EVOCA S.p.A. Quarterly Report Q Period ended September 30 th, 2017

Transcription

1 EVOCA S.p.A. Quarterly Report Q Period ended September 30 th, 2017

2 Table of Contents General Information... 3 Presentation of Financial Data... 3 Key Figures and Highlights... 6 Business Review... 8 Financial Review... 9 Material Risk Factors and Material Recent Developments Condensed Consolidated Statement of Comprehensive Income for the Three and Nine Month Period ended September 30 th, 2017 (unaudited) Condensed Consolidated Balance Sheet as of September 30 th, 2017 (unaudited) Condensed Consolidated Statement of Cash Flows for the Period ended September 30 th, 2017 (unaudited) Condensed Consolidated Statement of Changes in Equity for the Period ended September 30 th, 2017 (unaudited) Notes to the Condensed Consolidated Financial Statements

3 General Information EVOCA S.p.A. (previously LSF9 Canto Investments S.p.A.) and its subsidiaries (together with the Company, the Group ) is the leading manufacturer in Europe of coffee, other hot and cold beverage and food vending machines based on units sold, with a particular focus on espresso coffee and with a rapidly developing presence in coffee machines for the Office Coffee Service ( OCS ) and food service agreements. The Group designs, engineers, develops, manufactures, customizes, assembles and distributes a broad range of vending and coffee machines. The Group sells its products under seven main brands: Necta, Wittenborg, Saeco, Gaggia, Ducale, Cafection and SGL. Machines include small table-top to large free standing models, utilizing both pay and non-pay solutions and are primarily designed for the workplace, including offices, factories, schools, shopping centers, airports, train stations, gas stations, hospitals, hotels and restaurants. The Group operates six manufacturing plants in Italy, one in Romania and one in Canada, all of which have flexible assembly operations, and has a commercial arrangement with an additional manufacturing plant in China. The Group operates in nearly all major international markets, maintaining relationships with direct customers or, alternatively, through a network of dealers and its commercial subsidiaries located in Italy, Denmark, UK, France, Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina, Australia, Singapore, Russia, Romania, Portugal, Canada and the US. As part of the strategy to strengthen its product offering, on March 14 th, 2017 the Company completed the acquisition of Saeco Vending S.p.A. and its subsidiaries ( Saeco ), creating a more holistic product platform that addressed the need of the existing EVOCA customer base. The acquisition of Saeco for a total consideration of Euro 55.7 million was funded by issuing additional notes in an amount of Euro 70 million under the existing 7% Senior Secured Notes due On June 6 th, 2017, the Company acquired the entire share capital of Ducale Macchine da Caffè S.r.l. ( Ducale ), a company based in Parma (Italy) with a long established history as an innovative manufacturer of coffee and vending machines. With this acquisition the Company intends to strengthen its competitive position by increasing the current range of hot drink vending machines with models from the Ducale range. The Ducale acquisition had a total consideration of Euro 19.7 million and was funded through group cash and drawings under our Revolving Facility. On July 11 th, 2017 the Company completed the joint venture in order to acquire 100% of Les Entreprises Cafection Inc. ( Cafection ), the leading manufacturer of bean-to-cup machines for the OCS market in North America. EVOCA owns a 67% stake in the joint venture, while the previous Cafection owner retains a 33% stake. The joint venture vehicle, based in Quebec City, will continue with the well-known Cafection brand and represents for the Company the ideal platform for the expansion of EVOCA s espresso coffee technology into the North American market. The Cafection acquisition for a total consideration of Euro 29.6 million was funded by issuing additional notes in an amount of Euro 40 million under the existing 7% Senior Secured Notes due Presentation of Financial Data The figures presented in this Noteholder report have been prepared on the following basis: for the three, nine and twelve months ended September 30 th, 2017: the consolidated results of the Company under the current ownership, including the results of Saeco since March 14 th, 2017, the results of Ducale since June 6 th, 2017 and the results of Cafection since July 11 th, 2017; 3

4 for the three months ended September 30 th, 2016: the consolidated results of the Company under the current ownership, excluding Saeco, Ducale and Cafection; for the nine months ended September 30 th, 2016 and FY 2016: the aggregation of the consolidated results of the Company under the previous ownership from January 1 st, 2016 until March 22 nd, 2016 and the consolidated results of the Company under the current ownership from March 23 rd, 2016 until September 30 th, 2016 and December 31 st, 2016, respectively ( Pro forma ). The EVOCA acquisition occurred in March 2016 has been recorded using the acquisition method of accounting, in accordance with the International Financial Reporting Standards as adopted by the European Union ( IFRS ). Although the purchase accounting requirement has no impact on the Company s business or cash flow, it adversely impacts the Company s reported IFRS gross margin and EBITDA for the period between the EVOCA acquisition - occurred in March and September 30 th, This presentation enables the Noteholders to view the business as a whole, and provides meaningful and relevant financial information that is useful in evaluating the Company ongoing operations, in the same manner as management views and operates the business. The three months ended September 30 th, 2017 pro forma consolidated results of the Company with Saeco Group, Ducale and Cafection are located in EVOCA Financial Performance file uploaded in Important Notice In this report, the terms Group, we, us and our refer to the Issuer and its subsidiaries. No representation or warranty (whether express or implied) is given in respect to any information on this presentation or that this presentation is suitable for the recipient s purposes. The information herein is not all inclusive nor does it contain all information that may be desirable or required in order to properly evaluate the Group. Neither the Group nor any of its officers, directors, employees, affiliates or advisors will have any liability with respect to any use of, or reliance upon, any of the information contained herein. The Group has no obligation whatsoever to update any of the information or the conclusions contained herein or to correct any inaccuracies that may become apparent subsequent to the date hereof. This report may contain forward looking statements within the meaning of the U.S. federal securities laws and the securities laws of certain other jurisdictions. In some cases, these forward looking statements can be identified by the use of forward looking terminology, including the words aims, anticipates, believes, continue, could, estimates, expects, forecasts, future, guidance, intends, may, ongoing, plans, potential, predicts, projects, seek, should, target, will, would or, in each case, their negative or other variations or comparable terminology or by discussions of strategies, plans, objectives, targets, goals, investments, future events, beliefs or intentions. These forward looking statements are based on plans, estimates and projections as they are currently available to our management. Such forward looking statements are not guarantees of future performance and are subject to, or are based on, a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements. Any forward looking statements are only made as at the date hereof and, except to the extent required by applicable law or regulation, we undertake no obligation to publicly update or publicly revise any forward looking statement, whether as a result of new information, future events or otherwise. 4

5 This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities in any entity of the Group. The recipient acknowledges and agrees that it is responsible for making an independent judgment in relation to information contained herein and for obtaining all necessary financial, legal, accounting, regulatory, tax, investment or any other advice that it deems necessary or appropriate. This presentation is only for persons having professional experience in matters relating to investments and must not be acted or relied on by any person. All figures presented in this report are based on our consolidated management accounts and are unaudited. The financial information herein includes certain non-ifrs measures that we use to evaluate our economic and financial performance. These measures include, among others, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Operating Profit Before Exceptional Items. The non- IFRS measures may not be comparable to similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under IFRS. 5

6 Key Figures and Highlights (*) For the three months ended For the nine months ended For the twelve months ended ( thousands) September 30, September 30, September 30, September 30, September 30, December 31, Results Pro forma Pro forma Pro forma Revenue 95,924 67, , , , ,564 Adjusted EBITDA* 21,539 16,329 65,049 56,251 84,365 75,568 Adjusted EBITDA margin** 22.5% 24.3% 22.9% 24.9% 23.6% 25.2% Operation profit/(loss) 3,217 11,490 17,880 39,038 (17,882) 3,276 Profit/(loss) for the period (7,072) 1,512 (10,940) (6,156) (46,576) (41,792) Cash flow Cash at the beginning of period 81,954 39,645 51,089 48,088 50,670 48,088 Net cash flow from operating activities 22,701 20,329 44,075 35,960 66,105 57,990 Net cash flow from investing activities (36,360) (1,705) (119,449) 240,159 (132,982) 226,627 Of which: capital expenditures (4,709) (3,198) (11,115) (9,625) (14,921) (13,432) Of which: Acquisition (30,373) 0 (102,571) 248,292 (116,571) 234,292 Of which: Tax settlement (1,278) 1,492 (5,763) 1,492 (1,489) 5,766 Net cash flow from financing activities *** (8,875) (7,602) 83,706 (273,537) 75,628 (281,615) Cash at the end of period **** 59,420 50,670 59,420 50,670 59,420 51,089 Financial Position Net debt***** 451, ,779 Net debt / Adjusted EBITDA ****** We define Adjusted EBITDA as net profit (loss) plus income tax expense, net financial income (expense), depreciation, amortization, special costs and the Real/Euro foreign exchange adjustment. We present non-ifrs measures because we believe they and similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity and are intended to assist in the analysis of our operating results, profitability and ability to service debt. Adjusted EBITDA is not a measure of financial performance under IFRS and should not be considered in isolation or as an alternative to any other measures of performance derived in accordance with IFRS. Adjusted EBITDA, as presented in this Report, may not be comparable to similarly titled measures reported by other companies. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. (**) We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. (***) Cash Flow from financing activities includes interest payment. (****) Cash at the end of September 2017 and December 2016 includes Euro 1 million relating to N&W purchase price held in escrow account to cover possible purchaser's warranty claims under the acquisition agreement of N&W Group. (*****) Net Debt consists of Senior Secured Notes, Second Lien Notes (together the "Notes"), Revolving facility and 0.2 million of other debt, less cash and cash equivalents, net of escrow account of Euro 1 million and excluding accrued interests on the Notes and on Revolving facility. Adjusted EBITDA for the twelve months ended September 30, 2017 pro forma for the ratio calculation is 94.0 million ( 77.5 million N&W + 8 million Saeco million Ducale (******) million Cafection). Q compared to Q For the three month ended September 30 th, 2017 Revenue of EVOCA Group was Euro 95.9 million, Euro 28.8 million higher than revenue for the same period in 2016 due to: i) increased sales in EVOCA Group old perimeter by Euro 6.7 million due to the good performance of small-medium sized customers (Euro +4.6 million, including Euro 0.4 million in Western Europe and Euro 4.2 million in the rest of the world, respectively, especially in Asia and East Europe), and of three of our four largest key customers (Euro +2.8 million), partially offset by decreased sales to one other key customer by Euro 0.7 million; ii) increased sales in Saeco by Euro 14.5 million, iii) increased sales in Ducale by Euro 2.9 million and iv) increased sales in Cafection by Euro 4.7 million. For the three month ended September 30 th, 2017 Adjusted EBITDA increased by Euro 5.2 million compared to the same period in Saeco, Ducale and Cafection increased sales by Euro 1.5 million, Euro 0.8 million and Euro 1 million, respectively. Adjusted EBITDA of EVOCA Group old perimeter is Euro 1.9 million higher than EBITDA for the same period in 2016, slightly offset by the negative impact of the exchange difference (Euro 0.5 million), driven by [higher USD. For the three month ended September 30 th, 2017 Operation profit was impacted by the amortization of the intangible assets arising from the purchase price allocation following EVOCA acquisition (which amounted to Euro 9.3 million). For the three month ended September 30 th, 2017 Cash flow from operating activities was Euro 2.4 million higher than same period in 2016, primarily due to the contribution of the newly acquired companies and with EVOCA old perimeter s cash flow from operating activities in line with cash flow from operating activities for the same period in

7 The ratio of Net Debt to Adjusted EBITDA was equal to 4.8x as of September 30 th, 2017, improving the 5.1x ratio as of June 30 th, Q YTD compared to Q YTD For the nine-month ended September 30 th, 2017, Revenue was Euro 57.4 million higher than in the same period in Saeco s, Ducale s and Cafection s to such increase was Euro 39.2 million, Euro 3.7 million and Euro 4.7 million, respectively. EVOCA Group old perimeter Revenue was Euro 9.8 million higher than same period in 2016 and was characterized by both a strong performance with small-medium sized customers (+Euro 10.1 million or 6.4%) and the recovery of three of our four largest customers (+Euro 2.8 million or 6.7%), which was only partially offset by decreased sales to one of our other key customers (-13% or Euro 3.2 million lower, compared to the same period in 2016). For the nine-month ended September 30 th, 2017, Adjusted EBITDA increased by Euro 8.8 million (+15.6%), from Euro 56.3 million for the same period in 2016 to Euro 65 million. Saeco, Ducale and Cafection increased their Adjusted EBITDA for the nine months ended September 30 th, 2017 by Euro 4.9 million, Euro 1 million and Euro 1 million, respectively. Adjusted EBITDA of EVOCA Group old perimeter was Euro 1.9 million higher than same period last year due to better sales performances, slightly offset by a Euro 0.9 million negative exchange difference impact driven by US dollar. Cash flow from operating activities increased by Euro 8.1 million, which includes an aggregate contribution of Euro 4.8 million from Saeco, Ducale and Cafection, as well as for Euro 3.3 million from EVOCA Group old perimeter due to reduced special costs and taxes, partially offset by weaker working capital performance driven by higher inventory levels. LTM September 2017 compared to LTM December 2016 For the twelve months ended September 30 th, 2017, Revenue reached Euro 357 million (Euro 57.4 million higher than December 31 st, 2016 results) and Adjusted EBITDA reached Euro 84.4 million (Euro 8.8 million higher than December 31 st, 2016 results), primarily as a result of increased revenue in Saeco, Ducale and Cafection and improved of EVOCA Group old perimeter. The result for the twelve months ended September 30 th, 2017 reflects the impact of the EVOCA Group purchase price allocation finalized in December

8 Business Review For the three months ended For the nine months ended September 30, September 30, September 30, September 30, ( thousands) Pro forma Pro forma Revenue by geography 95,924 67, , ,315 Italy 23,898 21,480 75,520 73,304 France 10,333 8,919 36,861 31,827 Spain 6,076 4,700 19,486 16,879 UK 3,582 2,755 9,401 8,367 Germany 4,619 3,176 15,028 10,259 Nordics 4,328 3,247 15,075 15,468 Other Europe 13,126 10,232 39,198 32,224 East Europe 8,430 2,834 23,987 10,395 Africa & Middle East 1, ,095 2,529 Asia & Pacific 5,518 1,977 14,185 5,217 North America 8,445 3,423 14,421 9,497 Central & South America 6,283 3,736 15,462 10,350 Revenue by line of business (*) 95,924 67, , ,315 Auto Coffee (1) 30,033 22,787 91,330 79,501 Semi Auto Coffee (2) 34,425 17,562 93,415 57,995 Impulse (3) 12,532 12,128 42,536 39,857 Accessories & Spares 18,934 14,649 56,438 48,962 (*) new way of presentation of our revenue (1) Auto Coffee: machines for large sized location. Defined as machines with cup dispensing technology (2) Semi Auto Coffee: machines for small and medium sized location. Defined as machines without cup dispensing technology (3) Impulse: machines dispensing snack & food and can & bottle, complementary products to coffee machine offering For the nine-month ended September 30 th, 2017 performance of Western European countries (comprising, among others, Italy, France, Spain, UK, Germany and the Nordics) increased by Euro 22.2 million, compared to the same period in 2016 primarily as a result of Saeco s and Ducale s contribution of Euro 16.8 million and Euro 3.8 million, respectively, and the growth in EVOCA Group old perimeter by Euro 1.8 million especially in France, Germany, UK and Belgium, slightly offset by a decrease in Italy, Spain and Nordics area. The EVOCA revenue increase in those countries has been characterized by the higher numbers of small-medium customers (+1.8% or Euro 2.1 million higher than the same period in 2016), offset by the underperformance of one of our four key customers (-13% or Euro 3.2 million lower than revenues for the same period in 2016). For the nine-month ended September 30 th, 2017, performance in the rest of the world has shown an overall increase of Euro 35.2 million (+93%) compared to the same period in 2016 due to i) Saeco and Cafection contribution of Euro 22.4 million and Euro 4.7 million, respectively and ii) the solid performance of the Group in Asia & Pacific (mainly China and Singapore), East Europe (mainly Romania and Russia) and Africa & Middle East, partially offset by lower sales in North America for the EVOCA old perimeter. Included in revenue arising for the nine months ended September 30 th, 2017 is the revenue of approximately Euro 44.4 million (compared to Euro 31.5 million for the same period in 2016), which arose from sales to the two largest customers of the Group. No single customer contributed 10% or more to Group s revenue for the nine months ended September 30 th, 2017 while during the same period in 2016, our two largest customers each contributed to 10% of our total Revenue. Auto Coffee For the nine months ended September 30 th, 2017, revenue increased by Euro 11.8 million as compared to the same period in

9 For the nine-month ended September 30 th, 2017, EVOCA Group old perimeter revenue increased by Euro 3.4 million as compared to the same period 2016 thanks to good results in Eastern Europe (mainly Russia, Romania and Poland), Middle East (driven by UAE and Saudi Arabia), Belgium and UK, slightly offset by the underperformance of the rest of the world (mainly Italy). For the nine-month ended September 30 th, 2017, Saeco s and Ducale s contribution was Euro 5 million and Euro 3.4 million, respectively. Semi Auto Coffee For the nine months ended September 30 th, 2017, revenue increased by Euro 35.4 million as compared to the same period in For the nine-month ended September 30 th, 2017, EVOCA Group old perimeter revenue increased by Euro 4.9 million as compared to the same period in 2016, due to our very positive performance especially in Asia & Pacific area (Euro +3 million), as well as in Germany, the Netherlands, UK and Spain (Euro million in aggregate), partially offset by the underperformance of one of our key customer in Italy (Euro -2.2 million). For the nine-month ended September 30 th, 2017, Saeco s and Cafection s contribution was Euro 27.1 million and Euro 3.4 million respectively. Impulse For the nine-month ended September 30 th, 2017, revenue increased by Euro 2.7 million as compared to the same period in For the nine-month ended September 30 th, 2017, EVOCA Group old perimeter revenue increased by Euro 1.4 million as compared to the same period in 2016, due to improved results in in Eastern Europe (mainly Romania), South America, France, Germany, Nordics and Middle East, slightly offset by the underperformance in Italy, UK, Spain and APAC. For the nine-month ended September 30 th, 2017, Saeco s contribution was Euro 1.3 million. Spares & Accessories For the nine months ended September 30th, 2017, revenue increased by Euro 7.5 million as compared to the same period in For the nine-month ended September 30th, 2017, Saeco s, Ducale s and Cafection s contribution was Euro 5.7 million Euro 0.4 million and Euro 1.3 million, respectively. Financial Review Operating profit For the nine months ended September 30 th 2017, the Operating profit was Euro 17.9 million, primarily impacted by: i) the amortisation of the intangible assets arisen by the purchase price allocation following EVOCA Group acquisition for Euro 27.9 million, ii) the contribution of Saeco Group for Euro 3.7 million, iii) the contribution of Ducale for Euro 1 million, iv) the contribution of Cafection for Euro 0.8 million, v) a negative exchange difference of Euro 2.2 million as a result mainly of USD and Brazilian Real and vi) the restructuring costs of Euro 3.6 million related to the production transfer of SGL. Excluding the above mentioned one-off items, the Operating Profit would have been Euro 45.9 million, Euro 6.9 million higher than the Operating Profit for the same period in For the nine months ended September 30 th, 2017, the impact of non-recurring items was minor if compared to the same period last year, amounting to an expense of Euro 3.3 million, including mainly costs related to the Saeco, Ducale and Cafection acquisitions, efficiency enhancement projects and certain charges for Italian short time working contracts. For the nine months ended September 30 th, 9

10 2016, non-recurring costs included costs related to EVOCA Group acquisition occurred on March 22 nd, 2016 (mainly concentrated in the second quarter 2016). For the nine months ended September 30 th, 2017, operating profit was also impacted by negative exchange differences for Euro 2.2 million (including an impact of Euro 0.8 million and Euro 0.9 on Brazilian Real and USD, respectively). The Brazilian Real exchange difference is largely due to a translation effect (mostly unrealized) arising from the conversion of intercompany trade payables; in the nine months ended September 30 th 2016 the Group recorded a positive exchange difference of Euro 1.2 million (mainly driven by a positive impact of Euro 1.4 million resulting from Brazilian Real). Financial results and taxation For the nine months ended September 30 th, 2017, net financial expenses increased by Euro 3.7 million, from Euro 25.6 million for the same period in 2016, to Euro 29.2 million. This increase results from the new financing structure which has been put in place since the EVOCA Acquisition and from issuances of Euro 70 million and Euro 40 million of additional notes under the existing Secured Notes due 2023 to fund the Saeco and Cafection acquisitions, respectively. For the nine months ended September 30 th, 2017, Euro 29.2 million included mainly Euro 27 million interests on Senior Secured and Second Lien Notes, Euro 1 million amortisation of financing fees, Euro 0.4 million interests and commitment fees under the Revolving Facility and other financial costs, compared to Euro 25.6 million for the same period in 2016, which included Euro 10.4 million, mainly related to the old facilities (Senior and Mezzanine), together with 15.2 million of interest expenses related to the former Bridge Facility Agreement and Revolving Facility Agreements. Income tax expense for the nine months ended September 30 th 2017 reflects the tax benefit recognised to the Italian companies having a high level of equity and the impact of purchase price allocation, compared to figures in the same period in 2016, which were impacted by a Italian tax audit (Euro 12 million) and did not include any purchase price effects. Cash flow statement For the nine months ended September 30 th, 2017, net cash flow from operating activities was Euro 44.1 million, compared to Euro 36 million for the same period The increase of 8.1 million was due to i) improved performance in the EVOCA old perimeter amounting to Euro 3.2 million, ii) Saeco s contribution of Euro 2.7 million and iii) Ducale s and Cafection s aggregate contribution of Euro 2.2 million. Working capital in EVOCA Group old perimeter as a percentage of revenue increased slightly, with Trade Working Capital as a percentage of revenue for the twelve months ended September 30 th, 2017 at 13.5%, compared to 12.7% for the same period in 2016, driven by higher inventory levels to serve the expected higher turnover in the next quarter. For the nine months ended September 30 th, 2017, the net cash used in investing activities was Euro million and attributable to i) Euro 54.2 million related to Saeco acquisition (Euro 55.7 purchase price paid less Euro 1.5 million of cash acquired) ii) Euro 19.6 million related to Ducale acquisition completed in June 2017 (Euro 19.7 purchase price paid less Euro 0.1 million of cash acquired) iii) Euro 28.8 million related to Cafection acquisition, which closed in June 2017 (Euro 29.7 purchase price paid less Euro 0.9 million of cash acquired) iv) Euro 11.1 million to net capital expenditures (of which Euro 1.6 million from Saeco) v) Euro 6.7 million referred to the payments of the installments related to the Italian tax settlement, compensated by an Equity injection from the Shareholders of Euro 1 million. For the nine months ended September 30 th, 2017, net cash from financing activities was Euro 83.7 million. This includes Euro 72.1 million of cash in from the issuance of additional notes in an amount of EUR 70 million under the existing 7% Senior Secured Notes due 2023 to fund the Saeco acquisition, net of Euro 10.8 million as repayment of Revolving Facility, as well as Euro 41.8 million of cash as a 10

11 result of a further issuance of additional notes in an amount of EUR 40 million under the existing 7% Senior Secured Notes due 2023 to fund Cafection Transaction which was completed in July Material Risk Factors and Material Recent Developments SGL production transfer On July 13th, 2017 SGL, the Company s subsidiary based in Piemonte, announced the relocation of its production activity to other plants of the Group. The relocation provides a collective redundancy procedure involving 98 SGL employees. Negotiations with the Unions started in July and have been completed in September with a redundancy package for the people involved of approximately Euro 3.5 million. The production activity has been stopped in October and the biggest portion of the redundant people left the company. The remaining portion of redundant people will be involved in finalizing the production transfer and will leave the company by the end of Change of name On November 29, 2017 N&W Global Vending S.p.A. changed its name into EVOCA S.p.A. 11

12 Condensed Consolidated Statement of Comprehensive Income for the Three and Nine Month Period ended September 30 th, 2017 (unaudited) (All amounts in thousands unless indicated otherwise) CONDENSED INTERIM INCOME STATEMENT In Euros thousand For the three months ended For the nine months ended September 30, September 30, September 30, September 30, Pro forma Pro forma Continuing operations Revenue from Sales 95,924 67, , ,315 Cost of Sales (72,143) (43,533) (212,730) (145,436) Gross profit 23,782 23,593 70,990 80,880 Sales & Marketing (9,255) (6,598) (27,503) (21,517) Logistic (1,841) (1,414) (5,426) (4,527) Administrations (3,910) (3,037) (11,134) (9,325) Operating Exchange Difference (552) (249) (2,164) 1,191 Total operating costs (15,558) (11,298) (46,227) (34,178) Restructuring income/(expenses) (3,562) (2) (3,562) (14) Special costs (1,444) (802) (3,322) (7,650) Operating profit 3,217 11,490 17,880 39,038 Finance Income Finance costs (11,063) (8,061) (30,103) (25,955) Profit/(Loss) before income tax (7,301) 3,552 (11,352) 13,487 Income tax expense 228 (2,041) 413 (19,643) Loss for the period (7,072) 1,512 (10,940) (6,156) Third Party Net Result (7,276) (11,143) N&W Group Net Result Consolidated comprehensive income: Loss for the period (7,072) 1,512 (10,940) (6,156) Items that may be reclassified subsequently to the Income Statement Cash Flow Hedge 9 (127) Exchange differences on translating foreign operations (448) (258) (694) 161 Income Tax related to the above component (3) (34) (115) 26 Other comprehensive income/expense for the period, net of income tax (442) (419) (296) 291 TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (7,514) 1,093 (11,236) (5,864) 12

13 A reconciliation of Adjusted EBITDA (segment profit) to loss for the period is provided as follows: For the three months ended For the nine months ended For the twelve months ended September 30, September 30, September 30, September 30, September 30, December 31, Pro forma Pro forma Pro forma Profit/(Loss) for the period (7,072) 1,512 (10,940) (6,156) (19,556) (14,773) Income taxes (228) 2,041 (413) 19,643 (10,688) 9,368 EBT (7,301) 3,552 (11,352) 13,487 (30,244) (5,405) Net Financial Costs 10,517 7,938 29,232 25,551 63,271 59,590 EBIT 3,217 11,490 17,880 39,038 33,027 54,185 Depreciation 2,103 1,894 5,720 5,485 7,540 7,305 Amortisation (1) 1,977 1,837 5,735 5,475 7,343 7,083 Special costs 5, ,884 7,664 2,176 2,956 Exchange Difference on BRL (94) (1,410) 4,819 2,570 Adjusted EBITDA (2) 12,209 16,329 37,058 56,251 54,905 74,099 (1) For the three and nine months ended September 30th, 2017 amortization excludes respectively Euro 9,330 and Euro 27,991 PPA impact (2) Euro 4,883, Euro 979 and Euro 1,011 are respectively Saeco, Ducale and Cafection contribution from acquisition date 13

14 Condensed Consolidated Balance Sheet at September 30 th, 2017 (unaudited) (All amounts in thousands unless indicated otherwise) CONDENSED INTERIM BALANCE SHEET In Euros thousand As at As at September 30, December 31, ASSETS Intangible assets 693, ,650 Property, plant and equipment 45,618 38,014 Available-for-sale investments 6 6 Receivable and other non-current assets 2,152 1,887 Deferred tax assets 24,648 18,461 Total non-current assets 765, ,018 Cash and cash equivalents 59,420 51,089 Trade receivables, net 96,604 66,056 Inventories,net 63,434 39,423 Other receivables 3,377 3,706 Tax receivables 9,060 8,384 Derivative financial instruments 82 - Total current assets 231, ,658 TOTAL ASSETS 997, ,676 SHAREHOLDERS' EQUITY AND LIABILITIES Share Capital 41,138 41,138 Other Reserves 187, ,704 Loss for the period (11,143) (27,521) Third parties' equity 6,742 - Total shareholders' equity 224, ,321 Non-current financial indebtness 503, ,713 Provision for post-employment benefits 14,733 12,358 Deferred tax liabilities 80,171 88,016 Non-current tax payables 13,517 20,147 Other non-current payables 1,000 1,000 Non-current payables to leasing companies Provisions 8,945 6,668 Total non-current liabilities 621, ,954 Current financial indebtness 18,038 16,025 Payables to related parties Trade payables 86,717 74,484 Current tax payables 18,169 14,309 Other current payables 28,508 23,099 Derivative financial instruments Total current liabilities 151, ,401 TOTAL LIABILITIES 773, ,355 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 997, ,676 14

15 Condensed Consolidated Statement of Cash Flows for the Period ended September 30 th, 2017 (unaudited) (All amounts in thousands unless indicated otherwise) CONDENSED INTERIM STATEMENT OF CASH FLOWS In Euros thousand For the three months ended For the nine months ended September 30, September 30, September 30, September 30, Pro forma Pro forma Cash flows from operating activities Cash generated from operations 23,940 21,760 46,973 39,708 Income taxes paid (1,239) (1,431) (2,898) (3,748) Net Cash Flows from operating activities 22,701 20,330 44,075 35,960 Cash flows from investing activities Net additions to tangible and intangible assets (4,709) (3,198) (11,115) (9,625) Tax settlement (1,278) 1,492 (5,763) 1,492 Saeco acquisition (1,600) - (54,213) - Ducale acquisition - - (19,585) - Cafection acquisition (28,773) - (28,773) - Equity injection, net of EVOCA purchase price ,292 Net Cash Flows (utilised)/from investing activities (36,360) (1,705) (119,449) 240,159 Cash flows from financing activities Interests paid (1,659) (7,579) (19,630) (20,676) Other finance cash-flows (7,216) (23) 103,335 (252,861) Net Cash Flows (utilised)/from in financing activities (8,875) (7,602) 83,706 (273,537) Net increase/(decrease) in cash and cash equivalents (22,534) 11,023 8,331 2,582 Cash and cash equivalents at start of period 81,954 39,645 51,089 48,088 Cash and cash equivalents at end of period 59,420 50,670 59,420 50,670 15

16 Condensed Consolidated Statement of Changes in Equity for the Period ended September 30 th, 2017 (unaudited) (All amounts in thousands unless indicated otherwise) Other components of comprehensive income Share Capital Cash Flow Hedge Foreing Currency Translation Reserve Actuarial gains/losses Share based plan Other Reserves Accumulated losses Loss for the period Total Equity Balance at January 1, Loss for the period (27,521) (27,521) Other comprehensive income for the period, net of income tax (575) (1,383) (328) (2,286) Total Comprehensive Loss for the period - (575) (1,383) (328) (27,521) (29,807) Increases 41, , ,984 Recognition of share based payment Balance at December 31, ,138 (575) (1,383) (328) ,896 - (27,521) 228,321 Other components of comprehensive income Share Capital Cash Flow Hedge Foreing Currency Translation Reserve Actuarial gains/losses Share based plan Other Reserves Accumulated losses Loss for the period Third Party Equity Total Equity Balance at January 1, ,138 (575) (1,383) (328) ,896 - (27,521) 228,321 Loss for the period (11,143) 203 (10,940) Other comprehensive income for the period, net of income tax 397 (694) (298) Total Comprehensive Loss for the period 397 (694) (11,143) 203 (11,237) Increases 967 6,538 7,505 Transfer to accumulated loss (27,521) 27,521 - Recognition of share based payment Balance at September 30, ,138 (179) (2,077) (328) ,863 (27,521) (11,143) 6, ,683 16

17 Notes to the Condensed Consolidated Financial Statements (All amounts in thousands, unless indicated otherwise) 1 Basis of preparation EVOCA S.p.A. (hereinafter also the Company ) is a joint-stock company established in Italy on October 27 th, 2005 and indirectly controlled by Lone Star Investment Fund, which acquired the EVOCA Group on March 22 nd, EVOCA S.p.A. and its subsidiaries (together with the Company, the Group ) is the leading manufacturer in Europe of coffee, other hot and cold beverage and food vending machines based on units sold, with a particular focus on espresso coffee and a rapidly developing presence in coffee machines for the OCS and food service agreements. The Group designs, engineers, develops, manufactures, customizes, assembles and distributes a broad range of vending and coffee machines. The Group operates six manufacturing plans in Italy, one in Romania and one in Canada, all with flexible assembly operations, and has a commercial arrangement with an additional manufacturing plant in China. The Group operates in nearly all major international markets maintaining relationships with direct customers or, alternatively, through a network of dealers and its commercial subsidiaries located in Italy, Denmark, UK, France, Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina, Australia, Singapore, Russia, Romania, Portugal, Canada and US. As part of the strategy to strengthen its product offering, on March 14 th, 2017 the Company finalized the acquisition of Saeco, on June 6 th, 2017 the Company acquired the entire share capital of Ducale and on July 11 th, 2017 finalized the acquisition of Cafection. These condensed consolidated interim financial statements have been prepared in accordance with some criteria IAS 34, Interim financial reporting. The condensed consolidated interim financial statements do not include all the notes of the type normally included in the annual financial statements. Accordingly, the condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended December 31 st, 2016, which have been prepared in accordance with IFRS. The figures presented in this noteholder report have been prepared on the following basis: for the three, nine and twelve months ended September 30 th, 2017: the consolidated results of the Company under the current ownership, including the results of Saeco since March 14 th, 2017, Ducale result since June 6 th, 2017 and Cafection result since July 11 th, 2017; for the three months ended September 30 th, 2016: the consolidated results of the Company under the current ownership excluding Saeco, Ducale and Cafection; for the nine months ended September 30 th, 2016 and FY 2016: the aggregation of the consolidated results of the Company under the previous ownership from January 1 st, 2016 until March 22 nd, 2016 and the consolidated results of the Company under the current ownership from March 23 rd, 2016 until September 30 th, 2016 and December 31 st, 2016 ( Pro forma ), respectively. Condensed consolidated balance sheet at September 30 th, 2017: comparison is made to Audited consolidated statement of financial position as at December 31 st, The condensed consolidated interim financial statements have been prepared on a going concern basis, which covers a period of at least twelve months as at the date of the condensed consolidated interim financial statements. The Group s presentation currency is Euro. 17

18 Any event and/or transaction significant to an understanding of the changes since September 30 th, 2017 has been included in these consolidated condensed interim financial statements. 2 Accounting policies The condensed consolidated interim financial statements have been prepared under the historical cost convention, except for certain financial instruments that are measured at fair value. The accounting policies adopted in the preparation of these condensed consolidated interim financial statements are consistent with those that were applied in the preparation of the Group s financial statements for the year ended December 31 st, Estimates The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended December 31 st, Financial risk management and financial instruments Financial risk factors The Group s corporate treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group. These risks include: credit risk; liquidity risk and market risk (including interest rate risk, foreign exchange rate risk and price risk). a- Credit risk: the Group exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed annually. b- Liquidity risk: the Group has built a liquidity risk management framework for the management of short, medium and long-term funding. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. c- Market risk (including interest rate risk, foreign exchange rate risk and price risk). The Group is primarily exposed to the financial risks of changes in foreign currency exchange rates and interest rates. The Group enters into a variety of derivative financial instruments to manage its exposure to foreign currency rate risk. As at September 30 th, 2017 the Group has entered only in short term financial derivatives contract. Fair value estimation The different levels have been defined as follows: Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); 18

19 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The fair values of financial assets and financial liabilities are determined as follows: the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market prices; the fair value of derivative instruments is calculated using quoted prices. Where such prices are not available, use is made of discounted cash flow analysis using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives; foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts; The directors consider that the carrying amounts of all financial assets and financial liabilities not measured at fair value approximate their fair values. There were no changes in valuation techniques during the period. 5 Operating exchange difference As of September 30 th 2017, the Group recorded negative operating exchange differences for a total amount of Euro 2.2 million, while in the same period of 2016 the Company recorded positive differences for a total amount of Euro 1.2 million. These exchange differences are largely due to a translation effect (mostly unrealized) arising from the conversion of both intercompany trade payables recorded in our Brazilian subsidiary related to purchases of products from our Italian subsidiary denominated in Euro and to Italian trade receivable exposure in American Dollar. As of September 30 th, 2017, due to depreciation of the Brazilian Real, the translation of the Euro denominated intercompany trade payables in our Brazilian subsidiary into Brazilian Real resulted in an increase of payables with a corresponding unrealized operating exchange loss of Euro 0.8 million recognized in the income statement of the Brazilian entity. As of September 30 th 2016, due to significant appreciation of the Brazilian Real, the unrealized operating exchange profit amounted to Euro 1.4 million. 6 Income Tax expense Income tax expense is recognised based on management s estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate for the year remains unchanged compared to last year. 7 Property, plant and equipment (Tangible Assets) For the nine months ended September 30 th, 2017, property, plant and equipment increased by Euro 5 million of which Euro 1.1 million from Saeco Group. Additions mainly relate to Plants and machinery and refer to the purchase of moulds and equipment for the production of new models of Necta and Wittenborg vending machines on the productions sites of Valbrembo and Mapello. A total net depreciation expense of Euro 5.7 million has been charged in the line Cost of sales in the statement of comprehensive income. 19

20 8 Intangible Assets For the nine months ended September 30 th, 2017 Intangible assets increased by Euro 6.1 million of which Euro 0.5 million from Saeco and mainly consist in R&D costs for the development of new products and technology solutions. As previously discussed, the acquisition by LSF9 Canto Investments S.p.A. of EVOCA S.p.A. was consummated on March 22 nd, The Goodwill arising from such a business combination amount to Euro million and represents, amongst other things, the value of the Company s market position and reputation, as well as the value of the Company s workforce. The preliminary goodwill arising from Saeco acquisition consummated on March 14 th, 2017 is equal to Euro 17.9 million. The preliminary goodwill arising from Ducale acquisition consummated on June 6 th, 2017 is equal to Euro 17.3 million. The preliminary goodwill arising from Cafection acquisition consummated on July 11 th, 2017 is equal to Euro 29.7 million Goodwill is not amortized, but tested for impairment annually, as well as whenever there are events or changes in circumstances (triggering events) which suggest that the carrying amount may not be recoverable. Goodwill is carried at cost less accumulated impairment losses. The preparation of these condensed consolidated interim financial statements reflects the Purchase Price Allocation ( PPA ) following Saeco Acquisition on March 14 th, 2017, Ducale acquisition on June 6 th, 2017 and Cafection acquisition on July 11 th, Such PPA represents a preliminary allocation to be finalized at year end, once information about facts and circumstances will be definitely obtained. 9 Inventories Inventories increased by Euro 24 million as compared to December 31 st, 2016 mostly driven by the inclusion of Saeco Group inventory (Euro 13.8 million) and Ducale inventory (Euro 2.4 million) and Cafection inventory (Euro 4 million) Trade Receivables Compared to December 31, 2016, trade receivables increased by Euro 30.5 million to Euro 96.6 million as of September 30 th, 2017, compared to Euro 66.1 million as of December 31 st, This increase is mainly attributable to the inclusion of Saeco trade receivables (Euro 17.8 million), Ducale trade receivables (Euro 1.3 million) and Cafection trade receivables (Euro 3 million), as well as sales phasing in the old EVOCA perimeter. 11 Profit Participation Loans ( PPL ) Following the Acquisition, on March 22 nd, 2016 executive and senior employees of the Company decided to participate to the investment by acquiring a PPLs in an amount of Euro 1,7 million. Such PPLs foresee a remuneration linked to an IRR (Internal Rate of Return) realized by Lone Star Fund IX in respect of its initial investments in the EVOCA Group and economic and financial performance. The fair value of the PPLs has been estimated at Euro 0.7 million based on a Monte Carlo valuation method. The Company recognised an amount of Euro 0.1 million through the consolidated income statement for the period January 1 st, 2017 until September 30 th, 2017 according to the estimated 5 years maturity period, with a corresponding credit to equity as the Company has no obligation to settle the liability arising from the PPL arrangement. 20

21 12 Financial indebtedness The financial indebtedness of the Group mainly consists of the Senior Secured Notes of Euro 410 million and Second Lien Notes of Euro 100 million. The current portion of the financial indebtedness mainly relates to: i) accrued interests payable of Senior and Second Lien notes at the next interest payment dates and ii) accrued interests related to the Revolving Credit Facility commitment fee. 13 Provision for post-employment benefits The increase in provision for post-employment benefits is related to the acquisition of Saeco (Euro 2 million) and to the acquisition of Ducale (Euro 0.4 million). Provision for post-employment benefits in EVOCA Group old perimeter is substantially in line with December Other non-current payables Euro 1,000 refer to the residual portion of the purchase price to be paid to N&W Holdings S.à r.l, the previous owner of EVOCA Group to be due within 48 months from the acquisition date and now placed in a bank escrow account. 15 Provisions Provisions include an Euro 3.6 million restructuring provision, mainly related to employees layoff costs, has been accrued following the announcement of the relocation of SGL production activity to other plants of the Group. Provisions also include Euro 0.2 million deriving from the inclusion of Saeco. Since the last annual report, no material changes were noted in other contingencies for the EVOCA Group old perimeter. It is not anticipated that any material liabilities will arise from the contingent liabilities other than those provided for. 21