Financial position

Reclassified consolidated statement of financial position of the Salini Impregilo Group

Net invested capital

The net invested capital amounted to €1,537.0 million at June 30, 2014, for an increase of €313.1 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 €2.1 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 €78.8 million in the net value of these assets;
• lastly, investments for the period totaled €98.8 million and were mainly related to several recently acquired major projects in Australia, Qatar and Chile as well as projects already launched in Ethiopia;
• lastly, the value of the investments decreased by €6.6 million chiefly as a result of the valuation by the equity method of several significant investments.

Non-current assets (liabilities) held for sale

Non-current assets (liabilities) held for sale amounted to €188.4 million at June 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 €182.7 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 year, largely reflects the impairment losses reported by the Todini Group in relation to several projects in the process of completion. More detailed information is provided in this Half-year financial report under the section entitled “Non-current assets held for sale and discontinued operations – Part two”.

Provisions for risks

The provisions for risks amounted to €103.1 million, practically unchanged compared to the end of the previous year. 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 €18.2 million, a decrease of €2.3 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 €15.9 million. The negative change of €0.6 million compared with December 31, 2013, is mainly related to the reclassification of some receivables from non-consolidated 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 €80.1 million at June 30, 2014. The change in net tax assets and liabilities compared to the previous year, which was negative and came to €1.1 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 Half-year consolidated 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 €358.5 million, from €266.5 million to €625.0 million. In view of the aforementioned adoption of the new standards IFRS 10 and IFRS 11 and their effects applied retrospectively to December 31, 2013, please note that when the Group conducted the in-depth studies on the application criteria with which these standards have been adopted in relation to investments held by the Group in certain Italian consortia and consortium companies - proportionally consolidated under the previously applicable framework - it was found that a more appropriate classification was required for the existing debit/credit positions between the parent company and those units with respect to the classifications noted in the Directors’ Report at March 31, 2014. These studies essentially focused on certain liabilities highlighted by the parent company for capital funding of some consortia companies, used to reduce the value of the non-current financial assets and which, with respect to comparative information presented at March 31, 2014, have consequently resulted in a reduction in the net fixed assets, with a corresponding increase in the balance of working capital in the comparative figures provided herein.

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 €235.9 million, up €20.6 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, offset only in part by the use of inventories for construction activities on some foreign contracts, among which, in particular, the Angostura and Sogamoso River hydroelectric projects and lots 2 and 3 of the Abu Dhabi water tunnel.
• work in progress increased by €253.4 million, from €1,105.2 million to €1,358.5 million. This change reflects the effects of production gains, particularly with regard to projects in Africa (Ethiopia and Nigeria), the Far 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 €1,560.6 million for a decrease of €70.1 million. This change was mainly due to the effects of the following factors:
• The net decrease in contractual advance payments by €50.0 million, due to 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 GmbH, sold to third parties before the end of the period and
• the increase in "negative work in progress" totaling approximately €23 million, mainly relating to several projects in the Middle East (UAE, Qatar).
• The current receivables and payables decreased, totaling €60.6 million and €28.9 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 detailed information is provided in the subsequent sections of this Half-year financial report, 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 €38.0 million, mainly due to the receivables from third party partners in new projects in the Middle East. Other current liabilities decreased by €8.1 million, chiefly due to a reduction in payables owed to third party partners in projects underway in South Africa.

Net financial position

At June 30, 2014, the consolidated net financial position of the Group's continuing operations amounted to €417.7 million (negative by €331.7 million), while that of the non-current assets held for sale amounted to €67.1 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 0.37. The net financial position for non-current assets held for sale refers to Todini Costruzioni Generali S.p.A. and its subsidiaries.

On June 20, 2014, as part of an operation 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 operation 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 €161.5 million. In the same context of this offer, aimed as described to Italian and international investors only, the parent company Salini Costruttori S.p.A. at the same time 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..

The change in the net financial position, net of that resulting from the aforementioned transaction, is substantially consistent with the evolution in net working capital, which increased compared with December 31, 2013. This situation is considered typical of industry dynamics in the earlier months of the year.

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

Net financial position of the Salini Impregilo Group