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MANAGEMENT REPORT // 01 MARTIFER GROUP Highlights Key Financial Indicators Main Events Main Posterior Events
02 FINANCIAL PERFORMANCE Consolidated Results Analysis Revenues EBITDA and Net Profit Consolidated Capex Consolidated Capital Structure Analysis
03 ANALYSIS BY SEGMENT Metallic Constructions Naval Industry Renewables
04 MARTIFER SHARE PERFORMANCE
05 FUTURE PROSPECTS
// MANDATORY INFORMATION
// INTERIM CONSOLIDATED FINANCIAL INFORMATION 06 INTERIM CONSOLIDATED FINANCIAL STATEMENTS
07 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE: This translation into English of the Portuguese document was made only for the convenience of non-Portuguese speaking shareholders. For all intents and purposes, the Portuguese version shall prevail.
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01 | MARTIFER GROUP
HIGHLIGHTS
Revenues reached 96.5 M€ in the 1st half
Positive EBITDA of 3 M€ with a 3.2 % margin
Net Profit attributable to shareholders of 5.7 M€ (which compares with -3.2 M€ YOY)
Net Debt decreased 29 M€ compared with December 2016 to 207 M€
Order Book in Metallic Constructions and Naval Industry registered an YTD growth to 292 M€ and the Naval Industry segment represents 34 %
MAIN FINANCIAL INDICATORS
M€ JUNE -17 JUNE -16 VAR.%
Revenues 96.5 106.8 -10% EBITDA 3.0 4.4 -33% EBITDA margin 3.2% 4.5% -1.3 pp Depreciation & Amortization -5.1 -5.6 10% Provisions & Impairment Losses -10.4 -0.7 <-100% EBIT -12.6 -1.9 <-100% EBIT margin -13.4% -1.9% -11.5 pp Financial Results 18.5 0.1 >100% Profit before taxes 5.9 -1.8 n.m. Income tax -1.4 -1.2 -22% Profit after taxes on continued operations 4.5 -3.0 n.m. Discontinued operations results 0.0 -3.7 n.m. Attributable to non-controlling interests 0.0 -1.7 n.m. Attributable to shareholders 0.0 -1.9 n.m. Net Profit 4.5 -6.6 n.m. Attributable to non-controlling interests -1.2 -3.4 65% Attributable to shareholders 5.7 -3.2 n.m. Earnings per share 0.058 -0.033 n.m.
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MAIN EVENTS
JANUARY 2017
Construction of the new Midland Metropolitan Hospital
Martifer is participating in the construction of one of the most innovative health infrastructure projects in the United Kingdom, the new Midland Metropolitan Hospital. Located in Sandwell, west of Birmingham, it occupies an area of 6.76 hectares and, it will start operating in 2018.
With architecture by Edward William Architects office, this hospital is designed in 3 levels, each one corresponding to functionality: the upper part includes the nursing areas, the middle the clinical areas and finally, the lower floor, the car parks. Its interior has several squares and gardens providing natural lighting in most of the facilities.
Martifer has been part of the project since July 2016 and has the responsibility of providing, transporting and installing 16,500 sqm of modular podium facades, with terracotta and wooden coating in the nursing wards.
Remodelling Al Faisaliah Shopping Centre
With Al Khozama Management Company as its Client, Martifer participates in the remodelling of the Al Faisaliah Shopping Centre in Riyadh, Saudi Arabia, being responsible for the supply and assembly of 510 tonnes of metal structure, 4,300 sqm of glass facades and 3,900 sqm of stainless steel coating.
Award of the construction of a Suction Dredger to West Sea
West Sea was awarded the construction of a Trailing Split Suction Hoper Dredger, 70.25 metres long, with a 11.40 metre beam and a 4 metre draught. Reaching a speed of 9 knots, the ship will have a load capacity of 1,001 cubic metres and a maximum depth of dredging of -40 metres.
MARCH 2017
Delivery of Douro Elegance and Douro Serenity hotel ships
West Sea delivered to Douro Azul two hotel ships that were baptized as Douro Elegance and as Douro Serenity. The baptism gala was held at the Pier of Gaia and Joss Stone and Sara Sampaio were the godmothers of the hotel ships. The party, with about 200 guests, included music, a multimedia and fireworks show in an evening full of glamour, which ended with a concert by Joss Stone. The presence of national and international public figures led to a great coverage by the media, from TV and general newspapers to magazines and channels dedicated to social life and fashion.
With these two ships, plus the Emerald Radiance ship delivered in April to Scenic Cruises, West Sea and Navalria have 10 hotel ships sailing in the Douro River (8 for Douro Azul and 2 for Scenic Cruises) in their construction portfolio.
Multipurpose Pavilion of Dammam University, the third sports infrastructure built in Saudi Arabia
Martifer started the assembly of the Multipurpose Pavilion of the University of Dammam, in Saudi Arabia. The metal structure manufactured by Martifer weighs 4,300 tonnes and begins to rise. Following King Abdullah Sports City and Prince Abdullah Al Faisal Stadiums in Jeddah, this is the third sports infrastructure built in Saudi Arabia.
MARTIFER GROUP 7
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Ventinveste completes wind farms
Martifer Group participated in the construction and development of the Moimenta, Sernancelhe, Três Marcos and Vale do Chão wind farms, with the construction by Martifer Construções and the development by Ventinveste, a subsidiary of Martifer Group. This is the largest wind project in which Martifer group participated, with Ventinveste realizing the disposal of the projects in reference.
MAY 2017
West Sea celebrates the floatation of NRP Sines
On 3rd May, West Sea celebrated the floating of NRP Sines, one of two Oceanic Patrol Ships that are under construction for the Portuguese Navy. The ceremony brought to the shipyard the Minister of National Defence, the Minister of the Sea and the Chief of Staff of the Navy and National Maritime Authority. The ship is expected to be delivered in 2018.
West Sea’s team has been consistently praised for its ability to work, to meet deadlines and for its quality in the building of these two ships. The good execution rhythm of these complex projects and the satisfaction of our client give greater strength for future challenges.
JUNE 2017
ITER - Structure for the Tokamak reactor
Martifer continues to participate in the ITER project. This time with the supply and assembly of the metal structure that will allow the assembly of the Tokamak reactor in building B11. This project includes the structural and connection dimensioning and also the supply and assembly of the covering of the roof and facade (deck and checker plate), totalling 280 tonnes and 818 sqm area.
The structure is a provisional platform that works as a top that will allow a simultaneous development of several works, in the several levels of height.
MAIN POSTERIOR EVENTS
JULY 2017
Two new shipbuilding projects
Douro Splendor
Douro Azul awarded West Sea the construction of a hotel vessel to sail in the Douro, identical to Douro Elegance. It will have a length of 79 metres and capacity for 126 passengers. Its completion is scheduled for May 2018.
World Explorer
Mystic Cruises has awarded West Sea the construction of a luxury cruise ship to navigate in Antarctica. This will be a major challenge for West Sea because of its size and technical requirements. With 126 meters of length and a mouth of 19 meters, it will have a capacity for 176 guests and for 125 members of the crew. The cruise should be ready to sail at the end of 2018.
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Supply and assembly of metallic structure for Geneva International Airport - East Wing
Martifer Group won a contract for the supply and assembly of metal structure for the Geneva International Airport - East Wing.
The contract has an estimated value of 45 million euros and the deadline for the execution of the work is 24 months.
The metal structure will be manufactured mainly in Martifer Group’s facilities in Oliveira de Frades, making it possible to reinforce the export side of Martifer Group, which currently represents more than 80 % of the turnover in the metal structure segment in Portugal.
The award of this contract is a demonstration of confidence in national engineering and in Martifer Group’s technical capacity.
SUBSEQUENT EVENTS
No other facts that affect the released financial information have occurred since the reference date of the results up until the release of this report.
MARTIFER GROUP 9
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02 | FINANCIAL PERFORMANCE
CONSOLIDATED RESULTS ANALYSIS
M€ JUNE -17 JUNE -16 VAR.%
Revenues 96.5 106.8 -10% EBITDA 3.0 4.4 -33% EBITDA margin 3.2% 4.5% -1.3 pp Depreciation & Amortization -5.1 -5.6 10% Provisions & Impairment Losses -10.4 -0.7 <-100% EBIT -12.6 -1.9 <-100% EBIT margin -13.4% -1.9% -11.5 pp Financial Results 18.5 0.1 >100% Profit before taxes 5.9 -1.8 n.m. Income tax -1.4 -1.2 -22% Profit after taxes of continued operations 4.5 -3.0 n.m. Discontinued operations results 0.0 -3.7 n.m. Attributable to non-controlling interests 0.0 -1.7 n.m. Attributable to shareholders 0.0 -1.9 n.m. Net Profit 4.5 -6.6 n.m. Attributable to non-controlling interests -1.2 -3.4 65% Attributable to shareholders 5.7 -3.2 n.m. Earnings per share 0.058 -0.033 n.m.
REVENUES
In the 1st half of 2017, the operating income was 96.5 million euros (106.8 million euros in the 1st half of 2016), 61 % of which were in the Metallic Constructions segment, 32 % in the Naval Industry segment and 7 % in the Renewables segment.
JUNE -17 JUNE -16 REVENUES VAR. (%) M€ WEIGHT M€ WEIGHT Martifer Consolidated 96.5 100% 106.8 100% -10% Metallic Constructions 59.0 61% 82.6 77% -29% Naval Industry 30.8 32% 18.1 17% 70% Renewables 6.7 7% 6.3 6% 6% Others 0.0 0% -0.2 0% n.m.
EBITDA AND NET PROFIT
In the 1st half of 2017, consolidated EBITDA reached 3 million euros, the Naval Industry segment contributed in 3.4 million euros and the Renewables segment in 1.4 million euros.
JUNE -17 JUNE -16 EBITDA VAR. (%) M€ MARGIN M€ MARGIN Martifer Consolidated 3.0 3.2% 4.4 4.5% -33% Metallic Constructions -1.8 -3.1% -0.2 -0.3% <-100% Naval Industry 3.4 11.3% 1.8 9.9% 93% Renewables 1.4 22.6% 2.4 45.2% -42% Others -0.1 0.4 n.m.
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Consolidated Net Profit amounted to 4.5 million euros, showing a marked improvement when compared to the same period last year (-6.6 million euros).
CAPEX
The amount of investment in tangible and intangible fixed assets in the 1st half of 2017 was 1.1 million euros, applied in the Metallic Constructions segment (0.1 million euros) and in the Renewables segment (1 million euros), mainly in wind and solar projects in Central Europe and in Latin America.
CONSOLIDATED CAPITAL STRUCTURE ANALYSIS
FINANCIAL POSITION
M€ JUNE -17 DEC-16 VAR. %
Fixed Assets (including Goodwill) 127.4 142.4 -11% Other non-current assets 75.5 69.3 9% Inventory and Receivables 146.4 152.7 -4% Cash and cash equivalents 46.3 53.1 -13% Total Assets 395.5 417.5 -5% Shareholders’ Equity attributable to Group -2.6 -7.7 67% Non-controlling interests -31.8 -30.2 -5% Total Equity -34.3 -37.9 9% Non-current debt and leasings 237.2 273.4 -13% Other non-current liabilities 35.6 31.5 13% Current debt and leasings 16.1 15.5 4% Other current liabilities 141.0 134.9 4% Total Liabilities 429.9 455.4 -6%
The total value of the assets amounted to 395.5 million euros (417.5 million euros as of 31st December 2016), with non-current assets totalling 203 million euros (211 million euros as of 31st December 2016).
Equity attributable to Group on 30th June 2017 totalled -2.6 million euros, which represents an improvement of 5.1 million euros when compared with 31st December 2016.
As of 30th June 2017, liquidity ratio stood at 123 % (137 % on 31st December 2016) and the solvency ratio at 118 % (126 % on 31st December 2016).
NET DEBT
During the 1st half of 2017, the Group's net debt continued to decline, in line with the assumptions set out in Martifer Group's Strategic Plan. As of 30th June 2017, the consolidated net debt amounted to 207 million euros, reflecting a reduction of 29 million euros compared to 31st December 2016.
This evolution results from the implementation of the Group's Strategic Plan and consequently the achievement of the Financial Restructuring Agreement, the implementation of a plan for the disposal of non-core assets and the improvement in the performance of the Group’s working capital.
FINANCIAL PERFORMANCE 13
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TREND OF CONSOLIDATED NET DEBT (M€)
600
485 500 444
400 377 336 321 330 283 300 260 236 207 200
100
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H 2017
Note: Net Debt = Borrowings + Financial Leasings (+/-) Derivatives - Cash and Cash Equivalents
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03 | ANALYSIS BY SEGMENT
METALLIC CONSTRUCTIONS
ACTIVITY
This segment integrates the sub holding Martifer Metallic Constructions and it includes the activities of steel structures, aluminium and glass facades and Oil & Gas infrastructures.
The order book at the end of the 1st half of 2017 amounted to 193 million euros and was spread across several geographic regions.
ORDER BOOK BY GEOGRAPHY
GEOGRAPHY TOTAL % Africa 22 11% Algeria 14 7% Sub-Saharan Africa 8 4% Eastern Europe and Middle East 20 11% Western Europe 151 78% TOTAL 193 100%
OPERATING RESULTS
The Metallic Constructions operating income reached 59 million euros in the 1st half of 2017, with a decrease of 29 % compared with the same period last year (82.6 million euros). This decrease reflects the slowdown in activity in some geographies, mainly in Portugal, in Angola and in Romania, combined with the delay of the start-up of new projects in France and in the United Kingdom, and despite the increase in activity in Saudi Arabia.
EBITDA for the 1st half of 2017 was negative in 1.8 million euros, penalized by non-recurrent events - the sale of 50 % of the subsidiary M-City Gliwice in Poland – and by the foreign exchange effect in Angola.
EBIT was negative in 3.1 million euros compared with a negative value of 2.2 million euros on 30th June 2016.
M€ JUNE-17 JUNE -16 VAR.%
Revenues 59.0 82.6 -29% EBITDA -1.8 -0.2 <-100% EBITDA margin -3.1% -0.3% -2.9 pp Depreciation & Amortization -1.8 -2.2 19% Provisions & Impairment Losses 0.5 0.2 >100% EBIT -3.1 -2.2 -41% EBIT margin -5.4% -2.9% -2.4 pp Gains and losses in associates companies and joint arrangements -2.7 -0.9 <-100%
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NAVAL INDUSTRY
ACTIVITY
This segment integrates the sub holding Martifer Metallic Constructions and it includes shipbuilding, ship repair services and ships’ reconversions.
The order book at the end of the 1st half of 2017 totalled 98 million euros.
OPERATING RESULTS
The Naval Industry is operating revenues amounted to 30.8 million euros on 30th June 2017, which corresponds to an increase of about 70 % of the same period of the previous year, where shipbuilding represents 71 % and ship repair services represents the remaining 29 %.
EBITDA in the 1st half of 2017 stood at 3.4 million euros positive, 93 % higher than the EBTIDA of the same period of 2016, mainly due to the positive variation in the volume of activity and the increase in efficiency, reflecting the exponential growth period that this activity has been going through.
M€ JUNE-17 JUNE-16 VAR.%
Revenues 30.8 18.1 70% EBITDA 3.4 1.8 93% EBITDA margin 11.3% 9.9% 1.4 pp Depreciation & Amortization -0.4 -0.4 -2% EBIT 3.0 1.4 >100% EBIT margin 9.9% 7.7% 2.3 pp Gains and losses in associates companies and joint arrangements 0.0 0.0 n.m.
ANALYSIS BY SEGMENT 17
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RENEWABLES
ACTIVITY
Martifer Renewables, SGPS, S.A., sub holding for the Renewables business segment, 100% owned by Martifer, SGPS, S.A., acts as a developer of renewable energy, mainly in the development of wind farms and solar photovoltaic projects. More than accumulating operating power, Martifer Renewables' strategy is based on a rigorous use of capital in the development and construction of projects, having implemented a policy of asset rotation in the development process, construction management, asset management and operation and maintenance (O & M).
OPERATING RESULTS
Renewables' total operating income in the 1st half of 2017 amounted to approximately 6.7 million euros and is mainly due to the activity of solar and wind farms in operation in Spain and in Romania.
EBITDA reached 1.4 million euros in the 1st half of 2017. Regarding EBIT, it totalled around -12 million euros, with the recognition of impairments in exploration parks in Romania as a consequence of regulatory changes published in the 1st half of 2017.
‘Gains and losses in associate companies and joint arrangements had a positive effect in the Net Profit in the 1st half of 2017, mainly as a result from the participation of Martifer Group in the Moimenta, in the Sernancelhe, in the Três Marcos and in the Vale do Chão wind farms, with the construction by Martifer Construções and the development by Ventinveste, a subsidiary of Martifer Group. This is the largest wind project in which Martifer Group participated, and Ventinveste completed the sale of the projects in reference during the 1st half of 2017.
The CAPEX in the 1st half of 2017 in the development of wind and solar projects amounted to 1 million euros.
M€ JUNE -17 JUNE -16 VAR.%
Revenues 6.7 6.3 7% EBITDA 1.4 2.4 -43% EBITDA margin 22.6% 45.2% -22.5 pp Depreciation & Amortization -2.9 -3.0 4% Provisions & Impairment Losses -10.4 -0.3 <-100% EBIT -12.0 -1.0 <-100% EBIT margin -195.4% -17.6% -177.8 pp Gains and losses in associates companies and joint arrangements 19.7 0.6 23%
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04 | MARTIFER SHARE PRICE PERFORMANCE
SHARE PRICE TREND
220
200
180
160 Martifer
140 PSI 20
120
100
80 31-12-2016 31-01-2017 28-02-2017 31-03-2017 30-04-2017 31-05-2017 30-06-2017
Source: Reuters
TRADED VOLUME (‘000 shares)
600
500
400
300
200
100
0 31-12-2016 31-01-2017 28-02-2017 31-03-2017 30-04-2017 31-05-2017 30-06-2017
Source: Reuters
Stock market performance in the 2nd quarter of 2017 was positive. The US stock market recorded the 6th consecutive quarter with gains by valuing 2.57 %, increasing the gains accumulated since the beginning of the year to 6.81 %, which is accompanied by Europe, with a positive trend. The best performance on the European side was recorded by the Portuguese index PSI20 which increased 5.42 % in
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the quarter and increased 8.85 % since the beginning of the year. The German DAX index that appreciated only 1.78 % in the 2nd quarter of 2017 has already risen 8.66 % since the beginning of the year. The European financial sector has also been penalized by the uncertainty surrounding the health of the Italian banking sector.
During the 2nd quarter of 2017, the value of the shares of Martifer, SGPS, S.A. increased, representing an appreciation of around 47 %. Since the beginning of the year, it has risen around 91 %.
The stock price Martifer closed the 1st half of 2017 at 0.36 euros / share. The maximum price reached was 0.4 euros / share and a minimum of 0.176 euros / share.
The average daily volume of Martifer shares traded during the 1st half of 2017 was 54,816 shares, approximately triple the average volume traded in the 1st half of 2016 (17,166 shares). On the other hand, it is important to point out a decrease of around 76 % in the average daily traded volume of PSI20 in the same period.
The market capitalization of Martifer on 30th June 2017 stood at 36 million euros.
MARTIFER SHARE PRICE PERFORMANCE 21
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05 | FUTURE PROSPECTS
We will keep our focus on the defined objectives and the continuity of the implementation of the Strategic Plan, whose results obtained since 2015 are visible and satisfactory, namely:
to reinforce the international presence, focusing on core geographies and attractive opportunities in markets profitable above average;
to reinforce the order book in the Metallic Constructions and in the Naval Industry segments – the order book was 292 million euros at the end of the 1st half 2017 which represents an increase of 22 % since 31st December 2016;
to reinforce the sustainable growth strategy in the Renewables segment;
to reduce indebtedness through the sale of non-core assets – the Net Debt decreased 29 million euros since 31st December 2016 and decreased about 129 million euros since 31st December 2013;
to resize and adequate the structure in all geographies where we are present;
to improve processes and operational efficiency.
Oliveira de Frades, 28th August 2017
The Board of Directors,
Carlos Manuel Marques Martins Jorge Alberto Marques Martins (Chairman of the Board of Directors) (Vice-Chairman of the Board of Directors)
Pedro Nuno Cardoso Abreu Moreira Arnaldo José Nunes da Costa Figueiredo (Member of the Board of Directors) (Member of the Board of Directors)
Jorge Bento Ribeiro Barbosa Farinha Luís Valadares Tavares (Member of the Board of Directors) (Member of the Board of Directors)
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MANDATORY INFORMATION
SHAREHOLDINGS OF THE MEMBERS OF THE MANAGEMENT AND SUPERVISORY BODIES
In accordance with article 447 of the Portuguese Companies Code, the securities issued by Martifer SGPS, SA and companies dominated by it, held by members of the governing bodies in the period from 1st January 2017 through to 30th June 2017, are the following:
HOLDER GOVERNING BODY NO. SHARES HELD ON 30/06/2017
Carlos Manuel Marques Martins* Board of Directors 420,542 Jorge Alberto Marques Martins Board of Directors 230,260 I’M – SGPS, S.A. ** Board of Directors 42,405,689 Arnaldo José Nunes da Costa Figueiredo Board of Directors 3,000 MOTA-ENGIL, SGPS, S.A. *** Board of Directors 37,500,000 Luís Valadares Tavares Board of Directors - Jorge Bento Ribeiro Barbosa Farinha Board of Directors - Pedro Nuno Cardoso Abreu Moreira Board of Directors - Américo Agostinho Martins Pereira Supervisory Board - Carlos Alberto da Silva e Cunha Supervisory Board - Paulo Sérgio Jesus das Neves Supervisory Board - António Baia Engana Supervisory Board - António Joaquim Brochado Correia Statutory Auditor, representing PriceWaterhouseCoopers - José Joaquim Neiva Nunes de Oliveira General Meeting - Luis Leitão Marques Vale Lima General Meeting - Luis Neiva Nunes de Oliveira General Meeting -
* Shares held by the company Black & Blue Investimentos, S.A. (Carlos Manuel Marques Martins is a board member in this company and, together with his household, are sole shareholders) ** Directors Carlos Manuel Marques Martins and Jorge Alberto Marques Martins are holders of the share capital of I’M SGPS, SA and are, respectively, its Chairman of the Board of Directors and Director *** Director Arnaldo José Nunes da Costa Figueiredo is a Director of MOTA-ENGIL, SGPS, S.A.
EVENTS DESCRIBED IN ARTICLE 447 OF THE PORTUGUESE COMPANIES CODE
NAME OF THE MEMBER OF THE GOVERNING BODY GOVERNING BODY NO. SHARES HELD ON 30/06/2017
Carlos Manuel Marques Martins Board of Directors 420,542 Jorge Alberto Marques Martins Board of Directors 230,260 Pedro Nuno Cardoso Abreu Moreira Board of Directors - Arnaldo Nunes da Costa Figueiredo Board of Directors 3,000 Luis António de Valadares Tavares Board of Directors - Jorge Bento Ribeiro Barbosa Farinha Board of Directors - Carlos Alberto da Silva e Cunha Supervisory Board - Américo Agostinho Martins Pereira Supervisory Board - Paulo Sérgio Jesus das Neves Supervisory Board - António Baia Engana Supervisory Board -
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Directors Carlos Manuel Marques Martins and Jorge Alberto Marques Martins, respectively Chairman and Vice-Chairman of the Board of Directors, besides the shares held as described above, are sole equal shareholders of I’M SGPS, SA, that on 30th June 2017 held a total of 42,405,689 shares of Martifer SGPS, S.A..
Transactions by the members of the governing bodies in the 1st half 2017:
During the 1st half 2017 no transactions were carried out by the members of the governing bodies.
HOLDERS OF QUALIFYING SHAREHOLDINGS
According to paragraph c), number 1, of article 9 of CMVM regulation number 5/2008, the following is the list of qualifying shareholders, with an indication of the number of shares and percentage of voting rights held, calculated according to article 20 of the Securities Code (CMVM), on 30th June 2017:
SHAREHOLDERS NO. OF SHARES % OF SHARE CAPITAL % OF VOTING RIGHTS 1)
I’M – SGPS, SA 42,405,689 42.41% 43.37% Carlos Manuel Marques Martins* 420,542 0.42% 0.43% Jorge Alberto Marques Martins* 230,260 0.23% 0.24% Total Imputable to I’M – SGPS, SA 43,056,491 43.06% 44.03% Mota-Engil – SGPS, SA 37,500,000 37.50% 38.35% Arnaldo José Nunes da Costa Figueiredo ** 3,000 0.00% 0.00% Total Imputable to Mota-Engil, SGPS, SA 37,503,000 37.50% 38.35%
1) % Voting rights = Number of shares / (Total no. of shares – Own shares) * Holder of a position in the Governing Bodies of I’M SGPS, SA ** Holder of a position in the Governing Bodies of Mota-Engil SGPS, SA
MANDATORY INFORMATION 27
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STATEMENT OF COMPLIANCE ACCORDING TO ARTICLE 246, NUMBER 1, PARAGRAPH C) OF THE SECURITIES CODE (CMVM)
(Free translation from the original in Portuguese)
Dear Shareholders,
According to article 246, number 1, paragraph c) of the Securities Code (CMVM) and to the best of our knowledge:
(i) the information contained in the consolidated management report faithfully reports the evolution of trading, the performance and the position of Martifer SGPS, SA and of the companies in its consolidation perimeter and contains a description of the main risks and uncertainties that its business faces; and,
(ii) the information contained in its financial statements and accompanying notes was prepared in accordance with the applicable accounting practices, giving a true and fair view of the assets, liabilities, financial position and results of Martifer SGPS, SA and of the companies included in its consolidation perimeter.
Oliveira de Frades, 28th August 2017
The Board of Directors,
Carlos Manuel Marques Martins Jorge Alberto Marques Martins (Chairman of the Board of Directors) (Vice-Chairman of the Board of Directors)
Pedro Nuno Cardoso Abreu Moreira Arnaldo José Nunes da Costa Figueiredo (Member of the Board of Directors) (Member of the Board of Directors)
Jorge Bento Ribeiro Barbosa Farinha Luís Valadares Tavares (Member of the Board of Directors) (Member of the Board of Directors)
28 // 1H 2017 REPORT //
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06 | INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS FOR THE 1ST HALF 2017 AND 2016
(The translation of the consolidated Financial Statements was originally issued in Portuguese – Note 31)
1ST HALF 2017 1ST HALF 2016 NOTES (NON-AUDITED) (NON-AUDITED)
Sales and services rendered 3, 4 93,713,531 97,833,797 Other income 5 2,800,121 8,923,353 Cost of goods sold 6 (29,419,366) (27,622,399) Subcontractors 7 (25,744,095) (28,609,206) External supplies and services 8 (15,045,124) (18,921,733) Staff costs 9 (17,477,585) (19,534,193) Other expenses 10 (5,862,998) (7,666,344) 3 2,964,485 4,403,275 Amortizations 3 (5,099,223) (5,649,377) Provisions 11, 24 (89,737) 2,533,696 Impairment losses 11 (10,354,317) (3,184,689) 3 (12,578,792) (1,897,095)
Financial income 12 10,843,292 6,748,798 Financial expenses 12 (4,073,022) (6,404,384) Gains / (losses) on associate companies and joint arrangements 13 11,733,328 (262,351) Profit before tax of continued operational units 5,924,806 (1,815,032) Income tax 14 (1,427,970) (1,173,561) Profit after tax of continued operational units 4,496,837 (2,988,593)
Earnings from discontinued operations 20 - (3,656,285) Attributable to: non-controlling interests 20 - (1,723,133) owners of Martifer 20 - (1,933,152) Profit for the period 4,496,837 (6,644,879) Attributable to: non-controlling interests 21 (1,181,390) (3,406,016) owners of Martifer 15 5,678,227 (3,238,863)
Earnings per share: 15 Basic and diluted 0.0581 (0.0331) from continued operations 0.0581 (0.0134) from discontinued operations - (0.0198)
The accompanying notes are part of these financial statements | Amounts expressed in euros
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE 1ST HALF 2017 AND 2016
(The translation of the consolidated Financial Statements was originally issued in Portuguese – Note 31)
1ST HALF 2017 1ST HALF 2016
(NON-AUDITED) (NON-AUDITED)
Profit for the year 4,496,837 (6,644,879) Amounts that will be reclassified by results Fair value of cash flow hedges (derivatives), net of tax - (36,245) Exchange differences arising from (i) translating foreign operations; (ii) net investment in subsidiaries and (806,587) (1,552,399) (iii) goodwill Income recognized directly in equity (806,587) (1,588,645) Total comprehensive income for the period 3,690,250 (8,233,524)
Attributable to: non-controlling interests (1,460,496) (4,092,079) owners of Martifer 5,150,746 (4,141,445)
Total comprehensive income for the period from continued operations 3,690,250 (4,352,635) from discontinued operations - (3,880,889)
The accompanying notes are part of these financial statements | Amounts expressed in euros
INTERIM CONSOLIDATED FINANCIAL STATEMENTS 33
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CONSOLIDATED STATEMENTS OF THE FINANCIAL POSITION ON 30TH JUNE 2017 AND ON 31ST DECEMBER 2016
(The translation of the consolidated Financial Statements was originally issued in Portuguese – Note 31) 30TH JUNE 2017 31ST DECEMBER NOTES (NON-AUDITED) 2016 ASSETS Non-current assets Goodwill 10,980,675 10,980,675 Intangible assets 2,207,506 2,407,152 Tangible fixed assets 114,243,871 128,977,697 Investment properties 20,826,300 20,826,300 Financial assets under the equity method 16 22,505,908 4.848.908 Available for sale investments 17 6,247,095 6.009.794 Other non-current receivables 18 21,025,768 32.761.393 Deferred tax assets 4,847,429 4,854,801 202,884,553 211,666,721 Current assets Inventories 11,801,087 8,222,869 Trade receivables 18 66,351,134 71,092,276 Other receivables 18 30,848,021 40,658,733 Income tax 1,136,795 551,394 Current tax assets 7,320,818 6,355,573 Other current assets 19 28,899,486 25,820,407 Cash and cash equivalents 46,286,479 53,087,694 Derivatives 3,221 3,221 192,647,041 205,792,167 Total assets 395,531,594 417,458,888 EQUITY Issued capital 21 50,000,000 50,000,000 Share premium - 186,500,000 Treasury stock (2,868,519) (2,868,519) Reserves (55,384,873) (197,790,042) Profit for the year 5,678,227 (43,585,139) Equity attributable to owners of Martifer (2,575,165) (7,743,700) Non-controlling interests 21 (31,764,914) (30,169,515) Total equity (34,340,079) (37,913,215)
LIABILITIES Non-current liabilities Borrowings 22 224,370,780 260,546,024 Obligation under finance leases 12,876,453 12,876,453 Trade payables and Other payables 23 11,565,438 11,230,557 Provisions 24 23,032,106 19,325,876 Deferred tax liabilities 957,924 957,607 272,802,701 304,936,517 Current liabilities Borrowings 22 16,096,617 15,502,287 Obligation under finance leases 7,285 25,289 Trade payables 23 54,269,400 59,908,138 Other payables 23 13,486,164 11,662,550 Income tax 1,979,914 861,330 Current tax liabilities 5,494,490 3,266,242 Other current liabilities 25 65,735,102 59,209,750 157,068,972 150,435,586 Total liabilities 429,871,673 455,372,103
Total equity and liabilities 395,531,594 417,458,888
The accompanying notes are part of these financial statements | Amounts expressed in euros
34 // 1H 2017 REPORT //
06 // CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE 6 MONTH PERIODS ENDED ON 30TH JUNE OF 2017 AND OF 2016 (The translation of the consolidated Financial Statements was originally issued in Portuguese – Note 31)
FAIR VALUE FOREIGN EQUITY RESERVES NON- ISSUED SHARE TREASURY CURRENCY OTHER ATTRIBUTABLE TO TOTAL NET PROFIT CONTROLLING CAPITAL PREMIUM STOCK CASH FLOW TRANSLATION RESERVES OWNERS OF THE EQUITY INTERESTS HEDGE RESERVES PARENT DERIVATIVES Balance on 1st January 2016 50,000,000 186,500,000 (2,868,519) 21,038 (21,860,588) (171,259,650) (482,490) 40,049,791 (28,377,206) 11,672,585 Appropriation of the profit of 2015 - - - - - (482,490) 482,490 - - -
COMPREHENSIVE INCOME FOR THE
PERIOD Profit for the period ------(3,238,863) (3,238,863) (3,406,016) (6,644,879) Exchange differences arising from (i) translating foreign operations and (ii) net investment in - - - - (905,549) - - (905,549) (698,633) (1,604,183) subsidiaries Exchange differences arising from goodwill - - - - 28,481 - - 28,481 23,303 51,784 Other changes in equity of parent company and - - - (25,514) - - - (25,514) (10,732) (36,245) subsidiaries Total comprehensive income for the period - - - (25,514) (877,068) - (3,238,863) (4,141,445) (4,092,079) (8,233,524) Other changes in equity of parent company and - - - - - (475,353) - (475,353) (11,725) (487,077) subsidiaries Changes in the consolidation perimeter - - - - - (577,977) - (577,977) (63,430) (641,407) Balance on 30th June 2016 50,000,000 186,500,000 (2,868,519) (4,476) (22,737,656) (172,312,980) (3,721,353) 34,855,017 (32,544,439) 2,310,578 Balance on 1st January 2017 50,000,000 186,500,000 (2,868,519) - (22,397,808) (175,392,235) (43,585,139) (7,743,700) (30,169,515) (37,913,215) Appropriation of the profit of 2016 - - - - - (43,585,139) 43,585,139 - - -
COMPREHENSIVE INCOME FOR THE
PERIOD Profit for the period ------5,678,227 5,678,227 (1,181,390) 4,496,837 Exchange differences arising from (i) translating foreign operations and (ii) net investment in - - - - (527,481) - - (527,481) (279,106) (806,587) subsidiaries Total comprehensive income for the period - - - - (527,481) - 5,678,227 5,150,746 (1,460,496) 3,690,250 Dividends Distribution ------(118,215) (118,215) Other changes in equity of parent company and - (186,500,000) - - - 186,451,470 - (48,530) (41,980) (90,510) subsidiaries Changes in the consolidation perimeter - - - - - 66,319 - 66,319 25,293 91,611 Balance on 30th June 2017 50,000,000 - (2,868,519) - (22,925,288) (32,459,585) 5,678,227 (2,575,165) (31,764,914) (34,340,079)
The accompanying notes are part of these financial statements | Amounts expressed in euros
INTERIM CONSOLIDATED FINANCIAL STATEMENTS 35
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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE 1ST HALF OF 2017 AND OF 2016
(The translation of the consolidated Financial Statements was originally issued in Portuguese – Note 31)
1ST HALF 2017 1ST HALF 2016 NOTES (NON-AUDITED) (NON-AUDITED)
OPERATING ACTIVITIES
Receipts from customers 131,239,274 144,002,660
Payments to suppliers (81,955,961) (96,626,626)
Payments to employees (17,376,238) (19,353,534)
Cash generated from operations 31,907,075 28,022,500
Income tax paid / received (894,787) (465,409)
Other receipts/(payments) relating to operating activities (6,258,076) (2,241,817)
Cash generated from other operating activities (7,152,863) (2,707,226)
Net cash generated by operating activities from discontinued operations - (5,924,460)
Net cash generated by operating activities (1) 24,754,212 19,390,815
INVESTING ACTIVITIES
Receipts arising from:
Financial assets 202,500 2,988,795
Tangible fixed assets 217,435 3,329,579
Interest and similar income 290,044 2,028,207
Others 58,912 785,245
768,891 9,131,826
Payments arising from:
Financial assets - (607,847)
Tangible fixed assets (1,148,553) (2,177,730)
Intangible assets (3,080) (63,044)
Others (119,615) (202,849)
(1,271,248) (3,051,470)
Net cash generated by investing activities from discontinued operations - 359,246
Net cash generated by investing activities (2) (502,357) 6,439,602
FINANCING ACTIVITIES
Receipts arising from:
Borrowings 1,556,108 3,768,950
Others 81,481 2,995,965
1,637,589 6,764,915
Payments arising from:
Borrowings (27,510,256) (12,558,835)
Leasings (33,693) (568,077)
Interest and similar costs (3,336,536) (4,564,080)
Others (274,249) (40,298)
(31,154,734) (17,731,290)
Net cash generated by financing activities from discontinued operations - (5,233,415)
Net cash generated by financing activities (3) (29,517,145) (16,199,790)
Net increase in cash and cash equivalents (4)=(1)+(2)+(3) (5,265,290) 9,630,627
Changes in the consolidation perimeter and others (287,348) (12,254,218)
Effect of foreign exchange currencies (1,246,073) (1,956,993)
Fair-Value variations (2,505) -
Cash and cash equivalents at the beginning of the period 53,087,694 52,640,152
Cash and cash equivalents at the end of the period
from continuing operations 46,286,479 47,052,564
from discontinued operations - 1,007,004
The accompanying notes are part of these financial statements | Amounts expressed in euros
36 // 1H 2017 REPORT //
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07 | NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTORY NOTE
Martifer SGPS, S.A., with its registered head office at Zona Industrial, town of Oliveira de Frades, in Portugal (‘Martifer SGPS’ or ‘Company’), and its group of companies (all denominated ‘Group’), have as their main activities metallic constructions (steel structures, aluminium and glass façades and infrastructures for oil & gas), the naval industry and the promotion and development of renewable energy projects (Note 3).
Martifer SGPS was incorporated on 29th October 2004, having its share capital been realized through the delivery of market valued shares that the shareholders held in Martifer Construções, S.A., a company that was incorporated in 1990 and which at that time was the holding company of the current Martifer Group.
As of the Initial Public Offering in June 2007, Martifer SGPS, S.A. shares have been listed on Euronext Lisbon.
In September 2014, Martifer SGPS’s Board of Directors decided, following the strategy to focus on the metallic constructions area, to sell its stake in Martifer Solar (composed by Martifer Solar S.A. and its subsidiaries, 55 % held by the Group). As the sale was highly likely, and the requirements of IFRS 5 were fulfilled, Martifer Solar’s assets and liabilities were classified as “non-current assets held for sale” and “liabilities associated to non-current assets held for sale”, respectively, being Martifer Solar’s Net Profit presented as “discontinued operations’ result” (Note 20). In August 2016, Martifer Solar, SA and its subsidiaries were sold, except for Martifer Solar Inc. and Martifer Silverado Fund LLC, which have been subsidiaries of the company Duelobrigatório, SA since July 2016, and this company is 55 % owned by the Group. But in relation to which there is a shareholders agreement that determines the shared control, therefore, it was included in the consolidation by the equity method.
On 30th June 2017, the Group develops its activity mainly in Western Europe (in Portugal, in Spain, in France and in the United Kingdom), in Eastern Europe (in Poland and in Romania), in the Middle East (in Saudi Arabia), in Latin America (in Colombia and in Brazil), in the Sub-Saharan Africa (in Angola and in Mozambique) and in Algeria.
The following notes have been selected in order to contribute to the understanding of the most significant changes in the consolidated financial position of the Group and its performance compared to the last annual reporting date with reference to 31st December 2016.
All the amounts presented in these notes are expressed in euros (rounded to the unit), unless otherwise indicated.
These financial statements have not been audited.
1. ACCOUNTING POLICIES
BASIS OF PREPARATION
These accompanying consolidated financial statements relate to the consolidated financial statements of Martifer Group and were prepared in accordance with the International Financial Reporting Standards (“IFRS”), as adopted by the European Union, in force at the beginning of the economic period started 1st January 2017. These are the International Financial Reporting Standards issued by the International Accounting Standards Board ("IASB"), and the interpretations were issued by the International Financial Reporting Interpretations Committee ("IFRIC") or by the previous Standing Interpretations Committee ("SIC"), that have been endorsed by the European Union.
The interim consolidated financial report for the period ended on 30th June 2017 has been prepared in accordance with IAS 34 - ‘Interim Financial Reporting’ as adopted by the European Union.
These consolidated financial statements have been prepared on a going concern basis from the books and accounting records of the companies included in the consolidation (Note 2) and have been prepared under the historical cost convention, except for the revaluation of certain financial instruments, which are stated at fair value.
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The accounting policies adopted are consistent with those considered in the financial statements for the year ended on 31st December 2016 and disclosed in the corresponding notes.
The accounting standards that entered into force on 1st January 2017 did not cause major changes in the financial information hereby presented.
The consolidated financial statements are presented in euros since this is the main currency of the Group’s operations.
In the preparation of the consolidated financial statements, in accordance with the IAS/IFRS, the Group’s Board of Directors adopted certain assumptions and estimations that affect the assets and liabilities reported, as well as the profits and losses incurred related to the reported periods. All the estimations and assumptions of the Board of Directors were carried out taking into consideration the best knowledge available of the events and the negotiations in progress on the day of the approval of the financial statements.
2. GROUP COMPANIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS
The Group companies included in the consolidated financial statements, their consolidation methods, head offices and percentage of share capital held by the Group, on 30th June 2017 and on 31st December 2016 are as follows:
COMPANIES CONSOLIDATED USING THE FULL CONSOLIDATION METHOD
SHARE CAPITAL HELD PERCENTAGE FY 2016 COMPANY HEAD OFFICE COUNTRY DESIGNATION DIRECTLY INDIRECTLY TOTAL TOTAL Oliveira de Martifer SGPS, S.A. Portugal Martifer SGPS Holding Frades Martifer Metallic Constructions SGPS, Oliveira de Martifer Metallic Portugal 75.00% - 75.00% 75.00% S.A. Frades Constructions Martifer - Construções Metalomecânicas, Oliveira de Martifer Portugal - 75.00% 75.00% 75.00% S.A. Frades Construções Martifer Mota-Engil Coffey 1) Dublin Ireland MMECC - 45.00% 45.00% 45.00% Construction Joint Venture Limited Martifer Alumínios Martifer Alumínios Angola, S.A. Luanda Angola - 75.00% 75.00% 75.00% Angola Martifer Aluminium Martifer Aluminium Limited Dublin Ireland - 75.00% 75.00% 75.00% Irlanda United Martifer Aluminium Martifer Aluminium UK Limited London - 75.00% 75.00% 75.00% Kingdom Reino Unido Martifer Aluminium Martifer Aluminium SAS Rungis France - 75.00% 75.00% 75.00% França Martifer – Construcciones Metálicas Madrid Spain Martifer Espanha - 75.00% 75.00% 75.00% España, S.A. Martifer – Construções Metálicas Luanda Angola Martifer Angola - 59.06% 59.06% 59.06% Angola, S.A. Martifer Construction Limited Dublin Ireland Martifer Irlanda - 75.00% 75.00% 75.00% Martifer Polska Sp. Zo.o. Gliwice Poland Martifer Polska - 75.00% 75.00% 75.00% Martifer Constructions, SAS Rungis France Martifer França - 75.00% 75.00% 75.00% Martifer Romania SRL Bucharest Romania Martifer Roménia 2.00% 73.50% 75.50% 75.50% Park Logistyczny Biskupice Gliwice Poland Biskupice - 75.00% 75.00% 75.00% Martifer Konstrukcje Sp. Z o.o. Gliwice Poland Martifer Konstrukcje - 75.00% 75.00% 75.00% Martifer Slovakia S.R.O. Bratislava Slovakia Martifer Slovakia - - - 75.00% Albergaria-a- Sociedade de Madeiras do Vouga, S.A. Portugal Madeiras do Vouga - 75.00% 75.00% 75.00% Velha Martifer Retail & Warehousing Angola, Martifer Retail Luanda Angola - 75.00% 75.00% 75.00% S.A. Angola United Martifer UK Limited London Martifer UK - 75.00% 75.00% 75.00% Kingdom MT Construction Maroc, S.A.R.L. Tangier Morocco Martifer Marrocos - 75.00% 75.00% 75.00% Martifer Arábia Saudi Martifer Constructions LLC Riyadh Saudi Arabia - 75.00% 75.00% 75.00% Saudita Martifer Beteiligungsverwaltungs GmbH Vienna Austria Martifer GmbH 100.00% - 100.00% 100.00% M City Gliwice Sp. Zo.o Gliwice Poland M City Gliwice 2) - - - 75.00%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 39
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SHARE CAPITAL HELD PERCENTAGE FY 2016 COMPANY HEAD OFFICE COUNTRY DESIGNATION DIRECTLY INDIRECTLY TOTAL TOTAL Martifer Energia Martifer Energia S.R.L. Bucharest Romania - 75.00% 75.00% 75.00% Roménia Martifer Energia Martifer Energia LLC Kiev Ukraine - 75.00% 75.00% 75.00% Ucrânia Martifer Wind Energy Systems LLC San Angelo, TX USA Martifer Wind USA - 75.00% 75.00% 75.00% Martifer Energia Martifer Energy Systems PTY Cape Town South Africa - 63.75% 63.75% 63.75% África do Sul Navalria – Docas, Construções e Aveiro Portugal Navalria - 75.00% 75.00% 75.00% Reparações Navais, S.A. Oliveira de West Sea - Estaleiros Navais, Lda. Portugal West Sea - 75.00% 75.00% 75.00% Frades Martifer Construcciones Peru, S.A. Lima Peru Martifer Peru - 75.00% 75.00% 75.00%
Oliveira de 1) Martifer Amal, S.A. Portugal Martifer Amal - 45.00% 45.00% 45.00% Frades Global Holding Global Holding Limited Zebbug Malta - 75.00% 75.00% 75.00% Limited Global Engineering & Construction Zebbug Malta Global Engineering - 75.00% 75.00% 75.00% Limited Oliveira de Martifer Solar Martifer Solar SGPS, S.A. Portugal 100.00% - 100.00% 100.00% Frades SGPS Oliveira de Martifer Martifer Renewables SGPS, S.A. Portugal 100.00% - 100.00% 100.00% Frades Renewables SGPS Oliveira de Martifer Martifer Renewables, S.A. Portugal - 100.00% 100.00% 100.00% Frades Renewables SA Martifer Renewables ETVE, S.A.U. Madrid Spain Martifer Renovables - 100.00% 100.00% 100.00% Eurocab FV 1 S.L. Madrid Spain Eurocab 1 - 100.00% 100.00% 100.00% Eurocab FV 2 S.L. Madrid Spain Eurocab 2 - 100.00% 100.00% 100.00% Eurocab FV 3 S.L. Madrid Spain Eurocab 3 - 100.00% 100.00% 100.00% Eurocab FV 4 S.L. Madrid Spain Eurocab 4 - 100.00% 100.00% 100.00% Eurocab FV 5 S.L. Madrid Spain Eurocab 5 - 100.00% 100.00% 100.00% Eurocab FV 6 S.L. Madrid Spain Eurocab 6 - 100.00% 100.00% 100.00% Eurocab FV 7 S.L. Madrid Spain Eurocab 7 - 100.00% 100.00% 100.00% Eurocab FV 8 S.L. Madrid Spain Eurocab 8 - 100.00% 100.00% 100.00% Eurocab FV 9 S.L. Madrid Spain Eurocab 9 - 100.00% 100.00% 100.00% Eurocab FV 10 S.L. Madrid Spain Eurocab 10 - 100.00% 100.00% 100.00% Eurocab FV 11 S.L. Madrid Spain Eurocab 11 - 100.00% 100.00% 100.00% Eurocab FV 12 S.L. Madrid Spain Eurocab 12 - 100.00% 100.00% 100.00% Eurocab FV 13 S.L. Madrid Spain Eurocab 13 - 100.00% 100.00% 100.00% Eurocab FV 14 S.L. Madrid Spain Eurocab 14 - 100.00% 100.00% 100.00% Eurocab FV 15 S.L. Madrid Spain Eurocab 15 - 100.00% 100.00% 100.00% Eurocab FV 16 S.L. Madrid Spain Eurocab 16 - 100.00% 100.00% 100.00% Eurocab FV 17 S.L. Madrid Spain Eurocab 17 - 100.00% 100.00% 100.00% Eurocab FV 18 S.L. Madrid Spain Eurocab 18 - 100.00% 100.00% 100.00% Eurocab FV 19 S.L. Madrid Spain Eurocab 19 - 100.00% 100.00% 100.00% Eviva Energy S.R.L. Bucharest Romania Eviva Roménia - 100.00% 100.00% 100.00% Eviva Nalbant S.R.L. Bucharest Romania Eviva Nalbant - 100.00% 100.00% 100.00% Eviva Agighiol S.R.L. Bucharest Romania Eviva Agighiol - 100.00% 100.00% 100.00% Eviva Casimcea S.R.L. Bucharest Romania Eviva Casimcea - 100.00% 100.00% 100.00% Premium Management Consulting, Premium Bucharest Romania - 85.00% 85.00% 85.00% S.R.L. Management Martifer Renewables, S.A. Gliwice Poland Eviva Polónia - 100.00% 100.00% 100.00% PV Sol 1 Sp. Zo.o Krakow Poland PV Sol 1 - 100.00% 100.00% 100.00% PV Sol 2 Sp. Z o.o Krakow Poland PV Sol 2 - 100.00% 100.00% 100.00% PV Sol 3 Sp. Z o.o Krakow Poland PV Sol 3 - 100.00% 100.00% 100.00% Eviva Beteiligungsverwaltungs GmbH Vienna Austria Eviva GmbH - 100.00% 100.00% 100.00% Eviva Hidro S.R.L. Bucharest Romania Eviva Hidro 1.00% 99.00% 100.00% 100.00% Martifer Deutschland GmbH Berlin Germany Martifer - 100.00% 100.00% 100.00%
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SHARE CAPITAL HELD PERCENTAGE FY 2016 COMPANY HEAD OFFICE COUNTRY DESIGNATION DIRECTLY INDIRECTLY TOTAL TOTAL Deutschland
Wind Farm Odrzechowa Sp. Zo.o Gliwice Poland Wind Odrzechowa - - - 100.00% Wind Farm Wind Farm Bukowsko Sp. Zo.o Gliwice Poland - 100.00% 100.00% 100.00% Bukowsko Wind Farm Wind Farm Markowa Sp. Zo.o Gliwice Poland - 100.00% 100.00% 100.00% Markowa Wind Farm Lada Sp. Zo.o Gliwice Poland Wind Farm Lada - 100.00% 100.00% 100.00% Wind Farm Jawornik Sp. Zo.o Gliwice Poland Wind Farm Jawornik - 100.00% 100.00% 100.00% Wind Farm Piersno Sp. Zo.o Gliwice Poland Wind Farm Piersno - 100.00% 100.00% 100.00% Wind Farm Oborniki Sp. Zo.o Gliwice Poland Wind Farm Oborniki - 100.00% 100.00% 100.00% Renewables Italy Martifer Renewables Italy BV Amsterdam Netherlands - 100.00% 100.00% 100.00% Holanda Oliveira de Cedilhas ao Vento S.A. Portugal Cedilhas ao Vento - 100.00% 100.00% 100.00% Frades Martifer Martifer Renewables Brasil LTDA Fortaleza Brazil - 100.00% 100.00% 100.00% Renewables Brasil Martifer Renováveis - Geração de Fortaleza Brazil Ventania - 55.00% 55.00% 55.00% Energia e Participações S.A. Eólica Cajueiro da Praia, Ltda . Fortaleza Brazil Cajueiro - - - 55.00% SBER – Sociedade Brasileira de Fortaleza Brazil SBER 1) - - - 46.88% Energias Renováveis, Ltda. MSPAR Energia e Participações, SA Barueri Brazil MSPAR - 100.00% 100.00% 100.00% Floresta I, Geração de Energia S.A. Areia Branca Brazil Floresta I - 99.00% 99.00% 99.00% Floresta II, Geração de Energia S.A. Areia Branca Brazil Floresta II - 99.00% 99.00% 99.00% Floresta III, Geração de Energia S.A. Areia Branca Brazil Floresta III - 99.00% 99.00% 99.00% Floresta IV, Geração de Energia S.A. Areia Branca Brazil Floresta IV - 99.00% 99.00% 99.00% Martifer Martifer Renewables O&M Sp. z o.o. Gliwice Poland - 52.00% 52.00% 52.00% Renewables O&M Eviva Energy Co S.A.S Bogota Colombia Eviva Energy - 100.00% 100.00% -
1) The consolidation of these companies using the full consolidation method is a consequence of the Group having stepped shareholdings, but exercising control at each level 2) This company ceased to be fully consolidated due to the fact that Martifer Beteiligungsverwaltungs GmbH had sold its shares to Martifer Metallic Constructions SGPS (47.8 %) and to APCL Invest, SA (50 %)
COMPANIES CONSOLIDATED USING THE EQUITY METHOD
The companies consolidated using the equity method; their registered offices and the percentage of share capital held by the Group are as follows:
SHARE CAPITAL HELD PERCENTAGE FY 2016
COMPANY HEAD OFFICE COUNTRY DESIGNATION DIRECTLY INDIRECTLY TOTAL TOTAL Metallic Construction Associate companies: Liszki Green Park, Sp. Zo.o Gliwice Poland Liszki Green Park - 33.75% 33.75% 33.75% Martifer Amal, S.A. Nacala Mozambique Martifer Amal - 26.25% 26.25% 26.25% Martimetal Spa Algiers Algeria Martimetal - 36.75% 36.75% 36.75% Joint control companies: Promoquatro – Investimentos Oliveira de Portugal Promoquatro - 37.50% 37.50% 37.50% Imobiliários, Lda. Frades M City Bialystok Sp. Zo.o Gliwice Poland M City Bialystok - 37.50% 37.50% 37.50% M City Radom Sp. Zo.o Gliwice Poland M City Radom - 37.50% 37.50% 37.50% M. City Szczecin Sp. Z o.o. Gliwice Poland M City Szczecin - 37.50% 37.50% 37.50% CNA Chantier Naval CNA Chantier Naval d'Arzew , SPA Arzew Algeria - 36.75% 36.75% 36.75% d'Arzew M City Gliwice Sp. Zo.o Gliwice Poland M City Gliwice 1) - 37.50% 37.50% -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 41
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SHARE CAPITAL HELD PERCENTAGE FY 2016
COMPANY HEAD OFFICE COUNTRY DESIGNATION DIRECTLY INDIRECTLY TOTAL TOTAL Renewables Joint control companies: Ventinveste, S.A. Lisbon Portugal Ventinveste SA 6.00% 42.50% 48.50% 48.50% Âncora Wind – Energia Eólica, S.A Lisbon Portugal Âncora - - - 24.25% Parque Eólico do Douro Sul, Lisbon Portugal PE Douro Sul - - - 24.25% S.A. Parque Eólico de Vale do Chão, Lisbon Portugal PE Vale do Chão - - - 24.25% S.A. Parque Eólico de Vale Grande. S.A. Lisbon Portugal PE Vale Grande - 48.50% 48.50% 48.50% SPEE 3 – Parque Eólico do Baião, Lisbon Portugal SPEE 3 - 50.00% 50.00% 50.00% S.A. SPEE 2 – Parque Eólico de Vila Oliveira de Portugal SPEE 2 - 50.00% 50.00% 50.00% Franca de Xira, S.A. Frades Parque Eólico da Penha da Gardunha, Oliveira de PE Penha da Portugal - 50.00% 50.00% 50.00% Lda. Frades Gardunha FW Warta Sp. Z.o.o Krakow Poland Warta - 50.00% 50.00% 50.00% Others Oliveira de Duelobrigatório, S.A. Portugal Duelobrigatório 55.00% - 55.00% 55.00% Frades S. Francisco 2) Martifer Solar Inc. USA Martifer Inc. - 55.00% 55.00% 55.00% CA S. Francisco 2) MT Silverado Fund I LLC USA Silverado - 31.42% 31.42% 31.42% CA
1) This company started to be consolidated using the equity method because Martifer Beteiligungsverwaltungs GmbH had sold its shares to MMC (47.8 %) and APCL Invest, S.A (50 %). 2) In July 2016, these companies were no longer part of Martifer Solar Group and were acquired by Duelobrigatório, SA, which is 55 % owned by Martifer SGPS. However, there is a loss of control caused by this operation so they are no longer consolidated by the full method. Now these companies are consolidated by the equity method.
During the 1st half 2017 and in 2016 the changes occurred in the consolidation perimeter were the following:
INCORPORATED COMPANIES
In the 1st Half 2017:
DURING 1ST HALF 2017 HEAD OFFICE COUNTRY
Renewables Subsidiary companies: Eviva Energy Co S.A.S. Bogota Colombia
In 2016:
FY 2016 HEAD OFFICE COUNTRY
Solar Subsidiary companies: RA Solar S.A.E. Cairo Egypt Mire Solar SA de CV Mexico City Mexico Renewables Subsidiary companies: Cedilhas ao Vento S.A. Oliveira de Frades Portugal PV Sol 1 Sp. Zo.o Krakow Poland PV Sol 2 Sp. Z o.o Krakow Poland PV Sol 3 Sp. Z o.o Krakow Poland Others Associate companies: Duelobrigatório, S.A. Oliveira de Frades Portugal
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ACQUIRED COMPANIES
In the 1st Half 2017:
During the 1st half of 2017 there were no acquisitions of companies.
In 2016:
FY 2016 HEAD OFFICE COUNTRY
Renewables Joint control companies: FW Warta Sp. Z.o.o Krakow Poland
SOLD / LIQUIDATED COMPANIES
In the 1st Half 2017:
DURING 1ST HALF 2017 HEAD OFFICE COUNTRY
Metallic Constructions Subsidiary companies: Martifer Slovakia S.R.O. Bratislava Slovakia Renewables Subsidiary companies: Wind Farm Odrzechowa Sp. Zo.o Gliwice Poland Eólica Cajueiro da Praia, Ltda . Fortaleza Brazil SBER – Sociedade Brasileira de Energias Renováveis, Ltda. Fortaleza Brazil Joint control companies: Âncora Wind – Energia Eólica, S.A Lisbon Portugal Parque Eólico do Douro Sul, S.A. Lisbon Portugal Parque Eólico de Vale do Chão, S.A. Lisbon Portugal
In 2016:
FY 2016 HEAD OFFICE COUNTRY
Metallic Constructions Subsidiary companies: Martifer Aluminium Pty, Ltd Sydney Australia Solar Subsidiary companies: Martifer Solar Canada, Ltd. Toronto Canada Martifer Solar, S.A. Oliveira de Frades Portugal Martifer Solar Sistemas Solares, S.A. Madrid Spain Solar Parks Construccion Parques Solares ETVE, S.A. Madrid Spain MTS Solar Sistemas Solares, S.A. Mexico City Mexico Martifer Solar Chile Holding, Lda Santiago Chile Mencey Solar SpA Santiago Chile Dehesa Solar SpA Santiago Chile Martifer Solar Servicios México Mexico City Mexico Martifer Solar S.R.L. Milan Italy MTS1 S.R.L. Syracuse Italy MTS2 S.R.L. Syracuse Italy
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43
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FY 2016 HEAD OFFICE COUNTRY
Martifer Solar RO S.R.L. Bucharest Romania Martifer Solar Inc. S. Francisco, CA USA MT Silverado Fund I LLC S. Francisco, CA USA Martifer Solar Hellas, A.T.E. Athens Greece Martifer Solar Angola Luanda Angola Martifer Solar N.V. Deerlijk Belgium Martifer Solar UK Limited London United Kingdom MTS Exbury Solar Limited London United Kingdom MTS Manton Manor Solar Limited London United Kingdom MTS Stud Farm Solar Limited London United Kingdom MTS Penderi Solar Limited London United Kingdom Martifer Solar S.A.S. Lyon France Home Energy France SAS Lyon France PVGlass S.r.l. Milan Italy MPrime Solar Solutions, S.A. Oliveira de Frades Portugal Sol Cativante, Lda. Sever do Vouga Portugal Martifer Solar Investments, B.V. Amsterdam Netherlands MTS6 S.R.L. Syracuse Italy Martifer Solar SK s.r.o. Dolny Kubin Slovakia Ginosa Solar Farm, S.R.L. Rome Italy Solar Spritehood S.R.L Rome Italy Steadfast Fairview Solar, Ltd Andover United Kingdom Martifer Solar UA, LLC Kiev Ukraine Inspira Martifer Solar Limited Mumbai India Societé Developpement Local SA Dakar Senegal Martimak Solar Besiktas Turkey Martiper Solar Besiktas Turkey Martifer Solar Lasout Lyon France Martifer Solar Parrou Lyon France Martifer Solar Parroc Lyon France Martifer Solar Singapura PTE. LTD. Singapore Singapore Martifer Solar Japan KK Tokyo Japan Solariant Portfolio GK One Tokyo Japan EVIVA SOLAR 1 LTD Athens Greece EVIVA SOLAR 2 LTD Athens Greece Khepri Solar B.V._NL Amsterdam Netherlands RA Solar S.A.E Cairo Egypt Martifer Solar MZ, S.A. Maputo Mozambique Greencoverage Unipessoal, Lda. Oliveira de Frades Portugal Martifer Solar, Ltda Pindamonhangaba Brazil Visiontera Unipessoal, Lda Oliveira de Frades Portugal United Arab Martifer Solar Middle East Dubai Emirates Believe in Bright Unipessoal, LDA. Oliveira de Frades Portugal Associate Companies: Parque Solar Seseña I, S.L. Madrid Spain Empresa de Energia Renovable Maria del Sol Norte S.A. Santiago Chile MSN Solar Uno SpA Santiago Chile MSN Solar Dos SpA Santiago Chile
44 // 1H 2017 REPORT //
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FY 2016 HEAD OFFICE COUNTRY
MSN Solar Tres SpA Santiago Chile MSN Solar Cuatro SpA Santiago Chile MSN Solar Cinco SpA Santiago Chile Martifer Solar Canadá, Ltd. Toronto Canada Mire Solar SA de CV Mexico City Mexico Renewables Subsidiary companies: Martifer Renewables Pty, Ltd. Sydney Australia Martifer Renewables Investments ETVE, S.A. Madrid Spain Martifer Renewables Brazil B.V. Amsterdam Netherlands Associate Companies: Parque Eólico do Cabeço Norte, S.A. Lisbon Portugal Parque Eólico do Pinhal do Oeste, S.A. Lisbon Portugal Parque Eólico do Planalto, S.A. Lisbon Portugal Parque Eólico da Serra do Oeste, S.A. Lisbon Portugal Parque Eólico de Torrinheiras, S.A. Lisbon Portugal
CHANGES IN THE CONSOLIDATION METHOD
In the 1st Half 2017:
M City Gliwice Sp. Zo.o - from full consolidation method to equity method. This company ceased to be fully consolidated because Martifer Beteiligungsverwaltungs GmbH had sold its shares to Martifer Metallic Constructions SGPS (47.8 %) and APCL Invest, SA (50 %), and the last one doesn’t belong to Martifer Group.
In 2016:
Martifer Solar Inc. and MT Silverado Fund LLC - from full consolidation method to equity method. In July 2016 these companies stopped being part of the Martifer Solar Group and were acquired by Duelobrigatório, S.A., 55 % owned by Martifer SGPS, but there was a loss of control in the scope of this operation.
OTHER CHANGES IN THE CONSOLIDATION PERIMETER
In the 1st Half 2017:
Cedilhas ao Vento S.A. – Shared capital is now held by Martifer Renewables Italy BV by 91 %, by Martifer Renewables Brasil Ltda by 5 % and by MSPAR Energia e Participações, SA by 4 %. In 2016 Cedilhas ao Vento S.A. was 100 % owned by Martifer Renewables Italy BV.
In 2016:
Martifer Energy Systems SGPS, S.A. and Martifer Global SGPS, S.A. were merged into Martifer Metallic Constructions SGPS, S.A. and as a consequence the first two were extinguished.
FW Warta Sp. Z.o.o - increase in shareholding from 25 % to 50 %.
The companies Martifer Inovação e Gestão, S.A., Martifer Gestão de Investimentos, S.A., Nagatel Viseu - Promoção Imobiliária, S.A. and Gebox, S.A. were merged into Martifer Construções Metalomecânicas, S.A., and as a consequence the first four were extinguished.
Duelobrigatório, S.A. - was 100 % owned by Martifer SGPS which subsequently sold 45 %, with 55 % of the latter being held.
Despite the sale of the 55 % stake held in Martifer Solar, S.A., its entities in the US will continue to be owned by Martifer Group (owned by the company Duelobrigatório).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 45
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3. OPERATIONAL SEGMENTS
The Group bases its disclosure of information on the main segments of its internal organisation for management purposes.
The Group is organised in three business areas: ‘Metallic Constructions’, ‘Naval Industry’ and ‘Renewables’ and all are coordinated and supported by Martifer SGPS.
The ‘Metallic Constructions’ business area includes all the construction activities involving metal mechanical constructions, aluminium and glass façades and infrastructures for oil & gas. ‘Naval Industry’ includes shipbuilding, ship repair services and ship reconversions. The ‘Renewables’ segment includes the promotion and development of renewable energy projects, with special emphasis on the wind sector.
Until 2016, the 'Metallic Constructions' segment included ‘Naval Industry’, but considering the characteristics of this industry and the weight it already has in the Group's total activity, from 2017 onwards it became an operating segment itself and was reported as such. Martifer Metallic Constructions, SGPS, S.A. remains as the sub holding aggregator of the operational segments 'Metallic Constructions' and 'Naval Industry'. The information for 2016 has been disaggregated to allow its comparability with the 2017 information.
The amounts presented in ‘Others’ are related to the services rendered by Martifer SGPS, S.A..
The accounting policies used in the preparation of the information by each business segment is the same as the ones used in the preparation of the attached financial statements (Note 1).
On 30th June 2017 and 2016, the breakdown of sales and services rendered by operational segments is as follows:
SALES TO EXTERNAL CUSTOMERS INTERSEGMENT SALES TOTAL 6M' 2017 6M' 2016 6M' 2017 6M' 2016 6M' 2017 6M' 2016 Metallic Constructions 57,144,999 74,424,570 8,243,683 6,823,895 65,388,682 81,248,465 Naval Industry 30,452,264 18,041,060 507,181 531,502 30,959,445 18,572,562 Renewables 6,116,267 5,368,167 400,488 325,744 6,516,755 5,693,911 Others - - 250,640 541,564 250,640 541,564 93,713,529 97,833,797 9,401,992 8,222,705 103,115,522 106,056,503 Intersegment eliminations (9,401,991) (8,222,706) 93,713,531 97,833,797
Sales and services rendered to external customers, by geographical origin and by segment were as follows on 30th June 2017 and 2016:
6M' 2017 6M' 2016
Iberian Peninsula Metallic Constructions 18,110,235 31,315,211 Naval Industry 30,452,264 18,041,060 Renewables 2,301,211 2,122,021 Central Europe Metallic Constructions 13,217,742 24,154,288 Renewables 3,021,693 2,935,124 Other markets Metallic Constructions 25,817,021 18,955,071 Renewables 793,363 311,023 93,713,531 97,833,797
In the 1st half of 2017, the sales and services rendered decreased by around 4 million euros compared to the same period last year. There was a reduction of around 23 % in Metallic Constructions, due to the slowdown of activity in some geographies, especially in Portugal, in Angola and in Romania, combined with the delay in starting new projects in France and in the United Kingdom, despite the fact that there was an increase in activity in Saudi Arabia. During the 1st half of 2016, there was a significant activity in Portugal due to the implementation of the Âncora Wind project and the Faro Airport, hence the sales and services rendered were significantly higher in this period.
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On 30th June 2017 and 2016 the earnings before interest, taxes, amortizations, provisions and impairment losses (EBITDA) and earnings before interest and taxes (EBIT) by primary segments were as follows:
EBITDA EBIT 6M' 2017 6M' 2016 6M' 2017 6M' 2016 Metallic Constructions (1,785,563) (234,328) (3,064,154) (2,214,571) Naval Industry 3,435,509 1,819,585 3,026,473 1,419,797 Renewables 1,382,909 2,410,461 (11,952,241) (960,479) Others (68,370) 407,556 (588,870) (141,843) 2,964,485 4,403,275 (12,578,792) (1,897,095)
In the 1st half of 2017, the consolidated EBITDA recorded a positive value of 3 million euros, for which contributed the Naval Industry segment with 3.4 million euros and the Renewables segment with 1.4 million euros. The decrease in EBITDA in Metallic Constructions is due to the sale of 50 % of the subsidiary M-City Gliwice in Poland and due to the reduction in activity and the exchange rate effect in Angola. The increase in the Naval Industry is mainly due to the positive variation of the volume of activity and the increase of efficiency, reflecting a period of marked growth that the activity crosses nowadays. In what concerns Renewables, the EBITDA results from the activity of solar parks and wind farms in operation in Spain and Romania.
The Renewables segment registered in the 1st half of 2017 impairment of tangible fixed assets for the assets Babadag 1 and Babadag 2 (in Romania) wind farms amounting to around 9 million euros as a result of public regulatory changes in Romania, with impact on its EBIT.
The Group’s capital expenditures (acquisition of tangible and intangible assets) and depreciation/amortizations, by operating segments, until 30th June 2017 and 2016 were as follows:
CAPITAL EXPENDITURES AMORTIZATIONS 6M' 2017 6M' 2016 6M' 2017 6M' 2016 Metallic Constructions 71,767 151,309 1,783,203 2,214,880 Naval Industry 4,562 170,568 409,036 399,788 Renewables 1,048,886 1,339,757 2,906,485 3,033,419 Others - - 500 1,290 1,125,215 1,661,634 5,099,223 5,649,377
4. SALES AND SERVICES RENDERED
On 30th June 2017 and 2016, the breakdown of sales and services rendered was as follows:
6M' 2017 6M' 2016
Revenue from the sale of goods and merchandise 42,924,314 58,157,496 Services rendered 50,789,217 39,676,301 93,713,531 97,833,797
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 47
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5. OTHER INCOME
On 30th June 2017 and 2016 the breakdown of the caption ‘Other income’ is as follows:
6M' 2017 6M' 2016
Change in production 223 (710) Taxes 148,534 13,409 Reversals of impairment losses: Trade debtors 14,330 61,991 Other impairment losses 4,358 - Supplementary income 285,499 2,106,616 Capital gains in non-financial assets 402,704 801,983 Operating subsidies 8,452 4,972 Investment subsidies 26,374 181,428 Foreign exchange gains 1,216,891 5,122,696 Other operational gains 692,755 630,968 Total 2,800,121 8,923,353
The item 'Supplementary Income' on 30th June 2016 is mainly due to income obtained from the Metallic Constructions segment in Portugal.
The caption ‘foreign exchange gains’ is related with exchange variations in non-financial transactions, mainly in non-Euro Zone Group companies (Note 1).
The caption 'Other operational gains' during the 1st half of 2017 mainly includes revenues from the Metallic Constructions area, with contributions from Romania and Saudi Arabia.
6. COST OF GOODS SOLD
On 30th June 2017 and 2016 the cost of goods sold was as follows:
6M' 2017
Opening balance 5,575,577 Purchases 38,308,689 Changes in the consolidation perimeter, currency exchange differences, transfers and others (5,978,140) Closing balance 8,486,761 29,419,366
6M' 2016
Opening balance 5,712,906 Purchases 32,751,563 Changes in the consolidation perimeter, currency exchange differences, transfers and others (3,619,387) Closing balance 7,222,684 27,622,399
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7. SUBCONTRACTORS
On 30th June 2017 and 2016 the caption ‘subcontractors’ was as follows:
6M' 2017 6M' 2016
Subcontractors 25,744,095 28,609,206 25,744,095 28,609,206
The subcontracts are essentially related to construction works carried out in the ‘Metallic Constructions’ and ‘Naval Industry’ segments.
8. EXTERNAL SUPPLIES AND SERVICES
On 30th June 2017 and 2016 the external supplies and services are as follows:
6M' 2017 6M' 2016
Transportation of goods 1,916,115 1,712,220 Specialized works 3,644,401 6,816,798 Leases and rents 2,618,660 3,753,041 Service Fees 1,384,582 1,015,447 Travelling expenses 726,350 777,904 Electricity and Fuel 1,265,193 1,306,765 Insurance 847,256 827,740 Maintenance and repairs 748,563 775,535 Communications 210,797 250,454 Security 434,713 423,064 Legal and notarial fees 197,895 79,565 Commissions 109,152 145,173 Advertising 197,089 52,749 Cleaning, health and safety 230,955 178,133 Tools and devices 113,822 219,820 Others 399,581 587,325 15,045,124 18,921,733
In general, there was a decrease in external supplies and services as a result of the decrease in activity in the 1st half of 2017, especially relating to rents and leases and specialized work.
Specialized works include costs with auditing, consulting, information systems, studies and reports.
9. STAFF COSTS
On 30th June 2017 and 2016, staff costs were as follows:
6M' 2017 6M' 2016
Salaries 13,725,657 15,463,565 Social contributions and others 3,751,928 4,070,628 17,477,585 19,534,193
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 49
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The social charges relate primarily to social security contributions, to the food and health subsidies, insurance costs and indemnities.
10. OTHER EXPENSES
On 30th June 2017 and 2016, the caption ‘Other expenses’ was as follows:
6M' 2017 6M' 2016
Taxes 868,230 721,749 Impairment losses: Trade debtors 699,692 8,405 Other impairment losses - (548,109) Losses in non-financial assets 808,818 132,942 Foreign exchange losses 2,495,560 6,895,889 Fines and penalties 41,595 24,094 Other operational losses 949,103 431,375 Total 5,862,998 7,666,344
The caption ‘Foreign exchange losses’ is related with exchange variations in non-financial transactions, mainly in non-Euro Zone Group companies (Note 1). In June 2017 the geographies that most contributed to the significant value of exchange losses were Angola and Saudi Arabia.
The caption 'Losses in non-financial assets' essentially regards the loss resulting from the sale of 50 % of M City Gliwice Sp. Zo.o to APCL Invest, S.A.
11. PROVISIONS AND IMPAIRMENT LOSSES
The provisions and impairment losses during the six-month periods ended on 30th June 2017 and 2016 were as follows:
6M' 2017 6M' 2016
Impairment losses in financial assets - 285,122 In intangible assets 8,631 - In tangible fixed assets 10,345,686 2,899,567 10,354,317 3,184,689 Provisions (Note 24) Arising from the use of the equity method - (1,465,053) Onerous contracts (1,294,066) 131,529 Others 1,383,804 (1,200,171) 89,737 (2,533,696)
The impairment losses on tangible fixed assets recorded in the 1st half of 2017 are essentially related to the Renewables segment and regard Babadag 1 and Babadag 2 wind farms (in Romania) amounting to about 9 million euros as a result of public regulatory changes in Romania in the 1st half of 2017.
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12. NET FINANCIAL RESULTS
The net financial results for the periods ended on 30th June 2017 and 2016 can be analysed as follows:
FINANCIAL INCOME 6M' 2017 6M' 2016 Loans and accounts receivable (including bank deposits) - Interest income 340,584 1,224,126 Other financial income related to other financial assets - Foreign exchange gains 925,915 675,342 - Gains on the sale of financial assets 315 4,827,637 - Other financial income 9,576,477 21,693 10,843,292 6,748,798
FINANCIAL EXPENSES 6M' 2017 6M' 2016 Loans and accounts payable - Interest expenses in bank loans and in finance leases 2,559,090 2,829,862 Other financial income related to other financial liabilities - Foreign exchange losses 732,337 2,555,344 - Other financial expenses 781,594 1,019,179 4,073,022 6,404,384
The captions ‘foreign exchange gains / losses’ are related with exchange variations in financial transactions, mainly in non-Euro Zone Group companies (Note 1).
The caption ‘Gains on the sale of financial assets’ in the 1st half 2016 is mainly related with the sale of the share in the company Greenvouga and with the additional receipt from the sale of Eviva Gizalki Sp. Zo.o., which was sold in 2015.
13. GAINS/ (LOSSES) IN ASSOCIATE COMPANIES AND JOINT ARRANGEMENTS
On 30th June 2017 and 2016, the gains and losses in associated companies and joint-ventures were as follows:
6M' 2017 6M' 2016 Equity Method: Parque Eólico da Penha da Gardunha, Lda. (10,850) - Ventinveste, S.A. 19,349,279 - SPEE 2 – Parque Eólico de Vila Franca de Xira, S.A. 246,929 466,131 SPEE 3 – Parque Eólico do Baião, S.A. 122,114 147,410 Liszki Green Park, Sp. Zo.o. (2,616,837) - M-City Szczecin (5,210) - M City Bialystok Sp. Zo.o. (297) - M City Radom Sp. Zo.o. (1,106) - M City Gliwice Sp. Zo.o. (333) - Promoquatro 2,493 - Martifer Amal 241,383 - Martimetal (294,362) (868,907) Warta (18,687) (6,985) CNA Chantier Naval d'Arzew, SPA (31,186) - 16,983,328 (262,351) Others: Provision of Duelobrigatório, SA. (5,250,000) - (5,250,000) -
11,733,328 (262,351)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 51
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The amount recorded in Ventinveste, S.A. results essentially from the gain on the sale of wind farm projects during the 1st half of 2017.
The information on associate companies and joint ventures is included in Note 16.
14. INCOME TAX
On 30th June 2017 and 2016, the reconciliation between current tax and income tax of each period is summarized as follows:
6M' 2017 6M' 2016
Current tax 1,427,970 948,031 Deferred tax - tax loss recognition - 225,530 Deferred tax - 225,530 Income tax 1,427,970 1,173,561
15. EARNINGS PER SHARE
Martifer SGPS only issued ordinary shares, and as such, no shares have special voting or dividend rights.
Martifer has just one type of potential ordinary dilutive shares: stock options. In order to calculate diluted earnings per share it is necessary to determine whether these stock options, independently of being or not exercisable, are diluted, which happens when the exercise price of the opting is lower than the average market price of the shares.
Since the average market price of Martifer’s shares, during the period between 1st January 2017 and 30th June 2017 was 0.25 euros, below that of the exercise price of the stock options (3.84 euros), these stock options are non-diluting because, if the options were to be exercised, the number of outstanding shares would be reduced.
Therefore, on 30th June 2017 there is no difference between the basic and diluted earnings per share. The share capital of Martifer SGPS, SA is represented by 100,000,000 ordinary shares, fully paid, representing a share capital of 50,000,000 euros.
The weighted average number of shares outstanding is deducted of 2,215,910 treasury stocks acquired by Martifer SGPS.
On 30th June 2017 and 2016, the basic and diluted earnings per share can be summarised as follows:
6M' 2017 6M' 2016
Profit for the year (I) 5,678,227 (3,238,863) Weighted average number of shares outstanding (II) 97,784,090 97,784,090 Basic and diluted earnings per share (I) / (II) 0.0581 (0.0331) from continuing operations 0.0581 (0.0134) from Assets held for sale - (0.0198)
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16. FINANCIAL ASSETS UNDER THE EQUITY METHOD
On 30th June 2017 and on 31st December 2016, the financial assets under the equity method were as follows:
TOTAL EQUITY FINANCIAL ASSETS SUPPLEMENTARY % SHARES WITHOUT SUPPLEMENTARY UNDER EQUITY CAPITAL NET PROFIT th SUPPLEMENTARY CAPITAL 30 JUNE HELD METHOD IMPAIRMENTS CAPITAL 2017
30th JUNE 2017
Martimetal, SPA 49.00% 812,091 397,924 - - (600,739) 397,924 SPEE 3 - Parque eólico de Baião, 50.00% 1,702,790 851,395 - - 244,229 851,395 S.A. SPEE 2 - Parque eólico de Vila 50.00% 4,026,095 2,013,047 - - 493,858 2,013,047 Franca de Xira, S.A. Martifer Amal, S.A. (Mozambique) 35.00% (657,710) - 949,728 (230,199) 689,667 719,529
FW Warta Sp. Z.o.o.1) 50.00% (83,145) 625,668 - - (37,374) 625,668
Ventinveste, S.A. 48.50% 33,427,021 16,212,105 - - 39,895,420 16,212,105 CNA Chantier Naval d'Arzew, 49.00% 5,015,744 933,007 - - (63,644) 933,007 SPA M City Gliwice Sp. Zo.o 50.00% 1,505,981 753,232 - - (667) 753,232
Duelobrigatório, S.A. 2) 55.00% 6,882,838 - 4,950,000 (4,950,000) (258,954) - 22,505,908
TOTAL EQUITY FINANCIAL ASSETS SUPPLEMENTARY % SHARES WITHOUT SUPPLEMENTARY st UNDER EQUITY CAPITAL NET PROFIT 31 SUPPLEMENTARY CAPITAL HELD METHOD IMPAIRMENTS DECEMBER CAPITAL 2016 31st DECEMBER 2016
Martimetal, SPA 49.00% 1,468,549 719,589 - - (2,523,179) 719,589 SPEE 3 - Parque eólico de Baião, 50.00% 1,458,562 729,281 - - 367,320 729,281 S.A. SPEE 2 - Parque eólico de Vila 50.00% 3,532,237 1,766,118 - - 1,026,575 1,766,118 Franca de Xira, S.A. Martifer Amal, S.A. (Mozambique) 35.00% (1,256,104) - - - (1,332,201) -
FW Warta Sp. Z.o.o.1) 50.00% 25,359 616,411 - - (18,570) 616,411
Ventinveste, S.A. 48.50% (6,576,513) - - - (1,105,308) - CNA Chantier Naval d'Arzew, 49.00% 2,076,549 1,017,509 - - (70,079) 1,017,509 SPA Duelobrigatório, S.A. 2) 55.00% 9,121,619 - - - 1,103,917 - 4,848,908
1) The amount of the financial investment includes Goodwill of 667,240 euros on 30th June 2017 and of 639,342 euros on 31st December 2016. 2) At the end of 2016, the Group's holding in Duelobrigatório SA was considered totally impaired by prudence, since no return is expected due to the uncertainty on the recovery of its US investment.
In 2016, the acquisition of FW Warta, the incorporation of CNA Chantier Naval d'Arzew and the constitution of the company Duelobrigatório (that holds US companies in the Solar segment that were not sold to Voltalia Group) stand out. In the case of Duelobrigatório, although Martifer SGPS, SA owns 55 % of its share capital, the control is shared with the other shareholder as a result of a shareholder agreement. During the 1st half of 2017, M City Gliwice Sp. Zo.o. started to be consolidated using the equity method (Note 2).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 53
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On 30th June 2017 and on 31st December 2016, the movements occurred in this caption were as follows:
30th JUNE 2017 31st DECEMBER 2016
Opening balance 4,848,908 3,150,644 Supplementary Capital Reclassification 1) 1,232,806 - Acquisition of Warta - 607,200 Constitution of CNA Chantier Naval d'Arzew - 1,017,509 Constitution of Duelobrigatório, S.A. - 27,500 Change in the consolidation method of Duelobrigatório, S.A. - 4,382,237 Change in the consolidation method of M City Gliwice Sp. Zo.o 761,544 - Application of the equity method: - - - From performance in results 16,184,145 24,120 - Other equity changes (211,315) 622,443 Supplementary Capital Payments / Receipts (805,000) - Effect of foreign currency exchange differences 251,511 - Other changes 33,870 34,146 Impairments movements 209,438 (5,016,891) Closing Balance 22,505,908 4,848,908
1) Supplementary Capital and respective impairments in 2016 were reported under "Trade Receivables and Other Receivables" and in 2017 are being reported under "Financial Investments under the Equity Method" (Note 18).
17. INVESTMENTS AVAILABLE FOR SALE
On 30th June 2017 and on 31st December 2016, the investments available for sale were as follows:
30th JUNE 2017 31st DECEMBER 2016
Non-current financial investment 6,049,286 5,811,911 Others 197,808 197,883 6,247,095 6,009,794
On 30th June 2017 and on 31st December 2016, the movement occurred in the caption ‘Investments available for sale’ was as follows:
30th JUNE 2017 31st DECEMBER 2016
Opening balance 6,009,794 4,266,234 Additions 336,602 2,182,640 Reductions (498,912) (32,127) Impairments 437,500 (437,500) Transfers - 386 Others (37,889) 30,162 Closing balance 6,247,095 6,009,794
The reversal on the item 'Impairments' refers to an investment in Muki Solar, which was sold in the 1st semester 2017.
The available for sale investments do not have a defined maturity.
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18. TRADE RECEIVABLES AND OTHER RECEIVABLES
The detail of the caption ‘trade and other receivables’, for the periods ended on 30th June 2017 and on 31st December 2016 was as follows:
NON-CURRENT CURRENT 30th JUNE 2017 31st DECEMBER 2016 30th JUNE 2017 31st DECEMBER 2016 Cost: Trade receivables: Trade receivables 8,615,170 986,711 67,502,793 69,433,660 Notes receivables - - 2,193,153 2,592,288 Doubtful trade receivables - - 10,266,135 12,027,004 8,615,170 986,711 79,962,081 84,052,952 Other receivables: Related companies 12,169,489 37,161,933 5,627,891 12,885,499 Advances to suppliers - - 6,040,502 7,143,788 Others 3,956,382 4,057,587 39,005,797 40,389,012 16,125,871 41,219,520 50,674,190 60,418,299
24,741,041 42,206,231 130,636,271 144,471,251
Impairment losses in accounts receivables were as follows:
NON-CURRENT CURRENT 30th JUNE 2017 31st DECEMBER 2016 30th JUNE 2017 31st DECEMBER 2016 Accumulated impairment losses: Trade receivables - - 13,610,946 12,960,676 Other receivables 3,715,273 9,444,838 19,826,168 19,759,566 3,715,273 9,444,838 33,437,114 32,720,242
Carrying amount - trade receivables 8,615,170 986,711 66,351,134 71,092,276
Carrying amount - other receivables 12,410,598 31,774,682 30,848,021 40,658,733
Total 21,025,768 32,761,393 97,199,155 111,751,009
Supplementary Capital and respective impairments in 2016 were reported under "Trade Receivables and Other Receivables" and in 2017 they are being reported under "Financial Investments under the Equity Method" (Note 16).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 55
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19. OTHER CURRENT ASSETS
On 30th June 2017 and on 31st December 2016, the breakdown of the caption ‘Other current assets’ was as follows:
30th JUNE 2017 31st DECEMBER 2016
Accrued income: Construction contracts Cost 14,994,784 19,043,532 Impairment losses (2,427,754) (2,296,136) Carrying amount 12,567,030 16,747,396 Interest to be received 412,767 263,615 Other accrued income 9,056,247 6,006,799 22,036,044 23,017,810 Prepayments: Insurance 772,576 557,620 Financial expenses 201,159 201,159 Rents 48,841 176,633 Other prepayments 563,826 1,188,376 Deferred Cost - Work in Progress 3,636,452 - 5,222,854 2,123,788 Other (current) financial assets 1,640,588 678,811 28,899,486 25,820,407
The caption 'Deferred Cost - Work in Progress' refers essentially to invoices related with construction contracts but whose work has not yet been carried out or the material was invoiced but not yet entered the manufacturing process.
20. NON-CURRENT ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH THE ASSETS
Martifer SGPS, SA decided in September 2014, to focus the Group’s activity in Metallic Constructions (steel structures, aluminium and glass façades, oil & gas infrastructures and naval industry) and fulfil the active sale plan of its 55 % share of Martifer Solar. As the sale was highly likely, Martifer Solar’s assets and liabilities were classified as “non-current assets held for sale” and “liabilities associated to non-current assets held for sale” respectively, being Martifer Solar’s Net Profit presented as “result of discontinued operations”.
In August 2016, Martifer Solar, SA and its subsidiaries were sold to Voltalia Group, except for Martifer Solar Inc. and Martifer Silverado Fund LLC. These two companies became part of the company Duelobrigatório, SA in July 2016. Duelobrigatório is 55 % owned by Martifer SGPS, and for which there is shared control with the shareholder holding the remaining 45 %. Thus, both on 30th June 2017 and on 31st December 2016 there were no non-current assets held for sale.
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The detail of the results of the assets held for sale in the 1st half of 2017 and 2016 was as follows:
6M’ 2017 6M’ 2016
(NON-AUDITED) (NON-AUDITED)
Sales and services rendered - 42,980,875 Other income - 2,028,889 Cost of goods sold - (23,419,821) Subcontractors - (4,880,888) External supplies and services - (11,810,654) Staff costs - (5,610,727) Other operational gains and losses - (985,194) - (1,697,520) Amortizations - (1,068,730) Provisions and impairment losses - 584,603 Operating income - (2,181,647) Financial income - 1,110,926 Financial expenses - (3,016,065) Gains / (losses) on associate companies and joint arrangements - 24,127 Profit before tax - (4,062,659) Income tax - 406,373 Profit for the year - (3,656,285) Attributable to: non-controlling interests - (1,723,133) owners of Martifer - (1,933,152)
21. EQUITY
Share capital
Martifer SGPS, SA’s share capital, fully subscribed and paid on 30th June 2017, amounts to 50,000,000 euros and is represented by 100,000,000 bearer shares with a nominal value of 50 euro cents each. All shares have the same rights, one vote per share. During the 1st half of 2017 and of 2016, no movements occurred in the number of shares of the Group.
During the 1st half of 2017 and of 2016, Martifer SGPS, S.A. did not acquire any shares. The Group held 2,215,910 treasury shares, corresponding to 2.22 % of its capital.
On 30th June 2017, the share capital of Martifer SGPS, S.A. was held 42.41 % by I’M SGPS, S.A., 0.65 % by two board members related with I’M SGPS, S.A., 37.5 % by Mota-Engil SGPS, S.A. and 2.22 % are treasury shares. The remaining 17.22 % represents free-float listed in Euronext Lisbon.
Non-controlling interests Movements in the non-controlling interests are as follows:
30th JUNE 2017 31st DECEMBER 2016
Opening balance (30,169,515) (28,377,206) Net Profit (1,181,390) (16,267,343) Other changes in equity (279,106) (481,923) Changes in the consolidation perimeter 25,293 15,044,551 Others (160,195) (87,594) (31,764,914) (30,169,515)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 57
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The detail of the main non-controlling interests can be analysed as follows:
% NON-CONTROLLING INTERESTS 30th JUNE 2017 31st DECEMBER 2016 30th JUNE 2017 31st DECEMBER 2016 Metallic Constructions Martifer – Construções Metálicas Angola, S.A. 40.94% 40.94% 1,092,178 2,139,684 Martifer Alumínios Angola, S.A. 25.00% 25.00% 526,582 576,060 Martifer Constructions, SAS 25.00% 25.00% (1,215,826) (1,196,621) Martifer UK Limited 25.00% 25.00% (1,586,662) (1,711,642) Martifer Polska Sp. Zo.o. 25.00% 25.00% (2,396,087) (2,361,131) Martifer Konstrukcje Sp. z o.o. 25.00% 25.00% (2,084,253) (2,080,475) Martifer - Construções Metalomecânicas, S.A. 25.00% 25.00% (19,589,171) (19,270,633) Martifer Metallic Constructions SGPS, S.A. 25.00% 25.00% 2,727,740 3,319,650 Martifer Romania SRL 24.50% 24.50% (4,242,448) (4,046,921) Martifer Energia S.R.L. 25.00% 25.00% (673,932) (767,491) Martifer Wind Energy Systems LLC 25.00% 25.00% (2,812,570) (2,812,661) Saudi Martifer Constructions LLC 25.00% 25.00% 595,139 504,424 Other non-controlling interests - - (1,459,045) (1,719,124) Naval Industry Navalria – Docas, Construções e Reparações Navais, S.A. 25.00% 25.00% (2,029,273) (2,012,155) West Sea-Estaleiros Navais,Lda 25.00% 25.00% 1,450,932 1,029,521 Renewables Martifer Renováveis - Geração de Energia e Participações S.A. 45.00% 45.00% 110,343 457,683 Other non-controlling interests - - (178,564) (217,683) (31,764,914) (30,169,515)
22. BORROWINGS
On 30th June 2017 and on 31st December 2016 the borrowings can be analysed as follows:
BETWEEN 1 AND 3 BETWEEN 3 AND 5 MORE THAN 5 30th JUNE 2017 UNTIL 1 YEAR TOTAL YEARS YEARS YEARS Financial institutions borrowings: Bank loans 11,552,706 13,859,509 137,221,380 72,443,711 235,077,306 Bank overdrafts 711,367 - - - 711,367 Authorized overdrafts 3,303,829 - - - 3,303,829 Other borrowings: Other borrowings 528,715 11,166 548,874 286,140 1,374,895 16,096,617 13,870,675 137,770,254 72,729,851 240,467,397
st BETWEEN 1 AND 3 BETWEEN 3 AND 5 MORE THAN 5 31 DECEMBER 2016 UNTIL 1 YEAR TOTAL YEARS YEARS YEARS Financial institutions borrowings: Bank loans 10,408,309 17,949,624 162,640,348 79,034,861 270,033,142 Bank overdrafts 667,028 - - - 667,028 Authorized overdrafts 3,576,824 - - - 3,576,824 Other borrowings: Other borrowings 850,127 75,011 535,992 310,188 1,771,318 15,502,287 18,024,635 163,176,340 79,345,049 276,048,311
In the 1st half of 2017, there was a 13 % reduction in debt, largely driven by the repayment of the Holding's debt as a result of the sale of the wind parks included in the Âncora Wind project. This sale was in line with the Group's strategic plan which includes the disposal of non-core assets within the scope of the consolidated debt reduction objective.
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23. TRADE PAYABLES AND OTHER PAYABLES
On 30th June 2017 and on 31st December 2016, trade payables and other payables can be analysed as follows:
NON-CURRENT CURRENT 30th JUNE 2017 31st DECEMBER 2016 30th JUNE 2017 31st DECEMBER 2016 Trade payables 3,675,960 11,222,036 54,269,400 59,908,138 Other Creditors: Fixed assets suppliers 37,996 - 220,091 284,506 Related companies and other shareholders 7,851,482 7,021 469,754 983,428 Advanced payments received from customers - - 9,808,005 8,024,226 Other creditors - 1,500 2,988,314 2,370,390 Other payables 7,889,478 8,521 13,486,164 11,662,550
Total 11,565,438 11,230,557 67,755,563 71,570,688
The value of non-current suppliers on 31st December 2016 is mainly related to a partnership celebrated in the past for the development of real estate projects in Poland and the settlement of the balance will be done in accordance with the disposal of the said projects, thus not having a specific maturity date. The variation verified is mainly due to M City Gliwice Sp. Zo.o.’s change its consolidation method, to the equity method.
On 30th June 2017 and on 31st December 2016, the caption ‘Related companies and other shareholders’ includes balances payable to suppliers resulting from the Group’s operating activities, as well as from tangible and intangible asset acquisitions. The Board of Directors believes that the carrying amount of these balances is very similar to their fair value and that the effect of the financial discounts of these amounts is not material
The increase on ‘Related companies and other shareholders’ as of 31st December 2016 is related to the change in the method of consolidation of the company M City Gliwice Sp. Zo.o, which start to be consolidated using the equity method and its balances with other Group companies ceased to be eliminated in the consolidation process.
24. PROVISIONS
The information related with ‘Provisions’ on 30th June 2017 and on 31st December 2016 can be detailed as follows:
30th JUNE 2017 31st DECEMBER 2016
Quality guarantees 1,915,765 2,112,104 Legal claims in progress 907,365 923,314 Onerous Contracts 529,932 1,624,246 Contractual obligations 11,113,205 5,414,581 Provisions arising from the use of the equity method 8,565,839 9,251,631 23,032,106 19,325,876
The changes in the ‘Provisions’ during the 1st half of 2017 were as follows:
CHANGE OF CONSOLIDATION OPENING ADDITIONS DEDUCTIONS CLOSING APPLICATIONS PERIMETER, EXCHANGE BALANCE (NOTE 11) (NOTE 11) BALANCE RATE DIFFERENCES, TRANSFERS Quality guarantees 2,112,104 - - - (196,338) 1,915,765 Legal claims in progress 923,314 - - - (15,950) 907,364 Onerous contracts (Note 11) 1,624,246 - (1,294,066) - 199,753 529,932 Contractual obligations (Note 11, Note 13) 5,414,580 1,395,520 (11,716) (937,984) 5,252,806 11,113,205 Provisions arising from the use of the 9,251,631 - - - (685,792) 8,565,839 equity method 19,325,876 1,395,520 (1,305,783) (937,984) 4,554,479 23,032,106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 59
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The amount of the transfers in the caption 'Contractual obligations' on 30th June 2017 is essentially related to the provision constituted referring to Duelobrigatório.
25. OTHER CURRENT LIABILITIES
On 30th June 2017 and on 31st December 2016, other current liabilities are as follows:
30th JUNE 2017 31st DECEMBER 2016
Accrued expenses Accrued Expenses - Work in progress 5,678,178 - Holiday pay and bonuses 3,458,476 3,357,129 Interest borne but not yet overdue 369,385 874,408 Production performed by third parties not yet invoiced 27,452 68,797 Other accrued expenses 1,995,554 2,124,402 11,529,045 6,424,736 Deferred income Production invoiced and not yet performed 46,236,832 46,032,883 Subsidies / Government grants 360,918 387,293 Other deferred income 7,608,308 6,364,838 54,206,058 52,785,014
65,735,102 59,209,750
The caption ' Accrued Expenses - Work in progress ' is related essentially to work done on the construction contracts in progress for which invoices have not yet been received.
The 'Other accrued expenses' correspond to other supplies and services rendered by third parties until 30th June 2017 for which invoices were received after this date.
The caption 'Other deferred income' as of 30th June 2017, as well as on 31st December 2016, results essentially from the recognition of the deferred income attributed to the green certificates in Eviva Nalbant S.R.L..
26. CONTINGENT ASSETS AND LIABILITIES
On 30th June 2017, the contingent liabilities are as follows:
a) 1. On 29th October 2009, Martifer Polska, in consortium with Ocekon Engenharia sro (Slovakia), entered into an agreement with Energomontaz-Poludnie SA for the works, whose purpose was to manufacture, execute, deliver and mount the steel roof of the Baltic Arena stadium in Gdansk, Poland, worth approximately 11.3 million euros. On 2nd September 2010, Martifer received from Energomontaz a notice of immediate termination of the agreement, without prior notice. The reason for the breach of contract was the delay in the execution of the work, which in Martifer's opinion is totally unfounded and ineffective. On 17th December 2010, Martifer filed a lawsuit against Energomontaz, requiring a value of approximately 12.6 million euros, including interest, cost of capital involved and total damage caused to Martifer due to lack of cooperation. This lawsuit was suspended due to the Energomontaz - Poludnie S.A’s insolvency proceedings.
2. On 17th January 2012, Energomontaz filed a lawsuit against Martifer and Ocekon Engenharia sro for a total amount of 5.7 million euros. The hearings are in progress and witnesses were examined in 2015. In March 2017, the court dismissed the case against Ocekon Engenharia sro, as it was removed from the commercial register. More audiences are scheduled for 2017.
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3. Meanwhile, Energomontaz has entered into bankruptcy proceedings. In April 2013, the list of claims by Martifer in the amount of 16.9 million euros was submitted to the insolvency administrator. However, the court did not recognise the list of the claims submitted by Martifer, so the claim was neither recognized nor accepted by the Court.
Martifer Group has recognized in its financial statements the risk of losses related to accounts receivable, increase in income from work in progress and from the bank guarantee executed. Therefore, it considers that the framework of this process is duly reflected in the financial statements.
b) The Romanian subsidiary, Martifer Constructii, acquired on 9th March 2007 a plot of land in Aricesti, Prahova province, in Romania, for approximately 8.2 million RON. The referred acquisition is under a judicial dispute, currently pending judicial action, with its terms running under appeal, being expected one of two outcomes:
1. The Court rules a decision under which the land is maintained in property of the Romanian State, initial owner, in which Martifer Constructii shall have the right to an indemnity, at least, in an equivalent amount to the price paid for the land when it was acquired;
2. The Court rules a decision under which the land transits to Martifer Constructii’s assets, with Martifer Constructii acquiring the totality of the rights of the land.
According to the developments on the current judicial action, Martifer considers as most probable the happening of the scenario presented in 1), with a high probability of recovery of the amount paid when the land was acquired.
The Group's expectation is that no losses will occur with these processes over and above the ones already recognized in its financial statements.
27. COMMITMENTS
Financial Guarantees
On 30th June 2017 and on 31st December 2016, the financial guarantees provided by the Group to third parties related to bank guarantees and guarantee insurance to project owners whose projects are undertaken by several Group companies, detailed by currency were as follows:
30th JUNE 2017 31st DECEMBER 2016
Euro 25,283,311 31,220,206 Zloty 23,664 22,674 New Leu 323,987 399,123 US Dollar (*) 14,710,672 14,167,863 Moroccan Dirham 81,606 84,354 Sterling Pound 1,137,229 1,167,979 41,560,470 47,062,198
(*) Bank guarantees for good execution issued in Angola and in Portugal, mostly to guarantee projects to Saudi Arabia.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 61
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The breakdown by Group Company is as follows:
30th JUNE 2017 31st DECEMBER 2016
Martifer Construções Metalomecânicas SA 19,496,000 18,676,046 Martifer Metallic Constructions SGPS, SA 5,778,531 6,168,327 West Sea Lda 5,071,217 9,223,000 Martifer Construcciones Metálicas Espanha 612,049 612,049 Martifer Polska 23,664 - Martifer Constructii 505,429 726,129 Martifer Construções SK - 721,971 Martifer Konstrukcje - 22,674 EUROCAB FV 1 SL 29,770 29,770 EUROCAB FV 8 SL 11,227 11,227 EUROCAB FV 9 SL 11,227 11,227 EUROCAB FV 10 SL 11,227 11,227 EUROCAB FV 11 SL 11,227 11,227 EUROCAB FV 12 SL 11,227 11,227 EUROCAB FV 17 SL 11,227 11,227 EUROCAB FV 18 SL 11,227 11,227 Martifer Construções SAS - 15,000 Martifer Construções Metálicas Angola S.A. 9,965,218 10,788,641 41,560,470 47,062,198
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Pledges or Mortgages
On 30th June 2017 the assets pledged or mortgaged to financial institutions were as follows:
DEBT COMPANY GUARANTEE ASSET VALUE AMOUNT
Martifer Metallic Constructions SGPS, SA Share pledge of Martifer Construções SA 20 % (no. shares 1,500,000) 5,561,738 16,310,458 5M€ Generic Mortgage of building Vale Tripeiro, lot 10 - I/J/K/L/M/N/O Martifer Construções SA 2,830,337 5,008,967 (Benavente) Martifer Construções SA 1,169,349 3,299,468 st Martifer Construções SA 1 degree mortgage of industrial building Cutting Unit (Monoblocos) 5,461,352 3,299,532 1st degree mortgage of administrative building Navalria SA nd 1,624,246 2 degree mortgage of industrial building Tower’s plant (article 1914) Martifer SGPS, SA 1,955,697
Martifer Construções SA Mortgage of industrial building Martifer Construções (article 2079) 968,840 6,427,826
Martifer Construções SA 3,048,645
Martifer Construções SA 1st degree share pledge of 25% of Martifer Renewables SGPS (no. Shares 1,016,126 25,056,079 25,000,000) Promoquatro Lda 2,035,204 Martifer Energy Systems SGPS 3,048,379 Martifer Construções SA Promissory Loan Note Class A no. 6 pledge 4,500,000 2,510,610
Mortgage of pilot building 68,492 2,601,527 Martifer Construções SA Mortgage of Land and Warehouse in Albergaria 1,415,300 13,650,935 Martifer SGPS, SA Generic Mortgage (7.5M€) of industrial building Towers’ plant (article 1914). 7,599,543 1st degree share pledge of Martifer Renewables SGPS 65 % (no. shares Martifer SGPS, SA 65,145,805 65,000,000) Martifer SGPS, SA Mortgage of building in Oliveira de Frades (article P-2003) Unit OlF MTC 522,043 Martifer SGPS, SA Loan Note Class A no. 5 pledge 4,500,000 Martifer OF warehouse 63,558 98,210,922 Multipark Paços de Ferreira 361,646 Other Lands MGI 326,097 Martifer SGPS, SA 1st degree share pledge of Martifer Renewables SGPS (nr. shares 10,000,000) 10,022,432 Various Mercantile equipment pledge 236,941 Equipment Mercantile pledge 70,833 Pledge of 2 term deposits no. 665-15.000021-5 worth 400.000€ and no. 787- 15.000 worth 35.500€ which are associated to bank guarantee no. 030- West Sea, Lda 1) 435,500 - 43.010448-6 issued on 2014/01/10 in amount of 435.500€ in favor of Estaleiros Navais de Viana do Castelo S.A. 1st degree share pledge of 100% shares of the following companies: Eurocab FV 1, S.L., Eurocab FV 2, S.L., Eurocab FV 3, S.L., Eurocab FV 4, S.L., Eurocab FV 5, S.L., Eurocab FV 6, S.L., Eurocab FV 7, S.L., Eurocab FV 8, S.L., Eurocab FV 1,657,728 Martifer Renovables ETVE, S.A.U. 9, S.L., Eurocab FV 10, S.L., Eurocab FV 11, S.L., Eurocab FV 12, S.L., Eurocab 27,305,033 FV 13, S.L., Eurocab FV 14, S.L., Eurocab FV 15, S.L., Eurocab FV 16, S.L., Eurocab FV 17, S.L., Eurocab FV 18, S.L., Eurocab FV 19, S.L., Share pledge of 50 % of Martifer Renovables ETVE shares 5,053,424 MARTIFER Romania SRL Mortgage of the factory 4,162,736 711,367 Mortgage of farm land and all equipment/construction included in the project/farm 32,137,645
EVIVA NALBANT 2) Share pledge of 100% of Eviva Nalbant shares (6,323,345) 10,453,893 Pledge over all movable assets (insurance, bank accounts, accounts receivable, 1,697,622 intellectual property, etc.) Martifer SGPS Equipment as guaranty in the 2013's Income Tax 366,846 61,750 175,068,539 202,580,584
1) There is no outstanding amount, as it is a bank guarantee issued in the same amount as the real guarantee. 2) On 30th June 2017 this company presented negative equity to the Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 63
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28. RELATED PARTIES
Group companies have commercial relations with each other that qualify them as related party transactions. All of these transactions are performed on an arm’s length basis.
Consequently, all these transactions are eliminated, since the consolidated financial statements disclose information regarding the holding company and its subsidiaries as if they were a single entity.
The balances resulting from the transactions performed with associate and jointly controlled companies, accounted through the equity method, are not eliminated. The amount of the balances not eliminated is approximately 53 million euros, with special regard to the accounts receivable from Ventinveste and some companies in Poland in the Metallic Constructions segment.
Besides current transactions, some relating to civil construction works done with the Mota-Engil Group and others associated with real estate management projects under way done by Estia Group, there are no other significant balances and transactions performed with related parties during the period ended on 30th June 2017 that significantly affected the financial position or performance of the Group.
29. SUBSEQUENT EVENTS
Since the reference date of the results, no facts that affect the released financial information occurred.
30. APPROVAL OF THE FINANCIAL STATEMENTS
The accompanying consolidated financial statements were approved by the Board of Directors on 28th August 2017.
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31. EXPLANATION ADDED FOR TRANSLATION OF THE FINANCIAL STATEMENTS
These financial statements are a translation of the consolidated financial statements originally issued in Portuguese in accordance with the International Financial Reporting Standards as adopted by the European Union. In the event of discrepancies, the Portuguese version prevails.
Oliveira de Frades, 28th August 2017
The Chief Accountant The Board of Directors
______João Alexandre Queiroz Oliveira Carlos Manuel Marques Martins (Chairman)
______Jorge Alberto Marques Martins (Vice-Chairman)
______Pedro Nuno Cardoso Abreu Moreira (Member of the Board of Directors)
______Arnaldo José Nunes da Costa Figueiredo (Member of the Board of Directors)
______Jorge Bento Ribeiro Barbosa Farinha (Member of the Board of Directors)
______Luís Valadares Tavares (Member of the Board of Directors)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 65