Tesmec

Investor Presentation • Mar 13, 2020

• Stringing
• Energy Automation
• Railway
• Trencher

Integrated Solutions Provider

2019 Results Presentation

Corporate Strategy >

• 2019 Business highlights and Results >
• Shareholder loan >
• Outlook 2020 >

VISION

To be a technological partner in a changing world >

VALUE PROPOSITION

To supply addedvalue integrated solutions for our customers > Innovation

MISSION

To operate in the market of infrastructure for the transport of energy, data and material (oil and derivatives, gas, water). >

STRATEGY

Internationalization Integration >

• Overhead power lines construction & maintenance >
• Advanced methodologies for powerlines improvement >

• Zero emissions underground cable laying >

• Catenary lines construction & maintenance >

• Diagnostics systems >

• Big Data integrated solutions for safe infrastructure >

• Telecommunications solutions for HV Grids >

• Grid Management: protection and metering solutions >

• Advanced sensors for fault passage indication, protection and monitoring >

• > Telecom networks, FTTH & long distance, power cable installation

• > Oil & Gas, Water pipelines
• > Bulk excavation, Quarries & Surfaces mining

COMBINE OPERATIONAL DATA IN THE CLOUD AND APPLY ADVANCED ANALYTICS

✓ Grassobbio, Patrica and Monopoli plants are fed by solar panels

✓ All Italian plants are certified according to ISO 9001-14001-45001

✓ The whole production process takes care of waste and complies with recycling regulations

STRINGING

FULL ELECTRIC MACHINE >

Zero emissions underground cable laying

Hybrid and electric railcars >

SUPER GRID AND SMART GRID RENEWABLE ENERGIES DIGITAL FOR GREEN

• Custom solutions for Smart Grid management >
• Energy consumption optimization through carbon footprint equipment >

TRENCHER

• Low pollution and low impact on environment >
• > Complete value chain for renewables

BIO OIL

13 March 2020 7

Factories

	TRS	RAIL	STR	AUT
Tesmec SPA Grassobbio
Tesmec SPA Endine
Tesmec SPA Sirone (precision machining work)
Marais Durtal (FR)
Tesmec USA Alvarado (USA)
Tesmec Rail Monopoli
Tesmec Automation Patrica
Tesmec Automation Padova -Fidenza

Corporate Strategy >

2019 Business highlights and Results >

• Shareholder loan >
• Outlook 2020 >

Full digital equipment marketing and sales Technological gap vs low cost competitors

Digital Product line Innovative Solution for Over Head Power Lines Refurbishment

During 2°H start of sales in North America of the new technology for reconductoring operations: great performances and great success.

Green Solution North America market

Introduction on the markets of Full Electric Equipment for urban area job sites.

Tesmec products recognized as PREMIUM in the market the commercial presence has been strengthened thanks to agreement with one of main USA rental house and strong implementation of the internal sales force.

2019 Energy Automation business highlights

Enel Market: diversification of the product portfolio Russia: market expansion for approved solution

Continues improvement through cybersecurity integration

Increased deployment through heavy sales plan and invasive technical support

Push on integrated solutions for primary and secondary substation automation

Italian Market: accelerating growth Foreign Markets: strengthen market position

Speed up production and supplies of Telecommunication solutions in North Africa and Middle East

Cleanfast at work Main targets USA and Europe

EVO series developments Renewables Projects

EVO series launch Productivity and efficiency increase

Clean & Fast Solutions Surface Mining Business

Enter the Bauxite Mining in Ivory Coast (Lizetta Project)

Wind and Solar Farms Automatic cables laying system

Certified solutions with remote control system for catenary maintenance operations in Italy & France

Diagnostic for SAFETY & RELIABILITY CONNECTED VEHICLES

Vehicle running demo and public speeches during technical railway conferences (Alpin Rail event).

Innovative FAST & SAFE methodology In Czech Republic with a new contract

High technological level reached by our railway systems and quality of Tesmec know-how.

Diagnostic devices and DIGITAL PLATFORM to measure and to manage big data.

GROUP (€ mln)	2019	2018	Delta %
REVENUES	200,7	194,6	3,1% (1)
EBITDA (2) (3)	27,4	18,9	45,1%
% on Revenues	13,7%	9,7%
EBIT	8,4	3,7	127,7%
% on Revenues	4,2%	1,9%
Differences in Exchange (4)	0,8	0,2	n/a
% on Revenues	0,4%	0,1%
PROFIT (LOSS) BEFORE TAX	4,2	0,3	n/a
% on Revenues	2,1%	0,2%
NET INCOME/(LOSS)	3,0	0,0	n/a
% on Revenues	1,5%	0,0%
GROUP (€ mln)	2019	2018	Delta %
NFP ante IFRS 16	99,8	77,7	-28,4%
NFP post IFRS 16 (3)	118,0

(1) + 1,7% at constant currencies

(2) The EBITDA has been growing due to management actions rolled out after the results of end 2018 and positive mix of the 2019 sales.

(3) Starting from the 1st January 2019, the new IFRS 16 has been introduced. It impacts:

•	EBITDA	+3,8 M€
•	Depreciation	- 3,5 M€
•	Net Results	- 0,4 M€
•	Right of use	+ 17,8 M€
•	NFP	+ 18,2 M€

The EBITDA ante IFRS would have been 23,6 M€

(4) The positive exchange differences are positive due to the favorable effects FX

ENERGY	2019	2018	Delta %
Revenues	44,2	41,7	6,0%
EBITDA*	5,6	4,8	19,3%
% on Revenues	12,6%	11,5%
* EBITDA ante IFRS 16 would have been 5,1 M€

• > Energy Automation Growth
• > Driven by European Market

TRENCHERS	2019	2018	Delta %
Revenues	125,3	125,4	-0,1%
EBITDA*	16,6	9,9	57,0%
% on Revenues	13,3%	8,0%
	* EBITDA ante IFRS 16 would have been 13,9 M€

• > USA Market Growth
• > European Market Growth
• > Less impacts of Australia Projects
• > USA & Italy Profitability Impact

>	RFI-OCPD:	Execution	delay
---	-----------	-----------	-------

• > TSO: Project Execution delay
• > Start-up Elzel Project
• > Awarded of new contracts postponed

RAILWAY	2019	2018	Delta %
Revenues	31,1	27,4	13,5%
EBITDA*	5,2	4,1	26,5%
% on Revenues	16,8%	15,0%
* EBITDA ante IFRS 16 would have been 4,7 M€

2019

Euro/mln	9M			Q4		FY
	2019	2018	Var.		2019	2018	Var.	2019	2018	Var.
REVENUES	144,2	140,5	2,6%		56,5	54,1	4,4%	200,7	194,6	3,1%
EBITDA ante IFRS 16	14,7 10,2%	12,2 8,7%	20,5%		8,9 15,8%	6,7 12,4%	32,8%	23,6 11,8%	18,9 9,7%	24,9%
EBITDA post IFRS 16	17,4 12,1%	12,2 8,7%	42,2%		10,0 17,7%	6,7 12,4%	52,2%	27,4 13,7%	18,9 9,7%	45,1%
EBIT	3,9	1,4	169,8%		4,5	2,3	95,7%	8,4	3,7	127,7%

2019 Differences in Exchange

GROUP (Euro mln)	2016	2017	2018	2019
Differences in Exchange	1,7	(4,7)	0,2	0,8
of which:
Realised	0,2	(1,6)	(0,2)	(0,1)
Unrealised	1,5	(3,1)	0,4	0,9
Differences in Exchange for currency:
USD	0,7	(3,0)	0,8	0,8
ZAR	0,6	(0,2)	0,5	0,1
OTHER	0,4	(1,5)	(1,1)	(0,1)
Total	1,7	(4,7)	0,2	0,8

2019 EBITDA

€ mln

* The impact of IFRS 16 is around 3,8 M€

Financial Information (€ mln)	2019	2018
Net Working Capital	73,0	48,9
Non Current assets	66,8	67,3
Right of use - IFRS 16/IAS 17	20,1	0,0
Other Long Term assets/liabilities	4,2	4,8
Net Invested Capital	164,2	121,0
Net Financial Indebtness	98,5	77,7
Lease liability - IFRS 16/IAS 17	19,5	0,0
Equity	46,2	43,3

2018 Increase of working capital due to Railways Business 2019

Working Capital evolution

€ 60,8 mln 2018 € 48,9 mln Impact due to the increase of working in progress contracts and receivables for the railways business and TRS Business

2019 € 73,0 mln

OPERATING NET FINANCIAL POSITION

* From 1 st January 2019, the new IFRS 16 has been introduced, the impact is term of NFP is around 18,2 M€, otherwise the NFP would have been around 99,8 M€

• Corporate Strategy >
• 2019 Business highlights and Results >
• Shareholder loan >
• Outlook 2020 >

Shareholder loan

LOAN xxx	Shareholder loan with related parties: - TTC S.r.l., majority shareholder of Tesmec - MTS S.p.A., indirectly controlled by TTC and shareholder of Tesmec
DETAILS	AMOUNT: maximum of Euro 7 million DURATION: 36 months ANNUAL INTEREST RATE: 2%
xxx GOALS	Providing the Tesmec Group with a reserve that allows to deal with any liquidity shortage that may be caused by the slowdown of the Group's production and commercial activities due to the current health emergency following the spread of the virus Covid-19 (so-called Coronavirus).

• Corporate Strategy >
• 2019 Business highlights and Results >
• Shareholder loan >
• Outlook 2020 >

2020 Stringing outlook

Europe

New market approach: closer relationship with the main players of transmission and distribution sectors thanks new product lines (digital equipment, full electric machines) and range of services (rental option, fleet management).

China

Strategic collaboration with one leader in transmission sector fully owned by SGCC to obtain a better local positioning and in all APAC region.

USA

Power Lines Refurbishment and renewable interconnection Entry into the growing Distribution OH sector Strengthening of the technical organization in Tesmec USA

Environmental Sostenibility

Develop of Full Electrical product line: pollution, noise, emissions free

13 March 2020 27

Enel Market: innovative technologies available Russia: new markets, new opportunities

Rapid diversification through availability of new solutions

Presence on the market as a well-known competitive Player

Italy: Growth in the Transmission market Foreign Markets: new tenders ongoing

New approach and new proposal to the customers

Enlarge the markets through new markets and new collaboration on the existing ones

CleanFast at work Solutions for fiber optic networks installation

Bauxite mine in Guinea Develop surface mining business

5G & Fiber Business Digital and connected system

Trencher remotely controlled Available for all TrenchTronic equipped machines

West Africa markets development Focus on services & customer satisfaction

Strengthening of services, after sales and customers' needs

PUSH our INTERNATIONALIZATION sales CONSOLIDATION of the investment

-USA

-France -Czeck Republic -North-East Europe -Central Asia

CONNECTED VEHICLES

-Certified vehicles -Software and algorithms -Diagnostic systems

Centre of excellence for the development of maintenance & diagnostic vehicles with integrated systems

CENTRALIZED PLATFORM

The Centralized Platform is the enabler for the optimization of the railways infrastructure

2020 outlook

COVID-19 xxx	The national and international scenario is characterized by the spread of Coronavirus and by the consequent restrictive measures for its containment, put in place by the public authorities of the countries concerned. Due to these circumstances, extraordinary in nature and extent, it is premature to make predictions on the 2020 outlook.
BUSINESS CONTINUITY	TESMEC Group confirms business continuity, both in Italy and in its foreign facilities, in compliance with Health Ministries instructions, adopting all the safety and health protocols that are required. Tesmec continuously and accurately monitors the situation, in concert with local and national institutions, assuring that every facility is fully working in terms of productivity, as well as commercial and technologic activity.
STRATEGIC GUIDELINES xxx	The Group will continue to implement its long-term strategic guidelines, confirming its focus in the key sectors with hi-tech content, mainly related to sustainable innovations, diagnostics and cybersecurity of infrastructures.

BACKLOG

Summary 2019 Profit & Loss statement - Appendix A

Profit & Loss Account (Euro mln)	2019	2018	Delta vs 2018	Delta %
Net Revenues	200,7	194,6	6,1	3,1%
Raw materials costs (-)	(88,0)	(89,1)	1,0	-1,2%
Cost for services (-)	(35,4)	(32,6)	(2,8)	8,6%
Personnel Costs (-)	(52,6)	(50,5)	(2,1)	4,2%
Other operating revenues/costs (+/-)	(5,5)	(11,3)	5,8	-51,4%
Non recurring revenues/costs (+/-)	0,8	0,0	0,8	na
Portion of gain/(losses) from equity investments evaluated using the equity method	0,3	0,2	0,0	14,3%
Capitalized R&D expenses	7,2	7,6	(0,4)	-4,7%
Total operating costs	(173,2)	(175,6)	2,4	-1,4%
% on Net Revenues	(86%)	(90%)
EBITDA	27,5	19,0	8,5	44,7%
% on Net Revenues	14%	10%
Depreciation, amortization (-)	(19,1)	(15,2)	(3,8)	25,1%
EBIT	8,4	3,7	4,7	124,3%
% on Net Revenues	4%	2%
Net Financial Income/Expenses (+/-)	(4,2)	(3,4)	(0,8)	22,2%
Taxes (-)	(1,2)	(0,3)	(1,0)	363,0%
Minorities	-	-	-
Group Net Income (Loss)	3,0	0,1	2,9	n/a
% on Net Revenues	1%	0%

Summary 2019 Balance Sheet - Appendix B

Balance Sheet (€ mln)	2019	2018
Inventory	69,9	62,6
Work in progress contracts	16,3	11,0
Accounts receivable	67,9	52,6
Accounts payable (-)	(57,5)	(54,4)
Op. working capital	96,7	71,8
Other current assets (liabilities)	(23,6)	(22,9)
Net working capital	73,0	48,9
Tangible assets	42,5	45,3
Right of use - IFRS 16/IAS 17	20,1	0,0
Intangible assets	20,4	18,0
Financial assets	3,9	4,0
Fixed assets	87,0	67,3
Net long term liabilities	4,2	4,8
Net invested capital	164,2	121,0
Cash & near cash items (-)	(17,9)	(42,8)
Short term financial assets (-)	(12,1)	(10,4)
Lease liability - IFRS 16/IAS 17	19,5	0,0
Short term borrowing	79,8	80,1
Medium-long term borrowing	48,7	50,8
Net financial position	118,0	77,7
Equity	46,2	43,3
Funds	164,2	121,0

Disclaimer

The Manager responsible for preparing the company's financial reports, Marco Paredi, declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this presentation corresponds to the document results, books and accounting records.

Certain information included in this document is forward looking and is subject to important risks and uncertainties that could cause actual results to differ materially.

Any estimates or forward-looking statements contained in this document are referred to the current date and, therefore, any of the assumptions underlying this document or any of the circumstances or data mentioned in this document may change. Tesmec S.p.A. expressly disclaims and does not assume any liability in connection with any inaccuracies in any of these estimates or forward-looking statements or in connection with any use by any third party of such estimates or forwardlooking statements.

This document does not represent investment advice or a recommendation for the purchase or sale of financial products and/or of any kind of financial services. Finally, this document does not represent an investment solicitation in Italy, pursuant to Section 1, letter (t) of Legislative Decree no. 58 of February 24, 1998, or in any other country or state.

In addition to the standard financial reporting formats and indicators required under IFRS, this document contains a number of reclassified tables and alternative performance indicators. The purpose is to help users better evaluate the Group's economic and financial performance. However, these tables and indicators should not be treated as a substitute for the standard ones required by IFRS.