Annual Report • Aug 5, 2019
Annual Report
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REPLY HALF-YEAR FINANCIAL REPORT 2019
| BOARD OF DIRECTORS AND CONTROLLING BODIES | 4 |
|---|---|
| FINANCIAL HIGHLIGHTS | 6 |
| REPLY LIVING NETWORK | 8 |
| INTERIM FINANCIAL REPORT 2019 | 19 |
| FINANCIAL REVIEW OF THE GROUP | 20 |
| OTHER INFORMATION | 27 |
| OUTLOOK ON OPERATIONS | 28 |
| HALF YEAR CONDENSED FINANCIAL STATEMENTS AT 30 JUNE 2019 | 29 |
| NOTES | 35 |
| ANNEXED TABLES | 73 |
| ATTESTATION OF THE HALF-YEAR CONDENSED FINANCIAL STATEMENTS PURSUANT TO 154 BIS OF LEG. D NO. 58/98 | 80 |
| 81 |
Chairman and Chief Executive Officer
Mario Rizzante
Chief Executive Officer Tatiana Rizzante
Filippo Rizzante Daniele Angelucci Claudio Bombonato Elena Maria Previtera Fausto Forti (1) (2) (3) Secondina Giulia Ravera (1) (2) Francesco Umile Chiappetta (1) (2)
President Giorgio Mosci
Statutory auditors Piergiorgio Re Ada Alessandra Garzino Demo
PwC S.p.A.
(1) Directors not invested with operational proxies. (2) Independent Directors according to the Corporate Governance code drawn up by the Committee for Corporate Governance (3) Lead independent director
This report has been translated into English from the original Italian version, in case of doubt the Italian versione shall prevail.
| YE 2018 | % | Economic figures (Euros/000) | 1st half 2019 (*) | % | 1st half 2018 | % |
|---|---|---|---|---|---|---|
| 1,035,793 | 100.0 | Revenues | 573,672 | 100.0 | 498,054 | 100.0 |
| 144,836 | 14.0 | Grosso operating income | 85,655 | 14.9 | 68,335 | 13.7 |
| 132,410 | 12.8 | Operating income | 67,599 | 11.8 | 62,117 | 12.5 |
| 139,217 | 13.4 | Income before taxes | 70,216 | 12.2 | 64,227 | 12.9 |
| 99,913 | 9.6 | Group net income | 49,414 | 8.6 | 45,941 | 9.2 |
| YE 2018 | Financial figures (Euros/000) | 1st half 2019 (*) | 1st half 2018 | |
|---|---|---|---|---|
| 485,297 | 517,913 | 432,932 | ||
| 1,315 | Non-controlling interest | 1,613 | (82) | |
| 1,076,104 | Total assets | 1,106,650 | 906,655 | |
| 145,288 | Net working capital | 128,086 | 152,668 | |
| 420,060 | Net invested capital | 501,240 | 382,619 | |
| 119,835 | Cash flow | 80,713 | 64,223 | |
| 66,552 | Net financial position (*) | 18,287 | 50,231 |
| YE 2018 | Data per single share (in Euros) | 1st half 2019 | 1st half 2018 |
|---|---|---|---|
| 37,411,428 | Number of shares | 37,411,428 | 37,411,428 |
| 3.54 | Operating result per share | 1.81 | 1.66 |
| 2.67 | Net result per share | 1.32 | 1.23 |
| 3.20 | Cash flow per share | 2.16 | 1.72 |
| 12.97 | 13.84 | 11.57 |
| YE 2018 | Other information | 1st half 2019 | 1st half 2018 |
|---|---|---|---|
| 7,606 | Number of employees | 7,924 | 7,251 |
(*) Reply applied the new Accounting Standard IFRS 16 prospectively from January 1, 2019 without restatement of comparative data.
Reply is a group that specializes in consulting, system integration and digital services. Comprised of a network of companies, Reply partners with leading industrial groups in defining business models, made possible by new technological and communication paradigms such as artificial intelligence, big data, cloud computing, digital communication and the Internet of Things (IoT).
Reply operates through a network of companies that specialize in processes, applications and technologies, as well as centers of excellence in their respective fields.
Processes For Reply, the understanding and use of technology involves the introduction of a new enabling factor for business processes, based on an in-depth knowledge of both the market and the specific industrial contexts of implementation.
Applications Reply designs and implements application solutions aimed at satisfying core business needs.
Technologies Reply optimizes the use of innovative technologies, implementing solutions capable of ensuring clients maximum efficiency and operational flexibility.
Consulting With a focus on strategy, communication, design, processes and technology.
System Integration Making the best use of potential technology, combining business consulting with innovative technological solutions.
Digital Services Innovative services based on new communication channels and digital trends.
In every market segment in which it operates, Reply combines sector-specific expertise with a broad experience in the provision of services and a wealth of advanced technological capabilities.
Reply works with leading operators in the sector to define and implement digital transformation strategies. These are based on the renewal of systems that support products and services and to support the development of new service models that are customer-focused and delivered across all channels. Furthermore, the rising use of the Internet of Things (IoT) requires an increasing reconfiguration of networks that can transport large volumes of data in real time. This data is no longer solely generated by smartphones and mobile devices, but by a multitude of connected objects with widely different functional characteristics.
Reply offers integrated strategic and technological consulting services to support the design, definition and management of the new-generation networks, based on SDN (Software Defining Network) technologies, capable of integrating and managing virtual networks (Network Virtualization) through network engineering services and network operations. The arrival of 5G networks, furthermore, marks the end of the fixed/mobile barrier, eliminating communication-related distances connected to broadband limitations, to latency, and to the receptive capacity of the 3G network.
tions. In this area, Reply works with some of the major players in the sector on many key issues, from the definition of multi-channel strategies, to the implementation of open banking. In particular, in the increasingly relevant fields of big data, robots and artificial intelligence, Reply is investing heavily and collaborating with leading financial institutions (banks and insurance companies) along two lines of development:
the concrete integration of the new big data technologies and architectures with existing systems; and the development of skills, analytics and machine learning models, aimed at extracting tangible business value from available databases.
Reply also boasts a strong and highly specialized presence in mobile payments and related m-commerce services. Reply offers consulting services, as well as a wide range of models and architectural solutions, aimed at the banking/insurance market and at emerging players in the payments industry.
Reply maintains a strong market presence in the wealth management arena and has developed a wide range of specific skills and solutions. These are focused on the emerging consulting models, on expanding -type solutions and platforms. In the area of Governance Risk Control (GRC), Reply operates with a dedicated consulting division highly specialized in issues relating to risk evaluation and risk control. Within this, Reply is working with several leading financial institutions on a
broad range of initiatives connected to the implementation of EBU standards and the development of associated models and solutions.
Finally, Reply has been involved in numerous projects relating to the most advanced frontiers of innovation, such as in the latest biometric recognition technologies and digital identity, as well as quantum computing.
Native Cloud platforms and applications, together with a focus on the enabling aspects of digital transformation, and development of Internet of Things are at the core o manufacturing market. Industry 4.0 and logistics 4.0 are increasingly critical aspects to the strategic development of companies in the sector. Reply has invested heavily to enhance its products and service offer in this area, with the re-engineering in 2017 and 2018 of its proprietary Supply Chain Execution and Manufacturing Execution System solutions.
The retail industry is experiencing a time of significant change driven by various factors, including the evolution of consumer purchasing behavior, the entry of new players and the digitization of products and services. Customer experience, on the other hand, is an increasingly key differentor for retailers. Consumers expect to be able to interact with a brand wherever they are, thereby strengthening the link between physical stores and e-commerce.
Reply partnered with various clients to support their digital transformation journeys. This work saw the merging of physical and virtual spaces through the development of multi-channel e-commerce platforms, of marketing automation solutions, of smart boxes and by re-engineering the logistics chain both on supplier and customers ends.
The energy and utilities sector saw the growth of innovative technologies on an industrial scale, across the entire value chain. Cloud Computing has become the leading provisioning tool for companies of all sizes, above all in the implementation of various digital transformation initiatives. The approach based on IoT models is increasingly widespread in the areas of generation, energy management and at the support of efficiency and smart city initiatives.
Against this backdrop of extensive transformation, Reply is one of the reference partners in the sector, combining knowledge of the market and of its unique processes, with a distinctive capability to design, implement and manage innovative digital solutions and further verticalised, with particular reference to the definition and development of new models in the
energy management and downstream services sectors aimed at energy efficiency, areas in which Reply works with energy sales companies, as well as with end customers.
The increasingly evident need to bridge the gap between citizens and Public Administrations (PA) has led to the introduction of measures aimed not only at restructuring the management and control model (e.g. reorganization of the national health system) but also the enhancement of existing services through the introduction of increasingly more digital and smarter systems (e.g. new monitoring system for individuals affected by chronic conditions). A public sector that is closer to its citizens implies a greater reach of the services offered, increasing the levels of usability and therefore of supply possibilities. In the area of digital health, on two main areas: developing a network of information sharing among the various stakeholders in the field (i.e. patients, professionals and networks of those affected); as well as monitoring and supporting the
Technological necessary to increase flexibility and efficiency. Reply is involved in a continuous process of research, selection and marketing of innovative solutions for sustaining the creation of value within organizations.
-machine interaction (with the development of conversation and natural language recognition systems or visual recognition systems), automation (through technologies such as intelligent process automation) and the creation of systems to support business decisions (data prediction). The essential factor for implementing artificial intelligence projects is the availability of data. AI offers effective results, provided that the datasets available are historical and updated in real time. Within this framework, Reply focuses not only on the technology, but also uses advanced models for the management and processing of vast amounts of data required to train the algorithms.
Specifically, Reply applies the results of its research on artificial intelligence to real-world scenarios, creating customized solutions that integrate machine learning, deep learning or reinforcement learning algorithms, with recommendation systems, predictive engines, conversational interfaces or video and players.
In a landscape of emerging technologies, blockchain will increasingly be able to foster new digital ecosystems based on distributed computational infrastructures. Today, the shared nature of blockchainbased digital registers represents an opportunity characterized by multi-industry application, with repercussions for the financial services sector and management of the supply chain. Moreover, the possible synergies with other exponential technologies such as IoT and artificial intelligence make blockchain an ideal convergence layer to support the data marketplaces of the future.
Reply has defined a portfolio of services, encompassing consulting, design and the implementation of solutions based on the blockchain and the distributed ledger technology (DLT). Among the major initiatives developed in 2018, Reply, alongside its insurance and academic sector partners, launched the first sandbox to define standards for the industrial adoption of legally enforceable smart contracts.
The Cloud has permanently established itself as one of the most important areas of transformation that companies have had to face. Virtual environments and services offered by leading, global vendors have modified the concept of IT, transforming it from being a simple commodity to one of the core elements on
At the same time, the ever-increasing maturity of the cloud in its various declinations (IaaS, PaaS or SaaS) is driving service providers and consulting companies to develop offerings to tackle highly strategic issues, such as the coexistence in the cloud with traditional on premise applications and the challenge of data management security.
In the Cloud Computing field, Reply has defined a products and services offer that combines the following elements:
The rapid evolution of data analytics tools was triggered by the major innovations of technology companies. These tools use data-driven analysis methodologies made possible both by the large availability of data and the increasing computational capacity for analysis. Specifically, the data-driven approach is defining a new framework for the design and management of customer-focused marketing initiatives. Once the needs of the individual customer have been interpreted, based on data and analysis provided by CRM platforms, it becomes possible to tailor one-to-one marketing campaigns, launched in real time to meet specific needs.
To exploit this competitive advantage and establish a consultative and strategic platform, Reply has created a competence center focused on the customer robotics approach. Experience from initiatives across various sectors (e.g. automotive, financial services, utilities, retail, etc.), has enabled Reply to develop a framework for the development and implementation of processes related to the direct interaction with the customer, designed to recognize and anticipate needs across the various digital channels. This initiative integrates machine learning, artificial intelligence and cognitive systems models.
Customer robotics facilitates the conception, design and implementation of services aimed at interpreting the data and providing fully data-driven customer service tools. These include recommendation systems for products and conversational services able to understand and interact independently using natural language.
Reply constantly invests in developing its expertise in leading CRM and e-commerce platforms and solutions, thanks to a solid ecosystem of partnerships with world leaders in the industry, including Microsoft, Oracle, SAP and Salesforce.
Over the years, IT-related risks have increased dramatically in frequency and impact, leading to serious security violations. Millions of client data records have been compromised worldwide, affecting governments and other organizations. As a result, the mounting attention from regulatory bodies concerning the protection of information, personal data and critical infrastructures, requires an everincreasing commitment from companies to manage their cyber security.
To respond to this increasing complexity, identification and implementation of the most suitable technological solutions to mitigate risk. Through its extensive network of partnerships, Reply offers wide-ranging expertise on the most innovative and widely used security technologies on the market. Furthermore, the company can help its customers to scout, select and implement protection solutions designed to mitigate advanced risks related to the latest technological drivers (cloud, IoT, Industry 4.0, automation, etc.).
Reply supports businesses throughout the implementation phase of its integrated information protection plan, from the identification of threats and vulnerabilities to the planning, design and employment of appropriate technological, legal, organizational and risk transfer (cyber insurance) countermeasures.
Lastly, thanks to its cyber security command center, Reply assists large organizations with advanced computer security incident management and response action as well as threat intelligence services.
Data and its uses have become a key strategic factor in the digital transformation of businesses. By combining technological skills in data analysis, data modelling and data process re-engineering, Reply makes it easier for its clients to approach the issue of data, focusing on cultural change and a new approach to data management and to the use of data. In particular, Reply supports its customers in the definition and implementation of data analytics platforms that apply advanced models to core corporate processes.
In 2018, Reply continued to develop a specific offer portfolio in the machine learning field, designed to address growing demand from companies wishing to automate lower impact processes such as invoice reconciliation, while building value-added services based on innovative process automation models through deep learning, image recognition and prescriptive analytics.
In a world increasingly characterized by complex ecosystems, Reply supports its clients to create innovative and distinctive product-service experiences for the B2C and B2B sectors. From analyzing needs through to strategic business objectives and technological enablers, Reply can transform them into integrated customer journeys and prototypes that make the results immediately tangible and verifiable. Results are then developed in an iterative and agile way, until they are launched on the market.
At the same time, a customer-centric approach requires a change in the organization, to enable a successful customer experience journey. Reply supports organizations in managing such changes to make them really customer-centric, receptive to market inputs or feedback, agile in releasing new products and services, as well as mobilizing cross-functional teams that operate in full autonomy towards specific objectives.
In 2018, Reply continued to invest in this area through the acquisition of new talent and expertise. Its two studios in Milan and Munich were further expanded enabling support for customers in Europe and globally.
Real time marketing, artificial intelligence and analysis of the customer journey are the three transformation technologies set to impact most on the relationship of brands with customers. The use of these technologies enables brands to increase their marketing results through a continuous improvement of the customer experience in terms of loyalty and growth of its base.
Taking advantage of these emerging capabilities means building a more data-driven vision of the individual customer. The growing interest in cross-device identification tools and account-based marketing solutions
(ABM) underlines the increasing interest among brands towards technologies offering targeted and coherent interactions among owned, earned and paid media.
Reply has developed a broad and highly specialized set of skills, including digital storytelling, contextual interaction, omnichannel loyalty, data recognition to capture large quantities of information and subsequent data analysis expertise to create effective market insights. To extend this scenario further, there is a need to ensure coherent communication between the various media involved, through a consolidated strategy that also incorporates a multimedia asset management component.
In recent years, Reply has developed specific expertise and solutions to support companies in the development of immersive experience projects through the application of augmented reality and virtual reality. These technologies are expected to have an increasingly strong impact on the marketing strategies of highly innovative brands.
Physical and digital, incompanies, reaching far beyond the retail market.
Today, there is an increasing demand that the digital presence of a brand guarantees a purchase experience can be made in just a few clicks, allowing customers to quickly browse an interactive site. There should be no barriers, technological, physical, digital or relating to touch points that limit the user experience. For companies, these needs translate into targeted investments that aim at optimizing and extending processes and choosing enabling technologies, passing through the definition of a clear digitalization strategy.
y strategic decision regarding investments in technology must be supported by increasingly sophisticated mathematical models based on data collected across the distribution chain, the sales chain and in all interactions with consumers. The value of this information is therefore twofold: the data is able to help streamline revenue reporting, quickly exerting influence on stock management, while the purchase conversion rate can be improved thanks to predictive analysis of purchasing behavior.
Reply supports its customers on their journey, offering the latest technological solutions and helping them to define the best digital transformation strategies for the specific market and budget.
The development of the videogame market is increasingly prevalent, attracting all age groups and remaining equally divided between males and females. The average age of gamers increased and to around 36 years old.
Videogames are more and more a communication language. A culture has developed that allows companies
In addition to creating internationally acclaimed games, Reply has developed an offer that meets the communication needs of gaming brands within a 360° perspective. Reply is constantly investing in this area so that it can offer, through the use of the latest technologies, increasingly innovative and engaging game experiences.
international market. In particular, the release of Lone Wolf, a legacy Reply production, on the Nintendo Switch platform has had considerable success both in terms of visibility and sales performance.
Industry 4.0 models are quickly redefining production sites around the world, transforming them into systems closely interconnected with the supply chain, logistics, sales, the products themselves and the support and maintenance chain.
For this new global world of interconnected production, Reply has developed a suite of integrated solutions n is to accompany its customers along the entire transformation journey: from the planning and development of solutions that open up the production sites and interconnect them to the entire digital world, to the design and implementation of solutions capab
The digitization of companies is a transformation expected to take place in the medium term, made possible and concrete by the use of all the vertical and horizontal pillars offered by Industry 4.0 (robotics, digital twin, cloud and fog computing, augmented reality, big data, artificial intelligence and machine learning, etc.).
products and services offer in the IoT realm. The first is the growing need for differentiation in insurance, telco and utilities. In response, companies in these industries have consolidated connected objects as a cornerstone of product portfolio extension strategies for creating value and customer loyalty. The second trend is the growing opportunity for marketing in support of existing products. Through the increasing availability of connectivity, it is now possible to fundamentally transform the market approach of the manufacturing segment. The third and final trend has seen the exponential spread and popularity of new voice interaction mechanisms, such as smart speakers or voice assistants, as well as new systems of interaction, which are stimulating a different interaction between the physical world and the digital services world.
To tackle these challenges, Reply has designed and developed HI ConnectTM, a platform of services, devices and middleware, on which to base specific vertical applications such as ecosystems for the
household appliances sector, advanced logistics, environmental security, contactless payment and product traceability. In 2018, Reply consolidated its position in the areas of home and professional appliances, connected insurance and in new telco offers and utilities for the connected home, as well as in the manufacturing, healthcare, insurance and automotive sectors.
Combining advanced technological skills, experimentation of new technologies that come to the market every month, and the ability to interpret customer needs and to produce high quality content in its proprietary laboratory, means Reply has developed a products and services offer for implementing augmented reality applications. This design and development offer enables users to enjoy an engaging experience, where they are transported into in a virtual and navigable environment. AR and VR projects implemented by Reply during the course of the year have covered many areas including in healthcare, where installations aimed at motor rehabilitation and training were created. Numerous projects were also conducted in the marketing sphere, which saw VR and AR become excellent
tools to support product presentation and customer engagement.
applications and architectures capable of meeting needs of the new market by increasing the usability and performance of services, integrating new channels and types of devices seamlessly following specific guidelines of each platform.
With reference to the increasingly pervasive phenomenon of mobile video where the quality and stability of the service are essential to ensuring its success Reply is engaged in major European projects for the provision of Over The Top services, with design, development, validation and monitoring teams. Following the latest mobile developments, during 2018, Reply launched its first experiments on the iOS platform, based on the use of AR Kit for augmented reality solutions, as well as on the Android platform, based on the Android Auto and Android TV tools.
In addition, Reply strengt business and consumer worlds. The factory includes a user experience laboratory that closely collaborates with teams of developers specialized in various platforms, which bases its activity on a data-driven
Social networks are increasingly connected to digital marketing activities that Reply integrates into a universal relationship model, based on paid, owned and earned media analysis and activation skills to enable and optimize a company positioning integrated in the relationship channels with its own ecosystem: social networks, search engines, comparison sites, shopping and social shopping squares, affiliate networks, email, applications, lead generation channels.
Reply supports its clients in the quest for innovation with services and platforms designed to fully exploit new potentials offered by networks and by communication technologies. These platforms are:
The Half-Year report for the period ended June 30, 2019 has been prepared in accordance with the Legislative Decree. 58/1998, as and has been prepared in accordance with IAS 34 Interim Financial Reporting.
Since the start of the year, the Group has recorded a consolidated turnover of 573.7 million Euros, which is an increase of 15.2% compared to the same period in 2018.
All indicators are positive for the period. In the first half of 2019, consolidated EBITDA was 85.7 million Euros, compared to the 68.3 million Euros recorded in 2018, and corresponds to 14.9% of turnover. Consolidated EBITDA excluding the effects of the application of IFRS 16 would have been 73.6 million Euros.
EBIT from January to June was 67.6 million Euros (62.1 million Euros in 2018), corresponding to 11.8% of turnover. EBIT excluding the effects of the application of IFRS 16 would have been 67.0 million Euros.
Pre-tax profit from January to June 2019 was 70.2 million Euros (64.2 million Euros in 2018), corresponding to 12.2% of turnover. The value excluding the effects of the application of IFRS 16 would have been equal to 70.7 million Euros.
ted turnover for the period of 290.1 million Euros, which is an increase of 11.9% compared to 2018.
EBITDA from April to June 2019 was equal to 43.3 million Euros (excluding the effects of the application of IFRS 16, this would have been equal to 37.1 million Euros), with an EBIT of 34.0 million Euros (excluding the effects of the application of IFRS 16, this would have been equal to 33.7 million Euros) and pre-tax profit of 36.0 million Euros (excluding the effects of the application of IFRS 16, this would have been equal to 36.3 million Euros).
As at 30 June ancial position is positive at 18.3 million Euros (101.1 million Euros excluding the effects of the application of IFRS 16). The net financial position as at 31 March 2019 was positive at 50.0 million Euros (134.3 million Euros excluding the effects of the application of IFRS 16).
half and is compared to the corresponding figures of the previous year:
| (thousand Euros) | 1 st half 2019 (*) |
% | 1 st half 2018 |
% |
|---|---|---|---|---|
| Revenues | 573,672 | 100.0 | 498,054 | 100.0 |
| Purchases | (11,126) | (1.9) | (9,177) | (1.8) |
| Personnel | (290,091) | (50.6) | (249,451) | (50.1) |
| Services and other costs | (187,747) | (32.7) | (171,480) | (34.4) |
| Other operating costs/(income) | 947 | 0.2 | 388 | 0.1 |
| Operating costs | (488,017) | (85.1) | (429,720) | (86.3) |
| Gross operating income (EBITDA) | 85,655 | 14.9 | 68,335 | 13.7 |
| Amortization, depreciation and write-downs | (18,014) | (3.1) | (6,285) | (1.3) |
| Other non recurring (expenses)/income | (41) | - | 68 | - |
| Operating income (EBIT) | 67,599 | 11.8 | 62,117 | 12.5 |
| (Loss)/gain on investments | 4,230 | 0.7 | 2,470 | 0.5 |
| Financial income/(expenses) | (1,613) | (0.3) | (360) | (0.1) |
| Income before taxes | 70,216 | 12.2 | 64,227 | 12.9 |
| Income taxes | (19,638) | (3.4) | (18,093) | (3.6) |
| Net income | 50,578 | 8.8 | 46,134 | 9.3 |
| Non controlling interests | (1,165) | (0.2) | (192) | (0.1) |
| Group net income | 49,414 | 8.6 | 45,941 | 9.2 |
(*) The first half year data of 2019 include the following impacts relating to the application of the new Accounting Standard IFRS 16:
cancellation of rents and rental fees with a positive impact on EBITDA of 12,044 thousand Euros;
depreciation and amortization increase for 11,449 thousand euro with a positive impact on EBIT of 595 thousand Euros;
increase in financial charges for 1,085 thousand Euros with a negative impact on EBT of 490 thousand Euros.
reclassified consolidated income statement of the second quarter and is compared to corresponding figures of the previous second quarter:
| (thousand Euros) | Q2 2019 (*) | % | Q2 2018 | % |
|---|---|---|---|---|
| Revenues | 290,128 | 100.0 | 259,175 | 100.0 |
| Purchases | (6,399) | (2.2) | (5,134) | (2.0) |
| Personnel | (148,065) | (51.0) | (131,085) | (50.6) |
| Services and other costs | (93,027) | (32.1) | (87,107) | (33.6) |
| Other operating (costs)/income | 675 | 0.2 | 284 | 0.1 |
| Operating costs | (246,817) | (85.1) | (223,042) | (86.1) |
| Gross operating income (EBITDA) | 43,311 | 14.9 | 36,133 | 13.9 |
| Amortization, depreciation and write-downs | (9,255) | (3.2) | (2,757) | (1.1) |
| Other non recurring (expenses)/income | (41) | - | 68 | - |
| Operating income (EBIT) | 34,015 | 11.7 | 33,444 | 12.9 |
| (Loss)/gain on investments | (3,059) | 1.1 | 2,470 | 1.0 |
| Financial income/(expenses) | (1,063) | (0.4) | 10 | - |
| Income before taxes | 36,011 | 12.4 | 35.924 | 13.9 |
(*) The second quarter data of 2019 include the following impacts relating to the application of the new Accounting Standard IFRS 16:
cancellation of rents and rental fees with a positive impact on EBITDA of 6,232 thousand Euros;
depreciation and amortization increase for 5,940 thousand euro with a positive impact on EBIT of 292 thousand Euros;
increase in financial charges for 554 thousand Euros with a negative impact on EBT of 262 thousand Euros.
REVENUE BY REGION (*)
(*)
Region 1: ITA, USA, BRA, POL, ROU Region 2: DEU, CHE, CHN, HRV Region 3: GBR, LUX, BEL, NLD, FRA, BRL
33.2%
2019, compared to December 31, 2018:
| (thousand Euros) | 30/06/2019 | % | 31/12/2018 | % | Change |
|---|---|---|---|---|---|
| Current operating assets | 471,403 | 565,092 | (93,689) | ||
| Current operating liabilities | (343,317) | (419,803) | 76,486 | ||
| Working capital, net (A) | 128,086 | 145,288 | (17,202) | ||
| Non current assets | 482,923 | 381,955 | 100,968 | ||
| Non current liabilities | (109,769) | (107,183) | (2,585) | ||
| Fixed capital (B) | 373,154 | 274,772 | 98,383 | ||
| Invested capital, net (A+B) | 501,240 | 100.0 | 420,060 | 100.0 | 81,180 |
| Shareholders' equity (C) | 519,526 | 103.6 | 486,612 | 115.8 | 32,914 |
| NET FINANCIAL POSITION (A+B-C) | (18,287) | (3.6) | (66,552) | (15.8) | 48,267 |
Increase in net invested capital amounting to 81,180 thousand Euros is mainly due to the adoption of the new IFRS 16 accounting standard that generated the accounting of a right-of-use asset amounting to 89,788 thousand Euros as at January 1, and an equivalent financial liability.
Net invested capital as at June 30, 2019, amounted to 501,240 thousand Euros, and was entirely financed by thousand Euros, that generated a positive net financial position of 18,287 thousand Euros.
The following table provides a breakdown of net working capital:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Work in progress | 154,810 | 77,061 | 77,749 |
| Trade receivables | 264,639 | 434,389 | (169,750) |
| Other current assets | 51,954 | 53,642 | (1,688) |
| Current operating assets (A) | 471,403 | 565,092 | (93,689) |
| Trade payables | 111,839 | 123,387 | (11,548) |
| Other current liabilities | 231,478 | 296,417 | (64,938) |
| Current operating liabilities (B) | 343,317 | 419,803 | (76,486) |
| Working capital, net (A-B) | 128,086 | 145,288 | (17,202) |
| % return on investments | 11.2% | 14.0% |
| (thousand Euros) | 30/06/2019 (*) | 31/12/2018 | Change |
|---|---|---|---|
| Cash and cash equivalents, net | 149,635 | 122,481 | 27,154 |
| Current financial assets | 1,401 | 997 | 403 |
| Due to banks | (20,634) | (31,990) | 11,356 |
| Due to other providers of finance | (442) | (689) | 247 |
| Financial liabilities IFRS 16 | (22,629) | - | (22,629) |
| Net financial position - Short-term | 107,331 | 90,799 | 16,532 |
| Due to banks | (27,989) | (23,366) | (4,623) |
| Due to other providers of finance | (912) | (881) | (31) |
| Financial liabilities IFRS 16 | (60,143) | - | (60,143) |
| Net financial position - Long-term | (89,044) | (24,247) | (64,797) |
| Total net financial position | 18,287 | 66,552 | (48,265) |
(*) The half year data of 2019 include financial liabilities for 82,772 thousand Euros following the application of the new accounting standard IFRS 16. Net of this effect, the group's net financial position at 30 June 2019 would have amounted to 101,059 thousand Euros.
Change in the item cash and cash equivalents is summarized in the table below:
| (thousand Euros) | 1st half 2019 |
|---|---|
| Cash flows from operating activities (A) | 80,713 |
| Cash flows from investment activities (B) | (21,220) |
| Cash flows from financial activities (C) | (32,339) |
| Change in cash and cash equivalents (D) = (A+B+C) | 27,154 |
| Cash and cash equivalents at beginning of period (*) | 122,481 |
| Cash and cash equivalents at year end (*) | 149,635 |
| Total change in cash and cash equivalents (D) | 27,154 |
(*) Liquid assets and cash equivalents net are net of current account overdrafts
The complete consolidated cash flow statement and the details of cash and other cash equivalents net are set forth below in the financial statements.
Reply offers high technology services and solutions in a market where innovation is of primary importance.
Reply considers research and continuous innovation a fundamental asset in supporting clients with the adoption of new technology.
Reply dedicates resources to Research and Development activities in order to project and define highly innovative products and services as well as possible applications of evolving technologies. In this context, Reply has developed its own platforms.
Reply has important partnerships with major global vendors so as to offer the most suitable solutions to different company needs. Specifically, Reply boasts the highest level of certification amongst the technology leaders in the Enterprise sector.
During the period, there were no transactions with related parties, including intergroup transactions, which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered.
The company in the notes to the financial statements and consolidated financial statements provides the information required pursuant to Art. 154-ter of the TUF [Consolidated Financial Act] as indicated by Consob Reg. no. 17221 of 12 March 2010, indicating that there were no significant transactions concluded during the period.
Information on transactions with related parties as per Consob communication of 28 July 2006 is disclosed at the annexed tables herein.
At June 30, 2019 the number of employees of the Group was 7,924 with an increase of 318 compared to December 31, 2018 and an increase of 673 resources compared to June 30, 2018.
In the first half 2019 Reply achieved very positive results, both in terms of turnover and margins. The first six months of the year have been marked by a huge number of projects focused on our core offering: cloud, IoT and connected products, data platforms and digital experience.
Over the course of those months, Reply saw a strong drive from new applications linked to the use of artificial intelligence and automation using robotics, specifically applied to both to autonomous cars and business processes.
The current world is now firmly modelled on a combination of artificial intelligence, cloud platforms and network connectivity. This new digital foundation represents the starting point from which further changes in technology and organisations, such as blockchain or 5G, will be introduced. New opportunities will open for emerging markets and unexplored business models, for which the capacity to understand and better exploit the technology as well as to integrate it with human components will be the key to success.
Turin, August 1, 2019
/s/ Mario Rizzante
For the Board of Directors The Chairman Mario Rizzante
| (thousand Euors) | Note | 1° half 2019 (**) | 1° half 2018 | Year 2018 |
|---|---|---|---|---|
| Revenues | 5 | 573,672 | 498,054 | 1,035,793 |
| Other income | 5,916 | 5,240 | 14,996 | |
| Purchases | 6 | (11,126) | (9,177) | (20,513) |
| Personnel | 7 | (290,091) | (249,451) | (508,652) |
| Services and other costs | 8 | (193,663) | (176,720) | (379,730) |
| Amortization, depreciation and write-downs | 9 | (18,014) | (6,285) | (13,848) |
| Other operating and non-recurring (cost)/income | 10 | 905 | 456 | 4,364 |
| Operating income | 67,599 | 62,117 | 132,410 | |
| (Loss)/gain on investments | 11 | 4,230 | 2,470 | 6,862 |
| Financial income/(expenses) | 12 | (1,613) | (360) | (55) |
| Income before taxes | 70,216 | 64,227 | 139,217 | |
| Income taxes | 13 | (19,638) | (18,093) | (38,230) |
| Net income | 50,578 | 46,134 | 100,987 | |
| Non controlling interest | (1,165) | (192) | (1,075) | |
| Group net result | 49,414 | 45,941 | 99,913 | |
| Earnings per share and diluted | 14 | 1.32 | 1.23 | 2.67 |
(*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Consolidated statement of income are reported in the Annexed tables herein and fully described in Note 35.
(**) The impacts on the main economic figures relating to the application of the new Accounting Standard IFRS 16 are disclosed in the Report on Operations and in Note 2 at
| (thousand Euros) | Note | 1st half 2019 | 1st half 2018 |
|---|---|---|---|
| Profit of the period (A) | 50,578 | 46,134 | |
| Other comprehensive income that will not be reclassified subsequently to profit or loss |
|||
| Actuarial gains/(losses) from employee benefit plans | (1,054) | 103 | |
| Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): |
26 | (1,054) | 103 |
| Other comprehensive income that may be reclassified subsequently to profit or loss: |
|||
| Gains/(losses) on cash flow hedges | (1,834) | (766) | |
| Gains/(losses) on exchange differences on translating foreign operations |
(24) | 1,279 | |
| Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2) |
(1,858) | 513 | |
| TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX (B) = (B1) +(B2) |
26 | (2,912) | 616 |
| Total comprehensive income (A)+(B) | 47,666 | 46,750 | |
| Total comprehensive income attributable to: | |||
| Owners of the parent | 46,502 | 46,557 | |
| Non-controlling interest | 1,165 | 192 |
| (thousand Euros) | Note | 30/06/2019 (**) | 31/12/2018 | 30/06/2018 |
|---|---|---|---|---|
| Tangible assets | 15 | 44,711 | 44,452 | 39,322 |
| Goodwill | 16 | 252,480 | 243,236 | 207,586 |
| Intangible assets | 17 | 13,889 | 14,201 | 14,891 |
| Right of use assets | 18 | 82,339 | - | - |
| Equity investments | 19 | 52,449 | 47,512 | 41,044 |
| Other financial assets | 20 | 6,703 | 5,255 | 5,903 |
| Deferred tax assets | 21 | 30,352 | 27,299 | 24,687 |
| Non current assets | 482,923 | 381,955 | 333,432 | |
| Inventories | 22 | 154,810 | 77,061 | 157,082 |
| Trade receivables | 23 | 264,639 | 434,389 | 247,453 |
| Other receivables and current assets | 24 | 51,954 | 53,642 | 45,890 |
| Financial assets | 20 | 1,401 | 997 | 1,283 |
| Cash and cash equivalents | 25 | 150,924 | 128,060 | 121,515 |
| Current assets | 623,727 | 694,149 | 573,223 | |
| TOTAL ASSETS | 1,106,650 | 1,076,104 | 906,655 | |
| Share Capital | 4,863 | 4,863 | 4,863 | |
| Other reserves | 463,636 | 380,521 | 382,127 | |
| Net result of the period | 49,414 | 99,913 | 45,941 | |
| Group shareholders' equity | 26 | 517,913 | 485,297 | 432,932 |
| Non controlling interest | 26 | 1,613 | 1,315 | (82) |
| NET EQUITY | 519,526 | 486,612 | 432,850 | |
| Due to minority shareholders and Earn out | 27 | 47,124 | 45,295 | 38,701 |
| Finacial liabilities | 28 | 28,901 | 24,247 | 52,204 |
| Financial liabilities from RoU | 28 | 60,143 | - | - |
| Employee benefits | 29 | 39,720 | 37,738 | 32,854 |
| Deferred tax liabilities | 30 | 16,725 | 17,128 | 18,636 |
| Provisions | 31 | 6,200 | 7,021 | 13,290 |
| Non current liabilities | 198,813 | 131,430 | 155,685 | |
| Finacial liabilities | 28 | 22,365 | 38,258 | 20,363 |
| Financial liabilities from RoU | 28 | 22,629 | - | - |
| Trade payables | 32 | 111,839 | 123,387 | 94,990 |
| Other current liabilities | 33 | 231,170 | 296,109 | 202,592 |
| Provisions | 31 | 308 | 308 | 174 |
| Current liabilities | 388,310 | 458,061 | 318,120 | |
| TOTAL LIABILITIES | 587,123 | 589,492 | 473,805 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 1,106,650 | 1,076,104 | 906,655 |
(*) Pursuant to Consob Regulation No. 15519 of 27 July 2006, the effects of related-party transactions on the Consolidated statement of financial position are reported in the Annexed tables herein and fully described in Note 35.
(**) The impacts on the main economic figures relating to the application of the new Accounting Standard IFRS 16 are disclosed in the Report on Operations and in Note 2 at
| (thousand Euros) | Share capital |
Treasury shares |
Capital reserve |
Earning reserve |
Cash flow hedge reserve |
Cumulative translation adjustment reserve |
Reserve for actuarial gains/(losses) |
Non controlling interest |
Total |
|---|---|---|---|---|---|---|---|---|---|
| At January 1°, 2018 | 4,863 | (25) | 72,836 | 338,442 | (34) | (11,171) | (3,508) | 668 | 402,072 |
| Dividends distributed | - | - | - | (13,083) | - | - | - | (650) | (13,733) |
| Total comprehensive income/(loss) |
- | - | - | 45,941 | (766) | 1,279 | 103 | 192 | 46,750 |
| Other changes | - | - | - | (1,945) | - | - | - | (292) | (2,237) |
| At June 30, 2018 | 4,863 | (25) | 72,836 | 369,355 | (800) | (9,892) | (3,405) | (82) | 432,850 |
| (thousand Euros) | Share capital |
Treasury shares |
Capital reserve |
Earning reserve |
Cash flow hedge reserve |
Cumulative translation adjustment reserve |
Reserve for actuarial gains/(losses) |
Non controlling interest |
Total |
|---|---|---|---|---|---|---|---|---|---|
| At January 1°, 2019 | 4,863 | (25) | 72,836 | 421,950 | (1,372) | (10,081) | (2,874) | 1,315 | 486,612 |
| Dividends distributed | - | - | - | (16,833) | - | - | - | (787) | (17,620) |
| Total comprehensive income/(loss) |
- | - | - | 49,414 | (1,834) | (24) | (1,054) | 1,165 | 47,666 |
| Other changes | - | - | - | 2,948 | - | - | - | (80) | 2,868 |
| At June 30, 2019 | 4,863 | (25) | 72,836 | 457,478 | (3,206) | (10,105) | (3,928) | 1,613 | 519,526 |
| (thousand Euros) | 1st half 2019 | 1st half 2018 |
|---|---|---|
| Net result of the period | 49,414 | 45,941 |
| Income taxes | 19,638 | 18,093 |
| Depreciation and amortization | 18,014 | 6,285 |
| Other non-monetary expenses/(income) | (2,486) | (7,445) |
| Change in work in progress | (77,749) | (63,431) |
| Change in trade receivables | 171,276 | 115,511 |
| Change in trade payables | (12,048) | (7,635) |
| Change in other assets and liabilities | (79,611) | (29,803) |
| Income taxes paid | (5,735) | (13,294) |
| Net cash flows from operating activities (A) | 80,713 | 64,223 |
| Payments for tangible and intangible assets | (6,478) | (16,023) |
| Change in right of use assets | (4,010) | - |
| Payments for financial assets | (1,797) | (260) |
| Payments for the acquisition of subsidiaries net of cash acquired | (8,936) | (39,323) |
| Net cash flows from investment activities (B) | (21,220) | (55,607) |
| Dividends paid | (17,620) | (13,733) |
| In payments from loans | - | 42,500 |
| Change in financial liabilities from RoU IFRS 16 | (7,006) | - |
| Repayment of loans | (8,783) | (9,766) |
| Other changes | 1,071 | 129 |
| Net cash flows from financing activities (C) | (32,339) | 19,131 |
| Net cash flows (D) = (A+B+C) | 27,154 | 27,747 |
| Cash and cash equivalents at beginning of period | 122,481 | 86,398 |
| Cash and cash equivalents at period end | 149,635 | 114,144 |
| Total change in cash and cash equivalents (D) | 27,154 | 27,747 |
| Detail of cash and cash equivalents | ||
|---|---|---|
| (thousand Euros) | 1st half 2019 | 1st half 2018 |
| Cash and cash equivalents at beginning of period | 122,481 | 86,398 |
| Cash and cash equivalents | 128,060 | 109,195 |
| Bank overdrafts | (5,578) | (22,798) |
| Cash and cash equivalents at period end | 149,635 | 114,144 |
| Cash and cash equivalents | 150,924 | 121,515 |
| Bank overdrafts | (1,288) | (7,371) |
| General information | NOTE 1 | - General information |
|---|---|---|
| NOTE 2 | - Accounting principles and basis of consolidation | |
| NOTE 3 | - Risk management | |
| NOTE 4 | - Consolidation | |
| Income statement | NOTE 5 | - Revenue |
| NOTE 6 | - Purchases | |
| NOTE 7 | - Personnel | |
| NOTE 8 | - Services and other costs | |
| NOTE 9 | - Amortization, depreciation and write-downs | |
| NOTE 10 | - Other operating and non-recurring income/(expenses) | |
| NOTE 11 | - (Loss)/gain on investments | |
| NOTE 12 | - Financial income/(expenses) | |
| NOTE 13 | - Income taxes | |
| NOTE 14 | - Earnings per share | |
| Statement of financial position - Assets | NOTE 15 | - Tangible assets |
| NOTE 16 | - Goodwill | |
| NOTE 17 | - Other intangible assets | |
| NOTE 18 | - RoU Assets | |
| NOTE 19 | - Equity Investments | |
| NOTE 20 | - Financial assets | |
| NOTE 21 | - Deferred tax assets | |
| NOTE 22 | - Work-in-progress | |
| NOTE 23 | - Trade receivables | |
| NOTE 24 | - Other receivables and current assets | |
| NOTE 25 | - Cash and cash equivalents | |
| Statement of financial position - Liabilities and equity |
NOTE 26 | - |
| NOTE 27 | - Due to minority shareholders and earn-out | |
| NOTE 28 | - Financial liabilities | |
| NOTE 29 | - Employee benefits | |
| NOTE 30 | - Deferred tax liabilities | |
| NOTE 31 | - Provisions | |
| NOTE 32 | - Trade payables | |
| NOTE 33 | - Other current liabilities | |
| Other information | NOTE 34 | - Segment Reporting |
| NOTE 35 | - Transactions with related parties | |
| NOTE 36 | - Guarantees, commitments and contingent liabilities | |
| NOTE 37 | - Events subsequent to 30 June 2019 | |
| NOTE 38 | - Approval of the Half year condensed Consolidated financial statements and authorization to publish |
Reply [MTA, STAR: REY] specializes in the implementation of solutions based on new communication channels and digital media. Reply, consisting of a network of specialist companies, supports important European industries belonging to the Telco & Media, Manufacturing & Retail, Bank & Insurances and Public Administration segments, in defining and developing new business models utilizing Big Data, Cloud Computing, CRM, Mobile, Social Media and Internet of Things paradigms. Reply offers consultancy, system integration, application management and business process outsourcing (www.reply.com).
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the 1606 of July 2002, starting from 1 January, 2005, the Reply Group adopted International Financial Reporting Standards (IFRS). The accounting principles applied are consistent with those used for preparation of the Consolidated Financial Statements at December 31, 2018.
More specifically the half year condensed consolidated financial statements at June 30, 2019 have been prepared in accordance to IAS 34 Interim financial reporting.
The Half-Year financial report has been prepared in accordance with Consob regulations regarding the format of financial statements, in application of art. 9 of Legislative Decree 38/2005 and other Consob regulations and instructions concerning financial statements.
The consolidated financial statements are prepared on the basis of the historic cost principle, modified as requested for the appraisal of some financial instruments for which the fair value criterion is adopted in accordance with IFRS 9.
The consolidated financial statements have been prepared on the going concern assumption. In this respect, uncertainties (as defined in paragraph 25 of IAS 1) exist with regards its ability to continue as a going concern. These consolidated financial statements are expressed in thousands of Euros and are compared to the consolidated financial statements of the previous year prepared in accordance with the same principles.
Further indication related to the format of the financial statements respect to IAS 1 is disclosed here within as well as information related to significant accounting principles and evaluation criteria used in the preparation of the following consolidated report.
The consolidated financial statements includes statement of income, statement of comprehensive income, equity, statement of cash flows and the explanatory notes.
The income statement format adopted by the Group classifies costs according to their nature, which is
The Statement of financial position is prepared according to the distinction between current and non-current assets and liabilities. The statement of cash flows is presented using the indirect method.
The most significant items are disclosed in a specific note in which details related to the composition and changes compared to the previous year are provided.
It should be noted that in order to comply with the indications contained in Consob Resolution no. 15519 of statement of financial position have been disclosed showing the amounts of related party transactions.
Pursuant to IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors), the IFRS in effect since January 1, 2019 are indicated and briefly described hereafter.
The application of the IFRS 16 accounting standard, in use since 1 January 2019, did not result in the restatement of the previous periods used for comparison (modified retrospective approach). According to this standard, liabilities for leasing are measured based on the residual payments set forth in the lease agreement, discounted using the incremental borrowing rate on the date of first adoption. The book value of the right-offirst application. The effects resulting from the application of the new standard are as follows:
| Economic figures (K/000) |
H1 2018 | H1 2019 | Q2 2018 |
Q2 2019 | ||||
|---|---|---|---|---|---|---|---|---|
| pre IFRS 16 |
post IFRS 16 |
Impact | pre IFRS 16 |
post IFRS 16 |
Impact | |||
| Services and other costs |
171,480 | 199,791 | 187,747 | (12,044) | 87,107 | 99,259 | 93,027 | (6,232) |
| EBITDA | 68,335 | 73,611 | 85,655 | 12,044 | 36,133 | 37,079 | 43,311 | 6,232 |
| Amortization and depreciation |
6,285 | 6,565 | 18,014 | 11,449 | 2,737 | 3,314 | 9,254 | 5,940 |
| EBIT | 62,117 | 67,004 | 67,599 | 595 | 33,444 | 33,723 | 34,015 | 292 |
| Financial expenses | 360 | 528 | 1,613 | 1,085 | (10) | 510 | 1,064 | 554 |
| Income before taxes | 64,227 | 70,706 | 70,216 | (490) | 35,924 | 36,273 | 36,011 | (262) |
| Financial figures K/000 |
31-12-18 | 01-01-19 | 30-06-19 | ||
|---|---|---|---|---|---|
| pre IFRS 16 | post IFRS 16 | Impact | |||
| RoU asset | - | 89,788 | - | 82,339 | 82,339 |
| Net financial position | 66,552 | 89,788 | 101,059 | 18,287 | (82,772) |
The commitments existing on December 31, 2018 arising from operating leases (in application of IAS 17) and the lease liabilities recognized in the statements of financial position at January 1, 2019 (in application of IFRS 16) are essentially in line with the financial liability accounted for in the Consolidated statement of financial position as at January 1, 2019 with the exception of the impacts deriving from the discounted cash
flows amounting to approximately 10 million Euros and the effects of the exemptions for short term leases or low value leases which did not have a significant impact.
The average discount rate applied to the lease liabilities recognized in the statements of financial position at the initial application date (January 1, 2019) was between 2 and 3%.
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment On October 23, 2018, Regulation EU no. 2018/1595 was issued which implemented IFRIC 23 - Uncertainty over
income tax treatments.
Amendments to IFRS 9: Prepayment features with negative compensation On March 22, 2018 Regulation EU no. 2018/498 was issued which implemented several amendments to IFRS 9 - Financial instruments.
On March 14, 2019 Regulation EU no. 2019/412 was issued which implemented several amendments to IAS 12 - Income taxes, IAS 23 - Borrowing costs, IFRS 3 - Business combinations and IFRS 11 - Joint arrangements.
IAS 28 (Investments in associates and joint ventures)
On February 8, 2019 Regulation EU no. 2019/237 was issued which implemented several amendments to IAS 28 - Investments in associates and joint ventures.
On March 13, 2019 Regulation EU no. 2019/402 was issued which implemented several amendments to IAS 19 - Employee Benefits.
The adoption of these amendments/interpretations had no impact on the Financial Statements at June 30, 2019.
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the applicable, when they become effective:
The Group does not expect any significant effects on its consolidated financial statements deriving from the new Standards/Interpretations.
With regards to financial counterparty risk, the Group does not present significant risk in credit-worthiness or solvency.
The group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time.
The cash flows, funding requirements and liquidity of the Group companies are monitored and centrally managed under the control of the Group Treasury. The aim is to guarantee the efficiency and effectiveness of the management of current and perspective capital resources (maintaining an adequate level of reserves of liquidity and availability of funds via a suitable amount of committed credit lines).
The difficult economic situation of the markets and of financial markets necessitates special attention being given to the management of the liquidity risk, and in that sense particular emphasis is being placed on measures taken to generate financial resources through operations and maintaining an adequate level of liquid assets. The Group therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans.
The Group entered into most of its financial instruments in Euros, which is its functional and presentation currency. Although it operates in an international environment, it has a limited exposure to fluctuations in the exchange rates.
The exposure to interest rate risk arises from the need to fund operating activities and M&A and investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of fecting the costs and returns of financing and investing transactions.
The interest rate risk to which the Group is exposed derives from bank loans; to mitigate such risks, the Group, when necessary,
strategies that do not contemplate derivative financial instruments for trading purposes.
The IFRS 13 establishes a fair value hierarchy which classifies the input of evaluation techniques on three levels adopted for the measurement of fair value. Fair value hierarchy attributes maximum priority to prices quoted (not rectified) in active markets for identical assets and liabilities (Level 1 data) and the non-observable minimum input priority (Level 3 data). In some cases, the data used to assess the fair value of assets or liabilities could be classified on three different levels of the fair value hierarchy. In such cases, the evaluation of fair value is wholly classified on the same level of the hierarchy in which input on the lowest level is classified, taking account its importance for the assessment.
The levels used in the hierarchy are:
The following table presents the assets and liabilities which were assessed at fair value on 30 June 2019, according to the fair value hierarchical assessment level.
| (thousand Euros) | Note | Level 1 | Level 2 | Level 3 |
|---|---|---|---|---|
| Investments | 19 | - | - | 52,449 |
| Convertible loans | 20 | - | - | 2,374 |
| Financial securities | 20 | 1,401 | - | - |
| Total financial assets | 1,401 | - | 54,883 | |
| IRS | - | 3,206 | ||
| Liabilities to minority shareholders and earn out | 27 | - | - | 47,124 |
| Total financial liabilities | - | 3,206 | 47,124 |
The valuation of investments in start-ups within the Internet of Things (IoT) business, through the acquisition of equity investments and through the issuance of convertible loans, is based on data not directly observable on active stock markets, and therefore falls under the fair value hierarchical Level 3.
The item financial securities is related to securities listed on the active stock markets and therefore falls under the fair value hierarchical Level 1.
To determine the effect of interest rate derivate financial instruments Reply refers to evaluation deriving from third parties (banks and financial institutes). The latter, in the calculation of their estimates made use of data observed on the market directly (interest rates) or indirectly (interest rate interpolation curves observed directly): consequently, for the purposes of IFRS7 the fair value used by the Group for the exploitation of hedging derivatives contracts in existence as at 30 June 2019 re-enters under the hierarchy profile in level 2.
The fair value of Liabilities to minority shareholders and earn out was determined by Group management on parameters based on budgets and plans of the purchased company. As the parameters are not observable on stock markets (directly or indirectly) these liabilities fall under the hierarchy profile in Level 3.
As at 30 June 2019, there have not been any transfers within the hierarchy levels.
Companies included in the consolidation are included on a line-by-line basis.
Change in consolidation compared to 30 June 2018 is related to:
June 2019 (5.1% on revenues).
also includes in the consolidation, with respect to 30 June 2018, the newly incorporated company Core Reply S.r.l., a company incorporated in the month of October 2018 under Italian law of which Reply S.p.A. holds 90% of the share capital.
Revenues from sales and services, including change in work in progress, amounted to 573,672 thousand Euros (498,054 thousand Euros al 30 June 2018).
This item includes consulting services, fixed price projects, assistance and maintenance services and other minor revenues.
The following table shows the percentage breakdown of revenues by Region. Moreover, the breakdown reflects the business management of the Group by Top Management and the allocation approximates the localization of services provided:
| Region (*) | 1st half 2019 | 1st half 2018 |
|---|---|---|
| Region 1 | 68.70% | 69.10% |
| Region 2 | 21.90% | 18.50% |
| Region 3 | 9.30% | 12.20% |
| IoT Incubator | 0.10% | 0.20% |
| Totale | 100.00% | 100.00% |
(*) Region 1: ITA, USA, BRA, POL, ROU Region 2: DEU, CHE, CHN, HRV Region 3: GBR, LUX, BEL, NLD, FRA, BRL
The following table shows the breakdown of revenues by Business Line:
| Business line | 1st half 2019 | 1st half 2018 |
|---|---|---|
| Tecnologia | 60,00% | 56,10% |
| Applicazioni | 30,60% | 33,20% |
| Processi | 9,40% | 10,70% |
| Totale | 100,00% | 100,00% |
Detail is as follows:
| (thousand Euros) | 1st half 2019 | 1st half 2018 | Change |
|---|---|---|---|
| Software licenses for resale | 7,042 | 5,990 | 1,051 |
| Hardware for resale | 1,351 | 228 | 1,123 |
| Other | 2,733 | 2,959 | (225) |
| Total | 11,126 | 9,177 | 1,949 |
Purchases of Software licenses and Hardware licenses for resale are recognized net of any change in inventory.
The item Other includes the purchase of fuel for 1,358 thousand Euros, the purchase of office stationery for 456 thousand Euros and the purchase of consumption material for 327 thousand Euros.
Detail is as follows:
| (thousand Euros) | 1st half 2019 | 1st half 2018 | Change |
|---|---|---|---|
| Payroll employees | 271,702 | 230,469 | 41,233 |
| Executive Directors | 18,389 | 18,982 | (593) |
| Total | 290,091 | 249,451 | 40,640 |
The increase in the cost of employees, amounting to 40,640 thousand Euros, is attributable to the total
Detail of personnel by category is provided below:
| (number) | 1st half 2019 | 1st half 2018 | Change |
|---|---|---|---|
| Directors | 279 | 264 | 15 |
| Managers | 990 | 858 | 132 |
| Staff | 6,655 | 6,129 | 526 |
| Total | 7,924 | 7,251 | 673 |
On 30 June 2019 the Group had 7,924, employees compared with 7,251 of the first half 2018.
Change in consolidation brought an increase to the workforce equal to 261 employees.
Payroll employees comprise mainly electronic engineers and economic, computer science, and business graduates from the best Universities.
Services and other costs comprised the following:
| (thousand Euros) | 1st half 2019 | 1st half 2018 | Change |
|---|---|---|---|
| Commercial and technical consulting | 129,021 | 103,384 | 25,637 |
| Travelling and professional training expenses | 19,683 | 17,618 | 2,065 |
| Other services | 32,011 | 33,139 | (1,128) |
| Office charges | 6,181 | 14,410 | (8,229) |
| Rental and leasing | 2,380 | 4,040 | (1,660) |
| Other | 4,387 | 4,129 | 258 |
| Total | 193,663 | 176,720 | 16,943 |
Change in Services and other costs, amounting to 16,943 thousand Euros, is attributable to an overall increase
The item Other services cost mainly includes marketing services, administrative and legal services, telephone and canteen.
Office expenses include services rendered by related parties referred to service contracts for the use of premises, domiciliation and provision of secretarial services for 641 thousand Euros and rent charged by third parties for 468 thousand Euros, utility costs for 3,369 thousand Euros, cleaning expenses for 886 thousand Euros and maintenance expenses for 458 thousand Euros.
The decrease of the items Office charges and Rental and leasing compared to the first half 2018 is mainly due to the reversal of the rent fees following the application of IFRS 16.
Depreciation of tangible assets, calculated on the basis of economic-technical rates determined in relation to the residual useful lives of the assets, resulted in an overall charge as at 30 June 2019 of 4,437 thousand Euros. Details of depreciation are provided in the notes to tangible assets.
Amortization of intangible assets for the first half 2019 amounted to 2,128 thousand Euros. Details of depreciation are provided in the notes to intangible assets.
Amortization related to RoU assets arising from the adoption of IFRS 16 amounted to 11,449 thousand Euros.
Other operating and non recurring income amounted to 905 thousand Euros (456 thousand Euros in the first half of 2018) and for:
The item amounted to positive 4,230 thousand Euros and is related to:
Detail is as follows:
| (thousand Euros) | 1st half 2019 | 1st half 2018 | Change |
|---|---|---|---|
| Financial income | 236 | 330 | (94) |
| Interest expenses | (443) | (327) | (116) |
| Other | (1,405) | (363) | (1,042) |
| Total | (1,613) | (360) | (1,252) |
Financial gains amounting to 120 thousand Euros referred mainly to interest on bank accounts.
Interest expenses mainly include expenses related to loans for M&A operations.
The item Other mainly includes:
At June 30, 2019 income taxes amounted to 19,638 thousand Euros and were recognized in accordance to the expected annual average income tax rates.
The basic earnings per share as at 30 June 2019 was amounting to 49,414 thousand Euros (45,941 thousand Euros as at 30 June 2018) divided by the weighted average number of shares as at 30 June 2019 which amounted to 37,407,400 (37,407,400 as at 30 June 2018).
| (in Euros) | 1st half 2019 | 1st half 2018 |
|---|---|---|
| Group net result | 49.414.000 | 45.941.000 |
| No. of shares | 37.407.400 | 37.407.400 |
| Basic earnings per share | 1,32 | 1,23 |
financial instruments potentially convertible in shares (stock options).
Tangible assets as at 30 June 2019 amounted to 44,711 thousand Euros and are detailed as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Buildings | 19,519 | 18,480 | 1,039 |
| Plant and machinery | 4,031 | 3,868 | 163 |
| Hardware | 5,837 | 6,134 | (297) |
| Other | 15,324 | 15,970 | (646) |
| Total | 44,711 | 44,452 | 259 |
Change in tangible assets in the first half of 2019 is summarized in the table below:
| (thousand Euros) | Buildings | Plant and machinery |
Hardware | Other | Total |
|---|---|---|---|---|---|
| Historical cost | 21,041 | 12,722 | 37,260 | 33,157 | 104,180 |
| Accumulated depreciation | (2,561) | (8,854) | (31,126) | (17,187) | (59,728) |
| 31/12/2018 | 18,480 | 3,868 | 6,134 | 15,970 | 44,452 |
| Historical cost | |||||
| Increases | 1,160 | 872 | 1,668 | 1,004 | 4,704 |
| Disposals | - | (670) | (208) | (138) | (1,016) |
| Change in consolidation | - | 58 | 3 | 60 | 121 |
| Other changes | - | (52) | (36) | 63 | (24) |
| Accumulated depreciation | |||||
| Depreciations | (126) | (777) | (1,803) | (1,730) | (4,437) |
| Utilized | - | 670 | 180 | 90 | 941 |
| Change in consolidation | - | - | - | (34) | (34) |
| Other changes | 5 | 61 | (101) | 40 | 5 |
| Historical cost | 22,201 | 12,930 | 38,688 | 34,145 | 107,964 |
| Accumulated depreciation | (2,681) | (8,899) | (32,851) | (18,821) | (63,253) |
| 30/06/2019 | 19,519 | 4,031 | 5,837 | 15,324 | 44,711 |
The item Buildings mainly includes:
Increase in the item Plant and machinery refers to the purchase of general devices and to plant systems for the offices in which the Group operates. In addition, the item includes financial lease for 268 thousand Euros (315 thousand Euros at 31 December 2018).
Change in the item Hardware is due to investments made by the companies included in Region 1 for 951 thousand Euros, 527 thousand Euros for purchases made by the companies included in Region 2 and 190 thousand Euros for purchases made by the companies included in Region 3. Furthermore this item includes financial leases for 162 thousand Euros (137 at 31 December 2018).
The item Other assets as at 30 June 2019 mainly includes improvements to third party assets and office furniture. The increase of 1,004 Euros mainly refers to the purchases of furniture and fittings for 415 thousand Euros. Such item also includes a financial leasing for furniture for a net value amounting to 998 thousand Euros (793 thousand Euros at 31 December 2018).
Other changes mainly refer to exchange differences.
As at 30 June 2019 tangible assets were depreciated by 58.6% of their value, compared to 57.3% at the end of 2018.
This item includes goodwill arising from consolidation of subsidiaries and the value of business branches purchased against payment made by some Group companies.
untries in which the Group operates, and are summarized as follows:
| Value at | Value at | |||
|---|---|---|---|---|
| (thousand Euros) | 31/12/2018 | Increase | Exchange difference | 30/06/2019 |
| Region 1 | 89.974 | - | 190 | 90,164 |
| Region 2 | 99,892 | 8,993 | - | 108,885 |
| Region 3 | 53,369 | - | 61 | 53,430 |
| Total | 243,236 | 8,993 | 251 | 252,479 |
Increase in Goodwill compared to 31 December 2018 owes to the acquisition of Neveling GmbH, a company incorporated under the German law of which Reply AG holds 100% of share capital, specializing in content-management systems activities based on sitecore technologies.
The following table summarizes the calculation of the temporary goodwill and the aggregate book value of the companies as at the acquisition date.
| (thousand Euros) | Fair value (*) |
|---|---|
| Tangible and intangible assets | 34 |
| Trade receivables and other currents assets | 1,526 |
| Cash and cash equivalents | 694 |
| Financial liabilities | - |
| Trade payables and other current liabilities | (500) |
| Net deferred taxes | (161) |
| Net assets acquired | 1,593 |
| Transaction value | 10,586 |
| Goodwill | 8,993 |
| (*) book value is equal to fair value |
In the first half of 2019 the Group did no detect any impairment indicators.
Net intangible assets as at 30 June 2019 amounted to 13,889 thousand Euros (14,201 thousand Euros on 31 December 2018) and are detailed as follows:
| (thousand Euros) | Cost original | Depreciation and amortization cumulative |
Net book value as at 30/06/2019 |
|---|---|---|---|
| Development costs | 29,132 | (25,213) | 3,918 |
| Software | 26,660 | (22,066) | 4,593 |
| Trademarks | 537 | - | 537 |
| Other intangible assets | 7,915 | (3,074) | 4,841 |
| Total | 64,243 | (50,354) | 13,889 |
| (thousand Euros) | Net book value as at 31/12/2018 |
Increase | Cumulative amortization |
Change in consolidation |
Other changes |
Net book value as at 30/06/2019 |
|---|---|---|---|---|---|---|
| Development costs | 4,584 | 608 | (1,273) | - | - | 3,918 |
| Software | 3,811 | 1,106 | (347) | 23 | - | 4,593 |
| Trademark | 537 | - | - | - | - | 537 |
| Other intangible assets | 5,270 | - | (508) | - | 80 | 4,841 |
| Total | 14,201 | 1,714 | (2,128) | 23 | 80 | 13,889 |
Change in intangible assets in the first half of 2019 is summarized in the table below:
Development costs refer to software and are accounted for in accordance with provisions of IAS 38.
The item Software mainly refers to software licenses purchased and used internally by the Group companies. This item includes 636 thousand Euros related to software development for internal use.
Company Reply S.p.A. (at the time Reply Europe Sàrl), in connection with the share capital increase that was resolved and subscribed to by the Parent Company. Such amount is not subject to systematic amortization.
The item Other intangible assets mainly refers to the Purchase Price Allocation following several Business combinations related to previous years.
The application of the IFRS 16 accounting standard, in use since 1 January 2019, resulted in the accounting of the book value of the right-ofleasing on the date of first application, net of any accrued income/costs or deferred revenue/expenses related to the lease. The table below shows the RoU Assets divided by category:
| (thousand Euros) | 01/01/2019 | Net changes | Amortization | 30/06/2019 |
|---|---|---|---|---|
| Buildings | 79,724 | 2,885 | (9,160) | 73,449 |
| Vehicles | 9,859 | 1,105 | (2,181) | 8,783 |
| Office equipment | 205 | 10 | (108) | 107 |
| Total | 89,788 | 4,000 | (11,449) | 82,339 |
The item Equity investments amounts to 52,449 thousand Euros and refers to investments in start-up companies in the IoT field made principally by the Investment company Breed Investments Ltd.
Note that the companies listed below, mainly held through an Investment Entity, are designated at fair value and accounted for in accordance with IFRS 9. The fair value is determined using the International Private Equity and Venture Capital valuation guideline (IPEV) and, as per industry practice, any change therein is recognized in profit /(loss) in the period in which they occurred.
Detail is as follows:
| (thousand Euros) | Value at 31/12/2018 |
New increases |
Follow-on investments |
Net fair value evaluation |
Impairment | Convertible loans conversion |
Exchange differences |
Value at 30/06/2019 |
|---|---|---|---|---|---|---|---|---|
| Investments | 47,503 | - | 736 | 4,230 | - | - | (21) | 52,449 |
The increase is related to the acquisition of share capital of investments already existing at December 31, 2018.
The net fair value evaluation amounting to 4,230 thousand Euros reflects the market values adjustments of the last rounds that took place in the first half 2019 on investments already in portfolio.
All fair value assessments shall be part of the hierarchy level 3.
Current and non-current financial assets amounted to a total of 8,104 thousand Euros compared to 6,253 thousand Euros as at 31 December 2018.
Detail is as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Receivables from insurance companies | 3,127 | 3,127 | - |
| Guarantee deposits | 1,163 | 1,115 | 49 |
| Financial receivables from non consolidated subsidiaries |
- | 300 | (300) |
| Other financial assets | 39 | 32 | (7) |
| Convertible loans | 2,374 | 982 | 1,392 |
| Short term securities | 1,401 | 697 | 704 |
| Total | 8,104 | 6,253 | 1,851 |
The item Receivables from insurance companies mainly refers to the insurance premiums paid against
Convertible loans relate to the option to convert into shares of the following start-up company in the field of IoT, detail is as follows:
| Value at 31/12/2018 |
Increases | Interests | Net fair value evaluation |
Equity conversion |
Exchange differences |
Value at 30/06/2019 |
|---|---|---|---|---|---|---|
| 982 | 1,310 | 86 | - | - | (4) | 2,374 |
The amount is referred to new investments in convertible loans during the first half.
The short-term securities mainly refer to time-limited investments (Time Deposit).
Note that the items Receivables from insurance companies, Convertible loans, Guarantee deposits and Other financial assets are not included in the net financial position.
Such item, which amounted to 30,352 thousand Euros as at 30 June 2019 (27,299 thousand Euros as at 31 December 2018), includes the fiscal charge corresponding to the temporary differences deriving from income before taxes and taxable income in relation to deferred deductibility items.
The decision to recognize deferred tax assets is taken by assessing critically whether the conditions exist for the future recoverability of such assets on the basis of expected future results.
Work in progress, amounting to 154,810 thousand Euros, is detailed as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Contract work in progress | 231,168 | 131,663 | 99,505 |
| Advance payments from customers | (76,358) | (54,602) | (21,756) |
| Total | 154,810 | 77,061 | 77,749 |
Any advance payments made by the customers are deducted from the value of the inventories, within the limits of the accrued consideration; the exceeding amounts are accounted as liabilities.
Trade receivables as at 30 June 2019 amounted to 264,639 thousand Euros with a net decrease of 169,750 thousand Euros.
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Domestic clients | 175,719 | 324,047 | (148,328) |
| Foreign trade receivables | 95,272 | 120,511 | (25,239) |
| Credit notes to be issued | (606) | (4,440) | 3,834 |
| Total | 270,385 | 440,118 | (169,733) |
| Allowance for doubtful accounts | (5,746) | (5,729) | (17) |
| Total trade receivables | 264,639 | 434,389 | (169,750) |
Trade receivables are shown net of allowances for doubtful accounts amounting to 5,746 thousand Euros at 30 June 2019 (5,729 thousand Euros at 31 December 2018).
The Allowance for doubtful accounts developed in the first half of 2019 as follows:
| (thousand Euros) | 31/12/2018 | Provision | Utilization | Reversal | 30/06/2019 |
|---|---|---|---|---|---|
| Allowance for doubtful accounts | 5,729 | 225 | (1) | (207) | 5,746 |
The carrying amount of Trade receivables is in line with its fair value.
Trade receivables are all collectible within one year.
The Group assigns part of its trade receivables through factoring operations.
The assignments of receivables can be with or without recourse; some assignments without recourse can include deferred payment clauses (for example, payment by the factor of a minor part of the purchase price is subordinated on the collection of the total amount of the receivables), require a deductible from the assignor, or require maintaining significant exposure to the cash flow trend deriving from the assigned receivables. This type of operation does not comply with the requirements of IAS 39 for the elimination of the assets from the financial statements, since the risks and benefits related to their collection have not been substantially transferred.
Consequently, all receivables assigned through factoring operations that do not satisfy the requirements for elimination provided by IFR they have been legally assigned and a financial liability for the same amount is recognized in the consolidated financial statements as Liabilities for advance payments on assignments of receivables. Gains and losses related to the assignment of these assets are only recognized when the assets are derecognized from the -economic position.
The book value of the assets assigned without recourse as at 30 June 2019 amounted to 5,419 thousand Euros, with the same increase of available liquidity.
As at 30 June 2019 there are no receivables transferred via Factoring operations with recourse.
Detail is as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Tax receivables | 20,115 | 21,486 | (1,371) |
| Advances to employees | 169 | 125 | 44 |
| Accrued income and prepaid expenses | 19,010 | 18,590 | 420 |
| Other receivables | 12,660 | 13,441 | (781) |
| Total | 51,954 | 53,642 | (1,688) |
The item Tax receivables mainly includes:
The item Other receivables includes the contributions receivable in relation to research projects for 6,768 thousand Euros (6,742 thousand Euros at 31 December 2018) .
The balance of 150,924 thousand Euros, with an increase of 22,864 thousand Euros compared with 31 December 2018, represents cash and cash equivalents as at the end of reporting period. Changes in cash and cash equivalents are fully detailed in the Consolidated statement of cash flows.
As at 30 June 2019 the share capital of Reply S.p.A., fully subscribed and paid, amounted to 4,863,486 Euros and comprises 37,411,428 ordinary shares of a nominal value of 0.13 Euros each.
The value of the Treasury shares, amounting to 25 thousand Euros, refers to the shares of Reply S.p.A. held by the parent company, that at 30 June 2019 are equal to n. 4.028.
On 30 June 2019 Capital reserves, amounting to 72,836 thousand Euros, were mainly comprised as follows:
Earnings reserves amounted to 457,478 thousand Euros and were comprised as follows:
Other comprehensive income
Other comprehensive income can be analyzed as follows:
| (thousand) Euros | 1st half 2019 | 1st half 2018 |
|---|---|---|
| Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax: |
||
| Actuarial gains/(losses) from employee benefit plans | (1,054) | 103 |
| Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): |
(1,054) | 103 |
| Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax: |
||
| Gains/(losses) on cash flow hedges | (1,834) | (766) |
| Gains/(losses) on exchange differences on translating foreign operations |
(24) | 1,279 |
| Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2): |
(1,858) | 513 |
| Total other comprehensive income, net of tax (B) = (B1) +(B2) | (2,912) | 616 |
.
Due to minority shareholders and earn out owed on 30 June 2019 amount to 47,124 thousand Euros (45,295 thousand Euros on 31 December 2018) and are detailed as follows:
| (thousand Euros) | 31/12/2018 | Increases | Fair value adjustments |
Payments | Exchange differences |
30/06/2019 |
|---|---|---|---|---|---|---|
| Payables to minority shareholders | 23,817 | - | - | (4,835) | 103 | 19,085 |
| Payables for Earn out | 21,478 | 6,527 | 41 | - | (8) | 28,038 |
| Total due to minority shareholders and earn out |
45,295 | 6,527 | 41 | (4,835) | 95 | 47,124 |
The increase in Payables for Earn out amounting to 6,527 is related to the acquisition of Neveling GmbH, a company incorporated under the German law of which Reply AG holds 100% of share capital, specializing in content-management systems activities based on sitecore technologies.
The item Fair value adjustments in the first half of 2019 amounted to 41 thousand Euros with a balancing entry in Profit and loss, reflects the best estimate in relation to the deferred consideration originally posted at the time of acquisition.
Detail is as follows:
| 30/06/2019 | 31/12/2018 | ||||||
|---|---|---|---|---|---|---|---|
| (thousand Euros) | Current | Non current | Total | Current | Non current | Total | |
| Bank overdrafts | 1,288 | - | 1,288 | 5,578 | - | 5,578 | |
| Bank loans | 20,634 | 27,989 | 48,624 | 31,990 | 23,366 | 55,356 | |
| Total due to banks | 21,923 | 27,989 | 49,912 | 37,569 | 23,366 | 60,935 | |
| Other financial borrowings | 442 | 912 | 1,354 | 689 | 881 | 1,570 | |
| IFRS 16 financial liabilities | 22,629 | 60,143 | 82,772 | - | - | - | |
| Total financial liabilities | 44,993 | 89,044 | 134,037 | 38,258 | 24,247 | 62,505 |
The following table illustrates the distribution of financial liabilities by due date:
| 30/06/2019 | 31/12/2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| (thousand Euros) | Due in 12 months |
From 1 to 5 years |
Over 5 years |
Total | Due in 12 months |
From 1 to 5 years |
Over 5 years |
Total |
| Bank overdrafts | 1,288 | - | - | 1,288 | 5,578 | - | - | 5,578 |
| M&A loans | 17,036 | 13,357 | - | 30,393 | 30,214 | 8,571 | - | 38,786 |
| Mortgage loans | 444 | 4,829 | 9,804 | 15,076 | 455 | 4,235 | 10,560 | 15,250 |
| Other financial borrowings | 442 | 912 | - | 1,354 | 689 | 881 | - | 1,570 |
| IFRS 16 financial liabilities | 22,629 | 50,860 | 9,284 | 82,772 | - | - | - | - |
| Derivative financial instruments | 3,155 | - | - | 3,155 | 1,321 | - | - | 1,321 |
| Total | 44,993 | 69,957 | 19,087 | 134,037 | 38,258 | 13,687 | 10,560 | 62,505 |
M&A loans refer to credit lines to be used for acquisition operations carried out directly by Reply S.p.A. or via companies controlled directly or indirectly by the same.
Summarized below are the existing contracts entered into for such a purpose:
Interest rates are also applied according to certain predetermined ratios (Covenants) of economic and financial nature calculated on the consolidated financial statements as at 31 December of each year and/or the consolidated interim report.
As contractually defined, such ratios are as follows:
At 30 June 2019, Reply fulfilled the Covenants under the various contracts.
The item Mortgages refers to financing granted to Tool Reply GmbH, for the acquisition of the building where the German company has its registered office. Reimbursement takes place via six monthly instalments (at 4.28%) with expiry on 30 September 2019.
It should be noted that during the year 2018 Tool Reply GmbH entered into a line of credit with Commerzbank for a total amount of 2,500 thousand Euros to be used by 28 June 2028. The loan is reimbursed on a quarterly basis (at an interest rate of 0.99%).
It should also be noted that on 24 May 2018 Reply S.p.A. undersigned with Unicredit S.p.A. a mortgage loan secured by guarantee for the purchase and renovation of the property De Sonnaz for a total amount of 40,000 thousand Euros and for a maximum duration of 156 months (13 years). The mortgage is disbursed in relation to the progress of the work and within the maximum period of 36 months commencing June 1, 2018. On 25 May 2018 the first disbursement of 12,500 thousand Euros was made.
The item IFRS 16 financial liabilities is related to the financial lease liabilities at 30 June 2019 related to the adoption of the new Accounting Standard IFRS 16.
Other financial borrowings are related to financial leases determined according to IAS 17.
The item Derivative financial instruments refers to loans whose underlying notional amounts to 50,643 thousand Euros.
The carrying amount of Financial liabilities is deemed to be in line with its fair value.
In compliance with Consob regulation issued on 28 July 2006 and in accordance with ESMA guidelines, the net financial position of the Reply Group at 30 June 2019 was as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Cash and cash equivalents | 150,924 | 128,060 | 22,864 |
| Current financial assets | 1,401 | 997 | 403 |
| Total financial assets | 152,324 | 129,057 | 23,267 |
| Current financial liabilities | (22,365) | (38,258) | 15,894 |
| Current IFRS 16 financial liabilities | (22,629) | - | (22,629) |
| Non-current financiali liabilities | (28,901) | (24,247) | (4,654) |
| Non-current IFRS 16 financial liabilities | (60,143) | - | (60,143) |
| Total financial liabilities | (134,037) | (62,505) | (71,532) |
| Total net financial position | 18,287 | 66,552 | (48,265) |
For further details with regards to the above table see Note 25 as well as Note 28.
Change in financial liabilities during the first half of 2019 is summarized below:
| (thousand Euros) | |
|---|---|
| Total financial liabilities 2018 | 62,505 |
| Bank overdrafts | (5,578) |
| Fair value IRS | (1,322) |
| Non-current financial liabilities 2018 | 55,605 |
| IFRS 16 financial liabilities | 82,772 |
| Cash flows | (8,783) |
| Total non-current financial liabilities as at 30 June 2019 | 129,593 |
| Bank overdrafts | 1,288 |
| Fair value IRS | 3,155 |
| Total financial liabilities as at 30 June 2019 | 134,037 |
Employee benefits are detailed as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Employee severeance indemnities | 27,624 | 25,707 | 1,917 |
| Employee pension funds | 10,547 | 10,518 | 29 |
| Directors severance indemnities | 1,534 | 1,498 | 36 |
| Other | 16 | 16 | - |
| Total | 39,720 | 37,738 | 1,981 |
The Employee severance indemnity represents the obligation to employees under Italian law (amended by Law 296/06) that has accrued up to 31 December 2006 and that will be settled when the employee leaves the company. In certain circumstances, a portion of the accrued liability may be given to an employee during his working life as an advance. This is an unfunded defined benefit plan, under which the benefits are almost fully accrued, with the sole exception of future revaluations.
employees was carried out by an independent actuary according to the following stages:
and on the existing employees, that is analytical calculations were made on each employee in force in the company at the assessment date without considering future work force.
The actuarial valuation model is based on the so called technical bases which represent the demographic, economic and financial assumptions underlying the parameters included in the calculation.
In accordance with IAS 19, Employment severance indemnities at 30 June 2019 are summarized in the table below:
| (thousand Euros) | |
|---|---|
| Balance as at 31/12/2018 | 25,707 |
| Cost relating to current work (service cost) | 2,323 |
| Actuarial gain/loss | 1,076 |
| Interest cost | 193 |
| Change in consolidation | 25 |
| Indemnities paid during the year | (1,700) |
| Balance as at 30/06/2019 | 27,624 |
The Pension fund item relates to liability as regards the defined benefit pensions of some German companies.
This amount is related to Directors severance indemnities paid during the year.
Deferred tax liabilities at 30 June 2019 amount to 16,725 thousand Euros and are referred mainly to the fiscal effects arising from temporary differences deriving from statutory income and taxable income related to deferred deductibility.
Deferred tax liabilities have not been recognized on retained earnings of the subsidiary companies as the Group is able to control the timing of distribution of said earnings and in the near future does not seem likely.
Provisions amount to 6,508 thousand Euros (of which 6,200 thousand Euros are non-current). Change in the first half of 2019 is summarized in the table below:
| (thousand Euros) | Balance at 31/12/2018 |
Accruals | Utilization | Reversals | Other changes | Balance at 30/06/2019 |
|---|---|---|---|---|---|---|
| Fidelity fund | 319 | 5 | (2) | - | - | 322 |
| Provision for risks | 7,010 | - | (605) | (250) | 32 | 6,187 |
| Totale | 7,329 | 5 | (607) | (250) | 32 | 6,508 |
Employee fidelity provisions refer mainly to provisions made for the employees of some German companies in relation to anniversary bonuses. The liability is determined through actuarial calculations applying a 5.5% rate.
The Provision for risks represents the best estimate for contingent liabilities. The accrual of the half year is referred to the update of this estimate and to new legal ongoing controversies, lawsuits with former employees and other liabilities in Italy and abroad.
The item Utilization is related to the merger by incorporation described in Note 36 where in 2018 the German court took note of the agreement reached between the parties, recognizing to the minority shareholders the payment of the sums established. The expenses arising from this agreement were accrued in previous years.
Other changes mainly refer to translation differences.
Trade payables at 30 June 2019 amount to 111,839 thousand Euros and are detailed as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Domestic suppliers | 94,779 | 99,600 | (4,822) |
| Foreign suppliers | 17,818 | 24,376 | (6,559) |
| Advances to suppliers | (758) | (590) | (168) |
| Total | 111,839 | 123,387 | (11,548) |
Other current liabilities at 30 June 2019 amounted to 231,170 thousand Euros with a decrease of 64,938 thousand Euros with respect to the previous financial year.
Detail is as follows:
| (thousand Euros) | 30/06/2019 | 31/12/2018 | Change |
|---|---|---|---|
| Income tax payable | 22,402 | 8,000 | 14,403 |
| VAT payable | 3,748 | 13,802 | (10,054) |
| Withholding tax and other | 5,277 | 7,423 | (2,146) |
| Total due to tax authorities | 31,427 | 29,224 | 2,203 |
| National social insurance payable | 25,445 | 28,308 | (2,863) |
| Other | 2,329 | 2,417 | (87) |
| Total due to social securities | 27,775 | 30,725 | (2,950) |
| Employee accruals | 76,099 | 80,354 | (4,255) |
| Other payables | 88,990 | 139,043 | (50,052) |
| Accrued expenses and deferred income | 6,879 | 16,764 | (9,884) |
| Total other payables | 171,969 | 236,160 | (64,191) |
| Other current liabilities | 231,170 | 296,109 | (64,938) |
Due to tax authorities amounting to 31,427 thousand Euros, mainly refers to payables due to tax authorities
Due to social security authorities amounting to 27,775 thousand Euros, is related to both Company and employees contribution payables.
Other payables at 30 June 2019 amount to 171,969 thousand Euros and mainly include:
Accrued Expenses and Deferred Income mainly relate to advance invoicing in relation to T&M consultancy activities to be delivered in the subsequent financial periods.
Segment reporting has been prepared in accordance with IFRS 8, as a breakdown of revenues by geographic area, determined as the area in which the services are executed.
| (thousand Euros) | Region 1 | % | Region 2 | % | Region 3 | % | IoT Incubator |
% | Interseg | Total 1st half 2019 |
% |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 398,541 | 100 | 126,981 | 100 | 54,220 | 100 | 415 | 100 | (6,485) | 573,672 | 100 |
| Operating costs | (332,396) | (83.4) | (109,682) | (86.4) | (50,196) | (92.6) | (2,228) | (536.7) | 6,485 | (488,017) | (85.1) |
| Gross operating income |
66,145 | 16.6 | 17,299 | 13.6 | 4,024 | 7.4 | (1,813) | (436.7) | 85,655 | 14.9 | |
| Amortization, depreciation and write-downs |
(10,828) | (2.7) | (4,391) | (3.5) | (2,722) | (5.0) | (74) | (17.8) | (18,014) | (3.1) | |
| Other non-recurring (costs)/income |
- | - | - | - | (41) | (0.1) | - | - | (41) | - | |
| Operating income | 55,318 | 13.9 | 12,908 | 10.2 | 1,260 | 2.3 | (1,887) | (454.5) | 67,599 | 11.8 | |
| Gain/(loss) on investments |
- | - | - | - | 1 | - | 4,229 | 1,018.5 | 4,230 | 0.7 | |
| Financial income/(loss) |
552 | - | (1,232) | (1.0) | (537) | (1.0) | (397) | (95.5) | (1,613) | (0.3) | |
| Income before taxes | 55,870 | 14.0 | 11,676 | 9.2 | 725 | 1.3 | 1,945 | 468.5 | 70,216 | 12.2 |
| (thousand Euros) | Region 1 | % | Region 2 | % | Region 3 | % | IoT Incuba tor |
% | Interseg | Total 1st half 2018 |
% | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 347,790 | 100 | 93,172 | 100 | 61,268 | 100 | 925 | 100 | (5,102) | 498,054 | 100 | |
| Operating costs | (297,282) | (85.5) | (80,496) | (86.4) | (54,550) | (89.0) | (2,494) | (269.6) | 5,102 | (429,720) | (86.3) | |
| Gross operating income |
50,508 | 14.5 | 12,677 | 13.6 | 6,718 | 11.0 | (1,569) | (169.6) | 68,335 | 13.7 | ||
| Amortization, depreciation and write-downs |
(4,394) | (1.3) | (1,095) | (1.2) | (784) | (1.3) | (12) | (1.3) | (6,285) | (1.3) | ||
| Other non-recurring (costs)/income |
283 | - | 275 | - | (490) | (0.8) | - | - | 68 | - | ||
| Operating income | 46,397 | 13.3 | 11,857 | 12,7 | 5,445 | 8.9 | (1,581) | (170.9) | 62,117 | 12.5 | ||
| Gain/(loss) on investments |
- | - | - | - | - | - | 2,470 | 267 | 2,470 | 0.5 | ||
| Financial income/(loss) |
2,592 | 1 | (551) | (0.6) | (448) | (0.7) | (1,953) | (211.1) | (360) | (0.1) | ||
| Income before taxes |
48,988 | 14.1 | 11,305 | 12.1 | 4,997 | 8.2 | (1,063) | (114.9) | 64,227 | 12.9 |
Breakdown of revenues by type is as follows:
| REGION 1 | REGION 2 | REGION 3 | IoT INCUBATOR | |||||
|---|---|---|---|---|---|---|---|---|
| BUSINESS LINE | 1st half 19 | 1st half 18 | 1st half 19 | 1st half 18 | 1st half 19 | 1st half 18 | 1st half 19 | 1st half 18 |
| T&M | 65,361 | 56,342 | 71,490 | 54,412 | 27,652 | 31,124 | - | - |
| FIXED PRICE PROJECTS | 333,180 | 291,448 | 55,491 | 38,760 | 26,568 | 30,144 | - | - |
| OTHER BUSINESS | - | - | - | - | - | - | 415 | 925 |
| TOTAL | 398,541 | 347,790 | 126,981 | 93,172 | 54,220 | 61,268 | 415 | 925 |
| (thousand Euros) | Region 1 | Region 2 | Region 3 | IoT Incubator | Intersegment | Total 1° half 2019 |
|---|---|---|---|---|---|---|
| Current operating assets | 389,678 | 73,270 | 38,470 | 273 | (30,288) | 471,403 |
| Current operating liabilities | (292,289) | (46,935) | (21,780) | (12,601) | 30,288 | (343,317) |
| Net working capital (A) | 97,389 | 26,335 | 16,690 | (12,327) | - 128,086 |
|
| Non-current assets | 186,692 | 161,903 | 79,330 | 54,998 | - 482,923 |
|
| Non-financial liabilities long term | (54,409) | (49,033) | (6,327) | - | - | (109,769) |
| Fixed capital (B) | 132,446 | 112,814 | 73,003 | 54,998 | - 373,154 |
|
| Net invested capital (A+B) | 229,835 | 139,149 | 89,693 | 42,671 | - 501,240 |
|
| (thousand Euros) | Region 1 | Region 2 |
Region 3 | IoT Incubator |
Intersegment | 31/12/2018 |
| Current operating assets | 465,884 | 76,609 | 45,146 | 163 | (22,710) | 565,092 |
| Current operating liabilities | (338,074) | (61,973) | (28,678) | (13,787) | 22,710 | (419,803) |
| Net working capital (A) | 127,810 | 14,636 | 16,467 | (13,625) | - | 145,288 |
| Non-current assets | 142,988 | 122,281 | 65,914 | 48,600 | - | 379,783 |
| Non-financial liabilities long term | (56,097) | (42,397) | (6,517) | - | - | (105,011) |
| Fixed capital (B) | 86,891 | 79,884 | 59,397 | 48,600 | - | 274,772 |
Breakdown of employees by operating segment is as follows:
| Region | 1st half 2019 | 1st half 2018 | Change |
|---|---|---|---|
| Region 1 | 5,659 | 5,402 | 257 |
| Region 2 | 1,636 | 1,218 | 418 |
| Region 3 | 625 | 619 | 6 |
| IoT Incubator | 4 | 12 | (8) |
| Total | 7,924 | 7,251 | 673 |
In accordance with IAS 24 Related parties are Group companies and persons that are able to exercise control, joint control or have significant influence on the Group and on its subsidiaries,
Transactions carried out by the group companies with related parties that as of the reporting date are considered ordinary business and are carried out at normal market conditions,
The main economic and financial transactions with related parties are summarized below.
| (thousand Euros) | |||
|---|---|---|---|
| Financial transactions | 30/06/2019 | 31/12/2018 | Nature of transactions |
| Trade receivables | 9 | 25 | Receivables from professional services |
| Trade payables | 114 | 136 | Payables for professional services and office rentals offices |
| Other payables | 2,256 | 4,522 | Payables for emoluments s to Directors and Managers with strategic responsibilities and Board of Statutory Auditors |
| Economic transactions | 1st half 2019 | 1st half 2018 | Nature of transactions |
| Revenues from professional services | 3 | 4 | Professional services executed |
| Services from Parent company and related parties |
641 | 545 | Service contracts relating to office rental and administration office |
| Personnel | 1.383 | 2.096 | Emoluments to Directors and Key Management with strategic responsibilities |
| Services and other costs | 56 | 61 | Emoluments to Statutory Auditors |
Reply Group Main economic and financial transactions
In accordance with IAS 24, emoluments to Directors, Statutory Auditors and Key Management are also included in transactions with related parties,
In accordance with Consob Resolution no, 15519 of 27 July 2006 and Consob communication no, DEM/6064293 of 28 July 2006 the financial statements annexed herein present the Consolidated Income statement and Balance Sheet showing transactions with related parties separately, together with the percentage incidence with respect to each account caption,
Pursuant to Art, 150, paragraph 1 of the Italian Legislative Decree n, 58 of 24 February 1998, no transactions have been carried out by the members of the Board of Directors that might be in potential conflict of interests with the Company.
Guarantees and commitments where existing, have been disclosed at the item to which they refer,
Note that:
Within three months from the registration of the merger in the Turin Companies Register, each minority shareholder was able to present a petition for the purpose of commencing, in compliance with German law, before a Judge qualified in Germany who shall have exclusive jurisdiction the assessment inherent in the Share Swap ratio and the corresponding amount in cash. All shareholders of Reply Deutschland will have the right to benefit from a possible increase in the exchange ratio determined by the Judge or on the basis of an agreement between the parties, and that is to say independently of their participation in the evaluation procedure. On the contrary, from the possible increase of the corresponding amount in cash determined by the Judge or on the basis of an agreement between the parties only the shareholders who verbally annotated their disagreement in the general meeting in respect of conditions of the law can benefit.
In the case where evaluation procedures include a modification of the exchange ratio, every single difference shall be regulated in cash.
At past, some minority shareholders have commenced the aforementioned procedures.
Following exchanges with the minority shareholders and their appointed representative, the Company has reached a settlement agreement where the payment of an additional amount of 4.41 Euros per share of Reply
Deutschland was agreed plus legal interest, in addition to the flat-rate reimbursement of proceedings costs. On 18 June 2018, the German court took note of the agreement reached between the parties. The expenses arising from this agreement amounting to approximately 5 million Euros is covered by specific provisions (please see Note 31).
As an international company, the Group is exposed to numerous legal risks, particularly in the area of product liability, environmental risks and tax matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal judgments could give rise to expenses that are not position and results,
Instead, when it is probable that an overflow of resources embodying economic benefits will be required to settle obligations and this amount can be reliably estimated, the Group recognizes specific provision for this purpose,
No significant events have occurred subsequent to 30 June 2019.
The Half year condensed consolidated financial statements at 30 June 2019 were approved by the Board of Directors on August 1, 2019 which authorized the publication within the terms of law.
| (thousand Euros) | 1st half 2019 | of which with related parties |
% | 1st half 2018 | of which with related parties |
% |
|---|---|---|---|---|---|---|
| Revenues | 573,672 | 3 | - | 498,054 | 4 | - |
| Other income | 5,916 | 5,240 | ||||
| Purchases | (11,126) | (9,177) | ||||
| Personnel | (290,091) | (1,383) | 0.5% | (249,451) | (2,096) | 0.8% |
| Services and other costs | (193,663) | (697) | 0.4% | (176,720) | (606) | 0.3% |
| Amortization, depreciation and write-downs |
(18,014) | (6,285) | ||||
| Other non-recurring (cost)/income |
905 | 456 | ||||
| Operating income | 67,599 | 62,117 | ||||
| Income from associate companies |
4,230 | 2,470 | ||||
| Financial income/(expenses) | (1,613) | (360) | ||||
| Income before taxes | 70,216 | 64,227 | ||||
| Income taxes | (19,638) | (18,093) | ||||
| Net income | 50,578 | 46,134 | ||||
| Non controlling interest | (1,165) | (192) | ||||
| Group net result | 49,414 | 45,941 |
| of which with | of which | |||||
|---|---|---|---|---|---|---|
| (thousand Euros) | 30/06/2019 | related parties |
% | 31/12/2018 | with related parties |
% |
| Tangible assets | 44,711 | 44,452 | ||||
| Goodwill | 252,480 | 243,236 | ||||
| Intangible assets | 13,889 | 14,201 | ||||
| RoU Assets | 82,339 | - | ||||
| Equity investments | 52,449 | 47,512 | ||||
| Other financial assets | 6,703 | 5,255 | ||||
| Deferred tax assets | 30,352 | 27,299 | ||||
| Non current assets | 482,923 | 381,955 | ||||
| Inventories | 154,810 | 77,061 | ||||
| Trade receivables | 264,639 | 9 | - | 434,389 | 25 | - |
| Other receivables and current assets | 51,954 | 53,642 | ||||
| Financial assets | 1,401 | 997 | ||||
| Cash and cash equivalents | 150,924 | 128,060 | ||||
| Current assets | 623,727 | 694,149 | ||||
| TOTAL ASSETS | 1,106,650 | 1,076,104 | ||||
| Share Capital | 4,863 | 4,863 | ||||
| Other reserves | 463,636 | 380,521 | ||||
| Net result of the period | 49,414 | 99,913 | ||||
| Group shareholders' equity | 517,913 | 485,297 | ||||
| Non controlling interest | 1,613 | 1,315 | ||||
| NET EQUITY | 519,526 | 486,612 | ||||
| Due to minority shareholders and Earn-out | 47,124 | 45,295 | ||||
| Finacial liabilities | 28,901 | 24,247 | ||||
| Financial liabilities from RoU | 60,143 | - | ||||
| Employee benefits | 39,720 | 37,738 | ||||
| Deferred tax liabilities | 16,725 | 17,128 | ||||
| Provisions | 6,200 | 7,021 | ||||
| Non current liabilities | 198,813 | 131,430 | ||||
| Finacial liabilities | 22,365 | 38,258 | ||||
| Financial liabilities from RoU | 22,629 | - | ||||
| Trade payables | 111,839 | 114 | 0.1% | 123,387 | 136 | 0.1% |
| Other current liabilities | 231,170 | 2,256 | 1.0% | 296,109 | 4,522 | 1.5% |
| Provisions | 308 | 308 | ||||
| Current liabilities | 388,310 | 458,061 | ||||
| TOTAL LIABILITIES | 587,123 | 589,492 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
1,106,650 | 1,076,104 |
| Company name | Headquarters | Group interest | |
|---|---|---|---|
| Parent company | |||
| Reply S.p.A. | Turin Corso Francia, 110 - Italy |
||
| Companies consolidates on a line-by-line basis | |||
| 4brands Reply GmbH & CO. KG. | Minden, Germany | 51.00% | |
| Air Reply S.r.l. (*) | Turin, Italy | 85.00% | |
| Arlanis Reply S.r.l. | Turin, Italy | 100.00% | |
| Arlanis Reply AG | Potsdam, Germany | 100.00% | |
| Aktive Reply S.r.l. | Turin, Italy | 100.00% | |
| Atlas Reply S.r.l. | Turin, Italy | 100.00% | |
| Avantage Reply Ltd. | London, United Kingdom | 100.00% | |
| Avantage Reply GmbH | Munich, Germany | 100.00% | |
| Avantage Reply (Belgium) Sprl | Brussels, Belgium | 100.00% | |
| Avantage Reply (Luxembourg) Sarl | Itzig, Luxembourg | 100.00% | |
| Avantage Reply (Netherlands) BV | Amsterdam, Netherland | 100.00% | |
| Avvio Reply Ltd. | London, United Kingdom | 100.00% | |
| Blue Reply S.r.l. | Turin, Italy | 100.00% | |
| Blue Reply GmbH | Guetersloh, Germany | 100.00% | |
| Bridge Reply S.r.l. | Turin, Italy | 60.00% | |
| Business Reply S.r.l. | Turin, Italy | 100.00% | |
| Breed Reply Ltd. | London, United Kingdom | 100.00% | |
| Breed Reply Investment Ltd. | London, United Kingdom | 80.00% | |
| Cluster Reply S.r.l. | Turin, Italy | 100.00% | |
| Cluster Reply GmbH & CO. KG | Munich, Germany | 100.00% | |
| Cluster Reply Informatica LTDA. | San Paolo, Brazil | 100.00% | |
| Cluster Reply Roma S.r.l. | Turin, Italy | 100.00% | |
| ComSysto Reply GmbH (*) | Munich, Germany | 100.00% | |
| Concept Reply GmbH | Munich, Germany | 100.00% | |
| Consorzio Reply Public Sector | Turin, Italy | 100.00% | |
| Core Reply S.r.l. | Turin, Italy | 90.00% | |
| Data Reply S.r.l. | Turin, Italy | 100.00% | |
| Data Reply GmbH (*) | Munich, Germany | 92.50% | |
| Discovery Reply S.r.l. | Turin, Italy | 100.00% | |
| e*finance consulting Reply S.r.l. | Turin, Italy | 100.00% | |
| Ekip Reply S.r.l. | Turin, Italy | 100.00% | |
| Elbkind Reply GmbH | Hamburg, Germany | 100.00% | |
| Eos Reply S.r.l. | Turin, Italy | 100.00% |
| Envision Reply S.r.l. | Turin, Italy | 88.00% |
|---|---|---|
| First Development Hub, LLC | Minsk, Belarus | 100.00% |
| Forge Reply S.r.l. | Turin, Italy | 100.00% |
| France Reply Ltd. | London, United Kingdom | 100.00% |
| Go Reply S.r.l. | Turin, Italy | 100.00% |
| Go Reply GmbH | Guetersloh, Germany | 100.00% |
| Hermes Reply S.r.l. | Turin, Italy | 100.00% |
| Hermes Reply Polska zo.o | Katowice, Poland | 100.00% |
| Implico LLC | Seattle, USA | 100.00% |
| Industrie Reply GmbH | Munich, Germany | 100.00% |
| Industrie Reply LLC | Michigan, USA | 100.00% |
| InEssence Reply GmbH | Düsseldorf, Germany | 100.00% |
| Infinity Reply GmbH | Düsseldorf, Germany | 100.00% |
| IrisCube Reply S.p.A. | Turin, Italy | 100.00% |
| Leadvise Reply GmbH | Darmstadt, Germany | 100.00% |
| Lem Reply S.r.l. | Turin, Italy | 100.00% |
| Like Reply S.r.l. | Turin, Italy | 100.00% |
| Live Reply GmbH | Düsseldorf, Germany | 100.00% |
| Logistics Reply S.r.l. | Turin, Italy | 100.00% |
| Lynx Recruiting Ltd. | London, United Kingdom | 100.00% |
| Macros Reply GmbH | Munich, Germany | 100.00% |
| MCG Systems AG | Colony, Germany | 100.00% |
| Modcomp GmbH | Colony, Germany | 100.00% |
| Neveling.net GmbH | Hamburg, Germany | 100.00% |
| Open Reply GmbH | Guetersloh, Germany | 100.00% |
| Open Reply S.r.l. | Turin, Italy | 100.00% |
| Pay Reply S.r.l | Turin, Italy | 100.00% |
| Portaltech Reply Ltd. | London, United Kingdom | 100.00% |
| Portaltech Reply S.r.l. | Turin, Italy | 100.00% |
| Portaltech Reply GmbH | Guetersloh, Germany | 100.00% |
| Portaltech Reply Süd GmbH | Munich, Germany | 100.00% |
| Power Reply S.r.l. | Turin, Italy | 100.00% |
| Power Reply GmbH & CO. KG. | Munich, Germany | 100.00% |
| Profondo Reply GmbH | Guetersloh, Germany | 100.00% |
| Protocube Reply S.r.l. | Turin, Italy | 70.00% |
| Reply Consulting S.r.l. | Turin, Italy | 100.00% |
| Reply AG | Guetersloh, Germany | 100.00% |
| Reply GmbH | Zurich, Switzerland | 100.00% |
| Reply do Brasil Sistemas de Informatica Ltda | Belo Horizonte, Brazil | 100.00% |
| Reply Inc. | Michigan, USA | 100.00% |
| Reply Ltd. | London, United Kingdom | 100.00% |
| Reply Belgium Sprl | Mont Saint Guibert, Netherland | 100.00% |
|---|---|---|
| Reply Digital Experience S.r.l. | Turin, Italy | 100.00% |
| Reply France Sarl | Paris, France | 100.00% |
| Reply Luxembourg Sarl | Sandweiler, Luxembourg | 100.00% |
| Reply NL Ltd. | London, United Kingdom | 100.00% |
| Reply Services S.r.l. | Turin, Italy | 100.00% |
| Reply Verwaltung GmbH | Guetersloh, Germany | 100.00% |
| Retail Reply S.r.l. | Turin, Italy | 100.00% |
| Ringmaster S.r.l. | Turin, Italy | 50.00% |
| Risk Reply Ltd. | London, United Kingdom | 100.00% |
| Riverland Reply GmbH | Munich, Germany | 100.00% |
| Santer Reply S.p.A. | Milan, Italy | 100.00% |
| Security Reply S.r.l. | Turin, Italy | 100.00% |
| Sense Reply S.r.l. | Turin, Italy | 90.00% |
| Solidsoft Reply Ltd. | London, United Kingdom | 100.00% |
| Spark Reply S.r.l. | Turin, Italy | 100.00% |
| Spark Reply GmbH | Germany | 100.00% |
| Spike Reply GmbH | Colony, Germany | 100.00% |
| Sprint Reply S.r.l. | Turin, Italy | 100.00% |
| Sprint Reply GmbH (formerly Twice Reply GmbH) | Munich, Germany | 100.00% |
| Storm Reply S.r.l. | Turin, Italy | 100.00% |
| Storm Reply GmbH | Guetersloh, Germany | 100.00% |
| Syskoplan Reply S.r.l. | Turin, Italy | 100.00% |
| Syskoplan Reply GmbH & CO. KG | Guetersloh, Germany | 100.00% |
| Sytel Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Sytel Reply S.r.l. | Turin, Italy | 100.00% |
| Target Reply S.r.l. | Turin, Italy | 100.00% |
| TamTamy Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Bucharest, Romania | 100.00% |
| TD Reply GmbH | Berlin, Germany | 100.00% |
| TD Marketing Consultants, Beijing Co. Ltd. | China | 100.00% |
| Tool Reply GmbH | Guetersloh, Germany | 100.00% |
| Triplesense Reply GmbH | Frankfurt, Germany | 100.00% |
| Twice Reply S.r.l. | Turin, Italy | 100.00% |
| Valorem LLC (*) | Kansas City, USA | 80.00% |
| Valorem Private Ltd | India | 99.99% |
| Valorem GmbH | Zurich, Switzerland | 100.00% |
| WM Reply Ltd | London, United Kingdom | 100.00% |
| Whitehall Reply S.r.l. | Turin, Italy | 100.00% |
| Xister Reply S.r.l. (*) | Turin, Italy | 89.20% |
|---|---|---|
| Companies carried at fair value | ||
| Amiko Digital Health Limited | England | 22.73% |
| CageEye AS | Norway | 10.16% |
| Callsign Inc. | England | 3.61% |
| Canard Drones Ltd. | Spain | 24.06% |
| Connecterra BV | Belgium | 23.25% |
| enModus Ltd. | England | 19.18% |
| Food Marble Digestive Health Ltd. | England | 23.45% |
| iNova Design Ltd. | England | 34.68% |
| Iotic Labs Limited | England | 18.31% |
| Kokoon Technology Ltd. | England | 39.71% |
| Metron Sas | France | 8.05% |
| RazorSecure Ltd. | England | 32.06% |
| Senseye Ltd. | England | 12.57% |
| Sensoria Inc. | USA | 24.00% |
| Sentryo SAS | France | 13.30% |
| TAG Sensors AS | Norway | 15.60% |
| Ubirch GmbH | Germany | 20.83% |
| We Predict Ltd. | England | 16.64% |
| Wearable Technologies Ltd. | England | 20.05% |
| Yellow Line Parking Ltd. | England | 9.86% |
| Zeetta Networks Limited | England | 29.28% |
(*) For these companies an option exists for the acquisition of the minority shares; the exercise of such option in future reporting periods is subject to the date.
3.1 the Half-year condensed financial statements at June 30, 2019:
Turin, August 1, 2019
/s/ Mario Rizzante /s/ Giuseppe Veneziano
Chairman and Chief Executive Officer Director responsible of drawing up the accounting documents
Mario Rizzante Giuseppe Veneziano
To the shareholders of Reply SpA
We have reviewed the accompanying consolidated condensed interim financial statements of Reply SpA and its subsidiaries (the Reply Group) as of 30 June 2019, comprising the consolidated statement of financial position, consolidated statement of income, consolidated statement of comprehensive income, statement of changes in consolidated equity, consolidated statement of cash flows and related notes. The directors of Reply SpA are responsible for the preparation of the consolidated condensed interim financial statements in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on these consolidated condensed interim financial statements based on our review.
We conducted our work in accordance with the criteria for a review recommended by Consob in Resolution No. 10867 of 31 July 1997. A review of consolidated condensed interim financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than a fullscope audit conducted in accordance with International Standards on Auditing (ISA Italia) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated condensed interim financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated condensed interim financial statements of the Reply Group as of 30 June 2019 are not prepared, in all material respects, in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the European Union.
The consolidated financial statements as of and for the year ended 31 December 2018 and the consolidated condensed interim financial statements for the period ended 30 June 2018 were audited and reviewed, respectively, by other auditors, who on 26 March 2019 expressed an unqualified opinion on the consolidated financial statements, and on 3 August 2018 expressed an unqualified conclusion on the consolidated condensed interim financial statements.
Turin, 5 August 2019
PricewaterhouseCoopers SpA
Mattia Molari (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
HEADQUARTER Reply S.p.A. Corso Francia. 110 10143 TURIN ITALY Tel. +39-011-7711594 Fax +39-011-7495416 www.reply.com
Share capital: Euro 4,863,485.64 i.v. Fiscal code and R.I. of Turin no. 97579210010 VAT 08013390011 REA of Turin 938289
MARKETING E-mail: [email protected] Tel. +39-011-7711594 Fax +39-011-7495416
INVESTOR RELATOR E-mail: [email protected] Tel. +39-02-535761 Fax +39-02-53576444
Corso Francia, 110, 10143 Turin – Italy Tel. +39-011-7711594 Fax. +39-011-7495416 [email protected] www.reply.com
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