n&w global vending s.p.a. financial performance …2017/04/27 · coffee machines market,...
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N&W Global Vending S.p.A.
Financial Performance for the Year Ended
December 31, 2016 April 12th, 2017
2
Disclaimer
In this report, the terms “Group”, “we”, “us” and “our” refer to N&W Global Vending S.p.A. (the “Company”) and its
subsidiaries.
This report may contain “forward looking statements” within the meaning of the U.S. federal securities laws and the
securities laws of certain other jurisdictions. In some cases, these forward looking statements can be identified by the use
of forward looking terminology, including the words “aims,” “anticipates,” “believes,” “continue,” “could,” “estimates,”
“expects,” “forecasts,” “future,” “guidance,” “intends,” “may,” “ongoing,” “plans,” “potential,” “predicts,” “projects,” “seek,”
“should,” “target,” “will,” “would” or, in each case, their negative or other variations or comparable terminology or by
discussions of strategies, plans, objectives, targets, goals, investments, future events, beliefs or intentions. These forward
looking statements are based on plans, estimates and projections as they are currently available to our management.
Such forward looking statements are not guarantees of future performance and are subject to, or are based on, a number
of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the
forward looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on
such forward looking statements. Any forward looking statements are only made as at the date hereof and, except to the
extent required by applicable law or regulation, we undertake no obligation to publicly update or publicly revise any forward
looking statement, whether as a result of new information, future events or otherwise.
All figures presented in this report are based on our consolidated management accounts and are unaudited. The financial
information herein includes certain non-IFRS measures that we use to evaluate our economic and financial performance.
These measures include, among others, EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and
Operating Profit Before Exceptional Items. The non-IFRS measures may not be comparable to similarly titled measures of
other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for
analysis of our operating results as reported under IFRS.
Index
3
• Financial Statements presentation 4
• Key figures 6
• Highlights 7
• Recent developments 8
• Business Review – Revenues 9
• Financial Review: Income Statement 12
• Financial Review: Cash Flow 13
• Balance Sheet & Net Debt 15
• Purchase Price Allocation 16
• Appendix 18
Financial Statements presentation
Management Report Proforma Consolidated Financial Statements
Consolidated Financial Statements
Period 12 months ended December
31, 2016
12 months ended December 31, 2016
From March 22nd, 2016 to December 31, 2016
Basis of preparation Non-IFRS See «Basis of Preparation» in
Pro forma Accounts IFRS
Purchase price allocation impact (see pages 16-17)
NO YES YES
Audited/Reviewed NO YES/Reviewed YES/Audited
Basis of audit N/A
International Standard on Assurance Engagements (ISAE)
3420
International Standards on Auditing
Filing of accounts with Register of Commerce in Italy
NO NO YES
4
Financial Statements presentation
5
To provide meaningful, reliable, relevant and comparable financial information the Company has opted to split its annual reporting
in three reports as set out below:
Management Report: The Company provides an overview of the business performance and financial performance during the 12-
month period ended December 31, 2016. The figures presented in this Management Report (some of which are non-IFRS) have
been derived from the Pro-forma Consolidated Financial Statements, wherein the impact of the purchase price allocation on the
N&W Group resulting from the acquisition of N&W has been excluded (see pages 16-17).
Pro Forma Consolidated Financial Statements: The Company provides an overview of the business performance and financial
performance for the twelve months ended December 31, 2016, and showing the impact of the purchase price allocation. The
principal characteristic of the Pro Forma Financial Statements is that they present the historical financial information of the N&W
Group for the twelve months ended December 31, 2016 as if the acquisition of N&W occurred on January 1, 2016, since it is not
possible to present audited consolidated financial statements for that period because a full parent-subsidiary relationship (as
defined by IAS 27/IFRS 10) did not exist amongst all component entities being combined for the entire twelve months. In
particular, LSF9 Canto Investments S.p.A. did not own and control N&W Global Vending S.p.A. and its subsidiaries prior to the
acquisition thereof on March 22nd, 2016 (the “Acquisition Date”). The Pro Forma Financial Statements have been examined by
Deloitte & Touche S.p.A. in accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance
Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus. We refer to the
assurance report of the independent auditor in paragraph I of Pro Forma Consolidated Financial Statements.
Consolidated Financial Statements: The consolidated financial statements have been prepared in accordance with IAS 27 and
IFRS 10 and therefore present the financial performance of the legal group owned and controlled by the Company as from the
Acquisition Date, as well as the stand-alone results of the Company and LSF9 Canto Investments S.p.A. from incorporation until
the Acquisition Date. The Consolidated Financial Statements have been audited by Deloitte & Touche S.p.A.. We refer to the audit
report of the independent auditor in paragraph I of Consolidated Financial Statements.
All comparisons made to 2015 relate to Pro Forma Consolidated financial statements of N&W Group.
6
Key figures (€ thousands) December 31, December 31,
2016 2015
Results
Revenues 299,564 302,325
Adjusted EBITDA* 75,568 74,099
Adjusted EBITDA margin** 25.2% 24.5%
Operating profit/(loss) 54,659 54,185
Profit/(loss) for the period (4,997) (14,773)
Cash flow
Cash at the beginning of period 48,088 33,197
Net cash flow from operating activities 57,990 60,651
Net cash flow from investing activities 226,627 (15,806)
Of which: capital expenditures (13,432) (15,806)
Of which: Acquisition 240,059
Net cash flow from financing activities *** (281,615) (29,954)
Cash at the end of period **** 51,089 48,088
Financial Position
Net debt***** 367,447
Net debt / Adjusted EBITDA 4.9
(**) We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenues.
(***) Cash Flow from financing activities includes Interest payment.
(****) Cash at the end of Dec. 2016 includes Euro 1 million relating to N&W purchase price held in escrow account
to cover possible purchaser's warranty claims under the acquisition agreement of N&W Group.
For the twelve months ended
(*) We define Adjusted EBITDA as net profit (loss) plus income tax expense, net financial income (expense), depreciation,
amortization, special costs and the Real/Euro foreign exchange adjustment. We present non-IFRS measures because we
believe they and similar measures are widely used by certain investors, securities analysts and other interested parties as
supplemental measures of performance and liquidity and are intended to assist in the analysis of our operating results,
profitability and ability to service debt. Adjusted EBITDA is not a measure of financial performance under IFRS and should not
be considered in isolation or as an alternative to any other measures of performance derived in accordance with IFRS.
Adjusted EBITDA, as presented in this Report, may not be comparable to similarly titled measures reported by other
companies.
(*****) Net Debt consists of Senior Secured Notes, Second Lien Notes, Revolving facilities and €0.1 million of other debt, less
cash and cash equivalents, net of escrow account of Euro 1 million.
7
Highlights
2016 Revenues of Euro 299.6 million, 0.9% less than 2015, have been characterised by
i) the good performance of small-medium sized customers, with growth of Euro 16.7 million (8.4% more
than 2015)
ii) a decrease in sales to our 4 largest customers, with a decline of Euro 19.4 million (18.5% less than
2015)
2016 Adjusted EBITDA performance has been satisfactory due: to a favourable customer and product mix
and continuous costs optimisation, 2016 Adjusted EBITDA reached Euro 75.6 million (25.2% of Net Sales),
Euro 1.5 million better than 2015 which was Euro 74.1 million (24.5% of Net Sales).
Cash flow generation from operating activities was at good levels in 2016 at Euro 58 million vs Euro 60.7
million in 2015.
The Ratio of Net Debt to Adjusted EBITDA is equal to 4.9 as of December 31, 2016, 0.1 better as
compared to a ratio of 5 as of September 30, 2016.
8
Recent Developments
On March 14th, 2017 the Group completed the announced acquisition of Saeco Vending S.p.A. (“Saeco”)
and on March 13th, 2017 placed an additional Euro 70 million of Senior Secured Notes in part to fund such
acquisition.
The deal which granted the licenses to use the well-known Saeco and Gaggia brands in the professional
coffee machines market, should enable N&W to grow substantially in the Office Coffee Service (OCS)
segment, strengthen its Vending & Ho.Re.Ca. lines and accelerate its sales development in strategic
markets such as Central Europe, Eastern Europe and Asia.
N&W expects to leverage the industrial, commercial and innovation capabilities of Saeco in order to keep
delivering the highest quality coffee experience out of home and enhance Saeco brands’ competitive
positioning through integration with N&W.
9
Business Review – Revenues
December
31, 2016
December 31,
2015
Variance
%
Revenue by geography (€ thousands) 299,564 302,325 -0.9%
Italy 95,205 95,809 -0.6%
France 41,775 42,254 -1.1%
Spain 22,621 22,709 -0.4%
UK 11,208 14,806 -24.3%
Germany 14,361 13,364 7.5%
Nordics 20,576 16,680 23.4%
Other Europe 41,325 49,920 -17.2%
East Europe 14,000 12,154 15.2%
Africa & Middle East 3,925 3,840 2.2%
Asia & Pacific 6,616 4,828 37.0%
North America 14,367 11,441 25.6%
Central & South America 13,586 14,519 -6.4%
Revenue (€ thousands) 299,564 302,325 -0.9%
Vending 184,558 189,571 -2.6%
H&C 131,876 133,028 -0.9%
S&F 49,729 53,951 -7.8%
C&B 2,953 2,592 13.9%
Horeca & Liquid 39,327 36,718 7.1%
OCS 10,402 12,835 -19.0%
Accessories & Spares 65,276 63,202 3.3%
For the twelve months ended
10
Business Review – Revenues
i) Geographies
2016 Revenues attributable to Western European countries (comprising Italy, France, Spain, UK,
Germany, Nordics and other Western European countries) was characterized by good sales to small-
medium sized customers (+7.3% compared to 2015) but was offset by a downturn in Revenues attributable
to our 4 largest customers (-18.5% compared to 2015).
Overall Revenues were down in 2016, -3.3% vs 2015.
Best performers were Nordics and Germany more than offset by the negative results in UK, Switzerland,
Italy and France (driven by decreases attributable to our 4 largest European customers).
Strong Sales in Emerging markets (East Europe, Africa&Midlle East, Asia&Pacific, Americas) resulted in a
growth in Revenues for 2016 of 12.2% vs 2015. Good sales growth was also realised in Asia&Pacific areas
as well as North America and Eastern Europe (mainly in Poland, Czeck Republic and Romania). Sales
decreased in Central&South America due mostly to a Brazilian market still facing a very difficult economic
situation.
11
Business Review – Revenues
ii) Line of Business
Vending
Revenues decreased by 2.6% during 2016 as compared to 2015. The shortfall is mainly driven by our 4
largest European customers who reduced their investments during 2016; such decrease is only partially
compensated by the strong performance of small-medium sized customers.
Horeca & Liquid
Good performances for these lines of business with revenues increasing 7.1% during 2016 as compared to
2015; the increase is driven by France, Germany, North/Central America as well as Asia&Pacific areas.
OCS
Revenues decreased by 19% during 2016 as compared to the 2015; the decrease is entirely driven by the
underperformance of one key customer.
Accessories and Spares
Revenue increased by 3.3% during 2016 as compared to 2015 mainly due to strong performance in Italian
and Japanese markets and with one key customer, only partially offset by the downturn in Brazil and UK.
Financial Review: Income Statement
12
.
Operating profit
Excluding the impact of the purchase price
allocation, Operating profit was Euro 54.7 million
for the twelve months ended December 31, 2016
compared to Euro 54.2 million for the twelve
months ended December 31, 2015.
The impact of non recurring items is equal to an
expense of Euro 11 million. This includes special
costs of Euro 6.5 million incurred in relation to
N&W Group acquisition on March 22nd, 2016
(including Euro 3.4 million of exit bonuses), Euro
1.6 million of costs for specific projects of a non-
recurring nature, Euro 1.5 million of costs for the
write-down of the financial loan outstanding with
VE Global Solutions LLC and Euro 0.8 million of
charges for Italian short time working contracts.
The operating profit is also impacted by positive
exchange differences on Brazilian Real of Euro
1.9 million largely due to a translation effect
(mostly unrealized) arising from the conversion of
intercompany trade payables recorded in our
Brazilian subsidiary related to purchases of
products from our Italian subsidiary denominated
in Euro.
(€ thousands)
December 31,
2016
December 31,
2015
Revenue from Sales 299,564 302,325
Cost of sales (177,378) (180,820)
Gross profit 122,186 121,505
Sales & Marketing (27,360) (28,499)
Logistic (6,114) (6,290)
Administrations (13,506) (12,702)
Operating Exchange Difference 363 85
Total operating costs (46,617) (47,406)
Adjusted EBITDA 75,568 74,099
Depreciation (8,708) (7,305)
Amortisation (2,970) (7,083)
Operating profit before exceptional items 63,890 59,711
Brazilian Operating Exchange Difference 1,953 (2,570)
Restructure costs (330) (39)
Other expenses (10,854) (2,917)
Operating profit 54,659 54,185
Finance Income 547 965
Finance costs (41,854) (60,555)
Net finance expenses (41,307) (59,590)
Profit/(Loss) before income tax 13,352 (5,405)
Income tax expense (18,349) (9,368)
(Loss) for the period from continuing
operations(4,997) (14,773)
For the twelve months ended
Financial Review: Cash Flow
13
.
Condensed cash flow statement Dec. 31 2016 Dec. 31, 2015
(€ thousands)
Adjusted EBITDA 75,568 74,099
Change in Trade Working Capital (409) 10,358
Change in Other Working Capital 1,056 (5,255)
Taxes (8,218) (15,593)
Special costs (10,008) (2,958)
Cash flow from operations 57,990 60,651
Investment in assets (Capex) (13,431) (15,806)
Equity injection at Acquisition Date 255,793
N&W share price at closing (21,501)
N&W Price Adjustment for tax settlement 6,512
Equity injection for tax settlement 2,239
Tax settlement instalments net of tax refund (2,985)
Cash flow from investing activities 226,627 (15,806)
Interest and other financial charges paid (37,689) (11,630)
Financial debt raising/(repayment) (243,926) (18,323)
Cash flow from financing activities (281,615) (29,954)
Cash flow for the period 3,001 14,891
Cash at Beginning of Period 48,088 33,197
Closing cash balance 51,089 48,088
For the twelve months ended
Financial Review: Cash Flow
14
.
For the year ended December 31, 2016, cash flow from operations was Euro 58 million. When eliminating the
impact of the special costs, the recurring cash flow from operations is equal to Euro 68 million, as compared to
Euro 63.6 million for the year ended December 31, 2015, reflecting the good performance of the business.
Net cash used in investing activities was Euro 226.6 million for the year ended December 31, 2016. This
comprises: i) Euro 13.4 million of capital expenditure, as compared to Euro 15.8 million in 2015, ii) Euro 258
million as equity injection from our shareholders, iii) Euro 14.9 million paid by LSF9 Canto Investments to the
seller as the net consideration for the acquisition of N&W, iv) the equity increase of Euro 2.2 million effected to
repay the June tax installment of the same amount, v) Euro 3 million of tax settlement, being the 3 installments
paid to the Italian tax authorities in June, September and December 2016 equal to Euro 6.7 million less the
Euro 3.7 million refund from the tax authorities in August 2016.
Net cash derived from financing activities was Euro (281.6) million for the year ended December 31, 2016 and
includes:
• Euro 400.0 million of proceeds from issuance of Senior Secured Notes and Second Lien Notes
• Euro 10.8 million of proceeds drawn from the Revolving Facility
• (Euro 653) million of capital repayments of previous loans (Senior and Mezzanine)
• (Euro 37.7) million of transactions fees and interests in connection with the repayment of old debt and the
issuance of the Senior Secured Notes, Second Lien Notes and Revolving Facility.
15
Balance Sheet & Net Debt
The ratio of Net Debt to Adjusted EBITDA is equal to 4.9 as of December 31, 2016, 0.1 better as
compared to a ratio of 5.0 as of September 30, 2016.
€ Thousand
December 31,
2016
September
30, 2016
Bridge Facility 400,000
Senior Secured Notes - Capital 300,000
Second Lien Notes - Capital 100,000
Revolving Facility 10,815 10,815
Senior Secured Notes - Interests 4,433
Second Lien Notes - Interests 2,217
Revolving Facility - Interests&Commit. Fee 18 16
Finance leases 51 56
Bank overdraft&other loans 2 22
Gross Debt 417,536 410,909
Less: cash (*) (50,089) (36,670)
Net Debt 367,447 374,239
Adjusted EBITDA 75,568 74,559
Net Debt/Adjusted EBITDA 4.9 5.0
(*) cash excludes amount in escrow account- €1m at 31.12.2016 and € 14m at 30.09.2016
Condensed balance sheet
December
31, 2016
December
31, 2015
(€ thousands)
Property, plant and equipment 38,014 41,147
Goodwill and other intangible assets 649,650 675,135
Other non current assets 1,893 3,053
Fixed assets 689,558 719,335
Net trade receivables 66,056 63,405
Inventories 39,423 41,329
Trade payables (74,489) (74,154)
Other net working capital (38,898) (39,038)
Current and deferred income taxes (95,628) (30,873)
Capital employeed 586,021 680,005
Equity 228,321 45,872
Secured Notes and Revolving Facilities 417,483
Financing fees (9,747) (2,147)
Bank and other borrowings 2 280,172
Third parties loans 404,130
Finance Leases 51 66
Cash * (50,089) (48,088)
Net financial debt (incl. financing
fees) 357,700 634,133
* C ash at the end of December excludes the escrow account of Euro 1 million
16
Purchase Price Allocation
(€ thousands)
Net assets at
Completion Date
before PPA
Fair value
adjustments
Net assets at
Completion
Date after PPA
Assets acquired 251,153 333,705 584,859
Property, plant & equipment 39,055 - 39,055
Intangible assets 19,373 304,782 324,156
R&D Capitalised 18,202 (18,202) -
Other IT intanglib les 1,171 - 1,171
Software - 18,066 18,066
Trademarks - 122,111 122,111
Patents - 73,505 73,505
Customer list - 109,302 109,302
Other non-current assets 3,119 - 3,119
Total non-current assets 61,547 304,782 366,330
Inventories 42,100 23,392 65,493
Trade and other receivables 83,124 683 83,807
Cash and cash equivalents 47,639 - 47,639
Deferred tax assets 16,743 4,847 21,590
Total current assets 189,606 28,922 218,528
Liabilities assumed (818,884) (98,438) (917,321)
Deferred income tax liabilities (6,884) (98,438) (105,322)
Other non-current liabilities (20,137) - (20,137)
Total non-current liabilities (27,021) (98,438) (125,459)
Trade payables (138,231) - (138,231)
Financial indebtness (653,631) - (653,631)
Total current liabilities (791,862) - (791,862)
Identifiable assets and liabilities (567,730) 235,267 (332,462)
Goodwill 583,719 (235,267) 348,451
Purchase Price Paid 15,989 - 15,989
Purchase Price Allocation
17
.
(€ thousands) Before PPA PPA After PPA
12 months ended
December 31,
2016
12 months ended
December 31,
2016
12 months ended
December 31,
2016
Revenue from Sales 299,564 299,564
Cost of sales (177,378) (177,378)
Gross profit 122,186 - 122,186
Sales & Marketing (27,360) (27,360)
Logistic (6,114) (6,114)
Administrations (13,506) (13,506)
Operating Exchange Difference 363 363
Total operating costs (46,617) - (46,617)
Adjusted EBITDA 75,568 - 75,568
Depreciation (8,708) (8,708)
Amortisation (a) (2,970) (27,991) (30,961)
Operating profit before exceptional items 63,890 (27,991) 35,899
Inventory revaluation (b) - (23,392) (23,392)
Brazilian Operating Exchange Difference 1,953 1,953
Restructure costs (330) (330)
Other expenses (10,854) (10,854)
Operating profit 54,659 (51,384) 3,276
Finance Income 547 547
Finance costs (41,854) (41,854)
Net finance expenses (41,307) - (41,307)
Profit/(Loss) before income tax 13,352 (51,384) (38,031)
Income tax expense (c) (18,349) 14,588 (3,761)
(Loss) for the period from continuing
operations(4,997) (36,795) (41,792)
Appendix
18
.
For a description of certain other information, including i) the management and shareholders of the Issuer,
ii) certain affiliate transactions, iii) indebtedness and material financing arrangements and material debt
instruments and iv) material risk factors please see the Offering Memorandum dated October 7, 2016 for
our Euro 300,000,000 7.000% Senior Secured Notes due 2023, a copy of which is posted on our website.
N&W Global Vending S.p.A.
Proforma Consolidated Financial Statements at 31
December 2016
1
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Index
I. Assurance report of the independent auditor 3
II. Basis of Preparation 5
III. Impact of Purchase Price Allocation 9
IV. Proforma Statement of Comprehensive Income for the Twelve Month Period Ended December 31,
2016 13
V. Proforma Statement of Financial Position as at December 31, 2016 14
VI. Proforma Statement of Cash Flows for the Twelve Month Period Ended December 31, 2016 15
VII. Proforma Statement of Changes in Equity for the Period Ended December 31, 2016 16
VIII. Notes to the Proforma Financial Statements 17
Note 1. General information 17
Note 2. Accounting policies 19
Note 3. Critical accounting estimates and judgements 33
Note 4. Business Combination 35
Note 5. Revenue 37
Note 6. Segment information 37
Note 7. Cost of Sales 39
Note 8. Reorganisation costs 40
Note 9. Other costs 40
Note 10. Net financial expense 40
Note 11. Taxes 41
Note 12. Comprehensive income components 44
Note 13. Intangible assets 45
Note 14. Property, plant and equipment 47
Note 15. Avilable-for-sale investments 48
2
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 16. Receivables and other non-current assets 48
Note 17. Cash and cash equivalents 49
Note 18. Trade receivables 49
Note 19. Inventories 50
Note 20. Other receivables 50
Note 21. Shareholders’ Equity 51
Note 22. Financial instruments 52
Note 23. Financial Indebtness 52
Note 24. Provision for post employment benefits 55
Note 25. Provision for risks and charges 56
Note 26. Warranty and reorganisation provisions 57
Note 27.Trade payables 58
Note 28. Other payables 58
Note 29. Derivative financial instruments (liabilities) 59
Note 30. Commitments for leasing agreements 59
Note 31. Financial risk management 60
Note 32. Events after the reporting date 69
3
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
I. Assurance report of the independent auditor
4
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
5
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
II. Basis of Preparation
LSF9 Canto Investments S.p.A. (“LSF9 Canto”), now merged into N&W Global Vending S.p.A.,
was incorporated on 25th
November 2015 by the private equity fund Lone Star Fund IX.
On 3rd
December 2015 LSF9 Canto entered into an agreement with N&W Holding S.à rl, owned by
Investcorp and Equistone Partner funds, to buy 100% of the corporate capital of N&W Global
Vending S.p.A.(“the Company”).
The Acquisition was finalized on 22nd
March 2016 and was funded through the issue of ordinary
equity shares of Euro 256 million indirectly by Lone Star Fund IX and by the drawdown of Senior
Secured Bridge (Euro 400 million) and Revolving Facilities (Euro 10.8 million) by LSF9 Canto.
On October 5th
, 2016 LSF9 Canto Investments S.p.A. has been extinguished by merging into the
wholly owned N&W Global Vending S.p.A. (reverse merger).
On October 14th
, 2016 the Company has issued Euro 300 million of Senior Secured Notes and Euro
100 million of Second Lien Notes both due in 2023; through this issuance the Company has fully
reimbursed the Bridge Facility of Euro 400 million.
N&W Global Vending S.p.A. and its subsidiaries (together with the Company, “the Group”) is the
leading European and largest manufacturer worldwide of vending machines on a sales volume basis
and operates in nearly all major international markets maintaining relationships with direct
customers or, alternatively, through a network of dealers and its commercial subsidiaries located in
Italy, Denmark, UK, France, Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina,
Australia, Singapore, Russia and Romania.
The Acquisition has been recorded using the acquisition method of accounting, in accordance with
the International Financial Reporting Standards as adopted by the European Union (“IFRS”).
Although the purchase accounting requirement has no impact on the Company’s business or cash
flow, it adversely impacts the Company’s reported IFRS gross margin and EBITDA for the period
between the Acquisition and December 31, 2016.
The principal characteristic of the proforma consolidated financial statements is that they present
the historical financial information of the N&W Group for which it is not possible to present
consolidated financial statements because a full parent-subsidiary relationship (as defined by IAS
27/IFRS 10) does not exist amongst all component entities being combined. In particular, LSF9
Canto Investments S.p.A. did not own and control N&W Global Vending S.p.A. and its subsidiaries
prior to the Acquisition. For this reason the consolidated results of N&W Group for the twelve
months ended December 31st, 2016 have been prepared on the following basis: the aggregation of
the consolidated results of the “Predecessor” from January 1st, 2016 until March 22
nd 2016 (not
audited) and the consolidated results of the “Successor” from March 23rd
, 2016 until December 31st,
2016 (audited). The same approach has been adopted in order to prepare the cash flow statement.
The statement of changes in equity presents the movements in equity after the Completion Date.
6
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
This presentation enables the noteholders to view the business as a whole, and provides meaningful
and relevant financial information that is useful in evaluating the Company’s ongoing operations, in
the same manner as management views and operates the business.
We refer to this figures as the “proforma consolidated financial statements” and the following
definitions are used throughout this document:
Successor Period: the consolidated results of LSF9 Canto Investments S.p.A., now N&W
Global Vending S.p.A. (“Successor”) from March 23rd
, 2016 until December 31st, 2016;
Predecessor Period: the consolidated results of the “Predecessor” from January 1st, 2016
until March 22nd
, 2016.
All comparison made to 2015 relate to the consolidated results of the “Predecessor” from January
1st, 2015 until December 31
st, 2015.
We refer to the accounting policies detailed in Note 2 of the accompanying proforma consolidated
financial statements which form an integral part of and should be read in conjunction with this Basis
of Preparation. The proforma results should not be used in isolation or substitution of predecessor
and successor results.
Finally, we wish to underpin the fact that the need for Proforma financial statements is only
temporary. The proforma financial statements are inherently a ‘temporary’ measure. From 2017
onwards, the Group will be in a position to prepare comparable consolidated financial statements.
The Proforma Financial Statements have been examinated by Deloitte & Touche S.p.A. in
accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance
Engagements to Report on the Compilation of Pro Forma Financial Information Included in a
Prospectus.
The amounts in this document are presented in thousands of euro (€ thousands), unless otherwise
stated. Rounding adjustments have been made in calculating some of the financial information
included in these proforma financial statements, as a result of which schedules may not add.
These proforma consolidated financial statements have been approved by the Company’s Board of
Directors for issue on 27th
March, 2017.
Important Notice
In this report, the terms “Group”, “we”, “us” and “our” refer to the Company and its subsidiaries.
This report may contain “forward looking statements” within the meaning of the U.S. federal
securities laws and the securities laws of certain other jurisdictions. In some cases, these forward
looking statements can be identified by the use of forward looking terminology, including the words
“aims,” “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “forecasts,” “future,”
“guidance,” “intends,” “may,” “ongoing,” “plans,” “potential,” “predicts,” “projects,” “seek,”
“should,” “target,” “will,” “would” or, in each case, their negative or other variations or comparable
7
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
terminology or by discussions of strategies, plans, objectives, targets, goals, investments, future
events, beliefs or intentions. These forward looking statements are based on plans, estimates and
projections as they are currently available to our management. Such forward looking statements are
not guarantees of future performance and are subject to, or are based on, a number of factors,
assumptions and uncertainties that could cause actual results to differ materially from those
described in the forward looking statements. Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward looking statements. Any forward looking
statements are only made as at the date hereof and, except to the extent required by applicable law
or regulation, we undertake no obligation to publicly update or publicly revise any forward looking
statement, whether as a result of new information, future events or otherwise.
All figures presented in this report are based on our consolidated management accounts and are
unaudited. The financial information herein includes certain non-IFRS measures that we use to
evaluate our economic and financial performance. These measures include, among others,
EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Operating Profit
Before Exceptional Items. The non-IFRS measures may not be comparable to similarly titled
measures of other companies and have limitations as analytical tools and should not be considered
in isolation or as a substitute for analysis of our operating results as reported under IFRS.
New standards, amendments and interpretation applicable from 1 January 2016
The following new standards and amendments, which were effective from 1 January 2016, were
adopted by the group. The adoption of these amendments had no effect on the Consolidated
Financial Statements.
Amendments to IFRS 11 – Joint arrangements: Accounting for acquisition of interest in
joint operations which clarify the accounting for acquisitions of an interest in a joint
operation that constitutes a business.
Amendments to IAS 16 – Property, Plant and Equipment and to IAS 38 – Intangible
Assets, which clarify that the use of revenue-based methods to calculate the depreciation of
an asset is not appropriate because revenue generated from an operating business that
includes the use of an asset generally reflects factors other than the consumption of the
economic benefits embodied in the asset. In addition, the amendments clarify that revenue
is generally presumed to be an inappropriate basis for measuring the consumption of the
economic benefits embodied in an intangible asset.
Annual Improvements to IFRSs 2012-2014 cycle, includes a series of amendments to IFRSs
in response to issues raised mainly on IFRS 5 – Non-current assets held for sale and
discontinued operations related to the changes of method of disposal of an asset (or disposal
group), on IFRS 7 – Financial Instruments: Disclosures related to clarification when
servicing contracts are deemed to constitute continuing involvement for disclosure
purposes, on IAS 19 – Employee Benefits related to discount rate determination and on IAS
8
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
34 – Interim Reporting related to paragraph 16A and the clarifications of the meaning of
disclosure of information “elsewhere in the interim financial report”.
Amendments to IAS 1 – Presentation of Financial Statements, which were a part of the
IASB’s initiative to improve presentation and disclosure in financial reports. The
amendments make a clear that materiality applies to the whole of financial statements and
that the inclusion of immaterial information can inhibit the usefulness of financial
disclosures. Furthermore, the amendments clarify that companies should use professional
judgment in determining where and in what order information is presented in the financial
disclosures.
New Standards and amendments not yet effective
Two new accounting principles applicable on or before January 1, 2018 were published in 2016:
IFRS 15 “Revenues from contracts with customers”: the purpose of IFRS 15 is to improve
revenues recognition methods by introducing a new accounting model that calls for: (i)
identifying a contract with a customer; ii) identifying the obligations entailed by the
contract; (iii) determining the transaction price; (iv) allocating the transaction price to the
individual contractual obligations; and (v) recognizing the revenues when each individual
contractual obligation is satisfied. The adoption of this principle could modify the revenue
amount; its potential impact is currently being determined.
IFRS 9 “Financial instruments,” for which first-time adoption modalities are still being
defined. The new IFRS 9 standard calls for a single model to classify and measure financial
instruments. Within the model, financial assets are classified into three categories
(amortized cost, fair value in “Reserve for other components of comprehensive income” and
fair value in the income statement) depending on the entity’s business model (because of
this dependency link, reclassifications between categories are forbidden, except when the
business model itself is changed). A new model to determine the writedowns on receivables
and liabilities so-called expected losses has been introduced and the default risk associated
with the counterparty is evaluated ex-ante. With regard to equity investments, the exemption
from the requirement to apply fair value to measure investments that are not publicly traded
has been eliminated. Hedge accounting rules have also been changed; specifically, the
existence of a relationship between a hedged asset/liability and the hedging instrument, with
balance in terms of weight, is sufficient to avoid ineffectiveness; it is permissible to hedge
the single components of the price formula of a commodity provided the components can be
identified separately and can be measured reliably; voluntary discontinuation of hedge
accounting is not allowed.
9
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
III. Impact of Purchase Price Allocation
Transaction overview and allocation of purchase price paid
Following the Acquisition finalized on 22nd
March 2016 a Purchase Price Allocation (“PPA”) has
been carried out.
The purchase price paid in cash was equal to €16 million, as compared to a negative net asset value
of N&W Group of €567.7 million at Completion Date. There is no contingent consideration
outstanding in relation to the Acquisition as of December 31, 2016. Consequently, the preliminary
goodwill – before purchase price allocation - was equal to €583.7 million.
The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS
3 Business Combinations. The total purchase price has been allocated to the identifiable assets and
liabilities acquired, based on the estimated fair values at the date of acquisition.
As a result of the purchase price allocation €233.6 million of the preliminary goodwill was allocated
to identifiable assets and liabilities. This allocation is shown below:
(€ thousands)
Net assets at
Completion
Date before
PPA
Fair value
adjustments Net assets at
Completion
Date after PPA
Assets acquired 251,153 333,705 584,859 Property, plant & equipment 39,055 - 39,055 Intangible assets 19,373 304,782 324,156
R&D 18,202 (18,202) -
Software 1,171 - 1,171
Internally generated software - 18,066 18,066
Trademarks - 122,111 122,111
Patents - 73,505 73,505
Customer Relationship - 109,302 109,302
Other non-current assets 3,119 - 3,119 Total non-current assets 61,547 304,782 366,330 Inventories 42,100 23,392 65,493 Trade and other receivables 83,124 683 83,807 Cash and cash equivalents 47,639 - 47,639 Deferred tax assets 16,743 4,847 21,590 Total current assets 189,606 28,922 218,528
Liabilities assumed (818,884) (98,438) (917,321) Deferred tax liabilities (6,884) (98,438) (105,322) Other non-current liabilities (20,137) - (20,137) Total non-current liabilities (27,021) (98,438) (125,459) Trade payables (138,231) - (138,231) Financial indebtness (653,631) - (653,631)
10
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Total current liabilities (791,862) - (791,862)
Purchase Price Paid 15,989 - 15,989 Identifiable assets and liabilities (567,730) 235,267 (332,462) Goodwill 583,719 (235,267) 348,451
The PPA process involved the following balance sheet items:
a) Intangible assets
The fair vaue adjustment of intangible assets of Euro 304.8 million is driven by the following
evaluation:
Internally generated software, Trademarks and Patents: based on the market approach, and
more specifically on the application of the Relief from royalty methodology, that estimates
the value of the intangible assets by discounting back the stream of royalty, net of taxes,
saved by the Company by owning the assets instead of leasing them. The method requires
the estimate of applicable royalty rates, that are extracted from market data with reference to
transaction related to similar assets;
Customer relationship: based on the excess earning methodology, taking into account the
operating profit, net of taxes, associated with the customer portfolio as of the transaction
date. The customer portfolio is reduced yearly according to a churn rate applicable, extracted
from the Company’s historical figures. The “excess” cash flow attributed to the customer
relationship is calculated by deducting the contributory asset charge, that is the theoretical
remuneration of the invested capital of the Company.
All the intangibles booked have a defined useful life.
b) Inventory
As required by business combinations accounting principles, the purchase method has been used
to evaluate it at the acquisition date.
According to purchase method, the inventory assumed by the acquirer is required to be
measured at its fair value. Fair value at the acquisition date tiypically includes profit attributed
to past production effort, i.e. in bringing the goods to their current condition. Except on grounds
of materiality, it is not generally appropriated to assign the acquiree’s carrying amount to the
cost of acquired inventories, because such cost does not reflect the manufacturing profit that is
recognised by the acquiree through the normal selling process.
The manufacturing profit considered as part of the fair value assigned to the N&W inventory at
the acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally
reversed to Profit and Loss during the year when the goods have been sold.
11
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The above fair value of the finished goods and merchandise has been evaluated deducting from
the selling price the costs of disposal: commissions, inventory stocking costs and distribution
costs.
c) Trade and other receivables
The Company has booked an asset of Euro 0.7 million for an Italian tax credit arisen in
connection with R&D costs.
d) Deferred tax assets and liabilities
The incremental depreciation of the fair value step-up for IFRS purposes will result in a pre-tax
income that is lower for IFRS purposes than for tax purposes. Consequently, a deferred tax
liability of Euro 98.4 million has been recognized to reflect the fact that cash taxes payable will
be higher than the tax charge reported in the income statement under IFRS.
e) Other assets and liabilities
The remaining assets and liabilities, including items such as cash and trade payables were stated
at their historical carrying values, which approximate fair value, given the short-term nature of
these assets and liabilities.
The excess of the purchase price over the preliminary amounts allocated to identifiable assets and
liabilities is equal to Euro 348.5 million and has been included in goodwill. This amount represents,
amongst other things, the value of the Company’s market position, brand and reputation, as well as
the value of the Company’s workforce. The goodwill has been provisionally allocated to Vending,
Ho.re.Ca and OCS Cash Generating Units, given that these which benefit from the synergies
permitted by the acquisition which generated the same (see Note 12).
Effect of Purchase price allocation on the income statement
The table below reflects the impact of the purchase price allocation (“PPA”) on the income
statement.
12
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
(€ thousands) Before PPA PPA After PPA
Revenue from Sales 299,564 299,564
Cost of sales (177,378) (177,378)
Gross profit 122,186 - 122,186
Sales & Marketing (27,360) (27,360)
Logistic (6,114) (6,114)
Administrations (13,506) (13,506)
Operating Exchange Difference 363 363
Total operating costs (46,617) - (46,617)
Adjusted EBITDA 75,568 - 75,568
Depreciation (8,708) (8,708)
Amortisation (a) (2,970) (27,991) (30,961)
Operating profit before exceptional items 63,890 (27,991) 35,899
Inventory revaluation (b) - (23,392) (23,392)
Brazilian Operating Exchange Difference 1,953 1,953
Restructure costs (330) (330)
Other expenses (10,854) (10,854)
Operating profit 54,659 (51,384) 3,276
Finance Income 547 547
Finance costs (41,854) (41,854)
Net finance expenses (41,307) - (41,307)
Profit/(Loss) before income tax 13,352 (51,384) (38,031)
Income tax expense (c) (18,349) 14,588 (3,761)
Profit/(Loss) for the period from continuing operations (4,997) (36,795) (41,792)
(a)
(b)
(c)
Adjustment reflects a non-cash charge of €23.4 million w hich is directly attibutable to the fair value step-up of the f inished goods
Adjustment reflects a charge of €28 million w hich is directly attibutable to the amortisation related to the intangible assets not
previously recognized.
Adjustment reflects € 14.6 million reversal of deferred tax liabilities and assets recognized at acquisition date, in connection w ith the
fair value step-up of inventory that has been recognized and to the new intangible assets capitalised.
Twelve
months ended
December 31,
2016
Twelve
months ended
December 31,
2016
Twelve
months ended
December 31,
2016
13
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
IV. Proforma Statement of Comprehensive Income for the Twelve Month Period
Ended December 31, 2016
Note 2016 2015
Continuing operations
Revenues from sales 5 299,564 302,325
Cost of sales 7 (240,440) (195,208)
Gross Profit 59,124 107,117
Operating costs
Sales & Marketing (27,360) (28,499)
Logistics (6,114) (6,290)
Administration (13,506) (12,702)
Exchange losses 2,316 (2,485)
Total operating costs (44,664) (49,976)
Reorganization costs 8 (330) (39)
Other costs 9 (10,854) (2,917)
OPERATING PROFIT 3,276 54,185
Financial income 547 965
Financial expense (41,854) (60,555)
Net financial expense 10 (41,307) (59,590)
LOSS BEFORE TAXES (38,031) (5,405)
Taxes 11 (3,761) (9,368)
NET LOSS (41,792) (14,773)
Consolidated Statement of Comprehensive Income for the year ended 31 December 2016
2016 2015
NET LOSS (41,792) (14,773)
Actuarial Loss on personnel provisions 12 (432) 174
Taxes 12 104 (48)
(328) 126
Hedge accounting of financial instruments 12 (757) 440
Changes in translation reserve 12 162 (55)
Taxes 12 182 (112)
(412) 273
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (42,532) (14,374)
The Notes to the Financial Statements are an integral part of the same.
Total items that may be reclassified subsequently to the Income Statement
Total items that will not be reclassified subsequently to the Income
Statement
14
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
V. Proforma Statement of Financial Position as at December 31, 2016
Note 31 December 2016 31 December 2015
ASSETS
Intangible assets 13 649,650 675,135
Property, plant and equipment 14 38,014 41,147
Available-for-sale investments 15 6 6
Receivable and other non-current assets 16 1,887 3,047
Deferred tax assets 11 18,461 18,304
Total non-current assets 708,018 737,639
Cash and cash equivalents 17 51,089 48,088
Trade receivables 18 66,056 63,405
Inventories 19 39,423 41,329
Other receivables 20 3,706 2,270
Tax receivables 11 8,384 9,392
Financial instruments (assets) - 111
Total current assets 168,658 164,595
TOTAL ASSETS 876,676 902,234
Note31 December 2016 31 December 2015
SHAREHOLDERS' EQUITY AND LIABILITIES
Share Capital 41,138 41,138
Other Reserves 196,099 20,191
Hedging Reserve (575) (14)
Translation Reserve (938) (1,101)
Riserva SOP 96 430
Utili / (perdite) portati a nuovo 34,293 -
Loss for the period (41,792) (14,773)
Total shareholders' equity 21 228,321 45,872
Non-current financial indebtness 23 391,713 130,000
Non-current payables to related parties - 400,031
Provision for post-employment benefits 24 12,358 12,001
Deferred tax liabilities 11 88,016 25,025
Non current tax payables 6,466 -
Other non current payables 28 14,681 -
Non-current payables to leasing companies 51 66
Provision for risks and charges 25 2,973 32,510
Warranty and Reorganisation provision 26 3,696 4,023
Total non-current liabilities 519,954 603,656
Current financial indebtness 23 16,025 148,018
Trade payables 27 64,953 64,181
Payables to factoring companies 23 - 7
Current payables to related parties 11 4,099
Current Tax payables 11 8,229 5,525
Other current payables 28 38,710 30,756
Derivative financial instruments 29 473 120
Total current liabilities 128,401 252,706
TOTAL LIABILITIES 648,355 856,362
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 876,676 902,234
The Notes to the Financial Statements are an integral part of the same.
15
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
VI. Proforma Statement of Cash Flows for the Twelve Month Period Ended
December 31, 2016
(€ thousand)Note
31 December
2016
31 December
2015
OPERATING ACTIVITIES
Net loss for the period (4,997) (14,773)
Net financial expense 10 41,307 59,590
Amortisation/depreciation 7 11,678 14,388
Allowance for doubtful receivables 18 2,022 689
Inventory write-down 19 (269) (444)
Post-employment benefits 24 (76) 12
Cost of employee stock option plan 21 (334) -
Current and deferred taxes 11 18,349 9,368
Cash flow from operating activities before 67,680 68,829
changes in net working capital
Trade receivables 18 (4,673) 6,733
Inventories 19 2,176 (977)
Trade payables 27 772 3,621
Cash flow generated by operating activities 65,955 78,206
Tax receivables 11 851 (837)
Other receivables 20 (1,534) 617
Tax payables 11 (62) (4,358)
Other payables 24 - 25 - 26 - 28 1,461 3,584
Translation reserve 21 162 -
Income tax paid (11,994) (15,593)
Interest paid (37,689) (11,021)
Net cash flow generated by operating activities 17,150 50,598
INVESTING ACTIVITIES
Receivables and other non-current assets 16 (349) (369)
Property, plant and equipment and intangible fixed assets 13 - 14 (13,432) (15,806)
Investements 4 (14,989) -
Equity 21 258,032 -
Net cash flow absorbed by investing activities 229,263 (16,175)
FINANCING ACTIVITIES
Payables to factoring companies (7) (204)
Payables to banks 23 (1,635) (318)
Proceeds from borrowings 23 410,815 -
Repayment of loans 23 (278,423) (18,423)
Payables to related parties (374,148) (596)
Payables to leasing companies (15) 9
Net cash flow absorbed by financing activities (243,413) (19,532)
3,000
(*) related items have been combined for more concise presentation.
NET INCREASE OF CASH AND CASH EQUIVALENTS 14,892
OPENING CASH AND CASH EQUIVALENTS 33,19748,089
CLOSING CASH AND CASH EQUIVALENTS 51,089 48,089
16
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
VII. Proforma Statement of Changes in Equity for the Period Ended December 31,
2016
Balance at 1 January 2015 41,138 (342) (1,046) (749) 430 35,772 (14,960) 60,243
Loss for the period (14,773) (14,773)
Other comprehensive income for the period, net of income tax 328 (55) 126 399
Total Comprehensive Income for the period - 328 (55) 126 - - (14,773) (14,374)
Allocation of loss of previous year (14,960) 14,960 -
Balance at 31 December 2015 41,138 (14) (1,101) (623) 430 20,812 (14,773) 45,872
Balance at 1 January 2016 50 - - - - - - 50
Loss for the period (27,521) (27,521)
Other comprehensive income for the period, net of income tax (575) (1,383) (328) (2,286)
Total Comprehensive Income for the period - (575) (1,383) (328) - - (27,521) (29,808)
Increases 41,088 216,896 257,984
Recognition of share based payment 96 96
Balance at 31 December 2016 41,138 (575) (1,383) (328) 96 216,896 (27,521) 228,322
Total Equity
Total Equity
Other components of comprehensive income
Share
Capital
Cash Flow
Hedge
Foreing Currency
Translation ReserveIas 19
Share based
plan IFRS 2
Other
Reserves
Loss for the
period
Other components of comprehensive income
Share
Capital
Cash Flow
Hedge
Foreing Currency
Translation ReserveIas 19
Share based
plan IFRS 2
Other
Reserves
Loss for the
period
17
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
VIII. Notes to the Proforma Financial Statements
Note 1. General information
N&W Global Vending S.p.A. (hereinafter also the “Company”) is a joint-stock company
established in Italy on 27 October 2005 and directly controlled by “Lone Stare Investments Fund”,
which acquired the N&W Group on 22 March 2016.
The N&W Group, the leader in Europe in this industry, is today the largest manufacturer in the
world of automatic vending machines, with the widest range of vending machines for both public
and private use.
Financial statements
The Group’s Consolidated Financial Statements include the following primary financial statements:
a statement of financial position, which shows current and non-current assets, current and
non-current liabilities, separately;
an income statement, which shows costs using a classification based on the functionality of
the same;
a statement of comprehensive income, which shows the items that will not be subsequently
reclassified to the income statement and the items that may be later reclassified to the
income statement at later stage;
a cash flow statement, which shows the cash flows generated by operating activities using
the indirect method;
a consolidated statement of changes in shareholders’ equity, prepared in accordance with the
provisions of IAS 1.
The Consolidated Financial Statements and all amounts in the explanatory notes are shown in
thousands of Euro (the functional currency of the Company), unless otherwise indicated.
Scope of consolidation
The 2016 consolidated financial statements include the financial statements of N&W Global
Vending S.p.A. (the parent company) and of all of the companies directly or indirectly controlled by
the N&W Group. The place of incorporation and operation is the same for all subsidiaries.
The reference date of the consolidated financial statements is the same as that of the financial
statements of the parent company N&W Global Vending S.p.A., as well as that of the subsidiaries;
the financial statements used for consolidation purposes are those at December 31, 2016, prepared
by the Board of Directors and/or the Sole Directors for approval by the respective Shareholders’
Meetings.
The 2016 consolidated financial statements include the following companies (“N&W Group”):
18
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
N&W Global Vending S.p.A., registered office in Valbrembo, 24030 (BG), Via Roma 24-
Italy (wholly owned);
N&W (Denmark) ApS – registered office in Odense, Denmark (wholly owned);
Wittenborg ApS – registered office in Odense, Denmark (wholly owned);
N&W Global Vending Ltd – registered office in Bilston, Great Britain, (wholly owned)
which includes Wittenborg UK Ltd – registered office in Bilston, Great Britain (wholly
owned);
N&W Global Vending GmbH – registered office in Wien, Austria (wholly owned);
N&W Global Vending GmbH – registered office in Rastatt, Germany (wholly owned);
N&W Global Vending Sas - registered office in Le Mesnil Amelot, France (wholly owned);
Fridge France Sas – registered office in Le Mesnil Amelot, France (wholly owned);
N&W Global Vending Spain SL – registered office in Madrid, Spain (wholly owned);
Necta Vending Solutions SA – registered office in Buenos Aires, Argentina (wholly
owned);
N&W Global Vending SP.z.o.o. – registered office in Warsaw, Poland (wholly owned);
N&W Global Vending Ltda – registered office in Sao Paulo, Brazil (wholly owned);
SGL ITALIA S.r.l – registered office in Turin, Italy (wholly owned);
N&W Innovative Solutions S.r.l. – registered office in Zoppola (PN), Italy (wholly owned);
N&W Global Vending S.A. – registered office in Drogenbos, Belgium (wholly owned);
N&W Australia Pty Ltd – registered office in North Sydney, Australia (wholly owned);
N&W Global Vending Pte Ltd – registered office in Singapore (wholly owned);
N&W Global Vending LLC – registered office in Moscow, Russia (wholly owned);
N&W Global Vending Romania Srl – registered office in Municipiul Cluj-Napoca, Calea
Dorobantilor, Romania (wholly owned).
US Partnership
In July 2005, N&W Global Vending S.p.A. signed a business partnership agreement with an
American partner to boost its strategic growth in the North American market through Vendors
Exchange Global Solutions LLC (hereinafter also VE Global Solutions LLC), which has an
exclusive arrangement to sell N&W products, with a view to developing a network of agencies that
can increase N&W’s presence in this market.
N&W disbursed Euro 2.9 million (USD 3.5 million) by means of a loan agreement to fund initial
costs.
On the closing date of the financial statements, Vendors Exchange Global Solutions LLC had not
repaid the loan outstanding with N&W Global Vending S.p.A. In turn, the management decided not
to exercise its right to convert the loan into a shareholding as envisaged by the partnership
agreement (the option expired on 31 December 2011). The Distributorship agreement is still fully
19
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
operational, and regulates all operational and management aspects related to sales and operations in
the United States, as well as, naturally, the right relating to the repayment of the above-cited loan.
In accordance with IFRS 10, no consolidation of the US partnership is required insofar as the N&W
Group does not have an Equity interest and the power to direct the relevant acitvities in Vendors
Exchange Global Solutions LLC.
Note 2. Accounting policies
The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to the period presented,
unless otherwise stated.
Note 2.1. Basis of preparation
The Consolidated Financial Statements have been prepared in accordance with the International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board
(“IASB”) and as adopted by the European Union. The term “IFRS” also includes all International
Accounting Standards (“IAS”) and all interpretations issued by the IFRS Interpretations Committee,
previously International Financial Reporting Interpretation Committee (“IFRIC”).
These consolidated financial statements are presented in Euro, which is the Group’s presentation
currency and the functional currency of the Company. All amounts in these consolidated financial
statements are presented in thousands of Euro, unless otherwise stated.
These financial statements are prepared on a going concern basis, i.e. assuming that operations will
continue in the foreseeable future.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in Note 2.
Note 2.2. Basis of Accounting
The consolidated financial statements have been prepared on the historical cost basis except for
financial instruments that are measured at fair value at the end of each reporting period, as
explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation technique. In estimating the fair
20
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
value of an asset or a liability, the Group takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset
or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis, except for share-based payment
transactions that are within the scope of IFRS 2 “Shared-based Payment”, leasing transactions that
are within the scope of IAS 17 “Leases”, and measurement that have some similarities to fair value
but are not fair value, such as net realisable value in IAS 2 “Inventories” or in value in use IAS 36
“Impairment of Assets”.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as
follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
Note 2.3. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and
entities (including structured entities) controlled by the Company and its subsidiaries. Control is
achieved when the Company:
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassess whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of controls listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over
the investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all relevant facts and circumstances
in assessing whether or not the Company’s voting rights in an investee are sufficient to give it
power, including:
the size of the Company’s holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
potential voting rights held by the Company, other vote holders or other parties;
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not have, the
current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meeting.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated income
statement and consolidated statement of comprehensive income from the date the Company gains
control until the date when the Company ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Changes in the Group’s ownership interest in subsidiaries that do not result in the Group losing
control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the
Group’s interests and the non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by which the non-
controlling interests are adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recongnised in profit or loss and is
calculated as the difference between i) the aggregate of the fair value of the consideration received
and the fair value of any retained interest and ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amount
previously recognised in other comprehensive income in relation to that subsidiary are accounted
for as if the Group had directly disposed of the related assets or liabilities of the subsidiary.
Note 2.4. Business combinations
Acquisition of business are accounted for using the acquisition method
The consideration transferred in a business combination is measured at fair value, which is
calculated as the sum of the acquisition-date fair values of the assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are generally
recognised in profit or loss as incurred.
At acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their
fair value, except that:
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with IAS 12 “Income Taxes” and IAS 19
“Employee Benefits” respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS 2 “Share-based Payment”
at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-
current Assets Held for Sale and Discontinued Operations”, are measured in accordance with
that Standard.
The excess of the sum of consideration transferred and the net fair value of identifiable assets
acquired and liabilities assumed is recognised as Goodwill. If, after reassessment, the net fair value
of identifiable assets acquired and liabilities assumed exceeds the consideration transferred it is
recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests may be initially measured either at fair value or at the non-controlling
interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement
basis is made on q transaction by transaction basis.
When the consideration transferred by the Group in a business combination includes assets or
liabilities resulting from a contingent consideration arrangement, the contingent consideration is
measured at its acquisition-date fair value and included as part of the consideration transferred in a
business combination. Changes in the fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted restrospectively, with corresponding adjustments
against goodwill. Measured period adjustments that arise from additional information obtained
during the “measurement period” about facts and circumstances that existed at the acquisition date.
When a business combination is achieved in stages, the Group’s previously held equity interest in
the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is
recognised in profit or loss. Amounts arising from interest in the acquiree prior to the acquisition
date that have previously been recognised in other comprehensive income are reclassified to profit
or loss where such treatment would be appropriate if the interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period,
or additional assets or liabilities are recognized, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognized at that date.
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 2.5. Goodwill
The goodwill resulting from a business combination is recognised under intangible assets at the date
on which control is acquired. Goodwill is recognised at cost, less accumulated impairment losses (if
any).
For purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating
units (“CGUs”) that is expected to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is
less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the
carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly
in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant CGU, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Note 2.6. Conversion of entries in foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other
than the entity's functional currency (foreign currencies) are recognised at the rates of exchange
prevailing at the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
The consolidated financial statements are presented in Euro, the parent company’s functional
currency. Transactions in the income statement made by subsidiaries located out of the Eurozone
(the “non Euro subsidiaries” located in Denmark, Brazil, Argentina, UK, Poland, Australia,
Singapore and Romania) are converted into Euro using the average exchange rate for the year on a
monthly basis, since the exchange rates did not fluctuate significantly during the period; the
amounts in the statement of financial position are converted at the exchange rate in force at 31
December.
The exchange differences resulting from the conversion of the investments in the “non Euro
subsidiaries” are recognised under “Translation reserve” under shareholders’ equity.
Note 2.7. Internally-Generated Research & Development Assets
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase
of an internal project) is recognised if, and only if, all of the following have been demonstrated:
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
the technical feasibility of completing the intangible asset so that it is available for use or to
sale;
the intention to complete the intangible asset to use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
Development costs that have previously been recognised in the income statement cannot be
recognised as intangible assets in the following period.
The amount initially recognised as an internally-generated intangible asset do not exceed the
amount that is expected to be recovered from the probable future economic benefits, after having
deducted the further development costs incurred directly to promote the product.
Investments in development recognised as intangible assets are amortised and are recognised as
expense on a systematic basis, so that they reflect the manner in which the future economic benefits
of the asset are expected to be used by the Group.
Development costs are amortised over a five year period, an average term considered to be
representative of the useful life of the benefits related to new products developed; the useful life is
periodically reviewed.
Note 2.8. Software
The costs associated with software development are usually expensed at the time they are incurred.
However, costs that are clearly associated to an identifiable and unique product, which will be
under the control of the Group and will provide future benefits, are recognised as intangible assets
where the requirements of IAS 38 have been met. The relative costs also include the costs of the
personnel who have contributed to developing the asset.
All of the expenses that increase and extend the performance of the software beyond its original
specifications and its assumed duration are recognised as intangible assets and increase the original
cost.
The costs relating to the maintenance or updating of existing software programmes are expensed at
the time they are incurred.
Note 2.9. Trademarks, Customer List and Patents
Intangible assets acquired in a business combination and recognised separately from goodwill are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Subsequent to initial recognition, intangible assets acquired in a business combination are reported
at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
Trademarks, with a finite useful life, are amortised on a straight-line basis according to their useful
life estimated to be 15 years.
The customer list, with a finit useful life, is reduced yearly according to a churn rate applicable,
extracted from the Company’s historical data estimated to be approximately 6 years.
Patents, with a finite useful life, are amortised on a straight-line basis according to their useful life
estimated to be 10 years.
Note 2.10. Property, plant and equipment
Property, plant and equipment are recognised at cost including ancillary charges, net of
accumulated depreciation and accumulated impairment losses.
Depreciation is recognised to facilitate the write-off of the cost of the assets less their residual
values over their useful lives, on a straight-line basis.
The useful lives are estimated as follows:
Property and plant 30-40 years
Equipment 3-10 years
The investments, which at year-end were not completed, are classified as Construction in progress
and are not depreciated.
The costs incurred for improvements to third party assets where capitalised are shown in the
financial statements under the category of assets to which they refer and are depreciated over the
shorter of the useful life and the lease term.
Expenses relating to refurbishments and improvements, which have led to a tangible increase in
production capacity or have extended useful life, are capitalised while ordinary maintenance and
repairs are expensed.
If the book value of an asset is higher than the estimated recoverable amount, its value is reduced to
the lower amount.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising
on the disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognised in
profit or loss.
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 2.11. Impairment of intangible and tangible fixed assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets (other than goodwill) to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). When it is not possible
to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the CGU to which the asset belongs.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less selling costs and value in use. In order to
calculate the fair value net of selling costs, specific valuation models are available; these
calculations are made using appropriate income multipliers, publically traded share prices relating
to similar companies or other available fair value indicators that are relevant to the assets to be
valued. When calculating the value in use, the assets are valued at the expected cash generating unit
level (CGU) based on how they are allocated. In assessing value in use, the estimated future post-
tax cash flows are discounted to their present value using a post-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
Where the recoverable amount of an asset of a CGU is lower than its carrying amount, the carrying
amount is reduced to its recoverable amount. An impairment loss is recognised immediately in
profit or loss.
If, subsequently, an impairment loss relating to the asset (that is not goodwill) reverses, the carrying
amount is increased to the revised recoverable value, but not exceeding the carrying amount that the
asset would have been recognised as if no impairment loss had been recognised in prior years.
Note 2.12. Financial instruments
A financial instrument is represented by a contract that gives rise to financial asset for a company
and a financial liability or an equity instrument for another company.
Financial assets and liabilities are initially measured at their fair value; the relative transaction costs
directly related to the acquisition or the issue are included in the initial measurement of all financial
assets/liabilities, other than for financial assets and liabilities carried at fair value through profit or
loss.
Financial assets
A financial asset is any asset that represents:
- cash and cash equivalents;
- a contractual right to receive cash or another financial asset from another party;
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
- a contractual right to exchange financial instruments with another party at potentially
favourable conditions;
- an instrument representing the shareholders’ equity of another company;
- a contract, including derivative, which is or may be settled with instruments representing a
company’s capital.
Impairment of financial assets
Financial assets, unlike those classified in the fair value category in the income statement (FVTPL),
are impairment tested at each reporting date. The recoverability of the value of financial assets are
verified for each individual instrument or collectively for groups of similar instruments at the end of
each reporting period.
Derecognition of financial assets
The company eliminates a financial asset from the financial statements when it transfers the
contractual right to receive cash flows from the asset in question or when said right expires.
When a financial asset is transferred, the extent to which the risks and benefits related to the
ownership of the financial asset are transferred must be assessed. More specifically:
if the company substantially transfers all of the risks and benefits related to the ownership of
the financial asset, it eliminates the asset transferred and separately recognises any rights or
obligations created or maintained as a consequence of said transfer;
if the company substantially maintains all of the risks and benefits related to the ownership
of the financial asset, it continues to recognise the asset.
Financial liabilities and shareholders’ equity
A financial liability is any liability that represents a contractual obligation to:
give cash or another financial asset to another company;
exchange financial instruments with another party at potentially unfavourable conditions;
a contract, including derivative, which is or may be settled with instruments representing a
company’s capital.
An instrument representing capital, an equity instrument, is a contract that represents a residual
equity investment in the assets of a company net of its liabilities; for example, this regards shares,
quotas or rights to purchase or subscribe for shares or quotas of a company.
Other financial liabilities
Other financial liabilities, including loans, are measured at amortised cost, using the effective
interest rate method.
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Derivative financial instruments
The company uses foreign currency and IRS derivative financial instruments to hedge the risks
resulting from fluctuations of exchange rates and interest rates. Derivative financial instruments are
recognised at their fair value at initially and are subsequently measured at their fari value at the end
of each reporting period. The resulting gain or loss is recognised in profit or loss unless the
derivative is designated and effective as a hedging instrument.
Hedge accounting
On the date a derivative contract is entered into, the Group Treasury designates the derivative as
either a (1) a hedge of the fair value of a recognised asset or liability (fair value hedge), or (2) a
hedge of a recognised asset or liability and of a forecasted transaction (cash flow hedge). Certain
derivative transactions while providing effective economic hedges under the Group’s risk
management policies, do not qualify for hedging accounting. Derivatives instruments are not
entered into for trading or speculative purposes.
Changes in the fair value of a derivative that is highly effective, and that is designated and qualify
as a fair value hedge, are recorded in the Income Statement along with the change in the fair value
of the hedged asset or liability that is attributable to the hedged risk. Changes in the fair value of a
derivative that is highly effective, and that is designated and qualified as a cash flow hedge, are
recognised directly in equity (hedging reserve). Amounts deferred in equity are included in the
Income Statement in the same periods during which the hedged items expected cash flows or
forecasted transaction affects the Income Statement.
The Group Treasury formally documents all relationships between hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking various hedge
transactions.
This process includes linking all derivatives designated as hedges to specific assets and liabilities or
to specific firm commitments or forecasted transactions.
The Group also formally assesses, both at the hedge inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in fair
values or cash flows of hedged items.
Note 2.13. Inventories
Inventories of raw materials and finished products are stated at the lower of purchase or production
cost, and net realisable value. Costs of inventories are determined on the weighted average cost
basis. Net realisable value represents the estimated selling price for inventories less all estimated
costs of completion and costs necessary to sell.
The purchase cost is inclusive of the costs incurred for transporting the goods to the warehousing
location. The production cost of the finished and semi-finished products includes the directly
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
attributable costs and a portion of the indirect costs (excluding finance expense) reasonably
attributable to the products based on the normal production capacity.
Work in progress, is measured at production cost for the year, taking into account the stage of
completion.
Obsolete and slow-moving inventories are written down to the net realisable value, by means of the
establishment of a specific provision to adjust the value of the inventories.
Note 2.14. Trade receivables
Receivables from customers are initially recognised at fair value and subsequently are recorded at
amortised cost, using the effective interest rate method, net of the losses for uncollectable
receivables. The amount of the write-down of the receivables is based on the analysis of all the
receivables outstanding at the end of the period.
Note 2.15. Payables to suppliers and other liabilities
Payables to suppliers along with the other liabilities, with the exception of financial liabilities, are
recognised at their expected settlement amount.
Note 2.16. Provisions for risks and charges
IAS 37 “Provision, Contingent Liabilities and Contingent Assets” requires recognition of a
provision when:
- the Group has a present obligation (legal or constructive) as a consequence of past events;
- it is probable that an outflow of resources will be required for fulfilling the obligation;
- it is possible to reliably estimate the amount of the obligation.
Provisions are recognised at the value that represents the best estimate of the amount to be paid to
discharge the obligation at the period end date, after having taken into consideration all the risks
associated with the obligation. When a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of those cash flows (when the
effect of the time value of money is material).
When a part or all of the expenses necessary for fulfilling the obligation are reimbursed by third
parties, a receivable is recognised as an asset provided that it is virtually certain that the
reimbursement will be received and that the amount of the receivable can be determined reliably.
Provisions for the expected cost of warranty obligations under local sale of goods legislation are
recognised at the date of sale of the relevant products.
A provision for reorganisation costs is recognised only if the Group has approved a formal detailed
plan for the reorganisation and has raised a valid expectation in those affected that it will carry out
the reorganisation by starting to implement the plan or announcing its main features to those
affected by it. The measurement of a reorganisation provision includes only the direct expenditures
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
arising from the restructuring, which are those amounts that are both necessarily entailed by the
reorganisation and not associated with the ongoing activities of the Group.
Note 2.17. Contingent liabilities
A contingent liability is:
- a possible obligation which derives from past events and whose existence will be confirmed
only on occurrence of one or more uncertain future events not totally under the control of
the company; or
- an obligation underway which derives from past events but which is not recognised because:
i) it is not probable that the use of resources suitable for producing economic benefits to
meet the obligation will be necessary; or
ii) the amount of the obligation cannot be determined with sufficient reliability.
Contingent liabilities are not subject to recognition, however if the event is possible but not
probable or if it is probable but cannot be quantified, suitable disclosure is provided in the notes to
the financial statements.
Note 2.18. Employment benefits
Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when
employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuation being carried out at the end of each annual
reporting period. Interest is calculated by applying the discount rate at the beginning of the period to
the defined benefit liability. Remeasurement, comprising actuarial gains and losses is recognised in
other comprehensive income and will not be subsequently to the income statement. Defined benefit
costs are categorised as follows:
- service cost;
- net interest;
- remeasurement.
Employee leaving indemnity (TFR)
TFR, accrued by the employees of the Italian Group companies at 31 December 2006 (applicable
date of the welfare reform), is classified as a defined-benefit schemes. The benefit that employees
have earned in return for services prior to 31 December 2016 is determined using an actuarial
technique, the projected unit credit method so as to make a reliable estimate of the amount to be
paid at the time of termination of the employment relationship. The projected unit credit method
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
requires the Group to make estimates (actuarial assumptions) about demographic variables and
financial variables that will affect the cost of the benefits. The benefit is discounted in order to
determine the present value of the defined benefit obligation using interest rates of high-quality
corporate bonds.
Further to the afore-mentioned welfare reform, TFR which accrues from 1 January 2007 is
classified as a defined-contribution plan, consequently payments for benefits earned by the
employees after this date are recognised as an expense as the Group has no further payment
obligations once the contributions have been paid. Contributions are recognised as liability to the
extent that they are not paid to the supplementary pension funds or to the Istituto Nazionale della
Previdenza Sociale treasury fund.
Short-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual
leave and sick leave in the period the related service is rendered at the undiscounted amount of the
benefits expected to be paid in exchange for that service.
Note 2.19. Income taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from “profit
before tax” as reported in the consolidated income statement because of items of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible.
The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted
by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not
recognised if the temporary difference arises from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference
arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Current and deferred tax assets and liabilities are offset when the income taxes are applied by the
same tax authority and where there is a legally recognised right to offset the amounts recorded.
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The deferred tax assets and liabilities are defined based on the tax rates which are expected to be
applied in the year in which these assets are realised or these liabilities are discharged considering
the rates in force or those already issued or essentially issued at the reporting date.
Note 2.20. Revenue recognition
Revenues is measured at the fair value of the consideration received or receivable. Revenue is
reduced for estimated customer returns, rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed,
at which time all following conditions are satisfied:
the transfer of the risks and benefits associated with the ownership of the goods takes place;
the Group retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
the amount of the revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the
Group; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Dividends and interest
Dividend income from investments is recognised when the shareholder’s right to receive payment
has been established (provided that it is probable that the economic benefits will flow to the Group
and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits
will flow to the Group and the amount of income can be measured reliably. Interest income is
accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount on initial recognition.
Note 2.21. Cost of sales
Cost of sales includes production cost of products sold. It includes the costs of raw materials, and
direct and indirect production costs. The latter includes the depreciation of property, plant and
equipment and amortisation of intangible assets relating to the production and write-down of the
inventories. The cost of sales also includes the transport cost relating to the deliveries and the
allowances made to the product warranty provisions.
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N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 2.22. Profit Partecipation Loan (“PPL”)
The Profit Partecipation Loan partecipated by Group employees are recognised at the market value
which estimate is based on Monte Carlo valuation method.
The Company recognises the changes in the market value in the income statement according to the
estimated 5 years maturity period with a corresponding credit to equity as the Company has no
obligation to settle the liability arising from the PPL arrangement.
Note 3. Critical accounting estimates and judgements
In the application of the Group’s accounting policies, the directors are required to make judgements,
estimates and assumptions about the carrying amounts of asset and liabilities that are not readily
apparent from other sources. The use of reasonable estimates therefore represents an essential
element in the preparation of the financial statements and does not affect the degree of reliability.
Estimates and assumptions are based on the opinion of management supported by experience
deriving from similar transactions and external evidence where available. They are based on the
latest information available and which is reliable, and include any additional evidence provided by
events that took place after the reporting date. Actual results may differ from estimates.
Since the actual results may differ from the afore-mentioned estimates, any changes in the
underlying circumstances or additional information could make a review of said estimates
necessary. The effect of the change in estimates has repercussions on the income statement:
- in the period in which the change took place, if the change only effects this period;
- in the period in which the change took place and in subsequent ones, if the change effects
several periods.
Determination of fair values in business combinations
The Company has applied estimates and judgements in order to determine the fair value of assets
acquired and liabilities assumed by way of a business combination. The value of assets, liabilities
and contingent liabilities recognized at the acquisition date are recognized at fair value. In
determining the fair value, the Company has utilized valuation methodologies including discounted
cash flow analysis. The Company’s estimates are based upon assumptions believed to be
reasonable, but which are inherently uncertain and unpredictable. These valuations require the use
of management’s assumptions, which would not reflect unanticipated events and circumstances that
may occur. Any significant change in key assumptions may cause the acquisition accounting to be
revised including the recognition of additional goodwill or a discount on acquisition.
Estimate of the Goodwill
The amount of goodwill initially recognized as a result of a business combination is dependent on
the allocation of the purchase price to the fair value of the identifiable assets acquired and the
liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a
34
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
considerable extent, on management’s judgment. Allocation of the purchase price affects the results
of the Group as finite lived intangible assets are amortized, whereas indefinite lived intangible
assets, including goodwill, are not amortized and could result in differing amortization charges
based on the allocation to indefinite lived and finite lived intangible assets.
Impairment testing
IFRS requires management to undertake an annual test for impairment of indefinite lived assets and,
for finite lived assets, to test for impairment if events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment testing is an area involving
management judgment, requiring assessment as to whether the carrying value of assets can be
supported by the net present value of future cash flows derived from such assets using cash flow
projections which have been discounted at an appropriate rate. In calculating the net present value
of the future cash flows, certain assumptions are required to be made in respect of highly uncertain
matters including management’s expectations of:
growth in EBITDA, calculated as adjusted operating profit before depreciation and
amortization;
timing and quantum of future capital expenditure;
long-term growth rates; and
the selection of discount rates to reflect the risks involved.
Changing the assumptions selected by management, in particular the discount rate and growth rate
assumptions used in the cash flow projections, could significantly affect the Company’s impairment
evaluation and hence results.
The goodwill has been provisionally allocated to Vending, Ho.Re.Ca and OCS Cash Generating
Units, given that these divisions are expected to benefit most from the sinergies of the Acquisition.
Any adjustment to such provisional values will be recognized within twelve months of the
Acquisition Date.
Income taxes
The Group is subject to income taxation in various jurisdictions. In order to determine the tax
liability on a global scale, a significant degree of estimation is required. Numerous transactions and
calculations must be made to be able to reach a final determination of the taxes, which however
remains uncertain during the ordinary course of the economic activities.
The Group recognises payables for taxes based on the estimates of tax to be paid. In the event of a
tax inspection, if the amount to be paid is different from that estimated, these differences will affect
the income taxes and the provisions for deferred taxes during the period in which these calculations
are made.
35
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 4. Business Combination
The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS
3 Business Combinations. As a result, the total purchase price has been allocated to the identifiable
assets and liabilities acquired, based on the estimated fair values at the date of acquisition.
Purchase consideration
Cash paid 14,989 Consideration in escrow account 1,000 Total purchase consideration 15,989
The purchase price paid in cash was equal to €16 million, as compared to a negative net asset value
of N&W Group of €567.7 million at Completion Date. Consequently, the preliminary goodwill –
before purchase price allocation - was equal to €583.7 million.
Assets acquired and liabilities recognised at the date of acquisition
The assets and liabilities recognised as a result of the acquisition are as follows:
(€ thousands) Net assets at Completion Date after PPA
Assets acquired 584,859 Property, plant & equipment 39,055 Intangible assets 324,156
Software 1,171
Internally generated software 18,066
Trademarks 122,111
Patents 73,505
Customer Relationship 109,302
Other non-current assets 3,119 Total non-current assets 366,330 Inventories 65,493 Trade and other receivables 83,807 Cash and cash equivalents 47,639 Deferred tax assets 21,590 Total current assets 218,529
Liabilities assumed (917,321) Deferred income tax liabilities (105,322) Other non-current liabilities (20,137) Total non-current liabilities (125,459) Trade payables (138,231) Financial indebtness (653,631) Total current liabilities (791,862)
Identifiable assets and liabilities (332,462)
36
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Purchase price allocation process has identified the following assets:
- Internally generated software, Trademarks and Patents
- Customer relationship
- Inventory (adjustment to fair value)
- Tax credit
For a complete description, please see paragraph “III. Impact of Purchase Price Allocation”.
Purchase consideration 15,989 Less: fair value of identifiable net assets acquired (332,462)
Goodwill arising acquisition 348,451
Acquisition-related costs
Acquisition-related costs of Euro 24,602 million refer to: Euro 10,141 of Financing and
Arrangement Fees on Bond and Revolving Facility (see note 23), Euro 8,000 of Committment and
Funding Fees included in Financial expenses (see note 10) and Euro 6,461 as consultancies costs
mainly for vendor and buyer due diligences (legal, tax, accounting, commercial due diligence)
related to Nighthawk Project connected with the sale of the Group (see note 9).
Tax settlement – Purchase price Adjustment
Following the receipt of tax assessment notices and claims for penalties relating to the tax period
2010 concerning certain allegations regarding the failure to apply or to pay tax withholdings on
interests paid on the financing granted on 2008 to N&W Group by N&W Holdings S.à r.l. (former
shareholder of N&W Group) and for the alleged illegitimate use of previous losses by N&W Group
(the “2010 Claims”), the latter filed on January 2016 with the competent offices a tax settlement
proposal (istanza di accertamento con adesione). In relation to the tax settlement proposal, N&W
Group initiated a tax settlement procedure (procedura di accertamento con adesione) with the tax
authority to reach a settlement in relation to litigations concerning the alleged illegitimate use of
previous losses by N&W Group in the tax periods from 2005 to 2009, the alleged illegitimate
deductibility of interests expenses in the tax periods from 2005 to 2007 and other minor issues (the
“Pending Claims”). Following several verbal discussions and meetings with the Italian Tax
Authority in relation, inter alia, to the 2010 Claims and to the Pending Claims, N&W Group
executed on 26 May 2016 with the competent authorities an agreement concerning the settlement
of the 2010 Claims, the Pending Claims and possible claims related to tax periods from 2011 to
2013 regarding the failure to apply and to pay tax withholdings on interests in relation to the
financing granted on 2008 to N&W Group by N&W Holdings S.à r.l.. The agreement provides that
N&W Group shall pay an amount equal to approx. Euro 36 million and forego a claim from the tax
authorities equal to approx. Euro 3.7 million arising from amounts already paid by N&W Group in
relation to pending claims with reference to the tax period 2006, which are not due anymore. The
payment to be made by N&W Global Vending S.p.A. on the basis of installments’ plans (n. 17
37
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
installments) agreed with the tax authority is covered by a guarantee provided to LSF9 Canto
Investments S.p.A. by (i) Lone Star Fund IX for a maximum amount equal to Euro 30 million
subject to certain terms and conditions; and (ii) by an indemnity from N&W Holdings S.à r.l. for an
amount equal to approx. Euro 6.5 million, as defined in the Share Purchase Agreement (“SPA”) of
3 December 2015 between N&W Holdings S.à r.l. and LSF9 Canto Investments SpA.
Revenue and profit contribution
As stated in note 5, the revenue and profit from continuing operations for the period are completely
attributable to the acquisition of N&W Group.
Had these business combinations been effected at 1 January 2016, the revenue from sales and
operating profit of the Group at 31 December 2016 would have been Euro 299.6 million and Euro
3.3 million respectively. The loss for the period from continuing operations would have been Euro
40.7 million.
Net cash flow on acquisition of subsidiaries
Cash paid 14,989 Less: cash and cash equivalent balance acquired (47,639)
Net purchase consideration (32,650)
Note 5. Revenue
The breakdown of sales by product line is as follows:
Proforma Predecessor
2016 2015
Hot and Cold (H&C) 131,877 133,028 Hotel, Restaurant and Cafeteria (Horeca) 22,181 19,655 Liquid 17,146 17,063 Snack and Food (S&F) 49,729 53,951 Can and Bottle 2,953 2,592 Office Coffee Service (OCS) 10,402 12,835 Accessories 14,287 14,280 Spare parts 50,989 48,921
Total Revenues from sales 299,564 302,325
Around 17% of revenues are generated by invoicing in currencies other than the Euro.
There have been no sales made to related parties during 2016 or 2015.
Note 6. Segment information
The Executive committee is the Group’s chief operating decision-maker (“CODM”). Management
has determined the operating segment based on the information reviewed by the Executive
committee for the purposes of allocating resources and assessing performance.
38
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The CODM considers the Group as a single segment. The Group produces machinery of different
size but the industrial process, risks and supply chain are the same for all types of machinery. In
addition, the information reviewed by the CODM only shows revenue by different products. In
consideration of structure of reporting, the process of allocating resources and activity of Group the
CODM has identified one segment (i.e. N&W Group).
The following table presents revenue information on a geographic basis:
Proforma Predecessor
2016 2015
Italy 95,205 95,809 France 41,240 41,316 Spain 22,621 22,709 UK 11,208 14,806 Germany 14,361 13,364 Nordic countries 20,576 16,680 Rest of Europe 41,325 49,920 Eastern Europe 14,000 12,154 Rest of World 39,028 35,567 Total Revenues from sales 299,564 302,325
2016 revenues from sales have been caracterised by the very good performance of small-medium
customers more than offset by downturn of major key accounts. Western European countries
(composed by Italy, France, Spain, UK, Germany and Nordic countries) registered an overall
performance slightly better than 2015 mainly thanks to the good results in Nordic countries and
Germany only partially offset by the downturn in UK due to the underperformance of some big
customers. Also in Rest of Europe the shortfall of revenues is attributable to the downturn of a
couple of big players.
Very good performances in Eastern Europe and in other emerging markets thanks to Czech
Republic, Romania, Baltics and Poland together with Asia&Pacific, North America and Africa
respectively.
Included in revenues arising from 2016 of Euro 299.6 million (2015: Euro 302.3 million) are
revenues of approximately Euro 31.2 million (Euro 66.7 million in 2015) which arose from sales to
the N&W Group’s largest customers. No other single customer contributed 10% or more to the
Group’s revenue during 2016 or 2015.
A reconciliation of Adjusted EBITDA to loss for the period is provided as follow:
39
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Proforma Predecessor
31 December
2016 31 December
2015
Loss for the period (41,792) (14,773) Income taxes 3,761 9,368
EBT (38,031) (5,405) Net Financial Expense 41,307 59,590 EBIT 3,276 54,185 * Depreciation 8,708 7,305 * Amortisation 30,961 7,083 Reorganisation and other costs 11,184 2,956 Exchange Difference on BRL (1,953) 2,570 Inventory revaluation reversal as per PPA 23,392 -
Adjusted EBITDA 75,568 74,099
* Depreciation and amortisation are included in Cost of Sales of consolidated accounts. 2016
amortization is impacted by Purchase Price Allocation (Euro 27,991).
Note 7. Cost of Sales
The cost of sales indicated in the income statement is made up as follows:
Proforma Predecessor
1 January-
31 December
2016
1 January-
31 December
2015 Cost of sales (177,378) (180,820) Amortisation and depreciation of intangible and tangible
fixed assets (39,669) (14,388)
Reversal of Inventory Revaluation (see below) (23,392) -
Total Cost of sales (240,440) (195,208)
During the year, the amortisation and depreciation relating to intangible assets and tangible fixed
assets was respectively expensed in Cost of Sales.
2016 Cost of Sales has been heavily impacted by the amortization of the Intangibles arisen by the
Purchase Price Allocation (Euro 27,991) together with the reversal of the inventory revaluation
occurred on acquisition date.
The manufacturing profit considered as part of the fair value assigned to the N&W inventory at the
acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally
reversed to Profit and Loss during the year when the goods have been sold.
The above fair value of the finished goods and merchandise has been evaluated deducting from the
selling price the costs of disposal: commissions, inventory stocking costs and distribution costs.
40
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 8. Reorganisation costs
The income statement for 2016 includes Euro 330 (39 Euro in 2015 ) as lay off costs relating to the
reduction of the employees in N&W Group companies.
Note 9. Other costs
The amount of Euro 10,854 (Euro 2,917 in 2015) indicated in the item “Other costs” in the 2016
income statement includes: Euro 6,461 as costs related to Nighthawk Project connected with the
sale of the Group, Euro 1,606 as costs for the accomplishment of specific projects of a non-
recurrent nature, Euro 787 as charges accrued for CIGO (“Cassa Integrazione Guadagni Ordinaria”,
a Social Security contract) by Italian legal entities for the application of short time working
procedure, Euro 360 as costs for occasional advisory services, Euro 1,508 as costs relating to the
write-down of the financial receivable outstanding with VE Global Solutions LLC and Euro 96 as
costs related to the Profit Partecipation Loan of some managers (see Note 21). The remaining Euro
36 are other minor various costs.
Note 10. Net financial expense
Proforma Predecessor
31 December
2016
31 December
2015
Financial income 547 965
Financial expenses (41,854) (60,555)
NET FINANCIAL EXPENSE (41,307) (59,590)
The financial income recorded in the income statement is analysed in the table presented below:
Proforma Predecessor
31 December
2016
31 December
2015
Bank interests 290 529
Interests on VE Global Solutions LLC Loan 200 193
Interests from Related Parties 57 243
TOTAL 547 965
41
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The financial expenses recorded in the income statement is analysed in the table presented below:
Proforma Predecessor
31 December
2016
31 December
2015
Interest on Senior Loan (2,267) (10,614)
Non cash interest - Senior Loan Financing Fees (2,148) (4,157)
Cash interest – Related parties - (1,437)
Non cash interest – Related parties (9,080) (42,553)
Bank commission (commitment, agency and admin) (140) (372)
Bank charges and other (1,414) (1,545)
Exchange gains/(losses) 277 123
Bridge Loan Interests (15,154) -
Bridge Commitment and Funding fees (8,000)
Revolving Facility interests and commitment fees (581) -
Revolving Facility non cash interests – financing fees (115) -
Senior Secured Notes interests (4,433) -
Second Lien Note interests (2,217) -
Senior&Second Lien Notes financing fees amortisation (279) -
WHT reversal on tax audit 3,696 -
TOTAL (41,854) (60,555)
2016 proforma financial costs mainly include: i) interests on the Senior Loan related to the
indebtness of N&W Group prior the acquisition as well as ii) interests due to the previous
Company’s shareholder on the outstanding Loan both existinguished at the acquisition date; iii)
interests on the Bridge Facility of Euro 400 million drawn on 22nd
March to finance the acquisition
and repaid on 15th
October at the time of Bond issuance; iv) Euro 8,000 of commitment and
Funding fees paid in order to obtain the Bridge Facility; v) interests on the Secured and Second Lien
Notes from 15th
October till 31st December 2016; vi) interests and commitment fees on the
Revolving Facility drawn down at the acquisition date for Euro 10,815 on a total of Euro 40,000
available.
Note 11. Taxes
Taxes receivables
Proforma Predecessor
31 December
2016 31 December
2015
Income tax receivables 2,552 5,385
VAT receivables 3,822 3,213
Other tax receivables 2,009 794
8,384 9,392
42
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Income tax receivables mainly refer to net advances of IRES and IRAP (regional business tax)
effected by Italian legal entities to Italian tax authority and by the Danish subsidiary.
VAT receivables represent all the VAT credits in the various countries of the companies belonging
to the Group.
Other tax receivables mainly include advances made by the Brazilian company for some local taxes
as well as tax credit for IRES reimbursement related to IRAP deduction on employees costs as per
Italian D.L. 201/2011 (Euro 632) and Italian tax credit for investment in capital equipment and
property as per D.L. 91/2014 (Euro 102).
Taxes payables (current and non current)
Proforma Predecessor
31 December
2016 31 December
2015
Income taxes payables 2,782 2,283
VAT payables 2,132 2,022
Other tax payables - 1,220 Italian tax audit - short term portion 2,874 -
Italian tax audit - long term portion 6,466 -
14,695 5,525
Income tax payables are essentially made up of income taxes owed by the Danish subsidiary.
VAT payables represent all the VAT debts in the various countries of the companies belonging to
the Group.
Euro 9,340 refer to the oustanding amount related to tax losses settled on May 26, 2016 (see Note
4).
On the basis of installments’ plan agreed, Euro 2,874 will be due by the Company to the Italian Tax
Authority by 31 December 2017 and Euro 6,466 on a quarterly basis by 31 December 2020.
The reconciliation between the 27.5% rate in force in the country of the Italian parent company and
the effective tax liability of the group is presented below:
43
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Proforma Predecessor
31 December
2016 31 December
2015
Loss before taxes (38,031) (5,405)
Tax calculated at the rate of the parent company
(27.5%) 10,459 1,486
Effect of different tax rate regimes 5,288 (457)
Italian Tax audit (12,383)
IRAP (regional business tax) (1,103) (1,216)
N&W Global Vending S.p.A. non-deductible interest (6,625) (10,830)
Parent Notional Interest Deduction (ACE) 2,856
Permanent differences (1,165) 1,154
Other (1,088) 495
Taxes in the income statement (3,761) (9,368)
The above reconciliation is determined by applying the tax rate of the parent company.
The IRAP is not considered in the reconciliation since it presents a different taxable base with
respect to the income taxes.
The income taxes are made up as per the table presented below:
Proforma Predecessor
31 December
2016 31 December
2015 Current income taxes (16,853) (5,964)
Deferred income taxes 13,092 (3,404)
(3,761) (9,368)
The deferred tax assets are analysed in the table presented below:
Proforma Predecessor
31 December 2016
31 December 2015
Inventory obsolescence allowance 794 1,281
Technical assistance provision (warranty provision) 568 655
Other provisions 1,228 1,716
Provision for doubtful receivables 1,674 1,879 Provision for other risks 429 348
Long-term investments 189 189
Intangible and tangible fixed assets 12,675 11,420
Prior losses recognised 836 788 Market value of IRS derivatives/forward contracts 68 28
TOTAL 18,461 18,304
The deferred tax liabilities are analysed in the table presented below:
44
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Proforma Predecessor
31 December
2016 31 December
2015
PPA impact (82,303) -
Development costs - (1,323)
Amortisation of goodwill (4,023) (20,200)
Amortisation/depreciation (875) (874)
Inventory - (63)
Currency purchase/sale derivatives (fair value) - (30)
Fair value tangible fixed assets - (1,897)
Exchange gains (703) (467)
Other (112) (171)
TOTAL (88,016) (25,025)
After all the appropriate offsettings in the statement of financial position, the following amounts are
indicated:
Proforma Predecessor
31 December
2016 31 December
2015 Deferred tax assets 18,461 18,304
Deferred tax liabilities (88,016) (25,025)
(69,555) (6,721)
The deferred tax assets exposed above have been recognised based on probable results that will be
available at the moment when temporary differences will reverse.
The deferred tax assets recognised on prior tax losses present the following maturities:
Proforma Predecessor
Maturity date 31 December
2016 31 December
2015 Indefinite life 836 788
Some group companies have not recorded deferred tax assets on the prior losses given the
uncertainty of the recovery by means of offsetting with the tax profits that it is envisaged will be
generated over the mid-term.
The fiscal impact of the prior losses not recognised at 31 December 2016 amounts to Euro 583 and
has an indefinite life (Euro 1,046 in 2015).
Note 12. Comprehensive income components
The comprehensive income components include changes in translation reserve on currency
transactions for Euro 162, hedge accounting of financial instruments for Euro (757) and Euro (432)
for the actuarial loss on personnel provision according to IAS 19.
45
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 13. Intangible assets
Goodwill Internally
generated
Research &
Development
Assets
Trademarks
Other
intangible
assets
Total
Historical cost
1 January 2015 700,094 62,440 73,303 18,968 854,805
Increases - 7,302 - 909 8,211
Exchange rate impact 20 (38) - 8 (10)
Disposals - (2) - (25) (27)
31 December 2015 700,114 69,702 73,303 19,860 862,979
Accumulated
amortisation and
impairment
1 January 2015 44,554 46,482 72,219 17,551 180,806 Amortisation for the year - 4,963 1,084 1,036 7,083
Exchange rate impact - (28) - (5) (33)
Disposals - - - (12) (12) 31 December 2015 44,554 51,417 73,303 18,570 187,844
Net book value - 31 December 2015
655,560
18,285
-
1,290
675,135
Goodwill Internally
generated
Research &
Development
Assets
Trademarks
Customer
list
Patents Internally
generated
software
Other
intangible
assets
Total
Historical cost
1 January 2016 700,114 69,702 73,303 - - - 19,860 862,979
PPA (351,663) (69,702) 48,808 109,302 73,505 18,066 - (171,684)
Increases - 6,737 - - - - 1,092 7,828
Exchange rate impact (53) 173 - - - - (34) 86
Disposals - - - - - - (22) (22)
31 December 2016 348,398 6,910 122,111 109,302 73,505 18,066 20,896 699,187
Accumulated
amortisation and
impairment
1 January 2016 44,554 51,417 73,303 - - - 18,570 187,844
PPA (44,554) (51,417) (73,303) - - - - (169,275)
Amortisation for the year - 2,033 6,106 13,663 5,513 2,710 939 30,964
Exchange rate impact - 55 (29) 26
Disposals - (22) (22)
31 December 2016 - 2,088 6,106 13,663 5,513 2,710 19,457 49,537
Net book value -
31 December 2016
348,398 4,821 116,005 95,640 67,992 15,356 1,439 649,650
46
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Goodwill
As described in paragraph “III. Impact of Purchase Price Allocation” the Goodwill arising form the
business combination amount to Euro 348.5 million and represents, amongst other things, the value
of the Company’s market position and reputation, as well as the value of the Company’s workforce.
Goodwill is not amortized, but tested for impairment annually, as well as whenever there are events
or changes in circumstances (triggering events) which suggest that the carrying amount may not be
recoverable. Goodwill is carried at cost less accumulated impairment losses.
The goodwill impairment test is performed at the level of a cash-generating unit which benefit from
the synergies permitted by the Acquisition which generated the same.
The goodwill has been provisionally allocated to the following Cash Generating Units:
Vending,
Ho.Re.Ca and
OCS,
given that these three divisions are expected to benefit most from the sinergies of the Acquisition.
Acquisition
date
31 December
2016
VENDING 280,687 280,644
HORECA 60,150 60,141
OCS 7,614 7,613
Goodwill 348,451 348,398
Net Assets
Allocated
goodwill
Net assets after
allocation of
Goodwill
VENDING 171,487 280,644 452,132 HORECA 59,996 60,141 120,137 OCS 5,612 7,613 13,225
TOTAL 237,095 348,398 585,493
Any adjustment to such provisional values will be recognized within twelve months of the
Acquisition Date. Starting from next year, when the goodwill is definitely allocated to the above
mentioned CGUs, the Group will perform impairment at least annually, or more frequently
whenever there will be an indication that the Goodwill might be impaired.
47
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Internally generated Research and Development assets
Also during 2016 N&W made great efforts in innovation and development of new products and
technology solutions with research and development activity continuing to be intense. Some
projects were completed during the year bringing new models of machines on the market.
Regarding Vending line of business, major investments referred to i) a new version of S&F Necta
branded machine providing also fresh products and suitable for semi public locations; ii) two
projects for touch screen machines whose launch on the market is expected during 2017 for H&C
segment; iii) the development of a new module that will be joined to Canto touch machine for
dispensing glasses lids still for H&C segment.
On Ho.Re.Ca side the restyling of two models with the aim of renewing their aesthetic is the
starting base for a process of harmonization of the design of all models in the range.
On SGL brand side most of the Research and Development costs were dedicated to Fancy, a new
compact machine suitable for many kind of capsules and to the new Trophy, a machine with Keurig
capsules properly set up for the US market.
Note 14. Property, plant and equipment
Property
and plant
Equipment Construction
in progress Advance
payments
Total
Historical cost
1 January 2015 35,543 120,995 317 31 156,886 Increases 753 6,268 585 60 7,666 Exchange rate impact 158 (137) - - 21 Disposals (69) (1,131) (30) - (1,230) Reclassifications 149 187 (336) - -
31 December 2015 36, 534 126,182 536 91 163,343
Accumulated
depreciation
1 January 2015 13,704 102,317 - - 116,021 Depreciation for the year 795 6,510 - - 7,305 Exchange rate impact 96 (125) - - (29) Disposals (17) (1,084) - - (1,101) Reclassifications 119 (119) - - -
31 December 2015 14,697 107,499 - - 122,196
Net book value - 31 December 2015
21,837 18,683 536 91
41,147
48
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Property
and plant
Equipment Construction
in progress Advance
payments
Total
Historical cost
1 January 2016 36,534 126,182 536 91 163,343 Increases 525 4,773 378 624 6,300 Exchange rate impact (358) (31) - - (389) Disposals (332) (1,389) - - (1,721) Reclassifications 236 405 (536) (105) -
31 December 2016 36,607 129,939 378 610 167,533
Accumulated
depreciation
1 January 2016 14,697 107,499 - - 122,196 Depreciation for the year 1,764 6,944 - - 8,708 Exchange rate impact (212) (47) - - (259) Disposals (14) (1,111) - - (1,125) Reclassifications 163 (163) - - - 31 December 2016 16,398 113,122 - - 129,520
Net book value - 31 December 2016
20,209 16,817 378 610 38,014
Investments made during 2016 are related to the purchase of equipment for the production of new
automatic vending models branded Necta and Wittenborg located in Mozzo, Valbrembo and
Mapello production sites. They mainly include moulds for the construction of the new machines
launched during the year.
Other investiments concerned plant work stations ergonomics aiming at improving safety at
workplace and other projects to reduce product costs and improve efficiency.
Note 15. Avilable-for-sale investments
Successor Predecessor
31 December 2016
31 December 2015
Other investments 6 6
Euro 6 refers to the participation in the R&D consortium “Kilometro Rosso” which supports the
Group in research activities.
Note 16. Receivables and other non-current assets
Euro 1,887 (Euro 3,047 in 2015) mainly refers to the “US Loan Note” for Euro 1,408 granted to
Vendors Exchange Global Solutions LLC and guarantee deposits for Euro 327 (Euro 266 in 2015).
49
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 17. Cash and cash equivalents
Cash and cash equivalents are as follows:
Successor Predecessor
31 December
2016 31 December
2015 Cash and cash equivalents 51,089 48,088
The above funds, represented by cash at banks and on hand at the period end date, are not subject to
any type of restriction except for Euro 1,000 deriving from N&W Holding S.à r.l. and placed in an
escrow account not to be utilized according to the Agreement set at the Acquisition date.
Note 18. Trade receivables
Successor Predecessor
31 December
2016 31 December
2015 Trade receivables 74,531 69,573 Less: Allowance for doubtful receivables (8,475) (6,168) Net trade receivables, short-term 66,056 63,405
The average collection period from customers is around 79 days (76 days in 2015).
The concentration of the credit risk is limited thanks to the high number of customers of the Group
who are located in various nations and with varied end markets.
Based on the Group’s past experience with regard to management of trade receivables, it is deemed
that the amount recorded in the financial statements corresponds to the real recoverable value of the
receivables obtained by means of the provision of a specific allowance for doubtful receivables.
The changes in the allowance for doubtful receivables during 2016 and 2015 follow:
2016 2015
Opening balance 6,168 5,531
Exchange rate impact 285 (52)
Increases 2,437 1,645
Decreases (415) (956)
Closing balance 8,475 6,168
The fair value of the trade receivables corresponds to the value of the trade receivables net of the
allowance for doubtful receivables.
Please see Note 31 “Financial risk management” for further details.
50
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 19. Inventories
Successor Predecessor
31 December
2016 31 December
2015 Raw Materials and Work in progress 10,213 12,284 Less: obsolescence provision (617) (670) Raw Materials and Work in progress, net 9,596 11,614 Finished products 33,323 33,412 Less: finished products obsolescence allowance (3,496) (3,697) Finished products, net 29,827 29,715
Closing inventories, net 39,423 41,329
The performance of the inventories reflects the constant monitoring activities on the level of the
stock together with the action for containing the warehousing costs.
The obsolescence provision has been calculated on slow-moving inventories.
31 December
2015 Exchange
difference Increases Decreases 31 December
2016
Raw materials and
Work in progress 670 - 78 (131) 617
Finished products 3,697 15 310 (526) 3,496
Total 4,367 15 388 (657) 4,113
Note 20. Other receivables
Successor Predecessor
31 December 2016
31 December 2015
Prepaid insurance premium 1,143 126
Prepaid maintenance and service contract fees 686 345 Prepaid rent 512 590
Advances to suppliers 401 279
“Cigo-Solidarietà” receivables 263 123
Credit notes to be received 124 69 Short-term deposits 32 13
Other receivables and prepaid expenses 545 655
Amounts charged to customers - 70
3,706 2,270
Prepaid insurance premium refers to Company's Warranty and Indemnity Insurance Policy entered
by LSF9 Canto Investment S.p.A. on 3 December 2015.
“Cigo-Solidarietà” receivables refer to the credit that N&W Global Vending S.p.A. and SGL Italia
S.r.l. have with the Social Security Body for “Solidarity and CIGO Contract”.
51
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Note 21. Shareholders’ Equity
Share capital
The issued and authorised share capital comprises 41,138,297 issued shares with a par value of
Euro 1 each. All shares are issued, authorised and fully-paid at 31 December 2016 (and 2015).
Profit Partecipation Loan
Following the Acquisition, on 22nd
March 2016 executive and senior employees of the Company
decided to participate to the investement by acquiring Profit Participation Loans (PPLs) for an
amount of Euro 1,665.
Such PPLs foresee a remuneration linked to an IRR (Internal Rate of Return) of at least 10%
realized by Lone Star Fund IX in respect of its initial investments in the N&W Group and economic
and financial performance.
The fair value of the PPLs has been estimated at Euro 615 based on Monte Carlo valuation method.
The Company recognised an amount of Euro 96 through the consolidated income statement for the
period 22nd
March till 31st December 2016 according to the estimated 5 years maturity period with a
corresponding credit to equity as the Company has no obligation to settle the liability arising from
the PPL arrangement.
Other reserves
The “Other reserves” under shareholders’ equity include:
- Euro 4,212 as Share Premium;
- Euro 1,500 as Revaluation Reserves;
- Euro 224,600 as statutory and other reserves.
Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative effective portion of gains and losses
arising on changes in fair value of forward foreign exchange hedging instruments entered into.
The underlying table indicates the changes relating to the hedging reserve:
Successor Predecessor
2016 Hedge
accounting reserve 2015 Hedge
accounting reserve
Opening balance - (342)
Business combination 211 -
- profits and losses on hedged cash flows transiting
the income statement (211) 342 - profits and losses on cash flow hedging instruments (757) (10) - tax effect on profits and losses on cash flow 182 (4)
52
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
hedging instruments
Closing balance (575) (14)
The profits and losses recorded under shareholders’ equity at the Acquisition date have been
released to the income statement in the line Financial expense during 2016.
Translation reserve
Exchange differences relating to the translation of the results and net assets of the Group’s foreign
operations from their functional currencies to the Group’s presentation currency are recognised
directly in other comprehensive income and accumulated in the translation reserve.
Note 22. Financial instruments
Market value of the derivatives
The table below shows the market value of the derivatives of the Group:
Successor Predecessor
31 December
2016 31 December
2015
Currency hedging agreements (575) (14)
As specified previously, the portion of profit or loss on the hedging instruments which is considered
to be effective is recognised directly under shareholders’ equity while the ineffective portion of the
profits and losses must be directly recognised in the income statement; the amounts classified under
shareholders’ equity are released to the income statement in the period in which the envisaged cash
flows are realised.
Note 23. Financial Indebtness
Successor Predecessor
31 December
2016 31 December
2015
Non current portion 391,713 130,000 Senior Secured Notes – 300ml 300,000 -
Second Lien Notes – 100ml 100,000 -
Capitalised financing fees (8,287) -
Senior – Term Loan C - 130,000
Current portion 16,025 148,025
Senior Secured Notes interests 4,433 -
Second Lien Notes interests 2,217 - Revolving Credit Facility – capital 10,815 -
Revolving Credit Facility – interests and commitment
fees 18 -
Capitalised financing fees (1,460) -
Bank overdraft 2 -
Payables to factoring companies - 7
Other bank loans 467
53
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Senior –Term Loan A and B - 147,551
Total Financial Indebtness 407,738 278,025
The financial indebtness of N&W Group at December 31, 2016 consists of the Senior Secured and
Second Lien notes (issued in October 2016, see below) together with the Revolving Credit Facility
drawn at the time of the Acquisition (see below).
The current portion of the financial indebtnebss relates to: i) accrued interest payable of Senior and
Second Lien notes at the next interest payment dates and the portion of the capitalized financing fee
that will be amortized into profit or loss over the next 12 months; ii) the reimbursement of Euro
10,815 of the Revolving Credit Facility to be done on 22nd
March 2017 with the related interests.
N&W Group will keep the commitment to drew amounts in the future when needed.
Revolving Credit Facility
On 18th
January 2016 the Company entered into a Super Senior Revolving Agreement for total
facility commitments of Euro 40,000. The termination date of this facility is 22 March 2022.
The amounts drawn under the revolving credit facility may be used to finance the general corporate
and working capital needs of the Group including capital expenditure, any permitted acquisitions,
investment or distribution, operational restructurings or permitted reorganizations.
Subject to the terms of this Agreement the Lenders under the Initial Facility make available a
multicurrency revolving credit facility which is equal to the total facility commitments.
Under the revolving credit facility, a lender may make available an ancillary facility, such as an
overdraft facility, a guarantee, a short-term facility, a foreign exchange facility, a credit card
facility, a derivative facility, an automated payments facility, any other facility or accommodation
required in connection with the business agreed by the Company with an Ancillary Lender.
As of December 31, 2016 the amount of the revolving facility drawn down is equal to Euro 10,815;
the accrued interests are settled on a quarterly basis, in this case the maturity date for the payment
of the related accrued interests is 22 March 2017 as well as the fully reimbursment of the credit
facility.
The rate applied for the calculation of the accrued interests is given by Euribor (if positive) plus a
margin of 3.5% per annum.
Senior and Second Lien Notes
On 14th
October 2016, the Company issued:
- a Senior Secured Notes for Euro 300 million carrying a fixed interest rate of 7% per annum
and due on 15th
October 2023;
- and a Second Lien Notes for Euro 100 million amount carrying a fixed interest rate of
10.5% per annum and due on 15th
April 2023.
54
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The Interests on the Notes are payable semi-annually in arrears on April 15 and October 15 of each
year, commencing on April 15, 2017.
Costs related to the issuance of the Notes are capitalized and amortized into profit or loss over the
term of the debt in accordance with the effective interest method. Total costs capitalized amounted
to Euro 9.2 million, of which Euro 8.9 million remain capitalized as of December 31, 2016.
With the issuance of the Notes N&W extinguished the Bridge Facility of Euro 400 million drawn
down at the time of the acquisition.
LSF9 Canto Midco DAC (the “Parent”) and N&W Global Vending S.p.A. (the “Company”)
provided security and guarantees in support of the Notes.
Name of Security
Provider Transaction Security Document
Parent Security over shares in the Company Company Assignment of all its rights and interests in and related to the Acquisition
Agreement Company Assignment of all its rights and interests in and related to the Tax Settlement
Equity Contribution Letter Company Assignment of all its rights and interests in and related to the Existing
Intercompany Debt Company Assignment of all rights and interests in and related to an intercompany loan
agreement dated 14 November 2008 between the Company as lender and
N&W Global Vending Spain S.L.U. as borrower Company Assignment of receivables, including insurance receivables Company Special privilege (privilegio speciale) Company Security over bank accounts Company Special privilege (privilegio speciale) Company Security over Necta trademarks Company Security over shares in Sgl Italia S.r.l. Company Security over shares in Fridge France SAS Company Security over shares in N&W Global Vending Limited Company Security over shares in N&W Global Vending GmbH Company Security over shares in N&W Global Vending S.L.U. Company Security over shares in N&W Denmark ApS
The following subsidiaries of N&W Global Vending S.p.A. provided security and guarantees in
support of the notes:
N&W Global Vending Limited;
SGL Italia S.r.l.;
N&W Denmark ApS and Wittenborg ApS; and
Fridge France SAS.
55
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Obligor Governing
law Details of Security
SGL Italia S.r.l. Italian Assignment of receivables, including insurance receivables N&W Global
Vending Limited English Fixed and floating charge over several receivables and assets
SGL Italia S.r.l. Italian Security over Intellectual Property, if any Wittenborg ApS English Security over English and European Intellectual Property Wittenborg ApS Danish Security over Danish Intellectual Property Wittenborg ApS Danish Security over bank accounts Wittenborg ApS Danish Security over receivables, including insurance and
intercompany receivables N&W Denmark ApS Danish Security over shares in Wittenborg ApS Fridge France SAS French Security over shares in N&W Global Vending SAS SGL Italia S.r.l. Italian Security over bank accounts
The collateral also secures the Revolving Credit Facility on an equal and ratable basis. Under the
terms of the Intercreditor Agreement, in the event of enforcement of the security over the collateral,
holders of the Senior Secured Notes will receive proceeds from the enforcement of the collateral
only after indebtedness in respect of the Revolving Credit Facility and certain hedging obligations
have been repaid in full. Any such proceeds will, after all obligations under the Revolving Credit
Facility and such hedging obligations have been repaid from such recoveries, be applied pro rata in
repayment of all obligations under the Indenture and any other obligations that are permitted to be
secured over the Collateral under the Indenture on an equal and ratable basis.
Note 24. Provision for post employment benefits
Successor Predecessor
31 December
2016 31 December
2015
Employee leaving indemnity 9,938 9,669
Italian Agents’ provision (ISC) 2,087 2,007 Other (Germany and Austria) 333 325
12,358 12,001
The item “Employee leaving indemnity” relates to the Italian companies and is recorded in
compliance with the actuarial techniques envisaged by IAS 19 “Employee Benefits”.
These actuarial simulations were made in accordance with the method of the benefits accrued using
the projected unit credit method envisaged, establishing:
- the cost relating to the service already provided by the workers (Past Service Liability);
- the cost relating to the service provided by the workers during the year (Service Cost);
- the cost relating to the interest expense deriving from the actuarial liability (Interest Cost);
- the actuarial profit/loss relating to the valuation period considered (Actuarial (gain)/loss).
56
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The main actuarial hypotheses used for the valuation are as follows:
2016 2015
Annual discount rate 1.31% 2.03% Annual leaving indemnity increase rate 2.63% 2.81% Annual inflation rate 1.50% 1.75%
The changes in the provision for employee leaving indemnity are illustrated below:
2016 2015
Opening balance 9,669 9,864 Additional provision (recognised in profit or loss) 664 172 Used during the year (395) (367)
Closing balance 9,938 9,669
Note 25. Provision for risks and charges
The risk provisions comprise contingent liabilities relating to staff, suppliers, and customers with
regard to various problems.
The change in the main risk provisions is analysed in the following table:
Customer
bonuses Financial
guarantees WEEE
Others
Total
1 January 2015 1,735 701 3,444 22,478 28,358
Provisions 474 - 140 6,063 6,677
Uses/Releases (1,354) (74) (1,016) (81) (2,525)
31 December 2015 855 627 2,568 28,460 32,510
Customer
bonuses Financial
guarantees WEEE
Others
Total
1 January 2016 855 627 2,568 28,460 32,510
Provisions 10 13 17 477 517
Reclassification (44) - - 44 -
Uses/Releases (492) (279) (1,032) (28,251) (30,054)
31 December 2016 329 361 1,553 730 2,973
The “Customer bonuses” provision mainly refers to the acknowledgement to key customers of
discounts which have a certain degree of uncertainty with regard to their future manifestation since
they are linked to the achievement of sales volumes in subsequent year.
The “Financial Guarantees” provision covers the risks which may arise from the guarantees given
to third parties further to leasing or factoring agreements entered into by these companies with the
N&W end customer. It reflects the amount of the risk deriving from the granting of a corporate
guarantee in favour of UBI Factor S.p.A. and UBI Leasing S.p.A. for leasing and loan agreements
entered into by the latter in previous years with third party customers on goods we produce when
the company is liable jointly and severally with the end customer.
57
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The “WEEE” provision (Waste Electrical and Electronic Equipment) refers to the EU Directive
2002/96/EC and 2003/108/EC. The purpose of this directive is to reduce the amount of scrap
machinery sent for disposal to landfill, scrapping or incineration, by requiring manufacturers to
arrange for collection and recycling and therefore encouraging them to design and produce
machines that facilitate repair, re-use, disassembly and recycling. In this way, the same
manufacturers are provided with an incentive to design and produce machinery which is easy to
repair, re-usables, strippable and recyclable.
At the end of the year, the amount of the provision was adjusted on the basis of the estimated useful
life of the machine fleet in circulation which could reasonably be subject to disposal in future years.
The adjustment also takes into account the extension of the period of use of the vending machines
due to their overhaul, a practice which has been observed over the last few years.
For the purpose of calculating the discounting back of the provision in question, was considered the
period of standard useful life for the type of individual model.
The “Others” provision contained an amount of Euro 28 million related to tax assessment notice
and claims settled during 2016, according to which they have been consequently reclassified among
tax and other payables (see note 11 and 28). During 2016 Euro 242 were accrued in SGL Italia S.r.l.
to cover the potential liability arising from a tax audit carried out during 2016 by the tax authority,
covering 2011 and 2012 fiscal years as well as Euro 178 were accrued for litigious cases and other
minor provisions.
Note 26. Warranty and reorganisation provisions
Warranty Provision
Reorganisation Provision
Total
1 January 2015 4,501 317 4,818
Provisions 1,168 - 1,168 Exchange rate impact (12) - (12) Utilised (1,951) - (1,951) 31 December 2015 3,706 317 4,023
Warranty Provision
Reorganisation
Provision Total
1 January 2016 3,706 317 4,023 Provisions 1,567 - 1,567 Exchange rate impact (15) - (15) Utilised (1,879) - (1,879) 31 December 2016 3,379 317 3,696
Warranty Provision
As far as Warranty Provision concerns, at 31 December 2016 N&W Group reviewed this provision
and adjusted it in order to reflect the current best estimate, taking into account risks and
uncertainties, particularly in respect to the new products launched during the year on the market.
The provision will cover the estimated costs of future technical assistance actions on products sold.
58
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The hypothesised measures mainly relate to potential defects of an epidemic nature which require
recalls with replacement of parts and technical measures. Also in consideration of the impacts
arising in the past relating to the various problems, the amount set aside is deemed sufficient to
cover the risk that will probably manifest between 2017 and 2019.
Reorganisation Provision
Euro 317 refer to the claim still pending with Incentive A/S, the previous owner of Wittenborg
Group.
Note 27.Trade payables
Successor Predecessor
31 December
2016 31 December
2015 Payables to suppliers 64,953 64,181
The average payment period of the suppliers is around 132 days (around 128 days in 2015); no
interest on payables to suppliers is owed. The group handles the liquidity to allow that all the
payables to be paid on their due date.
The entire total of the payables to suppliers refers to trade payables.
Note 28. Other payables
Successor Predecessor
31 December 2016
31 December 2015
Payables to tax authority 19,761 -
Payables to employees and agents 19,468 18,435
Customers rebates 9,751 10,052 Transaction costs 2,277 1,361
Payable to N&W Holding S.à r.l. 1,000 -
Accrued expenses 419 360
Consulting 416 275 Other 299 273
TOTAL 53,391 30,756
On May 26th
, 2016, a Tax Settlement has been reached by the Company with the Italian Tax
Authority relating to tax assessments regarding withholding taxes, tax losses, interest deduction and
other minor tax issues for fiscal years from 2005 to 2013 (see note 4).
Euro 19,761 refer to the amount of withholding taxes assessed with tax authorities.
On the basis of installments’ plan agreed, Euro 6,080 will be due by the Company to the Italian Tax
Authority by 31 December 2017 and Euro 13,681 on a quarterly basis by 31 December 2020.
59
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Euro 1,000 refer to the residual portion of the purchase price to be paid to N&W Holding S.à r.l.,
the previous owner of N&W Group, to be due within 48 months from the Acquisition date and now
placed in a bank escrow account (see note 17).
Note 29. Derivative financial instruments (liabilities)
Successor Predecessor
31 December 2016
31 December 2015
Currency hedging contract 473 120
473 120
The liabilities deriving from derivative instruments comprise the market value of the forward
contracts in GBP and USD entered into to hedge future currency transactions (see Note 22
“Financial instruments”).
The following table presents the Group’s financial assets and liabilities that are measured at fair
value at 31 December 2016:
At 31 December 2016 Level 1 Level 2 Level 3 Total
Assets
Available-for-sale investments - - 6 6
Total Assets - - 6 6
Liabilities
Foreign currency forward contracts - 473 - 473
Total Liabilities - 473 - 473
At 31 December 2015 Level 1 Level 2 Level 3 Total
Assets
Available-for-sale investments - - 6 6
Foreign currency forward contracts - 111 - 111
Total Assets - 111 6 117
Liabilities
Foreign currency forward contracts - 120 - 120
Total Liabilities - 120 - 120
Note 30. Commitments for leasing agreements
The future payments for leasing commitments which cannot be cancelled are as follows:
Successor Predecessor
31 December 2016 31 December 2015
Within 12 months 4,131 4,226 Between 1 and 5 years 8,081 9,303
Beyond 5 years 448 1,052
60
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
These commitments mainly refer to the leasing of offices, warehouses, office equipment and
vehicles.
Note 31. Financial risk management
Risks associated with the general condition of the economy
The economic, equity and financial situation may be influenced by various factors which make up
the macro-economic scenario - including increases and decreases in gross domestic product, the
level of consumer and business confidence, changes in interest rates for consumer credit and for
businesses, energy costs, the cost of commodities and other raw materials - in the various countries
in which the Group operates.
The difficulties of the financial markets or the continuation of the economic recession may
negatively influence the industrial growth of many businesses, including those of the Group.
In Europe, despite the measures adopted by many Governments, national and international
organisations and by the monetary authorities, for the purpose of providing financial support to the
member nations of the European Community in economic difficulties and dealing with the
possibility of default of the sovereign debts of certain European countries, doubts remain with
regard to the weight of the debts of some countries in the Eurozone and their ability to meet the
future financial commitments, the overall stability of the Euro and the sustainability of the Euro as a
single currency (or, in more extreme circumstances, the possibility of termination of said Euro), in
the presence of diverse economic and political contexts among the member countries of the
Eurozone.
These potential developments could have a negative impact on the business and the activities of the
Group. Even if the Group considers the suppression of the Euro and break-up of the European
Monetary Union to be a highly improbable scenario, and even if the diversified product portfolio
and the international presence mitigate the dependence on a single market and the exposure to
unstable economic and political conditions in a country or in a region, in any event its business is
sensitive to changes in the economic conditions.
Therefore, the current global financial and credit crisis, as well as the failure of the financial bailout
methods, both European and international, could have a negative impact on the business prospects,
the economic results and the financial situation of the Group.
Partly thanks to its peculiar shareholding structure, the Group has implemented a well-tested
mechanism for monitoring both the financial risks and those of another type, aimed at preventing
potential negative effects on the company equity and the implementation of the measures necessary
to contain the same.
An accurate analysis of the individual types of risk will be presented below, with regard to quality
and quantity.
61
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Categories of financial instruments
Successor Predecessor
Financial assets 31 December
2016 31 December
2015
Derivative instruments designated as hedging (Hedge
Accounting)
Forward currency contracts - 80
Loans and receivables (including cash and cash
equivalents)
Cash and cash equivalents 50,089 48,088
Receivables from customers, net 66,056 63,405
Other receivables and current assets 3,836 2,270
Receivables and other non-current assets 1,887 3,047
Available-for-sale investments 6 6
Financial liabilities 31 December
2016 31 December
2015
Derivative instruments designated as hedging (Hedge
Accounting)
Forward currency contracts 473 91
Loans and payables
Trade payables 64,953 64,181
Payables to factoring companies - 7
Payables to leasing companies 51 66
Financial liabilities at amortised cost
Bank payables - 278,018
Senior Secured and Second Lien Notes 391,125 -
Revolving credit facility 9,943 -
Financial guarantees 361 627
The underlying table summarises the net gains and losses which arise from the afore-mentioned
financial instruments.
62
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Successor Predecessor
31 December
2016 31 December
2015
Net gains and losses generated by:
Loan to US VE Global Solutions LLC 86 262
Trade receivables (2,437) (1,645)
Objectives of the financial risk management
The group cash management unit provides specific support services to the business, co-ordinates the
activities for accessing the capital market and the financial instrument market both at local and
international level, directly checks and handles the financial risks relating to all the transactions set
up by the Group companies.
These risks include:
a) credit risk;
b) liquidity risk;
c) market risk (including the risks linked to the exchange rates, currency and price fluctuations).
The Company tries to minimise the effects of these risks by resorting to derivative financial
instruments. The use of these instruments is governed by the cash management policies approved
by the directors and officers which propose the basic principles on how to more fully handle the
risks deriving from the exchange rate effect, the interest rates, the use of the derivative instruments
and the aims for the investment of the surplus liquidity. Compliance with said policies is regularly
checked and the company does not enter into contracts for financial instruments with speculative
purposes.
a) Credit risk
The credit risk is understood to be the risk that a third party debtor is unable to meet their obligation
with a consequent financial loss for the Group.
The credit risk with regard to the receivables from customers can consider itself to be of a limited
extent thanks to the high number of Group customers, which are spread throughout the world, cover
the production and vending market and manage a variety of end markets. Based on the past
experience of the Group in the management of the credit, management believes that no further
credit risk needs to be reflected in the financial statements.
With regard to the balance of receivables from customers at year-end, Euro 4,911 is owed by
VEGS, Euro 4,065 is owed by Selecta Group, Euro 3,733 by Pelican Rouge Group and Euro 2,345
by Smucker, the leading Group customers. Other customers which individually represent more than
3% of the total balance of trade receivables do not exist.
63
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
The market value of the trade receivables is close to the net nominal value of the same.
The breakdown of the customer payment schedule is as follows:
2016 Falling due Past due
0 - 90 90 - 180 180 - 360 over 360
Italy 18,838 361 26 - -
EU 23,993 4,714 490 190 635
Outside EU 11,359 3,158 761 1,541 75
TOTAL 54,190 8,233 1,277 1,731 710
The receivables in the above table are net of the bad debt provision.
The same table referring to the balances at 31 December 2015 is presented below for a useful
comparison:
2015 Falling due Past due
0 - 90 90 - 180 180 - 360 over 360
Italy 20,456 522 - - -
EU 25,341 3,233 469 174 413
Outside EU 8,015 3,457 705 620 -
TOTAL 53,812 7,212 1,174 794 413
The changes in the allowance for doubtful receivables were as follows:
1 January 2016 Exchange
difference Provision Utilisation 31 December
2016
Allowance for
doubtful
receivables 6,168 286 2,437 (415) 8,476
1 January 2015 Exchange
difference Provision Utilisation 31 December
2015
Allowance for
doubtful
receivables 5,531 (52) 1,645 (956) 6,168
b) Liquidity risk
The Group has put together a suitable management of the liquidity risk which involves the handling
of the liquidity and the short, medium and long-term loans.
The handling of the liquidity takes place by means of maintaining suitable reserves, credit facilities
and loans, by means of the monitoring of the current and forecast cash flows and by means of
correspondence between the maturities of the financial assets and liabilities. Our cash pooling
system enables us to benefit from surplus fund of certain subsidiaries to cover the financial
64
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
requirements of other subsidiaries: we invest surplus cash in interest-bearing current accounts and
short-term cash deposits, selecting instruments with appropriate maturities or sufficient liquidity to
provide sufficient headroom as determined by the above-mentioned forecasts.
At 31 December 2016, the Group had short-term credit facilities available for a total of around Euro
560 and a Revolving facility available for a total commitment of Euro 40,000 and drawn down for
an amount of Euro 10,815.
The table below shows the contractual maturities for each non-derivative financial liability.
The table has been drawn up based on the undiscounted cash flows of the financial liabilities as
from the first reimbursement date. The table includes both the cash flows relating to the debt and
those relating to the interest as of the various due dates.
2017 Jan-June
2017 July-Dec
2018 2018 2020 2021 Beyond Total
Senior Secured
Notes
-
-
-
-
- - 300,000 300,000
Second Lien
Notes - - - - - - 100,000 100,000 Cash interests on
Notes (excluding
security fee/
agency fee/
commitment fee) 15,838 15,750 31,500 31,500 31,500 31,500 57,750 215,338 Revolving
Facility 10,815 - - - - - - 10,815 Cash interests on
Revolving
Facility 95 - - - - - - 95
Bank overdraft 2 - - - - - - 2
CASH FLOW 26,750 15,750 31,500 31,500 31,500 31,500 457,750 626,250
The amount of cash flows in the following years is represented by the payment of interests for the
Secured and Second Lien Notes; only 2016 cash out is impacted by the reimbursement of Credit
Revolving Facility of Euro 10,815.
Based on the current indebtness level and on the expected cash flows, the Group will not not have
problems in meeting its financial obligations.
With regard to Trade payables, the average exposure period on the purchases is 132 days (128 days
in 2015); no interest on payables to suppliers is owed. The Group handles the liquidity to allow that
all the payables to be paid on expiry.
65
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
c) Market risk
The activities carried out mainly expose the Group to the financial risks associated with the
exchange rate and the interest rate. The Group avails itself of a series of derivative financial
instruments to handle its exposure to the interest rate risk and the exchange risk, including:
- forward currency contracts hedging the exchange risk deriving from the sales and the
purchases hypothesised at the time of the budget.
The exposures to the market risk are supported by sensitivity analysis.
The different levels of valuation method have been defined as follows:
- Level 1: are valuations derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities;
- Level 2: are valuations derived from inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices);
- Level 3: are valuations derived from inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
On October 18th
, 2016, Moody's Investors Service (Moody's) assigned a definitive B2 rating to the
Senior Secured Notes issued by N&W Global Vending S.p.A..
On October 3rd
, 2016, Standard & Poor's Ratings Services assigned its B rating to the Senior
Secured Notes issued by N&W Global Vending S.p.A..
d) Exchange rate risk
The N&W Group is exposed to the exchange rate risk deriving from the various foreign currency
exposures. Around 17% of the sales of the N&W Group is generated by invoicing in currencies
other than the Euro.
The Group Cash Management Unit has the aim of hedging around 80% of the short and long-term
exposures in currency using forward contracts or other derivative instruments.
During 2016, the Group Cash Management Unit hedged:
- around 47% of exposures (sales) in 2017 in British pounds
- around 30% of exposures (sales) in 2017 in US dollars.
At Group level, the foreign currency agreements are handled, when designated for hedging, as
hedges of the future currency transactions, which represent the global “long or short” exposure in a
specific currency.
At the year-end date, the most significant net amounts in currency, known as monetary assets and
liabilities, were as follows:
66
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
31 December 2016 31 December 2016 31 December 2015 31 December 2015
Liabilities Assets Liabilities Assets
GBP (562) 3,001 (5,909) 2,965
USD (2,723) 15,450 (3,069) 11,654
AUD - 799 - 719
DKK (98) - (195) -
EUR (8,828) 6,124 (38,797) 16,862
RON (472) - - 865
We also take into consideration the Euro, since it is a foreign currency for our branches in
Denmark.
Sensitivity Analysis on the net exposure in foreign currency
The Group is mainly exposed to the exchange rate risk on the following currencies: GBP, USD,
DKK, AUD, RON and EURO.
The sensitivity analysis discloses the income statement impact in the event of an increase or
decrease of 10% in the exchange rate of the local currency with respect to the foreign currencies.
The 10% change is that used for the purposes of the internal analysis of the rate risk and represents
management’s valuation of the reasonable and possible change in the exchange rates.
The sensitivity analysis is carried out on the foreign currency balances net of any hedges.
31 December 2016 31 December 2016
Receivables Payables
P&L Shift + 10% P&L Shift - 10% P&L Shift + 10% P&L Shift - 10%
GBP - - 37 (45)
USD (869) 1,062 179 (219)
DKK - - 6 (8)
EUR - - (196) 196
AUD (53) 64 - -
RON - - (38) 31
31 December 2015 31 December 2015
Receivables Payables
P&L Shift + 10% P&L Shift - 10% P&L Shift + 10% P&L Shift - 10%
GBP - - 389 (476)
USD (654) 799 21 (25)
DKK - - 13 (16)
EUR - - (1,590) 1590
67
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
AUD (47) 58 - -
RON (57) 70 - -
Forward currency contracts
The Group designates certain hedging instruments which include derivatives, embedded derivatives
in respect of foreign currency risk as either fair value hedges, cash flow hedges or hedges of net
investments in foreign operations. Hedges of foreign exchange risk commitments are accounted for
as cash flow hedges.
At the inception of the hedge relationship the entity documents the relationship between the hedging
instrument and the hedged item, along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore at the inception of the hedge and on ongoing
basis, the Group documents whether the hedging instrument is hightly effective in offsetting
changes in cash flows of the hedged item attributable to the hedged risk.
In particular the Group has entered into forward currency contracts to hedge itself against the
exchange rate risk deriving from future transactions in GBP and USD (which are designated as cash
flow hedges).
The following table analyses the forward currency contracts outstanding at the reporting date:
Currency hedges 2016 Average
exchange rate Foreign
currency
Euro
equivalent
value
Fair value
(Euro)
USD (sales) 1.0955 3,880 3,661 (190)
GBP (sales) 0.9028 5,000 5,539 (283)
Currency hedges 2015 Average
exchange rate Foreign
currency
Euro
equivalent
value
Fair value
(Euro)
USD (purchases) 1.1355 3,000 2,642 107
USD (sales) 1.0946 5,300 4,846 (120)
GBP (sales) 0.7403 3,000 4,052 4
With regard to the forward currency transactions, it should be noted that all the contracts mature
during 2017.
It should also be disclosed that the purchases and sales take place during the 2016 financial year; in
this year, the amounts included in other comprehensive income will be released to the income
statement.
The fair value is determined using external forward curve observable on the market.
68
N&W Global Vending S.p.A. – Proforma Consolidated Financial Statements at 31 December 2016
Sensitivity analysis on forward currency contracts
Forward currency contracts are measured with reference to the forward exchange rates listed on
official markets and return curves implicit in the listed interest rates corresponding to the maturities
of the contracts.
The sensitivity analysis discloses the impact on the hedging provision in the event of an increase or
decrease of 10% in the rate: the positive number shown below indicates an increase in equity when
the local currency appreciates 10% with respect to the reference currency.
In the event of a weakening of 10% in the local currency against the reference currency, an opposite
impact would be detected with regard to shareholders’ equity and the balance shown below would
be negative.
2016 2016 2015 2015
Impact on hedging reserve 10% increase 10% decrease 10% increase 10% decrease
GBP (sales) 384 (469) 267 (326)
USD (purchases) - - (181) 222
USD (sales) 260 (317) 330 (404)
Interest rate risk
Following the Acquisition and the repayment of the Senior credit facility, the amounts that the
Group borrows under the Revolving Credit Facility, are subject to variable interest rates, while the
main indebtness we have, that is Senior Secured Notes, carry interest at a fixed rate. We therefore
do not expect to use interest rate swaps in respect of our financing going forward.
Sensitivity analysis on the floating-rate payables
No sensitivity analysis has been carried out since at the year-end date, there were no IRS contracts
outstanding for the hedging of the rate fluctuation risk.
A hypothetical fluctuation of the rates at that date therefore would have had an impact on the
income statement for an amount directly proportionate to said fluctuation.
The Group’s exposures to the interest rates on financial instruments and financial liabilities are
detailed in the section dealing with “Liquidity risk” in these notes.
The effective interest rates for 2016 on Revolving credit facility and on Senior Secured Notes and
Second Lien Notes are as follows:
Effective interest rate
Revolving Credit Facility 2.761 % Senior Secured Notes and Second Lien Notes 7.875 %
N&W Global Vending S.p.A.
Consolidated Financial Statements at 31 December 2016
1
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Index
Presentation of Financial Data .................................................................................................................................... 3
I. Audit report 5
II. Management Report 7
III. Consolidated statement of comprehensive income for the period ended December 31, 2016 16
IV. Consolidated statement of financial positionas at December 31, 2016 17
V. Consolidated statement of cash flows for the period ended December 31, 2016 18
VI. Consolidated statement of changes in equity for the period ended December 31, 2016 19
VII. Notes to the consolidated financial statements 20
Note 1. General information ................................................................................................................................... 20
Note 2. Accounting policies ..................................................................................................................................... 22
Note 3. Critical accounting estimates and judgements .......................................................................................... 37
Note 4. Business combination ................................................................................................................................. 39
Note 5. Revenue ...................................................................................................................................................... 47
Note 6. Segment information ................................................................................................................................. 47
Note 7. Cost of Sales ............................................................................................................................................... 48
Note 8. Reorganisation costs .................................................................................................................................. 49
Note 9. Other costs ................................................................................................................................................. 49
Note 10. Net financial expense ............................................................................................................................... 49
Note 11. Taxes ......................................................................................................................................................... 50
Note 12. Comprehensive income components ....................................................................................................... 53
Note 13. Intangible assets ....................................................................................................................................... 53
Note 14. Property, plant and equipment ................................................................................................................ 55
Note 15. Available-for-sale investments ................................................................................................................. 56
Note 16. Receivables and other non-current assets ............................................................................................... 56
2
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 17. Cash and cash equivalents........................................................................................................................ 56
Note 18. Trade receivables ..................................................................................................................................... 56
Note 19. Inventories ................................................................................................................................................ 57
Note 20. Other receivables ..................................................................................................................................... 58
Note 21. Shareholders’ Equity ................................................................................................................................ 58
Note 22. Financial instruments ............................................................................................................................... 59
Note 23. Financial Indebtness ................................................................................................................................. 60
Note 24. Provision for post employment benefits .................................................................................................. 63
Note 25. Provision for risks and charges ................................................................................................................. 64
Note 26. Warranty and reorganisation provisions .................................................................................................. 65
Note 27. Trade payables ......................................................................................................................................... 65
Note 28. Other payables ......................................................................................................................................... 66
Note 29. Derivative financial instruments (liabilities) ............................................................................................. 66
Note 30. Commitments for leasing agreements ..................................................................................................... 67
Note 31. Financial risk management ....................................................................................................................... 67
Note 32. Fees paid to the Group’s auditors ............................................................................................................ 75
Note 33. Subsequent event ..................................................................................................................................... 75
3
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Presentation of Financial Data
LSF9 Canto Investments S.p.A. (“LSF9 Canto”), now merged into N&W Global Vending
S.p.A.,was incorporated on 25th
November 2015 by the private equity fund Lone Star Fund IX.
On 3rd
December 2015 LSF9 Canto entered into an agreement with N&W Holding S.à rl, owned by
Investcorp and Equistone Partner funds, to buy 100% of the corporate capital of N&W Global
Vending S.p.A.(“the Company”).
The Acquisition was finalized on 22nd
March 2016 and was funded through the issue of ordinary
equity shares of Euro 256 million indirectly by Lone Star Fund IX and by the drawdown of Senior
Secured Bridge (Euro 400 million) and Revolving Facilities (Euro 10.8 million) by LSF9 Canto.
On October 5th
, 2016 LSF9 Canto Investments S.p.A. has been extinguished by merging into the
wholly owned N&W Global Vending S.p.A. (reverse merger).
On October 14th
, 2016 the Company has issued Euro 300 million of Senior Secured Notes and Euro
100 million of Second Lien Notes both due in 2023; through this issuance the Company has fully
reimbursed the Bridge Facility of Euro 400 million.
N&W Global Vending S.p.A. and its subsidiaries (together with the Company, “the Group”) is the
leading European and largest manufacturer worldwide of vending machines on a sales volume basis
and operates in nearly all major international markets maintaining relationships with direct
customers or, alternatively, through a network of dealers and its commercial subsidiaries located in
Italy, Denmark, UK, France, Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina,
Australia, Singapore, Russia and Romania.
The Acquisition has been recorded using the acquisition method of accounting, in accordance with
the International Financial Reporting Standards as adopted by the European Union (“IFRS”).
Although the purchase accounting requirement has no impact on the Company’s business or cash
flow, it adversely impacts the Company’s reported IFRS gross margin and EBITDA for the period
between the Acquisition and December 31, 2016.
The consolidated financial statements have been prepared in accordance with IAS 27 and IFRS 10
and therefore present the financial performance of the legal group owned and controlled by the
Company as from the Acquisition Date, as well as the stand-alone results of the Company and LSF9
Canto Investments S.p.A. from incorporation until Acquisition Date. The Consolidated Financial
Statements have been audited by Deloitte & Touche S.p.A..
Important Notice
In this report, the terms “Group”, “we”, “us” and “our” refer to the Company and its subsidiaries.
This report may contain “forward looking statements” within the meaning of the U.S. federal
securities laws and the securities laws of certain other jurisdictions. In some cases, these forward
looking statements can be identified by the use of forward looking terminology, including the words
4
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
“aims,” “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “forecasts,” “future,”
“guidance,” “intends,” “may,” “ongoing,” “plans,” “potential,” “predicts,” “projects,” “seek,”
“should,” “target,” “will,” “would” or, in each case, their negative or other variations or comparable
terminology or by discussions of strategies, plans, objectives, targets, goals, investments, future
events, beliefs or intentions. These forward looking statements are based on plans, estimates and
projections as they are currently available to our management. Such forward looking statements are
not guarantees of future performance and are subject to, or are based on, a number of factors,
assumptions and uncertainties that could cause actual results to differ materially from those
described in the forward looking statements. Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward looking statements. Any forward looking
statements are only made as at the date hereof and, except to the extent required by applicable law
or regulation, we undertake no obligation to publicly update or publicly revise any forward looking
statement, whether as a result of new information, future events or otherwise.
All figures presented in this report are based on our consolidated management accounts and are
unaudited. The financial information herein includes certain non-IFRS measures that we use to
evaluate our economic and financial performance. These measures include, among others,
EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Operating Profit
Before Exceptional Items. The non-IFRS measures may not be comparable to similarly titled
measures of other companies and have limitations as analytical tools and should not be considered
in isolation or as a substitute for analysis of our operating results as reported under IFRS.
5
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
I. Audit report
6
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
7
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
II. Management Report
Introduction
The consolidated financial statements for the year ending 31 December 2016 have been prepared
according to IAS/IFRS accounting standards.
They refer to the period from the date of acquisition of the N&W group by the new shareholder
LSF9 Canto Midco DAC, 22nd
March 2016, to 31stDecember 2016; consequently, the tables and
statements below do not give comparative information for the previous year.
LSF9 Canto Investments S.p.A (“LSF9 Canto”), now merged into N&W Global Vending SpA, was
established on 25th
November by the private equity fund Lone Star Fund IX.
On 3rd
December 2015 LSF9 Canto stipulated a contract with N&W Holding S.à r.l, owned by the
investment funds Investcorp and Equistone Partner, to purchase 100% of the share capital of N&W
Global Vending S.p.A (“the “Company”).
The acquisition was finalised on 22nd
March 2016 and was financed through the issue of ordinary
shares for Euro 256 million and by the subscription of a loan called “Senior Secured Bridge” (Euro
400 million) and of a Revolving loan (Euro 10.8 million) directly by LSF9 Canto.
On 5th
October 2016, LSF9 Canto Investments S.p.A was incorporated into its 100% owned
subsidiary N&W Global Vending S.p.A. (reverse merger).
On 14th
October 2016, the Company issued a “Senior Secured Notes” Bond for Euro 300 million a
further “Second Lien Notes” Bond for Euro 100 million, both due in 2023; through the issue of
these Bonds the Company entirely repaid the “Senior Secured Bridge” loan for Euro 400 million.
The amounts in this document are presented in thousands of Euro (€ thousand), unless otherwise
indicated. Rounding adjustments have been made in calculating some of the financial information
included in these consolidated financial statements, as a result of which schedules may not add.
These consolidated financial statements were approved on 27th
March 2017 by the company's Board
of Directors.
Position of the company and operating performance
The N&W Group (hereinafter also the “Group”) produces and sells automatic vending machines for
hot and cold drinks in cups, cans, bottles and other “food and beverage products”.
With its production sites located throughout Italy and a recent start-up in Romania, the Group
designs, develops, produces, assembles and distributes automatic vending machines branded Necta,
Wittenborg and SGL and offers a wide range of products and services covering all aspects of the
distribution of food and beverages.
8
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Storage and distribution activities rely on logistics platforms, which ensure that shipments are
optimised, costs are contained and the level of service provided to its customers is continuously
improved.
Group’s sales and distribution organisation is able to provide customers with a complete and rapid
assistance, which regards both strictly technical and maintenance aspects and financial ones related
to the purchase of the machines.
The Group operates successfully in almost all international markets, the most important of which
are France, Spain, Switzerland, Germany, Holland, Great Britain, Scandinavia, Belgium, Poland,
Argentina, Brazil, Mexico, Oceania, Russia, Japan, USA and South America, and works either
directly with its customers, or through a network of dealers and sales branches located in Italy,
Denmark, Great Britain, France, Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina,
Australia, Singapore and Russia.
In addition to covering its “historic” markets, the Group has continued to develop less mature
markets, especially in North America, Asia and Australia, where it is achieving significant results in
terms of revenue growth and margins.
The N&W Group's turnover in the reference period (22nd
March - 31st December) was around Euro
220 million and the margin showed good growth thanks to a favourable client/market/product mix
and the consolidation of the measures to recover efficiency and contain production costs and
overheads.
During 2016, total Capex amounted at around Euro 11 million, below budget expectations; a large
part of the investments concerned costs relating to the development of new products and
technological solutions with a view to the continuing improvement of the existing product range
and the creation of new machines and innovative technical solutions.
Analysis of results and of the main economic and financial indicators
The following pages contain several summary tables of economic and financial figures, some of
which have been reclassified in order to facilitate the understanding of the main events in terms of
the Group’s operations and development.
Following the group's acquisition occurred on 22nd
March 2016, as mentioned in the previous
paragraphs, the tables and statements below do not give comparative information for the previous
year.
(Euro thousand)
31 December 2016
Revenues from sales
220,154
Cost of sales
(154,297)
Gross Profit
65,858
Marketing
(20,053)
Logistics
(4,613)
9
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Administration
(8,418)
Exchange differences
2,261
Total operating costs
(30,823)
Gross operating margin (EBITDA)
35,035
Amortisation/Depreciation/Write-downs
(34,844)
Net operating margin
191
Other costs
(6,574)
Financial income and expense
(31,430)
Reorganisation costs
(301)
Profit (loss) before taxes
(38,114)
Income taxes
10,593
Net profit (loss)
(27,521)
Self-financing (Net profit/loss + amortisation, depreciation, write-downs and provisions)
7,322
Average no. of employees
1,355
Revenue per capita
221
For a breakdown of revenues between the main geographic areas and by product line, please refer to
Notes 5 and 6 of the financial statements.
The net operating margin is affected by the negative impact of Euro 23 million deriving from the
revaluation of inventories of finished products (cost of sales) and of Euro 28 million of higher
amortisation for the asset items revalued in the context of the “Purchase Price Allocation”, of which
full details are provided in Note 4.1 of the Explanatory Notes.
The amount recorded in Other Costs is linked to the change of control costs of the N&W Group and
to one-off expenses incurred in 2016, while the lower restructuring costs include those incurred by
the various companies of the Group as part of a rationalisation process of its internal structure.
Income taxes for 2016 reflect the positive impact of revaluations in the above mentioned context of
“Purchase Price Allocation”.
As regards the patrimonial situation, the balance sheet is shown below, and has been reclassified on
the basis of financial criteria (slightly different to the standard statement) with a view to better
highlight the breakdown of assets and liabilities.
10
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
As described above, as a result of the N&W Group change of control the new shareholders made
new capital contributions to the company and reduced the overall debt; therefore the structure of the
Liabilities recorded a notable reinforcement of equity in relation to containment of medium/long-
term liabilities to third parties. For details of the entire transaction please refer to paragraph 1.
With a view to integrating the information provided through the reclassified income statement and
statement of financial position, the paragraphs below provide additional information in order to gain
a better understanding of the company’s situation, the trend in operating results and the financial
structure.
The profitability indicators show the company’s ability to invest its capital in a satisfactory way and
therefore provide a very brief overview of the company’s ability to fund the capital it has employed
and to cover the debt capital utilised. The Group’s structure, which clearly shows a rather high level
of debt due to its shareholding structure, does not enable comparisons with manufacturing
companies in the same business. The comments relating to these ratios must therefore be considered
in this view.
(€ thousand) 31 December 2016
ASSETS
Cash and cash equivalent 51,089
Trade receivables 66,056
Other current receivables 12,090
Inventory, net 39,423
Total current assets 168,658
Tangible net assets 38,014
Intangible net assets 649,650
Financial net assets 20,354
Total non-current assets 708,018
TOTAL ASSETS 876,676
EQUITY AND LIABILITIES
Current financial indebtness 16,025
Trade payables 64,953
Other current payables 47,423
Total current liabilities 128,401
Total non-current liabilities 519,954
Third-parties Fundings 648,355
Equity 228,321
Total fundings 876,676
11
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
2016
Definition
ROI
0.04%
Net Operating Margin / Net Invested Capital
ROE
-12.05%
Net Income / Own funds
ROS
15.91%
EBITDA / Sales
ROI is extremely limited due to the modest Net Operating Margin affected by the relevant one-off
items occurring in the context of the “Purchase Price Allocation” as already shown in the comments
to the income statement.
Despite the appreciable increase in Shareholders’ Equity, ROE is also negative affected by the
"Purchase Price Allocation” effects.
EBITDA is still at satisfactory levels even if negatively affected by the impact of the revaluation of
inventories, as shown above.
Financial leverage is very contained thanks to the significant capitalisation of the Group
implemented by the new shareholder and by the reduction in the level of debt to third parties.
The liquidity ratios show the Group’s ability to honour its short-term commitments, related to
operations, by using immediately available assets.
The table below shows several ratios, which highlight, although on a summary basis only, the
performance of the main asset items. However we underline that, for a better representation, it was
decided to analyse the economic items as well.
2016 Definition
FINANCIAL LEVERAGE 2.84 Third parties funding / Equity
ASSET COVERAGE 1.06(Equity + Non-current liabilities) / Non-current
assets, net
SOLIDITY - Financial structure -
2016 Definition
Liquidity Ratio 1.01(Cash and cash equivalents + Receivables) / Current
liabilities
Assets Ratio 1.31 Current assets / Current liabilities
LIQUIDITY - Financial structure -
2016 Definition
DIO 47 Inventory / Revenues from sales x 360
DSO 79 Trade receivables / Revenues from sales x 360
DPO 132 Trade payables / Cost of sales x 360
EFFICIENCY
12
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The efficiency ratios are still satisfactory, testament to the management's ability to manage working
capital and to generate cash.
Industrial business activities
The performance of the sales volume during the year directly influenced industrial activities and the
level of saturation of production plants. The year just ended has been characterised by a rather up-
and-down performance of the orders portfolio and a poor perspective vision. This obliged the Group
to make use of the Temporary Lay-off Scheme in Italy both for direct employees and for the
indirect workforce for certain periods of the year. The use of shock absorbers enabled the Group to
achieve its objective of bringing its cost structure in line with the current level of orders and, at the
same time, protected human resources, without eroding the skilled workforce.
The Necta brand recorded a better performance than the Wittenborg brand, which suffered from the
poor performance of certain clients.
In particular the H&C Necta product range recorded an improvement on the previous year and on
the budget forecast.
During 2016 the entire industrial structure was heavily involved in a new set of projects combined
in a single group called “A Step Forward”, which replaced the group of projects concluded in 2015
(called EFREM - Efficiency Recovery Measures).
While EFREM project was essentially characterised by an exclusive focus on reducing costs, the
new set of projects concerns above all aspects relating to efficiency recovery and aspects relating to
the development and modernisation of industrial activities, involving various departments.
Capex
The Capex plan, which has always been focused on new product development, totalled Euro 10.2
million for the nine months of 2016 after the acquisition.
The investments plan has been carried out as scheduled, albeit for a lower total that forecast in the
budget. The most significant amounts concerned the development of new products, activities
relating to the efficiency recovery projects and the Information Technology area.
The main product investments concerned the realisation of the new Table Top machine in the
Wittenborg 9100 range, USA version, the new high-capacity S&F distributor called Mambo and the
new Horeca Kalea machine along with Trophy and Fancy for the OCS range.
A series of significant investments has concerned activities relating to projects for efficiency
recovery and the improvement of production processes, in particular for the Digilean and Kaizen
parts.
Finally, a portion of capex continue to be made in the maintenance of buildings and production
plants and in improving the environment and safety in the workplace.
13
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Research & Development
N&W pursues a strategy of continuous product research and development. Over the years, the
Group has structured and improved its development and production processes in order to offer the
customer the highest level of customisation possible, without repercussions on its profitability.
Design and production processes are based on the concept of modularity, which minimises costs
and maximises economies of scale. Customisation is guaranteed both from an aesthetic perspective
(colours, different advertising surfaces, anti-theft and anti-vandalism characteristics), and as regards
the internal configuration (e.g. espresso, soluble, fresh brew and liquid for the H&C segment; spiral
layouts, position of products, temperature levels for the S&F segment).
Also during 2016, N&W Global Vending S.p.A. carried out numerous research and development
activities for its Vending, Horeca and OCS product ranges. Some of these projects were concluded
during the year, leading to the marketing of new machine models.
With regard to the Vending segment, at the end of the year a new version of a Necta snack and fresh
products (S&F) distributor for semi-public locations was launched. This new model has two
fundamental characteristics for his segment: robustness and the capacity to dispense a large number
of products with no particular packaging requirements. It is differentiated by the user interface in a
central position and two product windows enabling extension of the range of products offered and
easy management of the configurations of the two cells.
For Necta hot-drink (H&C) distributors, over the course of the year two projects were launched for
machines with a touchscreen user interface, scheduled to be launched in 2017. The touchscreen
interface applied to an automatic distributor offers a wide range of options with regard to choice and
customisation. In addition, this configuration is an opportunity to provide more information on the
products provided or to promote brands.
Still for the Necta H&C line, the development of a new model has begun and it will accompany a
Canto Touch distributor for providing cup lids. This is a service offered in public locations to
prevent hot drinks from being spilt while people are on the move.
With regard to the Wittenborg brand products, two new versions of the H&C 9100 table-top
distributor launched in 2015 were marketed, their main characteristic being new-generation
electronics and the touchscreen interface, which enables many parameters to be customised, by both
the technician and the end user, with great simplicity. The new versions are intended for the North
American and Northern European markets. The development of further versions of this distributor
for the same markets is still on-going and their launch is scheduled for 2017.
With regard to the Necta branded Horeca products the restyling of two models was introduced with
the aim of restyling them and launching a design harmonisation process for all models in the range.
In addition to the launches occurred in 2016, progress has been carried on whose launch on the
market is scheduled for 2017: a new super-automatic machine model with touchscreen interface
14
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
intended for the Asian markets and the restyling of another model in the range with its styling
coordinated with the new models already launched this year.
With regard to the SGL brand, the main efforts have focused on completing the new Trophy and
Fancy machines: the former is intended mainly for the American market, while the latter is aimed at
the domestic market thanks to its reduced size, more attractive design and better technology.
Human resources, organisation and environment
As of 31st December 2016, the N&W Group employed 1,356 people with an overall cost of Euro
53,224 for the nine months.
In 2016, the HR department focused on a number of specific areas:
1) Maintaining a cross-sector training project: thanks to the use of the provisions in the
Fondimpresa and Fondirigenti funds, there was a particular investment in training activities to
increase or consolidate knowledge of foreign languages and to boost leadership skills in middle
management, in addition to responding to occasional and specific requirements for more in-depth
technical knowledge.
2) Managing, maintaining and consolidating a system of part-time workers, as set out by our
collective labour agreement: to improve the work-life balance, for many years in the company
horizontal and vertical part-time work in production areas has been regulated. Even in office areas,
much space has been given to this contractual institution.
3) Consolidating a performance appraisal system for all executives, managers and white collars.
4) Updating the HR management system with the introduction of certain processes into the system
(training request, personnel request, job posting).
5) Introducing an online system for recording attendance and explaining absence for all office staff.
6) Communication project: the communication channel was consolidated and extended through
monitors installed at the offices and factory in Valbrembo, with the aim of making all internal
communications immediate and visible. Meetings were continued with all employees by the Chief
Executive Officer, as well as the publication of the company newsletter Coffee Break.
During 2016 the Company was forced to resort to the temporary lay-off scheme owing to a lack of
orders at certain moments.
Also for 2016, in the light of the uncertain economic situation, the company asked the trade unions
to postpone the renewal of the Collective Labour Agreement at the end of 2016, leaving the current
one in force. The unions accepted the proposal.
With regard to ordinary operations, also in 2016 the situation is positive in relation to litigation or
legal actions of significance with individual workers or with trade unions.
16
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
III. Consolidated statement of comprehensive income for the period ended
December 31, 2016
Note 2016
Continuing operations
Revenues from sales 5 220,154
Cost of sales 7 (189,140)
Gross Profit 31,014
Operating costs
Sales & Marketing (20,053)
Logistics (4,613)
Administration (8,418)
Exchange losses 2,261
Total operating costs (30,823)
Reorganization costs 8 (301)
Other costs 9 (6,574)
OPERATING LOSS (6,684)
Financial income 288
Financial expense (31,718)
Net financial expense 10 (31,430)
LOSS BEFORE TAXES (38,114)
Taxes 11 10,593
NET LOSS (27,521)
Consolidated Statement of Comprehensive Income for the year ended 31 December 2016
2016
NET LOSS (27,521)
Actuarial Loss on personnel provisions 12 (432)
Taxes 12 104
Total items that will not be reclassified subsequently to the Income Statement (328)
Hedge accounting of financial instruments 12 (757)
Changes in translation reserve 12 (1,383)
Taxes 12 182
(1,958)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (29,807)
The Notes to the Financial Statements are an integral part of the same.
Total items that may be reclassified subsequently to the Income Statement
17
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
IV. Consolidated statement of financial positionas at December 31, 2016
(€ thousand) Note 31 December 2016
ASSETS
Intangible assets 13 649,650
Property, plant and equipment 14 38,014
Available-for-sale investments 15 6
Receivable and other non-current assets 16 1,887
Deferred tax assets 11 18,461
Total non-current assets 708,018
Cash and cash equivalents 17 51,089
Trade receivables 18 66,056
Inventories 19 39,423
Other receivables 20 3,706
Tax receivables 11 8,384
Total current assets 168,658
TOTAL ASSETS 876,676
Note 31 December 2016
SHAREHOLDERS' EQUITY AND LIABILITIES
Share Capital 41,138
Other Reserves 216,566
Hedging Reserve (575)
Translation Reserve (1,383)
Riserva SOP 96
Loss for the period (27,521)
Total shareholders' equity 21 228,321
Non-current financial indebtness 23 391,713
Provision for post-employment benefits 24 12,358
Deferred tax liabilities 11 88,016
Non-current tax payables 11 6,466
Other non-current payables 28 14,681
Non-current payables to leasing companies 51
Provision for risks and charges 25 2,973
Warranty and Reorganisation provision 26 3,696
Total non-current liabilities 519,954
Current financial indebtness 23 16,025
Trade payables 27 64,953
Current payables to related parties 11
Current tax payables 11 8,229
Other current payables 28 38,710
Derivative financial instruments 29 473
Total current liabilities 128,401
TOTAL LIABILITIES 648,355
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 876,676
The Notes to the Financial Statements are an integral part of the same.
18
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
V. Consolidated statement of cash flows for the period ended December 31, 2016
(€ thousand)Note
31 December
2016
OPERATING ACTIVITIES
Net loss for the period (27,521)
PPA impact 4 36,795
Net financial expense 10 31,430
Amortisation/depreciation 7 6,853
Allowance for doubtful receivables 18 (34)
Inventory write-down 19 (303)
Post-employment benefits 24 (434)
Cost of employee stock option plan 21 96
Net foreign exchange (1,075)
Current and deferred taxes 11 3,995
Cash flow from operating activities before 49,801
changes in net working capital
Trade receivables 18 5,219
Inventories 19 3,474
Trade payables 27 (4,915)
Cash flow generated by operating activities 53,579
Tax receivables 11 214
Other receivables 20 (1,754)
Tax payables 11 5,925
Other current payables 24 - 25 - 26 -28 921
Translation reserve 21 581
Income tax paid (10,773)
Interest paid (34,100)
Net cash flow generated by operating activities 14,593
INVESTING ACTIVITIES
Receivables and other non-current assets 16 (283)
Property, plant and equipment and intangible fixed assets 13 - 14 (10,846)
Acquisition of subsidiary 4 32,600
Equity 21 257,983
Net cash flow generated by investing activities 279,454
FINANCING ACTIVITIES
Payables to factoring companies (7)
Payables to banks 23 (1,278)
Proceeds from borrowings 23 410,815
Repayment of loans 23 (278,423)
Payables to related parties (374,102)
Payables to leasing companies (13)
Net cash flow absorbed by financing activities (243,008)
50OPENING CASH AND CASH EQUIVALENTS
CLOSING CASH AND CASH EQUIVALENTS
NET INCREASE OF CASH AND CASH EQUIVALENTS 51,039
51,089
19
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
VI. Consolidated statement of changes in equity for the period ended December 31,
2016
Balance at 22 March 2016 50 - - - - - - 50
Loss for the period (27,521) (27,521)
Other comprehensive income for the period, net of income tax (575) (1,383) (328) (2,286)
Total Comprehensive Income for the period - (575) (1,383) (328) - - (27,521) (29,808)
Increases 41,088 216,896 257,984
Recognition of share based payment 96 96
Balance at 31 December 2016 41,138 (575) (1,383) (328) 96 216,896 (27,521) 228,322
Total Equity
Other components of comprehensive income
Share
Capital
Cash Flow
Hedge
Foreing Currency
Translation ReserveIas 19
Share based
plan IFRS 2
Other
Reserves
Loss for the
period
20
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
VII. Notes to the consolidated financial statements
Note 1. General information
N&W Global Vending S.p.A. (hereinafter also the “Company”) is a joint-stock company
established in Italy on 27 October 2005 and directly controlled by “Lone Stare Investments Fund”,
which acquired the N&W Group on 22 March 2016.
The N&W Group, the leader in Europe in this industry, is today the largest manufacturer in the
world of automatic vending machines, with the widest range of vending machines for both public
and private use.
Financial statements
The Group’s Consolidated Financial Statements include the following primary financial statements:
a statement of financial position, which shows current and non-current assets, current and
non-current liabilities, separately;
an income statement, which shows costs using a classification based on the functionality of
the same;
a statement of comprehensive income, which shows the items that will not be subsequently
reclassified to the income statement and the items that may be later reclassified to the
income statement at later stage;
a cash flow statement, which shows the cash flows generated by operating activities using
the indirect method;
a consolidated statement of changes in shareholders’ equity, prepared in accordance with the
provisions of IAS 1.
The Consolidated Financial Statements and all amounts in the explanatory notes are shown in
thousands of Euro (the functional currency of the Company), unless otherwise indicated.
Scope of consolidation
The 2016 consolidated financial statements include the financial statements of N&W Global
Vending S.p.A. (the parent company) and of all of the companies directly or indirectly controlled by
the N&W Group. The place of incorporation and operation is the same for all subsidiaries.
The reference date of the consolidated financial statements is the same as that of the financial
statements of the parent company N&W Global Vending S.p.A., as well as that of the subsidiaries;
the financial statements used for consolidation purposes are those at December 31, 2016, prepared
by the Board of Directors and/or the Sole Directors for approval by the respective Shareholders’
Meetings.
The 2016 consolidated financial statements include the following companies (“N&W Group”):
21
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
N&W Global Vending S.p.A., registered office in Valbrembo, 24030 (BG), Via Roma 24-
Italy (wholly owned);
N&W (Denmark) ApS – registered office in Odense, Denmark (wholly owned);
Wittenborg ApS – registered office in Odense, Denmark (wholly owned);
N&W Global Vending Ltd – registered office in Bilston, Great Britain, (wholly owned)
which includes Wittenborg UK Ltd – registered office in Bilston, Great Britain (wholly
owned);
N&W Global Vending GmbH – registered office in Wien, Austria (wholly owned);
N&W Global Vending GmbH – registered office in Rastatt, Germany (wholly owned);
N&W Global Vending Sas - registered office in Le Mesnil Amelot, France (wholly owned);
Fridge France Sas – registered office in Le Mesnil Amelot, France (wholly owned);
N&W Global Vending Spain SL – registered office in Madrid, Spain (wholly owned);
Necta Vending Solutions SA – registered office in Buenos Aires, Argentina (wholly
owned);
N&W Global Vending SP.z.o.o. – registered office in Warsaw, Poland (wholly owned);
N&W Global Vending Ltda – registered office in Sao Paulo, Brazil (wholly owned);
SGL ITALIA S.r.l – registered office in Turin, Italy (wholly owned);
N&W Innovative Solutions S.r.l. – registered office in Zoppola (PN), Italy (wholly owned);
N&W Global Vending S.A. – registered office in Drogenbos, Belgium (wholly owned);
N&W Australia Pty Ltd – registered office in North Sydney, Australia (wholly owned);
N&W Global Vending Pte Ltd – registered office in Singapore (wholly owned);
N&W Global Vending LLC – registered office in Moscow, Russia (wholly owned);
N&W Global Vending Romania Srl – registered office in Municipiul Cluj-Napoca, Calea
Dorobantilor, Romania (wholly owned).
US Partnership
In July 2005, N&W Global Vending S.p.A. signed a business partnership agreement with an
American partner to boost its strategic growth in the North American market through Vendors
Exchange Global Solutions LLC (hereinafter also VE Global Solutions LLC), which has an
exclusive arrangement to sell N&W products, with a view to developing a network of agencies that
can increase N&W’s presence in this market.
N&W disbursed Euro 2.9 million (USD 3.5 million) by means of a loan agreement to fund initial
costs.
On the closing date of the financial statements, Vendors Exchange Global Solutions LLC had not
repaid the loan outstanding with N&W Global Vending S.p.A. In turn, the management decided not
to exercise its right to convert the loan into a shareholding as envisaged by the partnership
agreement (the option expired on 31 December 2011). The Distributorship agreement is still fully
22
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
operational, and regulates all operational and management aspects related to sales and operations in
the United States, as well as, naturally, the right relating to the repayment of the above-cited loan.
In accordance with IFRS 10, no consolidation of the US partnership is required insofar as the N&W
Group does not have an Equity interest and the power to direct the relevant acitvities in Vendors
Exchange Global Solutions LLC.
Note 2. Accounting policies
The principal accounting policies applied in the preparation of these consolidated financial
statements are set out below. These policies have been consistently applied to the period presented,
unless otherwise stated.
Note 2.1. Basis of preparation
The Consolidated Financial Statements have been prepared in accordance with the International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board
(“IASB”) and as adopted by the European Union. The term “IFRS” also includes all International
Accounting Standards (“IAS”) and all interpretations issued by the IFRS Interpretations Committee,
previously International Financial Reporting Interpretation Committee (“IFRIC”).
These consolidated financial statements are presented in Euro, which is the Group’s presentation
currency and the functional currency of the Company. All amounts in these consolidated financial
statements are presented in thousands of Euro, unless otherwise stated.
These financial statements are prepared on a going concern basis, i.e. assuming that operations will
continue in the foreseeable future.
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in Note 3.
Note 2.2. Basis of Accounting
The consolidated financial statements have been prepared on the historical cost basis except for
financial instruments that are measured at fair value at the end of each reporting period, as
explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation technique. In estimating the fair
23
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
value of an asset or a liability, the Group takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset
or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these
consolidated financial statements is determined on such a basis, except for share-based payment
transactions that are within the scope of IFRS 2 “Shared-based Payment”, leasing transactions that
are within the scope of IAS 17 “Leases”, and measurement that have some similarities to fair value
but are not fair value, such as net realisable value in IAS 2 “Inventories” or in value in use IAS 36
“Impairment of Assets”.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as
follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
New standards, amendments and interpretation applicable from 1 January 2016
The following new standards and amendments, which were effective from 1 January 2016, were
adopted by the group. The adoption of these amendments had no effect on the Consolidated
Financial Statements.
Amendments to IFRS 11 – Joint arrangements: Accounting for acquisition of interest in
joint operations which clarify the accounting for acquisitions of an interest in a joint
operation that constitutes a business.
Amendments to IAS 16 – Property, Plant and Equipment and to IAS 38 – Intangible
Assets, which clarify that the use of revenue-based methods to calculate the depreciation of
an asset is not appropriate because revenue generated from an operating business that
includes the use of an asset generally reflects factors other than the consumption of the
economic benefits embodied in the asset. In addition, the amendments clarify that revenue
is generally presumed to be an inappropriate basis for measuring the consumption of the
economic benefits embodied in an intangible asset.
Annual Improvements to IFRSs 2012-2014 cycle, includes a series of amendments to IFRSs
in response to issues raised mainly on IFRS 5 – Non-current assets held for sale and
discontinued operations related to the changes of method of disposal of an asset (or disposal
group), on IFRS 7 – Financial Instruments: Disclosures related to clarification when
servicing contracts are deemed to constitute continuing involvement for disclosure
purposes, on IAS 19 – Employee Benefits related to discount rate determination and on IAS
24
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
34 – Interim Reporting related to paragraph 16A and the clarifications of the meaning of
disclosure of information “elsewhere in the interim financial report”.
Amendments to IAS 1 – Presentation of Financial Statements, which were a part of the
IASB’s initiative to improve presentation and disclosure in financial reports. The
amendments make a clear that materiality applies to the whole of financial statements and
that the inclusion of immaterial information can inhibit the usefulness of financial
disclosures. Furthermore, the amendments clarify that companies should use professional
judgment in determining where and in what order information is presented in the financial
disclosures.
New Standards and amendments not yet effective
Two new accounting principles applicable on or before January 1, 2018 were published in 2016:
IFRS 15 “Revenues from contracts with customers”: the purpose of IFRS 15 is to improve
revenues recognition methods by introducing a new accounting model that calls for: (i)
identifying a contract with a customer; ii) identifying the obligations entailed by the
contract; (iii) determining the transaction price; (iv) allocating the transaction price to the
individual contractual obligations; and (v) recognizing the revenues when each individual
contractual obligation is satisfied. The adoption of this principle could modify the revenue
amount; its potential impact is currently being determined.
IFRS 9 “Financial instruments,” for which first-time adoption modalities are still being
defined. The new IFRS 9 standard calls for a single model to classify and measure financial
instruments. Within the model, financial assets are classified into three categories
(amortized cost, fair value in “Reserve for other components of comprehensive income” and
fair value in the income statement) depending on the entity’s business model (because of
this dependency link, reclassifications between categories are forbidden, except when the
business model itself is changed). A new model to determine the writedowns on receivables
and liabilities so-called expected losses has been introduced and the default risk associated
with the counterparty is evaluated ex-ante. With regard to equity investments, the exemption
from the requirement to apply fair value to measure investments that are not publicly traded
has been eliminated. Hedge accounting rules have also been changed; specifically, the
existence of a relationship between a hedged asset/liability and the hedging instrument, with
balance in terms of weight, is sufficient to avoid ineffectiveness; it is permissible to hedge
the single components of the price formula of a commodity provided the components can be
identified separately and can be measured reliably; voluntary discontinuation of hedge
accounting is not allowed.
25
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 2.3. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and
entities (including structured entities) controlled by the Company and its subsidiaries. Control is
achieved when the Company:
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassess whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of controls listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over
the investee when the voting rights are sufficient to give it the practical ability to direct the relevant
activities of the investee unilaterally. The Company considers all relevant facts and circumstances
in assessing whether or not the Company’s voting rights in an investee are sufficient to give it
power, including:
the size of the Company’s holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
potential voting rights held by the Company, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not have, the
current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meeting.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated income
statement and consolidated statement of comprehensive income from the date the Company gains
control until the date when the Company ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Changes in the Group’s ownership interest in subsidiaries that do not result in the Group losing
control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the
Group’s interests and the non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by which the non-
26
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
controlling interests are adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recongnised in profit or loss and is
calculated as the difference between i) the aggregate of the fair value of the consideration received
and the fair value of any retained interest and ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amount
previously recognised in other comprehensive income in relation to that subsidiary are accounted
for as if the Group had directly disposed of the related assets or liabilities of the subsidiary.
Note 2.4. Business combinations
The term Business Combinatio means a transaction, which regards the acquisition of a business,
analogous to a purchase transaction in which control is transferred. Acquisition of business are
accounted for using the acquisition method.
The consideration transferred in a business combination is measured at fair value, which is
calculated as the sum of the acquisition-date fair values of the assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are generally
recognised in profit or loss as incurred.
At acquisition date, the identifiable assets acquired and liabilities assumed are recognised at their
fair value, except that:
deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with IAS 12 “Income Taxes” and IAS 19
“Employee Benefits” respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS 2 “Share-based Payment”
at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-
current Assets Held for Sale and Discontinued Operations”, are measured in accordance with
that Standard.
The excess of the sum of consideration transferred and the net fair value of identifiable assets
acquired and liabilities assumed is recognised as Goodwill. If, after reassessment, the net fair value
of identifiable assets acquired and liabilities assumed exceeds the consideration transferred it is
recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests may be initially measured either at fair value or at the non-controlling
interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement
basis is made on q transaction by transaction basis.
27
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
When the consideration transferred by the Group in a business combination includes assets or
liabilities resulting from a contingent consideration arrangement, the contingent consideration is
measured at its acquisition-date fair value and included as part of the consideration transferred in a
business combination. Changes in the fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted restrospectively, with corresponding adjustments
against goodwill. Measured period adjustments that arise from additional information obtained
during the “measurement period” about facts and circumstances that existed at the acquisition date.
When a business combination is achieved in stages, the Group’s previously held equity interest in
the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, if any, is
recognised in profit or loss. Amounts arising from interest in the acquiree prior to the acquisition
date that have previously been recognised in other comprehensive income are reclassified to profit
or loss where such treatment would be appropriate if the interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period,
or additional assets or liabilities are recognized, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognized at that date.
Note 2.5. Goodwill
The goodwill resulting from a business combination is recognised under intangible assets at the date
on which control is acquired. Goodwill is recognised at cost, less accumulated impairment losses (if
any).
For purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating
units (“CGUs”) that is expected to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is
less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the
carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly
in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant CGU, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Note 2.6. Conversion of entries in foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other
than the entity's functional currency (foreign currencies) are recognised at the rates of exchange
prevailing at the dates of the transactions. At the end of each reporting period, monetary items
28
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
The consolidated financial statements are presented in Euro, the parent company’s functional
currency. Transactions in the income statement made by subsidiaries located out of the Eurozone
(the “non Euro subsidiaries” located in Denmark, Brazil, Argentina, UK, Poland, Australia,
Singapore and Romania) are converted into Euro using the average exchange rate for the year on a
monthly basis, since the exchange rates did not fluctuate significantly during the period; the
amounts in the statement of financial position are converted at the exchange rate in force at 31
December.
The exchange differences resulting from the conversion of the investments in the “non Euro
subsidiaries” are recognised under “Translation reserve” under shareholders’ equity.
Note 2.7. Internally-Generated Research & Development Asset
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase
of an internal project) is recognised if, and only if, all of the following have been demonstrated:
the technical feasibility of completing the intangible asset so that it is available for use or to
sale;
the intention to complete the intangible asset to use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
Development costs that have previously been recognised in the income statement cannot be
recognised as intangible assets in the following period.
The amount initially recognised as an internally-generated intangible asset do not exceed the
amount that is expected to be recovered from the probable future economic benefits, after having
deducted the further development costs incurred directly to promote the product.
Investments in development recognised as intangible assets are amortised and are recognised as
expense on a systematic basis, so that they reflect the manner in which the future economic benefits
of the asset are expected to be used by the Group.
29
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Development costs are amortised over a five year period, an average term considered to be
representative of the useful life of the benefits related to new products developed; the useful life is
periodically reviewed.
Note 2.8. Software
The costs associated with software development are usually expensed at the time they are incurred.
However, costs that are clearly associated to an identifiable and unique product, which will be
under the control of the Group and will provide future benefits, are recognised as intangible assets
where the requirements of IAS 38 have been met. The relative costs also include the costs of the
personnel who have contributed to developing the asset.
All of the expenses that increase and extend the performance of the software beyond its original
specifications and its assumed duration are recognised as intangible assets and increase the original
cost.
The costs relating to the maintenance or updating of existing software programmes are expensed at
the time they are incurred.
Note 2.9. Trademarks, Customer List and Patents
Intangible assets acquired in a business combination and recognised separately from goodwill are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported
at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
Trademarks, with a finite useful life, are amortised on a straight-line basis according to their useful
life estimated to be 15 years.
The customer list, with a finite useful life, is reduced yearly according to a churn rate applicable,
extracted from the Company’s historical data estimated to be approximately 6 years.
Patents, with a finite useful life, are amortised on a straight-line basis according to their useful life
estimated to be 10 years.
Note 2.10. Property, plant and equipment
Property, plant and equipment are recognised at cost including ancillary charges, net of
accumulated depreciation and accumulated impairment losses.
Depreciation is recognised to facilitate the write-off of the cost of the assets less their residual
values over their useful lives, on a straight-line basis.
The useful lives are estimated as follows:
Property and plant 30-40 years
30
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Equipment 3-10 years
The investments, which at year-end were not completed, are classified as Construction in progress
and are not depreciated.
The costs incurred for improvements to third party assets where capitalised are shown in the
financial statements under the category of assets to which they refer and are depreciated over the
shorter of the useful life and the lease term.
Expenses relating to refurbishments and improvements, which have led to a tangible increase in
production capacity or have extended useful life, are capitalised while ordinary maintenance and
repairs are expensed.
If the book value of an asset is higher than the estimated recoverable amount, its value is reduced to
the lower amount.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising
on the disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognised in
profit or loss.
Note 2.11. Impairment of intangible and tangible fixed assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets (other than goodwill) to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). When it is not possible
to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the CGU to which the asset belongs.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less selling costs and value in use. In order to
calculate the fair value net of selling costs, specific valuation models are available; these
calculations are made using appropriate income multipliers, publically traded share prices relating
to similar companies or other available fair value indicators that are relevant to the assets to be
valued. When calculating the value in use, the assets are valued at the expected cash generating unit
level (CGU) based on how they are allocated. In assessing value in use, the estimated future post-
tax cash flows are discounted to their present value using a post-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
31
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Where the recoverable amount of an asset of a CGU is lower than its carrying amount, the carrying
amount is reduced to its recoverable amount. An impairment loss is recognised immediately in
profit or loss.
If, subsequently, an impairment loss relating to the asset (that is not goodwill) reverses, the carrying
amount is increased to the revised recoverable value, but not exceeding the carrying amount that the
asset would have been recognised as if no impairment loss had been recognised in prior years.
Note 2.12. Financial instruments
A financial instrument is represented by a contract that gives rise to financial asset for a company
and a financial liability or an equity instrument for another company.
Financial assets and liabilities are initially measured at their fair value; the relative transaction costs
directly related to the acquisition or the issue are included in the initial measurement of all financial
assets/liabilities, other than for financial assets and liabilities carried at fair value through profit or
loss.
Financial assets
A financial asset is any asset that represents:
- cash and cash equivalents;
- a contractual right to receive cash or another financial asset from another party;
- a contractual right to exchange financial instruments with another party at potentially
favourable conditions;
- an instrument representing the shareholders’ equity of another company;
- a contract, including derivative, which is or may be settled with instruments representing a
company’s capital.
Impairment of financial assets
Financial assets, unlike those classified in the fair value category in the income statement (FVTPL),
are impairment tested at each reporting date. The recoverability of the value of financial assets are
verified for each individual instrument or collectively for groups of similar instruments at the end of
each reporting period.
Derecognition of financial assets
The company eliminates a financial asset from the financial statements when it transfers the
contractual right to receive cash flows from the asset in question or when said right expires.
When a financial asset is transferred, the extent to which the risks and benefits related to the
ownership of the financial asset are transferred must be assessed. More specifically:
32
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
if the company substantially transfers all of the risks and benefits related to the ownership of
the financial asset, it eliminates the asset transferred and separately recognises any rights or
obligations created or maintained as a consequence of said transfer;
if the company substantially maintains all of the risks and benefits related to the ownership
of the financial asset, it continues to recognise the asset.
Financial liabilities and shareholders’ equity
A financial liability is any liability that represents a contractual obligation to:
give cash or another financial asset to another company;
exchange financial instruments with another party at potentially unfavourable conditions;
a contract, including derivative, which is or may be settled with instruments representing a
company’s capital.
An instrument representing capital, an equity instrument, is a contract that represents a residual
equity investment in the assets of a company net of its liabilities; for example, this regards shares,
quotas or rights to purchase or subscribe for shares or quotas of a company.
Other financial liabilities
Other financial liabilities, including loans, are measured at amortised cost, using the effective
interest rate method.
Derivative financial instruments
The company uses foreign currency derivative financial instruments to hedge the risks resulting
from fluctuations of exchange rates and interest rates. Derivative financial instruments are
recognised at their fair value at initially and are subsequently measured at their fair value at the end
of each reporting period. The resulting gain or loss is recognised in profit or loss unless the
derivative is designated and effective as a hedging instrument.
Hedge accounting
On the date a derivative contract is entered into, the Group Treasury designates the derivative as
either a (1) a hedge of the fair value of a recognised asset or liability (fair value hedge), or (2) a
hedge of a recognised asset or liability and of a forecasted transaction (cash flow hedge). Certain
derivative transactions while providing effective economic hedges under the Group’s risk
management policies, do not qualify for hedging accounting. Derivatives instruments are not
entered into for trading or speculative purposes.
Changes in the fair value of a derivative that is highly effective, and that is designated and qualify
as a fair value hedge, are recorded in the Income Statement along with the change in the fair value
of the hedged asset or liability that is attributable to the hedged risk. Changes in the fair value of a
derivative that is highly effective, and that is designated and qualified as a cash flow hedge, are
33
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
recognised directly in equity (hedging reserve). Amounts deferred in equity are included in the
Income Statement in the same periods during which the hedged items expected cash flows or
forecasted transaction affects the Income Statement.
The Group Treasury formally documents all relationships between hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking various hedge
transactions.
This process includes linking all derivatives designated as hedges to specific assets and liabilities or
to specific firm commitments or forecasted transactions.
The Group also formally assesses, both at the hedge inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in fair
values or cash flows of hedged items.
Note 2.13. Inventories
Inventories of raw materials and finished products are stated at the lower of purchase or production
cost, and net realisable value. Costs of inventories are determined on the weighted average cost
basis. Net realisable value represents the estimated selling price for inventories less all estimated
costs of completion and costs necessary to sell.
The purchase cost is inclusive of the costs incurred for transporting the goods to the warehousing
location. The production cost of the finished and semi-finished products includes the directly
attributable costs and a portion of the indirect costs (excluding finance expense) reasonably
attributable to the products based on the normal production capacity.
Work in progress, is measured at production cost for the year, taking into account the stage of
completion.
Obsolete and slow-moving inventories are written down to the net realisable value, by means of the
establishment of a specific provision to adjust the value of the inventories.
Note 2.14. Trade receivables
Receivables from customers are initially recognised at fair value and subsequently are recorded at
amortised cost, using the effective interest rate method, net of the losses for uncollectable
receivables. The amount of the write-down of the receivables is based on the analysis of all the
receivables outstanding at the end of the period.
Note 2.15. Payables to suppliers and other liabilities
Payables to suppliers along with the other liabilities, with the exception of financial liabilities, are
recognised at their expected settlement amount.
34
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 2.16. Provisions for risks and charges
IAS 37 “Provision, Contingent Liabilities and Contingent Assets” requires recognition of a
provision when:
- the Group has a present obligation (legal or constructive) as a consequence of past events;
- it is probable that an outflow of resources will be required for fulfilling the obligation;
- it is possible to reliably estimate the amount of the obligation.
Provisions are recognised at the value that represents the best estimate of the amount to be paid to
discharge the obligation at the period end date, after having taken into consideration all the risks
associated with the obligation. When a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of those cash flows (when the
effect of the time value of money is material).
When a part or all of the expenses necessary for fulfilling the obligation are reimbursed by third
parties, a receivable is recognised as an asset provided that it is virtually certain that the
reimbursement will be received and that the amount of the receivable can be determined reliably.
Provisions for the expected cost of warranty obligations under local sale of goods legislation are
recognised at the date of sale of the relevant products.
A provision for reorganisation costs is recognised only if the Group has approved a formal detailed
plan for the reorganisation and has raised a valid expectation in those affected that it will carry out
the reorganisation by starting to implement the plan or announcing its main features to those
affected by it. The measurement of a reorganisation provision includes only the direct expenditures
arising from the restructuring, which are those amounts that are both necessarily entailed by the
reorganisation and not associated with the ongoing activities of the Group.
Note 2.17. Contingent liabilities
A contingent liability is:
- a possible obligation which derives from past events and whose existence will be confirmed
only on occurrence of one or more uncertain future events not totally under the control of
the company; or
- an obligation underway which derives from past events but which is not recognised because:
i) it is not probable that the use of resources suitable for producing economic
benefits to meet the obligation will be necessary; or
ii) the amount of the obligation cannot be determined with sufficient reliability.
Contingent liabilities are not subject to recognition, however if the event is possible but not
probable or if it is probable but cannot be quantified, suitable disclosure is provided in the notes to
the financial statements.
35
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 2.18. Employment benefits
Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when
employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuation being carried out at the end of each annual
reporting period. Interest is calculated by applying the discount rate at the beginning of the period to
the defined benefit liability. Remeasurement, comprising actuarial gains and losses is recognised in
other comprehensive income and will not be subsequently to the income statement. Defined benefit
costs are categorised as follows:
- service cost;
- net interest;
- remeasurement.
Employee leaving indemnity (TFR)
TFR, accrued by the employees of the Italian Group companies at 31 December 2006 (applicable
date of the welfare reform), is classified as a defined-benefit schemes. The benefit that employees
have earned in return for services prior to 31st December 2016 is determined using an actuarial
technique, the projected unit credit method so as to make a reliable estimate of the amount to be
paid at the time of termination of the employment relationship. The projected unit credit method
requires the Group to make estimates (actuarial assumptions) about demographic variables and
financial variables that will affect the cost of the benefits. The benefit is discounted in order to
determine the present value of the defined benefit obligation using interest rates of high-quality
corporate bonds.
Further to the afore-mentioned welfare reform, TFR which accrues from 1 January 2007 is
classified as a defined-contribution plan, consequently payments for benefits earned by the
employees after this date are recognised as an expense as the Group has no further payment
obligations once the contributions have been paid. Contributions are recognised as liability to the
extent that they are not paid to the supplementary pension funds or to the Istituto Nazionale della
Previdenza Sociale treasury fund.
Short-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual
leave and sick leave in the period the related service is rendered at the undiscounted amount of the
benefits expected to be paid in exchange for that service.
Note 2.19. Income taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
36
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The tax currently payable is based on taxable profit for the year. Taxable profit differs from “profit
before tax” as reported in the consolidated income statement because of items of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible.
The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted
by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those
deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not
recognised if the temporary difference arises from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference
arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Current and deferred tax assets and liabilities are offset when the income taxes are applied by the
same tax authority and where there is a legally recognised right to offset the amounts recorded.
The deferred tax assets and liabilities are defined based on the tax rates which are expected to be
applied in the year in which these assets are realised or these liabilities are discharged considering
the rates in force or those already issued or essentially issued at the reporting date.
Note 2.20. Revenue recognition
Revenues is measured at the fair value of the consideration received or receivable. Revenue is
reduced for estimated customer returns, rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed,
at which time all following conditions are satisfied:
the transfer of the risks and benefits associated with the ownership of the goods takes place;
the Group retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
the amount of the revenue can be measured reliably;
37
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
it is probable that the economic benefits associated with the transaction will flow to the
Group; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Dividends and interest
Dividend income from investments is recognised when the shareholder’s right to receive payment
has been established (provided that it is probable that the economic benefits will flow to the Group
and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits
will flow to the Group and the amount of income can be measured reliably. Interest income is
accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount on initial recognition.
Note 2.21. Cost of sales
Cost of sales includes production cost of products sold. It includes the costs of raw materials, and
direct and indirect production costs. The latter includes the depreciation of property, plant and
equipment and amortisation of intangible assets relating to the production and write-down of the
inventories. The cost of sales also includes the transport cost relating to the deliveries and the
allowances made to the product warranty provisions.
Note 2.22. Profit Partecipation Loan (“PPL”)
The Profit Partecipation Loans partecipated by Group employees are recognised at the market value
which estimate is based on Monte Carlo valuation method.
The Company recognises the changes in the market value in the income statement according to the
estimated 5 years maturity period with a corresponding credit to equity as the Company has no
obligation to settle the liability arising from the PPL arrangement.
Note 3. Critical accounting estimates and judgements
In the application of the Group’s accounting policies, the directors are required to make judgements,
estimates and assumptions about the carrying amounts of asset and liabilities that are not readily
apparent from other sources. The use of reasonable estimates therefore represents an essential
element in the preparation of the financial statements and does not affect the degree of reliability.
Estimates and assumptions are based on the opinion of management supported by experience
deriving from similar transactions and external evidence where available. They are based on the
latest information available and which is reliable, and include any additional evidence provided by
events that took place after the reporting date. Actual results may differ from estimates.
38
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Since the actual results may differ from the afore-mentioned estimates, any changes in the
underlying circumstances or additional information could make a review of said estimates
necessary. The effect of the change in estimates has repercussions on the income statement:
- in the period in which the change took place, if the change only effects this period;
- in the period in which the change took place and in subsequent ones, if the change effects
several periods.
Determination of fair values in business combinations
The Company has applied estimates and judgements in order to determine the fair value of assets
acquired and liabilities assumed by way of a business combination. The value of assets, liabilities
and contingent liabilities recognized at the acquisition date are recognized at fair value. In
determining the fair value, the Company has utilized valuation methodologies including discounted
cash flow analysis. The Company’s estimates are based upon assumptions believed to be
reasonable, but which are inherently uncertain and unpredictable. These valuations require the use
of management’s assumptions, which would not reflect unanticipated events and circumstances that
may occur. Any significant change in key assumptions may cause the acquisition accounting to be
revised including the recognition of additional goodwill or a discount on acquisition.
Estimate of the Goodwill
The amount of goodwill initially recognized as a result of a business combination is dependent on
the allocation of the purchase price to the fair value of the identifiable assets acquired and the
liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a
considerable extent, on management’s judgment. Allocation of the purchase price affects the results
of the Group as finite lived intangible assets are amortized, whereas indefinite lived intangible
assets, including goodwill, are not amortized and could result in differing amortization charges
based on the allocation to indefinite lived and finite lived intangible assets.
Impairment testing
IFRS requires management to undertake an annual test for impairment of indefinite lived assets and,
for finite lived assets, to test for impairment if events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment testing is an area involving
management judgment, requiring assessment as to whether the carrying value of assets can be
supported by the net present value of future cash flows derived from such assets using cash flow
projections which have been discounted at an appropriate rate. In calculating the net present value
of the future cash flows, certain assumptions are required to be made in respect of highly uncertain
matters including management’s expectations of:
growth in EBITDA, calculated as adjusted operating profit before depreciation and
amortization;
timing and quantum of future capital expenditure;
39
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
long-term growth rates; and
the selection of discount rates to reflect the risks involved.
Changing the assumptions selected by management, in particular the discount rate and growth rate
assumptions used in the cash flow projections, could significantly affect the Company’s impairment
evaluation and hence results.
The goodwill has been provisionally allocated to Vending, Ho.Re.Ca and OCS Cash Generating
Units, given that these divisions are expected to benefit most from the sinergies of the Acquisition.
Any adjustment to such provisional values will be recognized within twelve months of the
Acquisition Date.
Income taxes
The Group is subject to income taxation in various jurisdictions. In order to determine the tax
liability on a global scale, a significant degree of estimation is required. Numerous transactions and
calculations must be made to be able to reach a final determination of the taxes, which however
remains uncertain during the ordinary course of the economic activities.
The Group recognises payables for taxes based on the estimates of tax to be paid. In the event of a
tax inspection, if the amount to be paid is different from that estimated, these differences will affect
the income taxes and the provisions for deferred taxes during the period in which these calculations
are made.
Note 4. Business combination
LSF9 Canto Investments S.p.A. (“LSF9 Canto”), wholly owned by the private equity fund Lone
Star Fund IX was incorporated on 25th November 2015 with a Share Capital of Euro 50.
On December 3rd 2015 LSF9 Canto entered into an agreement with N&W Holding S.à rl, owned by
Investcorp and Equistone Partner funds, to buy 100% of the corporate capital of N&W Global
Vending S.p.A.(“the Company”).
The Acquisition was finalized on March 22nd 2016 and was funded through the issue of ordinary
equity shares of Euro 256 million indirectly by Lone Star Fund IX and by the drawdown of Senior
Secured Bridge (Euro 400 million) and Revolving Facilities (Euro 10.8 million) by LSF9 Canto.
With the funds received, LSF9 Canto was able to: i) repay the outstanding Related Parties Loan
amounting to approx. Euro 374 million granted by the previous Shareholders, N&W Holding S.à r.l
to N&W Global Vending S.p.A., ii) lend Euro 258 million to N&W Global Vending S.p.A.
enabling the acquired entities to fully repay the outstanding Senior Bank loans granted by a
consortium of Banks amounting to approx Euro 279.4 million, iii) pay a portion of the purchase
price amounting to Euro 8.5 million, iv) ensure the remaining portion of the purchase price
amounting to Euro 14 million is paid into an escrow account as warranty to cover potential
liabilities mainly arising from the Italian tax settlement.
40
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
On October 5th
2016 LSF9 Canto has been extinguished by merging into the wholly owned N&W
Global Vending S.p.A. (reverse merger).
On October 14th 2016 the Company has issued Euro 300 million of Senior Secured Notes and Euro
100 million of Second Lien Notes both due in 2023; through this issuance the Company has fully
reimbursed the Bridge Facility of Euro 400 million.
N&W Global Vending S.p.A. and its subsidiaries is a leading European and largest manufacturer
worldwide, on sales volume basis, of vending machines. The Group operates in nearly all major
international markets maintaining relationships with direct customer or, alternatively, through a
network of dealers and its commercial subsidiaries located in Italy, Denmark, the UK, France,
Germany, Austria, Poland, Spain, Belgium, Brazil, Argentina, Australia, Singapore, Russia and
Romania.
The acquisition of N&W Group which is wholly owned by Lone Star Fund IX aims to increase
N&W Group’s value considering N&W Group’s strong brand awareness, international presence and
strong commitment in innovation and development of technology solutions together with new
products. The acquisition is expected to expand the business in core and emerging markets and to
continue the strong relationship with key players and to enhance more established relationships with
small medium customers.
Following the Acquisition finalized on March 22nd 2016 a Purchase Price Allocation has been
carried out.
The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS
3 Business Combinations. As a result, the total purchase price has been allocated to the identifiable
assets and liabilities acquired, based on the estimated fair values at the date of acquisition. The
following is not a definitive business combination.
Purchase consideration
Cash paid 14,989 Consideration in escrow account 1,000
Total purchase consideration 15,989
The purchase price paid in cash was equal to €16 million, as compared to a negative net asset value
of N&W Group of €567.7 million at Completion Date. Consequently, the preliminary goodwill –
before purchase price allocation - was equal to €583.7 million.
Assets acquired and liabilities recognised at the date of acquisition
The assets and liabilities recognised as a result of the acquisition are as follows:
41
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
(€ thousands) Net assets at Completion Date after PPA
Assets acquired 584,859 Property, plant & equipment 39,055 Intangible assets 324,156
Software 1,171
Internally generated software 18,066
Trademarks 122,111
Patents 73,505
Customer Relationship 109,302
Other non-current assets 3,119 Total non-current assets 366,330 Inventories 65,493 Trade and other receivables 83,807 Cash and cash equivalents 47,639 Deferred tax assets 21,590 Total current assets 218,529
Liabilities assumed (917,321) Deferred income tax liabilities (105,322) Other non-current liabilities (20,137) Total non-current liabilities (125,459) Trade payables (138,231) Financial indebtness (653,631) Total current liabilities (791,862)
Identifiable assets and liabilities (332,462)
Purchase price allocation process has identified the following assets:
- Internally generated software, Trademarks and Patents
- Customer relationship
- Inventory (adjustment to fair value)
- Tax credit
For a complete description, please see Note 4.1. “Impact of Purchase Price Allocation”.
Purchase consideration 15,989 Plus: fair value of identifiable net assets acquired 332,462
Goodwill arising acquisition 348,451
Acquisition-related costs
Acquisition-related costs of Euro 24,602 million refer to: Euro 10,141 of Financing and
Arrangement Fees on Bond and Revolving Facility (see note 23), Euro 8,000 of Committment and
Funding Fees included in Financial expenses (see note 10) and Euro 6,461 as consultancies costs
42
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
mainly for vendor and buyer due diligences (legal, tax, accounting, commercial due diligence)
related to Nighthawk Project connected with the sale of the Group, of which Euro 2,415 occured
after the Acquisiton Date (see note 9).
Tax settlement – Purchase price Adjustment
Following the receipt of tax assessment notices and claims for penalties relating to the tax period
2010 concerning certain allegations regarding the failure to apply or to pay tax withholdings on
interests paid on the financing granted on 2008 to N&W Group by N&W Holdings S.à r.l. (former
shareholder of N&W Group) and for the alleged illegitimate use of previous losses by N&W Group
(the “2010 Claims”), the latter filed on January 2016 with the competent offices a tax settlement
proposal (istanza di accertamento con adesione). In relation to the tax settlement proposal, N&W
Group initiated a tax settlement procedure (procedura di accertamento con adesione) with the tax
authority to reach a settlement in relation to litigations concerning the alleged illegitimate use of
previous losses by N&W Group in the tax periods from 2005 to 2009, the alleged illegitimate
deductibility of interests expenses in the tax periods from 2005 to 2007 and other minor issues (the
“Pending Claims”). Following several verbal discussions and meetings with the Italian Tax
Authority in relation, inter alia, to the 2010 Claims and to the Pending Claims, N&W Group
executed on 26 May 2016 with the competent authorities an agreement concerning the settlement
of the 2010 Claims, the Pending Claims and possible claims related to tax periods from 2011 to
2013 regarding the failure to apply and to pay tax withholdings on interests in relation to the
financing granted on 2008 to N&W Group by N&W Holdings S.à r.l.. The agreement provides that
N&W Group shall pay an amount equal to approx. Euro 36.5 million and forego a claim from the
tax authorities equal to approx. Euro 3.7 million arising from amounts already paid by N&W Group
in relation to pending claims with reference to the tax period 2006, which are not due anymore. The
payment to be made by N&W Global Vending S.p.A. on the basis of installments’ plans (n. 17
installments) agreed with the tax authority is covered by a guarantee provided to LSF9 Canto
Investments S.p.A. by (i) Lone Star Fund IX for a maximum amount equal to Euro 30 million
subject to certain terms and conditions; and (ii) by an indemnity from N&W Holdings S.à r.l. for an
amount equal to approx. Euro 6.5 million, as defined in the Share Purchase Agreement (“SPA”) of
3 December 2015 between N&W Holdings S.à r.l. and LSF9 Canto Investments S.p.A..
Revenue and profit contribution
As stated in note 5, the revenue and profit from continuing operations for the period are completely
attributable to the acquisition of N&W Group.
Had these business combinations been effected at 1 January 2016, the revenue from sales and
operating profit of the Group at 31st December 2016 would have been Euro 299.6 million and Euro
3.3 million respectively. The loss for the period from continuing operations would have been Euro
40.7 million.
43
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Net cash flow on acquisition of subsidiaries
Cash paid 14,989 Less: cash and cash equivalent balance acquired (47,589) Net purchase consideration (32,600)
Note 4.1. Impact of Purchase Price Allocation
Transaction overview and allocation of purchase price paid
Following the Acquisition finalized on 22nd
March, 2016 a Purchase Price Allocation (“PPA”) has
been carried out.
The purchase price paid in cash was equal to €16 million, as compared to a negative net asset value
of N&W Group of €567.7 million at Completion Date. There is no contingent consideration
outstanding in relation to the Acquisition as of December 31, 2016. Consequently, the preliminary
goodwill – before purchase price allocation - was equal to €583.7 million.
The Acquisition was recorded using the acquisition method of accounting, in accordance with IFRS
3 Business Combinations. The total purchase price has been allocated to the identifiable assets and
liabilities acquired, based on the estimated fair values at the date of acquisition.
As a result of the purchase price allocation €235.3 million of the preliminary goodwill was allocated
to identifiable assets and liabilities. This allocation is shown below:
(€ thousands)
Net assets at
Completion
Date before
PPA
Fair value
adjustments Net assets at
Completion
Date after PPA
Assets acquired 251,153 333,705 584,859 Property, plant & equipment 39,055 - 39,055 Intangible assets 19,373 304,782 324,156
R&D 18,202 (18,202) -
Software 1,171 - 1,171
Internally generated software - 18,066 18,066
Trademarks - 122,111 122,111
Patents - 73,505 73,505
Customer Relationship - 109,302 109,302
Other non-current assets 3,119 - 3,119 Total non-current assets 61,547 304,782 366,330 Inventories 42,100 23,392 65,493 Trade and other receivables 83,124 683 83,807 Cash and cash equivalents 47,639 - 47,639 Deferred tax assets 16,743 4,847 21,590 Total current assets 189,606 28,922 218,529
44
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Liabilities assumed (818,884) (98,438) (917,321) Deferred income tax liabilities (6,884) (98,438) (105,322) Other non-current liabilities (20,137) - (20,137) Total non-current liabilities (27,021) (98,438) (125,459) Trade payables (138,231) - (138,231) Financial indebtness (653,631) - (653,631) Total current liabilities (791,862) - (791,862)
Purchase Price Paid 15,989 - 15,989 Identifiable assets and liabilities (567,730) 235,267 (332,462) Goodwill 583,719 (235,267) 348,451
The PPA process involved the following balance sheet items:
a) Intangible assets
The fair vaue adjustment of intangible assets of €304.8 million is driven by the following
evaluation:
Internally generated software, Trademarks and Patents: based on the market approach, and
more specifically on the application of the Relief from royalty methodology, that estimates
the value of the intangible assets by discounting back the stream of royalty, net of taxes,
saved by the Company by owning the assets instead of leasing them. The method requires
the estimate of applicable royalty rates, that are extracted from market data with reference to
transaction related to similar assets;
Customer relationship: based on the excess earning methodology, taking into account the
operating profit, net of taxes, associated with the customer portfolio as of the transaction
date. The customer portfolio is reduced yearly according to a churn rate applicable, extracted
from the Company’s historical figures. The “excess” cash flow attributed to the customer
relationship is calculated by deducting the contributory asset charge, that is the theoretical
remuneration of the invested capital of the Company.
All the intangibles booked have a defined useful life.
b) Inventory
As required by business combinations accounting principles, the purchase method has been used
to evaluate it at the acquisition date.
According to purchase method, the inventory assumed by the acquirer is required to be
measured at its fair value. Fair value at the acquisition date typically includes profit attributed to
past production effort, i.e. in bringing the goods to their current condition. Except on grounds of
materiality, it is not generally appropriated to assign the acquiree’s carrying amount to the cost
of acquired inventories, because such cost does not reflect the manufacturing profit that is
recognised by the acquiree through the normal selling process.
45
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The manufacturing profit considered as part of the fair value assigned to the N&W inventory at
the acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally
reversed to Profit and Loss during the year when the goods (finished products, spares and
accessories) have been sold.
The above fair value of the finished goods and merchandise has been evaluated deducting from
the selling price the costs of disposal: commissions, inventory stocking costs and distribution
costs.
c) Trade and other receivables
The Company has booked an asset of Euro 0.7 million for an Italian tax credit arisen in
connection with R&D costs.
d) Deferred tax assets and liabilities
The incremental depreciation of the fair value step-up for IFRS purposes will result in a pre-tax
income that is lower for IFRS purposes than for tax purposes. Consequently, a deferred tax
liability of €98.4 million has been recognized to reflect the fact that cash taxes payable will be
higher than the tax charge reported in the income statement under IFRS.
e) Other assets and liabilities
The remaining assets and liabilities, including items such as cash and trade payables were stated
at their historical carrying values, which approximate fair value, given the short-term nature of
these assets and liabilities.
The excess of the purchase price over the preliminary amounts allocated to identifiable assets and
liabilities is equal to €348.5 million and has been included in goodwill. This amount represents,
amongst other things, the value of the Company’s market position, reputation, as well as the value
of the Company’s workforce. The goodwill has been provisionally allocated to Vending, Ho.re.Ca
and OCS Cash Generating Units, given that these which benefit from the synergies permitted by the
acquisition which generated the same (see Note 13).
Effect of Purchase price allocation on the income statement
The table below reflects the impact of the PPA on the income statement.
46
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
(€ thousands)
Incl. Impact PPA Impact PPAExcl. Impact
PPA
Revenue from Sales 220,154 220,154
Cost of sales (130,904) (130,904)
Gross profit 89,250 - 89,250
Sales & Marketing (20,053) (20,053)
Logistic (4,613) (4,613)
Administrations (8,418) (8,418)
Operating Exchange Difference 745 745
Total operating costs (32,338) - (32,338)
Adjusted EBITDA 56,911 - 56,911
Depreciation (5,643) (5,643)
Amortisation (29,200) (27,991) (1,209)
Operating profit before exceptional items 22,068 (27,991) 50,059
Inventory revaluation (23,392) (23,392) -
Brazilian Operating Exchange Difference 1,516 1,516
Restructure costs (301) (301)
Other expenses (6,574) (6,574)
Operating profit (6,684) (51,384) 44,699
Finance Income 288 288
Finance costs (31,718) (31,718)
Net finance expenses (31,430) - (31,430)
Profit/(Loss) before income tax (38,114) (51,384) 13,269
Income tax expense 10,593 14,588 (3,995)
Profit/(Loss) for the period (27,521) (36,795) 9,274
(a)
(b)
(c)
Period from
March 22, 2016
to December 31,
2016
Period from
March 22, 2016
to December
31, 2016
Period from
March 22, 2016
to December
31, 2016
Successor
(a)
Successor
(b)
Successor
(c)
Consolidated results of N&W Group as from March 22, 2016. This column excludes the impact of the
purchase price alllocation.
Consolidated results of N&W Group as from March 22, 2016. This column reflects the impact of the purchase
price alllocation and corresponds to the profit/loss for the period as reported in the consolidated financial
statement.
This column reflects the impact of the purchase price alllocation on the consolidated financial statement.
47
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 5. Revenue
The breakdown of sales by product line is as follows:
2016
Hot and Cold (H&C) 95,031 Hotel, Restaurant and Cafeteria (Horeca) 17,548 Liquid 12,574 Snack and Food (S&F) 36,484 Can and Bottle 2,259 Office Coffee Service (OCS) 8,361 Accessories 10,628 Spare parts 37,269 Total Revenues from sales 220,154
Around 17% of revenues are generated by invoicing in currencies other than the Euro.
There have been no sales made to related parties during the nine months period.
Note 6. Segment information
The Executive committee is the Group’s chief operating decision-maker (“CODM”). Management
has determined the operating segment based on the information reviewed by the Executive
committee for the purposes of allocating resources and assessing performance.
The CODM considers the Group as a single segment. The Group produces machinery of different
size but the industrial process, risks and supply chain are the same for all types of machinery. In
addition, the information reviewed by the CODM only shows revenue by different products. In
consideration of structure of reporting, the process of allocating resources and activity of Group the
CODM has identified one segment (i.e. N&W Group).
The following table presents revenue information on a geographic basis:
2016
Italy 69,033 France 28,882 Spain 16,307 UK 8,398
Germany 10,664 Nordic countries 14,239 Rest of Europe 31,567 Eastern Europe 9,877 Rest of World 32,187
Total Revenues from sales 220,154
48
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
2016 revenues from sales have been caracterised by the very good performance of small-medium
customers more than offset by downturn of major key accounts. Western European countries
(composed by Italy, France, Spain, UK, Germany and Nordic countries) registered an overall
performance slightly better than previous year mainly thanks to the good results in Nordic countries
and Germany only partially offset by the downturn in UK due to the underperformance of some big
customers. Also in Rest of Europe the shortfall of revenues is attributable to the downturn of a
couple of big players.
Very good performances in Eastern Europe and in other emerging markets thanks to Czech
Republic, Romania, Baltics and Poland together with Asia&Pacific, North America and Africa
respectively.
Included in revenues arising from nine months period in 2016 of Euro 220.2 million are revenues of
approximately Euro 23.3 million which arose from sales to the N&W Group’s largest customer. No
other single customer contributed 10% or more to the Group’s revenue during 2016.
A reconciliation of Adjusted EBITDA to loss for the period is provided as follow:
31 December
2016
Loss for the period (27,521) Income taxes (10,593) EBT (38,114) Net Financial Expense 31,430 EBIT (6,684) * Depreciation 5,643 * Amortisation 29,200 Reorganisation and other costs 6,876 Exchange Difference on BRL (1,516) Inventory Revaluation as per PPA 23,392 Adjusted EBITDA 56,911
*Depreciation and amortization are included in Cost of Sales of consolidated accounts and are
impacted by the amortization of Intangible assets arisen by Purchase Price Allocation (Euro
27,991).
Note 7. Cost of Sales
The cost of sales indicated in the income statement is made up as follows:
1 April-
31 December 2016 Cost of sales (130,904) Amortisation and depreciation of intangible and tangible
fixed assets (34,844)
Reversal of Inventory Revaluation (see below) (23,392)
Total Cost of sales (189,140)
49
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
During the period, the amortisation and depreciation relating to intangible assets and tangible fixed
assets was respectively expensed in Cost of Sales.
2016 Cost of Sales has been heavily impacted by the amortization of the Intangibles arisen by the
Purchase Price Allocation (Euro 27,991) together with the reversal of the inventory revaluation
occurred on acquisition date.
The manufacturing profit considered as part of the fair value assigned to the N&W inventory at the
acquisition date led to a stock revaluation of Euro 23.4 million. This amount has been totally
reversed to Profit and Loss during the year when the goods have been sold.
The above fair value of the finished goods and merchandise has been evaluated deducting from the
selling price the costs of disposal: commissions, inventory stocking costs and distribution costs.
Note 8. Reorganisation costs
The income statement for 2016 includes Euro 301 as lay off costs relating to the reduction of the
employees in N&W Group companies.
Note 9. Other costs
The amount of Euro 6,574 indicated in the item “Other costs” in 2016 income statement includes:
Euro 2,415 as costs related to Nighthawk Project connected with the sale of the Group, Euro 1.543
as costs for the accomplishment of specific projects of a non-recurrent nature, Euro 641 as charges
accrued by Italian legal entities for CIGO (“Cassa Integrazione Guadagni Ordinaria”, a Social
Security contract) for the application of short time working procedure, Euro 335 as occasional
advisory services, Euro 1,508 as costs related to the write-down of the financial receivable
outstanding with VE Global Solutions LLC and Euro 96 as costs related to the Profit Partecipation
Loan of some managers (see Note 21). The remaining Euro 36 are other minor various costs.
Note 10. Net financial expense
31 December
2016
Financial income 288
Financial expenses (31,718)
NET FINANCIAL EXPENSE (31,430)
The financial income recorded in the income statement is analysed in the table presented below:
31 December
2016
Bank interests 138
Interests on VE Global Solutions LLC Loan 150
TOTAL 288
50
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The financial expenses recorded in the income statement is analysed in the table presented below:
31 December
2016
Bridge Loan Interests (15,154)
Bridge Commitment and Funding fees (8,000)
Revolving Facility interests and commitment fees (581)
Revolving Facility non cash interests – financing fees (115)
Senior Secured Notes interests (4,433)
Second Lien Notes interests (2,217)
Senior&Second Lien Notes financing fees amortisation (279)
Bank charges and other (1,259)
Exchange gains/(losses) 319
TOTAL (31,718)
For the nine months period financial costs mainly include: i) interests on the Bridge Facility of Euro
400 million drawn on 22nd
March to finance the acquisition and repaid on 15th
October at the time
of Bond issuance; ii) Euro 8,000 of commitment and Funding fees paid in order to obtain the Bridge
Facility; iii) Interests on the Secured and Second Lien Notes from 15th
October till 31st December
2016; iv) Interests and commitment fees on the Revolving Facility drawn down at the acquisition
date for Euro 10,815 on a total of Euro 40,000 available.
Note 11. Taxes
Taxes receivables
31 December
2016
Income tax receivables 2,552
VAT receivables 3,822 Other tax receivables 2,009
8,384
Income tax receivables mainly refer to net advances of IRES and IRAP (regional business tax)
effected by Italian legal entities to Italian tax authority by the Danish subsidiary.
VAT receivables represent all the VAT credits in the various countries of the companies belonging
to the Group.
Other tax receivables mainly include advances made by the Brazilian company for some local taxes
as well as tax credit for IRES reimbursement related to IRAP deduction on employees costs as per
51
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Italian D.L. 201/2011 (Euro 632) and Italian tax credit for investment in capital equipment and
property as per D.L. 91/2014 (Euro 102).
Taxes payables (current and non current)
31 December
2016 Income taxes payables 2,782
VAT payables 2,132
Italian tax audit - short term portion 2,874
Italian tax audit - long term portion 6,466
14,695
Income tax payables are essentially made up of income taxes owed by the Danish subsidiary.
VAT payables represent all the VAT debts in the various countries of the companies belonging to
the Group.
Euro 9,340 refer to the oustanding amount related to tax losses settled on May 26, 2016. On the
basis of installments’ plan agreed, Euro 2,874 will be due by the Company to the Italian Tax
Authority by 31 December 2017 and Euro 6,466 on a quarterly basis by 31 December 2020.
The reconciliation between the 27.5% rate in force in the country of the Italian parent company and
the effective tax liability of the group is presented below:
31 December
2016
Loss before taxes (38,114)
Tax calculated at the rate of the parent company (27.5%) 10,481
Effect of different tax rate regimes 5,452
IRAP (regional business tax) (883)
N&W Global Vending S.p.A. non-deductible interest (4,969)
Parent Notional Interest Deduction (ACE) 2,856
Permanent differences (1,573)
Other (771)
Taxes in the income statement 10,593
The above reconciliation is determined by applying the tax rate of the parent company.
The IRAP is not considered in the reconciliation since it presents a different taxable base with
respect to the income taxes.
The income taxes are made up as per the table presented below:
52
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
31 December
2016
Current income taxes (2,091) Deferred income taxes 12,684
10,593
The deferred tax assets are analysed in the table presented below:
31 December 2016
Inventory obsolescence allowance 794
Technical assistance provision (warranty provision) 568
Other provisions 1,228
Provision for doubtful receivables 1,674 Provision for other risks 429
Long-term investments 189
Intangible and tangible fixed assets 12,675
Prior losses recognised 836 Market value of derivatives/forward contracts 68
TOTAL 18,461
The deferred tax liabilities are analysed in the table presented below:
31 December
2016 PPA impact (82,303)
Amortisation of goodwill (4,023)
Amortisation/depreciation (875)
Exchange gains (703) Other (112)
TOTAL 88,016
After all the appropriate offsettings in the statement of financial position, the following amounts are
indicated:
31 December
2016
Deferred tax assets 18,461 Deferred tax liabilities (88,016)
(69,555)
The deferred tax assets exposed above have been recognised based on probable results that will be
available at the moment when temporary differences will reverse.
The deferred tax assets recognised on prior tax losses present the following maturities:
53
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Maturity date 31 December
2016
Indefinite life 836
Some group companies have not recorded deferred tax assets on the prior losses given the
uncertainty of the recovery by means of offsetting with the tax profits that it is envisaged will be
generated over the mid-term.
The fiscal impact of the prior losses not recognised at 31 December 2016 amounts to Euro 583 and
has an indefinite life.
Note 12. Comprehensive income components
The comprehensive income components include changes in translation reserve on currency
transactions for Euro (1,383), hedge accounting of financial instruments for Euro (757) and Euro
(432) for the actuarial loss on personnel provision according to IAS 19.
Note 13. Intangible assets
Goodwill Internally
generated
Research &
Development
Assets
Trademarks
Customer
list
Patents Internally
generated
software
Other
intangible
assets
Total
Historical cost
Business combination 348,451 - 122,111 109,302 73,505 18,066 20,093 691,528
Increases - 5,240 - - - - 1,047 6,287
Exchange rate impact (53) 47 - - - - (17) (23)
Disposals - - - - - - (5) (5)
31 December 2016 348,398 5,287 122,111 109,302 73,505 18,066 21.118 697,787
Accumulated
amortisation and
impairment
Business combination - - - - - - 18,920 18,920
Amortisation for the
period - 431 6,106 13,663 5,513 2,710 777 29,200
Exchange rate impact - 35 - - - - (14) 21
Disposals - - - - - - (5) (5)
31 December 2016 - 466 6,106 13,663 5,513 2,710 19,678 48,136
Net book value -
31 December 2016
348,398 4,821 116,005 95,639 67,992 15,356 1,439 649,650
54
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Goodwill
As descirbed in Note 4.1. “Impact of Purchase Price Allocation”, the Goodwill arising from
business combination amount to Euro 348.5 million and represents, amongst other things, the value
of the Company’s market position and reputation, as well as the value of the Company’s workforce.
Goodwill is not amortized, but tested for impairment annually, as well as whenever there are events
or changes in circumstances (triggering events) which suggest that the carrying amount may not be
recoverable. Goodwill is carried at cost less accumulated impairment losses.
The goodwill impairment test is performed at the level of a cash-generating unit which benefit from
the synergies permitted by the Acquisition which generated the same.
The goodwill has been provisionally allocated to the following Cash Generating Units:
Vending,
Ho.Re.Ca and
OCS,
given that these three divisions are expected to benefit most from the sinergies of the Acquisition.
Acquisition
date
31 December
2016
VENDING 280,687 280,644
HORECA 60,150 60,141
OCS 7,614 7,613
Goodwill 348,451 348,398
Net Assets
Allocated
goodwill
Net assets after
allocation of
Goodwill
VENDING 171,487 280,644 452,132 HORECA 59,996 60,141 120,137
OCS 5,612 7,613 13,225
Total 237,095 348,398 585,493
Any adjustment to such provisional values will be recognized within twelve months of the
Acquisition Date. Starting from next year, when the goodwill is definitely allocated to the above
mentioned CGUs, the Group will perform impairment at least annually, or more frequently
whenever there will be an indication that the Goodwill might be impaired.
Internally generated Development assets
55
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Also during 2016 N&W made great efforts in innovation and development of new products and
technology solutions with research and development activity continuing to be intense. Some
projects were completed during the year bringing new models of machines on the market.
Regarding Vending line of business, major investments referred to i) a new version of S&F Necta
branded machine providing also fresh products and suitable for semi public locations; ii) two
projects for touch screen machines whose launch on the market is expected during 2017 for H&C
segment; iii) the development of a new module that will be joined to Canto touch machine for
dispensing glasses lids still for H&C segment.
On Ho.Re.Ca side the restyling of two models with the aim of renewing their aesthetic is the
starting base for a process of harmonization of the design of all models in the range.
On SGL brand side most of the Research and Development costs were dedicated to Fancy, a new
compact machine suitable for many kind of capsules and to the new Trophy, a machine with Keurig
capsules properly set up for the US market.
Note 14. Property, plant and equipment
Property
and plant
Equipment Construction
in progress Advance
payments
Total
Historical cost
Business combination 35,132 114,866 8 261 150,267 Increases 493 3,433 374 453 4,753 Exchange rate impact (163) 4 - - (159) Disposals (40) (1,129) - - (1,169) Reclassifications 208 (100) (4) (104) -
31 December 2016 35,630 117,074 378 610 153,692
Accumulated
depreciation
Business combination 14,686 96,531 - - 111,217 Depreciation for the
period 685 4,958 - - 5,643
Exchange rate impact (97) (5) - - (102) Disposals (14) (1,066) - - (1,080) Reclassifications 162 (162) - - -
31 December 2016 15,422 100,256 - - 115,678
Net book value - 31 December 2016
20,208 16,818 378 610 38,014
Investments made during 2016 are related to the purchase of equipment for the production of new
automatic vending models branded Necta and Wittenborg located in Mozzo, Valbrembo and
56
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Mapello production sites. They mainly include moulds for the construction of the new machines
launched during the year.
Other investiments concerned plant work stations ergonomics aiming at improving safety at
workplace and other projects to reduce product costs and improve efficiency.
Note 15. Available-for-sale investments
31 December 2016
Other investments 6
Euro 6 refers to the participation in the R&D consortium “Kilometro Rosso” which supports the
Group in research activities.
Note 16. Receivables and other non-current assets
Euro 1,887 mainly refers to the “US Loan Note” for Euro 1,408 granted to Vendors Exchange
Global Solutions LLC and guarantee deposits for Euro 327.
Note 17. Cash and cash equivalents
Cash and cash equivalents are as follows:
31 December
2016 Cash and cash equivalents 51,089
The above funds, represented by cash at banks and on hand at the period end date, are not subject to
any type of restriction except for Euro 1,000 deriving from N&W Holding S.à r.l. and placed in an
escrow account not to be utilized according to the Agreement set at the Acquisition date.
Note 18. Trade receivables
31 December
2016 Trade receivables 74,531 Less: Allowance for doubtful receivables (8,475) Net trade receivables, short-term 66,056
The average collection period from customers is around 79 days.
The concentration of the credit risk is limited thanks to the high number of customers of the Group
who are located in various nations and with varied end markets.
57
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Based on the Group’s past experience with regard to management of trade receivables, it is deemed
that the amount recorded in the financial statements corresponds to the real recoverable value of the
receivables obtained by means of the provision of a specific allowance for doubtful receivables.
The changes in the allowance for doubtful receivables during 2016 follow:
2016
Business combination 7,930
Exchange rate impact 580
Increases 807
Decreases (842)
Closing balance 8,475
The fair value of the trade receivables corresponds to the value of the trade receivables net of the
allowance for doubtful receivables.
Please see Note 31 “Financial risk management” for further details.
Note 19. Inventories
31 December
2016 Raw Materials and Work in progress 10,213 Less: obsolescence provision (617) Raw Materials and Work in progress, net 9,596 Finished products 33,323 Less: finished products obsolescence allowance (3,496) Finished products, net 29,827
Closing inventories, net 39,423
The performance of the inventories reflects the constant monitoring activities on the level of the
stock together with the action for containing the warehousing costs.
The obsolescence provision has been calculated on slow-moving inventories.
Raw materials
and work in
progress
Finished products
Total
Business combination 670 3,730 4,400
Exchange rate impact - 15 15
Increases 78 279 357
Decreases (131) (528) (659)
Closing balance 617 3,496 4,113
58
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 20. Other receivables
31 December 2016
Prepaid insurance premium 1,143
Prepaid maintenance and service contract fees 686
Prepaid rent 512
Advances to suppliers 401
“Cigo-Solidarietà” receivables 263
Credit notes to be received 124
Short-term deposits 32
Other receivables and prepaid expenses 545
3,706
Prepaid insurance premium refers to Company's Warranty and Indemnity Insurance Policy entered
by LSF9 Canto Investment S.p.A. on 3 December 2015.
“Cigo-Solidarietà” receivables refer to the credit that N&W Global Vending S.p.A. and SGL Italia
S.r.l. have with the Social Security Body for “Solidarity and CIGO Contract”.
Note 21. Shareholders’ Equity
Share capital
The issued and authorised share capital comprises 41,138,297 issued shares with a par value of
Euro 1 each. All shares are issued, authorised and fully-paid at 31 December 2016.
Profit Partecipation Loan
Following the Acquisition, on 22nd
March 2016 executive and senior employees of the Company
decided to participate to the investment by acquiring Profit Participation Loans (PPLs) for an
amount of Euro 1,665.
Such PPLs foresee a special remuneration linked to an IRR (Internal Rate of Return) of at least 10%
realized by Lone Star Fund IX in respect of its initial investments in the N&W Group and economic
and financial performance.
The fair value of the PPLs has been estimated at Euro 615 based on Monte Carlo valuation method.
The Company recognised an amount of Euro 96 through the consolidated income statement for the
period 22nd
March till 31st December 2016 according to the estimated 5 years maturity period with a
corresponding credit to equity as the Company has no obligation to settle the liability arising from
the PPL arrangement.
Other reserves
The “Other reserves” under shareholders’ equity include:
59
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
- Euro 4,212 as Share Premium;
- Euro 1,500 as Revaluation Reserves;
- Euro 210,854 as statutory and other reserves.
Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative effective portion of gains and losses
arising on changes in fair value of forward foreign exchange hedging instruments entered into.
The underlying table indicates the changes relating to the hedging reserve:
2016 Hedge
accounting reserve
Business combination 211
- profits and losses on hedged cash flows transiting the
income statement (211)
- profits and losses on cash flow hedging instruments (757) - tax effect on profits and losses on cash flow hedging
instruments 182
Closing balance (575)
Foreign currency translation reserve
Exchange differences relating to the translation of the results and net assets of the Group’s foreign
operations from their functional currencies to the Group’s presentation currency are recognised
directly in other comprehensive income and accumulated in the translation reserve.
Note 22. Financial instruments
Market value of the derivatives
The table below shows the market value of the derivatives of the Group:
31 December
2016
Currency hedging agreements (575)
As specified previously, the portion of profit or loss on the hedging instruments which is considered
to be effective is recognised directly under shareholders’ equity while the ineffective portion of the
profits and losses must be directly recognised in the income statement; the amounts classified under
shareholders’ equity are released to the income statement in the period in which the envisaged cash
flows are realised.
60
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 23. Financial Indebtness
31 December
2016
Non current portion 391,713
Senior Secured Notes – 300ml 300,000 Second Lien Notes – 100ml 100,000
Capitalised financing fees (8,287)
Current portion 16,025 Senior Secured Notes interests 4,433 Second Lien Notes interests 2,217
Revolving Credit Facility – capital 10,815
Revolving Credit Facility – interests and commitment
fees 18
Capitalised financing fees (1,460)
Bank overdraft 2
Total Financial Indebtness 407,738
The financial indebtness of N&W Group at December 31st, 2016 consists of the Senior Secured and
Second Lien notes (issued in October 2016, see below) together with the Revolving Credit Facility
drawn at the time of the Acquisition (see below).
The current portion of the financial indebtnebss relates to: i) accrued interest payable of Senior and
Second Lien notes at the next interest payment dates and the portion of the capitalized financing fee
that will be amortized into profit or loss over the next 12 months; ii) the reimbursement of Euro
10,815 of the Revolving Credit Facility to be done on 22nd
March 2017 with the related interests.
N&W Group will keep the commitment to drew amounts in the future when needed.
Revolving Credit Facility
On 18th
January 2016 the Company entered into a Super Senior Revolving Agreement for total
facility commitments of € 40,000. The termination date of this facility is 22 March 2022.
The amounts drawn under the revolving credit facility may be used to finance the general corporate
and working capital needs of the Group including capital expenditure, any permitted acquisitions,
investment or distribution, operational restructurings or permitted reorganizations.
Subject to the terms of this Agreement the Lenders under the Initial Facility make available a
multicurrency revolving credit facility which is equal to the total facility commitments.
Under the revolving credit facility, a lender may make available an ancillary facility, such as an
overdraft facility, a guarantee, a short-term facility, a foreign exchange facility, a credit card
facility, a derivative facility, an automated payments facility, any other facility or accommodation
required in connection with the business agreed by the Company with an Ancillary Lender.
61
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
As of December 31, 2016 the amount of the revolving facility drawn down is equal to € 10,815; the
accrued interests are settled on a quarterly basis, in this case the maturity date for the payment of
the related accrued interests is 22 March 2017 as well as the fully reimbursment of the credit
facility.
The rate applied for the calculation of the accrued interests is given by Euribor (if positive) plus a
margin of 3.5% per annum.
Senior and Second Lien Notes
On 14th
October 2016, the Company issued:
- a Senior Secured Notes for Euro 300 million carrying a fixed interest rate of 7% per annum
and due on 15th
October 2023;
- and a Second Lien Notes for Euro 100 million amount carrying a fixed interest rate of
10.5% per annum and due on 15th
April 2023;
The Interests on the Notes are payable semi-annually in arrears on April 15 and October 15 of each
year, commencing on April 15, 2017.
Costs related to the issuance of the Notes are capitalized and amortized into profit or loss over the
term of the debt in accordance with the effective interest method. Total costs capitalized amounted
to Euro 9.2 million, of which Euro 8.9 million remain capitalized as of December 31, 2016.
With the issuance of the Notes N&W extinguished the Bridge Facility of Euro 400 million drawn
down at the time of the acquisition.
LSF9 Canto Midco DAC (the “Parent”) and N&W Global Vending S.p.A. (the “Company”)
provided security and guarantees in support of the Notes.
62
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Name of Security
Provider Transaction Security Document
Parent Security over shares in the Company Company Assignment of all its rights and interests in and related to the Acquisition
Agreement Company Assignment of all its rights and interests in and related to the Tax Settlement
Equity Contribution Letter Company Assignment of all its rights and interests in and related to the Existing
Intercompany Debt Company Assignment of all rights and interests in and related to an intercompany loan
agreement dated 14 November 2008 between the Company as lender and
N&W Global Vending Spain S.L.U. as borrower Company Assignment of receivables, including insurance receivables Company Special privilege (privilegio speciale) Company Security over bank accounts Company Special privilege (privilegio speciale) Company Security over Necta trademarks Company Security over shares in Sgl Italia S.r.l. Company Security over shares in Fridge France SAS Company Security over shares in N&W Global Vending Limited Company Security over shares in N&W Global Vending GmbH Company Security over shares in N&W Global Vending S.L.U. Company Security over shares in N&W Denmark ApS
The following subsidiaries of N&W Global Vending S.p.A. provided security and guarantees in
support of the notes:
N&W Global Vending Limited;
SGL Italia S.r.l.;
N&W Denmark ApS and Wittenborg ApS; and
Fridge France SAS.
Obligor Governing
law Details of Security
SGL Italia S.r.l. Italian Assignment of receivables, including insurance receivables N&W Global
Vending Limited English Fixed and floating charge over several receivables and assets
SGL Italia S.r.l. Italian Security over Intellectual Property, if any Wittenborg ApS English Security over English and European Intellectual Property Wittenborg ApS Danish Security over Danish Intellectual Property Wittenborg ApS Danish Security over bank accounts
Wittenborg ApS Danish Security over receivables, including insurance and
intercompany receivables N&W Denmark ApS Danish Security over shares in Wittenborg ApS Fridge France SAS French Security over shares in N&W Global Vending SAS SGL Italia S.r.l. Italian Security over bank accounts
63
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The collateral also secures the Revolving Credit Facility on an equal and ratable basis. Under the
terms of the Intercreditor Agreement, in the event of enforcement of the security over the collateral,
holders of the Senior Secured Notes will receive proceeds from the enforcement of the collateral
only after indebtedness in respect of the Revolving Credit Facility and certain hedging obligations
have been repaid in full. Any such proceeds will, after all obligations under the Revolving Credit
Facility and such hedging obligations have been repaid from such recoveries, be applied pro rata in
repayment of all obligations under the Indenture and any other obligations that are permitted to be
secured over the Collateral under the Indenture on an equal and ratable basis.
Note 24. Provision for post employment benefits
31 December
2016
Employee leaving indemnity 9,938 Italian Agents’ provision (ISC) 2,087
Other (Germany and Austria) 333
12,358
The item “Employee leaving indemnity” relates to the Italian companies and is recorded in
compliance with the actuarial techniques envisaged by IAS 19 “Employee Benefits”.
These actuarial simulations were made in accordance with the method of the benefits accrued using
the projected unit credit method envisaged, establishing:
- the cost relating to the service already provided by the workers (Past Service Liability);
- the cost relating to the service provided by the workers during the year (Service Cost);
- the cost relating to the interest expense deriving from the actuarial liability (Interest Cost);
- the actuarial profit/loss relating to the valuation period considered (Actuarial (gain)/loss).
The main actuarial hypotheses used for the valuation are as follows:
2016
Annual discount rate 1,31% Annual leaving indemnity increase rate 2,63% Annual inflation rate 1,50%
The changes in the provision for employee leaving indemnity are illustrated below:
2016
Business combination 9,700 Additional provision (recognised in profit or loss) 575 Used during the year (337)
Closing balance 9,938
64
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 25. Provision for risks and charges
The risk provisions comprise contingent liabilities relating to staff, suppliers, and customers with
regard to various problems.
The change in the main risk provisions is analysed in the following table:
Customer
bonuses Financial
guarantees WEEE
Others
Total
Business combination 417 601 2,476 410 3,904
Provisions 9 13 18 478 518
Reclassification (44) - - 44 -
Uses/Releases (53) (253) (941) (202) (1,449)
31 December 2016 329 361 1,553 730 2,973
The “Customer bonuses” provision mainly refers to the acknowledgement to key customers of
discounts which have a certain degree of uncertainty with regard to their future manifestation since
they are linked to the achievement of sales volumes in subsequent year.
The “Financial Guarantees” provision covers the risks which may arise from the guarantees given
to third parties further to leasing or factoring agreements entered into by these companies with the
N&W end customer. It reflects the amount of the risk deriving from the granting of a corporate
guarantee in favour of UBI Factor S.p.A. and UBI Leasing S.p.A. for leasing and loan agreements
entered into by the latter in previous years with third party customers on goods we produce when
the company is liable jointly and severally with the end customer.
The “WEEE” provision (Waste Electrical and Electronic Equipment) refers to the EU Directive
2002/96/EC and 2003/108/EC. The purpose of this directive is to reduce the amount of scrap
machinery sent for disposal to landfill, scrapping or incineration, by requiring manufacturers to
arrange for collection and recycling and therefore encouraging them to design and produce
machines that facilitate repair, re-use, disassembly and recycling. In this way, the same
manufacturers are provided with an incentive to design and produce machinery which is easy to
repair, re-usables, strippable and recycable.
At the end of the year, the amount of the provision was adjusted on the basis of the estimated useful
life of the machine fleet in circulation which could reasonably be subject to disposal in future years.
The adjustment also takes into account the extension of the period of use of the vending machines
due to their overhaul, a practice which has been observed over the last few years.
For the purpose of calculating the discounting back of the provision in question, was considered the
period of standard useful life for the type of individual model.
65
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The “Others” provision includes mainly: Euro 242 accrued in SGL Italia S.r.l. to cover the
potential liability arising from a tax audit carried out during 2016 by the tax authority, covering
2011 and 2012 fiscal years; Euro 178 accrual for litigious cases and other minor provisions.
Note 26. Warranty and reorganisation provisions
Warranty Provision
Reorganisation
Provision Total
Business combination 3,885 317 4,022 Provisions 1,106 - 1,106 Exchange rate impact (5) - (5) Utilised (1,607) - (1,607) 31 December 2016 3,379 317 3,696
Warranty Provision
As far as Warranty Provision concerns, at 31 December 2016 N&W Group reviewed this provision
and adjusted it in order to reflect the current best estimate, taking into account risks and
uncertainties, particularly in respect to the new products launched during the year on the market.
The provision will cover the estimated costs of future technical assistance actions on products sold.
The hypothesised measures mainly relate to potential defects of an epidemic nature which require
recalls with replacement of parts and technical measures. Also in consideration of the impacts
arising in the past relating to the various problems, the amount set aside is deemed sufficient to
cover the risk that will probably manifest between 2017 and 2019.
Reorganisation Provision
Euro 317 refer to the claim still pending with Incentive A/S, the previous owner of Wittenborg
Group.
Note 27. Trade payables
31 December
2016 Payables to suppliers 64,953
The average payment period of the suppliers is around 132 day; no interest on payables to suppliers
is owed. The group handles the liquidity to allow that all the payables to be paid on their due date.
The entire total of the payables to suppliers refers to trade payables.
66
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 28. Other payables
31 December 2016
Payables to tax authority 19,761
Payables to employees and agents 19,468 Customers rebates 9,751
Payables to N&W Holding S.à r.l. 1,000
Transaction costs 2,277
Accrued expenses 419
Consulting 416
Other 299
TOTAL 53,391
On May 26th
, 2016, a Tax Settlement has been reached by the Company with the Italian Tax
Authority relating tax assessments regarding withholding taxes, tax losses, interest deduction and
other minor tax issues for fiscal years from 2005 to 2013 (see note 4).
Euro 19,761 refer to the oustanding amount of withholding taxes assessed with tax authorities.
On the basis of installments’ plan agreed, Euro 6,080 will be due by the Company to the Italian Tax
Authority by 31 December 2017 and Euro 13,681 on a quarterly basis by 31 December 2020.
Euro 1,000 refer to the residual portion of the purchase price to be paid to N&W Holding S.à r.l.,
the previous owner of N&W Group, to be due within 48 months from the acquisition date and now
placed in a bank escrow account (see note 17).
Note 29. Derivative financial instruments (liabilities)
31 December 2016
Currency hedging contract 473
The liabilities deriving from derivative instruments comprise the market value of the forward
contracts in USD and GBP entered into to hedge future currency transactions (see Note 22).
The following table presents the Group’s financial assets and liabilities that are measured at fair
value at 31 December 2016:
At 31 December 2016 Level 1 Level 2 Level 3 Total
Assets
Available-for-sale investments - - 6 6
Total Assets - - 6 6
Liabilities
Foreign currency forward contracts - (473) - (473)
Total Liabilities - (473) - (473)
67
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Note 30. Commitments for leasing agreements
The future payments for leasing commitments which cannot be cancelled are as follows:
31 December
2016 Within 12 months 4,131
Between 1 and 5 years 8,081
Beyond 5 years 448
These commitments mainly refer to the leasing of offices, warehouses, office equipment and
vehicles.
Note 31. Financial risk management
Risks associated with the general condition of the economy
The economic, equity and financial situation may be influenced by various factors which make up
the macro-economic scenario - including increases and decreases in gross domestic product, the
level of consumer and business confidence, changes in interest rates for consumer credit and for
businesses, energy costs, the cost of commodities and other raw materials - in the various countries
in which the Group operates.
The difficulties of the financial markets or the continuation of the economic recession may
negatively influence the industrial growth of many businesses, including those of the Group.
In Europe, despite the measures adopted by many Governments, national and international
organisations and by the monetary authorities, for the purpose of providing financial support to the
member nations of the European Community in economic difficulties and dealing with the
possibility of default of the sovereign debts of certain European countries, doubts remain with
regard to the weight of the debts of some countries in the Eurozone and their ability to meet the
future financial commitments, the overall stability of the Euro and the sustainability of the Euro as a
single currency (or, in more extreme circumstances, the possibility of termination of said Euro), in
the presence of diverse economic and political contexts among the member countries of the
Eurozone.
These potential developments could have a negative impact on the business and the activities of the
Group. Even if the Group considers the suppression of the Euro and break-up of the European
Monetary Union to be a highly improbable scenario, and even if the diversified product portfolio
and the international presence mitigate the dependence on a single market and the exposure to
unstable economic and political conditions in a country or in a region, in any event its business is
sensitive to changes in the economic conditions.
68
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Therefore, the current global financial and credit crisis, as well as the failure of the financial bailout
methods, both European and international, could have a negative impact on the business prospects,
the economic results and the financial situation of the Group.
Partly thanks to its peculiar shareholding structure, the Group has implemented a well-tested
mechanism for monitoring both the financial risks and those of another type, aimed at preventing
potential negative effects on the company equity and the implementation of the measures necessary
to contain the same.
An accurate analysis of the individual types of risk will be presented below, with regard to quality
and quantity.
Categories of financial instruments
Financial assets 31 December
2016
Loans and receivables (including cash and cash equivalents)
Cash and cash equivalents 50,089
Receivables from customers, net 66,056
Other receivables and current assets 3,836
Receivables and other non-current assets 1,887
Available-for-sale investments 6
Financial liabilities 31 December
2016
Derivative instruments designated as hedging (Hedge Accounting)
Forward currency contracts 473
Loans and payables
Trade payables 64,953
Payables to leasing companies 51
Financial liabilities at amortised cost
Senior Secured and Second Lien Notes 391,125
Revolving credit facility 9,943
Financial guarantees 361
69
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The underlying table summarises the net gains and losses which arise from the afore-mentioned
financial instruments.
31 December
2016
Net gains and losses generated by:
Loan to US VE Global Solutions LLC 201
Trade receivables (807)
Objectives of the financial risk management
The group cash management unit provides specific support services to the business, co-ordinates the
activities for accessing the capital market and the financial instrument market both at local and
international level, directly checks and handles the financial risks relating to all the transactions set
up by the Group companies.
These risks include:
a) credit risk;
b) liquidity risk;
c) market risk (including the risks linked to the exchange rates, currency and price fluctuations).
The Company tries to minimise the effects of these risks by resorting to derivative financial
instruments. The use of these instruments is governed by the cash management policies approved
by the directors and officers which propose the basic principles on how to more fully handle the
risks deriving from the exchange rate effect, the interest rates, the use of the derivative instruments
and the aims for the investment of the surplus liquidity. Compliance with said policies is regularly
checked and the company does not enter into contracts for financial instruments with speculative
purposes.
a) Credit risk
The credit risk is understood to be the risk that a third party debtor is unable to meet their obligation
with a consequent financial loss for the Group.
The credit risk with regard to the receivables from customers can consider itself to be of a limited
extent thanks to the high number of Group customers, which are spread throughout the world, cover
the production and vending market and manage a variety of end markets. Based on the past
experience of the Group in the management of the credit, management believes that no further
credit risk needs to be reflected in the financial statements.
With regard to the balance of receivables from customers at year-end, Euro 4,911 is owed by
VEGS, Euro 4,065 is owed by Selecta Group, Euro 3,733 by Pelican Rouge Group and Euro 2,345
70
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
by Smucker, the leading Group customers. Other customers which individually represent more than
3% of the total balance of trade receivables do not exist.
The market value of the trade receivables is close to the net nominal value of the same.
The breakdown of the customer payment schedule is as follows:
2016 Falling due Past due
0 - 90 90 - 180 180 - 360 over 360
Italy 18,838 361 26 - -
EU 23,993 4,714 490 190 635
Outside EU 11,359 3,158 761 1,541 75
TOTAL 54,190 8,233 1,277 1,731 710
The receivables in the above table are net of the bad debt provision.
The changes in the allowance for doubtful receivables were as follows:
1 April 2016 Exchange
difference Provision Utilisation 31 December
2016
Allowance
for doubtful
receivables
7,930 581 807 (842) 8,476
b) Liquidity risk
The Group has put together a suitable management of the liquidity risk which involves the handling
of the liquidity and the short, medium and long-term loans.
The handling of the liquidity takes place by means of maintaining suitable reserves, credit facilities
and loans, by means of the monitoring of the current and forecast cash flows and by means of
correspondence between the maturities of the financial assets and liabilities.
At 31 December 2016, the N&W Group had unused credit facilities with banks and current account
overdrafts for a total of around Euro 560 and a Revolving facility available for a total commitment
of Euro 40,000 and drawn down for an amount of Euro 10,815.
The table below shows the contractual maturities for each non-derivative financial liability.
The table has been drawn up based on the undiscounted cash flows of the financial liabilities as
from the first reimbursement date. The table includes both the cash flows relating to the debt and
those relating to the interest as of the various due dates.
2017 Jan-June
2017 July-Dec
2018 2018 2020 2021 Beyond Total
Senior Secured - 300,000 300,000
71
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Notes - - - - - Second Lien
Notes - - - - - - 100,000 100,000 Cash interests
on Notes
(excluding
security fee/
agency fee/
commitment
fee) 15,838 15,750 31,500 31,500 31,500 31,500 57,750 215,338 Revolving
Facility 10,815 - - - - - - 10,815 Cash interests
on Revolving
Facility 95 - - - - - - 95 Bank overdraft 2 - - - - - - 2 CASH FLOW 26,750 15,750 31,500 31,500 31,500 31,500 457,750 626,250
The amount of cash flows in the following years is represented by the payment of interests for the
Secured and Second Lien Notes; only 2016 cash out is impacted by the reimbursement of Credit
Revolving Facility of Euro 10,815.
Based on the current indebtness level and on the expected cash flows, the Group will not not have
problems in meeting its financial obligations.
With regard to Trade payables, the average exposure period on the purchases is 132 days; no
interest on payables to suppliers is owed. The Group handles the liquidity to allow that all the
payables to be paid on expiry.
c) Market risk
The activities carried out mainly expose the Group to the financial risks associated with the
exchange rate and the interest rate. The Group avails itself of a series of derivative financial
instruments to handle its exposure to the interest rate risk and the exchange risk, including:
- forward currency contracts hedging the exchange risk deriving from the sales and the
purchases hypothesised at the time of the budget.
The exposures to the market risk are supported by sensitivity analysis.
The different levels of valuation method have been defined as follows:
- Level 1: are valuations derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
- Level 2: are valuations derived from inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices);
72
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
- Level 3: are valuations derived from inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
On October 18th
, 2016, Moody's Investors Service (Moody's) assigned a definitive B2 rating to the
Senior Secured Notes issued by N&W Global Vending S.p.A..
On October 3rd
, 2016, Standard & Poor's Ratings Services assigned its B rating to the Senior
Secured Notes issued by N&W Global Vending S.p.A..
d) Exchange rate risk
The N&W Group is exposed to the exchange rate risk deriving from the various foreign currency
exposures. Around 17% of the sales of the N&W Group is generated by invoicing in currencies
other than the Euro.
The Group Cash Management Unit has the aim of hedging around 80% of the short and long-term
exposures in currency using forward contracts or other derivative instruments.
During the nine months period 2016, the Group Cash Management Unit hedged:
- around 47% of exposures (sales) in 2016 in British pounds
- around 30% of exposures (sales) in 2016 in US dollars.
At Group level, the foreign currency agreements are handled, when designated for hedging, as
hedges of the future currency transactions, which represent the global “long or short” exposure in a
specific currency.
At the year-end date, the most significant net amounts in currency, known as monetary assets and
liabilities, were as follows:
31 December 2016 31 December 2016
Liabilities Assets
GBP (562) 3,001
USD (2,723) 15,450
AUD - 799
DKK (98) -
EUR (8,828) 6,124
RON (472) -
We also take into consideration the Euro, since it is a foreign currency for our branches in
Denmark.
Sensitivity Analysis on the net exposure in foreign currency
The Group is mainly exposed to the exchange rate risk on the following currencies: GBP, USD,
DKK, AUD, RON and EURO.
73
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
The sensitivity analysis discloses the income statement impact in the event of an increase or
decrease of 10% in the exchange rate of the local currency with respect to the foreign currencies.
The 10% change is that used for the purposes of the internal analysis of the rate risk and represents
management’s valuation of the reasonable and possible change in the exchange rates.
The sensitivity analysis is carried out on the foreign currency balances net of any hedges.
31 December 2016 31 December 2016
Receivables Payables
P&L Shift + 10% P&L Shift - 10% P&L Shift + 10% P&L Shift - 10%
GBP - - 37 (45)
USD (869) 1,062 179 (219)
DKK - - 6 (8)
EUR - - (196) 196
AUD (53) 64 - -
RON - - (38) 31
Forward currency contracts
The Group designates certain hedging instruments which include derivatives, embedded derivatives
in respect of foreign currency risk as either fair value hedges, cash flow hedges or hedges of net
investments in foreign operations. Hedges of foreign exchange risk commitments are accounted for
as cash flow hedges.
At the inception of the hedge relationship the entity documents the relationship between the hedging
instrument and the hedged item, along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore at the inception of the hedge and on ongoing
basis, the Group documents whether the hedging instrument is hightly effective in offsetting
changes in cash flows of the hedged item attributable to the hedged risk.
In particular the Group has entered into forward currency contracts to hedge itself against the
exchange rate risk deriving from future transactions in GBP and USD (which are designated as cash
flow hedges).
The N&W Group’s Cash Management Unit formally documents all the relationships between the
hedging instruments and the hedged transactions, as well as the objective of the risk management
and the strategy used in the various hedging transactions. This process is valid for all the derivatives
designed as hedging specific assets and liabilities, company commitments and future transactions
envisaged. The Group also formally assesses, both at the start and on an on-going basis, whether the
derivatives used in the hedging transactions are highly effective in cancelling the changes in the fair
value of the hedged items.
The following table analyses the forward currency contracts outstanding at the reporting date:
74
N&W Global Vending S.p.A. – Consolidated Financial Statements at 31 December 2016
Currency hedges 2016
Average
exchange rate Foreign
currency Euro
equivalent
value
Fair value
(Euro)
USD (sales) 1.0955 3,880 3,661 (190)
GBP (sales) 0.9028 5,000 5,539 (283)
With regard to the forward currency transactions, it should be noted that all the contracts mature
during 2017.
It should also be disclosed that the purchases and sales take place during the 2017 financial year; in
this year, the amounts included in other comprehnsive income will be released to the income
statement.
The fair value is determined using external forward curve observable on the market.
Sensitivity analysis on forward currency contracts
Forward currency contracts are measured with reference to the forward exchange rates listed on
official markets and return curves implicit in the listed interest rates corresponding to the maturities
of the contracts.
The sensitivity analysis discloses the impact on the hedging provision in the event of an increase or
decrease of 10% in the rate: the positive number shown below indicates an increase in equity when
the local currency appreciates 10% with respect to the reference currency.
In the event of a weakening of 10% in the local currency against the reference currency, an opposite
impact would be detected with regard to shareholders’ equity and the balance shown below would
be negative.
2016
2016
Impact on hedging reserve 10% increase
10% decrease
GBP (sales) 384 (469)
USD (sales) 260 (317)
Interest rate risk
Following the Acquisition and the repayment of the Senior credit facility, the amounts that we
borrow under the Revolving Credit Facility, are subject to variable interest rates, while the main
indebtness we have, that is Senior Secured Notes, carry interest at a fixed rate.
We therefore do not expect to use interest rate swaps in respect of our financing going forward.
Sensitivity analysis on the floating-rate payables
No sensitivity analysis has been carried out since at the year-end date, there were no IRS contracts
outstanding for the hedging of the rate fluctuation risk.