GRUPPO DE ECCHER 2011 RIZZANI DE ECCHER S.P.A.
Via Buttrio, 36 33050 Cargnacco (UD) Italy Tel. +39 0432 6071 Fax +39 0432 522336 [email protected]
Joint Stock Company incorporated in Italy Share Capital Euro 20,000,000.00 fully paid up Member, Udine Chamber of Commerce Registration no.115684 Department of Foreign Trade UD 002577 Companies Register of Udine Tax ID & VAT Number IT00167700301
rizzanideeccher.com
Annual Report and Consolidated Financial Table of Contents Statements for the Financial Year 2011 (1st January – 31st December) 3 Letter from the Chairman During the Financial Year under review no material changes have occurred 4 2011 at a glance that require corrections or adjustments to the Annual Reports of preceding years. 10 History The 2011 Annual Report was approved by the Shareholders’ Annual General Meeting 13 Strategies held in Udine, Italy on 14th June 2012. 15 Organisation
18 Quality is Innovation
20 Sustainable Development
23 Areas of business activity
24 General Building This Annual Report was printed in 2500 copies in July 28 Infrastructures and circulated to shareholders and the public, including the financial community, 31 Engineering and Special Equipment employees of the company, for Bridges and Viaducts main customers and suppliers. 32 Real Estate Development For further information: 33 Focus [email protected]
45 Management Report
50 Notes to the 2011 Annual Report
51 Contents of the Consolidated Financial Statements
56 Balance Sheet Analysis
68 Income Statement Analysis
71 Independent auditors’ report
73 Consolidated Financial Statements
81 Appendices
89 Statutory Financial Statements of the Parent Company
1
LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS
Dear Shareholders,
Notwithstanding an increase in order backlog, the continuing economic and financial crisis that erupted globally in 2008 and the political upheavals of the spring of 2011 in the Mediterranean basin have caused a temporary reduction in Group turnover.
At € 359 million, the revenues marks a decrease of 26% as opposed to 2010, which is mostly due to the cancellation or delays of important overseas projects owing to the unfavourable global economic situation. Conversely, operating income (EBIT) of € 21,7 million and net profit of € 14.7 million emphasise an excellent performance.
The order backlog, notwithstanding the cancellation of contracts in Libya and (partially) in Kuwait, increased from € 1,641 million to € 1,979 million, of which roughly 1/3 in Italy and 2/3 abroad. This should be enough to ensure the comeback in the next years to the levels of production of 2010 at least.
This Annual Report and the enclosed Financial Statements have been drawn according to principles of transparency, independence, accuracy, complete- ness and reliability. These principles will provide any reader (whether mem- bers of the public, the financial community, customers, suppliers or Group employees) with a fair and accurate picture of results achieved.
In closing, I would like to convey my sincere thanks to our employees for their commitment and hard work towards the attainment of our corporate objectives. I would also like to thank all our business and financial partners for their continued support and contributions towards the Group’s success.
The Chairman Marco de Eccher
Preceding page: Office building Santa Monica, Udine (Italy)
3 2011 AT A GLANCE
economic and financial indicators [Euro thousand] 2007 2008 2009 2010 2011
Total revenues* 488,618 492,628 408,668 483,724 358,930
Total costs of production* (444,089) (463,386) (377,270) (447,761) (326,249) Gross operating income (EBITDA) ** 44,529 29,243 31,398 35,963 32,681 % EBIDTA 9.1% 5.9% 7.7% 7.4% 9.1% Depreciation and amortization (7,653) (6,773) (5,460) (10,201) (11,022) Operating income (EBIT) 36,876 22,470 25,938 25,762 21,659 % EBIT 7.5% 4.6% 6.3% 5.3% 6.0% Financial income/(expenses) and valuation adjustment of investments 95 (4,738) (2,355) (947) 2,762 Profit or (loss) before income taxes (EBT) 36,971 17,732 23,583 24,814 24,421 Income tax (13,268) (5,286) (7,387) (8,419) (6,271) Profit or (loss) for the financial period 23,703 12,446 16,196 16,396 18,150 Minority share of profit for the financial period 531 981 699 2,873 3,453 Consolidated Group profit or (loss) for the financial period 23,172 11,465 15,497 13,523 14,697
Share value of production from overseas 70% 74% 74% 80% 67% Cash flow *** 30,825 18,238 20,957 23,724 25,719
* extraordinary income/charges included ** EBITDA is conventionally calculated as the earning before depreciation and amortization, net financial income/(expenses), valuation adjustment of investment and income tax. Since the composition of EBITDA is not defined by the reference accounting standards, the criterion for its determination applied by the Group might not be consistent with that used by others and therefore not be comparable. *** consolidated Group profit + depreciation and amortization
Total non current assets 38,772 31,595 70,860 82,436 92,276 Inventory 52,084 76,652 61,332 70,056 91,209 Accounts receivable 239,188 194,949 156,276 193,859 163,396 Total current assets 291,272 271,601 217,608 263,915 254,605 Debts and other payables 201,720 178,031 160,956 187,475 199,132 Advances from customers 84,032 122,559 106,207 122,395 113,601 Total current liabilities 285,752 300,591 267,163 309,870 312,733
Net current assets (NCA) 5,520 (28,990) (49,555) (45,955) (58,128) Employees' severance indemnity 5,695 5,504 4,979 4,599 4,988 Provision for contingencies and other liabilities 16,537 2,168 3,330 3,979 1,243 Total non current liabilities 22,232 7,672 8,309 8,578 6,231
Net capital invested 22,060 (5,067) 12,996 27,903 27,917 Shareholders' equity 53,454 58,762 76,031 89,381 108,497 Net medium and long term financial position 7,500 9,100 9,034 11,228 23,357 Net short term financial position (NFP) **** (38,894) (72,929) (72,069) (72,706) (103,937) Total shareholders' equity and net financial position 22,060 (5,067) 12,996 27,903 27,917
NCA + NFP 44,414 43,939 22,514 26,751 45,809 Current ratio 1.16 1.15 1.08 1.09 1.15
**** negative number = positive net short term financial position / positive number = negative short term financial position
As evidenced by the foregoing data, the economic and financial € 61.5 million in 2010). The sum of net current assets (NCA) position of the Group remains excellent from a structural and net short term financial position (NFP) is € 45.8 million standpoint, with EBITDA and EBIT marking yet a slight (as opposed to € 26.8 million in 2010) and the corresponding reduction in absolute terms but a significant increase relative ratio is 1.15. The constant improvement of such financial to revenues, and – more importantly – with a significant indicators over the preceding years bears testimony to the improvement of the Group net financial position (inclusive of Group’s ability to negotiate construction contracts that allow short term and long-term debt relating to an ongoing leasing for operational and financing needs to be funded directly by contract), which is a positive € 80.6 million (as opposed to payments from clients (advances and progress payments).
4 36.9 488.6 492.6 483.7
408.7 358.9 25.9 25.8 80% 74% 23.2 22.5 70% 21.7 74% 15.5 14.7 67% 13.5 11.5
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Revenues = revenues Income from operations = net profit (millions of Euros) = percentage generated abroad (millions of Euros) = EBIT
48.3
43.4
30.8 29.4 25.0
20.4 19.5 16.4 15.1 13.5 0.3
0.1 0.1 0.02 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Profitability [%] = ROI Financial charges as a % of revenues = ROE
1979
1641
2160
1169 66% 1081 1072 1583 68%
82% 92% 1142 1151 1185 77%
746 1219 793 801 1783 439 377 364 349 350
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Order book = order book Number of employees = employees abroad (millions of Euros) = percentage abroad = employees in Italy
5 As anticipated, profitability ratios have improved as opposed decrease in the revenues, the Group in 2011 has yet again to the preceding year. Ratios such as ROI (expressed by the demonstrated its solidity and competitiveness, consolidating ratio between EBIT and gross invested capital inclusive of the market share gained over the past few years. cash and cash equivalent) at 16,4 and ROE (net earnings The backlog of orders at year end has posted a significant on shareholders’ equity inclusive of profit for the year) at increase reaching € 1,979 million (it was € 1,641 million in 13,5 have remained high. In addition, the ratio of financial 2010); it is expected that the execution of the order backlog charges and interest expenses on revenue has remained in the following years will lead to a split between overseas next to zero. and domestic turnover substantially in line with that of the Thus, in general terms and notwithstanding a 26% year under review.
PARENT COMPANY AND ITS MAIN OPERATING UNITS: 2011 AT A GLANCE
The following tables show the main economic and financial indicators of the parent company and its most representative consolidated subsidiaries on a stand-alone basis.
(Euro thousand)
Rizzani de Eccher 2007 2008 2009 2010 2011
Revenues 285,020 322,469 269,945 291,875 168,928
Shareholders’ equity 37,594 48,382 63,485 67,853 67,963
Operating income (EBIT) 30,036 15,187 11,666 738 (6,016)
Net profit (loss) 14,523 15,788 15,103 8,266 737
Cash flow (*) 16,850 18,113 18,176 12,147 4,347
Codest International 2007 2008 2009 2010 2011
Revenues 70,952 93,299 65,850 79,298 48,463
Shareholders’ equity 1,919 1,061 2,345 5,559 7,241
Operating income (EBIT) (7,118) (2,878) 975 5,595 2,464
Net profit (loss) (1,905) 152 931 3,567 1,682
Cash flow (*) (1,090) 984 1,641 4,256 2,043
Deal 2007 2008 2009 2010 2011
Revenues 19,196 7,654 14,550 27,048 26,347
Shareholders’ equity 3,487 3,499 3,548 5,257 7,510
Operating income (EBIT) 1,177 (61) 245 2,771 3,061
Net profit (loss) 648 12 49 1,709 2,253
Cash flow (*) 772 141 163 1,825 2,595
6 VFR Ltd consolidated with 2007 2008 2009 2010 2011 proportional method
Revenues 53,850 91,952 39,545 7,741 3,737
Shareholders’ equity 5,213 9,671 2,120 424 284
Operating income (EBIT) 4,096 9,679 8,778 7,612 3,539
Net profit (loss) 3,689 9,494 10,594 7,513 3,578
Cash flow (*) 4,533 13,666 19,275 7,513 3,578
Rizzani de Eccher Rizzani de Eccher USA Inc 2009 2010 2011 - Matta Sarl 2009 2010 2011
Revenues 7,668 43,280 44,954 Revenues 623 9,054 15,219
Shareholders’ equity 1,569 6,593 13,508 Shareholders’ equity 38 1,053 1,582
Operating income (EBIT) 67 7,867 9,206 Operating income (EBIT) 0 1,348 643
Net profit (loss) 150 4,941 6,227 Net profit (loss) (32) 1,019 461
Cash flow (*) 322 9,326 11,076 Cash flow (*) (32) 1,100 590
Rizzani de Eccher Rizzani de Eccher RAK FZ LLC Bahrain SPC 2009 2010 2011 2010 2011
Revenues 1,815 23,068 48,115 Revenues 8,507 30,188
Shareholders’ equity 1,638 3,098 5,708 Shareholders’ equity 924 5,515
Operating income (EBIT) 136 1,160 1,064 Operating income (EBIT) (75) 4,027
Net profit (loss) (162) 1,343 2,332 Net profit (loss) (69) 4,128
Cash flow (*) (41) 1,378 2,393 Cash flow (*) (65) 4,525
* defined as net profit + depreciation and amortization 7 EQUITY INVESTMENTS IN GROUP COMPANIES
Torre Scarl Tiliaventum Treviso Portocittà Spa Futura Srl Scarl Maggiore Srl
70.00% 50.00% 33.33% 25.00% 20.00%
75.00% 28.00% 64.92%
Sicea Srl Consorzio Metrobus Consorzio Consorzio Mantegna Scarl No. Mar GRA
15.13% 35.08% 26.60% 15.00%
100.00%
IRIDE Srl Riflessi Srl Safau San Giorgio Srl Codest Srl Iniziative Srl
60.00% 100.00% 49.99% 100.00%
Rizzani Rizzani VFR Ltd Pizzarotti Rizzani de Eccher de Eccher Rizzani de Eccher RAK FZ-LLC MATTA Sarl de Eccher Australia Saudi Arabia PTY Ltd
100.00% 51.00% 33.33% 50.00% 100.00%
98.00% 26.00% 5.00% 98.00%
Deal Srl Rizzani Tensacciai Srl Tesit Srl Codest de Eccher International USA Inc Srl
25.00% 95.00% 100.00%
8 Gabi Srl Store 26 Scarl City Contractor de Eccher Scarl Agricola Srl
100.00% 50.00% 50.00% 70.32%
20.00%
Consaro de Eccher Scarl Interiors Srl
16.99%
50.00% 84.00%
Cortelicini Srl Sinedil Srl Mediterranea Lavori Marittimi Sarl
98.00% 50.00% 15.00%
10.00%
VSL - RdE JV Consorzio Rizzani Interbridge Rizzani RdE de Eccher Technologies de Eccher America Bahrain BV Doo Centrale SPC
45.00% 98.42% 100.00% 51.00% 90.00%
98.42% 100.00%
Codest Consorzio Codruss Rizzani RSL JV Kazakhstan Codest Zao de Eccher LLP Engineering Canada Inc
100.00% 100.00% 50.00%
Companies operating mainly in Companies operating mainly in foreign markets the Italian market
Third-parties' Third-parties' interests interests
de Eccher de Eccher Group's Group's interest interest
[Companies under liquidation have been excluded]
9 HISTORY
1831 Rizzani is established in Udine, as a general international tender for the construction of five school contracting and construction company. Within a few years, complexes in Algeria. Two years later, the Company is it earns a prestigious reputation for carrying out large awarded a further five projects for the construction of two engineering projects in Italy and in several countries in tanneries and three shoe factories in the former Soviet Africa, Asia and Latin America. 1948 Riccardo de Eccher Union. This initial success ushers in a period of significant establishes a construction and real estate development growth in Eastern Europe and Central Asia, which continues company bearing his name, in the North Eastern Italian to this day. 1986 Thanks to the courage and commitment region of Trentino Alto Adige. 1970 Riccardo de Eccher of the de Eccher family, aided by a bright and talented takes over Rizzani, combining the track records and management team, the Group posts an extraordinary capabilities of the two firms into a new company, Rizzani de growth in turnover, topping revenues of 228 billion Eccher, managed by the de Eccher family. The merger and Italian liras in 1990, up from 37 billion liras in 1986. 1994 integration process of these two companies is completed in Difficult conditions in the domestic infrastructure market the early 1970s, laying the foundations for today’s corporate in the mid-90s - partly caused by the high profile anti- structure. 1976 - The second generation of the de Eccher graft ‘clean hands’ campaign - shift the Company’s focus family joins the management and the Company expands towards overseas markets. Revenues from international its focus and market share in infrastructure projects and projects exceed 50% of total turnover for the first time. public works. Following a devastating earthquake in the 2004 Rizzani de Eccher becomes one of the ten leading Friuli region in the same year, the Company’s resources construction companies in Italy, and is also listed among are immediately devoted to the reconstruction process, the Top 100 International Contractors by Engineering New including the careful restoration of the medieval town of Record Magazine solely on the basis of the share of turnover Venzone, which, from icon of destruction rose to become a generated abroad. 2005 From this year onward - thanks symbol of reconstruction, not only of historical buildings, to its established presence in many countries (Russia and but also of the whole urban and social fabric of the town. other CIS countries, Middle East, Mediterranean Basin 1980 The construction of two large sections of the Carnia- and North and Central America) - the share of revenue Tarvisio highway provides the Company with the opportunity from overseas operations remains consistently above 70%. to develop innovative construction techniques for the 2010 With the acquisition of the South Road Superway in prefabrication and erection of pre-cast concrete segments. Adelaide, Australia, the Group extends its operations to The latter technology is further developed in the following Oceania and the Pacific. 2011 The third generation of de years, as the Group completes many important highway Eccher family begins to work in the Group. and motorway projects. This invaluable technological Today, the Group is one of the world’s premier construction expertise is eventually consolidated with the establishment businesses and a market leader in its field, operating in four of Deal, a company dedicated to vanguard technologies for areas of activity with specialised and innovative know-how: the construction of elevated bridges and viaducts, utilising general building construction, infrastructure construction, mass-production industrialised systems. 1982 Towards engineering services and equipment solutions for bridges the end of this year, Rizzani de Eccher wins its first large and viaducts and real estate development.
Nella pagina a fianco: Palazzo Tergesteo, Trieste STRATEGIES
The Group’s continuous expansion in new geographic areas with high potential and the consolidation of its position in those areas where it already operates are objectives that are achieved through improvements in management efficiency and effectiveness of production methods, so as to guarantee quality and reliability in delivering products to customers. To achieve these objectives, the Group focuses on its organization, composed of people and processes, as the key driver. In an industry, such as general contracting, that is characterized by markedly tangible aspects, the Group instead leverages its intangible assets, the effectiveness of its processes and the skills of its human resources, in order to provide customers with fast response times and significantly higher quality standards than the industry average.
In particular, the Group places strong emphasis on two critical aspects:
Human Resources Development, which focuses on the organic development of resources internally, with the aim of developing the specific skill-sets to deal with the particular areas or markets where the Group operates. This policy hinges on a careful process of search and selection, the offering of career advancement opportunities, such as the Master course jointly organized by Rizzani de Eccher and the University of Triest, and the constant investment in internal training programs. Over the past few years, the Group has actively hired directly in the countries where it operates, so as to integrate more effectively with the local environment thus improving efficiency and effectiveness.
Process Optimization, aimed at securing better coordination within project teams as well as between project teams and head office.
13 14 ORGANISATION STRUCTURE
Board of Directors Internal Board of Auditors
Marco de Eccher Chairman Ferruccio di Lenardo Chairman
Marina Bonazza de Eccher Franco Asquini
Fabio Asquini Luciano Longhi
Renato Fabbro
Riccardo de Eccher
The overall management structure is aligned along three management cores or Central Directorates, which in turn branch out into Functional Directorates and Departments..
Directorate, Business Development Directorate, Central Operations Directorate, Administration and General Affairs
Business development Project management Administration, Finance Strategic planning Human resources and Accounting, Real estate development and management Special engineering services and equipment for bridges
Report to this Directorate: Report to this Directorate: Report to this Directorate: Commercial and Business Technical Departments and Finance and Administration, Development units, organized Area Departments, as well as Back Office, Real Estate, along product segments or Technical Support Services Operations and Equipment and geographical areas Department and Purchasing all Associated Companies Department e le consociate
The Group’s organisational structure, which includes members of the founding family in key management positions, ensures versatility and a swift decision-making process. Combined, these qualities provide a crucial competitive edge in continuously-evolving business environments, and facilitate a fast and flexible response to any market opportunity. At the same time, this streamlined structure does not prejudice the enforcement of strict operational and ethical standards throughout all Group companies and in any sectors and markets in which the Group operates, ensuring the delivery of quality and efficiency in line with the most rigorous standards.
15 Human resources Health and Safety
2011 2010 2009
Italy-based employees 2011 2010 2009
Management 50 29 35 AFI ASI AFI ASI AFI ASI Staff 187 145 147 Workers 202 176 167 0.92 0.19 2.27 0.62 2.16 0.46 Total Italy 439 350 349
Overseas-based employees Group consolidated data Calculation based on the following algorithms: Management 21 22 16
Staff 326 281 252 Accident Frequency Index (AFI): Accident Severity Index (ASI): Workers 399 498 525 AFI = (Ay x 100,000) / Mh ASI = (DLA x 1,000) / Mh
Total overseas 746 801 793 Where: Total Group 1,185 1,151 1,142 Ay = number of accidents in the year under review DLA = days lost to accident Total employees’ costs 60,308 53,228 45,687 Mh = cumulative man-hours during the year under review (Euro thousand)
The Group places the development of its human resources The most important goal achieved in 2011 was to obtain as one of its main corporate objectives, placing particular certification of the safety management system according to emphasis on training, career growth and organization. the international standards BS: OHSAS 18001:2007. The Group’s main competitive asset is composed of well The certification process involved a comprehensive audit prepared, dedicated professionals who are capable of carried out by Bureau Veritas, the appointed independent dealing with different environments and solve any type certification body, at the headquarters as well as at many of problems. The business in which the Group operates construction sites. The audit focused on the regularity and requires organized teams capable of expediting the project the correct application of national laws and compliance tasks assigned by various clients. with the mandatory provisions and standards imposed by OHSAS. These goals can only be achieved by the Group through A series of activities that mainly concern prevention and a corporate policy that is strongly oriented towards the protection and HSE personnel have been introduced development of its human resources potential, attracting and subsequently fully implemented into systems. Such only the best candidates, nurturing their professional activities involve periodic audits, equipment maintenance, growth at all levels and emphasizing merit and health training and supervision of personnel, control on performance over seniority.
As at 31 December 2011, the Group employs 1,185 individuals from a variety of ethnic, cultural and religious backgrounds, in different locations worldwide. Diversity is actively encouraged as it contributes towards enriching the competitive edge of the Group in its line of business.
Overseas-based (i.e. outside Italy) employees are 746, of which 711 hired locally. 439 employees are Italian nationals, of which 15% are based overseas. Educational qualifications are very high on average, with 43% possessing university degrees and 51% holding secondary school diplomas.
16 Training and career development
Over the course of 2011 the Group has continued to implement its knowledge-based programmes and training courses, both internal and external, which are specifically aimed at younger employees. Funds from the European Social Fund (ESF) have been drawn to finance Project Management, language and software courses. Great efforts have been placed upon career development from within the organization, and dedicated training programmes have been put in place with the following objectives: _development of technical engineering skills; _development of management and organizational skills; and _team-building and group bonding. To assess needs and design training plans, role analyses have been carried out by using appropriate tools, and these have proved particularly useful. This process, with a view to increasing staff motivation, also highlighted the possibility of undertaking organizational changes to ensure improvements in efficiency and a more complete response to growing market demands. The Masters Degree course in Project Management – Advanced Applications in the Construction Industry remains the flagship initiative. The course, which is now at its seventh edition, is yielding excellent results in terms of applications and recruiting opportunities. Alumni who have been hired by the Group have risen to prominent positions in Italy and abroad as project managers, finance managers, technical subcontractors and suppliers, as well as internal controls, office and project control specialists. The course is organized audit and review of implemented activities, with periodic in conjunction with the Universities of Triest and Udine and is redefinition of objectives. This commitment finds reflection taught by faculty professors as well as reputed professionals in the drastic decrease in the number of reported injuries with proven track records in the engineering and construction during the year under review. In addition, the great majority field, of which senior Rizzani de Eccher managers account of reports involved light injuries. for about 50% and offer an unrivalled patrimony of insights Similarly, despite numerous inspections conducted by and experiences. The course curriculum complements theory regulatory bodies and supervisory authorities (ASL, with practice, in the form of internships in construction sites CPT, INAIL and Labour Department) no penalties or in Italy and abroad. With the 2011 edition, the number of prescriptions have been imposed in connection with the alumni who are now employed by the Group has risen to 28. building site operations of the Group. These results The collaboration with Academia is extended to agreements represent a starting point from which to progress further with outside faculties for personnel training and to senior and ensure that the certifications are maintained, while managers of the Group holding professorships at the faculties aiming for the continuous decline of reported accidents. of engineering at the Universities of Udine and Padua. To achieve these objectives, the Group places the emphasis on the training of personnel at all levels, as the best means to raise the awareness of workers, supervisors and all people involved in business processes on the risks and critical issues associated with their job. For this reason, 2011 saw the commencement of the important training programmes, which will continue throughout 2012. These programmes will also introduce new concepts (related to communication and staff management) and strengthen the assessment of specific risks. The foregoing concepts are numerically reported in the accident frequency and severity indices in the table of page 16.
17 QUALITY IS INNOVATION
To compete in the field of complex constructions requires thorough planning of all activities, careful optimisation of resources and strict quality control. The main factors contributing to the Group’s success are the unending commitment to investing in innovation, stringent quality control systems and the professionalism and dedication of its employees.
The emphasis and sensitivity placed on quality control Rizzani de Eccher Spa management has allowed the Group to improve consistently _ISO 9001 Certification, certified 12 February 1999, on its qualitative benchmarks fulfilling stringent engineering attested by Bureau Veritas Italia Spa in relation to Design and architectural specifications, ensures constantly high and Construction of civil engineering works, industrial quality standards and achieving optimal levels of clients’ buildings, bridges, viaducts and transport infrastructure satisfaction. Rizzani de Eccher is a long-dated member works of UNI (the Italian National Agency for the unification of production standards) which positions it at the forefront _SOA Certification no. 6462/16/00 attested by SOA Nord Est of all new developments in production and quality control techniques. In many occasions, this commitment to _Accreditation as pre-qualified General Contractor with performance has won the Group commendations as well as the Italian Ministry of Transportation and Infrastructure performance fees. The Group’s constant focus on innovation no. 332/11 of 5 April 2011 and its rich pool of technical knowledge in the infrastructure sector has allowed Rizzani de Eccher to become a world _ BS OHSAS 18001:2007 Certification (health and leader in the design and engineering of special equipment workplace safety management system) of 5 July 2011 for the construction of bridges and viaducts. The continuous by Bureau Veritas Italia Spa in respect of Design and research and development activities of the design team of construction of civil and industrial engineering works, Deal Srl have allowed this Group to expand its range of bridges, viaducts and other transport infrastructure works products, which find application in other industrial sectors where tailor-made solutions and customised equipment are _ ISO 14001:2004 Certification (environment protection particularly appreciated. system) of 28 September 2011 by Bureau Veritas Italia Spa in respect of Design and construction of civil and A wide range of successful partnerships and affiliations industrial engineering works, bridges, viaducts and other with other major international contractors (e.g. Bovis Lend transport infrastructure works Lease, Cemea Investments Ltd, Six Construct Co. Ltd, John Holland Pty Ltd, OHL Obrascon Huarte Lain SA) testify to Deal Srl the status of Rizzani de Eccher as a robust and reliable _ISO 9001 Certification of 21 April 2005, attested partner. These ties also represent solid stepping stones by Bureau Veritas Italia Spa in respect of Design, towards the future growth of the Group in the global arena.
Another noteworthy development has been the year-end acquisition by Deal Srl of majority control of Tensacciai Srl and Tesit Srl, two companies operating in the design, fabrication and installation of cable-stays, components for tensile structures and post-tensioning systems. These acquisitions constitute a valuable addition and complement to the product range of Deal Srl and the Group, besides representing a further step towards the realisation of an integrated technological pole acting as depositary of the Group’s know-how.
The quality policy pursued by the Group has led to the following certifications and attestations:
18 construction, installation and operation of heavy Codest International Srl lifting equipment, including special equipment for the _GOST P ISO 9001 Certification of 28 September 2006, construction of bridges, such as overhead gantry cranes, attested by Tektoplan - MosCert CMK, in respect of pre-cast girder launching equipment, special elevated All activities and processes for the provision of technical formwork, cable-stayed erection equipment, post- and design services, site preparation and all construction tensioning systems, caissons and other equipment for the of buildings of any category; general civil and building off-shore sector; design and engineering of bridges and works; finishing and rendering; consulting and design viaducts for road, railways or urban mass rapid transit services for architectural and building purposes systems Gabi Srl Tensacciai Srl _ISO 9001:2008 Certification (Quality Management _ISO 9001 Certification of 4 December 1999 by Bureau System) of 9 September 2009, attested by Bureau Veritas Italia Spa in respect of Design, fabrication and Veritas Italia Spa in respect of Construction of tunnels, installation of cable-stay systems, post-tensioning underground works and roads systems, rock anchors, ground anchors and associated equipment and accessories; structural refurbishments _SOA Certification n. 6929/16/00 attested by SOA Nord Est Sicea Srl _ISO 9001 Certification certified on 30 July 2002, attested Torre Scarl by IGQ in respect of All activities and processes for _ISO 14001:2004 Certification (Environment Protection the construction, restoration and recovery of civil and System) of 25 October 2011, attested by Bureau industrial buildings; architectural restoration of heritage Veritas Italia Spa, in respect of Management and sites; construction and maintenance of roads; general coordination of all activities associated with the provision urbanization works of goods and services by the consortium contractors of the ‘Torre’ high-rise building for Banca Intesa Sanpaolo Spa _SOA Certification no. 9688/16/00 attested by SOA Nord Est in Torino
19 SUSTAINABLE DEVELOPMENT
The environment
The integration of business management systems with environmental issues was the starting point set by senior management, which led during the course of 2011 to obtaining the ISO 14001:2004 certification in respect of environmental management systems. This process has led to a deeper understanding of all environmental issues related to the processes of headquarters, the warehouse and the various construction the Law by all physical persons who are engaged in a sites scattered around the globe. working relationship with the Company, be it employment or simple cooperation. This starts from the mapping of New elements of evaluation (herein defined Initial the areas of the firm that are ‘at risk’ and goes as far as Environment Analyses) have been introduced with a view to: defining the pre-emptive protocols, which include the _ identifying critical factors and aspects organizational, physical and logical countermeasures set _ prioritising the same factors and aspects in relation to forth by the same Model 231. the particular context in which the local unit is immersed Through the prevention of the relevant offences, Model 231 _ defining the procedures to monitor these critical factors is intended to forestall the emergence of any administrative _ obtaining the necessary authorizations liability to the parent company of the Group, which may _ planning and adapting the overall project site affect its capital as a result of fines, pecuniary damages or organization so as to ensure that all such factors are kept injunctions. under constant scrutiny. In addition to this, Rizzani de Eccher is fully aware of the importance to educate and inform its employees and The internal audit programs have been implemented partners so as to ensure their full knowledge of the law and by introducing regular checks on all aspects of general the obligations associated with it as expressed by Model 231. building construction, and particularly those with more striking environmental impact. Training sessions have commenced to deal with these Value creation and distribution cogent environment issues and will continue throughout 2012 in anticipation of expected important changes in environment protection legislation in Italy and abroad. The integration between the traditional business values - economic values expressed by production and profitability - and the system of socio-political values - the centrality Code of ethics and compliance of the individual, integrity, quality of life – which are at once present inside and outside the organization, poses new problems of consensus and legitimacy. The With effect from December 2008 Rizzani de Eccher has progressive emergence in these past few years of the implemented its own organization and compliance manual, so called ‘stakeholder’s view’ has raised the urgency to thereby complying with the provisions of Legislative Decree have systems in place that are capable of measuring and 231/2001. To that effect, Rizzani de Eccher has drafted evaluating the ability of the firm to balance the disclosure and enacted, among the various documents that constitute requirements of business partners, whether internal such manual, the so called Model 231, a Code of Ethics or external (staff, shareholders, lenders, customers, (also available on www.rizzanideeccher.com) includes suppliers, public administration and the community at preventive and specific protocols. The Company has large). To this end, the parameter of ‘value added’, which is appointed a Supervisory Body entrusted with the functions derived by reclassifying the items in the income statement of supervising and enforcing compliance with Model 231 of this Annual Report, measures the wealth produced by and ensuring that the Code of Ethics is up to date with the firm for the benefit of the surrounding territory and its current legislation. stakeholders, thus expressing the relationship between the The aim of Model 231 is to prevent relevant offences under firm and the socio-economic system with which it interacts.
20 Value added calculation 2011 2010 Value added 2011 % 2010 % (Euro thousand) distribution (Euro thousand)
Value of production 353,571 480,078 Employees' 62,254 71.7% 54,868 67.8% (revenues) remuneration
Costs of production 260,418 390,139 Public administration 6,744 7.8% 9,372 11.6% remuneration
Operating value added 93,153 89,939 Debt capital (431) (0.5%) 76 0.1% remuneration
Extraordinary and additional 4,689 1,235 Equity capital - 0.0% 181 0.2% income/charges remuneration
Gross value added 97,842 91,174 Retained earnings 18,150 20.9% 16,395 20.2%
Amortisation and depreciation (11,022) (10,201) Charitable donations 103 0.1% 81 0.1%
Net value added 86,820 80,973 Net value added 86,820 100% 80,973 100%
The value added is presented in two different dimensions: witnessed by contributions and donations to various non- profit organizations. _scheme of calculation of value added, which emerges from comparing income and costs at each intermediate In 2011 the Group participated in the construction of a level; cold storage facility for vaccines in Abechè, Chad, through _scheme of distribution of value added comprising of the a donation of funds to UNICEF within a programme aimed sum of the remunerations received by stakeholders. at rehabilitating the country’s cold chain and particularly the logistics of vaccine distribution. Proper cold storage is essential to the effectiveness of vaccines. The value added to different stakeholders is identified as follows: The value added was determined by reclassifying the items in the income statement of this Annual Report, using the _remuneration of human resources: it includes direct and methodology proposed by ‘Gruppo Bilancio Sociale’ (GBS), indirect remunerations of all those who have a working an association which promotes ethical standards and relationship with the Group; principles of social responsibility in accounting practices. _remuneration of the public administration: it includes direct and indirect taxes paid by the Group; _remuneration of debt capital: it includes interest paid to the banking system and financial institutions; _remuneration of equity capital: it includes dividends paid out to shareholders; _remuneration of the enterprise: it includes any income set aside as reserve or retained earnings to finance future growth; _acts of liberality: they include and distributions of benefits for charity purposes.
Thus it emerges that the most substantial portions of value added go towards the remuneration of human resources and to the society at large through taxation. This underpins the central role of the enterprise as a contributor to human welfare. It is worth noting the Group’s commitment to supporting humanitarian and cultural projects, as
21 Project Business area Country Amount Share %
Al Udeid Air Force Base General building / Infrastructure Qatar 1,340,000,000 100.00 Doha
Railway Line Infrastructure Algeria 1,328,000,000 25.00 Oued Tlèlat Tlemcen
Jamal Abdul Nasser Street Infrastructure Kuwait 600,000,000 48.90 Kuwait City
Multifunction complex CityLife General building Italy 250,000,000 50.00 Milan
Headquarters of Intesa Sanpaolo General building Italy 246,000,000 70.00 Turin
Multifunction complex Treviso Maggiore General building / Real estate Italy 173,000,000 33.33 Treviso development
North Manama Causeway Infrastructure / Special equipment / Bahrain 143,000,000 50.00 Manama Engineering services
Residential complex Portopiccolo General building Italy 110,000,000 100.00 Sistiana - Triest
Technological building for central hospital General building / Project financing Italy 109,000,000 48.50 Udine
Requalification of Brescia hospital General building / Project financing Italy 107,000,000 55.92 Brescia
Summerland Hotel & Resort General building Lebanon 103,000,000 51.00 Beirut
Four Seasons Hotel General building Azerbaijan 95,000,000 100.00 Baku
Infrastructure works at Marjan Island Infrastructure UAE 76,000,000 100.00 Ras Al Khaimah
Dulles Metrorail elevated line Infrastructure USA 55,000,000 100.00 Washington DC
Evraz South Mill plant General building Russia 45,000,000 100.00 Rostov
State Road 826 Palmetto Expressway Infrastructure / Special equipment / USA 38,000,000 100.00 Miami Engineering services
Miami Orange Line LRT Infrastructure USA 31,000,000 100.00 Miami
Banca Nazionale del Lavoro General building Italy 19,000,000 61.44 Milano
Residential complex General building Kazakhstan 17,900,000 100.00 Atyrau
South Road Superway Special equipment / Australia 12,800,000 100.00 Adelaide Engineering services
22 AREAS OF BUSINESS ACTIVITY
Over the years, the Group has consolidated its leading position in four main areas: General Building Contracting, Infrastructure Contracting, Engineering Services and Equipment for Bridge Construction and Real Estate Development. Apart from the specific circumstances of certain individual markets, the Group is generally involved in all of the foregoing business areas, in every country where it is active. The Group’s well-established presence in Russia and CIS countries of Central Asia, Middle East, the Mediterranean Basin and Central and North America, combined with the vast international experience acquired with working for many international clients ensure a solid and dominant market position, pointing to strong growth and a stable future. The table in the previous page illustrates the main projects underway during the period under review, according to the four areas outlined above.
23 Business Areas. General building contracting
In general building contracting, the Group is well positioned in market segments which demand increasingly high standards of technology and quality. Since each building is unique and construction site conditions differ greatly, each project requires specific technical skills. Over the past few years, energy efficiency has become the underlying theme of every new project. This is accomplished through a vast range of design solutions including purpose- built volumes, the adoption of materials and technologies that facilitate heat transmission with the outside, the installation of energy-efficient heating/cooling systems and the recourse to renewable energy sources (solar energy, heat pumps). Furthermore, in order to compete in high-end market niches and to maintain the expected quality levels in the design and construction process, the Group has established a number of vertically-integrated dedicated subsidiaries, each of which specialises in particular steps of the production and delivery process. These steps include design, prefabrication, plant engineering and interior decoration and furnishing. These companies work in synergy within the framework of the general contracting business of the Group. The main sectors of activity in this area are: residential buildings, office buildings, industrial and commercial buildings, hospitals, schools, luxury hotels, large- scale renovations and recovery of heritage sites and finally military infrastructure.
Residential buildings The Group has always performed well in this area, leveraging off the market knowledge of its real estate development unit and the track record in high-quality construction projects. In this segment, the Group focuses on large and complex projects with high quality standards. In early 2011 Rizzani de Eccher commenced construction of the Portopiccolo mixed use project in Sistiana (Triest), a contract worth in excess of € 110 million. The project calls for the recovery of a disused quarry facing the sea, on whose site 420 residential units, retail outlets, hotels, bars, restaurants, a 100-berth marina and a beach resort are to be built. In February 2011, Codest International was awarded the contract for the construction of a residential complex in Kazan (Tatarstan, Russian Federation) comprising of 58 villas, a kindergarten, office and technical buildings. The contract is worth € 19 million. In December 2011, Rizzani de Eccher has taken over the position of Immobiliare Lombarda Spa (a Gruppo FonSai company) in the contracting consortium, which together with Lamaro Appalti Spa, is entrusted with the construction of the massive CityLife mixed-use development in Milan, a project started in 2008. The consortium had a construction backlog of € 160 million as at the date of Rizzani de Eccher acquisition. The backlog increased by a further € 48.5 million in January 2012 with the award of an additional contract for the construction of the 100 m tall Park Tower, a residential high rise designed by renowned architect Daniel Libeskind. In the same month, Codest International has executed an important contract agreement related to the 2018 Moscow World Cup; Office buildings this agreement includes the construction of a commercial area The construction of modern office buildings, which is rapidly consisting of a complex of 12 buildings (2 Hyatt hotels, 4 office developing in many markets, is a key focus area for the buildings, 6 residential buildings, for an amount in aggregate Group, characterized by a high level of sophistication. Each of € 395 million) in connection with the VTB Arena Stadium office building project requires close cooperation with highly Project. qualified designers to achieve an effective convergence of
24 technical requirements and functionality. Rizzani de Eccher remote heating network). Progress as at year end reached € is engaged in the design & build of the headquarters of 32 million. Naturally, difficult conditions in capital markets banks and multinational companies, as well as government have resulted in financial closing for the project being buildings and offices in Italy and abroad, with stages of postponed several times. However, Siram (a Dalkia company) deliveries ranging from ‘shell and core’ to complete and partners have continued to provide financing for the ‘fit out’, which includes the supply and installation of execution of the project in order to respect the deadlines interior furnishings. During the course of 2011, construction imposed by the public sector owner. activities have continued on the Banca Intesa Sanpaolo office tower in Turin, a skyscraper over 160 m tall designed by Luxury hotels renowned architect Renzo Piano. Rizzani de Eccher has won The experience in the field of large scale buildings combined the project in joint venture with Swiss contractor Implenia. with traditional craftsmanship has enabled the Group to As at 31 December 2011 the € 246 million project had compete effectively in the luxury hospitality segment. Works reached a progress of some € 34 million. have drawn to a close in 2011 at the lavish Four Seasons Hotel in Baku (Azerbaijan), a contract worth € 95 million, Industrial buildings while they have continued apace, reaching a progress of € 25 The Group’s track record in this field dates back to large million (on € 103 total) at the Summerland Hotel & Resort in industrial projects in Italy and abroad in the second half of Beirut, a luxury property on the waterfront of South Beirut, 1800s. In the past few decades such wealth of experience which shall be operated by Kempinski. has been put to good use as evidenced by the successful completion of industrial buildings in Italy and abroad in Military infrastructure several industries and sectors, such as steel plants, textile Infrastructure projects for the armed forces are factories, mechanical workshops, tanneries, shoe factories, characterised the world over by their sheer size and food processing and several other industrial buildings. complexity. They usually include the construction of a During the course of 2011, Codest won the contract for a number of independent structures, each designated for large-scale green field project consisting of the construction highly specialised functions. Military projects also require of a steel mill at Ust-Donetskiy (Rostov, Russian Federation) thorough and complex plant-engineering over vast areas, but for € 45 million. The mill will have a rated output capacity of need practical infrastructure for rapid and easy connections. 600,000 tons per annum of reinforced concrete bars (rebars) In all these projects, planning schedules and delivery times and other steel applications for the construction industry. are notoriously inflexible, since they are tightly linked to The plant will utilise Siemens technology installed by Codest. the movement of troops and armaments, which are in turn classified information. The Al Udeid Air Force Base, in Qatar Hospitals continues to be the Group’s flagship project in this field also This is an area characterized by the rapid evolution of in 2011, with an additional extension. Billed works at the functional requirements, increasingly sophisticated MEP end of 2011 topped € 1.291 billion. Construction is set to be components and ever more specific medical equipment. completed in 2012 for a final amount of € 1.340 billion. The utilization of project financing to fund the construction and operation of hospitals is becoming ever more frequent, which demands strong skills and commitment not just in respect of the design and construction challenges (with which the Group is obviously very experienced in dealing) but also in respect of the financial and legal challenges, which the Group has amply demonstrated to be able to negotiate with the required professionalism. During 2011, the project- finance scheme in respect of the expansion of the facilities of Spedali Civili di Brescia has reached several milestones such as the completion and opening of the new kitchen and canteen building and commencement of works on the new basement plate. Meanwhile, the entire project, whose contract amount has increased to € 107 million, has reached a progress of € 21 million at year end. As regards another hospital project-finance, the build & operate of several hospital facilities for S. Maria della Misericordia in Udine, an addendum to the main contract was finalised in 2011, with the project budget now reaching € 109 million (excluding the
25 Large scale building renovations and recovery of heritage sites The construction track record of more than a hundred years and the specific skills gained from the experience of the extensive post-earthquake reconstruction of the Friuli region in 1976 provide Rizzani de Eccher with the knowledge capital to undertake complex restorations on monumental buildings adopting the most innovative technologies. Works have been completed in 2011 on Palazzo Tergesteo, a historical building in Triest, while the Banca Nazionale del Lavoro Headquarters project in Piazza S. Fedele in Milan, a € 19 million contract, is nearing completion.
Business Area. Infrastructures
Rizzani de Eccher excels at infrastructure building and transport engineering in particular, thanks to more than one hundred years’ experience in this field. In the past few years most of the Group’s infrastructure projects have been outside Italy, as the Italian market is experiencing a period of recession due to funding shortages and competitive pressures on costs. Rizzani de Eccher is also actively involved in evaluating and securing project finance for infrastructure projects. At home and abroad, emphasis is placed on Design & Build tenders where competitive pricing is just one aspect of the overall offer, and where design and engineering solutions play an important role.
the respective international airports, while the latter project also involves Deal as the supplier of all special equipment. Again in the USA, 2011 witnessed substantial progress on the Palmetto Interchange in Miami (Florida), a clover-leaf junction on 5 levels and 4 overpasses worth € 38 million, including special equipments provided by Deal. In early 2010, Rizzani de Eccher in association with Pizzarotti won the contract for the enlargement to three lanes (in each direction) of the A4 Highway, comprising of a first stretch of 25 km from the Bridge over the Tagliamento River to Gonars and the Palmanova interchange for a total contract value of € 300 million, of which one third or € 100 million is under a private finance initiative (PFI) arranged by the builders. Unfortunately construction is still on hold pending the definition of the public portion of Environment and hydraulic engineering the financing. As at 31 December 2011, works on the North During past decades Rizzani de Eccher has completed Manama Causeway in Bahrain have reached a progress of € 86 important projects in this sector in Italy and abroad. Some million on a total of € 143 million, including special equipments of the most representative projects include sewerage pipe provided by Deal. This is a project carried out in joint venture networks; water purification systems equipped with underwater with Six Construct and a local contractor, which includes a pipelines for offshore discharge; aqueducts and water- 90,000 m2 viaduct made of prefabricated segments. Finally, supply networks and dredging works on rivers and navigable construction works continue on the massive prefabrication waterways. The infrastructure project at Marjan Island in Ras plant for bridge segments, which is intended to feed the two- al Khaimah (UAE), which covers the complete urbanization level upgrade of Jamal Abdul Nasser Street at Kuwait City. works comprising of roads, bridges, sewerage networks, an This project, worth in excess of € 600 million, covers a length of aqueduct, high and low voltage power lines, telephone lines and 14 km length and involves 395,000 m2 of prefabricated bridge street lighting for a grand complex of artificial islands set to segments. The contract is being performed in joint venture with host hotels and sports facilities, reached completion in 2011 for OHL (Spain) Trevi (Italy) and Kuwaiti contractor Boodai. a total contract value of € 76 million.
Highway networks, railways, subways and mass transit light railways At present Rizzani de Eccher is increasingly engaged in the construction of railways and in particular mass transit light railway systems in Italy and abroad. Works for the dual track Oued Tlélat Tlemcen railway line in Algeria have finally resumed at the end of 2011, on the basis of the revised design requested by the client. During the course of 2011 works have continued, reaching € 10 million progress, on the € 31 million Orange Metro Line in Miami, while the € 55 million Dulles Corridor Metrorail Project in Washington (DC) has almost reached completion. Both projects link existing metro lines with
28 29 30 Business Area. Engineering services and special equipment for bridges and viaducts
Rizzani de Eccher’s wealth of experience in infrastructure has allowed the Group to develop a specific area of expertise in engineering services and design and construction of special equipment for the construction of bridges. In 1992, these activities were consolidated in a new, special-purpose, wholly-owned subsidiary called Deal Srl. In a few years Deal has become a world leader in this highly specialised market, serving large international contractors. Deal provides design services and custom-built special heavy equipment for the construction of bridges and viaducts of any complexity and size. Its machinery and equipment capabilities include caissons, gantry cranes, large rubber-tired beam launching carriers, launching girders and self-launching ribs. Towards the end of 2011, Deal has acquired control of Tensacciai Srl and Tesit Srl, two companies with a strong track record in design, fabrication and installation of stay-cables and post-tensioning systems as well as joints, bearings and anti-seismic devices. As a result of these acquisitions, Deal is now in a position to provide clients with the complete package of specialised equipment and services required for bridge deck construction. More recently, the Group’s wealth of experience in the infrastructure sector has allowed Deal to apply its specific know-how to different and very promising areas, such as special equipment for the offshore Oil & Gas industry and special gantry equipment for shipping and port operations.
Engineering Services The Group’s technical personnel have gained invaluable experience from working with and for the parent company and established international contractors on large and prestigious infrastructure projects. This has enabled our engineers to develop a wealth of knowledge in bridge engineering and particularly in the field of metro-rails and mass rapid transit systems. The integration between engineers responsible for bridge design and construction and engineers responsible for equipment design has resulted in a more streamlined and seamless utilisation of the Group’s human resources, allowing the Group to position itself on the infrastructure market as a provider of a wide range of integrated services. Services include initial design, project and site planning, development of construction methods, design and development of special construction equipment, planning and optimisation of production cycles.
Equipment Deal can design and custom-build equipment for any type of construction system - be it prefabricated or cast in-situ - as well as any type of transportation and lifting equipment suited for every building site. The experience gained by most staff in the direct execution of the works the ‘full span’ method for the construction of high-speed has made it possible for Deal to design and develop railways and other important infrastructure works. highly efficient and reliable equipment unmatched by the There are now numerous cases in which large competition. Significant productivity results have been international contractors entrust Deal with the design achieved in the precast segmental technology, adopting and supply of the entire special equipment package, from the ‘span by span’ method for the construction of elevated prefabrication to launch, so as to secure the strongest metro-rails and mass rapid transit systems and adopting guarantees over the full production cycle.
31 Business Area. Real estate development
The Group has always been actively engaged in prestigious real estate development projects acting as a principal, or on behalf of select customers, from the public and private sector. Capitalising on its successful track record in real estate development, the Group positions itself on the market as the reliable partner to large developers as well as real estate investors and financial institutions. The Group has further strengthened organization and resources in the dedicated Real Estate Development division, with emphasis on project management and value-enhancement of property portfolios, with a view to obtaining a stronger accreditation with market players and partners. To this effect, as from 1st November 2011 all real estate development assets and businesses of the Group have been transferred into a single entity, IRIDE Immobiliare Rizzani de Eccher Srl.
Particular emphasis is being placed on developments in Still in Udine, the new Teatro 1 Development (adjacent ‘project finance’ with public-private partnerships, among to the ‘Giovanni da Udine Theatre’) is making good which the proposal submitted to the Municipality of Verona progress. The building is being reconverted into a for the recovery and development of the site of the erstwhile mixed use (residential and commercial) complex with Austro-Hungarian Arsenal. volumes of about 20,000 m3 and will feature eco- sustainable solutions attested by the A+ label. Sales have Rizzani de Eccher, through its 25% stake in Portocittà Spa, a joint commenced in 2011, arousing substantial interest in the venture company with other important construction groups and market. financial institutions, plays a key role in the PFI development of Porto Vecchio in Triest (the city’s old harbour). The project has At the same time, urbanization and administrative won a 70-year concession from the local Harbour Authority and permitting procedures are underway in order to involves the recovery of a disused section of the harbour in the enhance value for a newly acquired building located at city’s historical centre. The initiative, which is by far the largest the fringe of Udine’s historical city centre. The building such project in Italy and one of the largest in Europe, covers an is currently leased to energy utility company ENEL area of 45 hectares along a 4 km stretch of waterfront and calls and at the expiry of the lease will be converted into a for a development period of ten years. residential complex.
Among the most important real estate projects under way we Finally, during 2011 the Group has acquired the area of point out the following: the reconversion of the former UPIM the former Safau Steelworks, situated immediately to the department store in Udine, with a total built up area of south of the Udine city centre, next to the railway station. 11,000 m2, which calls for the demolition and reconstruction of The 75,000 m2 area will be the object of a functional and the building with the design of a famed international architect. architectural requalification in the years to come.
32 Focus
1 Palazzo Tergesteo Triest 2 Treviso Maggiore Treviso 3 State Road 826 Palmetto Expressway Miami Rizzani de Eccher. Focus 1
Palazzo Tergesteo Triest Client: Cerep Italy U
Palazzo Tergesteo is a neoclassical building dating back to 1842 situated in the heart of Triest’s historic city centre contract amount 16,200,000 (just a stone’s throw from Piazza Unità), which connects Piazza della Borsa (site of the former stock exchange and work commencement December 2008 commercial heart of Habsburg Triest) with Piazza Verdi, final delivery April 2011 the site of the renowned theatre of the same name. Volumes (excluding gallery) 53,300 m3 Careful restoration work has brought old splendour NLA 10,600 m2 back to the elegant neo-classical facade, the majestic covered area 2,440 m2 entrances that lead to the gallery reconstructed in its 2 original nineteenth century style, and the sculptures by glass canopy area 640 m Zandomeneghi and Bianchi. The variety of high quality materials used (marble, wood and ceramic), the use of the latest technologies and systems, the oak doors and shutters, have enhanced and made functional the building without detriment to the property’s historical charm.
The gallery, covered by a glass canopy and artfully restored, divides the building into four ‘towers’ that house 20 retail units located on the ground and mezzanine floors for a total of 4,000 m2. On the upper floors, one tower is devoted to offices, while the other three are intended for residential use.
34 34
36 37
Rizzani de Eccher. Focus 2
Treviso Maggiore Treviso Client: Fondazione Cassamarca
Treviso Maggiore was born just a few steps from the sixteenth century walls of Treviso, in the area where the contract amount 173,000,000 historic factory of bricks and ceramics ‘Appiani’ has been work commencement September 2005 operating since 1873. final delivery July 2012 The project, designed by the renowned architect Mario total volumes 236,000 m3 Botta with the aims of regenerating the area from 2 an environmental and architectural perspective and area 60,000 m linking the historic city centre with the most immediate above-ground built up area 80,000 m2 outskirts, finds its centre of gravity in the large central below-ground built up area 55,000 m2 square of over 11,000 m2, paved with Rosso Asiago marble and porphyry and dominated by a large marble poured concrete 119,000 m3 fountain, in addition to the landscaping offered by 1,500 reinforcement steel 16,600 t rose bushes. exterior walls cladding 45,100 m2 Facing the square are 10 mixed-use buildings (office, bricks employed 2,660,000 retail and residential) of variable height between five doors and windows installed 2,430 and nine floors, a multipurpose auditorium with 500 seats and a small church. The basement, which extends curtain walling 15,200 m2 for almost the entire surface of the complex, along with lifts 45 a parking garage located on the north end, hosts all technical installation and 2,000 parking spaces.
Treviso Maggiore was designed to become the new terminal for office and institutional buildings in the city and will host the prefecture, the police central precinct, the chamber of commerce, the manufacturers association, the confederation of craftsmen, the local tax office, another precinct for the financial police and the local headquarters of the builders association.
Arranged on the long sides of the square and complete with green areas, the residential buildings are developed on a lower area between ground floor and fourth floor, which includes 80 shops and offices, and a higher area on 4 towers, 9-storey each, yielding a total of 120 residential units. The residences include 16 duplex penthouses of 200 m2 each, with view over the Alps and the city centre to the north.
39 40 The exterior facades of all the architectural volumes including those for data distribution, security, access above ground – with traditional and evocative control and CCTVs. features – are covered by a cladding made of The project makes extensive use of renewable energy more than 2.6 million bricks and enclose interiors sources, such as air-conditioning systems that rely characterized by the extended use of wooden on cooling water from deep-water wells, solar floors and ceilings. All buildings are endowed with panels that provide hot water and photovoltaic plants sophisticated equipment and advanced technologies, designed to generate power.
41 42 Rizzani de Eccher / Deal. Focus 3
State Road 826 Palmetto Expressway Miami (Florida - USA) Client: Florida Department of Transportation Community Condotte de Moya JV LLC
As part of a USD 558 million mega-project (the most expensive ever developed by the State of Florida) aimed contract amount 38,000,000 at easing congestion on State Route 826 ‘Palmetto’, start of segment prefabrication activities April 2011 Rizzani de Eccher USA is currently building 4 viaducts start of segment launching activities September 2011 with the pre-cast segmental method. The overlying viaducts serve as connecting ramps with State Route estimated completion of prefabrication August 2013 836 ‘Dolphin’. estimated completion of launching May 2014 total length of viaducts 2,365 m The precast segments are fabricated in the purpose- built prefabrication plant, which is the same one that width 14 m had been previously served for the construction of the minimum curvature radius 180 m rapid transit Orange Line, and where two new sets total number of prefabricated segments 783 of formwork dedicated to the new project have been total surface area of elevated decks 32,200 m2 installed. concrete poured 19,000 m3 The heavy congestion of the underlying area and the steel 2,000 tons tight curvature radius of the viaducts have required post-tensioning steel strands 960 tons special engineering solutions and the application of innovative construction methods. A particularly complex system was applied to temporary anchor between superstructure and piles.
The segments are launched by a launching beam specially designed and assembled to operate on this project. Launching activities take place mostly at night time to minimise traffic disruption.
In order to execute the project, Deal has supplied the following special equipment (worth in aggregate € 2.8 million):
_ two sets of formwork for segment prefabrication ‘balanced cantilever’ type _ launching equipment set _ special accessories for expansion joints and pile-head segments
43 44 MANAGEMENT REPORT
Management Report
Economic and financial position operated in 2011 with focus, commitment and dedication, seeking opportunities and project acquisitions in new The consolidated financial statements for the accounting markets on one side, and striving for efficiency gains and period ending on 31 December 2011 show total revenues margin improvements in projects under management on (or value of production) of € 355.5 million (as opposed to the other, which has resulted in the fairly positive financial € 482.6 million in FY2010), EBITDA of € 32.7 million (it was performance described above. € 36.0 million in FY2010) and net profit of € 14.7 million (against € 13.5 million in FY2010). For the first time after years of constant growth, the share of revenues from overseas operations has decreased to In the face of a sharp reduction in revenues (or value of 66.8% (79.6% in 2010). production), which was down 26.4%, the Group posted a moderate reduction in operating profit (EBITDA) combined During the year under review, the following projects have with a slight improvement in net profit. This is a result that been acquired: bears testimony to Group’s ability to adjust its cost base in relation to changes in demand deriving from such factors as _ the construction of a mixed-use residential and political upheavals and adverse macroeconomic conditions. commercial complex in Moscow adjacent to a stadium venue for the 2018 football World Cup. The complex Uncertainty in the markets where the Group operates comprises of 12 buildings, of which 2 will be hotels under has caused investment expenditure to stall. Tough management by Hyatt, 4 buildings will be office towers and conditions in the construction market were exacerbated 6 more will serve as residential buildings. The client is MC in the second half of the financial year by the sudden, as Dynamo, a subsidiary of lender VTB Bank. The total value much as unpredictable, crisis that hit Eurozone financial for the project is ca. € 395 million; markets particularly hard. This had a significant impact _ the realization of a residential complex in Kazan (Russia) on the banking sectors and public finances of the weaker for ZAO Townhouses Compound Zagorodnaya Usadba for countries of the Southern border of Eurozone, which face ca. € 19 million; mounting public debt, slowing GDP growth and rising _ Rizzani de Eccher has taken over the position of budget deficits. Immobiliare Lombarda Spa (a Gruppo FonSai company) in the contracting consortium, which together with Lamaro Governments have dealt with the emergency primarily Appalti Spa, is entrusted with the construction of the massive by slashing spending and increasing taxes, wiping out CityLife mixed-use development in Milan. The acquisition investment incentives, and naturally, this has affected the yielded a backlog of € 202 million, which was increased by a construction market. further tranche of € 48.5 million in January 2012.
In the Mediterranean area, spontaneous reform movements During the year under review construction has continued degenerated into political upheavals. The tragic epilogues in respect of existing backlog orders, while activities have in countries such as Libya, Egypt and Tunisia have resumed in the railway project in Algeria. However, there contributed to destabilising the area, besides resulting have been slow-downs in projects (specifically in Eastern in the overall deterioration of relations between the Arab Europe and in the Gulf area) essentially as a result of world and the West. In particular, the Libyan crisis resulted clients scaling down investments in this uncertain climate. in the cancellation of a sizeable and prestigious project, which had been awarded to the Group the previous year, in The year-end acquisitions by Deal Srl of majority control partnership with other Italian companies. of Tensacciai Srl and Tesit Srl represent a new and remarkable development. The two target companies Against this gloomy backdrop, only North American operate in the field of design, fabrication and installation markets – and specifically the United States – have kept of cable-stays, components for tensile structures and steady and performed, thanks to budgetary expansion post-tensioning systems. These acquisitions constitute a policies and the adoption of effective measures aimed at valuable addition to the Group and complement the product improving competitiveness vis-à-vis other economies. range of Deal, besides representing a decisive step towards the realisation of an integrated technological pole acting as In spite of a bleak investment environment, the Group depositary of the Group’s know-how.
4747 Management Report
In consideration of the testing macro-economic conditions Market risk, operational risk and price risk described in the foregoing sections, the outlook for The Group is chiefly engaged in the construction business, financial year 2012 calls for current revenue levels to be specifically in the construction of residential buildings, maintained. Profitability however could suffer as a result of office buildings, industrial buildings, hospitals, hotels, the additional costs associated with the re-activation of the military infrastructure, large-scale restoration works and project in Algeria and lower than expected margins from large infrastructure projects such as roads, highways, some Italian projects. railways and subways. Normally, Group companies operate as main contractor, For further comments and summary data on the Group acting alone or in joint ventures. Furthermore, through please see the section ‘2011 at a glance’. subsidiary Deal, the Group provides engineering services such as the design and fabrication of special equipment for the construction of bridges and viaducts. The Group is Treasury shares and shares in parent companies actively present in the following countries: Italy, USA, UAE, Qatar, Kuwait, Bahrain, Lebanon, Saudi Arabia, Russia, Rizzani de Eccher Spa does not have ownership of any of its Ukraine, Kazakhstan, Azerbaijan, Algeria and Australia. own shares or of shares of its controlling companies, either The Group is therefore exposed to the general macro- directly or indirectly, through affiliated entities, trustees or economic risk of the countries in which it operates. The nominees. investment choices in buildings and infrastructures of potential clients are in fact influenced by the particular juncture in the economic cycle, whose principal variables Research and development are gross domestic product (GDP), capital formation rates, inflation, interest rate and exchange rate. It is No expenditure for research and development occurred in therefore possible that adverse socio-economic conditions the financial year 2011 allowed to be capitalized on the basis in operation countries may result in a slowdown or of accounting standards. However, Deal’s (and for the future, in extreme cases in a suspension and cancellation of Tensacciai and Tesit) technical team undertakes constant contracts acquired. Moreover, the constructions carried and continuous research and technological development out imply a type of operational risk which cannot be activities which has enabled the Group to become a world entirely neutralized. This is linked to the need to manage leader in designing and producing special machines and technical complexities of the works within the contractual equipment for the construction of bridges and viaducts. Such terms agreed, and in different environmental and costs have been accounted for in the income statement. regulatory contexts. With regards to price risk, if the projects require the purchase of raw materials which are subject to price Financial instruments: objectives and policies of the fluctuations, appropriate hedging strategies that minimize company and description of risks this risk are assessed and implemented wherever and whenever possible. Pursuant to the provisions of art 40, section 1 and 2, sub- section d) bis of Legislative Decree 127/1991 we report Credit risk the main risks and uncertainties to which the company is Credit risks consists in the Group’s exposure to potential exposed, as well as the financial transactions, securities losses deriving from clients not fulfilling their obligations. and instruments in which the Group is engaged or has Although the Group operates in areas which may require open positions consist of net cash and cash equivalents, managing sovereign risk, the Group’s counterparts are trade payables and receivables, advance payments from sovereign states, governmental entities or primary clients customers, bank debt and leasing liabilities. We also report which operate on international banks entrusted by primary that as at 31 December 2011 the Group has one IRS and financial institutions. a CAP in place as a hedge over parent company financing Credit risk management strategies articulates in several against interest rates volatility, a put option on dollars phases, starting from the preliminary valuation carried out and a currency option on credits in MYR. Details are listed before presenting an initial offer until the negotiation of under the Memorandum accounts in the Notes to this a contract and the accurate management of the contract annual report. itself once underwritten.
4848 Liquidity risk closing of the financial year, which may have an impact on Liquidity risk consists in the risk that the Group’s resources these Consolidated Financial Statements. may not be sufficient to meet its obligations at the time and mode agreed. Management believes that the Group generates adequate Business outlook cash flow; that the maturity profile of short and medium- to-long term liabilities is well balanced and that it matches As anticipated, also on account of the complex projects the corresponding maturity profile on the asset side of its currently being undertaken, during the course 2012 balance sheet. Management further believes that this risk production levels will be maintained at around the is non-existent in consideration of a net positive financial same levels of 2011, but profitability may be affected. position for the Group of over € 80 million. Management is strongly committed to limiting such impact on profitability by reducing costs and – wherever this is Interest rate risk possible – actively pursuing additional revenue claims Outstanding loans vary in terms of technical structure and through attentive contract management. are equally distributed between short-term and medium- term. Interest rates are on average at around 2.7%. One IRS and one CAP contract are in place as at 31 December 2011. The Group engages into such contract within the boundaries set by ordinary operations’ requirements avoiding speculative purposes.
In keeping with the Group’s general aversion to risk, financial transactions are only dealt with prime financial institutions and instruments which can be easily liquidated.
Foreign exchange risk The Group’s strong international presence make it exposed to currency risk. The Group’s policy and overriding objective is to match the currency of revenues with the currency of payments to local subcontractors and suppliers. However the Group does consider currency hedging transactions in the event that currency mismatches arise. As reported before, as of year end the Group is engaged in a put option for dollars and a currency option linked to credits in MYR.
Information concerning the staff, environment and organization
In connection with the disclosure in the matters of personnel, the environment and organization, we refer the reader to the sections titled “Human resources”, “Safety and health” and “Sustainable development”.
Significant events occurring after closing of the financial year
Management reports no significant events occurring after
49 NOTES TO THE 2011 ANNUAL REPORT CONTENTS OF THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of 31 December - appendix ‘B’: i.e. companies consolidated using the 2011 provide a clear picture of the assets and liabilities proportional method. position, the financial position and the profit-and-loss In accordance with Art. 28 (subsection 2) of Legislative result of following companies: Decree no. 127/1991, the subsidiaries and associated _ Rizzani de Eccher Spa companies listed in appendix ‘C’ are not consolidated. _ Subsidiaries (Appendices ‘A’ and ‘B’). As opposed to the Consolidated Financial Statements as at The consolidated financial statements were drawn up 31 December 2010, during financial year 2011 the following in accordance with the following Legislative Decrees: subsidiaries have been added to the scope of consolidation no.127/91; no.213/98; no.6/03 and no.37/04, and no. 32/07. with the full method: Tensacciai Srl, Tesit Srl, Interbridge The Group waived the exemption right contemplated by Technologies BV e Rizzani de Eccher Australia Pty Ltd; Art. 27 (subsection 3) of Legislative Decree 127/1991 in the City Contractor Scarl has been added to the scope of matter of Corporate Disclosure. consolidation with the proportional method. For the purposes of consolidation, the Financial Statements On the other side, while until 31 December 2010 Rizzani as at 31 December 2011 of the subsidiaries and associated de Eccher Doo was consolidated using the full method companies forming the Group, as drafted by their Boards and VSL-Rizzani de Eccher JV was consolidated using and approved or under approval by their respective the proportional method, in the year 2011 both have been Shareholders’ Annual General Meetings, have been used. consolidated using the equity method. These Financial Statements are truthfully derived from the corresponding entries in the ledgers and books of the Group duly kept and properly maintained in full compliance with the provisions of Art. 2423 et seq. of the Italian Civil Principles and basis of consolidation Code, save for consolidation adjustments for the sake of consistency with Group policies. The Financial Statements of foreign subsidiaries and associated companies have been converted into Euro using year-end spot exchange rates for balance sheet items and year-average exchange rate for income statement Scope of consolidation items. The foreign currency-denominated ending balances of overseas branches of the companies included in the Includes the companies and consortia listed in: consolidation were converted using the year-end spot rate. - appendix ‘A’: i.e. companies consolidated using the full The following exchange rates were adopted (rounded to the consolidation method; second decimal):
5151 Notes to the 2011 Annual Report
Exchange rate Average rate Currency 31.12.2011 2011 e. dividend payouts from consolidated companies to other US Dollar USD 1.29 1.39 consolidated companies are offset against each other.
Canadian Dollar CAD 1.32 1.38 Participations in joint ventures and other companies Russian Rouble RUR 41.76 41.57 included in the consolidation process over which Ukrainian Hryvnia UAH 10.37 10.55 control is exercised together with other partners were UAE Dirham AED 4.75 5.11 consolidated using the proportional method, booking their assets, liabilities and share of net income to the parent’s Kazakhstan Tenge KZH 191.88 204.10 consolidated financial statements pro-rata in proportion to Philippines Peso PHP 56.75 57.54 the percentage of ownership detained. Qatari Riyal QAR 4.71 4.80
Tajikistani Somoni TJS 6.16 6.27
Azerbaijani Manat AZN 1.02 1.04
Algerian Dinar DZD 97.47 98.42 Accounting principles and valuation criteria
Lebanese Pound LBP 1949.26 2097.05 The consolidated financial statements have been prepared Saudi Riyal SAR 4.85 5.22 in order to represent a true and fair view of the financial Kuwait Dollar KWD 0.36 0.37 position and results of operations of the companies
Bahrain Dinar BHD 0.49 0.52 included in consolidation.
In the consolidated accounts, unrealised currency translation gains from overseas branches are offset against corresponding unrealised losses, including any tax The following principles were adopted in consolidating liability or tax credit that may arise, and then booked to the Financial Statements with the full consolidation method: shareholders’ equity. Conversely, unrealised translation losses from overseas branches are booked as accruals in a. substitution of book value of equity investments held the statutory accounts. by the parent company and by other companies within Save for the above and the financial leasing accounting the consolidation perimeter with the net asset value as method, valuation criteria and accounting principles are resulting at the date of consolidation; while assets and the same as adopted in the parent’s financial statements liabilities of the investee companies are consolidated to and there have been no changes as opposed to previous the parent company. If any gains arise as a result, these financial years. are booked, were applicable to the assets of the subsidiary The items of the current consolidated accounts as at and for the excess as a consolidation difference item. 31.12.2011 are comparable to those of previous financial Conversely, if a negative item arises, this is booked to years. the shareholders’ equity under the entry ‘consolidation The main evaluation criteria adopted in the preparation of reserve’; the consolidated financial statements are detailed below. b. related-party transactions giving rise to intra-group payables-receivables and revenues-expenses are offset Intangible assets against each other; Intangibles are booked at historical cost net of cumulated amortisation. Intangibles are amortised in proportion to c. unrealised gains and losses arising from related- their useful life. party transactions are offset against each other in the In the event of depreciation, loss of market value or consolidated financial statements; other diminutions of value that exceed the accounting depreciation, intangible assets are written down based d. minority interests in the equity of consolidated companies on prudent principles. With the exception of goodwill, and their income are indicated as such in the consolidated depreciated assets may in future financial years be financial statements; reinstated at their original value (solely by adding back
5252 Contents of the Consolidated Financial Statements
depreciation charges) if the circumstances warrant it. The depreciation of fixed assets of the subsidiary Rizzani Goodwill, that is any excess of acquisition cost over net de Eccher USA Inc and Rizzani de Eccher Barhain SPC is book value and originating from the acquisition of business applied on the basis of different economic and technical units of other companies, is booked (with the prior consent factors. These consider the specific utilisation of machinery of the Board of Auditors) on the basis of the actual cost in the production process. incurred and is amortised on a straight-line basis over a All goods of value not exceeding € 516.46 and unless period of 10 years, in accordance to what is deemed as its independently valued otherwise, are expensed in their year useful life. of purchase, provided that their useful life is within the Incorporation, start up and development expenses are same year. In the event of permanent depreciation, long- capitalised (with the prior consent of the Board of Auditors) term loss of market value or other permanent diminution on the basis of the actual cost incurred and amortised on a of value that exceed the accounting depreciation, the assets straight-line basis over a period of 5 years. are written down based on prudent principles. Depreciated Project acquisition expenses, project planning, plant assets may in future financial years be reinstated at their erection and site mobilisation expenses are expensed original value (solely reduced by depreciation charges) if (booked to the income statement) in proportion to the the circumstances warrant it. progress payment certificates (revenues) of the specific Recurrent maintenance charges are booked as expenses in project to which they refer. the income statement. Extraordinary maintenance charges are booked as incremental value to the assets they refer to and depreciated pro-rata in accordance to the assets’ Fixed assets residual useful life. Fixed assets are entered in the financial accounts at their purchase cost or in-house production costs. Fixed assets are depreciated during each accounting period at assigned Leased assets rates that vary according to category and are indicated Assets acquired under financial leasing contracts are below. The depreciation rates are determined on the basis accounted for in the consolidated financial statements in of their useful life and residual value, taking into account accordance with the leasing capitalization method, save for economic and technical factors. The assigned depreciation any adjustments applicable in the event that the relevant rates are reduced by 50% for new assets in their first year, consolidated subsidiaries account for the same leasing in accordance to the average degree of their utilization. contracts under the operating leasing method. Therefore: _leased assets are booked as fixed assets at the cost of purchase as of the date of commencement of the leasing
Category Annual rate contract and are regularly depreciated in accordance with the assumed economic life of the assets; Buildings 3% _the outstanding obligation balances, which comprise of leasing instalments not yet due and the residual or Operating machinery and special equipment 15% redemption value of the assets, are booked as a payable in Excavators and mechanical shovels 20% the section ‘Amounts owed to other financiers’; General systems 10% _the interest portion of leasing instalments is recognised as an expense in the income statement in order to reflect a Photovoltaic system 9% flat interest rate on the outstanding principal. Formwork and scaffolding 25%
Light vehicles 25% Investments Heavy vehicles 20% Investments in shares of companies and entities which are Miscellaneous equipment 40% not fully consolidated are carried at their pro-rata share Light constructions 12.5% of net asset value (NAV). Other investments in companies
Office furniture and equipment 12% and entities that are of minor relevance are carried at cost, based on purchase price or share subscription price. Electronic and electromechanical 20% office equipment Equity investments are written down in the event of long- term loss or diminution of value, specifically in the event
53 Notes to the 2011 Annual Report
that the investee incurs substantial losses that are unlikely while any corresponding penalty or default interest is to be reinstated by the subsequent generation of earnings. booked on an accrual basis only as a result of warranting Investment in securities are booked at cost and adjusted for circumstances such as serving of a default notice, any long-term loss of value. favourable arbitration and court verdicts, etc. Payables and Written down investments may be reinstated at a higher other debts are booked at their face value. value in future fiscal years if the circumstances warrant it. Interest on overdue receivables is a statutory penalty Other long-term investments such as loans and debentures interest set by law. are valued at the net realisable value at maturity.
Employees’ severance indemnity Inventories Accruals to the employee severance indemnity are made Raw materials are valued at the lower of purchase cost and on the basis of the amounts actually owed to employees at net realisable value. Works in progress that have duration the end of each accounting period, calculated in accordance of more than 12 months include works that have been with relevant legislation and the applicable employment completed but have not yet received final commissioning contracts. and are valued on the basis of their physical progress, with Management reports that pursuant to the modifications the exception of works in progress by Rizzani de Eccher USA to the employees’ severance indemnity by Law 296 of 27 Inc and Rizzani de Eccher Bahrain SPC, whose valuation is December 2006 and ensuing regulations, the accruals to made on a ‘cost to cost’ basis, as this method offers a better the employees’ severance indemnity from 1st January representation of the specific contracts involved. 2007 onward (or any successive date) can be placed, at the Works in progress, as attested by approved progress option of the employee, with the Treasury Fund at INPS certificates, are booked net of any advances already paid (Social Security Agency) or with private sector funds. by clients. Works in progress with duration of less than 12 months are booked on the basis of the related cumulative costs and Accruals and deferred income/expenses expenses incurred to date. Accruals and deferred income/expenses are calculated on Allocations of risk reserves or general prudential the basis of the accounting periods to which they refer. provisions arising from running projects or which are likely to arise from completed projects under guarantee schemes Revenue and cost recognition are classified under provisions for contingencies and other Revenues from the sale of materials, semi-finished and liabilities on the liabilities side of the balance sheet. finished goods are recognised as of the time of delivery of Works in progress of own real estate developments are goods. Revenues from the sale of services are recognised valued with reference to their production cost calculated as of the time of the completion or delivery of service. by adding all imputable direct costs, and excluding indirect Revenues from works in progress under contract terms costs such as selling, general, administration and interest equal to or exceeding 12 months are recognised as of expenses. the time of formal attestation in a progress certificates Completed portions of own real estate developments are endorsed by customer. Revenues from works in progress valued at the lower of replacement cost and net realisable under contract terms of less than 12 months are booked as value. of the time of completion or delivery. Variation claims are included in revenues only in the event of deliberations and favourable arbitration verdicts, Receivables and payables provided that objective circumstances warranting the claim Trade receivables are entered at their presumed realisation do exist. value. Costs and expenses for the purchase of goods and services Overdue receivables with interests accruing until 31 are booked with reference to the corresponding revenue December 2002 are carried at their nominal value, items as described above. integrated by penalty interest accruals in the corresponding tax exempt fund over the same period. Overdue receivables with interests accruing in subsequent Income tax periods are posted at their assumed net realisation value, Income tax for the accounting period is calculated on a time
5454 Contents of the Consolidated Financial Statements
accrual basis. Tax charges are determined on the basis of counterparty is made in the balance sheet. If fair value is in relevant tax regulations during the accounting period. the money, no gain is booked in the financial statements. Deferred tax assets and liabilities are calculated on the For foreign currency derivative contracts qualifying as basis of any mismatch (provisional difference) between hedging positions, the differential between spot rate and accounting and fiscal valuations of assets and liabilities, forward rate at year-end is booked in the accounts or, in applying the projected tax rate presumed to be in effect the case of options, is booked the premium paid at the as of the time when such differences arise. Deferred time of subscription, distributed over the options’ life. Fair tax asset is recognised only if management is of the value is indicated in the Notes to this Annual Report. Non- reasonable opinion that they will be refunded. Deferred tax hedging foreign currency derivative contracts are instead liabilities are recognised with respect to taxable amounts booked as a counterparty payable if out of the money, or arising from accounting and tax valuation mismatches, counterparty receivable if in the money. except in the event that management is of the reasonable The determination of fair value of derivative contracts is opinion that such liabilities are unlikely to arise. For this made in accordance with generally accepted valuation reason, no deferred tax liabilities were set off against the methods and models. Besides fair value of derivative corresponding tax-exempt reserves in shareholders’ equity, contracts, the Notes to this Annual Report also includes in in consideration that no transactions giving rise to deferred the Memorandum accounts section the notional amount of tax liabilities are likely to occur. The net balances between open derivative contracts as at year end. tax assets and liabilities are offset against each other as and whenever permitted by relevant laws. Foreign currency transactions Foreign currency transactions are converted in Euro at the Memorandum accounts spot exchange rate as of the date of the transaction. Memorandum accounts include back-to-back guarantees provided by the Group on behalf of subsidiaries and associated companies not consolidated and third Assets and liabilities in foreign currencies party beneficiaries, in compliance with Art. 2424 of the Assets and liabilities denominated in foreign currencies are Italian Civil Code. They also include bank and insurance converted in Euro at the year-end spot exchange rate. Any guarantees in the form of performance bonds, retention gains or losses arising from exchange rate differential are money guarantees and bid bonds in which the Group is an booked to the income statement. obligor. To avoid duplications and uphold the principle of clarity of these Financial Statements, bank and insurance guarantees on contract advances are not included in the memorandum accounts, but are discussed in the Notes to Additional information this Annual Report as a comment on the relevant items of the Financial Statements. The disclosure required under the provisions of Art. 38 of Legislative Decree no. 127/1991 is provided along with supplementary comments item by item in the same order Derivative contracts as they appear in the Financial Statements. Derivative contracts on interest rates and foreign The Group has not exercised its waivers under the currencies are booked in accordance to whether they provisions of Art. 29, subsection 4, of Legislative Decree no. meet the relevant regulatory requirements which qualify 127/1991. derivative contracts as a hedging position. For derivative contracts on interest rates which qualify as hedging, only the portion of interest associated with the periodic liquidation of the maturing contract differential is Audited financial statements booked. The contract fair value is indicated in the Note to this Annual Report but it’s not reflected in the balance sheet. Pursuant to Art. 2409-bis of the Italian Civil Code and the For interest rate derivative contracts which do not qualify as Art. 13, subsection 1, of Legislative Decree no. 39 of 27 hedging positions and whose fair value is out of the money, January 2010, these Consolidated Financial Statements an allocation corresponding to the exposure towards the have been audited by Reconta Ernst & Young Spa.
5555 Balance sheet analysis
7. Other intangible assets: other intangible assets amount Assets to €12,241,859 and are primarily constituted by site mobilisation and project design expenses for works with duration of more than 12 months. These expenses are amortised pro-rata in proportion with the work in progress of the projects they refer to. Project design costs for Banca Intesa in Torino are particularly significant, amounting to € 8,277,741 at year end. Also relevant are the site mobilisation expenses related to ‘Portopiccolo’ which amount to € 923,812. With reference to the project costs of the Banca Intesa works, the capitalised expenses, which include those related to the overall project (€ 2,447,395) B. Non-current assets and those related to specific project components or activities (such as structures, facades and lifts) as set forth I. Intangible assets: intangible assets amount to in sub-contract agreements and amounting to € 5,830,346, € 13,882,706. Details of the breakdown and the changes in are amortised pro-rata in direct proportion with the work in the accounting period are provided in appendix ‘D’. progress of said components or activities.
1. Formation and start-up: formation and start-up expenses amount to € 74,828 and consist mainly of costs II. Fixed assets: these include land and buildings, plant related to establishing new companies and capitalized and machinery, equipment and other assets for a total net extraordinary expenses incurred in the current year, or book value of € 73,188,191. The breakup between historic carried over from previous accounting periods. cost and accumulated depreciation is detailed in the table below: 3. Patents and rights to use patents of others: amount to € 743,163 and consist of intangible assets such as patents and patent rights acquired by Deal Srl with the acquisition of controlling stakes in Tesit Srl and Tensacciai Srl. Fixed assets 31.12.2011 31.12.2010
Land and buildings 50,113,699 51,303,135 4. Concessions, licenses, trademarks and similar marks: Accumulated depreciation (4,305,421) (4,334,960) amount to € 47,222 and consist of intangible assets such as trademarks, logos and similar licenses acquired by Deal Srl Land and buildings 45,808,278 46,968,175 with the acquisition of controlling stakes in Tesit Srl Plant and machinery 40,549,473 31,864,377 and Tensacciai Srl. Accumulated depreciation (20,442,267) (16,243,548)
5. Goodwill: goodwill amounts to € 460,000. It includes Plant and machinery 20,107,206 15,620,829 € 100,000 representing the residual (unamortised) goodwill Tools, fittings, furniture, from the acquisition by the Group parent company of a fixtures and other equipment 14,392,761 13,593,533 business unit of Bipielle Real Estate, formerly Basileus Accumulated depreciation (8,529,997) (6,999,799) Spa, and € 360,000 from the acquisition of the post- Tools, fittings, furniture, tensioning and stay-cables business of Tensacciai Srl. fixtures and other equipment 5,862,764 6,593,734 Goodwill is amortised in a straight line over a period of 10 Other assets 3,616,147 2,775,252 years in relation to the economic life of the investment. Accumulated depreciation (2,404,966) (1,954,733)
5 bis. Consolidation differences: consolidation differences, Other assets 1,211,180 820,519 i.e. share premium paid, for a total of € 315,634, of which Tangible assets under € 223,613 emerging from the consolidation of Rizzani de construction and advances 198,764 115,014
Eccher USA Inc and € 92,021 from the consolidation of Tesit Srl. This difference is amortised over 10 years, which Total fixed assets 73,188,191 70,118,271 fairly represents the future value of such asset.
5656 Balance sheet analysis
The relevant transactions concerning changes in fixed € 2,491,469 as of 31.12.2011 (as opposed to € 2,626,752 as assets related to the current financial year are highlighted of 31.12.2010). A detailed breakdown of equity investments in appendix ‘E’. in associated companies and companies whose accounts are not consolidated in these financial statements is shown The increase in investments in fixed assets over the preceding in the following table. year (€ 3,069,921) is mainly attributable to the purchase of plants and machinery necessary to carry out construction As at year end, the Group holds ‘Other equity investments’ works at the sites of Torino and Manama (Bahrain). for an aggregate € 489,075 (as opposed to € 496,832 as of 31 December 2010). Among these, the most important is a III. Investments: investments comprise of equity stake in Cantina Bertiolo, which is valued at € 389,781. investments, loans and securities. Participations in subsidiaries and associated companies 1. Equity investments: equity investments amount to amount to € 81,160 and € 1,921,234 respectively, as follows:
Subsidiary companies 2011 share Book value at Book value at 31.12.2011 31.12.2010
Codruss 98.42% 1,608 1,608
Safau Iniziative Srl 100.00% 10,000 10,000
Peloritani Scarl under liquidation 64.15% 6,549 6,549
Rizzani de Eccher DOO (1) 90.00% 4,838 -
Consorzio RdE America Centrale 99.97% 52,162 52,162
Prospettive Immobiliari Srl under liquidation 60.00% 1 502
Sinedil Srl 99.00% 2 2
Rizzani de Eccher Australia PTY (2) 100.00% - 1
Volturno Scarl under liquidation 75.00% 6,000 6,000
Total 81,160 76,824
Associated companies
Associated companies through Deal Srl (3) 31.20% 1,348,273 1,470,164
de Eccher Interiors Srl (3) 20.00% 9,963 73,729
Store 26 Scarl 50.00% 5,000 5,000
Variante di Valico Scarl under liquidation 33.33% 27,340 27,340
Risalto Srl under liquidation 33.33% 27,463 27,463
VSL-RdE JV (1) 45.00% 66,098 -
Consorzio Lybia Green Way 24.50% 24,500 -
Futura Srl (3) 20.00% 412,597 449,399
Total 1,921,234 2,053,096
(1) Company accounted for using the equity method since 2011 (2) Company full consolidated since 2011 (3) Company accounted for using the equity method
5757 Notes to the 2011 Annual Report
2. Accounts receivable: accounts receivable amount to As described earlier in the introduction section to these Notes, € 1,463,458 (€ 1,253,278 as of 31 December 2010). They consist total contracts in progress are offset by cumulative advance of term loans to non-consolidated subsidiaries, associated payments received from customers against regularly attested companies and third parties. Their breakdown is as follows: and duly invoiced progress certificates in the amount of € 1,085 million (€ 1,141 million as of 31 December 2010). Advance a. Accounts receivable from subsidiaries payments of €17.6 million mainly relate to down payments 31.12.2011 31.12.2010 made to sub-contractors, suppliers and professionals. The Peloritani Scarl under liquidation 252,129 251,129 increase is mainly due to advance payments to sub-contractors and suppliers for the ongoing project in Lebanon. Such Safau Iniziative Srl 165,000 120,000 advances have already been reimbursed by the client as part of the cost plus fee contract in effect for this project. Total 417,129 371,129 Management would like to highlight the amount of contingent revenues associated with pending variation claims initiated b. Accounts receivable from associated companies by the parent company and several subsidiaries. As indicated 31.12.2011 31.12.2010 earlier, any variation claims, liquidated damages and extra- fees are recognised as revenues upon their final ratification, Borgo Sole Spa - 249,998 in keeping with the principles that objective circumstances Fressynet-Rizzani de Eccher JV 39,299 - warranting the claim do exist.
Total 39,299 249,998 II. Accounts receivable: current accounts receivable amount to € 157,453,337 (€ 190,982,528 as of 31 December 2010). d. Accounts receivable from other companies: for a total € 1,007,030 (as opposed to € 632,151 as of 31 December 1. Trade receivables: amount to € 139,096,468 (€ 2010). This item includes security deposits for € 385,698 177,416,994 as of 31 December 2010) net of provisions for and other loans for € 621,052. It also includes € 365.912 bad and doubtful debts of € 2,733,814 and after deducting receivables from third party shareholders in associated € 1,635,716 set aside as interest on overdue receivables. companies consolidated with the proportional method. The breakdown of accounts receivable is as follows: net receivables due within 12 months € 135,746,907; net 3. Other investments: other investments amount to € receivables due beyond 12 months € 3,349,561. Receivables 2,074,740 (€ 4,568,042 as of 31 December 2010) and consist over 12 months relate to retention monies held by clients in of securities issued by top rated financial institutions. connection with projects not yet formally commissioned. The reduction in outstanding client receivables is due essentially to the collection of significant receivables outstanding at C. Current assets year-end in 2010 in respect of the Al Udeid Air Force Base, a project which has been successfully completed. I. Inventories: total inventories at year end amount to € 91,209,861 (€ 70,056,009 as of 31 December 2010) and The geographical break-down of receivables is as follows are broken down as follows: (amounts in thousands of Euro):
31.12.2011 31.12.2010 Italy and Europe 72,668 Raw materials and consumables 9,420,999 8,590,758 Russia and CIS 14,319 Works in progress and components 7,373,372 7,469,883 Middle East 43,489
Contracts in progress 45,654,809 36,559,281 Africa 894
North and Central America 5,353 Finished goods and goods for resale 11,141,797 8,620,676 Far East 1,055
Advances to suppliers 17,618,884 8,815,411 Australia 1,318
Total 91,209,861 70,056,009 Total 139,096
58 Balance sheet analysis
Changes in provisions for bad and doubtful debts are 3. Receivable from associated companies: amount summarised below: to € 46,794 (€ 283.248 as of 31 December 2010), all due within 12 months by associated companies that are outside the scope of the proportional method Opening balance 4,143,609 consolidation (because not material or because they are
Provisions 72,106 valued using the equity method):
Collections (write-backs) (1,522,129)
Changes in consolidation area 40,228 31.12.2011 31.12.2010 de Eccher Interiors Srl 24,866 2,120 Closing balance at year-end 2,733,814 Store 26 Scarl 21,928 281,128
Total 46,794 283,248 The write-backs of € 1,522,129 refer to the collection of a trade receivable for € 1,297,258 in Dubai, which had been fully provided for in earlier financial years, and for 4.bis Tax credits: amount to € 12,690,017 € 224,871 to the collection by the Group parent company of (€ 10,504,825 as of 31 December 2010) and are broken another receivable that had been classified as doubtful in down as follows: an earlier financial year. 31.12.2011 31.12.2010 The amounts allocated to contingencies for bad and doubtful receivables at year end reflect the most Corporate income tax 3,912,099 5,477,904 and withholding tax conservative assessment by management on the credit risk for the current year. VAT receivables 8,777,918 5,026,921 Provisions for interests on overdue receivables amount to € 1,635,716, having been reduced by € 12,479 as a result Total 12,690,017 10,504,825 of the write-back of a non-performing receivable collected in 2011. Commencing in 2003 interest is booked with the underlying principal on a time-accrual basis. The above balances are posted net of any debt owed in connection with the same tax and are inclusive of the consolidation of the net tax credit/debit positions Opening balance 1,648,195 transferred to the parent company under applicable Italian Provisions - rules and regulations in the matter of tax accounting for Collections (write-backs) (12,479) consolidation.
Closing balance at year end 1,635,716 4.ter Deferred tax assets: deferred tax assets amount to 2. Receivable from subsidiary companies: amount to € 2,368,250 net of deferred tax liabilities. The previous € 61,326 (€ 67,570 as of 31 December 2010) and are all year the net of deferred taxes was a liability for € 728,140. due within 12 months from controlled companies which are not consolidated (because they are immaterial or The significant increase is due to tax calculated on the under liquidation). They are broken down as follows: receipt of contractual claims took place in 2010, which upon filing of the tax return, hence from a tax perspective, 31.12.2011 31.12.2010 have been prudently considered as taxable income, but Peloritani Scarl under liquidation 60,786 60,786 because their effectiveness was subject to final arbitration Rizzani de Eccher Australia PTY - 4,627 award, from an accounting perspective they could not consider as certain income and booked to the income Volturno Scarl under liquidation - 1,872 statement. Safau Iniziative Srl 540 285 The following table shows movements and balances in Total 61,326 67,570 respect of deferred tax assets and liabilities.
59 Notes to the 2011 Annual Report
Deferred tax assets Tax rate Balance 2010 (Decreases) 2011 Increases 2011 Balance 2011
Gains/(losses) on valuation of works in progress 27.5% 90,190 (83,998) - 6,192
Provision for contingencies 31.4% - 27.5% 528,419 (125,567) - 402,852
Public relation expenses 31.4% 1,530 (1,256) - 274
Directors’ compensations 27.5% 15,582 (15,582) 4,125 4,125
Tax losses Italy – RdE USA Inc. 27.5% - 34% 218,821 (49,981) 245,647 414,487
Losses on foreign exchange 27.5% 444,153 (231,076) 398,540 611,617
Goodwill amortisation 31.4% 83,734 - 19,538 103,272
SITAF Arbitration Award 31.4% - - 2,770,668 2,770,668
Consolidation adjustments 31.4% 776,246 (557,843) - 218,403
Total deferred tax assets 2,158,675 (1,065,303) 3,487,213 4,580,585
Deferred tax liabilities
Deferred capital gains 31.4% 166,744 (54,079) 10,517 123,182
Penalty interest (accruals) 27.5% 113,109 (15,119) 24,149 122,139
Gains on foreign exchange 27.5% 487,634 (379,254) 143,950 252,330
Accelerated depreciation RdE USA Inc. 34% 1,040,263 (469,894) - 570,369
Consolidation adjustments 31.4% 1,079,065 - 65,250 1,144,315
Total deferred tax liabilities 2,886,815 (918,346) 243,866 2,212,335
Net deferred tax assets / (liabilities) (728,140) (146,957) 3,243,347 2,368,250
6060 Balance sheet analysis
5. Other receivables: amount to € 3,190,482 and are D. Prepayments and accrued income due from:
31.12.2011 31.12.2010
Employees 130,944 57,884 Prepayments and income accruals amount to € 3,824,427
Welfare and social security 483,120 501,929 (€ 2,876,785 as of 31 December 2010). Revenue accruals are just € 60,547 and chiefly relate to accruals of interest Other 2,576,418 2,150,078 on bond coupons. Prepaid expenses are broken down as follows: Total 3,190,482 2,709,891
31.12.2011 31.12.2010 Other receivables for € 2,576,418 include € 1,293,780 in Insurance premia sureties for arbitrations, € 214,036 in insurance advance and guarantees 1,966,460 1,406,929 payments, € 156,094 in legal fees paid on behalf of ANAS to Rents 460,328 219,725 be recovered, and € 912,508 in sundry receivables. Other prepaid expenses 1,338,092 1,148,805
IV. Cash and cash equivalents: cash and cash equivalent Total 3,764,880 2,775,459 reserves are € 122,150,398 and are held as follows:
31.12.2011 31.12.2010 The increase in prepayments in respect of insurance pre- Bank deposits 121,654,999 74,004,856 mia and guarantees is primarily due to the new infrastruc- Cash on hand 495,399 224,902 ture project in Kuwait, which commenced in 2011, and to the Bahrain road bridges project, which in 2011 achieved Total 122,150,398 74,229,758 full production.
The item ‘Other prepaid expenses’ includes € 632,404 in The Group’s net financial position as of 31 December 2011, respect of project costs kept in abeyance and progressively taking into account cash and cash equivalents, net of bank charged to income statement proportionally to the project’s loans and payables to other financial institutions (e.g. for progress and € 112,104 related to the registration fee and unpaid leasing instalments) is a positive € 80.6 million concession lease for the Porto Vecchio redevelopment (€ 61.5 million as of 31 December 2010). project in Triest.
61 Liabilities
A. Consolidated shareholders’ equity These are: _ reserve for 6 % increase according to Law 64/86,
31.12.2011 31.12.2010 amounting to € 10,466; _ capital subscription reserves pursuant to Law 64/86 I, Share capital, authorised, issued and outstanding 20,000,000 20,000,000 amounting to € 417,896; _ reserve for subsidised interest according to Law 904/77 IV, Legal reserve 3,168,442 2,755,131 amounting to € 2,644,521; VII, Other reserves: _ revaluation reserve according to Law 72/83 amounting to extraordinary reserve 59,086,447 46,453,314 € 11,092. reserve for foreign currency Changes in consolidated shareholders’ equity are shown in translation gains (losses) 1,318,130 129,221 appendix ‘F’. consolidation reserve 121,190 67,105 Reconciliations of balances between shareholders’ equity IX, Group profit (loss) for the and net profit of the parent and the Group respectively, are financial period 14,696,658 13,522,831 detailed in appendix ‘G’.
Total Group shareholders’ equity 98,390,866 82,927,602
Minority share of equity 6,652,768 3,580,236 B. Provisions for contingencies and other liabilities
Minority share of profit (loss) 3,452,938 2,872,938 1. Provisions for pensions and similar obligations: amount to € 432,713 (€ 380,454 as of 31 December 2010). It consists
Total consolidated of severance payments to the directors of subsidiary Deal Srl. shareholders’ equity 108,496,572 89,380,776 2. Provisions for taxation, including deferred tax liabilities: amount to € 2,212,335 and are presented in the The share capital consists of 4,000,000 preferred shares balance sheet after offset against deferred tax assets. (with privileged claim over dividend distribution) with a nominal value of € 1 each and 16,000,000 ordinary shares During the course of 2011, Rizzani de Eccher Spa and with a nominal value of € 1 each. subsidiary Codest International Srl became the object Balance sheet items of overseas subsidiaries and associated of a tax audit by the Inland Revenue Office in respect of companies are converted in Euro at the spot exchange rate the 2008 financial year. While Codest International Srl as at year end. The corresponding income statement items had already received a formal warrant, Rizzani de Eccher are converted at the average exchange rate for the year. The Spa is yet to receive any formal warrant or notification reserve for foreign currency translation gains (losses) shows as at the time of printing these Financial Statements in any gain (or loss) arising from any difference between spot respect of the afore-mentioned audit, as well as an earlier exchange rate and the average exchange rate. audit carried out in 2008. In both cases, nevertheless, the Shareholders’ equity includes reserves, which in the event of objections raised are not significant, although they are distribution would form part of the Group’s taxable income. currently being examined by the Group tax consultants.
6262 Balance sheet analysis
It should be noted that during 2012 Codest International 31.12.2011 Change 31.12.2010 lodged a claim and obtained judgment that threw out Rizzani a portion of the case under contention. The Group is de Eccher Spa 2,662,815 (162,267) 2,825,082 convinced of the strengths of its case and believes that no Deal Srl 891,160 (115,076) 1,006,236 provisions should be made against possible tax liabilities Sicea Spa 67,612 (27,152) 94,764 in connection with this case. Codest International Srl 292,153 (137,274) 429,427 3. Other provisions: amount to € 810,765 and consist of Consorzio provisions for contractual contingencies and default risk Codest Engineering 66,680 8,338 58,342 associated with works in progress. Changes in provisions Treviso for contractual and default risks are here under detailed. Maggiore Srl 30,544 (3,771) 34,315
de Eccher Agricola Srl 59,301 6,806 52,495 Opening balance 2,862,094 Rizzani de Eccher Provisions 163,044 USA Inc 143,767 62,923 80,844
Write-backs (2,214,373) Portocittà Spa 239 239 -
Torre Scarl 79,871 62,599 17,272 Closing balance at year end 810,765 City Contractor Scarl 217,725 217,725 -
Tensacciai Srl 344,912 344,912 -
The opening balance of the provisions include sums set Tesit Srl 130,521 130,521 - aside in previous years by Treviso Maggiore Srl and IRIDE Srl VFR Ltd against future charges on contracts completed (Immobiliare Rizzani or in progress. The charges having since been actually de Eccher Srl) 1,202 1,202 - incurred, the relevant share of provisions has been written Total 4,988,502 389,725 4,598,777 back to the income statement. The additional provision of € 163,044 refers to maintenance charges set aside for the Bahrain bridge project. Such additional provisions are made proportionally to the progress of construction. D. Debts and other payables
3. Amounts owed to shareholders for loans: loans from shareholders amount to € 1,234,278 (€ 367,624 as on 31 C. Employees’ severance indemnity December 2010) and consist of the third party’s portions of shareholders loan extended to Interbridge Technologies BV, The employees’ severance indemnity is calculated for Torre Scarl and Riflessi Srl (formerly Iride Srl), respectively. each employee, pursuant to the labour and employment contracts currently in force. The following table highlights 4. Amounts owed to banks: total bank loans outstanding the movements in provisions and utilisations made during at year-end amount to € 35,358,051 (€ 6,037,500 as of 31 the current year. The accrued severance payables are posted December 2010). They consist of short term debt (due within net of any advances already paid to employees. Following 12 months) for € 17,696,043 and long term loans (maturity the enactment of Law No. 296 of 27 December 2006 and beyond 12 months but within 5 years) for € 17,662,008. subsequent legislative decrees issued in 2007 in the matter At year-end, the weighted average cost of debt was 3%, of employee severance indemnity, the amounts accruing to in line with the previous financial year. Total credit lines the employee severance indemnity for each employee are from the banking system as at 31 December 2011 amount - upon instruction of each employee – either deposited with in aggregate to € 552 million, of which € 57 million in the specific treasury fund with INPS (Social Security Agency) cash credit lines and € 495 million non-cash in the form of or placed in private sector investment funds. The amounts guarantees and surety bonds. At year-end, the utilisation of to be transferred are those accrued from 1 January 2007 or the non-cash lines was € 302 million in guarantees issued from the date of the employee’s instruction. and surety bonds.
63 Notes to the 2011 Annual Report
5. Amounts owed to other lenders: payables to other 9. Amounts owed to subsidiary companies: payables to lenders amount to € 6,211,961 of which € 517,039 in the subsidiaries amount to € 212,807 and relate to debts owed short-term and € 5,964,922 in the medium and long-term to subsidiaries which are out of the scope of consolidation (€ 1,429,440 beyond 5 years). This is actually a single payable (because of their immateriality or their being under and represents the outstanding payable balance arising from liquidation). Payables to subsidiaries are broken-up as the takeover in 2010 of a third party debtor position in a real follows: estate leasing contract. The outstanding payable comprises 31.12.2011 31.12.2010 of the ‘principal-only’ portion of leasing instalments payable Peloritani Scarl under liquidation 5,984 5,351 and the residual or redemption value of the asset. Volturno Scarl under liquidation 167,388 538,185
6. Advance payments from customers: customer advances Sinedil Srl 6,289 6,289 amount to € 113,601,065 (€ 122,394,599 as of 31 December Consorzio RdE America Centrale 2010). These consist of advance payments on works in under liquidation 12,729 4,738 progress for € 112,806,688 and advance payments received Safau Iniziative Srl 20,417 3,982 in connection with the sale of real estate assets for
€ 794,377. Sureties and bonds issued as a guarantee in Total 212,807 558,545 support of such advance payments amount to € 101,277,676 as opposed to € 75,645,844 as of 31 December 2010. The payable to ‘Volturno Scarl under liquidation’ refer Breakdown of customers’ advance payments by geographical mainly to the VAT credit assigned by Volturno to the parent area (in thousands of Euro): company within a scheme of Intra-Group VAT settlements.
Italy 20,258 10. Amounts owed to associated companies: payables to Russia and CIS 9,639 non-consolidated associated companies consist mainly
Middle East 33,234 of considerations for services executed by associated companies that are out of the scope of consolidation Africa 44,157 (because considered not material or because they are North and Central America 2,443 valued using the equity method):
Far East 3,491 31.12.2011 31.12.2010
Australia 379 de Eccher Interiors Srl - 156,027
Total 113,601 Variante di Valico Scarl under liquidation 23,770 23,770
Store 26 Scarl - 275,000 7. Amounts owed to suppliers: payables to suppliers and subcontractors amount to € 174,037,682, and have Borgo Padova Scarl - 759,816 increased by € 10,569,961 as opposed to the previous year. Consorzio Lybia Green Way 11,258 - Breakdown of trade payables by geographical area (in thousands of Euro): Total 35,028 1,214,613
Italy 116,124
Russia and CIS 6,673 11. Amounts owed to parent company: payables to the controlling shareholders amount to € 285,794 Middle East 46,162 and relate to trade payables associated with services Africa 525 rendered and invoiced by the parent company North and Central America 3,288 Marienberg SA.
Far East 781 12. Amounts owed to the tax authority: tax payables Australia 484 at year-end amount to € 6,378,388 and are shown in the table on the following page. Total 174,037 The increase in payables for Tax c/IRPEF for € 284,809
64 Balance sheet analysis
is due to the enlargement of the consolidation area, which the purchase consideration of a building by the parent now includes the newly acquired City Contractor Scarl, company; € 905,379 in surety deposits from third parties; Tensacciai Srl and Tesit Srl. € 576,431 as a payable associated with the Tensacciai The payables for overseas taxes relate primarily to tax transfer of business transaction as a payable due by the payables of subsidiary Rizzani de Eccher USA Inc. transferee to the transferor; and € 960,521 as another
31.12.2011 31.12.2010 payable arising from the take-over transaction of CityLife.
Tax c/IRPEF (personal income tax) 1,486,774 986,289
Tax c/IRES (corporate income tax) 77,079 604,565
Tax c/IRAP (regional revenue tax) 60,518 217,741 E. Accruals and deferred income
Tax c/IVA Italy (domestic VAT) 34,208 84,826 Accruals and deferred income are € 783,474 (€ 458,386 Tax c/IVA overseas (cross border VAT) 381,338 394,372 as of 31 December 2010) and include income statement Overseas taxation 3,550,992 3,447,626 adjustments to revenues and costs pursuant to the timing accrual method. These adjustments mainly comprise of Other tax payables 787,479 107,411 accrued commissions for € 499,428 on bank guarantees
Total 6,378,388 5,842,830 paid in financial year 2012 but pertaining to financial year 2011, and deferred income of € 284,045.
13. Amounts owed to the social security institutions: mainly consist of amounts owed to social security agencies in connection with salaries and emoluments pertaining to the month of December 2011 and including year-end bonuses and emoluments, paid in January 2012. Much the same way as in tax payable, this item posted an increase as a result of the entrance of City Contractor Scarl, Tensacciai Srl and Tesit Srl in the consolidation perimeter.
31.12.2011 31.12.2010
INPS payables 1,338,244 915,846
INAIL payables 177,711 38,810
Other payables 202,815 277,957
Total 1,718,770 1,232,613
14. Other payables: sundry payables amount to € 13,152,739 (€ 13,609,480 as of 31 December 2010) and consist of the following items: _ payables to employees for € 4,789,196 due to salaries and wages for the month of December 2011, paid in January 2012, and the allocation of holiday entitlements; _ other payables of € 8,363,543, of which: € 1,420,029 associated with the acquisition by parent Rizzani de Eccher Spa of a business unit of Bipielle Real Estate; € 1,917,162 in client payments attributable to joint-venture or consortium partners; € 700,000 being the balance outstanding on
65 Memorandum accounts
The total balance of the memorandum accounts at year- B. Guarantees issued by third parties on behalf of Group end amounts to € 257,515,629 posting a decrease of of companies: € 6,569,905 with respect to 31 December 2010. These consist of the following off-balance sheet items: 31.12.2011 31.12.2010
B1. banks: A. Guarantees provided in favour of third parties: performance guarantees 133,989,193 125,401,510
31.12.2011 31.12.2010 bid bonds 23,984,671 24,442,546
A1. in favour of subsidiary companies 5,063,000 - against release 8,339,020 4,949,653 of retention notes A2. in favour of associated companies 11,239,520 - other guarantees 3,384,834 6,361,964 A3. in favour of other companies - -
Total 169,697,718 161,155,673 Total 16,302,520 -
B2. insurance companies:
performance guarantees 61,982,991 101,305,618
bid bonds 2,503,820 -
against release 3,247,405 426,801 of retention notes
other guarantees 3,781,175 1,197,442
Total 71,515,391 102,929,861
Total guarantees 241,213,109 264,085,534
Total memorandum accounts 257,515,629 264,085,534
6666 Balance sheet analysis
Foreign exchange derivatives contract does not qualify as such from an accounting and As already stated in the section about general accounting regulatory point of view. Therefore, the marked-to-market principles, the objective of the company is to hedge against value (negative) of € 32,565 is posted in the balance sheet. exchange fluctuations in respect of both receipts and payments in foreign currency. Interest rate derivatives The following table provide details of the company’s The table below provides details of the company’s exposure exposure to foreign exchange derivatives (forward currency to interest rate swaps intended to hedge the company’s sale/purchase contracts and options). underlying bank debt against a rise in interest rates. It must be noted that such IRS contracts qualify as hedging It must be noted that while the two contracts above are instruments. Therefore, no marked-to-market value is intended for hedging purpose, the MYR currency option posted in the balance sheet.
Exchange Market Contract Expiry Contract type Currency Amount rate Euro value date date
Forward sale USD 2,000,000 1.3687 1,461,241 (80,710) 14.11.11 15.06.12
Currency option MYR 4,258,600 (*) (**) (**) (32,565) 08.09.11 15.06.12
(*) notional amount outstanding as at 31.12.2011 (**) company pays or receives EUR funds according to the exchange rate at maturity/expiry
Nominal Interest Market Contract Expiry Contract type amount rate value date date
Interest Rate Swap 3,000,000 2.12% (12,403) 29.05.09 04.06.12
Interest Rate Swap with cap 3,000,000 Euribor 3m max 2.6% 1,02 04.06.09 08.06.12
6767 Income statement analysis
Income statement
A. Value of production (revenues) and construction inventories not yet accounted for in progress payment certificates approved by clients. In 2011 the aggregate value of production (consolidated revenues) for the Group is € 355,466,803 (€ 482,608,530 4. Work performed for own purposes and capitalised: as of 31 December 2010). The table below provides the these amount to € 2,299,828 and consist of € 1,801,203 geographical split for revenues (in thousands of euro): in capitalised site mobilisation, preparation and erection expenses for pluriannual projects amortised in proportion to the progress of works; and € 498,625 in Italy 117,993 33,2% capitalised costs for the erection of a photovoltaic energy Russia and CSI 58,959 16,6% production plant on the roof of the factory situated Middle East 116,907 32,9% in Udine.
Africa 37 0,0% 5. Other revenues and income: other income is North and Central America 47,017 13,2% € 8,986,908 and includes:
Far East 5,184 1,5%
Australia 9,370 2,6% Sale of raw materials 2,607,100 Total 355,467 100% Rents and ancillary revenues 1,142,202
Insurance compensation 158,046
Capital gains from sales of fixed assets 681,592 1. Sales of goods and services: these amount to € 334,797,795 and consist of revenues from works in Contributions booked as income 92,968 progress (inclusive of approved claims), revenues from Other revenues 3,059,604 the sale of real estate and units thereof, service fees and revenues from the sale of special equipment and Release of provisions 1,245,396 machinery. Total 8,986,908
2. Change in finished goods and work in progress inventory: inventory changes account for positive Other sundry revenues of € 3,059,604 also include gains € 2,051,525. This item consists of the algebraic sum of ca. € 593,000 booked as a result of the resolution of of opening and closing balances of construction stock certain disputes with customers and suppliers in Russia, and inventories (under construction and completed) and € 859,000 associated with debiting the share of of real estate projects developed for the Group’s own personnel and human resources costs attributable to joint account. venture partners in the Bahrain project. The write back of unutilised provisions is made to the extent that the reasons 3. Changes in contracts in progress: shows a positive that warranted the provisions in the first place have balance of 7,330,747 and represents the algebraic sum disappeared according in the prudential assessment made of opening and closing balances of works in progress by management.
68 Notes to the 2011 Annual Report
B. Costs of production 10. Valuation adjustments: the total for this item was € 11,094,160 at year end (€ 10,570,450 in 2010) of which Costs of production amount in aggregate to € 336,890,318 € 2,110,658 pertaining to amortisation of intangible assets (€ 457,755,048 in 2010). A detailed breakdown of these and € 8,911,397 pertaining to depreciation of fixed assets. items is included in the income statement. Furthermore, provisions and write-downs for bad and doubtful receivables were made for € 72,106 (€ 370,000 in 2010). 6. Costs for raw materials, consumables and goods Further details on depreciation and amortisation can be for sale: amount to € 68,727,215 (€ 57,017,896 in 2010) found in appendices ‘D’ e ‘E’. and consist primarily of purchases of raw materials, semi-finished products, finished products and sundry 14. Other operating costs: amount to € 8,713,610 (€ 6,510,585 consumables. in 2010) and include mainly bank commissions and fees for bank and insurance guarantees as well minor expenses as 7. Costs for services: amount € 180,226,897 (€ 327,833,261 registry fees and stamp duties, various taxes, penalties and in 2010) and consist of expenses incurred in connection charges from customers, donations. These charges also with services rendered by third parties for sub-contracts, include a charge of € 2,225,982 corresponding to a delay design and technical consulting services, consulting penalty imposed by a public client in a construction contract, services and transportation. The significant decrease is which the company strongly opposes. However the charge is related to the decrease in the revenues. made in keeping with the principle of prudent risk assessment.
8. Costs for use of assets owned by others: amount to € 6,193,732 (€ 4,885,359 in 2010) and refers to rentals and C. Financial income and expenses leasing expenses. Net financial income for the year is € 2,762,842, which 9. Costs for employees: amount to € 60,307,766 (€ 53,227,658 marks an improvement as opposed the previous year, when of 2010). The increase in employee costs as opposed to the the net position was negative (espenses) for € 764,190. This preceding year is commensurate with an increase in the improvement is primarily due to currency translation gains average number of employees in 2011, as detailed by the from favourable exchange rates.They are detailed below following table which provides the total number of Group analytically. employees as at year-end and the average for 2010 and 2011. 15. Income from equity investments: is € 1,691 in 2011 Average Average 31.12.2011 31.12.2010 2011 2010 (€ 1,690 in 2010) and refers primarily to income from
securities in portfolio. Employees - Italy:
Management 50 29 52 29 16. Other financial income: amounts to € 1,957,902 (it was € 974,816 in 2010) and consists of: Staff 187 145 188 148 Interest income from banks and securities 1,729,716 Workers 202 176 205 176 Penalty interest on overdue receivables 153,208 Total Italy 439 350 445 353 Interest on other receivables 74,978 Employees - Overseas: Total 1,957,902
Management 21 22 23 19 17. Interest expenses and similar charges: interest Staff 326 281 306 260 expenses and charges in 2011 are € 1,213,340 (it was Workers 399 498 420 454 € 706,602 in 2010) and consist of:
Total overseas 746 801 748 733 Bank loans interest expenses 956,706 Interest on other debt 256,634
Total 1,185 1,151 1,193 1,086 Total 1,213,340
69 Notes to the 2011 Annual Report
The item ‘Interest on other debts’ includes € 201,080 Disclosure in the matter of compensation to refers to interest payments in connection with the afore- members of the board of directors, statutory mentioned real estate leasing contract. auditors and external auditors (pursuant to Art. 38, Paragraph 1, Sub-Paragraph o) and 17 bis. Foreign currency translation gains / (losses): the Sub-Paragraph o) septies of Legislative Decree 127/1991) management of foreign currency exposure has led to a net gain of € 2,016,589 as opposed to a net loss of € 1,034,094 in 2010. Pursuant to Article 38 paragraph 1, Sub-Paragraph o) of Legislative Decree no, 127/91, the Company reports that D. Valuation adjustments in respect of investments directors’ compensations in 2011 reached in aggregate € 972,953 while the aggregate amount of compensations to 18. Revaluations: during 2011 revaluations of equity investments the statutory auditors was € 40,500. These sums include were made for an aggregate of € 81,149 (it was € 186,571 in compensations for directorships and administrative 2010) in connections with the revaluation of participations in positions in other Group subsidiaries and associated associated companies under the equity method. companies. Pursuant to Article 38, Paragraph 1, Sub-Paragraph o) 19. Devaluations: write-downs amount to € 81,744 (€ 100,394 in septies of Legislative Decree 127/91, we further report 2010) and arise primarily from the devaluation of participations that the aggregate compensation payable to the auditing in associated companies under the equity method. firm mandated with the annual audit of the consolidated financial statements of the Group is € 128,675. Such E. Extraordinary income and charges compensation covers fees and charges in respect of the audits performed on parent company Rizzani de Eccher 20. Extraordinary income: positive extraordinary items Spa, subsidiaries Codest International Srl and Deal Srl, amount to € 3,462,926 and include the following: a € 423,000 as well as on consortium company Tiliaventum Scarl (in realised gain from the sale of surplus construction equipment respect of the portion relevant to the Group). in Kazakhstan, following completion of the project there; a € 1,733,000 payout from the liquidation of assets under the Related party transactions Cogolo bankruptcy (while the Cogolo receivable had been fully (pursuant to Art. 38, Paragraph 1, Sub-Paragraph o) written off in the previous years); and € 1,038,000 in forfeited quinquies of Legislative Decree 127/1991) supplier payables under the statute of limitations prescribed by law. The following table provides details of payables, 21. Extraordinary charges: they consist of: receivables, revenues and costs associated with related parties having relevance in the context of these Financial Contingent losses 379,319 Statements. We further report that the transactions herein Capital losses (realised) 1,715 contemplated are conducted on an arm’s length basis on the basis of current market rates. Total 381,034
Receivables Payables Income Expenses
Marienberg SA* The contingent losses include a € 106,000 settlement with - 285,794 1,181 484,994 the receivers of an insolvency proceeding, who had promoted a rescission and claw back action versus a subsidiary Total - 285,794 1,181 484,994 company. Of this settlement, €90,000 has been recovered as * Parent company of Rizzani de Eccher Spa an indemnity from the former shareholders of the subsidiary company involved, and booked as an extraordinary gain. Information in respect of transactions and 22. Income taxes for the period: corporate income tax for the commitments off-balance sheet year under review is € 6,271,029 (it was € 8,418,537 in 2010), of (pursuant to Art. 38, Paragraph 1, Sub-Paragraph o) which € 6,561,927 in current taxes and € 290,899 in deferred sexies of Legislative Decree 127/1991) tax assets. The tax payable is commensurate with the taxable income, as derived from the accounting profit for the financial The Group is not involved in any off-balance sheet year adjusted in relation to the tax laws and regulations of the transactions or commitments that for any reason different countries where companies are established. whatsoever are not disclosed in the balance sheet.
7070 INDEPENDENT AUDITORS’ REPORT Independent auditors’ report
72 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET
Change Assets 31.12.2011 31.12.2010 YoY
A Receivable from shareholders for capital stock Shares not called up 0 0 0 Shares already called up 0 0 0
Total receivable from shareholders for capital stock 0 0 0
B Non current assets
I) Intangible assets 1 Formation and start up 74,828 23,685 51,143 2 Costs of research, development and advertising 0 0 0 3 Patents and rights to use patents of others 743,163 0 743,163 4 Concessions, licences, trademarks and similar rights 47,222 0 47,222 5 Goodwill 460,000 200,000 260,000 5 bis Consolidation differences 315,634 255,557 60,077 6 Intangible assets in progress and payments on account 0 0 0 7 Other 12,241,859 3,390,710 8,851,149 Total intangibles assets 13,882,706 3,869,952 10,012,754
II) Fixed assets 1 Land and buildings 45,808,278 46,968,175 (1,159,897) 2 Plant and machinery 20,107,206 15,620,829 4,486,377 3 Tools, fittings, furniture, fixtures and other equipment 5,862,764 6,593,734 (730,970) 4 Other 1,211,180 820,519 390,661 5 Tangible assets in course of construction and payments on 198,764 115,014 83,750 Total fixed assets 73,188,191 70,118,271 3,069,921
III) Investments 1 Equity investments in: a) subsidiary companies 81,160 76,824 4,336 b) associated companies 1,921,234 2,053,096 (131,862) c) parent companies 0 0 0 d) other companies 489,075 496,832 (7,757) Total 2,491,469 2,626,752 (135,283) 2 Accounts receivable due from: a) subsidiary companies 417,129 371,129 46,000 b) associated companies 39,299 249,998 (210,699) c) parent companies 0 0 0 d) other companies 1,007,030 632,151 374,879 Total 1,463,458 1,253,278 210,180 3 Other investments 2,074,740 4,568,042 (2,493,303) 4 Treasury stock 0 0 0 Total investments 6,029,667 8,448,072 (2,418,404)
Total non current assets 93,100,565 82,436,295 10,664,270
74 Change Assets 31.12.2011 31.12.2010 YoY
C Current assets
I) Inventory 1 Raw materials and consumables 9,420,999 8,590,758 830,241 2 Work in progress and components 7,373,372 7,469,883 (96,511) 3 Contracts in progress 45,654,809 36,559,281 9,095,528 4 Finished goods and goods for resale 11,141,797 8,620,676 2,521,121 5 Advances to suppliers 17,618,884 8,815,411 8,803,474 Total inventory 91,209,861 70,056,009 21,153,852
II) Accounts receivable 1 Trade receivables a) amounts falling due within 12 months 135,746,907 174,718,280 (38,971,373) b) amounts falling due beyond 12 months 3,349,561 2,698,714 650,847 Total 139,096,468 177,416,994 (38,320,526) 2 Receivable from subsidiary companies 61,326 67,570 (6,244) 3 Receivable from associated companies 46,794 283,248 (236,454) 4 Receivable from parent companies 0 0 0 4bis Tax credits 12,690,017 10,504,825 2,185,192 4ter Deferred tax asset 2,368,250 0 2,368,250 5 Others 3,190,482 2,709,891 480,592 Total accounts receivable 157,453,337 190,982,528 (33,529,191)
III) Investments 1 Subsidiary companies 0 0 0 2 Associated companies 0 0 0 3 Parent companies 0 0 0 4 Other companies 0 0 0 5 Treasury stock 0 0 0 6 Other investments 0 0 0 Total investments 0 0 0
IV) Cash and cash equivalents 1 Bank and postal current accounts 121,654,999 74,004,856 47,650,143 2 Checks deposited 0 0 0 3 Cash on hand 495,399 224,902 270,497 Total cash and cash equivalents 122,150,398 74,229,758 47,920,641
Total current assets 370,813,596 335,268,295 35,545,302
D Prepayments and accrued income 3,824,427 2,876,785 947,642
Total assets 467,738,589 420,581,375 47,157,214
75 CONSOLIDATED BALANCE SHEET
Change Liabilities 31.12.2011 31.12.2010 YoY
A Consolidated shareholders' equity I Share capital, authorized, issued and outstanding 20,000,000 20,000,000 0 II Additional paid-in capital 0 0 0 III Revaluation reserve 0 0 0 IV Legal reserve 3,168,442 2,755,131 413,311 V Statutory reserves 0 0 0 VI Reserve for treasury stock owned 0 0 0 VII Other reserves: - extraordinary reserve 59,086,447 46,453,314 12,633,133 - reserve for foreign currency translation gains (losses) 1,318,130 129,221 1,188,908 - consolidation reserve 121,190 67,105 54,085 VIII Retained earnings 0 0 0 IX Group profit (loss) for the financial period 14,696,658 13,522,831 1,173,827 Total Group shareholders' equity 98,390,866 82,927,602 15,463,264 Minority share of equity 6,652,768 3,580,236 3,072,532 Minority share of profit (loss) 3,452,938 2,872,938 580,000 Total minorities’ equity 10,105,706 6,453,174 3,652,532
Total consolidated shareholders' equity 108,496,572 89,380,776 19,115,796
B Provision for contingencies and other liabilities 1 Provisions for pensions and similar obligations 432,713 380,454 52,259 2 Provision for taxation, included deferred tax 0 736,100 (736,100) 3 Other provisions 810,765 2,862,094 (2,051,329)
Total provisions for contingencies and other liabilities 1,243,478 3,978,648 (2,735,170)
C Employees' severance indemnity 4,988,502 4,598,777 389,725
D Debts and other payables 1 Debenture loans 0 0 0 2 Convertible debenture loans 0 0 0 3 Amounts owed to shareholders for loans 1,234,278 367,624 866,654 4 Amounts owed to banks a) falling due within 12 months 17,696,043 1,031,223 16,664,820 b) falling due beyond 12 months 17,662,008 5,006,277 12,655,731 Total 35,358,051 6,037,500 29,320,551 5 Amounts owed to other lenders amounts falling due within 12 months 517,039 492,757 24,282 amounts falling due beyond 12 months 5,694,922 6,221,764 (526,842) Total 6,211,961 6,714,521 (502,560) 6 Advances from customers 113,601,065 122,394,599 (8,793,533) 7 Amounts owed to suppliers 174,037,682 163,467,721 10,569,961 8 Debts represented by bills of exchange 0 0 0 9 Amounts owed to subsidiary companies 212,807 558,545 (345,738) 10 Amounts owed to associated companies 35,028 1,214,613 (1,179,585) 11 Amounts owed to parent companies 285,794 724,742 (438,948) 12 Amounts owed to the tax authority 6,378,388 5,842,830 535,558 13 Amounts owed to the social security institutions 1,718,770 1,232,613 486,157 14 Other payables 13,152,739 13,609,480 (456,741)
Total debts and other payables 352,226,563 322,164,788 30,061,775
E Accruals and deferred income 783,474 458,386 325,088
Total liabilities and consolidated shareholders' equity 467,738,589 420,581,375 47,157,214
76 Change Memorandum accounts 31.12.2011 31.12.2010 YoY
1 Guarantees a) Guarantees provided in favour of third parties a1) in favour of subsidiary companies 5,063,000 0 5,063,000 a2) in favour of associated companies 11,239,520 0 11,239,520 a3) in favour of other companies 0 0 0 Total 16,302,520 0 16,302,520 b) Guarantees issued by third parties on behalf of Group companies b1) banks 169,697,718 161,155,673 8,542,045 b2) insurance companies 71,515,391 102,929,861 (31,414,470) Total 241,213,109 264,085,534 (22,872,425)
Total Guarantees 257,515,629 264,085,534 (6,569,905)
Total memorandum accounts 257,515,629 264,085,534 (6,569,905)
77 CONSOLIDATED INCOME STATEMENT
Change Year 2011 Year 2010 YoY
A Value of production 1 Sales of goods and services 334,797,795 464,271,086 (129,473,291) 2 Change in finished goods and work in progress inventory 2,051,525 (3,610,672) 5,662,197 3 Change in contracts in progress 7,330,747 11,291,292 (3,960,545) 4 Work performed for own purposes and capitalised 2,299,828 1,098,529 1,201,299 5 Other revenues and income 8,986,908 9,558,295 (571,387)
Total value of production 355,466,803 482,608,530 (127,141,727)
B Costs of production 6 For raw materials, consumables and goods for sale 68,727,215 57,017,896 11,709,319 7 For services 180,226,897 327,833,261 (147,606,364) 8 For use of assets owned by others 6,193,732 4,885,359 1,308,374
9 For employees: a) wages and salaries 44,740,398 39,131,344 5,609,054 b) social security costs 8,641,223 8,306,046 335,177 c) employee severance indemnity 1,806,009 1,460,763 345,247 d) provision costs 0 0 0 e) other costs relating to employees 5,120,136 4,329,505 790,631 Total costs for employees 60,307,766 53,227,658 7,080,108
10 Valuation adjustments: a) amortization of intangible assets 2,110,658 889,512 1,221,146 b) depreciation of tangible assets 8,911,397 9,310,938 (399,541) c) writedown in the carrying value of non-current assets 0 0 0 d) allowance for doubtful accounts receivable included in current assets and other current assets 72,106 370,000 (297,895) Total valuation adjustments 11,094,160 10,570,450 523,710
11 Change in raw materials, consumables and goods for sale inventory 1,626,937 (2,605,631) 4,232,567 12 Amounts provided for contingencies 0 0 0 13 Other accruals 0 315,470 (315,470) 14 Other operating costs 8,713,610 6,510,585 2,203,026
Total costs of production 336,890,318 457,755,048 (120,864,730)
Operating margin (EBIT) (A-B) 18,576,485 24,853,482 (6,276,997)
C Financial income and expenses 15 Income from equity investments 1,691 1,690 1
16 Other financial income a) from accounts receivable included in non-current assets 55,484 212,517 (157,034) b) from other permanent investments which are non-current assets other than equity investments 132,987 188,640 (55,653) c) from other investments classified as current assets 0 0 0 d) other income 1,769,431 573,659 1,195,772 Total other financial income 1,957,902 974,816 983,086
17 Interest expenses and similar charges 1,213,340 706,602 506,738 17bis Foreign currency translation gains / (losses) 2,016,589 (1,034,094) 3,050,683
Total financial income and (expenses) 2,762,842 (764,190) 3,527,033
78 Change Year 2011 Year 2010 YoY
D Valuation adjustments in respect of investments 18 Revaluations: a) of equity investments 81,149 186,571 (105,422) b) of other non-current assets which are not equity investments 0 0 0 c) of non-perrnanent investments 0 0 0 Total 81,149 186,571 (105,422) 19 Devaluation: a) of equity investments 81,744 100,394 (18,650) b) of other non-current assets which are not equity investments 0 269,749 (269,749) c) of non-permanent investments 0 0 0 Total 81,744 370,143 (288,399)
Total valuation adjustments in respect of investment (595) (183,572) 182,977
E Extraordinary income and charges 20 Income a) realised gains from disposal of assets 423,080 447,398 (24,318) b) other extraordinary income 3,039,846 667,727 2,372,119 Total 3,462,926 1,115,125 2,347,801 21 Charges a) realised losses from disposal of assets 1,715 6,756 (5,041) b) other extraordinary losses and expenses 379,319 199,784 179,534 Total 381,034 206,540 174,493
Total extraordinary income and (charges) 3,081,892 908,585 2,173,307
Profit or (loss) before income taxes 24,420,624 24,814,305 (393,681)
22 Income taxes for the period a) current taxes 6,561,927 7,871,784 (1,309,857) b) deferred tax (assets) / liabilties (290,899) 546,752 (837,651) Total 6,271,029 8,418,537 (2,147,508)
Profit or (loss) for the financial period 18,149,596 16,395,769 1,753,827
Minority share of (profit) or loss for the financial period (3,452,938) (2,872,938) (580,000)
Consolidated Group profit or (loss) for the financial period 14,696,658 13,522,831 1,173,827
79 CASH FLOW STATEMENT
Year 2011 Year 2010 a) Cash flow from operations Group Profit for the financial period 14,696,658 13,522,831
Changes to adjust the profit for the financial period to the cash flow generated (utilised) by operating activities Minority share of profit 3,452,938 2,872,938 Depreciation and amortization 11,022,054 10,200,449 Provision for employees' severance indemnity 1,858,268 1,491,751 Drawing from employees' severance indemnity (1,416,284) (1,840,928) Change in net deferred tax assets/(liabilities) (3,104,350) 1,659,188 Net (Revaluation)/devaluation of investments 595 183,572 Provision/(drawing) for contingencies and other liabilities (2,051,329) (118,784) Allowance for doubtful accounts receivable included in current assets 72,106 370,000 Dividends from equity investments (1,691) (1,690) Realised losses from disposal of assets 173,612 357,790 Realised gains from disposal of assets (1,035,237) (1,498,730) sub total 23,667,340 27,198,386
Changes in working capital Decrease (Increase) in accounts receivable (excluded deferred tax asset) 35,824,744 (38,800,483) Decrease (Increase) in inventory (21,153,852) (8,723,536) Decrease (Increase) in prepayments and accrued income (947,642) (75,683) Increase (Decrease) in debts and other paybles 9,170,664 26,183,091 Increase (Decrease) in advances from customers (8,793,534) 16,187,237 Increase (Decrese) in accruals and deferred income 325,088 220,737 Total cash flow from operations 38,092,806 22,189,749 b) Cash flow from investing activities Fixed assets' additions (15,104,231) (25,380,419) Change in consolidation area: fixed assets (901,602) (1,720,044) Fixed assets' disposals 4,886,141 8,236,421 Intangible assets' additions (12,029,930) (771,829) Change in consolidation area: intangible assets (93,484) (1,837,162) Dividends from equity investments 1,691 1,690 Investments' additions (425,215) (192,986) Investments' disposals 2,843,620 846,707 Total cash flow from investing activities (20,823,010) (20,817,621) c) Cash flow from financing activities Increase (Decrease) in shareholders' loans 866,654 117,624 Increase (Decrease) in current and non current amounts due to banks and to other financiers 28,817,991 920,225 Dividends paid to shareholders 0 (5,000,000) Increase (Decrease) in minorities' equity 199,594 (748,306) Total cash flow from financing activities 29,884,239 (4,710,457) d) Increase (Decrease) in currency translation reserve of branch balances (476,388) 2,597,397 e) Increase (Decrease) in foreign currency translation reserve 1,188,908 104,687 f) Increase (Decrease) in consolidation reserve 54,085 0
Total cash flow 47,920,640 (636,245)
Cash and cash equivalents at the beginning of the financial period 74,229,758 74,866,003 Cash and cash equivalents at the end of the financial period 122,150,398 74,229,758 Changes in cash and cash equivalents during the financial period 47,920,641 (636,245)
80 APPENDICES
APPENDIX A
List of consolidated companies adopting the line-by-line method Pursuant to Art. 26 of Legislative Decree 127/91 (Art. 38, sub-section 2, point a) of Leg. Decree 127/91)
Corporate Name Based in Currency Share Ownership % Ownership % capital 2011 2010
Rizzani de Eccher Spa Pozzuolo del Friuli (UD) Euro 20,000,000 parent company parent company Codest International Srl Pozzuolo del Friuli (UD) Euro 10,400 98.00% 98.00% Codest Srl Pozzuolo del Friuli (UD) Euro 100,000 100.00% 100.00% Consorzio Codest Engineering Pozzuolo del Friuli (UD) Euro 53,000 98.42% 98.42% Cortelicini Srl Pozzuolo del Friuli (UD) Euro 98,000 98.00% 98.00% Deal Srl Pozzuolo del Friuli (UD) Euro 46,800 98.00% 98.00% de Eccher Agricola Srl Rivignano (UD) Euro 27,375 70.32% 70.32% Gabi Srl Pozzuolo del Friuli (UD) Euro 42,702 100.00% 100.00% IRIDE Srl (Imm. Rizzani de Eccher Srl) Pozzuolo del Friuli (UD) Euro 5,000,000 100.00% 51.00% Metrobus Scarl Pozzuolo del Friuli (UD) Euro 10,000 64.92% 64.92% Riflessi Srl Pozzuolo del Friuli (UD) Euro 10,200 60.00% 60.00% Sicea Srl Vigonza (PD) Euro 600,000 75.00% 75.00% Tensacciai Srl * Milano Euro 100,000 98.10% 0.00% Tesit Srl ** Milano Euro 104,000 98.00% 0.00% Torre Scarl Pozzuolo del Friuli (UD) Euro 10,000 70.00% 70.00% Codest Kazakhstan LLP *** Almaty (KZ) KZT 1,000,000 98.00% 98.00% Interbridge Technologies BV Hoofddorp (NL) Euro 50,000 51.00% 0.00% Rizzani de Eccher Australia Pty LTD Adelaide (AUS) AUD 1 100.00% 100.00% Rizzani de Eccher Canada Inc **** Vancouver (CDN) CAD 100 100.00% 100.00% Rizzani de Eccher RAK FZ-LLC Ras al Khaimah (UAE) AED 10,000,000 100.00% 100.00% Rizzani de Eccher Matta Sarl Beirut (LIB) LP 150,000,000 51.00% 51.00% Rizzani de Eccher USA Inc. * Miami (USA) USD 3,010,090 50.50% 50.50% Rizzani de Eccher Bahrain SPC Manama (Bahrain) BHD 500,000 100.00% 100.00% Mediterranea Lavori Marittimi Sarl ***** Beirut (LIB) LP 28,000,000 98.70% 98.70%
* Subsidiary company controlled with Deal Srl ** Subsidiary company of Deal Srl *** Subsidiary company of Codest International Srl **** The 50% participation in RSL JV is consolidated in the financial statements of Rizzani de Eccher Inc (Canada) ***** Subsidiary company controlled with Cortelicini Srl
APPENDIX B
List of consolidated companies adopting the proportional method Pursuant to Art. 37 of Legislative Decree 127/91 (Art. 38, sub-section 2, point b) of Leg. Decree 127/91)
Corporate Name Based in Currency Share Ownership % Ownership % capital 2011 2010
City Contractor Scarl Milano Euro 10,000 50.00% 0.00% Consorzio Mantegna Vigonza (PD) Euro 50,000 28.00% 28.00% Portocittà Spa Triest (TS) Euro 2,000,000 25.00% 25.00% San Giorgio Srl Mogliano Veneto (TV) Euro 10,000 49.99% 49.99% Treviso Maggiore Srl Ponzano Veneto (TV) Euro 12,000 33.33% 33.33% Tiliaventum Scarl Pozzuolo del Friuli (UD) Euro 10,000,000 50.00% 50.00% Pizzarotti-Rizzani de Eccher Saudi Arabia Ltd Riyadh (Arabia Saudita) SAR 10,000,000 50.00% 50.00% VFR Ltd Cipro CYP 5,000 33.33% 33.33%
83 APPENDIX C
List of subsidiary and associated companies consolidated by the equity method (Art. 38, sub-section 2, point c) of Leg. Decree 127/91)
Corporate Name Based in Currency Share Direct Group capital ownership % ownership %
de Eccher Interiors Srl Pozzuolo del Friuli (UD) Euro 100,000 20.00% 20.00% Associated company through Deal Srl Padova Euro 100,000 - 30.58% Futura Srl Brescia Euro 2,500,000 20.00% 20.00% VSL - Rizzani de Eccher JV Berna (CH) CHF 100,000 45.00% 45.00% Rizzani de Eccher Doo Rijeka (HR) HRK 20,000 90.00% 90.00%
List of subsidiary and associated companies under the cost method (Art. 38, sub-section 2, point d) of Leg. Decree 127/91)
Corporate Name Based in Currency Share Direct Group Reason of esclusion capital ownership ownership from consolidation area % %
Consorzio RdE America Centrale Pozzuolo del Friuli (UD) Euro 53,000 98.42% 99.97% Art. 28 sub. 2 point a) Leg. Decree 127/91 Peloritani Scarl (under liq.) Pozzuolo del Friuli (UD) Euro 10,000 64.15% 64.15% Art. 28 sub. 2 point a) Leg. Decree 127/91 Prospettive Immobiliari Srl (under liq.) Triest Euro 50,000 60.00% 60.00% Art. 28 sub. 2 point a) Leg. Decree 127/91 Safau Iniziative Srl Pozzuolo del Friuli (UD) Euro 10,000 100.00% 100.00% Art. 28 sub. 2 point a) Leg. Decree 127/91 Sinedil Srl Trento Euro 50,000 50.00% 99.00% Art. 28 sub. 2 point a) Leg. Decree 127/91 Store 26 Scarl Vicenza Euro 10,000 50.00% 50.00% Art. 28 sub. 2 point a) Leg. Decree 127/91 Risalto Srl (under liq.) Rome Euro 88,917 33.33% 33.33% Art. 28 sub. 2 point a) Leg. Decree 127/91 Variante di Valico Scarl (under liq.) Rome Euro 90,000 33.33% 33.33% Art. 28 sub. 2 point a) Leg. Decree 127/91 Volturno Scarl (under liq.) Pozzuolo del Friuli (UD) Euro 10,000 75.00% 75.00% Art. 28 sub. 2 point a) Leg. Decree 127/91 OOO Koruss Moscow RUB 100,000 100.00% 100.00% Art. 28 sub. 2 point a) Leg. Decree 127/91 Codruss Moscow RUB 55,000 - 98.42% Art. 28 sub. 2 point a) Leg. Decree 127/91 Consorzio Libya Green Way Milano Euro 100,000 24.50% 24.50% Art. 28 sub. 2 point a) Leg. Decree 127/91
84 APPENDIX D
Schedule of intangible assets 31.12.2010 Change in Increase Effects for currency Amortization 31.12.2011 consolidation (decrease) translation and area reclassification Formation and start up City Contractor Scarl - 600 - - (300) 300 Codest Srl 1,923 - - - (481) 1,442 de Eccher Agricola Srl 1,524 - - - (508) 1,016 Gabi Srl 1,410 (1,410) - - - - IRIDE Srl (Imm.Rizzani de Eccher Srl) 600 - 11,346 - (2,569) 9,377 Portocittà Spa 1,900 - - - (475) 1,425 RdE Matta Scarl 12,272 - - 160 (2,941) 9,491 Sicea Srl - - 4,150 - (830) 3,320 Tesit Srl - 1,199 8,082 - (3,961) 5,320 Tensacciai Srl - - 25,304 - (5,061) 20,243 Tiliaventum Scarl 2,456 - - - (614) 1,842 Torre Scarl 1,600 - - - (400) 1,200 Treviso Maggiore Srl - 123,998 75,549 - (179,694) 19,853 Sub- total 23,685 124,387 124,431 160 (197,834) 74,828
Goodwill Rizzani de Eccher Spa 200,000 - - - (100,000) 100,000 Tensacciai Srl - - 400,000 - (40,000) 360,000 Sub- total 200,000 - 400,000 - (140,000) 460,000
Patents and rights to use patents of others Deal Srl - - 850,000 - (170,000) 680,000 City Contractor Scarl - 80,836 12,293 - (31,536) 61,593 Tesit Srl - 1,845 - - (275) 1,570 Sub- total - 82,681 862,293 - (201,811) 743,163
Concessions, licences, trademarks and similar rights Deal Srl - - 50,000 - (2,778) 47,222 Sub- total - - 50,000 - (2,778) 47,222
Other Codest Kazakhstan LLP 758 - - 157 (244) 671 Deal Srl 18,887 - 10,849 - (13,057) 16,679 Gabi Srl 9,023 1,410 - - (3,478) 6,955 Mediterranea Lavori Marittimi Sarl - 834 - - (172) 662 Portocittà Spa 243,215 - 3,088 - (61,421) 184,881 Rizzani de Eccher Spa 1,766,941 - 1,285,211 737 (365,556) 2,687,333 Rizzani de Eccher Matta - Sarl 7,186 - - 72 (1,697) 5,561 Rizzani de Eccher RAK FZ LLC 53,063 - - (2,495) (50,568) - Rizzani de Eccher USA Inc 13,568 - 14,028 (6,993) - 20,603 San Giorgio Srl - - 5,976 - (120) 5,856 Sicea Srl 145 - - - (145) - Tensacciai Srl - 8,100 27,673 102,245 (7,235) 130,783 Tiliaventum Scarl 51,000 - 182,618 - - 233,618 Torre Scarl 1,358,553 - 8,969,881 - (1,064,542) 9,263,891 Treviso Maggiore Srl 123,927 (123,927) - - - - Sub- total 3,646,267 (113,583) 10,499,323 93,723 (1,568,235) 12,557,493
Total intangible assets Formation and start up 23,685 124,387 124,431 160 (197,834) 74,828 Goodwill 200,000 - 400,000 - (140,000) 460,000 Patents and rights to use patents of others - 82,681 862,293 - (201,811) 743,163 Concessions, licences, trademarks and similar rights - - 50,000 - (2,778) 47,222 Other 3,646,267 (113,583) 10,499,323 93,723 (1,568,235) 12,557,493 Total 3,869,952 93,484 11,936,047 93,883 (2,110,658) 13,882,706
85 APPENDIX E 31.12.2010 Change in Increase Decrease 31.12.2011 Schedule of fixed assets consolidation and area reclassification Land and buildings de Eccher Agricola Srl 5,320,145 - 11,369 - 5,331,514 IRIDE Srl (Imm.Rizzani de Eccher Srl) - - - 20,555,890 20,555,890 Rizzani de Eccher Spa 44,848,809 - 164,633 (21,952,380) 23,061,062 Rizzani de Eccher USA Inc 655,392 - - 21,426 676,818 Sicea Srl 478,789 - 9,626 - 488,415 Sub-total 51,303,135 - 185,628 (1,375,064) 50,113,699
Plant and machinery City Contractor Scarl - 57,620 6,733 - 64,353 Codest International Srl 4,780,269 - 11,531 (2,674,509) 2,117,291 Codest Kazakhstan LLP 1,453,806 - 810 (1,038,202) 416,414 Consorzio Codest Engineering 123,045 - - (99,459) 23,586 Deal Srl 1,490,594 - 885,745 - 2,376,339 de Eccher Agricola Srl 2,177,344 - 46,679 - 2,224,023 Metrobus Scarl 14,418 - - - 14,418 Pizzarotti RdE Saudi Arabia - - 3,880 - 3,880 Rizzani de Eccher Bahrain SPC 21,402 3,424 1,058,159 (24,543) 1,058,442 Rizzani de Eccher - Matta Sarl 1,051,078 - 49,334 32,742 1,133,154 Rizzani de Eccher Spa 12,257,512 - 3,112,900 (106,206) 15,264,206 Rizzani de Eccher USA Inc 7,623,227 - 3,520,528 (1,795,644) 9,348,111 Sicea Srl 2,641 - - - 2,641 Tensacciai Srl - 2,170,324 - - 2,170,324 Tesit Srl - 456,826 - (14,607) 442,219 Torre Scarl 45,313 - 3,370,184 - 3,415,497 Treviso Maggiore Srl 454,202 - - (349,152) 105,050 VFR Ltd 369,524 - - - 369,524 Sub-total 31,864,376 2,688,194 12,066,483 (6,069,580) 40,549,473
Tools, fittings, furniture, fixtures and other equipment Codest International Srl 1,360,292 - - (269,153) 1,091,139 Consorzio Codest Engineering 78,468 - - (63,284) 15,184 Codest Kazakhstan LLP 2,084,197 - 1,236 (436,833) 1,648,600 Deal Srl 113,485 - 33,440 (30,500) 116,425 de Eccher Agricola Srl - 18,058 - - 18,058 Interbridge Technologies B.V. - 13,190 - - 13,190 Metrobus Scarl 34,203 - - - 34,203 Pizzarotti RdE Saudi Arabia - - 509 - 509 Rizzani de Eccher Bahrain SPC 14,399 (3,424) 835,518 (358,397) 488,096 Rizzani de Eccher - Matta Sarl 405,390 - 22,652 12,628 440,670 Rizzani de Eccher Spa 7,755,505 - 624,811 (888,199) 7,492,117 Rizzani de Eccher USA Inc 1,175,420 - 348,708 19,048 1,543,176 Sicea Srl 22,628 - - - 22,628 Tesit Srl - 91,845 2,607 - 94,452 Tensacciai Srl - 446,942 - - 446,942 Torre Scarl 502,455 - 415,949 - 918,404 Treviso Maggiore Srl 47,091 - - (38,123) 8,968 Sub-total 13,593,533 566,611 2,285,430 (2,052,813) 14,392,761
Other City Contractor Scarl - 158,708 21,203 - 179,911 Codest International Srl 207,796 - - (77,358) 130,438 Codest Kazakhstan LLP 5,390 - 4,422 (973) 8,839 Consorzio Codest Engineering 23,081 - - (52) 23,029 Deal Srl 62,623 - - - 62,623 de Eccher Agricola Srl 21,769 (18,058) - - 3,711 Metrobus Scarl 6,630 - - - 6,630 Mediterranea Lavori Marittimi Sarl 897 - - (897) - Portocittà Spa - - 29,693 - 29,693 Rizzani de Eccher RAK FZ LLC 48,429 - - 797 49,226 Rizzani de Eccher - Matta Sarl 82,615 - 8,572 2,537 93,724 Rizzani de Eccher Spa 1,785,739 - 344,599 (99,464) 2,030,874 Rizzani de Eccher USA Inc 62,847 - 45,548 1,437 109,832 Sicea Srl 234,725 - - (96) 234,629 Tesit Srl - 99,632 1,333 - 100,965 Tensacciai Srl - 291,742 - - 291,742 Torre Scarl 207,536 - 27,571 - 235,107 Treviso Maggiore Srl 25,175 - - - 25,175 Sub-total 2,775,252 532,024 482,941 (174,069) 3,616,147
Tangible assets in course of construction and payments on IRIDE Srl (Imm.Rizzani de Eccher Srl) 58,501 - - - 58,501 Portocittà Spa 56,513 - 83,750 - 140,263 Sub-total 115,014 - 83,750 - 198,764
Total fixed assets Land and buildings 51,303,135 - 185,628 (1,375,064) 50,113,699 Plant and machinery 31,864,377 2,688,194 12,066,483 (6,069,580) 40,549,473 Tools, fittings, furniture, fixtures and other equipment 13,593,532 566,611 2,285,430 (2,052,813) 14,392,761 Other 2,775,251 532,024 482,941 (174,069) 3,616,147 Tangible assets in course of construction and payments on 115,014 - 83,750 - 198,764
Total 99,651,309 3,786,829 15,104,231 (9,671,526) 108,870,843
Note: the effect of currency translation is included in the Decrease column 86 APPENDIX E Accumulated Change in Depreciation Draw-down Accumulated Total net Schedule of fixed assets depreciation consolidation depreciation fixed assets 31.12.2010 area 31.12. 2011 2011 Land and buildings de Eccher Agricola Srl - - - - - 5,331,514 IRIDE Srl (Imm.Rizzani de Eccher Srl) - - (87,810) - (87,810) 20,468,080 Rizzani de Eccher Spa (3,720,025) - (1,042,388) 1,396,490 (3,365,923) 19,695,139 Rizzani de Eccher USA Inc (452,250) - (195,005) (29,564) (676,819) (0) Sicea Srl (162,686) - (12,184) - (174,870) 313,545 Sub-total (4,334,960) - (1,337,387) 1,366,926 (4,305,421) 45,808,278
Plant and machinery City Contractor Scarl - - (6,412) - (6,412) 57,941 Codest International Srl (2,143,973) - (273,720) 889,661 (1,528,032) 589,259 Codest Kazakhstan LLP (1,387,788) - (240,528) 1,245,893 (382,423) 33,991 Consorzio Codest Engineering (60,248) - (2,721) 42,964 (20,005) 3,581 Deal Srl (1,075,159) - (135,468) - (1,210,627) 1,165,712 de Eccher Agricola Srl (977,108) - (103,281) - (1,080,389) 1,143,634 Metrobus Scarl (12,953) - (690) - (13,643) 775 Pizzarotti RdE Saudi Arabia - - (42) (3) (45) 3,835 Rizzani de Eccher Bahrain SPC - (2,274) (397,242) 1,543 (397,973) 660,469 Rizzani de Eccher - Matta Sarl (46,571) - (77,151) (14,010) (137,732) 995,423 Rizzani de Eccher Spa (6,865,007) - (1,175,961) 54,244 (7,986,724) 7,277,482 Rizzani de Eccher USA Inc (3,144,749) - (2,616,110) 942,206 (4,818,653) 4,529,457 Sicea Srl (1,971) - (225) - (2,196) 445 Tensacciai Srl - (1,761,571) (24,151) - (1,785,722) 384,602 Tesit Srl - (309,577) (25,911) 1,342 (334,146) 108,073 Torre Scarl (2,316) - (317,016) - (319,332) 3,096,165 Treviso Maggiore Srl (156,181) - (10,590) 118,083 (48,689) 56,363 VFR Ltd (369,524) - - - (369,524) - Sub-total (16,243,548) (2,073,422) (5,407,219) 3,281,922 (20,442,267) 20,107,206
Tools, fittings, furniture, fixtures and other equipment Codest International Srl (954,095) - (75,681) 214,120 (815,656) 275,483 Consorzio Codest Engineering (66,866) - (558) 52,826 (14,598) 586 Codest Kazakhstan LLP (1,117,981) - (165,281) 160,279 (1,122,983) 525,617 Deal Srl (94,683) - (6,875) 21,350 (80,208) 36,217 de Eccher Agricola Srl - (3,386) (2,257) - (5,643) 12,415 Interbridge Technologies B.V. - - (1,697) - (1,697) 11,493 Metrobus Scarl (30,181) - (2,681) - (32,862) 1,341 Pizzarotti RdE Saudi Arabia - - (34) (3) (37) 472 Rizzani de Eccher Bahrain SPC (4,155) 2,274 (636) 416 (2,101) 485,995 Rizzani de Eccher - Matta Sarl (25,922) - (34,180) (3,398) (63,500) 377,170 Rizzani de Eccher Spa (4,296,460) - (1,051,653) 360,318 (4,987,795) 2,504,322 Rizzani de Eccher USA Inc (320,746) - (407,273) - (728,019) 815,157 Sicea Srl (22,369) - (172) - (22,541) 86 Tesit Srl - (89,508) (2,001) - (91,509) 2,943 Tensacciai Srl - (431,192) (1,724) - (432,916) 14,026 Torre Scarl (31,582) - (89,161) - (120,743) 797,661 Treviso Maggiore Srl (34,759) - (378) 27,949 (7,189) 1,779 Sub-total (6,999,799) (521,812) (1,842,242) 833,856 (8,529,997) 5,862,764
Other City Contractor Scarl - - (61,171) - (61,171) 118,740 Codest International Srl (167,919) - (11,212) 67,095 (112,036) 18,402 Codest Kazakhstan LLP (3,939) - (1,577) 1,123 (4,393) 4,446 Consorzio Codest Engineering (14,807) - (2,924) 34 (17,697) 5,332 Deal Srl (62,404) - (146) - (62,550) 73 de Eccher Agricola Srl (6,536) 3,386 (112) - (3,262) 448 Metrobus Scarl (6,630) - - - (6,630) - Mediterranea Lavori Marittimi Sarl (75) - - 75 - - Portocittà Spa - - (1,557) - (1,557) 28,136 Rizzani de Eccher RAK FZ LLC (19,999) - (10,623) (1,184) (31,806) 17,420 Rizzani de Eccher - Matta Sarl (9,564) - (13,354) (1,274) (24,192) 69,532 Rizzani de Eccher Spa (1,386,446) - (138,226) 98,440 (1,426,232) 604,642 Rizzani de Eccher USA Inc (23,134) - (22,446) - (45,580) 64,251 Sicea Srl (224,977) - (4,192) - (229,169) 5,460 Tesit Srl - (46,269) (12,293) - (58,562) 42,404 Tensacciai Srl - (247,110) (4,846) - (251,956) 39,786 Torre Scarl (17,711) - (36,730) - (54,441) 180,667 Treviso Maggiore Srl (10,593) - (3,140) - (13,733) 11,442 Sub-total (1,954,733) (289,993) (324,549) 164,309 (2,404,966) 1,211,180
Tangible assets in course of construction and payments on IRIDE Srl (Imm.Rizzani de Eccher Srl) - - - - - 58,501 Portocittà Spa - - - - - 140,263 Sub-total - - - - - 198,764
Total fixed assets Land and buildings (4,334,960) - (1,337,387) 1,366,926 (4,305,421) 45,808,278 Plant and machinery (16,243,548) (2,073,422) (5,407,219) 3,281,921 (20,442,267) 20,107,206 Tools, fittings, furniture, fixtures and other equipment (6,999,799) (521,812) (1,842,242) 833,855 (8,529,997) 5,862,764 Other (1,954,733) (289,993) (324,549) 164,309 (2,404,966) 1,211,180 Tangible assets in course of construction and payments on - - - - - 198,764
Total (29,533,040) (2,885,227) (8,911,397) 5,647,010 (35,682,652) 73,188,191
87 APPENDIX F
Schedule of changes in consolidated shareholders' equity Foreign Total Minority Total currency Group Group share of consolidated Share Legal Consolidation translation Extraordinary profit sharholders' equity shareholders' capital reserve reserve reserve reserve (loss) equity and profit equity
Situation as of 31st December 2009 20,000,000 2,000,000 67,105 20,197 34,113,423 15,497,625 71,698,349 4,332,879 76,031,228
Allocation of profit for the year 2009 - 755,131 - - 14,742,494 (15,497,625) - - - Dividends distribution - - - - (5,000,000) - (5,000,000) - (5,000,000) Change in consolidation area ------(748,306) (748,306) Foreign currency translation gain (loss) of branch balances - - - - 2,597,397 - 2,597,397 - 2,597,397 Gain (loss) on foreign currency translation - - - 109,024 - - 109,024 (4,337) 104,687 Profit (loss) for the financial period - - - - - 13,522,831 13,522,831 2,872,938 16,395,769
Situation as of 31st December 2010 20,000,000 2,755,131 67,105 129,221 46,453,314 13,522,831 82,927,602 6,453,174 89,380,776
Allocation of profit for the year 2010 - 413,310 - - 13,109,521 (13,522,831) - - - Change in consolidation area - - 54,085 - - - 54,085 (171,821) (117,736) Foreign currency translation gain (loss) of branch balances - - - - (476,388) - (476,388) - (476,388) Gain (loss) on foreign currency translation - - - 1,188,908 - - 1,188,908 371,415 1,560,323 Profit (loss) for the financial period - - - - - 14,696,658 14,696,658 3,452,938 18,149,596
Situation as of 31st December 2011 20,000,000 3,168,441 121,190 1,318,129 59,086,447 14,696,658 98,390,866 10,105,706 108,496,572
APPENDIX G
Reconciliation between parent company and consolidated accounts
Shareholders' Profit Shareholders' Profit equity (loss) equity (loss) Thousand of Euro 2011 2011 2010 2010
Statutory financial statements of the parent company 67,636 737 67,853 8,266
Off-set of consolidated equity investments difference between book value of equity investments and net assets value 9,961 - 2,111 20 consolidation differences 408 (241) 348 (32) allocation of differential between purchase price and pro rata share of net assets value 2,357 - 2,357 - foreign currency translation differences 1,318 - 129 - pro rata share of profit of consolidated companies 16,431 16,431 14,014 14,014 write-down / write-up on investements in consolidated companies - - (2,786) (2,786)
Off-set of related party transactions capital gains/losses and intercompany profit (836) 1,024 (1,860) (819) dividends distribution including currency translation gains or losses - (3,248) - (5,086)
Adjustment due to consolidation accounting principles foreign currency translation gain (loss) of branch balances (494) - (646) -
Other adjustments valuation of investments due to application of equity method 1,243 (207) 1,450 (219) valuation of leasing contract 367 202 165 165
Total Group consolidated shareholders' equity 98,391 14,698 83,135 13,523
Minority share of equity and profit 10,106 3,452 6,453 2,873
Total consolidated shareholders' equity 108,497 18,150 89,588 16,396
88 STATUTORY FINANCIAL STATEMENTS OF THE PARENT COMPANY STATUTORY BALANCE SHEET
Change Assets 31.12.2011 31.12.2010 YoY
A Receivable from shareholders for capital stock Shares not called up 0 0 0 Shares already called up 0 0 0
Total receivable from shareholders for capital stock 0 0 0
B Non current assets
I) Intangible assets 1 Formation and start up 0 0 0 2 Costs of research, development and advertising 0 0 0 3 Patents and rights to use patents of others 0 0 0 4 Concessions, licences, trademarks and similar rights 0 0 0 5 Goodwill 100,000 200,000 (100,000) 6 Intangible assets in progress and payments on account 0 0 0 7 Other 2,473,944 1,511,722 962,222 Total intangibles assets 2,573,944 1,711,722 862,222
II) Fixed assets 1 Land and buildings 6,839,481 27,938,076 (21,098,595) 2 Plant and machinery 7,277,482 5,478,105 1,799,377 3 Tools, fittings, furniture, fixtures and other equipment 2,504,322 3,459,045 (954,723) 4 Other 604,642 399,049 205,593 5 Tangible assets in course of construction and payments on 0 2,660,642 (2,660,642) Total fixed assets 17,225,927 39,934,917 (22,708,990)
III) Investments 1 Equity investments in: a) subsidiary companies 32,988,487 18,198,959 14,789,528 b) associated companies 7,528,415 7,254,063 274,352 c) other companies 159,974 187,754 (27,780) Total 40,676,876 25,640,776 15,036,100 2 Accounts receivable due from: a) subsidiary companies 2,959,188 1,963,917 995,271 b) associated companies 0 69,605 (69,605) c) parent company 0 0 0 d) others company 327,245 603,503 (276,258) Total 3,286,433 2,637,025 649,408 3 Other investments 98,155 64,414 33,741 4 Treasury stock 0 0 0 Total investments 44,061,464 28,342,215 15,719,249
Total non current assets 63,861,335 69,988,854 (6,127,519)
90 Change Assets 31.12.2011 31.12.2010 YoY
C Current assets
I) Inventory 1 Raw materials and consumables 2,248,489 5,444,828 (3,196,339) 2 Work in progress and components 2,489,112 7,450,213 (4,961,101) 3 Contracts in progress 19,015,702 7,741,127 11,274,575 4 Finished goods and goods for resale 1,722,260 3,000,610 (1,278,350) 5 Advances to suppliers 2,718,486 3,562,220 (843,734) Total inventory 28,194,049 27,198,998 995,051
II) Accounts receivable 1 Trade receivables a) amounts falling due within 12 months 77,753,708 116,315,244 (38,561,536) b) amounts falling due beyond 12 months 0 0 0 Total 77,753,708 116,315,244 (38,561,536) 2 Receivable from subsidiary companies 8,116,699 8,048,981 67,718 3 Receivable from associated companies 1,184,564 2,223,758 (1,039,194) 4 Receivable from parent companies 1,137 1,141 (4) 4bis Tax credits 4,840,918 5,264,525 (423,607) 4ter Deferred tax asset 3,011,941 8,817 3,003,124 5 Others 1,708,617 1,821,080 (112,463) Total accounts receivable 96,617,584 133,683,546 (37,065,962)
III) Investments 1 Subsidiary companies 0 0 0 2 Associated companies 0 0 0 3 Other companies 0 0 0 4 Treasury stock 0 0 0 5 Other investments 0 0 0 Total investments 0 0 0
IV) Cash and cash equivalents 1 Bank and postal current accounts 85,370,113 40,815,163 44,554,950 2 Checks deposited 0 0 0 3 Cash on hand 70,361 48,151 22,210 Total cash and cash equivalents 85,440,474 40,863,314 44,577,160
Total current assets 210,252,107 201,745,858 8,506,249
D Prepayments and accrued income 1,977,290 2,791,570 (814,280)
Total assets 276,090,732 274,526,282 1,564,450
91 STATUTORY BALANCE SHEET
Change Liabilities 31.12.2011 31.12.2010 YoY
A Shareholders’ equity I Share capital, authorized, issued and outstanding 20,000,000 20,000,000 0 II Additional paid-in capital 0 0 0 III Revaluation reserve 0 0 0 IV Legal reserve 3,168,442 2,755,131 413,311 V Statutory reserves 0 0 0 VI Reserve for treasury stock owned 0 0 0 VII Other reserves 44,057,107 36,831,172 7,225,935 VIII Retained earnings 0 0 0 IX Profits (loss) for the financial period 737,147 8,266,209 (7,529,062)
Total shareholders' equity 67,962,696 67,852,512 110,184
B Provision for contingencies and other liabilities 1 Provisions for pensions and similar obligations 0 0 0 2 Provision for taxation, included deferred tax 0 0 0 3 Other provisions 0 0 0
Total provisions for contingencies and other liabilities 0 0 0
C Employees' severance indemnity 2,662,815 2,825,082 (162,267)
D Debts and other payables 1 Debenture loans 0 0 0 2 Convertible debenture loans 0 0 0 3 Amounts owed to shareholders for loans 0 0 0 4 Amounts owed to banks a) falling due within 12 months 1,089,606 671,761 417,845 b) falling due beyond 12 months 348,928 4,033,777 (3,684,849) Total 1,438,534 4,705,538 (3,267,004) 5 Amounts owed to other lenders 0 0 0 6 Advances from customers 60,249,023 44,657,867 15,591,156 7 Amounts owed to suppliers 92,671,437 117,643,894 (24,972,457) 8 Debts represented by bills of exchange 0 0 0 9 Amounts owed to subsidiary companies 21,547,528 18,967,571 2,579,957 10 Amounts owed to associated companies 18,626,258 4,984,205 13,642,053 11 Amounts owed to parent companies 127,258 527,690 (400,432) 12 Amounts owed to the tax authority 1,551,665 923,889 627,776 13 Amounts owed to the social security institutions 821,560 810,686 10,874 14 Other payables 7,981,778 10,470,194 (2,488,416)
Total debts and other payables 205,015,041 203,691,533 1,323,508
E Accruals and deferred income 450,180 157,154 293,026
Total liabilities and shareholders' equity 276,090,732 274,526,282 1,564,450
92 Change Memorandum accounts 31.12.2011 31.12.2010 YoY
1 Guarantees a) in favour of subsidiary and associated companies 143,094,633 183,965,865 (40,871,232) b) issued by third parties in favour of the company 151,356,811 159,033,917 (7,677,106) 2 Commitments, Futures a) outstanding leasing obligations 0 6,714,521 (6,714,521)
Total memorandum accounts 294,451,444 349,714,303 (55,262,859)
93 STATUTORY INCOME STATEMENT
Change Year 2011 Year 2010 YoY
A Value of production 1 Sales of goods and services 149,475,319 282,084,753 (132,609,434) 2 Change in finished goods and work in progress inventory 2,210,436 2,334,464 (124,028) 3 Change in contracts in progress 11,274,487 2,704,502 8,569,985 4 Work performed for own purposes and capitalised 1,602,114 547,214 1,054,900 5 Other revenues and income 4,365,697 4,203,752 161,945
Total value of production 168,928,053 291,874,685 (122,946,632)
B Costs of production 6 For raw materials, consumables and goods for sale 17,808,712 15,811,034 1,997,678 7 For services 117,440,141 245,545,027 (128,104,886) 8 For use of assets owned by others 1,493,390 1,705,012 (211,622)
9 For employees: a) wages and salaries 16,696,078 16,150,984 545,094 b) social security costs 4,824,454 4,825,323 (869) c) employee severance indemnity 1,109,828 998,488 111,340 d) provision costs 0 0 0 e) other costs relating to employees 2,603,218 2,454,682 148,536 Total costs for employees 25,233,578 24,429,477 804,101
10 Valuation adjustments: a) amortization of intangible assets 423,388 364,287 59,101 b) depreciation of tangible assets 3,186,756 3,146,391 40,365 c) writedown in the carrying value of non current assets 0 0 0 d) allowance for doubtful accounts receivable included in current assets and other current assets 0 370,000 (370,000) Total valuation adjustments 3,610,144 3,880,678 (270,534)
11 Change in raw materials, consumables and goods for sale inventory 3,208,250 (4,328,126) 7,536,376 12 Amounts provided for contingencies 0 0 0 13 Other accruals 0 0 0 14 Other operating costs 6,149,857 4,093,867 2,055,990
Total costs of production 174,944,072 291,136,969 (116,192,897)
Operating margin (EBIT) (A-B) (6,016,019) 737,716 (6,753,735)
C Financial income and expenses 15 Income from equity investments 3,272,163 5,261,451 (1,989,288)
16 Other financial income: a) from accounts receivable included in non-current assets 45,816 12,557 33,259 b) from other permanent investments which are non-current assets other than equity investments 0 0 0 c) from other investments classified as current assets 0 0 0 d) other income 1,460,135 628,542 831,593 Total other financial income 1,505,951 641,099 864,852
17 Interest expenses and similar charges 623,263 412,822 210,441 17bis Foreign currency translation gains and (losses) 1,397,433 (30,307) 1,427,740
Total financial income and (expenses) 5,552,284 5,459,421 92,863
94 Change Year 2011 Year 2010 YoY
D Valuation adjustments in respect of investments 18 Revaluations: a) of equity investments 0 3,873,729 (3,873,729) b) of other non-current assets which are not equity investments 0 0 0 c) of non-perrnanent investments 0 0 0 Total 0 3,873,729 (3,873,729) 19 Devaluation: a) of equity investments 27,779 73,385 (45,606) b) of other non-current assets which are not equity investments 0 214,547 (214,547) c) of non-permanent investments 0 0 0 Total 27,779 287,932 (260,153)
Total valuation adjustments in respect of investment (27,779) 3,585,797 (3,613,576)
E Extraordinary income and charges 20 Income 990,254 400,729 589,525 21 Charges 18,152 111,400 (93,248)
Total extraordinary income and (charges) 972,102 289,329 682,773
Profit or (loss) before income taxes 480,588 10,072,263 (9,591,675)
22 Income taxes for the period a) current taxes (24,103) 2,056,233 (2,080,336) b) deferred tax (assets) / liabilties (232,456) (250,179) 17,723 Total (256,559) 1,806,054 (2,062,613)
Profit or (loss) for the financial period 737,147 8,266,209 (7,529,062)
95 © Rizzani de Eccher Spa Graphic design: Polystudio Francesco Messina with Francesca Zucchi Photos: Archive Rizzani de Eccher, Printed: GFP.it July 2012
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