Tea Group
Consolidated financial statements for
2016
Tea Group
Index
Tea Group – Directors’ Report on Operations
The Group 5 Group Regulations 5 Main events during the year ended 31 December 2016 6 Consolidated Financial Statements 12
Tea Group – Consolidated Financial Statements
Consolidated Financial Statements 15
Notes to the Consolidated Financial Statements 29 Introduction 30 Balance Sheet – Assets 37 Balance Sheet – Liabilities and Equity 52 Income Statement 60
Financial Statements of the consolidated companies 69
Report of the External Auditors 80
Financial Statements as at 31/12/2016 Page 2
Tea Group
Directors’ Report on the Operations
2016 Consolidated Financial Statements
Financial Statements as at 31/12/2016 Page 3
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Financial Statements as at 31/12/2016 Page 4
Tea Group
Tea Group Directors’ Report – Consolidated Financial Statements for 2016
1) THE GROUP The Tea Group comprises holding company Tea S.p.A. and the following subsidiaries: • Tea Energia S.r.l. (100% owned subsidiary): operates as a retailer of electricity, gas and heat ; • Mantova Ambiente S.r.l. (40.48% owned but with a majority of General Meeting voting rights): provides a municipal solid waste collection and distribution service, disposes of all types of waste, provides green maintenance services; • SEI S.r.l. (100% owned subsidiary): activities include gas distribution, operation of teleheating systems and cogeneration of electricity, management of street lighting and heating system; • Tea Acque S.r.l. (60% owned subsidiary): operates in the municipal water and sewage service segment; • Tea Onoranze Funebri S.r.l. (100% owned subsidiary): operates in the funeral services business; • Electrotea S.r.l.( 60% owned by Tea SEI S.r.l.): activities regard electrical power plants using renewable sources of energy; • Tea Reteluce S.r.l. (60% owned subsidiary): street lighting services; • AqA Mantova S.r.l. (100% owned subsidiary): operates in the municipal water and sewage service segment in the Municipality of Castiglione delle Stiviere; • Global Funeral Service S.r.l. (100% controlled through Tea Onoranze Funebri S.r.l.): operates service centre for funeral service companies.
Membership of a Group Following implementation of Legislative Decree 118/2011, the Municipal Authority of Mantua, majority shareholder of the Tea Group, shall prepare Consolidated Financial Statements for the Group with the other companies controlled by it.
2) GROUP REGULATIONS The organisational/corporate decisions designed to separate management and control functions from operating activities have required the establishment of appropriate mechanisms to safeguard the Group’s cohesion. Accordingly, two key actions have been taken: a) – assumption of Steering and Monitoring Regulations operational since 1.9.2006; b) – adoption of an Organisational, Management and Control Model in terms of Legislative Decree 231/2001, while appointing a Supervisory Board (SB).
Steering and Monitoring Regulations The objective of the Steering and Monitoring Regulations is to document support processes (or Decision-making Processes) in order to guarantee a consistent approach within the Group’s new organisational structure.
Scope of application of the Steering and Monitoring Regulations: The Steering and Monitoring Regulations apply to holding company Tea S.p.A. (“ Holding company ”) and to all of the direct and indirect subsidiaries (“ Operating Companies ”).
The Company has adopted an Organisational, Management and Control Model in terms of Legislative Decree 231/2001 and provided that the Code of Conduct attached to the Tea Organisational Model should be used as the main reference for standards and procedures by all of the subsidiaries; the subsidiaries have formally accepted said document when adopting their own Organisational, Management and Control Models. Compliance with the Group’s Code of Conduct has been included as a binding contractual requirement in the Tea Group’s General Terms and Conditions of Sale. Over the years, the model has been supplemented and updated in relation to: • the operational rules of the organisation; • certain types of newly introduced offences including: organised crime, industrial and trade offences, copyright offences and offences regarding enticement not to make statements, or to make false statements, to the judicial authorities; • requirements introduced by the Authority for Electricity, Gas and the Public Water Service in relation to unbundling.
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3) MAIN EVENTS DURING THE YEAR ENDED 31 DECEMBER 2016 For details regarding holding company Tea S.p.A., reference should be made to the Directors’ Report on Operations in said company’s separate financial statements for 2016. Information regarding the main subsidiaries is provided below:
Tea Energia General Performance Since the first few days of the year, the sharp downturn on the oil market was the main factor that boosted commercial efforts focused mainly on the industrial client base. Much earlier than in prior years, these clients set out their conditions for the procurement of gas and electricity in 2017. In the wake of oil price levels – at their lowest in the last ten years – the Company had already renewed agreements with almost all of its customer portfolio in the early part of the year. This market situation lasted until April when oil price increases led to higher prices for all commodities. Market conditions during this time period enabled the Company to optimise its own electricity purchases. The company has continued along the path set out in its business plan with the objective of growing and improving its trading activities, with a return to growth in sales in the industrial segment, especially in sectors where there has been at least a slight recovery in consumption and in investment confidence. All other segments of the customer base have grown by number. In particular, domestic and mass market electricity contracts have recorded significant increases (up by more than 21% on prior year in the free market segment), a result which consolidates the structural trend of growth seen in recent years. The fact the Italian TV License Fees now have to be collected via electricity bills (for domestic customers) has forced the Company to implement the necessary infrastructure, providing all of its sales channels with appropriate training. Unfortunately, this represents yet another “unrelated expense” collected via electricity bills and the percentage cost of raw materials is now at an all-time low level (25% of total cost per KWh). This makes it essential to develop commercial offers that go beyond mere discounts, which are sometimes tiny and are not always decisive when customers are considering a change of electricity provider.
In terms of gas procurement, the improvement of the business has continued with a partial increase in volumes managed directly through Shipping activities and trading at “VTPs” (Virtual Trading Points). This has made commercial negotiations more competitive and has enabled the company to offer favourable, bespoke renewal conditions to Customers.
From the second half of 2016, there were changes to general market conditions, mainly in relation to regulatory changes made by the AEEGSI and the shutdown of some French nuclear plants. In more detail, from the end of September, two important factors contributed towards a general reversal of the spot and forward price trend:
o on the one hand, resolutions 444/2016/R/eel and 342/2016/E/eel affected operators’ procurement strategies, triggering a rise in spot prices;
o on the other hand, meanwhile, problems in France with EDF’s nuclear power plants (21 nuclear reactors out of 58 were shut down) has led to higher electricity prices in France with a major knock- on effect on all neighbouring countries, including Italy (Italy imports 15% of the electricity generated in France).
In light of information currently available and given the inherently volatile nature of the energy market, as well as price trends in the first few months of 2017, we decided we should make a provision to take account of the negative mark to market valuation of several contracts for the sale of electricity that were signed in 2016 and are valid at a fixed price in 2017.
Capital expenditure During the year, the Company completed a €1,344 thousand investment to connect the former Belleli factory to the teleheating network. At 31 December 2016, there was an ongoing IT project to update business operating software for a total of € 636 thousand.
Mantova Ambiente General performance Much of 2016 was used to renew the Company’s Institutionalised Public-Private Partnership, establishing the perimeter of operations for the next ten years and conducting the special tendering process which identified a Financial Statements as at 31/12/2016 Page 6
Tea Group suitable private sector partner and assigned operational duties. Some 50 municipalities with a total of 271,000 inhabitants have signed up to the new project. The new partner commenced its activities with effect from 1/01/2017. From a general operational perspective, it is fair to say that the Company has maintained its leading position in relation to the environmental cleansing services it provides, with specific reference to its separated waste collection performance. In terms of practical operational matters, the Company has commenced a detailed investigation to identify the operational and market oriented structures that should be implemented for the coming years, also taking account of the excellent separated waste collection performance which has radically changed the situation regarding waste in need of processing. More generally, almost all of the Company’s Financial Plan has been adjusted due to changes in collection frequency, especially for unseparated waste which is now at an all-time low level.
Capital expenditure Capital expenditure totalled € 1,752,962 including € 21,181 on intangible assets for software and leasehold improvements and € 1,731,781on tangible assets as follows:
Waste containers and dumpsters 96,790 Motor vehicles 1,364,275 Sundry equipment 91,854 Furniture and ordinary office equipment 33,062 Electronic office equipment 28,323 Recycling areas 102,477 Video surveillance systems 15,000 1,731,781
The capex on motor vehicles regarded the purchase of vehicles for mechanical road sweeping, special vehicles for the collection and transportation of waste, medium/light vehicles to improve the domestic waste collection service, vehicles for the collection of special waste (especially, waste produced by hospitals and medical centres) and other special vehicles for use in operations. “Waste containers and dumpsters” includes the purchase of 19 dumpsters with lids and two waste containers for use in municipal waste collection centres. With regard to the operation of waste treatment plants, the Company acquired new equipment for the composting plant in Pieve di Coriano and two reconditioned landfill compactors for use at the Cascina Olla landfill.
SEI – Servizi Energetici Integrati General Performance This Company’s activities include the distribution of gas for all purposes, operation of teleheating plants and networks and co-generation of heat and electricity, energy saving services, the development of renewable energy generation systems and operation of thermal power plants.
The company has continued to strive to increase its volume of business, focusing mainly on expanding its existing services and concessions. The following should be noted with regard to the two services whose development depends on participation in public tendering procedures (Gas Distribution and Energy Service): − Gas Distribution: this segment is highly regulated by the Authority (the AEEGSI) and has seen the establishment – on a national level – of Local Areas (177 in total) and the subsequent scheduling of competitive tenders for contracts to provide Distribution services in the various Local Areas. Specifically, the Mantua Area has been divided into two Local Areas (Local Area 1: Mantua North – Local Area 2: Mantua South). It should also be noted that the Local Area tendering process for Mantua has been postponed until 2019 as a result of the earthquake which struck in 2012 and consequent legislation. The 4 th regulatory period which provides for a 2.5% recovery of operating costs came into force in 2014.
The following may be noted in relation to the Energy Service: − the teleheating service has been hooked up to a total of 886,957 m 3 of premises, thus arriving at a total volume of 6,340,000 m 3. Comparing the total annual volume connected with that realised by other operators in the industry (see AIRU figures), it is clear that Tea Sei S.r.l. has one of the highest figures. − With regard to heating management, we highlight the acquisition of 12 new heating management services, Financial Statements as at 31/12/2016 Page 7
Tea Group
taking the total to 37.
We note the following in the field of hydropower production: − “Vasarina” plant: the plant is still operating on a provisional basis (since June 2015). Testing has been approved by the Provincial Authority has not yet given its formal approval. In 2016, the plant generated energy totalling 2,374,480 (2015: 1,324,144 kWh).
Capital expenditure The Company has incurred total capex of € 3,181,472 including € 149,948 on intangible assets and € 3,031,524 on tangible assets, as follows:
Software 93,959 Leasehold improvements 28,268 Transformation of thermal heat management equipment 27,720 Total capex on intangible assets 149,948
Gas supply points 762,102 Gas networks 1,377,451 Gas depressurising systems 166,557 Remote controls 41,581 “Vasarina” hydropower plant 22,737 Gas telemetering 506,825 Heat meters 80,675 Gas meters 52,487 Sundry equipment 9,476 Furniture and ordinary office equipment 1,514 Electronic office equipment 10,119 Total capex on tangible assets 3,031,524
Tea Acque General Performance In 2016, the Company consolidated its activities in the Municipalities of Porto Mantovano and San Giorgio di Mantova where it began to operate in March 2015 after acquiring the public water and sewage business of ASEP S.p.A. .
The Company’s activities have remained broadly unchanged compared to prior year in terms of both volume of water distributed and tariff levels. There have been no changes to the perimeter of operations except in relation to new areas now served by the water distribution network.
However, the Company has continued with all activities designed to improve the quality of its water and sewage services through a significant program of improvements and new investment, as detailed later in this report. It is worth highlighting the investment made in the new analysis laboratory which will enable the Company to become a key player in the Mantua area as it is the only operator with access to a state-of-the-art, complete analysis structure.
In April 2016, the Company signed a contract with G.I.S.I. SpA to take over sewage collection and treatment services in the Municipalities of Viadana, Dosolo, Sabbioneta and Pomponesco, thus finalising the agreement that was signed when data was transmitted to the Authority in the period required by Resolution no. 585/2012.
This operation should be considered part of the process for the aggregation of residual services within the area covered by the Company .
With a resolution dated 28/12/2015, the AEEGSI approved the Water Tariff Method for the second MTI-2 regulatory period for the four years 2016-2019. The tariff method essentially confirms the one already set out in the regulatory resolution for the period 2015-2016, although it does introduce important new rules relating to companies currently involved in an aggregation process in order to establish single operators in specific areas, in relation to fulfilment of capital expenditure plans and OPEX levels in line with the national average.
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In 2016, with Board of Directors’ Resolution no 12 of 27/06/2016, Mantua AATO approved the Intervention Plan for 2016-2019, the tariff for the 2016-2019 regulatory period and the business plan for all operators of public water and sewage services in the Mantua area – said business plan sets out operating costs and capex. It also approved the annual forecast for tariff revenues with the related tariff multiplier amounts. Resolution no 40 of 24/11/2016 of the Provincial Council of the Province of Mantua approved the earlier resolution by the AATO and asked the Special Company to provide the AEEGSI with details on the tariff calculation insofar as it related to them. The plan forecasts capex of € 38,940,000 for the period 2016 – 2019 or € 37.51 per inhabitant served, equal to 60% of the capex forecast for the entire Local Area. Over the four year period, the average tariff will increase by a total of 2.10% from the 2015 average tariff of € 1.387/m³ to € 1.416/m³ which is the lowest tariff in the area, thanks to the low level of Opex (operating expenditure 2016) and the smaller tariff increase than for other operators.
Moreover, in 2016, with Board of Directors’ Resolution no 11 of 27/06/2016, Mantova AATO approved the calculation of “accumulated amounts” which relate to tariff recoveries from 2006 to 2011 – for the Company, this amounts to around € 578,000 for the areas on which it operates.
Capital expenditure The Company has incurred capex totalling € 11,631,884 including € 909,682 for intangible assets (€ 24,240 software, € 722,380 leasehold improvements, € 163,062 other deferred charges) and € 10,722,202 on tangible assets, as analysed in the table below:
Water supply points 724,173 Water distribution network 2,100,458 Sewage network 2,115,157 Drinking water plant 496,137 General and specific plant 3,000 Treatment plants 1,024,588 Meters 389,018 Motor vehicles 0 Sundry equipment 488,471 Furniture and ordinary office equipment 10,786 Electronic office equipment 25,383 Light constructions and land 11,360 Assets under construction 3,333,671 TOTAL CAPEX ON TANGIBLE ASSETS 10,722,202
Tea Onoranze Funebri: The company’s objectives include operating a funeral services business and related services. In 2016, the company’s operating results were better than in prior year (574 funeral services carried out in 2016 against 562 in 2015). This must be considered a good performance as it was achieved in a year when the mortality rate in the Mantua area fell slightly. The funeral services carried out by the company increased by around 1.5pp as a percentage of the total number of deaths in the Municipality of Mantua (30.79% in 2016 against 29.38% in 2015).
There has been a steady increase in the number of bereaved persons opting not to use their own homes during the period when people may pay their respects to the deceased; rather, they increasingly prefer to have the body moved to a funeral home where mourners can call to pay their respects. Moreover, Tea Onoranze Funebri has received many requests from the bereaved for access to specific rooms where mourners can visit the deceased. Consequently, the Company has begun to offer such services in order to remain competitive with other local funeral businesses. With effect from July 2016, the company has also taken the opportunity to develop a partnership with Casa Funeraria dell’Agenzia della Concordia and has created a structure with a new brand and image: “ CASA FUNERARIA DI MANTOVA ”. This partnership has increased the number of internal mourning rooms from three to five in order to improve client service. The facilities are operated in line with the service standards of Tea Onoranze Funebri which focus on efficiency, care and attention and value for money for the client. They are managed by subsidiary GFS which is
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Tea Group situated next to the Funeral Home and this enables Tea Onoranze Funebri to maintain maximum control over the business.
At the end of 2015, Tea Onoranze Funebri acquired 100% of Global Funeral Service S.r.l. (GFS) and, in 2016, there have been promotional activities in several different provinces. New clients have been acquired (both public and private sector) and almost all clients already served in prior years have been retained. In 2016, the number of funeral services organised by GFS S.r.l. increased by more than 15% compared to 2015.
ElectroTea The Marenghello hydropower plant is situated alongside the Pozzolo-Maglio outlet – off the River Mincio – which is used to deviate water from the Mincio when water levels are high and to feed the Pozzolo irrigation channel. The Province of Mantua – resolution no. 2269-2010 – granted Goito Energia S.r.l. authorisation to build the power plant. The plant has installed capacity of 780 kW and potential capacity of 2,500 MWh.
The plant was built by Electrotea S.r.l. and came into operation on 21/12/2012. It is entitled to the all-inclusive tariff under Ministerial Decree 6/07/2012. The plant is operated by Electrotea S.r.l. which has entrusted its practical operation to Sei S.r.l. (formerly Tea Sei). In 2016, there were no significant changes to the plant and no new capex was incurred. In 2016, electricity production totalled 1,917.7MWh (2,272MWh in 2015), The decrease compared to prior year was due to plant shutdowns in January, February and March 2016 because of water shortages and low production in October and November again because of water shortages.
Tea Reteluce: In 2016, the company consolidated its public street lighting services in 28 participating municipalities, for a total of 56,533 street lights operated.
The Company completed its takeover of third party networks in March 2016 and now has full access and control in relation to the street lights which fall under its contracts.
Work on improvements to street lighting systems continued in 2015 with priority on maximising the energy savings envisaged in the tendering documents. By the end of the year, more than 36,000 old technology street lights had been replaced with new LED lights; 64% of the network has now undergone these improvements. An agreement with a private sector partner has been signed in relation to these activities. This made it possible to offer participating municipalities a 5% reduction in the overall cost thanks to the technological improvements involving the replacement of traditional lighting per the tendering documents with more recent LED technology.
Electricity cost trends led to a 6% decrease in the cost of electricity consumed and, as agreed by contract, this was passed on in the form of a reduction in the charges payable by the Municipalities.
The company’s activities have also involved the continuation of work required under the contract and new installations requested by the participating municipalities.
The electric vehicle related business has been expanded further with the charge network in the province of Mantua now including 20 charge points. New charge points – already confirmed – will extend the network to a total of 30 points by the end of the first half of 2017. It should be noted that all of the charge points can be accessed via a Smartphone App which allows the user to select their preferred electricity provider as long as it has an agreement with the payment circuit used. The App in question gives users access to a network of more than 18,000 charge points across Europe.
The reorganisation planned at the end of 2015 was implemented in February 2016. This led to an increase in street lighting personnel also following the transfer of personal from other Tea Group companies directly to the Company – the Company now directly employs five persons. The reorganisation also involved a reduction in the service agreements originally signed in order to take account of the reduced level of services provided by the Group in support of the Company’s activities. The Company has now
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Tea Group improved its own organisational structure without affecting the costs forecast in the original project plan. However, it now has access to more specialist resources and the management structure has been simplified.
Moreover, in order to optimise management of street lighting services within the Tea Group, in December 2016, the Company acquired the business unit regarding the Sei S.r.l.’s remaining street lighting activities in the Municipalities of Gazzuolo, Magnacavallo and Carbonara di Po. The acquisition cost € 386,000 and it was effective from 01/01/2017.
Capital expenditure Capital expenditure of € 4,239,119 was incurred during the year of which € 206,371 on intangible assets (software and IT projects) and € 4,032,748 on tangible assets all related to street lighting networks. The capex mainly related to the purchase of LED technology light sources in accordance with the contractual changes offered to participating municipalities. The funding needed to cover the higher level of capex has been provided by the Tea Group central treasury.
AqA Mantova: General Performance This Company was incorporated on 20 January 2016; the related documents were prepared by Notary Fabrizio Rossi of Castiglione delle Stiviere, Repertory no. 56.103 and Collection no. 15,964. It was created following the partial spin-off of the water and sewage business of Indecast S.r.l. with the incorporation of a new company wholly owned by the Municipality of Castiglione delle Stiviere called ”Acque Castiglionesi S.r.l.”, registered office in Castiglione delle Stiviere, Via Gerra. The Company was registered on 25/1/2016. On 01/02/2016, the Mayor of Castiglione della Stiviere issued a mayoral ordering authorising the business activities, until such time as authorisation from the Province of Mantua is finalised. On 29/02/2016, the Tea S.p.A. shareholders’ general meeting approved a share issue reserved for the Municipality of Castiglione delle Stiviere and to be subscribed through the contribution in kind of Acque Castiglionesi S.r.l.; Said share issue with the contribution in kind took place on 02/03/2016. On 07/03/2016, an Extraordinary Quotaholders’ General Meeting of Acque Castiglionesi repealed the articles of association of Acque Castiglionesi and approved the current one while, at the same time, changing the name of the company to AqA Mantova S.r.l. transferring its registered office from Castiglione delle Stiviere Via Gerra to Mantua Via Taliercio 3 and maintaining the operating headquarters in Via Gerra. On 29/07/2016, the order issued by the Mayor was renewed as further documentation from Indecast S.r.l. is still awaited.
Customer services are operated by the Company’s direct personnel but have been coordinated by parent company Tea S.p.A. Until December, the Company kept the office used by Indecast at the Municipality of Castiglione delle Stiviere. A new Tea Group sales office was opened in early December 2016. The Company’s operating personnel has been coordinated by management from Tea Acque (Tea Group). The former Indecast database was transferred to the Group’s management system in the first half of 2016. The first meter readings were also performed and the first bills issued using the Group’s systems. The supplier contracts already signed by Indecast were maintained during the year until their scheduled expiry date and new competitive tendering processes have been organised using Group procedures.
Capital expenditure The Company has incurred capex totalling € 675,415 of which € 77,309 for intangible assets (€ 38,000 of software, € 6,707 of start-up costs and € 32,602 of other deferred expenses) and € 598,106 on tangible assets, as shown in the table below:
Buildings 3,992 Water supply points 6,511 Sewage network 58,351 Purification/treatment plans (finance lease options exercised) 353,975 Lifting equipment 75,571 Meters 94,719 Furniture and ordinary office equipment 3,749 Electronic office equipment 1,238 TOTAL CAPEX ON TANGIBLE ASSETS 598,106
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4) CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements report an overall net profit of Euro €14,187.3 thousand against Euro 12,044.8 thousand in 2015. Net profit pertaining to the Tea Group amounts to Euro 12,587.1 thousand (Euro 10,758.3 thousand in 2015) while net profit pertaining to minority interests amounts to Euro 1,600.2 thousand (Euro 1,286.4 thousand in 2015). Consolidated shareholders’ equity (including net profit for 2016) has increased from Euro 123,782.7 thousand at 31 December 2015 to Euro 136,560.3 thousand at 31 December 2016 and includes: shareholders’ equity pertaining to the Group of Euro 126,715.2 thousand and shareholders’ equity pertaining to minority of Euro 9,845.1 thousand. The following tables contain reclassified Income Statement (based on the “performed production” method) and Balance Sheet (“financial” method) information.
Income Statement reclassified using “performed production” method Aggregate figures 2016 2015 Difference Value of production 251,557,591 254,341,310 -2,783,719 - cost of raw materials 55,302,162 73,269,212 -17,967,050 - costs for services 111,986,583 102,310,541 9,676,042 - use of third party assets / lease and rental costs 4,084,146 4,166,222 -82,076 +/- Change in inventory of raw materials 346,234 -609,988 956,222 - Other operating expenses 3,620,454 3,296,834 323,621 VALUE ADDED 76,218,012 71,908,489 4,309,522 - personnel costs 27,782,330 27,024,612 757,718 EBITDA 48,435,682 44,883,877 3,551,804 - depreciation and amortisation 16,127,073 14,893,848 1,233,225 - provisions 11,232,459 10,268,383 964,076 - allocation to Employee Severance Indemnity/TFR 1,450,814 1,390,565 60,249 provision EBIT 19,625,336 18,331,081 1,294,254 +/- non-recurring income (expenses) -2,000,000 -2,000,000 0 +/- financial income (expenses 3,101,543 2,775,062 326,481 EBT 20,726,879 19,106,143 1,620,735 - taxes on income 6,539,554 7,061,392 -521,838 NET PROFIT (Rn) 14,187,325 12,044,751 2,142,573
Reclassified Balance Sheet – sources and applications method APPLICATIONS 2016 2015 SOURCES 2016 2015 Intangible assets 14,317,440 14,397,215 Shareholders’ Equity (N) 136,560,298 123,782,738 Tangible assets 199,871,779 180,963,023 Financial assets 26,839,457 27,111,484 Non-Current Liabilities 112,745,744 113,863,207 Inventory 2,390,832 2,619,401 Deferred liquidity (ld) 119,489,415 111,492,626 Current Liabilities (Pc) 117,936,778 106,646,666 Immediate liquidity (li) 4,333,897 7,708,862 Total Applications 367,242,820 344,292,611 Total Sources 367,242,820 344,292,611
IMPIEGHI 2016 2015 FONTI 2016 2015 Intangible assets 14,317,440 14,397,215 Tangible assets 199,871,779 180,963,023 Long-Term Capital (P) 249,306,042 237,645,945 Financial assets 26,839,457 27,111,484 Financial Statements as at 31/12/2016 Page 12
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Inventory 2,390,832 2,619,401 Deferred liquidity (ld) 119,489,415 111,492,626 Short-Term Capital 117,936,778 106,646,666 Immediate liquidity (li) 4,333,897 7,708,862 Total Applications 367,242,820 344,292,611 Total Sources 367,242,820 344,292,611
APPLICATIONS 2016 2015 SOURCES 2016 2015 Intangible assets 14,317,440 14,397,215 Tangible assets 199,871,779 180,963,023 Equity (N) 136,560,298 123,782,738 Financial assets 26,839,457 27,111,484 Inventory 2,390,832 2,619,401 Deferred liquidity (ld) 119,489,415 111,492,626 Debt 230,682,522 220,509,873 Immediate liquidity (li) 4,333,897 7,708,862 Total Applications 367,242,820 344,292,611 Total Sources 367,242,820 344,292,611
The following Financial Ratios were calculated following the above reclassification adjustments:
Ratios 2016 2015 Non-current assets/ Total assets (I/K) 0.656 0.646 Working capital / Total assets (C/K) 0.344 0.354 Equity / Total assets (N/K) 0.372 0.360 Debt / Total assets (T/K) 0.628 0.640 Current ratio (C/Pc) 1.070 1.142 Liquidity ratio ((Li+Ld)/Pc) 1.050 1.118 Fixed capital self-financing ratio (N/I) 0.567 0.556 ROE (Rn/N) 10.39% 9.73% ROI (EBIT/Ko) 8.14% 8.24% ROS (EBIT/V) 7.80% 7.21%
Net financial position 2016 2015 Difference
Total non-current assets 241,028,676 222,471,722 18,556,954 Working capital 17,035,646 19,836,518 -2,800,872 Gross invested capital 258,064,322 242,308,240 15,756,082 Total provisions and others -52,712,961 -48,382,362 -4,330,599 Net invested capital 205,351,361 193,925,878 11,425,483 Shareholders’ equity 136,560,298 123,782,738 12,777,560 Net financial position 68,791,063 70,143,140 -1,352,077 Total sources of finance 205,351,361 193,925,878 11,425,483
Debt/equity ratio 0.50 0.57 -0.06
The small percentage changes in non-current assets, working capital, equity and debt as a percentage of total assets is the result of a capex/investment trend in line with prior years. This has left intact the various asset and liability components as a percentage of total assets. As regards profitability, all of indicators show improvement compared to prior year. In particular, we note the increase in operating profit compared to 2015 (EBITDA +3.6 Mln/€). However, this improvement is almost entirely absorbed by the higher level of depreciation, amortisation and provisions recorded during the year.
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The indices set out above show increases in ROE (Return on Equity ) from 9.73% to 10.39% and in ROS ( Return on Sales ) from 7.21% to 7.80%, mainly thanks to the good results achieved during the year by companies like Tea Energia and Tea Acque and to the entrance of AqA Mantova into the scope of consolidation. The “Debt/Equity Ratio” has improved from 0.57 at 31 December 2015 to 0.50 at 31 December 2016 as a result of a reduction in the level of net debt and an increase in shareholders’ equity, also following the acquisition by the Municipality of Castiglione delle Stiviere of a stake in Tea S.p.A.
Mantua, 07 March 2017
The Chairman of the Board of Directors Massimiliano Ghizzi
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Consolidated financial statements for 2016 Balance Sheet • Income Statement
• Statement of Cash Flows
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BALANCE SHEET - ASSETS 31.12.2016 31.12.2015
A) RECEIVABLES FROM SHAREHOLDERS FOR UNPAID CAPITAL
B) NON-CURRENT ASSETS I.) INTANGIBLE ASSETS: 1) start-up and expansion costs 12,060 10,121 2) development costs 3) patents and intellectual property rights 955,578 882,316 4) concessions, licences and trademarks 1,286,623 1,794,937 5) goodwill 503,785 704,210 6) assets in progress and payments on account 956,960 1,553,980 7) other 10,602,434 9,451,651 Total intangible assets 14,317,440 14,397,215
II.) TANGIBLE ASSETS: 1) land and buildings 41,031,998 38,092,224 2) plant and machinery 127,337,051 114,472,591 3) industrial and commercial equipment 5,497,585 6,540,475 4) other 17,553,147 17,905,589 5) assets under construction and payments on account 8,451,998 3,952,144 Total tangible assets 199,871,779 180,963,023
III.) FINANCIAL ASSETS: 1) investments in: a) subsidiaries 0 0 b) associated companies 4,783,813 4,526,360 c) parent companies d) companies controlled by parent companies d-bis) other entities 15,565,120 17,565,120 2) non-current financial receivables: a) from subsidiaries 0 0 - current 0 0 - non-current Total receivables from subsidiaries 0 0 b) from associated companies - current - non-current 5,466,346 3,923,982 Total receivables from associated companies 5,466,346 3,923,982 c) from parent companies - current 0 0
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BALANCE SHEET - ASSETS 31.12.2016 31.12.2015 - non-current Total receivables from parent companies 0 0 d) from companies controlled by parent companies - current - non-current Total receivables from companies controlled by parent companies d-bis) from others - current 71,766 - non-current 24,178 24,256 Total receivables from others 24,178 96,022 3) Other securities 1,000,000 1,000,000 4) derivative instruments 0 0 Total financial assets 26,839,457 27,111,484
TOTAL NON-CURRENT ASSETS 241,028,676 222,471,722
C) CURRENT ASSETS I.) INVENTORY: 1) raw materials 1,779,466 1,971,041 2) work in progress and semi-finished goods 611,366 648,360 3) job order work in progress 4) finished goods 5) payments on account Total Inventory 2,390,832 2,619,401
II.) RECEIVABLES 1) trade accounts - current 83,337,875 78,972,826 - non-current 1,530,323 Total trade receivables 84,868,198 78,972,826 2) from subsidiaries - current 0 0 - non-current Total receivables from subsidiaries 0 0 3) from associated companies - current 1,393,898 1,487,244 - non-current Total receivables from associated companies 1,393,898 1,487,244 4) from parent companies - current 2,256,681 1,131,513 - non-current Total receivables from parent companies 2,256,681 1,131,513 5) from companies controlled by parent companies
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BALANCE SHEET - ASSETS 31.12.2016 31.12.2015 - current 102,636 150,357 - non-current 0 0 Total receivables from companies controlled by parent companies 102,636 150,357 5-bis) tax receivables - current 6,976,585 10,516,840 - non-current Total tax receivables 6,976,585 10,516,840 5-ter) deferred tax assets - current 9,217,703 8,668,759 - non-current Total deferred tax assets 9,217,703 8,668,759 5-quater) from others - current 7,442,224 6,091,654 - non-current 391,303 382,913 Total receivables from others 7,833,527 6,474,567 Total Receivables 112,649,228 107,402,106
III.) FINANCIAL ASSETS 1) investments in subsidiaries 2) investments in associated companies 3) investments in parent companies 3-bis) investments in companies controlled by parent companies 4) other investments 5) derivative instruments 726,475 29,612 6) other securities 3,358,115 1,359,602 Total Financial Assets 4,084,590 1,389,214
IV.) CASH AND CASH EQUIVALENTS: 1) Bank and post office accounts 4,312,528 7,690,658 2) Cheques 3) Cash and cash equivalents on hand 21,369 18,204 Total Cash and Cash Equivalents 4,333,897 7,708,862
TOTAL CURRENT ASSETS 123,458,547 119,119,583
D) PREPAID EXPENSES AND ACCRUED INCOME: Accrued income 31,491 3,490 Prepaid expenses 2,724,106 2,697,816 TOTAL PREPAID EXPENSES AND ACCRUED INCOME 2,755,597 2,701,306
TOTAL ASSETS 367,242,820 344,292,611
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BALANCE SHEET – LIABILITIES AND EQUITY 31.12.2016 31.12.2015
A) SHAREHOLDERS’ EQUITY I. SHARE CAPITAL 73.402.672 71.941.912 II. SHARE PREMIUM RESERVE 4.127.245 1.872.238 III. REVALUATION RESERVES 2.592.373 2.592.373 IV. LEGAL RESERVE 3.442.783 2.944.901 VI. OTHER RESERVES 30.342.576 27.281.670 EXTRAORDINARY RESERVE 30.313.172 27.253.637 VOLUNTARY CONTRIBUTION RESERVE 1.491 1.491 MERGER RESERVE 22.730 22.730 RESERVE FOR SURPLUS EARNINGS 5.183 3.812 VII. CASH FLOW HEDGE RESERVE 726.475 −147.721 VIII. RETAINED EARNINGS (ACCUMULATED LOSSES) −90.389 −2.180.640 IX. PROFIT (LOSS) FOR THE YEAR 12.587.139 10.758.327 X. NEGATIVE RESERVE FOR TREASURY SHARES HELD −415.717 −415.717 Consolidated shareholders’ equity - Group 126.715.157 114.647.343 SHARE CAPITAL AND RESERVES – MINORITY INTERESTS 8.244.957 7.848.970 PROFIT FOR THE YEAR – MINORITY INTERESTS 1.600.184 1.286.425 Consolidated shareholders’ equity – Minority interests 9.845.141 9.135.395 TOTAL SHAREHOLDERS’ EQUITY 136.560.298 123.782.738
B) PROVISIONS FOR RISKS AND CHARGES 1) for retirement benefits and similar obligations 31.825 16.297 2) ) taxation, including deferred tax 15.935 32.886 3) derivative instruments 177.333 4) other 45.639.974 41.180.698 TOTAL PROVISIONS FOR RISKS AND CHARGES 45.687.734 41.407.214
C) EMPLOYEE SEVERANCE INDEMNITY – “TFR” 7.025.227 6.975.148
D) PAYABLES: 1) bonds - current - non-current Total bonds 0 0 2) convertible bonds - current - non-current Total convertible bonds 0 0 3) shareholder loans payable
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BALANCE SHEET – LIABILITIES AND EQUITY 31.12.2016 31.12.2015 - current - non-current Total shareholder loans payable 0 0 4) bank borrowing: - current 14,323,654 13,353,972 - non-current 58,476,783 64,142,600 Total bank borrowing 72,800,437 77,496,572 5) payables to other lenders - current 30,906 30,907 - non-current 293,617 324,523 Total payables to other lenders 324,523 355,430 6) payments on account - current 5 5 - non-current Total payments on account 5 5 7) trade payables - current 65,037,432 53,359,201 - non-current Total trade payables 65,037,432 53,359,201 8) payables represented by credit instruments - current - non-current Total payables represented by credit instruments 0 0 9) payables to subsidiaries - current 0 0 - non-current 0 0 Total payables to subsidiaries 0 0 10) payables to associated companies - current 439,449 532,548 - non-current Total payables to associated companies 439,449 532,548 11) payables to parent companies - current 17,389,072 16,903,092 - non-current 517 382 Total payables to parent companies 17,389,589 16,903,474 11-bis) payables to companies controlled by parent companies - current 0 0 - non-current 0 0 Total payables to companies controlled by parent companies 0 0 12) tax payables: - current 1,654,368 4,057,709 - non-current Total tax payables 1,654,368 4,057,709
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BALANCE SHEET – LIABILITIES AND EQUITY 31.12.2016 31.12.2015 13) payables to social security and pensions institutions - current 1.550.223 1.570.963 - non-current Total payables to social security and pensions institutions 1,550,223 1,570,963 14) other payables - current 5,544,265 4,791,932 - non-current 1,261,866 1,013,340 Total other payables 6,806,131 5,805,272
TOTAL PAYABLES 166,002,157 160,081,174
E) ACCRUED EXPENSES AND DEFERRED INCOME: accrued expenses 14,052 26,033 deferred income 11,953,352 12,020,304 TOTAL ACCRUED EXPENSES AND DEFERRED INCOME 11,967,404 12,046,337
TOTAL LIABILITIES AND EQUITY 367,242,820 344,292,611
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INCOME STATEMENT 31.12.2016 31.12.2015
A) VALUE OF PRODUCTION
1) revenue from sales and services: 242,154,834 244,661,061 2) Change in inventory of work-in-progress, semi-finished and finished good −36,994 −64,703 3) Change in job order work-in-progress 4) Increase in non-current assets due to capitalisation of internal works 3,245,271 4,953,975 5) other revenue and income Sundry 6,007,939 4,616,751 Operating grant income 186,541 174,226 Total Value of Production 251,557,591 254,341,310
B) COST OF PRODUCTION
6) raw, ancillary and consumable materials and goods 55,302,162 73,269,212
7) services 111,986,583 102,310,541
8) use of third party assets / lease and rental costs 4,084,146 4,166,222
9) personnel costs: a) wages and salaries 21,212,480 20,479,579 b) social contributions 6,510,471 6,480,659 c) employee severance indemnity 1,450,814 1,390,565 d) retirement benefits and similar e) other personnel costs 59,379 64,374 Total personnel costs 29,233,144 28,415,177
10) depreciation, amortisation and writedowns: a) amortisation of intangible assets 2,563,792 2,147,574 b) depreciation of tangible assets 13,563,281 12,746,274 c) other writedowns of non-current assets 95,813 d) writedown of current receivables and cash and cash equivalents 4,048,074 4,869,681 Total depreciation, amortisation and writedowns 20,270,960 19,763,529
11) change in inventory of raw, ancillary and consumable materials and goods 346,234 −609,988
12) provisions for risks 4,038,350 2,458,000
13) other provisions 3,050,222 2,940,702
14) other operating expenses 3,620,454 3,296,834
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INCOME STATEMENT 31.12.2016 31.12.2015 Total Cost of Production 231,932,255 236,010,229
Difference between Value and Cost of Production (A-B) 19,625,336 18,331,081
C) FINANCIAL INCOME AND EXPENSES 15) income from investments from subsidiaries 0 from associated companies from parent companies from companies controlled by parent companies other 2,996,853 3,082,476 Total income from investments 2,996,853 3,082,476
16) other financial income: a) from receivables classed as non-current assets due from subsidiaries due from associated companies due from parent companies due from companies controlled by parent companies other Total other financial income from receivables classed as non-current assets 0 0 b) from securities classed as non-current assets which are not investments c) from securities classed as current assets which are not investments d) income other than the above from subsidiaries 0 0 from associated companies from parent companies 0 0 from companies controlled by parent companies other 789,058 835,042 Total income other than the above 789,058 835,042 Total other financial income 789,058 835,042
17) interest and other financial expenses: to subsidiaries 0 0 to associated companies to parent companies 0 0 other 684,368 1,142,456 Total interest and other financial expenses 684,368 1,142,456
17-bis) exchange gains and losses 0 0 Total Financial Income and Expenses (15+16-17±17-bis) 3,101,543 2,775,062
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INCOME STATEMENT 31.12.2016 31.12.2015 D) ADJUSTMENTS TO VALUE OF FINANCIAL ASSETS 18) revaluations: a) of investments 0 0 b) of non-current financial assets 0 c) of securities classed as current assets which are not investments d) of derivative instruments
19) writedowns a) of investments 2,000,000 2,000,000 b) of non-current financial assets c) of securities classed as current assets which are not investments d) of derivative instruments Total adjustments to value of financial assets −2,000,000 −2,000,000
Profit before taxation (A-B+C+D) 20,726,879 19,106,143
20) taxes on income for the year: - current taxation 4,328,102 4,256,251 - deferred taxation −17,894 −7,315 - deferred tax income −523,551 62,059 - income (expenses) from participation in consolidated taxation /fiscal transparency regime 2,752,897 2,750,397 Total Taxes on Income for the Year 6,539,554 7,061,392
21) Profit (loss) for the year 14,187,325 12,044,751 of which profit / (loss) pertaining to minority interests 1,600,184 1,286,425 of which profit / (loss) pertaining to the Group 12,587,141 10,758,326
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STATEMENT OF CASH FLOWS (amounts stated in thousands of Euro) 31.12.2016 31.12.2015 A. Cash flows from operating activities (indirect method) Profit (loss) for the year 14,187 12,045 Taxes on income 6,540 7,061 Interest expenses/(interest income) −105 307 (Dividends) −2,925 −2,627 (Gains)/losses on disposal of assets −91 −48 1. Profit (loss) for the year before taxes in income, interest, dividends and gains/losses 17,607 16,738 on disposal
Adjustments for non-cash items with no impact on net working capital
Allocations to provisions 11,709 9,053 Depreciation/Amortisation of non-current assets 16,127 14,894 Impairment adjustments 994 786 Adjustments to value of financial assets and liabilities from derivatives not involving any 0 0 cash flows Other adjustments for non-cash items 1,955 0 2. Cash flows before changes in NWC 48,392 41,471 Change in net working capital Decrease/(increase) in inventories 229 −733 Decrease/(increase) in trade receivables −9,943 6,523 Increase/(decrease) in trade payables 7,688 −9,833 Decrease/(increase) in prepaid expenses and accrued income −54 −100 Increase/(decrease) in accrued expenses and deferred income −79 −1,057 Other changes in net working capital 779 8,829 3. Cash flows after changes in NWC 47,012 45,101 Other adjustments Interest received/(interest paid) −347 −725 Taxes on income paid −6,632 −6,195 Dividends received 2,925 2,627 (Utilisation of provisions) −2,677 −6,309 Other receipts/(payments) 0 0 4. Cash flows after other adjustments 40,280 34,500 Cash flows from operating activities (A) 40,280 34,500 B. Cash flows from investing activities Tangible assets (Investments) −29,654 −28,895 Divestments 846 481 Intangible assets (Investments) −2,739 −4,293 Divestments 378 0 Non-current financial assets (Investments) 462 1,121 Divestments 0 124 Current financial assets (Investments) −2,758 −1,389
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STATEMENT OF CASH FLOWS (amounts stated in thousands of Euro) 31.12.2016 31.12.2015 Divestments 940 3,599 (Acquisition of businesses net of cash and cash equivalents) 0 0 Sale of businesses net of cash and cash equivalents 0 0 Cash flows from investing activities (B) −32,524 −29,253 C. Cash flows from financing activities Debt Increase (decrease) in short-term bank borrowing 931 −2,850 Loans arranged 3,913 7,394 (Loans repaid) −10,130 −9,110 Equity Paid share capital increase 0 0 (Share capital reimbursed) 0 0 Sale (purchase) of treasury shares 0 4 (Dividends (and advances on dividends) paid) −5,844 −1,176 Cash flows from financing activities (C) −11,131 −5,738 Increase (decrease) in cash and cash equivalents (A ± B ± C) −3,375 −492 Cash and cash equivalents at 01.01.2016 7,709 8,201 of which: 0 0 Bank and post office accounts 7,691 8,187 Cheques 0 0 Cash and cash equivalents on hand 18 14 Cash and cash equivalents at 31.12.2016 4,334 7,709 of which: Bank and post office accounts 4,313 7,691 Cheques 0 0 Cash and cash equivalents on hand 21 18
The Chairman of the Board of Directors Massimiliano Ghizzi
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Notes to the Consolidated Financial Statements for 2016
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Tea S.p.A. Group Notes to the Consolidated Financial Statements for 2016
SCOPE OF CONSOLIDATION The scope of consolidation includes holding company Territorio Energia Ambiente S.p.A. and the subsidiaries in which it, directly or indirectly, holds a majority of stock capital or controls, under agreements with other stockholders, a majority of General Meeting voting rights. Details of the Group companies with company names, corporate objectives, stock capital and the scope of consolidation are shown below:
Therefore, the scope of consolidation includes nine companies. As well as carrying out its activities, the Holding company establishes the Group’s strategic objectives, coordinates Group activities and provides the other companies with administrative and technical advice and assistance. The following tables contain the key information regarding the companies controlled directly or indirectly by Tea S.p.A. which form the scope of consolidation.
Details of subsidiaries of Tea S.p.A. – 1 of 2 Mantova Ambiente Name Tea Energia S.r.l. S.E.I. S.r.l. Tea Acque S.r.l. Tea Onoranze S.r.l. S.r.l. City or Country Mantua Mantua Mantua Mantua Mantua Sale of electricity, gas and Environmental Energy Water and Business objectives Funeral services heat services services sewage service Capital in Euro 2,000,000 227,270 1,000,000 3,050,000 100,000 % interest held 100.00% 40.48% 100.00% 60.00% 100.00%
Details of subsidiaries of Tea S.p.A. – 2 di 2 Global Funeral Name Tea Reteluce S.r.l. AqA Mantova S.r.l. ElectroTea S.r.l. Service S.r.l. City or Country Mantua Mantua Mantua Mantua Water and sewage Operation of hydro -power Business objectives Street lighting service Funeral services service plant Capital in Euro 100.000 1.000.000 50.000 51.000 % interest held 60.00% 100.00% 60% 100.00%
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We note that, following the implementation of Legislative Decree 118/2011, the Municipality of Mantua – the majority shareholder of the Tea Group – will prepare Consolidated Financial Statements with the other companies controlled by it.
BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements for 2015 have been prepared in accordance with the requirements of Section III of Legislative Decree no 127/1991, as supplemented, where not regulated by the Decree, by the Accounting Standards issued by the Italian Accounting Profession (“ il Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili ”). When preparing the financial statements, the changes to Italian statutory reporting requirements introduced by Legislative Decree 139/2015 were taken into account. Said Decree led to the updating of the Accounting Standards referred to in the previous paragraph and, in particular, of OIC 17 “Consolidated Financial Statements and the Equity Method”. The Consolidated Financial Statements, which include the financial statements of all of the companies in the scope of consolidation, comprise the consolidated balance sheet, the consolidated income statement, the consolidated statement of cash flows – prepared based on the structure and content of the separate financial statements of the consolidated entities – and these notes. They are accompanied by the Directors’ Report on Operations. The Consolidated Financial Statements have been prepared based on the financial statements as at 31 December 2016 of Holding company Tea S.p.A. and the companies in the scope of consolidation, already approved by the respective Shareholders’ General Meetings or prepared by the Boards of Directors for approval by the General Meetings. The Notes to the Financial Statements illustrate, analyse and, in some cases, supplement the figures reported in the Financial Statements and provide all additional information considered necessary in order to provide a true and fair view of the consolidated balance sheet and financial situation and the consolidated profit or loss for the year.
CONSOLIDATION PRINCIPLES The financial statements at 31 December 2016 of the individual companies included in the scope of consolidation have been prepared in accordance the requirements of the Italian Civil Code, as interpreted and supplemented by the accounting standards issued by the Italian Accounting Standards Board (“ Organismo Italiano di Contabilità (O.I.C.) ”), taking account of the changes introduced by Legislative Decree no 139/2015. In the consolidated financial statements, the individual entities are considered part of a single, larger entity, so: • the assets, liabilities, revenues, expenses and cash flows of the holding company are added on a line-by-line basis to the corresponding assets, liabilities, revenues, expenses and cash flows of the subsidiaries; • balance sheet, income statement and cash flow items between consolidated entities are eliminated from the consolidated financial statements in order to show only balances and transactions between the Group and third parties. The Consolidated Financial Statements provide an important reporting purpose as they are the primary source of the Group’s balance sheet, income statement and financial information with third parties and of operating information. The Company has prepared the Consolidated Financial Statements on a line-by-line basis which provides for the inclusion of the assets, liabilities, revenues, costs and cash flows of the entities included in the scope of consolidation while eliminating balances and transactions taking place within the scope of consolidation. Each asset and liability is included in full for consolidation purposes, irrespective of the percentage interest held in each company. Portions of equity and consolidated profit/loss for the year pertaining to minority shareholders are recorded under specific balance sheet and income statement captions. Note that, as permitted by Article 31(3) of Legislative Decree 127/1991, internal profits included in the inventories of consolidated entities which have purchased goods from other Group companies are not eliminated.
ACCOUNTING POLICIES AND VALUATION CRITERIA The accounting standards listed below have been updated to reflect the amendments, improvements and new standards introduced in relation to statutory reporting requirements under the Italian Civil Code by Legislative Decree 139/2015 which implements the Accounting Directive 34/2013/UE. In more detail, the following accounting standards have been updated: - OIC 9 Impairment adjustments to tangible and intangible assets - OIC 10 Statement of cash flows - OIC 12 Content and format of the Financial Statements - OIC 13 Inventories - OIC 14 Cash and cash equivalents
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- OIC 15 Receivables - OIC 16 Tangible assets - OIC 17 Consolidated financial statements and the equity method - OIC 18 Prepaid expenses and accrued income, accrued expenses and deferred income - OIC 19 Payables - OIC 20 Debt securities - OIC 21 Investments - OIC 23 Contract work in progress - OIC 24 Intangible assets - OIC 25 Taxes on income - OIC 26 Transactions, assets and liabilities in foreign currency - OIC 28 Equity - OIC 29 Changes of accounting policy, changes of accounting estimates, correction of errors, significant events after the reporting period - OIC 31 Provisions for risks and charges and Employee Severance Indemnity A new accounting standard – OIC 31 Derivative instruments – has also been issued. The other accounting standards have remained unchanged The most significant accounting policies adopted when preparing the Financial Statements at 31 December 2016, in accordance with Article 2426 of the Italian Civil Code and the aforementioned Italian Accounting Standards, are as follows:
Intangible assets Intangible assets are recorded at purchase or production cost, including related expenses and costs directly attributable to the asset. They are systematically amortised in every reporting period based on their remaining useful lives. Where required by law, the consent of the Board of Statutory Auditors for recognition of intangible assets is obtained. Start-up and expansion costs are amortised on a straight-line basis over five years. Development costs are amortised over their estimated useful lives. In exceptional cases where their useful lives cannot be reliably estimated, they are amortised over a period of not more than five years. Until the amortisation period has been completed, dividends may only be distributed if there are sufficient remaining available reserves to cover the residual amount of the intangible assets. Costs incurred for basic research are expenses to the income statement in the period in which they are incurred. Advertising expenses are recorded in full in the income statement for the period in which they are incurred. Goodwill includes amounts paid in that regard upon business acquisition transactions or other corporate transactions and is amortised over its useful life. The useful life is estimated upon initial recognition and cannot be altered in subsequent periods. If it is not possible to estimate the useful life, goodwill is amortised over a period of ten years. When calculating the useful life of goodwill, the Company considers available information in order to estimate the period within which it is probable that there shall be economic benefits in relation to the goodwill. Leasehold improvements are capitalised and recorded under “Other intangible assets” if they are not separable from the assets themselves (otherwise, they are recorded under the relevant “tangible assets” caption). They are systematically amortised over the shorter of their expected useful lives and the residual lease period, taking account of any renewal period if it depends on the Company. Where, irrespective of the amortisation already recorded, there has been an impairment of value, the intangible asset is adjusted accordingly. If, in subsequent years, the reasons for the impairment adjustment cease to apply, the original amount is restored, up to the value the asset would have had if the impairment adjustment had never been made; this is except for Goodwill and “Deferred expenses” in terms of Article 2426 (5) of the Italian Civil Code.
Tangible assets Tangible assets are recorded at purchase or internal construction cost and stated net of depreciation charged during the year and in prior years. Cost includes related expenses and the portion of direct and indirect expenses reasonably attributable to the asset, in relation to the period of construction until when the asset became available for use. Tangible assets may be revalued only when required or permitted by specific laws. Tangible assets are systematically depreciated in every reporting period on a straight-line basis. The depreciation rates applied are set out in the relevant section of the Notes to Balance Sheet Assets. For tangible assets which came into use during the year, the depreciation period commences from the month when the asset effectively became available and ready for use. Depreciation is also calculated on tangible assets temporarily not in use. Land, investment property and tangible assets with an unlimited useful life are not depreciated. Financial Statements as at 31/12/2016 Page 32
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Where, irrespective of the depreciation already recorded, there has been an impairment of value, the intangible asset is adjusted accordingly. If, in subsequent years, the reasons for the impairment adjustment cease to apply, the original amount is restored, up to the value the asset would have had if the impairment adjustment had never been made. Ordinary repair and maintenance costs are charged in full to the income statement. Incremental maintenance costs are allocated to the relevant fixed assets and depreciated over the remaining useful lives of said assets. Costs incurred to expand, modernise or improve the structural features of a tangible asset may be capitalised if the produce and significant, measurable increase in production capacity, safety or useful life. If the costs do not generate such effects, they are treated like ordinary maintenance and charged to the income statement. When tangible assets are destined for disposal, they are reclassified to a specific current assets caption and stated at the lower of net carrying amount and realisable amount based on market trends.
Receivables (including receivables classed as non-current financial assets) Receivables are reported using the amortised cost method, taking account of the time factor and estimated realisable amount. The amortised cost method is not applied when its effects would be irrelevant i.e. when transaction costs, commission paid between the parties and all other differences between initial amount and amount on maturity are immaterial. The nominal amount of receivables is adjusted, as necessary, by a specific provision for bad debts, as deducted directly from the receivables in order to bring them into line with their estimated realisable amount. The provision is equal to the difference between the book amount of the receivables and the estimated future cash flows, as reduced for amounts not expected to be collected, discounted at the original effective rate of interest of the receivable (i.e. the effective rate of interest calculated upon initial recognition). The amount of the writedown is recorded in the income statement. We note that, as permitted by Legislative Decree 139/15, at 31 December 2016, receivables already in place at 31 December 2015 are recorded at their nominal amount which is felt to represent their realisable amount. For more details, see the Note “Accounting effects of the Accounting Reform”. Receivables transferred upon factoring operations are derecognised from the balance sheet only if factored on a non- recourse basis and if substantially all of the credit risks have been transferred. Receivables transferred with recourse or, in any case, without transferrin all risks remain on the Balance Sheet and a corresponding financial liability for the same amount is recognised in respect of the advance payment received. Receivables generated under the centralised treasury management system are recorded, if the terms of collection permit it, in a specific Current Assets caption. If the short-term terms of collection are not satisfied, these receivables are recorded under non-current financial assets.
Investments and securities (classified as non-current assets) Investments and debt securities classified as non-current assets are destined to be held by the Company as long-term assets. Investments are measured using the cost method, as adjusted for any impairment of value. Debt securities are measured using the amortised cost method. Under the cost method, carrying amount is determined based on acquisition or subscription price, including related expenses. When an impairment of value is identified, the carrying amount of an investment is reduced to its recoverable amount which is determined based on the future benefits expected to be obtained. If the equity method is applied, investments in subsidiaries and associated companies are recorded at an amount equal to the corresponding portion of equity per the latest financial statements prepared in compliance with Articles 2423 and 2423 bis of the Italian Civil Code, less dividends and after making the adjustments required by Consolidated Financial Reporting principles. During the first year of application, the premium paid compared to the relevant portion of equity of the companies at the date of acquisition is recorded under investments insofar as it is attributable to amortisable assets or to goodwill of said companies. The difference attributable to depreciable assets or to goodwill is depreciated/amortised at the rates applicable to these assets. In subsequent periods, the additional (lower) amounts resulting from application of this method are recorded in the income statement of the investing company and, upon allocation of net profit for the year, recorded in a specific, non-distributable equity reserve. If investments in associated companies or subsidiaries have a carrying amount that is higher than the amount obtained applying the appropriate valuation method or, if there is no obligation to prepare consolidated financial statements, higher than the relevant portion of equity per the latest financial statements of the associated company or subsidiary, the difference shall be explained in the Notes. The amortised cost of a security is the amount at which the security was valued upon initial recognition less any principal repayments, as increased or decreased by the amortisation accumulated applying the effective interest method to any difference between the initial value and the value at maturity and deducting any reduction (made directly or by means of a provision) due to impairment of value or non-recoverability. Financial Statements as at 31/12/2016 Page 33
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Inventory Inventory is recorded at the lower of purchase or production cost – determined based on the weighted average cost method – and estimated realisable amount based on market trends (Article 2426(9) of the Italian Civil Code). Purchase cost is intended as the effective purchase cost plus related expenses, excluding financial expenses. The realisable amount of goods, finished products, semi-finished goods and work-in-progress is determined based on market trends. Meanwhile, the realisable amount of raw and ancillary materials used in the production of finished goods is determined based on market trends, generally considering replacement cost. The value of inventory is written down in the balance sheet when realisable amount based on market trends is lower than carrying amount. Obsolete items are written down based on their possibility of utilisation or sale. Contract work in progress includes medium-term contracts. It is measured based on consideration accruing with reasonable certainty, using the completed contract method. Any losses on contracts estimated with reasonable accuracy are deducted in full from the value of the contract work-in-progress in the period in which they come to light. If the loss is greater than the value of the work-in-progress, the Company records a specific provision for risks and charges equal to the excess. Any probable losses are recorded in the period in which they become foreseeable based on a reasonable, objective valuation of the circumstances. The losses are recognised irrespective of the percentage of completion of the contract. Such losses have not been offset against positive margins forecast on other contracts. Therefore, contracts are considered individually for the purposes of recognition of such losses. Additional consideration is included in contract revenues only if it has been formally accepted by the customer by the reporting date or, even if there has been no formal acceptance, based on the most recent information and past experience, at the reporting date, it is highly probable that the request for additional consideration will be accepted.
Cash and cash equivalents Reporting date cash and cash equivalents are measured at nominal amount. Cash and cash equivalents denominated in foreign currency are measured at the reporting date exchange rate.
Prepaid expenses and accrued income, accrued expenses and deferred income These items include portions of costs and revenues relating to the year but payable or receivable in future periods and portions of costs and revenues incurred before the reporting date but relating to future reporting periods, in accordance with the accrual principle.
Provisions for risks and charges Provisions for risks and charges are created to cover losses or liabilities of a determinate nature, which are certain or probable but whose amount or due date could not be determined at the reporting date. The amounts provided represent the best possible estimate on the basis of available information. Risks for which a liability is merely possible are disclosed in the Note on provisions without making allocating a provision for risks and charges. Amounts allocated to provisions for risks and charges are recorded under the income statement captions of the relevant cost categories (B, C or D). Whenever it is not possible to link the nature of the amount provided to a caption in one of the above categories, the amounts allocated to provisions for risks and charges are recorded under income statement captions B12 and B13.
Payables Payables are reported using the amortised cost method, taking account of the time factor. Payables are initially recognised at nominal amount less any transaction expenses and all of the bonuses, discounts and allowances directly related to the transaction which generated the payable. Transaction expenses, any commission income and expenses and any difference between the initial amount and nominal amount upon maturity are included in the calculation of amortised cost using the effective interest method. We note that, as permitted by Legislative Decree 139/15, at 31 December 2016, payables already in place at 31 December 2015 are recorded at their nominal amount which is felt to represent their settlement amount. For more details, see the Note “Accounting effects of the Accounting Reform”. The amortised cost method is not applied to payables when its effect is insignificant. Generally speaking, the effect is insignificant for short-term payables (i.e. payables due within a year). Trade payables are initially recognised when the significant risks and rewards of ownership have been transferred. Payables for services are recorded when the services have been rendered.
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Financial payables and payables arising for reasons other than purchases of goods and services are recorded when the Company’s obligation towards the counterparty arises. Payables for employee leave and deferred remuneration, including the amount due to social security and pensions institutions, are recorded based on the amount that would be payable if the employment relationship ceased on the reporting date.
Finance lease transactions Finance lease transactions are accounted for under the operating lease method with lease instalments recorded in the income statement on an accrual basis. A specific section of the Notes provides the additional disclosures required by law to show the accounting treatment of finance leases under the finance lease method.
Derivative instruments Derivative instruments are assets and liabilities measured at fair value. Derivatives are classified as hedging instruments only when, upon signature of the contract, there is a genuine, documented relationship between the item hedged and the financial instrument and the effectiveness of the hedge – as regularly tested - is high. When hedging derivatives hedge the risk of changes in the fair value of the instruments being hedged (“ fair value hedges” , e.g. hedging of changes in the “ fair value ” of fixed rate assets/liabilities), the derivatives are measured at “fair value ” with the effects recorded in the income statement; accordingly, the hedged instruments are restated to reflect changes in fair value associated with the hedged risk. When the derivatives hedge the risk of changes in cash flow from the hedged instruments (“ cash flow hedges ”, e.g. hedging of changes in cash flow from assets/liabilities due to interest rate fluctuation), the intrinsic value of the gains or losses on the derivative financial instrument is suspended under equity. Gains or losses relating to a hedge that has become ineffective are recorded in the income statement. Moreover, if a hedging instrument or a hedging relationship is closed but the hedged operation has not yet been realised, gains and losses accumulated to date – and recorded under equity until then – are recorded in the income statement when the operation in question is realised. Therefore, changes in the fair value of derivative hedging instruments are recorded: − in the income statement under captions D18 or D19 in the case of a fair value hedge of a Balance Sheet asset or liability; − in a specific equity reserve (under caption AVII “Reserve for cash flow hedges”) in the case of cash flow hedges intended to offset the effect of the hedged cash flows. Changes in the fair value of derivatives classified as held for trading as they do not meet hedge account requirements are recorded in the balance sheet and in the income statement under captions D18 or D19.
Revenues Revenues from the sale of goods and services forming part of ordinary activities are recorded net of returns, discounts, allowances and bonuses, as well as taxes directly related to the sale of the products and the services. Revenue from services are recognised when the services are rendered and/or mature and are stated net of related taxes. Related party transactions take place on an arm’s length basis.
Costs Costs are accounted for an accrual basis, irrespective of the date of collection and payment. They are stated net of returns, discounts, allowances and bonuses.
Dividends Dividends are recorded in the period in which the right to receive a dividend arises as a result of a resolution passed by a General Meeting of the subsidiary or associated company to distribute earnings or reserves. Dividends are recorded as financial income, irrespective of the nature of the reserves distributed. The shareholder company checks that, following the distribution, the recoverable amount of its investment has not decreases to a an extent that makes it necessary to record an impairment adjustment.
Financial income and expenses Financial income and expenses are recorded on an accrual basis. Expenses relating to any form of factoring (with or withour recourse) of any type of receivables (trade, financial, other) are recorded in the relevant reporting period.
Taxes on income for the year and deferred taxation
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Taxes on income are recorded based on an estimate of taxable income in accordance with tax laws and regulations, taking account of applicable exemptions and tax credits due. Deferred tax assets and liabilities are calculated based on temporary differences between the value of assets and liabilities for statutory reporting purposes and the corresponding amounts for tax purposes. They have been determined taking account of the tax rate the Company is expected to incur in the year when the temporary differences form part of taxable income, considering rates in force or already approved at the reporting date. Deferred tax liabilities are recorded under the “Deferred tax provision” caption of provisions for risks and charges on the liabilities side of the Balance Sheet while deferred tax assets are recorded under current assets caption “Deferred tax assets”. Deferred tax assets are recognised for all deductible temporary difference, in accordance with the prudence principle, if it is reasonably certain that, in the years when the temporary differences reverse, there will be taxable income of not less than the differences reversing. Meanwhile, deferred tax liabilities are recorded in respect of all taxable temporary differences. Deferred taxes relating to reserves subject to taxation upon distribution are not recorded if it is improbable that said reserves will be distributed to the shareholders.
MAIN EFFECTS OF INTRODUCTION OF NEW ITALIAN/OIC ACCOUNTING STANDARDS ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 As previously stated, the new OIC Accounting Standards have been published and are applicable from the financial statements for the year ended 31 December 2016.The main effects on the financial statements for the year ended 31 December 2016 are disclosed in the notes.
OTHER INFORMATION Exceptions in terms of Article 2423 (4) of the Italian Civil Code It should also be noted that there have been no exceptional circumstances requiring exceptions to be made to statutory reporting requirements in terms of Article 2423 (4) of the Italian Civil Code.
RECLASSIFICATIONS OF PRIOR YEAR BALANCES The reclassifications of prior year balances are due to changes introduced by the previously mentioned Accounting Reform. Details are provided in the Note titled “Accounting effects of the Accounting Reform”.
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NOTES TO THE BALANCE SHEET
ASSETS
A detailed analysis of Balance Sheet Assets at 31 December 2016 is presented below.
B) I Intangible assets Intangible assets amount to Euro 14,317.4 thousand at 31 December 2016 (Euro 14,397.2 thousand at 31.12.2015). A detailed breakdown is provided below. “Start-up and expansion costs” refers to expenses incurred for the incorporation of the most recent companies. “Patents and intellectual property rights” relates to software licence expenses. “Concessions, licences and trademarks” refers to the purchase by SIEM S.p.A. of the site in Ceresara comprising land, buildings and a concession to operate a waste treatment business and also the purchase of rights to use an adjacent plot of land where the new logistics centre is situated. “Goodwill” mainly refers to the purchase of the A.SE.P. gas and public water service businesses and to costs arising on the acquisition of gas customer contracts from Linea Group. “Assets under progress and payments on account” includes capex relating to: an IT project; payments on account for projects and work on street lighting systems and video surveillance systems and expenses for a number of clean-ups. At 31 December 2016, “Other intangible assets” mainly included the gas network of the Municipality of Asola; deferred expenses relating to the connection of the former Belleli factory to the Teleheating network; improvements to waste disposal facilities; and capex on the new water analysis laboratory and on the logistics centre. At 31 December 2016, there were no commitments relating to the intangible assets held.
Movements on intangible assets A detailed statement of movements on intangible assets has been prepared and is provided on the following pages. For each caption, it shows historical cost, accumulated amortisation and previous revaluations/writedowns, movements during the period, closing balances and total revaluations at the reporting date. Where present, the amount of financial expenses allocated during the year to Balance Sheet assets has been disclosed in the notes, separately for each caption.
31.12.2016 31.12.2015 Change 1) start-up and expansion costs 12,060 10,121 1,939 2) development costs
3) patents and intellectual property rights 955,578 882,316 73,262
4) concessions, licences and trademarks 1,286,623 1,794,937 −508,314 5) goodwill 503,785 704,210 −200,425 6) assets in progress and payments on account 956,960 1,553,980 −597,020 7) other 10,602,434 9,451,651 1,150,783 I. INTANGIBLE ASSETS: 14,317,440 14,397,215 −79,775
B I 1) Start-up and expansion costs Amount Historical cost at 31.12.2015 17,689 Accumulated amortisation at 31.12.2015 -7,568 Net carrying amount at 31.12.2015 10,121 Decrease 0 Increase 6,707 Decrease in provision 0 Reclassifications from/to assets in progress 0 Amortisation -4,768 Writedowns 0 Revaluation 0
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B I 1) Start-up and expansion costs Amount Net carrying amount at 31.12.2016 12,060
B I 3) Patents and intellectual property rights Amount Historical cost at 31.12.2015 10,648,954 Accumulated amortisation at 31.12.2015 -9,766,638 Net carrying amount at 31.12.2015 882,316 Decrease -2,169 Increase 395,387 Decrease in provision 0 Reclassifications from/to assets in progress 628,029 Amortisation -947,985 Writedowns 0 Revaluation 0 Net carrying amount at 31.12.2016 955,578
B I 4) Concessions, licences and trademarks Amount Historical cost at 31.12.2015 2,972,336 Accumulated amortisation at 31.12.2015 -1,177,399 Net carrying amount at 31.12.2015 1,794,937 Decrease -363,855 Increase 0 Decrease in provision 126,190 Reclassifications from/to assets in progress 0 Amortisation -270,649 Writedowns 0 Revaluation 0 Net carrying amount at 31.12.2016 1,286,623
B I 5) Goodwill Amount Historical cost at 31.12.2015 1,181,136 Accumulated amortisation at 31.12.2015 -476,926 Net carrying amount at 31.12.2015 704,210 Decrease 0 Increase 0 Decrease in provision 0 Reclassifications from/to assets in progress 0 Amortisation -200,425 Writedowns 0 Revaluation 0 Net carrying amount at 31.12.2016 503,785
B I 6)Assets in progress and payments on account Amount Historical cost at 31.12.2015 1,553,980 Accumulated amortisation at 31.12.2015 0 Net carrying amount at 31.12.2015 1,553,980 Decrease 0
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B I 6)Assets in progress and payments on account Amount Increase 2,834,186 Decrease in provision 0 Reclassifications from/to assets in progress -3,431,206 Amortisation 0 Writedowns 0 Revaluation 0 Net carrying amount at 31.12.2016 956,960
B I 7) Other Amount Historical cost at 31.12.2015 17,422,554 Accumulated amortisation at 31.12.2015 -7,970,903 Net carrying amount at 31.12.2015 9,451,651 Decrease -65,697 Increase 112,806 Decrease in provision 459 Reclassifications from/to assets in progress 2,338,670 Amortisation -1,139,641 Writedowns -95,813 Revaluation 0 Net carrying amount at 31.12.2016 10,602,435
“Start-up and expansion costs” have increased by Euro 6.7 thousand as a result of costs capitalised for the incorporation of AqA Mantova S.r.l. Amortisation for the period was Euro 4.8 thousand. “Patents and intellectual property rights” has increased by Euro 1,023.7 thousand due to purchases of licences and software. Meanwhile, decreases regard amortisation of Euro 948.3 thousand. The Euro 508.3 thousand net decrease in “Concessions, licences and trademarks” includes Euro 237.7 thousand relating to a refund of the amount paid in 2014 for stamp duty on the Ceresara site; it also includes Euro 270.6 thousand of amortisation for the period. “Goodwill” decreased during the year as a result of amortisation of Euro 200.4 thousand. Increases of Euro 2,562.7 thousand to “Other intangible assets” relate almost entirely to expenses to connect the former Belleli factory to the Teleheating network (Euro 1,344 thousand) – work on this project was completed in 2016 (at 31.12.2015, these costs were classified under assets in progress). Other smaller amounts capitalised during the year were: Euro 722 thousand for works carried out on the new laboratory by TEA Acque and Euro 180 thousand for deferred expenses. Changes during the year on “Assets in progress and payments on account” relate to the capitalisations described above.
Assessment of recoverability of intangible assets When preparing the Financial Statements, given the presence of certain indicators of impairment, the Company performed an assessment of the recoverability of its intangible assets. The Company did not identify any effective indicators of impairment. No impairment adjustments or writedowns were made during the year.
B) II Tangible assets This caption includes non-current assets which form part of the Company’s permanent organisation. Assets are classified under this category not because of their inherent nature but because of their use within the business. Such assets are normally used in order to generate income from ordinary activities. They are not destined for sale or for transformation in order to obtain the Company’s products. Any tangible assets which the Company intends to sell are classified separately from tangible assets i.e. under a specific current assets caption. Ordinary depreciation, as shown on a specific schedule, has been calculated using rates felt to represent the remaining useful lives of the tangible assets. The depreciation rates applied are as follows: Financial Statements as at 31/12/2016 Page 39
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Land 0% Buildings 3% Light constructions 10% Gas supply points 2% Gas distribution network 2% Water distribution network 2.5% Teleheating network 5% Sewage network 2.5% Votive light network 8% Telecommunications network 8% Depressurising systems 4% Storage tanks 2% Water supply plants 12.5% Drinking water plants 8.33% Thermal power plants 9% Hydropower plants 7% Cogeneration plants 9% General plant 8.33% Street lighting systems 8% or contract period Sewage pumping systems 12.5% Gas meters 4% - 6.67% Remote controls 8% Commercial vehicles 20% Automobiles 25% Video surveillance systems 20% Sundry equipment 10% Ordinary office furniture and equipment 12% Electronic office equipment 20% Gas networks to be returned free of charge Contract period
Tangible assets amounted to Euro 199,871.8 thousand at 31 December 2016 (Euro 180,963.0 thousand at 31.12.2015). A detailed breakdown is provided below. “Land and buildings”, amounting to Euro 41,032 thousand, includes various land and buildings used in the business and the Mariana Mantovana landfill site. “Plant and machinery” includes the teleheating and gas networks, thermal and hydropower plants, water and sewage service equipment and networks, gas depressurising systems, street lighting systems, the “Vasarina” mini-hydro power plant and general plant for a total of Euro 127,337 thousand. “Industrial and commercial equipment” includes sundry equipment such as gas/water meters and garbage bins/containers with a net carrying amount of Euro 5,497.6 thousand at 31.12.2016. “Other tangible assets”, amounting to Euro 17,553.1 thousand, mainly includes commercial vehicles/automobiles, revamping of the Ceresara plant, recycling centres, office equipment and assets purchased for cemetery services and for gas distribution networks to be returned free of charge. “Assets under construction and payments on account”, amounting to Euro 8,452 thousand, mainly includes capex in progress in relation to: the expansion of the Teleheating network; work on the Mariana Mantovana landfill; the construction of new water purification plants in Gonzaga and Suzzara, work on sewage collection systems and extraordinary maintenance of the sewage network; work on the water network and, finally, the drinking water plant in Bigarello.
Movements on tangible assets A detailed statement of movements on tangible assets has been prepared and is provided on the following pages. For each caption, it shows historical cost, accumulated depreciation and previous revaluations/writedowns, movements during the period, closing balances and total revaluations at the reporting date.
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Where present, the amount of financial expenses allocated during the year to Balance Sheet assets has been disclosed in the notes, separately for each category.
31.12.2016 31.12.2015 Change 1) land and buildings 41,031,998 38,092,224 2,939,774 2) plant and machinery 127,337,051 114,472,591 12,864,460 3) industrial and commercial equipment 5,497,585 6,540,475 −1,042,890 4) other tangible assets 17,553,147 17,905,589 −352,442 5) assets under construction and payments on account 8,451,998 3,952,144 4,499,854 II. TANGIBLE ASSETS: 199,871,779 180,963,023 18,908,756
B II 1) Land and buildings Amount Historical Cost at 31.12.2015 68,127,080 Accumulated depreciation at 31.12.2015 -30,034,856 Net carrying amount at 31.12.2015 38,092,224 Decreases 0 Increases 1,443,218 Decrease in provision 0 Transfers from assets under construction 3,032,256 Depreciation -1,535,700 Writedowns 0 Revaluation 0 Net Carrying Amount at 31.12.2016 41,031,998
B II 2) Plant and machinery Amount Historical Cost at 31.12.2015 208,346,283 Accumulated depreciation at 31.12.2015 -93,873,692 Net carrying amount at 31.12.2015 114,472,591 Decreases -3,489,103 Increases 5,712,475 Decrease in provision 2,602,339 Transfers from assets under construction 15,704,494 Depreciation -7,665,745 Writedowns 0 Revaluation 0 Net Carrying Amount at 31.12.2016 127,337,051
B II 3) Industrial and commercial equipment Amount Historical Cost at 31.12.2015 14,809,175 Accumulated depreciation at 31.12.2015 -8,268,700 Net carrying amount at 31.12.2015 6,540,475 Decreases -129,692 Increases 427,043 Decrease in provision 110,535 Transfers from assets under construction 1,035,330 Depreciation -1,587,577
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B II 3) Industrial and commercial equipment Amount Writedowns -898,529 Revaluation 0 Net Carrying Amount at 31.12.2016 5,497,585
B II 4) Other tangible assets Amount Historical Cost at 31.12.2015 38,216,732 Accumulated depreciation at 31.12.2015 -20,311,143 Net carrying amount at 31.12.2015 17,905,589 Decreases -657,817 Increases 2,439,505 Decrease in provision 544,572 Transfers from assets under construction 187,184 Depreciation -2,865,886 Writedowns 0 Revaluation 0 Net Carrying Amount at 31.12.2016 17,553,147
B II 5) Assets under construction and payments on account Amount Historical Cost at 31.12.2015 3,952,144 Accumulated depreciation at 31.12.2015 0 Net carrying amount at 31.12.2015 3,952,144 Decreases 0 Increases 23,939,267 Decrease in provision 0 Transfers from assets under construction -19,439,413 Depreciation 0 Writedowns 0 Revaluation 0 Net Carrying Amount at 31.12.2016 8,451,998
The main increases to the value of tangible assets during the year regarded: - Land and buildings: the increase – net of depreciation for the year - of Euro 2,939.8 thousand is mainly due to new company AqA Mantova S.r.l. which owns the land on which the laboratory and purification/treatment plant in Castiglione delle Stiviere stand, capex made by Tea S.p.A. on the landfill and extraordinary maintenance of buildings (work in Viale della Favorita). - Plant and machinery – has increased – after depreciation of Euro 7,703.2 thousand - by Euro 12,864.4 thousand as a result of capex on street lighting systems (Euro 4,006 thousand); works on the teleheating network and thermal power plants and network (Euro 2,189.8 thousand); work on the gas distribution network (Euro 1,377 thousand) with related connections (Euro 762 thousand) and telemetering (Euro 507 thousand); capex on purification/treatment plants (Euro 1,025 thousand), on the sewage network (Euro 2,115 thousand), on the water network (Euro 2,100 thousand) and on water plants and supply points (Euro 1,220 thousand). - Industrial and commercial equipment: decreases mainly relate to depreciation of Euro 1,579.1 thousand, disposals of garbage containers/bins of Euro 410.5 thousand and writedowns of Euro 898.5 thousand. These decreases are offset by increases due to purchases of new waste containers and dumpsters (Euro 169 thousand); purchases of new equipment for the water analysis laboratory (Euro 488 thousand) and meters (Euro 446 thousand). - Other tangible assets: decreases include Euro 352.4 thousand of depreciation and disposals totalling Euro 3,483.1 thousand. The balance also includes increases of Euro 2,343.6 thousand due to purchases of motor vehicles, mainly for the environmental cleansing business (Euro 1,426 thousand). Financial Statements as at 31/12/2016 Page 42
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- Assets under construction and payments on account: the net increase of Euro 4,499.9 thousand relates to capex projects commenced during the year to expand the landfill and the teleheating network (Euro 1,141.5 thousand); the construction of the new purification/treatment plants in Gonzaga and Suzzara, the water network in Bagnolo San Vito and Castellucchio, the drinking water plant in Bigarello, the Commessaggio- Campitello-Gazzuolo water pipeline, the Bondeno-Gonzaga collection system and extraordinary maintenance on the Pomponesco and Serravalle sewage networks for a total of Euro 3,334 thousand.
Assessment of recoverability of tangible assets When preparing the Financial Statements, given the presence of certain indicators of impairment, the Company performed an assessment of the recoverability of its tangible assets and performed the revaluation described previously. The Company did not identify any further indicators of impairment.
B) III Financial assets At 31 December 2016, the Company held non-current financial assets totalling Euro 26,839.5 thousand (Euro 27,111.5 thousand at 31 December 2015). This caption includes the following: - investments in associated companies of Euro 4,783.8 thousand (Euro 4,526.4 thousand at 31 December 2015); - investments in other entities of Euro 15,565.1 thousand (Euro 17,565.1 thousand at 31 December 2015); - financial receivables from associated companies of Euro 5,466.3 thousand (Euro 3,924 thousand at 31 December 2015); - financial receivables from others of Euro 24.2 thousand (Euro 96.0 thousand at 31 December 2015); - other securities of Euro 1,000 thousand (Euro 1,000 thousand at 31 December 2015. In the Financial Statements, no non-current financial assets are carried at more than their fair value.
Investments The following table shows movements on investments during the year:
31.12.2016 Increase Decrease 31.12.2015 a) subsidiaries 0 0 0 0 b) associated companies 4,783,813 257,453 0 4,526,360 c) parent companies d) companies controlled by parent companies d-bis) other entities 15,565,120 0 −2,000,000 17,565,120 B.III 1) investments in: 20,348,933 257,453 −2,000,000 22,091,480
The investments classed as non-current assets represent long-term, strategic investments by the Company.
Movements on non-current financial assets (investments, other securities, treasury shares)
Investments Investments Investments Investments in companies Investments Total Other in in associated in parent controlled by in other Investments securities subsidiaries companies companies parent entities companies Amount at 01.01.2016 0 4,526,360 0 0 17,565,120 22,091,480 1,000,000 Changes during the year Purchases 257,453 257,453 Disposals Writedowns -2,000,000 -2,000,000 Revaluations Reclassifications
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Investments Investments Investments Investments in companies Investments Total Other in in associated in parent controlled by in other Investments securities subsidiaries companies companies parent entities companies Other changes Total changes 0 257,453 0 0 -2,000,000 -1,742,547 0 Amount at 31.12.2016 0 4,783,813 0 0 15,565,120 20,348,933 1,000,000
On 26 April 2016, associated company Biociclo S.r.l. approved a quota capital increase from € 52,000 to € 2,200,000 through the conversion of reserves and through payments in cash/in kind by the quotaholders. The Company participated in this quota capital increase paying the amount due to maintain the same percentage interest which, upon completion of the operation, will amount to € 528,000. The writedown regards the investment in Enipower Mantova.
Details of investments in associated companies At 31 December 2016, the Company held investments in associated companies totalling Euro 4,783.8 thousand (Euro 4,526.4 thousand at 31 December 2015). The following table contains details of investments held directly, or through a fiduciary company or other intermediary:
Investments in associated companies Blugas Infrastrutture Name Unitea S.r.l. Tnet Servizi S.r.l. Biociclo S.r.l. S.r.l. Castiglione delle City or Country Mantua Mantua Mantua Stiviere (MN) Quota capital in Euro 14,300,000 100,000 10,000 52,000 Profit (Loss) for last year in −447,662 1,790,090 -287,302 464,944 Euro Quotaholders’ equity in Euro 14,623,125 2,650,566 368,734 2,336,999 Interest held in Euro 4,196,837 1,325,284 92,184 560,880 % interest held 28.70% 50.00% 25.00% 24% Value at 31.12.2016 4,116,065 395,315 2,500 269,933
Note that the information set out in the above table relates to Financial Statements as at 31 December 2015.
Comment, details of investments in associated companies
Blugas Infrastrutture S.r.l. This company operates a gas storage facility under a concession agreement. The investment is not subject to any disposal restrictions.
UniTea S.r.l. This company operates a renewable energy plant. The investment is not subject to any disposal restrictions.
Tnet Servizi S.r.l. This company provides telephone and internet services via a cable and wi-fi network. The investment is not subject to any disposal restrictions.
Biociclo S.r.l. This company operates waste treatment plants.
Details of investments in other entities
Financial Statements as at 31/12/2016 Page 44
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At 31 December 2016, the Company had investments in other entities totalling Euro 15,565.1 thousand (Euro 17,565.1 thousand at 31 December 2015). Investments in other entities are recorded at acquisition price. The following table contains details of investments held directly, or through a fiduciary company or other intermediary:
Investments in other entities Enipower Mantova Sinergie Italiane Casalasca Servizi Name A.G.I.R.E. S.c.r.l. Last Service S.r.l. S.p.A. S.r.l. in liquidation S.p.A. Casalmaggiore City or Country Mantua Mantua Milan Zola Predosa (BO) (CR) Quota / Share 144,000,000 65,000 1,000,000 500,000 58,400 capital in Euro Profit (Loss) for 28,921,888 −102,181 2,898,875 134,276 6,129 last year in Euro Equity in Euro 197,828,292 290,436 −12,184,357 1,337,331 82,421 Interest held in 26,706,819 23,235 0 185,622 560 Euro % interest held 13.50% 8.00% 4.97% 13.88% 0.68% Value at 15,440,000 4,000 1 120,719 400 31.12.2016
Note that the information set out in the above table relates to Financial Statements as at 31 December 2015, except for SINIT S.r.l. in liquidation which is as at 30 September 2016.
Other securities The most significant changes during the year in relation to other securities are shown in the following table:
31.12.2016 Increase Decrease 31.12.2015 M/L TERM SECURITIES 1,000,000 1,000,000 B.III3) Other securities 1,000,000 0 0 1,000,000
This caption includes Euro 1,000.0 thousand of bonds issued by MPS and maturing on 12/5/2017. The amount of Euro 1,000.0 thousand has been provided as security to MPS for a loan granted by said bank to TNet Servizi S.r.l. in which Tea S.p.A. holds a 25% interest.
Movements on non-current financial assets (receivables) The most significant movements on non-current financial receivables during the year are shown in the following table :
31.12.2016 Increase Decrease 31.12.2015 a) due from subsidiaries - current - non-current Total receivables from subsidiaries 0 0 0 0 b) due from associated companies - current - non-current 5,466,346 1,542,364 3,923,982
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31.12.2016 Increase Decrease 31.12.2015 Total receivables from associated companies 5,466,346 1,542,364 3,923,982 c) due from parent companies - current - non-current Total receivables from parent companies 0 0 0 0 d) due from companies controlled by parent companies - current - non-current Total receivables from companies controlled by 0 0 0 0 parent companies d-bis) due from others - current −71,766 71,766 - non-current 24,178 24,256 Total receivables from others 24,178 −71,766 96,022 B.III 2) receivables: 5,490,524 1,542,364 -71,766 4,020,004
Movements during the year on non-current financial receivables from associated companies mainly related to the following: - new loans to associated companies UniTea S.r.l. (Euro 800 thousand) and Blugas Infrastrutture S.r.l. (Euro 742.4 thousand); - settlement of the loan to Blugas srl in liquidation following completion of the liquidation process. Transactions with the associated companies indicated above took place on an arm’s length basis.
Receivables from others mainly include Euro 14.3 thousand relating to the IRPEF/Employee income tax advance paid on the TFR/Employee severance indemnity under Law 662/96 and guarantee deposits of Euro 9.9 thousand.
Breakdown of non-current receivables by geographical area A breakdown of non-current receivables by geographical area has not been provided as the most of the non-current receivables are due from associated companies based in Italy, especially in the province of Mantua in Lombardy Region.
Non-current receivables relating to transactions with a repurchase obligation Pursuant to Article 2427(6-ter), we provide below details of transactions with a repurchase obligation for the buyer. There are no transactions with a repurchase obligation.
C) I Inventory At 31 December 2016, inventory totalled Euro 2,390.8 thousand (Euro 2,619.4 thousand at 31 December 2015). Note that inventory is not subject to any securities or guarantees.
31.12.2016 31.12.2015 Change 1) raw materials 1,779,466 1,971,041 −191,575 2) work in progress and semi-finished goods 611,366 648,360 −36,994 3) job order work in progress 4) finished goods 5) payments on account C.I. INVENTORY: 2,390,832 2,619,401 −228,569
The balance of Euro 1,779.5 thousand at 31 December 2016 (Euro 1,971.0 thousand at 31 December 2015) relates to materials held in inventory. Meanwhile work in progress and semi-finished goods inventory of Euro 611.4 thousand at Financial Statements as at 31/12/2016 Page 46
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31 December 2016 (Euro 648.4 thousand at 31 December 2015) relates to inventory of cemetery/funeral items (burial recesses and gravestones) valued at total production cost, including internal labour for design and assistance. The 31 December 2016 inventory balance is stated net of an obsolescence provision of Euro 160.0 thousand (Euro 120 thousand at 31 December 2015).
C) II Receivables Receivables amounted to Euro 112,649.2 thousand at 31 December 2016 (Euro 107,402.1 thousand at 31 December 2015). The balance includes third party trade receivables of Euro 84,868.2 thousand after a provision for bad debts of Euro −19,591.9 thousand, receivables from associated companies of Euro 1,393,9 thousand, receivables from parent companies of Euro 2,256.7 thousand, receivables of Euro 102.6 thousand from associated companies, tax receivables of Euro 6,976.6 thousand, deferred tax assets of Euro 9,217.7 thousand and other receivables of Euro 7,833.5 thousand. It should be noted that the 31.12.2015 comparative figures for Trade receivables, Receivables from parent companies and Receivables from companies controlled by parent companies have been reclassified following changes to the balance sheet lay-out introduced by the “Accounting Reform” contained in Legislative Decree 139/2015. Trade receivables due within a year include receivables generated by ordinary sales transactions and are due from Italian customers. The balance includes trade receivables of Euro 78,970.8 thousand, invoices to be issued of Euro 25,571.0 thousand, credit notes to be issued of Euro −1,612 thousand and the provision for bad debts of Euro −19,591.9 thousand. Trade receivables due after more than a year include Euro 173.1 thousand resulting from the sale of the “Fibre” business to MNET in 2016 and due after 31.12.2016. Note that implicit interest income separated from this type of receivable as required by the new OIC 15 “Receivables”. The remaining Euro 1,357.2 thousand regards receivables from private partner A3M Luce. Receivables from associated companies include trade receivables of Euro 1,393.9 thousand. Receivables from parent companies include receivables from the Municipality of Mantua (controlling shareholder) for a total of Euro 2,256.7 thousand. Receivables from companies controlled by the parent companies amount to Euro 102.6 thousand (Euro 150.4 thousand at 31 December 2015) and refer to receivables – for utilities – from companies controlled by the Municipality of Mantua (majority shareholder of TEA S.p.A.) like Aster S.r.l. and A.S.P.eF. Tax receivables mainly include the VAT receivable of Euro 2,809.1 thousand and other tax receivables of Euro 3,911 thousand, detailed as follows: - Euro 2,652.3 thousand of gas and electricity duty credits; - Euro 902 thousand for IRES refunds; - Euro 273.5 thousand regional gas surtax credits; - Euro 83.2 thousand for sundry receivables from the tax authorities. Deferred tax assets of Euro 9,217.7 thousand relate to deductible temporary differences. Other receivables due within a year mainly includes advances to suppliers of Euro 1,713.1 thousand; social bonus receivables of Euro 794.4 thousand and other receivables of Euro 3,049.0 thousand. Other receivables mainly comprises refunds receivable from tax collection agency Equitalia of Euro 561.9 thousand; refunds for damages from suppliers of Euro 250.0 thousand; receivables from the AEEGSI of Euro 898.3 thousand and, finally, receivables from SIEM S.p.A. and sundry municipalities for a total of Euro 1,069.4 thousand. Receivables from others due after more than a year entirely consist of guarantee deposits.
31.12.2016 31.12.2015 Change - receivables from users and customers 78,970,803 72,088,381 6,882,422 - Invoices to be issued 25,570,965 26,691,707 −1,120,742 - credit notes to be issued −1,611,991 −1,083,076 −528,915 - Provision for bad debts −19,591,902 −18,724,186 −867,716 C.II.1 Trade receivables - current 83,337,875 78,972,826 4,365,049
31.12.2016 31.12.2015 Change - receivables from users and customers 1,530,323 1,530,323 C.II.1 Trade receivables – non-current 1,530,323 0 1,530,323
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The following table shows movements on the provision for bad debts for statutory reporting purposes and for tax purposes. Note that the analysis of the amounts to be provided at 31.12.2016 was performed on an individual company level based on the receivables ageing and the amount of the provision.
Bad debt prov. Bad debt prov. Description under Art. 2426 under Art. I.C.C. 917/1986 Balance at 31.12.2015 −18,724,186 556,323 Utilised during year 3,562,599 −342,006 Allocated during year −4,430,315 311,679 Balance at 31.12.2016 −19,591,902 525,996
31.12.2016 31.12.2015 Change C.II.3 Receivables from associated companies - current 1,393,898 1,487,244 −93,346 - non-current Total receivables from associated companies 1,393,898 1,487,244 −93,346
31.12.2016 31.12.2015 Change C.II.4 Receivables from parent companies - current - receivables for invoices issued 1,685,620 1,122,702 562,918 - invoices to be issued 585,737 8,811 576,926 - credit notes to be issued −14,676 0 −14,676 - receivable from tax consolidation 0 0 0 - receivable for VAT transferred 0 0 0 - receivables for collection of bills/invoices 0 0 0 - other receivables 0 0 0 Total current 2,256,681 1,131,513 1,125,168 - non-current Total non-current 0 0 0 Total receivables from parent companies 2,256,681 1,131,513 1,125,168
31.12.2016 31.12.2015 Change C.II.5 Receivables from companies controlled by parent companies - current - receivables for invoices issued 47,978 150,347 −102,369 - invoices to be issued 54,658 10 54,648 - credit notes to be issued 0 0 0 - other receivables 0 0 0 Total current 102,636 150,357 −47,721 - non-current Total non-current 0 0 0 Total receivables from companies controlled by parent companies 102,636 150,357 −47,721
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31.12.2016 31.12.2015 Change C.II.5-bis Tax receivables - current - current income taxes 256,560 580,297 −323,737 - VAT 2,809,096 2,927,789 −118,693 - other 3,910,929 7,008,754 −3,097,825 Total current 6,976,585 10,516,840 −3,540,255 - non-current Total non-current Total tax receivables 6,976,585 10,516,840 −3,540,255
31.12.2016 31.12.2015 Change C.II.5-ter Deferred tax assets - current - deferred tax assets – IRES 8,556,373 8,030,772 525,601 - deferred tax assets – IRAP 661,330 637,987 23,343 Total current 9,217,703 8,668,759 548,944 - non-current Total non-current Total deferred tax assets 9,217,703 8,668,759 548,944
31.12.2016 31.12.2015 Change C.II.5-quater Receivables from others, current 7,442,224 6,091,654 1,350,570
Other receivables 3,049,031 Advances to employees 139 Advances to suppliers 1,713,062 Prepaid card 14,340 Social bonus receivables 794,353 Tariff component compensation receivables 81,957 Collections receivable 1,189,309 Receivables from CCSE 590,189 Receivables from social security/pensions institutions 9,844 7,442,224
31.12.2016 31.12.2015 Change C.II.5-quater Receivables from others, non-current 391,303 382,913 8,390
The increase in receivables as a whole is surely related to the inclusion in the scope of consolidation of new company AqA Mantova S.r.l. and to normal fluctuation due to ordinary activities.
Breakdown of current receivables by geographical area Most current receivables are due from customers resident in the province of Mantua, Lombardy. However, the following chart shows a percentage split of trade receivables by region.
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Receivables at 31.12.2016
3% 8%
Lombardia
Veneto
OtherAltre regioni region s
89%
Current receivables relating to transactions with a repurch ase obligation Pursuant to Article 2427(6-ter), we provide below details of transactions with a repurchase obligation for the buyer. There are no transactions with a repurchase obligation .
C) III Financial assets In accordance with the new OIC 32 “ Derivat ive Instruments”, at 31 December 2016, the Company has recorded the fair value of derivatives entered into and in place at the reporting date . For comparative purposes, the new Standard also required the disclosure of derivatives in place at 31 December 20 15. The effect of these entries was recorded directly in equity because, in terms of OIC 32, the contracts in question may be classified as cash flow hedges. Other securities includes the value of the white certificates (energy savings certificates) purch ased during the year in order to achieve the obligatory limits imposed by energy saving regulations .
31.12.2016 31.12.2015 Change 1) investments in subsidiaries 2) investments in associated companies 3) investments in parent companies 3-bis) investments in companies controlled by parent companies 4) other investments 5) derivative instruments 726,475 29,612 696,863 6) other securities 3,358,115 1,359,602 1,998,513 III. FINANCIAL ASSETS 4,084,590 1,389,214 2,695,376
C) IV Cash and cash equivalents Cash and cash equivalents amounted to Euro 4,333.9 thousand at 31 December 2016 (Euro 7,708.9 thousand at 31 December 2015) and mainly included bank cu rrent account balances of Euro 4,312.5 thousand and cash on hand of Euro 21.4 thousand.
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31.12.2016 31.12.2015 Change 1) Bank and post office accounts 4,312,528 7,690,658 −3,378,130 2) Cheques 3) Cash and cash equivalents on hand 21,369 18,204 3,165 IV. CASH AND CASH EQUIVALENTS: 4,333,897 7,708,862 −3,374,965
See the Statement of Cash Flows for further details of the change in cash and cash equivalents.
D) Prepaid expenses and accrued income This caption amounts to Euro 2,755.6 thousand and includes Euro 31.5 thousand of accrued income in the form of accrued interest accruing on receivables. It also includes Euro 2724.1 thousand of prepaid expenses - some Euro 415.4 thousand of prepaid expenses will mature within a year with Euro 2,308.8 thousand maturing after more than a year.
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LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes on the main items included in Liabilities and Shareholders’ Equity are provided below.
A) Shareholders’ equity
The main Shareholders’ Equity items and movements thereon are analysed below:
31.12.2016 31.12.2015 Change I. SHARE CAPITAL 73,402,672 71,941,912 1,460,760 II. SHARE PREMIUM RESERVE 4,127,245 1,872,238 2,255,007 III. REVALUATION RESERVES 2,592,373 2,592,373 0 IV. LEGAL RESERVE 3,442,783 2,944,901 497,882 V. STATUTORY RESERVES VI. OTHER RESERVES 30,342,576 27,281,670 3,060,906 VII. RESERVE FOR CASH FLOW HEDGES 726,475 −147,721 874,196 VIII. RETAINED EARNINGS (ACCUMULATED LOSSES) −90,389 −2,180,640 2,090,251 IX. PROFIT (LOSS) FOR THE YEAR 12,587,139 10,758,327 1,828,812 X. NEGATIVE RESERVE FOR TREASURY SHARES HELD −415,717 −415,717 0 SHAREHOLDERS’ EQUITY – GROUP 126,715,157 114,647,343 12,067,814 CAPITAL AND RESERVES – MINORITY INTERESTS 8,244,957 7,848,970 395,987 PROFIT PERTAINING TO MINORITY INTERESTS 1,600,184 1,286,425 313,759 SHAREHOLDERS’ EQUITY PERTAINING TO MINORITY INTERESTS 9,845,141 9,135,395 709,746 A) SHAREHOLDERS’ EQUITY: 136,560,298 123,782,738 12,777,560
The following tables show movements on shareholders’ equity during the year and a reconciliation with shareholders’ equity and the profit for the year per the Group consolidated financial statements for 2016:
Share capital Share Revaluation Legal reserve Other reserves Profit for the Total Equity of premium reserve and retained year Group reserve earnings 31 -Dec -15 71,941,912 1,872,238 2,592,373 2,944,901 24,537,592 10,758,327 114,647,343
Payments from 1,460,760 2,255,007 - - - - 3,715,767 shareholders Allocation of net - - - 497,882 5,293,790 -5,791,672 - profit Distribu tion of - - - - -4,966,655 -4,966,655 dividends Net profit for the 12,706,358 12,706,358 year New consolidations and - - - 25,003 -119,219 -94,216 deconsolidations Other - - - 706,560 - 706,560
31 -Dec -16 73,402,672 4,127,245 2,592,373 3,442,783 30,562,946 12,587,139 126,715,157
Result Equity pertaining Result pertaining to Equity pertaining to pertaining to to Group minority interests minority interests Group Balances per separate financial statements of Tea 12,677,425 126,646,774 Financial Statements as at 31/12/2016 Page 52
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Result Equity pertaining Result pertaining to Equity pertaining to pertaining to to Group minority interests minority interests Group S.p.A. Balances per financial statements of consolidated 6,215,694 36,024,492 1,600,184 8,244,958 companies Difference between equity of consolidated subsidiaries and their carrying amount -5,937,578 -25,530,493 Elimination of intra-Group transactions -368,401 -580,472 Balance at 31.12.2016 12,587,141 136,560,300 1,600,184 8,244,958
Changes in shareholders’ equity items At 31.12.2016, share capital was wholly subscribed and paid and amounted to Euro 73,402.7 thousand. The increases in share capital and in the share premium preserve during the year are due to the interest acquired by the Municipality of Castiglione delle Stiviere in parent company Tea S.p.A. following a resolution of the Shareholders’ General Meeting of 29 February 2016. The subscribed increase was paid through the contribution of an investment in AqA Mantova srl, the company which operates the public water and sewage system in the municipal area of the new shareholder. The changes in Other Reserves are due to the allocation of the net profit for 2015 and to the creation of new captions required by the new accounting standards issued by the Italian Accounting Profession, in order to accommodate the changes made to Italian statutory reporting requirements by the “Accounting Reform” in Legislative Decree 138/2015. In more detail, the new OIC 32 “Derivative Instruments” has made it necessary to account for Derivatives in place at the reporting date and to create a specific Equity caption. As the derivatives entered into by Tea Energia between 2015 and now have been classed as cash flow hedges, in accordance with said OIC 32, as described in the Note on Financial Assets, the Reserve for Cash Flow Hedges is generated by recognising the fair value of said instruments. For comparative purposes, Derivatives in place at 31.12.2015 have also been reported. During the year, the reserve increased by Euro 874.2 thousand due to the reversal of Euro 177.3 thousand and the booking of 2016 Derivatives totalling Euro 696.9 thousand.
B) Provisions for risks and charges
At 31 December 2016, provisions for risks and charges amounted to Euro 45,687.7 thousand (Euro 41,407.2 thousand at 31.12.2015) and were analysed as follows:
31.12.2016 Increases Decreases 31.12.2015 B1) for retirement benefits and similar obligations 31,825 15,527 16,297
The provision for retirement benefits and similar obligations regards the agents’ supplementary leaving indemnity provision.
31.12.2016 Increases Decreases 31.12.2015 B2) for taxation, including deferred tax 15,935 −16,951 32,886
Movements on the deferred tax provision depend changes to non-taxable temporary differences.
31.12.2016 Increases Decreases 31.12.2015 DERIVATIVE FINANCIAL INSTRUMENTS 0 -177,333 177,333 B3) derivative financial instruments 0 -177,333 177,333
At 31.12.2015, “derivative financial instruments – payables” reflected the amount of derivatives at that date with a negative fair value; these amounts have been recorded for comparative purposes only (as required by the new OIC 32). The decrease at 31.12.2016 is due to the fact that these contracts reached maturity and the effect was recorded in the income statement.
31.12.2016 Increases Decreases 31.12.2015 Financial Statements as at 31/12/2016 Page 53
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31.12.2016 Increases Decreases 31.12.2015 PROVISION FOR MANAGEMENT OF FULL LANDFILL 13,310,987 1,207,671 −175,567 12,278,883 PROVISION FOR RISKS IN EXCESS OF PROV. FOR MGMT 3,046,475 −147,672 3,194,147 OF FULL LANDFILL PROVISION FOR LITIGATION RISKS 90,000 90,000 SOLIDARITY PROVISION 150,000 100,000 50,000 PROVISION FOR RISKS 11,320,683 3,928,421 −738,503 8,130,765 PROVISION FOR WRITEDOWN OF INVESTMENTS 8,000 −89,300 97,300 PROVISION FOR ADDITIONAL INV. IN LANDFILL 7,714,473 700,683 7,013,790 PROV FOR RISKS RE EXCESS OVER ADD. INV IN L.FILL 9,829,356 −476,457 10,305,813 PROVISION FOR DISMANTLING OF EQUIPMENT 170,000 150,000 20,000 B 4) other 45,639,974 6,086,775 −1,627,499 41,180,698
Note 1): Provision for management of full landfill and Provision for risks in excess of provision for management of full landfill The “Provision for management of the full landfill” has been calculated based on the total capacity of the landfill i.e. around 4 million cubic metres and on an appraisal of post mortem costs. The provision has increased by Euro 1,207.7 thousand for allocations relating to the year. The “Provision for management of full landfill” has been decreased by Euro 175.6 thousand in relation to utilisation for the year. The “Provision for risks in excess of provision for management of full landfill” has been decreased by Euro 147.7 thousand due to the amount reversed in 2016.
Note 2): Provision for litigation risks This provision reflects risks relating to certain litigations that have not yet been completed.
Note 3): Solidarity provisions This provision is for the elimination from water tariffs of amounts destined for the Municipalities for gestures of solidarity. Euro 100 thousand was provided during the year to help meet the specific needs of disadvantaged families and, therefore, for purely social purposes.
Note 4): Provision for risks Movements on these provisions are shown in the following table:
Description 31.12.2016 Increase Decrease 31.12.2015 Risks re liquidation of Sinit 1,625,000 1,625,000 Risks re purchase and sale of gas Tea Energia 700,000 700,000 0 Risks for TNet warranties 1,760,000 1,760,000 Other provisions for risks 1,521,751 803,420 -88,503 806,834 Gas & power risks 3,000,000 1,050,000 -300,000 2,250,000 Water cycle risks 2,213,932 1,125,000 -350,000 1,438,932 Provision for crematorium maintenance 500,000 250,000 250,000 Total 11,320,683 3,928,420 -738,503 8,130,766
The increases in 2016 regarded: • Risks re purchase and sale of gas TEA Energia: Euro 700 thousand for SINIT liquidation expenses, in the form of additional fees on the cost of gas. • Other provisions for risks: o Euro 170 thousand for the indemnity the Municipality of Ceresara could claim to update the 2016 grant for the waste disposal plant situated in the municipality; Financial Statements as at 31/12/2016 Page 54
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o Euro 300 thousand for ordinary litigation; o Euro 60 thousand for future expenses relating to spin-off; o Sundry. The provision largely takes account of expenses for the Municipality of Mantua. The provision was utilised in 2016 and a further Euro 283.5 thousand has been allocated. • Gas & Power risks, provision has increased by: o Euro 150.0 thousand: provision for Terna 2016 final balance adjustment; o Euro 100.0 thousand: provision for forecast SNAM balancing adjustment under new settlement rules (Resolution 229/2012 and s.m.i.) – 2016 session; o Euro 570.0 thousand: provision for unfavourable margins on fixed price contracts; o Euro 230.0 thousand: provision for forecast loss on indirect sales network. • Water Cycle Risks: o Euro 200.0 thousand for adjustments requested by GISI S.p.A. under contract for management of treatment plants for the period 2008-2013; o Euro 605.0 thousand regarding potential tariff adjustments to the RCVol component i.e. the difference between the VRG due for 2016 and the effective billing for offsetting when determining 2018 tariff; o Euro 320.0 thousand regarding potential tariff adjustments to the RCopex component i.e. the difference between the VRG due for 2016 and the effective billing for offsetting when determining 2018 tariffs. • Provision for crematorium oven maintenance: Euro 250 thousand for significant forthcoming works on the combustion chamber refractory.
Note 5): Provision for writedown of investments At 31/12/2016, this provision amounted to Euro 8 thousand and related to the investment in UniTea S.r.l. The decrease during the year is due to completion of the liquidation of associated company Blugas S.r.l. in liquidation.
Note 6): Provision for additional investment in landfill and provision for risks in excess As highlighted in note 1, the “Provision for additional investment in landfill” – representing a provision for the estimated global cost of the investment which will increase the depreciable amount, as calculated based on capex actually incurred (excluding investments in progress) – has been redetermined based on the new overall capacity of the landfill. As a result of the appraised investments, the quantities contributed to the landfill and the amount still available at 31.12.2016, some Euro 794.0 thousand has been allocated in relation to 2016 while Euro -93.3 thousand has been reclassified to accumulated depreciation. The “Provision for risks in excess of additional landfill investment” was created in 2014 and includes the excess created following the expansion of landfill capacity. This provision has been and will be released in coming years in proportion to the amount transferred over the years. During the year, it decreased by Euro 476.4 thousand due to the reversal relating to the period.
Note 7): Provision for dismantling of equipment The increase during the year is due to the planned closure of the Gonzaga purification plant owned by Tea S.p.A. in relation to which dismantling and clean-up costs of Euro 150 thousand are expected.
C) Employee severance indemnity (“TFR”) provision
31.12.2016 31.12.2015 Change C) EMPLOYEE SEVERANCE INDEMNITY (“TFR”) PROVISION 7,025,227 6,975,148 50,079
The employee severance indemnity provision, amounting to Euro 7,025.2 thousand (Euro 6,975.2 thousand at 31 December 2015), has been determined in accordance with Article 2120 of the Italian Civil Code. The provision represents the Company’s effective liability at 31.12.2016 towards employees at that date, net of advance payments made.
D) Payables Payables are measured in accordance with OIC 9.
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Short-term “Bank borrowing” includes Euro 14,323.7 thousand regarding current account overdrafts with leading banks (facilities subject to interest in line with market rates) and long-term loan repayments due within a year. “Bank borrowing” due after more than a year includes the non-current portion of the principal due on medium/long-term loans. The amount due after more than five years totals to Euro 39,671.1 thousand and mainly relates to loans obtained for works on water and sewage systems and for teleheating. Payables to other lenders includes a loan from Lombardy region which was taken on following the acquisition of the San Benedetto Po network in 2014. The amount due after more than a year is Euro 293.6 thousand. “Trade payables” regard purchase transactions made on normal terms of payment. The entire balance is due within a year. “Payables to associated companies” includes payables for invoices of Euro 439.4 thousand. “Payables to parent companies” includes: - Euro 9,889,1 thousand for invoices received and to be received, - Euro 6,539.1 thousand of dividends payable to the parent company, - Euro 960.8 thousand of other payables. “Tax payables” mainly refers to: - Euro 157.4 thousand of current taxes payable, - Euro 546.9 thousand of VAT payable, - Euro 718.6 thousand of taxes deducted at source from salaries and other remuneration, - Euro 19.6 thousand of electricity surtaxes payable; - Euro 211.9 thousand of Italian TV license fees collected and payable to the Tax Authorities. “Payables to social security and pensions institutions” includes Euro 272.6 thousand payable to INPDAP, Euro 1,012.4 thousand payable to INPS, Euro 38.7 thousand payable to INAIL, Euro 203.5 thousand payable to pension funds and Euro 23.1 thousand of other payables. “Other payables – current” mainly comprise Euro 803.8 thousand due to employees for paid holidays/leave, Euro 1,708.9 thousand due to the Provincial authority for the surcharge on waste tariffs, Euro 1,426.9 thousand of payables for tariff component compensation and Euro 109.1 thousand of payables for collections and sundry other payables of Euro 1,411.9 thousand. “Other payables – non-current” refers to guarantee deposits.
These items are analysed below with details of maturity dates and movements during the year:
31.12.2016 31.12.2015 Change - current 14,323,654 13,353,972 969,682 - non-current 58,476,783 64,142,600 −5,665,817 D)4) bank borrowing: 72,800,437 77,496,572 −4,696,135
Bank borrowing 31.12.2016 Due within a year 14,323,654 Due after 1 to 5 years 18,805,655 Due after more than 5 years 39,671,128 Total bank borrowing 72,800,437
31.12.2016 31.12.2015 Change - current 5 5 0 - non-current D) 6) payments on account 5 5 0
Due within a year 31.12.2016 31.12.2015 Change - trade payables 35,596,108 29,435,541 6,160,567 - invoices to be received 30,267,413 25,115,815 5,151,598
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31.12.2016 31.12.2015 Change - credit notes to be received −826,089 −1,192,155 366,066 D) 7) trade payables 65,037,432 53,359,201 11,678,231
31.12.2016 31.12.2015 Change - current 439,449 532,548 −93,099 - non-current D) 10) payables to associated companies 439,449 532,548 −93,099
Due after more than a year 31.12.2016 31.12.2015 Change - invoices payable 6,860,126 8,033,143 −1,173,017 - invoices and credit notes to be received 3,029,014 0 3,029,014 - payables from tax consolidation 0 0 0 - payable for VAT transferred 0 0 0 - cash pooling payable 0 0 0 - payables for collection of bills/invoices - dividends payable 6,539,112 7,927,075 −1,387,963 - TIA payables 0 0 0 - ecotax payables - other payables 960,820 942,874 17,946 D) 11) payables to parent companies 17,389,072 16,903,092 485,980
Due within a year 31.12.2016 31.12.2015 Change - current taxes 157,387 445,874 −288,487 - VAT 546,923 3,530 543,393 - other 950,058 3,608,305 −2,658,247 D) 12) Tax payables: 1,654,368 4,057,709 −2,403,341
Electricity duty payable to tax authorities 1,710 Gas duty payable to tax authorities 0 Municipal electricity surtax payable 17,904 Taxes withheld at source from salaries and remuneration 718,551 Italian TV licence fees payable 211,893 950,058
31.12.2016 31.12.2015 Change D) 13) payables to social security and pensions institutions 1,550,223 1,570,963 −20,740
- due to INPDAP 272,598 - due to INPS 1,012,361 - due to INAIL 38,675 - due to pension fund 203,530 - other 23,059 1,550,223
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Due after more than a year 31.12.2016 31.12.2015 Change - provincial surcharge on waste tariff payable 1,708,915 1,609,976 98,939 - due to employees for paid holidays/leave 803,815 815,980 −12,165 - sundry payables 3,031,535 2,365,976 665,559 D14) other payables 5,544,265 4,791,932 752,333
Other payables Advances to Municipality for funeral expenses 1,411,912 Payables for tariff components 326 Payables for collections 1,426,939 Remuneration payable to employees 109,078 Other payables 83,280
3,031,535
31.12.2016 31.12.2015 Change - guarantee deposits from users and third parties 1,261,866 1,013,340 248,526 D14) other payables 1,261,866 1,013,340 248,526
The changes in the various payables balances are the result of normal business activities .
Breakdown of payables by geographical area The following chart provides a breakdown of payables by geographical area .
Payables at 31.12.2016
3% 20%
Lombardia Lazio 5% OtherAltre regioni regions
Veneto Emilia-Romagna
57% 15%
Payables secured on company assets The payab les due to Cariparma bank refer to a loan regarding the purchase of the premises in Via Taliercio and Via Nenni – both Mantua – which is secured by a mortgage on both properties. The loan is repayable in six -monthly instalments with the final payment due i n 2027.
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Analysis of payables secured on company assets (table) There are no other payables secured on company assets.
Payables relating to transactions with a repurchase obligation Pursuant to Article 2427(6-ter), we note that the financial statements do not include any payables relating to transactions with a future repurchase obligation for the buyer.
E) Accrued expenses and deferred income In terms of Article 2424 bis (6) of the Italian Civil Code, these items regard costs relating to the period but due in future periods and income received by the reporting date but relating to future periods. The caption includes accrued expenses of Euro 14.1 thousand (mainly interest on loans) and deferred income of 11,593.4 thousand (of which Euro 4,049.8 thousand of long-term deferred income) mainly in relation to government grants.
31.12.2016 31.12.2015 Change Accrued expenses 14,052 26,033 −11,981 Deferred income 11,953,352 12,020,304 −66,952 E) ACCRUED EXPENSES AND DEFERRED INCOME: 11,967,404 12,046,337 −78,933
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NOTES TO THE INCOME STATEMENT
A) Value of production
Before proceeding with an analysis of the individual items, it should be recalled that, in accordance with Article 2428(1) of the Italian Civil Code, comments on general revenue and cost trends have been made in the Directors’ Report on Operations. Value of production amounts to Euro 251,557.6 thousand (Euro 254,341.3 thousand in 2015). Revenues from sales and services total Euro 242,154.8 thousand (Euro 244,661.1 thousand in 2015) and are stated net of returns, discounts, allowances and bonuses, as well as after taxes directly connected with the sale of goods and the supply of services. Line item A2 “Change in inventory of work in progress” refers to the change in inventory of cemetery/funeral items of Euro −37 thousand. Line item A4 “increases in non-current assets due to capitalisation of internal works” includes capitalised costs which led to increases in “Intangible assets” and/or “Tangible assets”.. Line item A5 “other revenues” is analysed as follows:
31.12.2016 31.12.2015 Change Rental income 46,223 24,101 22,122 Other real estate income 30,102 41,473 −11,371 Income from management of users/utility 870,196 774,256 95,940 Personnel services 673,665 109,056 564,609 Insurance pay-outs 334,873 55,776 279,097 Gains on disposals 190,179 116,884 73,295 Operating grant income 186,541 174,226 12,315 Sundry and minor revenues 3,862,701 3,495,205 367,496 5) other revenues and income 6,194,480 4,790,977 1,403,503
We note the, following the introduction of new accounting standards to implement the “Accounting reform” under Legislative Decree 139/2015, the comparative amounts for line item A5 at 31.12.2015 also include the reclassification of non-recurring income that could not be included in other Value of Production captions. These reclassification adjustments have been made solely for comparative purposes.
Breakdown of revenues from sales and services by business category The following table contains a breakdown of revenues by business category:
31.12.2016 31.12.2015 Change Gas distribution 3,279,841 3,234,654 45,187 Sale of gas 44,830,442 57,107,900 −12,277,458 Sale of water 11,211,710 10,138,803 1,072,907 Sale of heat 10,859,506 11,996,944 −1,137,438 Sale of electricity 63,688,418 57,985,221 5,703,197 Sale of steam 249,143 252,235 −3,092 Management of sewage/purification systems 18,831,699 16,328,601 2,503,098 Environmental cleansing services 57,756,884 58,618,110 −861,226 Operation of landfill 7,704,525 7,340,389 364,136 Cemetery and funeral services 6,491,856 5,648,227 843,629 Services to third parties 2,698,266 2,574,606 123,660 Operation of Thermal Power Plants 1,062,675 936,762 125,913 Management of street lighting 7,541,569 7,824,221 −282,652
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31.12.2016 31.12.2015 Change Roads and road signs service 943,689 848,979 94,710 Maintenance of parks and public green areas 4,160,104 3,949,492 210,612 Sale of materials 31,107 12,208 18,899 Technical services −566,490 −1,581,157 1,014,667 Fee for use of plant/systems 1,379,890 1,444,866 −64,976 1) revenues from sales and services: 242,154,834 244 ,661,061 −2,506,227
31.12.2016 31.12.2015 Change Opening inventory of work-in progress, semi -finished and finished goods 648,360 713,063 −64,703 Closing inventory of work-in-progress, semi -finished and finished goods 611,366 648,360 −36,994 2) Change in inventory of work-in-progress, semi -finished and finished −36,994 −64,703 27,709 goods
31.12.2016 31.12.2015 Change Costs for items taken from inventory 381,393 796,282 −414,889 Internal personnel costs 2,863,878 4,157,693 −1,293,815 4) Incr. in non-current assets due to capitalisation of internal works 3,245,271 4,953,975 −1,708,704
Breakdown of revenues from sales and services by geographical area The following chart contains a breakdown of revenues by Region .
REVENUES 2016
2% 7% 2%
Lombardia
Veneto
Emilia -Romagna
89% AltreOther regioni region s
B) Cost of production
Cost of production amounts to Euro 23 1, 932.3 thousand (Euro 236,010.2 thousand in 2015). Costs for raw, ancillary and consumable materials are stated net of returns, discounts, allowances and bonuses and are analysed as follows:
31.12.2016 31.12.2015 Change Purchases of untreated water 15,676 13,587 2,089 Purchases of heat 2,480,539 2,628,231 −147,692 Purchases of electricity 22,604,323 23 ,742,495 −1,138,172
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31.12.2016 31.12.2015 Change Purchases of methane gas 25,076,170 40,861,855 −15,785,685 Purchases for funeral services 266,325 350,419 −84,094 Heating fuel 68,769 4,977 63,792 Fuel for teleheating service 0 89,946 −89,946 Garbage containers 63,957 88,828 −24,871 Inventory items 1,752,554 2,245,368 −492,814 Raw materials and purification agents 545,140 362,166 182,974 Gas odoriser 93,492 76,309 17,183 Return of certain cemetery items 13,926 13,177 749 Other purchases 1,030,080 1,394,338 −364,258 Fuel and lubricants 1,188,250 1,279,625 −91,375 Stationery and printed materials 102,961 117,891 −14,930 6) raw, ancillary and consumable materials and goods 55,302,162 73,269,212 −17,967,050
Line item B7) includes costs for purchases of services in the course of ordinary operating activities. It mainly comprises the following items:
31.12.2016 31.12.2015 Change Repairs and maintenance 5,888,407 5,427,588 460,819 Waste disposal 9,090,310 9,342,807 −252,497 Gardening and landscaping services 2,583,736 2,329,777 253,959 Waste/garbage services 15,509,249 15,161,044 348,205 Gas distribution 5,241,643 4,123,970 1,117,673 Outsourced services 10,759,914 10,827,721 −67,807 Water analysis and treatment 381,675 409,851 −28,176 Postage and telegraphs 563,637 457,899 105,738 Telephone 242,912 243,489 −577 Office cleaning and washing of vehicles 289,789 276,376 13,413 Legal and notary fees 2,116,408 1,752,849 363,559 Insurance 1,180,057 1,100,468 79,589 Software assistance 384,033 315,605 68,428 Preparation and issue of bills 560,774 585,987 −25,213 Meter reading 381,912 295,383 86,529 Connectivity fees 31,903 15,154 16,749 Temporary labour 307,204 78,436 228,768 Municipal Services 7,211,768 7,101,126 110,642 Board of Directors’ fees 95,001 113,708 −18,707 Board of Statutory Auditors’ fees 168,668 165,478 3,190 INPS/Social security contributions on consultancy 5,670 7,999 −2,329 Membership fees 159,875 131,993 27,882 Other personnel costs 635,586 615,513 20,073 Fees on guarantees/sureties 384,914 289,041 95,873 Bank charges 405,997 362,762 43,235 Sundry services 2,393,550 2,601,341 −207,791 Financial Statements as at 31/12/2016 Page 62
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31.12.2016 31.12.2015 Change Electricity distribution 45,011,991 38,177,176 6,834,815 7) costs for services 111,986,583 102,310,541 9,676,042
Line item B8) is analysed as follows:
31.12.2016 31.12.2015 Change PROPERTY RENTAL AND RELATED EXPENSES 182,175 195,863 −13,688 PROPERTY RENTAL EXPENSES TEA SPA 0 0 0 RENTAL/HIRE OF MOVEABLE ASSETS 399,497 391,683 7,814 RENTAL/HIRE OF CARS 8,836 9,941 −1,105 LEASE COST OF COMPANY CARS PROVIDED AS FRINGE BENEFITS 9,300 2,462 6,838 RENTAL/HIRE OF MOVEABLE ASSETS FROM PRIVATE PARTNER 132,999 216,566 −83,567 FEES FOR CONCESSIONS AND RIGHTS OF WAY 141,951 142,928 −977 LEASE INSTALMENTS – PRINCIPAL ELEMENT 182,713 182,713 FEES FOR USE OF PLANT 12 0 12 FEES FOR PURIFICATION/TREATMENT SERVICES 0 0 0 FEES TO MUNICIPALITIES FOR USE OF PLANT/SYSTEMS 2,480,314 2,700,499 −220,185 RENT AND USER FEES TEA SPA 0 0 0 RENT AND USER FEES SIEM SPA 475,225 493,200 −17,975 BUSINESS RENTAL COST 25,072 25,072 OTHER LEASE AND RENTAL COSTS 15,645 13,080 2,565 RENTAL EXPENSES 30,407 30,407 8) use of third party assets / Lease and rental costs 4,084,146 4,166,222 −82,076
31.12.2016 31.12.2015 Change 9) Personnel costs 29,233,144 28,415,177 817,967
Line item B9) includes personnel costs incurred during the year. In more detail, caption B9a) includes wages and salaries including amounts accruing and not paid in relation to additional months’ salaries and paid holidays/leave, as stated inclusive of taxes and social contributions borne by the employees; caption B9b) includes social contributions payable by the Company; caption B9c) includes the amount provided during the year for employee severance indemnities/TFR; and, finally, caption B9d) includes amounts allocated to supplementary pension funds other than the TFR.
Line item B10) “Depreciation, amortisation and writedowns” is analysed as follows:
31.12.2016 31.12.2015 Change 10) depreciation, amortisation and writedowns: a) amortisation of intangible assets 2,563,792 2,147,574 416,218 b) depreciation of tangible assets 13,563,281 12,746,274 819,617 Total depreciation and amortisation per a) and b) 16,129,683 14,893,848 1,235,835 c) other writedowns of non-current assets 95,813 95,813 d) writedown of current receivables and cash and cash equivalents 4,048,074 4,869,681 −821,607
Total line item B) 10) 20,270,960 19,763,529 510,041
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Note that: • Depreciation and amortisation for the gas segment has been calculated in accordance with Article 2 of Decree Law no 211/2005 which reduced the tax deductible rates of depreciation for certain tangible assets used by companies operating in the gas segment; • Depreciation regarding the public water and sewage service has been calculated in accordance with AEEGSI Resolution no. 585 of 28/12/2012 insofar as it regards the useful life of assets. • The land on which buildings are situated has not been depreciated.
31.12.2016 31.12.2015 Change - opening inventory 2,219,980 1,253,685 966,295 - closing inventory −1,873,746 −1,863,673 −10,073 11) change in inventory of raw, ancillary and consumable materials 346,234 −609,988 956,222 and goods
31.12.2016 31.12.2015 Change ALLOCATIONS TO PROVISIONS FOR RISKS 4,038,350 2,458,000 1,580,350 12) allocations to provisions for risks 4,038,350 2,458,000 1,580,350
31.12.2016 31.12.2015 Change ALLOCATION TO PROVISION FOR MANAGEMENT OF FULL LANDFILL 1,207,671 1,535,543 −327,872 ALLOCATION TO PROVISION FOR DISMANTLING OF EQUIPMENT 150,000 150,000 ALLOCATION TO PROVISION FOR LANDFILL INVESTMENTS 794,022 842,902 −48,880 ALLOCATION TO PROVISION FOR ADJUSTMENT TO DEPRECIATION 898,529 562,257 336,272 13) other allocations to provisions 3,050,222 2,940,702 109,520
Line item B14) “Other operating expenses” includes:
31.12.2016 31.12.2015 Change Official tax stamps 102,674 102,338 336 Vehicle road tax 35,369 35,613 −244 Stamp duty 64,610 52,321 12,289 Sundry taxes and duties 72,033 34,951 37,082 Municipal property tax 154,974 97,773 57,201 Non-deductible VAT 282,273 114,303 167,970 Sales promotion activities 1,162,405 1,024,874 137,531 Fees to Energy businesses’ Authority 56,688 56,202 486 Newspaper/magazine subscriptions and purchases 40,995 49,088 −8,093 Losses on disposals 99,495 68,871 30,624 Other operating expenses 1,548,937 1,660,500 −111,563 14) other operating expenses 3,620,453 3,296,834 323,619
C) Financial income and expenses Net financial income amounts to Euro 3,101,543.
31.12.2016 31.12.2015 Change
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31.12.2016 31.12.2015 Change C) FINANCIAL INCOME AND EXPENSES: 15) income from investments subsidiaries 0 0 associated companies parent companies companies controlled by parent companies other 2,996,853 3,082,476 −85,623 Total income from investments 2,996,853 3,082,476 −85,623 16) other financial income: a) from non-current receivables due from subsidiaries associated companies parent companies companies controlled by parent companies other Total financial income from non-current receivables b) from securities classed as non-current assets which are not investments c) from securities classed as current assets which are not investments d) income other than the above from subsidiaries 0 0 0 associated companies parent companies 0 0 0 companies controlled by parent companies other 789,058 835,042 −45,984 Total income other than the above 789,058 835,042 −45,984 Total other financial income 789,058 835,042 −45,984 17) interest and other financial expenses to subsidiaries 0 0 0 associated companies parent companies 0 0 0 other 684,368 1,142,456 −458,088 17-bis) exchange gains and losses Total interest and other financial expenses 684,368 1,142,456 −458,088 C) FINANCIAL INCOME AND EXPENSES: 3,101,543 2,775,062 326,481
Bonds Bank borrowing Other Total
Interest and other financial expenses 669,931 14,437 684,368
D) Adjustments to value of financial assets
31.12.2016 31.12.2015 Change 18) revaluations: a) of investments 0 0 0 Financial Statements as at 31/12/2016 Page 65
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31.12.2016 31.12.2015 Change b) of non-current financial assets 0 0 c) of securities classified as current assets which are not investments d) of derivative instruments 19) writedowns a) of investments −2,000,000 −2,000,000 0 b) of non-current financial assets c) of securities classified as current assets which are not investments d) of derivative instruments D) ADJUSTMENTS TO VALUE OF FINANCIAL ASSETS: −2,000,000 −2,000,000 0
E) Taxes on income for the year Taxes on income have been calculated in accordance with current tax law. They represent the taxes for the reporting period. Taxes on income for the year ended 31 December 2016 amount to Euro 6,539.6 thousand (Euro 7,061.4 thousand in 2015) and include:
31.12.2016 31.12.2015 Change - current taxes 4,328,102 4,256,251 71,851 - deferred taxes −17,894 −7,315 −10,579 - deferred tax income −523,551 62,059 −585,610 - income (expenses) from participation in consolidated taxation /fiscal 2,752,897 2,750,397 2,500 transparency regime 20) taxes on income for the year: 6,539,554 7,061,392 −521,838
OTHER INFORMATION
Employment details As shown in the following table, the headcount includes 567 employees compared to 572 employees at 31 December 2015. Headcount movements during 2016 are shown below:
Actual headcount at Started during Left during Actual headcount at 31.12.2015 year year 31.12.2016 Senior managers, total 9 1 0 10 Managers, total 16 2 -2 16 White collar workers, 278 13 -12 279 total Blue collar workers, total 269 17 -24 262 Apprentices, total 0 0 0 0 Headcount, total 572 33 -38 567
Off Balance Sheet commitments, guarantees and contingent liabilities Pursuant to Article 2427(9) of the Italian Civil Code, the following table contains details of the guarantees given by the TEA Group. Description Amount (Euro thousands) Guarantees in favour of associated companies for M/L term loans 11,620.9 Guarantees in favour of other companies for M/L term loans 6,158.7 Guarantees in favour of associated companies for VAT refund 1,247.9 Guarantees in favour of other companies for VAT refund 199.0 Securities provided as collateral for associated company’s credit facilities 1,000.0
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We note that, at the reporting date, the Company had made no commitments for the sale of goods and services towards third parties and/or parent companies, subsidiaries, associated companies or companies controlled by the parent companies.
Off balance sheet agreements There are no off balance sheet agreements which could significantly impact the Company’s balance sheet and financial position and result for the year, in terms of Article 2427(22-ter) of the Italian Civil Code.
Exceptional revenue or cost items In terms of Article 2427(13) of the Italian Civil Code, we note that no exceptional revenue or cost items have been recorded.
Financial instruments issued by the Company The Group did not issue any financial instruments during the year or in prior years.
Disclosures regarding derivatives See the above notes with regard to the accounting treatment of derivatives.
Related party transactions The information on related party transactions required by Article 2427(22-bis) of the Italian Civil Code is provided below. The definition of related party is as contained in International Accounting Standards (IAS 24).
BALANCE SHEET Municipality of Mantua ASTER Srl ASPEF Srl Trade receivables 2,256,681 6,650 95,987 Financial receivables - - - Other receivables - - - Trade payables 10,752,273 - - Financial payables - - Other payables 6,637,316 - -
INCOME STATEMENT Municipality of Mantua ASTER Srl ASPEF Srl Operating revenues 7,178,872 156,932 395,255 Operating costs 2,959,590 6,356 - Financial income (expenses) - - -
Tea S.p.A. – Siem S.p.A. Tea S.p.A. and Siem S.p.A. are companies wholly owned by Italian local authorities and, on 2013, as instructed by said authorities, they commenced a business combination process with a view to establishing a single entity to manage solid urban waste services in the Province of Mantua. This led to the unification of their operating activities under a single company – Mantova Ambiente S.r.l. – which has provided environmental cleansing services over a vast area of the Province of Mantua since 2010. The new Sole Director of Siem S.p.A., appointed at the end of 2014, is working with Tea S.p.A. and continues to have as his primary objective the process of integration of the operating companies. The Chairman of Siem previously acted and the Sole Director currently also acts as Chairman of the Board of Directors of Mantova Ambiente.
Mantova Ambiente S.r.l. has intra-Group receivables of € 1,450,153 and intra-Group payables of € 712.979 with quotaholder SIEM S.p.A. The receivables regard payments collected by SIEM on behalf of Mantova Ambiente. Meanwhile, the payables of € 712,979 include trade payables of € 536,942 and € 176.037 of non-collectible receivables transferred to the company. These balances have been confirmed by the counterparty.
Accounting effects of the Accounting Reform The Notes include the disclosures required by OIC 29 and, in particular, a description of the effect the Accounting Reform had on the Company’s balance sheet and financial position and result for the period.
Optional exemptions from full adoption of the new accounting standards Application of the amortised cost method Financial Statements as at 31/12/2016 Page 67
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Legislative Decree introduces the amortised cost valuation method for use in measuring receivables, payables and non-current assets in the form of securities. The standard provides for an optional exemption which makes it possible not to apply the amortised cost method to receivables, payables and non-current assets in the form of securities that were reported in the 2015 financial statements. Consequently, balances arising from 1 January 2016 onwards have been measured using the amortised cost method while balances arising prior to 1 January 2015 continue to be reported in accordance with the previous requirements.
Balance Sheet and Income Statement reclassifications Balances relating to companies controlled by the parent companies Legislative Decree provided for the introduction of specific Balance Sheet (Assets and Liabilities) and Income Statement captions for amounts relating to companies controlled by parent companies. For this reason, certain amounts had to be reclassified to these new captions in the Balance Sheet at 31 December 2015.
Elimination of Income Statement class E The Accounting Reform has eliminated Income Statement class E which included non-recurring/extraordinary items. Consequently, the amounts included under the relevant captions in the 2015 income statement have been reclassified to the most appropriate captions based on their nature.
New numbering of several captions The numbering of several captions has changed following the elimination and introduction of certain line items in the Balance Sheet and Income Statement.
Significant events after the reporting period The tendering process called by the three public sector quotaholders of Mantova Ambiente has been completed and the new private quotaholder, Progetto Mantova, has been identified. It will hold a 20% interest in place of the outgoing quotaholders SER.I.T. (11%) and LOMB.RI.CA. (9%).
The Financial Statements, comprising the Balance Sheet, the Income Statement, the Statement of Cash Flows and the Notes, present a true and fair view of the Balance Sheet and Financial Position and of the consolidated result for the period; they reflect the contents of the accounting records.
Mantua, 07 March 2017
The Chairman of the Board of Directors Massimiliano Ghizzi
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2016 financial statements of the consolidated companies
Tea Energia S.r.l. Mantova Ambiente S.r.l. Sei S.r.l. Tea Acque S.r.l. Tea Onoranze Funebri S.r.l. Electrotea S.r.l. Tea Reteluce S.r.l. AqA Mantova S.r.l. Global Funeral Service S.r.l.
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Financial Statements as at 31/12/2016 Page 70
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Tea Energia S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital 0 0 Non-current assets Intangible assets 1,866,256 1,388,970 Tangible assets 34,356 28,228 Financial assets 7,209,877 3,274,361 Total non-current assets 9,110,489 4,691,559 Current assets Inventory 458,184 759,763 Receivables 38,707,977 37,500,227 Current financial assets 726,475 29,612 Cash and cash equivalents 221,179 323,317 Total current assets 40,113,815 38,612,919 Prepaid expenses and accrued income 81,757 34,931 Total assets 49,306,061 43,339,409 Liabilities and equity Quotaholders’ equity Quota capital 2,000,000 2,000,000 Reserves 5,483,121 3,332,455 Retained earnings (accumulated losses) 0 0 Profit (loss) for the year 3,371,852 1,876,469 Total Quotaholders’ equity 10,854,973 7,208,924 Provisions for risks and charges 3,031,825 2,443,630 Employee severance indemnity (TFR) provision 44,187 34,349 Payables 31,365,776 27,789,060 Accrued expenses and deferred income 4,009,300 5,863,446 Total liabilities and equity 49,306,061 43,339,409
Income Statement 2016 2015 Value of production 127,258,138 135,091,749 Cost of production 122,440,390 131,372,831 Financial income and expenses 191,949 160,831 Adjustments to value of financial assets 0 0 Non-recurring income and expenses 0 0 Profit before taxation 5,009,697 3,879,749 Taxes on income for the year 1,637,845 2,003,280 Profit (Loss) for the year 3,371,852 1,876,469
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Mantova Ambiente S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital 0 0 Non-current assets Intangible assets 777,287 1,124,880 Tangible assets 14,935,524 17,399,002 Financial assets 400,702 143,249 Total non-current assets 16,113,513 18,667,131 Current assets Inventory 593,303 570,754 Receivables 36,704,616 34,555,222 Current financial assets Cash and cash equivalents 136,348 255,805 Total current assets 37,434,267 35,381,781 Prepaid expenses and accrued income 302,434 348,010 Total assets 53,850,214 54,396,922 Liabilities and Equity Quotaholders’ equity Quota capital 227,270 227,270 Reserves 9,683,762 9,683,762 Retained earnings (Accumulated losses) 0 0 Profit (Loss) for the year 1,592,014 1,496,029 Total Quotaholders’ equity 11,503,046 11,407,061 Provisions for risks and charges 241,566 71,566 Employee severance indemnity (TFR) provision 2,723,282 2,868,349 Payables 38,875,818 39,254,909 Accrued expenses and deferred income 506,502 795,037 Total liabilities and equity 53,850,214 54,396,922
Income Statement 2016 2015 Value of production 71,774,976 71,960,081 Cost of production 69,216,586 69,140,631 Financial income and expenses -26,347 -386,996 Adjustments to value of financial assets 0 0 Non-recurring income and expenses 0 0 Profit before taxation 2,532,043 2,432,454 Taxes on income for the year 940,029 936,425 Profit (Loss) for the year 1,592,014 1,496,029
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Sei S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital 0 0 Non-current assets Intangible assets 5,887,780 6,293,464 Tangible assets 20,369,812 18,454,692 Financial assets 48,279 46,049 Total non-current assets 26,305,871 24,794,205 Current assets Inventory 139,038 143,446 Receivables 13,402,901 13,170,124 Current financial assets 3,358,115 1,359,602 Cash and cash equivalents 584 1,000 Total current assets 16,900,638 14,674,172 Prepaid expenses and accrued income 1,572,324 1,821,324 Total assets 44,778,833 41,289,701 Liabilities and Equity Quotaholders’ equity Quota capital 1,000,000 1,000,000 Reserves 7,782,319 6,080,283 Retained earnings (Accumulated losses) 0 0 Profit (Loss) for the year 789,103 1,702,036 Total Quotaholders’ equity 9,571,422 8,782,319 Provisions for risks and charges 170,339 223,182 Employee severance indemnity (TFR) provision 1,095,039 1,105,866 Payables 32,836,219 30,031,801 Accrued expenses and deferred income 1,105,814 1,146,533 Total liabilities and equity 44,778,833 41,289,701
Income Statement 2016 2015 Value of production 27,527,430 27,591,473 Cost of production 26,354,527 25,071,977 Financial income and expenses -97,635 -127,053 Adjustments to value of financial assets 2,229 3,579 Non-recurring income and expenses 0 0 Profit before taxation 1,077,497 2,396,022 Taxes on income for the year 288,394 693,986 Profit (Loss) for the year 789,103 1,702,036
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Tea Group
Tea Acque S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital 0 0 Non-current assets Intangible assets 1,377,313 745,134 Tangible assets 51,237,760 42,873,124 Financial assets 2,386 2,386 Total non-current assets 52,617,459 43,620,644 Current assets Inventory 259,511 208,124 Receivables 16,185,505 18,704,806 Current financial assets 0 0 Cash and cash equivalents 692,117 428,574 Total current assets 17,137,133 19,341,504 Prepaid expenses and accrued income 92,645 107,301 Total assets 69,847,237 63,069,449 Liabilities and Equity Quotaholders’ equity Quota capital 3,050,000 3,050,000 Reserves 2,119,778 1,141,750 Retained earnings (Accumulated losses) 0 0 Profit (Loss) for the year 1,534,982 978,027 Total Quotaholders’ equity 6,704,760 5,169,777 Provisions for risks and charges 2,363,932 1,488,932 Employee severance indemnity (TFR) provision 1,055,170 1,143,056 Payables 53,848,074 51,561,105 Accrued expenses and deferred income 5,875,301 3,706,579 Total liabilities and equity 69,847,237 63,069,449
Income Statement 2016 2015 Value of production 32,677,207 32,175,626 Cost of production 30,012,653 30,404,695 Financial income and expenses 15,278 -84,173 Adjustments to value of financial assets 0 0 Non-recurring income and expenses 0 0 Profit before taxation 2,679,832 1,686,758 Taxes on income for the year 1,144,850 708,731 Profit (Loss) for the year 1,534,982 978,027
Financial Statements as at 31/12/2016 Page 74
Tea Group
Tea Onoranze Funebri S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital 0 0 Non-current assets Intangible assets 1,060 2,120 Tangible assets 21,975 24,226 Financial assets 182,927 175,412 Total non-current assets 205,962 201,758 Current assets Inventory 6,043 6,087 Receivables 432,811 280,299 Current financial assets Cash and cash equivalents 90,915 59,300 Total current assets 529,769 345,686 Prepaid expenses and accrued income 158,565 6,062 Total assets 894,296 553,506 Liabilities and Equity Quotaholders’ equity Quota capital 100,000 100,000 Reserves 109,817 109,817 Retained earnings (Accumulated losses) 0 0 Profit (Loss) for the year 26,515 -173,786 Total Quotaholders’ equity 236,332 36,031 Provisions for risks and charges 0 0 Employee severance indemnity (TFR) provision 108,009 99,105 Payables 549,955 415,263 Accrued expenses and deferred income 3,107 Total liabilities and equity 894,296 553,506
Income Statement 2016 2015 Value of production 2,004,581 1,801,172 Cost of production 1,976,259 1,731,845 Financial income and expenses -38 2,880 Adjustments to value of financial assets 7,515 -224,042 Non-recurring income and expenses 0 0 Profit before taxation 35,799 -151,835 Taxes on income for the year 9,284 21,951 Profit (Loss) for the year 26,515 -173,786
Financial Statements as at 31/12/2016 Page 75
Tea Group
ElectroTea S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital 0 0 Non-current assets Intangible assets 0 0 Tangible assets 1,929,497 2,097,280 Financial assets 0 0 Total non-current assets 1,929,497 2,097,280 Current assets Inventory Receivables 704,096 145,468 Current financial assets Cash and cash equivalents 4,188 45,242 Total current assets 708,284 190,710 Prepaid expenses and accrued income 5,496 7,453 Total assets 2,643,277 2,295,443 Liabilities and Equity Quotaholders’ equity Quota capital 50,000 50,000 Reserves 24,552 18,588 Retained earnings (Accumulated losses) Profit (Loss) for the year 3,715 5,965 Total Quotaholders’ equity 78,267 74,553 Provisions for risks and charges 0 0 Employee severance indemnity (TFR) provision 0 0 Payables 2,561,941 2,216,543 Accrued expenses and deferred income 3,069 4,347 Total liabilities and equity 2,643,277 2,295,443
Income Statement 2016 2015 Value of production 442,894 447,686 Cost of production 352,767 356,611 Financial income and expenses -82,009 -80,746 Adjustments to value of financial assets 0 0 Non-recurring income and expenses 0 0 Profit before taxation 8,118 10,329 Taxes on income for the year 4,403 4,364 Profit (Loss) for the year 3,715 5,965
Financial Statements as at 31/12/2016 Page 76
Tea Group
Tea Reteluce S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital Non-current assets Intangible assets 283,639 92,415 Tangible assets 5,126,862 1,232,715 Financial assets Total non-current assets 5,410,501 1,325,130 Current assets Inventory Receivables 4,154,325 4,454,376 Current financial assets Cash and cash equivalents 664,605 38,997 Total current assets 4,818,930 4,493,373 Prepaid expenses and accrued income 28,136 248 Total assets 10,257,567 5,818,751 Liabilities and Equity Quotaholders’ equity Quota capital 100,000 100,000 Reserves 801,000 801,000 Retained earnings (Accumulated losses) -280,551 -286,530 Profit (Loss) for the year 92,846 5,979 Total Quotaholders’ equity 713,295 620,449 Provisions for risks and charges Employee severance indemnity (TFR) provision 60,197 161 Payables 9,481,915 5,198,141 Accrued expenses and deferred income 2,160 Total liabilities and equity 10,257,567 5,818,751
Income Statement 2016 2015 Value of production 7,498,502 7,756,692 Cost of production 7,340,399 7,710,561 Financial income and expenses -60,490 -39,074 Adjustments to value of financial assets 0 0 Non-recurring income and expenses 0 0 Profit before taxation 97,613 7,057 Taxes on income for the year 4,767 1,078 Profit (Loss) for the year 92,846 5,979
Financial Statements as at 31/12/2016 Page 77
Tea Group
AqA Mantova S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital Non-current assets Intangible assets 58,700 Tangible assets 7,084,588 Financial assets Total non-current assets 7,143,288 0 Current assets Inventory 62,239 Receivables 2,513,430 Current financial assets Cash and cash equivalents 32,387 Total current assets 2,608,056 0 Prepaid expenses and accrued income 175,293 Total assets 9,926,637 0 Liabilities and Equity Quotaholders’ equity Quota capital 1,000,000 Reserves 2,740,770 0 Retained earnings (Accumulated losses) Profit (Loss) for the year 94,216 Total Quotaholders’ equity 3,834,986 0 Provisions for risks and charges 60,000 Employee severance indemnity (TFR) provision 193,907 Payables 5,836,774 Accrued expenses and deferred income 970 Total liabilities and equity 9,926,637 0
Income Statement 2016 2015 Value of production 2,970,874 Cost of production 2,770,094 Financial income and expenses -53,791 Adjustments to value of financial assets 0 0 Non-recurring income and expenses 0 0 Profit before taxation 146,989 0 Taxes on income for the year 52,773 Profit (Loss) for the year 94,216 0
Financial Statements as at 31/12/2016 Page 78
Tea Group
Global Funeral Service S.r.l. Balance Sheet 2016 2015 Assets Receivables from quotaholders for unpaid capital Non-current assets Intangible assets 146,437 166,001 Tangible assets 349,024 100,075 Financial assets 10,270 10,348 Total non-current assets 505,731 276,424 Current assets Inventory 188,453 187,368 Receivables 556,992 374,503 Current financial assets Cash and cash equivalents 411,766 16,271 Total current assets 1,157,211 578,142 Prepaid expenses and accrued income 16,564 18,771 Total assets 1,679,506 873,337 Liabilities and Equity Quotaholders’ equity Quota capital 51,000 51,000 Reserves 123,858 112,312 Retained earnings (Accumulated losses) 5,928 Profit (Loss) for the year 7,515 5,618 Total Quotaholders’ equity 182,373 174,858 Provisions for risks and charges Employee severance indemnity (TFR) provision 144,582 134,712 Payables 1,352,433 562,852 Accrued expenses and deferred income 118 915 Total liabilities and equity 1,679,506 873,337
Income Statement 2016 2015 Value of production 1,764,474 1,640,202 Cost of production 1,683,128 1,604,812 Financial income and expenses -20,783 -13,436 Adjustments to value of financial assets 0 Non-recurring income and expenses 1 Profit before taxation 60,563 21,955 Taxes on income for the year 53,048 16,337 Profit (Loss) for the year 7,515 5,618
Financial Statements as at 31/12/2016 Page 79
Tea Group
Report of the External Auditors
Financial Statements as at 31/12/2016 Page 80
Deloitte & Touche S.p.A. Via Cefalonia, 70 25124 Brescia Italia
Tel: 02 83327030 Fax: 02 83327029 www.deloitte.it
INDEPENDENT AUDITORS’ REPORT PURSUANT TO ARTICLE 14 OF LEGISLATIVE DECREE No. 39 OF JANUARY 27, 2010
To the Shareholders of TEA S.p.A.
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of TEA S.p.A. and its subsidiaries (the “TEA Group”), which comprise the consolidated balance sheet as at December 31, 2016, the consolidated statement of income and statement of cash flows for the year then ended and the explanatory notes.
Management’s Responsibility for the Financial Statements
The Company's Directors are responsible for the preparation of these consolidated financial statements that give a true and fair view in accordance with the Italian law governing financial statements.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA Italia) issued pursuant to art. 11 of Italian Legislative Decree 39/10. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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© Deloitte & Touche S.p.A.
2
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the TEA Group as at December 31, 2016, and of its financial performance and cash flows for the year then ended in accordance with the Italian law governing financial statements.
Report on Other Legal and Regulatory Requirements
Opinion on the consistency of the report on operations with the consolidated financial statements
We have performed the procedures indicated in the Auditing Standard (SA Italia) n° 720B in order to express, as required by law, an opinion on the consistency of the report on operations, which is the responsibility of the Directors of TEA S.p.A., with the consolidated financial statements the TEA Group as at December 31, 2016. In our opinion the report on operations is consistent with the consolidated financial statements of the TEA Group as at December 31, 2016.
DELOITTE & TOUCHE S.p.A.
Signed by Piergiulio Bizioli Partner
Brescia, Italy March 23, 2017
This report has been translated into the English language solely for the convenience of international readers.