Financial position

Reclassified consolidated statement of financial position of the Salini Impregilo Group

(Amounts in thousands of euros) September 30, 2014December 31, 2013 (§)Overall change
Property, plant and equipment, intangibles and non-current financial assets 802,873 746,858 56,015
Non-current assets (liabilities) held for sale 191,113 235,543 -44,430
Provisions for risks  -104,950 -102,207 -2,743
Post-employment benefits and employee benefits -19,772 -20,508 736
Other non-current assets (liabilities) 16,875 16,502 373
Tax assets (liabilities) 91,339 81,153 10,186
Inventories 235,024 215,321 19,703
Contract work in progress 1,389,869 1,105,176 284,693
Advances on contract work in progress (1,710,070) (1,630,770) -79,300
Receivables 1,921,032 1,886,462 34,570
Payables (1,390,750) (1,382,725) -8,025
Other current assets 370,188 287,889 82,299
Other current liabilities -226,571 -214,837 -11,734
Working capital 588,722 266,516 322,206
Net invested capital 1,566,200 1,223,857 342,343
Equity attributable to the owners of the parent 1,122,793 699,627 423,166
Non-controlling interests 32,657 192,522 -159,865
Shareholders’ equity 1,155,450 892,149 263,301
Net financial position 410,750 331,708 79,042
Total financial resources 1,566,200 1,223,857 342,343

(§) The statement of financial position data at December 31, 2013 were reclassified due to the adoption of the new standards IFRS 10 and IFRS 11.

Net invested capital

The net invested capital amounted to € 1,566.2 million at September 30, 2014, for an increase of € 342.3 million compared with the end of the previous year. The main changes are primarily attributable to the factors mentioned below.

Property, plant and equipment, intangibles and non-current financial assets

Net property, plant and equipment, intangibles and non-current financial assets were up € 56 million. The main changes that occurred in this item compared with the end of the previous year are reviewed below:

  • due to the sale of the controlling interest held in Fisia Babcock Environment the non-current assets decreased for a total amount of € 12.9 million;
  • the amortization and depreciation for the period caused a further reduction of € 118.2 million in the net value of these assets;
  • investments in property, plant and equipment, and intangible assets for the period totaled € 181.8 million and were mainly related to several recently acquired major projects in Qatar and Namibia, as well as projects already launched in Ethiopia and Kazakhstan;
  • lastly, the value of the investments increased by € 6.1 million chiefly as a result of the valuation by the equity method of several investments in associates.

Non-current assets (liabilities) held for sale

Non-current assets (liabilities) held for sale amounted to € 191.1 million at September 30, 2014. They include the net assets (liabilities) of the following units of the Group:

  • Todini Costruzioni Generali S.p.A. and its direct subsidiaries (net assets), for a total of € 185.4 million and
  • USW Campania Projects (net assets) for € 5.7 million, unchanged compared with the end of the previous year.

The change in this item compared with the previous period, largely reflects the impairment losses reported by the Todini Group in relation to several projects in the process of completion.

Provisions for risks

The provisions for risks amounted to € 105.0 million and showed increase of € 2.7 million. Specifically, the provisions for risks on equity investments decreased by € 1.2 million due to the measurement at equity of associates. Other provisions increased by € 3.9 million mainly as a result of the provision made during the period of € 3.4 million on the Metro 6 contract in Chile.

It is worth mentioning that in the period being reviewed no situations developed that would have required changes in the valuations performed earlier as to the adequacy of these items which, at this point, are totally confirmed.

Post-employment benefits and employee benefits

This item amounted to € 19.8 million, a decrease of € 0.7 million compared with the previous year. This is mainly attributable to the ordinary operations of the Group during the reporting period.

Other non-current assets (liabilities)

Other non-current assets, net of liabilities, amounted to € 16.9 million. The increase of € 0.4 million compared with December 31, 2013, is mainly related to the reclassification of some receivables from nonconsolidated equity investments. These receivables, net of the related allowance, were reclassified in line with the update of the forecasts on when they may be collected.

Net tax assets (liabilities)

This item amounted to € 91.3 million at September 30, 2014. The change in net tax assets and liabilities compared to the previous year, which was positive and came to € 10.2 million, mainly reflects the effects of the determination of the tax liability for the period at the consolidated level, taking also into account the different tax dynamics affecting foreign units and changes in the respective asset (liability) positions recognized in accordance with the tax laws of the countries where the units operate, as well as the amount of the tax payments on account made for the current year. In this regard, in accordance with the relevant international financial reporting standards, for the purpose of preparing this Interim financial report, the consolidated tax expense for the period is determined based on estimates that at the present time could reasonably be made on the expected operating performance for the current year and the resulting tax impact.

Working capital

Working capital increased by € 322.2 million, from € 266.5 million to € 588.7 million.

The main changes in working capital related to developments in the group’s operating activities and the greater production on certain domestic and international contracts during the year. They are summarized below:

  • inventories totaled € 235.0 million, up € 19.7 million over the previous year due to the combined effect of increased procurement activity for the progress of foreign contracts, specifically concerning hydroelectric projects in Ethiopia and works in Qatar, offset only in part by the use of inventories for construction activities on some foreign contracts, among which, in particular, the Sogamoso River hydroelectric projects.
  • Work in progress increased by € 284.7 million, from € 1,105.2 million to € 1,389.9 million. This change reflects the effects of production gains, particularly with regard to projects in Africa (Ethiopia and Nigeria), the Middle East and EU countries (Denmark and Italy - High Speed - High Capacity railway).
  • Advances on contract work in progress and “negative” contract work in progress (i.e.: invoiced advances greater than the cumulative value of the projects constructed) totaled € 1,710.1 million for an increase of € 79.3 million. This change was mainly due to the effects of the following factors:
    • the net increase in contractual advance payments by € 117.6 million, mainly attributable to the payment of the advance for the construction of Line 3 of the Riyadh Metro, partially offset by the absorption of disbursements recognized in previous years through the development of production activities which were overall greater than the value of the new disbursements recognized in the current year for the portion attributable to the Group;
    • the reduction – by € 43.0 million – of “negative work in progress” attributable to the company Fisia Babcock Environment G.m.b.H., sold to third parties before the end of the second quarter and
    • the increase in “negative work in progress” totaling approximately € 4.7 million.
  • The current receivables and payables increased by a total of € 34.6 million and € 8.0 million respectively. In addition to the ordinary effects depending on the trend of the industrial activities during the period and the ordinary relations with customers and suppliers related to those activities, this change reflects the adjustment to the values expressed in Venezuelan currency to the official exchange rate (“SICAD 2”) adopted by the Group from June 30, 2014 which depreciated substantially compared to the prior official exchange rate (“CENCOEX”, formerly known as “CADIVI”). As a result of this adoption, for which more details are provided in the Half-year financial report and should be consulted for more information, the effective value of the receivables (net of payables) denominated in Venezuelan currency decreased by € 47.8 million compared to December 31, 2013.
  • Other current assets increased by € 82.3 million mainly due to the advances to suppliers and insurance costs paid in advance with regard to the Group’s new projects. Other current liabilities increased by € 11.7 million compared to December 31, 2013 and related in particular to payables for indemnifications and expropriations of new contracts.

Net financial position

At September 30, 2014, the consolidated net financial position of the Group’s continuing operations amounted to € 410.8 million (negative by € 331.7 million), while that of the non-current assets held for sale amounted to € 50.8 million (negative by € 53.9 million). At the end of the period, the Net Debt/Equity ratio (based on the Net financial position of continuing operations), on a consolidated basis, was 0.36. The net financial position for non-current assets held for sale refers to Todini Costruzioni Generali S.p.A. and its subsidiaries.

The change in the financial position, net of the cash resulting from the capital increase and the disposal of equity investments, was generated by the investments in property, plant and equipment made on contracts at the launch stage and the use of cash by operating activities, especially in relation to the increase in working capital.

With reference to the capital increase, you are reminded that, on June 20, 2014, as part of a transaction aimed at Italian and international institutional investors, the Board of Directors of the parent company Salini Impregilo S.p.A. exercised the powers granted to it by the Extraordinary Shareholders’ Meeting held on September 12, 2013, and approved the share capital increase limited to 10% of the existing capital, waiving option rights. The transaction was successfully completed with the issuance of 44,740,000 new ordinary shares without par value and the increase in share capital amounting to € 44,740,000.

The subscription price of the shares was set at € 3.70 per share, while the consideration received, net of directly related additional expenses, was € 161.6 million. In the same context and at the same time of this offer, aimed, as described, to Italian and institutional investors only, the controlling company Salini Costruttori S.p.A. sold 94,000,000 Salini Impregilo S.p.A. ordinary shares.

Furthermore, following this sale, the parent company repaid its financial payables in full to Salini Impregilo S.p.A.

Gross debt, excluding financial debt with SPVs, decreased by € 301.8 million, compared to December 31, 2013, and stood at € 1,357.8 million.

Total gross debt amounted to € 1,535.9 million and decreased by € 200.3 million compared to December 31, 2013. Financial debt with SPVs includes in particular the financial debt taken out during the third quarter of 2014 to finance the works for the Panama Canal expansion project as established in the agreements signed on August 1, 2014.

The Group’s net financial position at September 30, 2014, is summarized in the following table.

Net financial position

(Amounts in thousands of euros)September 30, 2014December 31, 2013 (§)Change
Non-current financial assets 59,689 48,928 10,761
Current financial assets 17,925 222,113 -204,188
Cash and cash equivalents  442,579 908,631 -466,052
Total cash and cash equivalents and other financial assets 520,193 1,179,672 -659,479
Bank and other loans -459,911 -634,693 174,782
Bonds -550,336 -552,542 2,206
Finance lease payables -106,695 -97,671 -9,024
Total non-current indebtedness (1,116,942) (1,284,906) 167,964
Current portion of bank loans and current account facilities -176,176 -313,819 137,643
Current portion of bond issues -12,403 -11,154 -1,249
Current portion of finance lease payables -46,624 -45,422 -1,202
Total current indebtedness -235,203 -370,395 135,192
Derivative assets - 1,016 -1,016
Derivative liabilities -5,662 -4,354 -1,308
Financial assets held by SPVs 604,927 223,789 381,138
Non-current indebtedness held by SPVs -1,400 -14,484 13,084
Current indebtedness held by SPVs -176,663 -62,046 -114,617
Total other financial assets (liabilities) 421,202 143,921 277,281
Total net financial position – continuing operations -410,750 -331,708 -79,042
Net financial position for assets held for sale -50,839 -53,868 3,029
Net financial position including non-current assets held for sale -461,589 -385,576 -76,013

(§) The data at December 31, 2013 were reclassified due to the adoption of the new standards IFRS 10 and IFRS 11.