Investor Relator Patrizia Pellegrinelli Tel: 035.4232840 - Fax: 035.3844606 e-mail: [email protected]

Tesmec S.p.A.

Registered Office: Piazza Sant'Ambrogio, 16 – 20123 Milan Fully paid up share capital as at 30 June 2016 Euro 10,708,400 Milan Register of Companies no. 314026 Tax and VAT code 10227100152

Website: www.tesmec.com Switchboard: 035.4232911

TABLE OF CONTENTS

TABLE OF CONTENTS 5
COMPOSITION OF THE CORPORATE BODIES7
GROUP STRUCTURE9
INTERIM CONSOLIDATED FINANCIAL REPORT 11
1. Introduction12
2.Macroeconomic Framework 12
3.Significant events occurred during the period 13
4.Activity, reference market and operating performance for the first six months of 201615
5.Summary of balance sheet figures as at 30 June 2016 21
6.Management and types of financial risk 23
7.Atypical and/or unusual and non-recurring transactions with related parties23
8.Group Employees23
9.Other information 23
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 25
Consolidated statement of financial position as at 30 June 2016 and as at 31 December 201526
Consolidated income statement for the half-year ended 30 June 2016 and 201527
Consolidated statement of comprehensive income for the half-year ended 30 June 2016 and 201528
Statement of consolidated cash flows for the half-year ended 30 June 2016 and 201529
Statement of changes in consolidated shareholders' equity for the half-year
ended 30 June 2016 and 2015 30
Explanatory notes 31
Certification pursuant to Article 154-bis of Italian Legislative Decree 58/9848
INDEPENDENT AUDITOR'S REPORT 49

COMPOSITION OF THE CORPORATE BODIES

Board of Directors (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)

Chairman and Chief Executive Officer	Ambrogio Caccia Dominioni
Vice Chairman	Gianluca Bolelli
Directors	Sergio Arnoldi () Gioacchino Attanzio () Guido Giuseppe Maria Corbetta () Caterina Caccia Dominioni Lucia Caccia Dominioni Paola Durante ()
(*) Independent Directors

Board of Statutory Auditors (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)

Chairman	Simone Cavalli
Statutory Auditors	Stefano Chirico Alessandra De Beni
Alternate Auditors	Attilio Marcozzi Stefania Rusconi

Members of the Control and Risk Committee (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)

Chairman	Sergio Arnoldi
Members	Gioacchino Attanzio Gianluca Bolelli

Members of the Remuneration and Appointments Committee (in office until the date of the Shareholders' Meeting convened to approve the financial statements as at 31 December 2018)

Chairman	Gioacchino Attanzio
Members	Sergio Arnoldi Caterina Caccia Dominioni
Lead Independent Director	Gioacchino Attanzio
Director in charge of the internal control and risk management system	Caterina Caccia Dominioni
Manager responsible for preparing the Company's financial statements	Andrea Bramani
Independent Auditors	Ernst &Young S.p.A.

GROUP STRUCTURE

(1) The remaining 33% is held by Simest S.p.A. Since Tesmec has an obligation to buy it back from Simest S.p.A., from an accounting point of view the shareholding of the Parent Company in Tesmec USA, Inc. is fully consolidated on a 100% basis.
(2) The remaining 47.17% is held by Simest S.p.A. for 33.96% and by C2D SAS (related party) for 13.21%. Since Tesmec has an obligation to buy it back from Simest S.p.A., from an accounting point of view the shareholding of the Parent Company in Marais Technologies SAS is consolidated on an 86.79% basis.

INTERIM CONSOLIDATED FINANCIAL REPORT

1. Introduction

The parent company Tesmec S.p.A. (hereinafter "Parent Company" or "Tesmec") is a legal entity organised in accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA (screen-based share market) STAR Segment of the Milan Stock Exchange. The registered office of the Tesmec Group (hereinafter "Group" or "Tesmec Group") is in Milan, Piazza S. Ambrogio 16.

The Tesmec Group is a leader in the design, production and marketing of special products and integrated solutions for the construction, maintenance and streamlining of infrastructures relating to the transmission of electrical power and data and material transport.

Founded in Italy in 1951 and managed by the Chairman and Chief Executive Officer Ambrogio Caccia Dominioni, the Group has more than 650 employees and nine production plants, four in Italy, Grassobbio (Bergamo), Endine Gaiano (Bergamo), Sirone (Lecco) and Monopoli (Bari), one in the USA, in Alvarado (Texas) and one in France, Durtal and as result of the recent acquisitions of Bertel, SGE and CPT, other three new Italian production plants in Fidenza, Padua and Patrica (FS), respectively. The Group also has a global commercial presence through foreign subsidiaries and sales offices in USA, South Africa, Russia, Qatar, Bulgaria, China and France

As a result of its listing on the Stock Exchange on 1 July 2010, the Parent Company has pursued the stated objective of diversification of the types of products in order to offer a complete range of integrated solutions grouped into three main areas of business: Stringing equipment, Trencher and Rail.

Through the different types of product, the Group is able to offer:

Stringing equipment segment

stringing equipment for the installation of wires and laying of underground cables;
electronic devices and sensors for the management, monitoring and automation of power lines.

Trencher segment

high-powered crawler trenching machines for the linear excavation of oil pipelines, gas pipelines, water systems, telecommunication networks and drainage operations;
surface miners for earthworks, quarries and surface mines;
specialised excavation services;

Rail segment

rail equipment for the installation and maintenance of catenary wire systems and for special operations such as, for example, removing snow from the track.
last generation power unit.

All types of product are developed according to the ISEQ approach (Innovation, Safety, Efficiency and Quality), in observance of environmental sustainability and energy saving.

The know-how achieved in the development of specific technologies and innovative solutions and the presence of a team of highly-skilled engineers and technicians allow the Tesmec Group to directly manage the entire production chain: from the design, production and marketing of machinery to the supply of know-how relating to the use of systems and optimisation of work, to all pre- and post-sales services related to machinery and the increase in site efficiency.

2. Macroeconomic Framework

The global macroeconomic scenario in the first half of 2016 continues to be characterised by a low growth, persistent unemployment and political uncertainty. The outcome of the consultative referendum of June in Great Britain on the European Union (known as Brexit) and the recent terrorist attacks are partially due to this scenario. Uncertainty and low growth have a direct impact on the lack of growth in consumer spending, highlighted by the persistence of very low levels of inflation and the postponement of investment decisions with increase in levels of equipment obsolescence.

The expansionary monetary policies alone do not seem to be able to start a trend reversal compared to the growth trends that for the Countries of the OECD area recorded a modest average rate of 2% as from 2008, year of the Lehman Brothers crisis. There is a gradual increase in the awareness of the need to combine them with appropriate tax policies.

In this scenario, the impact of the payments for interests on the EBITDA dropped from 7% in 2008 to 2% in 2015 for the companies, and since the Deposit Facility Rate has fallen below zero, the propensity of the banking system to convert liquidity in loans to businesses increased.

In the light of this context, we confirm the validity of the diversification strategy recently implemented by the Tesmec Group with the acquisition of the Marais Group and the entry into the maintenance of railway rolling stock (Railway) and electrical grids (automation) for exploiting the recovery of infrastructure investments in telecommunications, and investments in the rail and electricity segments aimed at improving the levels of safety and efficiency in energy transmission.

3. Significant events occurred during the period

The completion of the diversification strategy in the trencher segment for service activities started with the acquisition of the Marais Group on 8 April 2015 continued during the period as well as the completion of the range in the new automation segment of power lines with the following investments:

on 9 February 2016, the subsidiary Group Marais SA purchased the entire shareholding in the French company EAM SRL, with registered office in Carcassone, for Euro 450 thousand;
on 3 March 2016, the parent company Tesmec S.p.A. purchased for Euro 0.3 million the remaining 60% of the share capital of Bertel S.r.l., company characterised as a highly innovative start-up in that operating in a market with a high technical profile such as that of streamlining systems of Transmission Power Lines. As a result of this operation, Tesmec holds the entire share capital of the company; as at June 30, 2016 Bertel increased Group's revenue for Euro 0.2 million.

On 20 April 2016, the parent company Tesmec S.p.A. acquired 100% of CPT Engineering S.r.l., company specialised in the design and implementation of monitoring, protection and industrial automation solutions, which offers cuttingedge systems within the technologies of power lines. In detail, the transaction involved the purchase of the entire share capital of CPT against a price of Euro 300 thousand to which an earn-out up to a maximum of Euro 800 thousand is expected to be added related to the achievement of certain turnover results by the CPT and its economic balance. The payment of the price by Tesmec will be made by using own resources.

As at 31 December 2015, CPT recorded a turnover of Euro 1.4 million, a negative EBITDA of Euro 200 thousand and net financial payables of Euro 1.7 million. As at June 30, 2016 CPT increased Group's revenue for Euro 0.3 million.
On 28 April 2016, the subsidiary SGE S.r.l. finalised the acquisition by R&S Laboratorio S.r.l. of the business unit, already rented since 2014, active in technology research, design, manufacture and sale of sensors and fault and basic electrical quantity detectors in substations and medium voltage power lines.

The value of the transaction is Euro 1.4 million, and Euro 0.9 million was already paid upon acquisition and the remaining part will be paid in subsequent instalments. In 2015, the Business Unit subject-matter of the acquisition recorded revenues of Euro 3.6 million. The transaction was finalised on 30 June 2016 but effective as from 1 July 2016. Given the positive performance of the business unit rented, the acquisition took place in advance compared to the timeframe expected for exercising the option and allowed a lower financial outlay.

The transaction is included in the more general development strategy in the Energy Automation sector, within which the Group recently concluded the acquisition of Bertel S.r.l. as a whole, active in the sector of streamlining systems of Transmission Power Lines (transaction completed and communicated last 3 March) and the acquisition of CPT Engineering S.r.l., company specialised in the design and implementation of monitoring, protection and industrial automation solutions, which offers cutting-edge systems within the technologies of power lines (transaction communicated on 1 April and completed on 20 April 2016).

These acquisitions represent a significant step in the growth process of Tesmec in the world of energy, allowing the Group to complete the portfolio of solutions offered at the level of different voltage classes (high, medium, low) to meet the new technological challenges related to renewable energy sources and to distributed generation. In fact, the combination of the excellent skills in the development of sensors with the excellent skills in electronic devices will allow the Tesmec Group to offer a wide range of integrated systems to manage efficiently and in a sustainable manner the requests of a market characterised by the increase in energy consumption.

Other significant events during the period include:

on 29 April 2016, upon approval of the financial statements for 2015, the Shareholders' Meeting of Tesmec S.p.A. resolved to:
allocate the profit of the Parent Company, amounting to Euro 7,412 thousand, as follows:
assign a dividend of Euro 0.025 to each outstanding ordinary share;
assign to the extraordinary reserve the amount of profit remaining after the allocation to dividend.
appoint the new Board of Directors that will remain in office until the shareholders' meeting that will be called to approve the financial statements for the year ended 31 December 2018, composed of Gianluca Bolelli, Sergio Arnoldi, Gioacchino Attanzio, Guido Giuseppe Maria Corbetta, Caterina Caccia Dominioni, Lucia Caccia Dominioni and Paola Durante as well as Ambrogio Caccia Dominioni who was confirmed as Chairman of the Board of Directors;
appoint the new Board of Statutory Auditors that will also remain in office until the shareholders' meeting called to approve the 2018 financial statements, composed of Statutory Auditors Simone Cavalli (Chairman), Alessandra De Beni and Stefano Chirico and Alternate Auditors Attilio Marcozzi and Stefania Rusconi;
on 29 April 2016, the Board of Directors confirmed Ambrogio Caccia Dominioni as the Chief Executive Officer and Alfredo Brignoli and Gianluca Bolelli as Vice Chairman.

The Board of Directors decided to:

change the name of the current Remuneration Committee in "Remuneration and Appointments Committee" and to merge the function previously carried out by the Appointments Committee in the new Remuneration and Appointments Committee;
appoint the directors Gioacchino Attanzio (Chairman), Sergio Arnoldi and Caterina Caccia Dominioni as members of the new Remuneration and Appointments Committee;
appoint the directors Sergio Arnoldi (Chairman), Gianluca Bolelli and Gioacchino Attanzio as members of the Control and Risk Committee;
appoint Caterina Caccia Dominioni as director in charge of the internal control and risk management system;
appoint the Independent Director Gioacchino Attanzio as lead independent director;
appoint Lorenzo Pascali (Chairman), Maurizio Brigatti and Stefano Chirico as members of the Supervisory Body that will remain in office until the shareholders' meeting that will be called to approve the financial statements for the year ended 31 December 2018;
on 22 May 2016, the subsidiary Marais Group sold the 40% share held in Marais Algerie SARL at the price of Euro 40 thousand, to the majority shareholder in that this investment was no longer of strategic importance.

3.1 Impact of the acquisition of the remaining 60% of Bertel

As described above, on 3 March 2016, the parent company Tesmec S.p.A. purchased the remaining 60% of the share capital of Bertel S.r.l. (of which Tesmec already owned 40% of the share capital).

The value of the transaction amounted to Euro 300 thousand corresponding to the nominal value and will be paid in two tranches: the first one of Euro 150 thousand within 12 months and the second one of Euro 150 thousand within 24 months. Moreover, following the acquisition of Bertel S.r.l., it repaid the loan of Euro 260 thousand to the old shareholder.

The differential arising from this acquisition amounted to Euro 1,147 thousand and has been provisionally allocated among Assets in progress and advance payments to suppliers in that, as provided by IFRS 3, within 12 months after the transaction (i.e. March 2017), the recording of the acquisition will be completed through the final allocation of the arising differential.

Assets and liabilities at fair value are broken down below:

Book values of the acquired company	Company acquisition
(Euro in thousands)	BERTEL

Assets
Intangible assets	2,539
Property, plant and equipment	162
Other non-current assets	598
Inventories	668
Trade receivables	285
Other current assets	757
Cash and cash equivalents	79
Total assets	5,088

Liabilities
Medium/long-term loans	146
Employee benefit liability	133
Interest-bearing financial payables (current portion)	4,069
Other current liabilities	587
Total liabilities	4,935

Fair value of net assets acquired	153

3.2 Effects of the acquisition of CPT

As described above, on 20 April 2016, the parent company Tesmec S.p.A. purchased 100% of the share capital of CPT Engineering S.r.l. The transaction involved the purchase of the entire share capital of CPT against a price of Euro 300 thousand to which an earn-out up to a maximum of Euro 800 thousand is expected to be added related to the achievement of certain turnover results by the CPT and its economic balance. The payment of the price by Tesmec will be made by using own resources.

The differential arising from this acquisition amounted to Euro 100 thousand and has been provisionally allocated among Assets in progress and advance payments to suppliers in that, as provided by IFRS 3, within 12 months after the transaction (i.e. April 2017), the recording of the acquisition will be completed through the final allocation of the arising differential.

4. Activity, reference market and operating performance for the first six months of 2016

In the first half of 2016, the demand for rental and service business with a high content for the customer increased confirming the validity of the strategic choice of Tesmec that with the acquisition of the Marais Group and the recent developments in the automation segment is the provider of integrated solutions and complementary services. The passage from the traditional offer of the Group to the new offer required financial investments and technical developments that had an impact in the short-term on major economic indicators. However, the validity of the strategic choices made is confirmed by the collection of new important orders in the railway and automation segment and the opening of new important trade negotiations. The return to traditional levels of profitability of the Group as well as the validity of the strategic choices made will also be linked to targeted cost efficiency initiatives that have already begun in Tesmec USA with the reduction and rationalisation of personnel.

The interim consolidated financial statements of Tesmec have been prepared in accordance with the International Financial Reporting Standards – hereinafter the "IFRS" or the "International Accounting Standards" –, which were endorsed by the European Commission, in effect as at 30 June 2016. The following table shows the major economic and financial indicators of the Group in June 2016 and in June 2015.

OVERVIEW OF THE FINANCIAL RESULTS
30 June 2015	Key income statement data (Euro in millions)	30 June 2016
85.1	Operating Revenues	74.0
14.2	EBITDA	7.4
9.6	Operating Income	1.4
6.5	Group Net Profit	(1.3)

31 December 2015	Key financial position data (Euro in millions)	30 June 2016
145.8	Net Invested Capital	155.9
55.9	Shareholders' Equity	51.1
89.9	Net Financial Indebtedness	104.8
13.2	Investments in property, plant and equipment and intangible assets	11.1
569	Annual average employees	646

With reference to the above figures, the information relating to the main subsidiary companies with operations during the half-year is shown below:

Tesmec USA Inc., a company that is 67% owned by Tesmec S.p.A. and 33% by Simest S.p.A. (with an option of Tesmec S.p.A. to repurchase the Simest's shareholding interest), is based in Alvarado (Texas) and operates in the trencher segment and in the rail segment (as from 2012). In the first six months of 2016, revenues achieved directly with customers/end users came to Euro 12.8 million. In the half-year, the decline in demand in the traditional oil&gas segment continued and the first positive results of the sales of machinery in the civil construction industry are starting, and machinery were sold from the fleet that previously had been used by customers with the "Rent to Buy" formula confirming the appreciation of the technology by the market.
Tesmec Service S.r.l., company 100% owned by Tesmec S.p.A. with registered office in Grassobbio (BG) and operating unit in Monopoli (BA), carries out its activity of design and construction of machinery for the maintenance of rolling stock. During the first half-year of 2016, the company continued to develop the product range for the domestic market and recorded revenues of Euro 2.4 million.
Tesmec SA (Pty) Ltd, 100% owned by Tesmec S.p.A., with registered office in Johannesburg (South Africa), was set up in August 2011. In the first six months, the company generated revenues of Euro 2.6 million confirming the positive trend achieved in the second half of last year.
Condux Tesmec Inc, a joint venture that is 50% owned by Tesmec S.p.A. and 50% by US shareholder Condux, which is based in Mankato (USA), has been active since June 2009 in selling products for the North American stringing equipment market. The company has been consolidated using the equity method and in the first six months of the year generated revenues totalling Euro 4.0 million.
Tesmec Peninsula WLL, a Joint Venture with registered office in Doha (Qatar) 49% owned by Tesmec S.p.A., is the hub through which the Tesmec Group is present on the Arabian peninsula. The activity of Tesmec Peninsula started in the second quarter of 2011. The company has been consolidated using the equity method and generated revenues of Euro 0.3 million.
SGE S.r.l., company 100% owned by Tesmec S.p.A., with registered office in Grassobbio (BG), is specialised in the design and sales of sensors and fault detectors and measurement devices for medium voltage power lines. During the first half-year of 2016, revenues amounted to Euro 2.2 million.
Marais Technologies SAS, with registered office in Durtal (France), company 52.83% owned by Tesmec S.p.A., 33.96% by Simest S.p.A. (with an option of Tesmec to repurchase this shareholding interest at 30 June 2020) and 13.21% by C2D SAS. The French company, purchased on 8 April 2015, is the holding of an international group leader

in rental services and construction of machines for infrastructures in telecommunications, electricity and gas. The Marais Group generated during the first half-year of 2016 revenues totalling Euro 15.7 million.

Income statement

The comments provided below refer to the comparison of the consolidated income statement figures as at 30 June 2016 with those as at 30 June 2015.

The main profit and loss figures for the first six months of 2016 and 2015 are presented in the table below:

	Half-year ended 30 June
(Euro in thousands)	2016	% of revenues	2015	% of revenues
Revenues from sales and services	73,986	100.0%	85,131	100.0%
Cost of raw materials and consumables	(31,062)	-42.0%	(44,038)	-51.7%
Cost for services	(15,430)	-20.9%	(13,265)	-15.6%
Non-recurring costs for services	-	0.0%	(494)	-0.6%
Payroll costs	(19,770)	-26.7%	(16,143)	-19.0%
Other operating (costs)/ revenues, net	(2,937)	-4.0%	(1,989)	-2.3%
Gain on a bargain purchase (badwill)	-	0.0%	2,633	3.1%
Amortisation and depreciation	(5,921)	-8.0%	(4,621)	-5.4%
Development costs capitalised	2,560	3.5%	2,478	2.9%
Portion of losses/(gains) from the valuation of operational Joint Ventures using the equity method	13	0.0%	(67)	-0.1%
Total operating costs	(72,547)	-98.1%	(75,506)	-88.7%
Operating income	1,439	1.9%	9,625	11.3%
Financial expenses	(4,695)	-6.3%	(3,811)	-4.5%
Financial income	2,072	2.8%	3,223	3.8%
Portion of gains/(losses) from associated companies and non operational Joint Ventures evaluated using the equity method	(95)	-0.1%	(181)	-0.2%
Pre-tax profit	(1,279)	-1.7%	8,856	10.4%
Income tax	(31)	0.0%	(2,362)	-2.8%
Net profit for the period	(1,310)	-1.8%	6,494	7.6%
Profit / (loss) attributable to non-controlling interests	(14)	0.0%	4	0.0%
Group profit (loss)	(1,296)	-1.8%	6,490	7.6%

Revenues

Total revenues as at 30 June 2016 decreased by 13.1%.

This decrease as shown in the table below mainly affected the Group's traditional activity of sale of machinery and spare parts for the Trencher and Stringing segment. Conversely, for service activities, especially of the Trencher segment, there has been a sharp increase that is attributable to the acquisition of the Marais Group in France and to the subsidiary Tesmec USA. In fact, as previously emphasised, the direct sale of machinery slowed down in the first half of 2016 both due to the greater market demand aimed more to lease contracts and rents than to direct investments, both due to the postponement of some important orders that are being awarded and that will be defined during the last months of 2016. The first half of last year was also characterised by the progress in revenues of the order to Abengoa Group (Stringing equipment segment) that generated considerable revenues mainly in the Eurozone.

	Half-year ended 30 June
(Euro in thousands)	2016	2015
Sales of products	59,640	77,574
Services rendered	14,572	8,481
	74,212	86,055
Changes in work in progress	(226)	(924)
Total revenues from sales and services	73,986	85,131

a) Revenues by geographic area

The turnover of the Group continues to be produced almost exclusively abroad and in non-EU countries, in particular. Also sales made to customers based in Europe are at times intended for use outside the European continent. The revenue analysis by area is indicated below, comparing the first half of 2016 with the first half of 2015, and indicates the growth of the European and US markets, balanced by the downtrends recorded in the European and North and Central America markets. It is emphasised that the segmentation by geographic area is determined by the country where the customer is, regardless of the place where the project activities are organised.

	Half-year ended 30 June
(Euro in thousands)	2016	2015
Italy	8,013	5,340
Europe	15,446	36,622
Middle East	11,240	9,979
Africa	14,144	7,826
North and Central America	12,972	18,347
BRIC and Others	12,171	7,017
Total revenues	73,986	85,131

As noted above, the decline in European sales was influenced by the work order of the Abengoa Group that generated its revenues mainly in the first half of 2015 and is therefore to be considered contingent.

b) Revenues by segment

	Half-year ended 30 June
(Euro in thousands)	2016	% of revenues	2015	% of revenues	2016 vs. 2015
Stringing equipment	22,176	30.0%	45,877	53.9%	(23,701)
Trencher	49,453	66.8%	38,629	45.4%	10,824
Rail	2,357	3.2%	625	0.7%	1,732
Total revenues	73,986	100.0%	85,131	100.0%	(11,145)

In the first six months of 2016, the Group consolidated revenues of Euro 73,986 thousand, marking a decrease of Euro 11,145 thousand compared to Euro 85,131 thousand in the same period of the previous year. In percentage terms, this decrease represents a negative difference of 13.1%, which is split unevenly between the Group's three business areas. More specifically, an increase of +277.1% was recorded for the Rail segment, +28.0% for the Trencher segment and -51.7% for the Stringing equipment segment.

The increase in revenues in the Trencher segment is mainly a result of the contribution of the Marais Group and of the sales in the African continent.

The already mentioned order of the Stringing equipment segment and related to the Abengoa Group that characterised the revenues of the first half of 2015 is the main reason for the decline in the sector during the first six months of 2016. Note, however, that the Energy Automation business, with the consolidation of recent developments in the sector of technologies for power lines, is contributing increasingly to the Group's results.

For the Rail segment, the results are still very low and can, therefore, generate significant fluctuations if analysed on a halfyearly basis. However, important commercial operations in continuous development are confirmed as well as possible new contracts whose potential turnover could lead to the generation of revenues in the coming quarters.

Operating costs net of depreciation and amortisation

	Half-year ended 30 June
(Euro in thousands)	2016	2015	2016 vs. 2015	% change
Cost of raw materials and consumables	(31,062)	(44,038)	12,976	-29.5%
Cost for services	(15,430)	(13,265)	(2,165)	16.3%
Non-recurring costs for services	-	(494)	494	-100.0%
Payroll costs	(19,770)	(16,143)	(3,627)	22.5%
Other operating (costs)/ revenues, net	(2,937)	(1,989)	(948)	47.7%
Gain on a bargain purchase (badwill)	-	2,633	(2,633)	100.0%
Development costs capitalised	2,560	2,478	82	3.3%
Portion of losses/(gains) from the valuation of Joint Ventures using the equity method	13	(67)	80	-119.4%
Operating costs net of depreciation and amortisation	(66,626)	(70,885)	4,259	-6.0%

The table shows a decrease in operating costs of Euro 4,259 thousand (-6.0%) in a less than proportional way compared to the decrease in sales (-13.1%). The table shows that this reduction is due to the different mix of the Group's activities with a shift on service activities that resulted in a decrease (-29.5%) in the cost for the purchase of raw materials and consumables against an increase in costs of services by 16.3% and payroll costs by 22.5% resulting from the change in the consolidation area (Marais SARL and Bertel S.r.l.).

The first half of 2015 benefited from a positive net value of non-recurring costs and revenues of Euro 2,139 thousand (consisting of non-recurring costs for services of Euro 494 thousand and of Badwill of Euro 2,633 thousand) deriving from the acquisition of the Marais Group on 8 April 2015. Net of this item, the reduction would have been 8.8%.

EBITDA

As a result of the decrease in revenues (-13.1%) in a more than proportional way compared to the decrease in operating costs (-6.0%), in terms of margins, EBITDA amounts to Euro 7,360 thousand decreasing by 48.3% compared to what was recorded in the first half of 2015. Without the effect of badwill, the decrease would have been 39.2%.

A restatement of the income statement figures representing the performance of EBITDA is provided below:

	Half-year ended 30 June
(Euro in thousands)	2016	% of revenues	2015	% of revenues	2016 vs. 2015
Operating income	1,439	1.9%	9,625	11.3%	(8,186)
+ Depreciation and amortisation	5,921	8.0%	4,621	5.4%	1,300
EBITDA (*)	7,360	9.9%	14,246	16.7%	(6,886)
+ Non-recurring costs	-	0.0%	494	0.6%	(494)
+ Badwill	-	0.0%	(2,633)	-3.1%	2,633
adj EBITDA (*)	7,360	9.9%	12,107	14.2%	(4,747)

(*) The EBITDA is represented by the operating income gross of amortisation/depreciation. The EBITDA thus defined represents a measurement used by Company management to monitor and assess the company's operating performance. EBITDA is not recognised as a measure of performance by the IFRS and therefore is not to be considered an alternative measurement for assessing the performance of the Group's operating income. As the composition of EBITDA is not governed by the reference accounting standards, the criterion for determination applied by the Group may not be in line with the criterion adopted by others and is therefore not comparable.

The tables below show the income statement figures relating to EBITDA as at 30 June 2016 compared to those as at 30 June 2015, broken down into three operating segments:

	Half-year ended 30 June
(Euro in thousands)	2016	% of revenues	2015	% of revenues	2016 vs. 2015
Stringing equipment	2,523	11.4%	8,222	17.9%	(5,699)
Trencher	4,713	9.5%	6,225	16.1%	(1,512)
Rail	124	5.3%	(201)	-32.2%	325
EBITDA	7,360	9.9%	14,246	16.7%	(6,886)

This result is the combined effect of different trends in the three segments:

Stringing equipment: the worsening of the EBITDA from Euro 8,222 thousand in the first half of 2015 to Euro 2,523 thousand in 2016 is only due to lower revenues (affected in 2015 by the Abengoa work contract) that did not allow the regular absorption of fixed costs. Moreover, the consolidation of the company Bertel - the acquisition of control of which was finalised - and of the newly acquired CPT had also an impact.
Trencher: the margin decreased by 24.3% from Euro 6,225 thousand in the first half of 2015 to Euro 4,713 thousand in the same period of 2016. As already pointed out, the previous period was affected by a positive item of Euro 2,139 thousand mainly related to Badwill generated by the Marais operation.
Rail: advanced revenues in the period generated a positive absorption of overhead costs, generating a positive EBITDA of Euro 124 thousand.

Financial Management

	Half-year ended 30 June
(Euro in thousands)	2016	2015
Net Financial Income/Expenses	(2,181)	(2,458)
Foreign exchange gains/losses	(453)	1,832
Fair value adjustment of derivative instruments	11	38
Portion of losses/(gains) from the valuation of equity investments using the equity method	(95)	(181)
Total net financial income/expenses	(2,718)	(769)

Net financial management decreased compared to the same period in 2015 of Euro 1,949 thousand due, for Euro 2,285 thousand, to the different USD/EUR exchange rate in the two periods of reference that resulted in the recording of net losses totalling Euro 453 thousand (realised for Euro 82 thousand and unrealised for Euro 371 thousand) in the first half of 2016 against net profits of Euro 1,832 thousand in the first half of 2015.

The net cost of borrowing decreased by 13.0% thanks to the benefits on the reduction of cost of short-term funding.

5. Summary of balance sheet figures as at 30 June 2016

Information is provided below on the Group's main equity indicators as at 30 June 2016 compared to 31 December 2015. In particular, the following table shows the reclassified funding sources and uses from the consolidated balance sheet as at 30 June 2016 and as at 31 December 2015:

(Euro in thousands)	As at 30 June 2016	As at 31 December 2015
USES
Net working capital (1)	70,004	63,505
Fixed assets	87,104	83,945
Other long-term assets and liabilities	(1,185)	(1,697)
Net invested capital (2)	155,923	145,753
SOURCES
Net financial indebtedness (3)	104,828	89,876
Shareholders' equity	51,095	55,877
Total sources of funding	155,923	145,753

(1) The net working capital is calculated as current assets net of current liabilities excluding financial assets and financial liabilities. Net working capital is not recognised as a measure of performance by the IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balance obtained by the Company may not necessarily be comparable therewith.

(2) The net invested capital is calculated as net working capital plus fixed assets and other long-term assets less long-term liabilities. The net invested capital is not recognised as a measure of performance under IFRS. The valuation criteria applied by the Company may not necessarily be the same as those adopted by other groups and therefore the balance obtained by the Company may not necessarily be comparable therewith.

(3) The net financial indebtedness is calculated as the sum of cash and cash equivalents, current financial assets including available–for–sale securities, financial liabilities, fair value of hedging instruments and other non-current financial assets.

A) Net working capital

The table below shows a breakdown of "Net Working Capital" as at 30 June 2016 and 31 December 2015:

(Euro in thousands)	As at 30 June 2016	As at 31 December 2015
Trade receivables	53,773	50,882
Work in progress contracts	2,281	3,864
Inventories	60,149	58,891
Trade payables	(32,699)	(39,049)
Other current assets/(liabilities)	(13,500)	(11,083)
Net working capital (1)	70,004	63,505

Net working capital amounted to Euro 70,004 thousand, marking an increase of Euro 6,499 thousand (equal to 10.2%) compared to 31 December 2015. This trend shows the effects of increased stock due to low sales for the period in the traditional sector and longer payment times granted to new customers. The cost reduction measures implemented in Tesmec USA (which led to a 40% reduction in personnel especially in the production area) are expected to have a positive effect on the reduction of working capital rebalancing the production levels with sales.

B) Fixed assets

The table below shows a breakdown of "Fixed assets" as at 30 June 2016 and 31 December 2015:

(Euro in thousands)	As at 30 June 2016	As at 31 December 2015
Intangible assets	19,260	13,827
Property, plant and equipment	64,147	65,352
Equity investments in associates	3,690	4,763
Other equity investments	7	3
Fixed assets	87,104	83,945

Total fixed assets recorded an increase of Euro 3,159 thousand due to the decrease in property, plant and equipment of Euro 1,205 thousand thanks to the sale of trenchers from the fleet especially by the American subsidiary offset by the increase in intangible assets of Euro 5,433 thousand.

The increase in property, plant and equipment is due to the change in the consolidation area for a total value of Euro 4,509 thousand related for Euro 823 thousand to the companies acquired during the period (EAM S.r.l. and C.P.T. Engineering S.r.l.) and for Euro 3,686 thousand to the line-by-line consolidation of the subsidiary Bertel S.r.l. as from 1 March 2016. This amount includes as assets in progress and advance payments to suppliers the temporary differential of Euro 1,147 thousand generated by the acquisition of the remaining 60% of the equity investment in the company Bertel S.r.l. in March. As provided by IFRS 3, within 12 months after the transaction (i.e. March 2017), the recording of the acquisition will be completed through the final allocation of the emerging differential.

C) Net financial indebtedness

Details of the breakdown of "Net financial indebtedness" as at 30 June 2016 and 31 December 2015 are as follows:

(Euro in thousands)	As at 30 June 2016	of which with related parties and group	As at 31 December 2015	of which with related parties and group
Cash and cash equivalents	(28,815)		(21,204)
Current financial assets (1)	(7,194)	(6,555)	(11,871)	(11,499)
Current financial liabilities	61,232	1,304	45,240	1,241
Current portion of derivative financial instruments	-		14
Current financial indebtedness (2)	25,223	(5,251)	12,179	(10,258)
Non-current financial liabilities	79,261	14,078	77,347	14,743
Non-current portion of derivative financial instruments	344		350
Non-current financial indebtedness (2)	79,605	14,078	77,697	14,743
Net financial indebtedness pursuant to CONSOB Communication No. DEM/6064293/2006	104,828	8,827	89,876	4,485

(1) Current financial assets as at 30 June 2016 and 31 December 2015 include the market value of shares and warrants, which are therefore considered cash and cash equivalents.

(2) Current and non-current financial indebtedness is not identified as an accounting element by the IFRS. The valuation criteria applied by the Group may not necessarily be the same as those adopted by other groups and therefore the balances obtained by the Group may not be comparable therewith.

In the first six months of 2016, the Group's net financial indebtedness increased compared to the figure at the end of 2015 by Euro 14,952 thousand and improves compared to the figure as at 31 March 2016 of Euro 107,074 thousand. Without considering the notional debt of the building of Grassobbio, recognised due to the application of IAS 17, the net Indebtedness as at 30 June 2016 would have been Euro 87,644 thousand. The change compared to 31 December 2015 is mainly attributable to the trend of sales and to the changes in the consolidation area with the acquisition of 100% of the subsidiary Bertel.

The table below shows the breakdown of the following changes:

increase in current financial indebtedness of Euro 13,044 thousand due to the:

increase in current financial liabilities of Euro 15,992 thousand mainly due to (i) Euro 12,399 thousand as a result of greater advances on export and to (ii) Euro 4,807 thousand as a result of the increase in current portion of medium/long-term loans;
increase in current financial assets and cash and cash equivalents of Euro 2,934 thousand;
increase in non-current financial indebtedness of Euro 1,908 thousand due to the drawing-up of new medium/long-term loan contracts amounting to Euro 13,107 thousand offset by the reclassification in the current financial indebtedness relating to the short-term portions.

6. Management and types of financial risk

For the management of financial risks, please see the paragraph "Financial risk management policy" contained in the Explanatory Notes to the Annual Consolidated Financial Statements for 2015, where the Group's policies in relation to the management of financial risks are presented.

7. Atypical and/or unusual and non-recurring transactions with related parties

In compliance with the Consob communications of 20 February 1997, 27 February 1998, 30 September 1998, 30 September 2002 and 27 July 2006, it should be noted that during the first half of the 2016 financial year, no transactions took place with related parties of an atypical or unusual nature, outside of normal company operations or such as to harm the profits, balance sheet or financial results of the Group.

For significant intercompany and related party information, please see the paragraph "Related party transactions" in the Explanatory Notes.

8. Group Employees

The average number of Group employees in the first half-year of 2016, including the employees of companies that are fully consolidated, is 646 persons compared to 569 in 2015 as a result of the acquisitions made in the period.

9. Other information

Treasury shares

On 29 April 2016, the Shareholders' Meeting resolved favourably on the First Section of the Report on Remuneration pursuant to Article 123-ter of Legislative Decree no. 58/98 and authorised also the Board of Directors, for a period of 18 months, to purchase, on the regulated market, ordinary shares of Tesmec until 10% of the share capital of the Company and within the limits of the distributable profits and of the available reserves resulting from the last financial statements duly approved by the Company or the subsidiary company making the purchase. The authorisation also includes the right to dispose of (in whole or in part and also in several times) the shares in the portfolio subsequently, even before having exhausted the maximum amount of shares purchasable and to possibly repurchase the shares to the extent that the treasury shares held by the Company and, if necessary, by the companies controlled by it, do not exceed the limit established by the authorisation. The quantity and the price at which transactions will be made will comply with the operating procedures laid down by the regulations. This authorisation replaces the last authorisation resolved by the Shareholders' Meeting on 30 April 2015 and expiring in October 2016.

In the period between 1 July 2015 and the date of this Report, the Company purchased 1,854,176 treasury shares (1.73% of Share Capital) at an average price of Euro 0.6588 for a total amount net of commissions of Euro 1,221,588 thousand. On the date of this report, the Company holds a total of 4,450,497 treasury shares, equal to 4.16% of the Share Capital.

Subsequent events and business outlook

Among the events subsequent to the end of the half-year, the following are of note:

On 1 August 2016, Tesmec S.p.A. finalised the acquisition from Ampere S.r.l. in liquidation, of the business unit, including the Ampere trademark, involved in the sale of measuring and monitoring instruments and after-sales services for the production, transmission and distribution of electrical power.

Established in Milan in 1940, Ampere, right from the start, acted as distributor in Italy of some of the most qualified manufacturing companies of measuring, monitoring and diagnostic instruments. Over the years, it gained extensive experience, gaining the trust of the main national players of the Energy sector.

More specifically, the transaction involved the acquisition of the business unit of Ampere S.r.l. against a price composed of a fixed part and a variable part. The fixed net price amounted to Euro 106 thousand. The variable part (Earn Out) amounted to 1% of net turnover that will be pursued by the business unit in the following 13 months as from the signing date of the sales contract. The payment of the price by Tesmec will be made by using own resources.

As at 31 December 2015, the business unit subject-matter of the acquisition recorded Revenues of approximately Euro 2.7 million.

The acquisition of the business unit of Ampere S.r.l., highly specialised in commercial activities and after-sales services for the main Italian utilities, aims at completing the offer of Tesmec that is further strengthened, through a vertical integration, in the world of power networks. Moreover, this acquisition allows the Tesmec Group to strengthen its presence in Italy by benefiting from the strong relations that Ampere S.r.l. has with important customers.

The transaction is part of the growth strategy in the sector of technologies for energy transport and confirms the Group's will to invest in the Energy Automation segment.

On 1 August 2016, the company Marais Cote D'Ivoire, 100% owned by Group Marais SA, was set up. The company is based in Abidjan (Ivory Coast) and its purpose is the construction of energy telecommunications networks, sale and rental of Trencher machines.

Business outlook

Globally, there are some trends, such as focus on safety, a greater interest in environmental sustainability and increasing investments in infrastructures for connectivity, which are transversal to different businesses of the Group and on which Tesmec is focusing its interventions in order to ensure its growth in the near future.

In particular, the Group is stepping up its activities in the sector of telecommunication networks and optical fibre, both for FTTH (Fibre to the Home) and long-distance projects, especially in the African continent, Australia and New Zealand, in which the finalisation of important contracts with leading international contractors is expected. Moreover, in the Trencher segment, the provision of services and solutions with high added value will enable an improvement in working capital thanks to the lower inventory impact, in addition to a reduction in the net financial position. Moreover, thanks to the measures of cost efficiency and focusing on the service activity taken for the subsidiary Tesmec USA, an increase in volumes and in margins is expected also in the American market.

With regard to the rail segment, the first important work orders for full maintenance services on the working equipment of the national network and investments for the development of highly efficient vehicles are recorded, in full observance with safety and environmental standards, which should lead to a significant growth of the segment in the coming quarters. In fact, important investments are expected by the main rail operators for the renewal of the existing fleets in order to comply with the new regulations in terms of safety and emissions.

Finally, interesting prospects are also expected in the sector of technologies for intelligent networks, where the Group is implementing an integration strategy to meet the new challenges related to renewable energy sources and to the distributed generation. Finally, the stringing equipment market is characterised by a cyclical trend related to large projects for the construction of power lines for which some important negotiations are currently in progress.

During July and August the total Order Backlog increased of around Euro 20.0 million.

Therefore, based on ongoing negotiations in different business areas, in the second half of 2016 the Group is expected to grow significantly, such as to allow an improvement of all the economic and financial indicators compared to the first half of the year.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements

Consolidated statement of financial position as at 30 June 2016 and as at 31 December 2015

	Notes	30 June 2016	31 December 2015
(Euro in thousands)
NON-CURRENT ASSETS
Intangible assets	6	19,260	13,827
Property, plant and equipment	7	64,147	65,352
Equity investments valued using the equity method		3,690	4,763
Other equity investments		7	3
Financial receivables and other non-current financial assets		190	473
Derivative financial instruments	15	3	11
Deferred tax assets Non-current trade receivables		10,278 263	8,844 80
TOTAL NON-CURRENT ASSETS		97,838	93,353
CURRENT ASSETS
Work in progress contracts	8	2,281	3,864
Inventories	9
		60,149	58,891
Trade receivables	10	53,773	50,882
of which with related parties:	10	2,748	4,050
Tax receivables		695	486
Other available-for-sale securities		536	22
Financial receivables and other current financial assets	11	6,658	11,849
of which with related parties:	11	6,555	11,499
Other current assets		4,754	4,337
Cash and cash equivalents		28,815	21,204
TOTAL CURRENT ASSETS		157,661	151,535
TOTAL ASSETS		255,499	244,888
SHAREHOLDERS' EQUITY SHAREHOLDERS' EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS
Share capital	12	10,708	10,708
Reserves / (deficit)	12	40,079	36,623
Group net profit / (loss)	12	(1,296)	6,931
TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS		49,491	54,262
Minority interest in capital and reserves / (deficit)		1,618	1,385
Net profit / (loss) for the period attributable to non-controlling interests		(14)	230

TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		1,604	1,615
TOTAL SHAREHOLDERS' EQUITY		51,095	55,877
NON–CURRENT LIABILITIES
Medium/long-term loans	13	64,558	62,675
of which with related parties: Bond issue	13	14,078 14,703	14,743 14,672
Derivative financial instruments	15	344	350
Employee benefit liability		3,418	2,847
Deferred tax liabilities		8,348	8,255
Other non-current liabilities		150	3
Non-current trade payables		3	-
TOTAL NON-CURRENT LIABILITIES		91,524	88,802
CURRENT LIABILITIES
Interest-bearing financial payables (current portion)	14	61,232	45,240
of which with related parties:	14	1,304	1,241
Derivative financial instruments	15	-	14
Trade payables		32,699	39,049
of which with related parties:		161	200
Advances from customers		1,839	1,694
Income taxes payable		2,906	2,933
Provisions for risks and charges		3,531	3,392
Other current liabilities		10,673	7,887
TOTAL CURRENT LIABILITIES		112,880	100,209
TOTAL LIABILITIES		204,404	189,011
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		255,499	244,888

Consolidated income statement for the half-year ended 30 June 2016 and 2015

		Half-year ended 30 June
(Euro in thousands)	Notes	2016	2015
Revenues from sales and services	16	73,986	85,131
of which with related parties:		3,182	5,352
Cost of raw materials and consumables		(31,062)	(44,038)
of which with related parties:		(9)	(181)
Cost for services		(15,430)	(13,265)
of which with related parties:		(159)	(6)
Non-recurring costs for services		-	(494)
Payroll costs		(19,770)	(16,143)
Other operating (costs)/ revenues, net		(2,937)	(1,989)
of which with related parties:		118	(9)
Gain on a bargain purchase (badwill)		-	2,633
Amortisation and depreciation		(5,921)	(4,621)
Development costs capitalised		2,560	2,478
Portion of losses/(gains) from the valuation of operational Joint Ventures using the equity method		13	(67)
Total operating costs	17	(72,547)	(75,506)
Operating income		1,439	9,625
Financial expenses		(4,695)	(3,811)
of which with related parties:		(436)	(540)
Financial income		2,072	3,223
of which with related parties:		67	73
Portion of gains/(losses) from associated companies and non-operational Joint Ventures evaluated using the equity method		(95)	(181)
Pre-tax profit		(1,279)	8,856
Income tax		(31)	(2,362)
Net profit for the period		(1,310)	6,494
Profit / (loss) attributable to non-controlling interests		(14)	4
Group profit (loss)		(1,296)	6,490
Basic and diluted earnings per share		(0.012)	0.0606

Consolidated statement of comprehensive income for the half-year ended 30 June 2016 and 2015

Notes	2016	2015
	(1,310)	6,494



12	(623)	2,732

	(251)	84
	69	(23)
12	(182)	61

	(805)	2,793
	(2,115)	9,287

	(2,101)	9,283
	(14)	4
		Half-year ended 30 June

Statement of consolidated cash flows for the half-year ended 30 June 2016 and 2015

		Half-year ended 30 June
(Euro in thousands)	Notes	2016	2015
CASH FLOW FROM OPERATING ACTIVITIES
Net profit for the period		(1,310)	6,494
Adjustments to reconcile net income for the period with the cash flows generated by (used in) operating activities:
Amortisation and depreciation	6-7	5,921	4,621
Provisions for employee benefit liability		131	33
Provisions for risks and charges / inventory obsolescence / doubtful accounts		391	902
Gain on a bargain purchase (badwill)			(2,633)
Employee benefit payments		189	(165)
Payments of provisions for risks and charges		63	(479)
Net change in deferred tax assets and liabilities		(1,321)	(532)
Change in fair value of financial instruments	15	(12)	41
Change in current assets and liabilities:
Trade receivables	10	(2,894)	(12,879)
Inventories	9	(367)	(2,438)
Trade payables		(6,262)	7,670
Other current assets and liabilities		2,145	1,812
NET CASH FLOW GENERATED BY OPERATING ACTIVITIES (A)		(3,326)	2,447
CASH FLOW FROM INVESTING ACTIVITIES
Investments in property, plant and equipment	7	(7,095)	(3,002)
Investments in intangible assets	6	(3,927)	(3,120)
(Investments) / disposal of financial assets		5,938	473
Change in the consolidation area	5.1	(6,510)	315
Proceeds from sale of property, plant and equipment and intangible	6-7	6,965	2,821
assets
NET CASH FLOW USED IN INVESTING ACTIVITIES (B)		(4,629)	(2,513)
NET CASH FLOW FROM FINANCING ACTIVITIES
Disbursement of medium/long-term loans	16	13,169	6,370
Repayment of medium/long-term loans	16	(11,808)	(8,703)
Change in the consolidation area		930
Net change in short-term financial debt	14	15,996	2,002
Purchase of treasury shares	12	(193)	(157)
Other changes	12	92	48
Dividend distribution	12	(2,566)	(2,403)
NET CASH FLOW GENERATED BY (USED IN) FINANCING ACTIVITIES (C)		15,620	(2,843)
TOTAL CASH FLOW FOR THE PERIOD (D=A+B+C)		7,665	(2,909)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (E)		(54)	213
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD (F)		21,204	18,665
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD (G=D+E+F)		28,815	15,969
Additional information:
Interest paid		2,822	1,757
Income tax paid		1,018	1,343

Statement of changes in consolidated shareholders' equity for the half-year ended 30 June 2016 and 2015

(Euro in thousands)	Share capital	Legal reserve	Share premium reserve	Reserve of Treasury Shares	Translation reserve	Other reserves	Profit for the period	Total Shareholders' Equity Attributable to Parent Company Shareholders	Total Shareholders´ Equity Attributable to Non Controlling Interests	Total shareholders' equity

Balance as at 1 January 2015	10,708	2,004	10,915	(1,010)	2,114	18,524	4,909	48,164	9	48,173
Profit for the period	-	-	-	-	-	-	6,490	6,490	4	6,494
Other profits / (losses)	-	-	-	-	2,732	61	-	2,793	-	2,793
Total comprehensive income / (loss)	-	-	-	-	-	-	-	9,283	4	9,287
Allocation of profit for the period	-	137	-	60	-		2,309 (2,506)	-	-	-
Dividend distribution	-	-	-	-	-	-	(2,403)	(2,403)	-	(2,403)
Change in the consolidation area	-	-	-	-	-	25	-	25	(25)	-
Other changes	-	-	-	(157)	-	(38)	-	(195)		(195)
Balance as at 30 June 2015	10,708	2,141	10,915	(1,107)	4,846	20,881	6,490	54,874	(12)	54,862

(Euro in thousands)	Share capital	Legal reserve	Share premium reserve	Reserve of Treasury Shares	Translation reserve	Other reserves	Profit for the period	Total Shareholders' Equity Attributable to Parent Company Shareholders	Total Shareholders´ Equity Attributable to Non Controlling Interests	Total shareholders' equity

Balance as at 1 January 2016	10,708	2,141	10,915	(2,136)	5,731	19,972	6,931	54,262	1,615	55,877
Profit for the period	-	-	-	-	-	-	(1,296)	(1,296)	(14)	(1,310)
Other profits / (losses)	-	-	-	-	(630)	(182)	-	(812)	7	(805)
Total comprehensive income / (loss)	-	-	-	-	-	-	-	(2,108)	(7)	(2,115)
Allocation of profit for the period	-	-	-	111	-		4,254 (4,365)	-	-	-
Dividend distribution	-	-	-	-	-	-	(2,566)	(2,566)	-	(2,566)
Change in the consolidation area	-	-	-	-	-	96	-	96	(4)	92
Purchase of treasury shares	-	-	-	(193)	-	-	-	(193)		(193)
Balance as at 30 June 2016	10,708	2,141	10,915	(2,218)	5,101		24,140 (1,296)	49,491	1,604	51,095

Explanatory notes

Accounting policies adopted in preparing the consolidated financial statements as at 30 June 2016

1. Company information

The parent company Tesmec S.p.A. (hereinafter "Parent Company" or "Tesmec") is a legal entity organised in accordance with the legal system of the Italian Republic. The ordinary shares of Tesmec are listed on the MTA STAR Segment of the Milan Stock Exchange since 1 July 2010. The registered office of the Tesmec Group (hereinafter "Group" or "Tesmec Group") is in Milan, Piazza S. Ambrogio 16.

2. Reporting standards

The interim consolidated financial statements as at 30 June 2016 were prepared in condensed form in accordance with International Financial Reporting Standards (IFRS), by using the methods for preparing interim financial reports provided by IAS 34 Interim financial reporting.

The accounting standards adopted in preparing the interim consolidated financial statements as at 30 June 2016 are those adopted for preparing the consolidated financial statements as at 31 December 2015 in compliance with IFRS.

More precisely, the consolidated statement of financial position, income statement, comprehensive income statement, statement of changes in shareholders' equity and statement of cash flows are drawn up in extended form and are in the same format adopted for the consolidated financial statements as at 31 December 2015. The explanatory notes to the financial statements indicated below are in condensed form and therefore do not include all the information required for annual financial statements. In particular, as provided by IAS 34, in order to avoid repeating already disclosed information, the notes refer exclusively to items of the consolidated statement of financial position, the consolidated income statement, the consolidated statement of comprehensive income, the statement of changes in consolidated shareholders' equity and the statement of consolidated cash flows whose breakdown or change, with regard to amount, type or unusual nature, are significant to understanding the economic and financial situation of the Group as at 30 June 2016.

Since the interim condensed consolidated financial statements do not disclose all the information required in preparing the consolidated annual financial statements, it must be read together with the consolidated financial statements as at 31 December 2015.

The consolidated financial statements as at 30 June 2016 comprise the consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, statement of changes in consolidated shareholders' equity, statement of consolidated cash flows and related explanatory notes. Comparative figures are disclosed as required by IAS 34 (31 December 2015 for the statement of financial position and the first half-year of 2015 for the consolidated income statement, consolidated comprehensive income statement, statement of changes in shareholders' equity and cash flow).

The interim consolidated financial statements are presented in Euro and all values are rounded to the nearest thousand, unless otherwise indicated.

The issue of the interim consolidated financial statements of the Tesmec Group for the period ended 30 June 2016 was authorised by the Board of Directors on 8 September 2016.

Translation of foreign currency financial statements and of foreign currency items

The exchange rates used to determine the value in Euros of the financial statements of subsidiary companies expressed in foreign currency (exchange rate to 1 Euro) are shown below:

		Average exchange rates for the	End-of-period exchange rate
		half-year ended 30 June	as at 30 June
	2016	2015	2016	2015
US Dollar	1.116	1.116	1.110	1.119
Bulgarian Lev	1.956	1.956	1.956	1.956
Russian Rouble	78.412	64.602	71.520	62.355
South African Rand	17.204	13.299	16.446	13.642
Renmimbi	7.272	6.941	7.376	6.937
Qatar Riyal	4.061	4.062	4.041	4.073
Algerian Dinar	121.215	106.761	122.497	110.698
Tunisian Dinar	2.290	2.163	2.447	2.175
Australian Dollar	1.522	1.426	1.493	1.455
New Zealand Dollar	1.648	1.506	1.562	1.655
CFA Franc	655.957	655.957	655.957	655.957

3. Restatement of the figures of the previous financial year

To better represent the financial statement contents, the bond issue of Euro 15 million and with maturity date 31 December 2018, included in the item "Medium/long-term loans" was reclassified, also for the 2015 financial year, to the item "Bond issue".

The table below summarises the effect of the reclassification made:

(Euro in thousands)	31 December 2015 (restated)	31 December 2015
Medium-long term loan	62,675	77,409
Medium-long term loan	62,675	77,409
Bond issue	14,672	-
Total bond issue	14,672	-
Interest-bearing financial payables (current portion)	45,240	45,178
Interest-bearing financial payables (current portion)	45,240	45,178

4. Consolidation methods and area

As at 30 June 2016, the area of consolidation changed with respect to that as at 31 December 2015:

on 9 February 2016, the subsidiary Group Marais SA purchased the entire shareholding in the French company EAM SRL, with registered office in Carcassone, for Euro 450 thousand;
on 3 March 2016, the parent company Tesmec S.p.A. purchased the remaining 60% of the share capital of Bertel S.r.l. The subsidiary, previously consolidated with the equity method, as from that date is consolidated on a line-by-line basis;
on 20 April 2016, the subsidiary Tesmec Balkani EAD was wound-up in that this investment was no longer of strategic importance;
on 20 April 2016, the parent company Tesmec S.p.A. acquired 100% of CPT Engineering S.r.l., company specialised in the design and implementation of monitoring, protection and industrial automation solutions, which offers cuttingedge systems within the technologies of power lines, consolidated on a line-by-line basis as from that date;

on 22 May 2016, the subsidiary Marais Group sold the 40% share held in JV Marais Algerie SARL at the price of Euro 40 thousand, consolidated in the financial statements using the equity method.

5. New accounting standards

The accounting standards adopted for the preparation of the interim condensed consolidated financial statements are the same as those adopted for the preparation of the consolidated financial statements for the year ended 31 December 2015, with the exception of the adoption as of 1 January 2016 of the new standards, amendments and interpretations. The Group has not adopted in advance any new standard, interpretation or change issued but not yet in force.

The nature and effects of these changes are shown below. Albeit these new standards and amendments were applicable for the first time in 2016, they have no significant impact on the consolidated financial statements of the Group or on the interim condensed consolidated financial statements of the Group. The nature and impact of each new standard/amendment is listed below:

Amendments to IAS 19 - Defined contribution plans: employee contributions

IAS 19 requires an entity to consider contributions from employees or third parties in the recording of defined benefit plans. When the contributions are related to the provided service, they should be attributed to the periods of service as a negative benefit. This amendment clarifies that, if the amount of contributions does not depend on the number of years of service, the entity is allowed to recognise these contributions as a reduction of the cost of service in the period in which the service is rendered, instead of allocating the contribution to the periods of service. This amendment is effective for annual periods beginning on or after 1 February 2015. This amendment is not relevant to the Group, given that none of the entities that are part of the Group have plans comprising contributions of employees or third parties.

Annual Improvements to IFRSs 2010–2012 Cycle

IFRS 2 Share-based payments

This improvement applies prospectively and clarifies various points related to the definition of performance and service conditions representing vesting conditions, including:

a performance condition must include a service condition;
an objective of performance must be achieved while the counterparty provides a service;
an objective of performance can refer to the operations or activities of an entity, or to those of another entity within the same Group;
a performance condition can be a market based performance condition or a non-market performance condition;
if the counterparty, regardless of the reasons, ceases to provide service during the vesting period, the service condition is not met.

Therefore, these improvements did not affect the accounting standards of the Group, since none of the entities forming part of the Group have plans that require share-based remuneration.

IFRS 3 Business Combinations

The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of IFRS 9 (or IAS 39, as applicable). This is consistent with the Group's current accounting policy, and thus this amendment had no impact on the Group's accounting policy.

IFRS 8 Operating segments

The amendment applies prospectively and clarifies that:

an entity should disclose information on the assessments made by the management in applying the aggregation criteria set forth in paragraph 12 of IFRS 8, including a short description of the operating segments that have been aggregated and of the economic characteristics (for example: sales, gross margin) used for defining whether the segments are "similar";
it is necessary to present the reconciliation of the segment assets with the total assets only if the reconciliation is presented by the senior operating decision maker, as required for segment liabilities.

The Group did not apply the aggregation criteria provided by IFRS 8.12. In the previous periods, the Group presented the reconciliation of the segment's assets with total assets and continues to present it in Explanatory Notes, inasmuch as the reconciliation is provided to the highest decision-making level.

IAS 16 Property, plant and equipment and IAS 38 Intangible assets

The amendment applies prospectively and clarifies that in IAS 16 and in IAS 38 an asset can be revalued with reference to observable data both by adjusting the gross book value of the asset to the market value and by determining the market value of the book value and adjusting proportionally the gross book value in such a way that the resulting book value is equal to the market value. Moreover, the accumulated amortisation and depreciation is the difference between the gross book value and the book value of the asset. The Group has not recorded any revaluation adjustment during the interim period of reference.

IAS 24 Related party disclosures

The amendment applies prospectively and clarifies that a management entity (entity providing key management personnel services) is a related party subject to related party disclosures. Moreover, an entity that makes use of a management entity must disclose the costs incurred for management services. This amendment is not relevant for the Group in that it does not receive management services from other entities.

Amendments to IFRS 11 - Accounting for Acquisitions of interests in Joint Operations

The amendments to IFRS 11 require that a joint operator that records the acquisition of a stake in a joint arrangement whose assets represent a business, must apply the relevant principles of IFRS 3 regarding the accounting of business combinations. The amendments also clarify that, if joint control is maintained, the interest previously held in a joint operation is not subject to re-measurement at the time of the acquisition of an additional interest in the same joint operation. Moreover, an exclusion from the scope of IFRS 11 was added to clarify that the amendments do not apply when the parties that share control, including the entity that prepares the financial statements, are under the share control of the same last controlling party.

The changes apply both to the acquisition of the initial stake in a joint arrangement and to the acquisition of further stakes in the same joint arrangement. The amendments must be applied from years starting 1 January 2016 or later; early application is permitted. These amendments have no impact on the Group in that during the period there were no acquisitions of interests in a joint operation

Amendments to IAS 16 and IAS 38 - Clarification of Acceptable methods of depreciation and amortisation

The amendments clarify the principle contained in IAS 16 Property, plant and equipment and IAS 38 Intangible Assets: revenues reflect a model of economic benefits generated by the management of a business (to which the asset belongs), rather than economic benefits that are consumed with the use of the asset. This means that a revenue-based method cannot be used to depreciate property, plant and equipment and could be used only in very limited circumstances for the amortisation of intangible assets. The amendments must be applied from years starting 1 January 2016 or later; early application is permitted. These amendments have no impact on the Group in that the Group does not use methods based on revenues for the amortisation/depreciation of non-current assets.

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

These amendments have no impact on the Group in that the Group has no bearer plants.

Amendments to IAS 27 Equity Method in separate financial statements

The amendments will allow entities to use the net equity method to recognise investments in subsidiaries, joint ventures and associates in its separate financial statements. Entities that are already applying the IFRS and decided to change the accounting criteria by passing to the net equity method in their separate financial statements must apply the change retrospectively. In case of first adoption of the IFRS, the entity that decides to use the equity method in its own separate financial statements must apply it from the date of transition to the IFRSs. The amendments take effect for financial periods starting 1 January 2016 or later; early application is permitted. These amendments have no impact on the consolidated financial statements of the Group.

Annual Improvements to IFRSs - 2012–2014 Cycle

These amendments take effect for financial periods starting 1 January 2016 or later. They include:

IFRS 5 Non-current assets held for sale and discontinued operations

Assets or disposal groups are generally held for sale or for distribution to owners. The amendment states that the change from one to another of these methods of disposal should not be considered a new plan to sell, but rather a continuation of the original plan. Therefore, there is no interruption in the application of the requirements of IFRS 5. This amendment must be applied prospectively.

IFRS 7 Financial Instruments: Disclosures

(i) Servicing contracts

The amendment states that a servicing contract that includes a fee can lead to a continuous involvement in a financial asset. An entity must define the nature of the fee and of the agreement on the basis of the guidance in IFRS 7 on continuous involvement to consider whether a disclosure is requested. The definition of which service contract involves continuous involvement must be made retrospectively. However, the disclosure required must not be presented for the financial years preceding the first-time application of this amendment.

(ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements

The amendment clarifies that the disclosure requirements on fees do not apply to condensed interim financial statements, unless this disclosure provides a significant updating of the information presented in the last financial statements. This amendment must be applied retrospectively.

IAS 19 Employee benefits

The amendment clarifies that the active market (market depth) of high-quality company bonds must be defined by reference to the currency of the bond, rather than the country in which the bond is located. When there is no active market for highquality company bonds in that currency, the rates of the related Italian Government bonds must be used. This amendment must be applied prospectively.

Amendments to IAS 1 Disclosure Initiative

The amendments to IAS 1 clarify rather than amend significantly some of the already existing requirements of IAS 1. The amendments clarify:

The materiality requirement in IAS 1;
the fact that specific lines in the statement of profit/(loss) for the year or of other components of the statement of comprehensive income or in the statement of financial position can be broken down;
that the entities have flexibility with respect to the order in which they present the notes to the financial statements;
that the portion of other components of the statement of comprehensive income related to associates and joint ventures accounted for with the equity method must be presented in aggregate on one line, and classified among those items that will not be reclassified subsequently to the income statement.

In addition, the amendments clarify the requirements that apply when sub-totals are presented in the statement of profit/(loss) for the year or of other components of the statement of comprehensive income or in the statement of financial position. These amendments take effect for financial periods starting 1 January 2016 or later; early application is permitted. These amendments have no impact on the Group.

COMMENTS ON THE MAIN ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS

6. Intangible assets

The breakdown and changes in "Intangible assets" as at 30 June 2016 and as at 31 December 2015 are shown in the table below:

(Euro in thousands)	01/01/2016	Increases due to purchases	Change in the consolidation area	Decreases	Amortisation	Exchange rate differences	30/06/2016
Development costs	11,612	2,925	2,852	-	(2,616)	(60)	14,713
Rights and trademarks	2,215	36	410	-	(326)	(1)	2,334
Assets in progress and advance payments to suppliers	-	966	1,247	-	-	-	2,213
Total intangible assets	13,827	3,927	4,509	-	(2,942)	(61)	19,260

As at 30 June 2016, intangible assets totalled Euro 19,260 thousand, up Euro 5,433 thousand on the previous year due to:

development costs capitalised in the first six months of 2016 for Euro 2,925 thousand, partially offset by amortisation for the period (Euro 2,616 thousand). These costs are related to projects for the development of new products and equipment that are expected to generate positive cash flows in future years; change in the consolidation area for a total value of Euro 4,509 thousand related for Euro 823 thousand to the
companies acquired during the period (EAM S.r.l. and C.P.T. Engineering S.r.l.) and for Euro 3,686 thousand to the line-by-line consolidation of the subsidiary Bertel S.r.l. as from 1 March 2016; this amount includes as assets in progress and advance payments to suppliers the temporary differential of Euro 1,147 thousand generated by the acquisition of the remaining 60% of the equity investment in the company Bertel S.r.l. in March. The company is characterised as a highly innovative start-up in that operating in a market with a high technical profile such as that of streamlining systems of Transmission Power Lines; this justifies the differential arising from the acquisition.
As provided by IFRS 3, within 12 months after the transaction (i.e. March 2017), the recording of the acquisition will be completed through the final allocation of the emerging differential.

7. Property, plant and equipment

The breakdown and changes in "Property, plant and equipment" as at 30 June 2016 and as at 31 December 2015 are shown in the table below:

(Euro in thousands)	01/01/2016	Increases due to purchases	Change in the consolidation area	Decreases	Reclassifications	Depreciations	Exchange rate differences	30/06/2016
Land	5,815	-	189	-	-	(4)	(4)	5,996
Buildings	24,613	95	856	-	2,599	(550)	(117)	27,496
Plant and machinery	7,898	50	54	(11)	(2,599)	(551)	(32)	4,809
Equipment	1,267	261	100	(15)	-	(221)	2	1,394
Other assets	25,219	6,375	802	(6,939)	-	(1,653)	(206)	23,598
Assets in progress and advance payments to suppliers	540	314	-	-	-	-	-	854
Total property, plant and equipment	65,352	7,095	2,001	(6,965)	-	(2,979)	(357)	64,147

As at 30 June 2016, property, plant and equipment totalled Euro 64,147 thousand, down compared to the previous year by Euro 1,205 thousand.

The decrease is due to the sale of trenchers from the fleet especially by the American subsidiary partially offset by the increase resulting from the change in consolidation area of Euro 2,001 thousand relating to the companies acquired during the period (EAM S.r.l. and C.P.T. Engineering S.r.l.).

8. Work in progress contracts

The following table sets forth the breakdown of Work in progress contracts as at 30 June 2016 and as at 31 December 2015:

(Euro in thousands)	30 June 2016	31 December 2015
Work in progress (Gross)	2,281	9,158
Advances from contractors	-	(5,294)
Work in progress contracts	2,281	3,864

"Work in progress" refers exclusively to the rail segment where the machinery is produced in accordance with specific customer requirements. "Work in progress" is recognised as an asset if, on the basis of an analysis carried out for each contract, the gross value of work in progress is greater than advances from customers; it is recognised as a liability if the advances are greater than the related work in progress.

If the advances are not collected at the reporting date, the corresponding amount is recognised as trade receivables.

9. Inventories

The following table provides a breakdown of the item Inventories as at 30 June 2016 compared to 31 December 2015:

(Euro in thousands)	30 June 2016	31 December 2015
Raw materials and consumables	33,802	32,886
Work in progress	12,222	9,824
Finished products and goods for resale	14,001	16,134
Advances to suppliers for assets	124	47
Total Inventories	60,149	58,891

Inventories compared to 31 December 2015 increased by Euro 1,258 thousand mainly due to low sales for the period in the traditional sector.

10. Trade receivables

The following table sets forth the breakdown of Trade Receivables as at 30 June 2016 and as at 31 December 2015:

(Euro in thousands)	30 June 2016	31 December 2015
Trade receivables from third-party customers	51,025	46,832
Trade receivables from associates, related parties and joint ventures	2,748	4,050
Total trade receivables	53,773	50,882

The increase in trade receivables (5.7%) reflects the trend of sales for the half-year concentrated in June, in particular. The balance of Trade Receivables due from related parties fell by Euro 1,302 thousand mainly due to deconsolidation of the Joint Venture Marais Algerie Sarl; the latter, amounting to Euro 1,092 thousand, was reclassified to trade receivables from thirdparties.

Referring to the situation of Abengoa Group, which is going through a phase of restructuring, please note that the Group has already collected more than 90% of the order of last year and the remaining credit is covered by guarantees.

11. Financial receivables and other current financial assets

The following table provides a breakdown of financial receivables and other current financial assets as at 30 June 2016 and as at 31 December 2015:

(Euro in thousands)	30 June 2016	31 December 2015
Financial receivables due from associates, related parties and joint ventures	6,555	11,499
Financial receivables from third parties	41	285
Other current financial assets	62	65
Total financial receivables and other current financial assets	6,658	11,849

The decrease in current financial assets from Euro 11,849 thousand to Euro 6,658 thousand is mainly due to the decrease in credit positions relating to specific contracts signed with JV related parties on which an interest rate is applied and repayable within 12 months, and to the acquisition of the remaining 60% of the company Bertel S.r.l. described in paragraph 5.

12. Share capital and reserves

The share capital amounts to Euro 10,708 thousand, fully paid in, and is comprised of 107,084,000 shares with a par value of Euro 0.1 each.

The following table provides a breakdown of Other reserves as at 30 June and as at 31 December 2015:

(Euro in thousands)	30 June 2016	31 December 2015
Revaluation reserve	86	86
Extraordinary reserve	25,294	20,559
Change in the consolidation area	96	(900)
Severance indemnity valuation reserve	(461)	(278)
Network Reserve	794	794
Retained earnings/(losses brought forward)	(1,669)	(289)
Total other reserves	24,140	19,972

The revaluation reserve is a reserve in respect of which tax has been deferred, set up in accordance with Italian Law No. 72/1983.

The value of translation differences has a negative impact on Shareholders' Equity of Euro 630 thousand as at 30 June 2016.

As a result of the resolution of 29 April 2016, with the approval of the 2015 financial statements, the Shareholders' Meeting of Tesmec S.p.A. decided to allocate the profit of the Parent Company of Euro 7,412 thousand, as follows:

assign a dividend of Euro 0.025 to each outstanding ordinary share;
assign to the Extraordinary Reserve the amount of profit remaining after the allocation to the Legal reserve and dividend.

13. Medium-long term loans

During the first six months of 2016, medium-long term loans (including the bond issue) increased from Euro 77,471 thousand to Euro 79,868 thousand mainly due to (i) the signing of new medium/long-term loans totalling Euro 13,107 thousand and to the (ii) reclassification in the current financial indebtedness relating to the short-term portion of loans and financial leases (Euro 15,899 thousand as at 30 June 2016 compared to Euro 16,953 thousand as at 31 December 2015).

14. Interest-bearing financial payables (current portion)

The following table provides details of this item as at 30 June and as at 31 December 2015:

(Euro in thousands)	30 June 2016	31 December 2015
Advances from banks against invoices and bills receivables	30,802	18,403
Other financial payables (short-term leases)	2,516	2,455
Payables due to factoring companies	3,490	4,822
Current account overdrafts	3,043	22
Short-term loans to third parties	853	3,806
Current portion of medium/long-term loans	20,502	15,695
Other short-term financial payables	26	37
Total interest-bearing financial payables (current portion)	61,232	45,240

The increase in the current portion of medium/long-term loans refers to the reclassification of the short-term portion of the loans described in the previous paragraph.

15. Disclosure of derivative financial instruments

The following table shows a summary of the financial instruments, other than cash and cash equivalents, owned by the Group as at 30 June 2016:

(Euro in thousands)	Loans and receivables/ financial liabilities measured at amortised cost	Guarantee deposits	Cash and cash equivalents	Available-for sale financial assets	Fair value recognised in the income statement

Financial assets:
Financial receivables	190	-	-	-	-
Trade receivables	263	-	-	-	-
Derivative financial instruments	-	-	-	-	3
Total non-current	453	-	-	-	3

Trade receivables	53,773	-	-	-	-
Financial receivables from related parties	6,555	-	-	-	-
Financial receivables from third parties	103	-	-	-	-
Other available-for-sale securities	-	-	-	536	-
Cash and cash equivalents	-	-	28,815	-	-
Total current	60,431	-	28,815	536	-

Total	60,884	-	28,815	536	3

Financial liabilities:
Loans	48,659	-	-	-	-
Bond issue	14,703
Non-current portion of finance leases, net	15,899	-	-	-	-

Derivative financial instruments	-	-	-	-	344
Trade payables	3
Total non-current	79,264	-	-	-	344

Loans	21,355	-	-	-	-
Other financial payables (short-term leases)	2,516	-	-	-	-
Other short-term financial payables	37,361	-	-	-	-
Trade payables	32,699	-	-	-	-
Total current	93,931	-	-	-	-

Total	173,195	-	-	-	344

Management and types of risk

Within its scope of operations, the Group is exposed, to a greater or lesser extent, to certain types of risk that are managed as follows.

The Group does not hold derivatives or similar products for purely speculative purposes.

Interest rate risk

The Tesmec Group's exposure to interest rate risk is managed by taking overall exposure into consideration: as part of the general policy to optimise financial resources, the Group seeks equilibrium, by using less expensive forms of financing.

With regard to the market risk due to changes in the interest rate, the Group's policy is to hedge the exposure related to the portion of medium to long-term indebtedness. Derivative instruments such as Swaps, Collars and Caps are used to manage this risk.

As at 30 June 2016, there were six positions related to derivative instruments of interest rate swap hedging the risk related to the potential increase in interest bearing financial payables (current portion) due to fluctuating market rates. The notional value of these positions was equal to Euro 15.5 million, with a negative equivalent value of Euro 301 thousand. Moreover, there were four positions related to derivative instruments of Cap interest rate; the notional value of these positions was equal to Euro 7.8 million, with a negative net equivalent value of Euro 40 thousand.

Exchange rate risk

A significant portion of the Group's revenues is generated by sales in foreign countries, including developing countries.

The main transaction currencies used for the Group's sales are the Euro and the US Dollar. The Group believes that if the exchange rate fluctuations of these two currencies are low, there is no risk to operating margins, insofar as the sale price could be adapted on each occasion to the exchange rate. However, if the US dollar were to depreciate significantly against the Euro, we cannot exclude negative effects on margins to the extent that a good portion of sales in US dollars concerns the productions of Italian factories that operate with costs in the Eurozone.

With regard to net exposure that is mainly represented by loans in US Dollars of Tesmec S.p.A., the forward buying of the American currency is adopted as the only hedging instrument. However, these hedges are carried out only for one part of the total exposure in that the timing of the inflow of the receipts in dollars is difficult to predict at the level of each sales invoice. Besides, for a good part of the sales in dollars, the Group uses the production of the American factory with costs in US dollars by creating in this way a sort of natural hedging of the currency exposure.

Forward sale instruments for fixing the exchange rate at the moment of the order are mainly used for covering the risk of the dollar exposure deriving from:

i) selling trenchers produced in Italy in Middle-East Countries;

ii) selling stringing machines produced in Italy in the USA where purchases are in Euro, and sales in US dollars.

Despite the adoption of the above strategies aimed at reducing the risks arising from fluctuation of exchange rates, the Group cannot exclude that future changes thereof might affect the results of the Group. Fluctuations in exchange rates could also significantly affect the comparability of the results of each financial period.

In the first six months of 2016, the Group did not sign any forward cover contracts of the Euro/USD exchange rate.

Credit risk

For the Group, credit risk is closely linked to the sale of products on the market. In particular, the extent of the risk depends on both technical and commercial factors and the purchaser's solvency also linked to the country risk.

From a commercial viewpoint, the Group is not exposed to a high credit risk insofar as it has been operating for years in markets where payment on delivery or letter of credit issued by a prime international bank are usually used as payment methods. For customers located in the European region, the Group mainly uses factoring without recourse. The provisions for doubtful accounts are considered to be a good indication of the extent of the overall credit risk.

Price risk

In general, price risk is linked to the fluctuation of commodity prices.

Specifically, the price risk of the Group is mitigated by the presence of many suppliers of raw materials as well as by the need to be sure on the supply volumes, in order not to affect the warehouse stock.

In reality, this risk seems remote for two fundamental reasons:

the existence and use of alternative suppliers;
the heterogeneity of raw materials and components used in the production of the Tesmec machinery: it is unlikely for all of them to be affected by increasing price tensions at the same time.

In particular, in the current market situation, this risk seems particularly weakened by the situation of oversupply in many markets.

Liquidity/cash flow variation risks

The management of financial requirements and related risks (mainly interest rate risks, liquidity and exchange rate risks) is carried out by the Group on the basis of guidelines defined by the Group General Management and approved by the Chief Executive Officer of the Parent Company.

The main purpose of these guidelines is to guarantee the presence of a liability structure always in equilibrium with the structure of the balance sheet assets, in order to keep a very sound balance sheet structure.

Forms of financing most commonly used are represented by:

medium/long-term loans with multiyear redemption plan, to cover the investments in fixed assets and to finance expenses related to several development projects;
short-term loans, advances on export, transfers of trade receivables, to finance the working capital.

The average cost of indebtedness is benchmarked to the trend of the 1/3-month Euribor rates for short-term loans and of the 3/6-month Euribor rates for medium to long-term loans. Some interest rate hedges have been set in place for floating medium-long term loans.

Some existing medium/long-term loans contain certain financial covenant clauses in relation to the financial statements of the Group and to the financial statements of Tesmec USA; they are verified on an annual basis Only the "BNL Pool 2011-2017" loan is required to be verified on a semi-annual basis, which is carried out on results for the period duly re-measured on an annual basis On the basis of the half-year results and related re-measuring, it was necessary to reclassify in the short-term the residual position amounting to Euro 0.5 million.

Risks related to transactions with suppliers

The Tesmec Group adopts a supply policy aimed at diversifying the suppliers of components that are characterised by purchased volumes or by high added value. However, the termination for any reason of these supply relations could imply for the Group supply problems of such raw materials, semi-finished and finished goods as for quantity and time suitable for ensuring the continuity of production, or the provisioning could lead to time issues for achieving quality standards already acquired with the old supplier.

Disclosures: hierarchy levels of fair value measurement

In relation to financial instruments measured at fair value, the following table shows the classification of such instruments on the basis of the hierarchy of levels required by IFRS 13, which reflects the significance of the inputs used in measuring the fair value. The levels are broken down as follows:

level 1 quoted prices without adjustment recorded in an active market for measured assets or liabilities;
level 2 are inputs other than quoted prices included within Level 1, that are observable in the market, either directly (as in the case of prices) or indirectly (i.e. when derived from the prices);
level 3 inputs that are not based on observable market data.

The following table shows the assets and liabilities that are measured at fair value as at 30 June 2016, divided into the three levels defined above:

(Euro in thousands)	Book value as at 30 June 2016	Level 1	Level 2	Level 3
Financial assets:
Derivative financial instruments	3	-	3	-
Total non-current	3	-	3	-

Other available-for-sale securities	536	-	-	536
Total current	536	-	-	536

Total	539	-	3	536
Financial liabilities:
Derivative financial instruments	344	-	344	-
Total non-current	344	-	344	-

Total	344	-	344	-

16. Revenues from sales and services

The table below shows the breakdown of Revenues from sales and services as at 30 June 2016 and as at 30 June 2015:

		Half-year ended 30 June
(Euro in thousands)	2016	2015
Sales of products	59,640	77,574
Services rendered	14,572	8,481
	74,212	86,055
Changes in work in progress	(226)	(924)
Total revenues from sales and services	73,986	85,131

In the first six months of 2016, the Group consolidated revenues of Euro 73,986 thousand, marking a decrease of Euro 11,145 thousand compared to Euro 85,131 thousand in the same period of the previous year. In percentage terms, this increase represents a negative difference of 13.1%, which is split unevenly between the Group's three business areas. More specifically, an increase of +277.1% was recorded for the Rail segment, +28.0% for the Trencher segment and -51.7% for the Stringing equipment segment.

The increase in revenues in the Trencher segment is mainly a result of the contribution of the Marais Group and of the sales in the African continent.

17. Operating costs

The item operating costs amounted to Euro 72,547 thousand, a decrease of 3.9% compared to the previous year, a more than proportional increase with respect to the decrease in revenues (13.1%).

In the first six months of the previous financial year, they included non-recurring costs and revenues of Euro 2,139 thousand (consisting of non-recurring costs for services of Euro 494 thousand and Badwill of Euro 2,633 thousand) deriving from the acquisition of the Marais Group on 8 April 2015.

18. Segment Reporting

For management purposes, the Tesmec Group is organised into strategic business units on the basis of the nature of the goods and services supplied, and presents three operating segments for disclosure purposes:

Stringing equipment segment

stringing equipment for the installation of wires and laying of underground cables;
electronic devices and sensors for the management, monitoring and automation of power lines.

Trencher segment

high-powered crawler trenching machines for the linear excavation of oil pipelines, gas pipelines, water systems, telecommunication networks and drainage operations;
surface miners for earthworks, quarries and surface mines;
specialised excavation services;

Rail segment

rail equipment for the installation and maintenance of catenary wire systems and for special operations such as, for example, removing snow from the track.
last generation power unit.

The tables below show the income statement figures as at 30 June 2016 compared to those at 30 June 2015, broken down into three operating segments:

	Half-year ended 30 June
		2016				2015
(Euro in thousands)	Stringing equipment	Trencher	Rail	Consolidated	Stringing equipment	Trencher	Rail	Consolidated
Revenues from sales and services	22,176	49,453	2,357	73,986	45,877	38,629	625	85,131
Operating costs net of depreciation and amortisation	(19,653)	(44,740)	(2,233)	(66,626)	(37,655)	(32,404)	(826)	(70,885)
EBITDA	2,523	4,713	124	7,360	8,222	6,225	(201)	14,246
Amortisation and depreciation	(1,525)	(3,433)	(963)	(5,921)	(1,077)	(2,879)	(665)	(4,621)
Total operating costs	(21,178)	(48,173)	(3,196)	(72,547)	(38,732)	(35,283)	(1,491 )	(75,506)
Operating income	998	1,280	(839)	1,439	7,145	3,346	(866)	9,625
Net financial income/(expenses)				(2,718)				(769)
Pre-tax profit				(1,279)				8,856
Income tax				(31)				(2,362)
Net profit for the period				(1,310)				6,494
Profit / (loss) attributable to non-controlling interests				(14)				4
Group profit (loss)				(1,296)				6,490

Management monitors the operating income of its business units separately for the purpose of making decisions on resource allocation and performance assessment. Segment performance is assessed on the basis of operating income. Group financial management (including financial income and charges) and income tax is managed at Group level and are not allocated to the individual operating segments.

The following table shows the consolidated statement of financial position by business segment as at 30 June and as at 31 December 2015:

			As at 30 June 2016			As at 31 December 2015
(Euro in thousands)	Stringing equipment	Trencher	Rail	Not allocated	Consolidated	Stringing equipment Trencher		Rail	Not allocated	Consolidated
Intangible assets	10,484	3,719	5,057	-	19,260	4,537	3,664	5,626	-	13,827
Property, plant and equipment	12,589	51,435	123	-	64,147	11,456	53,792	104	-	65,352
Financial assets	3,125	682	-	83	3,890	4,187	692	371	-	5,250
Other non-current assets	915	3,211	101	6,314	10,541	146	2,775	78	5,925	8,924
Total non-current assets	27,113	59,047	5,281	6,397	97,838	20,326	60,923	6,179	5,925	93,353
Work in progress contracts	-	-	2,281	-	2,281	-	-	3,864	-	3,864
Inventories	14,302	45,513	334	-	60,149	12,580	45,865	446	-	58,891
Trade receivables	11,408	42,211	154	-	53,773	13,247	36,874	761	0	50,882
Other current assets	1,613	3,527	298	7,205	12,643	826	3,244	309	12,315	16,694
Cash and cash equivalents	-	-	-	28,815	28,815	-	-	-	21,204	21,204
Total current assets	27,323	91,251	3,067	36,020	157,661	26,653	85,983	5,380	33,519	151,535
Total assets	54,436	150,298	8,348	42,417	255,499	46,979	146,906	11,559	39,444	244,888
Shareholders' equity attributable to Parent Company Shareholders	-	-	-	49,491	49,491	-	-	-	54,262	54,262
Shareholders' equity attributable to non-controlling interests	-	-	-	1,604	1,604	-	-	-	1,615	1,615
Non-current liabilities	1,112	8,422	450	81,540	91,524	35	9,086	372	79,309	88,802
Current financial liabilities	-	-	-	61,232	61,232	-	-	-	45,254	45,254
Trade payables	10,588	20,777	1,334	-	32,699	15,820	22,248	981	-	39,049
Other current liabilities	1,380	8,293	324	8,952	18,949	531	6,135	277	8,963	15,906
Total current liabilities	11,968	29,070	1,658	70,184	112,880	16,351	28,383	1,258	54,217	100,209
Total liabilities	13,080	37,492	2,108	151,724	204,404	16,386	37,469	1,630	133,526	189,011
Total shareholders' equity and liabilities	13,080	37,492	2,108	202,819	255,499	16,386	37,469	1,630	189,403	244,888

9. Related party transactions

The following table gives details of economic and equity transactions with related parties. The companies listed below have been identified as related parties as they are linked directly or indirectly to the current shareholders:

	Half-year ended 30 June 2016				Half-year ended 30 June 2015
(Euro in thousands)	Revenues	Cost of raw materials	Cost of services	Other operating (costs)/ revenues, net	Financial income and expenses	Revenues	Cost of raw materials	Cost of services	Other operating (costs)/ revenues, net	Financial income and expenses
Associates:
Locavert S.A.	67	-	-	-	-	26	-	-	-	-
Bertel S.p.A.	-	-	-	-	-	78	-	2	4	16
SEP Moselle	-	-	-	-	-	23	-	-	-	-
Subtotal	67	-	-	-	-	127	-	2	4	16
Joint Ventures:
Condux Tesmec Inc.	1,117	-	-	89	26	2,039	-	-	91	6
Tesmec Peninsula	-	-	-	54	41	2,182	(147)	(28)	54	51
Marais Tunisie	-	-	-	-	-	-	(27)	-	-	-
Subtotal	1,117	-	-	143	67	4,221	(174)	(28)	145	57
Related parties:
Ambrosio S.r.l.	-	-	-	(7)	-	-	-	-	(7)	-
TTC S.r.l.	-	-	(21)	-	-	-	-	(32)	-	-
CBF S.r.l.	-	-	-	1	-	-	-	-	-	-
Ceresio Tours S.r.l.	-	-	(3)	-	-	-	-	(5)	-	-
Dream Immobiliare S.r.l.	-	-	-	(167)	(436)	-	-	-	(195)	(540)
CONAI	-	(1)	-	-	-	-	-	-	-	-
Lame Nautica S.r.l.	-	-	-	-	-	1	-	-	-	-
M.T.S. Officine meccaniche S.p.A.	1,965	-	2	5	-	969	-	2	45	-
Reggiani Macchine S.p.A.	33	(8)	(137)	143	-	-	(7)	55	7	-
Finetis SARL	-	-	-	-	-	25	-	-	-	-
COMATEL	-	-	-	-	-	9	-	-	-	-
C2D	-	-	-	-	-	-	-	-	(8)	-
Subtotal	1,998	(9)	(159)	(25)	(436)	1,004	(7)	20	(158)	(540)
Total	3,182	(9)	(159)	118	(369)	5,352	(181)	(6)	(9)	(467)

	30 June 2016					31 December 2015
(Euro in thousands)	Trade receivables	Current financial receivables	Non current financial payables	Current financial payables	Trade payables	Trade receivables	Current financial receivables	Non current financial payables	Current financial payables	Trade payables
Associates:
Locavert S.A.	12	-	-	-	-	12	-	-	-	-
Bertel S.p.A.	-	-	-	-	-	25	2,524	-	-	-
SEP Moselle	-	35	-	-	-	-	32	-	-	-
SEP Cergy	-	-	-	-	-	-	46	-	-	-
SEP Semofor 77	-	-	-	24	-	-	-	-	20	-
SEP Laison	-	6	-	10	-	-	-	-	10	-
SEP College	-	-	-	-	-	-	6	-	-	-
Subtotal	12	41	-	34	-	37	2,608	-	30	-
Joint Ventures:
Condux Tesmec Inc.	714	855	-	-	-	576	2,307	-	-	1
Tesmec Peninsula	39	3,765	-	-	-	44	4,690	-	-	7
Marais Tunisie	-	2	-	-	-	-	2	-	-	-
Marais Lucas	-	794	-	-	-	-	794	-	-	-
Marais Algerie SARL	-	-	-	-	-	1,102	-	-	-	-
Subtotal	753	5,416	-	-	-	1,722	7,793	-	-	8
Related parties:
Ambrosio S.r.l.	-	-	-	-	4	-	-	-	-	-
TTC S.r.l.	-	-	-	-	-	-	-	-	-	42
Ceresio Tours S.r.l.	-	-	-	-	1	-	-	-	-	-
Dream Immobiliare S.r.l.	-	1,096	14,078	1,270	141	-	1,096	14,743	1,211	52
Eurofidi S.p.A.	-	2	-	-	-	-	2	-	-	-
CONAI	-	-	-	-	1	-	-	-	-	1
Lame Nautica S.r.l.	-	-	-	-	-	1	-	-	-	-
M.T.S. Officine meccaniche S.p.A.	1,949	-	-	-	-	2,170	-	-	-	-
Reggiani Macchine S.p.A.	4	-	-	-	-	52	-	-	-	77
Fintetis S.r.l.	30	-	-	-	-	30	-	-	-	-
COMATEL	-	-	-	-	-	38	-	-	-	-
C2D	-	-	-	-	14	-	-	-	-	20
Subtotal	1,983	1,098	14,078	1,270	161	2,291	1,098	14,743	1,211	192
Total	2,748	6,555	14,078	1,304	161	4,050	11,499	14,743	1,241	200

Locavert S.A.: the French associate purchases normally trenchers/spare parts for rental business and carrying-out of excavation works at market prices and terms of payment;
Condux Tesmec, Inc.: the JV purchases stringing machines and equipment for sale on the American market at market prices and terms of payment;
Tesmec Peninsula WLL: the JV operates on the Saudi Arabian market supplying trencher machinery produced by the Group as well as on-site and after-sale support services. The income and cost items relate to the normal marketing activities of trenching machines;
Marais Algerie SARL: as a result of the sale of the equity investment and of the ensuing deconsolidation of the Joint Venture Marais Algerie Sarl, as at 30 June 2016, economic and equity transactions were reclassified to third parties;
Ambrosio S.r.l.: costs for services refer to the rental for the registered office of Milan;
Dream Immobiliare S.r.l.: financial income and expenses includes notional interests payable deriving from the recognition in accordance with IAS 17 of the Building of Grassobbio of Euro 436;
M.T.S. Officine meccaniche S.p.A.: revenues refer to sales of semi-finished products made by the Tesmec Workshop in Sirone;
Reggiani Macchine S.p.A.: costs for services mainly refers to costs related to users for a total amount of Euro 143 thousand.

Certification pursuant to Article 154-bis of Italian Legislative Decree 58/98

1. The undersigned Ambrogio Caccia Dominioni and Andrea Bramani, as the Chief Executive Officer and the Manager responsible for preparing the Company's financial statements of Tesmec S.p.A., respectively, hereby certify, also taking into consideration the provisions of Article 154-bis, paragraphs 3 and 4, of Italian Legislative Decree no. 58 of 24 February 1998:
the adequacy in relation to the characteristics of the business and
the actual application

of the administrative and accounting procedures for preparing the Interim Condensed Consolidated Financial Statements as at 30 June 2016.

1. We also certify that:
2.1 the Interim condensed consolidated financial statements as at 30 June 2016:
have been prepared in accordance with IFRS as endorsed by the European Union, as provided by the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;
correspond to the amounts shown in the Company's accounts, books and records;
provide a true and fair view of the equity, income and cash flow situation of the issuer and of its consolidated companies.
2.2 the interim report on operations refers to the important events that took place during the first nine months of the financial period and their impact on the Condensed Consolidated Financial Statements, together with a description of the main risks and uncertainties for the three remaining months of the financial period. The interim report on operations also includes a reliable analysis of information on significant transactions with related parties.

Grassobbio, 8 September 2016

Ambrogio Caccia Dominioni Andrea Bramani

Chief Executive Officer Manager responsible for preparing the Company's financial statements

INDEPENDENT AUDITOR'S REPORT

AI assistant

Tesmec — Interim / Quarterly Report 2016

4055_ir_2016-09-26_148684e1-d1d3-4b54-b683-4432e618c4d4.pdf

Tesmec S.p.A.

1. Introduction

Stringing equipment segment

Trencher segment

Rail segment

2. Macroeconomic Framework

3. Significant events occurred during the period

3.1 Impact of the acquisition of the remaining 60% of Bertel

3.2 Effects of the acquisition of CPT

4. Activity, reference market and operating performance for the first six months of 2016

Income statement

Revenues

a) Revenues by geographic area

b) Revenues by segment

Operating costs net of depreciation and amortisation

EBITDA

Financial Management

5. Summary of balance sheet figures as at 30 June 2016

A) Net working capital

B) Fixed assets

C) Net financial indebtedness

6. Management and types of financial risk

7. Atypical and/or unusual and non-recurring transactions with related parties

8. Group Employees

9. Other information

Treasury shares

Subsequent events and business outlook

Business outlook

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated statement of financial position as at 30 June 2016 and as at 31 December 2015

Consolidated income statement for the half-year ended 30 June 2016 and 2015

Consolidated statement of comprehensive income for the half-year ended 30 June 2016 and 2015

Statement of consolidated cash flows for the half-year ended 30 June 2016 and 2015

Statement of changes in consolidated shareholders' equity for the half-year ended 30 June 2016 and 2015

Explanatory notes

Accounting policies adopted in preparing the consolidated financial statements as at 30 June 2016

1. Company information

2. Reporting standards

Translation of foreign currency financial statements and of foreign currency items

3. Restatement of the figures of the previous financial year

4. Consolidation methods and area

5. New accounting standards

Amendments to IAS 19 - Defined contribution plans: employee contributions

Annual Improvements to IFRSs 2010–2012 Cycle

IFRS 2 Share-based payments

IFRS 3 Business Combinations

IFRS 8 Operating segments

IAS 16 Property, plant and equipment and IAS 38 Intangible assets

IAS 24 Related party disclosures

Amendments to IFRS 11 - Accounting for Acquisitions of interests in Joint Operations

Amendments to IAS 16 and IAS 38 - Clarification of Acceptable methods of depreciation and amortisation

Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

Amendments to IAS 27 Equity Method in separate financial statements

Annual Improvements to IFRSs - 2012–2014 Cycle

IFRS 5 Non-current assets held for sale and discontinued operations

IFRS 7 Financial Instruments: Disclosures

(i) Servicing contracts

(ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements

IAS 19 Employee benefits

Amendments to IAS 1 Disclosure Initiative

COMMENTS ON THE MAIN ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS

6. Intangible assets

7. Property, plant and equipment

8. Work in progress contracts

9. Inventories

10. Trade receivables

11. Financial receivables and other current financial assets

12. Share capital and reserves

13. Medium-long term loans

14. Interest-bearing financial payables (current portion)

15. Disclosure of derivative financial instruments

Management and types of risk

Interest rate risk

Exchange rate risk

Credit risk

Price risk

Liquidity/cash flow variation risks

Tesmec Interim / Quarterly Report 2016