Sogefi: results for first nine months of 2020

THIRD QUARTER 2020 SHOWS PROFIT

Higher revenues, greater margin and lower fixed costs

RESULTS FOR FIRST NINE MONTHS NEGATIVELY IMPACTED BY FIRST HALF

Revenues at € 860.6 million, -21.9% at constant exchange rates (car market -23.2%)

EBITDA margin in line with 2019: € 94.7million, 11% of revenues

 (11.4% in first nine months of 2019)

EBIT: -€ 3.2 million as effect of lower volumes

EBIT for the whole year 2020 expected to be positive (excluding restructuring costs)

Milan, October 23 2020 – The Board of Directors of Sogefi S.p.A., which met today under the chairmanship of Monica Mondardini, has approved the Interim Financial Report of the group as of September 30 2020. Sogefi, a company of the CIR group, is one of the main producers worldwide of components for motor vehicles in three sectors: Air and Cooling, Filtration and Suspensions.

After the first half of 2020 in which world car production suffered an unprecedented decline (-33.2%) due to the effects of the spread of the Covid-19 pandemic, in the third quarter the market reported a strong recovery compared to the previous quarter (+60.7%), with volumes just 3.5% below those of the same period of 2019 (after a second quarter at -42.9%). The recovery affected all markets: China, where production was greater than that of the third quarter of the previous year (+10.7%), NAFTA with volumes equivalent to those of third quarter 2019 (+0.5%), the EU with volumes gradually rising, although lower in the third quarter than in 2019 (-10.7%). In South America the situation was still decidedly critical (-20.9%).

Despite the recovery in the third quarter, the first nine months of 2020 as a whole again posted very significant declines: -23.2% for world car production compared to the first nine months of 2019, -31.3% in the EU, -26.5% in North America, -8.9 % in China and -40.4% in South America. 

During the first half of the year the Group’s priority was the safety of its workforce. From the moment when news of the Covid-19 phenomenon in China was received, action was taken immediately to reduce the risk of contagion. In the second quarter almost all activity in the factories and other workplaces was suspended in compliance with the instructions issued by the various local authorities or at the decision of the company, which had recourse everywhere to working from home whenever possible. All measures recommended for health and safety in the workplace were adopted and production processes were reviewed in all geographical areas with the formulation and implementation of new safety protocols including social distancing and the use of systems for individual protection. In the current phase, the new wave of contagion is leading to the adoption of further restrictive measures to limit the number of people present in the workplace with the adoption of flexible working.

At the same time, incisive measures were put in place to mitigate the impact of the crisis and the consequent contraction in sales and these made it possible to achieve a positive result in the third quarter. In particular, this result was due to the following:

  • The increase in the contribution margin to 31%, up from 30.3% in the third quarter of 2019 and 29.5% in the second quarter;
  • The 20.2% reduction in fixed costs with their ratio to revenues falling from 17% in third quarter 2019 to 14.8% in 2020.

Despite the situation of the first nine months, since the beginning of the year Sogefi has obtained new contracts for a total amount estimated to be in line with previous years and with the objectives of maintaining/growing its market share.

More specifically, Air and Cooling obtained an important contract (€ 100 million) to supply air intake manifolds in aluminium to a prime German OEM. This material to all extents and purposes introduces a new product line in a date 25% of the value of orders received in the first nine months of the year were for components for cooling hybrid or full-electric vehicles, which forms a basis for the division to achieve an excellent positioning in the markets in future.  

The Suspensions division received an order from a prime North American producer of full-electric vehicles and thus, at global level, orders for hybrid and full-electric applications reached 35% of the total orders for the 9-month period. This growth was obtained partly thanks to the new product developed specifically to meet the demand for lightweight parts and rapid time-to-market for electric vehicles. The division has in fact engineered a conical progressive rate spring suspension for this type of application.

KEY RESULTS FOR THE THIRD QUARTER OF 2020

Third quarter revenues showed a significant recovery compared to the previous period and were more or less in line with the third quarter of 2019 at constant exchange rates (-8.1% at current exchange rates).

The results were positive thanks to the recovery of revenues and to the measures adopted, which led to a slight increase in the contribution margin and a significant reduction of fixed costs. 

EBITDA was 14% compared to 12% in the same period of 2019.

EBIT was positive for € 15.6 million, which was higher than the figure for 2019 of € 13.1 million; the ratio of EBIT to sales rose from 3.5% to 4.6%.

In the period the Group reported net income of € 5.6 million versus € 1.4 million in 2019.

Free Cash Flow before IFRS 16 was positive for € 28.0 million versus € 2.8 million in 2019.

KEY RESULTS FOR THE FIRST NINE MONTHS OF 2020

REVENUES

In the first nine months of 2020, Sogefi’s revenues came in at € 860.6 million, posting a decline compared with the same period of 2019 of 25.1% at historical exchange rates and of 21.9% at constant exchange rates.

Looking back at the trend of revenues during the year, after the first two months of the year when sales were in line with 2019, in March the first effects of the pandemic were recorded (-29.5% on 2019), which then became seriously worse in the months of April (-79.5%) and May (-64.5%); in June the recovery began (with a more limited fall in revenues compared to 2019, -24.9 %), continuing then in July (-18%), August (-7.5%) and September, when revenues showed slight growth compared to 2019 (+0.8%). 

The performance of revenues at constant exchange rates in the first nine months was better than  the market in all the main geographical areas: -24.6% in Europe versus the market’s -31.3%, -17.9% in NAFTA versus -26.5%, +12.6% in China versus -8.9%.

By business sector, Filtration (with a fall in revenues of 16.2% at constant exchange rates) and Air and Cooling (-17.8% at constant exchange rates) reported a distinctly less unfavourable performance than the market thanks, for Filtration, to the greater resilience of the OES and Aftermarket channels and, for Air and Cooling, to the development of the contract portfolio particularly in North America. The impact of the crisis was greater for Suspensions, where revenues fell by 30.6% at constant exchange rates, reflecting the greater concentration of the business in Europe and South America and the particularly unfavourable performance of the sector in these areas.

OPERATING RESULT AND NET RESULT

In the nine month period the fall in revenues had significant effects on the economic results of the group, despite the positive impact of the mitigation measures adopted.

EBITDA for the first nine months came in at € 94.7 million, down from € 130.7 million in the same period of 2019; it should be noted that profitability (EBITDA / Revenues %) came to 11%, which was substantially in line with the same period of 2019 (11.4%).

The contribution margin of the first nine months of the year was slightly better than that of 2019, rising from 29.7% to 30.3%; the impact of the cost of raw materials was lower thanks partly to market phenomena and partly to the plans put in place as from last year to optimize the purchase prices of steel for the production of suspension systems and this offset the impact of the inevitable production inefficiencies caused by the shutdown and subsequent return to production and the low volumes. The ratio of fixed costs to sales in the first nine months was substantially unchanged from the same period of 2019, thanks to the reductions obtained, part of which were temporary while part were destined to become structural.

EBIT was a negative € 3.2 million, which compared to a positive result of € 37.4 million in the first nine months of 2019. The lower EBIT reflects the fall in revenues and the non-recurring charges incurred as a result of the situation: restructuring charges of € 14.2 million (€ 5.7 million in the first nine months of 2019) and the write-down of fixed assets for € 8.2 million (€ 2.2 million in the same period of the previous year).

The group’s net result was a loss of € 23.2 million compared to net income of € 8.3 million in 2019, after financial expense that was substantially in line with that of the previous year and tax expense of € 2.8 million versus € 12.6 million last year. 

DEBT AND EQUITY

Regarding Free Cash Flow, in the first nine months of 2020, before IFRS 16, absorption of € 42.8 million was reported (versus -€ 0.5 million in the first nine months of 2019), most of which was due to the evolution of working capital caused by the particular circumstances that arose during the year. As is generally the case in the sector, amounts due from customers are received more promptly compared to the payment terms of suppliers, thanks partly to the use of factoring. The decline in sales resulted in lower cash receipts, while payments to suppliers continued to be made. This imbalance is gradually being re-absorbed as business recovers. Free Cash Flow including IFRS 16 payables amounted to -€ 55.6 million compared to -€ 4.3 million in the first nine months of 2019.

Net debt before IFRS 16 stood at € 299.0 million at September 30 2020, higher than at the end of 2019 (€ 256.2 million), but significantly lower than the figure at June 30 2020 (when the net debt amounted to € 327 million).

Including the financial payables for rights of use, as per IFRS 16, net debt at September 30 2020 totalled € 374.5 million, up from € 318.9 million at December 31 2019 and € 330.0 million at September 30 2019. It should be noted that in 2020 the group has been developing a new site for the production of suspensions in Romania, which will increase the group’s competitiveness in the sector. In the third quarter the signing of the lease contract for the new facility led to the recognition of an IFRS 16 payable of approximately € 19.0 million.

As is known, as of June 30 the covenants of the loan agreements in force were being complied with and to the best of our knowledge at present and based on our forecasts, no breaches of contract are expected to emerge by December 31 2020.

At September 30 2020 the group had committed credit lines € 220.0 million in excess of its requirements.

At September 30 2020 shareholders’ equity, excluding minority interests, amounted to € 146.6 million (€ 188.7 million at December 31 2019).

THE IMPACT OF COVID-19 ON THE BUSINESS

Following the spread of the Covid-19 pandemic, Sogefi first suspended production in China and then in the second half of March production at almost all of its sites. Business started to resume everywhere, first in China and then from May onwards in all the other countries in which the group operates, albeit with production volumes that were until August significantly lower than those of the previous year and those forecast.

As for the evaluation of the impact that the pandemic is having on the group, the pre Covid-19 forecasts had envisaged that sales revenues for 2020 would be substantially in line with 2019 and in the first two months of the year the Company did in fact report volumes equivalent to or higher than those expected. However, during subsequent months there was an extremely significant decline with a recovery only from June onwards. Consequently Sogefi reported revenues of € 860.6 million, down by 25.1% compared to the same period of last year. This reduction was almost entirely attributable to the effects of the circumstances generated by the pandemic. The contraction in volumes, even though partly offset by the reduction in fixed costs, nonetheless had a negative impact that can be estimated at € 42.0 million on EBIT and of € 27.0 million on the net result. It also led to a significant rise in debt.  

The Company has been taking action to reduce the impact of the crisis since March but in addition to this it is now working to adapt itself structurally to the changed market circumstances and to rapidly regain economic and financial stability, albeit in a context of lower volumes which are today forecast even for the fourth quarter of 2020 and for 2021.  

SIGNIFICANT EVENTS THAT HAVE TAKEN PLACE SINCE SEPTEMBER 30 3020

In October the group obtained new medium-term loan agreements for a total amount of € 134.5 million granted by prime Italian and French banks.

OUTLOOK FOR THE YEAR

Visibility as to the evolution of the market in the coming months remains limited despite the improvement in volumes seen in the third quarter.

With regard to the pandemic, in Europe the risk of a second wave of Covid-19 appears to be materializing with recent figures showing that it is spreading at higher levels than during the lockdown phase. In North and South America the evolution of the pandemic remains most concerning and it is difficult, therefore, to predict what measures will be taken by the authorities. The adoption in coming months of new measures limiting production and private business cannot be ruled out. It is also extremely uncertain as to what impact the current circumstances will have on demand in the automotive sector.

After a third quarter 2020 that was better than expected, for the fourth quarter of 2020 IHS expects that world production could come in at -2.7% compared to the fourth quarter of 2019. The year 2020 could therefore close with a market downturn of 17.9% on the whole year.

In this uncertain scenario Sogefi has factored into its projections for the fourth quarter the assumption that the market will be around -10%, in which it expects that it will be able to achieve a positive EBIT for the whole year, excluding restructuring charges.  

STOCK GRANT PLAN

On the strength of the authorization given to it by the Annual General Meeting of the Shareholders on April 20 2020, the Board of Directors implemented Stock Grant Plan 2020 by assigning 790,000 rights.

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CIR: results for first half 2020

Revenues 856.7 million (€ 1.059,1 million in first half 2019)

EBITDA: € 103.8 million (€ 140.0 million in first half 2019)

EBIT: -€ 8.3 million (€ 46.0 million in first half 2019)

Net result: -€ 30.4 million

Net financial position of the parent company at € 397.1 million, higher than at December 31 2019 (€ 295.7 million)

Milan, July 31 2020 – The Board of Directors of CIR S.p.A., which met today under the chairmanship of Rodolfo De Benedetti, has approved the Semi-Annual Financial Report as of June 30 2020 presented by Chief Executive Officer Monica Mondardini.

Consolidated results

CIR’s results for the first half of 2020 were affected significantly by the strong impact that the spread of the Covid-19 pandemic has had on all the businesses of the group, i.e. social and healthcare services (KOS), the production of components for the automotive sector (Sogefi), and the management of the financial investments of the CIR holding company and its non-industrial subsidiaries.

KOS’s business was affected by the public health emergency in all sectors, with a significant impact on economic performance: in the care homes, activity was concentrated on the complex management of the public health emergency with new admissions on hold; the rehabilitation facilities reported a decline in the number of patients following the slowdown of normal activity with the health system under stress and activity focused on the emergency; outpatient services were suspended or severely limited as was diagnostic activity; meanwhile the company focused on putting in place the necessary measures for protection of staff and patients.

Sogefi’s business was seriously affected, as indeed was the case for all of the automotive sector, by the effects of the pandemic; production was suspended first in China and then, in the second half of March, in almost all of its plants. Currently, production in China has returned to monthly levels in line with the forecasts made before the crisis; in the remaining geographical areas, production resumed gradually as from May after the main customers returned to production, but volumes were still significantly lower than those pre- Covid. The situation remains particularly critical in Mercosur and India.

In the first half of 2020, the consolidated revenues of the CIR group came in at € 856.7 million and were down by 19.1% on 2019. After the first two months which saw growth of 9.7% on the corresponding period of 2019, the public health emergency caused an immediate and drastic contraction of revenues due mainly to the suspension of Sogefi’s production activity.

The consolidated gross operating margin (EBITDA) came to € 103.8 million and was down by 25.8% from the figure for the first half of 2019 (€ 140.0 million), following the trend of revenues; the consolidated operating result (EBIT) was a negative € 8.3 million versus a positive result of € 46.0 million in the first half of 2019.

The net result was a loss of € 30.4 million after earnings of € 1.6 million in the first half of 2019.

The consolidated net financial debt before IFRS 16 amounted to € 285.7 million at June 30 2020 and was down by € 42.0 million compared to the figure at December 31 2019 (€ 327.6 million). The financial payables for rights of use according to IFRS 16 totalled € 787.8 million at June 30 2020 and thus the total consolidated debt stood at € 1,073.5 million. The payables as per IFRS 16 refer mainly to the subsidiary KOS (€ 731.8 million), which operates mostly in leased premises.

The net financial position of the Parent Company (including the non-industrial subsidiaries) was a positive € 397.1 million at June 30 2020, higher than at December 31 2019 (€ 295.7 million), following the cash inflow from the sale of CIR’s entire interest in GEDI Gruppo Editoriale S.p.A. to EXOR (€ 102.4 million), completed on April 23 2020.

The equity of the Group stood at € 728.5 million at June 30 2020 versus € 770.7 million at December 31 2019 and the decline mainly reflects the loss for the period.

As regards KOS, its revenues came in at € 337.2 million, with a rise of 19.9% on the same period of 2019 thanks to the significant contribution of Charleston (the group acquired in October 2019, which operates in Germany in the care-home sector): on a like-for-like basis revenues fell by 10.6%.

EBIT was € 18.1 million, down from € 31.6 million in 2019, due not only to the decline in the number of guests and patients in Italy because of the Covid-19 emergency, as illustrated above, but also to the higher costs incurred for protection measures to counter and limit the effects of the pandemic. The first half closed with a loss of € 2.1 million compared to earnings of € 14.4 million in the first half of 2019.

Cash flow was positive for € 11.8 million and the net financial debt before IFRS 16 declined from € 368.0 million at December 31 2019 to € 356.2 million at June 30 2020.

As for Sogefi, automotive production worldwide fell by 33% in the first half of 2020 compared to the first half of 2019, with Europe and NAFTA, Sogefi’s main areas of activity, reporting -40%. In this scenario Sogefi’s revenues came in at € 519.5 million, posting a decline of 33.2% on 2019. In the main geographical areas the group reported a distinctly better performance than the market and, thanks to the cost cutting action taken, profitability (EBITDA/revenues %) declined by just two percentage points, from 11% to 9%. Despite this, EBIT came to -€ 18.8 million, after non-recurring charges of
approximately € 18.0 million, compared to +€ 24.4 million in the first half of 2019. The first half closed with a loss of € 28.8 million, which compares with net income for the first half of 2019 of € 6.9 million.

Net financial debt at June 30 2020 before IFRS 16 rose to € 327.0 million from € 256.2 million at the end of 2019, and the increase was due mainly to the rise in working capital caused by the drastic reduction in sales, which had an immediate effect on cash inflows; this increase should be reabsorbed gradually as business recovers.

Regarding the financial investments of the holding company and the subsidiaries devoted to financial management, given the turbulence and sell-offs in the financial markets, in the first half a loss of € 5.6 million was reported, which meant a negative return of -1.4%; the portfolio of bonds and hedge funds obtained an overall positive return of 0.7%, while losses of € 7.9 million were posted for fair value adjustments made to the investments in private equity and other equity investments.

Events that have occurred since June 30 2020

On July 13 2020, as was stipulated in the agreement of December 2 2019, CIR acquired a shareholding interest in the capital of Giano Holding S.p.A., which represents transparently 5% of the share capital of GEDI. The acquisition involved a disbursement of € 11.7 million, equivalent to a price of € 0.46 for each GEDI share.

Outlook for the year

The degree of uncertainty as to the evolution of the business and the results of the second half remains extremely high.

As far as KOS is concerned, towards the end of the first half there was an inversion of the trend with a recovery in rehabilitation activity, the acute sector and in diagnostics and oncology services; the care-home sector has stabilized but is not yet at the recovery stage. As things are at present, provided there is no second wave of contagion in the autumn, it is expected that the diagnostic areas, oncology treatments, psychiatrics and the acute sector could return to levels of pre-Covid activity during this year. For rehabilitation and the care-homes, the return to normal levels of activity is expected to take place in 2021. Moreover with reference to the care-home sector in Germany, it should be noted that the impact of Covid-19 was limited and the return to normality is expected to be by the end of this year.

In this scenario, it is therefore plausible that the reduction in revenues and results of the business reported in the first half will be less in the second half of the year.

As regards Sogefi, visibility as to the evolution of the market in the coming months remains limited both in terms of the uncertainty as to the evolution of the pandemic and of the difficulty in forecasting the impact of macro-economic circumstances caused by the same on demand in the automotive sector. For the second half of 2020, IHS Markit, a source commonly used by the sector, expects that, without a second outbreak of Covid-19 and resulting measures to restrict production and adverse effects of the latter on the market, world production could be at -10% compared to the second half of 2019, while market analyst forecasts tend to be more cautious, expecting a world market contraction in a range between -15% and -30%, the latter in the event of a second wave of Covid-19.

In this uncertain scenario, Sogefi has incorporated into its expectations for the second half of the year a world market scenario hypothesis of around -20%, against which it expects to achieve an EBIT, excluding restructuring costs, that is slightly positive, a significant reduction in the net loss compared to the first half and a slightly positive free cash flow.

Both companies, in the light of the totally exceptional circumstances that arose in the first half of the year, despite today having financial resources in excess of their current needs and not foreseeing any increase in their debt compared to the levels at the end of June 2020, given the uncertainty as to the evolution of the market and anticipating the natural expiry of their existing loans, have begun negotiations with their financial partners, with whom they have consolidated relationships, to ensure that they have sufficient funding available in the medium term.

In the light of the above, the CIR group expects the second half of the year to still be difficult but provided there is no second wave of Covid-19 it should be much better than the first half.

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CIR: AGM approves Financial Statements for 2019

New Board for the three years 2020-2022. Rodolfo De Benedetti confirmed as Chairman and Monica Mondardini as Chief Executive Officer. Former CIR Directors Philippe Bertherat, Maristella Botticini, Franco Debenedetti, Silvia Giannini and Francesca Pasinelli enter the Board

Milan, June 8 2020 – The Annual General Meeting of the Shareholders of CIR S.p.A. – Compagnie Industriali Riunite was held today in Milan under the chairmanship of Rodolfo De Benedetti.

Pursuant to terms of Art. 106, paragraph 4, of Decree Law no. 18 of March 17 2020, Shareholder attendance at the AGM took place exclusively through the designated representative appointed in accordance with the terms of Art. 135-undecies of D.Lgs. no 58 of February 24 1998 (TUF) and identified as Studio Segre S.r.l., to whom proxies/ sub-proxies were given as per the terms of Art. 135-novies of the TUF, in waiver of Art. 135-undecies, paragraph 4, of the TUF.

Approval of the Financial Statements for 2019

The Shareholders approved the Financial Statements for 2019 of CIR and COFIDE before the merger (on February 19 2020 the merger by incorporation of CIR S.p.A. – Compagnie Industriali Riunite into COFIDE – Gruppo De Benedetti S.p.A. took effect; the name of the Company resulting from the merger is CIR).

The group closed the year with pro-forma consolidated revenues of € 2,114.4 million, substantially unchanged from 2018, and EBITDA of € 290.3 million, down by 7.4% with constant accounting criteria. The net result before the effects relating to GEDI was a positive € 14.3 million (€ 22.6 million excluding non-recurring items and changes to accounting standards, in line with € 21.8 million, the comparable figure for the year 2018); including GEDI, the group reported a loss of € 122.4 million.

The Shareholders’ Meeting approved the proposal of the Board of Directors not to distribute dividends and the proposal not to renew the authorization to buy back own shares.

Stock Grant Plan

The Shareholders approved the first section of the report on compensation policy and on the compensation paid out and voted in favour of the second section of the same report. They also approved the Stock Grant Plan for 2020 aimed at directors and/or executives of the company and its subsidiaries for a total maximum of 4,500,000 conditional rights, each of which will give the beneficiaries the right to receive 1 CIR share free of charge. The shares assigned will be made available by drawing upon the own shares held by the company as treasury stock.

Appointment of the Board of Directors

The Shareholders Meeting established 12 as the number of members of the Board of Directors compared to the 9 members of the outgoing Board. For the three years 2020-2022 the following persons were appointed: Rodolfo De Benedetti, Monica Mondardini, Edoardo De Benedetti, Marco De Benedetti, Franco Debenedetti, Philippe Bertherat, Maristella Botticini, Paola Dubini, Silvia Giannini, Pia Luisa Marocco, Francesca Pasinelli and Maria Serena Porcari. The Directors were drawn from the sole list presented by the majority Shareholder F.lli De Benedetti S.p.A.. The CVs of the Directors are available on the website www.cirgroup.com.

During the Meeting Chairman Rodolfo De Benedetti and Chief Executive Monica Mondardini thanked the outgoing Directors Massimo Cremona and Francesco Guasti andthe outgoing Statutory Auditors for their work at the service of the company.

Appointment of the Board of Statutory Auditors

The Shareholders also appointed the members of the Board of Statutory Auditors of the company for the three years 2020-2022. The Statutory Auditors in office are Francesco Mantegazza, Maria-Maddalena Gnudi and Gaetano Rebecchini. The Alternate Auditors are Antonella Dellatorre, Luigi Macchiorlatti Vignat and Gianluca Marini. The Statutory Auditors were drawn from the sole list presented by the majority Shareholder F.lli De Benedetti S.p.A.. The Statutory Auditors’ CVs are available on the website www.cirgroup.com.

Renewal of powers delegated to the Board of Directors

In the extraordinary part of the meeting the Shareholders renewed the authorization of the Board of Directors to increase the share capital up to a maximum amount of € 500 million and to issue convertible warrants or bonds with warrants attached even without the option right and in this case in favour of institutional investors.
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Meeting of the Board of Directors

After the AGM, the Board of Directors, on the strength of the powers given to it by the Annual General Meeting of the Shareholders, implemented Stock Grant Plan 2020 by assigning 3,640,311 rights.

The Board of Directors confirmed Rodolfo De Benedetti as Chairman and Monica Mondardini as Chief Executive Officer of the company.

The Board checked the presence of the requisites for independence of the Directors, qualifying the following persons as independent: Philippe Bertherat, Maristella Botticini, Paola Dubini, Silvia Giannini, Pia Luisa Marocco, Francesca Pasinelli and Maria Serena Porcari. Seven Directors out of a total of twelve are therefore independent.

The Board also acknowledged that the members of the Board of Statutory Auditors meet the requirements for independence.

Lastly the members were appointed of the Appointments and Compensation Committee (Francesca Pasinelli, Chairman, Philippe Bertherat, Silvia Giannini, Maria Serena Porcari), of the Control, Risk and Sustainability Committee (Silvia Giannini, Chairman, Maristella Botticini, Paola Dubini, Pia Luisa Marocco, Francesca Pasinelli, Maria Serena Porcari), and of the Committee for Related-Party Transactions (Silvia Giannini, Chairman, Maristella Botticini, Paola Dubini, Pia Luisa Marocco, Francesca Pasinelli, Maria Serena Porcari). The Lead Independent Director was also appointed (Maria Serena Porcari).

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The Executive responsible for the preparation of the Company’s Financial Statements, Giuseppe Gianoglio, hereby declares, in compliance with the terms of paragraph 2 Article 154 bis of the Finance Consolidation Act (TUF), that the figures contained in this press release correspond to the results documented in the Company’s accounts and general ledger.

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CIR: results for first quarter 2020

  • After first two months of growth, the quarterly results were impacted by the shutdown in March of Sogefi’s production activities, by higher costs incurred by KOS to respond to the public health emergency, and by financial market turbulence, all due to the Covid-19 pandemic  
  • Revenues stable at € 531.5 million (€ 530.2 million in 1Q 2019), thanks to the extension of the perimeter in 2019 with the acquisition made in Germany in the healthcare sector 
  • EBITDA: € 66.2 million (€ 69.5 million in 1Q 2019) 
  • EBIT: € 12 million (€ 23.6 million in 1Q 2019) 
  • Net result: -€ 12.1 million
  • Net financial position of the parent company is extremely solid: € 280.7 million (approximately € 380 million expected by end of April)

Milan, April 24 2020 – The Board of Directors of CIR S.p.A. – Compagnie Industriali Riunite, which met today under the chairmanship of Rodolfo De Benedetti, has approved the Financial Report as of March 31 2020 presented by Chief Executive Officer Monica Mondardini. 

Impact of Covid-19 on the group 

At the beginning of January 2020, the WHO published news of the spread of coronavirus in China, particularly in the Wuhan district, and on January 30 declared a public health emergency at international level. During February, the virus was reported to have spread to Europe and America and by March a situation of substantial lockdown had been put in place. Italy was the first country in Europe to be invaded by the pandemic, and today is still one of the hardest hit countries, and the one that has adopted the most stringent measures to contain the spread of the virus. These measures have led to a declining trend of the phenomenon, but the conditions and the timing of the return to social interaction and economic activity are still uncertain and the country is awaiting the beginning of May for information on possible developments. Even in the other countries in which the group operates, the prospects for a return to normality are still uncertain. 

In this context, the companies of the CIR group took immediate action to protect the health of their employees, in compliance with the instructions issued by the governments of the various countries in which they operate, and implemented all the activities necessary and appropriate to manage the Covid-19 crisis and protect their sustainability.

The impact of the crisis on the businesses of the group was and continues to be significant: KOS, whose businesses are all operational except for outpatient facilities, has been operating in entirely exceptional conditions, dealing with the consequences of the exposure to the virus of individuals at whom its services are specifically directed; Sogefi, like the whole of the automotive sector, had to suspend its production activity first in China (which is today starting up again) and then in the second half of March in all regions of the world where it has a presence. Lastly, turbulence in the financial markets has led to adjustments to the value of the financial investments managed by the CIR holding company and its non-operating subsidiaries, despite the prudent profile of their investment portfolio.  

Consolidated results

In the first quarter of 2020, the CIR group reported consolidated revenues of € 531.5 million, substantially unchanged from € 530.2 million in the same period of 2019. In the first quarter, KOS increased its revenues thanks to the acquisition of Charleston in Germany in 2019, while Sogefi reported a decline in revenues due to the almost total shutdown of its production activities in the second half of March. 

The consolidated gross operating margin (EBITDA) came to € 66.2 million (12.5% of revenues) and was down by 5% from € 69.5 million (13.1% of revenues) in the first three months of 2019. The gross operating margin of the first two months showed an improvement in Sogefi’s profitability and the Italian businesses of KOS also held up well, while in March, because of the shutdown of Sogefi’s businesses and the impact of the public health emergency on the KOS group, EBITDA was lower. 

The consolidated operating result (EBIT) was € 12.0 million (2.3% of revenues), down from € 23.7 million in the first quarter of 2019; the reduction reflects the trend of EBITDA and the higher level of amortization in KOS after the incorporation of Charleston. 

The financial management result was affected by the generalized fall in the markets, giving rise to a negative return on the portfolio of the holding company of € 7.5 million, compared to a positive result of € 3.7 million in first quarter 2019. 

From the second half of February onwards, the financial markets experienced sharp declines both in the equity sector (between the start of the year and March 31 the S&P 500 index lost 20% and the Eurostoxx 50 index was down by 26%) and in the bond sector (with negative returns of between -5% and -15% in the various asset classes). The loss of € 7.5 million on the financial investment portfolio of the parent company CIR and its non-industrial subsidiaries was due mainly to the adjustment to fair value of the positions held in the Equity, Hedge Fund and High Yield bond segments. The average size of the portfolio was € 383 million with a negative performance in the quarter of 1.9%, which confirms the fact that it was less volatile than the markets. 

The net result was a loss of € 12.1 million versus earnings of € 4.1 million in the first quarter of 2019 (€ 5.7 million including the result of the assets held for disposal). 

Consolidated net debt before IFRS 16 amounted to € 367.7 million at March 31 2020, up by € 40.1 million compared to December 31 2019 (€ 327.6 million). KOS made investments for approximately € 25 million in acquisitions and greenfield developments and Sogefi made investments in a new plant in Romania for € 4.3 million.

The net financial position of the Parent Company (including the non-industrial subsidiaries) at March 31 2020 was positive for € 280.7 million, lower than at December 31 2019 (€ 295.7 million) mainly because of the above-mentioned adjustments to the fair value of assets (€ 8.8 million), and new capitalized assets (€ 0.9 million).

Financial payables for rights of use as per IFRS 16 totalled € 789.9 million at March 31 2020 leading to overall consolidated net financial debt of € 1,157.6 million. The IFRS 16 payables refer mainly to the subsidiary KOS (€ 733.0 million) which operates mostly in leased premises (it should be noted that Charleston operates exclusively in leased properties).

The equity of the group stood at € 757.7 million at March 31 2020 versus € 770.7 million (pro-forma) at December 31 2019 and the reduction reflects the loss for the period. 

Healthcare

KOS, which is controlled by CIR (59.5%) and in which F2i Healthcare has an interest, is the principal operator in Italy in the long-term care sector. The group manages 137 facilities, mainly in the centre and north of Italy and in Germany, with a total of more than 12,500 beds, and is active not only in Italy but also in India and the United Kingdom in the sector of diagnostics and oncology treatments. 

In the first three months of 2020, KOS reported revenues of € 181.3 million, posting a rise of 29.2%, due to the enlargement of its perimeter thanks to the acquisition of Charleston, compared to € 140.3 million in the same period of 2019. Revenues of the businesses in Italy, the UK and India declined overall by 1.5% compared to 2019; Charleston’s revenues came to € 43.1 million. 

Consolidated EBITDA came in at € 35.6 million, up from € 33.1 million in 2019, with Charleston contributing € 7.7 million in the quarter. The rest of the perimeter showed a decline due to the effects of the Covid-19 pandemic on the group.

Consolidated EBIT came to € 12.3 million versus € 16.8 million reported in the first quarter of 2019. The reduction was due to a rise of € 6.8 million in amortization resulting from the change in the perimeter compared to the first quarter of 2019.

Consolidated net income was € 2.0 million compared to € 7.8 million in 2019.

At March 31 2020, KOS had net debt before IFRS16 of € 392.5 million, up from € 368.0 million at December 31 2019, after investments of € 24.7 million made in acquisitions and greenfield developments. Operating cash flow was lower than that normally generated by business activity because of the circumstances caused by the pandemic. 

At March 31 2020, consolidated equity stood at € 287.8 million versus € 285.9 million at December 31 2019.

Automotive components

Sogefi is one of the main producers worldwide in the sectors of suspension, filtration, and air and cooling systems for motor vehicles, with 41 production plants in four continents. The company is controlled by CIR (56.6%) and is listed on the Stock Exchange.

Sogefi reported revenues of € 350.2 million, down by 10.2% compared to the same period of 2019. The overall decline was more limited than that reported by the market (-24.7%) thanks to the good performance of all geographical areas except China in the first two months of the year. 

EBITDA for first quarter 2020 came in at € 34.9 million, compared to € 41.3 million in the same period of 2019; profitability (EBITDA / Revenues %) was 10% and was down from 10.6% in the same period of the previous year. 

EBIT came to € 3.7 million versus € 11.3 million in the first quarter of 2019. The reduction in EBIT took place in March because of the collapse in volumes, and includes the negative effect of exchange rates for € 5.3 million, mainly referring to South America. 

The first quarter closed with a net loss of € 5.6 million, which compares with a net result for first quarter 2019 of € 0.2 million (€ 1.6 million including the result of businesses held for disposal).  

Free Cash Flow for the first quarter of 2020 was a positive € 5.4 million versus -€ 9.1 million in 2019, thanks to a decidedly more favourable performance of working capital. 

Net financial debt before IFRS 16 stood at € 256.7 million at March 31 2020 and was substantially unchanged from € 256.2 million at the end of 2019 but lower than the figure of € 262.1 million reported at March 31 2019. Including the amount of € 56.7 million resulting from the application of IFRS 16, net debt amounted to € 313.4 million at March 31 2020, down from € 318.9 million at December 31 2019. At March 31 2020, Sogefi had credit lines of € 298 million in excess of its net debt figure, for which all the conditions have been respected and which are thus available for drawdown at a simple request. 

At March 31 2020, consolidated equity, excluding minority interests, amounted to € 181.1 million (€ 188.7 million at December 31 2019).

Non-core investments

The non-core investments of the group totalled € 76.9 million at March 31 2020 (€ 74.5 million at December 31 2019).

They consisted of a diversified portfolio of funds in the private equity sector, the fair value of which was € 59.2 million at March 31 2020, and a diversified portfolio of direct minority shareholdings worth € 17.7 million at March 31 2020.  

Events that have taken place since March 31 2020

In order not to prevent the operating companies of the group from accessing bank loans guaranteed by SACE, as per the terms of D.L. no. 23 of April 8 2020, to counter the effects of Covid 19, on April 20 2020 the Board of Directors of CIR decided to withdraw both the proposal to distribute a dividend of € 0.02 per share for the year 2019 and the proposal to authorize the buyback and disposal of own shares and then to postpone the ordinary and extraordinary Annual General Meeting of the Shareholders, scheduled for April 24 2020, until June 8 2020. The Board in any case reserves the right to evaluate the possibility of submitting the proposals withdrawn to a General Meeting of the Shareholders in the second half of the year, should the evolution of the current crisis permit it. 

On April 23 2020 the sale was completed of CIR’s 43.78% shareholding in GEDI Gruppo Editoriale to EXOR N.V.. More specifically, the sale was completed of GEDI to Giano Holding S.p.A., a newly established company wholly owned by EXOR, at a price per share of € 0.46, which corresponds to a total amount of € 102.4 million. An investment agreement was also signed by CIR, EXOR and Giano Holding, regulating the purchase by CIR, on completion of the mandatory public offer to buy GEDI shares and at the same price as that of the offer  (€ 0.46), of a shareholding interest in Giano Holding representing, transparently, 5% of the issued share capital of GEDI.

Outlook for the year

In the current state of uncertainty about the evolution of the pandemic at global level and of the measures that the governments of the various countries will adopt for the recovery phase, it is impossible to make any reliable forecasts of the impact of the Covid-19 phenomenon on the CIR group. 

The evolution of Sogefi’s business is particularly uncertain, given that the repercussions of the pandemic on the automotive sector have been particularly significant. The group is focused on doing all it can to manage the crisis: it has put in place actions to reduce costs and limit as far as possible outlays for current costs and investments that are not strictly necessary, it regularly assesses liquidity positions, liaising with its financial partners, and is preparing to start operating again, introducing higher safety standards for personnel and cost flexibility, in relation to volumes that will be negatively affected by circumstances for a certain period of time. Despite this, both the period of closure and the first months after business resumes will see economic losses that will also be reflected in an increase in net debt.

As for KOS, the coming months will be devoted to limiting the negative impact of the spread of the Covid-19 virus and to defending the health of guests, patients and workers. After a phase of intense development activity, during the rest of the year the company will focus on the integration of the numerous acquisitions that it has made in recent times. 

Regarding the investments of the parent company, the management of its financial assets remains based on prudential long-term policies. The parent company of the CIR group (together with the other non-industrial subsidiaries) has a very solid capital position with net cash and cash equivalents of € 280.7 million, which are not restricted and are not subject to any obligations. This position increased in April by € 102.4 million from the sale of the investment in GEDI.  

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CIR press release

The Board of Directors of CIR has decided to withdraw its proposals regarding the distribution of dividends and the authorization to buy back and dispose of own shares, and consequently to postpone until June 8 2020 the ordinary and extraordinary Annual General Meeting of the Shareholders scheduled to be held on April 24 2020  

Milan, April 21 2020 –The Board of Directors of CIR acknowledges that the economic environment has changed since the date of the last Board of Directors meeting held on March 9 2020 and the issue of the recent D.L. no. 23 of April 8 2020 (the “Liquidity Decree”). Article 1 of this decree allows businesses to access bank financing under guarantees issued by SACE S.p.A. but only on the condition that the beneficiary company or “any other company  with its headquarters in Italy belonging to the same group as the latter, does not approve the distribution of dividends or the buyback of own shares during  2020”.

In this changed regulatory environment and given the general situation of the markets which the group’s operating companies will have to measure up to, in order not to prevent them from accessing bank loans guaranteed by SACE if necessary, the Board has resolved to withdraw both the proposal for the distribution of a dividend of € 0.02 per share for the year 2019 and thus not to distribute any dividends, and the proposal for the authorization of the buyback and disposal of own shares (but maintaining the cancellation of the resolution authorizing the buyback of own shares of April 29 2019, for the part not yet executed).

As a result of the above and in the light of the right given by Art. 106 of D.L. no. 18 of March 17 2020, the Board of Directors has voted to postpone the ordinary and extraordinary Annual General Meeting of the Shareholders from April 24 2020 until June 8 2020 with the following Agenda:  

Ordinary part

1. Financial Statements for the year ended December 31 2019. Resolutions on the same. Presentation of the Consolidated Financial Statements for the year ended December 31 2019.

2. Financial Statements for the year ended December 31 2019 of “CIR S.p.A. – COMPAGNIE INDUSTRIALI RIUNITE” Tax Code 00519120018 incorporated into “COFIDE – Gruppo De Benedetti S.p.A.” Tax Code 01792930016 (now “CIR S.p.A. – COMPAGNIE INDUSTRIALI RIUNITE”). Resolutions on the same.

3. Determination of the number of Directors, appointment of the members of the Board of Directors for the years 2020-2022 and decision as to their fees.

4. Appointment of the Board of Statutory Auditors for the years 2020-2022 and decision as to their fees.

5. Proposal to cancel the resolution of April 29 2019 regarding the authorization to buy back and dispose of own shares.

6. Report on compensation policy and compensation paid out. Resolutions on the same.

7. Proposal for the approval of Stock Grant Plan 2020.

Extraordinary part

1. Proposal to cancel the authorization of the Board of Directors to increase the share capital and issue bonds, approved by the Extraordinary General Meeting of the Shareholders on April 27 2018 and assignment of new authorizations as per the terms of Articles 2443 and 2420 ter of the Civil Code.

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The Board in any case reserves the right to evaluate the possibility of submitting the proposals withdrawn to a General Meeting of the Shareholders in the second half of the year, should the developments of the current emergency allow it. The company’s calendar of events will be amended with the new date of the Annual General Meeting.

The Notice of Annual General Meeting and the further pre-AGM documentation including the time limits for the presentation of lists for the renewal of the Board of Directors and Board of Statutory Auditors, adjusted in the light of the resolutions adopted at today’s Board meeting, will be made available to the public within the time-frames and following the procedures laid down by law and any regulations applicable.

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Sogefi: AGM approves Financial Statements for 2019

Mauro Fenzi confirmed as Chief Executive Officer of the Company

Milan, April 20 2020 – The Annual General Meeting of the Shareholders of Sogefi S.p.A. was held today under the chairmanship of Monica Mondardini.

Pursuant to the terms of Art. 106, paragraph 4, of Decree Law no. 18 of March 17 2020, Shareholder attendance at the Annual General Meeting is exclusively through the designated representative, appointed as per the terms of Art. 135-undecies of D.Lgs. no. 58 of February 24 1998 (TUF) and identified as Studio Segre S.r.l., to whom proxies and sub-proxies were also assigned in accordance with Art. 135-novies of the TUF, in waiver of Art. 135-undecies, paragraph 4, of the TUF. 

Approval of the Financial Statements for 2019

The Shareholders approved the Financial Statements for 2019. Sogefi closed the year with consolidated revenues of € 1,519.2 million (versus € 1,570.7 million in 2018), EBITDA of € 174.3 million (€ 176.1 million in 2018) and consolidated net income of € 3.2 million (€ 14.0 million in 2018). The parent company Sogefi S.p.A. reported net income of € 7.7 million (compared to a loss of € 13.7 million in 2018).

The Shareholders adopted the proposal put forward by the Board of Directors that no dividends be distributed.

Stock Grant Plan, Compensation Policy and own shares

The Shareholders approved the first section of the report on compensation policy and emoluments paid out and expressed a vote in favour of the second section of the same report. They also approved the Stock Grant Plan for 2020 for employees of the Company and its subsidiaries for a maximum of 1,000,000 conditional rights, each of which will give the beneficiaries the right to be assigned 1 Sogefi share free of charge. The shares assigned will be made available by drawing upon the own shares held by the Company as treasury stock. The Plan has the aim of rewarding the beneficiaries’ loyalty to the companies of the Group, giving them an incentive to increase their commitment to improving performance.

Regarding the buyback of own shares, following the renewal by the Shareholders of the authorization of the Board of Directors to buy back a maximum of 10 million own shares (including 2,212,478 own shares held today as treasury stock, corresponding to 1.8419% of the share capital), given that Decree Law no. 23 of April 8 2020 (the so-called “Liquidity Decree” enacting urgent measures on the subject of access to credit and tax obligations for businesses) stipulates that SACE S.p.A. can until December 31 2020 give guarantees in favour of banks and domestic and international financial institutions to businesses with their headquarters in Italy affected by the Covid-19 epidemic, provided that the latter do not approve the buyback of own shares during 2020, the Board of Directors has adopted a resolution that it will not start any buyback programmes for the whole of 2020.   

Mauro Fenzi confirmed as Chief Executive Officer

The Shareholders confirmed Mauro Fenzi – who was co-opted by the Board, as per the terms of Art. 2386 of the Civil Code, on December 9 2019 – as a Director of the Company. After the AGM, the Board of Directors confirmed him as Chief Executive Officer of the Company. Mauro Fenzi has also held the position of General Manager since January 1 2020. His curriculum vitae is available on the website www.sogefigroup.com.

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CIR: F.lli De Benedetti S.p.A. presents list for Board of Directors

Milan, March 30 2020 – CIR S.p.A. – Compagnie Industriali Riunite announces that the company F.lli De Benedetti S.p.A., holder of 381,500,256 ordinary shares in CIR equal to 29.87% of the share capital and 44.53% of the voting rights, is the only shareholder to have presented a list for the renewal of the Board of Directors for the years 2020-2022 at the ordinary Annual General Meeting of the Shareholders to be held on April 24 2020 at 11.00 a.m. at a single call.

F.lli De Benedetti S.p.A. also announces that at the AGM it will put forward the proposal that there should be 12 members of the Board of Directors compared to the 9 currently holding the position.

The list contains the following candidates:

  1. De Benedetti Rodolfo
  2. Mondardini Monica
  3. De Benedetti Edoardo
  4. De Benedetti Marco
  5. Debenedetti Franco
  6. Bertherat Philippe (independent)
  7. Botticini Maristella (independent)
  8. Dubini Paola (independent)
  9. Giannini Silvia (independent)
  10. Marocco Pia Luisa (independent)
  11. Pasinelli Francesca (independent)
  12. Porcari Maria Serena (independent)

The CVs and the documentation in which the candidates accept their candidature and attest that they possess the requisites prescribed by law and by the Company Bylaws together with the profile containing their personal and professional details will be made available to the public as from April 3 2020 at the Company headquarters (Via Ciovassino 1, Milan), on the website www.cirgroup.com, and on the authorized storage mechanism eMarket STORAGE.

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Consolidated results for 2019

  • Merger CIR-COFIDE: received a positive reaction from the market
  • Agreement reached on December 2 2019 for the sale to EXOR N.V. of the holding in GEDI (43.7%) for € 0.46 per share, which includes a premium of approximately 70%
  • Revenues at € 2,114.4 million, in line with 2018 (€ 2,115.6 million)
  • Revenues of the subsidiary KOS continue to grow (€ 595.2 million, +9.2%). Start of development of core activities abroad with the acquisition of Charleston
  • EBITDA: € 290.3 million 
  • EBIT: € 85.5 million 
  • Net result excluding GEDI positive for € 14.3 million 
  • Loss reported on the interest in GEDI of € 136.7 million, of which € 58.6 million as the share pro rata of the losses of the subsidiary and € 78.1 million as the adjustment of the carrying value to the sale price agreed on
  • Net financial position of the parent company solid at € 295.7 million (€ 299.6 million in 2018)
  • Proposed dividend of € 0.02 per share, in line with 2018, considering the share exchange rate

Milan, March 9 2020 – On February 19 2020 the merger by incorporation of CIR S.p.A. – Compagnie Industriali Riunite into COFIDE – Gruppo De Benedetti S.p.A. became effective; the name of the Company post-merger is CIR. 

The Board of Directors, which met today under the chairmanship of Rodolfo De Benedetti, approved the statutory and consolidated Financial Statements for the year ended December 31 2019 of CIR and COFIDE, as the merger took place in 2020, and examined the pro-forma results of the group – as if the merger had taken place last year – as presented by Chief Executive Officer Monica Mondardini. The information below refers to the pro-forma results, but also gives the results of CIR and COFIDE pre-merger in a concise form. 

The Board voted to propose that the Annual General Meeting of the Shareholders approve the distribution of a dividend of € 0.02 per share.

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During 2019 important deals were concluded, deals that redesigned the structure and perimeter of the group. 

The merger was initiated between CIR and its parent company COFIDE, after being approved by their respective Boards of Directors on March 11 2019. The merger took effect on February 19 2020. It has shortened the control chain and reduced unproductive costs, making the shares more liquid thanks to the greater float.  The market reacted positively. 

An agreement was reached with EXOR N.V. for the sale of CIR’s holding in GEDI Gruppo Editoriale. The sale of GEDI, the group that CIR had controlled for over thirty years, was part of CIR’s strategy of focusing its managerial commitment and its resources on sectors in which it is present where there is greater potential for the creation of value. The transfer of control to the EXOR holding guarantees that GEDI, which operates in a highly challenging market, will be able to count on a strong shareholder with experience in the sector and a long-term plan. The agreement includes a price per share that incorporates a premium of approximately 70% of stock exchange prices prior to the announcement: the market reacted positively to the deal to the benefit of CIR. In spite of this, CIR reported a significant loss as the sale price was lower than the carrying value. 

A first step was taken to expand abroad the core business of the subsidiary KOS through the acquisition of the German company Charleston, which operates in the nursing home sector with 47 facilities with a total of 4,050 beds, and is forecasting 2020 revenues of € 175 million. For KOS Charleston represents a 30% increase in size and the start of a path of international growth in addition to its intense consolidation activity in Italy.

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The Financial Statements for 2019, as was already commented on in detail in the interim financial reports, were formulated with the application of the new accounting standard IFRS 16 which produced changes in all the main financial indicators, EBITDA in particular, and involved the recognition as debt of the present value of future lease payments. 

Moreover, following the deal announced on December 2 2019, the interest in GEDI was classified as an “asset held for disposal” in accordance with IFRS 5. 

The consolidated results for 2019 were affected by the loss resulting from the pro-forma net result for the year 2019 of GEDI, burdened by the write-down of goodwill and the value of its newspaper titles (la Repubblica and La Stampa), and by the adjustment of the carrying value of the asset to the price agreed upon for the sale. 

The financial figures presented below, relating to the consolidated Financial Statements for 2019, in application of IFRS 5, do not include GEDI, except for in the net result and shareholders’ equity numbers.

Consolidated results

The group reported consolidated revenues of € 2,114.4 million, substantially unchanged from 2018, with KOS posting growth of 9.2% and Sogefi declining by 3.3%.

The consolidated gross operating margin (EBITDA) came in at € 290.3 million (13.7% of revenues); before the application of IFRS 16, EBITDA was € 238.6 million, down by 7.4% compared to the figure for 2018 (€ 257.7 million), because of the unfavourable performance of the automotive market in which Sogefi operates and the significant non-recurring charges incurred for the completion of extraordinary transactions, particularly the acquisition of  Charleston by KOS and the CIR-COFIDE merger.

The consolidated operating result (EBIT) came to € 85.5 million (4% of revenues) versus       € 109.6 million in 2018 and the decline was due to the factors mentioned above. 

The net result before the effects relating to GEDI was a positive € 14.3 million (€ 22.6 million excluding non-recurring elements and the change in accounting standards, in line with € 21.8 million, the comparable figure for the year 2018); including GEDI, the group reported a loss of € 122.4 million.

The portfolio of financial investments of the parent company and the non-industrial subsidiaries recorded a return of 4.5% (excluding private equity and other equity investments), which was slightly higher than the market benchmark in all asset classes. 

The consolidated net debt before IFRS 16 amounted to € 327.6 million at December 31 2019, up by € 107.8 million from December 31 2018 (€ 219.8 million). With consolidated free cash flow of around € 66 million, KOS invested in acquisitions and greenfield projects for € 117.7 million, Sogefi invested in new plants for an amount of € 10.5 million, dividends were distributed for a total of € 40.9 million and own shares were bought back for € 4.7 million. 

Financial payables for rights of use as per IFRS 16 came to a total of € 800.1 million at December 31 2019 leading to overall consolidated net financial debt of € 1,127.7 million. The payables as per IFRS16 mainly refer to the subsidiary KOS (€ 737.3 million), which operates principally in leased facilities (it should be noted that Charleston operates only in leased properties).

The equity of the group stood at € 770.7 million at December 31 2019 versus € 923.3 million at December 31 2018 and the reduction was due mainly to the loss reported on GEDI, the distribution of dividends and the buyback of own shares. 

At December 31 2019 the group had 18,648 employees, up from 14,006 at December 31 2018. The increase was due to the acquisition of Charleston, which employs 3,981 people.

Healthcare

KOS, which is controlled by CIR (59.5%) and in which F2i Healthcare has an interest, is the principle operator in Italy in the long-term care sector. The group manages 135 facilities, mainly in the north of Italy and in Germany, with a total of 12,464 beds, and is active not only in Italy but also in India and the United Kingdom in the sector of diagnostics and oncology treatments. 

In 2019 the consolidated revenues of KOS were up by 9.2% at € 595.2 million. The Long-Term Care sector reported growth in revenues of 9.5%, thanks to organic growth and to the contribution of the acquisitions made in 2018 and 2019; the Diagnostics and Oncology Treatment area also grew significantly (+11.7%), thanks to the evolution of its contract portfolio. 

Consolidated EBITDA came in at € 141.3 million (€ 102.0 million excluding the effect of IFRS16, in line with the amount reported in the previous year). The benefits deriving from the new acquisitions, especially Charleston, will already be seen in 2020 and will reach full potential over the next three years. 

Consolidated EBIT came to € 67.7 million and was slightly higher than the figure reported in 2018 (€ 66.3 million).

Consolidated net income was € 30.3 million, down from € 35.2 million reported in 2018, due to higher financial charges (€ 1.9 million), the negative impact of IFRS16 (€ 2.5 million) and the extraordinary charges incurred for the acquisitions. 

At December 31 2019 the KOS group had net debt before IFRS16 of € 368.0 million versus € 259.4 million at December 31 2018; cash flow was a positive € 44 million, acquisitions were made for € 99 million and greenfield developments for € 18.7 million; lastly, dividends of € 35.9 million were distributed.

At December 31 2019 consolidated equity stood at € 292.2 million, compared to € 297.7 million at December 31 2018.

During 2019 KOS’s growth trajectory in long-term care continued with the acquisition of Charleston Holding GmbH, a German company active in the supply of residential services for the non self-sufficient elderly and ancillary services for elderly people with a high level of disability, Villa Pineta S.r.l., a private hospital in Modena, and Casa Serena S.r.l., a care home situated in Carasco (GE). KOS also acquired SELEMAR S.r.l., which manages a pathology laboratory in Urbino, and Laboratorio Gamma S.r.l. based in Grosseto.

Automotive components

Sogefi is one of the main producers worldwide in the sectors of suspension, filtration, and air and cooling systems for motor vehicles, with 41 production plants in four continents. The company is controlled by CIR (56.7%) and is listed on the Stock Exchange.

In 2019 Sogefi reported revenues of € 1,519.2 million, down by 3.3% compared to 2018. The decline was overall more limited than that reported by the market (-5.8%) thanks to the better performance of revenues in Italy. By business sector, compared to the performance of the market, Filtration bucked the trend with growth of 1.7%, Air and Cooling showed a more limited decline (-1.7%), while Suspensions reported a decline of 5.6%, in line with the market. 

EBITDA came in at € 174.3 million (of which € 12.4 million from the application of IFRS 16), and profitability (EBITDA / Revenues %), despite the fall in volumes, came to 11.5%, a figure in line with that of the previous year with the same accounting standards and excluding in 2018 the non-recurring income of € 6.6 million resulting from the close of the quality claims of  Systèmes Moteurs S.A.S.. 

EBIT came to € 39.6 million (€ 43 million excluding the write-off of certain projects) versus € 60.1 million in 2018 (€ 53.5 million without considering the above-mentioned non-recurring gain of € 6.6 million). The operating result showed good growth in Europe thanks to the actions taken in the period while a negative impact was caused by critical factors which affected the North American businesses of the group, the unfavourable performance of the Chinese and South American markets and the start-up costs of the new plants in Morocco (Filtration) and Romania (Suspensions). 

Net income came to € 3.2 million compared to € 14.0 million in 2018.   

The net financial debt before IFRS stood at € 256.2 million at December 31 2019 and was down slightly from € 260.5 million at the end of 2018. Including the amount of € 62.7 million from the application of IFRS 16, the net debt at December 31 2019 totalled € 318.9 million.

At December 31 2019 consolidated Shareholders’ equity amounted to € 207.8 million (€ 213.8 million at December 31 2018).

Operations held for disposal

In 2019 GEDI obtained consolidated revenues of € 603.5 million, with a decline of 7% compared to 2018, because of the contraction of the advertising market and the continuing decline in copies of newspapers and magazines sold. 

The adjusted operating result, before non-recurring charges and IFRS16, was € 26.9 million, down from € 33.1 million in 2018. 

In 2019 the newspaper and magazine titles were written down significantly from their carrying values against the backdrop of a market scenario that has worsened beyond expectations. More specifically, GEDI wrote down the value of the titles la Repubblica and La Stampa by an amount of € 105.6 million net of the deferred taxes recognized in the balance sheet for these assets. Moreover, the interest in Persidera was sold, giving a capital loss of € 16.5 million. Lastly, a provision of € 25.1 million was set up for corporate restructuring. GEDI therefore reported a net loss of € 129.0 million.

Non-core investments

The non-core investments of the group totalled € 74.5 million at December 31 2019 (€ 86.0 million at December 31 2018).

They consisted of a diversified portfolio of funds in the private equity sector, the fair value of which was € 56.6 million at December 31 2019, and a diversified portfolio of direct minority shareholdings worth € 17.9 million at December 31 2019.

Outlook for the year

The evolution of the group’s results will depend on that of the sectors in which its strategic equity investments operate, as well as on the performance of the financial markets to which the return on financial assets managed by the non-industrial companies of the group are linked.  

For 2020, KOS expects to see a rise in revenues of some 30%, thanks to the growth in its Italian businesses (around 5%) and to the consolidation of Charleston over the whole year. The profitability of the more recent investments will be fully evident in the next 3-5 years. 

In the automotive sector, the uncertainty as to the market prospects has been accentuated by the unpredictable evolution of the Covid-19 virus and its effects on the world economy and on international trade. The group has limited direct exposure to the Chinese market (China accounts for just 5% of revenues), but there is undoubtedly a risk of the Coronavirus having a global impact on a market that is already in a weak situation. Before factoring in the Coronavirus phenomenon, the effects of which are for the moment unpredictable, based on its portfolio of contracts and the forecast evolution of the market, Sogefi would expect revenues to be in line with those of 2019, which was in fact confirmed for the first two months of 2020, profitability in Europe to hold up and an improvement of profitability in North America, thanks to the new contracts acquired by the Air and Cooling business unit.  

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Results of the CIR group

In 2019 the CIR group reported consolidated revenues of € 2,114.4 million, substantially in line with 2018, with KOS showing growth of 9.2% and Sogefi reporting a decline of 3.3%.

The consolidated gross operating margin (EBITDA) came in at € 292.6 million (13.8% of revenues); before the application of IFRS 16, EBITDA for 2019 would be € 240.9 million, down by 7% compared to the figure for 2018 (€ 259.0 million) because of the unfavourable performance of the automotive market, in which Sogefi operates, and the significant non-recurring charges incurred for the extraordinary transactions, particularly the acquisition of Charleston by KOS and the CIR-COFIDE merger.

The consolidated operating result (EBIT) was € 87.8 million (4.1% of revenues), versus € 111.0 million in 2018 with the decline due to the factors described above. 

The net result before the effects relating to GEDI was a positive € 15.0 million; including GEDI, the group reported a loss of € 121.7 million.

Results of the COFIDE group 

The group reported consolidated revenues of € 2,114.4 million, substantially unchanged from 2018, with KOS showing growth of 9.2% and Sogefi reporting a decline of 3.3%.

The consolidated gross operating margin (EBITDA) came in at € 290.3 million (13.7% of revenues); before the application of IFRS 16, EBITDA for 2019 would be € 238.6 million, down by 7.4% compared to the figure for 2018 (€ 257.7 million) because of the unfavourable performance of the automotive market in which Sogefi operates, and the significant non-recurring charges incurred for the extraordinary transactions, particularly the acquisition of Charleston by KOS and the CIR-COFIDE merger.

The consolidated operating result (EBIT) was € 85.5 million (4% of revenues), versus € 109.6 million in 2018 with the decline due to the factors described above. 

The net result before the effects relating to GEDI was a positive € 7.8 million; including GEDI, the group reported a loss of € 69.8 million.

The parent company COFIDE S.p.A. closed 2019 with net income of € 13.4 million versus net earnings of € 11.1 million in 2018. 

Proposed dividend

The Board of Directors has decided to propose that the Annual General Meeting of the Shareholders approve the distribution of a dividend of € 0.02 per share. The value per share is in line with level of remuneration given in 2018 to the Shareholders of the former CIR. The dividend will be paid on May 20 2020 with the detachment of coupon no. 35 on May 18 and record date May 19.  

Annual General Meeting of the Shareholders

The Annual General Meeting has been convened at a single calling for April 24 2020. At today’s meeting, the Board of Directors resolved:  

  • To put before the Shareholders’ Meeting a motion to cancel and renew the authorization of the same Board of Directors for a period of 18 months to buy back a maximum of 200,000,000 of its own shares and in any case up to 20% of the share capital at a unit price that cannot be more than 10% higher or lower than the benchmark price recorded by the shares on regulated markets on the trading day preceding each single buyback transaction or the date on which the price is fixed. In any case, when the shares are bought back in the regulated market, the price must not be higher than the higher of the price of the last independent transaction and the highest current independent bid price on the same market, in compliance with what is set out in EU Delegated Regulation no. 2016/1052. The main reasons why this authorization is being renewed are: to fulfil the obligations resulting from possible stock option plans or other awards of shares of the Company to employees or members of the Board of Directors of CIR, its subsidiaries or its parent company; to fulfil any obligations resulting from debt instruments that are convertible into or exchangeable with equity instruments; to have a portfolio of own shares to use as consideration for any possible extraordinary transactions, even those involving an exchange of equity holdings with other entities within the scope of transactions of interest to the Company (a so-called “stock of securities”); to support market liquidity of the shares; to take advantage of opportunities for creating value, as well as investing liquidity efficiently in relation to the market trend; for any other purpose qualified by the competent Authorities as admitted market practice in accordance with applicable European or domestic rules, and with the procedures established therein; 
  • To put before the Shareholders’ Meeting for approval a stock grant plan for 2020 aimed at directors and/or executives of the company and its subsidiaries for a maximum of 4,500,000 conditional rights, each of which will give the beneficiaries the right to be assigned free of charge 1 CIR share. The shares thus assigned will be made available from the own shares that the company is holding as treasury stock;
  • To propose the renewal of the Board of Directors, as stipulated in the merger agreement;
  • To propose the renewal of the Board of Statutory Auditors the mandate of which comes to an end with the approval of the Financial Statements for the year ended December 31 2019; 
  • To propose, in an extraordinary session, that the authorization of the Board of Directors be renewed to effect capital increases up to a maximum of € 500 million, capital increases in favour of directors and employees of the company and its subsidiaries for a maximum amount of € 11 million, and to issue convertible bonds and bonds with warrants attached, even without the option right and in this case in favour of institutional investors. 

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The Executive responsible for the preparation of the Company’s Financial Statements, Giuseppe Gianoglio, hereby declares, in compliance with the terms of paragraph 2 Article 154 bis of the Finance Consolidation Act (TUF), that the figures contained in this press release correspond to the results documented in the Company’s accounts and general ledger. 

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Alternative performance indicators

Below the meaning and content are given of the “alternative performance indicators”, not envisaged by IFRS accounting standards but used in this press release to provide a better evaluation of the economic and financial performance of the group: 

– EBITDA (gross operating margin): an indicator of operating performance calculated by adding “amortization, depreciation and write-downs” to the “operating result”; 
– Consolidated net financial debt: an indicator of the financial structure of the group; it is the algebraic sum of financial receivables, securities, other financial assets and cash and cash equivalents in current assets, of bonds, other borrowings and financial payables for rights of use in non-current liabilities, of bank borrowings, bonds, other financial payables and financial payables for rights of use in current liabilities. 

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Sogefi: 2019 revenues € 1,519.2m, -2.2% at constant exchange rates (market -5.8%)

SOGEFI (CIR GROUP): 2019 REVENUES € 1,519.2M, -2.2% AT CONSTANT EXCHANGE RATES (MARKET -5.8%)

EBITDA at € 174.3 million, 11.5% of revenues

Profitability in line with 2018 but improved during 2019 

EBIT at € 39.6 million after significant start-up costs for new production sites and write-down of assets

Milan, February 24 2020 – The Board of Directors of Sogefi S.p.A., which met today under the chairmanship of Monica Mondardini, has approved the proposed financial statements for the year 2019. Sogefi, a company of the CIR Group, is one of the main global producers of automotive components in three sectors: Air and Cooling, Filtration and Suspensions. 

Mauro Fenzi, Chief Executive of Sogefi, made the following statement:

“Sogefi in a difficult year succeeded in outperforming the market and keeping its margins substantially stable. Indeed margins improved in the fourth quarter and in Europe they improved over the whole year. The management team and the employees of a company with a great tradition like Sogefi, which has a consolidated relationship with its customers, will continue in their effort to meet the challenges of a market that is profoundly evolving”.

Revenues

In 2019, the world car market reported a decline in production of 5.8% compared to 2018: -4.7% in Europe, -3.9% in North America, -8.9% in Asia and -4% in South America. In the fourth quarter the decline was 5.4%, with Europe and NAFTA very weak (-6.3% and -8.9% respectively).

Sogefi reported revenues of € 1,519.2 million, down by 3.3% from 2018 at historical exchange rates and down by 2.2% at constant exchange rates.

Revenues at constant exchange rates were down by 1.7% in Europe, by 6.3% in North America and by 8.2% in Asia, while in South America they were up by 8.1%. The overall decline was more limited than that reported by the market (-5.8%) thanks to the performance of revenues in Europe which held up compared to the market (-1.7%, versus -4.7% for the market).

Even in the last quarter of the year Sogefi confirmed a sales performance that was better than the market (-3.5% at current exchange rates and 2.2% at constant exchange rates compared to the market’s -5.4%), with Europe at -1.8% and growth in China and India.  

By business sector, Filtration with growth of 2.7% (+1.7% at current exchange rates) bucked the market trend, Air and Cooling reported a more limited decline that the market (-3.5% at constant exchange rates and -1.7% at current exchange rates) while the revenues of Suspensions reported a decline of 5.6% (-8.8% at current exchange rates).

Operating results and net income

EBITDA for 2019 came in at € 174.3 million (of which € 12.4 million from the application of IFRS 16), and profitability (EBITDA / Revenues %), despite the lower volumes, came to 11.5%, a value in line with that of the previous year on a like-for-like basis and excluding in 2018 the non-recurring income of € 6.6 million from the settlement of the quality claims in Systèmes Moteurs S.A.S..

In the fourth quarter, profitability (11.8%) was in line with the number for the third quarter of the year and confirms the recovery that took place in the year (10.6% and 11.6% in the first and second quarters respectively). Moreover, profitability in the fourth quarter was higher than the figure reported in fourth quarter 2018 and was 9.7% with the same accounting standards.

EBIT was € 39.6 million versus € 60.1 million in 2018 (€ 53.5 million without considering the above-mentioned item of non-recurring income of € 6.6 million); profitability (EBIT / Revenues %) came to 2.6%, compared to 3.4% in 2018. The decline in EBIT was due partly to the lower EBITDA in absolute terms, linked to the fall in revenues, and partly to the start-up costs of the plants in Morocco and Romania and lastly to a write-off of business activities for € 10.7 million.

Operating results showed healthy growth in Europe, thanks to the action taken in the period, while a negative impact came from various circumstances affecting the North American businesses of the group and from the unfavourable performance of the Chinese and South American markets.

Income before taxes came to € 15.9 million (€ 36.2 million in 2018) after financial expenses of € 23.7 million (€ 19.5 million before application of IFRS 16), versus € 23.9 million in 2018. 

Net income came in at € 3.2 million compared to € 14.0 million in 2018, after tax charges of € 13.7 million, down from € 20.0 million in the previous year. The greater impact of taxes reflects the composition of the result, with some geographical area posting significant earnings and others where the decision was made not to recognize deferred tax assets offsetting losses linked to the start-up of business activities or continuing critical market conditions. The net result includes income of € 4.0 million from the sale of the Fraize plant (included in the item “Discontinued operations”), which compares with net income of € 1.1 million from the same business in 2018.

Net debt

Free Cash Flow for 2019 was a positive € 8.4 million, up from € 2.9 million in 2018, which included the disbursement for the acquisition of minority interests in the Indian subsidiary (€ 16.7 million). 

Net debt before IFRS 16 stood at € 256.2 million at December 31 2019, which was slightly lower than the figure of € 260.5 million at the close 2018. Including the sum of € 62.7 million from the application of IFRS 16, the net debt figure at December 31 2019 would have been € 318.9 million.

Equity

At December 31 2019 Shareholders’ equity, excluding minority interests, stood at € 188.7 million (€ 192.9 million at December 31 2018).

Employees

The Sogefi Group had 6,818 employees at December 31 2019 versus 6,967 at December 31 2018. The reduction was due both to the decline in business activity and to the sale in 2019 of the Fraize plant (127 employees at December 31 2018).

Results of the parent company Sogefi S.p.A.

The parent company Sogefi S.p.A. reported net income of € 7.7 million in 2019 compared to a net loss of € 13.7 million in the same period of the previous year. The increase was due mainly to the greater flow of dividends distributed by the subsidiaries and to lower financial expense.

Outlook for the year 2020

Sector sources expect 2020 global car production to decline slightly, with Europe at -1.4%; for the first quarter of 2020, the trend should be a major decline, mainly in China, with a recovery in the following quarters.  It should be highlighted that the market outlook remains highly uncertain and the visibility low.

Taking into account its contracts portfolio, Sogefi expects sales substantially in line with 2019 and slightly better than the market.

A stable profitability in Europe is expected, thanks to the actions taken particularly in the Suspensions business, and a margin recovery is expected in North America, thanks to the new Air & Cooling contracts acquired. 

The current year will be key for the development of the new Suspensions plant in Romania which will contribute to strengthen the EMEA business from 2022 onwards.

These perspectives do not incorporate the effects of Coronavirus; considering the relatively limited exposure of Sogefi to the Chinese market, the main risk is represented by the impact on the world economy and on the car production worldwide.

Proposed dividend

The Board of Directors will propose to the Annual General Meeting of the Shareholders that no dividend be distributed.

Annual General Meeting of the Shareholders

The Annual General Meeting of the Shareholders of Sogefi has been called for April 20 2020 at the first call and for April 21 2020 at the second call.

  • The Board of Directors has voted to put the following proposals before the ordinary session of the AGM: The cancellation and renewal of the power assigned to the same Board of Directors, taking into account current legislation and regulations in force, Consob Resolution no. 20876 of April 3 2019 and Consob Guidelines of July 2019, for a period of 18 months to buy back a maximum of 10 million own shares (including 2,212,478 own shares held today, corresponding to 1.8419% of the share capital) at a unit price that must not be more than 10% higher or lower than the benchmark price recorded by the shares in the stock exchange trading session preceding each single buyback transaction or the date on which the price is fixed and in any case, when the purchases are made on a regulated market, at a price that is no higher than the higher of the price of the last independent transaction and the current independent bid price in the same market, in accordance with what is stipulated in EU Delegated Regulation no. 2016/1052. The main reasons for renewing this authorization are the following: to fulfil obligations resulting from any stock option plans or other forms of assignation of the Company’s shares to employees or members of the Board of Directors of Sogefi or its affiliated companies; to fulfil obligations that may derive from debt instruments that can be converted into or exchanged for shares;  to have a portfolio of own shares to use as consideration in any extraordinary transactions, possibly involving an exchange of shareholding interests, with other parties within the scope of transactions of interest to the Company (a so-called “stock of shares”); to be able to increase the liquidity of the shares in the market; to be able to take any opportunities for creating value as well as investing liquidity efficiently in relation to the trend of the market; for any other purpose that the competent Authorities should qualify as permitted market practice as per the terms of the European and domestic rules applicable, and following the procedures established therein;
  • The approval of a stock grant plan for 2020 aimed at employees of the Company and its subsidiaries for a maximum of 1,000,000 conditional rights, each of which will give the beneficiaries the right to be assigned 1 Sogefi share free of charge. The shares thus assigned will be made available from the stock of own shares held by the company. The plan has the aim of rewarding loyalty in the relationship between the beneficiaries and the companies of the Group, giving them an incentive to increase their commitment to improving the performance of the companies.

The Annual General Meeting will also be called upon to pass a resolution for the appointment of a Director and the proposal is that Mr Mauro Fenzi (Chief Executive Officer and General Manager of the Company) should be confirmed after being co-opted by the Board as per the terms of Art. 2386 of the Civil Code on December 9 2019.

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