Sit — Investor Presentation 2019

Nov 6, 2019

9M 2019 – Results presentation

November, 6 2019

Highlights

• 9M 2019 consolidated revenues are € 262,8 million, -2,5% vs 9M 2018
• 3Q 2019 consolidated revenues are € 95,5 million, +1,6% vs 3Q 2018
• Group revenues displays two different trends in divisional sales:
• Heating is at -9,3% vs 9M 2018, improving vs H1 (-12,8%)
• Smart Gas Metering +22,5% vs 9M 2018; order portfolio confirmed for 2019FY
• In the Heating business American market performs well (+17,7%)
• Increase in 9M 2019 EBITDA of 6,9% thanks to additional efficiencies
• Favorable tax ruling (+€3,7 million) improves net income
• Capex lower than forecasted

Key financial results

, unless otherwise stated €m	9M 2019	%	9M 2018	%	Chg YoY
Revenues	262 8 ,	0% 100 ,	269 4 ,	0% 100 ,	(2 5%) ,
EBITDA	37 1 ,	14 1% ,	34 7 ,	12 9% ,	6 9% ,
EBIT	20 3 ,	7 7% ,	20 6 ,	7 6% ,	(1 1%) ,
Net income	16 2 ,	2% 6 ,	16 5 ,	1% 6 ,	(2 0%) ,
Cash flow from operations	0 8 ,		(20 8) ,
NTWC	49 9 ,		50 1 ,
financial debt Net	86 9 ,		92 4 ,

Reported EBITDA includes the following non recurring items:

	9M 2019	9M 2018
director Managing severance costs	-	2 7 ,
Translisting to MTA	-	1 1 ,
shopfloor relocation and Captive startup	0 8 ,	-
reimbursement Insurance	(0 8) ,	-
for bonus Provision CEO IPO post	0 6 ,	-
Other	0 2 ,	0 05 ,
Total non recurring operating items	0 8 ,	3 8 ,
adoption First time IFRS 16	(1 ,7)	-

Consolidated revenues

Breakdown by Division

€m , unless otherwise stated	9M 19	%	9M 18	%	Chg YoY
Heating	190	72	210	78	(9
	7	6%	3	1%	3%)
	,	,	,	,	,
Smart	69	26	56	21	22
Gas	5	5%	8	1%	5%
Metering	,	,	,	,	,
Total	260	0%	267	1%	(2
business	2	99	1	99	6%)
sales	,	,	,	,	,
Other revenues	2 5 ,	0% 1 ,	2 3 ,	0 9% ,	8% 7 ,
Total revenues	262 8 ,	100 0% ,	269 4 ,	100 0% ,	(2 5%) ,

Breakdown by geography

, unless otherwise stated €m	9M 19	%	9M 18	%	Chg YoY
Italy	103	39	97	36	6
	8	5%	7	3%	2%
	,	,	,	,	,
(excuding	95	2%	111	2%	(14
Italy)	2	36	1	41	3%)
Europe	,	,	,	,	,
America	45	17	38	14	17
	4	3%	7	4%	3%
	,	,	,	,	,
Asia/Pacific	18	7	21	8	(15
	5	0%	9	1%	8%)
	,	,	,	,	,
Total revenues	262 8 ,	100 0% ,	269 4 ,	100 0% ,	(2 5%) ,

Consolidated revenue bridge

Heating sales

Heating sales by geography

, unless otherwise stated €m	9M 19	%	9M 18	%	Chg YoY
Italy	37	19	41	19	(10
	4	6%	7	8%	3%)
	,	,	,	,	,
(excuding	88	46	106	50	(16
Italy)	8	6%	5	6%	6%)
Europe	,	,	,	,	,
America	45	23	38	18	17
	1	6%	3	2%	7%
	,	,	,	,	,
Asia/Pacific	19	10	23	3%	(18
	4	2%	7	11	2%)
	,	,	,	,	,
Total	190	100	210	100	(9
business	7	0%	3	0%	3%)
sales	,	,	,	,	,

9M 2019 - Heating sales by application

• Italy reflects, as stated in the H1 comments, the impact of lower export due to the Chinese coal to gas policy and a slowdown of the Italian endmarket
• Europe, down 7,9% in Q3, reduces the YTD difference vs last year mainly due to Turkey. In the country starting from Q3 there are more comparable conditions not influenced by the change in regulation that took place in 1H2018
• America grows significantly (+6,8€, +17,7%, +10,8% at same forex rates) thanks to market share increase
• The improved trend in Q3 vs H1 in Asia/Pacific (-2,4%) is mainly due to China that has slightly recovered
• Central Heating absorbs most of the decrease vs 9M 2018 while Storage Water Heating grows thanks to America

Smart Gas Metering sales

€m, unless otherwise stated	9M 19	%	9M 18	%	Chg. YoY
Residential	66,5	95,7%	55,2	97,3%	20,4%
Commercial & Industrial	2,8	4,0%	1,4	2,5%	98,9%
Other	0,2	0,3%	0,1	0,2%	65,5%
Total business sales	69,5	100,0%	56,8	100,0%	22,5%

• 9M 2019 sales are mainly realized in Italy
• Product qualification and pilot testing in foreign markets are in process
• UK certification expected by Q1 2020
• 2019FY order portfolio is confirmed

Smart Gas Metering sales by application Smart Gas Metering order portfolio (€m)

EBITDA bridge

From EBITDA to net income

, unless otherwise stated €m	9M 2019	% of sales	9M 2018	% of sales	Chg YoY
EBITDA	37 1 ,	14 1% ,	34 7 ,	12 9% ,	6 9% ,
D&A of impairment assets ,	16 8 ,		14 2 ,
EBIT	20 3 ,	7% 7 ,	20 6 ,	6% 7 ,	(1 1%) ,
(charges)/income financial Net	(2 7) ,		3 4 ,
(charges)/income forex Net	(0 6) ,		(0 8) ,
Other financial (charges)/income	(0 0) ,		(0 1) ,
EBT	17 0 ,	6 5% ,	22 6 ,	8 4% ,	(24 8%) ,
Taxes	(0 8) ,		(6 1) ,
Net income	16 2 ,	6 2% ,	16 5 ,	6 1% ,	(2 0%) ,
(charges)/income financial , adjusted Net	(2 3) ,	0 9% ,	(2 5) ,	0 9% ,	(7 8%) ,
adjusted Net income	13 1 ,	5 0% ,	14 8 ,	5 5% ,	(11 2%) ,

• Increase in Depreciation is due to capex plan deployed in 2018 (€1m) and IFRS 16 impact for €1,6m

• Net financial charges and income include the change in FV accounting of Warrants and Performance shares

• 9M 2019 taxes include favourable effect of ruling regarding tax impact of FV accounting of previous years for approx. €3,7m

• Net income adjusted includes operating items, financial items and non recurring tax ruling
• 9M 2019 adjusted net income is 5,0% of revenues versus 5,5% of 9M 2018

Net trade working capital

€ unless otherwise stated m,	2019 09	2018 12	2019 09 2018 12 vs	2018 09	2017 12	2018 09 2017 12 vs
Inventory	57 9 ,	52 2 ,	5 6 ,	61 7 ,	38 1 ,	23 6 ,
receivables Accounts	58 5 ,	52 0 ,	6 4 ,	65 7 ,	52 1 ,	13 5 ,
payables Accounts	66 5 ,	74 8 ,	(8 3) ,	77 3 ,	68 4 ,	8 9 ,
Trade Working Capital Net	49 9 ,	29 5 ,	20 4 ,	50 1 ,	21 9 ,	28 2 ,
NTWC/Revenues	14 2% ,	8 2% ,	6 0% ,	13 9% ,	6 8% ,	7 2% ,

• 9M trend in NTWC (+€20,4m) reflects Heating business seasonality and Smart Gas Metering order backlog
• Improved payment terms on account receivables due to reabsorption of 2018.09 overdue

Cash flow and net debt

Details on cash generation Key considerations

€m, unless otherwise stated	9M 2019	9M 2018
Current cash flow	40,1	36,2
Change in net working capital	(28,1)	(35,0)
Capex, net	(11,2)	(21,9)
Cash flow from operations	0,8	(20,8)
Financial charges, paid and accrued	(1,9)	(2,4)
Dividends paid	(7,0)	(6,0)
IFRS 16 - Leases	(0,6)	-
Other	0,2	1,9
Change in net debt	(8,4)	(27,3)
Net debt - BoP reported	71,3	65,1
IFRS 16 - BoP initial recognition	7,1	-
Net debt - EoP	86,9	92,4

• Current cash flow improves versus same period of last year
• Working capital reflects seasonality
• 9M 2019 change in Working capital performs better than previous year thanks to
• initial stock level more in line with planned operating conditions
• improved AR payment terms due to reabsorption of 2018 overdue
• 9M 2019 capex effect on cash flow is in delay vs planned
• Net Debt/EBITDA adjusted: 1,74 vs 1,90 same period of LY

Outlook and final comments

• Expected topline in line with 9M performances

• Forecasted EBITDA growing mid single digit

• Capital management review in process

• Q4 is expected to be cash positive with an improvement of net debt vs 2019.09

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.

Statements contained in this presentation, particularly those regarding any SIT Group possible or assumed future performance, are or may be forward looking statements and in this respect they involve some risks and uncertainties.

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

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