Interim Report on Operations at 31 March 2015

Transcription

1 Interim Report on Operations at 31 March 2015 Retelit S.p.A. Registered Office at Viale Francesco Restelli 3/ Milan Share Capital 144,208, fully paid-up Register of Companies of Milan, Tax ID and VAT no Tribunal of Milan, REA (Economic Administrative Index) no Interim Report on Operations at 31 March

2 Contents Company Officers...3 Letter to Shareholders Interim Report on Operations General Information Group Structure Key Factors Influencing Operations during the Period Investments Analysis of Economic, Equity and Financial Management Summary Data Income Analysis Equity and Financial Analysis Business Outlook Consolidated Financial Statements Consolidated statement of financial position Consolidated statement of comprehensive income Consolidated statement of changes in shareholders equity Cash flow statement and Net financial position Notes to the Consolidated Financial Statements Criteria applied in preparing the Interim Report on Operations Consolidation Scope Major Items Contributing to the Result for the Period Comments on the Financial Position and Net Financial Position Related Party Transactions Events subsequent to the end of the period Right to opt out of the obligation to publish a disclosure in the event of significant operations Declaration of the Manager Responsible for Corporate Financial Reporting Interim Report on Operations at 31 March

3 Company Officers BOARD OF DIRECTORS Dario Pardi Chairman Federico Protto CEO Stefano Borghi Nicolò Locatelli Valentino Bravi Laura Guazzoni Carla Sora Laura Rovizzi Annunziata Magnotti BOARD OF STATUTORY AUDITORS Paolo Mandelli Chairman Silvano Crescini Regular Auditor Vittorio Curti Regular Auditor Paolo Martinotti Substitute Auditor Luca Zoani Substitute Auditor APPOINTMENTS AND REMUNERATION COMMITTEE Valentino Bravi (Chairman) Stefano Borghi Laura Rovizzi CONTROL, RISKS AND RELATED PARTIES COMMITTEE Laura Guazzoni (Chairwoman) Carla Sora Annunziata Magnotti Nicolò Locatelli EXTERNAL AUDITING FIRM Deloitte & Touche S.p.A. Notes: The Board of Directors was appointed by the Shareholders Meeting on 7 January 2015, and will remain in office until the date of the Shareholders Meeting which approves the financial statements for the year ending 31 December The Board of Statutory Auditors was appointed by the Shareholders Meeting of 3 May 2012, for the three-year period , and will remain in office until the date of the Shareholders Meeting which approves the financial statements for the year ending 31 December The auditing firm was appointed by the Shareholders Meeting of 3 May 2012 for the financial years ending from to i. Independent Directors: Valentino Bravi, Laura Guazzoni, Carla Sora, Laura Rovizzi, Annunziata Magnotti. Interim Report on Operations at 31 March

4 Letter to Shareholders Dear Shareholders, The Retelit Group has already initiated some of the operations envisaged in the Business Plan, ensuring the development of our business in accordance with the related strategic lines, which - as already announced - pursue on the one hand continuous growth in the Wholesale market of telecommunications services and its geographic expansion through investment in the AAE-1 submarine cable, and on the other strong integration of our offer with Data Center, Cloud and connectivity services as well as Value Added Services (VAS) intended for private companies and public administrations (Business). The consolidated results for Q recorded an improvement compared to the corresponding period of the previous year. There was also a slight improvement compared to the Business Plan thanks to the good performance of the Wholesale market, while the Business segment, although there is a first positive feedback from customers, is not yet having the expected development, also as a result of a continuing particularly unfavorable macroeconomic framework. In detail, the first three months of 2015 show: total revenues of 9.5 million, an increase compared to Q ( 8.9 million), however down compared to Q ( 9.9 million), which had benefited from significant revenues from the concession of rights of use to third parties (IRU) related to FTTC projects (Fiber To The Cabinet); gross operating profit (EBITDA) of 2.3 million, an improvement over 2.2 million in Q and 2.0 million Q4 2014; consolidated operating profit (EBIT) negative for 0.5 million, however better than the operating loss of 0.6 million recorded in Q and the operating loss of 6.4 million - also as a result of write-downs of fixed assets for 5.8 million - reported in Q4 2014; profit for the period of 3.5 million (while in Q1 and Q4 2014, losses were recorded for the period amounting respectively to 0.2 million and 6.1 million) which benefits for 3.5 million from financial income related to the fair value measurement at 31 March 2015 of the currency forward derivative instruments, subscribed for a total of USD 35,660 thousand in December 2014 and the remaining amount of which amounted to USD 33,310 thousand at the reporting date. It is pointed out that said financial income, accounted for according to IAS/IFRS international accounting standards, referring to a transaction that is intended to hedge payments in US currency of the submarine cable, could undergo positive or negative changes, also relevant, in the continuation of the year as a result of a possible appreciation or depreciation of the US currency. Further positive signs, especially for the medium term, come from the acquisition process of orders: in Q1 of the year the company s business activities generated new orders for a total value (measured in the first 12 months of contract) of 2.4 million against a churn rate lower than both plan figures and historical data. The consolidated net financial position at 31 March 2015 is positive for 20.5 million, an increase compared to the end of 2014 when it amounted to 15.7 million, and cash and cash equivalents amounted to 17.3 million, an increase compared to 15.6 million at 31 December Over the next few weeks, both the Board of Directors and the management team will be committed to concluding the medium to long term financing agreements with major banks, in order to ensure adequate Interim Report on Operations at 31 March

5 procurement of additional financial resources necessary for the continuation of the AAE-1 project and for the completion of the investments envisaged in the Business Plan, investments which are essential for its full realization also in the coming years. Of course we continue to operate in a context where the market uncertainties, which we monitor constantly, still have an important effect. However, the Retelit Group has the determination and the necessary requirements - first of all, its state-of-the-art technology infrastructure and the know-how and quality of its people - to play a leading role and achieve the ambitious targets that we all - with responsibility - have set. Aware of this, we will face the challenges ahead working to create value for our shareholders. Milan, 8 May 2015 Retelit S.p.A. Chairman of the Board of Directors Signed Mr. Dario Pardi Interim Report on Operations at 31 March

6 1 Interim Report on Operations 1.1 General Information The primary purpose of Retelit S.p.A. and its direct subsidiaries (hereinafter jointly the Retelit Group or the Group ) is to carry on business in the telecommunications industry. Publication of the Retelit Group s Interim Report on Operations at 31 March 2015 was authorized by a resolution of the Board of Directors on 8 May Group Structure Retelit S.p.A., established on 31 August 1999, with registered office in Milan, Viale Francesco Restelli 3/7, and fully paid-up share capital of 144,208,618.73, is listed on the Electronic Stock Exchange (MTA) organized and managed by Borsa Italiana S.p.A. Retelit controls 100% of e-via S.p.A., established on 29 June 1999, with registered office in Milan, Viale Francesco Restelli 3/7, and fully paid-up share capital of 109,173, Retelit USA LLC, whose establishment was approved by the Board of Retelit S.p.A. on 13 June 2014 with a share capital of USD 1.00 registered in the State of Delaware (USA), is wholly owned by Retelit S.p.A. Currently, Retelit USA LLC has not yet developed transactions, has not concluded contracts and does not hold assets and liabilities sufficient to achieve the characteristics of relevance/materiality required by the IFRS framework. On 20 April 2015, the Board of Directors of Retelit S.p.A. resolved to liquidate the company Retelit USA LLC. Interim Report on Operations at 31 March

7 1.3 Key Factors Influencing Operations during the Period With regard to the most significant events that occurred during the quarter, the following is reported. The ordinary Shareholders Meeting of 7 January 2015 appointed the new Board of Directors of the Company. The Board of Directors, composed of 9 members, will remain in office until the date of the Shareholders Meeting called to approve the financial statements at 31 December On 12 January 2015, the Board of Directors of Retelit S.p.A. checked the independence requirements of the Independent Directors and established the Appointment and Remuneration Committee and the Control and Risks Committee. On 19 January 2015, the Board of Directors of Retelit S.p.A. appointed Federico Protto as CEO and General Manager. The Shareholders Meeting of 29 January 2015 resolved contrarily to the proposals of the previous Board of Directors regarding: the share capital increase of up to 25,000 thousand to be offered in subscription and, pursuant to article 2441, paragraph 5, Civil Code, to the qualified foreign investors GEM Global Yield Fund LLC SCS and therefore, excluding the option right under article 2441, paragraph 1, CC; free allocation to GEM Global Yield Fund LLC SCS, pursuant to article 2441, paragraph 5, CC, and therefore, excluding the option right under article 2441, paragraph 1, CC, of warrants containing the right to subscribe Retelit S.p.A. ordinary shares and divisible share capital increase in exchange for cash for a maximum amount of 5,000 thousand, to service the possible exercise of the warrants. the issuance of a maximum of 20,000,000 convertible bonds into Retelit S.p.A. ordinary shares coupled with warrants, to be offered for subscription, in accordance with article 2441, paragraph 5, CC, of the qualified foreign investor KBC Telco Infrastructure Pty Ltd and, therefore, excluding the option right under article 2441, paragraph 1, CC, for the divisible share capital increase in exchange for cash for the amount of maximum 10,000,000 to service the possible conversion of the convertible bonds into Retelit S.p.A. ordinary shares; for the divisible capital increase in exchange for cash for the amount of maximum 20,000 thousand to service the possible exercise of the said warrants bearing the right to subscribe Retelit S.p.A. ordinary shares. Consequently, in recent months, the Board of Directors has initiated negotiations with some banks in order to obtain the financial resources necessary to cover the needs arising from the AAE-1 project and from the realization of the planned investments on the proprietary infrastructure in Italy. On 30 March 2015, the Board of Directors of the Company approved the Business Plan, which envisages the implementation of four areas over the five years: Consolidation and development of the Wholesale market of telecommunications services; Development of connectivity services and Value Added Services (VAS) for the Corporate market and PA; Development of Data Center and Cloud services; Continuity on AAE-1 submarine cable project. In 2019, the objectives of the Plan of the Retelit Group include: Revenues equal to approx. 70 million with a CAGR of approx. 14%; EBITDA equal to approx. 25 million and EBITDA Margin equal to approx. 36%; Investments accumulated in the 5 years equal to 114 million; Interim Report on Operations at 31 March

8 Net financial position positive for approx. 25 million. More specifically, the 2015 Plan includes: Revenues between 39 and 41 million; EBITDA between 9 and 10 million. The Business Plan is an expression of the strategic direction of the new Management focused on: the enhancement of the Group s historic areas of coverage; the consolidation and development of the Wholesale market for telecommunications services with approximately 8,800 km of fiber-optics, 9 metropolitan networks and 18 Data Centers; the development of new activities with greater growth potential, such as connectivity and VAS for the Corporate and Public Administration market, and on the expansion of the Data Center and Cloud. The Business Plan also envisages the continuity of the investment in the consortium for the construction of the AAE-1 submarine cable, approved by the previous Board of Directors. On 30 March 2015, the Board of Directors conferred to the Chairman of the Board of Directors Dario Pardi operating proxies for the development of the strategy and Cloud services offer envisaged in the Business Plan. On 31 March 2015, the Group - through its subsidiary e-via manifested its interest in active participation in Italy s ultra broadband strategy described in the document issued by the Presidency of the Council of Ministers on 3 March In support of this manifestation of interest, the Group notified to the Ministry for Economic Development its intention to make investments, in line with the Business Plan, which fall within the definition of infrastructural interventions as set out in article 33, paragraph 7-ter of Law Decree no. 179 of 2012 which provides: a) fiber-optic connections to business and public administration sites in direct and wholesale mode; b) fiber-optic connections FTTN (Fiber To The Node) under wholesale to sites (ex. towers, poles or pylons) hosting third-party equipment for the provision of broadband and ultra-broadband services in wireless technology (ex. WiMAX, LTE); c) fiber-optic connections under wholesale to street cabinets used by third parties for the provision of broadband or ultra-broadband services in FTTC technology (Fiber To The Cabinet); d) realization of new network sections and laying new fiber-optic cable to extend its coverage; e) realization of sites, networks and terrestrial backhauling links to service traffic from national and international submarine cables. Participation in Italy s broadband strategy would allow the Group to benefit from any reliefs provided by the regulations. 1.4 Investments Investments made in Q amounted to 2,930 thousand and relate to: 2,210 thousand for one installment related to the investment in the AAE-1 consortium. The related invoice was settled in April The total investment in the AAE-1 consortium at 31 March 2015 totaled 9,741 thousand; 646 thousand for investments in infrastructure of fiber-optic network and Data Center. The Retelit Group has expanded the coverage of its network both through the realization of new connections and through the acquisition of third-party network. The total size of the network increased by 54 km Interim Report on Operations at 31 March

9 compared to December 2014, thanks to various projects and interventions, such as the beginning of the expansion of the MAN of Reggio Emilia, used for a FTTC project (Fiber To The Cabinet), and fiberoptic connections for the backhauling of numerous mobile telephony sites. The current extension of the fiber-optic network is equal to 8,804 km (includes 818 km of sections with overlapping of dark fibers and infrastructure leased from third parties, therefore the overall distance totals 7,986 km) of which 2,140 km in urban areas; 74 thousand for other investments. Interim Report on Operations at 31 March

10 1.5 Analysis of Economic, Equity and Financial Management Summary Data 31/03/ /03/2014 var. (valori in migliaia di euro) Valore della produzione % Valore aggiunto (1) % Margine operativo ante ammortamenti, oneri finanziari e imposte (EBITDA) % Risultato operativo (EBIT) (458) (616) 26% Utile / (perdita) del periodo (227) n.a. Margine netto percentuale (2) 36,3% -2,5% 31/03/ /12/2014 Patrimonio netto di pertinenza degli azionisti della Capogruppo n. n. Organico medio 72,7 64,8 Rapporto di indebitamento (O/P)* -15,5% -12,2% Indebitamento netto/totale capitale impiegato (O/Q)* -18,4% -13,9% (*) vedi tabella posizione finanziaria netta (1) differenza tra valore della produzione e acquisti di materie prime, servizi esterni e altri costi operativi (2) Utile/(perdita) d'esercizio/valore della produzione Interim Report on Operations at 31 March

11 1.5.2 Income Analysis (valori in migliaia di euro) 31/03/ /03/2014 var. servizi di telecomunicazione % concessioni diritti d'uso e manutenzione di rete % altri prodotti e servizi % ricavi dell'attività caratteristica % altri ricavi % Valore della produzione % The value of revenues at 31 March 2015 amounted to 9,549 thousand, compared with 8,917 thousand in the corresponding period of 2014, showing an increase of 7%. The analysis of the various revenue components shows an increase of 6% for telecommunications services, which amounted to 7,999 thousand compared to 7,568 thousand in the corresponding period of Revenues from concessions for rights of use and network maintenance amounted to 1,490 thousand, compared to 1,195 thousand in the corresponding period of 2014, showing an increase of 25% mainly due to the new fiber-optic connections of the sites of mobile operators released in the period. Below is a graphical representation of the breakdown by market of revenues from ordinary operations at 31 March ricavi attività caratteristica per mercato Wholesale 95% Business 5% Interim Report on Operations at 31 March

12 EBITDA at 31 March 2015 amounted to 2,296 thousand, an improvement of 7% compared to a value of 2,152 thousand in the same period in This result benefited from an increase in the value of production and was impacted by an increase in customer activation costs and personnel costs following improvements to the technical and commercial structures aimed at implementing the activities envisaged in the Business Plan. Directors fees amounted to 243 thousand (267 thousand in 2014) and include the cost of the supervisory bodies. Below is a graph analysis that highlights the evolution of EBITDA at 31 March 2015 compared to figure of the previous period. EBIT for the period was negative for 458 thousand, an improvement compared to -616 thousand in the corresponding period of EBIT was affected by an increase in depreciation and amortization of tangible and intangible assets determined as follows: 218 thousand due to investments made in the previous year; -56 per thousand due to the write-down following impairment at 31 December 2014; -38 thousand due to lower amortization in 2015 of investments whose useful life ended in During the period, no provisions were made in contrast to as occurred during the corresponding period of 2014, when provisions amounted to 138 thousand. Below is a graph analysis that highlights the evolution of EBIT at 31 March 2015 compared to figure of the previous period. Interim Report on Operations at 31 March

13 Profit for the period of 3,466 thousand, in addition to benefiting from 610 thousand of financial income, includes 3,495 thousand of financial income related to the fair value measurement at 31 March 2015 of the currency forward derivative instruments, subscribed for a total of USD 35,660 thousand in December 2014 and the remaining amount of which amounted to USD 33,310 thousand at the reporting date. It shall be noted that although the currency forward derivative instruments were subscribed to hedge payments in US currency of the submarine cable, they do not meet the criteria set by international accounting standards to be treated in hedge accounting according to international accounting standard IAS 39. Net of the effect of the financial income related to currency forward derivative instruments, profit for the period would amount to 152 thousand, however a significant improvement compared to the corresponding figure of the previous period. Taxes for the period calculated under current regulations amount to 181 thousand. Interim Report on Operations at 31 March

14 Comparison with the consolidated financial results of Q As an additional analysis, a comparison is provided between the results at 31 March 2015 and the results of Q Q Q (migliaia di euro) Ricavi Altri proventi Totale ricavi e proventi operativi Acquisti di materie prime e servizi esterni (4.632) (5.625) Costi del personale (1.413) (1.451) Altri costi operativi (1.207) (1.186) RISULTATO OPERATIVO ANTE AMMORTAMENTI E SVALUTAZIONI Ammortamenti e svalutazioni delle attività materiali ed immateriali (2.754) (8.523) Altri accantonamenti e svalutazioni - 98 RISULTATO OPERATIVO (458) (6.444) Proventi finanziari Proventi finanziari da strumenti derivati Oneri finanziari (0) (102) Risultato prima delle imposte (5.981) Imposte sul reddito di periodo (181) (80) Imposte differite Utile / (Perdita) di periodo (6.061) The value of revenues realized in Q recorded a decrease of 362 thousand (equal to a decline of 3.6%) compared to Q equal to 9,863 thousand. This change was mainly due to lower revenues ( -232 thousand) from the sale of IRU - Indefeasible Right of Use (concessions to third parties of long-term rights of use on our network), primarily as a result of the many releases of sites linked to the FTTC (Fiber To The Cabinet) and FTTN (Fiber To The Node) projects that occurred in Q The value of other income realized in Q shows a decrease of 332 thousand compared to Q data of 380 thousand, which had benefited from the income from the redefinition of credit positions with customers and updating of estimates of some debt positions for wayleave expenses. Interim Report on Operations at 31 March

15 Despite lower revenues, EBITDA at 31 March 2015 shows an improvement compared to Q (+15.9%, or +315 thousand) in view of the fact that in Q4 of the previous year, strategic consultancy was accounted for in the income statement - consultancy mainly related to the activities performed for the identification and preparation of financing submitted and not approved by the Shareholders Meeting on 29 January for a total of 1,593 thousand ( 76 thousand in Q1 2015). Part of this improvement is absorbed by the provision in Q of the fixed and variable remuneration envisaged for the Board of Directors for a total of 230 thousand, which was offset by a release of 119 thousand in Q4 2014, following the cancellation of the variable remuneration of the Directors, previously set aside, for the failure to achieve the goals set. EBIT in Q was negative for 458 thousand, however a significant improvement compared with the same negative result of 6,444 thousand in the previous quarter, which was significantly impacted as a result of impairment, by write-downs of tangible and intangible assets related to the network infrastructure for 5,783 thousand. In the absence of such impairment, EBIT in Q would have amounted to a loss of 661 thousand Equity and Financial Analysis (valori in migliaia di euro) 31/03/ /12/2014 variazione Attività finanziarie - correnti (3.269) (124) - cassa e altre disponibilità liquide (17.267) (15.583) Indebitamento netto/eccedenze nette di cassa (A) (20.536) (15.707) 31% Totale patrimonio netto ( B ) Totale capitale impiegato ( C ) % Rapporto di indebitamento (A/B) -15,5% -12,2% Indebitamento netto/totale capitale impiegato (A/C) -18,4% -13,9% (valori in migliaia di euro) 31/03/ /03/2014 Flusso finanziario netto generato (assorbito) dall'attivita' operativa Flusso monetario generato (assorbito) dall'attivita' di investimento (2.952) (1.578) Flusso di cassa complessivo Disponibilita' liquide all'inizio dell'esercizio Disponibilita' liquide al termine dell'esercizio Cash and cash equivalents of the Group at 31 March 2015 amount to 17,267 thousand as compared with the figure recorded at 31 December 2014, of 15,583 thousand. Current financial assets amounting to 3,269 thousand refer to the current portion of the fair value measurement at 31 March 2015 of the currency forward derivative instruments, subscribed for a total of USD 35,660 thousand in December 2014 and the remaining amount of which amounted to USD 33,310 thousand at the reporting date. In Q1 2015, the company generated cash for a total of 1,684 thousand compared to 144 thousand in the same period of the previous year. 1.6 Business Outlook The performance of the business in the early months of the year recorded a slight improvement compared with the forecasts of the Plan. In Q1 of the year, sales activities generated new orders for a total value Interim Report on Operations at 31 March

16 (measured in the first 12 months of the contract) of 2.4 million. This figure is higher than as estimated in the Plan. The churn rate in Q also improved compared to the figures of the Plan. Thus, a benefit is expected in terms of increased sales in the coming periods. Of this 2.4 million of new orders, 5% refers to the Business segment. The Group continues to implement actions to strengthen its positioning in the Wholesale market of infrastructures and fiber-optic broadband data transmission services and to develop business in the area of Data Center, Cloud and Value Added Services (VAS) to companies and public entities, in accordance with the Business Plan. With regard to the AAE-1 project, negotiations will continue that initiated several weeks ago with leading international operators potentially interested in reserving in advance part of the capacity and band-width that will be available to Retelit as soon as the submarine cable becomes operational. By the first half of July 2015, medium to long-term loan agreements are expected to be closed with top financial institutions, in order to ensure the availability of adequate additional financial resources to carry on the AAE-1 project and to complete the investments envisaged in the Business Plan. Interim Report on Operations at 31 March

17 2 Consolidated Financial Statements 2.1 Consolidated statement of financial position (migliaia di euro) 31/03/ /12/2014 Attività non correnti: Attività materiali Infrastruttura di rete Altre immobilizzazioni materiali Immobilizzazioni materiali in corso Totale attività materiali Attività immateriali Concessioni, licenze, marchi e diritti simili Altre immobilizzazioni immateriali Totale attività immateriali Attività finanziarie non correnti Attività per imposte anticipate Altre attività non correnti Totale altre attività non correnti TOTALE ATTIVITA' NON CORRENTI Attività correnti: Attività finanziarie correnti Crediti commerciali, crediti vari e altre attività correnti Crediti tributari, crediti IVA e imposte dirette correnti Cassa e altre disponibilità liquide equivalenti TOTALE ATTIVITA' CORRENTI TOTALE ATTIVITA' Patrimonio netto: Capitale emesso Riserve di patrimonio netto e risultati d'esercizio (11.779) (15.244) Patrimonio netto e risultati di esercizio TOTALE PATRIMONIO NETTO Passività non correnti: TFR e altri fondi relativi al personale Fondi per rischi e oneri futuri Ricavi differiti non correnti TOTALE PASSIVITA' NON CORRENTI Passività correnti: Debiti commerciali, vari e altre passività correnti Debiti tributari, debiti IVA e imposte dirette correnti Ricavi differiti correnti TOTALE PASSIVITA' CORRENTI TOTALE PASSIVITA' Interim Report on Operations at 31 March

18 2.2 Consolidated statement of comprehensive income 31/03/ /03/2014 (migliaia di euro) Ricavi Altri proventi Totale ricavi e proventi operativi Acquisti di materie prime e servizi esterni (4.632) (4.430) Costi del personale (1.413) (1.225) Altri costi operativi (1.207) (1.111) RISULTATO OPERATIVO ANTE AMMORTAMENTI E SVALUTAZIONI Ammortamenti e svalutazioni delle attività materiali ed immateriali (2.754) (2.629) Altri accantonamenti e svalutazioni - (138) RISULTATO OPERATIVO (458) (616) Proventi finanziari Proventi finanziari da strumenti derivati Oneri finanziari (0) (10) RISULTATO PRIMA DELLE IMPOSTE (227) Imposte sul reddito del periodo (181) - Imposte differite - - Utile / (Perdita) di periodo (227) Utile (perdita) riconosciuti a Patrimonio Netto che non transiteranno da Conto economico Utile (perdita) riconosciuti a Patrimonio Netto che transiteranno da Conto economico Totale utile / (Perdita) d'esercizio (227) 2.3 Consolidated statement of changes in shareholders equity capitale sociale riserva sovrapprezz o azioni altre riserve utili/(perdit e) portati a nuovo utili (perdite) riconosciuti a Patrimonio Netto riserve da consolida mento TOTALE patrimonio netto 01/01/ (40.719) (87) Utile (perdita) di periodo (7.881) (155) (8.036) Aumento capitale sociale - 31/12/ (48.599) (242) Utile (perdita) di periodo Aumento capitale sociale - 31/03/ (45.133) (242) Interim Report on Operations at 31 March

19 2.4 Cash flow statement and Net financial position (migliaia di euro) 31/03/ /03/2014 FLUSSO MONETARIO DA ATTIVITA' OPERATIVA Utile (perdita) (227) Rettifiche per: Ammortamenti Svalutazioni 33 Variazione del fondo T.F.R Variazione del fondo rischi ed oneri futuri (35) 35 Interessi e oneri finanziari corrisposti/ (ricevuti) (4.105) (389) Imposte del periodo 181 FLUSSO MONETARIO GENERATO (ASSORBITO) DALL'ATTIVITA' OPERATIVA (Incremento)/Decremento crediti commerciali e altre attività correnti (2.683) (319) (Incremento)/Decremento crediti tributari, crediti IVA e imposte dirette (2) (12) Incremento/(Decremento) debiti fornitori e ricavi differiti (23) Incremento/(Decremento) Debiti tributari, debiti IVA e imposte dirette correnti (102) (93) VARIAZIONE NETTA DELLA ATTIVITA' E PASSIVITA' CORRENTI E ALTRE VARIAZIONI (447) FLUSSO FINANZIARIO NETTO GENERATO (ASSORBITO) DALL'ATTIVITA' OPERATIVA FLUSSO MONETARIO DA ATTIVITA' DI INVESTIMENTO (Investimenti) in attività materiali (2.856) (1.119) (Investimenti) in attività immateriali (74) (428) Investimenti netti in altre attività non correnti (22) (31) FLUSSO MONETARIO GENERATO (ASSORBITO) DALL'ATTIVITA' DI INVESTIMENTO (2.952) (1.578) FLUSSO MONETARIO DA ATTIVITA' DI FINANZIAMENTO (Incremento)/Decremento netto attività finanziarie Variazioni capitale sociale e riserve - FLUSSO MONETARIO GENERATO (ASSORBITO) DALL' ATTIVITA' DI FINANZIAMENTO FLUSSO DI CASSA COMPLESSIVO DISPONIBILITA' LIQUIDE ALL'INIZIO DELL'ESERCIZIO DISPONIBILITA' LIQUIDE AL TERMINE DELL'ESERCIZIO Interim Report on Operations at 31 March

20 COMPOSIZIONE Saldo al Saldo al A. Cassa D. Liquidità E. Crediti finanziari correnti I. Indebitamento finanziario corrente 0 0 J. Indebitamento finanziario corrente netto I-E-D (20.536) (15.707) N. Indebitamento finanziario non corrente 0 0 O. Indebitamento finanziario netto J+N (20.536) (15.707) Totale patrimonio netto (P) Totale patrimonio impiegato (Q) Rapporto indebitamento O/P -15,5% -12,2% Indebitamento netto/totale capitale impiegato (O/Q) -18,4% -13,9% 2.5 Notes to the Consolidated Financial Statements Criteria applied in preparing the Interim Report on Operations The amounts shown in the Interim Report on Operations are expressed in thousands of Euro unless otherwise stated. For the use of this method, the rounding-off criteria was applied to the figures shown in the various tables contained in this Interim Report on Operations. The amounts in the statements herein have been rounded and therefore may not add up to the totals shown. The accounting and consolidation standards adopted in the preparation of the interim report at 31 March 2015 are consistent with those applied in the annual consolidated financial statements at 31 December The Interim Report on Operations of the issuer and its subsidiaries was prepared in accordance with the provisions of article 154-ter Financial reports of the Consolidated Finance Act, introduced by Legislative Decree 195/2007 and IAS 34 (Interim Financial Statements). As allowed by said standard, this interim report does not include all the information required in annual consolidated financial statements; therefore, it shall be read together with the consolidated financial statements of the Retelit Group prepared for the year The preparation of this document required the application of accounting standards and methods that are sometimes based on subjective evaluations and estimates, linked to historical experience, and assumptions that are from time to time considered reasonable and realistic depending on the related circumstances and the findings available. The application of said estimates and assumptions affect the amounts reported in the balance sheet, income statement and cash flow statement and disclosures. The year-end values of the items of the consolidated financial statements for which said estimates and assumptions were used may differ from those reported in this document due to the uncertainty that characterizes some assumptions and conditions on which the estimates are based. This Interim Report on Operations, as permitted by the relevant legislation, has been prepared on a consolidated basis and is not subject to audit by Deloitte & Touche S.p.A. Interim Report on Operations at 31 March

21 The comparative period proposed is 31 December 2014 for balance sheet items and 31 March 2014 for the income statement and cash flow statement. The company s net financial position is compared with the figure at 31 December Consolidation Scope The consolidation scope is composed as follows: Imprese incluse nell'area di consolidamento Sede Valuta Capitale % di possesso Retelit S.p.A Milano - MI Euro ,73 Capogruppo e-via S.p.A. Milano - MI Euro ,00 100% Retelit S.p.A. exercises control as defined in the new IFRS 10 both over e-via S.p.A. and over Retelit USA LLC. However, since Retelit USA LLC has currently not yet developed transactions, has not concluded contracts and does not hold assets and liabilities sufficient to reach the characteristics of relevance/materiality required by the IFRS framework, the Group has decided to exclude said investment from the consolidation scope at The ownership of investments does not imply the existence of risks other than those identified in the consolidated financial statements at The Group s consolidated financial statements at 31 March 2015 were therefore prepared on the basis of the equity, economic and financial situations of the Parent Company and e-via S.p.A Major Items Contributing to the Result for the Period The economic results for the interim period are not affected by significant effects of the seasonal nature of the business. At 31 March 2015, total operating revenues and income amounted to 9,549 thousand, compared with 8,917 thousand in the corresponding period of 2014, showing an increase of 7%. Specifically, telecommunications services, core activity of the group, show an increase of 6% and revenue services from the sale of rights to use, primarily as a result of the new fiber-optic connections in the sites of mobile operators released during the period, show an increase of 25%. Other income amounts to 48 thousand compared to 95 thousand in the same period of 2013 and includes non-recurring items. The value of the item Purchases of raw materials and external services in Q amounted to 4,632 thousand compared to 4,430 thousand in the corresponding period of The change is mainly due to the increase in interconnection costs following the increase in revenues for telecommunications services. The increase in personnel costs compared to 2014 is due to the strengthening of the technical and commercial structures aimed at the implementation of activities envisaged in the Business Plan. The average number of employees increased from 60 in Q to 72.7 in Q Operating income before depreciation and amortization in the quarter was positive for 2,296 thousand, an improvement of 7% compared to 2,152 thousand reported in the same period of the previous year. Interim Report on Operations at 31 March

22 Total depreciation went from 2,629 thousand in March 2014 to 2,754 thousand in March 2015, mainly due to investments made in the previous year net of the benefit, for 56 thousand, and the effect of the write-down following impairment at 31 December Operating income for the first quarter was negative for 458 thousand compared to a negative value of 616 thousand in the corresponding period of Financial income at 31 March 2015 amounted to 610 thousand compared to 400 thousand in Financial income refers to 240 thousand for interest accrued on the receivable due from Linkem S.p.A. after the contract of sale of the WiMAX business, 358 thousand for exchange rate differences and the remainder for other income. Financial income from derivative instruments refers to the effect of the fair value measurement at 31 March 2015 of the currency forward derivative instruments, subscribed for a total of USD 35,660 thousand in December 2014 and the remaining amount of which amounted to USD 33,310 thousand at the reporting date. It shall be noted that although they were subscribed to hedge payments in US currency of the submarine cable, they do not meet the criteria set by international accounting standards to be treated in hedge accounting according to international accounting standard IAS 39. The net income for the quarter is positive for 3,466 thousand compared to a loss in Q of 227 thousand. Income taxes for the period amounted to 181 thousand, of which 155 thousand calculated as the IRES on the profit of the period and 26 thousand of IRAP Comments on the Financial Position and Net Financial Position At 31 March 2015, tangible assets amounted to 106,536 thousand, an increase compared to 105,518 thousand at year-end The increase, net of the depreciation process of assets, is mainly due to investments related to the construction of the submarine cable through the AAE-1 consortium ( 2,210 thousand). The total investment in the AAE-1 consortium at 31 March 2015 amounted to 9,741 thousand and is included in the item Assets in progress. Non-current financial assets amounted to 10,394 thousand and relate to 10,003 thousand for the portion of non-current receivables from Linkem for the sale of the business unit WiMAX and the remainder for the non-current portion of the receivable related to the effect of the fair value measurement at 31 March 2015 of the currency forward derivative instruments. Current financial assets amount to 8,133 thousand and refer to 4,863 thousand for the current portion (including accrued interest) of the receivable from Linkem for the sale of the business unit WiMAX and 3,269 thousand for the current portion of the receivable related to the effect of the fair value measurement at 31 March 2015 of the currency forward derivative instruments. It shall be pointed out that according to the payment plan of the receivable from Linkem, the next tranche for a total value of 5,500 thousand, including interest, is due in November The consolidated net financial position at 31 March 2015 is positive for 20,536 thousand, while at 31 December 2014 it amounted to 15,707 thousand. The financial position benefits from recognition of Interim Report on Operations at 31 March

23 current financial receivables resulting from the effect of fair value measurement at 31 March 2015 of currency forward derivative instruments. Cash and cash equivalents of the Group at 31 March 2015 amount to 17,267 thousand as compared with the figure recorded at 31 December 2014, of 15,583 thousand. The increase in cash and cash equivalents during the period was influenced by investments that absorbed a total of 2,952 thousand compared with a net cash flow from operating activities of 4,636 thousand. 3 Related Party Transactions The table below summarizes the main income statement and balance sheet values of the Retelit Group with related parties. Transactions between Retelit Group companies and related parties are conducted on an arm s length basis and in the Group s economic interest. Crediti commerciali, crediti vari e altre attività correnti Debiti commerciali, vari e atre passività correnti Acquisto di materie prime e servizi esterni Società (Euro/000) (Euro/000) (Euro/000) Site S.p.A Totale Acquisto Infrastruttura (Euro/000) 15 3 Valore in bilancio Incidenza percentuale 1% 1% 0% Site S.p.A., through its parent company HBC S.p.A., owns a shareholding in the Retelit Group capital of more than 2% and has mainly realized the networks on behalf of e-via S.p.A. 3 0% 4 Events subsequent to the end of the period In recent months, the Board of Directors has initiated negotiations with some banks in order to obtain the financial resources necessary for the continuation of the AAE-1 project and for the completion of the investments envisaged in the Business Plan. With regard to credit and loans, which are at various stages of negotiation, at the date of this report the following is stated: Banco Popolare Soc. Coop. resolved in favor of the subsidiary e-via S.p.A. an unsecured loan of 2 million with total duration of 48 months, a line of 1 million for draw-downs of hot money with a maturity of 12 months from the date of completion and, until revocation, a line of 250 thousand for the opening of credit in the bank account and a line of 2.75 million for advances on invoices in Italy. The above credit facilities are subject to the subscription by the parent company Retelit S.p.A. of patronage for 7 million. The resolution shall not commit Banco Popolare until the signing of the contractual documentation and the foregoing guarantee. Banca Monte dei Paschi di Siena S.p.A. announced that it had approved the granting of a line of hot money for 7.5 million with a maturity of 30 June 2016, the draw-downs of which will however be subject to the channeling of trade flows of Retelit and the favorable opinion of MPS Capital Service regarding the possible support for the medium to long term funding. Even in this case, the resolution will become binding following the signing of the loan contract. Interim Report on Operations at 31 March

24 Unicredit S.p.A. and Banca Popolare di Milano Soc. Coop. approved in equal portions a loan of 15 million in favor of e-via S.p.A. with a duration of 5 years from the signing, including 18 months grace period. The term sheet that was sent by the agent bank, in addition to the transfer by way of guarantee for the receivable from Linkem S.p.A. (the Group will however maintain availability in terms of use of related cash), indicates as guarantees to protect the banks a special privilege on part of the fiber-optic network for a value of at least 40 million and a surety on first demand issued by the parent company Retelit S.p.A. Included are also covenants of commitment to perform/not perform certain transactions and financial covenants related to EBITDA, net financial debt and investments and commitment of e-via to subscribe derivative financial instruments to hedge the interest rate risk for a notional amount of at least 50% of the value of the loan. In addition, the term sheet provides that in case of assumption of medium to long term loans in excess of 10 million, consent of the banks shall be required. The resolution and related economic conditions will become binding upon signing the loan contract. Intesa Sanpaolo S.p.A. is considering the possibility of providing the company e-via S.p.A. with a medium to long term loan syndicated with other banks. It is currently not known whether and to what extent the bank may grant such loan. With reference to the above, the Directors intend to come to a complete definition of the financial resources as soon as possible and however by mid-july It shall also be noted that the same banks and other banks have expressed their interest in order to analyze and negotiate further actions to meet the cash requirements for the entire explicit period of the Plan and that currently none of the banks have formalized commitments. By resolution dated 20 April 2015, the Board delegated to the CEO the powers to carry out all acts required for the winding up of the US subsidiary Retelit USA LLC. To date, the records do not show that the aforesaid company has performed any significant transaction or that it owns financial resources. In April 2015, an additional amount of 2,210 thousand was paid to the AAE-1 consortium for the realization of the related submarine cable considering the invoice received and accounted for in Q Right to opt out of the obligation to publish a disclosure in the event of significant operations Pursuant to article 3 of Consob Resolution no of 20 January 2012, on 14 December 2012 the Board of Directors of Retelit S.p.A. resolved to make use of the derogation envisaged in articles 70, paragraph 8 and 71, paragraph 1-bis, of Consob Regulation no /99 (as amended). 6 Declaration of the Manager Responsible for Corporate Financial Reporting The undersigned Antonio Maconi, in his capacity as Manager Responsible for Corporate Financial Reporting of Retelit S.p.A., declares, in accordance with Article 154-bis, paragraph 2, of the Consolidated Law on Finance, that, to the best of his knowledge, the accounting data contained in this document corresponds to the documented results, books and records. Interim Report on Operations at 31 March

25 Retelit S.p.A. Manager Responsible for Corporate Financial Reporting Signed Mr. Antonio Maconi Retelit S.p.A. The Chairman Signed Mr. Dario Pardi Interim Report on Operations at 31 March