Sit — Earnings Release 2020

May 13, 2020

Q1 2020 – Results presentation

May 13, 2020

Highlights

• Q1 2020 consolidated revenues are € 73,4 million, -8,9% vs Q1 2019
• Divisional sales:
  • Heating accounts €56,4 million at -9,2% vs same period of 2019
  • Smart Gas Metering with €16,4 million is -7,3% vs Q1 2019
• In the Heating business Europe accounts a lower decrease (4,9%) due to new products introduced by customers and final market growth in central Europe
• Q1 2020 EBITDA of €8,9 million (12,1% of revenues) vs €12,5 million (15,5% of revenues) at Q1 2019
• Net debt at €101,6 million, includes IFRS 16 effect of €5,3, reflects seasonal trend in NTWC and strong support provided to supply chain

Key financial results

, unless otherwise stated €m	Q1 2020	%	Q1 2019	%	Chg YoY
Revenues	73 4 ,	100 0% ,	80 6 ,	100 0% ,	(8 9%) ,
EBITDA	8 9 ,	12 1% ,	12 5 ,	15 5% ,	(28 6%) ,
EBIT	3 3 ,	4 5% ,	7 1 ,	8 9% ,	(53 9%) ,
EBT	4 9 ,	6 7% ,	3 2 ,	4 0% ,	52 5% ,
Net income	4 2 ,	7% 5 ,	n.a	-	-
Cash flow from operations	(19 4) ,		(11 6) ,
NTWC	9 57 ,		46 6 ,
financial debt Net	101 6 ,		91 0 ,

• Sales display the following divisional trends:
  • Heating: -9,2%
  • Metering: -7,3%
• EBITDA includes net volume effect of €-4,6m
• EBIT is 4,5% on revenues vs 8,9% of LY
• Q1 2020 net income at €4,2m, 5,7% of revenues
• Q1 2020 operating cash flow of €-19,4m after capex for €0,6m vs €-11,6m and €5,1m respectively in Q1 2019
• Net financial debt stands at € 101,6m vs €91,0m at same period of 2019 mainly for trend in NTWC

Breakdown by Division

€m , unless otherwise stated	Q1 20	%	Q1 19	%	Chg . YoY
Heating	56 4 ,	76 8% ,	62 1 ,	77 1% ,	(9 2%) ,
Smart Gas Metering	16 4 ,	22 3% ,	17 7 ,	21 9% ,	(7 3%) ,
Total business sales	72,7	99,1%	79,8	99,0%	(8 ,8%)
Other revenues	0 7 ,	0 9% ,	0 8 ,	1 0% ,	(15 1%) ,
Total revenues	73,4	100,0%	80,6	100,0%	(8 ,9%)

Breakdown by geography

€m , unless otherwise stated	Q1 20	%	Q1 19	%	Chg . YoY
Italy	26	35	28	35	(9
	1	6%	8	7%	2%)
	,	,	,	,	,
(excuding	30	42	32	40	(4
Italy)	9	1%	4	2%	5%)
Europe	,	,	,	,	,
America	12	16	13	17	(11
	3	7%	9	2%	5%)
	,	,	,	,	,
Asia/Pacific	4	5	5	6	(25
	1	6%	5	9%	7%)
	,	,	,	,	,
Total revenues	73,4	100,0%	80,6	100,0%	(8 ,9%)

Consolidated revenue bridge (€m)

Heating sales

Q1 Heating sales by geography

, unless otherwise stated €m	Q1 20	%	Q1 19	%	Chg . YoY
Italy	11	5%	12	7%	(9
	6	20	8	20	8%)
	,	,	,	,	,
(excuding	28	51	30	48	(4
Italy)	7	0%	2	7%	9%)
Europe	,	,	,	,	,
America	12	21	13	22	(11
	1	4%	7	1%	9%)
	,	,	,	,	,
Asia/Pacific	4	7	5	8	(25
	0	1%	3	6%	3%)
	,	,	,	,	,
Total business sales	56,4	100,0%	62,1	100,0%	(9 ,2%)

Q1 Heating sales by application

, unless otherwise stated €m	Q1 20	%	Q1 19	%	Chg . YoY
Central Heating	34 4 ,	9% 60 ,	38 0 ,	1% 61 ,	(9 6%) ,
Direct Heating	8 2 ,	14 5% ,	10 0 ,	16 1% ,	(17 9%) ,
Storage Water Heating	5 5 ,	9 8% ,	6 1 ,	9 9% ,	(10 5%) ,
Catering	2 5 ,	4 3% ,	2 6 ,	4 2% ,	(6 6%) ,
Other	5 9 ,	10 5% ,	5 4 ,	8 7% ,	9 4% ,
Total business sales	56,4	100,0%	62,1	100,0%	(9 ,2%)

• Italy. Q1 decrease of 9,8% reflects 2-3 weeks of shutdown of major customers due to covid19. Q1 Italian boiler end-market is down 11,5% vs previous year
• Europe down €1,5m, -4,9%, of which UK (10,2% of divisional sales) explains decrease of €1,2m,-17,7% caused mainly by plant shutdown
• Turkey (10,6% of divisional sales) is flat vs Q1 2019
• Other central European markets grow thanks to new products and boiler end market growth
• America is down €1,6m, -11,9%, -14,5% at same forex. Major customers managed end of 2019 overstock while Q1 sales were effected by mild winter
• Asia/Pacific is down 25,3% for covid19 lockdown

Q1 Metering sales by application

, unless otherwise stated €m	Q1 20	%	Q1 19	%	Chg . YoY
Residential	15	94	16	94	(7
	5	5%	7	6%	4%)
	,	,	,	,	,
Commercial	0	5	0	5	(2
&	9	3%	9	0%	3%)
Industrial	,	,	,	,	,
Other	0	0	0	0	(43
	0	2%	1	4%	3%)
	,	,	,	,	,
Total business sales	16,4	100,0%	17,7	100,0%	(7 ,3%)

• Sales are substantially all realized in Italy
• UK product certification is on going with slight delay due to lockdown in governmental offices – certification is expected by H1 2020

2013 – 2020E Metering sales trend (€m)

EBITDA bridge

Euro millions

From EBITDA to EBT

, unless otherwise stated €m	Q1 2020	% of sales	Q1 2019	% of sales	Chg YoY
EBITDA	8 9 ,	12 1% ,	12 5 ,	15 5% ,	(28 6%) ,
of D&A impairment assets ,	5 6 ,		5 3 ,
EBIT	3 3 ,	5% 4 ,	7 1 ,	9% 8 ,	(53 9%) ,
financial (charges)/income Net	(0 6) ,		(3 8) ,
(charges)/income Net forex	2 2 ,		(0 1) ,
(charges)/income Other financial	-		-
EBT	4 9 ,	6 7% ,	3 2 ,	4 0% ,	52 5% ,
(charges)/income financial adjusted Net	(0 8) ,	(1 1%) ,	(1 4) ,	(1 7%) ,	(39 8%) ,

• Depreciation includes IFRS 16 impact of €0,5m
• Net financial charges and income include the impact of FV accounting of Warrants
  • Q1 2019: €2,5m charges
  • Q1 2020: €0,3m income
• Net forex income of €2,2m
• Net income Q1 2020 is €4,2m (5,7% of revenues)
• Net financial charges adjusted are net of FV accounting of equity instruments

Net trade working capital

, unless otherwise stated €m	2020 03	2019 12	2020 03 vs 2019 12	2019 03	2018 12	2019 03 vs 2018 12
Inventory	51 9 ,	51 1 ,	0 8 ,	60 9 ,	52 2 ,	8 6 ,
receivables Accounts	62 5 ,	57 2 ,	5 3 ,	50 2 ,	52 0 ,	(1 8) ,
payables Accounts	56 5 ,	73 3 ,	(16 8) ,	64 5 ,	74 8 ,	(10 3) ,
Trade Working Capital Net	57 9 ,	35 0 ,	22 9 ,	46 6 ,	29 5 ,	17 1 ,
NTWC/Revenues	19 6% ,	9 9% ,	9 7% ,	2% 14 ,	8 2% ,	6 1% ,

Non recourse factoring 0,7 10,7 (10,0) 14,7 9,1 5,6 (13,9) Capex account payables 1,9 5,1 (3,2) 2,4 8,0 (5,6) (0,5) Net Trade Working Capital adjusted 60,5 50,8 9,7 63,7 46,6 17,1 (3,1)

• 2020.03 reported NTWC increase is mainly due to AP NTWC adjusted/Revenues 20,5% 14,4% 6,1% 19,5% 12,9% 6,5% 1,0%
  • Increase in reported AR also reflects decrease in non recourse factoring
  • AR overdue at 2020.03 is in line with historical levels

2020.03 vs 2019.03

Cash flow and net debt

€m, unless otherwise stated	Q1 2020	Q1 2019
Current cash flow	10,6	13,1
Change in net working capital	(29,3)	(19,6)
Capex, net	(0,6)	(5,1)
Cash flow from operations	(19,4)	(11,6)
Financial charges, paid and accrued	(0,5)	(0,6)
Dividends paid	-	-
IFRS 16 - Leases	-	(0,2)
Other	(3,3)	(0,2)
Change in net debt	(23,2)	(12,5)
Net debt - BoP	78,4	78,5
Net debt - EoP	101,6	91,0

Change in net debt Net financial position

, unless otherwise stated €m	31/03/2020	31/12/2019	31/03/2019
(Cash & cash equivalents)	(15 0) ,	(34 1) ,	(40 3) ,
Current	24	19	16
debts	5	7	8
, net	,	,	,
debt	85	85	104
Non	2	0	9
current	,	,	,
derivatives MTM	1 6 ,	2 0 ,	3 0 ,
IFRS	3	5	6
16	5	7	7
- Leases	,	,	,
debt	101	78	91
Net	6	4	0
- EoP	,	,	,

• Q1 2020 current cash flow of +€10,6M vs €13,1 of previous year
• NTWC burns €23,8m vs end of 2019 for less AR factoring and increase in supplier payments
• Other WC items absorb €5,5m mainly for taxes and VAT credit
• Q1 2020 capex are €0,5m vs €5,1m vs previous year
• Q1 2020 other items for €3,3m refers to change in translation reserve
• Net Debt/LTM EBITDA adjusted: 2,27 vs 1,87 of LY

Final comments regarding coronavirus impact

• Starting from April 14, 2020 production at Italian plants resumed, in compliance with all of the applicable safety and health and hygiene regulations. Operations were further normalised from May 4, 2020, coinciding with the start of Phase 2.
• Overall foreign operations were not significantly impacted by mandatory lockdown local regulation, except for China in the initial part of Q1 2020
• Smart working and flexibility initiatives are in place
• Order portfolio update/outlook with major clients is in progress
• Additional liquidity to manage uncertain scenarios has been assured with banking partners

Regulatory statement

The manager responsible for the preparation of the company's accounts, Paul Fogolin, hereby declares, as per article 154 bis, paragraph 2, of the "Testo Unico della Finanza", that all information related to the company's accounts contained in this presentation are fairly representing the accounts and the books of the company.

Paul Fogolin Chief Financial Officer paul.fogolin@sitgroup.it

Investor Relations Mara Di Giorgio +39 335 773 7417 investorrelations@sitgroup.it

Disclaimer

This presentation has been prepared by SIT S.p.A. only for information purposes and for the presentation of the Group's results and strategies.

For further details on the SIT Group, reference should be made to publicly available information.

Since at the moment there is no existing reliable market research which provide the required level of detail, nor any official data, the statements of key information, the assessments concerning the positioning of SIT Group and the assessments regarding the market and the market segments of the reference market are based exclusively on assessments carried out by SIT's management, in accordance to its own knowledge of the market and its analysis of the data gathered. For such reason, these statements and assessments may not be updated and/or may also be quite approximate. Due to the lack of reliable and standardized data and of market data provided by third parties, these assessments are necessarily subjective and are provided, unless otherwise specified, by SIT on the basis of the analysis of the data it, as a company, has gathered. These evaluations and the performance of the industries in which SIT operates could prove to be different from those assumed due to the known and unknown risks, the uncertainties and other causes.

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Any reference to past performance of the SIT Group shall not be taken as an indication of future performance.

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