N&W Global Vending S.p.A. Financial Performance for the Year Ended December 31, 2016 April 12 th, 2017

Transcription

1 N&W Global Vending S.p.A. Financial Performance for the Year Ended December 31, 2016 April 12 th, 2017

2 Disclaimer In this report, the terms Group, we, us and our refer to N&W Global Vending S.p.A. (the Company ) and its subsidiaries. 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. 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, EBITDA Margin, 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. 2

3 Index Financial Statements presentation 4 Key figures 6 Highlights 7 Recent developments 8 Business Review Revenues 9 Financial Review: Income Statement 12 Financial Review: Cash Flow 13 Balance Sheet & Net Debt 15 Purchase Price Allocation 16 Appendix 18 3

4 Financial Statements presentation Management Report Proforma Consolidated Financial Statements Consolidated Financial Statements Period 12 months ended December 31, months ended December 31, 2016 From March 22 nd, 2016 to December 31, 2016 Basis of preparation Non-IFRS See «Basis of Preparation» in Pro forma Accounts IFRS Purchase price allocation impact (see pages 16-17) NO YES YES Audited/Reviewed NO YES/Reviewed YES/Audited Basis of audit N/A International Standard on Assurance Engagements (ISAE) 3420 International Standards on Auditing Filing of accounts with Register of Commerce in Italy NO NO YES 4

5 Financial Statements presentation To provide meaningful, reliable, relevant and comparable financial information the Company has opted to split its annual reporting in three reports as set out below: Management Report: The Company provides an overview of the business performance and financial performance during the 12- month period ended December 31, The figures presented in this Management Report (some of which are non-ifrs) have been derived from the Pro-forma Consolidated Financial Statements, wherein the impact of the purchase price allocation on the N&W Group resulting from the acquisition of N&W has been excluded (see pages 16-17). Pro Forma Consolidated Financial Statements: The Company provides an overview of the business performance and financial performance for the twelve months ended December 31, 2016, and showing the impact of the purchase price allocation. The principal characteristic of the Pro Forma Financial Statements is that they present the historical financial information of the N&W Group for the twelve months ended December 31, 2016 as if the acquisition of N&W occurred on January 1, 2016, since it is not possible to present audited consolidated financial statements for that period because a full parent-subsidiary relationship (as defined by IAS 27/IFRS 10) did not exist amongst all component entities being combined for the entire twelve months. In particular, LSF9 Canto Investments S.p.A. did not own and control N&W Global Vending S.p.A. and its subsidiaries prior to the acquisition thereof on March 22 nd, 2016 (the Acquisition Date ). The Pro Forma Financial Statements have been examined by Deloitte & Touche S.p.A. in accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus. We refer to the assurance report of the independent auditor in paragraph I of Pro Forma Consolidated Financial Statements. Consolidated Financial Statements: The consolidated financial statements have been prepared in accordance with IAS 27 and IFRS 10 and therefore present the financial performance of the legal group owned and controlled by the Company as from the Acquisition Date, as well as the stand-alone results of the Company and LSF9 Canto Investments S.p.A. from incorporation until the Acquisition Date. The Consolidated Financial Statements have been audited by Deloitte & Touche S.p.A.. We refer to the audit report of the independent auditor in paragraph I of Consolidated Financial Statements. All comparisons made to 2015 relate to Pro Forma Consolidated financial statements of N&W Group. 5

6 Key figures For the twelve months ended ( thousands) December 31, December 31, Results Revenues 299, ,325 Adjusted EBITDA* 75,568 74,099 Adjusted EBITDA margin** 25.2% 24.5% Operating profit/(loss) 54,659 54,185 Profit/(loss) for the period (4,997) (14,773) Cash flow Cash at the beginning of period 48,088 33,197 Net cash flow from operating activities 57,990 60,651 Net cash flow from investing activities 226,627 (15,806) Of which: capital expenditures (13,432) (15,806) Of which: Acquisition 240,059 Net cash flow from financing activities *** (281,615) (29,954) Cash at the end of period **** 51,089 48,088 Financial Position Net debt***** 367,447 Net debt / Adjusted EBITDA 4.9 (*) 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. (**) We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenues. (***) Cash Flow from financing activities includes Interest payment. (****) Cash at the end of Dec 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, Revolving facilities and 0.1 million of other debt, less cash and cash equivalents, net of escrow account of Euro 1 million. 6

7 Highlights 2016 Revenues of Euro million, 0.9% less than 2015, have been characterised by i) the good performance of small-medium sized customers, with growth of Euro 16.7 million (8.4% more than 2015) ii) a decrease in sales to our 4 largest customers, with a decline of Euro 19.4 million (18.5% less than 2015) 2016 Adjusted EBITDA performance has been satisfactory due: to a favourable customer and product mix and continuous costs optimisation, 2016 Adjusted EBITDA reached Euro 75.6 million (25.2% of Net Sales), Euro 1.5 million better than 2015 which was Euro 74.1 million (24.5% of Net Sales). Cash flow generation from operating activities was at good levels in 2016 at Euro 58 million vs Euro 60.7 million in The Ratio of Net Debt to Adjusted EBITDA is equal to 4.9 as of December 31, 2016, 0.1 better as compared to a ratio of 5 as of September 30,

8 Recent Developments On March 14 th, 2017 the Group completed the announced acquisition of Saeco Vending S.p.A. ( Saeco ) and on March 13 th, 2017 placed an additional Euro 70 million of Senior Secured Notes in part to fund such acquisition. The deal which granted the licenses to use the well-known Saeco and Gaggia brands in the professional coffee machines market, should enable N&W to grow substantially in the Office Coffee Service (OCS) segment, strengthen its Vending & Ho.Re.Ca. lines and accelerate its sales development in strategic markets such as Central Europe, Eastern Europe and Asia. N&W expects to leverage the industrial, commercial and innovation capabilities of Saeco in order to keep delivering the highest quality coffee experience out of home and enhance Saeco brands competitive positioning through integration with N&W. 8

9 Business Review Revenues For the twelve months ended December 31, 2016 December 31, 2015 Variance % Revenue by geography ( thousands) 299, , % Italy 95,205 95, % France 41,775 42, % Spain 22,621 22, % UK 11,208 14, % Germany 14,361 13, % Nordics 20,576 16, % Other Europe 41,325 49, % East Europe 14,000 12, % Africa & Middle East 3,925 3, % Asia & Pacific 6,616 4, % North America 14,367 11, % Central & South America 13,586 14, % Revenue ( thousands) 299, , % Vending 184, , % H&C 131, , % S&F 49,729 53, % C&B 2,953 2, % Horeca & Liquid 39,327 36, % OCS 10,402 12, % Accessories & Spares 65,276 63, % 9

10 Business Review Revenues i) Geographies 2016 Revenues attributable to Western European countries (comprising Italy, France, Spain, UK, Germany, Nordics and other Western European countries) was characterized by good sales to smallmedium sized customers (+7.3% compared to 2015) but was offset by a downturn in Revenues attributable to our 4 largest customers (-18.5% compared to 2015). Overall Revenues were down in 2016, -3.3% vs Best performers were Nordics and Germany more than offset by the negative results in UK, Switzerland, Italy and France (driven by decreases attributable to our 4 largest European customers). Strong Sales in Emerging markets (East Europe, Africa&Midlle East, Asia&Pacific, Americas) resulted in a growth in Revenues for 2016 of 12.2% vs Good sales growth was also realised in Asia&Pacific areas as well as North America and Eastern Europe (mainly in Poland, Czeck Republic and Romania). Sales decreased in Central&South America due mostly to a Brazilian market still facing a very difficult economic situation. 10

11 Business Review Revenues ii) Line of Business Vending Revenues decreased by 2.6% during 2016 as compared to The shortfall is mainly driven by our 4 largest European customers who reduced their investments during 2016; such decrease is only partially compensated by the strong performance of small-medium sized customers. Horeca & Liquid Good performances for these lines of business with revenues increasing 7.1% during 2016 as compared to 2015; the increase is driven by France, Germany, North/Central America as well as Asia&Pacific areas. OCS Revenues decreased by 19% during 2016 as compared to the 2015; the decrease is entirely driven by the underperformance of one key customer. Accessories and Spares Revenue increased by 3.3% during 2016 as compared to 2015 mainly due to strong performance in Italian and Japanese markets and with one key customer, only partially offset by the downturn in Brazil and UK. 11

12 Financial Review: Income Statement ( thousands). December 31, 2016 December 31, 2015 Revenue from Sales 299, ,325 Cost of sales (177,378) (180,820) Gross profit 122, ,505 Sales & Marketing (27,360) (28,499) Logistic (6,114) (6,290) Administrations (13,506) (12,702) Operating Exchange Difference Total operating costs (46,617) (47,406) Adjusted EBITDA 75,568 74,099 Depreciation (8,708) (7,305) Amortisation (2,970) (7,083) Operating profit before exceptional items 63,890 59,711 Brazilian Operating Exchange Difference 1,953 (2,570) Restructure costs (330) (39) Other expenses (10,854) (2,917) Operating profit 54,659 54,185 Finance Income Finance costs (41,854) (60,555) Net finance expenses (41,307) (59,590) Profit/(Loss) before income tax 13,352 (5,405) Income tax expense (18,349) (9,368) (Loss) for the period from continuing operations For the twelve months ended (4,997) (14,773) Operating profit Excluding the impact of the purchase price allocation, Operating profit was Euro 54.7 million for the twelve months ended December 31, 2016 compared to Euro 54.2 million for the twelve months ended December 31, The impact of non recurring items is equal to an expense of Euro 11 million. This includes special costs of Euro 6.5 million incurred in relation to N&W Group acquisition on March 22 nd, 2016 (including Euro 3.4 million of exit bonuses), Euro 1.6 million of costs for specific projects of a nonrecurring nature, Euro 1.5 million of costs for the write-down of the financial loan outstanding with VE Global Solutions LLC and Euro 0.8 million of charges for Italian short time working contracts. The operating profit is also impacted by positive exchange differences on Brazilian Real of Euro 1.9 million largely due to a translation effect (mostly unrealized) arising from the conversion of intercompany trade payables recorded in our Brazilian subsidiary related to purchases of products from our Italian subsidiary denominated in Euro. 12

13 Financial Review: Cash Flow For the twelve months ended Condensed cash flow statement Dec Dec. 31, 2015 ( thousands) Adjusted EBITDA 75,568 74,099 Change in Trade Working Capital (409) 10,358 Change in Other Working Capital 1,056 (5,255) Taxes (8,218) (15,593) Special costs (10,008) (2,958) Cash flow from operations 57,990 60,651 Investment in assets (Capex) (13,431) (15,806) Equity injection at Acquisition Date 255,793 N&W share price at closing (21,501) N&W Price Adjustment for tax settlement 6,512 Equity injection for tax settlement 2,239 Tax settlement instalments net of tax refund (2,985) Cash flow from investing activities 226,627 (15,806) Interest and other financial charges paid (37,689) (11,630) Financial debt raising/(repayment) (243,926) (18,323) Cash flow from financing activities (281,615) (29,954). Cash flow for the period 3,001 14,891 Cash at Beginning of Period 48,088 33,197 Closing cash balance 51,089 48,088 13

14 Financial Review: Cash Flow For the year ended December 31, 2016, cash flow from operations was Euro 58 million. When eliminating the impact of the special costs, the recurring cash flow from operations is equal to Euro 68 million, as compared to Euro 63.6 million for the year ended December 31, 2015, reflecting the good performance of the business. Net cash used in investing activities was Euro million for the year ended December 31, This comprises: i) Euro 13.4 million of capital expenditure, as compared to Euro 15.8 million in 2015, ii) Euro 258 million as equity injection from our shareholders, iii) Euro 14.9 million paid by LSF9 Canto Investments to the seller as the net consideration for the acquisition of N&W, iv) the equity increase of Euro 2.2 million effected to repay the June tax installment of the same amount, v) Euro 3 million of tax settlement, being the 3 installments paid to the Italian tax authorities in June, September and December 2016 equal to Euro 6.7 million less the Euro 3.7 million refund from the tax authorities in August Net cash derived from financing activities was Euro (281.6) million for the year ended December 31, 2016 and includes: Euro million of proceeds from issuance of Senior Secured Notes and Second Lien Notes Euro 10.8 million of proceeds drawn from the Revolving Facility (Euro 653) million of capital repayments of previous loans (Senior and Mezzanine) (Euro 37.7) million of transactions fees and interests in connection with the repayment of old debt and the issuance of the Senior Secured Notes, Second Lien Notes and Revolving Facility.. 14

15 Balance Sheet & Net Debt Condensed balance sheet ( thousands) December 31, 2016 December 31, 2015 Property, plant and equipment 38,014 41,147 Goodwill and other intangible assets 649, ,135 Other non current assets 1,893 3,053 Fixed assets 689, ,335 Net trade receivables 66,056 63,405 Inventories 39,423 41,329 Trade payables (74,489) (74,154) Other net working capital (38,898) (39,038) Current and deferred income taxes (95,628) (30,873) Capital employeed 586, ,005 Equity 228,321 45,872 Secured Notes and Revolving Facilities 417,483 Financing fees (9,747) (2,147) Bank and other borrowings 2 280,172 Third parties loans 404,130 Finance Leases Cash * (50,089) (48,088) Net financial debt (incl. financing fees) 357, ,133 * C ash at the end of December excludes the escrow account of Euro 1 million Thousand December 31, 2016 September 30, 2016 Bridge Facility 400,000 Senior Secured Notes - Capital 300,000 Second Lien Notes - Capital 100,000 Revolving Facility 10,815 10,815 Senior Secured Notes - Interests 4,433 Second Lien Notes - Interests 2,217 Revolving Facility - Interests&Commit. Fee Finance leases Bank overdraft&other loans 2 22 Gross Debt 417, ,909 Less: cash (*) (50,089) (36,670) Net Debt 367, ,239 Adjusted EBITDA 75,568 74,559 Net Debt/Adjusted EBITDA (*) cash excludes amount in escrow account- 1m at and 14m at The ratio of Net Debt to Adjusted EBITDA is equal to 4.9 as of December 31, 2016, 0.1 better as compared to a ratio of 5.0 as of September 30,

16 Purchase Price Allocation ( thousands) Net assets at Completion Date before PPA Fair value adjustments Net assets at Completion Date after PPA Assets acquired 251, , ,859 Property, plant & equipment 39,055-39,055 Intangible assets 19, , ,156 R&D Capitalised 18,202 (18,202) - Other IT intanglibles 1,171-1,171 Software - 18,066 18,066 Trademarks - 122, ,111 Patents - 73,505 73,505 Customer list - 109, ,302 Other non-current assets 3,119-3,119 Total non-current assets 61, , ,330 Inventories 42,100 23,392 65,493 Trade and other receivables 83, ,807 Cash and cash equivalents 47,639-47,639 Deferred tax assets 16,743 4,847 21,590 Total current assets 189,606 28, ,528 Liabilities assumed (818,884) (98,438) (917,321) Deferred income tax liabilities (6,884) (98,438) (105,322) Other non-current liabilities (20,137) - (20,137) Total non-current liabilities (27,021) (98,438) (125,459) Trade payables (138,231) - (138,231) Financial indebtness (653,631) - (653,631) Total current liabilities (791,862) - (791,862) Identifiable assets and liabilities (567,730) 235,267 (332,462) Goodwill 583,719 (235,267) 348,451 Purchase Price Paid 15,989-15,989 16

17 Purchase Price Allocation. ( thousands) Before PPA PPA After PPA 12 months ended December 31, months ended December 31, months ended December 31, 2016 Revenue from Sales 299, ,564 Cost of sales (177,378) (177,378) Gross profit 122, ,186 Sales & Marketing (27,360) (27,360) Logistic (6,114) (6,114) Administrations (13,506) (13,506) Operating Exchange Difference Total operating costs (46,617) - (46,617) Adjusted EBITDA 75,568-75,568 Depreciation (8,708) (8,708) Amortisation (a) (2,970) (27,991) (30,961) Operating profit before exceptional items 63,890 (27,991) 35,899 Inventory revaluation (b) - (23,392) (23,392) Brazilian Operating Exchange Difference 1,953 1,953 Restructure costs (330) (330) Other expenses (10,854) (10,854) Operating profit 54,659 (51,384) 3,276 Finance Income Finance costs (41,854) (41,854) Net finance expenses (41,307) - (41,307) Profit/(Loss) before income tax 13,352 (51,384) (38,031) Income tax expense (c) (18,349) 14,588 (3,761) (Loss) for the period from continuing operations (4,997) (36,795) (41,792) 17

18 Appendix For a description of certain other information, including i) the management and shareholders of the Issuer, ii) certain affiliate transactions, iii) indebtedness and material financing arrangements and material debt instruments and iv) material risk factors please see the Offering Memorandum dated October 7, 2016 for our Euro 300,000, % Senior Secured Notes due 2023, a copy of which is posted on our website.. 18

19 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 31 December 2016

20 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Index I. Assurance report of the independent auditor 3 II. Basis of Preparation 5 III. Impact of Purchase Price Allocation 9 IV. Proforma Statement of Comprehensive Income for the Twelve Month Period Ended December 31, V. Proforma Statement of Financial Position as at December 31, VI. Proforma Statement of Cash Flows for the Twelve Month Period Ended December 31, VII. Proforma Statement of Changes in Equity for the Period Ended December 31, VIII. Notes to the Proforma Financial Statements 17 Note 1. General information 17 Note 2. Accounting policies 19 Note 3. Critical accounting estimates and judgements 33 Note 4. Business Combination 35 Note 5. Revenue 37 Note 6. Segment information 37 Note 7. Cost of Sales 39 Note 8. Reorganisation costs 40 Note 9. Other costs 40 Note 10. Net financial expense 40 Note 11. Taxes 41 Note 12. Comprehensive income components 44 Note 13. Intangible assets 45 Note 14. Property, plant and equipment 47 Note 15. Avilable-for-sale investments 48 1

21 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note 16. Receivables and other non-current assets 48 Note 17. Cash and cash equivalents 49 Note 18. Trade receivables 49 Note 19. Inventories 50 Note 20. Other receivables 50 Note 21. Shareholders Equity 51 Note 22. Financial instruments 52 Note 23. Financial Indebtness 52 Note 24. Provision for post employment benefits 55 Note 25. Provision for risks and charges 56 Note 26. Warranty and reorganisation provisions 57 Note 27.Trade payables 58 Note 28. Other payables 58 Note 29. Derivative financial instruments (liabilities) 59 Note 30. Commitments for leasing agreements 59 Note 31. Financial risk management 60 Note 32. Events after the reporting date 69 2

22 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 I. Assurance report of the independent auditor 3

23 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at

24 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 II. Basis of Preparation LSF9 Canto Investments S.p.A. ( LSF9 Canto ), now merged into N&W Global Vending S.p.A., was incorporated on 25 th November 2015 by the private equity fund Lone Star Fund IX. On 3 rd December 2015 LSF9 Canto entered into an agreement with N&W Holding S.à rl, owned by Investcorp and Equistone Partner funds, to buy 100% of the corporate capital of N&W Global Vending S.p.A.( the Company ). The Acquisition was finalized on 22 nd March 2016 and was funded through the issue of ordinary equity shares of Euro 256 million indirectly by Lone Star Fund IX and by the drawdown of Senior Secured Bridge (Euro 400 million) and Revolving Facilities (Euro 10.8 million) by LSF9 Canto. On October 5 th, 2016 LSF9 Canto Investments S.p.A. has been extinguished by merging into the wholly owned N&W Global Vending S.p.A. (reverse merger). On October 14 th, 2016 the Company has issued Euro 300 million of Senior Secured Notes and Euro 100 million of Second Lien Notes both due in 2023; through this issuance the Company has fully reimbursed the Bridge Facility of Euro 400 million. N&W Global Vending S.p.A. and its subsidiaries (together with the Company, the Group ) is the leading European and largest manufacturer worldwide of vending machines on a sales volume basis and 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 and Romania. The Acquisition 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 Acquisition and December 31, The principal characteristic of the proforma consolidated financial statements is that they present the historical financial information of the N&W Group for which it is not possible to present consolidated financial statements because a full parent-subsidiary relationship (as defined by IAS 27/IFRS 10) does not exist amongst all component entities being combined. In particular, LSF9 Canto Investments S.p.A. did not own and control N&W Global Vending S.p.A. and its subsidiaries prior to the Acquisition. For this reason the consolidated results of N&W Group for the twelve months ended December 31 st, 2016 have been prepared on the following basis: the aggregation of the consolidated results of the Predecessor from January 1 st, 2016 until March 22 nd 2016 (not audited) and the consolidated results of the Successor from March 23 rd, 2016 until December 31 st, 2016 (audited). The same approach has been adopted in order to prepare the cash flow statement. The statement of changes in equity presents the movements in equity after the Completion Date. 5

25 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 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 s ongoing operations, in the same manner as management views and operates the business. We refer to this figures as the proforma consolidated financial statements and the following definitions are used throughout this document: Successor Period: the consolidated results of LSF9 Canto Investments S.p.A., now N&W Global Vending S.p.A. ( Successor ) from March 23 rd, 2016 until December 31 st, 2016; Predecessor Period: the consolidated results of the Predecessor from January 1 st, 2016 until March 22 nd, All comparison made to 2015 relate to the consolidated results of the Predecessor from January 1 st, 2015 until December 31 st, We refer to the accounting policies detailed in Note 2 of the accompanying proforma consolidated financial statements which form an integral part of and should be read in conjunction with this Basis of Preparation. The proforma results should not be used in isolation or substitution of predecessor and successor results. Finally, we wish to underpin the fact that the need for Proforma financial statements is only temporary. The proforma financial statements are inherently a temporary measure. From 2017 onwards, the Group will be in a position to prepare comparable consolidated financial statements. The Proforma Financial Statements have been examinated by Deloitte & Touche S.p.A. in accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus. The amounts in this document are presented in thousands of euro ( thousands), unless otherwise stated. Rounding adjustments have been made in calculating some of the financial information included in these proforma financial statements, as a result of which schedules may not add. These proforma consolidated financial statements have been approved by the Company s Board of Directors for issue on 27 th March, Important Notice In this report, the terms Group, we, us and our refer to the Company and its subsidiaries. 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 6

26 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 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. 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, EBITDA Margin, 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. New standards, amendments and interpretation applicable from 1 January 2016 The following new standards and amendments, which were effective from 1 January 2016, were adopted by the group. The adoption of these amendments had no effect on the Consolidated Financial Statements. Amendments to IFRS 11 Joint arrangements: Accounting for acquisition of interest in joint operations which clarify the accounting for acquisitions of an interest in a joint operation that constitutes a business. Amendments to IAS 16 Property, Plant and Equipment and to IAS 38 Intangible Assets, which clarify that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated from an operating business that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. In addition, the amendments clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. Annual Improvements to IFRSs cycle, includes a series of amendments to IFRSs in response to issues raised mainly on IFRS 5 Non-current assets held for sale and discontinued operations related to the changes of method of disposal of an asset (or disposal group), on IFRS 7 Financial Instruments: Disclosures related to clarification when servicing contracts are deemed to constitute continuing involvement for disclosure purposes, on IAS 19 Employee Benefits related to discount rate determination and on IAS 7

27 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at Interim Reporting related to paragraph 16A and the clarifications of the meaning of disclosure of information elsewhere in the interim financial report. Amendments to IAS 1 Presentation of Financial Statements, which were a part of the IASB s initiative to improve presentation and disclosure in financial reports. The amendments make a clear that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. Furthermore, the amendments clarify that companies should use professional judgment in determining where and in what order information is presented in the financial disclosures. New Standards and amendments not yet effective Two new accounting principles applicable on or before January 1, 2018 were published in 2016: IFRS 15 Revenues from contracts with customers : the purpose of IFRS 15 is to improve revenues recognition methods by introducing a new accounting model that calls for: (i) identifying a contract with a customer; ii) identifying the obligations entailed by the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the individual contractual obligations; and (v) recognizing the revenues when each individual contractual obligation is satisfied. The adoption of this principle could modify the revenue amount; its potential impact is currently being determined. IFRS 9 Financial instruments, for which first-time adoption modalities are still being defined. The new IFRS 9 standard calls for a single model to classify and measure financial instruments. Within the model, financial assets are classified into three categories (amortized cost, fair value in Reserve for other components of comprehensive income and fair value in the income statement) depending on the entity s business model (because of this dependency link, reclassifications between categories are forbidden, except when the business model itself is changed). A new model to determine the writedowns on receivables and liabilities so-called expected losses has been introduced and the default risk associated with the counterparty is evaluated ex-ante. With regard to equity investments, the exemption from the requirement to apply fair value to measure investments that are not publicly traded has been eliminated. Hedge accounting rules have also been changed; specifically, the existence of a relationship between a hedged asset/liability and the hedging instrument, with balance in terms of weight, is sufficient to avoid ineffectiveness; it is permissible to hedge the single components of the price formula of a commodity provided the components can be identified separately and can be measured reliably; voluntary discontinuation of hedge accounting is not allowed. 8

28 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 III. Impact of Purchase Price Allocation Transaction overview and allocation of purchase price paid Following the Acquisition finalized on 22 nd March 2016 a Purchase Price Allocation ( PPA ) has been carried out. The purchase price paid in cash was equal to 16 million, as compared to a negative net asset value of N&W Group of million at Completion Date. There is no contingent consideration outstanding in relation to the Acquisition as of December 31, Consequently, the preliminary goodwill before purchase price allocation - was equal to million. The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS 3 Business Combinations. The total purchase price has been allocated to the identifiable assets and liabilities acquired, based on the estimated fair values at the date of acquisition. As a result of the purchase price allocation million of the preliminary goodwill was allocated to identifiable assets and liabilities. This allocation is shown below: ( thousands) Net assets at Completion Date before PPA Fair value adjustments Net assets at Completion Date after PPA Assets acquired 251, , ,859 Property, plant & equipment 39,055-39,055 Intangible assets 19, , ,156 R&D 18,202 (18,202) - Software 1,171-1,171 Internally generated software - 18,066 18,066 Trademarks - 122, ,111 Patents - 73,505 73,505 Customer Relationship - 109, ,302 Other non-current assets 3,119-3,119 Total non-current assets 61, , ,330 Inventories 42,100 23,392 65,493 Trade and other receivables 83, ,807 Cash and cash equivalents 47,639-47,639 Deferred tax assets 16,743 4,847 21,590 Total current assets 189,606 28, ,528 Liabilities assumed (818,884) (98,438) (917,321) Deferred tax liabilities (6,884) (98,438) (105,322) Other non-current liabilities (20,137) - (20,137) Total non-current liabilities (27,021) (98,438) (125,459) Trade payables (138,231) - (138,231) Financial indebtness (653,631) - (653,631) 9

29 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Total current liabilities (791,862) - (791,862) Purchase Price Paid 15,989-15,989 Identifiable assets and liabilities (567,730) 235,267 (332,462) Goodwill 583,719 (235,267) 348,451 The PPA process involved the following balance sheet items: a) Intangible assets The fair vaue adjustment of intangible assets of Euro million is driven by the following evaluation: Internally generated software, Trademarks and Patents: based on the market approach, and more specifically on the application of the Relief from royalty methodology, that estimates the value of the intangible assets by discounting back the stream of royalty, net of taxes, saved by the Company by owning the assets instead of leasing them. The method requires the estimate of applicable royalty rates, that are extracted from market data with reference to transaction related to similar assets; Customer relationship: based on the excess earning methodology, taking into account the operating profit, net of taxes, associated with the customer portfolio as of the transaction date. The customer portfolio is reduced yearly according to a churn rate applicable, extracted from the Company s historical figures. The excess cash flow attributed to the customer relationship is calculated by deducting the contributory asset charge, that is the theoretical remuneration of the invested capital of the Company. All the intangibles booked have a defined useful life. b) Inventory As required by business combinations accounting principles, the purchase method has been used to evaluate it at the acquisition date. According to purchase method, the inventory assumed by the acquirer is required to be measured at its fair value. Fair value at the acquisition date tiypically includes profit attributed to past production effort, i.e. in bringing the goods to their current condition. Except on grounds of materiality, it is not generally appropriated to assign the acquiree s carrying amount to the cost of acquired inventories, because such cost does not reflect the manufacturing profit that is recognised by the acquiree through the normal selling process. The manufacturing profit considered as part of the fair value assigned to the N&W inventory at the acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally reversed to Profit and Loss during the year when the goods have been sold. 10

30 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The above fair value of the finished goods and merchandise has been evaluated deducting from the selling price the costs of disposal: commissions, inventory stocking costs and distribution costs. c) Trade and other receivables The Company has booked an asset of Euro 0.7 million for an Italian tax credit arisen in connection with R&D costs. d) Deferred tax assets and liabilities The incremental depreciation of the fair value step-up for IFRS purposes will result in a pre-tax income that is lower for IFRS purposes than for tax purposes. Consequently, a deferred tax liability of Euro 98.4 million has been recognized to reflect the fact that cash taxes payable will be higher than the tax charge reported in the income statement under IFRS. e) Other assets and liabilities The remaining assets and liabilities, including items such as cash and trade payables were stated at their historical carrying values, which approximate fair value, given the short-term nature of these assets and liabilities. The excess of the purchase price over the preliminary amounts allocated to identifiable assets and liabilities is equal to Euro million and has been included in goodwill. This amount represents, amongst other things, the value of the Company s market position, brand and reputation, as well as the value of the Company s workforce. The goodwill has been provisionally allocated to Vending, Ho.re.Ca and OCS Cash Generating Units, given that these which benefit from the synergies permitted by the acquisition which generated the same (see Note 12). Effect of Purchase price allocation on the income statement The table below reflects the impact of the purchase price allocation ( PPA ) on the income statement. 11

31 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 ( thousands) Before PPA PPA After PPA Twelve Twelve Twelve months ended months ended months ended December 31, December 31, December 31, Revenue from Sales 299, ,564 Cost of sales (177,378) (177,378) Gross profit 122, ,186 Sales & Marketing (27,360) (27,360) Logistic (6,114) (6,114) Administrations (13,506) (13,506) Operating Exchange Difference Total operating costs (46,617) - (46,617) Adjusted EBITDA 75,568-75,568 Depreciation (8,708) (8,708) Amortisation (a) (2,970) (27,991) (30,961) Operating profit before exceptional items 63,890 (27,991) 35,899 Inventory revaluation (b) - (23,392) (23,392) Brazilian Operating Exchange Difference 1,953 1,953 Restructure costs (330) (330) Other expenses (10,854) (10,854) Operating profit 54,659 (51,384) 3,276 Finance Income Finance costs (41,854) (41,854) Net finance expenses (41,307) - (41,307) Profit/(Loss) before income tax 13,352 (51,384) (38,031) Income tax expense (c) (18,349) 14,588 (3,761) Profit/(Loss) for the period from continuing operations (4,997) (36,795) (41,792) (a) Adjustment reflects a charge of 28 million w hich is directly attibutable to the amortisation related to the intangible assets not previously recognized. (b) Adjustment reflects a non-cash charge of 23.4 million w hich is directly attibutable to the fair value step-up of the finished goods (c) Adjustment reflects 14.6 million reversal of deferred tax liabilities and assets recognized at acquisition date, in connection w ith the fair value step-up of inventory that has been recognized and to the new intangible assets capitalised. 12

32 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 IV. Proforma Statement of Comprehensive Income for the Twelve Month Period Ended December 31, 2016 Note Continuing operations Revenues from sales 5 299, ,325 Cost of sales 7 (240,440) (195,208) Gross Profit 59, ,117 Operating costs Sales & Marketing (27,360) (28,499) Logistics (6,114) (6,290) Administration (13,506) (12,702) Exchange losses 2,316 (2,485) Total operating costs (44,664) (49,976) Reorganization costs 8 (330) (39) Other costs 9 (10,854) (2,917) OPERATING PROFIT 3,276 54,185 Financial income Financial expense (41,854) (60,555) Net financial expense 10 (41,307) (59,590) LOSS BEFORE TAXES (38,031) (5,405) Taxes 11 (3,761) (9,368) NET LOSS (41,792) (14,773) Consolidated Statement of Comprehensive Income for the year ended NET LOSS (41,792) (14,773) Actuarial Loss on personnel provisions 12 (432) 174 Taxes (48) Total items that will not be reclassified subsequently to the Income (328) 126 Statement Hedge accounting of financial instruments 12 (757) 440 Changes in translation reserve (55) Taxes (112) (412) 273 Total items that may be reclassified subsequently to the Income Statement TOTAL COMPREHENSIVE LOSS FOR THE YEAR (42,532) (14,374) The Notes to the Financial Statements are an integral part of the same. 13

33 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 V. Proforma Statement of Financial Position as at December 31, 2016 Note ASSETS Intangible assets , ,135 Property, plant and equipment 14 38,014 41,147 Available-for-sale investments Receivable and other non-current assets 16 1,887 3,047 Deferred tax assets 11 18,461 18,304 Total non-current assets 708, ,639 Cash and cash equivalents 17 51,089 48,088 Trade receivables 18 66,056 63,405 Inventories 19 39,423 41,329 Other receivables 20 3,706 2,270 Tax receivables 11 8,384 9,392 Financial instruments (assets) Total current assets 168, ,595 TOTAL ASSETS 876, ,234 Note SHAREHOLDERS' EQUITY AND LIABILITIES Share Capital 41,138 41,138 Other Reserves 196,099 20,191 Hedging Reserve (575) (14) Translation Reserve (938) (1,101) Riserva SOP Utili / (perdite) portati a nuovo 34,293 - Loss for the period (41,792) (14,773) Total shareholders' equity ,321 45,872 Non-current financial indebtness , ,000 Non-current payables to related parties - 400,031 Provision for post-employment benefits 24 12,358 12,001 Deferred tax liabilities 11 88,016 25,025 Non current tax payables 6,466 - Other non current payables 28 14,681 - Non-current payables to leasing companies Provision for risks and charges 25 2,973 32,510 Warranty and Reorganisation provision 26 3,696 4,023 Total non-current liabilities 519, ,656 Current financial indebtness 23 16, ,018 Trade payables 27 64,953 64,181 Payables to factoring companies 23-7 Current payables to related parties 11 4,099 Current Tax payables 11 8,229 5,525 Other current payables 28 38,710 30,756 Derivative financial instruments Total current liabilities 128, ,706 TOTAL LIABILITIES 648, ,362 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 876, ,234 The Notes to the Financial Statements are an integral part of the same. 14

34 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 VI. Proforma Statement of Cash Flows for the Twelve Month Period Ended December 31, 2016 ( thousand) OPERATING ACTIVITIES Note Net loss for the period (4,997) (14,773) Net financial expense 10 41,307 59,590 Amortisation/depreciation 7 11,678 14,388 Allowance for doubtful receivables 18 2, Inventory write-down 19 (269) (444) Post-employment benefits 24 (76) 12 Cost of employee stock option plan 21 (334) - Current and deferred taxes 11 18,349 9,368 Cash flow from operating activities before 67,680 68,829 changes in net working capital Trade receivables 18 (4,673) 6,733 Inventories 19 2,176 (977) Trade payables ,621 Cash flow generated by operating activities 65,955 78,206 Tax receivables (837) Other receivables 20 (1,534) 617 Tax payables 11 (62) (4,358) Other payables ,461 3,584 Translation reserve Income tax paid (11,994) (15,593) Interest paid (37,689) (11,021) Net cash flow generated by operating activities 17,150 50,598 INVESTING ACTIVITIES FINANCING ACTIVITIES Receivables and other non-current assets 16 (349) (369) Property, plant and equipment and intangible fixed assets (13,432) (15,806) Investements 4 (14,989) - Equity ,032 - Net cash flow absorbed by investing activities 229,263 (16,175) Payables to factoring companies (7) (204) Payables to banks 23 (1,635) (318) Proceeds from borrowings ,815 - Repayment of loans 23 (278,423) (18,423) Payables to related parties (374,148) (596) Payables to leasing companies (15) 9 Net cash flow absorbed by financing activities (243,413) (19,532) NET INCREASE OF CASH AND CASH EQUIVALENTS 3,000 14,892 OPENING CASH AND CASH EQUIVALENTS 48,089 33,197 CLOSING CASH AND CASH EQUIVALENTS 51,089 48,089 (*) related items have been combined for more concise presentation. 15

35 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 VII. Proforma Statement of Changes in Equity for the Period Ended December 31, 2016 Other components of comprehensive income Share Capital Cash Flow Hedge Foreing Currency Translation Reserve Ias 19 Share based plan IFRS 2 Other Reserves Loss for the period Total Equity Balance at 1 January ,138 (342) (1,046) (749) ,772 (14,960) 60,243 Loss for the period (14,773) (14,773) Other comprehensive income for the period, net of income tax 328 (55) Total Comprehensive Income for the period (55) (14,773) (14,374) Allocation of loss of previous year (14,960) 14,960 - Balance at ,138 (14) (1,101) (623) ,812 (14,773) 45,872 Other components of comprehensive income Share Capital Cash Flow Hedge Foreing Currency Translation Reserve Ias 19 Share based plan IFRS 2 Other Reserves Loss for the period Total Equity Balance at 1 January 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 Income for the period - (575) (1,383) (328) - - (27,521) (29,808) Increases 41, , ,984 Recognition of share based payment Balance at ,138 (575) (1,383) (328) ,896 (27,521) 228,322 16

36 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 VIII. Notes to the Proforma Financial Statements Note 1. General information N&W Global Vending S.p.A. (hereinafter also the Company ) is a joint-stock company established in Italy on 27 October 2005 and directly controlled by Lone Stare Investments Fund, which acquired the N&W Group on 22 March The N&W Group, the leader in Europe in this industry, is today the largest manufacturer in the world of automatic vending machines, with the widest range of vending machines for both public and private use. Financial statements The Group s Consolidated Financial Statements include the following primary financial statements: a statement of financial position, which shows current and non-current assets, current and non-current liabilities, separately; an income statement, which shows costs using a classification based on the functionality of the same; a statement of comprehensive income, which shows the items that will not be subsequently reclassified to the income statement and the items that may be later reclassified to the income statement at later stage; a cash flow statement, which shows the cash flows generated by operating activities using the indirect method; a consolidated statement of changes in shareholders equity, prepared in accordance with the provisions of IAS 1. The Consolidated Financial Statements and all amounts in the explanatory notes are shown in thousands of Euro (the functional currency of the Company), unless otherwise indicated. Scope of consolidation The 2016 consolidated financial statements include the financial statements of N&W Global Vending S.p.A. (the parent company) and of all of the companies directly or indirectly controlled by the N&W Group. The place of incorporation and operation is the same for all subsidiaries. The reference date of the consolidated financial statements is the same as that of the financial statements of the parent company N&W Global Vending S.p.A., as well as that of the subsidiaries; the financial statements used for consolidation purposes are those at December 31, 2016, prepared by the Board of Directors and/or the Sole Directors for approval by the respective Shareholders Meetings. The 2016 consolidated financial statements include the following companies ( N&W Group ): 17

37 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 N&W Global Vending S.p.A., registered office in Valbrembo, (BG), Via Roma 24- Italy (wholly owned); N&W (Denmark) ApS registered office in Odense, Denmark (wholly owned); Wittenborg ApS registered office in Odense, Denmark (wholly owned); N&W Global Vending Ltd registered office in Bilston, Great Britain, (wholly owned) which includes Wittenborg UK Ltd registered office in Bilston, Great Britain (wholly owned); N&W Global Vending GmbH registered office in Wien, Austria (wholly owned); N&W Global Vending GmbH registered office in Rastatt, Germany (wholly owned); N&W Global Vending Sas - registered office in Le Mesnil Amelot, France (wholly owned); Fridge France Sas registered office in Le Mesnil Amelot, France (wholly owned); N&W Global Vending Spain SL registered office in Madrid, Spain (wholly owned); Necta Vending Solutions SA registered office in Buenos Aires, Argentina (wholly owned); N&W Global Vending SP.z.o.o. registered office in Warsaw, Poland (wholly owned); N&W Global Vending Ltda registered office in Sao Paulo, Brazil (wholly owned); SGL ITALIA S.r.l registered office in Turin, Italy (wholly owned); N&W Innovative Solutions S.r.l. registered office in Zoppola (PN), Italy (wholly owned); N&W Global Vending S.A. registered office in Drogenbos, Belgium (wholly owned); N&W Australia Pty Ltd registered office in North Sydney, Australia (wholly owned); N&W Global Vending Pte Ltd registered office in Singapore (wholly owned); N&W Global Vending LLC registered office in Moscow, Russia (wholly owned); N&W Global Vending Romania Srl registered office in Municipiul Cluj-Napoca, Calea Dorobantilor, Romania (wholly owned). US Partnership In July 2005, N&W Global Vending S.p.A. signed a business partnership agreement with an American partner to boost its strategic growth in the North American market through Vendors Exchange Global Solutions LLC (hereinafter also VE Global Solutions LLC), which has an exclusive arrangement to sell N&W products, with a view to developing a network of agencies that can increase N&W s presence in this market. N&W disbursed Euro 2.9 million (USD 3.5 million) by means of a loan agreement to fund initial costs. On the closing date of the financial statements, Vendors Exchange Global Solutions LLC had not repaid the loan outstanding with N&W Global Vending S.p.A. In turn, the management decided not to exercise its right to convert the loan into a shareholding as envisaged by the partnership agreement (the option expired on 2011). The Distributorship agreement is still fully 18

38 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 operational, and regulates all operational and management aspects related to sales and operations in the United States, as well as, naturally, the right relating to the repayment of the above-cited loan. In accordance with IFRS 10, no consolidation of the US partnership is required insofar as the N&W Group does not have an Equity interest and the power to direct the relevant acitvities in Vendors Exchange Global Solutions LLC. Note 2. Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to the period presented, unless otherwise stated. Note 2.1. Basis of preparation The Consolidated Financial Statements have been prepared in accordance with the International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standard Board ( IASB ) and as adopted by the European Union. The term IFRS also includes all International Accounting Standards ( IAS ) and all interpretations issued by the IFRS Interpretations Committee, previously International Financial Reporting Interpretation Committee ( IFRIC ). These consolidated financial statements are presented in Euro, which is the Group s presentation currency and the functional currency of the Company. All amounts in these consolidated financial statements are presented in thousands of Euro, unless otherwise stated. These financial statements are prepared on a going concern basis, i.e. assuming that operations will continue in the foreseeable future. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2. Note 2.2. Basis of Accounting The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair 19

39 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 Shared-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurement that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 Inventories or in value in use IAS 36 Impairment of Assets. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. Note 2.3. Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company: has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of controls listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company s voting rights in an investee are sufficient to give it power, including: the size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Company, other vote holders or other parties; 20

40 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meeting. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated income statement and consolidated statement of comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group s ownership interest in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, a gain or loss is recongnised in profit or loss and is calculated as the difference between i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amount previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary. Note 2.4. Business combinations Acquisition of business are accounted for using the acquisition method The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their fair value, except that: 21

41 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations, are measured in accordance with that Standard. The excess of the sum of consideration transferred and the net fair value of identifiable assets acquired and liabilities assumed is recognised as Goodwill. If, after reassessment, the net fair value of identifiable assets acquired and liabilities assumed exceeds the consideration transferred it is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests may be initially measured either at fair value or at the non-controlling interests proportionate share of the acquiree s identifiable net assets. The choice of measurement basis is made on q transaction by transaction basis. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted restrospectively, with corresponding adjustments against goodwill. Measured period adjustments that arise from additional information obtained during the measurement period about facts and circumstances that existed at the acquisition date. When a business combination is achieved in stages, the Group s previously held equity interest in the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interest in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if the interest were disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. 22

42 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note 2.5. Goodwill The goodwill resulting from a business combination is recognised under intangible assets at the date on which control is acquired. Goodwill is recognised at cost, less accumulated impairment losses (if any). For purposes of impairment testing, goodwill is allocated to each of the Group s cash-generating units ( CGUs ) that is expected to benefit from the synergies of the combination. A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Note 2.6. Conversion of entries in foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. The consolidated financial statements are presented in Euro, the parent company s functional currency. Transactions in the income statement made by subsidiaries located out of the Eurozone (the non Euro subsidiaries located in Denmark, Brazil, Argentina, UK, Poland, Australia, Singapore and Romania) are converted into Euro using the average exchange rate for the year on a monthly basis, since the exchange rates did not fluctuate significantly during the period; the amounts in the statement of financial position are converted at the exchange rate in force at 31 December. The exchange differences resulting from the conversion of the investments in the non Euro subsidiaries are recognised under Translation reserve under shareholders equity. Note 2.7. Internally-Generated Research & Development Assets Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: 23

43 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 the technical feasibility of completing the intangible asset so that it is available for use or to sale; the intention to complete the intangible asset to use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Development costs that have previously been recognised in the income statement cannot be recognised as intangible assets in the following period. The amount initially recognised as an internally-generated intangible asset do not exceed the amount that is expected to be recovered from the probable future economic benefits, after having deducted the further development costs incurred directly to promote the product. Investments in development recognised as intangible assets are amortised and are recognised as expense on a systematic basis, so that they reflect the manner in which the future economic benefits of the asset are expected to be used by the Group. Development costs are amortised over a five year period, an average term considered to be representative of the useful life of the benefits related to new products developed; the useful life is periodically reviewed. Note 2.8. Software The costs associated with software development are usually expensed at the time they are incurred. However, costs that are clearly associated to an identifiable and unique product, which will be under the control of the Group and will provide future benefits, are recognised as intangible assets where the requirements of IAS 38 have been met. The relative costs also include the costs of the personnel who have contributed to developing the asset. All of the expenses that increase and extend the performance of the software beyond its original specifications and its assumed duration are recognised as intangible assets and increase the original cost. The costs relating to the maintenance or updating of existing software programmes are expensed at the time they are incurred. Note 2.9. Trademarks, Customer List and Patents Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). 24

44 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Trademarks, with a finite useful life, are amortised on a straight-line basis according to their useful life estimated to be 15 years. The customer list, with a finit useful life, is reduced yearly according to a churn rate applicable, extracted from the Company s historical data estimated to be approximately 6 years. Patents, with a finite useful life, are amortised on a straight-line basis according to their useful life estimated to be 10 years. Note Property, plant and equipment Property, plant and equipment are recognised at cost including ancillary charges, net of accumulated depreciation and accumulated impairment losses. Depreciation is recognised to facilitate the write-off of the cost of the assets less their residual values over their useful lives, on a straight-line basis. The useful lives are estimated as follows: Property and plant Equipment years 3-10 years The investments, which at year-end were not completed, are classified as Construction in progress and are not depreciated. The costs incurred for improvements to third party assets where capitalised are shown in the financial statements under the category of assets to which they refer and are depreciated over the shorter of the useful life and the lease term. Expenses relating to refurbishments and improvements, which have led to a tangible increase in production capacity or have extended useful life, are capitalised while ordinary maintenance and repairs are expensed. If the book value of an asset is higher than the estimated recoverable amount, its value is reduced to the lower amount. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 25

45 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note Impairment of intangible and tangible fixed assets other than goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets (other than goodwill) to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested at least annually, and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value less selling costs and value in use. In order to calculate the fair value net of selling costs, specific valuation models are available; these calculations are made using appropriate income multipliers, publically traded share prices relating to similar companies or other available fair value indicators that are relevant to the assets to be valued. When calculating the value in use, the assets are valued at the expected cash generating unit level (CGU) based on how they are allocated. In assessing value in use, the estimated future posttax cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Where the recoverable amount of an asset of a CGU is lower than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. If, subsequently, an impairment loss relating to the asset (that is not goodwill) reverses, the carrying amount is increased to the revised recoverable value, but not exceeding the carrying amount that the asset would have been recognised as if no impairment loss had been recognised in prior years. Note Financial instruments A financial instrument is represented by a contract that gives rise to financial asset for a company and a financial liability or an equity instrument for another company. Financial assets and liabilities are initially measured at their fair value; the relative transaction costs directly related to the acquisition or the issue are included in the initial measurement of all financial assets/liabilities, other than for financial assets and liabilities carried at fair value through profit or loss. Financial assets A financial asset is any asset that represents: - cash and cash equivalents; - a contractual right to receive cash or another financial asset from another party; 26

46 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at a contractual right to exchange financial instruments with another party at potentially favourable conditions; - an instrument representing the shareholders equity of another company; - a contract, including derivative, which is or may be settled with instruments representing a company s capital. Impairment of financial assets Financial assets, unlike those classified in the fair value category in the income statement (FVTPL), are impairment tested at each reporting date. The recoverability of the value of financial assets are verified for each individual instrument or collectively for groups of similar instruments at the end of each reporting period. Derecognition of financial assets The company eliminates a financial asset from the financial statements when it transfers the contractual right to receive cash flows from the asset in question or when said right expires. When a financial asset is transferred, the extent to which the risks and benefits related to the ownership of the financial asset are transferred must be assessed. More specifically: if the company substantially transfers all of the risks and benefits related to the ownership of the financial asset, it eliminates the asset transferred and separately recognises any rights or obligations created or maintained as a consequence of said transfer; if the company substantially maintains all of the risks and benefits related to the ownership of the financial asset, it continues to recognise the asset. Financial liabilities and shareholders equity A financial liability is any liability that represents a contractual obligation to: give cash or another financial asset to another company; exchange financial instruments with another party at potentially unfavourable conditions; a contract, including derivative, which is or may be settled with instruments representing a company s capital. An instrument representing capital, an equity instrument, is a contract that represents a residual equity investment in the assets of a company net of its liabilities; for example, this regards shares, quotas or rights to purchase or subscribe for shares or quotas of a company. Other financial liabilities Other financial liabilities, including loans, are measured at amortised cost, using the effective interest rate method. 27

47 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Derivative financial instruments The company uses foreign currency and IRS derivative financial instruments to hedge the risks resulting from fluctuations of exchange rates and interest rates. Derivative financial instruments are recognised at their fair value at initially and are subsequently measured at their fari value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss unless the derivative is designated and effective as a hedging instrument. Hedge accounting On the date a derivative contract is entered into, the Group Treasury designates the derivative as either a (1) a hedge of the fair value of a recognised asset or liability (fair value hedge), or (2) a hedge of a recognised asset or liability and of a forecasted transaction (cash flow hedge). Certain derivative transactions while providing effective economic hedges under the Group s risk management policies, do not qualify for hedging accounting. Derivatives instruments are not entered into for trading or speculative purposes. Changes in the fair value of a derivative that is highly effective, and that is designated and qualify as a fair value hedge, are recorded in the Income Statement along with the change in the fair value of the hedged asset or liability that is attributable to the hedged risk. Changes in the fair value of a derivative that is highly effective, and that is designated and qualified as a cash flow hedge, are recognised directly in equity (hedging reserve). Amounts deferred in equity are included in the Income Statement in the same periods during which the hedged items expected cash flows or forecasted transaction affects the Income Statement. The Group Treasury formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific assets and liabilities or to specific firm commitments or forecasted transactions. The Group also formally assesses, both at the hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Note Inventories Inventories of raw materials and finished products are stated at the lower of purchase or production cost, and net realisable value. Costs of inventories are determined on the weighted average cost basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to sell. The purchase cost is inclusive of the costs incurred for transporting the goods to the warehousing location. The production cost of the finished and semi-finished products includes the directly 28

48 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 attributable costs and a portion of the indirect costs (excluding finance expense) reasonably attributable to the products based on the normal production capacity. Work in progress, is measured at production cost for the year, taking into account the stage of completion. Obsolete and slow-moving inventories are written down to the net realisable value, by means of the establishment of a specific provision to adjust the value of the inventories. Note Trade receivables Receivables from customers are initially recognised at fair value and subsequently are recorded at amortised cost, using the effective interest rate method, net of the losses for uncollectable receivables. The amount of the write-down of the receivables is based on the analysis of all the receivables outstanding at the end of the period. Note Payables to suppliers and other liabilities Payables to suppliers along with the other liabilities, with the exception of financial liabilities, are recognised at their expected settlement amount. Note Provisions for risks and charges IAS 37 Provision, Contingent Liabilities and Contingent Assets requires recognition of a provision when: - the Group has a present obligation (legal or constructive) as a consequence of past events; - it is probable that an outflow of resources will be required for fulfilling the obligation; - it is possible to reliably estimate the amount of the obligation. Provisions are recognised at the value that represents the best estimate of the amount to be paid to discharge the obligation at the period end date, after having taken into consideration all the risks associated with the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When a part or all of the expenses necessary for fulfilling the obligation are reimbursed by third parties, a receivable is recognised as an asset provided that it is virtually certain that the reimbursement will be received and that the amount of the receivable can be determined reliably. Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products. A provision for reorganisation costs is recognised only if the Group has approved a formal detailed plan for the reorganisation and has raised a valid expectation in those affected that it will carry out the reorganisation by starting to implement the plan or announcing its main features to those affected by it. The measurement of a reorganisation provision includes only the direct expenditures 29

49 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 arising from the restructuring, which are those amounts that are both necessarily entailed by the reorganisation and not associated with the ongoing activities of the Group. Note Contingent liabilities A contingent liability is: - a possible obligation which derives from past events and whose existence will be confirmed only on occurrence of one or more uncertain future events not totally under the control of the company; or - an obligation underway which derives from past events but which is not recognised because: i) it is not probable that the use of resources suitable for producing economic benefits to meet the obligation will be necessary; or ii) the amount of the obligation cannot be determined with sufficient reliability. Contingent liabilities are not subject to recognition, however if the event is possible but not probable or if it is probable but cannot be quantified, suitable disclosure is provided in the notes to the financial statements. Note Employment benefits Retirement benefit costs and termination benefits Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuation being carried out at the end of each annual reporting period. Interest is calculated by applying the discount rate at the beginning of the period to the defined benefit liability. Remeasurement, comprising actuarial gains and losses is recognised in other comprehensive income and will not be subsequently to the income statement. Defined benefit costs are categorised as follows: - service cost; - net interest; - remeasurement. Employee leaving indemnity (TFR) TFR, accrued by the employees of the Italian Group companies at 2006 (applicable date of the welfare reform), is classified as a defined-benefit schemes. The benefit that employees have earned in return for services prior to 2016 is determined using an actuarial technique, the projected unit credit method so as to make a reliable estimate of the amount to be paid at the time of termination of the employment relationship. The projected unit credit method 30

50 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 requires the Group to make estimates (actuarial assumptions) about demographic variables and financial variables that will affect the cost of the benefits. The benefit is discounted in order to determine the present value of the defined benefit obligation using interest rates of high-quality corporate bonds. Further to the afore-mentioned welfare reform, TFR which accrues from 1 January 2007 is classified as a defined-contribution plan, consequently payments for benefits earned by the employees after this date are recognised as an expense as the Group has no further payment obligations once the contributions have been paid. Contributions are recognised as liability to the extent that they are not paid to the supplementary pension funds or to the Istituto Nazionale della Previdenza Sociale treasury fund. Short-term employee benefits A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Note Income taxes Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated income statement because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Current and deferred tax assets and liabilities are offset when the income taxes are applied by the same tax authority and where there is a legally recognised right to offset the amounts recorded. 31

51 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The deferred tax assets and liabilities are defined based on the tax rates which are expected to be applied in the year in which these assets are realised or these liabilities are discharged considering the rates in force or those already issued or essentially issued at the reporting date. Note Revenue recognition Revenues is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sale of goods Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all following conditions are satisfied: the transfer of the risks and benefits associated with the ownership of the goods takes place; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of the revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Dividends and interest Dividend income from investments is recognised when the shareholder s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. Note Cost of sales Cost of sales includes production cost of products sold. It includes the costs of raw materials, and direct and indirect production costs. The latter includes the depreciation of property, plant and equipment and amortisation of intangible assets relating to the production and write-down of the inventories. The cost of sales also includes the transport cost relating to the deliveries and the allowances made to the product warranty provisions. 32

52 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note Profit Partecipation Loan ( PPL ) The Profit Partecipation Loan partecipated by Group employees are recognised at the market value which estimate is based on Monte Carlo valuation method. The Company recognises the changes in the market value in the income statement 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. Note 3. Critical accounting estimates and judgements In the application of the Group s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of asset and liabilities that are not readily apparent from other sources. The use of reasonable estimates therefore represents an essential element in the preparation of the financial statements and does not affect the degree of reliability. Estimates and assumptions are based on the opinion of management supported by experience deriving from similar transactions and external evidence where available. They are based on the latest information available and which is reliable, and include any additional evidence provided by events that took place after the reporting date. Actual results may differ from estimates. Since the actual results may differ from the afore-mentioned estimates, any changes in the underlying circumstances or additional information could make a review of said estimates necessary. The effect of the change in estimates has repercussions on the income statement: - in the period in which the change took place, if the change only effects this period; - in the period in which the change took place and in subsequent ones, if the change effects several periods. Determination of fair values in business combinations The Company has applied estimates and judgements in order to determine the fair value of assets acquired and liabilities assumed by way of a business combination. The value of assets, liabilities and contingent liabilities recognized at the acquisition date are recognized at fair value. In determining the fair value, the Company has utilized valuation methodologies including discounted cash flow analysis. The Company s estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management s assumptions, which would not reflect unanticipated events and circumstances that may occur. Any significant change in key assumptions may cause the acquisition accounting to be revised including the recognition of additional goodwill or a discount on acquisition. Estimate of the Goodwill The amount of goodwill initially recognized as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a 33

53 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 considerable extent, on management s judgment. Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortized, whereas indefinite lived intangible assets, including goodwill, are not amortized and could result in differing amortization charges based on the allocation to indefinite lived and finite lived intangible assets. Impairment testing IFRS requires management to undertake an annual test for impairment of indefinite lived assets and, for finite lived assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment testing is an area involving management judgment, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management s expectations of: growth in EBITDA, calculated as adjusted operating profit before depreciation and amortization; timing and quantum of future capital expenditure; long-term growth rates; and the selection of discount rates to reflect the risks involved. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Company s impairment evaluation and hence results. The goodwill has been provisionally allocated to Vending, Ho.Re.Ca and OCS Cash Generating Units, given that these divisions are expected to benefit most from the sinergies of the Acquisition. Any adjustment to such provisional values will be recognized within twelve months of the Acquisition Date. Income taxes The Group is subject to income taxation in various jurisdictions. In order to determine the tax liability on a global scale, a significant degree of estimation is required. Numerous transactions and calculations must be made to be able to reach a final determination of the taxes, which however remains uncertain during the ordinary course of the economic activities. The Group recognises payables for taxes based on the estimates of tax to be paid. In the event of a tax inspection, if the amount to be paid is different from that estimated, these differences will affect the income taxes and the provisions for deferred taxes during the period in which these calculations are made. 34

54 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note 4. Business Combination The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS 3 Business Combinations. As a result, the total purchase price has been allocated to the identifiable assets and liabilities acquired, based on the estimated fair values at the date of acquisition. Purchase consideration Cash paid 14,989 Consideration in escrow account 1,000 Total purchase consideration 15,989 The purchase price paid in cash was equal to 16 million, as compared to a negative net asset value of N&W Group of million at Completion Date. Consequently, the preliminary goodwill before purchase price allocation - was equal to million. Assets acquired and liabilities recognised at the date of acquisition The assets and liabilities recognised as a result of the acquisition are as follows: ( thousands) Net assets at Completion Date after PPA Assets acquired 584,859 Property, plant & equipment 39,055 Intangible assets 324,156 Software 1,171 Internally generated software 18,066 Trademarks 122,111 Patents 73,505 Customer Relationship 109,302 Other non-current assets 3,119 Total non-current assets 366,330 Inventories 65,493 Trade and other receivables 83,807 Cash and cash equivalents 47,639 Deferred tax assets 21,590 Total current assets 218,529 Liabilities assumed (917,321) Deferred income tax liabilities (105,322) Other non-current liabilities (20,137) Total non-current liabilities (125,459) Trade payables (138,231) Financial indebtness (653,631) Total current liabilities (791,862) Identifiable assets and liabilities (332,462) 35

55 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Purchase price allocation process has identified the following assets: - Internally generated software, Trademarks and Patents - Customer relationship - Inventory (adjustment to fair value) - Tax credit For a complete description, please see paragraph III. Impact of Purchase Price Allocation. Purchase consideration 15,989 Less: fair value of identifiable net assets acquired (332,462) Goodwill arising acquisition 348,451 Acquisition-related costs Acquisition-related costs of Euro 24,602 million refer to: Euro 10,141 of Financing and Arrangement Fees on Bond and Revolving Facility (see note 23), Euro 8,000 of Committment and Funding Fees included in Financial expenses (see note 10) and Euro 6,461 as consultancies costs mainly for vendor and buyer due diligences (legal, tax, accounting, commercial due diligence) related to Nighthawk Project connected with the sale of the Group (see note 9). Tax settlement Purchase price Adjustment Following the receipt of tax assessment notices and claims for penalties relating to the tax period 2010 concerning certain allegations regarding the failure to apply or to pay tax withholdings on interests paid on the financing granted on 2008 to N&W Group by N&W Holdings S.à r.l. (former shareholder of N&W Group) and for the alleged illegitimate use of previous losses by N&W Group (the 2010 Claims ), the latter filed on January 2016 with the competent offices a tax settlement proposal (istanza di accertamento con adesione). In relation to the tax settlement proposal, N&W Group initiated a tax settlement procedure (procedura di accertamento con adesione) with the tax authority to reach a settlement in relation to litigations concerning the alleged illegitimate use of previous losses by N&W Group in the tax periods from 2005 to 2009, the alleged illegitimate deductibility of interests expenses in the tax periods from 2005 to 2007 and other minor issues (the Pending Claims ). Following several verbal discussions and meetings with the Italian Tax Authority in relation, inter alia, to the 2010 Claims and to the Pending Claims, N&W Group executed on 26 May 2016 with the competent authorities an agreement concerning the settlement of the 2010 Claims, the Pending Claims and possible claims related to tax periods from 2011 to 2013 regarding the failure to apply and to pay tax withholdings on interests in relation to the financing granted on 2008 to N&W Group by N&W Holdings S.à r.l.. The agreement provides that N&W Group shall pay an amount equal to approx. Euro 36 million and forego a claim from the tax authorities equal to approx. Euro 3.7 million arising from amounts already paid by N&W Group in relation to pending claims with reference to the tax period 2006, which are not due anymore. The payment to be made by N&W Global Vending S.p.A. on the basis of installments plans (n

56 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 installments) agreed with the tax authority is covered by a guarantee provided to LSF9 Canto Investments S.p.A. by (i) Lone Star Fund IX for a maximum amount equal to Euro 30 million subject to certain terms and conditions; and (ii) by an indemnity from N&W Holdings S.à r.l. for an amount equal to approx. Euro 6.5 million, as defined in the Share Purchase Agreement ( SPA ) of 3 December 2015 between N&W Holdings S.à r.l. and LSF9 Canto Investments SpA. Revenue and profit contribution As stated in note 5, the revenue and profit from continuing operations for the period are completely attributable to the acquisition of N&W Group. Had these business combinations been effected at 1 January 2016, the revenue from sales and operating profit of the Group at 2016 would have been Euro million and Euro 3.3 million respectively. The loss for the period from continuing operations would have been Euro 40.7 million. Net cash flow on acquisition of subsidiaries Cash paid 14,989 Less: cash and cash equivalent balance acquired (47,639) Net purchase consideration (32,650) Note 5. Revenue The breakdown of sales by product line is as follows: Proforma Predecessor Hot and Cold (H&C) 131, ,028 Hotel, Restaurant and Cafeteria (Horeca) 22,181 19,655 Liquid 17,146 17,063 Snack and Food (S&F) 49,729 53,951 Can and Bottle 2,953 2,592 Office Coffee Service (OCS) 10,402 12,835 Accessories 14,287 14,280 Spare parts 50,989 48,921 Total Revenues from sales 299, ,325 Around 17% of revenues are generated by invoicing in currencies other than the Euro. There have been no sales made to related parties during 2016 or Note 6. Segment information The Executive committee is the Group s chief operating decision-maker ( CODM ). Management has determined the operating segment based on the information reviewed by the Executive committee for the purposes of allocating resources and assessing performance. 37

57 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The CODM considers the Group as a single segment. The Group produces machinery of different size but the industrial process, risks and supply chain are the same for all types of machinery. In addition, the information reviewed by the CODM only shows revenue by different products. In consideration of structure of reporting, the process of allocating resources and activity of Group the CODM has identified one segment (i.e. N&W Group). The following table presents revenue information on a geographic basis: Proforma Predecessor Italy 95,205 95,809 France 41,240 41,316 Spain 22,621 22,709 UK 11,208 14,806 Germany 14,361 13,364 Nordic countries 20,576 16,680 Rest of Europe 41,325 49,920 Eastern Europe 14,000 12,154 Rest of World 39,028 35,567 Total Revenues from sales 299, , revenues from sales have been caracterised by the very good performance of small-medium customers more than offset by downturn of major key accounts. Western European countries (composed by Italy, France, Spain, UK, Germany and Nordic countries) registered an overall performance slightly better than 2015 mainly thanks to the good results in Nordic countries and Germany only partially offset by the downturn in UK due to the underperformance of some big customers. Also in Rest of Europe the shortfall of revenues is attributable to the downturn of a couple of big players. Very good performances in Eastern Europe and in other emerging markets thanks to Czech Republic, Romania, Baltics and Poland together with Asia&Pacific, North America and Africa respectively. Included in revenues arising from 2016 of Euro million (2015: Euro million) are revenues of approximately Euro 31.2 million (Euro 66.7 million in 2015) which arose from sales to the N&W Group s largest customers. No other single customer contributed 10% or more to the Group s revenue during 2016 or A reconciliation of Adjusted EBITDA to loss for the period is provided as follow: 38

58 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Proforma Predecessor Loss for the period (41,792) (14,773) Income taxes 3,761 9,368 EBT (38,031) (5,405) Net Financial Expense 41,307 59,590 EBIT 3,276 54,185 * Depreciation 8,708 7,305 * Amortisation 30,961 7,083 Reorganisation and other costs 11,184 2,956 Exchange Difference on BRL (1,953) 2,570 Inventory revaluation reversal as per PPA 23,392 - Adjusted EBITDA 75,568 74,099 * Depreciation and amortisation are included in Cost of Sales of consolidated accounts amortization is impacted by Purchase Price Allocation (Euro 27,991). Note 7. Cost of Sales The cost of sales indicated in the income statement is made up as follows: Proforma Predecessor 1 January January Cost of sales (177,378) (180,820) Amortisation and depreciation of intangible and tangible (39,669) (14,388) fixed assets Reversal of Inventory Revaluation (see below) (23,392) - Total Cost of sales (240,440) (195,208) During the year, the amortisation and depreciation relating to intangible assets and tangible fixed assets was respectively expensed in Cost of Sales Cost of Sales has been heavily impacted by the amortization of the Intangibles arisen by the Purchase Price Allocation (Euro 27,991) together with the reversal of the inventory revaluation occurred on acquisition date. The manufacturing profit considered as part of the fair value assigned to the N&W inventory at the acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally reversed to Profit and Loss during the year when the goods have been sold. The above fair value of the finished goods and merchandise has been evaluated deducting from the selling price the costs of disposal: commissions, inventory stocking costs and distribution costs. 39

59 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note 8. Reorganisation costs The income statement for 2016 includes Euro 330 (39 Euro in 2015 ) as lay off costs relating to the reduction of the employees in N&W Group companies. Note 9. Other costs The amount of Euro 10,854 (Euro 2,917 in 2015) indicated in the item Other costs in the 2016 income statement includes: Euro 6,461 as costs related to Nighthawk Project connected with the sale of the Group, Euro 1,606 as costs for the accomplishment of specific projects of a nonrecurrent nature, Euro 787 as charges accrued for CIGO ( Cassa Integrazione Guadagni Ordinaria, a Social Security contract) by Italian legal entities for the application of short time working procedure, Euro 360 as costs for occasional advisory services, Euro 1,508 as costs relating to the write-down of the financial receivable outstanding with VE Global Solutions LLC and Euro 96 as costs related to the Profit Partecipation Loan of some managers (see Note 21). The remaining Euro 36 are other minor various costs. Note 10. Net financial expense Proforma Predecessor Financial income Financial expenses (41,854) (60,555) NET FINANCIAL EXPENSE (41,307) (59,590) The financial income recorded in the income statement is analysed in the table presented below: Proforma Predecessor Bank interests Interests on VE Global Solutions LLC Loan Interests from Related Parties TOTAL

60 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The financial expenses recorded in the income statement is analysed in the table presented below: Proforma Predecessor Interest on Senior Loan (2,267) (10,614) Non cash interest - Senior Loan Financing Fees (2,148) (4,157) Cash interest Related parties - (1,437) Non cash interest Related parties (9,080) (42,553) Bank commission (commitment, agency and admin) (140) (372) Bank charges and other (1,414) (1,545) Exchange gains/(losses) Bridge Loan Interests (15,154) - Bridge Commitment and Funding fees (8,000) Revolving Facility interests and commitment fees (581) - Revolving Facility non cash interests financing fees (115) - Senior Secured Notes interests (4,433) - Second Lien Note interests (2,217) - Senior&Second Lien Notes financing fees amortisation (279) - WHT reversal on tax audit 3,696 - TOTAL (41,854) (60,555) 2016 proforma financial costs mainly include: i) interests on the Senior Loan related to the indebtness of N&W Group prior the acquisition as well as ii) interests due to the previous Company s shareholder on the outstanding Loan both existinguished at the acquisition date; iii) interests on the Bridge Facility of Euro 400 million drawn on 22 nd March to finance the acquisition and repaid on 15 th October at the time of Bond issuance; iv) Euro 8,000 of commitment and Funding fees paid in order to obtain the Bridge Facility; v) interests on the Secured and Second Lien Notes from 15 th October till 31 st December 2016; vi) interests and commitment fees on the Revolving Facility drawn down at the acquisition date for Euro 10,815 on a total of Euro 40,000 available. Note 11. Taxes Taxes receivables Proforma Predecessor Income tax receivables 2,552 5,385 VAT receivables 3,822 3,213 Other tax receivables 2, ,384 9,392 41

61 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Income tax receivables mainly refer to net advances of IRES and IRAP (regional business tax) effected by Italian legal entities to Italian tax authority and by the Danish subsidiary. VAT receivables represent all the VAT credits in the various countries of the companies belonging to the Group. Other tax receivables mainly include advances made by the Brazilian company for some local taxes as well as tax credit for IRES reimbursement related to IRAP deduction on employees costs as per Italian D.L. 201/2011 (Euro 632) and Italian tax credit for investment in capital equipment and property as per D.L. 91/2014 (Euro 102). Taxes payables (current and non current) Proforma Predecessor Income taxes payables 2,782 2,283 VAT payables 2,132 2,022 Other tax payables - 1,220 Italian tax audit - short term portion 2,874 - Italian tax audit - long term portion 6,466-14,695 5,525 Income tax payables are essentially made up of income taxes owed by the Danish subsidiary. VAT payables represent all the VAT debts in the various countries of the companies belonging to the Group. Euro 9,340 refer to the oustanding amount related to tax losses settled on May 26, 2016 (see Note 4). On the basis of installments plan agreed, Euro 2,874 will be due by the Company to the Italian Tax Authority by 2017 and Euro 6,466 on a quarterly basis by The reconciliation between the 27.5% rate in force in the country of the Italian parent company and the effective tax liability of the group is presented below: 42

62 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Proforma 2016 Predecessor 2015 Loss before taxes (38,031) (5,405) Tax calculated at the rate of the parent company (27.5%) 10,459 1,486 Effect of different tax rate regimes 5,288 (457) Italian Tax audit (12,383) IRAP (regional business tax) (1,103) (1,216) N&W Global Vending S.p.A. non-deductible interest (6,625) (10,830) Parent Notional Interest Deduction (ACE) 2,856 Permanent differences (1,165) 1,154 Other (1,088) 495 Taxes in the income statement (3,761) (9,368) The above reconciliation is determined by applying the tax rate of the parent company. The IRAP is not considered in the reconciliation since it presents a different taxable base with respect to the income taxes. The income taxes are made up as per the table presented below: Proforma Predecessor Current income taxes (16,853) (5,964) Deferred income taxes 13,092 (3,404) (3,761) (9,368) The deferred tax assets are analysed in the table presented below: Proforma Predecessor Inventory obsolescence allowance 794 1,281 Technical assistance provision (warranty provision) Other provisions 1,228 1,716 Provision for doubtful receivables 1,674 1,879 Provision for other risks Long-term investments Intangible and tangible fixed assets 12,675 11,420 Prior losses recognised Market value of IRS derivatives/forward contracts TOTAL 18,461 18,304 The deferred tax liabilities are analysed in the table presented below: 43

63 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Proforma Predecessor PPA impact (82,303) - Development costs - (1,323) Amortisation of goodwill (4,023) (20,200) Amortisation/depreciation (875) (874) Inventory - (63) Currency purchase/sale derivatives (fair value) - (30) Fair value tangible fixed assets - (1,897) Exchange gains (703) (467) Other (112) (171) TOTAL (88,016) (25,025) After all the appropriate offsettings in the statement of financial position, the following amounts are indicated: Proforma Predecessor Deferred tax assets 18,461 18,304 Deferred tax liabilities (88,016) (25,025) (69,555) (6,721) The deferred tax assets exposed above have been recognised based on probable results that will be available at the moment when temporary differences will reverse. The deferred tax assets recognised on prior tax losses present the following maturities: Proforma Predecessor Maturity date Indefinite life Some group companies have not recorded deferred tax assets on the prior losses given the uncertainty of the recovery by means of offsetting with the tax profits that it is envisaged will be generated over the mid-term. The fiscal impact of the prior losses not recognised at 2016 amounts to Euro 583 and has an indefinite life (Euro 1,046 in 2015). Note 12. Comprehensive income components The comprehensive income components include changes in translation reserve on currency transactions for Euro 162, hedge accounting of financial instruments for Euro (757) and Euro (432) for the actuarial loss on personnel provision according to IAS

64 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Historical cost Note 13. Intangible assets Goodwill Internally generated Research & Development Assets Trademarks Other intangible assets Total Historical cost 1 January ,094 62,440 73,303 18, ,805 Increases - 7, ,211 Exchange rate impact 20 (38) - 8 (10) Disposals - (2) - (25) (27) ,114 69,702 73,303 19, ,979 Accumulated amortisation and impairment 1 January ,554 46,482 72,219 17, ,806 Amortisation for the year - 4,963 1,084 1,036 7,083 Exchange rate impact - (28) - (5) (33) Disposals (12) (12) ,554 51,417 73,303 18, ,844 Net book value ,560 18,285-1, ,135 Goodwill Internally generated Research & Development Assets Trademarks Customer list Patents Internally generated software Other intangible assets 1 January ,114 69,702 73, , ,979 PPA (351,663) (69,702) 48, ,302 73,505 18,066 - (171,684) Increases - 6, ,092 7,828 Exchange rate impact (53) (34) 86 Disposals (22) (22) ,398 6, , ,302 73,505 18,066 20, ,187 Total Accumulated amortisation and impairment 1 January ,554 51,417 73, , ,844 PPA (44,554) (51,417) (73,303) (169,275) Amortisation for the year - 2,033 6,106 13,663 5,513 2, ,964 Exchange rate impact - 55 (29) 26 Disposals - (22) (22) ,088 6,106 13,663 5,513 2,710 19,457 49,537 Net book value ,398 4, ,005 95,640 67,992 15,356 1, ,650 45

65 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Goodwill As described in paragraph III. Impact of Purchase Price Allocation the Goodwill arising form the 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. 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 goodwill impairment test is performed at the level of a cash-generating unit which benefit from the synergies permitted by the Acquisition which generated the same. The goodwill has been provisionally allocated to the following Cash Generating Units: Vending, Ho.Re.Ca and OCS, given that these three divisions are expected to benefit most from the sinergies of the Acquisition. Acquisition date 2016 VENDING 280, ,644 HORECA 60,150 60,141 OCS 7,614 7,613 Goodwill 348, ,398 Net Assets Allocated goodwill Net assets after allocation of Goodwill VENDING 171, , ,132 HORECA 59,996 60, ,137 OCS 5,612 7,613 13,225 TOTAL 237, , ,493 Any adjustment to such provisional values will be recognized within twelve months of the Acquisition Date. Starting from next year, when the goodwill is definitely allocated to the above mentioned CGUs, the Group will perform impairment at least annually, or more frequently whenever there will be an indication that the Goodwill might be impaired. 46

66 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Internally generated Research and Development assets Also during 2016 N&W made great efforts in innovation and development of new products and technology solutions with research and development activity continuing to be intense. Some projects were completed during the year bringing new models of machines on the market. Regarding Vending line of business, major investments referred to i) a new version of S&F Necta branded machine providing also fresh products and suitable for semi public locations; ii) two projects for touch screen machines whose launch on the market is expected during 2017 for H&C segment; iii) the development of a new module that will be joined to Canto touch machine for dispensing glasses lids still for H&C segment. On Ho.Re.Ca side the restyling of two models with the aim of renewing their aesthetic is the starting base for a process of harmonization of the design of all models in the range. On SGL brand side most of the Research and Development costs were dedicated to Fancy, a new compact machine suitable for many kind of capsules and to the new Trophy, a machine with Keurig capsules properly set up for the US market. Note 14. Property, plant and equipment Property and plant Equipment Construction in progress Advance payments Total Historical cost 1 January , , ,886 Increases 753 6, ,666 Exchange rate impact 158 (137) Disposals (69) (1,131) (30) - (1,230) Reclassifications (336) , , ,343 Accumulated depreciation 1 January , , ,021 Depreciation for the year 795 6, ,305 Exchange rate impact 96 (125) - - (29) Disposals (17) (1,084) - - (1,101) Reclassifications 119 (119) , , ,196 Net book value ,837 18, ,147 47

67 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Property and plant Equipment Construction in progress Advance payments Total Historical cost 1 January , , ,343 Increases 525 4, ,300 Exchange rate impact (358) (31) - - (389) Disposals (332) (1,389) - - (1,721) Reclassifications (536) (105) , , ,533 Accumulated depreciation 1 January , , ,196 Depreciation for the year 1,764 6, ,708 Exchange rate impact (212) (47) - - (259) Disposals (14) (1,111) - - (1,125) Reclassifications 163 (163) , , ,520 Net book value ,209 16, ,014 Investments made during 2016 are related to the purchase of equipment for the production of new automatic vending models branded Necta and Wittenborg located in Mozzo, Valbrembo and Mapello production sites. They mainly include moulds for the construction of the new machines launched during the year. Other investiments concerned plant work stations ergonomics aiming at improving safety at workplace and other projects to reduce product costs and improve efficiency. Note 15. Avilable-for-sale investments Successor Predecessor Other investments 6 6 Euro 6 refers to the participation in the R&D consortium Kilometro Rosso which supports the Group in research activities. Note 16. Receivables and other non-current assets Euro 1,887 (Euro 3,047 in 2015) mainly refers to the US Loan Note for Euro 1,408 granted to Vendors Exchange Global Solutions LLC and guarantee deposits for Euro 327 (Euro 266 in 2015). 48

68 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note 17. Cash and cash equivalents Cash and cash equivalents are as follows: Successor Predecessor Cash and cash equivalents 51,089 48,088 The above funds, represented by cash at banks and on hand at the period end date, are not subject to any type of restriction except for Euro 1,000 deriving from N&W Holding S.à r.l. and placed in an escrow account not to be utilized according to the Agreement set at the Acquisition date. Note 18. Trade receivables Successor Predecessor Trade receivables 74,531 69,573 Less: Allowance for doubtful receivables (8,475) (6,168) Net trade receivables, short-term 66,056 63,405 The average collection period from customers is around 79 days (76 days in 2015). The concentration of the credit risk is limited thanks to the high number of customers of the Group who are located in various nations and with varied end markets. Based on the Group s past experience with regard to management of trade receivables, it is deemed that the amount recorded in the financial statements corresponds to the real recoverable value of the receivables obtained by means of the provision of a specific allowance for doubtful receivables. The changes in the allowance for doubtful receivables during 2016 and 2015 follow: Opening balance 6,168 5,531 Exchange rate impact 285 (52) Increases 2,437 1,645 Decreases (415) (956) Closing balance 8,475 6,168 The fair value of the trade receivables corresponds to the value of the trade receivables net of the allowance for doubtful receivables. Please see Note 31 Financial risk management for further details. 49

69 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note 19. Inventories Successor Predecessor Raw Materials and Work in progress 10,213 12,284 Less: obsolescence provision (617) (670) Raw Materials and Work in progress, net 9,596 11,614 Finished products 33,323 33,412 Less: finished products obsolescence allowance (3,496) (3,697) Finished products, net 29,827 29,715 Closing inventories, net 39,423 41,329 The performance of the inventories reflects the constant monitoring activities on the level of the stock together with the action for containing the warehousing costs. The obsolescence provision has been calculated on slow-moving inventories Exchange difference Increases Decreases 2016 Raw materials and (131) 617 Work in progress Finished products 3, (526) 3,496 Total 4, (657) 4,113 Note 20. Other receivables Successor Predecessor Prepaid insurance premium 1, Prepaid maintenance and service contract fees Prepaid rent Advances to suppliers Cigo-Solidarietà receivables Credit notes to be received Short-term deposits Other receivables and prepaid expenses Amounts charged to customers ,706 2,270 Prepaid insurance premium refers to Company's Warranty and Indemnity Insurance Policy entered by LSF9 Canto Investment S.p.A. on 3 December Cigo-Solidarietà receivables refer to the credit that N&W Global Vending S.p.A. and SGL Italia S.r.l. have with the Social Security Body for Solidarity and CIGO Contract. 50

70 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Note 21. Shareholders Equity Share capital The issued and authorised share capital comprises 41,138,297 issued shares with a par value of Euro 1 each. All shares are issued, authorised and fully-paid at 2016 (and 2015). Profit Partecipation Loan Following the Acquisition, on 22 nd March 2016 executive and senior employees of the Company decided to participate to the investement by acquiring Profit Participation Loans (PPLs) for an amount of Euro 1,665. Such PPLs foresee a remuneration linked to an IRR (Internal Rate of Return) of at least 10% realized by Lone Star Fund IX in respect of its initial investments in the N&W Group and economic and financial performance. The fair value of the PPLs has been estimated at Euro 615 based on Monte Carlo valuation method. The Company recognised an amount of Euro 96 through the consolidated income statement for the period 22 nd March till 31 st December 2016 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. Other reserves The Other reserves under shareholders equity include: - Euro 4,212 as Share Premium; - Euro 1,500 as Revaluation Reserves; - Euro 224,600 as statutory and other reserves. Cash flow hedging reserve The cash flow hedging reserve represents the cumulative effective portion of gains and losses arising on changes in fair value of forward foreign exchange hedging instruments entered into. The underlying table indicates the changes relating to the hedging reserve: Successor 2016 Hedge accounting reserve Predecessor 2015 Hedge accounting reserve Opening balance - (342) Business combination profits and losses on hedged cash flows transiting the income statement (211) profits and losses on cash flow hedging instruments (757) (10) - tax effect on profits and losses on cash flow 182 (4) 51

71 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 hedging instruments Closing balance (575) (14) The profits and losses recorded under shareholders equity at the Acquisition date have been released to the income statement in the line Financial expense during Translation reserve Exchange differences relating to the translation of the results and net assets of the Group s foreign operations from their functional currencies to the Group s presentation currency are recognised directly in other comprehensive income and accumulated in the translation reserve. Note 22. Financial instruments Market value of the derivatives The table below shows the market value of the derivatives of the Group: Successor Predecessor Currency hedging agreements (575) (14) As specified previously, the portion of profit or loss on the hedging instruments which is considered to be effective is recognised directly under shareholders equity while the ineffective portion of the profits and losses must be directly recognised in the income statement; the amounts classified under shareholders equity are released to the income statement in the period in which the envisaged cash flows are realised. Note 23. Financial Indebtness Successor Predecessor Non current portion 391, ,000 Senior Secured Notes 300ml 300,000 - Second Lien Notes 100ml 100,000 - Capitalised financing fees (8,287) - Senior Term Loan C - 130,000 Current portion 16, ,025 Senior Secured Notes interests 4,433 - Second Lien Notes interests 2,217 - Revolving Credit Facility capital 10,815 - Revolving Credit Facility interests and commitment 18 - fees Capitalised financing fees (1,460) - Bank overdraft 2 - Payables to factoring companies - 7 Other bank loans

72 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Senior Term Loan A and B - 147,551 Total Financial Indebtness 407, ,025 The financial indebtness of N&W Group at December 31, 2016 consists of the Senior Secured and Second Lien notes (issued in October 2016, see below) together with the Revolving Credit Facility drawn at the time of the Acquisition (see below). The current portion of the financial indebtnebss relates to: i) accrued interest payable of Senior and Second Lien notes at the next interest payment dates and the portion of the capitalized financing fee that will be amortized into profit or loss over the next 12 months; ii) the reimbursement of Euro 10,815 of the Revolving Credit Facility to be done on 22 nd March 2017 with the related interests. N&W Group will keep the commitment to drew amounts in the future when needed. Revolving Credit Facility On 18 th January 2016 the Company entered into a Super Senior Revolving Agreement for total facility commitments of Euro 40,000. The termination date of this facility is 22 March The amounts drawn under the revolving credit facility may be used to finance the general corporate and working capital needs of the Group including capital expenditure, any permitted acquisitions, investment or distribution, operational restructurings or permitted reorganizations. Subject to the terms of this Agreement the Lenders under the Initial Facility make available a multicurrency revolving credit facility which is equal to the total facility commitments. Under the revolving credit facility, a lender may make available an ancillary facility, such as an overdraft facility, a guarantee, a short-term facility, a foreign exchange facility, a credit card facility, a derivative facility, an automated payments facility, any other facility or accommodation required in connection with the business agreed by the Company with an Ancillary Lender. As of December 31, 2016 the amount of the revolving facility drawn down is equal to Euro 10,815; the accrued interests are settled on a quarterly basis, in this case the maturity date for the payment of the related accrued interests is 22 March 2017 as well as the fully reimbursment of the credit facility. The rate applied for the calculation of the accrued interests is given by Euribor (if positive) plus a margin of 3.5% per annum. Senior and Second Lien Notes On 14 th October 2016, the Company issued: - a Senior Secured Notes for Euro 300 million carrying a fixed interest rate of 7% per annum and due on 15 th October 2023; - and a Second Lien Notes for Euro 100 million amount carrying a fixed interest rate of 10.5% per annum and due on 15 th April

73 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The Interests on the Notes are payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, Costs related to the issuance of the Notes are capitalized and amortized into profit or loss over the term of the debt in accordance with the effective interest method. Total costs capitalized amounted to Euro 9.2 million, of which Euro 8.9 million remain capitalized as of December 31, With the issuance of the Notes N&W extinguished the Bridge Facility of Euro 400 million drawn down at the time of the acquisition. LSF9 Canto Midco DAC (the Parent ) and N&W Global Vending S.p.A. (the Company ) provided security and guarantees in support of the Notes. Name of Security Provider Parent Company Company Company Company Company Company Company Company Company Company Company Company Company Company Company Transaction Security Document Security over shares in the Company Assignment of all its rights and interests in and related to the Acquisition Agreement Assignment of all its rights and interests in and related to the Tax Settlement Equity Contribution Letter Assignment of all its rights and interests in and related to the Existing Intercompany Debt Assignment of all rights and interests in and related to an intercompany loan agreement dated 14 November 2008 between the Company as lender and N&W Global Vending Spain S.L.U. as borrower Assignment of receivables, including insurance receivables Special privilege (privilegio speciale) Security over bank accounts Special privilege (privilegio speciale) Security over Necta trademarks Security over shares in Sgl Italia S.r.l. Security over shares in Fridge France SAS Security over shares in N&W Global Vending Limited Security over shares in N&W Global Vending GmbH Security over shares in N&W Global Vending S.L.U. Security over shares in N&W Denmark ApS The following subsidiaries of N&W Global Vending S.p.A. provided security and guarantees in support of the notes: N&W Global Vending Limited; SGL Italia S.r.l.; N&W Denmark ApS and Wittenborg ApS; and Fridge France SAS. 54

74 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Obligor Governing Details of Security law SGL Italia S.r.l. Italian Assignment of receivables, including insurance receivables N&W Global English Fixed and floating charge over several receivables and assets Vending Limited SGL Italia S.r.l. Italian Security over Intellectual Property, if any Wittenborg ApS English Security over English and European Intellectual Property Wittenborg ApS Danish Security over Danish Intellectual Property Wittenborg ApS Danish Security over bank accounts Wittenborg ApS Danish Security over receivables, including insurance and intercompany receivables N&W Denmark ApS Danish Security over shares in Wittenborg ApS Fridge France SAS French Security over shares in N&W Global Vending SAS SGL Italia S.r.l. Italian Security over bank accounts The collateral also secures the Revolving Credit Facility on an equal and ratable basis. Under the terms of the Intercreditor Agreement, in the event of enforcement of the security over the collateral, holders of the Senior Secured Notes will receive proceeds from the enforcement of the collateral only after indebtedness in respect of the Revolving Credit Facility and certain hedging obligations have been repaid in full. Any such proceeds will, after all obligations under the Revolving Credit Facility and such hedging obligations have been repaid from such recoveries, be applied pro rata in repayment of all obligations under the Indenture and any other obligations that are permitted to be secured over the Collateral under the Indenture on an equal and ratable basis. Note 24. Provision for post employment benefits Successor Predecessor Employee leaving indemnity 9,938 9,669 Italian Agents provision (ISC) 2,087 2,007 Other (Germany and Austria) ,358 12,001 The item Employee leaving indemnity relates to the Italian companies and is recorded in compliance with the actuarial techniques envisaged by IAS 19 Employee Benefits. These actuarial simulations were made in accordance with the method of the benefits accrued using the projected unit credit method envisaged, establishing: - the cost relating to the service already provided by the workers (Past Service Liability); - the cost relating to the service provided by the workers during the year (Service Cost); - the cost relating to the interest expense deriving from the actuarial liability (Interest Cost); - the actuarial profit/loss relating to the valuation period considered (Actuarial (gain)/loss). 55

75 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The main actuarial hypotheses used for the valuation are as follows: Annual discount rate 1.31% 2.03% Annual leaving indemnity increase rate 2.63% 2.81% Annual inflation rate 1.50% 1.75% The changes in the provision for employee leaving indemnity are illustrated below: Opening balance 9,669 9,864 Additional provision (recognised in profit or loss) Used during the year (395) (367) Closing balance 9,938 9,669 Note 25. Provision for risks and charges The risk provisions comprise contingent liabilities relating to staff, suppliers, and customers with regard to various problems. The change in the main risk provisions is analysed in the following table: Customer Financial WEEE Others Total bonuses guarantees 1 January , ,444 22,478 28,358 Provisions ,063 6,677 Uses/Releases (1,354) (74) (1,016) (81) (2,525) ,568 28,460 32,510 Customer Financial WEEE Others Total bonuses guarantees 1 January ,568 28,460 32,510 Provisions Reclassification (44) Uses/Releases (492) (279) (1,032) (28,251) (30,054) , ,973 The Customer bonuses provision mainly refers to the acknowledgement to key customers of discounts which have a certain degree of uncertainty with regard to their future manifestation since they are linked to the achievement of sales volumes in subsequent year. The Financial Guarantees provision covers the risks which may arise from the guarantees given to third parties further to leasing or factoring agreements entered into by these companies with the N&W end customer. It reflects the amount of the risk deriving from the granting of a corporate guarantee in favour of UBI Factor S.p.A. and UBI Leasing S.p.A. for leasing and loan agreements entered into by the latter in previous years with third party customers on goods we produce when the company is liable jointly and severally with the end customer. 56

76 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The WEEE provision (Waste Electrical and Electronic Equipment) refers to the EU Directive 2002/96/EC and 2003/108/EC. The purpose of this directive is to reduce the amount of scrap machinery sent for disposal to landfill, scrapping or incineration, by requiring manufacturers to arrange for collection and recycling and therefore encouraging them to design and produce machines that facilitate repair, re-use, disassembly and recycling. In this way, the same manufacturers are provided with an incentive to design and produce machinery which is easy to repair, re-usables, strippable and recyclable. At the end of the year, the amount of the provision was adjusted on the basis of the estimated useful life of the machine fleet in circulation which could reasonably be subject to disposal in future years. The adjustment also takes into account the extension of the period of use of the vending machines due to their overhaul, a practice which has been observed over the last few years. For the purpose of calculating the discounting back of the provision in question, was considered the period of standard useful life for the type of individual model. The Others provision contained an amount of Euro 28 million related to tax assessment notice and claims settled during 2016, according to which they have been consequently reclassified among tax and other payables (see note 11 and 28). During 2016 Euro 242 were accrued in SGL Italia S.r.l. to cover the potential liability arising from a tax audit carried out during 2016 by the tax authority, covering 2011 and 2012 fiscal years as well as Euro 178 were accrued for litigious cases and other minor provisions. Note 26. Warranty and reorganisation provisions Warranty Reorganisation Total Provision Provision 1 January , ,818 Provisions 1,168-1,168 Exchange rate impact (12) - (12) Utilised (1,951) - (1,951) , ,023 Warranty Reorganisation Total Provision Provision 1 January , ,023 Provisions 1,567-1,567 Exchange rate impact (15) - (15) Utilised (1,879) - (1,879) , ,696 Warranty Provision As far as Warranty Provision concerns, at 2016 N&W Group reviewed this provision and adjusted it in order to reflect the current best estimate, taking into account risks and uncertainties, particularly in respect to the new products launched during the year on the market. The provision will cover the estimated costs of future technical assistance actions on products sold. 57

77 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The hypothesised measures mainly relate to potential defects of an epidemic nature which require recalls with replacement of parts and technical measures. Also in consideration of the impacts arising in the past relating to the various problems, the amount set aside is deemed sufficient to cover the risk that will probably manifest between 2017 and Reorganisation Provision Euro 317 refer to the claim still pending with Incentive A/S, the previous owner of Wittenborg Group. Note 27.Trade payables Successor Predecessor Payables to suppliers 64,953 64,181 The average payment period of the suppliers is around 132 days (around 128 days in 2015); no interest on payables to suppliers is owed. The group handles the liquidity to allow that all the payables to be paid on their due date. The entire total of the payables to suppliers refers to trade payables. Note 28. Other payables Successor Predecessor Payables to tax authority 19,761 - Payables to employees and agents 19,468 18,435 Customers rebates 9,751 10,052 Transaction costs 2,277 1,361 Payable to N&W Holding S.à r.l. 1,000 - Accrued expenses Consulting Other TOTAL 53,391 30,756 On May 26 th, 2016, a Tax Settlement has been reached by the Company with the Italian Tax Authority relating to tax assessments regarding withholding taxes, tax losses, interest deduction and other minor tax issues for fiscal years from 2005 to 2013 (see note 4). Euro 19,761 refer to the amount of withholding taxes assessed with tax authorities. On the basis of installments plan agreed, Euro 6,080 will be due by the Company to the Italian Tax Authority by 2017 and Euro 13,681 on a quarterly basis by

78 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Euro 1,000 refer to the residual portion of the purchase price to be paid to N&W Holding S.à r.l., the previous owner of N&W Group, to be due within 48 months from the Acquisition date and now placed in a bank escrow account (see note 17). Note 29. Derivative financial instruments (liabilities) Successor Predecessor Currency hedging contract The liabilities deriving from derivative instruments comprise the market value of the forward contracts in GBP and USD entered into to hedge future currency transactions (see Note 22 Financial instruments ). The following table presents the Group s financial assets and liabilities that are measured at fair value at 2016: At 2016 Level 1 Level 2 Level 3 Total Assets Available-for-sale investments Total Assets Liabilities Foreign currency forward contracts Total Liabilities At 2015 Level 1 Level 2 Level 3 Total Assets Available-for-sale investments Foreign currency forward contracts Total Assets Liabilities Foreign currency forward contracts Total Liabilities Note 30. Commitments for leasing agreements The future payments for leasing commitments which cannot be cancelled are as follows: Successor Predecessor Within 12 months 4,131 4,226 Between 1 and 5 years 8,081 9,303 Beyond 5 years 448 1,052 59

79 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 These commitments mainly refer to the leasing of offices, warehouses, office equipment and vehicles. Note 31. Financial risk management Risks associated with the general condition of the economy The economic, equity and financial situation may be influenced by various factors which make up the macro-economic scenario - including increases and decreases in gross domestic product, the level of consumer and business confidence, changes in interest rates for consumer credit and for businesses, energy costs, the cost of commodities and other raw materials - in the various countries in which the Group operates. The difficulties of the financial markets or the continuation of the economic recession may negatively influence the industrial growth of many businesses, including those of the Group. In Europe, despite the measures adopted by many Governments, national and international organisations and by the monetary authorities, for the purpose of providing financial support to the member nations of the European Community in economic difficulties and dealing with the possibility of default of the sovereign debts of certain European countries, doubts remain with regard to the weight of the debts of some countries in the Eurozone and their ability to meet the future financial commitments, the overall stability of the Euro and the sustainability of the Euro as a single currency (or, in more extreme circumstances, the possibility of termination of said Euro), in the presence of diverse economic and political contexts among the member countries of the Eurozone. These potential developments could have a negative impact on the business and the activities of the Group. Even if the Group considers the suppression of the Euro and break-up of the European Monetary Union to be a highly improbable scenario, and even if the diversified product portfolio and the international presence mitigate the dependence on a single market and the exposure to unstable economic and political conditions in a country or in a region, in any event its business is sensitive to changes in the economic conditions. Therefore, the current global financial and credit crisis, as well as the failure of the financial bailout methods, both European and international, could have a negative impact on the business prospects, the economic results and the financial situation of the Group. Partly thanks to its peculiar shareholding structure, the Group has implemented a well-tested mechanism for monitoring both the financial risks and those of another type, aimed at preventing potential negative effects on the company equity and the implementation of the measures necessary to contain the same. An accurate analysis of the individual types of risk will be presented below, with regard to quality and quantity. 60

80 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Categories of financial instruments Financial assets Successor 2016 Predecessor 2015 Derivative instruments designated as hedging (Hedge Accounting) Forward currency contracts - 80 Loans and receivables (including cash and cash equivalents) Cash and cash equivalents 50,089 48,088 Receivables from customers, net 66,056 63,405 Other receivables and current assets 3,836 2,270 Receivables and other non-current assets 1,887 3,047 Available-for-sale investments 6 6 Financial liabilities Derivative instruments designated as hedging (Hedge Accounting) Forward currency contracts Loans and payables Trade payables 64,953 64,181 Payables to factoring companies - 7 Payables to leasing companies Financial liabilities at amortised cost Bank payables - 278,018 Senior Secured and Second Lien Notes 391,125 - Revolving credit facility 9,943 - Financial guarantees The underlying table summarises the net gains and losses which arise from the afore-mentioned financial instruments. 61

81 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Successor 2016 Predecessor 2015 Net gains and losses generated by: Loan to US VE Global Solutions LLC Trade receivables (2,437) (1,645) Objectives of the financial risk management The group cash management unit provides specific support services to the business, co-ordinates the activities for accessing the capital market and the financial instrument market both at local and international level, directly checks and handles the financial risks relating to all the transactions set up by the Group companies. These risks include: a) credit risk; b) liquidity risk; c) market risk (including the risks linked to the exchange rates, currency and price fluctuations). The Company tries to minimise the effects of these risks by resorting to derivative financial instruments. The use of these instruments is governed by the cash management policies approved by the directors and officers which propose the basic principles on how to more fully handle the risks deriving from the exchange rate effect, the interest rates, the use of the derivative instruments and the aims for the investment of the surplus liquidity. Compliance with said policies is regularly checked and the company does not enter into contracts for financial instruments with speculative purposes. a) Credit risk The credit risk is understood to be the risk that a third party debtor is unable to meet their obligation with a consequent financial loss for the Group. The credit risk with regard to the receivables from customers can consider itself to be of a limited extent thanks to the high number of Group customers, which are spread throughout the world, cover the production and vending market and manage a variety of end markets. Based on the past experience of the Group in the management of the credit, management believes that no further credit risk needs to be reflected in the financial statements. With regard to the balance of receivables from customers at year-end, Euro 4,911 is owed by VEGS, Euro 4,065 is owed by Selecta Group, Euro 3,733 by Pelican Rouge Group and Euro 2,345 by Smucker, the leading Group customers. Other customers which individually represent more than 3% of the total balance of trade receivables do not exist. 62

82 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 The market value of the trade receivables is close to the net nominal value of the same. The breakdown of the customer payment schedule is as follows: 2016 Falling due Past due over 360 Italy 18, EU 23,993 4, Outside EU 11,359 3, , TOTAL 54,190 8,233 1,277 1, The receivables in the above table are net of the bad debt provision. The same table referring to the balances at 2015 is presented below for a useful comparison: 2015 Falling due Past due over 360 Italy 20, EU 25,341 3, Outside EU 8,015 3, TOTAL 53,812 7,212 1, The changes in the allowance for doubtful receivables were as follows: Allowance for doubtful receivables 1 January 2016 Exchange difference Provision Utilisation , ,437 (415) 8,476 Allowance for doubtful receivables b) Liquidity risk 1 January 2015 Exchange difference Provision Utilisation ,531 (52) 1,645 (956) 6,168 The Group has put together a suitable management of the liquidity risk which involves the handling of the liquidity and the short, medium and long-term loans. The handling of the liquidity takes place by means of maintaining suitable reserves, credit facilities and loans, by means of the monitoring of the current and forecast cash flows and by means of correspondence between the maturities of the financial assets and liabilities. Our cash pooling system enables us to benefit from surplus fund of certain subsidiaries to cover the financial 63

83 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 requirements of other subsidiaries: we invest surplus cash in interest-bearing current accounts and short-term cash deposits, selecting instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. At 2016, the Group had short-term credit facilities available for a total of around Euro 560 and a Revolving facility available for a total commitment of Euro 40,000 and drawn down for an amount of Euro 10,815. The table below shows the contractual maturities for each non-derivative financial liability. The table has been drawn up based on the undiscounted cash flows of the financial liabilities as from the first reimbursement date. The table includes both the cash flows relating to the debt and those relating to the interest as of the various due dates Jan-June 2017 July-Dec Beyond Total Senior Secured Notes , ,000 Second Lien Notes , ,000 Cash interests on Notes (excluding security fee/ agency fee/ commitment fee) 15,838 15,750 31,500 31,500 31,500 31,500 57, ,338 Revolving Facility 10, ,815 Cash interests on Revolving Facility Bank overdraft CASH FLOW 26,750 15,750 31,500 31,500 31,500 31, , ,250 The amount of cash flows in the following years is represented by the payment of interests for the Secured and Second Lien Notes; only 2016 cash out is impacted by the reimbursement of Credit Revolving Facility of Euro 10,815. Based on the current indebtness level and on the expected cash flows, the Group will not not have problems in meeting its financial obligations. With regard to Trade payables, the average exposure period on the purchases is 132 days (128 days in 2015); no interest on payables to suppliers is owed. The Group handles the liquidity to allow that all the payables to be paid on expiry. 64

84 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 c) Market risk The activities carried out mainly expose the Group to the financial risks associated with the exchange rate and the interest rate. The Group avails itself of a series of derivative financial instruments to handle its exposure to the interest rate risk and the exchange risk, including: - forward currency contracts hedging the exchange risk deriving from the sales and the purchases hypothesised at the time of the budget. The exposures to the market risk are supported by sensitivity analysis. The different levels of valuation method have been defined as follows: - Level 1: are valuations derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; - Level 2: are valuations derived from 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 3: are valuations derived from inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). On October 18 th, 2016, Moody's Investors Service (Moody's) assigned a definitive B2 rating to the Senior Secured Notes issued by N&W Global Vending S.p.A.. On October 3 rd, 2016, Standard & Poor's Ratings Services assigned its B rating to the Senior Secured Notes issued by N&W Global Vending S.p.A.. d) Exchange rate risk The N&W Group is exposed to the exchange rate risk deriving from the various foreign currency exposures. Around 17% of the sales of the N&W Group is generated by invoicing in currencies other than the Euro. The Group Cash Management Unit has the aim of hedging around 80% of the short and long-term exposures in currency using forward contracts or other derivative instruments. During 2016, the Group Cash Management Unit hedged: - around 47% of exposures (sales) in 2017 in British pounds - around 30% of exposures (sales) in 2017 in US dollars. At Group level, the foreign currency agreements are handled, when designated for hedging, as hedges of the future currency transactions, which represent the global long or short exposure in a specific currency. At the year-end date, the most significant net amounts in currency, known as monetary assets and liabilities, were as follows: 65

85 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at Liabilities Assets Liabilities Assets GBP (562) 3,001 (5,909) 2,965 USD (2,723) 15,450 (3,069) 11,654 AUD DKK (98) - (195) - EUR (8,828) 6,124 (38,797) 16,862 RON (472) We also take into consideration the Euro, since it is a foreign currency for our branches in Denmark. Sensitivity Analysis on the net exposure in foreign currency The Group is mainly exposed to the exchange rate risk on the following currencies: GBP, USD, DKK, AUD, RON and EURO. The sensitivity analysis discloses the income statement impact in the event of an increase or decrease of 10% in the exchange rate of the local currency with respect to the foreign currencies. The 10% change is that used for the purposes of the internal analysis of the rate risk and represents management s valuation of the reasonable and possible change in the exchange rates. The sensitivity analysis is carried out on the foreign currency balances net of any hedges Receivables Payables P&L Shift + 10% P&L Shift - 10% P&L Shift + 10% P&L Shift - 10% GBP (45) USD (869) 1, (219) DKK (8) EUR - - (196) 196 AUD (53) RON - - (38) Receivables Payables P&L Shift + 10% P&L Shift - 10% P&L Shift + 10% P&L Shift - 10% GBP (476) USD (654) (25) DKK (16) EUR - - (1,590)

86 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 AUD (47) RON (57) Forward currency contracts The Group designates certain hedging instruments which include derivatives, embedded derivatives in respect of foreign currency risk as either fair value hedges, cash flow hedges or hedges of net investments in foreign operations. Hedges of foreign exchange risk commitments are accounted for as cash flow hedges. At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore at the inception of the hedge and on ongoing basis, the Group documents whether the hedging instrument is hightly effective in offsetting changes in cash flows of the hedged item attributable to the hedged risk. In particular the Group has entered into forward currency contracts to hedge itself against the exchange rate risk deriving from future transactions in GBP and USD (which are designated as cash flow hedges). The following table analyses the forward currency contracts outstanding at the reporting date: Currency hedges 2016 Average exchange rate Foreign currency Euro equivalent value Fair value (Euro) USD (sales) ,880 3,661 (190) GBP (sales) ,000 5,539 (283) Currency hedges 2015 Average exchange rate Foreign currency Euro equivalent value Fair value (Euro) USD (purchases) ,000 2, USD (sales) ,300 4,846 (120) GBP (sales) ,000 4,052 4 With regard to the forward currency transactions, it should be noted that all the contracts mature during It should also be disclosed that the purchases and sales take place during the 2016 financial year; in this year, the amounts included in other comprehensive income will be released to the income statement. The fair value is determined using external forward curve observable on the market. 67

87 N&W Global Vending S.p.A. Proforma Consolidated Financial Statements at 2016 Sensitivity analysis on forward currency contracts Forward currency contracts are measured with reference to the forward exchange rates listed on official markets and return curves implicit in the listed interest rates corresponding to the maturities of the contracts. The sensitivity analysis discloses the impact on the hedging provision in the event of an increase or decrease of 10% in the rate: the positive number shown below indicates an increase in equity when the local currency appreciates 10% with respect to the reference currency. In the event of a weakening of 10% in the local currency against the reference currency, an opposite impact would be detected with regard to shareholders equity and the balance shown below would be negative Impact on hedging reserve 10% increase 10% decrease 10% increase 10% decrease GBP (sales) 384 (469) 267 (326) USD (purchases) - - (181) 222 USD (sales) 260 (317) 330 (404) Interest rate risk Following the Acquisition and the repayment of the Senior credit facility, the amounts that the Group borrows under the Revolving Credit Facility, are subject to variable interest rates, while the main indebtness we have, that is Senior Secured Notes, carry interest at a fixed rate. We therefore do not expect to use interest rate swaps in respect of our financing going forward. Sensitivity analysis on the floating-rate payables No sensitivity analysis has been carried out since at the year-end date, there were no IRS contracts outstanding for the hedging of the rate fluctuation risk. A hypothetical fluctuation of the rates at that date therefore would have had an impact on the income statement for an amount directly proportionate to said fluctuation. The Group s exposures to the interest rates on financial instruments and financial liabilities are detailed in the section dealing with Liquidity risk in these notes. The effective interest rates for 2016 on Revolving credit facility and on Senior Secured Notes and Second Lien Notes are as follows: Effective interest rate Revolving Credit Facility % Senior Secured Notes and Second Lien Notes % 68

88

89 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016

90 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Index Presentation of Financial Data... 3 I. Audit report 5 II. Management Report 7 III. Consolidated statement of comprehensive income for the period ended December 31, IV. Consolidated statement of financial positionas at December 31, V. Consolidated statement of cash flows for the period ended December 31, VI. Consolidated statement of changes in equity for the period ended December 31, VII. Notes to the consolidated financial statements 20 Note 1. General information Note 2. Accounting policies Note 3. Critical accounting estimates and judgements Note 4. Business combination Note 5. Revenue Note 6. Segment information Note 7. Cost of Sales Note 8. Reorganisation costs Note 9. Other costs Note 10. Net financial expense Note 11. Taxes Note 12. Comprehensive income components Note 13. Intangible assets Note 14. Property, plant and equipment Note 15. Available-for-sale investments Note 16. Receivables and other non-current assets

91 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 17. Cash and cash equivalents Note 18. Trade receivables Note 19. Inventories Note 20. Other receivables Note 21. Shareholders Equity Note 22. Financial instruments Note 23. Financial Indebtness Note 24. Provision for post employment benefits Note 25. Provision for risks and charges Note 26. Warranty and reorganisation provisions Note 27. Trade payables Note 28. Other payables Note 29. Derivative financial instruments (liabilities) Note 30. Commitments for leasing agreements Note 31. Financial risk management Note 32. Fees paid to the Group s auditors Note 33. Subsequent event

92 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Presentation of Financial Data LSF9 Canto Investments S.p.A. ( LSF9 Canto ), now merged into N&W Global Vending S.p.A.,was incorporated on 25 th November 2015 by the private equity fund Lone Star Fund IX. On 3 rd December 2015 LSF9 Canto entered into an agreement with N&W Holding S.à rl, owned by Investcorp and Equistone Partner funds, to buy 100% of the corporate capital of N&W Global Vending S.p.A.( the Company ). The Acquisition was finalized on 22 nd March 2016 and was funded through the issue of ordinary equity shares of Euro 256 million indirectly by Lone Star Fund IX and by the drawdown of Senior Secured Bridge (Euro 400 million) and Revolving Facilities (Euro 10.8 million) by LSF9 Canto. On October 5 th, 2016 LSF9 Canto Investments S.p.A. has been extinguished by merging into the wholly owned N&W Global Vending S.p.A. (reverse merger). On October 14 th, 2016 the Company has issued Euro 300 million of Senior Secured Notes and Euro 100 million of Second Lien Notes both due in 2023; through this issuance the Company has fully reimbursed the Bridge Facility of Euro 400 million. N&W Global Vending S.p.A. and its subsidiaries (together with the Company, the Group ) is the leading European and largest manufacturer worldwide of vending machines on a sales volume basis and 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 and Romania. The Acquisition 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 Acquisition and December 31, The consolidated financial statements have been prepared in accordance with IAS 27 and IFRS 10 and therefore present the financial performance of the legal group owned and controlled by the Company as from the Acquisition Date, as well as the stand-alone results of the Company and LSF9 Canto Investments S.p.A. from incorporation until Acquisition Date. The Consolidated Financial Statements have been audited by Deloitte & Touche S.p.A.. Important Notice In this report, the terms Group, we, us and our refer to the Company and its subsidiaries. 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 3

93 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 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. 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, EBITDA Margin, 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. 4

94 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 I. Audit report 5

95 N&W Global Vending S.p.A. Consolidated Financial Statements at

96 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 II. Management Report Introduction The consolidated financial statements for the year ending 2016 have been prepared according to IAS/IFRS accounting standards. They refer to the period from the date of acquisition of the N&W group by the new shareholder LSF9 Canto Midco DAC, 22 nd March 2016, to 31 st December 2016; consequently, the tables and statements below do not give comparative information for the previous year. LSF9 Canto Investments S.p.A ( LSF9 Canto ), now merged into N&W Global Vending SpA, was established on 25 th November by the private equity fund Lone Star Fund IX. On 3 rd December 2015 LSF9 Canto stipulated a contract with N&W Holding S.à r.l, owned by the investment funds Investcorp and Equistone Partner, to purchase 100% of the share capital of N&W Global Vending S.p.A ( the Company ). The acquisition was finalised on 22 nd March 2016 and was financed through the issue of ordinary shares for Euro 256 million and by the subscription of a loan called Senior Secured Bridge (Euro 400 million) and of a Revolving loan (Euro 10.8 million) directly by LSF9 Canto. On 5 th October 2016, LSF9 Canto Investments S.p.A was incorporated into its 100% owned subsidiary N&W Global Vending S.p.A. (reverse merger). On 14 th October 2016, the Company issued a Senior Secured Notes Bond for Euro 300 million a further Second Lien Notes Bond for Euro 100 million, both due in 2023; through the issue of these Bonds the Company entirely repaid the Senior Secured Bridge loan for Euro 400 million. The amounts in this document are presented in thousands of Euro ( thousand), unless otherwise indicated. Rounding adjustments have been made in calculating some of the financial information included in these consolidated financial statements, as a result of which schedules may not add. These consolidated financial statements were approved on 27 th March 2017 by the company's Board of Directors. Position of the company and operating performance The N&W Group (hereinafter also the Group ) produces and sells automatic vending machines for hot and cold drinks in cups, cans, bottles and other food and beverage products. With its production sites located throughout Italy and a recent start-up in Romania, the Group designs, develops, produces, assembles and distributes automatic vending machines branded Necta, Wittenborg and SGL and offers a wide range of products and services covering all aspects of the distribution of food and beverages. 7

97 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Storage and distribution activities rely on logistics platforms, which ensure that shipments are optimised, costs are contained and the level of service provided to its customers is continuously improved. Group s sales and distribution organisation is able to provide customers with a complete and rapid assistance, which regards both strictly technical and maintenance aspects and financial ones related to the purchase of the machines. The Group operates successfully in almost all international markets, the most important of which are France, Spain, Switzerland, Germany, Holland, Great Britain, Scandinavia, Belgium, Poland, Argentina, Brazil, Mexico, Oceania, Russia, Japan, USA and South America, and works either directly with its customers, or through a network of dealers and sales branches located in Italy, Denmark, Great Britain, France, Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina, Australia, Singapore and Russia. In addition to covering its historic markets, the Group has continued to develop less mature markets, especially in North America, Asia and Australia, where it is achieving significant results in terms of revenue growth and margins. The N&W Group's turnover in the reference period (22 nd March - 31 st December) was around Euro 220 million and the margin showed good growth thanks to a favourable client/market/product mix and the consolidation of the measures to recover efficiency and contain production costs and overheads. During 2016, total Capex amounted at around Euro 11 million, below budget expectations; a large part of the investments concerned costs relating to the development of new products and technological solutions with a view to the continuing improvement of the existing product range and the creation of new machines and innovative technical solutions. Analysis of results and of the main economic and financial indicators The following pages contain several summary tables of economic and financial figures, some of which have been reclassified in order to facilitate the understanding of the main events in terms of the Group s operations and development. Following the group's acquisition occurred on 22 nd March 2016, as mentioned in the previous paragraphs, the tables and statements below do not give comparative information for the previous year. (Euro thousand) 2016 Revenues from sales 220,154 Cost of sales (154,297) Gross Profit 65,858 Marketing (20,053) Logistics (4,613) 8

98 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Administration (8,418) Exchange differences 2,261 Total operating costs (30,823) Gross operating margin (EBITDA) 35,035 Amortisation/Depreciation/Writedowns (34,844) Net operating margin 191 Other costs (6,574) Financial income and expense (31,430) Reorganisation costs (301) Profit (loss) before taxes (38,114) Income taxes 10,593 Net profit (loss) (27,521) Self-financing (Net profit/loss + amortisation, depreciation, writedowns 7,322 and provisions) Average no. of employees 1,355 Revenue per capita 221 For a breakdown of revenues between the main geographic areas and by product line, please refer to Notes 5 and 6 of the financial statements. The net operating margin is affected by the negative impact of Euro 23 million deriving from the revaluation of inventories of finished products (cost of sales) and of Euro 28 million of higher amortisation for the asset items revalued in the context of the Purchase Price Allocation, of which full details are provided in Note 4.1 of the Explanatory Notes. The amount recorded in Other Costs is linked to the change of control costs of the N&W Group and to one-off expenses incurred in 2016, while the lower restructuring costs include those incurred by the various companies of the Group as part of a rationalisation process of its internal structure. Income taxes for 2016 reflect the positive impact of revaluations in the above mentioned context of Purchase Price Allocation. As regards the patrimonial situation, the balance sheet is shown below, and has been reclassified on the basis of financial criteria (slightly different to the standard statement) with a view to better highlight the breakdown of assets and liabilities. 9

99 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 ( thousand) 2016 ASSETS Cash and cash equivalent 51,089 Trade receivables 66,056 Other current receivables 12,090 Inventory, net 39,423 Total current assets 168,658 Tangible net assets 38,014 Intangible net assets 649,650 Financial net assets 20,354 Total non-current assets 708,018 TOTAL ASSETS 876,676 EQUITY AND LIABILITIES Current financial indebtness 16,025 Trade payables 64,953 Other current payables 47,423 Total current liabilities 128,401 Total non-current liabilities 519,954 Third-parties Fundings 648,355 Equity 228,321 Total fundings 876,676 As described above, as a result of the N&W Group change of control the new shareholders made new capital contributions to the company and reduced the overall debt; therefore the structure of the Liabilities recorded a notable reinforcement of equity in relation to containment of medium/longterm liabilities to third parties. For details of the entire transaction please refer to paragraph 1. With a view to integrating the information provided through the reclassified income statement and statement of financial position, the paragraphs below provide additional information in order to gain a better understanding of the company s situation, the trend in operating results and the financial structure. The profitability indicators show the company s ability to invest its capital in a satisfactory way and therefore provide a very brief overview of the company s ability to fund the capital it has employed and to cover the debt capital utilised. The Group s structure, which clearly shows a rather high level of debt due to its shareholding structure, does not enable comparisons with manufacturing companies in the same business. The comments relating to these ratios must therefore be considered in this view. 10

100 N&W Global Vending S.p.A. Consolidated Financial Statements at Definition ROI 0.04% Net Operating Margin / Net Invested Capital ROE % Net Income / Own funds ROS 15.91% EBITDA / Sales ROI is extremely limited due to the modest Net Operating Margin affected by the relevant one-off items occurring in the context of the Purchase Price Allocation as already shown in the comments to the income statement. Despite the appreciable increase in Shareholders Equity, ROE is also negative affected by the "Purchase Price Allocation effects. EBITDA is still at satisfactory levels even if negatively affected by the impact of the revaluation of inventories, as shown above. SOLIDITY - Financial structure Definition FINANCIAL LEVERAGE 2.84 Third parties funding / Equity ASSET COVERAGE 1.06 (Equity + Non-current liabilities) / Non-current assets, net Financial leverage is very contained thanks to the significant capitalisation of the Group implemented by the new shareholder and by the reduction in the level of debt to third parties. The liquidity ratios show the Group s ability to honour its short-term commitments, related to operations, by using immediately available assets. LIQUIDITY - Financial structure Definition Liquidity Ratio 1.01 (Cash and cash equivalents + Receivables) / Current liabilities Assets Ratio 1.31 Current assets / Current liabilities The table below shows several ratios, which highlight, although on a summary basis only, the performance of the main asset items. However we underline that, for a better representation, it was decided to analyse the economic items as well. EFFICIENCY 2016 Definition DIO 47 Inventory / Revenues from sales x 360 DSO 79 Trade receivables / Revenues from sales x 360 DPO 132 Trade payables / Cost of sales x

101 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The efficiency ratios are still satisfactory, testament to the management's ability to manage working capital and to generate cash. Industrial business activities The performance of the sales volume during the year directly influenced industrial activities and the level of saturation of production plants. The year just ended has been characterised by a rather upand-down performance of the orders portfolio and a poor perspective vision. This obliged the Group to make use of the Temporary Lay-off Scheme in Italy both for direct employees and for the indirect workforce for certain periods of the year. The use of shock absorbers enabled the Group to achieve its objective of bringing its cost structure in line with the current level of orders and, at the same time, protected human resources, without eroding the skilled workforce. The Necta brand recorded a better performance than the Wittenborg brand, which suffered from the poor performance of certain clients. In particular the H&C Necta product range recorded an improvement on the previous year and on the budget forecast. During 2016 the entire industrial structure was heavily involved in a new set of projects combined in a single group called A Step Forward, which replaced the group of projects concluded in 2015 (called EFREM - Efficiency Recovery Measures). While EFREM project was essentially characterised by an exclusive focus on reducing costs, the new set of projects concerns above all aspects relating to efficiency recovery and aspects relating to the development and modernisation of industrial activities, involving various departments. Capex The Capex plan, which has always been focused on new product development, totalled Euro 10.2 million for the nine months of 2016 after the acquisition. The investments plan has been carried out as scheduled, albeit for a lower total that forecast in the budget. The most significant amounts concerned the development of new products, activities relating to the efficiency recovery projects and the Information Technology area. The main product investments concerned the realisation of the new Table Top machine in the Wittenborg 9100 range, USA version, the new high-capacity S&F distributor called Mambo and the new Horeca Kalea machine along with Trophy and Fancy for the OCS range. A series of significant investments has concerned activities relating to projects for efficiency recovery and the improvement of production processes, in particular for the Digilean and Kaizen parts. Finally, a portion of capex continue to be made in the maintenance of buildings and production plants and in improving the environment and safety in the workplace. 12

102 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Research & Development N&W pursues a strategy of continuous product research and development. Over the years, the Group has structured and improved its development and production processes in order to offer the customer the highest level of customisation possible, without repercussions on its profitability. Design and production processes are based on the concept of modularity, which minimises costs and maximises economies of scale. Customisation is guaranteed both from an aesthetic perspective (colours, different advertising surfaces, anti-theft and anti-vandalism characteristics), and as regards the internal configuration (e.g. espresso, soluble, fresh brew and liquid for the H&C segment; spiral layouts, position of products, temperature levels for the S&F segment). Also during 2016, N&W Global Vending S.p.A. carried out numerous research and development activities for its Vending, Horeca and OCS product ranges. Some of these projects were concluded during the year, leading to the marketing of new machine models. With regard to the Vending segment, at the end of the year a new version of a Necta snack and fresh products (S&F) distributor for semi-public locations was launched. This new model has two fundamental characteristics for his segment: robustness and the capacity to dispense a large number of products with no particular packaging requirements. It is differentiated by the user interface in a central position and two product windows enabling extension of the range of products offered and easy management of the configurations of the two cells. For Necta hot-drink (H&C) distributors, over the course of the year two projects were launched for machines with a touchscreen user interface, scheduled to be launched in The touchscreen interface applied to an automatic distributor offers a wide range of options with regard to choice and customisation. In addition, this configuration is an opportunity to provide more information on the products provided or to promote brands. Still for the Necta H&C line, the development of a new model has begun and it will accompany a Canto Touch distributor for providing cup lids. This is a service offered in public locations to prevent hot drinks from being spilt while people are on the move. With regard to the Wittenborg brand products, two new versions of the H&C 9100 table-top distributor launched in 2015 were marketed, their main characteristic being new-generation electronics and the touchscreen interface, which enables many parameters to be customised, by both the technician and the end user, with great simplicity. The new versions are intended for the North American and Northern European markets. The development of further versions of this distributor for the same markets is still on-going and their launch is scheduled for With regard to the Necta branded Horeca products the restyling of two models was introduced with the aim of restyling them and launching a design harmonisation process for all models in the range. In addition to the launches occurred in 2016, progress has been carried on whose launch on the market is scheduled for 2017: a new super-automatic machine model with touchscreen interface 13

103 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 intended for the Asian markets and the restyling of another model in the range with its styling coordinated with the new models already launched this year. With regard to the SGL brand, the main efforts have focused on completing the new Trophy and Fancy machines: the former is intended mainly for the American market, while the latter is aimed at the domestic market thanks to its reduced size, more attractive design and better technology. Human resources, organisation and environment As of 31 st December 2016, the N&W Group employed 1,356 people with an overall cost of Euro 53,224 for the nine months. In 2016, the HR department focused on a number of specific areas: 1) Maintaining a cross-sector training project: thanks to the use of the provisions in the Fondimpresa and Fondirigenti funds, there was a particular investment in training activities to increase or consolidate knowledge of foreign languages and to boost leadership skills in middle management, in addition to responding to occasional and specific requirements for more in-depth technical knowledge. 2) Managing, maintaining and consolidating a system of part-time workers, as set out by our collective labour agreement: to improve the work-life balance, for many years in the company horizontal and vertical part-time work in production areas has been regulated. Even in office areas, much space has been given to this contractual institution. 3) Consolidating a performance appraisal system for all executives, managers and white collars. 4) Updating the HR management system with the introduction of certain processes into the system (training request, personnel request, job posting). 5) Introducing an online system for recording attendance and explaining absence for all office staff. 6) Communication project: the communication channel was consolidated and extended through monitors installed at the offices and factory in Valbrembo, with the aim of making all internal communications immediate and visible. Meetings were continued with all employees by the Chief Executive Officer, as well as the publication of the company newsletter Coffee Break. During 2016 the Company was forced to resort to the temporary lay-off scheme owing to a lack of orders at certain moments. Also for 2016, in the light of the uncertain economic situation, the company asked the trade unions to postpone the renewal of the Collective Labour Agreement at the end of 2016, leaving the current one in force. The unions accepted the proposal. With regard to ordinary operations, also in 2016 the situation is positive in relation to litigation or legal actions of significance with individual workers or with trade unions. 14

104

105 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 III. Consolidated statement of comprehensive income for the period ended December 31, 2016 Note 2016 Continuing operations Revenues from sales 5 220,154 Cost of sales 7 (189,140) Gross Profit 31,014 Operating costs Sales & Marketing (20,053) Logistics (4,613) Administration (8,418) Exchange losses 2,261 Total operating costs (30,823) Reorganization costs 8 (301) Other costs 9 (6,574) OPERATING LOSS (6,684) Financial income 288 Financial expense (31,718) Net financial expense 10 (31,430) LOSS BEFORE TAXES (38,114) Taxes 11 10,593 NET LOSS (27,521) Consolidated Statement of Comprehensive Income for the year ended 2016 NET LOSS (27,521) Actuarial Loss on personnel provisions 12 (432) Taxes Total items that will not be reclassified subsequently to the Income Statement (328) Hedge accounting of financial instruments 12 (757) Changes in translation reserve 12 (1,383) Taxes Total items that may be reclassified subsequently to the Income Statement (1,958) TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (29,807) The Notes to the Financial Statements are an integral part of the same

106 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 IV. Consolidated statement of financial positionas at December 31, 2016 ( thousand) Note 2016 ASSETS Intangible assets ,650 Property, plant and equipment 14 38,014 Available-for-sale investments 15 6 Receivable and other non-current assets 16 1,887 Deferred tax assets 11 18,461 Total non-current assets 708,018 Cash and cash equivalents 17 51,089 Trade receivables 18 66,056 Inventories 19 39,423 Other receivables 20 3,706 Tax receivables 11 8,384 Total current assets 168,658 TOTAL ASSETS 876,676 Note 2016 SHAREHOLDERS' EQUITY AND LIABILITIES Share Capital 41,138 Other Reserves 216,566 Hedging Reserve (575) Translation Reserve (1,383) Riserva SOP 96 Loss for the period (27,521) Total shareholders' equity ,321 Non-current financial indebtness ,713 Provision for post-employment benefits 24 12,358 Deferred tax liabilities 11 88,016 Non-current tax payables 11 6,466 Other non-current payables 28 14,681 Non-current payables to leasing companies 51 Provision for risks and charges 25 2,973 Warranty and Reorganisation provision 26 3,696 Total non-current liabilities 519,954 Current financial indebtness 23 16,025 Trade payables 27 64,953 Current payables to related parties 11 Current tax payables 11 8,229 Other current payables 28 38,710 Derivative financial instruments Total current liabilities 128,401 TOTAL LIABILITIES 648,355 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 876,676 The Notes to the Financial Statements are an integral part of the same. 17

107 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 V. Consolidated statement of cash flows for the period ended December 31, 2016 ( thousand) OPERATING ACTIVITIES INVESTING ACTIVITIES FINANCING ACTIVITIES Note 2016 Net loss for the period (27,521) PPA impact 4 36,795 Net financial expense 10 31,430 Amortisation/depreciation 7 6,853 Allowance for doubtful receivables 18 (34) Inventory write-down 19 (303) Post-employment benefits 24 (434) Cost of employee stock option plan Net foreign exchange (1,075) Current and deferred taxes 11 3,995 Cash flow from operating activities before 49,801 changes in net working capital Trade receivables 18 5,219 Inventories 19 3,474 Trade payables 27 (4,915) Cash flow generated by operating activities 53,579 Tax receivables Other receivables 20 (1,754) Tax payables 11 5,925 Other current payables Translation reserve Income tax paid (10,773) Interest paid (34,100) Net cash flow generated by operating activities 14,593 Receivables and other non-current assets 16 (283) Property, plant and equipment and intangible fixed assets (10,846) Acquisition of subsidiary 4 32,600 Equity ,983 Net cash flow generated by investing activities 279,454 Payables to factoring companies (7) Payables to banks 23 (1,278) Proceeds from borrowings ,815 Repayment of loans 23 (278,423) Payables to related parties (374,102) Payables to leasing companies (13) Net cash flow absorbed by financing activities (243,008) NET INCREASE OF CASH AND CASH EQUIVALENTS 51,039 OPENING CASH AND CASH EQUIVALENTS 50 CLOSING CASH AND CASH EQUIVALENTS 51,089 18

108 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 VI. Consolidated statement of changes in equity for the period ended December 31, 2016 Other components of comprehensive income Share Capital Cash Flow Hedge Foreing Currency Translation Reserve Ias 19 Share based plan IFRS 2 Other Reserves Loss for the period Total Equity Balance at 22 March 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 Income for the period - (575) (1,383) (328) - - (27,521) (29,808) Increases 41, , ,984 Recognition of share based payment Balance at ,138 (575) (1,383) (328) ,896 (27,521) 228,322 19

109 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 VII. Notes to the consolidated financial statements Note 1. General information N&W Global Vending S.p.A. (hereinafter also the Company ) is a joint-stock company established in Italy on 27 October 2005 and directly controlled by Lone Stare Investments Fund, which acquired the N&W Group on 22 March The N&W Group, the leader in Europe in this industry, is today the largest manufacturer in the world of automatic vending machines, with the widest range of vending machines for both public and private use. Financial statements The Group s Consolidated Financial Statements include the following primary financial statements: a statement of financial position, which shows current and non-current assets, current and non-current liabilities, separately; an income statement, which shows costs using a classification based on the functionality of the same; a statement of comprehensive income, which shows the items that will not be subsequently reclassified to the income statement and the items that may be later reclassified to the income statement at later stage; a cash flow statement, which shows the cash flows generated by operating activities using the indirect method; a consolidated statement of changes in shareholders equity, prepared in accordance with the provisions of IAS 1. The Consolidated Financial Statements and all amounts in the explanatory notes are shown in thousands of Euro (the functional currency of the Company), unless otherwise indicated. Scope of consolidation The 2016 consolidated financial statements include the financial statements of N&W Global Vending S.p.A. (the parent company) and of all of the companies directly or indirectly controlled by the N&W Group. The place of incorporation and operation is the same for all subsidiaries. The reference date of the consolidated financial statements is the same as that of the financial statements of the parent company N&W Global Vending S.p.A., as well as that of the subsidiaries; the financial statements used for consolidation purposes are those at December 31, 2016, prepared by the Board of Directors and/or the Sole Directors for approval by the respective Shareholders Meetings. The 2016 consolidated financial statements include the following companies ( N&W Group ): 20

110 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 N&W Global Vending S.p.A., registered office in Valbrembo, (BG), Via Roma 24- Italy (wholly owned); N&W (Denmark) ApS registered office in Odense, Denmark (wholly owned); Wittenborg ApS registered office in Odense, Denmark (wholly owned); N&W Global Vending Ltd registered office in Bilston, Great Britain, (wholly owned) which includes Wittenborg UK Ltd registered office in Bilston, Great Britain (wholly owned); N&W Global Vending GmbH registered office in Wien, Austria (wholly owned); N&W Global Vending GmbH registered office in Rastatt, Germany (wholly owned); N&W Global Vending Sas - registered office in Le Mesnil Amelot, France (wholly owned); Fridge France Sas registered office in Le Mesnil Amelot, France (wholly owned); N&W Global Vending Spain SL registered office in Madrid, Spain (wholly owned); Necta Vending Solutions SA registered office in Buenos Aires, Argentina (wholly owned); N&W Global Vending SP.z.o.o. registered office in Warsaw, Poland (wholly owned); N&W Global Vending Ltda registered office in Sao Paulo, Brazil (wholly owned); SGL ITALIA S.r.l registered office in Turin, Italy (wholly owned); N&W Innovative Solutions S.r.l. registered office in Zoppola (PN), Italy (wholly owned); N&W Global Vending S.A. registered office in Drogenbos, Belgium (wholly owned); N&W Australia Pty Ltd registered office in North Sydney, Australia (wholly owned); N&W Global Vending Pte Ltd registered office in Singapore (wholly owned); N&W Global Vending LLC registered office in Moscow, Russia (wholly owned); N&W Global Vending Romania Srl registered office in Municipiul Cluj-Napoca, Calea Dorobantilor, Romania (wholly owned). US Partnership In July 2005, N&W Global Vending S.p.A. signed a business partnership agreement with an American partner to boost its strategic growth in the North American market through Vendors Exchange Global Solutions LLC (hereinafter also VE Global Solutions LLC), which has an exclusive arrangement to sell N&W products, with a view to developing a network of agencies that can increase N&W s presence in this market. N&W disbursed Euro 2.9 million (USD 3.5 million) by means of a loan agreement to fund initial costs. On the closing date of the financial statements, Vendors Exchange Global Solutions LLC had not repaid the loan outstanding with N&W Global Vending S.p.A. In turn, the management decided not to exercise its right to convert the loan into a shareholding as envisaged by the partnership agreement (the option expired on 2011). The Distributorship agreement is still fully 21

111 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 operational, and regulates all operational and management aspects related to sales and operations in the United States, as well as, naturally, the right relating to the repayment of the above-cited loan. In accordance with IFRS 10, no consolidation of the US partnership is required insofar as the N&W Group does not have an Equity interest and the power to direct the relevant acitvities in Vendors Exchange Global Solutions LLC. Note 2. Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to the period presented, unless otherwise stated. Note 2.1. Basis of preparation The Consolidated Financial Statements have been prepared in accordance with the International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standard Board ( IASB ) and as adopted by the European Union. The term IFRS also includes all International Accounting Standards ( IAS ) and all interpretations issued by the IFRS Interpretations Committee, previously International Financial Reporting Interpretation Committee ( IFRIC ). These consolidated financial statements are presented in Euro, which is the Group s presentation currency and the functional currency of the Company. All amounts in these consolidated financial statements are presented in thousands of Euro, unless otherwise stated. These financial statements are prepared on a going concern basis, i.e. assuming that operations will continue in the foreseeable future. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. Note 2.2. Basis of Accounting The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair 22

112 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 Shared-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurement that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 Inventories or in value in use IAS 36 Impairment of Assets. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. New standards, amendments and interpretation applicable from 1 January 2016 The following new standards and amendments, which were effective from 1 January 2016, were adopted by the group. The adoption of these amendments had no effect on the Consolidated Financial Statements. Amendments to IFRS 11 Joint arrangements: Accounting for acquisition of interest in joint operations which clarify the accounting for acquisitions of an interest in a joint operation that constitutes a business. Amendments to IAS 16 Property, Plant and Equipment and to IAS 38 Intangible Assets, which clarify that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated from an operating business that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. In addition, the amendments clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. Annual Improvements to IFRSs cycle, includes a series of amendments to IFRSs in response to issues raised mainly on IFRS 5 Non-current assets held for sale and discontinued operations related to the changes of method of disposal of an asset (or disposal group), on IFRS 7 Financial Instruments: Disclosures related to clarification when servicing contracts are deemed to constitute continuing involvement for disclosure purposes, on IAS 19 Employee Benefits related to discount rate determination and on IAS 23

113 N&W Global Vending S.p.A. Consolidated Financial Statements at Interim Reporting related to paragraph 16A and the clarifications of the meaning of disclosure of information elsewhere in the interim financial report. Amendments to IAS 1 Presentation of Financial Statements, which were a part of the IASB s initiative to improve presentation and disclosure in financial reports. The amendments make a clear that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. Furthermore, the amendments clarify that companies should use professional judgment in determining where and in what order information is presented in the financial disclosures. New Standards and amendments not yet effective Two new accounting principles applicable on or before January 1, 2018 were published in 2016: IFRS 15 Revenues from contracts with customers : the purpose of IFRS 15 is to improve revenues recognition methods by introducing a new accounting model that calls for: (i) identifying a contract with a customer; ii) identifying the obligations entailed by the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the individual contractual obligations; and (v) recognizing the revenues when each individual contractual obligation is satisfied. The adoption of this principle could modify the revenue amount; its potential impact is currently being determined. IFRS 9 Financial instruments, for which first-time adoption modalities are still being defined. The new IFRS 9 standard calls for a single model to classify and measure financial instruments. Within the model, financial assets are classified into three categories (amortized cost, fair value in Reserve for other components of comprehensive income and fair value in the income statement) depending on the entity s business model (because of this dependency link, reclassifications between categories are forbidden, except when the business model itself is changed). A new model to determine the writedowns on receivables and liabilities so-called expected losses has been introduced and the default risk associated with the counterparty is evaluated ex-ante. With regard to equity investments, the exemption from the requirement to apply fair value to measure investments that are not publicly traded has been eliminated. Hedge accounting rules have also been changed; specifically, the existence of a relationship between a hedged asset/liability and the hedging instrument, with balance in terms of weight, is sufficient to avoid ineffectiveness; it is permissible to hedge the single components of the price formula of a commodity provided the components can be identified separately and can be measured reliably; voluntary discontinuation of hedge accounting is not allowed. 24

114 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 2.3. Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company: has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of controls listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company s voting rights in an investee are sufficient to give it power, including: the size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Company, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meeting. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated income statement and consolidated statement of comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group s ownership interest in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non- 25

115 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, a gain or loss is recongnised in profit or loss and is calculated as the difference between i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amount previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary. Note 2.4. Business combinations The term Business Combinatio means a transaction, which regards the acquisition of a business, analogous to a purchase transaction in which control is transferred. Acquisition of business are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their fair value, except that: deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations, are measured in accordance with that Standard. The excess of the sum of consideration transferred and the net fair value of identifiable assets acquired and liabilities assumed is recognised as Goodwill. If, after reassessment, the net fair value of identifiable assets acquired and liabilities assumed exceeds the consideration transferred it is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests may be initially measured either at fair value or at the non-controlling interests proportionate share of the acquiree s identifiable net assets. The choice of measurement basis is made on q transaction by transaction basis. 26

116 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted restrospectively, with corresponding adjustments against goodwill. Measured period adjustments that arise from additional information obtained during the measurement period about facts and circumstances that existed at the acquisition date. When a business combination is achieved in stages, the Group s previously held equity interest in the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interest in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if the interest were disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. Note 2.5. Goodwill The goodwill resulting from a business combination is recognised under intangible assets at the date on which control is acquired. Goodwill is recognised at cost, less accumulated impairment losses (if any). For purposes of impairment testing, goodwill is allocated to each of the Group s cash-generating units ( CGUs ) that is expected to benefit from the synergies of the combination. A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Note 2.6. Conversion of entries in foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items 27

117 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. The consolidated financial statements are presented in Euro, the parent company s functional currency. Transactions in the income statement made by subsidiaries located out of the Eurozone (the non Euro subsidiaries located in Denmark, Brazil, Argentina, UK, Poland, Australia, Singapore and Romania) are converted into Euro using the average exchange rate for the year on a monthly basis, since the exchange rates did not fluctuate significantly during the period; the amounts in the statement of financial position are converted at the exchange rate in force at 31 December. The exchange differences resulting from the conversion of the investments in the non Euro subsidiaries are recognised under Translation reserve under shareholders equity. Note 2.7. Internally-Generated Research & Development Asset Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: the technical feasibility of completing the intangible asset so that it is available for use or to sale; the intention to complete the intangible asset to use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Development costs that have previously been recognised in the income statement cannot be recognised as intangible assets in the following period. The amount initially recognised as an internally-generated intangible asset do not exceed the amount that is expected to be recovered from the probable future economic benefits, after having deducted the further development costs incurred directly to promote the product. Investments in development recognised as intangible assets are amortised and are recognised as expense on a systematic basis, so that they reflect the manner in which the future economic benefits of the asset are expected to be used by the Group. 28

118 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Development costs are amortised over a five year period, an average term considered to be representative of the useful life of the benefits related to new products developed; the useful life is periodically reviewed. Note 2.8. Software The costs associated with software development are usually expensed at the time they are incurred. However, costs that are clearly associated to an identifiable and unique product, which will be under the control of the Group and will provide future benefits, are recognised as intangible assets where the requirements of IAS 38 have been met. The relative costs also include the costs of the personnel who have contributed to developing the asset. All of the expenses that increase and extend the performance of the software beyond its original specifications and its assumed duration are recognised as intangible assets and increase the original cost. The costs relating to the maintenance or updating of existing software programmes are expensed at the time they are incurred. Note 2.9. Trademarks, Customer List and Patents Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Trademarks, with a finite useful life, are amortised on a straight-line basis according to their useful life estimated to be 15 years. The customer list, with a finite useful life, is reduced yearly according to a churn rate applicable, extracted from the Company s historical data estimated to be approximately 6 years. Patents, with a finite useful life, are amortised on a straight-line basis according to their useful life estimated to be 10 years. Note Property, plant and equipment Property, plant and equipment are recognised at cost including ancillary charges, net of accumulated depreciation and accumulated impairment losses. Depreciation is recognised to facilitate the write-off of the cost of the assets less their residual values over their useful lives, on a straight-line basis. The useful lives are estimated as follows: Property and plant years 29

119 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Equipment 3-10 years The investments, which at year-end were not completed, are classified as Construction in progress and are not depreciated. The costs incurred for improvements to third party assets where capitalised are shown in the financial statements under the category of assets to which they refer and are depreciated over the shorter of the useful life and the lease term. Expenses relating to refurbishments and improvements, which have led to a tangible increase in production capacity or have extended useful life, are capitalised while ordinary maintenance and repairs are expensed. If the book value of an asset is higher than the estimated recoverable amount, its value is reduced to the lower amount. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Note Impairment of intangible and tangible fixed assets other than goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets (other than goodwill) to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested at least annually, and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value less selling costs and value in use. In order to calculate the fair value net of selling costs, specific valuation models are available; these calculations are made using appropriate income multipliers, publically traded share prices relating to similar companies or other available fair value indicators that are relevant to the assets to be valued. When calculating the value in use, the assets are valued at the expected cash generating unit level (CGU) based on how they are allocated. In assessing value in use, the estimated future posttax cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. 30

120 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Where the recoverable amount of an asset of a CGU is lower than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. If, subsequently, an impairment loss relating to the asset (that is not goodwill) reverses, the carrying amount is increased to the revised recoverable value, but not exceeding the carrying amount that the asset would have been recognised as if no impairment loss had been recognised in prior years. Note Financial instruments A financial instrument is represented by a contract that gives rise to financial asset for a company and a financial liability or an equity instrument for another company. Financial assets and liabilities are initially measured at their fair value; the relative transaction costs directly related to the acquisition or the issue are included in the initial measurement of all financial assets/liabilities, other than for financial assets and liabilities carried at fair value through profit or loss. Financial assets A financial asset is any asset that represents: - cash and cash equivalents; - a contractual right to receive cash or another financial asset from another party; - a contractual right to exchange financial instruments with another party at potentially favourable conditions; - an instrument representing the shareholders equity of another company; - a contract, including derivative, which is or may be settled with instruments representing a company s capital. Impairment of financial assets Financial assets, unlike those classified in the fair value category in the income statement (FVTPL), are impairment tested at each reporting date. The recoverability of the value of financial assets are verified for each individual instrument or collectively for groups of similar instruments at the end of each reporting period. Derecognition of financial assets The company eliminates a financial asset from the financial statements when it transfers the contractual right to receive cash flows from the asset in question or when said right expires. When a financial asset is transferred, the extent to which the risks and benefits related to the ownership of the financial asset are transferred must be assessed. More specifically: 31

121 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 if the company substantially transfers all of the risks and benefits related to the ownership of the financial asset, it eliminates the asset transferred and separately recognises any rights or obligations created or maintained as a consequence of said transfer; if the company substantially maintains all of the risks and benefits related to the ownership of the financial asset, it continues to recognise the asset. Financial liabilities and shareholders equity A financial liability is any liability that represents a contractual obligation to: give cash or another financial asset to another company; exchange financial instruments with another party at potentially unfavourable conditions; a contract, including derivative, which is or may be settled with instruments representing a company s capital. An instrument representing capital, an equity instrument, is a contract that represents a residual equity investment in the assets of a company net of its liabilities; for example, this regards shares, quotas or rights to purchase or subscribe for shares or quotas of a company. Other financial liabilities Other financial liabilities, including loans, are measured at amortised cost, using the effective interest rate method. Derivative financial instruments The company uses foreign currency derivative financial instruments to hedge the risks resulting from fluctuations of exchange rates and interest rates. Derivative financial instruments are recognised at their fair value at initially and are subsequently measured at their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss unless the derivative is designated and effective as a hedging instrument. Hedge accounting On the date a derivative contract is entered into, the Group Treasury designates the derivative as either a (1) a hedge of the fair value of a recognised asset or liability (fair value hedge), or (2) a hedge of a recognised asset or liability and of a forecasted transaction (cash flow hedge). Certain derivative transactions while providing effective economic hedges under the Group s risk management policies, do not qualify for hedging accounting. Derivatives instruments are not entered into for trading or speculative purposes. Changes in the fair value of a derivative that is highly effective, and that is designated and qualify as a fair value hedge, are recorded in the Income Statement along with the change in the fair value of the hedged asset or liability that is attributable to the hedged risk. Changes in the fair value of a derivative that is highly effective, and that is designated and qualified as a cash flow hedge, are 32

122 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 recognised directly in equity (hedging reserve). Amounts deferred in equity are included in the Income Statement in the same periods during which the hedged items expected cash flows or forecasted transaction affects the Income Statement. The Group Treasury formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific assets and liabilities or to specific firm commitments or forecasted transactions. The Group also formally assesses, both at the hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Note Inventories Inventories of raw materials and finished products are stated at the lower of purchase or production cost, and net realisable value. Costs of inventories are determined on the weighted average cost basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to sell. The purchase cost is inclusive of the costs incurred for transporting the goods to the warehousing location. The production cost of the finished and semi-finished products includes the directly attributable costs and a portion of the indirect costs (excluding finance expense) reasonably attributable to the products based on the normal production capacity. Work in progress, is measured at production cost for the year, taking into account the stage of completion. Obsolete and slow-moving inventories are written down to the net realisable value, by means of the establishment of a specific provision to adjust the value of the inventories. Note Trade receivables Receivables from customers are initially recognised at fair value and subsequently are recorded at amortised cost, using the effective interest rate method, net of the losses for uncollectable receivables. The amount of the write-down of the receivables is based on the analysis of all the receivables outstanding at the end of the period. Note Payables to suppliers and other liabilities Payables to suppliers along with the other liabilities, with the exception of financial liabilities, are recognised at their expected settlement amount. 33

123 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note Provisions for risks and charges IAS 37 Provision, Contingent Liabilities and Contingent Assets requires recognition of a provision when: - the Group has a present obligation (legal or constructive) as a consequence of past events; - it is probable that an outflow of resources will be required for fulfilling the obligation; - it is possible to reliably estimate the amount of the obligation. Provisions are recognised at the value that represents the best estimate of the amount to be paid to discharge the obligation at the period end date, after having taken into consideration all the risks associated with the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When a part or all of the expenses necessary for fulfilling the obligation are reimbursed by third parties, a receivable is recognised as an asset provided that it is virtually certain that the reimbursement will be received and that the amount of the receivable can be determined reliably. Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the relevant products. A provision for reorganisation costs is recognised only if the Group has approved a formal detailed plan for the reorganisation and has raised a valid expectation in those affected that it will carry out the reorganisation by starting to implement the plan or announcing its main features to those affected by it. The measurement of a reorganisation provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the reorganisation and not associated with the ongoing activities of the Group. Note Contingent liabilities A contingent liability is: - a possible obligation which derives from past events and whose existence will be confirmed only on occurrence of one or more uncertain future events not totally under the control of the company; or - an obligation underway which derives from past events but which is not recognised because: i) it is not probable that the use of resources suitable for producing economic benefits to meet the obligation will be necessary; or ii) the amount of the obligation cannot be determined with sufficient reliability. Contingent liabilities are not subject to recognition, however if the event is possible but not probable or if it is probable but cannot be quantified, suitable disclosure is provided in the notes to the financial statements. 34

124 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note Employment benefits Retirement benefit costs and termination benefits Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuation being carried out at the end of each annual reporting period. Interest is calculated by applying the discount rate at the beginning of the period to the defined benefit liability. Remeasurement, comprising actuarial gains and losses is recognised in other comprehensive income and will not be subsequently to the income statement. Defined benefit costs are categorised as follows: - service cost; - net interest; - remeasurement. Employee leaving indemnity (TFR) TFR, accrued by the employees of the Italian Group companies at 2006 (applicable date of the welfare reform), is classified as a defined-benefit schemes. The benefit that employees have earned in return for services prior to 31 st December 2016 is determined using an actuarial technique, the projected unit credit method so as to make a reliable estimate of the amount to be paid at the time of termination of the employment relationship. The projected unit credit method requires the Group to make estimates (actuarial assumptions) about demographic variables and financial variables that will affect the cost of the benefits. The benefit is discounted in order to determine the present value of the defined benefit obligation using interest rates of high-quality corporate bonds. Further to the afore-mentioned welfare reform, TFR which accrues from 1 January 2007 is classified as a defined-contribution plan, consequently payments for benefits earned by the employees after this date are recognised as an expense as the Group has no further payment obligations once the contributions have been paid. Contributions are recognised as liability to the extent that they are not paid to the supplementary pension funds or to the Istituto Nazionale della Previdenza Sociale treasury fund. Short-term employee benefits A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Note Income taxes Income tax expense represents the sum of the tax currently payable and deferred tax. 35

125 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated income statement because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Current and deferred tax assets and liabilities are offset when the income taxes are applied by the same tax authority and where there is a legally recognised right to offset the amounts recorded. The deferred tax assets and liabilities are defined based on the tax rates which are expected to be applied in the year in which these assets are realised or these liabilities are discharged considering the rates in force or those already issued or essentially issued at the reporting date. Note Revenue recognition Revenues is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sale of goods Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which time all following conditions are satisfied: the transfer of the risks and benefits associated with the ownership of the goods takes place; the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of the revenue can be measured reliably; 36

126 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 it is probable that the economic benefits associated with the transaction will flow to the Group; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Dividends and interest Dividend income from investments is recognised when the shareholder s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset s net carrying amount on initial recognition. Note Cost of sales Cost of sales includes production cost of products sold. It includes the costs of raw materials, and direct and indirect production costs. The latter includes the depreciation of property, plant and equipment and amortisation of intangible assets relating to the production and write-down of the inventories. The cost of sales also includes the transport cost relating to the deliveries and the allowances made to the product warranty provisions. Note Profit Partecipation Loan ( PPL ) The Profit Partecipation Loans partecipated by Group employees are recognised at the market value which estimate is based on Monte Carlo valuation method. The Company recognises the changes in the market value in the income statement 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. Note 3. Critical accounting estimates and judgements In the application of the Group s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of asset and liabilities that are not readily apparent from other sources. The use of reasonable estimates therefore represents an essential element in the preparation of the financial statements and does not affect the degree of reliability. Estimates and assumptions are based on the opinion of management supported by experience deriving from similar transactions and external evidence where available. They are based on the latest information available and which is reliable, and include any additional evidence provided by events that took place after the reporting date. Actual results may differ from estimates. 37

127 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Since the actual results may differ from the afore-mentioned estimates, any changes in the underlying circumstances or additional information could make a review of said estimates necessary. The effect of the change in estimates has repercussions on the income statement: - in the period in which the change took place, if the change only effects this period; - in the period in which the change took place and in subsequent ones, if the change effects several periods. Determination of fair values in business combinations The Company has applied estimates and judgements in order to determine the fair value of assets acquired and liabilities assumed by way of a business combination. The value of assets, liabilities and contingent liabilities recognized at the acquisition date are recognized at fair value. In determining the fair value, the Company has utilized valuation methodologies including discounted cash flow analysis. The Company s estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management s assumptions, which would not reflect unanticipated events and circumstances that may occur. Any significant change in key assumptions may cause the acquisition accounting to be revised including the recognition of additional goodwill or a discount on acquisition. Estimate of the Goodwill The amount of goodwill initially recognized as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management s judgment. Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortized, whereas indefinite lived intangible assets, including goodwill, are not amortized and could result in differing amortization charges based on the allocation to indefinite lived and finite lived intangible assets. Impairment testing IFRS requires management to undertake an annual test for impairment of indefinite lived assets and, for finite lived assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment testing is an area involving management judgment, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management s expectations of: growth in EBITDA, calculated as adjusted operating profit before depreciation and amortization; timing and quantum of future capital expenditure; 38

128 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 long-term growth rates; and the selection of discount rates to reflect the risks involved. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Company s impairment evaluation and hence results. The goodwill has been provisionally allocated to Vending, Ho.Re.Ca and OCS Cash Generating Units, given that these divisions are expected to benefit most from the sinergies of the Acquisition. Any adjustment to such provisional values will be recognized within twelve months of the Acquisition Date. Income taxes The Group is subject to income taxation in various jurisdictions. In order to determine the tax liability on a global scale, a significant degree of estimation is required. Numerous transactions and calculations must be made to be able to reach a final determination of the taxes, which however remains uncertain during the ordinary course of the economic activities. The Group recognises payables for taxes based on the estimates of tax to be paid. In the event of a tax inspection, if the amount to be paid is different from that estimated, these differences will affect the income taxes and the provisions for deferred taxes during the period in which these calculations are made. Note 4. Business combination LSF9 Canto Investments S.p.A. ( LSF9 Canto ), wholly owned by the private equity fund Lone Star Fund IX was incorporated on 25th November 2015 with a Share Capital of Euro 50. On December 3rd 2015 LSF9 Canto entered into an agreement with N&W Holding S.à rl, owned by Investcorp and Equistone Partner funds, to buy 100% of the corporate capital of N&W Global Vending S.p.A.( the Company ). The Acquisition was finalized on March 22nd 2016 and was funded through the issue of ordinary equity shares of Euro 256 million indirectly by Lone Star Fund IX and by the drawdown of Senior Secured Bridge (Euro 400 million) and Revolving Facilities (Euro 10.8 million) by LSF9 Canto. With the funds received, LSF9 Canto was able to: i) repay the outstanding Related Parties Loan amounting to approx. Euro 374 million granted by the previous Shareholders, N&W Holding S.à r.l to N&W Global Vending S.p.A., ii) lend Euro 258 million to N&W Global Vending S.p.A. enabling the acquired entities to fully repay the outstanding Senior Bank loans granted by a consortium of Banks amounting to approx Euro million, iii) pay a portion of the purchase price amounting to Euro 8.5 million, iv) ensure the remaining portion of the purchase price amounting to Euro 14 million is paid into an escrow account as warranty to cover potential liabilities mainly arising from the Italian tax settlement. 39

129 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 On October 5 th 2016 LSF9 Canto has been extinguished by merging into the wholly owned N&W Global Vending S.p.A. (reverse merger). On October 14th 2016 the Company has issued Euro 300 million of Senior Secured Notes and Euro 100 million of Second Lien Notes both due in 2023; through this issuance the Company has fully reimbursed the Bridge Facility of Euro 400 million. N&W Global Vending S.p.A. and its subsidiaries is a leading European and largest manufacturer worldwide, on sales volume basis, of vending machines. The Group operates in nearly all major international markets maintaining relationships with direct customer or, alternatively, through a network of dealers and its commercial subsidiaries located in Italy, Denmark, the UK, France, Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina, Australia, Singapore, Russia and Romania. The acquisition of N&W Group which is wholly owned by Lone Star Fund IX aims to increase N&W Group s value considering N&W Group s strong brand awareness, international presence and strong commitment in innovation and development of technology solutions together with new products. The acquisition is expected to expand the business in core and emerging markets and to continue the strong relationship with key players and to enhance more established relationships with small medium customers. Following the Acquisition finalized on March 22nd 2016 a Purchase Price Allocation has been carried out. The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS 3 Business Combinations. As a result, the total purchase price has been allocated to the identifiable assets and liabilities acquired, based on the estimated fair values at the date of acquisition. The following is not a definitive business combination. Purchase consideration Cash paid 14,989 Consideration in escrow account 1,000 Total purchase consideration 15,989 The purchase price paid in cash was equal to 16 million, as compared to a negative net asset value of N&W Group of million at Completion Date. Consequently, the preliminary goodwill before purchase price allocation - was equal to million. Assets acquired and liabilities recognised at the date of acquisition The assets and liabilities recognised as a result of the acquisition are as follows: 40

130 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 ( thousands) Net assets at Completion Date after PPA Assets acquired 584,859 Property, plant & equipment 39,055 Intangible assets 324,156 Software 1,171 Internally generated software 18,066 Trademarks 122,111 Patents 73,505 Customer Relationship 109,302 Other non-current assets 3,119 Total non-current assets 366,330 Inventories 65,493 Trade and other receivables 83,807 Cash and cash equivalents 47,639 Deferred tax assets 21,590 Total current assets 218,529 Liabilities assumed (917,321) Deferred income tax liabilities (105,322) Other non-current liabilities (20,137) Total non-current liabilities (125,459) Trade payables (138,231) Financial indebtness (653,631) Total current liabilities (791,862) Identifiable assets and liabilities (332,462) Purchase price allocation process has identified the following assets: - Internally generated software, Trademarks and Patents - Customer relationship - Inventory (adjustment to fair value) - Tax credit For a complete description, please see Note 4.1. Impact of Purchase Price Allocation. Purchase consideration 15,989 Plus: fair value of identifiable net assets acquired 332,462 Goodwill arising acquisition 348,451 Acquisition-related costs Acquisition-related costs of Euro 24,602 million refer to: Euro 10,141 of Financing and Arrangement Fees on Bond and Revolving Facility (see note 23), Euro 8,000 of Committment and Funding Fees included in Financial expenses (see note 10) and Euro 6,461 as consultancies costs 41

131 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 mainly for vendor and buyer due diligences (legal, tax, accounting, commercial due diligence) related to Nighthawk Project connected with the sale of the Group, of which Euro 2,415 occured after the Acquisiton Date (see note 9). Tax settlement Purchase price Adjustment Following the receipt of tax assessment notices and claims for penalties relating to the tax period 2010 concerning certain allegations regarding the failure to apply or to pay tax withholdings on interests paid on the financing granted on 2008 to N&W Group by N&W Holdings S.à r.l. (former shareholder of N&W Group) and for the alleged illegitimate use of previous losses by N&W Group (the 2010 Claims ), the latter filed on January 2016 with the competent offices a tax settlement proposal (istanza di accertamento con adesione). In relation to the tax settlement proposal, N&W Group initiated a tax settlement procedure (procedura di accertamento con adesione) with the tax authority to reach a settlement in relation to litigations concerning the alleged illegitimate use of previous losses by N&W Group in the tax periods from 2005 to 2009, the alleged illegitimate deductibility of interests expenses in the tax periods from 2005 to 2007 and other minor issues (the Pending Claims ). Following several verbal discussions and meetings with the Italian Tax Authority in relation, inter alia, to the 2010 Claims and to the Pending Claims, N&W Group executed on 26 May 2016 with the competent authorities an agreement concerning the settlement of the 2010 Claims, the Pending Claims and possible claims related to tax periods from 2011 to 2013 regarding the failure to apply and to pay tax withholdings on interests in relation to the financing granted on 2008 to N&W Group by N&W Holdings S.à r.l.. The agreement provides that N&W Group shall pay an amount equal to approx. Euro 36.5 million and forego a claim from the tax authorities equal to approx. Euro 3.7 million arising from amounts already paid by N&W Group in relation to pending claims with reference to the tax period 2006, which are not due anymore. The payment to be made by N&W Global Vending S.p.A. on the basis of installments plans (n. 17 installments) agreed with the tax authority is covered by a guarantee provided to LSF9 Canto Investments S.p.A. by (i) Lone Star Fund IX for a maximum amount equal to Euro 30 million subject to certain terms and conditions; and (ii) by an indemnity from N&W Holdings S.à r.l. for an amount equal to approx. Euro 6.5 million, as defined in the Share Purchase Agreement ( SPA ) of 3 December 2015 between N&W Holdings S.à r.l. and LSF9 Canto Investments S.p.A.. Revenue and profit contribution As stated in note 5, the revenue and profit from continuing operations for the period are completely attributable to the acquisition of N&W Group. Had these business combinations been effected at 1 January 2016, the revenue from sales and operating profit of the Group at 31 st December 2016 would have been Euro million and Euro 3.3 million respectively. The loss for the period from continuing operations would have been Euro 40.7 million. 42

132 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Net cash flow on acquisition of subsidiaries Cash paid 14,989 Less: cash and cash equivalent balance acquired (47,589) Net purchase consideration (32,600) Note 4.1. Impact of Purchase Price Allocation Transaction overview and allocation of purchase price paid Following the Acquisition finalized on 22 nd March, 2016 a Purchase Price Allocation ( PPA ) has been carried out. The purchase price paid in cash was equal to 16 million, as compared to a negative net asset value of N&W Group of million at Completion Date. There is no contingent consideration outstanding in relation to the Acquisition as of December 31, Consequently, the preliminary goodwill before purchase price allocation - was equal to million. The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS 3 Business Combinations. The total purchase price has been allocated to the identifiable assets and liabilities acquired, based on the estimated fair values at the date of acquisition. As a result of the purchase price allocation million of the preliminary goodwill was allocated to identifiable assets and liabilities. This allocation is shown below: ( thousands) Net assets at Completion Date before PPA Fair value adjustments Net assets at Completion Date after PPA Assets acquired 251, , ,859 Property, plant & equipment 39,055-39,055 Intangible assets 19, , ,156 R&D 18,202 (18,202) - Software 1,171-1,171 Internally generated software - 18,066 18,066 Trademarks - 122, ,111 Patents - 73,505 73,505 Customer Relationship - 109, ,302 Other non-current assets 3,119-3,119 Total non-current assets 61, , ,330 Inventories 42,100 23,392 65,493 Trade and other receivables 83, ,807 Cash and cash equivalents 47,639-47,639 Deferred tax assets 16,743 4,847 21,590 Total current assets 189,606 28, ,529 43

133 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Liabilities assumed (818,884) (98,438) (917,321) Deferred income tax liabilities (6,884) (98,438) (105,322) Other non-current liabilities (20,137) - (20,137) Total non-current liabilities (27,021) (98,438) (125,459) Trade payables (138,231) - (138,231) Financial indebtness (653,631) - (653,631) Total current liabilities (791,862) - (791,862) Purchase Price Paid 15,989-15,989 Identifiable assets and liabilities (567,730) 235,267 (332,462) Goodwill 583,719 (235,267) 348,451 The PPA process involved the following balance sheet items: a) Intangible assets The fair vaue adjustment of intangible assets of million is driven by the following evaluation: Internally generated software, Trademarks and Patents: based on the market approach, and more specifically on the application of the Relief from royalty methodology, that estimates the value of the intangible assets by discounting back the stream of royalty, net of taxes, saved by the Company by owning the assets instead of leasing them. The method requires the estimate of applicable royalty rates, that are extracted from market data with reference to transaction related to similar assets; Customer relationship: based on the excess earning methodology, taking into account the operating profit, net of taxes, associated with the customer portfolio as of the transaction date. The customer portfolio is reduced yearly according to a churn rate applicable, extracted from the Company s historical figures. The excess cash flow attributed to the customer relationship is calculated by deducting the contributory asset charge, that is the theoretical remuneration of the invested capital of the Company. All the intangibles booked have a defined useful life. b) Inventory As required by business combinations accounting principles, the purchase method has been used to evaluate it at the acquisition date. According to purchase method, the inventory assumed by the acquirer is required to be measured at its fair value. Fair value at the acquisition date typically includes profit attributed to past production effort, i.e. in bringing the goods to their current condition. Except on grounds of materiality, it is not generally appropriated to assign the acquiree s carrying amount to the cost of acquired inventories, because such cost does not reflect the manufacturing profit that is recognised by the acquiree through the normal selling process. 44

134 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The manufacturing profit considered as part of the fair value assigned to the N&W inventory at the acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally reversed to Profit and Loss during the year when the goods (finished products, spares and accessories) have been sold. The above fair value of the finished goods and merchandise has been evaluated deducting from the selling price the costs of disposal: commissions, inventory stocking costs and distribution costs. c) Trade and other receivables The Company has booked an asset of Euro 0.7 million for an Italian tax credit arisen in connection with R&D costs. d) Deferred tax assets and liabilities The incremental depreciation of the fair value step-up for IFRS purposes will result in a pre-tax income that is lower for IFRS purposes than for tax purposes. Consequently, a deferred tax liability of 98.4 million has been recognized to reflect the fact that cash taxes payable will be higher than the tax charge reported in the income statement under IFRS. e) Other assets and liabilities The remaining assets and liabilities, including items such as cash and trade payables were stated at their historical carrying values, which approximate fair value, given the short-term nature of these assets and liabilities. The excess of the purchase price over the preliminary amounts allocated to identifiable assets and liabilities is equal to million and has been included in goodwill. This amount represents, amongst other things, the value of the Company s market position, reputation, as well as the value of the Company s workforce. The goodwill has been provisionally allocated to Vending, Ho.re.Ca and OCS Cash Generating Units, given that these which benefit from the synergies permitted by the acquisition which generated the same (see Note 13). Effect of Purchase price allocation on the income statement The table below reflects the impact of the PPA on the income statement. 45

135 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 ( thousands) Successor (a) Period from March 22, 2016 to December 31, 2016 Incl. Impact PPA Successor (b) Period from March 22, 2016 to December 31, 2016 Impact PPA Successor (c) Period from March 22, 2016 to December 31, 2016 Excl. Impact PPA Revenue from Sales 220, ,154 Cost of sales (130,904) (130,904) Gross profit 89,250-89,250 Sales & Marketing (20,053) (20,053) Logistic (4,613) (4,613) Administrations (8,418) (8,418) Operating Exchange Difference Total operating costs (32,338) - (32,338) Adjusted EBITDA 56,911-56,911 Depreciation (5,643) (5,643) Amortisation (29,200) (27,991) (1,209) Operating profit before exceptional items 22,068 (27,991) 50,059 Inventory revaluation (23,392) (23,392) - Brazilian Operating Exchange Difference 1,516 1,516 Restructure costs (301) (301) Other expenses (6,574) (6,574) Operating profit (6,684) (51,384) 44,699 Finance Income Finance costs (31,718) (31,718) Net finance expenses (31,430) - (31,430) Profit/(Loss) before income tax (38,114) (51,384) 13,269 Income tax expense 10,593 14,588 (3,995) Profit/(Loss) for the period (27,521) (36,795) 9,274 (a) Consolidated results of N&W Group as from March 22, This column reflects the impact of the purchase price alllocation and corresponds to the profit/loss for the period as reported in the consolidated financial statement. (b) This column reflects the impact of the purchase price alllocation on the consolidated financial statement. (c) Consolidated results of N&W Group as from March 22, This column excludes the impact of the purchase price alllocation. 46

136 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 5. Revenue The breakdown of sales by product line is as follows: 2016 Hot and Cold (H&C) 95,031 Hotel, Restaurant and Cafeteria (Horeca) 17,548 Liquid 12,574 Snack and Food (S&F) 36,484 Can and Bottle 2,259 Office Coffee Service (OCS) 8,361 Accessories 10,628 Spare parts 37,269 Total Revenues from sales 220,154 Around 17% of revenues are generated by invoicing in currencies other than the Euro. There have been no sales made to related parties during the nine months period. Note 6. Segment information The Executive committee is the Group s chief operating decision-maker ( CODM ). Management has determined the operating segment based on the information reviewed by the Executive committee for the purposes of allocating resources and assessing performance. The CODM considers the Group as a single segment. The Group produces machinery of different size but the industrial process, risks and supply chain are the same for all types of machinery. In addition, the information reviewed by the CODM only shows revenue by different products. In consideration of structure of reporting, the process of allocating resources and activity of Group the CODM has identified one segment (i.e. N&W Group). The following table presents revenue information on a geographic basis: 2016 Italy 69,033 France 28,882 Spain 16,307 UK 8,398 Germany 10,664 Nordic countries 14,239 Rest of Europe 31,567 Eastern Europe 9,877 Rest of World 32,187 Total Revenues from sales 220,154 47

137 N&W Global Vending S.p.A. Consolidated Financial Statements at revenues from sales have been caracterised by the very good performance of small-medium customers more than offset by downturn of major key accounts. Western European countries (composed by Italy, France, Spain, UK, Germany and Nordic countries) registered an overall performance slightly better than previous year mainly thanks to the good results in Nordic countries and Germany only partially offset by the downturn in UK due to the underperformance of some big customers. Also in Rest of Europe the shortfall of revenues is attributable to the downturn of a couple of big players. Very good performances in Eastern Europe and in other emerging markets thanks to Czech Republic, Romania, Baltics and Poland together with Asia&Pacific, North America and Africa respectively. Included in revenues arising from nine months period in 2016 of Euro million are revenues of approximately Euro 23.3 million which arose from sales to the N&W Group s largest customer. No other single customer contributed 10% or more to the Group s revenue during A reconciliation of Adjusted EBITDA to loss for the period is provided as follow: 2016 Loss for the period (27,521) Income taxes (10,593) EBT (38,114) Net Financial Expense 31,430 EBIT (6,684) * Depreciation 5,643 * Amortisation 29,200 Reorganisation and other costs 6,876 Exchange Difference on BRL (1,516) Inventory Revaluation as per PPA 23,392 Adjusted EBITDA 56,911 *Depreciation and amortization are included in Cost of Sales of consolidated accounts and are impacted by the amortization of Intangible assets arisen by Purchase Price Allocation (Euro 27,991). Note 7. Cost of Sales The cost of sales indicated in the income statement is made up as follows: 1 April Cost of sales (130,904) Amortisation and depreciation of intangible and tangible (34,844) fixed assets Reversal of Inventory Revaluation (see below) (23,392) Total Cost of sales (189,140) 48

138 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 During the period, the amortisation and depreciation relating to intangible assets and tangible fixed assets was respectively expensed in Cost of Sales Cost of Sales has been heavily impacted by the amortization of the Intangibles arisen by the Purchase Price Allocation (Euro 27,991) together with the reversal of the inventory revaluation occurred on acquisition date. The manufacturing profit considered as part of the fair value assigned to the N&W inventory at the acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally reversed to Profit and Loss during the year when the goods have been sold. The above fair value of the finished goods and merchandise has been evaluated deducting from the selling price the costs of disposal: commissions, inventory stocking costs and distribution costs. Note 8. Reorganisation costs The income statement for 2016 includes Euro 301 as lay off costs relating to the reduction of the employees in N&W Group companies. Note 9. Other costs The amount of Euro 6,574 indicated in the item Other costs in 2016 income statement includes: Euro 2,415 as costs related to Nighthawk Project connected with the sale of the Group, Euro as costs for the accomplishment of specific projects of a non-recurrent nature, Euro 641 as charges accrued by Italian legal entities for CIGO ( Cassa Integrazione Guadagni Ordinaria, a Social Security contract) for the application of short time working procedure, Euro 335 as occasional advisory services, Euro 1,508 as costs related to the write-down of the financial receivable outstanding with VE Global Solutions LLC and Euro 96 as costs related to the Profit Partecipation Loan of some managers (see Note 21). The remaining Euro 36 are other minor various costs. Note 10. Net financial expense 2016 Financial income 288 Financial expenses (31,718) NET FINANCIAL EXPENSE (31,430) The financial income recorded in the income statement is analysed in the table presented below: 2016 Bank interests 138 Interests on VE Global Solutions LLC Loan 150 TOTAL

139 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The financial expenses recorded in the income statement is analysed in the table presented below: 2016 Bridge Loan Interests (15,154) Bridge Commitment and Funding fees (8,000) Revolving Facility interests and commitment fees (581) Revolving Facility non cash interests financing fees (115) Senior Secured Notes interests (4,433) Second Lien Notes interests (2,217) Senior&Second Lien Notes financing fees amortisation (279) Bank charges and other (1,259) Exchange gains/(losses) 319 TOTAL (31,718) For the nine months period financial costs mainly include: i) interests on the Bridge Facility of Euro 400 million drawn on 22 nd March to finance the acquisition and repaid on 15 th October at the time of Bond issuance; ii) Euro 8,000 of commitment and Funding fees paid in order to obtain the Bridge Facility; iii) Interests on the Secured and Second Lien Notes from 15 th October till 31 st December 2016; iv) Interests and commitment fees on the Revolving Facility drawn down at the acquisition date for Euro 10,815 on a total of Euro 40,000 available. Note 11. Taxes Taxes receivables 2016 Income tax receivables 2,552 VAT receivables 3,822 Other tax receivables 2,009 8,384 Income tax receivables mainly refer to net advances of IRES and IRAP (regional business tax) effected by Italian legal entities to Italian tax authority by the Danish subsidiary. VAT receivables represent all the VAT credits in the various countries of the companies belonging to the Group. Other tax receivables mainly include advances made by the Brazilian company for some local taxes as well as tax credit for IRES reimbursement related to IRAP deduction on employees costs as per 50

140 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Italian D.L. 201/2011 (Euro 632) and Italian tax credit for investment in capital equipment and property as per D.L. 91/2014 (Euro 102). Taxes payables (current and non current) 2016 Income taxes payables 2,782 VAT payables 2,132 Italian tax audit - short term portion 2,874 Italian tax audit - long term portion 6,466 14,695 Income tax payables are essentially made up of income taxes owed by the Danish subsidiary. VAT payables represent all the VAT debts in the various countries of the companies belonging to the Group. Euro 9,340 refer to the oustanding amount related to tax losses settled on May 26, On the basis of installments plan agreed, Euro 2,874 will be due by the Company to the Italian Tax Authority by 2017 and Euro 6,466 on a quarterly basis by The reconciliation between the 27.5% rate in force in the country of the Italian parent company and the effective tax liability of the group is presented below: 2016 Loss before taxes (38,114) Tax calculated at the rate of the parent company (27.5%) 10,481 Effect of different tax rate regimes 5,452 IRAP (regional business tax) (883) N&W Global Vending S.p.A. non-deductible interest (4,969) Parent Notional Interest Deduction (ACE) 2,856 Permanent differences (1,573) Other (771) Taxes in the income statement 10,593 The above reconciliation is determined by applying the tax rate of the parent company. The IRAP is not considered in the reconciliation since it presents a different taxable base with respect to the income taxes. The income taxes are made up as per the table presented below: 51

141 N&W Global Vending S.p.A. Consolidated Financial Statements at Current income taxes (2,091) Deferred income taxes 12,684 10,593 The deferred tax assets are analysed in the table presented below: 2016 Inventory obsolescence allowance 794 Technical assistance provision (warranty provision) 568 Other provisions 1,228 Provision for doubtful receivables 1,674 Provision for other risks 429 Long-term investments 189 Intangible and tangible fixed assets 12,675 Prior losses recognised 836 Market value of derivatives/forward contracts 68 TOTAL 18,461 The deferred tax liabilities are analysed in the table presented below: 2016 PPA impact (82,303) Amortisation of goodwill (4,023) Amortisation/depreciation (875) Exchange gains (703) Other (112) TOTAL 88,016 After all the appropriate offsettings in the statement of financial position, the following amounts are indicated: 2016 Deferred tax assets 18,461 Deferred tax liabilities (88,016) (69,555) The deferred tax assets exposed above have been recognised based on probable results that will be available at the moment when temporary differences will reverse. The deferred tax assets recognised on prior tax losses present the following maturities: 52

142 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Maturity date 2016 Indefinite life 836 Historical cost Some group companies have not recorded deferred tax assets on the prior losses given the uncertainty of the recovery by means of offsetting with the tax profits that it is envisaged will be generated over the mid-term. The fiscal impact of the prior losses not recognised at 2016 amounts to Euro 583 and has an indefinite life. Note 12. Comprehensive income components The comprehensive income components include changes in translation reserve on currency transactions for Euro (1,383), hedge accounting of financial instruments for Euro (757) and Euro (432) for the actuarial loss on personnel provision according to IAS 19. Note 13. Intangible assets Goodwill Internally generated Research & Development Assets Trademarks Customer list Patents Internally generated software Other intangible assets Business combination 348, , ,302 73,505 18,066 20, ,528 Increases - 5, ,047 6,287 Exchange rate impact (53) (17) (23) Disposals (5) (5) ,398 5, , ,302 73,505 18, ,787 Total Accumulated amortisation and impairment Business combination ,920 18,920 Amortisation for the ,106 13,663 5,513 2, ,200 period Exchange rate impact (14) 21 Disposals (5) (5) ,106 13,663 5,513 2,710 19,678 48,136 Net book value ,398 4, ,005 95,639 67,992 15,356 1, ,650 53

143 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Goodwill As descirbed in Note 4.1. Impact of Purchase Price Allocation, the Goodwill arising from 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. 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 goodwill impairment test is performed at the level of a cash-generating unit which benefit from the synergies permitted by the Acquisition which generated the same. The goodwill has been provisionally allocated to the following Cash Generating Units: Vending, Ho.Re.Ca and OCS, given that these three divisions are expected to benefit most from the sinergies of the Acquisition. Acquisition date 2016 VENDING 280, ,644 HORECA 60,150 60,141 OCS 7,614 7,613 Goodwill 348, ,398 Net Assets Allocated goodwill Net assets after allocation of Goodwill VENDING 171, , ,132 HORECA 59,996 60, ,137 OCS 5,612 7,613 13,225 Total 237, , ,493 Any adjustment to such provisional values will be recognized within twelve months of the Acquisition Date. Starting from next year, when the goodwill is definitely allocated to the above mentioned CGUs, the Group will perform impairment at least annually, or more frequently whenever there will be an indication that the Goodwill might be impaired. Internally generated Development assets 54

144 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Also during 2016 N&W made great efforts in innovation and development of new products and technology solutions with research and development activity continuing to be intense. Some projects were completed during the year bringing new models of machines on the market. Regarding Vending line of business, major investments referred to i) a new version of S&F Necta branded machine providing also fresh products and suitable for semi public locations; ii) two projects for touch screen machines whose launch on the market is expected during 2017 for H&C segment; iii) the development of a new module that will be joined to Canto touch machine for dispensing glasses lids still for H&C segment. On Ho.Re.Ca side the restyling of two models with the aim of renewing their aesthetic is the starting base for a process of harmonization of the design of all models in the range. On SGL brand side most of the Research and Development costs were dedicated to Fancy, a new compact machine suitable for many kind of capsules and to the new Trophy, a machine with Keurig capsules properly set up for the US market. Note 14. Property, plant and equipment Property and plant Equipment Construction in progress Advance payments Total Historical cost Business combination 35, , ,267 Increases 493 3, ,753 Exchange rate impact (163) (159) Disposals (40) (1,129) - - (1,169) Reclassifications 208 (100) (4) (104) , , ,692 Accumulated depreciation Business combination 14,686 96, ,217 Depreciation for the 685 4, ,643 period Exchange rate impact (97) (5) - - (102) Disposals (14) (1,066) - - (1,080) Reclassifications 162 (162) , , ,678 Net book value ,208 16, ,014 Investments made during 2016 are related to the purchase of equipment for the production of new automatic vending models branded Necta and Wittenborg located in Mozzo, Valbrembo and 55

145 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Mapello production sites. They mainly include moulds for the construction of the new machines launched during the year. Other investiments concerned plant work stations ergonomics aiming at improving safety at workplace and other projects to reduce product costs and improve efficiency. Note 15. Available-for-sale investments 2016 Other investments 6 Euro 6 refers to the participation in the R&D consortium Kilometro Rosso which supports the Group in research activities. Note 16. Receivables and other non-current assets Euro 1,887 mainly refers to the US Loan Note for Euro 1,408 granted to Vendors Exchange Global Solutions LLC and guarantee deposits for Euro 327. Note 17. Cash and cash equivalents Cash and cash equivalents are as follows: 2016 Cash and cash equivalents 51,089 The above funds, represented by cash at banks and on hand at the period end date, are not subject to any type of restriction except for Euro 1,000 deriving from N&W Holding S.à r.l. and placed in an escrow account not to be utilized according to the Agreement set at the Acquisition date. Note 18. Trade receivables 2016 Trade receivables 74,531 Less: Allowance for doubtful receivables (8,475) Net trade receivables, short-term 66,056 The average collection period from customers is around 79 days. The concentration of the credit risk is limited thanks to the high number of customers of the Group who are located in various nations and with varied end markets. 56

146 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Based on the Group s past experience with regard to management of trade receivables, it is deemed that the amount recorded in the financial statements corresponds to the real recoverable value of the receivables obtained by means of the provision of a specific allowance for doubtful receivables. The changes in the allowance for doubtful receivables during 2016 follow: 2016 Business combination 7,930 Exchange rate impact 580 Increases 807 Decreases (842) Closing balance 8,475 The fair value of the trade receivables corresponds to the value of the trade receivables net of the allowance for doubtful receivables. Please see Note 31 Financial risk management for further details. Note 19. Inventories 2016 Raw Materials and Work in progress 10,213 Less: obsolescence provision (617) Raw Materials and Work in progress, net 9,596 Finished products 33,323 Less: finished products obsolescence allowance (3,496) Finished products, net 29,827 Closing inventories, net 39,423 The performance of the inventories reflects the constant monitoring activities on the level of the stock together with the action for containing the warehousing costs. The obsolescence provision has been calculated on slow-moving inventories. Raw materials and work in progress Finished products Total Business combination 670 3,730 4,400 Exchange rate impact Increases Decreases (131) (528) (659) Closing balance 617 3,496 4,113 57

147 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 20. Other receivables 2016 Prepaid insurance premium 1,143 Prepaid maintenance and service contract fees 686 Prepaid rent 512 Advances to suppliers 401 Cigo-Solidarietà receivables 263 Credit notes to be received 124 Short-term deposits 32 Other receivables and prepaid expenses 545 3,706 Prepaid insurance premium refers to Company's Warranty and Indemnity Insurance Policy entered by LSF9 Canto Investment S.p.A. on 3 December Cigo-Solidarietà receivables refer to the credit that N&W Global Vending S.p.A. and SGL Italia S.r.l. have with the Social Security Body for Solidarity and CIGO Contract. Note 21. Shareholders Equity Share capital The issued and authorised share capital comprises 41,138,297 issued shares with a par value of Euro 1 each. All shares are issued, authorised and fully-paid at Profit Partecipation Loan Following the Acquisition, on 22 nd March 2016 executive and senior employees of the Company decided to participate to the investment by acquiring Profit Participation Loans (PPLs) for an amount of Euro 1,665. Such PPLs foresee a special remuneration linked to an IRR (Internal Rate of Return) of at least 10% realized by Lone Star Fund IX in respect of its initial investments in the N&W Group and economic and financial performance. The fair value of the PPLs has been estimated at Euro 615 based on Monte Carlo valuation method. The Company recognised an amount of Euro 96 through the consolidated income statement for the period 22 nd March till 31 st December 2016 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. Other reserves The Other reserves under shareholders equity include: 58

148 N&W Global Vending S.p.A. Consolidated Financial Statements at Euro 4,212 as Share Premium; - Euro 1,500 as Revaluation Reserves; - Euro 210,854 as statutory and other reserves. Cash flow hedging reserve The cash flow hedging reserve represents the cumulative effective portion of gains and losses arising on changes in fair value of forward foreign exchange hedging instruments entered into. The underlying table indicates the changes relating to the hedging reserve: 2016 Hedge accounting reserve Business combination profits and losses on hedged cash flows transiting the income statement (211) - profits and losses on cash flow hedging instruments (757) - tax effect on profits and losses on cash flow hedging instruments 182 Closing balance (575) Foreign currency translation reserve Exchange differences relating to the translation of the results and net assets of the Group s foreign operations from their functional currencies to the Group s presentation currency are recognised directly in other comprehensive income and accumulated in the translation reserve. Note 22. Financial instruments Market value of the derivatives The table below shows the market value of the derivatives of the Group: 2016 Currency hedging agreements (575) As specified previously, the portion of profit or loss on the hedging instruments which is considered to be effective is recognised directly under shareholders equity while the ineffective portion of the profits and losses must be directly recognised in the income statement; the amounts classified under shareholders equity are released to the income statement in the period in which the envisaged cash flows are realised. 59

149 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 23. Financial Indebtness 2016 Non current portion 391,713 Senior Secured Notes 300ml 300,000 Second Lien Notes 100ml 100,000 Capitalised financing fees (8,287) Current portion 16,025 Senior Secured Notes interests 4,433 Second Lien Notes interests 2,217 Revolving Credit Facility capital 10,815 Revolving Credit Facility interests and commitment fees 18 Capitalised financing fees (1,460) Bank overdraft 2 Total Financial Indebtness 407,738 The financial indebtness of N&W Group at December 31 st, 2016 consists of the Senior Secured and Second Lien notes (issued in October 2016, see below) together with the Revolving Credit Facility drawn at the time of the Acquisition (see below). The current portion of the financial indebtnebss relates to: i) accrued interest payable of Senior and Second Lien notes at the next interest payment dates and the portion of the capitalized financing fee that will be amortized into profit or loss over the next 12 months; ii) the reimbursement of Euro 10,815 of the Revolving Credit Facility to be done on 22 nd March 2017 with the related interests. N&W Group will keep the commitment to drew amounts in the future when needed. Revolving Credit Facility On 18 th January 2016 the Company entered into a Super Senior Revolving Agreement for total facility commitments of 40,000. The termination date of this facility is 22 March The amounts drawn under the revolving credit facility may be used to finance the general corporate and working capital needs of the Group including capital expenditure, any permitted acquisitions, investment or distribution, operational restructurings or permitted reorganizations. Subject to the terms of this Agreement the Lenders under the Initial Facility make available a multicurrency revolving credit facility which is equal to the total facility commitments. Under the revolving credit facility, a lender may make available an ancillary facility, such as an overdraft facility, a guarantee, a short-term facility, a foreign exchange facility, a credit card facility, a derivative facility, an automated payments facility, any other facility or accommodation required in connection with the business agreed by the Company with an Ancillary Lender. 60

150 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 As of December 31, 2016 the amount of the revolving facility drawn down is equal to 10,815; the accrued interests are settled on a quarterly basis, in this case the maturity date for the payment of the related accrued interests is 22 March 2017 as well as the fully reimbursment of the credit facility. The rate applied for the calculation of the accrued interests is given by Euribor (if positive) plus a margin of 3.5% per annum. Senior and Second Lien Notes On 14 th October 2016, the Company issued: - a Senior Secured Notes for Euro 300 million carrying a fixed interest rate of 7% per annum and due on 15 th October 2023; - and a Second Lien Notes for Euro 100 million amount carrying a fixed interest rate of 10.5% per annum and due on 15 th April 2023; The Interests on the Notes are payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, Costs related to the issuance of the Notes are capitalized and amortized into profit or loss over the term of the debt in accordance with the effective interest method. Total costs capitalized amounted to Euro 9.2 million, of which Euro 8.9 million remain capitalized as of December 31, With the issuance of the Notes N&W extinguished the Bridge Facility of Euro 400 million drawn down at the time of the acquisition. LSF9 Canto Midco DAC (the Parent ) and N&W Global Vending S.p.A. (the Company ) provided security and guarantees in support of the Notes. 61

151 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Name of Security Provider Parent Company Company Company Company Company Company Company Company Company Company Company Company Company Company Company Transaction Security Document Security over shares in the Company Assignment of all its rights and interests in and related to the Acquisition Agreement Assignment of all its rights and interests in and related to the Tax Settlement Equity Contribution Letter Assignment of all its rights and interests in and related to the Existing Intercompany Debt Assignment of all rights and interests in and related to an intercompany loan agreement dated 14 November 2008 between the Company as lender and N&W Global Vending Spain S.L.U. as borrower Assignment of receivables, including insurance receivables Special privilege (privilegio speciale) Security over bank accounts Special privilege (privilegio speciale) Security over Necta trademarks Security over shares in Sgl Italia S.r.l. Security over shares in Fridge France SAS Security over shares in N&W Global Vending Limited Security over shares in N&W Global Vending GmbH Security over shares in N&W Global Vending S.L.U. Security over shares in N&W Denmark ApS The following subsidiaries of N&W Global Vending S.p.A. provided security and guarantees in support of the notes: N&W Global Vending Limited; SGL Italia S.r.l.; N&W Denmark ApS and Wittenborg ApS; and Fridge France SAS. Obligor Governing Details of Security law SGL Italia S.r.l. Italian Assignment of receivables, including insurance receivables N&W Global Vending Limited English Fixed and floating charge over several receivables and assets SGL Italia S.r.l. Italian Security over Intellectual Property, if any Wittenborg ApS English Security over English and European Intellectual Property Wittenborg ApS Danish Security over Danish Intellectual Property Wittenborg ApS Danish Security over bank accounts Security over receivables, including insurance and Wittenborg ApS Danish intercompany receivables N&W Denmark ApS Danish Security over shares in Wittenborg ApS Fridge France SAS French Security over shares in N&W Global Vending SAS SGL Italia S.r.l. Italian Security over bank accounts 62

152 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The collateral also secures the Revolving Credit Facility on an equal and ratable basis. Under the terms of the Intercreditor Agreement, in the event of enforcement of the security over the collateral, holders of the Senior Secured Notes will receive proceeds from the enforcement of the collateral only after indebtedness in respect of the Revolving Credit Facility and certain hedging obligations have been repaid in full. Any such proceeds will, after all obligations under the Revolving Credit Facility and such hedging obligations have been repaid from such recoveries, be applied pro rata in repayment of all obligations under the Indenture and any other obligations that are permitted to be secured over the Collateral under the Indenture on an equal and ratable basis. Note 24. Provision for post employment benefits 2016 Employee leaving indemnity 9,938 Italian Agents provision (ISC) 2,087 Other (Germany and Austria) ,358 The item Employee leaving indemnity relates to the Italian companies and is recorded in compliance with the actuarial techniques envisaged by IAS 19 Employee Benefits. These actuarial simulations were made in accordance with the method of the benefits accrued using the projected unit credit method envisaged, establishing: - the cost relating to the service already provided by the workers (Past Service Liability); - the cost relating to the service provided by the workers during the year (Service Cost); - the cost relating to the interest expense deriving from the actuarial liability (Interest Cost); - the actuarial profit/loss relating to the valuation period considered (Actuarial (gain)/loss). The main actuarial hypotheses used for the valuation are as follows: 2016 Annual discount rate 1,31% Annual leaving indemnity increase rate 2,63% Annual inflation rate 1,50% The changes in the provision for employee leaving indemnity are illustrated below: 2016 Business combination 9,700 Additional provision (recognised in profit or loss) 575 Used during the year (337) Closing balance 9,938 63

153 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 25. Provision for risks and charges The risk provisions comprise contingent liabilities relating to staff, suppliers, and customers with regard to various problems. The change in the main risk provisions is analysed in the following table: Customer Financial WEEE Others Total bonuses guarantees Business combination , ,904 Provisions Reclassification (44) Uses/Releases (53) (253) (941) (202) (1,449) , ,973 The Customer bonuses provision mainly refers to the acknowledgement to key customers of discounts which have a certain degree of uncertainty with regard to their future manifestation since they are linked to the achievement of sales volumes in subsequent year. The Financial Guarantees provision covers the risks which may arise from the guarantees given to third parties further to leasing or factoring agreements entered into by these companies with the N&W end customer. It reflects the amount of the risk deriving from the granting of a corporate guarantee in favour of UBI Factor S.p.A. and UBI Leasing S.p.A. for leasing and loan agreements entered into by the latter in previous years with third party customers on goods we produce when the company is liable jointly and severally with the end customer. The WEEE provision (Waste Electrical and Electronic Equipment) refers to the EU Directive 2002/96/EC and 2003/108/EC. The purpose of this directive is to reduce the amount of scrap machinery sent for disposal to landfill, scrapping or incineration, by requiring manufacturers to arrange for collection and recycling and therefore encouraging them to design and produce machines that facilitate repair, re-use, disassembly and recycling. In this way, the same manufacturers are provided with an incentive to design and produce machinery which is easy to repair, re-usables, strippable and recycable. At the end of the year, the amount of the provision was adjusted on the basis of the estimated useful life of the machine fleet in circulation which could reasonably be subject to disposal in future years. The adjustment also takes into account the extension of the period of use of the vending machines due to their overhaul, a practice which has been observed over the last few years. For the purpose of calculating the discounting back of the provision in question, was considered the period of standard useful life for the type of individual model. 64

154 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The Others provision includes mainly: Euro 242 accrued in SGL Italia S.r.l. to cover the potential liability arising from a tax audit carried out during 2016 by the tax authority, covering 2011 and 2012 fiscal years; Euro 178 accrual for litigious cases and other minor provisions. Note 26. Warranty and reorganisation provisions Warranty Reorganisation Total Provision Provision Business combination 3, ,022 Provisions 1,106-1,106 Exchange rate impact (5) - (5) Utilised (1,607) - (1,607) , ,696 Warranty Provision As far as Warranty Provision concerns, at 2016 N&W Group reviewed this provision and adjusted it in order to reflect the current best estimate, taking into account risks and uncertainties, particularly in respect to the new products launched during the year on the market. The provision will cover the estimated costs of future technical assistance actions on products sold. The hypothesised measures mainly relate to potential defects of an epidemic nature which require recalls with replacement of parts and technical measures. Also in consideration of the impacts arising in the past relating to the various problems, the amount set aside is deemed sufficient to cover the risk that will probably manifest between 2017 and Reorganisation Provision Euro 317 refer to the claim still pending with Incentive A/S, the previous owner of Wittenborg Group. Note 27. Trade payables 2016 Payables to suppliers 64,953 The average payment period of the suppliers is around 132 day; no interest on payables to suppliers is owed. The group handles the liquidity to allow that all the payables to be paid on their due date. The entire total of the payables to suppliers refers to trade payables. 65

155 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 28. Other payables 2016 Payables to tax authority 19,761 Payables to employees and agents 19,468 Customers rebates 9,751 Payables to N&W Holding S.à r.l. 1,000 Transaction costs 2,277 Accrued expenses 419 Consulting 416 Other 299 TOTAL 53,391 On May 26 th, 2016, a Tax Settlement has been reached by the Company with the Italian Tax Authority relating tax assessments regarding withholding taxes, tax losses, interest deduction and other minor tax issues for fiscal years from 2005 to 2013 (see note 4). Euro 19,761 refer to the oustanding amount of withholding taxes assessed with tax authorities. On the basis of installments plan agreed, Euro 6,080 will be due by the Company to the Italian Tax Authority by 2017 and Euro 13,681 on a quarterly basis by Euro 1,000 refer to the residual portion of the purchase price to be paid to N&W Holding S.à r.l., the previous owner of N&W Group, to be due within 48 months from the acquisition date and now placed in a bank escrow account (see note 17). Note 29. Derivative financial instruments (liabilities) 2016 Currency hedging contract 473 The liabilities deriving from derivative instruments comprise the market value of the forward contracts in USD and GBP entered into to hedge future currency transactions (see Note 22). The following table presents the Group s financial assets and liabilities that are measured at fair value at 2016: At 2016 Level 1 Level 2 Level 3 Total Assets Available-for-sale investments Total Assets Liabilities Foreign currency forward contracts - (473) - (473) Total Liabilities - (473) - (473) 66

156 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Note 30. Commitments for leasing agreements The future payments for leasing commitments which cannot be cancelled are as follows: 2016 Within 12 months 4,131 Between 1 and 5 years 8,081 Beyond 5 years 448 These commitments mainly refer to the leasing of offices, warehouses, office equipment and vehicles. Note 31. Financial risk management Risks associated with the general condition of the economy The economic, equity and financial situation may be influenced by various factors which make up the macro-economic scenario - including increases and decreases in gross domestic product, the level of consumer and business confidence, changes in interest rates for consumer credit and for businesses, energy costs, the cost of commodities and other raw materials - in the various countries in which the Group operates. The difficulties of the financial markets or the continuation of the economic recession may negatively influence the industrial growth of many businesses, including those of the Group. In Europe, despite the measures adopted by many Governments, national and international organisations and by the monetary authorities, for the purpose of providing financial support to the member nations of the European Community in economic difficulties and dealing with the possibility of default of the sovereign debts of certain European countries, doubts remain with regard to the weight of the debts of some countries in the Eurozone and their ability to meet the future financial commitments, the overall stability of the Euro and the sustainability of the Euro as a single currency (or, in more extreme circumstances, the possibility of termination of said Euro), in the presence of diverse economic and political contexts among the member countries of the Eurozone. These potential developments could have a negative impact on the business and the activities of the Group. Even if the Group considers the suppression of the Euro and break-up of the European Monetary Union to be a highly improbable scenario, and even if the diversified product portfolio and the international presence mitigate the dependence on a single market and the exposure to unstable economic and political conditions in a country or in a region, in any event its business is sensitive to changes in the economic conditions. 67

157 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Therefore, the current global financial and credit crisis, as well as the failure of the financial bailout methods, both European and international, could have a negative impact on the business prospects, the economic results and the financial situation of the Group. Partly thanks to its peculiar shareholding structure, the Group has implemented a well-tested mechanism for monitoring both the financial risks and those of another type, aimed at preventing potential negative effects on the company equity and the implementation of the measures necessary to contain the same. An accurate analysis of the individual types of risk will be presented below, with regard to quality and quantity. Categories of financial instruments Financial assets 2016 Loans and receivables (including cash and cash equivalents) Cash and cash equivalents 50,089 Receivables from customers, net 66,056 Other receivables and current assets 3,836 Receivables and other non-current assets 1,887 Available-for-sale investments 6 Financial liabilities 2016 Derivative instruments designated as hedging (Hedge Accounting) Forward currency contracts 473 Loans and payables Trade payables 64,953 Payables to leasing companies 51 Financial liabilities at amortised cost Senior Secured and Second Lien Notes 391,125 Revolving credit facility 9,943 Financial guarantees

158 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The underlying table summarises the net gains and losses which arise from the afore-mentioned financial instruments. Net gains and losses generated by: 2016 Loan to US VE Global Solutions LLC 201 Trade receivables (807) Objectives of the financial risk management The group cash management unit provides specific support services to the business, co-ordinates the activities for accessing the capital market and the financial instrument market both at local and international level, directly checks and handles the financial risks relating to all the transactions set up by the Group companies. These risks include: a) credit risk; b) liquidity risk; c) market risk (including the risks linked to the exchange rates, currency and price fluctuations). The Company tries to minimise the effects of these risks by resorting to derivative financial instruments. The use of these instruments is governed by the cash management policies approved by the directors and officers which propose the basic principles on how to more fully handle the risks deriving from the exchange rate effect, the interest rates, the use of the derivative instruments and the aims for the investment of the surplus liquidity. Compliance with said policies is regularly checked and the company does not enter into contracts for financial instruments with speculative purposes. a) Credit risk The credit risk is understood to be the risk that a third party debtor is unable to meet their obligation with a consequent financial loss for the Group. The credit risk with regard to the receivables from customers can consider itself to be of a limited extent thanks to the high number of Group customers, which are spread throughout the world, cover the production and vending market and manage a variety of end markets. Based on the past experience of the Group in the management of the credit, management believes that no further credit risk needs to be reflected in the financial statements. With regard to the balance of receivables from customers at year-end, Euro 4,911 is owed by VEGS, Euro 4,065 is owed by Selecta Group, Euro 3,733 by Pelican Rouge Group and Euro 2,345 69

159 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 by Smucker, the leading Group customers. Other customers which individually represent more than 3% of the total balance of trade receivables do not exist. The market value of the trade receivables is close to the net nominal value of the same. The breakdown of the customer payment schedule is as follows: 2016 Falling due Past due over 360 Italy 18, EU 23,993 4, Outside EU 11,359 3, , TOTAL 54,190 8,233 1,277 1, The receivables in the above table are net of the bad debt provision. The changes in the allowance for doubtful receivables were as follows: Allowance for doubtful receivables 1 April 2016 Exchange difference Provision Utilisation , (842) 8,476 b) Liquidity risk The Group has put together a suitable management of the liquidity risk which involves the handling of the liquidity and the short, medium and long-term loans. The handling of the liquidity takes place by means of maintaining suitable reserves, credit facilities and loans, by means of the monitoring of the current and forecast cash flows and by means of correspondence between the maturities of the financial assets and liabilities. At 2016, the N&W Group had unused credit facilities with banks and current account overdrafts for a total of around Euro 560 and a Revolving facility available for a total commitment of Euro 40,000 and drawn down for an amount of Euro 10,815. The table below shows the contractual maturities for each non-derivative financial liability. The table has been drawn up based on the undiscounted cash flows of the financial liabilities as from the first reimbursement date. The table includes both the cash flows relating to the debt and those relating to the interest as of the various due dates Beyond Total Jan-June July-Dec Senior Secured - 300, ,000 70

160 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Notes Second Lien Notes , ,000 Cash interests on Notes (excluding security fee/ agency fee/ commitment fee) 15,838 15,750 31,500 31,500 31,500 31,500 57, ,338 Revolving Facility 10, ,815 Cash interests on Revolving Facility Bank overdraft CASH FLOW 26,750 15,750 31,500 31,500 31,500 31, , ,250 The amount of cash flows in the following years is represented by the payment of interests for the Secured and Second Lien Notes; only 2016 cash out is impacted by the reimbursement of Credit Revolving Facility of Euro 10,815. Based on the current indebtness level and on the expected cash flows, the Group will not not have problems in meeting its financial obligations. With regard to Trade payables, the average exposure period on the purchases is 132 days; no interest on payables to suppliers is owed. The Group handles the liquidity to allow that all the payables to be paid on expiry. c) Market risk The activities carried out mainly expose the Group to the financial risks associated with the exchange rate and the interest rate. The Group avails itself of a series of derivative financial instruments to handle its exposure to the interest rate risk and the exchange risk, including: - forward currency contracts hedging the exchange risk deriving from the sales and the purchases hypothesised at the time of the budget. The exposures to the market risk are supported by sensitivity analysis. The different levels of valuation method have been defined as follows: - Level 1: are valuations derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; - Level 2: are valuations derived from 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); 71

161 N&W Global Vending S.p.A. Consolidated Financial Statements at Level 3: are valuations derived from inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). On October 18 th, 2016, Moody's Investors Service (Moody's) assigned a definitive B2 rating to the Senior Secured Notes issued by N&W Global Vending S.p.A.. On October 3 rd, 2016, Standard & Poor's Ratings Services assigned its B rating to the Senior Secured Notes issued by N&W Global Vending S.p.A.. d) Exchange rate risk The N&W Group is exposed to the exchange rate risk deriving from the various foreign currency exposures. Around 17% of the sales of the N&W Group is generated by invoicing in currencies other than the Euro. The Group Cash Management Unit has the aim of hedging around 80% of the short and long-term exposures in currency using forward contracts or other derivative instruments. During the nine months period 2016, the Group Cash Management Unit hedged: - around 47% of exposures (sales) in 2016 in British pounds - around 30% of exposures (sales) in 2016 in US dollars. At Group level, the foreign currency agreements are handled, when designated for hedging, as hedges of the future currency transactions, which represent the global long or short exposure in a specific currency. At the year-end date, the most significant net amounts in currency, known as monetary assets and liabilities, were as follows: Liabilities Assets GBP (562) 3,001 USD (2,723) 15,450 AUD DKK (98) - EUR (8,828) 6,124 RON (472) - We also take into consideration the Euro, since it is a foreign currency for our branches in Denmark. Sensitivity Analysis on the net exposure in foreign currency The Group is mainly exposed to the exchange rate risk on the following currencies: GBP, USD, DKK, AUD, RON and EURO. 72

162 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 The sensitivity analysis discloses the income statement impact in the event of an increase or decrease of 10% in the exchange rate of the local currency with respect to the foreign currencies. The 10% change is that used for the purposes of the internal analysis of the rate risk and represents management s valuation of the reasonable and possible change in the exchange rates. The sensitivity analysis is carried out on the foreign currency balances net of any hedges Receivables Payables P&L Shift + 10% P&L Shift - 10% P&L Shift + 10% P&L Shift - 10% GBP (45) USD (869) 1, (219) DKK (8) EUR - - (196) 196 AUD (53) RON - - (38) 31 Forward currency contracts The Group designates certain hedging instruments which include derivatives, embedded derivatives in respect of foreign currency risk as either fair value hedges, cash flow hedges or hedges of net investments in foreign operations. Hedges of foreign exchange risk commitments are accounted for as cash flow hedges. At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore at the inception of the hedge and on ongoing basis, the Group documents whether the hedging instrument is hightly effective in offsetting changes in cash flows of the hedged item attributable to the hedged risk. In particular the Group has entered into forward currency contracts to hedge itself against the exchange rate risk deriving from future transactions in GBP and USD (which are designated as cash flow hedges). The N&W Group s Cash Management Unit formally documents all the relationships between the hedging instruments and the hedged transactions, as well as the objective of the risk management and the strategy used in the various hedging transactions. This process is valid for all the derivatives designed as hedging specific assets and liabilities, company commitments and future transactions envisaged. The Group also formally assesses, both at the start and on an on-going basis, whether the derivatives used in the hedging transactions are highly effective in cancelling the changes in the fair value of the hedged items. The following table analyses the forward currency contracts outstanding at the reporting date: 73

163 N&W Global Vending S.p.A. Consolidated Financial Statements at 2016 Currency hedges 2016 Average exchange rate Foreign currency Euro equivalent value Fair value (Euro) USD (sales) ,880 3,661 (190) GBP (sales) ,000 5,539 (283) With regard to the forward currency transactions, it should be noted that all the contracts mature during It should also be disclosed that the purchases and sales take place during the 2017 financial year; in this year, the amounts included in other comprehnsive income will be released to the income statement. The fair value is determined using external forward curve observable on the market. Sensitivity analysis on forward currency contracts Forward currency contracts are measured with reference to the forward exchange rates listed on official markets and return curves implicit in the listed interest rates corresponding to the maturities of the contracts. The sensitivity analysis discloses the impact on the hedging provision in the event of an increase or decrease of 10% in the rate: the positive number shown below indicates an increase in equity when the local currency appreciates 10% with respect to the reference currency. In the event of a weakening of 10% in the local currency against the reference currency, an opposite impact would be detected with regard to shareholders equity and the balance shown below would be negative. Impact on hedging reserve % increase 10% decrease GBP (sales) 384 (469) USD (sales) 260 (317) Interest rate risk Following the Acquisition and the repayment of the Senior credit facility, the amounts that we borrow under the Revolving Credit Facility, are subject to variable interest rates, while the main indebtness we have, that is Senior Secured Notes, carry interest at a fixed rate. We therefore do not expect to use interest rate swaps in respect of our financing going forward. Sensitivity analysis on the floating-rate payables No sensitivity analysis has been carried out since at the year-end date, there were no IRS contracts outstanding for the hedging of the rate fluctuation risk. 74

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