Annual Report • Mar 15, 2018
Annual Report
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Registered Office: 1 Via Matteo Civitali, Milan Fully paid up share capital: € 26,140,644.50 Fiscal code and Milan Company Registration No. 00748210150
The Company prepares the consolidated financial statements for the Recordati group.
ALBERTO RECORDATI Chairman
ANDREA RECORDATI Vice Chairman, Chief Executive Officer and General Manager
| FRITZ SQUINDO | |
|---|---|
| ROSALBA CASIRAGHI | Independent |
| MICHAELA CASTELLI | Independent |
| PAOLO FRESIA | Independent |
| MARIO GARRAFFO | Independent |
| MARCO VITALE | Independent |
| ELISA CORGHI | Independent |
ANTONIO SANTI Chairman
MARCO NAVA LIVIA AMIDANI ALIBERTI Statutory Auditors
PATRIZIA PALEOLOGO ORIUNDI ANDREA BALELLI Alternate Auditors
To Our Shareholders,
The Annual Report of the Company for the year ended 31st December 2017, which we submit to you for your approval, reports net income of € 212,505,744.
The review of operations in the consolidated annual report attached to this report may be consulted for information on operations and growth strategies.
In order to facilitate comprehension a reclassified income statement is given below showing revenue (1) and expense by function:
| € (thousands) | 2017 | % of revenue |
2016 | % of revenue |
Change 2017/2016 |
% |
|---|---|---|---|---|---|---|
| Revenue (1) | 371,131 | 100.0 | 321,535 | 100.0 | 49,596 | 15.4 |
| Cost of sales | (149,756) | (40.3) | (138,757) | (43.2) | (10,999) | 7.9 |
| Gross profit | 221,375 | 59.7 | 182,778 | 56.8 | 38,597 | 21.1 |
| Selling expenses | (56,831) | (15.3) | (52,174) | (16.2) | (4,657) | 8.9 |
| R&D expenses | (30,167) | (8.1) | (24,645) | (7.7) | (5,522) | 22.4 |
| G&A expenses | (30,304) | (8.2) | (28,403) | (8.8) | (1,901) | 6.7 |
| Other income (expense), net | (2,611) | (0.7) | (2,960) | (0.9) | 349 | (11.8) |
| Operating income | 101,462 | 27.4 | 74,596 | 23.2 | 26,866 | 36.0 |
| Financial (expense)/income, net | (11,812) | (3.2) | (4,670) | (1.5) | (7,142) | 152.9 |
| Revaluation of investments | 0 | 0 | 10,643 | 3.3 | (10,643) | (100.0) |
| Dividends | 160,050 | 43.1 | 53,021 | 16.5 | 107,029 | 201.9 |
| Pretax income | 249,700 | 67.3 | 133,590 | 41.5 | 116,110 | 86.9 |
| Taxes | (37,194) | (10.0) | (23,488) | (7.3) | (13,706) | 58.4 |
| Net income | 212,506 | 57.3 | 110,102 | 34.2 | 102,404 | 93.0 |
(1) The revenue reported in the reclassified income statement includes other income of € 123 thousand, relating in particular to training grants and rents, which in the statutory balance sheet are classified under Note 4 as Other revenue and income.
Revenue was up € 49.6 million on the same period in the previous year due above all to greater sales abroad. Sales of metoprolol based products in particular made by the Company in the second half totalled € 34.5 million (a description of the acquisition of the rights for "metoprolol" is given in the section Other Information).
Good growth was recorded in Italy in sales of the following prescription products: Urorec® (silodosin), a specialty indicated for the treatment of the symptoms of benign prostatic hypertrophy (BPH); and Cardicor® (bisoprolol), a drug belonging to the beta blocker class indicated for the treatment of chronic cardiac insufficiency.
Sales of pharmaceutical chemicals, consisting of the active ingredients produced at the Campoverde di Aprilia plant, amounting to € 40.9 million, were up 1.9% compared with 2016.
Selling expenses were up €4.7 million on the previous year attributable in particular to royalties paid and distribution costs resulting from the acquisition of metoprolol.
R&D costs totalled € 30.2 million accounting for 8.1% of revenue.
General and administrative expenses were up € 1.9 million on 2016 due to the expansion of central management units needed for the integration, monitoring and co-ordination of foreign subsidiaries as the Group implemented its international growth strategy.
Operating income of € 101.5 million was up 36.0% on the year before amounting to 27.4% of revenue.
Financial charges came to €11.8 million, up €7.1 million on the previous year, of which €4.0 million due to the negative balance on gains and losses resulting from exchange rate differences, related in particular to the performance of the United States dollar and the Tunisian dinar.
Net income came to € 212.5 million, up € 102.4 million on the previous year, due in particular to higher dividends.
A brief summary is given below of the net financial position, while further details are given in item 41 of the notes to the financial statements.
| (605,820) | (264,214) | (341,606) |
|---|---|---|
| 10,105 | 16,396 | (6,291) |
| (62,980) | (153,541) | 90,561 |
| (337,091) | (360,213) | 23,122 |
| 274,111 | 206,672 | 67,439 |
| 31.12.2017 | 31.12.2016 | Change 2017/2016 |
(1) Including the recognition at fair value of derivative instruments to hedge foreign exchange rate risk (cash flow hedges).
The net financial position as at 31st December 2017 was a debt of € 658.7 million compared with a debt of € 401.4 million as at 31st December 2016.
Dividends were distributed during the year totalling € 159.6 million, of which € 72.1 million for the balance on the 2016 dividend and € 87.5 million as an interim dividend relating to 2017. Amounts were recognised attributable to the Company for the acquisition of European marketing rights on "metoprolol" for a net amount of €179.7 million and the brands Transipeg®, Transipeglib® and Colopeg® were purchased from Bayer for the French market for a pay-out of €27.8 million.
On 31st May 2017 the Company issued bonds for € 125.0 million, privately and fully placed through the Pricoa Capital Group.
Expenditure on property, plant and equipment came to € 9.0 million and related to investments made at the Milan headquarters (€ 4.4 million) for production and pharmaceutical research in particular, and also at the Campoverde plant (€ 4.6 million).
R&D
The company is focusing its research on the identification of new pharmaceuticals for the treatment of urination disorders.
Rec 0438 is a product for intravesical administration and it is used for patients with neurological hyperactive bladder who must make daily recourse to self-catheterization to empty the bladder. The objective of this treatment is to reduce hyperactivity of the bladder and episodes of incontinence, which have a substantial impact on the quality of patients' lives. Once trials on healthy volunteers were completed, in 2017 trials were also completed on adult patients with post-traumatic lesions of the spine. The data acquired confirmed that this pharmaceutical was well tolerated locally and is not absorbed at the level of systemic circulation. A second trial at European level was therefore planned for patients with spinal lesions to assess the tolerance of repeated administrations of the pharmaceutical, carried out on patients both in hospital and in their homes. This trial will also constitute a "Proof of Concept", because the effectiveness of the pharmaceutical in reducing hyperactive bladder of neurological origin will also be assessed by carrying out a urodynamic test. If positive this trial will open up the way to the development of a pharmaceutical for paediatric spina bifida patients with secondary neurological hyperactive bladder.
Cariprazine is a potent dopamine D3/D2 receptor partial agonist with preferential binding to D3 receptors and partial agonist at serotonin 5-HT1A receptors. An agreement was signed in 2016 with Gedeon Richter to market this novel antipsychotic in Western Europe, Algeria, Tunisia and Turkey and to carry out a programme of paediatric trials in Europe.
Cariprazine received approval in 2017 from the European Medicines Agency (EMA) by means of a centralised procedure for the treatment of schizophrenia.
Schizophrenia is a mental disease characterised by serious behavioural disorders and disturbances of perception (hallucinations) and cognition (delirium). Delirium and hallucinations are also known as positive or productive symptoms and they are accompanied by negative symptoms such as apathy, with loss of affection and imagination, responsible for the loss of contact with reality by patients and their isolation within a world that is incomprehensible to others.
Assessment of the regulatory documentation is currently in progress by Swissmedic, in order to obtain authorisation for marketing also in Switzerland.
Fenticonazole is an antimycotic active ingredient for topical use, a product of Recordati research.
An in vitro trial was conducted in 2017 to test its antimycotic and antibacterial activities on strains of microorganisms isolated from patients. The resulting data will allow the potential of the pharmaceutical to be assessed in the treatment not only of mycotic infections, but also of mixed vagina infections. This data is of particular interest because approximately 20-30% of women with bacterial vaginitis are also co-infected with Candida. Development of a new vaginal soft capsule has also been commenced, with a different composition of the excipients, designed to improve patient compliance.
An agreement was concluded in May with AstraZeneca for the acquisition of the European marketing rights for the products Seloken®/Seloken® ZOK (metoprolol succinate) and the fixed combination Logimax® (metoprolol succinate and felodipine). The deal was closed on 30th June (and on 10th July for the part regarding Rumania). Additionally, royalties will be due to AstraZeneca for the use of the product brands for an agreed period. Metoprolol succinate is a beta-blocker indicated mainly for the treatment of various disorders including hypertension, angina pectoris and disturbances of cardiac rhythm and maintenance treatment following myocardiac infarct and functional cardiac disturbances with palpitations. It is a pharmaceutical that is widely used in all European countries which will allow Group companies to expand their product portfolios, especially in Poland, France and Germany.
The Company has considerable experience in marketing pharmaceuticals for cardiovascular diseases and has a large portfolio of pharmaceuticals for the treatment of hypertension and related disorders.
During the transition period, while waiting for the transfer of marketing authorisations in various countries, AstraZeneca has managed the distribution and sale of products on the market on behalf the Company on the basis of a transitional service agreement signed by both parties.
The impact of "metoprolol" on various items in the financial statements is described in the comments and in particular in the following notes to the income statement: No. 3 Revenue, No. 5 Costs for raw materials and goods, No. 7 Depreciation and amortisation and No. 8 Other operating expenses.
Treasury stock consisting of 3,028,000 shares was sold during the year for € 30,267 thousand, following the exercise of stock option rights by Group employees under the 2010-2013 and 2014-2018 stock option plans. The Company held treasury stock consisting of 863,262 shares as at 31st December 2017 accounting for 0.41% of the share capital.
The section "Principal risks and uncertainties" in the review of operations in the consolidated annual report attached to this report may be consulted for an analysis and description of the principal risks and uncertainties to which the Company is exposed pursuant to paragraphs 1 and 2 of article 2428 of the Italian Civil Code.
The information required under paragraph three, point 6-bis of Art. 2428 of the Italian Civil Code concerning the Company's objectives and policies in respect of financial risk management is fully reported in the notes to the financial statements.
In compliance with the requirements contained in Art. 4, paragraph 7 of the Regulation on related-party transactions adopted with Consob Resolution 17221 of 12th March 2010 and subsequent amendments and also in Art. 2391-bs, paragraph 1 of the Italian Code, the Company reports that it has adopted "Regulations for related-party transactions", the full text of which is available on the Company website at www.recordati.it (in the "Corporate Governance" section).
The Company has a secondary headquarters at 4 Via Mediana Cisterna, Campoverde di Aprilia (Latina).
Shares held by directors, statutory auditors, general managers and other key management personnel are reported in the Remuneration Report published in accordance with Art. 123-ter of the Consolidated Finance Law.
In compliance with Art. 37, paragraph 2 of the Markets Regulations adopted with Consob deliberation No. 16191 of 29th October 2007 as subsequently amended, we report that, although Recordati S.p.A. is controlled by Fimei S.p.A., it is not subject to management and co-ordination by that company within the meaning of articles 2497 et seq of the Italian Civil Code. This is because Fimei S.p.A. is a mere financial holding company with no operations of any kind and it does not exert any influence or conduct any activities which might affect the management decisions and organisation of Recordati S.p.A..
The Corporate Governance Report pursuant to article 123 bis of Legislative Decree No. 58/98, which contains
information pursuant to article 89 bis of the Issuers' Regulations, may be consulted on the Company website at www.recordati.it, in the section "Corporate Governance".
As at 31st December 2017, intercompany accounts with Group companies and the parent company Fimei S.p.A. consisted of payables of € 355,967 thousand and receivables of € 115,127 thousand. The most significant items are as follows:
Sales and services to Group companies in 2017 amounted to € 137,997 thousand.
Dividends were received during the year from Bouchara Recordati S.a.s. amounting to € 60,000 thousand and from Recordati Ireland Ltd amounting to € 100,050 thousand.
Tax payables include those to the parent company Fimei S.p.A. amounting to € 2,479 thousand, which relate to the following:
The following summary is set out in the table below in compliance with Consob Resolution No. 15519 of 27th July 2006:
| Percentage of transactions with related parties € (thousands) |
Total | Related parties Amount |
% |
|---|---|---|---|
| Percentage of transactions or positions in the balance sheet with related parties |
|||
| Trade receivables and other | 90,806 | 37,545 | 41.35 |
| Long-term financial assets | 10,105 | 10,009 | 99.05 |
| Short-term financial assets | 67,573 | 67,573 | 100.00 |
| Trade payables and other | 85,172 | 10,117 | 11.88 |
| Long-term financial liabilities | 602,712 | 58,367 | 9.68 |
| Short-term financial liabilities | 334,707 | 287,483 | 85.89 |
| statement with related parties | |||
|---|---|---|---|
| Revenue | 373,041 | 138,070 | 37.01 |
| Income from investments | 160,050 | 160,050 | 100.00 |
| Costs of purchases and service provision | 176,397 | 22,191 | 12.58 |
| Financial income/(expense), net | (11,812) | (1,535) | 13.00 |
Transactions and positions with related parties as a percentage of cash flows is basically the same as that for the income statement items because the transactions are conducted under normal market conditions.
SIGNIFICANT TRANSACTIONS, EXCEPTION TO DISCLOSURE OBLIGATIONS
The Company decided to take advantage, with effect from 20th December 2012, of the right not to comply with obligations to publish the reports required when significant extraordinary operations are performed consisting of mergers, demergers, share capital increases through contributions in kind, acquisitions and disposals, in accordance with Art. 70, paragraph 8 and with Art. 71, paragraph 1-bis of the Issuers' Regulations issued by Consob with Resolution No. 11971/1999 and subsequent amendments.
Cross-Border merger of Recordati SA Chemical and Pharmaceutical Company into Recordati S.p.A.
The terms of cross-border merger for the merger into Recordati S.p.A. (the "Acquiring Company") of the Luxembourg company Recordati S.A. Chemical and Pharmaceutical Company (the "Company Acquired"), which is wholly owned by it, was filed with the Company Registrar on 12th June 2017.
As already reported, the resolution passed by Recordati S.p.A.'s Board of Directors which approved the crossborder merger by acquisition of Recordati S.A. Chemical and Pharmaceutical Company was filed with the Milan Company Registrar on 7th April 2017, while the common draft terms of cross-border merger had been approved on 1st March 2017 by the Board of Directors of the Acquiring Company and on 27th February 2017 by the Board of Directors of the Company Acquired, each within the scope of their responsibilities and in co-operation with each other.
The merger was of the cross-border type because the two companies concerned belonged to two different member states of the European Union and it was carried out by the cancellation of all the shares issued by the Acquired Company and with no increase in the share capital of the Acquiring Company, because Recordati S.p.A. owned the entire share capital of Recordati S.A. Chemical and Pharmaceutical Company.
Furthermore, since this was a merger by acquisition in which the Acquiring Company was the direct owner of the entire share capital of the Company Acquired, "simplified" merger rules were applied in accordance with article 2505 of the Italian Civil Code, article 18 of Legislative Decree No. 108/2008, and article 278 et seq of the Luxembourg Law.
From an accounting viewpoint, the merger was carried out on the basis of the financial positions of the companies participating in the merger at 31st December 2016, as represented by the proposed separate company financial statements at and for the period ended 31 December 2016.
The elimination of the carrying amount of the investment in the Acquired Company (€ 217,586 thousand), against the equity of the latter (€ 247,399 thousand), generated a gain on the merger of € 29,813 thousand recognized in "Other Reserves" within the equity of the Acquiring Company.
The transactions of the Acquired Company have been recognized, also for income tax purposes, in the financial statements of the Acquiring Company from 1st January 2017. We underline that during the period of the financial year 2017 prior to the approval of the merger, the Acquired Company reported a loss of € 379 thousand. As a result of the merger, that loss was therefore recognized in the income statement of the Acquiring Company.
For greater ease of understanding the information below is reported in the pages that follow:
- the financial position of the Acquiring Company resulting after recognition of entries relating to the merger by acquisition of the Acquired Company calculated on the basis of the original financial positions of the two Companies as at 31st December 2016;
- details of movements that occurred in the financial statements of the Acquired Company during the course of 2017 before the merger contract was filed.
| BALANCE SHEET ASSETS |
31/12/2016 RECORDATI S.P.A. |
31/12/2016 RECORDATI S.A. LUX |
Initial adjustments 01/01/17 |
Merger adjustments 01/01/17 |
01/01/2017 RECORDATI S.P.A. |
|
|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||||
| Property, plant and equipment | 44,850,587 | - | - | - | 44,850,587 | |
| Intangible assets | 25,516,643 | - | - | - | 25,516,643 | |
| Investments | 621,143,621 | 355,031,276 | 9,918,583 (217,586,090) | 768,507,390 | ||
| Investments in "Recordati S.A. Lux" | 221,342,638 | - | (3,756,548) | (217,586,090) | - | |
| Investments in "Other Companies" | 399,800,983 | 355,031,276 | 13,675,131 | - | 768,507,390 | |
| Loans and receivables | 16,396,325 | - | - | - | 16,396,325 | |
| Deferred tax assets | 3,721,972 | - | - | - | 3,721,972 | |
| Total Non-Current Assets | 711,629,148 | 355,031,276 | 9,918,583 (217,586,090) | 858,992,917 | ||
| CURRENT ASSETS | ||||||
| Inventories | 54,944,368 | - | - | - | 54,944,368 | |
| Trade receivables | 53,100,706 | 65,309 | - | (468) | 53,165,547 | |
| Other receivables | 10,556,382 | 190,920 | - | - | 10,747,302 | |
| Other current assets | 539,034 | - | - | - | 539,034 | |
| Fair value of hedging derivatives | 12,497,477 | - | - | - | 12,497,477 | |
| Other short-term receivables | 119,856,750 | 12,955,621 | 1,352,376 | (81,898,184) | 52,266,563 | |
| Short-term financial investments, cash and cash equivalents | 86,814,873 | 90,445 | - | - | 86,905,318 | |
| Total Current Assets | 338,309,590 | 13,302,295 | 1,352,376 | (81,898,652) | 271,065,609 | |
| TOTAL ASSETS | 1,049,938,738 | 368,333,571 | 11,270,959 (299,484,742) | 1,130,058,526 | ||
| BALANCE SHEET | 31/12/2016 | 31/12/2016 | Initial | Merger | 01/01/2017 | |
| LIABILITIES | RECORDATI | RECORDATI | adjustments | adjustments | RECORDATI | |
| S.P.A. | S.A. LUX | 01/01/17 | 01/01/17 | S.P.A. | ||
| EQUITY | ||||||
| Share capital | 26,140,645 | 82,500,000 | - | (82,500,000) | 26,140,645 | |
| Additional paid-in capital | 83,718,523 | - | - | - | 83,718,523 | |
| Treasury stock | (76,761,059) | - | - | - | (76,761,059) | |
| Statutory reserve | 5,228,129 | 8,250,000 | - | (8,250,000) | 5,228,129 | |
| Other reserves | 237,931,918 | 145,002,980 | 6,438,782 (115,190,368) | 274,183,312 | ||
| Other reserves | 237,931,918 | 145,002,980 | 6,438,782 | (145,002,980) | 244,370,700 | |
| Merger gain | - | - | - | 29,812,612 | 29,812,612 | |
| Revaluation reserve | 2,602,229 | - | - | - | 2,602,229 | |
| Interim dividend | (72,245,319) | - | - | - | (72,245,319) | |
| Net income for the previous year | - | 59,188 | - | (59,188) | - | |
| Net income for the year | 110,102,226 | 11,586,534 | - | (11,586,534) | 110,102,226 | |
| Total equity | 316,717,292 | 247,398,702 | 6,438,782 (217,586,090) | 352,968,686 | ||
| NON-CURRENT LIABILITIES Loans |
276,711,756 | - | - | - | 276,711,756 | |
| Personnel leaving indemnities | 11,236,914 | - | - | - | 11,236,914 | |
| Other non-current liabilities | - | - | 2,514,640 | - | 2,514,640 | |
| Deferred tax liabilities | - | - | 2,317,537 | - | 2,317,537 | |
| Total Non-Current Liabilities | 287,948,670 | - | 4,832,177 | - | 292,780,847 | |
| CURRENT LIABILITIES | ||||||
| Trade payables | 44,515,223 | 47,081 | - | (468) | 44,561,836 | |
| Other current payables | 19,567,259 | 654,702 | - | - | 20,221,961 | |
| Tax liabilities | 4,396,667 | - | - | - | 4,396,667 | |
| Other current liabilities | 788 | - | - | - | 788 | |
| Provisions | 12,958,448 | - | - | - | 12,958,448 | |
| Fair value of hedging derivatives (cash flow hedges) | 3,621,403 | - | - | - | 3,621,403 | |
| Loans - due within one year | 36,818,182 | - | - | - | 36,818,182 | |
| Bank overdrafts and short-term loans | 1,777,678 | - | - | - | 1,777,678 | |
| Other short-term borrowings | 321,617,128 | 120,233,086 | - | (81,898,184) | 359,952,030 | |
| Total Current Liabilities | 445,272,776 | 120,934,869 | - | (81,898,652) | 484,308,993 | |
| TOTAL LIABILITIES | 1,049,938,738 | 368,333,571 | 11,270,959 (299,484,742) | 1,130,058,526 |
MOVEMENTS IN 2017 IN THE FINANCIAL STATEMENTS OF RECORDATI S.A. CHEMICAL AND PHARMACEUTICAL COMPANY PRIOR TO ITS CROSS-BORDER MERGER BY ACQUISITION INTO RECORDATI S.P.A.
| RECORDATI S.A. LUX BALANCE SHEET ASSETS |
Movements 01/01/17 - 12/06/17 |
|---|---|
| NON-CURRENT ASSETS | |
| Investments | 804,063 |
| Total Non-Current Assets | 804,063 |
| CURRENT ASSETS | |
| Other loans and receivables | 67,044 |
| Other short-term receivables | (400,676) |
| Short-term financial investments, cash and cash equivalents | (6,832) |
| Total Current Assets | (340,464) |
| TOTAL ASSETS | 463,599 |
| RECORDATI S.A. LUX | |
| BALANCE SHEET LIABILITIES |
Movements 01/01/17 - 12/06/17 |
| EQUITY | |
| Net loss for the period | (379,285) |
| Total equity | (379,285) |
| NON-CURRENT LIABILITIES Total Non-Current Liabilities |
- |
| CURRENT LIABILITIES | |
| Trade payables | 20,335 |
| Other short-term borrowings | 822,549 |
| Total Current Liabilities | 842,884 |
| TOTAL LIABILITIES | 463,599 |
| RECORDATI S.A. LUX INCOME STATEMENT |
Movements 01/01/17 - 12/06/17 |
| REVENUE Other revenues and income |
76 |
| Total Revenue | 76 |
| Other operating expenses | (105,626) |
| Operating income | (105,550) |
| Income from investments | 86,000 |
| Financial expense, net | (359,735) |
| Pre-tax loss | (379,285) |
| NET LOSS | (379,285) |
The implementation of company policies, operations at the beginning of the current year, the potential of our products, the financial strength of the company and the managerial capacities of our personnel lead us to forecast a positive result again in 2018.
Milan, 15th March 2018
on behalf of the Board of Directors The Vice Chairman and Chief Executive Officer Andrea Recordati
INCOME STATEMENTS FOR THE YEARS ENDED 31ST DECEMBER 2017 AND 31ST DECEMBER 2016
| Amounts in euro | Notes | 2017 | 2016 |
|---|---|---|---|
| Revenue | 3 | 371,007,812 | 320,706,360 |
| Other income: | 4 | 2,033,524 | 2,406,223 |
| Total income | 373,041,336 | 323,112,583 | |
| Raw materials costs | 5 | (105,404,864) | (92,531,130) |
| Personnel costs | 6 | (79,795,958) | (80,893,025) |
| Depreciation and amortisation | 7 | (14,590,233) | (9,426,053) |
| Other operating expenses | 8 | (78,225,666) | (67,061,983) |
| Changes in inventories | 9 | 6,437,179 | 1,395,412 |
| Operating income | 101,461,794 | 74,595,804 | |
| Revaluations of investments | 0 | 10,779,000 | |
| Impairment of investments | 0 | (135,908) | |
| Income from investments | 10 | 160,050,000 | 53,021,231 |
| Financial income (expense), net | 11 | (11,812,244) | (4,669,901) |
| Pre-tax income | 249,699,550 | 133,590,226 | |
| Taxes | 12 | (37,193,806) | (23,488,000) |
| Net income for the year | 212,505,744 | 110,102,226 |
| Earnings per share (in euro) | |||||
|---|---|---|---|---|---|
| Basic | 1.026 | 0.534 | |||
| Diluted | 1.016 | 0.526 |
Basic earnings per share is calculated on average shares outstanding in the relative periods, consisting of 207,030,319 shares in 2017 and 206,117,418 in 2016. The figures are calculated net of average treasury stock held, which amounted to 2,094,837 shares in 2017 and 3,007,738 shares in 2016.
Diluted earnings per share is calculated taking into account stock options granted to employees.
| Assets | |||
|---|---|---|---|
| Amounts in euro | Notes | 31st December 2017 |
31st December 2016 |
| Non-current assets | |||
| Property, plant and equipment | 13 | 46,960,970 | 44,850,587 |
| Intangible assets | 14 | 239,514,582 | 25,516,643 |
| Investments | 15 | 774,357,367 | 621,143,621 |
| Loans and receivables | 16 | 10,104,582 | 16,396,325 |
| Deferred tax assets | 17 | 27,233,306 | 3,721,972 |
| Total non-current assets | 1,098,170,807 | 711,629,148 | |
| Current assets | |||
| Inventories | 18 | 61,381,547 | 54,944,368 |
| Trade receivables | 19 | 82,250,366 | 53,100,706 |
| Other receivables | 20 | 8,556,027 | 10,556,382 |
| Other current assets | 21 | 652,671 | 539,034 |
| Fair value of hedging derivatives (cash flow hedges) | 22 | 3,824,811 | 12,497,477 |
| Other short-term receivables | 23 | 67,573,180 | 119,856,750 |
| Short-term financial investments, cash and cash |
equivalents 24 206,537,934 86,814,873
Total current assets 430,776,536 338,309,590
BALANCE SHEETS as at 31ST DECEMBER 2017 and as at 31ST DECEMBER 2016
| Amounts in euro | Notes | 31st December | 31st December | |
|---|---|---|---|---|
| 2017 | 2016 | |||
| Equity | ||||
| Share capital | 25 | 26,140,645 | 26,140,645 | |
| Additional paid-in capital | 25 | 83,718,523 | 83,718,523 | |
| Treasury stock | 25 | (17,029,155) | (76,761,059) | |
| Statutory reserve | 25 | 5,228,129 | 5,228,129 | |
| Other reserves | 25 | 218,802,826 | 237,931,918 | |
| Revaluation reserve | 25 | 2,602,229 | 2,602,229 | |
| Interim dividend | 25 | (87,469,996) | (72,245,319) | |
| Net income for the year | 25 | 212,505,744 | 110,102,226 | |
| Total shareholders' equity | 444,498,945 | 316,717,292 | ||
| Non-current liabilities | ||||
| Loans | 26 | 602,712,138 | 276,711,756 | |
| Personnel leaving indemnities | 27 | 10,860,373 | 11,236,914 | |
| Other non-current liabilities | 28 | 2,514,640 | 0 | |
| Total non-current liabilities | 616,087,151 | 287,948,670 | ||
| Current liabilities | ||||
| Trade payables | 29 | 55,763,611 | 44,515,223 | |
| Other current payables | 30 | 20,992,064 | 19,567,259 | |
| Tax liabilities | 31 | 8,416,591 | 4,396,667 | |
| Other current liabilities | 0 | 788 | ||
| Provisions | 32 | 36,538,425 | 12,958,448 | |
| Fair value of hedging derivatives (cash flow hedges) | 33 | 9,559,347 | 3,621,403 | |
| Loans – due within one year |
34 | 47,224,432 | 36,818,182 | |
| Bank overdrafts and short-term loans | 35 | 2,384,170 | 1,777,678 | |
| Other short-term borrowings | 36 | 287,482,607 | 321,617,128 | |
| Total current liabilities | 468,361,247 | 445,272,776 |
Total equity and liabilities 1,528,947,343 1,049,938,738
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31ST DECEMBER 2017 AND 31ST DECEMBER 2016
| € (thousands) | 2017 | 2016 |
|---|---|---|
| Net income for the year | 212,506 | 110,102 |
| Gains/(losses) on cash flow hedges | 1,553 | (4,130) |
| Valuation of the personnel leaving indemnity fund pursuant to IAS 19 |
(74) | (200) |
| Income (expense) for the year recognised directly in equity | 1,479 | (4,330) |
| Comprehensive income for the year | 213,985 | 105,772 |
| € (thousands) | Share | Addition | Treasury | Statutory | Other reserves | Revaluat | Interim | Net | Total | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| capital | al paid-in | stock | reserve | Sundry | Fair Value | IAS | ion | dividend | (loss)/ | ||
| capital | reserves | hedging | compl | reserves | income | ||||||
| instrument reserve |
iance | for the | |||||||||
| reserve | period | ||||||||||
| Balance as at 31st December 2015 | 26,141 | 83,718 | (35,061) | 5,228 | 147,599 | (3,289) | 98,723 | 2,602 | (61,605) 125,515 389,571 | ||
| Allocation of 2015 net income as per shareholders' resolution of 13.4.2016: |
|||||||||||
| to reserves | 2,425 | (2,425) | 0 | ||||||||
| dividends to shareholders | 61,605 | (123,090) (61,485) | |||||||||
| Repurchase of treasury stock | (71,605) | (71,605) | |||||||||
| Sales of treasury stock | 29,905 | (7,187) | 22,718 | ||||||||
| Dividends expired | 5 | 5 | |||||||||
| Interim dividends | (72,245) | (72,245) | |||||||||
| Comprehensive income for | |||||||||||
| the period | (4,130) | (200) | 110,102 105,772 | ||||||||
| IAS compliance as at 31st | |||||||||||
| December 2016 | |||||||||||
| Stock options | 3,986 | 3,986 | |||||||||
| Balance as at 31st December 2016 | 26,141 | 83,718 | (76,761) | 5,228 | 142,842 | (7,419) 102,509 | 2,602 | (72,245) 110,102 316,717 | |||
| Allocation of 2016 net income | |||||||||||
| as per shareholders' resolution of 11.4.2017: |
|||||||||||
| dividends to shareholders | 72,245 (110,102) (37,857) | ||||||||||
| to reserves | (34,280) | (34,280) | |||||||||
| Gain on merger | 29,813 | 29,813 | |||||||||
| Sales of treasury stock | 59,732 | (29,465) | 30,267 | ||||||||
| Dividends expired | 5 | 5 | |||||||||
| Interim dividends | (87,470) | (87,470) | |||||||||
| Comprehensive income for | |||||||||||
| the period | 1,553 | (74) | 212,506 213,985 | ||||||||
| IAS compliance as at 31st | |||||||||||
| December 2017 | |||||||||||
| Stock options | 3,961 | 3,961 | |||||||||
| Reserve for adjustments to | 8,593 | 8,593 | |||||||||
| financial instruments | |||||||||||
| Recordati SA Lux IAS reserve | 765 | 765 | |||||||||
| Balances as at 31st December 2017 | 26,141 | 83,718 (17,029) | 5,228 | 108,915 | (5,866) 115,754 | 2,602 | (87,470) 212,506 444,499 |
CASH FLOW STATEMENT FOR THE YEARS ENDED 31ST DECEMBER 2017 AND 31ST DECEMBER 2016
| € (thousands) | 2017 | 2016 |
|---|---|---|
| Operating activities | ||
| Net income for the year | 212,506 | 110,102 |
| Income from investments | (160,050) | (53,021 |
| Depreciation of property, plant and equipment | 6,748 | 6,339 |
| Amortization of intangible assets | 7,842 | 3,087 |
| Write-up/write-down of investments | 0 | (10,643) |
| (Increase)/decrease in deferred tax liabilities | (26,349) | 950 |
| Increase/(decrease) in personnel leaving indemnities | (377) | 65 |
| Other provisions | 23,580 | (1,357) |
| Dividends received | 160,050 | 53,021 |
| Trade receivables | (29,085) | 4,812 |
| Other receivables and other current assets | 2,078 | (4,127) |
| Inventories | (6,437) | (1,395) |
| Trade payables | 11,202 | 4,566 |
| Other payables and other current liabilities | 769 | (1,115) |
| Tax liabilities | 4,020 | (2,511) |
| Net cash from operating activities | 206,497 | 108,773 |
| Investing activities | ||
| Net (investments)/disposals in property, plant and equipment | (8,858) | (7,670) |
| Net (investments)/disposals in intangible assets | (221,840) | (1,556) |
| Net (increase)/decrease in equity investments | (943) | (120,790) |
| Net (increase)/decrease in other non-current assets | 6,292 | 6,035 |
| Net cash used in investing activities | (225,349) | (123,981) |
| Financing activities | ||
| Loans – due after one year | 389,518 | 113,292 |
| Dividends distributed | (159,607) | (133,730) |
| (Purchase)/sale of treasury stock | 30,267 | (48,887) |
| Effect on shareholders' equity of application of IAS/IFRS | 1,934 | 1,493 |
| Repayment of loans | (36,457) | (32,752) |
| Net cash from/(used in) financing activities | 225,655 | (100,584) |
| Effects of extraordinary operation | ||
| Net (increase)/decrease in equity investments | (137,445) | 0 |
| Current assets and liabilities | 445 | 0 |
| Shareholders' equity | 31,165 | 0 |
| Net cash from/(used in) financing activities | (105,835) | 0 |
| Change in short-term financial position | 100,968 | (115,792) |
| Short-term financial position at beginning of year * | (116,723) | (931) |
| Short-term financial position at end-of-year * | (15,755) | (116,723) |
* Includes the total of other short term loans, short-term financial investments and cash and cash equivalents, bank overdrafts and other short-term borrowings excluding the current portion of medium and long-term loans.
The separate annual financial statements comprise the income statement, the balance sheet, the statement of comprehensive income, the statement of changes in shareholders' equity, the cash flow statement and these notes to the financial statements. In compliance with Legislative Decree No. 38 of 28th February 2005, – in implementation of the options provided for by Art. 5 of Regulation (EC) No. 1606/2002 of the European Parliament and Council of 19th July 2002 concerning International Accounting Standards – the separate company financial statements have been prepared applying the international accounting standards (IAS/IFRS) issued or revised by the International Accounting Standards Board and homologated by the European Union and also the regulations issued in implementation of Art. 9 of Legislative Decree No. 38/2005. The "IAS/IFRS" are intended as including all the interpretations of the International Financial Reporting Interpretation Committee ("IFRIC"), previously named the Standing Interpretations Committee ("SIC").
The presentation adopted by the Company for the income statement in the separate annual financial statements classifies revenues and expenses by nature. The distinction between the principle of current and non-current was adopted for the presentation of assets and liabilities in the balance sheet.
These 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 financial statements have been prepared on a historical cost basis, except for hedging derivatives (and the relative underlying hedged financial liability) for which their fair value has been applied and except for defined benefit plans for which the actuarial valuation was performed as prescribed by IAS 19.
Two new accounting standards are applicable as of 1st January 2018 for which early application was permitted. The accounting standard IFRS 9 "Financial instruments" introduces new requirements for the classification, measurement and impairment of financial assets and liabilities and new rules for hedge accounting.
The accounting standard IFRS 15 "Revenue from contracts with customers" sets five steps for the recognition of revenue to be applied to all contracts stipulated with customers, except for those that fall within the scope of the IAS/IFRS standards.
The Company did not exercise the option for early adoption of the new standards and in 2017 it completed studies to identify the areas affected by their application and to determine the relative effects. No significant impacts on the income statement and balance sheet were found.
Furthermore, the new accounting standard IFRS 16 "Leases" will be applicable with effect from 1st January 2019. This eliminates the classification of leases as operating or finance for the purposes of the preparation of financial statements by companies that operate as lessees. Essentially, for all contracts with a lease term of longer than 12 months (unless the underlying asset has a low value), it will be necessary to recognise an asset representing the right-of-use, a liability representing the obligation to make payments in accordance with the contract and the effects in the income statement of the depreciation of the asset and recognition of the interest expenses on the financial liability. The impacts resulting from the application of the new standard are currently being assessed.
The principal accounting policies adopted are set out below.
Property, plant and equipment - Property, plant and equipment is stated at historical cost less accumulated depreciation and any recognised impairment loss. Subsequent costs are only capitalized when it is probable that the future economic benefits will flow to the Company. The costs for ordinary maintenance and repairs are recognized through profit and loss at the time at which they are incurred.
The carrying amount of property, plant and equipment is subject to impairment testing to measure any loss in value when events or situations occur which indicate that the carrying amount of the assets can no longer be recovered (see paragraph on impairment).
Depreciation is computed on a straight-line basis using rates which are held to be representative of the estimated useful life of the assets:
| Industrial buildings | 2.5% - 5.5% |
|---|---|
| Plant & machinery | 10% - 17.5% |
| Other equipment | 12% - 40% |
The depreciation of an asset begins when it is installed and is ready for use or, in the case of self-constructed assets, when the assets have been completed and are ready for use.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and it is recognized through profit or loss for the period.
Intangible assets - An intangible asset is recognized only if it can be identified, if it is probable that it will generate future economic benefits and its cost can be measured reliably. Intangible assets are valued at purchase cost, net of amortization calculated on a straight-line basis and on the basis of their estimated useful life which, however, cannot exceed 20 years. Patents, licenses and know-how are amortized from the year of the first sale of the relative products. Amortization of distribution and license rights is generally calculated over the duration of the contract.
Impairment - At each balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the greater of net selling price and value in use. In measuring value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of the money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized. A reversal of an impairment loss is recognized as income immediately.
Investments in subsidiaries – Investments in subsidiaries are recognized at cost of acquisition adjusted for impairment.
Positive differences arising at the time of purchase between the acquisition cost and the quota of the equity at present values held in the subsidiary attributable to the Company are therefore included in the carrying amount of the investment.
Investments in subsidiaries are subject to impairment testing annually or more frequently if necessary in order to test for possible loss of value. Where evidence exists that the value of these investments has been impaired, this is recognized through profit or loss as an impairment loss. Where an impairment loss subsequently reverses or reduces, this is recognized in the income statement as a reversal of impairment within the limits of the cost of acquisition.
According to IFRS 2, stock option plans for the employees of subsidiaries constitute an increase in the value of the relative investments. That increase in value consists of the fair value of the options on the grant date and it is recognised as an increase in the investments at constant rates over the period between the grant and the vesting date, with the balancing entry recognized directly in equity.
Receivables (included in non-current assets) - Receivables are stated at their nominal value and reduced for impairment losses.
Inventories - Inventories are stated at the lower of cost or market value, where the market value of raw materials and subsidiaries is their substitution cost while that related to finished goods and work-in-process is their net realizable value.
Inventories of raw materials and supplies are valued at their average weighted acquisition cost including costs incurred in bringing the inventories to their location and condition at year-end.
Inventories of work-in-process and finished goods are measured at their average weighted manufacturing cost which includes the cost of raw materials, consumables, direct labour and indirect costs of production, exclusive of general expenses.
Inventories are written-down if the market value is lower than cost as described above or in the case of obsolescence resulting from slow moving stocks.
Trade receivables - Trade receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and cash equivalents - Cash in banks on demand and highly liquid investments.
Equity - Equity instruments issued by the Company are recorded at the amount of the proceeds received. The proposed dividend is recognized as a liability at the time of adoption of the dividend resolution at the annual shareholders' meeting.
The cost and selling prices of treasury shares are recognized directly in equity and therefore gains and losses on sales are not recognized in the income statement.
Loans - Interest-bearing loans are recorded at the proceeds received, net of direct issue costs.
Subsequently, loans are measured using the amortized cost method as prescribed by IAS 39. The amortized cost is the amount of the liability on initial recognition net of capital repayments and transaction costs amortized using the effective interest rate method.
If the loans are hedged using derivative instruments qualifying as "fair value hedges", in accordance with IAS 39, these loans are measured at fair value as are their related derivative instruments.
Personnel leaving indemnities - Employee benefits presented in the balance sheet are the result of valuations carried out as prescribed by IAS 19. The liabilities recognized in the balance sheet for post-employment benefit plans represent the present value of the defined benefit obligation, as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost. The present value of the defined benefit obligation is determined using the Projected Unit Credit Method. All actuarial gains and losses are recognized directly in the schedule of gains and losses stated in equity. Until 31st December 2006 the staff leaving indemnities of Italian companies were considered defined benefit plans. The regulations governing those indemnities were amended by Law 296 of 27th December 2006 (2007 Finance Act) and subsequent amendments made in early 2007. In view of those changes and for companies with at least 50 employees in particular, those indemnities are only to be treated as defined benefit plans for the amounts that matured prior to 1st January 2007 (and not yet paid at the balance sheet date), while subsequent to that date they are treated as a defined
Trade payables - Include payables arising from supply agreements and are stated at their nominal value.
Other payables - Include payables arising in the normal course of business (towards employees and third parties) and are stated at their nominal value.
Bank overdrafts and loans - Bank overdrafts and loans are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Derivative financial instruments - The Company uses derivative financial instruments to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivatives are measured at fair value at the end of each reporting period.
Hedging relationships are of two types, "fair value hedge" or "cash flow hedge". A "fair value hedge" is a hedge of the exposure to changes in the fair value of an asset or liability that is already recognized in the balance sheet. A "cash flow hedge" is a hedge of the exposure to variability in cash flows relating to a recognized asset or liability or to a forecasted transaction.
The gain or loss from the change in fair value of a derivative instrument qualifying as a "fair value hedge" is recognized immediately through profit or loss. At the same time, the carrying amount of the hedged item is adjusted for the corresponding gain or loss since the inception of the hedge, which also is recognized immediately through profit or loss.
The gain or loss from the change in fair value of a hedging instrument qualifying as a "cash flow hedge" is recognized directly in equity.
The gain or loss from the change in fair value of a derivative financial instrument which does not qualify as a hedging instrument is recognized immediately through profit or loss.
Provisions - Provisions are recognized when the Group has a present obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
Foreign currencies - Transactions in currencies other than the euro are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in profit or loss for the period. Non-monetary assets and liabilities recorded at the rates of exchange prevailing on the dates of the transactions are not translated on the balance sheet date.
The expenses are presented in the income statement "by nature". The choice of this method of presentation is based on the nature of the Company as both a holding and an operating company. The objective is to both optimise and simplify general accounting practices and all the relative compliance activity required by Italian tax regulations.
Revenue - Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to the Company and that the amount of revenue can be measured reliably.
Revenue arising from the sale of goods is recognized when the enterprise has transferred the significant risks and rewards of ownership. These are stated net of discounts, rebates and returns.
Revenues include income from royalties due on licensed out products and up-front payments received under licensing agreements.
Research and development expenses - All research costs are expensed in the income statement in the year in which they are incurred in accordance with IAS 38. IAS 38 also prescribes that development costs must be capitalized if technical and commercial feasibility of the asset for development or sale have been established. Regulatory and other uncertainties inherent in the development of new products are so high that the guidelines for capitalization under IAS 38 are not met so that development costs are expensed as incurred during the year.
Research and development costs include amounts due under collaboration agreements with third parties.
Non-reimbursable government grants - Government grants towards investment in plant are recognized as income over the periods necessary to match them with the related costs and are stated in the balance sheet as deferred income. Non-reimbursable government grants, including those for research, are booked to the income statement on an accrual basis within the item "other revenue".
Share based payment transactions – According to IFRS 2, stock option plans for employees constitute a part of the remuneration of the beneficiaries, the cost of which is given by the fair value of the options on the grant date. It is recognized through profit and loss at constant rates over the period between the grant and the vesting date, with the balancing entry recognized directly in equity.
Financial items – These include interest income and expense, foreign exchange gains and losses, both realized and unrealized, and differences arising from the valuation of securities.
Taxation - Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year and tax rates in force at the date of the balance sheet are applied.
Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the liability is settled or the asset realized. Deferred tax is charged or credited through profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Earnings per share - Earnings per share is the net income for the period attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by adjusting the average weighted number of outstanding shares for the effects of all the potential dilutive ordinary shares.
Revenue came to € 371,008 thousand in 2017 (€ 320,706 thousand in 2016) and was composed as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Net sales | 359,041 | 314,270 | 44,771 |
| Royalties and up-front payments | 575 | 889 | (314) |
| Revenue from services | 11,392 | 5,547 | 5,845 |
| Total revenue | 371,008 | 320,706 | 50,302 |
| € (thousands) | 2017 | 2016 | |||
|---|---|---|---|---|---|
| Italy | Abroad | Italy | Abroad | ||
| Pharmaceuticals | 185,242 | 132,065 | 183,561 | 90,357 | |
| Pharmaceutical chemicals | 2,765 | 37,944 | 2,708 | 37,144 | |
| Others | 389 | 636 | 325 | 175 | |
| Total revenue for net sales | 188,396 | 170,645 | 186,594 | 127,676 |
Revenue from pharmaceuticals in Italy was € 185,242 thousand, up € 1,681 thousand on the same period of the previous year. Prescription pharmaceuticals saw growth in sales of Urorec® and Cardicor®.
The review of operations may be consulted for further information on products.
Sales in the pharmaceutical sector were up € 41,708 thousand compared with the previous year, attributable in particular to sales of metoprolol based products made by the Company in the second half amounting to € 33.0 million and also to higher sales of lercanidipine and tribenoside. Sales abroad in the chemical sector increased by 2.2% compared with the year before, due in particular to sales of manidipine and other principal active ingredients.
Net sales revenues included € 126,327 thousand (€ 111,238 thousand in 2016) for sales of products to subsidiaries:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Recordati Ireland Ltd. | 90,134 | 80,513 | 9,621 |
| Innova Pharma S.p.A. | 20,959 | 20,873 | 86 |
| Laboratoires Bouchara Recordati S.a.s. | 296 | 144 | 152 |
| Casen Recordati S.L. | 413 | 104 | 309 |
| Jaba Recordati S.A. | 2,674 | 2,615 | 59 |
| Recordati Pharma GmbH | 3,257 | 2,901 | 356 |
| Recordati Ilaç | 539 | 497 | 42 |
| Orphan Europe S.a.r.l. | 1,437 | 2,959 | (1,522) |
| Opalia Pharma S.A. | 21 | 34 | (13) |
| Recordati Hellas Pharmaceuticals S.A. | 1,259 | 580 | 679 |
| Herbacos Recordati s.r.o. | 4,220 | 18 | 4,202 |
| Recordati Romania S.r.l. | 1,118 | 0 | 1,118 |
| Total | 126,327 | 111,238 | 15,089 |
All commercial transactions with subsidiaries took place under normal market conditions.
Revenues for royalties, up-front payments and services are composed as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Services and royalties to subsidiaries: | |||
| Orphan Europe Italy S.r.l. | 40 | 40 | 0 |
| Innova Pharma S.p.A. | 883 | 925 | (42) |
| Recordati Ireland Ltd. | 2,125 | 1,099 | 1,026 |
| Laboratoires Bouchara Recordati S.a.s. | 765 | 667 | 98 |
| Recordati Pharma GmbH | 327 | 226 | 101 |
| Casen Recordati S.L. | 347 | 267 | 80 |
| Jaba Recordati S.A. | 315 | 304 | 11 |
| Recordati Ilaç | 359 | 292 | 67 |
| Recordati Hellas Pharmaceuticals S.A. | 96 | 55 | 41 |
| Herbacos Recordati sro | 19 | 16 | 3 |
| Recordati Romania S.r.l. | 6 | 4 | 2 |
| Orphan Europe Sarl | 1,238 | 564 | 674 |
| Recordati Rare Diseases Inc. | 1,457 | 713 | 744 |
| Rusfic LLC | 52 | 26 | 26 |
| Recordati Polska Sp zoo | 22 | 14 | 8 |
| Italchimici S.p.A. | 3,619 | 635 | 2,984 |
| Total services and royalties to subsidiaries | |||
| 11,670 | 5,847 | 5,823 | |
| Services and royalties to third parties | |||
| Royalties and up-front payments | 297 | 589 | (292) |
| Total services and royalties to third parties | 297 | 589 | (292) |
| Total revenue from services and royalties | 11,967 | 6,436 | 5,531 |
The revenue from services to subsidiaries related principally to the "Group Service Agreement" for services performed on behalf of subsidiaries during the year.
Revenue from Recordati Ireland Ltd included valuable consideration of € 871 thousand, proportionate to the sales price, in relation to the successful conclusion of the acquisition of marketing rights for metoprolol in some European countries from AstraZeneca.
The increase compared with 2016 in the amounts charged to Orphan Europe Sarl and to Recordati Rare Diseases Inc. is attributable to R&D work carried out on behalf of those subsidiaries
The increase in income from Italchimici S.p.A. is in relation to the continuation on an annual basis of the service (started in June 2016) and above all to the increase in co-promotion activities (started in September 2016).
Proceeds from Laboratoires Bouchara Recordati S.a.s. include royalties amounting to € 278 thousand. Services and royalties to third parties, which amounted to € 297 thousand, related in particular to contractual charges made to partners for commissions and royalties on sales of Entact®.
Other revenue and income came to € 2,034 thousand in 2017, compared with € 2,406 thousand in 2016. It includes employees charges for the use of hired cars, other indemnities, non-recurring income, exceptional receivables and gains on the sale of non-current assets.
There were also the charges passed on to licensees for the "1.83% discount" and the "5% pay back" due on request from AIFA (Italian Medicines Agency) from the holder of the AIC (marketing authorisation).
We report the payment of a training grant amounting to € 74 thousand from Fondimpresa.
The item also included € 1 thousand for government grants for plant, € 55 thousand for income from property investments and € 17 thousand for charging for services provided to the subsidiary Fimei S.p.A..
Details of grants received for investments recognized in the income statement are given below for the last five years.
| € (thousands) | |
|---|---|
| 2013 | 15 |
| 2014 | 14 |
| 2015 | 12 |
| 2016 | 6 |
| 2017 | 1 |
| Total | 48 |
Income from property investments includes the rent of properties to the subsidiary Fimei S.p.A. amounting to € 8 thousand, the rent of premises at the Milan site to Innova Pharma S.p.A. amounting to € 12 thousand and the rent of part of the offices in via Marostica in Milan to Orphan Europe Italy S.r.l. for € 35 thousand.
These are composed as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Raw materials and goods: | |||
| from licensing-in agreements | 38,478 | 37,248 | 1,230 |
| from other | 52,284 | 41,130 | 11,154 |
| 90,762 | 78,378 | 12,384 | |
| Goods for resale | 1,123 | 1,280 | (157) |
| Packaging materials | 7,553 | 7,215 | 338 |
| Others and consumables | 5,967 | 5,658 | 309 |
| Total | 105,405 | 92,531 | 12,874 |
The change in purchases of raw materials, goods and other materials correlates with the changes in the sales mix for each product.
The increase in purchases from licensing-in agreements includes €1,429 thousand for the purchase of the available stock of Ceftibuten following the acquisition of the Isocef ® brand.
Other costs include purchases of metoprolol for € 8,719 thousand and those from Recordati Ireland Ltd for € 10,361 thousand, from Innova Pharma S.p.A. for € 5,038 thousand and from Casen Recordati S.L. for € 2,722 thousand.
Personnel costs were composed as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Wages and salaries | 55,926 | 54,864 | 1,062 |
| Social security costs | 17,542 | 17,075 | 467 |
| Salary resulting from stock option plans | 2,003 | 2,044 | (41) |
| Other costs | 4,325 | 6,910 | (2,585) |
| Total personnel costs | 79,796 | 80,893 | (1,097) |
The expense for stock option plans is a result of the application of IFRS 2, which requires the valuation of those options as a component of the wages of the beneficiaries and recognition of the cost determined in that manner in the income statement.
Other costs include the portions of the leaving indemnity charges for the year destined to pension funds in accordance with the legislation introduced by Law 296 of 27th December 2006.
Average labour force figures for the Company are as follows:
| 2017 | 2016 | Change 2017/2016 |
|
|---|---|---|---|
| Executives | 67 | 64 | 3 |
| Office workers | 570 | 565 | 5 |
| Manual workers | 371 | 355 | 16 |
| Total | 1,008 | 984 | 24 |
This is composed as follows:
Amortisation of intangible assets
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Patent rights and marketing authorizations | 5,074 | 417 | 4,657 |
| Distribution, license, trademark and similar | |||
| rights | 2,768 | 2,670 | 98 |
| Total | 7,842 | 3,087 | 4,755 |
The increase in the depreciation of intangible assets compared with the previous year includes € 4,493 thousand attributable to the acquisition of the rights on metoprolol.
| Total | 6,748 | 6,339 | 409 |
|---|---|---|---|
| Vehicles for internal transport | 23 | 24 | (1) |
| Electronic equipment | 466 | 542 | (76) |
| Office furnishings and machines | 48 | 41 | 7 |
| Miscellaneous laboratory equipment | 846 | 757 | 89 |
| Normal depreciation machinery | 1,189 | 1,050 | 139 |
| Accelerated depreciation machinery | 2,526 | 2,326 | 200 |
| General plant | 513 | 493 | 20 |
| Industrial buildings | 1,137 | 1,106 | 31 |
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
| Other operating expenses were composed as follows: | |||
|---|---|---|---|
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
| Pay back and discount of 1.83% | 8,374 | 7,046 | 1,328 |
| Meetings and scientific publications, market surveys | |||
| and expenses for medical and scientific | |||
| communications and advertising | 9,609 | 11,073 | (1,464) |
| Clinical and pharmacological trials and professional | |||
| advice | 5,549 | 3,250 | 2,299 |
| Commissions on sales paid to agents and logistics | |||
| commissions | 6,248 | 5,080 | 1,168 |
| Transport and storage | 2,266 | 2,292 | (26) |
| Utilities and similar (motor fuel, gas, water, etc.) | 4,458 | 5,054 | (596) |
| Destruction of industrial waste and cleaning | 1,842 | 1,876 | (34) |
| Innova co-promotion service | 1,976 | 2,619 | (643) |
| Italchimici co-promotion service | 262 | 0 | 262 |
| Maintenance | 3,923 | 3,825 | 98 |
| Insurance premiums | 673 | 681 | (8) |
| Directors' fees | 708 | 664 | 44 |
| Statutory auditors' fees | 124 | 126 | (2) |
| Sundry personnel costs | 3,290 | 3,059 | 231 |
| Legal, judiciary and notary expenses | 399 | 319 | 80 |
| Sundry services and expenses charged back to | |||
| subsidiaries | 5,823 | 3,569 | 2,254 |
| Postal and telecommunications expenses | 398 | 353 | 45 |
| External processing | 7,983 | 6,432 | 1,551 |
| Royalties payable | 3,115 | 66 | 3,049 |
| Rent of premises | 340 | 341 | (1) |
| Car hire expenses | 2,426 | 2,416 | 10 |
| Membership fees | 210 | 313 | (103) |
| Prior year expenses | 67 | 5 | 62 |
| Sundry taxation | 1,780 | 1,659 | 121 |
| Provisions for agent customer indemnities | 133 | 96 | 37 |
| Company and product acquisition costs | 522 | 2,272 | (1,750) |
| Service expenses and charges made by subsidiaries | 1,458 | 276 | 1,182 |
| Costs of the "Buzzi Hospital renovation" | 2,000 | 0 | 2,000 |
| Other operating expenses | 2,270 | 2,300 | (30) |
| Total | 78,226 | 67,062 | 11,164 |
The 1.83% payback and discount expense totalling € 8,374 thousand includes the contribution due to AIFA (Italian Medicines Agency), which replaces the 5% price reduction on some selected products. This procedure, already allowed and used in previous years, remained in force until September for Zanipril®, Coripren® and Atover® and came to an end following the transition to generic status of the main formulation of the lercanidipine+enalapril based products. The amount is calculated on sales of products made in 2016.
Commissions paid to agents included commissions to Recordati Rare Diseases for sales in the United States of America of pharmaceutical chemicals amounting to € 83 thousand.
Logistics commissions were up on 2016 due to charges relating to the metoprolol transitional service agreement.
Expenses for sundry services included the auditors' fees.
Details of that remuneration are provided in attachment 6 in compliance with Art. 149-duodecies of the Consob Issuers' Regulations.
Sundry services included, amongst other things, R&D costs incurred on behalf of Orphan Europe Sarl and Recordati Rare Diseases Inc. and then charged back to subsidiaries and also service expenses relating to metoprolol incurred during the transition period.
Expenses for the Innova Pharma S.p.A. and Italchimici S.p.A. co-promotion service related to services carried out by the sales network of those companies on behalf of the Parent Company.
Details are given in the relevant parts of the Remuneration Report (published in accordance with Art. 123-ter of the Consolidated Finance Law) of the following: the remuneration of directors, statutory auditors, general managers and other key management personnel; the shares held in the Company by those persons; the stock option rights granted to them.
No use was made of finance lease assets in 2017
External processing included work performed by Laboratoires Bouchara Recordati S.a.s. amounting to € 291 thousand.
The increase in royalties paid compared with 2016 relates directly to the sales of metoprolol.
The intercompany services include services received from the subsidiaries Herbacos Recordati s.r.o. (€ 228 thousand), Recordati A.G. (€ 255 thousand) and Recordati Polska Sp. z.o.o. (€ 974 thousand), mainly in relation to activities carried out by subsidies for metoprolol.
The item "sundry taxation" amounting to € 1,780 thousand (€ 1,659 thousand in 2016) relates to the following:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Contribution under Decree Law No. | |||
| 269/2003 | 242 | 262 | (20) |
| Government license tax | 632 | 525 | 107 |
| Municipal property and service taxes | 313 | 313 | 0 |
| Stamp duties and similar | 15 | 15 | 0 |
| Non-deductible taxes | 81 | 111 | (30) |
| Sundry taxes | 497 | 433 | 64 |
| Total | 1,780 | 1,659 | 121 |
In compliance with Decree Law 269 of 30th September 2003 converted into Law 326 of 24th November 2003, a contribution was paid in April amounting to 5% of the expenses incurred in the previous year for advertising activities, self certified by the Company within the legal time limits.
Taxes for government licenses are attributable to the maintenance and changes to registrations for ethical and self-medication products and to the registrations of new products. Sundry taxes include Tari (refuse tax), convention and congress registration taxes and Campoverde duties.
The costs for the project to renovate the Buzzi Hospital relate to the obligation undertaken by the Company (as reported in note 32) as a charitable initiative in memory of Ing. Giovanni Recordati. These will be concluded with the renovation of the paediatric inpatient and the outpatients area.
Details of changes in inventories are as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Raw materials, ancillary materials, | |||
| consumables and supplies | 4,138 | 159 | 3,979 |
| Intermediates and work-in-process | 2,304 | (1,463) | 3,767 |
| Finished products and goods | (5) | 2,699 | (2,704) |
| Total | 6,437 | 1,395 | 5,042 |
Income from investments came to € 160,050 thousand (€ 53,021 thousand in 2016) and related to subsidiaries.
This income consisted of dividends declared and distributed by Bouchara Recordati S.A.S. (€ 60,000 thousand) and Recordati Ireland Ltd. (€ 100,050 thousand).
Net financial income (expense) showed net expense of € 11,812 thousand in 2017 (€ 4,670 thousand in 2016). The main items are summarised in the table below.
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Foreign exchange gains (losses) | (3,966) | 12 | (3,978) |
| Loss on the derecognition of investments | (47) | 0 | (47) |
| Interest income from subsidiaries | 1,071 | 1,832 | (761) |
| Interest expense payable to subsidiaries | (2,605) | (823) | (1,782) |
| Interest expense on loans | (1,325) | (1,178) | (147) |
| Interest expense on bond debt | (4,290) | (2,923) | (1,367) |
| Net interest on short-term financial positions | 488 | (620) | 1,108 |
| Bank charges | (1,014) | (790) | (224) |
| Interest cost in respect of defined benefit plans (IAS 19) |
(124) | (180) | 56 |
| Total | (11,812) | (4,670) | (7,142) |
The balance on foreign exchange differences represented a loss of € 3,966 thousand in 2017, compared with a gain of € 12 thousand in 2016. More specifically, the loss for the year consisted of € 3,517 thousand on transactions concluded during the year and a loss of € 449 thousand resulting from the translation as at 31st December 2017 of assets and liabilities in foreign currency. Art. 2426, point 8-bis is therefore applicable to that income, by which, if a net gain arises from the foreign exchange translation performed at the end of the year, that amount is allocated to a special reserve that is not distributable until the gain is actually realized.
Interest income from subsidiaries is as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Italchimici S.p.A. | 141 | 53 | 88 |
| Recordati S.A. – Luxembourg |
0 | 73 | (73) |
| Recordati AG | 2 | 3 | (1) |
| Orphan Europe Sarl | 45 | 121 | (76) |
| Fic Médical S.a.r.l. | 1 | 1 | 0 |
| Recordati Polska Sp. z.o.o. | 7 | 9 | (2) |
| Casen Recordati S.L. | 578 | 758 | (180) |
| Rusfic LLC | 112 | 731 | (619) |
| Opalia Pharma S.A. | 141 | 83 | 58 |
| Recordati Rare Diseases - Mexico |
7 | 0 | 7 |
| Recordati Ireland Ltd. | 16 | 0 | 16 |
| Laboratoires Bouchara Recordati Sas | 1 | 0 | 1 |
| Recordati Romania S.r.l. | 20 | 0 | 20 |
| Total | 1,071 | 1,832 | (761) |
Interest income relates to loans granted to subsidiaries during the year (€ 755 thousand) and to the centralised cash pooling treasury system in operation at the Parent Company since 2007 on the basis of which monthly interest receivable and payable is recognised at market rates (€ 316 thousand).
The following short-term loans were outstanding as at 31st December: to Recordati Polska z.o.o. (PLN 1,500,000), to Opalia Pharma S.A. (TND 1,000,000), to Recordati Rumania S.r.l. (RON 3,000,000) and to Recordati Rare Diseases SA de C.V. (MXN 3,000,000); two long-term loans were outstanding to Casen Recordati S.L. (€ 15,000 thousand) and to Opalia Pharma S.A. (TND 3,000,000)
Interest expense paid to subsidiaries is as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Casen Recordati S.L. | 50 | 35 | 15 |
| Laboratoires Bouchara Recordati Sas | 14 | 25 | (11) |
| Innova Pharma S.p.A. | 44 | 47 | (3) |
| Recordati S.A. – Luxembourg |
0 | 3 | (3) |
| Jaba Recordati S.A. | 6 | 2 | 4 |
| Recordati Ireland Ltd. | 93 | 100 | (7) |
| Orphan Europe Spain S.L. | 6 | 5 | 1 |
| Orphan Europe Sarl | 60 | 4 | 56 |
| Recordati Pharma GmbH | 32 | 21 | 11 |
| Recordati Rare Diseases Inc. | 2,055 | 407 | 1,648 |
| Recordati AG | 0 | 2 | (2) |
| Recordati Hellas Pharmaceuticals S.A. | 5 | 0 | 5 |
| Orphan Europe Germany GmbH | 6 | 5 | 1 |
| Herbacos Recordati s.r.o. | 1 | 15 | (14) |
| Orphan Europe Italy S.r.l. |
15 | 14 | 1 |
| Orphan Europe Benelux BVBA | 2 | 1 | 1 |
| Bouchara Recordati s.a.s. | 48 | 69 | (21) |
| Orphan Europe Nordic A.B. | 2 | 1 | 1 |
| Orphan Europe Switzerland Gmbh | 0 | 1 | (1) |
| Rusfic LLC | 44 | 0 | 44 |
| Orphan Europe Middle East FZ LLC | 5 | 13 | (8) |
| Recordati Pharmaceuticals Ltd. | 54 | 0 | 54 |
| Recordati Orphan Drugs | 63 | 53 | 10 |
| Total | 2,605 | 823 | 1,782 |
Interest expense relates to loans granted by subsidiaries during the year (€ 2,156 thousand) and to the centralized cash pooling treasury system amounting to € 449 thousand.
As at 31st December a short-term loan of € 7,000 thousand was outstanding from the company Orphan Europe Middle East FZ LLC together with a long term loan from Recordati Rare Diseases Inc. amounting to USD 70,000,000.
Taxes recognized in the income statement are composed as follows:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Current taxation: | |||
| IRES (corporate income tax) | 24,489 | 19,257 | 5,232 |
| IRAP (regional tax on production) | 4,248 | 3,106 | 1,142 |
| Substitute tax for relief on goodwill | 12,640 | 0 | 12,640 |
| Provisions for risks resulting from tax | 22,143 | 0 | 22,143 |
| inspections | |||
| Total current taxation | 63,520 | 22,363 | 41,157 |
| Deferred taxation: | |||
| Movement in deferred tax assets/liabilities, net | (25,287) | (328) | (24,959) |
| Use of prior years deferred tax assets/liabilities | (1,039) | 1,309 | (2,348) |
| Deferred tax asset rate adjustment | 0 | 144 | (144) |
| Total deferred tax liabilities | (26,326) | 1,125 | (27,451) |
| Total | 37,194 | 23,488 | 13,706 |
Provisions for taxes were made on the basis of estimated taxable income.
The provision for deferred tax (assets)/liabilities of € 25,287 thousand is composed as follows:
| 2017 | 2016 | |||
|---|---|---|---|---|
| Temporary differences |
Tax Effect | Temporary differences |
Tax Effect | |
| DEFERRED TAX ASSETS | ||||
| - Relief on goodwill |
(78,997) | (22,198) | 0 | 0 |
| - Puretech valuation |
(7,992) | (2,317) | 0 | 0 |
| - Provisions |
(2,246) | (539) | (749) | (180) |
| - Costs relating to future years |
(756) | (181) | (619) | (148) |
| - Write-down of inventories |
(216) | (52) | 0 | 0 |
| TOTAL | (90,207) | (25,287) | (1,368) | (328) |
| DEFERRED TAX ASSETS/LIABILITIES, | ||||
| NET | (25,287) | (328) |
The use of deferred tax assets was positive by € 1,039 thousand and related to provisions of € 144 thousand, costs relating to future years of € 149 thousand and release of the provision for deferred taxes in relation to the revaluations made in prior years amounting to € 1,332 thousand.
The reconciliation between the current tax rate for income tax levied on the Company and the actual tax rate incurred is as follows.
| 2017 | 2016 | |
|---|---|---|
| % | % | |
| Tax rate applicable for IRES (corporate income tax) | 24 | 27,5 |
| Dividends from subsidiaries | (14,6) | (10,4) |
| Contributions to congresses | 0,2 | 0,4 |
| Economic Growth legislation (ACE – allowance for |
0 | (0,5) |
| corporate equity) | ||
| Effect of reversal of investment write-down | 0 | (2,2) |
| Other differences, net | 0 | 0,5 |
| Tax rate applicable for IRES (corporate income tax) | 9,6 | 15,3 |
| IRAP (regional tax on production) | 1,7 | 2,3 |
| Provisions for risks resulting from tax inspections | 8,9 | 0 |
| Relief on goodwill | (3,8) | 0 |
| Adjustment of deferred taxes on equity investments | (1,5) | 0 |
| Tax rate on pre-tax income | 14,9 | 17,6 |
IRAP (regional tax on production) as a percentage of pre-tax profit was 1.7% because the tax is calculated on a different tax basis which includes interest and some extraordinary items.
The Company took advantage of the option granted by the tax legislation to obtain tax relief on the mismatches between the higher book values for goodwill resulting from extraordinary operations and the corresponding amounts recognised for tax purposes. The legislation allows the payment of a substitute IRES and IRAP tax at a rate of 16% and the subsequent deductibility of the amounts subject to relief in the amount of one fifth for each year starting from the second year following that in which the substitute tax is paid.
Exercising the tax relief option resulted in a total payment of € 12.6 million for the substitute tax and the recognition of deferred tax assets on the future tax benefits amounting to € 22.2 million.
Provisions for risks resulting from tax inspections amount to € 22.1 million and they relate to risks resulting from inspections into two Group companies which began in 2015 and are still in progress (see note No. 40).
Property plant and equipment, net of accumulated depreciation, as at 31st December 2017 and 2016 amounted to € 46,961 thousand and € 44.851 thousand respectively. Changes in this item are given below.
| € (thousands) | Land and buildings |
Plant and machinery |
Other fixtures |
Construction in progress |
Total property, plant and equipment |
|---|---|---|---|---|---|
| Cost of acquisition | |||||
| Balance as at 31.12.16 | 38,387 | 155,491 | 35,854 | 6,549 | 236,281 |
| Additions | 645 | 1,890 | 543 | 5,877 | 8,955 |
| Disposals | (84) | (678) | (716) | 0 | (1,478) |
| Reclassifications | 528 | 4,103 | 1,361 | (6,001) | (9) |
| Balance as at 31.12.17 |
39,476 | 160,806 | 37,042 | 6,425 | 243,749 |
| Accumulated depreciation | |||||
| Balance as at 31.12.16 | 28,973 | 131,671 | 30,786 | 0 | 191,430 |
| Depreciation | 1,137 | 4,228 | 1,383 | 0 | 6,748 |
| Disposals | (64) | (612) | (714) | 0 | (1,390) |
| Balance as at 31.12.17 | 30,046 | 135,287 | 31,455 | 0 | 196,788 |
| Carrying amount as at 31st December 2017 |
9,430 | 25,519 | 5,587 | 6,425 | 46,961 |
| as at 31st December 2016 | 9,414 | 23,820 | 5,068 | 6,549 | 44,851 |
Additions in 2017 amounted to € 8,955 thousand and related to investments of € 4,395 thousand in the Milan plant and headquarters and to work done on the Campoverde di Aprilia plant amounting to € 4,560 thousand.
Depreciation for the year amounted to € 6,748 thousand and was calculated on all depreciable assets using rates which are held to be representative of the estimated useful life of the assets.
Intangible assets, net of accumulated amortization, as at 31st December 2017 and 2016 December amounted to € 239,515 thousand and € 25,517 thousand respectively. Changes in this item are given below.
| Patent rights and marketing authorizations |
Distribution, license, trademark and similar rights |
construction and advances |
Total intangible assets |
|
|---|---|---|---|---|
| 30,575 | 41,468 | 13,234 | 2,099 | 87,376 |
| 181,705 | 17 | 0 | 40,109 | 221,831 |
| 0 | 752 | 0 | (743) | 9 |
| 212,280 | 42,237 | 13,234 | 41,465 | 309,216 |
| 26,964 | 21,661 | 13,234 | 0 | 61,859 |
| 5,074 | 2,768 | 0 | 0 | 7,842 |
| 32,038 | 24,429 | 13,234 | 0 | 69,701 |
| 239,515 | ||||
| 3,611 | 19,807 | 0 | 2,099 | 25,517 |
| 180,242 | 17,808 | 0 | Other Assets under 41,465 |
The additions to intangible assets amounting to € 221,831 thousand relate mainly to the acquisition of the rights on metoprolol from AstraZeneca, and of the Transipeg®, Transipeglib® and Colopeg® brands for the French market from Bayer Consumer Health.
All intangible assets have a defined useful life and are amortized over a period not exceeding 20 years.
Investments amounted to € 774,357 thousand as at 31st December 2017, up € 153,213 thousand compared with 2016, as reported in the table in Attachment 1. The percentage of ownership and the number of shares or quotas possessed are reported in Attachment 2.
A comparison between the carrying amount of investments in subsidiaries and their valuation using the equity method, in accordance with Art. 2426 of the Italian Civil Code, is reported in Attachment 3.
IAS 27 - Separate financial statements - requires recognition of investments in subsidiaries according to the cost method or, as an alternative, using the fair value in accordance with IAS 39. Recordati S.p.A. has adopted the cost criterion and therefore, where there are indications that part or all of the cost cannot be recovered, the carrying amount must be reduced to the relative recoverable amount, in compliance with IAS 36 (Impairment of assets). Where that impairment subsequently reverses or reduces, the carrying amount is increased to the amount of the new estimate of the recoverable amount which, however, cannot exceed the original cost. For the calculation of reversals for investments in companies that are not listed and that is where no reliable market value (fair value less costs to sell) can be determined, the recoverable amount has been defined as the value in use, intended as the present value of the estimated cash flows from it based on the expected results of the investments and the estimated amount of a hypothetical "ultimate disposal". The expected results forecast in the business plans of each investment were taken into consideration in the calculation of the value in use, increased by their "terminal value" appropriately adjusted to take account of risks and uncertainties intrinsic to the assumptions on which the plans were based. Those results and the "terminal value" were discounted to present values by applying the current cost of capital of the companies in compliance with the method recommended in IAS 36.
Furthermore, we report that an impairment test was carried out at consolidated level on the Group as the unit both to verify the recoverability of the equity investments recognised in the separate financial statements of Recordati Industria Chimica e Farmaceutica S.p.A. and also to verify the recoverability of the goodwill arising in the consolidated financial statements of the Recordati group. It is therefore considered that the impairment test carried out at consolidated level also provides indications concerning possible impairment at the level of the separate financial statements and therefore for the purposes of testing the carrying amounts of equity investments for impairment.
According to IFRS 2, stock option plans for the employees of subsidiaries constitute an increase in the value of the relative investments. That increase in value consists of the fair value of the options on the grant date and it is recognised as an increase in the investments at constant rates over the period between the grant and the vesting date, with the balancing entry recognized directly in equity. The cost of the stock options granted to employees of foreign companies was recognised as an increase in the value of the relative investments amounting to € 1,958 thousand.
A detailed summary of both directly and indirectly controlled subsidiaries is given in Attachment 4 with the sales revenue and net income for each company.
All the investments reported regard share capital with voting rights.
The relative part of the consolidated report may be consulted for further information on investments.
The company Tecnofarmaci S.c.p.A. was liquidated during the year with the consequent receipt of the proceeds more or less in line with the book value and it was decided to cease being shareholder of the Consortium C4T S.c.a r.l..
Non-current loans and receivables as at 31st December 2017 amounted to € 10,105 thousand (€ 16,396 thousand as at 31st December 2016) and related almost entirely to long-term loans granted to Casen Recordati S.L. (€ 9,000 thousand due in 2020) and to Opalia Pharma S.A- (TND 3,000,000 equivalent to € 1,009 thousand due in 2019).
These loans were granted under normal market conditions.
These amounted to € 27,233 thousand as at 31st December 2017 (€ 3,722 thousand as at 31st December 2016), an increase of € 23,511 thousand.
The main deferred tax assets and changes in them are analyzed in the two tables below:
| Balance as at 31st December | 27,233 | 3,722 |
|---|---|---|
| Adjustment for change in the tax rate | 0 | (303) |
| Uses | (3,108) | (1,309) |
| Increases | 26,619 | 1,645 |
| Balance as at 1st January | 3,722 | 3,689 |
| € (thousands) | 2017 | 2016 |
| € (thousands) | Balance as at 1st January |
Provision | Use | Balance as at 31/12 |
|---|---|---|---|---|
| Relief on goodwill | 0 | 22,198 | 0 | 22,198 |
| Valuation of derivatives | ||||
| instruments | 2,343 | 0 | (490) | 1,853 |
| Provisions for risks | 2,247 | 539 | (144) | 2,642 |
| Write-down of inventories | 54 | 52 | 0 | 106 |
| IAS Valuation of investment | (1,332) | 1,332 | 0 | 0 |
| Valuation of former Lux |
||||
| investment | 0 | 2,317 | (2,347) | (30) |
| Other | 410 | 181 | (127) | 464 |
| Total | 3,722 | 26,619 | (3,108) | 27,233 |
During the year the Company took advantage of the option granted by the tax legislation to obtain tax relief on the mismatches between the higher book values for goodwill resulting from extraordinary operations and the corresponding amounts recognised for tax purposes. The legislation allows the payment of a substitute IRES (corporate income tax) and IRAP (regional production tax) tax at a rate of 16% and the subsequent deductibility of the amounts subject to relief in the amount of one fifth for each year starting from the second year following that in which the substitute tax is paid.
The amounts on which tax relief is obtained relate to goodwill calculated according to tax rules arising from the acquisitions of Italchimici S.p.A. and Pro Farma AG (now Recordati AG), both carried out in 2016. The benefit arising from the future tax deductibility of the amounts subject to tax relief resulted in the recognition of deferred tax assets amounting to € 22.2 million.
The provisions for prior year taxes amount to € 22.1 million and relate to the risk resulting from tax inspections into two Group companies which began in 2015 and are still in progress (see note No. 40).
Inventories as at 31st December 2017 and 2016 amounted to € 61,382 thousand and € 54,944 thousand, as shown in the following table:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Raw materials, ancillary materials, | |||
| consumables and supplies | 15,628 | 11,490 | 4,138 |
| Intermediates and work-in-process | 14,397 | 12,093 | 2,304 |
| Finished goods | 30,097 | 31,361 | (1,264) |
| AstraZeneca metoprolol stock | 1,260 | 0 | 1,260 |
| Total | 61,382 | 54,944 | 6,438 |
Inventories increased by €6.4 million compared with the previous year as follows: €2.5 million relating to the acquisition of the Isocef® brand; € 1.3 million in relation to the acquisition of metoprolol; € 1.2 million for an increase in the security stocks of some active ingredient products at the Campoverde di Aprilia plant in order to meet expected future requirements.
Trade receivables as at 31st December 2017 and 2016 amounted to € 82,250 thousand and € 53,101 thousand respectively as shown below:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Trade receivables from subsidiaries | 37,004 | 18,820 | 18,184 |
| Trade receivables from others: | |||
| Italy | 28,210 | 28,460 | (250) |
| Abroad | 18,145 | 7,014 | 11,131 |
| 83,359 | 54,294 | 29,065 | |
| less: | |||
| Allowance for doubtful accounts | (1,109) | (1,193) | 84 |
| Total trade receivables | 82,250 | 53,101 | 29,149 |
€ 8,921 thousand of the increase in foreign trade receivables is attributable to sales of metoprolol. Exposure calculated on receivables from others, excluding metoprolol during the transition period, stood at 61 days outstanding as at 31st December 2017, in line with a year earlier.
The adjustment of receivables in non-euro currencies resulted in the recognition of negative exchange rate differences of € 70 thousand. The receivables are recognized inclusive of those adjustments.
Trade receivables from Group companies arose from the supply of goods and services and are composed as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Innova Pharma S.p.A. | 4,390 | 4,293 | 97 |
| Recordati Ireland Ltd. | 18,029 | 9,110 | 8,919 |
| Laboratoires Bouchara Recordati S.a.s. |
698 | 422 | 276 |
| Jaba Recordati S.A. | 1,069 | 913 | 156 |
| Recordati Pharma GmbH | 474 | 834 | (360) |
| Casen Recordati S.L. | 231 | 162 | 69 |
| Recordati Ilaç | 291 | 224 | 67 |
| Orphan Europe Italy S.r.l. | 23 | 23 | 0 |
| Recordati Hellas Pharmaceuticals S.A | 597 | 80 | 517 |
| Herbacos Recordati S.A. |
2,818 | 10 | 2,808 |
| Orphan Europe Sarl | 1,821 | 2,004 | (183) |
| Recordati Romania S.r.l. | 623 | 3 | 620 |
| Recordati Polska S.p. z.o.o. | 10 | 9 | 1 |
| Recordati Rare Diseases Inc. | 1,497 | 0 | 1,497 |
| Opalia Pharma S.A. | 263 | 50 | 213 |
| Rusfic LLC | 60 | 30 | 30 |
| Italchimici S.p.A. | 4,068 | 653 | 3,415 |
| Bouchara Recordati S.a.s. | 42 | 0 | 42 |
| Total | 37,004 | 18,820 | 18,184 |
The changes compared to the previous year are considered transitory and are related to automated netting procedures for outstanding intercompany positions, by which intercompany items are automatically offset against each other each month and the relative balances settled.
Changes in the allowance for doubtful accounts are as follows:
| € (thousands) | 2017 | 2016 |
|---|---|---|
| Balance as at 1st January | 1,193 | 1,229 |
| Utilization for losses on receivables | (84) | (138) |
| Addition for the year | 0 | 102 |
| Balance as at 31st December | 1,109 | 1,193 |
The allowance is considered appropriate in relation to potential risks of insolvency.
The composition of the principal receivables in foreign currency is as follows:
| 31.12.2017 | 31.12.2016 | |||
|---|---|---|---|---|
| Currency | €(000) | Currency | €(000) | |
| Receivables in US\$ | 15,513,165 | 13,072 | 4,810,374 | 4,466 |
Other receivables amounted to € 8,556 thousand (€ 10,556 thousand as at 31st December 2016). The composition is given in the table below.
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Tax income | 2,175 | 1,426 | 749 |
| From parent companies | 0 | 19 | (19) |
| From subsidiaries | 541 | 744 | (203) |
| Advances to employees and agents | 392 | 6,556 | (6,164) |
| Others | 5,448 | 1,811 | 3,637 |
| Total other receivables | 8,556 | 10,556 | (2,000) |
Tax receivables as at 31st December 2017 amounted to € 2,175 thousand (€ 1,426 thousand in 2016). They were composed as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Refund requested from tax authorities | 43 | 43 | 0 |
| VAT | 1,823 | 1,326 | 497 |
| Receivables for foreign VAT tax authorities | 51 | 48 | 3 |
| Tax receivables pursuant to Recordati S.A. | 258 | 0 | 258 |
| Sundry items | 0 | 9 | (9) |
| Total tax receivables | 2,175 | 1,426 | 749 |
The VAT credit consisted of the balance for December 2017 and the VAT refund applied for on 18th October 2007 in relation to VAT on motor vehicles.
Receivables from subsidiaries stood at € 541 thousand (€ 744 thousand in 2016) and related to VAT transferred under Group procedures from the company Innova Pharma S.p.A.
Advances to employees and agents as at 31st December 2017 and 2016 came to € 392 thousand and € 6,556 thousand respectively. They consisted of advances to employees, expense accounts for medical representatives and loans granted to employees who exercised stock option rights amounting to € 216 thousand for the purchase of 37,500 shares resulting from the options granted on 9th February 2011 and 8th May 2012.
Receivables from others amounted to € 5,448 thousand as at 31st December 2017 (€1,811 thousand as at 31st December 2016) and they included € 4,009 thousand for the provision made for sales of metoprolol in December as well as receivables from suppliers for advances and outstanding refunds.
Other current assets amounted to € 652 thousand (€ 539 thousand as at 31st December 2016) and related mainly to prepaid expenses. These were advance instalments on periodic services covering two financial years.
These amounted to € 3,825 thousand (€ 12,497 thousand as at 31st December 2016).
The market value (fair value) as at 31st December 2017 of the currency swaps entered into by the Company to hedge a bond issued for \$ 75 million issued on 30th September 2014 totalled € 3,752 thousand. That value represents the potential benefit resulting from a lower value in euro 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 € 2,595 thousand, while that of the instrument to hedge the \$ 25 million tranche of the loan granted by Unicredit was positive by € 1,157 thousand.
The interest rate swaps to hedge medium to long-term loans measured at fair value as at 31st December 2017 gave rise to an asset of € 73 thousand. The fair value measurement relates to interest rate swaps entered into to hedge interest rates on loans granted by Intesa Sanpaolo (€ 33 thousand) and UBI Banca (€ 40 thousand).
Other short-term receivables all consist of amounts due from subsidiaries as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Casen Recordati S.L. | 6,018 | 6,025 | (7) |
| Orphan Europe Sarl | 27 | 8,974 | (8,947) |
| Recordati S.A. – Luxembourg |
0 | 70,225 | (70,225) |
| FIC Médical S.a.s. | 88 | 1 | 87 |
| Recordati Ireland Ltd. | 37,232 | 1 | 37,231 |
| Recordati Polska sp. z.o.o. | 362 | 342 | 20 |
| Rusfic LLC | 711 | 4,050 | (3,339) |
| Opalia Pharma S.A. | 343 | 417 | (74) |
| Recordati Romania S.r.l. | 655 | 0 | 655 |
| Recordati Rare Diseases SA de C.V. | 134 | 0 | 134 |
| Italchimici S.p.A. | 22,003 | 28,888 | (6,885) |
| Pro Farma AG | 0 | 933 | (933) |
| Total | 67,573 | 119,856 | (52,283) |
These receivables are attributable to a cash pooling treasury system in operation at the Parent Company and to loans granted to Casen Recordati S.L., Recordati Polska sp. z.o.o., Opalia Pharma S.A., Recordati Rumania S.r.l. and Recordati Rare Diseases SA de C.V.. Interest is paid on these receivables at market rates.
These are composed as shown in the following table.
| Total | 206,538 | 86,815 | 119,723 |
|---|---|---|---|
| Cash on hand | 3 | 3 | 0 |
| Deposits in bank current accounts | 206,535 | 86,812 | 119,723 |
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
Cash and cash equivalents as at 31st December 2017, consisted of current accounts and short-term bank deposits.
A summary of the changes in the shareholders' equity accounts is reported in the relative statement. Following the entry into force of Legislative Decree 6/2003, which amended the Italian Civil Code, the table contained in Attachment 5 was introduced, which gives the composition of reserves on the basis of availability for use and distribution.
Share capital - The share capital as at 31st December 2017 amounting to € 26,140,644, is fully paid up and consists of 209,125,156 ordinary shares with a par value of € 0.125 each. It remained unchanged over the course of 2017.
As at 31st December 2017 the Company had two stock option plans in place in favour of certain Group employees, the 2010-2013 plan with options granted on 9th February 2011, 8th May 2012, 17th April 2013 and 30th October 2013 and the 2014-2018 plan with options granted on 29th July 2014 and 13th April 2016. The exercise 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 over a period of five years and options not exercised within the eighth year of the date of grant expire. Options cannot be exercised if the employee leaves the Company before they are vested.
| Strike price (€) |
Options outstanding as |
Options granted |
Options exercised |
Options cancelled and |
Options outstanding |
|
|---|---|---|---|---|---|---|
| at 1.1.2017 | during 2017 |
during 2017 | expired | as at 31.12.2017 |
||
| Grant date | ||||||
| 9th February 2011 | 6.7505 | 597,500 | - | (426,000) | - | 171,500 |
| 8th May 2012 | 5.3070 | 1,425,000 | - | (858,500) | - | 566,500 |
| 17th April 2013 | 7.1600 | 120,000 | - | (72,500) | (10,000) | 37,500 |
| 30th October 2013 | 8.9300 | 155,000 | - | (90,000) | - | 65,000 |
| 29th July 2014 | 12.2900 | 4,530,000 | - | (1,365,000) | (174,000) | 2,991,000 |
| 13th April 2016 | 21.9300 | 3,973,000 | - | (216,000) | (234,000) | 3,523,000 |
| Total | 10,800,500 | - | (3,028,000) | (418,000) | 7,354,500 |
Details of stock options outstanding at 31st December 2017 are given in the table below:
Additional paid-in capital as at 31st December 2017 amounted to € 83,718 thousand and was unchanged compared with 31st December 2016.
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.
As at 31st December 2017 this amounted to € 17,029 thousand, consisting of 863,262 treasury shares held in portfolio.
The change during the year was € 59,732 thousand and was due to the transfer of 3,028,000 shares for € 59,732 thousand for use in the 2010-2013 and 2014-2018 stock option plans.
This amounted to € 5,228 thousand and was unchanged compared with 31st December 2016, because the limit set by Art. 2430 of the Italian Civil Code had been reached.
Other reserves totalled € 218,803 thousand. Details are given in the table below.
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Gain on merger | 29,813 | 0 | 29,813 |
| Extraordinary reserve | 57,663 | 121,403 | (63,740) |
| Reserve under Art. 13 Par. 6 of Legislative Decree 124/1993 |
99 | 99 | 0 |
| Extraordinary VAT concession reserve | 517 | 517 | 0 |
| Research and investment grants | 17,191 | 17,191 | 0 |
| Non-distributable reserve for investments in | |||
| southern Italy | 3,632 | 3,632 | 0 |
| International accounting standards reserve | 115,754 | 102,509 | 13,245 |
| Total | 224,669 | 245,351 | (20,682) |
| Fair value derivative instruments | (5,866) | (7,419) | 1,553 |
| Total other reserves | 218,803 | 237,932 | (19,129) |
• Gain on merger
Following the merger by acquisition of the former subsidiary, Recordati S.A. Chemical and Pharmaceutical Company into Recordati S.p.A., as already reported previously, a merger gain was recognised in "other reserves" within equity, amounting to € 29,813 thousand.
• Extraordinary reserve
This amounted as at 31st December 2017 and 31st December 2016 to € 57,663 thousand and € 121,403 thousand respectively. The overall decrease of € 63,740 thousand arose from the following operations:
These amount to € 17,191 thousand and are unchanged compared with the previous year. The grants are 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 mainly fully depreciated.
This amounted to € 115,754 thousand (€ 102,509 thousand as at 31st December 2016) and is composed as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Reversal of fixed asset revaluations | 40,479 | 40,479 | 0 |
| Revaluation of investments | 43,054 | 43,054 | 0 |
| Inventories | 463 | 463 | 0 |
| Personnel leaving indemnities | (754) | (680) | (74) |
| Stock options | 14,463 | 12,460 | 2,003 |
| Adjustment to investments for stock options | 8,691 | 6,733 | 1,958 |
| Reserve to adjust entries for the merged company |
765 | 0 | 765 |
| Financial instrument adjustment reserve | 8,593 | 0 | 8,593 |
| Total | 115,754 | 102,509 | 13,245 |
Changes that occurred in the items in 2017 included the following:
o Personnel leaving indemnities
the valuation of the personnel leaving indemnities provision in accordance with IAS 19 generated a reserve as at 31st December 2017 amounting to € 754 thousand;
o Stock options
the amount of € 14,463 thousand relates to the personnel expense for stock options issued and granted after 7th November 2002 and not yet exercised, valued in accordance with IFRS 2. The amount of € 8,691 thousand relates to the cost for the stock options of employees of subsidiaries, the valuation of which, in agreement with IFRS 2, was recognised as an increase in the value of the investments in the companies in which those employees work;
That reserve, amounting to € 765 thousand, originated as a result of the following two transactions:
That reserve, amounting to € 8,593 thousand, is a result almost entirely of the adjustment as at the value date, net of tax, of the value of the investment in PureTech Health p.l.c., recognised following the merger by acquisition already mentioned of Recordati S.A. Chemical and Pharmaceutical Company. To a residual extent the item includes the adjustment to the value of the investments in Codexis (€ 14 thousand) and Fluidigm (€ 2 thousand).
• Reserve for fair value movements in derivative instruments
In accordance with the provisions of IAS 39, 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 31st December 2017, net of tax, was negative by € 5,866 thousand.
• Revaluation reserve
This amounted to € 2.602 thousand (unchanged compared with 2016) and consisted of revaluation balances within the meaning of Law 413/1991.
Untaxed (taxation suspended) reserves as at 31st December 2017 amounted to € 87,826 thousand and consisted of € 15,964 thousand of reserves for grants received net of the taxed portion, € 517 thousand of the VAT concession reserve and € 99 thousand of the reserve formed pursuant to the Law regulating pension funds and € 71,246 thousand of the revaluation reserves net of the substitute taxes. Revaluation reserves amounting to € 68,644 thousand were eliminated in compliance with international accounting standards and the non-taxability was transferred to the additional paid-in capital reserve. No deferred tax provisions were recognized in respect of those reserves, because, in accordance with IAS 12, these deferred tax provisions are recognized in the year in which the distribution is declared.
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Bond subscribed in dollars by the investor Pricoa Capital Group (Prudential) |
62,536 | 71,151 | (8,615) |
| Loan granted by Unicredit at a floating interest rate repayable in semi-annual instalments by 2020 |
25,000 | 35,000 | (10,000) |
| Loan granted by Ing Bank at a floating interest rate repayable in semi-annual instalments by 2020 |
18,750 | 26,250 | (7,500) |
| Loan granted by BNL at a floating interest rate repayable in semi annual instalments by 2018 |
12,500 | 25,000 | (12,500) |
| Loan granted by Centrobanca (now UBI Banca) at a floating interest rate repayable in semi-annual instalments by 2022 |
34,091 | 40,909 | (6,818) |
| Loan granted by BNL at a floating interest rate repayable in six monthly instalments by 2020 |
25,000 | 25,000 | 0 |
| Loan granted by Intesa Sanpaolo at a floating interest rate repayable in semi-annual instalments by 2021 |
25,000 | 25,000 | 0 |
| Loan granted by Recordati Rare Diseases at a fixed interest rate repayable in semi-annual instalments by 2025 |
58,367 | 66,407 | (8,040) |
| Bond subscribed in euro by the investor Pricoa Capital Group (Prudential) |
125,000 | 0 | 125,000 |
| Loan granted by Mediobanca at a floating interest rate repayable in annual instalments by 2024 |
75,000 | 0 | 75,000 |
| Loan granted by UBI Banca at a floating interest rate repayable in a single instalment in 2022 |
50,000 | 0 | 50,000 |
| Loan granted by Unicredit at a floating interest rate repayable in a single instalment in 2021 |
50,000 | 0 | 50,000 |
| Loan granted by Intesa Sanpaolo at a floating interest rate repayable in semi-annual instalments by 2025 |
75,000 | 0 | 75,000 |
| Loan granted by Banca Passadore at a floating interest rate repayable in annual instalments by 2022 |
15,000 | 0 | 15,000 |
| Total amortized cost of loans | 651,244 | 314,717 | 336,527 |
| Portion due within one year | (47,224) | (36,818) | (10,406) |
| Portion due after one year | 604,020 | 277,899 | 326,121 |
| Expenses relating to loans | (1,308) | (1,187) | (121) |
| Total | 602,712 | 276,712 | 326,000 |
As at 31st December 2017 medium to long-term loans, inclusive also of the current portions (see note 34), amounted to € 649,936 thousand. The net increase of € 336,406 thousand compared with 31st December 2016 was the result of new loans for € 389,518 thousand, repayment instalments for the period amounting to € 36,457 thousand and the effect of foreign currency translations (a decrease of € 16,655 thousand).
The repayment schedules for the portions of the medium and long-term loans due after 31st December 2018 are as follows:
| € (thousands) | |
|---|---|
| 2019 | 66,366 |
| 2020 | 62,300 |
| 2021 | 91,235 |
| 2022 | 90,331 |
| 2023 | 32,091 |
| 2024 and after Total |
260,389 602,712 |
On 30th September 2014 the Company subscribed a bond for a total of \$ €75 million, divided into two tranches: \$ €50 million at a fixed rate of 4.28% per annum, repayable semi-annually from 30 March 2022 and maturing on 30th September 2026; and \$ €25 million at a fixed rate of 4.51% per annum, repayable semi-annually from 30th March 2023 and maturing on 30th September 2029.
The translation of the debt as at 31st December 2017 determined a reduction in the liability of € 8,614 thousand compared with 31st December 2016, due to the depreciation of the United States dollar against the euro.
The loan was hedged at the same time by two currency rate swap transactions, which involved transformation of the debt into a total of € 56.0 million, at a fixed interest rate of 2.895% per annum for the tranche maturing in 12 years and at a fixed interest rate of 3.15% per annum for that maturing in 15 years.
The measurement of the hedging instruments at fair value as at 31st December 2017, was positive on aggregate by € 3,752 thousand and was recognized directly as an increase in equity and an increase in the asset item "Fair value of hedging derivatives – cash flow hedges" (see note 22).
The bond loan is subject to covenants and failure to comply with them may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
In May 2015, the Company signed a loan agreement with Unicredit for € 50 million, granted net of fees and commissions of € 0.4 million. The main terms and conditions of the loan are a floating interest rate equal to the six-month Euribor plus a spread of 80 basis points and a life of five years with semi-annual repayments of the principal from November 2015 and until May 2020. The remaining debt as at 31st December 2017 was € 25 million. The loan is partially hedged by an interest rate swap (a cash flow hedge), with which a portion of the debt is transformed to a fixed interest rate of 1,734%. The measurement at fair value of the derivative instrument as at 31st December for the hedge of € 16.7 million was negative by € 242 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan contract with Unicredit contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
In 2015 the Company renegotiated a loan agreement with ING Bank for € 30.0 million, originally signed by the Company on 8th January 2014 with a change made solely to the interest rate.
The new terms and conditions are for a floating interest rate equal to the six-month Euribor plus a spread of 85 basis points (compared with 190 basis points under the previous agreement), while the semi-annual repayments of the principal from July 2016 and until January 2020 remain unchanged. The loan was fully hedged by an interest rate swap (a cash flow hedge), which transformed the whole debt to a fixed interest rate of 1,913% after the renegotiation described above. The measurement at fair value of the derivative instrument as at 31st December 2017 gave a negative result of € 367 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan agreement with ING Bank contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 30th September 2013, the Company signed a loan agreement with Banca Nazionale del Lavoro for € 50.0 million, disbursed net of expenses and commissions of € 0.6 million. The main terms and conditions were a floating interest rate equal to the six-month Euribor plus a spread (which, following a renegotiation between the parties, was reduced from 200 basis points to 70 basis points from 1st April 2015 and to 50 basis points from 29th March 2017) and a life of 5 years with semi-annual repayments of the principal by September 2018 commencing from March 2015. The loan was fully hedged with an interest rate swap (a cash flow hedge), which transformed the whole debt to a fixed interest rate which now stands at 1.4925% following the recent renegotiation. The measurement at fair value of the derivative instrument as at 31st December 2017 gave a negative result of € 119 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan agreement with Banca Nazionale del Lavoro contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 30th November 2010, the Company signed a loan contract with Centrobanca (now UBI Banca), for a three-year programme of investments in Research & Development. The loan, which Centrobanca (now UBI Banca) funded through a loan from the European Investment Bank, amounted to € 75.0 million of which € 30.0 million, net of expenses of € 0.3 million, was disbursed in 2010 and € 45.0 million in the first quarter of 2011. The main terms and conditions were a floating interest rate and a life of 12 years with
repayment in semi-annual instalments of the principal from June 2012 and through December 2022. The remaining debt as at 31st December 2017 was € 34 million. In June 2012 the loan was hedged by an interest rate swap (a cash flow hedge), which transformed the whole debt to an interest rate of 2.575%.
The measurement at fair value of the derivative instrument as at 31st December 2017 gave a negative result of € 1,331 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan agreement with Centrobanca (now UBI Banca) contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 23rd December 2016, the Company signed a loan agreement with Banca Nazionale del Lavoro for € 25.0 million, disbursed net of fees and commissions of € 0.1 million. The main terms and conditions were a floating interest rate equal to the 6-month Euribor plus a spread of 40 basis points and a life of 4 years, with semi-annual repayments of the principal by September 2020 commencing from March 2019. The loan was fully hedged at the same time with an interest rate swap (a cash flow hedge), which transformed the whole debt to a fixed interest rate of 0.41%. The measurement at fair value of the derivative instrument as at 31st December 2017 gave a negative result of € 82 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan agreement with Banca Nazionale del Lavoro contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 23rd December 2016, the Company signed a loan agreement with Intesa Sanpaolo for € 25.0 million, disbursed net of fees and commissions of € 0.1 million. The main terms and conditions are a floating interest rate equal to the 6-month Euribor plus a spread of 60 basis points and a life of 5 years, with semiannual repayments of the principal by December 2021 commencing from June 2019.
The loan was fully hedged at the same time with an interest rate swap (a cash flow hedge), which transformed the whole debt to a fixed interest rate of 0.68%. The measurement at fair value of the derivative instrument as at 31st December 2017 gave a negative result of € 44 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan agreement with Intesa Sanpaolo contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 8th November 2016, the Company signed a loan agreement with the subsidiary Recordati Rare Diseases
for a total loan of \$ €70.0 million divided into two tranches \$ €30 million at a fixed rate of 3.35% per annum, repayable in a single instalment due on 13th June 2023 and \$ €40 million at a fixed rate of 3.50% per annum, repayable in a single instalment due on 13th June 2025. The loan was fully hedged with two cross currency swap transactions, which involved transformation of the debt into a total of € 62.9 million, at a fixed interest rate of 1.56% per annum for the tranche maturing in 7 years and at a fixed interest rate of 1.76% per annum for that maturing in 9 years. The measurement at fair value of the hedging instruments as at 31st December 2017 gave an aggregate negative result of € 6,860 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
In May 2017, the Company issued a bond for a total of € 125,000 thousand, at a fixed rate of 2.07% per annum, repayable annually from 31st May 2025 and maturing on 31st May 2032.
The bond loan is subject to covenants and failure to comply with them may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 28th July 2017, the Company signed a loan agreement with Mediobanca for € 75.0 million. The main terms and conditions of the loan are a floating interest rate equal to the 6-month Euribor plus a spread of 95 basis points and a life of 7 years with annual repayments of the principal commencing in July 2018 and continuing until July 2024. The loan was hedged by an interest rate swap (a cash flow hedge), which transformed the whole debt to an interest rate of 1.29%. The measurement at fair value of the derivative instrument as at 31st December 2017 gave a negative result of € 419 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan agreement with Mediobanca contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 7th December 2017, the Company signed a loan agreement with UBI Banca for € 50.0 million, disbursed net of up-front fees and commissions of 0.10%. The main terms and conditions of the loan are a floating interest rate equal to the 6-month Euribor plus a spread of 50 basis points, with semi-annual repayments of the interest and repayment of the principal in a single instalment on 7th September 2022. The loan was hedged by an interest rate swap (a cash flow hedge), which transformed the whole debt to an interest rate of 0.714%. The measurement at fair value of the derivative instrument as at 31st December 2017 gave a positive result of €40 thousand and this was recognized directly as an increase in equity and an increase in the asset item "Fair value of hedging derivatives – cash flow hedges" (see note 22).
The loan contract with UBI Banca contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 29th September 2017, the Company signed a loan agreement with Unicredit for € 50.0 million, disbursed net of up-front fees and commissions of 0.15%. The main terms and conditions of the loan are a floating interest rate equal to the 6-month Euribor plus a spread of 55 basis points, with semi-annual repayments of the interest and repayment of the principal in a single instalment on 29th September 2021. The loan was hedged by an interest rate swap (a cash flow hedge), which transformed the whole debt to an interest rate of 0.698%. The measurement at fair value of the hedging instruments as at 31st December 2017 gave an aggregate negative result of € 95 thousand and this was recognized directly as a reduction in equity and an increase in the liability item "Fair value of hedging derivatives – cash flow hedges" (see note 33).
The loan contract with UniCredit contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 18th October 2017 the Company signed a loan agreement with Intesa Sanpaolo for € 75.0 million, disbursed net of fees and commissions of € 0.2 million. The main terms and conditions of the loan are a floating interest rate equal to the 6-month Euribor plus a spread of 95 basis points and a life of 8 years with semi-annual repayments of the principal by October 2025 commencing from June 2019. The loan was fully hedged by an interest rate swap (a cash flow hedge), which transformed the whole debt to a fixed interest rate of 1.305%. The measurement at fair value of the derivative instrument as at 31st December 2017 gave a positive result of €32 thousand and this was recognized directly as an increase in equity and an increase in the asset item "Fair value of hedging derivatives – cash flow hedges" (see note 22).
The loan contract with Intesa Sanpaolo contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
On 10th November 2017, the Company signed a loan agreement with Banca Passadore for € 15.0 million, disbursed net of expenses and commissions of € 7 thousand. The main terms and conditions of the loan are a floating interest rate equal to the 3-month Euribor plus a spread of 65 basis points and a life of 5 years with annual repayments of the principal from November 2020 and until November 2022.
The loan contract with UBI Passadore contains financial covenants which, if not complied with, may result in the immediate call of the loan.
The financial covenants are as follows:
Those conditions were amply fulfilled.
The balance as at 31st December 2017 was € 10,860 thousand (€ 11,237 thousand as at 31st December 2016). Changes in the item were as follows:
| € (thousands) | 2017 | 2016 |
|---|---|---|
| Balance as at 1st January | 11,237 | 11,172 |
| Additions during the year | 125 | 180 |
| Use for the year | (547) | (352) |
| Change in fair value of the personnel leaving indemnity | ||
| fund (IAS 19) | 45 | 237 |
| Balance as at 31st December | 10,860 | 11,237 |
The valuation of the personnel leaving indemnity fund in accordance with IAS 19 generated a liability as at 31st December 2017 of € 10,860 thousand. The calculations made, which used actuarial parameters updated as at 31st December 2017, found a greater liability and resulted in the recognition of an adjustment of € 45 thousand to the fund compared with the figure as at 31st December 2016 which was stated, net of tax, in the statement of comprehensive income recognised as equity, as required by the relative accounting standard.
The balance as at 31st December 2017 stood at € 2,515 thousand (€ 0 thousand as at 31st December 2016) and relates to the long-term debt for the acquisition of the investment in Opalia Pharma held by the former subsidiary Recordati S.A. Chemical and Pharmaceutical Company, now merged by acquisition into the Company.
Trade accounts payable, which are entirely of a business nature and include end-of-year provisions for invoices to be received, amounted as at 31st December 2017 and 2016 to € 55,764 thousand and € 44,515 thousand respectively.
Balances as at 31st December 2017 and 2016 were as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Suppliers, subsidiaries | 7,544 | 8,050 | (506) |
| Suppliers, Italy | 17,504 | 22,179 | (4,675) |
| Suppliers, Italy for invoices to be received | 10,355 | 7,611 | 2,744 |
| Suppliers, abroad | 8,802 | 4,780 | 4,022 |
| Suppliers, abroad for invoices to be | |||
| received | 11,559 | 1,895 | 9,664 |
| Total trade payables | 55,764 | 44,515 | 11,249 |
Details for subsidiaries are as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Recordati Rare Diseases Inc. | 9 | 94 | (85) |
| Laboratoires Bouchara Recordati S.a.s. | 22 | 106 | (84) |
| Innova Pharma S.p.A. | 2,510 | 4,050 | (1,540) |
| Italchimici S.p.A. | 262 | 3 | 259 |
| Recordati Ireland Ltd. | 2,832 | 3,044 | (212) |
| Casen Recordati S.L. | 507 | 641 | (134) |
| Recordati AG (formerly Pro Farma AG) | 28 | 0 | 28 |
| Recordati S.A. – Switzerland |
0 | 112 | (112) |
| Herbacos Recordati S.r.o. | 387 | 0 | 387 |
| Recordati Polska Sp. Z.o.o. | 457 | 0 | 457 |
| Recordati Romania S.r.l. | 530 | 0 | 530 |
| Total payables to subsidiaries | 7,544 | 8,050 | (1,493) |
There were no concentrations of large debts to a single or a small number of suppliers.
The adjustment of trade payables in non-euro currencies resulted in the recognition of net positive exchange rate differences of € 166 thousand.
The largest trade payables in foreign currency were as follows:
| 31.12.2017 31.12.2016 |
||||
|---|---|---|---|---|
| Currency | €(000) | Currency | €(000) | |
| Payables in US\$ | 3,853,821 | 3,374 | 1,509,749 | 1,512 |
| Payables in GBP | 68,026 | 88 | 156,007 | 193 |
Other current accounts payable as at 31st December 2017 amounted to € 20,992 thousand (€ 19,567 thousand as at 31st December 2016). They were composed as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Payables to third parties for the acquisition of | |||
| Opalia Pharma S.A. | 655 | 0 | 655 |
| Employees | 9,519 | 8,635 | 884 |
| Social security | 6,902 | 6,640 | 262 |
| Commissions to agents | 745 | 963 | (218) |
| Others | 3,171 | 3,329 | (158) |
| Total other borrowings and payables | 20,992 | 19,567 | 1,425 |
The debt to third parties regards the short-term portion of the debt for the acquisition of the investment in Opalia Pharma S.A. held by the former subsidiary Recordati S.A. Chemical and Pharmaceutical Company, now merged by acquisition into Recordati S.p.A..
Amounts due to employees include amounts accrued and not paid, vacations not taken and bonuses for presence and for achieving objectives.
Social security payables not only include contribution expenses for those periods but also the amount due to pension institutes for December.
Amounts payable to agents include € 290 thousand in commissions for foreign agents.
Other payables include directors' fees accruing as at 31st December 2017 (€ 516 thousand), credit notes to be issued (€ 809 thousand) and those for the debt to Regions pursuant to Law 122 of 30th July 2010 amounting to € 1,212 thousand. We also report € 68 thousand of payables to Orphan Europe Italy S.r.l. in relation to VAT transfers within the Group and € 26 thousand of payables to Italchimici S.p.A..
Tax liabilities amounted to € 8,417 thousand as at 31st December 2017 (€ 4,397 thousand as at 31st December 2016).
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Liabilities payable to Fimei S.p.A. for IRES (corporate income tax) |
2,479 | 1,285 | 1,194 |
| Liabilities for current taxation | 1,121 | 561 | 560 |
| Liabilities for split payment of VAT | 2,509 | 0 | 2,509 |
| Liabilities for employee withholding taxes | 2,040 | 2,517 | (477) |
| Liabilities for self-employed withholding taxes | 267 | 33 | 234 |
| Other tax liabilities | 1 | 1 | 0 |
| Total tax liabilities | 8,417 | 4,397 | 4,020 |
The payables to the parent company FIMEI S.p.A. are composed as follows:
Liabilities for current taxation consist of the IRAP (regional production tax) due for the year, net of payments on account.
We report that Decree Law No. 50 of 24th April 27 amended Art. 17-ter of Presidential Decree No. 63/1972 which extended split payment of VAT procedures to include transactions carried out by companies listed in the FTSE MIB index of Borsa Italiana. That therefore includes Recordati S.p.A. Consequently as of 1st July 2017 the Company has been making payments of the VAT stated on invoices
received from suppliers directly to the tax authorities.
In respect of the above, the liability for split payment of VAT as at 31st December 2017 was € 2,509 thousand.
These consist of tax and other provisions as reported in the table below.
| Other risks 9,124 7,467 |
1,657 |
|---|---|
| For agent customer indemnities 1,669 1,536 |
133 |
| Tax 25,745 3,955 |
21,790 |
| € (thousands) 31.12.2017 31.12.2016 |
Change 2017/2016 |
A provision of €22,143 thousand was set for risks resulting from tax inspections.
The change in the provision for other risks is due to utilizations of € 349 thousand and additional provisions of € 2,007 thousand.
Uses related mainly to the conclusion of personnel litigation cases and to the payment of a notice indemnity to employees.
Provisions include costs of € 1,949 thousand consisting of an obligation (IAS 37) arising from the approval by the Board of Directors on the 15th June 2017 which commits the Company to renovate the paediatric and outpatient area of the Bambini Vittore Buzzi Hospital which forms part of the Fatebenefratelli Sacco Health Authority. It is a charitable initiative in memory of Ing. Giovanni Recordati which will be carried out in 2018 by a contractor engaged for that purpose at the end of 2017 and will conclude with a charitable donation to the Buzzi Hospital for the works carried out by and at the expense of the Company.
The balance as at 31st December 2017 was € 9,559 thousand (€ 3,621 thousand as at 31st December 2016).
The interest rate swaps to hedge the cash flows related to medium and long-term loans measured at fair value as at 31st December 2017 gave rise to a € 2,699 thousand liability which represents the unrealized benefit of paying the current expected future rates instead of the rates agreed for the duration of the loans. The fair value measurement relates to interest rate swaps entered into by the Company to hedge interest rates on loans granted by Centrobanca (€ 1,331 thousand), Banca Nazionale del Lavoro (€ 201 thousand), ING Bank (€ 367 thousand), Unicredit (€ 338 thousand), Intesa Sanpaolo (€43 thousand) and Mediobanca (€ 419 thousand).
The market value (fair value) as at 31st December 2017 of two cross-currency swaps entered into to hedge currency risks on loans to the United States company Recordati Rare Diseases, for a total nominal value of \$ €70.0 million, was negative on aggregate by € 6,860 thousand and was recognised directly as a reduction in equity.
The current portions of medium and long-term loans due within one year as at 31st December 2017 and 2016 were composed as follows:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Loan granted for research by Centrobanca (now UBI Banca) at a floating interest rate repayable in semi-annual instalments by 2022 |
6,818 | 6,818 | 0 |
| Loan granted by BNL at a floating interest rate repayable in | |||
| semi-annual instalments by 2018 | 12,406 | 12,500 | (94) |
| Loan granted by Unicredit at a floating interest rate | |||
| repayable in semi-annual instalments by 2020 | 10,000 | 10,000 | 0 |
| Loan granted by Ing Bank at a floating interest rate | |||
| repayable in semi-annual instalments by 2020 | 7,500 | 7,500 | 0 |
| Loan granted by Mediobanca at a floating interest rate | |||
| repayable in annual instalments by 2024 | 10,500 | 0 | 10,500 |
| Total | 47,224 | 36,818 | 10,406 |
Bank overdrafts and short-term loans as at 31st December 2017 and 2016 amounted to € 2,384 thousand and € 1,777 thousand respectively.
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Current account overdrafts | 982 | 837 | 146 |
| Interest on loans | 505 | 149 | 356 |
| Interest on bond debt | 897 | 792 | 105 |
| Total | 2,384 | 1,777 | 607 |
The balance on other short-term payables consisted entirely of amounts due to subsidiaries and amounted to € 287,483 thousand (€ 321,617 thousand as at 31st December 2016).
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Recordati S.A. – Luxembourg |
0 | 11,673 | (11,673) |
| Innova Pharma S.p.A. | 32,755 | 31,935 | 820 |
| Laboratoires Bouchara Recordati S.a.s. | 11,024 | 18,369 | (7,345) |
| Herbacos Recordati S.r.o. | 0 | 2,101 | (2,101) |
| Casen Recordati S.L. | 42,410 | 26,493 | 15,917 |
| Orphan Europe Germany GmbH | 6,147 | 4,844 | 1,303 |
| Orphan Europe Sarl | 42,103 | 0 | 42,103 |
| Recordati Rare Diseases Inc. | 94 | 109 | (15) |
| Recordati Orphan Drugs | 48,428 | 42,750 | 5,678 |
| Orphan Europe Spain S.L. | 5,431 | 3,816 | 1,615 |
| Orphan Europe Italy S.r.l. | 14,096 | 10,577 | 3,519 |
| Recordati Ireland Ltd. | 77 | 75,645 | (75,568) |
| FIC Médical S.a.r.l. | 0 | 301 | (301) |
| Orphan Europe Benelux BVBA | 1,472 | 1,371 | 101 |
| Orphan Europe Portugal LDA | 304 | 304 | 0 |
| Recordati Hellas Pharmaceuticals S.A. | 4,262 | 341 | 3,921 |
| Recordati Pharma Gmbh | 40,362 | 21,233 | 19,129 |
| Bouchara Recordati Sas | 23,093 | 60,081 | (36,988) |
| Orphan Europe Nordic A.B. | 1,392 | 1,241 | 151 |
| Orphan Europe Switzerland GmbH | 331 | 331 | 0 |
| Jaba Recordati S.A. | 6,699 | 2,800 | 3,899 |
| Orphan Middle East FZ LLC | 7,003 | 5,302 | 1,701 |
| Total | 287,483 | 321,617 | (34,134) |
The payables consist of € 280,386 thousand for the centralized cash pooling system and of € 7,097 thousand for payables for loans from Orphan Middle East FZ LLC (€ 7,003 thousand) and Recordati Rare Diseases (€ 94 thousand).
We report that following the merger of Recordati S.A. Chemical and Pharmaceutical Company, the debt of € 11,673 thousand to the merged company still existing as at 31st December 2016 was cancelled.
As prescribed by IFRS 7, a comparison of the carrying amounts as at 31st December 2017 and the fair values of financial assets and liabilities is given below.
| € (thousands) | Carrying | Fair |
|---|---|---|
| amount | value | |
| Financial assets | ||
| Other short-term receivables | 67,573 | 67,573 |
| Financial investments and cash and cash equivalents | 216,547 | 216,976 |
| Trade receivables | 82,250 | 82,250 |
| Other receivables | 8,556 | 8,556 |
| Fair value of hedging derivatives (cash flow hedges) | 3,825 | 3,825 |
| Financial liabilities | ||
| Loans | ||
| - loans at fixed interest rates |
124,880 | 120,655 |
| - at fixed rate hedged by cross currency swaps (CCS) |
120,640 | 117,989 |
| - at floating rate hedged with interest rate swaps (IRS) |
404,417 | 404,417 |
| Trade payables | 55,764 | 55,764 |
| Other payables | 29,409 | 29,409 |
| Fair value of hedging derivatives (cash flow hedges) | 9,559 | 9,559 |
| Bank overdrafts and short-term loans | 2,384 | 2,384 |
| Other short-term borrowings | 287,483 | 287,483 |
The Company constantly monitors the financial risks to which it is exposed in order to take immediate mitigating action when necessary. Financial policies are designed to achieve a balanced and prudent structure as a basic condition for funding internal and external growth.
As prescribed by IFRS 7, the main financial risks to which the Company is exposed are hereby disclosed.
The liquidity risk to which the Company may be exposed is the inability to raise sufficient financial resources for its ongoing business and for the development of its industrial and commercial activities. The two main factors which determine the Company's liquidity are, on the one hand, the resources generated or absorbed by operations and by investments, and on the other, the expiry and renewal terms of debt or the degree of liquidity of financial investments and market conditions.
The terms and conditions of the Company's loans and its financial assets are set out in notes 24, 26, 34 and 35 which address, respectively, short-term financial investments, cash and cash equivalents, medium to long-term loans and the current portions of medium to long-term loans and bank loans and overdrafts.
The Company believes that the funds and credit lines currently available, in addition to those
generated by operations and financing activities, are enough to satisfy investment needs, working capital requirements and the repayment of debts on their natural due dates.
The Company closely controls its credit exposure through the allocation of credit limits to each single customer and an internal reporting system. As at 31st December 2017, the credit exposure was not critical due to the large number of customers, their geographical distribution and the average amount of each account receivable. More specifically as at 31st December 2017 gross trade receivables, inclusive of those receivable from subsidiaries, totalled € 83,359 thousand and the relative allowance for doubtful accounts of € 1,109 thousand recognized is considered to be sufficient in relation to the risk of insolvencies.
The Company raises funds using debt and invests excess cash in money market funds and other financial instruments. The fluctuation of market interest rates influences the cost and returns of the debt and investment instruments therefore affecting the Company's net financial charges.
The Company's policy is to limit the risk arising from interest rate fluctuations by establishing fixed interest rate loans or floating interest rate loans. Any floating rate loans are promptly hedged by using derivative instruments (e.g. interest rate swaps – IRS), used solely for hedging and not speculative purposes.
This hedging policy allows the company to minimise the risk attaching to fluctuations in interest rates (as illustrated in note 26).
Foreign currency risk
The Company is exposed to foreign currency fluctuations which can affect its operating results. In particular, the Company is exposed to foreign currency fluctuations on its international sales and financing denominated in currencies other than the euro.
The company also enters into forward contracts for the purchase and sale of currency in order to hedge amounts at risk. It does this for hedging purposes only and not for speculation.
Reporting by business segment and geographical area, presented in compliance with IFRS 8 – Operating segments – has been performed according to the same accounting policies employed in the presentation of the consolidated financial statements of the Group where, following the acquisition of Orphan Europe, two main segments have been identified: the pharmaceuticals segment and the orphan pharmaceuticals segment, which relates to the whole of Orphan Europe. Consequently the only business segment that exists for Recordati S.p.A. is the pharmaceuticals segment. Furthermore, the pharmaceutical chemicals business is considered an integral part of the pharmaceuticals segment because from an organisational and strategic viewpoint it is involved principally in the production of the active ingredients required to produce pharmaceuticals.
The following table presents net revenues by geographic area:
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Europe | 347,676 | 297,839 | 49,837 |
| of which Italy | 192,993 | 188,258 | 4,735 |
| Australasia | 8,934 | 8,485 | 449 |
| The Americas | 12,516 | 12,882 | (366) |
| Africa | 1,882 | 1,500 | 382 |
| Total | 371,008 | 320,706 | 50,302 |
The Company is party to certain legal actions.
On 29th September 2006, a notice of tax assessment was served on the Company by the Milan 6 Office of the Tax Authorities relating to the fiscal year 2003. It was assessed for additional taxation as follows: corporate income tax of € 2.3 million, IRAP (regional production tax) of € 0.2 million and VAT of € 0.1 million and the imposition of fines of € 2.6 million. The Company believed no amount was due and considered the assessment flawed both from a legitimacy as well as a substantive point of view, and is supported in its position by professional opinion. An appeal was therefore filed with the Provincial Tax Commission of Milan. The first instance judgment before section 33 of the Provincial Tax Commission was concluded partially in the Company's favour with decision No. 539/33/07 dated 11th October 2007, filed on 16th October 2007. An appeal was subsequently filed against that judgment with the Regional Tax Commission of Milan, firstly by the Milan Office 6 of the Tax Authorities with notice served on 8 November 2008 and secondly by the Company with notice served on 7th January 2009. With judgment No. 139/32/09 of 10th June 2009, filed on 27th November 2009, section 32 of the Regional Tax Commission of Milan rejected the interlocutory appeal filed by the Company and accepted the principal appeal of the Milan Office 6 of the Tax Authorities. As a result of that judgment the claims contained in the aforementioned tax assessment relating to the tax year 2003 were confirmed in their entirety and the Company paid the full amount due. On 26th May 2010, the Company appealed that decision before the Supreme Court of Cassation. On 20th April 2017 the hearing took place and as a result with the decision n. 20805/17, handed down on 6th September 2017, the Court came to the decision to almost reject all the Company's arguments.
On 24th September 2014, the Company received a visit from the Milan Tax Police Unit of the Guardia di Finanza (finance police) as part of a general tax inspection for IRES (corporate income tax) and IRAP (regional tax on production) purposes (relating to the years 2010, 2011, 2012). The inspection was concluded for the year 2010 with a "Record of Findings" issued on 23rd September 2015 with which the inspectors found that the cost for a provision of services amounting to € 50,000 was not sufficiently documented and therefore to be considered not deductible from taxable income. On 19th October 2015 the Company filed an application for full settlement of the findings by consent, concluded following payment of the sums due. On 26th July 2016 as part of the tax inspection into the company mentioned above, the Milan Tax Police Unit of the Guardia di Finanza notified the Company of a "Record of Findings" for the financial year 2011, followed by a tax assessment by the tax authorities on the basis of which it found a cost of €50,000 for a provision of services – which had been appealed against also in the previous year – not sufficiently documented and therefore considered not deductible from taxable income. On 15th December 2016, the Company decided to comply with the tax assessment.
On 25th September 2017, again within the same tax audit of the Company above mentioned, the Italian Tax Police issued a Tax Audit Report for the 2012 tax year, which was followed up by a notice of assessment by the Internal Revenue Service, disallowing costs for services rendered for an amount of € 50,000 - an issue with regard to which notices of assessment were already issued for the previous tax periods - being not sufficiently documented and therefore not deductible for income tax purposes. On 23rd January 2018, the Company filed an application for full settlement of the findings by consent for VAT purposes whilst, on 29th January 2018, the Company decided to comply with the tax assessment for IRES and IRAP purposes.
In December 2015, the same Italian Tax Police (Guardia di Finanza) notified the Company of their intention to commence a general income tax inspection covering the years 2009 through 2014 involving the Group companies which reside in Ireland and in Luxembourg, Recordati Ireland Ltd and Recordati S.A. Chemical and Pharmaceutical Company respectively. The declared intention of the inspection is to evaluate the operational context of the foreign companies in order to verify whether said companies are in reality only formally localized abroad but are substantially managed/administered from Italy. On 28th February 2017 the Italian Tax Police (Guardia di Finanza) prescribed the extension of the income tax inspection to include the year 2015. After having analysed the documents and completed the investigation process, the Italian Tax Police finally revealed to Recordati Ireland Ltd., on 6th September 2017, their reasons for considering the Irish company subject to tax in Italy for corporate tax purposes in the reference period, resulting in an assessment of taxes allegedly owed to Italy, in the amount of € 109,4 million, against taxes of € 51,8 million already paid in Ireland. Similarly, the Italian Tax Police finally revealed to Recordati S.A. Chemical and Pharmaceutical Company, on 6th September 2017, their reasons for considering the Luxembourg company subject to tax in Italy for corporate tax purposes in the reference period, resulting in an assessment of taxes allegedly owed to Italy, in the amount of € 7.2 million. Recordati lreland Ltd. and Recordati S.p.A. (as acquiring company by way of merger of Recordati S.A. Chemical & Pharmaceutical Company) filed their comments and observations on the findings reported in the above mentioned Tax Audits Reports within the legal deadlines. At the date of approval of the financial statements the tax reports and the said observations are still under consideration by the Tax Authorities (Agenzia delle Entrate). Although the Group's viewpoints remain unchanged on the legitimacy of its tax practices, it was decided to recognise, based on the best estimate of the potential exposure arising from the ongoing tax audits, a provision of € 22,1 million, including penalties.
The following summary is set out in the table below in compliance with Consob Resolution No. 15519 of 27th July 2006:
| € (thousands) | 31.12.2017 | 31.12.2016 | Change 2017/2016 |
|---|---|---|---|
| Deposits in bank current accounts and cash on hand |
206,538 | 86,815 | 119,723 |
| Short-term loans to Group companies | 67,573 | 119,857 | (52,284) |
| Cash and cash equivalents and current receivables |
274,111 | 206,672 | 67,439 |
| Bank overdrafts and short-term loans | (2,384) | (1,778) | (606) |
| Loans – due within one year |
(47,224) | (36,818) | (10,406) |
| Short-term borrowings from Group Companies | (287,483) | (321,617) | 34,134 |
| Short-term borrowings | (337,091) | (360,213) | 23,122 |
| Net current financial position | (62,980) | (153,541) | 90,561 |
| Loans and receivables – due after one year |
10,105 | 16,396 | (6,291) |
| Borrowings – due after one year (1) |
(605,820) | (264,214) | (341,606) |
| Net financial position | (658,695) | (401,359) | (257,336) |
(1) Including the recognition at fair value of derivative instruments to hedge foreign exchange rate risk (cash flow hedges).
In compliance with Consob communication of 28th July 2006 a summary is given in the table below of the main events, transactions and actions which are non-recurring and which do not repeat frequently in the usual course of business. The overall net effect of such occurrences on the profit and loss, balance sheet and cash flow of the Company is not significant.
| € (thousands) | 2017 | 2016 | Change 2017/2016 |
|---|---|---|---|
| Expenses related to the return of expired pharmaceuticals |
(163) | (200) | 37 |
| Company acquisition costs | 0 | (2,272) | 2,272 |
| Costs for the acquisition of metoprolol rights | (522) | 0 | (522) |
| Costs of the "Buzzi Hospital renovation" | (2,000) | 0 | (2,000) |
| Biopharma marketing proceedings reimbursement |
0 | 354 | (354) |
| Total non-recurring operating expense | (2,685) | (2,118) | (567) |
In compliance with CONSOB communication of 28th July 2006, the Company performed no atypical and/or unusual transactions in 2017, as defined in that same communication, according to which atypical and/or unusual transactions are those which because of their significance or importance, the nature of the counterparties, the content of the transaction, the way in which the transfer price is decided and the timing of the event (close to the end of the financial year) might give rise to doubts concerning: the accuracy and completeness of the information in the financial statements, a conflict of interests, the security of the company's assets, the protection of the interests of minority shareholders.
| € (thousands) | Balance as at 31st Dec 2016 |
Share capital sales and redemptions |
Mergers | Acquisitions subscrip tions |
Initial adjust ments |
IFRS valuation |
IFRS 2 Stock option valuation |
Balance as at 31st Dec 2017 |
|---|---|---|---|---|---|---|---|---|
| Investments in subsidiaries | ||||||||
| Recordati S.A. – Luxembourg | 221,343 | - | (221,343) | - | - | - | - | 0 |
| Casen Recordati S.L. – Spain | 192,463 | - | 77,362 | - | - | - | 446 | 270,271 |
| Innova Pharma S.p.A. – Italy | 10,561 | - | - | - | - | - | 3 | 10,564 |
| Recordati Portuguesa LDA – Portugal | 78 | (78) | - | - | - | - | - | 0 |
| Bouchara Recordati S.a.s. – France | 55,702 | - | 17 | - | - | - | 439 | 56,158 |
| Recordati Pharmaceuticals Ltd. – United Kingdom |
753 | - | 21,836 | - | - | - | - | 22,589 |
| Recordati Hellas Pharmaceuticals S.A. – Greece |
97 | - | 4,656 | - | - | - | 37 | 4,790 |
| Herbacos Recordati S.r.o. – Czech Republic |
15 | - | 19,557 | - | - | - | 60 | 19,632 |
| Recordati Polska Sp. z.o.o. – Poland | 19,311 | - | - | - | - | - | 115 | 19,426 |
| Italchimici S.p.A. – Italy | 106,294 | - | - | - | - | - | - | 106,294 |
| Recordati AG (formerly Pro Farma AG) - Switzerland |
14,496 | - | - | - | - | - | - | 14,496 |
| Recordati Rare Diseases Canada Inc. - Canada |
- | - | - | 245 | - | - | - | 245 |
| Recordati Rare Diseases Inc. – United States |
- | - | 1,782 | - | - | - | 244 | 2,026 |
| Recordati Rare Diseases Ukraine LLC - Ukraine |
- | 0 | - | - | - | - | 0 | |
| Recordati Rare Diseases S.A. DE C.V. – Mexico |
- | - | 10 | 804 | - | - | 9 | 823 |
| Recordati Rare Diseases Comercio Medicamentos Ltda - Brazil |
- | - | 212 | - | - | - | (6) | 206 |
| Recordati Ireland LTD - Ireland | - | - | 632 | - | - | - | 176 | 808 |
| Recordati SA - Switzerland | - | - | 1,607 | - | - | - | 61 | 1,668 |
| Recordati Orphan Drugs S.A.S. - France | - | - | 52,588 | - | - | - | 255 | 52,843 |
| Opalia Pharma S.A. - Tunisia | - | - | 18,055 | - | 1,927 | - | - | 19,982 |
| Recordati Romania Srl - Rumania | - | - | 1,463 | - | - | - | 18 | 1,481 |
| Recordati Pharma GMBH - Germany | - | - | 87,050 | - | - | - | 101 | 87,151 |
| Accent LLC – Russian Federation | - | - | 66,707 | - | - | - | - | 66,707 |
| 621,113 | (78) | 132,191 | 1,049 | 1,927 | 0 | 1,958 | 758,160 | |
| Investments in other companies: | ||||||||
| Tecnofarmaci S.CpA - in liquidation – Pomezia (Rome) |
28 | (28) | - | - | - | - | - | - |
| Sifir S.p.A. – Reggio Emilia | 0 | - | - | - | - | - | - | 0 |
| Consorzio Dafne – Reggello (Florence) | 2 | - | - | - | - | - | - | 2 |
| Consorzio Nazionale Imballaggi – Rome | 0 | - | - | - | - | - | - | 0 |
| Consorzio C4T – Pomezia (Rome) | 1 | (1) | - | - | - | - | - | - |
| DGT - United States | - | - | 0 | - | - | - | - | 0 |
| Codexis Inc. - United States | - | - | 24 | - | - | 13 | - | 37 |
| PureTech Health p.l.c. - United States | - | - | 5,224 | - | 7,992 | 2,937 | - | 16,153 |
| Fluidigm Corp. - United States | - | - | 7 | - | - | (2) | 0 | 5 |
| 31 | (29) | 5,255 | 0 | 7,992 | 2,948 | 0 | 16,197 | |
| TOTAL | 621,144 | (107) | 137,446 | 1,049 | 9,919 | 2,948 | 1,958 | 774,357 |
| € (thousands) | Balance as at 31st Dec 2017 |
Percentage ownership |
Number of shares or quotas possessed |
|---|---|---|---|
| Investments in subsidiaries | |||
| Casen Recordati S.L. – Spain | 270,271 | 100.00 | 2,389,660 |
| Innova Pharma S.p.A. – Italy | 10,564 | 100.00 | 960,000 |
| Bouchara – Recordati S.a.s. – France | 56,158 | 100.00 | 10,000 |
| Recordati Pharmaceuticals Ltd. – United Kingdom | 22,589 | 100.00 | 15,000,000 |
| Recordati Hellas Pharmaceuticals S.A. – Greece | 4,790 | 100.00 | 1,005,000 |
| Herbacos Recordati S.r.o. – Czech Republic | 19,632 | 100.00 | 2,560 |
| Recordati Polska Sp. z.o.o. – Poland | 19,426 | 100.00 | 90,000 |
| Italchimici S.p.A. – Italy | 106,294 | 100.00 | 7,646,000 |
| Recordati AG (formerly Pro Farma AG) - Switzerland | 14,496 | 100.00 | 30,000 |
| Recordati Rare Diseases Canada Inc. - Canada | 245 | 100.00 | 1,000 |
| Recordati Rare Diseases Inc. - United States | 2,026 | 100.00 | 100 |
| Recordati Rare Diseases Ukraine LLC - Ukraine | 0 | 0.01 | 1 |
| Recordati Rare Diseases S.A. DE C.V. – Mexico | 823 | 99.998 | 49,999 |
| Recordati Rare Diseases Comercio Medicamentos Ltda - Brazil | 206 | 99.398 | 166 |
| Recordati Ireland LTD - Ireland | 808 | 100.00 | 200,000 |
| Recordati SA - Switzerland | 1,668 | 100.00 | 2,000 |
| Recordati Orphan Drugs S.A.S. - France | 52,843 | 90.00 | 51,300 |
| Opalia Pharma S.A. - Tunisia | 19,982 | 90.00 | 612,000 |
| Recordati Romania Srl - Rumania | 1,481 | 100.00 | 500,000 |
| Recordati Pharma GMBH - Germany | 87,151 | 55.00 | 1 |
| Accent LLC – Russian Federation | 66,707 | 100.00 | 1 |
| 758,160 | |||
| Investments in other companies: | |||
| Sifir S.p.A. – Reggio Emilia | 0 | 0.04 | 1,304 |
| Consorzio Dafne – Reggello (Florence) | 2 | 1.16 | 1 |
| Consorzio Nazionale Imballaggi – Rome | 0 | n,s, | 1 |
| DGT - United States | 0 | n,s, | n,s, |
| Codexis Inc. - United States | 37 | n,s | 5,203 |
| PureTech Health p.l.c. – United Kingdom | 16,153 | 4.02 | 9,554,140 |
| Fluidigm Corp. - United States | 5 | n,s | 1,019 |
| 16,197 | |||
| TOTAL | 774.357 |
COMPARISON BETWEEN THE CARRYING AMOUNT OF DIRECT INVESTMENTS IN SUBSIDIARIES AND THEIR VALUATION USING THE EQUITY METHOD
| 364,274 | 1,090,272 | 183,905 | 1,014,129 | 758,160 | 1,340,751 | ||
|---|---|---|---|---|---|---|---|
| Canada* | 233 | 246 | 13 | 100.00 | 246 | 245 | (167) |
| Recordati Rare Diseases Canada Inc. – | |||||||
| Opalia Pharma S.A. - Tunisia | 8,051 | 24,873 | 4,621 | 90.00 | 22,386 | 19,982 | 29,373 |
| Recordati Rare Diseases Comercio Medicamentos Ltda - Brazil |
0 | 276 | 108 | 99.398 | 274 | 206 | 274 |
| Recordati Rare Diseases S.A. DE C.V. – Mexico* |
687 | (145) | (378) | 99.998 | (145) | 823 | (337) |
| Accent LLC – Russian Federation* | 0 | 359 | 35 | 100.00 | 359 | 66,707 | 33,470 |
| Recordati Romania Srl - Rumania | 1,073 | 2,888 | 1,209 | 100.00 | 2,888 | 1,481 | 2,303 |
| Recordati Ireland LTD - Ireland | 200 | 170,000 | 81,384 | 100.00 | 170,000 | 808 | 151,917 |
| Recordati Rare Diseases Inc. – United States | 9,988 | 118,954 | 28,342 | 100.00 | 118,954 | 2,026 | 115,831 |
| Recordati S.A. - Switzerland | 1,709 | 3,883 | 1,938 | 100.00 | 3,883 | 1,668 | 3,279 |
| Recordati Pharma GMBH - Germany | 600 | 141,287 | 14,681 | 55.00 | 77,708 | 87,151 | 112,251 |
| Recordati Orphan Drugs S.A.S. - France | 57,000 | 100,749 | 6,121 | 90.00 | 90,674 | 52,843 | 178,592 |
| Recordati AG (formerly Pro Farma AG) – Switzerland* |
2,564 | 3,874 | 430 | 100.00 | 3,874 | 14,496 | 13,824 |
| Italchimici S.p.A. – Italy | 7,646 | 49,290 | 15,165 | 100.00 | 49,290 | 106,294 | 120,271 |
| Herbacos Recordati s.r.o. - Czech Republic | 1,003 | 11,938 | 2,184 | 100.00 | 11,938 | 19,632 | 26,869 |
| Recordati Polska S.p.z.o.o. - Poland* | 1,077 | 641 | (384) | 100.00 | 641 | 19,426 | 16,013 |
| Recordati Hellas S.A. – Greece* | 10,050 | 4,634 | (265) | 100.00 | 4,634 | 4,790 | 4,233 |
| Recordati Pharmaceuticals Ltd. - United Kingdom* |
16,907 | 18,367 | 503 | 100.00 | 18,367 | 22,589 | 17,964 |
| Innova Pharma S.p.A. - Italy | 1,920 | 35,836 | 2,521 | 100.00 | 35,836 | 10,564 | 35,795 |
| Bouchara Recordati S.a.s. - France | 4,600 | 51,602 | 12,630 | 100.00 | 51,602 | 56,158 | 126,584 |
| Casen Recordati S.L. - Spain | 238,966 | 350,721 | 13,048 | 100.00 | 350,721 | 270,271 | 352,412 |
| Investments | |||||||
| € (thousands) | Share capital | 31.12.2017 Equity |
Profit (loss) | % Ownership |
Corresponding pro-rata equity (A) |
Carrying amount (B) |
Valuation Art. 2426 (C) |
| Difference A-B 255,969 |
|
|---|---|
| Surplus C-B 582,591 |
* The carrying amount of the investment has not been adjusted to bring it into line with the amount calculated using the equity method because the results of the annual impairment test showed that the difference was not to be considered an indicator of permanent impairment.
| Subsidiaries | Headquarters | Currency | Share capital | Profit (loss) 2017 |
Equity as at 31/12/2017 |
Revenue 2017 |
|
|---|---|---|---|---|---|---|---|
| INNOVA PHARMA S.p.A. Marketing and sales of pharmaceuticals |
Italy | €(000) | 1,920 | 2,521 | 35,836 | 45,707 | |
| CASEN RECORDATI S.L. Research, production and sales of pharmaceuticals |
Spain | €(000) | 238,966 | 13,048 | 350,721 | 91,636 | |
| BOUCHARA RECORDATI S.A.S. Research, production and sales of pharmaceuticals |
France | €(000) | 4,600 | 12,630 | 51,602 | 16,669 | |
| REC.RARE DISEASES COMERCIO DE MEDICAMENTOS LTDA. Dormant, holds pharmaceutical marketing rights in Brazil |
Brazil | BRL(000) | 0 | 428 | 1,097 | 3,570 | |
| RECORDATI RARE DISEASES Inc. Research, production and sales of pharmaceuticals |
U.S.A. | USD(000) | 11,979 | 33,991 | 142,661 | 125,526 | |
| RECORDATI IRELAND LTD Research, production and sales of pharmaceuticals |
Ireland | €(000) | 200 | 81,384 | 170,000 | 300,368 | |
| RECORDATI S.A. Marketing and sales of pharmaceuticals |
Switzerland | CHF(000) | 2,000 | 2,268 | 4,544 | 9,569 | |
| LABORATOIRES BOUCHARA RECORDATI S.A.S. Research, production and sales of pharmaceuticals |
France | €(000) | 14,000 | 19,102 | 35,596 | 184,339 | |
| RECORDATI PHARMA GmbH Marketing and sales of pharmaceuticals |
Germany | €(000) | 600 | 14,681 | 141,287 | 104,106 | |
| RECORDATI PHARMACEUTICALS LTD Marketing and sales of pharmaceuticals |
United Kingdom |
GBP(000) | 15,000 | 446 | 16,296 | 2,492 | |
| RECORDATI HELLAS PHARMACEUTICALS S.A. Marketing and sales of pharmaceuticals |
Greece | €(000) | 10,050 | (265) | 4,634 | 12,818 | |
| JABA RECORDATI S.A. Marketing and sales of pharmaceuticals |
Portugal | €(000) | 2,000 | 2,213 | 10,348 | 39,970 | |
| JABAFARMA PRODUTOS FARMACÊUTICOS S.A. Marketing of pharmaceuticals |
Portugal | €(000) | 50 | 101 | 615 | 720 | |
| BONAFARMA PRODUTOS FARMACÊUTICOS S.A. Marketing of pharmaceuticals |
Portugal | €(000) | 50 | 587 | 3,331 | 2,450 | |
| RECORDATI ORPHAN DRUGS S.A.S. Holding company |
France | €(000) | 57,000 | 6,121 | 100,749 | 1.933 | |
| ORPHAN EUROPE SWITZERLAND GmbH Marketing and sales of pharmaceuticals |
Switzerland | CHF(000) | 20 | 11 | 339 | 71 | |
| ORPHAN EUROPE MIDDLE EAST FZ LLC Marketing and sales of pharmaceuticals |
United Arab Emirates |
€(000) | 20 | 7,656 | 12,265 | 15,021 | |
| ORPHAN EUROPE NORDIC AB Marketing and sales of pharmaceuticals |
Sweden | SEK(000) | 100 | 14,388 | 19,070 | 38,265 | |
| ORPHAN EUROPE PORTUGAL LDA Marketing and sales of pharmaceuticals |
Portugal | €(000) | 5 | (11) | 556 | 95 | |
| ORPHAN EUROPE S.A.R.L. Research, production and sales of pharmaceuticals |
France | €(000) | 320 | 15,855 | 68,272 | 71,170 |
| Subsidiaries | Headquarters | Currency | Share capital | Profit (loss) 2017 |
Equity as at 31/12/2017 |
Revenue 2017 |
|---|---|---|---|---|---|---|
| ORPHAN EUROPE UNITED KINGDOM LTD Marketing and sales of pharmaceuticals |
United Kingdom |
GBP(000) | 50 | 1,610 | 2,101 | 5,128 |
| ORPHAN EUROPE GERMANY GmbH Marketing and sales of pharmaceuticals |
Germany | €(000) | 26 | 4,006 | 4,516 | 10,949 |
| ORPHAN EUROPE SPAIN S.L. Marketing and sales of pharmaceuticals |
Spain | €(000) | 1,775 | 1,681 | 6,325 | 5,240 |
| ORPHAN EUROPE ITALY S.R.L. Marketing and sales of pharmaceuticals |
Italy | €(000) | 40 | 3,689 | 14,618 | 9,929 |
| ORPHAN EUROPE BENELUX BVBA Marketing and sales of pharmaceuticals |
Belgium | €(000) | 19 | 1,491 | 2,388 | 4,777 |
| FIC MEDICAL S.A.R.L. Marketing of pharmaceuticals |
France | €(000) | 174 | 216 | 1,185 | 2,451 |
| HERBACOS RECORDATI s.r.o. Research, production and sales of pharmaceuticals |
Czech Republic | CZK(000) | 25,600 | 55,766 | 304,826 | 438,072 |
| RECORDATI SK s.r.o. Marketing and sales of pharmaceuticals |
Slovak Republic |
€(000) | 33 | 20 | 253 | 679 |
| RUSFIC LLC Marketing and sales of pharmaceuticals |
Russian Federation |
RUB(000) | 3,560 | 390,296 | 1,104,706 | 6,060,488 |
| RECOFARMA ILAÇ Ve Hammaddeleri Sanayi Ve Ticaret L.Ş. Marketing of pharmaceuticals |
Turkey | TRY(000) | 10 | 50 | 220 | 444 |
| RECORDATI ROMANIA S.R.L. Marketing and sales of pharmaceuticals |
Rumania | RON(000) | 5,000 | 5,631 | 13,454 | 32,217 |
| RECORDATI İLAÇ Sanayi Ve Ticaret A.Ş. Research, production and sales of pharmaceuticals |
Turkey | TRY(000) | 120,875 | 42,353 | 198,823 | 334,372 |
| RECORDATI POLSKA Sp. z o.o Marketing and sales of pharmaceuticals |
Poland | PLN(000) | 4,500 | (1,606) | 2,679 | 62,422 |
| ACCENT LLC Holds pharmaceutical marketing rights |
Russian Federation |
RUB(000) | 20 | 2,450 | 24,904 | 3,600 |
| RECORDATI UKRAINE LLC Marketing and sales of pharmaceuticals |
Ukraine | UAH(000) | 1,032 | 7,666 | 26,239 | 170,365 |
| CASEN RECORDATI Portugal Unipessoal Ltd Marketing and sales of pharmaceuticals |
Portugal | €(000) | 100 | 67 | 368 | 462 |
| OPALIA PHARMA S.A. Research, production and sales of pharmaceuticals |
Tunisia | TND(000) | 9,656 | 5,542 | 29,830 | 47,797 |
| OPALIA RECORDATI SARL Marketing of pharmaceuticals |
Tunisia | TND(000) | 20 | 697 | 1,695 | 2,763 |
| RECORDATI RARE DISEASES S.A. DE CV Marketing and sales of pharmaceuticals |
Mexico | MXN(000) | 16,250 | (8,948) | (3,432) | 12,420 |
| RECORDATI RARE DISEASES COLOMBIA S.A.S Marketing and sales of pharmaceuticals |
Colombia | COP(000) | 150,000 | 2,478,203 | 4,166,874 | 14,346,377 |
| RECORDATI RARE DISEASES CANADA INC. * Marketing and sales of pharmaceuticals |
Canada | CAD(000) | 350 | 20 | 370 | 3,453 |
| ITALCHIMICI S.p.A. Marketing and sales of pharmaceuticals |
Italy | €(000) | 7,646 | 15,165 | 49,290 | 43,538 |
| RECORDATI AG (già PRO FARMA AG) Marketing and sales of pharmaceuticals |
Switzerland | CHF(000) | 3,000 | 503 | 4,533 | 10,198 |
| PRO FARMA GmbH Marketing and sales of pharmaceuticals |
AUSTRIA | €(000) | 35 | 9 | 396 | 667 |
* Formed in 2017.
DETAILS OF ITEMS IN SHAREHOLDERS' EQUITY
| € (thousands) | Amount | Possibility of use |
Amount available |
Amount distributable without tax effects |
Amount distributable with tax effects |
Notes |
|---|---|---|---|---|---|---|
| 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 | 0 | 2,602 | |
| Statutory reserve | 5,228 | B | ||||
| By-law reserves | 0 | |||||
| Treasury stock reserve | (17,029) | (17,029) | (17,029) | 0 | ||
| Other reserves | ||||||
| Gain on merger | 29,813 | A B C | 29,813 | 29,813 | 0 | |
| Extraordinary reserve | 57,663 | A B C | 57,663 | 57,663 | 0 | |
| Reserve under Art. 13 Par. 6 of Legislative Decree 124/1993 |
99 | A B C | 99 | 0 | 99 | |
| Research and investment grants | 17,191 | A B C | 17,191 | 1,227 | 15,964 | 2 |
| Extraordinary VAT concession reserve | 517 | A B C | 517 | 0 | 517 | |
| Southern Italy investment fund | 3,632 | |||||
| IAS reserve | 109,888 | A B C | 109,888 | 109,888 | 0 | |
| Interim dividends | (87,470) | (87,470) | (87,470) | 0 | ||
| Net income for the year | 212,506 | A B C | 212,506 | 212,506 | 0 | |
| Total shareholders' equity | 444,499 | 409,499 | 321,673 | 87,826 |
A for share capital increase
B to replenish losses
C to distribute to shareholders
Amounts in euro
| Type of service | Provider of the service | Remuneration |
|---|---|---|
| Accounting audit | Auditor of the Company | 128.800 |
| Attestation services | Auditor of the Company | 44.000 |
| Due diligence | Auditor of the Company | 51.000 |
The undersigned, Andrea Recordati, in his capacity as Vice Chairman and Chief Executive Officer, and Fritz Squindo, as the Manager responsible for the preparation of the financial statements of Recordati S.p.A., pursuant to the provisions or article 154-bis, clauses 3 and 4, of Legislative Decree No. 58 of 24th February 1998, hereby attest
the adequacy with respect to the Company structure and
of the administrative and accounting procedures applied in the preparation of the separate company financial statements for the financial year 2017.
2.1 the financial statements as at and for the year ended 31st December 2017:
2.2 The report on operations includes a reliable operating and financial review of the Company as well as a description of the main risks and uncertainties to which it is exposed.
Milan, 15th March 2018
The Vice Chairman and
Chief Executive Officer Manager responsible for the preparation of the Company's financial reports
Andrea Recordati Fritz Squindo
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