Half-year report of Safe Bag Group as of 30 June 2017 CONSOLIDATED HALF-YEAR REPORT OF THE SAFE BAG GROUP AS OF 30 JUNE 2017

Transcription

1 Half-year report of Safe Bag Group as of 30 June 2017 CONSOLIDATED HALF-YEAR REPORT OF THE SAFE BAG GROUP AS OF 30 JUNE

2 Half-year report of Safe Bag Group as of 30 June 2017 TABLE OF CONTENTS A. THE SAFE BAG GROUP 1. Presentation of the Group page 4 2. Corporate structure page 9 3. Company bodies page Safe Bag in Borsa AIM page 11 B. REPORT ON OPERATIONS 1. Operational trends and business outlook of the Safe Bag Group page Economic and financial performance of the Safe Bag Group page Other information page 24 C. CONSOLIDATED FINANCIAL STATEMENTS OF THE SAFE BAG AS OF 30 JUNE Consolidated Financial Statements page Explanatory Notes to the Consolidated Financial Statements page 35 2

3 The Safe Bag Group A. THE SAFE BAG GROUP 3

4 The Safe Bag Group 1. Presentation of the Group The Safe Bag Group is a multinational company which operates in the airport retail market; the latter has a customer basin of 3.7 billion travellers across the world and is expected to continually grow. The market for baggage protection is a niche of the more extensive Airport Retail market. The supply of the service is concentrated with the Landside sector prior to check-in given that it primarily targets passengers that still have check-in baggage. Founded in 1997 by Rudolph Gentile, a manager with proven experience in the field of air transportation, Safe Bag is one of the pioneers of baggage wrapping services worldwide. The Safe Bag Group is currently the leader in Europe and a reference model for all companies in the sector, both in terms of quality and innovation. Strategic vision, along with significant investments in technology, infrastructure and training, has enabled the company to rapidly and significantly increase service quality standards and the level of professionalism of its staff. In the near future, Safe Bag will continue to invest in innovation and growth in order to consolidate its leadership in the industry. International operations Logo celebrating the 20 year anniversary of Safe Bag. As of 30 June 2017, Safe Bag is operational in 84 sales points across 25 airports. Warsaw is not yet operational. Of the 25 airports, 21 are in Europe, including 6 in Italy and four in North America. In Europe, the Group is not only present in Italy but also in France, Portugal, Switzerland and Poland. The airports where the Group has operated in the first six months of 2017 are listed below: Italy (via Safe Bag Spa) - Venice, Bologna, Naples, Genoa, Olbia and Rome; France (via FSB Service Sarl) - Paris Charles De Gaulle, Paris Orly, Nice, Lyon, Marseille, Toulouse, Bordeaux; Portugal (through Flysafeb Unipessoal Lda) - Lisbon, Port, Faro, Ponta Delgada and Madeira; 4

5 The Safe Bag Group Switzerland (via Safe Bag Sagl) - Geneva and Zurich; United States (via Safe Bag USA LLC) - Miami; Canada (through Safe Bag Canada Inc.) - Montreal, Vancouver and Ottawa Poland (through Safe Bag Polska SP. Z O.O.) - Warsaw (airport not yet operational but with which an agreement has already been stipulated) Safe Bag SpA has been listed in AIM Milan London Stock Exchange as of September It is the only company of its sector that is listed within a stock exchange. Services The portfolio of offers of Safe Bag is the most extensive and innovative of the industry and at a global level. The value proposition includes baggage protection services, the sale of travelling accessories and the Weight and Save service. The Baggage Protection service consists of: the wrapping of the baggage through a special anti-fire and biodegradable film which protects it from potential damages deriving from transportation and theft; a traceability service using SITA and 24/7 customer service; accessory indemnity guarantee in the case of delayed delivery after 24 hours, damages and partial/total theft which is combined with an insurance (service in collaboration with the AXA Assistance group); The offer of Safe Bag is integrated with the sale of travel accessories for the comfort and safety of passengers during air travel, selected from global leading brands. The Weigh and Save Service is implemented with a weight scale which allow for double weighing and a single payment. In addition, Safe Bag offers within certain airports additional services to passengers that include baggage deposits, baggage shipments, concierge services, etc. Development of Technological Products During the course of 2016, the Safe Bag Group has continued to invest in the development of its commercial offer, particularly within the mobile sector. Safe Bag is completing the development of an Iphone and Android App named Safe Bag 24, which will allow passengers to purchase and benefit from Safe tracking and security services from any part of the world. 5

6 The Safe Bag Group Sales Points The Safe Bag Group internally designs its sales point, relying on the collaboration of trusted suppliers and using top quality materials. Each sales point has peculiar features, and adapts to the spaces and needs of airports. Sales points vary by size and variety of product offers, and are primarily of three types: Wrapping machines (Stand Alone) Kiosks with signs and shop windows for travel goods Traditional sales points with an extensive range of products and services for baggages and travellers 6

7 The Safe Bag Group All types of sales points are strategically located within the departures areas near check-in zones for departing passengers; they are created in order to maximize visibility and the propensity for purchases. Communications and Marketing Safe Bag invests a significant amount of resources in order to constantly improve its image and that of the Group. Safe Bag has been capable of creating a strong brand identity that emotionally connects passengers and attracts their attention. The logo is a key success factor: Safe Bag locations at the airport are elegant, luminous and attractive for passengers as well as in perfect harmony with the airport environment. Significant resources are invested in advertising through different channels: press, media, social networks, mailings, co-marketing. Safe Bag marketing efforts focus on both web-social media as well as "traditional" media, both inside and outside the airport (specialized magazines, advertising panels,...). Personnel Our human resources have been the true engine of the company's success over the years, as well as its guarantee for future success. Safe Bag invests significant resources in order to attract, grow, and retain the best talent that combine technical expertise with exceptional customer and sales skills. These requirements are achieved through the following factors: Rigorous selection procedures Numerous hours of training in the classroom and in the field Performance incentive systems Programs for international promotions and mobility 7

8 8 The Safe Bag Group

9 The Safe Bag Group Hardware and Software The wrapping machines are of the latest generation and are entirely designed and manufactured within the Safe Bag plant in Gallarate. The innovative technology enables operators to fully and safely wrap their baggage in less than 30 seconds. The wrapping machines are equipped with a sophisticated proprietary software (Revenue Control System) as well as a system of sensors which allow for the recording of economic and operational performance in real time. 9

10 The Safe Bag Group 2. Shareholding structure The Safe Bag Group is composed of a series of subsidiary companies which are controlled by the parent company Safe Bag SpA. The overall structure is depicted below: Safe Bag S.p.a. 100% Safe Bag Polska Sp. z o. o. 100% 100% 100% 100% 100% Flysafeb FSB Service Sarl Safe Bag USA Llc Maleta SeguraSl* Unipessoal Lda Safe Bag Sagl 100% Safe Bag Canada Inc. 74,5% Safe Wrap of Florida JV, Llc 99,0% Safe Bag Brazil Ltda 1,0% * It should be noted that the Spanish subsidiary Maleta Segura Sl is not part of the scope of consolidation given that it is not operational and is in liquidation. 10

11 The Safe Bag Group 3. Company bodies The composition of company bodies is illustrated below. BOARD OF DIRECTORS Chairman Chief Executive Officer Non-executive director Non-executive director Independent director Rudolph Gentile Alessandro Notari Roberto Mosca Giuseppe Gentile* Roberta Pierantoni BOARD OF STATUTORY AUDITORS Chairman Standing Auditors Alternate Auditors Stefano Baruffato Antonio Spizzichino/Enrico Orvieto Michelangelo Rossini/Armando Pontecorvo AUDITING COMPANY Auditing company Audirevi NOMAD Nominated Advisor Baldi & Partners * Commander Giuseppe Gentile was co-opted by the Board of Directors on 16 May 2017 following the resignation of the director Gabriella Minerva for the reasons given in the press release issued on 16 May

12 The Safe Bag Group 4. Safe Bag on Borsa Italia - AIM Safe Bag was listed in Piazza Affari (Milan Stock Exchange) in September 2013 within the segment of AIM Italia AIM Italia is the market of Borsa Italiana dedicated to SMEs which allows access to stock markets with a simplified listing process and currently includes about a fifth of listed companies. Over the past 12 months (see graph below, data referring to 31 August 2017), the Safe Bag stock reported growth of 372.9%, fluctuating between a minimum of 0.84 Euro (13 September 2016 ) and a maximum of 6.67 Euro (31 May 2017), thereby outperforming AIM Italia whose performance was equal to 27.2 %%. As of the start of 2017, the stock price has increased by 340.2%, outperforming the AIM Italia index which reported a growth of 21.14%. Information on volumes, turnover velocity and volatility Volume dynamics, volatility and turnover velocity (see graphs below) an element which is occasionally problematic for a segment such as Aim Italia - were favorable for Safe Bag whose capital turnover in the last 12 months (on an annual basis) was 164.6% against an average of 34.2% for AIM Italy and 116.3% for MTA. 12

13 The Safe Bag Group Stock market trends and the Peer Group An analysis of trends in the peer group (refer to the tables below) highlights the fact that the performance of Safe Bag at 1 month, six months and 12 months was always better than the identified basket. 13

14 B. REPORT ON OPERATIONS 14

15 1. Operational trends and business outlook for the Safe Bag Group In the first half of 2017, the Safe Bag Group improved its economic performance with respect to the previous year as well as with respect to the industrial plan by means of: 1. Commercial agreements which aim to improve the service offered to customers; 2. The stipulation of new airport agreements or the extension of current ones; The details of each action are described below. 1. Commercial agreements which aim to improve the service offered to customers. In May 2017, Safe Bag announced that it had stipulated a three-year commercial agreement with Aviation Services SpA, the top Italian baggage handle which provides ground assistance services for passengers and aircraft at the airports of Rome Fiumicino, Roma Ciampino, Naples Capodichino, Bologna G. Marconi and Catania Fontanarossa, for a total of 21 million passengers in According to this agreement, Safe Bag will provide Aviation Services S.p.a. with a service of support and assistance in the handling of baggage tracking requests addressed to all Lost & Found offices of Aviation Services S.p.a. The latter, for its part, will collaborate with Safe Bag S.p.A. in order to optimize the logistical activities related to the finding and return of all baggage traced by Safe Bag itself within any of the airport airports where Aviation Services is operational. 2. The stipulation of new airport agreements or the extension of current ones In April 2017, Safe Bag communicated that it took over the position of the local operator as of 1 May within the international airport of Vancouver for the supply of its integrated offer of services for travellers (including the baggage wrapping and tracking service, jointly referred to as the Premium Package, Travel Goods and Save and Weigh services). The Vancouver airport is currently - after Toronto - the second largest in Canada with more than 17 million passengers (cumulative) in 2016, up by 6.8% in January and February 2017 compared to the same two-month period of Following the entrance in Montreal in June 2016, Vancouver - an important North American west coast airport - represents the second most important airport in Canada for Safe Bag. In May 2017, Safe Bag announced that it had renewed its integrated offer of solutions (baggage wrapping, traceability through Safe Bag 24 and the sale of Travel Goods) at the Italian airport of Olbia. Olbia airport, where Safe Bag has been present since 2002, is Sardinia's second most important airline hub, growing in the first three months of 2017 by 4% compared to the same period of Again in May 2017, Safe Bag won the tender for the supply of its integrated service offer for travelers within Warsaw s Frédéric Chopin Airport, beginning with activities starting next October and with a slight delay compared to the previously announced date of 1 July (see press release of 22 May 2017); this was implemented following the request of the airport, and is of indefinite duration. Warsaw is the most important airline hub in Poland with circa 13 million passengers (cumulative) in 2016, reporting strong growth in the first quarter of 2017 of % compared to the same quarter of In June 2017, Safe Bag undersigned a contract for the supply of its integrated service offering for travelers within Ottawa Macdonald-Cartier International Airport with the start of operations scheduled for June

16 The Ottawa airport following Toronto, Montreal and Vancouver (Safe Bags already operates in the last two) - is the fourth largest in Canada with circa 5 million passengers (cumulative) in 2016 Following the renewals/openings of 2017, the duration of the license portfolio of Safe Bag (average duration of licenses weighted on the basis of revenues) was 4.0 years as of 30 June The primary events which occurred after 30 June 2017 are illustrated below: In July 2017, Safe Bag, announced that - following the analysis and verification of offers submitted in connection with the tender for subcontracting areas allocated for "baggage wrapping" activities within the Italian airports " Leonardo da Vinci" in Fiumicino and "GB Pastine" of Ciampino - it has been awarded Lot no. 1 of the tender. For the sake of completeness, it should be noted that the call for tenders provided for the subdivision of the areas allocated for "baggage wrapping" activities into two different "Lots"which were to be awarded separately, while specifying that Lot no. 2 could have been assigned to the party awarded Lot no. 1 only under certain conditions. As a result of the awarding of the scores given in the call for tenders, Safe Bag was: - ranked first in the ranking for Lot no. 1 (which includes 6 sales points in Terminal 3, Landside Departures within Leonardo da Vinci Airport in Fiumicino); - ranked first in the ranking for Lot no. 2 (which includes: 3 sales points in Terminal 1, Landside Departures within Leonardo da Vinci Airport in Fiumicino; 1 sales point in the GB Pastine Ciampino Airport's Landside Departure Area; 1 sales point within the Terminal 5 Landside Departures within the Leonardo da Vinci Airport in Fiumicino); Given that - in relation to Lot no. 2 - Safe Bag was the only bidder, the company Aeroporti di Roma S.p.A. concluded that the conditions set out in the call for tenders for assignment of both Lots to the same party were not met, it decided to call a new tender for Lot no. 2 alone. In July 2017, Safe Bag communicated to have received from SAVE SpA an official communication for the subcontracting assignment of the areas assigned to the supply of its integrated offer of solutions (baggage wrapping and tracking through Safe Bag 24 and the sale of Travel Goods) for an additional five years within the Marco Polo airport of Venice. In July 2017, Safe Bag reported that the APP SafeBag24 had been launched and is available on both Android and IOS systems. The SafeBag24 service is an innovative Lost & Found Concierge passenger service that connects airports and airlines around the globe in order to fully assign the search and re-routing process of lost baggage to one party. In case of baggage loss, SafeBag24 undertakes to return the baggage to its owner within 24 hours of the complaint filed at the Lost & Found office. The customer by inserting his or her personal data as well as the lost baggage identification data within the app - can receive real-time updates of the baggage status and its route to the address specified by the passenger. In addition, the passenger can interface not only with the app but also with a real 24/7 call center. The app also acts as an actual assistant during the trip. In fact, once the user has registered his/her flight, the customer is alerted in real time of any delays, cancellations and gate changes in addition to the changes in baggage claim carousel changes at the destination. With the 'Follow My Flight' feature, the customer can share the travel itinerary with his/her friends, particularly the arrival which will be constantly updated in real time. 16

17 With the 'Flight History' feature, the customer has a historical record of miles traveled with each airline as well as the year of travel and geographic areas that were visited: a useful tool for tracking travels. The service includes insurance in collaboration with the AXA Assurance partner and provides for reimbursement from the 25th hour - ranging from 100 per day up to a maximum of 1,000 for delayed delivery as well as a maximum of 4,000 in the case of certain baggage loss baggage and 100 in the case of partial theft of content. The launch of the new service was supported by an important advertising campaign which is currently underway in partnership with Publitalia within the network of the Mediaset group and within the Facebook and Instagram social media. In September 2017, Safe Bag announced that it had signed a temporary contract for the supply of its integrated service offer for travelers within Rio de Janeiro's International Airport (Galeão - "Antônio Carlos Jobim"). This contract provides for the initiation of activities by the end of September 2017 and will have a temporary duration until the new tender that will be held in The Rio de Janeiro airport is the largest in Brazil with circa 16 million passengers (cumulative) in 2016, and growing in With regard to operational and financial dynamics, the first half of 2017 was characterized by a series of operations which aims to more effectively structure the company and prepare it for future challenges. The details of each operation are described below. In January 2017, Safe Bag reported that no Beneficiary had sent within the deadline - a declaration of adherence to the Stock Option Plan (whose Regulations are published on the Company's website: "Investor Relations" section) deliberated on 7 April 2016 by the Board of Directors and on 30 June 2016 by the Shareholders' Meeting (as reported in the press releases of 8 April and 30 June 2016). The main reasons for the lack of participation in the Stock Option Plan (the "Plan") include the disadvantageous tax treatment of the Stock Options combined with the lock up provided for in the Plan's Regulations. This circumstance resulted in the definitive cancellation of the Plan, with the consequent adoption by the Board of Directors of resolutions pertaining to the revocation of the share capital increase for the Plan itself, and approved by the Board on 30 June On 24 February 2017, the extraordinary shareholders meeting deliberated to reduce the share capital pursuant to Article 2445 of the Italian Civil Code and to amend Article 5 of the Articles of Association in order to incorporate the change in share capital resulting from its decrease. The reasons for this resolution of the shareholders meeting are based on the intention to optimize the composition of shareholders equity of Safe Bag SpA, thereby adjusting it to the activities, structure and needs of the Company. The creation of suitable available reserves also favors an easier 17

18 distribution of future dividends from attained profits, in accordance with Article 2433 of the Italian Civil Code, thereby guaranteeing a remuneration of the shareholders investment. Within the same shareholders meeting, the shareholders also deliberated to revoke the resolution for increase of the share capital approved on 30 June 2016 for the purposes of the Stock Option Plan given that the beneficiaries of the latter opted to not participate. On 16 May 2017, and following the resignation of the director Gabriella Minerva, the Board of Directors of Safe Bag deliberated, in accordance with the law, in favor of the co-option of Commander Giuseppe Gentile as non-executive director. Commander Gentile was previously the founding shareholder and CEO of the airlines Air Europe and Air Italy and, in more recent years, held the position of CEO of the companies of the Meridiana Group. He is therefore not only an experienced professional with expert knowledge of the airport and air transportation markets but also retains the skills, contacts and authority to aid management in its pursuit of the ambitious growth objectives that will be presented at the time of approval of the Industrial Plan of the Company. In June 2017, Safe Bag approved the Industrial Plan. INTRODUCTION- FINANCIAL/ECONOMIC TARGETS The objectives of the Plan for the two business areas of Safe Bag (the "traditional" wrapping business and integrated assistance services for travelers) for 2020 are as follows: o o o o o Revenues of 49.6 million; Ebitda of 11.1 million, equivalent to 22% of revenues; Ebit of 9.5 million; Net profit of 6.3 million; NFP (Liquid assets) equal to ( 10.8 million) In order to more effectively pursue these objectives and to more effectively take advantage of - and efficiently organize - growth opportunities, the Board has also planned to transfer the company branch dedicated to providing assistance services from Safe Bag to a newly founded joint stock company named SOSTRAVEL.COM. Primary forecast information relative to the two company branches is provided below. SAFE BAG S.P.A. FOCUS ON GROWTH AND DEVELOPMENT: o NEW AIRPORTS Following the acquisition of the two recent international licenses in Vancouver and Warsaw, the Group currently operates in 24 airports located in seven different countries: Italy, France, Portugal, Switzerland, United States, Canada and Poland. For prudential purposes, only two new additional licenses were introduced in the first two years of the Plan ( ) while four new licenses were added in the second part of the Plan ( ). The primary airport licenses in the portfolio expire after 2020, as can be deduced from the average weighted duration of licenses as of 31 December 2016, and equal to 3.8 years. 18

19 o o o o EXPANSION OF THE OFFER AT THE SALE POINTS At the sales points where the Group is operational, additional baggage-related airport services will be added: baggage storage, baggage delivery, baggage release and depart, weigh and save, sale of travel accessories. OPERATIONAL EFFICIENCY The Group believes that it will manage growth with an essentially unchanged number of staff members while continuing to invest in the automation of processes and the development of production software. MERGER AND ACQUISITION The company has identified and started negotiations with certain industry players in several geographic areas across the globe with the aim of promoting a "build up" process by external means and which has not been included in the Plan for prudential reasons. TRANSFER TO THE MTA ( MERCATO TELEMATICO AZIONARIO, ELECTRONIC EQUITY MARKET) AND/OR NASDAQ Finally, the plan provides for the transfer of Safe Bag SpA to MTA and/or a double listing on NASDAQ by 2020 after taking into account the significant weight of activities in North America (44% of total revenues between Canada and the United States) as well as additional growth opportunities in both Americas. Consolidated economic/financial forecasts for (business wrapping line): Dividend policy In the light of the forecasts reported above, the Board has finally defined a dividend policy for the years of the Plan which aims to achieve a balanced mix of remuneration for shareholders and support for growth. From this perspective, the payout ratio for the years was set at 35% of distributable earnings. For the current year, the Board has proposed to the Shareholders' Meeting that an extraordinary dividend of 1 million Euro be distributed. In June 2017, Safe Bag s shareholders unanimously approved the distribution of an extraordinary dividend of up to 1 million Euro, equal to Euro per share (gross of amounts deductible by law). 19

20 The aforementioned dividend was paid on 26 July 2017, with a detachment date set for 24 July 2017 and a record date (date of entitlement to payment) set for 25 July 2017 for a total amount of Euro 1,000,000. The NFP of the Plan obviously takes account the dividend distributions for shareholders during the time period of the Plan as well as investments required for growth, the spin-off of the newly founded SOSTRAVEL.COM S.p.A. and a prudential conversion of warrants. SOSTRAVEL.COM S.P.A. The Plan provides for the spin-off of software as a Service (SAAS) activities as well as of the baggage tracking assistance services (Safe Bag 24 service) into a Newco SpA which will be named SOSTRAVEL.COM. The operation aims, on the one hand, to create an independent organizational structure which will exercise activities that differ from the traditional wrapping service and, on the other hand, aims to separate the necessary investments required for its growth. The operation will provide for the proportional allocation of SOSTRAVEL.COM shares to all Safe Bag shareholders by means of technical modalities that are currently in the process of being defined. The Board hopes that the operation can be successfully completed by 2017 and that the entity which is spun off can retain the characteristics of innovative SMEs; the aim is to initiate the procedure for admission of the new entity within the AIM market. SOSTRAVEL.COM will provide its customers with an e-commerce platform which can be accessed both through the WEB and the APP, and where they will be able to purchase the best and most innovative assistance services for travelers. o o o SERVICES Safe Bag 24 Lost & found Concierge - Tracking Insurance; Legal Assistance in case of delays, flight cancellations and overbooking; Health insurance; travel insurance; Real Time Flight Info. MARKET The digital features of the SOSTRAVEL.COM sales channels allow for instant access to the global travel market (3.5 billion passengers). The potential market for the proposed services is also much wider than the target relative to the wrapping services typically offered by Safe Bag (3% of travelers): these services, in fact, typically reach an average of 20% of total travelers. GROWTH AND DEVELOPMENT STRATEGY The first customer basin which the new company will target are the two million passengers who each year utilize wrapping services at the Safe Bag sales points. Advertising, promotion and marketing campaigns are now being planned within primary TV and web channels, and agreements will be stipulated with partners operating in the tourism sector, such as airlines, tour operators and holiday/flight portals. The main growth will be based on a nation-based growth strategy with focus on major European nations. 20

21 2. Economic/financial performance of the Safe Bag Group The Group closed the year ended on 30 June 2017 with results that exceeded forecasts: EBITDA at 1.9 million Euro and Net Income at 1.1 million Euro. Consolidated economic/financial results as of 30 June 2017: (figures in Mil. ) Consolidated first half at June, Budget (annual) Change 1H2017 1H % 2017 Revenues 13,0 11,9 1,1 10% 29,9 EBITDA 1,9 1,5 0,4 31% 5,0 EBIT 1,7 1,1 0,6 51% 4,2 Net Profit 1,1 0,8 0,2 29% 2,7 Change 1H2017 FY % NFP (Cash) 0,7 0,5 0,2 46% -0,9 Short Term NPF (Cash) -1,5-2,8 1,3-47% Weighted average duration of the concession portfolio (years) 4,0 3,8 0,20 5% A summary comparison between 30 June 2016 and 30 June 2017 is provided below: REVENUES of 13 million Euro, up 10%; EBITDA increased from +1.5 to +1.9 million Euro, up by 0.4 million Euro (+ 31%); EBIT increased from +1.1 to +1.7 million Euro, up by 0.6 million Euro (+ 51%); 21

22 NET INCOME increased from +0.8 to +1.1 million Euro, up by 0.3 million euro (+ 29%); NFP increased from 0.5 to 0.7 million Euro, an increase of 0.2 million Euro (+ 46%) compared to the same figure as at 31 December 2016; Weighted average duration of the contract portfolio: four years (does not take into account airports that are not yet operational such as Warsaw, nor tender 1 of Rome Fiumicino and Rio de Janeiro) Primary consolidated economic results as of 30 June 2017 Consolidated revenues as of 30 June 2017 amounted to 13 million Euro, an increase of circa 10% compared to 30 June 2016, including four percentage points attributable to Canada - whose revenues refer to six months of operations, unlike the previous year when the business had just started - and six percentage points of growth given a constant scope of consolidation within the markets of France and Portugal. An analysis of revenues by geographic area confirms, in the first half of 2017, extensive international diversification, with the United States as the Group's first market with approximately 41% of revenues, France as the second market with approximately 31% of revenues, and Italy and Portugal respectively with 9%. These are followed by Switzerland with circa 6% and finally Canada with approx. 4%. EBITDA amounted to approximately 1.9 million Euro, an increase of 0.4 million Euro (+ 31%) compared with the same figure for This increase is mainly attributable to the improved performance of the airports in France, Portugal and Canada. EBIT was positive for approximately 1.7 million Euro, up by 0.6 million Euro (+ 51%) This result was not only due to the elements affecting the aforementioned EBITDA but also depreciation, amortization, provisions and write-downs totalling 0.4 million Euro as well as the deconsolidation of the Spanish subsidiary which resulted in a proceed of 0.2 million Euro. Net profit was positive by circa 1.1 million Euro, up by Euro 0.3 million Euro (+ 29%). Net financial indebtedness (NFP) changed by circa 0.2 million Euro compared to 31 December 2016 and increased from 0.5 million Euro to 0.7 million Euro, mainly due to the change in trade policy which led to a 22

23 decrease in payables to suppliers of circa 1.5 million Euro. If NFP calculations were to include cash deposits with banks for the issue of sureties at airports as well as all security deposits at the airports where the company operates, the Adjusted NFP would be positive (liquid assets) by approximately 14 thousand Euro. 23

24 Consolidated financial statements as of 30 June 2017 Consolidated income statement Figures in Euro (Consolidated Balance Sheet) 30-giu-17 % 30-giu-16 % Change Change % Revenues % % % Other sales % % % Total Revenues ,0% ,0% % Cost of sales % % % Services % % % Personnel costs % % (70.177) (2%) Other costs % % ( ) (77%) EBITDA ,5% ,3% % Amortization and depreciation ( ) -2% ( ) -2% (67.995) 26% Writedowns % 0 0% % Provisions (70.358) -1% (99.978) -1% (30%) EBIT ,7% ,2% % Financial income and expenses (net) ( ) -2% ( ) -2% (72.564) 35% Revaluations/writedowns of fin. assets 0 0% 0 0% 0 0% Profit (loss) before tax ,5% ,5% % Tax ( ) (2%) (69.550) (1%) ( ) -362% NET PROFIT ,1% ,9% % (utile(/perdita dipertinenza di terzi ( ) Group Net Profit ,3% ,9% % Consolidated balance sheet Figures in Euro (Consolidated Balance Sheet) 30-giu dic-16 Intangible assets Tangible assets Immobilizzazioni finanziarie (A) Net fixed capital Inventories Trade receivables Other assets Trade paybles ( ) ( ) Other liabilities ( ) ( ) (B) Working Capital ( ) ( ) (C) Total provisions ( ) ( ) (D)=(A)+(B)+(C) Net capital employed Cash and cash equivalents Current financial receivables Financial liabilities ( ) ( ) (E) Net Financial Position ( ) ( ) (F) Equity (G)= (F)- (E) Total Sources

25 Cash Flow Figures in Euro Profit (loss) for the period before tax Adjustments for: - non monetary elements - inventory change ( ) (65.628) - non monetary elements - net writedown (revaluation) of fixed assets non monetary elements - provisions/(reversals) (81.441) non monetary elements - amortization and depreciation Profit (loss) for the period before tax Cash flow generated by operations - income taxes Other financial (income)/expenses without cash flow 0 0 Total Change in working capital Change in trade receivables ( ) Change in trade paybles ( ) ( ) Change in other receivables and other paybles ( ) ( ) Other Changes ( ) Change in several indeminities and provisions ( ) (97.357) Change in other provisions and deferred taxes 0 0 Total ( ) ( ) Cash flow from operating activities (1) Investments: - Tangible ( ) ( ) - Intangible ( ) Net cash flow arising from the business combination: Financial ( ) Cash flow from investing activities (2) ( ) Financial Assets Increases/(decreases) in financial debt ( ) Dividends on minorities ( ) ( ) Capital increase from Warrant Safe Bag Expenses for capital transaction 0 0 Other changes in equity (0) (1.314) Cash flow from financing activities (3) ( ) Cash flow from operating activities ( ) Change in cash and cash equivalents (1+2+3) ( ) Cash and cash equivalents at the beginnings of the period Cash and cash equivalents at the end of the period

26 3. Other information This section supplies information in compliance with the provisions of Article Operational risks and uncertainties The company and the Group's organizational divisions are particularly attentive in identifying and monitoring typical risks of the business, with the dual aim of providing management with tools suitable for adequately managing and maximizing the protection of corporate assets. In compliance with the disclosure requirements introduced by Legislative Decree no. 32 of 22 [missing date] 2007 (which incorporated Directive 51/2003/EC), it is necessary to identify the risks associated with the operations of Safe Bag, and which currently can be identified as the following: risk related to competition and the entry of new operators in the sector of reference as well as competition in terms of price and quality of service (underlying technology); market risk due to potentially negative economic conditions in national and international markets as well as due to geopolitical reasons; liquidity risk, exchange rate risk, interest rate risk: refer to paragraph 5 of the explanatory notes to the financial statements. In terms of operational risks, these may result from the inadequacy of processes and company systems in supporting core business functions. For the Group, operational risks essentially refer to the possibility of losing essential information for company operations due to problems in baggage wrapping machines or in the management of the IT system or data management. The Group monitors this type of risk both at the level of front line structures and of specific operating units. Current legal disputes Trial initiated by Safe Bag S.p.a. against SEA, ADR and True Star Group s.p.a. (Court of Milan G.r. no /2014). As has been repeatedly noted (even at the time of approval of previous financial statements), Safe Bag S.p.A. had summoned by means of a summons dated 13 June Aeroporti di Roma s.p.a. ( ADR ), SEA - Società Per Azioni Esercizi Aeroportuali ( SEA ) and Truestar Group s.p.a. ( Truestar ) in court in order to obtain, amongst other items: (i) a confirmation of the illegitimate practices applied by SEA and ADR, in collaboration with the other summoned party Truestar, for the purposes of preventing the access of Safe Bag SpA within the markets of the airports of Rome Fiumicino, Milan Malpensa and Milan Linate; (ii) an order preventing SEA and ADR from proceeding with the direct assignment of the areas of the airport grounds dedicated to baggage wrapping services to Truestar; and (ii) compensation for damages which Safe Bag SpA sustained as a result of these actions. More specifically, the actions of the summoned companies were contested from the perspective of a violation of the norms pursuant to Articles 101 and 102 of the Treaty on the Functioning of the European Union and of Articles 2 and 3 of Law no. 287 of 10 October 1990 as well as in terms of alleged actions of unfair competition and/or offences pursuant to Article 2043 of the Italian Civil Code. In settling this trial, the Court of Milan, by means of sentence no of 5 July 2017, overall admitted the requests outlined above and, in particular: (i) ascertained and declared that as of 2007, SEA, Società Per Azioni Esercizi Aeroportuali, has undertaken even in collaboration with True Star Group SpA actions within 26

27 the airports of Malpensa and Linate which constitute a violation of Articles 101 and 102 of the Treaty on the Functioning of the European Union and of Articles 2 and 3 of Law no. 287 of 10 October 1990; (ii) prohibited SEA, Società Per Azioni Esercizi Aeroportuali, from directly assigning sole rights agreements to TrueStar Group SpA for the areas of the airport grounds dedicated to baggage wrapping services, while also providing for a penalty of Euro 200, per violation. On the other hand, the Court of Milan dismissed the request of Safe Bag relative to compensation for damages sustained as a result of the aforementioned anti-competitive actions given that, with regard to this point, the claims of the Company were partly lacking in evidence with regard to demonstrating the effectively sustained damages. With regard to this specific aspect, the Company is conducting a full evaluation of the possibility/utility of contesting the sentence in question which certainly appears reasonable in terms of ascertaining the violation of antitrust regulations on the part of the summoned parties (regulations resulting in the consequent requirement for airport managers to assign areas dedicated to baggage wrapping only after conducting competitive tenders); it is less reasonable in terms of the failure to admit the aforementioned compensation claim. R&D activities The Company and the Group continue their R&D activities pertaining to the project for the design and production of the new Safe Bag 24 product as well as others which will be marketed in upcoming years. For more details, refer to the presentation of the Group in the first chapter. Activities linked to the ISO 9001:2008 certification The company has received the ISO 9001:2008, ISO 22301:2012, BS 0HSAS 18001:2007 certifications and, on the basis of the implemented audits, Safe Bag continues to comply with the requirements of these certifications. Organizational model The parent company has adopted the Organizational, Management and Contorl Model ( Model 231 ) pursuant to Legislative Decree no. 231 of 8 June Safety and workplace environment The company Safe Bag has created a system for management of worker safety and health, in accordance with the provisions of Legislative Decree no. 81 of 9 April 2008 and its subsequent amendments and supplements as well as with OHSAS, thereby allowing the organization to control risks and optimize worker safety in the workplace. During the course of the year, the company has continued to strengthen its company security system through a careful review of the measures that are deemed opportune to guarantee improvement in security levels over time. Operations with related parties Operations with related parties essentially concern the exchange of goods, the supply of services, the supply and use of financial resources with subsidiary, associated and other controlled companies and the optimization of Group treasury management. These relations fall within the ordinary operations of the company and are implemented at normal market conditions, ie at conditions which are established between 27

28 independent parties. The parent company Safe Bag SpA retains shareholdings in the following companies: FSB Service Sarl, a company incorporated under French law with a share capital of Euro 50, Flysafeb Unipessoal LDA, a company incorporated under Portuguese law with a share capital of Euro 20, Safe Bag USA LLC, established for business development in the United States and, specifically, within the Miami Airport. SafeWrap of Florida JV LLC is part of this company; Safe Bag USA retains a direct shareholding of 74.5% Safe Bag Sagl, a company incorporated under Swiss law with a share capital of Swiss Francs 20, Safe Bag Brasil LTDA, a company incorporated under Brazilian law, 99% owned by Safe Bag USA and 1% by Safe Bag S.p.A. Safe Bag Canada INC, company incorporated under Canadian law with a share capital of Canadian Dollars On the date of approval of this document, the company was 68.10% owned by RG Holding Srl, 10.96% owned by AC Holding Investments SA (this shareholding is however subject to a court ordered seizure granted in favor of Retailer Group Srl, now merged into RG Holding Srl), 5.26% owned by Alessandro Notari and the remaining portion, 15.68%, owned by the market. It should be noted that, on 3 September 2013, the Board of Directors approved the Procedure for Operations with Related Parties of the Company which regulates the rules pertaining to the identification, approval and execution of operations with related parties, and which are implemented by the Company in order to ensure transparency as well as their substantive and procedural correctness. With regard to details of operations with related parties, refer to that specified in the relative paragraphs of the explanatory notes. Management and coordination activities The Company is subject to management and coordination by the parent company RG Holding Srl which directly retains 68.10% of the shares. Relations with RG Holding Srl are commercial in nature and primarily financial; they pertain to financing operations from and to the parent company. Own shares As of the date of approval of this report, the parent company has not directly acquired or sold nor owns - not even indirectly through its subsidiaries or third parties own shares. Information on the environment and personnel In compliance with the provisions of Article 2428, paragraph 2, of the Italian Civil Code, the following should be noted: the company implements its activities in full compliance with environmental provisions as well as norms regulating workplace hygiene. With regard to personnel policies, it should be noted that the company has reduced the number of FTE s during the course of the year as a result of the closure of airports. 28

29 The management of human resources involves a continual and constant process of training and updating in order to create incentives for personnel to pursue professional development. In order to improve the services offered by its personnel in the airport, Safe Bag has continued to provide training courses that aim to optimize organizational capacities, customer service and sales attitudes. With regard to the organization of personnel, the organizational chart has been streamlined by opportunely separating departments and identifying roles, responsibilities and job tasks. IT privacy It should be noted that Safe Bag has outsourced the project for the updating and consolidation of the company system for management of obligations relating to privacy regulations (Leg. Decree 196/03). As a result, an external consultant was identified who has the necessary qualifications in terms of experience, know-how and reliability; he will be entrusted with updating the company privacy system as of the start of the year This operation in addition to including an additional adjustment and updating of security measures and privacy documentation pertaining to the correct processing of personal data will also provide for the preparation of a Security Planning Document as an additional oversight mechanism beyond legal requirements. Secondary offices The list of secondary offices of Safe Bag SpA is reported below: LOCATION ADDRESS OFFICE TYPE Bologna E.Marconi Airport Local Operating Unit Genoa Genoa Airport Local Operating Unit Naples Naples Airport Local Operating Unit Pisa Pisa Airport Local Operating Unit Olbia Olbia Airport Local Operating Unit Venice Venice Airport Local Operating Unit Fiumicino (RM) Rome Airport Local Operating Unit 29

30 C. CONSOLIDATED FINANCIAL STATEMENTS OF THE SAFE BAG GROUP AS OF 30 JUNE

31 1. CONSOLIDATED FINANCIAL STATEMENTS 31

32 Consolidated Financial Statements of Safe Bag S.p.A. as of 30 June 2017 Share capital Euro 10,455, Company subject to management and coordination of RG Holding S.r.l. 32

33 SITUAZIONE PATRIMONIALE-FINANZIARIA Valori in euro Attività non correnti Immobilizzazioni immateriali Avviamento Terreni, immobili, impianti e macchinari di cui Terreni e fabbricati di cui Impianti e Macchinari di cui altri beni Partecipazioni (0) Altre attività non correnti Attività finanziarie non correnti Depositi cauzionali Conti correnti vincolati Titoli Attività fiscali differite Totale Attività Non Correnti Attività correnti Rimanenze Crediti commerciali Crediti commerciali verso terzi Capogruppo Crediti commerciali iscritti nelle controllate Altre attività correnti Crediti per consolidato fiscale Capogruppo Altri crediti Crediti per IVA - Ratei e Risconti Attività per imposte correnti Attività finanziarie correnti Disponibilità liquide e strumenti equivalenti Totale Attività Correnti Attività non correnti possedute per la vendita - - Totale Attivo

34 SITUAZIONE PATRIMONIALE-FINANZIARIA Patrimonio netto Capitale sociale Riserve Riserva da valutazione (22.476) (22.476) Utile (perdite) portate a nuovo ( ) Risultato netto del periodo Totale Patrimonio netto attribuibile agli azionisti della Capogrupp Patrimonio netto di terzi Totale Patrimonio netto Passività non correnti Debiti finanziari non correnti Debiti finanziari verso controllante Debiti verso società di leasing Debiti per finanziamenti bancari Loan in capo a Safe Bag USA Debiti commerciali Fondo per altri benefici ai dipendenti Fondo per rischi ed oneri futuri Imposte differite passive Totale Passività Non Correnti Passività correnti Debiti finanziari correnti Debiti verso società di leasing Finanziamenti bancari Conti correnti bancari Debiti vs controllante 67 0 Debiti commerciali Debiti verso controllante Debiti verso altri Altre passività correnti Debiti tributari e previdenziali Debiti verso il personale dipendente Verso la controllante Dividendi deliberati Altre passività correnti Passività per imposte correnti Totale Passività Correnti Passività direttamente correlate ad attività possedute per la vendita - - Totale Patrimonio netto e Passivo

35 CONTO ECONOMICO COMPLESSIVO Valori in euro Note Ricavi delle vendite Altri proventi Totali Ricavi Costi per acquisti 25 ( ) ( ) Costi per servizi 26 ( ) ( ) Costo del personale 27 ( ) ( ) Altri costi operativi 28 ( ) ( ) Costi Operativi ( ) ( ) Margine Operativo Lordo Ammortamenti 1,3 ( ) ( ) Accantonamenti per rischi 29 (70.358) (99.978) Rivalutazioni / (Svalutazioni) ,00 Risultato operativo Proventi finanziari Oneri finanziari ( ) ( ) Proventi (Oneri) Finanziari Netti 31 ( ) ( ) Risultato Prima delle Imposte Imposte 32 ( ) (69.550) Risultato Netto (A) Attribuibile a: (Utile)/ Perdita di pertinenza dei terzi ( ) ( ) Risultato di pertinenza del Gruppo Altri Utili/(Perdite) del risultato economico complessivo: Altre componenti del conto economico complessivo del periodo che saranno successivamente rilasciate a conto economico Traduzione di bilanci espressi in valuta estera Effetto fiscale relativo agli Altri Utili/(Perdite) Altre componenti del conto economico complessivo del periodo che non saranno successivamente rilasciate a conto economico Utili/(perdite) attuariali relative ai "piani a benefici definiti" 16 - (34.620) Totale Altri Utili/(Perdite), al netto dell'effetto fiscale (B) Totale Utile/(Perdita) complessiva (A) + (B)