Quarterly Report • May 12, 2016
Quarterly Report
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The Board of Directors 12 May 2016
| 1 | THE COMPANY B&C SPEAKERS S.P.A. – CORPORATE BODIES 3 |
|---|---|
| 2 | INTRODUCTION 4 |
| 3 | THE MAIN ASPECTS OF THE PERIOD FROM JANUARY TO MARCH 2016 4 |
| 4 | INFORMATION ON OWNERSHIP STRUCTURE 4 |
| 5 | OPERATING, ECONOMIC AND FINANCIAL RESULTS 5 |
| 6 | STATEMENT OF CHANGES IN EQUITY 11 |
| 7 | NET FINANCIAL POSITION 11 |
| 8 | SIGNIFICANT EVENTS OCCURRING AFTER 31 MARCH 2016 12 |
| 9 | OUTLOOK FOR THE ENTIRE YEAR 2016 12 |
| 10 | SHARE PERFORMANCE IN 2016 13 |
| - BALANCE SHEET AND CONSOLIDATED INCOME STATEMENT RELATING TO 31 MARCH 2016 14 |
|
| - CERTIFICATION OF FINANCIAL REPORTING MANAGER PURSUANT TO ARTICLE 154-BIS, PARAGRAPH 2 OF LEGISLATIVE DECREE NO. 58/1998. 17 |
| Chairperson: | Gianni Luzi |
|---|---|
| Chief Executive Officer: | Lorenzo Coppini |
| Director: | Simone Pratesi |
| Director: | Alessandro Pancani |
| Director: | Francesco Spapperi |
| Independent Director: | Roberta Pecci |
| Independent Director: | Gabriella Egidi |
| Independent Director: | Patrizia Mantoan |
| Chairperson: | Sara Nuzzacci |
|---|---|
| Regular Auditor: | Giovanni Mongelli |
| Regular Auditor: | Leonardo Tommasini |
PricewaterhouseCoopers S.p.A.
The Interim Report at 31 March 2016 has been prepared pursuant to Legislative Decree 195/2007 and article 154 ter of the T.U.F.; the economic and financial aggregates shown below, even if determined on the basis of IFRS and in particular the same measurement criteria used for the preparation of the consolidated financial statements as at 31 December 2015, do not represent an interim financial statement prepared in accordance with I.F.R.S. and in particular with IAS 34.
This interim report has not been subjected to audit.
As at 31 March 2016 official data reported the following major shareholders:
Subsequent to 31 March 2016 there were no significant changes in the ownership structure.
This Interim Report at 31 March 2016 contains the information required by art. 154 ter of the TUF.
The IFRS accounting standards used by the Group are the same as those applied in the preparation of the financial statements for the year ended 31 December 2015, to which reference should be made.
In particular, as required by IFRS, a provision was made for the carrying out of estimates and the formulation of assumptions, which are reflected in the determination of the carrying amounts of assets and liabilities, including potential assets and liabilities at the end of the period. These estimates and assumptions are used specifically for determining amortisation and depreciation, impairment testing of assets (including the measurement of receivables), provisions, employee benefits, deferred tax assets and liabilities. The final results could therefore differ from these estimates and assumptions; moreover, the estimates and assumptions are reviewed and updated periodically and the effects of each change are immediately reflected in the financial statements.
Below are the financial statements and the explanatory notes to the statements. All values are expressed in euros, unless otherwise indicated. The financial and economic data presented are compared with the corresponding figures of 2015.
On this point, it should be noted that, starting with the interim report as at 30 September 2015, the Group's management decided to adopt an arrangement for the Statement of Comprehensive Income with classification by destination rather than by nature. Therefore, starting from 30 September 2015, the statement of comprehensive income shows a different classification of costs together with the identification of intermediate results in terms of EBITDA, EBIT, EBT and net profit. This approach was adopted with the double aim of (i) aligning the periodic financial disclosure with management reporting used internally by management for decision-making and control purposes and (ii) improving the readability and effectiveness of information in annual and interim reporting towards third parties.
The main changes relate to the following items:
classified under "Costs for services, leases and rentals"); purchases of goods that are also not directly associated with the production process (previously classified under "Consumption of raw and ancillary materials and goods"); remuneration for directors, professionals, consultants and supervisory bodies, as well as property rent and hire costs (previously classified under "Costs for services, leases and rentals"); stock exchange fees; taxes other than on income; losses and contingent liabilities (previously classified under "Other costs").
The statement of comprehensive income for the first three months of 2015 was reclassified to allow a homogeneous comparison of magnitudes and economic results. It should be noted that, following the reclassification of costs by destination, EBITDA and EBIT restated in the first three months of 2015 increased by € 4 thousand, related to bank charge costs classified in financial charges rather than Administrative and General costs.
These financial statements, prepared in accordance with the requirements of art. 154 ter of the TUF, report the positive and negative components of income, the net financial position, divided between short, medium and long term items, as well as the Group's financial position. In view of this, the financial statements presented and the explanatory notes thereto, prepared for the sole purpose of compliance with the provisions of the aforementioned Issuer Regulations, are devoid of certain data and information that would be required for a complete representation of the financial position and the results of the Group for the quarter ended at 31 March 2016 in accordance with IFRS.
B&C Speakers is a key international entity in the production and marketing of "top quality professional loudspeakers"; owing to the nature and type of business carried on, the Group operates exclusively in this sector, both nationally and internationally.
Products are manufactured and assembled at the Italian production plant of the Parent Company, which also deals directly with marketing and sales in the various geographical areas covered.
Distribution in the US market is handled through the American subsidiary B&C Speakers NA LLC, which also offers support services for sales to local customers.
Distribution in the Brazilian market is handled through the subsidiary B&C Speakers Brasil LTDA.
Below is the table showing the Group's economic performance during the first three months of 2016 compared with the figures for the same period of 2015.
| Economic trends - Group B&C Speakers | ||||
|---|---|---|---|---|
| (€ thousands) | I Q 2016 YTD | Incidence | I Q 2015 YTD |
Incidence |
| Revenues | 8,807 | 100.00% | 8,619 | 100.0% |
| Cost of sales | (5,149) | -58.47% | (5,163) | -59.9% |
| Gross margin | 3,658 | 41.53% | 3,456 | 40.1% |
| Other revenues | 17 | 0.20% | 32 | 0.4% |
| Cost of indirect labour | (514) | -5.84% | (450) | -5.2% |
| Commercial expenses | (187) | -2.12% | (186) | -2.2% |
| General and administrative expenses | (884) | -10.04% | (939) | -10.9% |
| Ebitda | 2,090 | 23.73% | 1,912 | 22.2% |
| Depreciation of tangible assets | (184) | -2.09% | (178) | -2.1% |
| Amortization of intangible assets | (7) | -0.08% | (17) | -0.2% |
| Writedowns | (5) | -0.06% | (5) | -0.1% |
| Earning before interest and taxes (Ebit) | 1,894 | 21.50% | 1,712 | 19.9% |
| Financial costs | (228) | -2.59% | (270) | -3.1% |
| Financial income | 346 | 3.93% | 278 | 3.2% |
| Earning before taxes (Ebt) | 2,012 | 22.85% | 1,720 | 20.0% |
| Income taxes | (663) | -7.52% | (606) | -7.0% |
| Profit for the year | 1,350 | 15.33% | 1,114 | 12.9% |
| Minority interest | 0 | 0.00% | 0 | 0.0% |
| Group Net Result | 1,350 | 15.33% | 1,114 | 12.9% |
| Other comprehensive result | (186) | -2.11% | (43) | -0.5% |
| Total Comprehensive result | 1,164 | 13.21% | 1,070 | 12.4% |
EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is defined by the Issuer's Directors as the "profit before tax and financial income and expenses", as resulting from the consolidated income statement approved by the Board of Directors, gross of amortisation of intangible fixed assets, depreciation of tangible fixed assets, provisions and impairment, as shown on the above consolidated income statement. EBITDA is a measure used by the Issuer to monitor and assess the Group's operating performance and is not defined as an accounting measure either by Italian Accounting Standards or by the IASs/IFRSs; it should therefore not be considered as an alternative measure for assessing trends in the Group's operating result. Since the structure of EBITDA is not regulated by the reference accounting standards, the measuring criteria applied by the Group may not be the same as that used by other operators and/or groups and may, therefore, not be comparable.
EBIT (Earnings Before Interest and Tax) is the consolidated result before tax, charges and financial income as recorded in the income statement prepared by the Directors in drawing up the IAS/IFRS-compliant financial statements.
EBT (earnings before taxes) is the consolidated result before tax, as recorded in the income statement prepared by the Directors in preparing IAS/IFRS-compliant consolidated financial statements.
Consolidated revenues in the first three months of 2016 amounted to € 8.81 million, resulting in growth of 2.18% over the same period of 2015 when turnover stood at € 8.62 million.
In the table below we show the breakdown by geographical area of the turnover achieved by the Group during the period under review compared with the same period of the previous year:
| Revenues per geographic area (values in Euro/thausand) |
I Q 2016 YTD | % | I Q 2015 YTD | % | Difference | Difference % |
|---|---|---|---|---|---|---|
| Latin America | 457 | 5% | 907 | 11% | (450) | -49.6% |
| Europe | 4,434 | 50% | 3,471 | 40% | 962 | 27.7% |
| Italy | 925 | 10% | 897 | 10% | 27 | 3.1% |
| North America | 1,983 | 23% | 1,264 | 15% | 719 | 56.9% |
| Middle East & Africa | 82 | 1% | 26 | 0% | 57 | 220.2% |
| Asia & Pacific | 926 | 11% | 2,054 | 24% | (1,128) | -54.9% |
| Total | 8,807 | 100% | 8,619 | 100% | 188 | 2.2% |
During the period the Group increased its presence on the European market (+27.7% with sales of € 4.4 million) and the North American market (+56.9% with sales of € 2 million). Also on the Italian market the results achieved were up compared with the first three months of 2015 (+3.1% with sales of € 0.9 million). Revenue achieved on the South American market was down largely due to the unstable economic situation in the Brazil area. In the first three months of the year, the Asian market saw a significant drop in revenue due to a slowing in Chinese customer orders which was partly recovered in April.
As at 31 March 2016, the order book of the parent company amounted to € 8.9 million, while at the end of the first quarter of 2015 the figure was € 9.5 million.
This category includes raw materials (purchasing, processing by third parties and changes in inventories), the cost of personnel directly involved in the production process, transport costs and the costs for commissions payable, customs duties and other direct costs of lesser importance.
Cost of sales during the first three months of 2016 had a decreased impact on revenues compared to the first three months of 2015, rising from 59.90% to 58.47%. This variation is mainly due to (i) a slight decrease in the incidence of the costs for raw materials due to a marketing mix of the period that favoured products with more added value and (ii) strong performance on the US market by the American subsidiary. The other components of costs of sales (transport costs, commissions, transportation and other costs) have substantially maintained the same proportion of revenues.
This category refers to costs for staff, executives and workers not directly associated with the production process.
Over the first three months of 2016 indirect personnel costs increased broadly in line with the increase in turnover, slightly increasing their proportion of revenues (5.84% in the first three months of 2016 against 5.22% in the same period last year).
This category refers to costs for commercial consultancy, advertising and marketing, travel and subsistence and other minor charges relating to the commercial sector.
Commercial expenses showed no significant changes compared to the first three months of the previous year. Their impact on revenues remained largely unchanged, representing 2.16% in the first three months of 2015 and 2.12% in the first three months of 2016.
This category refers to the costs for maintenance and utilities, provision of services not directly linked to the production process, purchases of goods not directly associated with the production process, remuneration for directors, professionals, consultants and supervisory bodies, property rent, hire costs and other indirect costs of lesser importance.
Administrative and general costs decreased by around € 55 thousand compared to the first three months of the previous year, largely due to lower costs for consulting for the previous year. Therefore, their impact on revenue was down by one percent compared to the first three months of the previous year.
Mainly as a result of the trends described above, EBITDA in the first three months of 2016 amounted to € 2.09 million, an increase of 9.3% over the same period of 2015 (which amounted to € 1.91 million).
The EBITDA margin for the first three months of 2016 was therefore equal to 23.7% of revenues, an increase of 1.5 percentage points compared to the first quarter of 2015 (when it was 22.2% of revenues for the period).
The depreciation and amortisation of tangible and intangible assets has increased compared to the corresponding period of the previous year as a result of investment flows during the previous year.
Below is the financial data as at 31 March 2016 compared with assets at the end of 2015.
| Reclassified Balance sheet | 31 March | 31 December | |
|---|---|---|---|
| (€ thousands) | 2016 | 2015 | Change |
| Property, plant & Equipment | 3,141 | 3,238 | (96) |
| Inventories | 9,018 | 8,813 | 206 |
| Trade receivables | 7,608 | 7,085 | 523 |
| Other receivables | 1,438 | 1,390 | 48 |
| Trade payables | (3,069) | (3,180) | 112 |
| Other payables | (2,242) | (1,937) | (305) |
| Working capital | 12,753 | 12,170 | 583 |
| Provisions | (778) | (743) | (34) |
| Invested net working capital | 15,117 | 14,664 | 453 |
| Cash and cash equvalents | 1,976 | 1,496 | 480 |
| Investments in associates | 50 | 50 | - |
| Goodwill | 1,394 | 1,394 | - |
| Short term securities | 3,981 | 3,994 | (13) |
| Other financial receivables | 456 | 456 | (0) |
| Financial assets | 7,857 | 7,390 | 467 |
| Invested net non operating capital | 7,857 | 7,390 | 467 |
| NET INVESTED CAPITAL | 22,974 | 22,054 | 920 |
| Equity | 19,277 | 18,099 | 1,178 |
| Short-term financial borrowings | 1,132 | 1,134 | (2) |
| Long-term financial borrowing | 2,565 | 2,822 | (257) |
| RAISED CAPITAL | 22,974 | 22,054 | 920 |
Fixed assets: are defined by the Issuer's Directors as the value of long-term assets (tangible and intangible). Net Operating Working Capital: is defined by the Issuer's Directors as the value of inventories, trade receivables and other receivables net of debts for supplies and other payables. Funds: the value of bonds linked to employees' and directors' severance pay. Invested net working capital: is the value of financial assets and other financial credits as described above. Raised capital: is the value of net assets of the Group and the total indebtedness of the Group.
A number of comments on the classification of assets and liabilities according to their operational destination are presented below.
Net Operating Invested Capital shows an increase of € 0.4 million compared with 31 December 2015. This increase was mainly due to the combined effect of the following factors:
Net Non-Operating capitalshowed an increase of around € 0.4 million compared to 31 December 2015, primarily due to the effect of the increase in Group liquidity.
The other Capital categories showed no significant changes compared with 31 December 2015.
Changes in net equity reserves of the Group during the first three months of 2016 are attributable primarily to the balance of Treasury shares (negative as a result of purchases made in the period). It should be noted, however, that the decrease in share capital is due to IFRS-compliant handling of trading of Treasury shares.
Financial debt in the short term equal to € 1,132 thousand is made up of € 1,125 thousand from short-term loan contracts by the Group (of which € 996 thousand relating to long-term loans granted by Cassa di Risparmio di Firenze maturing in July 2019, € 29 thousand relative to implicit financial debt linked to a financial leasing contract and € 100 thousand relating to development loans in foreign markets agreed with SIMEST) and for the remainder from the use of current account overdrafts granted by lenders.
Financial debt in the medium/long term equal to € 2,565 thousand is made up of the longterm portion of the loans contracted by the parent company (€ 2,343 thousand relating to long-term financing granted by Cassa di Risparmio di Firenze, € 200 thousand regarding the SIMEST loan and € 22 thousand regarding implicit financial debt linked to the existing financial leasing contract.
Below is the statement of changes in equity from 1 January 2016 to 31 March 2016 (figures in thousands of Euro):
| Share Capital |
Legal reserve |
Share premium reserve |
Extraordinary reserve |
Foreign exchange reserve |
Other reserve |
Fair value reserve |
Retained | earnings Net profit | Exchange differences on translating foreign operations |
DBO actuarial gain/(losses ) (net of tax effect) |
Net group Equity |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2016 | 1,073 | 379 | 2,835 | 44 | 27 | 3,284 | (160) | 8,880 | 4,977 | 36 | 10 | 18,099 |
| Allocation of 2015 result | - | 10 | 5,012 | (4,977) | (36) | (10) | 0 | |||||
| Dividend distribution | - | 0 | 0 | |||||||||
| Treasury shares | (2) | (133) | (133) | (135) | ||||||||
| Consolidation and foreign | ||||||||||||
| exchange effect | - | 149 | 149 | |||||||||
| Result of the period | - | 1,350 | (186) | 0 | 1,164 | |||||||
| Balance at 31 March 2016 | 1,071 | 379 | 2,702 | 44 | 27 | 3,151 | (150) | 14,041 | 1,350 | (186) | 0 | 19,277 |
Below is the Net Financial Position table prepared in line with that reported in the consolidated financial statements as at 31 December 2015 (figures in thousands of Euro).
| 31 March | 31 December | |||
|---|---|---|---|---|
| 2016 (a) | 2015 (a) | Change % | ||
| A. Cash | 1,976 | 1495.913 | 32% | |
| C. Securities held for trading | 3,981 | 3,994 | 0% | |
| D. Cash and cash equivalent (A+C) | 5,957 | 5,490 | 9% | |
| F. Bank overdrafts | (7) | (10) | -31% | |
| G. Current portion of non current borrowings | (1,125) | (1,124) | 0% | |
| I. Current borrowingse (F+G) | (1,132) | (1,134) | 0% | |
| J. Current net financial position (D+I) | 4,825 | 4,356 | 11% | |
| K. Non current borrowings | (2,565) | (2,822) | -9% | |
| N. Non current borrowings | (2,565) | (2,822) | -9% | |
| O. Total net financial position (J+N) | 2,261 | 1,535 | 47% |
(a) Informations extracted and/or calculated from the financial statements prepared in accordance with IFRS as adopted by the European Union.
Note: The net financial position, calculated by the Parent Company management as detailed above, is not identified as an accounting measurement under the Italian Accounting Standards or the IFRSs endorsed by the European Commission. Therefore, the measurement criteria may not be consistent with that adopted by other operators and/or groups and may, therefore, not be comparable. Moreover, the definition may differ from that established by the Issuer's loan contracts.
The cash flows generated by operations in the first three months of the current financial year have resulted in a positive Net financial Position, up by € 0.7 million compared to 31 December 2015.
Following the closing date of this quarter and until the draft date of this report, the following events have been worthy of note:
With regard to the full-year forecast for 2016, the Company management believes that this will represent a consolidation year, in particular after the great growth realized in 2015.
Below is a summary table of the evolution of recent share performance.
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 31 March | 31 December | |
|---|---|---|---|
| (Values in Euro) | 2016 | 2015 | |
| ASSETS | |||
| Fixed assets | |||
| Tangible assets | 3,031,544 | 3,145,378 | |
| Goodwill | 1,393,789 | 1,393,789 | |
| Other intangible assets | 109,872 | 92,329 | |
| Investments in non controlled associates | 50,000 | 50,000 | |
| Deferred tax assets | 268,845 | 307,014 | |
| Other non current assets | 152,279 | 152,766 | |
| related parties | 88,950 | 88,950 | |
| Other assets (TFM insurance) | 303,405 | 303,405 | |
| Total non current assets | 5,309,734 | 5,444,681 | |
| Currents assets | |||
| Inventory | 9,018,082 | 8,812,521 | |
| Trade receivables | 7,607,768 | 7,084,609 | |
| Tax assets | 773,819 | 737,790 | |
| Other current assets | 4,376,435 | 4,339,376 | |
| Cash and cash equivalents | 1,976,074 | 1,495,913 | |
| Total current assets | 23,752,178 | 22,470,209 | |
| Total assets | 29,061,912 | 27,914,890 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 31 March | 31 December |
|---|---|---|
| (Values in Euro) | 2016 | 2015 |
| LIABILITIES | ||
| Equity | ||
| Share capital | 1,070,671 | 1,072,541 |
| Other reserves | 3,151,634 | 3,283,847 |
| Retained Earnings | 14,040,912 | 8,879,546 |
| Fair value reserve | (149,547) | (159,596) |
| Profit/(loss) for the year | 1,163,693 | 5,022,801 |
| Total equity attributable to shareholders of the parent | 19,277,363 | 18,099,139 |
| Minority interest | - | 0 |
| Total equity | 19,277,363 | 18,099,139 |
| Non current equity | ||
| Long-term borrowings | 2,564,719 | 2,821,554 |
| Severance Indemnities | 689,948 | 660,765 |
| Provisions for risk and charges | 87,596 | 82,596 |
| Deferred tax liabilities | 33,127 | 33,127 |
| Total non current liabilities | 3,375,390 | 3,598,042 |
| Current liabilities | ||
| Short-term borrowings | 1,131,754 | 1,133,516 |
| Trade liabilities | 3,068,713 | 3,180,375 |
| Tax liabilities | 1,170,252 | 936,917 |
| Other current liabilities | 1,038,440 | 966,901 |
| Total current liabilities | 6,409,159 | 6,217,709 |
| Total Liabilities | 29,061,912 | 27,914,890 |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | 1 Q 2016 YTD 1 Q 2015 YTD | ||
|---|---|---|---|
| (Values in Euro) | |||
| Revenues | 8,807,068 | 8,619,008 | |
| Cost of sales | (5,149,205) | (5,163,156) | |
| Gross Margin | 3,657,862 | 3,455,853 | |
| Other revenues | 17,328 | 31,509 | |
| Cost of indirect labour | (514,203) | (449,969) | |
| Commercial expenses | (187,104) | (185,819) | |
| General and administrative expenses | (884,061) | (939,225) | |
| related parties | (230,820) | (230,718) | |
| Ebitda | 2,089,822 | 1,912,350 | |
| Depreciation of tangible assets | (183,984) | (178,160) | |
| Amortization of intangible assets | (6,960) | (17,250) | |
| Writedowns | (5,000) | (5,000) | |
| Earning before interest and taxes | 1,893,879 | 1,711,940 | |
| Financial costs | (227,686) | (269,980) | |
| Financial income | 346,293 | 277,605 | |
| Earning before taxes | 2,012,486 | 1,719,564 | |
| Income taxes | (662,661) | (605,897) | |
| Profit for the year (A) | 1,349,824 | 1,113,667 | |
| Other comprehensive income/(losses) for the year that will not be | |||
| reclassified in icome statement: | |||
| Exchange differences on translating foreign operations | (175,465) | (40,976) | |
| Actuarial gain/(losses) on DBO (net of tax) | (10,667) | (2,435) | |
| Total other comprehensive income/(losses) for the year (B) | (186,132) | (43,411) | |
| Total comprehensive income (A) + (B) | 1,163,693 | 1,070,255 | |
| Profit attributable to: | |||
| Owners of the parent | 1,349,824 | 1,113,667 | |
| Minority interest | - | - | |
| Total comprehensive income atributable to: | |||
| Owners of the parent | 1,163,693 | 1,070,255 | |
| Minority interest | - | - |
The Financial Reporting Manager, Mr. Francesco Spapperi declares, pursuant to paragraph 2 article 154-bis of the Consolidated Financial Law, that the accounting information contained in this document, "Interim report at 31 March 2016", corresponds to the company's accounting documents, books and records.
The Financial Reporting Manager
Francesco Spapperi
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