Quarterly Report • Nov 14, 2023
Quarterly Report
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Investor Relator Fjorela Puce Tel: 035.4232840 - Fax: 035.3844606 E-mail: [email protected]
Tesmec S.p.A.
Registered Office: Piazza Sant'Ambrogio, 16 – 20123 Milan Fully paid-up share capital as at 30 September 2023 Euro 15,702,162 Milan Register of Companies no. 314026 Tax and VAT code: 10227100152
Website: www.tesmec.com Switchboard: 035.4232911
| COMPOSITION OF THE CORPORATE BODIES 7 |
|---|
| GROUP STRUCTURE 9 |
| INTERIM CONSOLIDATED REPORT ON OPERATIONS 11 |
| 1. Introduction 12 |
| 2. Macroeconomic Framework 15 |
| 3. Significant events during the period 16 |
| 4. Activity, reference market and operating performance for the first nine months of 2023 17 |
| 5. Income statement 18 |
| 6. Summary of financial position statement figures as at 30 September 2023 22 |
| 7. Management and types of financial risk 24 |
| 8. Atypical and/or unusual and non-recurring transactions with related parties 24 |
| 9. Group Employees 24 |
| 10. Other information 24 |
| CONSOLIDATED FINANCIAL STATEMENTS 25 |
| Consolidated statement of financial position as at 30 September 2023 and as at 31 December 2022 26 |
| Consolidated income statement as at 30 September 2023 and 30 September 2022 28 |
| Consolidated statement of comprehensive income as at 30 September 2023 and 30 September 2022 29 |
| Statement of consolidated cash flows as at 30 September 2023 and 30 September 2022 30 |
| Statement of changes in consolidated shareholders' equity as at 30 September 2023 |
| and 30 September 2022 31 |
| Explanatory notes 32 |
| Certification pursuant to Article 154-bis of Italian Legislative Decree no. 58/98 38 |
Board of Directors (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2024)
| Chairman and Chief Executive Officer | Ambrogio Caccia Dominioni |
|---|---|
| Vice Chairman | Gianluca Bolelli |
| Directors | Caterina Caccia Dominioni Lucia Caccia Dominioni Paola Durante () Simone Andrea Crolla () Emanuela Teresa Basso Petrino () Guido Luigi Traversa () Antongiulio Marti Nicola Iorio |
| (*) Independent Directors |
Board of Statutory Auditors (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2024)
| Chairman | Simone Cavalli |
|---|---|
| Statutory auditors | Attilio Massimo Franco Marcozzi Laura Braga |
| Alternate auditors | Alice Galimberti Maurizio Parni |
Members of the Control and Risk, Sustainability and Related Parties Transactions Committee (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2024)
| Chairperson | Emanuela Teresa Basso Petrino |
|---|---|
| Members | Simone Andrea Crolla |
| Guido Luigi Traversa |
Members of the Remuneration and Appointments Committee (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2024)
| Chairperson | Emanuela Teresa Basso Petrino |
|---|---|
| Members | Antongiulio Marti Caterina Caccia Dominioni |
| Lead Independent Director | Paola Durante |
| Director in charge of the internal control and risk management system |
Ambrogio Caccia Dominioni |
| Manager responsible for preparing the Company's financial statements |
Ruggero Gambini |
| Independent Auditors | Deloitte & Touche S.p.A. |
(Not audited by the Independent Auditors)
The Parent Company Tesmec S.p.A. (hereinafter "Parent Company" or "Tesmec") is a legal entity organised in accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA (screen-based share market) STAR Segment of the Milan Stock Exchange. The registered office of the Tesmec Group (hereinafter "Group" or "Tesmec Group") is in Milan, Piazza S. Ambrogio 16.
The Tesmec Group is a leader in the design, production and marketing of special products and integrated solutions for the construction, maintenance and streamlining of infrastructures relating to the transmission of electrical power, data and material transport.
Founded in Italy in 1951 and managed by the Chairman and Chief Executive Officer Ambrogio Caccia Dominioni, the Group, as from its listing on the Stock Exchange on 1 July 2010, has pursued the stated objective of diversification of the types of products in order to offer a complete range of integrated solutions grouped into three main areas of business: Energy, Trencher and Rail. The structure has more than 900 employees and has production plants located in Grassobbio (Bergamo), Endine Gaiano (Bergamo), Sirone (Lecco) and Monopoli (Bari) in Italy, Alvarado (Texas) in the USA and Durtal in France. Furthermore, after the reorganisation of the Automation segment, Tesmec Automation has 3 additional operating units available in Fidenza, Padua and Patrica (Frosinone). The Group has a global commercial structure, with a direct presence on different continents, through foreign companies and sales offices in the USA, South Africa, Russia, Qatar, China, France, Australia, New Zealand, Côte d'Ivoire and Saudi Arabia.
Through the different types of product, the Group is able to offer:
In continuity with 2022, which was characterised by significant growth in revenues and operating margins, the Tesmec Group envisaged further momentum for 2023 in the growth of Revenues and economic and financial results, based on:
In line with this vision, the Group's Budget for the current year envisaged:
As described in more detail below, the final figures as at 30 September 2023 are expected to confirm the overall positive economic trend defined in the forecasts, while the reabsorption of working capital – and more specifically of stocks – has been slower than expected and is confirmed to continue in the fourth quarter of the current year.
In 2023, the Group worked on the implementation of its strategic, technological, production and commercial development programmes, with the growth of Revenues accelerating from June and continuing in the third quarter, resulting in an increase in turnover for the first nine months of the year of approximately 12% compared to 2022, only slightly below the budget for the period.
This increase in Revenues as at 30 September was made possible by:
The order backlog, an important indicator of the Group's medium-term business opportunities, stood at a level of just under Euro 412 million, also thanks to the Rail segment (where the proprietary technologies developed by Tesmec, in particular for the rail diagnostics segment, provide a powerful lever for international growth), and the Energy Automation segment, both of which are characterised by multi-year tenders. The Stringing equipment and Trencher segments, by their very nature, continue to be characterised by an order collection profile that is historically more focused on shorter time horizons.
In terms of operating results, consolidated EBITDA reached Euro 27.5 million, substantially in line with the budget for the period and up 6% compared to 2022, although affected, in relation to the latter, by a higher level of fixed costs of approximately 10% (originated from a strengthening of the commercial and business development structure, especially in the Trencher segment, the benefits of which in terms of higher sales/margins have yet to reach a steady state) and higher non-recurring expenses of approximately Euro 2.0 million (as already highlighted as at 30 June, mainly attributable to the Trencher segment due to the recognition of extra costs in Australia related to the completion of some work orders).
It should be noted that the aforementioned increase in EBITDA was positively impacted – as anticipated when commenting on the expectations for the second half of the year in the Report as at 30 June – by the expected acceleration of results in the third quarter of the year, which led to the reabsorption of the EBITDA gap with respect to 2022 recorded in the first half of the year. From this point of view, the achievement of an EBITDA margin of 18% in the July-September period, even if slightly lower than that foreseen in the budget for the third quarter but decidedly higher than that of the third quarter of 2022 (which was negatively influenced, as was the fourth quarter, by the inflationary dynamics in place at the time) corroborates the working hypothesis of an EBITDA margin target of 20% when fully operational, thanks to the progressive improvement of the sales mix and to the effect of operating leverage.
More precisely:
In terms of financial management, the increased weighting of financial expenses already recorded as at 30 June was confirmed, with net interest expense rising from Euro 4.0 million in the first nine months of 2022 to Euro 8.0 million as at 30 September 2023; this increase was due to the higher cost of money resulting from the known base rate increases by the ECB, coupled with a still high level of inventories, which in turn resulted in a seasonally higher level of net financial payables than as previous 31 December. This increase in net financial payables was also accompanied by a negative effect, on a decreasing basis, of the result of exchange rate changes, which decreased from a gain of Euro 8.2 million as at 30 September 2022 to a loss of Euro 1.4 million (largely unrealised) as at 30 September 2023. Therefore, the decremental contribution to the income statement compared to 2022 deriving from financial management was equal to Euro -13.7 million, with a direct impact on the profit for the period before tax allocations.
As a direct effect of the above, the net result was a marginal profit of Euro 0.2 million, compared to the profit of Euro 9.2 million as at 30 September 2022. It is also worth noting the gradual improvement in the Net Result over the nine months, with a loss in the first quarter of 2023, a break-even in the second quarter and a strong recovery in the third quarter, elements that confirm the positive expectations for the fourth quarter of the financial period, historically the most important in terms of seasonal revenues and profitability.
With reference to the figures of the statement of financial position as at 30 September 2023, there were still significant values of inventories and work in progress to support the current and future growth of the business, which, together with the changes occurred in the other asset items, resulted in levels of invested capital and, symmetrically, of net financial position that were substantially in line with those recorded as at 30 June. In relation to this, management confirms its expectation of a significant and gradual replenishment of stock levels as at 31 December, both in terms of a reduction in material inventories (thanks to expected sales in the fourth quarter, with repurchases at lower levels than consumption), and of SAL levels (thanks to the achievement of invoicing milestones for work orders related to the Rail and Energy Automation segments).
Symmetrically, the Net Financial Position as at 30 September 2023 amounted to Euro 149 million, marginally lower than the level of Euro 150 million as at 30 June last year, but higher than the level of Euro 128 million as at 31 December 2022, with an increase in the nine months of 2023 of Euro 21 million entirely due to working capital.
More specifically, in terms of free cash flow, in the first nine months of 2023, Tesmec generated:
therefore, for a total negative balance of -20.6 million.
With reference to Tesmec's financial structure, it is important to point out that the Net Financial Position as at 30 September of Euro 149.0 million consists of:
Moreover, it should be noted that:
Based on the positive economic performance of the first nine months of the financial year and the action of the management determined to accelerate the recovery of profitability and focused on cash generation, the Board of Directors of Tesmec, also in light of the well-known developments in the geopolitical and macro-economic/financial, updated the guidance for the whole of 2023, confirming an EBITDA margin in the previously indicated range of 16%-17%, despite expected revenues in the range of 270-280 million euros (compared to the range of 280-290 million euros previously communicated) and a reduction in Net Financial Debt compared to the figure at 30 September 2023 but increasing compared to 31 December 2022.
§ § §
In closing, it is specified that some of the Group's financing contracts provide for compliance as of 31 December with specific financial parameters relating to the ratio (a) between Net Financial Debt and Shareholders' Equity and (b) between Net Financial Debt and EBITDA. The amounts subject to covenants measured on a rolling 12-month basis as at 30 September would present values that are not yet in line with those contractually for: therefore, the Management prepared sensitivity analyses to assess compliance with these covenants as at 31 December 2023, the effective date of the contractual recognition. In light of these simulations and the related sensitivity analyses, the Board of Directors positively assessed the existence of the requirements relating to the covenants and therefore to the company's ability to continue as a going concern on the basis of which the Report as at 30 September 2023 was prepared and approved.
Global economic activity slowed down in the third quarter: the expansion in services slowed and the downturn in the manufacturing cycle continued. Growth remained solid in the United States but declined sharply in China. The post-pandemic change in the composition of global demand towards services and the tightening of monetary policies weighed on trade in goods. The restrictive stance of monetary policies in the major advanced economies, the slowdown of economic activity in China, and international tensions, related to the ongoing war in Ukraine and fuelled by the recent terrorist attacks in Israel, continue to weigh on global growth prospects. According to forecasts published by the International Monetary Fund in October, global GDP growth would slow from 3.5% in 2022 to just below 3% on average in the two-year period 2023-24, with the risks tilted mainly to the downside. In the third quarter, the reduction in oil supply led to an increase in prices; natural gas prices also increased, but in line with the usual seasonal trends. However, risks of price increases could come from the worsening of tensions in the Middle East and the potential for higher heating consumption should the coming winter be harsher than normal. In the third quarter, conditions in the international financial markets worsened, reflecting investors' revised expectations of rapid monetary easing. In the main advanced economies, yields on long-term government bonds rose while the increase in share prices observed in the first half of the year came to a halt as interest rates rose and the global growth prospects deteriorated. Between the end of June and the beginning of October, the euro depreciated against the US dollar due to the better prospects for growth in the United States than in the Eurozone, as well as the widening interest rate differential.
1 Source: Bank of Italy – Economic Bulletin, Issue 4/2023 – October.
In the summer months, the cyclical weakness in the Eurozone that started at the end of 2022 continued, reflecting tighter financing conditions and the erosion of household incomes due to inflation. The development of economic activity was heterogeneous among the major countries: it grew in France and Spain, remained stagnant in Germany and declined in Italy. According to ECB experts' projections published in September, GDP will slow to 0.7% in 2023, accelerate to 1.0% in 2024 and 1.5% in 2025. In July and September, the Governing Council of the ECB raised policy rates by a total of 50 basis points, bringing the rate on central bank deposits to 4.0%. The Council currently believes that the reference rates have reached levels that, if maintained for a sufficiently long period, will make a substantial contribution to the timely return of inflation to the 2% objective. The Council also confirmed that it will continue to follow a data-driven approach in determining the appropriate level and duration of monetary restriction and that future decisions will ensure that reference interest rates are set at sufficiently restrictive levels for as long as necessary. In September, consumer and core inflation fell to 4.3% and 4.5%, respectively. Energy prices decreased and food prices slowed down. According to the ECB experts' projections, the trend in consumer prices are expected to decline by 5.6% this year, by 3.2% in 2024 and by 2.1% in 2025.
After a strong increase in the first quarter, in Italy GDP fell in the second quarter, reflecting the decline in value added in industry and the slowdown in the expansion of services. According to the Bank of Italy's assessments, after the decrease in the second quarter, the phase of weak economic activity continued and extended to both manufacturing and services. The indicators confirm the weakness of domestic demand, reflecting the worsening of credit access conditions, the erosion of household income due to inflation and the loss of strength in the labor market. The weakness in manufacturing activity is still attributable to the more energy-intensive sectors, where production levels remain well below pre-pandemic levels. Exports of goods in volume decreased again, reflecting the slowdown in world trade and the lack of dynamism in economic activity in the Eurozone. However, there has been a marked improvement in the delivery times of goods, suggesting that the supply chain difficulties are gradually, but not definitively, being overcome. According to surveys conducted by the Bank of Italy between August and September, the opinions of the companies on the general economic situation worsened as did their pessimism about their own operating situation. Companies also envisage a slowdown in capital expenditure this year due to difficulties in accessing credit. The ECB's rise in policy rates continues to be reflected in the cost of credit. Between May and August, the decrease in bank loans to businesses and households became more pronounced; the decline reflects both the marked weakness in demand for credit, held back by the increase in the cost of loans and lower liquidity requirements for investments, and the worsening of the supply criteria, mainly driven by the higher risk perceived by intermediaries. On the labor market, the participation rate remained high and the unemployment rate continued to fall. The positive trend in remuneration strengthened in the private sector, driven by some renewals and index-linking clauses envisaged by a limited number of collective agreements. While wages increase gradually, the prices of intermediate goods and energy show an overall decrease since the beginning of 2023, after the sharp increases of the previous two years. Consumer inflation rose slightly in September, affected by the increase in fuel prices. Food inflation decreased but remains high. Core inflation remained almost unchanged, at a level well below the peak reached in February. The conditions of the Italian financial markets worsened again as from August, affected by the weakening of the economic activity and the prospect of policy interest rates remaining at high levels for a prolonged period. Bond yields of Italian non-financial companies increased since the first ten days of July, while share prices in Italy decreased overall.
The Government updated its trend estimates and objectives for public accounts for the current year and the next three years. According to the new programmes, net indebtedness and debt are expected to be 5.3% and 140.2% of GDP, respectively, in 2023. Net indebtedness is expected to gradually decrease in the coming years to 3.6% of GDP in 2025 and 2.9% in 2026. At the beginning of August, the Government submitted a request for an overall amendment to the National Recovery and Resilience Plan, and on 9 October, our country received Euro 18.5 billion for the third tranche of funds, bringing the total resources to more than Euro 85 billion so far. In the baseline scenario of the Bank of Italy's forecast, GDP is expected to increase by 0.7% this year, by 0.8% in 2024 and by 1.0% in 2025. The macroeconomic scenario worsened compared to the second quarter and will continue to be affected by the tightening of the monetary and financial conditions and by the weak global trade in the coming year. Therefore, growth would suffer from tighter financing conditions and weak international trade, but would benefit from the effects of the NRRP measures and the gradual recovery of the household purchasing power. In fact, inflation is expected to fall to 2.4% in 2024 (from 6.1% in 2023) and 1.9% in 2025. However, these projections remain characterised by a high degree of uncertainty, with the deterioration of geopolitical tensions, the worsening of the Chinese economy and the greater rigidity of credit supply conditions in Italy posing downside risks to economic growth.
The significant events occurred during the period are reported below:
on 20 April 2023, the Ordinary Shareholders' Meeting of Tesmec S.p.A. met electronically in a single call and approved the Financial Statements as at 31 December 2022 and the allocation of the Net Profit. During the Shareholders'
Meeting, the Consolidated Financial Statements as at 31 December 2022 of the Tesmec Group and the related reports were presented, including the Consolidated Non-Financial Statement;
The consolidated financial statements of Tesmec have been prepared in accordance with the International Financial Reporting Standards (hereinafter the "IFRS" or the "International Accounting Standards"), endorsed by the European Commission, in effect as at 31 December 2022. The following table shows the Group's major economic and financial indicators of the first nine months of 2023 and the financial indicators as at 30 September 2023 compared with the same period of 2022 and with 31 December 2022.
| OVERVIEW OF RESULTS | ||||||
|---|---|---|---|---|---|---|
| 30 September 2022 | Key income statement data (Euro in millions) | 30 September 2023 | ||||
| 173.5 | Operating Revenues | 193.5 | ||||
| 25.9 | EBITDA | 27.5 | ||||
| 9.7 | Operating Income | 10.3 | ||||
| 9.2 | Group Net Profit | (0.2) | ||||
| 967 | Number of employees | 1,019 | ||||
| 31 December 2022 | Key financial position data (Euro in millions) | 30 September 2023 | ||||
| 173.8 | Net Invested Capital | 233.4 | ||||
| 69.4 | Shareholders' Equity | 84.4 | ||||
| 128.4 | Group net financial indebtedness | 149.0 | ||||
| 36.9 | Net investments in property, plant and equipment, intangible assets and rights of use | 14.5 | ||||
In this section, a number of Alternative Performance Measures not envisaged by IFRS (non-GAAP measures) and used by the directors in order to allow a better assessment of the Group's operating performance are illustrated. The Alternative Performance Measures are constructed exclusively from the Group's historical accounting data and are determined in accordance with the provisions of the Guidelines on Alternative Performance Measures issued by ESMA/2015/1415 as per CONSOB Communication no. 92543 of 3 December 2015.
The Alternative Performance Measures shown below should not be interpreted as indicators of the Group's future performance:
The comments provided below refer to the comparison of the consolidated income statement figures as at 30 September 2023 with those as at 30 September 2022.
The main accounting figures for the first nine months of 2023 and 2022 are presented in the table below:
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | % of revenues | 2022 | % of revenues | 2023 vs 2022 |
| Revenues from sales and services | 193,507 | 100.0% | 173,451 | 100.0% | 20,056 |
| Cost of raw materials and consumables | (84,247) | -43.5% | (69,204) | -39.9% | (15,043) |
| Costs for services | (38,336) | -19.8% | (34,531) | -19.9% | (3,805) |
| Payroll costs | (47,374) | -24.5% | (44,697) | -25.8% | (2,677) |
| Other operating costs/revenues, net | (5,889) | -3.0% | (5,369) | -3.1% | (520) |
| Amortisation and depreciation | (17,168) | -8.9% | (16,235) | -9.4% | (933) |
| Development costs capitalised | 9,033 | 4.7% | 6,826 | 3.9% | 2,207 |
| Portion of losses/(gains) from operational Joint Ventures evaluated using the equity method |
787 | 0.4% | (553) | -0.3% | 1,340 |
| Total operating costs | (183,194) | -94.7% | (163,763) | -94.4% | (19,431) |
| Operating income | 10,313 | 5.3% | 9,688 | 5.6% | 625 |
| Financial expenses | (12,962) | -6.7% | (10,600) | -6.1% | (2,362) |
| Financial income | 3,532 | 1.8% | 14,841 | 8.6% | (11,309) |
| Portion of losses/(gains) from associated companies and non-operational Joint Ventures evaluated using the equity method |
(14) | 0.0% | 44 | 0.0% | (58) |
| Pre-tax profit/(loss) | 869 | 0.4% | 13,973 | 8.1% | (13,104) |
| ARK E IR |
|---|
| CERTIFIED |
| Income tax | (680) | -0.4% | (4,730) | -2.7% | 4,050 |
|---|---|---|---|---|---|
| Profit/(loss) for the period | 189 | 0.1% | 9,243 | 5.3% | (9,054) |
| Profit/(loss) attributable to non-controlling interests | 438 | 0.2% | (5) | 0.0% | 443 |
| Group profit/(loss) | (249) | -0.1% | 9,248 | 5.3% | (9,497) |
Total revenues as at 30 September 2023, compared to the corresponding period of the previous year, recorded an increase of 11.6%.
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | % of revenues | 2022 | % of revenues | 2023 vs 2022 |
| Sales of products | 144,699 | 74.8% | 111,275 | 64.2% | 33,424 |
| Services rendered | 35,726 | 18.5% | 43,802 | 25.3% | (8,076) |
| Changes in work in progress | 13,082 | 6.8% | 18,374 | 10.6% | (5,292) |
| Total revenues from sales and services | 193,507 | 100.0% | 173,451 | 100.0% | 20,056 |
Services rendered mainly concern the trencher segment and are represented by the machine rental business carried out in the United States, France, North Africa and Oceania.
The Group's turnover is produced abroad for 78.9% and, in particular, in non-EU countries. The revenue analysis by geographic area is indicated below with a comparison between the first nine months of 2023 and the same period of 2022. It should be noted that the percentage drop in sales in Italy was due to the Trencher and Rail segments, for which the foreign component had a greater weight during the period.
It is emphasised that the segmentation by geographic area is determined by the country where the customer is located, regardless of where project activities are organised.
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | % of revenues | 2022 | % of revenues | 2023 vs 2022 |
| Italy | 40,828 | 21.1% | 51,633 | 29.8% | (10,805) |
| Europe | 46,511 | 24.0% | 32,826 | 18.9% | 13,685 |
| Middle East | 28,417 | 14.7% | 19,523 | 11.3% | 8,894 |
| Africa | 8,049 | 4.2% | 6,883 | 4.0% | 1,166 |
| North and Central America | 37,694 | 19.5% | 33,202 | 19.1% | 4,492 |
| BRIC and Others | 32,008 | 16.5% | 29,384 | 16.9% | 2,624 |
| Total revenues | 193,507 | 100.0% | 173,451 | 100.0% | 20,056 |
Operating costs net of depreciation and amortisation as at 30 September 2023, compared to the corresponding period of the previous year, recorded an increase of 12.5%.
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | % of revenues | 2022 | % of revenues | 2023 vs 2022 |
| Cost of raw materials and consumables | (84,247) | -43.5% | (69,204) | -39.9% | (15,043) |
| Costs for services | (38,336) | -19.8% | (34,531) | -19.9% | (3,805) |
| Payroll costs | (47,374) | -24.5% | (44,697) | -25.8% | (2,677) |
| Other operating costs/revenues, net | (5,889) | -3.0% | (5,369) | -3.1% | (520) |
| Development costs capitalised | 9,033 | 4.7% | 6,826 | 3.9% | 2,207 |
| Portion of losses/(gains) from operational Joint Ventures evaluated using the equity method |
787 | 0.4% | (553) | -0.3% | 1,340 |
|---|---|---|---|---|---|
| Operating costs net of depreciation and amortisation | (166,026) | -85.8% | (147,528) | -85.1% | (18,498) |
The table shows an increase in operating costs of Euro 18,498 thousand. This increase in cost reflects:
with regard to raw materials, consumables and services, the increase in sales, with different product mix;
with regard to labor costs, the impact of inflation, remuneration policy and increase in the workforce;
As a result of the foregoing, EBITDA amounted to Euro 27,481 thousand, up on the figure recorded in the first nine months of 2023 when it was equal to Euro 25,923 thousand.
A restatement of the income statement figures representing the performance of EBITDA is provided below:
| As at 30 September | |||||||
|---|---|---|---|---|---|---|---|
| (Euro in thousands) | 2023 % of revenues 2022 % of revenues 2023 vs 2022 |
||||||
| Operating income | 10,313 | 5.3% | 9,688 | 5.6% | 625 | ||
| + Amortisation and depreciation | 17,168 | 8.9% | 16,235 | 9.4% | 933 | ||
| EBITDA | 27,481 | 14.2% | 25,923 | 14.9% | 1,558 |
EBITDA amounted to Euro 27,481 thousand, up from Euro 25,923 thousand as at 30 September 2022 2022 and is positively impacted by commercial development on new international markets and by a better sales mix, in particular in the Trencher and Energy segment.
| As at 30 September | ||||||
|---|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | % of revenues | 2022 | % of revenues | 2023 vs 2022 | |
| Net financial income/expenses | (7,847) | -4.1% | (4,774) | -2.8% | (3,073) | |
| Foreign exchange gains/losses | (1,403) | -0.7% | 8,199 | 4.7% | (9,602) | |
| Fair value adjustment of derivative instruments on exchange rates | (180) | -0.1% | 816 | 0.5% | (996) | |
| Portion of losses/(gains) from associated companies and non operational Joint Ventures evaluated using the equity method |
(14) | 0.0% | 44 | 0.0% | (58) | |
| Total net financial income/expenses | (9,444) | -4.9% | 4,285 | 2.5% | (13,729) |
The net financial management result decreased compared to the same period in the previous financial year by a total of Euro -13,729 thousand, due to:
The tables below show the income statement figures as at 30 June 2023 compared to those as at 30 June 2022, broken down into three operating segments.
| As at 30 September | ||||||
|---|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | % of revenues | 2022 | % of revenues | 2023 vs 2022 | |
| Energy | 49,305 | 25.5% | 37,907 | 21.9% | 11,398 | |
| Trencher | 106,164 | 54.9% | 99,076 | 57.1% | 7,088 | |
| Rail | 38,038 | 19.7% | 36,468 | 21.0% | 1,570 | |
| Total Revenues | 193,507 | 100.0% | 173,451 | 100.0% | 20,056 |
In the first nine months of 2023, the Group consolidated revenues of Euro 193,507 thousand, with an increase of Euro 20,056 thousand (equal to 11.6%) compared to Euro 173,451 thousand in the same period of the previous year. This result is the combined effect of different trends in the three segments:
The table below shows EBITDA figures as at 30 September 2023 compared to those as at 30 September 2022, broken down into three operating segments:
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | % of revenues | 2022 | % of revenues | 2023 vs 2022 |
| Energy | 7,210 | 14.6% | 5,159 | 13.6% | 2,051 |
| Trencher | 13,439 | 12.7% | 10,786 | 10.9% | 2,653 |
| Rail | 6,832 | 18.0% | 9,978 | 27.4% | (3,146) |
| EBITDA | 27,481 | 14.2% | 25,923 | 14.9% | 1,558 |
This result is the combined effect of different trends in the three segments:
the Rail segment had an EBITDA of Euro 6,832 thousand (or 18.0% of Revenues), down Euro 3,146 thousand from Euro 9,978 thousand as at 30 September 2022. The segment generated lower margins compared to the first nine months of the previous year, due to a contingent situation of a different order mix, expected to improve starting from the next quarters.
Information is provided below on the Group's main equity indicators as at 30 September 2023 compared to 31 December 2022. In particular, the following table shows the reclassified funding sources and uses from the consolidated statement of financial position as at 30 September 2023 and as at 31 December 2022:
| (Euro in thousands) | As at 30 September 2023 | As at 31 December 2022 |
|---|---|---|
| USES | ||
| Net working capital | 105,562 | 80,631 |
| Fixed assets | 109,457 | 111,658 |
| Other long-term assets and liabilities | 18,362 | 19,452 |
| Net invested capital | 233,381 | 211,741 |
| SOURCES | ||
| Net financial indebtedness | 148,994 | 128,364 |
| Shareholders' equity | 84,387 | 83,377 |
| Total sources of funding | 233,381 | 211,741 |
The table below shows a breakdown of "Net Working Capital" as at 30 September 2023 and 31 December 2022:
| (Euro in thousands) | As at 30 September 2023 | As at 31 December 2022 |
|---|---|---|
| Trade receivables | 60,195 | 56,229 |
| Work in progress contracts | 29,694 | 24,973 |
| Inventories | 117,521 | 101,411 |
| Trade payables | (85,792) | (74,178) |
| Other current assets/(liabilities) | (16,056) | (27,804) |
| Net working capital | 105,562 | 80,631 |
Net working capital amounted to Euro 105,562 thousand, marking an increase of Euro 24,931 thousand (equal to 30.9%) compared to 31 December 2022. This trend is mainly due to the increase in the item "Inventories" of Euro 16,110 thousand, this value represents the peak of working capital whose reabsorption - and more precisely of stocks - proceeded more slowly than expected, but which is also confirmed to continue in the fourth quarter of the current financial year.
The table below shows a breakdown of "Fixed assets" as at 30 September 2023 and 31 December 2022:
| (Euro in thousands) | As at 30 September 2023 | As at 31 December 2022 |
|---|---|---|
| Intangible assets | 36,163 | 32,293 |
| Property, plant and equipment | 47,867 | 51,759 |
| Rights of use | 19,110 | 21,939 |
|---|---|---|
| Equity investments in associates | 6,276 | 5,639 |
| Other equity investments | 41 | 28 |
| Fixed assets | 109,457 | 111,658 |
The total of fixed assets recorded a net decrease of Euro 2,201 thousand compared to 31 December 2022.
The table below shows a breakdown of "Net financial indebtedness" as at 30 September 2023 and 31 December 2022:
| (Euro in thousands) | As at 30 September 2023 |
of which with related parties and group |
As at 31 December 2022 |
of which with related parties and group |
|---|---|---|---|---|
| Cash and cash equivalents | (35,369) | (50,987) | ||
| Current financial assets | (27,711) | (1,580) | (17,163) | (2,596) |
| Current financial liabilities | 94,693 | 1,081 | 80,086 | 4,144 |
| Current financial liabilities from rights of use | 8,082 | 7,280 | ||
| Current portion of derivative financial instruments | - | - | ||
| Current financial indebtedness | 39,695 | (499) | 19,216 | 1,548 |
| Non-current financial liabilities | 96,100 | 1,899 | 92,376 | - |
| Non-current financial liabilities from rights of use | 13,199 | 16,772 | ||
| Non-current portion of derivative financial instruments | - | - | ||
| Non-current financial indebtedness | 109,299 | 1,899 | 109,148 | - |
| Net financial indebtedness pursuant to CONSOB Communication no. DEM/6064293/2006 |
148,994 | 1,400 | 128,364 | 1,548 |
| Trade payables and other non-current payables | - | - | ||
| Group net financial indebtedness | 148,994 | 1,400 | 128,364 | 1,548 |
In the first nine months of 2023, the Group's net financial indebtedness increased by Euro 20,630 thousand compared to the figure as at 31 December 2022 and it decreased compared to the amount recorded as at 30 June 2023 (Euro 150,317 thousand). This change is due to the increase in net working capital of Euro 24,931 thousand and to the negative cash flow for the period of Euro 4,301 thousand including changes in financial items related to the application of IFRS 16.
The net financial indebtedness prior to the application of IFRS 16, as at 30 September 2023, is equal to Euro 127,713 thousand with an increase of Euro 104,312 thousand compared to the end of 2022.
With reference to cash and cash equivalents as at 30 September 2023, they amounted to Euro 35,369 thousand, a decrease of Euro 15,618 thousand compared to the value of Euro 50,987 thousand as at 31 December 2022, due to both the repayment of medium/long-term loans for the period and the financing of working capital requirements for the period. Current financial liabilities increased from Euro 80,086 thousand at 31 December 2022 to Euro 94,693 thousand as at 30 September 2023, while non-current financial liabilities amounted to Euro 96,100 thousand as at 30 September 2023, a slight increase from Euro 92,376 thousand, due to new medium/long-term lines obtained in the period, net of the amount reclassified among current liabilities for repayments in the next 12 months.
The existing loan agreements and bond issues contractually provide for the calculation of the financial covenants based on net financial indebtedness calculated on the consolidated financial statements as at 31 December and prior to the application of IFRS 16. The loan agreement of the subsidiary Tesmec USA, Inc. provides for financial covenants to be calculated quarterly on the combined financial statements of the Group's US subsidiaries. As at 30 September 2023, these parameters were met. Please refer to the foregoing discussion on the forward-looking assessment carried out to assess the Group's ability to meet its contractually agreed financial parameters as at 31 December 2023.
For the management of financial risks, please see the paragraph "Financial risk management policy" contained in the Explanatory Notes to the Annual Consolidated Financial Statements for 2022, where the Group's policies in relation to the management of financial risks are presented.
In compliance with the CONSOB communications of 20 February 1997, 27 February 1998, 30 September 1998, 30 September 2002 and 27 July 2006, we specify that no transactions took place with related parties of an atypical or unusual nature that are far removed from the company's normal operations or such as to harm the profits, balance sheet or financial results of the Group.
For significant intercompany and related party information, please see the paragraph "Related party transactions" in the Explanatory Notes.
The number of Group employees in the first nine months of 2023, including the employees of companies that are fully consolidated, is 1,019 persons compared to 967 in the first nine months of 2022.
The following significant events occurred after the end of the period:
In the first nine months of 2023, Tesmec continued its growth path, thanks to the ability to adapt to external challenges and anticipate market trends. The Group diversified its activities geographically and sectorally, further invested in strategic, high vitality and with growing prospective businesses, such as Trencher, with solutions for the digitalization and construction of telecommunications networks, as well as for the development of the mining sector. In addition, through its U.S. subsidiary, Tesmec can benefit from the new U.S. IRA Plan - Inflation Reduction Act - which should further favor US-based production, contributing to the 2023 financial year performance. In the Railway sector, investments to reduce congestion in road vehicles, to increase sustainable mobility, and to diagnose and maintain lines with the aim of ensuring the safety of rail transport, are yielding excellent results. In the Energy sector, the growing shift towards renewable energy sources is confirmed, with the consequent adaptation of electricity grids to new needs.
Given the positive performance of the first nine months of the year and the Management's action to accelerate the recovery of profitability and focus on cash generation, the Board of Directors of Tesmec, also considering the known developments in the geopolitical and macroeconomic/financial framework, has updated its guidance for the entire 2023 as follows:
(Not audited by the Independent Auditors)
| 30 September 2023 | 31 December 2022 | |
|---|---|---|
| (Euro in thousands) | ||
| NON-CURRENT ASSETS | ||
| Intangible assets | 36,163 | 32,293 |
| Property, plant and equipment | 47,867 | 51,759 |
| Rights of use | 19,110 | 21,939 |
| Equity investments in associates evaluated using the equity method | 6,276 | 5,639 |
| Other equity investments | 41 | 28 |
| Financial receivables and other non-current financial assets | 7,774 | 10,549 |
| Derivative financial instruments | 573 | 753 |
| Deferred tax assets | 18,705 | 16,349 |
| Non-current trade receivables | 2,788 | 1,754 |
| Other non-current assets | 1,211 | 1,204 |
| TOTAL NON-CURRENT ASSETS | 140,508 | 142,267 |
| CURRENT ASSETS | ||
| Work in progress contracts | 29,694 | 24,973 |
| Inventories | 117,521 | 101,411 |
| Trade receivables | 60,195 | 56,229 |
| of which with related parties: | 3,783 | 2,027 |
| Tax receivables | 4,192 | 2,412 |
| Financial receivables and other current financial assets | 27,711 | 17,163 |
| of which with related parties: | 1,580 | 2,596 |
| Other current assets | 18,634 | 12,252 |
| Cash and cash equivalents | 35,369 | 50,987 |
| TOTAL CURRENT ASSETS | 293,316 | 265,427 |
| TOTAL ASSETS | 433,824 | 407,694 |
| SHAREHOLDERS' EQUITY | ||
| SHAREHOLDERS' EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS | ||
| Share capital | 15,702 | 15,702 |
| Reserves/(deficit) | 65,952 | 57,290 |
| Group net profit/(loss) | (249) | 7,862 |
| TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS | 81,405 | 80,854 |
| Capital and reserves/(deficit) attributable to non-controlling interests | 2,544 | 2,469 |
| Net profit/(loss) for the period attributable to non-controlling interests | 438 | 54 |
| TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS | 2,982 | |
| TOTAL SHAREHOLDERS' EQUITY | 84,387 | 2,523 83,377 |
| NON-CURRENT LIABILITIES | ||
| Medium/long-term loans | 96,100 | 91,130 |
| of which with related parties: | 1,899 | - |
| Bond issue | - | 1,246 |
| Non-current financial liabilities from rights of use | 13,199 | 16,772 |
| Employee benefit liability | 4,077 | 3,958 |
| Deferred tax liabilities | 8,612 | 7,199 |
| TOTAL NON-CURRENT LIABILITIES | 121,988 | 120,305 |
| CURRENT LIABILITIES | ||
|---|---|---|
| Interest-bearing financial payables (current portion) | 92,205 | 76,369 |
| of which with related parties: | 1,081 | 4,144 |
| Bond issue | 2,488 | 3,717 |
| Current financial liabilities from rights of use | 8,082 | 7,280 |
| Derivative financial instruments | - | |
| Trade payables | 85,792 | 74,178 |
| of which with related parties: | 1,216 | 1,177 |
| Advances from customers | 8,626 | 12,574 |
| Income taxes payable | 4,551 | 4,421 |
| Provisions for risks and charges | 3,160 | 3,759 |
| Other current liabilities | 22,545 | 21,714 |
| TOTAL CURRENT LIABILITIES | 227,449 | 204,012 |
| TOTAL LIABILITIES | 349,437 | 324,317 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 433,824 | 407,694 |
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2023 | 2022 | |||
| Revenues from sales and services | 193,507 | 173,451 | |||
| of which with related parties: | 8,833 | 10,712 | |||
| Cost of raw materials and consumables | (84,247) | (69,204) | |||
| of which with related parties: | (190) | (8) | |||
| Costs for services | (38,336) | (34,531) | |||
| of which with related parties: | 54 | (105) | |||
| Payroll costs | (47,374) | (44,697) | |||
| Other operating costs/revenues, net | (5,889) | (5,369) | |||
| of which with related parties: | 98 | 188 | |||
| Amortisation and depreciation | (17,168) | (16,235) | |||
| Development costs capitalised | 9,033 | 6,826 | |||
| Portion of losses/(gains) from operational Joint Ventures evaluated using the equity method |
787 | (553) | |||
| Total operating costs | (183,194) | (163,763) | |||
| Operating income | 10,313 | 9,688 | |||
| Financial expenses | (12,962) | (10,600) | |||
| of which with related parties: | (301) | (364) | |||
| Financial income | 3,532 | 14,841 | |||
| of which with related parties: | 55 | 92 | |||
| Portion of losses/(gains) from associated companies and non operational Joint Ventures evaluated using the equity method |
(14) | 44 | |||
| Pre-tax profit/(loss) | 869 | 13,973 | |||
| Income tax | (680) | (4,730) | |||
| Profit/(loss) for the period | 189 | 9,243 | |||
| Profit/(loss) attributable to non-controlling interests | 438 | (5) | |||
| Group profit/(loss) | (249) | 9,248 | |||
| Basic and diluted earnings/(losses) per share | (0.0004) | 0.0152 |
| As at 30 September | ||||
|---|---|---|---|---|
| (Euro in thousands) | 2023 | 2022 | ||
| PROFIT/(LOSS) FOR THE PERIOD | 189 | 9,243 | ||
| Other components of comprehensive income: | ||||
| Other components of comprehensive income that will be subsequently reclassified to net income/(loss) for the period: |
||||
| Exchange differences on conversion of foreign financial statements | 693 | 4,400 | ||
| Other changes | 128 | - | ||
| Other components of comprehensive income that will not be subsequently reclassified to net income/(loss) for the period: |
||||
| Actuarial profit/(loss) on defined benefit plans | - | 615 | ||
| Income tax | - | (148) | ||
| - | 467 | |||
| Total other income/(losses) after tax | 821 | 4,867 | ||
| Total comprehensive income (loss) after tax | 1,010 | 14,110 | ||
| Attributable to: | ||||
| Shareholders of Parent Company | 551 | 14,064 | ||
| Non-controlling interests | 459 | 46 |
| As at 30 September | ||
|---|---|---|
| (Euro in thousands) | 2023 | 2022 |
| CASH FLOW FROM OPERATING ACTIVITIES | ||
| Profit/(loss) for the period | 189 | 9,243 |
| Adjustments to reconcile net income for the period with the cash flows generated by (used in) operating activities: |
||
| Amortisation and depreciation | 17,168 | 16,235 |
| Provisions for employee benefit liability | 1,277 | 403 |
| Provisions for risks and charges/inventory obsolescence/doubtful accounts | 2,401 | 2,179 |
| Employee benefit payments | (1,161) | (347) |
| Payments of provisions for risks and charges | (851) | (117) |
| Net change in deferred tax assets and liabilities | (1,166) | 1,010 |
| Change in fair value of financial instruments | 180 | (816) |
| Change in current assets and liabilities: | ||
| Trade receivables | (10,026) | (13,852) |
| of which with related parties: | (1,756) | (7,985) |
| Inventories | (22,325) | (14,593) |
| Trade payables | 13,399 | 12,615 |
| of which with related parties: | 41 | 82 |
| Other current assets and liabilities | (7,279) | (3,367) |
| NET CASH FLOW GENERATED BY OPERATING ACTIVITIES (A) | (8,194) | 8,593 |
| CASH FLOW FROM INVESTING ACTIVITIES | ||
| Investments in property, plant and equipment | (8,323) | (6,757) |
| Investments in intangible assets | (10,035) | (8,792) |
| Investments in Rights of use | (2,987) | (4,415) |
| (Investments)/disposals of financial assets | (8,355) | (14,323) |
| of which with related parties: | 1,016 | 4,781 |
| Change in the consolidation area | (3,632) | |
| Proceeds from sale of property, plant and equipment, intangible assets and rights of use | 6,894 | 7,317 |
| NET CASH FLOW USED IN INVESTING ACTIVITIES (B) | (22,806) | (30,602) |
| NET CASH FLOW FROM FINANCING ACTIVITIES | ||
| Disbursement of medium/long-term loans | 32,754 | 15,316 |
| of which with related parties: | (1,899) | (3,263) |
| Recognition of financial liabilities from rights of use | 3,311 | 6,012 |
| Repayment of medium/long-term loans | (29,789) | (13,912) |
| Repayment of financial liabilities from rights of use | (6,047) | (7,179) |
| Net change in short-term financial debt | 15,240 | 4,125 |
| of which with related parties: | (3,063) | 4,052 |
| Change in the consolidation area | - | 2,479 |
| Other changes from comprehensive income statement | 128 | - |
| NET CASH FLOW GENERATED BY/(USED IN) FINANCING ACTIVITIES (C) | 15,597 | 6,841 |
| TOTAL CASH FLOW FOR THE PERIOD (D=A+B+C) | (15,403) | (15,168) |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (E) | (215) | 1,410 |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD (F) | 50,987 | 50,189 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (G=D+E+F) | 35,369 | 36,431 |
| Additional information: | ||
| Interest paid | 8,750 | 5,571 |
| Income tax paid | 1,138 | 584 |
| (Euro in thousands) | Share capital |
Legal reserve |
Share premium reserve |
Reserve of treasury shares |
Translation reserve |
Other reserves |
Net profit/(loss) for the period |
Total shareholders' equity attributable to Parent Company shareholders |
Total shareholders' equity attributable to non controlling interests |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 1 January 2023 | 15,702 | 2,141 | 39,215 | (2,341) | 3,873 | 14,402 | 7,862 | 80,854 | 2,523 | 83,377 |
| Profit/(loss) for the period | - | - | - | - | - | - | (249) | (249) | 438 | 189 |
| Other changes | - | - | - | - | 128 | - | - | 128 | - | 128 |
| Other profits/(losses) | - | - | - | - | 672 | - | 672 | 21 | 693 | |
| Comprehensive income statement | - | - | - | - | 800 | - | (249) | 551 | 459 | 1,010 |
| Allocation of profit for the period | - | - | - | - | - | 7,862 | (7,862) | - | - | - |
| Balance as at 30 September 2023 | 15,702 | 2,141 | 39,215 | (2,341) | 4,673 | 22,264 | (249) | 81,405 | 2,982 | 84,387 |
| (Euro in thousands) | Share capital |
Legal reserve |
Share premium reserve |
Reserve of treasury shares |
Translation reserve |
Other reserves |
Net profit/(loss) for the period |
Total shareholders' equity attributable to Parent Company shareholders |
Total shareholders' equity attributable to non controlling interests |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 1 January 2022 | 15,702 | 2,141 | 39,215 | (2,341) | 3,886 | 12,769 | 1,195 | 72,567 | 75 | 72,642 |
| Profit/(loss) for the period | - | - | - | - | - | - | 9,248 | 9,248 | (5) | 9,243 |
| Other profits/(losses) | - | - | - | - | 4,349 | 467 | 4,816 | 51 | 4,867 | |
| Comprehensive income statement | - | - | - | - | 4,349 | 467 | 9,248 | 14,064 | 46 | 14,110 |
| Change in the consolidation area | - | - | - | - | - | 40 | - | 40 | 2,439 | 2,479 |
| Allocation of profit for the period | - | - | - | - | - | 1,195 | (1,195) | - | - | - |
| Balance as at 30 September 2022 | 15,702 | 2,141 | 39,215 | (2,341) | 8,235 | 14,471 | 9,248 | 86,671 | 2,560 | 89,231 |
The Parent Company Tesmec S.p.A. (hereinafter "Parent Company" or "Tesmec") is a legal entity organised in accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA STAR Segment of the Milan Stock Exchange as from 1 July 2010. The registered office of the Tesmec Group (hereinafter "Group" or "Tesmec Group") is in Milan, Piazza S. Ambrogio 16.
The interim consolidated report on operations as at 30 September 2023 was prepared in condensed form. Since the interim consolidated report on operations does not disclose all the information required in preparing the consolidated annual financial statements or interim financial statements in accordance with IAS 34, it must be read together with the consolidated financial statements as at 31 December 2022.
The accounting standards adopted in preparing this interim consolidated report on operations as at 30 September 2023 are those adopted for preparing the consolidated financial statements as at 31 December 2022 in compliance with IFRS, to which reference is made for full details. Note that the standards and interpretations approved by the European Union and that came into force for the first time on 1 January 2023 have no particular relevance for the Group. Moreover, the Group has not adopted in advance any other principle, interpretation or modification published but not yet in force.
The interim consolidated report on operations as at 30 September 2023 comprises the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, statement of changes in consolidated shareholders' equity, consolidated statement of cash flows. Comparative figures are disclosed (31 December 2022 for the statement of financial position and the third quarter of 2022 for the consolidated income statement, consolidated statement of comprehensive income, statement of changes in shareholders' equity and cash flow statement).
More precisely, the consolidated statement of financial position, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in shareholders' equity and the consolidated statement of cash flows are drawn up in extended form and are in the same format adopted for the consolidated financial statements as at 31 December 2022.
The interim consolidated report on operations is presented in Euro. The balances in the financial statements and notes to the financial statements are expressed in thousands of Euro, except where specifically indicated.
Disclosure of the interim consolidated report on operations of the Tesmec Group for the period ended 30 September 2023 was authorised by the Board of Directors on 6 November 2023.
The exchange rates used to determine the value in Euros of the financial statements of subsidiary companies expressed in foreign currency (exchange rate to Euro 1) are shown below:
| Average exchange rates for the | End-of-period exchange rate | |||||
|---|---|---|---|---|---|---|
| period ended 30 September | as at 30 September | |||||
| 2023 | 2022 | 2023 | 2022 | |||
| US Dollar | 1.083 | 1.064 | 1.059 | 0.975 | ||
| Russian Rouble | 90.465 | 75.069 | 103.163 | 55.406 | ||
| South African Rand | 19.887 | 16.952 | 19.981 | 17.535 |
| Renminbi | 7.624 | 7.019 | 7.735 | 6.937 |
|---|---|---|---|---|
| Qatari Riyal | 3.943 | 3.872 | 3.856 | 3.548 |
| Algerian Dinar | 147.368 | 152.183 | 145.658 | 137.057 |
| Tunisian Dinar | 3.350 | 3.240 | 3.352 | 3.179 |
| Australian Dollar | 1.621 | 1.504 | 1.634 | 1.508 |
| New Zealand Dollar | 1.755 | 1.647 | 1.758 | 1.718 |
| Saudi Riyal | 4.062 | 3.989 | 3.973 | 3.656 |
| CFA Franc | 655.957 | 655.957 | 655.957 | 655.957 |
| GNF Franc | 9,224.179 | 9,300.010 | 8,991.354 | 8,386.382 |
| Moroccan Dinar | 10.961 | 10.580 | 10.917 | 10.714 |
As at 30 September 2023, the consolidation area did not change with respect to that as at 31 December 2022.
The accounting standards adopted for the preparation of the interim condensed consolidated financial statements are the same as those adopted for the preparation of the consolidated financial statements for the year ended 31 December 2022, with the exception of the adoption as of 1 January 2023 of the new standards and amendments. The Group has not adopted in advance any new standard, interpretation or amendment issued but not yet in force.
Several amendments are applied for the first time in 2023 but have no impact on the Group's interim consolidated financial report.
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a new accounting standard for insurance contracts that considers recognition and measurement, presentation and disclosure. IFRS 17 replaces IFRS 4 Insurance Contracts issued in 2005. IFRS 17 applies to all types of insurance contracts (e.g. life, non-life, direct insurance and reinsurance), regardless of the type of entity that issues them, as well as to certain guarantees and financial instruments with discretionary participation features; some exceptions apply with regard to the scope of application. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. Contrary to the requirements of IFRS 4, which are largely based on maintaining previous local accounting standards, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. IFRS 17 is based on a general model, supplemented by:
These amendments are not relevant to the interim consolidated financial report of the Group.
The amendments to IAS 8 clarify the distinction between changes in accounting estimates, changes in accounting policies and corrections of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.
These amendments are not relevant to the interim consolidated financial report of the Group.
The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and examples to help entities apply materiality judgements to the disclosure of accounting standards. The amendments aim to help entities provide more useful accounting policy disclosures by replacing the requirement for entities to disclose their "significant" accounting policies with a requirement to disclose their "material" accounting policies and by adding guidance on how entities apply the concept of materiality in making accounting policy disclosure decisions.
The amendments had no impact on the Group's interim condensed consolidated financial statements, but are expected to have an impact on the disclosure of accounting policies in the Group's consolidated annual financial statements.
The amendments to IAS 12 Income Taxes narrow the scope of the exception to initial recognition so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases and dismantling liabilities. These amendments are not relevant to the interim consolidated financial report of the Group.
For management purposes, the Tesmec Group is organised into strategic business units identified based on the goods and services provided, and presents three operating segments for disclosure purposes:
machines and integrated systems for overhead and underground stringing of power lines and fibre optic cables; integrated solutions for the streamlining, management and monitoring of low, medium and high voltage power lines (smart grid solutions).
Trencher segment
Machines and integrated systems for the installation, maintenance and diagnostics of the railway catenary wire system, plus customised machines for special operations on the line.
No operating segment has been aggregated in order to determine the indicated operating segments that are the subject of the reporting.
| As at 30 September | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||||||
| (Euro in thousands) | Energy | Trencher | Rail | Consolidated | Energy | Trencher | Rail | Consolidated | ||||
| Revenues from sales and services |
49,305 | 106,164 | 38,038 | 193,507 | 37,907 | 99,076 | 36,468 | 173,451 | ||||
| Operating costs net of depreciation and amortisation |
(42,095) | (92,725) | (31,206) | (166,026) | (32,748) | (88,290) | (26,490) | (147,528) | ||||
| EBITDA | 7,210 | 13,439 | 6,832 | 27,481 | 5,159 | 10,786 | 9,978 | 25,923 | ||||
| Amortisation and depreciation | (3,591) | (10,514) | (3,063) | (17,168) | (3,588) | (9,723) | (2,924) | (16,235) | ||||
| Total operating costs | (45,686) | (103,239) | (34,269) | (183,194) | (36,336) | (98,013) | (29,414) | (163,763) | ||||
| Operating income | 3,619 | 2,925 | 3,769 | 10,313 | 1,571 | 1,063 | 7,054 | 9,688 | ||||
| Net financial income/(expenses) |
(9,444) | 4,285 | ||||||||||
| Pre-tax profit/(loss) | 869 | 13,973 | ||||||||||
| Income tax | (680) | (4,730) | ||||||||||
| Profit/(loss) for the period | 189 | 9,243 | ||||||||||
| Profit/(loss) attributable to non-controlling interests |
438 | (5) | ||||||||||
| Group profit/(loss) | (249) | 9,248 |
The directors monitor separately the results achieved by the business units in order to make decisions on resources, allocation and performance assessment. Segment performance is assessed based on operating income.
Group financial management (including financial income and charges) and income tax are managed at Group level and are not allocated to the individual operating segments.
The following table shows the consolidated statement of financial position by operating segment as at 30 September 2023 and as at 31 December 2022:
| As at 30 September 2023 | As at 31 December 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Euro in thousands) | Energy | Trencher | Rail | Not allocated |
Consolidated | Energy | Trencher | Rail | Not allocated |
Consolidated |
| Intangible assets | 14,001 | 10,653 | 11,509 | - | 36,163 | 11,612 | 10,143 | 10,538 | - | 32,293 |
| Property, plant and equipment | 3,460 | 34,334 | 10,073 | - | 47,867 | 3,148 | 38,731 | 9,880 | - | 51,759 |
| Rights of use | 845 | 17,715 | 550 | - | 19,110 | 660 | 20,591 | 688 | - | 21,939 |
| Financial assets | 5,585 | 4,283 | 4,796 | - | 14,664 | 4,935 | 2,545 | 5,208 | 4,281 | 16,969 |
| Other non-current assets | 1,622 | 19,969 | 1,113 | - | 22,704 | 1,693 | 7,528 | 639 | 9,447 | 19,307 |
| Total non-current assets | 25,513 | 86,954 | 28,041 | - | 140,508 | 22,048 | 79,538 | 26,953 | 13,728 | 142,267 |
| Work in progress contracts | 4,576 | - | 25,118 | - | 29,694 | 2,908 | - | 22,065 | - | 24,973 |
| Inventories | 30,668 | 78,039 | 8,814 | - | 117,521 | 24,903 | 68,744 | 7,764 | - | 101,411 |
| Trade receivables | 11,140 | 48,490 | 565 | - | 60,195 | 9,270 | 37,700 | 9,259 | - | 56,229 |
| Other current assets | 3,573 | 31,236 | 15,728 | - | 50,537 | 1,646 | 9,021 | 10,436 | 10,724 | 31,827 |
| Cash and cash equivalents | 3,216 | 6,845 | 8,074 | 17,234 | 35,369 | 3,947 | 8,685 | 14,227 | 24,128 | 50,987 |
| Total current assets | 53,173 | 164,610 | 58,299 | 17,234 | 293,316 | 42,674 | 124,150 | 63,751 | 34,852 | 265,427 |
| Total assets | 78,686 | 251,564 | 86,340 | 17,234 | 433,824 | 64,722 | 203,688 | 90,704 | 48,580 | 407,694 |
| Shareholders' equity attributable to Parent Company shareholders |
- | - | - | 81,405 | 81,405 | - | - | - | 80,854 | 80,854 |
| Shareholders' equity attributable to non-controlling interests |
- | - | - | 2,982 | 2,982 | - | - | - | 2,523 | 2,523 |
| Non-current liabilities | 2,850 | 23,401 | 12,035 | 83,702 | 121,988 | 2,536 | 17,760 | 11,474 | 88,535 | 120,305 |
| Current financial liabilities | 10,744 | 4,571 | 10,898 | 68,480 | 94,693 | 3,158 | 5,397 | 13,950 | 57,581 | 80,086 |
| Current financial liabilities from rights of use |
244 | 5,182 | 119 | 2,537 | 8,082 | 263 | 4,210 | 142 | 2,665 | 7,280 |
| Trade payables | 24,677 | 46,492 | 14,623 | - | 85,792 | 21,760 | 39,611 | 12,807 | - | 74,178 |
|---|---|---|---|---|---|---|---|---|---|---|
| Other current liabilities | 2,422 | 22,947 | 13,513 | - | 38,882 | 1,662 | 8,668 | 18,613 | 13,525 | 42,468 |
| Total current liabilities | 38,087 | 79,192 | 39,153 | 71,017 | 227,449 | 26,843 | 57,886 | 45,512 | 73,771 | 204,012 |
| Total liabilities | 40,937 | 102,593 | 51,188 | 154,719 | 349,437 | 29,379 | 75,646 | 56,986 | 162,306 | 324,317 |
| Total shareholders' equity and liabilities |
40,937 | 102,593 | 51,188 | 239,106 | 433,824 | 29,379 | 75,646 | 56,986 | 245,683 | 407,694 |
The following table gives details of economic and equity transactions with related parties. The companies listed below have been identified as related parties as they are linked directly or indirectly to the current shareholders:
| As at 30 September 2023 | As at 30 September 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Euro in thousands) | Revenues | Cost of raw materials |
Costs for services |
Other operating costs/revenues , net |
Financial income and expenses |
Revenues | Cost of raw materials |
Costs for services |
Other operating costs/revenues , net |
Financial income and expenses |
| Associates: | ||||||||||
| Locavert S.A. | 105 | - | - | - | - | 783 | - | - | - | - |
| Subtotal | 105 | - | - | - | - | 783 | - | - | - | - |
| Joint Ventures: | ||||||||||
| Condux Tesmec Inc. | 7,698 | (190) | (1) | 208 | 53 | 5,068 | - | (15) | 175 | 34 |
| Tesmec Peninsula | - | - | - | - | - | 3,327 | - | (55) | - | 50 |
| Subtotal | 7,698 | (190) | (1) | 208 | 53 | 8,395 | - | (70) | 175 | 84 |
| Related parties: | ||||||||||
| Ambrosio S.r.l. | - | - | - | (3) | (2) | - | - | - | (2) | (2) |
| TTC S.r.l. | - | - | (41) | 16 | - | - | - | (23) | - | - |
| Dream Immobiliare S.r.l. | - | - | - | (151) | (220) | - | - | - | 5 | (266) |
| FI.IND | - | - | - | 7 | - | - | - | - | - | - |
| M.T.S. Officine meccaniche S.p.A. |
999 | - | (12) | 11 | (60) | 1,514 | (8) | (2) | 10 | (63) |
| ICS Tech. S.r.l. | 31 | - | - | 3 | - | 17 | - | - | - | - |
| TCB Sport S.r.l. | - | - | - | 2 | - | - | - | - | - | - |
| COMATEL | - | - | - | - | - | 3 | - | - | - | - |
| Triskell Conseil Partner | - | - | - | - | - | - | - | (10) | - | - |
| RX S.r.l. | - | - | - | 5 | (17) | - | - | - | - | (25) |
| Subtotal | 1,030 | - | (53) | (110) | (299) | 1,534 | (8) | (35) | 13 | (356) |
| Total | 8,833 | (190) | (54) | 98 | (246) | 10,712 | (8) | (105) | 188 | (272) |
| 30 September 2023 | 31 December 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Euro in thousands) | Trade receivables |
Current financial receivables |
Non current financial payables |
Current financial payables |
Trade payables |
Trade receivables |
Current financial receivables |
Non current financial payables |
Current financial payables |
Trade payables |
|
| Associates: | |||||||||||
| Locavert S.A. | 38 | - | - | - | - | 11 | - | - | - | 1 | |
| Primis Group S.r.l. | - | - | - | - | - | - | - | - | - | - | |
| Subtotal | 38 | - | - | - | - | 11 | - | - | - | 1 | |
| Joint Ventures: | |||||||||||
| Condux Tesmec Inc. | 3,197 | 709 | - | - | - | 1,284 | 1,725 | - | - | 14 | |
| Marais Lucas | - | 794 | - | - | - | - | 794 | - | - | - | |
| Subtotal | 3,197 | 1,503 | - | - | - | 1,284 | 2,519 | - | - | 14 | |
| Related parties: | |||||||||||
| Ambrosio S.r.l. | - | - | - | - | 34 | - | - | - | - | 19 | |
| Dream Immobiliare S.r.l. |
- | 77 | - | - | 1,008 | - | 77 | - | - | 990 | |
| Fi.ind. | 9 | - | - | - | - | - | - | - | - | - | |
| TTC S.r.l. | - | - | - | - | 24 | - | - | - | - | - | |
| M.T.S. Officine meccaniche S.p.A. |
490 | - | 1,686 | 200 | 63 | 650 | - | - | 3,050 | 72 | |
| ICS Tech. S.r.l. | 43 | - | - | - | - | 82 | - | - | - | - | |
| COMATEL | - | - | - | - | - | - | - | - | - | - | |
| RX S.r.l. | 6 | - | 213 | 881 | 87 | - | - | - | 1,094 | 71 | |
| Triskell Conseil Partner | - | - | - | - | - | - | - | - | - | 10 | |
| Subtotal | 548 | 77 | 1,899 | 1,081 | 1,216 | 732 | 77 | - | 4,144 | 1,162 | |
| Total | 3,783 | 1,580 | 1,899 | 1,081 | 1,216 | 2,027 | 2,596 | - | 4,144 | 1,177 |
of the administrative and accounting procedures adopted to prepare the Interim consolidated report on operations as at 30 September 2023.
Grassobbio, 6 November 2023
Mr. Ambrogio Caccia Dominioni Mr. Ruggero Gambini
Chief Executive Officer Manager responsible for preparing the Company's financial statements
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