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Datalogic

Quarterly Report Jun 4, 2020

4452_10-q_2020-06-04_98be0010-dc55-4f99-b743-9c59c19ccd8f.pdf

Quarterly Report

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TABLE OF CONTENTS

GROUP STRUCTURE page 3
COMPOSITION OF CORPORATE BODIES page 4
REPORT ON OPERATIONS page 5
CONSOLIDATED FINANCIAL STATEMENTS page 17
Consolidated Statement of Financial Position - Assets
Consolidated Statement of Financial Position - Liabilities
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Cash Flow
Changes in Consolidated Shareholders' Equity
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS page 24
Information on the Statement of Financial Position
Information on the Income Statement
ANNEXES
  • ⋅ Certification by the Manager in charge of drawing up the Company's accounting statements
  • ⋅ Consolidation Area
  • ⋅ Reconciliation of Alternative Performance Indicators
  • ⋅ Restatement of Segment disclosure

DISCLAIMER

This document includes forward-looking statements, related to future events and Group operating, economic and financial results. These statements include risk and uncertainty elements as they depend on the occurrence of events and future developments. The actual results may deviate, even to a significant extent, from the expected outcome due to multiple factors, most of which are beyond the Group's control.

Datalogic Confidential Internal

GROUP STRUCTURE

COMPOSITION OF CORPORATE BODIES

Board of Directors (1)

  • Romano Volta Executive Chairman (2) Valentina Volta CEO (2) Angelo Busani Independent Director Roberto Lancellotti Independent Director Chiara Giovannucci Orlandi Independent Director Pietro Todescato Executive Director Filippo Maria Volta Non-executive Director Vera Negri Zamagni Independent Director
  • Angelo Manaresi Independent Director and Lead Independent Director

Board of Statutory Auditors (3)

Salvatore Fiorenza Chairman Elena Lancellotti Statutory Auditor Roberto Santagostino Statutory Auditor

Ines Gandini Alternate Statutory Auditor Eugenio Burani Alternate Statutory Auditor Patrizia Cornale Alternate Statutory Auditor

Audit and Risk, Remuneration and Appointments Committee

Angelo Manaresi Chairman Chiara Giovannucci Orlandi Independent Director Filippo Maria Volta Non-executive Director

Independent Auditor (4) Deloitte & Touche S.p.A.

(1) The Board of Directors will remain in office until the Shareholders' Meeting held for the approval of the financial statements as at 31 December 2020.

(2) Legal representative as regards third parties.

(3) The Board of Statutory Auditors will remain in office until the Shareholders' Meeting held for the approval of the financial statements as at 31 December 2021.

(4) Deloitte & Touche S.p.A. was appointed Independent Auditor for the nine-year period from 2019 to 2027 by the Shareholders' Meeting held on 30 April 2019 and will remain in office until the Shareholders' Meeting held for the approval of the financial statements as at 31 December 2027.

Report on Operations

REPORT ON OPERATIONS

INTRODUCTION

This Interim Report as at 31 March 2020 was drawn up pursuant to Art. 154 ter of T.U.F. and was prepared in compliance with the international accounting standards (IAS/IFRS) endorsed by the European Union.

The amounts reported in the tables of the Report on Operations are expressed in thousands of Euro. The notes to the accounts are expressed in millions of Euro.

GROUP PROFILE

Datalogic S.p.A. and its subsidiaries ("Group" or "Datalogic Group") is the global technological leader in the markets of automatic data capture and process automation. The Group is specialised in the design and production of bar code readers, mobile computers, detection, measurement and security sensors, vision and laser marking systems and RFID. Its pioneering solutions contribute to increase efficiency and quality of processes along the entire value chain, in the Retail, Manufacturing, Transportation & Logistics and Healthcare sectors.

HIGHLIGHTS OF THE PERIOD

The following table summarises the Datalogic Group's key operating and financial results as at 31 March 2020 in comparison with the same period a year earlier:

Quarter ended
31.03.2020 % on 31.03.2019 % on Change % % ch.
Revenues Revenues Change net FX
Revenues 124,168 100.0% 144,647 100.0% (20,479) -14.2% -15.0%
Adjusted EBITDA 7,330 5.9% 21,647 15.0% (14,317) -66.1% -63.4%
Operating result (EBIT) (1,197) -1.0% 14,822 10.2% (16,019) n.a. n.a.
Net Profit/(Loss) for the period (4,265) -3.4% 12,567 8.7% (16,832) n.a. n.a.
Net financial position (NFP) (21,004) (3,925) (17,079)

In the first quarter of 2020, revenues came to €124.2 million, showing a decline of 14.2% on the same period of 2019, Adjusted EBITDA decreased to €7.3 million, taking the Adjusted EBITDA margin to 5.9% (15.0% as at 31 March 2019).

All reference geographical areas reported a decrease, for the first quarter of 2020. EMEAI reported a drop of -14.8%, mitigated by +3.5% growth in Italy, -13.7% in the Americas and 11.7% in APAC.

The net loss for the quarter amounted to €4.3 million (profit of €12.6 million in the same period of 2019).

As at 31 March 2020, the Net Financial Position was negative for €21.0 million, with a decrease of respectively €17.1 million compared to 31 March 2019 (negative by €3.9 million) and €34.4 million compared to 31 December 2019 (positive for €13.4 million).

PERFORMANCE ALTERNATIVE INDICATORS (NON-GAAP MEASURES)

To allow for a better valuation of the Group's performance, management adopted certain alternative performance indicators that are not identified as accounting measures within IFRS (NON-GAAP measures). The measurement criteria applied by the Group might not be consistent with those adopted by other groups and the indicators might not be comparable with indicators calculated by the latter. These performance indicators, determined according to provisions set out by Guidelines on Performance Indicators, issued by ESMA/2015/1415 and adopted by Consob with communication no. 92543 of 3 December 2015, refer only to the performance of the accounting period related to this Interim Report and the compared periods.

The performance indicators must be considered as supplementary and do not supersede information given pursuant to IFRS standards. The description of the main indicators adopted is given hereunder.

  • EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation): this indicator is defined as Profit/Loss for the period before depreciation and amortisation of tangible and intangible assets, financial income and expenses and income taxes.
  • Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation and Amortisation): this indicator is defined as Profit/Loss for the period before depreciation and amortisation of tangible and intangible assets, financial income and expenses and income taxes, as well as of costs and revenues considered by the Management as non-recurring because they are significant in amount and type and, as such, do not reflect the Group's core business.
  • Net Trade Working Capital: this indicator is calculated as the sum of Inventories and Trade Receivables, less Trade Payables.
  • Net Working Capital: this indicator is calculated as the sum of Net Trade Working Capital and Other Current Assets and Liabilities, including short-term Provisions for Risks and Charges.
  • Net Invested Capital: this indicator is the total of Current and Non-Current Assets, excluding financial assets, less Current and Non-Current Liabilities, excluding financial liabilities.
  • NFP (Net Financial Position) or Net Financial Debt: this indicator is calculated based on provisions set out by Consob Communication no. 15519 of 28 July 2006. This indicator includes also "Other financial assets" represented by temporary cash investments and financial liabilities for operating leases resulting from the application of the new IFRS 16 accounting standard.
  • Free Cash Flow: this indicator is calculated as cash flows from operating activities, net of investments in tangible and intangible fixed assets (excluding right-of-use assets recognised over the period in accordance with IFRS 16) and financial and tax income and charges for operating activities.

GROUP RECLASSIFIED ECONOMIC RESULTS FOR THE PERIOD

The following table shows the main income statement items of the current period, compared with the same period in the previous year:

Quarter ended
31.03.2020 31.03.2019 Change %
Change
Revenues 124,168 100.0% 144,647 100.0% (20,479) -14.2%
Cost of goods sold (66,189) -53.3% (74,496) -51.5% 8,307 -11.2%
Gross Operating Margin 57,979 46.7% 70,151 48.5% (12,172) -17.4%
Research and Development expenses (16,927) -13.6% (14,304) -9.9% (2,623) 18.3%
Distribution expenses (28,795) -23.2% (29,102) -20.1% 307 -1.1%
General and Administrative expenses (11,594) -9.3% (11,107) -7.7% (487) 4.4%
Other operating income/(expenses) 601 0.5% 580 0.4% 21 3.6%
Total Operating expenses and others (56,715) -45.7% (53,933) -37.3% (2,782) 5.2%
Non-recurring costs/revenues and write-downs (1,228) -1.0% (199) -0.1% (1,029) 517.1%
Amortisation and depreciation from acquisitions (1,233) -1.0% (1,197) -0.8% (36) 3.0%
Operating result (EBIT) (1,197) -1.0% 14,822 10.2% (16,019) n.a.
Financial Income/(Expenses) (2,269) -1.8% (215) -0.1% (2,054) 955.3%
Foreign exchange gains/(losses) (3,023) -2.4% 1,504 1.0% (4,527) n.a.
Profit/(Loss) before taxes (EBT) (6,489) -5.2% 16,111 11.1% (22,600) n.a.
Taxes 2,224 1.8% (3,544) -2.5% 5,768 n.a.
Net Profit/(Loss) for the period (4,265) -3.4% 12,567 8.7% (16,832) n.a.
Non-recurring costs/revenues and write-downs (1,228) -1.0% (199) -0.1% (1,029) 517.1%
Depreciation of tangible assets (4,488) -3.6% (4,158) -2.9% (330) 7.9%
Amortisation of intangible assets (2,811) -2.3% (2,468) -1.7% (343) 13.9%
Adjusted EBITDA 7,330 5.9% 21,647 15.0% (14,317) -66.1%

Consolidated revenues were €124.2 million, down by 14.2% compared to €144.7 million in the same period of the previous year.

The following table shows the breakdown by geographical area of Group revenues achieved in the first quarter of 2020, compared with the same period of the previous year:

Quarter ended
31.03.2020 % Change 31.03.2019
(Restated)1
% Change Change % Change % ch.
net FX
Italy 11,750 9.5% 11,353 7.8% 397 3.5% 3.5%
EMEAI (excluding Italy) 59,493 47.9% 72,304 50.0% (12,811) -17.7% -18.0%
Total EMEAI 71,243 57.4% 83,657 57.8% (12,414) -14.8% -15.1%
Americas 39,781 32.0% 46,100 31.9% (6,318) -13.7% -15.5%
APAC 13,143 10.6% 14,890 10.3% (1,747) -11.7% -12.4%
Total Revenues 124,168 100.0% 144,647 100.0% (20,480) -14.2% -15.0%

1 Comparison data as at 31 March 2019 were restated to reflect the new allocations of Group revenues to geographical areas and business segments, as they were redefined by the Management. Reference should be made to Annex 4 for more details.

All reference geographical areas reported a decrease, for the first quarter of 2020. EMEAI reported a drop of -14.8%, mitigated by +3.5% growth in Italy, -13.7% in the Americas and -11.7% in APAC. The trend of the period was affected by an expected weakness in the markets, which had already emerged at the end of 2019, when investment decisions were postponed and was affected by an unfavorable comparison with the same period of 2019 due to the roll-outs of fixed retail scanners in the main retail chains and the completion of important multi-year projects in the Transportation & Logistics segment. The restrictive measures adopted first in APAC and subsequently in Europe and North America further led to a more pronounced contraction in volumes, both due to the slowdown in the supply chain and to the demand of end customers and distributors.

Gross Operating Margin was €58.0 million, down by 17.4% from €70.2 million reported in the first quarter of the previous year. As a percentage of revenues, it decreased by 1.8 percentage points compared to the same period in 2019, going from 48.5% in the first quarter of 2019 to 46.7% in the first quarter of 2020. Net of exchange rate effect, the impact of Gross Operating Margin on revenues decreased by 1.3 percentage points, compared to the same period in the previous year, mainly volumes decrease and to some extent to price effect.

Operating expenses and others, were €56.7 million, increased by 5.2% compared to €53.9 million in the same period of 2019, and by 8.4 as a percentage of turnover, from 37.3% to 45.7%, mainly due to investments in R&D and lower volumes.

A 18.3% increase in Research and Development expenses, which amounted at €16.9 million, (13.6% of revenues) compared to 9.9% reported in the first quarter of 2019 (€14.3 million).

In the first quarter of 2020, Research and Development spending, including investments, increased from €14.0 million to €18.8 million. The percentage of turnover is around 15.1%, compared to 9.7% reported in the first quarter of 2019, with an increase of 5.4 percentage points.

Distribution expenses, equal to €28.8 million, resulted slightly lower than the previous period (€29.1 million in the first period of 2019), with a percentage of 23.2% on revenues, compared to 20.1% recorded in 2019. Net of the one off effect of the first quarter of 2019 for the bad debt release on a project of Solution Net Systems Inc. division resolved positively for €1.8 million, distribution expenses decrease in the first quarter of 2020 by 6.8% thanks to efficiencies gained in APAC, EMEAI and marketing.

Adjusted EBITDA was €7.3 million (€21.6 million in the first quarter of 2019) and showed 9.1% decrease as percentage on revenue (8.5% decrease at constant exchange rate), equal to 5.9% compared to 15.0% recorded in the first quarter of 2019. Margin trend recorded over the period reflected the decrease in volumes and the price effects, mainly due to the Covid-19 scenario, as well as the increase in R&D investments, deemed strategic for the Group growth over the medium-long term.

EBIT is negative at €1.2 million, compared to positive €14.8 million reported in the same period of the previous year, primarily due to the effects of the Covid-19 scenario.

FINANCIAL INCOME/(EXPENSES)

Quarter ended
31.03.2010 31.03.2019 Change
Financial Income/(Expenses) (503) (625) 122
Fair Value (1,567) 742 (2,309)
Foreign exchange gains/losses (3,023) 1,504 (4,527)
Bank expenses (220) (302) 82
Others 21 (29) 50
Total Financial Income/(Expenses) (5,292) 1,290 (6,582)

Net Financial Income/(Expenses), negative by €5.3 million, worsened by €6.6 million, mainly due to the unfavourable performance of foreign exchange differences, negative by €3.0 million (positive by €1.5 million as at 31 March 2019) and to the negative fair value of cash equivalents investments (€-1.6 million in the first quarter 2020, compared to positive €0.7 million reported in the same quarter of 2019) driven by the downturn of financial markets at quarter end.

Net loss amounted to €4.3 million (profit of €12.6 million as at 31 March 2019).

GROUP ECONOMIC RESULTS BY DIVISION FOR THE PERIOD

Operating segments are identified based on the management reporting used by senior management to allocate resources and evaluate results. Consistently with the previous year, the operating segments were included in the following divisions:

  • Datalogic, which represents the Group's core business and designs and produces bar code scanners, mobile computers, detection, measurement and security sensors, vision and laser marking and RFID systems that contribute to increasing the efficiency and quality of processes in the areas of Retail, Manufacturing, Transportation & Logistics and Healthcare, along the entire value chain;
  • Solution Net Systems, specialised in supplying and installing integrated solutions for the postal segment and distribution centres in the Retail sector;
  • Informatics, which sells and distributes products and solutions for the management of inventories and mobile assets tailored to small and medium sized companies.

The following tables show the comparison between the divisional Revenues and Adjusted EBITDA achieved in the first quarter of 2020 and those achieved in the same period of 2019:

Quarter ended
31.03.2020 % on revenues 31.03.2019 % on revenues Change %
Datalogic 115,252 92.8% 135,647 93.8% (20,395) -15.0%
Solution Net Systems 5,522 4.4% 5,465 3.8% 57 1.0%
Informatics 4,187 3.4% 4,292 3.0% (105) -2.4%
Adjustments (793) -0.6% (757) (0.5%) (36)
Total Revenues 124,168 100.0% 144,647 100.0% (20,479) -14.2%
Quarter ended
31.03.2020 % on revenues 31.03.2019 % on revenues Change %
Datalogic 6,972 6.0% 20,694 15.3% (13,722) -66.3%
Solution Net Systems 110 2.0% 985 18.0% (875) -88.8%
Informatics 218 5.2% (73) (1.7%) 291 n.a.
Adjustments 30 -3.8% 41 (5.4%) (11)
Total Adjusted EBITDA 7,330 5.9% 21,647 15.0% (14,317) -66.1%

DATALOGIC DIVISION

In the first quarter of 2020, the Datalogic Division reported a turnover of €115.3 million, down (-15.0%) compared to the same period of 2019, with a drop in all geographical areas, especially EMEAI and Americas.

Divisional Adjusted EBITDA amounted to €7.0 million, decreasing with respect to the same period of 2019, with an Adjusted EBITDA margin of 6.0% (15.3% as at 31 March 2019). Net of exchange rate effect, Adjusted EBITDA margin of the division was 6.6%.

Below is the breakdown by industry of the Datalogic Division's revenues:

Quarter ended
31.03.2020 % 31.03.2019
(Restated)2
% Change % % ch. net
FX
Retail 47,273 41.0% 51,650 38.1% (4,377) -8.5% -9.6%
Manufacturing 25,935 22.5% 28,544 21.0% (2,609) -9.1% -9.7%
Transportation & Logistics 8,513 7.4% 14,085 10.4% (5,571) -39.6% -40.2%
Healthcare 4,076 3.5% 4,951 3.6% (875) -17.7% -18.9%
OEM 472 0.4% 224 0.2% 248 110.4% 104.2%
Channel 28,982 25.1% 36,194 26.7% (7,212) -19.9% -20.1%
Total Revenues 115,252 100% 135,647 100.0% (20,395) -15.0% -15.8%

Retail

The Retail sector decreased by 8.5% compared to the same period of the previous year, with a slowdown in APAC (- 14.7%) and EMEAI (-18.3%) areas, the latter penalized by the conclusion of the roll outs in the fixed retail scanner segment of the main retail chains, mitigated by a double-digit growth recorded in the Americas (+14.2%).

Manufacturing

The Manufacturing sector decreased by 9.1%, compared to the same period of the previous year, due to the persistent economic slowdown in the automotive sector, especially in EMEAI and North America, while APAC remained substantially unchanged.

Transportation & Logistics

The Transportation & Logistics sector reported a decrease, equal to 39.6%, compared to the same period of 2019, driven by a negative performance in all geographical areas, especially North America, where an unfavorable comparison basis is recorded compared to the first quarter of 2019 following the conclusion of some multi-year projects.

Datalogic Confidential Internal

2 Comparison data as at 31 March 2019 were restated to reflect the new allocations of Group revenues to geographical areas and business segments, as they were redefined by the Management. Reference should be made to Annex 4 for more details.

Healthcare

The Healthcare sector recorded 17.7% decrease, compared to the same quarter of 2019, especially in EMEAI and APAC, albeit a slight growth was recorded in North America.

OEM

The OEM sector reported a very positive performance in all geographical areas, despite its still marginal contribution to Group revenues.

Channel

The sales through distribution channel to small and medium-sized customers reported a 19.9% decrease, compared to the same quarter of 2019.

SOLUTION NET SYSTEMS DIVISION

In the first quarter of 2020, the Solution Net Systems Division recorded revenues amounting to €5.5 million, in line with the same period of 2019. Divisional Adjusted EBITDA amounted to €0.1 million, down compared to the same period of 2019, due to the different mix and the stage of completion of ongoing projects.

INFORMATICS DIVISION

In the first quarter of 2020, the Informatics Division recorded a turnover of €4.2 million (€4.3 million in the same period of 2019). Divisional Adjusted EBITDA was positive by €0.2 million (up by €0.3 million compared to the same period of 2019), it improved thanks to the increased sales of services and shift to the new business model "Software as a Service".

GROUP RECLASSIFIED STATEMENT OF FINANCIAL POSITION FOR THE PERIOD

The following table shows the main financial and equity items for the Datalogic Group as at 31 March 2020, compared with 31 December 2019.

31.03.2020 31.12.2019 Change % Change
Intangible assets 52,433 50,471 1,962 3.9%
Goodwill 190,557 186,126 4,431 2.4%
Tangible assets 102,223 99,355 2,868 2.9%
Financial assets and equity investments in associates 6,916 10,241 (3,325) -32.5%
Other non-current assets 49,451 44,906 4,545 10.1%
Total Fixed Assets 401,580 391,099 10,481 2.7%
Trade receivables 74,363 78,203 (3,840) -4.9%
Trade payables (84,591) (106,029) 21,438 -20.2%
Inventories 103,312 102,921 391 0.4%
Net Trade Working Capital 93,084 75,095 17,989 24.0%
Other current assets 50,553 49,345 1,208 2.4%
Other current liabilities and Provisions for risks,
current (77,571) (78,219) 648 -0.8%
Net Working Capital 66,066 46,221 19,845 42.9%
Other non-current liabilities (34,139) (34,571) 432 -1.2%
Employee severance indemnity (6,987) (7,026) 39 -0.6%
Provisions for risks, non-current (4,923) (4,916) (7) 0.1%
Net Invested Capital 421,597 390,807 30,790 7.9%
Shareholders' Equity (400,593) (404,171) 3,578 -0.9%
Net financial position (NFP) (21,004) 13,364 (34,368) -257.2%

As at 31 March 2020, Net Trade Working Capital was €93.1 million (15.7% of revenues), increasing by €18.0 million compared to 31 December 2019 (equal to €75.1 million), following the lower commercial exposure to suppliers due to costs and volumes reduction.

Net Invested Capital, reached €421.6 million (€390.8 million as at 31 December 2019), increased by €30.8 million compared to the previous year, of which €6.1 million due to exchange rate effect. The increase is due to net working capital, in the amount of €19.8 million, as well as to fixed assets, amounting to €10.5 (of which €5.4 million due to exchange rate effect), following investments in R&D and in production facilities.

As at 31 March 2020, the Net Financial Position was negative for €21.0 million, with a decrease of respectively €17.1 million compared to 31 March 2019 (negative by €3.9 million) and €34.4 million compared to 31 December 2019.

Negative Free cash flow of €27.0 million in the first quarter of 2020 (negative by €12.0 million in the same period of 2019), due to cash absorption of operations within the Covid scenario and higher investments in R&D, strategic for the medium-term growth of the Group. Net financial negative by €3.2 million, reported a worsening, compared to the first quarter of 2019, due to the unfavourable performance of exchange rates and fair value of cash equivalents investments. They were however offset by a lower cash absorption of other operating assets and liabilities.

Cash flows, which brought about the change in Consolidated Net Financial Position as at 31 March 2020, are summarised as follows:

31.03.2020 31.03.2019 Change
Net Financial Position/(Net Financial Debt) at the beginning of the period 13,365 23,843 (10,478)
Adjusted EBITDA 7,330 21,647 (14,317)
Change in net trade working capital (17,989) (18,264) 275
Net investments (8,676) (6,082) (2,594)
Change in taxes (4,426) (4,504) 78
Financial Incomes/(Expenses) (3,207) 1,289 (4,496)
Dividend distribution - - -
Treasury shares (2,470) (2,497) 27
Other changes (1,621) (5,247) 3,626
Change in Net financial position (NFP) before IFRS 16 (31,059) (13,658) (17,401)
IFRS 16 (3,311) (14,110) 10,799
Change in Net financial position (34,370) (27,768) (6,602)
Net Financial Position/(Net Financial Debt) at the end of the period (21,005) (3,925) (17,080)

As at 31 March 2020, the Net Financial Debt/(Net Financial Position) is broken down as follows:

31.03.2020 31.12.2019
A. Cash and bank deposits 121,948 151,829
B. Other cash equivalents 12 12
b1. restricted cash 12 12
C. Securities held for trading - -
c1. short-term - -
c2. long-term - -
D. Cash and cash equivalents (A) + (B) + (C) 121,960 151,841
E. Current financial receivables 29,633 31,200
e1. other current financial receivables 29,633 31,200
F. Bank overdrafts 205 221
G. Current portion of non-current debt 49,187 47,421
H. Other current financial liabilities 6,411 6,457
h1. hedging instruments - -
h2. leasing payables 5,172 4,589
h3. current financial liabilities 1,239 1,868
I. Current financial debt (F) + (G) + (H) 55,803 54,099
J. Current net financial debt/(Current net financial position) (I) - (E) - (D) (95,790) (128,942)
K. Non-current bank borrowing 110,025 110,106
L. Bonds - -
M. Other non-current liabilities 6,769 5,472
m1. hedging instruments - -
m2. leasing payables 6,769 5,472
m3. non-current financial liabilities - -
N. Non-current financial debt (K) + (L) + (M) 116,794 115,578
O. Net financial debt/(Net financial position) (J) + (N) 21,004 (13,364)

As at 31 March 2020, the Group has credit lines in place amounting to €338.4 million, of which €177.8 million unused including €100.0 million long-term subscribed during the month of March 2020, aimed at supporting investments, and €77.8 million short-term.

RECONCILIATION OF THE NET RESULT AND THE EQUITY OF THE PARENT COMPANY WITH THE GROUP

The Reconciliation between Equity and Net Profit of Datalogic S.p.A. and the corresponding consolidated values as at 31 March 2020 and 31 December 2019, as envisaged in Consob Communication no. DEM/6064293 of 28 July 2006, are disclosed here below.

31 March 2020 31 December 2019
Shareholders'
Equity
Profit/loss
for the
period
Shareholders'
Equity
Profit/loss
for the
period
Parent Company's equity and profit 350,773 (359) 353,548 105,040
Shareholders' equity and profit/(loss) of consolidated
companies
103,160 (5,348) 105,404 56,671
Elimination of dividends (114,470)
Amortisation of intangible assets - Business Combination (5,827) (5,827)
Business Combination under common control (31,733) (31,733)
Elimination of capital gain on sale of business branch (17,067) (17,067)
Elimination of intercompany transactions (7,452) 2,033 (9,485) 2,792
Adjustment of write-downs and capital gains on equity
investments
5,517 5,517
Goodwill impairment (1,395) (1,395)
Others 238 (377) 616 (218)
Tax effect 4,380 (214) 4,594 466
Consolidated's equity and profit 400,593 (4,265) 404,171 50,281

SIGNIFICANT EVENTS OF THE PERIOD

In the first quarter of 2020, a reorganization of the commercial structure was launched in order strengthen the endusers and partners' markets oversee in the respective geographies.

The first quarter of 2020, as previously outlined, was significantly affected by the spread of the Covid pandemic, for which the Group implemented all the necessary measures to protect the safety of its employees, through the activation of smart-working, sanitization of the work environments, the implementation of health and safety devices, to manage the business in the lockdown phase, as well as the phase of progressive restart, in the best possible way without interruption.

During the month of March 2020, the Group subscribed additional credit lines for an amount of €100 million, which has not been used at the date of this document, aimed at supporting the Group's growth and investments.

On 30 March 2020, the Company postponed from 30 April 2020 to 4 June 2020 the Shareholders' Meeting that will be called, inter alia, to examine the Financial Statements as at 31 December 2019, in view of the health emergency related to Covid-19 (Coronavirus) and the regulations issued by Decree Law no. 18 of 17 March 2020 (so-called Decree Law "Cura Italia").

The Board of Directors also confirmed that it will propose to the aforesaid Shareholders' Meeting the distribution of an ordinary unit dividend, gross of legal withholdings, equal to 30 Euro cents per share, for a maximum total amount of €17,533,947, with coupon detachment on 15 June 2020 (record date 16 June 2020) and payment as from 17 June 2020

SUBSEQUENT EVENTS

After the end of the quarter, the Covid-19 emergency continued and stricter measures were adopted by the various Government authorities. This led to an extension of the lockdown, in April and partly in May, in Europe and its gradual activation in the United States, the Group's main markets.

In response to this situation, the Company had adopted an action plan aimed at mitigating the impact of Covid-19 already in March, managing the emergency by focusing on the safety of its own resources first and foremost, but at the same time ensuring business continuity in order to protect the Group's economic and financial performance and equity soundness. These measures, which at the date of the hereby document are still partially being defined in light of recent regulatory developments, are and will be implemented through careful financial planning to be executed through cost and investment reduction plans not strictly necessary, as well as through the use of social safety nets.

FORESEEABLE EVOLUTION

Given the current uncertainty about the duration and intensity of the health and socio-economic emergency related to Covid-19, as well as the timing of a possible return to normal life, the Group deems that it is not yet possible to estimate the overall impact that this epidemic will have over the year.

The economic and financial performance recorded in the first quarter of 2020 reflects the impact of the spread, first in China and then in the rest of the world, of the pandemic and the resulting restrictive measures adopted by local Governments and implemented by the Datalogic Group to protect the health of its employees, and which, while designed to ensure business continuity, have nevertheless led to a reduction, even significant, in business activities.

To date, the elements underlying the development of forecasts for the year remain very uncertain. The evolution of the pandemic, the resolutions of the Authorities on the recovery of economic activities, which are still partially in lockdown today, as well as the reaction of the markets, in a context of recession that could emerge in several regions of the world, have resulted in negative growth forecasts for the first half of the year and potentially for the remainder of 2020.

Despite the expected short-term negative performance, the Group believes that, once the current emergency eases, the sound economic and financial fundamentals will lead Datalogic to grow again in the medium term.

SECONDARY LOCATIONS

The Parent Company has no secondary locations.

The Chairman of the Board of Directors

(Mr. Romano Volta)

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS (€/000) Note 31.03.2020 31.12.2019
A) Non-current assets (1+2+3+4+5+6+7+8) 401,580 391,099
1) Tangible assets 90,638 89,602
Land 1 8,773 8,778
Buildings 1 31,413 31,820
Other assets 1 34,160 35,418
Assets in progress and payments on account 1 16,292 13,586
2) Intangible assets 242,990 236,597
Goodwill 2 190,557 186,126
Development costs 2 9,637 9,927
Other 2 27,391 28,430
Assets in progress and payments on account 2 15,405 12,114
3) Right-of-use assets 3 11,585 9,753
4) Equity investments in affiliates 4 776 776
5) Financial assets 6,140 9,465
Equity investments 6 6,140 9,465
Securities 6 0 0
6) Non-current financial receivables 0 0
7) Trade and other receivables 7 1,554 1,334
8) Deferred tax assets 13 47,897 43,572
B) Current assets (9+10+11+12+13+14+15) 379,821 413,510
9) Inventories 103,312 102,921
Raw and ancillary materials and consumables 8 47,081 41,754
Work in progress and semi-finished products 8 20,315 23,582
Finished products and goods 8 35,916 37,585
10) Trade and other receivables 99,259 103,127
Trade receivables 7 74,363 78,203
of which from associates 7 846 895
of which from related parties 7 0 0
Other receivables, accrued income and prepaid expenses 7 24,896 24,924
of which from associates 5 0
of which from related parties 77 77
11) Tax receivables 9 25,657 24,421
of which from parent company 12,742 12,742
12) Financial assets 29,633 31,200
Securities 6 0 0
Other 6 29,633 31,200
13) Current financial receivables 0 0
14) Financial assets - Derivative instruments 6 0 0
15) Cash and cash equivalents 121,960 151,841
C) Held-for-sale assets 0 0
Total Assets (A+B+C) 781,401 804,609

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

LIABILITIES (€/000) Note 31.03.2020 31.12.2019
A) Total Shareholders' Equity (1+2+3+4+5+6) 10 400,593 404,171
1) Share capital 10 30,392 30,392
2) Reserves 10 129,660 128,972
3) Retained earnings 10 243,003 192,885
4) Profit/(Loss) for the period 10 (4,204) 50,069
5) Group Shareholders' Equity 10 398,852 402,318
6) Profit/(Loss) for the period - Minorities 10 (61) 212
6) Minority share capital 10 1,803 1,641
6) Minority interests 1,742 1,853
B) Non-current liabilities (7+8+9+10+11+12+13) 162,843 162,091
7) Non-current financial payables 11 116,794 115,578
8) Non-current financial liabilities 0 0
9) Tax payables 67 68
10) Deferred tax liabilities 12 18,275 17,819
11) Post-employment benefits 13 6,987 7,026
12) Provisions for risks and charges, non-current 14 4,923 4,916
13) Other liabilities 15 15,797 16,684
C) Current liabilities (14+15+16+17+18) 217,965 238,347
14) Trade and other payables 133,068 154,153
Trade payables 15 84,591 106,029
of which to associates 15 63 55
of which to related parties 112 133
Other payables, accrued liabilities and deferred income 15 48,477 48,124
15) Tax payables 9 24,778 25,822
of which to parent company 15,913 15,913
16) Provisions for risks and charges, current 14 4,316 4,273
17) Current financial liabilities 0 0
18) Current financial payables 11 55,803 54,099
Total Liabilities (A+B+C) 781,401 804,609

CONSOLIDATED INCOME STATEMENT

(€/000) Note 31.03.2020 31.03.2019
1) Revenues 16 124,168 144,647
Revenues from sale of products 114,994 135,995
Revenues from services 9,174 8,652
of which from related parties and associates 1,166 1,067
2) Cost of goods sold 17 66,568 74,496
of which to related parties and associates 126 229
Gross Operating Margin (1-2) 57,600 70,151
3) Other operating revenues 18 1,165 1,127
4) Research and development expenses 17 17,056 14,330
of which to related parties and associates 143 155
5) Distribution expenses 17 29,200 29,106
of which to related parties and associates 6 17 -
6) General and administrative expenses 17 13,142 12,473
of which to related parties and associates 51 173
7) Other operating expenses 17 564 547
Total operating costs 59,962 56,456
Operating result (1,197) 14,822
8) Financial income 19 8,540 10,834
9) Financial expenses 19 13,832 9,545
Financial Income/(Expenses) (8-9) (5,292) 1,289
10) Profits from associates - -
Profit/(Loss) before taxes from continuing operations (6,489) 16,111
Income taxes 20 (2,224) 3,544
Profit/(loss) for the period (4,265) 12,567
Basic earnings/(loss) per share (Euro) 21 (0.07) 0.22
Diluted earnings/(loss) per share (Euro) 21 (0.07) 0.22
Attributable to:
Shareholders of the Parent Company (4,204) 12,567
Minority interests (61)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(€/000) Note 31.03.2020 31.03.2019
Profit/(loss) for the period (4,265) 12,567
Other components of the statement of comprehensive income:
Other components of the statement of comprehensive income which will be
subsequently reclassified to profit/(loss) for the period: - -
Profit/(Loss) on derivative financial instruments (cash flow hedge) 10 54 69
Profit/(Loss) due to translation of the accounts of foreign companies 10 6,429 2,486
Profit/(Loss) from financial assets at FVOCI 10 (3,325) 2,053
of which tax effect 39 (549)
Total other components of the statement of comprehensive income which 3,158 4,608
will be subsequently reclassified to profit/(loss) for the period
Other components of the statement of comprehensive income which will
not be subsequently reclassified to profit/(loss) for the period
Actuarial gains (losses) on defined-benefit plans
of which tax effect
Total other components of the statement of comprehensive income which - -
will not be subsequently reclassified to profit/(loss) for the period
Total profit/(loss) of Comprehensive Income Statement 3,158 4,608
Total comprehensive profit/(loss) for the period (1,107) 17,175
Attributable to:
Shareholders of the Parent Company (1,046) 17,175
Minority interests (61) -

CONSOLIDATED STATEMENT OF CASH FLOW

(€/000) Note 31.03.2020 31.03.2019
Profit/(loss) before taxes (6,489) 16,111
Depreciation of tangible assets and write-downs 1, 2 3,105 4,166
Amortisation of intangible assets and write-downs 1, 2 2,812 2,471
Depreciation of right-of-use assets 3 1,382 1,303
Losses (Gains) from sale of fixed assets 18, 19 (9) 15
Change in provisions for risks and charges 15 52 (761)
Change in bad debt provisions 18 96 (1,755)
Change in employee benefits reserve 14 (39) 99
Other non-monetary changes 5,346 (1,893)
Cash flow generated (absorbed) from operations before changes in working
capital
6,256 19,756
Change in trade receivables 7 3,744 13,358
Change in final inventories 8 (391) (11,909)
Change in trade payables 16 (21,438) (17,958)
Change in other current assets 7 28 (11)
Change in other current liabilities 16 353 (7,768)
Change in other non-current assets 7 (220) 3,497
Change in other non-current liabilities 16 (887) 534
Cash flow generated (absorbed) from operations after changes in
working capital
(12,555) (501)
Change in taxes (4,426) (4,504)
Interest paid (745) (840)
Interest collected 107 147
Cash flow generated (absorbed) from operations (A) (17,619) (5,698)
Increase in intangible assets 2 (4,294) (1,626)
Decrease in intangible assets 2 (9)
Increase in tangible assets 1 (4,399) (4,508)
Decrease in tangible assets 1 17 61
Increase in right-of-use assets (3,311)
Change in consolidation area
Change in non-current financial assets 5
Cash flow generated (absorbed) from investments (B) (11,987) (6,082)
Change in financial receivables 5 743
Change in financial payables 12, 6 1,040 (1,187)
Repayment of lease financial payables 2,018 (1,368)
(Purchase)/sale of treasury shares 11 (2,470) (2,497)
Dividend payment 11
Effect of change in cash and cash equivalents (1,002) 673
Other changes 139 (231)
Cash flow generated (absorbed) from financial activity (C) (275) (3,868)
Net increase (decrease) in available cash (A+B+C) 10 (29,881) (15,648)
Net cash and cash equivalents at beginning of period 10 151,841 181,430
Net cash and cash equivalents at end of period 10 121,960 165,782

CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY

Description Share
capital
Share
premium
reserve
Treasury
shares
Translation
reserve
Other
Reserves
Retained
earnings
Group
Profit
(Loss)
Group
Shareholders'
Equity
Profit (Loss)
of
Minority
interests
Shareholders'
Equity of Min.
interests
Profit
(Loss)
Shareholders'
Equity
01.01.2020 30,392 111,779 (15,113) 26,530 5,776 192,885 50,069 402,318 212 1,853 50,281 404,170
Allocation of earnings 50,069 (50,069) (212) 212 (50,281)
Dividends
Treasury shares (2,470) (2,470) (2,470)
Stock Grant
Other changes (11) (11) (50)
Profit/(loss) for the
period
(4,204) (4,204) (61) (4,265) (4,265)
Other components of
the statement of 6,429 (3,271) 3,158 3,158
comprehensive income
Comprehensive profit
(loss)
6,429 (3,271) (4,204) (1,046) (61) (61) (4,265) (1,107)
31.03.2020 30,392 111,779 (17,583) 32,948 2,505 242,954 (4,204) 398,791 (61) 1,803 (4,265) 400,593
Description Share
capital
Share
premium
reserve
Treasury
shares
Translation
reserve
Other
Reserves
Retained
earnings
Group
Profit
(Loss)
Group
Shareholders'
Equity
Profit (Loss)
of
Minority
interests
Shareholders'
Equity of Min.
interests
Profit
(Loss)
Shareholders'
Equity
01.01.2019 30,392 111,779 (10,811) 20,401 2,545 159,292 62,210 375,809 62,210 375,809
Allocation of earnings 62,210 (62,210) (62,210)
Dividends
Treasury shares (2,566) (2,566) (2,566)
Stock Grant 69 69 69
Other changes
Profit/(loss) for the
period
12,567 12,567 12,567 12,567
Other components of
the statement of 4,341 267 (2) 4,606 4,606
comprehensive income
Comprehensive profit
(loss)
4,341 267 (2) 12,567 17,173 12,567 17,173
31.03.2019 30,392 111,779 (13,377) 24,742 2,881 221,500 12,567 390,485 12,567 390,485

Explanatory Notes to the Consolidated Financial Statements

EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

GENERAL INFORMATION

The Datalogic Group is the global leader in the markets of automatic data capture and process automation. The Group is specialised in the design and production of bar code readers, mobile computers, detection, measurement and security sensors, vision and laser marking systems and RFID.

Its pioneering solutions contribute to increase efficiency and quality of processes in the areas of Retail, Manufacturing, Transportation & Logistics, and Healthcare, along the entire value chain.

Datalogic S.p.A. (hereinafter "Datalogic", the "Parent Company" or the "Company") is a company listed in the STAR segment of the Italian Stock Exchange managed by Borsa Italiana S.p.A., with its registered office in Italy. The address of the registered office is Via Candini, 2 - Lippo di Calderara (BO).

This Consolidated Interim Report as at 31 March 2020 includes the figures of the Parent Company and its subsidiaries (defined hereinafter as the "Group"), as well as its minority interests in associates.

The publication of the Consolidated Interim Report as at 31 March 2020 of the Datalogic Group was authorised by resolution of the Board of Directors dated 14 May 2020.

BASIS OF PRESENTATION

1) General criteria

This Consolidated Interim Report was drawn up pursuant to Art. 154-ter of Legislative Decree no. 58 (TUF) of 24 February 1998 and following amendments and supplements, as well as to the Consob's Issuer Regulation. This Consolidated Interim Report complies with IAS 34 "Interim Financial Reporting" providing the abbreviated notes required by this international accounting standard, supplemented to provide additional information, as necessary.

Therefore, this Consolidated Interim Report must be read together with the Consolidated Financial Statements and the Explanatory Notes as at 31 December 2019, which have been prepared in accordance with IFRS accounting standards endorsed by the European Union, approved at the Shareholders' Meeting held on 19 March 2020 and available in the section Investor Relations at www.Datalogic.com.

This Consolidated Interim Report is drawn up in thousands of Euro, which is the Group's "functional" and "presentation" currency.

2) Financial statements

The financial statements adopted are compliant with those required by IAS 1 and which were used in the Consolidated Financial Statements for the year ended 31 December 2019, in particular:

  • current and non-current assets, as well as current and non-current liabilities are disclosed separately in the Statement of Financial Position. Current assets, which include cash and cash equivalents, are those set to be realised, sold or used during the Group's normal operational cycle; current liabilities are those whose extinction is envisaged during the Group's normal operating cycle or in the 12 months after the reporting date;

  • with regard to the Income Statement, cost and revenue items are disclosed based on grouping by function, as this classification was deemed more meaningful for comprehension of the Group's business result;

  • the Statement of Comprehensive Income presents the components that determine profit/(loss) for the period and the costs and revenues reported directly under shareholders' equity;
  • the Statement of Cash Flow is presented using the indirect method.

Furthermore, as required by Consob resolution no. 15519 of 27 July 2006, with regard to the consolidated income statement, costs and revenues from non-recurring operations have been specifically identified and the related effects on the major interim levels have been indicated separately. Non-recurring events and transactions are mainly identified according to the nature of the transactions. In particular, items which, given their nature, do not occur on an ongoing basis during normal operations are included among non-recurring costs/revenues (these include, for example: income/expenses from business combinations and income/expenses from corporate reorganisation processes).

3) New accounting standards, interpretations and amendments adopted by the Group

No new accounting standards or interpretations and amendments were adopted in this Consolidated Interim Report.

4) New accounting standards issued but still not in force

At the reporting date of this Consolidated Interim Report, some accounting criteria were issued but are not yet applicable, as described in the Group Consolidated Financial Statements as at 31 December 2019, to which reference is made. The Group intends to adopt these standards and interpretations, if applicable, when they will enter into force.

5) Use of estimates and assumptions

The preparation of the IFRS-compliant Consolidated Interim Report requires directors to apply accounting standards and methodologies that, in some cases, are based on valuations and estimates, which in turn refer to historic experience and assumptions based on specific circumstances at any given time. The application of such estimates and assumptions affects the amounts related to revenues, costs, assets and liabilities, as well as contingent liabilities disclosed and any relevant information. The actual amounts of accounting items, for which these estimates and assumptions have been used, might be different from those reported due to the uncertainty characterising the assumptions and conditions on which estimates are based.

The economic result of the period is disclosed net of taxes recognised based on the best estimate of the weighted average rate expected for the year.

Transition to IFRS 16 introduces some elements of professional judgement, which involve the definition of some accounting policies and the use of assumptions and estimates in relation to the lease term and the incremental borrowing rate.

6) Consolidation area

During the first three months of 2020, no changes occurred in the consolidation area.

7) Translation criteria of items in foreign currency

The exchange rates used to determine the countervalue in Euro of financial statements expressed in foreign currency of subsidiaries (currency for 1 Euro) are shown hereunder:

Currency (ISO Code) Quantity of currency/1 Euro
March 2020 March 2020 December 2019 March 2019
Final exchange
rate
Average exchange
rate for the
period
Final exchange
rate
Average exchange
rate for the
period
US Dollar (USD) 1.0956 1.1027 1.1234 1.1358
British Pound Sterling (GBP) 0.8864 0.8623 0.8508 0.8725
Swedish Krona (SEK) 11.0613 10.6689 10.4468 10.4187
Singapore Dollar (SGD) 1.5633 1.5281 1.5111 1.5388
Japanese Yen (JPY) 118.9000 120.0973 121.9400 125.0835
Australian Dollar (AUD) 1.7967 1.6791 1.5595 1.5944
Hong Kong Dollar (HKD) 8.4945 8.5686 8.7473 8.9116
Chinese Renminbi (CNY) 7.7784 7.6956 7.8205 7.6635
Real (BRL) 5.7001 4.9167 4.5157 4.2775
Mexican Pesos (MXN) 26.1772 22.0918 21.2202 21.8057
Hungarian Forint (HUF) 360.0200 339.1370 330.5300 317.9075

SEGMENT DISCLOSURE

Operating segments are identified based on the management reporting used by senior management to allocate resources and evaluate results.

For 2020, the operating segments were included in the following divisions:

  • Datalogic, which represents the Group's core business and designs and produces bar code scanners, mobile computers, detection, measurement and security sensors, vision and laser marking and RFID systems that contribute to increasing the efficiency and quality of processes in the areas of Retail, Manufacturing, Transportation & Logistics and Healthcare;
  • Solution Net Systems, specialised in supplying and installing integrated solutions for the postal segment and distribution centres in the Retail sector;
  • Informatics, which sells and distributes products and solutions for the management of inventories and mobile assets tailored to small and medium sized companies.

Sales transactions amongst the operating segments indicated hereunder are executed at arm's length conditions, based on the Group transfer pricing policies.

The income statement information related to operating segments as at 31 March 2020 and 31 March 2019 are as follows (€/000):

Segment economic position Datalogic
Business
Solution Net
System
Informatics Adjustments Total Group
31.03.2020
Revenues 115,252 5,522 4,187 (793) 124,168
Adjusted EBITDA 6,972 110 218 30 7,330
% Revenues 6.00% 1.99% 5.21% 5.9%
EBIT (1,415) 97 91 30 (1,197)
Segment economic position Datalogic
Business
Solution Net
System
Informatics Adjustments Total Group
31.03.2019
Revenues 135,647 5,465 4,292 (757) 144,647
Adjusted EBITDA 20,694 985 (73) 41 21,647
% Revenues 15.26% 18.02% -1.70% 14.97%
EBIT 14,120 963 (302) 41 14,822

The balance-sheet information related to operating segments as at 31 March 2020 and 31 March 2019 are as follows (€/000):

Segment financial position Datalogic
Business
Solution Net
System
Informatics Adjustments Total Group
31.03.2020
Total Assets 779,970 13,206 20,927 (32,702) 781,401
Total Liabilities 368,753 7,294 5,175 (414) 380,808
Shareholders' Equity 411,217 5,912 15,752 (32,288) 400,593
Segment financial position Datalogic
Business
Solution Net
System
Informatics Adjustments Total Group
31.03.2019
Total Assets 831,678 16,411 20,585 (23,386) 845,288
Total Liabilities 429,453 7,276 5,949 12,125 454,803
Shareholders' Equity 402,225 9,135 14,636 (35,511) 390,485

INFORMATION ON THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS

Note 1. Tangible assets

Over the period, recognised net investments amounted to €4,382 thousand, and depreciation amounted to €3,105 thousand, while the exchange rates were negative by €241 thousand. Tangible assets are broken down as at 31 March 2020 and 31 December 2019 as follows:

31.03.2020 31.12.2019 Change
Land 8,773 8,778 (5)
Buildings 31,413 31,820 (407)
Other assets 34,160 35,418 (1,258)
Assets in progress and payments on account 16,292 13,586 2,706
Total 90,638 89,602 1,036

The "Other assets" item as at 31 March 2020 includes the following categories: Plant and machinery (€11,240 thousand), Industrial equipment and moulds (€10,419 thousand), Office furniture and machines (€9,586 thousand), General plants related to buildings (€1,396 thousand), Commercial equipment and demo room (€818 thousand), Maintenance on thirdparty assets (€560 thousand), and Motor vehicles (€66 thousand).

The balance of item "Assets in progress and payments on account", equal to €16,292 thousand, is mainly composed of the following: €12,456 thousand for investments made for the building and enlargement of Group plants, €3,261 thousand for moulds under construction, €454 thousand for self-manufactured equipment and production lines. The increase for the period is due primarily to the construction of Buildings in Germany (€702 thousand) and in the United States (€1,267 thousand), in addition to moulds under construction (€1,180 thousand).

Note 2. Intangible assets

Over the period, recognised net investments amounted to €4,294 thousand, and amortisation amounted to €2,812 thousand, while the exchange rates amounted to €4,911 thousand. Intangible assets are broken down as at 31 March 2020 and 31 December 2019 as follows:

31.03.2020 31.12.2019 Change
Goodwill 190,557 186,126 4,431
Development costs 9,637 9,927 (290)
Other intangible assets 27,391 28,430 (1,039)
Assets in progress and payments on account 15,405 12,114 3,291
Total 242,990 236,597 6,393

Goodwill

"Goodwill", totalling €190,557 thousand, consisted of the following items:

31.03.2020 31.12.2019 Change
CGU Datalogic 176,802 172,642 4,159
CGU Informatics 13,755 13,483 272
Total 190,557 186,126 4,431

The change in "Goodwill", compared to 31 December 2019, is mainly attributable to translation differences. This Goodwill has been allocated to the CGUs (Cash Generating Units) corresponding to the individual companies and/or sub-groups to which they pertain.

As at 31 March 2020, the Directors deemed that assumptions underlying the impairment tests and related sensitivity tests undergone for the aforesaid CGUs as at 31 December 2019 and the related Business plans were still valid. Therefore, no impairment indicators were reported with reference to recognised goodwill. In this evaluation, Directors took account of results achieved as at 31 March 2020 and estimated for the entire year 2020.

Development costs, Other and Assets in progress and payments on account

The "Development costs" item, amounting to €9,637 thousand, is composed of specific product development projects. The "Other" item, amounting to €27,391 thousand, consists primarily of intangible assets acquired through business combinations carried out by the Group. Details are shown in the following table:

31.03.2020 31.12.2019 Change
Patents 13,480 14,184 (704)
Know-how 2,843 3,066 (223)
Licence agreement 2,884 2,943 (59)
Software 8,148 8,098 50
Others 36 138 (102)
Total 27,391 28,430 (1,039)

The "Assets in progress and payments on account" item, equal to €15,405 thousand, is attributable, in the amount of €12,803 thousand, to the capitalisation of costs relating to Research and Development projects that are currently underway, as well as, in the amount of €2,602 thousand, to software implementations that are not yet completed.

Note 3. Right-of-use assets

Over the period, recognised net investments amounted to €3,313 thousand, and depreciation amounted to €1,382 thousand, while the exchange rates were negative by €99 thousand. Right-of-use assets are broken down as at 31 March 2020 and 31 December 2019 as follows:

31.03.2020 31.12.2019 Change
Buildings 9,037 7,560 1,477
Vehicles 2,417 2,041 376
Office equipment 131 152 (21)
Total 11,585 9,753 1,832

Note 4. Equity investments in associates

Equity investments owned by the Group as at 31 March 2020 remained unchanged compared to the previous year and they are broken down as follows:

31.12.2019 Increases Decreases Transfers 31.03.2020
CAEN RFID Srl 550 550
R4I 150 150
Datalogic Automation AB 2 2
Specialvideo Srl 29 29
Datasensor GMBH 45 45
Total 776 - - - 776

Note 5. Financial assets and liabilities by category

The following table shows the breakdown of "Financial assets and liabilities", according to provisions set out by IFRS 9:

Financial assets
at amortised
cost
Financial assets at
FV through profit
or loss
Financial assets at
FV through OCI
31.03.2020
Non-current financial assets 1,554 6,140 7,694
Financial assets - Equity investments 6,140 6,140
Financial assets - Securities
Financial assets - Loans
Financial assets - Other
Other receivables 1,554 1,554
Current financial assets 221,219 29,633 250,852
Trade receivables 74,363 74,363
Other receivables 24,896 24,896
Financial assets - Other 29,633 29,633
Financial assets - Securities
Cash and cash equivalents 121,960 121,960
Total 222,773 29,633 6,140 258,546
Derivatives Financial liabilities
at amortised cost
31.03.2020
Non-current financial liabilities 132,591 132,591
Financial payables 116,794 116,794
Financial liabilities - Derivative instruments
Other payables 15,797 15,797
Current financial liabilities 188,696 188,696
Trade payables 84,416 84,416
Other payables 48,477 48,477
Financial liabilities - Derivative instruments 0
Short-term financial payables 55,803 55,803
Total 321,287 321,287

Fair value of financial assets and liabilities is determined based on methods that can be classified under the various hierarchy levels of fair value, as set forth by IFRS 13. In particular, the Group has adopted internal valuation models that are generally used in finance and based on prices supplied by market operators, or prices taken from active markets.

Fair value – hierarchy

All the financial instruments measured at fair value are classified in the three categories defined below:

Level 1: market prices;

Level 2: valuation techniques (based on observable market data);

Level 3: valuation techniques (not based on observable market data).

Level 1 Level 2 Level 3 31.03.2020
Assets measured at fair value
Financial assets - Equity investments 5,535 605 6,140
Financial assets - Non-current securities
Financial assets - Other non-current financial assets
Financial assets - Other 18,590 11,043 29,633
Financial assets - Loans
Financial assets - Derivative instruments
Total Assets measured at fair value 24,125 11,043 605 35,773

Note 6. Financial assets

The financial assets include the following:

31.03.2020 31.12.2019 Change
Non-current financial assets 6,140 9,465 (3,325)
Current financial assets 29,633 31,200 (1,567)
Total 35,773 40,665 (4,892)

The "Current financial assets" item consists of investments in corporate cash, represented by insurance policies and mutual investment funds. The change refers to the measurement at fair value for the period.

The "Non-current financial assets" item is composed of equity investments in other companies held by the Group, and is broken down as follows:

31.12.2019 Fair value Adj. Transaltion Effects 31.03.2020
Listed equity investments 8,860 (3,463) 138 5,535
Unlisted equity investments 605 605
Total 9,465 (3,463) 138 6,140

The amount of the "Listed equity investments" item is represented by the 1.2% investment in the share capital of the Japanese company Idec Corporation listed on the Tokyo Stock Exchange.

Note 7. Trade and other receivables

Details of trade and other receivables item as at 31 March 2020 and 31 December 2019 are as follows:

31.03.2020 31.12.2019 Change
Trade receivables 71,943 73,164 (1,220)
Contract assets 3,744 5,361 (1,618)
Bad debt provision (1,324) (1,217) (107)
Trade receivables 73,363 77,308 (2,945)
Receivables from associates 846 895 (49)
Total Trade receivables 74,363 78,203 (3,840)
Other receivables - current accrued income and prepaid expenses 24,896 24,924 (28)
Other receivables - non-current accrued income and prepaid expenses 1,554 1,334 220
Total Other receivables - accrued income and prepaid expenses 26,450 26,258 192
Trade and other receivables - Non-current 1,554 1,334 220
Trade and other receivables - current 99,259 103,127 (3,868)

Trade receivables

The "Trade receivables" item as at 31 March 2020, gross of bad debt provisions, amounted to €74,363 thousand, representing a decrease of 4.9%. As at 31 March 2020, factored trade receivables amounted to €26,483 thousand (compared to €36,566 thousand at the end of 2019). Trade receivables from associates arise from commercial transactions carried out at arm's length conditions.

Other receivables - accrued income and prepaid expenses

The detail of the "Other receivables - accrued income and prepaid expenses" item is shown below:

31.03.2020 31.12.2019 Change
Other short-term receivables 2,706 2,311 395
Other long-term receivables 1,554 1,334 220
VAT receivables 17,514 18,534 (1,020)
Accrued income and prepaid expenses 4,676 4,079 597
Total 26,450 26,258 192

The "Accrued income and prepaid expenses" item is mainly composed of insurance, as well as hardware and software fees.

Note 8. Inventories

31.03.2020 31.12.2019 Change
Raw and ancillary materials and consumables 47,081 41,754 5,327
Work in progress and semi-finished products 20,315 23,582 (3,267)
Finished products and goods 35,916 37,585 (1,669)
Total 103,312 102,921 391

Inventories are disclosed net of an obsolescence provision totalling €10,238 thousand as at 31 March 2020 (€10,121 thousand as at 31 December 2019) and are substantially in line with the previous year.

Note 9. Tax payables and receivables

31.03.2020 31.12.2019 Change
Tax receivables 25,657 24,421 1,236
of which from parent company 12,742 12,742 -
Tax payables (24,778) (25,822) 1,044
of which to parent company (15,913) (15,913) -
Total 879 (1,401) 2,280

As at 31 March 2020, the "Tax receivables" item amounted to €25,657 thousand, up €1,236 thousand compared to the end of 2019 (€24,421 thousand as at 31 December 2019). The receivables for IRES tax from the parent company Hydra S.p.A., equal to €12,742 thousand (€12,742 thousand as at 31 December 2019 are classified under this item.

The "Tax payables" item amounted to €24,778 thousand as at 31 March 2020, down €1,044 thousand (€25,822 thousand as at 31 December 2019). The payables for IRES tax to the parent company Hydra S.p.A., generated within the tax consolidation regime and equal to €15,913 thousand (€15,913 thousand as at 31 December 2019) are classified under this item.

LIABILITIES AND SHAREHOLDERS' EQUITY

Note 10. Shareholders' Equity

The detail of equity accounts is shown below, while changes in shareholders' equity are reported in the specific statement:

31.03.2020 31.12.2019 Change
Share capital 30,392 30,392
Share premium reserve 111,779 111,779
Treasury shares held in portfolio (17,583) (15,113) (2,470)
Share capital and capital reserves 124,588 127,058 (2,470)
Translation reserve 32,959 26,530 6,429
Other reserves 2,505 5,777 (3,272)
Retained earnings 244,806 194,527 50,279
Profit/(loss) for the period (4,265) 50,279 (54,544)
Total consolidated Shareholders' Equity 400,593 404,171 (3,578)

Share capital

As at 31 March 2020, the share capital amounted to €30,392 thousand, representing the share capital, entirely subscribed and paid by the Parent Company Datalogic S.p.A.. The share capital comprises a total number of ordinary shares of 58,446,491, including 1,370,337 held as treasury shares, for a counter-value of €17,583 thousand, making the number of outstanding shares at that date 57,076,154. The shares have a nominal unit value of €0.52.

Other Reserves

As at 31 March 2020, changes in other reserves are broken down as follows:

  • change in the translation reserve, amounting to €6,429 thousand;
  • change in the cash flow hedge reserve, amounting to €54 thousand;
  • negative change in financial assets reserve, measured at FVOCI, amounting to €3,325 thousand.

Note 11. Financial payables

Financial payables are broken down as follows:

31.03.2020 31.12.2019 Change
Non-current financial payables 116,794 115,578 1,216
Current financial payables 55,803 54,099 1,704
Total 172,597 169,677 2,920

The breakdown of this item is detailed below:

31.03.2020 31.12.2019 Change
Borrowings from Bank 157,715 157,527 188
Others 1,497 1,497
Financial payables IFRS 16 11,941 10,061 1,880
Payables to factoring companies 1,239 1,868 (629)
Bank overdrafts 205 221 (16)
Total 172,597 169,677 2,920

Covenants

Some borrowing contracts envisage the compliance, by the Group, with some financial covenants, measured every six months as at 30 June and as at 31 December, as summarised in the following table:

Bank Company Covenants Frequency Reference
statements
Club Deal Datalogic SpA NFP/EBITDA 2.75 Semi-annual Consolidated
E.I.B. Datalogic SpA NFP/EBITDA 2.75 Semi-annual Consolidated

Note 12. Net deferred taxes

Deferred tax assets and liabilities result both from positive items already recognised in the income statement and subject to deferred taxation under current tax regulations and temporary differences between recorded assets and liabilities and their relevant taxable value.

Deferred tax assets are accounted for based on assumptions of the future recoverability of the temporary differences that originated them, that is based on economic and fiscal strategic plans.

Temporary differences that generate deferred tax assets are mainly tax losses and taxes paid abroad, provisions for risk and charges and foreign exchange rate translation. Deferred tax liabilities are mainly due to temporary differences for adjustments to exchange rates and statutory and fiscal differences of amortisation/depreciation plans related to tangible and intangible assets.

The total of net deferred taxes is broken down as follows:

31.03.2020 31.12.2019 Change
Deferred tax assets 47,897 43,572 4,325
Deferred tax liabilities (18,275) (17,819) (456)
Net deferred taxes 29,622 25,753 3,869

Change in deferred taxes is mainly due to the release of deferred taxes recognised on incomes become taxable over the year, represented by gains on exchange rates and dividends from investee companies, as well as by recognition of deferred tax assets over tax losses of Italian companies.

Note 13. Post-employment benefits

The breakdown of changes in the "Post-employment benefits" item as at 31 March 2020 and 31 March 2019 is shown below:

2020 2019
1 January 7,026 6,541
Accrual 445 571
Payments (361) (163)
Other movements 6
Social security receivables for post-employment benefits (123) (315)
31 March 6,987 6,640

Note 14. Provisions for risks and charges

The breakdown of the "Provisions for risks and charges" item is as follows:

31.03.2020 31.12.2019 Change
Provisions for risks and charges, current 4,316 4,273 43
Provisions for risks and charges, non-current 4,923 4,916 7
Total 9,239 9,189 50

The detailed breakdown of and changes in this item are presented below:

31.12.2019 Increases Foreign exchange 31.03.2020
gains/losses
Product warranty provision 8,305 2 8,307
Others 885 48 933
Total 9,189 48 2 9,239

The "Product warranty provision" item covers the estimated cost of repairing products sold up to 31 March 2020 and covered by a warranty period. It amounts to €8,307 thousand (of which €4,633 thousand long-term) and is considered sufficient in relation to the specific risk it covers.

The "Others" item includes primarily allocations made by possible tax liabilities, labour disputes and Agents' severance indemnity. Some irrelevant disputes related to the Group are currently in place. Their risk is assessed by experts and no allocations were made in relation to them, as provided for by IAS 37.

Note 15. Trade and other payables

The breakdown of trade and other payables is summarised in the following table:

31.03.2020 31.12.2019 Change
Trade payables 83,506 104,193 (20,687)
Contract liabilities - customer advances 910 1,648 (738)
Trade payables 84,416 105,841 (21,451)
Payables to associates 63 55 8
Payables to related parties 112 133 (21)
Total Trade payables 84,591 106,029 (21,438)
Other payables - current accrued liabilities and deferred income 48,477 48,124 353
Other payables - non-current accrued liabilities and deferred income 15,797 16,684 (887)
Total Other payables - accrued liabilities and deferred income 64,274 64,808 (534)
Less: non-current portion 15,797 16,684 (887)
Current portion 133,068 154,153 (21,085)

Trade payables amounted to €84,591 thousand, down by €21,250 thousand compared to the previous year.

Other payables – accrued liabilities and deferred income

The detailed breakdown of this item is as follows:

31.03.2020 31.12.2019 Change
Non-current accrued liabilities and deferred income 15,797 16,684 (887)
Other short-term payables: 28,605 27,134 1,471
Payables to employees 20,739 17,883 2,856
Payables to pension and social security agencies 5,886 6,382 (496)
Other payables 1,980 2,869 (889)
VAT payables 2,721 3,673 (952)
Current accrued liabilities and deferred income 17,151 17,317 (166)
Total 64,274 64,808 (534)

Payables to employees represents the amount due for salaries and vacations accrued by employees as at 31 March 2020. The item "Accrued liabilities and deferred income" is mainly composed of deferred income related to multi-annual maintenance contracts.

INFORMATION ON THE INCOME STATEMENT

Note 16. Revenues

Revenues divided by type are shown in the following table:

Quarter ended
31.03.2020 31.03.2019 Change
Revenues from sale of products 114,994 135,564 (20,570)
Revenues from services 9,174 9,083 91
Total Revenues 124,168 144,647 (20,479)

In the first quarter of 2020, consolidated net revenues amounted to €124,168 thousand, down by 14.2% compared to €144,647 thousand in the same period of 2019.

In the first quarter of 2020, the Datalogic division reported revenues amounting to €115,252 thousand, with a negative performance in all geographical areas. The business segments that contribute the most as regards revenues over the period are Retail, Manufacturing and Channel. The segments that reported the best performances in terms of growth are OEM and GCO.

The Group's revenues, divided by recognition method and business segment, are broken down as follows:

Datalogic Solution Net Informatics Adjustments 31.03.2020
System
Revenues broken down by recognition
method
Revenues from the sale of goods and services -
point in time 104,359 955 3,195 (793) 107,716
Revenues from the sale of goods and services -
over the time 10,893 4,567 992 16,452
Total 115,252 5,522 4,187 (793) 124,168
Datalogic Solution Net
System
Informatics Adjustments 31.03.2019
Revenues broken down by recognition
method
Revenues from the sale of goods and services -
point in time
123,491 379 3,628 (757) 126,741
Revenues from the sale of goods and services -
over the time
12,156 5,086 664 17,906
Total 135,647 5,465 4,292 (757) 144,647

The Group recognises revenues from the sale of goods and services in a specific moment, when the control of the assets has been transferred to the customer, generally upon delivery of the good or the rendering of the service.

Conversely, revenues are generally recognised over time, based on the stage of completion of contract performance obligations. This item includes revenues resulting from contracts and postponement contracts related to a multi-annual warranty.

Datalogic Solution Net
System
Informatics Adjustments 31.03.2020
Revenues broken down by type
Sale of goods 107,514 5,176 3,001 (697) 114,994
Sale of services 7,738 346 1,186 (96) 9,174
Total 115,252 5,522 4,187 (793) 124,168
Datalogic Solution Net
System
Informatics Adjustments 31.03.2019
Revenues broken down by type
Sale of goods 127,959 4,829 3,964 (757) 135,995
Sale of services 7,688 636 328 8,652
Total 135,647 5,465 4,292 (757) 144,647

Note 17. Cost of goods sold and operating costs

Quarter ended
31.03.2020 31.03.2019 Change
Cost of goods sold 66,568 74,496 (7,928)
Operating costs 59,962 56,456 3,507
Research and Development expenses 17,056 14,330 2,726
Distribution expenses 29,200 29,106 94
General and Administrative expenses 13,142 12,473 670
Other operating expenses 564 547 17
Total 126,530 130,952 (4,421)

Cost of goods sold

This item amounted to €66,568 thousand, down by 10.6% compared to the same period of 2019. The percentage on revenues increased by 2.1% and amounted to 53.6% (51.5% in the same period of 2019).

Operating costs

Operating costs increased by 6.2%, from €56,456 thousand to €59,962 thousand. The percentage on turnover increased from 39.0% to 48.3%, reporting a 9.3% worsening. In particular:

  • "Research and development expenses" amounted to €17,056 thousand and increased, compared to the same period of the previous year, with a percentage on turnover of 13.7% (9.9% in the same period of the previous year).
  • "Distribution expenses" amounted to €29,200 thousand, in line compared to the same period of the previous year, with a percentage increase on turnover from 20.1% to 23.5%.
  • "General and administrative expenses" amounted to €13,142 thousand, up by 6.0%.

The breakdown of "Other operating expenses" is as follows:

Quarter ended
31.03.2020 31.03.2019 Change
Non-income taxes 493 250 243
Provision risk accrual 6 6 0
Accrual/(Releases) for doubtful accounts 0 5 (5)
Cost charge-backs 60 247 (187)
Loss on disposal of fixed assets 1 39 (38)
Others 4 0 4
Total 564 547 17

Breakdown of costs by type

The following table provides the details of total costs (cost of goods sold and total operating costs) by type:

Quarter ended
31.03.2020 31.03.2019 Change
Purchases 47,746 65,707 (17,962)
Change in inventories (661) (10,561) 9,901
Labour cost 44,876 46,429 (1,553)
Amortisation, depreciation and write-downs 7,299 6,625 674
Goods receipt and shipment expenses 3,741 4,605 (864)
Travel and meetings expenses 2,298 3,509 (1,211)
Technical, legal and tax advisory consultancies 2,837 1,746 1,091
Subcontracted work 2,598 1,455 1,143
Quality certification expenses 2,543 539 2,004
Consumables and R&D material 2,061 1,965 96
EDP expenses 1,540 1,108 432
Marketing expenses 1,352 1,969 (617)
Repairs and warranty provision accrual 1,233 351 882
Building expenses 872 570 302
Royalties 641 708 (67)
Utilities 572 599 (27)
Directors' remuneration 551 550 1
Telephone expenses 545 462 83
Sundry service costs 381 540 (159)
Expenses for plant and machinery and other assets 354 349 5
Entertainment expenses 310 200 110
Vehicle expenses 305 327 (22)
Insurances 273 188 85
Commissions 262 302 (40)
Others 2,002 710 1,292
Total Cost of goods sold and operating costs 126,530 130,952 (4,422)

Costs for purchases and change in inventories decreased by €8,061 thousand (-14.6%), compared to the same period of 2019, and remained unchanged in terms of percentage on total revenues.

Labour cost amounted to €44,876 thousand (€46,429 thousand in the same period of 2019) and reported a decrease of €1,553 thousand compared to the previous year (-3.3%). The change, compared to 31 March 2019, is due to the decrease in the average number of employees on a payroll during the period, mainly in Europe. The detailed breakdown of labour cost is as follows:

Quarter ended
31.03.2020 31.03.2019 Change
Wages and salaries 34,819 35,231 (412)
Social security charges 7,056 7,699 (643)
Employee severance indemnities 620 708 (88)
Retirement and similar benefits 404 394 10
Other labour costs 1,977 2,397 (420)
Total 44,876 46,429 (1,553)

The increase of €674 thousand in the "Amortisation, depreciation and write-downs" is mainly due to higher investments both on production plants and on product development.

The "Goods receipt and shipment expenses" item, amounting to €3,741 thousand, recorded a 18.8% decrease, with a better percentage on turnover compared with the previous period (-0.2%).

Costs related to "Subcontracted work" amounted to €2,598 thousand and refer primarily to orders in the Solution Net Systems division. They increased compared to the same period of the previous year according to the progress of some projects.

Expenses related to "Technical, legal and tax advisory consultancies", amounting to €2,837 thousand, increased by €1,091 thousand compared to the same period of 2019. In particular, they are related to technical consultancies in R&D.

"Quality certification expenses", amounting to 2,543 thousand, increased by €2,004 thousand compared to the same period of 2019, following the certification of new products.

Pursuant to provisions as per Law no. 124/2017, art. 1, par. 125-129, it is noted that grants to research and development expenses are due primarily to the portion pertaining to the year of grants received on the following projects:

  • "Rossini" (RObot enhanced SenSing, INtelligence and actuation to Improve job quality in manufacturing) financed by the European Commission within the Horizon 2020 program;
  • "Flute" (FLexibility, Usability, easy installation and configuration faciliTy, Eco-sustainability), financed by the Emilia Romagna Region (Regional Law 14/2014).

Note 18. Other revenues

Quarter ended
31.03.2020 31.03.2019 Change
Grants to research and development expenses 626 0 626
Miscellaneous income and revenues 492 1,092 (600)
Rents 24 24 0
Income on disposal of fixed assets 10 24 (14)
Contingent assets 0 2 (2)
Others 13 (15) 28
Total 1,165 1,127 38

The "Grants to research and development expenses" item includes the tax receivables for R&D activities (€500 thousand).

Note 19. Financial Income/(Expenses)

Quarter ended
31.03.2020 31.03.2019 Change
Financial Income/(Expenses) (2,070) 117 (2,187)
Foreign exchange gains/losses (3,023) 1,504 (4,527)
Bank expenses (220) (302) 82
Others 21 (29) 50
Total Financial Income/(Expenses) (5,292) 1,290 (6,582)

Due to the unfavourable trend of exchange rates and the negative result from cash investments, the Net Financial Income/(Expenses) item was negative for €5,292 thousand, a worsening of €6,582 thousand compared to a positive result of €1,290 thousand reported in the same period of 2019, mainly due to the unfavourable performance of foreign exchange differences and to the negative fair value of cash equivalents.

Note 20. Taxes

Quarter ended
31.03.2020 31.03.2019 Change
Profit/(Loss) before taxes from continuing operations (6,489) 16,111 (22,600)
Income taxes 1,002 3,001 (1,999)
Deferred taxes (3,226) 543 (3,769)
Total (2,224) 3,544 (5,768)
Tax Rate 34.3% 22.0% 12.3%

The average tax rate came to 34.3% in the first quarter 2020 (22.0% as at 31 March 2019). The tax rate in the first quarter is positive due to the recognition of deferred tax assets over tax losses of Italian companies.

Note 21. Earnings/loss per share

Earnings/loss per share

As required by IAS 33, information on data used to calculate the earning/loss per share is provided below. Basic EPS is calculated by dividing the profit and/or loss for the period, attributable to the shareholders of the Parent Company, by the weighted average number of ordinary shares outstanding during the reference period. For purposes of calculating diluted EPS, the weighted average number of outstanding shares is determined assuming translation of all potential shares with a dilutive effect (stock grant attributions), and the Group's net profit is adjusted for the post-tax effects of translation.

Quarter ended
31.03.2020 31.03.2019
Group profit/(loss) for the period (4,265) 12,567
Average number of shares (thousands) 58,025 57,469
Basic earnings/(loss) per share (0.07) 0.22
Group profit/(loss) for the period (4,265) 12,567
Average number of shares (thousands) - Diluted effect 57,851 57,477
Diluted earnings/(loss) per share (0.07) 0.22

TRANSACTIONS WITH SUBSIDIARIES THAT ARE NOT CONSOLIDATED LINE BY LINE, ASSOCIATES AND RELATED PARTIES

For the definition of "Related parties", see both IAS 24, approved by EC Regulation no. 1725/2003, and the Procedure for Transactions with Related Parties approved by the Board of Directors on 4 November 2010 (most recently amended on 24 July 2015), available on the Company's website www.datalogic.com.

The parent company of the Datalogic Group is Hydra S.p.A.

Intercompany transactions are executed as part of the ordinary operations and at arm's length conditions. Furthermore, there are other relationships with related parties, always carried out as part of ordinary operations and at arm's length conditions, of an immaterial amount and in accordance with the "OPC Procedure", chiefly with Hydra S.p.A. or entities under joint control (with Datalogic S.p.A.), or with individuals that carry out the coordination and management of Datalogic S.p.A. (including entities controlled by the same and close relatives).

Related-party transactions refer chiefly to commercial and real estate transactions (instrumental and non-instrumental premises for the Group under lease or leased) and advisory activities as well as to companies joining the scope of tax consolidation. None of these assumes particular economic or strategic importance for the Group since receivables, payables, revenues and costs referred to the related parties are not a significant proportion of the total amount of the financial statements.

Pursuant to Art. 5, par. 8, of the Consob Regulations, it should be noted that, over the period 01/01/2020 - 31/03/2020, the Company's Board of Directors did not approve any relevant transaction, as set out by Art. 3, par. 1, lett. b) of the Consob Regulations, or any transaction with minority related parties that had a significant impact on the Group's equity position or profit/(loss).

Parent
Company
Company
controlled by
Chairman of BoD
Not consolidated
companies on a line
by-line basis
31.03.2020
Equity investments - - 776 776
Held-for-sale assets - - - -
Other trade receivables - accrued income and - 77 851 928
prepaid expenses
Receivables pursuant to tax consolidation 12,742 - - 12,742
Financial receivables - - - -
Payables pursuant to tax consolidation 15,913 - - 15,913
Trade payables - 112 80 192
Financial payables - - - -
Operating expenses - 290 47 337
Trade and other revenues - - 1,168 1,168
Financial income - - - -
Profits/(losses) from associates - - - -

NUMBER OF EMPLOYEES

31.03.2020 31.03.2019 Change
Datalogic 2,901 3,017 (116)
Solution Net Systems 36 42 (6)
Informatics 75 84 (9)
Total 3,012 3,143 (131)

The Chairman of the Board of Directors (Mr. Romano Volta)

Annexes

ANNEX 1

STATEMENT PURSUANT TO ART. 154-BIS, PARAGRAPH 2, OF LEGISLATIVE DECREE NO. 58/1998

Interim Report as at 31 March 2020

The undersigned Ms. Laura Bernardelli, as Manager in charge of drawing up the Datalogic S.p.A. 's accounting statements, hereby certify that, pursuant to provisions set out by paragraph 2 of Article 154 bis, of Legislative Decree no. 58 of 24 February 1998, the Consolidated Interim Report as at 31 March 2020 is consistent with the accounting records.

Datalogic Confidential Internal

Lippo di Calderara di Reno (BO), 14 May 2020

Datalogic S.p.A.

Manager in charge of drawing up the accounting statements Laura Bernardelli

ANNEX 2

CONSOLIDATION AREA

The Consolidated Financial Statements include interim reports of the Parent Company and the companies that are directly and/or indirectly controlled by the Parent Company or on which the latter has a significant influence. Reports of subsidiaries were duly adjusted, as necessary, to render them consistent with the accounting criteria of the Parent Company. The companies included in the scope of consolidation as at 31 March 2020, consolidated on a line-by-line basis, are disclosed hereunder:

Company Registered office Share capital Total
Shareholders'
Equity (€/000)
Profit/loss for
the period
(€/000)
%
Ownership
Datalogic S.p.A. Bologna – Italy Euro 30,392,175 350,773 (359)
Datalogic Real Estate France Sas Paris – France Euro 2,227,500 3,726 25 100%
Datalogic Real Estate UK Ltd. Redbourn - England GBP 3,500,000 5,457 44 100%
Datalogic IP Tech S.r.l. Bologna – Italy Euro 65,677 22,761 163 100%
Informatics Holdings, Inc. Plano, Texas - USA USD 1,568 15,521 7 100%
Wasp Barcode Technologies Ltd Redbourn - England GBP 0 231 9 100%
Datalogic (Shenzhen) Industrial Automation
Co. Ltd.
Shenzhen - China CNY 2,136,696 2,898 (13) 100%
Datalogic Hungary Kft Fonyod - Hungary HUF 3,000,000 4,845 266 100%
Solution Net Systems, Inc. Quakertown, PA - USA USD 5,912 (141) 100%
Datalogic S.r.l. Bologna – Italy Euro 10,000,000 147,514 (9,457) 100%
Datalogic Slovakia S.r.o. Trnava - Slovakia Euro 66,388 7,887 1,459 100%
Datalogic USA Inc. Eugene, OR - USA USD 100 230,907 1,048 100%
Datalogic do Brazil Comercio de
Equipamentos e Automacao Ltda.
Sao Paulo - Brazil BRL 20,257,000 580 211 100%
Datalogic Technologia de Mexico S.r.l. Colonia Cuauhtemoc -
Mexico
MXN 0 (283) (69) 100%
Datalogic Scanning Eastern Europe GmbH Darmstadt - Germany Euro 25,000 3,800 10 100%
Datalogic Australia Pty Ltd Mount Waverley
(Melbourne) - Australia
AUD 3,188,120 866 26 100%
Datalogic Vietnam LLC Vietnam USD 3,000,000 28,066 910 100%
Datalogic Singapore Asia Pacific Pte Ltd. Singapore SGD 3 3,418 279 100%
Suzhou Mobydata Smart System Co. Ltd Suzhou, JiangSu - China CNY 161,224 3,679 (125) 51%

The following companies were consolidated at cost as at 31 March 2020:

Company Registered office Share
capital
Total
Shareholders'
Equity (€/000)
Profit/loss for
the period
(€/000)
%
Ownership
Specialvideo S.r.l. (*) Imola - Italy Euro 10,000 840 205 40%
Datasensor Gmbh (*) Otterfing - Germany Euro 150,000 29 29 30%
CAEN RFID S.r.l. (*) Viareggio (LU) - Italy Euro 150,000 1,233 49 20%
R4I S.r.l. (*) Benevento Euro 131,250 403 (43) 20%
Datalogic Automation AB (**) Malmö, Sweden SEK 100,000 807 368 20%

(*) data as at 31 December 2018

(**) data as at 30 June 2018

ANNEX 3

RESTATEMENT OF SEGMENT DISCLOSURE

As envisaged by the International Accounting Standards regarding segment disclosure, in the case of reorganisation of business segments, comparative periods are restated to allow for a uniform comparison. Below are the restated results for the first quarter of 2019 following the reorganisation of the commercial function launched in 2020, in which some revenue allocation logics to geographical areas and business segments have been partially redefined with the aim of ensuring the supervision of the different types of end-user customers and partners alongside the geographical one of the Country.

REVENUES BY GEOGRAPHICAL AREA

31.03.2019
Reported
Restatement 31.03.2019
Restated
Italy 11,765 (412) 11,353
EMEAI (excluding Italy) 71,850 454 72,304
Total EMEAI 83,615 42 83,657
Americas 46,272 (172) 46,100
APAC 14,760 130 14,890
Total Revenues 144,647 - 144,647

REVENUES BY BUSINESS SEGMENT

31.03.2019
Reported
Restatement 31.03.2019
Restated
Retail 63,565 (11,915) 51,650
Manufacturing 38,885 (10,341) 28,544
Transportation & Logistics 14,744 (659) 14,085
Healthcare 5,427 (476) 4,951
OEM 224 224
Channel 13,026 23,168 36,194
Total Revenues 135,647 - 135,647

Within the reorganization of the commercial function, the revenue allocation criteria were partially modified, by reallocating to the Channel segment a portion of the sales made to "partner" customers and previously classified under the industries according to a turnover prevalence criterion, as communicated by the distribution network. This category includes revenues not directly attributable to the other identified segments.

The new approach allows for an even more accurate measurement of the performance of individual segments, to which only revenues from direct sales to end customers are attributed according to the segment to which they belong. The rationale of the change in approach is based on the desire to make the measurement of market trends in individual sectors more accurate and timelier, in order to strengthen the effectiveness and timeliness of strategic go to market decisions.

ANNEX 4

RECONCILIATION - ALTERNATIVE PERFORMANCE INDICATORS (NON-GAAP MEASURES)

The following table shows the reconciliation between EBITDA and Adjusted EBITDA as at 31 March 2020, compared with 31 March 2019.

31.03.2020 31.03.2019 Change %
Change
Adjusted EBITDA 7,330 5.9% 21,647 15.0% (14,317) -66.1%
Cost of goods sold 379 0.3% 0 0.0% 379 n.a.
Research and development expenses 102 0.1% 0 0.0% 102 n.a.
Distribution expenses 405 0.3% 4 0.0% 401 n.a.
General and administrative expenses 342 0.3% 195 0.1% 147 75.4%
Other operating income/(expenses) 0 0.0% 0 0.0% 0 n.a.
Non-recurring costs/revenues and write
downs
1,228 1.0% 199 0.1% 1,029 517.1%
EBITDA 6,102 4.9% 21,448 14.8% (15,346) -71.5%

Non-recurring costs and revenues refer to income and charges recognised and borne mainly due to corporate and segment reorganisations started in 2019, in addition to costs related to the Covid-19 emergency. The latter refer primarily to higher lockdown-related procurement and distribution costs, as well as costs of sanitation and purchase of workplace safety devices, penalties for cancellation of trade fairs and events and internal personnel costs for the handling of emergency.

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