Annual Report • Aug 4, 2020
Annual Report
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REPLY HALF-YEAR FINANCIAL REPORT 2020
| BOARD OF DIRECTORS AND CONTROLLING BODIES | 4 |
|---|---|
| FINANCIAL HIGHLIGHTS | 5 |
| REPLY LIVING NETWORK | 8 |
| INTERIM FINANCIAL REPORT 2020 | 25 |
| FINANCIAL REVIEW OF THE GROUP | 26 |
| OTHER INFORMATION | 33 |
| OUTLOOK ON OPERATIONS | 34 |
| HALF YEAR CONDENSED FINANCIAL STATEMENTS AT 30 JUNE 2020 | 35 |
| NOTES | 41 |
| ANNEXED TABLES | 77 |
| ATTESTATION OF THE HALF-YEAR CONDENSED FINANCIAL STATEMENTS PURSUANT TO 154 BIS OF LEG. D NO. 58/98 | 85 |
| INDEPENDENT AUDITORS' REPORT | 86 |
2 | Half year financial report at 30 June 2020
Chairman and Chief Executive Officer Mario Rizzante
Chief Executive Officer
Tatiana Rizzante
Filippo Rizzante Daniele Angelucci Claudio Bombonato Elena Maria Previtera Fausto Forti (1) (2) (3) Secondina Giulia Ravera (1) (2) Francesco Umile Chiappetta (1) (2)
President Giorgio Mosci
Piergiorgio Re Ada Alessandra Garzino Demo
PwC S.p.A.
(1) Directors not invested with operational proxies. (2) Independent Directors according to the Corporate Governance code drawn up by the Committee for Corporate Governance (3) Lead independent director
This report has been translated into English from the original Italian version, in case of doubt the Italian version shall prevail.
4 | Half year financial report at 30 June 2020
| YE 2019 | % | Economic figures (Euros/000) |
1st half 2020 | % | 1 st half 2019 |
% |
|---|---|---|---|---|---|---|
| 1,182,528 | 100.0 | Revenues | 615,176 | 100.0 | 573,672 | 100.0 |
| 191,307 | 16.2 | Gross operating margin | 90,217 | 14.7 | 85,655 | 14.9 |
| 155,324 | 13.1 | Operating margin | 74,147 | 12.1 | 67,599 | 11.8 |
| 161,419 | 13.7 | Income before taxes | 75,138 | 12.2 | 70,216 | 12.2 |
| 113,858 | 9.6 | Group net income | 53,938 | 8.8 | 49,414 | 8.6 |
| YE 2019 | Financial figures (Euros/000) |
1st half 2020 | 1 st half 2019 |
|---|---|---|---|
| 583,722 | Group shareholders' equity | 609,890 | 517,913 |
| 3,339 | Non-controlling interest | 3,325 | 1,613 |
| 1,307,913 | Total assets | 1,211,581 | 1,106,650 |
| 87,390 | Net working capital | 70,571 | 128,086 |
| 482,030 | Net invested capital | 490,630 | 501,240 |
| 202,793 | Cash flow | 68,839 | 80,713 |
| 105,031 | Net financial position | 122,585 | 12,287 |
| YE 2019 | Data per single share (in Euros) | 1st half 2020 | 1 st half 2019 |
|---|---|---|---|
| 37,411,428 | Number of shares | 37,411,428 | 37,411,428 |
| 4.15 | Operating result per share | 1.98 | 1.81 |
| 3.04 | Net result per share | 1.44 | 1.32 |
| 5.42 | Cash flow per share | 1.84 | 2.46 |
| 15.60 | Shareholders' equity per share | 16.30 | 13.84 |
| YE 2019 | Other information | 1st half 2020 | 1 st half 2019 |
|---|---|---|---|
| 8,157 | Number of employees | 8,540 | 7,924 |
Reply is a company that specialises in consulting, system integration and digital services with a focus on the invention, design and implementation of solutions based on the new communication channels and digital media.
Composed of a network of companies, Reply partners with key industrial groups in defining and developing business models made possible by the new technological and communication paradigms such as big data, cloud computing, digital communication, the Internet of Things and mobile and social networking. In so doing, it aims to optimise and integrate processes, applications and devices.
With over 8,000 employees Reply operates through a network of companies that specialise in processes, applications and technologies and are centres of excellence in their respective fields of expertise.
Processes – for Reply, the understanding and use of technology establishes a new enabling factor for business processes, based on an in-depth market knowledge of the specific industrial contexts of implementation.
Applications – Reply designs and implements software solutions aimed at satisfying a company's core business requirements.
Technologies – Reply optimises the use of innovative technologies, by implementing solutions capable of ensuring maximum efficiency and operational flexibility for its customers.
Consulting – with a focus on strategy, communication, design, processes and technology;
System Integration – making the best use of the potential of technology, by combining business consulting with innovative technological solutions and high added value;
Digital Services – innovative services based on new communication channels and digital trends.
In every market segment in which it operates, Reply combines specific sector expertise with broad experience in the provision of services and a wealth of advanced technological capabilities.
The convergence between the physical and virtual realms is profoundly revolutionising the relationship with customers and the approach adopted by today's Telco & Media companies. In this context, increasingly competitive and "hybrid" operators are having to tackle new challenges, to which they must respond with innovative and tailor-made offers, new business models and state-of-the-art operational processes.
In this scenario, characterised by rapid and profound change, Reply is collaborating with leading players in the sector to define and implement digital transformation strategies that leverage big data, using artificial intelligence and machine learning systems to design services increasingly more suitable and better targeted to customers' needs. Moreover, thanks to its extensive expertise and knowledge of the sector and its operational dynamics, Reply is not only able to take appropriate actions to optimise processes, but also to automate them by leveraging specific Robotic Process Automation solutions.
The relationship with customers and attention to the service provided are not, however, the only aspects affected by the digital changes that are transforming the Telco sector. The ever-greater diffusion of connected objects also requires a corresponding change in networks, through a reconfiguration that enables the transmission – in real time – of huge volumes of data, no longer generated by smartphones and other mobile devices alone, but by a myriad of connected objects. Reply plays an active role in this new "smart connection" era, in which the network must adapt and reconfigure itself according to the constantly changing requirements of the user. With this in mind, Reply has defined an integrated offer of strategic and technological consulting services to support the evolution related to the 5G network and to the design, definition and management of new generation networks based on the SDN paradigms. Networks that are capable of integrating and managing virtual networks through network engineering and network operations services.
Furthermore, in recent years, networks have been innovating faster and faster, driven not only by technological developments such as 5G, but also by the separation between HW and SW, the breakdown of networks, and by cloud and edge computing, which are all becoming elements of increasing distinction for operators. The software part will increasingly cover the core of network intelligence, to leave transmission areas to be dedicated to HW devices. In this context, Reply has gained a profound experience in its projects relating to unbundled networks, combining the specialized skills of networks with the ability to create software systems in an agile way, and with highly performing development methodologies that guarantee low latency and "Carrier grade" solutions.
The digital world is radically transforming the financial institutions sector. Leading market analysts are predicting that the digital financial platforms market will explode over the next few years, both in terms of the increased number of natively digital retail customers, as well as the technological evolution towards highly scalable cloud platforms.
The growing penetration of solutions based on artificial intelligence and robotics is another powerful element of transformation, based on new decision-making models made possible by the explosion of available data (big data), the increasing digitisation of internal services/processes and interfaces with the market.
Reply accompanies European banks and insurance companies in their digital transformation. The company helps them not only in the definition of multi-channel strategies and the implementation of open banking and open insurance models, but also in allowing new architectures and technologies to coexist with legacy systems and architectures. To do this, Reply brings its extensive know-how in key areas such as big data, robotics and artificial intelligence, with the aim of improving customer interaction and developing new decision-making models to analyse risks and optimise internal operational processes through the adoption of Robotic Process Automation (RPA) techniques.
Moreover, Reply also operates in the mobile payment sector, in the m-commerce services realm and in related platforms, offering solutions, services and consultancy for the banking and insurance market, as well as for new, emerging players working on payments solutions.
Reply also boasts a strong presence in the wealth management industry, having developed specific solutions for new consultancy models, including robo-advisory platforms. Moreover, Reply is significantly active on the risk control front, operating in Europe with a consultancy division dedicated to Governance, Risk and Control (GRC). Reply also develops solutions that help financial institutions implement regulations issued by the European Banking Union and, finally, is strongly committed to innovation driven by projects linked, for example, to biometric recognition, digital identity, quantum computing and blockchain technology.
Reply invested significantly to enhance its portfolio of Industry 4.0 and Logistics 4.0 solutions, fully reengineering its proprietary solutions for supply chain execution and for the manufacturing execution system. Thanks to the integration of the IoT, cloud computing and big data paradigms, the ability to interact with the latest generation of sensors installed on production lines and products was further boosted, with the aim of creating the backbone of the next generation of applications in the logistics and manufacturing sector.
Reply also works with leading groups in the manufacturing sector in the transformation and evolution of systems in the production and distribution fields, with a specific products and services offer that integrates technological consultancy and the industrial context domain. In particular, Reply's areas of intervention concern the support of supplier and purchase management processes, the design and implementation of control and planning systems based on the new generation of cloud-based ERP solutions, the planning and control of production units and the design and definition of logistics supply networks.
One of the manufacturing sectors that underwent a major transformation is the automotive sector, particularly in terms of connected vehicles and mobility platforms. In these areas, Reply has closely followed the ACES (Autonomous, Connected, Electrical and Shared) paradigm, developing specialised skills and projects related to autonomous driving assistance, where the level of automation is taking its first steps towards level 5, in other words, driving without any human intervention. The connectivity front is another realm in which Reply collaborates with the leading OEMs to create commercial versions of V2I (Vehicle-to-Infrastructure) connectivity platforms. In this area, Reply's developments concern both on-board software applications (infotainment and telematic boxes), as well as mobile and back-end solutions for the processing of the data received and the provision of B2C and B2B services.
Electric and hybrid vehicles represent another innovative leap, a transport category for which optimising the charging process, both in terms of logistics and timeframes, is key. With this in mind, Reply has leveraged its consolidated experience in the mobile field and in the development of cloud-based platforms to design, in collaboration with client companies, platforms at the service of connected vehicles. Capable of integrating data from on-board systems with distributed network data, these platforms make it possible to calculate optimal routes between the different charging stations available. Moreover, in the Shared Mobility realm, Reply collaborated with the leading European operator in the creation of a communication control unit between vehicles and infrastructures, handling both the hardware and software development.
Finally, Reply has confirmed its leadership in the IT solutions sector for logistics, in support of the automotive industry, with projects for leading OEMs covering the entire supply chain: from production, to factory logistics, transport and after-sales distribution.
The evolution of customers' purchasing behaviour, the entry of new players into the market, e-commerce and impetus of the digitalisation of products and services have already radically and permanently changed the retail sector. In this renewed dimension, the customer experience is also transforming, becoming a differentiating element for retailers. Today, customers are increasingly demanding closer relationships with brands and expecting to be able to interact wherever they are, breaking down the boundary between physical stores and e-commerce. A fully personalised shopping experience is a prerequisite for a positive perception of the interaction with companies and brands. Consequently, data-driven strategies that include the real-time analysis of customer behaviour, as well as a perfect connection between the digital and physical world, are absolutely crucial.
Reply also supports traditional operators in adding digital capabilities to their business, integrating the most up-to-date technologies into their activities and daily interactions with the consumer. Reply collaborated with numerous European retailers to introduce voice assistants and solutions based on augmented and virtual reality, in order to radically transform the shopping experience by practically eliminating the barrier between the digital and in-store dimensions.
Increasingly advanced digital technologies are having a significant impact on the entire supply chain associated with the energy sector and with the services provided by utilities. Today, digitalisation involves all supply phases, from production to sales and all the way to consumption control. Today, Cloud computing is the most commonly used tool for primary provisioning, while the approach based on IoT models is increasingly popular in the generation and energy management sector, being used primarily to support efficiency and smart city initiatives. Moreover, the trend towards the development of "open innovation" approaches is on the rise among large companies in the sector, including through the search for collaborations with innovative start-ups.
In this context, Reply is one of the reference partners for the sector, combining knowledge of the market and of its unique processes, with a distinctive capability to design, implement and manage innovative digital solutions and technological platforms at the support of "core business".
The company's consolidated skills and expertise in the introduction of new digital technologies have been further verticalised. In addition to the definition and development of new models in the energy management sector and downstream services – areas in which Reply collaborates with energy sales companies, as well as with end customers – experiments and collaborations have continued in areas linked to blockchain technology, to advanced analytics and to artificial intelligence and its applications to the sector.
Today, technology and health are increasingly connected and healthcare is quickly evolving towards a new "ecosystem" capable of satisfying all the key steps related to patient care: from prevention to treatment and all the way to follow-up services. This model is known as "connected care" and is characterised by a double advantage, both for patients and for healthcare professionals.
On one hand, it allows citizens/patients to access information regarding their health through unified and interoperable digital platforms and to share this information in a safe and voluntary matter with doctors, nurses and other actors. On the other hand, it is possible to connect all the different actors that come into contact with the patient, in order to seamlessly integrate the various information systems, exchange data and information and ensure the availability of the patient's medical history, thus providing them with effective support throughout the diagnosis and treatment processes.
In this context, Reply is positioned as an innovative leader in the healthcare and data realms. The company combines its skills and expertise in innovative technologies such as big data, cloud computing, digital media and the Internet of Things, with its extensive healthcare know-how to offer specifically-created interoperability platforms and suites, starting from those designed for processes related to Reception and Patient Relationship Management (Appheal Reply platform), to its solutions focused on patient treatment and continuity of patient care (Ticuro Reply™ platform).
Technological innovation is the basis of Reply's growth. The company has always pursued the objective of providing its clients with the tools they need to increase flexibility and efficiency. Reply is committed to in a continuous process of research, selection and the marketing of innovative solutions for sustaining the creation of value within organisations.
Reply has been at the forefront of artificial intelligence for years and today its offer is divided into three main areas: human-machine interaction (with the development of conversation and natural language recognition systems or visual recognition systems), the automation of business processes (through Intelligent Process Automation solutions) and the creation of systems to support business decisions (data prediction and prescription).
However, in order for artificial intelligence systems to become pervasive, the availability of data must also progressively improve. Indeed, AI offers effective results, provided that relevant datasets are available, both historical and updated in real time. With this in mind, Reply supports its customers by helping them to identify sources, as well as to build and organise information and sophisticated and combined models with Reinforcement and Transfer Learning methodologies, to ensure the use of algorithms characterised by very high accuracy and performance.
This is further enhanced by Reply's expertise in providing services to enrich datasets and to improve algorithm performance. To achieve this, Reply relies on ad hoc information collection through scraping or through its proprietary crowdsourcing platform, as well as the generation of pseudo-real synthetic data, assisted by generative neural networks and 3D modelling, or leveraging the integration of data streaming services, like those of IoT origin or, in the near future, distributed on 5G networks.
Moreover, to ensure that artificial intelligence can be applied correctly, it must be introduced into real processes, particularly in the industrial sector, in a controlled, measurable and reliable manner. To address these needs, Reply offers its proprietary framework, which is capable of providing process control tools, performance monitoring, behaviour transparency and confidence in results (fairness, explainability, bias detection and mitigation).
In the future, AI will be expected to play an increasingly key role, right from the conception and design phases of each new solution. The many vertical solutions and algorithms developed in recent years for different business cases and industries, allow Reply to offer customers rapid, agile and ad hoc adaptations of AI systems, including thanks to collaborations with leading international players in AI technologies.
In the broad landscape of emerging technologies, blockchain represents a technological paradigm that, over the next few years, will be increasingly able to foster new digital ecosystems based on distributed computational infrastructures. The shared and distributed nature of blockchain-based digital registers represents an opportunity characterised by multi-industry application, with particular repercussions to the financial services sector and to the management of the supply chain. Moreover, the ability to create synergies with exponential technologies such as IoT or artificial intelligence enables the blockchain to become a convergence layer capable of supporting future data markets.
With an offer structured along the lines of consulting services, design and the implementation of solutions based on blockchain and the Distributed Ledger Technology (DLT), Reply developed the first system platform aimed at insurance companies and banks. Conceived and developed in collaboration with key partners in the insurance and university spheres, thanks to the use of smart contracts, the platform facilitates the issue and placement of parametric insurance products with reimbursement guaranteed.
Reply is also working on the development of leasing, securitisation and surety platforms. Together with the CeTIF (Research Centre in Technologies, Innovation and Financial Services) of the Cattolica University in Milan, Reply was a promoter of the first edition of the Blockchain Executive Program, a training course aimed at executive roles in companies operating in different industrial sectors.
Cloud Computing has long since become the paradigm for enabling the digital transformation. Implementing or migrating solutions in the cloud is now essential for companies, which, more than ever, are looking for support in making the most appropriate choices. With its decades of experience, Reply is able to support and guide its customers towards the best strategy, whether the latter is built on a "hybrid" approach or developed directly on the application platforms "as a service".
Microservice-based architectures have taken over in the hybrid cloud world and "container" orchestrators have established themselves as the true paradigm able to enable digital transformation, while at the same time limiting the lock-in risks. Within this framework, Reply helps its customers to develop functionality based on a continuous delivery and continuous deployment approach.
Thanks to partnerships with major international vendors including Adobe, Amazon Web Services, Google, Microsoft, Oracle, SAP and Salesforce, Reply designs, develops and implements solutions that allow customers to benefit from the most effective solutions for their needs, both in terms of the model and the technology selected. Reply is also able to offer a cloud infrastructure management service, available 24/7, to support customers, not only in the architectural component, but also at the application level. Finally, Reply completed the migration to the cloud of all its proprietary application platforms.
The data-driven approach, which today sees an increasingly widespread use within companies, is rapidly defining a new paradigm for the design and management of marketing initiatives. Indeed, once the needs of the individual customer have been interpreted, based on the data and the analysis provided by CRM platforms (i.e. Customer Relationship Management), it becomes fundamental to have tools available that are able to support the definition and the execution of highly customised one-to-one marketing campaigns and can be launched in real time, making it possible to intercept increasingly more accurate and punctual requests.
To respond to this change of scenario, Reply has created a competence centre focused on customer robotics, for the development and implementation of processes relating to direct interaction with the customer across all sales channels. Thanks to the integration of machine learning models, artificial intelligence and cognitive systems, Reply helps companies to recognise and anticipate users' needs on the various contact channels.
An approach based on data analysis, in fact, facilitates the conception, design and implementation of highly personalised services, such as recommendation systems for catalogue products and conversational systems capable of understanding and interacting independently using natural language.
Lastly, Reply is constantly investing in developing its expertise in leading CRM and e-commerce platforms and solutions, thanks to a solid ecosystem of partnerships with world leaders in the industry, including Microsoft, Oracle, SAP and Salesforce.
In recent years, cyber risks have increased dramatically, not only in terms of their frequency, but also when it comes to the severity of the consequences, leading to a large number of data security breaches involving hundreds of millions of customers, as well as significant economic damage to governments and organisations. This growth in significant attacks, together with the increased attention from regulatory bodies on issues concerning the protection of information, personal data and critical infrastructures, requires an ever-increasing commitment from companies to manage the risks associated with cyber security.
In order to respond to this increasing complexity, Reply has developed a products and services offer designed to protect the integrity of its customers' systems, from the definition of the best computer security strategies, to the identification and implementation of the most suitable technological solutions to mitigate risk. Through its extensive partnership network, Reply is able to offer in-depth knowledge of the most innovative and popular security technologies on the market and to help customers with the scouting, selection and implementation of some of the best protection solutions, particularly as pertaining to risks associated with cloud services, IoT, industry 4.0 and automation.
Reply supports its customers during all the implementation phases of an integrated protection plan: from the identification of threats and vulnerabilities to the planning, design and implementation of appropriate technological, legal, organisational and risk transfer (cyber insurance) countermeasures. Moreover, thanks to its cyber security command centre, Reply assists large organisations with advanced computer security incident management and response, as well as with threat intelligence services.
Today, the ability to manage, process and transform data into a strategic asset is a priority for companies who wish to understand better the market in which they operate as well as their customers, but also for those looking to optimise internal processes. The key is the integration between the various technologies and a conscious use of data, developing value cases through accurate metrics.
Reply combines technological expertise in data mapping and data integration, with a profound knowledge of augmented data management and augmented analytics, supported by its skills in the design of data solutions, DataOps and MLOps, in addition to defining the organisational and operational Data Enablement Labs models.
Reply supports its customers through all the stages of the data adoption process, accelerating the construction or consolidation of analysis teams and of the supporting platforms. Moreover, Reply oversees aspects relating to the technological transformation (e.g. migrating data platforms from on premise to the cloud), as well as strategic aspects (e.g. the selection of key datasets or core skillsets), with the aim of reducing the timeframes required for the implementation of success cases with a measurable ROI.
Reply strengthened its offer in the machine learning sector, by integrating specific deep learning and reinforcement learning skills and using them in commercial Machine Learning and Artificial Intelligence contexts. Moreover, it further developed its offer in the Data Academy and Data Design Thinking spheres. The main goal is to support companies in the creation of enterprise analytics platforms, as well as in making the transition from pilot projects to scalable solutions in production, thus enabling the automatic integration of predictive and prescriptive models within business processes and within new digital services.
In a world increasingly characterised by complex ecosystems, "customer-driven transformation" is the real differentiating factor in offering products and services in the B2C as well as the B2B spheres. With a view to the constant personalisation of services, Reply partners with and supports its customers in creating innovative and distinctive experiences, starting from the analysis of people's needs, strategic business objectives and technology enablers, to achieve a personalised customer journey and to help companies create products and services capable of immediate and tangible results.
A customer-centric approach also requires a transformation in the internal organisation of the company. Reply enters this scenario, by supporting organisations in managing this change and helping them to become more agile and receptive, in other words, capable of capturing the best feedback and inputs from the market, while helping them to become faster in launching new products and services.
Reply continues to invest in this area through the acquisition of new talent and expertise, further expanding its two offices in Milan and Munich which offer support to various types of customers, from start-ups to large global industrial groups.
In a world saturated with stimuli and distractions, it is absolutely key for companies to be able to establish a solid relationship with their target audience. Reply helps customers to design and implement a customer journey filled with experiences, also thanks to the use of innovative technologies and an in-depth knowledge of the user.
The foundation of the Reply philosophy consists of a personalised approach and a human-centric design. Over the years, the Company has continued to invest in creating scalable platforms and in the collection and analysis of a significant amount of data to understand user behaviour, improve marketing results and create new business opportunities, with a thought process based on an eco-system perspective rather than on a single application. To accomplish this, Reply applied the principles of Design Thinking, Lean UX and Growth Hacking and implemented social strategies and automated CRM activities, thus creating responsive and user-friendly mobile interfaces and intelligent recommendation engines.
Artificial intelligence will enable the enhancement of the digital experience over the next few years, while voice interfaces will radically change the way customers interact with a brand or make purchases.
Moreover, AI can help companies accurately predict which content is most relevant to a specific customer audience, as well as understanding what their next actions may be.
Mixed reality applications are set to become the new paradigm of digital marketing. Indeed, as a hybrid between AR and VR, Mixed Reality (MR) is expected to become the next major paradigm shift in customer experience. By combining different types of technologies, including sensors, advanced optics as well as power and the latest generation processing networks, Mixed Reality is expected to enable the user to superimpose augmented holographic digital content in space in real time, creating incredibly real scenarios. All this, in turn, will allow companies and brands to connect, interact and sell their products and services in ways that have never been possible before.
Reply is working to help companies keep up with the digital experience, accompanying them towards an extreme and successful personalisation of their communication, services and products.
When analysis and logic come together with imagination and intuition, something unexpected happens in terms of technological innovation. It is precisely on this principle that Reply has based its Data-Driven Marketing offer, which is capable of combining data science with business skills and creativity. Reply's technology and approach help companies reduce the pressure of emotion in marketing decisions, leaving room for decisions based on data analysis: an approach that makes it possible to minimise the unnecessary aspects related to advertising, for a more efficient and effective process.
Reply offers a wide range of flexible and easy-to-use Data dashboards (such as the proprietary China Beats, Pulse and Sonar platforms), which are capable of transforming the data collected into stories. The Company has also introduced the Data Creativity Score, the first data-driven system designed to quantify the level of creativity in a marketing campaign. Moreover, by applying brand personalisation models based on the principles of behavioural psychology and comparing them with the analysis of the echo generated by social media networks and buzz, Reply allows marketing experts to monitor Digital Brand Equity in real time.
These services are joined by the proprietary Advanced Analytics system, based on the latest scraping algorithms that exploit artificial intelligence and natural language processing. Thanks to this system, Reply is one of the few providers in the world capable of offering real-time tracking of a marketing campaign's ROI, thus enabling companies to reach their targets while optimising costs. Finally, with a focus on the Retail sector, Reply has created a solution capable of offering new and extraordinary opportunities for producers of consumer goods and for the retail world, by increasing the number of shop visits, optimising sales timeframes and differentiating the offer based on the specific target.
Today, it has become increasingly important to pursue a digital strategy and to try to implement it as quickly as possible. We are witnessing a constant wealth of innovation, which in turn is bringing to life a vicious circle, where the goal is to create more value for the customer and greater efficiency for the company. In an increasingly digitalised world, where information is available everywhere and transactions are carried out with a simple touch of a finger or based on voice or facial recognition, it is essential for companies to learn to differentiate themselves.
This is precisely why e-commerce must reach a new level: it can no longer be a simple catalogue or a web showcase where products are reviewed or where there is a margin of personalisation. E-commerce must learn to involve and adapt digital marketing technologies, innovative techniques such as RPA or VR/AR, artificial intelligence and other channels such as digital ads, e-mail, search engines, the mobile world, social media marketing and even physical stores, along with information derived from data and digital content. A winning mix that leads to customer engagement, higher revenue and profitability.
In other words, a transversal optimisation that impacts the entire user experience, with the aim of increasing sales across all channels. The process involves all the stages, from attracting new customers to learning about their tastes, and from completing a single purchase to the customer's choice to go back for additional purchases, all with the aim of acquiring more customers, more brands and higher sales. Reply accompanies its customers in defining this path, while enhancing business efficiency and leveraging technological innovation to help companies create more value for the end user.
To be competitive on the current market, companies must be able to innovate quickly and on a widespread basis. Over the next few years, the agile approach is expected to become crucial and will be applied to all new projects. The "cloud first" philosophy and data-based models will see a growing need to put security and data protection at the very base of the life cycle and software development cycle.
In order to excel in the digital economy, characterised by the convergence between the physical and the digital worlds, organisations must remove the boundaries between IT and business.
This will enable companies to be agile in exploiting the new developments that are available, while being careful to avoid damage to legacy systems and projects.
Reply is able to support its customers in the Enterprise Architecture sphere, thanks to an extensive and proven catalogue of architectural frameworks, methods and models (for example, the Scaled Agile Framework and SecDevops), consolidated in various projects carried out on behalf of leading industrial and financial groups in the media and services sector.
The world of video games is not immune to the relentless changes and disruptions brought about by the digital age. In recent years, very different business and consumption models have become established: on one hand, the multiplayer concept and the birth of the freemium model, while on the other hand, the growth of digital marketplaces and new hardware platforms. Other revolutions are already expected in the near future, starting from the cloud gaming model, which promises to assert itself in a very short period of time, also driven by the 5G networks that will be able to guarantee very low latency. This trend promises to lead to the introduction of new business models, as well as new ways of using such models.
In this constantly changing scenario, one of the very few constants are the players' interest in the quality of the products: from the game and the story, to the graphics and the characters. These are all elements to which Reply has always attached great importance, as evidenced by the fact that the products developed over the years still appeal on the market and continue to register the interest of users across all leading platforms, from mobile to PC and to the various consoles.
In the consumer sector, Reply's main VR product (Theseus) was included within an international gaming convention last year. Moreover, Reply is at work on a new title, to be launched in the next few years, which is expected to consolidate the company's position as one of the leading firms in the sector. In the B2B sphere, Reply has developed various games for companies looking to establish a more modern approach to dialogue with their customer base. The gaming industry has proven to be a strategic sector for Reply, which over the years has developed an offer capable of meeting the needs of brands, by helping them to exploit the potential of gaming to improve corporate communication and the relationship with customers.
Data processing power, latest-generation mechanical automation, as well as machine learning systems and artificial intelligence, are the drivers behind the fourth industrial revolution. The new Industry 4.0 models are quickly redefining production sites around the world, transforming traditional factories into closely interconnected systems capable of communicating in real time with the supply chain, logistics, sales, the actual products and the entire support and maintenance chain.
Plants are thus becoming open ecosystems that need to be able to adapt autonomously to new tasks, but also to carry out self-maintenance projects and organise input and output flows through constant communication with supply chains, while attaining levels of efficiency and control that make it possible to minimise costs and maximise results.
In this scenario, the product becomes a living component of the ecosystem: from design, to prototyping and up to production and to its after-sales dimension. The concept of the Digital Twin thus comes to life. This allows companies to maintain a digital copy of the product during its entire life cycle, starting from the traditional representation in CAD systems, to all of the subsequent phases.
Together with the Polytechnic University of Turin, Reply is working on Additive Manufacturing, a set of tools that make it possible to add the specific characteristics of additive manufacturing to MES/MOMS systems. Reply has also directly created a suite of integrated solutions, capable of making customers' production systems flexible, connected and efficient.
Reply's mission is to accompany companies throughout the transformation process: from the planning and development of solutions that open up the production sites and interconnect them to the entire digital world, to the design and implementation of solutions that are able to render products "smart", connected and digital. In addition, thanks to its data science specialists, Reply provides support in the processing of data collected by the interconnected systems, in order to develop algorithms aimed at automating production processes, in an efficient and effective manner.
A distinctive feature of Reply's offer is the availability of tools based on augmented reality and virtual reality, which can be adopted by companies to accompany people in the transition to a 4.0 approach.
Lastly, Reply is also a founding partner of two Industry 4.0 Centres in Turin and Milan, in collaboration with the Polytechnic University of Turin and the Polytechnic University of Milan.
In a digital world that is constantly evolving and where video content is growing exponentially in volume, resolution, immersive capacity and three-dimensionality, talking of virtual reality or augmented reality now seems limiting.
The increasing computing power of devices, the capacity of the networks to offer incredibly low latency levels, the evolution of computer vision machine learning algorithms, the emergence of innovative software solutions such as pixel streaming and the evolution of increasingly smaller and more powerful visors, are all phenomena that are facilitating the shift from a logic of "experimentation" to a logic of "actual adoption" of these technologies across various business scenarios.
Thanks to its expertise in this sector, Reply has introduced immersive technologies in all their forms, incorporating them into concrete projects designed to support the communication and marketing of customer brands and as a tool for improving training processes.
Training, in fact, is an area where immersive technologies offer key advantages, as they provide contextualised instructions in the field, as well as because they create real virtual environments in which customers can experiment and practice in complete safety.
Reply has also created a holographic (HoloBeam) person-to-person (P2P) communication platform designed to enable participants to see the 3D reconstruction of the other participants and to share and interact using three-dimensional elements.
It is expected that new visors and new technologies will arrive on the market in 2020. Reply's laboratories and teams focused on the analysis and study of these technologies will allow the company to maintain a leadership consultancy role in this sector.
Reply is committed to supporting companies towards a "mobile digital transformation" with a focus on a multi-channel approach. The broad portfolio of products and services in this realm touches on the themes of User Experience, Data Centric Design and Multimodal Human-Machine Interfaces, thanks to which users can access a series of services that go beyond the terminal, to include voice assistants, chatbots and onboard vehicle infotainment systems. All this translates into a "fluid" mobile experience, in which the user chooses the device and how to use it.
The increasingly better performance of devices has made it possible even for the mobile world to adopt artificial intelligence systems that enable advanced services such as object recognition, biometric data processing or a number of augmented reality extensions.
Through the experience gained over the years, Reply offers its customers a mobile factory capable of not only exploiting the potential of native development, but also of quickly moving in to new market segments, leveraging the capabilities of hybrid development. All this, based on a versatile approach that enables the creation of applications natively conceived for smartphones, tablets, wearables, TVs and cars.
Today, all key sectors have already started to experiment or consolidated their first experiences in the IoT field, starting from the automotive industry, where sizable investments in the connected car began last year, as well as in the insurance world, where this technology promises important changes in the relationship with customers, in risk management associated with policies and in the development of new targeted products.
The IoT is also crucial for the telecommunications sector, which today seems to be the most ready to handle a large number of connected objects and where the world of connected objects represents a structural opportunity to increase the top line, reduce the churn and develop the role of B2B service providers, which is an important goal in the transformation of business models.
Utilities also find themselves in the same position, with respect to which the IoT has become essential, not only to increase competitiveness, but also to generate, distribute and manage energy and energy efficiency. 2019 saw the launch of the new Reply accelerator for smart home solutions in the insurance, telecommunications and utilities sectors, with important results on a global level. Moreover, Reply's HI ConnectTM platform has also consolidated its standing in the market as an effective choice for medium and large companies in the manufacturing sector.
Indeed, manufacturing appears to be the sector that shows the most promise in terms of being significantly revolutionised by the Internet of Things, opening the doors to Industrial IoT (IIOT), in other words connectivity linked to the digital transformation of manufacturing companies in Industry 4.0. In this context, Reply is consolidating its position as a privileged partner, with the Edge Computing offer playing a key role, namely the ability to move the intelligence of some typically cloud systems such as artificial intelligence (AI) and machine learning (ML) close to where the data is produced (i.e. the production line). Moreover, Reply is also investing in 5G, a strategic element for Industry 4.0 in the near future, and on the integration of IoT cloud platforms for industry, home to the Digital Twin applications designed to enable product development and maintenance.
New technologies are emerging on the market, which make it possible to radically rethink complex problems from the computational point of view.
We are referring, of course, to the accelerated computing realm, where the basic objective is to accelerate computational workloads through the use of innovative hardware platforms.
In this context, Quantum Computing takes a leading role, as it enables the encapsulation of information within Quantum Bits (Qubits), thus taking advantage of the massive parallelisation of quantum algorithms. Quantum Computing thus makes it possible to solve problems that would normally be impossible to tackle using traditional technologies.
Reply has created a competence centre dedicated to Quantum Computing, which delved deeper into the application of different types of quantum algorithms to areas of interest to customers, some of which have already been integrated into innovative projects. Reply developed a number of optimisation solutions during the year, ranging from a logistics solution, to one concerning frequencies in telecommunications, finance and financial assets, all the way to the design of Quantum Machine Learning solutions applied to classification algorithms.
Since their arrival in the early 2000s, social media has been a key factor in social development and continues to be a tool in constant evolution. Users consume, interact, stay in touch with other users and participate, on social media platforms. Today, an entire generation does not know and is unable to conceive the world without social media. Consequently, brands are investing more and more time and resources in marketing and advertising activities on these platforms.
Within this framework, social media networks are no longer just a virtual place to post and share fun content, but also a strategic space for companies to enhance the recognition of a brand and increase user involvement. Thanks to the new technologies and features launched on a daily basis, social media has become an effective tool for funnelling marketing activities, capable of involving customers within their environment and enabling an uninterrupted experience.
With the huge number of connected users, all of varied origins and backgrounds, social media networks are able to offer an impressive amount of data. From the information obtained, to the analysis of trends and behavioural patterns, social media networks make it possible to understand users' needs and desires at an extremely detailed level, thus also enabling the optimisation of marketing campaigns.
Aware that a deep and thorough understanding of users and their habits is the basis for building a successful brand, Reply designs, manages and upgrades connected digital ecosystems, in which brand and customers meet. By combining extensive knowledge and expertise in the world of data, with a broad knowhow of content, channels, media and technology in general, Reply's international team of experts is able to create a fully connected infrastructure, made up of different digital touchpoints, where brands and customers can connect directly.
Today, networks consist of distributed "information systems" that provide real-time access to an everincreasing quantity of complex data, information and content. This use of the Internet is creating new, competitive models, based on approaches to service that depend on three fundamental components: the software platforms involved, an understanding of and expertise in the relevant processes and service management.
Reply supports its customers in this quest for innovation with services and platforms that are designed to exploit in full the new potential offered by networks and communication technologies.
Reply supports its clients in the quest for innovation with services and platforms designed to fully exploit new potentials offered by networks and by communication technologies. These platforms are:
The Half-Year report for the period ended June 30, 2020 has been prepared in accordance with the Legislative Decree. 58/1998, as amended, and the "Regolamento Emittenti" issued by Consob. The Report also conforms with the requirements of the International Financial Reporting Standards ("IFRS") issued by International Accounting Standards Board ("IASB") adopted by the European Union and has been prepared in accordance with IAS 34 – Interim Financial Reporting.
Since the start of the year, the Group has recorded a consolidated turnover of 615.2 million Euros, which is an increase of 7.2% compared to the same period in 2019.
All indicators are positive for the period. In the first half of 2020, consolidated EBITDA of 90.2 million Euros compared to the 85.7 million Euros recorded in 2019 and corresponds to 14.7% of turnover.
EBIT, from January to June, was 74.1 million Euros (67.6 million Euros in 2019), corresponding to 12.1% of turnover.
Pre-tax profit, from January to June 2020, was 75.1 million Euros (70.2 million Euros in 2019), corresponding to 12.2% of turnover.
As regards the second quarter 2020, the Group's performance was also positive, with consolidated turnover for the period of 298.2 million Euros, up by 2.8% compared to 2019.
EBITDA, from April to June 2020, amounted to 42.6 million Euros, with EBIT of 36.1 million Euros and pre-tax profit of 41.1 million Euros.
As at 30 June 2020, the Group's net financial position was positive for 122.6 million Euros, while at 31 December 2019 was positive for 105.0 million Euros.
Reply's performance is shown below in the following reclassified consolidated income statement of the first half and is compared to the corresponding figures of the previous year:
| (thousand Euros) | 1st half 2020 | % | 1st half 2019 | % |
|---|---|---|---|---|
| Revenues | 615,176 | 100.0 | 573,672 | 100.0 |
| Purchases | (10,731) | (1.7) | (11,126) | (1.9) |
| Personnel | (305,678) | (49.7) | (290,091) | (50.6) |
| Services and other costs | (209,298) | (34.0) | (187,747) | (32.7) |
| Other operating (costs)/income | 748 | 0.1 | 947 | 0.2 |
| Operating costs | (524,959) | (85.3) | (488,017) | (85.1) |
| Gross operating income (EBITDA) | 90,217 | 14.7 | 85,655 | 14.9 |
| Amortization, depreciation and write-downs | (19,409) | (3.2) | (18,014) | (3.1) |
| Other non-recurring (costs)/income | 3,339 | 0.5 | (41) | - |
| Operating income (EBIT) | 74,147 | 12.1 | 67,599 | 11.8 |
| (Loss)/gain on investments | 4,717 | 0.8 | 4,230 | 0.7 |
| Financial income/(expenses) | (3,727) | (0.6) | (1,613) | (0.3) |
| Income before taxes | 75,138 | 12.2 | 70,216 | 12.2 |
| Income taxes | (20,364) | (3.3) | (19,638) | (3.4) |
| Net income | 54,773 | 8.9 | 50,578 | 8.8 |
| Non-controlling interests | (836) | (0.1) | (1,165) | (0.2) |
| Group net income | 53,938 | 8.8 | 49,414 | 8.6 |
Reply's second quarter performance is shown below in the following reclassified consolidated income statement of the second quarter and is compared to corresponding figures of the previous second quarter:
| (thousand euros) | Q2 2020 | % | Q2 2019 | % |
|---|---|---|---|---|
| Revenues | 298,184 | 100.0 | 290,128 | 100.0 |
| Purchases | (5,327) | (1.8) | (6,399) | (2.2) |
| Personnel | (150,104) | (50.3) | (148,065) | (51.0) |
| Services and other costs | (100,357) | (33.7) | (93,027) | (32.1) |
| Other operating (costs)/income | 198 | 0.1 | 675 | 0.2 |
| Operating costs | (255,590) | (85.7) | (246,817) | (85.1) |
| Gross operating income (EBITDA) | 42,593 | 14.3 | 43,311 | 14.9 |
| Amortization, depreciation and write-downs | (9,820) | (3.3) | (9,255) | (3.2) |
| Other unusual (costs)/income | 3,339 | 1.1 | (41) | - |
| Operating income (EBIT) | 36,112 | 12.1 | 34,015 | 11.7 |
| (Loss)/gain on investments | 5,036 | 1.7 | 3,059 | 1.1 |
| Financial income/(expenses) | 48 | - | (1,063) | (0.4) |
| Income before taxes | 41,197 | 13.8 | 36,011 | 12.4 |
(*)
Region 1: ITA, USA, BRA, POL, ROU Region 2: DEU, CHE, CHN, HRV Region 3: GBR, LUX, BEL, NLD, FRA, BLR
62.5% 60.0% 30.6% 9.4% Technologies Applications Processes
The table below illustrates the Group's financial structure as at June 30, 2020, compared to December 31, 2019:
| (thousand Euros) | 30/06/2020 | % | 31/12/2019 | % | Change |
|---|---|---|---|---|---|
| Current operating assets | 429,107 | 547,134 | (118,027) | ||
| Current operating liabilities | (358,537) | (459,744) | 101,207 | ||
| Working capital, net (A) | 70,571 | 87,390 | (16,819) | ||
| Non-current assets | 520,981 | 518,170 | 2,811 | ||
| Non-current liabilities | (100,922) | (123,530) | 22,608 | ||
| Fixed capital (B) | 420,059 | 394,640 | 25,419 | ||
| Invested capital, net (A+B) | 490,630 | 100.0 | 482,030 | 100.0 | 8,600 |
| Shareholders' equity (C) | 613,215 | 125.0 | 587,061 | 121.8 | 26,155 |
| NET FINANCIAL POSITION (A+B-C) | (122,585) | (25.0) | (105,031) | (21.8) | (17,554) |
Net invested capital as at June 30, 2020, amounted to 490,630 thousand Euros, and was entirely financed by Shareholders' equity for 613,215 thousand Euros, that generated a positive net financial position of 122,585 thousand Euros.
The following table provides a breakdown of net working capital:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Work in progress | 136,803 | 75,328 | 61,474 |
| Trade receivables | 239,354 | 432,240 | (192,886) |
| Other current assets | 52,951 | 39,566 | 13,385 |
| Current operating assets (A) | 429,107 | 547,134 | (118,027) |
| Trade payables | 76,136 | 119,951 | (43,815) |
| Other current liabilities | 282,400 | 339,793 | (57,393) |
| Current operating liabilities (B) | 358,537 | 459,744 | (101,207) |
| Working capital, net (A-B) | 70,571 | 87,390 | (16,819) |
| % return on investments | 5.7% | 7.4% |
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Cash and cash equivalents, net | 253,355 | 239,571 | 13,784 |
| Current financial assets | 1,855 | 1,666 | 189 |
| Due to banks | (10,125) | (16,648) | 6,523 |
| Financial liabilities IFRS 16 | (22,508) | (20,991) | (1,517) |
| Short-term financial position | 222,578 | 203,598 | 18,980 |
| Due to banks | (25,112) | (25,846) | 734 |
| Financial liabilities IFRS 16 | (74,882) | (72,271) | (2,161) |
| M/L term financial position | (99,993) | (98,567) | (1,426) |
| Total net financial position | 122,585 | 105,031 | 17,554 |
Change in the item cash and cash equivalents is summarized in the table below:
| (thousand Euros) | 1st half 2020 |
|---|---|
| Cash flows from operating activities (A) | 68,839 |
| Cash flows from investment activities (B) | (14,449) |
| Cash flows from financial activities (C) | (40,556) |
| Change in cash and cash equivalents (D) = (A+B+C) | 13,785 |
| Cash and cash equivalents at beginning of period (*) | 239,571 |
| Cash and cash equivalents at year end (*) | 253,355 |
| Total change in cash and cash equivalents (D) | 13,785 |
(*) Liquid assets and cash equivalents net are net of current account overdrafts
The complete consolidated cash flow statement and the details of cash and other cash equivalents net are set forth below in the financial statements.
Reply offers high technology services and solutions in a market where innovation is of primary importance.
Reply considers research and continuous innovation a fundamental asset in supporting clients with the adoption of new technology.
Reply dedicates resources to Research and Development activities in order to project and define highly innovative products and services as well as possible applications of evolving technologies. In this context, Reply has developed its own platforms.
Reply has important partnerships with major global vendors so as to offer the most suitable solutions to different company needs. Specifically, Reply boasts the highest level of certification amongst the technology leaders in the Enterprise sector.
During the period, there were no transactions with related parties, including intergroup transactions, which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered, these transactions took place in accordance with the internal procedures containing the rules aimed at ensuring transparency and fairness, under Consob Regulation 17221/2010.
The company in the notes to the financial statements and consolidated financial statements provides the information required pursuant to Art. 154-ter of the TUF [Consolidated Financial Act] as indicated by Consob Reg. no. 17221 of 12 March 2010, indicating that there were no significant transactions concluded during the period as defined by Art. 4, paragraph 1, let a) of the aforementioned regulation that have significantly affected the Group's financial or economic position. The information pursuant to Consob communication of 28 July 2006 are presented in the annexed tables herein.
At June 30, 2020 the number of employees of the Group was 8,540 with an increase of 383 compared to December 31, 2019 and an increase of 616 resources compared to June 30, 2019.
No significant events have occurred subsequent to 30 June 2020. Please refer to the paragraph Outlook on operations for further information.
The year 2020 will mark history. During February and March, as the Covid-19 pandemic spread in the northern hemisphere, the world came to a standstill. Reply had the ability to react in an effective way to this period of unimaginable discontinuity. In less than two days, all of Reply's 8000+ people were able to work remotely. As a result, Reply was able to continue to honour the commitments we made with our customers, often working on fundamental systems which ensured not only the continuity of their business, but also the survival of entire countries and industries.
In these months, despite the difficulties linked to the various lock-downs, Reply has continued on its growth path, with positive results in all the geographies where it is operating. This has been possible thanks to the exclusive focus on new technologies and the resilience of our network model which has allowed to promptly compensate the slowdown in activities linked to sectors particularly affected by the pandemic such as, for example, transport, manufacturing and tourism.
In the second quarter of 2020 there has been a significant slowdown in growth due to the Pandemic and the lock down in the various countries where Reply is present: from 11.8% in the first quarter to 2.8% in the second quarter.
The business evolution in the next months will depend:
In this scenario Reply has shown to be resilient, flexible and adaptable to the new situation by maximizing the business growth opportunities and profitability.
Turin, July 31, 2020
/s/ Mario Rizzante
For the Board of Directors The Chairman Mario Rizzante
| (thousand Euros) | Note | 1st half 2020 | 1st half 2019 | Year 2019 |
|---|---|---|---|---|
| Revenues | 5 | 615,176 | 573,672 | 1,182,528 |
| Other income | 6 | 5,593 | 5,916 | 23,159 |
| Purchases | 7 | (10,731) | (11,126) | (21,250) |
| Personnel | 8 | (305,678) | (290,091) | (578,263) |
| Services and other costs | 9 | (214,891) | (193,663) | (414,077) |
| Amortization, depreciation and write-downs | 10 | (19,409) | (18,014) | (37,239) |
| Other operating and non-recurring (cost)/income | 11 | 4,087 | 905 | 466 |
| Operating income | 74,147 | 67,599 | 155,324 | |
| (Loss)/gain on investments | 12 | 4,717 | 4,230 | 11,364 |
| Financial income/(expenses) | 13 | (3,727) | (1,613) | (5,268) |
| Income before taxes | 75,138 | 70,216 | 161,419 | |
| Income taxes | 14 | (20,364) | (19,638) | (44,829) |
| Net income | 54,773 | 50,578 | 116,590 | |
| Non-controlling interest | (836) | (1,165) | (2,732) | |
| Group net result | 53,938 | 49,414 | 113,858 | |
| Earnings per share and diluted | 15 | 1.44 | 1.32 | 3.04 |
(*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Consolidated statement of income are reported in the Annexed tables herein and fully described in Note 36.
| (thousand Euros) | Note | 1st half 2020 | 1st half 2019 |
|---|---|---|---|
| Profit of the period (A) Other comprehensive income that will not be reclassified subsequently to |
54,773 | 50,578 | |
| profit or loss | |||
| Actuarial gains/(losses) from employee benefit plans | (461) | (1,054) | |
| Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): |
27 | (461) | (1,054) |
| Other comprehensive income that may be reclassified subsequently to profit or loss: |
|||
| Gains/(losses) on cash flow hedges | 1,073 | (1,834) | |
| Gains/(losses) on exchange differences on translating foreign operations |
(10,094) | (24) | |
| Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2) |
(9,021) | (1,858) | |
| TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX (B) = (B1) +(B2) |
27 | (9,483) | (2,912) |
| Total comprehensive income (A)+(B) | 45,291 | 47,666 | |
| Total comprehensive income attributable to: | |||
| Owners of the parent | 44,455 | 46,502 | |
| Non-controlling interest | 836 | 1,165 |
| (thousand Euros) | Note | 30/06/2020 | 31/12/2019 | 30/06/2019 |
|---|---|---|---|---|
| Tangible assets | 16 | 48,616 | 48,298 | 44,711 |
| Goodwill | 17 | 263,879 | 267,541 | 252,480 |
| Intangible assets | 18 | 13,027 | 13,676 | 13,889 |
| RoU Assets | 19 | 92,538 | 90,569 | 82,339 |
| Equity investments | 20 | 59,108 | 56,991 | 52,449 |
| Other financial assets | 21 | 7,829 | 7,567 | 6,703 |
| Deferred tax assets | 22 | 35,985 | 33,527 | 30,352 |
| Non-current assets | 520,981 | 518,170 | 482,923 | |
| Inventories | 23 | 136,803 | 75,328 | 154,810 |
| Trade receivables | 24 | 239,354 | 432,240 | 264,639 |
| Other receivables and current assets | 25 | 52,951 | 39,566 | 51,954 |
| Financial assets | 21 | 1,855 | 1,666 | 1,401 |
| Cash and cash equivalents | 26 | 259,637 | 240,943 | 150,924 |
| Current assets | 690,600 | 789,743 | 623,727 | |
| TOTAL ASSETS | 1,211,581 | 1,307,913 | 1,106,650 | |
| Share Capital | 4,863 | 4,863 | 4,863 | |
| Other reserves | 551,089 | 465,000 | 463,636 | |
| Net result of the period | 53,938 | 113,858 | 49,414 | |
| Group shareholders' equity | 27 | 609,890 | 583,722 | 517,913 |
| Non-controlling interest | 3,325 | 3,339 | 1,613 | |
| NET EQUITY | 27 | 613,215 | 587,061 | 519,526 |
| Due to minority shareholders and Earn-out | 28 | 27,702 | 41,301 | 39,374 |
| Financial liabilities | 29 | 26,058 | 26,857 | 28,901 |
| Financial liabilities from RoU | 29 | 73,936 | 71,710 | 60,143 |
| Employee benefits | 30 | 45,343 | 43,355 | 39,720 |
| Deferred tax liabilities | 31 | 19,104 | 19,810 | 16,725 |
| Provisions | 32 | 8,773 | 8,897 | 6,200 |
| Noncurrent liabilities | 200,915 | 211,931 | 191,063 | |
| Due to minority shareholders and Earn-out | 28 | 12,023 | 10,166 | 7,750 |
| Financial liabilities | 29 | 17,471 | 18,557 | 22,365 |
| Financial liabilities from RoU | 29 | 21,444 | 20,454 | 22,629 |
| Trade payables | 33 | 76,136 | 119,951 | 111,839 |
| Other current liabilities | 34 | 269,878 | 339,113 | 231,170 |
| Provisions | 32 | 500 | 680 | 308 |
| Current liabilities | 397,451 | 508,921 | 396,060 | |
| TOTAL LIABILITIES | 598,366 | 720,853 | 587,123 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 1,211,581 | 1,307,913 | 1,106,650 |
(*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Consolidated statement of financial position are reported in the Annexed tables herein and fully described in Note 36.
| (thousand Euros) | Share capital |
Treasury shares |
Capital reserve |
Earning reserve |
Cash flow hedge reserve |
Translation reserve |
Reserve for actuarial gains/(losses) |
Non controlling interests |
Total |
|---|---|---|---|---|---|---|---|---|---|
| At January 1°, 2019 | 4,863 | (25) | 72,836 | 421,950 | (1,372) | (10,081) | (2,874) | 1,315 | 486,612 |
| Dividends distributed | - | - | - | (16,833) | - | - | - | (787) | (17,620) |
| Total comprehensive income/(loss) |
- | - | - | 49,414 | (1,834) | (24) | (1,054) | 1,165 | 47,666 |
| Other changes | - | - | - | 2,948 | - | - | - | (80) | 2,868 |
| At June 30, 2019 | 4,863 | (25) | 72,836 457,478 | (3,206) | (10,105) | (3,928) | 1,613 | 519,526 |
| (thousand Euros) | Share capital |
Treasury shares |
Capital reserve |
Earning reserve |
Cash flow hedge reserve |
Translation reserve |
Reserve for actuarial gains/(losses) |
Non controlling interests |
Total |
|---|---|---|---|---|---|---|---|---|---|
| At January 1°, 2020 | 4,863 | (25) | 122,836 | 470,227 | (2,529) | (5,735) | (5,916) | 3,339 | 587,061 |
| Dividends distributed | - | - | - | (19,452) | - | - | - | (798) | (20,250) |
| Total comprehensive income/(loss) |
- | - | - | 53,938 | 1,073 | (10,094) | (461) | 836 | 45,291 |
| Other changes | - | - | - | 1,166 | - | - | - | (52) | 1,114 |
| At June 30, 2020 | 4,863 | (25) | 122,836 505,879 | (1,456) | (15,829) | (6,378) | 3,325 | 613,215 |
| (thousand Euros) | 1st half 2020 | 1st half 2019 |
|---|---|---|
| Net result of the period | 53,938 | 49,414 |
| Income taxes | 20,364 | 19,638 |
| Depreciation and amortization | 19,409 | 18,014 |
| Other non-monetary expenses/(income) | (8,003) | (2,486) |
| Change in work in progress | (61,474) | (77,749) |
| Change in trade receivables | 192,886 | 171,276 |
| Change in trade payables | (43,815) | (12,048) |
| Change in other assets and liabilities | (98,978) | (79,611) |
| Income taxes paid | (5,487) | (5,735) |
| Net cash flows from operating activities (A) | 68,839 | 80,713 |
| Payments for tangible and intangible assets | (6,210) | (6,478) |
| Payments for financial assets | (539) | (1,797) |
| Payments for the acquisition of subsidiaries net of cash acquired | (7,750) | (8,936) |
| Net cash flows from investment activities (B) | (14,499) | (17,211) |
| Dividends paid | (20,250) | (17,620) |
| In payments from loans | 1,027 | - |
| Financial liabilities for leasing | (12,685) | (11,016) |
| Repayment of loans | (8,647) | (8,783) |
| Other changes | - | 1,071 |
| Net cash flows from financing activities (C) | (40,556) | (36,348) |
| Net cash flows (D) = (A+B+C) | 13,785 | 27,154 |
| Cash and cash equivalents at beginning of period | 239,571 | 122,481 |
| Cash and cash equivalents at period end | 253,355 | 149,635 |
| Total change in cash and cash equivalents (D) | 13,785 | 27,154 |
| (thousand Euros) | 1st half 2020 | 1st half 2019 |
|---|---|---|
| Cash and cash equivalents at beginning of period | 239,571 | 122,481 |
| Cash and cash equivalents | 240,943 | 128,060 |
| Bank overdrafts | (1,372) | (5,578) |
| Cash and cash equivalents at period end | 253,355 | 149,635 |
| Cash and cash equivalents | 259,637 | 150,924 |
| Bank overdrafts | (6,282) | (1,288) |
| General information | Note 1 | - General information |
|---|---|---|
| Note 2 | - Accounting principles and basis of consolidation | |
| Note 3 | - Risk management | |
| Note 4 | - Consolidation | |
| Income statement | Note 5 | - Revenue |
| Note 6 | - Other revenues | |
| Note 7 | - Purchases | |
| Note 8 | - Personnel | |
| Note 9 | - Services and other costs | |
| Note 10 | - Amortization, depreciation and write-downs | |
| Note 11 | - Other operating and non-recurring income/(expenses) | |
| Note 12 | - (Loss)/gain on investments | |
| Note 13 | - Financial income/(expenses) | |
| Note 14 | - Income taxes | |
| Note 15 | - Earnings per share | |
| Statement of financial position - Assets |
Note 16 | - Tangible assets |
| Note 17 | - Goodwill | |
| Note 18 | - Other intangible assets | |
| Note 19 | - RoU Assets | |
| Note 20 | - Equity Investments | |
| Note 21 | - Financial assets | |
| Note 22 | - Deferred tax assets | |
| Note 23 | - Work-in-progress | |
| Note 24 | - Trade receivables | |
| Note 25 | - Other receivables and current assets | |
| Note 26 | - Cash and cash equivalents | |
| Statement of financial position - Liabilities and equity |
Note 27 | - Shareholders' equity |
| Note 28 | - Due to minority shareholders and Earn-out | |
| Note 29 | - Financial liabilities | |
| Note 30 | - Employee benefits | |
| Note 31 | - Deferred tax liabilities | |
| Note 32 | - Provisions | |
| Note 33 | - Trade payables | |
| Note 34 | - Other current liabilities | |
| Other information | Note 35 | - Segment Reporting |
| Note 36 | - Transactions with related parties | |
| Note 37 | - Guarantees, commitments and contingent liabilities | |
| Note 38 | - Events subsequent to 30 June 2020 | |
| Note 39 | - Approval of the Half year condensed Consolidated financial statements and authorization to publish |
Reply [MTA, STAR: REY] specializes in the implementation of solutions based on new communication channels and digital media. Reply, consisting of a network of specialist companies, supports important European industries belonging to the Telco & Media, Manufacturing & Retail, Bank & Insurances and Public Administration segments, in defining and developing new business models utilizing Big Data, Cloud Computing, CRM, Mobile, Social Media and Internet of Things paradigms. Reply offers consultancy, system integration and application management and business process outsourcing (www.reply.com).
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the European Union. The designation "IFRS" also includes all valid International Accounting Standards ("IAS"), as well as all interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), formerly the Standing Interpretations Committee ("SIC"). Following the coming into force of European Regulation No. 1606 of July 2002, starting from 1 January, 2005, the Reply Group adopted International Financial Reporting Standards (IFRS). The accounting principles applied are consistent with those used for preparation of the Consolidated Financial Statements at December 31, 2019. More specifically the half year condensed consolidated financial statements at June 30, 2020 have been prepared in accordance to IAS 34 Interim financial reporting.
The Half-Year financial report has been prepared in accordance with Consob regulations regarding the format of financial statements, in application of art. 9 of Legislative Decree 38/2005 and other Consob regulations and instructions concerning financial statements.
The consolidated financial statements are prepared on the basis of the historic cost principle, modified as requested for the appraisal of some financial instruments for which the fair value criterion is adopted in accordance with IFRS 9.
The consolidated financial statements have been prepared on the going concern assumption. In this respect, despite operating in a difficult economic and financial environment, the Group's assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist with regards its ability to continue as a going concern.
These consolidated financial statements are expressed in thousands of Euros and are compared to the consolidated financial statements of the previous year prepared in accordance with the same principles.
Further indication related to the format of the financial statements respect to IAS 1 is disclosed here within as well as information related to significant accounting principles and evaluation criteria used in the preparation of the following consolidated report.
The consolidated financial statements include statement of income, statement of comprehensive income, statement of financial position, statement of changes in shareholders' equity, statement of cash flows and the explanatory notes.
The income statement format adopted by the Group classifies costs according to their nature, which is deemed to properly represent the Group's business.
The Statement of financial position is prepared according to the distinction between current and noncurrent assets and liabilities. The statement of cash flows is presented using the indirect method. The most significant items are disclosed in a specific note in which details related to the composition and changes compared to the previous year are provided.
It should be noted that in order to comply with the indications contained in Consob Resolution no. 15519 of 27 July 2006 "as to the format of the financial statements", additional statements: income statement and statement of financial position have been disclosed showing the amounts of related party transactions.
With regard to the accounting standards approved but not yet applicable or not yet approved by the European Union, please refer to the Annual Report as at 31 December 2019.
It should be noted that, during the first half of 2020, the following principles were issued even if not yet effective:
IFRS 17 - 'Insurance Contracts' (issued on 18 May 2017), with initial recognition scheduled for 1 January 2023. The new standard disciplines the accounting treatment of insurance contracts issued and reinsurance contracts held. IFRS 17 is applicable starting on or after January 10 2023.
Amendments to IAS 1: on 23 January 2020, the IASB issued the document "Amendments to IAS 1 presentation of Financial Statements: classification of liabilities as current or non-current" to clarify the requirements for classifying liabilities as current or non-current.
More precisely, the following:
Due to the Covid-19 pandemic, the IASB proposed to postpone the date of entry into force of the document to 1 January 2023, to give companies more time to make any changes in classification resulting from the changes.
Amendments to IFRS 3 - 'Business Combinations' (issued on 14 May 2020). The reference to the Conceptual Framework for Financial Reporting has been updated without changing the accounting requirements for business combinations.
Amendments IAS 16 - 'Property, Plant and Equipment' on Proceeds before Intended Use (issued on 14 May 2020). The amendments prohibit a company to deduct, from the cost of an item of property, plant and equipment, amounts received from selling items produced while bringing that asset to the location and into the condition necessary for it to be capable of operating in the manner intended by management. Instead, the company must recognize the proceeds from selling such items, and the cost of producing them, in profit or loss.
Amendments to IAS 37 - 'Provisions, Contingent Liabilities and Contingent Assets' on Onerous Contracts-Cost of Fulfilling a Contract (issued on 14 May 2020). The amendment specifies that the 'cost of fulfilling' a contract comprises the 'costs that relate directly to the contract'.
Amendment to IFRS 16 - 'Leases' The IASB issued the document on 28 May 2020 "Amendment to IFRS 16 Leases Covid-19-Related Rent Concessions". The amendment provides a practical expedient that allows tenants not to consider changes to the lease concessions that occur as a direct consequence of the Covid-19 pandemic. This amendment is effective from the years starting on or after 1 June 2020. Earlier application is allowed, even in financial statements not yet approved by 28 May 2020.
Annual improvements: The annual improvements make minor amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards", IFRS 9 "Financial Instruments", IAS 41 "Agriculture" and examples Illustrations accompanying IFRS 16 "Leases".
All amendments shall enter into force on 1 January 2022.
As of 30 June 2020, the above changes have no impact on the Half-Year condensed Financial Statements. Currently, the Group is analysing the standards outlined above and assessing whether their adoption will have a significant impact on the Financial Statements.
For business purposes, specific policies are adopted to assure its clients' solvency. With regards to financial counterparty risk, the Group does not present significant risk in credit-worthiness or solvency.
The group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time.
The cash flows, funding requirements and liquidity of the Group companies are monitored and centrally managed under the control of the Group Treasury. The aim is to guarantee the efficiency and effectiveness of the management of current and perspective capital resources (maintaining an adequate level of reserves of liquidity and availability of funds via a suitable amount of committed credit lines).
The difficult economic situation of the markets and of financial markets necessitates special attention being given to the management of the liquidity risk, and in that sense particular emphasis is being placed on measures taken to generate financial resources through operations and maintaining an adequate level of liquid assets. The Group therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans.
The Group entered into most of its financial instruments in Euros, which is its functional and presentation currency. Although it operates in an international environment, it has a limited exposure to fluctuations in the exchange rates.
The exposure to interest rate risk arises from the need to fund operating activities and M&A and investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Group's net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions.
The interest rate risk to which the Group is exposed derives from bank loans; to mitigate such risks, the Group, when necessary, has used derivative financial instruments designated as "cash flow hedges". The use of such instruments is disciplined by written procedures in line with the Group's risk management strategies that do not contemplate derivative financial instruments for trading purposes.
The IFRS 13 establishes a fair value hierarchy which classifies the input of evaluation techniques on three levels adopted for the measurement of fair value. Fair value hierarchy attributes maximum priority to prices quoted (not rectified) in active markets for identical assets and liabilities (Level 1 data) and the nonobservable minimum input priority (Level 3 data). In some cases, the data used to assess the fair value of assets or liabilities could be classified on three different levels of the fair value hierarchy. In such cases, the evaluation of fair value is wholly classified on the same level of the hierarchy in which input on the lowest level is classified, taking account its importance for the assessment.
The levels used in the hierarchy are:
The following table presents the assets and liabilities which were assessed at fair value on 30 June 2020, according to the fair value hierarchical assessment level.
| (thousand Euros) | Note | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|
| Investments | 20 | - | - | 59,108 |
| Convertible loans | 21 | - | - | 2,430 |
| Financial securities | 21 | 1,489 | - | - |
| Other financial assets | - | 979 | 366 | |
| Total financial assets | 1,489 | 979 | 61,904 | |
| Derivative financial liabilities (IRS) | 29 | - | 3,724 | |
| Liabilities to minority shareholders and earn out | 28 | - | - | 39,725 |
| Total financial liabilities | - | 3,724 | 39,725 |
The valuation of investments in start-ups within the Internet of Things (IoT) business, through the acquisition of equity investments and through the issuance of convertible loans, is based on data not directly observable on active stock markets, and therefore falls under the fair value hierarchical Level 3.
The item Financial securities is related to securities listed on the active stock markets and therefore falls under the fair value hierarchical Level 1.
The item Other financial assets is mainly related to deposit and bank accounts and the fair value is equal to book values.
To determine the effect of interest rate derivate financial instruments Reply refers to evaluation deriving from third parties (banks and financial institutes). The latter, in the calculation of their estimates made use of data observed on the market directly (interest rates) or indirectly (interest rate interpolation curves observed directly): consequently, for the purposes of IFRS 7 the fair value used by the Group for the exploitation of hedging derivatives contracts in existence as at 30 June re-enters under the hierarchy profile in level 2.
The fair value of Liabilities to minority shareholders and earn out was determined by Group management on the basis of the sales purchase agreements for the acquisition of the company's shares and on economic parameters based on budgets and plans of the purchased company. As the parameters are not observable on stock markets (directly or indirectly) these liabilities fall under the hierarchy profile in Level 3.
As at 30 June 2020, there have not been any transfers within the hierarchy levels.
Companies included in the consolidation are included on a line-by-line basis.
Change in consolidation compared to 30 June 2019 is related to Blowfish Digital Holdings Ltd and its subsidiaries Threepipe Ltd and Spot Digital Ltd, companies incorporated under the English law of which Reply Ltd. Holds 100% of share capital, acquired in the month of October 2019, specializing in digital marketing and creative agency.
Change in the consolidation does not significantly affect the Group's revenues and profits before tax on 30 June 2020.
Furthermore, the list of the Reply Group's companies and equity investments, presented as an annex herein, also includes in the consolidation, with respect to 30 June 2019:
It is to be noted that on 26 June 2020 Reply sold the investment in Lem.
Revenues from sales and services, including change in work in progress, amounted to 615,176 thousand Euros (573,672 thousand Euros at 30 June 2019).
This item includes consulting services, fixed price projects, assistance and maintenance services and other minor revenues.
The following table shows the percentage breakdown of revenues by Region. Moreover, the breakdown reflects the business management of the Group by Top Management and the allocation approximates the localization of services provided:
| Region (*) | 1st half 2020 | 1 st half 2019 |
|---|---|---|
| Region 1 | 67.80% | 68.70% |
| Region 2 | 21.80% | 21.90% |
| Region 3 | 10.30% | 9.30% |
| IoT Incubator | 0.10% | 0.10% |
| Total | 100.0% | 100.0% |
Disclosure required by IFRS 8 ("Operating segment") is provided in Note 35 herein.
Region 1: ITA, USA, BRA, POL, ROU Region 2: DEU, CHE, CHN, HRV Region 3: GBR, LUX, BEL, NLD, FRA, BLR
The following table shows the breakdown of revenues by Business Line:
| Business line | 1st half 2020 | 1 st half 2019 |
|---|---|---|
| Technologies | 62.5% | 60.0% |
| Applications | 29.4% | 30.6% |
| Processes | 8.1% | 9.4% |
| Total | 100.0% | 100.0% |
Other revenues amounted to 5,593 thousand Euros at 30 June 2020 (5,916 thousand Euros at 30 June 2019) and mainly refer to miscellaneous income, non-recurring income and R&D contributions.
Detail is as follows:
| (thousand Euros) | 1st half 2020 | 1st half 2019 | Change |
|---|---|---|---|
| Software licenses for resale | 7,928 | 7,042 | 886 |
| Hardware for resale | 271 | 1,351 | (1,080) |
| Other | 2,532 | 2,733 | (201) |
| Total | 10,731 | 11,126 | (395) |
Purchases of Software licenses and Hardware licenses for resale are recognized net of any change in inventory.
The item Other includes the purchase of fuel for 732 thousand Euros, the purchase of office stationery for 611 thousand Euros and the purchase of consumption material for 551 thousand Euros.
Personnel includes payroll employees and executive directors amounting to 305,678 thousand Euros compared with 290,091 thousand Euros of the first half 2019.
The increase in the cost of employees, amounting to 15,587 thousand Euros, is attributable to the total registered increase in the Group's business and in the increase in employees.
Detail of personnel by category is provided below:
| (number) | 1st half 2020 | 1st half 2019 | Change |
|---|---|---|---|
| Directors | 315 | 279 | 36 |
| Managers | 1,075 | 990 | 85 |
| Staff | 7,150 | 6,655 | 495 |
| Total | 8,540 | 7,924 | 616 |
On 30 June 2020 the Group had 8,540 employees compared with 7,924 of the first half 2019.
Change in consolidation brought an increase to the workforce equal to 78 employees.
Employees are mainly electronic engineers and economic, computer science, and business graduates from the best Universities.
Services and other costs comprised the following:
| (thousand Euros) | 1st half 2020 | 1st half 2019 | Change |
|---|---|---|---|
| Commercial and technical consulting | 124,698 | 129,021 | (4,323) |
| Travelling and professional training expenses | 10,059 | 19,683 | (9,624) |
| Other services costs | 29,556 | 32,011 | (2,455) |
| Office expenses | 6,930 | 6,181 | 749 |
| Lease and rentals | 1,826 | 2,380 | (554) |
| Other | 41,822 | 4,387 | 37,435 |
| Total | 214,891 | 193,663 | 21,228 |
Change in Services and other costs, amounting to 21,228 thousand Euros, is attributable to an overall increase in the Group's business and to the item Other that includes an extraordinary accrual that management considered necessary subsequent to the economic effects in relation to COVID-19 with contra-entry offsetting working capital items.
The item Other services cost mainly includes hosting and cloud services, marketing services, administrative and legal services, telephone and canteen.
Office expenses include services rendered by related parties referred to service contracts for the use of premises, domiciliation and provision of secretarial services for 618 thousand Euros and rent charged by third parties for 983 thousand Euros, utility costs for 3,452 thousand Euros, cleaning expenses for 958 thousand Euros and maintenance expenses for 389 thousand Euros.
Depreciation of tangible assets, calculated on the basis of economic-technical rates determined in relation to the residual useful lives of the assets, resulted in an overall charge as at 30 June 2020 of 4,819 thousand Euros. Details of depreciation are provided in the notes to tangible assets.
Amortization of intangible assets for the first half 2020 amounted to 1,838 thousand Euros. Details of depreciation are provided in the notes to intangible assets.
Amortization related to RoU assets arising from the adoption of IFRS 16 amounted to 12,752 thousand Euros.
Other operating and non-recurring net income is related to events and transactions that do not occur in the regular course of business amounted to 4,087 thousand Euros in the first half of 2020 (905 thousand Euros in the first half of 2019) and were related to:
The item amounting to positive 4,717 thousand Euros and is related to the fair value adjustments to equity investments in start-up companies made by the Investments company Breed Investments Ltds.
Detail is as follows:
| (thousand Euros) | 1st half 2020 | 1st half 2019 | Change |
|---|---|---|---|
| Financial income | 189 | 236 | (46) |
| Interest expenses | (798) | (443) | (355) |
| Other | (3,118) | (1,405) | (1,713) |
| Total | (3,727) | (1,613) | (2,114) |
Financial gains are mainly related to interest on bank accounts amounting to 51 thousand Euros. Interest expenses mainly include expenses related to loans for M&A operations. The item Other mainly includes:
At June 30, 2020 income taxes amounted to 20,364 thousand Euros and were recognized in accordance to the expected annual average income tax rates.
The basic earnings per share as at 30 June 2020 was calculated on the basis of the Group's net result amounting to 53,938 thousand Euros (49,414 thousand Euros as at 30 June 2019) divided by the weighted average number of shares as at 30 June 2020, net of treasury shares, which amounted to 37,407,400 (37,407,400 as at 30 June 2019).
| (in Euros) | 1st half 2020 | 1st half 2019 |
|---|---|---|
| Group net result | 53,938,000 | 49,414,000 |
| No. of shares | 37,407,400 | 37,407,400 |
| Basic earnings per share | 1.44 | 1.32 |
The basic earnings per share is the same of diluted earnings per share because there aren't financial instruments potentially convertible in shares (stock options).
Tangible assets as at 30 June 2020 amounted to 48,616 thousand Euros and are detailed as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Buildings | 21,570 | 20,878 | 692 |
| Plant and machinery | 6,070 | 5,152 | 918 |
| Hardware | 6,047 | 6,403 | (356) |
| Other | 14,929 | 15,865 | (936) |
| Total | 48,616 | 48,298 | 318 |
Change in tangible assets in the first half of 2020 is summarized in the table below:
| (thousand Euros) | Buildings | Plant and machinery |
Hardware | Other | Total |
|---|---|---|---|---|---|
| Historical cost | 23,733 | 13,944 | 41,187 | 36,775 | 115,640 |
| Accumulated depreciation | (2,855) | (8,792) | (34,784) | (20,911) | (67,342) |
| 31/12/2019 | 20,878 | 5,152 | 6,403 | 15,865 | 48,298 |
| Historical cost | |||||
| Increases | 833 | 1,707 | 1,844 | 1,357 | 5,741 |
| Disposals | - | (21) | (299) | (126) | (446) |
| Change in consolidation | - | (5) | (39) | (50) | (94) |
| Other changes | - | (1) | (212) | (796) | (1,009) |
| Accumulated depreciation | |||||
| Depreciations | (129) | (807) | (2,086) | (1,798) | (4,819) |
| Utilized | - | 19 | 249 | 85 | 353 |
| Change in consolidation | - | 5 | 42 | 50 | 97 |
| Other changes | (12) | 21 | 145 | 341 | 495 |
| Historical cost | 24,566 | 15,624 | 42,481 | 37,160 | 119,831 |
| Accumulated depreciation | (2,996) | (9,554) | (36,434) | (22,231) | (71,216) |
| 30/06/2020 | 21,570 | 6,070 | 6,047 | 14,929 | 48,616 |
The item Buildings mainly includes:
Increase in the item Plant and machinery refers to the purchase of general devices and to plant systems for the offices in which the Group operates.
Change in the item Hardware is due to investments made by the companies included in Region 1 for 793 thousand Euros, 857 thousand Euros for purchases made by the companies included in Region 2 and 195 thousand Euros for purchases made by the companies included in Region 3.
The item Other as at 30 June 2020 mainly includes improvements to third party assets and office furniture. The increase of 1,357 Euros mainly refers to the purchases of furniture and fittings for 614 thousand Euros, to improvements made to the offices where the Group's companies operate for 283 thousand Euros and mobile phones for 169 thousand Euros.
Other changes mainly refer to exchange differences.
As at 30 June 2020 tangible assets were depreciated by 59.4% of their value, compared to 58.2% at the end of 2019.
This item includes goodwill arising from consolidation of subsidiaries purchased against payment made by some Group companies.
Goodwill was allocated to the cash generating units ("CGU"), identified in the countries in which the Group operates, and are summarized as follows:
| (thousand Euros) | Value at 31/21/2019 |
Exchange difference | Value at 30/06/2020 |
|---|---|---|---|
| Region 1 | 90,737 | (518) | 90,219 |
| Region 2 | 108,885 | - | 108,885 |
| Region 3 | 67,919 | (3,145) | 64,774 |
| Total | 267,542 | (3,663) | 263,879 |
In relation to the extraordinary situation due to the pandemic COVID-19, the Group carried out impairment testing on goodwill by updating the annual budgets and discounting the parameters at 30 June. The test confirmed no impairment of goodwill in the Regions in which the Group operates. In accordance with the company procedures, it is based on a prospective cash flow methodology identified in the Discounted cash flow analysis.
The following assumptions were used in calculating the recoverable value of the Cash Generating Units applied to the impairment test and largely described in the 2019 Annual Financial Report.
| Assumption | Region 1 | Region 2 | Region 3 |
|---|---|---|---|
| Terminal value growth rates: | 1% | 1% | 1% |
| Discount rate, net of taxes: | 7.87% | 4.85% | 6.21% |
| Discount rated, before taxes: | 10.36% | 6.93% | 7.67% |
| Multiple of EBIT | 12.2 | 12.2 | 12.2 |
The impairment test, that includes the sensitivity analysis on the main parameters, confirms no impairment of goodwill in the Regions in which the Group operates.
On 30 June 2020 the difference between the headroom estimated and the book value of the net invested capital inclusive of the goodwill initially recognized, is equal to 520.5% for Region 1, 150.1% for Region 2 and 28.1% for Region 3.
It is to be noted that Reply has developed a sensitivity analysis of the estimated recoverable value as at 30 June 2020 as already carried out for the 2019 annual close, assuming a reduction of more than 15% in the turnover growth values, and an increase of 100 basis points in the discount rate that confirmed the results of the impairment test carried out on the same date.
Finally, it is appropriate to note that the estimates and budget data to which the above mentioned parameters have been applied are those determined by management on the basis of past performance and expectations of developments in the markets in which the Group operates.
Moreover, estimating the recoverable amount of the Cash-Generating Units requires discretion and the use of estimates by Management. The Group cannot guarantee that there will be no goodwill impairment in future periods. Circumstances and events which could potentially cause further impairment losses are constantly monitored by Reply management.
Net intangible assets as at 30 June 2020 amounted to 13,027 thousand Euros (13,676 thousand Euros on 31 December 2019) and are detailed as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Development costs | 2,673 | 3,191 | (519) |
| Software | 5,878 | 5,303 | 574 |
| Trademark | 537 | 537 | - |
| Other intangible assets | 3,941 | 4,646 | (705) |
| Total | 13,027 | 13,676 | (649) |
Change in intangible assets in the first half of 2020 is summarized in the table below:
| (thousand Euros) | Development costs | Software | Trademark | Other intangible assets |
Total |
|---|---|---|---|---|---|
| Historical cost | 29,663 | 27,880 | 537 | 8,312 | 66,391 |
| Accumulated depreciation | (26,471) | (22,576) | - | (3,667) | (52,714) |
| 31/12/2019 | 3,191 | 5,303 | 537 | 4,646 | 13,676 |
| Historical cost | |||||
| Increases | 419 | 1,057 | - | 17 | 1,493 |
| Disposals | - | (173) | - | - | (173) |
| Change in consolidation | (75) | (55) | - | (8) | (138) |
| Other changes | - | (129) | - | (501) | (630) |
| Accumulated depreciation | |||||
| Depreciations | (938) | (471) | - | (429) | (1,838) |
| Utilized | - | 202 | - | - | 202 |
| Change in consolidation | 75 | 55 | - | - | 130 |
| Other changes | - | 88 | - | 216 | 304 |
| Historical cost | 30,007 | 28,579 | 537 | 7,820 | 66,943 |
| Accumulated depreciation | (27,334) | (22,702) | - | (3,879) | (53,916) |
| 30/06/2020 | 2,673 | 5,878 | 537 | 3,941 | 13,027 |
Development costs refer to software and are accounted for in accordance with provisions of IAS 38.
The item Software mainly refers to software licenses purchased and used internally by the Group companies. This item includes 735 thousand Euros related to software development for internal use.
The item Trademark mainly refers to the value of the "Reply" trademark granted on 9 June 2000 to the Parent Company Reply S.p.A. (at the time Reply Europe Sàrl), in connection with the share capital increase that was resolved and subscribed to by the Parent Company. Such amount is not subject to systematic amortization.
The item Other intangible assets mainly refers to the Purchase Price Allocation following several Business combinations related to previous years.
The application of the IFRS 16 accounting standard, in use since 1 January 2019, resulted in the accounting of the book value of the right-of-use asset ("RoU Asset") that is equal to the book value of the liabilities for leasing on the date of first application, net of any accrued income/costs or deferred revenue/expenses related to the lease. The table below shows the RoU Assets divided by category:
| Exchange | |||||
|---|---|---|---|---|---|
| (thousand Euros) | 01/01/2020 | Net changes | difference | Amortization | 30/06/2020 |
| Buildings | 80,861 | 14,375 | (1,687) | (9,871) | 83,678 |
| Vehicles | 9,535 | 2,062 | (3) | (2,815) | 8,780 |
| Office equipment | 173 | (22) | (5) | (66) | 80 |
| Total | 90,569 | 16,416 | (1,694) | (12,752) | 92,538 |
The net changes mainly refer to the signing of new financial leasing agreements, resulting in an increase in the value of the right of use, the redetermination of certain liabilities, increases in rents and the renegotiation of existing contracts.
The item Equity investments amounts to 59,108 thousand Euros and includes investments in start-up companies principally in the IoT field made by the Investment company Breed Investment Ltd.
Note that the companies listed below, mainly held through an Investment Entity, are designated at fair value and accounted for in accordance with IFRS 9 "Financial Instruments: Recognition and Measurements". The fair value is determined using the International Private Equity and Venture Capital valuation guideline (IPEV) and, as per industry practice, any change therein is recognized in profit /(loss) in the period in which they occurred.
Detail is as follows:
| (thousand Euros) | Value at 31/12/2019 |
Follow-on investments |
Net fair value evaluation |
Impairment | Exchange differences |
Value at 30/06/2020 |
|---|---|---|---|---|---|---|
| Investments | 56,992 | 342 | 4,717 | - | (2,942) | 59,108 |
The increase is related to the acquisition of share capital of investments already existing at December 31, 2019.
The net fair value evaluation amounting to 4,717 thousand Euros reflects the market values adjustments of the last rounds that took place in the first half 2020 on investments already in portfolio.
All fair value assessments shall be part of the hierarchy level 3.
Current and non-current financial assets amounted to a total of 9,684 thousand Euros compared to 9,233 thousand Euros as at 31 December 2019.
Detail is as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Short term securities | 1,489 | 1,666 | (187) |
| Financial receivables from third parties | 366 | - | (366) |
| Current financial assets | 1,855 | 1,666 | 189 |
| Receivables from insurance companies | 3,194 | 3,183 | 11 |
| Guarantee deposits | 1,225 | 1,189 | 36 |
| Other financial assets | 979 | 1,251 | (272) |
| Convertible loans | 2,430 | 1,944 | 486 |
| Non-current financial assets | 7,829 | 7,567 | 261 |
| Total | 9,684 | 9,233 | 451 |
The item Receivables from insurance companies mainly refers to the insurance premiums paid against pension plans of some German companies and to directors' severance indemnities.
Convertible loans relate to the option to convert into shares of the following start-up company in the field of IoT, detail is as follows:
| Value at 31/12/2019 | Increases | Interests | Exchange differences | Value at 30/06/2020 |
|---|---|---|---|---|
| 1,944 | 539 | 82 | (134) | 2,430 |
The amount is referred to new investments in convertible loans during the first half.
The short-term securities mainly refer to time-limited investments (Time Deposit).
Note that the items Receivables from insurance companies, Convertible loans, Guarantee deposits and Other financial assets are not included in the net financial position.
Cash and cash equivalents are detailed as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Bank accounts | 258,131 | 238,720 | 19,411 |
| Cash | 1,506 | 2,223 | (716) |
| Total | 259,637 | 240,943 | 18,694 |
For further details, please see note 26.
Such item, which amounted to 35,985 thousand Euros as at 30 June 2020 (33,527 thousand Euros as at 31 December 2019), includes the fiscal charge corresponding to the temporary differences deriving from income before taxes and taxable income in relation to deferred deductibility items.
The decision to recognize deferred tax assets is taken by assessing critically whether the conditions exist for the future recoverability of such assets on the basis of expected future results.
Contract work in progress, amounting to 136,803 thousand Euros, is recognized net of a provision amounting to 36,041 thousand Euros and is detailed as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Contract work in progress | 217,433 | 136,808 | 80,625 |
| Advance payments from customers | (80,630) | (61,480) | (19,150) |
| Total | 136,803 | 75,328 | 61,474 |
Any advance payments made by the customers are deducted from the value of the inventories, within the limits of the accrued consideration; the exceeding amounts are accounted as liabilities.
Trade receivables as at 30 June 2020 amounted to 239,354 thousand Euros with a net decrease of 192,886 thousand Euros.
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Domestic clients | 142,327 | 320,712 | (178,386) |
| Foreign trade receivables | 101,669 | 119,006 | (17,337) |
| Credit notes to be issued | - | (3,598) | 3,598 |
| Total | 243,996 | 436,120 | (192,124) |
| Allowance for doubtful accounts | (4,642) | (3,880) | (762) |
| Total trade receivables | 239,354 | 432,240 | (192,886) |
Trade receivables are shown net of allowances for doubtful accounts, calculated by using the expected credit loss approach pursuant to IFRS 9, amounting to 4,642 thousand Euros at 30 June 2020 (3,880 thousand Euros at 31 December 2019).
It should also be noted that the item includes write-downs due to losses related to working capital.
The Allowance for doubtful accounts developed in the first half of 2020 as follows:
| (thousand Euros) | 31/12/2019 | Provision | Utilization | Reversal | Other changes | 30/06/2020 |
|---|---|---|---|---|---|---|
| Allowance for doubtful accounts | 3,880 | 1,398 | (154) | (421) | (60) | 4,642 |
The carrying amount of Trade receivables is in line with its fair value. Trade receivables are all collectible within one year.
Detail is as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Tax receivables | 24,047 | 10,365 | 13,682 |
| Advances to employees | 108 | 143 | (35) |
| Accrued income and prepaid expenses | 17,886 | 15,912 | 1,974 |
| Other receivables | 10,909 | 13,145 | (2,236) |
| Total | 52,951 | 39,566 | 13,385 |
The item Tax receivables mainly includes:
The item Other receivables includes the contributions receivable in relation to research projects for 6,073 thousand Euros (6,355 thousand Euros at 31 December 2019).
The balance of 259,637 thousand Euros, with an increase of 18,694 thousand Euros compared with 31 December 2019, represents cash and cash equivalents as at the end of reporting period. Changes in cash and cash equivalents are fully detailed in the Consolidated statement of cash flows.
As at 30 June 2020 the share capital of Reply S.p.A., fully subscribed and paid, amounted to 4,863,486 Euros and comprises 37,411,428 ordinary shares of a nominal value of 0.13 Euros each. The number of shares in circulation as at 30 June 2020 total 37,407,400 unchanged compared to yearended 2019.
The value of the Treasury shares, amounting to 25 thousand Euros, refers to the shares of Reply S.p.A. held by the parent company, that at 30 June 2020 are equal to n. 4,028, unchanged compared to year-ended 2019.
On 30 June 2020 Capital reserves, amounting to 122,836 thousand Euros, were mainly comprised as follows:
Earnings reserves amounted to 505,879 thousand Euros and were comprised as follows:
Other comprehensive income can be analysed as follows:
| (thousand Euros | 1st half 2020 | 1st half 2019 |
|---|---|---|
| Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax: |
||
| Actuarial gains/(losses) from employee benefit plans | (461) | (1,054) |
| Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): |
(461) | (1,054) |
| Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax: |
||
| Gains/(losses) on cash flow hedges | 1,073 | (1,834) |
| Gains/(losses) on exchange differences on translating foreign operations |
(10,094) | (24) |
| Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): |
(9,021) | (1,858) |
| Total other comprehensive income, net of tax (B) = (B1) +(B2) | (9,483) | (2,912) |
Due to minority shareholders and Earn-out owed on 30 June 2020 amount to 39,725 thousand Euros (51,468 thousand Euros on 31 December 2019), of which 12,023 thousand Euros are current. The item refers to deferred consideration defined in the business combination. The distinction between Payables to Minority Shareholders and Earn-out stems solely from whether or not there is any legal minority interest related to the initial transition.
Detail is as follows:
| (thousand Euros) | 31/12/2019 | Fair value adjustments |
Payments | Exchange differences |
30/06/2020 |
|---|---|---|---|---|---|
| Payables to minority shareholders | 20,025 | (175) | (6,090) | 43 | 13,803 |
| Payables for Earn out | 31,443 | (3,163) | (1,660) | (697) | 25,923 |
| Total due to minority shareholders and Earn-out |
51,468 | (3,338) | (7,750) | (654) | 39,725 |
The item Fair value adjustments in the first half of 2020 amounted to 3,338 thousand Euros with a balancing entry in Profit and loss, reflects the best estimate in relation to the deferred consideration originally posted at the time of acquisition.
Total payments made amounted to 7,750 thousand Euros in the first half of 2020 and refer to the consideration paid in relation to the initial contracts signed at the time of acquisition.
Detail is as follows:
| 30/06/2020 | 31/12/2019 | ||||||
|---|---|---|---|---|---|---|---|
| (thousand Euros) | Current | Non current |
Total | Current | Non current |
Total | |
| Bank overdrafts | 6,282 | - | 6,282 | 1,372 | - | 1,372 | |
| Bank loans | 10,084 | 21,428 | 31,513 | 13,749 | 25,846 | 39,595 | |
| Derivative financial instruments | 40 | 3,684 | 3,724 | 2,899 | - | 2,899 | |
| Total due to banks | 16,407 | 25,112 | 41,519 | 18,020 | 25,846 | 43,866 | |
| Other financial borrowings | 1,064 | 946 | 2,010 | 537 | 1,011 | 1,548 | |
| IFRS 16 financial liabilities | 21,444 | 73,936 | 95,379 | 20,454 | 71,710 | 92,164 | |
| Total financial liabilities | 38,914 | 99,993 | 138,908 | 39,011 | 98,567 | 137,578 |
The following table illustrates the distribution of financial liabilities by due date:
| 30/06/2020 | 31/12/2019 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (thousand Euros) | Due in 12 months |
From 1 to 5 years |
Over 5 years |
Total | Due in 12 months |
From 1 to 5 years |
Over 5 years |
Total | |
| Bank overdrafts | 6,282 | - | - | 6,282 | 1,372 | - | - | 1,372 | |
| M&A loans | 9,821 | 4,286 | - | 14,107 | 13,429 | 8,571 | - | 22,000 | |
| Mortgage loans | 263 | 7,172 | 9,971 | 17,406 | 321 | 6,834 | 10,440 | 17,595 | |
| Other financial borrowings | 1,064 | 946 | - | 2,010 | 537 | 1,011 | - | 1,548 | |
| IFRS 16 financial liabilities | 21,444 | 50,882 | 23,053 | 95,379 | 20,454 | 48,485 | 23,225 | 92,164 | |
| Derivative financial instruments | 40 | 1,394 | 2,290 | 3,724 | 2,899 | - | - | 2,899 | |
| Total | 38,914 | 65,064 | 34,929 | 138,908 | 39,011 | 64,901 | 33,665 | 137,578 |
M&A loans refer to credit lines to be used for acquisition operations carried out directly by Reply S.p.A. or via companies controlled directly or indirectly by the same.
Summarized below are the existing contracts entered into for such a purpose:
o Tranche B, amounting to 20,000 thousand Euros, to be used by 30 September 2016.The loan is reimbursed on a half-year basis deferred to commence on 31 March 2017. Such credit line is entirely reimbursed at 30 June 2020.
On 30 September 2015 Reply S.p.A. entered into a line of credit with Unicredit S.p.A. for a total amount of 25,000 thousand Euros to be used by 30 September 2018. On 17 February 2017 a reduction of the credit line to 1,500,000 was agreed and completely utilized, the loan is reimbursed on a half year basis deferred to commence on 31 March 2019 and will expire on 30 November 2021. Such credit line was used for 750 thousand Euros at 30 June 2020.
Interest rates are also applied according to certain predetermined ratios (Covenants) of economic and financial nature calculated on the consolidated financial statements as at 30 June of each year and/or the consolidated interim report.
As contractually defined, such ratios are as follows:
At 30 June 2020, Reply fulfilled the Covenants under the various contracts.
The item Mortgages refers to financing granted to Tool Reply GmbH during the year 2018 by Commerzbank for a total amount of 2,500 thousand Euros to be used by 30 June 2028. The loan is reimbursed on a quarterly basis (at an interest rate of 0.99%).
It should also be noted that on 24 May 2018 Reply S.p.A. undersigned with Unicredit S.p.A. a mortgage loan secured by guarantee for the purchase and renovation of the property De Sonnaz for a total amount of 40,000 thousand Euros and for a maximum duration of 156 months (13 years). The mortgage is disbursed in relation to the progress of the work and within the maximum period of 36 months commencing June 1, 2018. Such credit line was used for 15,300 thousand Euros at 30 June 2020.
The item IFRS 16 financial liabilities is related to the financial lease liabilities at 30 June 2020 related to the adoption of the new Accounting Standard IFRS 16.
The item Derivative financial instruments refers to several loans established with primary financial institutions (Intesa Sanpaolo S.p.A. and Unicredit S.p.A.) to hedge changes in floating interest rates on loans and/or mortgages; the total underlying notional amounts to 60,500 thousand Euros. The effective component of the instruments is stated in the Statement of changes in net equity whereas the ineffective portion of the Derivative instruments is recorded at the income statement.
The carrying amount of Financial liabilities is deemed to be in line with its fair value.
In compliance with Consob regulation issued on 28 July 2006 and in accordance with ESMA guidelines, the net financial position of the Reply Group at 30 June 2020 was as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Cash and cash equivalents | 259,637 | 240,943 | 18,694 |
| Current financial assets | 1,855 | 1,666 | 189 |
| Total financial assets | 261,493 | 242,609 | 18,884 |
| Current financial liabilities | (17,471) | (18,557) | 1,086 |
| Current IFRS 16 financial liabilities | (21,444) | (20,454) | (990) |
| Noncurrent financial liabilities | (26,058) | (26,857) | 799 |
| Noncurrent IFRS 16 financial liabilities | (73,936) | (71,710) | (2,225) |
| Total financial liabilities | (138,908) | (137,578) | (1,329) |
| Total net financial position | 122,585 | 105,031 | 17,554 |
For further details with regards to the above table see Note 21, Note 26 as well as Note 29. Pursuant to the aforementioned recommendations long term financial assets are not included in the net financial position.
Change in financial liabilities during the first half of 2020 is summarized below:
| ((thousand Euros) | |
|---|---|
| Total financial liabilities 2019 | 137,578 |
| Bank overdrafts | (1,372) |
| IRS | (2,899) |
| Non-current financial liabilities 2019 | 133,307 |
| IFRS 16 financial liabilities | 3,215 |
| Cash flows | (7,620) |
| Total non-current financial liabilities as at 30 June 2020 | 128,901 |
| Bank overdrafts | 6,282 |
| IRS | 3,724 |
| Total financial liabilities as at 30 June 2020 | 138,908 |
Employee benefits are detailed as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Employee severance indemnities | 31,336 | 29,385 | 1,951 |
| Employee pension funds | 12,387 | 12,385 | 2 |
| Directors severance indemnities | 1,605 | 1,569 | 36 |
| Other | 16 | 16 | - |
| Total | 45,343 | 43,355 | 1,988 |
The Employee severance indemnity represents the obligation to employees under Italian law (amended by Law 296/06) that has accrued up to 31 December 2006 and that will be settled when the employee leaves the company. In certain circumstances, a portion of the accrued liability may be given to an employee during his working life as an advance. This is an unfunded defined benefit plan, under which the benefits are almost fully accrued, with the sole exception of future revaluations.
The procedure for the determination of the Company's obligation with respect to employees was carried out by an independent actuary according to the following stages:
Re-proportioning of the discounted performances based on the seniority accrued at the valuation date with respect to the expected seniority at the time the company must fulfil its obligations. In order to allow for the changes introduced by Law 296/06, the re-proportioning was only carried out for employees of companies with fewer than 50 employees that do not pay Employee severance indemnities into supplementary pension schemes.
Reassessment of Employee severance indemnities in accordance with IAS 19 was carried out "ad personam" and on the existing employees, that is analytical calculations were made on each employee in force in the company at the assessment date without considering future work force.
The actuarial valuation model is based on the so called technical bases which represent the demographic, economic and financial assumptions underlying the parameters included in the calculation.
In accordance with IAS 19, Employment severance indemnities at 30 June 2020 are summarized in the table below:
| (thousand Euros) | |
|---|---|
| Balance as at 31/12/2019 | 29,385 |
| Cost relating to current work (service cost) | 2,953 |
| Actuarial gain/loss | 461 |
| Interest cost | 110 |
| Change in consolidation | (31) |
| Indemnities paid during the year | (1,543) |
| Balance as at 30/06/2020 | 31,336 |
The Pension fund item relates to liability as regards the defined benefit pensions of some German companies.
This amount is related to Directors severance indemnities paid during the year.
Deferred tax liabilities at 30 June 2020 amount to 19,104 thousand Euros and are referred mainly to the fiscal effects arising from temporary differences deriving from statutory income and taxable income related to deferred deductibility.
Deferred tax liabilities have not been recognized on retained earnings of the subsidiary companies as the Group is able to control the timing of distribution of said earnings and in the near future does not seem likely.
Provisions amount to 9,273 thousand Euros (of which 8,773 thousand Euros are non-current). Change in the first half of 2020 is summarized in the table below:
| (thousand Euros) | Balance at 31/12/2019 |
Accruals | Utilization | Reversals | Exchange differences |
Balance at 30/06/2020 |
|---|---|---|---|---|---|---|
| Fidelity fund | 450 | 80 | (21) | 3 | - | 512 |
| Provision for risks | 9,127 | 840 | (510) | (242) | (454) | 8,761 |
| Total | 9,577 | 920 | (532) | (239) | (454) | 9,273 |
Employee fidelity provisions refer mainly to provisions made for the employees of some German companies in relation to anniversary bonuses. The liability is determined through actuarial calculations applying a 5.5% rate.
The Provision for risks represents the best estimate for contingent liabilities. The accrual of the half year is referred to the update of this estimate and to new legal ongoing controversies, lawsuits with former employees and other liabilities in Italy and abroad. Utilization and reversals of the period relate to the resolution of previous disputes mostly related to employees.
Trade payables at 30 June 2020 amount to 76,136 thousand Euros and are detailed as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Domestic suppliers | 64,285 | 97,719 | (33,434) |
| Foreign suppliers | 12,459 | 22,788 | (10,329) |
| Advances to suppliers | (608) | (556) | (51) |
| Total | 76,136 | 119,951 | (43,815) |
Other current liabilities at 30 June 2020 amounted to 269,878 thousand Euros with a decrease of 69,236 thousand Euros with respect to the previous financial year.
Detail is as follows:
| (thousand Euros) | 30/06/2020 | 31/12/2019 | Change |
|---|---|---|---|
| Income tax payable | 26,681 | 8,750 | 17,932 |
| VAT payable | 10,037 | 20,651 | (10,614) |
| Withholding tax and other | 5,200 | 8,163 | (2,963) |
| Total due to tax authorities | 41,918 | 37,564 | 4,355 |
| National social insurance payable | 34,024 | 31,552 | 2,471 |
| Other | 2,672 | 2,997 | (325) |
| Total due to social securities | 36,695 | 34,549 | 2,147 |
| Employee accruals | 81,895 | 90,503 | (8,609) |
| Other payables | 105,767 | 159,890 | (54,123) |
| Accrued expenses and deferred income | 3,602 | 16,608 | (13,005) |
| Total other payables | 191,264 | 267,001 | (75,737) |
| Other current liabilities | 269,878 | 339,113 | (69,236) |
Due to tax authorities amounting to 41,918 thousand Euros, mainly refers to debit to the Treasury for VAT amounting, payables due to tax authorities for withholding tax on employees and professionals' compensation.
Due to social security authorities amounting to 36,695 thousand Euros, is related to both Company and employee's contribution payables.
Other payables at 30 June 2020 amount to 191,264 thousand Euros and mainly include:
Accrued Expenses and Deferred Income mainly relate to advance invoicing in relation to T&M consultancy activities to be delivered in the subsequent financial periods.
Segment reporting has been prepared in accordance with IFRS 8, as a breakdown of revenues by geographic area, determined as the area in which the services are executed.
| (thousand Euros) | Region 1 | % | Region 2 |
% | Region 3 |
% | IoT Incub ator |
% | Interseg ment |
1st half 2020 |
% |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 422,919 | 100 | 135,600 | 100 | 64,837 | 100 | 59 | 100 | (8,240) | 615,176 | 100 |
| Operating costs | (359,153) | (84.9) | (113,647) | (83.8) | (59,499) | (91.8) | (900) | (1,513.5) | 8,240 | (524,959) | (85.3) |
| Gross operating income | 63,766 | 15.1 | 21,953 | 16.2 | 5,339 | 8.2 | (841) | (1,413.5) | - | 90,217 | 14.7 |
| Amortisation, depreciation and write-downs |
(11,164) | (2.6) | (5,281) | (3.9) | (2,949) | (4.5) | (16) | (26.1) | (19,409) | (3.2) | |
| Other non-recurring (costs)/income |
175 | - | 1,199 | 1 | 1,964 | 3 | - | - | 3,339 | 1 | |
| Operating income | 52,778 | 12.5 | 17,872 | 13.2 | 4,354 | 6.7 | (856) | (1,439.6) | 74,147 | 12.1 | |
| Gain/(loss)on investments | - | - | - | - | - | - | 4,717 | 7,930 | 4,717 | 1 | |
| Financial income/(loss) | (2,963) | (0.7) | (1,661) | (1.2) | 621 | 1 | 276 | 464 | (3,727) | (0.6) | |
| Income before taxes | 49,815 | 11.8 | 16,211 | 12.0 | 4,975 | 7.7 | 4,137 | 6,954.7 | 75,138 | 12.2 |
| (thousand Euros) | Region 1 | % | Region 2 |
% | Region 3 |
% | IoT Incub ator |
% | Interseg ment |
1st half 2019 |
% |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 398,541 | 100 | 126,981 | 100 | 54,220 | 100 | 415 | 100 | (6,485) | 573,672 | 100 |
| Operating costs | (332,396) | (83.4) | (109,682) | (86.4) | (50,196) | (92.6) | (2,228) | (536.7) | 6,485 | (488,017) | (85.1) |
| Gross operating income | 66,145 | 16.6 | 17,299 | 13.6 | 4,024 | 7.4 | (1,813) | (436.7) | - | 85,655 | 14.9 |
| Amortisation, depreciation and write-downs |
(10,828) | (2.7) | (4,391) | (3.5) | (2,722) | (5.0) | (74) | (17.8) | (18,014) | (3.1) | |
| Other non-recurring (costs)/income |
- | - | - | - | (41) | (0.1) | - | - | (41) | - | |
| Operating income | 55,318 | 13.9 | 12,908 | 10.2 | 1,260 | 2.3 | (1,887) | (454.5) | 67,599 | 11.8 | |
| Gain/(loss)on investments | - | - | - | - | 1 | - | 4,229 | 1.018.5 | 4,230 | 0.7 | |
| Financial income/(loss) | 552 | - | (1,232) | (1.0) | (537) | (1.0) | (397) | (95.5) | (1,613) | (0.3) | |
| Income before taxes | 55,870 | 14.0 | 11,676 | 9.2 | 725 | 1.3 | 1,945 | 468.5 | 70,216 | 12.2 |
Breakdown of revenues by type is as follows:
| REGION 1 | REGION 2 | REGION 3 | IoT INCUBATOR | ||||||
|---|---|---|---|---|---|---|---|---|---|
| BUSINESS LINE | 1st half 20 |
1st half 19 |
1st half 20 |
1st half 19 |
1st half 20 |
1st half 19 |
1st half 20 |
1st half 19 |
|
| T&M | 17.1% | 16.4% | 51.5% | 56.3% | 45.8% | 51.0% | - | - | |
| FIXED PRICE PROJECTS |
82.9% | 83.6% | 48.5% | 43.7% | 54.2% | 49.0% | - | - | |
| OTHER BUSINESS | - | - | - | - | - | - | 100.0% | 100.0% | |
| TOTAL | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| (thousand Euros) | Region 1 | Region 2 | Region 3 | IoT Incubator |
Intersegment | Total 1st half 2020 |
|---|---|---|---|---|---|---|
| Current operating assets | 337,219 | 90,404 | 38,505 | 273 | (37,293) | 429,107 |
| Current operating liabilities | (265,243) | (66,527) | (48,597) | (15,462) | 37,293 | (358,537) |
| Net working capital (A) | 71,975 | 23,877 | (10,093) | (15,189) | - | 70,571 |
| Non-current assets | 186,215 | 173,811 | 98,524 | 62,431 | 520,981 | |
| Non-financial liabilities long term | (52,681) | (42,992) | (5,249) | - | (100,922) | |
| Fixed capital (B) | 133,534 | 130,819 | 93,275 | 62,431 | - | 420,059 |
| Net invested capital (A+B) | 205,509 | 154,696 | 83,182 | 47,243 | - | 490,630 |
| IoT | ||||||
|---|---|---|---|---|---|---|
| (thousand Euros) | Region 1 | Region 2 | Region 3 | Incubator | Intersegment | Total 2019 |
| Current operating assets | 438,195 | 96,720 | 47,120 | 703 | (35,604) | 547,134 |
| Current operating liabilities | (363,886) | (80,186) | (36,095) | (15,180) | 35,604 | (459,744) |
| Net working capital (A) | 74,308 | 16,534 | 11,025 | (14,477) | - | 87,390 |
| Non-current assets | 187,425 | 167,119 | 103,459 | 60,167 | 518,170 | |
| Non-financial liabilities long term | (61,233) | (47,959) | (14,338) | - | (123,530) | |
| Fixed capital (B) | 126,192 | 119,160 | 89,121 | 60,167 | - | 394,640 |
| Net invested capital (A+B) | 200,500 | 135,694 | 100,146 | 45,690 | - | 482,030 |
Breakdown of employees by operating segment is as follows:
| Region | 1 st half 2020 |
1 st half 2019 |
Change |
|---|---|---|---|
| Region 1 | 6,001 | 5,659 | 342 |
| Region 2 | 1,736 | 1,636 | 100 |
| Region 3 | 800 | 625 | 175 |
| IoT Incubator | 3 | 4 | (1) |
| Total | 8,540 | 7,924 | 616 |
In accordance with IAS 24 Related parties are Group companies and persons that are able to exercise control, joint control or have significant influence on the Group and on its subsidiaries and key management with strategic responsibilities and related families.
Transactions carried out by the group companies with related parties that as of the reporting date are considered ordinary business and are carried out at normal market conditions.
The main economic and financial transactions with related parties are summarized below.
| (thousand Euros) | |||
|---|---|---|---|
| Financial transactions | 30/06/2019 | 31/12/2019 | Nature of transactions |
| Trade receivables | 16 | 153 Receivables from professional services | |
| Trade payables | 132 | - | Payables for professional services and office rentals offices |
| Other payables | 3,713 | 5,210 | Payables for emoluments s to Directors and Managers with strategic responsibilities and Board of Statutory Auditors |
| Economic transactions | 1st half 2020 | st half 2019 1 |
Nature of transactions |
| Revenues from professional services | 20 | 3 Professional services executed | |
| Services from Parent company and related parties |
618 | 641 | Service contracts relating to office rental and administration office |
| Personnel | 5,796 | 3,583 Emoluments to Directors and Key Management with strategic responsibilities |
|
| Services and other costs | 71 | 56 Emoluments to Statutory Auditors |
With reference the Cash flows statement, the above mentioned transactions impact the change in working capital by 1,228 thousand Euros.
In accordance with IAS 24, emoluments to Directors, Statutory Auditors and Key Management are also included in transactions with related parties.
In accordance with Consob Resolution no, 15519 of 27 July 2006 and Consob communication no, DEM/6064293 of 28 July 2006 the financial statements annexed herein present the Consolidated Income statement and Balance Sheet showing transactions with related parties separately, together with the percentage incidence with respect to each account caption.
Pursuant to Art, 150, paragraph 1 of the Italian Legislative Decree n, 58 of 24 February 1998, no transactions have been carried out by the members of the Board of Directors that might be in potential conflict of interests with the Company.
Guarantees and commitments where existing, have been disclosed at the item to which they refer.
Note that:
Within three months from the registration of the merger in the Turin Companies Register, each minority shareholder was able to present a petition for the purpose of commencing, in compliance with German law, before a Judge qualified in Germany – who shall have exclusive jurisdiction – the assessment inherent in the Share Swap ratio and the corresponding amount in cash. All shareholders of Reply Deutschland will have the right to benefit from a possible increase in the exchange ratio determined by the Judge or on the basis of an agreement between the parties, and that is to say independently of their participation in the evaluation procedure. On the contrary, from the possible increase of the corresponding amount in cash determined by the Judge or on the basis of an agreement between the parties only the shareholders who verbally annotated their disagreement in the general meeting in respect of conditions of the law can benefit.
In the case where evaluation procedures include a modification of the exchange ratio, every single difference shall be regulated in cash.
At past, some minority shareholders have commenced the aforementioned procedures.
Following exchanges with the minority shareholders and their appointed representative, the Company has reached a settlement agreement where the payment of an additional amount of 4.41 Euros per share of Reply Deutschland was agreed plus legal interest, in addition to the flat-rate reimbursement of proceedings costs. On 18 June 2018, the German court took note of the agreement reached between the parties. The expenses arising from this agreement amounting to approximately 5 million Euros is covered by specific provisions.
As an international company, the Group is exposed to numerous legal risks, particularly in the area of product liability, environmental risks and tax matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that are not covered, or not fully covered, by insurers' compensation payments and could affect the Group financial position and results.
Instead, when it is probable that an overflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, the Group recognizes specific provision for this purpose.
No significant events have occurred subsequent to 30 June 2020. Please refer to the paragraph Outlook on operations for further information.
The Half year condensed consolidated financial statements at 30 June 2020 were approved by the Board of Directors on July 31, 2020 which authorized the publication within the terms of law.
| of which with |
||||||
|---|---|---|---|---|---|---|
| (thousand Euros) | 1st half 2020 | related parties |
% | 1st half 2019 | of which with related parties |
% |
| Revenues | 615,176 | 20 | - | 573,672 | 3 | - |
| Other income | 5,593 | 5,916 | ||||
| Purchases | (10,731) | (11,126) | ||||
| Personnel | (305,678) | (5,796) | 1.9% | (290,091) | (3,583) | 1.2% |
| Services and other costs | (214,891) | (689) | 0.3% | (193,663) | (697) | 0.4% |
| Amortization, depreciation and write-downs |
(19,409) | (18,014) | ||||
| Other operating and non-recurring (cost)/income |
4,087 | 905 | ||||
| Operating income | 74,147 | 67,599 | ||||
| (Loss)/gain on investments | 4,717 | 4,230 | ||||
| Financial income/(expenses) | (3,727) | (1,613) | ||||
| Income before taxes | 75,138 | 70,216 | ||||
| Income taxes | (20,364) | (19,638) | ||||
| Net income | 54,773 | 50,578 | ||||
| Non-controlling interest | (836) | (1,165) | ||||
| Group net result | 53,938 | 49,414 |
| of which with related |
of which with related |
|||||
|---|---|---|---|---|---|---|
| (thousand Euros) | 30/06/2020 | parties | % | 31/12/2019 | parties | % |
| Tangible assets | 48,616 | 48,298 | ||||
| Goodwill | 263,879 | 267,541 | ||||
| Intangible assets | 13,027 | 13,676 | ||||
| RoU Assets | 92,538 | 90,569 | ||||
| Equity investments | 59,108 | 56,991 | ||||
| Other financial assets | 7,829 | 7,567 | ||||
| Deferred tax assets | 35,985 | 33,527 | ||||
| Non-current assets | 520,981 | 518,170 | ||||
| Inventories | 136,803 | 75,328 | ||||
| Trade receivables | 239,354 | 16 | - | 432,240 | 153 | 0.04% |
| Other receivables and current assets | 52,951 | 39,566 | ||||
| Financial assets | 1,855 | 1,666 | ||||
| Cash and cash equivalents | 259,637 | 240,943 | ||||
| Current assets | 690,600 | 789,743 | ||||
| TOTAL ASSETS | 1,211,581 | 1,307,913 | ||||
| Share Capital | 4,863 | 4,863 | ||||
| Other reserves | 551,089 | 465,000 | ||||
| Net result of the period | 53,938 | 113,858 | ||||
| Group shareholders' equity | 609,890 | 583,722 | ||||
| Non-controlling interest | 3,325 | 3,339 | ||||
| NET EQUITY | 613,215 | 587,061 | ||||
| Due to minority shareholders and Earn-out | 27,702 | 41,301 | ||||
| Financial liabilities | 26,058 | 26,857 | ||||
| Financial liabilities from RoU | 73,936 | 71,710 | ||||
| Employee benefits | 45,343 | 43,355 | ||||
| Deferred tax liabilities | 19,104 | 19,810 | ||||
| Provisions | 8,773 | 8,897 | ||||
| Noncurrent liabilities | 200,915 | 211,931 | ||||
| Due to minority shareholders and Earn-out | 12,023 | 10,166 | ||||
| Financial liabilities | 17,471 | 18,557 | ||||
| Financial liabilities from RoU | 21,444 | 20,454 | ||||
| Trade payables | 76,136 | 132 | 0.2% | 119,951 | ||
| Other current liabilities | 269,878 | 3,713 | 1.4% | 339,113 | 5,210 | 1.5% |
| Provisions | 500 | 680 | ||||
| Current liabilities | 397,451 | 508,921 | ||||
| TOTAL LIABILITIES | 586,366 | 720,853 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
1,211,581 | 1,307,913 |
| Company name | Headquarters | Group interest | |
|---|---|---|---|
| Parent company | |||
| Reply S.p.A. | Turin – Corso Francia, 110 - Italy | ||
| Companies consolidated on a line-by-line basis | |||
| 4brands Reply GmbH & CO. KG. | Minden, Germany | 51.00% | |
| Air Reply S.r.l. (*) | Turin, Italy | 85.00% | |
| Alpha Reply GmbH (formerly Profondo Reply GmbH) | Guetersloh, Germany | 100.00% | |
| Arlanis Reply S.r.l. | Turin, Italy | 100.00% | |
| Arlanis Reply AG | Potsdam, Germany | 100.00% | |
| Aktive Reply S.r.l. | Turin, Italy | 100.00% | |
| Atlas Reply S.r.l. | Turin, Italy | 100.00% | |
| Avantage Reply Ltd. | London, United Kingdom | 100.00% | |
| Avantage Reply (Belgium) Sprl | Brussels, Belgium | 100.00% | |
| Avantage Reply (Luxembourg) Sarl | Itzig, Luxembourg | 100.00% | |
| Avantage Reply (Netherlands) BV | Amsterdam, Netherland | 100.00% | |
| Avvio Reply Ltd. | London, United Kingdom | 100.00% | |
| Avvio Reply S.r.l. | Turin. Italy | 100.00% | |
| Blowfish Digital Holdings Ltd. | London, United Kingdom | 100.00% | |
| Blue Reply S.r.l. | Turin, Italy | 100.00% | |
| Blue Reply GmbH | Guetersloh, Germany | 100.00% | |
| Bridge Reply S.r.l. | Turin, Italy | 60.00% | |
| Business Reply S.r.l. | Turin, Italy | 100.00% | |
| Breed Reply Ltd. | London, United Kingdom | 100.00% | |
| Breed Reply Investment Ltd. | London, United Kingdom | 80.00% | |
| Cluster Reply S.r.l. | Turin, Italy | 100.00% | |
| Cluster Reply GmbH & CO. KG | Munich, Germany | 100.00% | |
| Cluster Reply Informatica LTDA. | San Paolo, Brazil | 100.00% | |
| Cluster Reply Roma S.r.l. | Turin, Italy | 100.00% | |
| Comsysto D.O.O. | Zagreb, Croatia | 100.00% | |
| ComSysto Reply GmbH | Munich, Germany | 100.00% | |
| Concept Reply GmbH | Munich, Germany | 100.00% | |
| Consorzio Reply Public Sector | Turin, Italy | 100.00% | |
| Core Reply S.r.l. | Turin, Italy | 90.00% |
| Data Reply S.r.l. | Turin, Italy | 100.00% |
|---|---|---|
| Data Reply GmbH (*) | Munich, Germany | 92.50% |
| Discovery Reply S.r.l. | Turin, Italy | 100.00% |
| e*finance consulting Reply S.r.l. | Turin, Italy | 100.00% |
| Ekip Reply S.r.l. | Turin, Italy | 100.00% |
| Elbkind Reply GmbH | Hamburg, Germany | 100.00% |
| Eos Reply S.r.l. | Turin, Italy | 100.00% |
| Envision Reply S.r.l. | Turin, Italy | 88.00% |
| Forge Reply S.r.l. | Turin, Italy | 100.00% |
| France Reply Ltd. | London, United Kingdom | 100.00% |
| Go Reply S.r.l. | Turin, Italy | 100.00% |
| Go Reply GmbH | Guetersloh, Germany | 100.00% |
| Hermes Reply S.r.l. | Turin, Italy | 100.00% |
| Hermes Reply Consulting (Nanjing) Co. Ltd. | China | 100.00% |
| Hermes Reply Polska zo.o | Katowice, Poland | 100.00% |
| Implico LLC | Seattle, USA | 100.00% |
| Industrie Reply GmbH | Munich, Germany | 100.00% |
| Industrie Reply LLC | Michigan, USA | 100.00% |
| Infinity Reply GmbH | Düsseldorf, Germany | 100.00% |
| IrisCube Reply S.r.l. | Turin, Italy | 100.00% |
| Laife Reply GmbH | Munich, Germany | 100.00% |
| Leadvise Reply GmbH | Darmstadt, Germany | 100.00% |
| Like Reply S.r.l. | Turin, Italy | 100.00% |
| Live Reply GmbH | Düsseldorf, Germany | 100.00% |
| Logistics Reply S.r.l. | Turin, Italy | 100.00% |
| Logistics Reply GmbH | Munich, Germany | 100.00% |
| Lynx Recruiting Ltd. | London, United Kingdom | 100.00% |
| Macros Reply GmbH | Munich, Germany | 100.00% |
| MCG Systems AG | Colony, Germany | 100.00% |
| Modcomp GmbH | Colony, Germany | 100.00% |
| Neveling.net GmbH | Hamburg, Germany | 100.00% |
| Open Reply GmbH | Guetersloh, Germany | 100.00% |
| Open Reply S.r.l. | Turin, Italy | 100.00% |
| Pay Reply S.r.l | Turin, Italy | 100.00% |
| Portaltech Reply Ltd. | London, United Kingdom | 100.00% |
| Portaltech Reply S.r.l. | Turin, Italy | 100.00% |
| Portaltech Reply GmbH | Guetersloh, Germany | 100.00% |
|---|---|---|
| Portaltech Reply Süd GmbH | Munich, Germany | 100.00% |
| Power Reply S.r.l. | Turin, Italy | 100.00% |
| Power Reply GmbH & CO. KG. | Munich, Germany | 100.00% |
| Protocube Reply S.r.l. | Turin, Italy | 70.00% |
| Red Reply GmbH | Frankfurt, Germany | 100.00% |
| Reply Consulting S.r.l. | Turin, Italy | 100.00% |
| Reply AG | Guetersloh, Germany | 100.00% |
| Reply GmbH | Zurich, Switzerland | 100.00% |
| Reply do Brasil Sistemas de Informatica Ltda | Belo Horizonte, Brazil | 100.00% |
| Reply Inc. | Michigan, USA | 100.00% |
| Reply Ltd. | London, United Kingdom | 100.00% |
| Reply Belgium Sprl | Mont Saint Guibert, Netherland | 100.00% |
| Reply Digital Experience S.r.l. | Turin, Italy | 100.00% |
| Reply France Sarl | Paris, France | 100.00% |
| Reply Luxembourg Sarl | Sandweiler, Luxembourg | 100.00% |
| Reply NL Ltd. | London, United Kingdom | 100.00% |
| Reply Services S.r.l. | Turin, Italy | 100.00% |
| Reply Verwaltung GmbH | Guetersloh, Germany | 100.00% |
| Retail Reply S.r.l. | Turin, Italy | 100.00% |
| Ringmaster S.r.l. | Turin, Italy | 50.00% |
| Risk Reply Ltd. | London, United Kingdom | 100.00% |
| Riverland Reply GmbH | Munich, Germany | 100.00% |
| Santer Reply S.p.A. | Milan, Italy | 100.00% |
| Security Reply S.r.l. | Turin, Italy | 100.00% |
| Sense Reply S.r.l. | Turin, Italy | 90.00% |
| Solidsoft Reply Ltd. | London, United Kingdom | 100.00% |
| Spark Reply S.r.l. | Turin, Italy | 100.00% |
| Spark Reply GmbH | Germany | 100.00% |
| Spike Reply GmbH | Colony, Germany | 100.00% |
| Sprint Reply S.r.l. | Turin, Italy | 100.00% |
| Sprint Reply GmbH | Munich, Germany | 100.00% |
| Spot Digital Ltd. | London, United Kingdom | 100,00% |
| Storm Reply S.r.l. | Turin, Italy | 100.00% |
| Storm Reply GmbH | Guetersloh, Germany | 100.00% |
| Syskoplan Reply S.r.l. | Turin, Italy | 100.00% |
| Syskoplan Reply GmbH & CO. KG | Guetersloh, Germany | 100.00% |
|---|---|---|
| Sytel Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Sytel Reply S.r.l. | Turin, Italy | 100.00% |
| Target Reply S.r.l. | Turin, Italy | 100.00% |
| TamTamy Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Bucharest, Romania | 100.00% |
| TD Reply GmbH | Berlin, Germany | 100.00% |
| TD Marketing Consultants, Beijing Co. Ltd. | China | 100.00% |
| Threepipe Reply Ltd. | London, United Kingdom | 100,00% |
| Tool Reply GmbH | Guetersloh, Germany | 100.00% |
| Triplesense Reply GmbH | Frankfurt, Germany | 100.00% |
| Valorem LLC (*) | Kansas City, USA | 90.00% |
| Valorem Private Ltd | India | 99.99% |
| Valorem GmbH | Zurich, Switzerland | 100.00% |
| WM Reply Inc. | Illinois, USA | 80.00% |
| WM Reply LLC | Minsk, Belarus | 100.00% |
| WM Reply Ltd | London, United Kingdom | 100.00% |
| Whitehall Reply S.r.l. | Turin, Italy | 100.00% |
| Xister Reply S.r.l. | Turin, Italy | 100.00% |
(*) For these companies an option exists for the acquisition of the minority shares; the exercise of such option in future reporting periods is subject to the achievement of profitability parameters. The accounting of such options reflects management's best estimate at the reporting date.
| Companies carried at fair value | ||
|---|---|---|
| Amiko Digital Health Ltd | England | 22.73% |
| CageEye AS | Norway | 9.95% |
| Callsign Inc. | England | 3.61% |
| Canard Drones Ltd. | Spain | 24.06% |
| Connecterra BV | Belgium | 16.00% |
| enModus Ltd. | England | 19.18% |
| FoodMarble Digestive Health Ltd. | England | 23.45% |
| iNova Design Ltd. | England | 34.05% |
| Iotic Labs Ltd. | England | 16.28% |
| Kokoon Technology Ltd. | England | 30.33% |
| Metron Sas | France | 10.11% |
| RazorSecure Ltd. | England | 32.03% |
| Senseye Ltd. | England | 12.58% |
| Sensoria Inc. | USA | 24.00% |
| TAG Sensors AS | Norway | 15.60% |
| Ubirch GmbH | Germany | 18.51% |
| We Predict Ltd. | England | 16.64% |
| Wearable Technologies Ltd. | England | 18.64% |
| Yellow Line Parking Ltd. | England | 9.86% |
| Zeetta Networks Limited | England | 29.28% |
3.1 the Half-year condensed financial statements at June 30, 2020:
have been prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union through Regulation (EC) 1606/2002 of the European Parliament and Counsel, dated 19 July 2002, as well as the measures issued to implement article 9 of Legislative Decree no.38/2005; - correspond to the amounts shown in the Company's accounts, books and records; and - provide a fair and correct representation of the financial conditions, results of operations and cash flows of the Company and its consolidated subsidiaries;
3.2 the related interim management report includes a reliable analysis of the significant events affecting the Company in the first six months of the current fiscal year and the impact of such events on the Company's condensed financial statements as well as a description of the main risks and uncertainties.
Turin, July 31, 2020
/s/ Mario Rizzante /s/ Giuseppe Veneziano
Chairman and Chief Executive Officer Director responsible of drawing up the accounting documents
Mario Rizzante Giuseppe Veneziano
To the shareholders of Reply SpA
We have reviewed the accompanying consolidated condensed interim financial statements of Reply SpA and its subsidiaries (the Reply Group) as of 30 June 2020, comprising the consolidated statement of financial position, consolidated statement of income, consolidated statement of comprehensive income, statement of changes in consolidated equity, consolidated statement of cashflows and related notes. The directors of Reply SpA are responsible for the preparation of the consolidated condensed interim financial statements in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on these consolidated condensed interim financial statements based on our review.
We conducted our work in accordance with the criteria for a review recommended by Consob in Resolution No. 10867 of 31 July 1997. A review of consolidated condensed interim financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than a fullscope audit conducted in accordance with International Standards on Auditing (ISA Italia) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated condensed interim financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the consolidated condensed interim financial statements of the Reply Group as of 30 June 2020 are not prepared, in all material respects, in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union.
Turin, 4 August 2020
PricewaterhouseCoopers SpA
Mattia Molari (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
Reply S.p.A. Corso Francia, 110 10143 TURIN – ITALY Tel. +39-011-7711594 Fax +39-011-7495416 www.reply.com
Share capital: Euro 4,863,485.64 i.v. Fiscal code and R.I. of Turin no. 97579210010 VAT 08013390011 REA of Turin 938289
E-mail: [email protected] Tel. +39-011-7711594 Fax +39-011-7495416
E-mail: [email protected] Tel. +39-02-535761 Fax +39-02-53576444
Corso Francia, 110, 10143 Turin – Italy Tel. +39-011-7711594 Fax. +39-011-7495416 [email protected] www.reply.com
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