Quarterly Report • Sep 12, 2019
Quarterly Report
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This report is a translation. The Italian version prevails.
On 29 April 2019, the Shareholders' Meeting of the parent company Landi Renzo S.p.A. elected the Board of Directors and the Board of Statutory Auditors for the period 2019-2021. They will therefore remain in office until the Shareholders' Meeting called to approve the Financial Statements for the year ending 31 December 2021. The Meeting changed the number of board members to nine. Also on the same date, the Board of Directors appointed Cristiano Musi as Chief Executive Officer and General Manager and confirmed Stefano Landi as Executive Chairman.
On the date on which this Half-Yearly Financial Report was drafted, the company officers were as follows:
| Executive Chairman | Stefano Landi |
|---|---|
| Honorary Chairperson - Director | Giovannina Domenichini |
| Chief Executive Officer | Cristiano Musi |
| Director | Silvia Landi |
| Director | Angelo Iori |
| Director | Paolo Emanuele Maria Ferrero |
| Independent Director | Anton Karl |
| Independent Director | Sara Fornasiero (*) |
| Independent Director | Vincenzo Russi |
| Board of Statutory Auditors | |
| Chairman of the Board of Statutory Auditors | Fabio Zucchetti |
| Statutory Auditor | Diana Rizzo |
| Statutory Auditor | Domenico Sardano |
| Alternate Auditor | Marina Torelli |
| Alternate Auditor | Gian Marco Amico di Meane |
| Control and Risks Committee | |
| Chairperson | Sara Fornasiero |
| Committee Member | Angelo Iori |
| Committee Member | Vincenzo Russi |
| Remuneration Committee | |
| Chairperson | Sara Fornasiero |
| Committee Member | Angelo Iori |
| Committee Member | Vincenzo Russi |
| Committee for Transactions with Related Parties | |
| Chairperson | Sara Fornasiero |
| Committee Member | Vincenzo Russi |
| Supervisory Board (Italian Legislative Decree 231/01) | |
| Chairperson | Jean-Paule Castagno |
| Board Member | Sara Fornasiero |
| Board Member | Domenico Sardano |
| Independent Auditing Firm | PricewaterhouseCoopers S.p.A. |
(*) The Director also holds the office of Lead Independent Director
Landi Renzo S.p.A. Via Nobel 2/4 42025 Corte Tegge – Cavriago (RE) – Italy Tel. +39 0522 9433 Fax +39 0522 944044 Share capital: Euro 11,250,000 Tax Code and VAT Reg. No. IT00523300358
This report is available online at: www.landirenzogroup.com
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| Change | ||||
| ECONOMIC INDICATORS FOR THE SECOND QUARTER | Q2 2019 | Q2 2018 | Change | % |
| Revenue | 58,237 | 55,259 | 2,978 | 5.4% |
| Adjusted Gross Operating Profit (EBITDA) (1) | 8,173 | 8,717 | -544 | -6.2% |
| Gross Operating Profit (EBITDA) | 7,833 | 8,150 | -317 | -3.9% |
| Net Operating Profit (EBIT) | 4,732 | 5,581 | -849 | -15.2% |
| Earnings before Tax | 3,071 | 3,558 | -487 | -13.7% |
| Net profit (loss) for the Group and minority interests | 2,296 | 2,867 | -571 | -19.9% |
| Adjusted Gross Operating Profit (EBITDA) / Revenue | 14.0% | 15.8% | ||
| Gross Operating Profit (EBITDA) / Revenue | 13.5% | 14.7% | ||
| Net profit (loss) for the Group and minority interests / Revenue | 3.9% | 5.2% | ||
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| Change | ||||
| ECONOMIC INDICATORS FOR THE FIRST HALF-YEAR | 30/06/2019 | 30/06/2018 | Change | % |
| Revenue | 102,035 | 97,296 | 4,739 | 4.9% |
| Adjusted Gross Operating Profit (EBITDA) (1) | 13,612 | 14,077 | -465 | -3.3% |
| Gross Operating Profit (EBITDA) | 13,272 | 12,683 | 589 | 4.6% |
| Net Operating Profit (EBIT) | 7,007 | 7,460 | -453 | -6.1% |
| Earnings before Tax (EBT) | 4,527 | 3,426 | 1,101 | 32.1% |
| Net profit (loss) for the Group and minority interests | 2,886 | 1,692 | 1,194 | 70.6% |
| Adjusted Gross Operating Profit (EBITDA) / Revenue | 13.3% | 14.5% | ||
| Gross Operating Profit (EBITDA) / Revenue | 13.0% | 13.0% | ||
| Net profit (loss) for the Group and minority interests / Revenue | 2.8% | 1.7% | ||
| (Thousands of Euro) | |||
|---|---|---|---|
| STATEMENT OF FINANCIAL POSITION | 30/06/2019 | 31/12/2018 | 30/06/2018 |
| Net fixed assets and other non-current assets | 107,334 | 100,983 | 98,517 |
| Operating capital (2) | 23,630 | 18,893 | 20,970 |
| Non-current liabilities (3) | -7,126 | -7,428 | -10,873 |
| NET INVESTED CAPITAL | 123,838 | 112,448 | 108,614 |
| Net Financial Position (4) | 60,709 | 52,872 | 51,625 |
| Net Financial Position - standards remaining the same (5) | 53,729 | 52,872 | 51,625 |
| Equity | 63,129 | 59,576 | 56,989 |
| BORROWINGS | 123,838 | 112,448 | 108,614 |
| (Thousands of Euro) | |||
|---|---|---|---|
| KEY INDICATORS | 30/06/2019 | 31/12/2018 | 30/06/2018 |
| Operating capital / Turnover (rolling 12 months) | 12.3% | 10.0% | 11.8% |
| Net financial debt / Equity | 96.2% | 88.7% | 90.6% |
| Adjusted net financial debt (5) / EBITDA (rolling 12 months) | 2.17 | 2.10 | 2.59 |
| Personnel (peak) | 512 | 494 | 492 |
| (Thousands of Euro) | |||
|---|---|---|---|
| CASH FLOWS | 30/06/2019 | 31/12/2018 | 30/06/2018 |
| Gross operational cash flow | 4,770 | 9,946 | 5,436 |
| Cash flow for investment activities | -4,157 | -8,269 | -2,534 |
| Gross FREE CASH FLOW | 613 | 1,677 | 2,902 |
| Non-recurrent expenditure for voluntary resignation incentives and TFR (severance pay) |
-132 | -4,377 | -4,046 |
| Net FREE CASH FLOW | 481 | -2,700 | -1,144 |
(1) The data does not include accounting of non-recurring costs. As EBITDA is not identified as an accounting measure under IAS/IFRS, it may be calculated in different manners. EBITDA is a measure used by the company's management to monitor and evaluate its operating performance. The management believes that EBITDA is an important parameter to measure the company's operating performance, as it is not influenced by the effects of the different criteria for determining the tax base, the amount and characteristics of invested capital and the relative amortisation policies. The company's way of calculating EBITDA may not be the same as the methods adopted by other companies/groups, and therefore its value may not be comparable with the EBITDA calculated by others.
(2) This is calculated as the difference between Trade Receivables, Inventories, Contract Work in Progress, Other Current Assets and Trade Payables, Tax liabilities, Other Current Liabilities.
(3) These are calculated by totalling Deferred Tax Liabilities, Defined Benefit Plans for employees and Provisions for Risks and Charges.
(4) The net financial position is calculated in accordance with the provisions of CONSOB Communication DEM/6064293 of 28 July 2006. (5) Not including the effects of the application of IFRS 16 - Leases.
The Board of Directors meeting held on the same date confirmed Cristiano Musi as Chief Executive Officer as well as General Manager.
intention to proceed with the early full repayment at par of the "LANDI RENZO 6,10% 2015-2022" Bonded Loan, (ISIN IT0005107237), pursuant to art. 9 of the relative Regulation. June On 6 June 2019, the Company sent a letter to the lending banks notifying them of its intention: - to proceed with the voluntary early repayment of the financial debt deriving from the Optimisation Agreement; - to request from the lending banks the maintenance of the existing revocable commercial and current account credit lines and the other guarantees given, also outside the scope of the Optimisation Agreement; - to proceed with the formal termination of the Optimisation Agreement. On 20 June 2019, the Company also notified the lending banks of its irrevocable decision to proceed with the full repayment in advance of the expiry of the Optimisation Agreement, in accordance with paragraph 5.7 of such agreement, of the existing medium/long-term loans. June On 26 June 2019, Landi Renzo S.p.A., along with Lovato Gas S.p.A. and SAFE S.p.A., subsidiaries/associates still falling under the Optimisation Agreement, agreed with the lending banks to terminate the Optimisation Agreement by mutual consent and as a result to fully extinguish the financial debt and for the lending banks to maintain the existing commercial and current account credit lines and the other guarantees provided in favour of the Company and its subsidiaries/associates. June On 26 June 2019 Landi Renzo S.p.A. entered into a five-year medium-long term loan agreement with a pool of three major banks (BPM - mandated lead arranger and bookrunner, Intesa Sanpaolo and Unicredit) for a total of Euro 65 million under more favourable economic conditions, which will make it possible to reduce financial expenses compared to current levels as well as improve the Group's debt
profile. The relative financial resources were used to repay the financial debt deriving from the Optimisation Agreement in full, on 28 June 2019, and the Bonded Loan, on 1 July 2019, for a total of Euro 55 million. The remainder of the new loan will be used to support current and future investments.
This consolidated half-yearly financial report at 30 June 2019 was prepared pursuant to Italian Legislative Decree 58/1998 and subsequent modifications, as well as the Issuer Regulations issued by CONSOB.
This consolidated half-yearly financial report has been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and endorsed by the European Union, and has been drafted in accordance with IAS 34 - Interim Financial Reporting, applying the same accounting principles as adopted in preparing the consolidated financial statements at 31 December 2018, without prejudice to the new accounting standards applicable as of this year and described in detail below in this report and the explanatory notes.
As a partial exception to the provisions of IAS 34, this report provides detailed rather than summary tables in order to provide a clearer view of the economic-equity and financial dynamics over the six-month period. All values presented below are expressed in thousands of Euro and comparisons are made with respect to data from the corresponding period of the previous year for the economic values and with respect to the data at 31 December 2018 for the financial data, unless otherwise indicated. The explanatory notes are also presented in compliance with the information required by IAS 34 with the supplements considered useful for a clearer understanding of the half-yearly financial statements.
As described in more detail below in this report, as the Landi Renzo Group has the modified retrospective approach for the first time adoption as of 1 January 2019 of IFRS 16 - Leases, which does not require the restatement of comparative data, the income statement and balance sheet data at 30 June 2019 are not directly comparable with those from 31 December 2018 or with those relating to the same period of the previous year.
The first half of 2019 ended with positive results in terms of turnover as well as profit and in line with management forecasts as well as the Strategic Plan. The Group strives to be a key player in the mobility of the future, enhancing the importance and the role of gas-mobility which still has significant room for development, both in the Passenger Car segment and, especially, in the Heavy Duty segment. To that end, the Group has embarked upon a path of growth and technological development aiming to offer innovative and efficient solutions to its customers, which will make it possible to accelerate value creation, as set forth in the Strategic Plan. Indeed, at global level the Automotive segment is experiencing a historic phase of renewal and development due to the increasing attention placed on environmental issues, resulting in increasingly stringent greenhouse gas emissions limits imposed by a growing number of countries. In this context, the Group's management has identified significant and appealing opportunities for gas-mobility in the Mid and Heavy Duty segment, increasingly oriented towards LNG, RNG and CNG solutions, as well as in the sector Passenger car and Light commercial vehicles (LCV), in which the Group can provide strategic support to the main automotive manufacturers in completing their "green" product range. In order to take the most advantage of these opportunities, as set forth in the Strategic Plan the Group has significantly increased its new product development activities for the OEM channel, with a particular focus on Mid and Heavy Duty vehicles, as well as the After Market channel.
The first six months of 2019 ended with turnover of Euro 102,035 thousand, up compared with the same period of the previous financial year (+4.9%), and a net profit of Euro 2,886 thousand (Euro 1,692 thousand at 30 June 2018).
As also highlighted in the 2018 Annual Financial Report, activities connected to the labour mobility plan agreed upon with the trade unions and the implementation of the "EBITDA improvement" project guidelines were completed in the previous year, with substantial positive effects for profit margins. In the first half of 2019, the validity and effectiveness of the actions undertaken by the management were confirmed, enabling the Group to maintain adequate profit margins consistent with the budget forecasts set forth in the Strategic Plan. Indeed, at 30 June 2019 EBITDA was Euro 13,272 thousand (equal to 13% of the turnover), up compared with Euro 12,683 thousand in the same period of the previous year. This result is particularly significant considering that compared with the same period of the previous year, this half-year was characterised by considerable sales in the OEM channel, which generally has lower profit margins than the After Market sales channel. Indeed, at 30 June 2019 OEM channel sales made up 43.5% of total sales (38.9% at 30 June 2018).
The result in terms of total sales in the OEM channel (+17.3%) was primarily due to increasing orders from several top European automotive manufacturers which are using LPG bifuel engines to develop their "green" product ranges and which have confirmed the Landi Renzo Group as their strategic partner, due to its well established experience in the sector. This confirms the Landi Renzo Group's well established strategic positioning in the OEM channel and its recognition as a supplier of high quality, efficient and reliable components and systems.
In the After Market channel, the Group achieved turnover of Euro 57,620 thousand during the half-year, a slight decline compared with the same period of the previous year (Euro 59,423 thousand) mostly due to the decrease in the Rest of the World area and the current instability in South America, for which however there have been clear signs of a recovery since the second quarter of 2019. This result in any event confirms the adequacy of the efforts made in terms of expansion, and the Group's strategic positioning, both in Italy and abroad.
In light of the continuous, clear improvement in the Group's economic and financial performance and the favourable conditions in the financial markets in terms of the cost of money, in the first half of 2019 the management entered into important negotiations with several top financial institutions with a view to obtaining a new loan in order to extinguish the Group's financial debt deriving from the Optimisation Agreement entered into in March 2017 and the "LANDI RENZO 6,10% 2015-2022" Bonded Loan (ISIN IT0005107237), as well as obtain a simultaneous reduction in financial expenses.
On 26 June 2019, Landi Renzo S.p.A., along with Lovato Gas S.p.A. and SAFE S.p.A., subsidiaries/associates still falling under the Optimisation Agreement, agreed with the lending banks involved in the agreement to formally terminate it, also calling for:
On the same date the Company entered into a five-year medium-term loan agreement with a pool of three major banks (BPM - mandated lead arranger and bookrunner, Intesa Sanpaolo and Unicredit) for a total of Euro 65 million under more favourable economic conditions, which will make it possible to reduce financial expenses compared to current levels as well as improve the Group's debt profile. The relative financial resources were used to repay the financial debt deriving from the Optimisation Agreement in full, on 28 June 2019, and the Bonded Loan, on 1 July 2019, for a total of Euro 55 million. The remainder of the new loan will be used to support current and future investments.
The Net Financial Position at 30 June 2019 is Euro 60,709 thousand, of which Euro 6,980 thousand due to the application of IFRS 16 - Leases. With the standards remaining the same, i.e. without considering the effects of the application of that accounting standard, the Net Financial Position at 30 June 2019 would have been Euro 53,729
thousand, basically in line with 31 December 2018 (Euro 52,872 thousand), but with a significant improvement compared to the end of the previous quarter (Euro 59,697 thousand at 31 March 2019). This result is particularly positive considering that during the half-year significant investments were made in OEM product development projects (LNG and CNG), amounting to Euro 2,641 thousand.
The following table shows the evolution of the main economic performance indicators for the first half of 2019 compared with the first half of 2018.
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| 30/06/2019 | % | 30/06/2018 | % | |
| Revenues from sales and services | 102,035 | 100.0% | 97,296 | 100.0% |
| Other revenues and income | 229 | 0.2% | 163 | 0.2% |
| Operating costs | -88,652 | -86.9% | -83,382 | -85.7% |
| Adjusted gross operating profit | 13,612 | 13.3% | 14,077 | 14.5% |
| Non-recurring costs | -340 | 0.3% | -1,394 | 1.4% |
| Gross operating profit | 13,272 | 13.0% | 12,683 | 13.0% |
| Amortisation, depreciation and impairment | -6,265 | -6.1% | -5,223 | -5.4% |
| Net operating profit | 7,007 | 6.9% | 7,460 | 7.7% |
| Financial income (charges) and exchange rate differences | -2,577 | -2.5% | -2,882 | -3.0% |
| Gain (loss) on equity investments valued using the equity method |
97 | 0.1% | -1,152 | -1.2% |
| Profit (loss) before tax | 4,527 | 4.4% | 3,426 | 3.5% |
| Current and deferred taxes | -1,641 | -1.6% | -1,734 | -1.8% |
| Net profit (loss) for the Group and minority interests, including: |
2,886 | 2.8% | 1,692 | 1.7% |
| Minority interests | -53 | -0.1% | -93 | -0.1% |
| Net profit (loss) for the Group | 2,939 | 2.9% | 1,785 | 1.8% |
The consolidated revenues for the first six months of 2019 were Euro 102,035 thousand, an increase of Euro 4,739 thousand (+4.9%) compared with the same period in the previous year, especially thanks to the positive performance of the OEM channel (+17.3%). As mentioned above, sales in the OEM channel at 30 June 2019 represented 43.5% of the Group's total revenues compared with 38.9% in the same period of the previous year, especially due to the increase in turnover from several major European automotive manufacturers which are using LPG bifuel engines to develop their "green" product ranges and with which the Landi Renzo Group has worked for years as a strategic partner. In the After Market channel, revenues from sales at 30 June 2019 were down slightly during the half-year, mainly due to the decline in the Rest of the World market, due to the reduction of the positive effects deriving from the inventives from gas-mobility granted by some countries starting from the previous year and to the difficult situation of the Brazilian market penalized in aprticular during the first quarter.
Adjusted EBITDA at 30 June 2019 was Euro 13,612 thousand, compared with Euro 14,077 thousand in the same period of the previous year, confirming the validity and effectiveness of the actions undertaken by the management in terms of the company reorganisation and the reduction in fixed and variable costs. Indeed, the Group maintained
adequate profit margins despite the fact that there were higher sales during the half-year in the OEM channel, which has lower profit margins than the After Market Channel. Non-recurring costs, equal to Euro 340 thousand at 30 June 2019 and relating to strategic consultancy, were down significantly compared with the same period of the previous year (equal to Euro 1,394 thousand, also relating to strategic consultancy).
The Gross Operating Profit (EBITDA) was positive at Euro 13,272 thousand, up by 4.6% compared with the same period of the previous year (Euro 12,683 thousand).
The Net Operating Profit (EBIT) was positive at Euro 7,007 thousand, down by 6.1% compared with the same period of the previous year (Euro 7,460 thousand).
The Group operates directly only in the Automotive segment and indirectly in the "Gas Distribution and Compressed Natural Gas" segment through the joint venture SAFE & CEC S.r.l. which, in accordance with the contractual governance system, meets the joint control requirements as stipulated by IFRS 11, and is consolidated according to the equity method. This report provides information about the trend in this segment during the first six months of 2019, to provide a better understanding of the impact of this business unit on the Group's accounts.
| Q2 2019 | % of revenues |
Q2 2018 | % of revenues |
Change | % |
|---|---|---|---|---|---|
| 10,908 | 18.7% | 11,041 | 20.0% | -133 | -1.2% |
| 27,253 | 46.8% | 21,888 | 39.6% | 5,365 | 24.5% |
| 9,316 | 16.0% | 9,425 | 17.2% | -109 | -1.2% |
| 10,760 | 18.5% | 12,905 | 23.4% | -2,145 | -16.6% |
| 58,237 | 100.0% | 55,259 | 100.0% | 2,978 | 5.4% |
| (Thousands of Euro) | ||||||
|---|---|---|---|---|---|---|
| Geographical distribution of revenues | At 30/06/2019 | % of revenues |
At 30/06/2018 | % of revenues |
Change | % |
| Italy | 19,740 | 19.3% | 18,960 | 19.5% | 780 | 4.1% |
| Europe (excluding Italy) | 49,709 | 48.7% | 40,953 | 42.1% | 8,756 | 21.4% |
| America | 13,440 | 13.2% | 15,061 | 15.4% | -1,621 | -10.8% |
| Asia and Rest of the World | 19,146 | 18.8% | 22,322 | 23.0% | -3,176 | -14.2% |
| Total | 102,035 | 100.0% | 97,296 | 100.0% | 4,739 | 4.9% |
Regarding the geographical distribution of revenues, during the first six months of 2019 the Group realised 80.7% (80.5% at 30 June 2018) of its consolidated revenues abroad (48.7% in Europe and 32.0% outside Europe), and in more detail:
Sales in the Italian market of Euro 19,740 thousand were up by Euro 780 thousand compared with the same period of the previous year, in particular:
The increase of Euro 8,756 thousand in revenues in Europe was primarily attributable to the increase in OEM sales to several major automotive manufacturers which, in the development of their "green" product ranges, are using LPG bifuel engines and have confirmed the Landi Renzo Group as their strategic partner.
Sales in the first six months of 2019 in the American continent, equal to Euro 13,440 thousand, recorded a decrease of 10.8% (equivalent to Euro 1,621 thousand). This was mainly attributable to the current situation in the Brazilian market which was penalised, especially in the first quarter.
The Asia and Rest of the World markets marked a decline of 14.2% (Euro 3,176 thousand) compared with the first six months of 2018 due to the reduction in positive effects arising from the gas-mobility incentives granted by some countries starting in the previous year.
In the first six months of 2019, the adjusted Gross Operating Profit (adjusted EBITDA) was positive, Euro 13,612 thousand, equivalent to 13.3% of revenues, substantially in line with the same period of the previous year (Euro 14,077 thousand at 30 June 2018). This result is particularly significant considering the sharp rise in sales in the OEM channel compared with the same period of the previous year. Indeed, although this channel has lower profit margins than the After Market channel, thanks to the policies enacted by the management to reduce fixed costs, the Group's profit margins were in any event very positive and met expectations.
The Gross Operating Profit (EBITDA) was positive at Euro 13,272 thousand, equal to 13% of revenue, and up by Euro 589 thousand compared with the first half of last year. Non-recurring costs, equal to Euro 340 thousand at 30 June 2019 and relating to strategic consultancy, were down significantly compared with the same period of the previous year (equal to Euro 1,394 thousand, also relating to strategic consultancy).
| Total | -340 | -1,394 | 1,054 |
|---|---|---|---|
| Strategic consultancy | -340 | -1,394 | 1,054 |
| NON-RECURRING COSTS | 30/06/2019 | 30/06/2018 | Change |
| (Thousands of Euro) |
Costs of raw materials, consumables and goods and changes in inventories increased overall from Euro 46,580 thousand at 30 June 2018 to Euro 54,346 thousand at 30 June 2019, which in absolute terms is an increase of Euro 7,766 thousand. The increase in these costs was due to the increase in turnover compared with the same period of the previous year, particularly in the OEM channel.
The costs of services and use of third-party assets amounted to Euro 19,097 thousand, compared with Euro 21,816 thousand in the same period of the previous year. The reduction in this item was mainly linked to:
Personnel costs were Euro 14,237 thousand, a decrease compared with the same period of the previous financial year (Euro 14,981 thousand at 30 June 2018), while the Group had a total of 512 employees, a slight increase compared with the end of the previous year (494). Despite this increase in employees, personnel costs declined as the first half of 2018 benefitted only in part from the effects of the company restructuring concluded in the initial months of last year, as well as since the group heavily invested in highly specialised resources to support the increasing research and development performed for new products and solutions, capitalised when they meet the requirements laid out in IAS 38.
The Net Operating Profit (EBIT) for the period was Euro 7,007 thousand (Euro 7,460 thousand at 30 June 2018), after accounting for amortisation, depreciation and impairment of Euro 6,265 thousand (Euro 5,223 thousand at 30 June 2018). The increase in amortisation and depreciation was primarily due to the application of IFRS 16 - Leases.
Total financial expenses (interest income, interest charges and exchange rate differences) amounted to Euro 2,577 thousand (Euro 2,882 thousand at 30 June 2018) and are inclusive of Euro 436 thousand deriving from the recognition in the income statement of residual transaction costs incurred to sign the Optimisation Agreement and pending items following the measurement at amortised cost of the relative loans, subject to voluntary early repayment following the refinancing transaction illustrated above, and Euro 70 thousand deriving from the application of IFRS 16. Net of these effects, financial expenses alone would have amounted to Euro 1,867 thousand, in line with the same period of the previous year (Euro 1,924 thousand). The reduction in overall financial expenses is in any event primarily due to the reduction in exchange effects, thanks to greater stability in the exchange rates used by the group.
In the first six months of 2019, the effect of the valuation with the equity method of the equity investments in joint ventures was positive at Euro 97 thousand (Euro -1,152 thousand from write-down at 30 June 2018). This includes the Group's share of the profits for the period from the Joint Ventures Krishna Landi Renzo India Private Ltd Held (revaluation of Euro 297 thousand) and SAFE&CEC S.r.l. (write-down equal to Euro 200 thousand).
The first six months ended with a pre-tax profit of Euro 4,527 thousand against a pre-tax profit of Euro 3,426 thousand at 30 June 2018, after the recognition of gains on the valuation of equity investments of Euro 97 thousand.
The net result for the Group at 30 June 2019 was positive at Euro 2,939 thousand compared with a positive result of Euro 1,785 thousand in the same period of 2018.
In order to allow for a better understanding and comparability of the Group's economic and financial results, below are the details of the effects deriving from the application of IFRS 16 - Leases in the first half of 2019.
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| 30/06/2019 | 30/06/2018 | |||
| Landi Renzo Consolidated |
IFRS 16 Adjustment |
Landi Renzo Consolidated with standards remaining the same |
Landi Renzo Consolidated |
|
| Revenues from sales and services | 102,035 | 102,035 | 97,296 | |
| Other revenues and income | 229 | 229 | 163 | |
| Operating costs | -88,992 | -1,362 | -90,354 | -84,776 |
| Gross operating profit | 13,272 | -1,362 | 11,910 | 12,683 |
| Amortisation, depreciation and impairment | -6,265 | 1,242 | -5,023 | -5,223 |
| Net operating profit | 7,007 | -120 | 6,887 | 7,460 |
| Financial income (charges) and exchange rate differences |
-2,577 | 70 | -2,507 | -2,882 |
| Gain (loss) on equity investments valued using the equity method |
97 | 97 | -1,152 | |
| Profit (loss) before tax | 4,527 | -50 | 4,477 | 3,426 |
| Current and deferred taxes | -1,641 | 13 | -1,628 | -1,734 |
| Net profit (loss) for the Group and minority interests, including: |
2,886 | -37 | 2,849 | 1,692 |
| Minority interests | -53 | -53 | -93 | |
| Net profit (loss) for the Group | 2,939 | -37 | 2,902 | 1,785 |
The "Gas Distribution and Compressed Natural Gas" segment was the subject in 2017 of a strategic aggregation with Clean Energy Fuels Corp, the aim of which was to create the world's second-largest group in the sector, in terms of business volume. The aggregation was based on the establishment of a newco called SAFE & CEC S.r.l. and subsequent contribution of 100% of SAFE S.p.A. by the Landi Group and 100% of Clean Energy Compressor Ltd (now "IMW Industries Ltd") by Clean Energy Fuels Corp. In accordance with the contractually required governance system, which reflects the joint control agreement between the two shareholders, the Group's share is classified as a "joint venture" pursuant to international accounting standards (IFRS 11) and therefore is consolidated via the equity method.
During the first six months of 2019, the "Gas Distribution and Compressed Natural Gas" segment achieved considerably improved results compared with the first half of 2018, with consolidated net sales of Euro 28,825 thousand (+9.5% compared with 30 June 2018), adjusted EBITDA of Euro 1,985 thousand (Euro 568 thousand at 30 June 2018), and a post-tax loss of Euro 394 thousand (compared with a loss of Euro 2,558 thousand at 30 June
Currently, the order portfolio is higher than forecast, with resulting impacts on production efficiency due to the need to respect the contractual deadlines set forth as much as possible. In this regard, it is also acknowledged that in April, SAFE S.p.A. entered into an agreement with ENI S.p.A. for the supply and maintenance of 20 CNG distribution systems, to be used in fuel stations in the ENI network for passenger cars as well as heavy duty vehicles. The agreement provides for a partnership over the next five years, in which SAFE S.p.A. will be committed in the first 3 years to the supply and installation of the equipment (consisting of the compressor, driver, distributor, control system and storage system), and in the following 2 years it will provide the relative maintenance services.
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| Balance Sheet and Financial Position | 30/06/2019 | 31/03/2019 | 31/12/2018 | 30/06/2018 |
| Trade receivables | 43,349 | 34,498 | 35,131 | 36,409 |
| Inventories | 39,144 | 42,375 | 38,895 | 39,003 |
| Trade payables | -59,231 | -49,592 | -55,166 | -53,517 |
| Other net current assets | 368 | -37 | 33 | -925 |
| Net operating capital | 23,630 | 27,244 | 18,893 | 20,970 |
| Tangible assets | 11,920 | 12,254 | 12,745 | 13,397 |
| Intangible assets | 51,079 | 51,289 | 51,065 | 49,662 |
| Right-of-use assets | 7,029 | 4,616 | 0 | 0 |
| Other non-current assets | 37,306 | 37,137 | 37,173 | 35,458 |
| Fixed capital | 107,334 | 105,296 | 100,983 | 98,517 |
| TFR (severance pay) and other provisions | -7,126 | -7,794 | -7,428 | -10,873 |
| Net invested capital | 123,838 | 124,746 | 112,448 | 108,614 |
| Financed by: | ||||
| Net Financial Position (*) | 60,709 | 64,158 | 52,872 | 51,625 |
| Group shareholders' equity | 63,457 | 60,886 | 59,852 | 57,716 |
| Minority interests | -328 | -298 | -276 | -727 |
| Borrowings | 123,838 | 124,746 | 112,448 | 108,614 |
| Ratios | 30/06/2019 | 31/03/2019 | 31/12/2018 | 30/06/2018 |
| Net operating capital | 23,630 | 27,244 | 18,893 | 20,970 |
| Net operating capital/Turnover (rolling) | 12.3% | 14.4% | 10.0% | 11.8% |
| Net invested capital | 123,838 | 124,746 | 112,448 | 108,614 |
| Net capital employed/Turnover (rolling) | 64.2% | 65.7% | 59.8% | 61.3% |
(*) The net financial position at 30 June 2019 is inclusive of Euro 6,980 thousand for financial liabilities for rights of use deriving from the application of IFRS 16 - Leases as of 1 January 2019.
Net operating capital at the end of the period stood at Euro 23,630 thousand. This is an increase of Euro 4,737 thousand compared with the same figure recorded on 31 December 2018 as a result of the increase of Euro 8,218
thousand in trade receivables, which was offset only in part by the increase in trade payables. With respect to the first quarter of 2019, the impact of net invested capital on rolling 12-month sales posted a clear improvement, from 14.4% to 12.3%, a percentage substantially aligned with the values of the first half of 2018 (11.8%) and with Automotive segment best practices. The trend in working capital is under control and is essentially stable in relation to the growth in turnover.
Trade receivables stood at Euro 43,349 thousand, an increase of Euro 8,218 thousand compared with 31 December 2018. At 30 June 2019, derecognised receivables disposed through factoring stood at Euro 26,925 thousand, compared with Euro 25,391 thousand at 31 December 2018.
There was an increase of Euro 4,065 thousand in trade payables, which rose from Euro 55,166 thousand at 31 December 2018 to Euro 59,231 thousand, while the closing inventories, totalling Euro 39,144 thousand, were essentially in line with 31 December 2018 (Euro 38,895 thousand).
The increase in Fixed capital is linked primarily to the effects of the application of IFRS 16 - Leases, which entailed the recognition at 30 June 2019 of right of use assets of Euro 7,029 thousand.
At 30 June 2019, TFR (severance pay) and other provisions, totalling Euro 7,126 thousand at 30 June 2019, were basically in line with 31 December 2018.
Net of the effects of the application of IFRS 16 - Leases, Net Invested Capital totalled Euro 116,809 thousand, basically unchanged compared with December 2018 (Euro 112,448 thousand). The percentage indicator calculated on the rolling turnover also increased from 59.8% to 64.2%, mainly as a result of that effect.
| (thousands of Euro) | ||||
|---|---|---|---|---|
| 30/06/2019 | 31/03/2019 | 31/12/2018 | 30/06/2018 | |
| Cash and cash equivalents | 51,348 | 17,156 | 15,075 | 23,188 |
| Current financial assets | 2,760 | 0 | 0 | 0 |
| Bank financing and borrowings | -23,518 | -25,026 | -16,203 | -16,932 |
| Right-of-use liabilities | -1,989 | -1,470 | 0 | 0 |
| Bonds issued | -29,064 | -3,863 | -3,843 | -6,345 |
| Short-term borrowings | -419 | -419 | -419 | -419 |
| Net short term indebtedness | -882 | -13,622 | -5,390 | -508 |
| Borrowings | -54,836 | -23,117 | -23,054 | -24,567 |
| Right-of-use liabilities | -4,991 | -2,991 | 0 | 0 |
| Bonds issued | 0 | -24,218 | -24,218 | -26,131 |
| Other borrowings | 0 | -210 | -210 | -419 |
| Net medium-long term indebtedness | -59,827 | -50,536 | -47,482 | -51,117 |
| Net Financial position | -60,709 | -64,158 | -52,872 | -51,625 |
| Net Financial Position - accounting standards remaining the same (*) | -53,729 | -59,697 | -52,872 | -51,625 |
(*) Not including the effects of the application of IFRS 16 - Leases.
In light of the continuous improvement in the Group's economic and financial performance and the favourable
conditions in the financial markets in terms of the cost of money, in the first half of 2019 the management entered into important negotiations with several top financial institutions with a view to obtaining a new loan in order to extinguish the Group's existing financial debt deriving from the Optimisation Agreement entered into on March 2017 and the "LANDI RENZO 6,10% 2015-2022" Bonded Loan (ISIN IT0005107237), as well as obtain a simultaneous reduction in financial expenses.
On 26 June 2019, Landi Renzo S.p.A., along with Lovato Gas S.p.A. and SAFE S.p.A., subsidiaries/associates still falling under the Optimisation Agreement, agreed with the lending banks involved in the agreement to formally terminate it, also calling for:
On the same date the Company entered into a five-year medium/long-term loan agreement with a pool of three major banks (BPM - mandated lead arranger and bookrunner, Intesa Sanpaolo and Unicredit) for a total of Euro 65 million under more favourable economic conditions, which will make it possible to reduce financial expenses compared to current levels. The relative financial resources were used to repay the financial debt deriving from the Optimisation Agreement in full, on 28 June 2019, and the Bonded Loan, on 1 July 2019, for a total of Euro 55 million. The remainder will instead be used to support current and future investments.
The Net Financial Position at 30 June 2019 is Euro 60,709 thousand (Euro 51,625 at 30 June 2018 and Euro 52,872 thousand at the end of the previous year), and was impacted by the application of the new international accounting standard IFRS 16 - Leases, which entailed the recognition of financial liabilities for rights of use of Euro 6,980 thousand at 30 June 2019.
Net of the effect of the application of IFRS 16 - Leases, the Group's Net Financial Position would have been Euro 53,729 thousand, substantially in line with 31 December 2018 (Euro 52,872 thousand), but with a significant improvement compared with the first quarter of 2019 (Euro 59,697 thousand) despite the significant investments in development projects made during the half-year.
The following table illustrates the trend in total cash flow:
| (thousands of Euro) | ||||
|---|---|---|---|---|
| 30/06/2019 | 31/03/2019 | 31/12/2018 | 30/06/2018 | |
| Gross operational cash flow | 4,770 | -3,860 | 9,946 | 5,436 |
| Cash flow for investment activities | -4,157 | -2,269 | -8,269 | -2,534 |
| Gross Free Cash Flow | 613 | -6,129 | 1,677 | 2,902 |
| Non-recurrent expenditure for voluntary resignation incentives and TFR (severance pay) |
-132 | 0 | -4,377 | -4,046 |
| Net Free Cash Flow | 481 | -6,129 | -2,700 | -1,144 |
Net cash flow from operating activities at the end of June, as shown in the Cash Flow Statement, was positive at Euro 4,638 thousand (net of non-recurring outlays of Euro 132 thousand), while net investment activities entailed a cash absorption of Euro 4,157 thousand.
Investments in property, plant, machinery and other equipment totalled Euro 1,281 thousand (Euro 1,386 thousand at 30 June 2018) and refer to purchases of plant and machinery, new production moulds and testing/control equipment.
The increase in intangible assets amounted to Euro 2,982 thousand (Euro 1,243 thousand at 30 June 2018) and mainly related to the capitalisation of costs of development projects relating to new products for the OEM and After Market channel, which meet the requirements of IAS 38 for recognition as balance sheet assets. As illustrated previously, at global level the Automotive segment is experiencing a historic phase of renewal and development due to the increasing attention placed on environmental issues, resulting in increasingly stringent greenhouse gas emissions limits imposed by a growing number of countries. In this context, the Group's management has identified significant and interesting opportunities for gas-mobility and, as also set forth in the strategic plan, has significantly increased its new product development activities in order to best take advantage of them.
In the first half of 2019, Landi Renzo S.p.A. generated revenues of Euro 74,457 thousand. The Gross Operating Profit totalled Euro 9,493 thousand (inclusive of Euro 340 thousand in non-recurring costs), compared with Euro 7,259 thousand at 30 June 2018 (inclusive of Euro 1,394 thousand in non-recurrent costs), while the net financial position was Euro -62,156 thousand (Euro -56,210 thousand, net of the effects deriving from the application of IFRS 16) compared with Euro -54,538 thousand at 31 December 2018.
At the end of the six-month period, the Parent Company's workforce numbered 296 employees, basically in line with 31 December 2018 (300).
The following is a reconciliation statement between the results for the period and the capital and reserves of the Group with the corresponding values of the Parent Company.
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| RECONCILIATION STATEMENT | Net Shareholder's equity at 30.06.2019 |
Result at 30.06.2019 |
Net Shareholder's equity at 30.06.2018 |
Result at 30.06.2018 |
| Shareholder's equity and result for the year of the Parent Company |
53,607 | 1,895 | 54,486 | 3,585 |
| Difference in value between book value and pro rata value of the accounting equity of the consolidated companies |
10,923 | 0 | 3,591 | 0 |
| Pro rata results achieved by investees | 0 | 1,783 | 0 | 2,659 |
| Elimination of intra-group dividends | 0 | 0 | 0 | -2,964 |
| Elimination of the effects of intra-group commercial transactions |
-800 | 120 | -1,224 | 241 |
| Profits and losses on exchange from valuation of intra group loans |
-71 | 71 | 591 | -591 |
| Elimination of revaluation/write-down of investments and recognition of impairment of goodwill |
0 | -1,078 | 0 | -1,220 |
| Elimination of the effects of intra-group assets | -527 | 34 | -455 | -18 |
|---|---|---|---|---|
| Other minor effects | -3 | 61 | 0 | 0 |
| Shareholders' equity and result for the year from Consolidated Financial Statements |
63,129 | 2,886 | 56,989 | 1,692 |
| Shareholders' equity and result for the year of minority interests |
-328 | -53 | -727 | -93 |
| Shareholders' equity and result for the year of the Group |
63,457 | 2,939 | 57,716 | 1,785 |
Research and Development activities in the first half of 2019 saw the continuation of projects initiated in the previous year as well as the launch of new initiatives, in particular:
The Landi Group maintains a constant dialogue with its Shareholders through a responsible and transparent activity of communication carried out by the Investor Relations office, with the aim of providing a clear explanation of the company's evolution. The Investor Relations office is also assigned the task of organizing presentations, events and "Road shows" that enable a direct relationship between the financial community and the Group's Top management. For further information and to consult the economic-financial data, corporate presentations, periodic publications, official communications and real time updates on the share price, visit the Investors section of the website www.landirenzogroup.com.
The following table summarizes the main share and stock market data for the six-month period:
| Price at 2 January 2019 | 1.1080 |
|---|---|
| Price at 28 June 2019 | 1.1180 |
| Maximum price 2019 (2 January 2019 - 28 June 2019) | 1.3800 |
| Minimum price 2019 (2 January 2019 - 28 June 2019) | 1.0660 |
| Market Capitalisation at 30 June 2019 (thousands of Euro) | 125,775 |
| Group equity and minority interests at 30 June 2019 (thousands of Euro) | 63,129 |
| Number of shares representing the share capital | 112,500,000 |
The share capital is made up of 112,500,000 shares with a nominal value of Euro 0.10 per share, for a total of Euro 11,250,000.00.
The Group is exposed to various risks associated with its activities, particularly in relation to the following types:
On 30 June 2019, existing financial covenants on loans were respected.
The Half-Yearly Financial Report at 30 June 2019 does not include all the information on the management of the above-mentioned risks required for the annual financial statements, and should be read in conjunction with the Annual Financial Report prepared for the year ended 31 December 2018. There were no substantial changes in the
management of the risks mentioned above.
The creditor/debtor relationships and economic transactions with related companies are the subject of a specific analysis in "Explanatory Notes to the Condensed Half-Yearly Consolidated Financial Statements" to which you are referred. It should also be noted that sales and purchases between the parties are not classed as atypical or unusual since they fall within the regular operations of the Group companies and they are conducted at regular market rates. Regarding the relationships with the parent company Girefin S.p.A., it should also be noted that the Directors of Landi Renzo S.p.A. deem that it does not exercise the administration and coordination activities envisaged by art. 2497 of the Italian Civil Code, because:
As of today, there have been no changes with regards to the conditions indicated above.
Lastly, please note that in accordance with CONSOB Regulation 17221/2010, and pursuant to Article 2391-bis of the Italian Civil Code, the Board of Directors has adopted the specific procedure for transactions with related parties, available on the company website, to which you are referred.
Pursuant to CONSOB communication no. 6064293 of 28 July 2006, note that during the period no atypical and/or unusual transactions occurred outside the normal operation of the company that could give rise to doubts regarding the correctness and completeness of the information in the financial statements, conflicts of interest, protection of company assets and safeguarding of minority shareholders.
In compliance with the provisions of article 2428 of the Italian Civil Code, it is confirmed that during 2018 and the first half of 2019 the Parent Company did not negotiate any treasury shares or shares of parent companies and does not at present hold any treasury shares or shares of parent companies.
Pursuant to art. 3 of CONSOB Resolution no. 18079 of 20 January 2012, Landi Renzo S.p.A. decided to adopt the opt-out system envisaged by arts. 70, par. 8, and 71, par. 1-bis, of CONSOB Regulation no. 11971/99 (as amended). It is therefore able to opt out from the disclosure of the information documents listed in Annex 3B to said CONSOB Regulation, on occasion of significant mergers, demergers, increases in capital through contribution of goods in kind, acquisitions and disposals.
No sub-offices were established.
Half-yearly financial report – H1 2019 ________________________________________________________________ 23
After the end of the six-month period and up to the present date we point out that, in compliance with the provisions of the Bonded Loan Regulation, on 1 July 2019 (as 30 June 2019 was not a business day) the Company paid the bondholders a total of Euro 29,064 thousand, of which Euro 28,286 thousand by way of full early repayment and Euro 778 thousand by way of interest accrued.
With regard to the business outlook, taking into account the results of the first six months of 2019, the uncertainties in the reference market, and orders in the portfolio, the information already given at the time of approval of the Annual Financial Report at 31 December 2018 is confirmed, i.e. the revenues will prove to be between Euro 185 million and Euro 190 million, with an adjusted EBITDA of around Euro 27 million.
With respect to the joint venture SAFE & CEC, currently the order portfolio is higher than forecast, with resulting impacts on production efficiency due to the need to respect the contractual deadlines set forth as much as possible. On the basis on the most recent forecast, the revenues areexpected in the range of Euro 65-70 million, in increase compared to 2018, with an adjusted EBITDA between Euro 6 million and Euro 7 million.
Cavriago, 11 September 2019
Chief Executive Officer Cristiano Musi
| (Thousands of Euro) | |||
|---|---|---|---|
| ASSETS | Notes | 30/06/2019 | 31/12/2018 |
| Non-current assets | |||
| Land, property, plant, machinery and equipment | 2 | 11,920 | 12,745 |
| Development expenditure | 3 | 7,599 | 6,932 |
| Goodwill | 4 | 30,094 | 30,094 |
| Other intangible assets with finite useful lives | 5 | 13,386 | 14,039 |
| Right-of-use assets | 6 | 7,029 | 0 |
| Equity investments valued using the equity method | 7 | 23,011 | 22,292 |
| Other non-current financial assets | 8 | 397 | 352 |
| Other non-current assets | 9 | 3,991 | 3,991 |
| Deferred tax assets | 10 | 9,907 | 10,538 |
| Total non-current assets | 107,334 | 100,983 | |
| Current assets | |||
| Trade receivables | 11 | 43,349 | 35,131 |
| Inventories | 12 | 39,144 | 38,895 |
| Other receivables and current assets | 13 | 8,228 | 8,016 |
| Current financial assets | 14 | 2,760 | 0 |
| Cash and cash equivalents | 15 | 51,348 | 15,075 |
| Total current assets | 144,829 | 97,117 | |
| TOTAL ASSETS | 252,163 | 198,100 | |
| (Thousands of Euro) | ||
|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | 30/06/2019 | 31/12/2018 |
| Shareholders' Equity | ||
| Share capital | 11,250 | 11,250 |
| Other reserves | 49,268 | 43,931 |
| Profit (loss) for the period | 2,939 | 4,671 |
| Total Shareholders' Equity of the Group | 63,457 | 59,852 |
| Minority interests | -328 | -276 |
| TOTAL SHAREHOLDERS' EQUITY 16 |
63,129 | 59,576 |
| Non-current liabilities | ||
| Non-current bank loans 17 |
54,836 | 23,055 |
| Other non-current financial liabilities 18 |
0 | 24,427 |
| Non-current liabilities for rights of use 19 |
4,991 | 0 |
| Provisions for risks and charges 20 |
5,000 | 5,443 |
| Defined benefit plans for employees 21 |
1,707 | 1,646 |
| Deferred tax liabilities 22 |
419 | 339 |
| Total non-current liabilities | 66,953 | 54,910 |
| Current liabilities | ||
| Bank financing and short-term loans 23 |
23,518 | 16,203 |
| Other current financial liabilities 24 |
29,483 | 4,262 |
| Current liabilities for rights of use 25 |
1,989 | 0 |
| Trade payables 26 |
59,231 | 55,166 |
| Tax liabilities 27 |
2,471 | 2,385 |
| Other current liabilities 28 |
5,389 | 5,598 |
| Total current liabilities | 122,081 | 83,614 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 252,163 | 198,100 |
| (Thousands of Euro) | |||
|---|---|---|---|
| CONSOLIDATED INCOME STATEMENT | Notes | 30/06/2019 | 30/06/2018 |
| Revenues from sales and services | 29 | 102,035 | 97,296 |
| Other revenue and income | 30 | 229 | 163 |
| Cost of raw materials, consumables and goods and change in inventories | 31 | -54,346 | -46,580 |
| Costs for services and use of third party assets | 32 | -19,097 | -21,816 |
| Personnel costs | 33 | -14,237 | -14,981 |
| Allocations, write-downs and other operating expenses | 34 | -1,312 | -1,399 |
| Gross operating profit | 13,272 | 12,683 | |
| Amortisation, depreciation and impairment | 35 | -6,265 | -5,223 |
| Net operating profit | 7,007 | 7,460 | |
| Financial income | 36 | 49 | 77 |
| Financial expenses | 37 | -2,373 | -1,924 |
| Exchange gains (losses) | 38 | -253 | -1,035 |
| Gain (loss) on equity investments valued using the equity method | 39 | 97 | -1,152 |
| Profit (loss) before tax | 4,527 | 3,426 | |
| Current and deferred taxes | 40 | -1,641 | -1,734 |
| Net profit (loss) for the Group and minority interests, including: | 2,886 | 1,692 | |
| Minority interests | -53 | -93 | |
| Net profit (loss) for the Group | 2,939 | 1,785 | |
| Basic earnings (loss) per share (calculated on 112,500,000 shares) | 41 | 0.0261 | 0.0159 |
| Diluted earnings (loss) per share | 41 | 0.0261 | 0.0159 |
| (Thousands of Euro) | |||
|---|---|---|---|
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | Notes | 30/06/2019 | 30/06/2018 |
| Net profit (loss) for the Group and minority interests: | 2,886 | 1,692 | |
| Profits/losses that will not be subsequently reclassified in the income statement | |||
| Remeasurement of employee defined benefit plans (IAS 19) | 18 | -45 | 6 |
| Total profits/losses that will not be subsequently reclassified in the income statement |
-45 | 6 | |
| Profits/losses that could subsequently be reclassified in the income statement | |||
| Valuation of investments with the equity method | 7 | 621 | 0 |
| Exchange rate differences from conversion of foreign operations | 91 | -1,083 | |
| Total profits/losses that could subsequently be reclassified in the income statement |
712 | -1,083 | |
| Profits/losses recorded directly in Shareholders' Equity after tax effects | 667 | -1,077 | |
| Total consolidated income statement for the period | 3,553 | 615 | |
| Profit (loss) for Shareholders of the Parent Company | 3,605 | 672 | |
| Minority interests | -52 | -57 | |
| (Thousands of Euro) | ||
|---|---|---|
| CONSOLIDATED CASH FLOW STATEMENT | 30/06/2019 | 30/06/2018 |
| Financial flows deriving from operating activities | ||
| Pre-tax profit (loss) for the period | 4,527 | 3,426 |
| Adjustments for: | ||
| Depreciation of property, plant and equipment | 2,049 | 2,354 |
| Amortisation of intangible assets | 2,974 | 2,869 |
| Depreciation of right-of-use assets | 1,242 | 0 |
| Loss (profit) from disposal of tangible and intangible assets | -28 | -37 |
| Impairment loss on receivables | 9 | 83 |
| Net financial expenses | 2,577 | 2,882 |
| Profit (loss) attributable to investments valued using equity method | -97 | 1,152 |
| 13,253 | 12,729 | |
| Changes in: | ||
| Inventories | -249 | -2,441 |
| Trade receivables and other receivables | -8,561 | -7,130 |
| Trade payables and other payables | 3,823 | 4,385 |
| Provisions and employee benefits | -427 | -3,854 |
| Cash generated from operations | 7,839 | 3,689 |
| Interest paid | -2,128 | -1,841 |
| Interest received | 14 | 37 |
| Income taxes paid | -1,087 | -495 |
| Net cash generated from operating activities | 4,638 | 1,390 |
| Financial flows from investments | ||
| Proceeds from the sale of property, plant and equipment | 106 | 95 |
| Purchase of property, plant and equipment | -1,281 | -1,386 |
| Purchase of intangible assets | -341 | -100 |
| Development expenditure | -2,641 | -1,143 |
| Net cash absorbed by investment activities | -4,157 | -2,534 |
| Free Cash Flow | 481 | -1,144 |
| Financial flows from financing activities | ||
| Disbursements (reimbursements) of loans to associates | -2,760 | 0 |
| Disbursements (reimbursements) of medium/long-term loans | 35,815 | -1,028 |
| Change in short-term bank debts | 3,895 | 8,673 |
| Repayment of leases IFRS 16 | -1,248 | 0 |
| Net cash generated (absorbed) by financing activities | 35,702 | 7,645 |
| Net increase (decrease) in cash and cash equivalents | 36,183 | 6,501 |
| Cash and cash equivalents as at 1 January | 15,075 | 17,779 |
| Effect of exchange rate fluctuation on cash and cash equivalents | 90 | -1,092 |
| Closing cash and cash equivalents | 51,348 | 23,188 |
| (Thousands of Euro) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Share capital |
Statutory Reserve |
Extraordinary and Other Reserves |
Share Premium Reserve |
Future share capital increase contributions |
Result for the year |
Group Shareholders' Equity |
Profit (Loss) attributable to minority interests |
Capital and reserves attributable to minority interests |
Total Shareholders' Equity |
|
| Balance at 31 December 2017 |
11,250 | 2,250 | 148 | 30,718 | 8,867 | 4,139 | 57,372 | -437 | -232 | 56,703 |
| Effect of IFRS 9 application |
-321 | -321 | -321 | |||||||
| Balance as at 1 January 2018 |
11,250 | 2,250 | -173 | 30,718 | 8,867 | 4,139 | 57,051 | -437 | -232 | 56,382 |
| Result for the year | 1,785 | 1,785 | -93 | 1,692 | ||||||
| Actuarial profits/losses (IAS 19) |
6 | 6 | 6 | |||||||
| Translation difference |
-1,119 | -1,119 | 36 | -1,083 | ||||||
| Total overall profits/losses |
0 | 0 | -1,113 | 0 | 0 | 1,785 | 672 | -93 | 36 | 615 |
| Other changes | -7 | -7 | -1 | -8 | ||||||
| Allocation of profit | 4,139 | -4,139 | 0 | 437 | -437 | 0 | ||||
| Balance as at 30 June 2018 |
11,250 | 2,250 | 2,846 | 30,718 | 8,867 | 1,785 | 57,716 | -93 | -634 | 56,989 |
| Balance as at 31 December 2018 |
11,250 | 2,250 | 2,096 | 30,718 | 8,867 | 4,671 | 59,852 | -138 | -138 | 59,576 |
| Effect of IFRS 16 application |
0 | 0 | 0 | |||||||
| Balance as at 1 January 2019 |
11,250 | 2,250 | 2,096 | 30,718 | 8,867 | 4,671 | 59,852 | -138 | -138 | 59,576 |
| Result for the year | 2,939 | 2,939 | -53 | 2,886 | ||||||
| Actuarial profits/losses (IAS 19) |
-45 | -45 | -45 | |||||||
| Translation difference |
90 | 90 | 1 | 91 | ||||||
| Valuation of investments using equity method |
621 | 621 | 621 | |||||||
| Total overall profits/losses |
0 | 0 | 666 | 0 | 0 | 2,939 | 3,605 | -53 | 1 | 3,553 |
| Other changes | 0 | 0 | ||||||||
| Allocation of profit | 4,671 | -4,671 | 0 | 138 | -138 | 0 | ||||
| Balance as at 30 June 2019 |
11,250 | 2,250 | 7,433 | 30,718 | 8,867 | 2,939 | 63,457 | -53 | -275 | 63,129 |
The Landi Renzo Group (also "the Group") has been active in the motor propulsion fuel supply system sector for more than sixty years: designing, producing, installing and selling environmentally-friendly LPG and CNG fuel supply systems ("Automotive" segment), and compressors for fuel stations through the SAFE and IMW trademarks ("Gas Distribution and Compressed Natural Gas systems" segment). The Group manages all phases of the process that leads to the production and sale of automotive fuel supply systems; it sells both to the main automobile manufacturers at a world-wide level (OEM channel) and to independent retailers and importers (After Market channel).
It should be noted that the structure of the Landi Renzo Group at 30 June 2019 has not changed compared with 31 December 2018.
The Parent Company of the Landi Renzo Group is Landi Renzo S.p.A. with registered office in Cavriago (RE), Italy, listed in the FTSE Italia STAR segment of the Milan Stock Exchange.
These Condensed Half-Yearly Consolidated Financial Statements are subject to limited auditing by PricewaterhouseCoopers S.p.A.
The abbreviated half-yearly consolidated financial statements at 30 June 2019 have been prepared pursuant to art. 154-ter of Italian Legislative Decree 58/1998 "Consolidated Financial Law (Testo Unico della Finanza)", in accordance with the provisions of international accounting standards (IAS/IFRS) adopted by the European Union, and, in particular, those of IAS 34 "Interim Financial Reporting". As a partial exception to the provisions of IAS 34, this report provides detailed rather than summary tables in order to provide a clearer view of the economic-equity and financial dynamics over the six-month period. The explanatory notes are also presented in compliance with the information required by IAS 34 with the supplements considered useful for a clearer understanding of the half-yearly financial statements.
The Condensed Half-Yearly Consolidated Financial Statements at 30 June 2019, approved by the Board of Directors on 11 September 2019, must be read in conjunction with the Consolidated Annual Financial Statements at 31 December 2018.
The consolidation method for the financial statements of the group companies is specified below in these notes.
The valuation criteria used for the preparation of the consolidated financial statements for the six months ending 30 June 2019 are the same as those used for the consolidated financial statements at 31 December 2018.
In addition to the interim values of the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income at 30 June 2019, the balance sheet figures for the year ending 31 December 2018 and the income statement figures at 30 June 2018 are included in the tables below for purposes of comparison.
As described in more detail below in this report, given the application as of 1 January 2019 of IFRS 16 - Leases, the income statement and balance sheet data at 30 June 2019 are not directly comparable with those from 31 December 2018 or with those relating to the same period of the previous year. The application of this new international accounting standard also required a change in the structure of the cash flow statement.
The functional and reporting currency is the Euro. Figures in the statements and tables in this half-yearly financial report are in thousands of Euro, unless specified otherwise.
The accounting standards adopted in preparing the condensed half-yearly consolidated financial statements at 30 June 2019 are consistent with those adopted for the preparation of the consolidated financial statements at 31 December 2018, with the exception of the adoption of the new accounting standards, amendments, improvements and interpretations applicable as of 1 January 2019 listed below.
| EU endorsement |
|
|---|---|
| regulation | Description |
| Regulation (EU) |
IFRS 16 Leases: the new standard, which replaces IAS 17, provides a revised definition of a |
| 2017/1986 | lease and introduces a criterion based on control (right of use) of an asset in order to |
| distinguish between leasing contracts and service contracts, identifying the following as | |
| discriminating factors: | |
| - the identification of the asset, |
|
| - the right to substitution of the asset, |
|
| - the right to obtain substantially all the economic benefits from the use of the asset and |
|
| - the right to direct the use of the asset underlying the contract. |
|
| The standard establishes a unique leasing contract recognition and assessment model for | |
| the lessee, which provides for the entry of the asset that is subject to the lease, including | |
| operating, in the assets set-off by a financial debt, with the possibility of not recognising a | |
| contract as a lease if the lease term is 12 months or assets of modest value. | |
| Regulation (EU) |
Annual Improvements to IFRS Standards 2014-2016 Cycle: amending IFRS 1, IFRS 12 and |
| 2018/182 | IAS 28. |
| Regulation (EU) |
IFRS 2 Classification and Measurement of Share-based Payment Transactions aims to |
| 2018/289 | clarify the accounting of certain types of share-based payment transactions. |
| Regulation (EU) | Amendments to IAS 40 regarding transfers of investment property. The amendment |
| 2018/400 | includes the following changes: |
| i) Paragraph 57 of IAS 40 is amended to state that an entity must transfer a property |
|
| from, or to, the real estate investment category only when there is evidence of a | |
| change in use. | |
| ii) The list of examples indicated in paragraph 57 (a) – (d) is redefined as a non |
|
| exhaustive list. | |
| These amendments do not apply to the Group's consolidated financial statements. | |
| Regulation (EU) | The amendments to IFRS 9 Financial Instruments aim to allow the measurement at |
| 2018/498 | amortised cost or fair value through other comprehensive income of financial assets |
| characterised by an early repayment option with the so-called "negative compensation". | |
|---|---|
| These amendments do not apply to the Group's consolidated financial statements. | |
| Regulation (EU) | IFRIC 22 — Foreign Currency Transactions and Advance Consideration covers foreign |
| 2018/519 | currency transactions if an entity recognises a non-monetary asset or liability from the |
| payment or receipt of an advance before the entity recognises the relative asset, cost or | |
| revenue. The provision must not be applied to taxes, insurance or reinsurance contracts. | |
| This IFRIC does not apply to the Group's consolidated financial statements. | |
| Regulation (EU) | The interpretation IFRIC 23 – Uncertainty over Income Tax Treatments provides indications |
| 2018/1595 | on how to present uncertainty of the tax treatment of a given phenomenon in accounting for |
| income tax. |
The accounting principles and modifications to the accounting principles described above, with the exception of IFRS 16, have not had significant effects on the Group's financial statements.
The Group has applied IFRS 16 - Leases as of 1 January 2019 adopting the modified retrospective approach, recognising the lease liability at the present value of the remaining payments due, discounted using the marginal rate of financing at the date of initial application (if the implicit interest rate is unavailable) and enrolling the right of use asset at an amount equal to the lease liability, adjusted for the amount of any accruals and deferrals relating to the lease. The use of this methodology did not entail the restatement of comparative information and did not have any effects on the Group's shareholders' equity.
The Group has exercised the right not to apply the new standard to the following contracts:
The Group instead did not rely on the practical expedient provided by the standard which makes it possible not to apply the new accounting to leases with a duration of less than 12 months as of the date of initial application (1 January 2019).
The application of this standard entailed the recognition in the financial statements at 1 January 2019 of right-of-use assets of Euro 4,943 thousand. Below are the effects deriving from the initial application of IFRS 16 on the consolidated statement of financial position at 1 January 2019.
| (Thousands of Euro) | |||
|---|---|---|---|
| ASSETS | 01/01/2019 | FTA IFRS 16 | 01/01/2019 restated |
| Non-current assets | |||
| Land, property, plant, machinery and equipment | 12,745 | 12,745 | |
| Development expenditure | 6,932 | 6,932 | |
| Goodwill | 30,094 | 30,094 | |
| Other intangible assets with finite useful lives | 14,039 | 14,039 | |
| Right-of-use assets | 0 | 4,943 | 4,943 |
| Equity investments valued using the equity method | 22,292 | 22,292 | |
| Other non-current financial assets | 352 | 352 | |
| Other non-current assets | 3,991 | 3,991 | |
| Deferred tax assets | 10,538 | 10,538 | |
| Total non-current assets | 100,983 | 4,943 | 105,926 |
| Current assets | |||
| Trade receivables | 35,131 | 35,131 | |
| Inventories | 38,895 | 38,895 | |
| Other receivables and current assets | 8,016 | 8,016 | |
| Cash and cash equivalents | 15,075 | 15,075 | |
| Total current assets | 97,117 | 0 | 97,117 |
| TOTAL ASSETS | 198,100 | 4,943 | 203,043 |
| (Thousands of Euro) | |||
| SHAREHOLDERS' EQUITY AND LIABILITIES | 01/01/2019 | FTA IFRS 16 | 01/01/2019 restated |
| Shareholders' Equity | |||
| Share capital | 11,250 | 11,250 | |
| Other reserves | 43,931 | 43,931 | |
| Profit (loss) for the period | 4,671 | 4,671 | |
| Total Shareholders' Equity of the Group | 59,852 | 0 | 59,852 |
| Minority interests | -276 | -276 | |
| TOTAL SHAREHOLDERS' EQUITY | 59,576 | 0 | 59,576 |
| Non-current liabilities | |||
| Non-current bank loans | 23,055 | 23,055 | |
| Other non-current financial liabilities | 24,427 | 24,427 | |
| Non-current liabilities for rights of use | 0 | 3,207 | 3,207 |
| Provisions for risks and charges | 5,443 | 5,443 | |
| Defined benefit plans for employees | 1,646 | 1,646 | |
| Deferred tax liabilities | 339 | 339 | |
| Total non-current liabilities | 54,910 | 3,207 | 58,117 |
| Current liabilities | |||
| Bank financing and short-term loans | 16,203 | 16,203 | |
| Other current financial liabilities | 4,262 | 4,262 | |
| Current liabilities for rights of use | 0 | 1,736 | 1,736 |
| Trade payables | |||
| 55,166 | 55,166 | ||
| Tax liabilities | 2,385 | 2,385 | |
| Other current liabilities | 5,598 | 5,598 | |
| Total current liabilities | 83,614 | 1,736 | 85,350 |
Below we show the effects on the consolidated income statement of the Group at 30 June 2019.
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| 30/06/2019 | 30/06/2018 | |||
| Landi Renzo Consolidated |
IFRS 16 Adjustment |
Landi Renzo Consolidated with standards remaining the same |
Landi Renzo Consolidated |
|
| Revenues from sales and services | 102,035 | 102,035 | 97,296 | |
| Other revenues and income | 229 | 229 | 163 | |
| Operating costs | -88,992 | -1,362 | -90,354 | -84,776 |
| Gross operating profit | 13,272 | -1,362 | 11,910 | 12,683 |
| Amortisation, depreciation and impairment |
-6,265 | 1,242 | -5,023 | -5,223 |
| Net operating profit | 7,007 | -120 | 6,887 | 7,460 |
| Financial income (charges) and exchange rate differences |
-2,577 | 70 | -2,507 | -2,882 |
| Gain (loss) on equity investments valued using the equity method |
97 | 97 | -1,152 | |
| Profit (loss) before tax | 4,527 | -50 | 4,477 | 3,426 |
| Current and deferred taxes | -1,641 | 13 | -1,628 | -1,734 |
| Net profit (loss) for the Group and minority interests, including: |
2,886 | -37 | 2,849 | 1,692 |
| Minority interests | -53 | -53 | -93 | |
| Net profit (loss) for the Group | 2,939 | -37 | 2,902 | 1,785 |
The following table lists the new international accounting standards, or the amendments of standards and interpretations already in force, which must begin being applied from 1 January 2020 or thereafter.
| EU endorsement regulation |
Description |
|---|---|
| 12 October 2017 | The IASB published amendments to IAS 28 – Investments in Associates and Joint Ventures |
| to facilitate implementation. The amendments aim to clarify that IFRS 9 applies to long-term | |
| receivables from an associate company or joint venture which, substantially, are part of the | |
| net investment in the associate company or joint venture. | |
| The amendments will come into force on 1 January 2020. | |
| 12 December 2017 | The IASB published the Annual Improvements to IFRSs 2015-2017 Cycle, including |
| amendments to IAS 12 – Income Taxes, IAS 23 – Borrowing Costs, IFRS 3 – Business | |
| Combinations and IFRS 11 – Joint Arrangements. | |
| The amendments will come into force on 1 January 2020. | |
| 7 February 2018 | The IASB published amendments to IAS 19 – Plan Amendment, Curtailment or Settlement, |
| which clarifies the methodology for determining the cost relating to current labour supply and | |
| net interest when there is a change to the defined benefit plan. The amendments are | |
| applicable starting from the financial years starting from 1 January 2020. Early application is | |
| permitted. |
The Group is evaluating the effects that the application of such standards may have on its financial statements. The Group did not exercise the option to apply them early.
During the year, the IASB made amendments to several international accounting standards issued previously and published new international accounting standards, for which the approval process has not yet been completed.
| Date | IAS Publications |
|---|---|
| 30 January 2014 | IFRS 14 entered into force on 1 January 2016, but the European Commission decided to |
| suspend the endorsement process pending the new accounting standard on rate-regulated | |
| activities. | |
| IFRS 14 allows only entities which adopt IFRS for the first time to continue to recognise rate | |
| regulation balances in accordance with the previous accounting standards adopted. To | |
| improve comparability with entities that already apply IFRS and do not recognise such | |
| balances, the standard requires the effect of rate regulation to be presented separately from | |
| other items. | |
| 18 May 2017 | The IASB published IFRS 17 – Insurance Contracts. The standard aims to improve |
| understanding by investors, and others, of the exposure to risk, profitability and the financial | |
| position of insurers. IFRS 17 replaces IFRS 4, issued in 2004 as an interim Standard, and | |
| will come into force on 1 January 2021, but prior application is permitted. | |
| This standard is not applicable to the Group. | |
| 22 October 2018 | The IASB published the amendment to IFRS 3 Business Combinations with a view to |
| helping to determine whether a transaction is an acquisition of a business or a group of | |
| assets which does not qualify as a business pursuant to IFRS 3. | |
| The changes will be applied to acquisitions subsequent to 1 January 2020. However, early | |
| application is permitted. | |
| 31 October 2018 | The IASB published the amendments to IAS 1 and IAS 8 which aim to clarify the definition |
| of "material" to help companies decide whether information needs to be included in the | |
| financial statements. | |
| The amendments apply as of 1 January 2020. However, early application is permitted. |
The Group is evaluating the effects that the application of such standards may have on its financial statements.
The preparation of the Condensed Half-Yearly Consolidated Financial Statements requires the directors to apply accounting standards and methods that are sometimes based on difficult and subjective assessments and estimates derived from past experience and based on assumptions that are considered reasonable and realistic given the circumstances. Application of these estimates and assumptions affects the amounts presented in the financial statements, such as the Consolidated Statement of Financial Position, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Cash Flow Statement, and in disclosures provided. Estimates are used in recognizing goodwill, impairment of fixed assets, development costs, taxes, provisions for bad debts and inventories write-down, employee benefits and other provisions. The estimates and assumptions are reviewed periodically and the effects of each
variation are immediately reflected in the Income Statement.
However, some valuation processes, especially the more complex ones such as establishing any loss in value of noncurrent assets, are normally carried out to a fuller extent only during the preparation of the annual financial statements, when all the necessary information is available, except for those cases in which there are impairment indicators that require an immediate assessment of possible losses in value.
The Group performs activities that do not on the whole present significant seasonal or cyclical variations in total sales over the course of the year, except for the signing of new supply contracts on the OEM channel which may involve planned and differing delivery schedules in the individual quarters.
The financial statements in the currency of the foreign subsidiaries are converted into the accounting currency, adopting the half-year end exchange rate for the consolidated Statement of Financial Position and the average exchange rate over the six months for the Consolidated Income Statement. The conversion differences deriving from the adjustment of the opening Equity according to the current exchange rates at the end of the period, and those due to the different method used for conversion of the result for the period, are recorded in the Statement of Comprehensive Income and classified among other reserves.
The following table specifies the exchange rates used for the conversion of financial statements expressed in currencies other than the accounting currency.
| Exchange rate (Currency against the Euro) |
At 30/06/2019 | Ave. H1 2019 | At 31/12/2018 | Average 2018 | At 30/06/2018 | Ave. H1 2018 |
|---|---|---|---|---|---|---|
| Real – Brazil | 4.351 | 4.342 | 4.444 | 4.308 | 4.488 | 4.142 |
| Renminbi – China | 7.819 | 7.668 | 7.875 | 7.808 | 7.717 | 7.709 |
| Rial – Iran | 47,796.000 | 47,450.936 | 48,090.000 | 48,209.878 | 49,651.000 | 47,664.675 |
| Rupee – Pakistan | 184.759 | 162.001 | 160.115 | 143.282 | 141.907 | 137.971 |
| Zloty – Poland | 4.250 | 4.292 | 4.301 | 4.261 | 4.373 | 4.221 |
| Leu – Romania | 4.734 | 4.742 | 4.663 | 4.654 | 4.663 | 4.654 |
| Dollar - US | 1.138 | 1.130 | 1.145 | 1.181 | 1.166 | 1.210 |
| Peso - Argentina | 48.568 | 46.800 | 43.159 | 32.909 | 32.705 | 26.038 |
| Rupee - India | 78.524 | 79.124 | 79.730 | 80.733 | 79.813 | 79.490 |
The scope of consolidation includes the Parent Company Landi Renzo S.p.A. and the companies in which it holds a direct or indirect controlling stake according to IFRS. There has been no change to the scope of consolidation at 30 June 2019 compared with 31 December 2018.
The list of equity investments included in the scope of consolidation and the relative consolidation method is provided below.
| Description | Registered Office | Share capital |
% stake at 30 June 2019 Direct investment |
Indirect investme nt |
Note s |
|
|---|---|---|---|---|---|---|
| Parent Company | ||||||
| Landi Renzo S.p.A. | Cavriago (RE) - Italy | EUR | 11,250,000 | Parent Company |
||
| Companies consolidated using the line-by-line method | ||||||
| Landi International B.V. | Utrecht (The Netherlands) | EUR | 18,151 | 100.00% | ||
| Landi Renzo Polska Sp.Zo.O. | Warsaw (Poland) | PLN | 50,000 | 100.00% | (1) | |
| LR Industria e Comercio Ltda | Espirito Santo (Brazil) | BRL | 4,320,000 | 99.99% | ||
| Beijing Landi Renzo Autogas System Co. Ltd |
Beijing (China) | USD | 2,600,000 | 100.00% | ||
| L.R. Pak (Pvt) Limited | Karachi (Pakistan) | PKR | 75,000,000 | 70.00% | ||
| Landi Renzo Pars Private Joint Stock Company |
Tehran (Iran) | IRR | 55,914,800,00 0 |
99.99% | ||
| Landi Renzo RO srl | Bucharest (Romania) | RON | 20,890 | 100.00% | ||
| Landi Renzo USA Corporation | Wilmington - DE (USA) | USD | 3,067,131 | 100.00% | ||
| AEB America S.r.l. | Buenos Aires (Argentina) | ARS | 2,030,220 | 96.00% | ||
| Lovato Gas S.p.A. | Vicenza (Italy) | EUR | 120,000 | 100.00% | ||
| Officine Lovato Private Limited | Mumbai (India) | INR | 19,091,430 | 74.00% | (2) | |
| Associates and subsidiaries consolidated using the equity method | ||||||
| SAFE&CEC S.r.l. | S. Giovanni in Persiceto (Bologna, Italy) |
EUR | 2,500,000 | 51.00% | (3) | |
| Krishna Landi Renzo India Private Ltd Held |
Gurugram - Haryana (India) | INR | 118,000,000 | 51.00% | (4) | |
| Other minor companies | ||||||
| Landi Renzo VE.CA. | Caracas (Venezuela) | VEF | 2,035,220 | 100.00% | (5) | |
| Landi Renzo Argentina S.r.l. - in liquidation |
Buenos Aires (Argentina) | ARS | 1,378,000 | 96.00% | (5) | |
| Lovato do Brasil Ind Com de Equipamentos para Gas Ltda |
Curitiba (Brazil) | BRL | 100,000 | 100.00% | (5) | |
| EFI Avtosanoat-Landi Renzo LLC |
Navoiy Region (Uzbekistan) | USD | 800,000 | 50.00% | (5) |
(1) Held indirectly through Landi International B.V.
(2) Held by Lovato Gas S.p.A.
(3) Company joint venture that controls 100% of SAFE S.p.A. and 100% of IMW Industries Ltd and its subsidiaries
(4) Company joint venture
(5) Companies not consolidated as a result of their irrelevance
The changes reported hereafter have been calculated on the balances at 31 December 2018 as regards balance sheet items and on the values of the first half of 2018 as regards income statement items.
Following the application as of 1 January 2019 of IFRS 16 - Leases, the income statement and balance sheet data at 30 June 2019 are not directly comparable with those from 31 December 2018 or with those relating to the same period of the previous year.
During the first six months of 2019 the Group's direct operations were only in the Automotive segment.
The Group operates indirectly in the "Gas Distribution and Compressed Natural Gas" segment through the joint venture SAFE & CEC S.r.l. which, in accordance with the contractual governance system, meets the joint control requirements as stipulated by IFRS 11, and is consolidated according to the equity method.
Consolidated revenues recorded in the first six months of 2019 by the Landi Renzo Group are divided by geographical area as follows:
| (Thousands of Euro) | ||||||
|---|---|---|---|---|---|---|
| Geographical distribution of revenues | At 30/06/2019 | % of revenues |
At 30/06/2018 | % of revenues |
Change | % |
| Italy | 19,740 | 19.3% | 18,960 | 19.5% | 780 | 4.1% |
| Europe (excluding Italy) | 49,709 | 48.7% | 40,953 | 42.1% | 8,756 | 21.4% |
| America | 13,440 | 13.1% | 15,061 | 15.4% | -1,621 | -10.8% |
| Asia and Rest of the World | 19,146 | 18.9% | 22,322 | 23.0% | -3,176 | -14.2% |
| Total | 102,035 | 100.0% | 97,296 | 100.0% | 4,739 | 4.9% |
Tangible assets showed an overall net decrease of Euro 825 thousand, decreasing from Euro 12,745 thousand at 31 December 2018 to Euro 11,920 thousand at 30 June 2019.
The following is an analysis of changes in "Land, property, plant, machinery and other equipment" that took place during the period:
| (Thousands of Euro) | ||||||
|---|---|---|---|---|---|---|
| Net value | 31/12/2018 | Acquisitions | (Disposals) | Depreciation rates |
Other changes |
Net Value at 30/06/2019 |
| Land and buildings | 811 | 4 | 0 | -121 | -25 | 669 |
| Plant and machinery | 6,134 | 182 | 0 | -810 | -186 | 5,320 |
| Industrial and commercial equipment |
2,968 | 414 | -6 | -712 | -56 | 2,608 |
| Other tangible assets | 1,850 | 233 | -72 | -406 | 163 | 1,768 |
| Assets in progress and payments on account |
982 | 448 | 0 | 0 | 125 | 1,555 |
| Total | 12,745 | 1,281 | -78 | -2,049 | 21 | 11,920 |
The main increases in tangible assets during the six-month period relate to:
The main decreases in tangible assets for the first six months of 2019, totalling Euro 78 thousand, relate to disposals of industrial vehicles, equipment and furnishings, which did not have significant impacts on the income statement.
The significant amount with respect to the previous year in the item Assets in progress and advance payments, totalling Euro 1,555 thousand as at 30 June 2019 (Euro 982 thousand as at 31 December 2018), primarily includes investments made by the Parent Company in several new work benches for the specific production required to create new products for an important OEM customer. This machinery is currently in the completion phase and is expected to be used in the production process in the course of the coming months.
The column "Other changes" includes primarily conversion differences on assets held by companies abroad.
This item breaks down as follows:
| (Thousands of Euro) | |||||
|---|---|---|---|---|---|
| Net Value at 31/12/2018 |
Increases | Depreciation and write downs |
Other changes | Net Value at 30/06/2019 |
|
| Development expenditure | 6,932 | 2,641 | -1,974 | 0 | 7,599 |
Development costs amounted to Euro 7,599 thousand (Euro 6,932 thousand at 31 December 2018) and include the
costs incurred by the Group both for internal personnel and for services supplied by third parties, for projects meeting the requirements of IAS 38 to be capitalised.
As illustrated in the Interim Report on Operating Performance, indeed, at global level the Automotive segment is experiencing a historic phase of renewal and development due to the increasing attention placed on environmental issues, resulting in increasingly stringent greenhouse gas emissions limits imposed by a growing number of countries. In this context, the Group's management has identified significant and appealing opportunities for gas-mobility, especially in the Mid and Heavy Duty segment, but also in the sector Passenger car and Light commercial vehicles (LCV), to support the main automotive manufacturers in completing their "green" product range. In order to take the most advantage of these opportunities, as set forth in the strategic plan the Group has significantly increased its new product development activities for the OEM, with a particular focus on Mid and Heavy Duty vehicles.
Costs capitalised during the first half of 2019 totalled Euro 2,641 thousand (Euro 1,143 thousand at 30 June 2018) and refer mainly to the capitalisation of costs of development projects for new products for the OEM and After Market channel, the value of which is expected to be recovered through revenue flows generated in future years.
It is expected that new product development activities will continue during the second half of 2019.
The increases for the period relate to development projects in progress at 30 June 2019, for which the grounds for recoverability have been verified.
The Goodwill item totalled Euro 30,094 thousand, unchanged compared with 31 December 2018.
| Total | 30,094 | 30,094 | 0 |
|---|---|---|---|
| Automotive | 30,094 | 30,094 | 0 |
| CGU | 30/06/2019 | 31/12/2018 | Change |
| (Thousands of Euro) |
During the six months there were no events or circumstances that indicate possible impairment in relation to the goodwill mentioned above. In particular, the half-yearly results of the Group are in line with the budget.
Please also note that at the reporting date of these condensed half-yearly consolidated financial statements, the company's market capitalisation is significantly higher than the value of the consolidated shareholders' equity, further confirming the absence of indicators of possible impairment.
This item breaks down as follows:
| (Thousands of Euro) | |||||
|---|---|---|---|---|---|
| Net Value at 31/12/2018 |
Increases | Amortisation rates |
Other changes | Net Value at 30/06/2019 |
|
| Other intangible assets with finite useful lives |
14,039 | 341 | -1,000 | 6 | 13,386 |
Other intangible assets with finite useful lives, equal to Euro 13,386 thousand (Euro 14,039 thousand at 31 December
2018), predominantly include Rights to use intellectual property and trademarks owned by the Group, in particular the values of the Lovato (Euro 6,810 thousand), A.E.B. (Euro 5,052 thousand) and other minor brands, expressed at the fair value at the time of purchase, defined on the basis of valuations made by independent professionals, and amortised over 18 years, a period considered representative of the useful life of these brands.
During the six months there were no events or circumstances that indicate possible impairment in relation to the other intangible assets mentioned above.
This item breaks down as follows:
| (Thousands of Euro) | ||||||
|---|---|---|---|---|---|---|
| Net Value at 31/12/2018 |
FTA of IFRS 16 01/01/2019 |
Increases | Depreciation rates |
Other changes |
Net Value at 30/06/2019 |
|
| Buildings | 0 | 4,553 | 4,139 | -1,117 | -1,149 | 6,425 |
| Motor vehicles | 0 | 390 | 339 | -125 | 0 | 604 |
| Total | 0 | 4,943 | 4,478 | -1,242 | -1,149 | 7,029 |
Right-of-use assets recognised on first time adoption of the new accounting standard IFRS 16 - Leases on 1 January 2019 amounted to Euro 4,943 thousand.
The significant increases during the half-year of right-of-use assets on buildings are linked to the renewal with the related company Gireimm S.r.l. of the lease agreement on the property used as the operating headquarters of Landi Renzo S.p.A., the contractual expiry of which was scheduled for 10 May 2019. This agreement, which has a duration of 5 years, renewable only by written agreement between the parties, entailed mainly an increase in right-of-use assets and the relative liabilities of Euro 3,841 thousand.
The other changes are primarily linked to the agreement entered into by Landi Renzo S.p.A. and the related company Gireimm S.r.l. for the early termination without penalties of the lease agreement on the portion of the property located in Cavriago named New Technical Centre, no longer necessary to the Group. Following the termination of this agreement, the right of use assets declined by Euro 1,149 thousand.
This item, equal to Euro 23,011 thousand, includes the value of the Joint Venture Krishna Landi Renzo Prv Ltd, and SAFE & CEC S.r.l., assessed using the equity method.
| (Thousands of Euro) | ||||
|---|---|---|---|---|
| Description | 31/12/2018 | Increases | Decreases | 30/06/2019 |
| Krishna Landi Renzo India Private Ltd Held | 384 | 298 | 0 | 682 |
| SAFE & CEC S.r.l. | 21,908 | 621 | -200 | 22,329 |
| Total | 22,292 | 919 | -200 | 23,011 |
In particular:
This item breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Other non-current financial assets | 30/06/2019 | 31/12/2018 | Change |
| EFI Avtosanoat-Landi Renzo LLC | 172 | 172 | 0 |
| Landi Renzo Argentina | 5 | 5 | 0 |
| Guarantee deposits | 199 | 167 | 32 |
| Other financial assets | 21 | 8 | 14 |
| Total | 397 | 352 | 46 |
Other non-current financial assets, totalling Euro 397 thousand (Euro 352 thousand at 31 December 2018) mainly include the value of the equity investment in the Joint Venture EFI Avtosanoat Landi Renzo – LLC of Euro 172 thousand and not consolidated because it is not significant, as well as guarantee deposits of Euro 199 thousand and other assets.
Other non-current assets, totalling Euro 3,991 thousand as at 31 December 2018, include the portion beyond the financial year of the receivables from AVL Italia S.r.l. regarding the sale of the company branch relating to the laboratory management part of the Technical Centre. This contract stipulates the receipt of 10 annual instalments and the charging of interests on the residual receivables at the end of each financial year.
This item is shown in detail below (thousands of Euro):
| Offsettable deferred tax assets and liabilities | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Deferred tax assets | 13,201 | 14,253 | -1,052 |
| Deferred tax liabilities | -3,294 | -3,715 | 421 |
| Total net deferred tax assets | 9,907 | 10,538 | -631 |
The following table shows the values of the deferred tax assets and liabilities and their movements from 31 December 2018 to 30 June 2019:
| Deferred tax assets | Deferred tax assets 31/12/2018 |
Uses | Write downs |
Temporary differences |
Other changes |
Deferred tax assets 30/06/2019 |
|---|---|---|---|---|---|---|
| Goodwill and flat-rate tax | 1,237 | -292 | 945 | |||
| Temporary differences | 3,155 | -406 | 392 | 3,141 | ||
| Other deferred tax assets | 986 | -155 | 831 | |||
| Tax losses | 8,875 | -591 | 8,284 | |||
| a) Total deferred tax assets | 14,253 | -1,444 | 0 | 392 | 0 | 13,201 |
| Deferred tax liabilities | Deferred tax liabilities 31/12/2018 |
Uses | Write downs |
Temporary differences |
Other changes |
Deferred tax liabilities 30/06/2019 |
| Other temporary differences | 0 | -38 | 60 | 22 | ||
| Intangible assets | 3,715 | -443 | 3,272 | |||
| b) Total deferred tax liabilities |
3,715 | -481 | 0 | 60 | 0 | 3,294 |
In particular, net deferred tax assets, totalling Euro 9,907 thousand (Euro 10,537 thousand at 31 December 2018), related to both temporary differences between the book values of assets and liabilities on the balance sheet and the corresponding tax values recognised, and to the losses from the national tax consolidation scheme deemed to be recoverable on the basis of the company plans, the realisation of which is subject to the intrinsic risk of nonimplementation inherent in its provisions.
At 30 June 2019 offsettable deferred tax liabilities totalled Euro 3,294 thousand (Euro 3,715 thousand at 31 December 2018), with a decrease of Euro 421 thousand, and are primarily related to temporary differences between the book values of certain tangible and intangible assets and the values recognised for tax purposes.
Trade receivables (including trade receivables due from related parties), stated net of the related depreciation fund, are analysed by geographical segment as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Trade receivables by geographical area | 30/06/2019 | 31/12/2018 | Change |
| Italy | 6,149 | 5,281 | 868 |
| Europe (excluding Italy) | 9,953 | 5,992 | 3,961 |
| America | 17,531 | 15,954 | 1,577 |
| Asia and Rest of the World | 16,077 | 14,303 | 1,774 |
| Provision for bad debts | -6,361 | -6,399 | 38 |
| Total | 43,349 | 35,131 | 8,218 |
Trade Receivables totalled Euro 43,349 thousand, net of the Provision for Bad Debts equal to Euro 6,361 thousand, compared with Euro 35,131 thousand at 31 December 2018.
Total transactions for the sale of trade receivables through factoring without recourse, for which the corresponding receivables were derecognised, amounted to Euro 26,925 thousand (Euro 25,391 thousand at 31 December 2018).
Receivables from related parties totalled Euro 2,786 thousand (Euro 2,605 thousand at 31 December 2018) and related to supplies of goods to the Joint Venture Krishna Landi Renzo India Private Ltd Held and to the Joint Venture EFI Avtosanoat-Landi Renzo LLC. All the related transactions are carried out at arm's length conditions.
The provision for bad debts, which was calculated using analytical criteria on the basis of the data available and, in general, of the historical trend, changed as follows:
| (Thousands of Euro) | |||||
|---|---|---|---|---|---|
| Provision for bad debts | 31/12/2018 | Allocation | Uses | Other changes |
30/06/2019 |
| Provision for bad debts | 6,399 | 9 | 0 | -47 | 6,361 |
The allocations made during the period, necessary in order to adjust the book value of the payables to their assumed recovery value, amounted to Euro 9 thousand.
The following table provides information on the maximum credit risk divided by past due credit classes, gross of the bad debt provision:
(Thousands of Euro)
| Past due | |||||
|---|---|---|---|---|---|
| Total | Not past due 0-30 days 30-60 days 60 and beyond | ||||
| Trade receivables at 30/06/2019 | 49,710 | 29,535 | 6,669 | 2,181 | 11,325 |
| Trade receivables at 31/12/2018 | 41,530 | 26,196 | 4,690 | 2,252 | 8,392 |
It is considered that the book value of the item Trade Receivables approximates the fair value thereof.
Checks performed by the company on these customers did not reveal any particular solvency risks not already covered by the related provision.
4.4.12. INVENTORIES
| (Thousands of Euro) | |||
|---|---|---|---|
| Inventories | 30/06/2019 | 31/12/2018 | Change |
| Raw materials and parts | 27,527 | 26,675 | 852 |
| Work in progress and semi-finished products | 10,154 | 9,896 | 258 |
| Finished products | 8,887 | 9,643 | -756 |
| Inventory write-down reserve | -7,424 | -7,319 | -105 |
| Total | 39,144 | 38,895 | 249 |
Closing inventories totalled Euro 39,144 thousand, net of the inventory write-down reserve of Euro 7,424 thousand, and they were essentially aligned with 31 December 2018. The Group estimated the size of the inventory write-down reserve so as to take account of the risks of technical obsolescence of inventories and to align the book value with their assumed recovery value. At 30 June 2019, this item totalled Euro 7,424 thousand, an increase of Euro 105 thousand compared with 31 December 2018.
This item breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Other receivables and current assets | 30/06/2019 | 31/12/2018 | Change |
| Tax assets | 3,547 | 4,704 | -1,157 |
| Receivables from others | 2,369 | 2,636 | -267 |
| Accruals and deferrals | 2,312 | 676 | 1,636 |
| Total | 8,228 | 8,016 | 212 |
Tax assets consist primarily of VAT recoverable from the tax authorities for Euro 1,942 thousand and income tax credit of Euro 1,605 thousand.
Receivables from others refer to payments on account, credit notes to be received and other receivables, and to the short-term receivables from AVL Italia S.r.l. relating to the aforementioned sale of the company branch for a total of Euro 570 thousand, as well as the related accrued interest.
Accruals and deferrals relate mainly to prepaid expenses for long-term business services, insurance premiums, leases, association fees and hardware /software maintenance fees paid in advance, in addition to costs incurred in advance on commercial projects which will have economic benefits starting from next year.
This item breaks down as follows:
| (Thousands of Euro) Current financial assets |
30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| SAFE S.p.A. loan | 2,760 | 0 | 2,760 |
| Total | 2,760 | 0 | 2,760 |
Following the signing of the new medium/long-term loan agreement, described below in this report, and the agreement for the early termination of the Optimisation Agreement, in which the Parent Company and SAFE S.p.A. participated, the Parent Company granted a loan maturing on 31 December 2019 to the latter so it could repay its medium/longterm loans falling under the above-mentioned Optimisation Agreement.
This loan is interest bearing and the relative rates were defined on the basis of current market values.
This item, consisting of the active balances of bank current accounts and cash in hand in both Euro and foreign currency, breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Cash and cash equivalents | 30/06/2019 | 31/12/2018 | Change |
| Bank and post office accounts | 51,310 | 15,033 | 36,277 |
| Cash | 38 | 42 | -4 |
| Total | 51,348 | 15,075 | 36,273 |
Cash and cash equivalents totalled Euro 51,348 thousand (Euro 15,075 thousand at 31 December 2018). The high amount of cash and cash equivalents at 30 June 2019 is primarily due to the above-mentioned refinancing agreement, which allowed the group to repay the existing medium/long-term loans falling under the Optimisation Agreement and the Bonded Loan in advance. While the existing medium/long-term loans were repaid, in accordance with the agreement with the lending banks, on 28 June 2019, the Bonded Loan was repaid on 1 July 2019, as set forth in the relative Regulation.
For analysis of the production and absorption of cash during the half-year, please refer to the Consolidated Statement of Cash Flows.
It is considered that the book value of the item "Cash and cash equivalents", not subject to a significant risk of changes in value, is aligned with its fair value at the date of the financial statements.
The credit risk relating to Cash and cash equivalents is therefore deemed to be limited since the deposits are split over primary national and international banking institutions.
The following table provides a breakdown of shareholders' equity items:
| (Thousands of Euro) | |||
|---|---|---|---|
| Shareholders' Equity | 30/06/2019 | 31/12/2018 | Change |
| Share capital | 11,250 | 11,250 | 0 |
| Other reserves | 49,268 | 43,931 | 5,337 |
| Profit (loss) for the period | 2,939 | 4,671 | -1,732 |
| Total Shareholders' Equity of the Group | 63,457 | 59,852 | 3,605 |
| Capital and Reserves attributable to minority interests | -275 | -138 | -137 |
| Profit (loss) attributable to minority interests | -53 | -138 | 85 |
| Total Minority Interests | -328 | -276 | -52 |
| Total Consolidated Equity | 63,129 | 59,576 | 3,553 |
The share capital stated is the fully subscribed and paid-up share capital of the company Landi Renzo S.p.A. which is equal to a nominal Euro 11,250 thousand, subdivided into a total of 112,500,000 shares, with a nominal value equal to Euro 0.10.
The Consolidated Net Equity at 30 June 2019 shows a positive variation of Euro 3,553 thousand compared to 31 December 2018, mainly due to the profit for the period of Euro 2,886 thousand, and the recognition in the statement of comprehensive income of part of the valuation of the joint venture SAFE&CEC made using the equity method (positive Euro 621 thousand), i.e. share of the other components of the consolidated Statement of Comprehensive Income accounted for by the joint venture.
For further details on the changes compared with 31 December 2018, please refer to the Consolidated Statement of Changes in Equity.
The Other reserves are shown in detail below:
| (Thousands of Euro) | |||
|---|---|---|---|
| Other reserves | 30/06/2019 | 31/12/2018 | Change |
| Statutory Reserve | 2,250 | 2,250 | 0 |
| Extraordinary and Other Reserves | 16,300 | 10,963 | 5,337 |
| Share Premium Reserve | 30,718 | 30,718 | 0 |
| Total Other Reserves of the Group | 49,268 | 43,931 | 5,337 |
The balance of the Statutory Reserve totalled Euro 2,250 thousand and remains unchanged since it has reached one fifth of the share capital.
The Extraordinary Reserve and other reserves refer to the profits made by the Parent Company and by the subsidiaries in previous financial years and rose by Euro 5,337 thousand due to the allocation of the profit from the previous financial year, as well as due to the recognition of part of the valuation with the equity method of the joint venture SAFE&CEC in the statement of comprehensive income.
The Share Premium Reserve originated as a result of the quotation operation for an amount equal to Euro 46,598 thousand, net of the related costs. This reserve was used during the 2017 financial year for Euro 15,880 thousand to partially cover the losses for the year 2016.
The minority interest represents the share of equity and result for the period of foreign subsidiaries not owned in full.
In light of the continuous, clear improvement in the Group's economic and financial performance and the favourable conditions in the financial markets in terms of the cost of money, in the first half of 2019 the Group management entered into important negotiations with several top financial institutions with a view to obtaining a new loan in order to
extinguish the existing financial debt deriving from the Optimisation Agreement entered into on March 2017 and the "LANDI RENZO 6,10% 2015-2022" Bonded Loan (ISIN IT0005107237), as well as obtain a simultaneous reduction in financial expenses.
On 26 June 2019, Landi Renzo S.p.A., along with Lovato Gas S.p.A. and SAFE S.p.A., subsidiaries/associates still falling under the Optimisation Agreement, agreed with the lending banks involved in the agreement to formally terminate it, also calling for:
On the same date the Company entered into a five-year medium-term loan agreement with a pool of three major banks (BPM - mandated lead arranger and bookrunner, Intesa Sanpaolo and Unicredit) for a total of Euro 65 million under more favourable economic conditions, which will make it possible to reduce financial expenses compared to current levels as well as improve the Group's debt profile. The relative financial resources were used to repay the financial debt deriving from the Optimisation Agreement in full, on 28 June 2019, and the Bonded Loan, on 1 July 2019, for a total of Euro 55 million. The remainder of the new loan will be used to support current and future investments.
The new loan agreement has a single covenant with regard to the EBITDA/Net Financial Position ratio, which had been respected at the date of this report.
On the basis of the loan agreement, the Company also committed to covering at least 50% of the notional amount of the two main lines of the loan with derivative financial instruments within 3 months of when the agreement was entered into. Please note that in July, the relative Interest Rate Swap ("IRS") contracts were signed with the lending banks to cover 70% of the nominal value of those lines in order to reduce the risk of interest rate volatility in the Group's financial statements.
| (Thousands of Euro) | |||
|---|---|---|---|
| Non-current bank loans | 30/06/2019 | 31/12/2018 | Change |
| Loans and financing | 55,515 | 23,259 | 32,256 |
| Amortised cost | -679 | -204 | -475 |
| Total | 54,836 | 23,055 | 31,781 |
This item breaks down as follows:
This item includes the medium/long term portion of bank debts for unsecured loans and finance. It totalled Euro 54,836 thousand at 30 June 2019, compared with Euro 23,055 thousand at 31 December 2018.
The structure of the debt is exclusively at a variable rate indexed to the Euribor and increased by a spread aligned with the normal market conditions; the loan currency is the Euro, except for the loans provided in United States dollars by the Bank of the West, totalling USD 4 million. The loans are not secured by real collateral and there are no clauses other than the early payment clauses normally envisaged by commercial practice.
The annual repayment plan for the medium/long-term loans, based on the balances at 30 June 2019, is shown below.
| (Thousands of Euro) | |
|---|---|
| Maturities | Loans and financing |
| 2019 (2H) | 4,000 |
| 2020 (1H) | 4,000 |
| Amortised cost | -288 |
| Bank financing and short-term loans | 7,712 |
| 2020 (2H) | 4,391 |
| 2021 | 10,210 |
| 2022 | 10,210 |
| 2023 | 10,210 |
| 2024 | 20,494 |
| Amortised cost | -679 |
| Non-current bank loans | 54,836 |
| Total | 62,548 |
Following the full early repayment of the Bonded Loan, planned for 1 July 2019, the relative residual debt was all classified to current liabilities. As a result, at 30 June 2019, other non-current financial liabilities totalled zero (Euro 24,427 thousand at 31 December 2018).
This item breaks down as follows:
| (Thousands of Euro) | ||||||
|---|---|---|---|---|---|---|
| Net Value at 31/12/2018 |
FTA of IFRS 16 01/01/2019 |
Increases | Repayments | Other changes |
Net Value at 30/06/2019 |
|
| Buildings | 0 | 4,553 | 4,026 | -1,121 | -1,086 | 6,372 |
| Motor vehicles | 0 | 390 | 339 | -127 | 6 | 608 |
| Total | 0 | 4,943 | 4,365 | -1,248 | -1,080 | 6,980 |
| of which current | 1,989 | |||||
| of which no-current | 4,991 | |||||
Following the initial application of the new accounting standard IFRS 16 - Leases as of 1 January 2019, the Group recognised right-of-use liabilities of Euro 4,943 thousand in its financial statements (Euro 6,980 thousand at 30 June 2019). This change is due primarily to the combined effect of:
the recognition of a right-of-use liability equal to Euro 3,841 thousand following the signing of the new lease agreement on the property located at Via Nobel 2/4 used as the headquarters of the parent company, which had expired on 10 May 2019;
decrease in right-of-use liabilities of Euro 1,086 thousand against the agreement signed by the Parent Company with Gireimm S.r.l. for early withdrawal, without penalties, from the lease agreement on the portion of the New Technical Centre property.
This item breaks down as follows:
| (Thousands of Euro) | |||||
|---|---|---|---|---|---|
| Provisions for risks and charges | 31/12/2018 | Allocation | Utilisation | Other changes |
30/06/2019 |
| Provision for product warranties | 4,562 | 977 | -1,079 | 1 | 4,461 |
| Provision for lawsuits in progress | 142 | -52 | 90 | ||
| Provisions for pensions | 63 | 5 | 0 | 68 | |
| Other provisions | 676 | 60 | -355 | 381 | |
| Total | 5,443 | 1,042 | -1,486 | 1 | 5,000 |
The item "Provision for product warranties" includes the best estimate of the costs related to the commitments that the Group companies have incurred as an effect of legal or contractual provisions, in relation to the expenses connected with providing product warranties for a fixed period of time starting from the sale thereof. This estimate was calculated with reference to the historical data of the Group, on the basis of specific contractual content. At 30 June 2019 this provision totalled Euro 4,461 thousand. The allocation, totalling Euro 977 thousand, was stated on the Income Statement under the item "Provisions, write-downs and other operating expenses". Uses of the risk provision totalling Euro 1,079 thousand are due to the coverage of warranty costs correlated with supplies of components in previous years.
The provision for lawsuits in progress relates to the probable payment for a current dispute with a service supplier declared bankrupt.
Provisions for pensions relate to the provision accrued for agents' additional customer indemnity, including provisions for the year of Euro 5 thousand.
The item Other provisions decreased following the disbursement of voluntary retirement incentives and the recognition of reimbursements to a top After Market channel customer.
This item includes employee severance indemnity (TFR) funds set up in compliance with the regulations in force. The following is the overall change in defined benefit plans for employees:
| (Thousands of Euro) | |||||
|---|---|---|---|---|---|
| Defined benefit plans for employees | 31/12/2018 | Allocation | Utilisation | Other changes |
30/06/2019 |
| Employee severance pay reserve | 1,646 | 15 | -20 | 66 | 1,707 |
The provision is due to the effect of the revaluation of the TFR (severance pay) for current employees at the end of the period. Uses totalling Euro 20 thousand refer to amounts paid to employees who left their post, primarily based on the agreements signed as part of the company restructuring plan, while the other changes column relates to adjustment of the DBO (Defined Benefit Obligation) according to IAS 19.
| Actuarial assumptions used for valuations |
30/06/2019 |
|---|---|
| Demographic table | SIM2017 / SIF2017 |
| Discount rate (Euro Swap) | 0.38% |
| Probability of request for advance | 4.00% |
| Expected % of employees who will resign before pension |
7.50% - 7.90% |
| Maximum % of TFR (severance pay) requested in advance |
70.00% |
| Annual cost of living increase rate | 1.00% |
At 30 June 2019, deferred tax liabilities that did not meet the offsetting requirements for the purposes of IAS 12 totalled Euro 419 thousand (Euro 339 thousand at 31 December 2018), with an increase of Euro 80 thousand, and are primarily related to temporary differences between the book values of certain intangible assets and the values recognised for tax purposes.
| Deferred tax liabilities | Deferred tax liabilities 31/12/2018 |
Uses | Temporary differences |
Other changes |
Deferred tax liabilities 30/06/2019 |
|---|---|---|---|---|---|
| Intangible assets | 324 | 0 | 80 | 0 404 |
|
| Other temporary differences | 15 | 0 | 0 | 0 15 |
|
| Total deferred tax liabilities | 339 | 0 | 80 | 0 419 |
| (Thousands of Euro) | |||
|---|---|---|---|
| Bank financing and short-term loans | 30/06/2019 | 31/12/2018 | Change |
| Advances, Import fin. and other current bank payables | 15,806 | 12,991 | 2,815 |
| Loans and financing | 8,000 | 3,321 | 4,679 |
| Amortised cost | -288 | -109 | -179 |
| Total | 23,518 | 16,203 | 7,315 |
"Bank financing and short-term loans", totalling Euro 23,518 thousand (Euro 16,203 thousand at 31 December 2018), consists of the current portion of existing unsecured loans and financing and of the utilisation of short-term commercial credit lines.
This item, totalling Euro 29,483 thousand (Euro 4,262 thousand at 31 December 2018), includes:
| Total | 29,064 | 419 | 29,483 |
|---|---|---|---|
| Other current financial liabilities | 29,064 | 419 | 29,483 |
| 2020 (1H) | 0 | 210 | 210 |
| 2019 (2H) | 29,064 | 209 | 29,273 |
| Maturities | Debenture loan | Simest Loan | Total |
| (Thousands of Euro) |
As previously described, the Bonded Loan was repaid in full on 1 July 2019.
This item amounted to Euro 1,989 thousand and relates to the current portion of right-of-use liabilities recognised in the financial statements following the application of the new international accounting standard IFRS 16 - Leases.
Trade payables totalled Euro 59,231 thousand, with an increase of Euro 4,065 thousand compared with 31 December 2018.
Trade payables (including trade payables to related parties) can be analysed by geographical segment as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Trade payables by geographical area | 30/06/2019 | 31/12/2018 | Change |
| Italy | 46,216 | 45,860 | 356 |
| Europe (excluding Italy) | 10,901 | 6,140 | 4,761 |
| America | 1,494 | 927 | 567 |
| Asia and Rest of the World | 620 | 2,239 | -1,619 |
| Total | 59,231 | 55,166 | 4,065 |
Trade payables to related parties are Euro 2,891 thousand and mainly refer to relations with the companies Gireimm S.r.l. and Gestimm S.r.l. for property lease payments.
All the related transactions are carried out at arm's length conditions.
Tax liabilities, consisting of total amounts payable to the Tax Authorities of the individual States in which the companies of the Group are located, totalled Euro 2,471 thousand, compared with Euro 2,385 thousand at 31 December 2018.
This item breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Other current liabilities | 30/06/2019 | 31/12/2018 | Change |
| Payables to welfare and social security | 1,252 | 1,460 | -208 |
| Other payables (payables to employees, to others) | 4,030 | 3,889 | 141 |
| Advance payments | 71 | 203 | -132 |
| Accrued expenses and deferred income | 36 | 46 | -10 |
| Total | 5,389 | 5,598 | -209 |
Other current liabilities totalled Euro 5,389 thousand, a decrease of Euro 209 thousand compared with 31 December 2018.
In particular, the "Other Payables" item, amounting to Euro 4,030 thousand, refers primarily to other payables for current pay and deferred pay to be settled in relation to employees.
The "Advance payments" item, Euro 71 thousand at 30 June 2019, mainly includes advances paid by customers.
As previously shown, following the initial application of IFRS 16 - Leases, the income statement data for the first half of 2019, and in particular the items Costs for services and use of third-party assets, Amortisation, depreciation and impairment and Financial expenses, are not directly comparable with the same period of 2018.
| (Thousands of Euro) | |||
|---|---|---|---|
| Revenues from sales and services | 30/06/2019 | 30/06/2018 | Change |
| Revenues related to the sale of assets | 99,102 | 95,476 | 3,626 |
| Revenues for services and other revenues | 2,933 | 1,820 | 1,113 |
| Total | 102,035 | 97,296 | 4,739 |
During the first half of 2019, the Landi Renzo Group achieved revenues of Euro 102,035 thousand, an increase of Euro 4,739 thousand compared with the same six months of the previous year. For more details, please refer to the Interim Report on Operating Performance.
Revenues from related parties totalling Euro 971 thousand refer to supplies of goods to the Joint Venture Krishna Landi Renzo India Private Ltd Held and to the Joint Venture EFI Avtosanoat-Landi Renzo LLC, as well as to the supply of services.
Other revenues and income totalled Euro 229 thousand (Euro 163 thousand at 30 June 2018) and are formed mainly of contributions recognised to the Parent Company of Euro 166 thousand, contingent gains of Euro 35 thousand and gains on sales of fixed assets of Euro 28 thousand.
This item breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Cost of raw materials, consumables and goods and change in inventories |
30/06/2019 | 30/06/2018 | Change |
| Raw materials and parts | 44,644 | 37,724 | 6,920 |
| Finished products intended for sale | 8,693 | 7,957 | 736 |
| Other materials and equipment for use and consumption | 1,009 | 899 | 110 |
| Total | 54,346 | 46,580 | 7,766 |
The total costs for purchases of raw materials, consumables and goods (including the change in inventories) amount to Euro 54,346 thousand (Euro 46,580 thousand at 30 June 2018), an increase of Euro 7,766 thousand compared with 30 June 2018. The increase in these costs was due to the increase in turnover compared with the same period of the previous year, particularly in the OEM channel.
This item breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Costs for services and use of third-party assets | 30/06/2019 | 30/06/2018 | Change |
| Industrial and technical services | 12,917 | 12,389 | 528 |
| Commercial, general and administrative services | 5,603 | 6,171 | -568 |
| Non-recurring strategic consultancy | 340 | 1,394 | -1,054 |
| Costs for use of third-party assets | 237 | 1,862 | -1,625 |
| Total | 19,097 | 21,816 | -2,719 |
Costs for services and use of third-party assets amount to Euro 19,097 thousand (Euro 21,816 thousand at 30 June
2018) with a decrease of Euro 2,719 thousand. The reduction in this item was mainly linked to:
The item "Non-recurring strategic consultancy" totalled Euro 340 thousand at 30 June 2019 (Euro 1,394 thousand at 30 June 2018) and relates to non-recurring services provided by major consulting firms in order to perform strategic, organisational and economic/financial analyses, as well as support the management in defining the new strategic plan. At 30 June 2018 this item included expenses relating to the appointment of a Top Consulting Firm engaged to support the Chief Executive Officer and the company management in preparing and implementing an EBITDA improvement action plan.
The reduction in costs for use of third-party assets was primarily caused by the application of IFRS 16 - Leases, which modified the method of accounting for operating leases. On the basis of that principle, for operating lease agreements entered into by the Group, right-of-use assets were recognised with the resulting recognition in the income statement of the relative depreciation and financial expenses for the half-year, unlike in the previous accounting model, which required the recognition of costs for lease payments in the income statement.
The residual amount of costs for use of third-party assets in the income statement mainly relates to contracts eligible for the simplification options established by the standard, or those relating to low-value assets or with a duration of 12 months or less.
This item breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Personnel costs | 30/06/2019 | 30/06/2018 | Change |
| Wages and salaries, social security contributions and expenses for defined benefit plans | 11,617 | 12,872 | -1,255 |
| Temporary agency work and transferred work | 2,162 | 1,371 | 791 |
| Directors' remuneration | 458 | 738 | -280 |
| Total | 14,237 | 14,981 | -744 |
Personnel costs were Euro 14,237 thousand, a decrease compared with the same period of the previous financial year (Euro 14,981 thousand at 30 June 2018), while the Group had a total of 512 employees, a slight increase compared with the end of the previous year (494). Despite this increase in employees, personnel costs declined as the first half of 2018 benefitted only in part from the effects of the company restructuring concluded in the initial months of last year, as well as since the group heavily invested in highly specialised resources to support the increasing research and development performed for new products and solutions, capitalised when they meet the requirements laid out in IAS 38.
On 29 April 2019, the Shareholders' Meeting approved, pursuant to article 114-bis of Italian Legislative Decree 58/98, a compensation plan named the "2019-2021 Performance Shares Plan" concerning the free assignment of the right to
receive Landi Renzo S.p.A. ordinary shares free of charge (for a maximum total of 3,200,000 shares), based on the degree to which specific performance objectives are reached. The assignment of shares is subject to reaching at least one of the performance objectives as well as the existence, at the date of assignment of the shares, of the employment and/or management relationship with the Company or its subsidiaries.
The plan is for the Chief Executive Officer of the Parent Company as well as other managers to be identified based on their level of contribution to the business, autonomy and complexity of their position by the Board of Directors after consulting with the Remuneration Committee.
The plan aims to reward the achievement of targets for the 2019-2021 period, as well as incentivise the alignment of the interests of the management with those of the shareholders with a view to creating value over a medium/long-term horizon. The Plan lasts for three years and provides for the assignment of Shares in a lump sum at the end of the vesting period.
At the date on which these condensed half-yearly consolidated financial statements were drafted the plan beneficiaries, except for the CEO, had not yet been defined and the relative bilateral agreements had not yet been signed with them, therefore no costs relating to that plan were recognised for the half-year.
The following table lists the number of employees in the workforce at the end of the period, broken down between Italian and foreign companies.
| 31/12/2018 | 30/06/2018 |
|---|---|
| 300 | 303 |
| 24 23 |
29 |
| 171 | 160 |
| 494 | 492 |
| 30/06/2019 296 192 512 |
Allocations, write-downs and other operating expenses totalled Euro 1,312 thousand (Euro 1,399 thousand at 30 June 2018), a decrease of Euro 87 thousand. This item consists mainly of allocations to the provisions for product warranties and other operating costs.
This item breaks down as follows:
| (Thousands of Euro) | |||
|---|---|---|---|
| Amortisation, depreciation and impairment | 30/06/2019 | 30/06/2018 | Change |
| Amortisation of intangible assets | 2,974 | 2,869 | 105 |
| Depreciation of tangible assets | 2,049 | 2,354 | -305 |
| Depreciation of rights of use | 1,242 | 0 | 1,242 |
| Total | 6,265 | 5,223 | 1,042 |
Amortisation and depreciation amounted to Euro 6,265 thousand (Euro 5,223 thousand at 30 June 2018), an increase
of Euro 1,042 thousand. This increase is primarily linked to the application of IFRS 16 - Leases, which entailed the recognition for the first half of 2019 of higher depreciation of Euro 1,242 thousand. Net of this effect, amortisation and depreciation would have been essentially in line with the previous year (Euro 5,023 thousand at 30 June 2019, compared with Euro 5,223 thousand at 30 June 2018).
No elements emerged from the analysis which revealed the need to change the useful lifetime of tangible and intangible assets.
The amortisation of intangible assets refers primarily to the amortisation of development and design expenditure incurred by the Group, costs for the purchase and registration of trademarks and licenses and for software (applications and management systems) purchased over time.
The depreciation of tangible assets refers primarily to property, plant and machinery for production, assembly and running-in of the products, to industrial and commercial equipment for the purchase of moulds, to testing and control tools and to electronic processors.
Financial income totalled Euro 49 thousand (Euro 77 thousand at 30 June 2018) and refers to interest income on bank deposits.
Financial expenses amounted to Euro 2,373 thousand (Euro 1,924 thousand at 30 June 2018). This increase is primarily linked to the above-mentioned early termination of the medium/long-term loans included within the Optimisation Agreement, which entailed the release to the income statement of the residual effects of pending transaction costs following the measurement of the relative financial payables at amortised cost (Euro 436 thousand).
The net exchange differences amounted to Euro -253 thousand (Euro 1,035 thousand at 30 June 2018), of which Euro 84 thousand relating to net exchange gains from valuation.
At 30 June 2019, the Group did not have financial instruments hedging exchange rate risk.
This item, totalling Euro 97 thousand (Euro -1,152 thousand as at 30 June 2019), includes the valuation using the equity method of the Group's equity investments and joint ventures, namely:
thousand (revaluation of Euro 168 thousand at 30 June 2018).
Taxes at 30 June 2019 totalled Euro 1,641 thousand, compared with Euro 1,734 thousand at 30 June 2018.
The "base" earnings/loss per share were calculated by relating the net profit/loss of the Group to the weighted average number of ordinary shares in circulation in the period (112,500,000). The "base" earnings per share, which corresponds with the "diluted" earnings (loss) per share since there are no convertible bonds or other financial instruments with possible diluting effects, is Euro 0.0261. The earnings per share for the first half of 2018 were Euro 0.0159.
At 30 June 2019, the Group is involved in proceedings, brought both by and against it, for non-significant amounts.
The Landi Group deals with related parties at market conditions considered to be normal in the markets in question, taking account of the characteristics of the goods and the services supplied.
Transactions with related parties listed below include:
The following table summarises the relationships with related parties:
| Company | Sales revenues |
Purchase of finished products |
Costs for use of third party assets |
Expense (Income) from JVs valued using the equity method |
Current financial assets |
Receivables | Payables |
|---|---|---|---|---|---|---|---|
| SAFE & CEC | 0 | 0 | 0 | -297 | 2,760 | 0 | 0 |
| Gestimm S.r.l. | 0 | 0 | 317 | 0 | 0 | 0 | 104 |
| Krishna Landi Renzo India Priv. Ltd | 488 | 320 | 0 | 200 | 0 | 2,177 | 235 |
| Efi Avtosanoat | 483 | 0 | 0 | 0 | 0 | 609 | 0 |
| Reggio Properties LLC | 0 | 0 | 53 | 0 | 0 | 0 | 0 |
| Gireimm S.r.l. | 0 | 0 | 601 | 0 | 0 | 0 | 2,552 |
| Total | 971 | 320 | 971 | -97 | 2,760 | 2,786 | 2,891 |
Pursuant to CONSOB communication no. 6064293 of 28 July 2006, note that during the first half of 2019 no atypical and/or unusual transactions occurred outside the normal operation of the company that could give rise to doubts regarding the correctness and completeness of the information in the financial statements, conflicts of interest, protection of company assets, safeguarding the minority shareholders.
Pursuant to CONSOB communication no. 6064293 of 28 July 2006, it is stated that during the first half of 2019 no nonrecurring significant events or transactions took place, except for the refinancing transaction described above.
Please refer to comments relating to this in the Interim Report on Operating Performance.
Certification of the condensed half-yearly consolidated financial statements pursuant to art. 154-bis of Italian Legislative Decree 58/98
1) Having regard to the provisions of art. 154-bis, paragraphs 3 and 4, of Italian Legislative Decree No. 58 dated 24 February 1998, the undersigned Cristiano Musi, CEO, and Paolo Cilloni, Officer in charge of preparing the accounting documents of Landi Renzo S.p.A., state:
of the administrative and accounting procedures for preparing the condensed half-yearly consolidated financial statements as at 30 June 2019.
Cavriago, 11 September 2019
Cristiano Musi Paolo Cilloni
Officer in charge of preparing the CEO company accounting documents
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