Interim / Quarterly Report • Aug 5, 2016
Interim / Quarterly Report
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Emak S.p.A. • Via Fermi, 4 • 42011 Bagnolo in Piano (Reggio Emilia) ITALY Tel. +39 0522 956611 • Fax +39 0522 951555 - [email protected] • www.emak.it Capitale Sociale Euro 42.623.057,10 Interamente versato • Registro delle Imprese N. 00130010358 • R.E.A. 107563 Registro A.E.E. IT08020000000632 • Registro Pile/Accumulatori IT09060P00000161 Meccanografico RE 005145 • C/C Postale 11178423 • Partita IVA 00130010358 • Codice Fiscale 00130010358
| Group chart of Emak Group as at 30 June 2016 3 | |
|---|---|
| Main shareholders of Emak S.p.A. 4 | |
| Emak Group profile 6 | |
| Production organization 8 | |
| Strategy 9 | |
| Main risks and uncertainties 9 | |
| Intermediate Directors Report at 30 June 2016 12 | |
| 1. Main economic and financial figures for the Group 13 | |
| 2. Economic and financial results of Emak Group 14 | |
| 3. Dealings with related parties 19 | |
| 4. Plan to purchase Emak S.p.A. shares 19 | |
| 5. Disputes 19 | |
| 6. Business outlook, principle risks and elements of uncertainty 20 | |
| 7. Significant events occurring during the period and positions or transactions arising from atypical and | |
| unusual transactions, significant and non-recurring 20 | |
| 8. Subsequent events and other informations 20 | |
| 9. Reconciliation between shareholders' equity and net profit of the parent company Emak and consolidated | |
| equity and the results 21 | |
| Emak Group – Consolidated financial statements at 30 June 2016 23 | |
| Consolidated Income Statement 24 | |
| Statement of financial position 25 | |
| Statement of changes in consolidated equity for the Emak Group at 30.06.2015 26 | |
| Statement of changes in consolidated equity for the Emak Group at 31.12.2015 and at 31.12.2016 26 | |
| Consolidated Cash Flow Statement 27 | |
| Explanatory notes to the consolidated financial statements of Emak Group at 30.06.2016 28 | |
| Declaration on the half year report in accordance whit Article 154-bis, paragraph 2 of Legislative Decree no. | |
| 58/1998 (Testo Unico della Finanza) 53 | |
| Auditor's review report on the half year condensed consolidated financial statement 54 |
Valley Industries LLP is consolidated at 100% as a results of the "Put and Call Option Agreement" that governs the purchase of the 10% remaining.
Lemasa is consolidated at 100% as a results of the "Put and Call Option Agreement" that governs the purchase of the 30% remaining.
P.T.C. S.r.l. is consolidated at 100% as a results of the "Put and Call Option Agreement" that governs the purchase of the 10% remaining.
Comet do Brasil Investimentos Ltda is owned for 99% by Comet S.p.A .and 1% by P.T.C. S.r.l.
The share capital of Emak S.p.A. consists of 163.934.835 shares with a par value of 0.26 euros per share.
The Company has been listed on the Milan Stock Exchange since June 25, 1998. Since September 2001 the stock has been included in the Segment of Equities with High Requirements (STAR).
Below is summarized the composition of the shareholders of Company as at June 30 2016.
The Ordinary General Meeting of the Shareholders of the Parent Company, Emak S.p.A. on 22 April 2016 appointed the Board of Directors and the Board of Statutory Auditors for the financial years 2016-2018 and conferred also the engagement for the independent audit for the financial years 2016-2024.
| Board of Directors | |
|---|---|
| Chairman and Chief Executive Officer | Fausto Bellamico |
| Deputy Chairman | Aimone Burani |
| Executive Director | Stefano Slanzi |
| Independent Director | Massimo Livatino |
| Alessandra Lanza | |
| Elena Iotti | |
| Directors | Francesca Baldi |
| Ariello Bartoli | |
| Luigi Bartoli | |
| Paola Becchi | |
| Giuliano Ferrari | |
| Vilmo Spaggiari | |
| Guerrino Zambelli | |
| Marzia Salsapariglia | |
| Audit Committee and Remuneration Committee | |
| Chairman | Massimo Livatino |
| Components | Alessandra Lanza |
| Elena Iotti | |
| Board of Statutory Auditors | |
| Chairman | Paolo Caselli |
| Acting auditors | Gianluca Bartoli |
| Francesca Benassi | |
| Alternate auditor | Maria Cristina Mescoli |
| Federico Cattini | |
| Independent Auditor | Deloitte & Touche S.p.A. |
| Financial Reporting Officer | Aimone Burani |
| Supervisory Body as per Legislative Decree 231/01 | |
| Chairman | Sara Mandelli |
| Acting member | Roberto Bertuzzi |
The Emak Group develops, manufactures and distributes a wide range of products in three business areas complementary to each other: Outdoor Power Equipment (OPE); Pumps and High Pressure Water Jetting (PWJ); Components and Accessories (C&A).
I. Outdoor Power Equipment, includes the development, manufacture and marketing of products for gardening, forestry and small agricultural equipments, such as brush cutters, lawnmowers, garden tractors, chainsaws, tillers and motor cultivators. The Group distributes its products under its main brands Oleo-Mac, Efco, Bertolini and Nibbi Staub (the latter only to the French market). The Group's product range is intended for professional and high demanding private users. The Group operates mainly in the specialized dealer channel, distributing its products through its commercial subsidiaries and, where it hasn't a direct presence, through a network of 135 distributors; it is estimated to serve around the world over 22,000 specialty dealers.
The reference market of the Group (considered to be the specialized dealer channel, excluding large-scale distribution) has an estimated value of 7-8 billion of Euros. In mature markets such as North America and Western Europe, demand is mainly for replacement: the main driver is represented by economic and gardening trends. Weather conditions are a factor affecting the level of demand for some product families such as brush cutters, lawnmowers and garden tractors in the spring-summer and chainsaws in the autumnwinter. In emerging markets, such as the Far East, Eastern Europe and South America, demand is mainly for "first purchase": the main driver in these areas is economic growth, the evolution of agricultural mechanization and relative support policies. Another factor that influences the demand is the price of commodities: the trend in oil prices can affect the demand for alternative energy sources, such as wood for heating and consequently the demand for chain saws; the trend in the price of agricultural commodities influences investments in agricultural equipment.
II. Pumps and High Pressure Water Jetting, this category brings together the development, manufacture and marketing of diaphragm pumps intended for agriculture (spraying and weeding), piston pumps for the industrial sector, of professional pressure washers and hydrodynamic units and machines for urban cleaning. The Group distributes its products under Comet, HPP, PTC, Master Fluid and Lemasa brands. Group customers are the followings: manufacturers of machines for spraying and weeding with regard to agriculture pumps; builders of hydrodynamic units and pressure washers in relation to industrial pumps; specialized dealers and contractors respectively for pressure washers and hydrodynamic units.
The market has a value globally estimated between 2.5 and 3.4 billion Euros. The pumps for agriculture market consists mainly of Italian operators. The demand is strongly linked to economic cycles, population growth and the resulting increase in demand for agricultural production; in developing countries demand is linked to the evolution of the mechanization of agriculture and relative support policies. The market for high pressure water jetting is constantly evolving, given the different fields of application of pumps and systems. There are several drivers of market demand, depending on the type of product:
underwater; iron and steel; foundries; chemical processes; energy production; paper mills; transport; municipalities; food; automotive and motor Industry
The Group's business is affected by seasonal demand. Gardening machines and components, which represent the majority of the Group's sales, follow the purchase model of the end user. Most of the products are in fact sold in the spring and summer, seasons in which are concentrated the maintenance of the green. Whereas the principal Group's markets are in the northern hemisphere, sales are concentrated in the first and second quarters, in order to supply the network of specialized dealers in time to meet the demands of the end customer at the beginning of season. The demand for products aimed forest activity is usually higher in the second half. Demand for the products of the line Pumps and High Pressure Water Jetting sees a higher concentration in the first half given the more pronounced seasonality of sales of pumps for agriculture, while the product water jetting (industrial pumps, pressure washers and hydrodynamic units) are overall homogeneously distributed during the year.
The following graphic shows the breakdown of sales by quarter of last financial year.
The production model is flexible, focused on high value-added phases of engineering, industrialization and assembly. The production facilities are oriented towards lean manufacturing, with the involvement of the supply chain on the basis of the extended factory model. With particular reference to the Outdoor Power Equipment segment, the engine of hand-held products (such as trimmers and chainsaws) is integrated in the machine and is entirely engineered and designed by the Group. For lawnmowers, lawn tractors, tillers and cultivators, the engine is acquired from primary manufacturers.
Production volumes can be easily modified according to fluctuations in demand through flexible management so that seasonal peaks in demand can be satisfied through overtime or additional shifts, with no need for additional investments.
Each plant has specific characteristics that vary according to the products manufactured. The group manufactures its products in 17 different facilities that have a combined surface area of around 160,000 m².
| Company | Location | Output |
|---|---|---|
| Emak | Bagnolo in Piano (RE) - Italy Pozzilli (IS) - Italy |
Chainsaws, brushcutters, power cutters, cultivators, cutter bar mowers, transporters Lawnmowers and rotary tillers |
| Emak Tailong | Zhuhai - China | Cylinders for combustion engines |
| Emak Jiangmen | Jiangmen - China | Chainsaws and brushcutters intended for the price sensitive segment |
| Tecomec | Reggio Emilia - Italy | Accessories for agricultural machinery for spraying and weeding and accessories and components for pressure washers |
| Speed France | Arnas - France | Nylon line and heads for brushcutters |
| Speed North America | Wooster, Ohio - USA | Nylon line for brushcutters |
| Speed Line South Africa | Pietermaritzburg - South Africa | Nylon line for brushcutters |
| Speed Industrie | Mohammedia - Marocco | Nylon line for brushcutters |
| Speed South America | Santiago - Chile | Nylon line for brushcutters |
| Ningbo | Ningbo - China | Accessories and components for high pressure washing and chain saws and brushcutters |
| Geoline Electronic | Poggio Rusco (MN) - Italy | Computers, control units and electronic control systems for agricultural machines for spraying and weeding |
| Comet | Reggio Emilia - Italy | Pumps, motor pumps and control units for agriculture and industry and pressure washers for the cleaning sector |
| Valley | Paynesville, Minnesota - Usa | Components and accessories for industry and agriculture sectors |
| PTC | Genova - Italy Rubiera (RE) - Italy |
Hydrodynamic units |
| Lemasa | Indaiatuba - Brazil | High pressure pumps |
The main goal of Emak Group is the creation of value for its stakeholders.
In order to achieve this objective, the Group focuses on:
The Group believes that effective risk management is a key factor for maintaining value over time: for this reason, in the conduct of its business, the Group defines its strategic and operative objectives through its governance structure and Internal Control System and monitors, as well as manages, the risks that could compromise the achievement.
The effective management of risks is a key factor in the creation of the Group's value over time, especially in the light of the difficult macro-economic situation, and is a support to management in defining the most appropriate competitive strategies.
As part of its industrial activity, Emak Group is exposed to a series of risks, the identification, assessment and management of which are assigned to Managing Directors, also in the role of Executives Directors appointed pursuant to the self-regulatory Code of Borsa Italiana S.p.A., to business area managers and the Audit Committee, which is responsible of supporting the Board of Directors on issues relating to internal control and risk management.
In order to prevent and manage the most significant risks, the Group uses a risk classification model, dividing risks according to the business function from which they may derive or through which they can be managed. Risk assessment is carried out on the basis of an estimate of the financial impact and the probability of occurrence.
The Directors responsible for the internal control system oversee the "risk management" process by implementing the guidelines defined by the Board of Directors in relation to risk management and by verifying their adequacy.
Internal Audit's task is to control the efficiency and effective functioning of the internal control and risk management system through risk assessment activities and the management of the results of this analysis, with particular attention to the continuous improvement of management policies.
As part of this process, different types of risk are classified on the basis of the assessment of their impact on the achievement of the strategic objectives, that is to say, on the basis of the consequences that the occurrence of the risk may have in terms of compromised operating or financial performance, or of compliance with laws and/or regulations.
The main strategic-operating risks to which the Emak Group is subject are:
The Group is exposed to risks associated with health and safety at work and the environment, which could involve the occurrence work-related accidents and illness, environmental pollution phenomena or the failed compliance of specific legal regulations. The risks associated with such phenomena may lead to penal or administrative sanctions against the Group. The Group manages these types of risks through a system of
procedures aimed at guaranteeing the implementation and the execution of control activities that ensure compliance with the reference legislation.
Weather conditions may impact on the sales of certain product families. Generally, weather conditions characterized by drought can cause contractions in the sale of gardening products such as lawnmowers and garden tractors, while winters with mild climate adversely affect sales of chainsaws.
The Group operates on a global scale, in a sector characterized by a high level of competition and in which sales are concentrated mainly in mature markets with moderate or low rates of growth in demand. Performances are closely correlated to factors such as the level of prices, product quality, trademarks and technology, which define the competitive positioning of operators on the market.
The Group's results are influenced by the actions of a number of large customers, with which generally there are no agreements involving minimum purchase quantities. As a result, the demand of such customers for fixed volumes of products cannot be guaranteed and it is impossible to rule out that a loss of important customers or the reduction of orders made by them could have negative effects on the Group's economic and financial results.
The Group's economic results are influenced by the trend in the price of raw materials and components. The main raw materials used are copper, steel, aluminum and plastic materials. Their prices can fluctuate significantly during the year since they are linked to official commodity prices on the reference markets.
The Group is exposed to potential liability risks towards customers or third parties in relation to product liability due to possible design and/or manufacturing defects in the Group's products, also attributable to third parties such as suppliers and assemblers. Moreover, in the event that products are defective or do not meet technical and legal specifications, the Group, also by order of control authorities, could be obliged to withdraw such products from the market.
International expansion strategies have increased the Group's presence in emerging economies characterized also by greater socio-political volatility and instability compared to mature economies. Investments made in a number of countries, therefore, could be influenced by substantial changes in the local socio-political context, which could generate changes in the economic conditions that were present at the time of making the investment. The Group's performances are therefore more heavily influenced by this type of risk than in the past. The Group coordinates all the M&A activity profiles for the purpose of mitigating the risks. In addition, the Group has set up constant monitoring in order be able to intercept possible sociopolitical or economic changes in such countries to minimize any consequent impact.
In the ordinary performance of its operating activities, the Emak Group is exposed to various financial nature risks. For detailed analysis, reference should be made to the appropriate section of the Explanatory Notes to Annual Financial Statements 2015 which the disclosures as per IFRS no. 7 are set out in.
With the aim of reducing the financial impact of any harmful event, the Group has arranged to transfer residual risks to the insurance market, when insurable.
In this sense, Emak, as part of its risk management process, has taken steps to customize insurance coverage in order to significantly reduce exposure, particularly with regard to possible damages arising from the manufacturing and marketing of products.
All companies of the Emak Group are today insured against major risks considered as strategic, such as: product liability and product recall, general civil liability and property all risks. Other insurance coverage has been taken out at the local level in order to respond to regulatory requirements or specific regulations.
The analysis and insurance transfer of the risks to which the Group is exposed is carried out in collaboration with an insurance broker which, through an international network, is also able to assess the adequacy of the management of the Group's insurance programs on a global scale.
| Y 2015 | 2 Q 2016 2 Q 2015 | I H 2016 | I H 2015 | |
|---|---|---|---|---|
| 381,579 | Net sales | 115,679 117,929 |
229,950 | 227,772 |
| 37,495 | EBITDA ADJ (*) |
14,683 13,591 |
30,426 | 28,676 |
| 35,814 | EBITDA (*) |
14,484 13,178 |
30,227 | 27,431 |
| 23,286 | EBIT | 10,990 10,097 |
23,732 | 21,486 |
| 8,992 | Net profit | 8,470 4,692 |
15,792 | 11,541 |
| Y 2015 | 2 Q 2016 2 Q 2015 | I H 2016 | I H 2015 | ||
|---|---|---|---|---|---|
| 10,291 | Investment in property, plant and equipment | 3,106 | 2,220 | 6,016 | 4,599 |
| 1,926 | Investment in intangible assets | 525 | 643 | 1,000 | 1,022 |
| 21,520 | Free cash flow from operations (*) |
11,964 | 7,773 | 22,287 | 17,486 |
| 31.12.2015 | 30.06.2016 | 30.06.2015 | |
|---|---|---|---|
| 267,871 | Net capital employed | 284,553 | 294,629 |
| (99,383) | Net debt | (106,011) | (122,601) |
| 168,488 | Total equity | 178,542 | 172,028 |
| Y 2015 | 2 Q 2016 2 Q 2015 | I H 2016 | I H 2015 | ||
|---|---|---|---|---|---|
| 9.4% | EBITDA / Net sales (%) | 12.5% | 11.2% | 13.1% | 12.0% |
| 6.1% | EBIT/ Net sales (%) | 9.5% | 8.6% | 10.3% | 9.4% |
| 2.4% | Net profit / Net sales (%) | 7.3% | 4.0% | 6.9% | 5.1% |
| 8.7% | EBIT / Net capital employed (%) | 8.3% | 7.3% | ||
| 0.59 | Net Debt / Equity | 0.59 | 0.71 | ||
| 1,693 | Number of employees at period end | 1,691 | 1,683 |
| 31.12.2015 | 30.06.2016 | 30.06.2015 | ||
|---|---|---|---|---|
| 0.054 | Earnings per share (€) | 0.096 | 0.070 | |
| 1.02 | Equity per share (€) (*) |
1.08 | 1.04 | |
| 0.77 | Official price (€) | 0.70 | 0.89 | |
| 0.98 | Maximum share price in period (€) | 0.82 | 0.95 | |
| 0.76 | Minimum share price in period (€) | 0.61 | 0.82 | |
| 126 | Stockmarket capitalization (€ / million) | 115 | 146 | |
| 163,537,602 | Average number of outstanding shares | 163,537,602 | 163,537,602 | |
| 163,934,835 | Number of shares comprising share capital | 163,934,835 | 163,934,835 | |
| 0.132 | Cash flow per share: net profit + amortization/depreciation (€) | (*) | 0.136 | 0.107 |
| 0.025 | Dividend per share (€) | - | - |
(*) See section "definitions of alternative performance indicators"
Consolidated income statement summary figures for the first half-year of 2016 are shown below:
| FY 2015 | % | €/000 | 1H 2016 | % | 1H 2015 | % | Change % |
|---|---|---|---|---|---|---|---|
| 381,579 | 100 | Net sales | 229,950 | 100 | 227,772 | 100 | 1.0 |
| 37,495 | 9.8 | Ebitda Adj (*) | 30,426 | 13.2 | 28,676 | 12.6 | 6.1 |
| 35,814 | 9.4 | Ebitda (*) | 30,227 | 13.1 | 27,431 | 12.0 | 10.2 |
| 23,286 | 6.1 | Ebit | 23,732 | 10.3 | 21,486 | 9.4 | 10.5 |
| 15,092 | 4.0 | Profit before taxes | 23,020 | 10.0 | 19,341 | 8.5 | 19.0 |
| 8,992 | 2.4 | Net profit | 15,792 | 6.9 | 11,541 | 5.1 | 36.8 |
(*) EBITDA and EBITDA adjusted: see section "definition of alternative performance indicators"
In the first semester 2016 Emak Group achieved a consolidated turnover of € 229,950 thousand, compared to € 227,772 thousand of last year, an increase of 1%. The improvement is due to organic growth for 1.7%, change in scope of consolidation for 0.7% and negative currency effect for 1.4%.
The following table shows an analysis of sales reported for first half 2016, broken down by business and geographic area, compared with the sales of the same period of the previous year:
| €/000 | OUTDOOR POWER EQUIPMENT |
PUMPS AND HIGH PRESSURE WATER JETTING |
COMPONENTS AND ACCESSORIES |
TOTAL | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1H 2016 | 1H 2015 | Var. % 1H 2016 1H 2015 Var. % 1H 2016 1H 2015 Var. % 1H 2016 | 1H 2015 | Var. % | ||||||||
| Europe | 89,809 | 90,499 | (0.8) | 26,157 | 25,797 | 1.4 | 43,349 | 42,257 | 2.6 | 159,315 | 158,553 | 0.5 |
| Americas | 5,168 | 7,092 (27.1) | 25,653 | 24,602 | 4.3 | 14,749 | 13,762 | 7.2 | 45,570 | 45,456 | 0.3 | |
| Asia, Africa and Oceania | 12,894 | 12,156 | 6.1 | 5,824 | 5,745 | 1.4 | 6,347 | 5,862 | 8.3 | 25,065 | 23,763 | 5.5 |
| Total | 107,871 | 109,747 | (1.7) | 57,634 | 56,144 | 2.7 | 64,445 | 61,881 | 4.1 | 229,950 | 227,772 | 1.0 |
Sales on the European market were slightly down compared to the same period mainly due to the slowdown in the second quarter in the countries of Central Europe consequently to the late start of the season for gardening products, as a result of unfavorable weather conditions. Sales in the Americas were generally stable compared to those booked, net of one-off operation, in the first half of last year. Sales in Asia, Africa and Oceania remain higher than in the same period last year thanks to a good performance in the Middle East, despite a slight decline in the second quarter in some of the Far East markets.
Sales on the European market were higher than last year, mainly thanks to the recovery marked on the Italian market and in some countries of Eastern Europe during the second quarter. The American sales growth was driven by positive results obtained by the Mexican market and the sales contribution in the first quarter of Lemasa amounting to € 1,684 thousand, not included in the same period in 2015,, which more than offset the delay recorded in the second quarter on the North American market. In Asia, Africa and Oceania, the increase in sales is attributable to a general recovery in the second quarter.
The growth of the European market sales was due to the good performances of the markets of Western Europe and the partial recovery recorded in the second quarter on the Italian market, which offset the decline in some countries of Eastern Europe. In the Americas it has been confirmed the positive trend seen in the
first quarter, with good results in the US market and in line with last year in Latin American markets. The increase in sales in Asia, Africa and Oceania continued in the second quarter driven by the markets of the Far East, mainly Japan, and the Middle East, particularly Turkey.
The turnover in second quarter 2016 amounted to € 115,679 thousand against € 117,929 thousand for the same period of last year, decreased by 1.9%.
The following table shows an analysis of sales reported for the second quarter 2016, broken down by business and geographic area, compared with the sales of the same period of the previous year:
| €/000 | OUTDOOR POWER EQUIPMENT |
PUMPS AND HIGH PRESSURE WATER JETTING |
COMPONENTS AND ACCESSORIES |
TOTAL | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2Q 2016 | 2Q 2015 | Var. % 2Q 2016 2Q 2015 Var. % 2Q 2016 2Q 2015 Var. % 2Q 2016 | 2Q 2015 Var. % | |||||||||
| Europe | 45,374 | 47,238 | (3.9) | 13,338 | 12,962 | 2.9 | 22,697 | 20,690 | 9.7 | 81,409 | 80,890 | 0.6 |
| Americas | 2,153 | 3,208 (32.9) | 13,132 | 13,769 | (4.6) | 6,977 | 7,154 | (2.5) | 22,262 | 24,131 | (7.7) | |
| Asia, Africa and Oceania | 6,320 | 6,954 | (9.1) | 3,245 | 3,023 | 7.3 | 2,443 | 2,931 (16.6) 12,008 | 12,908 | (7.0) | ||
| Total | 53,847 | 57,400 | (6.2) | 29,715 | 29,754 | (0.1) | 32,117 | 30,775 | 4.4 | 115,679 | 117,929 | (1.9) |
In the first half of 2016, EBITDA amounted to € 30,227 thousand against € 27,431 thousand in the same period last, an increase of 10.2%.
EBITDA as a percentage of revenues is 13.1%, against 12% in same period of last year.
The result of the first half of 2016 benefited from a positive sales mix among the various areas of activity and of product, favored the sale of most professional products of the range.
The increase in personnel costs is partly due to the full consolidation of Lemasa (joined the Group in the beginning of April 2015), to a greater incidence of temporary staff employed in some of the Group's plants to meet higher production volumes and to the lower recourse to social welfare compared to the previous year. The average number of employees in the workforce, including temporary workers, increased amounting to 1,863 against the 1,850 in the same period of the previous year.
The continuous activities to improve logistical efficiencies combined to the reduction of general costs led to the decrease in operating costs compared to the same period last year. The figure for the first half of 2016 includes expenses of € 199 thousand for M&A and restructuring transactions. In the year-earlier period, the figure included charges of € 1,245 thousand for litigation, M&A and reorganization.
Excluding these effects, EBITDA would amount to € 30,426 thousand (13.2% of turnover) compared to € 28,676 thousand (12.6% of turnover) in the same period of 2015.
EBITDA for the second quarter 2016 amounts to € 14,484 thousand, compared to € 13,178 thousand for the corresponding quarter of the previous year.
EBIT for the first half 2016 is € 23,732 thousand, compared to € 21,486 thousand for the same period of last year.
EBIT as a percentage of sales stands at 10.3% compared to 9.4% of 30 June 2015.
Non-annualized EBIT as a percentage of net invested capital is 8.3%, compared to 7.3% of the same period of the previous year.
Depreciation and amortization are € 6,495 thousand, compared to € 5,945 thousand in the same period of the previous year.
EBIT for the second quarter 2016 is € 10,990 thousand, compared to € 10,097 thousand for the same quarter of last year.
Net profit for the fist half 2016 is € 15,792 thousand, compared to € 11,541 thousand for the same period last year.
The trend in financial management was principally affected by the accounting of charges for € 921 thousand related to the discounting of the payable to the transferor of Lemasa participation and by the inclusion of major amounts paid for the price adjustment related to the acquisition of S.I.Agro Mexico for an amount of € 360 thousand.
Currency management in the second quarter 2016 was positive for € 2,368 thousand, compared to a negative balance of € 357 thousand for the same period last year.
Currency management in the first half of 2016 was positive by € 2,005 thousand, while it was negative for € 61 thousand for the same previous period, consequently the strengthening of the Brazilian currency against the Euro which resulted in a positive assessment of currency positions of the Brazilian companies at period end exchange rates.
Taxes for the period amounted to € 7,228 thousand compared to € 7,800 thousand for the same period last year, respectively, corresponding to a tax rate of 31.4% and 40.3%. For the comparison, please refer to the notes n. 14 of the half year financial statements.
Net profit for the second quarter 2016 is € 8,470 thousand, compared to € 4,692 thousand for the same quarter of last year.
| 31.12.2015 | €/000 | 30.06.2016 30.06.2015 | |
|---|---|---|---|
| 113,363 | Net non-current assets | 115,219 | 115,796 |
| 154,508 267,871 |
Net working capital Total net capital employed |
169,334 284,553 |
178,833 294,629 |
| 166,992 | Equity attributable to the Group | 177,037 | 170,391 |
| 1,496 | Equity attributable to non controlling interests | 1,505 | 1,637 |
| (99,383) | Net debt | (106,011) | (122,601) |
During first half 2016 Emak Group invested € 7,016 thousand in property, plant and equipment and intangible assets, as follows:
Investments broken down by geographical area are as follows:
Net working capital moved from € 154,508 thousand at December 31, 2015 to € 169,334 thousand, an increase of € 14,826 thousand.
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Net working capital at 01 January | 154,508 | 148,575 |
| Increase/(decrease) in inventories | (5,408) | 448 |
| Increase/(decrease) in trade receivables | 20,870 | 30,996 |
| (Increase)/decrease in trade payables | 5,464 | (217) |
| Change in scope of consolidation | 140 | 3,487 |
| Other changes | (6,240) | (4,456) |
| Net working capital at 30 June | 169,334 | 178,833 |
The increase in net working capital is related to the seasonality of the Group's sales, which produces on average 60% of annual turnover in the first half. The increase in trade receivables compared to 31 December 2015 is due to the cyclical nature of sales. The improvement in index for trade receivables contributed to the decrease in net working capital compared to the same period last year.
Consolidated equity at 30 June 2016 is € 178,542 thousand against € 168,488 thousand at December 31, 2015. Earnings per share at 30 June 2016 amounted to € 0.096 compared to € 0.070 in the previous year. Earnings per share at 31 December 2015 amounted to € 0.054.
Net negative financial position was € 106,011 thousand at 30 June 2016, an increase of € 6,628 thousand compared to the € 99,383 thousand at 31 December 2015.
The following table shows the movements in the net financial position of the first half:
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Opening NFP | (99,383) | (79,043) |
| Ebitda | 30,227 | 27,431 |
| Financial income and expenses | (2,717) | (2,084) |
| Exchange gains and losses | 2,005 | (61) |
| Income taxes | (7,228) | (7,800) |
| Cash flow from operations, excl. changes in operating assets and liabilities |
22,287 | 17,486 |
| Changes in operating assets and liabilities | (12,950) | (25,173) |
| Cash flow from operations | 9,337 | (7,687) |
| Change from investments and disinvestments | (9,715) | (7,628) |
| Other equity changes | (5,738) | 386 |
| Change in consolidation area | (512) | (28,629) |
| Closing NFP | (106,011) | (122,601) |
Overall, the operating cash flow was positive by € 9,337 thousand, compared with the negative value of € 7,687 thousand for the same period last year. The improvement in EBITDA together with a more efficient net working capital management contributed to cash generation in the period.
Cash flow from operations, net of taxes, amounted to € 22,287 thousand in the first six months of 2016, against € 17,486 thousand for the same period of last year. The increase in working capital compared to the beginning of the year, although lower than the change in the first half of 2015, resulted in an absorption of resources for € 12,950 thousand.
The net financial position is made up as follows:
| ( €/000 ) | 30.06.2016 | 31.12.2015 | 30.06.2015 |
|---|---|---|---|
| Cash and banks | 37,598 | 42,518 | 16,416 |
| Securities and derivative financial instruments | 283 | 88 | 70 |
| Other financial assets | 536 | 452 | 826 |
| Financial liabilities | (61,751) | (55,936) | (53,849) |
| Derivative financial instruments | (487) | (501) | (615) |
| Short-term net debt | (23,821) | (13,379) | (37,152) |
| Other financial assets | 9,467 | 7,836 | 9,493 |
| Financial liabilities | (91,657) | (93,840) | (94,942) |
| Long-term net debt | (82,190) | (86,004) | (85,449) |
| Cash and banks | 37,598 | 42,518 | 16,416 |
| Securities and derivative financial instruments | 283 | 88 | 70 |
| Other financial assets | 10,003 | 8,288 | 10,319 |
| Financial liabilities | (153,408) | (149,776) | (148,791) |
| Derivative financial instruments | (487) | (501) | (615) |
| Total net debt | (106,011) | (99,383) | (122,601) |
Long-term financial payables include the non-current portion of loan principal repayments and debt for equity investments in the amount of € 16,543 thousand.
Short-term financial payables mainly consist of:
Financial liabilities for the purchase of the remaining shares of the minority investments and for the adjustment of acquisition transactions with deferred payment subject to contractual restrictions, in the amount of € 18,240 thousand related to the following companies:
Emak S.p.A. is controlled by Yama S.p.A., which holds 75.2% of its share capital and which, as a nonoperating holding company, is at the head of a larger group of companies operating mainly in the production of machinery and equipment for agriculture and gardening and of components for motors, and in real estate. The Emak Group has limited supply and industrial service dealings with such companies, as well as dealings of a financial nature deriving from the participation of a number of companies in the Emak Group in the tax consolidation headed by Yama S.p.A..
From the above relationships, of usual and recurring type fall in industrial activity in the ordinary exercise derives the major part of the activities developed in the period from Emak Group with related parties. The operations concerned are all regulated under the current market conditions, according to the framework resolutions, approved periodically by the Board of Directors of the company involved. These transactions, governed by the procedures of protection under Art. 4, Reg. Consob. 17221/2010 refers in the notes to paragraph no. 33.
* * * * * * *
The determination of the remuneration of Directors and Auditors and Managers with strategic responsibility in the parent company, occurs as part of the governance framework illustrated to the Shareholders and to the public through the report as per art. 123-ter of Leg. Dec. 58/98, available on the site www.emak.it. The remuneration of Directors and Auditors and Managers with strategic responsibility in the parent company is also regulated by suitable protection procedures that provide for the Parent Company to perform control and harmonization activities.
At December 31, 2015, the Company held 397,233 treasury shares in portfolio for an equivalent value of € 2,029 thousand.
On April 22, 2016, the Shareholders' Meeting renewed the authorization to purchase and dispose of treasury shares for the purposes laid down by it. During 2016 there were no purchases or sales of own shares, leaving the balances at beginning of year unchanged.
There were no disputes in progress that might lead to liabilities in the financial statements other than those already described in notes 28 and 30 of the consolidated half year statements, to which reference is made.
The first half was positive overall. Despite the gardening season has started with a month of delay, with a consequent impact on sales of the Outdoor Power Equipment line, the Group improved its financial results. The second half shows good prospects, with a good order backlog also supported by the introduction of new products on the market.
Demand of the business areas in which the Group continues to be subject to the instability that characterizes the global scenario. Nevertheless it is believed that the Group will achieve the expected goals of revenue growth, profitability and net financial position improvement.
The significant events that occurred during the period and positions or transactions arising from atypical and unusual transactions, significant and non recurring are set out in notes 5 and 6 of half year financial statements.
On August 1, the parent company Emak S.p.A. has signed the agreement for the purchase the 30% of Cifarelli S.p.A., based in Voghera (PV), company active in the production and marketing of professional machines for agriculture and maintenance of green and plants, such as atomizers, shakers for olives and blowers. Cifarelli closed the year 2015 with sales of € 12.4 million, an adjusted EBITDA of around 20% of sales turnover and net cash of approximately € 3 million.
The closing of the deal is expected within the year, after completion of the contractual formalities.
The price agreed for the acquisition of the 30% amounts to € 3.750 million.
On the remaining 70% were agreed a call option and a put option to be exercised on the date of approval of the financial statements at 31/12/2019, for which the exercise price will be based on the results that will be achieved by Cifarelli in the period 2017-2019. At the same time and in case of failure to achieve the certain minimum future results, the agreement includes a put option in favor of Emak and a call option in favor of Cifarelli on the 30% stake.
With the confirmation of Cifarelli family to run the company, the transaction sees as fundamental aspect for future value creation for the benefit of both parties, the implementation of a plan of commercial, production and new products development synergies that Emak and Cifarelli have identified and intend to develop with a joint work plan starting from the closing date.
In July, began the work to build the new R&D center at the headquarters of the parent company. The project aims to make available to the team engaged in the development of new products, modern and vanguard equipment that support a fundamental activity for the future growth of the Group. The total estimated investment for the completion of the work is approximately € 5,500 thousand over the next two years.
The Company has resolved to make use, with effect from 31 January 2013, of the right to derogate from the obligation to publish the informative documents prescribed in the event of significant merger, demerger, share capital increase through the transfer of goods in kind, acquisition and disposal operations, pursuant to art. 70, paragraph 8, and art. 71, paragraph 1-bis of Consob Issuers Regulations, approved with resolution no. 11971 of 4/5/1999 and subsequent modifications and integrations.
In accordance with the Consob Communication dated July 28 2006, the following table provides a reconciliation between net income for first half 2016 and shareholders' equity at 30 June 2016 of the Group (Group share), with the corresponding values of the parent company Emak S.p.A.
| €/000 | Equity at 30.06.2016 |
Result for the year ending 30.06.2016 |
Equity at 30.06.2015 |
Result for the year ending 30.06.2015 |
|---|---|---|---|---|
| Equity and result of Emak S.p.A. | 153,565 | 6,912 | 148,354 | 6,501 |
| Equity and result of consolidated subsidiaries |
186,388 | 13,877 | 195,219 | 11,575 |
| Total aggregated | 339,953 | 20,789 | 343,573 | 18,076 |
| Effect of the elimination of the accounting value of shareholdings |
(160,250) | - | (170,251) | - |
| Elimination of dividends | - | (5,178) | - | (6,541) |
| Elimination of other intergroup items and profits |
(1,161) | 181 | (1,294) | 6 |
| Total consolidated amount | 178,542 | 15,792 | 172,028 | 11,541 |
| Minority interest | (1,505) | (121) | (1,637) | (130) |
| Equity and result attributable to the Group |
177,037 | 15,671 | 170,391 | 11,411 |
Bagnolo in Piano (RE), August 5, 2016
On behalf of the Board of Directors
The Chairman
Fausto Bellamico
The chart below shows, in accordance with recommendation CESR/05-178b published on November 3, 2005, the criteria used for the construction of key performance indicators that management considers necessary to the monitoring the Group performance.
EBITDA adjusted: is obtained by deducting at EBITDA the impact of charges for litigation, expenses related to M&A transaction, and revenue for government grants and restructuring charges.
EBITDA: calculated by adding the items "Net profit" plus "Amortization, depreciation and impairment losses".
FREE CASH FLOW FROM OPERATIONS: calculated by adding the items "Net profit" plus "Amortization, depreciation and impairment losses".
PER SHARE: is obtained dividing the item "Group equity" by number of outstanding shares at period end.
CASH FLOW PER SHARE: is obtained dividing the sum of the items "Group Net Profit" + "Amortization/depreciation" by the average number of outstanding shares in the period.
NET WORKING CAPITAL: include items "Trade receivables", "Inventories", current non financial "other receivables" net of "Trade payables" and current non financial "other payables".
NET NON-CURRENT ASSETS: include non-financial "Non current assets" net of non-financial "Non-current liabilities"
Thousand of Euro
| Year 2015 | CONSOLIDATED INCOME STATEMENT | Notes | 1H 2016 | of which with related parties |
1H 2015 | of which with related parties |
|---|---|---|---|---|---|---|
| 381,579 | Revenues from sales | 8 | 229,950 | 1,233 | 227,772 | 1,777 |
| 2,451 | Other operating incomes | 8 | 1,146 | 883 | ||
| 8,004 | Change in inventories | (5,229) | (865) | |||
| (211,493) | Raw materials, consumables and goods | 9 | (117,092) | (1,913) | (122,014) | (1,747) |
| (70,460) | Personnel expenses | 10 | (39,164) | (37,202) | ||
| (74,267) | Other operating costs and provisions | 11 | (39,384) | (1,138) | (41,143) | (1,190) |
| (12,528) | Amortization, depreciation and impairment losses | 12 | (6,495) | (5,945) | ||
| 23,286 | Operating profit | 23,732 | 21,486 | |||
| 1,255 | Financial income | 13 | 657 | 6 | 493 | |
| (5,799) | Financial expenses | 13 | (3,374) | (2,577) | ||
| (3,650) | Exchange gains and losses | 13 | 2,005 | (61) | ||
| 15,092 | Profit before tax | 23,020 | 19,341 | |||
| (6,100) | Income taxes | 14 | (7,228) | (7,800) | ||
| 8,992 | Net profit (A) | 15,792 | 11,541 | |||
| (146) | (Profit)/loss attributable to non controlling interests | (121) | (130) | |||
| 8,846 | Net profit attributable to the group | 15,671 | 11,411 | |||
| 0.054 | Basic earnings per share | 15 | 0.096 | 0.070 | ||
| 0.054 | Diluted earnings per share | 15 | 0.096 | 0.070 |
| STATEMENT OF COMPREHENSIVE INCOME | Notes | 1H 2016 | 1H 2015 |
|---|---|---|---|
| Net profit (A) | 15,792 | 11,541 | |
| Profits/(losses) deriving from the conversion of foreign company accounts |
(1,589) | 3,440 | |
| Profits/(losses) deriving from the transfer of treasury shares in | - | - | |
| Income taxes on OCI (*) | - | - | |
| Total other components to be included in the comprehensive income statement (B) |
(1,589) | 3,440 | |
| Total comprehensive income for the period (A)+(B) | 14,203 | 14,981 | |
| Comprehensive net profit attributable to non controlling interests Comprehensive net profit attributable to the Group |
(97) 14,106 |
(57) 14,924 |
|
| portfolio (*) |
(*) Items will not be classified in the income statement
| 31.12.2015 | ASSETS | Notes | 30.06.2016 | of which with related parties |
30.06.2015 | of which with related parties |
|---|---|---|---|---|---|---|
| Non-current assets | ||||||
| 60,236 | Property, plant and equipment | 16 | 60,751 | 58,801 | ||
| 8,118 | Intangible assets | 17 | 8,250 | 6,290 | ||
| 53,132 | Goodwill | 18 | 56,143 | 14,826 | 59,601 | 15,005 |
| 230 | Equity investments | 230 | 230 | |||
| 9,053 | Deferred tax assets | 26 | 7,142 | 7,126 | ||
| 7,836 | Other financial assets | 19 | 9,467 | 334 | 9,493 | 408 |
| 69 | Other assets | 21 | 65 | 277 | ||
| 138,674 | Total non-current assets | 142,048 | 15,160 | 141,818 | 15,413 | |
| Current assets | ||||||
| 138,359 | Inventories | 22 | 133,235 | 130,786 | ||
| 97,006 | Trade and other receivables | 21 | 119,286 | 1,405 | 130,277 | 1,259 |
| 5,324 | Current tax receivables | 26 | 3,538 | 4,268 | ||
| 452 | Other financial assets | 19 | 536 | 487 | 826 | 822 |
| 88 | Derivative financial instruments | 20 | 283 | 70 | ||
| 42,518 | Cash and cash equivalents | 37,598 | 16,416 | |||
| 283,747 | Total current assets | 294,476 | 1,892 | 282,643 | 2,081 | |
| 422,421 | TOTAL ASSETS | 436,524 | 17,052 | 424,461 | 17,494 |
| 31.12.2015 | SHAREHOLDERS' EQUITY AND LIABILITIES | Notes | 30.06.2016 | of which with related parties |
30.06.2015 | of which with related parties |
|---|---|---|---|---|---|---|
| Shareholders' Equity | ||||||
| 166,992 | Shareholders' Equity of the Group | 23 | 177,037 | 170,391 | ||
| 1,496 | Non controlling interests | 1,505 | 1,637 | |||
| 168,488 | Total shareholders' equity | 178,542 | 172,028 | |||
| Non-current liabilities | ||||||
| 93,840 | Loans and borrowings | 25 | 91,657 | 94,942 | ||
| 6,049 | Deferred tax liabilities | 26 | 5,944 | 5,015 | ||
| 8,932 | Employee benefits | 27 | 9,005 | 8,934 | ||
| 1,659 | Provisions for risks and charges | 28 | 1,627 | 1,693 | ||
| 835 | Other non-current liabilities | 29 | 786 | 887 | ||
| 111,315 | Total non-current liabilities | 109,019 | 111,471 | |||
| Current liabilities | ||||||
| 80,848 | Trade and other payables | 24 | 79,066 | 4,340 | 79,652 | 3,849 |
| 3,682 | Current tax liabilities | 26 | 5,958 | 5,203 | ||
| 55,936 | Loans and borrowings | 25 | 61,751 | 53,849 | ||
| 501 | Derivative financial instruments | 20 | 487 | 615 | ||
| 1,651 | Provisions for risks and charges | 28 | 1,701 | 1,643 | ||
| 142,618 | Total current liabilities | 148,963 | 4,340 | 140,962 | 3,849 | |
| 422,421 | TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 436,524 | 4,340 | 424,461 | 3,849 |
| Euro/000 | Share Share premium |
OTHER RESERVES | RETAINED EARNINGS | TOTAL | EQUITY ATTRIBUTABLE |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| capital | Legal reserve |
Revaluation reserve |
Cumulative translation adjustment |
Reserve Ias 19 |
Other reserves |
Retained earnings |
Net profit of the period |
GROUP | TO MINORITY INTERESTS |
TOTAL | ||
| Balance at 31.12.2014 | 40,594 | 42,454 | 2,060 | 1,138 | 4,087 | (776) | 27,733 | 30,654 | 10,467 | 158,411 | 1,688 | 160,099 |
| Change in treasury shares | ||||||||||||
| Profit reclassification | 301 | 6,078 | (10,467) | (4,088) | (17) | (4,105) | ||||||
| Other changes | 1,230 | (86) | 1,144 | (91) | 1,053 | |||||||
| Net profit for the period | 3,513 | 11,411 | 14,924 | 57 | 14,981 | |||||||
| Balance at 30.06.2015 | 40,594 | 42,454 | 2,361 | 1,138 | 7,600 | (776) | 28,963 | 36,646 | 11,411 | 170,391 | 1,637 | 172,028 |
The share capital is show n net of treasury shares of a value of € 2,029 thousand
| OTHER RESERVES | RETAINED EARNINGS | EQUITY | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Thousand of Euro | SHARE CAPITAL |
SHARE PREMIUM |
Legal reserve |
Cumulative Revaluation Reserve Other Retained translation reserve IAS 19 reserves earnings adjustment |
Net profit of the period |
TOTAL GROUP |
ATTRIBUTABLE TO MINORITY INTERESTS |
TOTAL | ||||
| Balance at 31.12.2014 | 40,594 | 42,454 | 2,060 | 1,138 | 4,087 | (776) | 27,733 | 30,654 | 10,467 | 158,411 | 1,688 | 160,099 |
| Profit reclassification | 301 | 6,078 | (10,467) | (4,088) | (17) | (4,105) | ||||||
| Other changes | 3,167 | (2,083) | 1,084 | (109) | 975 | |||||||
| Net profit for the period | 2,795 | (56) | 8,846 | 11,585 | (66) | 11,519 | ||||||
| Balance at 31.12.2015 | 40,594 | 42,454 | 2,361 | 1,138 | 6,882 | (832) | 30,900 | 34,649 | 8,846 | 166,992 | 1,496 | 168,488 |
| Profit reclassification | 348 | 4,410 | (8,846) | (4,088) | (88) | (4,176) | ||||||
| Other changes | 27 | 27 | 27 | |||||||||
| Net profit for the period | (1,565) | 15,671 | 14,106 | 97 | 14,203 | |||||||
| Balance at 30.06.2016 | 40,594 | 42,454 | 2,709 | 1,138 | 5,317 | (832) | 30,900 | 39,086 | 15,671 | 177,037 | 1,505 | 178,542 |
The share capital is show n net of treasury shares of a value of € 2,029 thousand
| 31.12.2015 ( €/000 ) | Notes | 30.06.2016 | 30.06.2015 | |
|---|---|---|---|---|
| Cash flow from operations | ||||
| 8,992 | Net profit for the period | 15,792 | 11,541 | |
| 12,528 | Amortization, depreciation and impairment losses | 12 | 6,495 | 5,945 |
| (61) | Capital (gains)/losses on disposal of property, plant and equipment | (30) | (7) | |
| (224) | Decreases/(increases) in trade and other receivables | (18,522) | (30,721) | |
| (8,021) | Decreases/(increases) in inventories | 5,408 | (448) | |
| 5,372 | (Decreases)/increases in trade and other payables | 140 | 6,404 | |
| (179) | Change in provision for employee benefits | 36 | (178) | |
| (251) | Decreases/increases in provisions for liabilities | 28 | 18 | (225) |
| (205) | Decreases/increases in derivative financial instruments | (208) | (73) | |
| 17,951 | Net cash generated by operations | 9,129 | (7,762) | |
| Cash flow from investment activities | ||||
| (8,903) | Increases in property, plant and equipment and intangible assets | (9,746) | (7,634) | |
| (8,123) | (Increases) and decreases in financial assets | (1,714) | (10,154) | |
| 61 | Proceeds from disposal of property, plant and equipment | 30 | 7 | |
| (14,181) | Change in scope of consolidation Valley LLP | (248) | (14,181) | |
| (31,146) | Net cash absorbed by investment activities | (11,678) | (31,962) | |
| Cash flow from financial activities | ||||
| 919 | Change in equity | 27 | 1,051 | |
| 42,040 | Change in short and long-term loans and borrowings | (2,973) | 35,334 | |
| (199) | Change in finance leases | (13) | (81) | |
| (4,105) | Dividends paid | (4,176) | (4,105) | |
| 2,583 | Change in translation reserve | (1,589) | 3,440 | |
| 41,238 | Net cash absorbed by financial activities | (8,724) | 35,639 | |
| 28,043 | NET INCREASE IN CASH AND CASH EQUIVALENTS | (11,273) | (4,085) | |
| 6,971 | OPENING CASH AND CASH EQUIVALENTS | 35,014 | 6,971 | |
| 35,014 | CLOSING CASH AND CASH EQUIVALENTS | 23,741 | 2,886 | |
| ADDITIONAL INFORMATION ON THE CASH FLOW STATEMENT | |||
|---|---|---|---|
| 31.12.2015 ( €/000 ) | 30.06.2016 | 30.06.2015 | |
| RECONCILIATION OF CASH AND CASH EQUIVALENTS | |||
| 6,971 | Opening cash and cash equivalents, detailed as follows: | 35,014 | 6,971 |
| 13,238 | Cash and cash equivalents | 42,518 | 13,238 |
| (6,267) | Overdrafts | (7,504) | (6,267) |
| 35,014 | Closing cash and cash equivalents, detailed as follows: | 23,741 | 2,886 |
| 42,518 | Cash and cash equivalents | 37,597 | 16,416 |
| (7,504) | Overdrafts | (13,856) | (13,530) |
| Other information: | |||
| 108 | Change in related party receivables and service transactions | (30) | 199 |
| 294 | Change in related party payables and service transactions | (198) | 122 |
| (821) | Change in related party financial assets | - | (1,230) |
| - | Change in related party financial liabilities | - | - |
Emak S.p.A. (hereinafter "Emak" or the "Parent Company") is a public company, with registered offices in Via Fermi, 4 in Bagnolo in Piano (RE). It is listed on the Italian stock market (MTA) on the the STAR segment.
Emak S.p.A. is controlled by Yama S.p.A., an industrial holding company, which holds the majority of its capital and appoints, in accordance with law and statute, the majority of the members of its governing bodies. Emak S.p.A., nonetheless, is not subject to management or coordination on the part of Yama, and its Board of Directors makes its own strategic and operating choices in complete autonomy.
Values shown in these notes are in thousands of Euros, unless otherwise stated.
The half year report at 30 June 2016 is subject to a limited audit by Deloitte & Touche S.p.A. This audit is significantly less extensive than that of a complete audit carried out according to established auditing standards.
The principal accounting policies used for preparing the abbreviated consolidated financial statements for the half-year are in line, except as specified below, with those applied for the annual consolidated financial statements at 31 December 2015 and are briefly discussed below.
The abbreviated consolidated half-year report of the Emak Group at 30 June 2016 has been drawn-up in compliance with the IFRS's issued by the International Accounting Standards Board and adopted by the European Union and has been prepared in accordance with the IAS 34 accounting standard (Interim Financial Reporting), with art. 154-ter (financial reports) of the Consolidated Finance Act and with Consob regulations and resolutions in force. The same accounting principles used in preparing the consolidated financial statements at 31 December 2015 were applied."IFRS" also includes all valid International Accounting Standards ("IAS") still in force, as well as all interpretations of the International Financial Reporting Standards Interpretations Committee (IFRS IC, formerly "IFRIC"), previously known as the Standing Interpretations Committee ( "SIC"). For this purpose, the financial statements of consolidated subsidiaries were reclassified and adjusted.
There are also the explanatory notes according to the disclosures required by IAS 34 with the supplementary information considered useful for a clearer understanding of the abbreviated interim financial statements. The interim financial statements at June 30, 2016 should be read in conjunction with the annual financial statements at 31 December 2015.
In accordance with IAS 1, the Directors confirm that, given the economic outlook, the capital and the Group's financial position, it operates as a going concern.
As partial exception to the provisions of IAS 34, these interim financial statements provide detailed as opposed to summary schedules in order to provide a better and clearer view of the economic-financial and financial dynamics during the period. The financial statements used at June 30, 2016 are consistent with those in place for the annual financial statements at December 31, 2015.
The consolidated half-year report includes the balance sheet, the consolidated income statement, the statement of consolidated comprehensive income, the statement of changes in consolidated equity, the statement of cash flows and notes to the accounts, in accordance with the requirements provided for by IFRS.
The half year financial report presents annual data for comparative purposes in the previous year in order to provide adequate information in consideration of the seasonality of the business of the company. Indeed, the Group carries out an activity that is affected by the non perfect homogeneity of the flow of revenues and expenses during the year, showing a concentration of revenues mainly in the first half of each year.
The preparation of financial statements in conformity with IFRS requires the use of estimates by the directors. The areas involving a higher degree of judgment or complexity and areas where assumptions and estimates could have a significant impact on the consolidated financial statements are discussed in note 4.
It is also to be noted that some valuation procedures, in particular the more complex such as the determination of any impairment of non-current assets, are generally carried out only in the preparation of annual financial statements, when all necessary information are available, except in cases where there are indications that an immediate assessment of any impairment is required. Even the actuarial valuations for the calculation of provisions for employee benefits are normally processed on the occasion of the annual financial statement. Current and deferred tax is recognized based on tax rates in force at the date of the half year report.
The consolidated financial statements include the financial statements of Emak S.p.A. and the italian and foreign companies over which Emak exercises direct or indirect control by governing their financial and operating policies and receiving the related benefits, according to the criteria established by IFRS 10.
The acquisition of subsidiaries is accounted for using the purchase method, except for those acquired in 2011 from the parent company, Yama S.p.A.
The cost of acquisition initially corresponds to the fair value of the assets acquired, the financial instruments issued and the liabilities at the date of acquisition, as increased for any directly attributable acquisition costs, and ignoring any non controlling interests.
The excess of the cost of acquisition, over the Group's share, of the fair value of the net assets acquired is recognized as goodwill.
If the cost of acquisition is lower, the difference is directly expensed to income.
The financial statements of subsidiaries are included in the consolidated accounts starting from the date of taking control until such control ceases to exist. Non controlling interests and the amount of profit or loss for the period attributable to non controlling interests are shown separately in the consolidated balance sheet and income statement.
Subsidiaries are consolidated line-by-line from the date that the Group obtains control.
It also specified that:
Transactions, balances and unrealized profits relating to operations between Group companies are eliminated. Unrealized losses are similarly eliminated, unless the operation involves a loss in value of the asset transferred. The financial statements of the enterprises included in the scope of consolidation have been suitably adjusted, where necessary, to align them with the accounting principles adopted by the Group.
Associated companies are companies in which the Group exercises significant influence, as defined by IAS 28 - Investments in Associates, but not control lover financial and operating policies. Investments in associated companies are accounted for with the equity method starting from the date the significant influence begins, up to when such influence ceases to exist.
Compared to December 31, 2015 became the scope of consolidation the Acquatecnica S.r.l., a company acquired on 28 January 2016 and subsequently merged company P.T.C. S.r.l. The economic and financial data are included in these financial statements since January 1, 2016.
Compared to 30 June 2015 there were no changes scope of consolidation, except for those previously described; it should be noted that the half-year financial statements at June 30, 2015 included the economic data of Lemasa company refer solely to the second quarter of 2015 as it consolidated from April 1, 2015.
More details of the transactions are described in section 2 of the Half Year Report.
The scope of consolidation at June 30 2016 includes the following companies:
| Name | Head office | Share capitale |
Currency | % consolidated |
Held by | % of participation |
|---|---|---|---|---|---|---|
| Emak S.p.A. | Bagnolo in Piano - RE (I) | 42,623,057 | € | |||
| Emak Suministros Espana SA | Getafe - Madrid (E) | 270,459 | € | 90.000 Emak S.p.A. | 90.000 | |
| Emak U.K. Ltd | Lichfield (UK) | 342,090 | GBP | 100.000 Emak S.p.A. | 100.000 | |
| Emak Deutschland Gmbh | Fellbach - Oeffingen (D) | 553,218 | € | 100.000 Emak S.p.A. | 100.000 | |
| Emak France SAS | Rixheim (F) | 2,000,000 | € | 100.000 Emak S.p.A. | 100.000 | |
| Jiangmen Emak Outdoor Power Equipment Co.Ltd (4) |
Jiangmen (RPC) | 25,532,493 | RMB | 100.000 Emak S.p.A. | 100.000 | |
| Victus-Emak Sp. Z o.o. | Poznan (PL) | 10,168,000 | PLN | 100.000 Emak S.p.A. | 100.000 | |
| Tai Long (Zhuhai) Machinery Manufacturing Ltd Zhuhai (RPC) | 16,353,001 | RMB | 100.000 Emak S.p.A. | 100.000 | ||
| Epicenter LLC | Kiev (UA) | 19,026,200 | UAH | 61.000 Emak S.p.A. | 61.000 | |
| Raico S.r.l. | Reggio Emilia (I) | 20,000 | € | 100.000 Emak S.p.A. | 100.000 | |
| Sabart S.r.l. | Reggio Emilia (I) | 1,900,000 | € | 100.000 Emak S.p.A. | 100.000 | |
| Tecomec S.r.l. | Reggio Emilia (I) | 1,580,000 | € | 100.000 Emak S.p.A. | 100.000 | |
| Speed France SAS | Arnax (F) | 300,000 | € | 100.000 Tecomec S.r.l. | 100.000 | |
| Speed North America Inc. | Wooster - Ohio (USA) | 10 | USD | 100.000 Speed France SAS | 100.000 | |
| Speed Line South Africa Ltd | Pietermaritzbury (ZA) | 100 | ZAR | 51.000 Speed France SAS | 51.000 | |
| Ningbo Tecomec Manufacturing Co. Ltd | Ningbo City (RPC) | 8,029,494 | RMB | 100.000 Tecomec S.r.l. | 100.000 | |
| Comet S.p.A. | Reggio Emilia (I) | 2,600,000 | € | 100.000 Emak S.p.A. | 100.000 | |
| Comet France SAS | Wolfisheim (F) | 320,000 | € | 100.000 Comet S.p.A. | 100.000 | |
| Comet Usa Inc | Burnsville - Minnesota (USA) | 231,090 | USD | 100.000 Comet S.p.A. | 100.000 | |
| PTC S.r.l. (3) | Genova (I) | 55,556 | € | 100.000 Comet S.p.A. | 90.000 | |
| Valley Industries LLP (1) | Paynesville - Minnesota (USA) | 0 | USD | 100.000 Comet Usa Inc | 90.000 | |
| Emak do Brasil Industria LTDA | Curitiba (BR) | 8,518,200 | BRL | 99.980 Emak S.p.A. | 99.980 | |
| S.I. Agro Mexico | Guadalajara (MEX) | 1,000,000 | MXM | 85.000 Comet S.p.A. | 85.000 | |
| Geoline Electronic S.r.l. | Poggio Rusco - MN (I) | 100,000 | € | 51.000 Tecomec S.r.l. | 51.000 | |
| Speed Industrie Sarl | Mohammedia (MA) | 1,445,000 | MAD | 100.000 Speed France SAS | 100.000 | |
| Speed South America S.p.A. | Providencia (RCH) | 87,825,360 | CLP | 100.000 Speed France SAS | 100.000 | |
| 99.000 Comet S.p.A. | ||||||
| Comet do Brasil Investimentos LTDA | Indaiatuba (BR) | 19,000,000 | BRL | 1.000 PTC S.r.l. | 100.000 | |
| Lemasa industria e comércio de equipamentos de alta pressao S.A. (2) |
Indaiatuba (BR) | 14,040,000 | BRL | 100.000 Comet do Brasil LTDA | 70.000 |
(1) The share in Valley Industries LLP is consolidated at 100% as a result of the "Put and Call Option Agreement" which regulates the acquisition of the 10% remaining.
(2) The share in Lemasa is consolidated at 100% as a result of the "Put and Call Option Agreement" which regulates the acquisition of the 30% remaining.
(3) The share in P.T.C. S.r.l. consolidated at 100% as a result of the "Put and Call Option Agreement" which regulates the acquisition of the 10% remaining.
(4) Under the contract signed in December 2004 and subsequent amendments, the shareholding of 49% in Jiangmen Emak Outdoor Power Equipment Co. Ltd., previously owned by Simest S.p.A., has been acquired by Emak S.p.A. on July 2014.
IFRS 8 provides for information to be given for certain items in the financial statements on the basis of the operational segments of the company.
An operating segment is a component of a company:
a) that carries on business activities generating costs and revenues;
IFRS 8 is based on the so-called "Management approach", which defines sectors exclusively on the basis of the internal organizational and reporting structure used to assess performance and allocate resources.
On the basis of the new criteria for the definition of the operating segments introduced by IFRS 8, the Group identified, following the "management approach" a single segment of activity, which includes all business areas related to the Group.
Transactions included in the financial statements of each group company are recorded using the currency of the primary economic environment in which the company operates (functional currency). The consolidated financial statements are presented in Euro, the functional and presentation currency of the Parent Company.
Transactions in foreign currencies are translated using the exchange rates at the dates of the transactions. Gains and losses arising from foreign exchange receipts and payments in foreign currency and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in income. Gains and losses realized on cash flow hedges whose hedged items are still unrealized are deferred in comprehensive income statement.
The financial statements of all group companies whose functional currency differs to the presentation currency of the consolidated financial statements are translated as follows:
(i) assets and liabilities are translated at the closing rate on the balance sheet date;
(ii) income and expenses are translated at the average rate for the period;
(iii) all translation differences are recognized as a separate reserve under equity ("cumulative translation adjustment").
| 31.12.2015 | Amount of foreign for 1 Euro | Average 1H 2016 | 30.06.2016 | Average 1H 2015 | 30.06.2015 |
|---|---|---|---|---|---|
| 0.73 | GB Pounds (UK) | 0.78 | 0.83 | 0.73 | 0.71 |
| 7.06 | Renminbi (Cina) | 7.30 | 7.38 | 6.94 | 6.94 |
| 4.26 | Zloty (Poland) | 4.37 | 4.44 | 4.14 | 4.19 |
| 1.09 | Dollar (Usa) | 1.12 | 1.11 | 1.12 | 1.12 |
| 16.95 | Zar (South Africa) | 17.20 | 16.45 | 13.30 | 13.64 |
| 26.16 | Uah (Ukraine) | 28.42 | 27.56 | 23.87 | 23.54 |
| 4.31 | Real (Brazil) | 4.13 | 3.59 | 3.31 | 3.47 |
| 10.79 | Dirham (Morocco) | 10.87 | 10.87 | 10.81 | 10.85 |
| 18.91 | Mexican Pesos (Mexico) | 20.17 | 20.63 | 16.89 | 17.53 |
| 772.71 | Chilean Pesos (Chile) | 769.13 | 735.50 | 693.34 | 714.92 |
The main exchange rates used to translate in Euro these financial statements are as follows:
Details of the accounting policies applied to individual items within the financial statements can be found in sections 2.5 to 2.26 of the explanatory notes to the consolidated financial statements at 31 December 2015.
The following IFRS accounting standards, amendments and interpretations were first adopted by the Group starting January 1, 2016:
Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" (issued on November 21, 2013) concerning the recognition of contributions from employees or third parties to defined benefit plans.
Amendments to IFRS 11 Joint Arrangements – "Accounting for acquisitions of interests in joint operations" (issued on May 6, 2014) concerning the accounting for acquisitions of interests in a joint operation when the operation constitutes a business.
Amendments to IAS 16 Property, plant and equipment and IAS 41 Agriculture – "Bearer Plants" (issued on June 30, 2014) providing for bearer plants, i.e. fruit trees that bear produce annually (such as vines, hazelnut plants) to be accounted for under IAS 16 (rather than IAS 41).
Amendments to IAS 16 Property, plant and Equipment and IAS 38 Intangibles Assets – "Clarification of acceptable methods of depreciation and amortisation" (issued on May 12, 2014) establishing that a depreciation method based on revenue is not appropriate, because the revenue arising from the operation of a business of which the asset under depreciation or amortisation is part reflects a different pattern from the mere use of the economic benefits arising from the asset, which is a pre-requisite for depreciation or amortisation.
Amendments to IAS 1 – "Disclosure Initiative" (issued on December 18, 2014): the goal of the amendments is to provide some clarifications on disclosures and other elements that may be perceived as hindrance to a clear and intelligible presentation of financial statements. The adoption of these amendments had no impact on the financial statements of the Group.
On December 12, 2013, the IASB published document "Annual Improvements to IFRSs: 2010-2012 Cycle" (including IFRS 2 Share Based Payments – Definition of vesting condition, IFRS 3 Business Combination – Accounting for contingent consideration, IFRS 8 Operating segments – Aggregation of operating segments and Reconciliation of total of the reportable segments' assets to the entity's assets, IFRS 13 Fair Value Measurement – Short-term receivables and payables) and – on September 25, 2014 – document "Annual Improvements to IFRSs: 2012-2014 Cycle" (including: IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 – Financial Instruments: Disclosure and IAS 19 – Employee Benefits) partly amending existing standards.
The adoption of the amendments referred to above had no impact on the Group's financial statements.
The European Union has not yet completed its endorsement process for the standards and amendments below reported at the date of this Interim financial report.
IFRS 15 – Revenue from Contracts with Customers (issued on May 28, 2014 and supplemented with further clarifications published on April 12, 2016) bound to replace IAS 18 – Revenue and IAS 11 – Construction Contracts, as well as the interpretations IFRIC 13 – Customer Loyalty Programmes, IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers and SIC 31 – Revenues-Barter Transactions Involving Advertising Services. The standard provides for a new revenue recognition model, which will be applicable to all agreements made with customers, with the exception of those falling under the scope of application of other IAS/IFRSs such as leases and insurance policy contracts and financial instruments. The main steps for revenue recognition according to the new model are:
This standard is applicable as of January 1, 2018, though early adoption is allowed.
Final version of IFRS 9 – Financial instruments (issued on July 24, 2014). The standard includes the results of the Classification, valuation, impairment and hedge accounting phases relating to the IASB project pending the replacement of IAS 39:
On January 13, 2016, the IASB issued IFRS 16 – Leases which is to replace IAS 17 – Leases, as well as IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset to differentiate between lease and service agreements according to: asset identification,
right to replacement of the asset, right to obtain all economic benefits arising out of use of the asset and right to control the use of the asset underlying the agreement.
The standard introduces a single lessee accounting model for recognising and measuring lease agreements, which provides for the underlying asset – including assets underlying operating leases – to be recognised in the statement of financial position as assets and lease financial liabilities. Lessees may elect to not recognise agreements for low-value assets or with a term of up to 12 months within the scope of this standard. No significant changes are introduced for lessor accounting.
The standard applies for reporting periods beginning on or after January 1, 2019. Early application is only allowed for early adopters of IFRS 15 - Revenue from Contracts with Customers.
On September 11, 2014 the IASB issued amendments to IFRS 10 and IAS 28 "Sales or Contribution of Assets between an Investor and its Associate or Joint Venture". The purpose of these amendments was to resolve the conflict between IAS 28 and IFRS 10 concerning the measurement of profit or loss arising from transfers or assignments of a non-monetary asset to a joint venture or associate in return for its shares. The IASB has suspended the application of these amendments for the time being.
On December 18, 2014, the IASB published document "Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)" (issued on December 18, 2014) introduces certain changes to address issues arisen after the application of the consolidation exception granted to investment entities. The amendments apply at the latest as of the reporting period starting on January 1, 2016 or at a later date. Early adoption is allowed. Directors do not expect any significant effect on the financial statements of the Group when these amendments are adopted.
On January 19, 2016 the IASB issued the document "Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)" that contains some amendments to IAS 12. The document aims at providing some clarifications on the recognition of deferred tax assets on tax losses carried forward upon the occurrence of certain circumstances as well as on the measurement of taxable income for future years. The amendments apply as of January 1, 2017, though early adoption is allowed.
On January 29, 2016 the IASB published the document "Disclosure Initiative (Amendments to IAS 7)" that contains some amendments to IAS 7. The document aims at clarifying and improving disclosures on financial liabilities. In particular, the amendments require to disclose information that enables users of the financial statements to understand the changes in liabilities arising from financing transactions. The amendments apply as of January 1, 2017, though early adoption is allowed. No comparative information relating to prior years is required.
On June 20, 2016 the IASB published the document "Classification and measurement of share-based payment transactions (Amendments to IFRS 2)" that contains some clarifications in relation to the accounting of the effects coming from vesting conditions in the presence of cash-settled share-based payments, the classification of share-based payments with net settlement characteristics and the recognition
of changes to the terms and conditions of a share-based payment which modify its classification from cashsettled to equity-settled. The amendments apply as of January 1, 2018, though early adoption is allowed.
With reference to principles IFRS 9, IFRS 15 and IFRS 16 described above, the Group is assessing the implementation criteria and impacts on the consolidated financial statements, while in reference to the other standards and interpretations detailed above, it is not expected that the adoption will have significant impacts on assets, liabilities, costs and revenues of the Group.
Details can be found in the explanatory notes to the consolidated financial statements at 31 December 2015.
The preparation of the financial statements and the related notes under IFRS has required management to make estimates and assumptions affecting the value of reported assets and liabilities and the disclosures relating to potential assets and liabilities at the balance sheet date. Actual results could differ from these estimates. Estimates are used for recording provisions for doubtful accounts and inventory obsolescence, amortization and depreciation, write-downs to assets, employee benefits, taxes and other provisions. Estimates and assumptions are reviewed periodically and the effects of any change are immediately reflected in the income statement.
On January 28, 2016, the subsidiary P.T.C. Srl signed the act of purchasing a stake of 100% of the share capital of Acquatecnica Srl, based in Cremosano (CR), a company active in the production of applications for the "Water Jetting", for an amount of € 500 thousand, of which € 250 thousand paid at closing and the remainder to be paid the 280 day following the closing. This price balance can vary in relation to the realization of potential contingencies, as determined in the preliminary agreement of purchase shares, signed on 25 November 2015.
In order to accelerate as much as possible the process of integration of the two companies, on 19 January 2016, the respective boards of directors have approved the merger by incorporation of Acquatecnica Srl in P.T.C. Srl, subjecting the construction to completion of the acquisition of 100% of Acquatecnica Srl by P.T.C. Srl, which took place on January 28, 2016, simultaneously the shareholders of the two companies approved the merger by incorporation of Acquatecnica Srl in P.T.C. Srl.
On March 4, 2016 was signed the merger act, which provides for the effect for accounting and fiscal effects of the transaction from January 1, 2016 and those civil law from April 1, 2016.
The revenues of the company acquired during the year 2015 amounted to € 500 thousand, while shareholders' equity at December 31 amounted to € 94 thousand.
Through this operation, P.T.C. can reinforce its presence in the hydrodynamic unit sector and in general the Group will extend its range in the Pumps and High Pressure Water Jetting sector.
The fair value of assets and liabilities subject to business combination with effect of 1 January 2016, the price paid and the financial cost are detailed below:
| Fair Value | Fair value of | ||
|---|---|---|---|
| €/000 | Book values | adjustments | acquired assets |
| Non-current assets | |||
| Other non-current financial receivables | 2 | - | 2 |
| Current assets | |||
| Inventories | 284 | - | 284 |
| Trade and other receivables | 57 | - | 57 |
| Cash and cash equivalents | 4 | - | 4 |
| Non-current liabilities | |||
| Post-emplyment benefits | (36) | - | (36) |
| Current liabilities | |||
| Trade and other liabilities | (189) | - | (189) |
| Current tax liabilities | (12) | - | (12) |
| Financial liabilities | (16) | - | (16) |
| Total net assets acquired | 94 | - | 94 |
| % interest held | 100% | ||
| Net equity acquired | 94 | ||
| Goodwill | 408 | ||
| Purchase price paid | 252 | ||
| Deferred price | 250 | ||
| Cash and cash equivalents | 4 | ||
| Net cash outflow | 248 |
Based on the provisions of IFRS 3, the difference between the price paid and the corresponding share of equity has been allocated as goodwill given the coincidence between the fair value and book value of the merged company.
Pursuant to the agreement signed on January 9, 2014 by Comet S.p.A., for the acquisition of 55% share of company S.I.Agro Mexico (by which the shareholding was increased from 30% to 85%), it is noted that following the results achieved in the year 2015 it was given an additional consideration of € 360 thousand, in settlement of the price per share already paid in 2014, which amounted to € 694 thousand.
In the consolidated financial statements at June 30, 2016, in accordance with IFRS 3, this amount was recorded under financial expenses.
No atypical or unusual transactions took place in the first half of 2016.
It is shown in the table below details of the net financial position, which includes the net financial debt determined according to ESMA criteria (based on the format required by Consob communication no. 6064293 of 28 July 2006):
| Net financial position | 30/06/2016 | 31/12/2015 | 30/06/2015 | |
|---|---|---|---|---|
| A. | Cash and banks | 37,598 | 42,518 | 16,415 |
| B. | Other cash | - | - | - |
| C. | Assets for trading | - | - | - |
| D. | Liquidity (A+B+C) | 37,598 | 42,518 | 16,415 |
| E. | Current financial receivables | 819 | 540 | 897 |
| F. | Current bank loans | (20,617) | (17,073) | (23,068) |
| G. | Current portion of current loans | (38,977) | (37,876) | (29,832) |
| H. | Other financial debts | (2,644) | (1,488) | (1,564) |
| I. | Current financial debts (F+G+H) | (62,238) | (56,437) | (54,464) |
| J. | Net current financial debts (I+E+D) | (23,821) | (13,379) | (37,152) |
| K. | Non current bank loans | (74,105) | (78,696) | (78,212) |
| L. | Bonds issued | - | - | - |
| M. | Other non current financial debts | (17,552) | (15,144) | (16,730) |
| N. | Non current financial debts (K+L+M) | (91,657) | (93,840) | (94,942) |
| O. | Net financial debts (J+N) | (115,478) | (107,219) | (132,094) |
| P. | Non current financial receivables | 9,467 | 7,836 | 9,493 |
| Q. | Net financial position(O+P) | (106,011) | (99,383) | (122,601) |
Financial debts at 30 June 2016 include € 18,240 thousand, of which € 16,543 thousand as non – current debt, for the acquisition of equity investments. To guarantee current and future liabilities for the acquisition of equity interests, € 8,939 thousand have been deposited in Escrow Account, registered in the accounts under the heading "Other medium-long-term financial assets".
At 30 June 2016 net financial debts include amounts receivable from related parties for the amount of € 821 thousand, of which € 486 thousand are short-term, attributable to the receivable from Yama S.p.A. for the guarantees included in the contract in favor of Emak S.p.A. as part of the so-called "Greenfield Operation" through which Emak S.p.A. acquired in 2011 the Company Comet S.p.A., Tecomec S.r.l., Sabart S.r.l. and Raico S.r.l.
Details of revenues from sales are as follows:
| €/000 | 1 H 2016 | 1 H 2015 |
|---|---|---|
| Net sales revenues (net of discounts and rebates) | 227,990 | 227,042 |
| Revenues from recharged transport costs | 2,596 | 2,583 |
| Returns | (636) | (1,853) |
| Total | 229,950 | 227,772 |
Other operating income is analyzed as follows:
| €/000 | 1 H 2016 | 1 H 2015 |
|---|---|---|
| Capital gains on property, plant and equipment | 86 | 26 |
| Government grants | 66 | 103 |
| Advertising reimbursement | 280 | 190 |
| Insurance refunds | 38 | 67 |
| Recovery of other funds | 214 | 198 |
| Other operative income | 462 | 299 |
| Total | 1,146 | 883 |
The cost of raw materials, consumables and goods is analyzed as follows:
| €/000 | 1 H 2016 | 1 H 2015 |
|---|---|---|
| Raw materials, semi-finished products and goods | 114,409 | 119,331 |
| Other purchases | 2,683 | 2,683 |
| Total | 117,092 | 122,014 |
Details of these costs are as follows:
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Wage and salaries | 26,274 | 24,862 |
| Social security charges | 7,689 | 7,399 |
| Employee termination indemnities | 1,145 | 1,078 |
| Other costs | 685 | 1,068 |
| Directors' emoluments | 880 | 797 |
| Temporary staff | 2,491 | 1,998 |
| Total | 39,164 | 37,202 |
Details of these costs are as follows:
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Subcontract work | 6,765 | 7,117 |
| Maintenance | 2,024 | 1,916 |
| Trasportation | 9,256 | 10,199 |
| Advertising and promotion | 2,059 | 1,861 |
| Commissions | 3,209 | 3,207 |
| Travel | 1,533 | 1,386 |
| Consulting fees | 1,896 | 2,506 |
| Other services | 7,092 | 6,917 |
| Services | 33,834 | 35,109 |
| Rents, rentals and the enjoyment of third party assets | 3,811 | 3,720 |
| Increases in provisions (note 28) | 128 | 78 |
| Other costs | 1,611 | 2,236 |
| Total | 39,384 | 41,143 |
Details of these amounts are as follows:
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Amortization of intangible assets (note 17) | 1,240 | 978 |
| Depreciaton of property, plant and equipment (note 16) | 5,255 | 4,967 |
| Total | 6,495 | 5,945 |
The item "Depreciation of property, plant and equipment" includes, for the amount of € 387 thousand, the effect of the reduction of the remaining useful life of certain buildings because of the imminent construction of the "The new R&D center." For further information please see the section "Subsequent Events" in the Interim Management Report.
"Financial income" is analyzed as follows:
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Income from adjustment to fair value of derived instruments for hedging interest rate risk |
91 | 93 |
| Interest on bank and postal current accounts | 77 | 60 |
| Interest on other financial assets | 365 | 200 |
| Other financial income | 124 | 140 |
| Financial income | 657 | 493 |
"Other financial income" refers to interest accrued on the escrow account with the escrow account agreement as part of the acquisition agreement of company Lemasa, in which has been referred to in the preceding paragraphs.
"Financial expenses" are analyzed as follows:
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Interest on medium-term bank loans and borrowings | 1,332 | 1,447 |
| Interest on short-term bank loans and borrowings | 196 | 239 |
| Costs from adjustment to fair value and fixing of derived instruments for hedging interest rate risk |
327 | 125 |
| Financial charges from valuing employee termination indemnities | 77 | 101 |
| Financial expenses from discounting debts | 956 | 528 |
| Other financial costs | 486 | 137 |
| Financial expenses | 3,374 | 2,577 |
Financial expenses from discounting debts refer to charges due to the discounting on liabilities for the acquisition of equity investments.
The item "Other financial costs" includes € 360 thousand for the amount paid in settlement of the pro-rata price for the purchase of the investment in the subsidiary S.I.Agro Mexico, following the best results achieved by it in the course of 2015.
The breakdown of "exchange gains and losses" is as follows:
| €/000 | 1H 2016 | 1H 2015 |
|---|---|---|
| Profit / (Loss) on exchange differences on trade transactions | (347) | (971) |
| Profit / (Loss) on exchange differences on financial transactions | 2,352 | 910 |
| Exchange gains and losses | 2,005 | (61) |
The item "Profit / (Loss) on exchange difference on financial transactions" include the recording of valuation profits for an amount of around € 1,593 thousand deriving from the adjustment to the exchange rate at the end of the period of the loan granted in Euros by Comet S.p.A. to Comet do Brasil for the principal amount of € 9,840 thousand, finalized to the acquisition of company Lemasa.
The estimated charge for current tax and changes in deferred tax assets and liabilities in the first half of 2016 is € 7,228 thousand (€ 7,800 thousand in the corresponding prior year period) equal to a taxation of 31.4%, decreased compared to the 40.3% for the same period in the previous financial year.
The effective tax rate of the first half was affected by a positive impact on the parent company, amounting to € 505 thousand, due to the recognition of facility "ACE" (Allowance for Corporate Equity, art. 1, Decree 201/2011, converted in L. 214/2011), not recorded in the first half of the previous year. In addition, the tax rate for the same period last year was negatively affected by the recognition of expenses from tax disputes for € 838 thousand (with a 4.4% effect on the tax rate for 2015), and the non-inclusion, for the purposes prudential, the deferred tax assets on tax losses carried forward in the amount of approximately € 450 thousand (with a 2.3% effect on the tax rate for 2015).
"Basic" earnings per share are calculated by dividing the net profit for the period attributable to the Parent company's shareholders by the weighted average number of ordinary shares outstanding during the period,
excluding the average number of ordinary shares purchased or held by the Parent company as treasury shares. The Parent company has only ordinary shares outstanding.
| 1H 2016 | 1H 2015 | |
|---|---|---|
| Net profit attributable to ordinary shareholders in the parent company (€/1.000) | 15,671 | 11,411 |
| Weighted average number of ordinary shares outstanding | 163,537,602 | 163,537,602 |
| Basic earnings per share (€) | 0.096 | 0.070 |
Diluted earnings per share are the same as basic earnings per share.
Changes in property, plant and equipment are shown below:
| Change in | Exchange | |||||||
|---|---|---|---|---|---|---|---|---|
| €/000 | 31.12.2015 | scope of | Increase | Decrease | Reclassification | difference | Other changes | 30.06.2016 |
| consolidation | ||||||||
| Land and buildings | 45,269 | 969 | (449) | 45,789 | ||||
| Accumulated depreciation | (15,926) | (990) | 99 | (16,817) | ||||
| Land and buildings | 29,343 | - | (21) | - | - | (350) | - | 28,972 |
| Plant and machinery | 79,495 | 115 | 1,612 | (102) | 2,040 | (87) | 83,073 | |
| Accumulated depreciation | (62,011) | (115) | (2,257) | 62 | (76) | 88 | (64,309) | |
| Plant and machinery | 17,484 | - | (645) | (40) | 1,964 | 1 | - | 18,764 |
| Other assets | 93,657 | 518 | 2,308 | (236) | (1,196) | (69) | 518 | 95,500 |
| Accumulated depreciation | (82,564) | (518) | (2,008) | 192 | 76 | 299 | (84,523) | |
| Other assets | 11,093 | - | 300 | (44) | (1,120) | 230 | 518 | 10,977 |
| Advances and fixed assets in progress |
2,316 | 1,127 | (22) | (844) | (21) | (518) | 2,038 | |
| Cost | 220,737 | 633 | 6,016 | (360) | - | (626) | - | 226,400 |
| Accumulated depreciation (note 12) |
(160,501) | (633) | (5,255) | 254 | - | 486 | - | (165,649) |
| Net book value | 60,236 | - | 761 | (106) | - | (140) | - | 60,751 |
Intangible assets report the following changes:
| €/000 | 31.12.2015 | Change cons. area |
Increase | Depreciation | Reclassification | Exchange difference |
30.06.2016 |
|---|---|---|---|---|---|---|---|
| Development costs | 896 | - | 2 | (232) | - | - | 666 |
| Patents and intellectual property rights |
2,237 | - | 746 | (593) | 28 | (1) | 2,417 |
| Concessions, licences and trademarks |
763 | - | 9 | (36) | - | 120 | 856 |
| Other intangible assets | 3,671 | - | 67 | (379) | 39 | 253 | 3,651 |
| Advances and fixed assets in progress |
551 | - | 176 | - | (67) | - | 660 |
| Net book value (note 12) | 8,118 | - | 1,000 | (1,240) | - | 372 | 8,250 |
The goodwill of € 56,143 thousand reported at June 30, 2016 is detailed below:
| €/000 | 31.12.2015 | Change in scope of consolidation |
Exchance difference |
30.06.2016 |
|---|---|---|---|---|
| Goodwill from the acquisition of Victus-Emak Sp. z o.o. | 874 | - | (34) | 840 |
| Goodwill from the acquisition of the company branch Victus IT | 4,834 | - | (188) | 4,646 |
| Goodwill of Bertolini S.p.A. | 2,074 | - | - | 2,074 |
| Goodwill from the acquisition of Tailong Machinery Ltd. | 2,964 | - | (126) | 2,838 |
| Goodwill from the acquisition of Tecomec Group | 2,807 | - | - | 2,807 |
| Goodwill from the acquisition of Comet Group | 2,279 | - | - | 2,279 |
| Goodwill from the acquisition of Speed France | 2,854 | - | - | 2,854 |
| Goodwill of HPP S.r.l. | 1,974 | - | - | 1,974 |
| Goodwill from transfer of the business PTC | 360 | - | - | 360 |
| Goodwill from the acquisition of Master Fluid | 523 | - | - | 523 |
| Goodwill from the acquisition of Valley LLP | 11,941 | - | (231) | 11,710 |
| Goodwill from the acquisition of Geoline Eletctronic S.r.l. | 2,088 | - | - | 2,088 |
| Goodwill from the acquisition of S.I.Agro Mexico | 634 | - | - | 634 |
| Goodwill from the acquisition of Lemasa Ltda | 16,926 | - | 3,182 | 20,108 |
| Goodwill from the acquisition of Acquatecnica S.r.l. | - | 408 | - | 408 |
| Total | 53,132 | 408 | 2,603 | 56,143 |
The amount of € 2,088 thousand relates to the positive difference emerged following the acquisition by Tecomec Group of 51% of Geoline Electronic S.r.l.
The amount of € 634 thousand relates to the positive difference emerged following the acquisition of S.I. Agro Mexico, company in which Comet Group increased its shareholding from 30% to 85% of share capital during the year 2014.
Since there were no particular elements arising during the half-year which may imply the non-recoverability of the recorded values, no impairment tests were carried out at 30 June 2016.
"Other non current financial assets", amounted to € 9,467 thousand mainly it refers to:
"Other current financial assets", amounting to € 536 thousand, includes € 486 thousand as short-term portion of the receivable owed by Yama S.p.A. as shown in the previous paragraph.
The financial statements values relate to changes in the fair value of financial instruments for:
All derivative financial instruments belonging to this heading are valued at fair value at the second hierarchical level, that is, the estimate of their fair value has been carried out using variables other than prices quoted in active markets and which are observable (on the market) either directly (prices) or indirectly (derived from prices).
In the case in point, the fair value recorded is equal to the "market to market" estimation provided by independent sources, which represents the current market value of each contract calculated at the date at the closing date of the Financial Statements.
Accounting for the instruments presented below is at fair value. According with the relevant accounting standards such effects have been accounted in the income statement in the current year. The current value of these contracts as at 30 June 2016 is represented as follows:
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Positive fair value assesment exchange rate hedge | 261 | 57 |
| Positive fair value assesment exchange options contracts | 22 | 31 |
| Positive fair value assesment IRS and interest rate options | - | - |
| Total derivative financial instrument | 283 | 88 |
| Negative fair value assesment exchange rate hedge | 20 | 141 |
| Negative fair value assesment IRS and interest rate options | 467 | 360 |
| Total derivative financial instrument liabilities | 487 | 501 |
At 30 June 2016 appear outstanding purchases of foreign currencies with forward contracts for
| Company | Nominal value (€/000) |
Exchange rate | Due to (*) | ||
|---|---|---|---|---|---|
| Forward contrats for foreign currencies purchases | |||||
| Cnh/Euro | Emak S.p.A. | Cnh | 16,000 | 7.47 | 20/09/2016 |
| Euro/Gbp | Emak UK Ltd. | € | 2,000 | 0.76 | 31/03/2017 |
| Eur/Pln | Victus-Emak S.p. Z.o.o. | € | 2,350 | 4.36 | 12/09/2016 |
| Usd/Euro | Emak France Sas | Usd | 200 | 1.09 | 31/12/2016 |
| Usd/Euro | Sabart S.r.l. | Usd | 3,000 | 1.12 | 30/12/2016 |
| Euro/Usd | Comet USA Inc | € | 800 | 1.10 | 19/08/2016 |
| Options for foreign currencies purchases | |||||
| Cnh/Euro | Emak Spa | Cnh | 36,000 | 7.825 | 07/12/2016 |
(*) The due date is indicative of the last contract.
Finally, on 30 June 2016 result also outstanding IRS contracts and options on interest rates with the aim of covering the risk of variability of interest rates on loans.
The Parent Emak S.p.A. and the subsidiaries Tecomec S.r.l., Comet S.p.A. and Comet USA Inc. have signed IRS contracts and options on interest rates for a total notional value of € 43,215 thousand; the expiration of the instruments is so detailed:
| Bank | Company | Notional Euro (€/000) |
Date of the operation | Due to |
|---|---|---|---|---|
| Banca Popolare dell'Emilia Romagna | Emak S.p.A. | 333 | 20/01/2010 | 31/12/2016 |
| Banca Popolare di Verona | Emak S.p.A. | 1,366 | 28/03/2013 | 30/09/2017 |
| UniCredit | Emak S.p.A. | 1,750 | 22/05/2013 | 31/03/2018 |
| Banca Popolare Comm. Industria | Emak S.p.A. | 3,500 | 30/06/2015 | 31/12/2019 |
| Carisbo | Emak S.p.A. | 2,222 | 24/09/2015 | 12/06/2020 |
| Mediobanca | Emak S.p.A. | 5,000 | 24/09/2015 | 31/12/2020 |
| Banca Monte dei Paschi di Siena | Emak S.p.A. | 3,000 | 24/09/2015 | 31/12/2020 |
| Banca Popolare Comm. Industria | Comet S.p.A. | 2,000 | 10/10/2011 | 12/10/2016 |
| Banca Popolare Comm. Industria | Comet S.p.A. | 2,000 | 09/05/2012 | 28/04/2017 |
| UniCredit | Comet S.p.A. | 2,100 | 22/05/2013 | 29/03/2018 |
| UniCredit | Comet S.p.A. | 6,044 | 06/08/2015 | 20/03/2020 |
| Banca Nazionale del Lavoro | Comet S.p.A. | 2,844 | 06/08/2015 | 20/03/2020 |
| Carisbo | Comet S.p.A. | 2,222 | 24/09/2015 | 12/06/2020 |
| UniCredit | Tecomec S.r.l. | 682 | 11/04/2012 | 31/07/2017 |
| Carisbo | Tecomec S.r.l. | 2,222 | 24/09/2015 | 12/06/2020 |
| MPS | Tecomec S.r.l. | 2,000 | 24/09/2015 | 31/12/2020 |
| Intesa San Paolo | Comet USA Inc | 3,930 | 27/02/2013 | 19/02/2019 |
| Total | 43,215 |
The average interest rate resulting from the instruments is equal to 0.56%.
All the contracts, while having the purpose and characteristics of hedging operations, do not formally comply with the rules for being accounted for as such; for this reason all the changes in fair value have been recorded in the income statement in the relevant financial period on the accruals basis.
Derivative contracts on interest rate and currency stipulated to hedge future cash flows associated with investments and which meet the requirements of IAS 39 are recognized according to the criteria of "hedge accounting".
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Trade receivables | 117,318 | 95,853 |
| Provision for doubtful accounts | (4,550) | (3,963) |
| Net trade receivables | 112,768 | 91,890 |
| Trade receivables from related parties (note 33) | 912 | 882 |
| Prepaid expenses and accrued income | 1,635 | 971 |
| Other receivables | 3,971 | 3,263 |
| Total current portion | 119,286 | 97,006 |
| Other non current receivables | 65 | 69 |
| Total non current portion | 65 | 69 |
"Other loans", for its current portion, also includes an amount of € 493 thousand for receivables of certain Group companies towards the controlling company Yama S.p.A., emerging from the relationships that govern the tax consolidation to which the same participate, and referring to the instance of reimbursement submitted in 2012 by the consolidating company in order to obtain the tax benefit associated with the
deductibility, from taxable IRES, of IRAP related to personnel costs, employee and assimilated, under Article 2, paragraph 1-c of the Decree-law no. 201/2011.
All non-current receivables fall due within 5 years.
Inventories are detailed as follows:
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Raw, ancillary and consumable materials | 36,819 | 39,096 |
| Work in progress and semi-finished products | 20,765 | 20,693 |
| Finished products and goods | 75,651 | 78,570 |
| Total | 133,235 | 138,359 |
Inventories at 30 June 2016 are stated net of provisions amounting to € 6,275 thousand (€ 5,806 thousand at 31 December 2015) intended to align the obsolete and slow moving items to their estimated realizable value.
Share capital is fully paid up at 30 June 2016 and amounts to € 42,623 thousand and consists of 163,934,835 ordinary shares of par value € 0.26 each. All shares are fully paid.
The adjustment of € 2,029 thousand to equity for the purchase of treasury shares represents the overall consideration paid on the market by Emak S.p.A. to buy the treasury shares held on 30 June 2016. The nominal value of these treasury shares is € 104 thousand.
With regards to the sale and purchase of treasury shares carried out during the period, reference should be made to the appropriate section in the half year report.
On 22 April 2016 the Shareholders' Meeting resolved the distribution of dividends relating to the 2015 financial year for a total of € 4,088 thousand, these dividends have been fully paid in June 2016.
At 30 June 2016 the share premium reserve is € 42,454 thousand, consists of the premiums on newly issued shares. The reserve is shown net of legal costs for the increase in capital, realized in 2011, of € 1,598 thousand and net of the relative tax effect of € 501 thousand.
At June 30, 2016 the legal reserve is of € 2,709 thousand (€ 2,361 thousand was at December 31, 2015).
At 30 June 2016, the revaluation reserve includes reserves deriving from the revaluation pursuant to former L. 72/83 for € 371 thousand and ex L. 413/91 for € 767 thousand. No changes occurred during the period.
At 30 June 2016 the reserve for conversion differences for a positive amount of € 5,317 thousand is entirely attributable to the differences generated from the translation of balances into the Group's reporting currency.
At 30 June 2016 the IAS 19 reserve is equal a negative amount of € 832 thousand, for the actuarial valuation difference of post-employment benefits to employees
At 30 June 2016 the other reserves includes:
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Trade payables | 56,930 | 62,090 |
| Payables due to related parties (note 33) | 1,046 | 1,244 |
| Payables due to staff and social security institution | 12,335 | 9,763 |
| Accrued expense and deffered income | 456 | 615 |
| Advances from customers | 2,599 | 2,634 |
| Other payables | 5,700 | 4,502 |
| Total | 79,066 | 80,848 |
The increase of the item "Payables due to staff and social security institution" is linked to the time effect of the thirteenth salary and holidays accrued but not taken.
The item "Other payables" includes € 3,294 thousand for current IRES tax liabilities recorded by some companies of the Group towards the parent company Yama S.p.A. and arising from the relationships that govern the consolidated tax return, according to art. 116 and following of the Presidential Decree n. 917/1986.
Details of short-term loans and borrowings are as follows:
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Overdrafts | 13,856 | 7,504 |
| Bank loans | 45,260 | 46,943 |
| Liabilities for purchase of equity investments | 1,697 | 600 |
| Financial accrued expense and deffered income | 479 | 503 |
| Other loans | 446 | 360 |
| Finance leases | 13 | 26 |
| Total current | 61,751 | 55,936 |
The carrying amount of short-term loans and finance lease approximates their current value. The item "Liabilities for purchase of equity investments" refers to:
Long-term loans and borrowings are repayable as follows:
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Bank loans | 74,105 | 78,696 |
| Liabilities for purchase of equity investments | 16,543 | 14,210 |
| Other loans | 1,009 | 934 |
| Total non current portion | 91,657 | 93,840 |
The item "Liabilities for purchase of equity investments" includes:
The item "Other loans" includes € 786 thousand, refers to the granting at the parent company Emak S.p.A. of a subsidized loan on the part of Simest S.p.A. in accordance with Law 133/08, through which, the Italian companies, are assisted in their internationalization process through loans at preferential interest rates.
The loans that fall beyond 5 years amount to € 224 thousand.
Some medium-long term loans are subject to financial covenants, on the basis of the debt/EBITDA and debt/Equity ratios consolidated at year-end; no constraint of compliance with financial covenant applies to 30 June 2016.
Deferred tax assets are detailed below:
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Deffered tax on impairment of assets | 455 | 475 |
| Reversal of unrealized intercompany gains | 2,138 | 2,197 |
| Provision for inventory obsolescence | 1,360 | 1,272 |
| Losses in past financial periods | 818 | 1,383 |
| Provisions for bad debts | 280 | 284 |
| Deferred tax asset on on unrealized exchange differences | 34 | 550 |
| Other deferred tax assets | 2,057 | 2,892 |
| Total | 7,142 | 9,053 |
The exploitation of past tax losses is of limited duration. The accrued tax losses attributable to Emak Usa Inc, for which are limited in duration until 2026, have been transferred into Comet USA Inc following the merger occurred in 2014 and will be used by the same company.
Deferred tax liabilities are detailed below:
| €/000 | 30.06.2016 | 31.12.2015 |
|---|---|---|
| Deffered tax on property IAS 17 | 1,210 | 1,222 |
| Deffered tax on on fair value adjustments | 2,209 | 1,928 |
| Deferred tax on unrealized exchange differences | 265 | 222 |
| Deffered tax on valutation of provision for employee termination indemnities under IAS 19 |
3 | 3 |
| Other deferred tax liabilities | 2,257 | 2,674 |
| Total | 5,944 | 6,049 |
Other deferred tax liabilities refers mainly to less costs that will be fiscally recognized in future financial periods.
The "Current tax assets" amount, at 30 June 2016, to € 3,538 thousand, against € 5,324 thousand at 31 December 2015, refer to VAT credits, surplus payments on account of direct tax and other tax assets. The figure also includes an amount of € 326 thousand as a result of the payment made in June 2014, on a provisional basis and pending appeal against the assessment on annuity in 2008 by way of adjustment of prices of certain cross-border Intercompany transactions (for the details of which are provided in note 28 - Provisions for liabilities and charges), and an amount of € 1,047 thousand as tax assets -ex Law 201/2011 and ex Legal Decree 185/2009- requested for reimbursement by Emak S.p.A. and Comag S.r.l. in previous years.
"Current tax liabilities" amount to €5,958 thousand at 30 June 2016 compared with € 3,682 at 31 December 2015, and refer to payables for direct tax for the period, to VAT liabilities and withholding taxes.
Liabilities refer mainly to amounts payable for employment termination indemnity falling due at the end of employees' working life, equal to € 8,481 thousand.
The valuation of the indemnity leaving fund (TFR) at the closing date, carried out according to the nominal debt method in force would be € 8,331 thousand.
The principal economic and financial assumptions used to calculate the fund are the same as those used at the close of the 2015 financial year.
Movements in these provisions are detailed below:
| €/000 | 31.12.2015 | Increase | Decrease | Exchange differences |
30.06.2016 |
|---|---|---|---|---|---|
| Provisions for agents' termination indemnity | 1,576 | 69 | (112) | 1,533 | |
| Other provisions | 83 | 11 | 94 | ||
| Total non current portion | 1,659 | 69 | (112) | 11 | 1,627 |
| Provisions for products warranties | 435 | 2 | (3) | (1) | 433 |
| Other provisions | 1,216 | 57 | (4) | (1) | 1,268 |
| Total current portion | 1,651 | 59 | (7) | (2) | 1,701 |
The provision for agents' termination indemnity is calculated on the basis of agency relationships in force at the close of the financial year. It refers to the probable indemnity accrued to agents at 30 June 2016.
Other non-current provisions are related to:
Item "Other provisions", for its current portion, refers to the best estimate of liabilities that are deemed probable the current state, detailed as follows:
• allocations for € 404 thousand (including legal defense costs € 33 thousand), relating to an assessment, carried out by the Tax Authorities of Bologna, section large contributors, against Emak S.p.A. during the year 2013, concerning the period 2008-2009-2010.
On the basis of the minutes, the Agency has determined, by way of adjustment of prices of certain crossborder intra-group transactions, for all three years concerned by the audit, taxes and interest for a total of € 835 thousand (the amounts assessed penalties do not match art. 1, paragraph 2-ter of Legislative Decree 471/97).
Given all investigations, closed a vain attempt to reconciliation, actions have been proposed; the related hearings discussion will take place in the coming months. Emak is convinced of the correctness of his actions and of the validity of their arguments, also on the basis of the assessments of their defenders. Therefore confirms the prudential provisions already set forth above, quantified in € 404 thousand, including associated costs of defense, corresponding to the maximum sacrifice acceptable, exclusively on the basis of economy and opportunities, in the conciliation and for all annuity involved;
The amount reported on 30 June 2016 equal to € 786 thousand, compared to € 835 thousand at 31 December 2015, refers to the capital grant received by Comag S.r.l. under Law 488/92 which is being recognized over future years. The portion of the grant recognizable this year is classified under current liabilities as other payables and amounts to € 102 thousand.
On 30 June 2016 is pending tax litigation against Comet S.p.A., following a verification of the Revenue Agency which ended October 12, 2012, concerning the 2010 tax period. The contested findings concerning IRES and IRAP for about € 70 thousand, plus interest. Following the negative outcome of the company in the first instance, during the year 2015 were paid € 20 thousand by way of a provisional role entry, pending a decision on appeal.
It is noted that liabilities that might emerge from this relate to a period when control of Comet S.p.A. was exercised by Yama S.p.A., transferring to Emak the corresponding shareholding. Under the contractual guarantees, every liability, which may have to be defined, will be subject to comprehensive recasting to the Group by Yama S.p.A.
The Group is exposed to a variety of financial risks associated with its business activities:
The Emak Group constantly monitors the financial risks to which it is exposed, so as to minimise potential negative effects on financial results.
The Group's exposure to financial risks, also considering the change in the scope of consolidation, has not undergone significant changes compared to 31 December 2015.
The Group has no purchases commitments of fixed assets involving non-recurring financial disbursement in the short-term except as indicated in the half year financial report in paragraph 8 regarding the new R&D center.
It should be noted that, with respect to shares held directly or indirectly by the Parent Company Emak S.p.A., are in place the following contractual agreements:
The transactions made with related parties by the Emak Group in the first half of 2016 mainly relate to two different types of usual relations, within the ordinary course of business, adjusted to market conditions and with the parent company Yama S.p.A. and certain subsidiary companies.
It is, in first place, exchange of goods and provision of services. Among the companies under the Yama direct control, some have provided during, the period 2016 to the Emak Group, components, materials and production, as well as the leasing of industrial surfaces. On the other hand, certain companies of Yama Group bought from Emak Group products for the completion of their respective range of commercial offer. The execution of these operations is responding to industrial and commercial purposes and logic.
Secondly, relations of a financial nature attain the participation of the companies Comet S.p.A., Tecomec S.r.l., Sabart S.r.l. and Raico S.r.l. to the tax consolidation under Articles. 117 et seq., Tax Code, which involves Yama, as consolidating company. The criteria and procedures for the settlement of such transactions are established and formalized in agreements of consolidation, based on the principle of equal treatment between participants.
The nature and extent of the commercial operations described above is represented in the following tables.
| Related parties (€/000) |
Net sales | Receivables | Financial revenues |
Current financial assets |
Non current financial assets |
|---|---|---|---|---|---|
| Agro D.o.o. | 241 | 94 | - | - | - |
| Cofima S.r.l. | - | 1 | - | - | - |
| Euro Reflex D.o.o. | 389 | 480 | - | - | - |
| Garmec S.p.A. | 216 | 124 | - | - | - |
| Mac Sardegna S.r.l. | 386 | 199 | - | - | - |
| Selettra S.r.l. | 1 | 1 | - | - | - |
| Yama S.p.A. | - | 13 | 6 | 487 | 334 |
| Total | 1,233 | 912 | 6 | 487 | 334 |
| Related parties (€/000) | Purchase of raw materials and finished products |
Other costs Commercial and other Payables |
|
|---|---|---|---|
| Agro D.o.o. | 19 | - | 3 |
| Cofima S.r.l. | 510 | 221 | 579 |
| Euro Reflex D.o.o. | 1,153 | 1 | 325 |
| Garmec S.p.A. | 2 | - | 1 |
| Mac Sardegna S.r.l. | - | 3 | 3 |
| Selettra S.r.l. | 229 | - | 134 |
| Yama Immobiliare S.r.l. | - | 913 | 1 |
| Total | 1,913 | 1,138 | 1,046 |
The amount of outstanding balances with related parties relating to the fiscal consolidation are exposed to notes 21 and 24.
As regards relations with the parent company's corporate bodies, is summarized the following economic reports at 30 June 2016:
Please refer to what described in paragraph 8 of the Directors' Report.
We, the undersigned, Fausto Bellamico, as President and Chief Executive Officer, and Aimone Burani, the latter also in his position as Financial Reporting Officer of the company Emak S.p.A. affirm, taking account of the provisions of art. 154-bis, paragraphs 3 and 4, of legislative decree 24 February 1998, n. 58:
the suitability, with reference to the nature of the company, and
of administrative and accounting procedures for the preparation of the individual financial statements and the consolidated financial statements for the financial period 1 January 2016 - 30 June 2016.
No significant elements have emerged with reference to point 1 above.
2.1 The abbreviated half-year accounts:
2.2 The intermediate directors' report contains references to significant events that have occurred in the first six months of the financial period and their effect on the abbreviated half-year accounts, together with a description of the main risks and uncertainties for the remaining six months of the financial period. The intermediate directors' report contains, as well, information regarding significant operations with related parties.
Date: 5 August 2016
President and Chief Executive Officer Fausto Bellamico
The Financial Reporting Officer Aimone Burani
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