Quarterly Report • Sep 18, 2017
Quarterly Report
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as of 30 June 2017
Prepared in conformity with the International Financial Reporting Standards endorsed by the European Union
| Introduction to the condensed consolidated interim financial statement at 30 June 2017 4 |
|---|
| Condensed consolidated interim financial statement at 30 June 2017 prepared in conformity with the IFRSs endorsed by the European Union 5 |
| Condensed consolidated interim financial statement at 30 June 2017 14 |
| Notes to the condensed consolidated interim financial statement at 30 June 2017 prepared in conformity with the IFRSs adopted by the European Union 18 |
| Certification of the Condensed Consolidated Interim Financial Statements under the terms of Art. 154-bis of Italian Legislative Decree 58/98 44 |
| Independent Auditors' Report 45 |
The present file is available on the Internet at the address: www.bcspeakers.com
Registered Office in Bagno a Ripoli (FI), at Via Poggiomoro 1 Paid-up share capital of Euro 1,100,000 Companies Register Florence Office – Tax Code 01398890481
| 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 |
Independent auditing firm PricewaterhouseCoopers S.p.A.
The present Condensed Consolidated Interim Financial Statement of the B&C Speakers Group at 30 June 2017 was prepared observing the International Accounting Standards ("IFRSs") issued by the International Accounting Standards Board ("IASB") and endorsed by the European Union and was drawn up in conformity with IAS 34 "Interim Financial Statements". These condensed consolidated interim financial statements therefore do not include all the information required of the annual financial statements and must be read together with the annual financial statements prepared for the financial year ended 31 December 2016.
The present report has been drawn up also in accordance with Italian Legislative Decree 58/1998, and with the Regulation for Issuers published by Consob.
During the first half of 2017 the Parent Company continued in its Buy-Back programme involving treasury shares in accordance with the resolution passed by the Shareholders' Meeting held on 26 April 2017 which renewed the mandate to purchase treasury shares for another 12 months. At 30 June 2017, it held 77,772 treasury shares, equal to 0.71% of the share capital. The shares have been accounted for in accordance with IFRS. The weighted average purchase price of shares in the portfolio is Euro 4.39.
At the date of this report (September 2017), the number of Treasury shares owned has changed and amounts to 47,772, equal to 0.43% of the share capital; For your information we can note that the Parent Company B&C Speakers S.p.A. is controlled by R&D International S.r.l. which performs work of direction and coordination.
The equity interest held by the holding Research & Development International S.r.l. represented, at 30 June 2017, 55.36% of the share capital; further information on relations with the holding are contained in the rest of the report.
During May 2017, B&C Speakers issued an ordinary dividend of Euro 0.4 per ordinary share in circulation in addition to an extraordinary dividend, on the tenth anniversary of the Company's listing, of Euro 0.6 per ordinary share in circulation. The total value of the dividend issued was therefore Euro 10.9 million.
The B&C Speakers Group is one of the international reference points as regards the economic sector of production and sale of "professional loudspeakers in a high quality band"; the business of the Group, which operates both at the national and international level, is carried on entirely in the above sector (production and sale of Loudspeakers in a high quality band). 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.
Products are distributed on the North American market through the subsidiary B&C Speakers NA LLC which performs a role of commercial support to the Parent Company.
Distribution on the Latin American market has been integrated thanks to the activity of the subsidiary B&C Speakers Brasil LTDA, a company incorporated in December 2009 and wholly controlled by the Parent Company.
Products are distributed on the Asian market through local distributors served directly by the Parent Company.
In the tables below we present the economic and financial highlights of the half-year period:
| (€ thousands) | 1st half | 1st half |
|---|---|---|
| 2017 | 2016 | |
| Revenues | 20,116 | 18,675 |
| Ebitda | 4,852 | 4,481 |
| Ebit | 4,455 | 4,075 |
| Net profit | 3,066 | 2,639 |
| 30 June | 31 December |
|---|---|
| 2017 | 2016 |
| 4,900 | 5,057 |
| 5,374 | 2,485 |
| 24,087 | 26,334 |
| 9,662 | 7,028 |
| 14,425 | 19,306 |
| 13,950 | 21,878 |
| (€ thousands) | 1st half | 1st half |
|---|---|---|
| 2017 | 2016 | |
| Operating cash flow | 996 | 2,016 |
| Cash flow from investing activities | 2,615 | (220) |
| Cash flow from financial activities | (6,787) | (4,583) |
| Cash and cash equivalent at end of the year | (3,175) | (2,788) |
| (€ thousands) | 30 June | 31 December |
|---|---|---|
| 2017 | 2016 | |
| Current net financial position | 1,567 | 8,766 |
| Total net financial position | (3,099) | 7,073 |
The B&C Speakers S.p.A. shares are listed on the Mercato Telematico Azionario organised and managed by Borsa Italiana S.p.A..
At 30 June 2017 the listed price for shares in B&C Speakers S.p.A. (BEC) stood at Euro 11.37 and consequently the market capitalization amounted to about Euro 125 million.
The following shows the share performance of B&C Speakers SpA during the last 12 months:
The world economy is consolidating with more solid and widespread expansion, compared to the one recorded at the end of 2016.
The prospects for global growth are overall positive, though there remain significant downsizing risks related to uncertainty over economic policies, the persistence of geopolitical tensions and the doubts associated with Brexit.
In the Euro area, the economy is growing more than expected in 2017, with expansive rates in the second quarter of 2017, higher than in the first quarter and as initially estimated. As for Italy, economic activity accelerated in the first months of 2017, driven mainly by the sharp rise in household expenditure and the strengthening of the services sector.
he professional audio sector has grown considerably over recent decades due to the technological revolution in the field of music that has effectively cancelled the opportunities for many artists to sell discs in favour of concerts and live performances. This fact has led to a huge increase in the number of live shows and a fairly high average ticket price resulting in an increase in quality expectations for the public attending live concerts.
This trend has favoured the higher quality companies and allowed B&C Speakers Group to grow both internally and with advantage for its competitors. In addition, our market is also affected by construction spending, since many installations relate to places such as new theatres, cinemas, clubs and discos, karaoke pubs, large stations and airports where public announcements also for security purposes have raised the need for higher quality sound systems.
The latest driver of market growth is the increasing spread of audio systems in shopping centres.
Following the policies of the Chinese Government, the trend of rare earth (neodymium and disprosion) prices used as raw materials in magnets production is experiencing a growth that could have an impact on the costs for components of the Group.
The general economic trend during the first half of 2017 was up compared to that seen during the first half of the previous financial year. The order book (in relation to the Parent Company), of approximately Euro 8.4 million at 30 June 2017 rose (by around 21%) with respect to the Euro 6.9 million at 31 December 2016.
To better present the trend in operations in relation to the first half of financial year 2017 compared with the same period of the previous year, a table showing these results is provided below:
| (€ thousands) | I half 2017 | Incidence I half 2016 | Incidence | |
|---|---|---|---|---|
| Revenues | 20,116 | 100.00% | 18,675 | 100.0% |
| Cost of sales | (11,688) | -58.10% | (10,941) | -58.6% |
| Gross margin | 8,428 | 41.90% | 7,734 | 41.4% |
| Other revenues | 95 | 0.47% | 35 | 0.2% |
| Cost of indirect labour | (1,140) | -5.67% | (1,043) | -5.6% |
| Commercial expenses | (478) | -2.38% | (422) | -2.3% |
| General and administrative expenses | (2,052) | -10.20% | (1,822) | -9.8% |
| Ebitda | 4,852 | 24.12% | 4,481 | 24.0% |
| Depreciation of tangible assets | (383) | -1.90% | (375) | -2.0% |
| Amortization of intangible assets | (14) | -0.07% | (13) | -0.1% |
| Writedowns | 0 | 0.00% | (19) | -0.1% |
| Earning before interest and taxes (Ebit) | 4,455 | 22.15% | 4,075 | 21.8% |
| Financial costs | (253) | -1.26% | (152) | -0.8% |
| Financial income | 284 | 1.41% | 249 | 1.3% |
| Earning before taxes (Ebt) | 4,486 | 22.30% | 4,172 | 22.3% |
| Income taxes | (1,334) | -6.63% | (1,436) | -7.7% |
| Profit for the year | 3,153 | 15.67% | 2,736 | 14.7% |
| Minority interest | 0 | 0.00% | 0 | 0.0% |
| Group Net Result | 3,153 | 15.67% | 2,736 | 14.7% |
| Other comprehensive result | (87) | -0.43% | (97) | -0.5% |
| Total Comprehensive result | 3,066 | 15.24% | 2,639 | 14.1% |
This interim report presents and comments on certain financial figures and certain reclassified schedules 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 3 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 achieved during the first half of 2017 amounted to 20.12 million Euro; an increase (+7.72%) compared with the first half of 2016 when they were 18.67 million Euro.
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:
| Geographical Area | 1st half | 1st half | Change | Change % | |||
|---|---|---|---|---|---|---|---|
| 2017 | % | % 2016 |
|||||
| America Latina | 1,338,680 | 6.7% | 1,159,340 | 6.2% | 179,340 | 15% | |
| Europa | 9,313,806 | 46.3% | 8,941,745 | 47.9% | 372,061 | 4% | |
| Italia | 1,274,300 | 6.3% | 1,729,355 | 9.3% | (455,055) | -26% | |
| Nord America | 4,031,946 | 20.0% | 3,802,354 | 20.4% | 229,592 | 6% | |
| Medio Oriente & Africa | 236,580 | 1.2% | 149,312 | 0.8% | 87,268 | 58% | |
| Asia & Pacifico | 3,920,880 | 19.5% | 2,893,188 | 15.5% | 1,027,692 | 36% | |
| Totale | 20,116,191 | 100.0% | 18,675,293 | 100.0% | 1,440,899 | 7.72% |
During the period, the Group has significantly increased its presence in the Asian market (+36% with sales of Euro 3.9 million) and has achieved good performance in the South American market (+15% with sales of Euro 1.3 million), in the North American market (+6% with sales of Euro 4 million) and on the European market (+4% with sales of Euro 9.3 million) which remains the most important market for the Group. Unlike the Italian market the results achieved were down compared with the first half of 2016 (-26% with sales of 1.3 million Euro).
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 three months of 2017 had a slightly lower impact on revenues compared to the first six months of 2016, rising from 58.59% to 58.10%. The trend was due essentially to a decrease in the impact of costs for raw materials (-0.8 percentage points) offset by an increase in transport, customs duties and other minor components (+0.4 percentage points). Direct labour costs increased proportionally to the increase in revenue and therefore the impact of this item on revenue remained constant compared to the first half of 2016.
This category refers to costs for staff, executives and workers not directly associated with the production process.
Over the first six months of 2017, indirect personnel costs did not show significant changes compared to the first half of 2016.
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 no significant changes compared to the first six months of the previous year. Their impact on revenues remained largely unchanged, representing 2.26% in the first six months of 2015 and 2.38% in the first six months of 2017.
Administrative and general expenses increased by around Euro 230 thousand compared to the first six months of the previous period, with a slightly increased impact on revenues which went from 9.75% in the first six months of 2016 to 10.20% of the first six months 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.
Mainly as a result of the trends described above, EBITDA in the first six months of 2017 amounted to Euro 4.85 million, an increase of 8,28% compared to the first six months of 2016 which amounted to Euro 4.48 million.
The EBITDA margin for the first six months of 2017 was therefore equal to 24.12% of revenues, substantially in line with the first six months of 2016 (when it was 24.00% of revenues for the period).
The depreciation and amortisation of tangible and intangible assets was in line with that of the corresponding period of the previous year as a result of net investment flows and assets which ended their useful life.
EBIT of the first half of 2017 amounted to Euro 4.45 million; a, increase (9.33%) compared with the first half of 2016 (when the figure was Euro 4.07 million). The EBIT margin was 22.15% of revenues (21.82% in the first half of 2016).
The net profit of the Group at the end of the first half of 2017 amounted to 3.15 million Euro and represents a percentage of 15.67% of consolidated revenues (up compared with the same period of the previous financial year, when it amounted to 2.74 million Euro, equivalent to 14.65% of the revenues of the period).
The Group's financial stability remains on adequate levels although the Net Financial Position declined compared with the end of the previous financial year; at 30 June 2017 it was in fact a negative 3.01 million Euro while at 31 December 2016 it was a positive 7.07 million Euro. The difference is mainly due to the payment of the Euro 10.9 million dividend disbursed in May as well as payment of taxes.
Below is the reclassified balance sheet according to the allocation of sources and uses:
| Reclassified Balance sheet | June 30, December 31, | ||
|---|---|---|---|
| (€ thousands) | 2017 | 2016 | Change |
| Property, plant & Equipment | 2,693 | 2,807 | (114) |
| Inventories | 9,229 | 8,182 | 1,048 |
| Trade receivables | 9,348 | 7,774 | 1,575 |
| Other receivables | 681 | 780 | (99) |
| Trade payables | (4,394) | (3,949) | (445) |
| Other payables | (1,753) | (1,950) | 197 |
| Working capital | 13,112 | 10,836 | 2,276 |
| Provisions | (709) | (793) | 84 |
| Invested net working capital | 15,096 | 12,851 | 2,246 |
| Cash and cash equvalents | 1,712 | 3,731 | (2,019) |
| Investments in associates | 50 | 50 | - |
| Goodwill | 1,394 | 1,394 | - |
| Short term securities | 3,370 | 6,164 | (2,794) |
| Other financial receivables | 509 | 510 | (1) |
| Financial assets | 7,035 | 11,849 | (4,814) |
| Invested net non operating capital | 7,035 | 11,849 | (4,814) |
| NET INVESTED CAPITAL | 22,131 | 24,700 | (2,568) |
| Equity | 13,950 | 21,878 | (7,928) |
| Short-term financial borrowings | 3,515 | 1,129 | 2,386 |
| Long-term financial borrowing | 4,666 | 1,693 | 2,973 |
| RAISED CAPITAL | 22,131 | 24,700 | (2,568) |
Fixed assets: 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 Euro 2.2 million compared with 31 December 2016. This increase was mainly due to the combined effect of the following factors:
an increase in inventories of around Euro 1 million needed to face the increase in the order backlog for the second half of 2017;
a decrease in fixed assets of approximately Euro 114 thousand due to the combined effect of amortisation and depreciation of the period and of investments made in the period on the production lines;
Invested Net Non-Operating Capital has dropped around Euro 4.8 million compared to 31 December 2016, principally due to the effect of the decrease in short-term securities held due to liquidity reasons and due to the decrease in liquidity. The decrease in the two categories is due to the decrease in liquidity following payment of dividends and taxes.
The other Capital categories showed no significant changes compared with 31 December 2016.
The total Net Financial Position was a negative Euro 3.01 million (positive at Euro 7.07 million at 31 December 2016), mainly due to the payment of the extraordinary dividend in May 2017 and payment of taxes.
At 30 June 2017 the Group's workforce numbered 120 employees, in line with 31 December 2016.
Investments during the first half of 2017 were mainly focused on improving production lines, in order to increase efficiency and production capacity, and on the purchase of new vehicles for transporting goods.
During the first half of 2017, the following significant events occurred:
With regard to the full-year forecast for 2017, the parent company management believes that, given trends in demand and production capacity, it can expect the year to end with increased revenue volumes compared to the previous one.
As at the date of preparing these financial statements (September 2017), the official data reveals the following major shareholders:
To examine the main risks and uncertainties to which the group is exposed, since neither the internal nor the external conditions changed with respect to the final months of financial year 2016, the reader is referred to the full discussion on the matter in the report on operations of the consolidated financial statements at 31 December 2016.
For a description of the financial risks please refer to the notes to the condensed interim financial statement.
The Group abides by the Code of Corporate Governance of Italian Listed Companies currently in effect.
In accordance with the legislative obligations a "Corporate Governance Report" is prepared annually. In addition to providing a general description of the corporate governance system adopted by the Group, this contains the information on the ownership structures and on acceptance of the single prescriptions of the Code of Corporate Governance and on observance of the consequent commitments. For a more detailed description of the elements that make up Corporate Governance see the complete document relating to the annual report available on the website www.bcspeakers.com, in the Corporate Documents section.
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Values in Euro) |
Notes | June 30, 2017 |
December 31, 2016 |
|
|---|---|---|---|---|
| ASSETS | ||||
| Fixed assets | ||||
| Tangible assets | 1 | 2,610,377 | 2,709,902 | |
| Goodwill | 2 | 1,393,789 | 1,393,789 | |
| Other intangible assets | 3 | 82,953 | 97,355 | |
| Investments in non controlled associates | 4 | 50,000 | 50,000 | |
| Deferred tax assets | 5 | 253,363 | 296,702 | |
| Other non current assets | 6 | 509,219 | 509,749 | |
| related parties | 30 | 88,950 | 88,950 | |
| Total non current assets | 4,899,702 | 5,057,498 | ||
| Currents assets | ||||
| Inventory | 7 | 9,229,445 | 8,181,834 | |
| Trade receivables | 8 | 9,348,129 | 7,773,575 | |
| Tax assets | 9 | 146,608 | 225,624 | |
| Other current assets | 10 | 3,651,173 | 6,421,637 | |
| Cash and cash equivalents | 11 | 1,711,879 | 3,731,312 | |
| Total current assets | 24,087,234 | 26,333,982 | ||
| Total assets | 28,986,936 | 31,391,480 | ||
| LIABILITIES | June 30, 2017 |
December 31, 2016 |
||
| Equity | ||||
| Share capital | 12 | 1,086,444 | 1,087,340 | |
| Other reserves | 12 | 4,450,540 | 4,494,290 | |
| Foreign exchange reserve Retained earnings |
12 12 |
469,517 7,943,879 |
559,170 15,737,242 |
|
| Total equity attributable to shareholders of the parent | 13,950,380 | 21,878,042 | ||
| Minority interest | - | 0 | ||
| Total equity | 13,950,380 | 21,878,042 | ||
| Non current equity | ||||
| Long-term borrowings | 13 | 4,665,547 | 1,692,635 | |
| Severance Indemnities | 14 | 670,272 | 710,137 | |
| Provisions for risk and charges | 15 | 38,540 | 82,596 | |
| Deferred tax liabilities | 16 | 0 | 0 | |
| Total non current liabilities | 5,374,359 | 2,485,368 | ||
| Current liabilities | ||||
| Short-term borrowings | 16 | 3,515,275 | 1,128,918 | |
| Trade liabilities | 17 | 4,393,853 | 3,948,795 | |
| related parties | 30 | 80 | 340 | |
| Tax liabilities | 18 | 422,830 | 712,098 | |
| Other current liabilities | 19 | 1,330,239 | 1,238,259 | |
| Total current liabilities | 9,662,197 | 7,028,070 | ||
| Total Liabilities | 28,986,936 | 31,391,480 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||
|---|---|---|---|---|
| (Values in Euro) | Notes | I half 2017 | I half 2016 | |
| Revenues | 21 | 20,116,191 | 18,675,293 | |
| 22 | ||||
| Cost of sales | (11,688,231) | (10,941,499) | ||
| Other revenues | 23 | 94,662 | 34,614 | |
| Cost of indirect labour | 24 | (1,140,490) | (1,043,483) | |
| Commercial expenses | 25 | (477,891) | (421,814) | |
| General and administrative expenses | 26 | (2,051,832) | (1,821,627) | |
| related parties | 30 | (461,941) | (461,941) | |
| Depreciation of tangible assets | 27 | (382,686) | (374,546) | |
| Amortization of intangible assets | 27 | (14,242) | (13,028) | |
| Writedowns | 27 | 0 | (18,646) | |
| Earning before interest and taxes | 4,455,481 | 4,075,264 | ||
| Financial costs | 28 | (252,679) | (151,724) | |
| Financial income | 28 | 283,646 | 248,570 | |
| Earning before taxes | 4,486,448 | 4,172,110 | ||
| Income taxes | 29 | (1,333,895) | (1,436,091) | |
| Profit for the year (A) | 3,152,553 | 2,736,019 | ||
| Other comprehensive income/(losses) for the year that will not be reclassified in icome statement: |
||||
| Actuarial gain/(losses) on DBO (net of tax) | 12 | 2,635 | (13,135) | |
| Other comprehensive income/(losses) for the year that will be reclassified in icome statement: |
||||
| Exchange differences on translating foreign operations | 12 | (89,653) | (83,947) | |
| Total other comprehensive income/(losses) for the year (B) | (87,018) | (97,082) | ||
| Total comprehensive income (A) + (B) | 3,065,535 | 2,638,937 | ||
| Profit attributable to: | ||||
| Owners of the parent | 3,152,553 | 2,736,019 | ||
| Minority interest | - | - | ||
| Total comprehensive income atributable to: | ||||
| Owners of the parent | 3,065,535 | 2,638,937 | ||
| Minority interest | - | - | ||
| Basic earning per share | 12 | 0.29 | 0.25 | |
| Diluted earning per share | 12 | 0.29 | 0.25 |
| (Euro thousands) 2017 A- Net current bank balances at the beginning of the period 3,732 B- Cash flow from operating activities Profit/loss for the period (Including third parties Profit/loss) 3,066 Income tax expense 1,334 Amortization of intangibles assets 14 Depreciation of tangible assets 383 Finance cost 253 Interest income (284) Net change in provisions for risk and charges and other provision relating to personell (15) Change in provigion for leaving indemnities Allocations and revaluations - Actuarial gain/(losses) (4) (Use) (65) (increase) decrease in current trade and other current receivables (1,527) (increase) decrease in deferred tax assets and liabilities 43 (increase) decrease in inventory (1,048) Increase (decrease) in current trade and other payables 290 Net cash from/(used in) operating activities 2,444 Paid interest costs (109) Collected interest income 184 Taxes paid (1,523) Total (B) 996 (Investments) in non current tangible assets (294) Proceeds for sale of non current tangible assets 6.70 Net (investments) in non current intangible assets - Net (investments) in investment in associates - Net (investments) in non current securities 1 (Investments) in current securities (327) Proceeds from sale of current securities 3,229 Total (C) 2,615 |
2016 | |
|---|---|---|
| 1,486 | ||
| 2,639 | ||
| C- Cash flow from investing activities | 1,436 | |
| 13 | ||
| 375 | ||
| 152 | ||
| (249) | ||
| 25 | ||
| - | ||
| 22 | ||
| - | ||
| (981) | ||
| 50 | ||
| 255 | ||
| (782) | Note 1 | |
| 2,955 | ||
| (152) | ||
| 249 | ||
| (1,036) | ||
| 2,016 | ||
| (196) | ||
| - | ||
| (24) | ||
| - | ||
| - | ||
| (214) | ||
| 213 | ||
| (220) | ||
| D- Cash flow from financing activities | ||
| (Outflow) from repayment of loans (795) |
(561) | |
| Inflow from borrowing activities 5,000 |
- | |
| Purchase of treasury shares (71) |
(267) | |
| Dividend paid to shareholders (10,921) |
(3,755) | |
| Total (D) (6,787) |
(4,583) | |
| E- Cash flow for the period (B+C+D) (3,175) |
(2,788) | |
| F- Cash and cash equivalents at end of the period 557 |
(1,302) |
Note 1: the liquidity absorbed by the change in the amounts owed to suppliers and others comprises the absorption of liquid funds due to transactions with the parent R&D International S.r.l. for an amount which is not significant.
The following table shows the composition of the balance of net cash and cash equivalents at 30 June 2017 and at 30 June 2016:
| 30-Jun-17 | 30-Jun-16 | |
|---|---|---|
| Cash | 1,712 | 1,608 |
| Bank overdrafts | (1,155) | (2,910) |
| Total | 557 | (1,302) |
We present below the changes in net equity that occurred in the first half of 2017 and in the first half of 2016.
| Share Capital |
Legal Reserve |
Share premium reserve |
Extraordinary reserve |
Exchange rate reserve |
Foreign exchange reserve |
Retained earnings |
Net Group Equity |
Minority interest |
Total net Equity | |
|---|---|---|---|---|---|---|---|---|---|---|
| Euro thousand | ||||||||||
| Balance at January 1, 2017 | 1.088 | 379 | 4.045 | 44 | 27 | 559 | 15.736 | 21.878 | - | 21.878 |
| 0 | 0 | 0 | ||||||||
| Result of the period | 3.182 | 3.182 | 3.182 | |||||||
| Other comprehensive income/expenses | (89) | 2 | (87) | (87) | ||||||
| Totale other comprehensive income/expenses | - | - | - | - | - | (89) | 3.184 | 3.095 | - | 3.095 |
| Shareholders | ||||||||||
| Allocation of previous year result | 27 | (27) | - | - | - | |||||
| Dividend distribution | (10.921) | (10.921) | - | (10.921) | ||||||
| Treasury shares allocation | (1) | (70) | - | (71) | (71) | |||||
| Other | - | - | - | |||||||
| Balance at June 30, 2017 | 1.087 | 379 | 3.975 | 44 | 54 | 470 | 7.972 | 13.981 | - | 13.981 |
| 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 | 3,153 | 3,153 | 3,153 | |||||||
| Other comprehensive income/expenses | (89) | 2 | (87) | (87) | ||||||
| Totale other comprehensive income/expenses | - | - | - | - | - | (89) | 3,155 | 3,066 | - | 3,066 |
| Shareholders | ||||||||||
| Allocation of previous year result | 27 | (27) | - | - | - | |||||
| Dividend distribution | (10,921) | (10,921) | - | (10,921) | ||||||
| Treasury shares allocation | (1) | (71) | - | (72) | (72) | |||||
| Other | - | - | - | |||||||
| Balance at June 30, 2017 | 1,086 | 379 | 3,976 | 44 | 52 | 470 | 7,943 | 13,951 | - | 13,951 |
The present condensed consolidated interim financial statements were prepared in compliance with the International Accounting Standards ("IFRSs") issued by the International Accounting Standards Board ("IASB") and endorsed by the European Union. The term "IFRS" is also used to refer to all revised International Accounting Standards ("IAS") and all interpretations provided by the International Financial Reporting Interpretations Committee ("IFRIC"), previously named the Standing Interpretations Committee ("SIC").
The present condensed consolidated interim financial statements were drawn up, in a summary form, in accordance with IAS 34 "Interim Financial Statements". These condensed interim financial statements do not include, therefore, all the information required in the annual financial statements and must be read together with the annual financial statements prepared for the financial year ended 31 December 2016.
The accounting standards adopted in preparing the present condensed consolidated interim financial statements are the same as those adopted in preparing the Group's annual consolidated financial statements for the financial year ended 31 December 2016.
In the context of preparation of the condensed consolidated interim financial statements the Management of the Company carried out valuations, estimates and assumptions which have an effect on the amounts of the revenues, costs and assets and liabilities and on the disclosure related to the potential assets and liabilities at the reference date of the same. It should be noted that, as these are estimates, they may differ from the actual results that may be obtained in the future.
Certain valuation processes, in particular the more complex ones such as determining any impairment losses on non-current assets are generally carried out completely only on preparation of the year-end consolidated financial statements, when all the necessary information is available, except in cases when there is evidence of impairment that requires an immediate measurement of losses.
Income taxes are recognised on the basis of the best estimate of the average rate expected for the entire financial year.
The Group's activities are not subject to significant seasonal factors.
Limited auditing of the condensed consolidated interim financial statement for the B&C Speakers Group at 30 June 2017 was entrusted to PricewaterhouseCoopers S.p.A.
This condensed interim financial statement does not implement new international accounting principles or changes to those adopted in the preparation of the 2016 report.
At the date of this report, the competent bodies of the European Union have completed the approval process required for the adoption of amendments and of the principles described below.
As of the date of this report, the competent bodies of the European Union have not yet completed the approval process required for the adoption of amendments and of the principles described below.
• In January 2016, the IASB published IFRS 16 "Leasing". This new standard will replace the current IAS 17. The main change involves recognition by lessors which, based on IAS 17, were required to make a distinction between capital leasing (recorded using financial method) and operating leasing (recorded using the equity method). With IFRS 16, accounting treatment of operating leasing is the same as financial leasing. The IASB has envisaged an optional exemption for certain low value and short-term rental and leasing contracts.
This standard will apply as of 1 January 2019. Early application is possible in conjunction with IFRS 15 "Revenues from Contracts with Customers".
liabilities deriving from financing activities. These changes will be applicable as of 1 January 2017, after completion of the endorsement process by the EU.
The changes to the standard will enable all companies that issue insurance contracts the option of recognising in the statement of comprehensive income, rather than in the income statement, the volatility that might arise when IFRS 9 is applied before the new standard on insurance contracts is issued. In addition, it will allow businesses whose activity is mainly associated with insurance contracts a temporary waiver in the application of IFRS 9 until 2021. Entities deferring the application of IFRS 9 will continue to apply IAS 39. These amendments apply as of 1 January 2018.
The amendments clarify, correct or remove the redundant text in the related IFRS and it is thought unlikely that they will have a significant impact on the Financial Statements or disclosures.
The Group will adopt these new standards, amendments and interpretations, on the basis of the envisaged application date, and will assess the relative impacts, when they have been approved by the European Union.
This Condensed Consolidated Interim Statement comprises the Consolidated Statement of Financial Position, the Consolidated Statement of Comprehensive Income, the Statement of Changes in Shareholders' Equity, the Statement of Cash Flows and these Explanatory Notes.
With reference to the form of the consolidated financial statements, the Group has chosen to present the following accounting formats:
The Consolidated Statement of Financial Position is presented with opposing sections and separate indication of Assets, Liabilities and Net Equity.
In turn, the Assets and Liabilities are recorded in the consolidated financial statements on the basis of whether they are classified as current or non-current.
The consolidated income statement is classified according to destination. The following aggregates are highlighted: (i) EBIT, which includes all components of income and cost, net of depreciation, amortisation, write-downs and other provisions (ii) EBT, which includes EBT net of tax on income and finally (iii) net income for the period. The Comprehensive Income Statement is presented with a breakdown of Other comprehensive profits and losses that distinguishes between gains and losses that will be reclassified in the income statement and gains and losses that will not be reclassified in the income statement.
The consolidated cash flow statement is broken down according to cash-generating areas and prepared applying the indirect method. Cash and cash equivalents included in the consolidated cash flow statement include the asset balances of this item at the reporting date. Foreign currencies were converted at the average exchange rate for the period. Income and expenses relating to interest rates, dividends received and income tax are included in the cash flows generated by operational management.
The consolidated statement of changes in net equity is included, as required by the international accounting standards, with the separate highlighting of the consolidated result for the period and of all income, revenues, expenses and charges that are not recorded on the income statement, but rather charged directly to consolidated net equity, in accordance with specific IASs/IFRSs.
The Consolidated Interim Financial Statement at 30 June 2017 prepared according to the IFRSs includes line by line the financial statements of the Parent Company and of the companies of the B&C Speakers Group
The following companies therefore fall under the full consolidation scope at 30 June 2017:
| Companies | Country | Currency | Share | Group structure at 30 June 2016 | Group structure at 31 December 2016 | ||||
|---|---|---|---|---|---|---|---|---|---|
| capital | Direct | Indirect | Total | Direct | Indirect | Total | |||
| B&C Speaker S.p.A. | Italy | Euro | 1,086,444 | Parent Company | Parent Company | ||||
| B&C Speaker NA LLC | USA | USD | 30,000 | 100% | - | 100% | 100% | - | 100% |
| B&C Speaker Brasil LTDA | Brasil | Real | 1,720,729 | 100% | - | 100% | 100% | - | 100% |
| Share | Group structure at 30 June 2016 | Group structure at 31 December 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Associated company | Country | Currency | capital | Direct | Indirect | Total | Direct | Indirect | Total |
| Silence Tech S.r.l. | Italia | Euro | 150,000 | 33% | - | 33% | 33% | - | 33% |
There were no changes relative to the scope of consolidation at 31 December 2016.
With reference to the information required by the application of IFRS 12 we can note that the subsidiaries present linear situations for which no significant evaluations and assumptions were necessary in order to identify their classification.
The exchange rates applied in the conversion of financial statements in currencies other than the Euro in the first half of 2017, at 31 December 2015 and in the first half of 2015 are shown in the table below:
| Currency | 30-Jun-17 | 31-Dec-16 | 30-Jun-16 | |||
|---|---|---|---|---|---|---|
| Avg exch. | Final exch. | Avg exch. | Final exch. | Avg exch. | Final exch. | |
| EURO/USD | 1.083022 | 1.1412 | 1.107 | 1.054 | 1.115937 | 1.1102 |
| EURO/REAL | 3.443113 | 3.76 | 3.856 | 3.431 | 4.129549 | 3.5898 |
IFRS 8 requires precise identification of the areas of business in the internal reports used by the management in order to allocate resources to the various segments and monitor their performance. Based on the definition of the operating segments given by IFRS 8, the Group operates in a single sector ("acoustic transducers") and consequently executive reporting pertains to this area of business alone.
A breakdown of property, plant and equipment at 30 June 2017 and the related changes during the period are highlighted in the following tables:
(In Euro)
| Reclassificatio | ||||||
|---|---|---|---|---|---|---|
| Historic cost | 31-Dec-16 | Additions | n Foreign exch. | (Decreases) | 30-Jun-17 | |
| Land and buildings | 5,599 | - | - | (427) | - | 5,172 |
| Photovoltaic System and other minor | 933,262 | 4,229 | - | - | - | 937,491 |
| Lightweight construction | 30,879 | - | - | - | - | 30,879 |
| Plants and machinery | 4,571,357 | 58,900 | - | (7,325) | (6,800) | 4,616,132 |
| Industrial equipment | 4,570,162 | 75,489 | - | (234) | - | 4,645,417 |
| Various equipment | 874,950 | 118,674 | - | (6,498) | (59,164) | 927,962 |
| Fixed assets in progress | 12,000 | 42,110 | - | - | - | 54,110 |
| Total | 10,998,209 | 299,402 | - | (14,484) | (65,964) | 11,217,163 |
| Accumulated depreciation | 31-Dec-16 | Depreciation | Reclassificatio Foreign exch. | (Decreases) | 30-Jun-17 | |
| Land and buildings | 4,369 | 797 | - | (374) | - | 4,792 |
| Photovoltaic System and other minor | 336,363 | 39,068 | - | - | - | 375,431 |
| Lightweight construction | 11,149 | 1,531 | - | - | - | 12,680 |
| Plants and machinery | 2,971,062 | 213,281 | - | (6,469) | (4,216) | 3,173,658 |
| Industrial equipment | 4,169,605 | 109,147 | - | (151) | - | 4,278,601 |
| Various equipment | 795,759 | 18,863 | - | (2,586) | (50,412) | 761,623 |
| Fixed assets in progress | - | - | - | - | - | - |
| - | - | - | - | - | ||
| Total | 8,288,307 | 382,686 | - | (9,580) | (54,628) | 8,606,785 |
| Accumulated | |||||||
|---|---|---|---|---|---|---|---|
| Net value | 31-Dec-16 | Net increases Reclassificatio Foreign exch. Depreciation | depreciation | 30-Jun-17 | |||
| Land and buildings | 1,230 | - | - | (53) | (797) | - | 380 |
| Photovoltaic System and other minor | 596,899 | 4,229 | - | - | (39,068) | - | 562,060 |
| Lightweight construction | 19,730 | - | - | - | (1,531) | - | 18,199 |
| Plants and machinery | 1,600,295 | 52,100 | - | (856) | (213,281) | 4,216 | 1,442,474 |
| Industrial equipment | 400,557 | 75,489 | - | (83) | (109,147) | - | 366,816 |
| Various equipment | 79,191 | 59,510 | - | (3,912) | (18,863) | 50,412 | 166,338 |
| Fixed assets in progress | 12,000 | 42,110 | - | - | - | - | 54,110 |
| Total | 2,709,902 | 233,438 | - | (4,904) | (382,686) | 54,628 | 2,610,377 |
The most significant changes that occurred during the first half of 2017 mainly refer to investments made on the production lines in order to increase their efficiency and the production capacity, as well as the purchase of new vehicles for goods transport to replace those that had been disposed of.
A breakdown of this item at 30 June 2017 is highlighted in the following table:
(In Euro)
| Goodwill | 30-Jun-17 | 31-Dec-16 |
|---|---|---|
| Goodwill on B&C Speakers Usa NA LLC | 1,393,789 | 1,393,789 |
| Writedowns | - | - |
| Total goodwill | 1,393,789 | 1,393,789 |
Goodwill deriving from consolidation of the equity investment in B&C Speakers NA LLC was Euro 1,394 thousand at 30 June 2017 (unchanged compared with 31 December 2016). This figure represents the surplus between the value of the investment entered at the purchase cost compared to the Group's portion of current values of assets, liabilities and identifiable contingent liabilities recognised in the financial statements of the subsidiary at the time of the first consolidation on 31 December 2004 and at the time of the purchase of the remaining 20% stake on 31 December 2007.
Goodwill, together with the other assets of the American subsidiary, was subjected to impairment tests on the occasion of preparing the annual financial statements. The recoverability of the carrying amount is tested by comparing the net book value of individual cash generating units ("CGU") with the recoverable amount (value in use). This recoverable amount is the present value of future cash flows that are expected from continuous use of the assets belonging to the cash generating units and from the terminal value attributable to them. The recoverability of goodwill is tested at least once a year (on 31 December) even in the absence of evidence of impairment. Please refer to the annual financial statements for the information about the main hypotheses and assumptions adopted in calculating the value in use.
The hypotheses formulated in preparing the industrial plan used for the impairment test carried out on the occasion of preparing the annual financial statements, approved by the Board of Directors on 20 March 2017, did not undergo significant changes during the half-year in question. Impairment indicators such as to lead the management to consider necessary an update of the impairment test carried out at 31 December 2016 in support of the recognition of the goodwill difference are therefore not present, at the date on which the present report was drawn up.
Given that the recoverable amount is determined on the basis of estimates, the group can not ensure that no goodwill impairment occurs in future periods.
A breakdown of intangible assets at 30 June 2017, and the related changes in the period are shown in the following table:
(In Euro)
| Other intangible fixed assets | 31-Dec-16 | Additions | Reclassifications | Exchange | Depreciation | 30-Jun-17 |
|---|---|---|---|---|---|---|
| Patent rights | 97,335 | - | - | (140) | 14,242 | 82,953 |
| Intangible assets in progress | - | - | - | - | - | - |
| Total | 97,335 | - | - | (140) | 14,242 | 82,953 |
"Patent rights" comprise software purchased from external suppliers, B&C Speakers trademark registration costs and costs for patent registration.
This item amounts to Euro 50 thousand, unchanged with respect to 31 December 2016 and reflects the value of the investment at 33% in the new company Silence Tech S.r.l. founded together with two other companies for the purpose of exploiting "Silence" technology developed along with the two other partners. The Company, established at the end of 2015 is still in the start-up phase.
At 30 June 2017 this item includes assets for prepaid taxes, net of deferred tax liabilities, equal to Euro 253 thousand, (Euro 297 thousand at 31 December 2016).
These amounts consist of prepaid taxes arising following the taxation of not-entirely-deductible costs during the period and prepaid tax arising following derecognition of intra-Group margins.
Deferred tax assets have been recognised because the management expects the Company to generate future taxable income against which it can use this positive balance.
At 30 June 2017 this item is as follows: (In Euro)
| Other non current assets | 30-Jun-17 | 31-Dec-16 | Change | % Change |
|---|---|---|---|---|
| Insurance poilcies | 357,032 | 357,032 | 0 | 0% |
| Guarantee deposits | 56,826 | 56,826 | - | 0% |
| Ires refund receivables | 88,950 | 88,950 | - | 0% |
| Others | 6,411 | 6,941 | (530) | -8% |
| Total non current assets | 509,219 | 509,749 | (530) | 0% |
Insurance policies refers to receivables accrued in respect of the insurance companies Fondiaria Assicurazioni and Allianz in relation to the capitalisation policies signed in order to guarantee adequate financial cover of the Directors' severance pay.
The value of the assets relating to insurance policies recognised in the financial statements has been measured according to the value of the premiums paid.
"Guarantee deposits" reflects the amount receivable for guarantee deposits issued based on contracts for the lease of a building located in Bagno a Ripoli, Loc. Vallina, Via Poggio Moro No. 1, for Euro 57 thousand.
Warehouse inventories are calculated according to the F.I.F.O. method and can be broken down as follows at 30 June 2017:
(In Euro)
| Inventories | 30-Jun-17 | 31-Dec-16 | Change | Change % |
|---|---|---|---|---|
| Row materials and consumables | 813,930 | 734,118 | 79,812 | 11% |
| Work in progress and semi-finished | 7,501,703 | 5,765,880 | 1,735,823 | 30% |
| Finished goods | 1,304,683 | 2,066,169 | (761,486) | -37% |
| Gross Total | 9,620,316 | 8,566,167 | 1,054,149 | 12% |
| Provision for inventory writedowns | (390,872) | (384,333) | (6,539) | 2% |
| Net Total | 9,229,445 | 8,181,834 | 1,047,611 | 13% |
The value of inventories is shown net of provisions for inventory writedowns of Euro 391 thousand at 30 June 2017.
| Foreign | |||||
|---|---|---|---|---|---|
| Change in Provision for inventory writedowns | 31-Dec-16 | Increase | Use | Exchange | 30-Jun-17 |
| Provision for inventory writedowns | 384,333 | 15,000 | - | (8,461) | 390,872 |
| Total | 384,333 | 15,000 | - | (8,461) | 390,872 |
Provisions for inventory writedowns have been estimated as a result of an analysis on the recoverability of stock values.
The gross value of inventories as at 30 June 2017 would appear to have increased by Euro 1 million overall with respect to the total at 31 December 2016. The increase in final inventories is based on the sustained increase in the Group's turnover and in the order backlog at the date of this report, as reported in the management report.
Trade receivables relate to normal sales made to domestic and foreign customers and can be broken down as follows on 30 June 2017:
(In Euro)
| Trade receivables | 30-Jun-17 | 31-Dec-16 | Change | Change % |
|---|---|---|---|---|
| Trade receivables | 9,759,708 | 8,224,857 | 1,534,851 | 19% |
| (Provision for doubtful accounts) | (411,579) | (451,282) | 39,703 | -9% |
| Total | 9,348,129 | 7,773,575 | 1,574,554 | 20% |
The adjustment of the value of the Group's receivables to the estimated realisable value was obtained by means of specific Provisions for the Impairment of Receivables which amount to approximately Euro 411 thousand at 30 June 2017 (Euro 451 thousand at 31 December 2016).
The gross amount of trade receivables increased compared with 31 December 2016 principally due to the Group's increased turnover.
At 30 June 2017, tax assets of Euro 147 thousand (Euro 226 thousand at 31 December 2016), consisted principally of VAT receivables of Euro 101 thousand, current withholding taxes of Euro 32 thousand and tax receivables of the Brazilian subsidiary of Euro 13 thousand.
At 30 June 2017 other current assets amounted to Euro 3,651 thousand (Euro 6,422 thousand at 31 December 2016) and were made up as follows:
| (In Euro) | |
|---|---|
| -- | ----------- |
| Other current assets | 30-Jun-17 | 31-Dec-16 | Change | % Change |
|---|---|---|---|---|
| Receivables towards supplier | 118,396 | 65,994 | 52,402 | 79% |
| Securities | 3,370,299 | 6,164,655 | (2,794,356) | -45% |
| Other minor receivables | 13,006 | 37,450 | (24,444) | -65% |
| Total other receivables | 3,501,702 | 6,268,099 | (2,766,397) | -44% |
| Commercial fairs | 72,002 | 69,213 | 2,789 | 4% |
| Phone expenses | 5,563 | 5,479 | 84 | 2% |
| Assistance and assurance fees | 29,544 | 18,913 | 10,631 | 56% |
| Specialist contract | 12,750 | 12,250 | 500 | 4% |
| Other | 29,613 | 47,683 | (18,070) | -38% |
| Total prepaid expenses and accrued income | 149,472 | 153,538 | (4,066) | -3% |
| Total current assets | 3,651,173 | 6,421,637 | (2,770,464) | -43% |
Securities held in the portfolio refer to asset management items denominated in Euro and held for short-term liquidity. These securities were measured at fair value and the estimated gain (Euro 130 thousand) recognised as financial expenses on the income statement.
The significant decrease compared to 31 December 2016 is due to the sale of part of the portfolio aimed at covering the financial demands generated by payment of the extraordinary dividend and taxes. The aforementioned sale generated capital gains of Euro 52 thousand classified amongst financial income.
The item "Specialist contract" refers to accrued expenses for service fees relating to the portion accruing to the second half of 2017 to be paid to Intermonte Sim S.p.A. for its Specialist service.
As required by Consob Communication No. DEM/6064293 of 28 July 2006 and in accordance with the CESR recommendation of 10 February 2005 "Recommendations for the standardised implementation of the regulation of the European Commission on financial statements", the Group's net financial position at 30 June 2017 is detailed below:
(In Euro thousands)
| 30 June | 31 December | ||
|---|---|---|---|
| 2017 (a) | 2016 (a) | Change % | |
| A. Cash | 1,712 | 3,731 | -54% |
| C. Securities held for trading | 3,370 | 6,164 | -45% |
| D. Cash and cash equivalent (A+C) | 5,082 | 9,895 | -49% |
| F. Bank overdrafts | (1,154) | 0 | #DIV/0! |
| G. Current portion of non current borrowings | (2,361) | (1,129) | 109% |
| I. Current borrowingse (F+G) | (3,515) | (1,129) | 211% |
| J. Current net financial position (D+I) | 1,567 | 8,766 | -82% |
| K. Non current borrowings | (4,666) | (1,693) | 176% |
| N. Non current borrowings | (4,666) | (1,693) | 176% |
| O. Total net financial position (J+N) | (3,099) | 7,073 | -144% |
(a) Informations extracted and / or calculated from the financial statements prepared in accordance with IFRS as adopted by the European Union.
Below is a statement of reconciliation between the cash and cash equivalents at end of the period highlighted in the consolidated cash flow statement and the net financial position shown above.
| 30-Jun-17 | 31-Dec-16 | ||
|---|---|---|---|
| Cash and cash equivalents at end of the period | 558 | 3,731 | |
| Current portion of non current borrowings | (2,361) | (1,129) | |
| Non current borrowings | (4,666) | (1,693) | |
| Securities held for trading | 3,370 | 6,164 | |
| Total net financial position | (3,099) | 7,073 |
For further details concerning the change in cash and cash equivalents, please refer to the enclosed consolidated cash flow statement.
The share capital was Euro 1,086 thousand at 30 June 2017 and had decreased by Euro 1 thousand following accounting for the purchase of treasury shares according to the provisions of the IASs/IFRSs. As a result of the continuation of the buy-back plan, on 30 June 2017 B&C Speakers S.p.A. held a total of 78,272 equal to 0.71% of the share capital. At the time this report was prepared (September 2017), the number of Treasury shares owned has changed and amounts to 48,272, equal to 0.44% of the share capital;
The following table shows the changes, in the first half of 2017, to the number of shares outstanding of the Parent Company:
| Outstanding | |
|---|---|
| Reconciliation of the number of outstanding shares | shares (n.) |
| December 31, 2016 | 10,931,190 |
| Treasury shares purchased | (9,462) |
| Treasury Shares sold | - |
| June 30, 2017 | 10,921,728 |
This item, equal to Euro 4,451 thousand at 30 June 2017, comprises the legal reserve for Euro 379 thousand, the extraordinary reserve for Euro 44 thousand, the reserve for unrealised capital gains on currency exchange for Euro 52 thousand and the share premium reserve for Euro 3,976 thousand.
In particular, the share premium reserve, which originated on placing of the Parent Company's ordinary shares, during the period in question, fell by Euro 71 thousand following the recognition of operations carried out on treasury shares.
This item amounted to Euro 470 as at 31 December 2017 and includes the exchange differences arising from conversion of the financial statements in foreign currencies. This reserve decreased by Euro 89 thousand due to the recognition of other comprehensive income components relating to the conversion of financial statements in foreign currency.
This item includes the following reserves:
This includes the results of previous years net of distribution of dividends.
This item includes the effects on net equity of the discounting component of severance indemnity.
This item comprises the net period result for Euro 3,152 thousand and other period profits/(losses) for a positive value of Euro 3 thousand relative to the actuarial gains component deriving from the actuarial measurement of severance indemnity. This financial component is stated, net of the related tax effect, amongst the other items of the statement of comprehensive income, as envisaged by the amendment to IAS 19 applicable as from 1 January 2013.
The following tables show the effects recognised in the other components of the Statement of Comprehensive Income:
| Foreign exchange reserve |
Retained earnings | Total Group | Minority interests | Total other comprehensive income/(losses) |
|
|---|---|---|---|---|---|
| Euro Thousand | |||||
| June 30, 2017 | |||||
| Other comprehensive income/(losses) for the year | |||||
| that will not be reclassified in icome statement: | |||||
| Actuarial gain/(losses) on DBO (net of tax) | 2 | 2 | 2 | ||
| Total | - | 2 | 2 | - | 2 |
| Other comprehensive income/(losses) for the year | |||||
| that will be reclassified in icome statement: | |||||
| Exchange differences on translating foreign operations | (89) | (89) | - | (89) | |
| Total | (89) | - | (89) | - | (89) |
| Other comprehensive income/(losses) for the year: | (89) | 2 | (87) | - | (87) |
| June 30, 2016 | |||||
| Other comprehensive income/(losses) for the year | |||||
| that will not be reclassified in icome statement: | |||||
| Actuarial gain/(losses) on DBO (net of tax) | (13) | (13) | (13) | ||
| Total | - | (13) | (13) | - | (13) |
| Other comprehensive income/(losses) for the year | |||||
| that will be reclassified in icome statement: | |||||
| Exchange differences on translating foreign operations | (84) | (84) | - | (84) | |
| Total | (84) | 0 | (84) | - | (84) |
| Other comprehensive income/(losses) for the year: | (84) | (13) | (97) | 0 | (97) |
| June 30, 2017 | June 30, 2016 | |||||
|---|---|---|---|---|---|---|
| Gross value | Fiscal effect | Net value | Gross value | Fiscal effect | Net value | |
| Euro thousand | ||||||
| Actuarial gain/(losses) on DBO | 3 | (1) | 2 | (19) | 6 | (13) |
| Exchange differences on translating foreign operations | (89) | (89) | (84) | (84) | ||
| Other comprehensive income/(losses) | (86) | (1) | (87) | (103) | 6 | (97) |
Earnings per share have been calculated as per IAS 33. The value of this indicator is Euro 0.29 per share (Euro 0.25 in the first half of 2016). This indicator has been calculated by dividing the profit or loss attributable to the shareholders of the Parent company by the weighted average of the ordinary shares in issue during the period (n. 10,982,697 shares in the first half of 2017).
This item amounted to Euro 4,690 thousand at 30 June 2017 (Euro 1,693 thousand at 31 December 2016) and is made up as follows:
(In Euro)
| Long-term borrowings | 30-Jun-17 | 31-Dec-16 | Change | % Change |
|---|---|---|---|---|
| Long-term Simest loan | 50,000 | 100,000 | (50,000) | -50% |
| Long-term Unicredit loan | 3,524,931 | - | 3,524,931 | |
| Long-term CRF loan | 1,090,616 | 1,592,635 | (502,019) | -32% |
| Total long-term borrowing | 4,665,547 | 1,692,635 | 2,972,912 | 176% |
The item "Long-term Simest loan" (Euro 50 thousand at 30 June 2017), includes the portion due beyond the next 12 months of the unsecured long-term loan agreed with Simest S.p.A. on 19 April 2011 for an original amount of Euro 500 thousand. This loan was granted by the Italian company for businesses abroad to protect capital stability and thus increase competitiveness on export markets.
The item "UniCredit loan" of Euro 3,524 thousand at 30 June 2017 includes the portion due beyond the following year of the long-term financing agreement with UniCredit S.p.A. in April of this year.
The item "Short-term CRF loan" of Euro 1,091 thousand at 30 June 2017 includes the portion due beyond the following year of the long-term financing agreement with Cassa di Risparmio di Firenze S.p.A. In parallel with the signing of this loan agreement, the Company also signed an Interest Rate Swaps (IRS) hedging contract with CR Firenze S.p.A., aimed at keeping the interest rate of the loan fixed. The fair value of this contract was recognised in the income statement under financial costs.
The table below outlines the changes in financial debt for both the current and non-current portions:
| New | Reclassification | ||||
|---|---|---|---|---|---|
| Change in borrowings | 31-dic-16 | Refunds | borrowings | current portion | 30-giu-17 |
| Non current portion | |||||
| Bank borrowings | 1,692,635 | - | 3,524,931 | (552,019) | 4,665,547 |
| Leasing | - | - | - | - | - |
| Total non current borrowings | 1,692,635 | - | 3,524,931 | (552,019) | 4,665,547 |
| Curent portion | |||||
| Bank overdrafts | - | - | 1,154,193 | - | 1,154,193 |
| Bank borrowings | 1,099,581 | (549,183) | 1,244,172 | 552,019 | 2,346,588 |
| Leasing | 29,337 | (14,844) | - | - | 14,493 |
| Total current borrowings | 1,128,918 | (564,027) | 2,398,365 | 552,019 | 3,515,274 |
The following tables show the main features and conditions of said loans and the Interest Rate Swap hedging contract.
(In Euro)
| Loans details | Simest Loan | Unicredit | CRF |
|---|---|---|---|
| Lender | Simest S.p.A. | Unicredit S.p.A. | Banca CR Firenze S.p.A. |
| Original amount | 500,000 | 5,000,00 0 |
4,000,000 |
| Contract date | 19-Apr-11 | 18-apr-17 | 31-lug-15 |
| Due date | 31-Dec-18 | 30-apr-21 | 29-lug-19 |
| N. instalments | 10 | 48 | 48 |
| N. pre- instalments | 5 | - | - |
| Periodicity | Half-yearly | Monthly | Monthly |
| Interest rate | Preammortamento: 2,49% | 0.35% | 1 month Euribor + 0,5% |
| Ammortamento: 0,5% | |||
| Current portion | 100,000 | 1,244,17 2 |
1,002,417 |
| Non current portion | 50,000 | 3,524, 931 |
1,090,616 |
| Counterpart | Banca CR Firenze S.p.A. |
|---|---|
| Type of contract | Interest Rate Swap (IRS) |
| Purpose | Hedging of interest variability risk associated with the Banca CR Firenze S.p.A. loan |
|---|---|
| Original amount | 4,000,000 |
| Periodicity | Monthly |
| Bank Interest Rate | Euribor 1 month |
| Company Interest Rate | 0.15% |
| Contract date | 29-lug-15 |
These loans are not subject to covenants nor do they involve any negative pledges relative to the Group.
Due date 29-lug-19 Mark to market amount at Decembre 31, 2015 (14,202)
The item includes liability accrued in relation to employee severance indemnity and liability accrued against the severance indemnity envisaged for Directors at end of their mandate.
In order to recognise the severance indemnity appropriately, the financial-actuarial value of the liabilities was recalculated, for each employee, to determine a liability similar to that which arises in defined benefit pension plans, in accordance with the guidelines of IAS 19. These provisions are stated net of any advances paid and cash disbursed following resignations which occurred during the period in question.
The present value of liabilities for severance indemnity, in accordance with IAS 19, is Euro 285 thousand (Euro 353 thousand at 31 December 2016).
Severance indemnity is a defined-benefit obligation booked in accordance with IAS 19 - Employee Benefits. The amount of severance indemnity is calculated by applying the Projected Unit Credit Method, performing actuarial evaluations at the end of the reporting period.
The following are the technical and economic bases used for the assessment of Severance Indemnity:
| 30-Jun-17 | |
|---|---|
| Technical annual discounting rate | 1.08% |
| Annual inflation rate | 1.50% |
| Annual TFR increase rate | 2.625% |
With regard to the evaluation of the discount rate, the reference used was the IBoxx Corporate AA index of June 2017 with a duration from 7 to 10 years (in line with the average duration of the evaluated group).
In compliance with the provisions of the new IAS 19, the following tables provide:
that would have been seen following the changes made to the actuarial hypotheses reasonably possible at that date, in absolute terms;
indication of the contribution for the following financial year;
indication of the average financial term of the obligation for defined benefit plans.
| DBO June 30, 2017 |
|---|
| 282,786 |
| 286,304 |
| 287,983 |
| 280,964 |
| 278,872 |
| 290,914 |
| Year | Amount |
|---|---|
| 1 | 23,698 |
| 2 | 22,143 |
| 3 | 20,686 |
| 4 | 44,875 |
| 5 | 31,586 |
| Service Cost and Duration | ||
|---|---|---|
| Service Cost | 0.00 | |
| Duration | 8.60 |
Provisions for Directors' Severance Pay at 30 June 2017 amounted to Euro 386 thousand (Euro 357 thousand at 31 December 2016) and, in order to recognise them, for each Director, provisions were set aside for the portion matured during the period on the basis of the existing agreement.
At 30 June 2017 the item, of Euro 39 thousand (Euro 82 thousand at 31 December 2016), contains provisions to cope with the risk of warranty support for the Group's products.
The decrease compared to the figure at 31 December 2016 is due to the issue of part of the fund which, based on the historic trend of costs sustained for hedging, had become excessive.
This item amounted to Euro 3,515 thousand at 30 June 2017 (Euro 1,129 thousand at 31 December 2016) and is made up as follows:
(In Euro)
| Short term borrowings | 30-Jun-17 | 31-Dec-16 | Change | % Change |
|---|---|---|---|---|
| Credemleasing loan | 14,493 | 29,337 | (14,844) | -51% |
| Short-term Simest loan | 100,000 | 100,000 | - | 0% |
| Finanziamento Unicredit | 1,244,172 | - | 1,244,172 | |
| Short-term CRF loan | 1,002,417 | 999,581 | 2,836.00 | 0% |
| Bank overdrafts | 1,154,193 | - | 1,154,193 | |
| Total | 3,515,275 | 1,128,918 | 2,386,357 | 211% |
The "Credem Leasing" loan item, of Euro 14 thousand at 30 June 2017, contains the short-term portion of the implicit loan related to leasing contracts for the existing palletising system.
The "Long-term Simest loan" item (Euro 100 thousand on 30 June 2017), includes the short-term portion of the unsecured long-term loan agreed with Simest S.p.A. on 19 April 2011 for an original amount of Euro 500 thousand.
The item "UniCredit loan" of Euro 1,244 thousand at 30 June 2017 includes the short-term portion of the financing agreement with UniCredit S.p.A. in April of this year.
The item "Short-term CRF loan" of Euro 1,002 thousand at 30 June 2017 includes the short-term portion due of the loan agreement with Cassa di Risparmio di Firenze S.p.A.
For details on the conditions of outstanding loans, one should refer to Note 13.
For more details on the cash flows that have determined the change in short-term financial borrowings, please refer to the attached consolidated statement of cash flows.
This item includes amounts due to suppliers and provisions for invoices to be received.
(In Euro)
| Trade payables | 30-Jun-17 | 31-Dec-16 | Change | % Change |
|---|---|---|---|---|
| Trade payables | 4,393,853 | 3,948,795 | 445,058 | 11% |
| Total trade payables | 4,393,853 | 3,948,795 | 445,058 | 11% |
The increase in amounts owed to suppliers is due to greater purchasing volumes in the period in order to support the Group's increased turnover.
At 30 June 2017, this item was Euro 435 thousand (Euro 712 thousand at 31 December 2016) and includes tax liabilities for current taxes of the Group net of advances paid.
At 30 June 2017, this item is made up as follows:
(In Euro)
| Other current liabilities | 30-Jun-17 | 31-Dec-16 | Change | % Change |
|---|---|---|---|---|
| Due to social security funds | 162,243 | 273,432 | (111,189) | -41% |
| Unused vacation time and holidays | 520,646 | 337,733 | 182,913 | 54% |
| Due to personnel | 315,699 | 326,549 | (10,850) | -3% |
| Other liabilities | 331,651 | 300,545 | 31,106 | 10% |
| Total current liabilities | 1,330,239 | 1,238,259 | 91,980 | 7% |
The item "Unused vacation time and holidays" includes accruals for the thirteenth month bonus as well as the payable for remaining holidays at 30 June 2017. The increase in the payable compared with 31 December 2016 was due to the greater accumulation of holidays recorded normally at the end of the first half of the financial year compared with the end of the previous financial year.
The category of "due to personnel" includes payables for salary and retribution not yet paid at 30 June 2017 and settled within the third working day of the next month.
The item "Other liabilities" mainly includes the debt accrued for the management performance bonus (Euro 130 thousand), the payable for directors' fees (Euro 77 thousand), the payable for fair value measurement of the IRS contract with Banca CR Firenze S.p.A. (Euro 14 thousand) and other smaller amounts.
At 30 June 2017, as also at 31 December 2016, there are no records of any guarantees given to third parties by Group companies.
Contractual requirements taken on by the Group are listed below by deadline:
| Euro thousands | In 1 year | Between 2 and 5 years |
Beyond 5 years | Total |
|---|---|---|---|---|
| Operating Lease contracts | 924 | 2,911 | 601 | 4,436 |
| Total |
(In Euro)
| Geographical Area | 1st half 2017 |
% | 1st half 2016 |
% | Change | Change % |
|---|---|---|---|---|---|---|
| America Latina | 1,338,680 | 6.7% | 1,159,340 | 6.2% | 179,340 | 15% |
| Europa | 9,313,806 | 46.3% | 8,941,745 | 47.9% | 372,061 | 4% |
| Italia | 1,274,300 | 6.3% | 1,729,355 | 9.3% | (455,055) | -26% |
| Nord America | 4,031,946 | 20.0% | 3,802,354 | 20.4% | 229,592 | 6% |
| Medio Oriente & Africa | 236,580 | 1.2% | 149,312 | 0.8% | 87,268 | 58% |
| Asia & Pacifico | 3,920,880 | 19.5% | 2,893,188 | 15.5% | 1,027,692 | 36% |
| Totale | 20,116,191 | 100.0% | 18,675,293 | 100.0% | 1,440,899 | 7.72% |
The item can only be broken down in relation to the geographical area for the sales, as the Group's business segment is identifiable exclusively as the manufacture and sale of "top-quality professional loudspeakers". Sales reported here are net of intra-Group transactions carried out by Group companies.
Sales on the Italian market in the course of the two periods here compared were made entirely by the Parent Company.
During the period, the Group has significantly increased its presence in the Asian market (+36% with sales of Euro 3.9 million) and has achieved good performance in the South American market (+15% with sales of Euro 1.3 million), in the North American market (+6% with sales of Euro 4 million) and on the European market (+4% with sales of Euro 9.3 million) which remains the most important market for the Group. Unlike the Italian market the results achieved were slightly down compared with the first half of 2016 (-26% with sales of 1.3 million Euro).
In the first semester of 2017, three clients achieved turnover above 10% of the total: they make up 10%, 13% and 17% of half-year turnover, respectively.
The item is made up of:
| Cost of sales | I half 2017 | I half 2016 | Change | Change % |
|---|---|---|---|---|
| Consumption of production materials | 8,847,557 | 8,365,821 | 481,736 | 6% |
| Direct labour | 2,254,775 | 2,100,390 | 154,385 | 7% |
| Freight | 418,563 | 298,050 | 120,513 | 40% |
| Duties, commissions and other minor costs | 167,337 | 177,238 | (9,901) | -6% |
| Totale Cost of Sales | 11,688,232 | 10,941,499 | 746,733 | 7% |
The increase in costs of raw materials and third-party manufacturing, direct labour costs, and transport costs is due to the increased levels of production in the first half of 2017 compared to the same period of the previous year.
As specified in the report on operations, the cost of sales during the first six months of 2017 decreased slightly in terms of its impact on revenues when compared to the first six months of 2016, shifting from 58.59% to 58.10%.
This category mainly refers to recoveries of expenses and premiums received by suppliers to reach the contractually planned spending budget.
This category refers to costs of R&D staff, office personnel, top executives and workers not directly involved in the production process.
The item is made up of:
| Cost of indirect labour | I half 2017 | I half 2016 | Variazione | Variazione % |
|---|---|---|---|---|
| Retribution | 889,251 | 813,755 | 75,496 | 9% |
| Social charges | 212,081 | 194,610 | 17,471 | 9% |
| Severance indemnity | 39,158 | 35,118 | 4,040 | 12% |
| Total cost of indirect labour | 1,140,490 | 1,043,483 | 97,007 | 9% |
The increase seen in "Retribution" and "social charges" was mainly due to contractual adjustments during the year. As specified in the report on operations, over the first six months of 2017 indirect personnel costs saw a slight increase with respect to the trend for turnover, going from 5.59% of revenues during the first six months of 2016 to 5.67% during the first half of 2017.
Commercial expenses, at Euro 478 thousand (Euro 422 thousand in the first half of 2016) did not see significant changes with respect to the first six months of the previous year.
Administrative and general costs, at Euro 2,052 thousand, increased by around Euro 230 thousand compared to the first six months of the previous year, largely due to use of technical consultants with the aim of increasing manufacturing efficiency.
The item is made up of:
| Amortization, depreciation and writedowns | I half 2017 | I half 2016 | Change | Change % |
|---|---|---|---|---|
| Amortization of intangibles assets | 14,242 | 13,028 | 1,214 | 9% |
| Depreciation of tangible assets | 382,686 | 374,546 | 8,140 | 2% |
| Total amortizations and depreciations | 396,927 | 387,574 | 9,353 | 2% |
| Bad debt provision | - | 18,646 | (18,646) | -100% |
| Total Writedowns | - | 18,646 | (18,646) | -100% |
It was not necessary to set aside any bad-debt-impairment provisions given that the provisions existing at 31 December 2016 were sufficient to cover the risk of bad debts.
Please refer to the Note 8. For further informations.
The item is made up of:
| Financial income and expenses | I half 2017 | I half 2016 | Change | Change % |
|---|---|---|---|---|
| Bank interest income | 374 | 1,063 | (689) | -65% |
| Interest on securities | 52,081 | - | 52,081 | |
| Accrued income on futures | - | 14,052 | (14,052) | -100% |
| Accrued income on securities | 87,236 | 77,366 | 9,870 | 13% |
| Exchange rate differences income | 111,573 | 150,472 | (38,899) | -26% |
| Exchange rate differences accruals | 13,211 | 5,371 | 7,840 | 146% |
| Accrued income on IRS contract | 14,202 | - | 14,202 | |
| Other financial income | 4,969 | 245 | 4,723 | 1925% |
| Total financial income | 283,646 | 248,570 | 35,076 | 14% |
| Interest expenses | 16,071 | 16,375 | (305) | -2% |
| Financial expenses for Defined Benefit Obligation | - | 3,267 | (3,267) | |
| Accrued loss on IRS contract | - | 29,029 | (29,029) | |
| Exchange rate difference expenses | 80,845 | 70,742 | 10,103 | 14% |
| Loss on Securities | - | 3,483 | (3,483) | |
| Exchange rate differences accruals | 144,200 | 18,239 | 125,961 | 691% |
| Banck expenses | 8,371 | 8,756 | (385) | -4% |
| Other financial costs | 3,192 | 1,832 | 1,360 | 74% |
| Total financial expenses | 252,679 | 151,724 | 100,955 | 67% |
| Total financial income (expenses) | 30,967 | 96,846 | (65,879) | -68% |
This item, including current and deferred taxes, is Euro 1,346 thousand (Euro 1,436 thousand in the first half of 2016).
Income taxes are recognised on the basis of the best estimate of the average rate expected for the entire financial year (average tax rate expected on the basis of the Group's budget forecasts).
The transactions that occurred during the first half of 2017 with related parties are summarised below together with information on transactions with related parties on the basis of the requirements of Consob Communication DEM/6664293 of 28 July 2006.
The related parties were identified by Directors as the holding company Research & Development International S.r.l., a company with registered office in Florence, Viale dei Mille No. 60, Tax Code 02342270481, share capital Euro 90,000, which at 30 June 2017 holds 55.36% of the shares of B&C Speakers S.p.A.
(In Euro)
| Research & | |||||
|---|---|---|---|---|---|
| Total | Development | Total related | |||
| General and Administrative Expenses | balance | Intl. Srl | parties | Incidence | |
| 1 half 2017 | (2.051.832) | (461.941) | (461.941) | 23% | |
| 1 half 2016 | (1.821.627) | (461.941) | (461.941) | 25% |
The costs incurred in relation to "Research & Development International S.r.l." are related to the rent for the property in which the Parent Company's new production line was installed and to the rent for the building in which the Parent Company's management and administrative activities are performed.
(In Euro)
| Research & | ||||
|---|---|---|---|---|
| Total | Development | Total related | ||
| Other non current receivables | balance | Intl. Srl | parties | Incidence |
| 30 June 2017 | 509.219 | 88.950 | 88.950 | 17% |
| 31 December 2016 | 509.749 | 88.950 | 88.950 | 17% |
| Research & | ||||
|---|---|---|---|---|
| Total | Development | Total related | ||
| Trade payables | balance | Intl. Srl | parties | Incidence |
| 30 June 2017 | (4.393.853) | (80) | (80) | 0% |
| 31 December 2016 | (3.948.795) | (340) | (340) | 0% |
The debit positions in relation to Research & Development International S.r.l. at 30 June 2017, arose as a result of the rental contract for the property in which the Parent company's new production line was installed.
The credit position of Research & Development International S.r.l. existing at 30 June 2017, related to the credit for an IRES rebate which arose in 2012 following the rebate application made by the Holding for the financial years in which the Group companies availed themselves of tax consolidation.
We certify, under the terms of Art. 2.6.2. Section 13 of the Regulation for Markets Organized and Managed by Borsa Italiana S.p.A., the existence of the conditions pursuant to Article 37 of Consob Regulation No. 16191/2007.
Transactions with related parties were carried out under conditions equivalent to those prevailing in free transactions between independent parties.
Pursuant to the Consob Communication of 28 July 2006, it is noted that during the first half of 2017 no nonrecurring operations occurred.
Under the terms of Consob Communication of 28 July 2006, we can specify that during the first half of 2017 the Group did not engage in any atypical and/or unusual operations, as defined in the said Communication.
The Company's activities are exposed to a variety of financial risks: market risk (including foreign exchange risk and price risk), credit risk, interest rate risk and liquidity risk. The strategy adopted by the Group with regard to the management of financial risks is based on the impossibility of being able to influence the external markets and consequently the strategy focuses on an attempt to reduce the adverse effects on the financial performance of the Group itself.
The Group operates internationally and is exposed to exchange risk arising from changes in exchange rates for foreign currencies, primarily the USD and GBP; the exchange risk will manifest in future transactions. The Company does not make provision for coverage of this risk, except to seek a long term balance between its sales and purchases, especially in the U.S. dollar zone.
In the first half of 2017, the Group continued to make significant purchases abroad, particularly in Asia; the value of purchases made in foreign currencies (USD) is summarised as follows:
Purchases in US Dollars equal to 5.4 million whose corresponding value in Euros (calculated according to the average exchange rate for the year) is equal to Euro 4.9 million.
Purchases in Canadian Dollars equal to Euro 147 thousand whose corresponding value in Euro (calculated according to the average exchange rate for the year) is equal to Euro 102 thousand.
Meanwhile, during the first half of 2017, the Group invoiced clients in foreign currency. More specifically, within the item revenue, the elements paid in foreign currency (USD and HKD) are listed below:
Sales in US Dollars equal to 4.2 million whose corresponding value in Euros (calculated according to the average exchange rate for the year) is equal to Euro 3.9 million.
Sales in HK Dollars equal to 1.9 million whose corresponding value in Euros (calculated according to the average exchange rate for the year) is equal to Euro 0.2 million.
Sales in Brazilian Real equal to 1 million whose corresponding value in Euros (calculated according to the average exchange rate for the year) is equal to Euro 0.3 million.
These figures show that purchases in foreign currency account for approximately 26% of total purchases (25% in the first half of 2016), while sales in foreign currency account for 21% of the Group's turnover (16% in the first half of 2016).
On the basis of that set out above, a 3% increase/decrease in the Euro would generate potential gains of Euro 17 million and losses of Euro 19 million, respectively.
On the Balance sheet, the equivalent in Euros of trade receivables entered in US dollars on 30 June 2017 amounted to Euro 0.5 million (the total value on 31 December 2016 was Euro 1.7 million), while the equivalent value of trade payables in US dollars on 30 June 2017 amounted to Euro 1.6 million (the total value on 31 December 2016 amounted to Euro 1 million).
Trade Receivables and Payables in other currencies are negligible.
Considering that which is set out above, an increase/decrease of 3% in the Euro would generate potential gains of Euro 11 thousand and losses of Euro 11 thousand, respectively.
We must stress that the Group continues to guarantee its suppliers receive a constant and significant cash flow to pay for supplies, with consequent limited currency exposure at the end of the period.
Based on the above data, the impact of tax receivables in currency reaches approximately 14% of the overall trade value, while the impact of trade payables in currency accounts for 36% of the total value of corporate debt.
The balance sheet assets in a currency other than the Euro were adequate to the exact exchange rate on 30 June 2017, with the associated costs and profits entered in the income statement.
The Company does not have significant concentrations of credit risk, since the strategy adopted has aimed at working with customers who have good credit standing. When transactions entailed a higher risk margin or information on the customer was insufficient, the Company demanded to receive advance payment before supplying the products.
The company has no outstanding financial assets or liabilities which is such as to significantly affect the profitability of the Company. Therefore, despite the Company not being significantly affected by changes in interest rates the management adopted adequate hedging instruments for interest rate fluctuation risk in particular with regard to the long term loan with CR Firenze S.p.A., through the signing of an IRS (Interest Rate Swaps) agreement.
As at 30 June 2017, the Company has a negative Net Financial Position of Euro 3.01 million (7.04 million as at 31 December 2016). It is the result of a current positive NFP of about Euro 1.57 million (8.77 million as at 31 December 2016) and non-current net financial debt of Euro 4.67 million (Euro 1.69 million as at 31 December 2016). For the characteristics of the loans in question, one should refer to Note 11. The Company believes that the existing loans and short and medium term credit lines, as well as those that will be generated by operations, will allow it to meet its requirements arising from investment activities, management of working capital and repayment of debts in line with their natural due dates.
For financial instruments recorded on the statement of financial position at fair value, IFRS 7 requires these values to be classified according to a hierarchy of levels that reflects the significance of the inputs used in determining their fair value. The following levels exist: level 1 - listings taken from an active market for the assets or liabilities being measured;
level 2 – inputs other than listed prices as per the point above, which can be observed directly (prices) or indirectly (price derivatives) on the market;
level 3 – inputs not based on observable market data.
The table below shows the assets and liabilities measured at fair value as at 30 June 2017, according to the hierarchical level of fair value measurement:
| Hierarchical level of Fair Value measurement | Level 1 | Level 2 | Level 3 |
|---|---|---|---|
| Financial assets | |||
| Other current assets | 3,370,299 | - | - |
| Total | 3,370,299 | - | - |
| Financial liabilities | |||
|---|---|---|---|
| Interest Rate Swap | - | (14,202) | - |
| Total | - | (14,202) | - |
We note that, with respect to 31 December 2016, there were no movements between the various fair value levels.
The Group assesses its financial assets and financial liabilities at amortised cost except for asset management included among other current assets and IRS hedging agreement that are measured at fair value through profit and loss.
After the reporting date of this 2017 interim report, and up to the date on which it was prepared, no significant events occurred.
This document was published on 18 September 2017, authorised by the Director with financial delegation.
2.1 the condensed consolidated interim financial statements:
Florence, 18 September 2017
Simone Pratesi Francesco Spapperi
Financially-Delegated Director Financial Reporting Manager
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