Sit — Investor Presentation 2020

Nov 5, 2020

9M 2020 – Results presentation

November 5, 2020

Highlights

• Q3 consolidated revenues are € 93,6m, -2,0% vs Q3 2019 picking up (+57,5%) from Q2 lockdown
• Q3 Divisional sales:
• Heating accounts €69,6m at +3,0% vs same period of 2019
• Smart Gas Metering with €23,4m is -13,5% vs 2019
• 9M consolidated revenues are €227,0m -13,6% vs previous 9M
• In the Heating business Q3 accounts increase in Italy (+4,8%) and rest of Europe (+8,0%) that rebound after severe lockdown effects in previous quarter. Highlights are on the following geographies: Central Europe +23,9%, UK +20,9% and Turkey +12,6%
• Q3 EBITDA margin of 18,4% thanks to volumes and efficiencies brings 9M EBITDA to €32,4m (14,3% of revenues) vs €37,1m (14,1% of revenues) at same period 2019
• Net debt at €96,7m, accounts quarterly increase of €7,9 for swing in NTWC and Tunisian project

Key financial results

, unless otherwise stated €m	9M 2020	%	9M 2019	%	Chg . YoY
Revenues	227 0 ,	0% 100 ,	262 8 ,	0% 100 ,	(13 6%) ,
EBITDA	32 4 ,	14 3% ,	37 1 ,	14 1% ,	(12 7%) ,
EBIT	15 1 ,	6 7% ,	20 3 ,	7 7% ,	(25 6%) ,
EBT	13 2 ,	5 8% ,	17 0 ,	6 5% ,	(22 4%) ,
Net income	11 4 ,	0% 5 ,	16 2 ,	2% 6 ,	(29 8%) ,
Cash flow from operations	(5 6) ,		0 8 ,
NTWC	58 2 ,		49 9 ,
financial debt Net	96 7 ,		86 9 ,

, unless otherwise stated €m	Q3 2020	%	Q3 2019	%	Chg . YoY
Revenues	93	0%	95	0%	(2
	6	100	5	100	0%)
	,	,	,	,	,
EBITDA	17	18	16	16	7
	2	4%	0	7%	8%
	,	,	,	,	,
EBIT	11	12	10	10	10
	3	1%	2	7%	9%
	,	,	,	,	,
EBT	9	10	10	11	(9
	6	2%	6	1%	7%)
	,	,	,	,	,
Net income	7 6 ,	8 1% ,	11 7 ,	12 2% ,	(35 3%) ,

• YTD revenues are -13,6% (-20,3% at H1) and display the following divisional trend:
• Heating: 8,6% (vs -15,0% at H1)
• Metering: -27,3% (vs. -36,0% at H1)
• 9M EBITDA includes net volume effect of € -10,6m improving by €0,2m vs previous quarter
• 9M EBIT accounts depreciation of €17,3m approx. with an increase of €0,5m vs 2019
• Net income at 5,0% of revenues. 2019 accounted one off tax ruling revenue of €3,7m
• 9M operating cash flow decrease reflects EBITDA reduction accounted in Q2
• NTWC accounts swing in Q3 for increase in sales
• Net financial debt stands at €96,7m vs end of 2019 of €78,4m and includes Tunisian acquisition for €1,1m and building rent for €2,2m

Breakdown by Division

, unless otherwise stated €m	9M 20	%	9M 19	%	Chg . YoY
Heating	174 3 ,	8% 76 ,	190 7 ,	6% 72 ,	(8 6%) ,
Smart Gas Metering	50 6 ,	22 3% ,	69 5 ,	26 5% ,	(27 3%) ,
Total business sales	224,9	99,1%	260,2	99,0%	(13 ,6%)
Other revenues	2 1 ,	0 9% ,	2 5 ,	1 0% ,	(17 8%) ,
Total revenues	227,0	100,0%	262,8	100,0%	(13 ,6%)

Breakdown by geography

€m , unless otherwise stated	9M 20	%	9M 19	%	Chg . YoY
Italy	78	34	103	39	(24
	4	5%	8	5%	5%)
	,	,	,	,	,
(excuding	90	40	95	36	(4
Italy)	9	0%	2	2%	5%)
Europe	,	,	,	,	,
America	40	17	45	17	(11
	1	7%	4	3%	6%)
	,	,	,	,	,
Asia/Pacific	17	7	18	7	(4
	6	8%	5	0%	6%)
	,	,	,	,	,
Total revenues	227,0	100,0%	262,8	100,0%	(13 ,6%)

Consolidated revenue bridge (€m)

Breakdown by Division

€m , unless otherwise stated	Q3 20	%	Q3 19	%	Chg . YoY
Heating	69 6 ,	74 4% ,	67 6 ,	70 8% ,	3 0% ,
Smart Gas Metering	23 4 ,	25 0% ,	27 1 ,	28 3% ,	(13 5%) ,
Total business sales	93,1	99,4%	94,7	99,1%	(1 ,7%)
Other revenues	0 5 ,	6% 0 ,	0 8 ,	9% 0 ,	(34 3%) ,
Total revenues	93,6	100,0%	95,5	100,0%	(2 ,0%)

Breakdown by geography

, unless otherwise stated €m	Q3 20	%	Q3 19	%	Chg . YoY
Italy	34	37	38	40	(9
	8	1%	6	4%	9%)
	,	,	,	,	,
(excuding	36	39	33	35	8
Italy)	5	0%	6	2%	7%
Europe	,	,	,	,	,
America	15	16	16	17	(5
	4	5%	3	0%	1%)
	,	,	,	,	,
Asia/Pacific	6	7	7	7	(2
	9	3%	1	4%	9%)
	,	,	,	,	,
Total revenues	93,6	100,0%	95,5	100,0%	(2 ,0%)

Q3 Consolidated revenue bridge (€m)

Heating sales

Q3 Heating sales by geography

Italy	12	9%	9	6%	8%
	5	17	11	17	4
	,	,	,	,	,
(excuding	34	48	31	46	8
Italy)	0	8%	4	5%	0%
Europe	,	,	,	,	,
America	15	21	16	23	(6
	2	8%	1	9%	0%)
	,	,	,	,	,
Asia/Pacific	8	11	8	12	(1
	0	5%	1	0%	3%)
	,	,	,	,	,
Total business sales	69,6	100,0%	67,6	100,0%	3,0%

9M Heating sales by geography

€m , unless otherwise stated	Q3 20	%	Q3 19	%	Chg . YoY
Italy	12 5 ,	9% 17 ,	9 11 ,	6% 17 ,	8% 4 ,	• Italy. Q3 accounts an increase of 4,8% vs previous year rebounding after
(excuding Italy) Europe	34 0 ,	48 8% ,	31 4 ,	46 5% ,	8 0% ,	severe shutdown effect in Q2 by major customers.
America	15 2 ,	21 8% ,	16 1 ,	23 9% ,	(6 0%) ,	• Europe. Q3 up €2,5m, +8,0%, of which UK explains €1,1m,+20.9% being the
Asia/Pacific	8 0 ,	11 5% ,	8 1 ,	12 0% ,	(1 3%) ,
Total business sales	69,6	100,0%	67,6	100,0%	3,0%	area most affected by plant shutdown and stock reduction by distributors;
						Turkey (12,6% of quarterly divisional sales) is up €1,0m, +12,2% in Q3 vs
						previous year, and is up €0,5m, +2,5% vs 9M 2019 due to OEM demand
9M Heating sales by geography						• Other central European markets in Q3 confirm growth trend bringing YTD
€m , unless otherwise stated	9M 20	%	9M 19	%	Chg . YoY	increase to €2,3m, +23,9% thanks to new products and boiler end-market
Italy	31 1 ,	17 9% ,	37 4 ,	19 6% ,	(16 8%) ,	• America, Q3 is down €1,0m, -6,0%, -1,4% at same forex improving YTD trend
(excuding Italy) Europe	84 9 ,	48 7% ,	88 8 ,	46 6% ,	(4 4%) ,
America	39 7 ,	22 7% ,	45 1 ,	23 6% ,	(12 1%) ,	to -11,7% from -17,7% accounted in H1, net of forex effect
Asia/Pacific	18 7 ,	7% 10 ,	19 4 ,	2% 10 ,	(3 9%) ,	• Asia/Pacific, Q3 is overall flat vs previous year with China up €0,3m, +6,1%
Total business sales	174,3	100,0%	190,7	100,0%	(8 ,6%)	and Middle East and Australia down €0,9m and €0,1m respectively

• Q3 Divisional sales are +3,0% vs previous year, +4,3% at same forex
• Italy. Q3 accounts an increase of 4,8% vs previous year rebounding after severe shutdown effect in Q2 by major customers.
• Europe. Q3 up €2,5m, +8,0%, of which UK explains €1,1m,+20.9% being the area most affected by plant shutdown and stock reduction by distributors; Turkey (12,6% of quarterly divisional sales) is up €1,0m, +12,2% in Q3 vs previous year, and is up €0,5m, +2,5% vs 9M 2019 due to OEM demand
• Other central European markets in Q3 confirm growth trend bringing YTD increase to €2,3m, +23,9% thanks to new products and boiler end-market
• America, Q3 is down €1,0m, -6,0%, -1,4% at same forex improving YTD trend to -11,7% from -17,7% accounted in H1, net of forex effect
• Asia/Pacific, Q3 is overall flat vs previous year with China up €0,3m, +6,1%

Q3 Metering sales by application

, unless otherwise stated €m	Q3 20	%	Q3 19	%	Chg . YoY
Residential	22	6%	26	8%	(16
	1	94	5	97	4%)
	,	,	,	,	,
Commercial	1	4	0	2	112
&	2	9%	5	0%	6%
Industrial	,	,	,	,	,
Other	0	0	0	0	109
	1	5%	1	2%	1%
	,	,	,	,	,
Total business sales	23,4	100,0%	27,1	100,0%	(13 ,5%)

2013 – 2019 Metering sales trend and 2020 backlog (€M)

9M Metering sales by application

€m , unless otherwise stated	9M 20	%	9M 19	%	Chg . YoY
Residential	47	94	66	95	(28
	5	0%	5	7%	5%)
	,	,	,	,	,
Commercial	2	5	2	4	(0
&	8	5%	8	0%	6%)
Industrial	,	,	,	,	,
Other	0	5%	0	3%	4%
	2	0	2	0	23
	,	,	,	,	,
Total business sales	50,6	100,0%	69,5	100,0%	(27 ,3%)

9M EBITDA bridge

From EBITDA to net income – 9M

, unless otherwise stated €m	9M 2020	of % sales	9M 2019	of % sales	Chg YoY
EBITDA	32 4 ,	14 3% ,	37 1 ,	14 1% ,	(12 7%) ,
D&A impairment of assets ,	17 3 ,		16 8 ,
EBIT	15 1 ,	6 7% ,	20 3 ,	7 7% ,	(25 6%) ,
(charges)/income financial Net	(3 1) ,		(2 7) ,
(charges)/income forex Net	1 1 ,		(0 6) ,
EBT	13 2 ,	5 8% ,	17 0 ,	6 5% ,	(22 4%) ,
Taxes	(1 8) ,		(0 8) ,
income Net	11 4 ,	0% 5 ,	16 2 ,	2% 6 ,	(29 8%) ,
(charges)/income financial adjusted Net	(2 7) ,	(1 2%) ,	(2 3) ,	(0 9%) ,	14 7% ,
income adjusted Net	11 8 ,	5 2% ,	13 1 ,	5 0% ,	(10 3%) ,

• Depreciation increase of €0,5m
• Increase in Net financial charges/income reflects change in MTM of derivatives and less income on USD cash deposits
• Change in FV of Warrants in line with previous year and equal to a net charge of €0,4m
• Net forex income of €1,1m mainly due to EUR/MXN, was €1,4m in H1 2020
• Taxes in 2019 include one off tax ruling revenues for €3,7m; while 2020 tax losses recorded in H1 have been totally absorbed during Q3
• Net financial charges adjusted are net of FV accounting effects of equity instruments

Net trade working capital

, unless otherwise stated €m	2020 09	2019 12	2020 09 vs 2019 12	2019 09	2018 12	2019 09 vs 2018 12	2020 09 vs 2019 09
Inventory	57 6 ,	51 1 ,	6 5 ,	57 9 ,	52 2 ,	5 6 ,	(0 2) ,
receivables Accounts	63 2 ,	57 2 ,	6 0 ,	58 5 ,	52 0 ,	6 4 ,	4 8 ,
payables Accounts	62 7 ,	73 3 ,	(10 6) ,	66 5 ,	74 8 ,	(8 3) ,	(3 8) ,
Trade Working Capital Net	58 2 ,	35 0 ,	23 2 ,	49 9 ,	29 5 ,	20 4 ,	8 3 ,
NTWC/Revenues	19 2% ,	9 9% ,	9 3% ,	14 2% ,	8 2% ,	6 0% ,	5 0% ,
Non recourse factoring payables Capex account	6 2 , 1 7 ,	10 7 , 5 1 ,	(4 6) , (3 4) ,	11 5 , 2 7 ,	9 1 , 8 0 ,	2 4 , (5 3) ,	(5 4) , (1 0) ,

• Reported NTWC increase of €8,3m vs previous 9M is mainly due to trend in AP for extended supply chain support and in AR for lower level of non-recourse factoring AR (adjusted for non recourse factoring)/Revenues 22,9% 19,3% 3,6% 19,9% 18,1% 1,8% 3,0%
• In Q3 NTWC accounts a swing of +€15,3m thanks to increase in sales (+€21,9 in AR)
• Inventory level reflects positive outlook for following months and industry seasonality

Change in net debt

€m , unless otherwise stated	9M 2020	9M 2019
cash flow Current	33,9	40,1
Change in NTWC	(23 ,1)	(21 ,1)
Inventory	(8 4) ,	(6 2) ,
Receivables Accounts	(6 8) ,	(6 6) ,
Payables Accounts	(8 0) ,	(8 3) ,
Other working capital	(7 ,1)	(7 ,0)
Capex, net	(9 ,2)	(11 ,2)
Cash flow from operations	(5 ,6)	0,8
Financial charges	(2 0) ,	(1 9) ,
Dividends paid	(3 5) ,	(7 0) ,
IFRS 16 - Leases	(2 7) ,	(0 6) ,
Other	(4 6) ,	0 2 ,
Change in debt net	(18 ,3)	(8 ,4)
debt Net - BoP	78,4	78,5
debt Net - EoP	96,7	86,9

• 9M Current cash flow decrease reflects EBITDA reduction accounted in Q2
• YTD change in NTWC is basically in line with previous year; Q3 NTWC burns €14,4m mainly for AR (€21,2m cash absorption) due to pick up in volumes
• Q3 Capex have accelerated as expected (€5,0m)
• Dividends paid are 50% lower than previous year for covid contingency plan decided during lockdown
• Increase in IFRS 16 leases refer to rent of Tunisian plant building and facilities (€2,0m)
• 2020 Other items include €2,8m for translation reserve and €1,1m for Tunisian acquisition

Net financial position

€m, unless otherwise stated	30/09/2020	31/12/2019	30/09/2019
(Cash cash equivalents) &	(34 ,0)	(34 ,1)	(35 ,1)
Current debt , net	35,8	19,7	18,3
debt Non current	85,5	85,0	95,0
derivatives MTM	2,6	2,0	2,5
IFRS 16 - Leases	6,9	5,7	6,2
debt Net - EoP	96,7	78,4	86,9

• Net Debt/LTM EBITDA adjusted: 2,26 vs 1,74 of LY vs 1,62 of 2019FY

Final comments and outlook

• SIT has in place a cross functional task force to monitor and manage the impact of covid on all operations and has deployed strict safety measures in all plants and subsidiaries world wide. Extensive smart working and other workplace solutions have been adopted in accordance to current legislation and sanitary best practices
• In this scenario, performance outlook is still dependent on the uncertain impact of second wave covid emergencies or mandatory shutdown
• 2020FY consolidated sales outlook is confirmed low double-digit decrease vs previous year
• Heating sales are improving thanks to restocking and national incentives
• Despite decrease in volumes, 2020FY EBITDA margin is expected slightly lower than previous year thanks to increased efficiencies and cost control
• Capex plan is confirmed, and the full year amount is expected in the range of approx. 15 million euro
• High single digit improvement of net financial position is expected vs current value as NWC is released
• Closing of Janz acquisition is expected by end of 2020

ANNEXES

Non recurring operating items

Reported EBITDA includes the following non recurring items:

	9M 2020	9M 2019
shopfloor relocation Captive	-	0 8 ,
reimbursement Insurance	-	(0 8) ,
for bonus Provision CEO IPO post	-	0 6 ,
Change in previous provisions years	-	0 2 ,
Other	-	(0 1) ,
Total recurring operating items non	-	0 8 ,

Reported EBITDA includes the following non recurring items:

	Q3 2020	Q3 2019
Captive shopfloor relocation	-	0 0 ,
reimbursement Insurance	-	-
for Provision CEO IPO bonus post	-	0 2 ,
Change in previous provisions years	-	0 0 ,
Other	-	(0 0) ,
Total recurring operating items non	-	0 2 ,

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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