The Board of Directors of the Itway Group approves the 2017 Financial Statements and the Interim Management Report as at March 31, 2018
2017 FINANCIAL STATEMENTS
The BoD of the Itway Group approves the 2017 Financial Statements
INTERIM MANAGEMENT REPORT AS AT MARCH 31, 2018
Ravenna, May 30, 2018 – The Board of Directors of Itway S.p.A., a company listed on the Star segment of Borsa Italiana, approved today the financial statements as at December 31, 2017 and the individual financial statements to submit to the shareholders’ meeting.
At the same meeting the Board of Directors also approved the interim financial report as at March 31, 2018.
2017 saw a continuation of the strategic re-positioning of the Group that started in past fiscal years following the sale in 2016 to the Esprinet Group of the value added IT distribution activities related to wholesale marketing to System Integrators and Value Added Resellers of hardware, software and various services in Italy, Spain and Portugal. In particular, in 2017 there was a further disposal, completed in November 2017, whereby all of the share capital of the Business-e S.p.A subsidiary was sold to Maticmind S.p.A, a company also operating in the IT sector, for an agreed price of Euro 12,335,526 (of which Euro 6.6 million was already received). This transaction was already communicated to the market with press releases on October 16, 2017 and November 8, 2017.
The transaction was completed on November 8, 2017 by collecting a first installment of the consideration equal to Euro 6,140,526, paid by Maticmind SpA, which was added to the deposit of Euro 500,000 paid upon signing the preliminary contract. The contractual agreements stipulated with Maticmind stipulated that the balance of the price should be paid in further tranches with deferred payments until the 1st anniversary of the closing of the sale.
However, on March 31, 2018 and April 30, 2018, pending the completion of certain accounting audits initiated by Maticmind S.p.A. upon the acquisition of 100% of Business-E, Maticmind omitted the payment of two tranches of price, expiring on those dates, for a total of Euro 3 million.
In May 2018, several meetings took place between the buyer and the seller to clarify some issues which Maticmind objected to and which they considered to justify the non-payment. Following these meetings, a settlement agreement is being formalized, aimed at preventing possible litigation,
The Itway Group operates in three main types of activities: 1) value added distribution of “best of breed” software technology (the best among what is available, at all moments, on the market) in Greece and Turkey; 2) offer of services and consultancy aimed at training and supporting companies in the fields of Cybersecurity, IT security, Managed Security Services; 3) and in the innovative and emerging Cloud Computing, Internet of Things, Big Data and Blockchain. The main Strategic Business Units (SBU) are in charge of these sectors: the VAD SBU (Value Added Distribution), the VAR SBU (Value Added Reseller) and the VAS SBU (Value Added Services).
ANALYSYS OF THE OPERATING RESULTS, FINANCIAL POSITION AND CASH FLOWS OF THE GROUP IN 2017
Following are the main consolidated economic indicators for the fiscal period ended December 31, 2017 compared with those of the previous fiscal period and with the new operating perimeter highlighted (Total Group includes the business unit sold, the results of the disposed Business-e subsidiary alone and the net result corresponding to the new consolidation perimeter).
|Thousands of Euro||Total Group||Business-e transaction||Net Itway Group||Total Group||Business-e transaction||Italy, Iberica VAD transaction||Net Itway Group|
In relation to the perimeter of the Group corresponding to the assets that remained within Itway, consolidated Revenue totalled Euro 31.1 million, up 6.1% compared with Euro 29.3 million in 2016
EBITDA was a negative Euro 1.4 million compared with a positive Euro 4.1 million in 2016; EBIT in 2017 was a negative Euro -2.6 million compared with Euro 3.2 million year on year. The Result before taxes was a negative Euro -0.6 million compared with a negative Euro -1.5 million in the same period of 2016.
Group Net Financial Position
|Thousands of Euro||
|Cash on Hand||440||1,523|
|Current financial assets||1,428||–|
|Current financial liabilities||(9,667)||(22,164)|
|Current net financial position||(6,987)||(18,158)|
|Non current financial assets||2,098||500|
|Non current financial liabilities||(1,899)||(3,642)|
|Non current net financial position||199||(3,142)|
|Total net financial position||(6,788)||(21,300)|
The Financial Position as of December 31, 2017 totalled approx. Euro -6.8 million compared with Euro -21.3 million at December 31, 2016, improving by approx. Euro 14 million mainly as a result of:
Current liabilities furthermore include two Iccrea medium-term loans, for a total of Euro 912 thousand, for which the covenants were breached and that are therefore currently classified as short term, even though the parameters are currently being redefined in order to maintain the original status of medium-term.
The digital market in Italy in 2017 grew +2.3% (compared with 1.8% in 2016) with the innovative Digital Enablers sectors continuing to expand. These are the segments in which the Group made important investments over the past five years and is well positioned. Assinform forecasts for 2016-2019 continue to indicate an expansion in the different sectors with double digit growth rates [Cybersecurity (+11.9%), Cloud Computing (+19.8%), IoT (+14.3), Big Data (+23.1%)]
Market Positioning: The Itway Group during the fiscal year continued to invest in the markets of Cybersecurity, Cloud Computing, IoT and Big Data that are all related and correlated. Furthermore, it continued to reposition on new product lines in order to replace low margin lines with those with higher value added that also allow for a lower use of working capital.
Performance of the Business Areas
Sector performance: Value Added Distribution (VAD)
In the Value Added Distribution sector the Group operates in Greece and Turkey in the distribution of specialized hardware and software products, certification services on distributed software technologies and pre- and post-sale technical assistance for clients that are System Integrators and Value Added Resellers that sell products directly to end clients.
Following are the main economic indicators of the VAD SBU, compared with those of the previous fiscal year; in the Italy and Iberica VAD Transaction column are the data of the business units sold in the previous fiscal year, as already indicated:
|(thousands of Euro)||December 31, 2017
|December 31, 2016
|Italy, Iberica VAD transaction||Total Itway VAD|
|Result before taxes||1,782||1,548||1,264||2,812|
|Result for the period||1,369||1,116||261||1,377|
The Turkish subsidiary confirmed once again the development prospects of the Country and ended the fiscal period with revenue volumes and profitability in line with the same period of 2016. The results for the period were however impacted by the performance of the Turkish Lira exchange rate, which lost approx. 23% of its value against the Euro compared with 2016. Therefore, in local currency terms, results would show a revenue increase of 16% and a growth in the Result for the period of 22% and a net profit of over Euro 1 million.
The performance of the Greek subsidiary was in line with 2016 and, despite the continued delicate situation of the Country, is consolidating the results achieved in the past fiscal years ending the period with a net profit of over Euro 300 thousand.
Sector performance: Value Added Reseller SBU
Through the Value Added Reseller SBU, the Group operates in the following market segments:
Following is the brief income statement of the VAR SBU, compared with the previous fiscal year. The data refer to the Business-e subsidiary, 100% of which was sold to Maticmind in November 2017.
|Thousands of Euro||31/12/2017||31/12/2016|
|Result before taxes||(2,072)||528|
|Result for the period||(2,072)||214|
Business-e, a leader in Italy in the Cybersecurity sector, after its sale has continued its growth within the Maticmid S.p.A. group with which Itway has in place industrial agreements for the future on Cybersecurity that also involve 4Science (Data Curation and Big Data), with the VAR SBU and iNebula (Cloud Computing and IoT) of the VAS SBU.
Sector performance: Activities of the Parent Company and other Start-up sectors
After the sale of the Italian distribution activities to Esprinet S.p.A., Itway has assumed the role of parent company listed on Borsa Italiana S.p.A. that supplies services of different nature to the operational subsidiaries and includes new sectors, described below, which are investing in the realization of products and tat are in an operational and commercial start-up phase.
Furthermore, Iway S.p.A., following the sale of Business-e, starting from 2018 has become an operational holding with activities including the VAR SBU.
These sectors, related but that do not coincide with the historical ones (VAD and VAR) still, do not yet make a relevant contribution to the consolidated results but they are important in terms of strategy to strengthen and diversify the business segments
These new innovative sectors, still in the start-up phase, are::
During the period further services were developed that relate to more administrative aspects and that were thought for professional and accounting firms. This expansion was made possible thanks to the introduction in iNebula (the company of the Group that covers “in the cloud” services) of the specific know how of some professional and technical experts that came from the cloud services for professionals sector and that had gained important experience specialized companies. This also allowed to also expand, in addition to the previously described sectors, to the area of Process Governance with proprietary and high value added services and know-how.
Information Technology for Science: ICT for Cultural Heritage and Data Curation services, in the start-up phase. The reference market is worth Euro 4 billion in Europe and there are slightly more than 10 players specialized in this sector at a global level
ANALYSIS OF OPERATING RESULTS, FINANCIAL POSITION AND CASH FLOWS OF THE PARENT COMPANY ITWAY SPA
For the parent company Itway SpA, the fiscal year as at December 31, 2017 ended with a Net Result of Euro -1,783 thousand, compared with Euro -64 thousand in the previous year.
EBIT came in at a negative Euro 2,182 thousand compared with a positive Euro 602 thousand in the previous year.
Net Financial Position of the Parent Company
|thousands of Euro||31/12/2017||
|Cash on hand||129||119|
|Current financial liabilities||(8,171)||(14,529)|
|Current net financial position||(7,230)||(14,013)|
|Non current financial assets||2,098||500|
|Non current financial liabilities||(1,899)||(2,845)|
|Non current financial position||199||(2,345)|
|Total net financial position||(7,031)||(16,358)|
Also the net financial position of the parent company Itway S.p.A. as of December 31, 2017 improved by approx. Euro 9.3 million compared with December 31, 2016 as it received a significant portion of account receivables of the business units sold in 2016 and that were in force as of December 31, 2016, which allowed to pay back the related bank advances.
Current financial liabilities for the time being include a medium-term Iccrea financing for Euro 267 thousand, for which the terms of the covenants were not observed and is therefore classified as short term. The parameters are currently being redefined in order to maintain the original status of medium term.
Expired debt positions of Itway S.p.A. and of the Itway Group, divided by type (financial, account, tax, social security and towards employees) and the eventual related reaction initiatives of creditors (reminders, interruption of supply, injunctions, etc.)
As of December 31, 2017 expired financial positions of the parent company Itway totalled Euro 6.9 million, which the expired financial positions of the Itway Group totalled Euro 7.7 million. Talks with Banks are underway to re-define the terms and conditions to remodulate financial indebtedness.
The parent company as of December 31, 2017 has expired account indebtedness towards suppliers of approx. Euro 2.5 million (of which approx. Euro 0.4 million for amounts being contested by debtors, also through legal procedures) and an indebtedness towards tax authorities for VAT debt expired as of December 31, 2017 totalling approx. Euro 0.2 million related to debt not paid at their natural expiry and that was settled by the terms foreseen by regulations in force in the month of May 2018.
The Itway Group as of December 31, 2017 had an expired account indebtedness towards suppliers of the Companies of the Group totalling approx. Euro 6.8 million (of which approx. Euro 2.1 million for amounts being contested by the debtors, also through legal proceedings) and an indebtedness towards tax authorities for VAT debt that expired as of December 31, 2017 totalling approx. Euro 0.35 million related to debt not paid at the natural expiry during the 2016 fiscal year but that is expected to be paid within the terms foreseen by regulations in force.
As of March 31, 2018 the Itway Group had an expired account indebtedness towards suppliers of the Companies of the Group totalling approx. Euro 7.5 million (of which some Euro 2.1 million for amounts being contested by debtors also through legal proceedings) and an indebtedness towards tax authorities that expired March 31, 2018 totalling some Euro 559 thousand relate to debt not paid at the natural expiry in previous fiscal periods of which Euro 290 thousand were settle in the month of May 2018 and the balance is expected to be paid within the terms foreseen by regulations in force.
Please note that the Itway Group as of March 31, 2018 had social security debt not paid at the natural expiry totalling Euro 179 thousand of which Euro 156 thousand was settled in the month of May 2018 and the balance will be paid within the terms foreseen by the regulations in force while there are no debts towards employees that have not been paid at the natural expiry.
In relation to the financial and account expired indebtedness of Itway S.p.A. and the Itway Group, mentioned above, please note that to date some reminders from creditors were received and there are legal disputes or initiatives for Euro 750 thousand while there has been no suspension of service. Furthermore, the Company and the Group have begun talks with financial creditors in a bid to define the terms and conditions to remodulate debt.
The Company and the Group as of December 31, 2017 did not have social security debt and debt towards employees that were not paid at the natural expiry.
Relations with related parties:
During the 2017 fiscal period the Group had commercial and financial relationships with related parties. These relationships were part of normal management activity, regulated at market conditions that are established by contract by the parties in line with the standard procedures.
Industrial plan for 2018-2022 and financial plan of Itway Spa for 2018/2019
The Board of Directors approved the guidelines of the industrial plan of the Group for the period 2018-2022 and the financial plan for Itway S.p.A. for all of 2019 following the sale of Business-e and also considering the sale of Itway Hellas SA and Itway Turkyie Ltd for which the legal and financial due diligence leading up to the Sale and Purchase Agreement has been completed. These guidelines foresee that the Group does not exit from the security sector but that it re-positions itself. Furthermore the plan foresees a greater focus on the Be Innova S.r.l. subsidiary and on the iNebula and 4Science start-ups. There will be a continuation of the development of foreign subsidiaries also in the MEA area where the Group is present through its stake in Itway Mena FZC.
In light of the what emerges from the approved financial plan and after having made the necessary checks of future expected cash flows, also considering the sale of Itway Hellas SA and Itway Turkyie Ltd for which the legal and financial due diligence leading up to the Sale and Purchase Agreement has been concluded, the Directors have deemed with reasonable certainty that the Company and the Group in the new configuration are able to face their commitments in the 2018-2019 timeframe and therefore confirmed the adoption on the going concern principle in drafting the consolidated financial statements and the separate financial statements of the Parent Company as at December 31, 2017.
Foreseeable evolution of operations
The sale of Business-e S.p.A. that represented an important asset in the strategic vision of the Group, significantly rebalanced the Group’s finances. As seen in the 2018-2022 Industrial Plan there is no exit from the security sector: a re-positioning is underway and based on investments made by Itway S.p.A. that will be covered with the proceeds from the sale of the Greek and Turkish subsidiary. This will go hand in hand with a greater focus on the Be Innova subsidiary and the iNebula and 4Science start-ups.
Proposal for the allocation of the Result of the period
In terms of the al location of the result for the period, the Board of Directors proposes to carry forward the loss of Euro 1,783,139 incurred in 2017.
INTERIM MANAGEMENT REPORT AS AT MARCH 31, 2018 (unaudited)
In the quarter ended March 31, 2018 operating revenue of the “Itway Group” rose in volume terms by 23.9% compared with the same year earlier period while EBITDA was a negative Euro 369 thousand compared with Euro -472 thousand in the same period of 2017. EBIT and the Result before taxes came in respectively at Euro -519 thousand and Euro -571 thousand compared with the same period of 2017 when EBIT came in at Euro -622 thousand and the Result before taxes at Euro -626 thousand.
|(Thousands of Euro)||Quarter ended March 31, 2018
|Quarter ended March 31, 2017 (restated)|
|Itway Group||Itway Group||Business-e transaction||Total consolidated|
|Result before taxes||(571)||(626)||181||(445)|
The Net Financial Position of the Group improved as at March 31, 2018 to Euro -5.4 million compared with Euro -6.8 million as at December 31, 2017 due to the cash on hand of the Greek and Turkish subsidiaries.
The Parent Company as at December 31, 2017 owns 887,366 own shares (equal to 11.22% of share capital) for a nominal value of Euro 443,683 and a net movement in 2017 of approx. Euro -148 thousand and an overall purchase cost for the shares held in portfolio of Euro 1,386 thousand (equal to the amount reflected in the Own share reserve deducted from net equity of the fiscal period and at a consolidated level). During the 2017 fiscal year, as authorized by the Shareholders meeting of Itway Spa, a total of 200 own shares were purchased (equal to 0.00% of share capital) for a nominal value of Euro 100 and a total of 82,600 shares were sold (equal to 1.04% of share capital) for a nominal value of Euro 41,300.
As of March 31, 2018 the Parent Company owns No. 886,366 own shares (equal to 11.21% of share capital) for a nominal value of Euro 443,183 and a revenue (booked in the balance sheet as a deduction from net equity) for the period equal to Euro 1,360.00; during the period a total of No. 1,000 own shares were sold (equal to 0.01% of share capital) for a nominal value of Euro 500, as authorized the Shareholders’ meeting of Itway S.p.A..
Following the end of the quarter and to the date of the current report no own shares were purchased or sold.
As foreseen by paragraph 2, art. 154-bis of the T.U.F., the manager mandated to draft the corporate Accounting documents of Itway Group, Sonia Passatempi, declares that the corporate accounting information in this press release corresponds to the documental evidence, financial books and accounting records.
Founded in Ravenna on July 4, 1996, Itway S.p.A. is the parent of a group that operates in the IT sector through the planning, production and distribution of technologies and solutions in the cyber security sector. For over 20 years represented a reference point for digital transformation solutions and services. Since 2001, Itway has been listed on the STAR segment of Borsa Italiana. www.itway.com
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