Reclassified consolidated income statement of the Salini Impregilo Group
| (Amounts in thousands of euros) | 1st quarter 2014 | 1st quarter 2013 (§) | Change |
|---|---|---|---|
| Operating revenue | 813,643 | 305,825 | 507,818 |
| Other revenue | 45,343 | 2,035 | 43,308 |
| Total revenue | 858,986 | 307,860 | 551,126 |
| Operating costs | (770,688) | (261,975) | (508,713) |
| Gross operating profit (EBITDA) | 88,298 | 45,885 | 42,413 |
| EBITDA % | 10,3% | 14,9% | |
| Amortization and depreciation | (43,231) | (18,750) | (24,481) |
| Operating profit (EBIT) | 45,067 | 27,135 | 17,932 |
| Return on Sales | 5,2% | 8,8% | |
| Financing income (costs) and gains (losses) on investments | |||
| Financing costs | (19,777) | (4,788) | (14,989) |
| Gains on investments | 3,793 | 20,308 | (16,515) |
| Net financing costs and gains on investments | (15,984) | 15,520 | (31,504) |
| Earnings before taxes (EBT) | 29,083 | 42,655 | (13,572) |
| Income taxes | (9,597) | (7,202) | (2,395) |
| Profit (Loss) from continuing operation | 19,486 | 35,453 | (15,967) |
| Profit (Loss) from discontinued operations | 725 | (6,289) | 7,014 |
| Profit (Loss) before allocation to non-controlling interests | 20,211 | 29,164 | (8,953) |
| Non-controlling interests | (4,919) | 1,164 | (6,083) |
| Profit (Loss) attributable to owners of the parent | 15,292 | 30,328 | (15,036) |
(§) The data for the first quarter of 2013 were reclassified in accordance with the requirements of IFRS 5 to reflect our decision to hold Todini available for sale; in addition, in that period the Impregilo Group was valued by the equity method.
Reclassified consolidated income statement of the Salini Impregilo Group for the first quarter of 2014 with a comparison with homogeneous data for the corresponding period the previous year
| (Amounts in thousands of euros) | 1st quarter 2014 | Salini Group 1st quarter 2013 (§) | Impregilo Group 1st quarter 2013 reclassif. as per IFRS 11 and IFRS 5 (*) | Elimination of the effects of the valuation of Impregilo | Salini Group 1st quarter 2013 reclassif. on a homogeneous basis | Change |
|---|---|---|---|---|---|---|
| Operating revenue | 813,643 | 305,825 | 489,092 | - | 794,917 | 18,726 |
| Other revenue | 45,343 | 2,035 | 12,255 | - | 14,290 | 31,053 |
| Total revenue | 858,986 | 307,860 | 501,347 | - | 809,207 | 49,779 |
| Operating costs | (770,688) | (261,975) | (463,333) | - | (725,308) | (45,380) |
| Gross operating profit (EBITDA) | 88,298 | 45,885 | 38,014 | - | 83,899 | 4,399 |
| EBITDA % | 10,3% | 14,9% | 7,6% | 10,4% | ||
| Amortization and depreciation | (43,231) | (18,750) | (14,636) | - | (33,386) | (9,845) |
| Operating profit (EBIT) | 45,067 | 27,135 | 23,378 | - | 50,513 | (5,446) |
| Return on Sales | 5,2% | 8,8% | 4,7% | 6,2% | ||
| Financing income (costs) and gains (losses) on investments | ||||||
| Financing costs | (19,777) | (4,788) | (11,193) | (15,981) | (3,796) | |
| Gains on investments | 3,793 | 20,308 | 2,178 | (20,308) | 2,178 | 1,615 |
| Net financing costs and gains on investments | (15,984) | 15,520 | (9,015) | (20,308) | (13,803) | (2,181) |
| Earnings before taxes (EBT) | 29,083 | 42,655 | 14,363 | (20,308) | 36,710 | (7,627) |
| Income taxes | (9,597) | (7,202) | (4,680) | (11,882) | 2,285 | |
| Profit (Loss) from continuing operation | 19,486 | 35,453 | 9,683 | (20,308) | 24,828 | (5,342) |
| Profit (Loss) from discontinued operations | 725 | (6,289) | 59,130 | 52,841 | (52,116) | |
| Profit (Loss) before allocation to non-controlling interests | 20,211 | 29,164 | 68,813 | (20,308) | 77,669 | (57,458) |
| Non-controlling interests | (4,919) | 1,164 | 179 | 1,343 | (6,262) | |
| Profit (Loss) attributable to owners of the parent | 15,292 | 30,328 | 68,992 | (20,308) | 79,012 | (63,720) |
(§) The data for the first quarter of 2013 were reclassified in accordance with the requirements of IFRS 5 to reflect our decision to hold Todini and Fisia Babcock available for sale; in addition, in that period the Impregilo Group was valued by the equity method.
As described above, the data commented below refer to the first quarter of 2013, reclassified on a homogeneous basis.
Revenue
The revenue booked in the first quarter of 2014 totaled 859.0 million euros (809.2 million euros on a homogeneous basis) and included 759.6 million euros generated outside Italy (659.4 million euros on a homogeneous basis). A revenue breakdown by geographic region is provided in the table below
| (Amounts in thousands of euros) | 1st quarter 2014 | 1st quarter 2013 | Change | % |
|---|---|---|---|---|
| Italy | 101,112 | 151,980 | (50,868) | (33.5%) |
| EU (except Italy) | 100,094 | 74,966 | 25,128 | 33.5% |
| Non-EU countries | 124,324 | 50,105 | 74,219 | 148.1% |
| Asia | 44,707 | 50,324 | (5,617) | (11.2%) |
| Middle East | 51,234 | 41,102 | 10,132 | 24.7% |
| Africa | 235,934 | 196,021 | 39,913 | 20.4% |
| North America | 27,483 | 19,242 | 8,241 | 42.8% |
| South America | 172,740 | 227,626 | (54,886) | (24.1%) |
| Asia Pacific | 3,078 | 0 | 3,078 | n.a. |
| Eliminations | (1,720) | (2,159) | 439 | (20.3%) |
| Total revenue | 858,986 | 809,207 | 49,779 | 6.2% |
Total consolidated revenue shows an increase of about 6.2% compared with the amount stated on a homogeneous basis in the corresponding period the previous year. This increase is the net result of the following factors:
- production progress on some large-scale projects in Ethiopia, Denmark and Poland, which, compared with the first quarter of 2013, became fully operational generating an increase in operating revenue of about 138 million euros;
- temporary slowing of production in some large-scale projects in Venezuela, which were adversely affected by the peculiar social and political conditions that developed in that country in 2013 and continued to deteriorate in the first quarter of 2014, which caused a reduction of about 20 million euros in operating revenue compared with the first three months of 2013. However, the Group’s presence in that geographic region has been well established for a number of years and similar situations of instability already occurred in the past. Considering the social importance of the projects that are being developed in Venezuela and the relationships that exist both at the social and contractual level, it seems reasonable to presume that the conditions existing at this point are temporary and, consequently, conclude that the occurrence of specific situations of a critical nature should be viewed as nothing more than a mere possibility;
- the problems encountered in connection with the work on the expansion of the Panama Canal, specifically regarding the deterioration of the relationships with the customer—described in detail in the Group’s 2013 Annual Financial Report, which should be consulted for more complete information-which also resulted in a reduction of production volumes of about 31 million euros in the first quarter of this year;
- the virtual completion of major road and highways projects in Italy and the sale to external parties, in a transaction that closed the previous year, of activities related to the construction of Milan’s External East Bypass, which reduced operating revenue by a total of about 51 million euros.
The item "Other revenue" includes mainly positive components of income originated in the projects in progress and arising from and ancillary industrial activities not directly attributable to the contract with the client.
Operating profit
The operating profit amounted to 45.1 million euros (positive by 50.5 million euros on a
homogeneous basis). A breakdown of operating profit by operational geographic region is provided in the table that follows:
| (Amounts in thousands of euros) | 1st quarter 2014 | 1st quarter 2013 | Change | % |
|---|---|---|---|---|
| Italy | (42,492) | (31,171) | (11,321) | 36.3% |
| UE (except Italy) | 4,465 | 3,922 | 543 | 13.8% |
| Non-EU countries | 1,299 | (367) | 1,666 | (454.0%) |
| Asia | 12,603 | 6,405 | 6,198 | 96.8% |
| Middle East | 7,334 | (107) | 7,441 | (6954.2%) |
| Africa | 51,858 | 46,713 | 5,145 | 11.0% |
| North America | 1,406 | (119) | 1,525 | (1281.5%) |
| South America | 9,281 | 27,418 | (18,137) | (66.1%) |
| Asia Pacific | (687) | (2,181) | 1,494 | (68.5%) |
| Eliminations | 0 | 0 | 0 | n.a. |
| Consolidated operating profit - EBIT | 45,067 | 50,513 | (5,446) | (10.8%) |
Please note that the Italy region includes the overhead costs for the central organizations not directly attributable to contracts in progress.
The performance of the operating activities in the first quarter of 2014, both in absolute terms and in a homogeneous comparison with the corresponding period the previous year, was not affected by unusual occurrences extraneous to the production cycle and, in this regard, no specific situations occurred that would have required updating the full-life projections for the Group’s main projects. Therefore, given this situation, the operating profitability achieved in the quarter subject of this Report reflects in a substantially consistent fashion the evolution of the production activities described in the comments to “Revenue.”
With regard to the different types of operating costs, a comparison with homogeneous data for the first quarter of 2013 shows the following main changes:
- the increase in service costs, including subcontractors and other operating expenses, amounting to 39.8 million euros, is directly attributable to the change in production recognized for some projects structurally characterized by a greater recurrence of this type of charges;
- the increase of 5.6 million euros in accruals to provisions and impairment losses reflects primarily adjustments made to receivables owed by customers in Venezuela to reflect a more conservative and reasonable time horizon for the collection of these receivables, taking also into account the social and political situation that currently exists in that country, as mentioned above;
- lastly, the increase in amortization and depreciation expense reflects, in addition to the reversal attributable to the quarter of the higher values assigned to some intangible assets of the old Impregilo upon acquisition of control by the old Salini, the circumstance that the projects in Denmark and Ethiopia specifically, which generated an increase in revenue compared with the first quarter of 2013, are characterized by a production structure of the direct type, with the presence of substantial use of plant and equipment and that, consistent with the performance of industrial activities, generated a corresponding increase in depreciation expense compared with the comparative period.
Financing income (costs) and gains (losses) on investments
Net financing costs totaled 19.8 million euros (costs of 16.0 million euros on a homogeneous basis), while net gains on investments amounted to 3.8 million euros (2.2 million euros).
The increase in net financing costs, compared with the corresponding amount stated on a homogeneous basis for the first quarter of 2013, reflects primarily the effect of the following factors:
- an increase of 12.2 million euros in net financial expense caused chiefly by a rise in gross financial debt compared with the first quarter of 2013. It is worth mentioning that within the framework of the complex activities that resulted in the acquisition of control over the Impregilo Group after the end of the first quarter of 2013, several important medium/long-term structured financing transactions were carried out. These transaction, which are described in detail in the 2013 Annual financial report of the Group and in the various mandatory disclosure documents made available to the public in 2013, while partially repaid in 2013, continued to have a burdensome effect in the first quarter of 2014 and were not taken into account in the reclassification of the economic results for the comparative period;
- an improvement of 8.4 million euros in the currency translation effect, that reflects both the effect of the appreciation of the euro versus some foreign currencies in which some project cost items are denominated and the positive effects resulting from discrepancies existing in the foreign exchange markets with regard to some currencies for which official fixed exchange rates are arbitrarily maintained, which did not produce the same effects in the first quarter of 2013.
Profit from discontinued operations
During the period reviewed in this chapter, the profit from discontinued operations totaled 0.7 million euros (profit of 52.8 million euros on a homogeneous basis). The reported profit is the net result of the following factors:
- a profit of 4.9 million euros (loss of 6.3 million euros on a homogeneous basis) reported by Todini Costruzioni Generali S.p.A. and its subsidiaries;
- a loss of 0.2 million euros reported by the remaining activities of the USW Campania Projects; and
- a loss of 4.0 million euros (loss of 0.3 million euros) reported in the first quarter of 2014 by Fisia Babcock Environment G.m.b.H. It is worth mentioning that the sale of the investment in this company to external parties closed in May 2014.
Complete information about the main developments about the main developments affecting the various assets held for sale and discontinue operations is provided in the corresponding chapter presented later in this Interim report on operations.
Income taxes
The tax expense recognized for the first quarter of 2014, in accordance with the requirements of the relevant international accounting standards, reflects the average tax rate that could be estimated at this point for the full year, based on the Group’s experience and currently available projections for that period. However, it is worth mentioning that the abovementioned rate is the same as the rate estimated, on a homogeneous basis for the corresponding period the previous year.
Non-controlling interests
The portion of the net profit attributed to non-controlling interests in the subsidiaries had a negative effect of 4.9 million euros (positive effect of 1.3 million euros).