Consolidated financial statements

Transcription

Content
20 years ......................................................................................................................................................................5
Integrated reporting year two....................................................................................................................................6
Dear shareholders......................................................................................................................................................8
Overview.....................................................................................................................................................................11
Group highlights................................................................................................................................................11
Mission & Values...............................................................................................................................................14
Significant events in the reporting period...............................................................................................................16
MAG - Company profile and sustainability..............................................................................................................18
Company profile................................................................................................................................................18
Corporate responsibility....................................................................................................................................28
Ownership status.......................................................................................................................................................48
Development phase...................................................................................................................................................49
Social sustainability........................................................................................................................................64
Sustainable innovation......................................................................................................................................77
Annual report..............................................................................................................................................................81
Director’s report.........................................................................................................................................................84
Group performance...........................................................................................................................................84
Alternative (“NON IFRS”) performance ratios...................................................................................................90
Development of new products...........................................................................................................................97
Corporate governance disclosure ....................................................................................................................102
Events after the reporting date..........................................................................................................................105
Outlook..............................................................................................................................................................105
Proposal of the board of directors to rhe shareholders.....................................................................................106
Consolidated financial statements as at and for the year ended 30 semptember 2015 .....................................109
Consolidated financial statements...........................................................................................................................110
Statement of financial position (1/2)..................................................................................................................110
Statement of comprehensive income................................................................................................................114
Statement of cash flows....................................................................................................................................116
Statement of changes in equity ........................................................................................................................118
Notes to the consolidated financial statements ....................................................................................................121
1.Overview.....................................................................................................................................................122
2. Basis of preparation....................................................................................................................................123
3. Basis of consolidation..................................................................................................................................125
4. Main accounting policy................................................................................................................................130
5. Significant matters.......................................................................................................................................139
6. Notes to the statement of financial position.................................................................................................145
7. Notes to the statement of comprehensive income...................................................................................... 154
8. Assets classified as held for sale and directly associated liabilities............................................................ 160
9. Reconciliation of the parent’s profit for the year and equity with consolidated figures................................ 160
Separate financial statements as at and for the year ended 30 semptember 2015.............................................165
Financial statements .................................................................................................................................................168
Statement of comprehensive income................................................................................................................172
Statement of cash flows....................................................................................................................................174
Statement of changes in equity.........................................................................................................................176
Notes to the separate financial statements ............................................................................................................179
1.Overview.....................................................................................................................................................180
2. Basis of preparation....................................................................................................................................181
3. Main accounting policies.............................................................................................................................185
4. Significant matters.......................................................................................................................................194
5. Notes to the statement of financial position.................................................................................................199
6. Notes to the statement of comprehensive income...................................................................................... 209
7. Assets classified as held for sale and directly associated liabilities............................................................ 215
M
en must always earn what they inherit from
their fathers in order to properly call it their
own
Ciò che l’uomo ha ereditato dai suoi padri deve sempre riguadagnarselo con i propri sforzi per possederlo saldamente
Benedetto Croce
20 years
2015 is above all a year of anniversaries, which share
courage and spirit of adventure.
The first twenty years of MAG’s business project and the
100th anniversary of the incorporation of Società Idrovolanti
Alta Italia, whose Borgomanero factory still hosts the
Group’s headquarters.
The first anniversary celebrates the beginning of a
contemporary, forward-looking project which draws on
solid industrial experience, such as SIAI, stories of people
and aerospace companies, technologies and the Italian
influence around the world.
This anniversary represents a link between the past and
the future, a legacy that provides encouragement and moral
strength, a roadmap which, while incorporating continuity
with the past, looks to the long-term future with vision and
pragmatism.
The different stages of this path measure one’s
achievements, maintain the historical memory and
encourage new activities while firmly continuing the legacy.
Foto gentilmente concessa da AVIANI EDITORE
Integrated reporting
year two
2015 is the second year in a row that the Mecaer Aviation
Group’s annual report has been prepared as an integrated
report, where the mandatory financial data are integrated
with strategic, organisational and business information to
better delineate the features of the group, in terms of the
sustainability of its business model, while also providing information on the economic and social impact.
Taken in 2013/2014, this decision takes the group step by
step towards increasingly sophisticated reporting, confirming the relationship between financial and non-financial
performance and offering the most comprehensive view
possible of the group’s business.
Accordingly, combining and subsequently reorganising the
information was deemed essential and effective in order to
highlight the various perspectives of the stakeholders directly and indirectly involved in MAG’s business project.
The evolution of reporting formats and methods has its roots
in the development of the company’s culture which is driven
not only by increasingly stringent compliance requirements,
but also by an increased awareness of the importance of
social responsibility in its various forms.
It is no coincidence that the historical legacy of the doctrinal
debates over the trade-off between individual and corporate responsibility in general, has highlighted accountability
and company controls as complementary to the scope of
legislation.
Christopher D. Stone lucidly entitled a brilliant empirical
and anticipatory analysis of financial fraud and corporate
political influence commissioned by the National Science
Foundation Where the Laws Ends1.
The group’s governance system has evolved over time on
a voluntary basis, applying the best practices defined by
regulated markets gradually and in proportion to the company’s size and its stage of maturity.
1 Christopher D. Stone, “Where The Law Ends: The Social Control of Corporate Behaviour”, Harper 6 Row, 1975. Research funded by the US National Science Foundation with the support of the Foundation’s Law and Social
Science Program and carried out with the participation of the Faculty of Law
of the University of Southern California.
6
MAG | Annual Report 2015
Corporate governance likewise developed in step with the
process of developing an identity and is today substantially
in line with models featuring a certain degree of complexity.
The implementation of an internal control and risk management system pursuant to Legislative decree no. 262/2005
began in recent months. The aim is to move towards an
integrated compliance regime where regulatory compliance
stems from a highly integrated and interconnected view of
compliance risks and ensures correct, transparent internal
reporting and reporting to stakeholders in general.
This report includes the environmental indicators identified in accordance with the recommendations issued by
the IIRC2. They have been systematically monitored in the
group’s main sites since 2014/15. As shown by the indicators themselves, although the group’s industrial activities
are not significantly dangerous for the environment, the
group’s sensitivity to the internal and external perception of
this critical issue resulted in the introduction of these indicators which also represent a useful self-diagnosis tool and
are important to achieve the environmental certifications
slated for 2016.
Indeed, accountability is also a legislative duty vis-à-vis the
various compliance regimes, a stance that stresses the cultural and aspirational component and the pursuit of socially
acceptable behaviour.
With respect to methodology, certain clearly identified sections in the first part of this report include information that
the group has provided on a voluntary basis with reference
to the principles and recommendations issued by the IIRC
and the regulatory standards currently being defined at EU
level3.
The 2015 Annual Report also includes the Director’s
report, the Consolidated financial statements as
at and for the year ended 30 semptember 2015 and
the Separate financial statements as at and for the
year ended 30 semptember 2015.
The term integrated is also representative of the group’s
offer which is based on the integration between products
and services as well as on a combination of both consolidated and highly innovative technologies. Furthermore, the
aerospace production industry in which the group operates
is characterised by very distinctive trends that require special reporting in order to put events and decisions into context and best represent their contribution to creating value.
In general, the main issues are intensive investments and
economic cycles which, for most of the segments in which
the group is active, cover a medium/long-term, sometimes
a very long-term, time frame.
In this scenario, the stakeholders’ perspective (i.e., those
that have an interest at stake in the company and share
risks) adds a multi-dimensional element to long-term strategies, combining an understanding of the contribution to the
creation of value and the implication of control.
2 International Integrated Reporting Council.
3 Directive 2014/95/EU of the European Parliament and of the Council of
22 October 2014 amending Directive 2013/34/EU as regards disclosure of
non-financial information.
7
Dear shareholders
The year that just ended has been another positive year,
with economic and financial performance that can be regarded as more than satisfactory. Several factors contributed
to such results, starting by the investments performed in
2014 for the purpose of improving the industrial operations
and by the development of the new-born Aircraft Services
business unit, which is at an early stage, but it is expected
to play a very important role in the nearest future. Also,
some economic favorable circumstances, like the exchange
rate of the main currencies the Group operates with, the US
and the Canadian dollar against the Euro, have contributed
to the overall result.
From a merely quantitative stand point, the economic and
financial results of the year can be summarized as follows:
◊ Net earnings € 6.3 million, + 167% compared to
2014,
◊ EBITDA € 16.2 million, +30% compared to 2014,
◊ Production Revenue € 133 million, in line with 2014,
◊ Sales € 123 million, - 6% compared to 2014, in line
with the budget for the year; 2014 was still affected
by the residual activity on the AW101 VVIP program,
◊ Net Financial Position € 27,8 million, compared to
the € 32,5 million of 2014.
The Canadian subsidiary has for the first time recorded a
net profit (CAD 1.4 million), further to a EBITDA of some
CAD 3,6 million, a turning point that sounds of compensation for the sacrifices undertaken and the investments borne
as well as of confirmation for the strategies pursued and for
the industrial plans that had envisaged such outcome.
Beyond the figures, here are some remarkable events that I
feel the need to highlight:
◊ the award of new contracts, as the ITP for the landing system of the Alenia Aermacchi M345 trainer
aircraft, the framework agreement with Airbus Helicopters for the Stylence special cabin interior, the
contract for the first AW189 VIP interior, some important commercial agreements concerning the industrial support for the NH500 and AB412 aircrafts
which are likely to ensure stability to the MRO ope-
8
rations of the Aircraft Services,
◊ the delivery of the first AW139 VIP interior realized
in the US Hagerstown facility,
◊ the achievement of important STC’s, for the Bell
429 VIP as well as for the AH145 EMS
◊ The positive resolution of some pending claims toward customers
During the year we have fine-tuned our strategy and defined our medium and long term targets which call for a remarkable growth in volumes, also by acquisitions, in order
to increasingly achieve a world-wide basis and to reduce
the predominance of Finmeccanica as a percentage of
total sales . The achievement of such goals will be made
possible by the already acquired backlog, which includes
programs currently are under development. They currently
do not generate sales, but they will definitely be the driving
force in the years to come.
technologies in the field of the creation and control
of Comfort conditions: noise-vibration reduction, environmental optimization and cabin management.
B)
With regard to the Aircraft Services business
unit, we shall try to replicate the strategy pursued in the
helicopter segment, exploiting the owned competencies of
the cabin comfort, externally acquiring the skills in aircraft
management, which the Company does not yet possess.
In conclusion, I would reaffirm the final statement of my last
year message to you, shareholders, that « also thanks to
the competence and dedication of our human resources, a
key factor of our success, the business opportunities of this
past year have made the Group stronger and more prepared to take on the new challenges of the years to come»
For that purpose we intend to strengthen the Aircraft Services in North America, to extend and develop the presence
of all our Divisions in the fixed-wings sector. Today the fixed-wings segment barely represents 15 % of our revenue,
while its potential market is of a much larger size, when
compared to that of the rotor-wings.
Claudio Brun
Managing Director
More specifically, the distinctive elements of this growth
strategy, will be the following.
A)
As regards the Integrated Aircraft Systems business unit,
◊ the landing systems, whose sales are currently
higher for the fixed-wings rather than for the rotorwings, will organically continue to grow, benefitting
from the strong cooperation with UTAS and the
launch in production of the new programs already
achieved either for rotorcrafts or for trainers and
VLJ’s,
◊ the growth of the flight control systems will be focused on the hydraulic and EMA actuation and eventually strengthened by a possible acquisition,
◊ the Cabin Comfort will be enhanced and valued
by developing and acquiring competencies and
9
Overview
Group highlights
The structure of the MAG group at the reporting date is
summarised below. It has not changed since the previous
year except for the increase in the investment in SAT – Società Aeroporto del Tronto S.p.A. (“SAT”) which rose from
93.3% to 93.9%. The only non-controlling interests relate to
local public authorities4.
Mecaer Aviation Group
S.p.A. (Italy)
100,0 %
Mecaer America Inc.
(Canada)
100,0 %
Mecaer Aviation Group
Inc. (USA)
93,9 %
Società Aeroporto
del Tronto S.p.A. (Italy)
In accordance with the group’s organisational and business
model, the companies substantially report to the following
two main operating segments or Strategic Business Units
(“SBU”) which can be divided into three divisions:
◊ Integrated Aircraft Systems – focused on the
sale of products (systems, sub-systems and parts)
mainly for Original Equipment Manufacturers
(“OEM”);
◊ Aircraft Services – focused on aircraft management and the supply of related services.
Two divisions report to the first SBU.
◊ Actuation and Landing Systems (“ALS”),
◊ Cabin Comfort Systems (“CCS”).
The second SBU represents the Aircraft Services (“AS”) division.
Each SBU, comprised of the relevant divisions, has its own
range of products and services.
4 Ascoli Piceno municipal authorities, which holds 6.1% of the company at
the 2015 reporting date.
Integrated Aircraft Systems
Actuation and Landing
Systems Division (ALS)
Aircraft Services
Cabin Comfort Systems
Division (CCS)
Aircraft Services
Division (AS)
The following graphs give a summary of the main financial
and non-financial performance indicators, which have been
selected to paint an overall picture of the group in its entirety
(in millions of Euros, units or percentages %)
Revenue5
Workers7
800
200
600
150
Mln. Euro
400
100
200
50
0
2012
0
2012
2013
2014
2015
2013
Temporary Workers
2014
2015
Employees
Yeovil AW101 project (closed)
EBITDA6
Research and evelopment8
20
14
Mln. Euro
12
15
10
8
Mln. Euro
10
5
6
4
2
0
0
2012
2013
15
2014
2015
2012
2013
2014
2015
The section on the group’s performance of operations and
financial position includes information on the performance
of the main group companies (see Highlights of main
consolidated companies), while the notes to the consolidated financial statements include equity information on
the main group companies (see 3.1 Consolidation methods and scope).
% val. prod.
10
5
0
2012
2013
2014
2015
5 Revenue includes that relating to the AW101 interiors project in the three
years in which the project was active.
6 Adjusted EBITDA; for the definition see Director’s report, Alternative (“NON IFRS”) performance ratios.
7 Temporary workers include those hired under temporary employment
contracts pursuant to Italian law and jobshoppers that worked at the operating site in Yeovil (UK) (for additional information see also Human resources and safety in the workplace).
8 The data refer to total spending for applied research and development,
including the amount funded directly by the group and the amount covered
by revenue from customers or grants/assistance.
Image courtesy of AVIANI EDITORE
Mission & Values
L
everaging our background as an OEM, we
combine technology with design and style to
be the partner of choice and the problem solver
for our customers in the helicopter, trainer and b&ga
market.
I
inative and Essential
be imaginative
Our history shows that it is possible to be our
very best with sacrifice, creativity and lofty
aspirations.
deliver on the promise
We believe that long-lasting results go hand-in-hand with long-term
relationships based on trust that we have forged with people, be they
our employees, customers or other stakeholders.
business integrity
We are convinced that it is absolutely necessary for any project within
our organisation to act with honesty and integrity.
S
o customers see us as the best solution, we must
provide the highest technical expertise and the
most reliable product quality at competitive
prices
value our people
It is a top priority for us to support our people and to encourage
their continuous training and professional growth in a transparent,
cooperative and accessible working environment.
In line with its characteristics, size and history, MAG has
always gathered and processed information on its sustainability, initially intuitively and now in a more structured manner.
The main steps taken in its commitment to sustainability are
M
ost importantly, to remain successful, we
must consistently deliver on our promises,
since our reputation is fundamental for
our future growth
2006/2007
2008/2009
2011/2012
Implementation of
the Organisational
and control model
pursuant to
Legislative Decree
N. 231/2001
Implementation
of MAG group’s
Corporate
Governance model
Publication and
circulation of MAG
group’s Code of
Conduct
2013/2014
2014/2015
Preparation of the
first MAG group’s
Integrated Report
Beginning of the
implementation of
the Compliance
model pursuant to
Ligislative Decree
N. 262/2005
Significant events in
the reporting period
OCTOBER 2014
OCTOBER 2014
NOVEMBER 2014
Completion of the second
phase (800 metres) of the
airstrip asphalt
Setting and appointment of
MAG’s Executive Committee
KAI UAV first flight using MAG’s
landing system
NOVEMBER 2014
DECEMBER 2014
DECEMBER 2014
AW169 Control Rods FFC
certification
STC for INAER HEMS KIT
Contract for industrial support to
Italy’s Air Force NH500 aircraft
JANUARY 2015
JANUARY 2015
ITP award M345 Alenia
Aermacchi landing system
Beginning of V280 Bell
Helicopter experimental
activities
FEBRUARY 2015
Delivery of the first 429WLG
Bell Helicopter with MAG
landing system
APRIL 2015
APRIL 2015
MAY 2015
MACH3 Certification from
Quebec Government
First AW139 VIP interior at MAG
Inc.’s site in Hagerstown MD
(USA)
Delivery of the first 525 Bell
Helicopter interior KIT
MAY 2015
JUNE 2015
JUNE 2015
International Yacht and Aviation
Award - Private jet Belvedere
concept
H160 first flith with FFC and
MAG’s landing system
International Paris Airshow Le
Bourget - partecipation with
Piedmont region cluster
FEBRUARY 2015
JULY 2015
JULY 2015
AUGUST 2015
STC for 429 Bell Helicopter
Interiors
EASA certification for the first
installation of 429 Bell Helicopter
MAGnificent luxury interior
525 Bell first flight with MAG’s
landing system
Master agreement for Stylence/
EMS Airbus H145 special cabin
interior
MARCH 2015
MARCH 2015
AUGUST 2015
SEPTEMBER 2015
SEPTEMBER 2015
HAI Eli-Expo Orlando partecipation in trade show and
exhibition
Contract for the manufacturing
of the first AW189 VVIP interiors
International patent for
materials for aircraft interiors
soundproofing
Completion of the multi-stage
electromechanical actuator project
- Lombardy Aerospace District
Bylaws reform and appointment of
a manager for financial reporting
pursuant to LD no. N. 262/2005
MAG - Company
profile and
sustainability
Company profile
MAG is an Italian industrial group operating internationally
in the aerospace sector. It pursues a leadership position in
the market segments in which it is present.
It was founded in 1995 through a buy-out by private investors and is currently mainly owned by leading institutional
investors.
MAG has followed a highly ambitious quantitative and qualitative growth process with a targeted investment plan. The
group currently boasts significant, comprehensive expertise
and infrastructures to support its future growth.
The group’s activities are focused in the helicopter and business & general aviation aircraft in the civil sector and, to a
marginal extent, the military sector.
In line with outsourcing trends on the aerospace market
over the past twenty years, which have led the main original
equipment manufacturers (OEMs) to transfer the design,
production and management of entire systems to suppliers/
partners, MAG has decided to compete as a system integrator in the market segment that it has identified. The group’s
origins and know-how as an aircraft maker undoubtedly
contributed to its positioning, gained in previous industrial
projects (Nardi, Agusta and SIAI Marchetti), involving structures and resources that are now part of the MAG group.
Through the development of new products, expertise and
technologies, MAG has strengthened its competitive edge
by participating in innovative industrial projects as part of
strategic partnerships with major OEMs or industrial groups
that supply sophisticated products in the aerospace and defense sector.
The group’s activities are currently organised into two operating segments. They have been defined as part of the
process to improve the company’s strategies, leading to the
identification of the two main strategic areas in which MAG
is active.
theoretically multi-business nature and its willingness to go
through economic, operational and change processes that
pursue coordination of products, technologies and the reference market.
In this respect, the internal organisation evolved to be structured by divisions, incorporating production factors, technical and human resources, and which is deemed best to
pursue management objectives.
Consequently, some divisions sharing the same basis were
subsequently combined, while maintaining the differences
and the structures that had led to their identification.
The drivers that currently determine the strategic positioning
and competitive policies distinguish between the group’s offer of products and systems that mainly, but not exclusively,
target Original Equipment Manufacturers, i.e., aircraft makers, and the provision of a wide range of services to aircraft
makers, some of which are already part of the existing skill
sets and others related to diversification and development
objectives.
Indeed, it is felt that this second strategic area, in terms of
both size and nature, has more potential than its present
value. However, this is also the reason for its identification
as an operating segment, i.e., clearly directing the decisionmaking process and allocating the resources necessary to
implement strategies.
The first operating segment (the Integrated Aircraft Systems) is therefore characterised by an offer of products
and systems that has many technologies and mainly targets
OEMs. It is comprised of two divisions: Actuation and Landing Systems (“ALS”) and Cabin Comfort Systems (“CCS”).
This is based on the company’s awareness of its at least
18
19
Strategic business
units
Divisions
Business
lines
sbu1 integrated
Actuation & Landing Systems
•Landing Systems
•Actuation & Flight Control Systems
•Hydraulic Systems
•Damping Systems
aircraft systems
SBU2 AIRCRAFT SERVICES
•Cabin Noise-Vibration Reduction Systems
•Cabin Environmental Optimization Systems
•Cabin Management Systems
Design and
Aircraft Services
•Kit installation
•Style Design
•Aircraft Mission Customization
•Aircraft Completion, Refurbishment & MRO one stop shop, FBO
Product Related Services
Production of Kits
Products
•Landing Gear
•Wheel & Brake
•Steering
•Retract Actuator (Hydr.
& EMA)
•Command Lever &
Control Unit (Hydr.
Manifold, Electronic)
Sites
Companies
Montreal (Canada)
•Pilot Stick and Pedal
Assy
•Command Chain
(Mechanical Rods, Wire)
•Actuator (Hydr. & EMA)
•Servoactuator
•Control Unit (Hydr.
Manifold, Electronic)
Borgomanero (Italy)
•Liners and Silens with
soundproofing
•Embedded Air Distribution
Ducts
•Environmental Control System
•Air Purification
•Cabin Monuments & Cabinets
•intercom
•infotainment
•cabin lights control
•cabin utilities control
•cabin air flow control
Monteprandone (Italy)
MAG Design Studio
Roma (Italy)
Monteprandone,
Vergiate (Italy)
Philadelphia (USA)
MAG Inc.
Mecaer America
Inc.
Mecaer Aviation Group S.p.A.
SAT S.p.A.
SBU Integrated Aircraft Systems
Divisions:
Actuation and Landing Systems
Revenue (Mln. Eur):
Operatings sites:
Employees:
102,9
4
434
Actuation and Landing Systems division (ALS)
The ALS division offers primary technological systems
(safety critical), i.e., landing systems, actuation and flight
control systems, damping systems and hydraulic systems.
These products are created for specific aircraft and are
sold to OEMs.
By developing technologically homogenous systems, MAG
group’s background of expertise in mechanical, hydraulic,
electro-mechanical and electronic technologies, commands and materials is transversal.
It has developed and consolidated this expertise over time
in a lengthy process that began with build-to-print activities
and ended with make-to-design projects, also entailing the
creation of parts, the development and testing of systems,
all the way to system integration.
◊ Integrated landing systems are mostly proprietary
and currently include:
◊ front and main landing gear legs,
◊ wheels and brakes,
◊ retraction and extraction actuators (hydraulic and
electro-mechanical),
◊ command levers and control devices (hydraulic and
electronic),
◊ steering commands (hydraulic, electro-hydraulic
and electromechanical),
◊ antiskid features.
Mainly proprietary integrated flight command and actuation systems include:
◊ pilot and co-pilot control panels, pedals,
◊ flight controls (mechanical with bars and levers,
electric wire),
◊ servo-actuators (hydraulic and electromechanical),
◊ closed-ring controls (hydraulic and electronic).
The purpose of this division is to ensure customers receive
support for the entire life of each product from a specific
product support area, which also operates under licence
for non-proprietary products.
The division has operating sites in Borgomanero (Novara,
Italy) and Laval (Montréal, Canada).
It recently acquired new projects for the Bell Helicopter
505, Bell Helicopter 525, Airbus Helicopter AH160 and the
Korean UAV Kaori and Alenia Aermacchi M345 aircraft.
Cabin Comfort Systems division (CCS)
The CCS division consists of technological/functional cabin
comfort systems co-designed with OEMs in the initial development stage of a new aircraft, when the cabin can be
significantly engineered to meet the customer’s needs or at
a later stage.
This system category is used in sophisticated cabin management systems which combine fully innovative technologies with existing ones adapted to the aerospace sector.
This category mainly includes:
◊ noise-vibration reduction systems,
◊ environmental optimisation systems,
◊ cabin management systems,
which share the common goal of improving cabin comfort.
The developments of this business line are aimed at finding
alternative solutions that meet the need for an improvement
in functionalities, the maintenance of parts and systems,
and that improve comfort through entertainment and vibration and noise reduction systems.
Some developments are particularly innovative and result in
the legal protection of design rights (e.g., Damp systems for
multilayer composite panels); others refer to the introduc-
tion of new technologies that generate technical contents
for consumers in the aerospace field (e.g., WAP wrdware
products and remote control systems).
These systems are supplied as KITs and, in addition to
distinguishing MAG’s systems offer, they complement the
range of traditional components and parts (cabinets, liners,
transparent electro-chromatic parts, lights, etc.).
Therefore, cabin kits are differentiated based on the type of
customisation (emergency medical service, VIP, corporate,
oil & gas applications).
The CCS division also ensures customers receive support
for the product’s entire life from a dedicated product support
area.
CCS operating activities are concentrated at the Monteprandone site (Ascoli Piceno, Italy).
This business line recently acquired new projects for the
Bell Helicopter 525, AirbusHelicopter AH160, AgustaWestland AW 189 and the restyling of the AW139 aircraft.
SBU Aircraft Services
Divisions
Aircraft Services
Revenue (Mln. Eur):
Operating sites:
Employees:
20,5
4
93
Unlike the CCS division of the Integrated Aircraft Systems
which mainly co-designs products with OEMs, the Aircraft
Services segment offers services for aircraft already developed by the manufacturer.
The MAG Design Studio, which constitutes an integral part
of the AS division, is the distinguishing feature, as it aims to
achieve brand recognition in the style of its VIP interiors,
ergonomic optimisation and industrial design.
Its aim is to offer a complete range of services to give end
customers or operators customised aircraft that meets the
requirements of their specific mission.
As such, the MAG Design Studio strives to be both a point
of reference for customers’ style coordinators and the solution for customers seeking one single provider with a complete solution.
The range of aircraft services includes
◊ kit installation,
◊ style design,
◊ aircraft mission customisation (VIP and EMS interiors),
◊ air base services (flight, maintenance and overhaul
services),
◊ support in pilot and maintenance technician training,
to enable customers to fully focus on their core activities,
such as emergency assistance, airtaxi services, business
travel and freight transport.
These services are offered to OEMs, operators and end customers and are based on the research and development
(R&D) conducted for the proprietary systems developed by
other group divisions. They draw on specific infrastructures
(hangars, landing pads, airstrips and classrooms for technical personnel), which are either owned (the Tronto airstrip)
or belong to third parties.
The background exploited for this business line consists,
inter alia, of aircraft building know-how passed down from
previous manufacturing experience.
Aircraft MRO & refurbishment, and cabin kit installation
complete the range of services offered and can be carried
out at either the customer’s facilities or MAG’s infrastructures for one-stop shopping.
Mobile aircraft repair stations can also perform MRO activities on aircraft.
Refurbishment and kit installation services include VIP
(which can feature MAG Design Studio styling), EMS, Corporate, Utility and Oil & Gas interiors.
AS activities are located in various centres near key customers and exploit infrastructures useful for the services,
such as regional airports: Monteprandone (Ascoli Piceno,
Italy), Vergiate (Varese, Italy), Philadelphia (PA, USA) and
Hagerstown (MD, USA).
The business line recently acquired new projects for the
Bell Helicopter 429 VIP, Airbus Helicopters EC145 VIP and
Airbus Helicopters EC 145T2 EMS aircraft.
B
y working every day in the factory to produce
something that we then see living and running
in the streets of the world and returning to us
in the form of wage, which then becomes bread, wine,
and house for our family, we contribute to the vibrating
life of the factory, to its smallest as well as to its biggest
things, we end up loving it, growing fond of it and, in
this way, it truly becomes part of us. The work becomes
little by little part of our soul, like an immense spiritual
force.
Lavorando ogni giorno tra le pareti della fabbrica e le macchine e i banchi e gli altri uomini per produrre qualcosa che vediamo correre nelle vie del mondo e ritornare a noi in salari che sono poi pane, vino e casa, partecipiamo ogni giorno alla vita pulsante della fabbrica, alle sue cose più piccole e alle sue cose più grandi, finiamo
per amarla, per affezionarci e allora essa diventa veramente nostra, il lavoro diventa a poco a poco parte della
nostra anima, diventa quindi una immensa forza spirituale.
A. Olivetti9
Corporate responsibility
Governance and sustainability
MAG’s business model and corporate governance system
took shape, first instinctively and then progressively designed, around the primary aim of creating long-lasting value.
Over time, a sense of sustainability gradually, but determinately arose, as it is expressed in this report.
The relationship between governance and government and
the interdependence of a company’ social aspects and its
central role in the implementation of industrial policies in
MAG’s sector has traced an unusual path, with an uncommon timing, as can be seen in the experience of Airbus Industries, which was set up as a non-company for the European integration project10.
Within the scope of the more recent debate about11 the
9 Ai lavoratori (2012), “Discorsi agli operai di Pozzuoli ed Ivrea” L. Gallino.
Collana Humana Civitas, Edizioni di Comunità.
10 “L’Europa dei progetti: imprese, innovazione, sviluppo”. Dario Velo.
Giuffré editore, 2007.
11 “Corporate Governance and Sustainability: Challenges for Theory and
Practice”, Suzanne Benn, Dexter Dunphy, Routledge, 270 Madison Ave, NY,
2013.
28
complex and frequently controversial nature of corporate
responsibility, an increasingly specific ontology has taken
shape in the form of a system of values that combine running a business with its sustainability, from the differentiated
and multi-faceted view of stakeholders.
In the past few decades, companies have become fertile
ground for experimenting with economic theories that are,
at times, contrasting12 but share the rising awareness of the
multi-dimensional nature of company policies, which often
prove to be ineffective when oriented only, or reductively, to
generating profit.
The way in which companies are now seen as experimental
– and privileged - entities is due to the fact that a company
constitutes the core unit of advanced economies, which is
to say that it is the most elementary structure of economic
development, and because its old and new governance
systems have proven to be crucial for the development of
economic behaviour, with a view to reconciling, after attaining coherence, business objectives with the principles of
sustainability.
12 “The Social Responsibility of Business is to Increase its Profits”, Friedman M. (1970), New York Times Magazine, 13 Sept., N.Y. and “Strategic
Management: a Stakeholder approach” Freeman R.E. (1984), Pitman, Boston.
In recent times, sustainability principles have been applied
to economic development, to the extent that they have been
codified, and this has included many different rules, operating principles and process standards13 in the various fields.
It is into this historically dense context in which much experience has been gained that the series of concepts and
values on which MAG has based its own business model
and governance structure fall, seeking to integrate as far as
possible all the legislative and internal rules, relationships,
processes and company systems through which it exercises business control, clearly outlining the structure of responsibilities that guides the achievement of objectives.
From an operational standpoint, the pursuit of these objectives entails striving for excellence in business organisation,
safeguarding the solidity of assets and the reliability of its
essential processes and in the functional transparency and
professional and ethical conduct.
In conjunction with an efficient business strategy, these elements constitute the system of values whereby MAG interprets and meets the expectations of its stakeholders.
13 Consider ISO 26000 with respect to social responsibility and AA1000.
29
The stakeholders paradigm
Recent developments in strategic management theory emphasise a change in the nature of companies, such as, for example, the growing importance of intangible assets, intangible capital and know-how, which are increasingly more valuable
than financial assets.
In order to understand and internalise the company’s aims and the factors underlying its success, the affirmation of its
principles must also consider its vision of the identity and role of stakeholders.
With respect to the identity of stakeholders, the most concise and preferred definitions take an approach that is both pragmatic and philosophical14, identifying a stakeholder as anyone who has an interest in MAG “at stake”, be such interest
capital, human, physical or financial.
With respect to their role, it is certain that the driver that links them is the fact that they share risk, giving each of them the
ability and, at the same time, the right to influence strategic company decisions.
The most interesting part of MAG’s value system is the fact that stakeholders provide a competitive edge in proportion to
and because of their investment, be it tangible or intangible.
Combining these elements, as noted above, Integration becomes the byword for a notion that was once technical/productive. In this way, it is borrowed from the terminology of the various integrated technologies on which MAG’s business plan
is based, becoming a meta-term that efficiently denotes the view that stakeholders, or rather values, are complementary
and interdependent in the group’s business model.
Each of the stakeholders, to whom the section on the sustainability of the MAG project is dedicated (see Social sustainability), offers a different perspective on how value is created. Similarly, this aspect is considered in the strategic
guidelines applied to long-term planning (see Strategies and strategic positioning).
Stakeholder
Value
Competitive edge
Risk
Human resources (employees
and workers)
Identity
Expertise and company climate
Welfare
Shareholders
Address
Solidity and wealth
Share capital
Customers
Positioning
Reputation and growth
Confidence and goodwill
Suppliers
Integration
Quality and efficency
Continuity
Financial community
Resource allocation
Liquidity
Credit
Public administration and
institutions
Consensus
Systemic support and
infrastructures
Continuity and welfare
Community and the local area
Report
Social and environmental
resources
Pollution and health
Technological community
Know how
Innovation
Change
Economic value and stakeholders
Maintaining that stakeholders contribute in different but fundamental ways to the company’s competitiveness means conceptualising that they contribute concretely to the potential creation of economic value.
In line with the group’s newly developed notion of financial reporting, MAG has supplemented the performance and financial data to present a necessarily simplified schedule analysing the generation and allocation of economic value to
stakeholders.
14 For everyone, M.B.E. Clarkson, “The Corporation and its Stakeholders: Classic and Contemporary Readings”. University of Toronto Press, 1998.
30
31
To this end, economic value means the total wealth created by MAG, based on the GRI15 definition in a manner consistent
with objectively measurable indicators in accordance with the relevant standards of accounting and financial practice.
However, economic value is also shown divided into value distributed and value withheld, constituting the breakdown
of value among the various stakeholders (suppliers, workers, financial backers, shareholders, the public administration
and the community).
Economic value generated by the group
2014/15
2013/14
2012/13
2011/12
Revenue
123.356
130.788
148.936
122.134
Other segment revenue
7.998
(1.227)
16.681
6.351
Other income
1.750
724
918
1.030
301
371
319
26
1.918
939
(1.602)
2.650
Total economic value generated
135.323
131.595
165.252
132.191
Economic value distributed by the group
2014/15
2013/14
2012/13
2011/12
Supplier remuneration
80.477
80.285
103.380
82.188
Worker remuneration
36.313
37.573
46.332
34.942
2.450
2.801
2.413
3.805
-
-
-
-
3.465
3.317
5.236
3.693
101
14
12
14
Total economic value distributed
122.806
123.990
157.373
124.642
Economic value withheld by the group
2014/15
2013/14
2012/13
2011/12
Amortisation and depreciation
4.825
4.562
4.267
4.330
Provisions
1.409
696
310
1.001
-
-
(94)
-
6.283
2.347
3.396
2.218
12.517
7.605
7.879
7.549
Financial income
Exchange rate gains (losses)
Financial backer remuneration
Shareholder remuneration
Public administration remuneration
Donations
Utilisation of provisions
Reserves
Total economic value withheld
The structure of distributed value highlights the numerical significance of wealth creation from the economic process
carried out by the group’s business activities, with a significant role played by suppliers, corresponding to the strategically
integrated supply chain, and collaborators, who are the biggest driver, through work and the skills they provide.
The distribution of economic value to the public administration is also important. It ideally represents the remuneration of
services, infrastructures and the community in general.
Dividends are not distributed as earnings are withheld within the group as value allocated to support future development
strategies.
15 Global Reporting Initiative.
33
The external context
and currency depreciation against strong ones, being the
US dollar, the Euro and the Yen.
The macroeconomic context
Six years after the world economy emerged from its broadest and deepest postwar recession, the holy grail of robust
and synchronized global expansion remains elusive.
As identified by the IMF16 in its recent World Economic
Outlook Report, despite considerable differences in country-specific outlooks, the new forecasts bring down expected
near-term growth marginally and downside risks to the
world economy appear more pronounced.
Advanced economies show strengthening of fundamentals
in the short term, particularly the US and UK, more fragile in
Europe and Japan.
In emerging or developing economies the situation remains
extremely uncertain and affected by economic factors, such
as the considerable decrease in the price of raw materials,
and the political instability which had a material impact and
generated significant social and economic costs.
Overall, the forecasts of the International Monetary Fund
about said economies indicate 2015 as the fifth consecutive
year of declining growth.
Again with respect to these areas, it should be noted that
the overall decline is accompanied by the resistance of
productivity to improvement. This is partly due to the low
investments of these countries, sometimes marked by high
growth, that limit productivity and hold back wage trends.
However, the weakness of aggregate demand which is, in
turn, held back by the low level of investments in a vicious
cycle, remains the common denominator.
With respect to the overall trend of post-war economies,
according to some economic historians, there is a progressive narrowing of the driving force of technological progress
over growth, which is momentarily mitigated by the entry of
China and former Soviet Union countries into the market
economy.
According to another school of thought, the driving force
of the so-called “transformative innovation”, which ranges
from robotics to bioengineering, maintains strong activation
capabilities although, similarly to the invention of electric
power over one hundred years ago, several decades are
necessary before the returns are reflected in the quantitative growth of the domestic product.
In more practical and immediate terms, the downward trend
in the price of oil and commodities, including many metals,
that has been underway more or less since 2011, further accentuated in the past few months, generating a progressive deterioration of the balance of trade for many producing
countries and, consequently, a contraction of cash flows
16 International Monetary Fund (“IMF”). World Economic Outlook Report.
21 October 2015. Maurice Obstfelt. Economic Counsellor.
34
In this mix of different phenomena, several economists
see the characteristics of a technical adjustment process
that reflects growth rate differentials in a context of floating
exchange rates. In other words, exchange rate trends are
mainly due to their natural role of “shock absorbers” rather
than to currency policy conflicts. In fact, every time an emerging country – e.g., Argentina or China – tried to introduce
a fixed exchange rate, it had a devastating effect on both
central bank reserves and, more generally, on the financial
stability of the economy as a whole.
At present, many issues of concern are caused by the significant rise in debt taken on in the strong currencies by
companies operating in emerging markets, as well as the
continuing concern over China’s prospects and the evolution of situations such as that of Greece in the Eurozone,
which, sometimes, rapidly accentuate market volatility.
Therefore, the overall scenario remains inconsistent, with
figures highlighting the weakening of growth in the first half
of 2015, still estimated at +3.1% p.a. globally, below initial
forecasts (+3.8%) and 2014 actual figures (3.4%).
Among the advanced countries, the United States and
the United Kingdom show positive fundamentals and GDP
growth per annum is respectively estimated at 2.6% and
2.5% for 2015 and 2.8% and 2.2% for 2016.
In the US, the recovery is set to continue, mainly driven by
the deflation of energy products, the reduction in fiscal drag
and robust internal demand. These factors are expected to
prevail over the impact on exports of the dollar, which has
been persistently strong since early 2015.
The unemployment rate further decreased to 5.1% at the
end of August, down 0.4% and 1% on February and on the
same period of 2014, respectively.
Up until now the monetary policy has been careful in detecting emerging trends and postponed the normalisation
process which, however, remains one of the goals of the
Federal Reserve and a focus of attention for emerging economies.
Based on the concerns about the international macroeconomic scenario, the September’s Federal Open Market
Committee did not make any change to the target range for
federal funds rates (0.0 – 0.25%), while market operators
expect an increase in 2016, as confirmed by the trend of
interest rates of OIS17.
In North America, Canada shows an opposite trend, after the significant growth (2.4%) recorded in 2014. This is
mainly due to the effect of the adjustment caused by the
17 Overnight Indexed Swaps. Source: Thomson Reuters Datastream. The
expected return on these derivatives, reflected in prices, reflect operators’
expectations about the future trend of overnight interest rates.
Macroeconomic context (% change on the previous year)
IMF118
Revisions vs July2015
2014
2015
2016
2015
2016
World
3,4
3,1
3,6
(0,2)
(0,2)
Advanced countries
1,8
2,0
2,2
(0,1)
(0,2)
Eurozone
0,9
1,5
1,6
(0,1)
(0,2)
(0,1)
0,6
1,0
(0,2)
(0,2)
UK
3,0
2,5
2,2
0,1
-
US
2,4
2,6
2,8
0,1
(0,2)
Canada
2,4
1,0
1,7
(0,5)
(0,4)
Emerging countries
4,6
4,0
4,5
(0,2)
(0,2)
Brazil
0,1
(3,0)
(1,0)
(1,5)
(1,7)
China
7,3
6,8
6,3
-
-
India
7,3
7,3
7,5
(0,2)
-
Russian Federation
0,6
(3,8)
(0,6)
(0,4)
(0,8)
World trade
3,3
3,2
4,1
(0,9)
(0,3)
GDP
Japan
fall in the price of oil products and other raw materials that
account for a considerable portion of both domestic product
and exports.18
Meanwhile, the effects of the earlier expansionary monetary policies, together with the robust growth in the US that
drives non-commodity exports, generate a redistribution of
aggregate demand and a positive overall effect on the domestic product of the last two quarters of 2015. After the fall
recorded in the first half of the year19, the rebound effect is
estimated at approximately 2%20 in the second half, bringing total annual growth to +1%.
The analysis shown in the Canadian central bank’s Monetary Policy Report, highlights the change in the contribution of
the various components of domestic product to the latter’s
actual (2014) and expected (2015 – 2017) variation.
In the Eurozone the situation remains complex, with a global recovery underway despite several risk factors, such as
18 IMF. World Economic Outlook Report. “Overview of the World Economic
Outlook Projections”. Table 1.1.
19 (0.8) IQ, (0.5) IIQ. Source: Bank of Canada. “Monetary Policy Report”,
21 October 2015.
20 Bank of Canada, op. cit..
the weakening of world trade and the turbulence in financial
and currency markets.
Internal demand strengthened in the first quarter of the year
and, based on statistics21, remains the main determinant of
growth, while net exports are more influenced by the weak
demand from emerging countries and benefit from the depreciation of the Euro, especially against the US dollar.
Since the first few months of the year the recovery has spread within the Eurozone.
The accommodative monetary policies progressively implemented by the European Central Bank played a decisive leading role, especially through the Expanded asset
purchase programme (EAPP) which, since January 2015,
has included the bonds issued by the central administrations of Eurozone countries. As of 9 October 2015, a total
of 359 billion22 worth of public securities were purchased,
in addition to 125 billion covered bank bonds and 13 billion asset-backed securities. The aim of these measures
21 European Central Bank, “Economic bulletin no. 4/2015”. October 2015.
22 Banca d’Italia, “Economic bulletin. No. 4/2015”. October 2015. 1.2 The
Euro Area.
35
is to increase the amount of money23 in circulation in the
system, enhancing the liquidity of public and private bodies
that benefit from securitisation and obtaining effects similar to those generated by the quantitative easing policies
directly implemented by the main monetary authorities24 to
combat recession. All monetary indicators of the relevant
period improved and the available liquidity lays the ground
for an improvement of credit trends, which have remained
weak up until now.
In other words, the ECB’s measures are contributing
to “restoring the proper functioning of the monetary policy transmission mechanism and soften credit granting
criteria”25.
Credit for this success goes to the Governor Mr. Draghi who
substantially revolutionised the European Central Bank monetary policy, while complying with the mandate laid down
under the European Treaty, against a fragmented and sometimes contradictory political context and an economic
scenario facing the threat of deflation.
Despite the slight improvement in the third quarter of 2015,
the depreciation of the Euro26, which began in mid-2014,
contributed to increasing the international competitiveness
of European companies and redefining the inflation outlook for the area. Indeed, the import prices of consumables
and intermediate goods rose considerably over the past few
months, although the transmission of the exchange rate to
harmonised inflation takes place with distributed and mitigated delay due to the nature of the production and the price
chains. In the absence of further exchange rate fluctuations,
the depreciation of the Euro should have its maximum inflationary effect at the end of 201527.
Besides the economic factors and the real success of the
measures that support the growth of Europe, the latter’s
overall potential28 remains relatively weak given the legacy
of the recent recession, demographic factors and the unsatisfactory productivity.
The idle production capacity in the Eurozone remains above pre-crisis levels29, while the unemployment gap has widened to 10% of the labour force in September 2015 compared to 7.5% in 2007.
23 The impact affects the M3 aggregate which includes, compared to the
other aggregates, financial assets (bonds and short-term government securities) which may represent a store of value.
24 The Federal Reserve decided (Q3 programme) to purchase securities
worth USD40billion per month until a “sustainable” growth level is reached.
The Bank of England implemented a purchase programme worth GBP375
billion, while the Bank of Japan further expanded its QE programme, increasing it to JPY91 thousand.
25 European Central Bank, op.cit., 5. Money and credit.
26 Since 6 November 2014, the date of commencement of the preliminary
(according to EU) works for the Eurosystem purchase programme, the Euro
has depreciated by 10% against the US dollar and by 5.2% in nominal effective terms. Source: Banca d’Italia., op.cit. 1.3 World financial markets.
27 E. Hahn., “Pass-through of external shocks to euro area inflation”, Working Paper Series, no. 243. ECB. July 2003.
28 IMF Executive Board’s discussion of the World Economic Outlook, Global Financial Stability Report, and Fiscal Monitor, 21 September 2015.
29 The Commission’s quarterly survey of businesses, fourth quarter of
2015. The percentage of idle production capacity is equal to 18.5%, up 2.9%
on 2007.
36
Therefore, medium/long-term prospects30 remain characterised by moderate growth and limited inflation.
Public finances indicate a deficit of the public administration
of 2.6% of GDP. In September, the government revised estimated trends upwards35. 2015 indebtedness is expected to
increase on 201436 despite the rise in tax revenues.
In this context, the Italian economy shows moderate signs
of recovery31, with a slight reduction of the gap compared
to the Eurozone as a whole, estimated at 0.7% and 0.3%
for 2015 and 2016, respectively. The growth recorded in
the first two quarters of the year was driven by the good
performance of exports and the increase in the domestic
demand for consumer goods, especially durables, while the
decrease in investments remains high, particularly in the
construction sector.
Thanks to the Eurosystem’s measures, after a long period
of contraction, in Italy, lending to the non-financial private
sector stabilised during the summer. However, lending remains extremely challenging to obtain for small companies
and for specific sectors, such as the construction and the
service sectors. Conversely, loans to larger manufacturing
companies have increased in the twelve months to August37.
In particular, Italy’s economic trends generally reflect changes in the macroeconomic environment rather than the government’s measures, where the public finance situation
prevents the implementation, inter alia, of accommodating
tax policies to complement the monetary ones introduced at
central level32.
Therefore, according to the most authoritative sources, the
global economy experienced a growth slowdown in 2015
caused by the factors described earlier, specifically the performance of the emerging markets and the depressive effect on exporting countries of the decrease in the price of
energy and non-energy raw materials.
The delay in the definition and implementation of business policies to recover the impacts of the decrease in
investments on production capacity, which marked the entire recessionary period, makes it difficult to adopt measures
which will bring Italian companies out of the crisis.
Growth is expected to resume at a higher pace starting from
2016, following the combined effect of two types of factors.
The lack of measures to resolve local imbalances, i.e., involving those sectors that have the ability to activate the
economy, such as the construction sector, mitigate the
effects of the cyclical reversal and prevent Italy from fully
benefiting from the opportunities offered by the improved
economic situation.
Italy’s GDP is 8.9% below pre-crisis levels, the number of
employed people decreased by over 720 thousand and the
number of unemployed workers doubled to almost 8 million33.
Companies used the reforms implemented by the Italian
government on the employment market, which were generally aimed at increasing flexibility, to essentially reduce
personnel expenses rather than to increase productivity
and the country’s growth potential.
From a more technical point of view, the relief from social
security contributions for employees newly-hired under
open-ended contracts, and, above all, the new individual
dismissal procedure introduced by the Jobs Act, which reduces the dismissal costs for companies with at least 15
employees, generated an initial increase in new employees.
However, the effect on participation and employment rates
which are, presently, contradictory34, should be assessed
over a longer time horizon.
30 IMF, “Recent Development and Prospects”, Economic Outlook for Individual Countries and Regions. October 2015.
31 Banca d’Italia, op.cit., 2. The Italian economy.
32 Remark by Vitor Constancio, Vice-President of the European Central
Bank at the Prometeia meeting, November 2015.
33 Source. Confindustria. Scenari Economici. No. 24/2015. “Le sfide della
politica economica”. September 2015.
34 The available data refer to the Mandatory disclosures of the Ministry of
Labour and Social Policies. They differ from those provided by ISTAT (the
Italian National Statistical Institute) in its “Workforce survey”.
The first is the expected gradual return to growth of regions
that are currently under stress or whose performance is largely below their growth potential, such as Brazil, Latin America in general and part of the Middle East.
The second refers to the effect of countries such as China
and India which continue to drive global growth in terms of
size and trends.
Finally, in the Eurozone, emerging countries show remarkably high growth rates38, supported by the main economic
factors, though affected by the contraction suffered by Russia and the significant indebtedness of companies vis-à-vis
investments. The political tensions with the Russian Federation have an impact on the most active countries, such as
Turkey, which is expected to grow steadily by 3% in both
2015 and 2016.
In the first half of 2015, international trading volumes increased at levels below GPD, indicating that the economic
performance of the period was more favourable for the service sector, rather than for the sectors trading in goods.
The analyses carried out by the International Monetary
Fund and Consensus Economics on the risk data concerning the prospects of the global economic system point to a
slight deterioration of the uncertainty index on the key factors of the global outlook.
35 “Note updating the Economic and Financial Report for 2015”, 18 September 2015.
36 132.8% of GDP compared to 132.1% in 2014, 129.3% compared to
128.4% if indebtedness is considered net of support to EUM countries [bilateral loans to Greece, Italy’s portion of the loans disbursed to the European
Financial Stability Facility (EFSF) and the contribution to capital of the European Stability Mechanism (ESM)].
37 Banca d’Italia, Economic Bulletin No. 4/2015 “Credit demand and supply” and Il Sole 24 Ore, “Bank Lending Survey.”
38 3% in 2015 and 2016. Source: IMF, op.cit. “GDP Growth Forecasts”.
October 2015.
The resulting scenarios based on quantitative data cannot
cover the issues that, today, have a major impact on the
evolution of social and economic systems, starting from the
geopolitical risks that have an increasingly disruptive effect
on international trade and financial transactions, and also
cause imbalances, migratory flows and vulnerable social
and cultural trends.
The theoretical debate on Secular Stagnation39 introduces
into econometrics an assessment of the economic systems’
potential to continue their expansionary trends that are already uncertain in the most advanced economies, despite
the structural policies and reforms due to the considerable
imbalances in many regions of the world which are often
functional to preserving growth scenarios.
This context includes theories40 that underline the strategic
value of international agreements and reforms aimed at a
more balanced distribution of wealth and access to natural
resources, making the most of the relocalisation of production activities underway, including the re-territorialisation of
areas.
The contribution of innovation and research and development, particularly in the energy, transport and the commodities cycle sector, could prove decisive to the qualitative
improvement of the economic processes, in terms of sustainability. Despite the quantitative effect, this essentially
offers a broader and less self-referential perspective of progress.
The aerospace industry
The aerospace industry plays a strategic role in advanced
economies, as it generates wealth and high-level technologies and constitutes a key sector for political/institutional
and national sovereignty equilibrium.
The modern age of the aerospace industry began 111 years
ago with the first flight by the Wright brothers on 17 December 1903.
From that moment on, it has sent the first man to the moon,
introduced supersonic flight, developed aircraft carrying
over one billion passengers per year and sent a spacecraft
beyond the solar system.
This industry changed how consumers travel, communicate
by satellite, buy on the Internet, start armed conflicts and
reach the furthest corners of the earth with humanitarian
missions.
The aerospace industry will continue to innovate technologies, generating improvements in this and other fields.
39 IMF, World Economic Outlook 2014, “Scenario analysis”, October 2014.
40 Karl Polany, Columbia University, “The Great Transformation: The Political and economic Origins of Our Time”, 1944, Review Essay by Anne Mayew, College of Arts and sciences, University of Tennessee. More recently,
Serge Latouche, Paris Orsay University and Institut d’études du devoloppement économique et social (IEDES), “L’invention de l’économie”, 2010.
37
In the long term, the commercial sector will bring people
closer using the safest and most efficient air transport.
Financial performance differential between the top 20 US companies
of the sector – Commercial vs. Defence. In billions of USD or as a
percentage
The defence sector is driven by the need for ongoing technical improvements in order to launch reconnaissance and
containment missions that mitigate the risks for those involved.
In general, technological innovation is the key factor for progress in this industry and to identify new markets and create
demand for existing markets.
Turnover of the top 20 companies in this industry in 201441
totalled approximately USD500 billion, with operating profit up on the previous year by more than 10%. The top 20
US companies in this industry account for roughly three
quarters of the above figures, confirming North America’s
leading role in industrial terms and with respect to the reference market value.
Top 20 US A&D
companies
Nine
months
ended
09/2014
Nine
months
ended
09/2013
Var. %
Commercial aerospace
Defence
109,4
99,9
9,5%
Operating profit
162,8
166,2
(2,1)%
Defence
13,4
11,7
14,5%
Defense
18,4
17,8
3,4%
Financial performance of the top 20 companies in the aerospace
industry. In billions of USD or as a percentage.
Top 20 US A&D
companies
Turnover
Operating profit
Operating margin
Nine months
ended
09/2014
Nine months
ended
09/2013
Var%
272,2
266,2
2,3%
31,8
11,7%
29,5
11,1%
7,8%
5,4%
In this context, the commercial segment again outperformed the defence segment in 2014, whose performance remains strongly affected by the US government’s shrinking
public spending after the strong impetus generated by the
prolonged armed conflicts, from Iraq to Afghanistan. The US
accounts for 39% of the overall global defence spending.
Financial performance differential between the top 20 companies
The entire sector employs a total of over two million people42, and three times as many if the entire industrial chain
is considered43.
As mentioned earlier, the aerospace industry relies on the
mastery of high-level technologies and innovation plays
a crucial role in companies’ commercial success, with implications for all other economic sectors through the overall
industrial chain. The products that the aerospace industry
develops are highly complex with research, development
and production cycles which span an average of 30 years in
the civil segment and 50 years in the military segment, contributing to the very long periods of invested capital remuneration. The extent of financial resources needed to support
these processes is a barrier to entry.
The aerospace industry is highly global in both its structure
and outlets, exports significantly, is extremely competitive
and is subject to drastic cyclical changes, especially in the
civil segment.
of the sector – Commercial vs. Defence. In billions of USD or as a
percentage.
Top 20 A&D global
companies
Nine
months
ended
09/2014
Nine
months
ended
09/2013
Var. %
The aerospace industry. Civil aircraft and business jet
Fatturato
171,6
159,4
7,7%
Defense
199,1
201,6
(1,3)%
Reddito operativo
17,5
15,4
13,6%
Defense
20,6
19,9
3,5%
41 Deloitte. “2015 Global aerospace and defence industry outlook”. 2015.
38
The products developed are conditioned by the regulations
of political, national and international institutions through
independent access to the sky and space, telecommunications network control, surveillance, protection and defence
In general, the aerospace manufacturing industry was
reshaped after the end of the cold war, with a wave of restructuring in the various segments and, in particular, aircraft with over 100 seats, characterised by the Boeing/
Airbus duopoly, regional aircraft dominated by Bombardier
and Embraer and helicopters in which a small number of
OEMs operate in varying extents.
42 2,073,489 for 2012. Deloitte. “Global Aerospace & Defense Industry Financial Performance Study”. 2013. Pg. 10 Metrics.
43 Conférence FEM – “L’avenir de l’industrie aérospatiale européenne”.
On the other hand, the business jet segment is extremely
dynamic and has expanded to accommodate new manufacturers, with the growing role of very light jets.
2015 will be remembered as a record year in terms of sector M&A transactions, with the total value of transactions
approximating USD52 billion44. This includes, in particular,
Lockheed Martin’s acquisition of Sikorsky Helicopter from
United Technologies (USD 9 billion) and Berkshire Hathaway’s acquisition of Precision Castparts (USD 37.2 billion).
At present, the fundamentals of the commercial segment
are rather strong and encouraging, supported by low interest rates, access to loans and the decrease in operators’
management costs following favourable oil price trends.
Given the instability that characterises many industrial sectors, the aerospace industry attracts investors despite intense market scrutiny.
The performance of the civil aerospace industry is linked to
the evolution of air transport and the reasons set out above.
It shows a continuous improvement in the long term compared to the general economic trend.
Indeed, compared to the average growth rate of the world
economy which, in the period 2015 – 2034, is estimated
at approximately 3.1%45, the estimated civil growth rate46
is equal to approximately 3.6%, with an expected aircraft
demand of 38 thousand units worth about USD5,600 billion.
The growth of passenger (+4.9%) and cargo (+4.7%) transport is equally high, with the RPK (Revenue Passenger
Kilometer) index up by little less than 5% p.a.
Civil Aircraft47 – Breakdown of demand by geographical
segment in 2015 - 203448
Geographical
segment
Number of aircraft
Percentage
14.330
37,7%
Europe
7.310
19,2%
North America
7.890
20,7%
Middle East
3.180
8,4%
Latin America
3.020
7,9%
CIS48
1.150
3,0%
Africa
1.170
3,1%
Total
38.050
Asia
Aeromobili
civili
- domanda
di nuovi velivoli
Civil Aircraft
- demand
for new
aircraft 2015-2034
in units 2015
- 2034 in unità
8%
Total cost (billions
of USD)
Unit cost (USD/
barrel)
2013
208
110
2014
195
100
2015
125
<80
In the short term, the increase in airline companies and operators’ productivity is a market driver, while in the long term,
the main phenomena are linked to the changes underway
in many regions of the world affecting transport means and
characteristics.
Almost 40% of the demand for new aircraft in the next twenty years will come from Asia, mainly driven by China which
is set to become the largest domestic travel market, while
Asian routes will hold the main share of traffic.
44 PWC. Missioncontrol. “Aerospace and Defense Industry Mergers and
Acquisitions Report.” November 2015.
45 IHS Economics. “Country and Industry Forecasting”. Ed. March 2015.
46 Boeing. “Current Market Outlook 2015-2034”.
Asia
Asia
Europe
Europa
8%
38%
North America
Nord America
Middle East
Medio Oriente
Latin America
America
Latina
CIS
21%
Africa
CIS
19%
In 2015, these parameters were particularly high (RPK: 6%,
capacity +5.8%), mainly as a consequence of the improvement in the use conditions of the fleet that, during the year,
benefited, in particular, from the decrease in fuel prices.
Year
3%3%
Africa
From 1981 to 2014, the increase in the production and sale
of commercial aircraft was 218%49, while the average increase50 in production over the past 20 years is approximately
87%.
As mentioned earlier, income from commercial air transport
doubled on the previous year thanks to the favourable conditions experienced in 2015, reaching the highest level of
the past thirty years.
Over the last ten years, the sector’s annual average growth
rate (CAGR) approximated 7%, further confirming its outperformance of the economy.
47 Boeing. Op. cit. The data do not include business jets or light sport aircraft.
48 Commonwealth of Independent States
49 Deloitte. “Global Aerospace and Defense Industry Outlook”. October
2015. “History and forecast for large commercial aircraft orders and production (1981 to 2014)”.
50 7-year mobile average. DTTL. “Global Aerospace and Defense Industry
Outlook”. Op.cit..
39
With respect to the segmentation of turnover expected from
new aircraft, 70% is still related to the single-aisle category
which, at present, has a fleet of 14,100 aircraft.
Business Jets and GA turboprops – Number of units and revenue in
Civil Aircraft
Units of Production 2015 - 2024
(% Market Share)
2015-202453
Units
16%
47%
Billions of USD
GA Turboprop (excluded pistons)
5.680
19,9
Very Light to Light-Medium Jets
4.134
34,1
Medium to Long-Range Jets
5.315
209,0
185
12,1
15.314
275,1
27%
6,5%
9,3%1,4%
11%
Regional
jets
Regional
jets
12,5%
Single-aisle
Single-aisle
Small
widebody
Small
widebody
Medium widebody
Medium widebody
Large widebody
Large widebody
LargeAircraft
Aircraft
Large
Regional
RegionalAircraft
Aircraft
Business
Jets
Business
Jets
GA/Utility
GA/Utility
Corporate Airliners
Total
70,2%
Civil Aircraft
Value of Production 2015 - 2024
(% Market Share)
4%
1%
8%
As in prior years, during the economic downturn, the typical
reaction of manufacturers was to increase investments and
launch a series of new models.
Performance discrepancies remain between the larger aircraft category (the mid-size and long-range), and so far
less vibrant vitality lighter categories.
Analysts estimate the sales potential54 for the next ten years
at slightly less than 10 thousand aircraft, worth approximately USD255 billion or twice the amount for the previous
decade.
Business
jet market
forecast
20152015
- 2024
(units)
Business
jet market
forecast
- 2024
(unità)
300
unità
250
200
150
100
50
Veryto
Light
to Light-Medium
Very Light
Light-Medium
JetsJets
Corporate
Airliners Airlines
Corporate
7,2%
34,7%
12,4%
37,1%
Regional aircraft
4.040
136,1
Business jet
9.634
255,3
GA/utility
5.680
20,0
36.277
3.084,2
Totale
51 Fonte: Forecast International, “Analysis 2. The Market for Regional
Transport Aircraft”, November 2015.
40
After the negative period which went from 2009 al 2012, the
business jets segment has been recovering since 2013
and is expected to consolidate in the next five years.
This trend is supported by the increase in orders and the
overall rise in air traffic using this type of aircraft.
The next table shows the value of this market by aircraft
type.
52 Source: Forecast International, “The Market for Regional Transport Aircraft. Analysis 2”, November 2015.
2024
2023
2022
2021
2020
100
75,9%
50
27,0%
-
GA
Turboprops
GA
Turboprops
GA
Turboprops
Medium
Medium to
to Long-Range
Long-Range Jets
Veryto
Light
to Light-Medium
Light-Medium
Jets
Very
Light
to
Very Light
Light-Medium
JetsJets
CorporateAirliners
Airliners
Corporate
Corporate Airlines
Airlinee
Types
Airliner Types
Medium
Medium
Light
Large
Large
Super Mid-Size
Super Mid-Size
Long Range
2024
2.672,8
2019
150
2015
16.923
2017
200
2023
Large aircraft
Miliardi di USD
2018
300
unità
250
4,4%
1,2%
51
Unità
2016
Business jet
market forecast
2015
- 2024 (millions
of US
dollars)
Business
jet market
forecast
2015 - 2024
(unità)
Business
Jets
&Jets
Business
&Turboprops
GA
Turboprops
Business
Jets
&GA
GA
Turboprops
Value
ofValue
Production
2014
- 2023
of Production
Units
of
Production
20142014-2023
- 2023
(%(%
Market
Share)
(% Market
Share)
Market
Share)
2022
Civil aircraft – Number of units and revenue in 2015 - 2024
GA
Turboprops
GA
Turboprops
Very Light
In general, the group operates in this market as a supplier of
landing systems for extreme categories, i.e., the largest business jets (Gulfstream) and very light jets (One Aviation).
2021
Of the two historical markets for regional aircraft, North
America is the most dynamic, while Europe is affected by
weaker economies and, above all, greater legislative and
tax constraints, and, consequently is likely to be overtaken
by Asia.
27,0%
2020
The regional segment has recently evolved with the consolidation of ETRs and Bombardiers in relation to turboprops
and the withdrawal of other manufacturers from the market.
Jets maintain their leading position; according to estimates,
in the 2015 – 2024 decade, they account for 55.3% of the
segment’s total deliveries and 74.6% of the value generated52.
Medium
LightLight
Medium
Very Light
Light
Light
GA/Utility
2019
The table below provides a summary of civil aircraft market
forecasts for 2015-2024, including business jets.
Business Jets
Regional
Business
JetsAircraft
GA/Utility
Large
Large
Super Mid-Size
Super Mid-Size
Long Range
Medium
Medium
Light
2017
Consolidation by product family (components, air structures, electronics, interiors, etc.) could continue in the next
few years to create economies of scale and ensure adequate investments in skills and equipment.
Large
Aircraft
Large Aircraft
Regional
Aircraft
Airlinee
Types
Airliner Types
37,1%
34,7%
2018
The second refers to the probable changes the supply
chain is expected to undergo with further consolidation, given smaller companies’ difficulties in meeting the necessary
investment levels.
1,2%
2016
The first envisages the entry of a new global competitor in
the duopoly that has existed since 1997. This possibility is
mainly linked to the technological factor, i.e., in terms of innovation with an impact on both functionality and efficiency.
87%
-
Business
& GA
Turboprops
Business
JetsJets
& GA
Turboprops
of Production
Units Units
of Production
20142014-2023
- 2023
(% Market
Share)
(% Market
Share)
2015
Based on the above, production levels are expected to increase by at least 20% over the next ten years, with two
possible developments.
Medium
LightLight
Medium
Very Light
Very Light
The latter’s market is highly concentrated in North America,
the largest one geographically, but that has also reached
a certain level of saturation. Despite the improvement in
the overall economic conditions and in companies’ profits,
private parties are still reluctant to complete significant acquisitions, also given the uncertainties surrounding some
aspects of the tax policies to be adopted by the government.
With respect to the first category, Gulfstream has maintained its leadership position. The introduction of the G650
aircraft, for which MAG is producing most of the landing system, along with Bombardier’s Global 7000 and 8000 mo-
53 Source: Forecast International, “The Market for Business Jet Aircraft.
Analysis 3”. December 2014.
54 9,634 in the 2015 - 2024 period, 2015 estimate: 893. Source: Forecast
International. “The Market for Business Jets Aircraft. Analysis 3”, October
2014.
Light
Light
41
dels, constituted the potential birth of a new category: ultralong-range aircraft, as the size and performance of these
models significantly differs from the long-range average.
Gulfstream has also completed the development of the P42
which is a substantial evolution of the G450 and which sees
the collaboration of MAG group in the design and production stages for the main landing gear components.
The very light jet segment was the most affected by the
economic downturn and its post-crisis recovery is slower.
However, the last few months of 2015 showed indications of
a rebound related, in particular, to the customer One Aviation.
Indeed, the latter, which is the result of the merger between Eclipse Aerospace Inc. and Kestrel Aviation Inc., has a
considerable delivery portfolio of the aircraft mounting MAG
E500 and E550 landing system from 2016 onwards.
Trade associations, led by NBAA and GAMA, worked to
counteract this adverse publicity with empirical research
to highlight the economic advantages that the companies
would benefit from using private jets on an on-demand basis, as a shuttle between remote production sites, or for
chartering activities when utilisation is low.
The helicopter industry is worth approximately USD23056
billion on a ten-year basis and consists of a limited number
of manufacturers (OEMs), six of which cover roughly 54%
of the market in terms of the number of aircraft and 64% in
terms of revenue (Sikorsky Aircraft, Airbus Helicopters, Bell
Helicopter, AgustaWestland, NH Industries and Boeing Rotorcraft Systems). Including the share held by the Russian
Federation’s Russian Helicopters, the oligopoly accounts
for almost 69% of the number of aircraft and nearly 84% of
revenue.
The issue of alternatives to air transport was covered by
some studies on the top 500 S&P companies, coordinated
by the above associations, which provided an exhaustive
picture of private air transport and a quantification of the
economic benefit for companies.
According to statistics, only 22% of companies used private jets exclusively to transport top management, while 50%
transported also senior or middle managers and the remaining 20% technical and sales personnel and staff.
Very Light
jet market
forecast
- 2024 (unità)
market
forecast
2015
- 20242015
(units)
The key drivers for private transport are particularly interesting: 64% of the companies said that airline schedules
were incompatible with business travel needs, 19% that private jets were necessary to reach destinations that were not
served by airline operators, while a small percentage cited
the need to connect to a public transport route.
The diversification of private transport services offered using
business jets, such as fractional ownership, air charter or jet
cards, services provided by specialised companies, have
spurred the growth of the sector.
Analysts’ estimates are generally prudent on this point and
indicate an interesting development of very-light jets over
the next ten years in terms of units delivered and value.
Very light Jet
The evolution of the European market is negatively affected
by some regulatory obstacles and tax disincentives that increase operators’ management costs.
2016
Furthermore, an important contract with the Chinese operator Jinggong General Aviation involving 20 aircraft was
unveiled during the NBAA convention held in Las Vegas in
November 2015.
few years highlighted once again the issue surrounding
the social acceptability of possessing and using this type
of aircraft in a difficult social context, brought to light by politicians that did not hold back with their criticism about the
privileges enjoyed by many corporations.
Among the consolidated manufacturers, Airbus Helicopters
and AgustaWestland substantially confirmed their market
share, while the Bell Helicopter Textron group further improved its position as a result of its aircraft range renewal
programme it launched some years before.
Helicopter -- Big
BIG77OEMs
OEMs
Helicopter
Unitsof
ofProduction
Production 2015
2015 -- 2024
2024
Units
(%Market
MarketShare)
Share)
(%
8,5%
The positive period that began in 2011 continued in 2015
and should last until 2020 at least, with a steady increase
in orders and deliveries although some market outlets, such
as the Oil & Gas applications, are facing a crisis caused by
the decrease in the price of oil products and the reduction in
the profits of sector companies.
Despite these short to medium-term trends, the outlook remains positive and shows a consolidation trend of growth
opportunities. The forecast number and revenue of the units
estimated for the next ten years can be summarised as follows.
32,6%
150
100
50
2024
2023
2022
2021
2020
2019
2018
2017
2015
-
The key drivers for the development of this segment are
the flexibility of private transport, which is mainly business,
in an increasingly international context, lack of satisfaction
with commercial airlines and safety issues.
In the next few years, applicable regulations could entail
certain aspects, particularly in terms of emissions and the
expansion of the ETS55 system or the creation of equivalent systems, causing market changes with an impact on
operators’ management costs and, potentially, providing an
impetus to renew existing fleets.
Europe constitutes the second most important market in
this category, with growing demand, in particular in Eastern
Europe and Russia.
Lightforecast
jet market2015
forecast
2015 -(units)
2024 (milioni di USD)
Very light Jet Very
market
- 2024
800
600
400
200
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
-
Over the past 30 years, the success of the business jets
industry was driven by changes in travel trends and how the
public perceived these jets for business travel purposes, as
an opportunity to improve logistics and, hence, productivity,
rather than as a status symbol.
However, the economic difficulties that marked the past
From a technical/commercial point of view, the smaller size
aircraft category shows some overlaps with turboprops and
the helicopter segment, given the aircraft cost range (purchase and operating costs).
Consequently, the less expensive jets are included in the
business fleets as an alternative to turboprops (Daher-Socata TBM 900, Pilatus PC-12) or helicopters.
55 European Union (EU) Emissions Trading System (ETS). Following opposition from a number of Member States of the European Union, a tripartite
agreement (European commission, European Parliament, Council of Europe) was reached in March 2014, subsequently voted on by the European
parliament, restricting ETS application to flights to and from one of the 27
Member States.
Units
Billions
of USD
Sikorsky Aircraft Corp.
1.867
40,0
Airbus Helicopters
4.256
35,9
Bell-Boeing Joint
Program Office
157
11,3
AgustaWestland
1.952
25,4
Bell Helicopter Textron
2.828
18,0
Russian Helicopters
3.159
45,6
513
18,3
Other
7.125
47,9
Total
21.857
242,4
19,5%
8,9%
14,5%
Sikorsky aircraft Corp.
Bell-Boeing Joint Program Office
Bell-Boeing
Joint Program
Office.
Bell
Helicopter Textron
Inc.
Boeing Rotorcraft Systems
Airbus
AgustaWestland
Airbus
Russian
Helicopters
All Others
Agusta Westland
Bell Helicopter Textron Inc.
Russian Helicopters
All others
Helicopter - BIG 7 OEMs
(% Market Share)
16,5%
19,8%
7,5%
14,8%
4,7%
18,8%
7,4%
Boeing Rotorcraft
Systems
0,7%
12,9%
2,3%
Helicopters (Big 7 OEMs) – Number of units and revenue in 2015-2024
200
42
Helicopter industry
redirection launched, inter alia, by Russia, technological
developments and considerable investments, such as in
Korea. Meanwhile, the outlet markets of the helicopter industry evolved and grew, creating the conditions for an overall
development of the industry.
Bell-Boeing Joint Program Office
10,5%
Airbus
AgustaWestland
Russian Helicopters
All Others
The market segmentation by helicopter category shows
that civil aircraft will account for 73% of helicopter units and
40% of helicopter revenue over the next decade, while heavy military aircraft for defence will account for over 50% of
revenue.
In recent years, the share of the top six OEMs of the Western market fell slightly following the entry of some new
OEMs, specifically the Russian Federation and South Korea, in addition to the business restructuring and partial
56 Source: Forecast International, “The Market for Light Commercial – Rotorcraft. Analysis 3”. November 2014 and “The Market for Medium-Heavy
Commercial – Rotorcraft. Analysis 4”. March 2015.
43
Helicopters – Number of units and revenue in 2015-202457
Units
Billions of USD
Light civil helicopters (< 4.5 t)
11.353
30,7
Medium civil helicopters (4.5
– 8.5 t)
1.916
31,5
Heavy civil helicopters (>8.5 t)
1.728
28,8
862
7,4
Light military helicopters (<
4.5 t)
Medium military helicopters
(4.5 – 8.5 t)
Heavy military helicopters
(>8.5 t)
Total
962
5.036
21.857
mand, while the utility aircraft usage accounts for between
15% and 25% and includes the offshore energy sector, currently facing a small crisis due to the decrease in the price
of oil products.
A geographical analysis of the light civil aircraft market
shows that demand is still highly concentrated in mature
economies, especially in Europe and North America, which
should represent approximately 55% of the demand for the
coming decade. Asia is the second most important market,
with an estimated share of 15%, like that of Latin America.
Both markets are growing strongly.
27,0
117,0
242,4
The most numerically significant segment, i.e., light civil
helicopters, is positively related to the performance of the
global economy, as confirmed by the strong recovery since
the lows reached in 2010.
The current forecasts indicate a growth cycle until 2020, followed by a decrease in 2021 – 2022 and a return to growth
in 2023.
The outlook for Asia currently reflects the closure of the Chinese market to commercial private aviation. This political
factor is evolving and, as of 2016, may introduce some significant changes to future trends, boosting infrastructural
investments and commercial opportunities.
Recently, China’s helicopter fleets have expanded at high
rates61, but from a low starting point and still only to modest
revenue. The Indian and the Russian markets are potentially extremely rich, although both governments, for different
reasons, adopt protectionist policies that limit the opportunities available to Western manufacturers.
Helicopter
(% Market Share)
According to operators , the main driver of this market is
the renewal of fleets, comprised of aircraft with many flight
hours, unsuited to customers’ needs or no longer under
warranty, which are replaced with models with more sophisticated avionics and more complete equipment, including
in terms of flight safety.
58
23,0%
4,4%
51,9%
3,9%
In general, market surveys59 indicate the following as deciding factors in selecting aircraft from the most to the least influential range, cabin size, reliability levels and safety
equipment, followed by performance and brand loyalty.
7,9%
8,8%
Civili leggeri (< 4,5 t)
This segment is highly dependent on the economic trend of
North America and Europe - that account for over 50% of
its market, in addition to another 20% represented by Latin
America and Asia.
57 Source: Forecast International, “The Market for Light Commercial –
Rotorcraft. Analysis 3” and “The Market for Medium-Heavy Commercial –
Rotorcraft. Analysis 4”, op.cit.
58 Honeywell, “Turbine-Powered Civil Purchase Outlook”, 2015.
59 Honeywell, op.cit.
60 Source: Forecast International, “The Market for Light Commercial –
Rotorcraft. Analysis 3”, op.cit.
44
Civili pesanti (>8,5 t)
Light military (<4.5 t)
Governativi leggeri (< 4,5 t)
Governativi medi (4,5 – 8,5 t)
Governativi pesanti (>8,5 t)
Medium Civil ( 4.5 - 8.5 t)
Medium military ( 4.5 - 8.5 t)
Heavy Civil ( > 8.5 t)
Heavy Military ( > 8.5 t)
The helicopter market breakdown by aircraft manufacturer shows a dramatic concentration, with the top three
manufacturers – Airbus Helicopters, Bell Helicopter Textron
and AgustaWestland – accounting for over 54% of demand
for new aircraft in the next ten years, and over 68% in terms
of revenue.
Units
Billions of USD
Airbus Helicopters
3.772
27,3
2.583
12,3
AgustaWestland
1.808
22,4
Sikorsky Aircraft
650
11,0
MD Helicopters (MDHI)
210
0,5
Other
5.974
17,7
Total
14.997
91,2
MediumGovernativi
military
( 4.5
pesanti
(>8,5- t)8.5 t)
Heavy Civil ( > 8.5 t)
Heavy Military ( > 8.5 t)
AgustaWestland
Bell-Agusta Aerospace Co.
MD Helicopters Inc. (MDHI)
All Others
Eurocopter
AgustaWestland
MD Helicpoters Inc. (MDHI)
All others
Civil Helicopter - Big 5 OEMs
Civil Helicopter
- BIG 5 OEMs
Value
of Production
2015 - 2024
(% Market Share)
(% Market Share)
19,5%
29,9%
12,1%
AgustaWestland
Eurocopter
Sikorsky
aircraft Corp.
Sikorsky
Aircraft
Corp.
Bell
All Others Textron Inc.
Helicopter
MD Helicopters Inc. (MDHI)
MD Helicpoters Inc. (MDHI)
The top three OEMs hold a dominant position mainly in the
civil, light and medium helicopter segment, which is also the
most competitive. They also constitute the main market for
the group’s products and services, especially for the consolidated operating segments (supra Company profile).
The investments made during the 20 years of life of MAG,
particularly over the past ten years, were mainly aimed at
increasing the commercial diversification, pursuing an increasingly balanced position vis-à-vis the various aircraft
manufacturers.
The MAG group is present with its products in all main civil helicopter projects (AW109, AW119, AW139, AW169,
AW189, B429, B525, AH145 and AH160), and is the landing
system manufacturer for six projects.
Governativi leggeri (< 4,5 t)
61 20% on an annual basis in the period 2009 – 2014. The 2014 year-end
fleet is estimated at 465 units. Source: Forecast International, “The Market
for Light Commercial – Rotorcraft. Analysis 3”, op.cit.
All others
Civili medi (4,5 – 8,5 t)
Medium Civil
( 4.5medi
- 8.5
Governativi
(4,5t)
– 8,5 t)
0,0%
1,4%
Eurocopter
AgustaWestland
3,1%
Light military (<4.5 t)
12,1%
Eurocopter
11,1%
Civili pesanti (>8,5 t)
4,3%
13,5%
11,9%
Civili leggeri (< 4,5 t)
17,2%
24,6%
13,0%
Light civil (< 4.5 t)
25,2%
39,8%
0,5%
0,0%
12,7%
48,3%
Civil Helicopter - Big 5 OEMs
Civil of
Helicopter
- BIG 5 OEMs
Units
Production
2015 - 2024
(%Market
Market
Share)
(%
Share)
Civil helicopters – Number of units and production revenue
in 2015-202463
Si tratta di un segmento di mercato che é cresciuto costantemente negli anni recenti e di cui si prevede una ulteriore
crescita favorita dal lancio di nuovi modelli.
Helicopter
(% Market Share)
According to analysts60, the industry for this type of helicopters should grow by approximately 5.6% year on year
until 2017, followed by a more moderate 2.8% between
2018 and 2020. As mentioned earlier, starting from 2021, a
physiological decrease is expected, although the time horizon is speculative.
In terms of applications, because of their versatility, these
aircraft are suitable for many uses. The business market
accounts for approximately 31% of usage, law enforcement
and EMS usage make up between 15% and 20% of de-
Civili medi (4,5 – 8,5 t)
Light civil (< 4.5 t)
The Medium/Heavy civil aircraft segment is substantially
a niche occupied by a relatively small number of models
which, due to their weight, size and complexity, have fewer
potential applications than light aircraft models, and are
mainly used to support energy source exploration and offshore drilling platforms, as well as, to a minor extent, SAR62
activities and VIP government transport. Historically, Sikorsky, Airbus Helicopters and Russian Helicopters have been
significant players in this segment, while more recently AgustaWestland and Bell Helicopter have launched new models - the AW189 and Bell 525 – which straddle the light
civil and medium civil segments, like the S-92, the AS332/
EC225 and the Mil Mi-8/17 family.
62 Search and rescue.
63 Source: Forecast International, “The Market for Medium-Heavy Commercial – Rotorcraft. Analysis 4”. Op.cit.
With respect to the military sector, the light aircraft segment is sluggish, after a period of interrupted growth which
peaked in the five year period 2006 – 2010, doubling the
value of sales due to high military spending. Consequently,
as the amounts recorded in 2010 were unsustainable, the
correction has generated a decline that is expected to continue through to 2023, with a small recovery in 2016.This
segment is led by Airbus Helicopters and Bell Helicopter
in terms of units delivered and revenue, respectively. The
45
power relations are not expected to change in the next ten
years.
petitive factors.
The same applies to the medium-heavy helicopter segment that experienced a protracted period of growth (2005
– 2014) to subsequently stabilise and then point to a contraction phase. In this category, the weight of government
spending is clearly critical and, consequently, the conclusion of the some stages of military campaigns, above all
Afghanistan and Iraq, as well as the budget limitations imposed by political changes in this respect, played a very
important role.
This segment includes almost all the leading manufacturers
with important aircraft: AgustaWestland with the AW101 and
the CH47, manufactured in partnership with Boeing (the latter is present with the V-22, a convertiplane manufactured
for the Marines and the US military forces), Airbus Helicopters with the AH/EC725 and Sikorsky with the Black Hawk
H-60 series.
Governmental
Helicopters
8 OEMs
Governmental
Helos - BIG- Big
8 OEMs
Units
Production 2015
Units
ofofProduction
2015- 2024
- 2024
(%
Market
Share)
(%Market Share)
18,0%
2,3%
4,7%
4,6%
Eurocopter
AgustaWestland
BellNH
Helicopter
Textron Inc.
Industries SARL
Bell-Boeing
All OthersJoint Program office
NH Industries SARL
Boeing Rotorcraft systems
Korea Aerospace Industries
19,2%
36,7%
29,0
484
8,7
157
11,3
AgustaWestland
144
3,2
Bell Helicopter Textron
245
5,7
NH Industries
322
13,6
513
18,3
Korean Aerospace
Industries
313
6,1
Other
3.446
55,6
Total
6.860
151,5
MAG Group’s inclusion in military development projects is
currently limited to variations of civil models with a small
market share (approximately 10% of the total) and the Korean Utility Helicopter, built by KAI (Korea Aerospace Industries), on which production began in 2012, with approximately
260 helicopters expected to be built.
Access to military development projects is characterised
by restrictions, which typically consist of regional subsidy
policies and strict regulations (ITAR), which represent com64 Source: Forecast International, “The Market for Light Military – Rotorcraft 2015 - 2024”, November 2014 and “The Market for Medium-Heavy
Military – Rotorcraft 2015 - 2024”. April 2015.
Outout / Outcome
5,7%
7,4%
12,1%
9,0%
AgustaWestland
Eurocopter
Korea
Industries
BellAerospace
Helicopter
Textron
All Others
strenghening
Eurocopter
Program office
SikorskyBell-Boeing
AircraftJoint
Corp.
brand recognition and
2,1%
3,8%
increased commercial and
AgustaWestland
NH Industries SARL
Inc.
Bell-Boeing Joint Program office
NH Industries SARL
All Others
Strategies and strategic positioning
geographical diversification
remuneration of stakeholders
larger international presence
Integration of the product and
customer satisfaction and sound
service offer
reputation
continuous product and process
techynological competitive
innovation
advantages
more efficient operating model
General directives
optimisation of financial stability
technological change
valuing high-profile internal
infrastructural developments
behavioural developments
macroeconomic context
external context
1.236
value creation matrix
creation of value
Billions of USD
◊ consolidating MAG’s reputation as a reliable industrial aerospace group with a solid range of products and services. Customers are at the heart of every initiative in this strategy;
◊ strengthening the group’s presence in its market segments, not only by growing in size but also by focusing on the
essential processes of its core business, with the aim of acquiring a leadership position;
◊ increasing its diversification, with an increasingly international presence on the relevant advanced or emerging
markets, by entering new geographical areas (Asia) and expanding its presence in the training equipment and
business jet segments;
◊ strengthening its operating model, pursuing greater efficiency and process/structure integration. This scope also
includes projects involving human resources, management incentives and striving to balance individual results with
those of the entire group;
◊ optimising equity soundness, while maintaining a balance of sources and applications of funds, in order to strengthen capital, profits and cash flows.
Governmental Helicopters - Big 8 OEMs
Governmental Helos - BIG 8 OEMs
ValueValue
of Production
2015
- 2024
of Production 2015
- 2024
(% Market Share)
Share)
(%Market
4,0%
Bell-Boeing Joint Program
office
46
AgustaWestland
All Others
eight OEMs)64
Airbus Helicopters
3,6%
Eurocopter
Military helicopters – Number of units and revenue in 2015-2024 (top
Sikorsky Aircraft
2,1%
7,5%
Sikorsky
Aircraft Corp.
Sikorsky
Aircraft
Corp.
Bell-Boeing Joint Program office
Segment reporting);
strengthening its capital and managing it with discipline;
consolidating relationships with customers and retaining them;
expanding its customer base in its market segment and consequently diversifying its portfolio and the related risks;
projects of technical excellence, both in terms of applied research grants and the development of new products;
projects to develop the brand and increase brand recognition.
Consequently, the fundamental elements of this strategy consist of
7,1%
50,2%
The presence of OEMs from emerging countries, such Korea Aerospace Industries (KAI), or the Russian Federation
(Russian Helicopters) is increasingly stronger. According to
analysts, the latter is expected to lead the market over the
next ten years with over 2,171 aircraft and a market share
of 40.9%.
Units
◊
◊
◊
◊
◊
socio-political scenarios
resources
workplace diversity and
legal-legislative context
MAG has developed its strategy for the next five years with
a focus on exploiting growth opportunities and enhancing
the group. The strategy is based on the priority values
(see Mission & Values) that motivate us to improve and
consolidate our strengths and reduce our limitations and
weaknesses.
Business strategies and positioning. The strategic
plan
In general, the group’s goal is to structure its approach and
organisation in order to make the most of its tangible and
intangible assets in the interests of all stakeholders and
achieve satisfactory profitability levels through discipline, simplicity and a focus on:
The MAG group has charted its course in the light of the
above, substantially combining the experience of historic
aerospace companies, such as SIAI, which celebrates its
anniversary, and Agusta and Nardi in the helicopter segment.
This vision entailed significant investments in product innovation, initially as part of strategic partnerships (e.g., UTAS)
and then individually, after consolidating skills and reputation.
◊ its core business, which it has accurately identified
for each operating segment (see Company profile and Note esplicative al bilancio consolidato, 3.4
MAG’s business project re-interprets the values set 20 years ago in a modern way and with a focus on components,
progressively developing a range of products (systems) and
In recent years, this activity encompassed applied research
grants, with institutional partners (e.g., universities and private research centres), necessary to increase the skills in
opportunities
activities (services) to be offered to aircraft OEMs, integrating technologies and systems on which its signature and
competitive edge is based.
47
Ownership
status
Customer diversification
& Product Development
New AW109 servo
actuator
Hanwa LAV LS
AW101 VIP
INAER H145 EMS
MAKE TO DESIGN
AW139 FCS
Bell 525 CCS
Bell 429 CCS VIP
AW139 CCS
TAI Hurkus LS
AirGreen H145 EMS
AA M345 LS
AW119 LS (skid)
AW139 LS
AW109 CCS
Bell 525 LS
AH160 CCS
H145 CCS VIP
AW109 LS
Bell 505 FCS & servo
actuation
Hanwha KUH FCS
AW169 FCS
AH160 LS
Bell 429 LS
Eclipse E550 LS
AW189 CCS
NH500 AS
AH160 FCS
UTC A380 LS
BUILD TO PRINT
Piaggio P180 FCS
AW129 FCS
AB412 AS
Finmeccanica
Airbus Helicopters
Bell Helicopter
United Technologies
Others
UTC P42 LS
UTC G IV-V LS
UTC G650 LS
AW109 FCS
AW119 FCS
MATURITY
AW101 FCS
FULL PRODUCTION
LS
FCS
CCS
VIP
EMS
Landing Sys
Flight Control Sys
Cabin Comfort Sys
VIP Interior
Emergency Medical
System
AW189 FCS
EARLY PHASE
PRODUCTION TO BE STARTED
Product life
phase
related segments.
The group’s strategies since it took its current form are significantly informed by innovation as a core principle, as
the group strives for innovation as a means proportionate
to its size and potential, while also pursuing all tangible opportunities (see Sustainable innovation and infra Development of new products).
From a strategic and market positioning point of view, a
first evolutionary phase can be identified which developed
entirely in the helicopter elective segment, to subsequently
extend to trainers, business jets and UAVs.
More recently, a second phase generated a more precise
identification of business strategic affairs (BSA), based on
which the organisational, operational and management
sectors that constitute an operating segment were designed and built.
The first area coincides with the Integrated Aircraft Systems segment, described earlier, which today combines
the whole range of systems, being the safety-critical parts
of the ALS division (landing systems, flight control systems,
hydraulic systems, etc.) and the interior components of the
Cabin comfort division (liners, cabinet, infotainment systems, etc.), which both serve the OEM market.
Percentage wise, the group’s systems account on average
for 10% of the aircraft sale price, in addition to maintenance
activities that may reach a further 15%.
In the short term, the group’s objectives were aimed at expanding its market penetration with the implementation of
the following cross selling commercial strategies:
◊ business strategies, i.e., targeting OEMs that belonged to the same group as the customers already
served,
◊ product/service strategies, i.e., integrating the supply to the same customer with other products or services that are part of the same portfolio.
These strategies, including as part of organic growth,
strengthened or accelerated the diversification actions
that constitute a priority.
At the reporting date, the weight of the main customer
(Finmeccanica group) decreased by almost 10% on
2013/14 and is expected to fall below 50% over the fiveyear business plan.
MAG Group program (2015 - 2024)
The second area (Aircraft Services) refers to the supply
of aircraft services that the group is already able to provide
as part of a series of existing skills (e.g., MRO, aircraft completion, refurbishment, etc.) which, however, can be further
extended or developed, and with a potentially interesting
market outlet which, in turn, can also be extended from helicopters to fixed-wing aircraft.
With respect to the market, this strategic area can be mainly
identified in operators and end customers.
Rotary Wing Programs
Fixed Wing Programs
MAG group ASA (2016 - 2020)
Aircraft Services
In the first case, the driver of the potential size of these
markets relates to the demand for new aircraft of the reference segment, including that of the regional aircraft that
the group intends to penetrate in the near future. This segment is estimated at approximately USD 80 billion, of which
USD10 billion refers to commercial helicopters.
Suppliers
Commercial and
relationships
Integration, quality
Financial
community
Financial
Profitability,
financial soundness
Public
administration and
institutions
Infrastructures and
relationships
Consensus,
distribution of
wealth
Community and the
local area
Natural and
environmental
Innovation,
reducing
consumption
Technological
community
Technological
Innovation,
reducing
consumption
Many of the investments made, not only in technologies,
although they are certainly the most voluminous, cannot yet
be perceived in terms of current activities, but are an essential factor in consolidating MAG’s position and ensuring
business continuity over time.
Key Business Plan Guidelines
In 2015, the Company has refined its corporate strategy,
which had already been laid out in the previous years.
Through the 2016 – 2020 business plan, the Company will
implement such strategy. Key business guidelines of the
plan are:
◊ By 2020, exclusively through organic growth, we
plan to reach €200M in Sales, with an international
footprint and a diversified Customer Base (none of
our Customers will have a dominant position). These goals will be achieved also thanks to the new
contracts that have been awarded in the recent past
and are now in a development phase. As soon as
production will start, such new contracts will provide high revenues for many years - in 2020 these
contracts will return additional sales for €80M - thus
supporting future growth.
◊ MAG new development initiatives will be mainly focused on:
The group’s growth process is therefore based on development objectives in accordance with defined priorities.
These objectives are based on the essential elements underpinning its strategies. As such, its growth does not relate
solely to volumes.
It includes a series of actions aimed at increasing value, as
defined in previous sections of this report (e.g., Economic
value and stakeholders) and, accordingly, considering
the perspective of the various stakeholders.
Stakeholder
Type of capital
Objective
Human resources
(employees and
workers)
Human and
organisational
Employment, value
and climate
Shareholders
Financial
Profitability,
financial solidity
Customers
Commercial and
relationships
Reputation,
satisfaction
helicopter, trainer and VLJ new programs. We will
be increasingly offering to our Customers electromechanical retraction actuation systems, in line with
today’s “more electric and greener” market trends.
◊ Flight Control Systems activities will be focused on
hydraulic and electro-mechanical actuation for both
rotor wing and fixed wing platforms through the development of new primary and secondary flight control actuators and servo-actuators. MAG will exploit
more and more its various experiences, which already allowed the company to win different contracts
in the recent past.
◊ Cabin Comfort will continue its path of growth through the development and the acquisition of new competences and technologies in order to further improve cabin comfort control and performances in terms
of noise and vibration reduction, environmental control and cabin management. Especially concerning
VIP mission configurations, the capabilities of our
Design Studio will be an essential key to success.
A)
strengthening Aircraft Services Strategic
Business Unit, especially in North America,
B)
increasing the Company’s role in the fixed wing market segment, allowing us to double
fixed wing related-sales between 2015 and 2020.
This will lay the foundations to increase fixed wing
sales significantly during the following five years.
In detail, the main key aspects for this strategy will be:
A)
stems
Strategic Business Unit Integrated Aircraft Sy-
◊ Landing Systems business line – which today is
already focused mainly on fixed wing aircraft applications – will continue to grow thanks to the longterm strategic cooperation with UTAS, and thanks
to the beginning of the production phase of several
B)
Aircraft Services Strategic Business Unit
In addition to strengthening our presence in North America,
which will be the main development driver for the next five
years, we will try penetrate the fixed wing market by leveraging our cabin comfort competences, as we did successfully on rotor wing aircraft.
In synergy with our OEM Customers, we will offer our services to End Users, completing the range of our mission
customization solutions.
In this context, the Aircraft Refurbishment market segment
will offer interesting opportunities in the years to come.
During the five-year plan, margins are expected to grow,
not only because of the increase in volumes, but also as a
result of MAG efficiency improvement activities which were
launched a couple of years ago and have seen: layout reorganization of plants, investments in new machinery and in
IT Systems, training of people that have been heavily involved in lean manufacturing activities.
MAG growth and development will also be supported by the
Company’s Merger & Acquisition Plan, which represents a
potential upside of the Business Plan, yet not being part of
it.
Target Companies’ profile is obviously in line with the above-indicated strategies, such as, for example, the further
development of Aircraft Services activities in North America.
MAG growth through acquisitions will depend on the amount
of external funds to which we will have access. This, combined with our current competences and capabilities, as well
as our diversified portfolio, which includes four business lines, may notably allow us to reach a significant size and
visibility in the International Market.
51
Corporate governance and business
conduct
Governance is the term used since the Middle Ages65 to indicate the rules of conduct for an individual, family, political
system or even the cosmic relationship between god and
nature.
Over the centuries, a principle has arisen with respect to
the separation of running a business from its strategic and
control guidelines, with an increasingly clear and elaborate
definition, generally in the aftermath of large scandals, from
the mercantile companies of the 17th century66 to the Enron
scandal67.
It has, in this way, become a set of legislative and internal
rules, relationships, processes, systems and responsibilities to be followed not only in the pursuit of the organisation’s objectives but also in the methods used to achieve
them.
implement a single model, as conceived by Jaeger70 which
includes
◊ the identification of shared targets and strategic
plans for the individual group companies;
◊ the preparation of annual budgets for the group and
the individual companies;
◊ the implementation of forecast and control models;
◊ ongoing updates of the group’s organisational
structure.
Each of these components has been approved by the relevant corporate bodies. The parent is responsible for defining and checking strategic matters and policies concerning
the divisions of the various group businesses.
The growing complexity of companies and the contexts in
which they operate has led to the development of different
approaches and frequently created excessive regulations
surrounding the debate whether corporate governance
should or should not be essentially by rule (as in the case
of the SOX69 Act) or by principle (the UK system of comply
or explain).
This debate continues, demonstrating how the issue has
not been resolved with a system of rules, as necessary as
they are, but is deeply rooted in the company culture.
We are convinced that it is through cultural entrenchment
that terms like “transparency” and “integrity” resound in organisations and are effectively implemented.
Single business model
From a more strictly legal/corporate standpoint, MAG has
adopted an organisational model, entailing management
and coordination among the various entities, to pursue and
65 Geoffrey Chaucer, “The Canterbury Tales” (1380), “Fragment VI”.
66 South Sea Company, 1720, insider trading by King George I’s chancellor.
67 Enron Corp. 2001 bankruptcy declared in the United States Bankruptcy
Court.
68 A. Smith, “The Wealth of Nations”, 1776, “The directors of companies,
being managers of other people’s money rather than their own, cannot well
be expected to watch over it with the same anxious vigilance with which they
watch over their own”.
69 Paul Sarbanes – Mike Oxley, Public Company Accounting Reform and
Investor Protection Act, 2002.
52
The internal control system is comprised of a series of rules,
procedures and organisational structures aimed at ensuring
compliance with company strategies and the achievement
of the following objectives:
◊ the effectiveness and efficiency of company processes,
◊ safeguarding the value of assets and protection
against losses,
◊ the reliability and integrity of financial information;
◊ compliance with applicable legislation, plans and
internal procedures.
As part of its management and coordination activities, MAG:
The management and control model
MAG’s governance model is traditional, i.e., it features:
The engine behind this development can be summarised in
the words of Adam Smith68. Prudent management of others’
interests cannot come spontaneously to management,
whereas the primary result is, undoubtedly, the segregation
of duties, in which roles are assigned to separate parties
to reduce or limit conflicts of interest, in conjunction with a
series of controls that are as independent as possible.
Other elements of the internal control
system
◊ shareholders’ meetings, held as ordinary and extraordinary meetings and called to pass resolutions
in accordance with the law and by-laws;
◊ the board of directors, appointed to perform administration and company management;
◊ the board of statutory auditors, required to oversee: (i) compliance with the law and deed of incorporation and with the principles of correct administration in the performance of company activities;
(ii) the adequacy of the company’s organisational
system, the internal control system and the administration/accounting system, (iii) the ways in which
corporate governance is actually implemented, (iv)
risk management, (v) the legally-required audit and
the independent auditors’ independence.
MAG has opted to adopt a traditional administrative and
control model, as it is the most prevalent in the group’s history and more in line with its business context than other
alternative models based on other systems.
The company has voluntarily adopted a system of criteria
and principles that integrate its administration and control
system, based on the code of conduct that Borsa Italiana
S.p.A. wrote in 2011 for listed companies71.
During the year, this process entailed an amendment of the
document describing Corporate governance, appointing
a manager for financial reporting, an investor relator and
identifying the lead independent director within the board
of directors.
70 Rozenblum Doctrine. Pier Giusto Jaeger, “L’interesse sociale” Giuffré,
1964. “L’interesse sociale tra valorizzazione del capitale e protezione degli
Stakeholders. In ricordo di Pier Giusto Jaeger”. Quaderni di Giurusprudenza
Commerciale. Giuffré, 2010
71 Code of conduct approved by the Committee for Corporate Governance
in March 2006, modified in March 2010 by replacing article 7 (now article
6) and subsequently updated in December 2011, July 2014 and July 2015.
◊ checks the strategic development of the various
areas in which the group’s operates (see Strategies and strategic positioning);
◊ conducts a management control to ensure that a
balance is maintained, particularly with respect to
the profitability indicators and the financial balance
of both the individual companies and the group as a
whole (see Group performance);
◊ performs an operating check to evaluate each entity’s different risk profile through risk management
activities (see Risk management and compliance)
In compliance with the provisions of the code of conduct on
which the company has based its policies, the administrative and control model is integrated with:
On 31 March 2015, as part of a reorganisation, the shares
held by IMI Investimenti S.p.A., accounting for 16.42% of
share capital, were transferred to Melville S.r.l. which is part
of the US Neuberger Berman group. The latter operates in
private asset management sector.
There were no other changes in the ownership structure in
2014/2015 or after the reporting date.
Shareholder
Number of
shares
Percentage of
share capital
S.B.I. S.p.A.
7.931.242
60,37%
Melville S.r.l.
2.157.345
16,42%
91.481
0,70%
2.957.932
22,51%
13.138.000
100,00%
Private Equity Partners S.p.A.
Private Equity Partners SGR
S.p.A.
Total
MAG Shareholders at 30/09/2015 (% share capital)
Melville S.r.l.
Private Equity Partners S.p.A.
S.B.I. S.p.A.
Private Equity Partners SGR S.p.A.
MAG Shareholders at 30/09/2015 (% share capital)
committees set up within the board of directors to renew
company bodies, with responsibility for making proposals
and recommendations on specific issues without decisionmaking power, such as the executive committee (strategic
committee72) and the appointment and remuneration committee;
c)the internal auditor, responsible for an audit plan
to check that the internal control and risk management system is functional and adequate.
Finally, the group’s administrative and control model includes the Supervisory Body, which was set up following the
group’s adoption of the organisational and management
model pursuant to Legislative decree no. 231/2001, whose
functions, since 25 March 2013, are entrusted to the board
of statutory auditors, as permitted by Law no. 183/2011.
Shareholders
MAG’s shares are owned by private and institutional investors at 30 September 2015, as shown in the table below.
72 On 21 September 2015, in their extraordinary meeting, the shareholders amended the by-laws, eliminating the provision whereby the executive
committee is a delegated collective body. On the same date, the board of
directors appointed a strategic committee.
The board of directors
The current board of directors was appointed on 25 March
2013 in its present configuration of seven members and will
remain in office until the approval of the financial statements
as at and for the year ended 30 September 2015.
The board of directors met 17 times in 2014/2015 and was
fully attended.
The statutory auditors attended the meetings, along with, on
certain occasions, a few MAG managers who were asked to
report on specific issues on the agenda.
BOARD OF DIRECTORS [number of meetings during the year: 17]
53
position
member
code
Chairman
Alberto Ribolla
executive
Managing Director
Claudio Brun
executive
Deputy Chairman
Corrado Monti
executive
Deputy Chairman
Valter Pasqua
executive
Director
Ruggero Manciati
non-executive and
independent
Director
Emanuele Vignoli
non-executive
Director
Enrico Ricotta
non-executive and
independent
Consiglieri per fascia di età
14%
29%
35 - 50
35 - 50
5050-- 60
60
Over 60
Oltre 60
Composizione
del Consiglio
Amministrazione
Composition
of thedi
board
of directors
29%
38%
14%
32%
57%
30%
MAG
MAG
Media Assonime
Assonime average
Amm. Non esecutivi ed
Executive
directors
Indipendenti
Non-executive
ordinary
direcgors
Amm. Non and
esecutivi
"semplici"
No-executive and independent directors
Amm.esecutivi
9,30%
9,30%
41,86%
27,91%
11,63%
Strategic
plans and
SISTEMA
DIand
GOVERNANCE
E ASSETTO
Governance
system
ORGANIZZATIVO
budget, ordinary and
organisational
structure
extraordinary finance
Resolutions and
transaction
DELIBERE E INFORMATIVE
SU ANDAMENTO
information
about
GESTIONE E DOCUMENTIManagement
CONTABILI of
performance
and periodic
PERIODICI
litigation and
accounting reporting
PIANI STRATEGICI E BUDGET,
OPERAZIONI
remuneration
DI FINANZA ORDINARIA E STRAORDINARIA
Other
Directors by age bracket
57%
BoD’s resolutions by topic
Distribuzione delibere Cda per argomento
GESTIONE CONTROVERSIE,
REMUNERAZIONI
The board of directors carried out an in itinere assessment
ALTRO
of the adequacy
of its and its committees’ size, composition
and functioning, which showed that:
◊ the board of directors’ size (seven members, falling
within the by-laws’ provision requiring from five to
nine members) is adequate, considering the business size and type;
◊ considering that the board of directors consists of
four executive directors experienced in business
management and three non-executive directors
with different expertise, two of whom are independent, its composition is adequate;
◊ the board’s functioning and that of its committees,
illustrated in the tables below,
◊ is consistent with the company’s size and type of
activities and with the duties assigned to the Chairman and Managing director.
Constantly referring to corporate governance best practices, the board has decided, within the scope of its duties
and powers and within the limits of the by-laws, to:
◊ accurately define the role of the Chairman of the
board of directors and distinguish the duties, assignments and powers of this role from those of the
bodies appointed to manage business, specifying
the contents, limits and methods of the assigned
powers;
expand the role of the independent directors, as they are
defined in the aforementioned code of conduct and relevant
doctrine73, who have “no relationships with management or
the company that would compromise their independent judgement”, ensuring that “any (potential) conflict of interest is
adequately handled”. This process was completed in July
2015 with the appointment of a lead independent auditor
within the board of directors.
73 Code of Conduct of Borsa Italiana (cited) and “Internal controls in listed
companies” Consob (Italian commission for listed companies and the stock
exchange), Legal notes no. 4 – September 2012, EU Commission recommendations no. 162 of 15 February 2005, “Role of directors without executive duties or members of the supervisory body in listed companies and
members of committees of the board of directors or supervisory body”.
54
The executive committee (strategic committee)
On 6 October 2014, pursuant to article 18 of the by-laws,
MAG included an executive committee in its governance
model, which was set up within the board of directors to
create a closer link between the management structure and
the board of directors.
As part of the ongoing evolution of corporate governance,
considering the Committee’s significant function of strategic
guidance, the model was updated by amending some articles of the by-laws.
Accordingly, in their extraordinary meeting of 21 September
2015, the shareholders amended the by-laws, introducing
the role of manager for financial reporting (see) and eliminating the executive committee as a delegated collective
body.
On the same date, the board of directors set up the strategic
committee, comprised of the same members as the former
executive committee.
During the year, the executive committee met nine times.
The meetings were attended by all its members. The strategic committee met once.
EXECUTIVE COMMITTEE [number of meetings during the year: 9]
STRATEGIC COMMITTEE [number of meetings during the year: 1]
Member
Code
Alberto Ribolla
executive
Claudio Brun
executive
Corrado Monti
executive
Valter Pasqua
executive
lating to development projects worth over Euro 40
million in total;
◊ approval of fast-track investments in property, plant
and equipment and intangible assets entailing
changes in the approved budget with subsequent
reporting to the board of directors and approval of
the purchase agreements for goods and services
exceeding budget figures by over Euro 100 thousand;
◊ approval of the system risk monitoring plan and
checking that preventive measures and planned
corrective actions are implemented.
This committee is in place and was set up within the board
of directors for a useful and necessary purpose, i.e., to create a structured, organic process for the definition of the
business mission and to encourage the implementation of
its ethics in the strategic plan (see The stakeholders
paradigm).
Furthermore, having a body that liaises with company management increases the opportunities to report the repercussions that the main strategic decisions have on relationships with stakeholders.
As noted earlier (see Strategies and strategic positioning), for MAG, the strategic plan not only serves as a
guide for strategic decisions, but is also a tool for communications with stakeholders.
The appointment and remuneration committee
On 25 March 2013, the board of directors appointed an
appointment and remuneration committee and assigned it
the duties provided for by the code and those previously
assigned to the remuneration committee.
The appointment and remuneration committee, set up
within the board of directors, carrying on from the remuneration committee, consists of three members, including two
non-executive members.
The executive committee (strategic) is chaired by the deputy chairman74 and is composed of three other members of
the board of directors.
The committee meets once a month to discuss the following
topics, as delegated by the board of directors:
During the year, the committee met three times and was fully attended. At the reporting date, the committee was comprised as shown below75.
REMUNERATION AND APPOINTMENT COMMITTEE [number of
meetings during the year: 3]
◊ preliminary approval of the parent’s and group’s
draft medium-term business plan and the annual
budget, which will then be submitted for the definitive approval of the board of directors, and monitoring that they are properly implemented on a
monthly basis;
◊ preparation of development projects for new market
penetration and the pursuit of strategic opportunities;
◊ approval of binding bids for long-term contracts re74 Alberto Ribolla, formerly deputy chairman of the board of directors until
16 July 2015, replaced by Valter Pasqua.
Member
Code
Emanuele Vignoli
non-executive
Valter Pasqua
Executive
Ruggero Manciati
non-executive and
independent
75 Until 16 July 2015, the composition was unchanged from the previous
year (A. Rubolla – Chairman, M. Boschini, R. Manciati).
55
Manager for financial reporting
In their extraordinary meeting of 21 September 2015, the
shareholders amended the by-laws, introducing the role of
manager for financial reporting in accordance with Legislative decree no. 262/2005 and approving the related Regulation.
The by-laws amendment completes the voluntary
adjustment of the company’s governance and alignment to
the best practices applicable to companies whose shares
are traded on regulated markets.
The appointment of a manager for financial reporting is part
of a project for the implementation of a compliance model
pursuant to Legislative decree no. 262/2005 and related
provisions76, which will substantially start in 2015/2016.
The board of statutory auditors
The board of statutory auditors was appointed on 27 December 2013 with the same composition as the previous
three-year term. It will remain in office until the approval of
the financial statements as at and for the year ending 30
September 2016.
ment. The assessment was based on information provided
by and with the support of internal committees, with the assistance of the parent’s management.
As mentioned above, since 25 March 2013, the board of
statutory auditors also performs the Supervisory Body’s
duties, as provided for by the administrative and control model pursuant to Legislative decree no. 231/2001.
Internal audit
With its resolution of 25 March 2013, the shareholders
appointed an independent expert - Sergio Lamonica - to
handle internal audit for the 2012/2013-2014/2015 threeyear period.
The Internal Auditor is responsible for checking that the
internal control and risk management system is functional
and adequate. He reports to the board of directors and is
not responsible for any operating areas. His term of office is
that with which the board appointed him.
During the year, the Internal Auditor performed nine audits
of the group companies and prepared the same number of
audit reports.
Risk assessment
The group is exposed to a variety of risks due to the nature and type of its business activities and the context in which it
operates.
In addition to that described in the notes to the consolidated financial statements with respect to the technical and strategic
management of financial risks (see 5.3 Financial risk management), the group companies’ risk management policies
are based on containing and monitoring the main risk factors.
Over the past few years, the group has progressively embraced risk assessment and risk management concepts to create
and subsequently follow a structured risk identification, measurement and management process.
During its meeting of 30 March 2012, the board of directors of the parent, MAG, established the position of Chief Risk Officer (CRO) for the first time and assigned the role to the Deputy Chairman, confirming the appointment and powers when
it renewed his office on 25 March 2013.
The CRO’s work plan involves the implementation of a complex risk assessment process, which entails the assessment of
risks with the involvement of top managers and company bodies in their respective areas of expertise.
This process has led to, inter alia, the preparation of a risk management operating manual in accordance with UNI ISO
31000 standards, containing the guidelines for risk identification, probability and impact assessment, corrective measures
to eliminate risks and risk mitigation, transfer and retention, in accordance with UNI ISO 31000 and CEI EN 31010 standards.
Foremost, the assessment of risks to which the group is effectively exposed has led to their identification and mapping by
nature and type, as illustrated in a chart further on.
BOARD OF STATUTORY AUDITORS [number of meetings during the
year: 3]
Risk management and compliance
Position
Member
Chairman
Rocco di Leo
Standing statutory auditor
Luisa Marzoli
Standing statutory auditor
Guido Riccardi
Alternate statutory auditor
Daniela Caminiti
Alternate statutory auditor
Giovanni Tedeschi
Information flows pursuant to Legislative Decree No.
262/2005
The CRO monitors that the procedure is followed through routine follow-ups and by specifically monitoring planned and
agreed risk mitigation activities.
MAG’s administrative and control system is based on periodic and systematic flows of information between the various
bodies.
These flows are managed using reporting systems aligned
to group principles and standards, based on high-tech, integrated ERP data input systems and individual accounting
systems for each of the consolidated investees.
During the year, the board of statutory auditors met four times. Average attendance of its members was 89%.
The statutory auditors’ duties extend past conducting
checks and participating in periodic meetings required by
law to their involvement in the meetings of the board of directors and the meetings held twice a year with the independent auditors.
Over the years, the board of statutory auditors has checked
the suitability of Mecaer aviation Group S.p.A.’s and its
strategic subsidiaries’ organisational, administrative and
accounting structures, with specific reference to internal
controls, risk management and conflict of interest manage76 Legislative decree no. 303/2006, Legislative decree no. 195/2007, Legislative decree no. 58/1998 (Consolidated finance act).
56
Accordingly, the group has identified respective risk owners to whom it has individually presented the risk management
plan, along with the operating manual and it has identified the potential risks that fall into their areas of expertise, introducing a procedure in which risk reporting forms are filled out and the risk register is updated.
In accordance with the respective deadlines and methods
established in the by-laws, corporate governance model
and other internal documents, such as procedures and instructions, each body reports to its superior body on the
activities it has performed in the reporting period and those
that it has planned for the subsequent period, along with
any observations and recommended steps.
In this area, MAG has voluntarily implemented an integrated compliance model that meets the principles of Legislative decree no. 262/2005, which is expected to be launched
in 2015/2016, where the appointment of a manager responsible for financial reporting plays a complementary and functional role (see Manager for financial reporting).
In the future, this model will entail changes to the by-laws
and integrations to the governance model in order to make
the integrated compliance model fully effective.
57
Risk map
Below is a summary of the group’s main risks, which were identified during the risk assessment processes, along with the
measures or policies that the group pursues to monitor risk factors and mitigate them.
.
Risk
Risk management actions
The general economic crisis has influenced the budgets of the
public administrations and the relevant sector in general, which
could reduce the group’s profitability and its ability to generate
cash.
The group has taken measures to boost production efficiency
and perform contracts according to schedule, while at the same
time striving to contain overheads and maintain adequate
investment levels. It carefully vets investments through the
scrupulous evaluation of potential returns and whether they are
strategic, in order to keep its competitive edge in both the current
situation and the long term.
For certain business lines dedicated to institutional customers
(AS division), the group relies on the spending of national
governments and public institutions, which could be further cut as
a result of the financial crisis.
The group continues to take direct steps to increase the
expertise of internal personnel dedicated to these types of
activities, which require high levels of specialisation and specific
certification, so as to expand the range of aircraft and activities
they cover.
This increase in its potential offer enables the group to participate
in a larger number of public tenders.
The group is highly dependent on sales to companies that belong
to the same group (concentration).
For some time, the group has launched plans to achieve a
greater degree of customer and market diversification in the
medium-term.
These plans are part of a significant and targeted investment
policy, which focuses in particular on the development of new
products. This policy has enabled it to acquire important new
contracts in recent years.
The group’s contracts are mainly of a long-term nature with
established prices, which affect profit margins in the long term.
The group has a structured, agreed and formalised process for
quoting product and contract costs. Its internal control system
provides for a review of estimated contract costs on a systematic
basis.
These procedures entail the monitoring of significant risks, which
are identified from when the bid is made, throughout the project,
including through the constant comparison of the actual progress
of the project and its stage of completion in the accounting
records.
These analyses involve top management, the program managers
and the technical, engineering, manufacturing, production and
administration departments.
The results are weighted in the calculation of the necessary costs
to project completion at least once a year.
As part of its continuing operations, the group is exposed to
liability risks with its customers or related third parties.
The more significant obligations include ensuring suitable aftersales support, including through dedicated logistical-industrial
structures.
The group’s organisational structure is divided into divisions, in
order to better focus on customers, establishing, in subsequent
stages, a project management function within the divisions.
In this context, a product support structure may be created with a
dedicated division.
The group negotiates and agrees insurance policies on the
market for individual projects/products to cover any damage.
The group conducts a risk assessment each year to identify
maximum insured amounts and terms that best meet its risk
levels.
The agreed policies also sufficiently meet the coverage levels
required by customers for contracts in place.
Given the rigidity of its industry, the group faces the risk of having
single source strategic suppliers, whose performance can affect
the continuity of projects (business interruption risk).
The group reduces this risk through processes that, with
increasing structuring, ensure:
- careful selection and monitoring of the supply chain to achieve
high levels of integration;
- availability of double source strategic sub-supplies, where
possible.
58
Risk
Risk management actions
The group’s debt could affect its operating strategies.
The group monitors developments in its financial debt on a daily
basis, in both Italy and for its foreign operations.
Its financial strategy consists of maintaining a balance between
the sources and application of funds, particularly with respect to
the weight of consolidated debt against investments carried out.
In 2014/2015, the group contained its financial debt, despite
substantial investments to develop and produce new products.
The group also constantly monitors the interest rates of its loans.
The internal control system provides for short-term and mediumterm financial planning activities.
Based on expected cash generation, credit lines in place and the
positive outcome of all financial transactions to date, the group
believes that it will have the necessary resources to meet all its
obligations.
The group generates part of its revenue in currencies other than
those in which it incurs its costs. Accordingly, it is exposed to
currency risk.
Part of consolidated assets are in US and Canadian dollars.
The group continuously applies a currency risk hedging policy
by aligning revenue in non-Euro currencies to purchases on
markets outside the Eurozone.
The group seeks ways to balance cash holdings and cash
requirements in the various foreign currencies among the
companies operating in the different regions, always in
compliance with fair value rules.
In the short-term, volatility on currency markets could lead to
exchange rate differences.
As the volumes of flows in non-Euro currencies rise, the group
intends to agree short-term hedges.
The group operates on complex markets, in which the
settlement of potential disputes could be complicated and take a
long time.
Furthermore, the group is exposed to environmental risks due to
its various industrial plant.
The group regularly monitors pending and potential disputes,
taking the necessary corrective action and adjusting its provision
for risks on a periodic basis.
With respect to environmental risks, the group has a prevention
and ongoing monitoring programme in place, as well as
insurance coverage in one specific case, in order to mitigate the
consequences of a polluting event.
The group operates on particularly complex markets, which
require compliance with specific regulations.
Through specific external structures, the group monitors constant
updates to relevant regulations, subjecting the launch of business
projects to checks of compliance with restrictions and the
obtaining of the necessary authorisations.
A significant portion of consolidated assets is intangible,
particularly development costs for new products.
The group constantly monitors the progress of projects, taking
necessary corrective measures whenever there are unfavourable
trends. These updates influence estimated flows used for
impairment testing of amounts recognised in the consolidated
financial statements.
The group’s success also depends on the ability of its executive
directors and other members of management to effectively
manage it and its individual business segments.
The group’s human resource management policies facilitate
the identification of objectives, the medium-term appreciation
of skills and the maintenance of the corporate climate. Through
appropriate structures (the remuneration committee), the
group is implementing a management by objectives strategy to
complement its key management personnel incentive policies.
The notes to the consolidated and separate financial statements
provide disclosures about disputes and contingent liabilities.
The assessment of contingent liabilities of a legal and tax nature,
which requires the use of
estimates and assumptions, shows the costs that the directors,
based on the opinion of the group’s consultants, reasonably
estimate the group will incur.
59
Legal compliance
Fiscal governance
The group is pursuing a plan to gradually integrate corporate governance and legal compliance tools.
As part of its legal compliance and risk control projects, the
group has commenced a coding process for internal guidelines to organise, define and authorise infragroup transactions.
Internal control system
The group has gradually adopted an internal control system, which has now reached varying degrees of implementation and is most structured for the accounting control
system and administrative/accounting procedures, in order
to ensure that financial information is complete and correct
(supra Other elements of the internal control system and, in this section Information flows pursuant
to Legislative Decree No. 262/2005).
Strengthening the internal control system is a key objective in the scope of internal control tools and the modules
comprising the overall system (segment and consolidated
reporting, management control and the information system)
and in view of increasingly integrating the risk management
system.
Organisational model pursuant to Legislative Decree
No. 231/2001
The first step in this direction has been to develop the organisational and management model recommended by Legislative decree no. 231/2001, which the group first adopted
on 11 December 2007.
The aim of the model is to prevent specific types of crimes
from being committed by employees and/or contractors in
the group’s interests or to its benefit.
Overseen by the Supervisory Body, the model and controls
performed by the company functions involved have been
subsequently adjusted to meet organisational changes
within the group and developments in the applicable legislation.
The following table indicates the main updates recently
made to the model.
Update
Content
26 February 2013
Implementation of organisational changes
during the year
26 February 2013
Introduction of the special section
concerning environmental crimes
17 July 2013
Integration of information flows from
those subject to the model towards the
Supervisory Body
17 July 2013
Informing and training employees about the
existence and updating of the model
During the year, systematic checks were performed to verify that the model is effective, with the Supervisory Body
conducting controls and through interviews with personnel
involved in sensitive activities.
60
The aim of these steps is to ensure in the future and to an
increasingly structured extent that
◊ infragroup transactions are documented using the
appropriate contracts in accordance with the form
and substance requirements of legislation in the
countries where the group operates;
◊ contracts are subject to validation and authorisation by the bodies and organisations responsible for
such, in accordance with the accountability structure;
◊ infragroup transactions are carried out in accordance with the requirements of effectiveness and economic substance applicable to non-related parties
and on an arm’s length basis;
◊ fixed considerations for economic and financial
transactions are consistent with market rates in
accordance with the concept of fair value and with
the principles established by international practice
authorities.
As a first step in the implementation of this fiscal governance policy, each year, the parent prepares internal transfer
pricing documentation pursuant to article 1.2-ter of Legislative decree no. 471 of 18 December 1997, which was introduced into Italian legislation by article 26 of Law decree no.
78 of 31 May 2010, converted, as amended, by Law no. 122
of 30 July 2010 (the “Dossier”).
The purpose of the Dossier is to document how transactions between the group companies are governed on an
arm’s length basis in accordance with OECD guidelines.
General remuneration policy
The remuneration policy is made up of all the criteria and
guidelines that apply to the definition of remuneration for:
◊ members of the board of directors,
◊ members of the board of statutory auditors,
◊ key managers.
In recent years, the group has gradually implemented tools
to align the process by which remuneration is defined with
objectivity criteria and the requirements of strategic enhancement objectives, made possible by remuneration policies.
The broadest objective is to attract, motivate and retain people who, given their technical and managerial skills and
their different backgrounds, gender and experience, give
the group a competitive edge.
An effective remuneration policy reinforces the commitment
of employees and contractors and their alignment with commitment to organisational goals, the group’s mission and its
culture and values.
The following matrix summarises the principles and criteria
underpinning the remuneration policy.
amount, including both fixed fees and payments for meeting
attendance, of all board members’ remuneration.
The members of the board of directors receive fixed fees for
their responsibilities as a steering and control body, while financial incentives will be introduced if the company is listed.
There are no share-based incentive plans or early severance package agreements signed in advance.
Purpose and general principle
Principles
Criteria
The board of directors
Fairness and
consistency
Balanced remunerative
packages based on one’s position,
responsibilities, expertise and
demonstrated abilities;
Consistent approach in the various
countries/businesses/functions.
Upon the proposal of the appointment and remuneration
committee and having heard the opinion of the statutory auditors, the board of directors determines the fees for directors with specific duties, within the aforementioned amount.
Alignment with business
strategies
Structured incentive systems
linked to the achievement of
sustainable results for the group;
Definition of individual objectives
to maintain sustainable levels of
performance in terms of results
and risks.
The board of directors also defines an incentive plan (MBO),
considering proposals by the Appointment and Remuneration Committee and budget constraints. The plan is for:
Competitiveness
Ongoing analysis of peers’
remuneration practices and
general market trends;
Competitive salaries in terms of
amount and composition;
Alignment with the business
strategy and goals.
Rewarding merit and
performance
Bonuses based on performance,
distinction and selectivity;
Close link between remuneration
and group results;
Fixed and merit-based
remuneration seen as a key driver
for motivating and retaining
employees and for aligning
performance with organisational
objectives.
Governance and
compliance
Transparent governance;
Remuneration guidelines that
are consistent with national/
international practices and the
group’s values.
Parties involved in the remuneration process
Governance systems and rules are aimed at ensuring the
clear, transparent and efficient definition and management
of the group’s remuneration and incentive policies.
The main players in the process are:
◊ the shareholders
◊ the board of directors
◊ the Appointment and Remuneration Committee.
◊ Executive directors;
◊ Key managers77;
◊ Junior managers or managers heading functions or
projects.
Appointment and remuneration committee
The Appointment and Remuneration Committee is entrusted with preliminary and proposal duties for the determination of fees and the remuneration criteria of the company’s
subsidiaries as well, in order to encourage the application of
consistent criteria throughout the group.
The Appointment and Remuneration Committee is set up
within the board of directors and consists of at least two
non-executive directors and/or one independent director.
The term of office for members of this committee coincides
with the term of office of the board of directors. If the latter
is terminated in advance - for any reason - the committee’s
term of office immediately lapses as well. The board of directors can revoke the committee’s mandate at any time.
The chairman of the board of statutory auditors attends the
committee’s meetings.
No director attends the meetings of the Appointment and
Remuneration Committee when the proposals of the board
of directors for their remuneration are being formulated.
The Human Resource Manager serves as the committee’s
secretary, and the Human Resources Department is responsible for implementing the committee’ proposals once
they have been approved by the board of directors.
Shareholders’ meetings
Upon the proposal of the board of directors and having
heard the opinion of the appointment and remuneration
committee, the shareholders determine the maximum total
77 The board of directors approves the incentive system. Managers and
junior managers participate in the short-term merit-based plans provided for
by their individual employment contracts. This clause is included in the initial
or renewed employment contract depending on the type and breadth of the
employee’s or contractor’s responsibilities.
61
Components of remuneration
gate for access to the plan) and individual targets, which
are quantifiable and measurable and can either relate to
economic results/the financial position or technical/production indicators.
Fixed remuneration
Fixed remuneration is based on the resource’s role within
the organisation and is aimed at rewarding expertise and
merit.
The board of directors defines the structure of the shortterm incentive plan, upon the proposal of the Appointment
and Remuneration Committee.
Specifically, the following parameters are considered:
Medium to long-term incentive system for senior managers.
◊ he objectives and responsibilities assigned to the
position held;
◊ relevant remuneration benchmarks, with specific focus on professional positions presenting the highest
market risk, the business sector and the relevant
context;
◊ how the person fills the position in terms of proven
performance and expertise;
◊ potential growth for the most important professional
positions and those requiring critical expertise that
is the most difficult to find on the labour market;
◊ experience gained and career path.
Variable remuneration
The incentive system includes long-term variable components which constitute a recent development line for the
group’s policy as they create a sense of identity and instil loyalty in key positions. At present, they are reserved
for the managing director and senior managers (General
Manager/s, Co-General Managers and Division Heads).
Performance-based bonus.
This is linked to productivity and profitability for the year.
The conditions and criteria applied are defined annually
when the supplementary company contract is agreed. Blue
collars, white collars and junior managers not covered by
the MBO policy are eligible for this bonus.
The variable component of remuneration is mainly based
on the measurement of performance on an annual and/or
long-term basis.
Other one-off bonuses
The aim is to involve and direct people towards company
strategies, rewarding them for the value of individual and
team contributions.
Furthermore, to complete the variable component of remuneration, group companies may reward exceptional performance and seek to retain resources with a one-off bonus,
following selection and merit-based criteria and within budget constraints.
Gates to remuneration and a system of objectives based
on the group’s and the individual company’s performance
have been established to ensure a more direct correlation
between company results and the bonuses paid. Performance is measured considering performance and financial
indicators.
Variable, performance-based remuneration consists of the
following components:
Short-term management-by-objective incentives (annual
MBO bonus).
The short-term merit-based component may constitute up
to 30% of gross annual remuneration, unless otherwise indicated by the Appointment and Remuneration Committee,
and may be paid in part if only some of the collective or
individual targets are achieved. It is paid in the month following that in which the shareholders approve the financial
statements for the year to which the targets relate.
The variable component is annual and is linked to an incentive plan (MBO).
This plan provides for the definition of shared targets (e.g.,
consolidated EBITDA, considered the group’s main economic performance indicator, and which is usually used as the
62
Benefit (non-monetary)
Other non-monetary benefits are part of the group’s welfare
system and fall within a broader notion of remuneration:
◊ Third-party liability insurance policy (D&O), offered to directors, statutory auditors and managers for
liability for illegal acts or the violation of obligations
in the performance of their duties;
◊ Term life and disability/illness insurance policy
offered to executive directors and managers, including optional integration in addition to the mandatory collective life insurance coverage required by the
national labour agreement for industrial managers;
◊ Health insurance policy offered to managers who,
in addition to the provisions of the national labour
agreement for industrial managers, also benefit
from an extra policy for medical expenses not covered by the integrative healthcare fund (FASI).
ment purposes.
the statutory auditors’ fees as a fixed amount.
Severance pay
Key managers. These fees relate to employment contracts
subject to the national labour agreement for industrial managers.
In general, the group does not provide for any particular pay
if employment or one’s position is terminated in advance.
However, the payments and contributions due pursuant to
law and the national labour agreement or under individual
agreements reached within the scope and in accordance
with the limits of such provisions are paid to prevent legal
action taken on objective grounds.
Directors and key managers in subsidiaries. Their fees
and remuneration are fixed amounts.
Remuneration and the pay-mix
Different, competitive pay packages are created according
to position, and include fixed and variable remuneration and
benefits.
Non-competition agreements
To protect professional positions presenting high market
risk and those with critical know-how for the group’s success, non-competition agreements have been defined with
a consideration agreed while the employment relationship
is in place.
Addressees of the policies
Board of directors. The board members’ total remuneration consists of a fixed amount and fees for their attendance.
The aim is to position the group’s remuneration in line with
the market, while seeking to competitively remunerate the
top performers, resources with the best potential or those
holding strategic positions with the highest attrition risk.
The group aims to create a balance between the fixed and
variable components of remuneration, setting well-balanced pay mix levels. Variable remuneration may not exceed
fixed remuneration; therefore, a ratio of 1:1 has been set as
the maximum limit.
Board of statutory auditors. The shareholders determine
fixed
remuneration
short-term variable remuneration
long-term variable remuneration
Senior managers
Yes
25%-30% Of gross annual salary
Yes
Key senior managers
Yes
-
Other managers
Yes
-
Other group personnel
Yes
-
-
beneficiaries
For the completion of specific duties assigned to personnel,
special benefits may be provided, and as such are covered
by various application and tax rules. These benefits include
company cars for both work and personal use and weekday
housing for certain professional figures within the group for
the performance of their duties, for travel and for manage-
63
Social sustainability
The analysis of employees by gender reflects the stratification that the group inherited with the business units it has acquired. It is the group’s policy to strictly enforce equal opportunities, not only with respect to gender, but also religion,
personal beliefs, race, ethnic origin, etc..
Human resources and safety in the
workplace
Personnel hiring, composition and change policy
It is with growing attention that the group monitors the main
data on its workers, including employees, temporary workers and all other types of contractors and freelancers.
This focus is an extension of the group’s values and is due
to the awareness that expertise is not the only key factor in
the achievement of objectives, but a series of other factors
like company climate and constantly enhancing and encouraging professional and human qualities that resources offer and can develop is also crucial.
Throughout the year, management strives for ongoing dialogue with workers on the actual application of contracts,
their renewal and the management of relationships. At 30
September 2015, MAG group employees numbered 537,
compared to 521 at the end of 2013/2014, with an annual
average that remained higher than both previous years,
analysed by month and gender below.
2014/2015
2013/2014
M
F
Total
M
F
Total
M
F
Total
448
73
521
456
75
531
430
67
497
November
454
74
528
456
75
531
429
67
496
December
450
73
523
456
75
531
431
67
498
Jennuary
449
75
524
458
75
533
439
68
507
Febbruary
445
74
519
462
75
537
441
70
511
March
443
77
520
457
77
534
444
67
511
April
446
78
524
458
78
536
446
73
519
May
450
80
530
455
77
532
456
72
528
June
453
81
534
456
76
532
457
73
530
July
453
80
533
452
76
528
458
73
531
August
453
81
534
449
74
523
457
74
531
Annual average
64
455
82
537
449
72
521
454
75
529
449,92
77,33
527,25
455,33
75,42
530,75
445,17
70,50
515,67
2014/15
2013/14
2012/13
M
F
Total
M
F
TOT
M
F
Total
October
41
4
45
64
7
71
73
14
87
November
39
4
43
60
7
67
80
16
96
December
37
6
43
54
7
61
63
17
80
Jennuary
39
5
44
47
6
53
88
24
112
Febbruary
41
5
46
43
6
49
91
24
115
March
37
3
40
43
6
49
92
24
116
April
34
2
36
37
6
43
78
18
96
May
37
4
41
40
4
44
83
18
101
June
38
5
43
40
4
44
71
10
81
July
37
5
42
40
4
44
72
10
82
August
29
3
32
35
4
39
67
8
75
September
40
3
43
42
4
46
66
8
74
37,42
4,08
41,50
45,42
5,42
50,83
77,00
15,92
92,92
Annual average
2012/2013
October
September
The group also has temporary staff78 (with temporary employment contracts) in accordance with current laws and with the
aim of covering peaks in activities. The number of temporary staff is on-the-whole modest although, in prior years, activities
were particularly intense in some transitional phases, leading to an increase in temporary staff. This was particularly the
case in 2012/2013 and in the first half of 2013/2014, and related to the VIP AW101 interior contracts carried out by the
CCS and AS divisions. The table below shows the average cost of temporary staff of the year, analysed by gender and
compared with the previous two years.
In 2014/2015, the group hosted young interns gaining work experience to complete their studies, generally in support functions (administration, finance and HR).
Headcount changes in 2014/2015
Changes in the headcount in 2014/2015 are summarised below.
30/09/14
Managers
Junior managers and white collars
Hired
Terminated
Transferred
Promotions
30/09/15
26
2
2
0
1
27
234
30
23
0
-1
240
Blue collars
261
23
15
1
0
270
Total
521
55
40
1
0
537
78 The temporary staff discussed in this section consists of personnel working under the temporary employment contracts permitted under Italian law. It
does not include any other forms of employment (e.g. jobshoppers, contract-workers, etc.).
65
The table below analyses personnel by the functional area in which they work, considered thematically and transversally
rather than in terms of the overall organisation, which is divided into divisions.
The table also analyses the category and gender of new employees hired in the past three years.
2014/15
2013/14
2012/13
M
F
Total
M
F
Total
M
F
Total
1
1
2
3
0
3
3
0
3
Junior managers and white collars
17
13
30
18
4
22
26
13
39
Blue collars
23
0
23
15
1
16
41
2
43
Management (MD, Op.Un.Div.)
85
Production
Managers
Annual average
41
14
55
36
5
41
70
15
Resignations in 2014/2015 and the previous two years are analysed below by age and gender.
2014/15
2013/14
2012/13
M
F
Total
M
F
Total
M
F
Total
0
1
1
1
0
1
2
0
2
between 21 and 30 years
10
0
10
10
1
11
6
0
6
9
1
10
9
5
14
8
3
11
up to 20 years
4
0
4
6
2
8
7
2
9
over 50 years
13
2
15
14
1
15
11
0
11
Total
36
4
40
40
9
49
34
5
39
2014/15
2013/14
M
F
Total
M
F
Total
M
F
9
3
12
8
2
10
8
2
10
216
5
221
208
5
213
215
5
220
Product support
73
11
84
74
7
81
81
7
88
Quality
44
7
51
46
6
52
44
5
49
Research and development
53
5
58
52
4
56
50
4
54
Locistic
25
14
39
27
12
39
24
13
37
Administration, Finance, Information systems
12
23
35
13
20
33
10
22
32
Human resources and organisation
3
8
11
3
7
10
3
8
11
Sales
8
4
12
6
6
12
6
6
12
Purchases
Total
Managers
Junior
managers
White collars
Blue collars
Total
Resignation
0
1
12
2
15
Retirement
0
0
0
4
4
Contract expiry
0
0
2
0
2
Dismissal
1
1
6
5
13
Failure to pass the trial period
0
0
0
4
4
Death
1
1
0
0
2
Total
2
3
20
15
40
12
2
14
12
3
15
13
3
16
455
82
537
449
72
521
454
75
529
Hiring policy
◊ in various steps by different people,
◊ considering many different candidates for the same position.
Candidates are evaluated on the basis of their skills, training, previous experience, expectations and potential, with respect
to the organisation’s specific needs.
All newly hired employees are given a copy of the national labour agreement and the MAG code of conduct.
Employees are analysed by diploma/degree below.
2014/15
Analisys of empolyees by age, seniority and function
The first two tables analyse employee percentages by age,
2013/14
2012/13
M
F
Total
M
F
Total
M
F
Total
63
2
65
71
3
74
77
3
80
161
36
197
156
34
190
148
34
182
116
27
143
103
21
124
107
23
130
over 50 years
115
17
132
119
14
133
122
15
137
Total
455
82
537
449
72
521
454
75
529
up to 30 years
2014/15
2013/14
M
F
Total
M
F
Total
M
F
181
40
221
175
32
207
195
36
231
140
15
155
142
13
155
126
10
136
91
22
113
86
22
108
80
23
103
79 66
2012/13
M
F
Total
M
F
Total
M
F
Total
University degree
20,1%
6,1%
26,3%
20,4%
5,1%
25,5%
20,1%
5,1%
25,2%
High school diploma
28,1%
5,8%
33,9%
24,4%
4,4%
28,8%
24,9%
4,7%
29,6%
Professional school
16,6%
2,6%
19,2%
18,3%
2,7%
21,1%
17,8%
2,7%
20,5%
Middle school
19,7%
0,7%
20,5%
23,4%
1,1%
24,4%
23,5%
1,1%
24,5%
0,2%
0,0%
0,2%
0,2%
0,0%
0,2%
0,2%
0,0%
0,2%
84,7%
15,3%
100,0%
86,7%
13,3%
100,0%
86,5%
13,5%
100,0%
Elementary school
Total
Over the past four years (2011/12 – 2014/15), employees with a university degree rose by almost 3% (from 23.5% to
26.3%), while employees with a high school diploma increased by almost 6% (from 73.6% to 79.3%).
MAG group promotes its employees’ professional growth through continuous training. On the basis of feedback from the
relevant supervisors, HR management prepares an annual training plan with specific courses to be held.
2012/13
up to 5 years
over 20 years
2013/14
Training
and seniority for the past three years.
Totale
Total
The principles for the recruitment of new resources are based on ensuring equal opportunities for all candidates, without
any discrimination, and following a hiring process that is carried out
Finally, the following table summarises the reasons for termination of employment79 in 2014/2015.
2014/15
2012/13
Total
43
5
48
46
5
51
53
6
59
455
82
537
449
72
521
454
75
529
In 2014/2015, 15,284 hours of training were offered, compared to 12,805 hours in the previous year and an average of
16,200 hours in the last four years. Not considering new employee training, which is part of the orientation process and,
therefore, linked to changes in the headcount, training hours totalled 5,193, compared to 6,634 in 2013/2014 and 8,361 in
2012/2013.
The table below analyses hours of training in the previous three years, highlighting the courses held by in-house trainers.
When the reason is death, the employee did not die while working or for a work-related reason.
67
2013/2014
2012/2013
Work hours and absence
2011/2012
In-house training for new hires
7.176
2.531
6.853
Quality, safety and the environment
2.480
1.382
2.546
Administration and organisation
888
120
679
Foreign languages
336
738
597
Research and development
467
998
1.061
Computer skills
158
749
1.174
3.717
4.196
1.528
63
2.091
5.321
Total
15.284
12.805
19.759
including: Hours of training by internal personnel
10.091
5.585
12.170
Product/process awareness
Other
There are 40 hours of work per week for the Italian companies and Canada (Quebec) and 46 for the US. In the first two
cases, the 40 hours are divided into five working days from Monday to Friday.
The following table summarises main overtime data80.
2014/15
Monthly average workers reporting overtime
Number of overtime hours
Number of hours per year per person
2013/14
2012/13
313,0
326,0
294
32.496,3
33.213,3
39.250,0
61,6
62,6
76
2014/15
2013/14
2012/13
39.140,8
39.028,0
37.905,0
3,8%
3,8%
3,7%
74,2
73,5
73,5
2014/15
2013/14
2012/13
20.308,0
19.849,0
22.302,0
2,0%
2,2%
2,6%
38,5
37,4
43,2
The following tables give information81 on total hours of employee absence
The group has launched and, for the most part, completed a safety in the workplace training programme for workers, nominees and managers, along with periodic updates, in line with the provisions of current legislation.
Total annual hours of absence
The group has also made language training a priority, partly given its focus on international development, and therefore this
constitutes an objective for the expansion of the programme.
Diversity and equal opportunity
As noted previously, MAG group is committed to guaranteeing equal opportunities to all women employees, who make
up 15.3% of its personnel (13.8% in 2013/2014 and 14.2% in 2012/2013). Although, because of its industrial nature, the
company has historically seen the prevalence of male employees over female employees, especially among blue collars,
the most recent group policies are based on the principles of pluralism and prohibits all forms of discrimination, naturally
leading to a change in the gender composition of its headcount.
2014/2015
number
%
2013/2014
Percentage hours of absence/workable hours
Average hours of illness per person
and hours of sick leave.
Total annual hours of illness
Percentage hours of illness/workable hours
Average hours of absence per person
2012/2013
M
F
Total
M
F
Total
M
F
Total
455
82
537
449
72
521
454
75
529
84,7%
15,3%
100,0%
86,2%
13,8%
100,0%
85,8%
14,2%
100,0%
Similarly to other indicators, these figures are below the averages82 of Italy’s metal-mechanical industry.
Worker health and safety and work environment
The group is also very attentive to the family needs of its workers, without jeopardising its organisational and production
requirements.
It is a priority for the group to safeguard its workers’ health and safety. The health and safety issue management system is
compliant with current laws and regulations in the various legal systems where the group operates and, more generally, is
aimed at continuously improving work conditions.
This attention is reflected in its maternity and paternity leave, as provided for by the various legal systems where the group
operates, in its approval of requests to reduce work hours (part-time contracts entailing partial days or partial weeks).
The group’s Italian companies have updated procedures and operating processes to the requirements of Legislative decree no. 81/2008 (Consolidated act on health and safety in the workplace).
The group employs 25 disabled people, who were hired not only to fulfil a legal obligation (under Italian law) but to encourage their inclusion and integration in its organisation.
The table below summarises data on injuries in the workplace.
Remuneration and incentives
Junior managers and managers (or equivalent levels under other legislation) participate in an incentive system that include a merit-based component (MBO) and remuneration commensurate with the achievement of collective and individual
targets, subject to gates, in accordance with the criteria described in section GENERAL REMUNERATION POLICY (see).
The pension plans in place for all group employees are those provided for by current legislation applicable where the group
operates.
2013/14
2012/13
Injuries in the workplace
1
3
Injuries in transit
2
-
1
20
47
280
Average duration of absences due to injuries in the workplace (days)
MAG employees are assigned positions in accordance with the standards of the applicable labour agreements (Italian entities apply the national labour agreement for the metal-mechanical industry), integrated by secondary contracts that provide
for minimum remuneration based on the employee’s level and a merit-based bonus for blue and white collars.
68
2014/15
Average duration of absences due to injuries in transit (days)
6
86
-
31
Total hours of absences due to injuries
712
343
2.797
Hours of absences due to injuries per person
1,35
0,65
5,42
The trend is consistent with the group’s policy and the figures are considerably lower than the averages83 of the metalmechanical industry.
80 It does not include MAG Inc. data (the sites in Philadelphia - PA and Hagerstown - MD) which are not completely available for prior years used for comparison.
81 The previous note also applies to absences.
82 Source: Federmeccanica, “L’industria metalmeccanica in cifre”, June 2015. – Per capita total hours of absence from work: 110.5 and hours of sick leave:
51.7. (2013 figures).
83 Source: Federmeccanica, op.cit., Per capita hours of absence from work for injuries: 11.9 (2013).
69
Shareholders
SHARE CAPITAL. The composition of share capital is described in the section on corporate governance (see SHAREHOLDERS). Institutional investors, which are all Italian
residents, own a significant portion of the parent MAG’s
share capital. There are non-controlling investors as well,
as a result of the local public entity’s84 5.6% investment in
the wholly-owned subsidiary SAT.
DIVIDENDS. MAG’s shareholders have adopted a policy
that does not provide for the distribution of dividends. Profits
are entirely reinvested in operations.
RELATIONSHIPS WITH INVESTORS AND FINANCIAL
ANALYSTS. MAG’s financial reporting policy is based
on integrity, transparency and continuity, with a maturity
that tends to anticipate its growth process. In line with the
group’s growth in size and complexity, the main steps in the
preparation of financial information are summarised below.
First set of
financial
statements
audited on a
voluntary basis
1996/97
Group accounting
standards (ITA
GAAP) and
consolidated
report
2001/2002
Group standard
evolution (start
up and R&D)
GAP analysis Group accounting
standards (IFRS)
IFRS
transition - Group
FS
2002/2003
Management
reporting - local
GAAP and
consolidated
2010/2011
2011/2012
Qustomers and quality managements
Sales analisys
A breakdown of group revenue by division and product line
is given in the directors’ report (see GROUP PERFORMANCE), while geographical segment reporting is provided in
the notes (see 3.4 SEGMENT REPORTING).
maintaining adequate customer satisfaction by meeting current (and potential) requirements;
◊ striving for continuous improvement in processes and products;
◊ integrating the supply chain, which is qualified based on industrial criteria in a continuous improvement process,
◊ improving business performance.
These targets are pursued through the investment of resources and organisational aspects and can be tangibly seen in the
obtaining and maintenance of certification, the result of a company culture that strives to uphold the principles of quality.
In terms of numbers, current expenses85 and quality investments can be summarised as follows
(amounts in thousands of Euros)
The group’s turnover continues to be quite concentrated
in terms of customer and country as a result of the oligopoly nature of its main market, which consists of helicopter
OEMs, and due to the complexity of the diversification underway for some time.
Indeed, the diversification process is connected with the
high investment rate in new product development, with a rather long maturation cycle, that the group pursues in terms
of
◊ expanding the production range – with the effect of
offering more products and services for the same
aircraft;
◊ addition of new applications for its products/services – with the effect of broadening the potential
market for these products/services.
In each of these cases, business relationships with customers include a significant degree of integration and longterm consolidation.
2014/15
2013/14
2012/13
Product certification
200
171
185
Process certification
227
109
120
Equipment and measurement and inspection tools - operation
124
110
123
Equipment and measurement and inspection tools - investment
173
85
101
5
1
1
Training
24
38
16
Trials and tests (laboratories, universities, entities)
72
87
71
826
601
617
51
52
49
Technical standards, software, publications
Total
Addetti all’assicurazione/controllo qualità
The following table summarises the main certification of the group’s sites and organisational units.
Type
Industry standard
Ministero Difesa (IT)
Upgrading of the
internal control
system - dev.
programs
For the above reasons, an analysis of customers by size
shows that nearly all group customers are in extremely large groups, global competitors, which are often conglomerates.
2004/2005
2006/2007
LITIGATION. There is no litigation with shareholders either
pending at this time or in the past..
European Aviation Safety Agency (EASA)
Quality management
Kick-off of the
control system
project
First-time
application of
IFRS 8 on a
voluntary basis
IFRS
transition statutory FS
2013/2014
First integrated
annual report
The quality management system is crucial for companies
operating in the industrial aerospace industry if they are to
operate as an aerospace organisation and is an essential
condition for business continuity.
Federal Aviation Administration (FAA)
Transport Canada Civil Aviation (TCCA)
As such, it can be divided into two main parts:
◊ the general quality system (an industry standard),
as for advanced industrial companies in general,
which is integrated with environmental and workplace safety management systems;
◊ specific certification, such as for the organisation of
production and the development and maintenance
of aerospace products.
Special Process NADCAP Accreditation
Certification
Unit/site
AS/EN 9100:2009
Borgomanero (IT), Monteprandone (IT)
Laval (Can)
EN 9110:2012
AER-Q-2110
Design Organization Approval
(Part 21 J)
Monteprandone (IT)
Production Organization Approval
(Part 21 G)
Maintenance Organization Approval
(Part 145)
Borgomanero (IT), Monteprandone (IT),
Laval (Can)
Continued Airworthiness Maintenance
Organization
(Part M)
Monteprandone (IT)
Repair Station
(Part 145)
Borgomanero (IT),
Philadelphia (USA)
CAR 573
(Part 145)
Borgomanero (IT)
Manufacture and Certification
(AWM 561)
Laval (Can)
Maintenance Organization Approval
(CAR 573.02)
Laval (Can)
Non Desctructive Testing
Surface Enhancement
Borgomanero (IT)
Both parts are aimed at achieving the following objectives:
84 the Ascoli Piceno municipal authorities
70
85 The data do not include internal costs (e.g. hours of training taught by internal personnel).
71
Type
Certification
Unit/site
Airbus Helicopters
AgustaWestland
Service Center AgustaWestland
Bell Helicopter
Diamond Aircraft Industries
Customers approvals
One Aviation
Hanwha Corporation
Piper Aircraft
Piaggio Aero Industries
Service Center Woodward HRT
(amounts in thousands of Euros or percentages)
2014/15
Materials, components
and purchased semifinished products
Operating assets
44.033
53,5%
2013/14
41.940
47,6%
2.560
3,1%
4.341
4,9%
Services
35.727
43,4%
41.898
47,5%
Total
82.320
100,0%
88.179
100,0%
There were no significant disputes with suppliers at the reporting date.
UTC Aerospace Systems (GLG)
Nortrop Grumman
Model NH 300C
Type Certificates Helicopters
Model NH 300D
Model AMD 500N
The group also holds a series of product certifications, some of which are the equivalent of industrial design rights (e.g.
STC), described in the section on new product development.
The group measures the quality management system’s overall reliability using key performance indicators (KPI), which are
continuously monitored both internally and in conjunction with customers.
The KPI system differs depending on the type of activity and customer.
There were no disputes with customers at the reporting date.
Costs to repair products under warranty remain within physiological levels, and are provided for by constantly adjusting
the provision for product warranties. At 30 September 2015, the provision for product warranties totalled €1,273 thousand,
releasing the accrual of €115 thousand for 2014/15.
Suppliers and contractual terms
The MAG group has consolidated, longstanding relationships with most of its suppliers, especially those that make up the
supply chain, which is integrated through supply insourcing processes and provides products and services with the necessary certification and qualifications required by the industry.
Contractual terms are based on the principles of integrity, fairness and agreed growth strategies.
In order to treat their suppliers consistently, with a few necessary local differences, the group companies have prepared:
◊ procedures and operating instructions to ensure that supplier vetting processes and/or the periodic review of suppliers are carried out properly and on an arm’s length basis;
◊ general contractual terms applicable for specific categories of supplies, which are subject to specific approval and
referenced in purchase orders.
Relationships with the financial
community
The group has consolidated relationships with banks and
financial institutions. Its debt is contained and its financial
indicators reveal a sound level of equity and well balanced
sources and applications of funds.
At 30 September 2015, the ratio of net financial debt to
equity attributable to the owners of the parent is 0.58 (30
September 2014: 0.75).
Debt is mainly non-current (97.4%; 74.9% in the previous
year). The group’s credit facilities total roughly €105 million; of these, none of the bank facilities (approximately €26
million) were used, while roughly 42% of facilities for the
factoring of trade receivables was used (approximately €70
million).
Financial debt is analysed in the notes to the consolidated financial statements (see 9.1 Net financial debt),
while additional information on exposure and financial
covenants is given in the section on 5.3 Financial risk
management(see 5.3.5 Liquidity risk).
In 2013/2014, for the first time, the group underwent a voluntary rating procedure by a leading private rating agency.
The rating was made available to the group’s main banks,
as provided for by private rating rules.
The group operates with 12 Italian banks and four foreign
banks (HSBC, Republic Bank, Wells Fargo and Toronto Dominion).
There are no disputes pending with financial entities.
To help share with suppliers the values underpinning the group’s business model and to ensure compliance not only with
laws but also with the principles of transparency and integrity, MAG has informed all its suppliers of its code of conduct,
which it has published on its website and references in each purchase order that it issues.
The table below summarises group purchases by current expenses and investments in the past two years.
Relationships with the public
administration
Historically, the group’s relationships with the Italian public
administration consist of the following main types:
ministration;
◊ beneficiary of subsidised financing instruments;
◊ investee of public entities;
◊ generic relationships with the public administration
(e.g., tax authorities, agencies, social security institutions, etc.).
The group supplies public administration bodies and institutions (e.g. Ministry of Defence - General Directorate of
Air Armaments - Armaereo, Ministry of Farming and Forest
Policies and the Italian Tax Police) within the scope of contracts, usually of a long-term nature, for the supply of products and maintenance and overhaul services (of aircraft
and parts) and engineering services.
Over the years, the group has benefited from public financing assistance in the form of loans and, to a lesser extent,
grants, to support research and development and innovation in general, mainly under the following legislation:
◊ Law no. 808 of 24 December 1985;
◊ Law no. 46 of 17 February 1982;
◊ Law no. 296 of 27 December 2006 (and Law no.
244 of 24 December 2007).
Other minor assistance (e.g. Law no. 311 of 30 December
2004) falls within the scope of relationships with the tax authorities in the form of partial tax relief.
Law no. 808/85 also constitutes the main source of financial assistance to the industrial aerospace sector, with the
aim of developing and increasing the competitiveness of
industrial aerospace companies, through a support to the
research and development activities in a sector which is deemed strategic for the industrial policy.
Aerospace is indeed an investment-intensive sector as it
is oriented to achieving very innovative technological solutions which, due to their inner complexity, are risky and do
not guarantee immediate economic return.
By providing financial support to the research and development projects carried out by enterprises, the Law aims at
mitigating such risks during the start up phase of the project,
so that technology advances of the sector are encouraged.
In more general terms the Law qualifies as a measure of
industrial policy, which can help the enterprises’ competitiveness, strengthen the level of employment, positively
contribute to the country balance of payments, namely of
the trade balance.
As such, Law no. 808 facility has represented for the MAG
Group a key factor for creating a heritage of relevant skills
in the technological fields where the Group has been engaged, skills that have promoted the process of growth, of
generating employment, of diversification and internationalization.
◊ supplier of products and services to the public ad-
72
73
After the introduction of Law no. 808/85 into the legal system, there have been changes in its implementing measures, especially as regards its regulatory provisions and the
discipline of the different reimbursement regimes, changes
that have been mostly enacted by deeds of the Public Administration.
More specifically, the CIPE Directive no. 28 of 22 March
2006, which basically rules all MAG programs, introduced
a distinction of the programs that qualify for Law no. 808
assistance, between:
◊ Programs considered relevant to “National Security” or of “European interest” and
◊ Other programs.
In the Group 20 years history, the assistance received under
Law no. 808/85 globally amounts to € 46.4 million, against
four programs considered relevant to National Security (€
32 million), one program of European Interest (€ 10 million)
and two programs pertaining to the latter typology. The assistance (received and to be received) for the National Security and European Interest programs has been progressively
deducted over the years from the costs capitalized against
the relevant projects. Therefore, the royalties to be paid to
the MiSE (Ministry of Economic Development) in proportion
to the sales of the products incorporating the technologies
developed, furtherly represent lato sensu a social allocation
of the economic value generated through this government
assistance.
Over the same 20 years, the Group has borne some € 110
million of R&D expenditures, which became the driving force of its evolution, whose spillover effects were either internal, in terms of increased skills and market penetration, or
external, in terms of creation of value, not merely economic,
in the territories where the Group has been operating.
Given its importance in terms of investing in the development of new products, additional details on financing
and the accounting treatment of the related financial statements captions are provided for in the Annual Financial
Report (see Development of new products, 4.1.1.1 Research and development costs).
The public administration’s non-controlling interests in the
group companies consist of the Ascoli Piceno municipal authorities’ investment in the subsidiary SAT S.p.A. (Società
Aeroporto del Tronto S.p.A., “SAT”).
SAT is the vehicle for the project to create, through a series of steps, an infrastructure for fixed-wing aircraft landing
with maximum weight at take-off of up to 20 tonnes. The
infrastructure will be used to develop the group’s industrial
activities and, at the same time, make it possible to set up a
civil protection operating base.
Accordingly, the public administration bodies’ investment in
SAT, provided for by article 6 of its by-laws, is justified by the
public’s general interest in the construction of infrastructure
74
that could be strategic in an area that mostly falls within
objective area 286 and has poor infrastructure levels.
It is in these terms that Resolution no. 215 of 16 February
2005 of the Marche Regional Council falls, setting the guidelines for the creation of regional territorial development
agencies, along with the decree of 1 March 2006, whereby
the Ministry of Economic Development (previously the Ministry of the Economy and Finance) granted the Ascoli Piceno
municipal authorities funds to be used for the investment in
SAT.
In 2014/2015, the Marche Region expressed particular interest in the infrastructure to be used a base for the Civil
Protection, identifying the possibility of the local authority disbursing a grant against the residual portion of investments.
Environmental policy and responsibility
Over time, the group has kept an ongoing focus on the environmental impact of its production activities, although they
cannot be considered high risk.
Nevertheless, its risk and compliance analyses (see Risk
management and compliance) and analysis of compliance with increasingly stringent standards on safety in
the workplace (see Human resources and safety in
the workplace) have progressively lent more structure
to the analysis process and the prevention of potential risks.
This process is completely based on principles whereby
companies are required to:
◊ take a preventative approach to environmental
issues;
◊ implement initiatives that promote greater environmental responsibility,
◊ encourage the development and widespread use of
environmentally-friendly technologies.
In this respect, the group has always made compliance with
environmental protection legislation a crucial issue and has
always treated it as an opportunity to instil a company culture that includes the understanding that sustainability should
be considered as part of the value of economic activity and
products and services.
During the year, the procedure to obtain the ISO 14001 certification began. This certification provides for the audit of
Italian sites starting from June 2016.
In this respect, the group set up an overall reporting system
to gather statistical data and indicators on the environmental impact of its activities, as preliminarily summarised herein.
86 Areas with structural difficulties needing socio-economic redevelopment
support, in accordance with the qualification under the EU Regulation for
Structural Funds for 2000 - 2006.
Environmental impact
Natural gas
Consumption of gas per hour worked
2014/15
88
4,05
m3/h
Materials used and recyclability of products
The group’s main product lines (Aircraft Systems SBUs) are
characterised by high performance rates and an optimal
use of natural resources. The raw materials used mainly
comprise steel, alloy steel, aluminium and aluminium alloys
and composite materials.
They must comply with specific composition techniques
(STM/SAE/ISI). However, no sector regulations prevent the
use of recycled raw materials.
Accordingly, it is estimated that 65% of aluminium and aluminium alloys come from recovered scrap. With respect to
steel, no specific information is available on the percentage
originated from minerals.
Most materials used in processing represent a very low environmental hazard and production scraps and trimmings
are always reused or recycled through secondary markets
subject to specific controls.
Consequently, the group has identified the chemicals used
as the first type of hazardous materials to be monitored.
Specifically, paints prevail in terms of quantity.
During the year, paint consumption was monitored using
the following indicators.87figure is the simple arithmetic
mean of consumption per hour worked, calculated for each
production site.
Hazardous raw materials
Raw materials consumption (paints)
Consumption of materials per hour
worked87
Consumption of electricity
Consumption of electricity per hour
worked
Value
m.u.
5,9
Ton
0,020
Kg./h
Energy sources
The Italian sites mainly use natural gas for central heating
and the painting systems.
Conversely, the Canadian site uses electricity also for central heating.88
Natural gas
2014/15
Value
m.u.
503.318
m3
87 This figure is the simple arithmetic mean of consumption per hour worked, calculated for each production site.
88 This figure is the simple arithmetic mean of consumption per hour worked, calculated for each production site.
2014/15
Value
m.u.
6.420.574
Kwh
79,36
Kwh/h
All water used in production processes by the group’s sites
is disposed of. Consequently, there are no industrial water
discharges. Over 50% of all water used in industrial processes is withdrawn from the well and is recovered by concentration systems that minimise the volume of water required.
Water
Consumption of water (well)
Consumption of water (well) per hour
worked
Consumption of water (aqueduct)
Consumption of water (aqueduct) per
hour worked
2014/15
Value
m.u.
11.352
m3
0,08
m3/h
11.092
m3
0,07
m3/h
Waste
Scrap and waste from production are identified and separately collected to be subsequently recycled and disposed
of.89
Waste generation89
2014/15
The cyanidric products used at the Monteprandone site
must be authorised and withdrawals are rigorously monitored through time access to deposits by personnel with a
permit to handle toxic gases.
Consumption of natural gas
Electricity
2014
Value
m.u.
362,0
ton
Total annual amount generated per hour
worked
0,70
ton/h
Annual amount of hazardous waste
generated
29,9
ton
Annual amount of hazardous waste
generated per hour worked
0,06
ton/h
Total annual amount generated
Emissions
The efficiency level of pollutant emission control systems is
ensured by regular maintenance and periodic monitoring of
all emissions which confirmed the group is well within the
legal ceiling.
Thermal power stations are regularly inspected (NOx) and
cooling and air conditioning systems containing F-gas are
subject to maintenance and periodic inspections in accordance with the law.
No ozone depleting substances are used and systems
using R22 were modified or are being removed.
89 The figure refers to 2014 (calendar year). Indeed, for Italian companies,
it is derived from the Environmental declaration form.
75
CO2 emission figures of the year are given below. They refer to energy consumption using natural gas (central heating or production processes), electricity, fuel for company
cars and helicopters.
CO2 emissions
Use of natural gas, electricity and fuel for
vehicles
2014/15
Value
m.u.
5.029
ton
Expenditure and investments
During the year, environmental costs were incurred in connection with waste disposal, consultancies, analysis of
emissions and waste water and environmental maintenance.
Furthermore, the various group sites incurred costs related
to environmental protection investments.
Environmental investments
2014/15
Value
m.u.
Environmental expenditure
179
Eur /000
Impact environmental expenditure/
Turnover
0,15
%
Environmental investments
938
Eur /000
Impact environmental investments/
Turnover
0,76
%
Claims and litigation
There was no environmental contamination or pollution (underground or above).
No significant environmental litigation is underway.
Furthermore, the group believes that product innovation is
a key factor in corporate environmental responsibility,
and achieves such innovation by striving for production solutions that improve performance in terms of reducing fuel
consumption, improving the conditions of use and, for the
future, improving transport in general (see Sustainable
innovation).
Within the scope of the environmental compliance procedures, the various risk owners constantly monitor all main
risks, in accordance with applicable legislation.
No environmental events or claims occurred in recent history as a result of the group’s production activities, and no mid
to high risk factors have been identified to date.
76
Sustainable innovation
Product and process innovation is a strategic target for the
group, as it is a key factor in its development and essential
to building competitive edge and maintaining it over time.
Analyses conducted on current industrial trends in advanced countries reveal structural changes that increasingly
entail the outsourcing of lower valued added components in
industrial production.
Highly effective institutional surveys, such as the EU survey,
identify precise technological gaps as the reason for delays
in certain areas like Europe and associate high economic
development potential with strategic technological lines, as
a necessary aspect for sustainability and improved quality
of life.
The annual IUS90 for 2015 and the European Commission
have once again highlighted how national systems that are
balanced with respect to their various aspects – research
and development inputs, business innovation activities and
innovation outputs – not only remain top innovation leaders
but are closely correlated with the performance of the economy.
This leads to91 certain guidelines for the revision of the industrial system92 in which, beginning with the restrictions
created by the high cost of energy and ageing infrastructures, growth drivers are identified in the technologies that
encourage the sustainable development of economies,
such as the achievement of renewable energy targets in
2020, energy resource storage and redistribution systems,
smart grids, new materials and hybrid and electric means
of transport.
Therefore, the definition of the priority technologies on
which to base Europe’s industrial redevelopment has led
90 “Innovation Union Scoreboard 2015”. Directorate-General for Enterprise
and Industry, European Commission.
91 Jeremy Rifkin, Foundation on Economic Trends. “The third Industrial
Revolution. How Lateral Power Is Transforming Energy, the Economy, and
the World”.
92 José Manuel Barroso. “Mission Growth: Europe at the Lead of the New
Industrial Revolution”. European Commission conference papers, 29 May
2012
77
the European Commission to prepare a Framework for the Horizon 2020 project. The result is the development of the
FP793, it identifies Key Enabling Technologies (KET), which correspond with the technological domains that represent key
elements in promoting innovation and growth and that, accordingly, are placed at the centre of initiatives aimed at boosting
the competitiveness of European industry.
aerospace districts in the Piedmont and Lombardy regions
organised by the EU. These projects are at an advanced
stage of completion.
The Lombardy Aerospace District
KETs make it possible to innovate processes, goods and services in all economic sectors and, accordingly, are systemic
as they tend to converge and integrate. The MAG group’s focus on the potential associated with KETs has motivated it to
identify innovative solutions that have been either developed or researched in the scope of what are essentially new product development projects (see DEVELOPMENT OF NEW PRODUCTS).
Fondo Europeo di Sviluppo Regionale (FESR) Lombardia
(European fund for Lombardy regional development). Industrial research and experimental development project for a
multi-stage electromechanical actuator.
The group’s recent advancements in the H20 Framework are summarised below.
KET
Applications
Nanotechnology
Advanced materials
Summary and effective manufacturing
of nanomaterials, their components and
systems
Development of structurally advanced “3D
printing” materials (carbon microtubules)
Technology relating to functional,
multifunctional and structural materials
Development of DAMP (Diffused Anti
Vibration Multilayer Panels)
Technology relating to sustainable industry
materials
Development of surface treatment
technology to replace chrome and
cadmium (Nitrex)
Transition to a reliable, sustainable,
competitive energy system
“Challenge” technology
To create an intelligent, environmentallyfriendly, integrated transport system
Development of technology to implement
and control primary and secondary flight
controls and landing systems based on
the use of electromechanical components
(see National and international
platform)
Applications are developed through a network of partnerships with aerospace engineering departments at universities (the
Polytechnic University of Turin, the Polytechnic University of Milan, the Pisa University and the Rome 3 University) and
research bodies (Centre Recherche Industriel du Quebec).
Research and development applied to products fall under a few main lines divided into the helicopter and fixed-wing aircraft
segments.
◊ Landing systems and the related hydraulic, electromechanical and electrohydraulic retraction and actuation systems, hydraulic and electromechanical flight controls (primary and secondary commands) and, eventually, wire
flight control.
◊ Control and energy damping systems (advanced sound and vibration reduction solutions), infotainment and cabin
comfort control.
With respect to the qualification of innovation for transport and logistic development, having defined one of the five pillars94
of the third industrial revolution, the introduction of very light jets marked a groundbreaking change, winning One Aviation
Inc.(formerly Eclipse Aerospace Inc.) the Collier Trophy95 of the US National Aeronautic Association (NAA).
In the wake of the creation of the E500 with the previous Eclipse Aviation Corp., the E550 dual reactor is the most sophisticated version of the innovative personal jet concept, combining energy efficiency, avionics and extremely advanced
technology with a low purchase cost. These elements, which gave rise to the category of very light jets in 2006/2007, gave
a new group of users access to this type of private air transport and reinvented the concept of general aviation.
More in general, all the solutions aimed at improving energy efficiency and attaining sustainable mobility models directly
or indirectly combine technological excellence with environmental sustainability in which the concept of sustainable innovation lies.
National and international platform
The main projects in which the group is actively involved include those developed through technological clusters, like the
93 Framework Program 7 (2006 – 2013).
94 Jeremy Rafkin, op.cit.
95 Award established in 1911 (the first Collier Trophy was awarded to Glenn Curtiss for his successful development of the seaplane), which NAA gives each
year for “the greatest achievement in aeronautics or astronautics in America, with respect to improving the performance, efficiency, and safety of air or space
vehicles, the value of which has been thoroughly demonstrated by actual use during the preceding year”.
78
Piedmont Aerospace District
Fondo Europeo di Sviluppo Regionale (FESR) Piemonte (European fund for Piedmont regional development).
Research project for innovative solutions to be applied to
flight controls and actuators for “All Electric Aircraft” (AEA)
with the aim of improving the performance of aircraft and
reducing fuel consumption – hybrid flight control systems
(HFCS).
Partner – the Polytechnic University of Turin.
MESAP (Mechatronic and advanced production systems)
District
- Research project for innovative solutions for electrohydrostatic circuits with applications in aerospace, avionics
and robotics – Electro Hydrostatic Actuation for Industrial
Automation and Vibration Control (EHA InAViCo).
Partner – the Polytechnic University of Turin.
The aim is to institutionalise intellectual property (IP) management activities (i.e., patent portfolio management, control
of patent filing procedures, maintaining approved patents,
protecting group know-how and monitoring technological
competitors’ patent activities) and the related processes
and consolidate them over time.
To this end, during the past two years, the group has conducted, with increasing frequency, precedent research and
the parent has set up an R&D COMMITTEE FOR PRODUCTS AND TECHNOLOGIES to:
◊ periodically monitor the road map of technological
development and provide updates on road map progress;
◊ create a shared database of group companies’
know-how, promoting access thereto;
◊ lay the foundation for the optimisation of IP resources, including financial resources.
During the year, the committee met once.
The table below provides data summarising initiatives performed in the past three years
2014/15
2013/14
2012/13
Feasibility analysis and
precedent research
2
3
2
International patent
applications
1
1
-
Supplementary type
certificates (major changes)
3
3
3
58
63
67
Minor changes
- Industria 2015. Development project for advanced electromechanical retraction actuation systems for helicopter
landing systems.
Partner – University of Pisa – Department of Aerospace Engineering.
Using, managing and protecting intellectual property
Very recently, new product development, which the group
primarily conducts under contractual arrangements with
public or private customers, underwent a structural change
both in the sense that it now increasingly requires significant investments from the group and that is now allows for
greater autonomy, rewarding originality and innovation in
the proposal of solutions and applications.
This development was concurrent with growth in in-house
engineering expertise and the gaining of experience in certain types of products and technologies.
Similarly, initiatives have been launched with a focus on
subsequent steps in the vetting of grants for innovation that
the group contributes, which can constitute intellectual property at various levels, from ordinary know-how to stronger
design rights that are legally protected.
79
Annual report
Translation from the Italian original which remains the definitive version
Report of the auditors in accordance with article 14 of Legislative
decree no. 39 of 27 January 2010
To the shareholders of
1. We have audited the consolidated financial statements of the Mecaer Aviation Group as at and for the year ended 30
September 2015, comprising the statement of financial position, statement of comprehensive income, statement of
changes in equity, statement of cash flows and notes thereto. The parent’s directors are responsible for the preparation of these financial statements in accordance with the International Financial Reporting Standards endorsed by the
European Union. Our responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards recommended by Consob, the Italian Commission
for Listed Companies and the Stock Exchange. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement and are,
as a whole, reliable. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by directors. We believe that our audit provides a reasonable basis for our opinion. Reference should be made
to the report dated 23 December 2014 for our opinion on the prior year consolidated financial statements, which included the corresponding figures presented for comparative purposes.
3. In our opinion, the consolidated financial statements of the Mecaer Aviation Group as at and for the year ended 30
September 2015 comply with the International Financial Reporting Standards endorsed by the European Union. Therefore, they are clearly stated and give a true and fair view of the financial position of the Mecaer Aviation Group, the
results of its operations and its cash flows for the year then ended.
4. The directors of Mecaer Aviation Group S.p.A. are responsible for the preparation of a directors’ report on the financial
statements in accordance with the applicable laws. Our responsibility is to express an opinion on the consistency of
the directors’ report with the financial statements to which it refers, as required by the law. For this purpose, we have
performed the procedures required by the Italian Standard on Auditing 001 issued by the Italian Accounting Profession
and recommended by Consob. In our opinion, the directors’ report is consistent with the consolidated financial statements of the Mecaer Aviation Group as at and for the year ended 30 September 2015.
Novara, 23 December 2015
KPMG S.p.A.
Marco Boniardi - Director of Audit (signed on the original)
Director’s report
Group performance
The group’s overall performance for 2014/2015 can be
summarised as a slight decrease in volumes while overall
profitability has significantly improved.
The previous year was still affected by the discontinuation
up of the AW101 line of the CCS division, at the Yeovil (UK)
operating site, which was substantially completed in the first
half of 2014. As described in the 2013/14 annual report, the
foreign permanent establishment ceased to exist in 2014.
The portion pertaining to the AW101 line, net of production
revenue and cost, was slightly below €50 million in the three-year period 2011/12 – 2013/14, while the performance
of revenue was more linear, with 2013/14 similar to 2011/12,
up by approximately €11 million in 2014/15 compared to
2013/14.
The activity peaks of this cycle were flanked by major diseconomies affecting the entire business and engineering structure, which was required to support particularly
complex contracts, with different implementation factors
and very short execution times. Similarly to last year, the
group strategy that envisaged the use of mainly temporary
resources for the Yeovil (UK) operating site mitigated the
economic effects of the discontinuation.
In terms of operational experience and technological expertise, the experience gained from such contracts gave the
group a significant range of skills with potentially positive effects on future business developments. 2014/2015 saw the
acquisition of significant contracts, such as Alenia Aermacchi’s HET Trainer M345 landing system, the first VIP interior
for the AW189 or the Stylence/EMS special cabin interior for
the Airbus H145. The ongoing evolution of the group’s strategies identified a common strategic area for the ALS (Actuation and Landing Systems) and the CCS (Cabin Comfort
Systems) divisions, based on the offer of systems and components mainly to the OEM market. Consequently, it meets
the requirements to become its own Strategic Business Unit
(SBU), Integrated Aircraft Systems, which, however, internally preserves the two existing divisions, combined because of their similarity.
84
In this respect, the AS division, created last year within the
previous Maintenance and Completion division, continues
to focus on the supply of services, both interiors and customised, and reconfiguration, maintenance and repair services, carried out directly on the aircraft. Consequently, it is
a separate SBU, Aircraft Services, which represents an
important element for the group’s medium/long-term business development.
In terms of turnover, during the year, the Integrated Aircraft Systems SBU recorded a slight decrease in its overall value on the previous year, with significant growth in the
ALS division product lines and a reduction in those related
to the CCS division.
With respect to the former, the increase in the production and sale of landing systems, in which the Gulfstream
G4-G5-G650 and, in part the G7, lines built by the Canadian
site, played a fundamental role, should be noted. The first
flight of the Bell 525 Relentless mounting MAG’s landing
gear took place in July 2015.
With respect to the cabin interiors offered by the CCS division, as discussed in the introduction to this report, the
comparison with the prior year is affected by the discontinuation of the AW101 line, net of which volumes are in
line with 2013/14. The division is changing with a new focus on defining the reference strategic area and as a result
of the diversification process involving products (with the
expansion of the cabin management system range – e.g.
environmental) and customers (with systems that, today,
target a larger customer portfolio). For example, during the
year, this process led to the delivery of the first interior kit for
the Bell 525, while some interiors for the Airbus AH145 are
being manufactured.
The Aircraft Services SBU showed substantial stability
although the maintenance and overhaul services, which
are carried out at the Monteprandone site, remain closely
related to trends in public spending by the public administrations (the National Forest Guard, Italian Tax Police and
Air Force) which are the main clients. Considering the operating rigidities of the business line and the limited fungibility
of the relevant resources, the volumes have a direct effect
on profitability. MAG intends to maintain a portfolio offering
an adequate saturation level of the facilities. During the
year, some major contracts were renewed, such as that for
the long-time industrial support to the NH500 aircraft used
by the Air Force, or with the Ministry for Agriculture and Forestry for the same type of aircraft.
The interiors services, which are mainly carried out at
the operating sites in Philadelphia and Hagerstown, show
growth in volumes on the previous year.
In terms of design, which is a key aspect in the search for
customised style solutions, the achievements of the year
include the EASA certification of the first installation of the
Bell 429 MAGnificent luxury interiors.
Other achievements of the year include the International
Yacht and Aviation Award with the Belvedere concept for
the private jet category.
Consolidated revenue for 2014/2015 exceeded €123 million, compared to €131 million in the previous year.
Although volumes are not a priority, the group’s growth rate
in the long-term can be measured with a CAGR96 for turnover in the past five years of approximately 5%.
Revenue in foreign currency was generated against an
appreciation of the US dollar against the Euro, which was
particularly marked in the second half of the year and the
volatility of the Canadian dollar against the Euro although
the average values tend to converge.
With an average exchange rate of 1.1464 for 2014/2015
(1.3564 in 2013/2014), the monthly average US dollar/Euro
exchange rate hit its low in October 2014 (1.2823) and peaked in April 2015 (1.0552).
With an average exchange rate of 1.4025 CAD/€ in the year
(1.4625 in the previous year), the Canadian dollar’s monthly
average reached its low in August 2015(1.5236) and peaked in April 2015 (1.3085).
Revenue from sales in the year in foreign currency total ap96 Compound Annual Growth Rate.
85
proximately USD65.7 million and CAD0.4 million.
[thousands of Euros or percentages]
2014/15
TR - Total revenue from
core business
123.356
R - Revenue
133.104
The following table summarises total revenue from the core business during the year, analysed by the operating segments
within the two business lines, which is how the group is structured. Additional information on revenue by operating and
geographical segments is given in the notes to the consolidated financial statements (infra 3.4 Segment reporting).
EBITDA
.
2014/2015
2013/2014
2012/2013
2011/2012
Flight control systems and mechanical parts
32.342
29.881
24.002
27.510
Retractable landing and other hydraulic systems
31.432
26.092
24.901
21.459
Other products and mechanical processing
2.087
4.699
5.987
5.506
Hydraulic systems product support
6.637
5.999
6.978
5.347
Engineering
2.249
2.923
3.180
4.871
74.747
69.594
65.048
64.693
4.393
5.020
17.979
7.349
Completion of interiors with the supply of kits
23.756
37.124
45.624
29.887
Total CCS division
28.149
42.144
63.603
37.236
102.896
111.738
128.651
101.929
6.718
7.942
9.306
7.029
Total ALS division
Interior and non-structural components
Total Integrated Aircraft Systems
Interior services
Overhaul and maintenance of aircraft and components
13.742
11.108
10.979
13.176
Total Aircraft Services
20.460
19.050
20.285
20.205
123.356
130.788
148.936
122.134
Group total
In the Integrated Aircraft Systems business unit, revenue trends offset each other between the growth recorded by the
ALS division, especially in relation to flight control and landing systems, and the reduction for the CCS division, almost
entirely attributable to the completion of the AW101 line contracts.
With respect to the systems of the ALS division, the expansion of the production range (e.g., landing gear for the G7
Gulfstream aircraft) and the increase in production contributed to a higher turnover. Furthermore, product support recorded
positive results for the year with the group investing in resources and organisation for the future development of an area
deemed strategic.
Engineering revenue remains stable although its trend is strictly related to the type of new product development contracts
which do not always generate revenue and, clearly, the progress of projects. Revenue-generating projects include that for
the development of the landing system of Alenia Aermacchi’s M345 trainer aircraft, which will cover several years.
Revenue of the CCS division remained steady if the AW101 effect is not considered which, in the first half of 2013/14,
accounted for just under €15 million of turnover. With respect to diversification, for some segments, 2014/15 saw some important steps following the substantial completion of some development contracts (Inaer EMS and Bell 429 interior) which
open up to new market segments for the supply of interior component kits.
With respect to the AW101 line, the group entered into an agreement with AgustaWestland whereby MAG obtains a kind
of exclusivity for the production of additional interiors, possibly in 2016, based on different economic and organisational
factors from those for the 2012 – 2014 three-year period. This agreement relies on the skills developed by the group which
substantially represent a competitive edge.
The Aircraft Services business line recorded a positive year overall, growing on the previous year. Helicopter overhaul
shows a more or less steady trend and the interior reconfiguration of the Part 145 gave a positive contribution. In this respect, the production of the first AW139 VIP interiors in the sites of the US subsidiary should be noted.
Overall performance confirms that described earlier, with a change in turnover which, net of the completion of the AW101
contracts, points to an upward trend (5% CAGR 2010 – 2015).
Meanwhile, the measures to improve organisation and obtain a more balanced saturation of production site, especially
those located abroad, generated an increase in operating profitability, which was particularly strong in the year ended 30
September 2015.
% of R
2013/14
% of R
130.788
2012/13
% of R
148.936
130.285
2011/12
% of R
122.134
166.536
129.515
16.213
12,2%
12.413
9,5%
16.811
10,1%
12.371
9,6%
EBIT
9.979
7,5%
7.155
5,5%
12.328
7,4%
7.040
5,4%
EBT
9.748
7,3%
5.664
4,3%
8.637
5,2%
5.911
4,6%
Profit for the year attributable to the
owners of the parent
6.285
4,7%
2.347
1,8%
2.577
1,5%
2.223
1,7%
To give a better view of the performance of the year, profitability is normalised by eliminating non-recurring or exceptional
items which do not relate to operations, shown in the table below.
[thousands of
Euros]]
Description
Grants related to income
251
Prior year income
672
Other non-operating income
113
Adjustment to the product warranty provision
(115)
Write-downs of inventories (E500)
(784)
Non-recurring expense E500
(176)
Prior year expense
(137)
Total net non-recurring expense
(176)
In 2014/2015, adjusted EBITDA come quite close to the unadjusted value. An examination of the trend of this indicator
throughout the most recent years shows an underlying trend towards the ongoing improvement of performance.
2014/15
TR - Total revenue from
123.356
% of R
2013/14
130.788
% of R
2012/13
148.936
% of R
122.134
2011/12
core business
133.104
130.285
166.536
129.515
% of R
R - Revenue
16.389
12,3%
13.604
10,4%
16.815
10,1%
13.323
10,3%
Adjusted EBITDA
10.155
7,6%
8.346
6,4%
12.332
7,4%
7.992
6,2%
Adjusted EBIT
In the overall evaluation of profitability, the above-mentioned elements of discontinuation should be noted as well as the
fact that the life cycle of the group’s products and services has not yet reached the maturity stage. The profitability of the
systems still in a start-up stage is still affected by modest batches and experience curves. The after-market and product
support, in general, show considerable development margins in the medium/long-term and do not account for a significant
portion of revenue yet.
Net financial expense was positively impacted by favourable exchange rates, specifically in relation to the US dollar,
which appreciated against the Euro, and the Canadian dollar. These two currencies are functional currencies for the group
companies.
Interest and financial expense improved on the previous year thanks to the reduction of loans and debts and on-the-whole
favourable interest rates. Indeed, the European Central Bank’s accommodating monetary policy continued throughout the
year and in a context of weak growth with deflationary trends, the official rate has been kept at its all-time low of 0.05 points
since September 2014 and generated a negative bank overnight deposit rate (-0.30 since 10 September 2014).
Official ecb rate
Start date
07/2011
11/2011
12/2011
07/2012
05/2013
11/2013
06/2014
09/2014
Rate
1,500
1,250
1,000
0,750
0,500
0,250
0,150
0,050
The three-month Euribor continued to decrease in 2015, with negative averages from May onwards. The general conditions of financial markets slightly improved compared to 2014 although the statistical figures indicate that the credit market
is still struggling with high spreads that continue to be affected by the weak conditions of financial companies.
The group’s financial position remains steady, with credit facilities totalling €106 million (bank credit facilities of €27 million
86
87
for cash or advances and credit facilities for trade receivables factoring of €79 million). At the reporting date, 31% of the
bank credit facilities were used, while approximately 42% of the available facilities for the factoring without recourse of
trade receivables were used.
Thanks to its credit rating, the group can access credit with the main banking groups at prime rate conditions, while maintaining borrowing costs within satisfactory parameters.
[in thousands of Euros]
Interest and other financial income
2014/2015
2013/2014
2012/2013
2011/2012
301
371
325
26
1.918
939
(1.602)
2.650
(23)
(47)
(29)
(1.216)
(1.931)
(2.367)
(1.893)
(1.946)
Fees, commissions and other charges
(496)
(387)
(492)
(643)
net financial expense
(231)
(1.491)
(3.691)
(1.129)
(2.126)
(2.383)
(2.060)
(2.563)
Net exchange rate gains (losses)
Interest expense on discounting
Interest and other financial expense
Net of exchange rate differences and discounting
These parameters were analysed as part of the group’s financial risk management policy (see 5.3 Financial risk management).
The debt to equity ratio, based on equity in the consolidated financial statements, reveals a balanced use of sources,
showing very contained financial leverage.
The debt to EBITDA ratio indicates that the group’s potential ability to repay its financial debt using operating profit is adequate.
The table below provides liquidity ratios that, although affected by lower volumes with an impact on EBITDA in absolute
terms, confirm that the group has maintained a balance of current sources and application of funds.
Interst cover
ratio
DEBT TO EQUITY
2014/2015
2013/2014
2012/2013
2011/2012
0,58
0,75
0,46
0,43
DEBT TO EBITDA
1,72
2,62
1,15
1,37
DEBT TO ADJ. EBITDA
1,70
2,39
1,15
1,27
2011/2012
liquidity ratios
parametro
2014/2015
2013/2014
2012/2013
current ratio
2,04
1,71
1,61
1,57
acid test ratio
0,99
0,95
0,67
0,83
At the reporting date, the group held financial instruments hedging interest rate risk; (see 4.2.4 Derivatives).
In the consolidated statement of financial position, net non-current assets are in line with those of the prior year due
to the continuation of significant investing activities (€8,517 thousand in property, plant and equipment and intangible assets), against amortisation/depreciation (€4,825 thousand) and an increase in non-current loans and borrowings (€2,747
thousand).
The group’s policy is aimed at maintaining a balance between non-current sources and applications of funds (see Statement of cash flows).
The group continues to invest heavily in the development of new products (these activities increased by €5,581 thousand,
net of grants and tax credits), with an impact of roughly 4.5% on consolidated revenue. This is above the averages for the
sector, but is a distinguishing feature of the group’s development process.
The section on research and development activities (see Development of new products) also includes detailed
information on the main projects and their funding, given that certain projects have received government assistance to
support innovation. Investments are essential to create and maintain a competitive edge and ensure continued growth
above the market average levels of comparable competitors.
Current non-financial assets increased mainly due to the trend in work in progress, (€2,188 thousand) in parallel with
the progress of the overhaul and interiors contracts in place at year end, while trade receivables decreased significantly
(-€9,540 thousand). At the previous reporting date, the latter’s balance was considerably high due to the delay in some
cash inflows. The trend in current assets was also the result of a decrease in trade payables (-€10,343 thousand).
Closing net financial debt decreased on the previous year end by €4.7 million. The decrease is entirely related to the
non-current portion.
Additional details on the composition of net financial debt are provided in the notes (see 9.1 Net financial debt).
Statement of financial position highlights
A- NET NON-CURRENT ASSETS
B- NET CURRENT ASSETS
C- POST EMPLOYMENT BENEFITS AND PROVISIONS
2014/2015
2013/2014
2012/2013
2011/2012
32.020
30.217
25.116
23.076
56.876
58.757
48.269
45.862
(12.646)
(12.851)
(12.456)
(12.957)
D- INVESTED CAPITAL
76.250
76.123
60.929
55.981
E- EQUITY
48.402
43.593
41.659
39.086
F- NET FINANCIAL DEBT
27.848
32.530
19.270
16.895
G- TOTAL AS IN D
76.250
76.123
60.929
55.981
88
89
Alternative (“NON IFRS”)
performance ratios
To provide a better understanding of the group’s performance in the year ended 30 September 2015, in addition to
conventional ratios presented in accordance with IFRS, this
report provides certain performance ratios to supplement and not replace - conventional ratios. The ratios used are
detailed below.
Profitability ratios
EBITDA (Earning Before Interests, Taxes, Depreciation and
Amortisation – from continuing Operations).
The parent uses this ratio as a target for internal management control and in presentations to analysts and investors.
It serves as a unit of measure to evaluate operating performance.
Profit for the year
++ Current and deferred taxes
++ Financial expense/(financial income)
++ Non-recurring expense/(non-recurring income)
++ Amortisation, depreciation and accruals
++ Impairment losses/(reversals of impairment losses).
ADJUSTED EBITDA takes account of non-recurring or
exceptional items.
EBIT (Earning Before Interests and Taxes – from continuing
Operations) or Adjusted Gross Operating Profit.
Profit for the year
++ Current and deferred taxes
++ Financial expense/(financial income)
++ Non-recurring expense/(non-recurring income)
++ Impairment losses/(reversals of impairment losses).
L’ADJUSTED EBIT takes account of non-recurring or
exceptional items.
90
Financial ratios
NET FINANCIAL DEBT (Net financial position)97.
This ratio is used to indicate the group’s more general financial position.Liquid funds (bank and postal accounts, cash
and cash equivalents, cheques)
++ Securities in portfolio and liquid funds (or equivalents)
++ Current financial assets
-- Bonds
-- Current and non-current bank loans and borrowings
-- Other bank loans and borrowings and/or other loans that generate financial expense
-- Future lease payments to the lease companies recognised using the financial method (IAS 17).
DEBT TO EQUITY RATIO.
The ratio, which shows the balance between borrowed and
venture capital and the level of capitalisation, compares net
financial debt to equity.
CURRENT RATIO.
This is a liquidity ratio expressing the ratio of current assets
to current liabilities.
ACID TEST RATIO.
Highlights of main consolidated companies
The following notes provide information on other group
companies by operating segment, including their financial
highlights stated under IFRS, drawn from the respective financial statements.
Within its group, the company acts as parent responsible for
centralised activities. It also carries out production activities
on the helicopter and small jet market.
MAG is the result of the combination of previous corporate
and operating sites that, in line with the group’s organisation, report to two main operating segments, comprised of
divisions.
The Integrated Aircraft Systems operating segment which
focuses on the supply of systems and equipment for OEMs,
comprises the ALS (Actuation and Landing Systems) and
the CCS (Cabin Comfort Systems) divisions, while the Aircraft Services operating segment provides a wide range
of services for standard aircraft and coincides with the division of the same name.
The table below summarises core revenue by business line,
as they are structured within the two operating segments.
This ratio measures the group’s ability to repay current debt.
It is the ratio of cash plus current assets to current liabilities.
Mixed ratios
DEBT TO EBITDA RATIO.
The ratio, which is also frequently used the other way round,
shows the group’s ability to repay its financial liabilities by
using the gross operating profit.
97 See also the notes to the consolidated financial statements – see 9.1
NET FINANCIAL DEBT.
91
2014/2015
2013/2014
2012/2013
2011/2012
Flight control systems and mechanical parts
32.343
29.881
24.002
27.510
Landing and other hydraulic systems
13.496
15.713
15.762
15.278
Other products and mechanical processing
2.097
4.866
6.108
5.710
Hydraulic systems product support
5.237
4.480
5.695
4.086
Engineering
1.526
1.298
1.600
4.247
54.699
56.238
53.167
56.831
Total ALS division
Interior and non-structural components
4.393
5.020
17.979
7.029
Completion of interiors with the supply of kits
26.759
39.280
47.294
32.270
Total CCS division
31.152
44.300
65.274
39.300
Total Integrated Aircraft Systems
85.851
100.538
118.441
96.131
Overhaul and maintenance of aircraft and parts
7.702
9.052
9.610
12.332
Total Aircraft Services
7.702
9.052
9.610
12.332
93.553
109.590
128.051
108.463
Total
In 2014/2015, the revenue of the Integrated Aircraft Systems operating segment fell short of that of the previous year,
and was down significantly in the CCS division. In 2013/2014, the latter’s revenue included approximately €15 million generated by the AW101 line manufactured at the foreign permanent establishment of Yeovil (UK), which substantially ceased
operations in the first half of 2014.
Net of this event, which accounted for almost €10 million in 2011/2012, approximately €26 million in 2012/2013 and €15
million in 2013/2014, revenue shows a more linear trend with a substantial stability in the ALS division and a slight reduction
in the CCS division.
These phenomena accompanying the changes to the product mix, especially in relation to interiors, where a diversification
process is in underway ultimately leading to an expansion of the product range (EMS, VIP KIT interiors) and the penetration
of new market segments, are also the result of cross-selling activities vis-à-vis new customers within which MAG is present
through the ALS division projects (landing and hydraulic systems, flight controls).
Engineering revenue relates to non-recurring fees for the development of new products. Its performance is directly correlated to the percentage of completion of engineering projects. The actual figure for the year was generated by various
contracts, including the landing system of the M345 trainer.
line and the UK operating site, which was burdensome for the entire division, are no longer present.
In fact, the production sites efficiency measures, including through improvement business plans and partial reorganisation
(e.g., lean manufacturing), generated benefits in terms of process flows and margins from the manufactured systems.
These processes are also implemented with an increased integration of foreign sites into the activities of the two divisions
comprising the Integrated Aircraft Systems operating segment.
The parent’s net financial debt is balanced and, considered overall, representative of most group assets.
Net non-current assets increased in step with investing activities, which mainly relate to new product development (€5,657
thousand, net of grants) and fixed capital (€880 thousand). Financial investments were carried out in the investees during
the year (€5,000 thousand and €1,250 thousand to increase the share capital of Mecaer America Inc. and SAT S.p.A.,
respectively), partly in capital injections and partly by allocating financial assets to capital, by converting loans into capital.
Net current assets decreased on the previous year, mainly due to the effect of the reduction in trade receivables (€12,283
thousand), which were particularly high at 30 September 2014, partly offset by the decrease in balance of trade payables
(€9,435 thousand).
Contract work in progress increased by €2,192 thousand, reflecting the above effect of the increase in the production of the
Aircraft Services operating segment.
Closing net financial debt decreased (€3.515 thousand) on the previous year. During the year, it complied with expected
levels and is mainly non-current.
Statement of financial position highlights
30 September
2015
30 September
2014
30 September
2013
30 September
2012
34.687
A- net non-current assets
55.399
47.317
41.968
B- net current assets
40.276
46.806
34.626
34.151
(12.530)
(12.751)
(12.366)
(12.866)
C- post employment benefits and provisions
D- invested capital
83.145
81.372
64.228
55.972
E- equity
54.676
49.388
45.401
38.152
Additional information in this respect is provided in the section below on development projects, in which the project managed by the parent, including through its subsidiaries, are described (see Development of new products).
F- net financial position
28.469
31.984
18.827
17.820
G- total as in D
83.145
81.372
64.228
55.972
In the Aircraft Services operating segment, maintenance and overhaul activities did not perform particularly well. These
activities mainly take place at the Monteprandone (AP) service station, where the volume of activities is affected, also in
terms of timing, by how often public administrations decide to avail of maintenance as part of the long-term contracts entered into with the company. In this respect, these activities suffered a delay especially in the first half of the year, which
was recovered in the last few months of the year. Some long-term aircraft categories (e.g., 3,000 h) were also subject to
unscheduled activities that envisaged significant changes to the contracts.
Mecaer America Inc.
Mecaer America manufactures mechanical and hydraulic parts for airplanes and helicopters. Accordingly, it reports to the
Integrated Aircraft Systems operating segment, specifically, the ALS division.
The production site is located in the aerospace industrial district of Laval (Quebec), and it is specialised in the construction
of landing gear and related retraction systems for helicopters and airplanes.
Consequently, turnover was lower, although production revenue remained in line with prior years.
The global economic performance was positive since the significant improvement in operating profit offset the effect of
the reduction in volumes.
TR - Total revenue from core
business
R – revenue
EBITDA
EBIT
2014/15
% of R
2013/14
% of R
2012/13
% of R
2011/12
93.553
109.589
128.051
108.463
100.805
108.914
141.233
114.921
% of R
13.304
13,2%
12.381
11,4%
16.761
11,9%
14.525
12,6%
9.244
9,2%
8.989
8,3%
14.075
10,0%
11.556
10,1%
EBT
8.588
8,5%
7.237
6,6%
12.084
8,6%
5.864
5,1%
Profit for the year
5.164
5,1%
3.987
3,7%
7.249
5,1%
2.438
2,1%
It also provides maintenance and overhaul services (MRO) for components and systems.
Recent years have seen a lengthy start-up phase and development projects for new products.
These have required substantial investments, production and industrial activities.
Over the past three years, the company’s and the group’s strategy focused on the integration between make to design
projects, which are characterised by long-term development cycles and have a great potential over the long term, and
make to print projects, that suit the specialist skills acquired by Mecaer America, especially in the landing system field but,
can be launched more rapidly and, therefore, contribute to the achievement of the break even point.
These results are mainly due to the fact that some diseconomies generated by the peak of activities related to the AW101
2014/2015 saw the company achieve and surpass the financial stability thresholds included in the business plans for the
2015/2016 two-year period. This is the result of the increase in production of the main projects in which the company is
involved (e.g., Gulfstream G4, G5, G650) and the start of production of new products (G7, Bell 429), to which the appreciation of the US dollar contributed. Indeed, a signification portion of revenue is generated in this currency.
92
93
Operating profit was positively affected by the volume effect and the series of business efficiency measures launched in
the previous year and in parallel with the repositioning of the William Price – Laval site.
In the budget for 2015/2016, volumes are expected to continue to grow and profitability is set to increase, in line with the
trend highlighted since the year ended 30 September 2015.
In these financial statements, the company prudently increased the allowance for the write-down of inventories - spare
parts and systems, for the E500 and One Aviation E550 aircraft (formerly Eclipse Aerospace Inc.).
Following the CAD1,250 thousand increase, the allowance amounts to CAD4,862 thousand compared to inventories of
CAD5,871 thousand.
The accrual is due to a lower absorption rate of finished goods of the year, compared to prior estimates. Nevertheless, the
reduced absorption is due to a time shift mainly attributable to the recovery of the very light jet segment, and the fact that
the customer still had a stock of landing gear, which is now depleted.
The prospects for future projects are still encouraging since the customer confirmed the production plans, supported by a
growing backlog.
During the year, this interest was extended to the Marche region, which is favourable to an airfield that is suitable for the
construction of a base for the Civil Protection. This region is willing to cover the residual investment necessary to complete
work by disbursing a grant related to assets.
Cumulative investments up to 30 September 2015 total approximately €8.6 million, of which €6.4 million refers to the airfield whose first section (a length of 800 metres), with drainage pavement, was completed during the year.
Final costs are estimated at an additional €1.5 million and relate to the extension of the airstrip with asphalt for its full length
(1,499 metres) and related works to reinforce, control rainwater and improve the functioning of the control tower.
According to the business plan, works are expected to be completed in 2017.
SAT has the necessary work authorisations and, to date, there are no constraints that may prevent the completion of works.
During the year, the company obtained the authorisation to build a variation which will expire in 2016, unless extended.
Furthermore, the state concessions necessary to control rainwater were obtained from the Ascoli Piceno municipality.
The company’s engineering expertise in the retractable landing system segment, based on the use of hydraulic and electromechanical technologies, represents a pillar for the group.
The group is particularly interested in building this infrastructure because it will help develop the activities of the business
line that reports to the Aircraft Services operating segment. Indeed, in the group’s business plan, the airfield availability
plays a strategic role for a series of projects to diversify the supply of services in this operating segment by extending to
the fixed-wing aircraft industry.
Therefore, 2014/2015 ended with increased EBITDA, a profit for the year for the first time and a net financial position of
CAD1,440 thousand.
In this respect, the business development opportunities that have been included in the long-term plan, show adequate
conditions to recover investments in the medium/long-term period.
The business plan that covers the next three years confirms a consolidation of the viability of management and shows cash
flows adequate to ensure the recoverability of investments.
The company closed the year with performance slightly above that of the previous years, although it is still undergoing
start-up and was entirely focused on investing activities.
The €5,000 thousand share capital increase was carried out by the parent during the year as resolved in 2014.
[thousands of Canadian dollars or
percentages]
2014/15
% of R
2013/14
% of R
2012/13
% of R
2011/12
business
38.997
34.022
23.988
20.212
R – Revenue
39.257
34.174
29.480
21.252
% of R
EBITDA
3.657
9,3%
(766)
(2,2)%
(1.741)
(5,9)%
(3.109)
(14,6)%
EBIT
1.401
3,6%
(3.143)
(9,2)%
(3.915)
(13,3)%
(6.055)
(28,5)%
EBT
1.270
3,2%
(3.390)
(9,9)%
(5.916)
(20,1)%
(4.335)
(20,4)%
Profit/(loss) for the year
1.270
3,2%
(3.390)
(9,9)%
(5.916)
(20,1)%
(5.017)
(23,6)%
Having reached satisfactory revenue levels, profitability is in line with that of the business lines of the group’s more mature
and consolidated facilities, although there is still room for improvement.
In 2014/2015, Mecaer America posted taxable income for the first time. However, it prudently did not recognise deferred
tax assets on prior year tax losses which, net of the portion falling due in the tax period covered by these financial statements, amount to CA31,302 thousand and CAD31,125 thousand for federal and provincial taxes, respectively.
SAT Società Aeroporto del Tronto S.p.A.
2014/15
business
155
R – Revenue
155
EBITDA
35
% of R
2013/14
% of R
155
25
% of R
155
155
22,6%
2012/13
18
% of R
140
155
16,1%
2011/12
140
11,6%
(8)
(5,7)%
EBT
(22)
(14,2)%
(38)
(24,5)%
(49)
(31,6)%
(67)
(47,9)%
Loss for the year
(28)
(18,1)%
(40)
(25,8)%
(51)
(32,9)%
(67)
(47,9)%
Mecaer Aviation Group Inc.
This company has its registered office in Wilmington, Delaware and two operating sites based in Philadelphia, Pennsylvania, near the Philadelphia North East Airport, and in Hagerstown, Maryland. Furthermore, it can operate in New Jersey in
respect of some aircraft maintenance contracts.
Finally, it has a sales office in Irving, Texas, located in the Dallas-Fort-Worth aerospace district.
Its mission is to provide aircraft maintenance and overhaul services and interiors and regulation services, which make up
the core business of the Aircraft Services operating segment.
Its main customer remains the US related company AgustaWestland (AW Philadelphia Corp.) with which a contract for the
supply of the interiors of the AW119 and AW139 aircraft is in place.
This company’s mission is to promote, create and manage airfields, helicopter landing pads and airports within the province of Ascoli Piceno and Italy. Accordingly, it focuses on developing communications in its local area. As part of the strategic
areas identified by the group, the company falls under the Aircraft Services segment.
Since its inception, the company has implemented an investment plan with the aim of building an airport mainly to serve
the industrial site, with possible repercussions for the surrounding area, particularly in terms of the potential development
of general aviation locally.
However, a strong development is underway. Indeed, in 2014/2015, a significant portion of activities was carried out for
other customers. This related to maintenance (e.g., New Jersey State Police and Maryland State Police) and interiors services. In April 2015, MAG Inc.’s first VIP interior was completed at the Hagerstown site.
A local public body (the Ascoli Piceno municipal authorities) has invested in the company, demonstrating institutional interest in building the infrastructure, in a local context where infrastructure is lacking.
The performance of the year was affected by some inefficiencies attributable to the first VIP contracts which required
reworking and, more generally, the increase in the operating costs related to the opening of the Maryland site when saturation was not complete. During the year, MAG Inc. personnel accidentally severely damaged the tail boom of a New Jersey
police plane under maintenance. The repair costs (approximately USD949 thousand) were fully covered by the aviation
policies in place, although these amounts had a negative effect on the performance of the year.
94
95
However, an overall financial balance was maintained and the results achieved were in line with expectations. The target
for the current year is to improve the industrial efficiency of sites.
[thousands of US dollars or
percentages]
2014/15
business
15.732
R – Revenue
18.423
% of R
2013/14
% of R
14.009
2012/13
% of R
14.701
14.240
2011/12
% of R
10.667
15.201
10.821
EBITDA
779
4,2%
1.018
7,1%
1.742
11,5%
527
4,9%
EBIT
127
0,7%
694
4,9%
1.527
10,0%
384
3,6%
Profit for the year
590
3,2%
714
5,0%
647
4,3%
947
8,7%
Net financial position amounts to USD570 thousand at 30 September 2015.
MAG Inc. represents a frontier in the development of the group’s business that intends to invest in the expansion of this
operating segment, focusing, in particular, on the North American market which offers good potential for the industry as a
whole and as a line of development for Aircraft Services in particular.
Development of new
products
Activities to develop new products relate to the preparations
before their production launch.
The group dedicates substantial resources to new product development activities and traditionally distinguishes
between:
◊ technological research and development or
◊ applied research and development.
The group’s active or completed development projects focus closely on products and, as such, mainly fall under the
latter category.
These activities are part of projects that are contractually
governed with aircraft manufacturers. They are technically
and economically very feasible.
In certain cases, the group handles the complexity of the
technological contributions necessary through joint ventures and partnerships with OEMs or leading companies in
the aerospace structure and system integration industry.
The group’s commitment to this investment plan is crucial
to its growth strategy and has proven to be a decisive factor
in increasing its expertise, internationalisation and gradual
entry to market segments as a global competitor.
In most cases, a development project begins with specific
technologies provided by customers and moves forward to
encompass the design stage, prototyping, tests and trials,
then obtaining aerospace certification and beginning production.
Certain projects receive government assistance aimed to
support innovation and technological development, mainly
under the following legislation:
◊ Law no. 808 of 24 December 1985;
◊ Law no. 46 of 17 February 1982;
96
97
◊ Law no. 296 of 27 December 2006 (and Law no.
244 of 24 December 2007).
These laws, and especially Law no. 808/85 which relates
to the sector, perform the irreplaceable function of meeting
high investment costs required by projects.
The accounting treatment for these costs, which is detailed in the notes to the consolidated financial statements
(see 4.1.1.1 Research and development costs), is in
line with industry practice. It provides for the deferral of the
costs until the results of development become available for
use.
When this condition is met, which is unequivocally upon final certification of the aerospace product by the relevant authorities, the costs are depreciated on a straight-line basis
over the estimated useful life of each product.
Moreover, the length of the cycle of innovation and actual economic prospects for products developed make it
possible to separately identify, control and recover the investments from when they are incurred.
If these aspects cannot be adequately demonstrated, as in
the case of activities conducted primarily for applied research, the costs incurred are expensed in the same period.
The areas in which the most recent new product development projects have been conducted coincide with certain
specific segments under two operating segments:
A)
INTEGRATED AIRCRAFT SYSTEMS
The first operating segment is divided into two divisions:
Actuation and Landing Systems and Cabin Comfort Systems.
The former mainly relates to landing systems, for which the
group is committed to extending its ability to integrate and
design certain strategic sub-systems, such as electromechanical feedback actuators, wheels and brakes, steering
commands and, more generally, innovation in materials and
processes.
This division also includes actuators and flight controls, in
relation to which the group is focused on expanding its offer to encompass hydraulic and electromechanical servoactuators, and, eventually, wire flight control.
The second division has seen many advancements in vibration and sound reduction, infotainment and cabin comfort
(i.e., air conditioning and humidity).
The second operating segment includes, in addition to
applying materials and components (CCS) innovations to
interiors customisation, all ergonomics, style and industrial
design solutions, where innovation is the core business of
the Aircraft Services operating segment.
purpose AW149.
a complete hydraulic landing system for Bell Helicopter’s
525 Relentless, a medium lift two-turbine utility helicopter.
Following AgustaWestland’s request, the group began examining the design of a complete light and adaptive flight
control and damper system in 2006, i.e., a system capable
of changing its damping characteristics depending on the
flight conditions. The project, carried out in partnership with
the Polytechnic University of Turin, is being completed and
the first devices were produced during the year.
a. ACTUATION AND LANDING SYSTEMS
i. ELECTRO MECHANICAL ACTUATOR PROJECT
The project’s objective is the study, design and testing of an
electro mechanical actuator for retracting landing gear for
helicopters weighing up to 4,500 kg, according to the EASA
CS/FAR Parts 27 and 29 specifications.
It is focused on the use of technologies (electromechanical) more reliable than the more traditional ones (hydraulic)
and eco-friendly materials featuring high structure stability
of parts combined with weight reduction and lower energy
consumption.
The project is being carried out in collaboration with an industrial partner and the Department of Aerospace Engineering, University of Pisa. The project obtained the assistance
provided for by the “Bando Industria 2015” call for proposals
(new technologies for made in Italy products) granted by the
Ministry of Economic Development.
During the year, the project was substantially completed
with the integration of the electric engine with the electronic
control unit and an extensive schedule of trials to obtain
qualification for the retraction gear.
◊ Integrated Aircraft Systems,
◊ Aircraft Services.
98
Information is provided below on the progress of the main
projects, which, at the reporting date, were still underway or
had been recently completed. The following section provides additional information about the projects eligible for
assistance under Law no. 808/85 and already completed in
the years prior to 2014/15.
The group is pursuing several commercial opportunities in
respect of the project’s potential business applications.
ii. BELL 429.PROJECT. LANDING SYSTEM
This project relates to the development of retractable landing gear for Bell Helicopter Textron’s B429 aircraft and
was completed in 2014 when the certification was received
from Transport Canada (TC) and the Brazilian authorities
(ANAC). Production began at the Canadian site in 2015.
The first flight using MAG’s landing system took place in
July 2015.
Aircraft certification is scheduled for 2016.
This project is eligible for government assistance pursuant
to Law no. 808/85, as it relates to national security.
At the reporting date, these systems were still unsold and,
consequently, no royalties were recognised in this annual
report.
According to the aircraft manufacturer’s schedule for AW149
helicopters, the first deliveries will take place in 2017.
iv. AW 609 CONVERTIPLANE PROJECT
This project began as a partnership between AgustaWestland and Bell Helicopter, involving the study, design and development of a convertiplane, i.e., an aircraft with the mixed
features of a helicopter and an airplane. The project draws
on the group’s experience in the military tilt rotor helicopter
field gained in Italy and the US.
The project has been has stopped and started over the
years and went through a stage in which its content was
partially redefined. The group’s share consists of the pitch
control system which the Agusta-Bell consortium assigned
to the Hydraulic Research group (“HR”), the international
leader of the primary and secondary hydraulic flight controls
sector, along with control systems and flight commands with
fly-by-wire actuator assist, given the complexity.
The group’s work carried out to date was regulated by
agreements with HR, which subsequently merged into the
Woodward group. Later on, following the AgustaWestland’s
acquisition of the entire project, a proposal was made to
intensify
The helicopter is a light twin-engine, previously equipped
with skids, and its new configuration was certified in 2014.
the collaboration with a view to expanding the group’s role,
especially with reference to the landing system. The skills
developed by the group to date as part of this project have
a potentially interesting effect on both current projects and
future projects to be acquired.
At present, a waiver from the FAA is pending for the operation of heavier aircraft.
This project is eligible for government assistance pursuant
to Law no. 808/85, as it relates to national security.
This project is self-financed, with the exception of work related to the revision of additional specifications and the construction of prototypes.
At the reporting date, the project was still underway and
no sales have been made. Consequently, no royalties were
recognised in this annual report.
iii. AW149 PROJECT. LANDING SYSTEMS
v. BELL 525 (RELENTLESS). LANDING SYSTEM
These projects cover different systems used on the multi-
This project involves the study, design and development of
The group’s Canadian engineering department is mainly responsible for this project.
vi. AH160 PROJECT. LANDING SYSTEM
This project involves the study, design and development
of the main systems of the hydraulic landing gear for the
AH160 (formerly X4) Airbus Helicopters’ new generation aircraft, which should replace the EC155 in 2017.
The AH160 helicopter is a twin engine aircraft of medium
size, in the 9,000-11,000 pound category, and is highly innovative in terms of technology, with the use of by wire commands, and noise and fuel consumption.
The group’s Canadian engineering department is mainly responsible for this project.
vii.ELECTRO HYDROSTATIC ACTUATION FOR INDUSTRIAL AUTOMATION AND VIBRATION CONTROL (EHAINAVICO) MESAP PROJECT
This project involved the development of a technology, based on hydraulic circuits (electrohydrostatic or “EHA”), with
multiple applications in the aerospace industry and, in particular, the helicopter sector, because of the compactness
and low weight to power ratio.
The project, which was completed during the year, was
carried out with three industrial partners and in collaboration with the Polytechnic University of Turin, and received a
grant from the Piedmont Region.
Since its industrial application is not immediate, no project
costs have been expensed.
viii.HYBRID FLIGHT CONTROL SYSTEM (HFCS) PROJECT
The project involved the development of innovative solutions for small aircraft flight control, based on fly-by-wire
functionalities, for the utilities, business, general aviation,
aerobatics, trainers and UAV segments.
In particular, it involves the construction of electromechanical actuators using optic fibre sensors. The group is pursuing some commercial opportunities which may come to
fruition in 2016.
The project, which was completed in 2015, is part of the
Piedmont Region’s operating programme set out in FESR
2007/2013.
99
ix. ADVANCED FLIGHT CONTROL SYSTEM (AFCS)
PROJECT
The new technologies were subsequently installed on several helicopters (EC145-T2 and BELL 429).
The project involved the development of a new primary
flight control system for trainer aircraft (AFCS).
The project is being carried out in collaboration with the
Polytechnic University of Marche (Ancona).
The project was carried out as a joint venture with Finmeccanica Selex ES (formerly Selex Galileo S.p.A.), under an
agreement with the Ministry of Defence - General Directorate of Air Armaments, which provides that the latter covered
50% of the cost. The first stage was completed with Italian
Air Force approval.
iii. BELL 429 INTERIORS PROJECT
The group also began the preliminary steps to patent certain parts of the device, as permitted by contract.
x. BELL 505. SYSTEMS PROJECT
The project relates to the development of a series of hydraulic gear (reservoir, servo-actuator) for the Bell 505 aircraft’s
actuator gear and secondary mechanical flight controls.
The Bell 505 helicopter, which was initially called SLS (Short
Light Single) is a light single engine aircraft currently under
development by Bell Helicopter Textron, with certification
expected by early 2016.
The group’s development project entails the customer’s
contribution in the non-recurring investment.
B)
CABIN COMFORT SYSTEMS
This project concerned the development of customised interiors for the Bell 429 aircraft, in several configurations that
resulted in specific product brands, such as the Bell 429
MAGnificent. It was fully self-financed and was completed
during the year when the related STC were received.
iv. AW189 INTERIORS PROJECT
This project concerned the development of customised interiors for the AW189 aircraft in several configurations. It was
fully self-financed and was completed in November 2015
when the related STC were received
Tale programma è stato completamente autofinanziato.
v. AW139 INTERIORS RESTYLING PROJECT
This project concerns the development of new configurations for the customised interiors of the AW139 aircraft. It
began in the last few months of the year and is expected to
be completed in 2016.
B)
i. EMS INTERIORS PROJECT
AIRCRAFT SERVICES
i. INDUSTRIAL DESIGN
This project relates to customised installations of medical, auxiliary and support devices and structures, for EMS
(Emergency Medical System) use in rescue helicopters, air
ambulances and medical missions via air.
It was fully self-financed and was completed during the year
when the related STC were received starting from October
2014.
During the year, the first HEMS interiors kits were delivered.
These activities partly complement cabin comfort developments, integrating innovative systems (e.g., cabin management systems). However, they also express an industrial
design often associated with specific product brands.
Indeed, the group has launched a number of measures to
protect brands and proprietary design.
ii. CABIN MANAGEMENT SYSTEM PROJECT
Created within the family of cabin comfort projects, the
project is aimed at integrating new technologies in line with
consumer technological content. In the aerospace industry,
the transfer of these technologies is often a problem given
the safety requirements imposed by sector regulations.
During the year, progress was made, especially on proprietary software, in integrating wireless technologies, wireless
remote control systems, mobile wifi, audio/video streaming
and up-loading and position identification, in helicopters.
The prototypes were subject to aviation standards (RTCA
DO 160).
100
The Aircraft Services operating segment focuses on style
and innovative design, developed as part of the research
into customised solutions for the luxury interiors of both helicopters and fixed-wing aircraft.
C)
OTHER PROJECTS ELIGIBLE FOR ASSISTANCE
UNDER LAW NO. 808/85
The following section provides information about some development projects completed in prior years which benefited from assistance under Law no. 808/85.
i. AW101 UTILITY PROJECT. FLIGHT CONTROL SYSTEM
nical flight controls for the mid-heavy EH101 military helicopter, which was built under a specific agreement between
the Italian and English governments.
The group currently provides the mechanical flight control
system in a kit, comprising groups of rods, levers and rotors
for this helicopter, in configurations that have undergone
dramatic technological changes over time.
This project benefited from government assistance under
Law no. 808/85, as it related to national security.
At the reporting date, total sales amounted to €23,879 thousand (2014/2015: €2,917 thousand), while royalties totalled
€734 thousand (2014/2015: €65 thousand).
ii. AIRBUS A380 PROJECT. STEERING CONTROL MANIFOLD
This project was launched in 2002 for the customer UTAS
(Goodrich Landing Gear) for the design of a hydraulic component for the main landing gear of the Airbus A380. The
main project was completed with the aircraft’s certification
by EASA and the US FAA in December 2006.
Additional projects were subsequently carried out to improve the system’s functionalities, with changes to its configuration.
Minor system upgrading activities are still underway.
Law no. 808/85 as it was of “European interest” as defined
by CIPE resolution of 26 March 2006.
At the reporting date, total sales amounted to €8,213 thousand (2014/2015: €1,426 thousand), while royalties totalled
€365 thousand (2014/2015: €63 thousand).
iii. AW139 PROJECT. INTEGRATED ENERGY DISSIPATION SYSTEMS
The project, which refers to CCS division, concerned the
development of solutions that reduce acoustic impact inside
the AW149 military aircraft cabin.
Law no. 808/85, as it related to national security.
At the reporting date, no sales incorporating the newly
developed technology had been made. Consequently, no
royalties were recognised in this annual report.
Like for the systems for this aircraft, the customer AgustaWestland expected the first deliveries to take place in
2017.
The AW101 project (formerly EH101 Utility), completed in
2001, concerned the definition and development of mecha-
101
Corporate governance
disclosure
Disclosure on management and
coordination and transactions with
group companies
The following paragraphs provide corporate governance
information. Additional information is given in the sections
Corporate governance and business conduct and
In accordance with the provisions of articles 2497 and
2497-septies of the Italian Civil Code, it is noted that MAG
acts as holding company for the group companies in which
it directly or indirectly owns 100% investments. Accordingly,
it is required, inter alia, to prepare consolidated financial
statements and it also manages and coordinates its subsidiaries.
Risk management and compliance.
Disclosure required by legislative decree
No. 231/2001 on the administrative
liability of companies
The parent’s board of directors adopted the organisation,
management and control model for the company and its
group pursuant to Legislative decree no. 231/2001 with the
resolution passed on 11 December 2007.
The board of directors approved subsequent amendments
thereto on 10 June 2011 and 21 February 2013.
These principles are also found in the fair balancing of social and group interests, justification for the resolutions passed by the subsidiaries’ management bodies and the representation of the subsidiaries’ operations.
By resolution of the board of directors on 30 March 2012,
the supervisory board’s duties were entrusted to the board
of statutory auditors in accordance with Law no. 183/2011,
which amended article 6 of Legislative decree no. 231/2001.
Where such decisions affect the group companies’ performance, they are fully disclosed in the financial statements.
Four meetings were held during the year.
Disclosure required by legislative
decree No. 196/2003 on the protection of
personal data
In accordance with the provisions of paragraph 26 of the
Technical Regulations regarding security, included as Appendix B to Legislative decree no. 196 of 30 June 2003
(Personal Data Protection Code), the group updated the
Data Protection Document on 28 March 2011 in accordance
with article 34.g) of Legislative decree no. 196 of 30 June
2004 and subsequent modifications and integrations.
102
These management and coordination activities, which are
typical of group companies, ensure that the group companies’ decisions are consistent, coordinated and in line with
the group’s strategic guidelines. Each of the methods in
which the parent manages and coordinates its subsidiaries
is based on the principles of integrity and transparency.
MAG is not managed or coordinated by another entity pursuant to article 2497-bis of the Italian Civil Code.
Intragroup transactions are of a trading and financial nature.
Overall, they do not consist of significant amounts.
The following table summarises amounts generated by the
parent’s transactions with other group companies in the
year and infragroup balances at 30 September 2015, which
were eliminated in the preparation of the group’s consolidated financial statements. Furthermore, information relating
to the related party SBI S.p.A. is presented. Data on other
related parties is given in the specific section of the notes
(see 9.2 Related party transactions).
In accordance with the provisions of article 2497-bis of the
Italian Civil Code, the statement of financial position and
statement of comprehensive income highlights of MAG’s
most recently approved financial statements are provided
in the notes to the financial statements of the Italian companies that it controls.
These consolidated financial statements are filed, along
with the separate financial statements, with the Company
Registrar, even for group companies that have opted to apply the exemption from mandatory preparation of consolidated financial statements under article 27.3 of Legislative
decree no. 127/91.
For additional details on the group’s structure and subsidiaries, reference should be made above (see Highlights of
main consolidated companies).
103
(in thousands of Euros)
SAT
Mecaer America Inc.
Revenue from goods and services
-
1.236
3.002
-
Other revenue and income
3
340
53
20
Acquisition of intangible assets
-
38
-
-
Purchase of raw materials
-
1.850
615
-
Services
-
4.443
354
-
155
-
-
1.386
Financial income
-
79
148
-
Loans and receivables due WITHIN one
year
6
944
7.465
25
Loans and receivables due AFTER one year
-
2.252
-
-
Liabilities due WITHIN one year
-
1.726
982
-
Use of third party assets
MAG carries out trading transactions with the subsidiary Mecaer America, as the latter is the sub-contractor for
the supply of hydraulic systems of the AW109, AW139 and
AW380 landing systems.
During the year, Mecaer America’s engineering unit carried
out product development activities totalling €3,918 thousand on behalf of MAG.
Since 2006/2007, MAG and Mecaer America have a service centre agreement in place whereby the Canadian subsidiary ensures repair and maintenance on MAG products in
the North American market. These activities, which are part
of the parent’s contractual commitments, are performed by
Mecaer America, which holds valid airworthy certification for
that market, for an annual fixed fee. Under the agreement,
Mecaer America carries out the services under warranty
and pays Mecaer a royalty of 7% of realised turnover for repair and maintenance activities covered by the agreement.
In addition, under this agreement, MAG also supplies Mecaer America with parts and components for MRO activities
on MAG’s proprietary products. Total sales of goods to the
subsidiary Mecaer America in 2014/2015 amount to roughly €1,236 thousand and also include parts for the A380
project, which Mecaer America, sub-supplier of the final system, is required to buy from MAG.
Financial transactions with Mecaer America are limited to
the loan that the parent granted the Canadian subsidiary,
which shows an outstanding amount of USD2,523 thousand at 30 September 2015. Interest accrues on the loan at
market rates, linked to LIBOR.
MAG supplies its subsidiary MAG Inc. with AW119 and
AW139 interior aircraft kits, worth approximately €3,002
thousand in 2014/2015.
SBI
Information on treasury shares, group
company shares and share capital
No group company holds any treasury shares or those of
their parents, either directly or indirectly through trustees
or nominees, or acquired, sold or held any of these shares
during the year.
MAG’s share capital is fully subscribed and paid-up. At 30
September 2015, it totals €13,138 thousand and is divided
into 13,138 thousand shares with a nominal amount of €1
(one) each.
There are no stock option plans in place, nor are there securities granting special rights, employee equity interests or
restrictions to MAG voting rights at 30 September 2015.
arm’s length basis.
In this respect, since 2010/2011, each year, MAG has prepared the internal transfer pricing documentation pursuant
to article 1.2-ter of Legislative decree no. 471 of 18 December 1997, introduced into Italian legislation by article 26 of
Law decree no. 78 of 31 May 2010, converted, as modified,
by Law no. 122 of 30 July 2010 (the “Dossier”).
The purpose of the Dossier is to document how transactions between the group companies are governed on an
arm’s length basis in accordance with OECD guidelines.
There are no other infragroup financial transactions or transactions involving royalties (other than those mentioned
above) or management fees.
Disclosure on transactions with related
parties
Reference should be made to the notes to the separate
and consolidated financial statements for information on
transactions with related parties 6.10 Current loans and
receivables - Related parties, 6.15 Cash and cash
equivalents - Related parties, 6.20 Loans and borrowings, 6.24 Current financial liabilities - Related
parties, 7.2 Other revenue and income, 7.8 Use of
related party assets, 7.12 Financial income and expense.
The sections on Other Information in the notes to the consolidated financial statements and separate financial statements detail transactions with directors, statutory auditors
and CEOs of MAG (see 9.2 Related party transactions).
MAG has an airport services outsourcing agreement in place with SAT. This agreement entailed the payment of a fixed
fee of €155 thousand in the year.
Events after the reporting
date
This information is provided in the sections on Other Information in the notes to the consolidated and separate
financial statements (see 9.4 Events after the reporting date; 7.3 Variation in finished products, work
in progress and semi-finished goods).
Outlook
The year ended 30 September 2015 was a year of transition
which reabsorbed the effects of the discontinuation after the
peak of activities related to the AW101 line. Moreover, it was
characterised by the substantial return to volumes of activities consistent with a steady development path.
Furthermore, the Canadian production site is now fully up
and running with adequate volumes and profits substantially in line with those recorded by the business lines of the
reference segment.
Finally, integration between operating sites continued in line
with a consistent operating criterion.
All transactions with group companies are carried out on an
104
105
The next few years, starting from the current one, will be
focused on the consolidation of these results, by strengthening the sites’ ability to respond in order to support the
production start-ups scheduled and anticipate the needs for
quantitative growth, organically and with a view to possible
acquisitions.
As envisaged by the business plan, the 2015/16 investment
plan provides for the completion of some important projects
which are now in their final stage and increasing environmental certification.
The group’s current order backlog adequately covers the
budgets for 2015/2016 which forecast a further improvement in profitability, compared to the previous year, and a
steady financial position.
Proposal of the board
of directors to rhe
shareholders
The Managing Director proposes that the board of directors
◊ submit the separate and consolidated financial statements included in this annual report to the shareholders for their approval during the ordinary meeting;
◊ with reference to the separate financial statements,
considering the disclosures provided therein,
submit the proposal for the allocation of the profit for the year of €5,288,155 to the legal reserve
(€264,408) and other reserves (€5,023,747) to the
shareholders.
On behalf of the board of directors
Claudio Brun
Managing Director
(signed on the original)
106
Consolidated
financial statements
as at and for the year
ended 30 semptember
2015
Consolidated financial
statements
Statement of financial
position (1/2)
Description
Note
30.09.2015
30.09.2014
Difference
Intangible assets
6.1
33.348
30.652
2.696
Property, plant and equipment
6.2
15.556
15.602
(46)
Equity investments
6.3
9
8
1
Deferred tax assets
6.4
2.796
2.455
341
Other non-current assets
6.5
2.231
3.351
(1.120)
Other non-current assets - related parties
6.6
205
205
-
54.145
52.273
1.872
Total non-current assets
110
Inventories
6.7
51.153
51.044
109
Contract work in progress
6.8
5.639
3.451
2.188
(9.540)
Trade receivables
6.9
27.944
37.484
Current loans and receivables - related parties
6.10
25
28
(3)
Tax assets
6.11
512
1.376
(864)
Other current assets
6.12
7.107
9.598
(2.491)
Current financial assets
6.13
-
2.967
(2.967)
Cash and cash equivalents
6.14
16.261
14.887
1.374
Cash and cash equivalents - related parties
6.15
1.596
1.034
562
Assets classified as held for sale and directly associated liabilities
8
-
-
-
Total current assets
110.237
121.869
(11.632)
Total assets
164.382
174.142
(9.760)
111
position (2/2)
Description
Note
Share capital
Share premium reserve
Other reserves
Profit for the year
Equity attributable to the owners of the parent
Share capital and reserves attributable to non-controlling interests
Loss for the year attributable to non-controlling interests
Share capital and reserves attributable to non-controlling interests
Difference
13.138
13.138
-
5.564
5.564
-
22.949
22.060
889
6.285
2.350
3.935
47.936
43.112
4.824
468
484
(16)
(2)
(3)
1
466
481
(15)
Total equity and
6.16
48.402
43.593
4.809
6.17
1.791
2.200
(409)
Provisions
6.18
2.532
1.985
547
Deferred tax liabilities
6.19
8.323
8.666
(343)
Non-current loans and borrowings
6.20
24.281
24.370
(89)
Non-current loans and borrowings - related parties
6.20
2.836
-
2.836
Other non-current liabilities
6.21
22.125
22.056
69
61.888
59.277
2.611
Advances from customers
6.22
2.228
1.259
969
Current loans and borrowings
6.20
17.076
26.270
(9.194)
Current loans and borrowings - related parties
6.20
1.512
778
734
Trade payables
6.23
25.020
35.363
(10.343)
Current financial liabilities - related parties
6.24
258
-
258
Tax liabilities
6.25
972
786
186
Other current liabilities
6.26
7.026
6.816
210
Liabilities directly associated with assets held for sale
8
-
-
-
54.092
71.272
(17.180)
Total liabilities
115.980
130.549
(14.569)
Total equity and liabilities
164.382
174.142
(9.760)
Total current liabilities
30.09.2014
Employee benefits - post-employment benefits
Total non-current liabilities
112
30.09.2015
113
Statement of comprehensive
income
Description
Note
30.09.2015
30.09.2014
Net revenue
7.1
123.356
130.788
704
7.2
1.730
Other revenue and income - related parties
7.2
20
20
Variation in finished products, work in progress and semi-finished goods
7.3
2.039
(8.924)
Increase in internal work capitalised
7.4
5.959
7.697
Raw materials, consumable and supplies
7.5
(43.419)
(40.163)
Services
7.6
(35.727)
(41.898)
7.7
(1.853)
(1.630)
Use of related party assets
7.8
(1.394)
(1.393)
Personnel expense
7.9
(33.384)
(31.595)
Amortisation, deprecation, accruals and impairment losses
7.10
(6.234)
(5.258)
Other operating costs
7.11
(1.114)
(1.193)
9.979
7.155
Operating profit
Financial income
7.12
2.219
1.310
Financial expense
7.12
(2.260)
(2.572)
Financial expense - related parties
7.12
Profit before tax
Income taxes
7.13
(190)
(229)
9.748
5.664
(3.465)
(3.317)
Profit for the year
6.283
2.347
- Attributable to the owners of the parent
6.285
2.350
- Attributable to non-controlling interests
(2)
(3)
0,48
0,18
Earnings per share
7.14
Other comprehensive income (expense) that will be subsequently
reclassified to profit or loss
Net exchange rate losses on the translation of foreign operations
(1.598)
(196)
Income taxes on other comprehensive income (expense)
-
-
Other comprehensive income (expense) that will not be subsequently
reclassified to profit or loss
-
-
124
(217)
Ias 19 effect recognised directly in equity
6.17
Other comprehensive expense, net of income taxes
114
(1.474)
(413)
Total comprehensive income
4.809
1.934
- Attributable to the owners of the parent
4.811
1.937
- Attributable to non-controlling interests
(2)
(3)
115
Statement of cash flows
Description
Note
30.09.2015
30.09.2014
A
9.1
18.888
3.572
9.748
5.664
6.234
4.713
(251)
(9.922)
Opening net cash and cash equivalents
Profit before tax
Amortisation, depreciation and impairment losses
7.10
Variation in net working capital
B
Net variation in employee benefits - post-employement benefits
6.17
(285)
41
Net variation in the provision for risks and charges
6.18
(359)
462
Net variation in deferred taxes
6.4/6.19
(694)
(554)
Current taxes
7.13
(3.076)
(4.555)
Deferred taxes
7.13
694
562
12.011
(3.806)
Cash flows from (used in) operating activities
Net investments in non-current assets
C
116
- Intangible
6.1
(5.957)
(7.011)
- Property, plant and equipment
6.2
(2.560)
(4.122)
- Financial assets
6.3
(1)
-
- Other investing activities
6.5
1.120
1.319
- Assets/liabilities held for sale
8
-
-
(7.398)
(9.814)
Cash flows used in investing activities
Variation in current loans and borrowings – new loans
6.20
937
19.368
Variation in current loans and borrowings - settlements
6.20
(9.397)
(4.995)
Variation in non-current loans and borrowings – new loans
6.20
13.324
18.408
Variation in non-current loans and borrowings - settlements
6.20
(10.577)
(4.205)
Variation in other non-current liabilities
6.21
69
360
Share capital increase
6.16
-
-
Variation in the hedging reserve
6.16
-
-
6.16
-
-
Variation in translation and other reserves
6.16
-
-
(5.644)
28.936
D
Cash flows from (used in) financing activities
E
Cash flows of the year
9.1
(1.031)
15.316
F
Closing net cash and cash equivalents
9.1
17.857
18.888
117
Statement of changes in
equity
Description
Equity at 30.09.2013
Other
Reserves
Hedging
reserve
Profit
for the
year
Equity
attributable to
the owners of
the parent
Equity
attributable to
non-controlling
interests
Total
13.138
5.564
19.090
1
3.399
41.192
467
41.659
-
-
3.400
(1)
(3.399)
-
-
-
Capital injections from noncontrolling owners
-
-
-
-
-
-
-
-
Profit for the year
-
-
-
-
2.350
2.350
(3)
2.347
Reclassifications
-
-
(17)
-
-
(17)
17
-
Translation differences
-
-
(196)
-
-
(196)
-
(196)
Ias 19 effect recognised directly
in equity
-
-
(217)
-
-
(217)
-
(217)
Other comprehensive expense
-
-
(413)
-
-
(413)
-
(413)
13.138
5.564
22.060
-
2.350
43.112
481
43.593
Allocation of profit for the year
-
-
2.350
-
(2.350)
-
-
-
Capital injections from noncontrolling owners
-
-
-
-
-
-
-
6.283
Profit for the year
-
-
-
-
6.285
6.285
(2)
Reclassifications
-
-
13
-
-
13
(13)
-
Translation differences
-
-
(1.598)
-
-
(1.598)
-
(1.598)
Ias 19 effect recognised directly
in equity
-
-
124
-
-
124
-
124
-
-
(1.474)
-
-
(1.474)
13.138
5.564
22.949
-
6.285
47.936
Other comprehensive expense
Share
premium
reserve
118
Share
capital
(1.474)
466
48.402
119
Notes to the
consolidated financial
statements
1. Overview
2. Basis of preparation
The parent, Mecaer Aviation Group S.p.A. (“MAG S.p.A.”
or “MAG”) is a company limited by shares. It was set up in
Italy and is registered with the company registrar of Novara.
Under the option provided for by Legislative decree no. 38
of 28 February 2005 and as in previous years, the consolidated financial statements as at and for the year ended 30
September 2015 have been prepared in accordance with
the International Financial Reporting Standards (“IFRS”)
issued by the International Accounting Standards Board
(“IASB”), endorsed by the European Commission and included in EU regulations.
The MAG group supplies systems for helicopters and small
aircraft and provides the related aircraft interiors and completions services, as well as maintenance and overhaul services.
MAG S.p.A.’s registered office is in Via per Arona, 46, Borgomanero (Novara), where some corporate functions are
also located.
The group conducts its business activities in eight different
locations, four of which in Italy [Borgomanero, Novara; Monteprandone, Ascoli Piceno; Vergiate, Varese and Rome] and
four abroad [Laval, QC, Canada; Philadelphia, Pennsylvania, USA; Hagerstown, Maryland, USA and Irving, Texas,
USA] as described in more detail in the directors’ report.
Figures in these notes are provided in thousands of Euros.
The board of directors submitted these consolidated financial statements to the shareholders for approval on 22 December 2015.
The acronym IFRS also refers to all revised Standards
(“IAS”) and the interpretations of the International Financial
Interpretations Committee (“IFRIC”), formerly known as the
Standing Interpretations Committee (“SIC”).
The consolidated financial statements as at and for the year
ended 30 September 2015 comply with IFRS.
The section of these notes concerning Other Information
includes the disclosures required by IAS 1.96(d).
At the time when these notes were prepared, adjustments
and interpretations by official bodies with respect to certain
aspects were still pending. Accordingly, additional changes or integrations could be made to the Standards and
interpretations that could require or allow the MAG group
to change the recognition, measurement and classification
criteria adopted in the preparation of these consolidated financial statements.
As permitted by IAS 1, the statement of comprehensive income has been prepared presenting costs by nature, highlighting the operating profit and profit before taxes. To
better measure the performance of continuing operations,
expense and revenue arising from significant events or
transactions are indicated separately.
The statement of financial position has been prepared by
separating current assets and liabilities from those that are
non-current and by recognising any assets and liabilities
held for sale and discontinued operations separately, in accordance with IFRS 5.
122
123
Specifically, an asset or liability is classified as current when
it meets any of the following conditions:
◊ it is expected to be realised or settled or is held for
sale or consumption in the normal course of the
group’s operating cycle;
◊ it is held primarily for trading purposes;
◊ it is expected to be realised or settled within twelve
months of the reporting date.
If none of these conditions is met, the asset or liability is
classified as non-current.
The statement of cash flows has been prepared using the
indirect method, whereby the operating profit is adjusted
by the effect of non-monetary transactions, any deferrals
or accruals of previous or future collections or payments in
relation to operating activities and any expense or revenue
relating to cash flows arising from investing or financing activities.
Income and expense on non-current loans, the related hedging instruments and any dividends paid are included under
operating activities.
The statement of changes in equity shows the following
changes in equity captions, where applicable:
◊ allocation of profit for the year;
◊ owner transactions (repurchase or sale of treasury
shares);
◊ any gains or losses, net of the tax effect, recognised
directly in equity (gains or losses on the repurchase/sale of treasury shares) or that have a balancing entry in an equity reserve (e.g., share-based
payments for stock option plans);
◊ changes in the hedging reserve, net of any tax effect;
◊ changes in the fair value reserve;
◊ effects of any changes in the accounting policies.
3. Basis of consolidation
3.1
Consolidation methods and scope
The consolidation scope includes the subsidiaries, i.e., entities for which the parent has the power to govern the financial and operating policies so as to obtain benefits from
their activities98. In ascertaining whether or not the parent
has control, potential voting rights that could be exercised
are also considered.
The group has not set up any special purpose entities as
defined by SIC 12 nor has it carried out any business combinations as defined by IFRS 3.
There are no associates, joint ventures or jointly controlled
companies in which the group companies are investors.
The consolidated financial statements at 30 September
2015 include the financial statements of the parent, MAG
S.p.A., and its direct and indirect subsidiaries, which are detailed below. Their statement of financial position highlights
are also provided.99100101102
Company
Headquarters
Company
investor
Mecaer Aviation
Group S.p.A.
Borgomanero (NO)
– Italia
-
Mecaer America Inc.99
Laval (QC) – Canada
MAG S.p.A.
SAT Società aeroporto
del Tronto S.p.A.100
Monteprandone (AP)
- Italia
MAG S.p.A.
Mecaer Aviation
Group Inc.101
Wilmington (DE) –
USA102
MAG S.p.A.
98 Reference should also be made to the notes for details on the systematic criteria applied “4.1.3 Equity investments” on page 132 (see).
99 (“Mecaer America”)
100 “SAT S.p.A.” or “SAT”.
101 “MAG INC.”, formerly SEI of America Corp.
102 Operating sites in Philadelphia (Pennsylvania), Irving (Texas) and Hagerstown (Maryland).
124
125
Company
MAG
S.p.A.
Mecaer
America
SAT
S.p.A.
MAG Inc.
Owner
ship %
Share capital
Currency
Method of
consolidation
-
13.138.000
EUR
Line-by-line
100,00
84.656.157103
CAD
Line-by-line
93,94
8.250.000
EUR
Line-by-line
100,00
1.467.000
USD
Line-by-line
The results of operations reported by any subsidiaries acquired or sold during the year are included in the statement
of comprehensive income from the date of acquisition or up
to the date of sale.103
There are no companies excluded from consolidation.
The draft financial statements as at and for the year ended
30 September 2015, approved by the respective boards of
directors have been used for consolidation purposes. They
have been reclassified and, where necessary, adjusted for
alignment with the group accounting policies.
The subsidiaries’ financial statements are consolidated on
a line-by-line basis, which entails taking the full amount of
assets, liabilities, income and expense of each company,
regardless of the investment held.
The following main adjustments have been made to consolidate the statement of financial position and statement of
comprehensive income captions:
◊ elimination of the carrying amount of the parent’s
investments in companies included in the consolidation scope and corresponding portions of equity;
◊ elimination of intragroup receivables and payables
and income and expense arising on intragroup transactions;
◊ gains and losses arising on intragroup equity transactions are also eliminated if material.
All adjustments consider the related deferred tax effect,
where applicable.
The portion of equity of consolidated subsidiaries attributable to non-controlling interests is recognised separately
from equity attributable to the owners of the parent. It is
determined based on the percentage of ownership of assets and liabilities recognised at the date when the interest
was originally acquired and considering variations in equity
since that date.
103 Mecaer America’s equity also includes a contributed surplus of
CAD2,735,782.
126
3.2 Translation of foreign currency
captions and financial statements of
foreign operations
Balances included in the statement of financial position and
statement of comprehensive income of each group company are recognised in the currency of the primary economic environment in which the company operates (functional
currency).
or losses relating to the ineffective portion of the hedge are
taken to profit or loss. If the hedged portion of the foreign
operation is sold, total exchange rate gains or losses relating to that foreign operation are removed from equity and
taken to profit or loss as an adjustment to the gain or loss
on the sale.
The exchange rates applied in the translation of financial
statements prepared in foreign currency are as follows:
The group’s consolidated financial statements are prepared
in Euros, which is the parent’s functional currency.
Amounts expressed in currencies other than the functional currency, whether they are monetary (cash and cash
equivalents, assets and liabilities to be received or settled
in established or determinable monetary amounts, etc.) or
non-monetary (advances to suppliers of goods and/or services, goodwill, intangible assets, etc.) are initially recognised
at the exchange rate ruling when the transaction is performed.
Subsequently, monetary amounts are translated into the
functional currency at the closing rate and any differences
arising from translation are taken to profit or loss.
Non-monetary amounts are maintained at the exchange
rate ruling at the date of the transaction, unless continuing adverse economic trends affect the rate, in which case
exchange rate gains or losses are recognised in profit or
loss.
The rules for the translation of captions from local foreign
currency into the presentation currency, with the exception
of currency in hyper-inflationary economies (which do not
affect the group) are as follows:
◊ assets and liabilities, including the prior year corresponding figures, are translated at the closing rate;
◊ costs and revenue, income and expense, including
the prior year corresponding figures, are translated
at the average exchange rate of the year or at the
rate ruling at the date of the transaction if this varies
significantly from the average rate of the year;
◊ exchange rate gains or losses arising from the translation of statement of comprehensive income captions at a rate that differs from the closing rate and
from the translation of opening equity at a rate that
differs from the closing rate are taken to the translation reserve.
Goodwill and fair value adjustments relating to the acquisition of foreign operations are recognised as assets and
liabilities of the foreign operation and translated at the closing rate.
Exchange rate gains or losses arising from the translation
of a financial liability hedging a net investment in a foreign
operation are taken directly to equity (translation reserve) to
the extent that the hedge is effective. Exchange rate gains
Average rate of the
year
Closing rate
2014/2015
2013/2014
2014/2015
US dollar
1,1464
1,3564
1,1203
1,2583
Canadian
Dollar
1,4025
1,4625
1,5034
1,4058
currency
3.3
2013/2014
Use of estimates
The preparation of the consolidated financial statements
and related notes in accordance with IFRS requires the
group to make estimates and assumptions with an effect
on the carrying amounts of recognised assets and liabilities
and the disclosure of contingent assets and liabilities at the
reporting date.
Actual results may differ from these estimates. The estimates and assumptions are periodically revised and the effects
of any changes are taken to profit or loss.
Estimates mainly relate to the captions listed below with reference to their section in the notes.
Note
Research and development costs
6.1
Goodwill
6.1
Inventories
6.7
6.8
Trade receivables
6.9
Derivatives
4.2.4
Income taxes
6.4 - 6.19 - 7.13
Employee benefits - post-employment
bemefits
6.17
Provisions for risks and charges
6.18
3.4
The MAG group’s business activities may be divided into
two main operating segments, which comprise organisational structures, including divisions.
a) The Integrated Aircraft Systems related to the development and production of systems for OEMs104, which
comprise, because of similarity, the pre-existing divisions:
i. the Actuation and Landing Systems (“ALS”),
whose product lines include safety critical systems,
specifically landing gear, flight controls, actuators,
dampening and hydraulic systems,
ii. the Cabin Comfort Systems (“CCS”), whose product lines include cabin technical/functional systems
(noise-vibration reduction systems, environmental
optimisation systems, cabin management);
b) Aircraft Services, che ha per oggetto un insieme di
servizi destinati al velivolo standard, finalizzati a rendere
disponibile al cliente od operatore una piattaforma customizzata e funzionale alla specifica missione (elaborazione
di soluzioni stilistiche personalizzate, di installazione KIT, di
manutenzione e riparazione di velivoli e loro parti).
As permitted by IFRS 8.12, the ALS and the CCS divisions
have been combined into one reportable segment (Integrated Aircraft Systems) because of their similarity. Their distinctive feature is essentially the type of offer (systems) and
the target market.
The Aircraft Services remains a segment and coincides with
the relevant division. Its core activity comprises a range of
services which includes installation kits as well as aircraft
design, completion, refurbishment and MRO.
Turnover analysed by operating and geographical segment
is presented below. For the purposes of comparison, prior
year figures were restated in accordance with IFRS 8.30.
Segment reporting
Information on the performance of the group’s operating and
geographical segments is provided below, in accordance
with IFRS 8, on the basis of available financial statements
data and in line with the main policies used to periodically
examine the segment results at the highest decision-making level in order to evaluate performance.
104 Original Equipment Manufacturer.
127
MAG group – revenue by operating and geographical segment (in thousands of Euros)
2014/2015
Int. Aircraft Systems
Europe – eurozone
Europe - non-eurozone
North america
Rest of the world
Total
2013/2014
Eur/000
%
Eur/000
%
70.091
68,1%
82.315
73,7%
1.862
1,8%
2.336
2,1%
30.213
29,4%
24.197
21,6%
730
0,7%
2.891
2,6%
102.896
100,0%
111.738
100,0%
2014/2015
Aircraft Services
Europe – eurozone
%
Eur/000
%
7.702
37,6%
9.052
47,5%
-
-
-
-
12.758
62,4%
9.998
52,5%
-
-
-
-
20.460
100,0%
19.050
100,0%
North america
Rest of the world
Total
2013/2014
Eur/000
2014/2015
Total
Europe – eurozone
North america
Rest of the world
Total
Eur/000
%
Eur/000
%
77.793
63,0%
91.367
69,9%
1.862
1,5%
2.336
1,8%
42.971
34,8%
34.194
26,1%
730
0,7%
2.891
2,2%
123.356
100,0%
130.788
100,0%
MAG group – Performance by operating segment (in thousands of Euros)
Integrated aircraft
systems
2014/15
2013/14
Aircraft services
2014/15
2013/14
Unallocated
2014/15
2013/14
2014/15
2013/14
110.921
111.533
22.765
18.881
-
-
133.596
130.415
segment expense
(89.266)
(93.893)
(20.350)
(15.686)
(12.726)
(12.247)
(122.342)
(121.826)
21.655
17.640
2.325
3.196
(12.726)
12.247)
11.254
8.589
20%
16%
10%
17%
N/A
N/A
8%
7%
as a % of revenue
2013/14
Aircraft Services
2014/15
Unallocated
2013/14
2014/15
Total
2013/14
21.655
17.640
2.325
3.196
(12.726)
139
(161)
-
-
-
68
-
-
net non-operating income/
(expense)
(1.746)
(1.181)
(94)
-
425
cons. operating profit (loss)
20.048
16.367
2.231
3.196
(12.301)
(12.247)
2014/15
2013/14
11.254
8.589
-
139
(161)
-
-
68
(160)
(1.415)
(1.341)
(12.407)
9.979
7.155
differences in accounting
policies:
development costs
goodwill
Non-operating income and expense mainly refer to non-core economic components, of an exceptional or non-recurring
nature.
The following table summarises assets and liabilities.
Integrated Aircaft
systems
2014/15
2013/14
Aircaft Services
2014/15
2013/14
Unallocated
2014/15
Total
2013/14
2014/15
2013/14
segment assets
105.874
112.719
26.809
24.475
31.699
36.948
164.382
174.142
segment liabilities
(48.944)
(56.597)
(2.756)
(3.986)
(112.682)
(113.559)
(164.382)
(174.142)
segment investments
6.957
9.667
1.174
742
386
724
8.517
11.133
amortisation, depreciation
and impairment losses
4.265
4.029
501
265
465
419
5.230
4.713
Prior year figures were restated in order to separately present the assets and liabilities related to the Aircraft Services segment, where possible. At 30 September 2014, the latter’s assets and liabilities – which coincide with the relevant division –
were presented together with those of the CCS division (currently combined with the Integrated Aircraft Systems segment)
since they were hardly separable.
Total
segment revenue
segment operating profit/(loss)
Integrated Aircraft
Systems
2014/15
segment operating profit/
(loss)
2013/2014
The group’s results, in terms of the revenue and profitability of its operating segments, are summarised in the table on
the following page. With respect to the previous year, the figures related to the Integrated Aircraft Systems segment were
restated. Specifically, some overheads were reallocated.
Description
description
The performance of the Integrated Aircraft Systems segment improved on the previous year end mainly following the achievement of an adequate level of operating profit by the Canadian site, which is now in line with the group’s sector standards.
The performance of the Aircraft Services segment improved mainly thanks to the positive volumes recorded, in particular,
by the US sites where the first VIP interiors were manufactured.
“Other activities”, which included the investments and the assets under construction related to the airfield, were also combined with the Aircraft Services segment.
Infrasegment transactions are immaterial and, accordingly, have not been shown separately.
The above assets do not include current and non-current financial assets, other current and non-current assets, tax assets,
deferred tax assets and cash and cash equivalents.
Liabilities do not include equity, current and non-current borrowings, deferred tax liabilities, other current liabilities, tax liabilities and employee benefits. The trade payables related to the Aircraft Services segment are presented separately only
to the extent of the portion which could be distinguished by supplier or type of transaction.
The following table provides a reconciliation of the segment operating profits or losses, as calculated for decision-making
purposes, with the operating profit recognised in the consolidated financial statements (see Statement of comprehensive income)
128
129
4. Main accounting policy
The accounting policies applied to the most important captions are described below.
4.1
Non-current assets
4.1.1
Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance that generate future economic
benefits for the group. They are recognised at purchase or
production cost, including directly related charges incurred
to prepare them for use, net of accumulated amortisation
and any impairment losses.
Amortisation begins when the asset becomes available for
use and is calculated systematically over the residual useful
life of each asset. Amortisation is calculated considering the
actual use of the asset in the year in which an intangible
asset is initially recognised. Intangible assets with indefinite
useful lives are not amortised. The amortisation periods of
intangible assets are summarised in the table below. Reference should be made to the note to each caption for specific details on the identification criteria.
amort. period
(years)
development costs
product useful life
industrial patents and intellectual
property rights
5
licences
3
software
3
goodwill
indefinite useful life
other deferred costs
term of agreement
4.1.1.1 Research and development costs
Costs for research, undertaken to gain new scientific or
technical knowledge and understanding, are taken to profit
or loss when incurred.
130
Costs for development provide for a plan or design for the
production of new or substantially improved products or
processes. Development costs are capitalised if, and only
if, the cost can be reliably measured and estimated, the
product or process are technically and commercially feasible, future economic benefits are probable and the group
has the intention as well as adequate technical and financial resources to complete the development and use or sell
it. Specifically, this caption entirely relates to costs incurred for the development of new aerospace products. These
costs, which are identifiable and can be measured, relate
to specific development projects commissioned by customers or arising from the group’s participation in international
projects. They are highly technically and commercially feasible and the group can reasonably demonstrate that they
will generate future economic benefits.
The portion of internal and external development costs
exceeding the related revenue to be received from customers is capitalised against each project as development
costs and is amortised over the period in which the group
reasonably expects that the future benefits will arise.
In determining the useful life of each aerospace product developed, the group considers the following:
◊ the estimated useful life of the aircraft or the versions of the aircraft on which the product will be
used, on the basis of sales plans provided by the
manufacturer;
◊ the estimated useful life of the specific product, also
considering its technological features and conditions of use.
Amortisation is calculated on a straight-line basis. The
amortisation period begins when the products become available for use, which unequivocally coincides with the definitive certification of the product or aircraft to which it refers by
the relevant bodies and authorities.
Costs incurred for projects eligible for the assistance provided by Law no. 808 of 24 December 1985105 and consi105 [Official Gazette ed. 005 of 8 January 1986] “Interventi per lo sviluppo
e l’accrescimento di competitività delle industrie operanti nel settore aeronautico”.
dered functional to “national security” and similar costs are
recognised net of the related benefits (see 5. Significant
matters - 5.2 Development costs and government
assistance pursuant to Law No. 808/85).
4.1.1.2 Industrial patents and intellectual property
rights
Industrial patents and intellectual property rights are recognised at acquisition cost, net of amortisation and any impairment losses accumulated over time. They are amortised
starting in the year in which the right that the group has
acquired becomes available for use. Amortisation is calculated over the shorter of the period of expected use and the
period for which the right has been acquired.
4.1.1.3 Licenses, concessions and trademarks
These include the following:
◊ concessions, i.e., public administration measures
giving private entities the right to exclusively use
public assets or manage public services under regulated conditions;
◊ licences attributing the right to use patents or other
intangible assets over a determined or determinable period of time;
◊ licences to use know-how, application software or
the rights of others;
◊ trademarks identifying the origin of products from a
specific company.
The costs, including direct and indirect expenses incurred
to obtain these rights, are capitalised after the rights have
been acquired and are amortised systematically over the
shorter of the period of expected use and the period for
which the right has been acquired.
4.1.1.4 Goodwill
Goodwill arises from business combinations and reflects an
excess in the acquisition cost of the business or business
unit over the total fair value of acquired assets and liabilities
and identified contingent liabilities.
131
As it has an indefinite useful life, goodwill is not amortised.
Instead, it is tested for impairment at least once a year to
verify if it has undergone impairment losses, which are taken immediately to profit or loss and cannot be reversed,
even within the limits of previous impairment.
Goodwill on acquisitions that took place before transition
to IFRS continues to be recognised at its carrying amount
under Italian GAAP and is tested for impairment from that
date.
4.1.2
Property, plant and equipment are measured at purchase or
production cost, net of accumulated depreciation and any
impairment losses.
Cost includes direct charges incurred to prepare assets for
use and any dismantlement and removal costs incurred to
restore the site to its original conditions.
Costs for ordinary and/or routine maintenance and repairs
are taken directly to profit or loss when incurred.
Costs for improvements and maintenance that materially
increase the production capacity or safety of assets or that
prolong their useful lives are capitalised as an increase in
the carrying amount of the assets to which they relate.
Any government grants or grants relating to assets are taken as a direct decrease in the cost of the asset to which
they relate.
The carrying amount of each asset is depreciated on a systematic basis. Depreciation is calculated on a straight-line
basis each year over the residual useful lives of assets.
The useful lives and depreciation criteria are periodically reviewed and, where material changes are noted with respect
to the assumptions previously made, the depreciation rate
is adjusted on a prospective basis.
An asset’s useful life is generally confirmed each year and
adjusted if there have been improvements or replacements
affecting its useful life.
The rates applied to reflect useful lives are reduced by half
in the year in which assets go into use, since this reduction
is considered adequately indicative of the weighted average
period of use from when the assets went into use to the end
of the year.
The following table lists depreciation periods for each item
of property, plant and equipment.
Deprec. period (years)
land
indefinite useful life
buildings and airstrips
30 – 35
light constructions
10
generic plant – non-automated
machines
10
automated machines
5–6
automated robotic machines
4–5
electrolyte and galvanic cells
5
furnaces and accessories
6–7
generic equipment
4
specific equipment
4
inspection and testing tools
3–5
electronic office machines
5
furniture and furnishings
8–9
motor vehicles
4
internal means of transport
5
If a depreciable asset is comprised of separately identifiable components with useful lives that differ significantly from
the other components comprising the asset, depreciation is
calculated separately for each component, using the component approach.
Profits and losses on the sale of assets or groups of assets
are measured by comparing the selling price with the related carrying amount.
Costs incurred to expand, upgrade and improve structural
components of third parties are capitalised solely to the
extent to which they meet the requirements for separate
classification as assets or components of assets.
These costs are recognised as leasehold improvements
and are classified under property, plant and equipment, according to their nature.
The depreciation period is the shorter of the asset’s residual
useful life and the term of the lease or free loan agreement.
4.1.3
Equity investments
The group classifies its equity investments as follows:
◊ subsidiaries, over which the investor has the power
to govern the financial and operating policies so as
to obtain benefits from its activities and which are
consolidated and, therefore, eliminated;
◊ associates, over which the investor has significant
influence (at least 20% of votes in the ordinary shareholders’ meeting). Jointly controlled entities (e.g.,
joint ventures) are included in this category;
◊ parents, when the investor holds shares of its parent;
◊ other companies that do not fall into any of the above categories.
Any equity investments held for sale, such as those that
are acquired solely for the purpose of disposal within twelve
132
months, are classified separately as “assets held for sale”.
4.1.5
Equity investments held for sale are measured at the lower
of cost and fair value less costs to sell.
Assets (or disposal groups) are defined as held for sale
when their carrying amount will be recovered through disposal rather than through continuous use, as long as the
sale is highly probable.
The table in the first section of the notes to the consolidated
financial statements summarises equity investments (see 3
BASIS OF CONSOLIDATION) and details the criteria used
to identify the figures used for the purposes of consolidation.
4.1.4
Impairment losses
At least once a year, the group tests the recoverability of
the carrying amount of intangible assets, property, plant and
equipment and investments in subsidiaries and associates
to determine whether they have undergone impairment.
If there is evidence of impairment, the carrying amount of
the asset is reduced to its recoverable amount, which is the
greater of fair value less costs to sell and the asset’s value
in use.
In particular, in evaluating whether there have been any impairment losses on investments in subsidiaries and associates106, the recoverable amount is defined as value in use,
which is the present value of estimated cash flows based
on the investee’s expected results and the estimated proceeds from the ultimate disposal, in accordance with the
provisions of IAS 28.
Assets classified as held for sale
Assets (or disposal groups) remain classified as held for
sale even if there are delays or postponements in the period
necessary for the finalisation or conclusion of the sale, as
long as the delays are caused by events or circumstances
that are beyond the group’s control and there is sufficient
evidence of the group’s commitment to implement the disposal plan.
Assets that meet the criteria for classification as held for
sale are measured at the lower of carrying amount and fair
value less costs to sell. They are not amortised or depreciated.
4.2
Current assets
4.2.1
Inventories
Inventories are measured at the lower of purchase or production cost, including directly related charges, net of discounts and allowances, and estimated realisable value.
Cost is calculated using the weighted average cost method.
When, subsequently, impairment losses decrease or no longer exist, the carrying amount of the asset is restored to the
extent of the original cost, less any accumulated amortisation/depreciation.
Reversals of impairment losses are never applied to goodwill, as recommended by IAS 36 (see also 4.1.1.4 Goodwill).
Financial assets with fixed maturity are measured at amortised cost, which is calculated using the effective interest
method. When financial assets do not have a fixed maturity,
they are measured at cost.
Loans and receivables due after one year that do not bear
interest or that bear interest at below market rates are discounted using market rates.
The group regularly measures financial assets to verify if
there is objective evidence that they, taken individually or
collectively, have undergone impairment losses. If there is
evidence in this respect, the impairment losses are taken to
profit or loss for the year.
Finished products and work in progress are measured at
the progressive average cost for materials, plus the average hourly cost of labour for internal processing and price
paid for external processing.
Estimated realisable value is the estimated selling price in
the ordinary course of business considering any costs of
completion and the estimated costs necessary to make the
sale.
The carrying amount of inventories is adjusted through a
specific allowance to consider slow-moving or obsolete
items.
The group classifies inventories as follows:
◊
◊
◊
◊
4.2.2
raw materials, consumables and supplies,
work in progress and semi-finished products,
finished products and goods for resale,
payments on account.
Contract work in progress is recognised considering contractual considerations accrued with reasonable certainty
based on the percentage of completion.
106 If these are equity investments in unlisted companies for which fair
value less costs to sell cannot be reliably measured.
The stage of completion is calculated using the physical
133
measurement criterion, i.e., by measuring the size of the
work completed. The cost method is used as a benchmark.
The considerations calculated are based on contractually
agreed prices, including claims for price revisions and any
other reasonably expected additional fees.
Contracts with considerations in currency other than the
functional currency are measured by translating the portion
of considerations accrued at the closing rate (see also 3.2
Translation of foreign currency captions and financial statements of foreign operations).
The measurement reflects the best estimate of projects at
the reporting date.
The group periodically updates the assumptions underlying
these measurements. Any effects are recognised in the
year in which the adjustments are made.
Contract work in progress is recognised net of any allowances and progress billings relating to the contract in progress.
This analysis is performed individually for each contract,
recognising:
◊ the positive difference (work in progress in excess of
progress billings) under contract work in progress;
◊ the negative difference (work in progress less than
progress billings) under other current liabilities;
◊ any advances are recognised under other current
liabilities.
4.2.3
Trade receivables and other assets
Trade receivables and other assets falling due within normal commercial terms are initially recognised at fair value,
which generally corresponds with nominal amount, and
subsequently measured at amortised cost, net of identified
impairment losses. The group assesses their recoverability
on the basis of the present value of estimated future cash
flows.
4.2.4
Derivatives
Derivatives are always classified as assets held for trading
and measured at fair value through profit or loss, unless
they qualify for hedge accounting and are effective in hedging the underlying assets, liabilities or commitments of the
group.
In specifically identified cases, the group occasionally uses
derivatives exclusively as part of its strategies of hedging
interest rate risk on loans that accrue interest at variable
rates.
The group companies do not make regular use of other
types of derivatives, as management does not believe that
there are significant risks of fluctuations in the fair value of
recognised assets or liabilities or due to contractual commit-
134
ments (fair value hedges) or fluctuations in expected cash
flows on contractual or highly probably transactions (cash
flow hedges).
The effectiveness of hedges is documented at the inception
of the transaction, as well as periodically at each annual
reporting date. Hedge effectiveness is measured by comparing the variations in the fair value of the hedging instrument with those of the hedged item, or, in the event of more
complex instruments, using statistical analysis based on
risk variations.
The fair value of instruments listed on regulated markets
is taken with reference to the respective bid prices at the
reporting date.
The fair value of instruments not listed on regulated markets
is measured using financial calculation techniques.
In particular, the fair value of interest rate swaps is measured by discounting estimated cash flows. Specifically, the
fair value analysis is integrated by tests carried out to verify
the prospective and retrospective effectiveness of the hedge, as required by IAS 39.
4.2.5
This caption includes cash on hand, deposits and current
accounts with banks, post offices or other credit institutions
available for current transactions and other equivalents.
It also includes any current and highly liquid financial investments that are readily convertible into cash and not
subject to significant risks of fluctuations in value.
4.3.4
Hedging reserve
This reserve arises from recognising the effective portion
of hedging transactions using derivatives directly in equity.
4.3.5
Earnings per share
Basic earnings (losses) per share are calculated by dividing
the profit (loss) attributable to the owners of the parent by
the number of ordinary shares.
In the event of transactions affecting share capital during
the year, the number of shares is calculated as the weighted
average of the year.
All shares are ordinary. There are no dilutive effects to take
into account.
4.4 Trade payables and other
liabilities
Furthermore, legislation ensures that employees can request a partial advance on post-employment benefits vested during employment.
Only those employees who have worked for the company
for at least eight years may request an advance, and they
may only request up to 70% of their post-employment benefits vested at the date of the request.
4.3.1
Share capital
4.5.1
This reserve includes the amounts arising from capital increases against consideration in excess of the nominal
amount of shares.
4.3.3
Other reserve
These include retained earnings or losses carried forward
from previous years, the legal reserve, the translation reserve and the consolidation reserve.
This amount is decreased by 0.5% to fund the Post-employment Benefit Guarantee Fund set up with INPS (the
Italian social security institution), which replaces insolvent
employers. In addition, any amounts that the employee has
decided to allocate to a contractual pension fund are also
deducted.
They are classified as current liabilities, unless the group
has a contractual right to settle its obligations after at least
twelve months from the reporting date.
4.5 Employees benefits - Postemployment benefits
Italian post-employment benefits are governed by article
2120 of the Italian Civil Code and are each employee’s
right upon termination of employment. The amount of postemployment benefits due by the employer is equal to the
sum of 7.41% of annual remuneration valid for calculation
purposes due for the year.
They are subsequently measured at amortised cost, using
the effective interest method (see 4.4 Trade payables and
other liabilities).
Equity
4.3.2
Post-employment benefits (called “TFR” in Italy) fall under
the employee benefits regulated by IAS 19.
For revaluation purposes, post-employment benefits are
increased, with the exclusion of the portion accrued at 31
December of each year, by applying a rate comprised of a
fixed rate of 1.50% and 75% of the inflation rate recorded by
the cost of living index for December of the previous year.
This revaluation is taxable at a rate of 11%.
They are initially recognised at fair value, net of transaction
costs.
4.3
Share capital is comprised of the parent’s subscribed and
paid-in share capital. Any costs closely related to the issue
of shares are classified as a decrease in share capital when
they are directly related to such transaction.
ming actuarial and investment risks in relation to the plan.
Accordingly, the cost of the plan is not calculated based on
contributions due for the year, but on the basis of demographic and statistical assumptions and salary increase
trends.
Post-employment benefits
The group companies use two different types of post-employment (or integrative) benefits that take into account, for
Italian companies, the pension reform introduced by Law
no. 296 of 27 December 2006 with effect from 1 January
2007.
Defined contribution plans
The company pays fixed contributions to a separate entity
(fund) and will not have a legal or constructive obligation to
pay additional contributions if the mandated entity does not
have sufficient assets to pay benefits for past service. The
company recognises contributions to the plan when the employees provide service in exchange for the contributions.
Defined benefit plans
In this case, the company is obliged to pay agreed benefits
for employees in service and former employees by assu-
Unless internal labour agreements provide for more favourable conditions for employees, they may only obtain the
advance once during employment for well-specified reasons (purchase of first home, medical expenses).
Under Italian legislation, the carrying amount of post-employment benefits is equal to the amount accrued by each
employee at the reporting date.
Accordingly, the amount accrued is equal to the total that
would be paid to all employees if they were all to terminate
their employment at that date.
Under IFRS and considering the indications provided by the
International Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations Committee
(IFRIC), TFR is considered post-employment benefits under a defined-benefit plan and should be calculated using
actuarial techniques.
Before the pension reform took effect (1 January 2007),
135
the projected unit credit method (PUCM) provided for by
IAS 19.64/66 was used. It is still applied by companies with
fewer than 49 employees and calculates the average present value of benefit obligations vested through employee
service up to the date of the valuation, using projected remuneration.
To consider the effects of the reform on companies with
more than 49 employees, at the reporting date, the group
applied a different approach, which, in short, provides for,
◊ the projection of post-employment benefits already
vested for each employee in service at the measurement date up to the estimated time of payment;
◊ the measurement of estimated post-employment
benefit payments for each employee that the company will be required to make upon termination of
employment due to dismissal, resignation, inability
to work, death or retirement or requested advances;
◊ the discounting of each estimated payment at the
measurement date.
In accordance with the instructions provided by documents
issued by the Italian Accounting Standard Setter (OIC)107,
the group has applied this new approach, which provides
that companies do not consider future vesting portions of
post-employment benefits and apply amounts on a pro rata
basis to reproportion the present value of the obligation,
from the date when the pension reform took effect - 1 January 2007 - to measure the effects of curtailment, as specified in IAS 19.109.
Following the amendment to IAS 19 (2011), the group changed the accounting treatment applied to calculate income
and expense related to defined benefit plans.
In accordance with IAS 19 (2011) amended, the group calculates the net financial expense (income) of the year from
defined benefit plan liabilities (assets) by applying the discount rate used to measure the defined benefit obligation
at the beginning of the year to the defined benefit plan liabilities (assets) at the beginning of the year, considering any
changes to these defined benefit plan liabilities (assets) of
the year arising from benefit contribution or payment.
Based on the above, net financial expense on defined benefit plan liabilities (assets) now include:
◊ interest expense on the defined benefit obligation;
◊ interest income on plan assets; and
◊ interest on the effect of the asset ceiling.
All gains and losses arising from the actuarial calculation at
the reporting date are recognised in other comprehensive
income.
4.5.2
Termination benefits
Termination benefits are recognised as a liability and an
expense when the group is demonstrably committed to
terminating the employment of an employee or group of
employees before the normal retirement date or providing
termination benefits as a result of an offer made in order to
encourage voluntary redundancy. Termination benefits do
not generate future economic benefits for the group and,
accordingly, are immediately expensed.
4.6
Provisions
The provisions for risks and charges are recognised against
certain or probable losses and expenses for which the
group is uncertain of the timing and/or amount at the reporting date. They are recognised only if there is a current
legal or constructive obligation that will lead to an outflow of
resources embodying economic benefits as a result of past
events and it is probable that the outflow will be required to
settle the obligation. The amount recognised as a provision
is the best estimate of the discounted expenditure required
to settle the present obligation at the reporting date. The
discount rate used reflects current market assessments of
the time value of money and the risks specific to the liability.
Risks for which contingent liabilities are only possible are
disclosed in a specific section of the notes on commitments
and risks. They are not provided for.
4.7
Finance leases
Leases are considered finance leases when, as specified
by IAS 17, the risks and rewards incidental to ownership of
the leased asset are transferred to the lessee.
As lessee, at the date of initial recognition, the group recognises leased assets under non-current assets and recognises a financial liability at the same time equal to the
lower of the asset’s fair value and the present value of minimum future payments due at inception of the lease, using
the implicit interest rate of the lease or the marginal interest
rate of the loan.
Subsequently, the group takes the amortisation charge applied to the asset to profit or loss, along with interest separated from the payments of the year.
4.8
Operating leases
All group leases that do not substantially transfer all the
risks and rewards incidental to ownership of the leased asset are recognised as operating leases.
107 Appendix to Operating Guide 1 for transition to International Financial Reporting Standards (IFRS), chapter 13. “Consequences of Law no.
296/2006”.
136
Payments receivable or payable on operating leases are
taken to profit or loss over the term of the lease.
dies whether local, national or international.
4.9 Recognition of revenue, income,
costs and expense
These benefits come in the form of transfers of resources
in connection with the group’s compliance or commitment
to comply with certain conditions relating to its operating
activities. Grants are recognised on an accruals basis and
in direct correlation with costs incurred when their allocation
has been formally approved.
4.9.1
Revenue
Revenue is the gross inflow of economic benefits in the
course of the company’s ordinary activities. Revenue arising from transactions is measured at the fair value of the
consideration received taking into account the amount of
any trade discounts and volume rebates.
Revenue also includes work in progress. The measurement
criteria for work in progress are described in paragraph 4.2.2
Contract work in progress.
Revenue relating to the sale of goods is recognised when
all the following conditions have been met:
◊ the group has transferred to the buyer the significant risks and rewards of ownership of the goods;
◊ the group retains neither continuing managerial
involvement to the degree usually associated with
ownership nor effective control over the goods sold;
◊ the amount of revenue can be measured reliably;
◊ it is probable that the economic benefits associated
with the transaction will flow to the group;
◊ the costs incurred or to be incurred in respect of the
transaction can be measured reliably;
◊ the group has transferred to the buyer the significant
risks and rewards of ownership of the goods, which
generally coincides with transfer of ownership or
possession to the buyer, or when the revenue can
be measured reliably.
Revenue from the rendering of services is recognised in
the period when the services are provided. This recognition
method makes reference to the stage of completion of the
transaction at the reporting date, provided that the outcome
of the transaction can be estimated reliably.
The outcome of a transaction can be estimated reliably
when all the following conditions are satisfied:
with the transaction will flow to the entity;
◊ the stage of completion of the transaction at the reporting date can be measured reliably; and
◊ the costs incurred for the transaction and the costs
to complete the transaction can be measured reliably.
4.9.2
Government grants
Government grants refer to benefits flowing to the group
from the government, government agencies and similar bo-
Grants related to assets are government grants whose primary condition is that the group purchases, constructs or
otherwise acquires long-term assets. Subsidiary conditions
may also be attached restricting the type or location of the
assets or the periods during which they are to be acquired
or held.
These grants are recognised in profit or loss in direct relation to the depreciation/amortisation of the assets to which
they relate and are taken as a direct reduction in depreciation/amortisation.
Grants related to income also relate to expenses of the year
and are taken to profit or loss as a direct reduction in the
related cost.
Forgivable loans are loans which the lender undertakes to
waive repayment of under certain conditions.
Once these conditions are met they become grants recognised on an accruals basis in direct relation to the related
costs incurred.
4.9.3
Costs
Costs are recognised if they are pertinent to the group’s
business and on an accruals basis.
4.9.4
Financial income and expense
Financial income includes interest income on invested
cash, including available-for-sale financial assets, dividend
income, gains on the sale of available-for-sale financial assets, fair value gains on financial assets taken to profit or
loss and gains on hedges taken to profit or loss.
Interest income and expense are recognised on an accruals
basis using the effective interest method, i.e., at the interest
rate that makes all cash inflows and outflows (including any
premiums, discounts, commissions, etc.) comprising the
transaction financially equivalent.
Financial expense includes interest expense on loans, interest expense arising on the discounting of provisions, fair
value losses on financial assets at fair value through profit
or loss, impairment losses on financial assets and losses on
hedges at fair value through profit or loss.
Borrowing costs are recognised as an expense in the year
when incurred using the effective interest method. They are
never capitalised under assets.
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4.10 Income taxes
Income taxes of the year reflect estimated current and deferred taxation.
Current taxes are calculated for each company by applying
the tax regulations currently in place to estimated taxable
income, considering any tax subsidies.
The group’s Italian companies have not participated in the
domestic tax consolidation scheme provided for by articles
117 and 129 of Presidential decree no. 917/1986.
Deferred tax assets and liabilities are recognised on an
accruals basis on the temporary differences between the
carrying amounts of assets and liabilities and their tax bases.
5. Significant matters
They were not recognised on the following temporary differences:
5.1 New standards (IFRS) and
interpretations (IFRIC)
◊ initial recognition of assets or liabilities in a transaction other than a business combination that does
not affect either accounting profit or taxable income;
◊ investments in subsidiaries for which the difference
is not likely to reverse in future years;
◊ initial recognition of goodwill.
A list is provided below of new standards (IFRS) issued by
the IASB that, at the preparation date of these consolidated
financial statements, have been endorsed by the EU and
published in the EU’s Official Gazette.
IFRS/IFRIC
description
FTA date
IAS n. 1 amendment
Presentation of Financial Statements
2016/2017
IAS n. 16 amendment
2016/2017
IAS n. 19 amendment
Employee benefits
2016/2017
IAS n. 27 amendment
Separate Financial Statements
2016/2017
IAS n. 28 amendment
Investments in Associates and Joint Ventures
2016/2017
IAS n. 34 amendment
Interim Financial Reporting
2016/2017
IAS n. 38 amendment
Intangible assets
2016/2017
IAS n. 39 amendment
Financial Instruments: Recognition and Measurement
2018/2019
IAS n. 41 amendment
Agriculture
2016/2017
IFRS n. 5 amendment
Non-current Assets Held for Sale and Discontinued Operations
2016/2017
IFRS n. 7 amendment
Financial instruments: disclosures
2016/2017
IFRS n. 9
Financial instruments
2018/2019
Deferred tax assets are recognised under “Non-current assets”. The notes to this caption provide a table summarising
the temporary differences that gave rise to the recognition
of deferred tax assets.
IFRS n. 10 amendment
Consolidated Financial Statements
2016/2017
Joint Arrangements
2016/2017
Disclosure of Interests in Other Entities
2016/2017
IFRS n. 14
Regulatory Deferral Accounts
2016/2017
IFRS n. 15
Revenue from Contracts with Customers
2018/2019
The tax effects of temporary differences are due to the application of the tax rate that will apply when the differences
reverse, or the application of the current tax rate as the best
estimate of the rate that will be applicable if the time of reversal cannot be reasonably determined, and considering
current tax legislation at the reporting date
IFRS for SMEs amendment
International Financial Reporting Standard for Small and Medium-sized Entities
2017/2018
Deferred tax liabilities are recognised under “Non-current
liabilities”. The notes to this caption provide a table summarising the differences that gave rise to the recognition of
deferred tax liabilities.
Deferred tax assets are recognised only if it is probable that
the group will have sufficient future taxable profit against
which the assets can be used.
The recoverability of deferred tax assets is reviewed at
each reporting date. If it is no longer probable that the company will realise the related tax benefit, they are reduced
accordingly.
The “consolidation suite” became effective in 2015. It is
comprised of the following documents endorsed by the
European Union with Regulation (EU) no. 1254/2012 of 11
December 2012:
◊
◊
◊
◊
◊
138
IFRS 10 Consolidated Financial Statements,
IFRS 11 Joint Arrangements,
IFRS 12 Disclosure of Interests in Other Entities,
IAS 27 (2011) Separate Financial Statements,
IAS 28 (2011) Investments in Associates and Joint
139
In June 2012 and October 2012, the IASB amended the
above standards and published the two following documents endorsed by the European Union with Regulation
(EU) no. 313/2013 of 4 April 2013 and Regulation (EU) no.
1174/2013 of 21 November 2013, respectively:
lidated;
◊ Application of the equity method by a non-investment entity investor to an investment entity investee.
◊ The disclosure required by IFRS 12 for an investment entity measuring all of its subsidiaries at
fair value.
◊ Transition Guidance (amendments to IFRS 10, 11,
and 12),
◊ Investment Entities (amendments to IFRS 10, IFRS
12 and IAS 27 (2011)).
The amendment to IAS 34 – “Interim Financial Reporting”
clarifies the meaning of “elsewhere in the interim report”
and requires the inclusion of a cross-reference from the interim financial statements to the location of this information.
Mandatory application for investment entities only was
postponed to financial statements of annual periods beginning on or after 1 January 2014.
The amendment to IAS 41 – “Agriculture” changes the financial reporting for bearer plants which are now included
within the scope of IAS 16. Consequently, they are subsequently measured using the cost model or the revaluation
model. A bearer plant is defined as a living plant that:
Ventures.
The most significant change introduced by IFRS 10 is the
concept of one control model underlying consolidation,
combining that previously set out in IAS 17 “Consolidated
and Separate Financial Statements” and in SIC 12 “Consolidation - Special Purpose Entities”.
The amendment to IAS 1 – “Presentation of Financial Statements” refers to the requirements for presenting information
in terms of aggregation criteria and materiality, including the
specific disclosure required by other standards.
The amendments to IAS 16 – “Property, Plant and
Equipment”- and IAS 38 - “Intangible Assets” – introduce
additional specifications on depreciation and amortisation
methodologies deemed acceptable.
The amendment to IAS 19 – “Employee Benefits” modifies
the criteria used to calculate the rate to discount post-employment benefits, clarifying that, upon measurement, said
rate is to be denominated in the same currency in which the
benefits are to be paid.
The amendment to IAS 27 – “Separate Financial Statements” reinstates the equity method as an accounting option for equity investments.
The amendment also clarifies that when a parent ceases to
be an investment entity, or becomes an investment entity, it
shall account for the change from the date when the change
in status occurred.
The amendment to IAS 28 – “Investments in Associates and
Joint Ventures” (and IFRS 10 and IFRS 12) refers to investment entities that apply the consolidation exception and
clarifies the following criteria and requirements:
◊ The exemption from preparing consolidated financial statements for an intermediate parent entity is
available to a parent entity that is a subsidiary of an
investment entity, even if the investment entity measures all of its subsidiaries at fair value;
◊ A subsidiary that provides services related to the
parent’s investment activities should not be conso-
140
◊ Is used in the production or supply of agricultural
produce;
◊ Is expected to bear produce for more than one period;
◊ Has a remote likelihood of being sold as agricultural
produce, except for incidental scrap sales.
The amendment to IFRS 5 – “Non-current Assets Held for
Sale and Discontinued Operations” provides specific guidance in circumstances in which an entity reclassifies an
asset from being held for sale to being held for distribution
(or viceversa) and when it should cease held-for-distribution
accounting.
The amendment to IFRS 7 – “Financial Instruments: Disclosures – Hedge Accounting” relates to the disclosure requirements for hedging transactions in line with the introduction of the amendment to IFRS 9 about hedge accounting.
Application of the amendment will become mandatory in
tandem with the application of IFRS 9.
IFRS 9 completes the step-by-step project to replace IAS
39 and includes requirements for the recognition, measurement, impairment, derecognition and general hedge accounting of financial instruments. Early application is permitted before 2018/2019. The previous version of IFRS 9 is
applicable as of 2014/2015.
The recent amendments to IFRS 10 – “Consolidated Financial Statements” relate to the accounting treatment applicable when control is lost over an investee that is not a
business. Mandatory application starts from annual periods
beginning on or after 1 January 2016.
The amendments to IFRS 11 (which, since this year, has
replaced IAS 31 “Interests in Joint Ventures” and SIC 13
“Jointly Controlled Entities – Non Monetary Contributions by
Venturers”) provide clarifications on how to account for the
acquisition of an interest in a joint operation.
IFRS 14, published in January 2014, is an interim standard
which permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to
recognise rate regulation amounts in accordance with its
previous GAAP. This standard is applicable to annual periods beginning on or after 1 January 2016.
IFRS 15, which replaces IAS 11 (“Construction Contracts”),
IAS 28 (“Revenue”) and the related interpretations (IFRIC
13 “Customer Loyalty Programmes”, IFRIC 15 “Agreements
for the Construction of Real Estate”, IFRIC 18 “Transfer of
Assets from Customers” and SIC 31 “Revenue-Barter Transactions Involving Advertising Services”), unifies the revenue recognition criteria applicable to contractually-based
transactions. Its application becomes mandatory for annual
periods beginning on or after 1 January 2018.
The amendments to the IFRS for SMEs clarify existing requirements and are part of the three-year update and review cycle decided by the IASB. Their application becomes
mandatory for annual periods beginning on or after 1 January 2017.
Lastly, for illustrative purposes, the correlation between certain not yet applicable standards is summarised below.
Standard
description
Applic. to
annual periods
beginning on or
after
IFRS n.1
Exemption from the
requirement to restate
comparative information for
IFRS nr.9
Concurrent with
adoption of IFRS 9
IFRS n.7
Additional Hedge
accounting disclosures (and
consequential amendments)
resulting from the introduction
of the hedge accounting
chapter in IFRS nr.9
Concurrent with
adoption of IFRS 9
IFRS n.9
1 January 2018
IFRS n.10
Amendment to clarify the
accounting for the loss of
control of a subsidiary when
the subsidiary does not
constitute a business
1 January 2016
the competitiveness of companies operating in the aerospace industry and defence, under development costs in intangible assets, as they meet the requirements of paragraph
4.1.1.1 Research and development costs.
Costs for projects that are legally considered108 relevant
to “National security” or to be of “European interest” are
shown net of the government assistance collected or to be
collected under Law no. 808/85.
Similarly, the royalties to be paid to the granting body, which
substitute amortisation up to the offset cost, while any residual amount constitutes expense, are recognised in profit or
loss as operating costs on an accruals basis when the conditions of current legislation have been met, which primarily
consist of the sale of products incorporating the technology
for which the government assistance was provided.
Government assistance collected for projects that are not
considered relevant to “National security” or of “European
interest” is recognised under “Other liabilities” at nominal
amount, and the current and non-current portions are separated on the basis of when repayment is due.
In both cases, the costs recognised under intangible assets,
in accordance with the above standards (see 4.1.1.1 Research and development costs) are:
◊ amortised over the estimated useful lives or the period in which future economic benefits are expected
to be generated through the sale of products incorporating the technology developed;
◊ tested for impairment at least once a year until the
development is completed and subsequently as
soon as the potential realisation of future economic
benefits changes. They are tested for impairment
on the basis of estimated sales plans that consider
the particularly long life cycles for products under
development.
5.3
Financial risk management
The group is exposed to the following financial risks:
An examination of the group’s current situation showed that
the effects of applying the above changes are not significant.
5.2 Development costs and
government assistance pursuant to Law
No. 808/85
The group classifies costs incurred for designs, prototypes
and adjustments to technical/functional specifications for
clearly identified potential customers that qualify for the government assistance provided for by Law no. 808 of 24 December 1985, regulating government assistance to support
◊
◊
◊
◊
◊
◊
credit risk;
market risk;
currency risk;
interest rate risk;
liquidity risk;
business risk and uncertainties.
Information is provided below on the group’s actual exposure to each of these risks, its risk management policies and
processes, the methods used to assess the risks and how
the group manages capital.
108 Reference is made to the provisions of Law no. 808/85 and subsequent amendments and the regulatory provisions which integrate and govern
the specific aspects of the law (CIPE resolution no. 28/06 of 22 March 2006,
Decrees of the Ministry of Economic Development nos. 173 and 174 of 14
September 2010).
141
These consolidated financial statements also include additional quantitative information.
The board of directors has overall responsibility for the creation and supervision of the group’s risk management system.
Using a system whereby duties are delegated, the group
ensures the implementation of risk management guidelines
and the periodic monitoring of risks.
The finance department is responsible for monitoring risks,
using information generated by the internal control system.
The purpose of the group’s risk policy is not to speculate.
Rather, it is exclusively aimed at minimising the financial
risks of the core businesses of group companies.
Risk management policies are based on the following:
◊ identifying and analysing the risks to which the
group is exposed;
◊ setting limits and control tools;
◊ monitoring the tools.
5.3.1
Credit risk
Credit risk is the risk that a customer or counterparty to a
financial instrument generates a financial loss by failing to
fulfil its obligation. Credit risk mainly relates to trade receivables and financial investments.
The group’s exposure to credit risk largely depends on the
specific characteristics of each customer. Demographic variables typical to the group’s customer portfolio, including
default risk in the sector and country in which the customer
operates, have a minimal influence on credit risk.
A substantial part of the group’s turnover is generated with
industrial companies that are part of corporate groups. This
part has been falling dramatically (83% in 2013/14 and 75%
in 2014/15, specifically 71% for the Integrated Aircraft
Systems segment and 90% for the Aircraft Services segment), and, according to the business plan, it will fall below
50% over three years.
The group has worked with over 90% of its customers for
over four years.
It has not had any cases of significant bad debts in the last
ten years.
Accordingly, no group company has set up an allowance
for impairment other than the few isolated cases disclosed.
For the purposes of providing clear information, due to the
balances arising from the merger of SEI, which was merged
into MAG in 2009/2010, MAG’s financial statements include
certain bad debts arising from trading that took place before
SEI’s acquisition in 2001. SEI’s seller is exclusively respon-
142
sible for these amounts, which are subject to insolvency
proceedings or individual credit recovery processes. Their
nominal amount has been fully impaired through a specific
allowance set up when SEI was acquired.
The group does not make financial investments. Accordingly, it is not subject to the risk of issuer default.
The group’s policies provide for the issue of financial guarantees only in the interest of wholly-owned subsidiaries.
At 30 September 2015, there are no guarantees issued on
behalf of subsidiaries. There are no other financial guarantees.
5.3.2
Market risk
Market risk is theoretically connected to fluctuations in the
fair value and/or cash flows of a specific financial instrument
due to changes in market prices.
The group does not trade in financial instruments for speculative purposes. It does not hold financial assets for investment purposes and, accordingly, it does not have risk
profiles connected to financial market volatility.
Certain portions of debt exposed to interest rate risk could
be hedged using derivatives, in accordance with the group’s
risk management policy and where necessary.
The group has agreed loans with banks on the normal credit
market, which are mainly in Euros and are not secured by
collateral or personal guarantees.
5.3.5
This risk relates to the group’s ability to meet its obligations
with respect to financial liabilities. The group’s approach to
managing liquidity provides that it always has sufficient funds to meet its obligations at the scheduled due dates, both
in normal conditions and during times of financial tension,
without having to incur charges at above market rates normally applied to group companies.
The group monitors its financial position on a daily basis
and periodically forecasts its financial requirements.
((figures in thousands of Euros; ratios in units)109110111
The group generated total turnover of approximately USD66
million and CAD0.4 million in 2014/2015.
The group’s currency risk management policy is based on
seeking to find a structural balance in transactions performed regularly (purchases and sales) in US dollars, with the
aim of ensuring that net exposure in foreign currency remains at an acceptable level.
During the year, the group did not need to enter into hedges
and/or forward currency trading, as it pursued an overall
substantial balance between exchange rate gains and losses.
5.3.4
currency
original
amount
residual
amount
guarantees
Non-current (at
30.09.2014)
EUR
45,5
33,2
N/A
Non-current (at
30.09.2015)
EUR
45,4
34,8
N/A
Certain non-current loans have a clause that requires the
group to meet certain covenants. If it fails to meet these
covenants, repayment of the loan could be requested. The
ratios applied are summarised in the table below, along with
the residual principal due and the actual ratios at the reporting date.
The group has always met its obligations regularly.
5.3.3
These transactions are mainly in US dollars (USD) and, to a
lesser extent, in Canadian dollars (CAD).
(in millions of Euros)
type
With respect to specific hedges, the group has one derivative hedging interest rate risk for which reference should be
made to the specific note (see 5.3.4 Interest rate risk).
The group is exposed to currency risk on sales, purchases
and loans in currencies other than the functional currency of
the various group companies.
However, the variable rate loans are indexed to the Euribor
(generally the three-month rate), plus spreads in line with
the best market averages.
Liquidity risk
The following table provides information on the group’s loans, credit lines and facilities in place at the reporting date,
which the group has not secured with collateral or personal
guarantees other than its commitment to comply with certain covenants detailed below.
Currency risk
Most non-current loans bear interest at flat rates.
outstanding amount at
30.09.2015
5.036
354
At 30 September 2015, all ratios are within contractual limits.
ratio
limit
30.09.2015
30.09.2014
NFD /GROSS OPERATING PROFIT
3,5
1,72
2,62
NFD/EQUITY
1,2
0,58
0,75
NFD/ADJ. GROSS OPERATING PROFIT
4,0
1,70
2,39
NFD/EQUITY
2,5
0,58
0,75
ADJ.GROSS OPERATING PROFIT/NFE
4.839
1.695
2.083
7.000
Min. 4,0
7,64
5,60
NFD/GROSS OPERATING PROFIT
3,5
1,72
2,62
NFD/EQUITY
2,0
0,58
0,75
3,5
1,72
2,62
NFD/EQUITY
2,0
0,58
0,75
3,5
1,72
-
1,0
0,58
-
GROSS OPERATING PROFIT/NFE
NFD/EQUITY
Min. 3,5
7,55
-
3,5
1,72
-
NFD/EQUITY
2,0
0,58
-
Interest rate risk
This risk relates to fluctuations in market interest rates with
respect to interest expense paid on loans in place.
The group is marginally exposed to interest rate risk as it
has agreed an insignificant portion of financing on which
interest accrues at variable rates indexed to the Euribor.
109 Net financial debt, excluding other non-current liabilities as per Law no. 808/85 on projects that are not eligible for “National security” or “European
interest” assistance (see also 5. Significant matters - 5.2 Development costs and government assistance pursuant to Law No. 808/85).
110 The concept of gross operating profit substantially refers to adjusted EBITDA, as discussed in the alternative performance indicators section of the
directors’ report.
111 Net financial expense, excluding exchange rate gains and losses
143
(in millions of Euro)
type
current lines
current FCT
currency
limit
utilisation
guarantees
EUR
26,5
8,3
N/A
CAD
0,8
-
N/A
EUR
79,0
33,2
N/A
These credit lines include facilities available for the factoring without recourse of trade receivables, which are recognised separately. On occasion, the group has factored receivables, thereby transferring title thereto and default risk.
These transactions are legally and substantially considered
without recourse, as they do not provide for any guarantees, repurchase or recourse clauses.
6. Notes to the statement of
financial position
Overall, the group’s short-term facilities total approximately
€106 million and the percentage of utilisation at the reporting date is 31% for credit lines and bank facilities, while approximately 42% of the available facilities for the factoring
without recourse of trade receivables were used.
6.1
5.3.6
The following table provides variations in intangible assets.
Business risk and uncertainties
Reference should be made to the various sections of the
annual report for information on business risk and uncertainties (see The external context, Risk management
and compliance, Group performance).
Intagible assets
Development
costs
Ind.
patents
and
int. prop.
rights
Concessions,
licences
and
trademarks
29.318
-
617
610
5.596
31
156
(15)
-
(236)
Assets
under
development
Other
Total
19
88
30.652
-
4
185
5.972
-
-
-
-
(15)
-
19
-
(19)
(174)
(410)
(1.825)
(6)
(423)
-
-
(46)
(2.300)
(547)
-
(2)
-
-
(2)
(551)
47.808
66
4.215
680
4
1.473
54.246
(15.517)
(41)
(3.848)
(70)
-
(1.422)
(20.898)
32.291
25
367
610
4
51
33.348
Goodwill
30 September 2014:
Carrying amount
Increases
Cost offsetting (Laws no. 808/85
and 46/82)
Reclassifications/Impairment
losses
Amortisation
Net exchange rate losses
30 September 2015:
Historical cost
Accumulated amortisation
Carrying amount
The offsetting of the historical cost of “Development costs”
with government assistance under Laws nos. 808/85 and
46/82 relates to the recognition of costs that meet the requirements for capitalisation under intangible assets, net of the
related amounts of government assistance provided under
the above laws.
For information on the recognition of the government assistance provided under Law no. 808/85, reference should
be made to paragraph 5.2 Development costs and government assistance pursuant to Law No. 808/85.
For information on the recognition of the government assistance provided under Law no. 46/82, reference should be
made to paragraph 4.9.2 Government grants.
144
145
There are seven main groups of completed development
projects that have not yet been completely amortised. They
relate to products used in seven different types of aircraft.
In accordance with the criteria described above relating to
the identification of the useful lives of products developed
(see 4.1.1.1 Research and development costs), amortisation is calculated on a straight-line basis over the useful
lives of such assets, which at 30 September 2015 are not
shorter than ten years in most cases.
Development costs that are capitalised under assets at the
reporting date relate to groups of projects that can be summarised based on the aircraft in which the related product
will be used as follows.
Development costs for new products
2014/2015
AW109 projects
2.830
AW139/AW149/A149 projects
7.054
AW169 projects
251
Bell 429 projects
3.991
Bell 505 projects
298
Bell 525 projects
5.045
EADS X4 projects
3.745
G5/G650 projects
2.313
Electromechanical actuator systems (fixed-wing
and helicopters)
2.990
AW189 interiors projects
683
AW139 restyling projects
170
Other projects
2.921
Total
32.291
“Goodwill” is analysed below.
2014/2015
2013/2014
Acquisition of the interiors business
activity
610
610
Total
610
610
Goodwill is tested for impairment once a year.
For the purposes of impairment testing, goodwill was initially
allocated to the investee Mecaer America and the relevant
operating segment (Integrated Aircraft Systems), which are
the most detailed level at which the group monitors goodwill
for internal reporting purposes.
The recoverable amount of the cash-generating units is determined by calculating value in use.
These calculations use projected future cash flows based on actual operating profit and figures estimated in
the 2015/2016 approved budget and the 2014/2015 –
2018/2019 business plan approved in 2014 and currently
being updated.
The long-term plan, compared to which the 2014/2015
actual figures and the 2015/2016 budget show an improvement, was prepared using figures which include the revenue, costs and volumes of each project, projected on
the basis of the available or potential order backlog, cost
configurations and known or reasonably estimable cost and
revenue.
Statement of financial position figures are estimated for the
years covered by the plan considering investments needed
to sustain the trend in business volumes and maintain an
appropriate renewal rate of assets used in operations and
product innovation.
Property
Plant and
machinery
Industrial and
commercial
equipment
Other assets
Leasehold
improvements
Assets
under
construction
Total
2.310
3.979
1.734
621
1.359
5.599
15.602
Increases
-
615
458
286
337
864
2.560
Net decreases
-
(2)
-
-
-
-
(2)
Reclassifications/imp.
-
-
40
7
33
(80)
-
(10)
(1.160)
(735)
(278)
(342)
-
(2.525)
-
(97)
53
7
(42)
-
(79)
30 September 2014:
Carrying amount
Depreciation
Net exchange rate gains/
(losses)
30 September 2015:
Historical cost
2.440
17.309
9.376
3.033
4.132
6.383
42.673
Accumulated
depreciation
(140)
(13.974)
(7.826)
(2.390)
(2.787)
-
(27.117)
Carrying amount
2.300
3.335
1.550
643
1.345
6.383
15.556
The figures in the business plan adequately support the goodwill allocated to the production of interiors carried out by
the CCS division line of the Integrated Aircraft Systems operating segment. For additional information on the characteristics of the production lines, their organisational structure
and impact on group revenue, reference should be made to
the directors’ report (see Group performance).
6.3
No impairment losses were recognised on goodwill in previous years, except for that indicated with respect to Mecaer
America Inc..
This caption includes small amounts relating to non-controlling interests, including the interest held in the I-LAN association of small airports, which amounts to €3 thousand.
6.2
6.4
Equity investments
Deferred tax assets
The following tables provide an analysis of asset balances
at 30 September 2015 and 30 September 2014 for each
caption, with indication of amounts recoverable within and
after one year.
This airstrip is subject to a specific investment plan to enlarge it and subsequently build an airport. Assets under construction at the reporting date amount to €6,352 thousand.
These balances reflect the estimated tax charge arising on
temporary differences between the profit for the year and
taxable profit in relation to captions that are deductible in
future years.
Increases in these captions relate to investments to upgrade the production structures and insource activities that
were previously subcontracted.
Assets under construction and payments on account include increases in the year due to costs incurred for the longterm investment plan to build the above-mentioned airstrip.
No property, plant and equipment were pledged as collateral at 30 September 2015.
The tax rates applied in the calculation for the Italian companies are IRES of 27.5% and IRAP of approximately 4.2%.
The Canadian company used a tax rate in the region of
31.0%, which is the result of combining the provincial tax
rate (Quebec) with the federal tax rate.
This company’s tax position includes prior year tax losses
carried forward112 totalling CAD33,715 thousand (in addition
to CAD11,219 thousand relating to development costs) in
relation to federal taxes and CAD32,958 thousand (in addition to CAD12,647 thousand relating to development costs)
for provincial tax purposes.
The possibility of using these losses expires between 2026
and 2034, while a portion (including that relating to development costs) does not expire.
In the tax period of these financial statements, the company
has generated a taxable profit for the first time. For reasons
112 At the date of filing the latest tax return (2013/2014).
146
Having completed the start-up stage, the US company MAG
Inc. has systematically recorded taxable profit, absorbing all
the tax losses carried forward that it had initially recognised.
Property includes €2,278 thousand relating to the carrying
amount of the land used for the “Tronto” airstrip located within the Monteprandone (AP) industrial site and the
carrying amount of the airstrip.
Plant and machinery and industrial and commercial
equipment at 30 September 2015 include carrying amounts
of €437 thousand and €98 thousand, respectively, relating
to assets under finance lease for which current financial liabilities of €77 thousand and non-current financial liabilities
of €207 thousand have been recognised.
of prudence the valuation allowance was maintained in order to offset the estimable deferred tax assets related to prior year tax losses; consequently, no benefit was recognised
in this respect.
MAG Inc. operates in five US states; however, most of its
income is generated in two of them (Pennsylvania and Maryland). Consequently, the company is subject to a tax rate
which combines federal and state rates of approximately
41%.
2014/2015
2013/2014
Unrealised exchange rate losses
94
145
Fair value losses
144
38
Cash-deductible expenses
13
111
Expenses deductible on an accruals
basis
23
14
Taxed provisions for risks
54
-
Prior year interest expense on
discounting
12
15
Total deferred tax assets
recoverable WITHIN one year
340
323
2014/2015
2013/2014
1.825
1.566
Royalties
467
388
Impairment losses on loans and
receivables
-
Prior year interest expense on
discounting
53
65
Expenses deductible on an accruals
basis
73
38
Post-employment benefits recognised
under IAS 19
38
75
recoverable AFTER one year
2.456
2.132
2.796
2.455
147
6.5
requiring back-up inventories usually for fairly long periods
of time.
Deferred receivables for projects under Law no. 808/85
include the present value of government assistance to be
collected from the Ministry of Economic Development for
projects under Law no. 808/85 concerning national security and similar matters for which collection is deferred. The
portion expected to be collected within one year is classified
under other current assets (see 6.12 Other current assets).
2014/2015
2014/2015
2013/2014
Raw materials, consumables and
supplies
24.593
23.833
Work in progress and semi-finished
products
13.131
10.992
Finished products and goods for
resale
19.774
21.411
57.498
56.236
(6.457)
(5.451)
2013/2014
Allowance for inventory write-down
51.041
50.785
Advances to suppliers
112
259
Total inventories
51.153
51.044
Deferred receivables from the
Ministry of Economic Development
for projects under Law no. 808/85
2.108
3.243
Guarantee deposits and other noncurrent assets
123
108
Total other non-current assets
2.231
3.351
6.8
6.6 Other non-current assets - Related
parties
Guarantee deposits and other non-current assets include
non-interest bearing guarantee deposits of €206 thousand
given to the related party S.B.I. S.p.A. for the lease of the
properties in Borgomanero (NO) and Monteprandone (AP).
6.7
Inventories
2014/2015
2013/2014
Projects to develop new products
724
416
Aircraft interiors
3.063
642
Aircraft and component maintenance
1.852
2.393
Total contract work in progress
5.639
3.451
Contract work in progress comprises three main components that are part of different business lines, operating separately.
The first one includes long-term contracts for the development of new products, which are entirely or partially funded by revenue from the customer.
This caption is analysed in the table below.
Overall, there was a modest increase in all categories of
inventories, despite the growth in production volumes.
This was due to the constant monitoring of procurement levels and turnover rates.
The allowance for inventory write-down includes:
◊ specific write-downs for given situations, which total approximately €3,691 thousand at the reporting
date. These include roughly €3,301 thousand for
write-downs specifically and prudently recognised
on products, systems and components of the E550
aircraft for the customer One Aviation (Eclipse Aerospace);
◊ collective write-downs based on statistical analyses
of back-up components inventory trends, such as
movements that presumably reflect obsolescence
and/or excessive items, which total approximately
€2,766 thousand. These analyses are updated
each year on the basis of actual figures reported
and integrated by technical analyses carried out to
justify the need for write-downs.
Interiors include contracts for customised VVIP interiors,
while maintenance relates to overhaul of helicopters and
components carried out at the Monteprandone site.
Trade receivables
This caption is analysed in the table below. Carrying
amounts are in line with fair value.
The allowance for impairment consists of approximately
€510 thousand adjusting receivables of SEI, which arose
prior to its merger into the parent, MAG, in 2009/2010, as
detailed in note 5.3.1 Credit risk.
Trade receivables at the reporting date reflect the natural
monetary cycle. As noted above (5.3.1 Credit risk), with a
payment schedule that better meets the needs of the main
customer, the group occasionally factors trade receivables
without recourse which are collectable and due at the factoring date. The increase in the balance is attributable to a
transaction that was carried out last year near the reporting
date. There are no significant bad debts. Although a portion
of past due receivables remains, mostly due to the complexity of the procurement process for large customers, the
average DSO continue to be approximately 85 days and
180 days for residential and institutional customers, respectively. Receivables remain highly concentrated (roughly
54%) with the group’s key customer, Finmeccanica group.
2014/2015
2013/2014
Trade receivables
28.543
38.188
Allowance for impairment
(599)
(704)
Total trade receivables
27.944
37.484
At the reporting date, trade receivables may be analysed by
geographical segment as follows.
Geographical segment
Amount
Europe – Eurozone
14.050
Europe - non-Eurozone
169
North America
Considering the contractual terms, these contracts are of a
long-term nature and provide for contractual considerations
that the group measures on the basis of the percentage of
completion at the reporting date. This method considers
technical progress (physical measurement) and financial
progress (cost method).
12.608
Rest of the world
1.117
27.944
At the reporting date, past due receivables total €7,829
thousand. A breakdown of past due receivables by ageing
is set out below.
Interiors contracts are the main component at the reporting
date.
Work in progress is recognised under assets if, based on
an analysis conducted on each contract, the gross value of
work in progress exceeds progress billings. It is recognised
under liabilities if the progress billings exceed work in progress. If the progress billings have not been collected at the
reporting date, the relevant amount is classified as trade
receivables
This method is necessary given the specific nature of the
group’s industry, also considering contractual restrictions
148
6.9
6.10 Current loans and receivables Related parties
At 30 September 2015, current loans and receivables from
the related party S.B.I. S.p.A. amount to €25 thousand (for
additional details see 9.2 Related party transactions).
Their carrying amount is in line with their fair value.
6.11 Tax assets
Tax assets include advances on income taxes paid for the
year in excess of the total balance due.
The IRES (corporate income tax) tax asset includes the
excess IRES of €512 thousand for tax years for which
the parent has claimed reimbursement pursuant to article
2.1-quater of Decree law no. 201/2011, as detailed in the
note to Income taxes (7.13 Income taxes).
They are due within one year
2014/2015
2013/2014
IRES
512
574
Foreign taxes
-
473
IRAP
-
329
Total tax assets
512
1.376
6.12 Other current assets
Advances to suppliers relate to payments for orders primarily outside the EU. This caption, which was particularly high
for the CCS division at the end of the previous year, fell
considerably.
The VAT (and other equivalent indirect taxes) receivable
mainly comprises the Italian VAT, whose trend is correlated with the invoicing system applied to the key customer,
which, as a frequent exporter, makes purchases not subject
to VAT by issuing letters of intent for time brackets.
The balance includes the receivable of roughly €935 thousand of SAT for VAT paid on investments.
Nominal
amount
Impairment
Carrying
amount
3.070
-
3.070
31< x < 60
475
-
475
61 < x < 90
978
-
978
91 < x < 120
679
-
679
x > 120
3.226
(599)
2.627
Total past
due
8.428
(599)
7.829
Days
< 30
Receivables for projects under Law no. 808/85 include the
present value of government assistance to be collected
from the Ministry of Economic Development for projects
under Law no. 808/85 concerning national security and similar matters for which collection is deferred. The portion
expected to be collected after one year is classified under
other non-current assets (see 6.5 Other non-current
assets).
Deferred charges include portions of costs and charges
paid in advance but not pertaining to the year. These mainly
refer to costs for supplies.
149
Tax credits include €458 thousand due from the Canadian
tax authorities for research and development costs incurred
by the Canadian subsidiary.
Transfer credits to be received relate to trading transactions and include certain items of modest amounts due from
Finmeccanica group, which is also a supplier of the group.
Receivables due from the liquidator of HT S.p.A. reflect
the outstanding balance due from the subsidiary Hydraulic
Technologies S.p.A. as a result of its liquidation and which
the liquidator withheld on a precautionary basis.
2014/2015
2013/2014
VAT/GST/QST/HST
3.705
5.567
Contributions to be collected
1.226
1.518
Deferred charges
830
1.155
491
434
Tax credits
495
384
Other
105
304
-
216
250
15
5
5
7.107
9.598
Receivables from the Ministry of
Economic Development for deferred
projects under Law no. 808/85
Transfer credits to be received
Receivables due from the liquidator
of HT S.p.A.
Total other current assets
The fair value of the items comprising other current assets
is in line with the carrying amount.
2013/2015
2013/2014
-
2.967
In the previous year, this caption exceptionally comprised
a loan entered into on 30 September 2014 which became
effective on 1 October 2014.
This caption reflects the balance of bank and postal accounts. It is calculated as the nominal amount of current
accounts held with banks.
Bank deposits
Cash
Total cash and cash equivalents
2014/2015
2013/2014
16.250
14.878
11
9
16.261
14.887
The carrying amount is in line with fair value.
150
adequate credit ratings.
Certain group companies factor trade receivables, usually
every quarter. However, the factoring does not alter the nature of collection times in terms of method or amounts.
The group constantly monitors developments in its debt to
equity ratio and, in particular, the level of net debt and the
generation of cash flows from operating activities.
without recourse, as they do not provide for any guarantees, repurchase or buy-back clauses.
To achieve these objectives, the group looks to constantly
improve the profitability of its businesses.
6.15 Cash and cash equivalents Related parties
This caption reflects the balance of bank deposits. It is calculated as the nominal amount of current accounts held with
banks that are related parties (Credito Valtellinese group –
see also 9.2 Related party transactions). The carrying
amount is in line with fair value.
2014/2015
2013/2014
1.596
1.034
6.16 Equity
At 30 September 2015, paid-in and subscribed share capital amounts to €13,138 thousand, divided into 13,138 thousand shares with a nominal amount of €1 (one Euro) each.
No treasury shares are held directly or indirectly via trustees
or nominees.
6.13 Current financial assets
6.14
Variations in this caption relate to monetary cycles.
For information on changes and an analysis of equity, reference should be made to the statement of changes in equity
(see Statement of changes in equity). At the reporting
date, other comprehensive expense recognised in equity
(translation reserve, profits and losses arising from the application of IAS 19) totals €2,860 thousand.
No dividends have been distributed to the owners of the
parent during the last two years.
There are no significant restrictions arising from loan agreements or legal provisions limiting the subsidiaries’ ability
to transfer funds to the parent in the form of dividends, the
repayment of loans or advances, with the exception of compliance with the limits established in article 2426.1.5 of the
Italian Civil Code for companies that capitalise development
costs under intangible assets.
The group’s capital management objectives are to create
value for shareholders, safeguard business continuity and
support the group’s development. Accordingly, the group
seeks to maintain an adequate level of market capitalisation, at the same time enabling it to realise satisfactory returns for shareholders and guarantee accessibility to
outside sources of funding, including the achievement of
financial parameters113114115
The board of directors can make proposals to the shareholders to increase share capital or, if legally permitted, distribute reserves.
In this way, the group may also repurchase treasury shares
within the limits authorised by the shareholders, with the
same aims of creating value while achieving financial balance and improving the group’s rating.
2014/2015
2013/2014
a113
1,46 %
1,23 %
Inflation rate
i
2,00 %
2,00 %
Annual rate of increase in postemployment benefits
r
3,00%
3,00%
is114
1,00 %
1,00 %
Discount rate
Annual rate of salary increase
demographic parameters
Mortality
RG48 Tables115
Inability
INPS tables by age and gender
Retirement age
Achievement of requirements for mandatory
general insurance
annual employee turnover and advances on post-employment benefits
Equity means the value contributed by shareholders (share
capital and share premium reserve totalling €18,702 thousand) and the value generated by the group through the
results of operations (retained earnings and other reserves,
before the profit for the year and the translation reserve,
totalling €22,949 thousand).
2014/2015
2013/2014
advances
2,0 %
2,0 %
turnover
3,0 %
3,0 %
Post-employment benefits at 30 September 2015 and 2014
are analysed below.
6.17 Employee benefits – Postemployment benefit
2014/2015
The group companies grant post-employment benefits to
their employees both directly and by contributing to funds
outside the group. These benefits are granted in a variety of
ways, depending on the legal, tax and economic conditions
of each country in which the group operates. In particular,
for the Italian companies, the pension reform under Law
no. 296/2006 has been considered (see 4.5 Employees
benefits - Post-employment benefits). The benefits
are usually based on remuneration and years of employee
service.
The group companies grant post-employment benefits
through defined contribution and defined benefit plans. Under defined contribution plans, the group pays contributions
to public or private insurance companies on the basis of a
legal or contractual obligation, or voluntarily.
When the group pays the contributions, it fully meets its
obligations. The cost of the period is accrued on the basis
of employee service and is recognised by function under
personnel expense.
Defined benefit plans include the post-employment benefits
of Italian companies, which reflect accruals for all employees in service at the reporting date, calculated using the
projected unit credit method and actuarial techniques.
The techniques used for these calculations are shown in the
following tables.
2013/2014
MAG
1.791
2.200
total
1.791
2.200
The carrying amount is in line with fair value. Changes in
net liabilities for defined benefit obligations are provided in
the following table.
Liabilities for defined benefit plans at
30.09.2014
2.200
Current service cost and interest
8
Actuarial losses
(124)
Plan benefits paid
(293)
30.09.2015
1.791
Amounts taken to other comprehensive income in the two
consecutive years are detailed in the following table.
2014/2015
2013/2014
Current service cost
Interest cost
8
49
(124)
217
(116)
266
Curtailment
Actuarial (gains)/losses (OCI)
-
113 Rate indexed to the 7 to 10-year Iboxx Eurozone Corporate AA index.
114 Following the new pension reform for companies with more than 49
employees, the future portions accruing no longer remain with the company.
Instead, they are transferred to a supplementary pension fund or the INPS
treasury fund. Accordingly, the Italian companies are no longer required to
project future salaries using specific growth rates by professional position.
115 RG 48 mortality tables published by the government’s general accounting department.
151
They are taken to the following statement of comprehensive
income captions according to their nature.
2014/2015
2013/2014
Personnel expense
-
-
Financial expense
8
49
(124)
217
(116)
266
Other comprehensive income
(expense)
6.18 Provisions
The following tables provide an analysis of the composition
of and changes in this caption.
2014/2015
2013/2014
Provision for product warranties
2.010
1.388
Early retirement provision
-
166
Provision for litigation
522
431
Total provisions for risks and
charges
2.532
1.985
Provisions for risks and charges at 30.09.2014
1.985
Accruals
1.096
Utilisation
(549)
2.532
The provision for litigation has been accrued specifically to
cover pending litigation, including certain cases with former
group employees.
Details are not provided as this could weaken the group’s
position in the litigation.
The €1,096 thousand accrual of the year includes €801
thousand covering the expense to be incurred for retrofit
activities involving a specific element of the E550 aircraft
landing gear whose tolerances were redefined by the engineering.
This expense mainly comprises the estimated costs to
rework a component (trunion assy) and the costs for the
disassembly and inspection activities carried out by the aircraft maker during aircraft scheduled maintenance. The
estimate of said expense is based on an agreement reached with the customer and a statistical analysis of the inspections carried out starting from August 2015.
2013/2014
7.780
7.984
166
166
Unrealised exchange rate gains
186
256
Amortisation of goodwill
120
108
Leases
27
45
Accelerated depreciation
44
107
8.323
8.666
Total deferred tax liabilities
Deferred tax liabilities for research and development costs
arise from the temporary differences relating to the tax deduction of these costs in the year in which they were incurred. This creates a reversal effect in the related amortisation
(see 7.13 Income taxes).
Changes in this caption are shown in the following table.
Deferred tax liabilities at 30.09.2014
Net accruals
The following table provides a breakdown of deferred tax
liabilities.
6.21 Other non-current liabilities
6.25 Tax liabilities
This caption is entirely comprised of “Other liabilities under
Law no. 808/85” which include the difference between assistance received or to be received under Law no. 808/85,
relating to projects considered relevant to “National security
and similar”, and the portion of subsidised costs classified
under intangible assets as development costs, the difference between royalties charged to the projects and the liability
actually accrued at the conditions for which payment is provided for, as well as assistance under Law no. 808/85 for
projects not considered relevant to “National security and
similar” (see 5.2 Development costs and government
Tax liabilities include balances due for accrued income
taxes, net of payments on account.
-
Reversals/reclassifications
(343)
Deferred tax liabilities at 30.09.2015
8.323
The caption includes advances from customers for the provision of assets.
Loans and borrowings at 30 September 2015 are analysed
below, in comparison with those at the previous year end,
with indication of those that are current and non-current.
2014/2015
2013/2014
Bank loans
17.653
25.701
Other loans
935
1.347
18.588
27.048
including:
third parties
17.076
26.270
related parties
1.512
778
2014/2015
2013/2014
25.020
35.363
Bank loans
26.334
23.807
Other loans
783
563
Total non-current loans and
borrowings
27.117
24.370
including:
third parties
24.281
24.370
related parties
2.836
-
Financial debt is detailed in the notes to the group’s net
financial debt (see 9.1 Net financial debt).
Other direct taxes
IRAP
302
316
4
972
1
786
Total tax liabilities
6.26 Other current liabilities
Current and deferred remuneration shows the variable
components of remuneration recognised on an accruals basis and accrued additional month pay and untaken holidays.
Deferred income mainly refers to revenue relating to contract work in progress for product development and interiors
contracts that has been deferred under the percentage of
completion method.
Other liabilities under Law no. 808/85 include royalties charged to profit or loss, which are expected to be paid within
one year (see 5.2 Development costs and government
2014/2015
At the reporting date, trade payables may be analysed by
importo
Europe – Eurozone
Non-current loans
Total trade payables
469
The caption does not include overdue amounts.
This caption is comprised of payables to suppliers of goods
and services. The balance decreased on the previous year
end due to the effect of the temporary suspension of some
AW101 line interior contracts (India) which were then regularly completed in the first half of the year.
Bank facilities and current loans
Total current loans and
borrowings
2013/2014
666
Social security charges payable are consistently proportionate to personnel expense.
6.23 Trade payables
6.20 Loans and borrowings
2014/2015
IRES
Other current liabilities, whose carrying amount is in line
with fair value, are analysed in the following table.
6.22 Advances from customers
8.666
Information on the main terms and conditions of bank loans
in place are provided in the notes on financial risk management (see 5.3.5 Liquidity risk).
6.19 Deferred tax liabilities
152
2014/2015
20.714
823
North America
3.299
Rest of the world
184
25.020
2013/2014
Current and deferred
remuneration
3.996
3.558
Social security charges payable
1.208
1.340
782
951
Deferred income
Directors’ fees and expenses
84
74
Statutory auditors’ fees
174
166
Other liabilities under Law no.
808/85
238
122
Withholdings to be paid
22
63
Property tax
49
5
473
537
7.026
6.816
Other financial liabilities
Total other current liabilities
6.24 Current financial liabilities Related parties
General information on captions affected by related party
transactions is provided in paragraph 9.2 Related party
transactions (see). The carrying amount is in line with
fair value.
153
7. Notes to the statement
of comprehensive income
7.4 Increase in internal work
capitalised
7.1
This caption mainly relates to internal and external costs
incurred for long-term investment programmes to develop
new products. These costs are recognised under intangible
assets when they meet capitalisation requirements (see 6.1
Intagible assets).
Net revenue
Revenue from sales decreased by roughly 6% over the previous year.
More detailed information on trends in revenue is provided
in the directors’ report.
Revenue - goods and
processing, repair and
maintenance services
Design revenue
2014/2015
2013/2014
Variazione
%
121.107
127.865
(5,3%)
2.249
2.923
(23,1%)
123.356
130.788
(5,7%)
7.5 Raw materials, consumables and
supplies
The use of raw materials, consumables and supplies is,
overall, consistent with the mix of products and services,
as demonstrated by the breakdown of revenue. Production
values are down considerably in absolute terms.
Net revenue
supplies
7.2
2014/2015
2013/2014
43.419
40.163
The caption mainly comprises grants related to income
(€102 thousand), social security cuts on personnel bonuses
paid in prior years (€63 thousand) and smaller personnel
leaving incentives compared to 2013/2014 (€135 thousand)
and the release of the provision for legal disputes with employees (€90 thousand).
7.3 Variation in finished products,
work in progress and semi-finished
goods
This caption was directly affected by the factors described
in the notes to the statement of financial position (see 6.7
Inventories).
7.6
Services
The following table provides an analysis of services.
Sub-contracting and third-party processing relate to
outsourced production, the extent of which varies depending on production volumes. In any case, the use of these
services is for non-strategic industrial processes. The decrease over the previous year is due to the fall in production
volumes of the interiors segment and insourcing.
The cost of temporary staff and contractors fell mainly as
a consequence of the closure of the Yeovil site (UK), where
the AW10 customised interiors were mostly produced using
temporary staff.
This caption is a significant variable cost given the group’s
need for flexibility and the peaks of activity which characterise some operating segments.
154
The cost of advisory services are in line with the previous
year.
External engineering activities for the various segments are
provided to complement the activities of the group’s internal
units.
2014/2015
2013/2014
Third party processing and subcontracting
16.842
18.384
Advisory and sundry assistance
services
5.229
5.485
Temporary staff, consultants and
contractors
2.292
5.141
Electricity, telephone, canteen and
utilities
2.023
2.100
Travel expenses
1.972
2.093
Transport costs
1.820
1.871
Maintenance, repairs and technical
assistance
1.347
1.480
Insurance
1.183
1.041
Plant services and security
667
595
Directors’ fees
501
713
Participation in conferences and
trade fairs
393
414
Royalties
385
1.333
Royalties on Law no. 808/85 projects
309
424
135
124
Other services
629
700
Total services
35.727
41.898
Travel expenses had a significant impact, principally due
to the fact that operating units are located in different geographical segments.
Transport costs remain high as activities take place at several operating sites.
Insurance mainly relates to the cost of covering aerospace
risks, both in terms of third party liability on products and
the many risks arising from the inspection and maintenance
of aircraft and parts, mostly related to the AS division. In
155
this respect, the group has always pursued a prudent risk
coverage policy by agreeing adequate policies with leading
insurance companies.
Royalties are those due to UTAS (Goodrich Landing Gear)
for the AW139 LGS project, the Woodward group for assistance with certain types of hydraulic flight controls
and AgustaWestland for maintenance activities on some
hydraulic products (dampers).
Royalties on Law no. 808/85 projects include the accrued
benefits under this law on projects that are eligible for “National security” or “European interest” assistance. They are
calculated on a straight-line basis in proportion to the relevant sales for the year (see also above 5. Significant
matters, 5.2 Development costs and government
assistance pursuant to Law No. 808/85 and 6.21 Other
non-current liabilities).
newals on expiry were not considered.
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
1.116
831
810
202
-
7.9
This caption rose in line with the slight increase in the average headcount which remains overall modest.
2014/2015
2013/2014
25.013
23.771
Social security contributions
6.366
5.741
Post-employment benefits and
pension funds
1.031
994
Pension and similar costs
504
434
Other
469
655
33.384
31.595
Total personnel expense
7.7
This caption is mainly comprised of operating lease
payments for the industrial sites where the foreign operations’ factories (Laval, Philadelphia, Hagerstown and Irving)
are located and for the Rome office.
It also includes rent for cars, equipment and software.
2014/2015
2013/2014
1.853
1.630
The minimum future payments due for the main leases broken down by residual annual payment over the minimum
contractual term are summarised in the following table. Renewals on expiry were not considered.
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
510
413
414
415
416
7.8
This caption includes operating lease payments to the related party SBI S.p.A. for industrial sites where the Italian
companies’ factories are located. They amount to:
The following table summarises the average headcount during the year and the total at year end by category.
Headcount
Managers
2014/2015
2013/2014
1.394
1.393
156
30/09/2015
30/09/2014
30/09/2015
30/09/2014
27
26
26,5
27,0
240
234
237,0
234,0
Blue
collars
270
261
265,5
264,0
Total
537
521
529,0
525,0
7.10 Amortisation, depreciation,
accruals and impairment losses
For information on captions relating to amortisation, depreciation, accruals and impairment losses, reference should
be made to the tables on changes in property, plant and
equipment (see 6.2 Property, plant and equipment), in
intangible assets (see 6.1 Intagible assets) and the provisions for risks and charges (see 6.18 Provisions) in the
notes to the statement of financial position.
The following table summarises this caption.
contractual term are summarised in the following table. Re-
Other
5
223
2.055
Net exchange rate gains
-
-
Depreciation of property, plant and
equipment
2.525
2.508
Total financial expense
2.450
2.801
Total amortisation and
depreciation
4.825
4.563
third parties
2.260
2.572
related parties
190
229
405
-
-
150
98
-
Accruals for risks
1.021
224
Other accruals
(115)
321
depreciation, accruals and
impairment losses
6.234
5.258
Impairment losses on property, plant
and equipment
Impairment losses on trade
receivables
The following table provides an analysis of other operating
costs.
2014/2015
2013/2014
Prior year expense
304
502
Indirect taxes and duties
274
253
Membership dues
112
121
50
51
374
266
1.114
1.193
Books, publications, texts,
databases
Other
Total other operating costs
7.12 Financial income and expense
The following table provides a breakdown of financial income and expense, with indication of amounts relating to
transactions with related parties. For additional information
on related parties, reference should be made to the specific
paragraph 9.2 Related party transactions (see).
Interest income on discounting
2014/2015
2013/2014
295
353
Interest income on deposits with
banks
6
18
Other
-
-
1.918
939
Total financial income
2.219
1.310
third parties
2.219
1.310
related parties
-
-
2014/2015
2013/2014
including:
Current account interest expense
Interest expense on loans
Bank fees and commissions
including:
The following table provides an analysis of the net exchange rate gains and losses shown above.
2014/2015
2013/2014
Exchange rate gains
5.112
2.997
Exchange rate losses
3.194
2.058
Total net exchange rate gains
1.918
939
The captions include unrealised exchange rate gains and
losses of €1,640 thousand and €665 thousand, respectively.
7.11 Other operating costs
Average
Junior
managers
and white
collars
◊ €809 thousand for the Borgomanero (NO) site;
◊ €585 thousand for the Montaprandone (AP) sites.
Year end
2013/2014
2.300
Impairment losses on intangible
assets
Personnel expense
Wages and salaries
2014/2015
Amortisation of intangible assets
23
47
543
838
1.383
1.306
496
387
7.13 Income taxes
This caption includes income taxes and similar amounts accrued for the tax period of these financial statements, along
with amounts arising from the adjustment of deferred tax
assets and liabilities, which are detailed in the notes to the
related statement of financial position captions (see 6.4 Deferred tax assets and 6.19 Deferred tax liabilities).
In 2011/2012, the parent recognised IRES tax assets of
€570 thousand for tax periods from 2007/2008 to 2011/2012,
which it claimed for reimbursement on 18 February 2013. It
recognised said tax assets in 2011/2012, when the law converting Legislative decree no. 201/58 of 28 December 2011
became effective – as recommended by best practices (Assonime circular no. 1 of 15 January 2013). During the year,
€58 million was collected; consequently, at the reporting
date, the above tax asset amounts to €512 thousand.
The following table provides an analysis of total tax expense.
2014/2015
2013/2014
Current tax expense
4.158
3.828
Deferred tax income
(195)
(470)
Deferred tax expense
(498)
(92)
Income taxes relative to prior years
Total taxes of the year
-
51
3.465
3.317
The following table provides a reconciliation of the theoretical and effective tax expense.
157
Taxable profit
Description
Codes
Current average national tax rate
q
Profit before tax
U
Taxable base
IRAP
Tax
Taxable base
Total
31,6%
The tax rate applied to the deductible and taxable temporary differences varies depending on the specific situation,
generally in relation to whether or not the item is relevant for
the purposes of Italian IRAP.
(2)
(198)
They have been calculated at a tax rate that combines the
federal tax rate with those of the states (Pennsylvania, Maryland and Texas) where the profit was earned.
21
609
(21)
(9)
Tax
27,5%
Tax
4,2%
9.748
9.748
Income taxes
Theoretical tax expense
T=Uxq
Taxable temporary differences
2.681
A
(714)
410
(196)
(38)
(676)
-
(38)
Deductible temporary differences
B
2.140
Other cash-deductible expenses
Accruals to provisions and other allowances
(38)
588
497
70
-
1.518
497
146
--
65
-
Expenses relative to more than one year
Lease surplus prior to fta
341
Reversals of prior year temporary differences
C
45
12
(506)
Prior year items taxed in the year
859
-
Prior year depreciation and amortisation to be taxed
782
(270)
(757)
(236)
Reversal of taxed provisions/allowances
Prior year items deducted in the year
(838)
Current taxes paid during the year are summarised below.
2014/2015
-
Permanent differences
D
(32)
(9)
(4.607)
(194)
(203)
Taxable differences and foreign tax rates
E
(250)
(77)
(906)
(38)
(115)
Permanent differences - irap (calculated based on q’)
Total temporary and permanent differences
Effective current tax expense
F
The Canadian subsidiary did not recognise deferred tax
assets on the significant tax losses by adjusting the valuation allowance. The effect of the line-by-line consolidation of
Mecaer America Inc. on the profit before tax and the related
theoretical tax expense is set out in the reconciliation of current tax expense (code “E”).
-
-
23.353
982
982
G=Σ (A:F)
1.189
319
17.793
748
1.067
T’=T+ G
10.937
3.000
27.541
1.159
4.158
Income taxes (2013/2014 balance, 2014/2015
payments on account)
1.971
Other (IRAP) – 2013/2014 balance, 2014/2015
payments on account
1.105
Line offsetting
(700)
Net payments of the year
2.376
116117
Taxable profit
Description
Codes
V
Taxable
base
Tax
IRAP
Taxable
base
7.14 Earnings per share
Total
Tax
Tax
(1.366)
(277)
Prior year development costs
(646)
(205)
Accelerated amortisation and depreciation - deduction/
(reversal)
(707)
(57)
Prior year interest expense on discounting
56
15
(68)
(19)
Other/tax effects of consolidation entries and other captions
Basic earnings per share, calculated using the profit for the
year ended 30 September 2015 of €6,285 thousand and the
13,138,000 ordinary shares of the year, amount to €0.478.
At 30 September 2014, basic earnings per share amounted
to €0.179, calculated using the profit for the year of €2,350
thousand, divided by the same number of ordinary shares.
(12)
W
Royalties on law no. 808/85 Projects
Actuarial losses on post-employment benefits
Excess maintenance expenses
Accruals to taxed provisions
Other (goodwill)
Prior year leases
(1.983)
(323)
(250)
(79)
135
37
308
98
(160)
(44)
(1.989)
(329)
39
12
(65)
(18)
(193)
(53)
Other/tax effects of consolidation entries and other captions
Tax losses carried forward
X
Reversal of prior-year deferred tax assets
Y
-
Recovery of income taxes relative to prior years
Z
(41)
Total tax expense of the year
T’’=
T’+V+W+X+Y+Z
3.465
116 This caption is the sum of the differential between the US tax rate (average 44%) applicable to the taxable base of MAG Inc. and the Italian tax effect
(27.5% +4.2%) on the taxable base of Mecaer America Inc. which does not include lower taxes offsetting losses carried forward.
117 These differences consider the different IRAP tax bases, including the effect of non-deductible personnel expenses for employees, net of admissible
deductions.
158
159
8. Assets classified as held
for sale and directly
associated liabilities
The group does not have assets classified as held for sale
or directly associated liabilities at the reporting date.
9. Reconciliation of the
parent’s profit for the
year and equity with
consolidated figures
Equity at
30
September
2015
Equity and profit for the year of the parent
54.676
Elimination of the carrying amount of consolidated investments
(6. 382)
Other adjustments/reclassifications
Riclassification*
13
(358)
Equity and profit for the year attributable to the owners of the
parent
47.936
Non-controlling interests
Totale patrimonio netto e risultato consolidati
13
Profit
For
2014/2015
Equity at
30
September
2014
5.288
49.388
**(203)
(6.192)
(274)
(84)
4.811
43.112
466
(13)
(2)
481
48.402
-
4.809
43.593
* Reclassification of the majority shareholder’s nominal reserves
2014/2015
A
Cash on hand
B
Cash equivalents
C
Securities held for trading
D
Cash and cash equivalents (a)+(b)+(c)
E
Financial assets
F
Current bank loans and borrowings
G
Current portion of non-current financial debt
H
Other current loans and borrowings
I
Current financial debt (f)+(g)+(h)
J
Net current financial debt (i)-(e)-(d)
K
Non-current bank loans and borrowings
L
Bonds
M
Other non-current loans and borrowings
2013/2014
11
9
17.846
15.912
-
-
17.857
15.921
-
2.967
7.274
16.304
10.379
9.397
935
1.347
18.588
27.048
731
8.160
26.334
23.807
-
-
783
563
N
Non-current financial debt (k)+(l)+(m)
27.117
24.370
O
Net financial debt (j)+(n)
27.848
32.530
9.2
Related party transactions
Transactions and balances between consolidated companies have been eliminated on consolidation. In accordance with
IAS 24, the following information is provided on transactions and balances with other related parties. The details provided
relate to the parent’s directors and statutory auditors. There are no other positions that fall under the definition of key management personnel as per the relevant accounting standard. Non-monetary benefits have not been included in the analysis
as they are immaterial. The following data refer to 1 October 2014 – 30 September 2015.
from third parties.
** Including the decrease in the translation reserve (€1,598 thousand).
9.1
Net financial debt
The following table analyses net financial debt in accordance with the recommendations of the Consob communication
of 28 July 2006, using the format provided for in the CESR
recommendations of 10 February 2005 “Recommendation
for the consistent implementation of the European Commission regulation on prospectuses”.
160
Name
Position
Fixed fees
Variable fees
Other fees
Total
Alberto Ribolla
Chairman
108
-
9
117
Valter Pasqua
Deputy chairman
146
-
9
155
Corrado Monti
Deputy chairman
104
-
9
113
Claudio Brun
Managing director
30
-
9
39
Massimiliano Boschini
Director
6
-
5
11
Emanuele Vignoli
Director
4
-
6
10
Ruggero Manciati
Director
10
-
9
19
Enrico Ricotta
Director
10
-
8
18
Rocco Di Leo
Chairman of the board of stat. Auditors
48
-
6
54
Luisa Marzoli
Standing stat. Auditor
23
-
3
26
Guido Riccardi
30
-
3
33
161
Related parties include:
◊ S.B.I. S.p.A., which owns the industrial properties in which MAG and SAT have their operating offices. Since 11
June 2008, it had held 60.37% of MAG;
◊ the Credito Valtellinese Group, whose subsidiaries Credito Artigiano and Mediocreval carry out transactions with
group companies and share one director with MAG.
The following table summarises figures (in thousands of Euros) generated by related party transactions and balances
matched with the respective consolidated financial statements captions
All transactions with related parties are contractually governed on an arm’s length basis.
(in thousand of Euros)
SBI
Credito Valtellinese
25
-
205
-
-
1.596
-
2.836
Financial payables:
-
1.512
20
-
1.394
-
Financial income
-
-
Financial expense
-
190
9.3
Directors’, statutory auditors’ and independent auditors’ fees
IThe Directors’ fees total €457 thousand.The Statutory Auditors’ fees for the year total €101 thousand.The Independent
auditors’ fees total €90 thousand.
9.4
Events after the reporting date
There is nothing to report.
On behalf of the Board of Directors
Claudio Brun - Managing Director
162
Separate financial
statements as at and
for the year ended 30
semptember 2015
Translation from the Italian original which remains the definitive version
Report of the auditors in accordance with article 14 of Legislative
decree no. 39 of 27 January 2010
To the shareholders of
1. We have audited the separate financial statements of Mecaer Aviation Group S.p.A. as at and for the year ended 30
September 2015, comprising the statement of financial position, statement of comprehensive income, statement of
changes in equity, statement of cash flows and notes thereto. The company’s directors are responsible for the preparation of these financial statements in accordance with the International Financial Reporting Standards endorsed
by the European Union. Our responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards recommended by Consob, the Italian Commission
for Listed Companies and the Stock Exchange. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the separate financial statements are free of material misstatement and are, as
a whole, reliable. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by directors. We believe that our audit provides a reasonable basis for our opinion. Reference should be made
to the report dated 23 December 2014 for our opinion on the prior year separate financial statements, which included
the corresponding figures presented for comparative purposes.
3. In our opinion, the separate financial statements of Mecaer Aviation Group S.p.A. as at and for the year ended 30
September 2015 comply with the International Financial Reporting Standards endorsed by the European Union. Therefore, they are clearly stated and give a true and fair view of the financial position of Mecaer Aviation Group S.p.A.,
the results of its operations and its cash flows for the year then ended.
4. The directors of Mecaer Aviation Group S.p.A. are responsible for the preparation of a directors’ report on the financial
statements in accordance with the applicable laws. Our responsibility is to express an opinion on the consistency of
the directors’ report with the financial statements to which it refers, as required by the law. For this purpose, we have
performed the procedures required by the Italian Standard on Auditing 001 issued by the Italian Accounting Profession
and recommended by Consob. In our opinion, the directors’ report is consistent with the separate financial statements
of Mecaer Aviation Group S.p.A. as at and for the year ended 30 September 2015.
Novara, 23 December 2015
KPMG S.p.A.
Marco Boniardi - Director of Audit (signed on the original)
Financial statements
position (1/2)
(in Euros)
Description
Note
Intangible assets
5.1
5.2
3.556.303
3.996.438
(440.135)
Equity investments
5.3
41.293.937
35.043.937
6.250.000
Deferred tax assets
5.4
2.597.723
2.416.517
181.206
5.5
2.195.736
3.322.009
(1.126.273)
- Related parties
5.6
2.458.102
2.994.318
(536.216)
8.151.721
Total non-current assets
Difference
21.598.974
3.823.139
77.523.914
69.372.193
5.7
36.581.685
37.294.746
(713.061)
5.8
5.639.310
3.447.563
2.191.747
Trade receivables
5.9
17.485.987
29.768.906
(12.282.919)
5.10
8.439.200
9.366.735
(927.535)
Tax assets
5.11
512.486
1.372.626
(860.140)
Other current assets
5.12
5.094.651
7.764.715
(2.670.064)
5.13
-
2.967.000
(2.967.000)
5.14
14.322.175
14.374.359
(52.184)
5.15
1.595.809
1.033.771
562.038
Assets classified as held for sale and directly associated liabilities
7
-
-
-
89.671.303
107.390.421
(17.719.118)
167.195.217
176.762.614
(9.567.397)
Total current assets
30.09.2014
25.422.113
Inventories
Total assets
168
30.09.2015
169
position (2/2)
(in Euros)
Description
Note
Share capital
30.09.2014
Difference
13.138.000
-
5.563.684
5.563.684
-
Other reserves
30.810.264
26.482.250
4.328.014
Profit for the year
5.164.079
4.203.937
960.142
Equity
54.676.027
49.387.871
5.288.156
1.791.329
2.200.018
(408.689)
Total equity
5.16
Employee benefits – post-employment benefits
5.17
Provisions
5.18
2.457.091
1.984.927
472.164
Deferred tax liabilities
5.19
8.281.485
8.565.996
(284.511)
Non-current loans and borrowings
5.20
23.810.644
24.089.428
(278.784)
5.20
2.836.291
-
2.836.291
Other non-current liabilities
5.21
Total non-current liabilities
170
30.09.2015
13.138.000
22.125.407
22.055.703
69.704
61.302.247
58.896.072
2.406.175
Advances from customers
5.22
2.227.739
1.258.612
969.127
Current loans and borrowings
5.20
17.075.827
26.269.817
(9.193.990)
5.20
663.709
-
663.709
Trade payables
5.23
21.821.403
31.256.750
(9.435.347)
5.24
2.966.477
3.740.660
(774.183)
Tax liabilities
5.25
669.102
468.838
200.264
Other current liabilities
5.26
5.792.686
5.483.994
308.692
Liabilities directly associated with assets held for sale
7
-
-
-
Total current liabilities
51.216.943
68.478.671
(17.261.728)
Total liabilities
112.519.190
127.374.743
(14.855.553)
Total equity and liabilities
167.195.217
176.762.614
(9.567.397)
171
Statement of comprehensive
income
(in Euros)
Description
Note
30.09.2015
30.09.2014
Net revenue
6.1
89.161.226
105.667.402
Net revenue - related parties
6.2
4.391.506
3.922.192
6.3
651.148
551.118
Other revenue and income - related parties
6.4
23.000
122.503
Variation in finished products, work in progress and semi-finished goods
6.5
764.790
(8.677.585)
Increase in internal work capitalised
6.6
5.813.811
7.328.689
Raw materials, consumables and supplies
6.7
(28.505.832)
(29.790.297)
Raw materials, consumables and supplies - related parties
6.8
(2.459.572)
(3.983.070)
Services
6.9
(26.993.633)
(33.677.567)
Services - related parties
6.10
(4.795.052)
(4.447.784)
6.11
(763.176)
(819.503)
6.12
(1.541.201)
(1.539.689)
Personnel expense
6.13
(21.752.525)
(21.422.047)
Amortisation, depreciation, accruals and impairment losses
6.14
(4.059.496)
(3.391.942)
Other operating costs
6.15
(690.514)
(853.778)
Other operating costs - related parties
6.16
Operating profit
-
-
9.244.480
8.988.638
sFinancial income
6.17
1.487.507
903.616
Financial income - related parties
6.17
227.046
47.859
Financial expense
6.17
(2.229.219)
(2.533.716)
6.17
(142.159)
(169.053)
8.587.655
7.237.344
6.18
(3.423.576)
(3.033.407)
5.164.079
4.203.937
6.19
0,3931
0,3200
Profit before tax
Income taxes
Profit for the year
Earnings per share
Other comprehensive income (expense) that will be subsequently reclassified to profit or loss
Income taxes on other comprehensive income
Other comprehensive income (expense) that will not be subsequently reclassified to profit or loss
172
124.076
(217.214)
Other comprehensive income (expense), net of income taxes
5.17
124.076
(217.214)
Total comprehensive income
5.288.155
3.986.723
173
Statement of cash flows
(in Euros)
Description
Note
30.09.2015
30.09.2014
A
7.1
18.375.130
2.370.292
8.587.655
7.237.344
4.059.496
3.391.942
1.482.946
(10.409.033)
Opening net cash and cash equivalents
Profit before tax
Amortisation, depreciation and impairment losses
6.14
Variation in net working capital
Net variation in employee benefits - post-employment benefits
5.17
(284.613)
(176.492)
Net variation in provisions
5.18
(434.076)
(110.024)
Net variation in deferred taxes
5.4/5.19
(465.717)
(551.841)
Current taxes
6.18
(3.075.503)
(4.554.819)
860.140
(801.811)
465.717
551.841
11.196.045
(5.422.893)
Variation in tax assets
Deferred taxes
B
6.18
Cash flows from (used in) operating activities
Net investments in non-current assets
C
- Intangible assets
5.1
(5.656.579)
(6.523.486)
- Property, plant and equipment
5.2
(879.681)
(2.133.764)
- Financial assets
5.3
(1.993.826)
(250.000)
- Other investing activities
5.5/5.6
779.965
813.414
- Assets/liabilities held for sale
7
-
-
(7.750.121)
(8.093.836)
Cash flows used in investing activities
Variation in current loans and borrowings – new loans
5.20
866.649
20.056.294
Variation in current loans and borrowings - settlements
5.20
(9.396.930)
(4.994.869)
Variation in non-current loans and borrowings – new loans
5.20
13.324.364
18.408.089
Variation in non-current loans and borrowings - settlements
5.20
(10.766.857)
(4.307.328)
Variation in other non-current liabilities
5.21
69.704
359.383
Share capital increase
5.16
-
-
-
-
Net exchange rate gains (losses) on the translation of foreign operations
174
-
-
D
Cash flows from (used in) financing activities
5.17
(5.903.070)
29.521.569
E
Cash flows of the year
(2.457.146)
16.004.838
F
Closing net cash and cash equivalents
15.917.984
18.375.130
7.1
175
Statement of changes in
equity
(in Euros)
176
Description
Share
capital
Share
premium
reserve
Other
reserves
Heading
reserve
Profit for
the year
Equity
13.138.000
5.563.684
19.454.427
742
7.244.295
45.401.148
-
-
7.244.635
(340)
(7.244.295)
-
Capital injections
-
-
-
-
-
-
-
(217.214)
-
-
(217.214)
Profit for the year
-
-
-
-
4.203.937
4.203.937
13.138.000
5.563.684
26.481.848
402
4.203.937
49.387.871
-
4.204.324
(387)
(4.203.937)
-
Capital injections
-
-
-
-
-
Ias 19 and ias 39 effect recognised in equity
-
-
124.076
-
-
124.076
Rounding reserve
-
-
1
-
-
1
Profit for the year
-
-
-
-
5.164.079
5.164.079
13.138.000
5.563.684
30.810.249
15
5.164.079
54.676.027
177
Notes to the separate
financial statements
1. Overview
2. Basis of preparation
Mecaer Aviation Group S.p.A. (“MAG S.p.A.” or “MAG”) is
a company limited by shares. It was set up in Italy and is
registered with the company registrar of Novara.
Under the option provided for by Legislative decree no. 38
of 28 February 2005 and as in the previous year, the separate financial statements as at and for the year ended 30
September 2015 have been prepared in accordance with
the International Financial Reporting Standards (“IFRS”)
issued by the International Accounting Standards Board
(“IASB”), endorsed by the European Commission and included in EU regulations.
MAG supplies systems for helicopters and small airplanes
and provides the related aircraft interiors and completions
services, as well as maintenance and repair services.
MAG S.p.A.’s registered office is in Via per Arona, 46, Borgomanero (Novara), where some corporate functions are
also located.
The company conducts its business activities in four different locations (Borgomanero, Novara; Monteprandone,
Ascoli Piceno, Vergiate, Varese and Rome), as described
in more detail in the directors’ report. The Yeovil site in the
United Kingdom was closed during the year.
Figures in these notes are provided in Euros.
The board of directors submitted these consolidated financial statements to the shareholders for approval on 22 December 2015.
The acronym IFRS also refers to all revised Standards
(“IAS”) and the interpretations of the International Financial
Interpretations Committee (“IFRIC”), formerly known as the
Standing Interpretations Committee (“SIC”).
The 2013/2014 corresponding figures presented for comparative purposes also comply with the IFRS.
At the time when these notes were prepared, adjustments
and interpretations by official bodies with respect to certain
aspects were still pending. Accordingly, additional changes
or integrations could be made to the Standards and interpretations that could require or allow MAG to change the recognition, measurement and classification criteria adopted
in the preparation of these separate financial statements.
As permitted by IAS 1, the statement of comprehensive income has been prepared presenting costs by nature, highlighting operating profit and profit before taxes. To better
measure the performance of continuing operations, expense and revenue arising from significant events or transactions are indicated separately.
The statement of financial position has been prepared by
separating current assets and liabilities from those that are
non-current and by recognising any assets and liabilities
held for sale and discontinued operations separately, in accordance with IFRS 5.
Specifically, an asset or liability is classified as current when
it meets any of the following conditions:
◊ it is expected to be realised or settled or is held for
180
181
sale or consumption in the normal course of the
company’s operating cycle;
◊ it is held primarily for trading purposes;
◊ it is expected to be realised or settled within twelve
months of the reporting date.
◊ If none of these conditions is met, the asset or liability is classified as non-current.
Il The statement of cash flows has been prepared using
the indirect method, whereby operating profit is adjusted
by the effect of non-monetary transactions, any deferrals
or accruals of previous or future collections or payments in
relation to operating activities and any expense or revenue
relating to cash flows arising from investing or financing activities.
Income and expense on non-current loans, the related hedging instruments and any dividends paid are included under
operating activities.
The statement of changes in equity shows the following
changes in equity captions, where applicable:
◊ allocation of profit for the year;
◊ owner transactions (repurchase or sale of treasury
shares);
◊ any gains or losses, net of the tax effect, recognised
directly in equity (gains or losses on the repurchase/sale of treasury shares) or that have a balancing entry in an equity reserve (e.g., share-based
payments for stock option plans);
◊ changes in the hedging reserve, net of any tax effect;
◊ changes in the fair value reserve;
◊ effects of any changes in the accounting policies.
2.1
Use of estimates
The preparation of the separate financial statements and
related notes in accordance with IFRS requires the company to make estimates and assumptions with an effect on
the carrying amounts of recognised assets and liabilities
and the disclosure of contingent assets and liabilities at the
reporting date.
Actual results may differ from these estimates. The estimates and assumptions are periodically revised and the effects
of any changes are taken to profit or loss.
Estimates mainly relate to the captions listed below with reference to their section in the notes.
note
5.1
Goodwil
5.1
Inventories
5.7
5.8
Trade receivables
5.9
Derivatives
3.2.4
Income taxes
5.4 - 5.19 - 6.18
Employee benefits – post-employment
benefits
5.17
Provisions
5.18
2.2
Segment reporting
Information on the performance of the company’s operating and geographical segments is provided below, in accordance with IFRS 8, on the basis of available financial
statements data and in line with the main policies used to
periodically examine the segment results at the highest decision-making level in order to evaluate performance.
MAG’s business activities may be divided into two main
operating segments, which comprise organisational structures, including divisions.
a) The Integrated Aircraft Systems related to the development and production of systems for OEMs118, which
comprise, because of similarity, the pre-existing divisions:
i. The Actuation and Landing Systems (“ALS”)
whose product lines include safety critical systems,
specifically landing gear, flight controls, actuators,
dampening and hydraulic systems,
ii. The Cabin Comfort Systems (“CCS”), whose product lines include cabin technical/functional systems
(noise-vibration reduction systems, environmental
optimisation systems, cabin management);
b) The Aircraft Services, which relates to services for
standard aircraft, providing customers or operators with a
customised platform for the specific mission (development
of customised design solutions, installation kits, maintenance and repair of aircraft and parts thereof).
As permitted by IFRS 8.12, the ALS and the CCS divisions
have been combined into one reportable segment (Integrated Aircraft Systems) because of their similarity. Their
distinctive feature is essentially the type of offer (systems)
and the target market.
The Aircraft Services remains a segment and coincides
with the relevant division. Its core activity comprises a range
of services which includes installation kits as well as aircraft
design, completion, refurbishment and MRO.
Turnover analysed by operating and geographical segment
is presented below, in comparison with the previous year.
Revenue by operating and geographical segment (in Euros)
Integrated Aircraft
Systems
2014/2015
2013/2014
Eur
%
Eur
%
Europe – eurozone
70.048
81,6%
82.233
81,8%
1.862
2,2%
2.321
2,3%
North america
13.267
15,5%
14.405
14,3%
Rest of the world
674
0,7%
1.579
1,6%
Total
85.851
100,0%
100.538
100%
Aircraft Services
2014/2015
2013/2014
Eur
%
Eur
%
Europe – eurozone
7.702
100,0%
9.052
100,0%
-
-
-
-
North america
-
-
-
-
Rest of the world
-
-
-
-
Total
7.702
100,0%
9.052
100,0%
2014/2015
2013/2014
Eur
%
Eur
%
Europe – eurozone
77.750
83,1%
91.285
83,3%
1.862
2,0%
2.321
2,1%
North america
13.267
14,2%
14.405
13,1%
Rest of the world
674
0,7%
1.579
1,5%
Total
93.553
100,0%
109.590
100,0%
Total
The company’s results, in terms of the revenue and profitability of its operating segments, are summarised in the table on
the following page. With respect to the previous year, some industrial costs were reallocated.
Performance by operating segment (in Euros)
Description
Integrated Aircraft
Systems
2014/2015
2013/2014
2014/2015
2013/2014
2014/2015
2013/2014
2014/2015
2013/2014
Segment revenue
92.774.082
99.799.092
7.415.466
8.558.426
-
-
100.189.549
108.357.518
Aircraft Services
Unallocated
Total
Segment expense
(74.634.437)
(82.035.242)
(6.271.306)
(7.246.954)
(9.536.307)
(9.622.272)
(90.442.051)
(98.904.468)
Segment operating profit/
(loss)
18.139.645
17.763.850
1.144.160
1.311.472
(9.536.307)
(9.622.272)
9.747.498
9.453.050
As a % of revenue
20%
18%
15%
15%
N/A
N/A
10%
9%
Despite the slight decrease in volumes, the Integrated Aircraft Systems segment recorded a significant improvement in
operating profit as the result of the process improvement and structure efficiency plan. Similarly, the Aircraft Services segment recorded slightly lower volumes and a constant operating profit. The following table provides a reconciliation of the
segment operating profits or losses, as calculated for decision-making purposes, with the operating profit recognised in the
separate financial statements.
Description
Aircraft Services
Unallocated
Total
2014/2015
2013/2014
2014/2015
2013/2014
2014/2015
2013/2014
2014/2015
2013/2014
18.139.645
17.763.850
1.144.160
1.311.472
(9.536.307)
(9.622.272)
9.747.498
9.453.050
Development costs
217.784
(85.592)
-
-
-
-
217.784
(85.592)
Leases
(35.689)
(24.906)
-
-
-
-
(35.689)
(24.906)
Goodwill
-
68.006
-
-
-
-
-
68.006
Net non-operating
income
(1.110.405)
(158.945)
-
-
425.292
(314.699)
(685.113)
(473.644)
Other differences
-
-
-
-
Operating profit (loss)
17.211.335
17.562.413
1.144.160
1.311.472
Segment operating
profit/(loss)
Differences in
accounting policies:
51.725
(9.111.015)
(9.885.247)
51.725
9.244.480
8.988.638
118 Original Equipment Manufacturer.
182
183
Non-operating income and expense mainly refer to non-core economic components, of an exceptional or non-recurring
nature.
The following table summarises assets and liabilities by operating segment.
Aircraft Services
Unallocated
2014/2015
2013/2014
2014/2015
2013/2014
2014/2015
2013/2014
2014/2015
2013/2014
Segment assets
120.648.539
122.600.462
16.809.452
16.875.022
29.737.226
35.287.130
167.195.217
176.762.614
Segment liabilities
(50.215.420)
(57.496.575)
(1.177.697)
(2.720.077)
(115.802.099)
(116.545.962)
(167.195.217)
(176.762.614)
Segment
investments
6.125.584
7.857.839
24.645
5.200
386.031
794.211
6.536.260
8.657.250
Amortisation,
depreciation and
impairment losses
2.668.754
2.373.121
19.608
24.147
464.895
422.990
3.153.256
2.820.258
Description
Total
Infrasegment transactions are immaterial and, accordingly, have not been shown separately.
The above assets do not include current and non-current financial assets, other current and non-current assets, tax assets,
deferred tax assets and cash and cash equivalents.
Liabilities do not include equity, current and non-current borrowings, deferred tax liabilities, other current liabilities, tax liabilities and employee benefits. The trade payables related to the Aircraft Services segment are presented separately only
to the extent of the portion which could be distinguished by supplier or type of transaction.
The Integrated Aircraft Systems segment’s investment includes the financial expense on equity investments (Mecaer
America Inc.) and development costs for new products. The latter is net of the assistance granted under Law no. 808/85
to eligible projects.
The Aircraft Services segment includes the financial expense on equity investments (MAG Inc. and S.A.T. S.p.A.).
Il settore Aicrafts Services comprende la componente finanziaria, costituita dalle partecipazioni (MAG Inc. e S.A.T. S.p.A.).
3. Main accounting
policies
The accounting policies applied to the most important captions are described below.
3.1
Non-current assets
3.1.1
Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance that generate future economic benefits for the company. They are recognised at purchase or
production cost, including directly related charges incurred
to prepare them for use, net of accumulated amortisation
and any impairment losses.
Amortisation begins when the asset becomes available for
use and is calculated systematically over the residual useful
life of each asset. Amortisation is calculated considering the
actual use of the asset in the year in which an intangible
asset is initially recognised. Intangible assets with indefinite
useful lives are not amortised. The amortisation periods of
intangible assets are summarised in the table below. Reference should be made to the note to each caption for specific details on the identification criteria.
Amort. period
(years)
Development costs
Product useful life
Industrial patents and intellectual property
rights
5
Licences
3
Software
3
Goodwill
Indefinite useful life
Other deferred costs
Term of agreement
3.1.1.1 Research and development costs
Costs for research, undertaken to gain new scientific or
technical knowledge and understanding, are taken to profit
184
185
or loss when incurred.
Costs for development provide for plan or design for the
production of new or substantially improved products or
processes. Development costs are capitalised if, and only
if, the cost can be reliably measured and estimated, the product or process are technically and commercially feasible,
future economic benefits are probable, the company has
the intention as well as adequate technical and financial resources to complete the development.
starting in the year in which the right that the company has
acquired becomes available for use. Amortisation is calculated over the shorter of the period of expected use and the
period for which the right has been acquired.
3.1.1.3 Licences, concessions and trademarks
These include the following:
These costs, which are identifiable and can be measured,
relate to specific development projects commissioned by
customers or arising from the company’s participation in
international projects. They are highly technically and commercially feasible and the group can reasonably demonstrate that they will generate future economic benefits.
◊ concessions, i.e., public administration measures
giving private entities the right to exclusively use
public assets or manage public services under regulated conditions;
◊ licences attributing the right to use patents or other
intangible assets over a determined or determinable period of time;
◊ licences to use know-how, application software or
the rights of others;
◊ trademarks identifying the origin of products from a
specific company.
The portion of internal and external development costs
exceeding the related revenue to be received from customers is capitalised against each project as development
costs and is amortised over the period in which the company reasonably expects that the future benefits will arise.
The costs, including direct and indirect expenses incurred
to obtain these rights, are capitalised after the rights have
been acquired and are amortised systematically over the
shorter of the period of expected use and the period for
which the right has been acquired.
In determining the useful life of each aerospace product developed, the company considers the following:
3.1.1.4 Goodwill
Specifically, this caption entirely relates to costs incurred for
the development of new aerospace products.
◊ the estimated useful life of the aircraft or the versions of the aircraft on which the product will be
used, on the basis of sales plans provided by the
manufacturer;
◊ the estimated useful life of the specific product, also
considering its technological features and conditions of use.
Amortisation is calculated on a straight-line basis.
Goodwill arises from business combinations and reflects an
excess in the acquisition cost of the business or business
unit over the total fair value of acquired assets and liabilities
and identified contingent liabilities.
As it has an indefinite useful life, goodwill is not amortised.
Instead, it is tested for impairment at least once a year to
verify if it has undergone impairment losses, which are taken immediately to profit or loss and cannot be reversed,
even within the limits of previous impairment.
The amortisation period begins when the products become
available for use, which unequivocally coincides with the
definitive certification of the product or aircraft to which it
refers by the relevant bodies and authorities.
Goodwill on acquisitions that took place before transition
to IFRS continues to be recognised at its carrying amount
under Italian GAAP and is tested for impairment on an annual basis.
Costs incurred for projects eligible for the assistance provided by Law no. 808 of 24 December 1985119 and considered functional to “national security” and similar costs are
recognised net of the related benefits (see 4. Significant
3.1.2
assistance pursuant to law no. 808/85).
3.1.1.2 Industrial patents and intellectual property
rights
Industrial patents and intellectual property rights are recognised at acquisition cost, net of amortisation and any impairment losses accumulated over time. They are amortised
119 [Official Gazette ed. 005 of 8 January 1986] “Interventi per lo sviluppo
e l’accrescimento di competitività delle industrie operanti nel settore aeronautico”.
186
Property, plant and equipment are measured at purchase or
production cost, net of accumulated depreciation and any
impairment losses.
Cost includes direct charges incurred to prepare assets for
use and any dismantlement and removal costs incurred to
restore the site to its original conditions.
Costs for ordinary and/or routine maintenance and repairs
are taken directly to profit or loss when incurred.
Costs for improvements and maintenance that materially
increase the production capacity or safety of assets or that
prolong their useful lives are capitalised as an increase in
the carrying amount of the assets to which they relate.
Any government grants or grants relating to assets are taken as a direct decrease in the cost of the asset to which
they relate.
The carrying amount of each asset is depreciated on a systematic basis. Depreciation is calculated on a straight-line
basis each year over the residual useful lives of assets.
The useful lives and depreciation criteria are periodically reviewed and, where material changes are noted with respect
to the assumptions previously made, the depreciation rate
is adjusted on a prospective basis.
An asset’s useful life is generally confirmed each year and
adjusted if there have been improvements or replacements
affecting its useful life.
The rates applied to reflect useful lives are reduced by half
in the year in which assets go into use, since this reduction
is considered adequately indicative of the weighted average
period of use from when the assets went into use to the end
of the year.
The following table lists depreciation periods for each item
of property, plant and equipment.
Deprec. period
(years)
Light constructions
10
Generic plant – non-automated machines
10
Automated machines
5–6
Automated robotic machines
4–5
Electrolyte and galvanic cells
5
Furnaces and accessories
6–7
Generic equipment
4
Specific equipment
4
Inspection and testing tools
3–5
Electronic office machines
5
Furniture and furnishings
8–9
Motor vehicles
4
Internal means of transport
5
These costs are recognised as leasehold improvements
and are classified under property, plant and equipment, according to their nature.
The depreciation period is the shorter of the asset’s residual
useful life and the term of the lease or free loan agreement.
3.1.3
Equity investments
The company classifies its equity investments as follows:
◊ subsidiaries, over which the investor has the power
to govern the financial and operating policies so as
to obtain benefits from its activities;
◊ associates, over which the investor has significant
influence (at least 20% of votes in the ordinary shareholders’ meeting). Jointly controlled entities (e.g.,
joint ventures) are included in this category;
◊ parents, when the investor holds shares of its parent;
◊ other companies that do not fall into any of the above categories.
Any equity investments held for sale, such as those that
are acquired solely for the purpose of disposal within twelve
months, are classified separately as “assets held for sale”.
Subsidiaries, including jointly-controlled subsidiaries, and
associates, with the exception of those that are classified
as “assets held for sale”, are measured at acquisition or incorporation cost. This cost remains in subsequent financial
statements unless there are impairment losses or reversals
of impairment losses following a variation in the purpose of
the company or equity transactions.
Equity investments held for sale are measured at the lower
of cost and fair value less costs to sell.
3.1.4
Impairment losses
At least once a year, the company tests the recoverability of
the carrying amount of intangible assets, property, plant and
equipment and investments in subsidiaries and associates
to determine whether they have undergone impairment losses.
If a depreciable asset is comprised of separately identifiable components with useful lives that differ significantly from
the other components comprising the asset, depreciation is
calculated separately for each component, using the component approach.
Profits and losses on the sale of assets or groups of assets
are measured by comparing the selling price with the related carrying amount.
Costs incurred to expand, upgrade and improve structural
components of third parties are capitalised solely to the
extent to which they meet the requirements for separate
classification as assets or components of assets.
If there is evidence of impairment, the carrying amount of
the asset is reduced to its recoverable amount, which is the
greater of fair value less costs to sell and the asset’s value
in use.
In particular, in evaluating whether there have been any impairment losses on investments in subsidiaries and associates120, the recoverable amount is defined as value in use,
which is the present value of estimated cash flows based
on the investee’s expected results and the estimated proceeds from the ultimate disposal, in accordance with the
provisions of IAS 28.
120 If these are equity investments in unlisted companies for which fair
value less costs to sell cannot be reliably measured.
187
When, subsequently, impairment losses decrease or no
longer exist, the carrying amount of the asset is restored
to a new estimate of the recoverable amount that can be
reliably measured.
Reversals of impairment losses are never applied to goodwill, as recommended by IAS 36 (see also 3.1.1.4 Goodwill).
Financial assets with fixed maturity are measured at amortised cost, which is calculated using the effective interest
method. When financial assets do not have a fixed maturity,
they are measured at cost.
Loans and receivables due after one year that do not bear
interest or that bear interest at below market rates are discounted using market rates.
paid for external processing.
Estimated realisable value is the estimated selling price in
the ordinary course of business considering any costs of
completion and the estimated costs necessary to make the
sale.
The carrying amount of inventories is adjusted through a
specific allowance to consider slow-moving or obsolete
items.
The company classifies inventories as follows:
◊
◊
◊
◊
raw materials, consumables and supplies;
work in progress and semi-finished products;
finished products and goods for resale;
payments on account.
The company regularly measures financial assets to verify
if there is objective evidence that they, taken individually or
collectively, have undergone impairment losses. If there is
evidence in this respect, the impairment losses are taken to
profit or loss for the year.
3.2.2
3.1.5 Attività classificate come possedute per la
vendita
The stage of completion is calculated using the physical
measurement criterion, i.e., by measuring the size of the
work completed. The cost method is used as a benchmark.
Assets (or disposal groups) are defined as held for sale
when their carrying amount will be recovered through disposal rather than through continuous use, as long as the
sale is highly probable.
Assets (or disposal groups) remain classified as held for
sale even if there are delays or postponements in the period
necessary for the finalisation or conclusion of the sale, as
long as the delays are caused by events or circumstances
that are beyond the company’s control and there is sufficient evidence of the company’s commitment to implement
the disposal plan.
Assets that meet the criteria for classification as held for
sale are measured at the lower of carrying amount and fair
value less costs to sell. They are not amortised or depreciated.
3.2
Current assets
3.2.1
Inventories
Contract work in progress is recognised considering contractual considerations accrued with reasonable certainty
based on the percentage of completion.
The considerations calculated are based on contractually
agreed prices, including claims for price revisions and any
other reasonably expected additional fees.
Contracts with considerations in currency other than the
functional currency are measured by translating the portion
of considerations accrued at the closing rate.
The measurement reflects the best estimate of projects at
the reporting date.
The company periodically updates the assumptions underlying these measurements. Any effects are recognised
in the year in which the adjustments are made.
Contract work in progress is recognised net of any allowances and progress billings relating to the contract in progress.
This analysis is performed individually for each contract,
recognising:
Inventories are measured at the lower of purchase or production cost, including directly related charges, net of discounts and allowances, and estimated realisable value.
Cost is calculated using the weighted average cost method.
Finished products and work in progress are measured at
the progressive average cost for materials, plus the average hourly cost of labour for internal processing and price
188
◊ the positive difference (work in progress in excess of
progress billings) under contract work in progress;
◊ the negative difference (work in progress less than
progress billings) under other current liabilities;
◊ any advances are recognised under other current
liabilities.
3.2.3
Trade reveivables and other assets
which generally corresponds with nominal amount, and
subsequently measured at amortised cost, net of identified
impairment losses. The company assesses their recoverability on the basis of the present value of estimated future
cash flows.
3.2.4
Derivatives
Derivatives are always classified as assets held for trading
and measured at fair value through profit or loss, unless
they qualify for hedge accounting and are effective in hedging the underlying assets, liabilities or commitments of the
company.
In specifically identified cases, the company occasionally uses derivatives exclusively as part of its strategies of
hedging interest rate risk on loans that accrue interest at
variable rates.
The company generally does not use other types of derivatives, as management does not believe that there are
significant risks of fluctuations in the fair value of recognised assets or liabilities or due to contractual commitments
(fair value hedges) or fluctuations in expected cash flows
on contractual or highly probably transactions (cash flow
hedges).
3.3
Equity
3.3.1
Share capital
Share capital is comprised of the company’s subscribed
and paid-in share capital. Any costs closely related to the
issue of shares are classified as a decrease in share capital
when they are directly related to such transaction.
3.3.2
This reserve includes the amounts arising from capital increases against consideration in excess of the nominal
amount of shares.
3.3.3
Other reserves
These include retained earnings or losses carried forward
from previous years and the legal reserve.
3.3.4
Heading reserve
This reserve arises from recognising the effective portion
of hedging transactions using derivatives directly in equity.
3.3.5
Earnings per share
The effectiveness of hedges is documented at the inception
of the transaction, as well as periodically at each annual
reporting date. Hedge effectiveness is measured by comparing the variations in the fair value of the hedging instrument with those of the hedged item, or, in the event of more
complex instruments, using statistical analysis based on
risk variations.
Basic earnings (losses) per share are calculated by dividing the profit (loss) for year the by the number of ordinary
shares.
The fair value of instruments listed on regulated markets
is taken with reference to the respective bid prices at the
reporting date.
All shares are ordinary. There are no dilutive effects to take
into account.
The fair value of instruments not listed on regulated markets
is measured using financial calculation techniques.
In the event of transactions affecting share capital during
the year, the number of shares is calculated as the weighted
average of the year.
3.4
Financial and other liabilities
In particular, the fair value of interest rate swaps is measured by discounting estimated cash flows. Specifically, the
fair value analysis is integrated by tests carried out to verify
the prospective and retrospective effectiveness of the hedge, as required by IAS 39.
Financial and other liabilities are initially recognised at fair
value, net of transaction costs.
3.2.5
They are classified as current liabilities, unless the company has a contractual right to settle its obligations after
twelve months from the reporting date.
Cash and cash equivalent
This caption includes cash on hand, deposits and current
accounts with banks, post offices or other credit institutions
available for current transactions and other equivalents.
They are subsequently measured at amortised cost, using
the effective interest method.
It also includes any current and highly liquid financial investments that are readily convertible into cash and not
subject to significant risks of fluctuations in value.
Trade receivables and other assets falling due within normal commercial terms are initially recognised at fair value,
189
3.5 Employee benefits - Postemployment benefits
3.5.1
Unless internal labour agreements provide for more favourable conditions for employees, they may only obtain the
advance once during employment for well-specified reasons (purchase of first home, medical expenses).
The company uses two different types of employment (or
integrative) benefits that take into account, for the Italian
companies, the pension reform introduced by Law no. 296
of 27 December 2006 with effect from 1 January 2007.
Defined contribution plans
The company pays fixed contributions to a separate entity
(fund) and will not have a legal or constructive obligation to
pay additional contributions if the mandated entity does not
have sufficient assets to pay benefits for past service. The
company recognises contributions to the plan when the employees provide service in exchange for the contributions.
Defined benefit plans
In this case, the company is obliged to pay agreed benefits
for employees in service and former employees by assuming actuarial and investment risks in relation to the plan.
Accordingly, the cost of the plan is not calculated based on
contributions due for the year, but on the basis of demographic and statistical assumptions and salary increase
trends. Post-employment benefits (called “TFR” in Italy) fall
under the employee benefits regulated by IAS 19.
Italian post-employment benefits are governed by article
2120 of the Italian Civil Code and are each employee’s
right upon termination of employment. The amount of postemployment benefits due by the employer is equal to the
sum of 7.41% of annual remuneration valid for calculation
purposes due for the year.
This amount is decreased by 0.5% to fund the Post-employment Benefit Guarantee Fund set up with INPS (the
Italian social security institution), which replaces insolvent
employers. In addition, any amounts that the employee has
decided to allocate to a contractual pension fund are also
deducted.
For revaluation purposes, post-employment benefits are
increased, with the exclusion of the portion accrued at 31
December of each year, by applying a rate comprised of a
fixed rate of 1.50% and 75% of the inflation rate recorded by
the cost of living index for December of the previous year.
This revaluation is taxable at a rate of 11%.
Furthermore, legislation ensures that employees can request a partial advance on post-employment benefits vested during employment.
Only those employees who have worked for the company
for at least eight years may request an advance, and they
may only request up to 70% of their post-employment benefits vested at the date of the request.
190
Under Italian legislation, the carrying amount of post-employment benefits is equal to the amount accrued by each
employee at the reporting date.
Accordingly, the amount accrued is equal to the total that
would be paid to all employees if they were all to terminate
their employment at that date.
Under IFRS and considering the indications provided by the
International Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations Committee
(IFRIC), TFR is considered post-employment benefits under a defined-benefit plan and should be calculated using
actuarial techniques.
Before the pension reform took effect (1 January 2007),
the projected unit credit method (PUCM) provided for by
IAS 19.64/66 was used. It is still applied by companies with
fewer than 49 employees and calculates the average present value of benefit obligations vested through employee
service up to the date of the valuation, using projected remuneration.
To consider the effects of the reform on companies with
more than 49 employees, at the reporting date, the company applied a different approach, which, in short, provides
for:
◊ the projection of post-employment benefits already
vested for each employee in service at the measurement date up to the estimated time of payment;
◊ the measurement of estimated post-employment
benefit payments for each employee that the company will be required to make upon termination of
employment due to dismissal, resignation, inability
to work, death or retirement or requested advances;
◊ the discounting of each estimated payment at the
measurement date.
In accordance with the instructions provided by documents
issued by the Italian Accounting Standard Setter (OIC)121,
the company has applied this new approach, which provides that companies do not consider future vesting portions
of post-employment benefits and apply amounts on a pro
rata basis to reproportion the present value of the obligation, from the date when the pension reform took effect - 1
January 2007 - to measure the effects of curtailment, as
121 Appendix to Operating Guide 1 for transition to International Financial Reporting Standards (IFRS), chapter 13 “Consequences of Law no.
296/2006”.
specified in IAS 19.109.
3.7
Following the amendment to IAS 19 (2011), the company
changed the accounting treatment applied to calculate income and expense related to defined benefit plans.
Leases are considered finance leases when, as specified
by IAS 17, the risks and rewards incidental to ownership of
the leased asset are transferred to the lessee.
In accordance with IAS 19 (2011) amended, the company
calculates the net financial expense (income) of the year
from defined benefit plan liabilities (assets) by applying the
discount rate used to measure the defined benefit obligation
at the beginning of the year to the defined benefit plan liabilities (assets) at the beginning of the year, considering any
changes to these defined benefit plan liabilities (assets) of
the year arising from benefit contribution or payment.
As lessee, at the date of initial recognition, the company
recognises leased assets under non-current assets and recognises a financial liability at the same time equal to the
lower of the asset’s fair value and the present value of minimum future payments due at inception of the lease, using
the implicit interest rate of the lease or the marginal interest
rate of the loan.
Based on the above, net financial expense on defined benefit plan liabilities (assets) now include:
◊ interest expense on the defined benefit obligation;
◊ interest income on plan assets; and
◊ interest on the effect of the asset ceiling.
Financial leases
Subsequently, the company takes the amortisation charge
applied to the asset to profit or loss, along with interest separated from the payments of the year.
3.8
Operating leases
All gains and losses arising from the actuarial calculation at
the reporting date are recognised in other comprehensive
income.
Company leases that do not substantially transfer all the
risks and rewards incidental to ownership of the leased asset are recognised as operating leases.
3.5.2
Payments receivable or payable on operating leases are
taken to profit or loss over the term of the lease.
Termination benefits
Termination benefits are recognised as a liability and an
expense when the company is demonstrably committed
to terminating the employment of an employee or group of
employees before the normal retirement date or providing
termination benefits as a result of an offer made in order to
encourage voluntary redundancy. Termination benefits do
not generate future economic benefits for the company and,
accordingly, are immediately expensed.o.
3.6
Provisions for risks and charges
The provisions for risks and charges are recognised against
certain or probable losses and expenses for which the company is uncertain of the timing and/or amount at the reporting date. They are recognised only if there is a current legal or constructive obligation that will lead to an outflow of
resources embodying economic benefits as a result of past
events and it is probable that the outflow will be required to
settle the obligation. The amount recognised as a provision
is the best estimate of the discounted expenditure required
to settle the present obligation at the reporting date. The
discount rate used reflects current market assessments of
the time value of money and the risks specific to the liability.
Risks for which contingent liabilities are only possible are
disclosed in a specific section of the notes on commitments
and risks. They are not provided for.
3.9 Recognition of revenue, income,
costs and expense
3.9.1
Revenue
Revenue is the gross inflow of economic benefits in the
course of the company’s ordinary activities. Revenue arising from transactions is measured at the fair value of the
consideration received taking into account the amount of
any trade discounts and volume rebates.
Revenue also includes work in progress. The measurement
criteria for work in progress are described in paragraph 3.2.2
Contract work in progress.
Revenue relating to the sale of goods is recognised when
all the following conditions have been met:
◊ the company has transferred to the buyer the significant risks and rewards of ownership of the goods;
◊ the company retains neither continuing managerial
involvement to the degree usually associated with
ownership nor effective control over the goods sold;
with the transaction will flow to the company;
◊ the costs incurred or to be incurred in respect of the
transaction can be measured reliably;
◊ the company has transferred to the buyer the signi-
191
ficant risks and rewards of ownership of the goods,
which generally coincides with transfer of ownership or possession to the buyer, or when the revenue can be measured reliably.
3.9.3
Revenue from the rendering of services is recognised in
the period when the services are provided. This recognition
method makes reference to the stage of completion of the
transaction at the reporting date, provided that the outcome
of the transaction can be estimated reliably.
3.9.4
The outcome of a transaction can be estimated reliably
when all the following conditions are satisfied:
with the transaction will flow to the entity;
◊ the stage of completion of the transaction at the reporting date can be measured reliably; and
◊ the costs incurred for the transaction and the costs
to complete the transaction can be measured reliably.
3.9.2
Government grants
Government grants refer to benefits flowing to the company
from the government, government agencies and similar bodies whether local, national or international.
These benefits come in the form of transfers of resources in
connection with the company’s compliance or commitment
to comply with certain conditions relating to its operating
activities.
Grants are recognised on an accruals basis and in direct
correlation with costs incurred when their allocation has
been formally approved.
Grants related to assets are government grants whose primary condition is that the company purchases, constructs
or otherwise acquires long-term assets. Subsidiary conditions may also be attached restricting the type or location
of the assets or the periods during which they are to be
acquired or held.
These grants are recognised in profit or loss in direct relation to the depreciation/amortisation of the assets to which
they relate and are taken as a direct reduction in depreciation/amortisation.
Grants related to income also relate to expenses of the year
and are taken to profit or loss as a direct reduction in the
related cost.
Forgivable loans are loans which the lender undertakes to
waive repayment of under certain conditions.
Once these conditions are met they become grants recognised on an accruals basis in direct relation to the related
costs incurred.
192
Costs
Costs are recognised if they are pertinent to the company’s
business and on an accruals basis.
Financial income and expense
Financial income includes interest income on invested
cash, including available-for-sale financial assets, dividend
income, gains on the sale of available-for-sale financial assets, fair value gains on financial assets taken to profit or
loss and gains on hedges taken to profit or loss.
Interest income and expense are recognised on an accruals
basis using the effective interest method, i.e., at the interest
rate that makes all cash inflows and outflows (including any
premiums, discounts, commissions, etc.) comprising the
transaction financially equivalent.
Financial expense includes interest expense on loans, interest expense arising on the discounting of provisions, fair
value losses on financial assets at fair value through profit
or loss, impairment losses on financial assets and losses on
hedges at fair value through profit or loss.
deferred tax liabilities.
Deferred tax assets are recognised only if it is probable that
the company will have sufficient future taxable profit against
which the assets can be used.
The recoverability of deferred tax assets is reviewed at
each reporting date. If it is no longer probable that the company will realise the related tax benefit, they are reduced
accordingly.
Deferred tax assets are recognised under “Non-current assets”. The notes to this caption provide a table summarising
the temporary differences that gave rise to the recognition
of deferred tax assets.
The tax effects of temporary differences are due to the application of the tax rate that will apply when the differences
reverse, or the application of the current tax rate as the best
estimate of the rate that will be applicable if the time of reversal cannot be reasonably determined, and considering
current tax legislation at the reporting date.
Borrowing costs are recognised as an expense in the year
when incurred using the effective interest method. They are
never capitalised under assets.
3.10 Income taxes
Income taxes of the year reflect estimated current and deferred taxation.
Current taxes are calculated for each company by applying
the tax regulations currently in place to estimated taxable
income, considering any tax subsidies.
Deferred tax assets and liabilities are recognised on an
accruals basis on the temporary differences between the
carrying amounts of assets and liabilities and their tax bases.
They were not recognised on the following temporary differences:
◊ initial recognition of assets or liabilities in a transaction other than a business combination that does
not affect either accounting profit or taxable income;
◊ investments in subsidiaries for which the difference
is not likely to reverse in future years;
◊ initial recognition of goodwill.
Deferred tax liabilities are recognised under “Non-current
liabilities”. The notes to this caption provide a table summarising the differences that gave rise to the recognition of
193
4.
Significant matters
4.1 New standards (IFRS) and
interpretations (IFRIC)
A list is provided below of new standards (IFRS) issued by
the IASB that, at the preparation date of these separate
financial statements, have been endorsed by the EU and
published in the EU’s Official Gazette.
IFRS/IFRIC
Description
FTA date
Amendment to IAS 1
Presentation of Financial Statements
2016/2017
Amendment to IAS 16
Property, Plant and Equipment
2016/2017
Amendment to IAS 19
Employee Benefits
2016/2017
Amendment to IAS 27
Separate Financial Statements
2016/2017
Amendment to IAS 28
Investments in Associates and Joint Ventures
2016/2017
Amendment to IAS 34
Interim Financial Reporting
2016/2017
Amendment to IAS 38
Intangible Assets
2016/2017
Amendment to IAS 39
Financial Instruments: Recognition and Measurement
2018/2019
Amendment to IAS 41
Agriculture
2016/2017
Amendment to IFRS 5
Non-current Assets Held for Sale and Discontinued Operations
2016/2017
Amendment to IFRS 7
Financial Instruments: Disclosures
2016/2017
IFRS 9
Financial Instruments
2018/2019
Amendment to IFRS 10
Consolidated Financial Statements
2016/2017
Joint Arrangements
2016/2017
Disclosure of Interests in Other Entities
2016/2017
IFRS 14
Regulatory Deferral Accounts
2016/2017
IFRS 15
Revenue from Contracts with Customers
2018/2019
IFRS for SMEs amendment
International Financial Reporting Standard for Small and Medium-sized Entities
2017/2018
The “consolidation suite” became effective in 2014. It is
comprised of the following documents endorsed by the
European Union with Regulation (EU) no. 1254/2012 of 11
December 2012:
◊
◊
◊
◊
◊
194
IIFRS 10 Consolidated Financial Statements,
IFRS 11 Joint Arrangements,
IFRS 12 Disclosure of Interests in Other Entities,
IAS 27 (2011) Separate Financial Statements,
IAS 28 (2011) Investments in Associates and Joint
Ventures.
In June 2012 and October 2012, the IASB amended the
above standards and published the two following documents endorsed by the European Union with Regulation
(EU) no. 313/2013 of 4 April 2013 and Regulation (EU) no.
1174/2013 of 21 November 2013, respectively:
vestment entity investor to an investment entity investee.
◊ The disclosure required by IFRS 12 for an investment entity measuring all of its subsidiaries at
fair value.
◊ Transition Guidance (amendments to IFRS 10, 11,
and 12),
◊ Investment Entities (amendments to IFRS 10, IFRS
12 and IAS 27 (2011).
The amendment to IAS 34 – “Interim Financial Reporting”
clarifies the meaning of “elsewhere in the interim report”
and requires the inclusion of a cross-reference from the interim financial statements to the location of this information.
Mandatory application for investment entities only was
postponed to financial statements of annual periods beginning on or after 1 January 2014.
The amendment to IAS 41 – “Agriculture” changes the financial reporting for bearer plants which are now included
within the scope of IAS 16. Consequently, they are subsequently measured using the cost model or the revaluation
model. A bearer plant is defined as a living plant that:
The most significant change introduced by IFRS 10 is the
concept of one control model underlying consolidation,
combining that previously set out in IAS 17 “Consolidated
and Separate Financial Statements” and in SIC 12 “Consolidation - Special Purpose Entities”.
The amendment to IAS 1 – “Presentation of Financial Statements” refers to the requirements for presenting information
in terms of aggregation criteria and materiality, including the
specific disclosure required by other standards.
The amendments to IAS 16 – “Property, Plant and
Equipment”- and IAS 38 - “Intangible Assets” – introduce
additional specifications on depreciation and amortisation
methodologies deemed acceptable.
The amendment to IAS 19 – “Employee Benefits” modifies
the criteria used to calculate the rate to discount post-employment benefits, clarifying that, upon measurement, said
rate is to be denominated in the same currency in which the
benefits are to be paid.
The amendment to IAS 27 – “Separate Financial Statements” reinstates the equity method as an accounting option for equity investments.
The amendment also clarifies that when a parent ceases to
be an investment entity, or becomes an investment entity, it
shall account for the change from the date when the change
in status occurred.
The amendment to IAS 28 – “Investments in Associates and
Joint Ventures” (and IFRS 10 and IFRS 12) refers to investment entities that apply the consolidation exception and
clarifies the following criteria and requirements:
◊ LThe exemption from preparing consolidated financial statements for an intermediate parent entity is
available to a parent entity that is a subsidiary of an
investment entity, even if the investment entity measures all of its subsidiaries at fair value;
◊ A subsidiary that provides services related to the
parent’s investment activities should not be consolidated;
◊ Application of the equity method by a non-in-
◊ Is used in the production or supply of agricultural
produce;
◊ Is expected to bear produce for more than one period;
◊ Has a remote likelihood of being sold as agricultural
produce, except for incidental scrap sales.
The amendment to IFRS 5 – “Non-current Assets Held for
Sale and Discontinued Operations” provides specific guidance in circumstances in which an entity reclassifies an asset from being held for sale to being held for distribution
(or viceversa) and when it should cease held-for-distribution
accounting.
The amendment to IFRS 7 – “Financial Instruments: Disclosures – Hedge Accounting” relates to the disclosure requirements for hedging transactions in line with the introduction
of the amendment to IFRS 9 about hedge accounting.
Application of the amendment will become mandatory in
tandem with the application of IFRS 9.
IFRS 9 completes the step-by-step project to replace IAS
39 and includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting of financial instruments. Early application is permitted before 2018/2019. The previous version of IFRS 9 is
applicable as of 2014/2015.
The recent amendments to IFRS 10 – “Consolidated Financial Statements” relate to the accounting treatment applicable when control is lost over an investee that is not a
business. Mandatory application starts from annual periods
beginning on or after 1 January 2016.
The amendments to IFRS 11 (which, since this year, has
replaced IAS 31 “Interests in Joint Ventures” and SIC 13
“Jointly Controlled Entities – Non Monetary Contributions by
Venturers”) provide clarifications on how to account for the
acquisition of an interest in a joint operation.
IFRS 14, published in January 2014, is an interim standard
which permits an entity which is a first-time adopter of In-
195
ternational Financial Reporting Standards to continue to
recognise rate regulation amounts in accordance with its
previous GAAP. This standard is applicable to annual periods beginning on or after 1 January 2016.
IFRS 15, which replaces IAS 11 (“Construction Contracts”),
IAS 28 (“Revenue”) and the related interpretations (IFRIC
13 “Customer Loyalty Programmes”, IFRIC 15 “Agreements
for the Construction of Real Estate”, IFRIC 18 “Transfer
of Assets from Customers” and SIC 31 “Revenue-Barter
Transactions Involving Advertising Services”), unifies the
revenue recognition criteria applicable to contractuallybased transactions. Its application becomes mandatory for
annual periods beginning on or after 1 January 2018.
The amendments to the IFRS for SMEs clarify existing requirements and are part of the three-year update and review cycle decided by the IASB. Their application becomes
mandatory for annual periods beginning on or after 1 January 2017.
Lastly, for illustrative purposes, the correlation between certain not yet applicable standards is summarised below.
Standard
Description
Applic. to
annual periods
beginning on or
after
IFRS 1
Exemption from the
requirement to restate
comparative information for
IFRS 9
Concurrent with
adoption of IFRS
9
IFRS 7
Additional hedge
accounting disclosures (and
consequential amendments)
resulting from the introduction
of the hedge accounting
chapter in IFRS 9
Concurrent with
adoption of IFRS
9
IFRS 9
1 January 2018
IFRS 10
Amendment to clarify the
accounting for the loss of
control of a subsidiary when
the subsidiary does not
constitute a business
1 January 2016
intangible assets, as they meet the requirements of paragraph 3.1.1.1 Research and development costs.
Costs for projects that are legally considered122 relevant
to “National security” or to be of “European interest” are
shown net of the government assistance collected or to be
collected under Law no. 808/85.
Similarly, the royalties to be paid to the granting body, which
substitute amortisation up to the offset cost, while any residual amount constitutes expense, are recognised in profit or
loss as operating costs on an accruals basis when the conditions of current legislation have been met, which primarily
consist of the sale of products incorporating the technology
for which the government assistance was provided.
Government assistance collected for projects that are not
considered relevant to “National security” or of “European
interest” is recognised under “Other liabilities” at nominal
amount, and the current and non-current portions are separated on the basis of when repayment is due.
In both cases, the costs recognised under intangible assets,
in accordance with the above standards (see 3.1.1.1 Research and development costs) are:
◊ amortised over the estimated useful lives or the period in which future economic benefits are expected
to be generated through the sale of products incorporating the technology developed;
◊ tested for impairment at least once a year until the
development is completed and subsequently as
soon as the potential realisation of future economic
benefits changes. They are tested for impairment
on the basis of estimated sales plans that consider
the particularly long life cycles for products under
development.
4.3
Financial risk management
The company is exposed to the following financial risks:
An examination of the company’s current situation showed that the effects of applying the above changes are not
significant.
4.2 Development costs and
government assistance pursuant to law
no. 808/85
The company classifies costs incurred for designs, prototypes and adjustments to technical/functional specifications
for clearly identified potential customers that qualify for the
government assistance provided for by Law no. 808 of 24
December 1985, regulating government assistance to support the competitiveness of companies operating in the aerospace industry and defence, under development costs in
196
◊
◊
◊
◊
◊
◊
credit risk;
market risk;
currency risk;
interest rate risk;
liquidity risk;
business risk and uncertainties.
Information is provided below on the company’s actual exposure to each of these risks, its risk management policies
and processes, the methods used to assess the risks and
how the company manages capital.
The separate financial statements also include additional
122 Reference is made to the provisions of Law no. 808/85 and subsequent amendments and the regulatory provisions which integrate and govern
the specific aspects of the law (CIPE resolution no. 28/06 of 22 March 2006,
Decrees of the Ministry of Economic Development nos. 173 of 14 September
2010 and 174 of 14 September 2010)
nominal amount has been fully impaired through a specific
allowance set up when SEI was acquired.
quantitative information.
The board of directors is responsible overall for the creation
and supervision of the company’s risk management system.
Using a system whereby duties are delegated, the company
ensures the implementation of risk management guidelines
and the periodic monitoring of risks.
The finance department is responsible for monitoring risks,
using information generated by the internal control system.
The purpose of the MAG’s risk policy is not to speculate.
Rather, it is exclusively aimed at minimising the financial
risks of its core business.
Risk management policies are based on the following:
◊ identifying and analysing the risks to which the company is exposed;
◊ setting limits and control tools;
◊ monitoring the tools.
4.3.1
Credit risk
Credit risk is the risk that a customer or counterparty to a
financial instrument generates a financial loss by failing to
fulfil its obligation. Credit risk mainly relates to trade receivables and financial investments.
The company’s exposure to credit risk largely depends on
the specific characteristics of each customer. Demographic
variables typical to the company’s customer portfolio, including default risk in the sector and country in which the
customer operates, have a minimal influence on credit risk.
A substantial part of the company’s turnover is generated
with industrial companies that are part of one corporate group. This part has been falling dramatically (89% in
2013/14 and 84% in 2014/15, specifically 78% for the Integrated Aircraft Systems segment and 92% for the Aircraft
Services segment), and, according to the business plan, it
will fall below 50% over three years.
The company has worked with 90% of its customers for
over four years.
It has not had any cases of significant bad debts in the last
ten years.
Accordingly, the company has not set up an allowance for
impairment other than the few isolated cases disclosed.
For the purposes of providing clear information, due to the
balances arising from the merger of SEI, which was merged
into MAG in 2009/2010, MAG’s financial statements include
certain bad debts arising from trading that took place before
SEI’s acquisition in 2001. SEI’s seller is exclusively responsible for these amounts, which are subject to insolvency
proceedings or individual credit recovery processes. Their
The company does not make financial investments. Accordingly, it is not subject to the risk of issuer default.
The company’s policies provide for the issue of financial
guarantees only in the interests of wholly-owned subsidiaries.
At 30 September 2015, there are no guarantees issued on
behalf of subsidiaries.
4.3.2
Market risk
Market risk is theoretically connected to fluctuations in the
fair value and/or cash flows of a specific financial instrument
due to changes in market prices.
To this end, the company does not trade in financial instruments for speculative purposes. It does not hold financial
assets for investment purposes and, accordingly, it does not
have risk profiles connected to financial market volatility.
With respect to specific hedges, the company has one derivative hedging interest rate risk for which reference should
be made to the specific note (see 4.3.4 Interest rate
risk).
4.3.3
Currency risk
The company is exposed to currency risk on sales, purchases and loans in currencies other than the functional currency.
These transactions are only in US dollars (USD), in which
currency the company generated total turnover of approximately USD26.9 million (approximately €23.4 million) in
2014/2015.
The company’s currency risk management policy is based
on seeking to find a structural balance in transactions performed regularly (purchases and sales) in US dollars, with
the aim of ensuring that net exposure in foreign currency
remains at an acceptable level.
During the year, the company did not need to enter into
hedges and/or forward currency trading, as it pursued an
overall substantial balance between exchange rate gains
and losses.
4.3.4
Interest rate risk
This risk relates to fluctuations in market interest rates with
respect to interest expense paid on loans in place.
The company is marginally exposed to interest rate risk as
it has agreed an insignificant portion of financing on which
interest accrues at variable rates indexed to the Euribor.
197
Certain portions of debt exposed to interest rate risk could
be hedged using derivatives, in accordance with the company’s risk management policy and where necessary.
The company has agreed loans with banks on the normal
credit market, which are mainly in Euros and are not secured by collateral or personal guarantees.
4.3.5
Liquidity risk
This risk relates to the company’s ability to meet its obligations with respect to financial liabilities. The company’s
approach to managing liquidity provides that it always has
sufficient funds to meet its obligations at the scheduled due
dates, both in normal conditions and during times of financial tension, without having to incur charges at above market rates normally applied to the company.
The company monitors its financial position on a daily basis
and periodically forecasts its financial requirements.
gnised separately. On occasion, the company has factored
receivables, thereby transferring title thereto and default
risk. These transactions are legally and substantially considered without recourse, as they do not provide for any
guarantees, repurchase or recourse clauses.
Overall, the company’s short-term facilities total approximately €105.5 million, and the percentage of utilisation at
the reporting date is 31% for credit lines and bank facilities (€26.6 million), while approximately 42% of the facilities
for the factoring without recourse of trade receivables was
used.
4.3.6
Business risk and uncertainties
Reference should be made to the various sections of the
annual report for information on business risk and uncertainties (see The external context, Risk management
and compliance, Group performance).
of financial position
The company has always met its obligations regularly.
5.1Intangible assets
The following table provides information on the company’s
loans, credit lines and facilities in place at the reporting
date, which the company has not secured with collateral or
personal guarantees.
The following table provides variations in intangible assets.
Most non-current loans bear interest at flat rates.
Noncurrent (at
30.09.2014)
Noncurrent (at
30.09.2015)
Currency
€
€
Original
45,5
45,4
Residual
amount
Guarantees
AMOUNT
34,8
N/A
N/A
Residual
amount
Type
Currency
Current lines
€
26.5
8.3
N/A
Current FCT
€
79.0
33.2
N/A
Guarantees
These credit lines include facilities available for the factoring without recourse of trade receivables, which are reco-
198
Concessions,
licences
and
trademarks
Carrying amount
20.352.704
-
615.330
612.054
18.886
21.598.974
Increases
5.465.241
30.726
156.419
-
4.192
5.656.578
Cost offsetting (Law no. 808/85)
-
-
-
-
-
-
Reclassifications/Impairment losses
(235.671)
-
18.886
-
(18.886)
(235.671)
Amortisation
(1.168.309)
(6.145)
(423.314)
-
-
(1.597.768)
Historical cost
33.176.066
65.715
4.214.808
612.054
4.192
38.072.835
Accumulated amortisation
(8.762.102)
(41.134)
(3.847.486)
-
-
(12.650.722)
Carrying amount
24.413.964
24.581
367.322
612.054
4.192
25.422.113
Goodwill
Assets
under
development
Total
30 September 2015:
Certain non-current loans have clauses that require the
company to meet certain covenants. If it fails to meet these
covenants, repayment of the loan could be requested. The
ratios applied refer to the consolidated figures and are therefore summarised in the notes to the group’s consolidated
financial statements at 30 September 2015, to which reference is made (see 5.3.5 Liquidity risk). At 30 September
2015, all ratios are within contractual limits.
Original
Ind. patents
and
int. prop.
rights
30 September 2014:
However, the variable rate loans are indexed to
Type
Development
costs
The offsetting of the historical cost of “Development costs”
with government assistance under Laws no. 808/85 and
46/82 relates to the recognition of costs that meet the requirements for capitalisation under intangible assets, net of the
related amounts of government assistance provided under
the above laws.
For information on the recognition of the government assistance provided under Law no. 808/85, reference should
be made to paragraph 4.2 Development costs and government assistance pursuant to law no. 808/85.
For information on the recognition of the government assistance provided under Law no. 46/82, reference should be
made to paragraph 3.9.2 Government grants.
There are five main groups of completed development
projects that have not yet been completely amortised. They
relate to products used in five types of aircraft.
199
In accordance with the criteria described above relating to the identification of the useful lives of products developed (see
3.1.1.1 Research and development costs), amortisation is calculated on a straight-line basis over the useful lives of
such assets, which at 30 September 2015 are not shorter than 10 years in most cases.
Development costs that are capitalised under assets at the reporting date relate to groups of projects that can be summarised based on the aircraft in which the related product will be used as follows.
Development costs for new products
5.3
Equity investments
Considering the materiality of investments in subsidiaries, reference should be made to the consolidated financial statements prepared pursuant to article 25 of Legislative decree no. 127/91 for greater disclosures.
As required by the Italian Civil Code, the key data about equity investments are set out below.123124
2014/2015
Bell 525 projects
5.045.225
Share capital
Equity
Profit (loss)
for the
year ended
30.09.2015
% of holding
Carrying amount at
30.09.2015 (€)
AW139/AW149/A149 projects
4.499.119
EADS X4 projects
3.744.907
Mecaer America Inc. (Laval – Quebec)123
84.656.157
36.455.527
1.270.048
100,00%
33.058.418
Electromechanical actuator systems (fixed-wing and helicopters)
2.989.622
AW109 projects
2.830.343
MAG Inc.
(Philadelphia – Pennsylvania ) 124
1.467.000
3.020.638
589.810
100,00%
78.976
Other projects
2.599.903
Bell 429 projects
1.303.337
Società Aeroporto del Tronto S.p.A.
(Monteprandone – AP)
8.250.000
8.430.965
(28.082)
93,94%
8.153.460
AW189 Interiors projects
682.805
Bell 505 projects
297.572
AW169 projects
251.048
AW139 projects restyling
170.083
Total
24.413.964
The following table shows changes that occurred during the year and the carrying amounts at the reporting date, as required by article 2427.5 of the Italian Civil Code.
Since the impairment test carried out at 30 September 2015 in accordance with IAS 36 did not identify any impairment losses, the company has maintained the carrying amount of its investment in Mecaer America Inc., without adding adjustments
to those made in previous years.
Goodwill arose from the acquisition of the interiors business.
Goodwill is tested for impairment once a year.
The recoverable amount was calculated using a financial approach based on the profits and cash flows set out in the
2015/2016 budget approved and, for the three subsequent years, set out in the 2014/2015 – 2018/2019 business plan
approved in 2014 and currently being updated.
The figures in the business plan adequately support the goodwill allocated to the production of interiors carried out by the
CCS division. For additional information on the characteristics of the production lines, their organisational structure and
impact on revenue, reference should be made to the directors’ report (see 2.2 Segment reporting and Mecaer Aviation Group S.p.A.).
The 2014/2015 actual figures and those estimated in the budget for the year currently underway are better than those for
the first two years of the above plan.
5.2
With respect to the period covered by the plan, the estimates point to a progressive increase in volumes and a consolidation of profitability levels for the company in line with the group’s standards for the operating segment. The subsidiary
ended the year with a profit and its operating profit exceeded expectations.
Property
Plant and
machinery
Industrial and
commercial
equipment
41.763
Other assets
Leasehold
improvements
Assets
under
construction
Total
In a sensitivity analysis, Mecaer America’s cash flows were discounted using a rate ranging from 8.5% to 9.5%, taking
into account the specific conditions of the company and its reference market. MAG has extrapolated the cash flows for the
period following the explicit period using a growth rate of 0.5-1.5%, given the substantial investments in the plan and the
time period considered.
30 September 2014:
Carrying amount
1.714.931
1.284.386
442.957
432.662
79.739
3.996.438
Increases
76.622
437.563
157.967
191.357
18.874
882.383
Net decreases
(1.797)
(405)
(500)
39.571
7.200
32.968
(79.739)
Reclassifications
(2.702)
-
The recoverable amount calculated in this way is consistent with the carrying amount of the equity investment.The company carried out the impairment test based on information available at the preparation date of these separate financial
statements and reasonable estimate of future cash flows and other figures used. Changes in the variables used in the test
are constantly monitored in order to adjust the estimated recoverable amount of the
Impairment losses
Depreciation
(8.255)
(429.254)
(575.342)
(160.965)
(146.000)
150.745
7.611.369
8.364.658
1.986.135
2.286.242
(1.319.816)
30 September 2015:
Historical cost
18.874
20.418.023
Mecaer America Inc.
MAG Inc.
Accumulated depreciation
(117.237)
(6.250.867)
(7.178.885)
(1.539.476)
(1.775.255)
-
(16.861.720)
Carrying amount
33.508
1.360.502
1.185.773
446.659
510.987
18.874
3.556.303
Property solely comprises light constructions manufactured at the production facilities. Plant and machinery and industrial
and commercial equipment at 30 September 2015 include carrying amounts of €437 thousand and €98 thousand, respectively, relating to assets under finance lease for which current financial liabilities of €76 thousand and non-current financial
liabilities of €207 thousand have been recognised. Increases in these captions relate to investments that are part of an
ongoing plan to upgrade the production structures.
(Impairment losses)/
reversals of imp.
losses
30.09.2014
(decreases)
30.09.2015
valore di bilancio al
30.09.2015
Increases/
5.000.000
78.976
33.058.418
78.976
Società Aeroporto del Tronto S.p.A.
6.903.460
1.250.000
8.153.460
Total investments in subsidiaries
35.040.854
6.250.000
41.290.854
Other companies
3.083
Total other companies
3.083
-
3.083
35.043.937
6.250.000
41.293.937
Total equity investments
3.083
No property, plant and equipment were pledged as collateral at 30 September 2015.
123 Amounts in Canadian dollars (CAD).
124 Amounts in US dollars (USD).
200
201
5.4
Deferred tax assets
The following tables provide an analysis of asset balances at 30 September 2015 and 30 September 2014 for each caption, with indication of amounts recoverable within and after one year.
These balances reflect the estimated tax charge arising on temporary differences between the profit for the year and taxable profit in relation to captions that are deductible in future years.
The tax rates applied in the calculation are IRES of 27.5% and IRAP of 4.09%.
2014/2015
2013/2014
93.773
144.994
11.875
15.290
22.764
13.896
58.833
Variable components of cash-ded. remuneration
13.079
51.838
Total deferred tax assets recoverable WITHIN one year
141.491
284.851
2014/2015
2013/2014
1.825.103
1.565.843
Interest expense on discounting and actuarial losses on post-employment benefits
90.867
139.778
Royalties
467.275
388.081
72.987
37.964
Total deferred tax assets recoverable AFTER one year
2.456.232
2.131.666
2.597.723
2.416.517
5.5
Deferred receivables from the Ministry of Economic Development for projects under Law no. 808/85 include the present value of government assistance to be collected from
the Ministry of Economic Development for projects under
Law no. 808/85 concerning national security and similar
matters for which collection is deferred. The portion expected to be collected within one year is classified under
other current assets (see 5.12 Other current assets).
2014/2015
2013/2014
Deferred receivables from the
Ministry of Economic Development
2.107.951
3.242.766
Guarantee deposits and other noncurrent assets
87.785
79.243
2.195.736
3.322.009
5.6 Other non-current assets - related
parties
2014/2015
2013/2014
Credit facility - Mecaer America
(USD line)
2,252,109
2,185,488
Credit facility - Mecaer America (€
line)
-
602,837
Guarantee deposits
205,993
205,993
2,458,102
2,994,318
Specifically, the credit facilities were granted to the subsidiary Mecaer America at market conditions. Reference
202
should be made to the directors’ report for further information on intragroup transactions (see Disclosure on transactions with related parties).
Guarantee deposits mostly include non-interest bearing
guarantee deposits of €206 thousand given to the related
party S.B.I. S.p.A. for the lease of the properties in Borgomanero (NO) and Monteprandone (AP).
5.7
Inventories
This caption is analysed in the table below.
There was a considerable increase in inventories, mainly
due to the growth in volumes of the main operating segments.
Inventory turnover remained at normal rates, considering
procurement and production levels.
The allowance for inventory write-down includes collective
write-downs based on statistical analyses of inventory trends, such as variables that presumably reflect obsolescence
and/or excessive items, which total approximately €2,857
thousand. These analyses are updated each year on the
basis of actual figures reported and integrated by technical
analyses carried out to justify the need for write-downs.
This method is necessary given the specific nature of the
company’s industry, also considering contractual restrictions requiring back-up inventories, usually for fairly long
periods of time.
2014/2015
2013/2014
supplies
21.890.479
21.107.328
Work in progress and semifinished products
6.474.006
6.977.960
Finished products and goods for
resale
10.962.529
11.333.451
Allowance for inventory writedown
(2.856.826)
(2.383.891)
111.497
259.898
Total inventories
36.581.685
37.294.746
5.8
2014/2015
2013/2014
Projects to develop new products
724.107
412.047
Aircraft interiors
3.063.010
642.394
Aircraft and component maintenance
1.852.193
2.393.122
Total contract work in progress
5.639.310
3.447.563
Contract work in progress comprises three main components that are part of different businesses, operating separately.
The first one includes long-term contracts for the development of new products, which are entirely or partially funded by revenue from the customer.
Interiors includes contracts for VVIP customised interiors,
while maintenance relates to the overhaul of helicopters
and components carried out at the Monteprandone site.
Considering the contractual terms, these contracts are of a
long-term nature and provide for contractual considerations
that the company measures on the basis of the percentage
of completion at the reporting date. This method considers
technical progress (physical measurement) and financial
progress (cost method).
Contracts for VVIP customised interiors are the main component at the reporting date.
Work in progress is recognised under assets if, based on
an analysis conducted on each contract, the gross value of
work in progress exceeds progress billings. It is recognised
under liabilities if the progress billings exceed work in progress. If the progress billings have not been collected at the
reporting date, the relevant amount is classified as trade
receivables.
5.9
Trade receivables
thousand adjusting receivables of SEI, which was merged
into MAG in 2009/2010.
Trade receivables remain consistent with the natural monetary cycle. With a schedule for the most responsive to
the needs of the main customer, the company occasionally
factors trade receivables without recourse which are collectable and due at the factoring date.
There are no significant bad debts.
Although a portion of past due receivables remains, mostly
due to the complexity of the procurement process for large
customers, the average DSO continue to be approximately
90 days and 180 days for residential and institutional customers, respectively.
Receivables remain highly concentrated (71% if intragroup
transactions are excluded) with the company’s key customer, Finmeccanica group. Overall, the impact is equal to
48%.
Trade receivables
2014/2015
2013/2014
17.995.917
30.462.884
(509.930)
(693.978)
17.485.987
29.768.906
At the reporting date, trade receivables may be analysed by
Amount
Europe – Eurozone
14.003.126
168.898
North America
2.199.367
Rest of the world
1.114.596
17.485.987
At the reporting date, past due receivables total €4,418
thousand.
A breakdown of past due receivables by ageing is set out
below.
Days
Nominal
amount
<30
1.744.132
1.744.132
31<X<60
-
-
61<X<90
954.386
954.386
91<X<120
297.104
X>120
1.932.428
(509.930)
1.422.498
Total past due
4.928.050
(509.930)
4.418.120
Impairment
Carrying
amount
297.104
This caption is analysed in the table below. Its carrying
The allowance for impairment includes approximately €510
203
5.10 Current loans and receivables related parties
Trade receivables from related parties at the reporting date
are summarised in the following table. The carrying amount
is in line with fair value.
2014/2015
2013/2014
7.464.660
5.198.696
Mecaer America Inc.
928.078
4.114.406
SAT S.p.A.
5.870
7.049
S.B.I. S.p.A.
24.664
26.533
Unrealised exchange rate gains on
foreign currency receivables
15.928
20.050
Total trade receivables - related
parties
8.439.200
9.366.735
Trade receivables from the subsidiary Mecaer Aviation
Group Inc. were generated by the sale of kits for interiors
activities, totalling €3,002 thousand during the year.
Trade receivables from the subsidiary Mecaer America Inc.
were mainly generated by trading transactions. Changes
during the year relate to sales of goods (e.g., spare parts
for maintenance activities under the service centre agreement), recharges (insurance premiums, interest on loans
and seconded personnel costs) and collections.
Reference should be made to the specific section of the
directors’ report for additional information on transactions
with subsidiaries (see Disclosure on transactions
with related parties).
5.11 Tax assets
Tax assets include the excess IRES for the 2007/2008 2011/2012 tax years for which the company has claimed
reimbursement pursuant to article 2.1-quater of Decree law
no. 201/2011, as detailed in the note to Income taxes (see
6.18 Income taxes);
5.14 Cash and cash equivalents
The VAT receivable mainly comprises domestic VAT, whose
trend is correlated with the invoicing system applied to the
key customer, which, as a frequent exporter, makes purchases not subject to VAT by issuing letters of intent for time
brackets.
This caption, which is in line with its fair value, reflects the
balance of bank and postal accounts. It is calculated as the
nominal amount of current accounts held with banks.
Deferred charges include portions of costs and charges
paid in advance but not pertaining to the year. These mainly
refer to costs for supplies.
Transfer credits to be received relate to trading transactions and include certain items of modest amounts due from
Finmeccanica group, which is also a supplier of the company.
Tax credits include various individually insignificant items
relating to domestic and foreign indirect taxes.
Receivables due from the liquidator of HT S.p.A. reflect
the outstanding balance due from the subsidiary Hydraulic
Technologies S.p.A. as a result of its liquidation and which
the liquidator withheld on a precautionary basis.
2014/2015
2013/2014
VAT receivable
2.706.230
4.713.062
Contributions to be collected
1.225.580
1.518.327
Deferred charges
358.838
486.633
Tax credits
37.405
175.201
490.963
433.950
Receivables from the Ministry of
Economic Development
-
216.014
8.179
176.945
Other
12.344
24.588
Advances to employees for travel
expenses
250.484
15.367
Transfer credits to be received
4.628
4.628
Receivables due from the
liquidator of HT S.p.A.
5.094.651
7.764.715
Total other current assets
5.12 Other current assets
5.13 Current financial assets
Advances to suppliers relate to payments for orders primarily outside the EU. The decrease in this caption is due to
the drop in the volume of activities of the CCS division.
Receivables for projects under Law no. 808/85 include the
present value of government assistance to be collected
from the Ministry of Economic Development for projects
under Law no. 808/85 concerning national security and similar matters for which collection is deferred. The portion
expected to be collected after one year is classified under
other non-current assets (see 5.5 Other non-current
2014/2015
2013/2014
-
2.967.000
In the previous year, this caption comprised a loan entered
into on 30 September 2014 which became effective on 1
October 2014.
2014/2015
2013/2014
Bank deposits
14.314.997
14.367.453
Cash
7.178
6.906
14.322.175
14.374.359
The company factors trade receivables, usually every quarter. However, the factoring does not alter the nature of collection times in terms of method or amounts.
without recourse, as they do not provide for any guarantees, repurchase or buy-back clauses.
5.15 Cash and cash equivalents related parties
This caption reflects the balance of bank deposits. It is calculated as the nominal amount of current accounts held with
banks that are related parties (Credito Valtellinese group –
see also 7.2 Related party transactions). The carrying
2014/2015
2013/2014
1.595.809
1.033.771
for shareholders and guarantee accessibility to outside
sources of funding, including the achievement of adequate
credit ratings.
The company constantly monitors developments in its debt
to equity ratio and, in particular, the level of net debt and the
generation of cash flows from operating activities.
To achieve these objectives, the company looks to constantly improve the profitability of its businesses.
The board of directors can make proposals to the shareholders to increase share capital or, if legally permitted, distribute reserves.
In this way, the company may repurchase treasury shares
within the limits authorised by the shareholders, with the
same aims of creating value while achieving financial balance and improving the company’s rating.
Equity means the value contributed by shareholders (share
capital and share premium reserve totalling €18,701,684)
and the value generated by the company through the results of operations (retained earnings and other reserves,
before the profit for the year, totalling €30,810,264).
The profit for the year includes unrealised exchange rate
gains, since the company recognised net unrealised
exchange rate gains of approximately €354 thousand during the year. Under IAS 21, unrealised exchange rate gains
accumulated in equity are not subject to restrictions.
5.17 Employee benefits - postemployment benefits
5.16 Equity
At 30 September 2015, paid-up and subscribed share capital amounts to €13,138 thousand, divided into 13,138 thousand shares with a nominal amount of €1 (one Euro) each.
No treasury shares are held directly or indirectly via trustees
or nominees.
They are due within one year.
204
assets).
For information on changes and an analysis of equity, reference should be made to the statement of changes in equity
(see Statement of changes in equity). At the reporting
date, other comprehensive expense recognised in equity
(profits and losses arising from the application of IAS 19)
totals €137 thousand.
No dividends have been distributed to the owners during
the last two years.
The company’s capital management objectives are to create value for shareholders, safeguard business continuity
and support the company’s development. Accordingly, MAG
seeks to maintain an adequate level of market capitalisation, at the same time enabling it to realise sound returns
The company grants post-employment benefits to its employees both directly and by contributing to third-party funds.
These benefits are granted in a variety of ways, depending
on the legal, tax and economic conditions of each country
in which the company operates. In particular, the pension
reform under Law no. 296/2006 has been considered (see
3.5 Employee benefits - Post-employment benefits).
The benefits are usually based on remuneration and years
of employee service.
The company grants post-employment benefits through defined contribution and defined benefit plans.
Under defined contribution plans, the company pays contributions to public or private insurance companies on the
basis of a legal or contractual obligation, or voluntarily.
When the company pays the contributions, it fully meets its
obligations. The cost of the period is accrued on the basis
of employee service and is recognised by function under
personnel expense.
205
Defined benefit plans include the post-employment benefits, which reflect accruals for all employees in service at
the reporting date, calculated using the projected unit credit
method using actuarial techniques.
The techniques used for these calculations are shown in the
following tables.125126
Amounts taken to other comprehensive income in the two
consecutive years are detailed in the following table.
2013/2014
8.648
48.717
Personnel expense
Financial expense
Other comprehensive income
(expense)
parametri economico finanziari
2014/2015
2014/2015
(124.076)
217.214
(115.428)
265.931
2013/2014
Discount rate
a125
1,46 %
1,23 %
Inflation rate
i
2,00 %
2,00 %
Annual rate of increase in postemployment benefits
r
3,00%
3,00%
Annual rate of salary increase
is126
1,00 %
1,00 %
5.18 Provisions
The following tables provide an analysis of the composition
of and changes in this caption.
2014/2015
Parametri tecnico-demografici
2013/2014
RG 48 Tables127
Provision for product warranties
1.272.683
1.387.470
Inability
INPS tables by age and gender
Early retirement provision
-
166.000
Retirement age
Achievement of requirements for
mandatory general insurance
Provision for litigation
178.381
162.513
Other provisions
1.006.027
268.945
Total provisions for risks and
charges
2.457.091
1.984.927
Mortality
Annual employee turnover and advances on post-employment
benefits
2014/2015
2013/2014
Advances
2,0 %
2,0 %
Turnover
3,0 %
3,0 %
Post-employment benefits at 30 September 2015 and 2014
are analysed below.127
2014/2015
2013/2014
1.791.329
2.200.018
Changes in net liabilities for defined benefit obligations are
summarised in the following table.
30.09.2014
2.200.018
Current service cost and interest
8.648
Actuarial losses
(124.076)
Plan benefits paid
(293.261)
30.09.2015
1.791.329
Changes in net liabilities for defined benefit obligations are
summarised in the following table.
2014/2015
2013/2014
8.648
48.717
Current service cost
Interest cost
Curtailment
Actuarial (gains)/losses (OCI)
(124.076)
217.214
(115.428)
265.931
1.984.927
Accruals
1.101.027
Utilisation/reversal
(628.863)
2.457.091
The €114,787 reversal of the provision for product warranties is based on the consistent application of a statistical
approach to turnover for the year, adjusting the average
warranty costs weighted by the average impact of claims
over the contractual warranty period.
The provision for litigation has been accrued specifically to
cover litigation pending with former company employees.
5.21 Other non-current liabilities
The following table provides a breakdown of deferred tax
liabilities.
This caption is entirely comprised of “Other liabilities under
Law no. 808/85” which include the difference between assistance received or to be received under Law no. 808/85,
relating to projects considered relevant to “National security
and similar”, and the portion of subsidised costs classified
under intangible assets as development costs, the difference between royalties charged to the projects on a straightline basis and the liability actually accrued at the rates for
which payment is provided for, as well as assistance under
Law no. 808/85 for projects not considered relevant to “National security and similar” (see 4.2 Development costs
2014/2015
2013/2014
7.778.852
7.983.596
166.412
166.412
185.943
255.951
119.792
107.551
Leases
27.007
45.013
Accelerated depreciation
3.479
7.473
Total deferred tax liabilities
8.281.485
8.565.996
Deferred tax liabilities for research and development costs
arise from the temporary differences relating to the tax deduction of these costs in the year in which they were incurred. This creates a reversal effect related to amortisation
and, in the case of certain projects benefitting from Law no.
808/85, royalties (see also 6.18 Income taxes).
5.20 Loans and borrowings
Loans and borrowings at 30 September 2015 are analysed
below, in comparison with those at the previous year end,
with indication of those that are current and non-current.
Other provisions include the €801 thousand accrual covering the expense to be incurred for retrofit activities involving a specific element of the E550 aircraft landing gear
whose tolerances were redefined by the engineering. This
expense mainly comprises the estimated costs to rework a
component (trunion assy) and the costs for the disassembly
and inspection activities carried out by the aircraft maker
during aircraft scheduled maintenance. The estimate of
said expense is based on an agreement reached with the
customer and a statistical analysis of the inspections carried out starting from August 2015.
2014/2015
2013/2014
Bank facilities and current loans
Bank loans
16.804.446
24.922.668
Other loans
935.090
1.347.149
Total current loans and
borrowings
17.739.536
26.269.817
including:
related parties
-
2014/2015
2013/2014
Bank loans
26.333.931
23.807.195
Other loans
313.004
282.233
Total non-current loans and
borrowings
26.646.935
24.089.428
Non-current loans
including:
related parties
5.22 Advances from customers
The caption, whose carrying amount is in line with fair value, includes advances from customers for the provision of
assets. The decrease on the previous year end is related
to the fact that, in the previous year, the balance was significantly affected by the performance of interiors production
activities.
5.23 Trade payables
This caption, whose carrying amount is in line with fair value, is comprised of payables to suppliers of goods and services. The balance decreased on the previous year end,
due to the fall in production volumes.
2014/2015
2013/2014
21.821.403
31.256.750
26.269.817
663.709
third parties
and government assistance pursuant to law no.
808/85).
third parties 17.075.827
Details are not provided as this could weaken the company’s position in the litigation.
125 Rate indexed to the 7 to 10-year Iboxx Eurozone Corporate AA index.
126 Following the new pension reform for companies with more than 49
employees, the future portions accruing no longer remain with the company.
Instead, they are transferred to a supplementary pension fund or the INPS
treasury fund. Accordingly, the Italian companies are no longer required to
project future salaries using specific growth rates by professional position.
127 RG 48 mortality tables published by the government’s general accounting department.
206
5.19 Deferred tax liabilities
23.810.644
24.089.428
2.836.291
-
At the reporting date, trade payables may be analysed by
Europe – Eurozone
Amount
20.127.515
Europe - Non-Europe
817.984
North America
694.799
Rest of the world
181.105
21.821.403
Information on the main terms and conditions of bank loans
in place are provided in the notes to financial risk management (see 4.3.5 Liquidity risk).
Financial debt is detailed in the notes to the company’s net
financial debt (see 7.1 Net financial debt).
207
5.24 Current financial liabilities related parties
2014/2015
2013/2014
Mecaer America Inc.
1.726.085
2.882.923
885.490
804.953
SAT S.p.A.
-
1.000
S.B.I. S.p.A.
258.169
-
Unrealised exchange rate gains on foreign
currency receivables
96.733
51.784
Total current financial liabilities - related
parties
2.966.477
3.740.660
This caption is comprised of payables to North America
subsidiaries and arise exclusively from trading transactions.
sis and accrued additional month pay and untaken holidays.
Social security charges payable are consistently proportionate to personnel expense.
Deferred income mainly refers to revenue on sales relating
to contract work in progress for product development and
interiors contracts that has been deferred using the percentage of completion method.
Other liabilities under Law no. 808/85 include royalties charged to profit or loss, which are expected to be paid within
one year (see 4.2 Development costs and government
assistance pursuant to law no. 808/85).
Additional information is provided in paragraph 7.2 Related
party transactions (see).
of comprehensive income
6.1
5.25 Tax liabilities
Tax liabilities include balances due for accrued income
taxes, net of payments on account.
2014/2015
2013/2014
IRES
665.583
468.838
IRAP
3.519
-
Total tax liabilities
669.102
468.838
Overall changes in current taxes are presented in more detail in the note to INCOME TAXES.
5.26 Other current liabilities
Other current liabilities, whose carrying amount is in line
with fair value, are analysed in the following table.
2014/2015
2013/2014
Current and deferred remuneration
3.549.713
3.043.827
Social security charges payable
1.172.306
1.293.261
Deferred income
544.012
753.145
Directors’ fees and expenses
79.286
69.678
106.312
96.213
Other liabilities under Law no.
808/85
238.072
121.988
Withholdings to be paid
2.471
15.462
Other financial liabilities
100.514
90.420
Total other current liabilities
5.792.686
5.483.994
Net revenue
Revenue from sales fell, especially in the business lines
comprising the Aircraft Services segment and the CCS division of the Integrated Aircraft Systems segment. In the first
part of the year, the latter division recorded the residual volumes of Yeovil (UK) foreign site.
The overall decrease approximated €16,506 thousand,
down by 15.6% over the previous year. More detailed information on trends in revenue is provided in the directors’
report (see Highlights of main consolidated companies, Mecaer Aviation Group S.p.A.).
2014/2015
2013/2014
Variazione
Revenue - goods
and
processing, repair
and maintenance
services
87.634.942
104.369.440
(16.734.498)
Design revenue
1.526.284
1.297.962
228.322
Net revenue
89.161.226
105.667.402
(16.506.176)
6.2
Net revenue - related parties
2014/2015
2013/2014
Variazione
Revenue - goods
and
processing, repair
and maintenance
services
2.805.031
3.822.719
(1.017.688)
Design revenue
1.586.475
99.473
1.487.002
Net revenue
4.391.506
3.922.192
469.314
Current and deferred remuneration shows the variable
components of remuneration recognised on an accruals ba-
208
209
6.3
with the mix of products and services, as demonstrated by
the breakdown of production revenue.
The caption mainly comprises grants related to income
(€102,480 thousand), social security cuts on personnel
bonuses paid in prior years (€62,628 thousand), smaller personnel leaving incentives compared to 2013/2014
(€135,362 thousand) and the release of the provision for
legal disputes with employees (€90,000 thousand). .
supplies
6.9
6.4 Other revenue and income related parties
This caption includes contractual considerations of €20
thousand from SBI S.p.A. and €3 thousand from S.A.T.
S.p.A. for administrative management services.
6.5 Variation in finished products,
work in progress and semi-finished
goods
This caption was directly affected by the factors described
in the notes to the statement of financial position (see 5.7
Inventories).
6.6 Increase in internal work
capitalised
supplies
The use of raw materials, consumables and supplies is,
overall, consistent with the mix of products and services.
Production values are up considerably in absolute terms.
2.459.572
3.983.070
Services
The following table provides an analysis of services.
Sub-contracting and third-party processing relate to
outsourced production, the extent of which varies depending on production volumes. In any case, the use of these
services is for non-strategic industrial processes. The decrease over the previous year is due to the reduction in production volumes and insourcing.
The cost of temporary staff and contractors fell mainly as a
consequence of the closing of the Yeovil (UK) site, where
the customised interiors for the AW10 line were mostly produced using temporary staff.
The cost of advisory services is a significant caption,
specifically with respect to the engineering and technical
consultancies services which are mostly managed on an
outsourcing basis, complementing internal structures.
Travel expenses had a significant impact, principally due
to the fact that operating units are located in different geographical.
Third party processing and subcontracting
2014/2015
2013/2014
12.393.087
13.854.313
Temporary staff, consultants and
contractors
1.845.429
4.717.173
Advisory and sundry assistance
services
4.518.274
4.816.156
Transport costs
1.135.655
1.335.609
Electricity, telephone, canteen and
utilities
1.471.786
1.614.814
Travel expenses
1.167.998
1.289.422
Royalties on Law no. 808/85 projects include the accrued
benefits under this law on projects that are eligible for “National security” or “European interest” assistance. They are
calculated on a straight-line basis in proportion to the relevant sales for the year (see also above 4. Significant
assistance pursuant to law no. 808/85 and 5.21 Other
non-current liabilities).
Royalties are those due to UTAS (Goodrich Landing Gear)
for the AW139 LGS project, the Woodward group for assistance with certain types of hydraulic flight controls
and AgustaWestland for maintenance activities on some
hydraulic products (dampers).
6.10 Services-related parties
2014/2015
2014/2015
2013/2014
1.541.201
1.539.689
contractual term are summarised in the following table.
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
1.107.789
822.868
808.918
202.229
-
6.13 Personnel expense
2014/2015
2013/2014
Wages and salaries
15.813.485
15.575.663
Social security contributions
4.820.087
4.542.656
Third party processing and subcontracting - Mecaer America Inc.
3,894,171
3,662,832
Service station fees
546,622
456,124
Post-employment benefits and
pension funds
1.031.154
993.508
Cooperation agreement fees
354,259
302,385
Other
87.799
310.220
Other services
-
26,443
Total personnel expense
21.752.525
21.422.047
Total services
4,795,052
4,447,784
Fees of €546,622 relate to the service centre agreement
with the subsidiary Mecaer America Inc., whereby the latter
carries out overhaul and maintenance services on MAG’s
proprietary products in the North American market. The Canadian subsidiary, which holds valid airworthiness certification for that service, pays MAG a royalty proportionate to its
service station business revenue.
Fees of €354,259 relate to the cooperation agreement with
the subsidiary Mecaer Aviation Group Inc. for business development services in the North American market, especially the US. These services are carried out by a special unit of
MAG Inc. based in the aerospace industrial district of Dallas
– Fortworth (Texas).
Maintenance, repairs and
technical assistance
945.916
1.173.060
28.505.832
29.790.297
Insurance
931.082
841.080
Plant services and security
667.024
594.974
Directors’ fees
479.345
694.111
Royalties on Law no. 808/85
projects
346.973
423.992
6.11 Use of third party assets
Participation in conferences and
trade fairs
341.512
387.954
It mainly includes rent for cars, equipment and software.
Royalties
308.541
1.281.329
101.312
91.213
Other
339.699
562.367
Total services
26.993.633
33.677.567
This caption includes operating lease payments to the related party SBI S.p.A. for the company’s industrial sites
at Borgomanero (NO) and Monteprandone (AP), totalling
€1,386 thousand. It also includes €155 thousand relating to
the outsourcing agreement for airport services with S.A.T.
S.p.A. (unchanged compared to the previous year end).
2013/2014
2013/2014
The use of raw materials, consumables and supplies purchased from related parties - usually Mecaer America Inc.
and Mecaer Aviation Group Inc., is again, overall, consistent
6.12 Use of related party assets
This caption is in line with the previous year given the substantially stable average headcount.
2014/2015
supplies - related parties
210
2013/2014
Transport costs remain high as activities take place at several operating sites.
This caption mainly relates to internal and external costs
incurred for long-term investment programmes to develop
new products. These costs are recognised under intangible
assets when they meet capitalisation requirements (see 5.1
Intangible assets).
supplies
2014/2015
Insurance mainly relates to the cost of covering aerospace
risks, both in terms of third party liability on products and the
many risks arising from the inspection and maintenance of
aircraft and parts mainly by the AS division. In this respect,
the company has always pursued a prudent risk coverage
policy by agreeing adequate policies with leading insurance
companies.
2014/2015
2013/2014
763.176
819.503
The following table summarises the average headcount during the year and the total at year end by category.
Headcount
Year end
30/09/2015
Average
30/09/2014
2014/2015
2013/2014
Managers
17
17
17,0
17,5
Junior
managers
and white
collars
162
164
163,0
166,5
Blue
collars
184
182
183,0
183,0
Total
363
363
363,0
367,0
6.14 Amortisation, depreciation,
accruals and impairment losses
For information on captions relating to amortisation, depreciation, accruals and impairment losses, reference should
be made to the tables on changes in property, plant and
equipment (see 5.2 Property, plant and equipment), in
intangible assets (see 5.1 Intangible assets) and the provisions for risks and charges (see 5.18 Provisions) in the
notes to the statement of financial position.
211
The following table summarises this caption.
Amortisation of intangible assets
Depreciation of property, plant and
equipment
2014/2015
2013/2014
1.597.768
1.377.606
1.319.816
1.442.652
depreciation
2.917.584
2.820.258
Impairment losses on intangible
assets
235.671
-
Impairment losses on property, plant
and equipment
-
-
Impairment losses on trade
receivables
-
-
Accruals for risks
1.021.027
416.944
Other accruals
(114.786)
154.740
Impairment losses on equity
investments
-
-
depreciation, accruals and
impairment losses
4.059.496
2014/2015
2013/2014
Financial income and interest
income on discounting
522.225
352.572
Interest income on deposits with
banks
2.893
63.767
1.189.435
535.136
Total financial income
1.714.553
951.475
including:
third parties
related parties
2013/2014
Prior year expense
303.829
503.336
Membership dues
112.060
120.708
Indirect taxes and duties
61.393
82.713
Books, publications, texts,
databases
49.558
50.895
Other
163.674
96.126
Total other operating costs
690.514
853.778
Prior year expense includes approximately €47 thousand
of charges for variable remuneration disbursed in excess of
the amount accrued in 2013/2014 and the reversal of prior
year income.
47.859
2014/2015
2013/2014
46.582
Current account interest expense
494.764
782.086
Interest expense on loans
1.370.570
1.282.845
Bank fees and commissions
477.064
369.264
Other
6.055
221.992
Total financial expense
2.371.378
2.702.769
2.229.219
2.533.716
142.159
169.053
including:
related parties
2014/2015
227.046
22.925
third parties
The following table provides an analysis of other operating
costs.
903.616
Financial expense and interest
expense on discounting
3.391.942
6.15 Other operating costs
1.487.507
Further details of the breakdown of financial expense compared with prior year figures are set out in the directors’
report to which reference is made (see Mecaer Aviation
Group S.p.A.).
The following table provides an analysis of the net exchange rate gains and losses shown above:
2014/2015
2013/2014
Exchange rate gains
3.747.666
1.796.789
Exchange rate losses
(2.558.231)
(1.261.653)
Total net exchange rate gains
1.189.435
535.136
The caption includes unrealised exchange rate gains and
losses of €695,316 thousand and €340,994 thousand, respectively.
6.18 Income taxes
6.16 Other operating costs - related
parties
This caption was nil.
This caption includes income taxes and similar amounts accrued for the tax period of these financial statements, along
with amounts arising from the adjustment of deferred tax
assets and liabilities, which are detailed in the notes to the
related statement of financial position captions (see 5.4 Deferred tax assets and 5.19 Deferred tax liabilities).
6.17 Financial income and expense
The following table provides a breakdown of financial income and expense, with indication of amounts relating to
transactions with related parties. For additional information
on related parties, reference should be made to the specific
paragraph 7.2 Related party transactions (see).
212
The following table provides an analysis of total tax expense
.
2014/2015
2013/2014
Current tax expense
3.929.903
3.533.980
(40.610)
51.268
Deferred tax income
(181.206)
(433.901)
(284.511)
(117.940)
Total taxes of the year
3.423.576
3.033.407
With respect to current taxes, starting from the year ended
2011/2012, MAG has applied the specific and complex tax
rules provided for by domestic regulations for IFRS adopters.
Considering that the transition to IFRS for separate financial statements occurred after 2007/2008, which is when
the “substantial neutrality” scheme (provided for by Legislative decree no. 38/2005) was replaced by the “derivazione
rafforzata” scheme (introduced by Law no. 244/2007), MAG
is required to apply a complex system requiring the adoption of interim rules to “prior year” transactions, identified as
such on a qualification, classification and accruals basis.
In addition to Presidential decree no. 917/86, the reference legislative framework includes Ministerial decree no.
49/2009 (the “IFRS regulation”), while the main interpretation sources are tax authorities’ circulars no. 33/E/2009,
which provided clarifications about possibly bringing
carrying amounts into line with tax bases, and no. 7/E/2011,
which clarified how to calculate the taxable base of IFRS
adopters.
Research and development costs, which are regularly expensed when incurred and give rise to the caption “Increase
in internal work capitalised”, were considered a decrease in
the year when incurred and a related increase in the year
when the relevant amortisation/depreciation was recognised in profit or loss up until 2010/2011.
That treatment was based on a systematic interpretation of
articles 108.1 and 109 of Presidential decree no. 917/86
and was supported by an authoritative professional opinion
and best practices (Assonime circular no. 69 of 23 December 2005).
Since it was not an off-the-books deduction, which had
been temporarily allowed for development costs by the
previous wording of article 109.4.b of Presidential decree
no. 917/86, it was not affected by the subsequent changes
made to article 109 by Law no. 244/2007, which eliminated
the possibility of off-the-books deductions.
account the reversal of differences generated in previous
tax years.
As from the tax year 2011/2012, due to the application of
the different and specific tax scheme applicable to IFRS
adopters, capitalised research and development costs incurred during the year have become non-deductible, as no
departures from the “derivazione rafforzata” scheme are allowed in this case.
The interim rules set out in tax authorities’ circular no. 7/E
of 28 February 2011 apply to development projects for new
products that, based on the criteria established in article 15
of Legislative decree no. 158/2008 and clarified by tax authorities’ circular no. 33/E of 10 July 2009, qualify as “prior
year transactions”. This scheme is substantially in line with
the ruling tax regime in accordance with the allocation principle.
Royalties recognised in profit or loss in respect of development projects that benefit from Law no. 808/85 and are
relevant to “National security” or are of “European interest”,
whose capitalised costs are stated net of the related assistance, are added to the taxable base over the year to the
extent of the offset cost which, at the transition date, makes
up the taxable temporary difference.
The following table provides a reconciliation of the theoretical and effective tax expense.
The more significant items giving rise to non-deductible permanent differences for IRES purposes comprise car expenses (€282 thousand) and prior year income and expense
(€342 thousand). The non-taxable permanent difference
arises from one-off and analytical deductions of IRAP from
the IRES taxable base under the changes introduced by
Legislative decree no. 201/2011, converted into Law no.
214/2011, which the company did not apply to the previous
tax year.
The permanent differences for IRAP purposes are mainly
related to:
◊ as non-deductible differences, items of remuneration covered by article 11.1 of Legislative decree
no. 446/97 (€1,455 thousand) and temporary staff
(€1,662 thousand);
◊ as non-taxable differences, various deductions
(personnel expenses relative to trainees and disabled workers, research and development costs and
tax wedge).
Moreover, with reference to the changes made by the above-mentioned law to IRAP legislation set out in article 5 of
Legislative decree no. 446/97, establishing its separation
from IRES legislation, and changes made for the purposes
of that tax, with effect from 2007/2008, the IRAP tax base
was calculated on the basis of carrying amounts, taking into
213
IRES
Profit before tax/irap taxable base
U
IRAP
8.711.731
Total
32.138.862
Income taxes
Average current national tax rate (ires, irap)
Theoretical tax expense
q
T=Uxq
A
4,2%
1.352.013
(713.939)
3.747.739
(37.781)
(676.158)
27,5%
2.395.726
B
Other cash-deductible expenses
(37.781)
(37.781)
2.115.314
497.418
47.559
Accruals to provisions and other allowances
1.518.445
497.418
Other impairment losses
Employee benefits and expenses
Expenses relative to more than one year
142.843
Lease surplus prior to fta
65.473
Reversals of prior year temporary differences
55.166
Prior year items taxed in the year
858.550
Prior year depreciation and amortisation and
royalties to be taxed
782.232
(506.139)
Reversal of taxed provisions/allowances
(757.394)
(270.468)
Prior year items deducted in the year
(828.223)
(235.671)
Permanent differences
D
Non-deductible items
Untaxed items
Total temporary and permanent differences
Taxable base
Effective current tax expense
7. Assets classified as
held for sale and directly
associated liabilities
340.994
C
(82.146)
(4.607.726)
1.001.017
3.760.331
(1.083.162)
(8.368.058)
F= Σ (A:D)
1.374.395
(4.654.229)
G= U+F
10.086.127
27.484.635
T’ = G x q
The company does not have assets classified as held for
sale or directly associated liabilities at the reporting date.
2.773.685
1.156.218
7.1
(40.610)
Deferred tax income
I’’
(181.206)
I’’’
(284.511)
T’’= T’+I+I’
3.423.576
Total tax expense of the year
The following table analyses net financial debt in accordance with the recommendations of Consob communication of
28 July 2006, using the format provided for in the CESR recommendation of 10 February 2005 “Recommendations for
the consistent implementation of the European Commission
regulation on prospectuses”.
3.929.903
I’
Net financial debt
Current taxes paid during the year are summarised below.
(in Euros)
2014/2015
Captions
IRES (2013/2014 balance, 2014/2015 payments on account)
1.970.831
A
IRAP (2013/2014 balance, 2014/2015 payments on account)
1.104.672
B
Cash equivalents
Line offsetting
(700.000)
C
Securities held for trading
Net payments of the year
2.375.503
D
Cash and cash equivalents (a)+(b)+(c)
6.19 Earnings per share
Basic earnings per share, calculated using the profit for the year ended 30 September 2015 of €5,164,079 and the
13,138,000 ordinary shares of the year, amount to €0.39.At 30 September 2014, basic earnings per share amounted to
€0.32, calculated using the profit for the year of €4,203,937, consisting of the same number of ordinary shares.
214
2014/2015
Cash on hand
E
Financial assets
F
Current bank loans and borrowings
G
Current portion of non-current financial debt
H
Other current loans and borrowings
I
Current financial debt (f)+(g)+(h)
J
Net current financial debt (i)-(e)-(d)
K
Non-current bank loans and borrowings
L
Bonds
M
Other non-current loans and borrowings
N
O
2013/2014
7.178
6.906
15.910.820
15.401.224
-
-
15.917.998
15.408.130
-
2.967.000
6.425.839
15.525.738
10.378.606
9.396.930
935.090
1.347.148
17.739.535
23.302.817
1.821.537
7.894.687
26.333.931
23.807.195
-
-
313.004
282.233
Non-current financial debt (k)+(l)+(m)
26.646.935
24.089.428
Net financial debt (j)+(n)
28.468.472
31.984.115
215
7.2
Related party transactions
In accordance with IAS 24, the following information is provided on transactions and balances with other related parties.
The details provided relate to directors and statutory auditors. There are no other positions that fall under the definition of
key management personnel per the relevant accounting standard. Non-monetary benefits have not been included in the
analysis as they are immaterial. The following data refer to 1 October 2014 – 30 September 2015 (in Euros).
Name
Position
Fixed fees
Variables fees
Other fees
Total
Alberto Ribolla
Chairman
108.333
-
8.500
116.833
Valter Pasqua
Deputy chairman
145.850
-
8.500
154.350
Corrado Monti
Deputy chairman
104.167
-
8.500
112.667
Claudio Brun
Managing director
30.000
-
8.500
38.500
Massimiliano Boschini
Director
5.397
-
4.579
9.976
Emanuele Vignoli
Director
4.301
-
6.055
10.356
Ruggero Manciati
Director
10.000
-
8.500
18.500
Enrico Ricotta
Director
10.000
-
8.000
18.000
Rocco Di Leo
Chairman of the board of stat. Auditors
48.245
-
5.500
53.745
Luisa Marzoli
22.772
-
2.500
25.272
Guido Riccardi
30.294
-
2.500
32.794
Related parties include:
◊ S.B.I. S.p.A., which owns the industrial properties in which MAG has its operating offices. Since 11 June 2008, it
has held 60.37% of MAG;
◊ The Credito Valtellinese Group, whose subsidiaries Credito Artigiano and Mediocredito Centrale carry out transactions with MAG and share one director with MAG.
The following table summarises figures (in Euros) relating to related party transactions and balances matched with the
respective consolidated financial statements captions.
All transactions with related parties are contractually governed on an arm’s length basis.(in Euros)
SBI
Credito Valtellinese
24.664
-
205.993
-
1.595.809
2.836.291
663.709
258.169
-
20.000
-
1.541.201
-
Financial income - related parties
-
22
-
142.159
7.3
Directors’, statutory auditors’ and independent auditors’ fees
The Directors’ fees total €457 thousand.The Statutory Auditors’ fees for the year total €101 thousand.The Independent
auditors’ fees total €90 thousand.
On behalf of the board of directors
7.4
Claudio Brun - Managing Director
Events after the reporting date
There are no other significant events to report.
216
217

Consolidated financial statements

Transcription

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