Quarterly Report • Jul 28, 2017
Quarterly Report
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half-year financial report
at 30 June 2017
(2016-2018)
Giampiero Massolo (Chairman) Giuseppe Bono (Chief Executive Officer) Gianfranco Agostinetto Simone Anichini Massimiliano Cesare Nicoletta Giadrossi Paola Muratorio Fabrizio Palermo Donatella Treu Umberto Baldi (Secretary)
Gianluca Ferrero (Chairman) Roberto Spada (Standing member) Fioranna Vittoria Negri (Standing member) Alberto De Nigro (Alternate member) Flavia Daunia Minutillo (Alternate member) Massimiliano Nova (Alternate member)
(2013-2021)
PricewaterhouseCoopers S.p.A.
Oversight board Leg. Decree 231/01 (2015-2017)
Guido Zanardi (Chairman) Stefano Dentilli (Member) Giorgio Pani (Member)
Information regarding the composition and functions of the Board Committees (the Internal Control and Risk Committee, which is also serving on an interim basis as the committee responsible for related party transactions, the Compensation Committee, the Nomination Committee and the Sustainability Committee) is provided in the Governance section of the Fincantieri website at www.fincantieri.it
Forecast data and information must be regarded as forward-looking statements and therefore, not being based on simple historical facts, contain, by their nature, an element of risk and uncertainty because they also depend on the occurrence of future events and developments outside the Company's control. Actual results could therefore be materially different from those expressed in forward-looking statements. Forward-looking statements refer to the information available at the date of their publication; FINCANTIERI S.p.A. undertakes no obligation to revise, update or correct its forward-looking statements after such date, other than in the circumstances strictly required by applicable regulations. The forward-looking statements provided do not constitute and shall not be considered by users of the financial statements as advice for legal, accounting, tax or investment purposes nor is it the intention for such statements to create any type of reliance and/or induce such users to invest in the Company.
The structure of the Fincantieri Group and overview of the companies included in its consolidation will now be presented.
| SHIPBUILDING | OFFSHORE | EQUIPMENT, SYSTEMS AND SERVICES |
OTHER | |||
|---|---|---|---|---|---|---|
| Cruise Ships Ferries Contemporay Cruise ferries Premium Ro-Pax Upper Premium Dual fuel ferries Luxury Exploration/Niche |
Naval Vessels Aircraft Carriers Destroyers Frigates Corvettes Patrol vessels Amphibious ships Logistic support ships Multirole and research vessels Special vessels Submarines |
Mega Yacht Mega yacht > 70 m |
Offshore Drilling units Offshore support vessels: AHTS-PSV-OSCV Special vessels Fisheries/Aquaculture Wind offshore Expedition cruise vessels |
Systems and Components Cabins Public areas Electrical, electronic and electromechanical integrated systems Automation systems Entertainment systems Stabilization, propulsion, positioning and power generation systems Steam turbines Steel structure for large scale projects |
Services Ship repairs Refitting Refurbishment Conversions Product lifecycle management • Integrated logistic support • In-service support • Refitting • Conversions Training and assistance |
|
| FINCANTIERI S.p.A. • Monfalcone • Marghera • Sestri Ponente • Cantiere Integrato Navale Riva Trigoso e Muggiano • Ancona • Castellammare di Stabia • Palermo Bacini Palermo S.p.A. Gestione Bacini La Spezia S.p.A. Fincantieri Holding BV Cetena S.p.A. Fincantieri Marine Group Holdings Inc. FMG LLC • Sturgeon Bay Marinette Marine Corporation LLC • Marinette ACE Marine LLC • Green Bay Fincantieri India Pte Ltd. Fincantieri do Brasil Partecipacões S.A. Fincantieri USA Inc. Fincantieri Australia PTY LTD. Fincantieri (Shanghai) Trading Co. Ltd. Camper & Nicholsons International SA Etihad Ship Building LLC. Orizzonte Sistemi Navali S.p.A. CSSC - Fincantieri Cruise Industry Development Ltd. |
FINCANTIERI S.p.A. Fincantieri Oil&Gas S.p.A. Vard Group AS • Aukra • Langsten • Brattvaag • Brevik • Søviknes Vard Tulcea SA • Tulcea Vard Promar SA • Suape Vard Braila SA • Braila Vard Vung Tau Ltd. • Vung Tau Vard Electro AS Vard Design AS Vard Piping AS Vard Accomodation AS Vard Marine Inc. Seaonics AS |
FINCANTIERI S.p.A. • Riva Trigoso Seastema S.p.A. Seaf S.p.A. Isotta Fraschini Motori S.p.A. • Bari Fincantieri SI S.P.A. Marine Interiors S.p.A. Fincantieri Infrastructure S.P.A. Fincantieri Sweden AB Unifer Navale S.r.l. |
FINCANTIERI S.p.A. • Arsenale Triestino San Marco • Bacino di Genova Delfi S.r.l. Issel Nord srl FMSNA Inc |
FINCANTIERI S.p.A. |
Fincantieri is one of the world's largest shipbuilding groups and number one for diversification and innovation. It is leader in cruise ship design and construction and a reference player in all high-tech shipbuilding industry sectors, from naval to offshore vessels, from high-complexity special vessels and ferries to mega yachts, as well as in ship repairs and conversions, systems and equipment production and after-sales services.
Headquartered in Trieste (Italy), the Group has built more than 7,000 vessels in its over 230 years of history. With over 19,400 employees, of whom more than 8,200 in Italy, 20 shipyards in 4 continents, today Fincantieri is the leading Western shipbuilder. It has among its clients the major cruise operators, the Italian and the U.S. Navy, in addition to several foreign navies, and it is partner of some of the main European defense companies within supranational programmes.
Fincantieri's business is widely diversified by end markets, geographical exposure and by client base, with revenue mainly split between cruise ship, naval and offshore vessel construction. Compared with less diversified players, such diversification allows it to mitigate the effects of any fluctuations in demand on the end markets served. In particular, the Group operates through the following three segments:
After an operational reorganization in November 2016, the businesses of repairs and conversions, ship accommodation and integrated systems, previously included in the Shipbuilding operating segment, are now part of the Equipment, Systems and Services operating segment.
This reorganization also reflects the Group's strategy of developing the after-sales business in the areas of accommodation and integrated systems.
TRIESTE MONFALCONE MARGHERA SESTRI PONENTE GENOA RIVA TRIGOSO-MUGGIANO ANCONA CASTELLAMMARE DI STABIA PALERMO
AUKRA BRATTVAAG BREVIK LANGSTEN SØVIKNES
BRAILA TULCEA
_ asia
VUNG TAU
_ americas
GREEN BAY MARINETTE STURGEON BAY
BRAZIL
SUAPE
FINCANTIERI S.p.A. (Headquarter) Orizzonte Sistemi Navali Cetena Delfi Seastema Isotta Fraschini Motori Fincantieri Oil&Gas Seaf Marine Interiors Fincantieri SI Fincantieri Infrastructure Issel Nord
Vard Group (Headquarter) Vard Design Vard Piping Vard Electro Vard Accommodation Seaonics
Camper&Nicholsons International
4
continents
shipyards
Fincantieri India Vard Electrical Installation and Engineering (India) FMSNA INDIA BAHRAIN UAE
Development
CHINA
_ asia
Etihad Ship Building
SINGAPORE
Vard Holdings Vard Shipholding Singapore
Fincantieri (Shanghai) Trading CSSC - Fincantieri Cruise Industry
FMSNA YK JAPAN
_ americas
USA
BRAZIL
Fincantieri do Brasil Participações
_ oceania
AUSTRALIA
Fincantieri Australia
| page | |
|---|---|
| 10 | Introduction |
| 11 | Highlights |
| 14 | Key financials |
| 15 | Group operational performance |
| 18 | Group financial results |
| 24 | Operational review by segment |
| 29 | Other information |
| 33 | Enterprise risk management |
| 42 | Alternative performance measures |
| 44 | Reconciliation of the reclassified financial statements used in the report on operations with the mandatory ifrs statements |
The results for the first half of 2017 confirm the Group's positive growth trend in commercial, production and economic terms. They are also in line with the Business Plan 2016-2020 and consolidate Fincantieri's leadership position in all the main sectors in which it operates.
In the first half of 2017, after the excellent results obtained in 2016, Fincantieri has continued to see major commercial achievements in the Shipbuilding operating segment, with signed orders and agreements for a total of 12 cruise ships (including options), to be made in the Group's Italian shipyard:
Fincantieri also signed a memorandum of agreement with China State Shipbuilding Corporation (CSSC) and Carnival Corporation for the construction of two cruise ships, with an option for four more, which will be the first vessels of this kind ever built in China for the Chinese market. This agreement will see Fincantieri play a major role in overseeing the high potential strategic Chinese market, with a leading role in developing shipbuilding capabilities in the Chinese cruise industry. At 30 June 2017, the Group was able to count on a total backlog of around euro 25.5 billion, of which some euro 20.4 billion in backlog (the residual value of firm orders not yet completed) and euro 5.1 billion in soft backlog (representing the value of existing contract options and letters of intent as well as of contracts at an advanced stage of negotiation, none of which yet reflected in the order backlog), a large part of which it believes it can shortly convert into firm orders.
In terms of production, Fincantieri has confirmed that it is able to complete highly complex projects within contractual deadlines in a significant context of growing volumes. In the first half of this year, the company delivered three cruise ships by three different shipyards for three different brands, as well as two naval vessels, the sixth vessel in the "FREMM" program and the "Romeo Romei" submarine. In May 2017, Fincantieri signed the share purchase agreement for the acquisition of 66.6% of STX France's capital. Closure of the transaction, which requires payment of euro 79.5 million, financed through available resources, is subject to the conditions generally established for this sort of transaction and to the failure of the French State to exercise its pre emption right on the shares to be sold by STX Europe AS. Negotiations are currently ongoing between Fincantieri and the French State to finalize the governance agreements amongst future STX France shareholders. An essential condition for Fincantieri to close said transaction is that the combination of the two companies may add further value. With regard to the Offshore segment, in previous years VARD began actions to diversify the business, and these continue. In the first six months of 2017, the Norwegian subsidiary secured orders for the construction of three fishing vessels, two passenger and vehicle transport ferries and one Research expedition vessel. The latter of these, specialized in ocean research, will be built in collaboration with WWF Norway and confirms the subsidiary's ability to respond to client demands.
Over the course of the first half of 2017, VARD has also continued its cost reduction programs for operations in Norway and Brazil to adapt the current production structure to the reduced workload due to the crisis in demand for offshore vessels. It has continued to invest in the Group's Romanian sites to adjust its production capacity to the growing volume of activities deriving from both the aforementioned business diversification actions and the consolidation of production and business synergies with the Italian cruise segment.
The first half of 2017 confirms the revenue growth trend with an increase of 1.3% compared to the first half of 2016, thanks to the positive performance of the Shipbuilding segment. As expected, Offshore segment value of production declined, primarily due to the Oil&Gas market crisis, pending the full development of efforts to diversify, and to the reduction in activities in Brazil after shutting down the Vard Niterói yard.
Compared with the first half of 2016, the Group's profit margins have benefitted from increased earnings from cruise orders, mainly due to the production of cruise ships derived from the prototype units ordered after the crisis and the effects of actions aimed at improving the production and design processes, which began in the previous year, as well as at strengthening competitiveness and increasing productivity to meet the development of the vast workload.
Profit/(loss) before extraordinary and non-recurring income and expenses reports a profit of euro 28 million (profit of euro 19 million at 30 June 2016).
The profit/(loss) for the period, a profit of euro 11 million, is up euro 6 million from the first semester of 2016 (euro 5 million at 30 June 2016), notwithstanding the recognition of lower unrealized exchange gains for euro 18 million on translating a loan held by Vard Promar from US Dollars in Brazilian Reals, and also notwithstanding a greater impact from claims under asbestos-related lawsuits of approximately euro 7 million. The Group share of this result is a net profit of euro 13 million (euro 7 million at 30 June 2016).
Headcount has increased from 19,181 at 31 December 2016 (of whom 7,939 in Italy) to 19,428 at 30 June 2017 (of whom 8,269 in Italy). This effect is mainly attributable to the increase in resources employed at the Group's Italian shipyards, confirming Fincantieri's endeavours to meet the growth targets in the Business Plan.
1. Sum of backlog and soft backlog
euro 79.5 million, to be paid through available financial resources. The closing will be subject to customary conditions for this kind of transactions as well as the French state's choice not to exercise the preemption right on share subject to sales by STX Europe AS. Fincantieri continues to negotiate with the French State for the finalization of the shareholders' agreement for STX France. The creation of value remains an essential condition for the conclusion of the operation.
2. Consistent with the annual report 2016, this figure does not include construction loans.
| 31.12.2016 | Economic data | 30.06.2017 | 30.06.2016 | |
|---|---|---|---|---|
| 4,429 | Revenue and income | Euro/million | 2,295 | 2,266 |
| 267 | EBITDA | Euro/million | 146 | 113 |
| 6.0% | EBITDA margin (*) | Percentage | 6.3% | 5.0% |
| 157 | EBIT | Euro/million | 88 | 61 |
| 3.5% | EBIT margin (**) | Percentage | 3.8% | 2.7% |
| 60 | Profit/(loss) before extraordinary and non-recurring income and expenses |
Euro/million | 28 | 19 |
| (59) | Extraordinary and non-recurring income and (expenses) | Euro/million | (22) | (18) |
| 14 | Profit/(loss) for the period | Euro/million | 11 | 5 |
| 25 | Group share of profit/(loss) for the period | Euro/million | 13 | 7 |
| 31.12.2016 | Financial data | 30.06.2017 | 30.06.2016 |
|---|---|---|---|
| 1,856 | Net invested capital Euro/million |
1,877 | 1,663 |
| 1,241 | Equity Euro/million |
1,246 | 1,255 |
| (615) | Net financial position Euro/million |
(631) | (408) |
| 31.12.2016 | Other indicators | 30.06.2017 | 30.06.2016 | |
|---|---|---|---|---|
| 6,505 | Order intake (***) | Euro/million | 4,369 | 5,851 |
| 24,003 | Order book (***) | Euro/million | 26,086 | 25,038 |
| 24,031 | Total backlog ()(*) | Euro/million | 25,524 | 21,790 |
| 18,231 | - of which backlog (***) | Euro/million | 20,424 | 19,290 |
| 224 | Capital expenditure | Euro/million | 76 | 94 |
| (164) | Free cash flow | Euro/million | 41 | 37 |
| 96 | Research and Development costs | Euro/million | 53 | 49 |
| 19,181 | Employees at the end of the period | Number | 19,428 | 18,825 |
| 26 | Vessels delivered (*) | Number | 8 | 15 |
| 39 | Vessels ordered (*) | Number | 11 | 32 |
| 99 | Vessels in order book (*) | Number | 102 | 103 |
| 31.12.2016 | Ratios | 30.06.2017 | 30.06.2016 | |
|---|---|---|---|---|
| 8.8% | ROI | Percentage | 10.4% | (8.7)% |
| 1.1% | ROE | Percentage | 1.6% | (18.8)% |
| 0.8 | Total debt/Total equity | Number | 0.8 | 0.6 |
| 2.3 | Net financial position/EBITDA | Number | 2.1 | n.s. |
| 0.5 | Net financial position /Total equity | Number | 0.5 | 0.3 |
*) Ratio between EBITDA and Revenue and income
**) Ratio between EBIT and Revenue and income
***) Net of eliminations and consolidation adjustments
****) Sum of backlog and soft backlog
*****) Number of vessels over 40 meters in length
n.s. not significant
The percentages contained in this report have been calculated with reference to amounts expressed in thousands of euros.
Equipment, Systems and Services Consolidation adjustments
% order intake by operating
During the first six months of 2017, the Group recorded euro 4,369 million in new orders, compared with euro 5,851 million in the corresponding period of 2016, with a book-to-bill ratio (order intake/revenue) of 1.9 (2.6 at 30 June 2016).
Before intersegment consolidation adjustments, the Shipbuilding segment accounted for 89% of the period's total order intake (87% in the first half of 2016), the Offshore segment for 9% (12% in the first half of 2016) and the Equipment, Systems and Services segment for 7% (5% in the first half of 2016). With reference to the cruise ship business, in the first six months of 2017, Fincantieri secured an order for the construction of four new-generation cruise ships for the Norwegian Cruise Line brand, with an option for two more vessels for the same Group. This exceptional result enables Fincantieri to add a new prestigious brand to its client base, confirming the Group's ability and flexibility in developing advanced solutions to serve every segment and need of the modern cruise industry. Fincantieri also signed two memorandum of agreement, one for the construction of two cruise ships for the Princess Cruises and Holland America Line brands in the Carnival group (the second of these converted to an order in the second quarter of 2017), and the other for building two further cruise ships, with an option for two more vessels, for Viking Ocean Cruises.
In the Offshore segment, as a result of business diversification strategies, the Group secured orders for the construction of three fishing vessels, two passenger and vehicle transport ferries and one Research expedition vessel. The latter of these, specialized in ocean research, will be built in collaboration with WWF Norway.
| 31.12.2016 | Order intake analysis (Euro/million) | 30.06.2017 | 30.06.2016(*) | |||
|---|---|---|---|---|---|---|
| Amounts | % | Amounts | % | Amounts | % | |
| 5,003 | 77 | FINCANTIERI S.p.A. | 3,836 | 88 | 4,847 | 83 |
| 1,502 | 23 | Rest of Group | 533 | 12 | 1,004 | 17 |
| 6,505 | 100 | Total | 4,369 | 100 | 5,851 | 100 |
| 5,191 | 80 | Shipbuilding | 3,872 | 89 | 5,073 | 87 |
| 1,138 | 17 | Offshore | 379 | 9 | 729 | 12 |
| 664 | 10 | Equipment, Systems and Services | 323 | 7 | 318 | 5 |
| (488) | (7) | Consolidation adjustments | (205) | (5) | (269) | (4) |
| 6,505 | 100 | Total | 4,369 | 100 | 5,851 | 100 |
(*) The 30.06.2016 comparative figures have been restated following redefinition of the operating segments
following table.
The Group's total backlog amounts to euro 25.5 billion at 30 June 2017, of which euro 20.4 billion in backlog (euro 19.3 billion at 30 June 2016) and euro 5.1 billion in soft backlog (euro 2.5 billion at 30 June 2016), with the order delivery profile extending until 2026. The backlog and total backlog guarantee about 4.6 years and 5.8 years of work respectively in relation to the 2016 level of revenue. Before intersegment consolidation adjustments, the Shipbuilding segment accounts for 91% of the Group's backlog (in line with the first half of 2016), the Offshore segment for 7% (in line with the first half of 2016) and the Equipment, Systems and Services segment for 6% (5% in the first half of 2016).
The growth in backlog on the same period in the previous year confirms the Group's ability to transform soft backlog into firm orders.
% order backlog by segment in 1st half 2017 91%
The composition of the backlog by operating segment is shown in the Offshore
Equipment, Systems and Services Consolidation adjustments
| 31.12.2016 | Backlog analysis (Euro/million) | 30.06.2017 | 30.06.2016(*) | |||
|---|---|---|---|---|---|---|
| Amounts | % | Amounts | % | Amounts | % | |
| 15,961 | 88 | FINCANTIERI S.p.A. | 18,266 | 89 | 17,004 | 88 |
| 2,270 | 12 | Rest of Group | 2,158 | 11 | 2,286 | 12 |
| 18,231 | 100 | Total | 20,424 | 100 | 19,290 | 100 |
| 16,372 | 90 | Shipbuilding | 18,512 | 91 | 17,565 | 91 |
| 1,361 | 8 | Offshore | 1,403 | 7 | 1,266 | 7 |
| 1,155 | 6 | Equipment, Systems and Services | 1,288 | 6 | 1,024 | 5 |
| (657) | (4) | Consolidation adjustments | (779) | (4) | (565) | (3) |
| 18,231 | 100 | Total | 20,424 | 100 | 19,290 | 100 |
(*) The 30.06.2016 comparative figures have been restated following redefinition of the operating segments
The soft backlog, representing the value of existing contract options and letters of intent as well as of contracts at an advanced stage of negotiation, none of which yet reflected in the order backlog, amounted to approximately euro 5.1 billion at 30 June 2017, compared with euro 2.5 billion at 30 June 2016. The following table shows the deliveries scheduled each year for vessels currently in the order book, analyzed by the main business units. With reference to the current year, the table presents deliveries completed as at 30 June 2017 in addition to the total number of deliveries scheduled for the full year 2017.
| Deliveries | |||||||
|---|---|---|---|---|---|---|---|
| (number) | 30.06.17 completed |
2017 | 2018 | 2019 | 2020 | 2021 | Beyond 2021 |
| Cruise ships | 3 | 5 | 5 | 4 | 4 | 2 | 5 |
| Naval >40 m | 2 | 10 | 5 | 4 | 3 | 4 | 12 |
| Offshore | 3 | 19 | 23 | 5 |
% capital expenditure by operating segment in 1st half 2017
Shipbuilding Offshore Equipment, Systems and Services
Other Activities
Compared to the situation presented at 31 December 2016, the VARD Group delayed delivery of an "LPG carrier" (previously scheduled for 2017 and destined for the client Transpetro) at the Vard Promar shipyard (Brazil) until 2018.
Capital expenditure amounts to euro 76 million in the first six months of 2017, of which euro 26 million for intangible assets (including euro 15 million for development projects) and euro 50 million for property, plant and equipment. Capital expenditure represents 3.3% of the Group's revenue in the first six months of 2017 compared with 4.1% in the first six months of 2016.
Capital expenditure on property, plant and equipment in the first six months of 2017 mainly relates to initiatives to support growth in production volumes and to boost safety standards and compliance with environmental regulations within production sites. In more detail, this expenditure involved the introduction of new sandblasting and painting systems at the Monfalcone yard, the reorganization of operational areas within production sites and the technological upgrade of infrastructure and equipment. There was also continued investment in developing new technologies.
| 31.12.2016 | Capital expenditure analysis (Euro/million) | 30.06.2017 | 30.06.2016(*) | |||
|---|---|---|---|---|---|---|
| Amounts | % | Amounts | % | Amounts | % | |
| 174 | 78 | FINCANTIERI S.p.A. | 52 | 68 | 78 | 83 |
| 50 | 22 | Rest of Group | 24 | 32 | 16 | 17 |
| 224 | 100 | Total | 76 | 100 | 94 | 100 |
| 165 | 74 | Shipbuilding | 42 | 55 | 74 | 79 |
| 31 | 14 | Offshore | 19 | 25 | 11 | 12 |
| 8 | 3 | Equipment, Systems and Services | 3 | 4 | 2 | 2 |
| 20 | 9 | Other assets | 12 | 16 | 7 | 7 |
| 224 | 100 | Total | 76 | 100 | 94 | 100 |
| 80 | 64 | Intangible assets | 26 | 34 | 31 | 33 |
| 144 | 36 | Property, plant and equipment | 50 | 66 | 63 | 67 |
| 224 | 100 | Total | 76 | 100 | 94 | 100 |
(*) The 30.06.2016 comparative figures have been restated following redefinition of the operating segments
Presented below are the reclassified consolidated versions of the income statement, statement of financial position and statement of cash flows, the breakdown of consolidated net financial position and the principal economic and financial indicators used by management to monitor business performance.
A reconciliation of these reclassified statements to the IFRS statements can be found later on in this report.
| 31.12.2016 | (Euro/million) | 30.06.2017 | 30.06.2016 |
|---|---|---|---|
| 4,429 | Revenue and income | 2,295 | 2,266 |
| (3,291) | Materials, services and other costs | (1,671) | (1,712) |
| (846) | Personnel costs | (462) | (431) |
| (25) | Provisions | (16) | (10) |
| 267 | EBITDA | 146 | 113 |
| 6.0% | EBITDA margin | 6.3% | 5.0% |
| (110) | Depreciation, amortization and impairment | (58) | (52) |
| 157 | EBIT | 88 | 61 |
| 3.5% | EBIT margin | 3.8% | 2.7% |
| (66) | Finance income/(costs) | (39) | (32) |
| (10) | Income/(expense) from investments | (1) | (4) |
| (21) | Income taxes | (20) | (6) |
| 60 | Profit/(loss) before extraordinary and non-recurring income and expenses |
28 | 19 |
| 66 | of which attributable to Group | 30 | 19 |
| (59) | Extraordinary and non-recurring income and (expenses) | (22) | (18) |
| 13 | Tax effect of extraordinary and non-recurring income and expenses | 5 | 4 |
| 14 | Profit/(loss) for the period | 11 | 5 |
| 25 | Group share of profit/(loss) for the period | 13 | 7 |
Revenue and income amount to euro 2,295 million in the first six months of 2017, reporting an increase of euro 29 million (1.3%) on the same period of 2016, mainly due to the continuous growth in production volumes for the cruise ship business, which accounted for 51% of the Group's total revenue for the period (43% in the first six months of 2016). As expected, Offshore segment value of production declined, primarily due to the Oil&Gas market crisis, pending the full development of efforts to diversify, and to the reduction in activities in Brazil after shutting down the Vard Niterói yard.
(*) The 30. 06. 2016 comparative figures have been restated following redefinition of the operating segments
Revenue generated by foreign clients accounts for 86% of the total in the period ended 30 June 2017, a slight increase if compared with the 85% on the corresponding period of 2016.
EBITDA amounts to euro 146 million at 30 June 2017 (euro 113 million in the first half of 2016) with an EBITDA margin of 6.3%, improving by more than 20% if compared with the 5.0% margin at 30 June 2016. This increase is mainly attributable to the increased earnings from cruise orders derived from the prototype units ordered after the crisis at higher prices and the effects of actions aimed at improving the production and design processes, which began in the previous year, aimed at strengthening competitiveness and increasing productivity to meet the development of the vast workload.
(*) The 30. 06. 2016 comparative figures have been restated following redefinition of the operating segments
EBIT amounts to euro 88 million in the first six months of 2017, compared with euro 61 million for the same period in the previous year. The EBIT margin (EBIT expressed as percentage of revenue and income) is 3.8% at 30 June 2017 (2.7% in the first half of 2016).
Finance income/(costs) report a net expense of euro 39 million (net expense of euro 32 million at 30 June 2016). The variation compared with the first half of 2016 is due to the reduction in net income on unrealized exchange rates (euro 15 million), mostly associated with a loan taken out by Vard Promar, partially offset by the decrease in finance costs on construction loans (euro 7 million) for the subsidiary VARD.
Income taxes present a net charge of euro 20 million in the first six months of 2017, compared with a net charge of euro 6 million in the same period of 2016.
Profit/(loss) before extraordinary and non-recurring income and expenses reports a profit of euro 28 million at 30 June 2017, up compared to the euro 19 million at 30 June 2016.
Extraordinary and non-recurring income and expenses report euro 22 million in net expenses (euro 18 million at 30 June 2016) and mainly include costs for lawsuits of euro 21 million (of which euro 19 million relating to claims under asbestos-related lawsuits) and charges for business reorganization plans, mainly within the subsidiary VARD, of euro 1 million.
Tax effect relating to extraordinary and non-recurring income and expenses have had a net positive impact of euro 5 million at 30 June 2017.
Profit/(loss) for the period, reflecting the factors described above, is a net profit of euro 11 million (euro 5 million at 30 June 2016). The Group share of this result is a net profit of euro 13 million, compared with a net profit of euro 7 million in the same period of the previous year.
| 30.06.2016 | (Euro/million) | 30.06.2017 | 31.12.2016 |
|---|---|---|---|
| 546 | Intangible assets | 583 | 595 |
| 1,014 | Property, plant and equipment | 1,049 | 1,064 |
| 57 | Investments | 55 | 58 |
| (28) | Other non-current assets and liabilities | 42 | (69) |
| (61) | Employee benefits | (58) | (58) |
| 1,528 | Net fixed capital | 1,671 | 1,590 |
| 530 | Inventories and advances | 575 | 590 |
| 1,442 | Construction contracts and client advances | 1,594 | 604 |
| (937) | Construction loans | (970) | (678) |
| 419 | Trade receivables | 449 | 1,123 |
| (1,170) | Trade payables | (1,426) | (1,307) |
| (105) | Provisions for risks and charges | (130) | (126) |
| (44) | Other current assets and liabilities | 114 | 59 |
| 135 | Net working capital | 206 | 265 |
| - | Net assets classified as held for sale | - | 1 |
| 1,663 | Net invested capital | 1,877 | 1,856 |
| 863 | Share capital | 863 | 863 |
| 286 | Reserves and retained earnings attributable to the Group |
302 | 223 |
| 106 | Non-controlling interests in equity | 81 | 155 |
| 1,255 | Equity | 1,246 | 1,241 |
| 408 | Net financial position | 631 | 615 |
| 1,663 | Sources of funding | 1,877 | 1,856 |
The Reclassified consolidated statement of financial position reports an increase in net invested capital at 30 June 2017 of euro 21 million since the end of the previous year, mainly due to the following factors:
Construction loans amount to euro 970 million at 30 June 2017 (euro 678 million at 31 December 2016), of which euro 584 million relating to VARD (euro 578 million at 31 December 2016) and the remaining euro 386 million to the Parent Company (euro 100 million at 31 December 2016). Equity, at euro 1,246 million, records an increase of euro 5 million mainly due to the net income generated in the period (euro 11 million), the increase in reserves linked to hedging instruments for cash flows (euro 70 million) and the registering of the reserve related to the equity incentive plan for management (euro 2 million). These effects were partially offset by the reduction of the currency translation reserve (euro 36 million) and a net negative change in consolidated equity of euro 42 million (as a result of the decrease in non-controlling interests in equity of euro 68 million and the increase of Group equity of euro 26 million) deriving from the acquisition of further interests from VARD minority shareholders. The shareholding in the VARD Group went from 55.63% to 78.13%, while the average carrying value of the shares went from SGD 1.22 to SGD 0.94 at 30 June 2017.
| 30.06.2016 | (Euro/million) | 30.06.2017 | 31.12.2016 |
|---|---|---|---|
| 186 | Cash and cash equivalents | 144 | 220 |
| 85 | Current financial receivables | 34 | 33 |
| (140) | Current bank debt | (329) | (306) |
| (131) | Current portion of bank loans and credit facilities | (63) | (128) |
| - | Other current financial liabilities | (26) | (19) |
| (271) | Current debt | (418) | (453) |
| - | Net current cash/(debt) | (240) | (200) |
| 115 | Non-current financial receivables | 128 | 115 |
| (223) | Non-current bank debt | (218) | (229) |
| (298) | Bonds | (299) | (298) |
| (2) | Other non-current financial liabilities | (2) | (3) |
| (523) | Non-current debt | (519) | (530) |
| (408) | Net financial position | (631) | (615) |
The Consolidated net financial position, which excludes construction loans, reports a net debt balance of euro 631 million (euro 615 million in net debt at 31 December 2016). The item is influenced by the typical financial dynamics of the cruise segment, which were characterized during the period by a significant increase in volumes and, on the other hand, by the collection of final instalments for the vessels delivered during the period. Most of the Group's debt is used to finance current assets associated with cruise ship construction and thus directly connected with the financing of net working capital. By contrast, fixed capital is financed by equity and by other sources of long-term funding.
| 31.12.2016 | (Euro/million) | 30.06.2017 | 30.06.2016 |
|---|---|---|---|
| 73 | Net cash flows from operating activities | 122 | 131 |
| (237) | Net cash flows from investing activities | (81) | (94) |
| 115 | Net cash flows from financing activities | (110) | (117) |
| (49) | Net cash flows for the period | (69) | (80) |
| 260 | Cash and cash equivalents at beginning of period | 220 | 260 |
| 9 | Effects of currency translation difference on opening cash and cash equivalents |
(7) | 6 |
| 220 | Cash and cash equivalents at end of period | 144 | 186 |
| 31.12.2016 | (Euro/million) | 30.06.2017 | 30.06.2016 |
| (164) | Free cash flow | 41 | 37 |
The Reclassified consolidated statement of cash flows reports positive Free cash flow (the sum of cash flow from operating activities and cash flow from investing activities) of euro 41 million and negative net cash flows from financing activities of euro 110 million. Net cash flows for the period report a negative euro 69 million, slightly improving from the negative euro 80 million posted in the same period of 2016.
Net cash flows from operating activities also include the change in construction loans, which used euro 319 million in cash flow in the first half of 2017 (construction loans used euro 227 million in cash flow in the first half of 2016).
The following table presents additional economic and financial measures used by the Group's management to monitor the performance of its main business indicators in the periods considered. The following table shows the trend in the main profitability ratios and the strength and efficiency of the capital structure in terms of the relative importance of sources of finance between net debt and equity for the periods ended 30 June 2017 and 2016.
The ratios presented in the table have been calculated on the basis of economic parameters referring to a 12-month period, namely from 1 July 2016 to 30 June 2017 and from 1 July 2015 to 30 June 2016.
| 31.12.2016 | 30.06.2017 | 30.06.2016 | |
|---|---|---|---|
| 8.8% | ROI | 10.4% | (8.7)% |
| 1.1% | ROE | 1.6% | (18.8)% |
| 0.8 | Total debt/Total equity | 0.8 | 0.6 |
| 2.3 | Net financial position/EBITDA | 2.1 | n.s. |
| 0.5 | Net financial position /Total equity | 0.5 | 0.3 |
n.s. not significant
ROI and ROE at 30 June 2017 saw improvements compared with 31 December 2016, thanks to the growth in economic results both in the second half of 2016 and in the first half of 2017, and compared with 30 June 2016, when the percentage values reflected the negative results in the second half of 2015.
The indicators of strength and efficiency of the capital structure at 30 June 2017, compared to 31 December 2016, show an improvement in the Net Financial Position and EBITDA ratio due to the growth in the result for the period; they are in line with the ratios between financial indebtedness and equity, and net financial position and equity. Compared to the first half of 2016, there is an increase in net debt due to the absorption of financial resources needed to cope with the growth in Shipbuilding production volumes.
The Shipbuilding operating segment is engaged in the design and construction of cruise ships, ferries, naval vessels and mega yachts. Production is carried out at the Group's shipyards in Italy, Europe and the United States.
| 31.12.2016 | (Euro/million) | 30.06.2017 | 30.06.2016 ( ****) |
|---|---|---|---|
| 3,246 | Revenue and income ( *) |
1,757 | 1,599 |
| 185 | EBITDA ( *) |
115 | 69 |
| 5.7% | EBITDA margin ( ) ( *) |
6.5% | 4.3% |
| 5,191 | Order intake ( *) |
3,872 | 5,073 |
| 20,825 | Order book ( *) |
22,761 | 21,804 |
| 16,372 | Order backlog ( *) |
18,512 | 17,565 |
| 165 | Capital expenditure | 42 | 74 |
| 13 | Vessels delivered (number) ( ***) |
5 | 7 |
(*) Before eliminations between operating segments
(**) Ratio between segment EBITDA and Revenue and income
(***) Vessels over 40 meters in length
(****) The 30. 06. 2016 comparative figures have been restated following redefinition of the operating segments
Revenue from the Shipbuilding segment amounts to euro 1,757 million at 30 June 2017, up 9.9% from euro 1,599 million in the first half of 2016, and comprises euro 1,238 million from the cruise ships business (euro 1,030 million at 30 June 2016) and euro 515 million from the naval vessels business (euro 559 million at 30 June 2016). Compared with the first six months of 2016, cruise ship production volumes have continued to increase, with three ships delivered and 11 under construction at the Group's Italian yards at 30 June 2017, compared with the four delivered and nine under construction at 30 June 2016. Other activities report euro 4 million in revenue, down from euro 10 million at 30 June 2016.
Segment EBITDA amounts to euro 115 million at 30 June 2017 (euro 69 million at 30 June 2016), with an EBITDA margin of 6.5% (4.3% at 30 June 2016). The Group's profit margins have benefitted from increased earnings from cruise orders derived from the prototype units ordered after the crisis at higher prices and the effects of actions aimed at improving the production and design processes, which began in the previous year, aimed at strengthening competitiveness and increasing productivity to meet the development of the vast workload.
In the first six months of 2017 orders of euro 3,872 million were secured, which can be traced to the order received from Norwegian Cruise Line Holdings for the construction of four newgeneration cruise ships for the Norwegian Cruise Line brand and the order from Carnival for the construction of one cruise ship for the Holland America Line brand.
Capital expenditure on Property, plant and equipment in the first half of 2017 has mostly involved the continuation of activities to introduce new technology that will reduce the environmental impact of operations (particularly at the Monfalcone yard), the optimization of logistics in working areas at some production sites, and work to upgrade and improve the safety standards of machinery, equipment and buildings. Capital expenditure on yards in the United States was mainly related to infrastructure maintenance operations and modernization of production plants. With regard to intangible assets, it is worth noting in particular the capital expenditure on the development of a set of innovative and specialist technical and plant engineering solutions for ships capable of operating in Arctic areas, in addition to those for the development of innovative solutions and systems designed to improve the efficiency of cruise ship systems and operations.
The number of ships delivered in the first six months of 2017 is analyzed as follows:
| (number) | Deliveries |
|---|---|
| Cruise ships | 3 |
| Cruise ferries | |
| Naval vessels > 40 m | 2 |
| Mega-yachts | |
| Naval vessels <40 m |
The vessels delivered were:
The Offshore operating segment is engaged in the design and construction of high-end offshore support vessels, expedition cruise vessels, specialized ships, and vessels for offshore wind farms and open ocean aquaculture, and also offers innovative products in the field of drillships and semi-submersible drilling rigs. Fincantieri operates in this market through the VARD Group, FINCANTIERI S.p.A. and Fincantieri Oil&Gas S.p.A..
The VARD Group also provides its clients with turnkey electrical systems, inclusive of engineering, manufacturing, installation, integration testing and commissioning.
| 31.12.2016 | (Euro/million) | 30.06.2017 | 30.06.2016 |
|---|---|---|---|
| 960 | Revenue and income ( *) |
448 | 536 |
| 51 | EBITDA ( *) |
22 | 25 |
| 5.3% | EBITDA margin ( ) ( *) |
4.8% | 4.7% |
| 1,138 | Order intake ( *) |
379 | 729 |
| 2,366 | Order book ( *) |
2,478 | 2,447 |
| 1,361 | Order backlog ( *) |
1,403 | 1,266 |
| 31 | Capital expenditure | 19 | 11 |
| 13 | Vessels delivered (number) | 3 | 8 |
(*) Before eliminations between operating segments
(**) Ratio between segment EBITDA and Revenue and income
Revenue from the Offshore segment amounts to euro 448 million at 30 June 2017, down 16.4% compared with the first six months of 2016 (euro 536 million). The decrease in revenue compared with the first half of 2016, in small part offset by the positive effect of the change in the Norwegian Krone/Euro exchange rate (euro 11 million), is due to the reduction of VARD's activity in its European shipyards, pending the full implementation of the business diversification actions initiated in previous years in order to respond to the crisis in the core Oil&Gas industry, and due to the reduction of production activities in Brazil after the closure of the Vard Niterói site.
Offshore segment EBITDA of euro 22 million at 30 June 2017 compares with euro 25 million in the first six months of 2016 and reports profit margins of 4.8% versus 4.7% in the first six months of 2016. Profitability, still affected by the decline in demand for offshore assets due to the crisis in the Oil&Gas industry, is still not fully seeing the benefits of business diversification.
In the first half of 2017, order intake by the VARD Group amounted to euro 379 million. In detail, order intake relates to:
Capital expenditure in the first half of 2017 mainly related to expansion of production capacity at the Vard Tulcea shipyard to support the construction of cruise ship hulls for Norway and the multi-year program to build pre-fitted cruise ship blocks and sections for the Fincantieri production network.
The following vessels were delivered during the period:
| (number) | Deliveries |
|---|---|
| AHTS | |
| PSV (including MRV) | |
| OSCV | 3 |
| Other |
In detail:
The Equipment, Systems and Services operating segment is engaged in the design and production of systems, equipment and accommodation, in repair and conversion services and after-sales support for the vessels produced. These activities are carried out by FINCANTIERI S.p.A. and its subsidiaries Isotta Fraschini Motori S.p.A., Delfi S.r.l., Seastema S.p.A., Marine Interiors S.p.A., Fincantieri SI S.p.A. and FMSNA Inc.
| 31.12.2016 | (Euro/million) | 30.06.2017 | 30.06.2016 ( ***) |
|---|---|---|---|
| 495 | Revenue and income ( *) |
227 | 256 |
| 62 | EBITDA ( *) |
25 | 34 |
| 12.5% | EBITDA margin ( ) ( *) |
11.1% | 13.3% |
| 664 | Order intake ( *) |
323 | 318 |
| 1,742 | Order book ( *) |
1,987 | 1,596 |
| 1,155 | Order backlog ( *) |
1,288 | 1,024 |
| 8 | Capital expenditure | 3 | 2 |
| 45 | Engines produced in workshops (number) | 13 | 15 |
(*) Before eliminations between operating segments
(**) Ratio between segment EBITDA and Revenue and income
(***) The 30. 06. 2016 comparative figures have been restated following redefinition of the operating segments
Revenue from the Equipment, Systems and Services segment amounts to euro 227 million at 30 June 2017, with a reduction of 11.3% compared with the corresponding period in the previous year (euro 256 million). The reduction in revenue was mainly due to the reduced contribution of ship transformation activities, which, in the first half of 2016, benefitted from the positive effects of the "Renaissance" program for the client MSC Cruises, which came to an end in 2016.
Segment EBITDA is euro 25 million at 30 June 2017 (euro 34 million at 30 June 2016), with the margin decreasing to 11.1% from the 13.3% recorded in the first six months of 2016, mainly due to the change in the mix of products and services sold in the six-month period compared with the corresponding period in the previous year.
New order intake for Equipment, Systems and Services amounts to euro 323 million in the first half of 2017 and mainly refers to:
Other activities primarily refer to the costs incurred by corporate headquarters for directing, controlling and coordinating the business not allocated to other operating segments.
| 31.12.2016 | (Euro/million) | 30.06.2017 | 30.06.2016 |
|---|---|---|---|
| - | Revenue and income | - | - |
| (31) | EBITDA | (16) | (15) |
| n.a. | EBITDA margin | n.a. | n.a. |
| 20 | Capital expenditure | 12 | 7 |
n.a. not applicable
The most relevant items of capital expenditure relate to development of information systems in support of the Group's business; in particular, work has continued to implement an integrated system for ship design (CAD) and project lifecycle management (PLM), aimed at improving the efficiency and effectiveness of the engineering process. In addition, following on from previous years, work has continued to upgrade the Group's network infrastructure and hardware.
The market capitalization of Fincantieri, at the closing price on 30 June 2017, was approximately euro 1,652 million. In terms of stock liquidity, around 747 million shares were traded from the start of the year to 30 June 2017, with a daily average trading volume in the period of around 5.9 million shares, up on the 221 million shares traded (daily average 1.7 million) in the first half of 2016.
| 31.12.2016 | 30.06.2017 | 30.06.2016 | ||
|---|---|---|---|---|
| 0.38 | Average share price in the period | Euro | 0.73 | 0.35 |
| 0.47 | Share price at period end | Euro | 0.98 | 0.32 |
| 1,692 | Number of shares outstanding at period end | Million | 1,692 | 1,692 |
| 800 | Market capitalization ( *) |
Euro/million | 1,652 | 549 |
(*) Number of shares outstanding multiplied by reference share price at period end.
On 20 February 2017, Fincantieri and Ferretti Group announced they had signed a wide-ranging cooperation agreement with the goal of developing commercial and industrial synergies between the two Italian companies, world leaders in their respective markets. The agreement relates to the security and defense sector and to the recreational yachting industry. On 22 February 2017, Fincantieri, China State Shipbuilding Corporation (CSSC) and Carnival Corporation & plc signed a binding Memorandum of Agreement (MoA) for the construction of two cruise ships, with an option for four more, which will be the first vessels of this kind ever built in China for the Chinese market. The parties signed the MoA on behalf of the joint venture between Fincantieri and CSSC Cruise Technology Development Co., Ltd (CCTD), of the joint venture between Carnival Corporation and CSSC, and of the shipyard Shanghai Waigaoqiao Shipbuilding Co., Ltd (SWS).
On 27 February 2017, Marco Minniti, Italy's Minister of the Interior, and Giampiero Massolo, Fincantieri Chairman, in the company of Chief Executive Officer Giuseppe Bono, signed a National Legality Framework Agreement at the Ministry's headquarters in Rome. Also in attendance was Fincantieri CEO Giuseppe Bono. The agreement, aimed at preventing attempts at infiltration by organized crime, is based on the experience of several such agreements signed by the Group at a local level, and is a major milestone that will standardize anti-mafia checking procedures nationally for contractors and subcontractors at all Fincantieri Group locations.
On 24 March 2017, Fincantieri announced that the voluntary general offer for shares in VARD (the "Offer") had closed with acceptances for a total of 215,946,242 shares. Following the Offer and the purchase of VARD shares on the Singapore Stock Exchange during the Offer period, as at 24 March 2017, the total number of VARD shares owned directly or indirectly, controlled or agreed to be acquired by Fincantieri O&G, amounted to an aggregate number of 878,523,910 shares, representing approximately 74.45% of VARD's share capital. The consideration for the Offer Shares tendered in acceptance of the Offer was SGD 51,827,098.08 (approx. euro 34,281,715.89 at the exchange rate on 24 March 2017) while the amount paid for the VARD shares acquired on the Singapore Stock Exchange (excluding brokerage fees, clearing fees and applicable tax) was SGD 1,465,536.00 (approx. euro 969,398.07 at the exchange rate on 24 March 2017). After the Offer closing date, Fincantieri O&G further increased its shares in VARD to 78.13% of the share capital at 30 June 2017, thanks to a series of acquisitions made during the second quarter. The increased number of shares in VARD, which went from 55.63% to 78.13% of the share capital, has not altered the Fincantieri Group's scope of consolidation since VARD was already fully consolidated.
On 19 May 2017, Fincantieri signed the share purchase agreement for acquisition of 66.66% of STX France's capital from its shareholder STX Europe AS. The agreement lists a purchase price of euro 79.5 million, which the Company will pay through available financial resources. Closure of the transaction is subject to the conditions generally established for this sort of transaction and to the failure of the French State to exercise its pre-emption right on the shares to be sold by STX Europe AS. On the basis of the Heads of Terms on 12 April 2017, negotiations are ongoing between Fincantieri and the French State to finalize the governance agreements amongst future STX France shareholders.
On 19 May 2017, following approval of the financial statements of Fincantieri S.p.A. at 31 December 2016, the ordinary shareholders' meeting appointed the new Board of Statutory Auditors which will remain in office until the date of the shareholders' meeting called to approve the 2019 financial statements.
On 29 May 2017, Fincantieri and Eni signed a Memorandum of Understanding to collaborate in Research & Development of energy systems and, in particular, of the natural gas value chain. The understandings, which are highly innovative in their content and very important for the industry, are aimed at studying sustainable development projects and supporting the use of natural gas for transport.
On 31 May 2017, Fincantieri signed a letter of intent with China State Shipbuilding Corporation and the district of Baoshan in the city of Shanghai, aimed at creating an industrial park mainly dedicated to cruise, shipyard and maritime activities, as part of the development of these areas launched by China.
On 13 June 2017 Fincantieri, through its subsidiary Delfi, signed a purchase agreement for 83.5% of the share capital of Isselnord S.r.l., an Italian company operating in Defense and in the main civil industries, specializing in logistics support engineering and the IT technologies applied in this area. This transaction, which involves the Group fully controlling the subsidiary within a specified period, is part of the development of the "Naval services" operating segment.
On 4 July 2017, Fincantieri and GE Power reached a major milestone for the joint development of an innovative emission control system aimed at reducing pollution in the maritime industry. The new solution bears the name "Shipboard Pollutant Removal System" (Shipboard PRS) and, operational by 2020, it will be effective in reducing emissions in accordance with the most stringent MARPOL (MARitime POLlution) directives.
On 20 July 2017, Fincantieri and Mapei - leader in the chemical sector for the construction industry and with a specialized branch of products for shipbuilding - signed a strategic collaboration agreement regarding research and innovation. With this partnership Fincantieri intends to optimize laying times, reduce the weight of some the materials used, improve noise abatement using specific products, and develop and broaden the use of adhesive products in some shipbuilding applications. On Mapei's part, it intends to pursue projects that can lead to solutions for use in its own business.
The Group expects results for the year 2017 in line with the financial and economic projections presented in the Business Plan. In particular, in the second half of 2017, there will be a growth in revenue compared with the first six months of the year.
As for the Shipbuilding segment, Fincantieri expects two more cruise ships (of which one will be a prototype) to be delivered in the second half of the year, on top of the three ships already delivered in the first six months. In the naval segment, full operation of the Italian Navy's fleet renewal program is anticipated, whilst design and planning activities for the Qatari Ministry of Defense contract will be in full swing. The actions to increase earnings will also continue, including the production synergies established with VARD.
The Offshore segment remains characterized by the severe Oil&Gas crisis. As such, VARD continues to implement business diversification activities.
In the second half of 2017, the Equipment, Systems and Services segment is expected to confirm its positive results for the first six months, thanks in part to the development of the backlog relating to renewal of the Italian Navy's fleet. The project to regain control of the value chain by insourcing high value-added activities and outsourcing lower margin activities also continues; ad hoc controls have been created that are capable of strengthening the focus on the core product and further developing the after-sales business.
Direction and coordination by Fintecna S.p.A., the main shareholder of FINCANTIERI S.p.A., ceased as from 3 July 2014.
In compliance with the provisions of the Regulations concerning related party transactions adopted under Consob Resolution no. 17221 of 12 March 2010 and subsequent amendments and additions, FINCANTIERI S.p.A. has adopted a "Procedure for Related Party Transactions" with effect from 3 July 2014.
As far as related party transactions are concerned in the first half of 2017, these do not qualify as either atypical or unusual, since they fall within the normal course of business by the Group's companies. Such transactions are conducted under market conditions, taking into account the characteristics of the goods and services involved.
Information about related party transactions, including the disclosures required by the Consob Communication dated 28 July 2006, is presented in Note 28 of the Notes to the Condensed Consolidated Interim Financial Statements at 30 June 2017.
No purchases of the Parent Company's own shares were made on the market during the first half of 2017.
The "Report on Corporate Governance and Ownership Structure" (the "Report") required by art. 123-bis of Italy's Consolidated Law on Finance is a stand-alone document approved by the Board of Directors on 29 March 2017, and published in the "Corporate Governance" section of the Company's website at www.fincantieri.it.
The Report contains a general and complete overview of the corporate governance system adopted by FINCANTIERI S.p.A. It presents the Company's profile and the principles underlying the way it conducts its business; it provides information about the ownership structure and adoption of the Corporate Governance Code, including the main governance practices applied and the main characteristics of the system of internal control and risk management; it contains a description of the operation and composition of the governing and supervisory bodies and their committees, roles, duties and responsibilities.
The criteria for determining the compensation of the directors are set out in the "Remuneration Report", prepared in compliance with the requirements of art. 123-ter of Italy's Consolidated Law on Finance and art. 84-quater of the Consob Issuer Regulations, and published in the "Corporate Governance" section of the Company's website.
The Fincantieri Group is exposed in the normal course of its business activities to various financial and non-financial risk factors, which, if they should materialize, could have an impact on the results of operations and financial condition of the Group. Based on operating performance in the first six months of the year and the macroeconomic context, the risk factors foreseeable for the next six months of 2017 are described below according to their nature.
Given the operational complexity stemming not only from the inherent nature of shipbuilding but also from the Group's geographical and product diversification and acquisition-led growth, the Group is exposed to the risk of:
If the Group were unable to implement adequate project management activities, with sufficient or effective procedures and actions to control the proper completion and efficiency of its shipbuilding processes, or if it was unable to adequately manage the complexity arising from its product diversification or if it failed to efficiently distribute workloads according to production capacity (plant and labor) available on each occasion at the different production facilities, revenue and profitability might decline, with possible negative effects on its results of operations and financial condition.
To manage processes of such complexity, the Group implements procedures and work plans designed to manage and monitor the implementation of each project throughout its duration. In addition, the Group has adopted a flexible production structure in order to respond efficiently to fluctuations in vessel demand in the various business areas. This flexible approach allows the Group to overcome capacity constraints at individual shipyards and to work on more than one contract at the same time while ensuring that delivery dates are met. The Group is implementing actions aimed at improving the production and design processes in order to strengthen competitiveness and increase productivity.
The Fincantieri Group has many years of experience of building cruise ships for Carnival, an American shipowner and key player in the cruise industry, which operates not only through the Carnival brand but also through other prestigious brands such as P&O, Princess Cruises, Holland America Line, Cunard and Costa Cruises. The special relationship with the Carnival Group is certainly a strength for the Fincantieri Group, but also potentially a weakness if the client concentration aspect is considered. In the naval business, the bulk of revenue has traditionally come from the Italian Navy, representing a strategic asset for the Group, but whose demand for new ships is heavily dependent on defense spending policy. The subsidiary VARD, which in the past operated primarily in the offshore vessels market, has longstanding relationships with shipowners and companies operating in this sector.
The shipbuilding market in general is historically characterized by cycles, sensitive to trends in the industries served. The Group's offshore and cruise clients base their investment plans on demand by their own clientele; in the case of offshore, the main influence is energy demand and oil price forecasts, which in turn drive investment in exploration and production, while the main influences on the cruise industry are trends in the leisure market.
Postponement of fleet renewal programs or other events affecting the order backlog with the Fincantieri Group's principal cruise ship client could impact capacity utilization and business profitability; similarly a downturn in the offshore market could lead, as has already happened, to a reduction in the level of orders for the subsidiary VARD, as well as exposing it to the risk of cancellation or postponement of existing orders. Equally, the availability of resources earmarked by the State for defense spending on fleet modernization programs is a variable that could influence the Group's results of operations and financial condition.
The Fincantieri Group's policy of diversifying its cruise ship clients, while continuing to satisfy Carnival's requirements, has allowed it to enlarge the client base. In the naval vessels business, participation in international projects, like the FREMM program between Italy and France, has been of importance, as has the Group's expansion into the United States aimed at securing opportunities to expand production for the US defense sector, along with its efforts to develop international business through an active presence in the defense markets of other foreign countries with no domestic shipbuilding industry or, even if present, that lack the right technical skills, know-how or infrastructure for vessels of this kind. In this context, of particular importance is the order worth some euro 3.8 billion for the Qatari Ministry of Defense.
In order to mitigate the impact of the shipbuilding market cycle, the Group has pursued a diversification strategy in recent years, expanding its business both in terms of products and geographical coverage. Since 2005 the Group has expanded into the businesses of offshore, mega-yachts, marine systems and components, repairs, refitting and after-sales service. In parallel, the Group has expanded its business internationally, including through acquisitions.
Given the current downturn in the offshore market, the subsidiary VARD has pursued a strategy of diversifying into new market segments, such as expedition cruise, offshore wind, fishing and aquaculture, with the intent of reducing its exposure to the cyclical nature of the offshore Oil&Gas industry. As part of the program to improve efficiency and cut costs to rightsize production capacity for the new market opportunities, VARD has shut down one of its Brazilian yards, it has downsized the workforce at its facilities in Norway and Romania and it has repositioned one of the Norwegian yards to serve the aquaculture industry.
The production of standard vessels is now dominated by Asian shipyards, meaning that competitiveness can only be maintained by specializing in high value-added markets. As far as civilian vessels are concerned, the Parent Company has been focusing for several years on the cruise ship and cruise ferry segments, where it has a long track record; following the acquisition of VARD, it has extended this focus to the production of offshore support vessels. Additional factors that may affect competitiveness are the risk that due attention is not given to client needs, or that standards of quality and product safety are not in line with market demands and new regulations. Moreover, aggressive commercial policies, development of new products and new technologies, or increases in production capacity by competitors may lead to increased price competition, consequently impacting the required level of competitiveness.
Inattentive monitoring of the Group's markets and slow responses to the challenges posed by competitors and client needs may lead to a reduction in competitiveness, with an associated impact on production volumes, and/or less remunerative pricing, resulting in a drop in profit margins.
The Group endeavors to maintain competitive position in its business areas by ensuring a high quality, innovative product, and by seeking optimal costing as well as flexible technical and financial solutions in order to be able to propose more attractive offers than the competition. In parallel with the commercial initiatives to penetrate new market segments, the subsidiary VARD has developed a series of new ship projects, exploiting not only its own engineering and design expertise acquired in the offshore sector but also the know-how of the Fincantieri Group.
The difficult political and economic context and worsening regulatory environment of countries in which the Group operates, particularly for VARD's activities in Brazil, may adversely impact operations and future cash f lows. In addition, the pursuit of business opportunities in emerging markets, particularly in the defense sector, leads to increased exposure to country risk and/or risk of international bribery and corruption.
Situations involving country risk may have negative effects on the Group's results of operations and financial condition, with the loss of clients, profits and competitive advantage and, in the case of lawsuits and sanctions, on its reputation.
In pursuing business opportunities in emerging markets, the Group safeguards itself by favoring commercial prospects that are supported by inter-governmental agreements or other forms of cooperation between States, as well as by establishing, within its own organization, appropriate safeguards to monitor the processes at risk.
The shipbuilding contracts managed by the Group are mostly multi-year contracts for a fixed consideration, any change in which must be agreed with the client. Contract pricing must necessarily involve careful evaluation of the costs of raw materials, machinery, components, sub-contracts and all other construction-related costs (including personnel and overheads); this process is more complicated in the case of prototype or particularly complex ships.
Cost overruns not envisaged at the pre-contractual stage and not covered by a parallel increase in price can lead to a reduction in margins on the contracts concerned.
The Group takes into consideration expected increases in the components of contract costs when determining the offer price. In addition, at the time of signing the contract, fixed-price purchase options will already have been defined for some of the vessel's principal components.
Many factors can influence production schedules, as well as capacity utilization, and so impact agreed vessel delivery dates with possible penalties payable by the Group. These factors include, inter alia, strikes, poor industrial productivity, inadequate logistics and warehouse management, unexpected problems during design, engineering and production, events linked to adverse weather conditions, design changes or problems in procuring key supplies.
When the causes of late delivery are not recognized by contract, shipbuilding contracts provide for the payment of penalties that generally increase the longer the delay.
The Group manages its contracts through dedicated structures that control all aspects during the contract life cycle (design, procurement, construction, outfitting). Contracts with suppliers include the possibility of applying penalties for delays or hold-ups attributable to such suppliers.
The operational management of contracts carries a risk that a counterparty with whom the Group is doing business is unable to meet its commitments, more specifically involving client default on contractual payments, or supplier failure to discharge its obligations for operational or financial reasons. The Offshore industry is in the midst of a profound global market deterioration affecting all its players with a significant number of shipowners undertaking restructuring, in turn giving rise to increased counterparty risk. With particular reference to VARD, deterioration in the financial situation of many clients in the Offshore sector may lead to the cancellation or the postponement of the orders in the order book. This has already occurred for some orders.
Bankruptcy, whether by a client or supplier, can have serious effects on the Group's production and cash flows, given the high unit value of shipbuilding orders and the strategic nature of certain supplies for the production process. In particular, client cancellation of orders during vessel construction exposes the Group to the risk of having to sell the vessel in adverse market conditions and at prices that do not allow its construction costs to be recovered; likewise the postponement of deliveries can significantly increase working capital financing needs, with a consequent growth in debt and higher borrowing costs.
When acquiring shipbuilding orders, and where deemed necessary, the Group performs checks on the financial strength of its counterparties, including by obtaining information from leading credit rating agencies. Suppliers are subject to a strict qualification process, including evaluation of the potential risks associated with the counterparty concerned. As regards the financial aspect, the Group offers suppliers the opportunity to use instruments that facilitate their access to credit. To address the difficult situation in the offshore market, the subsidiary VARD is now working with clients and financial institutions to ensure delivery of not only vessels in the current order book but also those whose orders have been canceled. The subsidiary is also considering, where possible, all technical and commercial opportunities to reposition on the new markets served those vessels already built but whose orders have been cancelled.
A significant number of the Group's shipbuilding contracts (in general, for merchant vessels like cruise ships and offshore support vessels) establish that clients pay only a part of the contract price during ship construction; the balance of the price is paid upon delivery.
As a result, the Group incurs significant upfront costs, assuming the risk of incurring such costs before receiving full payment of the price from its clients and thus having to finance the working capital absorbed by ships during construction.
If the Group were unable to finance the working capital needs of ships during construction, it might not be able to complete contracts or win new ones, with negative effects on its results of operations and financial condition.
As for VARD, the cancellation and postponement of orders by clients in difficulty could have a significant impact on the Group's financial structure, with the risk that banks limit access to credit, thereby depriving it of the necessary funding for its working capital, such as construction loans.
The Group's objective is to maintain a more than sufficient level of committed and uncommitted credit lines and construction loans to guarantee coverage of the working capital needs generated by its operations.
The Group's clients often make use of financing to finalize the placement of orders.
Overseas clients may be eligible for export finance schemes structured in accordance with OECD rules.
Under such schemes, overseas buyers of ships can obtain bank credit against receipt of a guarantee by a national export credit agency, which in the case of Italy is SACE S.p.A. and GIEK in the case of Norway.
The availability of export financing is therefore a key condition for allowing overseas clients to award contracts to the Group, especially where cruise ship construction is concerned.
The lack of available finance for the Group's clients could have a highly negative impact on the Group's ability to obtain new orders as well as on the ability of clients to comply with the contractual terms of payment.
Fincantieri supports overseas clients during the process of finalizing export finance and particularly in managing relations with the agencies and companies involved in structuring such finance (for example, SACE, Simest and the banks). In addition, the process of structuring finance is managed in parallel with the process of finalizing the commercial contract, the enforceability of which is often subject to the shipowner's receipt of the commitment by SACE and the banks to provide an export credit guarantee. The subsidiary VARD is also actively working with GIEK, the Norwegian export credit agency, particularly in a new sector for the Norwegian market like that of expedition cruise vessels.
As an additional safeguard for the Group, in the event of a client default on its contractual obligations, Fincantieri has the right to terminate the contract. In such a case, it is entitled to keep the payments received and the ship under construction. The client may also be held liable for any uncovered costs.
The Fincantieri Group's decision to outsource some of its business activities is dictated by strategic considerations based on two factors: a) outsource activities for which it has the skills but insufficient in-house resources; b) outsource activities for which there are no in-house skilled resources and which would be too expensive and inefficient to develop.
Dependence on suppliers for certain business activities may result in the inability to ensure high standards of quality, failure to meet delivery dates, the acquisition of excessive supplier bargaining power, and a lack of access to new technologies.
In addition, the significant presence of suppliers in the production process has an impact on local communities, possibly requiring the Group to address social, political and legality issues.
A negative performance by suppliers in terms of quality, timing or costs causes production costs to rise, and the client's perception of the quality of the Fincantieri product to deteriorate. As for other partners at the local level, non-optimal relations may impact the Group's ability to compete on the market.
The Group has specific personnel in charge of coordinating the assembly of on-board systems and managing specific areas of outsourced production. In addition, the Fincantieri Group carefully selects its "strategic suppliers", which must meet the highest standards of performance. The Parent Company has developed a precise program of supplier performance evaluation in this regard, ranging from measurement of the services rendered, both in terms of quality of service offered and punctuality of delivery, to the strict observation of safety regulations, in line with the Group's "Towards Zero Accidents" objective. In addition, particular attention is paid in general to relations with the local communities that interact with the Group's shipyards, involving appropriate institutional relationships, as sometimes supplemented by the conclusion of suitable legality and/or transparency protocols with the local authorities, which in turn inspired the National Legality Framework Agreement signed in 2017. The subsidiary VARD has paid special attention to the process of evaluating and managing contracts with suppliers especially in light of the increase in the number of suppliers operating in new sectors entered as a result of its diversification strategy.
The Fincantieri Group has a vast accumulation of experience, know-how and business knowledge. As far as the workforce is concerned, the domestic labor market is not always able to satisfy the needs of production, either in terms of numbers or skills. The effective management of the Group's business is also linked to the ability to attract highly professional resources for key roles, and the ability to retain such talents within the Group; this involves suitable talent management with a view to continuous improvement, achieved by investing in staff training and performance evaluation.
The inadequacy of the domestic labor market to meet the Group's needs, the inability to acquire the necessary skills and the failure to transfer specific knowledge to the Group's resources, particularly in the technical sphere, could have negative effects on product quality.
The Human Resources Department constantly monitors the labor market and maintains frequent contact with universities, vocational schools and training institutes. The Group also makes a significant investment in training its staff, not only in technical-specialist and managerialrelational skills, but also regarding safety and quality. Lastly, specific training activities are planned to ensure that key management positions are covered in the event of staff turnover. The subsidiary VARD has carried out an internal reorganization to assist the process of diversifying into new markets, with particular attention to the development of new concepts and alteration of production processes.
The Fincantieri Group must abide by the rules, regulations and laws in force in the countries where it operates, including those to safeguard the environment and health and safety at work. Any breaches of such rules and regulations could result in civil, administrative or criminal sanctions, along with an obligation to do all that is necessary to comply with such regulations, the costs and liability for which could have a negative impact on the Group's business and results.
Any breaches of safety or environmental standards, any changes in the local legal and regulatory framework, as well as the occurrence of exceptional or unforeseen events, could cause the Fincantieri Group to incur extraordinary costs relating to the environment or safety at work.
The Group promotes compliance with all rules, regulations and laws that apply to it and implements and updates suitable prevention control systems for mitigating the risks associated with breach of such rules, regulations and laws. Accordingly, in order to prevent and manage the risk of occurrence of unlawful acts, the Parent Company has adopted an organizational, management and control model under Italian Legislative Decree 231 of 8 June 2001, which is also binding for suppliers and, in general, for third parties working with Fincantieri. In particular, the Parent Company has applied the provisions of Italian Legislative Decree 81/2008 - "Implementation of art. 1 of Law no. 123 dated 3 August 2007, concerning health and safety at work" (known as the "Health and Safety at Work Act"). Fincantieri has adopted suitable organizational models for preventing breach of these regulations, and sees that such models are reviewed and updated on an ongoing basis. The commitment to pursue and promote principles of environmental sustainability has been reaffirmed in the Parent Company's Environmental Policy document, which binds the Group to uphold regulatory compliance and to monitor working practices so as to ensure effective observance of the rules and regulations. The subsidiary VARD is also committed to minimizing the impact of its activities on the environment, involving actions in terms of resources, policies and procedures to improve its environmental performance. Fincantieri and VARD have started to implement and operate an Environmental Management System at their sites with a view to obtaining certification under UNI EN ISO 14001:2004.
Working in the defense and security sector, the Group is exposed to the risk that the evolving tendency in this sector could lead in the near future to restrictions on the currently permitted exceptions to competition law, with consequent limitations on the direct award of business in order to ensure greater competition in this particular market.
Possible limitations on the direct award of business could prevent the Group from being awarded work through negotiated procedures, without any prior publication of a public tender notice.
The Group is monitoring the possible evolution of national and Community legislation that could open up the possibility of competing in the defense and security sector including in other countries.
The Group's business could be adversely affected by:
Computer system failures, loss or corruption of data, including as a result of external attacks, inappropriate IT solutions for the needs of the business, or updates to IT solutions not in line with user needs, could affect the Group's operations by causing errors in the execution of operations, inefficiencies and procedural delays and other disruptions, affecting the Group's ability to compete on the market.
The Group considers it has taken all necessary steps to minimize these risks, by drawing on best practice for its governance systems and continuously monitoring the management of its IT infrastructure and applications. Authority to access and operate on the computer system is managed and maintained to ensure proper segregation of duties, as enhanced with the adoption of a new access management procedure using special software, allowing prior identification and treatment of the risks of segregation of duties (SoD) resulting from inappropriate attribution of access credentials.
The Group is exposed to exchange rate risk on transactions of a commercial and financial nature denominated in a currency other than the functional one (economic risk and transaction risk). In addition, translation risk can arise when preparing the consolidated financial statements, through translation of the income statements and balance sheets of consolidated companies that prepare their financial statements in a functional currency other than the Euro (mainly NOK, USD and BRL).
The absence of adequate currency risk management could increase the volatility of the Group's economic results. In particular, if currencies in which shipbuilding contracts are denominated were to depreciate, this could have an adverse impact on company profit margins.
Fincantieri has a policy for managing economic and transaction financial risks that defines instruments, responsibilities and reporting procedures, with which it mitigates currency market risks. The Group does not take out any hedges against currency risk related to the translation of financial statements of subsidiaries that use functional currencies other than the Euro (translation risk).
Some of the loan agreements entered into by the Group require it or some of its companies to comply with conditions, commitments and constraints of a financial and legal nature (such as the occurrence of events of default, even potential ones, cross-default clauses and covenants), non-observance of which could lead to immediate repayment of the loans. In addition, future increases in interest rates could lead to higher payments depending on the level of indebtedness outstanding at the time. The Group might not be able to access sufficient credit to properly finance its activities (such as in the case of particularly poor financial performance) or it might be able to access it only under particularly onerous terms and conditions. As for the Offshore industry, the worsening financial situation resulting in restructuring by many industry players is causing banks to reduce their credit exposure to such players, with the risk of consequent repercussions for VARD's ability to access construction loans, needed not only for offshore projects but also for those in new markets.
In the event of having limited access to credit, including because of its financial performance, or in the event of a rise in interest rates or of early repayment of debt, the Group could be forced to delay raising capital or to seek financial resources under more onerous terms and conditions, with negative effects on its results of operations and financial condition.
The Group constantly monitors both the circumstances that could adversely affect its results of operations and financial condition and its current and future capital and financial structure in order to ensure access to adequate types of finance in terms of amount and conditions. In particular, to mitigate liquidity risk and maintain a sufficient level of financial flexibility, the Group diversifies its sources of funding in terms of duration, counterparty and technical form.
Fincantieri's management reviews the performance of the Group and its business segments using certain non-GAAP measures not defined under IFRS. In particular, EBITDA is used as the main earnings indicator, as it enables the Group's underlying profitability to be assessed, by eliminating the impact of volatility associated with non-recurring items or extraordinary items outside the ordinary course of business.
As required by Consob Communication no. 0092543 of 3 December 2015 which implements the ESMA Guidelines on Alternative Performance Measures (document no. ESMA/2015/1415), the components of each of these measures are described below:
| 30.06.2017 | 30.06.2016 | |||
|---|---|---|---|---|
| (Euro/million) | Amounts in IFRS statement |
Amounts in reclassified statement |
Amounts in IFRS statement |
Amounts in reclassified statement |
| A - Revenue | 2,295 | 2,266 | ||
| Operating revenue | 2,252 | 2,232 | ||
| Other revenue and income | 43 | 34 | ||
| B - Materials, services and other costs | (1,671) | (1,712) | ||
| Materials, services and other costs | (1,673) | (1,715) | ||
| Recl. to I - Extraordinary and non-recurring income and expenses | 2 | 3 | ||
| C - Personnel costs | (462) | (431) | ||
| Personnel costs | (463) | (436) | ||
| Recl. to I - Extraordinary and non-recurring income and expenses | 1 | 5 | ||
| D - Provisions | (16) | (10) | ||
| Provisions | (35) | (20) | ||
| Recl. to I - Extraordinary and non-recurring income and expenses | 19 | 10 | ||
| E - Depreciation, amortization and impairment | (58) | (52) | ||
| Depreciation, amortization and impairment | (58) | (52) | ||
| F - Finance income/(costs) | (39) | (32) | ||
| Finance income/(costs) | (39) | (32) | ||
| G - Income/(expense) from investments | (1) | (4) | ||
| Income/(expense) from investments | (1) | (4) | ||
| H - Income taxes | (20) | (6) | ||
| Income taxes | (15) | (2) | ||
| Recl. to L - Tax effect of extraordinary and non-recurring income and expenses | (5) | (4) | ||
| I - Extraordinary and non-recurring income and expenses | (22) | (18) | ||
| Recl. from B - Materials, services and other costs | (2) | (3) | ||
| Recl. from C - Personnel costs | (1) | (5) | ||
| Recl. from D - Provisions | (19) | (10) | ||
| L - Tax effect of extraordinary and non-recurring income and expenses | 5 | 4 | ||
| Recl. from H - Income taxes | 5 | 4 | ||
| Profit/(loss) for the period | 11 | 5 |
| 30.06.2017 | 31.12.2016 | ||||
|---|---|---|---|---|---|
| (Euro/million) | Amounts in IFRS statement |
Amounts in reclassified statement |
Amounts in IFRS statement |
Amounts in reclassified statement |
|
| A) | Intangible assets | 583 | 595 | ||
| Intangible assets | 583 | 595 | |||
| B) | Property, plant and equipment | 1,049 | 1,064 | ||
| Property, plant and equipment | 1,049 | 1,064 | |||
| C) | Investments | 55 | 58 | ||
| Investments | 55 | 58 | |||
| D) | Other non-current assets and liabilities | 42 | (69) | ||
| Derivative assets | 67 | 4 | |||
| Other non-current assets | 27 | 16 | |||
| Other liabilities | (39) | (48) | |||
| Derivative liabilities | (13) | (41) | |||
| E) | Employee benefits | (58) | (58) | ||
| Employee benefits | (58) | (58) | |||
| F) | Inventories and advances | 575 | 590 | ||
| Inventories and advances | 575 | 590 | |||
| G) | Construction contracts and client advances | 1,594 | 604 | ||
| Construction contracts - assets | 2,207 | 1,374 | |||
| Construction contracts - liabilities and client advances | (613) | (770) | |||
| H) | Construction loans | (970) | (678) | ||
| Construction loans | (970) | (678) | |||
| I) | Trade receivables | 449 | 1,123 | ||
| Trade receivables and other current assets | 795 | 1,383 | |||
| Recl. to N) Other assets | (346) | (260) | |||
| L) | Trade payables | (1,426) | (1,307) | ||
| Trade payables and other current liabilities | (1,641) | (1,496) | |||
| Recl. to N) Other liabilities | 215 | 189 | |||
| M) | Provisions for risks and charges | (130) | (126) | ||
| Provisions for risks and charges | (130) | (126) | |||
| N) | Other current assets and liabilities | 114 | 59 | ||
| Deferred tax assets | 99 | 154 | |||
| Income tax assets | 21 | 23 | |||
| Derivative assets | 9 | 8 | |||
| Recl. from I) Other current assets | 346 | 260 | |||
| Deferred tax liabilities | (77) | (85) | |||
| Income tax liabilities | (12) | (11) | |||
| Derivative liabilities and option fair value | (57) | (101) | |||
| Recl. from L) Other current liabilities | (215) | (189) | |||
| O) | Net assets/(liabilities) held for sale | - | - | 1 | |
| NET INVESTED CAPITAL | 1,877 | 1,856 | |||
| P) | Equity | 1,246 | 1,241 | ||
| Q) | Net financial position | 631 | 615 | ||
| SOURCES OF FUNDING | 1,877 | 1,856 |
| page | |
|---|---|
| 48 | Consolidated statement of financial position |
| 49 | Consolidated statement of comprehensive income |
| 50 | Consolidated statement of changes in equity |
| 51 | Consolidated statement of cash flows |
| (Euro/000) | Nota | 30.06.2017 | of which related parties Note 28 |
31.12.2016 | of which related parties Note 28 |
|---|---|---|---|---|---|
| ASSETS | |||||
| NON-CURRENT ASSETS | |||||
| Intangible assets | 5 | 582,548 | 594,622 | ||
| Property, plant and equipment | 6 | 1,048,579 | 1,063,946 | ||
| Investments accounted for using the equity method | 7 | 52,509 | 54,973 | ||
| Other investments | 7 | 2,767 | 3,179 | ||
| Financial assets | 8 | 211,136 | 6,651 | 138,270 | 6,718 |
| Other assets | 9 | 27,025 | 681 | 16,155 | 731 |
| Deferred tax assets | 10 | 99,036 | 154,373 | ||
| Total non-current assets | 2,023,600 | 2,025,518 | |||
| CURRENT ASSETS | |||||
| Inventories and advances | 11 | 574,589 | 3,005 | 590,310 | 2,390 |
| Construction contracts - assets | 12 | 2,207,579 | 1,379,814 | ||
| Trade receivables and other current assets | 13 | 794,380 | 162,252 | 1,383,064 | 140,913 |
| Income tax assets | 14 | 20,574 | 23,068 | ||
| Financial assets | 15 | 51,150 | 411 | 49,047 | 550 |
| Cash and cash equivalents | 16 | 143,751 | 219,512 | ||
| Total current assets | 3,792,023 | 3,644,815 | |||
| Assets classified as held for sale | - | 6,314 | |||
| TOTAL ASSETS | 5,815,623 | 5,676,647 | |||
| EQUITY AND LIABILITIES EQUITY |
17 | ||||
| Attributable to owners of the parent | |||||
| Share capital | 862,981 | 862,981 | |||
| Reserves and retained earnings | 301,528 | 223,134 | |||
| Total Equity attributable to owners of the parent | 1,164,509 | 1,086,115 | |||
| Attributable to non-controlling interests | 81,771 | 155,241 | |||
| Total Equity | 1,246,280 | 1,241,356 | |||
| NON-CURRENT LIABILITIES | |||||
| Provisions for risks and charges | 18 | 117,943 | 109,805 | ||
| Employee benefits | 19 | 58,319 | 57,777 | ||
| Financial liabilities | 20 | 548,466 | 52,397 | 590,604 | 49,769 |
| Other liabilities | 21 | 38,615 | 48,233 | ||
| Deferred tax liabilities | 10 | 76,823 | 85,072 | ||
| Total non-current liabilities | 840,166 | 891,491 | |||
| CURRENT LIABILITIES | |||||
| Provisions for risks and charges | 18 | 12,159 | 16,169 | ||
| Construction contracts - liabilities | 12 | 613,828 | 776,114 | ||
| Trade payables and other current liabilities | 22 | 1,641,266 | 12,590 | 1,496,076 | 20,055 |
| Income tax liabilities | 12,171 | 10,586 | |||
| Financial liabilities | 23 | 1,449,753 | 94,283 | 1,240,044 | 57,599 |
| Total current liabilities | 3,729,177 | 3,538,989 | |||
| Liabilities directly associated with assets classified as held for sale | - | 4,811 | |||
| TOTAL EQUITY AND LIABILITIES | 5,815,623 | 5,676,647 |
| (Euro/000) | Nota | 30.06.2017 | of which related parties Note 28 |
30.06.2016 | of which related parties Note 28 |
|---|---|---|---|---|---|
| Operating revenue | 24 | 2,251,940 | 85,159 | 2,232,051 | 163,727 |
| Other revenue and income | 24 | 43,097 | 320 | 33,502 | 983 |
| Materials, services and other costs of which non-recurring |
25 28 |
(1,673,181) | (4,779) | (1,714,408) (389) |
(2,657) |
| Personnel costs of which non-recurring |
25 28 |
(463,854) (1,049) |
(436,007) (5,484) |
||
| Depreciation, amortization and impairment | 25 | (57,775) | (52,623) | ||
| Provisions | 25 | (34,582) | (19,852) | ||
| Finance income | 26 | 18,589 | 182 | 37,702 | 155 |
| Finance costs | 26 | (57,989) | (921) | (69,980) | (565) |
| Income/(expense) from investments | (59) | (3,054) | |||
| Share of profit/(loss) of investments accounted for using the equity method |
(1,280) | (897) | |||
| Taxes | 27 | (14,104) | (1,692) | ||
| PROFIT/(LOSS) FOR THE PERIOD (A) | 10,802 | 4,742 | |||
| Attributable to owners of the parent | 12,573 | 6,946 | |||
| Attributable to non-controlling interests | (1,771) | (2,204) | |||
| Basic earnings/(loss) per share (Euro) | 28 | 0,00743 | 0,00410 | ||
| Diluted earnings/(loss) per share (Euro) | 28 | 0,00742 | 0,00410 | ||
| Other comprehensive income/(losses), net of tax (OCI) | |||||
| Gains/(losses) from remeasurement of employee defined benefit plans |
17 19 |
702 | (3,380) | ||
| Total gains/(losses) that will not be reclassified to profit or loss, net of tax attributable to non-controlling interests |
17 | 702 | (3,380) | ||
| Effective portion of gains/(losses) on cash flow hedging instruments |
17 | 69,918 | 3,349 | ||
| Gains/(losses) arising from changes in OCI of investments accounted for using the equity method |
17 | (219) | (2,379) | ||
| Gains/(losses) arising from fair value measurement of available-for-sale securities and bonds |
|||||
| Exchange gains/(losses) arising on translation of foreign subsidiaries' financial statements |
17 | (36,082) | (16,144) | ||
| Total gains/(losses) that may be subsequently reclassified to profit or loss, net of tax |
17 | 33,617 | (15,174) | ||
| attributable to non-controlling interests | (3,927) | (22,514) | |||
| Total other comprehensive income/(losses), net of tax (B) attributable to non-controlling interests |
17 | 34,319 (3,927) |
(18,554) (22,514) |
||
| TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD (A) + (B) |
45,121 | (13,812) | |||
| Attributable to owners of the parent | 50,819 | 10,906 | |||
| Attributable to non-controlling interests | (5,698) | (24,718) |
| Equity attributable to |
Equity attributable |
|||||
|---|---|---|---|---|---|---|
| Reserves and | owners of | to non | ||||
| (Euro/000) | Note | Share capital |
retained earnings |
the parent |
controlling interests |
Total |
| 01.01.2016 | - | 862,981 | 275,038 | 1,138,019 | 128,079 | 1,266,098 |
| Business combinations | ||||||
| Share capital increase | 2,286 | 2,286 | ||||
| Acquisition of non-controlling interests | ||||||
| Dividend distribution | ||||||
| Other changes/roundings | 2 | 2 | 2 | 4 | ||
| Total transactions with owners | 2 | 2 | 2,288 | 2,290 | ||
| Profit/(loss) for the period | 6,946 | 6,946 | (2,204) | 4,742 | ||
| Other components | ||||||
| OCI for the period | 3,960 | 3,960 | (22,514) | (18,554) | ||
| Total comprehensive income for the period |
10,906 | 10,906 | (24,718) | (13,812) | ||
| 30.06.2016 | - | 862,981 | 285,946 | 1,148,927 | 105,649 | 1,254,576 |
| 01.01.2017 | 17 | 862,981 | 223,134 | 1,086,115 | 155,241 | 1,241,356 |
| Business combinations | ||||||
| Share capital increase | ||||||
| Acquisition of non-controlling interests | 25,790 | 25,790 | (67,772) | (41,982) | ||
| Dividend distribution | ||||||
| Reserve for long-term incentive plan | 1,785 | 1,785 | 1,785 | |||
| Other changes/roundings | ||||||
| Total transactions with owners | 27,575 | 27,575 | (67,772) | (40,197) | ||
| Net profit/(loss) for the period | 12,573 | 12,573 | (1,771) | 10,802 | ||
| Other components | ||||||
| OCI for the period | 38,246 | 38,246 | (3,927) | 34,319 | ||
| Total comprehensive income for the period |
50,819 | 50,819 | (5,698) | 45,121 | ||
| 30.06.2017 | 17 | 862,981 | 301,528 | 1,164,509 | 81,771 | 1,246,280 |
| (Euro/000) | Note | 30.06.2017 | 30.06.2016 |
|---|---|---|---|
| NET CASH FLOWS FROM OPERATING ACTIVITIES - of which related parties |
29 | (197,643) (29,368) |
357,071 9,931 |
| Investments in: | |||
| - intangible assets | (26,045) | (31,488) | |
| - property, plant and equipment | (49,669) | (62,565) | |
| - equity investments | (207) | ||
| - receivables and other financial assets | |||
| - business combinations, net of cash acquired | (5,515) | ||
| Disposals: - intangible assets |
114 | ||
| - property, plant and equipment | 536 | 77 | |
| - equity investments | 41 | ||
| - receivables and other non-current financial assets | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | (80,652) | (94,069) | |
| Change in non-current loans: - disbursements |
23,395 | 16,773 | |
| - repayments | (96,476) | (32,354) | |
| Change in non-current financial receivables: - disbursements |
(17,512) | ||
| - repayments | 106 | ||
| Change in current bank loans and credit facilities | |||
| - disbursements | 1,688,243 | 356,903 | |
| - repayments | (1,345,912) | (639,478) | |
| Change in current parent company loans and credit facilities | |||
| Change in other current financial liabilities/receivables | 6,955 | (43,810) | |
| Change in receivables for held-for-trading financial instruments | (2,384) | 796 | |
| Change in payables for held-for-trading financial instruments | (5,542) | (4,426) | |
| Net capital contributions by non-controlling interests | 2,286 | ||
| Increase in share capital | |||
| Purchase of shares from minority shareholders | (41,986) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | 208,781 | (343,204) | |
| - of which related parties | 39,518 | (5,635) | |
| NET CASH FLOWS FOR THE PERIOD | (69,514) | (80,202) | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 219,512 | 259,507 | |
| Effect of exchange rate changes on cash and cash equivalents | (6,247) | 6,140 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 143,751 | 185,445 |
| page | |
|---|---|
| 54 | Note 1 - Form, contents and other general information |
| 56 | Note 2 - Scope and basis of consolidation |
| 57 | Note 3 - Accounting standards |
| 57 | Note 4 - Critical accounting estimates and assumptions |
| 58 | Note 5 - Intangible assets |
| 59 | Note 6 - Property, plant and equipment |
| 60 | Note 7 - Investments accounted for using the equity method and other investments |
| 60 | Note 8 - Non-current financial assets |
| 61 | Note 9 - Other non-current assets |
| 61 | Note 10 - Deferred tax assets and liabilities |
| 62 | Note 11 - Inventories and advances |
| 63 | Note 12 - Construction contracts - net assets and liabilities |
| 63 | Note 13 - Trade receivables and other current assets |
| 64 | Note 14 - Income tax assets |
| 65 | Note 15 - Current financial assets |
| 66 | Note 16 - Cash and cash equivalents |
| 66 | Note 17 - Equity |
| 69 | Note 18 - Provisions for risks and charges |
| 70 | Note 19 - Employee benefits |
| 71 | Note 20 - Non-current financial liabilities |
| 71 | Note 21 - Other non-current liabilities |
| 72 | Note 22 - Trade payables and other current liabilities |
| 72 | Note 23 - Current financial liabilities |
| 73 | Note 24 - Revenue and income |
| 73 | Note 25 - Operating costs |
| 75 | Note 26 - Finance income and costs |
| 75 | Note 27 - Income taxes |
| 76 | Note 28 - Other information |
| 85 | Note 29 - Cash flows from operating activities |
| 86 | Note 30 - Segment information |
| 88 | Note 31 - Events after 30 june 2017 |
| 90 | Companies included in the scope of consolidation |
FINCANTIERI S.p.A. (hereinafter "Fincantieri" or the "Company" or the "Parent Company" and, together with its subsidiaries, the "Group" or the "Fincantieri Group") is a public limited company with its registered office in Via Genova no. 1, Trieste (Italy), and is listed on the Mercato Telematico Azionario (Italy's electronic stock market) organized and managed by Borsa Italiana S.p.A.. As at 30 June 2017, 71.6% of the Company's share capital of euro 862,980,725.70 was held by Fintecna S.p.A.; the remainder of share capital was distributed between a number of private investors, none of whom held significant interests of 2% or above. It should be noted that 100% of the share capital of Fintecna S.p.A. is owned by Cassa Depositi e Prestiti S.p.A. (hereinafter also referred to as "CDP"), 80.1% of whose share capital is in turn owned by Italy's Ministry of Economy and Finance.
The consolidated financial statements of the Fincantieri Group have been prepared in compliance with IFRS, meaning all the International Financial Reporting Standards, all the International Accounting Standards ("IAS"), and all the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") previously known as the Standing Interpretations Committee ("SIC"), which, at the reporting date of the consolidated financial statements, have been endorsed by the European Union in accordance with the procedure laid down in Regulation (EC) no. 1606/2002 of the European Parliament and European Council dated 19 July 2002.
The condensed consolidated interim financial statements as at and for the six months ended 30 June 2017 (the "Condensed Consolidated Interim Financial Statements"), were approved by the Company's Board of Directors on 25 July 2017.
PricewaterhouseCoopers S.p.A., the firm appointed to perform the statutory audit of the separate financial statements of the Parent Company and its main subsidiaries, has performed a limited review of the Condensed Consolidated Interim Financial Statements.
The Half-Year Financial Report of the Fincantieri Group as at 30 June 2017 has been prepared in accordance with the provisions of art. 154-ter par. 2 of Italian Legislative Decree no. 58/98 (known as the "Consolidated Law on Finance") and subsequent amendments and additions.
The Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 - Interim Financial Reporting. IAS 34 allows the preparation of financial statements in a "condensed" format, in which the minimum level of disclosure is less than that required by the IFRSs, as long as the reporting entity has previously published a complete set of financial statements prepared in accordance with IFRS. Since the contents of the Condensed Consolidated Interim Financial Statements are presented in a condensed format, they must be read in conjunction with the Group's consolidated financial statements for the year ended 31 December 2016, prepared in accordance with IFRS (the "2016 Consolidated Financial Statements").
With regard to the main financial risks to which the Group is exposed - credit risk, liquidity risk and market risk (in particular currency, interest rate and commodity price risk) - the management of these financial risks is the responsibility of the Parent Company which decides, in close collaboration with its operating units, whether and how to hedge these risks. There have been no significant changes in the major financial risks faced compared with those described in the 2016 Consolidated Financial Statements which should be consulted for more details. The following table shows the financial assets and liabilities that are measured at fair value at 30 June 2017 and 31 December 2016 according to their level in the fair value hierarchy:
| 30.06.2017 | 31.12.2016 | |||||
|---|---|---|---|---|---|---|
| (Euro/000) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Assets | ||||||
| Available-for-sale financial assets | ||||||
| Equity instruments | 1,031 | 593 | 1,414 | 625 | ||
| Debt instruments | ||||||
| Hedging derivatives | 73,760 | 12,073 | ||||
| Held-for-trading derivatives | 2,384 | |||||
| Total assets | 1,031 | 76,144 | 593 | 1,414 | 12,073 | 625 |
| Liabilities | ||||||
| Financial liabilities at fair value through profit or loss |
16,649 | 18,025 | ||||
| Hedging derivatives | 50,107 | 118,477 | ||||
| Held-for-trading derivatives | 847 | 6,389 | ||||
| Total liabilities | 50,954 | 16,649 | 124,866 | 18,025 |
Financial assets and liabilities measured at fair value are classified in the three hierarchical levels presented above, in order of the priority attributed to the inputs used to determine fair value. In particular:
Available-for-sale financial assets classified as Level 3 relate to equity investments carried at fair value. Level 3 also includes the financial liabilities relating to the fair value of options on equity investments calculated using valuation techniques whose inputs are not observable on the market. Movements in financial assets and liabilities classified as Level 3 are basically due to currency translation differences, which have had no impact on profit or loss.
The Group presents its statement of financial position using a "non-current/current" distinction, its statement of comprehensive income using a classification based on the nature of expenses, and its statement of cash flows using the indirect method. It is also noted that the Group has applied the provisions of Consob Resolution no. 15519 of 27 July 2006 concerning financial statement formats.
As previously stated, the scope and basis of consolidation adopted for the preparation of the Condensed Consolidated Interim Financial Statements are in line with those used to prepare the Consolidated Financial Statements, except as reported in Note 3.
The following transactions were performed during the first half of 2017:
No significant transactions or unusual events have taken place during the first half of 2017 or during 2016, except as reported in the Condensed Consolidated Interim Financial Statements as at and for the six months ended 30 June 2017. It is also noted that the Group's business is not subject to seasonal trends.
The exchange rates used to translate the financial statements of Group companies with a "functional currency" other than the Euro are as follows:
| 30.06.2017 | 31.12.2016 | 30.06.2016 | ||||
|---|---|---|---|---|---|---|
| Average rate | Closing rate | Average rate | Closing rate | Average rate | Closing rate | |
| US Dollar (USD) | 1.0830 | 1.1412 | 1.1069 | 1.0541 | 1.1159 | 1.1102 |
| UAE Dirham (AED) | 3.9758 | 4.1894 | 4.0634 | 3.8696 | 4.0966 | 4.0755 |
| Brazilian Real (BRL) | 3.4431 | 3.7600 | 3.8561 | 3.4305 | 4.1295 | 3.5898 |
| Norwegian Krone (NOK) | 9.1785 | 9.5713 | 9.2906 | 9.0863 | 9.4197 | 9.3008 |
| Indian Rupee (INR) | 71.1760 | 73.7445 | 74.3717 | 71.5935 | 75.0019 | 74.9603 |
| Romanian Leu (RON) | 4.5370 | 4.5523 | 4.4904 | 4.539 | 4.4956 | 4.5234 |
| Chinese Yuan (CNY) | 7.4448 | 7.7385 | 7.3522 | 7.3202 | 7.2965 | 7.3755 |
| Swedish Krona (SEK) | 9.5968 | 9.6398 | 9.4689 | 9.5525 | 9.3019 | 9.4242 |
The Group has not adopted early any accounting standards and interpretations whose application is not mandatory from 1 January 2017.
With reference to the new accounting standard, IFRS 15 - Revenue from contracts with customers, which replaces IAS 18 - Revenue and IAS 11 - Joint Arrangements, recently approved by the European Commission and effective for annual periods beginning on or after 1 January 2018, the Group conducted a preliminary analysis of the main sales contracts, not identifying a significant impact on Revenue recognition in its consolidated financial statements.
With regard to the new standard, IFRS 9 - Financial instruments, which substitutes IAS 39, also recently approved by the European Commission and effective for annual periods beginning on or after 1 January 2018, the Group is evaluating the method of implementing this new standard and its impact on the consolidated financial statements. Following a preliminary review, with particular reference to classification and hedge accounting, no material impacts are expected on the Group's financial statements.
The Shareholders' Meeting on 19 May 2017 approved a mid/long-term incentive plan for Group management, the accounting criteria for which are governed by IFRS 2.
According to the provisions of IFRS 2, the plan in question represents a component of the beneficiaries' remuneration. For plans that include remuneration in equity instruments, the cost is represented by the fair value of such instruments determined at the grant date and is recognized in "Personnel costs" (in the case of Company employees) and in "Service costs" over the period between the grant date and the maturity date, offset by an equity reserve known as "Equity incentive plan reserve". Changes in the fair value following the grant date have no effect on the initial evaluation. At the end of each quarter the estimate of the number of entitlements that will mature is updated. The change in estimate is recorded under "Equity incentive plan reserve" with the "Personnel costs" offset.
A full description of the use of accounting estimates can be found in the Consolidated Financial Statements at 31 December 2016.
Certain valuation processes, particularly the more complex ones, such as the determination of any impairment of non-current assets, are generally carried out in full only at the time of preparing the annual financial statements when all the necessary information is available, unless there are indicators of impairment that require the immediate assessment of any impairment losses.
Movements in this line item are as follows:
| (Euro/000) | Goodwill | Client relationships and order backlog |
Development costs |
Industrial patents and intellectual property rights |
Concessions, licenses, trademarks and similar rights |
Other intangibles |
Intangibles in progress and advances |
Total |
|---|---|---|---|---|---|---|---|---|
| - cost | 278,229 | 199,128 | 119,507 | 98,693 | 22,859 | 14,086 | 53,149 | 785,651 |
| - accumulated amortization and impairment losses |
(67,009) | (25,713) | (87,887) | (2,344) | (8,076) | (191,029) | ||
| Net carrying amount at 01.01.2017 |
278,229 | 132,119 | 93,794 | 10,806 | 20,515 | 6,010 | 53,149 | 594,622 |
| Movements - business combinations |
2,095 | 21 | 2,116 | |||||
| - capital expenditure | 1,356 | 42 | 437 | 75 | 24,135 | 26,045 | ||
| - net disposals | 0 | |||||||
| - reclassifications/other | (1) | 481 | 11 | 126 | (559) | 58 | ||
| - amortization | (4,201) | (8,195) | (1,104) | (1,014) | (687) | (15,201) | ||
| - impairment losses | 0 | |||||||
| - exchange rate differences |
(15,976) | (6,871) | (262) | (239) | (1,448) | (206) | (90) | (25,092) |
| Closing net carrying amount |
264,348 | 121,047 | 86,692 | 10,007 | 18,501 | 5,318 | 76,635 | 582,548 |
| - cost | 264,348 | 191,323 | 120,578 | 99,034 | 21,975 | 13,681 | 76,635 | 787,574 |
| - accumulated amortization and impairment losses |
(70,276) | (33,886) | (89,027) | (3,474) | (8,363) | (205,026) | ||
| Net carrying amount at 30.06.2017 |
264,348 | 121,047 | 86,692 | 10,007 | 18,501 | 5,318 | 76,635 | 582,548 |
"Goodwill" amounts to euro 264,348 thousand at 30 June 2017, of which euro 69,684 thousand allocated to the FMG Group cash-generating unit (CGU), within the Shipbuilding operating segment, and euro 192,656 thousand to the VARD Group CGU, within the Offshore operating segment. The reduction of the balance by euro 13,881 thousand compared to 31 December 2016 is mainly due to converting figures expressed in US Dollars and Norwegian Krone into euro. It is also worth noting the Group's acquisition of the shareholding in Issel Nord S.r.l. involved goodwill of euro 2,008 thousand. This value is provisional and may be subject to change until the price allocation is completed. More details about the transaction can be found in Note 2. "Concession, licenses, trademarks and similar rights" include euro 16,359 thousand for trademarks with indefinite useful lives, reflecting the expectation for their use.
In accordance with the provisions of IAS 36, the Group is of the opinion that the conditions exist as at 30 June 2017 to confirm the value of goodwill, of trademarks with indefinite useful lives and of the other intangible assets recognized as a result of business combinations, since no evidence of impairment has emerged indicating a reduction in their value.
Capital expenditure during the first half of 2017, of euro 26,045 thousand (euro 31,488 thousand at 30 June 2016), mainly included euro 15,674 thousand (euro 21,533 thousand at 30 June 2016) for the development innovative solutions and systems designed to improve the efficiency of cruise ship systems and operations, in addition to those for the development of a set of innovative and specialist technical and system engineering solutions for ships capable of operating in Arctic areas.
| (Euro/000) | Land and buildings |
Leased buildings |
Industrial plant, machinery and equipment |
Assets under concession |
Leasehold improvements |
Other assets |
Assets under construction and supplier advances |
Total |
|---|---|---|---|---|---|---|---|---|
| - cost | 619,215 | 3,936 | 1,200,557 | 185,356 | 28,706 | 176,477 | 159,379 | 2,373,626 |
| - accumulated depreciation and impairment losses |
(214,390) | (2,981) | (832,514) | (126,540) | (22,100) | (111,155) | (1,309,680) | |
| Net carrying amount at 01.01.2017 |
404,825 | 955 | 368,043 | 58,816 | 6,606 | 65,322 | 159,379 | 1,063,946 |
| Movements - business combinations |
3,215 | 3 | 160 | 3,378 | ||||
| - additions | 2,604 | 2,654 | 135 | 6 | 108 | 44,162 | 49,669 | |
| - net disposals | (398) | 209 | (189) | |||||
| - reclassifications/other | 2,374 | 1 | 1,439 | 270 | (4) | 693 | (4,151) | 622 |
| - depreciation | (8,441) | (215) | (28,176) | (1,962) | (499) | (3,262) | (42,555) | |
| - impairment losses | (19) | (19) | ||||||
| - finance costs | ||||||||
| - exchange rate differences |
(15,453) | (62) | (9,015) | (1) | (685) | (1,057) | (26,273) | |
| Closing net carrying amount |
388,707 | 679 | 335,157 | 57,259 | 6,108 | 62,336 | 198,333 | 1,048,579 |
| - cost | 608,263 | 3,635 | 1,185,999 | 185,761 | 28,684 | 177,387 | 198,333 | 2,388,062 |
| - accumulated depreciation and impairment losses |
(219,556) | (2,956) | (850,842) | (128,502) | (22,576) | (115,051) | (1,339,483) | |
| Net carrying amount at 30.06.2017 |
388,707 | 679 | 335,157 | 57,259 | 6,108 | 62,336 | 198,333 | 1,048,579 |
Capital expenditure in the first half of 2017 has resulted in additions of euro 49,669 thousand, mainly related to:
These are analyzed as follows:
| (Euro/000) | Associates | Joint ventures |
Total investments accounted for using the equity method |
Other companies carried at cost |
Other ompanies carried at fair value |
Total other investments |
Total |
|---|---|---|---|---|---|---|---|
| 01.01.2017 | 24,512 | 30,461 | 54,973 | 1,140 | 2,039 | 3,179 | 58,152 |
| Business combinations | 3 | 3 | 3 | ||||
| Additions | |||||||
| Revaluations/(Impairment losses) through profit or loss |
(1,851) | 571 | (1,280) | (325) | (325) | (1,605) | |
| Revaluations/(Impairment losses) through equity |
(219) | (73) | (292) | (292) | |||
| Disposals | (44) | (44) | (44) | ||||
| Dividends from investments accounted for using the equity method |
|||||||
| Reclassifications/Other | 337 | 337 | 337 | ||||
| Exchange rate differences | (1,185) | (1,185) | (90) | (90) | (1,275) | ||
| 30.06.2017 | 21,550 | 30,959 | 52,509 | 1,143 | 1,624 | 2,767 | 55,276 |
"Revaluations/(impairment losses) through profit or loss" of investments accounted for using the equity method (associates and joint ventures) include euro 1,280 thousand for the recognition of the Group's share of the loss for the period of associates and joint ventures; "revaluations/(impairment losses) through equity" report a negative balance of euro 292 thousand.
"Other investments" include euro 1,624 thousand in investments carried at fair value, calculated either on the basis of the related prices if quoted in active markets (Level 1), or using valuation techniques whose inputs are not observable on the market (Level 3). The change in the fair value of such investments has resulted in the recognition of net impairment losses of euro 325 thousand during the period.
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Grants financed by BIIS | 16,282 | 19,981 |
| Derivative assets | 66,926 | 3,817 |
| Other non-current financial receivables | 121,277 | 107,754 |
| Non-current financial receivables from investee companies | 6,651 | 6,718 |
| NON-CURRENT FINANCIAL ASSETS | 211,136 | 138,270 |
"Derivative assets" represent the reporting-date fair value of derivatives with a maturity of more than 12 months (Level 2).
Other non-current assets are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Other receivables from investee companies | 681 | 731 |
| Government grants receivable | 4,619 | 5,718 |
| Firm commitments | 11,922 | 1,819 |
| Other receivables | 9,803 | 7,887 |
| OTHER NON-CURRENT ASSETS | 27,025 | 16,155 |
Other non-current assets are all stated net of the related provision for impairment.
The following table presents the amount of and movements in the provision for impairment of other non-current receivables:
| (Euro/000) | Provision for impairment of other receivables |
|---|---|
| Total at 01.01.2017 | 16,104 |
| Utilizations | |
| Increases | |
| Releases | (1,800) |
| Total at 30.06.2017 | 14,304 |
Movements in deferred tax assets are analyzed as follows:
| (Euro/000) | Total |
|---|---|
| 01.01.2017 | 154,373 |
| Business combinations | 5 |
| Through profit or loss | (24,012) |
| Impairment losses | |
| Through other comprehensive income | (28,256) |
| Other movements | |
| Exchange rate differences | (3,074) |
| 30.06.2017 | 99,036 |
Deferred tax assets have been recognized on items for which the tax is likely to be recovered against forecast future taxable income of Group companies. The above deferred tax assets include euro 24 million which can be offset against the deferred tax liabilities shown below.
No deferred tax assets have been recognized on euro 92 million (euro 95 million at 31 December 2016) in carryforward losses of subsidiaries which are thought unlikely to be recovered against future taxable income.
Movements in deferred tax liabilities are analyzed as follows:
| (Euro/000) | Total |
|---|---|
| 01.01.2017 | 85,072 |
| Business combinations | |
| Through profit or loss | (3,066) |
| Impairment losses | |
| Through other comprehensive income | |
| Other movements | |
| Exchange rate differences | (5,183) |
| 30.06.2017 | 76,823 |
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Raw materials and consumables | 220,144 | 223,091 |
| Work in progress and semi-finished goods | 148,823 | 164,337 |
| Finished products | 31,516 | 33,549 |
| Merchandise | ||
| Total inventories | 400,483 | 420,977 |
| Advances to suppliers | 174,106 | 169,333 |
| TOTAL INVENTORIES AND ADVANCES | 574,589 | 590,310 |
Inventories and advances are stated net of relevant provisions for impairment. The following
table presents the amount of and movements in such provisions for impairment:
| Provision for | Provision for | |
|---|---|---|
| (Euro/000) | impairment - raw materials |
impairment- finished products |
| 01.01.2017 | 14,266 | 2,485 |
| Increases | 539 | |
| Utilizations | (670) | |
| Releases | ||
| Exchange rate differences | (46) | (75) |
| 30.06.2017 | 14,089 | 2,410 |
| 30.06.2017 | 31.12.2016 | |||||
|---|---|---|---|---|---|---|
| (Euro/000) | Construction contracts - gross |
Invoices issued and provision for future losses |
Construction contracts - net assets |
Construction contracts - gross |
Invoices issued and provision for future losses |
Construction contracts - net assets |
| Shipbuilding contracts | 6,557,499 | 4,385,155 | 2,172,344 | 4,774,660 | 3,418,220 | 1,356,440 |
| Other contracts for third parties |
44,226 | 8,991 | 35,235 | 34,696 | 11,322 | 23,374 |
| Total | 6,601,725 | 4,394,146 | 2,207,579 | 4,809,356 | 3,429,542 | 1,379,814 |
"Construction contracts – net liabilities" are analyzed as follows:
| 30.06.2017 | 31.12.2016 | |||||
|---|---|---|---|---|---|---|
| (Euro/000) | Construction contracts - gross |
Invoices issued and provision for future losses |
Construction contracts - net liabilities |
Construction contracts - gross |
Invoices issued and provision for future losses |
Construction contracts - net liabilities |
| Shipbuilding contracts |
2,934,229 | 3,537,402 | 603,173 | 3,880,919 | 4,645,533 | 764,614 |
| Other contracts for third parties |
161,090 | 171,251 | 10,161 | 137,008 | 148,423 | 11,415 |
| Client advances |
494 | 494 | 85 | 85 | ||
| Total | 3,095,319 | 3,709,147 | 613,828 | 4,017,927 | 4,794,041 | 776,114 |
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Trade receivables | 448,893 | 1,122,972 |
| Receivables from controlling companies (tax consolidation) | 47,828 | 34,034 |
| Government grants receivable | 8,094 | 7,292 |
| Other receivables | 216,102 | 132,231 |
| Indirect tax receivables | 37,621 | 37,343 |
| Firm commitments | 1,942 | 13,470 |
| Accrued income | 33,367 | 33,540 |
| Prepayments | 533 | 2,182 |
| TOTAL TRADE RECEIVABLES AND OTHER CURRENT ASSETS | 794,380 | 1,383,064 |
The above receivables are shown net of provisions for the impairment of receivables. These provisions relate to receivables that are no longer considered fully recoverable, including those involving legal action and judicial and out-of-court proceedings in cases of debtor default. A provision for interest charged on past due trade receivables has been recognized in a "Provision for past due interest".
The amount of and movements in the overall provisions for impairment of receivables are as follows:
| (Euro/000) | Provision for impairment of receivables |
|---|---|
| 01.01.2017 | 33,621 |
| Business combinations | |
| Utilizations | (2,597) |
| Increases | 167 |
| Releases | (6) |
| Exchange rate differences | (40) |
| 30.06.2017 | 31,145 |
"Firm commitments" reflect the fair value of hedged items in fair value hedges used by the Group to hedge currency risk arising on construction contracts in currencies other than the functional currency.
The increase of euro 674,079 thousand in trade receivables is mainly due to receipt of final payments for three cruise ships due to be delivered during the first months of 2017 and invoiced at 31 December 2016.
The increase of euro 83,871 thousand in Other receivables mainly refers to receivables for shipowner allowances, receivables for contributions to research and construction, and other receivables from Social Security authorities associated with the Parent Company.
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Italian corporate income taxation (IRES) | 17,028 | 18,337 |
| Italian regional tax on productive activities (IRAP) | 548 | 1,170 |
| Foreign tax | 2,998 | 3,561 |
| TOTAL INCOME TAX ASSETS | 20,574 | 23,068 |
The amount and movements in the provision for impairment of income tax assets are as follows:
| (Euro/000) | Provision for impairment of income tax assets |
|---|---|
| Balance at 1.1.2017 | 2,042 |
| Increases | |
| Releases | |
| Other changes | |
| Total at 30.06.2017 | 2,042 |
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Derivative assets | 9,218 | 8,256 |
| Other receivables | 33,497 | 32,403 |
| Government grants financed by BIIS | 7,331 | 7,196 |
| Accrued interest income | 868 | 960 |
| Prepaid interest and other financial expense | 236 | 232 |
| TOTAL CURRENT FINANCIAL ASSETS | 51,150 | 49,047 |
"Derivative assets" represent the reporting-date fair value of derivatives with a maturity of less than 12 months. The fair value of derivative financial instruments has been calculated considering market parameters and using widely accepted measurement techniques (Level 2). "Other receivables" mainly include deposits made by the VARD Group as security against contractual obligations to its lenders.
"Government grants financed by BIIS" (Banca Infrastrutture Innovazione e Sviluppo) report the current portion of government grants receivable by shipyards and by shipowners, assigned to Fincantieri as part of contract price.
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Bank and postal accounts | 143,636 | 219,370 |
| Checks | 17 | |
| Cash on hand | 115 | 125 |
| TOTAL CASH AND CASH EQUIVALENTS | 143,751 | 219,512 |
Cash and cash equivalents at period end include euro 20,461 thousand in bank deposits and escrow accounts; the remainder refers to the balances on current accounts held with a number of banks.
The composition of equity is analyzed in the following table:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Attributable to owners of the parent | ||
| Share capital | 862,981 | 862,981 |
| Share premium reserve | 110,499 | 110,499 |
| Legal reserve | 34,326 | 33,392 |
| Cash flow hedge reserve | 43,174 | (25,291) |
| Available-for-sale fair value reserve | (316) | (226) |
| Currency translation reserve | (113,735) | (65,167) |
| Other reserves and retained earnings | 215,007 | 145,825 |
| Profit/(Loss) for the period | 12,573 | 24,102 |
| 1,164,509 | 1,086,115 | |
| Attributable to non-controlling interests | ||
| Capital and reserves | 95,548 | 194,418 |
| Available-for-sale fair value reserve | (89) | (180) |
| Currency translation reserve | (11,917) | (28,646) |
| Profit/(Loss) for the period | (1,771) | (10,351) |
| 81,771 | 155,241 | |
| TOTAL EQUITY | 1,246,280 | 1,241,356 |
The share capital of FINCANTIERI S.p.A. amounts to euro 862,980,726, fully paid-in, divided into 1,692,119,070 ordinary shares with no par value. The number of shares is unchanged with respect to 31 December 2016.
SHARE PREMIUM RESERVE
This reserve has been recorded as a result of the capital increase accompanying the Company's listing on the Italian Electronic Stock Market on 3 July 2014. Listing costs of euro 11,072 thousand (net of tax effects) referring to the capital increase have been accounted for as a deduction from the share premium reserve, in compliance with IAS 32.
The cash flow hedge reserve reports the change in the effective portion of derivative hedging instruments measured at fair value.
The currency translation reserve reflects exchange differences arising from the translation into Euro of financial statements of foreign operations prepared in currencies other than the Euro.
These mainly comprise: i) surplus earnings after making allocations to the legal reserve and distributions in the form of shareholder dividends; ii) actuarial gains and losses on employee benefit plans; iii) the reserve for management's equity incentive plan.
The Fincantieri Group's purchase of shares from minority shareholders in the subsidiary VARD, completed in tranches during the first half of 2017 has led to a change of euro 25,790 thousand in other reserves and retained earnings. Specifically, the purchase of shares from minority shareholders in the Norwegian Group by Fincantieri Oil&Gas, which held 55.63% of shareholding in Vard Holdings Limited at 31 December 2016, was made through public offering (concluded on 24 March 2017), when a share capital of 74.45% was reached, and through subsequent purchase of shares on the market, which brought the total shareholding at the end of June 2017 to 78.13%. This transaction has not altered the Fincantieri Group's scope of consolidation since VARD was already fully consolidated; the aforementioned change in shareholding must be treated as a "transaction with owners" in which the difference between the value of the acquisition and the carrying amount of the non-controlling interest acquired is not recognized in profit or loss but in consolidated equity.
The reserve for the equity incentive plan for management has changed due to personnel costs, matured in the first half of 2017 (euro 1,785 thousand). More details about the incentive plan can be found in Note 28.
The change of euro 67,772 thousand since 31 December 2016 is due to purchase of the additional shares in VARD, as described above.
The amount of other comprehensive income/losses, presented in the statement of comprehensive income, is as follows:
| 30.06.2017 | 30.06.2016 | |||||
|---|---|---|---|---|---|---|
| (Euro/000) | Gross amount |
Tax (expense) /benefit |
Net amount | Gross amount |
Tax (expense) /benefit |
Net amount |
| Effective portion of profits/(losses) on cash flow hedging instruments |
99,275 | (29,357) | 69,918 | 4,868 | (1,519) | 3,349 |
| Gains/(losses) from remeasurement of employee defined benefit plans |
924 | (222) | 702 | (4,447) | 1,067 | (3,380) |
| Gains/(losses) arising from changes in OCI of investments accounted for using the equity method |
(219) | (219) | (2,379) | (2,379) | ||
| Gains/(losses) arising on translation of financial statements of foreign operations |
(37,405) | (1,323) | (36,082) | (16,144) | (16,144) | |
| Total other comprehensive income/(losses) | 62,575 | (28,256) | 34,319 | (18,102) | (452) | (18,554) |
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Effective portion of profits/(losses) arising in period on cash flow hedging instruments | 62,384 | 2,125 |
| Effective portion of profits/(losses) on cash flow hedging instruments reclassified to profit or loss | 36,891 | 2,743 |
| Effective portion of profits/(losses) on cash flow hedging instruments | 99,275 | 4,868 |
| Tax effect of other components of comprehensive income | (29,357) | (1,519) |
| TOTAL OTHER COMPREHENSIVE INCOME/(LOSSES), NET OF TAX | 69,918 | 3,349 |
The following table presents movements in the cash flow hedge reserve and the overall effect of derivative instruments on profit or loss:
| Equity | Profit | |||
|---|---|---|---|---|
| (Euro/000) | Gross | Taxes | Net | or loss |
| 01.01.2016 | (2,743) | 857 | (1,886) | |
| Change in fair value | (36,891) | 9,835 | (27,056) | |
| Utilization | 2,743 | (857) | 1,886 | (1,886) |
| Other income/(expenses) for risk hedging | 7,688 | |||
| Finance income/(costs) relating to held-for-trading derivatives and time-value component of hedging derivatives |
11,392 | |||
| 31.12.2016 | (36,891) | 9,835 | (27,056) | 17,194 |
| Equity | Profit | |||
| (Euro/000) | Gross | Taxes | Net | or loss |
| Change in fair value | 62,384 | (19,522) | 42,862 | |
| Utilization | 36,891 | (9,835) | 27,056 | (27,056) |
| Other income/(expenses) for risk hedging | 36,774 | |||
| Finance income/(costs) relating to held-for-trading derivatives and time-value component of hedging derivatives |
(1,705) | |||
| 30.06.2017 | 62,384 | (19,522) | 42,862 | 8,013 |
| (Euro/000) | Litigation | Product warranty |
Agent indemnity benefit |
Business reorganization |
Other risks and charges |
Total |
|---|---|---|---|---|---|---|
| Non-current portion | 54,746 | 35,733 | 76 | 19,250 | 109,805 | |
| Current portion | 1,816 | 7,696 | 2,524 | 4,133 | 16,169 | |
| 01.01.2017 | 56,562 | 43,429 | 76 | 2,524 | 23,383 | 125,974 |
| Business combinations | ||||||
| Other movements | 1 | (516) | (515) | |||
| Increases | 23,278 | 15,551 | 432 | 39,261 | ||
| Utilizations | (18,077) | (9,483) | (815) | (1,448) | (29,823) | |
| Releases | (2,340) | (964) | (3,304) | |||
| Exchange rate differences | (133) | (718) | (133) | (507) | (1,491) | |
| 30.06.2017 | 61,630 | 46,440 | 76 | 1,576 | 20,380 | 130,102 |
| Non-current portion | 59,982 | 40,134 | 76 | 17,751 | 117,943 | |
| Current portion | 1,648 | 6,306 | 1,576 | 2,629 | 12,159 |
These are analyzed as follows:
Increases in the litigation provision mainly refer to: i) precautionary provisions for claims brought by employees, authorities or third parties for damages arising from asbestos exposure; ii) the provision against the risk associated with the "Serene" litigation, recognized after the ruling handed down in January 2017 by the Trieste Court of Appeal, which rejected Fincantieri's opposition thereby making the arbitration awards issued in July 2014 executive; iii) other provisions for litigation with employees and suppliers and for other legal proceedings.
The "Product warranty" provision relates to the estimated cost of carrying out work under contractual guarantee after vessel delivery. The warranty period normally lasts for 1 or 2 years after delivery, but in some cases it may be longer.
The provision for "Other risks and charges" includes euro 7,804 thousand for environmental cleanup costs, while the remainder relates to various kinds of disputes, mostly of a contractual, technical or fiscal nature, which might be settled at the Group's expense either in or out of court.
Movements in this line item are as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Opening balance | 57,848 | 56,638 |
| Change in consolidation perimeter | 1,867 | |
| Business combinations | ||
| Interest cost | 477 | 1,198 |
| Costs of services | ||
| Actuarial (gains)/losses | (924) | 2,082 |
| Utilizations for benefits and advances paid | (1,077) | (2,060) |
| Staff transfers and other movements | 147 | (10) |
| Exchange rate differences | ||
| Closing balance | 58,338 | 57,848 |
| Plan assets | (19) | (71) |
| Closing balance | 58,319 | 57,777 |
The amount of Italian employee severance benefit recognized in the financial statements is calculated on an actuarial basis using the projected unit credit method; the discount rate used by this method to calculate the present value of the defined benefit obligation reflects the market yield on bonds with the same maturity as that expected for the obligation. The assumptions adopted are in line with those used for the financial statements at 31 December 2016 except for the discount rate, changed to 1.5% at the end of June 2017.
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Bond | 298,819 | 298,405 |
| Bank loans and credit facilities - non-current portion | 218,099 | 229,286 |
| Loans from BIIS - non-current portion | 16,282 | 19,981 |
| Liabilities to other lenders | 2,067 | 1,655 |
| Finance lease obligations | 348 | 519 |
| Derivative liabilities | 12,851 | 40,758 |
| TOTAL NON-CURRENT FINANCIAL LIABILITIES | 548,466 | 590,604 |
"Derivative liabilities" represent the reporting-date fair value of derivatives with a maturity of more than 12 months (Level 2).
With reference to "Bank loans and credit facilities - non-current portion", during the first half of 2017, the Parent Company obtained a new medium-term bullet loan for euro 15 million, with maturity in January 2020, from a leading international bank. In addition, at 30 June 2017, a non-current portion of euro 26 million of bank loans maturing in the next 12 months was reclassified to the current portion.
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Capital grants | 28,871 | 31,514 |
| Other liabilities | 9,737 | 13,739 |
| Firm commitments | 7 | 2,980 |
| TOTAL NON-CURRENT LIABILITIES | 38,615 | 48,233 |
"Capital grants" mainly comprise deferred income associated with grants for property, plant and equipment and innovation grants, which will be released to income in future years to match the related depreciation/amortization of these assets.
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Payables to suppliers | 1,229,902 | 1,204,623 |
| Payables to suppliers for reverse factoring | 196,360 | 102,037 |
| Social security payables | 45,160 | 32,937 |
| Other payables to employees | 92,082 | 65,385 |
| Other payables | 57,348 | 69,854 |
| Indirect tax payables | 11,995 | 12,611 |
| Firm commitments | 1,557 | 1,088 |
| Accrued expenses | 4,434 | 5,234 |
| Deferred income | 2,428 | 2,307 |
| TOTAL TRADE PAYABLES AND OTHER CURRENT LIABILITIES | 1,641,266 | 1,496,076 |
"Payables to suppliers for reverse factoring" report the liabilities to suppliers who have sold their credit with Fincantieri to a factoring company.
"Social security payables" include amounts due to INPS (the Italian social security authorities) for employer and employee contributions on June's wages and salaries and contributions on end-of-period wage adjustments. This balance also includes the 2017 premium due to INAIL, Italy's provider of national insurance against occupational injury and illness, which is being paid in instalments.
"Other payables to employees" report at 30 June 2017 include the effects of allocations made for unused holidays and deferred pay.
"Other payables" include employee income tax withholdings payable to tax authorities, sundry payables for insurance premiums, advances received against research grants, amounts payable to employee supplementary pension funds, security deposits received and various liabilities for disputes in the process of being settled financially.
"Firm commitments" reflect the fair value of hedged items in fair value hedges used by the Group to hedge currency risk arising on construction contracts in currencies other than the functional currency.
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Bank loans and credit facilities - current portion | 54,683 | 123,950 |
| Loans from BIIS - current portion | 7,331 | 7,196 |
| Bank loans and credit facilities - Construction loans | 969,580 | 677,578 |
| Other short-term bank debt | 201,148 | 290,602 |
| Liabilities to other lenders - current portion | 20,237 | 16,830 |
| Bank credit facilities repayable on demand | 126,618 | 16,336 |
| Financial liabilities for the acquisition of equity investments | 1,485 | 1,496 |
| Payables to joint ventures | 5,410 | 660 |
| Finance lease obligations - current portion | 301 | 411 |
| Fair value of options on equity investments | 16,649 | 18,025 |
| Derivative liabilities | 38,103 | 84,108 |
| Accrued interest expense | 8,208 | 2,852 |
| TOTAL CURRENT FINANCIAL LIABILITIES | 1,449,753 | 1,240,044 |
It is noted that on 25 May 2017 the Parent Company has regularly repaid a bullet loan of euro 65 million recorded at 31 December 2016 under Bank loans and credit facilities - current portion. At 30 June 2017, Bank loans and credit facilities - Construction loans includes the use of euro 386 million in construction loans by the Parent Company (of which euro 84 million disbursed by Cassa Depositi e Prestiti) and euro 584 million by the VARD Group.
Finally, it is noted that the reduction of other short-term bank debt is offset by the increase in outstanding debts; this change is due to a lower use of committed credit lines by the Parent Company in favor of greater use of uncommitted lines.
The fair value of derivative financial instruments has been calculated considering market parameters and using widely accepted measurement techniques (Level 2).
| (Euro/000) | 30.06.2017 | 30.06.2016 |
|---|---|---|
| Sales and service revenue | 982,301 | 725,683 |
| Change in construction contracts | 1,269,639 | 1,506,368 |
| Operating revenue | 2,251,940 | 2,232,051 |
| Gains on disposal | 377 | 49 |
| Sundry revenue and income | 29,075 | 29,732 |
| Government grants | 13,645 | 3,721 |
| Total other revenue and income | 43,097 | 33,502 |
| TOTAL REVENUE AND INCOME | 2,295,037 | 2,265,553 |
These are analyzed as follows:
| (Euro/000) | 30.06.2017 | 30.06.2016 |
|---|---|---|
| Raw materials and consumables | (1,108,984) | (1,150,618) |
| Services | (503,588) | (544,587) |
| Leases and rentals | (19,258) | (21,424) |
| Change in inventories of raw materials and consumables | (18,205) | 5,989 |
| Change in work in progress | (14,704) | 2,345 |
| Sundry operating costs | (17,883) | (19,481) |
| Cost of materials and services capitalized in fixed assets | 9,441 | 13,368 |
| Total materials, services and other costs | (1,673,181) | (1,714,408) |
| (Euro/000) | 30.06.2017 | 30.06.2016 |
|---|---|---|
| Personnel costs: | ||
| - wages and salaries | (338,010) | (316,040) |
| - social security | (103,331) | (94,834) |
| - costs for defined contribution plans | (16,737) | (15,614) |
| - other personnel costs | (10,339) | (15,535) |
| Personnel costs capitalized in fixed assets | 4,563 | 6,016 |
| Total personnel costs | (463,854) | (436,007) |
"Personnel costs" represent the total cost incurred for employees, including wages and salaries, employer social security contributions, gifts and travel allowances.
Lastly, "Wages and salaries" include the cost arising from the Performance Share Plan 2016-2018 (euro 1,785 thousand), approved by the Shareholders' Meeting on 19 May 2017, in favor of management identified by the Board of Directors of the Parent Company on 15 December 2016. More details about the transaction can be found in Note 28.
The Fincantieri Group's headcount at 30 June 2017 can be broken down as follows:
| (number) | 30.06.2017 | 30.06.2016 |
|---|---|---|
| Employees at period end: | ||
| Total at period end | 19,428 | 18,825 |
| - of whom in Italy | 8,269 | 7,838 |
| - of whom in Parent Company | 7,524 | 7,372 |
| - of whom in VARD | 9,025 | 8,739 |
| Average number of employees | 19,111 | 19,300 |
| - of whom in Italy | 7,943 | 7,769 |
| - of whom in Parent Company | 7,429 | 7,321 |
| - of whom in VARD | 8,932 | 9,277 |
| (Euro/000) | 30.06.2017 | 30.06.2016 |
|---|---|---|
| Depreciation and amortization: | ||
| - amortization of intangible assets | (15,201) | (11,850) |
| - depreciation of property, plant and equipment | (42,555) | (40,746) |
| Impairment: | ||
| - impairment of intangible assets | ||
| - impairment of property, plant and equipment | (19) | (27) |
| Total depreciation, amortization and impairment | (57,775) | (52,623) |
| Provisions: | ||
| - impairment of receivables | (167) | |
| - increases in provisions for risks and charges | (39,262) | (23,188) |
| - release of provisions and impairment reversals | 4,847 | 3,336 |
| Total provisions | (34,582) | (19,852) |
A breakdown of depreciation, amortization and impairment is provided in Notes 5 and 6. Details of "Provisions" can be found in Notes 9, 13 and 18.
| (Euro/000) | 30.06.2017 | 30.06.2016 |
|---|---|---|
| FINANCE INCOME | ||
| Interest and other income from financial assets | 1,274 | 1,532 |
| Income from derivative financial instruments | 16 | 1,353 |
| Bank interest and fees and other income | 2,346 | 3,374 |
| Foreign exchange gains | 14,953 | 31,443 |
| Total finance income | 18,589 | 37,702 |
| FINANCE COSTS | ||
| Interest and fees charged by joint ventures | (139) | (167) |
| Interest and fees charged by controlling companies | (782) | (83) |
| Expenses from derivative financial instruments | (2,249) | (6,896) |
| Interest on employee benefit plans | (351) | (533) |
| Interest and fees on bonds | (5,992) | (5,989) |
| Interest and fees on construction loans | (11,674) | (18,930) |
| Bank interest and fees and other expense | (16,323) | (18,573) |
| Foreign exchange losses | (20,479) | (18,809) |
| Total finance costs | (57,989) | (69,980) |
| TOTAL FINANCE INCOME AND COSTS | (39,400) | (32,278) |
These are analyzed as follows:
"Finance income" includes euro 445 thousand (euro 575 thousand in the first half of 2016) in interest formally paid by the Italian State to the Parent Company, but effectively paid to Banca Infrastrutture Innovazione e Sviluppo (with an equal amount recognized as a finance cost), under the structure in place to disburse government grants.
Income taxes have been calculated on the basis of the result for the period. Deferred income taxes are analyzed in Note 10.
The consolidated net financial position as monitored by the Group is presented below.
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| A. Cash | 115 | 142 |
| B. Other cash equivalents | 143,636 | 219,370 |
| C. Held-for-trading securities | ||
| D. Cash and cash equivalents (A)+(B)+(C) | 143,751 | 219,512 |
| E. Current financial receivables - of which related parties |
34,601 410 |
33,595 550 |
| F. Current bank debt - of which related parties |
(327,766) - |
(306,938) (20,000) |
| G. Current portion of non-current debt - of which related parties |
(62,891) (4,367) |
(126,802) (3,606) |
| H. Other current financial liabilities - of which related parties |
(27,606) (5,583) |
(19,397) (660) |
| I. Current debt (F)+(G)+(H) | (418,263) | (453,137) |
| J. Net current debt (D)+(E)+(I) | (239,911) | (200,030) |
| K. Non-current financial receivables - of which related parties |
127,928 6,651 |
114,472 6,718 |
| L. Non-current bank debt - of which related parties |
(218,099) (52,397) |
(229,286) (49,769) |
| M. Bond | (298,819) | (298,405) |
| N. Other non-current financial liabilities - of which related parties |
(2,415) - |
(2,174) - |
| O. Non-current debt (L)+(M)+(N) | (519,333) | (529,865) |
| P. Net non-current debt (K)+(O) | (391,405) | (415,393) |
| Q. Net financial position (J)+(P) | (631,316) | (615,423) |
For the purposes of complying with Consob Communication no. DEM/6064293/2006, the following table reconciles the above net financial position with the disclosure recommended by the European Securities and Markets Authority (ESMA).
| (Euro/000) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Net financial position | (631,316) | (615,423) |
| Non-current financial receivables | (127,928) | (114,472) |
| Construction loans | (969,580) | (677,578) |
| - of which related parties | (84,333) | (33,333) |
| Net financial position as per ESMA recommendation | (1,728,824) | (1,407,473) |
In accordance with Consob Communication no. 0092543 of 3 December 2015 with reference to the provisions of Consob Resolution no. 15519 of 27 July 2006, only items considered to be nonrecurring have been presented in the financial statements, and not extraordinary ones outside of ordinary operations. The items reported refer to costs of restructuring plans and other nonrecurring personnel costs presented gross of euro 91 thousand in tax effects (euro 325 thousand at 30 June 2016).
In accordance with the disclosures required by Consob Communication no. DEM/6064293 dated 28 July 2006, it is reported that no atypical and/or unusual transactions were carried out during the first half of 2017.
In May 2017, Fincantieri signed the sales agreement for acquisition of 66.6% of STX France's capital. Closure of the transaction, which requires payment of euro 79.5 million, financed through available resources, is subject to the conditions generally established for this sort of transaction and to the failure of the French State to exercise its pre-emption right on the shares to be sold by STX Europe AS. Negotiations are currently ongoing between Fincantieri and the French State to finalize the governance agreements amongst future STX France shareholders.
Intragroup transactions, transactions with Fintecna and its subsidiaries, with Cassa Depositi e Prestiti and its subsidiaries, with companies controlled by Italy's Ministry of Economy and Finance, and with other related parties in general, do not qualify as either atypical or unusual, since they fall within the normal course of business of the Fincantieri Group and are conducted on an arm's length basis.
The figures for related party transactions and balance are reported in the following tables:
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
30.06.2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| Non-current financial |
Current financial |
Trade receivables and other |
Trade receivables and other non |
Non-current financial |
Current financial |
Trade payables and other current |
||
| (Euro/000) | assets | assets | Advances ( *) |
current assets | current assets | liabilities | liabilities | liabilities |
| FINTECNA S.p.A. | ||||||||
| CASSA DEPOSITI E PRESTITI S.p.A. | 47,828 | (52,397) | (88,700) | (69) | ||||
| TOTAL CONTROLLING COMPANIES | 47,828 | (52,397) | (88,700) | (69) | ||||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 84,450 | (5,410) | (828) | |||||
| UNIFER NAVALE SRL | (173) | |||||||
| CAMPER & NICHOLSONS INT. SA | 343 | |||||||
| ETIHAD SHIP BUILDING LLC | 2,100 | 14,203 | (4,028) | |||||
| TOTAL JOINT VENTURES | 343 | 2,100 | 98,653 | (5,583) | (4,856) | |||
| ISLAND OFFSHORE LNG AS | 180 | |||||||
| OLYMPIC GREEN ENERGY KS | 418 | 47 | ||||||
| DOF ICEMAN AS | ||||||||
| BREVIK TECHNOLOGY AS | ||||||||
| MOKSTER SUPPLY AS | 6,053 | |||||||
| CANADIAN SUBSEA SHIPPING | 21 | |||||||
| CSS DESIGN | 681 | |||||||
| OLYMPIC CHALLENGER KS | ||||||||
| TOTAL ASSOCIATES | 6,651 | 68 | 681 | |||||
| CDP IMMOBILIARE S.r.l. | 3,250 | |||||||
| TIRRENIA DI NAVIGAZIONE S.p.A. | 10,752 | |||||||
| SACE FCT | 12 | (1) | ||||||
| PENSION FUND FOR SENIOR MANAGERS OF FINCANTIERI S.p.A. |
(566) | |||||||
| COMETA NATIONAL PENSION FUND | (2,095) | |||||||
| TERNA RETE ITALIA S.p.A. | (140) | |||||||
| IDS INGEGNERIA DEI SISTEMI S.p.A. | (12) | |||||||
| VALVITALIA S.p.A. | 733 | 16 | (1,738) | |||||
| SOLIDARIETÀ VENETO - PENSION FUND | (47) | |||||||
| OTHER | ||||||||
| TOTAL CDP GROUP | 733 | 14,030 | (4,599) | |||||
| QUANTA S.p.A. | (262) | |||||||
| EXPERIS S.r.l. | (73) | |||||||
| HORIZON SAS | (1) | |||||||
| BANCA DEL MEZZOGIORNO - MEDIOCREDITO CENT. S.p.A. |
||||||||
| LEONARDO GROUP Finmeccanica | 172 | 1,274 | (2,719) | |||||
| ENI GROUP | 467 | (4) | ||||||
| ENEL GROUP | (7) | |||||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
||||||||
| TOTAL OTHER RELATED PARTIES | 172 | 1,741 | (3,066) | |||||
| TOTAL RELATED PARTIES | 6,651 | 411 | 3,005 | 162,252 | 681 | (52,397) | (94,283) | (12,590) |
| TOTAL CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
211,136 | 51,150 | 174,106 | 794,380 | 27,025 | (548,466) | (1,449,753) | (1,641,267) |
| % on consolidated statement of financial position |
3% | 1% | 2% | 20% | 3% | 10% | 7% | 1% |
(*) "Advances" are classified in "Inventories and advances", as detailed in Note 11
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
31.12.2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Non-current financial |
Current financial |
Trade receivables and other |
Trade receivables and other non |
Non-current financial |
Current financial |
Trade payables and other current |
||
| (Euro/000) | assets | assets | Advances ( *) |
current assets | current assets | liabilities | liabilities | liabilities |
| FINTECNA S.p.A. | ||||||||
| CASSA DEPOSITI E PRESTITI S.p.A. | 34,034 | (49,769) | (36,939) | (62) | ||||
| TOTAL CONTROLLING COMPANIES | 34,034 | (49,769) | (36,939) | (62) | ||||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 77,308 | (660) | (1,902) | |||||
| UNIFER NAVALE SRL | (75) | |||||||
| CAMPER & NICHOLSON INT. SA | 499 | |||||||
| ETIHAD SHIP BUILDING LLC | 2,100 | 15,060 | (3,928) | |||||
| TOTAL JOINT VENTURES | 499 | 2,100 | 92,368 | (660) | (5,905) | |||
| ISLAND OFFSHORE LNG AS | ||||||||
| OLYMPIC GREEN ENERGY KS | ||||||||
| DOF ICEMAN AS | 6,532 | |||||||
| BREVIK TECHNOLOGY AS | 186 | |||||||
| MOKSTER SUPPLY AS | ||||||||
| CANADIAN SUBSEA SHIPPING | ||||||||
| CSS DESIGN | 731 | |||||||
| OLYMPIC CHALLENGER KS | 51 | |||||||
| TOTAL ASSOCIATES | 6,718 | 51 | 731 | |||||
| CDP IMMOBILIARE S.r.l. | 3,250 | |||||||
| TIRRENIA DI NAVIGAZIONE S.p.A. | 10,760 | |||||||
| SACE FCT | 6 | |||||||
| PENSION FUND FOR SENIOR MANAGERS OF FINCANTIERI S.p.A. |
(1,144) | |||||||
| COMETA NATIONAL PENSION FUND | (3,461) | |||||||
| TERNA RETE ITALIA S.p.A. | ||||||||
| IDS INGEGNERIA DEI SISTEMI S.p.A. | ||||||||
| VALVITALIA S.p.A. | ||||||||
| SOLIDARIETÀ VENETO - PENSION FUND | ||||||||
| OTHER | (153) | |||||||
| TOTAL CDP GROUP | 14,016 | (4,758) | ||||||
| HORIZON SAS | (1) | |||||||
| QUANTA SPA | (438) | |||||||
| EXPERIS SRL | ||||||||
| BANCA DEL MEZZOGIORNO - MEDIOCREDITO CENT. S.p.A. |
(20,000) | |||||||
| LEONARDO GROUP Finmeccanica | 287 | 42 | (8,787) | |||||
| ENI GROUP | 3 | 278 | (53) | |||||
| ENEL GROUP | ||||||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
175 | (51) | ||||||
| TOTAL OTHER RELATED PARTIES | 290 | 495 | (20,000) | (9,330) | ||||
| TOTAL RELATED PARTIES | 6,718 | 550 | 2,390 | 140,913 | 731 | (49,769) | (57,599) | (20,055) |
| TOTAL CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
138,270 | 49,047 | 590,310 | 1,383,064 | 16,155 | (590,604) | (1,240,044) | (1,496,076) |
| % on consolidated statement of financial position |
5% | 1% | 0% | 10% | 5% | 8% | 5% | 1% |
(*) "Advances" are classified in "Inventories and advances", as detailed in Note 11
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
30.06.2017 | ||||
|---|---|---|---|---|---|
| (Euro/000) | Operating revenue | Other revenue and income |
Materials, services and other costs |
Finance income | Finance costs |
| FINTECNA S.p.A. | |||||
| CASSA DEPOSITI E PRESTITI S.p.A. | (43) | (782) | |||
| TOTAL CONTROLLING COMPANIES | (43) | (782) | |||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 84,998 | 138 | (568) | (139) | |
| UNIFER NAVALE SRL | (386) | ||||
| CAMPER & NICHOLSONS INTERNATIONAL SA | 20 | ||||
| ETIHAD SHIP BUILDING LLC | 103 | (126) | |||
| TOTAL JOINT VENTURES | 84,998 | 241 | (1,080) | 20 | (139) |
| BREVIK TECHNOLOGY AS | 2 | ||||
| REM SUPPLY AS | 30 | ||||
| OLYMPIC GREEN ENERGY KS | 130 | ||||
| DOF ICEMAN AS | |||||
| TOTAL ASSOCIATES | 162 | ||||
| SIMEST S.p.A. | |||||
| SACE BT S.p.A. | |||||
| SACE FCT | 10 | ||||
| IDS INGEGNERIA DEI SISTEMI S.p.A. | (402) | ||||
| ACAM CLIENTI S.P.A. | (1) | ||||
| VALVITALIA | 32 | (343) | |||
| OTHER | |||||
| TOTAL CDP GROUP | 42 | (746) | |||
| QUANTA S.p.A. | (1,005) | ||||
| EXPERIS S.r.l. | (148) | ||||
| HORIZON SAS | |||||
| LEONARDO GROUP Finmeccanica | 18 | (1,319) | |||
| ENI GROUP | 161 | 19 | (416) | ||
| ENEL GROUP | (22) | ||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
|||||
| TOTAL OTHER RELATED PARTIES | 161 | 37 | (2,910) | ||
| TOTAL RELATED PARTIES | 85,159 | 320 | (4,779) | 182 | (921) |
| TOTAL CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
2,251,940 | 43,097 | (1,673,181) | 18,589 | (57,989) |
| % on consolidated statement of comprehensive income |
4% | 1% | 0% | 1% | 2% |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
30.06.2016 | ||||
|---|---|---|---|---|---|
| (Euro/000) | Operating revenue | Other revenue and income |
Materials, services and other costs |
Finance income | Finance costs |
| FINTECNA S.p.A. | (10) | ||||
| CASSA DEPOSITI E PRESTITI S.p.A. | (32) | (284) | |||
| TOTAL CONTROLLING COMPANIES | (43) | (284) | |||
| ORIZZONTE SISTEMI NAVALI S.p.A. | 162,658 | 369 | (359) | (167) | |
| UNIFER NAVALE SRL | |||||
| CAMPER & NICHOLSONS INTERNATIONAL SA | |||||
| ETIHAD SHIP BUILDING LLC | 753 | 533 | (174) | ||
| TOTAL JOINT VENTURES | 163,410 | 901 | (533) | (167) | |
| BREVIK TECHNOLOGY AS | 9 | ||||
| REM SUPPLY AS | 12 | ||||
| OLYMPIC GREEN ENERGY KS | 28 | ||||
| DOF ICEMAN AS | 106 | ||||
| TOTAL ASSOCIATES | 155 | ||||
| SIMEST S.p.A. | (347) | ||||
| SACE BT S.p.A. | (114) | ||||
| SACE FCT | |||||
| IDS INGEGNERIA DEI SISTEMI S.p.A. | |||||
| ACAM CLIENTI S.P.A. | |||||
| VALVITALIA | |||||
| OTHER | 9 | (168) | |||
| TOTAL CDP GROUP | 9 | (514) | (114) | ||
| QUANTA S.p.A. | (381) | ||||
| EXPERIS S.r.l. | (147) | ||||
| HORIZON SAS | 11 | ||||
| LEONARDO GROUP Finmeccanica | 2 | 44 | (763) | ||
| ENI GROUP | 18 | (258) | |||
| ENEL GROUP | 315 | ||||
| COMPANIES CONTROLLED BY MINISTRY OF ECONOMY AND FINANCE |
(18) | ||||
| TOTAL OTHER RELATED PARTIES | 317 | 73 | (1,567) | ||
| TOTAL RELATED PARTIES | 163,727 | 983 | (2,657) | 155 | (565) |
| TOTAL CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
2,232,051 | 33,502 | (1,714,408) | 37,702 | (69,980) |
| % on consolidated statement of comprehensive income |
7% | 3% | 0% | 0% | 1% |
Costs for contributions incurred in the first half of 2017 and included in personnel costs amounted to euro 477 thousand (euro 471 thousand in the first half of 2016) for the Pension Fund for Senior Managers of FINCANTIERI S.p.A. and euro 593 thousand (euro 506 thousand in the first half of 2016) for the Cometa National Pension Fund.
The increase in financial liabilities with Cassa Depositi e Prestiti S.p.A. is due to disbursement in the first half of 2017 of around euro 5 million in total, as the second tranche of disbursements of the soft loans relating to the "Environmental Logistics" and "Payload" technological innovation projects under Law 46/1982, repayable in June 2024. In the first half of the year, the use of construction loans disbursed by the parent company also increased by euro 51 million.
During the first half of 2017, Directors, Statutory Auditors, General Managers and other Key Management Personnel were paid a total of euro 3,709 thousand in remuneration by the Parent company, of which euro 1,809 thousand classified in personnel costs and euro 1,900 thousand in the cost of services.
A detailed description of the mid/long-term equity incentive plan for management, called the Performance Share Plan 2016- 2018, approved in the first half of 2017, can be found below.
| Basic/Diluted Earnings/(Loss) Per Share | 30.06.2017 | 30.06.2016 | |
|---|---|---|---|
| Profit/(loss) attributable to owners of the Parent | Euro/000 | 12,573 | 6,946 |
| Weighted average number of shares outstanding for the purpose of calculating basic earnings/(loss) per share |
Number | 1,692,119,070 | 1,692,119,070 |
| Weighted average number of shares outstanding for the purpose of calculating diluted earnings/ (loss) per share |
Number | 1,694,100,487 | 1,692,119,070 |
| Basic earnings/(loss) per share | Euro | 0.00743 | 0.00410 |
| Diluted earnings/(loss) per share | Euro | 0.00742 | 0.00410 |
The basic assumptions for calculating basic and diluted Earnings/(Loss) Per Share are as follows:
In calculating the diluted earnings per share, the 11,832,008 shares granted to beneficiaries of the mid/long-term incentive plan are taken into account, as described below.
On 19 May 2017 the FINCANTIERI S.p.A. Shareholders' Meeting approved the first cycle of the mid/long-term equity incentive plan for management, known as the Performance Share Plan 2016-2018, and the associated Regulations. The project was approved by the Board of Directors on 10 November 2016.
The Plan, structured in 3 three-year cycles, provides for the free grant, to beneficiaries identified by the Board of Directors, of entitlements to receive a maximum of 50,000,000 FINCANTIERI S.p.A. ordinary shares without nominal value, based on the achievement of specific performance targets for the three-year periods 2016-2018 (first cycle), 2017-2019 (second cycle) and 2018-2020 (third cycle). The performance targets for the Plan's first cycle have been identified as Total Shareholder Return ("TSR") and EBITDA, deemed to represent objective criteria for the measurement of longterm value creation for the Company. The performance targets for the second and third cycles will be identified at the time the Board of Directors grants the related entitlements.
The Plan provides for a three-year vesting period for all beneficiaries between the date of granting the entitlements and the date of allocating the shares to the beneficiaries. Therefore, if the performance targets are achieved and the other conditions of the Plan's Terms & Conditions satisfied, the shares vesting for the first cycle will be allotted and delivered to beneficiaries by 31 July 2019, while those vesting for the second and third cycles will be allotted and delivered by 31 July 2020 and 31 July 2021 respectively.
The Plan also provides for a lock-up period for part of the shares given to members of the Board of Directors or key management personnel.
The allocation of shares will either happen by: i) purchase of own shares in accordance with art. 2357 and 2357-ter of the Italian Civil Code, which will be submitted to the Ordinary Shareholders' Meeting; ii) the issuing, in accordance with art. 2349 of the Civil Code, of a maximum of 50,000,000 ordinary shares without nominal value, having the same characteristics as ordinary shares outstanding, without increasing the share capital, which will be submitted for approval by the Extraordinary Shareholders' Meeting.
With reference to the first cycle, 11,832,008 shares in FINCANTIERI S.p.A. were allocated to the beneficiaries identified by the Board of Directors on 15 December 2016. The performance targets are comprised of two components:
The total fair value of the first cycle in the plan, of euro 8,925,086, was determined on the grant date (which coincides with date the shareholders' meeting approved the plan) for the marketbased component. The Monte Carlo calculation method was used, which, based on appropriate hypotheses, allowed a large number of alternative scenarios to be defined over the time period in question. Unlike the market-based performance target, the non-market-based component (EBITDA) is not relevant in estimating the fair value, but is updated every quarter to take into account the expectations of the number of entitlements that may mature on the basis of EBITDA performance compared to the target. To estimate the number of entitlements at 30 June 2017, it was assumed that the target would be reached.
The following is an update on the status of litigation described in the Notes to the 2016 Consolidated Financial Statements:
With reference to the "Iraq" litigation, the proceedings pending before the Court of Appeal of Paris (against the arbitration award in favor of Fincantieri), the preliminary phase having been concluded, will have its final hearing on 21 November 2017. These legal proceedings did not interrupt negotiations; in fact, in recent months there have been meetings (some in Baghdad) between representatives of Fincantieri and of the Iraqi Navy in order to define a maintenance program for the four Saettia class ships built from 2008-2010. During these meetings, Fincantieri learned that the two corvettes covered by the 2015 Settlement Agreement have been included in a US-Iraq bilateral support project supported by FMS (Foreign Military Support). This could lead to new opportunities in the new-building area on which to build a possible new settlement scenario. We intend to continue the existing dialogue with the Iraqi government, including through diplomatic channels, while hoping for a favorable outcome from the French courts. In any case, a prudent approach has been adopted (total write-down of the receivables recognized by the Court of Genoa in 2006, currently under discussion before the Court of Appeal of Paris).
As regards the "Serene" dispute, in July 2015 Fincantieri lodged its opposition with the Trieste Court of Appeal (against the shipowner's request for recognition of foreign arbitration awards in Italy) in order to have the awards confirmed as contrary to domestic and international public order, as well as to enforce the revocation of the awards themselves for procedural fraud. A ruling was handed down in late January 2017, with the unexpected rejection of the Fincantieri appeal. Following the ruling by the Trieste Court of Appeal, which made the arbitration awards enforceable, in March 2017 the counterparty initiated the associated enforcement actions. In April 2017 Fincantieri appealed against those judgments in the Court of Cassation in order to bring to light the various defects in them, at the same time filing for suspension of the enforceability with the Trieste Court of Appeal until appeal hearings are concluded. On 3 July 2017 the competent Court of Appeal granted the suspension.
The Company has recognized a specific provision for risks (see Note 18).
In the same period, the measure proposed by the Company against the action brought by the counterparty in order to obtain enforceability of those awards in the Netherlands had an unfavorable outcome. The Company intends to file an appeal against this decision.
Finally, as regards the investigative action launched at the beginning of February 2015 to ensure that the shipowner is not in possession of any intellectual property right, a hearing was held on 6 December 2017 to clarify the conclusions and rule on the preliminary proceedings. The Company's lawyers have confirmed a reasonably optimistic opinion, although the outcome of the litigation (in connection with the exequatur of the English awards) remains unknown.
With reference to the Papanikolaou litigation, the first hearing in the proceedings before the Court of Cassation is to be held on 15 November 2017 and the hearing for the action brought by Papanikolaou against Fincantieri for alleged loss of income, initially planned for 8 December 2015, will be held on 17 April 2018.
The appeal brought by the subsidiary Fincantieri Oil&Gas S.p.A. against the rejection of the application for CFC exemption with reference to its subsidiary Vard Holdings Limited in Singapore has been declared inadmissible pursuant to recent case law, which denies judicial protection against a measure which does not directly affect the legal sphere of the taxpayer and refers it to the next phase of the investigation.
The tax audit begun in 2017 has ended; some irregularities were found, which the Subsidiary considers to be largely insubstantial and defensive actions are underway.
| These are analyzed as follows: | |
|---|---|
| -------------------------------- | -- |
| (Euro/000) | 30.06.2017 | 30.06.2016 |
|---|---|---|
| Profit/(Loss) for the period | 10,802 | 4,742 |
| Depreciation and amortization | 57,756 | 52,596 |
| (Gains)/losses from disposal of property, plant and equipment | (341) | 250 |
| (Revaluation)/impairment of property, plant and equipment, intangible assets and | ||
| equity investments | 1,624 | 4,016 |
| Increases/(releases) of provisions for risks and charges | 35,957 | 19,563 |
| Interest on employee benefits | 624 | 589 |
| Interest income | (3,620) | (4,906) |
| Interest expense | 34,910 | 43,742 |
| Income taxes | 14,104 | 1,692 |
| Long-term equity incentive plan | 1,785 | |
| Unrealized foreign exchange (gains)/losses | 1,773 | (22,183) |
| Gross cash flows from operating activities | 155,374 | 100,101 |
| CHANGES IN WORKING CAPITAL | ||
| - inventories | 1,117 | (120,199) |
| - construction contracts and client advances | (1,017,176) | 386,596 |
| - trade receivables | 671,975 | 141,240 |
| - other current assets and liabilities | (83,416) | (106,229) |
| - other non-current assets and liabilities | (4,017) | (3,840) |
| - trade payables | 128,330 | (14,021) |
| Cash flows from working capital | (147,813) | 383,648 |
| Dividends paid | ||
| Interest income received | 2,664 | 4,973 |
| Interest expense paid | (17,333) | (16,115) |
| Income taxes (paid)/collected | (3,796) | 10,691 |
| Utilization of provisions for risks and charges and for employee benefits | (31,365) | (26,126) |
| NET CASH FLOWS FROM OPERATING ACTIVITIES | (197,643) | 357,071 |
| - of which related parties | (29,368) | 9,927 |
Management has identified the following operating segments which reflect the model used to manage and control the business sectors in which the Group operates: Shipbuilding, Offshore, Systems, Components and Services and Other Activities.
The Shipbuilding operating segment is engaged in the design and construction of cruise ships, ferries, naval vessels (for the Italian and foreign navies) and Mega yachts. Production is carried out at the Group's shipyards in Italy and the United States. The Offshore operating segment is engaged in the design and construction of high-end support vessels, expedition cruise vessels, specialized ships and vessels for offshore wind farms and open ocean aquaculture, and in the offer of innovative products in the field of drillships and semi-submersible natural gas drilling rigs. Fincantieri operates in this market primarily through the VARD Group.
The Equipment, Systems and Services operating segment is engaged in the design and manufacture of high-tech equipment and systems, such as stabilization, propulsion, positioning and power generation systems, ship automation systems, steam turbines, integrated systems and ship accommodation, and in the provision of repair and conversion services, logistical support and after-sales services.
Other activities primarily refer to the cost of activities by corporate headquarters, which have not been allocated to other operating segments.
The Group evaluates the performance of its operating segments and the allocation of financial resources on the basis of revenue and EBITDA, defined as Profit/(loss) for the year adjusted for the following items: (i) Income taxes, (ii) Share of profit/(loss) of investments accounted for using the equity method, (iii) Income/(expense) from investments, (iv) Finance costs, (v) Finance income, (vi) Depreciation, amortization and impairment, (vii) costs associated with the "Wage Guarantee Fund", (viii) costs relating to reorganization plans and other non- recurring personnel costs, (ix) provisions for costs and legal expenses associated with lawsuits brought by employees for asbestos-related damages, and (x) other particularly material expenses or income outside the ordinary course of business arising from non-recurring events.
After an operational reorganization in November 2016, the businesses of repairs and conversions, ship accommodation and integrated systems, previously included in the Shipbuilding operating segment, are now part of the Equipment, Systems and Services operating segment.
This reorganization reflects the Group's strategy of developing the after-sales business in the area of accommodation and integrated systems.
The results of the operating segments at 30 June 2017 and 30 June 2016 are reported in the following pages:
| 30.06.2017 | |||||
|---|---|---|---|---|---|
| (Euro/000) | Shipbuilding | Offshore | Equipment, Systems and Services |
Other Activities |
Group |
| Segment revenue | 1,757,219 | 447,835 | 226,595 | 667 | 2,432,316 |
| Intersegment elimination | (7,385) | (31,872) | (97,491) | (529) | (137,278) |
| Revenue (*) | 2,295,038 | ||||
| EBITDA | 114,955 | 21,514 | 25,196 | (16,143) | 145,522 |
| EBITDA margin | 6.5% | 4.8% | 11.1% | 6.3% | |
| Depreciation, amortization and impairment | (57,775) | ||||
| Finance income | 18,589 | ||||
| Finance costs | (57,989) | ||||
| Income/(expense) from investments | (59) | ||||
| Share of profit of investments accounted for using the equity method |
(1,280) | ||||
| Income taxes | (14,104) | ||||
| Extraordinary and non-recurring income and expenses | (22,102) | ||||
| Profit/(loss) for the period | 10,802 | ||||
*) Revenue: Sum of "Operating revenue" and "Other revenue and income" reported in the consolidated statement of comprehensive income. Details of "Extraordinary and non-recurring income and expenses" (gross of the tax effect of euro 5,038 thousand) are presented in the following table.
| (Euro/000) | 30.06.2017 |
|---|---|
| Costs associated with the " Wage Guarantee Fund" (1) | (78) |
| Costs relating to reorganization plans and other non-recurring personnel costs (2) | (1,049) |
| Provisions for costs and legal expenses associated with asbestos-related lawsuits (3) | (18,736) |
| Other extraordinary income and expenses | (2,239) |
| Extraordinary and non-recurring income and expenses | (22,102) |
(1) Amount included in "Personnel costs".
(2) Amount included in "Personnel costs".
(3) Of which euro 1.6 million included in "Materials, services and other costs" and euro 17.1 million in "Provisions".
| 30.06.2016 | ||||||
|---|---|---|---|---|---|---|
| (Euro/000) | Shipbuilding | Offshore | Equipment, Systems and Services |
Other Activities |
Group | |
| Segment revenue | 1,599,192 | 536,118 | 255,900 | 582 | 2,391,792 | |
| Intersegment elimination | (3,506) | (17,757) | (104,517) | (459) | (126,239) | |
| Revenue (*) | 1,595,686 | 518,361 | 151,383 | 123 | 2,265,553 | |
| EBITDA | 68,571 | 24,952 | 34,396 | (14,628) | 113,291 | |
| EBITDA margin | 4.3% | 4.7% | 13.4% | 5.0% | ||
| Depreciation, amortization and impairment | (52,623) | |||||
| Finance income | 37,702 | |||||
| Finance costs | (69,980) | |||||
| Income/(expense) from investments | (3,054) | |||||
| Share of profit of investments accounted for using the equity method |
(897) | |||||
| Income taxes | (1,692) | |||||
| Extraordinary and non-recurring income and expenses | (18,005) | |||||
| Profit/(loss) for the period | 4,742 |
*) Revenue: Sum of "Operating revenue" and "Other revenue and income" reported in the consolidated statement of comprehensive income.
Details of "Extraordinary and non-recurring income and expenses" (gross of the tax effect of euro 3,934 thousand) are presented in the following table.
| (Euro/000) | 30.06.2016 |
|---|---|
| Costs associated with the "Extraordinary Wage Guarantee Fund" (1) | (518) |
| Costs relating to reorganization plans and other non-recurring personnel costs (2) | (5,873) |
| Provisions for costs and legal expenses associated with asbestos-related lawsuits (3) | (11,614) |
| Other extraordinary income and expenses | - |
| Extraordinary and non-recurring income and expenses | (18,005) |
(1) Amount included in "Personnel costs".
(2) Of which euro 3 million included in "Materials, services and other costs" and euro 0.8 million in "Personnel costs".
(3) Of which euro 1 million included in "Materials, services and other costs" and euro 9 million in "Provisions".
The following table shows a breakdown of Property, plant and equipment in Italy and other countries:
| (Euro/million) | 30.06.2017 | 31.12.2016 |
|---|---|---|
| Italy | 658 | 653 |
| Other countries | 391 | 411 |
| Total Property, plant and equipment | 1,049 | 1,064 |
Capital expenditure in the first half of 2017 on Intangible assets and Property, plant and equipment amounted to euro 76 million, of which euro 54 million in Italy and the remainder in other countries.
The following table shows a breakdown of revenue and income between Italy and other countries, according to client country of residence:
| (Euro/million) | 30.06.2017 | 30.06.2016 | ||
|---|---|---|---|---|
| Revenue and income |
% | Revenue and income |
% | |
| Italy | 326 | 14% | 340 | 15% |
| Other countries | 1,969 | 86% | 1,926 | 85% |
| Total Revenue and income | 2,295 | 2,266 |
The following table shows those clients whose revenue (defined as revenue plus change in inventories) accounted for more than 10% of the Group's revenue and income in each reporting period:
| (Euro/million) | 30.06.2017 | 30.06.2016 | ||
|---|---|---|---|---|
| Revenue and income |
% | Revenue and income |
% | |
| Client 1 | 563 | 25% | 524 | 23% |
| Client 2 | 334 | 15% | 223 | 10% |
| Total Revenue and income | 2,295 | 2,266 |
On 4 July 2017, Fincantieri and GE Power reached a major milestone for the joint development of an innovative emission control system aimed at reducing pollution in the maritime industry. The new solution bears the name "Shipboard Pollutant Removal System" (Shipboard PRS) and, operational by 2020, it will be effective in reducing emissions in accordance with the most stringent MARPOL (MARitime POLlution) directives.
On 20 July 2017, Fincantieri and Mapei - leader in the chemical sector for the construction industry and with a specialized branch of products for shipbuilding - signed a strategic collaboration agreement regarding research and innovation. With this partnership Fincantieri intends to optimize laying times, reduce the weight of some the materials used, improve noise abatement using specific products, and develop and broaden the use of adhesive products in some shipbuilding applications. On Mapei's part, it intends to pursue projects that can lead to solutions for use in its own business.
| Principal activity | Registered office |
Share capital | (%) interest held | % consolidated by Group |
||
|---|---|---|---|---|---|---|
| Subsidiaries consolidated line-by-line | ||||||
| BACINI DI PALERMO S.p.A. Dry-dock management |
Palermo (Italy) | EUR | 1,032,000.00 | 100.00 | Fincantieri S.p.A | 100.00 |
| CENTRO PER GLI STUDI DI TECNICA NAVALE CETENA S.p.A. Ship research and experimentation |
Genoa (Italy) | EUR | 1,000,000.00 | 71.10 15.00 |
Fincantieri S.p.A. Seaf S.p.A. |
86.10 |
| FINCANTIERI OIL & GAS S.p.A. Holding company |
Trieste (Italy) | EUR | 21,000,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI HOLDING B.V. Holding company for foreign investments |
Netherlands | EUR | 9,529,384.54 | 100.00 Fincantieri S.p.A. | 100.00 | |
| FINCANTIERI MARINE SYSTEMS NORTH AMERICA Inc. Sale and after-sales services relating to mechanical products |
USA | USD | 501,000.00 | 100.00 Fincantieri Holding B.V. | 100.00 | |
| FMSNA YK Servicing and sale of spare parts |
Japan | JPY | 3,000,000.00 | 100.00 | Fincantieri Marine Systems North America Inc. |
100.00 |
| GESTIONE BACINI LA SPEZIA S.p.A. Dry-dock management |
Muggiano (La Spezia) (Italy) |
EUR | 260,000.00 | 99.89 Fincantieri S.p.A. | 99.89 | |
| ISOTTA FRASCHINI MOTORI S.p.A. Design, construction, sale and after-sales services relating to fast medium-duty diesel engines |
Bari (Italy) | EUR | 3,300,000.00 | 100.00 Fincantieri S.p.A. | 100.00 | |
| SOCIETÀ PER L'ESERCIZIO DI ATTIVITÀ FINANZIARIE SEAF S.p.A. Financial support for Group companies |
Trieste (Italy) | EUR | 6,562,000.00 | 100.00 Fincantieri S.p.A. | 100.00 | |
| DELFI S.r.l. Technical and logistics engineering |
Follo (La Spezia) (Italy) |
EUR | 400,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| ISSEL NORD S.r.l. Logistics engineering |
Follo (La Spezia) (Italy) |
EUR | 102,961.00 | 83.50 | DELFI S.r.l. | 100.00 |
| ISSEL SERVICE S.r.l. Translation of manuals |
Follo (La Spezia) (Italy) |
EUR | 20,000.00 | 100.00 | ISSEL NORD S.r.l. | 100.00 |
| SEASTEMA S.p.A. Design and development of integrated automation systems |
Genoa (Italy) | EUR | 300,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI AUSTRALIA Pty Ltd. Shipbuilding support activities |
Australia | AUD | 2,200,100.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI USA Inc. Holding company |
USA | USD | 1,029.75 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI MARINE GROUP HOLDINGS Inc. Holding company |
USA | USD | 1,027.97 | 87.44 | Fincantieri USA Inc. | 87.44 |
| FINCANTIERI MARINE GROUP LLC. Ship building and repair |
USA | USD | 1,000.00 | 100.00 | Fincantieri Marine Group Holdings Inc. |
87.44 |
| MARINETTE MARINE CORPORATION Ship building and repair |
USA | USD | 146,706.00 | 100.00 | Fincantieri Marine Group LLC |
87.44 |
| ACE MARINE LLC. Building of small aluminium ships |
USA | USD | 1,000.00 | 100.00 | Fincantieri Marine Group LLC |
87.44 |
| FINCANTIERI DO BRASIL PARTICIPAÇÕES SA Holding company |
Brazil | BRL | 1,310,000.00 | 80.00 20.00 |
Fincantieri S.p.A. Fincantieri Holding B.V. |
100.00 |
| Principal activity | Registered office |
Share capital | (%) interest held | % consolidated by Group |
||
|---|---|---|---|---|---|---|
| FINCANTIERI INDIA Pte. Ltd. Design, technical support and marketing |
India | INR | 10,500,000.00 | 99.00 1.00 |
Fincantieri Holding B.V. Fincantieri S.p.A. |
100.00 |
| MARINE INTERIORS S.p.A. Ship interiors |
Trieste (Italy) | EUR | 5,120,000.00 | 100.00 | Seaf S.p.A. | 100.00 |
| FINCANTIERI SI S.p.A. Electric, electronic and electromechanical industrial solutions Trieste |
Trieste (Italy) | EUR | 500,000.00 | 100.00 | Seaf S.p.A. | 100.00 |
| FINCANTIERI INFRASTRUCTURE S.p.A. Carpentry |
Trieste (Italy) | EUR | 500,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI SWEDEN AB Sale, maintenance and after-sales service for a series of systems, equipment and related activities |
Sweden | SEK | 5,000,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| FINCANTIERI (SHANGHAI) TRADING Co. Ltd Engineering design, consulting and development |
China | CNY | 3,500,000.00 | 100.00 | Fincantieri S.p.A. | 100.00 |
| VARD HOLDINGS Ltd. Holding company |
Singapore | SGD | 932,200,000.00 | 78.13 | Fincantieri Oil&Gas S.p.A. |
78.13 |
| VARD GROUP AS Shipbuilding |
Norway | NOK | 10,000,000.00 | 100.00 | Vard Holdings Ltd. | 78.13 |
| VARD SHIPHOLDING SINGAPORE Pte. Ltd. Charter of boats, ships and barges |
Singapore | USD | 1.00 | 100.00 | Vard Holdings Ltd. | 78.13 |
| VARD ELECTRO AS Electrical/automation installation |
Norway | NOK | 1,000,000.00 | 100.00 | Vard Group AS | 78.13 |
| VARD ELECTRO ITALY S.r.l. Installation, production, sale and assistance for electrical equipment and parts |
Genoa (Italy) | EUR | 200,000.00 | 100.00 | Vard Electro AS | 78.13 |
| VARD RO HOLDING S.r.l. Holding company |
Romania | RON | 82,573,830.00 | 100.00 | Vard Group AS | 78.13 |
| VARD NITERÓI SA Shipbuilding |
Brazil | BRL | 354,883,790.00 | 100.00 | Vard Group AS Vard El. Brasil Ltda |
78.13 |
| VARD PROMAR SA Shipbuilding |
Brazil | BRL | 589,363,813.00 | 100.00 | Vard Group AS | 78.13 |
| ESTALEIRO QUISSAMÃ Ltda. Project development |
Brazil | BRL | 400,000.00 | 50.50 | Vard Group AS | 39.46 |
| VARD SINGAPORE Pte. Ltd. Sales and holding company |
Singapore | USD | 6,000,000.00 | 100.00 | Vard Group AS | 78.13 |
| VARD DESIGN AS Design and engineering |
Norway | NOK | 4,000,000.00 | 100.00 | Vard Group AS | 78.13 |
| VARD ACCOMMODATION AS Accommodation installation |
Norway | NOK | 500,000.00 | 100.00 | Vard Group AS | 78.13 |
| VARD PIPING AS Pipe installation |
Norway | NOK | 100,000.00 | 100.00 | Vard Group AS | 78.13 |
| SEAONICS AS Offshore handling systems |
Norway | NOK | 46,639,721.00 | 56.40 | Vard Group AS | 44.07 |
| Principal activity | Registered office |
Share capital | (%) interest held | % consolidated by Group |
||
|---|---|---|---|---|---|---|
| VARD SEAONICS HOLDING AS Dormant |
Norway | NOK | 30,000.00 | 100.00 | Vard Group AS | 78.13 |
| SEAONICS POLSKA SP. Z O.O. Engineering services |
Poland | PLN | 300,000.00 | 62.50 37.50 |
ICD Software AS Seaonics AS |
44.07 |
| VARD DESIGN LIBURNA Ltd. Design and engineering |
Croatia | HRK | 20,000.00 | 51.00 | Vard Design AS | 39.85 |
| VARD ELECTRO TULCLEA S.r.l. Electrical installation |
Romania | RON | 4,149,525.00 | 99.96 Vard Electro AS | 78.10 | |
| VARD ELECTRO BRAZIL (INSTALAÇÕES ELETRICAS) LTDA. Electrical installation |
Brazil | BRL | 3,000,000.00 | 99.00 1.00 |
Vard Electro AS Vard Group AS |
78.13 |
| VARD ELECTRO BRAILA S.r.l. Electrical installation |
Romania | RON | 45,000.00 | 100.00 | Vard Electro AS | 78.13 |
| VARD ELECTRICAL INSTALLATION AND ENGINEERING (INDIA) Pte. Ltd. Electrical installation |
India | INR | 7,000,000.00 | 99.00 1.00 |
Vard Electro AS Vard Electro Tulcea S.r.l. |
78.13 |
| VARD TULCEA SA Shipbuilding |
Romania | RON | 151,606,459.00 | 99.996 0.004 |
Vard RO Holding S.r.l. Vard Group As |
78.13 |
| VARD BRAILA SA Shipbuilding |
Romania | RON | 165,862,177.50 | 94.12 5.88 |
Vard RO Holding S.r.l. Vard Group AS |
78.13 |
| VARD ENGINEERING CONSTANTA S.r.l. Engineering |
Romania | RON | 1,408,000.00 | 70.00 30.00 |
Vard RO Holding S.r.l. Vard Braila S.A. |
78.13 |
| VARD VUNG TAU Ltd. Shipbuilding |
Vietnam | USD | 8,000,000.00 | 100.00 | Vard Singapore Pte. Ltd. | 78.13 |
| VARD ACCOMMODATION TULCEA S.r.l. Accommodation installation |
Romania | RON | 436,000.00 | 99.77 0.23 |
Vard Accommodation AS Vard Electro Tulcea S.r.l. |
78.13 |
| VARD ENGINEERING BREVIK AS Design and engineering |
Norway | NOK | 105,000.00 | 100.00 | Vard Group AS | 78.13 |
| VARD OFFSHORE BREVIK AS Services and installation |
Norway | NOK | 100,000.00 | 100.00 | Vard Group AS | 78.13 |
| VARD SHIP REPAIR BRAILA SA Ship repair |
Romania | RON | - | 100.00 | Vard Braila SA | 78.13 |
| VARD MARINE INC. Ship design and marine engineering |
Canada | CAD | 9,783,700.00 | 100.00 | Vard Group AS | 78.13 |
| VARD MARINE US INC. Ship design and marine engineering |
USA | USD | 10,000.00 | 100.00 | Vard Marine Inc. | 78.13 |
| VARD ENGINEERING GDANSK Sp. Z.o.o. Offshore design and engineering activities |
Poland | PLN | 50,000.00 | 100.00 | Vard Engineering Brevik AS |
78.13 |
| VARD CONTRACTING AS Various shipbuilding services |
Norway | NOK | 500,000.00 | 100.00 | Vard Group AS | 78.13 |
| ICD SOFTWARE AS Automation and control system software |
Norway | NOK | 536,796.00 | 100.00 | Seaonics AS | 44.07 |
| CDP TECHNOLOGIES AS Research and development of technology |
Norway | NOK | 302,204.00 | 100.00 | Seaonics AS | 44.07 |
| CDP TECHNOLOGIES ESTONIA OÜ Automation and control system |
Estonia | EUR | 5,200.00 | 100.00 | CDP Tecnologies AS | 44.07 |
| SIA ICD INDUSTRIES LATVIA Automation and control system software |
Latvia | EUR | 33,164.00 | 100.00 | ICD Software AS | 44.07 |
| INDUSTRIAL CONTROL DESIGN AS Automation and control system |
Norway | NOK | 30,000.00 | 100.00 | ICD Software AS | 44.07 |
| VARD ELECTRO CANADA Inc. Installation and integration of electrical systems |
Canada | CAD | 100,000.00 | 100.00 | Vard Electro As | 78.13 |
| Principal activity | Registered office |
Share capital | (%) interest held | % consolidated by Group |
||
|---|---|---|---|---|---|---|
| STORVIK AQUA AS Supplier of aquaculture equipment |
Norway | NOK | 1,100,000.00 | 94.64 | Vard Group AS | 73.94 |
| STORVIK SA Supplier of aquaculture equipment |
Chile | CLP | 137,989,917.00 | 95.00 | Storvik Aqua AS | 70.25 |
| STORVIK AQUA Ltd Supplier of aquaculture equipment |
UK | GBP | 10,000.00 | 100.00 | Storvik Aqua AS | 73.94 |
| Joint ventures consolidated using the equity method |
||||||
| ORIZZONTE SISTEMI NAVALI S.p.A. Management of large naval vessel contracts |
Genoa (Italy) | EUR | 20,000,000.00 | 51.00 | Fincantieri S.p.A. | 51.00 |
| ETIHAD SHIP BUILDING LLC Design, production and sale of civilian and naval ships |
Arab Emirates | AED | 2,500,000.00 | 35.00 | Fincantieri S.p.A. | 35.00 |
| CAMPER & NICHOLSON INTERNATIONAL SA Luxury yachting broker Various services relating to luxury yachts |
Luxembourg | EUR | 940,850.00 | 49.96 | Fincantieri S.p.A. | 49.96 |
| CSSC - FINCANTIERI CRUISE INDUSTRY DEVELOPMENT LTD Design and marketing of cruise ships |
Hong Kong | EUR | 2.00 | 40.00 | Fincantieri S.p.A. | 40.00 |
| UNIFER NAVALE S.r.l. Piping |
Modena (Italy) | EUR | 150,000.00 | 20.00 | Seaf S.p.A. | 20.00 |
| Associates consolidated using the equity method |
||||||
| CASTOR DRILLING SOLUTION AS Offshore drilling technology |
Norway | NOK | 229,710.00 | 34.13 | Seaonics AS | 15.04 |
| OLYMPIC CHALLENGER KS Shipowner |
Norway | NOK | 84,000,000.00 | 35.00 | Vard Group AS | 27.35 |
| BRIDGE EIENDOM AS Real estate |
Norway | NOK | 3,100,000.00 | 50.00 | Vard Group AS | 39.07 |
| BREVIK TECHNOLOGY AS Holding of technology licenses and patents |
Norway | NOK | 600,000.00 | 34.00 | Vard Group AS | 26.56 |
| MOKSTER SUPPLY AS Shipowner |
Norway | NOK | 13,296,000.00 | 40.00 | Vard Group AS | 31.25 |
| MOKSTER SUPPLY KS Shipowner |
Norway | NOK | 131,950,000.00 | 36.00 | Vard Group AS | 28.13 |
| REM SUPPLY AS Shipowner |
Norway | NOK | 345,003,000.00 | 26.66 | Vard Group AS | 20.83 |
| OLYMPIC GREEN ENERGY KS Shipowner |
Norway | NOK | 4,841,028.00 | 29.50 | Vard Group AS | 23.05 |
| DOF ICEMAN AS Shipowner |
Norway | NOK | 23,600,000.00 | 50.00 | Vard Group AS | 39.07 |
| TAKLIFT AS Floating cranes |
Norway | NOK | 2,450,000.00 | 25.47 Vard Group AS | 19.90 | |
| AS DAMECO Maintenance services |
Norway | NOK | 606,000.00 | 34.00 | Vard Offshore Brevik AS | 26.56 |
| CSS DESIGN LIMITED Design and engineering |
British Virgin Islands |
GBP | 100.00 | 31.00 | Vard Marine Inc. | 24.22 |
management representation on the condensed consolidated half-year financial statements pursuant to art. 81-ter of consob regulation 11971 dated 14 may 1999 and subsequent amendments and additions
of the administrative and accounting processes for the preparation of the condensed consolidated half-year financial statements at 30 June 2017, during the first half of 2017.
25 July 2017
chief executive officer Giuseppe Bono
manager responsible for preparing financial reports Carlo Gainelli
independent auditors' report on the review of the condensed consolidated interim financial statements as at and for the six months ended 30 june 2017
To the Shareholders of Fincantieri SpA
We have reviewed the accompanying consolidated condensed interim financial statements of Fincantieri SpA and its subsidiaries (the Fincantieri Group) as of 30 June 2017, comprising the consolidated statement of financial position, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and related notes. The directors of Fincantieri SpA are responsible for the preparation of the consolidated condensed interim financial statements in accordance with the International Accounting Standard applicable to interim financial reporting (IAS 34) as adopted by the European Union. Our responsibility is to express a conclusion on these consolidated condensed interim financial statements based on our review.
We conducted our work in accordance with the criteria for a review recommended by Consob in Resolution n°10867 of 31 July 1997. A review of consolidated condensed interim financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than a fullscope audit conducted in accordance with International Standards on Auditing (ISA Italia) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated condensed interim financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated condensed interim financial statements of the Fincantieri Group as of 30 June 2017 are not prepared, in all material respects, in accordance with the International Accounting Standard applicable to interim financial reporting (IAS 34) as adopted by the European Union.
Trieste, 26 July 2017
PricewaterhouseCoopers SpA
Signed by
Maria Cristina Landro (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
Parent Company Registered office 34121 Trieste – Via Genova n. 1 Tel: +39 040 3193111 Fax: +39 040 3192305 fincantieri.com Share capital Euro 862.980.725,70 Venezia Giulia Company Registry and Tax No. 00397130584 VAT No. 00629440322
Progetto grafico e impaginazione Sintesi/HUB Trieste
fincantieri.com
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