Quarterly Report • Aug 7, 2020
Quarterly Report
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AT 30 June 2020
| CORPORATE BODIES 5 | ||
|---|---|---|
| ALTERNATIVE PERFORMANCE INDICATORS 6 | ||
| KEY CONSOLIDATED INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION FIGURES | ||
| 7 | ||
| REPORT ON OPERATIONS 9 | ||
| 1. | GEFRAN GROUP'S STRUCTURE | 11 |
| 2. | GEFRAN GROUP ACTIVITIES | 12 |
| 3. | GEFRAN GROUP CONSOLIDATED RESULTS | 13 |
| 3.1 | CONSOLIDATED INCOME STATEMENT OF THE QUARTER | 13 |
| 3.2 | PROGRESSIVE CONSOLIDATED INCOME STATEMENT | 15 |
| 3.3 | CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 19 |
| 3.4 | CONSOLIDATED CASH FLOW STATEMENT | 22 |
| 4. | INVESTMENTS | 23 |
| 5. | RESULTS BY BUSINESS AREA | 24 |
| 5.1 | SENSORS | 24 |
| 5.2 | AUTOMATION COMPONENTS | 26 |
| 5.3 | MOTION CONTROL | 28 |
| 6. | RESEARCH AND DEVELOPMENT | 30 |
| 7. | HUMAN RESOURCES | 32 |
| 8. | MAIN RISKS AND UNCERTAINTIES TO WHICH THE GEFRAN GROUP IS EXPOSED | 32 |
| 8.1 | EXTERNAL RISKS | 36 |
| 8.2 | FINANCIAL RISKS | 38 |
| 8.3 | STRATEGIC RISKS | 40 |
| 8.4 | GOVERNANCE AND INTEGRITY RISKS | 41 |
| 8.5 | OPERATING RISKS AND REPORTING RISKS | 41 |
| 8.6 | LEGAL AND COMPLIANCE RISKS | 43 |
| 9. | SIGNIFICANT EVENTS IN THE FIRST HALF OF 2020 | 44 |
| 10. | SIGNIFICANT EVENTS FOLLOWING THE END OF THE FIRST HALF OF 2020 | 45 |
| 11. | OUTLOOK | 46 |
| 12. | OWN SHARES AND STOCK PERFORMANCE | 46 |
| 13. | DEALINGS WITH RELATED PARTIES | 47 |
| 14. | DEROGATION FROM THE OBLIGATIONS TO PUBLISH THE INFORMATION DOCUMENTS | 48 |
| CONSOLIDATED FINANCIAL STATEMENTS | 49 | |
| 1. | STATEMENTS OF PROFIT/(LOSS) FOR THE YEAR | 51 |
| 2. | STATEMENTS OF PROFIT/(LOSS) FOR THE PERIOD AND OTHER ITEMS OF | |
| COMPREHENSIVE INCOME | 52 | |
| 3. | STATEMENT OF FINANCIAL POSITION | 53 |
| 4. | CONSOLIDATED CASH FLOW STATEMENT | 54 |
| 5. | STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 55 | |
| SPECIFIC EXPLANATORY NOTES TO THE ACCOUNTS | 57 | |
| CERTIFICATION OF CONSOLIDATED FINANCIAL STATEMENTS PURSUANT TO ARTICLE 81-TER | ||
| OF CONSOB REGULATION 11971 OF 14 MAY 1999 AS AMENDED | 101 | |
| EXTERNAL AUDITORS' REPORT ON THE HALF-YEARLY CONSOLIDATED FINANCIAL | ||
| STATEMENTS | 103 |
Honorary Chairman Ennio Franceschetti Vice Chairman Andrea Franceschetti Chief Executive Officer Marcello Perini Director Daniele Piccolo (*) Director Monica Vecchiati (*) Director Cristina Mollis (*) Director Giorgio Metta (*)
Chairman Maria Chiara Franceschetti Vice Chairman Giovanna Franceschetti
(*) Independent directors pursuant to the Consolidated Law on Finance (TUF) and the Code of Conduct
Chairman Marco Gregorini Standing Auditor Luisa Anselmi Deputy Auditor Guido Ballerio
Standing Auditor Roberta Dell'Apa
PricewaterhouseCoopers S.p.A..
On 21 April 2016, the ordinary shareholders' meeting of Gefran S.p.A. engaged the external auditor PricewaterhouseCoopers S.p.A. to audit the separate annual financial report of Gefran S.p.A., as well as the consolidated annual and half-yearly financial reports of the Gefran Group for a period of nine years until the approval of the financial statements report for 2024, in accordance with Italian Legislative Decree 39/2010.
In addition to the standard financial schedules and indicators required under IFRS, this document includes reclassified schedules and alternative performance indicators. These are intended to enable a better assessment of the Group's economic and financial management. However, these tables and indicators must not be considered as a substitute for those required under IFRS.
Specifically, the alternative indicators used in the notes to the income statement are:
Added value: the direct margin resulting from revenues, including only direct material, gross of other production costs, such as personnel costs, services and other miscellaneous costs;
EBITDA: EBIT before depreciation, amortisation and impairment. The purpose of this indicator is to present the Group's operating profitability before the main non-monetary items;
EBIT: operating result before financial management and taxes. The purpose of this indicator is to present the Group's operating profitability.
Alternative indicators used in the notes to the statement of financial position are:
Net non-current assets: the algebraic sum of the following items in the statement of financial position:
o Goodwill
o Deferred tax assets
Working capital: the algebraic sum of the following items in the statement of financial position:
o Inventories
The amounts shown below only refer to continuing operations, unless otherwise specified.
| (Euro / 000) | 30 June 2020 30 June 2019 |
2Q 2020 | 2Q 2019 | |||||
|---|---|---|---|---|---|---|---|---|
| Revenues | 62,735 100.0% | 72,099 100.0% | 31,309 100.0% | 36,126 100.0% | ||||
| EBITDA | 7,336 | 11.7% | 10,735 | 14.9% | 4,109 | 13.1% | 4,466 | 12.4% |
| EBIT | 3,321 | 5.3% | 5,376 | 7.5% | 2,091 | 6.7% | 2,398 | 6.6% |
| Profit (loss) before tax | 2,214 | 3.5% | 5,508 | 7.6% | 1,649 | 5.3% | 2,113 | 5.8% |
| Group net profit (loss) | 1,139 | 1.8% | 4,029 | 5.6% | 1,060 | 3.4% | 1,481 | 4.1% |
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
|---|---|---|
| Invested capital from operations | 89,404 | 88,331 |
| Net working capital | 31,673 | 28,542 |
| Shareholders' equity | 75,845 | 75,044 |
| Net financial position | (13,559) | (13,287) |
| (Euro / 000) | 30 June 2020 | 30 June 2019 |
| Operating cash flow | 2,951 | 5,293 |
Investments 2,927 8,632
GEFRAN GROUP – HALF-YEARLY FINANCIAL REPORT AS AT 30 June 2020
The Gefran Group operates in three main business areas: industrial sensors, automation components and motion control for the electronic control of electric motors.
The Group offers a complete range of products and tailored turnkey solutions in numerous automation sectors. Just under 70% of its revenues are generated abroad.
The sensors business offers a complete range of products for measuring four physical parameters of position, pressure, force and temperature - which are used in many industrial sectors.
Gefran stands out for its technological leadership. It produces primary components internally and boasts a comprehensive product range that is unique worldwide. In certain product families, Gefran is world leader. The Sensors business generates about 80% of its revenues abroad.
The electronic components business is divided into three product lines: instrumentation, power controllers and automation platforms (operator interfaces, PLCs and I/O modules). These components are widely used in the control of industrial processes. As well as supplying products, Gefran offers its customers the possibility of designing and supplying tailored turnkey automation solutions through a close strategic partnership during the design and production stages.
Gefran sets itself apart with its expertise in hardware and software acquired in over thirty years of experience. Gefran is one of the main Italian manufacturers in these product lines and generates around 45% of its revenues through exports.
The motion control business develops products and solutions to regulate speed and control AC, DC and brushless electric motors. Products (inverters, armature converters and servodrives) guarantee maximum performance in terms of system precision and dynamics. These products are used in a variety of applications, including lift control, cranes, metal rolling lines, and in paper, plastics, glass and metal processing.
Through the integration of advanced capabilities and flexible hardware and software configurations, Gefran provides advantageous solutions for customers and target markets, optimising both technology and costs. The motion control business generates about 65% of its revenues abroad.
The following table shows the operating results for the second quarter 2020, reclassified and compared with those of the same previous period.
| 2Q 2020 | 2Q 2019 | Changes 2020-2019 | |||
|---|---|---|---|---|---|
| (Euro / 000) | Total | Total | Value | % | |
| a | Revenues | 31,309 | 36,126 | (4,817) | -13.3% |
| b | Increases for internal work | 459 | 628 | (169) | -26.9% |
| c | Consumption of materials and products | 11,237 | 12,908 | (1,671) | -12.9% |
| d | Added value (a+b-c) | 20,531 | 23,846 | (3,315) | -13.9% |
| e | Other operating costs | 4,681 | 6,152 | (1,471) | -23.9% |
| f | Personnel costs | 11,741 | 13,228 | (1,487) | -11.2% |
| g | EBITDA (d-e-f) | 4,109 | 4,466 | (357) | -8.0% |
| h | Depreciation, amortisation and impairment | 2,018 | 2,068 | (50) | -2.4% |
| i | EBIT (g-h) | 2,091 | 2,398 | (307) | -12.8% |
| l | Gains (losses) from financial assets/liabilities | (439) | (302) | (137) | -45.4% |
| m | Gains (losses) from shareholdings valued at equity | (3) | 17 | (20) | n.s. |
| n | Profit (loss) before tax (i±l±m) | 1,649 | 2,113 | (464) | -22.0% |
| o | Taxes | (589) | (632) | 43 | 6.8% |
| p | Group net profit (loss)(n±o) | 1,060 | 1,481 | (421) | -28.4% |
Revenues for the second quarter of 2020 were 31,309 thousand Euro, compared with 36,126 thousand Euro in the same period in the previous year, revealing a drop of 4,817 thousand Euro (-13.3%). As already noted in the first quarter of the year, also in the second quarter the spread of the Coronavirus limited the commercial activities of the Group, leading to a contraction in revenues that involved all the main international markets and extended to all the company's businesses.
The order portfolio for the second quarter of 2020 reveals shrinkage over the same period in 2019 (-15.6%). The motion control business unit registered good performance, collecting orders worth 876 thousand Euro more in the second quarter of 2020 than in the first quarter of the previous year.
The table below shows a breakdown of revenues by geographical region:
| (Euro / 000) | 2Q 2020 | 2Q 2019 | Changes 2020-2019 | |||
|---|---|---|---|---|---|---|
| value | % | value | % | value | % | |
| Italy | 10,069 | 32.2% | 11,622 | 32.2% | (1,553) | -13.4% |
| European Union | 7,366 | 23.5% | 8,938 | 24.7% | (1,572) | -17.6% |
| Europe non-EU | 1,119 | 3.6% | 1,200 | 3.3% | (81) | -6.8% |
| North America | 3,787 | 12.1% | 4,654 | 12.9% | (867) | -18.6% |
| South America | 579 | 1.8% | 1,065 | 2.9% | (486) | -45.6% |
| Asia | 8,268 | 26.4% | 8,512 | 23.6% | (244) | -2.9% |
| Rest of the World | 121 | 0.4% | 135 | 0.4% | (14) | -10.4% |
| Total | 31,309 | 100% | 36,126 | 100% | (4,817) | -13.3% |
The breakdown of revenues by geographical region for the second quarter reveals overall shrinkage in all the principal geographical regions in which the Group operates, and specifically: Italy (-13.4%), the European Union (-17.6%), and North and South America (-18.6% and -45.6%, respectively).
The table below shows the breakdown of revenues by business area in the second quarter of 2020 and a comparison with the same period of the previous year:
| 2Q 2020 | 2Q 2019 | Changes 2020-2019 | |||||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | value | % | value | % | value | % | |
| Sensors | 14,329 | 45.8% | 15,744 | 43.6% | (1,415) | -9.0% | |
| Automation components | 9,371 | 29.9% | 11,207 | 31.0% | (1,836) | -16.4% | |
| Motion control | 9,124 | 29.1% | 10,626 | 29.4% | (1,502) | -14.1% | |
| Eliminations | (1,515) | -4.8% | (1,451) | -4.0% | (64) | 4.4% | |
| Total | 31,309 | 100% | 36,126 | 100% | (4,817) | -13.3% |
The breakdown of revenues by business area in the second quarter of 2020 reveals a drop in revenues over the second quarter of 2019 in all the sectors the Group works in: sales of motion control were down by 14.1%, while sales of automation components dropped 16.4%. Revenues from the sensors business were also down (-9%), with shrinkage in Italy, Europe and America, while sales of sensors in Asia increased in the second quarter of 2020 over the same period in the previous year.
Increases for internal work in the second quarter of 2020 amounted to 459 thousand Euro, as compared to 628 thousand Euro in the same period of 2019. This item represents the portion of development costs incurred in the period and capitalised.
Added value in the quarter amounted to 20,531 thousand Euro (23,846 thousand Euro in the second quarter 2019), corresponding to 65.6% of revenues, down -0.4% from the figure in same previous period. The drop in added value, totalling 3,315 thousand Euro, primarily reflects the lower volumes sold.
Other operating costs in the second quarter of 2020 amount to 4,681 thousand Euro, and are 1,471 thousand Euro lower in terms of absolute value than the figure for the same quarter of 2019, representing 15% of revenues (17% in the same quarter of 2019).
Personnel costs in the quarter totalled 11,741 thousand Euro (37.5% of revenues), as compared to 13,228 thousand Euro in the same period of the previous year (36.6% of revenues), a 1,487 thousand Euro drop.
EBITDA for the second quarter of 2020 was positive at 4,109 thousand Euro (4,466 thousand Euro in the same quarter of 2019), and amounted to 13.1% of revenues (12.4% of revenues in the second quarter 2019), a decrease of 357 thousand Euro in absolute value compared to the previous year.
The lower margin in the quarter is primarily a result of shrinkage of sales volumes, only partially offset by reduced operating costs.
The item depreciation, amortisation and impairment totalled 2,018 thousand Euro in the quarter, as compared with 2,068 thousand Euro in the same previous period, a 50 thousand Euro drop.
EBIT in the second quarter 2020 is positive at 2,091 thousand Euro (6.7% of revenues), as compared with an EBIT of 2,398 thousand Euro in the same period in 2019 (6.6% of revenues), a 307 thousand Euro drop. The change is linked to the same dynamics illustrated for EBITDA.
Charges from financial assets/liabilities in the second quarter of 2020 total 439 thousand Euro (as compared to 302 thousand Euro of charges in 2019), and include:
Income from shareholdings valued at equity totals 3 thousand Euro, less than the same period in the previous year, when this item totalled 17 thousand Euro.
Taxes were, on the whole, negative for the amount of 589 thousand Euro (on the whole negative for the amount of 632 thousand Euro in the second quarter 2019). It may be broken down as follows:
Group net profit in the second quarter of 2020 was 1,060 thousand Euro, compared with again a profit of 1,481 thousand Euro in the second quarter of the previous year, a decrease of 421 thousand Euro.
The following table shows the operating results at 30 June 2020, reclassified and compared with those of the previous period.
Note that on 23 January 2019 Gefran Soluzioni S.r.l., a subsidiary of Gefran S.p.A., purchased 100% of the shares in Elettropiemme S.r.l.
The consolidated figures for the first half of 2020 include the operating results of Elettropiemme S.r.l. in the first 6 months of the year, while the 2019 figures with which they are compared include the operating results of this company for the months of February to June.
| 30 June 2020 |
30 June 2019 |
Changes 2020-2019 | |||
|---|---|---|---|---|---|
| (Euro / 000) | Total | Total | Value | % | |
| a | Revenues | 62,735 | 72,099 | (9,364) | -13.0% |
| b | Increases for internal work | 954 | 1,263 | (309) | -24.5% |
| c | Consumption of materials and products | 22,648 | 25,115 | (2,467) | -9.8% |
| d | Added value (a+b-c) | 41,041 | 48,247 | (7,206) | -14.9% |
| e | Other operating costs | 10,106 | 11,905 | (1,799) | -15.1% |
| f | Personnel costs | 23,599 | 25,607 | (2,008) | -7.8% |
| g | EBITDA (d-e-f) | 7,336 | 10,735 | (3,399) | -31.7% |
| h | Depreciation, amortisation and impairment | 4,015 | 5,359 | (1,344) | -25.1% |
| i | EBIT (g-h) | 3,321 | 5,376 | (2,055) | -38.2% |
| l | Gains (losses) from financial assets/liabilities | (1,106) | (127) | (979) | n.s. |
| m | Gains (losses) from shareholdings valued at equity | (1) | 259 | (260) | n.s. |
| n | Profit (loss) before tax (i±l±m) | 2,214 | 5,508 | (3,294) | -59.8% |
| o | Taxes | (1,075) | (1,479) | 404 | 27.3% |
| p | Group net profit (loss)(n±o) | 1,139 | 4,029 | (2,890) | -71.7% |
Revenues for the second quarter of 2020 were 62,735 thousand Euro, compared with 72,099 thousand Euro in the same period in the previous year, revealing a drop of 9,364 thousand Euro (-13%).
The Coronavirus pandemic resulted in closure of the Group's Chinese subsidiary in February, followed by closure of the Group's Italian plants in the month of March. In April, other countries were also affected by the lockdown (India and Brazil, for example), limiting the possibility to travel and consequently affecting the activities usually carried out by the commercial network. The Group's main plants are currently operational.
This situation led to shrinkage of revenues on all the world's principal markets and in all the fields of business and geographical regions in which the Group operates.
The order portfolio for the first six months of 2020 reveals shrinkage over the same period in 2019 (-7.8%), albeit less dramatic than the drop in revenues. The motion control business unit registered good performance, collecting orders worth 2,242 thousand Euro more in the first half of 2020 than in the first quarter of the previous year (+10.8%).
The order portfolio is up since 31 December 2019 (+12.1%).
The table below shows a breakdown of revenues by geographical region:
| 30 June 2020 | 30 June 2019 | Changes 2020-2019 | ||||
|---|---|---|---|---|---|---|
| (Euro / 000) | value | % | value | % | value | % |
| Italy | 19,768 | 31.5% | 23,086 | 32.0% | (3,318) | -14.4% |
| European Union | 15,483 | 24.7% | 18,526 | 25.7% | (3,043) | -16.4% |
| Europe non-EU | 2,603 | 4.1% | 2,238 | 3.1% | 365 | 16.3% |
| North America | 7,494 | 11.9% | 9,467 | 13.1% | (1,973) | -20.8% |
| South America | 1,587 | 2.5% | 2,224 | 3.1% | (637) | -28.6% |
| Asia | 15,433 | 24.6% | 16,164 | 22.4% | (731) | -4.5% |
| Rest of the World | 367 | 0.6% | 394 | 0.5% | (27) | -6.9% |
| Total | 62,735 | 100% | 72,099 | 100% | (9,364) | -13.0% |
The breakdown of revenues by geographical region reveals overall shrinkage in all the principal geographical regions in which the Group operates, and specifically: Italy (-14.4%), the European Union (-16.4%), and North and South America (-20.8% and -28.6%, respectively). On the other hand, revenues increased in non-EU Europe thanks to the healthy performance of the motion control business unit in the region.
The breakdown of business revenue for the first half of 2020 and the comparison with the same period of the previous year is as follows:
| 30 June 2020 | 30 June 2019 | Changes 2020-2019 | ||||
|---|---|---|---|---|---|---|
| (Euro / 000) | value | % | value | % | value | % |
| Sensors | 28,140 | 44.9% | 31,030 | 43.0% | (2,890) | -9.3% |
| Automation components | 18,412 | 29.3% | 22,248 | 30.9% | (3,836) | -17.2% |
| Motion control | 18,825 | 30.0% | 21,721 | 30.1% | (2,896) | -13.3% |
| Eliminations | (2,642) | -4.2% | (2,900) | -4.0% | 258 | -8.9% |
| Total | 62,735 | 100% | 72,099 | 100% | (9,364) | -13.0% |
The breakdown of revenues by business area in the first half of 2020 reveals a drop in revenues over the first six months of 2019 in all the sectors the Group works in: sales of motion control were down by 13.3%, while sales of automation components dropped 17.2%. Revenues from the sensors business were also down (-9.3%), with shrinkage in Italy, Europe and America, while sales of sensors in Asia increased in the first half of 2020 over the same period in the previous year.
Increases for internal work at 30 June 2020 came to 954 thousand Euro, compared with 1,263 thousand Euro recognised at 30 June 2019. This item represents the portion of development costs incurred in the period and capitalised.
Added value at 30 June 2020 amounted to 41,041 thousand Euro (48,247 thousand Euro at 30 June 2019), corresponding to 65.4% of revenues, down -1.5% from the figure in the first quarter of 2019. The drop in added value, totalling 7,206 thousand Euro, primarily reflects the lower volumes sold.
Other operating costs in the first half of 2020 amount to 10,106 thousand Euro, and are 1,799 thousand Euro lower in terms of absolute value than the figure for the same period of 2019, representing 16.1% of revenues (16.5% in the first half of 2019).
Personnel costs in the first six months of 2020 totalled 23,599 thousand Euro (37.6% of revenues), as compared to 25,607 thousand Euro in the first quarter of the previous year (35.5% of revenues), a 2,008 thousand Euro drop.
The average number of employees has increased from 800 in the first half of 2019 to 821 in the first half of 2020.
EBITDA at 30 June 2020 is positive by 7,336 thousand Euro (10,735 thousand Euro at 30 June 2019), representing 11.7% of revenues (14.9% of revenues in the first half of 2019), down Euro 3,399 thousand over the previous year in absolute terms.
The lower margin is primarily a result of shrinkage of sales volumes, only partially offset by reduced operating costs.
The item depreciation, amortisation and impairment totalled 4,015 thousand Euro in the first half of 2020, as compared with 5,359 thousand Euro in the first quarter of 2019, a 1,344 thousand Euro drop. The change is primarily a result of entry of impairment of assets in the sensors business in the first half of 2019 totalling 1,531 thousand Euro, associated with a property that was incapable of guaranteeing sufficient technological and energy performance to be sustainable in the long term. The existing building was demolished in 2019 in order to build a new construction that would be more functional and, above all, more advanced in terms of technological and energy performance. Work was completed in December 2019 and production began in the new building in January 2020.
EBIT at 30 June 2020 is positive at 3,321 thousand Euro (5.3% of revenues), as compared with an EBIT of 5,376 thousand Euro at 30 June 2019 (7.5% of revenues), a 2,055 thousand Euro drop. The change is a result of reduction of added value due to lower sales volumes, only partially offset by lower operating costs and depreciation/amortisation.
Charges from financial assets/liabilities in the first half of 2020 total 1,196 thousand Euro (as compared to 127 thousand Euro of charges in 2019), and include:
Charges from shareholdings valued at equity were 1 thousand Euro overall, down from 30 June 2019, when income amounting to 259 thousand Euro was recorded. The positive result in the first half of 2019 was mainly due to the adjustment of the value of the Ensun Group S.r.l., following the sale of 100% of the shares in Elettropiemme S.r.l.
Taxes were, on the whole, negative by 1,075 thousand Euro (1,479 thousand Euro as of 30 June 2019). The reduction in taxes is proportionate to the lower profit of the Group companies. It may be broken down as follows:
Group net profit in the first half of 2020 was 1,139 thousand Euro, compared with again a profit of 4,029 thousand Euro in the same period of the previous year, a decrease of 2,890 thousand Euro.
The Gefran Group's reclassified consolidated balance sheet at 30 June 2020 is shown below.
| 30 June 2020 | 31 December 2019 | |||
|---|---|---|---|---|
| (Euro / 000) | value | % | value | % |
| Intangible assets | 14,607 | 16.3 | 13,558 | 15.3 |
| Tangible assets | 46,030 | 51.5 | 47,850 | 54.2 |
| Other non-current assets | 7,846 | 8.8 | 9,536 | 10.8 |
| Net non-current assets | 68,483 | 76.6 | 70,944 | 80.3 |
| Inventories | 24,786 | 27.7 | 24,548 | 27.8 |
| Trade receivables | 27,978 | 31.3 | 28,931 | 32.8 |
| Trade payables | (21,091) | (23.6) | (24,937) | (28.2) |
| Other assets/liabilities | (3,138) | (3.5) | (3,484) | (3.9) |
| Working capital | 28,535 | 31.9 | 25,058 | 28.4 |
| Provisions for risks and future liabilities | (2,130) | (2.4) | (2,171) | (2.5) |
| Deferred tax provisions | (637) | (0.7) | (647) | (0.7) |
| Employee benefits | (4,847) | (5.4) | (4,853) | (5.5) |
| Invested capital from operations | 89,404 | 100.0 | 88,331 | 100.0 |
| Net invested capital | 89,404 | 100.0 | 88,331 | 100.0 |
| Shareholders' equity | 75,845 | 84.8 | 75,044 | 85.0 |
| Non-current financial payables | 27,206 | 30.4 | 21,916 | 24.8 |
| Current financial payables | 15,273 | 17.1 | 12,643 | 14.3 |
| Financial payables for IFRS 16 leases (current and non-current) | 2,916 | 3.3 | 3,084 | 3.5 |
| Financial liabilities for derivatives (current and non-current) | 279 | 0.3 | 169 | 0.2 |
| Financial assets for derivatives (current and non-current) | (1) | (0.0) | (1) | (0.0) |
| Other non-current financial investments | (98) | (0.1) | (97) | (0.1) |
| Cash and cash equivalents and current financial receivables | (32,016) | (35.8) | (24,427) | (27.7) |
| Net debt relating to operations | 13,559 | 15.2 | 13,287 | 15.0 |
| Total sources of financing | 89,404 | 100.0 | 88,331 | 100.0 |
Net non-current assets at 30 June 2020 were 68,433 thousand Euro, compared with 70,944 thousand Euro at 31 December 2019. The main changes were as follows:
decreases due to advance closure of contracts (42 thousand Euro). In addition to this, the item reflects the negative impact of the change in exchange rates, totalling 148 thousand Euro;
Working capital at 30 June 2020 was 28,535 thousand Euro, as compared to 25,058 thousand Euro at 31 December 2019, an overall increase of 3,477 thousand Euro. The main changes were as follows:
Provisions for risks and future liabilities were 2,130 thousand Euro, a decrease of 41 thousand Euro from 31 December 2019. The item includes provisions for current legal disputes and various risks, and the change since the end of 2019 is mainly attributable to movements in the product warranty provision.
Employee benefits amount to 4,849 thousand Euro, compared to 4,853 thousand Euro on 31 December 2019.
Shareholders' equity as of 30 June 2020 amounts to 75,845 thousand Euro, compared to 75,044 thousand Euro on 31 December 2019, a 801 thousand Euro increase. The change mainly concerns the positive result for the period, equal to 1,139 thousand Euro, partially offset by the negative impact of 225 thousand Euro generated by changes in the translation reserve.
Below is a reconciliation of the Parent Company's shareholders' equity and result for the period with the figures appearing in the consolidated financial statements for the first half of 2020:
| 30 June 2020 | ||||
|---|---|---|---|---|
| (Euro / 000) | Shareholders' equity |
Result for the period |
||
| Parent Company shareholders' equity and operating result | 69,234 | 4,281 | ||
| Shareholders' equity and operating result of the consolidated companies | 50,603 | (999) | ||
| Elimination of the carrying value of consolidated investments | (46,542) | - | ||
| Goodwill | 3,749 | - | ||
| Elimination of the effects of transactions conducted between consolidated companies |
(1,199) | (2,143) | ||
| Group share of shareholders' equity and operating result | 75,845 | 1,139 | ||
| Minorities' share of shareholders' equity and operating result | - | - | ||
| Shareholders' equity and operating result | 75,845 | 1,139 |
Net financial position as of 30 June 2020 is negative by 13,559 thousand Euro, which is 272 thousand Euro higher than at the end of 2019, when it was on the whole negative by 13,287 thousand Euro.
Net financial debt comprises short-term cash and cash equivalents of 15,605 thousand Euro and medium-/long-term debts of 29,164 thousand Euro.
This item reflects the negative impact of application of accounting standard IFRS16, worth 2,916 thousand Euro at 30 June 2020, of which 1,138 thousand Euro was reclassified in the current part while 1,778 thousand Euro was reclassified in the non-current part (totalling 3,084 thousand Euro at 31 December 2019, including 1,071 thousand Euro reclassified in the current part and 2,013 thousand Euro included in the medium/long term balance).
During the first half of 2020, the Parent Company signed two new loans for a total of 12,000 thousand Euro. Both have variable interest rates and no financial covenants.
The change in the net financial position is essentially due to the positive cash flows generated by ordinary operations (2,951 thousand Euro) and the proceeds from the reimbursement of the portion of capital of the subsidiary Ensun S.r.l.. (1,000 thousand Euro), absorbed by disbursements for technical investments made in the first half of 2020 and the payment of interest, taxes and rental fees (for a total of 4,168 thousand Euro).
This item breaks down as follows:
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
Change |
|---|---|---|---|
| Cash and cash equivalents and current financial receivables | 32,016 | 24,427 | 7,589 |
| Current financial payables | (15,273) | (12,643) | (2,630) |
| Current financial payables for IFRS 16 leases | (1,138) | (1,071) | (67) |
| (Debt)/short-term cash and cash equivalents | 15,605 | 10,713 | 4,892 |
| Non-current financial payables | (27,206) | (21,916) | (5,290) |
| Non-current financial payables for IFRS 16 leases | (1,778) | (2,013) | 235 |
| Non-current financial liabilities for derivatives | (279) | (169) | (110) |
| Non-current financial investments for derivatives | 1 | 1 | - |
| Other non-current financial investments | 98 | 97 | 1 |
| (Debt)/medium-/long-term cash and cash equivalents | (29,164) | (24,000) | (5,164) |
| Net financial position | (13,559) | (13,287) | (272) |
The Gefran Group's consolidated cash flow statement at 30 June 2020 shows a negative net change in cash on hand of 7,589 thousand Euro, compared to a positive change of 7,069 thousand Euro in the first half of 2019.
The change was as follows:
| (Euro / 000) | 30 June 2020 | 30 June 2019 |
|---|---|---|
| A) Cash and cash equivalents at the start of the period | 24,427 | 18,043 |
| B) Cash flow generated by (used in) operations in the period | 2,951 | 5,293 |
| C) Cash flow generated by (used in) investment activities | (1,922) | (8,475) |
| D) Free cash flow (B+C) | 1,029 | (3,182) |
| E) Cash flow generated by (used in) financing activities | 6,698 | 10,358 |
| F) Cash flow from continuing operations (D+E) | 7,727 | 7,176 |
| G) Cash flow from assets held for sale | 0 | 0 |
| H) Exchange rate translation differences on cash at hand | (138) | (107) |
| I) Net change in cash at hand (F+G+H) | 7,589 | 7,069 |
| J) Cash and cash equivalents at the end of the period (A+I) | 32,016 | 25,112 |
The cash flow from operations in the period was positive by 2,951 thousand Euro; in particular, operations in the first half of 2020, purged of the effect of provisions, amortisation and depreciation, and financial entries, generated 7,889 thousand Euro in cash (11,365 Euro in the first half of 2019), while the net change in other assets and liabilities in the same period drained 524 thousand Euro of resources (as also in the first half of 2019 for the amount of 3,832 thousand Euro) and management of operating capital absorbed 4,875 thousand Euro in cash (it had eroded 2,190 thousand Euro in cash in the first quarter of 2019).
Financial resources to support technical investments amount to 2,927 thousand Euro, (8,269 thousand Euro in the first half of 2019). In addition, during the first six months of 2020, a portion of the share capital of Ensun S.r.l. amounting to Euro 1,000 thousand was collected; in the first half of 2019, the acquisition of Elettropiemme S.r.l. was completed, which, net of the cash acquired, absorbed resources of 231 thousand Euro.
Free cash flow (operating cash flow excluding investment) was positive by 1,029 thousand Euro, as compared with a negative figure of 3,182 thousand Euro at 30 June 2019.
Financing activities generated cash for a total of 6,698 thousand Euro and compare to the first half of 2019, when they generated cash of 10,358 thousand Euro.
Gross technical investments in the first half of 2020 totalled 2,927 thousand Euro (8,632 thousand Euro at 30 June 2019) and regarded:
Investments are listed below by type and geographical region:
| Intangible assets 2,019 |
(Euro / 000) | at 30 June 2020 | at 30 June 2019 |
|---|---|---|---|
| 1,744 | |||
| Tangible assets | 908 | 6,888 | |
| Total 2,927 |
8,632 |
| 30 June 2020 | 30 June 2019 | ||||
|---|---|---|---|---|---|
| (Euro / 000) | intangible assets and goodwill |
tangible assets intangible assets and goodwill |
tangible assets | ||
| Italy | 2,012 | 786 | 1,742 | 3,010 | |
| European Union | 1 | 30 | - | 44 | |
| Europe non-EU | 6 | - | - | 8 | |
| North America | - | 11 | - | 3,591 | |
| South America | - | 6 | 2 | 79 | |
| Asia | - | 75 | - | 156 | |
| Rest of the World | - | - | - | - | |
| Total | 2,019 | 908 | 1,744 | 6,888 |
Investments in the first half of 2020 are broken down below by business area:
| (Euro / 000) | Sensors | Automation components |
Motion control |
Total |
|---|---|---|---|---|
| Intangible assets | 1,040 | 534 | 445 | 2,019 |
| Tangible assets | 409 | 243 | 256 | 908 |
| Total | 1,449 | 777 | 701 | 2,927 |
The following sections comment on the performance of the individual business areas.
To ensure correct interpretation of figures relating to the individual activities, it should be noted that:
The table below shows the key economic figures.
| (Euro / 000) | 30 June 2020 |
30 June 2019 |
value | Changes 2020 - 2019 % |
2Q 2020 | 2Q 2019 | Changes 2020 - 2019 value |
% | |
|---|---|---|---|---|---|---|---|---|---|
| Revenues | 28,140 | 31,030 (2,890) | -9.3% | 14,329 | 15,744 (1,415) | -9.0% | |||
| EBITDA | 6,072 | 7,945 (1,873) -23.6% | 3,481 | 3,712 | (231) | -6.2% | |||
| % of revenues | 21.6% | 25.6% | 24.3% | 23.6% | |||||
| EBIT | 4,380 | 4,865 | (485) -10.0% | 2,621 | 2,822 | (201) | -7.1% | ||
| % of revenues | 15.6% | 15.7% | 18.3% | 17.9% |
The breakdown of sensors business revenues by geographical region is as follows:
| 30 June 2020 | 30 June 2019 | Changes 2020 - 2019 | |||||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | value | % | value % |
value | % | ||
| Italy | 5,769 | 20.5% | 6,875 | 22.2% | (1,106) | -16.1% | |
| Europe | 9,285 | 33.0% | 10,737 | 34.6% | (1,452) | -13.5% | |
| America | 4,744 | 16.9% | 5,843 | 18.8% | (1,099) | -18.8% | |
| Asia | 8,218 | 29.2% | 7,433 | 24.0% | 785 | 10.6% | |
| Rest of the World | 124 | 0.4% | 142 | 0.5% | (18) | -12.7% | |
| Total | 28,140 | 100% | 31,030 | 100% | (2,890) | -9.3% |
The business unit's revenues as at 30 June 2020 totalled 28,140 thousand Euro, down by 31,030 thousand Euro (-9.3%) over the figure for the first half of 2019. The shrinkage applies to all geographical areas: Italy (-16.1%), Europe (-13.5%) and America (-18.8%). The Asian market has begun to recover, with an increase in revenues in the first half of 2020 over the same period in the previous year (+10.6%).
Orders received in the first six months of 2020, worth 29,038 thousand Euro, were down over the same period of the previous year (-10.2%), when they amounted to 32,342 thousand Euro; the order backlog as at 30 June 2020 was also down over 30 June 2019 (-8.1%) but an increase compared to 31 December 2019 (+13.2%).
In the second quarter of 2020 revenues amounted to 14,329 thousand Euro, down 9% over the same period in 2019, when they came to 15,744 thousand Euro.
EBITDA amounted to 6,072 thousand Euro at 30 June 2020, 1,873 thousand Euro (-23.6%) lower than on 30 June 2019, when it was 7,945 thousand Euro. The change in EBITDA may be attributed to lower volumes of sale and therefore lower added value, only partially compensated by lower operating costs.
EBIT in the first six months of 2020 amounted to 4,380 thousand Euro, equal to 15.6% of revenues, compared with 4,865 thousand Euro in the same period in the previous year (15.7% of revenues), a drop of 485 thousand Euro (-10%). EBIT in the first half of 2019 includes entry of 1,531 thousand Euro in impairment of a property used by the sensors business unit to adapt its carrying value to fair value. The property in question was unable to guarantee sufficient technological and energy performance to be sustainable in the long run. It was therefore decided that the existing building would be demolished and a new one constructed that would be more practical and, above-all, in the vanguard in terms of technology and energy efficiency. Work was completed in 2019 and the new plant has been in operation since January 2020.
Without this effect, EBIT at 30 June 2019 would be 9,476 thousand Euro, and the change in EBIT in the first half of 2020 compared to the same period in the previous year would be 3,404 thousand Euro.
Also note that the effect of adoption of accounting standard IFRS16 in the sensors business has resulted in reversal of 263 thousand Euro in leasing fees (218 thousand Euro in the first half of 2019) and entry of amortisation of usage rights worth 261 thousand Euro (200 thousand Euro in the first half of 2019).
Comparing the figures by quarter, EBIT in the second quarter of 2020 came to 2,621 thousand Euro (18.3% of revenues), the figure is compared with the second quarter of 2019 equal to 2,822 thousand Euro (17.9% of revenues).
Investments in the first six months of the year 2020 totalled 1,449 thousand Euro, including 1,040 thousand Euro in investments in intangible assets, 231 thousand Euro of which was for research and development in new products and 700 thousand Euro linked to patents.
Increases in tangible assets totalled 409 thousand Euro, including 322 thousand Euro invested by the Parent Company, primarily for the purchase of production equipment for increasing the capacity and efficiency of production (206 thousand Euro), as well as for adaptation of new buildings (47 thousand Euro). Investments in the Group's subsidiaries totalled 87 thousand Euro, primarily for the purchase of plant and machinery for production facilities and adaptation of buildings.
The table below shows the key economic figures.
| (Euro / 000) | 30 June | 30 June | Changes 2020-2019 |
2Q 2020 | 2Q 2019 | Changes 2020 - 2019 |
|||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | value | % | value | % | ||||
| Revenues | 18,412 | 22,248 (3,836) -17.2% | 9,371 | 11,207 (1,836) -16.4% | |||||
| EBITDA | 1,331 | 2,523 (1,192) -47.2% | 757 | 1,126 | (369) -32.8% | ||||
| % of revenues | 7.2% | 11.3% | 8.1% | 10.0% | |||||
| EBIT | 75 | 1,304 (1,229) -94.2% | 125 | 473 | (348) -73.6% | ||||
| % of revenues | 0.4% | 5.9% | 1.3% | 4.2% |
The breakdown of automation components business revenues by geographic region is as follows:
| 30 June 2020 | 30 June 2019 | Changes 2020-2019 | ||||
|---|---|---|---|---|---|---|
| (Euro / 000) | value | % | value | % | value | % |
| Italy | 10,167 | 55.2% | 12,600 | 56.6% | (2,433) | -19.3% |
| Europe | 4,965 | 27.0% | 5,686 | 25.6% | (721) | -12.7% |
| America | 1,565 | 8.5% | 2,260 | 10.2% | (695) | -30.8% |
| Asia | 1,668 | 9.1% | 1,626 | 7.3% | 42 | 2.6% |
| Rest of the World | 47 | 0.3% | 76 | 0.3% | (29) | -38.2% |
| Total | 18,412 | 100% | 22,248 | 100% | (3,836) | -17.2% |
Revenues totalled 18,412 thousand Euro at 30 June 2020, down 17.2% compared with the first six months of 2019. Shrinkage is a result of current economic trends, distributed over the geographical areas of most interest to the business unit, particularly Italy (-19.3%), Europe (- 12.7%) and America (-30.8%); all product lines in the business unit reveal shrinkage of revenues over the same period in the previous year.
Orders received in the first six months of 2020 total 15,856 thousand Euro, -22.7% less than the figure for the first quarter of the previous year, and the order backlog, worth 4,319 thousand Euro, has also fallen both compared to the figure as at 30 June 2019 (-27.7%) as well as that at 31 December 2019 (-4.6%).
In the second quarter of 2020 revenues amounted to 9,371 thousand Euro, down 16.4% over the same period in 2019, when they came to 11,207 thousand Euro.
EBITDA in the first half of 2020 is positive by 1,331 thousand Euro (7.2% of revenues), 757 thousand Euro lower than the figure for the first half of 2019, due to decreased sales, only partly compensated by lower operating costs.
EBIT at 30 June 2020 was positive at 75 thousand Euro, as compared with a positive EBIT of 1,304 thousand Euro at 30 June 2019. The 1,229 thousand Euro decrease is a result of the dynamics described above: lower volumes of sale and therefore lower added value, only partially compensated by a reduction in operating costs for ordinary management.
Also note that adoption of accounting standard IFRS16 led the automation components business unit to reverse leasing fees of 245 thousand Euro (208 thousand Euro in the first half of 2019) and to enter 237 thousand Euro in amortisation of usage rights (200 thousand Euro in the first half of 2019).
Comparing the figures by quarter, EBIT in the second quarter of 2020 came to 125 thousand Euro (1.3% of revenues), the figure is compared with the second quarter of 2019 equal to 473 thousand Euro (4.2% of revenues).
Investments in the first six months of 2020 totalled 777 thousand Euro. Investments in intangible assets amounted to 534 thousand Euro, of which 353 thousand Euro were to capitalise the cost of development of the new range of regulators and power controllers.
Investments in tangible assets amounted to 243 thousand Euro, invested in improvement of the Group's Italian production factories, plant and machinery and renewal of electronic office machines and equipment for information systems.
The table below shows the key economic figures.
| (Euro / 000) | 30 June | 30 June | Changes 2020-2019 |
2Q | 2Q 2019 | Changes 2020 - 2019 |
|||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | value | % | 2020 | value | % | |||
| Revenues | 18,825 | 21,721 (2,896) | -13.3% | 9,124 | 10,626 (1,502) -14.1% | ||||
| EBITDA | (67) | 267 | (334) | -125.1% | (129) | (372) | 243 | 65.3% | |
| % of revenues | -0.4% | 1.2% | -1.4% | -3.5% | |||||
| EBIT | (1,134) | (793) | (341) | -43.0% | (655) | (897) | 242 | 27.0% | |
| % of revenues | -6.0% | -3.7% | -7.2% | -8.4% |
The breakdown of motion control business revenues by geographic region is as follows:
| 30 June 2020 | 30 June 2019 | Changes 2020-2019 | |||||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | value | % | value | % | value | % | |
| Italy | 6,405 | 34.0% | 6,173 | 28.4% | 232 | 3.8% | |
| Europe | 3,776 | 20.1% | 4,570 | 21.0% | (794) | -17.4% | |
| America | 2,838 | 15.1% | 3,650 | 16.8% | (812) | -22.2% | |
| Asia | 5,609 | 29.8% | 7,152 | 32.9% | (1,543) | -21.6% | |
| Rest of the World | 197 | 1.0% | 176 | 0.8% | 21 | 11.9% | |
| Total | 18,825 | 100% | 21,721 | 100% | (2,896) | -13.3% |
Revenues in the first six months of 2020 amount to 18,825 thousand Euro, 2,896 thousand Euro lower (-13.3%) than the same period in the previous year. The contraction is concentrated in America (-22.2%), Asia (-21.6%) and Europe (-17.4%). Good performance was recorded Italy (+3.8%). In terms of products, sales of products dedicated to custom orders and the new Lift lines improved compared to the first half of 2019. On the other hand, the sales volumes of the other lines, in particular industrial applications, decreased.
The order portfolio in the first half of 2020 amounts to 23,067 thousand Euro, down 10.8% over the first six months of 2019, when this item totalled 20,826 thousand Euro. The backlog at 30 June 2020 was also up both on the figure at 30 June 2019 (+59.8%) and on that at 31 December 2019 (+52.2%).
In the second quarter of 2020, motion control revenues amounted to 9,124 thousand Euro, down 14.1% over the same period in 2019, when they came to 10,626 thousand Euro.
EBITDA at 30 June 2019 was negative at EUR 67 thousand (-0.4% of revenues). If compared with the figure for the previous period, which was positive by 267 thousand Euro (1.2% of revenues), a drop of 334 thousand Euro is evident, dictated by lower volumes of sale registered in the first half of 2020, not completely offset by the decrease in operating costs.
EBIT as of 30 June 2020 is negative by 1,134 thousand Euro, as compared to a negative EBIT of 793 thousand Euro for the same period in the previous year, a decrease of 341 thousand Euro. The reduction in operating costs partly recovered the lower added value achieved due to lower sales volumes.
Also note that adoption of accounting standard IFRS16 has allowed the motion control business unit to reverse 139 thousand Euro in leasing fees (137 thousand Euro in the first half of 2019) and enter amortisation of usage rights amounting to 140 thousand Euro (128 thousand Euro in the half quarter of 2019).
Investments in the first half 2020 amounted to 701 thousand Euro, including 256 thousand Euro invested in tangible assets, primarily for renewal of production equipment and improvement of the efficiency of production (135 thousand Euro).
Increases in intangible assets amounted to 445 thousand Euro and concerned the capitalisation of development costs (364 thousand Euro) relating to new products for the industrial sector and the lifting sector.
The Gefran Group invests significant financial and human resources in product research and development. In the first half of 2020, about 5% of revenues were invested in these activities, which are considered strategic to maintain high technological and innovative levels in products and ensure the competitiveness required by the market.
Research and development is concentrated in Italy, in the laboratories in Provaglio d'Iseo and Gerenzano. It is carried out within the technical department, with a separation between research and development into new products and production engineering aimed at improving existing products with new innovations.
The cost of technical personnel involved in the activities, consultancy and materials used is fully charged to the income statement, except for costs capitalised for the year that meet the requirements of IAS 38. Costs identified for capitalisation according to the above requirements are indirectly suspended by a revenue entry under a specific income statement item: "Increases for internal work".
The sensors area focused its research activities in the first half of 2020 on further strengthening Gefran's offer in the certification and connectivity area, focusing on high-end Melt sensors and Magnetostrictive position sensors in the HYPERWAVE range.
With particular regard to Melt sensors, the certification process in the functional safety field was extended to top of the range products, both for the transmission fluid versions as well as for the IMPACT line, with the aim of gaining new market shares in the polymer transformation sector. In addition to the HART protocol and Atex certification, today the HMX, HWX and the new IMPACT HIX family can also benefit from SIL2 and PLd certifications.
The new project developments that will mature in the second half of the year will still concern topof-the-range products and will be aimed at broadening the geographical focus of certifications, leading to IECEx certification, a prerequisite for obtaining multiple regional certifications, and Factory Mutual (FM) Explosion Proof certification, necessary to compete in the U.S. market.
In terms of processes, the year started with the installation of a system for the production of Melt sensors with NaK filling at the US plant. Moreover, technology transfer was started, which will allow the use of Thick Film sensitive elements in the production of Melt sensors, first in the US production site and then also in that in Shanghai, thus extending to the remote sites the benefits in terms of costs, performance and efficiency linked to this technology, already used in the Italian production lines.
As far as Magnetostrictive sensors are concerned, new product developments were directed towards the implementation of communication protocols with a view to Industry 4.0. In this context, two new series with IO-Link and Profinet communication protocol will join the HYPERWAVE family:
IO-Link, an industrial point-to-point communication protocol, is now the input solution for Smart sensors. The number of IO-Link nodes in the world is growing strongly (+40%) with 16 million nodes in 2019.
with superior performance, both in terms of primary performance and data transfer capacity, the new series with Profinet protocol will be at the top of Gefran's magnetostrictive offering; the number of nodes is also growing for Profinet (+25%), with a total of 32.4 million nodes installed in 2019.
Both protocols are expendable in a heterogeneous manner in the industrial machinery market. The RTE (Real Time Ethernet) series will be used for faster and more performing machines. IO-Link is the most economical Smart solution, with advantages in terms of cabling, autoparameterisation and acyclic data generation, indispensable requirements for Industry 4.0.
Research and development in the field of automation components focused on the projects described below.
For the instrumentation range, attention was focused on the development of specific functionalities for alternative sectors to traditional ones (e.g. plastics), such as:
For the power controller range, work focused on the development of:
Development activities in the motion control were in two main directions. On the one hand, the development of products in the standard catalogue, enriched with new Industry 4.0 functionalities for connectivity, safety and security, as well as the necessary functional and technological updating; on the other, the implementation of custom products, responding to specific ad hoc technical requirements (so-called job orders) requested by important market leaders in the industrial sector.
More specifically, projects were carried out in the first half of 2020 concerning:
A series of internal activities aimed at the development of new technologies, implemented independently and/or in collaboration with Universities and Research Centres, are also of importance, aimed at improving product performance and the possibility of introducing new functions and services, such as remote support and preventive maintenance.
At 30 June 2020 the Group's workforce numbered 811, a decrease of 18 since the end of 2019 and of 17 compared with 30 June 2019.
This change marks an overall turnover rate within the Group of 5%.
Changes in the first six months of 2020 were as follows:
In the normal course of its business, the Gefran Group is exposed to various financial and nonfinancial risk factors, which, should they materialise, could have a significant impact on its economic and financial situation.
Analysis of risk factors and assessment of their impact and probability of occurrence is the prerequisite for creation of value in the organisation. The ability to respond to risk correctly will help the Company to face corporate and strategic choices with confidence and contribute to prevention of the negative impact on the Company's targets and the Group's business.
The Group adopts specific procedures for management of risk factors that may have an impact on expected results.
On 13 February 2008, the Gefran S.p.A. Board of Directors resolved to adopt an Organisation, Management and Control Model ("Organisational Model") aimed at preventing commission of the crimes identified in Legislative Decree no. 231/01.
The model has been updated periodically in view of the evolution of the legislation and changes to the Company's organisation. The Organisational Model was updated under a resolution passed by the Board of Directors on 13 November 2019, based on the Confindustria Guidelines, in response to the need for continuous update of the corporate governance system, the structure of which was based in turn on the recommendations and regulations in the "Code of Conduct for Listed Companies" promoted by Borsa Italiana S.p.A., with which the Company complies.
Company organisations of significance for the purposes of internal auditing and risk management have also been identified:
In recent years Gefran has progressively approached the concepts of Risk Assessment and Risk Management with the aim of developing a process of periodic identification, assessment and management of the main risks. Starting in 2017, Gefran has taken advantage of the occasion to reinforce its governance model and implement Risk Assessment promoting proactive risk management in support of the company's principal decision-making processes, identifying any areas requiring special attention and focus.
This Risk Assessment allows the Board of Directors and Management to consciously assess risk scenarios that could compromise achievement of strategic goals and adopt further instruments capable of mitigating or managing significant exposure to risk, strengthening the Group's Corporate Governance and Internal Auditing System. Risk Assessment is extended to all types of risk/opportunity of potential significance for the Group, represented in the Risk Model - shown in the figure below - dividing internal and external risk areas characterising Gefran's business model into eight families:
External Risks: risks deriving from factors beyond the company's control, such as macroeconomic context and changes in the regulatory and/or market scenario;
Financial Risks: connected with the availability of funding, credit and cash management, and/or volatility of key market variables (e.g. commodity prices, interest rates, exchange rates);
| 1. External Risks | 2. Financial Risks | ||
|---|---|---|---|
| Macroeconomic context | Instability in Emerging Economies where the Group produces or sells its products |
Volatility of raw materials' prices | Business / financial counterparts |
| Catastrophic Events / Business Interruption | Evolution of laws, regulations and industry standards |
Exchange rate | Interest rate |
| Competition | Liquidity | Availability of capital / debt-reimbursement capability |
|
| 3. Strategic Risks | 4. Governance and Integrity Risks | ||
| Sustainability of Businesses (e.g. Motion / Automation) |
Investment decisions / M&A | Resistance to change | Integrity of behaviors / frauds |
| Product portfolio | Product / Process Innovation | Proxies and Powers | R&R (roles and responsibilities) / SoD |
| Effectiveness of medium-long term strategies | Effectiveness of extraordinary transactions | Management and government of foreign branches |
|
| Strategic planning | |||
| 5. Operating and Reporting Risks | 6. Legal and Compliance Risks | ||
| Adequacy / saturation of production capacity | Incorrect / inefficient production planning | Protection of the exclusiveness of the relationship |
Litigation |
| Obsolescence of plants / machineries | Quality of products / Recall | Contractual Risks | Adaptation to H&S legislation |
| Storage obsolescence | Dependence on contractors / critical suppliers |
Adaptation to environmental legislation | Adaptation to labor legislation |
| Reliability of supplier portfolio | Ineffectiveness of sales channels | Adaptation to 262 Italian Law / financial reporting |
Adaptation to 231 Italian Law Decree / Anticomuption |
| Pricing ineffectiveness | Budget, planning and reporting | Adaptation to fiscal legislation | Adaptation to privacy legislation |
| Dependence on critical clients | Transfer Pricing | Adaptation to industry legislation (ex. ISO) | |
| Order execution risk | Partitioning of suppliers | ||
| 7. IT Risks | 8. Risks connected to Human Resources | ||
| IT & Data Security (Cybersecurity and SoD) | Business Continuity / Disaster Recovery | Attraction and Retention | Professional development and compensation |
| Data & IT Governance | IT Infrastructure | Generational change | Industrial Relations |
| Web domain | Dependence on key figures | Poor communication between the first managerial lines |
|
| Timeliness of communications relating to organizational changes |
Average age of employees |
The eight risk families analysed are schematically represented below:
Management involved in the Risk Assessment process must use a clearly defined shared methodology to identify and assess specific risk events in terms of the probability of them actually occurring, their impact and the degree of adequacy of the existing risk management system, according to the following definitions:
The results of measurement of risk exposure analysed are then represented in the so-called Heat Map, a 4x4 matrix which, combined with the variables in subject, provides an immediate overview of risk events considered particularly significant.
The principal risks detected and assessed through Risk Assessment are described and discussed with all organisations of significance for the purposes of the internal auditing and risk management system and with the Board of Directors. The overview of the risks the Group is exposed to allows the Board of Directors and Management to reflect on the group's propensity for risk and identify risk management strategies to be adopted, or assess which risks and priorities are considered to require implementation, improvement or optimisation actions, or simple monitoring of exposure over time.
Adoption of a certain risk management strategy depends, however, on the nature of the risk event identified, and therefore, in the case of:
The Risk Assessment process conducted in 2019 involved 11 company contact people representing the Parent Company and subsidiaries.
External and internal risk factors are analysed below, classified according to the risk families identified above:
Note that, with reference to IT risk, the risk management processes currently implemented by the Group do not reveal any particular risks relating to the adequacy of information systems, in terms of infrastructure, data integrity and availability and the security of systems and applications used. Moreover, with reference to human resources risks, there are no specific risks to be reported, thanks to initiatives undertaken since 2017 and still underway; the reader is referred to section 11 of this Management Report for more details.
There is also no particular risk of personnel being unavailable due to contagion or other personal reasons related to the COVID-19 emergency.
Lastly, on the basis of economic results and cash flows in recent years, as well as available funds as of 30 June 2020, there is believed to be no significant uncertainty as of that date as to the Company's ability to maintain business continuity.
At the end of June, the global outlook for the current year was reviewed by the International Monetary Fund, which now estimates, net of second-wave Coronavirus risks, a contraction in world GDP of 4.9% (the previous estimate saw growth of 3.2%), while global GDP is expected to grow by 5.4% in 2021 (compared to 5.8% forecast in April). With reference to the Eurozone, the contraction estimated for 2020 is 10.2%, followed by a recovery of 6% in 2021: Italy, in particular, risks a 12.8% decrease, with a rebound of +6.3% in 2021. In this scenario, aggravated by the acceleration of the Covid-19 pandemic which forced many countries to tighten their closure measures, the exception is China, which already in April began to lift the lockdown and for which the International Monetary Fund confirms an overall growth in 2020, albeit at an all-time low (+1%), which accelerates in 2021 (over 8%).
The Gefran Group is present through subsidiaries in international markets and this widespread geographic presence enables the Group to mitigate the effects of any recessionary phases. Diversification of the markets where the Group operates and the products it offers reduces exposure to the cyclical trends of some markets.
With reference to the current situation, even though the COVID-19 virus has spread all over the world, the fact that it has affected different countries at different times, so that the resumption of production and commerce has also been staggered, has resulted in different trends in incoming orders and revenues: on the one hand, China has resumed full-swing production while, on the other, other important countries for the Group have slowed down.
As described above, the spread of the pandemic has had a negative impact on Gefran's economic results, including revenues which, in the first half of 2020, were 13% lower than in the same period of 2019; the Group is actively monitoring foreign markets, as it is unable to work on expansion of trade into new markets and fields of application due to the prohibition of travel for its sales network.
However, the possibility that these trends may have a significant impact on the Group's operations and economic and financial situation cannot be ruled out.
Gefran operates on open, unregulated markets that are not protected by any tariff barriers, regulated regime or public concession. The markets are highly competitive in terms of product quality, innovation, price competitiveness, product reliability and customer service to machinery manufacturers.
The Group operates in a very crowded competitive environment: operators which are large groups that may have greater resources or better cost structures, both in terms of economies of scale and factor costs, enabling them to implement aggressive pricing policies.
The success of the Gefran Group's activities derives from its capacity to focus its efforts on specific industrial sectors, concentrating on resolving technological problems and on customer service, thereby providing greater value to customers in the niche markets in which it competes.
Should the Group prove unable to develop and offer innovative and competitive products and solutions that match those supplied by its main competitors in terms of price, quality, functionality, or should there be delays in such developments, sales volumes could decline, with a negative impact on the Group's economic and financial results.
Although the Gefran Group believes that it can adapt its cost structure if sales volumes or prices decrease, the risk is that such a reduction in the cost structures will not be sufficiently large and quick, thus negatively affecting its economic and financial situation.
Since the Group makes and distributes electronic components used in electrical applications, it is subject to numerous legal and regulatory requirements in the various countries in which it operates, to the national and international technical standards applicable to companies operating in the same industry and to the products made and sold by the Group.
Any changes in laws or regulations could entail substantial costs to adapt the product characteristics or even temporary suspension of the sale of some products, which would affect revenues.
In addition, there is the risk of changes or tightening of the regulatory framework by supranational/national governmental bodies in the countries where Gefran operates that could have an impact on the Group's operating results.
The Group also places great importance on the protection of the environment and safety.
Its activities do not include the manufacture or processing of materials or components to an extent that would generate a significant risk of pollution or environmental damage.
The Group has introduced a series of controls and monitoring aimed at identifying and preventing any potential increase in this risk. Furthermore, it has taken out an insurance policy to cover potential liabilities arising from environmental damage to third parties. This does not exclude the possibility of residual environmental risks which have not been adequately identified and covered.
The enactment of other regulations that apply to the Group or its products, or changes in the regulations currently in force in the sectors in which the Group operates, also internationally, could force the Group to adopt more rigorous standards or limit its freedom of action in its areas of operation. These factors could entail costs relating to adapting the production facilities or product characteristics.
A significant portion of the Group's production and sales activities is carried out outside the European Union, particularly in Asia, the US and Brazil. The Group is exposed to risks relating to the global scale of its operations, including those relating to:
Unfavourable political and economic developments or those related to the health emergency in the countries in which the Group operates could have a negative impact – the extent of which would vary by country – on the Group's prospects and operations, and its economic and financial results.
As a global operator, the Gefran Group is exposed to market risks stemming from exchange rate fluctuations in the currencies of the various countries in which it operates.
Exposure to exchange rate risk is linked to the presence of production activities concentrated in Italy and commercial activities in various geographical regions outside the Eurozone. This organisational structure generates flows in currencies other than the currency in the place of production, mainly the US dollar, the Chinese renminbi, the Brazilian real, the Indian rupee, the Swiss franc, the Turkish lira and the UK pound; production areas in the US, Brazil, India, Switzerland and China mainly serve their local markets, with flows in the same currency.
Exchange rate risk arises when future transactions or assets and liabilities already recorded in the statement of financial position are denominated in a currency other than the functional currency of the company conducting the operation. In order to manage the exchange rate risk resulting from future commercial transactions and the recording of assets and liabilities in foreign currencies, the Group first and foremost exploits so-called natural hedging, seeking to level out the incoming and outgoing flows on all the currencies other than the Group's functional currency; furthermore, Gefran evaluates and if necessary establishes hedging transactions on the main currencies, by means of the Parent Company signing futures contracts. However, since the Company prepares its consolidated financial statements in euros, fluctuations in the exchange rates used to translate subsidiaries' accounting figures, originally expressed in local currency, may affect the Group's results and financial position.
Changes in interest rates affect the market value of the Group's financial assets and liabilities, as well as net financial charges. The interest rate risk to which the Group is exposed mainly originates from medium-/long-term financial payables. The Group is exposed almost exclusively to fluctuations in the Euro rate, since bank loans have been taken out by the Parent Company Gefran S.p.A., which supports the subsidiaries' financial requirements, also through cash pooling.
These variable-rate loans expose the Company to a risk associated with interest rate volatility, known as cash flow risk. To limit exposure to this risk, the Parent Company puts in place derivative hedging contracts, specifically Interest Rate Swaps (IRS), which convert the floating rate to a fixed rate, or Interest Rate Caps (CAP), which set the maximum interest rate, thereby reducing the risk originating from interest rate volatility.
The potential rise in interest rates, from the lows reached at present, is a possible risk factor for the next few quarters, although this is limited by hedging contracts.
Since the Group's production mainly involves mechanical, electronic and assembly processes, exposure to energy price fluctuations is very limited.
The Group is exposed to changes in basic commodity prices (e.g. metals) to a small extent, given the product cost component related to these materials is very limited.
The Gefran Group's financial situation is subject to risks associated with the general economic environment, the achievement of objectives and trends in the sectors in which the Group operates.
Gefran's capital structure is strong; it has own funds of Euro 75.8 million versus overall liabilities of Euro 85.6 million. All existing signed contracts are for loans at variable interest rates, determined by the Euribor rate plus an average spread of less than 110 bps in the past two years and do not have clauses that imply compliance with economic and financial requirements (covenants).
During the second quarter of 2020 two new loans were taken out: a new medium/long-term loan with Unicredit of 5 million Euro, without covenants and with a spread of 0.95%, and a second medium/long-term loan with BNL of 7 million Euro, without covenants and with a spread of 1.1%.
As soon as signs of the impact of COVID-19 began to appear, the Group implemented new organisational methods and cost-cutting processes, and began work on an important plan for redefinition of its activities and priorities, suggesting that the Group will be capable of financial expenditure for planned investments and regular operations.
With regard to the current situation, as soon as signs of the impact of COVID-19 began to appear, the Group implemented new organisational methods and cost-cutting processes, and began work on an important plan for redefinition of its activities and priorities, suggesting that the Group will be capable of financial expenditure for planned investments and regular operations.
Credit lines and cash on hand are sufficient for the Group's operations and the expected economic outlook. Credit lines granted by banks were subject to a review in the first half of the year, leading to the essential confirmation of the terms and conditions and amounts.
The Group has business relations with a large number of customers. Customer concentration is not high, since no customer accounts for more than 10% of total revenues. Supply agreements are normally long-term, because Gefran products form part of the customer's product design, and they are incorporated into the end product and have a significant influence on its performance. In accordance with IFRS 7.3.6a, all amounts presented in the financial statements represent the maximum exposure to credit risk.
The Group grants its customers deferred payment conditions, which vary according to the market practices in individual countries. All customers' solvency is regularly monitored, and any risks are periodically covered by appropriate provisions. Despite these precautions, under current market conditions, it cannot be ruled out that some customers may not be able to generate sufficient cash flow or may lack access to sufficient sources of funding, resulting in payment delays or a failure to honour obligations.
Receivables were adjusted to their estimated realisable value through a specific provision for doubtful receivables, calculated on the basis of an examination of individual debtor positions as required by IFRS 9 and taking into account past experience in each specific line of business and geographical region.
The medical emergency generated by Covid-19 already at the start of 2020 caused a global economic shock, with the result that the Group has conducted analyses assessing the possibility of increased credit risk.
To do this, the Group has developed estimates based on the most accurate information available on past events, current economic conditions and forecasts for the future. The analyses conducted to determine the existence of such a risk have been based primarily on three factors:
With reference to the latter point, the Group has conducted its analyses using a risk matrix that takes into account geographical region, industry, and individual customer solvency.
Management considers the forecasts thus generated to be reasonable and sustainable despite the current climate of uncertainty.
Gefran's ability to improve profitability and achieve the expected profit margins also depend on successful implementation of its strategy. Group strategy is based on sustainable growth, which can be achieved through investment and projects for products, applications and geographical markets, that lead to growth in profitability.
Gefran plans to implement its strategy by concentrating available resources on growing its core industrial business, favouring growth in strategic products that guarantee volumes, and in which the Group is technological and market leader. Gefran continues to make changes to its organisational structure, work processes and staff know-how to increase specialisation in research, marketing and sales by product and by application.
Given the uncertainty regarding the future macroeconomic environment, the operations described could take longer to implement than expected or may not prove fully satisfactory for the Group.
Gefran operates in a sector that is strongly influenced by technological innovation. The Group's approach to innovation is often customer-driven. Inadequate or delayed product/process/model innovation to anticipate and/or influence customers' demands could have negative repercussions, causing the company to miss opportunities and sacrifice market share and/or revenues.
The impact of this risk would increase if one or more competitors should propose business models and/or technologies which are more innovative than Gefran's.
In order to mitigate the impact of this risk, the Gefran Group has invested in software introducing new controls in production and processes, through reorganisation of production flows, and in human resources, with the addition of specialised figures focusing on the areas of innovation and innovative technological trends.
The Gefran Group has always been committed to applying and observing rigorous ethical and moral principles when conducting its internal and external activities, in full compliance with the laws in force and market regulations. The adoption of the Code of Ethics, the internal procedures put in place to comply with this code and the controls adopted guarantee a healthy, safe and efficient working environment for employees, and an approach intended to ensure complete respect for external stakeholders. The Group believes that ethics in business management must be pursued alongside financial growth, and the Code is therefore an explicit point of reference for everyone working with the Company.
Gefran has also effectively adopted an Organisation and Management Model pursuant to Legislative Decree No. 231/2001. The Group believes that this is not only a regulatory obligation but also a source of growth and wealth generation and has therefore fully restructured its activities and internal procedures in order to prevent the offences set out in this regulation from being committed. The Supervisory Board established by the Board of Directors performs its duties constantly and professionally, guaranteed by the presence of a two professionals with excellent knowledge of administration and process control systems.
The Group conducts the bulk of its business with private customers, which do not directly or indirectly belong to government organisations or public agencies, and rarely takes part in public tenders or subsidised projects. This further limits the risks of reputational or economic damage resulting from unacceptable ethical conduct.
The Group purchases raw materials and components from a large number of suppliers and depends on services and products supplied by other companies outside the Group. Conversely, electronic components, primarily microprocessors, power semi-conductors and memory chips, are purchased from leading global producers.
During the first half of 2020, the Group promptly set up a task force to identify the location of the plants of suppliers considered critical and, when they were found to be located in areas subject to lockdown, put in place in certain countries as a measure to contain the spread of COVID-19, direct orders for supplies to plants that are still in operation. The Group's Purchasing Department assessed alternative suppliers to mitigate the risk of interruption of supply, while purchasing the materials necessary to guarantee the business continuity of the Gefran Group's plants, which suffered no interruptions due to shortages of materials.
Gefran has undertaken to fulfil its commitments to suppliers, paying the amounts due regularly at the agreed due dates, a commitment underlined by participation in the Brescia Industrialists' Association's "I pay suppliers" initiative.
The Group's value chain covers all activities, including R&D, production, marketing, sales and technical support. Defects or errors in these processes may cause product quality problems that could potentially affect the Group's results and financial position.
The quality of the product and of the process underlying its production is of the utmost importance for the Group and this is evident in the quality function which, over the years, has been increasingly endowed with new resources and skills, at a global level, to ensure the proper supervision of this fundamental aspect.
In line with the practices of many operators in the sector, Gefran has taken out insurance policies that it considers sufficient to protect itself from the risks resulting from this liability. Furthermore, it has set up a specific product warranty provision to meet these risks, in line with the volume of activities and the historical occurrence of these phenomena.
However, should the insurance cover and risk provisions prove inadequate, the Group's results could be negatively affected. In addition, the Group's involvement in this type of dispute and any ruling against it therein could expose the Group to reputational damage, which also has potential consequences for the Group's results and financial position.
Gefran is an industrial group, so it is potentially exposed to the risk of production stoppages at one or more of its plants, due, for example, to machinery breakdowns, revocation or disputes regarding permits or licences from public authorities (e.g. following changes in the law), strikes or manpower unavailability, natural disasters, major disruptions to the supply of raw materials or energy, sabotage or attack.
There have been no significant interruptions of activity in recent years, even during the current health crisis. However, future interruption cannot be ruled out, and if it occurs for lengthy periods, the Group's results and financial position could be negatively affected if the damage exceeds the amount currently covered by insurance policies.
Gefran has implemented a disaster recovery system for restoring the systems, data and infrastructures necessary for the Group's work in the event of an emergency and in order to contain its impact.
Moreover, periodic oscillation of demand, making effective production planning difficult, and demand in excess of its productive capacity could cause Gefran to miss out on opportunities and/or lose revenues.
To mitigate this risk, Gefran has come up with plans for investment in plant and machinery, aiming for digitalisation, expansion and reorganisation of its productive spaces and hiring of new employees. If necessary, moreover, the company can shift production to another plant thanks to use of the same bill of materials and uniform production processes.
Risk assessment is essential to protect the health and safety of our workers. Gefran is constantly committed to mapping the operating risks that could be manifested in the various company sectors, to define opportunities and actions to minimise them, where possible.
Gefran has implemented all the procedures required to protect its employees' health during the COVID-19 pandemic, taking into account all the official protocols emanated by the governments of the countries where Gefran works. By way of example, with no intention of exhaustively listing the health and hygiene measures implemented on the company's premises and for its employees, a number of actions implemented in Group plants are listed below:
Within the scope of Gefran's core business, the manufacture and sale of products may give rise to issues linked to defects and consequent liability in respect of its customers or third parties. Like other operators in the industry, the Group is therefore exposed to the risk of product liability litigation in the countries in which it operates.
In line with the practices of many operators in the sector, Gefran has taken out insurance policies that it considers sufficient to protect itself from the risks resulting from this liability. It has also set up a specific provision against these risks.
However, should the insurance cover and risk provisions prove inadequate, the Group's results could be negatively affected. In addition, the Group's involvement in this type of dispute and any ruling against it could expose the Group to reputational damage, which also has potential consequences for the Group's results and financial position.
Although the Group considers it has adopted an appropriate system to protect its intellectual property rights, it cannot be ruled out that it may encounter difficulties defending these rights.
Furthermore, the intellectual property rights of third parties could inhibit or limit the Group's capacity to introduce new products onto the market. These events could have a negative impact on the development of activities and the Group's results and financial position.
The Shareholders' Meeting was asked to allocate all of the net profit from the year 2019 (6,221,826 Euro) to retained earnings.
In accordance with art. 123-ter of Italy's Consolidated Finance Act (TUF), the shareholders' meeting voted in favour of the Group's 2020 Remuneration Policy and remuneration for the year 2019.
The new Board of Directors appointed members Monica Vecchiati, Daniele Piccolo and Giorgio Metta to the Control and Risk Committee, while Daniele Piccolo, Monica Vecchiati and Cristina Mollis were appointed members of the Remuneration Committee.
The independence requirements of the newly-appointed board were also verified. The nonexecutive directors Daniele Piccolo, Monica Vecchiati, Cristina Mollis and Giorgio Metta declared they were in possession of the independence requirements. Daniele Piccolo is Lead Independent Director. Ennio Franceschetti, Maria Chiara Franceschetti, Andrea Franceschetti, Giovanna Franceschetti and Marcello Perini are Executive Directors.
The first half of 2020 also saw the global spread of Coronavirus (Covid-19), resulting in the World Health Organisation's declaration of a "global pandemic" in March as the number of countries reporting cases continued to grow. After the first cases of Covid-19 were reported in Asia, starting in January in China, the virus spread in Europe, with the first case officially reported in Italy on 21 February, and progressively spread to the Americas, particularly the United States.
The global health crisis led the governments of the affected countries to introduce increasingly restrictive measures, including limitation of travel, social isolation and suspension of all nonessential forms of production and commerce, with the primary goal of halting the spread of the virus and safeguarding human health.
These exceptional measures, many of which are still in effect today, have undeniably had a significant impact on society and the economy.
Gefran has also suffered the effects of the spread of Covid-19 in the countries where the Group operates, either directly with its own branches or indirectly through customers and suppliers, primarily as a result of the partial or total shutdown of production.
The Group responded with prompt introduction of measures aimed at protecting the safety of its employees and everyone it works with while ensuring business continuity compatibly with government directives. This has led to the definition of specific procedures for behaviour and access to company premises, and to preparation of health and safety protocols.
Synergies have been set up in the Group to respond to the shortage of PPE, ensuring that all employees have access to essential protective devices. In addition, the Group has begun to invest in ensuring the safest possible working conditions for its employees.
A task force was set up to manage the supply chain in order to ensure business continuity, responding to problems with geolocation of suppliers and definition of lockdown zones; there were no interruptions in production attributable to shortages of material in the quarter, and all financial commitments to suppliers were met.
As of the publication of this Financial Report, the Group's main production activities have resumed in all locations, while office staff work partly in the office and partly from home, in order to ensure the necessary social distancing.
The Gefran Group has also resorted to use of the exceptional wages guarantee fund and begun the required procedures for requesting government aid wherever available. In addition, actions are under way aimed at cutting costs and redefining the Group's actions and priorities.
Nothing to report.
2020 began on an optimistic note: the International Monetary Fund predicted an increase in global GDP, with 3.3% growth in 2020 and 3.4% growth in 2021. But following the propagation of the COVID-19 virus, these estimates were revised downwards, only minimally at first, followed by much greater reductions over the months that followed.
In the first quarter of the year, the crisis was more severe than expected, and the second quarter saw a further worsening: between April and May, the pandemic accelerated, forcing many countries to take more stringent measures, leaving deep scars on the global economy, public accounts and employment. A second wave of contagion would aggravate the recession, extending it to 2021. In light of this, and net of a second wave, the International Monetary Fund has updated its forecasts for 2020, which now sees a contraction in world GDP of 4.9%, and for 2021, when a recovery of 5.4% is envisaged. China is an exception in this international scenario: according to the International Monetary Fund, the revocation of the lockdown that took place as early as April has made it possible to estimate an overall growth in 2020, even if at record lows (+1%), which will accelerate in 2021 (over 8%). The OECD forecast, on the other hand, is more conservative, according to which China will also see a contraction of 2.6% in 2020.
With reference to the Eurozone, according to the International Monetary Fund, the contraction expected in 2020 is 10.2%, with a rebound of 6% in 2021: Italy risks a decline of 12.8% (+6.3% in 2021), Germany is going towards -7.8% and for the United Kingdom, the decline will be in excess of 10%.
The Gefran Group has felt the effects of the situation ever since the virus first appeared in China and then began to spread to other geographical areas of importance for the Group; it has responded by implementing new organisational methods and, where possible, exploiting the Group's international scope by making up for part of the production lost in the most strongly affected countries with production in other areas where industries have continued operating.
The Group reacted promptly to shrinking demand as a result of the impact of the pandemic by cutting costs and implementing a major review of its actions and priorities. Nevertheless, the global macroeconomic situation, characterised by contrasting signs at present, still presents many uncertainties, such that at present we do not assume that in the second half of 2020 we can achieve the same results as in the same period of 2019, confirming for the current year lower revenues and margins compared to 2019.
As of 30 June 2020, Gefran S.p.A. held 27,220 shares (0.19% of the total) with an average carrying value of Euro 5.7246 per share, all purchased in the fourth quarter of 2018.
No own shares were bought or sold during the first three half of 2020. As of the date of this report the situation was unchanged.
Brokerage on Gefran's shares by Intermonte takes place regularly.
Below we summarise the performance of the stock and volumes traded in the last 12 months:
On 12 November 2010, the Gefran Board of Directors approved the "Regulations for transactions with related parties" in application of Consob Resolution no. 17221 of 12 March 2010. These regulations have been published in the "Governance" section of the Company's internet site, available at https://www.gefran.com/en/gb/governance, in the "Internal dealings" section.
The procedure in question was updated by the Board of Directors on 3 August 2017 to bring the content in line with current regulations, specifically the entry into force of the "Market Abuse" regulation, EU 596/2014.
The regulation is based on the following general principles:
The regulation is structured as follows:
See paragraph 28 of the Notes to the Consolidated Financial Statements for details on transactions with related parties.
On 1 October 2012, the Gefran S.p.A. Board of Directors voted to use the option to provide simplified disclosure pursuant to article 70, paragraph 8, and article 71, paragraph 1-bis, of Consob Issuer Regulation 11971/1999 as amended.
GEFRAN GROUP – HALF-YEARLY FINANCIAL REPORT AS AT 30 June 2020
| 2Q | progressive as at 30 June | ||||
|---|---|---|---|---|---|
| (Euro / 000) | Notes | 2020 | 2019 | 2020 | 2019 |
| Revenues from product sales | 19 | 30,746 | 36,012 | 61,849 | 71,766 |
| Other revenues and income | 20 | 563 | 114 | 886 | 333 |
| Increases for internal work | 459 | 628 | 954 | 1,263 | |
| TOTAL REVENUES | 31,768 | 36,754 | 63,689 | 73,362 | |
| Change in inventories | 14 | 1,210 | 333 | 649 | 2,917 |
| Costs of raw materials and accessories | 21 | (12,447) | (13,241) | (23,297) | (28,032) |
| Service costs | 22 | (4,353) | (6,456) | (9,552) | (12,156) |
| of which related parties: | 28 | (48) | (38) | (98) | (81) |
| Miscellaneous management costs | (225) | (313) | (454) | (496) | |
| Other operating income | 3 | 631 | 3 | 638 | |
| Personnel costs | 23 | (11,741) | (13,228) | (23,599) | (25,607) |
| Impairment/reversal of trade and other receivables | 14 | (106) | (14) | (103) | 109 |
| Amortisation and impairment of intangible assets | 24 | (509) | (558) | (978) | (1,085) |
| Depreciation and impairment of tangible assets | 24 | (1,188) | (1,230) | (2,399) | (3,747) |
| Depreciation/amortisation total usage rights | 24 | (321) | (280) | (638) | (527) |
| EBIT | 2,091 | 2,398 | 3,321 | 5,376 | |
| Gains from financial assets | 25 | (37) | 36 | 490 | 485 |
| Losses from financial liabilities | 25 | (402) | (338) | (1,596) | (612) |
| (Losses) gains from shareholdings valued at equity | (3) | 17 | (1) | 259 | |
| PROFIT (LOSS) BEFORE TAX | 1,649 | 2,113 | 2,214 | 5,508 | |
| Current taxes | 26 | (166) | (363) | (419) | (1,015) |
| Deferred tax assets and liabilities | 26 | (423) | (269) | (656) | (464) |
| TOTAL TAXES | (589) | (632) | (1,075) | (1,479) | |
| NET PROFIT (LOSS) FOR THE YEAR | 1,060 | 1,481 | 1,139 | 4,029 | |
| Attributable to: | |||||
| Group | 1,060 | 1,481 | 1,139 | 4,029 | |
| Third parties | - | - | - | - | |
| Earnings per share | progressive as at 30 June | ||||
|---|---|---|---|---|---|
| (Euro) | Notes | 2020 2019 |
|||
| Basic earnings per ordinary share | 17 | 0.08 0.28 |
|||
| Diluted earnings per ordinary share | 17 | 0.08 0.28 |
| 2Q | progressive as at 30 June | ||||||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | Notes | 2020 | 2019 | 2020 | 2019 | ||
| NET PROFIT (LOSS) FOR THE YEAR | 1,060 | 1,481 | 1,139 | 4,029 | |||
| Items that will or could subsequently be reclassified in the statement of profit/(loss) for the period |
|||||||
| - conversion of foreign companies' financial statements |
16 | (408) | (487) | (225) | 128 | ||
| - equity investments in other companies | 16 | 4 | (33) | (24) | (32) | ||
| - fair value of cash flow hedging derivatives | 16 | (84) | (168) | (91) | (222) | ||
| Total changes, net of tax effect | (488) | (688) | (340) | (126) | |||
| Comprehensive result for the period | 572 | 793 | 799 | 3,903 | |||
| Attributable to: | |||||||
| Group | 572 | 793 | 799 | 3,903 | |||
| Third parties | - | - | - | - |
| (Euro / 000) | Notes | 30 June 2020 | 31 December 2019 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Goodwill | 10 | 5,923 | 5,917 |
| Intangible assets | 11 | 8,684 | 7,641 |
| Property, plant, machinery and tools | 12 | 43,119 | 44,761 |
| of which related parties: | 28 | 84 | 470 |
| Usage rights | 13 | 2,911 | 3,089 |
| Shareholdings valued at equity | 195 | 1,196 | |
| Equity investments in other companies | 1,658 | 1,690 | |
| Receivables and other non-current assets | 91 | 94 | |
| Deferred tax assets | 26 | 5,902 | 6,556 |
| Non-current financial investments for derivatives | 15 | 1 | 1 |
| Other non-current financial investments | 98 | 97 | |
| TOTAL NON-CURRENT ASSETS | 68,582 | 71,042 | |
| CURRENT ASSETS | |||
| Inventories | 14 | 24,786 | 24,548 |
| Trade receivables | 14 | 27,978 | 28,931 |
| Other receivables and assets | 7,144 | 7,953 | |
| Current tax receivables | 26 | 913 | 853 |
| Cash and cash equivalents | 15 | 32,016 | 24,427 |
| TOTAL CURRENT ASSETS | 92,837 | 86,712 | |
| TOTAL ASSETS | 161,419 | 157,754 | |
| SHAREHOLDERS' EQUITY | |||
| Share capital | 16 | 14,400 | 14,400 |
| Reserves | 16 | 60,306 | 53,602 |
| Profit/(loss) for the year | 16 | 1,139 | 7,042 |
| Total Group Shareholders' Equity | 75,845 | 75,044 | |
| Shareholders' equity of minority interests | 16 | - | - |
| TOTAL SHAREHOLDERS' EQUITY | 75,845 | 75,044 | |
| NON-CURRENT LIABILITIES | |||
| Non-current financial payables | 15 | 27,206 | 21,916 |
| Non-current financial payables for IFRS 16 leases | 15 | 1,778 | 2,013 |
| Non-current financial liabilities for derivatives | 15 | 279 | 169 |
| Employee benefits | 4,847 | 4,853 | |
| Non-current provisions | 18 | 634 | 644 |
| Deferred tax provisions | 26 | 637 | 647 |
| TOTAL NON-CURRENT LIABILITIES | 35,381 | 30,242 | |
| CURRENT LIABILITIES | |||
| Current financial payables | 15 | 15,273 | 12,643 |
| Current financial payables for IFRS 16 leases | 15 | 1,138 | 1,071 |
| Trade payables | 14 | 21,091 | 24,937 |
| of which related parties: | 28 | 98 | 120 |
| Current provisions | 18 | 1,496 | 1,527 |
| Current tax payables | 26 | 428 | 257 |
| Other payables and liabilities | 10,767 | 12,033 | |
| TOTAL CURRENT LIABILITIES | 50,193 | 52,468 | |
| TOTAL LIABILITIES | 85,574 | 82,710 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 161,419 | 157,754 |
| (Euro / 000) | Notes | 30 June 2020 |
30 June 2019 |
|
|---|---|---|---|---|
| A) CASH AND CASH EQUIVALENTS AT THE START OF THE PERIOD | 24,427 | 18,043 | ||
| B) CASH FLOW GENERATED BY (USED IN) OPERATIONS IN THE PERIOD: | ||||
| Net profit (loss) for the period | 1,139 | 4,029 | ||
| Depreciation, amortisation and impairment | 24 | 4,015 | 5,359 | |
| Provisions (Releases) | 14.18 | 1,210 | 1,098 | |
| Capital (gains) losses on the sale of non-current assets | 11.12 | (1) | (17) | |
| Net result from financial operations | 25 | 1,107 | (114) | |
| Taxes | 26 | 419 | 1,010 | |
| Change in provisions for risks and future liabilities | 18 | (194) | (518) | |
| Change in other assets and liabilities | (524) | (3,831) | ||
| Change in deferred taxes | 26 | 655 | 467 | |
| Change in trade receivables | 14 | 543 | (2,838) | |
| Change in inventories | 14 | (1,609) | (3,584) | |
| Change in trade payables | 14 | (3,809) | 4,232 | |
| of which related parties: | 28 | (22) | 31 | |
| TOTAL | 2,951 | 5,293 | ||
| C) CASH FLOW GENERATED BY (USED IN) INVESTMENT ACTIVITIES | ||||
| Investments in: | ||||
| - Property, plant & equipment and intangible assets | 11.12 | (2,927) | (8,269) | |
| of which related parties: | 28 | (84) | (368) | |
| - Equity investments and securities | 1,000 | - | ||
| - Acquisitions net of acquired cash | - | (231) | ||
| - Financial receivables | 3 | (2) | ||
| Disposal of non-current assets | 11.12 | 2 | 27 | |
| TOTAL | (1,922) | (8,475) | ||
| D) FREE CASH FLOW (B+C) | 1,029 | (3,182) | ||
| E) CASH FLOW GENERATED BY (USED IN) FINANCING ACTIVITIES | ||||
| New financial payables | 15 | 11,991 | 21,485 | |
| Repayment of financial payables | 15 | (5,296) | (3,883) | |
| Increase (decrease) in current financial payables | 15 | 1,244 | (1,539) | |
| Outgoing cash flow due to IFRS 16 | 15 | (648) | (571) | |
| Taxes paid | 26 | (151) | (336) | |
| Interest paid | 25 | (473) | (376) | |
| Interest received | 25 | 31 | 177 | |
| Dividends paid | 16 | - | (4,599) | |
| TOTAL | 6,698 | 10,358 | ||
| F) CASH FLOW FROM CONTINUING OPERATIONS (D+E) | 7,727 | 7,176 | ||
| H) Exchange rate translation differences on cash at hand | 15 | (138) | (107) | |
| I) NET CHANGE IN CASH AT HAND (F+G+H) | 7,589 | 7,069 | ||
| J) CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (A+I) | 32,016 | 25,112 |
| overall EC reserves |
equity | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Euro / 000) | Notes | Share capital | Capital reserves | Consolidation reserve | Other reserves | Retained profit /(loss) | Fair value measurement reserve |
Currency translation reserve |
Other reserves | Profit/(loss) for the year | Group Total shareholders' equity |
equity of minority interests Shareholders' |
Total shareholders' |
| Balance at 1 January |
14,400 21,926 5,368 10,095 | 10,143 | (12) 3,143 (400) | 8,151 | 72,814 | - 72,814 |
|||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | |||||||||||
| Destination of 2018 profit |
|||||||||||
| - Other | 16 | ||||||||||
| reserves and | 521 | - | 7,630 | (8,151) | - | - | |||||
| provisions | |||||||||||
| - Dividends | 16 | (4,599) | (4,599) | (4,599) | |||||||
| Income/ | 16 | ||||||||||
| (Expenses) | (25) | (203) | (210) | (438) | (438) | ||||||
| recognised | |||||||||||
| at equity | |||||||||||
| Change in | 16 | ||||||||||
| translation | 221 | 221 | 221 | ||||||||
| reserve | |||||||||||
| Other changes |
16 | - | 4 | 4 | 4 | ||||||
| 2019 profit | 16 | 7,042 | 7,042 | 7,042 | |||||||
| Balance at | |||||||||||
| 31 December | 14,400 21,926 5,864 10,099 | 13,174 (215) 3,364 (610) | 7,042 | 75,044 | - 75,044 |
||||||
| 2019 | |||||||||||
| Destination of | 16 | ||||||||||
| 2019 profit | |||||||||||
| - Other | 16 | ||||||||||
| reserves and | 820 | - | 6,222 | (7,042) | - | - | |||||
| provisions | |||||||||||
| - Dividends | 16 | - | - | - | |||||||
| Income/ | 16 | ||||||||||
| (Expenses) | - | (115) | - | (115) | (115) | ||||||
| recognised at | |||||||||||
| equity | |||||||||||
| Change in | 16 | ||||||||||
| translation reserve |
(225) | (225) | (225) | ||||||||
| Other | 16 | ||||||||||
| changes | - | (1) | 3 | 2 | 2 | ||||||
| 2020 profit | 16 | 1,139 | 1,139 | 1,139 | |||||||
| Balance at | |||||||||||
| 14,400 21,926 6,684 10,098 | 19,399 (330) 3,139 (610) | 1,139 | 75,845 | - 75,845 |
GEFRAN GROUP – HALF-YEARLY FINANCIAL REPORT AS AT 30 June 2020
Gefran S.p.A. is incorporated and located at Via Sebina 74, Provaglio d'Iseo (BS).
The half-yearly financial report of the Gefran Group for the period ended 30 June 2020 was approved by the Board of Directors on 6 August 2020, which authorised its publication.
The Group's main activities are described in the Report on Operations.
The consolidated half-yearly financial statements of the Gefran Group were prepared in accordance with the International Financial Reporting Standards adopted by the European Union.
They comprise the financial statements of Gefran S.p.A., of its subsidiaries and of the direct and indirect affiliates, approved by their respective Boards of Directors. The consolidated companies adopted international accounting standards, with the exception of a number of companies whose financial statements were restated for the Group's consolidated financial statements to bring them into line with IAS/IFRS standards.
The official audit of the half-yearly consolidated financial statements was carried out by PricewaterhouseCoopers S.p.A.
These consolidated half-yearly financial statements are presented in euro (EUR), the functional currency of most Group companies. Unless otherwise stated, all amounts are expressed in thousands of Euro.
For details on the seasonal nature of the Group's operations, please refer to the attached "Consolidated income statement by quarter".
The Gefran Group has adopted:
With reference to Consob resolution 15519 of 27 July 2006, amounts referring to transactions with related parties and non-recurring items are shown separately from the relevant items in the statement of financial position and income statement.
The consolidation principles and valuation criteria adopted in the preparation of these Half-yearly Financial Statements as of 30 June 2020 are the same as the accounting standards applied to the preparation of the 31 December 2019 Annual Financial Report.
With reference to Consob Communication DEM/11070007 of 5 August 2011, it is also noted that the Group does not hold in its portfolio any bonds issued by central or local governments or government agencies, and is therefore not exposed to risks generated by market fluctuations. The consolidated financial statements were prepared using the general historic cost criterion, adjusted as required for the valuation of certain financial instruments.
With reference to Consob Communication 0003907 of 19 January 2015, note 13 "Goodwill and other intangible assets with an indefinite life" includes the required information, and specifically the references to the external information and the sensitivity analysis.
With reference to Consob Communication 0092543 dated 3 December 2015, it is hereby revealed that in the Report on operations the guidelines of the ESMA (ESMA/2015/1415) were followed with regard to the information aimed at ensuring the comparability, reliability and comprehensibility of the Alternative Performance Indicators.
With reference to Consob Communication 0007780 of 28 January 2016, we note that the impact of market conditions on the information in the financial statements was included in the Directors' Report on Operations. We also note that the application of IFRS 13 "Fair value measurement" does not involve significant changes to items in the financial statements for Gefran.
The scope of consolidation as of 30 June 2020 was unchanged compared to 30 June 2019 and 31 December 2019.
There are no such cases applicable to the Group as of the date of this half-yearly Financial Report.
In drafting the financial statements and the explanatory notes to the accounts, in accordance with the IAS/IFRS principles, the Group makes use of estimates and assumptions to assess certain items. These are based on historical experience and uncertain but realistic assumptions, assessed regularly and, if necessary, updated, with effect on the income statement for the period and for future periods. The uncertainty inherent in these assessment estimates may lead to misalignment between the estimates made and the actual effects of the estimated events on the financial statements.
Below are the processes that require management to perform assessment estimates, and with regard to which a change in the underlying conditions could have a significant impact on the consolidated financial data:
Inventories are stated as the lower between the cost of purchase (measured using the weighted average cost method) and the net realisable value. The provision for impairment of inventory is necessary in order to adjust the value of inventories to the estimated realisable value: inventory composition is analysed for slow-moving stocks, with the aim of assessing a provision that reflects any obsolescence of same.
The provision for doubtful receivables reflects management's estimates regarding the recoverability of receivables from customers. Management's assessment is based on experience and on an analysis of situations with a known or probable risk of non-collection.
Regarding the introduction of IFRS 9, and particularly the new method for impairment of financial investments, starting on 1 January 2018 the Group revised its method for determination of the reserve to be used for coverage of losses on receivables, taking into account the losses expected throughout the life of the receivable, as required by the new standard, with no significant impact on the result for the period or on equity resulting from application of IFRS 9.
These are periodically subject to evaluation through the impairment test, with the aim of determining their present value and accounting for any differences in value; for details, see the specific sections of the notes to the financial statements.
The provision for the post-employment benefit reserve and the provision for non-competition agreements are posted to the financial statements and annually reviewed by external actuaries, taking into account assumptions regarding the discount rate, inflation and demographic assumptions; for details, see the specific section of the notes to the financial statements.
The recoverability of deferred tax assets is periodically evaluated, based on the results achieved and on the business plans prepared by management.
Provisions are made for risks of a legal and fiscal nature to represent the risk of a negative outcome. The amount of the provisions posted to the financial statements in relation to these risks represents management's best estimate at that time. This estimate entails the adoption of assumptions that depend on factors that may change over time and that could, therefore, have a significant effect on the current estimates made by management in preparing the Group's consolidated financial statements.
Non-current assets classified as held for sale are measured in accordance with IFRS 5 at the lower of their carrying value and their fair value minus selling costs. The economic effect of these assets also includes taxation.
The Group's activities are exposed to different types of risk: market risk (including exchange rate risks, interest rate risks and price risks), credit risk and liquidity risk. The Group's risk management strategy focuses on the market unpredictability and is intended to minimise the potential negative impact on the Group's results. Certain types of risk are mitigated through the use of derivatives. Coordination and monitoring of the main financial risks are centralised in the Group's Finance and Administration Department, as well as in the Purchasing function as regards price risk, in close partnership with the Group's operating units. Risk management policies are approved by the Group's Administration, Finance and Control Department, which provides written guidelines for the management of the risks listed above and the use of financial derivatives and other financial instruments. As part of the sensitivity analyses described below, the effect on the net profit figure and on shareholders' equity is determined gross of the tax effect.
The Group is exposed to exchange rate risk in relation to commercial transactions and cash held in currencies other than the euro, the Group's functional currency. Around 26% of sales are denominated in a different currency. Specifically, the Group is most exposed to the following exchange rates:
The sensitivity to a hypothetical and unexpected change of the exchange rates of 5% and 10% in the fair value of the financial statement assets and liabilities is shown below:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | ||||
|---|---|---|---|---|---|---|
| -5% | +5% | -5% | +5% | |||
| Chinese renminbi | 99 | (89) | 5 | (5) | ||
| US dollar | 56 | (47) | 62 | (56) | ||
| Total | 155 | (136) | 67 | (61) |
| (Euro / 000) | 30 June 2020 | 30 June 2019 | ||
|---|---|---|---|---|
| -10% | +10% | -10% | +10% | |
| Chinese renminbi | 208 | (170) | 11 | (9) |
| US dollar | 118 | (89) | 132 | (108) |
| Total | 326 | (259) | 143 | (117) |
The sensitivity to a hypothetical and unexpected change of the most significant exchange rates of 5% and 10% in the fair value of the net profit for the period is shown below:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | ||
|---|---|---|---|---|
| -5% | +5% | -5% | +5% | |
| Chinese renminbi | (24) | 22 | - | - |
| US dollar | 8 | (8) | 18 | (16) |
| Total | (16) | 14 | 18 | (16) |
| (Euro / 000) | 30 June 2020 | |||
|---|---|---|---|---|
| -10% | +10% | -10% | +10% | |
| Chinese renminbi | (51) | 42 | - | - |
| US dollar | 18 | (14) | 38 | (31) |
| Total | (33) | 28 | 38 | (31) |
The sensitivity to a hypothetical and unexpected change of the most significant exchange rates of 5% and 10% in the fair value of the shareholders' equity is shown below:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | |||
|---|---|---|---|---|---|
| -5% | +5% | -5% | +5% | ||
| Chinese renminbi | 479 | (433) | 524 | (474) | |
| US dollar | 376 | (341) | 372 | (336) | |
| Total | 855 | (774) | 896 | (810) |
| (Euro / 000) | 30 June 2020 | |||
|---|---|---|---|---|
| -10% | +10% | -10% | +10% | |
| Chinese renminbi | 1,011 | (827) | 1,107 | (905) |
| US dollar | 795 | (650) | 785 | (642) |
| Total | 1,806 | (1,477) | 1,892 | (1,547) |
The interest rate risk to which the Group is exposed mainly originates from medium to long-term financial payables with a variable rate. Variable-rate loans expose the Group to a risk associated with interest rate volatility (cash flow risk). The Group uses derivatives to hedge its exposure to interest rate risk, entering into Interest Rate Swap (IRS) and Interest Rate Cap (CAP) contracts.
The Group's Administration and Finance Department monitors exposure to interest rate risk and proposes appropriate hedging strategies to contain exposure within the limits defined and agreed in the Group's policies, using derivatives when necessary.
The table below shows a sensitivity analysis of the impact that an interest rate increase/decrease of 100 basis points would have on the consolidated net profit/(loss), comparing interest rates at 30 June 2020 and 30 June 2019, while keeping other variables unchanged.
| (Euro / 000) | 30 June 2020 | |||
|---|---|---|---|---|
| -100 | 100 | -100 | 100 | |
| Euro | 221 | (253) | 150 | (205) |
| US dollar | (12) | 12 | (18) | 18 |
| Total | 209 | (241) | 132 | (187) |
The potential impacts reported above have been calculated on the basis of the net liabilities representing the most significant part of the Group's payables as of the date of this annual financial report and calculating the effect of net financial charges on this amount resulting from changes in annual interest rates.
The net liabilities considered in this analysis include variable-rate financial receivables and payables, cash and cash equivalents, and financial derivatives, the value of which is affected by interest rate fluctuations.
The table below shows the carrying value at 30 June 2020, broken down by maturity, of the Group's financial instruments exposed to the interest rate risk:
| (Euro / 000) | <1 year | 1-5 years | >5 years | Total |
|---|---|---|---|---|
| Loans due | 10,757 | 27,206 | - | 37,963 |
| Financial payables due to leasing under IFRS 16 | 1,138 | 1,313 | 465 | 2,916 |
| Other accounts payable | (1) | - | - | (1) |
| Account overdrafts | 4,517 | - | - | 4,517 |
| Total liabilities | 16,411 | 28,519 | 465 | 45,395 |
| Cash in current accounts | 31,987 | - | - | 31,987 |
| Total assets | 31,987 | - | - | 31,987 |
| Total variable rate | 15,576 | (28,519) | (465) | (13,408) |
Unlike net financial position figures, the amounts shown in the table above do not include the fair value of derivatives (negative at 278 thousand Euro), cash on hand (positive at 29 thousand Euro) or deferred financial income (positive at 98 thousand Euro).
Prudent management of the liquidity risk arising from the Group's normal operations requires an appropriate level of cash on hand and short-term securities to be maintained, as well as the availability of funds obtainable through an appropriate amount of committed credit lines.
The Group's Administration and Finance Department monitors forecasts on the use of the Group's reserves of cash and cash equivalents based on expected cash flows. The table below shows the amount of reserves of cash and cash equivalents available on the reference dates:
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
Change |
|---|---|---|---|
| Cash and cash equivalents | 29 | 157 | (128) |
| Cash in bank deposits | 31,987 | 24,270 | 7,717 |
| Term deposits – less than 3 months | - | - | - |
| Total liquidity | 32,016 | 24,427 | 7,589 |
| Multiple mixed credit lines | 23,110 | 24,749 | (1,639) |
| Cash flexibility credit lines | 3,955 | 3,005 | 950 |
| Invoice factoring credit lines | 8,250 | 8,323 | (73) |
| Total credit lines available | 35,315 | 36,077 | (762) |
| Total liquidity available | 67,331 | 60,504 | 6,827 |
It should be noted that the reduction in credit facilities is the combined result of two opposing factors: on the one hand, credit facilities increased following the opening of a revolving line, while on the other they decreased due to the closure of credit facilities granted on behalf of the subsidiary Ensun S.r.l., following its liquidation in February.
To complete disclosure on financial risks, the table below shows a reconciliation of financial asset and liability classes, as identified in the Group's statement of financial position, and the types of financial assets and liabilities identified on the basis of IFRS 7 requirements:
| (Euro / 000) | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Available-for-sale assets valued at fair value: | ||||
| Shareholdings valued at fair value with a balancing item in other overall profit/(loss) |
214 | - | 1,444 | 1,658 |
| Hedging transactions | - | 1 | - | 1 |
| Total assets | 214 | 1 | 1,444 | 1,659 |
| Hedging transactions | - | (279) | - | (279) |
| Total liabilities | - | (279) | - | (279) |
Level 1: Fair values represented by the prices - listed in active markets (unadjusted) - of financial instruments identical to those being valued that may be accessed at the measurement date. These prices are defined as mark-to-market inputs as they provide a fair value measurement based directly on official market prices, therefore without the need for any modification or adjustment.
Level 2: Fair values determined using evaluation techniques based on variables that may be observed in active markets, which in this case include the evaluation of interest rate hedging and of foreign exchange hedging. As with the Level 1 inputs, the reference value is mark-to-market, i.e. the evaluation method whereby the value of a financial instrument or contract is systematically adjusted according to the current market prices.
Level 3: Fair values determined using evaluation techniques based on variables that may not be observed, and in particular the values of equity investments in other companies that are not listed on international markets, the overall value of which has not changed compared to 30 June 2019.
Below is a reconciliation of the different classes of financial assets and liabilities, as identified in the Group's statement of financial position, and types of financial assets and liabilities identified on the basis of the requirements of IFRS7, as of 30 June 2019:
| (Euro / 000) | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Available-for-sale assets valued at fair value: | ||||
| Shareholdings valued at fair value with a balancing item in other overall profit/(loss) |
307 | - | 1,444 | 1,751 |
| Hedging transactions | - | 3 | - | 3 |
| Total assets | 307 | 3 | 1,444 | 1,754 |
| Hedging transactions | - | (300) | - | (300) |
| Total liabilities | - | (300) | - | (300) |
The Gefran Group deals mainly with known and reliable customers. The Group's credit policy is to subject customers who require extended payment terms and new customers to credit checks. In addition, receivables are monitored over the year to reduce late payments and prevent significant losses.
The Group has adopted a policy of monitoring outstanding receivables, a measure made necessary given the possible deterioration of certain receivables, the decline in credit rating reliability and the lack of liquidity on the market. The impairment process conducted on the basis of the Group's procedures requires receivables to be written down by a percentage which depends on the time range of the outstanding receivable, in view of past experience in specific lines of business and geographical regions, as required by IFRS 9.
The medical emergency generated by Covid-19 already at the start of 2020 caused a global economic shock, with the result that the Group has conducted analyses assessing the possibility of increased credit risk, developing estimates based on the best more specific information. The analyses conducted to determine the existence of such a risk have been based primarily on three factors:
With reference to the latter point, the Group has conducted its analyses using a risk matrix that takes into account geographical region, industry, and individual customer solvency.
Management considers the forecasts thus generated to be reasonable and sustainable despite the current climate of uncertainty.
Below are the values of gross trade receivables at 30 June 2020 and 31 December 2019:
| (Euro / 000) | Total value |
Not overdue |
Overdue by up to 2 months |
Overdue by 2 to 6 months |
Overdue by 6 to 12 months |
Overdue by more than 12 months |
Receivables individually written down |
|---|---|---|---|---|---|---|---|
| Gross trade receivables at 30 June 2020 |
30,370 | 24,808 | 2,552 | 647 | 19 | 860 | 1,484 |
| Gross trade receivables at 31 December 2019 |
31,299 | 25,869 | 2,502 | 484 | 83 | 944 | 1,417 |
The Gefran Group has established formal procedures for customer credit and credit collection through the credit department and in partnership with leading external law firms. All the procedures put in place are intended to reduce credit risk. Exposure to other forms of credit, such as financial receivables, is constantly monitored and reviewed monthly or at least quarterly, in order to determine any losses or recovery-associated risks.
The Group's exposure to price risk is minimal. Purchases of materials and components subject to fluctuations in raw material prices are not significant. The purchase costs of the main components are usually set with counterparts for the full year and reflected in the budget. The Group has in place structured and formalised governance systems that it uses to regularly analyse its margins. Commercial operations are coordinated by business area, so as to monitor sales and manage discounts.
All the Group's financial instruments are recorded in the financial statements at fair value. The amount of financial liabilities valued at amortised cost is considered close to the fair value on the reporting date.
The table below summarises the Group's net financial position, comparing fair value and carrying value:
| carrying value | fair value | ||||
|---|---|---|---|---|---|
| 30 June 2020 |
31 December 2019 |
30 June 2020 |
31 December 2019 |
||
| (Euro / 000) | |||||
| Financial assets | |||||
| Cash and cash equivalents | 29 | 157 | 29 | 157 | |
| Cash in bank deposits | 31,987 | 24,270 | 31,987 | 24,270 | |
| Securities held for trading | - | - | - | - | |
| Financial investments for derivatives | 1 | 1 | 1 | 1 | |
| Non-current financial investments | 98 | 97 | 98 | 97 | |
| Total financial assets | 32,115 | 24,525 | 32,115 | 24,525 | |
| Financial liabilities | |||||
| Current portion of long-term debt | (10,757) | (9,342) | (10,757) | (9,342) | |
| Short-term bank debt | (4,517) | (3,296) | (4,517) | (3,296) | |
| Financial liabilities for derivatives | (279) | (169) | (279) | (169) | |
| Factoring | 1 | (5) | 1 | (5) | |
| Payables due to leasing contracts under IFRS 16 | (2,916) | (3,084) | (2,916) | (3,084) | |
| Other financial payables | - | - | - | - | |
| Non-current financial debt | (27,206) | (21,916) | (27,206) | (21,916) | |
| Total financial liabilities | (45,674) | (37,812) | (45,674) | (37,812) | |
| Total net financial position | (13,559) | (13,287) | (13,559) | (13,287) |
The organisational structure of the Gefran Group is divided into three areas of activity: sensors, automation components and motion control. The economic trends and the main investments are covered in the Report on Operations.
| (Euro / 000) | Sensors | Automation components |
Motion control |
Eliminations | Not divided |
30 June 2020 |
|
|---|---|---|---|---|---|---|---|
| a | Revenues | 28,140 | 18,412 | 18,825 | (2,642) | 62,735 | |
| b | Increases for internal work | 234 | 354 | 366 | - | 954 | |
| c | Consumption of materials and products | 7,726 | 7,185 | 10,379 | (2,642) | 22,648 | |
| d | Added value (a+b-c) | 20,648 | 11,581 | 8,812 | - 41,041 | ||
| e | Other operating costs | 4,912 | 2,364 | 2,830 | - | 10,106 | |
| f | Personnel costs | 9,664 | 7,886 | 6,049 | - | 23,599 | |
| g | EBITDA (d-e-f) | 6,072 | 1,331 | (67) | - | 7,336 | |
| h | Depreciation, amortisation and impairment | 1,692 | 1,256 | 1,067 | - | 4,015 | |
| i | EBIT (g-h) | 4,380 | 75 | (1,134) | - | 3,321 | |
| l | Gains (losses) from financial assets/liabilities | (1,106) (1,106) | |||||
| m | Gains (losses) from shareholdings valued at equity |
(1) | (1) | ||||
| n | Profit (loss) before tax (i±l±m) | 4,380 | 75 | (1,134) | (1,107) | 2,214 | |
| o | Taxes | (1,075) (1,075) | |||||
| p | Group net profit (loss)(n±o) | 4,380 | 75 | (1,134) | (2,182) | 1,139 |
| (Euro / 000) | Sensors | Automation components |
Motion control |
Eliminations | Not divided |
30 June 2019 |
|
|---|---|---|---|---|---|---|---|
| a | Revenues | 31,030 | 22,248 | 21,721 | (2,900) | 72,099 | |
| b | Increases for internal work | 430 | 369 | 464 | - | 1,263 | |
| c | Consumption of materials and products | 7,685 | 8,359 | 11,971 | (2,900) | 25,115 | |
| d | Added value (a+b-c) | 23,775 | 14,258 | 10,214 | - 48,247 | ||
| e | Other operating costs | 5,396 | 3,202 | 3,307 | - | 11,905 | |
| f | Personnel costs | 10,434 | 8,533 | 6,640 | - | 25,607 | |
| g | EBITDA (d-e-f) | 7,945 | 2,523 | 267 | - 10,735 | ||
| h | Depreciation, amortisation and impairment | 3,080 | 1,219 | 1,060 | - | 5,359 | |
| i | EBIT (g-h) | 4,865 | 1,304 | (793) | - | 5,376 | |
| l | Gains (losses) from financial assets/liabilities | (127) | (127) | ||||
| m Gains (losses) from shareholdings valued at equity | 259 | 259 | |||||
| n | Profit (loss) before tax (i±l±m) | 4,865 | 1,304 | (793) | 132 | 5,508 | |
| o | Taxes | (1,479) (1,479) | |||||
| p | Result from operating activities (n±o) | 4,865 | 1,304 | (793) | (1,347) | 4,029 | |
| q | Net profit (loss) from assets held for sale | - | - | ||||
| r | Group net profit (loss) (p±q) | 4,865 | 1,304 | (793) | (1,347) | 4,029 |
Intersegment sales are booked at transfer prices, which are broadly in line with market prices.
Revenues by geographical region
| (Euro / 000) | 30 June 2020 |
30 June 2019 |
Change | % |
|---|---|---|---|---|
| Italy | 19,374 | 22,874 | (3,500) | -15.3% |
| European Union | 15,077 | 18,525 | (3,448) | -18.6% |
| Europe non-EU | 2,600 | 2,234 | 366 | 16.4% |
| North America | 7,494 | 9,407 | (1,913) | -20.3% |
| South America | 1,587 | 2,224 | (637) | -28.6% |
| Asia | 15,350 | 16,108 | (758) | -4.7% |
| Rest of the World | 367 | 394 | (27) | -6.9% |
| Total | 61,849 | 71,766 | (9,917) | -13.8% |
| 30 June 2020 | 30 June 2019 | |||
|---|---|---|---|---|
| (Euro / 000) | intangible assets and goodwill |
tangible assets |
intangible assets and goodwill |
tangible assets |
| Italy | 2,012 | 786 | 1,742 | 3,010 |
| European Union | 1 | 30 | - | 44 |
| Europe non-EU | 6 | - | - | 8 |
| North America | - | 11 | - | 3,591 |
| South America | - | 6 | 2 | 79 |
| Asia | - | 75 | - | 156 |
| Rest of the World | - | - | - | - |
| Total | 2,019 | 908 | 1,744 | 6,888 |
| (Euro / 000) | 30 June 2020 | 31 December 2019 | Change | % |
|---|---|---|---|---|
| Italy | 49,409 | 51,163 | (1,754) | -3.4% |
| European Union | 2,779 | 2,892 | (113) | -3.9% |
| Europe non-EU | 3,193 | 3,306 | (113) | -3.4% |
| North America | 7,236 | 7,274 | (38) | -0.5% |
| South America | 444 | 599 | (155) | -25.9% |
| Asia | 5,521 | 5,808 | (287) | -4.9% |
| Rest of the World | - | - | - | n.s. |
| Total | 68,582 | 71,042 | (2,460) | -3% |
The item "Goodwill" amounted to 5,923 thousand Euro on 30 June 2020, as compared to 5,917 thousand Euro on 31 December 2019, and may be broken down as follows:
| (Euro / 000) | 31 December 2019 |
Increases | Decreases | Exchange rate differences |
30 June 2020 |
|---|---|---|---|---|---|
| Gefran France SA | 1,310 | - | - | - | 1,310 |
| Gefran India | 40 | - | - | (2) | 38 |
| Gefran Inc. | 2,613 | - | - | 8 | 2,621 |
| Sensormate AG | 1,954 | - | - | - | 1,954 |
| 5,917 | - | - | 6 | 5,923 |
The goodwill acquired following business combinations was allocated to specific CGUs for the purpose of impairment testing.
The carrying values of goodwill are shown below.
| (Euro / 000) | Year | Goodwill France |
Goodwill India | Goodwill USA | Goodwill Switzerland |
Total |
|---|---|---|---|---|---|---|
| Sensors | 2020 | 1,310 | - | 2,621 | 1,954 | 5,885 |
| 2019 | 1,310 | - | 2,613 | 1,954 | 5,877 | |
| Motion control | 2020 | - | 38 | - | - | 38 |
| 2019 | - | 40 | - | - | 40 | |
| Total | 2020 | 1,310 | 38 | 2,621 | 1,954 | 5,923 |
| 2019 | 1,310 | 40 | 2,613 | 1,954 | 5,917 |
As part of the analysis on the recoverability of the values of goodwill, in accordance with the main instructions of IAS 36, the values in use in the Group and in the CGU mentioned above, at which the tested assets were allocated, were determined. This exercise was based on the forecast cash flows discounted back, produced by the CGUs subject to analysis, appropriately discounted back by means of the rates which reflect the risk.
Goodwill relating to the France, USA and Switzerland CGUs has been assigned to the sensors business unit, that relating to the India CGU to the motion control business unit. For impairment testing purposes, all goodwill is examined on the basis of data from the specific CGUs, which corresponds to the subsidiary companies operating in the aforesaid geographic regions.
The COVID-19 pandemic and its effects on the global economy have, on the one hand, made it necessary to review impairment tests on goodwill, while on the other hand they have made it very difficult to revise plans for future years. For this reason, when determining value in use, the specific cash flows relating to the period 2020-2022 deriving from the original Group Plan were considered, that the management reviewed and for the moment confirmed, along with terminal value, which represents the ability to generate cash flows beyond the explicit forecast time scale.
The main assumptions that management used to calculate the value in use regard the discount rate (WACC) and the long-term growth rate (g), as well as the cash flows deriving from the Group Plan.
The rate used for discounting future cash flows is the weighted average cost of capital (WACC), calculated as the weighted average of the cost of own capital and the cost of third-party capital, net of the effect on taxation. In determining it, the risk premium rate was increased by one percent to reflect the effects of the COVID-19 pandemic, while maintaining the other components unvaried.
Also to reflect the macroeconomic effects of the spread of COVID-19, the long-term growth rate (g) has been decreased by one percentage point.
Below is a sensitivity analysis showing the break-even "g" and "wacc" rates in a "steady case" situation:
| Description (Euro /.000) | "g" rate % | WACC % | A | B |
|---|---|---|---|---|
| Goodwill - STEADY CASE | ||||
| France | 0.7% | 8.0% | -16% | 20% |
| India | 2.9% | 10.5% | -9% | 30% |
| USA | 1.3% | 8.1% | -11% | 16% |
| Switzerland | 0.2% | 7.6% | -2% | 9% |
A = g rate % break-even point with unchanged WACC B = WACC % of break-even point with stable g rate
The above analyses show that, both under stable conditions and in situations worse than those forecast, the recoverable amount of goodwill is not critical, also considering the change in the discount rate and the growth rate.
However, the directors will systematically monitor final income statement and statement of financial position data of the CGUs to assess the need to adjust forecasts and promptly reflect any further write-downs.
This item exclusively comprises assets with a finite life, and increased from 7,641 thousand Euro on 31 December 2019 to 8,684 thousand Euro on 30 June 2020. The changes during the period are shown below:
| Historical cost | 31 December 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Development costs | 18,867 | 32 | - | 437 | - | - | 19,336 |
| Intellectual property rights | 7,546 | 834 | - | 255 | - | (37) | 8,598 |
| Assets in progress and payments on account |
2,955 | 1,030 | - | (751) | - | - | 3,234 |
| Other assets | 10,416 | 123 | (4) | 69 | - | (8) | 10,596 |
| Total | 39,784 | 2,019 | (4) | 10 | - | (45) | 41,764 |
| Accumulated depreciation | 31 December 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
| (Euro / 000) | |||||||
| Development costs | 16,346 | 573 | - | - | - | - | 16,919 |
| Intellectual property rights | 6,817 | 192 | - | - | - | (34) | 6,975 |
| Other assets | 8,980 | 213 | (4) | - | - | (3) | 9,186 |
| Total | 32,143 | 978 | (4) | - | - | (37) | 33,080 |
| Net value | 31 December 2019 |
30 June 2020 |
Change |
|---|---|---|---|
| (Euro / 000) | |||
| Development costs | 2,521 | 2,417 | (104) |
| Intellectual property rights | 729 | 1,623 | 894 |
| Assets in progress and payments on account |
2,955 | 3,234 | 279 |
| Other assets | 1,436 | 1,410 | (26) |
| Total | 7,641 | 8,684 | 1,043 |
This is the table of changes related to the first half of 2019:
| Historical cost | 31 December 2018 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Development costs | 17,871 | - | - | - | - | - | 17,871 |
| Intellectual property rights | 7,099 | 91 | - | 47 | 147 | 3 | 7,387 |
| Assets in progress and payments on account |
1,647 | 1,261 | - | (156) | - | - | 2,752 |
| Other assets | 9,634 | 392 | - | 124 | 111 | 4 | 10,265 |
| Total | 36,251 | 1,744 | - | 15 | 258 | 7 | 38,275 |
| Accumulated depreciation | 31 December 2018 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
||
| (Euro / 000) | |||||||
| Development costs | 15,019 | 687 | - | - | - | - | 15,706 |
| Intellectual property rights | 6,333 | 160 | - | 17 | 147 | 3 | 6,660 |
| Other assets | 8,391 | 238 | - | - | 104 | 1 | 8,734 |
| Total | 29,743 | 1,085 | - | 17 | 251 | 4 | 31,100 |
| Net value | 31 December 2018 |
30 June 2019 |
Change |
|---|---|---|---|
| (Euro / 000) | |||
| Development costs | 2,852 | 2,165 | (687) |
| Intellectual property rights | 766 | 727 | (39) |
| Assets in progress and payments on account |
1,647 | 2,752 | 1,105 |
| Other assets | 1,243 | 1,531 | 288 |
| Total | 6,508 | 7,175 | 667 |
Development costs include capitalisation of costs incurred for the following activities:
These assets are estimated to have a useful life of five years.
Intellectual property rights comprise the costs incurred to purchase the company IT system management programs and the use of licences for third-party software, as well as patents. In particular, during the first half of 2020, ownership of the 3D Twisted Hall patent was acquired, for an amount of 700 thousand. Euro These assets have a useful life of three years.
Assets in progress and payments on account include payments on account paid to suppliers for the purchase of software programs and licenses due to be delivered in the following year, and for purchase of patents on technologies currently being developed. This item also includes 2,986 thousand Euro in development costs, which include 768 thousand Euro for the automation components business unit, 540 thousand Euro for the sensors business unit, and 1,677 thousand Euro for the motion control business unit, the benefits of which will appear in the income statement for the following year, so that they have not been amortised.
Other assets almost entirely represents costs for implementation of the ERP SAP/R3, Business Intelligence (BW), Customer Relationship Management (CRM) systems and management software, incurred by the Parent Company Gefran S.p.A. in previous years and the current year. These assets have a useful life of five years.
The increases in the historic value of "Intangible assets", worth 2,019 thousand Euro in the first half of 2020, include 948 thousand Euro linked with capitalization of internal costs (equal to 1,253 thousand Euro in the same period in the previous year).
| Historical cost |
31 December 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Land | 5,222 | - | - | - | - | 2 | 5,224 |
| Industrial buildings |
42,255 | 32 | - | 2,040 | - | (118) | 44,209 |
| Plant and machinery |
43,514 | 232 | (188) | 2,136 | - | (161) | 45,533 |
| Industrial and commercial equipment |
19,916 | 172 | (9) | 174 | - | (22) | 20,231 |
| Other assets | 7,436 | 88 | (8) | 66 | - | (71) | 7,511 |
| Assets in progress and payments on account |
4,988 | 384 | - | (4,426) | - | 1 | 947 |
| Total | 123,331 | 908 | (205) | (10) | - | (369) | 123,655 |
| Accumulated depreciation |
31 December 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
| (Euro / 000) | |||||||
| Industrial |
This item decreases from 44,761 thousand Euro at 31 December 2019 to 43,119 thousand Euro at 30 June 2020. The changes are shown in the table below:
| depreciation | December 2019 |
Increases Decreases Reclassifications | scope of consolidation |
rate differences |
June 2020 |
||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Industrial buildings |
20,864 | 648 | - | - | - | (68) | 21,444 |
| Plant and machinery |
33,285 | 1,195 | (188) | - | - | (103) | 34,189 |
| Industrial and commercial equipment |
18,524 | 334 | (9) | - | - | (17) | 18,832 |
| Other assets | 5,897 | 222 | (7) | - | - | (41) | 6,071 |
| Total | 78,570 | 2,399 | (204) | - | - | (229) | 80,536 |
| Net value | 31 December 2019 | 30 June 2020 |
Change |
|---|---|---|---|
| (Euro / 000) | |||
| Land | 5,222 | 5,224 | 2 |
| Industrial buildings |
21,391 | 22,765 | 1,374 |
| Plant and machinery |
10,229 | 11,344 | 1,115 |
| Industrial and commercial equipment |
1,392 | 1,399 | 7 |
| Other assets | 1,539 | 1,440 | (99) |
| Assets in progress and payments on account |
4,988 | 947 | (4,041) |
| Total | 44,761 | 43,119 | (1,642) |
This is the table of changes related to the first half of 2019:
| Historical cost | 31 December 2018 |
Increases | Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
|
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Land | 4,514 | 602 | - | - | - | (3) | 5,113 |
| Industrial buildings |
41,041 | 2,341 | (1,531) | 451 | 235 | 14 | 42,551 |
| Plant and machinery |
40,008 | 1,378 | (343) | 1,326 | 10 | 52 | 42,431 |
| Industrial and commercial equipment |
19,277 | 200 | (118) | 81 | 163 | 8 | 19,611 |
| Other assets | 6,958 | 262 | (188) | 33 | 325 | 17 | 7,407 |
| Assets in progress and payments on account |
2,131 | 2,105 | - | (1,890) | - | 1 | 2,347 |
| Total | 113,929 | 6,888 | (2,180) | 1 | 733 | 89 | 119,460 |
| Accumulated depreciation |
31 December 2018 |
Increases | Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
|
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Industrial buildings |
19,953 | 637 | 1 | - | 132 | 13 | 20,736 |
| Plant and machinery |
31,507 | 1,027 | (341) | 34 | 10 | 37 | 32,274 |
| Industrial and commercial equipment |
17,899 | 346 | (117) | - | 125 | 7 | 18,260 |
| Other assets | 5,615 | 206 | (182) | (35) | 234 | 13 | 5,851 |
| Total | 74,974 | 2,216 | (639) | (1) | 501 | 70 | 77,121 |
| Net value | 31 December 2018 |
30 June 2019 |
Change |
|---|---|---|---|
| (Euro / 000) | |||
|---|---|---|---|
| Land | 4,514 | 5,113 | 599 |
| Industrial buildings | 21,088 | 21,815 | 727 |
| Plant and machinery | 8,501 | 10,157 | 1,656 |
| Industrial and commercial equipment |
1,378 | 1,351 | (27) |
| Other assets | 1,343 | 1,556 | 213 |
| Assets in progress and payments on account |
2,131 | 2,347 | 216 |
| Total | 38,955 | 42,339 | 3,384 |
No writedowns were applied in the first half of 2020, whereas the first six months of 2019 saw the writedown of buildings due to loss of value worth a total of 1,531 thousand Euro.
The change in the exchange rate had a negative impact of 140 thousand Euro.
The biggest changes during the half year related to:
The increases in the historic value of the item "Buildings, plant and machinery and equipment", worth 908 thousand Euro in the first half of 2020, include 5 thousand Euro linked with capitalization of internal costs (equal to 10 thousand Euro in the first six months of 2019).
This item refers to the recording of the value of the assets covered by the lease contracts, according to the accounting standard IFRS16.
The value of "Usage rights" as of 30 June 2020 amounts to 2,911 thousand Euro, and shows the following changes:
| Historical cost |
31 December 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Real estate | 2,233 | 318 | (54) | - | - | (1) 2,496 | |
| Vehicles | 1,801 | 155 | (12) | - | - | (26) 1,918 | |
| Machinery and equipment |
138 | 37 | - | - | - | - | 175 |
| Total | 4,172 | 510 | (66) | - | - | (27) 4,589 |
| Accumulated depreciation |
31 December 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
|---|---|---|---|---|---|---|---|
| (Euro / 000) | |||||||
| Real estate | 522 | 297 | (16) | - | - | (10) | 793 |
| Vehicles | 507 | 309 | (8) | - | - | (10) | 798 |
| Machinery and equipment |
54 | 32 | - | - | - | 1 | 87 |
|---|---|---|---|---|---|---|---|
| Total | 1,083 | 638 | (24) | - | - | (19) 1,678 | |
| Net value | 31 December 2019 |
30 June 2020 |
Change | ||||
| (Euro / 000) | |||||||
| Real estate | 1,711 | 1,703 | (8) | ||||
| Vehicles | 1,294 | 1,120 | (174) | ||||
| Machinery and equipment | 84 | 88 | 4 | ||||
| Total | 3,089 | 2,911 | (178) |
This is the table of changes related to the first half of 2019:
| Historical cost |
31 December 2018 |
Valuation 1 January 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
||
|---|---|---|---|---|---|---|---|---|
| (Euro / 000) | ||||||||
| Real estate | - | 1,121 | - | - | - | 557 | (31) | 1,647 |
| Vehicles | - | 1,011 | 298 | (7) | - | - | (7) | 1,295 |
| Electronic office machines |
- | - | - | - | - | - | - | - |
| Machinery and equipment |
- | 122 | 16 | - | - | - | - | 138 |
| Total | - | 2,254 | 314 | (7) | - | 557 | (38) | 3,080 |
| Accumulated depreciation |
31 December 2018 |
Valuation 1 January 2019 |
Increases Decreases Reclassifications | Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
||
|---|---|---|---|---|---|---|---|---|
| (Euro / 000) | ||||||||
| Real estate | - | - | 273 | - | - | - | 1 | 274 |
| Vehicles | - | - | 227 | (1) | - | - | - | 226 |
| Electronic office machines |
- | - | - | - | - | - | - | - |
| Machinery and equipment |
- | - | 27 | - | - | - | - | 27 |
| Total | - | - | 527 | (1) | - | - | 1 | 527 |
| Net value | 31 December 2018 |
30 June 2019 |
Change | |
|---|---|---|---|---|
| (Euro / 000) | ||||
| Real estate | - | 1,373 | 1,373 | |
| Vehicles | - | 1,069 | 1,069 | |
| Electronic office machines |
- | - | - | |
| Machinery and equipment |
- | 111 | 111 | |
| Total | - | 2,553 | 2,553 |
As of 1 January 2020 the Group has a total of 205 contracts in place for leasing of vehicles, machinery, industrial equipment and electronic office machinery, as well as for rental of real estate. As required by the IASB, practical expedients were employed such as exclusion of contracts with a residual duration of less than 12 months or contracts for which the fair value of
the asset is calculated to fall below the conventional threshold of 5 thousand American dollars (of modest unitary value).
On the basis of their value and duration, of the 205 contracts in effect as of 1 January 2020:
The assets analysed here are entered in the financial statements:
In assessment of the fair value and useful lifespan of the assets which are the subject of the contracts subject to application of IFRS 16, the following factors were taken into consideration:
A total of 21 new leasing agreements were signed in 2020, 12 of which are subject to application of IFRS 16, and specifically: Of the remaining 9 contracts signed in 2020, excluded from the perimeter of application of the new accounting standard, 8 pertain to contracts with a duration of less than 12 months and one represents a contract regarding goods of modest value.
A total of 37 contracts ended, only 16 of which fell within the perimeter of application of IFRS 16 on the basis of their value and term as specified above, two of which were terminated in advance of their original due date, generating a loss of 1 thousand Euro, entered in the income statement under miscellaneous management costs.
Increases in the historic cost of the item "Usage rights" may be summed up as follows:
Decreases in the historical cost of "usage rights" in 2020, totalling 66 thousand Euro, refer to 16 terminated contracts. 2 of these, relating to the rental of company vehicles, were terminated before the expiry date.
Net working capital totals 31,673 thousand Euro, compared to 28,542 thousand Euro on 31 December 2019, and breaks down as follows:
| (Euro / 000) | 30 June 2020 | 31 December 2019 | Change |
|---|---|---|---|
| Inventories | 24,786 | 24,548 | 238 |
| Trade receivables | 27,978 | 28,931 | (953) |
| Trade payables | (21,091) | (24,937) | 3,846 |
| Net amount | 31,673 | 28,542 | 3,131 |
The value of inventories as of 30 June 2020 is equal to 24,786 thousand Euro, up by 238 thousand Euro over 31 December 2019. The balance breaks down as follows:
| (Euro / 000) | 30 June 2020 | 31 December 2019 | Change |
|---|---|---|---|
| Raw materials, consumables and supplies | 15,396 | 14,653 | 743 |
| provision for impairment of raw materials | (3,915) | (3,449) | (466) |
| Work in progress and semi-finished products | 8,918 | 8,707 | 211 |
| Provision for impairment of work in progress | (1,295) | (1,058) | (237) |
| Finished products and goods for resale | 7,323 | 7,269 | 54 |
| Provision for impairment of finished products | (1,641) | (1,574) | (67) |
| Total | 24,786 | 24,548 | 238 |
Inventories increased by 238 thousand Euro and mainly concern raw material stocks, up compared to the end of 2019, since at the beginning of the spread of the pandemic, excess quantities of material critical for production were taken in, in order to avoid risks of interruption in procurement and consequently in the production chain.
The economic impact of the change in inventories, on the other hand, sees a decrease compared to 31 December 2019 of 649 thousand Euro, since the average exchange rate for the period is used for the economic recognition of events.
The provision for obsolescence and slow moving inventories was adjusted according to need in the first half of 2020 through specific provisions totalling 987 thousand Euro (as compared to 667 thousand Euro in the same period in 2019). The change in the provision in the first six months of 2020 is shown below:
| (Euro / 000) | 31 Decembe r 2019 |
Provision s |
Uses | Release s |
Change scope of consolidatio n |
Exchange rate difference s |
30 June 2020 |
|---|---|---|---|---|---|---|---|
| Provision for impairment of inventory |
6,081 | 987 | (100 ) |
(28) | - | (89) | 6,85 1 |
The change in the provision in the first six months of 2019 is shown below:
| (Euro / 000) | 31 Decembe r 2018 |
Provision s |
Uses | Release s |
Change scope of consolidatio n |
Exchange rate difference s |
30 June 2019 |
|---|---|---|---|---|---|---|---|
| Provision for impairment of inventory |
5,212 | 667 | (223 ) |
- | 201 | 14 | 5,87 1 |
Trade receivables amount to 27,978 thousand Euro, compared to 28,931 thousand Euro on 31 December 2019, a 953 thousand Euro increase.
| (Euro / 000) | 30 June 2020 | 31 December 2019 | Change |
|---|---|---|---|
| Receivables from customers | 30,371 | 31,299 | (928) |
| Provision for doubtful receivables | (2,393) | (2,368) | (25) |
| Net amount | 27,978 | 28,931 | (953) |
This includes receivables subject to recourse factoring which the Parent Company has transferred to a leading factoring company for a total amount of 6 thousand Euro (15 thousand Euro as of 31 December 2019).
The change is related to the decrease in sales revenues recorded in the first half of the year.
Receivables were adjusted to their estimated realisable value through a specific provision for doubtful receivables, calculated on the basis of an examination of individual debtor positions and taking into account past experience in each specific line of business and geographical region, as required by IFRS 9. The provision as at 30 June 2020 represents a prudential estimate of the current risk, and registered the following changes:
| (Euro / 000) | 31 December 2019 |
Provisions Uses Releases | Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
|---|---|---|---|---|---|---|---|
| Provision for doubtful receivables | 2,368 | 108 | (20) | (5) | - | (58) 2,393 |
The table of changes in the first half of 2019 appears below:
| (Euro / 000) | 31 December 2018 |
Provisions Uses Releases | Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
||
|---|---|---|---|---|---|---|---|
| Provision for doubtful receivables | 2,406 | 66 | (28) | (175) | 149 | 12 | 2,430 |
The value of use of the fund includes amounts covering losses on unrecoverable receivables. The Group monitors the situation of the receivables most at risk and initiates the appropriate legal action. The carrying value of trade receivables is considered to approximate to their fair value.
There is no significant concentration of sales to individual customers: this phenomenon remains below 10% of Group revenues.
"Trade payables" came to 21,091 thousand Euro, compared with 24,937 thousand Euro as of 31 December 2019.
This item breaks down as follows:
| (Euro / 000) | 30 June 2020 | 31 December 2019 | Change |
|---|---|---|---|
| Payables to suppliers | 17,189 | 21,521 | (4,332) |
| Payables to suppliers for invoices to be received | 3,479 | 2,703 | 776 |
| Payments on account received from customers | 423 | 713 | (290) |
| Total | 21,091 | 24,937 | (3,846) |
Trade payables totalled 21,091 thousand Euro, down 3,846 thousand Euro since 31 December 2019. Trade payables at the end of 2019 were a result of purchases of materials for production and above all payables to suppliers for investments in the last quarter of 2019, paid in the first quarter of 2020. The Parent Company participated in the "I pay my suppliers" initiative of the Industrialists' Association of Brescia, confirming the Group's commitment to fulfilling its duties.
The table below shows a breakdown of the net financial position:
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
Change |
|---|---|---|---|
| Cash and cash equivalents and current financial receivables | 32,016 | 24,427 | 7,589 |
| Financial investments for derivatives | 1 | 1 | - |
| Other non-current financial investments | 98 | 97 | 1 |
| Non-current financial payables | (27,206) | (21,916) | (5,290) |
| Non-current financial payables for IFRS 16 leases | (1,778) | (2,013) | 235 |
| Current financial payables | (15,273) | (12,643) | (2,630) |
| Current financial payables for IFRS 16 leases | (1,138) | (1,071) | (67) |
| Financial liabilities for derivatives | (279) | (169) | (110) |
| Total | (13,559) | (13,287) | (272) |
The following table breaks down the net financial position by maturity:
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
Change |
|---|---|---|---|
| A. Cash on hand | 29 | 40 | (11) |
|---|---|---|---|
| B. Cash in bank deposits | 31,987 | 24,387 | 7,600 |
| C. Securities held for trading | - | - | - |
| D. Cash and cash equivalents (A) + (B) | 32,016 | 24,427 | 7,589 |
| E. Fair value current hedging derivatives | - | - | - |
| F. Current portion of long-term debt | (10,757) | (9,342) | (1,415) |
| G. Other current financial payables | (5,654) | (4,372) | (1,282) |
| H. Total current financial payables (F+G) | (16,411) | (13,714) | (2,697) |
| I. Total current payables (E+H) | (16,411) | (13,714) | (2,697) |
| J. Net current financial debt (I) + (D) | 15,605 | 10,713 | 4,892 |
| Non-current financial liabilities for derivatives | (279) | (169) | (110) |
| Non-current financial investments for derivatives E. Fair value non-current hedging derivatives |
1 (278) |
1 (168) |
- (110) |
| L. Non-current financial debt | (28,984) | (23,929) | (5,055) |
| M. Other non-current financial investments | 98 | 97 | 1 |
| N. Net non-current financial debt (K) + (L) + (M) | (29,164) | (24,000) | (5,164) |
| O. Net financial debt (J) + (N) | (13,559) | (13,287) | (272) |
| of which to minorities: | (13,559) | (13,287) | (272) |
Net financial position as of 30 June 2020 is negative by 13,559 thousand Euro, which is 272 thousand Euro higher than at the end of 2019, when it was on the whole negative by 13,287 thousand Euro.
The change in the net financial position is essentially due to the positive cash flows generated by ordinary operations (2,951 thousand Euro) and the proceeds from the reimbursement of the portion of capital of the subsidiary Ensun S.r.l.. (1,000 thousand Euro), absorbed by disbursements for technical investments made in the first half of 2020 and the payment of interest, taxes and rental fees (for a total of 4,168 thousand Euro).
The balance of cash and cash equivalents amounted to Euro 32,016 thousand at 30 June 2020, compared with Euro 24,427 thousand at 31 December 2019.
This item breaks down as follows:
| (Euro / 000) | 30 June 2020 | 31 December 2019 | Change |
|---|---|---|---|
| Cash in bank deposits | 31,987 | 24,270 | 7,717 |
| Cash | 29 | 40 | (11) |
|---|---|---|---|
| Other cash | - | 117 | (117) |
| Total | 32,016 | 24,427 | 7,589 |
The technical forms used as at 30 June 2020 are shown below:
Current financial payables at 30 June 2020 increased by 2,630 thousand Euro over the end of 2019 and break down as follows:
| (Euro / 000) | 30 June 2020 | 31 December 2019 | Change |
|---|---|---|---|
| Current portion of debt Current overdrafts |
10,757 4,517 |
9,342 3,296 |
1,415 1,221 |
| Factoring | (1) | 5 | (6) |
| Total | 15,273 | 12,643 | 2,630 |
The "factoring" item comprises payables to factoring companies, for the payment extension period from the original maturity of the payable with certain suppliers, for which the Parent Company has accepted non-recourse assignment.
Bank overdrafts at 30 June 2020 totalled 4,517 thousand Euro, compared to a balance at 31 December 2019 of 3,296 thousand Euro. The item relates primarily to Gefran S.p.A. and has the following characteristics:
| Bank (Euro/000) |
30 June 2020 31 December 2019 |
Change | |
|---|---|---|---|
| Unicredit | 1,800 | 2,400 | (600) |
| BNL | 1,500 | 2,000 | (500) |
| Banca Pop. Emilia Romagna | 2,513 | 3,012 | (499) |
| Mediocredito | 5,556 | 6,667 | (1,111) |
| BNL | 6,000 | 7,000 | (1,000) |
| Unicredit | 3,889 | - | 3,889 |
| BNL | 5,444 | - | 5,444 |
| Intesa | 57 | 95 | (38) |
| Unicredit S.p.A. - New York Branch | 447 | 742 | (295) |
| Total | 27,206 | 21,916 | 5,290 |
The loans listed in the table are all floating-rate contracts and have the following characteristics:
| Bank (Euro /000) |
Amount disbursed |
Signing date |
Balance at 30 June 2020 |
Of which within 12 months |
Of which beyond 12 months |
Interest rate | Maturity | Repayment method |
|---|---|---|---|---|---|---|---|---|
| drawn up by Gefran S.p.A. (IT) | ||||||||
| Unicredit | 6,000 14/11/2017 | 3,000 | 1,200 | 1,800 Euribor 3m + 0.90% 30/11/2022 | quarterly | |||
| BNL | 5,000 23/11/2017 | 2,500 | 1,000 | 1,500 Euribor 3m + 0.85% 23/11/2022 | quarterly | |||
| Banca Pop. Emilia Romagna |
5,000 28/11/2018 | 3,511 | 998 | 2,513 Euribor 3m + 0.75% 30/11/2023 | quarterly | |||
| Mediocredito | 10,000 28/03/2019 | 7,778 | 2,222 | 5,556 Euribor 3m + 1.05% 31/12/2023 | quarterly | |||
| BNL | 10,000 29/04/2019 | 8,000 | 2,000 | 6,000 | Euribor 3m + 1% | 29/04/2024 | quarterly | |
| Unicredit | 5,000 30/04/2020 | 5,000 | 1,111 | 3,889 Euribor 6m + 0.95% 31/12/2024 half-yearly | ||||
| BNL | 7,000 29/05/2020 | 7,000 | 1,556 | 5,444 | Euribor 6m + 1.1% | 31/12/2024 half-yearly | ||
| entered into by Elettropiemme S.r.l. (IT) | ||||||||
| Intesa | 300 29/01/2018 | 132 | 75 | 57 | Euribor 3m + 1.00% 28/01/2022 | quarterly | ||
| entered into by Gefran Inc. (US) | ||||||||
| Unicredit S.p.A. - New York Branch |
1,780 29/03/2019 | 1,042 | 595 | 447 | Libor 3m + 2.50% | 29/03/2022 | quarterly | |
| Total | 37,963 | 10,757 | 27,206 |
During the second quarter of 2020 two new loans were taken out: a new medium/long-term loan with Unicredit of 5 million Euro, without covenants and with a spread of 0.95%, and a second medium/long-term loan with BNL of 7 million Euro, without covenants and with a spread of 1.1%.
None of the loans outstanding at 30 June 2020 has clauses requiring compliance with economic and financial requirements (covenants).
Financial assets for derivatives totalled 1 thousand Euro as at 30 June 2020, and consist of the positive fair value recorded at the end of the half year of certain CAP contracts entered into by the Parent Company to hedge interest rate risks.
Financial liabilities for derivatives totalled 279 thousand Euro, owing to the negative fair value of certain IRS contracts, also entered into by the Parent Company to hedge interest rate risks.
To mitigate the financial risk associated with variable rate loans, which could arise in the event of an increase in the Euribor, the Group decided to hedge its variable rate loans through Interest Rate Cap contracts, as set out below:
| Bank (Euro/000) |
Notional principal |
Signing date |
Notional as at 30 June 2020 |
Derivative | Fair Value at 30 June 2020 |
Long position rate |
Short position rate |
|---|---|---|---|---|---|---|---|
| Unicredit | 6,000 14/11/2017 | 3,000 | CAP | - Strike Price 0% | Euribor 3m | ||
| BNL | 5,000 23/11/2017 | 2,500 | CAP | 1 Strike Price 0% | Euribor 3m | ||
| Total financial assets for derivatives – Interest rate risk |
1 |
The Group has also taken out IRS (Interest Rate Swap) contracts, as set out in the table below:
| Bank (Euro/000) |
Notional principal |
Signing date |
Notional as at 30 June 2020 |
Derivative | Fair Value at 30 June 2020 |
Long position rate |
Short position rate |
|---|---|---|---|---|---|---|---|
| Intesa | 10,000 29/03/2019 | 7,778 | IRS | (65) | Fixed 0% | Euribor 3m | |
| BNL | 10,000 29/04/2019 | 8,000 | IRS | (84) | Fixed 0.05% |
Euribor 3m | |
| Unicredit | 5,000 24/06/2019 | 3,511 | IRS | (31) | Fixed - 0.1% |
Euribor 3m | |
| Unicredit | 5,000 30/04/2020 | 5,000 | IRS | (54) | Fixed 0.05% |
Euribor 6m - floor - 0.95% |
|
| BNL | 7,000 29/05/2020 | 7,000 | IRS | (45) | Fixed 0.1% |
Euribor 6m - floor - 1.1% |
|
| Total financial liabilities for derivatives– Interest rate risk |
(279) |
At 30 June 2020, no derivatives have been taken out to hedge exchange rate risk.
All the contracts described above are booked at fair value:
| at 30 June 2020 | at 31 December 2019 | |||
|---|---|---|---|---|
| (Euro/000) | Positive fair value |
Negative fair value |
Positive fair value |
Negative fair value |
| Interest rate risk | 1 | (279) | 1 | (169) |
| Total cash flow hedge | 1 | (279) | 1 | (169) |
All derivatives were tested for effectiveness, with positive outcomes.
In order to support its operations, the Group has various credit lines granted by banks and other financial institutions available, mainly in the form of invoice factoring credit lines, cash flexibility and mixed credit lines for a total of 39,830 thousand Euro. Overall use of these lines at 30 June 2020 totalled 4,515 thousand Euro, with a residual available amount of 35,315 thousand Euro.
No fees are due in the event that these lines are not used.
The balance of Financial payables for IFRS 16 leases (current and non-current) at 30 June 2020 amounted to 2,916 thousand Euro and complies with the IFRS16, applied by the Group from 1 January 2019, which requires the recording of financial payables corresponding to the value of the usage rights recorded under non-current assets. Financial liabilities under IFRS 16 leases are classified on the basis of maturity as current liabilities (within one year), amounting to 1,138 thousand Euro, and non-current liabilities (beyond one year), amounting to Euros 1,778 thousand Euro.
Changes in this item are detailed below:
| (Euro / 000) | 31 Dec 2019 |
Increases | Decreases | Reclassifications | Change scope of consolidat ion |
Exchange rate difference s |
30 June 2020 |
|---|---|---|---|---|---|---|---|
| Leasing payables under IFRS 16 | 3,084 | 459 | (619) | - | - | (8) | 2,916 |
| Total | 3,084 | 459 | (619) | - | - | (8) | 2,916 |
Consolidated Shareholders' Equity may be broken down as follows:
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
Change |
|---|---|---|---|
| Portion pertaining to the Group | 75,845 | 75,044 | 801 |
| Portion pertaining to third-party interests | - | - | - |
| Net amount | 75,845 | 75,044 | 801 |
The Group's portion of Shareholders' Equity at 31 December was EUR 75,845 thousand, up by EUR 801 thousand over 31 December 2019. The most significant changes pertained to the positive annual result, amounting to 1,139 thousand Euro, partially absorbed by the change in the translation reserve of 230 thousand Euro.
Share capital was 14,400 thousand Euro, divided into 14,400,000 ordinary shares, with a nominal value of 1 Euro each.
On 31 December 2019 Gefran S.p.A. held 27,220 shares, representing 0.2% of the total; the situation is the same as 30 June 2020.
The Company has not issued convertible bonds.
For details on the changes in equity reserves during the half year, see the schedule showing changes in shareholders' equity.
Changes in the "Reserve for the measurement of securities at fair value" are shown in the table below.
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
Change |
|---|---|---|---|
| Balance at 1 January | (94) | (15) | (79) |
| UBI Banca S.p.A. shares | - | 6 | (6) |
| Woojin Plaimm Co Ltd shares | (32) | (106) | 74 |
| Tax effect | 8 | 21 | (13) |
| Net amount | (118) | (94) | (24) |
Movements in the "Reserve for the measurement of derivatives at fair value" are shown below:
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
Change |
|---|---|---|---|
| Balance at 1 January | (121) | 3 | (124) |
| Change in fair value of derivatives | (118) | (163) | 45 |
| Tax effect | 27 | 39 | (12) |
| Net amount | (212) | (121) | (91) |
Basic and diluted earnings per share are shown in the table below:
| 30 June 2020 | 30 June 2019 | |
|---|---|---|
| Basic earnings per share | ||
| - Profit (loss) for the period pertaining to the Group (Euro/000) | 1,687 | 4,029 |
| - Average No. of ordinary shares (No./000,000) | 14.37 | 14.373 |
| - Basic earnings per ordinary share | 0.117 | 0.280 |
| Diluted earnings per share | ||
| - Profit (loss) for the period pertaining to the Group (Euro/000) | 1,687 | 4,029 |
| - Average no. of ordinary shares (no./000,000) | 14.37 | 14.37 |
| - Basic earnings per ordinary share | 0.117 | 0.280 |
| Average number of ordinary shares | 14,372,780 | 14,372,780 |
"Non-current provisions" decreased by 10 thousand Euro compared with 31 December 2019, and break down as follows:
| (Euro / 000) | 31 December 2019 |
Provisions Uses Releases | Change in scope of consolidation |
Exchange rate differences |
30 June 2020 |
||
|---|---|---|---|---|---|---|---|
| Gefran S.p.A. risk provisions | |||||||
| - other provisions | 8 | - | - | - | - | - | 8 |
| Gefran France risk provisions | |||||||
| - for restructuring | 5 | - | - | - | - | - | 5 |
| Gefran Elettropiemme S.r.l. risk provision | |||||||
| - other provisions | 631 | - | (10) | - | - | - | 621 |
| Total | 644 | - | (10) | - | - | - | 634 |
"Current provisions" totalled 1,496 thousand Euro at 30 June 2020, down by 31 thousand Euro compared with 31 December 2019, and break down as follows:
| (Euro / 000) | 31 December 2019 |
Provisions | Uses | Releases | Change in scope of consolidation |
Exchange rate differences |
30 June 2020 |
|---|---|---|---|---|---|---|---|
| FISC | 87 | - | (4) | - | - | 83 | |
| Product warranty | 1,415 | 180 | (87) | (120) | - | 1,388 | |
| Other provisions | 25 | - | - | - | - | 25 | |
| Total | 1,527 | 180 | (91) | (120) | - | - | 1,496 |
The item refers to envisaged charges for repairs on products under warranty, equal to 1,388 thousand Euro, down by 27 thousand Euro compared to 31 December 2019; at year-end, the adequacy of the provision was checked, with a positive outcome.
The item "FISC" primarily represents existing contractual treatments in the German subsidiary Siei Areg.
"Revenues from product sales" totalled 61,849 thousand Euro in the first half of 2020, a decrease of 9,917 Euro thousand compared to the same period in 2019, equal to 13.8%. The following table provides a breakdown of sales and service revenues by business:
| (Euro / 000) | 30 June 2020 | 30 June 2019 Changes | % | |
|---|---|---|---|---|
| Sensors | 27,786 | 30,725 | (2,939) | -9.6% |
| Automation components | 15,993 | 19,691 | (3,698) | -18.8% |
| Motion control | 18,070 | 21,350 | (3,280) | -15.4% |
| Total | 61,849 | 71,766 | (9,917) | -13.8% |
The amount shown under total revenues includes revenues from services totalling 1,272 thousand Euro (1,849 thousand Euro in the first six months of 2019); see the Report on Operations for comments on the performance of the various businesses and geographical regions.
"Other operating revenues and income" total 886 thousand Euro, as compared with revenues of 553 thousand Euro in the first half of 2019, as shown in the following table:
| (Euro / 000) | 30 June 2020 | 30 June 2019 Changes | % | |
|---|---|---|---|---|
| Recovery of company canteen expenses | 13 | 20 | (7) | -35.0% |
| Insurance reimbursements | 10 | 1 | 9 | 900.0% |
| Rental income | 126 | 125 | 1 | 0.8% |
| Fees | 6 | 1 | 5 | 500.0% |
| Government grants | 483 | 55 | 428 | 778.2% |
| Other income | 248 | 131 | 117 | 89.3% |
| Total | 886 | 333 | 553 | 166% |
The most significant changes concern the item "Other income" (increase of 117 thousand Euro) which includes cross charges for R&D developments specifically requested by customers, and
the item "Government Contributions" (increase of 428 thousand Euro) which refers to contributions paid to cover the costs of PPE devices purchased as a result of the Covid-19 pandemic (205 thousand Euro), in addition to contributions paid for the I-Mec development project, concluded in May 2020, part of the Horizon 2020 project of the EU and co-financed by the Ministry of Education, Universities and Research.
"Costs of raw materials and accessories" amount to 23,297 thousand Euro, as compared to 28,032 thousand Euro at 30 June 2019. They break down as:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Raw materials and accessories | 23,297 | 28,032 | (4,735) |
| Total | 23,297 | 28,032 | (4,735) |
The reduction in purchases of raw materials and accessories reflects a reduction in production volumes, as a result of lower sales.
"Service costs" in the first half of 2020 amount to 9,552 thousand Euro, lower than the 2019 figure of 12,156 thousand Euro. They are broken down as follows:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Services | 9,077 | 11,646 | (2,569) |
| Use of third-party assets | 475 | 510 | (35) |
| Total | 9,552 | 12,156 | (2,604) |
As a result of transition to accounting standard IFRS 16, "Leases", all leasing agreements have been entered by the "financial method", and so lease fees are no longer entered among operating costs in the income statement, but represent repayment of loans entered at the time of entry of usage rights and interest among the assets in the financial statement.
Lease fees no longer allocated to the income statement under operating costs due to implementation of the new accounting standard amount to 648 thousand Euro (564 thousand Euro in the first half of 2019). Contracts excluded from adoption of IFRS 16 on the basis of the provisions of the standard, for which lease fees continue to be entered in the income statement, resulted in entry of 475 thousand Euro in costs in the first six months of 2020 (as compared to 510 thousand Euro in the first three months of 2019).
With reference to "Services", the item sees a decrease of 2,569 thousand Euro in the first half of 2020 compared to the same period in 2019; this is the result of the new organisational procedures, redefinition of activities and priorities and cost containment processes, promptly activated from the very first signs of the COVID-19 pandemic (in particular impact on travel, trade fairs, external work).
"Personnel costs" amounted to 23,599 thousand Euro, down by 2,008 thousand Euro over the figure as at 30 June 2019, which amounted to 25,607 thousand Euro, and break down as follows:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Salaries and wages | 17,871 | 19,367 | (1,496) |
| Social security contributions | 4,450 | 4,841 | (391) |
| Post-employment benefit reserve | 1,099 | 1,180 | (81) |
| Other costs | 179 | 219 | (40) |
| Total | 23,599 | 25,607 | (2,008) |
The decrease derives from the actions taken in response to the spread of the COVID-19 pandemic, and in particular the increased use of holidays and redundancy funds, as well as the reduction in M.B.O. bonuses. (equal to 350 thousand Euro and 446 thousand Euro, respectively). These actions were activated in all Group companies.
"Social security contributions" include costs for defined contribution plans for management (Previndai pension plan) amounting to 29 thousand Euro (25 thousand Euro at 30 June 2019).
The item "Other costs", down 40 thousand Euro, includes, among other items, restructuring costs resulting from reorganisation of the Group's subsidiaries.
The average number of Group employees in the first half of 2020, as compared with the same period in the previous year, was as follows:
| 30 June 2020 | 30 June 2019 | Change | |
|---|---|---|---|
| Managers | 18 | 16 | 2 |
| Clerical staff | 524 | 514 | 10 |
| Manual workers | 279 | 270 | 9 |
| Total | 821 | 800 | 21 |
The average number of employees grew by 21 over the first half of 2019; the precise number at 30 June 2020 was 811, an decrease of -17 over 30 June 2019 and of -18 compared to the end of the year 2019.
These items totalled 4,015 thousand Euro in the first half of 2020, as compared to 5,359 thousand Euro in the first quarter of 2019. These items include:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Intangible assets | 978 | 1,085 | (107) |
| Tangible assets | 2,399 | 3,747 | (1,348) |
| Usage rights | 638 | 527 | 111 |
| Total | 4,015 | 5,359 | (1,344) |
The change is primarily a result of the item "Tangible assets", 1,348 thousand Euro lower than the figure for the first six months of 2019, which included adaptation of buildings to fair value totalling 1,531 thousand Euro, entirely allocated to the sensors business unit.
The investment plan in the sensors business line includes expansion of production lines and requires large new spaces to support the expansion of business. The Group originally planned to adapt an existing building, but in-depth analysis revealed that the building was incapable of guaranteeing sufficient technological and energy performance and long-term sustainability. It was therefore decided that the existing building would be demolished and a new one constructed that would be more practical and, above-all, in the vanguard in terms of technology and energy efficiency. Work was completed and the activities in question were transferred at the end of December 2019. The new plant began operation early in January 2020.
Since 1 January 2019, moreover, the item also includes amortisation of usage rights in accordance with accounting standard IFRS16, totalling 638 thousand Euro in the first half of 2020 (527 thousand Euro in the same period of the previous year).
The breakdown of the item "Depreciation, amortisation and impairment" by business unit is shown in the table below:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Sensors | 1,692 | 3,080 | (1,388) |
| Automation components | 1,256 | 1,219 | 37 |
| Motion control | 1,067 | 1,060 | 7 |
| Total | 4,015 | 5,359 | (1,344) |
As at 30 June 2020, the item had a negative balance of 1,106 thousand Euro; this compares with again a negative balance of 127 thousand Euro as at 30 June 2019, and breaks down as follows:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Cash management | |||
| Income from cash management | 17 | 20 | (3) |
| Other financial income | 14 | 24 | (10) |
| Medium-/long-term interest | (186) | (106) | (80) |
| Short-term interest | (19) | (46) | 27 |
| Factoring interest and fees | (12) | (21) | 9 |
| Other financial charges | (6) | (28) | 22 |
| Total income (charges) from cash management | (192) | (157) | (35) |
| Currency transactions | |||
| Exchange gains | 128 | 133 | (5) |
| Positive currency valuation differences | 331 | 308 | 23 |
| Exchange losses | (303) | (185) | (118) |
| Negative currency valuation differences | (1,049) | (208) | (841) |
| Total other income (charges) from currency transactions | (893) | 48 | (941) |
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Other | |||
| Interest on financial payables due to leasing under IFRS 16 | (21) | (18) | (3) |
| Total other financial income (charges) | (21) | (18) | (3) |
| Gains (losses) from financial assets/liabilities | (1,106) | (127) | (979) |
The item "Cost of cash management" increased by a total of 35 thousand Euro over 30 June 2019 due to increased financial interest payable as a result of new loans taken out in the first half of 2020.
The balance of differences on foreign currency transactions has a negative value of 893 thousand Euro, as compared with a positive value of 48 thousand Euro on 30 June 2019. The change is a result of the dynamics of the Euro in relation to the other currencies managed by the Group.
The item "Other financial charges" includes financial charges on financial payables resulting from application of the new accounting standard IFRS 16, worth 21 thousand Euro in the first half of 2020 (18 thousand Euro in the first half of 2019).
The item "Taxes" was negative at 1,075 thousand Euro; this compares with again a negative balance of 1,479 thousand Euro as at 30 June 2019. The balance breaks down as follows:
| (Euro / 000) | 30 June 2020 | 30 June 2019 | Change |
|---|---|---|---|
| Current taxes | |||
| IRES (corporate income tax) | (155) | (243) | 88 |
| IRAP (regional production tax) | 18 | (207) | 225 |
| Foreign taxes | (282) | (565) | 283 |
| Total current taxes | (419) | (1,015) | 596 |
| Deferred tax assets and liabilities | |||
| Deferred tax liabilities | 11 | (75) | 86 |
| Deferred tax assets | (667) | (389) | (278) |
| Total deferred tax assets and liabilities | (656) | (464) | (192) |
| Total taxes | (1,075) | (1,479) | 404 |
| of which: | |||
| Allocated to assets held for sale | - | - | - |
| Relating to the operative part | (1,075) | (1,479) | 404 |
| Total taxes | (1,075) | (1,479) | 404 |
Current taxes for the first half of 2020 were on the whole down by 596 thousand Euro compared to the figure for the first half of 2019. The change is attributable to a decrease in the results of all Group companies.
Deferred taxes, which were on the whole negative by 656 thousand Euro, mainly originated out of use of advance taxes entered on prior tax losses of the Parent Company and its Chinese subsidiary.
See the Report on Operations for more details on deferred tax assets and liabilities.
The table below shows a breakdown of deferred tax assets and deferred tax liabilities for the first half of 2020:
| (Euro / 000) | 31 December 2019 |
Posted to the income statement |
Recognised in shareholders' equity |
Change scope of consolidation |
Exchange rate differences |
30 June 2020 |
|---|---|---|---|---|---|---|
| Deferred tax assets | ||||||
| Impairment of inventories | 1,316 | 153 | - | (5) | 1,464 | |
| Impairment of trade receivables | 345 | (39) | - | - | 306 | |
| Impairment of assets | 535 | - | - | - | 535 | |
| Deductible losses to be brought forward | 3,058 | (754) | - | (20) | 2,284 | |
| Exchange rate balance | 3 | (3) | - | - | - | |
| Elimination of unrealised margins on inventories |
570 | (20) | - | - | 550 | |
| Provision for product warranty risk | 322 | 28 | - | - | 350 | |
| Provision for miscellaneous risks | 343 | (32) | - | - | - | 311 |
| Fair value hedging | 64 | - | 38 | - | - | 102 |
| Total deferred tax assets | 6,556 | (667) | 38 | - | (25) | 5,902 |
| Deferred tax liabilities | ||||||
| Exchange valuation differences | - | (3) | - | - | (3) | |
| Other deferred tax liabilities | (647) | 14 | (1) | (634) | ||
| Total deferred taxes | (647) | 11 | - | - | (1) | (637) |
| Net total | 5,909 | (656) | 38 | - | (26) | 5,265 |
The table below shows a breakdown of deferred tax assets and deferred tax liabilities for the first half of 2019:
| (Euro / 000) | 31 December 2018 |
Posted to the income statement |
Recognised in shareholders' equity |
Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
|---|---|---|---|---|---|---|
| Deferred tax assets | ||||||
| Impairment of inventories | 1,120 | 121 | - | 2 | 1,243 | |
| Impairment of trade receivables | 359 | (23) | - | 1 | 337 | |
| Impairment of assets | 535 | - | - | - | 535 | |
| Deductible losses to be brought forward | 3,845 | (655) | 536 | 10 | 3,736 | |
| Exchange rate balance | 4 | (4) | - | - | - | |
| Elimination of unrealised margins on inventories |
518 | 142 | - | - | 660 | |
| Provision for product warranty risk | 282 | 20 | - | - | 302 | |
| Provision for miscellaneous risks | 247 | 10 | (2) | - | - | 255 |
| Fair value hedging | 2 | - | 77 | - | - | 79 |
| Total deferred tax assets | 6,912 | (389) | 75 | 536 | 13 | 7,147 |
| (Euro / 000) | 31 December 2018 |
Posted to the income statement |
Recognised in shareholders' equity |
Change scope of consolidation |
Exchange rate differences |
30 June 2019 |
|---|---|---|---|---|---|---|
| Deferred tax liabilities | ||||||
| Exchange valuation differences | (4) | 8 | (1) | - | 3 | |
| Other deferred tax liabilities | (623) | (83) | (3) | (709) | ||
| Total deferred taxes | (627) | (75) | (1) | - | (3) | (706) |
| Net total | 6,285 | (464) | 74 | 536 | 10 | 6,441 |
At 30 June 2020, the Group had granted guarantees on payables or commitments of third parties or subsidiaries totalling 95 thousand Euro, down from the figure for 31 December 2019, as summarised in the table below:
| (Euro / 000) | 30 June 2020 | 31 December 2019 |
|---|---|---|
| Banca Passadore | - | 2,750 |
| Banca Pop. Emilia Romagna | - | 1,020 |
| Sandrini Costruzioni | 66 | 66 |
| Sandrini Costruzioni | 29 | 29 |
| Total | 95 | 3,865 |
As at 31 December 2019, the surety issued in favour of Banca Passadore guaranteed the credit lines of Ensun S.r.l., and was awaiting completion of the release procedures by the bank, as the underlying loan had been completely extinguished as at 31 December 2019. The release procedures were completed during the first half of 2020 and the surety in question was revoked.
The surety issued in favour of Banca Popolare Emilia Romagna in the fourth quarter of 2018 with an 18-month term, worth 1,020 thousand Euro, guaranteed the credit lines of Gefran Drives and Motion S.r.l. The surety in question was revoked during the first half of 2020.
The two sureties issued in favour of Sandrini Costruzioni, totalling 95 thousand Euro, refer to the guarantee for the rental of the industrial building where Elettropiemme S.r.l. carries out its activities.
The Parent Company and certain subsidiaries are involved in various legal proceedings and disputes. It is, however, considered unlikely that the resolution of these disputes will generate significant liabilities for which provisions have not already been made.
The Group has stipulated contracts for rental of buildings and leasing of equipment, electronic machinery and company vehicles. With application of accounting standard IFRS 16, the amount of lease fees remaining payable appears in the financial statement under the items "Usage rights" and "Financial payables for leasing under IFRS16", and so the reader is referred to the notes on these topics for more information.
As required under the new accounting standard, some residual existing contracts have been excluded from the perimeter of application as they met the requirements for exclusion; leasing costs for these contracts entered in the income statement amount to 475 thousand Euro for the first half 2020 (510 thousand Euro in the same period of 2019).
At 30 June 2020, the total value of the Group's commitments was 1,237 thousand Euro, for leasing and rental contracts expiring within the next five years, which do not fall within the scope of application of IFRS 16 ( equal to 1,341 thousand Euro at 30 June 2019). This value mainly refers to the share of ancillary services relating to contracts subject to IFRS16, as well as contracts for which, based on their value and duration, the above standard has not been applied.
In accordance with IAS 24, information relating to the Group's dealings with related parties for the first half of 2020 and the same period of the previous year is provided below.
In compliance with the Consob resolution no. 17221 of 12 March 2010, the Gefran S.p.A. Board of Directors has adopted the Regulation for transactions with related parties, the current version of which was approved on 3 August 2017 and may be consulted on the internet site https://www.gefran.com/en/gb/governance, in the section entitled "Documents and procedures".
Transactions with related parties are part of normal operations and the typical business of each entity involved and are carried out under normal market conditions. There were no atypical or unusual transactions.
Noting that the economic and equity effects of consolidated infragroup transactions are eliminated in the consolidation process, the most significant dealings with related parties are listed below. These dealings have no material impact on the Group's economic and financial structure. They are summarised in the following tables:
| (Euro / 000) | Climat S.r.l. | Total |
|---|---|---|
| Revenues from product sales | ||
| 2019 | - | - |
| 2020 | - | - |
| Service costs | ||
| 2019 | (81) | (81) |
| 2020 | (98) | (98) |
| (Euro / 000) | Climat S.r.l. | Total |
| Property, plant, machinery and tools | ||
| 2019 | 470 | 470 |
| 2020 | 84 | 84 |
| Trade payables | ||
| 2019 | 120 | 120 |
| 2020 | 98 | 98 |
In accordance with internal regulations, transactions with related parties of an amount below Euro 50 thousand are not reported, since this amount was determined as the threshold for identifying material transactions.
In relations with its subsidiaries, the Parent Company Gefran S.p.A. has provided technical and administrative/management services and paid royalties on behalf of the Group's operative subsidiaries totalling 1.6 million Euro under specific contracts (1.8 million Euro as of 30 June 2019).
Gefran S.p.A. provides a Group cash pooling service, partly through a "Zero Balance" service, which involves all the European subsidiaries.
None of the subsidiaries holds shares of the Parent Company or held them during the period.
Persons of strategic importance have been identified as members of the executive Board of Directors of Gefran S.p.A. and of other Group companies, as well as executives with strategic responsibilities, generally identified as the General Manager of the sensors and components Business Unit and the Group's CFO.
Provaglio d'Iseo, 06 August 2020
For the Board of Directors
Chairman
Maria Chiara Franceschetti
Chief Executive Officer
Marcello Perini
| Q1 | Q2 | Q3 | Q4 | TOT | Q1 | Q2 | TOT | ||
|---|---|---|---|---|---|---|---|---|---|
| (Euro / 000) | 2019 | 2019 | 2019 | 2019 | 2019 | 2020 | 2020 | 2020 | |
| a | Revenues | 35,973 | 36,126 | 33,015 | 35,421 | 140,535 | 31,426 | 31,309 | 62,735 |
| b | Increases for internal work | 635 | 628 | 572 | 739 | 2,574 | 495 | 459 | 954 |
| c | Consumption of materials and products |
12,207 | 12,908 | 11,702 | 13,391 | 50,208 | 11,411 | 11,237 | 22,648 |
| d | Added value (a+b-c) | 24,401 | 23,846 | 21,885 | 22,769 | 92,901 | 20,510 | 20,531 | 41,041 |
| e | Other operating costs | 5,753 | 6,152 | 5,679 | 6,337 | 23,921 | 5,425 | 4,681 | 10,106 |
| f | Personnel costs | 12,379 | 13,228 | 11,878 | 11,765 | 49,250 | 11,858 | 11,741 | 23,599 |
| g | EBITDA (d-e-f) | 6,269 | 4,466 | 4,328 | 4,667 | 19,730 | 3,227 | 4,109 | 7,336 |
| h | Depreciation, amortisation and impairment |
3,291 | 2,068 | 1,976 | 2,020 | 9,355 | 1,997 | 2,018 | 4,015 |
| i | EBIT (g-h) | 2,978 | 2,398 | 2,352 | 2,647 | 10,375 | 1,230 | 2,091 | 3,321 |
| l | Gains (losses) from financial assets/liabilities |
175 | (302) | 55 | (414) | (486) | (667) | (439) | (1,106) |
| m | Gains (losses) from shareholdings valued at equity |
242 | 17 | 31 | (110) | 180 | 2 | (3) | (1) |
| n | Profit (loss) before tax (i±l±m) | 3,395 | 2,113 | 2,438 | 2,123 | 10,069 | 565 | 1,649 | 2,214 |
| o | Taxes | (847) | (632) | (807) | (741) | (3,027) | (486) | (589) | (1,075) |
| p | Group net profit (loss)(n±o) | 2,548 | 1,481 | 1,631 | 1,382 | 7,042 | 79 | 1,060 | 1,139 |
End-of-period exchange rates
| Currency | 30 June 2020 | 31 December 2019 |
|---|---|---|
| Swiss franc | 1.0651 | 1.0854 |
| Pound sterling | 0.9124 | 0.8508 |
| US dollar | 1.1198 | 1.1234 |
| Brazilian real | 6.1118 | 4.5157 |
| Chinese renminbi | 7.9219 | 7.8205 |
| Indian rupee | 84.6235 | 80.1870 |
| Turkish lira | 7.6761 | 6.6843 |
Average exchange rates in the period
| Currency | 1H 2020 | 1H 2019 | 2Q 2020 | 2Q 2019 |
|---|---|---|---|---|
| Swiss franc | 1.0639 | 1.1127 | 1.0668 | 1.1325 |
| Pound sterling | 0.8743 | 0.8773 | 0.8616 | 0.8723 |
| US dollar | 1.1015 | 1.1196 | 1.1023 | 1.1357 |
| Brazilian real | 5.4169 | 4.4135 | 4.9111 | 4.2768 |
| Chinese renminbi | 7.7481 | 7.7339 | 7.6937 | 7.6619 |
| Indian rupee | 81.6766 | 78.8501 | 79.8511 | 80.0730 |
| Turkish lira | 7.1521 | 6.3574 | 6.7391 | 6.1078 |
| Name | Registered office |
Country | Currency | Share capital |
Parent Company | % of direct ownership |
|---|---|---|---|---|---|---|
| Gefran UK Ltd | Warrington | UK | GBP | 4,096,000 Gefran S.p.A. | 100.00 | |
| Gefran Deutschland GmbH | Seligenstadt | Germany | Euro | 365,000 Gefran S.p.A. | 100.00 | |
| Siei Areg GmbH | Pleidelsheim | Germany | Euro | 150,000 Gefran S.p.A. | 100.00 | |
| Gefran France S.A. | Saint-Priest | France | Euro | 800,000 Gefran S.p.A. | 99.99 | |
| Gefran Benelux NV | Geel | Belgium | Euro | 344,000 Gefran S.p.A. | 100.00 | |
| Gefran Inc. | North Andover | US | USD | 1,900,070 Gefran S.p.A. | 100.00 | |
| Gefran Brasil Elettroel. Ltda | Sao Paolo | Brazil | REAL | 450,000 Gefran S.p.A. | 99.90 | |
| Sensormate AG | 0.10 | |||||
| Gefran India Private Ltd | Pune | India | INR | 100,000,000 Gefran S.p.A. | 95.00 | |
| Sensormate AG | 5.00 | |||||
| Gefran Siei Asia Pte Ltd | Singapore | Singapore | Euro | 3,359,369 Gefran S.p.A. | 100.00 | |
| Gefran Siei Drives Tech. Pte Ltd Shanghai | China (PRC) |
RMB | 28,940,000 Gefran Siei Asia | 100.00 | ||
| Gefran Siei Electric Pte Ltd | Shanghai | China (PRC) |
RMB | 1,005,625 Gefran Siei Asia | 100.00 | |
| Sensormate AG | Aadorf | Switzerland CHF | 100,000 Gefran S.p.A. | 100.00 | ||
| Gefran Middle East Ltd Sti | Istanbul | Turkey | TRY | 1,030,000 Gefran S.p.A. | 100.00 | |
| Gefran Soluzioni S.r.l. | Provaglio d'Iseo | Italy | Euro | 100,000 Gefran S.p.A. | 100.00 | |
| Gefran Drives and Motion S.r.l. | Gerenzano | Italy | Euro | 14,000,000 Gefran S.p.A. | 100.00 | |
| Elettropiemme S.r.l. | Trento | Italy | Euro | 70,000 Gefran Soluzioni S.r.l. | 100.00 |
| Name | Registered office |
Country | Currency | Share capital | Parent Company |
% of direct ownership |
|---|---|---|---|---|---|---|
| Ensun S.r.l. | Brescia | Italy | Euro | 30,000 | Gefran S.p.A. | 50 |
| Axel S.r.l. | Dandolo | Italy | Euro | 26,008 | Gefran S.p.A. | 15 |
| Name | Registered office |
Country | Currency Share capital | Parent Company |
% of direct ownership |
|
|---|---|---|---|---|---|---|
| Colombera S.p.A. | Iseo | Italy | Euro | 8,098,958 Gefran S.p.A. | 16.56 | |
| Woojin Plaimm Co Ltd | Seoul | South Korea | WON 3,200,000,000 Gefran S.p.A. | 2.00 | ||
| UBI Banca S.p.A. | Bergamo | Italy | Euro 2,254,368,000 Gefran S.p.A. | n/s |
The undersigned Marcello Perini, in his capacity as Chief Executive Officer, and Fausta Coffano, in her capacity as Executive in charge of financial reporting of Gefran S.p.A. hereby certify, with due regard for the provisions of Article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of 24 February 1998:
and
There are no significant events to report in this regard.
They further certify that:
provide a true and accurate representation of the financial situation of the issuer and all companies included in the scope of consolidation.
the Management Report includes a reliable analysis of the trends and results of management and of the situation of the issuer and of all the companies included in the scope of consolidation, along with a description of the principal risks and uncertainties to which they are exposed.
Provaglio d'Iseo, 06 August 2020
Chief Executive Officer Executive in charge of financial reporting
Marcello Perini Fausta Coffano
GEFRAN GROUP – HALF-YEARLY FINANCIAL REPORT AS AT 30 June 2020
To the shareholders of GEFRAN SpA
F or ewor d
We have reviewed the accompanying consolidated condensed interim financial statements of GE FRAN SpA and its subsidiaries (the GEFRAN Group) as of 30 J une 2020, comprising the statement of profit/(loss) for the period, the statement of profit/(loss) for the period and other items of comprehensive income, the statement of financial position, the consolidated cash flow statement, the statement of changes in shareholders' equity and related notes. The directors of GEFRAN SpA are responsible for the preparation of the consolidated condensed interim financial statements in accordance with International Accounting Standard 34 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 No. 10867 of 31 J uly 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 GEFRAN Group as of 30 J une 2020 are not prepared, in all material respects, in accordance with International Accounting Standard 34 applicable to interim financial reporting (IAS 34) as adopted by the E uropean Union.
Brescia, 7 August 2020
PricewaterhouseCoopers SpA
Signed by
Alessandro Mazzetti (Partner)
This report has been translated into English from the Italian original solely for the convenience of international readers
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