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Eurotech Interim / Quarterly Report 2019
4469_rns_2019-11-13_82ab8cea-1d75-4ec3-8ce2-1eb446c8a12b.pdf
Interim / Quarterly Report
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EUROTECH: RESULTS OF THE CONSOLIDATED INTERIM MANAGEMENT STATEMENT AT 30 SEPTEMBER 2019 APPROVED BY THE BOD. BOD CHAIRMAN APPOINTED AND 3 DIRECTORS CO-OPTED
Revenues at 30 September 2019 at €79.7 million (+33.4% at constant exchange rates), EBITDA €16.2 million (20.3% of revenues) and net profit €11.9 million.
Amaro (Italy), 13 November 2019
- − Consolidated revenues at €79.7 million (+39.9% compared to 30 September 2018, +33.4% at constant exchange rates)
- − Consolidated gross profit at €40.0 million (50.3% of revenues, +45.7% compared to 30 September 2018)
- − Consolidated EBITDA at €16.2 million (20.3% of revenues, €+10.6 million compared to 30 September 2018)
- − Consolidated EBIT at €13.2 million (16.6% of revenues, €+9.1 million compared to 30 September 2018)
- − Consolidated pre-tax profit at €13.1 million (16.5% of revenues, €+9.1 million compared to 30 September 2018)
- − Group net profit at €11.9 million (15.0% of revenues, €+8.6 million compared to 30 September 2018)
- − Net financial position with net cash of €5.2 million (it would have been €9.0 million without application of the new IFRS 16 - Leases)
- − Group shareholders' equity: €120.4 million
The Board of Directors of Eurotech S.p.A. today examined and approved the results of the first nine months of 2019.
The Chief Executive Officer Roberto Siagri commented: "We are satisfied with the growth in revenues and margins that we have been able to achieve over the past two years. And so, we are looking to the third quarter with confidence and we are already working to lay the foundation for another expansion phase over the medium to long-term".
Operating performance in the period
Following the good performance of the first and second quarter, over 30% growth in turnover was maintained also in the third quarter compared to 9M18, thanks to the orders collected over the last 18 months. EBITDA margin higher than 20% of revenues was achieved by combining this growth with the improvement of the gross profit owing to the mix of products sold, and including a slight rise in operating costs supporting strategic business.
The turnover amounting to €79.6 million is already higher in these nine months of 2019 than the turnover achieved in the twelve months of 2018. The geographical areas of the United States and Europe contributed the most to this increase in turnover, growing 71.3% and 56.9%, respectively, compared to 9M18. Japan, on the other hand, kept up a constant level of turnover in the two years compared.
The Group continued to operate and invest in the strategic direction laid out, with the purpose of remaining one of the players of reference in the field of Embedded Computers, and to assert itself as one of the major technological leaders also in the emerging sector of Edge Computers and Industrial IoT. This leadership role continues to be underscored and corroborated by the research of many market research and consultancy companies of the sector.
Operating performance of the Eurotech Group
Group revenues in 9M19 totalled €79.70 million, up by 39.9% compared to 9M18 when turnover was €56.97 million. At constant exchange rates, the increase would be 33.4%.
Gross profit in the period amounted to €40.05 million, accounting for 50.3% of turnover, compared to 48.2% in 9M18. This value improved also compared to that of 1H19 (accounting for 49.7%) and that recorded for the year 2018 (which amounted to 47.5%). In percentage terms, the gross profit reflects what was forecast in the plan for the year, i.e. a value close to 50%.
As regards operating costs, they accounted for 32.4% of revenues in the nine months, in line with what was recorded in 1H19, sharply improved compared to the 42.7% of 9M18. In absolute value, operating costs were up in 9M19 by €1.50 million (6.1%) to service present and future growth in revenues. Additional costs in the areas of research & development and sales will be incurred during the quarters to come to support additional growth in turnover and to increase ability to attract new customers. The very low growth in operating costs, considerably lower than the increase in revenues, keeps operating leverage active in a perspective of continuous growth in value. The entry into force this year of IFRS 16 entailed a reduction in operating costs of €1.1 million.
EBITDA for 9M19 was €16.19 million (20.3% of revenues) compared with €5.61 million in 2018 (9.8% of revenues), reflecting the trend of both gross profit and of operating costs and other revenues.
EBIT came to €13.25 million in 9M19 (16.6% of revenues), compared to €4.15 million in 9M18 (7.3% of revenues).
In the first nine months of 2019, including the exchange rate effects, financial management recorded a loss of €0.13 million, compared with a loss of €0.14 million in the first nine months of 2018.
The Group booked a pre-tax profit in 9M19 of €13.12 million, versus a profit of €3.99 million in 9M18. The improvement of the pre-tax result, equal to €9.12 million, reflects mainly the improvement of EBIT.
The Group net profit in the period under review was €11.93 million (€3.38 million in 9M18). Performance not only reflected the changes in the pre-tax profit, but comes from the estimated taxes that were calculated based on the rates established for the year by governing regulations and considering the tax benefit for the use of tax losses based on only the expected year-end results.
With regard to the third quarter, all of the indicators monitored by the Group continued to be positive, as they were in the previous quarters.
Specifically, turnover was €26.7 million (€19.7 million in 3Q18), up 35.7% compared to the same quarter the year before; the value of the turnover of the quarter corresponds to 33.5% of the turnover of the ninemonth period, similar to that of last year (34.5%).
In the quarter under review, the gross profit (51.4%) was constant compared to the second quarter of the year, and is up both compared to 1Q19 and to the single quarters of 2018.
3Q19 EBITDA was positive for €5.3 million (19.9%), while it was positive for €2.0 million in 3Q18 (10.1%). Full activation of operating leverage is seen also in the third quarter with the growth in turnover and the prudent management of operating costs.
3Q19 EBIT was influenced by the margins described and amounted to €4.3 million (16.2% of revenues), versus a positive result of €1.5 million (7.5% of revenues) in the same period of 2018.
These trends contributed to generate the interim nine months results mentioned above.
Statement of financial position of the Eurotech Group
At 30 September 2019, the Group had a consolidated net financial position with net cash of €9.0 million, excluding financial liabilities for rights of use introduced by IFRS 16, compared to the amount, also net cash, of €0.9 million at 31 December 2018. The new method of recognising leases (Right of Use) set out in IFRS 16 - Leases entailed the recognition by Group companies of financial liabilities for rights of use at 30 September 2019 equal to €3.8 million, which, subtracted from the net financial position, resulted in a post-IFRS 16 total net cash position of €5.2 million.
Group cash and cash equivalents were €24.9 million at 30 September 2019, while they were €13.2 million at year-end 2018.
Net working capital at 30 September 2019 came to €20.7 million, an increase of €5.12 million compared with 31 December 2018. This trend is mainly due to the increase in trade receivables due to the higher turnover enjoyed during the last 6 months, and to the lower trade payables. On an annual basis, the ratio between net working capital and turnover is still close to the target value of 20%.
Group shareholders' equity was €120.4 million (€102.0 million at 31 December 2018).
Outlook and events after the reporting period
On the basis of the portfolio of existing orders, 4Q19 turnover will be in line with that attained last year, but with higher margins that will therefore have a positive effect on the interim economic results so that results similar to those represented up to this point can be confirmed.
The effort put forth in addressing larger customers in the IoT and Edge Computing fields, mainly in the European and United States geographical areas, should bear its fruit in the medium-term and thus create the foundation for a new expansion of Group turnover.
Appointment of directors, Chairman of the Board of Directors and integration of board Committees
Today the Board of Directors also co-opted three directors after three directors resigned on 15 October 2019. Ms. Susanna Curti, Mr. Aldo Fumagalli and Mr. Antongiulio Marti, who also declared that they were not independent, were appointed as non-executive directors by co-option. The Curriculum Vitae of the coopted Directors is available on the company's website www.eurotech.com in the Investors/Company Information section. Based on the statement made to the Company, none of the three directors holds directly and/or indirectly shares of Eurotech.
Mr. Roberto Siagri, former Deputy Chairman and Chief Executive Officer, was also appointed Chairman of the Board of Directors of Eurotech.
Lastly, two of the board committees were integrated following the resignations of 15 October 2019. The independent director Giulio Antonello was appointed to the Remuneration Committee, and the independent director Carmen Pezzuto was appointed to the Control and Risks Committee.
As a result, the Board of Directors of Eurotech is formed by:
- Roberto Siagri, Chairman and CEO
- Dino Paladin, Deputy Chairman and non-executive director
- Giulio Antonello, non-executive and independent director
- Riccardo Costacurta, non-executive and independent director
- Susanna Curti, non-executive director
- Aldo Fumagalli, non-executive director
- Antongiulio Marti, non-executive director
- Chiara Mio, non-executive and independent director
- Carmen Pezzuto, non-executive and independent director
Following their integration, the board committees are formed by:
| Remuneration Committee: | Chiara Mio (Chairperson) | |||
|---|---|---|---|---|
| Giulio Antonello | ||||
| Riccardo Costacurta | ||||
| Control and Risks Committee: | Chiara Mio (Chairperson) | |||
| Riccardo Costacurta | ||||
| Carmen Pezzuto | ||||
| Committee for Related Party Transactions: | Riccardo Costacurta (Chairman) | |||
| Chiara Mio | ||||
| Carmen Pezzuto | ||||
| Appointments Committee: | Chiara Mio (Chairperson) | |||
| Giulio Antonello | ||||
| Roberto Siagri |
It is reported that in compliance with the provisions of CONSOB, the Consolidated Interim Financial Report at 30 September 2019 is available to anyone upon request at the registered office. The Report is also available on the website of Eurotech at www.eurotech.com (Investors section) and on the Centralised Storage system at .
The Financial Reporting Manager of Eurotech S.p.A., Mr. Sandro Barazza, states, pursuant to article 154-bis, paragraph 2 of the Consolidated Law on Finance, that the accounting information contained in this press release corresponds to the company's documents, books and accounting records.
THE EUROTECH GROUP
Eurotech (ETH:IM) is a multinational company that designs, develops and supplies Edge Computers and Internet of Things (IoT) solutions – complete with services, software and hardware – to system integrators and enterprises. By adopting Eurotech solutions, customers have access to IoT building blocks and software platforms, to Edge Gateway to enable asset monitoring and to High Performance Edge Computers (HPEC) conceived also for Artificial Intelligence (AI) applications. To offer increasingly complete solutions, Eurotech has activated partnerships with leading companies in their field of action, thus creating a global ecosystem that allows it to create "best in class" solutions for the Industrial Internet of Things. For more information about Eurotech: www.eurotech.com.
Corporate contacts:
Investor Relations
Andrea Barbaro Tel. +39 0433 485411 email: [email protected] Communications Office Giuliana Vidoni Tel. +39 0433 485411 email: [email protected]
ANNEXES - FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
| CONSOLIDATED INCOME STATEMENT | change (b-a) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (€ '000) | 3rd Qtr 2019 | % | 3rd Qtr 2018 | % | 9M 2019 (b) | % | 9M 2018 (a) | % | amount | % |
| Sales revenue | 26,660 | 100% | 19,652 | 100% | 79,698 | 100.0% | 56,974 | 100.0% | 22,724 | 39.9% |
| Cost of material | (12,950) | -48.6% | (10,206) | -51.9% | (39,648) | -49.7% | (29,494) | -51.8% | 10,154 | 34.4% |
| Gross profit | 13,710 | 51.4% | 9,446 | 48.1% | 40,050 | 50.3% | 27,480 | 48.2% | 12,570 | 45.7% |
| Services costs | (3,255) | -12.2% | (3,129) | -15.9% | (9,682) | -12.1% | (9,007) | -15.8% | 675 | 7.5% |
| Lease & hire costs | (89) | -0.3% | (402) | -2.0% | (250) | -0.3% | (1,225) | -2.2% | (975) | -79.6% |
| Payroll costs | (5,276) | -19.8% | (4,673) | -23.8% | (15,351) | -19.3% | (13,582) | -23.8% | 1,769 | 13.0% |
| Other provisions and costs | (132) | -0.5% | (114) | -0.6% | (554) | -0.7% | (527) | -0.9% | 27 | 5.1% |
| Other revenues | 360 | 1.4% | 854 | 4.3% | 1,979 | 2.5% | 2,472 | 4.3% | (493) | -19.9% |
| EBITDA | 5,318 | 19.9% | 1,982 | 10.1% | 16,192 | 20.3% | 5,611 | 9.8% | 10,581 | 188.6% |
| Depreciation & Amortization | (1,012) | -3.8% | (511) | -2.6% | (2,932) | -3.7% | (1,459) | -2.6% | 1,473 | 101.0% |
| Asset impairment | 0 | 0.0% | 0 | 0.0% | (10) | 0.0% | 0 | 0.0% | 10 | n/a |
| EBIT | 4,306 | 16.2% | 1,471 | 7.5% | 13,250 | 16.6% | 4,152 | 7.3% | 9,098 | 219.1% |
| Subsidiaries management | 0 | 0.0% | 0 | 0.0% | 0 | 0.0% | (19) | 0.0% | (19) | -100.0% |
| Finance expense | (374) | -1.4% | (162) | -0.8% | (880) | -1.1% | (811) | -1.4% | 69 | 8.5% |
| Finance income | 492 | 1.8% | 74 | 0.4% | 746 | 0.9% | 671 | 1.2% | 75 | 11.2% |
| Profit before tax | 4,424 | 16.6% | 1,383 | 7.0% | 13,116 | 16.5% | 3,993 | 7.0% | 9,123 | 228.5% |
| Income tax | (1,330) | -5.0% | 81 | 0.4% | (1,189) | -1.5% | (616) | -1.1% | 573 | 93.0% |
| Net profit (loss) of continuing operations before minority interest |
3,094 | 11.6% | 1,464 | 7.4% | 11,927 | 15.0% | 3,377 | 5.9% | 8,550 | 253.2% |
| Minority interest | 0 | 0.0% | 0 | 0.0% | 0 | 0.0% | 0 | 0.0% | 0 | n/a |
| Group net profit (loss) for period | 3,094 | 11.6% | 1,464 | 7.4% | 11,927 | 15.0% | 3,377 | 5.9% | 8,550 | 253.2% |
| Base earnings per share | 0.344 | 0.099 | ||||||||
| Diluted earnings per share | 0.344 | 0.099 | ||||||||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| (€'000) | at September 30, 2019 |
at December 31, 2018 |
|---|---|---|
| ASSETS | ||
| Intangible assets | 91,219 | 85,369 |
| Property, Plant and equipment | 6,322 | 2,579 |
| Investments in other companies | 165 | 160 |
| Deferred tax assets | 2,840 | 3,025 |
| Medium/long term borrowing allowed to affiliates companies and other Group |
||
| companies | 92 | 87 |
| Other non-current assets | 689 | 654 |
| Total non-current assets | 101,327 | 91,874 |
| Inventories | 21,866 | 21,998 |
| Contracts in progress | - | 86 |
| Trade receivables | 16,358 | 13,808 |
| Income tax receivables | 435 | 298 |
| Other current assets | 2,621 | 2,183 |
| Other current financial assets | 109 | 104 |
| Cash & cash equivalents | 24,933 | 13,196 |
| Total current assets | 66,322 | 51,673 |
| Total assets | 167,649 | 143,547 |
| LIABILITIES AND EQUITY | ||
| Share capital | 8,879 | 8,879 |
| Share premium reserve | 136,400 | 136,400 |
| Other reserves | ( 24,902) | ( 43,237) |
| Group shareholders' equity | 120,377 | 102,042 |
| Equity attributable to minority interest | - | - |
| Total shareholders' equity | 120,377 | 102,042 |
| Medium-/long-term borrowing | 12,495 | 4,312 |
| Employee benefit obligations | 2,768 | 2,465 |
| Deferred tax liabilities | 3,214 | 3,035 |
| Other non-current liabilities | 847 | 782 |
| Total non-current liabilities | 19,324 | 10,594 |
| Trade payables | 13,228 | 14,411 |
| Short-term borrowing | 7,319 | 8,125 |
| Derivative instruments | 73 | 20 |
| Income tax liabilities | 158 | 1,571 |
| Other current liabilities | 7,170 | 6,784 |
| Total current liabilities | 27,948 | 30,911 |
| Total liabilities | 47,272 | 41,505 |
| Total liabilities and equity | 167,649 | 143,547 |
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| (€'000) | Share capital Legal reserve | Share premium reserve |
Conversion reserve |
Other reserves |
Cash flow hedge reserve |
Actuarial gains/(losses ) on defined benefit plans reserve |
Exchange rate differences reserve |
Treasury shares |
Profit (loss) for period |
Group shareholders' equity |
Equity attributable to Minority interest |
Total shareholders' equity |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at December 31, 2018 | 8,879 | 1,385 | 136,400 | 12,223 | ( 63,924) | ( 20) | ( 425) | 3,925 | ( 2,083) | 5,682 | 102,042 | - | 102,042 |
| 2018 Result allocation | - | 391 | - | - | 5,291 | - | - | - | - | ( 5,682) | - | - | - |
| Profit (loss) as at June 30, 2019 | - | - | - | - | - | - | - | - | - | 11,927 | 11,927 | - | 11,927 |
| Comprehensive other profit (loss): | |||||||||||||
| - Hedge transactions | - | - | - | - | ( 53) | - | - | - | - | ( 53) | - | ( 53) | |
| - Foreign balance sheets conversion difference | - | - | - | 3,925 | - | - | - | - | 3,925 | - | 3,925 | ||
| - Exchange differences on equity investments in foreign companies |
- | - | - | - | - | - | - | 1,943 | - | - | 1,943 | - | 1,943 |
| Total Comprehensive result | - | - | - | 3,925 | - | ( 53) | - | 1,943 | - | 11,927 | 17,742 | - | 17,742 |
| - Performance Share Plan | - | - | - | - | 349 | - | - | - | 244 | - | 593 | - | 593 |
| Balance as at September 30, 2019 | 8,879 | 1,776 | 136,400 | 16,148 | ( 58,284) | ( 73) | ( 425) | 5,868 | ( 1,839) | 11,927 | 120,377 | - | 120,377 |
SUMMARY CASH FLOW STATEMENT
| (€'000) | at September 30, 2019 |
at December 31, 2018 |
at September 30, 2018 |
|
|---|---|---|---|---|
| Cash flow generated (used) in operations | A | 11,803 | 10,577 | 7,227 |
| Cash flow generated (used) in investment activities | B | ( 2,820) | ( 3,237) | ( 2,151) |
| Cash flow generated (absorbed) by financial assets | C | 2,485 | ( 905) | ( 3,200) |
| Net foreign exchange difference | D | 269 | 16 | ( 80) |
| Increases (decreases) in cash & cash equivalents | E=A+B+C+D | 11,737 | 6,451 | 1,796 |
| Opening amount in cash & cash equivalents | 13,196 | 6,745 | 6,745 | |
| Cash & cash equivalents at end of period | 24,933 | 13,196 | 8,541 |
NET FINANCIAL POSITION
| at September 30, 2018 |
|---|
| ( 8,541) |
| ( 8,541) |
| ( 98) |
| 4 |
| 7,842 |
| 7,748 |
| ( 793) |
| 2,026 |
| 2,026 |
| 1,233 |
| ( 86) |
| 1,147 |
NET WORKING CAPITAL
| at September | at December | at September | ||
|---|---|---|---|---|
| 30, 2019 | 31, 2018 | 30, 2018 | Changes | |
| (€'000) | (b) | (a) | (b-a) | |
| Inventories | 21,866 | 21,998 | 22,296 | (132) |
| Contracts in progress | 0 | 86 | 86 | (86) |
| Trade receivables | 16,358 | 13,808 | 13,967 | 2,550 |
| Income tax receivables | 435 | 298 | 218 | 137 |
| Other current assets | 2,621 | 2,183 | 1,764 | 438 |
| Current assets | 41,280 | 38,373 | 38,331 | 2,907 |
| Trade payables | (13,228) | (14,411) | (14,732) | 1,183 |
| Income tax liabilities | (158) | (1,571) | (319) | 1,413 |
| Other current liabilities | (7,170) | (6,784) | (6,522) | (386) |
| Current liabilities | (20,556) | (22,766) | (21,573) | 2,210 |
| Net working capital | 20,724 | 15,607 | 16,758 | 5,117 |