Quarterly Report • May 15, 2017
Quarterly Report
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REPLY INTERIM MANAGEMENT REPORT AT 31 MARCH 2017
| Board of directors | 5 |
|---|---|
| Financial highlights | 7 |
| Reply Living Network | 11 |
| Summary report of the first quarter 2017 | 22 |
| Consolidated financial statements and notes | 25 |
| Declaration pursuant to Article 154-bis, paragraph 2 of legislative decree no. 58 of 24 February 1998, "Single text in matter of regulation of financial intermediation" and subsequent changes |
33 |
| Annexed tables | 35 |
Chairman and Chief Executive Officer
Mario Rizzante
Chief Executive Officer Tatiana Rizzante
Daniele Angelucci Claudio Bombonato Oscar Pepino Filippo Rizzante Fausto Forti (1) (2) (3) Maria Letizia Jaccheri (1) (2) Enrico Macii (1) (2)
President Cristiano Antonelli
Paolo Claretta Assandri Ada Alessandra Garzino Demo
EY S.p.A.
(1) Directors not invested with operational proxies (2) Independent Directors according to the Corporate Governance code drawn up by the Committee for Corporate Governance (3) Lead Independent Director
This report has been translated into English from the original Italian version, in case of doubt the Italian version shall prevail.
(thousand Euros)
| Economic figures | Q1 2017 | % | Q1 2016 | % |
|---|---|---|---|---|
| Revenue | 208,405 | 100.0 | 186,344 | 100.0 |
| EBITDA | 28,059 | 13.5 | 24,948 | 13.4 |
| EBIT | 25,155 | 12.1 | 22,476 | 12.1 |
| EBT | 25,344 | 12.2 | 22,493 | 12.1 |
| 31/03/2017 | 31/12/2016 | |
|---|---|---|
| Net financial position | 80,627 | 28,186 |
| 31/03/2017 | 31/03/2016 | |
|---|---|---|
| Employees | 6,205 | 5,389 |
(*) Region 1: ITA, USA, BRA, POL, ROU Region 2: DEU, CHE Region 3: GBR, LUX, BEL, NLD, FRA, BRL
Reply is a company that specialises in consulting, system integration and digital services with a focus on the invention, design and implementation of solutions based on the new communication channels and digital media.
Composed of a network of companies, Reply partners with key industrial groups in defining and developing business models made possible by the new technological and communication paradigms such as big data, cloud computing, digital communication, the Internet of Things and mobile and social networking. In so doing, it aims to optimise and integrate processes, applications and devices.
Reply operates through a network of companies specialising in processes, applications and technologies, which are centres of excellence in their respective fields of expertise.
Processes – for Reply, the understanding and use of technology involves the introduction of a new enabling factor for business processes, based on an in-depth knowledge of both the market and the specific industrial contexts of implementation.
Applications – Reply designs and implements application solutions aimed at satisfying companies' core business requirements.
Technology – Reply optimises the use of innovative technologies, implementing solutions capable of ensuring maximum efficiency and operational flexibility for customers
Consulting – in terms of strategy, communication, design, process and technology;
System Integration – making the best use of the potential of technology, combining business consulting with innovative technological solutions of high added value;
Digital Services –innovative services based on new communication channels and digital trends.
In every market segment in which it operates, Reply combines specific sector expertise with broad experience in the provision of services and a wealth of advanced technological capabilities.
Reply works with major telecoms and media operators to define and implement digital transformation strategies applied to the main core processes.
Reply has defined an integrated offer of strategic and technological consultancy to support the design, definition and management of the new-generation networks, based on SDN (Software Defining Network) paradigms, capable of integrating and managing virtual networks (network virtualisation) through network engineering services and network operations. The solutions developed by Reply were also applied to the network mediation layers used in the automotive world to enable 3G-4G communication between the services and control centre (NOC-SOC) and cars equipped with a "black box".
Reply also works with leading European operators in the renewal of Operations Support/Business Support Systems (OSS/BSS) towards increasingly more customer-focused service models and an omnichannel configuration of the offer.
With regard to the area of network security, Reply has provided an innovative solution, based on the Ethereum Blockchain paradigms, to enable the identification, prevention and removal of attacks by hackers on SDN networks, which are typically more flexible and adaptable to the requirements of the service, but, at the same time, more vulnerable to external attacks.
Finally, Reply is involved in the design and implementation of services and applications for latest generation mobile devices (on-demand or linear audio/video content, integration with connected products, customer support services and omnichannel customer engagement solutions).
FINANCIAL SERVICESReply is increasingly active in supporting the digital transformation of Europe's financial institutions. In this field, Reply is working with some of the major players in the sector on many key issues, such as the definition of complete multi-channel digital experience and customer engagement strategies: from digital branding to the implementation of app strategy, from the development of a new generation of portals and multi-channel touchpoints to the complete redefinition of the underlying technological architecture, and the analysis of new customer journeys.
With regard to the wealth management area, Reply has a strong presence on the market and has developed a wide range of specific skills and solutions aimed at, for example, the emerging models of consultancy and remote advice platforms and solutions. In the area of Governance Risk Control (GRC), Reply operates with a dedicated consulting division, integrated into a European network and highly specialised in the subjects of risk-evaluation, risk control and new regulatory models and solutions.
In the increasingly strategic area of big data, Reply is heavily investing and operating with some of the most important financial institutions (banks and insurance companies) in two directions: the concrete integration of the new big data technologies and architectures with existing systems and architectures, and the development of skills as well as analytics and machine learning models, aimed at extracting tangible business value from available databases.
Another area in which Reply is strongly present and highly specialised is the mobile payments realm and related m-commerce services. Reply offers consulting services, as well as a wide range of models and architectural solutions based on different standards, technologies and usage profiles, aimed at the banking/insurance market and at emerging players in the payments industry.
Lastly, in the most advanced frontiers of innovation, Reply is present with numerous projects, such as in the area of the latest biometric recognition technologies and digital identity, in the IoT applied to specific insurance sectors (car, home and health), in cryptocurrencies and in solutions relating to blockchain technology, in the experimentation and assessment of "fintech" models of peer to peer lending, crowdfunding and in the definition of specific e-marketplaces for financial institutions.
MANUFACTURING & RETAILReply supports companies in the phases of transformation and management of information systems: from strategic design to the understanding and redefinition of main processes, and the implementation of solutions that integrate core applications in the manufacturing and distribution sectors. The areas of focus and development of skills concern: the support of supplier relationship management (SRM) processes; the design and implementation of control systems; the planning of production units through manufacturing execution systems (MES); the distribution and movement of products on complex logistics networks through supply chain execution (SCE) processes.
Industry 4.0 and Logistics 4.0 are elements of particular focus for the strategic development of companies in the sector. In particular, the new competitive challenge for processing companies is the introduction of increasing levels of flexibility within the shop floor. Reply has significantly enhanced its product offer in this area. Proprietary SCE and MES solutions have been re-engineered. On the basis of the IOT, cloud computing and big data paradigms, a solution was developed focused on the ability to interact with the latest generation of sensors on production lines and products, with the aim of creating the backbone for the next generation of applications in the logistics and manufacturing sector.
For the retail market, Reply has defined a specific line of products and services that combine consulting services with the design and development of integrated web and mobile solutions, call centre products and in-store services. Customer focus is a fundamental theme where digital devices, as well as the innovation of digital channels and of physical locations come together to create a single engaging and consistent user experience.
ENERGY & UTILITIESThe energy and utilities sector is seeing a progressive spread of innovative technologies on an industrial scale, with the aim of transforming existing processes in all areas of the value chain. Driven by market and regulatory pressures, operators are decisively targeting investments in the digitisation, optimisation, programming and operation of installations for the generation, transport and distribution of electricity. Indeed, the new home network model constitutes a new competitive arena in which utilities will be compared with operators in other market sectors, particularly telecommunications.
Reply is one of the reference partners for companies operating in the sector, combining an extensive knowledge of the market and of its unique processes, with a distinctive ability to design, implement and manage applications and technological solutions in support of the "core business" in the generation, trading and risk management, pricing and forecasting, metering, billing and CRM areas. Moreover, the company's consolidated expertise relating to the introduction of new technologies (IoT, big data, cloud, mobile, etc.) was vertically applied to operating models for the various areas of the energy and utility value chain, in particular in the definition and development of new smart metering, smart grid and asset and work management models. Reply also assists its customers in the adoption of new energy management paradigms aimed at raising energy efficiency, a field in which the company offers a complete product range aimed at both energy sales companies and end consumers.
HEALTHCARE & GOVERNMENTThe need for "cost savings" as well as the reorganisation of important public administration sectors, including health, have determined an initial legislative adjustment in central government in Italy, with the contextual redefinition of spending centres in various regions, with the redefinition of organisational models aimed at ensuring the centrality of citizens with regard to services supplied, whether relating to the health sector or otherwise. The slogan for this transformation is: Digital PA. In this scenario, Reply benefits from the experience it has gained in the most advanced online services, creating vertical applications and expertise that enable it to implement specific solutions for managing relationships with the public and with businesses.
Moreover, another important field of specialisation for Reply is telemedicine, or digital healthcare, which will increasingly move therapies and patient monitoring out of the hospital environment. The key areas that can potentially impact the organisational model are: the home telemonitoring of patients, electronic prescriptions and e-health solutions for the management of individuals suffering from chronic diseases. In this context, Reply has developed a specific platform designed to facilitate an integrated network of communications between patients and community operators at various levels: hospitals, nursing homes, healthcare centres, community centres and so forth.
Technological innovation has formed the basis for the development of Reply, a company that has always pursued the objective of providing its customers with the tools needed to increase flexibility and efficiency. Reply is involved in a continuous process of research, selection and marketing of innovative solutions for sustaining the creation of value within organisations.
Within the context of digital finance services, Reply has set up a Competence Centre focused on the study and development of the blockchain product offer. The Competence Centre, active in different countries (Italy, the UK, Germany, France, Benelux) and across various vertical industries (Banking, Insurance, Telco & Media, Energy, Retail, Healthcare, Real Estate, etc.), works to accelerate customer adoption of the most widespread blockchain technologies, such as Bitcoin, Ethereum, Hyperledger and Multichain. Moreover, the company's proven expertise in system integration is reflected in the blockchain world, in the ability to interface with
Blockchain-as-a-Service services offered by major IT vendors, allowing Reply's blockchain solutions to fall in the "enterprise-ready" software product category.
CLOUD COMPUTINGCloud computing has established itself as one of the most important areas of transformation that companies have had to face. The offer of virtual environments and services by leading vendors worldwide has in fact modified, if not revolutionised, the concept of IT as it was traditionally interpreted, by changing it from a simple commodity to one of the basic elements on which to configure one's digital transformation.
In order to fulfil the requirements for strategic and technological transformation and change management necessary for the implementation of the most suitable cloud model for specific situations, Reply has defined a service offering structured along the following lines:
consulting support (from the business process to operational management) capable of helping customers to understand, select and develop the best technological and application solutions;
an end-to-end provider service that, supported by the partnership with the major vendors worldwide including Amazon, Google, Microsoft, Oracle, SAP and Salesforce, allows customers to benefit from the most suitable solutions for their needs, both in terms of model and the technology chosen;
SaaS services and solutions, based on Reply's proprietary application platforms.
CUSTOMER ENGAGEMENTThe quality of services offered to customers, the ability to understand and anticipate their needs, the creation of an immediate, effective and cross channel interaction experience are essential elements for the building and expansion of a one-to-one relationship. Reply has defined a strategic CRM framework based, in particular, on the redefinition of processes and the introduction of new technologies focused on interaction automation and behavioural analysis.
By combining the skills gained in the fields of digital communication, social media, gamification, the Internet of Things, data intelligence and the mobile world, new techniques and methods have been identified aimed at defining a customer engagement strategy that responds quickly and effectively to customer needs. Another area of innovation, both in terms of process as well as of service, is rooted in the increasingly broader introduction of bots and virtual assistants that facilitate the real-time monitoring of customer experience across the entire digital ecosystem, providing a unique and no longer fragmented view per channel, of the brandcustomer relationship evolution.
Reply is constantly investing in developing its expertise in leading CRM and eCommerce platforms and solutions, thanks to a solid ecosystem of partnerships with world leaders in the industry, including Microsoft, Oracle, SAP and Salesforce.
DATA & ANALYTICSBy combining technological skills in data analysis, data modelling and data process reengineering, Reply made it easier for its customers to approach the issue of big data, by favouring the activation of a real and concrete pathway of cultural change and by introducing a new approach to data management.
In particular, Reply assisted companies in the application of Big Data technologies (creating architectures based on the new "data lake" concept) and in the development and application of advanced analytics models, bringing together business experts and data scientists to define core business processes with a data-driven focus.
Reply has also initiated the development of a specific offer in the machine learning field, designed to address the growing demand by companies to automate lower impact digitised processes (i.e. invoice reconciliation) while increasing the ability to build value-added services based on innovative process automation models through deep learning, image recognition and prescriptive analytics.
To better support its customers in the introduction of advanced data-use techniques, Reply has also developed a training programme aimed at establishing a new generation of data scientists capable of taking full advantage of the latest machine learning and data analysis techniques.
DIGITAL EXPERIENCEToday, technology has definitely moved beyond the confines of the ICT world, characterising, guiding and influencing our everyday life, and consequently opening new dimensions and opportunities for digital communication of the brand.
To better support its customers in this new vision of the brand and of the brand-customer relationship, Reply has developed an extended and specialised set of skills, ranging from digital storytelling to a multi-platform strategic vision, from contextual interaction (proximity marketing) to omnichannel loyalty, from data recognition abilities used to capture large quantities of information to the consequent data analysis expertise required to be able to transform the data into effective market insights.
In addition to the creation and management of every aspect of the interactive digital brand image, Reply's areas of expertise include creativity and technology as applied to important sectors such as mobile telephony, e-commerce, gaming and the Internet of Things. These also constitute areas that commercial brands need to master both now and especially in the future, as can already be seen in the major global communication markets.
Another important field in which Reply supports its corporate customers involves communication via digital social media networks. This is now a mainstream activity that has expanded significantly over the last few years and is now more than ever the acknowledged global arena for brand-user relationships.
DIGITAL PAYMENTThe vast diffusion of mobile devices among consumers and the creation of new payment instruments that see the mobile component as a supporting factor, make the payment sector one of the areas with the highest growth rate. Reply has defined a dedicated offer – based on consultancy services and technological platforms – to assist banks, financial institutions, telecommunications companies, utilities and retailers in the processes needed to create and supply innovative services of remote and proximity digital payments.
The technological asset is HI Credits™, the Reply platform that enables personalised and contextualised payment services, by using the available smartphone technologies.HI Credits™ is capable of supplying, on the same platform, remote and proximity payment services with mobile POS solutions and enabling transfers between private individuals based on current accounts with the P2P app.
E-COMMERCEIncreasingly more demanding, mobile consumers are now requesting a completely integrated experience from companies, personalised and unified as much as possible through various physical and digital channels. In a similar purchasing scenario, the success of this sector lies in the ability to invest in services aimed at promoting relations and interaction between sellers and customers, constantly innovating and extending sales models with new multi-channel strategies capable of offering consumers different touchpoints, both digital and physical, used to purchase products. One example is the increasingly widespread success of purchasing processes based on click and collect models, very useful in order to avoid additional delivery costs or unexpected events such as delays: purchases are made online and the product is collected free of charge at the shop.
An evolution of this dimension in the traditional purchasing scenario has led Reply to define an omnichannel strategy centred on customer needs capable of enabling companies to provide the final consumer with a completely unified and integrated experience through online, mobile and physical channels.
ENTERPRISE ARCHITECTUREToday, digital transformation is the predominant theme on the agenda for companies. All organisations have created, or are creating, systems and processes that require a bi-modal approach to information and development and management systems. In order to excel in the digital economy, characterised by the convergence between the physical and the digital, organisations must remove the boundaries between IT and business. This will allow companies to operate rapidly to exploit the new developments available to them, proceeding however with caution to avoid damaging existing systems and processes.
This new approach to IT requires agile delivery models in which small, highly qualified, multi-disciplinary teams implement a process of end-to-end change in very short timeframes, working directly with the managers of the various business areas involved. Reply supports its customers in enterprise architecture through the use of a vast catalogue of architectural frameworks, methods and models consolidated in many projects completed for large industrial, media and service groups.
INDUSTRY 4.0The fourth industrial revolution is the combined effect of connectivity, data processing power, latest generation mechanical automation, machine learning and artificial intelligence. Industry 4.0 models are quickly redefining production sites around the world, transforming them into systems closely interconnected with the supply chain, logistics, sales, the products themselves and the support and maintenance chain. The plants become open ecosystems that must be able to adapt autonomously to new tasks, to carry out their own maintenance activities and to predict the best input and output flows through constant communication with supply chains, attaining levels of efficiency and control that minimize costs and maximize results. For this new global world of interconnected production, Reply has developed a suite of integrated solutions, capable of ensuring its customers are flexible, connected and efficient. In particular, Reply's mission is to accompany its customers throughout the entire transformation journey: from the design and development of solutions that open up the production sites and interconnect them to the entire digital world, to the design and implementation of solutions that can make products "smart", connected and digital.
The drive for convergence between the telecom, media and consumer electronics sectors is making it necessary to treat items that currently lack any form of connectivity as "networked devices" (such as household appliances and integrated home automation control systems...). One of the major developments currently underway therefore consists of the progressive connection, not only of computers and devices, but of a range of material objects. This will result in an increasingly more pervasive network integrated with the daily activities of people. There are various fields of application: from industrial applications (production processes) to logistics and info-mobility, energy efficiency, remote assistance and environmental protection. Reply has designed and developed HI ReplyTM, a platform of services, devices and middleware, on which to base specific vertical applications such as advanced logistics, environmental security, contactless payment and product traceability. HI ReplyTM was designed and built within the Reply research and development centre based on the Internet of Things.
MOBILEIn the mobile sector, Reply supports companies in defining interaction scenarios with their users based on omnichannel applications and architectures capable of meeting the needs that the new market scenario is imposing: appeal and high usability of services, high performance; the creation of enabling architectures capable of integrating new channels and types of devices with flexibility through which to provide services and content on the basis of the specific guidelines of each platform. In particular, with regard to the exponentially growing phenomenon of mobile video – where the quality and stability of the service are essential to ensure its success – Reply is involved in major European projects for the provision of OTT-TV services, with design, development, validation and monitoring teams. In addition, Reply has established the company's own application factory dedicated to mobile applications for both the business and consumer spheres. There is a user experience laboratory in the factory, alongside teams of developers specialised in various platforms, which bases its activity on a data-driven approach using tools and methods that focus on users and their needs and behaviours.
AUGMENTED REALITY, VIRTUAL REALITY Augmented reality (real world vision enhanced by digital information) and virtual reality (the interaction and exploration of virtual environments) are now the subject of investments by all major technology leaders. The introduction on the market of various new headsets including the OCULUS (Facebook); Steam VR (VALVE); Hololens (Microsoft) and PlayStation VR (SONY). VR/AR represent the next big step in the convergence between the physical and the digital worlds, with countless B2B and B2C repercussions.
The use of these technologies in the professional and industrial sectors is already becoming more widespread today: from the presentation of very large projects that are difficult to transport, to the creation of training sessions on plants that are far away or have not even been built yet, to medical cybertherapy. By combining experience in the 3D sector deriving from the gaming world with mobile skills and new technologies in the world of wearable devices, Reply has therefore developed an offer specifically orientated towards the development of solutions devised to increase user involvement. This product offer includes the development of augmented reality applications (aimed at visualising a virtual product in a real environment) and immersive reality applications specifically designed to give users a captivating experience, transporting them into a navigable virtual environment.
RISK, PRIVACY & SECURITY Reply is now one of the leading players in this sector, with a comprehensive portfolio of services for risk management, privacy and information security management. In particular, Reply has developed an integrated approach for measuring and managing risk that is capable of assessing, concurrently, both the risk involved and the potential loss of value and income associated with that risk. Using this method, Reply enables its customers to implement a set of tools and activities aimed at cutting the operating costs associated with risk management, thereby ensuring that capital and resources can be allocated in the best possible ways.
SERVICE DESIGN Today, innovation is the only way to survive in an increasingly global and digital market. Innovating in a "sustainable" manner, therefore creating a positive impact for people, for the community and for the company itself, represents an ideal way to excel. Nowadays, it is people who drive the digital transformation and companies must find ways to listen to their requests. If, on the one hand, modern technology and the digitisation of products and services have given rise to new business opportunities, on the other, the analysis of users' real needs has become one of the key factors for the success of a company. Within the area of innovation and digital transformation, Reply has invested in strategic design, seen as an enabling factor in the provision of end-to-end solutions for its customers, with the aim of supporting them throughout the entire process, from the generation of ideas to the implementation and release of the final solution.
SOCIAL MEDIAIn recent years, social media has profoundly changed the way in which individuals of all age groups communicate and interact both in their private and professional lives. Reply offers an innovative approach for maximizing the value of brands' digital identity on social media channels, with a view to integration with other relational touch points, from search engines – nowadays closely interconnected with social media – to television, for second screen interaction analysis. Social media represents a valuable system of data that makes it possible to better understand users and generate actionable insight. For example, data on user expectations support marketing initiatives by helping to anticipate emerging trends; analytics data support the communications team in defining communication clusters; advertisement interaction data make it possible to optimise campaigns to decrease the dispersion of communication and to improve the conversion performance.
VIDEO & GAMING The explosive phenomenon of mobile and apps that we have seen in recent years brings with it new social behaviour patterns and new habits. One particularly obvious phenomenon involves the use of video games. Smartphones and tablets have seen the disproportionate growth of the gaming community, previously confined to owners of consoles or to the PC gaming community, transforming gaming into a mass phenomenon.
Video gaming, as well as being a mass phenomenon, has now also become a language of communication. Providing customers with an entertaining experience that leaves a positive opinion of the brand in their memory is a priority and is essential nowadays for any communication or engagement campaign, regardless of whether it is intended for the smartphone screen or packaged for a physical sales point.
Reply has developed a product offer capable of meeting all of a brand's needs, from the use of virtual reality and augmented reality to the production of educational games (Edutainment) or to promote a product or a message (Advergames). Reply is constantly investing in this area, so that by using the technologies involved it can offer increasingly innovative and engaging game experiences.
Designing and developing games is a highly professional and specialist activity. Reply's credibility in this sector is guaranteed by the quality of the B2C products it has developed over recent years and by the success they have enjoyed in the global market. The games developed by Reply involve all of the group's technological and distribution platforms, while the portfolio includes titles of varying complexity aimed at a variety of target audiences. The experience acquired and the quality of the games produced position Reply as a major player in the international gaming industry. This is reflected both in the production of its own products and in the supply of vertical services to other industries in the sector.
.
Since the beginning of the year, the Group has recorded a consolidated turnover amounting to €208.4 million, an increase of 11.8% compared to the corresponding data for 2016.
All indicators are positive for the period. In the first quarter of 2017 the consolidated EBITDA was €28.1 million (€24.9 million in 2016), equal to 13.5% of the turnover, with an EBIT of €25.2 million (€22.5 million in 2016), equal to 12.1% of the turnover.
Lastly, the profit before tax, from January to March 2017, was €23.5 million (€22.5 million in 2016), equal to 12.2% of the turnover.
The net financial position of the Group on 31 March 2017 is also positive by €80.6 million, a sharp increase compared to the €28.8 million recorded on 31 December 2016.
The investments made to align Reply's consultancy and technology with the major transformation that cloud computing, data and the internet of things have brought about, reflect in our strong 2016 results, in the first quarter of 2017 and in the performance of the stock.
The mission the Group has always been to support its customers through the introduction of technological innovations to gain competitive advantage. To do so Reply continually needs to evolve, research and expand our expertise and skill sets. This is why Reply has been working for some time on new frontiers in artificial intelligence, machine learning, virtual and augmented reality, applying them not only to established industries, such as financial services, retail, telco & media and utilities but also to emerging ones like Industry 4.0.
Reply's performance is summarized in the following reclassified consolidated statement of income.
| (thousand Euros) | Note | Q1 2017 | % | Q1 2016 | % |
|---|---|---|---|---|---|
| Revenue | 4 | 208,405 | 100.0 | 186,344 | 100.0 |
| Purchases | 5 | (2,947) | (1.4) | (4,690) | (2.5) |
| Personnel | 6 | (105,494) | (50.6) | (91,345) | (49.0) |
| Services and other expenses | 7 | (72,283) | (34.7) | (64,995) | (34.9) |
| Other operating expenses/(income) | 8 | 377 | 0.2 | (365) | (0.2) |
| Operating expenses | (180,346) | (86.5) | (161,396) | (86.6) | |
| Gross operating margin | 28,059 | 13.5 | 24,948 | 13.4 | |
| Amortization and write-downs | 9 | (2,904) | (1.4) | (2,339) | (1.3) |
| Other non recurring expenses/(income) | - | - | (133) | (0.1) | |
| Operating margin | 25,155 | 12.1 | 22,476 | 12.1 | |
| (Income)/losses on investments | - | - | - | - | |
| Financial (loss)/income | 10 | (189) | (0.1) | (17) | - |
| Income before taxes | 25,344 | 12.2 | 22,493 | 12.1 |
The Group's net financial position as at 31 March 2017, analyzed by due date and with comparative figures as at 31 December 2016 is shown in the following statement:
| (thousand Euros) | 31/03/2017 | 31/12/2016 |
|---|---|---|
| Cash and cash equivalents, net | 123,995 | 76,511 |
| Current financial assets | 3,584 | 2,925 |
| Due to banks | (15,051) | (18,893) |
| Due to other providers of finance | (899) | (738) |
| Net financial position, short term | 111,630 | 59,805 |
| Non current financial assets | 0 | 4 |
| Due to banks | (29,861) | (29,985) |
| Due to other providers of finance | (1,141) | (1,066) |
| Net financial position M/L term | (31,002) | (31,047) |
| Total net financial position | 80,627 | 28,758 |
Notwithstanding Legislative Decree no. 25 of 15 February 2016 has eliminated the obligation to publish Interim Management Statements, these have as at 31 March 2017 in relation to the first quarter of financial year 2017, been prepared, in capacity of STAR segment issuer, as required by Borsa Italiana S.p.A. under communication no. 7587 of 21 April 2016. The contents herein are pursuant to Art. 154-ter, paragraph 5 of Legislative Decree 24 February 1998, no. 58.
The interim report herein has been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board ("IASB") and endorsed by the European Union. The designation "IFRS" also includes all valid International Accounting Standards ("IAS"), as well as all interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"), formerly the Standing Interpretations Committee ("SIC").
The accounting policies applied in these financial statements are consistent with those adopted in preparing the annual report.
The preparation of the interim report requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities the financial statements reported herein. If in the future such estimates and assumptions, which are based on management's best judgment at the date of the interim financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.
Moreover, these valuation procedures, in particular those of a more complex nature regarding matters such as any impairment of non-current assets, are only carried out in full during the preparation of the annual financial statements, when all the information required is available, other than in the event that there are indications of impairment, when an immediate assessment is necessary
The values indicated in the accounting statements are expressed in thousands of Euros.
The Interim Management report as at 31 March 2017 was not subject to audit by Reply's Independent auditors, as allowed by existing laws.
Reply [MTA, STAR: REY] is specialized in the implementation of solutions based on new communication and digital media.
Reply, consisting of a network of specialized companies, assists important European industries belonging to Telco & Media, Manufacturing & Retail, Bank & Insurances and Public Administration sectors, in defining and developing new business models utilizing Big Data, Cloud Computing, CRM, Mobile, Social Media and Internet of Things paradigms. Reply offers consulting, system integration, application management and business process outsourcing www.reply.eu.
Companies included in consolidation are consolidated on a line-by-line basis.
Change in consolidation compared to 31 March 2016 is related to:
Change in consolidation does not significantly affect the Group's revenues and profits before tax on 31 March 2017.
Furthermore, the list of the Reply Group's companies and equity investments, presented as an annex herein, also includes in consolidation the following newly incorporated companies with respect to 31 March 2016.
Revenues from sales and services, including change in work in progress, amounted to 208,405 thousand Euros (186,344 thousand Euros in the first quarter of 2014) with an increase of 10.1%.
This item includes revenues generated from consulting activities, turn-key projects and assistance and maintenance services and other minor amounts.
The following table shows the percentage breakdown of revenues by geographic area. Moreover the breakdown reflects the business management of the Group by Top Management and the allocation approximates the localization of services provided:
| Region (*) | Q1 2017 | Q1 2016 |
|---|---|---|
| Region 1 | 70.8% | 71.8% |
| Region 2 | 17.3% | 16.8% |
| Region 3 | 11.7% | 11.0% |
| IoT Incubator | 0.2% | 0.3% |
| Total | 100.0% | 100.0% |
(*)
Region 1: ITA, USA, BRA, POL, ROU Region 2: DEU, CHE Region 3: GBR, LUX, BEL, NLD, FRA; BRL
The following table shows the percentage breakdown of revenues by business line:
| Q1 2017 | Q1 2016 | |
|---|---|---|
| Technologies | 52.5% | 48.8% |
| Applications | 37.1% | 42.3% |
| Processes | 10.4% | 8.9% |
| Total | 100.0% | 100.0% |
Detail is as follows:
| (thousand Euros) | Q1 2017 | Q1 2016 | Change |
|---|---|---|---|
| Software licenses for resale | 1,457 | 2,844 | (1,388) |
| Hardware for resale | 322 | 475 | (153) |
| Other | 1,169 | 1,370 | (201) |
| Total | 2,947 | 4,689 | (1,742) |
The items Software licenses for resale and Hardware licenses for resale include change in inventory of software and hardware products for resale.
The item Other mainly includes costs incurred for fuel expenses and the purchase of office material.
Increase in personnel expenses amounting to 14,148 thousand Euros owes to the overall increase of the Group's business and to the increase of the number of employees.
Detail of personnel by category is provided below:
| (number) | Q1 2017 | Q1 2016 | Change |
|---|---|---|---|
| Directors | 355 | 303 | 52 |
| Managers | 989 | 805 | 184 |
| Staff | 4,861 | 4,281 | 580 |
| Total | 6,205 | 5,389 | 816 |
Services and other costs amounting to 72,283 thousand Euros (64,995in the first quarter of 2016) comprised the following:
| (Thousand Euros) | Q1 2017 | Q1 2016 | Change |
|---|---|---|---|
| Consulting and commercial | 45,262 | 41,513 | 3,749 |
| Travelling and professional training expenses | 7,450 | 6,880 | 570 |
| Other services | 9,462 | 8,638 | 824 |
| Office charges | 5,691 | 4,245 | 1,446 |
| Rental and leasing | 2,010 | 2,047 | (38) |
| Other | 2,409 | 1,672 | 737 |
| Total | 72,283 | 64,995 | 7,288 |
Change in Services and other costs, amounting to 7,288 Euros, is attributable to an overall increase in the Group's business.
The item Other mainly includes marketing services, administrative and legal services, telephone and canteen expenses.
Office expenses include rent and all related charges.
Depreciation of tangible assets, amounting to 1,610 thousand Euros at 31 March 2017 has been determined on a straight-line basis at economic-technical rates that reflect the useful lives of the asset.
Amortization of intangible assets at 31 March 2017 amounted to 1,294 thousand Euros and is mainly related to:
Detail is as follows:
| (thousand Euros) | Q1 2017 | Q1 2016 | Change |
|---|---|---|---|
| Financial income | 388 | 57 | 331 |
| Financial losses | (271) | (273) | 2 |
| Other | 72 | 232 | (161) |
| Total | 189 | 17 | 172 |
The item Financial income mainly includes interest on bank accounts.
Financial losses mainly include the interest costs related to bank advances and to the use of the credit lines for M&A operations.
The item Other includes the Exchange rate differences from the translation of balance sheet items not stated in Euros, as well as changes in fair value of financial liabilities pursuant to IAS 39.
The net financial position as at 31 March 2017 was positive for 80,627 thousand Euros with an improvement of 51,869 thousand Euros compared to 31 December 2016 owing to the cash flows generated by operating activities.
Due to banks, amounting to 44,912 thousand Euros is referred mainly to credit lines for M&A operations
No significant events have occurred subsequent to 31 March 2017.
The following is to be noted:
For the Board of Directors /s/ Mario Rizzante Chairman
Mario Rizzante
DECLARATION PURSUANT TO ARTICLE 154-BIS, PARAGRAPH 2 OF LEGISLATIVE DECREE NO. 58 OF 24 FEBRUARY 1998, "SINGLE TEXT IN MATTER OF REGULATION OF FINANCIAL INTERMEDIATION" AND SUBSEQUENT CHANGES
The director responsible for preparing the Company's financial reports, Dott. Giuseppe Veneziano, declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this interim management report at 31 March 2017 corresponds to the results documented in the books, accounting and other records of the company.
Turin, 15 May 2017
/s/ Giuseppe Veneziano (Director responsible of drafting financial statements)
Giuseppe Veneziano
List of Group companies at 31 March 2017
| Company name | Headquarters | Group interest |
|---|---|---|
| Parent company | ||
| Reply S.p.A. | Turin – Corso Francia. 110 - Italy | |
| Companies consolidated on a line-by-line basis | ||
| 4brands Reply GmbH & CO. KG. | Minden, Germany | 51.00% |
| Air Reply S.r.l. (*) | Turin, Italy | 85.00% |
| Arlanis Reply S.r.l. | Turin, Italy | 100.00% |
| Arlanis Reply AG | Potsdam, Germany | 100.00% |
| Aktive Reply S.r.l. | Turin, Italy | 100.00% |
| Atlas Reply S.r.l. | Turin, Italy | 100.00% |
| Avantage Reply Ltd. | London, United Kingdom | 100.00% |
| Avantage Reply (Belgium) Sprl | Brussels, Belgium | 100.00% |
| Avantage Reply (Luxembourg) Sarl | Itzig, Luxemburg | 100.00% |
| Avantage Reply (Netherlands) BV | Amsterdam, Netherland | 100.00% |
| Avvio Reply Ltd (***) | London, United Kingdom | 100.00% |
| Blue Reply S.r.l. | Turin, Italy | 100.00% |
| Blue Reply GmbH | Guetersloh, Germany | 100.00% |
| Bridge Reply S.r.l. | Turin, Italy | 60.00% |
| Business Reply S.r.l. | Turin, Italy | 100.00% |
| Breed Reply Ltd | London, United Kingdom | 100.00% |
| Breed Reply Investment Ltd | London, United Kingdom | 80.00% |
| Cluster Reply S.r.l. | Turin, Italy | 100.00% |
| Cluster Reply GmbH & CO. KG | Munich, Germany | 100.00% |
| Cluster Reply Informatica LTDA. (*) | San Paolo, Brazil | 76.00% |
| Cluster Reply Roma S.r.l. | Turin, Italy | 100.00% |
| ComSysto GmbH | Munich, Germany | 100.00% |
| Concept Reply GmbH | Munich, Germany | 100.00% |
| Consorzio Reply Energy | Turin, Italy | 100.00% |
| Consorzio Reply Public Sector | Turin, Italy | 100.00% |
| Data Reply S.r.l. | Turin, Italy | 100.00% |
| Data Reply GmbH (*) | Munich, Germany | 70.00% |
| Discovery Reply S.r.l. | Turin, Italy | 100.00% |
| e*finance consulting Reply S.r.l. | Turin, Italy | 100.00% |
| Ekip Reply S.r.l. | Turin, Italy | 100.00% |
| EOS Reply S.r.l. | Turin, Italy | 100.00% |
| First Development Hub. LLC | Minsk, Belarus | 100.00% |
| Forge Reply S.r.l. | Turin, Italy | 100.00% |
| France Reply Ltd (***) | London, United Kingdom | 80.00% |
| Go Reply S.r.l. | Turin, Italy | 100.00% |
| Healthy Reply GmbH | Düsseldorf, Germany | 100.00% |
| Hermes Reply S.r.l. | Turin, Italy | 100.00% |
| Hermes Reply Polska zo.o | Katowice, Poland | 100.00% |
|---|---|---|
| Industrie Reply GmbH (ex Logistics Reply GmbH) | Munich, Germany | 100.00% |
| InEssence Reply GmbH | Düsseldorf, Germany | 100.00% |
| IrisCube Reply S.p.A. | Turin, Italy | 100.00% |
| Leadvise Reply GmbH | Darmstad, Germany | 100.00% |
| Lem Reply S.r.l. | Turin, Italy | 100.00% |
| Like Reply S.r.l. | Turin, Italy | 100.00% |
| Live Reply GmbH | Düsseldorf, Germany | 100.00% |
| Logistics Reply S.r.l. | Turin, Italy | 100.00% |
| Lynx Recruiting Ltd | London, United Kingdom | 100.00% |
| Macros Reply GmbH | Munich, Germany | 100.00% |
| Open Reply GmbH | Guetersloh, Germany | 100.00% |
| Open Reply S.r.l. | Turin, Italy | 100.00% |
| Pay Reply S.r.l | Turin, Italy | 100.00% |
| Portaltech Reply Ltd. | London, United Kingdom | 100.00% |
| Portaltech Reply S.r.l. | Turin, Italy | 100.00% |
| Portaltech Reply GmbH (*) | Guetersloh, Germany | 68.00% |
| Power Reply S.r.l. | Turin, Italy | 100.00% |
| Power Reply GmbH & CO. KG | Munich, Germany | 100.00% |
| Profondo Reply GmbH | Guetersloh, Germany | 100.00% |
| Protocube Reply S.r.l. | Turin, Italy | 55.00% |
| Reply Consulting S.r.l. | Turin, Italy | 100.00% |
| Reply AG | Guetersloh, Germany | 100.00% |
| Reply do Brasil Sistemas de Informatica Ltda | Belo Horizonte, Brazil | 100.00% |
| Reply Inc. | Michigan, USA | 100.00% |
| Reply Ltd. | London, United Kingdom | 100.00% |
| Reply Belgium SA | Mont Saint Guibert, Netherlands | 100.00% |
| Reply Digital Experience (ex Bitmama S.r.l.) | Turin, Italy | 100.00% |
| Reply France Sarl | Paris, France | 100.00% |
| Reply Luxembourg Sarl | Sandweiler, Luxemburg | 100.00% |
| Reply NL Ltd | London, United Kingdom | 100.00% |
| Reply Services S.r.l. | Turin, Italy | 100.00% |
| Reply Verwaltung GmbH | Guetersloh, Germany | 100.00% |
| Ringmaster S.r.l. | Turin, Italy | 50.00% |
| Risk Reply Ltd | London, United Kingdom | 80.00% |
| Riverland Reply GmbH | Munich, Germany | 100.00% |
| Santer Reply S.p.A. | Milano, Italy | 100.00% |
| Security Reply S.r.l. | Turin, Italy | 100.00% |
| Solidsoft Reply Ltd. | London, United Kingdom | 100.00% |
| Spark Reply S.r.l. | Turin, Italy | 85.00% |
| Spark Reply GmbH | Germany | 100.00% |
| Square Reply S.r.l. | Turin, Italy | 100.00% |
| Storm Reply S.r.l. (*) | Turin, Italy | 95.00% |
| Storm Reply GmbH (*) | Guetersloh, Germany | 80.00% |
| Syskoplan Reply S.r.l. | Turin, Italy | 100.00% |
| Syskoplan Reply GmbH | Zurich Switzerland | 100.00% |
| Syskoplan Reply GmbH & CO. KG | Guetersloh, Germany | 100.00% |
| Sytel Reply Roma S.r.l. | Turin, Italy | 100.00% |
|---|---|---|
| Sytel Reply S.r.l. | Turin, Italy | 100.00% |
| Target Reply S.r.l. | Turin, Italy | 100.00% |
| TamTamy Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Turin, Italy | 100.00% |
| Technology Reply Roma S.r.l. | Turin, Italy | 100.00% |
| Technology Reply S.r.l. | Bucharest, Romania | 100.00% |
| TD China (TD Marketing Consultants. Beijing Co. Ltd) | China | 100.00% |
| Tool Reply Gmbh | Guetersloh, Germany | 100.00% |
| Triplesense Reply S.r.l. | Turin, Italy | 100.00% |
| Triplesense Reply GmbH | Frankfurt, Germany | 100.00% |
| Twice Reply S.r.l. | Turin, Italy | 98.00% |
| Twice Reply GmbH | Munich, Germany | 100.00% |
| Trommsdorf+drüner. innovation+marketing consultants GmbH | Berlin, Germany | 100.00% |
| WM360 Ltd (***) | London, United Kingdom | 100.00% |
| WM360 Consultancy Services Ltd | London, United Kingdom | 100.00% |
| WM360 Crashpad Ltd. | London, United Kingdom | 100.00% |
| WM Reply Ltd. | London, United Kingdom | 100.00% |
| WM360 Resourcing Ltd | London, United Kingdom | 100.00% |
| Whitehall Reply S.r.l. | Turin, Italy | 100.00% |
| Xister Reply S.r.l.(*) | Turin, Italy | 89.20% |
| Xuccess Reply GmbH | Munich, Germany | 100.00% |
| Amiko Digital Health Ltd | England | 20.00% |
|---|---|---|
| Cocoon Alarm Ltd. | England | 22.09% |
| iNova Design Ltd. | England | 30.00% |
| Sensoria Inc. | USA | 24.0% |
| Zeetta Networks Ltd. | England | 23.39% |
| Iotic Labs Ltd. | England | 9.50% |
| Sentryo SAS | France | 12.64% |
| Connecterra BV | Belgium | 16.5% |
| RazorSecure Ltd. | England | 18.52% |
| Senseye Ltd. | England | 15.59% |
| Wearable Technologies Ltd. | England | 7.24% |
| We Predict Ltd. | Inghilterra | 8.28% |
(*)For these companies an option exists for the acquisition of the minority shares; the exercise of such option in future reporting periods is subject to the achievement of profitability parameters. The accounting of such options reflects management's best estimate at the reporting date.
Reply S.p.A. Corso Francia. 110 10143 TURIN – ITALY Tel. +39-011-7711594 Fax +39-011-7495416 www.reply.com
Share capital: Euro 4.863.485.64 i.v. Fiscal code and R.I. of Turin no. 97579210010 VAT 08013390011 REA of Turin 938289
E-mail: [email protected] Tel. +39-011-7711594 Fax +39-011-7495416
E-mail: [email protected] Tel. +39-02-535761 Fax +39-02-53576444
Corso Francia, 110, 10143 Turin – Italy Tel. +39-011-7711594 Fax. +39-011-7495416 [email protected] www.reply.com
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