Reply Half year financial report 2013

Transcription

1 Half-year financial report 2013

2 Reply Half year financial report 2013

3 Reply Half year financial report 2013 Contents 3 Board of directors and controlling bodies 4 Financial highlights 5 Reply living network 9 Interim financial report Financial review of the Group 16 Outlook on operations 17 Half year condensed consolidated financial statements at June 30, Consolidated income statement 19 Consolidated Statement of Comprehensive Income 20 Consolidated Statement of Financial Position 21 Statement of Changes in Consolidated Equity 22 Consolidated Statement of Cash Flows 23 Notes 57 Annexed tables 62 Attestation under Article 154 Bis of the Legislative Decree 58/98 63 Independent Auditors Report This half year report has been translated into English from the original Italian version, in case of doubt the Italian version shall prevail. 2

4 Board of Directors and Controlling Bodies Board of Directors Chairman and Chief Executive Officer Mario Rizzante Chief Executive Officer Tatiana Rizzante Executive Directors Daniele Angelucci Claudio Bombonato Oscar Pepino Filippo Rizzante (1) (2) (3) Fausto Forti Carlo Alberto Carnevale Maffè (1) (2) Marco Mezzalama (1) (2) Statutory Auditors President Cristiano Antonelli Statutory auditors Paolo Claretta Assandri Ada Alessandra Garzino Demo Independent Auditors Reconta Ernst & Young S.p.A. 1 Directors not invested with operational proxy. 2 Independent Directors according to the Corporate Governance code for public companies. 3 Lead Independent Director. 3

5 Reply Half year financial report 2013 Financial highlights Year 2012 % Economic figures (Euros/000) 1 st Half 2013 % 1 st Half 2012 % 494, Revenues 270, , , Gross operating income 37, , , Operating income 32, , , Income before taxes 31, , , Group net income 17, , Year 2012 Financial figures (Euros/000) 1 st Half st Half ,756 Group shareholders equity 188, ,341 2,704 Non-controlling interest 1,066 1, ,298 Total assets 452, , ,476 Net working capital 115,688 80, ,834 Net invested capital 182, ,944 31,896 Cash flow 23,624 11,229 (373) Net financial position 6,243 (17,683) Year 2012 Data per single share (in Euros) 1 st Half st Half ,222,857 Number of shares 9,267,857 9,222, Operating income per share Net result per share Cash flow per share Shareholders equity per share /12/2012 Other information 30/06/ /06/2012 3,725 Number of employees 3,951 3,577 4

6 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Reply living network 5

7 Reply Half year financial report 2013 Reply Living Network Reply is a leading Consulting, Systems Integration and Application Management company, specialising in the creation and implementation of solutions based on new communication networks and digital media. Reply s offer is aimed at fostering the success of its customers through the introduction of innovation along the whole economic digital chain. Given its knowledge of specific solutions and due to a consolidated experience, Reply addresses the main core issues of the various industrial sectors. Reply s offer covers three areas of competence: Processes for Reply the understanding and the use of technologies means introducing a new enabler for processes, as a result of in-depth knowledge of the market and of the specific industrial implementation contexts; Applications in Reply the design and implementation of application solutions are aimed at meeting the needs of the core business of enterprises; Technologies in Reply the use of innovative technologies is optimised to implement solutions to ensure customers benefit from maximum operational efficiency and flexibility. Within the three areas Reply offers: Consultancy strategic, communications, process and technology; Systems Integration a combination of business consulting with high value-added and innovative technology Solutions to harness the potential of technology; Application Management management, monitoring and continuous evolution of the technological assets. 6

8 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Market focus Reply supports the main European Industrial groups operating in Telco and Media, Banking, Insurance and Financial companies, Industry and Services, Energy and Utilities and Public Administration market segments. Telco and Media In , the major players in this sector invested substantial amounts in new value-added services. This was made possible by; the technological evolution of devices (ex. Smartphone, PDA, e- book, STB multichannel), the use of new generation networks (NGN) and the development and wide spreading of Social Networks, which has become the new media of today s generation. Reply is a distinguished player in the process of convergence between Telco and Media, with a special focus on components regarding; VAS, the Digital Terrestrial Technology, Multimedia Content Management and Billing and CRM services. Furthermore, Reply is one of the main partners with Telco Operators regarding Device Testing & Certification. Banking, Insurance and Financial companies Reply cooperates with major Banking Institutions and Insurance Companies in the identification and implementation of solutions combining core process optimisation with a substantial improvement in information asset efficiency. More specifically, Reply operates in defining end to end strategies and solutions by integrating the various components and putting forth all the necessary skills such as consulting, process, development, application and technology. Industry and Services Reply supports companies in the implementation, change and management of Business IT Systems from the strategic design to the understanding and redefinition of the core Processes. Reply designs and deploys solutions aimed at ensuring application integration supports the Extended Enterprise (CRM, SCM, BI). Energy and Utilities Reply has defined a set of specific offers regarding the main industry s vertical areas by supporting and assisting Retailers and Distribution Companies in relation to change and operational, organisational and technological alignment. In particular Reply is focused on designing models and creating application solutions in the main processes of CRM and Billing in the Utilities market, but has also worked with the main European Energy providers in implementing solutions in Pricing, Forecasting and Meter Data Management. Public Administration For Central Public Administration and the National Health Service, Reply leverages its experience gained in the most advanced online services, integrating applications and competencies to create specific solutions to manage relations with the citizen. 7

9 Reply Half year financial report 2013 Technology innovation The increasing popularity of user-driven on-line services, such as Facebook, Wikipedia and YouTube, has introduced a new way of experiencing Internet: 2.0; a perspective of the net based on user collaboration and enabled by tools such as Web Services, User Generated Contents, Social Networks and Cloud Computing. This is a starting point for new methodologies and software applications, for the purpose of sharing and collaboration between people. Social Networks The application of 2.0 models and technologies introduces new ways of participating in companies, based on dispersed and unstructured knowledge. The knowledge management platforms, which allow users have a voice (as more and more often is the case) open up to bottom-up approaches of construction and sharing of information based on wikis and blogs. New forms of communication based on Unified Messaging tools appear, speeding up interaction between corporate processes. Reply bases its offer in social networking with its own platform, Enterprise Social Network: TamTamy. Cloud Computing Reply s Cloud Computing offering is based on: End to End Consulting (from the process to the operative management) which is able to support clients in understanding, selecting and in the evolution of the most suitable technological and application solution; Proprietary Enterprise Private Cloud platform to help organisations to rapidly introduce this new method of supplying services in companies; SaaS solutions are based on Reply s main application platforms (TamTamy, SideUp Reply, Gaia Reply, Discovery Reply ). Consolidated partnerships with Amazon, Google, Microsoft and Oracle enable Reply to anticipate innovative technological competencies in Cloud Computing and SaaS platforms and make them immediately available to clients. Widget Factory The phenomena such as Cloud Computing and the always connected status of users have pushed software to abandon desktop and to transform into network services. There is a growing need to enrich web applications with the same or higher levels of interaction compared to the ones already accustomed to. Reply supports its clients with this new way of interpreting the web through the domain of innovative solutions which are available today, such as Adobe Flex, Adobe Air, and Microsoft Silverlight. The development of these technologies has brought about a greater distribution of Widget; a light-weight application accessible from more devices and channels (desktop, mobile, internet ). To effectively follow this trend, Reply has created internally a Widget Factory to analyse and extend the different widgeting solutions to expand their applications in the Enterprise sector. 8 Internet of Things The continuous push for the convergence between Telco, Media and Consumer Electronics will bring in the coming years the necessity to interpret how on line devices, objects which are not linked to any form of connectivity (appliances, controllers for home automation, integrated system, ) will integrate with other machines. Machine 2 Machine or Internet of Things, is destined to become a fundamental sector for the distribution of new technologies both in companies and in daily life. Reply intends to become an important point of reference for this sector and its correlated services. In February 2009, Reply acquired the Motorola research centre in Turin and set up its own Research and Development Centre aimed at working on the new internet of objects. The aim of Reply s new research centre is to create a platform of services, devices and middleware to support specific vertical applications such as info-mobility, advanced logistics, environmental safety, contactless payment and product traceability.

10 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Interim financial report

11 Reply Half year financial report 2013 Financial Review of the Group Premise The Half-Year report for the period ended June 30, 2013 has been prepared in accordance with the Legislative Decree. 58/1998, as amended, and the Regolamento Emittenti issued by Consob. The Report also conforms with the requirements of the International Financial Reporting Standards ( IFRS ) issued by International Accounting Standards Board ( IASB ) adopted by the European Union and has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting principles applied are consistent with those used for preparation of the Consolidated Financial Statements at December 31, 2011, except those otherwise stated under Accounting principles, amendments and interpretations adopted from January 1, Trend of the first half Since the beginning of 2013, the Group has achieved consolidated sales of 270 million Euros, an increase of 10.6% compared to The first half of 2013 also registered significant improvements in margins, with consolidated EBITDA of 37.4 million Euros (+21.7%) and EBIT of 32.8 million Euros (+18.9%) for the period. Earnings before tax at 31.9 million Euros were up 19.1% compared to the same period in With regard to the second quarter of 2013, the Group s results were also positive with a consolidated turnover for the period of million Euros, a 10.6% increase over the 2012 figure. The EBITDA from April to June 2013 amounted to 18.7 million Euros (+21.5% compared to 2012), with an EBIT of 15.8 million Euros (+15.5%), and earnings before tax of 15.4 million Euros (+14.8%). As at 30 June 2013, the Group s net financial position was positive in the amount of 6.2 million Euros (net of extraordinary transactions it would have been positive in the amount of 14.7 million Euros), compared to 23.1 million Euros at 31 March The first half of 2013 was very positive for Reply, with significant growth in all market segments where it is present. The most significant aspect is the soundness of this growth, based on the consolidation of relations with major customers who appreciate Reply s ability to always offer highly innovative paradigms in terms of technology, processes and business models. Reply s objective, in an increasingly global and multinational market, is to make Reply a reference point for all companies that view technology as their main lever for competitiveness and innovation. 10

12 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Reclassified consolidated statement of income at June 30, 2013 Reply s performance is shown below in the following reclassified consolidated income statement and is compared to corresponding figures of the previous year: (thousand Euros) 1 st Half 2013 % 1 st Half 2012 % Revenues 270, , Purchases (5,237) (1.9) (5,054) (2.1) Personnel (132,599) (49.1) (121,695) (49.8) Services and other costs, net (94,798) (35.1) (85,698) (35.1) Other operating income/(expense) (1,000) (0.4) Operating Costs (232,634) (86.2) (213,446) (87.4) Gross operating margin ( EBITDA) 37, , Amortization, depreciation and write-downs (3,640) (1.3) (3,138) (1.3) Other unusual income/(expenses) (928) (0.3) Operating income (EBIT) 32, , Financial income/(expenses) (860) (0.3) (772) (0.3) Result before tax of continuing operations 31, , Income tax (14,253) (5.3) (12,185) (5.0) Net result of continuing operations 17, , Non controlling interests (342) (0.1) (609) (0.2) Group net result 17, , Reclassified consolidated statement of income of the second quarter Reply s second quarter performance is shown below in the following reclassified consolidated income statement and is compared to corresponding figures of the previous second quarter: (thousand Euros) 2 nd Q 2013 % 2 nd Q 2012 % Revenues 135, , Purchases (2,608) (1.9) (2,811) (2.3) Personnel (67,885) (50.1) (60,748) (49.6) Services and other costs, net (46,359) (34.2) (42,573) (34.8) Other operating income/(expense) (1,000) (0.8) Operating Costs (116,853) (86.2) (107,132) (87.5) Gross operating margin ( EBITDA) 18, , Amortization, depreciation and write-downs (1,929) (1.4) (1,682) (1.4) Other unusual income/(expenses) (928) (0.7) Operating income (EBIT) 15, , Financial income/(expenses) (418) (0.3) (273) (0.2) Result before tax of continuing operations 15, ,

13 Reply Half year financial report 2013 Revenues by geographical area 30 June % 30 June % 14.3% 15.8% Italy Germany 74.2% 75.7% UK Revenues by business line 30 June % 9.1% 30 June % 41.0% Technologies Applications 48.5% 49.9% Processes Trend in the principle economic indicators (thousand Euros) EBITDA EBIT EBT 0 30-Jun Jun-12 12

14 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Analysis of the financial structure The table below illustrates the Group s financial structure as at June 30, 2013 compared to December 31, 2012: (thousand Euros) 30/06/2013 % 31/12/2012 % Change Current operating assets 264, ,451 (16,430) Current operating liabilities (148,332) (159,974) 11,642 Net working capital (A) 115, ,476 (4,788) Non current assets 135, ,689 (1,293) Non current financial liabilities (68,100) (78,332) 10,232 Fixed capital (B) 67,296 58,358 8,939 Net invested capital (A+B) 182, , ,150 Shareholders equity (C) 189, , ,767 NET FINANCIAL POSITION (A+B-C) (6,243) (3.4) (6,616) Net invested capital as at June 30, 2013, amounted to 182,984 thousand Euros, and was financed by Shareholders equity for 189,227 thousand Euros, with a remaining positive net financial position of 6,243 thousand Euros. The following table provides a breakdown of net working capital: (thousand Euros) 30/06/ /12/2012 Change Work-in-progress 36,093 15,428 20,665 Trade receivables 204, ,699 (33,363) Other operating assets 23,592 27,323 (3,732) Current operating assets (A) 264, ,451 (16,430) Trade payables 50,662 56,656 (5,994) Other current liabilities 97, ,318 (5,648) Current operating liabilities (B) 148, ,974 (11,642) Net working capital (A-B) 115, ,476 (4,788) % return on revenues 21.4% 24.7% 13

15 Reply Half year financial report 2013 Net financial position and cash flows statement (thousand Euros) 30/06/ /12/2012 Change Cash and cash equivalents, net 27,129 18,610 8,519 Current financial assets 699 1,315 (616) Due to banks (10,686) (9,150) (1,536) Other providers of finance (309) (572) 263 Short-term financial position 16,833 10,203 6,630 Non current financial assets 2,946 2, Due to banks (12,713) (12,778) 65 Other providers of finance (822) (649) (173) M/L term financial position (10,589) (10,576) (13) Total net financial position 6,243 (373) 6,617 Change in the item cash and cash equivalents is summarized in the table below: (thousand Euros) 30/06/2013 Cash flows from operating activities (A) 23,624 Cash flows from investment activities (B) (10,952) Cash flows from financial activities (C) (4,143) Change in cash and cash equivalents (D) = (A+B+C) 8,519 Cash and cash equivalents at beginning of period (*) 18,610 Cash and cash equivalents at year end (*) 27,129 Total change in cash and cash equivalents (D) 8,519 (*)Cash and cash equivalents net are net of bank overdrafts The complete consolidated cash flow statement and the details of cash and other cash equivalents net are set forth below in the financial statements. 14

16 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Other information Research and development activities Reply offers services and solutions with high technological standards in a market where innovation is of primary importance. Reply considers research and continuous innovation a fundamental asset in supporting clients with the adoption of new technology. Reply dedicates resources to Research and Development activities and concentrates on two sectors: Development and evolution of its own platforms: Click Reply Definio Reply Discovery Reply Gaia Reply Hi Reply Sideup Reply Starbytes TamTamy Reply has important partnerships with major global vendors so as to offer the most suitable solutions to different company needs. Specifically, Reply boasts the highest level of certification amongst the technology leaders in the Enterprise sector, among which: Microsoft Oracle SAP Amazon GOOGLE Hybris Salesforce Research and development activities are fully described in the Corporate information of Reply Living Network. Intergroup transactions and with related parties During the period, there were no transactions with related parties, including intergroup transactions, which qualified as unusual or atypical. Any related party transactions formed part of the normal business activities of companies in the Group. Such transactions are concluded at standard market terms for the nature of goods and/or services offered. The Annual Report provides the information required by art. 154-ter of the TUF as requested by Consob Regulation no of 12 March 2010, disclosing that no significant transactions took place in the period under exam. Information on transactions with related parties as per Consob communication of July 28, 2006 is disclosed at the Notes to the consolidated financial statement and annexed tables. 15

17 Reply Half year financial report 2013 Human resources At June 30, 2013 the number of employees of the Group was 3,951 with an increase of 226 compared to December 31, 2012 and an increase of 374 resources compared to June 30, Outlook on Operations Despite a challenging and uncertain economic context Reply, thanks to its strong thrust for innovation and renowned quality of its services, was able to grow in its main areas of activities, achieving positive results both in economic and financial terms in all its market areas. The positive start of the first half of 2013 has laid a solid basis on which Reply tends developing even in the second half of the year. Turin, August 1, 2013 /s/ Mario Rizzante For the Board of Directors The Chairman Mario Rizzante 16

18 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Half year condensed consolidated financial statements at June

19 Reply Half year financial report 2013 Reply Consolidated income statement (*) (thousand Euros) Note 1st Half st Half Revenues 5 270, , ,831 Other revenues 6,033 4,069 11,563 Purchases 6 (5,237) (5,054) (10,894) Personnel 7 (132,599) (121,695) (239,258) Services and other costs 8 (100,830) (89,767) (191,803) Amortization, depreciation and write-downs 9 (3,640) (3,138) (6,855) Other unusual operating income/(expenses) 10 (928) (1,000) (5,334) Operating income 32,814 27,586 52,249 Financial income/(expenses) 11 (860) (772) (1,984) Result before tax of continuing operations 31,954 26,814 50,265 Income tax 12 (14,253) (12,185) (22,006) Net result of continuing operations 17,702 14,630 28,259 Non controlling interest (342) (609) (1,164) Group net result 17,360 14,021 27,094 Net result per share Diluted net result per share (*)Pursuant to Consob Regulation no of 27 July 2006, the effects of related-party transactions on the Consolidated statement of income are reported in the Annexed tables herein and fully described in Note

20 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Reply Consolidated statement of comprehensive income (thousand Euros) Note 1 st Half st Half 2012 Gain (loss) of the period (A) 17,702 14,630 Other comprehensive income that will not be reclassified subsequently to profit or loss Actuarial gains/(losses) from employee benefit plans (348) tax relating to Other comprehensive income that will not be reclassified subsequently to profit or loss: Total Other comprehensive income that will not be reclassified subsequently to profit or loss, net of tax (B1): 844 (348) Other comprehensive income that may be reclassified subsequently to profit or loss: - - Gains/(losses) on cash flow hedges Gains/(losses) on exchange differences on translating foreign operations (193) Total Other comprehensive income that may be reclassified subsequently to profit or loss, net of tax (B2) 369 (193) TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX (B) = (B1) +(B2) 1,213 (541) Total comprehensive income (A)+(B) 18,915 14,089 Total comprehensive income attributable to: Owners of the parent 18,553 13,463 Non-controlling interests

21 Reply Half year financial report 2013 Reply Consolidated statement of financial position (*) 31/12/ /01/2012 (thousand Euros) Note 30/06/2013 (**) (**) Tangible assets 14 10,966 11,562 10,361 Goodwill , ,195 96,646 Other intangible assets 16 5,366 5,960 6,180 Equity investments Other financial assets 18 5,844 5,724 4,430 Deferred tax assets 19 10,965 11,530 9,689 Non current assets 138, , ,364 Work-in-progress 20 36,093 15,428 10,184 Trade receivables , , ,764 Other receivables and current assets 22 23,592 27,323 25,774 Other financial assets , Cash and cash equivalents 23 49,724 53,992 40,444 Current assets 314, , ,507 TOTAL ASSETS 452, , ,871 Share capital 24 4,819 4,796 4,796 Other reserves , , ,756 Group net result 17,360 27,094 24,150 Group shareholders equity , ,702 Non controlling interest 24 1,066 2,704 1,915 SHAREHOLDERS EQUITY 189, , ,617 Payables to minority shareholders and corporate transactions 25 30,904 40,190 32,307 Financial liabilities 26 13,535 13,427 16,414 Employee benefits 27 19,089 19,547 16,309 Deferred tax liabilities 28 8,478 9,945 8,404 Provisions 29 9,629 10,162 11,244 Non current liabilities 81,635 93,271 84,677 Financial liabilities 26 33,591 45,104 42,025 Trade payables 30 50,662 56,656 48,005 Other current liabilities 31 96, ,160 90,868 Provisions 29 1,463 1, Current liabilities 181, , ,575 TOTAL LIABILITIES 263, , ,252 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 452, , ,869 (*)Pursuant to Consob Regulation no of 27 July 2006, the effects of related-party transactions on the Consolidated statement of financial position are reported in the Annexed tables herein and fully described in Note 33. (**) Following the retrospective application of the amendment to IAS 19 from January 1, 2013 the comparative figures at January 1 and December 31,2012 have been restated as required by IAS 1. Reference should be made to the paragraph Accounting principles, amendments and interpretations adopted from January 1, 2013 for further details. 20

22 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Reply Statement of changes in consolidated equity (thousand Euros) Share capital Treasury shares Capital reserve Earning reserve Reserve for cash flow hedges Cumulative translation adjustment reserve Reserve for actuarial gains/(losses) Noncontrolling interests Total At December 31, 2011 (reported amounts) 4,796 (3,183) 49, ,666 - (91) 728 1, ,017 IAS 19 revised adoption effect (400) - (400) At January 1, ,796 (3,183) 49, ,666 - (91) 328 1, ,617 Dividends distributed (4,494) (582) (5,076) Change in treasury shares - (422) (422) Total comprehensive income for the period ,021 - (193) (365) ,089 Other changes (340) (166) (472) At 30 June ,796 (3,605) 49, ,853 - (284) (37) 1, ,736 (thousand Euros) Share capital Treasury shares Capital reserve Earning reserve Reserve for cash flow hedges Cumulative translation adjustment reserve Reserve for actuarial gains/(losses) Noncontrolling interests Total At December 31, 2012 (reported amounts) 4,796 (3,605) 48, ,305 (73) 24 (466) 2, ,461 IAS 19 revised adoption effect (1,058) - (1,058) At January 1, ,796 (3,605) 48, ,305 (73) 24 (1,524) 2, ,403 Share capital increase Dividends distributed (5,131) (844) (5,975) Change in treasury shares Total comprehensive income for the period , ,915 Other changes - - 2,261 (941) (1,303) (1,156) (1,139) At 30 June ,819 (3,605) 51, ,593 (32) 352 (2,003) 1, ,227 21

23 Reply Half year financial report 2013 Reply Consolidated statement of cash flows (thousand Euros) 1 st Half st Half 2012 Net result for the period 17,360 14,021 Income tax 14,253 12,184 Depreciation and amortization 3,640 3,138 Change in inventories (20,665) (19,727) Change in trade receivables 33,363 21,075 Change in trade payables (5,994) (2,243) Change in other assets and liabilities (15,882) (16,119) Income tax paid (2,450) (1,100) Net Cash flows from operating activities (A) 23,624 11,229 Payments for tangible and intangible assets (2,449) (4,540) Payments for financial assets 496 (1,904) Payments for the acquisition of subsidiaries net of cash acquired (8,999) 31 Net cash flows from investment activities (B) (10,952) (6,413) In payments from the issuing of shares Dividends paid (5,975) (5,076) Payments for acquisition of treasury shares - (422) In payments from financial loans 6,000 - Payment of instalments (4,551) (3,906) Other changes (586) 55 Net Cash flows from financing activities (C) (4,153) (9,349) Net cash flows (D) = (A+B+C) 8,519 (4,533) Cash and cash equivalents at beginning of year 18,610 6,394 Cash and cash equivalents at year end 27,129 1,861 Total change in cash and cash equivalents (D) 8,519 (4,533) Detail of net cash and cash equivalents (thousand Euros) 1 st Half st Half 2012 Cash and cash equivalents at the beginning of the year: 18,610 6,394 Cash and cash equivalents 53,992 40,444 Bank overdrafts (35,382) (34,050) Cash and cash equivalents at the end of the period: 27,129 1,861 Cash and cash equivalents 49,724 28,570 Bank overdrafts (22,596) (26,709) 22

24 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Notes General information NOTE 1 - General information NOTE 2 NOTE 3 NOTE 4 - Accounting principles and basis of consolidation - Financial risk management - Consolidation Income statement NOTE 5 - Revenues NOTE 6 NOTE 7 NOTE 8 NOTE 9 NOTE 10 NOTE 11 NOTE 12 NOTE 13 - Purchases - Personnel - Services and other costs - Amortization, depreciation and write-downs - Other unusual operating income/(expenses) - Financial income/(expenses) - Income taxes - Earnings per share Statement of financial position - Assets NOTE 14 - Tangible assets Statement of financial position - Liabilities and equity NOTE 15 NOTE 16 NOTE 17 NOTE 18 NOTE 19 NOTE 20 NOTE 21 NOTE 22 NOTE 23 NOTE 24 NOTE 25 NOTE 26 NOTE 27 NOTE 28 NOTE 29 NOTE 30 NOTE 31 - Goodwill - Other intangible assets - Equity Investments - Financial assets - Deferred tax assets - Work-in-progress - Trade receivables - Other receivables and current assets - Cash and cash equivalents - Shareholders equity - Payables to minority shareholders and Earn-out - Financial liabilities - Employee benefits - Deferred tax liabilities - Provisions - Trade payables - Other current liabilities Other information NOTE 32 - Segment Reporting NOTE 33 NOTE 34 - Transactions with related parties - Guarantees, commitments and contingent liabilities NOTE 35 - Events subsequent to 30 June

25 Reply Half year financial report 2013 NOTE 1 General information Reply [MTA, STAR: REY] is specialized in the implementation of solutions based on new communication and digital media. Reply, consisting of a network of specialized companies, assists important European industries belonging to Telco & Media, Manufacturing & Retail, Bank & Insurances and Public Administration sectors, in defining and developing new business models utilizing Big Data, Cloud Computing, CRM, Mobile, Social Media and Internet of Things paradigms. Reply offers consulting, system integration, application management and business process outsourcing NOTE 2 - Accounting principles and basis of consolidation Compliance with International accounting principles This Half- year financial report has been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the European Union. The designation IFRS also includes all valid International Accounting Standards ( IAS ), as well as all interpretations of the International Financial Reporting Interpretations Committee ( IFRIC ), formerly the Standing Interpretations Committee ( SIC ). Following the coming into force of European Regulation No of July 2002, starting from January 1, 2005, the Reply Group adopted International Financial Reporting Standards (IFRS). The Half-Year financial report has been prepared in accordance with Consob regulations regarding the format of financial statements, in application of art. 9 of Legislative Decree 38/2005 and other Consob regulations and instructions concerning financial statements. In particular, this Half-year financial report has been prepared in accordance with IAS 34- Interim Financial Reporting applying the same accounting principles and policies used in the preparation of the Consolidated financial statements at December 31, 2012 other those discussed in the following paragraph Accounting principles, amendments and interpretations adopted January 1, This Half-year financial report is expressed in thousands of Euros. The preparation of the interim financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements. If in the future such estimates and assumptions, which are based on management s best judgment at the date of the interim financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. Reference should be made to the section Use of estimates in the consolidated financial statements for the year ended December 31, 2012 for a detailed description of the more significant valuation procedures used by the Group. Moreover, these valuation procedures, in particular those of a more complex nature regarding matters such as any impairment of non-current assets, are only carried out in full during the preparation of the annual financial statements, when all the information required is available, other than in the event that there are indications of impairment, when an immediate assessment is necessary. Income taxes are recognized based upon the best estimate of the weighted average income tax rate expected for the full financial year. 24

26 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance General principles The half-year condensed consolidated financial statements are prepared under the historical cost convention, modified as required for the valuation of certain financial instruments. The criteria of fair value is adopted as defined by IAS 39. The half-year condensed consolidated financial statements have been prepared on the going concern assumption. In this respect, despite operating in a difficult economic and financial environment, the Group s assessment is that no material uncertainties (as defined in paragraph 25 of IAS 1) exist about its ability to continue as a going concern. These half-year condensed consolidated financial statements are expressed in thousands of Euros and are compared to the consolidated financial statements of the previous year prepared in accordance with the same principles. Further indication related to the format of the financial statements respect to IAS 1 is disclosed here within as well as information related to significant accounting principles and evaluation criteria used in the preparation of the following consolidated report. Format of the financial statements This Half-year financial report includes, statement of income, statement of comprehensive income, statement of financial position, statement of changes in shareholders equity, statement of cash flows and explanatory notes. The income statement format adopted by the group classifies costs according to their nature, which is deemed to properly represent the Group s business. The Statement of financial position is prepared according to the distinction between current and noncurrent assets and liabilities. The statement of cash flows is presented using the indirect method. The most significant items are disclosed in a specific note in which details related to the composition and changes compared to the previous year are provided. In connection with the requirements of Consob Resolution No of July 27, 2006 as to the format of the financial statements, additional statements: income statement and statement of financial position have been added showing the amounts of related party transactions. 25

27 Reply Half year financial report 2013 Accounting principles, amendments and interpretations adopted by January 1, 2013 Amendment to IAS 19 Employee benefits On June 16, 2011, the IASB issued an amendment to IAS 19 Employee Benefits, that the Group has retrospectively applied from January 1, The amendment modifies the requirements for recognizing defined benefit plans and termination benefits. The amendment removes the previous option of being able to defer actuarial gains and losses under the corridor method, requiring these to be recognized directly in other comprehensive income. In addition, the amendment requires the immediate recognition of past service costs in profit or loss. Net interest expense is calculated for all components by using the discount rate applied for measuring the obligation for defined benefit plans at the beginning of the period. In accordance with the previous version of IAS 19, the expected return on plan assets was calculated by using a long-term expected rate of return. In accordance with the transitional rules included in paragraph 173 of IAS 19, the Group has applied this amendment retrospectively from January 1, 2013, restating the balances of the statement of financial position at January 1, 2012 and December 31, 2012, as if the amendments to IAS 19 had always been applied. In detail, the final effects arising on the consolidated statement of financial position at January 1, 2012 and at December 31, 2012 due to the adoption of the amendment are as follows: At January 1, 2012 (thousand Euros) Amounts as previously reported IAS 19 revised adoption effect Amounts as restated Group net equity 156,100 (398) 155,702 Deferred tax assets 9, ,689 Employee benefits 15, ,309 At December 31, 2012 (thousand Euros) Amounts as previously reported IAS 19 revised adoption effect Amounts as restated Group net equity 175,756 (1,058) 174,698 Deferred tax assets 11, ,530 Employee benefits 18,035 1,512 19,547 Adopting this amendment did not lead to any significant additional effects on the consolidated statement of income, the consolidated statement of comprehensive income and the consolidated statement of cash flows for the first half of

28 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance Other accounting standards, amendments and interpretations effective from January 1, 2013 On May 12, 2011, the IASB issued IFRS 13 Fair Value Measurement, which clarifies the determination of fair value for the purpose of the financial statements and is applicable to all IFRSs permitting or requiring a fair value measurement or the presentation of disclosures based on fair value. The Group has prospectively applied this standard from January 1, The application of this standard did not have any effect on the measurement of items in this Half-year condensed financial statements. On June 16, 2011, the IASB issued an amendment to IAS 1 Presentation of Financial Statements requiring companies to group items presented in comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently. The amendment is applicable for periods beginning on or after July 1, 2012; the Group has applied this amendment since January 1, The application of this amendment had no effect on the measurement of items and had a limited effect on the disclosures provided in this Half-year condensed financial statements. On December 16, 2011, the IASB issued certain amendments to IFRS 7 Financial Instruments: Disclosures. The amendments require information about the effect or potential effect of netting arrangements for financial assets and liabilities on an entity s financial position. The required disclosures should be provided retrospectively. The Group has applied these amendments from January 1, Applying these amendments has not had effects on the disclosures presented in this Half-year condensed financial statements. On May 17, 2012, the IASB issued a set of amendments to IFRSs ( Annual Improvements to IFRSs Cycle ), to be applied retrospectively from January 1, 2013; set out below are those applicable to the Group that lead to changes in the presentation, recognition or measurement of financial statement items, excluding those that only regard changes in terminology having a limited accounting effect: IAS 1 Presentation of Financial Statements: the amendment clarifies the way in which comparative information should be presented when an entity changes accounting policies and when an entity provides comparative information in addition to the minimum comparative financial statements;; IAS 16 Property, Plant and Equipment: the amendment clarifies that items such as spare parts, stand-by equipment and servicing equipment shall be recognized in accordance with IAS 16 when they meet the definition of property, plant and equipment, otherwise such items shall be classified as inventory. IAS 32 Financial instruments: Presentation: the amendment eliminates an inconsistency between IAS 12 Income Taxes and IAS 32 concerning the recognition of taxation arising from distributions to shareholders, establishing that this shall be recognized in profit or loss to the extent the distribution refers to income generated by transactions originally recognized in profit or loss; IAS 34 Interim Financial Reporting: the amendment clarifies that the disclosures for total assets and total liabilities for a particular reportable segment shall be provided if and only if: a) a measure of total assets and liabilities, or both, is regularly provided to the chief operating decision maker, and b) there has been a material change from the amount disclosed in the last annual financial statements for that reportable segment. 27

29 Reply Half year financial report 2013 The Group has applied this amendment from January 1, Applying this amendment has had no effect on the measurement of items and has had limited effects on the disclosures presented in this Half-year condensed financial statements. The Group has not early adopted any other accounting standards, amendments and interpretations that have not yet come into force. NOTE 3 - Risk management Credit risk For business purposes, specific policies are adopted in order to guarantee that clients honour payments. With regards to financial counterparty risk, the Group does not present significant risk in creditworthiness or solvency. Liquidity risk The group is exposed to funding risk if there is difficulty in obtaining finance for operations at any given point in time. The cash flows, funding requirements and liquidity of Group companies are monitored or managed on a centralized basis through the control of the Group Treasury, with the aim of guaranteeing the efficient and effective management of actuarial and prospective financial resources (maintaining an adequate level of available liquidity and available reserves that are readily convertible to cash and credit through an adequate amount of committed credit lines). The difficult economic situation of the markets and of financial markets necessitates special attention being given to the management of the liquidity risk, and in that sense particular emphasis is being placed on measures taken to generate financial resources through operations and maintaining an adequate level of available liquidity as an important factor in facing 2013, which promises to be a difficult year. The Group therefore plans to meet its requirements to settle financial liabilities as they fall due and to cover expected capital expenditures by using cash flows from operations and available liquidity, renewing or refinancing bank loans. Risks associated with fluctuations in currency and interest rates As the Group operates mainly in a Euros area the exposure to currency risks is limited. The exposure to interest rate risk arises from the need to fund operating activities and M&A investments, as well as the necessity to deploy available liquidity. Changes in market interest rates may have the effect of either increasing or decreasing the Group s net profit/(loss), thereby indirectly affecting the costs and returns of financing and investing transactions. The interest rate risk to which the Group is exposed derives from bank loans; to mitigate such risks, the Group has used derivative financial instruments designated as cash flow hedges. The use of such instruments is disciplined by written procedures in line with the Group s risk management strategies that do not contemplate derivative financial instruments for trading purposes. 28

30 Financial highlights Reply Living Network Interim financial report 2013 Half year condensed consolidated financial statements at June 30, 2013 Annexed tables Declaration pursuant to art. 154-bis of the Consolidated law of finance NOTE 4 - Consolidation Companies included in consolidation are consolidated on a line-by-line basis. Change in consolidation compared to 30 June 2012 is as follows: Arlanis Software AG, acquired in August 2012, in which Reply S.p.A. holds 100% of the share capital. The company, is specialized in Social Business Applications, CRM, data migration and integration; Avvio Design Associates Ltd. acquired in December Reply S.p.A., through its subsidiary Reply Ltd., has acquired 100% of the shares of Avvio, an English company specialized in consulting and the implementation of strategies and solutions for Brand Engagement and Internal Communications, based on Corporate Social Networking. The change in the consolidation area does not significantly affect the Group s revenues and result before tax of continuing operations in the first half of Furthermore, the list of the Reply Group s companies and equity investments, presented in an annex, also includes in the consolidation area the following newly incorporated companies with respect to 30 June 2012: Pay Reply S.r.l. incorporated in November 2012, in which Reply holds 100% of the share capital. The company is specialised in consultancy services related to platforms based on remote and proximity payments; Juice Reply S.r.l. incorporated in December 2012, in which Reply holds 100% of the share capital. The company is specialised in Bigdata services. NOTE 5 - Revenues Revenues from sales and services, including changes in work in progress on orders, amounted to 270,015 thousand Euros (244,170 thousand Euros as at June 30, 2012). This item includes consulting services, fixed price projects, assistance and maintenance services and other minor revenues. The following table shows the percentage breakdown of revenues by geographic area: Country 1st Half st Half 2012 Italy 74.2% 75.7% Germany 14.3% 15.8% United Kingdom 11.5% 8.5% 100.0% 100.0% Disclosure required by IFRS 8 ( Operating segment ) is provided in Note 32 herein. 29

31 Reply Half year financial report 2013 NOTE 6 - Purchases Detail is as follows: (thousand Euros) 1st Half st Half 2012 Change Software licenses for resale 2,957 3,136 (179) Hardware for resale (120) Other 2,105 1, Total 5,237 5, Purchases of Software licenses and Hardware licenses for resale are recognized net of any change in inventory. The item Other mainly includes the purchase of fuel amounting to 1,145 thousand Euros and the purchase of office materials amounting to 538 thousand Euros. NOTE 7 - Personnel Detail is as follows: (thousand Euros) 1st Half st Half 2012 Change Payroll employees 118, ,663 10,588 Executive Directors 11,747 11, Project collaborators 2,601 2,701 (100) Total 132, ,695 10,904 The increase of the cost of labour, equal to 10,904 thousand Euros, refers to the overall increase of the Group s business and the number of employees. Detail of personnel by category is provided below: (number) 1st Half st Half 2012 Change Directors Managers Staff 3,087 2, Total 3,951 3, As at 30 June 2013, the Group had 3,951 employees, compared to 3,577 in the first half of Change in consolidation brought an increase of 58 employees. 30