In the latter part of 2013, the Board of Directors of Salini S.p.A. resolved to realize the value of the entire interest held in Todini Costruzioni Generali S.p.A. (hereinafter "Todini") through its divestment.
On the basis of the agreements signed during 2013 with Todini Finanziaria S.p.A. (hereinbelow "Todini Finanziaria"), Salini Impregilo S.p.A. exercised the option to acquire the remaining 22.29% share capital of Todini on July 28, for a total consideration of €5 million.
The aim of creating a global player in the sector of complex infrastructures capable of competing with the main international competitors, in terms of economies of scale, size and geographic complementarities made the development of the business and order backlog of Todini no longer strategic for the purpose of achieving the objectives of the Business Plan.
As illustrated above, following expressions of interest made in relation to operating activities both in Italy and abroad, it was decided to divide the Todini Group into business units, each with their own assets & liabilities and with the specific technical- administrative skills, in line with the expressions of interest received.
The following illustrates the composition of the various businesses:
Business A – Italian operating contracts
Includes the Metrocampania contracts (Naples Alifana and Secondigliano), the Variante di Valico and Naples Sarno River contracts, the plant and machinery situated at the Lungavilla Depot.
Business B – Foreign business unit
Includes all the foreign branches (operational and otherwise) with the exception of the portion of the Kazakhstan branch leader of the Almaty Khorgos JV (contract 50% attributable to Todini Costruzioni Generali and 50% attributable to Salini Impregilo), the foreign subsidiaries (with the exception of Todini Central Asia), the investments in foreign affiliates of Todini Costruzioni Generali, as well as all relationships with foreign entities included in the business unit.
Business C – Sale of business unit to Salini Impregilo
Includes the following contracts: Cagliari Capo Boi, Rome-Fiumicino, Milan-Lecco, Corso Del Popolo, Piscine dello Stadio and residues of closed Italian contracts, as well as the investees operating in the concessions (Piscine dello Stadio Srl – Piscine Scarl – Corso del Popolo SpA – Corso del Popolo Engineering Scarl).
Business D – Sale of business unit to Imprepar
Includes the non-operating subsidiaries and relationships with the non-operational associates of Todini Costruzioni Generali.
Business E – Residual part of Todini Costruzioni Generali S.p.A.
Includes the subsidiaries Maver (under closure) and Todini Central Asia, as well as the portion of the Kazakhstan branch, leader of the Almaty Khorgos JV.
It also includes the balance sheet balances of the "headquarters" with reference to contracts with third parties and the entities included in this business.
In accordance with IFRS 5, businesses A and B – which are destined for sale to third parties – have again been classified under Non-current assets held for sale and under Profit (loss) from discontinued operations, while the businesses to be sold to the Parent Company and to Imprepar as well as the residual part (Business E) have been restated under continuing operations. For comparison purposes, again in accordance with IFRS 5, the income statement data for the previous year has been shown in a consistent manner.
The tables below show the highlights from the financial statements of the Todini Group classified into non-current assets and liabilities held for sale:
Income statement data
| (in millions of euros) | 2014 | 2013 |
|---|---|---|
| Revenue | 209.7 | 312.9 |
| Operating profit (EBIT) | (59.5) | (78.5) |
| Financing income (costs) | (1.2) | (9.6) |
| Net profit (loss) for the period | (66.8) | (86.3) |
Financial position figures
| (in millions of euros) | December 31, 2014 | December 31, 2013 |
|---|---|---|
| Non-current assets | 34.4 | 87.6 |
| Provisions for risks, post-employment benefits and employee benefits | (7.6) | (7.4) |
| Working capital | 128.3 | 203.5 |
| Net invested capital | 155.1 | 283.7 |
| Net financial position | (81.3) | (53.9) |
| Net assets | 73.8 | 229.9 |
Risk areas
Naples, construction of a railway section for an urban railway system, Piscinola-Secondigliano segment
Construction of the civil engineering structures for the Piscinola – Secondigliano railway segment, part of a project to modernize and upgrade the Naples – Alifana railway, was suspended in the second half of 2011 due to the failure of the client Metrocampania Nordest S.r.l. (now Ente Autonomo Volturno) to pay the consideration owed for the work. As a result, the only activities carried out concerned ensuring the safety of the jobsites.
The client, while aware of the strategic significance of the project for the purpose of completing the railway system ringing the City of Naples, was unable to honor its commitments due to the financial difficulties that characterized the budget of the Campania region, which, ultimately, created a shortage of financial resources at the Metrocampania Nordest S.r.l. subsidiary, making the disbursements of the consideration owed extremely difficult.
In light of this situation, the Ministry of Infrastructures and Transportation, in accordance with the provisions of Decree Law No. 83 of June 22, 2012 (converted into Law No. 134 of August 7, 2012), appointed and ad acta Commissioner tasked with determining the amounts of the payables and receivables of the companies that operate the regional railway services, with the aim of developing a plan to cover the ascertained deficit.
At this point, the appointed Commissioner has apparently completed his task regarding the investigative and planning phase and is now expected to announce his subsequent determinations.
Considering that, in order to allow the Commissioner to carry out his activities, the above-mentioned Decree Law specified that no payment enforcement actions may be activated or pursued against the companies owned by the regional administration that operate railway transportation services for 12 months from the effective date of the above-mentioned Decree Law No. 83 (which deadline was extended several times and recently confirmed until December 31, 2015 by art. 41 paragraph 5 of Decree Law 133/2014), the subsidiary Todini Costruzioni Generali S.p.A. nevertheless took all actions that it deemed necessary to obtain satisfaction of its rights, while maintaining a non-confrontational relationship with its client, who still considers completion of the railway segment in question as a priority for the effective operation of the metropolitan railway ring.
Finally, with a document of June 30, 2014 notified to the Client, Todini Costruzioni Generali S.p.A. sold to the parent company Salini Impregilo S.p.A. all receivables covered by the outstanding invoices issued to Ente Autonomo Volturno.
During 2014, and before formalization of the sales deed, the Client made partial payments, to Todini Costruzioni Generali SpA, of approximately €8.5 million.
Finally, negotiations were initiated with the Client aimed at:
- paying the outstanding receivables;
- settling the claims for compensation due to the anomalous progress of works on the railway stretch;
- allowing completion of the works.
In the same negotiation, the Client requested that of the dispute concerning implementation of the lot adjacent to the Naples-Alifana railway (Secondigliano-Di Vittorio), contracted to a
temporary consortium of which Todini Costruzioni Generali S.p.A. is the lead contractor, be included in the settlement.
In relation to said second contract - whose works were never initiated - the temporary consortium awarded the same took legal proceedings to have the contract declared terminated, claiming compensation for all damages.
At present, we waiting to receive a formal proposal from the Client.
Ukraine
This country is currently going through a phase of social and geopolitical instability caused by the suspension by the Ukrainian government of the negotiations for the agreement of association with the European Union.
The Todini Costruzioni Generali subsidiary operates in Ukraine with a permanent organization, which was awarded a project to rehabilitate a section of the M03 Highway, and through a joint venture with Salini S.p.A. (now Salini Impregilo S.p.A.) and Akkord, a local partner, through which the modernization of Highway M06 has been virtually completed.
Because the jobsites are located near the cities of Poltava and Zhytomyr, geographically removed from the areas most affected by the current social crisis, production activities were not affected to any significant degree.
However, the weakness of the new political class and uncertainty about the country’s immediate political future, coupled with a steady weakening of Ukraine’s position versus its Russian neighbor for the supply of natural gas, caused a dramatic financial crisis that could be solved only with the intervention of the international community.
The Group management reasonably believes to be able to assess the profitability of the contracts awarded in Ukraine with a perspective of continuity, while constantly and continuously monitoring the internal developments in the country and without excluding that in the future currently unforeseeable events may occur that may require a change in these assessments.