Board of Directors Report on management performance of the Engineering Group THIRD QUARTER 2010 ENGINEERING GROUP

Transcription

1 Board of Directors Report on management performance of the Engineering Group THIRD QUARTER 2010 ENGINEERING GROUP

2 ENGINEERING INGEGNERIA INFORMATICA SpA ROME, Via San Martino della Battaglia, 56 THE UNDERSIGNED AND FULLY PAID UP SHARE CAPITAL IS EQUAL TO 31,875,000 TRADE REGISTER NO ROME CHAMBERS OF COMMERCE REA NO COMMENTS RELATIVE TO THE THIRD QUARTER 2010 BOARD OF DIRECTORS REPORT ON MANAGEMENT PERFORMANCE OF THE ENGINEERING GROUP 1. CORPORATE BODIES GROUP ACTIVITIES SCOPE OF CONSOLIDATION AS AT 30 SEPTEMBER FORM, CONTENT AND ACCOUNTING PRINCIPLES BUSINESS PERFORMANCE NET FINANCIAL POSITION SIGNIFICANT EVENTS OCCURRING DURING 3 rd QUARTER SIGNIFICANT EVENTS OCCURRED AFTER THE CLOSE OF 3 rd QUARTER INTRA-GROUP OPERATIONS OWN SHARES OUTLOOK CERTIFICATION ACCORDING TO ART BIS, LGS. DECREE N. 58/

3 1. CORPORATE BODIES Board of Directors The new Board of Directors, as deliberated during the last General Shareholders meeting on 24 April 2009 and the Board of Directors meeting on the same day, has been appointed for the coming three-year period , as follows: Michele Cinaglia Chairman Rosario Amodeo Executive Deputy Chairman Paolo Pandozy Managing Director Costanza Amodeo Executive Director Tommaso Amodeo Executive Director Giuliano Mari Independent Director Dario Schlesinger Independent Director Alberto De Nigro Independent Director Massimo Porfiri Independent Director Giancarlo Vitali Independent Director The so called one-tier governance system adopted by Engineering Ingegneria Informatica S.p.A. stipulates that management control, established by the Board of Directors, consists only of independent board members. Secretary Armando Iorio Lead Independent Director Giuliano Mari Internal control system functionality supervisor Rosario Amodeo Management Audit Committee Chairman Dario Schlesinger Management Audit Committee Members Alberto De Nigro Massimo Porfiri Remuneration Committee Chairman Giuliano Mari Remuneration Committee Members Massimo Porfiri Dario Schlesinger Auditing company PricewaterhouseCoopers SpA Specialist Centro Banca di Credito Finanziario e Mobiliare SpA Quarterly report as at /13

4 2. GROUP ACTIVITIES The Engineering Group represents one of the major Italian firms in the Information Technology service industry and ranks among the top 3 national operators. It is the leading Italian system integrator with an integrated and complete offering in services, design and IT consulting. The business model operates on different business lines, such as systems integration, consulting services, proprietary solutions, application management and outsourcing services. The offering is sustained by proprietary application products mainly focused on Finance, Healthcare, Utilities and Telecommunications. The reference market consists of medium to large customers in all primary market segments, including both public sector (healthcare, local and central administrations, defence and security) and private sector (banks, insurance companies, SGR, industry, telecommunications and utilities). As at 30 September 2010, the Group holds a leadership position with about 7% of the IT domestic market. The Group has 37 offices throughout Italy in addition to 2 subsidiary companies in Brazil and Belgium. Designing and implementing IT architectures for medium-large size companies is the Group s mission resulting in a portfolio made up by 1,000 clients and process, technological and business expertise. Quarterly report as at /13

5 3. SCOPE OF CONSOLIDATION AS AT 30 SEPTEMBER 2010 ENGINEERING INGEGNERIA INFORMATICA S.p.A. ENGIWEB SECURITY S.r.l % % ENGINEERING TRIBUTI S.p.A. ENGINEERING SARDEGNA S.r.l % % ENGINEERING INTERNATIONAL INC. OVER IT S.r.l % 70.00% NEXEN S.p.A. ENGO S.p.A % ENGINEERING INTERNATIONAL BELGIUM S.p.A % 25.00% ENGINEERING DO BRASIL 25.00% % 75.00% ENGINEERING.IT S.p.A % 65.00% SERVIZI TELEMATICI SICILIANI S.r.l SICILIA E SERVIZI VENTURE S.c.r.l % SITEL S.r.l. Quarterly report as at /13

6 4. FORM, CONTENT AND ACCOUNTING PRINCIPLES With relation to the implementation of the policy on Transparency and complying with the communication n 1814 of 28/1/2008 issued by Borsa Italiana and provisions of Consob communication of 30/4/2008 DEM/ , the information contained herein has been drafted according to the instructions contained in the Art. 154-ter Financial Reports of the Testo Unico della Finanza, introduced by Legislative Decree 195/2007. Economic and financial results herein contained have been drafted in compliance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), validated by the European Union, as well as to all relevant interpretations of the International Financial Reporting Interpretation Committee (IFRIC) and of the Standing Interpretation Committee (SIC). The companies included within the scope of the consolidation have been consolidated line-by-line, with the exception of the ones that are not operative, and results for both subsidiaries and the parent company are based on the same financial year. All evaluations have been made considering the Group continuing the activities in the foreseeable future. Achieved results as at 30 September 2010 include the companies shown in the scheme on previous page. Consolidated income statement represents the progressive situation as at the date and the one of the reference quarter compared with the same periods of previous year. In this present report, some alternative performance indicators not envisaged by IFRS are used, in line with recommendation CESR/05-178b published on 3 November Quarterly report as at /13

7 In particular, Ebitda (Gross Operating Margin) is calculated, with reference to the income statement tables, from the operative income gross of amortizations, provisions and write-downs. Instead, Ebit matches with the operating income. Furthermore, some estimates and assumptions have been made, evenly on all intermediate shown periods, having an effect on economic values and assets. If in the future these estimates and assumptions, based on top management s best judgements, should differ from real situations, they will be modified in the period in which these circumstances will change. The above evaluations are inspired to the principle of fairness and take into account standard procedures, past experiences, and the involvement of external consultants and market conditions. Net financial position figures are compared with closing figures of the previous quarter and with figures of the last financial year. Values in this quarterly report are expressed in millions of euros. Quarterly report as at /13

8 5. BUSINESS PERFORMANCE Third quarter results are characterized for an improvement of all indicators: ECONOMIC FIGURES (Amounts in mn) 1 / 7-30 / 09 1 / 1-30 / (*) 2010 yoy 2009 (*) 2010 yoy Net revenues Other revenues and income Total revenues % % Raw mat., subsid., consumables and goods Services Personnel Other overhead costs Production costs Gross operating result (EBITDA) % % % on net revenues 9.5% 11.2% 11.1% 11.0% Operating result (EBIT) % % % on net revenues 5.4% 8.5% 7.7% 8.2% Earning before taxes (EBT) % % % on net revenues 4.8% 7.7% 7.4% 7.8% (*) Third quarter 2009 included contingent assets (about 5 mn) resulting from a legal dispute with favourable outcome. In order to make comparable results, we show figures 2009 net of this effect. In particular: Total revenues reached mn (+7.1%) with a result at 30 September coming at mn (+5.0%) Gross operating result (EBITDA) registered an amount of 19.3 mn (+30.4%), taking result over the period January-September at 57.6 mn (+5.9%) EBT reached 13.2 mn, +77.6% on the same quarter of the previous year, with a result of 40.9 mn (+12.5% yoy) at 30 September Net financial position went from mn on 30 June 2010 to mn registered on 30 September 2010, in line with the result of the same period of previous year ( mn). Quarterly report as at /13

9 At 30 September 2010, acquired orders reached mn, +5.3% compared to the same period of previous year, while backlog came in at mn, +6.2% on September (Amounts in mn) ORDER PORTFOLIO Orders to be realised (a) 01 / Total booking (b) at 30 / % Net revenues (c) at 30 / % ORDERS IN PORTFOLIO (a + b - c) AT 30 / % At 30 September 2010, group headcount reached employees, +47 units on 30 June The increase is mainly due to organic growth; at the same time, as an additional element of flexibility, about 2000 external resources are utilized on projects on demand. Total Revenues Ebitda (millions of euros) (milllions of euros) Q 2 Q 3 Q YTD Q 2 Q 3 Q YTD Quarterly report as at /13

10 6. NET FINANCIAL POSITION At 30 September 2010, net financial position was recorded at mn, registering a negative balance of 8.6 mn compared with mn on 30 June In line with the performance of these last years, during the third quarter a slow-down in takings was registered during the months of July and August, getting back to normal in September. (Amounts in mn) NET FINANCIAL POSITION 09 / / / / 2010 Current financial liabilities (50.1) (47.8) (42.6) (36.8) Cash on hand Current financial liabilities (37.6) (37.0) (41.5) (54.4) TOTAL NET FINANCIAL POSITION (49.8) (38.0) (40.7) (49.3) For the last quarter of the year, we foresee a pick-up in takings, contributing to improve financial availabilities of the group at a31 December For a better understanding, in the following table we show the changes in the net financial position of the period: (Amounts in mn) DESCRIPTION Amount Financial availability/(borrowing) as at 1/7/2010 (40.7) Proceeds from ordinary operations Reorganisation charges (0.5) Net investments (0.5) Expenditures from ordinary operations (164.9) Financial availability/(borrowing) as at 30/9/2010 (49.3) Quarterly report as at /13

11 7. SIGNIFICANT EVENTS OCCURRING DURING 3 rd QUARTER 2010 Main events: August Engitech Ltd has been wound up. August Engineering Ingegneria Informatica S.p.A. has modified its company-by-laws, according to regulations provided by Legislative Decree D.lgs. 27/2010 (Shareholders rights) and Legislative Decree 39/2010 (Autiting of annual accounts). September Engineering Ingegneria Informatica S.p.A. founded, together with Almaviva S.p.A. and Elsag Datamat S.p.A. the consortium InItalia for the Italian information technology sector, with the objective to develop innovative products and solutions. 8. SIGNIFICANT EVENTS OCCURRED AFTER THE CLOSE OF 3 rd QUARTER No significant events occurred after the close of third quarter. 9. INTRA-GROUP OPERATIONS Pursuant to Consob recommendation no of 20 February 1997, this is to certify that operations within the Group took place at normal market conditions and there were no atypical operations and operations with related parties. It should be noted that relations among Engineering Group companies consist mainly of the supply of services required in customer projects, and generated shared revenues/costs for 70.5 mn. Quarterly report as at /13

12 10. OWN SHARES On 24 April 2010, the Engineering Ingegneria Informatica SpA Shareholders meeting resolved a plan to purchase the company's own shares up to a maximum of 2,500,000 shares over a maximum period of 18 months. As at 30 September 2010, the company owned 104,917 shares. The equivalent value of these shares is 2,836,758.27, booked as a balance sheet liability accordingly to IAS 32, for an average share price of On the date this report is approved, the number of own shares in the company portfolio has not changed, therefore is equal to n. 104, OUTLOOK In light of the results achieved in the first nine months of current year, Engineering s top management can confirm year-end forecasts recording a value of production between 730 and 760 million and an EBITDA between 84 and 88 million. As done in the previous years, also for 2010 we will propose to the Shareholders General Meetings of the companies Engineering Ingegneria Informatica S.p.A. and Engineering.IT S.p.A. to distribute a portion of yearly profits to the employees, according to criteria linked to the achievement of corporate goals. Confident that this proposal will be approved by the Shareholders meetings, we foresee to record about 6.5 mn at the end of the year, among personnel cost accordingly to IAS 19. Quarterly report as at /13

13 12. CERTIFICATION ACCORDING TO ART BIS, LGS. DECREE N. 58/1998 DOCUMENTS IN COMPLIANCE WITH ART BIS, PARAGRAPHS 2, LGS. DECREE N. 58/1998 DATED 24 FEBRUARY 1998 The undersigned Armando Iorio, in the position of Manager assigned to preparing accounting documents of Engineering Ingegneria Informatica SpA, certifies that the economic and financial figures shown on this report correspond to the results of accounting records. Rome, 12 November 2010 The manager assigned to the preparation of accounting documents Armando Iorio Quarterly report as at /13

14 ENGINEERING GROUP ECONOMIC FIGURES (Amounts in mn) 1 / 7-30 / 09 1 / 1-30 / (*) 2010 yoy 2009 (*) 2010 yoy Net revenues Other revenues and income Total revenues % % Raw mat., subsid., consumables and goods Services Personnel Other overhead costs Production costs Gross operating result (EBITDA) % % % on net revenues 9.5% 11.2% 11.1% 11.0% Operating result (EBIT) % % % on net revenues 5.4% 8.5% 7.7% 8.2% Earning before taxes (EBT) % % % on net revenues 4.8% 7.7% 7.4% 7.8% (*) Third quarter 2009 included contingent assets (about 5 mn) resulting from a legal dispute with favourable outcome. In order to make comparable results, we show figures 2009 net of this effect. (Amounts in mn) NET FINANCIAL POSITION 09 / / / / 2010 Current financial liabilities (50.1) (47.8) (42.6) (36.8) Cash on hand Current financial liabilities (37.6) (37.0) (41.5) (54.4) TOTAL NET FINANCIAL POSITION (49.8) (38.0) (40.7) (49.3) Quarterly report as at /13