INTERIM REPORT FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2013

Transcription

1 INTERIM REPORT FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2013 Registered office in Via della Valle dei Fontanili 29/ Rome, Italy Share capital: 1,084, fully paid-in Rome Companies Register, Tax Code and VAT number:

2 CONTENTS CORPORATE OFFICERS... 2 THE GROUP... 3 BASIS OF PRESENTATION... 3 BASIS OF CONSOLIDATION... 4 SIGNIFICANT EVENTS DURING THE PERIOD... 6 OTHER INFORMATION RESULTS OF OPERATIONS FINANCIAL POSITION AND CASH FLOW DECLARATION BY THE MANAGER RESPONSIBLE FOR FINANCIAL REPORTING page 1

3 CORPORATE OFFICERS Board of Directors Claudio Carnevale Chairman and CEO Francesco Ago (1), (2) Director Margherita Argenziano Director Raffaele Cappiello (1), (2) Director Cristian Carnevale Director Giovanni Galoppi (1), (2) Director Giorgio Angelo Girelli Director Giuseppe Guizzi (1), (2), (3) Director Giovanni La Croce Director (1) Member of the Remuneration Committee (2) Member of the Internal Audit Committee (3) Lead Independent Director Board of Statutory Auditors Antonio Mastrangelo Chairman Umberto Previti Flesca Auditor Maurizio Salimei Auditor Independent auditors Reconta Ernst & Young SpA page 2

4 THE GROUP The following chart shows the structure of the Acotel Group at : The parent company of Acotel Group SpA is Clama Srl, which at holds 1,727,915 ordinary shares, representing 41.4% of the share capital. Clama Srl does not carry out management and coordination activities as defined by art of the Italian Civil Code. BASIS OF PRESENTATION The Acotel Group s interim report for the three months ended 30 September 2012 has been prepared in compliance with art. 154-ter (Financial reporting) of Legislative Decree 58/1998 (the Consolidated Finance Act) and subsequent amendments and additions, and the CONSOB s Regulations for Issuers. page 3

5 The interim report has been prepared under the international financial reporting standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union. The accounting standards applied are consistent with those adopted for preparation of the Acotel Group s consolidated financial statements for the year ended 31 December 2011, integrated where necessary by the application of standards to take account of aspects not present at that date. The consolidated financial statements for the three months ended 30 September 2012 have been prepared on the basis of the underlying accounting records at that date, as adjusted in accordance with the matching principle. Preparation of this report required management to make estimates and assumptions, based primarily on internal records, which essentially have an effect on revenues and costs that have yet to be confirmed by customers and suppliers, any impairments of goodwill and inventories, and provisions for bad debts, litigation and taxation. Above all, a portion of the turnover generated by Acotel Interactive Inc. and its subsidiaries, in addition to certain related cost items, include preliminary figures, is derived primarily from internal reporting systems, and estimates that have yet to be confirmed by mobile transaction network providers and/or operators. Estimates and assumptions are also used in order to account for any refunds that may be payable to Digital Entertainment customers, and for the portion of revenues deriving from subscriptions for Digital Entertainment services billed in September 2012 and carried forward to the following accounting period. Finally, certain measurement processes, above all those of a complex nature relating to the estimate of potential impairments of fixed assets, are generally only fully carried out during preparation of the annual financial statements, unless events or changes in circumstances indicate that there may be an impairment requiring an immediate measurement of any loss. This interim report is unaudited. BASIS OF CONSOLIDATION The following table provides summary information on consolidated companies held, directly or indirectly, by Acotel Group SpA, the Parent Company. There was a change in the basis of consolidation during the third quarter of 2013 following the establishment of Jinny Software USA LLC by Jinny Software Ltd, of the Argentine company, Acotel SRL, by Acotel Interactive Inc. and Yabox LLC, and of Acotel Interactive India Private Limited by Acotel Interactive Inc. Companies consolidated on a line-by-line basis Company Date of acquisition Group s % interest Registered office Share capital Acotel SpA 28 April % (3) Rome EURO 13,000,000 AEM Acotel Engineering and SpA Manufacturing 28 April % Rome EURO 858,000 Acotel Chile SA 28 April % Santiago, Chile USD 17,330 page 4

6 Acotel Espana SL 28 April % Madrid EURO 3,006 Acotel Do Brasil Ltda 8 August 2000 (1) 100% Rio de Janeiro BRL 1,868,250 Jinny Software Ltd 9 April % Dublin EURO 3,201 Millennium Software SAL 9 April % (4) Beirut LPD 30,000,000 Info2cell.com FZ-LLC 29 January 2003 (2) 100% Dubai USD 5,000,000 Emirates for Information Technology Co. 29 January % (5) Amman JD 710,000 Acotel Interactive, Inc. 28 June 2003 (1) 100% Wilmington USD 10,000 Flycell Telekomunikasyon Hizmetleri AS 2 July 2005 (1) 99.9% (6) Istanbul TRY 50,000 Acotel Interactive Conteúdo Para Telefonia Móvel LTDA 6 June 2006 (1) 100% (6) Rio de Janeiro BRL 250,000 Jinny Software Romania SRL 26 June 2007 (1) 100% (4) Bucharest RON 200 Yabox LLC 24 October 2007 (1) 100% (6) Wilmington USD 1 Jinny Software Latin America Importaçāo e Exportaçāo Ltda 11 February 2008 (1) 100% (4) Sao Paulo BRL 3,714,815 Rawafed Information Company LLC 24 February 2008 (1) 51% (5) Riyadh SAR 500,000 Jinny Software Panama Inc. 1 July 2008 (1) 100% (4) Panama City USD 10,000 Flycell Italia Srl 10 July 2008 (1) 100% (6) Rome EURO 90,000 Flycell Argentina SA 26 October % (7) La Plata ARS 12,000 Acotel Serviços De Telemedicina Ltda. 28 March % (8) Rio de Janeiro BRL 400,000 Acotel Teleçomunicaçāo Ltda. 28 March % (8) Rio de Janeiro BRL 400,000 Bucksense, Inc. 28 June % Nevada USD 10,000 Urbe Roma S.S.D. a r.l. 2 February % (9) Rome EURO 10,000 Noverca Srl 10 July 2002 (10) 100% (11) Rome EURO 10,000 Noverca Italia Srl 9 May 2008 (1) 100% (11), (12) Rome EURO 10,000 Jinny Software USA LLC 1 July 2013 (1) 100% (4) Wilmington USD 94,069 (13) Acotel SRL 30 July 2013 (1) 100% (7) Buenos Aires ARS 20,000 Acotel Interactive India Private Limited 22 August 2013 (1) 100% (6) Mumbai INR 100,000 (1) The date of the company s entry into the Group coincides with its incorporation. (2) Prior to this date the Group owned 33% of this company, accounted for in investments in associates. (3) AEM owns 1.92% of the share capital. (4) Controlled via Jinny Software Ltd. (5) Controlled via Info2cell.com FZ-LLC. (6) Controlled via Acotel Interactive Inc. (7) Controlled via Acotel Interactive Inc. and Yabox LLC. (8) Controlled via Acotel do Brasil Ltda. (9) Controlled via Acotel SpA. (10) Prior to this date the Group owned 50% of this company, accounted for in investments in associates. (11) Since 20 May 2013 the Groups has full control of this company. (12) Controlled via Noverca Srl. (13) Value of the capital contributions paid by Jinny Software Ltd at the reporting date. page 5

7 SIGNIFICANT EVENTS DURING THE PERIOD The third-quarter results reveal that turnover grew at a faster pace than in the previous two quarters but especially due to a return to profit at the level of EBITDA, with gross operating profit benefitting from large-scale investment in advertising by subsidiaries belonging to the Acotel Interactive business area in recent quarters, with a view to promote the new services developed and support the start-up of commercial operations in countries in which the Group has only recently begun to operate. An analysis of the Group s quarterly results reveals that: turnover is up by over 40% from 21.9 million in the third quarter of 2012 to 30.7 million in the third quarter of 2013; the Group recorded gross operating profit (positive EBITDA) of 0.6 million, compared with a loss of 2 million in the same period of This section describes the principal factors that have influenced the results in the Group s different business areas in the period under review. ACOTEL INTERACTIVE Revenues from this business area are up from 17.4 million in the third quarter of 2012 to 24.4 million in the quarter under review, marking an increase of 40%. The performance benefitted from returns on large-scale investment in advertising during the quarter and in previous quarters and from the different method of accounting for revenues, adopted following changes in the contracts governing the provision of services to consumers in certain countries in which the Group operates. ( 000) Q * Inc./(Dec.) % inc./(dec.) (*): Digital Entertainment 18,603 12,275 6,328 52% Mobile Services 5,808 5, % Total 24,411 17,447 6,964 40% Amounts for 2012 have been restated to provide a better basis for comparison without any changing to the total balance. page 6

8 During the period the Group continued to promote and expand its offering of new products for the consumer segment (Digital Entertainment), aimed exclusively at smartphone and web users. 5 new games, conceived and developed in-house, were launched, increasing the total range to 24 games, compared with the 19 offered at the end of the second quarter of The number of installations and games played also saw strong growth compared with the previous quarter (up 188% and 199%, respectively). The app launched in the second quarter of 2013, which enables users to subscribe to Skillderby services and to be kept up to date with all the latest commercial offerings, was downloaded 230 thousand times and made available in another three countries: Brazil, the UAE and Saudi Arabia. The following graph shows revenue growth generated by the Digital Entertainment segment by geographical area: page 7

9 Aside from the North American market, which is down on the third quarter of 2012, all the other markets report significant growth, reflecting both a number of changes introduced in Italy and the Middle East with regard to contracts governing the provision of services to consumers, and, above all, returns on major investment in advertising in the first nine months of 2013 in countries in which the Group was already present, including Italy, Mexico, Turkey and the Middle East, and in others, such as Colombia, Peru, Ecuador and the Netherlands, entered by the Group during This investment, which was also significant in the third quarter of 2013 ( 4.2 million) and had a significant impact on margins in this business area in the first two quarters of the current year, began to bear fruit during the quarter just ended, increasing the Group s EBITDA to 0.6 million. During the third quarter Acotel Interactive Inc. established a new company in India, called Acotel Interactive India Private Limited, in order to introduce its last generation Digital Entertainment services into the Indian market. ACOTEL TLC The Acotel TLC business area operates in the following segments: page 8

10 Mobile VAS Technology products and services for mobile operators developed and sold by the subsidiary, Jinny Software Ltd; Mobile Communications mobile telecommunications services for end customers provided by Noverca Italia Srl, and SMS information services for corporate customers provided by Acotel SpA and Acotel do Brasil; Mobile Virtual Network Enabler (MVNE) and Mobile Virtual Network Aggregator (MVNA) services provided to Mobile Virtual Network Operators (MVNOs), developed and supplied by Noverca Srl. The Acotel TLC business area recorded an overall 46% increase in revenues from the 4.1 million of the third quarter of 2012 to 6 million in the quarter under review. ( 000) Q Inc./(Dec.) % inc./(dec.) Mobile VAS Technology 3,495 2,255 1,240 55% Mobile Communications 2,464 1, % Total 5,959 4,080 1,879 46% Revenues from Mobile VAS Technology, totalling 3.5 million, are up 55% on the third quarter of This performance reflects the excellent performance achieved by Jinny Software in the first nine months of the current year, with the company s order book up 37% on the first nine months of 2012 (up 65% on the third quarter of 2012). This strong commercial performance primarily reflects the market success of the company s products, above all its messaging platforms (SMS-C and MMS-C). This growth was also accompanied by the acquisition of major new customers, two in Europe and two in America and one in south-east Asia acquired in the quarter just ended. In this regard, the acquisition of its first contract with one of Latin America s leading mobile operators is, as well as the contract signed in Asia, of great strategic importance. page 9

11 As the following graph shows, the revenue breakdown by geographical segment for Jinny Software in the third quarter of 2013 highlights the improvement in its performance in all areas in which the company is present, except for Europe. The Mobile Communications segment includes Noverca Italia Srl, an MVNO providing mobile telecommunications services in Italy, and Acotel SpA (Rome) and Acotel do Brasil (Rio de Janeiro), page 10

12 which, in addition to being part of the Acotel Interactive business, supply messaging services for corporate customers in their respective countries of operation. Noverca Italia Srl ended the quarter with total revenues of approximately 1.5 million, up on the 1 million of the third quarter of 2012 (compared with the 0.6 million reported in the Interim Report for the nine months ended 30 September 2012, which was based on the Group s percentage interest in the company at that date). During the quarter just ended Nòverca launched Nòverca+ on the Italian market. This is a revolutionary application, developed in-house, offering the company s customers more than a traditional mobile communications service, enabling them to make and receive calls by exploiting their smartphone s data connectivity, as if they were using a VoIP application but with a distinct and unique feature: Nòverca+ is in fact the first and only app to be linked to a mobile number, thus effectively converting the smartphone into a dual SIM device. In the same way, a simple WiFi tablet can become an actual smartphone and make and receive calls using the Noverca+ app. Calls made by Nòverca customers using Noverca+ are completely free. Remaining in the Mobile Services segment, during the quarter Acotel SpA in Italy and Acotel do Brasil in Brazil supplied messaging services worth 1 million, slightly down on the 1.2 million of the same period of the previous year. page 11

13 Noverca Srl provided Mobile Virtual Network Enabler (MVNE) and Mobile Virtual Network Aggregator (MVNA) services to the subsidiary, Noverca Italia Srl, alone during the quarter and thus did not generate revenues on transactions with entities outside the Group. The company, however, proceeded with operational and commercial preparations for the launch of its services for external customers and expects to sign its first contracts by the end of the current year. ACOTEL NET Acotel Net reports revenues of 0.3 million, substantially in line with the third quarter of Acotel Net consists of three segments: in addition to Security Systems, it also includes the Energy and Health Management segments. Most of the above revenues was generated by the Security Systems segment attributable to AEM Acotel Engineering and Manufacturing SpA. In the Energy and Health segments, trials of the Group s energy and water management systems continued in cooperation with prestigious partners, such as Poste Italiane and Acea, in Italy and the Italian Embassy in Brazil. During the third quarter the Group also installed devices in order to perform tests on a number of premises used by Coni (the Italian Olympic Committee) in Rome. page 12

14 OTHER INFORMATION This October Acotel took part in the Smart Energy Expo held at the Verona Exhibition Centre, presenting its innovative solution for managing the consumption of energy, water and gas, developed entirely in-house. The system has so far been tested with a number of prestigious partners, with extremely positive results in terms of quality and reliability of the service. Acotel s new commercial offering provides users with real-time information about the amounts of energy, water and gas used at various times of day, enabling them to identify peaks in consumption and devise a strategy to reduce their costs and eliminate waste. The new version of the Nòverca+ app, enabling Nòverca users to also communicate via an ordinary 3G data network using the data connection available on their SIM, was also released during the month. In this way the VoIP service can also be used when there is no WiFi connection. page 13

15 RESULTS OF OPERATIONS RECLASSIFIED CONSOLIDATED INCOME STATEMENT Q3 9M ( 000) Note Inc./(Dec.) Inc./(Dec.) Revenues 1 30,695 21,880 8,815 90,100 72,880 17,220 Other income (29) 455 1,460 (1,005) Total 30,716 21,930 8,786 90,555 74,340 16,215 Change in work in progress, semi-finished and finished goods 6 (92) (18) 119 Raw materials, semi-finished and finished goods 2 (510) (209) (301) (1,383) (1,517) 134 External services 3 (22,579) (16,603) (5,976) (69,935) (50,516) (19,419) Rentals and leases 4 (444) (446) 2 (1,323) (1,481) 158 Staff costs 5 (6,061) (6,168) 107 (18,724) (18,240) (484) Internal capitalised costs Other costs 6 (578) (510) (68) (1,970) (1,573) (397) Gross operating profit/(loss) 640 (2,037) 2,677 (2,013) 1,628 (3,641) Amortisation and depreciation 7 (1,072) (1,069) (3) (3,198) (3,165) (33) Goodwill impairment (1,720) - (1,720) Impairment losses/reversal of impairment losses on non-current assets 10 (1) 11 (64) (36) (28) Operating profit/(loss) (422) (3,107) 2,685 (6,995) (1,573) (5,422) Net finance income/(costs) (463) 230 1,138 (908) PROFIT/(LOSS) BEFORE TAX (311) (2,533) 2,222 (6,765) (435) (6,330) Taxation 9 (1,233) (749) (484) (1,604) (2,229) 625 PROFIT/(LOSS) BEFORE NON- CONTROLLING INTERESTS (1,544) (3,282) 1,738 (8,369) (2,664) (5,705) Profit/(Loss) attributable to non-controlling interests PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT (1,618) (3,332) 1,714 (8,574) (2,777) (5,797) Earnings per share 10 (0.39) (0.81) (2.08) (0.68) Diluted earnings per share 10 (0.39) (0.81) (2.08) (0.68) Compared with the results for the same period of the previous year, the Acotel Group s results for the third quarter of 2013 show strong revenue growth and a significant improvement in earnings, which page 14

16 benefitted from major investment in advertising by the Group, from the second half of 2012, in order to penetrate new geographical markets and publicise its renewed commercial offering. Revenue of 30,695 thousand for the third quarter is up 40% on the figure for the third quarter of As the following graph shows, this result is even more significant when compared with revenue growth in the first and second quarters of 2013 (12% and 37%, respectively, compared with the same periods of the previous year). The gross operating loss (negative EBITDA) of 2,037 thousand for the third quarter of 2012 compares with the profit of 640 thousand recorded in the third quarter just ended. A closer look shows that the Group s overall performance in the third quarter of 2013: benefitted from improved margins in the Acotel Interactive business area, thanks to returns on large-scale investment in advertising during previous quarters in order to acquire customers in new geographical markets and promote new services developed entirely in-house; continues to reflect the operating losses reported by Noverca Srl and Noverca Italia Srl in the Acotel TLC business area and investment in the human resources and technologies needed to complete and promote the commercial offering in the Acotel Net business, with particular reference to energy management services. After amortisation, depreciation, impairments of non-current assets, the Group reports an operating loss of 422 thousand, marking a significant improvement on the loss of 3,107 thousand reported for the same period of the previous year. After net finance income of 111 thousand, estimated taxation for the period of 1,233 thousand and profit attributable to non-controlling interests of 74 thousand, the loss attributable to owners of the Parent for the third quarter of 2013 amounts to 1,618 thousand. page 15

17 Note 1 - Revenue Revenue of 30,695 thousand for the third quarter of 2013 is up on the figure for the same period of the previous year ( 21,880 thousand). As the following table shows, the increase in turnover primarily reflects the results of the Acotel Interactive and Acotel TLC business areas: ( 000) Q3 9M Q3 9M ACOTEL INTERACTIVE 24,411 71,290 17,447 56,565 ACOTEL TLC 5,959 17,792 4,080 15,234 ACOTEL NET 325 1, ,081 30,695 90,100 21,880 72,880 ACOTEL INTERACTIVE The Acotel Interactive business includes the services provided directly to consumers (Digital Entertainment), and those supplied to telephone companies and commercial companies (Mobile Services), and has the primary purpose of supplying value added content and services over mobile phones and the web. As the following table shows, revenues from this business area are up 40% from 17,447 thousand in the third quarter 2012 to 24,411 thousand in the quarter under review. ( 000) Q3 9M * Inc./(Dec.) * Inc./(Dec.) Digital Entertainment 18,603 12,275 6,328 54,016 41,335 12,681 Mobile Services 5,808 5, ,274 15,230 2,044 Total 24,411 17,447 6,964 71,290 56,565 14,725 (*): Amounts for 2012 have been restated to provide a better basis for comparison without, however, modifying the total balance. A closer look shows that Digital Entertainment services generated revenues of 18,603 thousand in the third quarter of 2013, up 52% on the same period of These services are supplied by Acotel Interactive Inc. and its direct subsidiaries, accounting for a total of 11,738 thousand, by Acotel SpA, accounting for 5,428 thousand, and Info2cell, which reports revenues of 1,437 thousand. The increase on the same period of 2012 primarily reflects increased turnover at Acotel SpA and Info2cell, in part due to the different method of accounting for revenues, adopted following changes in the contracts governing the provision of services to consumers. page 16

18 Mobile Service revenues, amounting to 5,808 thousand, are up 12% on the third quarter of These include the revenues generated by Info2cell Llc from the services it provides to the leading mobile operators in the Middle East, amounting to 4,032 thousand, the revenues from services rendered by the subsidiary, Acotel do Brasil, to the Brazilian operator, TIM Celular, amounting to 1,257 thousand, and those generated by the services provided to Telecom Italia by the subsidiary, Acotel SpA, totalling 519 thousand. The growth compared with the same period of 2012 is almost entirely attributable to the Middle Eastern market. ACOTEL TLC The revenues generated by the Acotel TLC business in the third quarter of 2013 amount to 5,959 thousand, up 46% on the same period of 2012, as shown in the following table: ( 000) Q3 9M Inc./(Dec.) Inc./(Dec.) Mobile VAS Technology 3,495 2,255 1,240 11,038 9,776 1,262 Mobile Communications 2,464 1, ,754 5,458 1,296 Total 5,959 4,080 1,879 17,792 15,234 2,558 Turnover generated by the Mobile VAS Technology segment, which is up 55% on the third quarter of 2012, is generated by Jinny Software from the supply of new equipment and the provision of maintenance to mobile operators in Africa, Latin America, Asia, Europe, the Middle East and North America. Mobile Communications revenues include: 1,529 thousand in MVNO revenues generated by Noverca Italia Srl; 902 thousand generated in Italy by Acotel SpA, primarily from services provided to leading banks; 33 thousand generated from the services provided to the Brazilian operator, TIM Celular, by Acotel do Brasil Ltda. The growth in Mobile Communications revenues compared with the same quarter of 2012 is due to increased turnover at Noverca Italia Srl, partly reflecting the fact that the company s operating results have been consolidated on a line-by-line basis since 20 May 2013, the date on which the Group acquired control. ACOTEL NET Revenues generated by the Acotel Net business almost exclusively regard the design, production and maintenance of electronic security systems in Italy by the subsidiary, AEM Acotel Engineering and Manufacturing SpA. page 17

19 A geographical breakdown of the Group s revenue is as follows: ( 000) Q3 % 9M % Q3 % 9M % ITALY 9, % 28, % 6, % 23, % LATIN AMERICA 9, % 24, % 5, % 18, % MIDDLE EAST 5, % 16, % 3, % 10, % NORTH AMERICA 2, % 10, % 4, % 12, % OTHER EUROPEAN COUNTRIES 1, % 6, % 1, % 3, % ASIA 1, % 1, % % 1, % AFRICA % 2, % % 3, % 30, % 90, % 21, % 72, % The geographical breakdown of revenue for the third quarter of 2013 shows growth in turnover in all the countries in which the Group trades, with the exception of North America. page 18

20 Note 2 Raw materials, semi-finished and finished products This item, amounting to 510 thousand in the third quarter, relates primarily to the purchase of materials for the construction of telecommunications equipment by Jinny Software. Note 3 External services The cost of external services totals 22,579 thousand, representing an increase of 36% compared with the third quarter of A breakdown of the service costs is shown below: ( 000) Q3 9M Q3 9M Interconnection and billing services 9,981 28,357 5,543 18,977 Advertising 4,152 16,536 3,969 9,638 Content providers 3,815 11,267 2,918 8,424 Telecommunications services 1,268 3, ,351 Professional consultants 558 1, ,634 Connectivity and sundry utilities 509 1, ,397 Travel expenses 397 1, ,484 Purchase of SMS packages 389 1, ,822 Remuneration of corporate officers Call Centre Outsourcing Auditors' fees Customer acquisitions Other minor expenses 811 2, ,784 Total 22,579 69,935 16,603 50,516 The increase in the cost of external services primarily reflects the increased cost of interconnection and billing services, linked to the method of accounting for revenues on a gross basis used by the Acotel Interactive business area, following the increase in turnover and changes to contracts in certain countries in which this business area operates. Note 4 - Rentals and leases Rentals and leases amount to 444 thousand and mainly include rentals on offices occupied by Group companies. page 19

21 Note 5 Staff costs Staff costs include: ( 000) Q3 9M Q3 9M Salaries and wages 4,763 14,541 4,947 14,263 Social security contributions 755 2, ,351 Staff termination benefits Finance costs (25) (61) (24) (73) Other costs 442 1, ,393 Total 6,061 18,724 6,168 18,240 Other staff costs include charges incurred in relation to professional training and refresher courses, prevention and health care expenses, and contributions for defined-contribution pension plans for the staff of foreign subsidiaries. The number of staff by category at and the comparison among the average numbers of the third quarter and first nine months of 2013 and 2012 are reported in the following table: At 30 Sept 2013 Average Q Average Q Average 9M 2013 Average 9M 2012 Managers Supervisors White- and blue-collar staff Total The geographical distribution of the Group s staff is shown in the table below: At 30 Sept 2013 At 30 Sept 2012 Italy Lebanon Brazil Jordan USA Ireland Romania Spain United Arab Emirates page 20

22 Malaysia 10 8 Kenya 9 9 Saudi Arabia 5 5 Turkey 2 2 Indonesia 2 2 Sudan 1 1 Mexico 1 - Total The figures shown in the tables regarding the geographical distribution of the Group s human resources and the workforce by category at 30 September 2012 are presented on the basis of the percentage share of the Italian companies, Noverca Srl and Noverca Italia Srl, then consolidated in Acotel Group SpA consolidated financial statements. In order to provide a like-for-like basis for comparison with the figures for, which reflect the line-by-line consolidation of the Group s Italian staff, it should be noted that the total number of staff employed in Italy 30 September 2012 was 138 and that, therefore, the total workforce employed by Group companies totalled 495. Note 6 Other costs Other costs amount to 578 thousand for the third quarter of 2013, including 214 thousand for indirect taxes payable by Acotel do Brasil, Acotel Interactive LTDA and Jinny Latin America in compliance with Brazilian legislation. The balance includes other general expenses and charges incurred by Group companies in connection with their ordinary activities. Note 7 - Amortisation and depreciation Details of the amortisation and depreciation of assets are given below: ( 000) Q3 9M Q3 9M Amortisation of intangible assets 369 1, Depreciation of property, plant and equipment 703 2, ,295 Total 1,072 3,198 1,069 3,165 Amortisation of intangible assets mainly refers to amortisation of the software and licences utilised by various Group companies, and the expenses paid to Telecom Italia in return for preparation and configuration of the technology infrastructure used in delivering the services provided by the MVNO, Nòverca. Depreciation of property, plant and equipment primarily refers to depreciation of the telecommunications equipment and infrastructures used by Group companies. page 21

23 Note 8 - Finance income and costs Net finance income of 111 thousand for the third quarter of 2013 breaks down as follows: ( 000) Q3 9M Q3 9M Foreign exchange gains Income from investments ,299 Interest income on bank deposits Total finance income 421 1, ,100 Foreign exchange losses (170) (526) - (630) Interest expense and bank charges (111) (319) (50) (242) Other finance costs (29) (78) (29) (90) Total finance costs (310) (923) (79) (962) Net finance income/(costs) ,138 Foreign exchange gains and losses largely regard realised and unrealised gains and losses generated by Acotel Interactive Inc. and its subsidiaries. Income from investments regards gains on financial assets held for trading through profit or loss. The reduction in finance income compared with the same period of the previous year reflects the sale (in part already completed at 31 December 2012) of a portion of the securities previously held, with the funds raised used to cover the losses incurred by the Noverca business in 2012 and to finance significant investment in advertising in the Acotel Interactive business area. Note 9 Taxation Taxation for the period, amounting to 1,233 thousand, reflects estimated income tax expense and deferred tax income and expense recognised by Group companies, net of the related reversals. Note 10 Earnings per share The calculation of basic and diluted earnings per share is based on the following data: page 22

24 ( 000) Q3 9M Q3 9M Profit/(loss) for the period ( 000) (1,618) (8,574) (3,332) (2,777) Number of shares (000) Shares in circulation at the start of the period* 4,114 4,114 4,114 4,114 Weighted average of treasury shares acquired/sold in the period Weighted average of ordinary shares in circulation 4,114 4,114 4,114 4,114 Basic and diluted earnings per share ** (0.39) (2.08) (0.81) (0.68) * : net of treasury shares held at the same date. **: basic earnings for the third quarter and first nine months of 2013 and 2012 coincide with diluted earnings per share as the conditions provided for by IAS 33 do not exist. page 23

25 FINANCIAL POSITION AND CASH FLOW RECLASSIFIED CONSOLIDATED STATEMENT OF FINANCIAL POSITION ( 000) 31 December 2012 (*) Inc./(Dec.) Non-current assets: Property, plant and equipment 9,962 10,445 (483) Intangible assets 14,231 14,299 (68) Other assets 3,593 3, TOTAL NON-CURRENT ASSETS 27,786 28,322 (536) Net current assets: Inventories Trade receivables 35,023 32,742 2,281 Other current assets 4,647 4,833 (186) Trade payables (25,411) (23,850) (1,561) Other current liabilites (6,370) (8,414) 2,044 TOTAL NET CURRENT ASSETS 8,648 6,032 2,616 PROVISIONS FOR STAFF TERMINATION AND OTHER EMPLOYEE BENEFITS (2,936) (2,578) (358) NON-CURRENT PROVISIONS (627) (629) 2 NET INVESTED CAPITAL 32,871 31,147 1,724 Equity: Share capital 1,084 1,084 - Reserves and retained earnings/(accumulated losses) 56,074 64,866 (8,792) Profit/(Loss) for the period (8,574) (6,053) (2,521) Non-controlling interests 1, TOTAL EQUITY 49,601 60,709 (11,108) MEDIUM-/LONG TERM DEBT Net cash and cash equivalents: Current financial assets (6,979) (16,722) 9,743 Cash and cash equivalents (15,094) (11,853) (3,241) Current financial receivables - (1,646) 1,646 Current financial liabilities 5, ,684 (16,730) (29,562) 12,832 NET FUNDS RECEIVABLE FROM OTHERS (16,730) (29,562) 12,832 TOTAL EQUITY AND NET FUNDS RECEIVABLE FROM OTHERS 32,871 31,147 1,724 (*): Amounts at 31 December 2012 have been partially restated to reflect the impact of IAS 19 (revised). page 24

26 The Acotel Group s net invested capital at amounts to 32,871 thousand, consisting of non-current assets of 27,786 thousand, net current assets of 8,648 thousand, provisions for staff termination benefits of 2,936 thousand and other non-current provisions of 627 thousand. Net invested capital is financed by consolidated equity of 49,601 thousand and net funds of 16,730 thousand. A detailed analysis of changes in the principal components of the financial position shows that: there have been no material changes in non-current assets during the period, except for amortisation and depreciation for the period; changes in net current assets reflect the performance of the Acotel Group s businesses; net funds at amount to 16,730 thousand, down on the figure for 31 December 2012 ( 29,562 thousand). The following analysis of the Group s net funds at 30 September 2013 shows a comparison with 30 June 2013 and 31 December NET FUNDS ( 000) 30 June December 2012 A. Cash and cash equivalents 15,094 14,228 11,853 B. Assets held for trading 6,463 10,279 15,710 C. Liquidity (A + B) 21,557 24,507 27,563 D. Financial receivables due from related parties - - 1,646 E. Other current financial receivables ,012 F. Current financial assets (D + E) ,658 G. Current bank borrowings (5,343) (5,457) (659) H. Current financial liabilities (G) (5,343) (5,457) (659) I. Non-current debt L. Net funds (C+F+H+I) 16,730 19,962 29,562 - receivable from related parties - - 1,646 - receivable from others 16,730 19,962 27,916 Net funds at amount to 16,730 thousand, a reduction compared with the end of 2012 (down 43%) and 30 June 2013 (down 16%). This essentially reflects significant investment in promotions by the Acotel Interactive business, the financial support provided by the Group to make up for the losses incurred by Noverca Srl and Noverca Italia Srl in the first nine months of 2013, and the cost of renovating the premises owned in Rio de Janeiro. page 25

27 DECLARATION BY THE MANAGER RESPONSIBLE FOR FINANCIAL REPORTING The manager responsible for the Group s financial reporting, Luca De Rita, hereby declares, pursuant to article 154 bis, paragraph 2 of the Consolidated Finance Act, that this consolidated interim report is consistent with the underlying accounting records. page 26