sanitari S.c.r.l. | 3 | - | - | - | - | 3 |
| Servizi Sanitari Integrati Marocco S.a.r.l. | 84 | - | - | - | (1) | 83 |
| SAS Sterilizasyon Servisleri A.Ş. | 466 | - | - | 25 | - | 491 |
| Shubhram Hospital Solutions Private Limited | (148) | 228 | - | - | (300) | (220) |
| Total | 22,257 | 228 | (150) | 420 | (587) | 22,168 |
Trade receivables amount to Euro 75,379 thousand as at 31 March 2018 up by Euro 840 thousand compared to 31 December 2017. During the course of the quarter, trade receivables due from public customers have been transferred to Credem Factor S.p.A. for Euro 14,736 thousand for a sum of Euro 14,700 thousand and to Unicredit Factoring S.p.A. trade receivables due from public clients worth Euro 11,125 thousand for a fee of Euro 11,106 thousand.
The item is broken down as follows:
| (thousands of Euros) | as at 31 March 2018 | as at 31 December 2017 |
|---|---|---|
| Due from others | 11,090 | 9,623 |
| Prepayments | 1,715 | 956 |
| Guarantee deposits receivable | 177 | 120 |
| Accrued income | 16 | 4 |
| Total | 12,998 | 10,703 |
Other non-current assets rose from Euro 10,703 thousand as at 31 December 2017 to Euro 12,998 thousand as at 31 March 2018. The item Due from third others is made up of the receivables of the subsidiary companies Se.Sa.Tre. S.c.r.l. and San Martino 2000 from the consortium Servizi Ospedalieri S.p.A. in the amount of Euro 2,281 thousand, the VAT receivable for Euro 7,557 thousand and, for the remaining part, mainly by advances and receivables toward welfare institutions, all collectable within the year. Prepayments increased primarily as a result of rentals and insurance premiums that were recognised at the beginning of the year. The item guarantee deposits refers to energy utilities and rentals.
The item in question increased by Euro 675 thousand compared to 31 December 2017. This increase was mainly associated with the cash in the BNP Paribas account of the Brazilian subsidiary SRI Empreendimentos e Participações Ltda to be used to finance group growth in Brazil.
As at 31 March 2018, shareholders' equity totalled Euro 142,598 thousand (including Euro 2,605 thousand attributable to non-controlling interests) compared to Euro 141,639 thousand (including Euro 2,564 thousand attributable to non-controlling interests) as at 31 December 2017.
The Company held 10,550 treasury shares, equivalent to approximately 0.03% of the share capital, as at 31 March 2018. The value of treasury shares was Euro 49 thousand. Their nominal amount, of Euro 11 thousand, was classified as a decrease to share capital, and the value exceeding the nominal amount, totalling Euro 38 thousand, was recognised as a reduction in the share premium reserve.
Non-current payables to banks and other lenders decreased from Euro 40,210 thousand as at 31 December 2017 to Euro 33,883 thousand at the end of the first quarter of 2018. This difference of Euro 6,327 thousand, is the result of the reimbursement of the expired mortgage instalments over the period.
Current payables to banks and other lenders increased by Euro 10,083 thousand from Euro 51,383 thousand as at 31 December 2017 to Euro 61,466 thousand at the end of the first quarter of 2018. This increase was brought about by the payment of the expired mortgage instalments for the period and a greater recourse to self-liquidating credit lines.
Trade payables increased from Euro 69,854 thousand as at 31 December 2017 to Euro 70,679 thousand as at 31 March 2018, due entirely to trade payables due after 12 months.
With the approval of the financial statements as at 31 December 2017, the vesting period of the LTI Cash 2015-2016-2017 Plan was completed. The Remuneration Committee, along with the Board of Statutory Auditors, on 13 March 2018, provided a very detailed report and support for the Board of Directors, highlighting the successful achievement of the performance targets foreseen for the net profit of the group cumulated during the vesting period. The Board of Directors has approved the payment to the beneficiaries, for Euro 877 thousand, according to the terms and conditions detailed in the regulations.
The item is broken down as follows:
| (thousands of Euros) | as at 31 March 2018 |
as at 31 December 2017 |
|---|---|---|
| Payable to Area S.r.l. | 500 | 1,000 |
| Payable to Steritek S.p.A. shareholders | 225 | 225 |
| Payable to Finanza e Progetti S.p.A. | 2,460 | 2,460 |
| Deferred price Aqualav Serviços De Higienização Ltda | 70 | 375 |
| Payable for earn-out on Maxlav Lavanderia Especializada S.A. and Vida Lavanderias Especializada S.A. |
1,108 | 1,116 |
| Total | 4,363 | 5,176 |
The variation of the item is specifically connected to the payment of the second instalment of the debt to Area S.r.l. equal to Euro 1,000 thousand and the current reclassification of the third instalment of Euro 500 thousand. On this item one should also note the payment of the deferred price quote for Aqualav Serviços De Higienização Ltda.
Purchases of raw materials and consumables have dropped from Euro 6,550 thousand at 31 March 2017 to Euro 6,224 thousand at 31 March 2018. This reduction is mainly attributable to lower single dose and procedural kit purchases in supplying certain clients.
The item is broken down as follows:
| (thousands of Euros) | as at 31 March 2018 | as at 31 March 2017 |
|---|---|---|
| External laundering and other industrial services | (5,662) | (5,386) |
| Travel and transport | (3,275) | (3,624) |
| Utilities | (2,871) | (3,047) |
| Administrative costs | (686) | (621) |
| Consortium and sales costs | (1,934) | (2,118) |
| Personnel expense | (682) | (593) |
| Maintenance | (1,848) | (1,316) |
| Use of third-party assets | (1,857) | (1,846) |
| Other services | (400) | (383) |
| Total | (19,215) | (18,934) |
Item Costs for services increased by Euro 281 thousand compared with the same period of the previous year. This increase was impacted by the consolidation, during the second half of the year, of Steritek S.p.A. and Ankateks Turizm İnşaat Tekstil Temizleme Sanayi ve Ticaret Ltd Şirketi. On a like-for-like basis, the costs for services would have amounted to Euro 18,530 thousand, therefore showing a decrease compared with 2017. To be noted, for the period, the positive effect of the devaluation of the average Real/Euro exchange rate. With a stable exchange rate, the costs for services would have increased by approximately Euro 336 thousand.
Costs for external laundering and other industrial services increased from Euro 5,386 thousand as at 31 March 2017 to Euro 5,662 thousand as at 31 March 2018. The item is affected by the increase in third party service provisions and by the cost of third party personnel. These increases are offset by a contraction of costs for external laundry services and sterilization of surgical instruments by third parties.
The costs for travel and transport showed a decrease of Euro 349 thousand compared to 31 March 2017. This reduction was particularly marked in the Italian area where the contractual agreements with a few clients has changed following the award of the new contracts with the Liguria Region.
Costs of utilities fell from Euro 3,047 thousand to Euro 2,871 thousand. This decrease is due to a reduction in gas tariffs following the renegotiation of contracts and a contraction in electrical energy consumption made possible by greater production efficiencies.
Consortium and sales costs were down from Euro 2,118 thousand as at 31 March 2017 to Euro 1,934 thousand as at 31 March 2018. The reduction of the item is mainly to be ascribed to minor consortium costs referred to IRCCS University Hospital Centre of San Martino in Genoa and the San Giovanni Hospital Centre in Rome.
The maintenance item was mainly impacted by the increase in the maintenance of surgical instruments, amounting to Euro 303 thousand, in the Italian area, the maintenance of Turkish production sites for Euro 35 thousand and on Brazilian production sites for Euro 30 thousand.
The item is broken down as follows:
| (thousands of Euros) | as at 31 March 2018 | as at 31 March 2017 |
|---|---|---|
| Costs for directors' fees | (318) | (391) |
| Salaries and wages | (14,954) | (13,984) |
| Temporary work | (590) | (498) |
| Social security charges | (4,620) | (4,587) |
| Employee severance indemnity | (840) | (813) |
| Other costs | (58) | (64) |
| Total | (21,380) | (20,337) |
Personnel expense increased from Euro 20,337 thousand as at 31 March 2017 to Euro 21,380 thousand as at 31 March 2018. The period was impacted by the consolidation of Ankateks Turizm İnşaat Tekstil Temizleme Sanayi ve Ticaret Ltd Şirketi amounting to Euro 562 thousand and the consolidation of Steritek S.p.A. for Euro 268 thousand. On the Italian area, it is also worth noting the increased cost of personnel severance incentives for Euro 404 thousand and the hiring of new personnel, especially at the surgical equipment sterilization centres in Bergamo, Florence and Columbus in Milan, which started during the second half of 2017. In the Brazilian area there has instead been a drop in personnel cost, equal to Euro 530 thousand, mainly due to the effects of the Real/Euro devaluation compared to the same period of the previous year. With a stable exchange rate, the increased personnel costs would have amounted to approximately 609 thousand.
The table below shows the average breakdown of personnel:
| 31 March 2018 | 31 March 2017 | |
|---|---|---|
| Executives | 17 | 14 |
| Middle managers | 22 | 26 |
| White-collar staff | 233 | 202 |
| Blue-collar staff | 3,235 | 2,943 |
| Total | 3,507 | 3,185 |
The item is broken down as follows:
| (thousands of Euros) | as at 31 March 2018 | as at 31 March 2017 |
|---|---|---|
| Amortisation of intangible assets | (268) | (496) |
| Depreciation of property, plant and equipment | (12,068) | (12,513) |
| Impairment and provisions | (98) | (368) |
| Total | (12,434) | (13,377) |
The variation in the depreciation of intangible fixed assets is due to the reduction of the client portfolio and closing in 2017 of the non-competition clause with the previous Managing Director (Euro 125 thousand). The reduction of the depreciation of property, plant and equipment from Euro 12,513 thousand to Euro 12,069 thousand is mainly associated with the liquidation of the consortium company Se.Sa.Tre. S.c.r.l. and the concomitant transfer of ownership of plants, machinery and surgical equipment to the ULSS Hospital Centre No. 2 Marca Trevigiana.
The reduction of the impairment and provisions item is the result of the impact of the application from 2018 of the IFRS 9 accounting principle that has led to a rectification of Euro 81 thousand to the provisions for the write-down of receivables.
Financial income increased from Euro 912 thousand as at 31 March 2017 to Euro 488 thousand as at 31 March 2018. The financial management has witnessed a drop in financial income seeing as in the compared statement there was an entry related to exchange profits amounting to Euro 415 thousand related to the calculation of the final price for the purchase of the Turkish group.
The item is broken down as follows:
| (thousands of Euros) | as at 31 March 2018 | As at 31 March 2017 |
|---|---|---|
| Interest expense and bank commission | (417) | (234) |
| Interest and expense to other lenders | (55) | (57) |
| Financial expense on employee benefits | (21) | (22) |
| Exchange gains and losses | (94) | - |
| Other financial expenses | (116) | (149) |
| Total | (703) | (462) |
Interest expense and bank commission increased compared to the same period of the previous year mainly because of the consolidation of the Turkish companies.
The increase in net financial debt as at 31 March 2018 compared to 31 December 2017, amounting to Euro 3,465 thousand, is to consider as a consequence of a reater VAT receivable.
In particular, examining the individual items, there was an increase of Euro 675 thousand in cash and cash equivalents in current accounts at banks compared to 31 December 2017 essentially as a result of the increase in liquidity in the BNP Paribas account of the Brazilian subsidiary SRI Empreendimentos e Participações Ltda, which is to be used to finance group growth in Brazil.
The financial receivables record a decrease compared to 31 December 2017 following the partial reimbursement of the loan granted by the Steril Piemonte S.c.r.l. company for Euro 384 thousand.
The non-current liabilities to banks and other lenders show a drop of Euro 6,327 thousand as a result of the reimbursement of expired mortgage instalments during the period, while current liabilities to banks and other lenders are on the increase by Euro 10,083 thousand following a greater recourse to self-liquidating credit lines.
The net financial position below has been prepared in accordance with CESR, now ESMA, recommendation of 10 February 2005, and reports the value of "Other current financial liabilities" in "Other current financial payables" and the value of "Other non-current financial liabilities" in "Other non-current payables"".
| (thousands of Euros) | as at 31 March 2018 | as at 31 December 2017 |
|---|---|---|
| A. Cash | 41 | 49 |
| B. Other cash equivalents | 8,633 | 7,950 |
| C. Securities held for trading | - | - |
| D. Cash and cash equivalents (A)+(B)+(C) | 8,674 | 7,999 |
| E. Current financial receivables | 7,562 | 7,946 |
| F. Current bank borrowings | (33,434) | (18,856) |
| G. Current portion of non-current borrowings | (28,032) | (32,527) |
| H. Other current financial payables | (4,363) | (5,176) |
| I. Current financial debt (F) + (G) + (H) | (65,829) | (56,559) |
| J. Current net financial debt (I) - (E) - (D) | (49,593) | (40,614) |
| K. Non-current bank borrowings | (33,883) | (40,210) |
| L. Bonds issued | - | - |
| M. Other non-current payables | (5,558) | (6,076) |
| N. Non-current financial debt (K) + (L) + (M) | (39,441) | (46,286) |
| O. Net financial debt (J)+(N) | (89,034) | (86,900) |
The Chairman of the Board of Directors
(Roberto Olivi)
The Financial Reporting Manager Ilaria Eugeniani states pursuant to Article 154 bis, paragraph 2, of the Consolidated Law on Finance that the accounting information presented in this document corresponds to the documented results, books and accounting entries.
The Financial Reporting Manager.
(Ilaria Eugeniani)
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