Quarterly Report • May 19, 2017
Quarterly Report
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INTERIM MANAGEMENT REPORT AT 31 MARCH 2017
On 29 April 2016, the Shareholders' Meeting of the parent company Landi Renzo S.p.A. elected the Board of Directors and the Board of Statutory Auditors for the period 2016-2018. They will therefore remain in office until the Meeting of Shareholders called to approve the Financial Statements for the year ending 31 December 2018. The Meeting also appointed PricewaterhouseCoopers S.p.A. as the independent auditing firm for the period 2016-2024. On 28 April 2017, after increasing the number of members of the Board of Directors from eight to nine, the Shareholders' Meeting appointed Cristiano Musi (formerly General Manager) as director; on the same date, the Board of Directors made him Chief Executive Officer and revoked all other mandates previously assigned. Chairman Stefano Landi continues to act as Executive Chairman of the Board. On the date this Interim Management Report was drafted, the company officers were as follows:
| Executive Chairman | Stefano Landi |
|---|---|
| Honorary Chairperson - Director | Giovannina Domenichini |
| Chief Executive Officer | Cristiano Musi |
| Director | Claudio Carnevale |
| Director | Silvia Landi |
| Director | Angelo Iori |
| Independent Director | Anton Karl |
| Independent Director | Sara Fornasiero (*) |
| Independent Director | Ivano Accorsi |
| Board of Statutory Auditors | |
| Chairman of the Board of Statutory Auditors | Eleonora Briolini |
| Standing Statutory Auditor | Massimiliano Folloni |
| Standing Statutory Auditor | Diana Rizzo |
| Alternate Auditor | Filomena Napolitano |
| Alternate Auditor | Andrea Angelillis |
| Control and Risks Committee | |
| Chairman | Sara Fornasiero |
| Committee Member | Ivano Accorsi |
| Committee Member | Angelo Iori |
| Remuneration Committee | |
| Chairman | Ivano Accorsi |
| Committee Member | Sara Fornasiero |
| Committee Member | Angelo Iori |
| Committee for Transactions with Related Parties | |
| Committee Member | Sara Fornasiero |
| Committee Member | Ivano Accorsi |
| Supervisory Body (Italian Legislative Decree 231/01) | |
| Chairman | Jean-Paule Castagno |
| Member of the Body | Sara Fornasiero |
| Member of the Body | Enrico Gardani |
| Independent Auditing Firm | PricewaterhouseCoopers S.p.A. |
| Financial Reporting Manager | Paolo Cilloni |
(*) The Director also holds the office of Lead Independent Director
Landi Renzo S.p.A. Via Nobel 2/4/6 42025 Corte Tegge – Cavriago (RE) – Italy Tel. +39 0522 9433 Fax +39 0522 944044 Share capital: €11,250,000 Tax Code and VAT No. IT00523300358
This report is available on the Internet at: www.landirenzogroup.com
| (Thousands of Euro) | |||
|---|---|---|---|
| ECONOMIC INDICATORS OF THE FIRST THREE MONTHS | Q1 2017 | Q1 2016 | Change |
| Revenue | 46,774 | 41,420 | 5,354 |
| Adjusted Gross Operating Profit (EBITDA) (1) | 2,196 | 363 | 1,833 |
| Gross Operating Profit (EBITDA) | 1,747 | 363 | 1,384 |
| Net Operating Profit (EBIT) | -2,260 | -3,755 | 1,495 |
| Earnings before Tax | -3,211 | -5,214 | 2,003 |
| Net profit (loss) for the Group and minority interests | -2,961 | -4,316 | 1,355 |
| Adjusted Gross Operating Profit (EBITDA) / Revenue | 4.7% | 0.9% | |
| Net profit (loss) for the Group and minority interests / Revenue | -6.3% | -10.4% | |
| (Thousands of Euro) | |||
|---|---|---|---|
| FINANCIAL POSITION | 31/03/2017 | 31/12/2016 | 31/03/2016 |
| Net fixed assets and other non-current assets | 95,165 | 96,967 | 103,271 |
| Operating capital (2) | 38,405 | 36,442 | 52,706 |
| Non-current liabilities (3) | -12,570 | -12,611 | -10,775 |
| NET CAPITAL EMPLOYED | 121,000 | 120,798 | 145,202 |
| Net financial position (cash) (4) | 69,877 | 75,716 | 78,434 |
| Equity | 51,123 | 45,082 | 66,768 |
| BORROWINGS | 121,000 | 120,798 | 145,202 |
| (Thousands of Euro) | |||
|---|---|---|---|
| CASH FLOWS | 31/03/2017 | 31/12/2016 | 31/03/2016 |
| Operational cash flow | -1,930 | -6,104 | -16,637 |
| Cash flow for investment activities | -1,556 | -9,144 | -2,095 |
| FREE CASH FLOW | -3,486 | -15,248 | -18,732 |
(1) The figures do not include the recognition of extraordinary costs of €449 thousand in the first three months of 2017.
(2) This is calculated as the difference between Trade Receivables, Inventories, Work in Progress on Orders, Other Current Assets and Trade Payables, Tax liabilities, Other Current Liabilities;
(3) These are calculated by totalling Deferred Tax Liabilities, Defined Benefit Plans and Provisions for Risks and Charges;
(4) The net financial position is calculated in accordance with the provisions of CONSOB Communication DEM/6064293 of 28 July 2006;
At the same time, the Group's financial structure Optimization Agreement was finalized, the guidelines of which were developed with the support of the financial advisor Mediobanca – Banca di Credito Finanziario S.p.A., after all banking institutions involved had signed it.
The agreement calls for, inter alia:
The project was also prepared in light of and consistent with the Group's Business Plan, the update of which was approved by the Board of Directors on 30 December 2016. The Business Plan was subject to an independent business review by KPMG Advisory S.p.A. in the capacity of independent third-party business advisor, and the results of that analysis and the relative documentation were considered by the Group's management in developing and finalizing the Financial Optimization Project.
In line with the above-mentioned Optimization Agreement, on 30 March 2017 the controlling shareholder made a future capital increase contribution to the Parent Company for a total of €8,866,5 thousand.
Revenue in the first quarter of 2017, up 12.9% (€5,354 thousand) compared to the same period of the previous year, was positively impacted by the good performance of sales of OEM gas systems and components in the domestic and European markets and the positive trend in sales through the After Market channel, while sales of electronic components for gas systems and gas distribution and compression systems through SAFE were down.
As regards commercial outlooks, the Automotive sector order portfolio is showing encouraging signs of a trend reversal compared to 2016, as concerns the OEM distribution channel as well as the After Market channel.
In addition, please note that the following have been under way since the start of the year: on one hand, a project for the reorganization of the Automotive business area with the aim of bringing the Group closer to the market, improving the capacity to satisfy its various requirements and reducing time to market, and on the other hand, an EBITDA improvement project with the support of a leading top consulting firm focusing on bringing efficiency levels in the Automotive business area more into line with sector best practices with a series of actions intended to reduce fixed as well as variable costs.
The initial advantages of these initiatives are expected to be visible already starting in the fourth quarter of 2017, with full benefits seen as of 2018.
Consolidated revenues for the first quarter of 2017 totalled €46,774 thousand, increasing by €5,354 thousand (+12.9%) compared with the same period of the previous year.
This increase in turnover mainly related to the good performance of sales in the OEM channel, thanks to the completion of the phase of transitioning to new Euro 6 LPG engines, and a strong sales drive promoted by the new management.
Although to a lesser extent, revenue earned in the After Market segment was up compared to the same period of the previous year.
The adjusted Gross Operating Profit (EBITDA) at the end of the quarter totalled €2,196 thousand, a net improvement compared with the same period of the previous year (€363 thousand) especially due to the higher sales revenue in the Automotive sector, the Landi Renzo Group's core business.
The Gross Operating Profit (EBITDA) was positive at €1,747 thousand. This result was affected not only by the above factors but also by extraordinary costs of €449 thousand, of which:
The following table sets out the main economic indicators of the Group for the first three months of 2017 compared with the same period in 2016.
| (Thousands of Euro) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31/03/2017 | Extraordinary costs |
31/03/2017 ADJ |
% | 31/03/2016 | Extraordinary costs |
31/03/2016 | % | ADJ changes |
ADJ % | |
| Revenues from sales and services |
46,774 | 46,774 | 100.0% | 41,420 | 41,420 | 100% | 5,354 | 12.9% | ||
| Other revenues and income | 250 | 250 | 0.5% | 195 | 195 | 0.5% | 55 | 28.2% | ||
| Operating costs | -45,277 | -449 | -44,828 | -95.8% | -41,252 | -41,252 | - 99.6% |
-3,576 | 8.7% | |
| Gross operating profit | 1,747 | 2,196 | 4.7% | 363 | 363 | 0.9% | 1,833 | 505.0% | ||
| Amortization, depreciation and impairment losses |
-4,007 | -4,007 | -8.6% | -4,118 | -4,118 | -9.9% | 111 | -2.7% | ||
| Net Operating Profit | -2,260 | -1,811 | -3.9% | -3,755 | -3,755 | -9.1% | 1,944 | n/a | ||
| Financial income (charges) and exchange differences |
-1,029 | -1,029 | -2.2% | -1,421 | -1,421 | -3.4% | 392 | -27.6% | ||
| Gain (loss) on equity investments valued using the equity method |
78 | 78 | 0.2% | -38 | -38 | -0.1% | 116 | - 305.3% |
||
| Profit (Loss) before tax | -3,211 | -2,762 | -5.9% | -5,214 | -5,214 | - 12.6% |
2,452 | n/a | ||
| Current and deferred taxes | 250 | 898 | ||||||||
| Net profit (loss) for the Group and minority interests, including: |
-2,961 | -4,316 | ||||||||
| Minority interests | 24 | -126 | ||||||||
| Net profit (loss) for the Group |
-2,985 | -4,190 | ||||||||
| First quarter 2017 compared to first quarter 2016 |
|---|
| --------------------------------------------------- |
| At 31/03/2017 | % of revenues |
At 31/03/2016 | % of revenues |
Changes | % |
|---|---|---|---|---|---|
| 40,395 | 86.4% | 33,946 | 82.0% | 6,449 | 19.0% |
| 2,536 | 5.4% | 3,694 | 8.9% | -1,158 | -31.3% |
| 42,931 | 91.8% | 37,640 | 90.9% | 5,291 | 14.1% |
| 3,843 | 8.2% | 3,780 | 9.1% | 63 | 1.7% |
| 46,774 | 100% | 41,420 | 100% | 5,354 | 12.9% |
(1) The Robotics division was sold on 28 April 2016
The Group's total revenues in the first three months were €46,774 thousand, an increase of 12.9% (€5,354 thousand) compared to the same period in the previous year.
Revenues from sales of products and services in the Gas segment increased by 14.1% (€5,291 thousand) in the first three months from €37,640 thousand in 2016 to €42,931 thousand in 2017.
The growth in sales as of 31 March 2017 in the Gas sector – Car systems (+19%) was caused by the increase in revenues on the OEM channel (+44.2%) and, to a lesser extent, in the Aftermarket segment (+5.3%).
Revenues in the Gas Sector – Distribution Systems were €2,536 thousand, down by €1,158 thousand compared with the same period of 2016, due to lower turnover in Europe and Asia, only partially offset by positive performance in the American markets. The increase in the order portfolio subsequent to the end of the quarter as well as the receipt of consistent payments on account from customers further bolster forecasts of a good recovery in turnover as the year continues.
Revenue from sales in Other segments amounted to €3,843 thousand, marking growth of 1.7% compared to the first quarter of 2016.
In light of the limited importance of sales relating to other sectors, the Group's sole business segment can be said to be the production of systems for cars and distribution systems (Gas Sector).
Distribution of sales by geographical area in the first quarter of 2017 is shown below.
| (Thousands of Euro) | ||||||
|---|---|---|---|---|---|---|
| Geographical distribution of revenues | At 31/03/2017 | % of revenues |
At 31/03/2016 | % of revenues |
Changes | % |
| Italy | 9,587 | 20.5% | 9,388 | 22.7% | 199 | 2.1% |
| Europe (excluding Italy) | 23,731 | 50.7% | 18,834 | 45.5% | 4,897 | 26.0% |
| America | 6,517 | 13.9% | 6,128 | 14.8% | 389 | 6.3% |
| Asia and Rest of the World | 6,939 | 14.9% | 7,070 | 17.0% | -131 | -1.9% |
| Total | 46,774 | 100% | 41,420 | 100% | 5,354 | 12.9% |
Regarding the geographical distribution of revenues, during the first three months of 2017 the Group achieved 79.5% of its consolidated revenues abroad (50.7% in Europe and 28.8% outside Europe), and in detail:
Sales in the Italian market, totalling €9,587 thousand (up €199 thousand compared to the same period of the previous year), substantially reflect good overall domestic market demand trends during the quarter, although with different performance in the OEM and After Market segments, as described below:
Revenue in Europe recovered significantly in the course of the quarter in question, with growth of 26% compared to the same period of 2016, driven mainly by the above-mentioned increase in OEM channel sales as a result of the completion of the phase of transitioning to new Euro 6 LPG engines.
Sales in the first three months for this area, equal to €6,517 thousand, represented an increase of 6.3%. This was mainly attributable to the good trend of the markets in Brazil, Colombia and Mexico, which offset the slowdown in Argentina and the United States.
The Asia and Rest of World markets saw a slight decrease of -1.9% compared to the first three months of 2016. This was essentially due to the lower sales levels for Distribution Systems. In the Car Systems segment, there was a positive trend in revenues on the Algerian and Iranian markets.
The adjusted Gross Operating Profit (adjusted GOP or adjusted EBITDA) for the first three months of 2017 was positive at €2,196 thousand, equal to 4.7% of revenues – an increase of €1,833 thousand compared to the figure for March 2016 (€363 thousand), especially due to the higher sales volumes of the Gas Segment - Car systems, the core business of the Landi Renzo Group, which alone had an adjusted EBITDA margin of roughly €3,045 thousand, equal to 7.5%, compared to €904 thousand in 1Q 2016, while the gas segment - distribution systems had a negative impact of €855 thousand.
The Gross Operating Profit (GOP or EBITDA) was positive in the amount of €1,747 thousand, inclusive of €449 thousand in extraordinary costs referring to strategic advisory expenses as well as voluntary retirement incentives provided to employees, as shown in detail below:
| (Thousands of Euro) | |||
|---|---|---|---|
| EXTRAORDINARY COSTS | 31/03/2017 | 31/03/2016 | Change |
| Strategic consultancy | -349 | - | -349 |
| Voluntary retirement incentives | -100 | - | -100 |
| Total | -449 | - | -449 |
Costs of raw materials, consumables and goods and changes in inventories increased overall from €19,105 thousand as at 31 March 2016 to €22,550 thousand as at 31 March 2017, which in absolute terms is an increase of €3,445 thousand, mainly related to the growth in sales volumes.
In the first quarter of 2017, the costs of services and use of third-party assets amounted to €11,479 thousand and included extraordinary costs of €349 thousand related to the strategic advisory costs mentioned above, compared to €11,312 thousand in the same period of last year.
In the first quarter, personnel costs amounted to €9,736 thousand and included extraordinary costs of €100 thousand, substantially aligned with €9,466 thousand recorded in the same period of last year.
The Net Operating Profit (EBIT) for the period was negative, in the amount of €2,260 thousand (- €3,775 thousand as at 31 March 2016), after accounting for amortization, depreciation and impairment losses of €4,007 thousand (€4,118 thousand as at 31 March 2016), as well as extraordinary costs of €449 thousand.
The quarter ended with a pre-tax loss of €3,211 thousand, against a pre-tax loss of €5,214 thousand in the first quarter of 2016.
In Q1 2017, net financial charges were €1,029 thousand, down compared to the same quarter of 2016 (€1,421 thousand), due primarily to the reduction in interest paid on the Bonded Loan and on medium/long-term mortgages and bank commissions and due to the improvement in foreign exchange management.
In the three months of 2017, the revaluation of equity investments valued using the net equity method is €78 thousand (write-down of - €38 thousand at 31 March 2016). This includes the Group's share of the Joint Venture Krishna Landi Renzo India Private Ltd Held.
The net result of the Group and minority interests in the first quarter of 2017 showed a loss of €2,961 thousand compared with a Group and minority interest loss of €4,316 thousand for the same period in 2016.
The net result for the period as at 31 March 2017 was negative for €2,985 thousand, compared with a negative result of €4,190 thousand in the same period of 2016.
| (Thousands of Euro) | |||
|---|---|---|---|
| Statement of Financial Position | 31/03/2017 | 31/12/2016 | 31/03/2016 |
| Trade receivables | 34,951 | 37,551 | 35,650 |
| Inventories | 49,719 | 49,872 | 60,955 |
| Work in progress on orders | 714 | 1,281 | 2,457 |
| Trade payables | -46,548 | -53,090 | -52,612 |
| Other net current assets | -431 | 828 | 6,256 |
| Net operating capital | 38,405 | 36,442 | 52,706 |
| Tangible assets | 29,262 | 30,500 | 33,998 |
| Intangible assets | 58,067 | 58,873 | 60,575 |
| Other non-current assets | 7,836 | 7,594 | 8,698 |
| Fixed capital | 95,165 | 96,967 | 103,271 |
| TFR and other provisions | -12,570 | -12,611 | -10,775 |
| Net capital employed | 121,000 | 120,798 | 145,202 |
| Financed by: | |||
| Net Financial Position | 69,877 | 75,716 | 78,434 |
| Group shareholders' equity | 51,410 | 45,405 | 66,409 |
| Minority interests | -287 | -323 | 359 |
| Borrowings | 121,000 | 120,798 | 145,202 |
| Ratios | 31/03/2017 | 31/12/2016 | 31/03/2016 |
| Net operating capital | 38,405 | 36,442 | 52,706 |
| Net operating capital/Turnover (rolling) | 20.2% | 19.8% | 26.2% |
| Net capital employed | 121,000 | 120,798 | 145,202 |
| Net capital employed/Turnover (rolling) | 63.8% | 65.6% | 72.1% |
Net operating capital at the end of the period totalled €38,405 thousand, marking a reduction compared to the first quarter of 2016 of €14,301 thousand due to the activities for the improvement in working capital already started last year and which continued during the quarter; in percentage terms, on rolling turnover, there was a sharp improvement in this figure from 26.2% at 31 March 2016 to the current 20.2%.
Trade receivables totalled €34,951 thousand, a decrease of €2,600 thousand compared to the figure as at 31 December 2016, also as a result of greater recourse to factoring operations with maturity credit for which there was derecognition of the relative receivables, totalling €24.4 million compared to €22.2 million in December 2016.
There was a reduction of €6,542 thousand in trade payables, which fell from €53,090 thousand as at 31 December 2016 to €46,548 thousand, while the closing inventories and work in progress on orders, totalling €50,433 thousand, decreased by €720 thousand.
Net invested capital (€121,000 thousand) was basically unchanged compared to December 2016, while the percentage indicator calculated on the rolling turnover decreased from 65.6% to 63.8%.
| (thousands of Euro) | |||
|---|---|---|---|
| 31/03/2017 | 31/12/2016 | 31/03/2016 | |
| Cash and cash equivalents | 20,997 | 16,484 | 20,263 |
| Bank payables and short-term loans | -25,187 | -40,662 | -36,725 |
| Bonds issued (net value) | -9,614 | -4,798 | |
| Short-term loans | -425 | -425 | -425 |
| Net short term indebtedness | -4,615 | -34,217 | -21,685 |
| Bonds issued (net value) | -31,377 | -21,764 | -28,382 |
| Medium-Long term loans | -33,885 | -19,735 | -28,367 |
| Net medium-long term indebtedness | -65,262 | -41,499 | -56,749 |
| Net financial position | -69,877 | -75,716 | -78,434 |
The net financial position was negative by €69,877 thousand compared to the negative net financial position as at 31 December 2016 of -€75,716 thousand (equal to -€78,434 thousand as at 31 March 2016).
Please note that upon closure of the Financial Optimization Agreement, compared to 31 December 2016, €23,819 thousand was reclassified from short to medium-term, inclusive of amounts referring to the Bonded Loan as well as unsecured loans.
As a result of the above-mentioned Optimization Agreement, on 30 March 2017 the controlling shareholder made a future capital increase contribution to the Parent Company for a total of €8,867 thousand.
The following table shows the total cash flow for the first quarter of 2017 compared with the first quarter of 2016:
| (thousands of Euro) | ||
|---|---|---|
| 31/03/2017 | 31/03/2016 | |
| Operational cash flow | -1,930 | -16,637 |
| Cash flow for investment activities | -1,556 | -2,095 |
| Free Cash Flow | -3,486 | -18,732 |
| Cash flow generated (absorbed) by financing activities | 7,541 | 975 |
| Overall cash flow | 4,055 | -17,757 |
Net cash flow from operating activities at the end of March, as shown in the financial statements, was negative at - €1,930 thousand; investment activities absorbed cash totalling €1,556 thousand; conversely, the cash flow generated by financial activities, which also includes the future capital increase contribution made by the main shareholder, was positive at €7,541 thousand.
Investments in property, plant, machinery and other equipment totalled €801 thousand (€777 thousand as at 31 March 2016) and refers to purchases of plant and machinery, new production moulds and testing/control equipment.
The increase in intangible assets amounted to €910 thousand (€1,357 thousand as at 31 March 2016) and mainly related to the capitalization of costs of development projects, which meet the requirements of IAS 38 for recognition as balance sheet assets.
As at 31 March 2017, Landi Renzo S.p.A. had generated revenues of €24,180 thousand, a significant improvement of 48.6% compared to €16,267 thousand in the same period of the previous year.
The Gross Operating Profit was positive and totalled €894 thousand compared to a negative value of - €978 thousand at 31 March 2016, with an increase of €1,872 thousand.
In the first quarter of 2017, the Parent Company incurred extraordinary costs of €449 thousand related to the strategic advisory costs and retirement incentives mentioned above.
The Landi Group deals with related parties at market conditions considered to be normal in the markets in question, taking account of the characteristics of the goods and the services supplied.
Transactions with related parties listed below include:
the relationships for supply of services between Gireimm S.r.l. and Landi Renzo S.p.A. and Safe S.p.A. for rent of the property used as the operational headquarters of the Parent Company and of the subsidiaries companies;
relationships for supply of services between Gestimm S.r.l., a company in which a stake is held through the parent company Girefin S.p.A., and the company A.E.B. S.p.A. for rent of the property used as the operational headquarters of the subsidiary;
After the end of the quarter and up to the present date we point out that:
Starting from 2018, the agreement will have a highly positive impact due to the reduction of fixed costs, with an improvement in EBIT of around €3 million on an annual basis and in EBITDA of roughly €1.5 million yearly on a like-for-like basis, as well as a positive impact of around €2 million yearly in terms of financial management (lower costs and payment of the price). The disposal of the business unit also makes it possible to reduce the investments necessary to maintain and upgrade the equipment sold on an annual basis by between €500 thousand and €700 thousand.
With regard to the business outlook, taking into account the results of the first three months of 2017, the uncertainties in the core market and the orders in the portfolio, the outlook already communicated at the time of the approval of the annual financial report as at 31 December 2016 is confirmed, with moderate business growth forecast along with a slight recovery in margins in terms of adjusted EBITDA already in 2017.
Cavriago, 11 May 2017
Chairman of the Board of Directors Stefano Landi
The Interim Management Report as at 31 March 2017, which has not been audited, has been prepared in compliance with art. 154-ter of Italian Legislative Decree no. 58 of 24 February 1998, as amended, and with the Regolamento Emittenti (Issuers' Regulations) issued by CONSOB (Italian Securities and Exchange Commission). Therefore, the provisions of the IAS on infra-annual financial information (IAS 34 – Interim Financial Reporting) were not adopted.
The Interim Management Report as at 31 March 2017 has been prepared in accordance with the IAS/IFRS. To this end, the data of the separate financial statements of the Italian and foreign subsidiaries have been reclassified and adjusted accordingly.
The line-by-line method is used for consolidation, which consists of stating all the items of assets and liabilities in their entirety, excluding the company joint venture Krishna Landi Renzo India Private LTD Held, which is consolidated using the equity method.
The accounting standards, and the valuation and consolidation criteria used in preparing the Interim Management Report as at 31 March 2017 are not different to those used in drawing up the consolidated financial statements closed at 31 December 2016, to which please refer for further information.
As well as the interim values as at 31 March 2017 and 2016, the financial data for the year ended on 31 December 2016 is shown for the purpose of comparison.
In application of IAS 12, par. 74, already at 31 December 2016, as well as for the first quarter of 2017 and as a result also at 31 March 2016, to ensure greater comparability, prepaid tax assets were offset with deferred tax liabilities.
The functional and presentation currency is the Euro. Figures in the schedules and tables herein are in thousands of Euro.
The accounting standards and calculation methods used for the preparation of this interim consolidated management report were not modified compared to those used to prepare the consolidated financial statements at 31 December 2016. Please note that the valuation and measurement of the accounting items shown are based on International Accounting Standards and the relative interpretations currently in force, and that no new accounting standards were applied early.
The preparation of the Interim Consolidated Financial Report requires the directors to apply accounting standards and methods that are sometimes based on difficult and subjective assessments and estimates derived from past experience and based on assumptions that are considered reasonable and realistic given the circumstances. Application of these estimates and assumptions affects the amounts presented in the financial statements, such as the Consolidated Statement of Financial Position, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Table of Changes in Equity and the Consolidated Cash Flow Statement, and in disclosures provided. Estimates are used in recognizing goodwill, impairment of fixed assets, development expenditure, taxes, provisions for bad debts and inventories write-down, employee benefits and other provisions. The estimates and assumptions are reviewed periodically and the effects of all changes are normally reflected immediately on the income statement.
However, some valuation processes, especially the more complex ones such as establishing any loss in value of non-current assets, are normally carried out to a fuller extent only during the preparation of the annual financial statements, when all the necessary information is available, except for those cases in which there are impairment indicators that require an immediate assessment of possible losses in value.
The Group performs activities that do not on the whole present significant seasonal or cyclical variations in total sales over the course of the year, except for the signing of new supply contracts on the OEM channel which may involve planned and differing delivery schedules in the individual quarters.
The policies and principles of the Landi Renzo Group for the identification, management and control of risks related to the activity are described in detail in the Consolidated Financial Statements as at 31 December 2016, to which you may refer for a more complete description of such aspects.
The consolidation scope includes the parent company Landi Renzo S.p.A. and the companies in which it holds a direct or indirect controlling stake according to IFRS.
The consolidation area at 31 March 2017 changed compared to 31 December 2016 due to the consolidation of the company Sound&Vision S.r.l., a wholly owned subsidiary of the company Eighteen Sound S.r.l., as well as the removal from Group consolidation area of the company Eurogas Utrecht B.V. as its liquidation is now complete.
Pursuant to art. 3 of Consob Resolution no. 18079 of 20 January 2012, Landi Renzo S.p.A. decided to adopt the opt-out system envisaged by arts. 70, par. 8, and 71, par. 1-bis, of CONSOB Regulation no. 11971/99 (as amended). It is therefore able to opt out from the disclosure of the information documents listed in Annex 3B to said CONSOB Regulation, on occasion of significant mergers, demergers, increases in capital through contribution of goods in kind, acquisitions and disposals.
| (Thousands of Euro) | |||
|---|---|---|---|
| ASSETS | 31/03/2017 | 31/12/2016 | 31/03/2016 |
| Non-current assets | |||
| Land, property, plant, machinery and equipment | 29,262 | 30,500 | 33,998 |
| Development expenditure | 8,210 | 8,420 | 8,464 |
| Goodwill | 30,094 | 30,094 | 30,094 |
| Other intangible assets with finite useful lives | 19,763 | 20,359 | 22,017 |
| Equity investments valued using the equity method | 121 | 43 | 71 |
| Other non-current financial assets | 447 | 664 | 453 |
| Prepaid tax assets | 7,268 | 6,887 | 8,174 |
| Total non-current assets | 95,165 | 96,967 | 103,271 |
| Current assets | |||
| Trade receivables | 33,213 | 35,553 | 33,279 |
| Trade receivables - related parties | 1,738 | 1,998 | 2,371 |
| Inventories | 49,719 | 49,872 | 60,955 |
| Work in progress on orders | 714 | 1,281 | 2,457 |
| Other receivables and current assets | 11,092 | 10,082 | 15,582 |
| Cash and cash equivalents | 20,997 | 16,484 | 20,263 |
| Total current assets | 117,473 | 115,270 | 134,907 |
| TOTAL ASSETS | 212,638 | 212,237 | 238,178 |
| (Thousands of Euro) | |||
|---|---|---|---|
| EQUITY AND LIABILITIES | 31/03/2017 | 31/12/2016 | 31/03/2016 |
| Equity | |||
| Share capital | 11,250 | 11,250 | 11,250 |
| Other reserves | 43,145 | 59,400 | 59,349 |
| Profit (loss) for the period | -2,985 | -25,245 | -4,190 |
| Total Equity attributable to the Group | 51,410 | 45,405 | 66,409 |
| Minority interests | -287 | -323 | 359 |
| TOTAL EQUITY | 51,123 | 45,082 | 66,768 |
| Non-current liabilities | |||
| Non-current bank loans | 32,836 | 18,687 | 26,899 |
| Other non-current financial liabilities | 32,426 | 22,812 | 29,850 |
| Provisions for risks and charges | 9,126 | 8,973 | 7,498 |
| Defined benefit plans for employees | 2,940 | 3,124 | 3,277 |
| Deferred tax liabilities | 504 | 514 | 0 |
| Total non-current liabilities | 77,832 | 54,110 | 67,524 |
| Current liabilities | |||
| Bank overdrafts and short-term loans | 25,187 | 40,662 | 36,725 |
| Other current financial liabilities | 425 | 10,039 | 5,223 |
| Trade payables | 41,809 | 48,919 | 50,248 |
| Trade payables – related parties | 4,739 | 4,171 | 2,364 |
| Tax liabilities | 2,494 | 2,604 | 1,683 |
| Other current liabilities | 9,029 | 6,650 | 7,643 |
| Total current liabilities | 83,683 | 113,045 | 103,886 |
| TOTAL EQUITY AND LIABILITIES | 212,638 | 212,237 | 238,178 |
| (Thousands of Euro) | ||
|---|---|---|
| 31/03/2017 | 31/03/2016 | |
| CONSOLIDATED INCOME STATEMENT | ||
| Revenues from sales and services | 46,570 | 41,416 |
| Revenues from sales and services – related parties | 204 | 4 |
| Other revenues and income | 250 | 195 |
| Cost of raw materials, consumables and goods and change in inventories | -22,550 | -19,105 |
| Costs for services and use of third party assets | -11,479 | -11,312 |
| Costs for services and use of third-party assets – related parties | -804 | -775 |
| Personnel expenses | -9,736 | -9,466 |
| Provisions, provision for bad debts and other operating expenses | -708 | -594 |
| Gross operating profit | 1,747 | 363 |
| Amortization, depreciation and impairment losses | -4,007 | -4,118 |
| Net Operating Profit | -2,260 | -3,775 |
| Financial income | 18 | 39 |
| Financial expenses | -1,059 | -1,301 |
| Exchange gains (losses) | 12 | -159 |
| Gain (loss) on equity investments valued using the equity method | 78 | -38 |
| Profit (Loss) before tax | -3,211 | -5,214 |
| Current and deferred taxes | 250 | 898 |
| Net profit (loss) for the Group and minority interests, including: | -2,961 | -4,316 |
| Minority interests | 24 | -126 |
| Net profit (loss) for the Group | -2,985 | -4,190 |
| Basic earnings (loss) per share (calculated on 112,500,000 shares) | -0.0265 | -0.0372 |
| Diluted earnings (loss) per share | -0.0265 | -0.0372 |
| (Thousands of Euro) | ||
|---|---|---|
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | 31/03/2017 | 31/03/2016 |
| Net profit (loss) for the Group and minority interests: | -2,961 | -4,316 |
| Gains/losses that will not be subsequently reclassified in the income statement | ||
| Restatement of defined employee benefit plans (IAS 19) | 50 | -193 |
| Total gains/losses that will not be subsequently reclassified on the income statement | 50 | -193 |
| Profits/losses that could subsequently be reclassified on the income statement | ||
| Exchange rate differences from conversion of foreign operations | 393 | -248 |
| Total profits/losses that could subsequently be reclassified on the income statement | 393 | -248 |
| Profits/Losses recorded directly to Equity net of tax effects | 443 | -441 |
| Total consolidated statement of comprehensive income for the period | -2,518 | -4,757 |
| Profit (loss) for Shareholders of the Parent Company | -2,549 | -4,605 |
| Minority interests | 31 | -152 |
| (Thousands of Euro) | |||
|---|---|---|---|
| CONSOLIDATED CASH FLOW STATEMENT | 31/03/2017 | 31/03/2016 | |
| Financial flows deriving from operating activities | |||
| Profit (loss) for the period | -2,961 | -4,316 | |
| Adjustments for: | |||
| Depreciation of property, plant and equipment | 2,046 | 2,143 | |
| Amortization of intangible assets | 1,902 | 1,876 | |
| Impairment losses on intangible assets | 60 | 100 | |
| Impairment loss on receivables | 40 | 86 | |
| Net financial charges | 1,029 | 1,421 | |
| Income tax for the year | -250 | -898 | |
| 1,866 | 412 | ||
| Changes in: | |||
| Work in progress on orders | 719 | -2,980 | |
| Trade receivables and other receivables | 1,561 | -2,013 | |
| Trade payables and other payables | -5,051 | -10,432 | |
| Provisions and employee benefits | 19 | -789 | |
| Cash generated from operating activities | -886 | -15,802 | |
| Interest paid | -670 | -487 | |
| Interest received | 6 | 20 | |
| Income taxes paid | -380 | -368 | |
| Net cash generated (absorbed) by operations | -1,930 | -16,637 | |
| Financial flows from investments | |||
| Proceeds from the sale of property, plant and equipment | 77 | 24 | |
| Equity investments valued using the equity method | 78 | 38 | |
| Purchase of property, plant and equipment | -801 | -800 | |
| Purchase of intangible assets | -10 | -84 | |
| Development expenditure | -900 | -1,273 | |
| Net cash absorbed by investment activities | -1,556 | -2,095 | |
| Financial flows from financing activities | |||
| Future share capital increase contributions | 8,867 | ||
| Disbursements (reimbursements) of medium/long-term loans | -336 | -3,920 | |
| Change in short-term bank debts | -990 | 4,895 | |
| Net cash generated (absorbed) by financing activities | 7,541 | 975 | |
| Net increase (decrease) in cash and cash equivalents | 4,055 | -17,757 | |
| Cash and cash equivalents as at 1 January | 16,484 | 38,264 | |
| Effect of exchange rate fluctuation on cash | 458 | -244 | |
| Closing cash and cash equivalents | 20,997 | 20,263 | |
This report, as required by IAS 7, paragraph 18, has been prepared using the indirect method.
| Other information | 31/03/2017 | 31/03/2016 |
|---|---|---|
| (Increase)/Decrease in trade receivables and other receivables from related parties | 260 | -53 |
| Increase/(Decrease) in trade payables and other payables to related parties | 568 | 273 |
| (Thousands of Euro) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital |
Statutory Reserve |
Extraordinary and Other Reserves |
Share Premium Reserve |
Future share capital increase contributions |
Result for the year |
Group Equity |
Profit (Loss) attributable to minority interests |
Capital and reserves attributable to minority interests |
Total Equity |
||
| Balance as at 31 December 2015 |
11,250 | 2,250 | 46,580 | 46,598 | 0 | -35,288 | 71,390 | -299 | 724 | 71,815 | |
| Result for the year | -4,190 | -4,190 | -126 | -4,316 | |||||||
| Actuarial profits/losses (IAS 19) |
-191 | -191 | -2 | -193 | |||||||
| Translation difference |
-224 | -224 | -24 | -248 | |||||||
| Total comprehensive profits/losses |
0 | 0 | -415 | 0 | 0 | -4,190 | -4,605 | -126 | -26 | -4,757 | |
| Other changes | -376 | -376 | 86 | -290 | |||||||
| Allocation of profit | -35,288 | 35,288 | 0 | 299 | -299 | 0 | |||||
| Total effects deriving from transactions with shareholders |
0 | 0 | -35,664 | 0 | 0 | 35,288 | -376 | 299 | -213 | -290 | |
| Balance as at 31 March 2016 |
11,250 | 2,250 | 10,501 | 46,598 | 0 | -4,190 | 66,409 | -126 | 485 | 66,768 | |
| Balance as at 31 December 2016 |
11,250 | 2,250 | 10,552 | 46,598 | 0 | -25,245 | 45,405 | -759 | 436 | 45,082 | |
| Result for the year | -2,985 | -2,985 | 24 | -2,961 | |||||||
| Actuarial profits/losses (IAS 19) |
50 | 50 | 50 | ||||||||
| Translation difference |
386 | 386 | 7 | 393 | |||||||
| Total comprehensive profits/losses |
436 | -2,985 | -2,549 | 24 | 7 | -2,518 | |||||
| Other changes | -313 | 8,867 | 8,554 | 5 | 8,559 | ||||||
| Allocation of profit | -25,245 | 25,245 | 0 | 759 | -759 | 0 | |||||
| Total effects deriving from transactions with shareholders |
-25,558 | 8,867 | 25,245 | 8,554 | 759 | -754 | 8,559 | ||||
| Balance as at 31 March 2017 |
11,250 | 2,250 | -14,570 | 46,598 | 8,867 | -2,985 | 51,410 | 24 | -311 | 51,123 | |
I, the undersigned, Paolo Cilloni, the Financial Reporting Manager of Landi Renzo S.p.A.,
declare
in accordance with Article 154-bis, subparagraph 2 of the Finance Consolidation Act (Legislative Decree 58/1998) that the accounting information contained in the Interim Management Report to 31 March 2017 corresponds to the accounting documents, ledgers and records.
Cavriago, 11 May 2017
Financial Reporting Manager Paolo Cilloni
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