Quarterly Report • Nov 14, 2017
Quarterly Report
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INTERIM REPORT as of 30 September 2017
The Board of Directors 14 November 2017
| 1 | B&C SPEAKERS S.P.A. — CORPORATE BODIES 3 THE COMPANY |
|
|---|---|---|
| 2 | INTRODUCTION 4 | |
| 3 | THE MAIN ASPECTS OF BUSINESS FROM JANUARY TO SEPTEMBER 2017 4 | |
| 4 | OPERATING, ECONOMIC AND FINANCIAL RESULTS 5 | |
| 5 | STATEMENT OF CHANGES IN EQUITY 10 | |
| 6 | NET FINANCIAL POSITION 11 | |
| 7 | SIGNIFICANT EVENTS OCCURRING AFTER 30 SEPTEMBER 2017 11 | |
| 8 | OUTLOOK FOR THE ENTIRE YEAR 2017 12 | |
| 9 | SHARE PERFORMANCE 12 | |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND STATEMENT OF COMPREHENSIVE INCOME AS OF 30 SEPTEMBER 2017 13 |
||
| CERTIFICATION OF FINANCIAL REPORTING MANAGER PURSUANT TO ARTICLE 154-BIS, PARAGRAPH 2 OF LEGISLATIVE DECREE NO. 58/1998. 15 |
| Chairperson: | Gianni Luzi |
|---|---|
| Chief Executive Officer: | Lorenzo Coppini |
| Director: | Simone Pratesi |
| Director: | Alessandro Pancani |
| Director: | Francesco Spapperi |
| Independent Director: | Roberta Pecci |
| Independent Director: | Gabriella Egidi |
| Independent Director: | Patrizia Mantoan |
| Chairperson: | Sara Nuzzaci |
|---|---|
| Regular Auditor: | Giovanni Mongelli |
| Regular Auditor: | Leonardo Tommasini |
PricewaterhouseCoopers S.p.A.
The Interim Report as of 30 September 2017 has been prepared pursuant to Legislative Decree 195/2007 and article 154-ter of the T.U.F.; the economic and financial aggregates shown below, even if determined on the basis of IFRS and in particular the same measurement criteria used for the preparation of the consolidated financial statements as of 31 December 2016, do not represent an interim financial statement prepared in accordance with IFRS and in particular with IAS 34.
This interim report has not been subjected to audit.
At the date this report was prepared, the official data indicate the following significant shareholders:
This Interim Report as of 30 September 2017 contains the information required by art. 154 ter of the TUF.
The IFRS accounting standards used by the Group are the same as those applied in the preparation of the financial statements for the year ended 31 December 2016, to which reference should be made.
In particular, as required by IFRS, a provision was made for the carrying out of estimates and the formulation of assumptions, which are reflected in the determination of the carrying amounts of assets and liabilities, including potential assets and liabilities at the end of the period. These estimates and assumptions are used specifically for determining amortisation, impairment testing of assets (including the measurement of receivables), provisions, employee benefits, deferred tax assets and liabilities. The final results could therefore differ from these estimates and assumptions; moreover, the estimates and assumptions are reviewed and updated periodically and the effects of each change are immediately reflected in the financial statements.
Below are the financial statements and the explanatory notes to the statements. All valuesare expressed in euros, unless otherwise indicated. The financial and economic data presented are compared with the corresponding figures of 2016.
These financial statements, prepared in accordance with the requirements of art. 154-ter of the TUF, report the positive and negative components of income, the net financial position, divided between short, medium and long-term items, as well as the Group's financial position. In view of this, the financial statements presented and the explanatory notes thereto, prepared for the sole purpose of compliance with the provisions of the aforementioned Issuer Regulations, are devoid of certain data and information that would be required for a complete representation of the financial position and the results of the Group for the quarter ended at 30 September 2017 in accordance with IFRS.
B&C Speakers is a key international entity in the production and marketing of "top quality professional loudspeakers"; owing to the nature and type of business carried out, the Group operates exclusively in this sector, both nationally and internationally.
Products are manufactured and assembled at the Italian production plant of the Parent Company, which also deals directly with marketing and sales in the various geographical areas covered.
Distribution in the US market is handled through the American subsidiary B&C Speakers NA LLC, which also offers support services for sales to local customers.
Distribution in the Brazilian market is handled through the subsidiary B&C Speakers Brasil LTDA.
Below is the table showing the Group's economic performance during the first nine months of 2017 compared with the figures for the same period of 2016.
| Economic trends - Group B&C Speakers | ||||
|---|---|---|---|---|
| (€ thousands) | 9 months 2017 |
Incidence | 9 months 2016 |
Incidence |
| Revenues | 29,654 | 100.00% | 28,534 | 100.0% |
| Cost of sales | (17,260) | -58.20% | (16,542) | -58.0% |
| Gross margin | 12,394 | 41.80% | 11,992 | 42.0% |
| Other revenues | 143 | 0.48% | 98 | 0.3% |
| Cost of indirect labour | (1,644) | -5.54% | (1,546) | -5.4% |
| Commercial expenses | (664) | -2.24% | (598) | -2.1% |
| General and administrative expenses | (3,032) | -10.22% | (2,786) | -9.8% |
| Ebitda | 7,198 | 24.27% | 7,160 | 25.1% |
| Depreciation of tangible assets | (576) | -1.94% | (568) | -2.0% |
| Amortization of intangible assets | (21) | -0.07% | (19) | -0.1% |
| Writedowns | 0 | 0.00% | (57) | -0.2% |
| Earning before interest and taxes (Ebit) | 6,601 | 22.26% | 6,516 | 22.8% |
| Financial costs | (351) | -1.18% | (204) | -0.7% |
| Financial income | 464 | 1.56% | 333 | 1.2% |
| Earning before taxes (Ebt) | 6,714 | 22.64% | 6,645 | 23.3% |
| Income taxes | (1,991) | -6.71% | (2,289) | -8.0% |
| Profit for the year | 4,723 | 15.93% | 4,356 | 15.3% |
| Minority interest | 0 | 0.00% | 0 | 0.0% |
| Group Net Result | 4,723 | 15.93% | 4,356 | 15.3% |
| Other comprehensive result | (100) | -0.34% | (147) | -0.5% |
| Total Comprehensive result | 4,623 | 15.59% | 4,209 | 14.8% |
Note: This interim report presents and comments on certain financial figures and certain reclassified statements not defined within the IFRS.
These amounts are defined below in compliance with the provisions in Consob Communication (DEM 6064293) of 28 July 2006, as subsequently amended (Consob Communication 0092543 of 03 December 2015, implementing the ESMA/2015/1415 guidelines).
The alternative performance indexes listed below should be used as additional information with respect to that foreseen in the IFRS, to assist the users of the financial report to better comprehend the Group's economic, capital and financial performance. We emphasise that the adjustment methods used by the Group to calculate these figures have remained constant over the years. We also note that they could differ from methods used by other companies.
EBITDA (Earnings Before Interest Taxes Depreciation and Amortisation) is defined by the Issuer's Directors as the "earnings before taxes and interests", as resulting from the consolidated income statement gross of amortisation of intangible assets, depreciation of property, plant and equipment, provisions and writedowns as resulting from the aforesaid consolidated income statement. EBITDA is a measure that the Issuer uses to monitor and assess the Group's operating performance.
EBIT (Earnings Before Interest and Taxes) represents the consolidated profit/loss before taxes, financial expenses and income as shown in the income statement tables prepared by the Directors in drawing up the financial statements in accordance with the IASs/IFRSs.
EBT (Earnings Before Taxes) is the consolidated result before tax, as recorded in the income statement prepared by the Directors in preparing IAS/IFRS-compliant financial statements.
Consolidated revenues in the first nine months of 2017 amounted to € 29.65 million, resulting in growth of 3.9% compared to the same period of 2016 when turnover stood at € 28.53 million.
The above growth was achieved thanks to good performance in the period just before summer when manufacturing and turnover levels were excellent.
In the table below, we show the breakdown by geographical area of the turnover achieved by the Group during the period under review compared with the same period of the previous year:
| Revenues per geographic area (values in Euro/thausand) |
3 Q 2017 YTD | % | 3 Q 2016 YTD | % | Difference | Difference % |
|---|---|---|---|---|---|---|
| Latin America | 2.107.025 | 7,1% | 1.591.061 | 5,6% | 515.964 | 32,4% |
| Europe | 13.790.217 | 46,5% | 13.381.690 | 46,9% | 408.527 | 3,1% |
| Italy | 1.875.616 | 6,3% | 2.430.126 | 8,5% | (554.510) | -22,8% |
| North America | 5.440.394 | 18,3% | 5.463.109 | 19,1% | (22.715) | -0,4% |
| Middle East & Africa | 327.978 | 1,1% | 189.680 | 0,7% | 138.298 | 72,9% |
| Asia & Pacific | 6.112.397 | 20,6% | 5.478.134 | 19,2% | 634.263 | 11,6% |
| Total | 29.653.628 | 100,0% | 28.533.800 | 100,0% | 1.119.828 | 3,9% |
During this period, the Group has significantly increased its presence in the Asian market (+11.6% with sales of € 6.1 million) and has achieved excellent performance in the South American market (+32.4% with sales of € 2.1 million), and in the European market (+3.1% with sales of € 13.7 million) which remains the most important market for the Group. Results were down in the Italian market compared to the first nine months of 2016 (-22.8% with sales of € 1.3 million). The North American market was substantially stable.
This category includes raw materials (purchasing, processing by third parties and changes in inventories), the cost of personnel directly involved in the production process, transport costs and the costs for commissions payable, customs duties and other direct costs of lesser importance.
Cost of sales during the first nine months of 2017 remained almost stable in terms of the proportion of revenues compared to the first nine months of 2016, rising from 57.97% to 58.20%.
This category refers to costs for office staff, executives and workers not associated with the production process.
Over the first nine months of 2017 cost of indirect labour increased slightly more than turnover, increasing their proportion of revenues (5.54% in the first nine months of 2017 against 5.42% in the same period last year).
This category refers to costs for commercial consultancy, advertising and marketing, travel and subsistence and other minor charges relating to the commercial sector.
Commercial expenses showed a slight increase compared to the first nine months of the previous year. Therefore, as a proportion of revenues they slightly increased from 2.09% in the first nine months of 2016 to 2.24% in the first nine months of 2017.
General and administrative expenses increased by around € 230,000 compared to the first six months of the previous period, with a slightly increased impact on revenues which went from 9.77% in the first nine months of 2016 to 10.22% in the first nine months of 2017. The increase is principally due to the use of technical consulting aimed at improving manufacturing and operational procedures as well as investment associated with the new company division.
As a result of the trends illustrated above, EBITDA of the first nine months of 2017 amounted to 7.19 million euro, with an increase of 0.53% compared with the same period of 2016 (in which EBITDA amounted to 7.16 million euro).
The EBITDA margin for the first nine months of 2017 was therefore equal to 24.27% of revenues, whilst it was 25.09% during the same period in 2016.
EBIT as of 30 September 2017 amounted to 6.6 million euro, an increase of 1.31% compared with the same period of 2016 (when the figure was 6.51 million euro). The EBIT margin was 22.26% of revenues (22.84% in the same period of 2016).
Depreciation of tangible fixed assets are broadly in line with the corresponding period of the previous year due to the combined effects of the natural conclusion of depreciation of existing assets and investments made in the first nine months of 2017, aimed essentially at improving production facilities.
Below is the financial data as of 30 September 2017 compared with assets at the end of 2016.
| Reclassified Balance sheet | 30 September | 31 December | |
|---|---|---|---|
| (€ thousands) | 2017 | 2016 | Change |
| Property, plant & Equipment | 2,612 | 2,807 | (195) |
| Inventories | 9,466 | 8,182 | 1,284 |
| Trade receivables | 8,437 | 7,774 | 664 |
| Other receivables | 770 | 780 | (10) |
| Trade payables | (2,808) | (3,949) | 1,141 |
| Other payables | (2,389) | (1,950) | (439) |
| Working capital | 13,477 | 10,836 | 2,641 |
| Provisions | (727) | (793) | 66 |
| Invested net working capital | 15,362 | 12,851 | 2,511 |
| Cash and cash equvalents | 2,158 | 3,731 | (1,574) |
| Investments in associates | 50 | 50 | - |
| Goodwill | 1,394 | 1,394 | - |
| Short term securities | 3,388 | 6,164 | (2,776) |
| Other financial receivables | 509 | 510 | (1) |
| Financial assets | 7,499 | 11,849 | (4,350) |
| Invested net non operating capital | 7,499 | 11,849 | (4,350) |
| NET INVESTED CAPITAL | 22,861 | 24,700 | (1,839) |
| Equity | 16,401 | 21,878 | (5,477) |
| Short-term financial borrowings | 2,378 | 1,129 | 1,249 |
| Long-term financial borrowing | 4,081 | 1,693 | 2,388 |
| RAISED CAPITAL | 22,861 | 24,700 | (1,839) |
Property, plant & Equipment: these are defined by the Issuer's Directors as the value of the multi-annual assets (tangible and intangible). Net Operating Working Capital: is defined by the Issuer's Directors as the value of inventories, trade receivables and other receivables net of debts for supplies and other payables. Funds: the value of bonds linked to employees' severance indemnities and directors' severance pay. Invested net working capital: is the value of financial assets and other financial receivables as described above. Raised capital: is the value of Net Equity of the Group and the total indebtedness of the Group.
A number of comments on the classification of assets and liabilities according to their operational destination are presented below.
Invested net working capital shows an increase of € 2.5 million compared with 31 December 2016. This increase was mainly due to the combined effect of the following factors:
Invested net non-operating capital has dropped by around € 4.3 million compared to 31 December 2016, principally due to the effect of the decrease in short-term securities and the decrease in cash and cash equivalents. The decrease in the two above categories is due to the absorption of cash and cash equivalents following payment of dividends and taxes.
The other Capital categories showed no significant changes compared with 31 December 2016.
Changes in the Group's net equity reserves during the first nine months of 2017 are primarily attributable to the distribution of dividends and the balance of treasury shares (positive as a result of sales made in the period). It should be noted, however, that the variation in share capital is due to IFRS-compliant handling of treasury shares allocation.
The total net financial position was a negative € 0.9 million (positive at € 7.07 million on 31 December 2016), mainly due to the payment of the extraordinary dividend in May 2017 and payment of taxes.
Short-term borrowings at € 2,378 thousand is entirely constituted of the short-term portion of funding taken out by the Parent Company.
Medium to long-term borrowings at € 4,081 thousand is entirely constituted of the mediumterm portion of funding taken out by the Parent Company.
Below is the statement of changes in net equity from 01 January 2017 to 30 September 2017 (figures in thousands of euros):
| Share Capital |
Legal Reserve |
Share premium reserve |
Extraordinar y reserve |
Exchange rate reserve |
Foreign exchange reserve |
Retained earnings |
Net Group Equity |
Minority interest |
Total net Equity |
|
|---|---|---|---|---|---|---|---|---|---|---|
| Euro thousand | ||||||||||
| Balance at January 1, 2017 | 1.087 | 379 | 4.047 | 44 | 25 | 559 | 15.737 | 21.878 | - | 21.878 |
| 0 | 0 | 0 | ||||||||
| Result of the period | 4.723 | 4.723 | 4.723 | |||||||
| Other comprehensive income/expenses | (101) | 2 | (99) | (99) | ||||||
| Totale other comprehensive income/expenses | - | - | - | - | - | (101) | 4.725 | 4.624 | - | 4.624 |
| Shareholders | ||||||||||
| Allocation of previous year result | 27 | (27) | - | - | - | |||||
| Dividend distribution | (10.921) | (10.921) | - | (10.921) | ||||||
| Treasury shares allocation | 10 | 811 | - | 821 | 821 | |||||
| Other | - | - | - | |||||||
| Balance at September 30, 2017 | 1.097 | 379 | 4.858 | 44 | 52 | 458 | 9.514 | 16.402 | - | 16.402 |
Below is the Net Financial Position table prepared in line with that reported in the consolidated financial statements as at 31 December 2017 (figures in thousands of Euro).
| 30 September | 31 December | ||
|---|---|---|---|
| 2017 (a) | 2016 (a) | Change % | |
| A. Cash | 2,158 | 3731.4 | -42% |
| C. Securities held for trading | 3,388 | 6,164 | -45% |
| D. Cash and cash equivalent (A+C) | 5,546 | 9,896 | -44% |
| F. Bank overdrafts | 0 | 0 | #DIV/0! |
| G. Current portion of non current borrowings | (2,378) | (1,129) | 111% |
| I. Current borrowingse (F+G) | (2,378) | (1,129) | 111% |
| J. Current net financial position (D+I) | 3,167 | 8,767 | -64% |
| K. Non current borrowings | (4,081) | (1,693) | 141% |
| N. Non current borrowings | (4,081) | (1,693) | 141% |
| O. Total net financial position (J+N) | (914) | 7,074 | -113% |
(a) Informations extracted and/or calculated from the financial statements prepared in accordance with IFRS as adopted by the European Union.
Note: The net financial position, calculated by the Parent Company management as detailed above, is not identified as an accounting measurement under the Italian Accounting Standards or the IFRSs endorsed by the European Commission. Therefore, the measurement criteria may not be consistent with that adopted by other operators and/or groups and may, therefore, not be comparable. Moreover, the definition may differ from that established by the Issuer's loan contracts.
The change in the total net financial position is principally due, as commented on above, to the payment of the extraordinary dividend in May 2017 and payment of taxes.
After the end of the third quarter of 2017 and up to the date of preparation of the Consolidated Interim Report, our attention was drawn to the following significant events:
As more fully explained in the press release on 02 October 2017, this agreement envisages a payment no higher than €7.4 million, funded by bank-issued credit in the medium-term. The completion of this operation is subject to certain conditions that are typical for this type of operation, including the completion of due diligence process, that at the time of writing, is ongoing.
This operation will allow the B&C Speakers Group to consolidate their leading position on the market in question and to better segment their market presence through the acquired brands.
As for developments over the whole of 2017, the management of the Parent Company believes that, given the dynamic demand and the production capacity, it is possible to foresee a year-end with increased revenue volumes, mid-single digit, compared to the previous one.
Below is a table showing the evolution of share performance during the last 12 months of the financial year (source Borse.it).
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | (Values | 30 September | 31 December |
|---|---|---|---|
| in Euro) | 2017 | 2016 | |
| ASSETS | |||
| Fixed assets | |||
| Tangible assets | 2,508,764 | 2,709,902 | |
| Goodwill | 1,393,789 | 1,393,789 | |
| Other intangible assets | 103,307 | 97,355 | |
| Investments in non controlled associates | 50,000 | 50,000 | |
| Deferred tax assets | 251,356 | 296,702 | |
| Other non current assets | 509,005 | 509,749 | |
| related parties | 88,950 | 88,950 | |
| Total non current assets | 4,816,222 | 5,057,497 | |
| Currents assets | |||
| Inventory | 9,465,717 | 8,181,834 | |
| Trade receivables | 8,437,332 | 7,773,575 | |
| Tax assets | 215,504 | 225,624 | |
| Other current assets | 3,691,581 | 6,421,637 | |
| Cash and cash equivalents | 2,157,709 | 3,731,312 | |
| Total current assets | 23,967,843 | 26,333,982 | |
| Total assets | 28,784,065 | 31,391,479 | |
| 30 September | 31 December | ||
| 2017 | 2016 | ||
| LIABILITIES | |||
| Equity | |||
| Share capital | 1,097,563 | 1,087,340 | |
| Other reserves | 5,332,671 | 4,494,290 | |
| Foreign exchange reserve | 457,846 | 559,170 | |
| Retained earnings | 9,513,058 | 15,737,242 | |
| Total equity attributable to shareholders of the parent | 16,401,138 | 21,878,042 | |
| Minority interest | - | 0 | |
| Total equity | 16,401,138 | 21,878,042 | |
| Non current equity | |||
| Long-term borrowings | 4,081,092 | 1,692,635 | |
| Severance Indemnities | 688,211 | 710,137 | |
| Provisions for risk and charges | 38,540 | 82,596 | |
| Deferred tax liabilities | 0 | 0 | |
| Total non current liabilities | 4,807,843 | 2,485,368 | |
| Current liabilities | |||
| Short-term borrowings | 2,378,388 | 1,128,918 | |
| Trade liabilities | 2,807,832 | 3,948,795 | |
| related parties | 0 | 961 | |
| Tax liabilities | 1,006,989 | 712,098 | |
| Other current liabilities | 1,381,875 | 1,238,258 | |
| Total current liabilities | 7,575,084 | 7,028,069 | |
| Total Liabilities | 28,784,065 | 31,391,479 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | 9 months | |
|---|---|---|
| (Values in Euro) | 9 months 2017 | 2016 |
| Revenues | 29,653,628 | 28,533,800 |
| Cost of sales | (17,259,655) | (16,541,538) |
| Other revenues | 143,477 | 97,825 |
| Cost of indirect labour | (1,644,005) | (1,545,730) |
| Commercial expenses | (663,572) | (597,697) |
| General and administrative expenses | (3,032,036) | (2,786,450) |
| related parties | (694,684) | (693,061) |
| Depreciation of tangible assets | (575,504) | (567,814) |
| Amortization of intangible assets | (21,019) | (19,403) |
| Writedowns | 0 | (57,102) |
| Earning before interest and taxes | 6,601,314 | 6,515,890 |
| Financial costs | (350,580) | (203,727) |
| Financial income | 463,690 | 332,984 |
| Earning before taxes | 6,714,424 | 6,645,146 |
| Income taxes | (1,991,157) | (2,288,801) |
| Profit for the year (A) | 4,723,267 | 4,356,345 |
| Other comprehensive income/(losses) for the year that will not be reclassified in icome statement: |
||
| Actuarial gain/(losses) on DBO (net of tax) | 1,099 | (18,146) |
| Other comprehensive income/(losses) for the year that will be reclassified in | ||
| icome statement: | ||
| Exchange differences on translating foreign operations | (101,324) | (128,862) |
| Total other comprehensive income/(losses) for the year (B) | (100,225) | (147,008) |
| Total comprehensive income (A) + (B) | 4,623,043 | 4,209,337 |
| Profit attributable to: | ||
| Owners of the parent | 4,723,267 | 4,356,345 |
| Minority interest | - | - |
| Total comprehensive income atributable to: | ||
| Owners of the parent | 4,623,043 | 4,209,337 |
| Minority interest | - | - |
| Basic earning per share | 0.43 | 0.39 |
| Diluted earning per share | 0.43 | 0.39 |
The Financial Reporting Manager, Mr. Francesco Spapperi declares, pursuant to paragraph 2 article 154-bis of the Consolidated Financial Law, that the accounting information contained in this document, "Interim report as of 30 September 2017", corresponds to the company's accounting documents, books and records.
The Financial Reporting Manager
Francesco Spapperi
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