Perfomance of the Holding Company Sogefi S.p.A.

In 2014, net result was Euro 2 million, compared to Euro 15.9 million in the previous year.
The reduction was due mainly to the lower flow of dividends approved by the subsidiaries.
urthermore, following the debt refinancing deals, in the year 2014 there was an increase of Euro 11.3 million in the amount of interest expense recognized, which was wholly offset by a financial gain of Euro 14 million corresponding to the higher fair value of the derivative embedded in the convertible bond.
“Operating costs” increased in 2014, in particular costs of non-financial services and amortisation, mainly connected with the more intensive use of the new SAP information system, and the corresponding increase in the royalty fees (“Other operating revenues”) charged to the subsidiaries using the system.
The item “Other non-operating income (expenses)” includes expenses for Euro 1.1 million (Euro 0.8 million in 2013) incurred in 2014 when certain executive functions were re-organised.

(in millions of Euro) 2014 2013
Financial income/expenses and dividends 3.7 19.1
Adjustments to financial assets - -
Other operating revenues 21.3 16.7
Operating costs (25.8) (23.3)
Other non-operating income (expenses) (2.1) (3.1)
Income taxes (4.9) (6.5)
NET RESULT 2.0 15.9


As regards the statement of financial position, the table below shows the main items as of December 31, 2014, compared with the figures recorded at the end of the previous year:

(in millions of Euro) Note (*) 12.31.2014 12.31.2013
Short-term assets (n) 14.4 20.7
Short-term liabilities (o) (8.9) (9.8)
Net working capital   5.5 10.9
Equity investments (p) 397.3 396.9
Other fixed assets (q) 67.6 55.4
CAPITAL INVESTED   470.4 463.2
Other medium and long-term liabilities (r) (1.4) (2.5)
Net financial indebtedness   307.7 304.9
Shareholders' equity   161.3 155.8
TOTAL   469.0 460.7

(*) See the notes at the end of this report for a detailed explanation of the reasons for the reclassifications that we have made.

The decrease in “Short-term assets” reflects for the most part a decrease in amount receivable from the Parent Company CIR S.p.A. arising from the participation in the Group tax filing system.
“Other fixed assets” include increased capitalised costs (for Euro 10.3 million) for the multi-year project started in 2011 to develop and implement the new integrated SAP information system at a group-wide level, as well as higher deferred tax assets on tax losses incurred during the year brought forward under the CIR Group tax filing system.

The decrease in “Other medium and long-term liabilities” is mainly traced back to utilisations of the Phantom Stock Option provision when 990,000 option rights under the 2008 plan were exercised on March 31, 2014.

“Shareholders’ equity” as of December 31, 2014 amounts to Euro 161.3 million, up from Euro 155.8 million as of December 31, 2013, mostly thanks to capital increases through subscription of Stock Options by the beneficiaries. The Company paid no dividends in 2014 as per resolution passed by the Shareholders’ Meeting on April 23, 2014, and the whole 2013 profit was allocated to Reserves and retained earnings.

Net financial position as of December 31, 2014 was Euro 307.7 million, with a net increase of Euro 2.8 million compared to December 31, 2013.

(in millions of Euro) 12.31.2014 12.31.2013
Short-term cash investments 36.6 40.1
Short/medium-term financial receivables to third and subsidiaries 123.2 119.2
Short-term financial debts (*) (139.5) (143.2)
Medium/long-term financial debts (328.0) (321.0)

(*) Including current portions of medium and long-term financial debts.

It should be noted that the Company undertook significant debt re-financing efforts during 2014 by taking out new bank loans and issuing convertible bonds designated “Euro 100,000,000 2 per cent Equity Linked Bonds due 2021” – as per resolution of the Board of Directors passed in May 2014 – ) which were placed with institutional investors. As a result of these transactions, the Company redeemed several loans in advance, including the Syndicated Loan obtained in 2012.

The table below illustrates the cash flow statement of Sogefi S.p.A.:

(in millions of Euro) Note* 2014 2013
SELF-FINANCING (s) (0.6) 18.3
Change in net working capital (t) 5.4 (10.6)
Other medium/long term assets/liabilities (u) 4.4 1.6
Sale of equity investments (v) - -
Increase in intangible assets   10.7 14.2
Purchase of tangible assets   - 0.1
Purchase of equity investments   0.4 0.4
FREE CASH FLOW   (1.9) (5.4)
Holding Company increases in capital   2.5 0.8
Net purchase of treasury shares   - -
Change in fair value derivative instruments   (3.4) (2.3)
Dividends paid by the Holding Company   - (14.7)
Change in net financial position (w) (2.8) (21.6)
Opening net financial position (w) (304.9) (283.3)

(*) See the notes at the end of this report for a detailed explanation of the reasons for the reclassifications that we have made.

While still negative for Euro 1.9 million, free cash flow improved by Euro 3.5 million in 2014 over the figure recorded in 2013. Lower profitability in 2014 was offset by a reduction of net working capital and lower investments in intangible fixed assets as compared to 2013.