Esprinet Group. Approved by the Board of Directors on 28 August 2014

Transcription

1 Esprinet Group Half-yearly financial report as at 30 June 2014 Approved by the Board of Directors on 28 August 2014 Parent company: Esprinet S.p.A. VAT number: IT Monza/Brianza Companies Register Number and tax code: Economic Administrative Index Head Office and Admin.ve Headquarters Via Energy Park, Vimercate (MB) Share capital subscribed and paid up as at 30/06/2014: Euro 7,860,651

2 Interim Directors Report on Operations Company officers Board of Directors: (Mandate expiring with approval of accounts for the year ending 31 December 2014) Chairman Francesco Monti (SC) Deputy Chairman & CEO Maurizio Rota (SC) CEO Alessandro Cattani (SC) Director Giuseppe Calì (SC) Director Stefania Calì (SC) Director Valerio Casari Director Andrea Cavaliere (InD) (CRC) (RAC) Director Mario Massari (InD) (CRC) (RAC) Director Marco Monti Director Umberto Giovanni Quilici (InD) Director Chiara Mauri (InD) (CRC) Director Cristina Galbusera (InD) (RAC) Secretary Paolo Fubini Studio Fubini Jorio Cavalli Notes: (InD): Indipendent Director (CRC): Control and Risk Commitee (RAC): Remuneration and Appointments Commitee (SC): Strategy Commitee Board of Statutory Auditor: (Mandate expiring with approval of financial statement for the year ending 31 December 2014) Chairman Permanent Auditor Permanent Auditor Alternate Auditor Alternate Auditor Giorgio Razzoli Emanuele Calcaterra Mario Conti Silvia Santini Maurizio Rusconi Independent Auditors: (Mandate expiring with approval of accounts for the year ending 31 December 2018) Reconta Ernst & Young S.p.A. Waiver of the obligations to provide information on extraordinary transactions Pursuant to article 70, section 8, and article 71, section 1-bis, of the Issuers Regulations issued by Consob, on 21 December 2012 the Board of Directors of Esprinet S.p.A. resolved to make use of the right to waive the obligations to publish the information documents stipulated for significant transactions relating to mergers, demergers, increases in capital by the contribution of goods in kind, acquisitions and transfers. Esprinet Group page 2

3 Interim Directors Report on Operations CONTENSTS INTERIM DIRECTORS' REPORT ON OPERATIONS Company Officers page 2 Activities and structure of the Esprinet Group page 4 1 General Information about the Esprinet Group 2 Target market trends Group's results of the period page 8 1 Summary of the Group's economic and financial results of the period 2 Comments on economic and financial results of the period 3 Sales by product family and customer type Significant events occurred in the period page 14 Relationships with related parties page 15 Main risks and uncertainties page 16 Other important information page 17 1 Research and development activities 2 Number and value of own shares 3 Atypical and/or unusual operations 4 Share incentive plans 5 Business combinations 6 Disposed or disposal groups 7 Net equity and result reconciliation between Group and parent company Outlook and main risk factors in the second half of the year page 24 CONDENSED HALF-YEARLY CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of financial position page 26 Consolidated separate income statement page 27 Consolidated statement of comprehensive income page 28 Consolidated statement of changes in equity page 28 Consolidated statement of cash flows page 29 Notes to the condensed half-yearly consolidated financial statements 1 Contents and format of the consolidated financial statements page Regulations, accounting principles and valuation criteria 1.2 Consolidation area 1.3 Critical accounting estimates, assumptions and definitions 1.4 Restatements of previous published financial statements 1.5 New or revised accounting standards and interpretations adopted by the Group 2 Segment information page Introduction 2.2 Separate income statement by operating segments 3 Notes to statement of financial position items page 39 4 Notes to income statement items page 52 5 Other significant information page Net financial indebtedness 5.2 Loan covenants 5.3 Relationships with related entities 5.4 Non-recurring significant events and operations 5.5 Seasonal nature of business 5.6 Financial instruments pursuant to IAS 39: classes of risk and 'fair value' 5.7 Derivatives analysis 5.8 Subsequent events 5.9 Relationships with related parties STATEMENT PURSUANT TO ART. 81-ter ISSUERS' REGULATION INDEPENDENT AUDITORS' REPORT Esprinet Group page 3

4 Interim Directors Report on Operations Activities and structure of the Esprinet Group 1. General information about the Esprinet Group The chart below illustrates the structure of the Esprinet Group as at 30 June 2014: Esprinet S.p.A. 9.5% Assocloud S.r.l. 100% 100% 60% 100% Comprel S.r.l. held for sale V-Valley S.r.l. Celly S.p.A. Esprinet Iberica S.L.U. 100% 25% 100% Celly Swiss S.a.g.l. 100% Celly Pacific Limited Ascendeo S.a.s. Celly Nordic OY Esprinet S.p.A. (hereafter Esprinet or the parent company ) and its subsidiaries (the Esprinet Group or the Group ) operate in Italy and Spain. In Italy, the Group is active within the following three business areas: business-to-business (B2B) distribution of Information Technology (IT) and consumer electronics; business-to-business (B2B) distribution of microelectronic components, held for sale. In Spain the Group operates solely in the B2B distribution of Information Technology (IT) and consumer electronics. References to Subgroup Italy and Subgroup Spain can be found in next comments and tables. As at 30 June 2014, besides the Esprinet S.p.A parent company, the former includes Comprel S.r.l. and V- Valley S.r.l., Celly S.p.A. acquired on 12 May 2014 all directly controlled companies governed by the Italian law, in addition to the associated company, Assocloud S.r.l.. The latter, even if jointly controlled, is considered as an investment in associate due to Esprinet s significant influence as per the statutory agreements. The acquisition perimeter includes Celly S.p.A. as well as its wholly-owned subsidiaries: - Celly Nordic OY, a Finnish-law company; - Celly Swiss SAGL, a Helvetic-law company; - Celly Pacific LTD, a Chinese-law company, completely owned by Celly Swiss SAGL; all of which are operating in the same segment as the Holding Company, as well as Celly s 25% share in Ascendeo SAS. At the same date, the Subgroup Spain is made up solely of Esprinet Iberica S.L.U. Up to 28 February 2014 the Group operated also in the business-to-consumer industry (B2C) of IT and consumer electronics through the company Monclick S.r.l.. Esprinet S.p.A. has its registered and administrative offices in Italy in Vimercate (Monza e Brianza), while warehouses and logistics centres are located in Cambiago (Milan) and Cavenago (Monza e Brianza). Esprinet uses Banca IMI S.p.A.as its specialist firm. Esprinet Group page 4

5 Interim Directors Report on Operations 2. Target Market Trend Italy IT and electronics consumption During the first six months of 2014 the Italian Information Technology market, measured by considering enduser IT consumption, increased by +3% compared to the same period last year, from 9.2 billion euro to 9.5 billion euro. This increase is mainly found in the Software sectors (+9%) compared to the Hardware one (+6.1%) while Services sectors showed a decrease of -1.9%. The following tables summarise first half IT spending trends in Italy from 2010 to 2014: (euro/million) 06/ / vs 10 06/ vs 11 06/ vs 12 06/ vs 13 Hardware 3,969 3,800-4% 3,621-5% 3,092-15% 3,280 6% Software 2,083 2,094 1% 2,108 1% 1,891-10% 2,061 9% Services 4,667 4,458-4% 4,386-2% 4,194-4% 4,114-2% Total IT Spending 10,719 10,351-3% 10,115-2% 9,177-9% 9,455 3% Source: Sirmi, July 2014 If Esprinet target market prospects are widened to include Information & Communication Technology, and also TLC (fixed/mobile services and devices), Consumer Electronics, the market size can be illustrated as follows: (euro/million) 06/ / vs 10 06/ vs 11 06/ vs 12 06/ vs 13 Hardware 3,969 3,800-4% 3,621-5% 3,092-15% 3,280 6% Software 2,083 2,094 1% 2,108 1% 1,891-10% 2,061 9% Services 4,667 4,458-4% 4,386-2% 4,194-4% 4,114-2% Total IT Spending 10,719 10,351-3% 10,115-2% 9,177-9% 9,455 3% Fixed TLC 8,752 8,364-4% 7,938-5% 7,421-7% 7,763 5% Mobile TLC 11,101 10,766-3% 10,597-2% 9,826-7% 10,196 4% Total TLC Spending 19,853 19,130-4% 18,535-3% 17,247-7% 17,959 4% Consumer electronics 4,290 4,219-2% 4,207 0% 3,508-17% 3,376-4% Total ICT 34,862 33,700-3% 32,857-3% 29,932-9% 30,790 3% Source: Sirmi, July 2014 The distribution industry: dimensions and trends The next table summarizes the market positions of the top 20 IT distribution concerns 1 for the years : 1 All mainly IT distributors have been considered in the Sirmi survey of distributors operating in Italy (approx. 160 out of the over 200 surveyed). Revenues of companies with fiscal years different from the solar year have been estimated by Sirmi for purposes of homogeneity. Each company has been ranked on the basis of its company perimeter in the single year, disregarding any recent acquisitions/transfers. Esprinet Group page 5

6 Interim Directors Report on Operations (Market Share) ESPRINET 1, , , % 23.7% 24.7% 2 COMPUTER GROSS ITALIA % 11.6% 12.4% 3 TECH DATA % 10.2% 10.5% 4 INGRAM MICRO ITALIA % 9.9% 9.2% 5 DATAMATIC % 6.0% 6.0% 6 ATTIVA % 3.5% 3.9% 7 BREVI % 2.2% 2.5% 8 FUTURA GRAFICA % 1.6% 1.7% 9 ADVEO ITALIA % 0.8% 1.4% 10 ITWAY % 1.1% 1.1% 11 EXECUTIVE % 1.1% 1.1% 12 IL TRIANGOLO % 1.1% 1.1% 13 COMPUTERLINKS % 0.8% 0.9% 14 EDSLAN % 0.9% 0.9% 15 FOCELDA % 0.9% 0.9% 16 COMETA % 0.8% 0.9% 17 SIDIN % 0.8% 0.8% 18 ICOS % 0.8% 0.8% 19 ADL AMERICAN DATALINE % 0.7% 0.7% 20 SNT TECHNOLOGIES % 0.7% 0.6% Top 20 distributors 5,012 4,923 5, % 79.3% 82.3% Total market 6,724 6,205 6, % 100.0% 100.0% Var % top 20 distributors -1.8% 4.2% Source: output based on Sirmi data 2014 (euro/million) The Esprinet Group confirm its leadership position in its relevant market thanks to a share of 25%, more than twice than the second national player. In the first half of 2014 the European distribution market Global Tech Distribution Council - Context, July 2014) recorded a significant growth level (+8.1% compared to the first half in 2013), increasing also compared to the first quarter in 2014 (+7.4%). This result is basically due to Germany s improved trend (+7.8% year over year compared to the +5.6% in the first quarter), while most of the other Countries confirmed the results of the first quarter. Preliminary output at July 2014 year-to-date seem to confirm such a favourable trend, being Spain an overperformer and Italy an underperformer within the monitored panel. In the first half of 2014 Italian growth rate were higher than the other countries (+11.8%). Overall European result was positively influenced also by Apple iphone being distributed through indirect channel, hence favourably contributing to the Italian figures. It is worth noting that after the end of the first half Esprinet Group has been appointed as Apple iphone s official distributor in the Italian market. More in detail, Italian corporate reseller channel proved to be the most reactive customer segment since it increased its market share by 1.5% mainly at the expense of dealers, which confirmed to be the largest segment thanks to a share of 44% on total, while retailers stand at around 30%. Best performers among the vendors were HP, Apple and Lenovo. Esprinet s market share ended up to be stable compared to the first half of 2013, thus confirming its clear leadership among Italian IT distributors. Spain IT, electronics consumption and distribution industry As previously stated, in the first half of 2014 the European distribution market Global Tech Distribution Council - Context, July 2014) recorded a significant growth rate (+8.1% compared to the first half in 2013). Preliminary output at July 2014 year-to-date seem to confirm such a favourable trend, being Spain an overperformer within the monitored panel. Spanish growth rate is higher then the other European Countries (+18.3%). More in details, the Spanish distribution industry was positively influenced by the corporate resellers which led a growth in market share by more than 2% while the overall scenario remained tough for retailers. Apple, Lenovo and HP were the best performers compared to the first half of Esprinet Group page 6

7 Interim Directors Report on Operations Esprinet Iberica s market share declined by almost -1.5% mainly due to iphone s entry in distribution business system. Net of that effect, Iberica s share would have been substantially stable. According to the data of GTDC, Esprinet Iberica ranks third in the Spanish distribution market, as showed further market data quoted in the table below: Tech Data % 13.4% 14.1% 2 Ingram Micro % 11.0% 11.0% 3 Esprinet Iberica % 8.7% 9.3% 4 Adveo Digital Systems % 6.0% 6.4% 5 Brightstar 20:20 Mobile % 4.2% 6.1% 6 Vinzeo Informatica % 6.2% 5.0% 7 Arrow ECS % 5.1% 5.2% 8 GTI % 2.7% 2.9% 9 MCR % 2.2% 2.6% 10 Westcon Group % 2.1% 2.3% 11 Activa % 1.1% 1.3% 12 Megasur % 1.2% 1.3% 13 Avnet % 1.1% 1.1% 14 UFP % 1.0% 1.0% 15 Valorista % 0.9% 1.0% 16 Infortisa % 0.7% 0.9% 17 DMI Computer % 0.8% 0.9% 18 Diode % 0.9% 1.2% 19 EBV Electronik % 0.8% 0.8% 20 Inforpor % 0.7% 0.8% Total top 20 3,804 3,790 4, % 70.7% 75.0% Total aggregated market 5,538 5,360 5, % 100.0% 100.0% Var % top % 7.9% Source: output based on Channel Partner data, Esprinet Group page 7

8 Interim Directors Report on Operations Group s results of the period 1. Summary of the Group s economic and financial results of the period notes 2014 % 2013 notes % % var. % var % 2013 notes % 14/13 14/13 Profit & Loss Sales 1,032, % 960,300 (2) 100.0% 8% 520, % 478,303 (2) 100.0% 9% Gross profit 65, % 59,449 (2) 6.2% 9% 34, % 29,239 (2) 6.1% 17% EBITDA (1) 19, % 16,744 (2) 1.7% 16% 10, % 13,863 (2) 2.9% -27% Operating income (EBIT) 17, % 15,188 (2) 1.6% 12% 8, % 7,853 (2) 1.6% 8% Profit before income tax 16, % 14,033 (2) 1.5% 19% 8, % 7,363 (2) 1.5% 13% Net income 13, % 10, % 29% 5, % 5, % -14% Financial data Cash flow (3) 14,832 11,656 Gross investments 1,544 1,785 Net w orking capital (4) 145,569 34,364 (5) Operating net w orking capital (6) 151,359 49,457 (5) Fixed assets (7) 98,866 96,753 (5) Net capital employed (8) 234, ,203 (5) Net equity 261, ,826 (5) Tangible net equity (9) 185, ,840 (5) Net financial debt (10) (29,756) (141,652) (5) Main indicators Net financial debt / Net equity (0.1) (0.5) (5) Net financial debt / Tangible net equity (0.2) (0.8) (5) EBIT / Finance costs - net (2) EBITDA / Finance costs - net (2) Net financial debt/ EBITDA (0.7) (3.5) (5) Operational data N. of employees at end-period 1, Avarage number of employees (11) 1, Earnings per share (euro) - From continuing operations - basic % % - Basic (2) 30% (2) -17% - From continuing operations - diluted % % - Diluted (2) 25% (2) -9% (1) 6 months EBITDA is equal to the operating income (EBIT) gross of amortisation and depreciation and accruals for risks and charges. (2) Different amounts from those published in the Half-yearly financial report as at 30 June 2013 due to reclassification, recurred even in the comparative figures, of the profit and loss values into Income/loss from disposal Group item. (3) Sum of consolidated net profit before minority interests and amortisation and depreciation. (4) Sum of current assets, non-current assets held for sale and current liabilities, gross of short-term net financial position. (5) Data/indicator referring as at 31 December (6) Sum of trade receivables, inventory and trade payables. (7) Non-current assets net of non-current financial assets. (8) Equal to the sum of the net working capital plus fixed assets net of non-current liabilities except of financial liabilities. (9) Equal to net equity less goodwill and intangible assets. (10) Sum of borrowings and short term financial liabilities net of cash and cash equivalents, assets/liabilities for financial derivatives and financial receivables. (11) Average of the balance at period beginning and end of companies consolidated. Q2 The 2014 first half economic and financial results and those of the relative periods of comparison have been measured by applying International Financial Standards ( IFRSs ). In the previous table, in combination with IFRSs defined measures, some alternative performance measures, not defined from IFRSs, are presented. These alternative performance measures, consistently presented in previous reports and not intended as substitute of IFRSs defined measures, are internally used by the management for measuring and controlling the Group s profitability, performance and financial position. As required by CESR (Committee of European Securities Regulators) recommendation n. CESR/05-178b, basis of calculation adopted are defined below the table. Esprinet Group page 8

9 Interim Directors Report on Operations 2. Comments on economic and financial results of the period A) Esprinet Group s financial highlights The Group s main economic, financial and asset results as at 30 June 2014 are hereby summarized: H1 H1 % % Var. Var. % restated* Sales 1,032, % 960, % 72,670 8% Cost of sales (967,957) % (900,851) % (67,106) 7% Gross profit 65, % 59, % 5,564 9% Sales and marketing costs (17,467) -1.69% (15,421) -1.61% (2,046) 13% Overheads and administrative costs (30,467) -2.95% (28,840) -3.00% (1,627) 6% Operating income (EBIT) 17, % 15, % 1,891 12% Finance costs - net (314) -0.03% (1,149) -0.12% % Other investments expenses / (incomes) (15) 0.00% (6) 0.00% (9) 150% Profit before income taxes 16, % 14, % 2,717 19% Income tax expenses (5,530) -0.54% (4,417) -0.46% (1,113) 25% Profit from continuing operations 11, % 9, % 1,604 17% Income/(loss) from disposal groups 2, % % 1, % Net income 13, % 10, % 2,947 29% Earnings per share - continuing operations % Earnings per share - basic (euro) % * Different amounts from those published in the Half-yearly financial report as at 30 June 2013 due to reclassification, recurred even in the comparative figures, of the profit and loss values into Income/loss from disposal Group item. Q2 Q2 % % Var. Var. % restated* Sales 520, % 478, % 42,089 9% Cost of sales (486,320) % (449,064) % (37,256) 8% Gross profit 34, % 29, % 4,833 17% Sales and marketing costs (9,520) -1.83% (7,595) -1.59% (1,925) 25% Overheads and administrative costs (16,083) -3.09% (13,791) -2.88% (2,292) 17% Operating income (EBIT) 8, % 7, % 616 8% Finance costs - net (128) -0.02% (484) -0.10% % Other investments expenses / (incomes) (15) 0.00% (6) 0.00% (9) 150% Profit before income taxes 8, % 7, % % Income tax expenses (2,673) -0.51% (2,098) -0.44% (575) 27% Profit from continuing operations 5, % 5, % 388 7% Income/(loss) from disposal groups (612) -0.12% % (1,236) -198% Net income 5, % 5, % (848) -14% Earnings per share - continuing operations % Earnings per share - basic (euro) (0.02) -15% * Different amounts from those published in the Half-yearly financial report as at 30 June 2013 due to reclassification, recurred even in the comparative figures, of the profit and loss values into Income/loss from disposal Group item. Consolidated sales of the first half of 2014 were 1,033.0 million euro showing an increase of +8% (72.7 million euro) compared to million euro of the first half In the second quarter consolidated sales increased by +9% compared to the same period of the previous year. Consolidated gross profit was 65.0 million euro showing an increase (equal to +9% or 5.6 million euro) compared to the same period of 2013 as a consequence of both higher sales and of an increase of gross profit margin. In the second quarter consolidated gross profit, equal to 34.1 million euro, increased by +17% compared to the same period in the previous year. Consolidated operating income (EBIT) was 17.1 million euro, showing an increase of +12% compared to the first quarter 2013 (15.2 million euro), with EBIT margin increasing to 1.65% from 1.58%, despite an increase of 3.7 million euro in operational costs compared to the same period of Consolidated EBIT of the second quarter, equal to 8.5 million euro increased by +8% (0.6 million euro) compared to the second Esprinet Group page 9

10 Interim Directors Report on Operations quarter of 2013, showing a soft decrease in EBIT margin (from 1.64% to 1.63%). Consolidated profit before income taxes was 16.7 million euro, benefitting lower financial costs of 0.8 million euro and showing an increase of +19% compared to the first semester In the second quarter consolidated profit before income taxes increased by +13% (equal to 1,0 million euro) thus targeting 8.3 million euro. Consolidated profit from continuing operations was 11.2 million euro, showing an increase of +17% (1.6 million euro) compared to the first half of In the second quarter 2014 consolidated profit from continuing operations increase of 0.4 million euro (+7%) compared to the same period in Consolidated net income was 13.3 million euro, increased by +29% (2.9 million euro) compared to the first semester 2013 benefitting of 2.0 million euro from income/loss from disposal groups increasing of 1.3 million euro (or +192%) compared to 30 June In the second quarter consolidated net income decreased of 0.8 million euro (-14%) compared to the same period of 2013 due to a negative impact of 0.6 million euro in income/loss from disposal groups decreased of 1.2 million euro compared to the same period of Basic earnings per share continuing operations as at 30 June 2014 was equal to 0.22 euro, showing an increase of +16% compared to the value of the first half in In the second quarter this value was equal to 0.11 euro compared to 0.10 euro of the same quarter in Basic earnings per ordinary share as at 30 June 2014 was 0.26 euro, showing an increase of +28% compared to the same value in the first half in In the second quarter this value was equal to 0.10 euro compared to 0.12 euro of the same period in /06/2014 % 31/12/2013 % Var. Var. % Fixed assets 98, % 96, % 2,114 2% Operating net w orking capital 151, % 49, % 101, % Other current assets/liabilities (5,790) -2.50% (15,665) % 9,875-63% Other non-current assets/liabilities (12,708) -5.48% (12,371) % (337) 3% Total assets 231, % 118, % 113,553 96% N.S. Short-term financial liabilities 21, % 38, % (17,193) -45% derivatives % % (174) -100% Financial receivables from factoring companies (1,944) -0.84% (2,829) -2.39% % Customers financial receivables (433) -0.19% (572) -0.48% % Cash and cash equivalents (59,373) % (176,893) % 117,520-66% Net current financial debt (40,374) % (141,551) % 101,177-71% Borrow ings 3, % 3, % % Debts for investments in subsidiaries 9, % % 9,811 N.S. Customers financial receivables (3,085) -1.33% (3,457) -2.93% % Net financial debt (A) (29,756) % (141,652) % 111,896-79% Net equity (B) 261, % 259, % 1,657 1% Total sources of funds (C=A+B) 231, % 118, % 113,553 96% Consolidated net working capital as at 30 June 2014 was million euro, compared to 49.5 million euro as at 31 December Consolidated net financial position as of 30 June 2014, positive by 29.8 million euro, compared to a cash surplus of million euro as at 31 December The reduction of net cash surplus was connected to the increase of consolidated net working capital as at 30 June 2014 influenced even by technical events often not related to the average level of working capital, particularly by a without-recourse sale of account receivables from customers. This program is aimed at transferring risk and reward to the buyer thus receivables sold are stripped out by balance sheet according to IAS 39. Esprinet Group page 10

11 Interim Directors Report on Operations Even considering other technicalities from factoring by means of which to obtain the result of advancing cash-in of credits on a no recourse basis - such as confirming used in Spain, the impact on financial debt was approx. 112 million euro as at 30 June 2014 (approx. 154 million euro as at 31 December 2013). Consolidated net equity as at 30 June 2014 was million euro, increasing by 1.7 million euro compared to million euro as at 31 December B) Financial highlights by geographical area B.1) Subgroup Italy The main economic, financial and asset results for the Italian subgroup (Esprinet, V-Valley and Celly Group) as at 30 June 2014 are hereby summarized: H1 H1 % % Var. Var. % restated* Sales to third parties 788, % 734, % 53,649 7% Intercompany sales 21, % 23, % (1,667) -7% Sales 809, % 757, % 51,982 7% Cost of sales (755,920) % (708,687) % (47,233) 7% Gross profit 53, % 49, % 4,749 10% Sales and marketing costs (14,687) -1.86% (12,908) -1.76% (1,779) 14% Overheads and administrative costs (24,696) -3.13% (22,834) -3.11% (1,862) 8% Operating income (EBIT) 14, % 13, % 1,108 8% * Different amounts from those published in the Half-yearly financial report as at 30 June 2013 due to reclassification, recurred even in the comparative figures, of the profit and loss values into Income/loss from disposal Group item. Q2 Q2 % % Var. Var. % restated* Sales to third parties 395, ,434 25,769 7% Intercompany sales 11,348 10, % Sales 406, ,251 26,300 7% Cost of sales (378,431) (356,239) (22,192) 6% Gross profit 28, % 24, % 4,108 17% Sales and marketing costs (8,079) -2.04% (6,328) -1.71% (1,751) 28% Overheads and administrative costs (13,025) -3.30% (10,862) -2.94% (2,163) 20% Operating income (EBIT) 7, % 6, % 194 3% * Different amounts from those published in the Half-yearly financial report as at 30 June 2013 due to reclassification, recurred even in the comparative figures, of the profit and loss values into Income/loss from disposal Group item. Sales were million euro, with an increase of +7% compared to million euro of the first half of The second quarter registered an increase of +7% compared to the second quarter of Gross profit was 53.8 million euro showing an increase of +10% compared to 49.1 million euro of the first half of 2013 thanks to the combination of the increasing gross profit margin (from 6.68% to 6.83%) and higher sales. In the second quarter 2014 gross profit was 28.1 million euro (+17% compared to the second quarter in 2013). Operating income (EBIT) was 14.5 million euro, with an increase of +8% compared to the same period in 2013 and EBIT margin increasing from 1.82% to 1.83% due to higher operational costs (3.9 million euro). EBIT in the second quarter 2014 registered an increase of +3% or 7.0 million euro compared to the 6.8 million euro in 2013 despite a slight reduction of EBIT margin (to 1.78% from 1.85% of the same period in 2013). Esprinet Group page 11

12 Interim Directors Report on Operations 30/06/2014 % 31/12/2013 % Var. Var. % Fixed assets 92, % 90, % 2,338 3% Operating net w orking capital 113, % 31, % 81, % Other current assets/liabilities 48, % 4, % 43, % Other non-current assets/liabilities (10,112) -4.14% (9,869) -8.45% (243) 2% Total assets 244, % 116, % 127, % Short-term financial liabilities 21, % 31, % (10,006) -32% Current financial (assets)/liabilities for derivatives % % (70) -100% Financial receivables from factoring companies (1,944) -0.80% (2,829) -2.42% % Financial (assets)/liab. From/to Group companies % (40,000) % 40, % Customers financial receivables (433) -0.18% (572) -0.49% % Cash and cash equivalents (36,561) % (122,354) % 85,793-70% Net current financial debt (17,826) -7.29% (134,567) % 116,741-87% Borrow ings 3, % 3, % % Debts for investments in subsidiaries 9, % % 9,811 N.S. Customers financial receivables (3,085) -1.26% (3,457) -2.96% % Net Financial debt (A) (7,208) -2.95% (134,668) % 127,460-95% Net equity (B) 251, % 251, % 231 0% Total sources of funds (C=A+B) 244, % 116, % 127, % Operating net working capital as at 30 June 2014 was million euro, compared to 31.9 million euro as at 31 December Net financial position as at 30 June 2014 was positive by 7.2 million euro compared to the cash surplus of million euro as at 31 December The impact of without-recourse sale of both account receivables as at 30 June 2014 was approx. 45 million euro (approx. 68 million euro as at 31 December 2013). B.2) Esprinet Iberica The main economic, financial and asset results of the Spanish subgroup as at 30 June 2014 are hereby summarized: H1 % H1 % Var. Var. % Sales to third parties 244, % 225, % 19,020 8% Intercompany sales % % - 0% Sales 244, % 225, % 19,020 8% Cost of sales (233,460) % (215,227) % (18,233) 8% Gross profit 11, % 10, % 787 8% Sales and marketing costs (2,553) -1.04% (2,277) -1.01% (276) 12% Overheads and administrative costs (6,002) -2.45% (6,250) -2.77% 248-4% Operating income (EBIT) 2, % 1, % % Q2 Q2 % % Var. Var. % Sales to third parties 125, ,869 16,320 15% Intercompany sales % Sales 125, ,869 16,320 15% Cost of sales (119,240) (103,641) (15,599) 15% Gross profit 5, % 5, % % Sales and marketing costs (1,324) -1.06% (1,150) -1.06% (174) 15% Overheads and administrative costs (3,177) -2.54% (3,052) -2.80% (125) 4% Operating income (EBIT) 1, % 1, % % Sales amounted to million euro showing an increase of +8% compared to million euro of the first half of In the second quarter sales increased by +15% (+16.3 million euro) compared to the same Esprinet Group page 12

13 Interim Directors Report on Operations period Gross profit as at 30 June 2014 was 11.2 million euro, with an increase of +8% compared to 10.4 million euro of the corresponding period of 2013, with a gross profit margin decrease from 4.60% to 4.57%. In the second quarter the gross profit increased by 14% compared to the previous period, with a gross profit margin to 4.75% from 4.80%. Operating income (EBIT), equal to 2.6 million euro, increased of 0.8 million euro compared to the first half of 2013, with EBIT margin increasing from 0.82% to 1.07%. In the second quarter EBIT was 1.4 million euro compared to 1.0 million euro of the second quarter of 2013 with EBIT margin to 1.16% from 0.94%. 30/06/2014 % 31/12/2013 % Var. Var. % Fixed assets 67, % 67, % (220) 0% Operating net w orking capital 37, % 17, % 20, % Other current assets/liabilities (14,143) % (20,165) % 6,022-30% Other non-current assets/liabilities (2,596) -2.94% (2,502) -4.01% (94) 4% Total assets 88, % 62, % 25,851 41% Short-term financial liabilities 40, % 7, % 32, % Current financial (assets)/liabilities for derivatives % % (104) -100% Financial (assets)/liab. From/to Group companies % 40, % (40,000) -100% Cash and cash equivalents (22,812) % (54,539) % 31,727-58% Net current financial debt 17, % (6,984) % 24, % Net Financial debt (A) 17, % (6,984) % 24, % Net equity (B) 70, % 69, % 1,415 2% Total sources of funds (C=A+B) 88, % 62, % 25,851 41% Operating net working capital as at June 2014 totalled 37.8 million euro compared to 17.6 million euro as at 31 December Net financial position as at June 2014, is negative by 17.5 million euro, compared to a cash surplus of 7.0 million euro as at 31 December The impact of without-recourse sale of account receivables or advancing cash-in of credits is equal to approx. 66 million euro (approx. 85 million euro as at 31 December 2013). 3. Sales by product family and customer type (euro/million) H % H restated % % Var. Q % Q restated % % Var. Dealer % % 5% % % 7% GDO/GDS % % 9% % % 13% Office/Consumable dealers % % 10% % % 12% VAR % % 6% % % 8% Sub-distributors % % 0% % % 3% Shop on-line % % 16% % % 5% Sales 1, % % 8% % % 9% Esprinet Group page 13

14 Interim Directors Report on Operations (euro/million) H % H restated % % Var. Q % Q restated % % Var. PC notebook % % 13% % % 16% PC - desktop and monitor % % 24% % % 43% Consumables % % -7% % % -8% Consumer Electronics % % 15% % % 17% Peripherical devices % % 6% % % 14% Software % % 12% % % 17% Storage % % -3% % % -5% Networking % % -2% % % -3% TLC % % 12% % % 6% PC - Tablet % % -8% % % -8% Server % % -12% % % -6% Services % % 36% % % 19% Other % % 22% % % 3% Sales 1, % % 8% % % 9% The sales analysis by customer type shows a widespread improvement compared to the first quarter 2013, in particular in the shop on-line channel (+16%), while the Sub-distributor channel suffered the most. A general growth can be highlighted also in the second quarter, with significant performance in GDO/GDS channel (+13%) and Office/Consumable dealers (+12%) From the product standpoint, there was a good performance in the PC Client segment (notebooks, desktops and tablets), to be attributed mainly to the rapid growth of the PC notebook, only partially counterbalanced by the negative trend of Tablet (-8%) Among the other categories, note should be taken of the excellent performances of Services (+36%) and of Consumers electronic (+15%), while Consumables (-7%) and Server (-12%) posted the worst sales results. Also the analyses of the second quarter reflect the results of the first half, highlighting the excellent performance of PC Client segment, mainly the PC desktop and monitor category (+43%). Significant events occurred in the period The significant events occurred in the first half of 2014 are hereby described: Esprinet to sale 100% of Monclick s share capital On 28 February 2014 Esprinet finalised the sale of 100% stake in its subsidiary Monclick S.r.l. for an equity value of 4.0 million paid in cash net of non-significant sale costs. On the same day the value of the Monclick subsidiary in the separated statement was 3.7 million, against an asset value of 1.5 million. The transaction represents a step forward in the process aimed at further focusing in the technology wholesale distribution business through maximizing non-core assets value. The buyer is Project Informatica S.p.A. - one of the most valuable IT system integrators in the Italian market - through a wholly owned company. Agreements with Project Informatica S.p.A. include collateral contracts having the purpose of smoothing the process of exiting the Esprinet Group and ruling future commercial relationships between Esprinet and Monclick. Esprinet S.p.A. Shareholders General Meeting On 30 April 2014, in second call, the Esprinet Shareholders Meeting approved the financial statements of Esprinet S.p.A as at 31 December 2013 and resolved to distribute a gross dividend of 0,089 euro per ordinary share before taxes and any mandatory substitute taxation. The dividend, equal to 4.5 million, was paid out from 8 May Shareholders Meeting approved the first section of the report on remuneration pursuant to paragraph 6 art. 123-ter decree law 58/1998. Esprinet Group page 14

15 Interim Directors Report on Operations The Shareholders Meeting approved the proposal for change and integration of current three years period Long Term Incentive Plan for executive directors and employees of Esprinet S.p.A., based on the grating of a up to a maximum of 1,150,000 shares of company s own shares ( performance stock grant ) approved by the Annual Shareholders Meeting on 9 May Major changes refer to the right granted to beneficiaries to receive a portion of the maximum number of shares in case of a partial achievement of financial targets, provided that a performance-threshold is at least overtaken. The Shareholders Meeting resolved to authorise, subject to prior revocation of former authorization resolved in the Shareholder s Meeting on 29 April 2013, the acquisition and disposal of own shares. During 2013 the company granted n. 168,000 own shares to some Company s managers, in execution of the Long Term Incentive Plan for the period. The proposed plan represents the re-iteration of the former one and comprises up to 10,480,000 ordinary shares of Esprinet S.p.A. with a nominal value of 0.15 each, or a maximum of 20% of share capital taking into account the own shares hold by the Company. Esprinet to purchase 60% of Celly s share capital On 12 May 2014 Esprinet S.p.A. signed a binding agreement for the acquisition of a 60% stake in the share capital of Celly S.p.A., an Italian company active in the wholesale distribution of accessories for mobile devices. The aforementioned deal will be executed through a purchase of shares from former shareholders as well as company s own shares and, ultimately, the subscription of a share capital increase. Total cash-out for Esprinet is million, which corresponds to a pre-money equity value for 100% of share capital of 13.0 million. The binding agreement comprises a shareholders agreement with the owners of 40% of the capital, Stefano Bonfanti, owner of a 20% stake in the company, and Claudio Gottero (owner of the remaining 20% through GIR S.r.l.), aimed at establishing corporate governance rules along the investment period when the minority shareholders will co-manage the operations together with Esprinet. The way-out from investment is regulated through put/call options. Relationship with related parties Group operations with related parties have been defined as per IAS 24 and were effected in compliance with current laws and according to mutual economic advantage. In case of products sold to individuals, these sales are made under the same conditions as those usually applied to employees. Operations among the parent Company Esprinet S.p.A. and its subsidiaries included in the consolidation area were excluded from the interim consolidated financial statements and therefore they are not quoted in this section. During the half-year, relationships with related parties consisted essentially in the sales of products and services at market conditions between Group s entities and associates or companies where the key management personnel of Esprinet S.p.A. play important roles. Relationships with key managers result from the recognition of the payments for services rendered by the same. Achieved sales are related to the sales of consumer electronics products to business and private customers at market condition. Services received are related to real estate lease agreements at market condition signed in previous periods than the one under review with the Immobiliare Selene S.r.l. dealing with Cambiago (MI) warehouse and with M.B. Immobiliare S.r.l. dealing with Cavenago (MB) warehouse. The total value of the aforementioned operations is not significant compared to the overall volume of the Group s activities. Balances of the statement of financial position and of income statements deriving from operations with related parties are summarised in the Notes to income statement. Esprinet Group page 15

16 Interim Directors Report on Operations It has also to be noted that, in the first half of this year, there were no operations of "greater importance" as defined by the "Procedure for the discipline of Transactions with Related Parties", approved by the Board of Directors of Esprinet S.p.A. in compliance with Consob resolution n of 12 March 2010 and subsequent amendments thereto, entered into force on 1 January Main risks and uncertainties Esprinet Group activities are exposed to risk factors able to influence its economic and financial situation. The Group identifies, assesses and manages risks in compliance with internationally recognised models and techniques such as the Enterprise Risk Management - Integrated Framework (CoSo 2). The identification of key risks has enabled their classification in the following categories: - strategic risks; - operational risks; - compliance risks; - financial risks. For each category of risk, the following is a brief description of the main risks, and of the response actions put into force or planned to bring the seriousness of the risk within acceptable levels for the Group. Strategic risks: criticality in the ability to plan and implement strategies in a systematic and co-ordinated fashion, inadequate response to unfavourable macro-economic scenarios, inadequate response to changes in customers and suppliers needs, inadequate management of the analysis/reaction process to price dynamics (deflationary events). Protection against strategic risks is usually linked to the quality of strategic planning processes and to the generation of new ideas and/or the validation of existing management models, to the frequency and effectiveness of business reviews and to the availability of competitive analysis methods and tools. Operational risks: interruption in logistics and storage systems, dependency on IT and web systems, dependency on key suppliers, less than optimal management of stock and warehouse turnover. Operational risks are typically defended against by a mixture of rules and procedures aimed at guaranteeing adequate prevention from risky events, as well as by insurance tools and business continuity and disaster recovery plans aimed at minimizing any possible financial impact of the risky events. Compliance risks: violation of laws, rules and regulations, including tax ones, which govern the Group operations (please see under Non-current provisions and other liabilities paragraph in the Notes to the condensed half-yearly consolidated financial statements in this report). These risks are mainly guarded against by an external structure made up of professionals who also guarantee that internal administrative resources are updated on new laws and regulations of any possible interest to the Group. Financial risks: credit risk and liquidity risk. Credit risk management strategies are as follows: - in the case of cash and cash equivalents and financial derivatives, by the choice of leading national and international banks; - in the case of trade receivables, within the limits of the credit negotiated and with the aim of optimizing the balance of costs and benefits, by the transfer of the risk to leading insurance and/or factoring firms, as well as the application of special checking procedures regarding the assignment and periodical revision of lines of credit to customers, besides the requirement of collateral in the case of customers whose ratings are insufficient to guarantee operations. Liquidity risk management hinges on cash-flow planning and also on the maintenance of consistent amounts of unused lines of credit in Italy and in Spain of a mainly self-liquidating nature, aided by a conservative financial policy favouring stable financing sources including that for financing working capital. Esprinet Group page 16

17 Interim Directors Report on Operations Other important information 1. Research and development activities The research and development of IT and web activities are related to the definition and planning of new processes and services referred to the IT platform used by the Group, which is at customers and suppliers disposal for information communication as well as for the management of sales and purchase orders process. These costs were entirely recorded in the income statement, mainly among the costs of respective departments. 2. Number and value of own shares From the original 1,350,000 shares purchased in 2007 (as per the assembly resolution on 26 April 2007) and partially allocated (168,600) on 3 May 2013 as per the Long Term Incentive Plan approved on 27 April 2010, at the date of this Report Esprinet S.p.A holds 1,181,400 own shares, representing 2.25% of the share capital. 3. Atypical and/or unusual operations No atypical and/or unusual events or operations according to the definition as per Consob communication No. DEM/ of the 28 July 2006 occurred during the year. 4. Share incentive plans Under the share incentive policies, aimed at strengthening the loyalty of those managers considered critical for the achievement of the Group s operating objectives, on 9 May 2012 the Esprinet S.p.A. shareholders meeting approved the proposal of the Compensation Committee for a further Long Term Incentive Plan for members of the Boards of Directors and executives of the Company. This Plan is valid for the 2012/2013/2014 three-year period and regards the stock grant of a maximum number of 1,150,000 ordinary Esprinet S.p.A. shares to beneficiaries. The stock grant was assigned on 14 May 2012 with maturity deferred up to the presentation of the Group s consolidated financial statements for the fiscal year 2014 to the Esprinet Shareholders Meeting. The exercise rights of the stock grant are conditional on the achievement of the Group s income targets in , as well as on the permanence of the beneficiary in the Group up to the presentation of the 2014 consolidated financial statement. It should be noticed that, with the presentation of the 2012 consolidated financial statement to the Shareholders Meeting of Esprinet S.p.A. on 29 April 2013, the Long Term Incentive Plan - approved by the Board of Directors on 27 April 2010 and addressed to the Board of Directors members as well as to the Company and its subsidiaries employees came to maturity. The Plan aimed at assigning a maximum number of 200,000 right to the free grant ( stock grant ) of Esprinet S.p.A. ordinary shares. The assignment was conditional to the achievement of the Group s income targets in , as well as on the permanence of the beneficiary in the Group until the approval date of the Group s consolidated financial statement. On 3 May 2013 as consequence of both the employment termination by some of the beneficiaries and the partial achievement of the performance targets, nr. 168,600 shares already in the Esprinet portfolio were delivered to the beneficiaries. Consequently the reserve of the net equity that included the costs related to the period of rights maturity was liquidated as regard the assigned shares, and reclassified in the special reserve of the head company Esprinet S.p.A. as regards the rights that came to maturity but had not been assigned. Further information can be found in the Notes to the consolidated financial statement paragraph Group Personnel costs. Esprinet Group page 17

18 Interim Directors Report on Operations 5. Business combinations Acquisition of Celly Group On 12 May 2014 Esprinet S.p.A., consistently with strategic process aimed at focusing on core business and penetrating high-profitability segments, finalized the acquisition of a 60% stake in the share capital of Celly S.p.A., an Italian company active in the wholesale distribution of accessories for mobile devices. The acquisition perimeter includes Celly S.p.A. as well as its wholly-owned subsidiaries: - Celly Nordic OY, a Finnish-law company; - Celly Swiss SAGL, a Helvetic-law company; - Celly Pacific LTD, a Chinese-law company, completely owned by Celly Swiss SAGL; all of which are operating in the same segment as the Holding Company, as well as Celly s 25% share in Ascendeo SAS, a French company active in the international distribution of Blackberry branded products. Esprinet S.p.A. and Celly non-controlling shareholders mutually granted put/call options on the residual 40% of Celly s shares, substantially symmetric as the exercise terms for both the put and call options are fundamentally identical, simultaneously exercisable by/toward the minority stockholders between the 5 th and 7 th year after the signing date. The option terms thus imply that Esprinet and the Celly minority stakeholders participate to a synthetic forward contract, whose underlying is represented by the 40% share of Celly S.p.A. capital. The consolidation of Celly Group, accounted for using the acquisition method, resulted in a goodwill not deductible for tax purposes, equal to 3.9 million euro arising from the difference between the acquisition spot price (7.9 million euro) and the fair values of the identifiable assets and liabilities of the above mentioned company, as summarised in the following table: Fair value Group Celly 12/05/2014 Fixed, intangible and financial assets 876 Deferred income tax assets 650 Receivables and other non-current assets 37 Inventory 7,283 Trade receivables 4,550 Other current assets 1,086 Cash and cash equivalents 2,178 Income tax liabilities (220) Other non-current liabilities (850) Trade payables (1,058) Other current liabilities (1,204) Short-term financial liabilities (6,570) Net assets fair value 6,758 Interest of minority shareholders: 40% (2,703) Net assets fair value relating to Esprinet shareholders 4,055 Provisional goodwill (1) 3,889 Cash paid 7,944 Potential compensation on the residual 40% 10,135 Potential compensation discounting (444) Potential cost of the total acquisition 17,635 (1) Goodwill amount subject to adjustment within 12 months from the transaction date as permitted by the accounting standard IFRS 3. The acquisition contract provides for the usual guarantees granted by sellers with reference to the subsequent potential liabilities due to events happened before the transaction date and not known at that date. As no significant or measurable surpluses have been identified from the acquired activities, the exceeding amount paid in comparison with the value of the acquired equity share was completely allocated to Goodwill Esprinet Group page 18