Quarterly Report • Nov 9, 2018
Quarterly Report
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Investor Relator Marco Paredi Tel: 035.4232840 - Fax: 035.3844606 e-mail: [email protected]
Registered Office: Piazza Sant'Ambrogio, 16 – 20123 Milan Fully paid up share capital as at 30 September 2018 Euro 10,708,400 Milan Register of Companies no. 314026 Tax and VAT code 10227100152
Website: www.tesmec.com Switchboard: 035.4232911
TABLE OF CONTENTS
| COMPOSITION OF THE CORPORATE BODIES7 |
|---|
| GROUP STRUCTURE9 |
| INTERIM CONSOLIDATED REPORT ON OPERATIONS11 |
| 1. Introduction12 |
| 2. Macroeconomic Framework 12 |
| 3. Significant events during the period 13 |
| 4. Activity, reference market and operating performance for the first nine months of 201815 |
| 5. Income statement16 |
| 6. Summary of balance sheet figures as at 30 September 2018 19 |
| 7. Management and types of financial risk 21 |
| 8. Atypical and/or unusual and non-recurring transactions with related parties21 |
| 9. Group Employees22 |
| 10. Other information 22 |
| INTERIM REPORT ON OPERATIONS 23 |
| Consolidated statement of financial position as at 30 September 2018 and as at 31 December 2017 24 |
| Consolidated income statement for the period ended 30 September 2018 and 2017 25 |
| Consolidated statement of comprehensive income for the period ended 30 September 2018 and 2017 26 |
| Statement of consolidated cash flows for the period ended 30 September 2018 and 2017 27 |
| Statement of changes in consolidated shareholders' equity for the period ended |
| 30 September 2018 and 2017 28 |
| Explanatory notes29 |
| Certification pursuant to Article 154-bis of Italian Legislative Decree 58/9848 |
COMPOSITION OF THE CORPORATE BODIES
Board of Directors (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)
| Chairman and Chief Executive Officer | Ambrogio Caccia Dominioni |
|---|---|
| Vice Chairman | Gianluca Bolelli |
| Directors | Sergio Arnoldi () Gioacchino Attanzio () Guido Giuseppe Maria Corbetta () Caterina Caccia Dominioni Lucia Caccia Dominioni Paola Durante () |
| (*) Independent Directors |
Board of Statutory Auditors (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)
| Chairman | Simone Cavalli |
|---|---|
| Statutory Auditors | Stefano Chirico Alessandra De Beni |
| Alternate Auditors | Attilio Marcozzi Stefania Rusconi |
Members of the Control and Risk Committee (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)
Chairman Sergio Arnoldi
Members Gioacchino Attanzio Gianluca Bolelli
Members of the Remuneration and Appointments Committee (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)
| Chairman | Gioacchino Attanzio |
|---|---|
| Members | Sergio Arnoldi Caterina Caccia Dominioni |
| Lead Independent Director | Gioacchino Attanzio |
| Director in charge of the internal control and risk management system |
Caterina Caccia Dominioni |
| Manager responsible for preparing the Company's financial statements |
Gianluca Casiraghi |
| Independent Auditors | EY S.p.A. |
GROUP STRUCTURE
(1) The remaining 33.96% is held by Simest S.p.A. Since Tesmec has an obligation to buy back the portion held by Simest S.p.A., for accounting purposes the shareholding of the Parent Company in Marais Technologies SAS is consolidated on an 100% basis.
(Not audited by the Independent Auditors)
The parent company Tesmec S.p.A. (hereinafter "Parent Company" or "Tesmec") is a legal entity organised in accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA (screen-based share market) STAR Segment of the Milan Stock Exchange. The registered office of the Tesmec Group (hereinafter "Group" or "Tesmec Group") is in Milan, Piazza S. Ambrogio 16.
The Tesmec Group is a leader in the design, production and marketing of special products and integrated solutions for the construction, maintenance and streamlining of infrastructures relating to the transmission of electrical power and data and material transport.
Founded in Italy in 1951 and managed by the Chairman and Chief Executive Officer Ambrogio Caccia Dominioni, the Group as from its listing on the Stock Exchange on 1 July 2010, pursued the stated objective of diversification of the types of products in order to offer a complete range of integrated solutions grouped into three main areas of business: Energy, Trencher and Rail. The structure has more than 850 employees and production plants located in Grassobbio (Bergamo), Endine Gaiano (Bergamo), Sirone (Lecco) and Monopoli (Bari) in Italy, Alvarado (Texas) in the USA and Durtal in France. Furthermore, after the reorganisation of the Automation sector, Tesmec Automation has 3 additional operating units available in Fidenza, Padua and Patrica (Frosinone). The Group has a global commercial structure, with a direct presence on different continents, through foreign companies and sales offices in the USA, South Africa, Russia, Qatar, China and France.
Through the different types of product, the Group is able to offer:
▪ machines and integrated systems for the installation, maintenance and diagnostics of the railway catenary wire system, plus customised machines for special operations on the line.
The know-how achieved in the development of specific technologies and innovative solutions and the presence of a team of highly-skilled engineers and technicians allow the Tesmec Group to directly manage the entire production chain: from the design, production and marketing of machinery to the supply of know-how relating to the use of systems and optimisation of work, to all pre- and post-sales services related to machinery and the increase in site efficiency.
The global macroeconomic context is going through a phase of turbulence related both to the European context, due to the tensions between the Italian Government and the European Commission, and to the world context, in the light of the trade war between the USA and China. However, macroeconomic data describes a consolidation of growth where the US economy is more vibrant, with an increasing GDP and an investment plan in line with the expansionary policies envisaged by the current government. China is experiencing a downturn due to trade tensions that are leading it to revise its current debt reduction estimates and look for ways to squeeze the economy. In the meantime, Europe is consolidating its growth forecasts. In particular, in Italy, the current cyclical phase remains characterised by a slowdown in industrial production, as opposed to the growth trend of the manufacturing index in the last three years, but accompanied by a recovery in exports. Positive signs come from the labour market with a recovery in employment and a significant reduction in unemployment.
The Stock Markets experienced a phase of reflection and, in particular, note the drop in the Italian index that loses about 24% of its capitalisation from May to date because of the political tensions in progress. The outlook remains uncertain in the coming
months due to the tensions mentioned above, but the widening of the spread could be functional to the achievement of more conciliatory positions between Italy and Europe and the post-election phase of the mid-term elections could mitigate trade hostilities between the United States and China. In the short term, the dollar is expected to strengthen and the position to be rebalanced in the medium term. On the commodity front, Brent should stabilise its bullish phase, thus continuing to support investments in related sectors.
The extraordinary transactions that occurred during the period include the following:
on 6 April 2018, the Ordinary Shareholders' Meeting of Tesmec met in single call and approved all items on the agenda. In detail, the Shareholders' Meeting approved the 2017 Financial Statements of the Parent Company Tesmec S.p.A., which closed with a Net Profit of Euro 1.9 million, up 20.9% compared to the Euro 1.6 million posted as at 31 December 2016, and resolved to allocate this Net Profit for the year to the Extraordinary reserve. The Shareholders' Meeting also resolved favourably on the First Section of the Report on Remuneration pursuant to Article 123-ter of Legislative Decree no. 58/98 and authorised also the Board of Directors, for a period of 18 months, to purchase, on the regulated market, ordinary shares of Tesmec until 10% of the share capital of the Company and within the limits of the distributable profits and of the available reserves resulting from the last financial statements duly approved by the Company or the subsidiary company making the purchase. The authorisation also includes the right to dispose of (in whole or in part and also in several times) the shares in the portfolio subsequently, even before having exhausted the maximum amount of shares purchasable and to possibly repurchase the shares to the extent that the treasury shares held by the Company and, if necessary, by the companies controlled by it, do not exceed the limit established by the authorisation. The quantity and the price at which transactions will be made will comply with the operating procedures laid down by the regulations. This authorisation replaces the last authorisation resolved by the Shareholders' Meeting on 28 April 2017 and expiring in October 2018. The resolution concerning authorisation to purchase treasury shares was passed with the favourable vote of the majority of the Tesmec shareholders at the shareholders' meeting other than the majority shareholder and therefore, pursuant to Article 44-bis of the Issuer Regulation, the shares that the Issuer will purchase in executing this resolution will be included in the share capital of the Issuer, on which the significant equity investment for the purpose of Article 106, paragraphs 1, 1-bis, 1-ter and 3 of the TUF will be calculated;
on 3 May 2018, the Tesmec Board of Directors, subject to the favourable opinion of the Board of Statutory Auditors, appointed Gianluca Casiraghi as new Chief Financial Officer and Manager responsible for preparing the Company's financial statements. The Board of Directors also approved the launch of the programme to purchase treasury shares, the purpose, duration and counter value of which were established in the resolution of the shareholders' meeting dated 6 April 2018, while the maximum quantity was set as 10% of Share Capital. The Board of Directors also resolved that the maximum number of shares that may be purchased each day shall be no more than 25% of the average daily volume of "Tesmec" shares traded on the market;
The consolidated financial statements of Tesmec have been prepared in accordance with International Financial Reporting Standards (hereinafter the "IFRS" or the "International Accounting Standards"), which were endorsed by the European Commission, in effect as at 31 December 2017. The following table shows the major economic and financial indicators of the Group as at September 2018 compared with the same period of 2017.
| OVERVIEW OF RESULTS | ||||||
|---|---|---|---|---|---|---|
| 30 September 2017 | Key income statement data (Euro in millions) | 30 September 2018 | ||||
| 132.1 | Operating Revenues | 140.5 | ||||
| 13.6 | EBITDA | 12.2 | ||||
| 3.1 | Operating Income | 1.4 | ||||
| (1.8) | Group Net Profit | (0.8) | ||||
| 769 | Annual average employees | 866 | ||||
| 31 December 2017 | Key financial position data (Euro in millions) | 30 September 2018 | ||||
| 130.1 | Net Invested Capital | 135.4 | ||||
| 44.8 | Shareholders' Equity | 42.6 | ||||
| 85.3 | Net Financial Indebtedness | 92.9 | ||||
| 15.8 | Investments in property, plant and equipment and intangible assets | 10.3 | ||||
The information on the operations of the main subsidiaries in the reference period is shown:
▪ Tesmec Rail S.r.l., a company 100% owned by Tesmec S.p.A., completed the construction of the new production plant in Monopoli, where the production of rail vehicles will be concentrated. The transfer to the new production unit took place in October 2018.
The comments provided below refer to the comparison of the consolidated income statement figures as at 30 September 2018 with those as at 30 September 2017.
The main profit and loss figures for the first nine months of 2018 and 2017 are presented in the table below:
| As at 30 September | ||||
|---|---|---|---|---|
| (Euro in thousands) | 2018 | % of revenues | 2017 | % of revenues |
| Revenues from sales and services | 140,493 | 100.0% | 132,131 | 100.0% |
| Cost of raw materials and consumables | (64,531) | -45.9% | (58,678) | -44.4% |
| Costs for services | (23,888) | -17.0% | (22,915) | -17.3% |
| Payroll costs | (36,365) | -25.9% | (33,412) | -25.3% |
| Other operating (costs)/revenues, net | (7,948) | -5.7% | (7,433) | -5.6% |
| Amortisation and depreciation | (10,797) | -7.7% | (10,463) | -7.9% |
| Development costs capitalised | 4,186 | 3.0% | 3,929 | 3.0% |
| Portion of losses/(gains) from the valuation of Joint Ventures using the equity method |
297 | 0.2% | (38) | 0.0% |
| Total operating costs | (139,046) | -99.0% | (129,010) | -97.6% |
| Operating income | 1,447 | 1.0% | 3,121 | 2.4% |
| Financial expenses | (5,054) | -3.6% | (8,110) | -6.1% |
| Financial income | 2,194 | 1.6% | 1,644 | 1.2% |
| Portion of losses/(gains) from the valuation of equity investments using the equity method |
12 | 0.0% | 63 | 0.0% |
| Pre-tax profit/(loss) | (1,401) | -1.0% | (3,282) | -2.5% |
| Income tax | 644 | 0.5% | 1,467 | 1.1% |
| Net profit/(loss) for the period | (757) | -0.5% | (1,815) | -1.4% |
| Profit/(loss) attributable to non-controlling interests | 18 | 0.0% | 25 | 0.0% |
| Group profit/(loss) | (775) | -0.6% | (1,840) | -1.4% |
Total revenues as at 30 September 2018 increased by 6.3% compared to those recorded in the same period of the previous financial year. The three business segments contributed to these results in different ways, with particularly significant growth in the Rail business.
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2018 | % of revenues | 2017 | % of revenues | 2018 vs. 2017 |
| Sales of products | 105,397 | 75.02% | 95,409 | 72.21% | 9,988 |
| Services rendered | 31,772 | 22.61% | 30,474 | 23.06% | 1,298 |
| 137,169 | 97.63% | 125,883 | 95.27% | 11,286 | |
| Changes in work in progress | 3,324 | 2.37% | 6,248 | 4.73% | (2,924) |
| Total revenues from sales and services | 140,493 | 100.00% | 132,131 | 100.00% | 8,362 |
Services rendered mainly concern the trencher segment and are represented by the machine rental business carried out in the United States, France, North Africa and Oceania.
The Group's turnover continues to be produced almost predominantly abroad and in particular, in non-EU countries. The revenue analysis by area is indicated below by comparing the first nine months of 2018 with the same period of 2017, which indicates the growth of the Italian and African markets, partially balanced by the downtrends recorded in the European, BRIC and Others markets. In the BRIC and Others segment, note that the period of the prior year was heavily influenced by the positive effect of sales in Indonesian markets related to the contract with the Indonesian Electricity Authority (PLN). It is emphasised that the segmentation by geographic area is determined by the country where the customer is located, regardless of where project activities/sales are organised.
| As at 30 September | |||
|---|---|---|---|
| (Euro in thousands) | 2018 | 2017 | |
| Italy | 33,441 | 23,422 | |
| Europe | 22,115 | 25,676 | |
| Middle East | 11,706 | 10,873 | |
| Africa | 16,572 | 9,826 | |
| North and Central America | 26,662 | 21,710 | |
| BRIC and Others | 29,997 | 40,624 | |
| Total revenues | 140,493 | 132,131 |
The operating costs amounted to Euro 139,046 thousand, an increase of 7.8% compared to the previous year, more than proportional with respect to the performance in revenues.
In terms of margins, EBITDA amounted to Euro 12,244 thousand, down by 9.9% compared to the figure recorded in the first nine months of 2017. EBITDA was impacted by the extra costs that emerged in the third quarter relating to Australian construction sites, which penalised the margin by approximately Euro 4,000 thousand; net of these costs EBITDA would have been approximately Euro 16 million.
A restatement of the income statement figures representing the performance of EBITDA is provided below:
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2018 | % of revenues | 2017 | % of revenues | 2018 vs. 2017 |
| Operating income | 1,447 | 1.0% | 3,121 | 2.4% | (1,674) |
| + Amortisation and depreciation | 10,797 | 7.7% | 10,463 | 7.9% | 334 |
| EBITDA (*) | 12,244 | 8.7% | 13,584 | 10.3% | (1,340) |
(*) EBITDA is represented by the operating income including amortisation/depreciation. The EBITDA thus defined represents a measurement used by Company management to monitor and assess the operating performance. EBITDA is not recognised as a measure of performance by IFRS and therefore is not to be considered an alternative measurement for assessing the performance of the Group's operating income. As the composition of EBITDA is not governed by the reference accounting standards, the calculation criterion applied by the Group may not be in line with the criterion adopted by others and is therefore not comparable.
| As at 30 September | |||
|---|---|---|---|
| (Euro in thousands) | 2018 | 2017 | |
| Net financial income/expenses | (2,539) | (2,017) | |
| Foreign exchange gains/losses | (371) | (4,561) | |
| Fair value adjustment of derivative instruments | 50 | 112 | |
| Portion of losses/(gains) from the valuation of equity investments using the equity method |
12 | 63 | |
| Total net financial income/expenses | (2,848) | (6,403) |
The net financial management recorded increased compared to the same period in 2017 by Euro 3,555 thousand, with the following changes reported:
The tables below show the income statement figures as at 30 September 2018 compared to those as at 30 September 2017, broken down into three operating segments.
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2018 | % of revenues | 2017 | % of revenues | 2018 vs. 2017 |
| Energy | 30,200 | 21.5% | 44,836 | 33.9% | (14,636) |
| Trencher | 94,157 | 67.0% | 76,083 | 57.6% | 18,074 |
| Rail | 16,136 | 11.5% | 11,212 | 8.5% | 4,924 |
| Total Revenues | 140,493 | 100.0% | 132,131 | 100.0% | 8,362 |
In the first nine months of 2018, the Group consolidated revenues of Euro 140,493, marking an increase of Euro 8,362 thousand compared to the same period of the previous year. In percentage terms, this change is split disparately between the Group's three business areas. More specifically, an increase of +43.9% was recorded for the Rail segment, +23.8% for the Trencher segment, and a decrease of -32.6% for the Energy segment.
For Energy segment, the revenues were Euro 30,200 thousand as at 30 September 2018 in respect to Euro 44,836 thousand as at 30 September 2017, that however benefitted from an important order for the supply of stringing equipment for the Indonesian market, completed at the end of 2016, which had an impact on revenues mainly on the first quarter of 2017.
The considerable increase in revenues in the Trencher segment was balanced across the Group's various segments of reference; particular importance should be given to the performance of the American market, which generated sales of USD 14 million only in the third quarter.
For the Rail segment, revenues improved compared to the same period of the previous year due to the delivery of maintenance vehicles and to technological advances that the Group is pursuing in terms of Research & Development.
The tables below show the income statement figures as at 30 September 2018 compared to those as at 30 September 2017, broken down into three operating segments:
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2018 | % of revenues | 2017 | % of revenues | 2018 vs. 2017 |
| Energy | 2,274 | 7.5% | 7,305 | 16.3% | (5,031) |
| Trencher | 7,693 | 8.2% | 4,815 | 6.3% | 2,878 |
| Rail | 2,277 | 14.1% | 1,464 | 13.1% | 813 |
| EBITDA (*) | 12,244 | 8.7% | 13,584 | 10.3% | (1,340) |
(*) EBITDA is represented by the operating income including amortisation/depreciation. The EBITDA thus defined represents a measurement used by Company management to monitor and assess the operating performance. EBITDA is not recognised as a measure of performance by IFRS and therefore is not to be considered an alternative measurement for assessing the performance of the Group's operating income. As the composition of EBITDA is not governed by the reference accounting standards, the calculation criterion applied by the Group may not be in line with the criterion adopted by others and is therefore not comparable.
This result is the combined effect of different trends in the three segments:
For more details on sector information, see the Explanatory note 19 "Segment Reporting" of this report.
Information is provided below on the Group's main equity indicators as at 30 September 2018 compared to 31 December 2017. In particular, the following tables show the reclassified funding sources and uses from the consolidated balance sheet as at 30 September 2018 and as at 31 December 2017:
| (Euro in thousands) | As at 30 September 2018 |
As at 31 December 2017 |
|---|---|---|
| USES | ||
| Net working capital (1) | 64,780 | 60,806 |
| Fixed assets | 67,981 | 68,386 |
| Other long-term assets and liabilities | 2,669 | 913 |
| Net invested capital (2) | 135,430 | 130,105 |
| SOURCES | ||
| Net financial indebtedness (3) | 92,864 | 85,273 |
| Shareholders' equity | 42,566 | 44,832 |
| Total sources of funding | 135,430 | 130,105 |
(1) The net working capital is calculated as current assets net of current liabilities excluding financial assets and financial liabilities. Net working capital is not recognised as a measure of performance by IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balance obtained by the Company may not necessarily be comparable therewith.
(2) The net invested capital is calculated as net working capital plus fixed assets and other long-term assets less long-term liabilities. The net invested capital is not recognised as a measure of performance under IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balance obtained by the Company may not necessarily be comparable therewith.
(3) The net financial indebtedness is calculated as the sum of cash and cash equivalents, current financial assets including available-for-sale securities, noncurrent financial liabilities, fair value of hedging instruments and other non-current financial assets.
The table below shows a breakdown of "Net Working Capital" as at 30 September 2018 and 31 December 2017:
| (Euro in thousands) | As at 30 September 2018 |
As at 31 December 2017 |
|---|---|---|
| Trade receivables | 59,359 | 39,854 |
| Work in progress contracts | 8,436 | 6,768 |
| Inventories | 61,392 | 63,125 |
| Trade payables | (52,861) | (39,479) |
| Other current assets/(liabilities) | (11,546) | (9,462) |
| Net working capital (1) | 64,780 | 60,806 |
(1) The net working capital is calculated as current assets net of current liabilities excluding financial assets and financial liabilities. Net working capital is not recognised as a measure of performance by IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balance obtained by the Company may not necessarily be comparable therewith.
Net working capital amounted to Euro 64,780 thousand, marking an increase of Euro 3,974 thousand (equal to 6.5%) compared to 31 December 2017. This trend is mainly due to the increase in the item "Trade receivables" of Euro 19,505 thousand (equal to 48.9%) offset by the increase in the item "Trade payables" of Euro 13,382 thousand (equal to 3.9%) and to the increase in work in progress contracts due to the execution of contracts related to the Rail segment.
The table below shows a breakdown of "Fixed assets" as at 30 September 2018 and 31 December 2017:
| (Euro in thousands) | As at 30 September 2018 |
As at 31 December 2017 |
|---|---|---|
| Intangible assets | 17,022 | 18,340 |
| Property, plant and equipment | 46,986 | 46,102 |
| Equity investments in associates | 3,967 | 3,937 |
| Other equity investments | 6 | 7 |
| Fixed assets | 67,981 | 68,386 |
Total fixed assets posted a decrease of Euro 405 thousand following the sale of trencher machines and depreciations for the period, which offset the increase in costs associated with development of the new Monopoli production facility, which will operate in the Rail sector.
The table below shows a breakdown of "Net financial indebtedness" as at 30 September 2018 and 31 December 2017:
| (Euro in thousands) | As at 30 September 2018 |
of which with related parties and group |
As at 31 December 2017 |
of which with related parties and group |
|---|---|---|---|---|
| Cash and cash equivalents | (23,726) | (21,487) | ||
| Current financial assets (1) | (7,332) | (4,328) | (12,450) | (9,386) |
| Current financial liabilities | 73,437 | 1,333 | 79,022 | 37 |
| Current portion of derivative financial instruments | 1 | 85 | ||
| Current financial indebtedness (2) | 42,380 | (2,995) | 45,170 | (9,349) |
| Non-current financial liabilities | 50,445 | - | 40,040 | - |
| Non-current portion of derivative financial instruments | 39 | 63 | ||
| Non-current financial indebtedness (2) | 50,484 | - | 40,103 | - |
| Net financial indebtedness pursuant to CONSOB Communication No. DEM/6064293/2006 |
92,864 | (2,995) | 85,273 | (9,349) |
(1) Current financial assets as at 30 September 2018 and 31 December 2017 include the market value of equities that are considered as cash and cash equivalents.
(2) Current and non-current financial indebtedness is not identified as an accounting element by IFRS. The valuation criteria applied by the Group may not necessarily be the same as those adopted by other groups and therefore the balances obtained by the Group may not necessarily comparable therewith.
In the first nine months of 2018, the Group's net financial indebtedness increased by Euro 7,591 thousand compared to the figure at the end of 2017, while it decreased by Euro 658 thousand compared to the value registered in the first quarter of 2017 (in which it amounted to Euro 93,522 thousand).
The table below shows the breakdown of the following changes:
For the management of financial risks, please see Explanatory Notes 4 "Financial risk management policy" contained in the Annual Consolidated Financial Statements for 2017, where the Group's policies in relation to the management of financial risks are presented. The Group has not identified changes with respect to the risks identified in the financial statements for 2017. A brief summary of these is contained in the paragraph "Management and types of risks" of the Explanatory Notes to this report.
In compliance with the Consob communications of 20 February 1997, 27 February 1998, 30 September 1998, 30 September 2002 and 27 July 2006, we specify that during the first nine months of 2018, no transactions took place with related parties of an atypical or unusual nature with no bearing on the company's normal operations or such as to harm the income statement, balance sheet or financial results of the Group.
For significant intercompany and related party information, please see the paragraph "Related party transactions" in the Explanatory Notes.
The average number of Group employees in the first nine months of 2018, including the employees of companies that are fully consolidated, is 866 persons compared to 769 in 2017 and 778 at the end of 2017. The increase is related to international growth with the strengthening of all markets in which Marais is a leader (Africa, Australia, New Zealand, etc.). It should be noted that 39 units refer to construction sites in Ivory Coast and Australia.
On 6 April 2018, the Shareholders' Meeting authorised the treasury share buy-back plan; the authorisation was granted for a period of 18 months; the authorisation of 6 April 2018 replaces the last authorisation resolved by the Shareholders' Meeting on 28 April 2017 and expiring in October 2018. The plan set the maximum quantity as 10% of Share Capital; from the launch of the buy-back plan resolved on 10 January 2012 (and renewed on 30 April 2014) to the date of the period covered by this report, 30 September 2018, a total of 4,711,879 shares (4.40% of Share Capital) have been purchased at an average price of Euro 0.5543 (net of commissions) for a total equivalent value of Euro 2,612 thousand. In the period no purchases of treasury shares were made.
On 26 October 2018, the new production site in Monopoli (Bari) was opened, which will be the headquarters of the subsidiary Tesmec Rail S.r.l. and will have the objective of further enhancing the Group's activity in the rail business. The modern site will be active in the design, prototyping and manufacture of special railway machines, in particular, railway wagons for the installation and maintenance of the railway catenary wire system, multi-purpose unit, shunting locomotives and power units for passenger trains.
Based on the well balanced and geographically diversified total order backlog, revenues around Euro 200 million are expected for the 2018 year end, a recovery in the quarter of the marginality and the confirm of net financial position improvement thanks to the normalization of working capital and the improvement of the operating profitability. The recovery of margins will not be enough to cover the extra costs related to the Australian orders, which have affected the result of the third quarter, but will guarantee a performance on an annual basis in line with the closing of the previous year.
In detail, the Railway business will record a further growth thanks to new orders related to the technological solutions in the field of catenary and diagnostics; it will be supported by the new production capacity provided by the new production plant in Puglia which has now reached full operation. With reference to the Trencher segment, a strong growth across the several sectors is expected, from the mining and tunneling business, particularly in Australia and Africa, development in the fiber and renewable energy industry and the confirmation of projects in the pipeline segment, particularly in the United States. In the last quarter we expect the improvement of the Energy sector driven by the start of important international projects in the Energy Automation segment; the Stringing segment will contribute as usually to the achievement of company targets, but with an outlook focused mainly on 2019.
Consolidated financial statements
| Notes | 30 September 2018 | 31 December 2017 | |
|---|---|---|---|
| (Euro in thousands) | |||
| NON-CURRENT ASSETS | |||
| Intangible assets | 6 | 17,022 | 18,340 |
| Property, plant and equipment | 7 | 46,986 | 46,102 |
| Equity investments in associates evaluated using the equity method | 3,967 | 3,937 | |
| Other equity investments | 6 | 7 | |
| Financial receivables and other non-current financial assets | 224 | 184 | |
| Derivative financial instruments | 15 | - | 1 |
| Deferred tax assets | 11,628 | 10,451 | |
| Non-current trade receivables | 10 | 161 | |
| TOTAL NON-CURRENT ASSETS | 79,843 | 79,183 | |
| CURRENT ASSETS | |||
| Work in progress contracts | 8 | 8,436 | 6,768 |
| Inventories | 9 | 61,392 | 63,125 |
| Trade receivables | 10 | 59,359 | 39,854 |
| of which with related parties: | 10 | 8,973 | 2,581 |
| Tax receivables | 897 | 909 | |
| Other available-for-sale securities | 2 | 2 | |
| Financial receivables and other current financial assets | 11 | 7,330 | 12,448 |
| of which with related parties: | 11 | 4,328 | 9,386 |
| Other current assets | 12,108 | 9,413 | |
| Cash and cash equivalents | 23,726 | 21,487 | |
| TOTAL CURRENT ASSETS | 173,250 | 154,006 | |
| TOTAL ASSETS | 253,093 | 233,189 | |
| SHAREHOLDERS' EQUITY | |||
| SHAREHOLDERS' EQUITY ATTRIBUTABLE TO PARENT COMPANY | |||
| SHAREHOLDERS | |||
| Share capital | 12 | 10,708 | 10,708 |
| Reserves / (deficit) | 12 | 32,596 | 33,829 |
| Group net profit / (loss) | 12 | (775) | (1,430) |
| TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS |
42,529 | 43,107 | |
| Capital and reserves / (deficit) attributable to non-controlling interests | 19 | 1,707 | |
| Net profit / (loss) for the period attributable to non-controlling interests | 18 | 18 | |
| TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NON-CONTROLLING | |||
| INTERESTS | 37 | 1,725 | |
| TOTAL SHAREHOLDERS' EQUITY | 42,566 | 44,832 | |
| NON–CURRENT LIABILITIES | |||
| Medium/long-term loans | 13 | 25,831 | 25,243 |
| Bond issue | 14 | 24,614 | 14,797 |
| Derivative financial instruments | 16 | 39 | 63 |
| Employee benefit liability | 3,592 | 3,656 | |
| Deferred tax liabilities | 5,545 | 6,202 | |
| Provisions for risks and charges | 55 | 24 | |
| Non-current trade payables | 1 | 2 | |
| TOTAL NON-CURRENT LIABILITIES | 59,677 | 49,987 | |
| CURRENT LIABILITIES | |||
| Interest-bearing financial payables (current portion) | 15 | 73,437 | 79,022 |
| of which with related parties: | 15 | 1,333 | 37 |
| Derivative financial instruments | 16 | 1 | 85 |
| Trade payables | 52,861 | 39,479 | |
| of which with related parties: | 2,802 | 2,366 | |
| Advances from customers | 6,132 | 3,377 | |
| Income taxes payable | 791 | 389 | |
| Provisions for risks and charges | 3,078 | 3,321 | |
| Other current liabilities | 14,550 | 12,697 | |
| TOTAL CURRENT LIABILITIES | 150,850 | 138,370 | |
| TOTAL LIABILITIES | 210,527 | 188,357 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 253,093 | 233,189 |
| As at 30 September | |||
|---|---|---|---|
| (Euro in thousands) | Notes | 2018 | 2017 |
| Revenues from sales and services | 17 | 140,493 | 132,131 |
| of which with related parties: | 15,590 | 12,915 | |
| Cost of raw materials and consumables | (64,531) | (58,678) | |
| of which with related parties: | (310) | (1) | |
| Costs for services | (23,888) | (22,915) | |
| of which with related parties: | (326) | (199) | |
| Payroll costs | (36,365) | (33,412) | |
| Other operating (costs)/revenues, net | (7,948) | (7,433) | |
| of which with related parties: | (3,733) | (1,573) | |
| Amortisation and depreciation | (10,797) | (10,463) | |
| Development costs capitalised | 4,186 | 3,929 | |
| Portion of losses/(gains) from the valuation of Joint Ventures using the equity method |
297 | (38) | |
| Total operating costs | 18 | (139,046) | (129,010) |
| Operating income | 1,447 | 3,121 | |
| Financial expenses | (5,054) | (8,110) | |
| of which with related parties: | (12) | - | |
| Financial income | 2,194 | 1,644 | |
| of which with related parties: | 108 | 89 | |
| Portion of losses/(gains) from the valuation of equity investments using the equity method |
12 | 63 | |
| Pre-tax profit/(loss) | (1,401) | (3,282) | |
| Income tax | 644 | 1,467 | |
| Net profit/(loss) for the period | (757) | (1,815) | |
| Profit/(loss) attributable to non-controlling interests | 18 | 25 | |
| Group profit/(loss) | (775) | (1,840) | |
| Basic and diluted earnings/(losses) per share | (0.007) | (0.017) |
| As at 30 September | |||
|---|---|---|---|
| (Euro in thousands) | Notes | 2018 | 2017 |
| NET PROFIT/(LOSS) FOR THE PERIOD | (775) | (1,840) | |
| Other components of comprehensive income | |||
| Other components of comprehensive income that will be subsequently reclassified to net income/(loss) for the year: |
|||
| Exchange differences on conversion of foreign financial statements | 12 | 1,049 | (2,975) |
| Other components of comprehensive income that will not be subsequently reclassified to net income/(loss) for the year: |
|||
| Actuarial profit/(loss) on defined benefit plans | 122 | 142 | |
| Income tax | (30) | (34) | |
| 12 | 92 | 108 | |
| Total other income/(losses) after tax | 1,141 | (2,867) | |
| Total comprehensive income (loss) after tax | 366 | (4,707) | |
| Attributable to: | |||
| Shareholders of Parent Company | 348 | (4,732) | |
| Minority interests | 18 | 25 |
| As at 30 September | |||
|---|---|---|---|
| (Euro in thousands) | Notes | 2018 | 2017 |
| CASH FLOW FROM OPERATING ACTIVITIES | |||
| Net profit for the period | (757) | (1,815) | |
| Adjustments to reconcile net income for the period with the cash flows generated by (used in) operating activities: |
|||
| Amortisation and depreciation | 6-7 | 10,797 | 10,463 |
| Provisions for employee benefit liability | 170 | 77 | |
| Provisions for risks and charges / inventory obsolescence / doubtful accounts | 679 | 423 | |
| Employee benefit payments | (112) | (222) | |
| Payments of provisions for risks and charges | (249) | (116) | |
| Net change in deferred tax assets and liabilities | (1,881) | (1,046) | |
| Change in fair value of financial instruments | 16 | (107) | (193) |
| Change in current assets and liabilities: | |||
| Trade receivables | 10 | (16,534) | 2,964 |
| of which with related parties: | (6,354) | (2,197) | |
| Inventories | 9 | 373 | 2,372 |
| Trade payables | 13,453 | 2,347 | |
| of which with related parties: | 437 | 174 | |
| Other current assets and liabilities | (611) | (813) | |
| of which with related parties: | - | 600 | |
| NET CASH FLOW GENERATED BY OPERATING ACTIVITIES (A) | 5,221 | 14,441 | |
| CASH FLOW FROM INVESTING ACTIVITIES | |||
| Investments in property, plant and equipment | 7 | (12,493) | (11,573) |
| Investments in intangible assets | 6 | (4,763) | (5,176) |
| (Investments) / disposals of financial assets | 5,234 | (2,497) | |
| of which with related parties: | 5,128 | (745) | |
| Proceeds from sale of property, plant and equipment and intangible assets | 6-7 | 6,992 | 4,771 |
| NET CASH FLOW USED IN INVESTING ACTIVITIES (B) | (5,030) | (14,475) | |
| NET CASH FLOW FROM FINANCING ACTIVITIES | |||
| Disbursement of medium/long-term loans | 13-14 | 16,663 | 5,909 |
| Repayment of medium/long-term loans | 15 | (12,623) | (19,065) |
| Net change in short-term financial debt | 15 | 598 | 16,951 |
| of which with related parties: | 1,342 | (5) | |
| Changes in the consolidation area | 12 | (2,250) | 42 |
| Other changes | 12 | (391) | - |
| NET CASH FLOW GENERATED BY/ (USED IN) FINANCING ACTIVITIES (C) | 1,997 | 3,837 | |
| TOTAL CASH FLOW FOR THE PERIOD (D=A+B+C) | 2,188 | 3,803 | |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (E) | 51 | (310) | |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD (F) | 21,487 | 18,501 | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (G=D+E+F) | 23,726 | 21,994 | |
| Additional information: | |||
| Interest paid | 3,509 | 4,221 | |
| Income tax paid | 133 | - |
| (Euro in thousands) | Share capital |
Legal reserve |
Share premium reserve |
Reserve of treasury shares |
Translation reserve |
Other reserves |
Net profit/(loss) for the period |
Total shareholders' equity attributable to parent company shareholders |
Total shareholders' equity attributable to non controlling interests |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 1 January 2018 | 10,708 | 2,141 | 10,915 | (2,341) | 3,185 | 19,929 | (1,430) | 43,107 | 1,725 | 44,832 |
| Net profit/(loss) for the period | - | - | - | - | - | - | (775) | (775) | 18 | (757) |
| First-time adoption of IFRS 9 | - | - | - | - | - | (391) | - | (391) | (391) | |
| Other profits/(losses) | - | - | - | - | 1,049 | 92 | - | 1,141 | (9) | 1,132 |
| Total comprehensive income/(loss) |
- | - | - | - | - | - | - | 368 | 9 | (16) |
| Allocation of profit from the previous year |
- | - | - | - | - | (1,430) | 1,430 | - | - | - |
| Change in the consolidation area | - | - | - | - | - | (553) | - | (553) | (1,697) | (2,250) |
| Purchase of treasury shares | - | - | - | - | - | - | - | - | - | - |
| Balance as at 30 September 2018 | 10,708 | 2,141 | 10,915 | (2,341) | 4,234 | 17,647 | (775) | 42,529 | 37 | 42,566 |
| (Euro in thousands) | Share capital |
Legal reserve |
Share premium reserve |
Reserve of treasury shares |
Translation reserve |
Other reserves |
Net profit/(loss) for the period |
Total shareholders' equity attributable to parent company shareholders |
Total shareholders' equity attributable to non controlling interests |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 1 January 2017 | 10,708 | 2,141 | 10,915 | (2,341) | 6,560 | 24,182 | (3,944) | 48,221 | 1,699 | 49,920 |
| Net profit/(loss) for the period | - | - | - | - | - | - | (1,840) | (1,840) | 25 | (1,815) |
| Other profits/(losses) | - | - | - | - | (2,975) | 108 | - | (2,867) | (4) | (2,871) |
| Total comprehensive income/(loss) |
- | - | - | - | - | - | - | (4,707) | 21 | (4,686) |
| Dividend distribution | - | - | - | - | - | (3,944) | 3,944 | - | - | - |
| Change in the consolidation area | - | - | - | - | - | (45) | - | (45) | 3 | (42) |
| Purchase of treasury shares | - | - | - | - | - | - | - | - | ||
| Balance as at 30 September 2017 | 10,708 | 2,141 | 10,915 | (2,341) | 3,585 | 20,301 | (1,840) | 43,469 | 1,723 | 45,192 |
The parent company Tesmec S.p.A. (hereinafter "Parent Company" or "Tesmec") is a legal entity organised in accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA STAR Segment of the Milan Stock Exchange as from 1 July 2010. The registered office of the Tesmec Group (hereinafter "Group" or "Tesmec Group") is in Milan, Piazza S. Ambrogio 16.
The interim consolidated report on operations as at 30 September 2018 was prepared in condensed form in accordance with International Financial Reporting Standards (IFRS), by using the methods for preparing interim financial reports provided by IAS 34 Interim financial reporting.
The accounting standards adopted in preparing the interim consolidated report on operations as at 30 September 2018 are those adopted for preparing the consolidated financial statements as at 31 December 2017 in compliance with IFRS, except as indicated in paragraph 4. New accounting standards, interpretations and amendments adopted by the Group.
More precisely, the consolidated statement of financial position, income statement, comprehensive income statement, statement of changes in shareholders' equity and statement of cash flows are drawn up in extended form and are in the same format adopted for the consolidated financial statements as at 31 December 2017. The explanatory notes to the financial statements indicated below are in condensed form and therefore do not include all the information required for annual financial statements. In particular, as provided by IAS 34, in order to avoid repeating already disclosed information, the notes refer exclusively to items of the consolidated statement of financial position, the consolidated income statement, the consolidated statement of comprehensive income, the statement of changes in consolidated shareholders' equity and the statement of consolidated cash flows whose breakdown or change, with regard to amount, type or unusual nature, are significant to understanding the economic and financial situation of the Group.
Since the interim condensed consolidated report on operations does not disclose all the information required in preparing the consolidated annual financial statements, it must be read together with the consolidated financial statements as at 31 December 2017.
The interim consolidated report on operations as at 30 September 2018 comprises the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, statement of changes in consolidated shareholders' equity, statement of consolidated cash flows and related explanatory notes. Comparative figures are disclosed as required by IAS 34 (31 December 2017 for the statement of financial position and the first nine months of 2017 for the consolidated income statement, comprehensive income statement, statement of changes in shareholders' equity and statement of cash flows).
The interim consolidated report on operations is presented in Euro and all values are rounded to the nearest thousand, unless otherwise indicated.
Disclosure of the interim consolidated report on operations of the Tesmec Group for the period ended 30 September 2018 was authorised by the Board of Directors on 31 October 2018.
The exchange rates used to determine the value in Euros of the financial statements of subsidiary companies expressed in foreign currency (exchange rate to 1 Euro) are shown below:
| Average exchange rates for the | End-of-period exchange rate | ||||
|---|---|---|---|---|---|
| period ended 30 September | as at 30 September | ||||
| 2018 | 2017 | 2018 | 2017 | ||
| US Dollar | 1.199 | 1.103 | 1.158 | 1.181 | |
| Bulgarian Lev | 1.956 | 1.956 | 1.956 | 1.956 | |
| Russian Rouble | 72.743 | 64.434 | 76.142 | 68.252 | |
| South African Rand | 15.160 | 14.578 | 16.445 | 15.944 | |
| Renminbi | 7.752 | 7.540 | 7.966 | 7.853 | |
| Qatari Riyal | 4.363 | 4.016 | 4.214 | 4.297 | |
| Algerian Dinar | 138.567 | 120.678 | 136.778 | 133.478 | |
| Tunisian Dinar | 3.018 | 2.627 | 3.246 | 2.917 | |
| Australian Dollar | 1.571 | 1.448 | 1.605 | 1.508 | |
| New Zealand Dollar | 1.700 | 1.545 | 1.751 | 1.635 | |
| CFA Franc | 655.957 | 655.957 | 655.957 | 655.957 |
As at 30 September 2018, the changes that have taken place in the consolidation area in comparison with 31 December 2017 are the following:
▪ on 31 January 2018, Tesmec S.p.A. acquired an additional investment equivalent to 13.21% of the share capital of Marais Technologies SAS. Following this operation, Tesmec S.p.A. holds 66.04%, while the remaining 33.96% is held by Simest S.p.A. Since Tesmec has an obligation to buy back the portion held by Simest S.p.A., for accounting purposes the shareholding of the Parent Company in Marais Technologies SAS is consolidated on an 100% basis.
With reference to the accounting standards in force from 1 January 2018, compared to those applicable for the financial year 2017, the only significant effect is related to the adoption of IFRS 9 "Financial instruments".
In July 2014, IASB issued the final version of IFRS 9 Financial Instruments that replaces "IAS 39 Financial Instruments: Recognition and measurement" and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the project on financial instrument accounting: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. With the exception of hedge accounting, the standard must be applied retrospectively but comparative information is not mandatory. As regards hedge accounting, in general, the standard applies in a prospective manner, with some limited exceptions.
The Group adopted the new standard from the date of entry into force, and does not show the comparative data. The Group ran a detailed analysis of the impact of all aspects covered by IFRS 9.
The Group has no significant impact on its financial statements and net equity following the application of the IFRS 9 recognition and measurement requirements. The Group continues measuring at fair value all financial assets currently measured at fair value.
The Group applied the option to present the fair value variations between the other components of the comprehensive income statement, meaning that the IFRS 9 will not have any significant impact.
Loans and trade receivables are held for collection on the contractual expiry of the cash flows referred to the collection of capital and interest. The Group has analysed contractual cash flow on these instruments and has concluded that they meet the criteria for measurement at their amortised cost, in compliance with IFRS 9. It has not therefore been necessary to reclassify these financial instruments.
Under IFRS 9, the entity must derecognise financial liabilities (or part of them) from the financial statements if, and only if, the liability is extinguished, i.e. if the obligation set out in the contract is met, cancelled or expired. A substantial variation in the terms of an existing financial liability or part of it must be recognised as an extinction of the original liability and the recognition of a new one.
The terms for applying this new rule are considerably different if the actualised value of the financial flow under the new terms, including any commission paid net of commission received, and using the original interest rate, are at least 10% different from the actualised value of the remaining financial flows of the original financial liability (so-called "10% test"). If the exchange of debt instruments or the change in the terms are recognised as an extinction, any cost or commission sustained are recorded as income or losses associated with the extinction. If the exchange or modification are not recognised as extinction, any cost or commission sustained will adjust the accounting value of the liability and will be amortised over the remaining term of the liability in question.
Loans that have been renegotiated in periods prior to the introduction of IFRS 9 must have their repayment plans recalculated, starting from the date of the renegotiation and adapting the carrying value to the NPV (net present value) of the new conditions.
The Group had no material variations on its existing loans or part of them, therefore the Group had no significant impacts.
IFRS 9 requires the Group to record expected credit losses on all bonds in its portfolio, loans and trade receivables referring to a period of either 12 months or the entire duration of the instrument's contract (e.g. lifetime expected loss). The Group applied the simplified approach, recognising expected credit loss on all receivables based on their residual contractual duration. The Group defined an allowance matrix based on historical data related to credit losses, taking into consideration customer-specific and market-specific factors.
As far as the expected credit losses are concerned, the impact amounts to Euro 391 thousand, net of the related tax impact, directly recorded by the Group to opening equity reserves as of 1 January 2018, without restating comparative data. For other debt financial assets (i.e., loans and debt securities at FVOCI), the ECL is based on the 12-month ECL. The 12 month ECL is the portion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. The Group had no impact with reference to this.
Not applicable for the Group.
IFRS 15 was issued in May 2014 and amended in April 2016, introducing a new five-stage model that will apply to revenue from contracts with customers. IFRS 15 requires recognition of revenue for an amount that reflects the consideration the entity believes to be entitled in exchange for the transfer of goods or services to the customer. The new standard will replace all current requirements found in IFRS regarding the recognition of revenues. The standard is effective for annual periods beginning on or after 1 January 2018, with full retrospective or modified application.
The Group applied the new standard starting from the date of entry into force, using the modified retrospective approach, according to which it is not necessary to restate the comparative data; with this approach, the impacts arising from the first-time adoption of the new standard are recognised through opening equity balances.
IFRS 15 had no significant impact on Group revenues and income statements.
During the assessment of the impacts coming from the introduction of the principle, the Group has identified the main types of revenues.
Sales of the Trencher segment consist of sales of crawler machinery for which the recognition of revenue occurs at the transfer of the asset's control, identified on the basis of International Commercial Terms (In.co.term). These contracts do not include any performance obligations other than the sale of the asset, or financial components or discount policies. Therefore, as of today these transactions did not highlight the need for changes to accounting treatments.
In the Trencher segment, the Group also considered the effects of the recognition of revenues from completed machinery not yet shipped to the customer (known as bill and hold) in view of the transaction price to be assigned to the specific Performance Obligation represented by the custody service: this service however is not relevant given the short time period in which it occurs.
Service contracts in Trencher segment are satisfied "over time" because the customer simultaneously receives and consumes the benefits provided by the Group.
Sales contracts of the Energy sector, in addition to the supply of material for stringing and for streamlining of power lines, can include additional services, such as transport services and / or design services. The Group has always adopted a separate accounting for the services in question, therefore, there is no need to change these accounting treatments.
The Group has performed specific considerations for the fees of some particular transport services (for example, for foreign customers), regarding the possible assumption of the role of Agent verifying the consistency with the new principle.
The main contracts in the rail segment concern the supply of customised machines, to which a full maintenance activity can be added for a subsequent period. The accounting treatment currently adopted by the Group, based on the allocation of the considerations between the construction phase, which matures on completion of works according to the percentage of completion method, and the maintenance activity, that is spread over the period after the delivery, has not required any change following the introduction of IFRS 15.
The amendments clarify when an entity should transfer a property, including those under construction or development, in or out of the Investment property heading. The amendment states that a change of use occurs when the property meets, or ceases to meet, the definition of real estate property and there is evidence of a change of use. A simple change in management's intentions for the property's use is not sufficient to prove change of use. This amendment is not relevant to the Group.
IASB issued amendments to IFRS 2 Share-based Payment dealing with three main areas: the effects of vesting conditions on the measurement of a cash-settled share based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. Upon adoption, the entity shall apply the amendments without restating prior periods, but the retrospective application is allowed if chosen for all three amendments and other criteria are observed. This amendment is not relevant to the Group.
The amendments deal with the problems created by introducing the new standard on financial instruments, IFRS 9, before introducing IFRS 17 Insurance Contracts, which replaces IFRS 4. The changes introduce two options for entities that issue insurance contracts: a temporary exemption from applying IFRS 9 and the overlay approach. These amendments are not relevant to the Group.
The amendments clarify that an entity that is a venture capital organisation or other qualified entity can decide, at the time of the initial recognition and with reference to each individual investment, to measure their investments in joint ventures or associated companies at fair value on the income statement.
If an entity that does not qualify as an investment entity has a holding in an associated company or joint venture that is an investment entity, when applying the equity method the former entity can decide to maintain the fair value measurement applied by the investment entity (associate or joint venture) when measuring their own investments. This choice can be made separately for each associate or joint venture that is an investment entity up to the last of the following dates to occur: (a) the initial measurement of the holding in the associate or joint venture that is an investment entity; (b) when the associate or joint venture becomes an investment entity; or (c) when the associate or joint venture that is an investment entity becomes parent company for the first time. This amendment is not relevant to the Group.
The short-term exemptions indicated in paragraphs E3-E7 of IFRS 1 have been deleted as having fulfilled their purpose. This amendment is not relevant to the Group.
IFRS 16 was published in January 2016 and replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 defines the principles for the recognition, measurement, presentation and disclosure of leasing and requires lessees to recognise all lease contracts in the financial statements based on a single model similar to that used to account for finance leases in accordance with IAS 17. The standard provides for two exemptions for the recognition by lessees - leasing contracts related to the "low-value" assets (i.e., personal computers) and short-term leasing contracts (such as contracts maturing within 12 months or less). As at the start of the lease contract, the lessee will post a liability of for lease payments (i.e. leasing liabilities) and an asset representing the right to use the underlying asset for the duration of the contract (i.e. right to use the asset). The lessees will have to account for the interest charges on the lease liabilities and the amortisation of the right of use separately.
Lessees will also have to re-measure the lease liability at certain events (for example: a change in the conditions of the lease, a change in future lease payments subsequent to changes in an index or a rate used to determine those payments). The lessee generally will recognise the amount of remeasurement of the leasing liabilities as an adjustment of the rights of use.
The recognition by IFRS 16 for lessors is substantially unchanged compared with today's recognition in accordance with IAS 17. Lessors will continue to classify all leases using the same classification principle set forth in IAS 17 and distinguishing between two types of leases: operating and financial leases.
IFRS 16 requires the lessees and lessors a more extensive disclosure than IAS 17.
IFRS 16 comes into effect for financial years beginning on 1 January 2019 or later. Early application is permitted, but not before the entity has adopted IFRS 15. The lessor can choose to apply the standard using a fully retrospective or a modified retrospective approach. The indications for transition set out in the standard permit certain facilitations.
In 2018, the Group will continue to identify the potential impacts of IFRS 16 on its consolidated reports.
The extraordinary transactions that occurred during the period include the following:
that the maximum number of shares that may be purchased each day shall be no more than 25% of the average daily volume of "Tesmec" shares traded on the market;
The breakdown and changes in "Intangible assets" for the period ended 30 June 2018 are shown in the table below:
| (Euro in thousands) | 01/01/2018 | Increases due to purchases |
Decreases | Amortisation | Exchange rate differences |
30/09/2018 |
|---|---|---|---|---|---|---|
| Development costs | 14,299 | 4,308 | - | (5,124) | 47 | 13,530 |
| Rights and trademarks | 3,299 | 255 | (56) | (893) | (1) | 2,604 |
| Assets in progress and advance payments to suppliers | 742 | 200 | (54) | - | - | 888 |
| Total intangible assets | 18,340 | 4,763 | (110) | (6,017) | 46 | 17,022 |
As at 30 September 2018, intangible assets totalled Euro 17,022 thousand, down Euro 1,318 thousand on the previous year due to:
▪ development costs capitalised in the first nine months of 2018 of Euro 4,308 thousand, fully offset by amortisation for the period (Euro 5,124 thousand). These costs are related to projects for the development of new products and equipment that are expected to generate positive cash flows in future years.
The breakdown and changes in "Property, plant and equipment" for the period ended 30 June 2018 are shown in the table below:
| (Euro in thousands) | 01/01/2018 | Increases due to purchases |
Decreases | Reclassifications | Depreciation | Exchange rate differences |
30/09/2018 |
|---|---|---|---|---|---|---|---|
| Land | 2,977 | - | - | - | (3) | 7 | 2,981 |
| Buildings | 10,742 | 34 | - | 4,197 | (337) | 180 | 14,816 |
| Plant and machinery | 3,601 | 1,061 | (2) | - | (750) | 36 | 3,946 |
| Equipment | 1,658 | 493 | (215) | 3 | (279) | 1 | 1,661 |
| Other assets | 26,498 | 6,674 | (6,665) | - | (3,411) | (171) | 22,925 |
| Assets in progress and advance payments to suppliers |
626 | 4,231 | - | (4,200) | - | - | 657 |
| Total property, plant and equipment | 46,102 | 12,493 | (6,882) | - | (4,780) | 53 | 46,986 |
As at 30 September 2018, property, plant and equipment totalled Euro 46,986 thousand, up compared to the previous year by Euro 884 thousand.
The change is due to the increase in costs related to the development of the new Monopoli production facility, which will operate in the Rail segment. These costs, previously recorded as assets in progress, were subsequently reclassified as Buildings in that the production site was completed in September.
The following table sets forth the breakdown of Work in progress contracts as at 30 September 2018 and as at 31 December 2017:
| (Euro in thousands) | 30 September 2018 | 31 December 2017 |
|---|---|---|
| Work in progress (Gross) | 11,597 | 8,128 |
| Advances from contractors | (3,161) | (1,360) |
| Work in progress contracts | 8,436 | 6,768 |
| Advances from contractors (Gross) | - | - |
| Work in progress (Gross) | - | - |
| Advances from contractors | - | - |
"Work in progress" refers exclusively to the Rail segment where the machinery is produced in accordance with specific customer requirements. "Work in progress" is recognised as an asset if, on the basis of an analysis carried out for each contract, the gross value of work in progress is greater than advances from customers; it is recognised as a liability if the advances are greater than the related work in progress.
If the advances are not collected at the reporting date, the corresponding amount is recognised as trade receivables.
The following table provides a breakdown of Inventories as at 30 September 2018 compared to 31 December 2017:
| (Euro in thousands) | 30 September 2018 | 31 December 2017 |
|---|---|---|
| Raw materials and consumables | 38,677 | 36,220 |
| Work in progress | 13,663 | 12,919 |
| Finished products and goods for resale | 8,283 | 13,773 |
| Advances to suppliers for assets | 769 | 213 |
| Total inventories | 61,392 | 63,125 |
Inventories as at 30 December 2018 decreased by Euro 1,733 thousand compared to 31 December 2017 thanks to the sales reported in the first nine months of 2018.
The following table provides a breakdown of Trade receivables as at 30 September 2018 and as at 31 December 2017:
| (Euro in thousands) | 30 September 2018 | 31 December 2017 |
|---|---|---|
| Trade receivables from third-party customers | 50,386 | 37,273 |
| Trade receivables from associates, related parties and joint ventures | 8,973 | 2,581 |
| Total trade receivables | 59,359 | 39,854 |
The increase in trade receivables (+48.9%) reflects the seasonal nature of the sales carried out in the last part of the period. With particular reference to expected losses on receivables (ECL), based on the new IFRS 9, this has had an impact on the provision for doubtful debts of Euro 515 thousand.
The balance of trade receivables due from related parties increased by Euro 6,392 thousand mainly due to higher sales in the period.
The following table provides a breakdown of financial receivables and other current financial assets as at 30 September 2018 and as at 31 December 2017:
| (Euro in thousands) | 30 September 2018 | 31 December 2017 |
|---|---|---|
| Financial receivables from associates, related parties and joint ventures | 4,328 | 9,386 |
| Financial receivables from third parties | 2,963 | 3,026 |
| Other current financial assets | 39 | 36 |
| Total financial receivables and other current financial assets | 7,330 | 12,448 |
The decrease in current financial assets from Euro 12,448 thousand to Euro 7,330 thousand is mainly due to the decrease in credit positions relating to specific contracts signed with related parties on which an interest rate is applied and repayable within 12 months.
The share capital amounts to Euro 10,708 thousand, fully paid in, and is comprised of 107,084,000 shares with a par value of Euro 0.1 each.
The following table provides a breakdown of Other reserves as at 30 September 2018 and as at 31 December 2017:
| 30 September 2018 | 31 December 2017 | |
|---|---|---|
| (Euro in thousands) | ||
| Revaluation reserve | 86 | 86 |
| Extraordinary reserve | 28,935 | 26,942 |
| Change in the consolidation area | (553) | (225) |
| Severance indemnity valuation reserve | (471) | (563) |
| Network reserve | 824 | 824 |
| First-time adoption of IFRS 9 | (391) | - |
| Retained earnings/ (losses brought forward) | (6,735) | (3,087) |
| Bills charged directly to shareholders' equity | ||
| on operations with entities under common control | (4,048) | (4,048) |
| Total other reserves | 17,647 | 19,929 |
The Revaluation reserve is a reserve in respect of which tax has been deferred, set up in accordance with Italian Law 72/1983.
The reserve for change in the consolidation area includes the effect deriving from the acquisition of 13.21% of Marais Technologies SAS. The price paid to acquire the investment amounted to Euro 2,250 thousand and generated a loss of Euro 553 thousand, which was recognised directly in the consolidation reserve, with a reduction in shareholders' equity attributable to non-controlling interests of Euro 1,697 thousand.
The first-time adoption IFRS 9 refers to the net impact related to the application of the new standard. The Group has attributed the largest allowance applied to the decrease in equity reserves at January 1, 2018 without restating the comparative data.
The value of the difference from translation of financial statements has a positive impact on shareholders' equity of Euro 1,049 thousand as at 30 September 2018.
As a result of the resolution of 6 April 2018, with the approval of the 2017 financial statements, the Shareholders' Meeting of Tesmec S.p.A. decided to allocate the profit of the parent company of Euro 1,993 thousand to the extraordinary reserve.
During the first nine months of 2018, medium/long-term loans increased from Euro 25,243 thousand to Euro 25,831 thousand mainly due to the stipulation of new medium/long-term loans offset by reclassification in current financial indebtedness of the short-term portion of medium/long-term loans.
On 27 July 2018, a new bond issue was placed with professional investors in the amount of Euro 10 million. The 4.75% fixed rate bond issue will expire on 30 June 2024 with half-yearly coupon and amortising repayment, and with a two-year preamortisation period. The Company has reserved the right - to be exercised by 31 December 2018 - to increase the nominal value of the bond issue up to a maximum of Euro 15 million.
The following table provides details of this item as at 30 September 2018 and as at 31 December 2017:
| (Euro in thousands) | 30 September 2018 | 31 December 2017 |
|---|---|---|
| Advances from banks against invoices and bills receivables | 41,915 | 36,010 |
| Other financial payables (short-term leases) | 1,263 | 1,187 |
| Payables due to factoring companies | 6,497 | 3,886 |
| Current account overdrafts | 5,294 | 4,112 |
| Short-term loans to third parties | 329 | 3,289 |
| Current portion of medium/long-term loans | 16,557 | 22,997 |
| Other short-term financial payables | 1,582 | 135 |
| Total interest-bearing financial payables (current portion) | 73,437 | 79,022 |
The decrease in current portion of medium/long-term loans is due to the (i) greater advances on exports for Euro 5,905 thousand compensated from (ii) Euro 6,440 thousand related to the decrease in the current portion of medium/long-term loans (of which Euro 7,406 thousand for the loan transaction carried out by Simest S.p.A. in Tesmec USA Inc. during 2010, which expired on 30 June 2018).
The following table shows a summary of the financial instruments, other than cash and cash equivalents, owned by the Group as at 30 September 2018:
| (Euro in thousands) | Loans and receivables/financial liabilities measured at amortised cost |
Guarantee deposits |
Cash and cash equivalents |
Available-for sale financial assets |
Fair value recognised in the income statement |
|---|---|---|---|---|---|
| Financial assets: | |||||
| Guarantee deposits | - | 224 | - | - | - |
| Trade receivables | 10 | - | - | - | - |
| Derivative financial instruments | - | - | - | - | - |
| Total non-current | 10 | 224 | - | - | - |
| Trade receivables | 59,359 | - | - | - | - |
| Financial receivables from related parties | 4,328 | - | - | - | - |
| Financial receivables from third parties | 3,002 | - | - | - | - |
| Other available-for-sale securities | - | - | - | 2 | - |
| Cash and cash equivalents | - | - | 23,726 | - | - |
| Total current | 66,689 | - | 23,726 | 2 | - |
| Total | 66,699 | 224 | 23,726 | 2 | - |
| Financial liabilities: | |||||
| Loans | 24,611 | - | - | - | - |
| Bond issue | 24,614 | - | - | - | - |
| Non-current portion of finance leases, net | 1,220 | - | - | - | - |
| Derivative financial instruments | - | - | - | - | 39 |
| Trade payables | 1 | - | - | - | - |
| Total non-current | 50,446 | - | - | - | 39 |
| Loans | 16,557 | - | - | - | - |
| Other financial payables (short-term leases) | 1,263 | - | - | - | - |
| Other short-term payables | 55,617 | - | - | - | - |
| Derivative financial instruments | - | - | - | - | 1 |
| Trade payables | 52,861 | - | - | - | - |
| Total current | 126,298 | - | - | - | 1 |
| Total | 176,744 | - | - | - | 40 |
Within its scope of operations, the Group is exposed, to a greater or lesser extent, to certain types of risk that are managed as follows.
The Group does not hold derivatives or similar products for purely speculative purposes.
The Tesmec Group's exposure to interest rate risk is managed by taking overall exposure into consideration: as part of the general policy to optimise financial resources, the Group seeks equilibrium, by using less expensive forms of financing.
With regard to the market risk due to changes in the interest rate, the Group's policy is to hedge the exposure related to the portion of medium to long-term indebtedness. Derivative instruments such as swaps, collars and caps are used to manage this risk.
As at 30 September 2018, there were four positions related to derivative instruments of interest rate swap hedging the risk related to the potential increase in interest bearing financial payables (current portion) due to fluctuating market rates. The notional value of these positions was equal to Euro 6.7 million, with a negative equivalent value of Euro 18 thousand. Moreover, there were four interest rate cap positions; the notional value of these positions was equal to Euro 6.2 million, with a negative equivalent value of Euro 22 thousand.
A significant portion of the Group's revenues is generated by sales in foreign countries, including developing countries.
The main transaction currencies used for the Group's sales are the euro and the US dollar. The Group believes that if the exchange rate fluctuations of these two currencies are low, there is no risk to operating margins, insofar as the sale price could be adapted on each occasion to the exchange rate. However, if the US dollar were to depreciate significantly against the euro, we cannot exclude negative effects on margins to the extent that a good portion of sales in US dollars concerns the productions of Italian factories that operate with costs in the Eurozone.
With regard to net exposure that is mainly represented by receivables in US dollars of Tesmec S.p.A., the only hedging instrument adopted is the purchasing of forwards on the US currency. However, these hedges are carried out only for one part of the total exposure in that the timing of the inflow of the receipts in dollars is difficult to predict at the level of each sales invoice. Besides, for a good part of the sales in dollars, the Group uses the production of the American factory with costs in US dollars by creating in this way a sort of natural hedging of the currency exposure.
Forward sale instruments for fixing the exchange rate at the moment of the order are mainly used for covering the risk of the dollar exposure deriving from:
i) selling trenchers produced in Italy in Middle Eastern countries;
ii) selling stringing machines produced in Italy in the USA where purchases are in euro, and sales in US dollars.
Despite the adoption of the above strategies aimed at reducing the risks arising from fluctuation of exchange rates, the Group cannot exclude that future changes thereof might affect the results of the Group. Fluctuations in exchange rates could also significantly affect the comparability of the results of each financial period.
As at 30 September 2018, there were no forward contracts.
For the Group, credit risk is closely linked to the sale of products on the market. In particular, the extent of the risk depends on both technical and commercial factors and the purchaser's solvency.
From a commercial viewpoint, the Group is not exposed to high credit risk insofar as it has been operating for years in markets where payment on delivery or letter of credit issued by a prime international bank are usually used as payment methods. For customers located in the European region, the Group mainly uses factoring without recourse. The provisions for doubtful accounts are considered to be a good indication of the extent of the overall credit risk.
In general, price risk is linked to the fluctuation of commodity prices.
Specifically, the price risk of the Group is mitigated by the presence of many suppliers of raw materials as well as by the need to receive absolute guarantees on supply volumes, in order not to affect the warehouse stock.
In reality, this risk seems remote for two fundamental reasons:
the existence and use of alternative suppliers;
the assortment of raw materials and components used in the production of the Tesmec machinery: it is unlikely for all of them to be affected by increasing price tensions at the same time.
In particular, in the current market situation, this risk seems particularly weakened by the situation of oversupply in many markets.
Financial requirements and related risks (mainly interest rate risks, liquidity and exchange rate risks) are managed by the Group based on guidelines defined by the Group General Management and approved by the Chief Executive Officer of the Parent Company.
The main purpose of these guidelines is to guarantee the presence of a liability structure always in equilibrium with the composition of balance sheet assets, in order to maintain a very sound balance sheet structure. Forms of financing most commonly used are represented by:
The average cost of indebtedness is benchmarked to the trend of the 1/3-month Euribor rates for short-term loans and the 3/6-month Euribor rates for medium to long-term loans. Some interest rate hedges have been set in place for floating medium/long-term loans. Existing loan contracts contain certain financial covenant clauses.
Tesmec Group adopts a purchasing policy aimed at diversifying the suppliers of components that have unique characteristics in terms of purchased volumes or high added value. However, the termination for any reason of these supply relations could imply for the Group provisioning problems for these raw materials, semi-finished and finished goods, in relation to the quantity and time suitable for ensuring the continuity of production, or purchasing could lead to time issues in order to achieve quality standards already acquired with the old supplier.
In relation to financial instruments measured at fair value, the following table shows the classification of such instruments on the basis of the hierarchy of levels required by IFRS 13, which reflects the significance of the inputs used in measuring the fair value. The levels are broken down as follows:
The following table shows the assets and liabilities that are measured at fair value as at 30 September 2018, divided into the three levels defined above:
| Book value as at 30 September |
Level 1 | Level 2 | Level 3 | |
|---|---|---|---|---|
| (Euro in thousands) | 2018 | |||
| Financial assets: | ||||
| Derivative financial instruments | - | - | - | - |
| Total non-current | - | - | - | - |
| Other available-for-sale securities | 2 | - | - | 2 |
| Total current | 2 | - | - | 2 |
| Total | 2 | - | - | 2 |
| Financial liabilities: | ||||
| Derivative financial instruments | 39 | - | 39 | - |
| Total non-current | 39 | - | 39 | - |
| Derivative financial instruments | 1 | - | 1 | - |
|---|---|---|---|---|
| Total current | 1 | - | 1 | - |
| Total | 40 | - | 40 | - |
The table below shows the breakdown of Revenues from sales and services as at 30 September 2018 and as at 30 September 2017:
| As at 30 September | |||||
|---|---|---|---|---|---|
| (Euro in thousands) | 2018 | 2017 | |||
| Sales of products | 105,397 | 95,409 | |||
| Services rendered | 31,772 | 30,474 | |||
| 137,169 | 125,883 | ||||
| Changes in work in progress | 3,324 | 6,248 | |||
| Total revenues from sales and services | 140,493 | 132,131 |
In the first nine months of 2018, the Group consolidated revenues of Euro 140,493, marking an increase of Euro 8,362 thousand compared to the same period of the previous year. In percentage terms, this change is split disparately between the Group's three business areas. More specifically, an increase of +43.9% was recorded for the Rail segment, +23.8% for the Trencher segment, and a decrease of -32.6% for the Energy segment.
For Energy segment, the revenues were Euro 30,200 thousand as at 30 September 2018 in respect to Euro 44,836 thousand as at 30 September 2017, that however benefitted from an important order for the supply of stringing equipment for the Indonesian market, completed at the end of 2016, which had an impact on revenues mainly on the first quarter of 2017.
The considerable increase in revenues in the Trencher segment was balanced across the Group's various segments of reference; particular importance should be given to the performance of the American market, which generated sales of USD 14 million only in the third quarter.
For the Rail segment, revenues improved compared to the same period of the previous year due to the delivery of maintenance vehicles and to technological advances that the Group is pursuing in terms of Research & Development.
The item operating costs amounted to Euro 139,046 thousand, an increase of 7.8% compared to the previous year, a more than proportional increase with respect to the performance in revenues.
For management purposes, Tesmec Group is organised into strategic business units identified based on the goods and services provided, and presents three operating segments for disclosure purposes:
▪ machines and integrated systems for overhead and underground stringing of power lines and fibre optic cables;
▪ integrated solutions for the streamlining, management and monitoring of low, medium and high voltage power lines (smart grid solutions).
▪ machines and integrated systems for the installation, maintenance and diagnostics of the railway catenary wire system, plus customised machines for special operations on the line.
No operating segment has been aggregated in order to determine the indicated operating segments that are the subject of the reporting.
| As at 30 September | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2017 | ||||||||
| (Euro in thousands) | Stringing equipment |
Trencher | Rail | Consolidated | Stringing equipment |
Trencher | Rail | Consolidated | |
| Revenues from sales and services |
30,200 | 94,157 | 16,136 | 140,493 | 44,836 | 76,083 | 11,212 | 132,131 | |
| Operating costs net of depreciation and amortisation |
(27,926) | (86,464) | (13,859) | (128,249) | (37,531) | (71,268) | (9,747) | (118,546) | |
| EBITDA | 2,274 | 7,693 | 2,277 | 12,244 | 7,305 | 4,815 | 1,465 | 13,585 | |
| Amortisation and depreciation |
(3,319) | (5,708) | (1,770) | (10,797) | (3,095) | (5,693) | (1,676) | (10,464) | |
| Total operating costs | (31,245) | (92,172) | (15,629) | (139,046) | (40,626) | (76,961) | (11,423) | (129,010) | |
| Operating income | (1,045) | 1,985 | 507 | 1,447 | 4,210 | (878) | (211) | 3,121 | |
| Net financial income/(expenses) |
(2,848) | (6,403) | |||||||
| Pre-tax profits | (1,401) | (3,282) | |||||||
| Income tax | 644 | 1,467 | |||||||
| Net profit/(loss) for the period |
(757) | (1,815) | |||||||
| Profit/(loss) attributable to non-controlling interests |
18 | 25 | |||||||
| Group profit/(loss) | (775) | (1,840) |
(*) EBITDA is represented by the operating income including amortisation/depreciation. The EBITDA thus defined represents a measurement used by Company management to monitor and assess the operating performance. EBITDA is not recognised as a measure of performance by IFRS and therefore is not to be considered an alternative measurement for assessing the performance of the Group's operating income. As the composition of EBITDA is not governed by the reference accounting standards, the calculation criterion applied by the Group may not be in line with the criterion adopted by others and is therefore not comparable.
Management, monitors separately the results achieved by the business units in order to make decisions on resource, allocation and performance assessment. Segment performance is assessed based on operating income.
Group financial management (including financial income and charges) and income tax are managed at Group level and are not allocated to the individual operating segments.
The following table shows the consolidated statement of financial position by business segment as at 30 September 2018 and as at 31 December 2017:
| As at 30 September 2018 | As at 31 December 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Euro in thousands) | Energy | Trencher | Rail | Not allocated |
Consolidated | Energy | Trencher | Rail | Not allocated |
Consolidated |
| Intangible assets | 8,961 | 4,315 | 3,746 | - | 17,022 | 9,741 | 4,280 | 4,319 | - | 18,340 |
| Property, plant and equipment | 1,864 | 38,495 | 6,627 | - | 46,986 | 1,905 | 42,595 | 1,602 | - | 46,102 |
| Financial assets | 489 | 3,695 | - | 13 | 4,197 | 3,330 | 767 | 12 | 20 | 4,129 |
| Other non-current assets | 1,269 | 4,206 | 89 | 6,074 | 11,638 | 1,743 | 2,857 | 97 | 5,915 | 10,612 |
| Total non-current assets | 12,583 | 50,711 | 10,462 | 6,087 | 79,843 | 16,719 | 50,499 | 6,030 | 5,935 | 79,183 |
| Work in progress contracts | - | - | 8,436 | - | 8,436 | - | - | 6,768 | - | 6,768 |
| Inventories | 17,578 | 23,838 | 19,976 | - | 61,392 | 16,170 | 45,632 | 1,323 | - | 63,125 |
| Trade receivables | 8,289 | 45,958 | 5,112 | - | 59,359 | 6,889 | 31,508 | 1,457 | - | 39,854 |
| Other current assets | 1,879 | 4,210 | 4,460 | 9,788 | 20,337 | 1,686 | 2,211 | 2,779 | 16,096 | 22,772 |
| Cash and cash equivalents | 1,092 | 1,966 | 8,713 | 11,955 | 23,726 | 1,474 | 1,000 | 4,942 | 14,071 | 21,487 |
| Total current assets | 28,838 | 75,972 | 46,697 | 21,743 | 173,250 | 26,219 | 80,351 | 17,269 | 30,167 | 154,006 |
| Total assets | 41,421 | 126,683 | 57,159 | 27,830 | 253,093 | 42,938 | 130,850 | 23,299 | 36,102 | 233,189 |
| Shareholders' equity attributable to parent company shareholders |
- | - | - | 42,529 | 42,529 | - | - | - | 43,107 | 43,107 |
| Shareholders' equity attributable to non-controlling interests |
- | - | - | 37 | 37 | - | - | - | 1,725 | 1,725 |
| Non-current liabilities | 1,122 | 5,842 | 3,390 | 49,323 | 59,677 | 1,100 | 7,832 | 1,266 | 39,789 | 49,987 |
| Current financial liabilities | 1,022 | 10,700 | 3,484 | 58,232 | 73,438 | 542 | 7,220 | 2,782 | 68,563 | 79,107 |
| Trade payables | 8,796 | 33,796 | 10,269 | - | 52,861 | 9,178 | 25,763 | 4,538 | - | 39,479 |
| Other current liabilities | 1,478 | 8,927 | 5,902 | 8,244 | 24,551 | 1,127 | 6,793 | 1,420 | 10,444 | 19,784 |
| Total current liabilities | 11,296 | 53,423 | 19,655 | 66,476 | 150,850 | 10,847 | 39,776 | 8,740 | 79,007 | 138,370 |
| Total liabilities | 12,418 | 59,265 | 23,045 | 115,799 | 210,527 | 11,947 | 47,608 | 10,006 | 118,796 | 188,357 |
| Total shareholders' equity and liabilities |
12,418 | 59,265 | 23,045 | 158,365 | 253,093 | 11,947 | 47,608 | 10,006 | 163,628 | 233,189 |
The following table gives details of economic and equity transactions with related parties. The companies listed below have been identified as related parties as they are linked directly or indirectly to the current shareholders:
| As at 30 September 2018 | As at 30 September 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Euro in thousands) | Revenues | Cost of raw materials |
Costs for services |
Other operating costs/revenues, net |
Financial income and expenses |
Revenues | Cost of raw materials |
Costs for services |
Other operating costs/revenues, net |
Financial income and expenses |
| Associates: | ||||||||||
| Locavert S.A. | 131 | - | - | - | - | 778 | - | - | - | - |
| SEP Semofor 77 | - | - | - | - | - | - | - | - | - | - |
| Subtotal | 131 | - | - | - | - | 778 | - | - | - | - |
| Joint Ventures: | ||||||||||
| Condux Tesmec Inc. | 3,179 | - | (9) | 125 | 2 | 1,945 | - | - | 133 | 4 |
| Tesmec Peninsula | 87 | (310) | (35) | - | 38 | - | - | (22) | 53 | 85 |
| Subtotal | 3,266 | (310) | (44) | 125 | 40 | 1,945 | - | (22) | 186 | 89 |
| Related parties: | ||||||||||
| Ambrosio S.r.l. | - | - | - | (11) | - | - | - | - | (11) | - |
| TTC S.r.l. | - | - | (53) | - | - | - | - | (21) | - | - |
|---|---|---|---|---|---|---|---|---|---|---|
| CBF S.r.l. | - | - | - | - | - | - | - | - | - | - |
| Ceresio Tours S.r.l. | - | - | (5) | - | - | - | - | (5) | - | - |
| Dream Immobiliare S.r.l. | - | - | - | (1,727) | - | - | - | - | (1,684) | - |
| CONAI | - | - | - | - | - | - | - | - | - | - |
| FI.IND. S.p.A. | - | - | - | 28 | - | - | - | - | 60 | - |
| Lame Nautica S.r.l. | - | - | - | - | - | 11 | - | - | - | - |
| M.T.S. Officine meccaniche S.p.A. |
4,707 | - | 6 | (1,824) | 36 | 5,715 | (1) | 34 | (124) | - |
| MTS4SERVICE USA LLC | 7,337 | - | - | (324) | 20 | 4,359 | - | - | - | - |
| Fintetis SARL | - | - | - | - | - | - | - | - | - | - |
| C2D | - | - | (230) | - | - | 1 | - | (185) | - | - |
| Comatel | 149 | - | - | - | - | 106 | - | - | - | - |
| Subtotal | 12,193 | - | (282) | (3,858) | 56 | 10,192 | (1) | (177) | (1,759) | - |
| Total | 15,590 | (310) | (326) | (3,733) | 96 | 12,915 | (1) | (199) | (1,573) | 89 |
| 30 September 2018 | 31 December 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (Euro in thousands) | Trade receivables |
Current financial receivables |
Current financial payables |
Trade payables |
Trade receivables |
Current financial receivables |
Current financial payables |
Trade payables |
|
| Associates: | |||||||||
| Locavert S.A. | 339 | - | - | - | 95 | - | - | - | |
| R&E Contracting | - | 165 | - | - | - | - | - | - | |
| Subtotal | 339 | 165 | - | - | 95 | - | - | - | |
| Joint Ventures: | |||||||||
| Condux Tesmec Inc. | 1,024 | 411 | - | - | 1,046 | - | - | - | |
| Tesmec Peninsula | 59 | 2,000 | 1,333 | - | 17 | 1,930 | 37 | 979 | |
| Marais Tunisie | - | 2 | - | - | - | 2 | - | - | |
| Marais Lucas | - | 794 | - | - | - | 794 | - | - | |
| Subtotal | 1,083 | 3,207 | 1,333 | - | 1,063 | 2,726 | 37 | 979 | |
| Related parties: | |||||||||
| Ambrosio S.r.l. | - | - | - | 4 | - | - | - | - | |
| TTC S.r.l. | - | - | - | 90 | - | - | - | 26 | |
| Ceresio Tours S.r.l. | - | - | - | 1 | - | - | - | - | |
| Dream Immobiliare S.r.l. | 759 | - | 453 | - | 1,162 | - | - | ||
| Fi.ind. | - | - | - | - | 27 | - | - | - | |
| M.T.S. Officine meccaniche S.p.A. | 1,923 | 197 | - | 1,848 | 1,373 | 2,911 | - | 1,199 | |
| MTS4SERVICE USA LLC | 5,447 | - | - | 336 | 10 | 1,387 | - | 119 | |
| Comatel | 64 | - | - | - | 9 | - | - | - | |
| C2D | 117 | - | - | 70 | 4 | 1,200 | - | 43 | |
| Subtotal | 7,551 | 956 | - | 2,802 | 1,423 | 6,660 | - | 1,387 | |
| Total | 8,973 | 4,328 | 1,333 | 2,802 | 2,581 | 9,386 | 37 | 2,366 |
Events occurring after the close of the financial period included:
On 26 October 2018, the new production site in Monopoli (Bari) was opened, which will be the headquarters of the subsidiary Tesmec Rail S.r.l. and will have the objective of further enhancing the Group's activity in the rail business. The modern site will be active in the design, prototyping and manufacture of special railway machines, in particular, railway wagons for the installation and maintenance of the railway catenary wire system, multi-purpose unit, shunting locomotives and power units for passenger trains.
of the administrative and accounting procedures for preparing the Condensed Consolidated Financial Statements as at 30 September 2018.
Grassobbio, 31 October 2018
Ambrogio Caccia Dominioni Gianluca Casiraghi
Chief Executive Officer Manager responsible for preparing the Company's financial statements
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