Intred — Interim / Quarterly Report 2019

Sep 26, 2019

Press Release

THE BOARD OF DIRECTORS APPROVED THE HALF YEAR REPORT AT 30 JUNE 2019

ALL FINANCIAL AND PERFORMANCE INDICATORS SHOW STRONG GROWTH REVENUES UP 21.4% TO € 10 MILLION IN THE FIRST HALF OF 2019 EBITDA MARGIN REACHED 40.9% THE FIBRE OPTIC NETWORK EXPANDED TO 2,400 KM

• REVENUES at €10 million, up 21% YoY thanks to the continued growth of FTTH ultrabroadband connections for business customers (+48% YoY)
• EBITDA¹ at €4.1 million, up 24.1% YoY (EBITDA margin: 40.9%)
• EBIT at €2.8 million, up 32.8% YoY (EBIT margin: 27.3%)
• Net profit at €2.1 million, up 35.8% YoY
• Net financial position of €5.7 million, compared to €6.6 million at 31 December 2018
• Investments of €3.3 million focused on developing the network, which expanded from 1,950 km at 31 December 2018 to 2,400 km

Milan, 26 September 2019 – The Board of Directors of Intred S.p.A. (the "Company" or "Intred"), a telecommunications operator listed on the Borsa Italiana AIM Italia market since 2018 (ticker symbol: ITD.MI) with an extensive presence in the Lombardy region, specialised in ultra-broadband, broadband, wireless and land line telephone networks and cloud and related services for business and retail customers, met today under the Chairmanship of Daniele Peli and examined and approved the Half Year Report at 30 June 2019, drafted in accordance with the AIM Italia Issuers' Regulation and Italian accounting standards.

1 EBITDA: Alternative performance indicator: EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation – i.e., Gross Operating Profit) is an alternative performance indicator not defined by Italian accounting standards but used by company management to monitor and evaluate the company's operating performance, as it is not influenced by volatility due to the effects of the different criteria for calculating taxable income, the amount and the characteristics of invested capital or the related depreciation/amortisation policies. Intred defines this indicator as Profit/(Loss) for the period before amortisation/depreciation and write-downs of intangible and tangible fixed assets, financial income and charges and income taxes.

Daniele Peli, Co-Founder and Chief Executive Officer of Intred, noted, "We are undoubtedly satisfied with the results achieved in the period, especially as we were able to improve both volumes and profit margins. The growth in this half year is even more significant in light of our continued work to expand the fibre optic network through two main strategies: continuing to re-invest a substantial amount of turnover - around 30% - in developing our proprietary network, as reported when the company went public, while also partnering with leading TLC players to acquire rights of use for dark optical fibre in the areas where we operate."

FINANCIAL HIGHLIGHTS AND RESULTS AS AT 30 JUNE 2019

RECLASSIFIED INCOME STATEMENT

	1 H 2019	1 H 2018	%
Revenues from sales	10,010,734	8,245,954	21.4%
Other revenues and income	125,671	103,203	21.8%
Value of production	10,136,404	8,349,157	21.4%
Raw materials	(50,929)	(81,317)	37.4%
Services	(1,432,267)	(1,227,660)	16.7%
Use of third party assets	(2,667,822)	(2,254,932)	18.3%
Operating expenses	286,288	(199,839)	43.3%
Total costs	(4,437,306)	(3,763,748)	17.9%
ADDED VALUE	5,699,098	(4,585,409)	24.3%
Personnel costs	(1,549,674)	(1,242,670)	24.7%
EBITDA	4,149,424	3,342,740	24.1%
Amortisation, depreciation and write
downs	(1,385,112)	(1,261,530)	9.8%
EBIT	2,764,312	2,081,209	32.8%
Financial income and charges	46,313	(36,743)	-226%
EBT	2,810,625	2,044,466	37.5%
Income taxes	(754,397)	(530,324)	42.3%
NET PROFIT	2,056,228	1,514,142	35.8%

Value of Production in the first half of 2019 rose 21% on the same period of the previous year to €10 million. This increase was mainly driven by ultra-broadband connection sales, which grew 48% on the first half of 2018, while the telephone business also grew significantly (+17%).

Revenue from data centre services (housing and cloud) and related services remained steady. As expected, Intred saw downturns in the broadband business (-9%) based on copper wire connections and the RDSL business (-7%), as it is pushing customers to migrate to higher-performance fibre optic connections through its sales policies.

Recurring fees account for over 94% of revenues, giving the company continuity and a clear view of future performance. The turnover churn rate is 4.5%.

In the first half of 2019, users with data connections increased considerably, from 26,268 at 31 December 2018 to 29,208 at 30 June 2019 and showing a 21% increase on the same period of the previous year.

The gross operating profit (EBITDA) for the first six months of 2019 totals €4.1 million, with an EBITDA margin of 40.9% (compared to 40% in the first half of 2018 and 38.1% in 2018).

The operating profit (EBIT) reached €2.8 million, with an EBIT margin of 27.3% (compared to 24.9% in the first half of 2018 and 23.4% in 2018).

The net profit for the first six months of 2019 is €2.1 million, equal to 20.3% of the value of production, compared to €1.5 million in the first half of 2018.

	30/06/2019	31/12/2018
Intangible fixed assets	5,238,009	4,856,910
Tangible fixed assets	18,510,838	16,990,967
Financial fixed assets	121,622	114,412
Fixed assets	23,870,470	21,962,289
Trade receivables	4,937,150	3,096,708
Trade payables	(5,273,487)	(5,061,557)
Operating working capital	(336,337)	(1,964,849)
Other receivables	1,448,059	1,398,866
Other payables	(5,726,665)	(4,757,990)
Net working capital	(4,614,943)	(5,323,973)
Provisions	(590,713)	(574,904)
TOTAL USES OF FUNDS	18,664,815	16,063,412
Cash flows	(8,111,930)	(9,651,093)
Non-current bank loans and borrowings	2,393,916	3,064,219
NFP	5,718,014	6,586,874
Shareholders' equity	24,382,829	22,650,286
TOTAL SOURCES OF FUNDS	18,664,815	16,063,412

RECLASSIFIED BALANCE SHEET

The net financial position is €5.7 million, compared to €6.6 million at 31 December 2018. Liquid funds amount to €8.1 million, compared to €9.6 million at 31 December 2018. Non-current bank loans and borrowings total €2.4 million, compared to €3.1 million at 31 December 2018.

Shareholders' equity at 30 June 2019 amounts to €24.4 million, up compared to the €22.6 million at 31 December 2018.

Investments and network development

Investments in the first half of 2019 totalled €3.3 million and essentially focused on developing the FTTH and FTTC fibre optic network mainly in the provinces of Brescia, Bergamo and Mantua. At 30 June 2019, the company's network had grown to 2,400 km of optical fibre from 1,950 km at the end of 2018, with 142 exchanges throughout the provinces of Brescia, Bergamo and Mantua. The network infrastructure converges on two ISO 27001 certified data centres connected to the main national/international carriers and the Milan Mix, which house the networking equipment of Cisco Systems and Huawei, the operators that manage connectivity for over 30,000 data users (figures updated to the first week of September 2019).

The bulk of investments in Intred's network infrastructure is for tangible fixed assets (€2.3 million, accounting for 69.7% of total capex) to develop the network, while the remainder (€0.6 million, 30.3% of total capex) is for intangible fixed assets, primarily consisting of acquisitions of 15-year IRU (indefeasible rights of use) for dark optical fibre and/or cables.

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SIGNIFICANT EVENTS

Intred signed an important agreement with Open Fiber on 19 February 2019 for use of its dark GPON (gigabit passive optical network). This deal, entailing a total investment of approximately €3 million over five years, will enable Intred to increase FTTH connection sales to a potential target of 70,000 property units in the city of Brescia, substantially boosting sales in the urban areas of Lombardy's largest cities.

On 15 May 2019, all 1,714,500 price adjustment shares (ISIN: IT0005337826) were converted into ordinary shares (ISIN: IT0005337818) at a ratio of 1 (one) ordinary share for every price adjustment share held. The company's share capital consists of 15,850,500 ordinary shares (ISIN: IT0005337818) following the conversion.

SIGNIFICANT EVENTS AFTER THE PERIOD END

On 2 July 2019, Intred signed important agreements with GTT S.p.A. and RETELIT S.p.A. to acquire the 15-year IRU for approximately 300 km of dark optical fibre. This deal will enable Intred to further develop its network in Lombardy, with a significant impact on fibre optic connection sales in the provinces of Milan, Monza and Brianza, Pavia and Como.

On 15 July 2019, in compliance with the disclosure obligations under Article 17 of the AIM Italia Issuers Regulation, Intred announced the mutual decision to terminate the nominated advisor contract with Integrae SIM, with effect from Wednesday 17 July 2019. The company named Banca Profilo S.p.A its new Nominated Adviser, which assumed the position on Thursday 18 July 2019. Integrae SIM S.p.A. continues to work with Intred as Specialist.

Furthermore, to keep the Intred share visible on the AIM market and expand its activities with the financial community, Intred appointed Alantra as its Corporate Broker. Alantra is a leading independent international investment bank.

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OUTLOOK FOR 2019

Growth forecasts for the rest of the year are largely positive. In the second half of 2019, the growth in revenue will continue to be driven by sales of ultra-broadband services and EIR sales to retail customers, while the process continues to transfer users from broadband connections to fibre optic connections with increased customer satisfaction and higher profitability. Commissioned investments and those in progress to expand the fibre optic network will lead to sharp growth in the second half of the year, confirming the previously reported investment plans. Given the steady growth in the number of customers and our clear view of future recurring revenue, we are confident that the annual results will exceed those achieved in the half year just ended, confirming the performance of the main indicators.

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FILING OF DOCUMENTATION

The documentation relating to the Half Year Report at 30 June 2019, as required by current legislation, will be made available to the public at the registered office (via Pietro Tamburini, 1, 25136 Brescia) and on the company's website www.intred.it in the Investors Relations/Financial Statements and Reports section.

Intred Telecomunicazioni

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A major telecommunications operator in eastern Lombardy and the Brescia province in particular, Intred was founded in 1996 by Daniele Peli, the company's current Chairman and CEO, and has been listed on the Borsa Italiana AIM Italia market since 2018 (ticker: ITD.MI). With a fibre optic network of over 2,400 km, 142 exchanges, two data centres, a wireless network with 42 radio stations and a national telephone network, Intred provides ultra-broadband, broadband and wireless connectivity, land line telephone service, cloud services and related services for business and retail customers, the latter served with the EIR brand. Intred directly operates its own infrastructure to ensure efficiency, profitability, service quality and – thanks to a dedicated in-house call centre – excellent service levels for its users, enabling it to achieve a customer satisfaction rate of 93.6%. Its high-value assets and consolidated, highly scalable business model, combined with turnover of €10.0 million in the first half of 2019, make Intred an ideal infrastructure technology partner with a full range of high-quality, reliable and secure solutions. www.intred.it

Nomad Banca Profilo S.p.A. +39 02 584081 alessio.muretti@bancaprofilo.it

Specialist Integrae SIM S.p.A. +39 02 87208720 info@integraesim.it

Investor Relations Intred CFO & Investor Relations Officer Filippo Leone Tel. +39 391 4143050 ir@intred.it

CDR Communication Vincenza Colucci Tel. +39 335 6909547 vincenza.colucci@cdr-communication.it Media Relations CDR Communication Angelo Brunello Tel. +39 329 2117752 angelo.brunello@cdr-communication.it