financial statements · 2020-05-14 · the company operates in the region of lombardy. the nature...

FINANCIAL STATEMENTS

2019

v WWW.INTRED.IT • g [email protected] - [email protected] • M 030.72.80.000

GENERAL INFORMATION ABOUT THE COMPANY

NAME REGISTERED INTRED S.P.A.

HEAD OFFICES flag VIA PIETRO TAMBURINI, 1 - 25136 BRESCIA (BS)

SHARE CAPITAL FULLY PAID-UP Money-Bill-Alt 10.000.000,00

VAT REG. NO. List-alt 02018740981

TAX CODE sticky-note 11717020157

REA (ECONOMIC AND ADMINISTRATIVE INDEX) NUMBER edit BS - 366982

LEGAL FORM ADDRESS-CARD JOINT-STOCK COMPANY

MAIN BUSINESS SECTOR (ATECO) CALENDAR-ALT 611000

COMPANY IN LIQUIDATION TIMES-CIRCLE NO

COMPANY WITH SOLE SHAREHOLDER TIMES-CIRCLE NO

COMPANY SUBJECT TO THE DIRECTION AND COORDINATION OF OTHERS TIMES-CIRCLE NO

GROUP MEMBERSHIP TIMES-CIRCLE NO

v WWW.INTRED.IT • g [email protected] - [email protected] • M 030.72.80.000

EXECUTIVE SUMMARY 5

FINANCIAL STATEMENTS 31 REPORT ON OPERATIONS 33

EXPLANATORY NOTES 57

REPORT OF THE AUDITING FIRM 101

REPORT OF THE BOARD OF STATUTORY AUDITORS 107

CONTENTS

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5

EXECUTIVE SUMMARY

1.1 LETTER TO THE SHAREHOLDERS 7

1.2 THE STRENGTH OF INNOVATION 11

1.3 SERVING THE BUSINESS COMMUNITY 13

1.4 A WINNING INSIGHT 14

1.5 ALWAYS ONE STEP AHEAD 16

1.6 GROWTH TRAVELS ON THE NETWORK 18

1.7 A STRONG OWNERSHIP STRUCTURE 20

1.8 GOVERNANCE 21

1.9 A LEADING PERFORMANCE 24

1.10 A VERY SATISFACTORY IPO 28

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A common theme runs through the future of the entire Italian economy and indeed all of society: access to high-performance infrastructure, designed and built using the most advanced technologies available to the companies that offer these services. The time for reflection has given way to the time for action – as we have seen first-hand in the weeks of the health emer-gency. One fact above all else points to the urgent need for future action: confinement at home and the use of remote working techniques have driven spikes in data traffic on our networks of up to 50%. Fortunately, we held up well under this entirely unexpected strain, thanks to our investments in fibre optics and network equipment.Without lapsing into stale rhetoric, this fact makes it even clearer that principles such as technological pro-gress and digital advancement are not just economic phenomena, but are also a means to social emancipa-tion and cultural progress. This is a principle in which we have always believed, and which we have made the measure of a business model based on deep expertise, but also on the study and analyses of the communities that are the focus of our entrepreneurial initiatives. As we never tire of saying, the synergy between technol-ogy and development is what drives us. I could describe 2019, on the one hand, as a year of consolidation of the positive results enabled by the operating and com-mercial expansion initiatives launched in recent years, but also, on the other, as a time for pursuing projects designed to bring further satisfaction in the years ahead. Our network – which grew by 53% in a single year – is being modernised and expanded: it is now a system of 3,000 km that offers a range of high-connectivity ser-vices to a broad area that, with our contribution, has achieved considerable growth rates. At the same time, our economic performance numbers reassure us that our operating and investing decisions have been effec-tive. In 2019 the value of production amounted to 21.2 million euro, an increase of 18.5% on the same period of the previous year. Revenues also showed similar growth (+21.1%) to 20.8 million euro, with an EBITDA of 8.7 mil-lion euro, up by 41.1%. Net profit was no exception at 4.3 million euro, up by 34.8%.Our customer numbers grew – a fact of which we are particularly proud, given that the market now offers

1.1 LETTER TO THE SHAREHOLDERS

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FINANCIAL STATEMENTS 2019

so many valid options that being able to count on the level of trust and reliance shown in us, by both our business and retail customers, inevitably reinforces our conviction that focusing on innovation and the search for solutions increasingly suited to the community’s needs and qualities is the winning decision. Consider, for example, that in December 2019 the number of users with ultra-broadband, broadband and wireless data connections reached nearly 32,000, an increase of 20% on the same period of the previous year. We have no intention of stopping our progress, which is set to continue, including through targeted transactions. I am proud to emphasise the important agreement reached with Open Fiber, which follows on and is inspired by the agreement with Telecom Italia and which will allow our company to increase its sales of Fibre-To-The-Home connections in areas served by our new partner’s net-work, with the prospect of capturing over70,000 potential property units located in the Brescia metropolitan area and many other population centres in the region. Under the agreement with Telecom, which governs the acquisition of the 15-year right of use to approximately 500 km of dark optic fibre, we extended our network to 90 additional municipalities in Lombardy, with important consequences in the prov-inces of Milan, Monza and Brianza, Lecco and Bergamo. A strategy that was further implemented by the agree-ments reached with Fastweb, GTT and the Retelit group for the activation of many additional kilometres of dark optic fibre. Expansion was also the goal of the acqui-sition intended to increase our presence throughout Lombardy, closed in early 2020, of 100% of Qcom S.p.A., specialised in providing broadband and high-tech ser-vices to over 4,000 business customers.In addition to the initiatives that I have cited, launched while maintaining our focus on the need to sustain growth rates from the standpoint of both infrastructure and revenue, I would be remiss not to mention that what we have achieved is due to the strong shared com-mitment shown by all operators within our group. We have never hidden our aspirations of further reinforcing our organisation, deepening our experience, broaden-ing our business horizons and gaining new skills, and we are doing so according to plans and initiatives that

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combine inorganic growth with the application of innovative, cutting-edge technological solutions. This is what we have always done: it is our distinctive approach, and to judge from the results, it is fair to say that the positive effects thus far indicate it is the right approach. We are in the habit of continually raising the bar for our goals, but I am convinced that we will easily succeed in leaping above it. This commitment begins with our senior management, because the primary responsibil-ity is ours, but everyone has an essential role to play. I would thus like to extend my gratitude to you all, now more than ever. An uncertain future is unfolding before us, springing from adversity that we would never have imagined we would be facing; the wounds inflicted on our communities are deep and our thoughts inevita-bly go out to those affected on a personal level by this disaster. The first antidote to this situation is inscribed in our DNA as hardworking, tenacious individuals. The work ethic that I have seen in recent years from every single member of our group is proof of this. To them, to our shareholders and to all those who work with our company each day, I would like to offer my support and my encouragement to stay united, for us and for our country’s future.

Daniele Peli, Chairman of the

Board of Directors

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1.2 THE STRENGTH OF INNOVATION /ABOUT US

Creative thought lies at the basis of all forms of pro-gress. This principle applies in all human endeavours, and even more so in advanced technological research, today more than ever before. Intred, a telecommunica-tions operator and provider of data and voice services through a proprietary network, was founded in 1996 by three partners who decided to translate their innovative intuition into a company, sustaining it with their exper-tise and professionalism.Today Intred is an established reality that boasts a competitive advantage and promotes new growth for its customers by offering cutting-edge solutions tai-lored to their actual needs. Based in Brescia, the com-pany offers a wide range of services, all featuring high technological value.Thanks to access to a fibre-optic network of nearly 3,000 kilometres, Intred is capable of providing broadband, ultra-broadband and wireless connectivity, land line telephone and cloud services, in addition to ancillary services for Business and Retail customers in Lombardy.The recent acquisition of the Bergamo-based QcomS.p.A. will enable even broader expansion and develop-ment of the network throughout the community.

THE PROFILE OF A COMPANY THAT

HAS STAKED ITS IDENTITY

ON INNOVATION AND CREATION

OF CUTTING-EDGE SOLUTIONS IN THE

ULTRA-HIGH-SPEED COMMUNICATIONS

SECTOR

2.900 KM FIBRE-OPTIC

NETWORK

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2.900 km of optic fibre

80qualified staff members

31.570users at the end of 2019

24years of advanced experience in the

telecommunications industry

35 million euroof capital

expenditures since the company’s foundation

93,6%customer satisfaction

index

A TRUE LEADER /INTRED IN FIGURES

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Intred has chosen to focus its business on a specific geographical area in order to optimise all its opera-tional efforts and direct its infrastructure investments as effectively as possible, through the rational use of resources and the careful profiling of the user base tar-geted by the company.

The company operates in the region of Lombardy.The nature of this community – historically known for its entrepreneurial initiatives – has naturally dictated the character of Intred’s customer base, in which Business Users generate the majority of revenues (54%), followed by domestic users served by the EIR brand (29% of rev-enues), and then by the Wholesale sector (13% of reve-nues) and Public Administration (4% of revenues).

MILANO

CREMONA

COMO

LECCO

MONZA BERGAMO

BRESCIA

MANTOVA

1.3 SERVING THE BUSINESS COMMUNITY /INTRED’S FOCUS

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Intred’s growth is based on the pillars of technological expertise and the choice of focusing its business on a limited geographical area. A journey that was begun just over twenty years ago but that has developed quickly, supported by the construction of an entre-preneurial infrastructure and a widespread and effec-tive sales network.

1996 – Intred S.r.l.. is founded in Milan. Its three found-ing members come from the same listed multinational. These include Daniele Peli, current Chairman and majority shareholder of the company.

1997 – Daniele Peli acquires the shares of the other two co-founders. The company’s growth is constant, first in the province of Brescia, then also in neighbouring Bergamo and Mantua.

1998 – Intred’s registered office is relocated from Milan to Villa Carcina (BS).

2007 – Intred is transformed from a limited liability company to a joint-stock company and its headquarters is relocated from Villa Carcina to Brescia.

A JOURNEY THAT BEGINS WITH AN AWARENESS OF

THE IMPORTANCEOF GROWTH IN

HARMONY WITH THE NEEDS OF

THE COMMUNITY AND CONSTANT IMPROVEMENT

OF OUR INFRASTRUCTURE.

1.4 A WINNING INSIGHT /OUR STORY

INTRED S.R.L. IS ESTABLISHED

1996

2007 TRANSFORMATION FROM

A LIMITED LIABILITY COMPANY TO A JOINT-

STOCK COMPANY.

1997DANIELE PELI

HEADS UP THE COMPANY

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2010 – Construction begins of a proprietary cable net-work, an investment that has a positive impact on turn-over. Geographical development continues, suggesting the creation, in 2011, of a new Brescia location home to 60 employees, a warehouse and two data centres.

2012 – Intred enters the market of residential users with the EIR brand, recording a significant increase in cus-tomers in the following five years, with an average 65% increase in turnover in the three-year period 2015-2017.

2017 – – A positive year. The value of production increases by more than 24% on 2016 to 14.8 million euro. In 2017 the company has approximately 21,600 Business and Retail customers in Lombardy.

2018 – On 16 July 2018, following a placement of 2.5 times the offering by Italian and foreign investors, Borsa Italiana admits the company’s ordinary shares to trading on the AIM Italia market (code: ITD.MI), the Alternative Capital Market organised and managed by Borsa Italiana S.p.A. On 18 July, Intred Telecomunicazioni S.p.A. rings the bell on the floor of the Italian Stock Exchange.

2020 - The acquisition of a 100% interest in Qcom S.p.A. closes on 27 February. The agreed considera-tion is approximately 10.2 million euro. Intred pays the sellers approximately 8.3 million euro, whereas the remainder will be paid according to a price-adjustment mechanism following the approval of Qcom’s 2019 financial statements.

CREATIONOF THE EIR BRAND

2012LISTING ON AIM ITALIA MARKET

2018

2010CONSTRUCTION OF THE PROPRIETARY NETWORK STARTS

2020ACQUISITION OF

QCOM S.P.A.

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1.5 ALWAYS ONE STEP AHEAD /THE COMPANY STRATEGY

Intred’s operating structure and business model are based on a structural and service range according to an approach that combines dynamism with cut-ting-edge technology. Due to the long-term vision of its top management and careful planning of its infra-structure and investments with a focus on innovation, the company today can count on a widespread network spanning Lombardy. The pillars underpinning Intred’s success story are clear and can be distilled into the following key points.• The decision to focus the business on a limited area,

so as to avoid any waste of resources and ensure a support service suited to the needs of the busi-ness market;

• The creation of a qualified, dedicated team of young, adequately trained sales personnel, motivated by the prospect of a long-term relationship with the company;

• The organisation of a next-generation fibre-optic net-work capable of ensuring the broadest possible cov-erage of the target area, made possible by a high-per-formance proprietary infrastructure;

• The development of the residential market to com-plete the range and thus increase the infrastructure’s return on investment at every single access point.

A FUTURE SHAPED BY CONSTANT

EXPANSION OF THE FIBRE-OPTIC

NETWORK,THE RISE OF ULTRA-

BROADBAND, THE CONSOLIDATION OF

THE RESIDENTIAL CUSTOMER BASE

UNDER THE EIR BRAND AND THE

STRIKING OFSTRATEGIC

PARTNERSHIPS.

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Over the next few years, Intred will pursue an organic growth strategy of expanding its proprietary fibre-op-tic network to further extend its geographical coverage and organisation. This will allow the catchment area to be widened and more competitive sale prices to be reached, as a direct consequence of the optimisation of the costs of connecting each user.Looking ahead, Intred’s future development path will move along clear and well thought-out lines:• The development of ultra-broadband connectivity,

through the divestment of broadband connectivity and the use of the proprietary network;

• The extension of the fibre network through contracts for the transfer of rights of use (IRU) with the main telecommunications operators;

• Increased network performance by replacing copper and ADSL with FTTC and FTTH technologies;

• Expansion of the domestic user base under the EIR brand;

• Identification of potential partners in support of the network’s development. The recent acquisition of the Bergamo-based Qcom dovetails perfectly with the development project for Lombardy, based on natural economies of scale and consolidation of the compa-ny’s competitive positioning.

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Proceeding quickly towards development. Thanks to the advent of fibre optics, more and more data are travelling in real time from one point of the globe to another. An essential medium and an advantage that was unthinkable just a few decades ago, which allows individuals and companies to take advantage of advanced services and enjoy an unprecedented devel-opment boost. Choosing fibre optics means ensuring long-term viability of investment, because the high scalability of the network allows an increased need for data connection to be tackled without making changes to the infrastructure.

The network that Intred makes available to its cus-tomers meets the criteria of maximum modernity and innovation. At the end of 2019 it had almost 3,000 km of cables spread throughout the region, forming a con-stantly expanding proprietary infrastructure designed to offer the highest level of performance. The net-work is highly redundant in terms of geography and active equipment used; access points to the network are reached by optic fibre with different geographi-cal routes. The quality of Intred’s offer is guaranteed by the experience and professionalism of its qualified personnel: the NOC (Network Operations Centre) con-tinuously monitors all network parameters to perform regular preventive maintenance operations that lead to a reduction in disturbances and to the rapid identifica-tion of problems and related solutions.

1.6 GROWTH TRAVELS ON THE NETWORK /INTRED’S OPTIC FIBRE

THE DEVELOPMENT OF THE FIBRE-

OPTIC NETWORK: BETTER SERVICESTHROUGH STATE-

OF-THE-ART METRO ETHERNET AND FIBRE-TO-THE-CABINET AND

FIBRE-TO-THE-HOME TECHNOLOGIES

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The reliability of Intred’s fibre optic network is guar-anteed by the use of latest-generation devices and the most advanced technologies in the f ield of METRO Ethernet.Intred is developing its own network in the Fiber-To-The-Cabinet and Fiber-To-The-Home modes.

FTTC (Fiber-To-The-Cabinet) service consists of a fibre-optic connection that reaches the local Street Cabinet and a copper connection from this device to the customer’s premises. Thanks to the limited length of the copper section and to new-generation transmission technologies, it is possible to achieve rel-atively high bandwidths, and therefore relatively high navigation speeds. Ideal for addressing the needs of companies that require stable, higher-performance solutions than those possible with traditional technol-ogies and guaranteed service continuity, an FTTC con-nection can be immediately activated in areas covered by Intred’s network.

FTTH (Fiber-To-The-Home) service consists of a dedi-cated all-optic-fibre Point-to-Point connection from Intred’s network to the customer’s premises. It is the highest-performing connection on the market and is able to support advanced ICT applications, share ser-vices between distant company offices and make the data hosted on external servers easily usable. All FTTH connection profiles proposed by Intred have contrac-tually defined SLAs and are characterised by symmet-rical bands, with solutions up to 100 Mbps and more on a project basis.Ideal for companies that manage large amounts of data and need high-performance, stable connections with guaranteed continuity of service, Intred’s FTTH connec-tion requires the installation of infrastructure and can be activated after a free feasibility study.

/ADVANCED TECHNOLOGY ENSURING MAXIMUM EFFICIENCY

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1.7 A STRONG OWNERSHIP STRUCTURE /INTRED’S SHAREHOLDERS

MARKET20%

EMPLOYEES & DIRECTORS

1%

VALUE FIRST SICAV

9.1%

MARISA PRATI1.6%

DANIELE PELI3.3%64+3+2+9+1+21+QINTRED SHARE

CAPITAL IS CURRENTLY MADE UP BY 15,850,500

ORDINARY SHARES

DM HOLDING S.R.L.64.4%

n67 % DANIELE PELIn33 % MARISA PRATI

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1.8 GOVERNANCE /THE BOARD OF DIRECTORS

COMPETENCE, IN-DEPTH

KNOWLEDGE OF THE SECTOR AND

PROFESSIONALISM. A TEAM ABLE

TO PROPEL THE COMPANY

TOWARDSINCREASINGLY

AMBITIOUS GOALS, WITH A VIEW

TO DEVELOPING HUMAN

RESOURCES.

DANIELE PELI Chairman and Chief Executive Officer

MARISA PRATI Director

ADALBERTO SALVI Director

RENZO TORCHIANI Director

ALESSANDRO TRIBOLDI Indipendent Director

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/THE MANAGEMENT

DANIELE PELI CEO

MARCO EFREM CARELLINI CTO

FILIPPO LEONE CFO

MANUEL METELLI Purchasing Manager

GIULIA PELI Marketing Manager

ROBERTA POLI HR & CRM Manager

EGON ZANAGNOLO Sales Manager

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VITTORIO GIONGO Chairman

BDO ITALIA S.P.A

SALVATORE CAPATORI Standing Auditor

GIOVANBATTISTA LECHI DI BAGNOLO Standing Auditor

LUCA LOCATELLI Alternate Auditor

FABRIZIO GIOVANNI ZANOLINI Alternate Auditor

/THE BOARD OF STATUTORY AUDITORS

/THE AUDITING COMPANY

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INCREASE IN REVENUE BETWEEN 2016 AND 2019

1.9 A LEADING PERFORMANCE / FINANCIAL HIGHLIGHTS

20192016 20182017

+25%+20%

+21%

11.514.4

17.220.8

2019 RESULTS

20192018

€ MLN

Value of production

EBITDA EBITDA margin

EBIT EBIT margin

Net Profit

PFN

+18,4%

+27,9%+38,1%

+34,4%

21,2 million

8,7 million 41,1%

5,8 million

27,2% 4,3 million

8,1 million

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20192016 20182017

+55.1%+26.1%

+34.8%

41.1%38.1%38.5%

33,8%

EBITDA DEVELOPMENT BETWEEN 2016 AND 2019

2018 201920172016

4.0

5.76.8

8.7

EBITDA margin

€ MLN

NET PROFIT FROM 2016 TO 2019

1.6

2.53.2

4.3

€ MLN

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InvestmentsIntred has built its growth on a commitment to improv-ing its fibre-optic network. Investments were made to this end for approximately 35 million euro since the company’s inception, of which 7.2 million euro in 2019 alone, equivalent to more than 34% of revenue, allo-cated to the development of FTTC and FTTH networks in Lombardy. Most of the investments aimed at improv-ing and expanding the infrastructure networks consist of property, plant and equipment (74%), connected to network development, and intangible assets, consisting of the acquisition of rights of use for optic fibre and cables (IRU) (26%).

A GROWTH STRATEGY THAT

COMBINESUPGRADED

TECHNOLOGY AND INFRASTRUCTURE,

AN EXPANDED USER BASE

AND DYNAMIC, WIDESPREAD SALES

OPERATIONS.

2014420KM

20161,120KM

20181,950KM

2015850KM

20171,500KM

20192,900KM

€ 35MINVESTED IN

NETWORK DEVELOPMENT

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OPTIC FIBRE

W

IRE

LESS N

ETW

ORK TELEPHONE NETW

ORK

DA

TA C

ENTE

R

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Since 18 July 2018 Intred S.p.A. has been listed on the AIM Italia (Alternative Investment Market) of the Italian Stock Exchange, the market dedicated to dynamic, competitive SMEs in search of capital to fund their growth, thanks to a balanced regulatory approach designed to meet the needs of ambitious companies.The placement price for the ordinary shares was set at 2.27 euro, resulting in a capitalisation of the Company at the start of trading of approximately 36 million euro and a free float of 18.6% of the company’s share capital.In 2019 Intred’s share price fluctuated between a low of 2.92 euro and a high of 6.20 euro. Daily average trad-ing volumes for 2019 were approximately 8.5k shares. Performance was positive in both absolute terms (+78%) and relative terms, with the shares outperforming the FTSE MIB by approximately 54.2% and the FTSE AIM Italia by approximately 87.0%. Intred actively seeks to establish an ongoing dialogue with the Italian and inter-national financial community. In pursuit of this goal, over the past 12 months it has met with 70 investors at roadshows organised by Banca Profilo (9), Alantra (28) and the AIM Conferences (21), where there was inter-est in the potential of the Company’s business model. Most of the investors met with were Italian, whereas foreign investors were met with at the AIM Conference in London or in conference calls by specific request. The feedback obtained indicates that investors are generally satisfied and in particular view Intred as a solid, well-managed and reliable company that has succeeded in keeping the promises made during its IPO. In addition, its business model and strategy are very well liked for their clarity, simplicity and efficacy.

1.10 A VERY SATISFACTORY IPO /ONE YEAR ON THE AIM MARKET

AN UNAVOIDABLE STEP FOR A

COMPANY THAT LOOKS TO THE

FUTUREWITH FINANCIAL

STRENGTH EQUAL TO ITS PLANS FOR

EXPANSIONAND A SIGN OF

STRONG INVESTOR CONFIDENCE.

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STOCK PERFORMANCE

SHARE PRICE

JEN FEB MAR APR MAY JUN JUL AGO SEP OCT NOV DEC

JEN FEB MAR APR MAY JUN JUL AGO SEP OCT NOV DEC

2019

+100%

+80%

+60%

+40%

+20%

0

-20%

6,0 €

5,5 €

5,0 €

4,5 €

4,0 €

3,5 €

3,0 €

2,5 €

INTRED

FTSE MIB

FTSE AIM

FINANCIAL STATEMENTS

REPORT ON OPERATIONS

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2.1.1 COMPANY DISCLOSURE 34

2.1.2 FINANCIAL POSITION 41

2.1.3 FINANCIAL PERFORMANCE 44

2.1.4 INFORMATION PURSUANT TO ARTICLE 2428 46

2.1.5 CONCLUSIONS 55

REPORT ON OPERATIONS

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2.1.1 COMPANY DISCLOSURE

Shareholders, the Explanatory Notes have provided you with information relating to the illustration of the financial statements as at 31/12/2019; in this document, in compliance with the provisions of Article 2428 of the Italian Civil Code, we provide you with information regarding the situation of your company and information on operations. This report, drawn up with values expressed in euro, is presented together with the Financial Statements in order to provide information on the company’s income, assets, financial and operating per-formance, accompanied, where possible, by historical elements and prospective evaluations.

Your company enjoyed a very positive year in 2019. Turnover increased by 21% (+3.6 million euro) compared to the previous year, to 20.8 million euro; at the same time, all the intermediate financial indicators improved significantly: EBITDA: 41.1% of production, equal to 8.7 million euro (up 27.9% from 2018); operating income (EBIT): 27.2% of production, equal to 5.7 million euro (up 37.4% from 2018); profit: 20.4% of production, equal to 4.3 million euro (up 34.8% from 2018). Additional indices are presented in the following tables.

INTRED is a medium-sized telecommunications oper-ator, structured and well organised from a technical and commercial point of view. Flexibility and a strong determination to win new market share, combined with an extremely broad, next-generation proprietary fibre-optic network, allow the company to compete on the same level as the major players in the sector, providing its customers with a full range of services: broadband and ultra-broadband connectivity, wireless connectivity, land line telephone, cloud services and connectivity for residential users.In 2010 the company’s management took the strate-gic decision of creating an extremely broad, next-gen-eration fixed-line network based on optic fibre in the province of Brescia. Two years later, this initiative led Intred to enter the unexplored TLC residential market with the dedicated EIR brand, in order to optimise the substantial investments required for the creation of this proprietary network.The “Broadband connectivity” category includes ADSL and HDSL connections, via copper wire, which provide bandwidth of up to 20 Mbps. The last mile of Telecom Italia is used for this type of connection. Today it is still the most widespread method of connection in Italy,

REVENUES

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SERVIZI OFFERTI

used for about 15 years and with a coverage close to 99% of the national territory. Over the next 4-5 years, fibre-based connections (FTTC and FTTH) are expected to almost completely replace XDSL connections.

With regard to the “Ultra-broadband connectivity” cat-egory, the Internet access network is developing with two different technologies: FTTH (Fiber-To-The-Home), with optic fibre being carried directly to the end user; FTTC (Fiber-To-The-Cabinet), with the fibre reaching the street cabinet and using the copper pair that starts from Telecom Italia’s cabinet (last eighth of a mile) to reach the end user with VDSL2 technology.

BROADBAND CONNECTIVITY VOICE

ULTRA-BROADBAND

CONNECTIVITYHOSTING

AND HOUSING

RDSL CONNECTIVITY

ANCILLARY SERVICES

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The “RDSL (wireless) connectivity” service is provided in areas not adequately covered with XDSL and optic fibre or in areas that require backup connections in alternative to cable.

With regard to the “Telephony (land line telephone)” cat-egory, Intred, as a telephone operator holding an OLO (Other Licensed Operators) Ministerial License, offers and manages its own telephone numbers directly or, in accordance with Resolutions 35/10/CIR (Pure Number Portability) and 274/07/CONS (Activation and migration of access services), can acquire these numbers from other OLOs and Telecom Italia.In its data centre, INTRED hosts its own telephone infra-structure, directly interconnected with the national network, thanks to which it provides telephone ser-vices via its own ULL (Unbundling Local Loop) net-work, in WLR (Wholesale Line Rental) or in VoIP (Voice over IP) technology.

In “Cloud Services”, since its foundation INTRED has offered hosting services (domain registration, email, web, etc.), housing (hospitality of physical servers at our data centres) and virtual servers.

The “Ancillary Services” group includes rental services for line termination equipment (routers and firewalls), technical support, ancillary charges, etc.

The value of production in 2019 amounted to 21.2 million euro, an 18.4% increase compared to the same period of the previous year. The increase in revenue con-tinues to be driven by the sales of fast ultra-broadband connections (FTTH and FTTC), up by 65% to 8.0 million euro. The telephone sector also improved (+12% to 2.0 million euro), sustained by sales of flat type sales pack-ages. Revenue from data centre services (Housing and Cloud) and accessories were in line with the previous year, while the decrease in the RDSL sector (-5%) and traditional broadband services based on copper cable connectivity (-7%), is the result of the company’s strat-egy of offering incentives to its customers to move to ultra-broadband fibre optic connections.

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2018

+ 17%

2019

- 9%

- 8%

+ 45%

OTHER

128185

ANCILLARY SERVICES

744863

HOSTING AND HOUSING

418417

VOICE

1,9982,335

ULTRA BROADBAND CONNECTIVITY

8,08711,721

RDSL CONNECTIVITY

2,0161,854BROADBAND CONNECTIVITY

3,8103,450

€ 000

Three charts are provided below:• the first shows the breakdown of 2019 turnover by

service line, with a comparison to 2018;

• the second shows turnover as a percent of the total individual service lines offered; and

• the third shows the breakdown of turnover by cus-tomer type.

Ultra-broadband is clearly expanding at an increasingly rapid pace, driving the increase in revenue seen in 2019, while broadband slows as it is progressively replaced by the new technology. More than 95% of turnover derives from recurring fees.

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56+17+9+11+2+4+1+LREVENUE BREAKDOWN BY SERVICE

ANCILLARY SERVICES

4%HOSTING AND HOUSING

2%VOICE

11%

RDSL CONNECTIVITY

9%

BROADBANDCONNECTIVITY

17%

ULTRA-BROADBAND

CONNECTIVITY

56%

OTHER

1%

54+13+29+4+LREVENUE BREAKDOWN BY CUSTOMER

BUSINESS

54%

WHOLESALE

13%

RESIDENTIAL

29%

PUBLIC ADMINISTRATION

4%

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Investments in 2019 amounted to 7.2 million euro, mainly concentrated on the development of the fibre-optic access network in FTTH and FTTC mode, mainly in the Lombardy region.The majority of Intred’s investments in network infra-structure are made up of property, plant and equipment (74% of the total): civil works for the laying of fibre-optic networks, normally commissioned to specialised tele-communications companies that customarily build infrastructure for various operators; fibre-optic cables of various sizes, purchased directly from national man-ufacturers; street cabinets and manholes, purchased from national manufacturers; electronic network equip-ment purchased from national and international dis-tributors (Huawei and Cisco Systems); and assets with a value of less than 516 euro, consisting mainly of con-nection termination equipment, routers and switches (Huawei, Cisco Systems, AVM, etc.), purchased from national and international distributors and suited for autonomous use.Another important part of the investments con-cerns intangible assets (26% of the total): these con-sist mainly of acquisitions of rights of use, in the form of IRUs (Indefeasible Rights of Use), with a duration of 15 years, for dark optic fibre and/or cable ducts. These IRUs were mainly acquired from Telecom Italia, Infratel Italia (an in-house company of the Ministry of Economic Development) and leading domestic oper-ators. The acquisition of IRUs has made it possible to expand network infrastructure relatively quickly at moderate costs and with a considerable reduc-tion in the necessary civil works, which has, conse-quently, reduced the amount of time required to obtain the permits from the competent authorities.

As far as marketing and communication are con-cerned, in 2019 the company also pursued the objective of increasing the notoriety of the INTRED brand, not only in the province of Brescia but also by expanding its range of action in Lombardy, positioning the com-pany as a solid, specialised and modern entity that is able to deserve the market’s trust, highlighting how the laying of proprietary optic fibre is a distinctive strategic element.Considerable resources have been dedicated to mar-keting activities aimed at promoting the EIR brand in the residential user market and its value positioning,

INVESTMENTS

MARKETING AND COMMUNICATION

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focusing on characteristics that can differentiate us from our national competitors, such as our local focus and transparent contractual conditions, and consoli-date Brand Awareness; in view of these goals, the logo was restyled and all advertising for the EIR brand was fully rethought during the year.Various communications channels were used to pro-mote marketing actions, including billboards and adver-tisements in local newspapers, local radio and television marketing campaigns and promotional activities on social media such as Facebook, LinkedIn and Google.There was a particular focus on athletic sponsorships, specif ically the main sponsor agreement with the “Brescia Calcio” football club.

On 27 February 2020, Intred S.p.A. closed the acqui-sition of Qcom S.p.A. As a result, it now holds a total of 1,320,000 shares (100% of share capital), for total provisional consideration of approximately 10.2 mil-lion euro, of which it has already paid 8.3 million euro (partly drawing down the loan of 6 million euro granted by Banca Intesa on 25 February 2020), whereas the remainder will be settled following the completion of the price adjustment procedure, which will be carried out after the approval of Qcom’s financial statements at 31 December 2019.

Pursuant to paragraph 5 of Article 2497-bis of the Italian Civil Code, it is certified that the company is not subject to the management and coordination of others.

SIGNIFICANTEVENTS

MANAGEMENT AND COORDINATION

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2.1.2 FINANCIAL POSITION

A reclassified Balance Sheet is provided below in the interest of a better understanding of the company’s financial position.

BALANCE SHEETYEAR2019 % YEAR

2018 % ABSOLUTE VAR. %

Trade receivables 3.712.528 20,0% 3.096.708 19,3% 615.820 19,9%

Other assets 661.108 3,6% 1.015.930 6,3% -354.822 -34,9%

Accrued income and prepaid expenses 554.587 3,0% 343.697 2,1% 210.890 61,4%

CURRENT ASSETS 4.928.223 26,6% 4.456.335 27,7% 471.888 10,6%

Trade payables -5.665.480 -30,6% -5.061.557 -31,5% -603.923 11,9%

Payments on account -1.771 -0,0% -3.515 -0,0% 1.744 -49,6%

Tax liabilities -822.546 -4,4% 269.471 1,7% -1.092.017 -405,2%

Accrued charges and deferred income -4.970.533 -26,8% -4.477.577 -27,9% -492.956 11,0%

Other liabilities -580.648 -3,1% -507.130 -3,2% -73.518 14,5%

CURRENT LIABILITIES -12.040.977 -65,0% -9.780.308 -60,9% -2.260.669 23,1%

NET WORKING CAPITAL -7.112.754 -38,4% -5.323.973 -33,1% -1.788.781 33,6%

Intangible assets 6.181.395 33,4% 4.856.910 30,2% 1.324.485 27,3%

Property, plant and equipment 19.955.173 107,7% 16.990.967 105,8% 2.964.206 17,4%

Long-term investments 121.303 0,7% 114.412 0,7% 6.891 6,0%

TOTAL NON-CURRENT ASSETS 26.257.871 141,8% 21.962.289 136,7% 4.295.582 19,6%

Employee severance indemnity -603.733 -3,3% -552.736 -3,4% -50.997 9,2%

Provisions for risks and charges -21.488 -0,1% -22.168 -0,1% 680 -3,1%

NET INVESTED CAPITAL 18.519.896 100,0% 16.063.412 100,0% 2.456.484 15,3%

Share capital -10.000.000 -54,0% -10.000.000 -62,3% 0 0,0%

Reserves -12.333.575 -66,6% -9.441.552 -58,8% -2.892.023 30,6%

Result for the year -4.325.290 -23,4% -3.208.734 -20,0% -1.116.556 34,8%

SHAREHOLDERS’ EQUITY -26.658.865 -143,9% -22.650.286 -141,0% -4.008.579 17,7%

Cash and cash equivalents 9.950.883 53,7% 9.651.093 60,1% 299.790 3,1%

Due to banks - within one year -585.374 -3,2% -1.252.305 -7,8% 666.931 -53,3%

Due to banks - after one year -1.226.540 -6,6% -1.811.914 -11,3% 585.374 -32,3%

NET FINANCIAL POSITION 8.138.969 43,9% 6.586.874 41,0% 1.552.095 23,6%

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USES OF FUNDS YEAR2019 % YEAR


Cash 483 0,0% 793 0,0% -310 -39,1%

Bank current accounts 9.950.400 24,1% 9.650.300 26,4% 300.100 3,1%

CASH AND CASH EQUIVALENTS 9.950.883 24,1% 9.651.093 26,4% 299.790 3,1%

Trade receivables 3.712.528 9,0% 3.096.708 8,5% 615.820 19,9%

Tax receivable 151.954 0,4% 507.249 1,4% -355.295 -70,0%

Other receivables 661.108 1,6% 1.015.930 2,8% -354.822 -34,9%

Accrued income and prepaid expenses 554.587 1,3% 343.697 0,9% 210.890 61,4%

TRADE AND OTHER RECEIVABLES 5.080.177 12,3% 4.963.584 13,6% 116.593 2,3%

WORKING CAPITAL 15.031.060 36,4% 14.614.677 40,0% 416.383 2,8%

Intangible assets 6.181.395 15,0% 4.856.910 13,3% 1.324.485 27,3%

Property, plant and equipment 19.955.173 48,3% 16.990.967 46,5% 2.964.206 17,4%

Long-term investments 121.303 0,3% 114.412 0,3% 6.891 6,0%

NON-CURRENT ASSETS 26.257.871 63,6% 21.962.289 60,0% 4.295.582 19,6%

TOTAL USES OF FUNDS 41.288.931 100,0% 36.576.966 100,0% 4.711.965 12,9%

SOURCES OF FUNDS YEAR2019 % YEAR


Due to banks 585.374 1,4% 1.252.305 3,4% -666.931 -53,3%

Due to customers 1.771 0,0% 3.515 0,0% -1.744 -49,6%

Trade payables 5.665.480 13,7% 5.061.557 13,8% 603.923 11,9%

Tax and social-security payables 974.500 2,4% 237.778 0,7% 736.722 309,8%

Other payables 580.648 1,4% 507.130 1,4% 73.518 14,5%

Accrued expenses and deferred income 4.970.533 12,0% 4.477.577 12,2% 492.956 11,0%

CURRENT LIABILITIES 12.778.305 30,9% 11.539.862 31,5% 1.238.443 10,7%

Due to banks 1.226.540 3,0% 1.811.914 5,0% -585.374 -32,3%

Provision for severance indemnity 603.733 1,5% 552.736 1,5% 50.997 9,2%

Provisions for risks and charges 21.488 0,1% 22.168 0,1% -680 -3,1%

CONSOLIDATED LIABILITIES 1.851.761 4,5% 2.386.818 6,5% -535.057 -22,4%

DEBT 14.630.066 35,4% 13.926.680 38,1% 703.386 5,1%

Share capital 10.000.000 24,2% 10.000.000 27,3% 0 0,0%

Reserves 12.333.575 29,9% 9.441.552 25,8% 2.892.023 30,6%

Result for the year 4.325.290 10,5% 3.208.734 8,8% 1.116.556 34,8%

SHAREHOLDERS’ EQUITY 26.658.865 64,6% 22.650.286 61,9% 4.008.579 17,7%

TOTAL SOURCES OF FUNDS 41.288.931 100,0% 36.576.966 100,0% 4.711.965 12,9%

BALANCE SHEET – SOURCES AND USES OF FUNDS

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INDICATORYEAR2019

YEAR2018

CHANGES%

Non-current assets coverage ratio

= A) Shareholders’ equity / B) Non-current assets 101,53 % 103,13 % (1,55) %

The indicator is used to assess the balance between the company’s equity and fixed investments

Debt to equity ratio

= [ TOT. LIABILITIES - A) Shareholders’ equity ]/ A) Shareholders’ equity 0,55 0,61 (9,84) %

The indicator expresses the ratio of debt to equity

Equity to invested capital

= A) Shareholders’ equity / TOT. ASSETS 64,97 % 61,92 % 4,28 %

This indicator measures the company’s capitalisation level and consequently its independence from debt

Financial charges to revenue

= C.17) Interest and other financial charges (ordinary share) / A.1) Revenue from sales and services (ordinary share)

0,20 % 0,44 % (54,55) %

This indicator expresses the ratio between the company’s financial charges and revenue

Equity less non-current assets

= [ A) Shareholders’ equity -( B) Non-current assets - B.III.2)Receivables (due within one year) ) ]

443.399 738.168 (39,93) %

This refers to the difference between equity and net non-current assets. It expresses, in absolute terms, the company’s ability to cover its investments in non-current assets with its own resources.

MAIN FINANCIAL POSITION INDICATORS

The following financial indicators have been calculated on the basis of the above reclassification:

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YEAR2019 % YEAR


VALUE OF PRODUCTION 21.186.905 100,0% 17.883.232 100,0% 3.303.673 18,5%

Revenue from sales 20.825.279 98,3% 17.201.907 96,2% 3.623.372 21,1%

Other revenue and income 361.626 1,7% 681.325 3,8% -319.699 -46,9%

EXTERNAL COSTS 9.213.622 43,5% 8.486.055 47,5% 727.567 8,6%

Purchase of goods 126.675 0,6% 122.384 0,7% 4.291 3,5%

Services 3.123.937 14,7% 3.357.104 18,8% -233.167 -6,9%

Rental, lease and hire 5.465.737 25,8% 4.661.197 26,1% 804.540 17,3%

Operating expenses 497.272 2,3% 345.370 1,9% 151.902 44,0%

VALUE ADDED 11.973.283 56,5% 9.397.177 52,5% 2.576.106 27,4%

Personnel costs 3.265.047 15,4% 2.590.483 14,5% 674.564 26,0%

EBITDA 8.708.236 41,1% 6.806.694 38,1% 1.901.542 27,9%

Amortisation, depreciation and write-downs 2.950.249 13,9% 2.616.628 14,6% 333.621 12,8%

EBIT 5.757.987 27,2% 4.190.066 23,4% 1.567.921 37,4%

Net financial income 82.984 0,4% -31.691 -0,2% 114.675 -361,9%

Financial income 124.446 0,6% 44.308 0,2% 80.138 180,9%

Financial charges -41.462 -0,2% -75.999 -0,4% 34.537 -45,4%

Adjustments to financial assets -341 -0,0% -105 -0,0% -236 224,8%

EBT 5.840.630 27,6% 4.158.270 23,3% 1.682.360 40,5%

Income taxes -1.515.340 -7,2% -949.536 -5,3% -565.804 59,6%

NET PROFIT 4.325.290 20,4% 3.208.734 17,9% 1.116.556 34,8%

INCOME STATEMENT

2.1.3 FINANCIAL PERFORMANCE

For a better understanding of the company’s operating result, a reclassification of the Income Statement is provided below.

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MAIN FINANCIAL PERFORMANCE INDICATORS

The following financial performance indices have been calculated on the basis of the above reclassification:

INDEXYEAR2019

YEAR2018

CHANGES%

R.O.E.

= 23) Profit (loss) for the year/ A) Shareholders’ equity 16,22 % 14,17 % 14,47 %

The index measures the return on equity invested in the company

R.O.I.

= [ A) Value of production (ordinary share)- A.5) Other revenues and income (ordinary share)- B) Production costs (ordinary share)+ B.14) Other operating expenses (ordinary share) ]/ TOT. ASSETS

14,27 % 10,54 % 35,39 %

The index measures the profitability and efficiency of capital invested in the core business

R.O.S.

= [ A) Value of production (ordinary share)- B) Production costs (ordinary share) ]/ A.1) Revenue from sales and services (ordinary share)

27,65 % 24,36 % 13,51 %

The index measures the company’s ability to generate profits from sales, i.e. the operating income earned per unit of revenue

R.O.A.

= [ A) Value of production(ordinary share) - B) Production costs (ordinary share) ] / TOT. ASSETS

13,95 % 11,46 % 21,73%

The index measures the return on invested capital with reference to the profit before financial income and charges

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A more detailed analysis of the information is provided below, as specifically required by Article 2428 of the Italian Civil Code.

2.1.4 INFORMATION PURSUANT TO ARTICLE 2428 OF THE ITALIAN CIVIL CODE

Pursuant to and for the purposes of the first paragraph of Article 2428 of the Italian Civil Code, a description of the main risks and uncertainties to which the company is exposed is provided below:

STRATEGIC RISKS

Risks associated with the high degree of market competitivenessThe Issuer operates in a dynamic, highly competitive context that puts it in competition with the main com-munication operators engaged on the Italian market, i.e. larger companies and industrial groups, including multinationals, and specialised operators with greater financial resources than the Issuer, or with specific sector skills that are particularly developed and such to allow for better positioning on the reference market. If the Issuer, following a rise in the number of its direct competitors, the strengthening of some of them or due to its lower investment capacity, is not able to main-tain its competitive strength on the market, this could have negative effects on the Issuer’s market position and growth prospects as well as on its economic and financial position and results of operations.

Risks associated with technological evolutionThe electronic communications sector is characterised by rapid technological development and is affected by the competitive pressure from technological advance-ment and the rapid obsolescence of the products and services offered by market players. The Issuer may, therefore, face increased competition due to emerg-ing technologies, such as, for example, the fifth gen-eration wireless network (so-called 5G), which should be implemented from 2020 and could, in some cases, potentially replace the technology currently used by the Issuer, as well as the products and services that may be introduced in the future. New technologies, in fact, could limit or reduce the Issuer’s activity and/

MAIN RISKS AND UNCERTAINTIES TO WHICH THE

COMPANY IS EXPOSED

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or favour the development and growth of compet-ing operators and this could reduce the competitive advantage currently enjoyed by the Issuer. In order to maintain or further improve its competitive position in the reference market, the Issuer endeavours to con-tinue to respond to rapid technological changes and to constantly develop the characteristics of its services and products so as to respond promptly to changing market needs. Nevertheless, the likely impossibility to face new investments and/or to adapt quickly to the technological evolution and/or to the introduction of a new technology, could influence the Issuer’s activity and/or results, causing negative effects on its economic and financial position and results of operations and also limiting its strategy of expansion on the market.

Risks associated with the dependence on licences, authorisations and concessionsThe provision of electronic communications networks or services to the public is subject, pursuant to Article 25, paragraph 3, of the Electronic Communications Code, to a general authorisation that can be obtained by submit-ting a declaration of commencement of business, pro-vided that the conditions and requirements set forth by the applicable law are met. If it is ascertained that these conditions are lacking, not met or breached, the Issuer may be subject to financial penalties by the Authority and may be prohibited from continuing, in whole or in part, its activities, with possible negative effects on its economic and financial position and results of oper-ations. Moreover, the above-mentioned authorisation has a maximum duration of twenty years and can be renewed by submitting, within the terms established by the applicable legislation, a specific declaration. The granting of the renewal of the authorisation is also subject to compliance with the conditions and require-ments established by the Electronic Communications Code. The Issuer has submitted the necessary declara-tion of commencement of business for the provision of public communications networks throughout the country, most recently on 21 May 2014. If, at the date of the expiry of the aforesaid authorisation, the Issuer were unable to obtain the renewal of the authorisation, including in consideration of the different or additional requirements that may be introduced by the Authority, this could have negative effects on its economic and financial position and results of operations. For the pro-vision of the above mentioned services, the Issuer has

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set up its own fibre-optic communications network, both by acquiring availability of the related infrastruc-ture from third party operators and setting up its own infrastructure, for direct access to end customers, for the construction, maintenance and extension of which the Issuer has obtained or will have to obtain specific rights of way for third party assets, rights of use for third party assets and other administrative authorisations. There can be no absolute certainty that, over time, unin-terruptedly, the requirements and/or conditions that the issue of authorisations and permit certificates is subordinate to will exist, nor can it be ensured that the Issuer will be able to obtain and maintain such rights of passage and use and administrative authorisations under acceptable conditions.Risks associated with dependence on the services and infrastructure of other operatorsIn order to offer its connectivity services to the public, the Issuer, in addition to having installed its own com-munications infrastructure, has also acquired, from third-party operators, in particular from Telecom Italia S.p.A. and Infratel S.p.A. (MiSE’s in-house company), the availability of networks for access to fibre-optic infra-structure in the provinces of Brescia, Bergamo and Mantua, on the basis of contracts for the transfer of the right of use in IRU (Indefeasible Right of Use) mode. Notwithstanding the contractual safeguards in favour of the Issuer, the full availability of the fibre infrastruc-ture depends on the continuous permanence of the rights of way held by the operators granting the Issuer the rights to use such fibres, as well as on the continuity

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of their full usability, which could be lost, even if for lim-ited periods of time, as a result of unforeseeable external events. Although the Company is increasingly autono-mously developing the connection to the end customer on the Date of the Admission Document, the Issuer largely provides access to users through the physical connection (consisting of the copper or fibre pair) of other operators. In this case as well, despite the contrac-tual protections in favour of the Issuer, as well as those provided for by applicable regulations, the availability of the service depends on the continuous availability of the access network and on its state and degree of maintenance and possible obsolescence. The Issuer’s activity depends in particular on the interconnection agreements concluded with various electronic commu-nications operators for access to and interconnection with their networks. Among these, the main supplier is Telecom Italia S.p.A., which offers its services on the basis of prices regulated by AGCOM in order to ensure an offer of services at fair and non-discriminatory con-ditions as well as on the basis of contractual terms sub-ject to prior control by AGCOM and, therefore, of limited negotiability. There is no guarantee that these contracts will be renewed annually under terms and conditions that are not worse than those currently in force as a result of amendments to AGCOM regulations. Any breach of contract by such operators, or any financial or operational difficulties which they may find themselves in, could have a negative effect on the economic results of the Issuer. Interconnection contracts also provide for a series of obligations on the part of the Issuer, the full or partial non-fulfilment of which may lead to the ter-mination of the relationship. If the Company is in any case in default, there is the possibility for the operator to suspend or interrupt the provision of services or to request the termination of the contract, with possible negative effects on the economic and financial position and results of operation of the Issuer. Operation in the electronic communications sector may involve the use of technological standards covered by patents and/or other intellectual and/or industrial property rights, with the consequence that if the Issuer were to use such standards in the future, it would have to acquire the relevant licences from the respective owners, thereby bearing the related costs. However, it is not possible to rule out the possibility that in the future third parties may lodge disputes or that proceedings, both admin-istrative and jurisdictional, may be initiated against the

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Issuer in relation to the violation of intellectual and/or industrial property rights relating to the aforemen-tioned technological standards.

FINANCIAL RISKS

In particular, with regard to the analysis of the finan-cial risks connected with the Company’s operations, we believe that we can report the following:

Credit and concentration riskThe maximum theoretical exposure to credit risk is represented by the book value of trade receivables and other receivables recorded under current assets.The main amount of these receivables relates to trade receivables, and the write-downs made are considered adequate to cover this type of risk.As at 31 December 2019 there were no significant con-centrations of credit risk as this risk is mitigated by the fact that credit exposure is spread over a large number of customers (individuals, cooperatives, companies and public bodies).It should be noted that the Issuer’s commercial offer provides for an initial cost for the activation of its services, to be borne by each new customer, in addi-tion to the payment of monthly fees for their supply, with invoicing upon the activation of the service and bimonthly in advance, respectively. The Company also carries out careful monitoring and debt recovery activ-ities and has adopted an internal procedure that pro-vides for the interruption of the service supply in the event of non-payment of the fees due.

Exchange rate riskThe Company is not subject to exchange rate risks as it uses the euro as the reference currency for its transactions

Interest rate riskThe Company is subject to financial risks arising from fluctuations in interest rates, since at 31 December 2019 there were credit lines of a banking nature in place.With regard to the use of these short-term credit lines for current operations, they are governed by contrac-tually defined market conditions and rates and the risk deriving from changes in the relative interest rates is not considered significant. As mentioned and explained in the Explanatory Notes, the company has signed

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derivative contracts in the form of interest rate caps.It should also be noted that there are no short, medium or long-term financing transactions in place with sub-sidiaries or associates.

OPERATIONAL RISKS

These represent the risk of losses deriving from organ-isational, procedural and production inefficiencies. The operational risks inherent in our business refer to possi-ble inadequacies in internal processes, external factors, fraud, employee errors, errors in correctly documenting transactions, loss of commercially sensitive critical data and failures in systems and/or network platforms.The company has adopted an adequate organisational model to prevent and limit these risks.

Environmental and occupational safety risksThe company carries out its activities in full compli-ance with the provisions on the environment and hygiene in the workplace.Relations with employees are managed with respect for human rights, fundamental rights at work, equal opportunities and labour and safety regulations, with constant attention paid to training. INTRED attaches great importance to the safety and health of work-ers in the workplace as part of its corporate strate-gies and objectives.

Country riskConsidering the total concentration of turnover in Italy (low-risk) and the type of services offered, there are no areas of activity with risk and/or return profiles that require particular disclosure.

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Pursuant to the second paragraph of Article 2428 of the Italian Civil Code, we certify that, due to the specific activity carried out and in view of a better understand-ing of the company’s situation, performance and oper-ating result, the presentation of non-financial indicators is not considered relevant.

There is no particular information regarding the environment to report. It should be noted, however, that the Company has not been found guilty or held liable for any charges in relation to damage caused to the environment.

The growth and professional development of people as a determining factor for the evolution and develop-ment of its activities remain the primary objectives of the company. The high level of skills and knowledge acquired, as well as the commitment, flexibility, dedi-cation and pursuit of excellence in one’s work, are valu-able assets that the company intends to preserve and, possibly, increase.During the year, there were no occupational accidents involving serious injuries or for which the company was found liable and the company did not receive any claims of occupational illnesses on employees or former employees and/or for mobbing.Personnel costs increased by 26% to 3.3 million euro, equivalent to 15.4% of the value of production (15.7% in 2017 and 14.8% in 2018). This section of expenditure contains the costs of direct employees and tempo-rary workers, which in 2019 averaged 68.5 units (Full Time Equivalent – FTE). Production per employee has improved significantly in recent years: 298 thou-sand euro in 2017, 307 thousand euro in 2018 and 313 thousand euro in 2019.In 2019, the company also devoted particular attention to personnel training. Technical courses were held inter-nally and/or through training companies specialised in networking, with special focus on Cisco Systems equip-ment. The company also organised training courses for sales staff and pre/post sales assistance staff, with the presence of specialised teachers.

MAIN NON-FINANCIAL

INDICATORS

ENVIRONMENTAL INFORMATION

PERSONNEL INFORMATION

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Pursuant to and for the purposes of point 1 of the third paragraph of Article 2428 of the Italian Civil Code, we certify that research and development activities were carried out during the year.Specifically, during 2019 your company, above all to sup-port the above investments, carried out basic research and development activities and focused its efforts par-ticularly on projects that are considered particularly innovative and that required a significant financial commitment, both for the internal staff involved and for the services, consulting and materials used for test-ing and experimentation. It is hoped that the positive outcome of these innovations will continue to generate good results in terms of turnover, with favourable reper-cussions on the company’s processes.

With regard to the provisions of point 2 of the third paragraph of Article 2428 of the Italian Civil Code, it should be noted that the company does not have any type of relationship with the companies concerned.

Pursuant to Articles 2435-bis and 2428 of the Italian Civil Code, it should be noted that the company did not hold any own shares at the closing date of the financial year.

We certify that the company is not subject to the con-straint of control by any company or group of companies.

In accordance with point 6), paragraph 3 of Article 2428 of the Italian Civil Code, we report that the results for the first few months of the current year signal a positive trend with respect to the results for reporting year, as confirmed by the increase in turnover and the improve-ment in financial performance indicators.Investments will continue to focus on developing the proprietary network, a crucial lever for generating

RESEARCH AND DEVELOPMENT

ACTIVITIES

TRANSACTIONS WITHSUBSIDIARIES,

ASSOCIATED COMPANIES, PARENT

COMPANIES AND COMPANIES SUBJECT

TO THE CONTROL OF THE PARENT

COMPANIES

OWN SHARES

SHARES/UNITS OF THE PARENT

COMPANY

OUTLOOK

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a solid increase in the company’s revenues. We will invest mainly in the FTTH network, extending its reach throughout Lombardy.In recent months, the national and international sce-nario has been characterised by the outbreak of Covid-19 (a novel coronavirus) and the restrictions that the Public Authorities have imposed in response to it, closing schools and many businesses and ordering residents to stay home. This has led to an increase in online activity. The services offered by Intred proved fundamental to ensuring connectivity for citizens, businesses and gov-ernment, in particular in support of remote working and use of countless cloud applications. Accordingly, given the nature of the sector, absent other abnormal situa-tions, we expect the Company’s business to continue to grow, even at this difficult time in history.

In order to reduce the risk of adverse changes in interest rates, derivative contracts (IRSs) have been entered into for hedging purposes.The derivative contracts entered into are correlated with the payables relating to the loan agreements signed.In particular, there is a high correlation between the technical/financial characteristics of the hedged liabili-ties and those of the hedging contract and there is also the intention to put the hedge in place.Transactions in derivative financial instruments are accounted for in a manner that is consistent with the main transactions for which they are carried out, or to the market where applicable.

In compliance with the provisions of Article 2428 of the Italian Civil Code, the following table shows the compa-ny’s secondary operating offices:Head Office: Via P. Tamburini n. 1 – Brescia (BS)Technical Headquarters: Via Triumplina n. 235 – Brescia (BS)

USE OF FINANCIALINSTRUMENTS

RELEVANT TO THE ASSESSMENT

OF FINANCIAL POSITION AND

OPERATING PERFORMANCE FOR THE YEAR

BRANCH OFFICES

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2.1.5 CONCLUSIONS

Shareholders, considering what has been previously reported and of the information provided in the Explanatory Notes, we invite you:• to approve the Financial Statements for the year

ended 31/12/2019, together with the Explanatory Notes and this Report that accompany them;

• to allocate the profit for the year in accordance with the proposal made in the Explanatory Notes.

Brescia, 20 March 2020For the Board of Directors

Daniele PeliChairman of the Board of Directors

EXPLANATORY NOTES

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2.2.1 BALANCE SHEET 58

2.2.2 INCOME STATEMENT 60

2.2.3 CASH FLOW STATEMENT /INDIRECT METHOD 62

2.2.4 EXPLANATORY NOTES

/INITIAL PART 64


/ASSETS 67


/LIABILITIES AND SHAREHOLDERS’ EQUITY 79


/INCOME STATEMENT 84


/CASH FLOW STATEMENT 91


/OTHER INFORMATIONS 92

2.2.10 EXPLANATORY NOTES /FINAL PART 98

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EXPLANATORY NOTES

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2.2.1 BALANCE SHEET

31/12/2019 31/12/2018ASSETSB) Non-current assets

I – Intangible assets - -3) industrial patents and intellectual property rights 68.739 44.0404) concessions, licenses, trademarks and similar rights 5.192.459 4.075.8335) goodwill - 6.5006) assets in progress and payments on account 25.783 2.2007) others 894.413 728.337

Total intangible assets 6.181.394 4.856.910II – Property, plant and equipment - -

1) land and buildings 2.519.085 2.573.2912) plant and machinery 17.389.638 14.366.9844) other assets 45.982 50.6925) assets in progress and payments on account 468 -

Total property, plant and equipment 19.955.173 16.990.967III – Long-term investments - -

1) equity investments in - -d-bis) other companies 3.896 4.007

Total equity investments 3.896 4.0072) receivables - -

d-bis) from others 42.404 50.171within the next financial year 42.404 50.171

Total receivables 42.404 50.1713) other securities 75.000 60.0004) derivative financial assets 3 234

Total long-term investments 121.303 114.412Total non-current assets (B) 26.257.870 21.962.289C) Current assets

II – Receivables - -1) trade receivables 3.712.528 3.096.708

within the next financial year 3.712.528 3.096.7085-bis) tax receivables 98.465 468.010

within the next financial year 98.465 468.0105-ter) prepaid tax assets 53.489 39.2395-quater) from others 661.108 1.015.930

within the next financial year 661.108 1.015.930Total receivables 4.525.590 4.619.887IV – Cash and cash equivalents - -

1) bank and postal deposits 9.950.400 9.650.3003) cash and valuables on hand 483 793

Total cash and cash equivalents 9.950.883 9.651.093Total current assets (C) 14.476.473 14.270.980D) Accruals and deferrals 554.588 343.697

TOTAL ASSETS 41.288.931 36.576.966

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31/12/2019 31/12/2018LIABILITIESA) Shareholders’ equity 26.658.865 22.650.286

I – Capital 10.000.000 10.000.000II – Share premium reserve 3.810.725 3.810.725IV – Legal reserve 624.089 463.652VI – Other reserves, separately indicated - -

Extraordinary reserve 7.915.089 5.183.802Total other reserves 7.915.089 5.183.802VII – Cash flow hedging reserve (16.328) (16.627)IX – Profit (loss) for the year 4.325.290 3.208.734

Total shareholders’ equity 26.658.865 22.650.286B) Provisions for risks and charges

2) for taxes, including deferred taxes - 563) financial derivative liabilities 21.487 22.112

Total provisions for risks and charges 21.487 22.168C) Staff severance indemnities 603.733 552.736D) Payables

4) due to banks 1.811.914 3.064.219within the next financial year 585.374 1.252.305after the next financial year 1.226.540 1.811.914

6) advances 1.771 3.515within the next financial year 1.771 3.515

7) trade payables 5.665.480 5.061.557within the next financial year 5.665.480 5.061.557

12) tax payables 849.946 143.580within the next financial year 849.946 143.580

13) payables to social security institutions 124.554 94.198within the next financial year 124.554 94.198

14) other payables 580.648 507.130within the next financial year 580.648 507.130

Total payables 9.034.313 8.874.199E) Accruals and deferrals 4.970.533 4.477.577

TOTAL LIABILITIES 41.288.931 36.576.966

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2.2.2 INCOME STATEMENT

31/12/2019 31/12/2018A) Value of production

1) revenue from sales and services 20.825.279 17.201.9075) other revenue and income - -

others 361.626 681.325Total other revenue and income 361.626 681.325

TOTAL VALUE OF PRODUCTION 21.186.905 17.883.232B) Production costs

6) for raw, ancillary and consumable materials and goods for resale 126.675 122.384

7) for services 3.123.935 3.357.1048) for rental, lease and hire 5.465.737 4.661.1979) for personnel - -

a) wages and salaries 2.410.160 1.932.801b) social security contributions 658.180 492.532c) staff severance indemnities 139.720 119.038e) other costs 56.987 46.112

Total personnel costs 3.265.047 2.590.48310) amortisation, depreciation and write-downs - -

a) amortisation 529.104 460.876b) depreciation 2.342.145 2.155.752d) write-downs of receivables included in current assets and cash and cash equivalents 79.000 -

Total amortisation, depreciation and write-downs 2.950.249 2.616.62814) other operating expenses 497.275 345.370

TOTAL PRODUCTION COSTS 15.428.918 13.693.166

DIFFERENCE BETWEEN VALUE OF PRODUCTION AND PRODUCTION COSTS (A - B) 5.757.987 4.190.066

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31/12/2019 31/12/2018C) Financial income and charges

15) income on investments - -others 45 -

Total income on investments 45 -16) other financial income - -

d) other income - -others 124.401 44.308Total other income 124.401 44.308

Total other financial income 124.401 44.30817) interest and other financial charges - -

others 41.462 75.999Total interest and other financial charges 41.462 75.999

Total financial income and charges (15+16-17+-17-bis) 82.984 (31.691)D) Value adjustments of financial assets and liabilities

19) write-downs - -a) of equity investments 341 105

Total write-downs 341 105Total value adjustments of financial assets and liabilities (18-19) (341) (105)

PRE-TAX PROFIT (LOSS) (A-B+-C+-D) 5.840.630 4.158.27020) Current, deferred and prepaid income taxes for the year

current taxes 1.529.740 948.650deferred and prepaid taxes (14.400) 886

Total current, deferred and prepaid income taxes for the year 1.515.340 949.536

21) PROFIT (LOSS) FOR THE YEAR 4.325.290 3.208.734

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2.2.3 CASH FLOW STATEMENT /INDIRECT METHOD

31/12/2019 31/12/2018A) Cash flows from operating activities (indirect method)

Profit (loss) for the year 4.325.290 3.208.734Income taxes 1.515.340 949.536Interest payable/(receivable) (82.939) 31.691Dividends (45)

1) Profit (loss) for the year before income tax, interest, dividends and gains/losses from/on disposal 5.757.646 4.189.961

Adjustments for non-monetary items that did not have a balancing entry in net working capitalDepreciation and amortisation 2.871.249 2.616.628Other upwards/(downwards) adjustments for non-monetary items 139.720 119.038

TOTAL ADJUSTMENTS FOR NON-MONETARY ITEMS THAT DID NOT HAVE A BALANCING ENTRY IN NET WORKING CAPITAL 3.010.969 2.735.666

2) Cash flow before changes in net working capital 8.768.615 6.925.627Changes in net working capitalDecrease/(Increase) in trade receivables (615.820) 484.828Decrease/(Increase) in trade payables 603.828 574.629Decrease/(Increase) in accrued income and prepaid expenses (210.891) 153.417Decrease/(Increase) in accrued expenses and deferred income 492.956 352.735Other decreases/(Other increases) in net working capital 1.518.613 (437.087)

TOTAL CHANGES IN NET WORKING CAPITAL 1.788.686 1.128.5223) Cash flow after changes in net working capital 10.557.301 8.054.149

Other adjustmentsInterest received/(paid) 82.939 (31.691)(Income taxes paid) (1.515.340) (949.536)Dividends received 45 -(Use of provisions) (56) (291)Other receipts/(payments) (88.723) (43.717)

TOTAL OTHER ADJUSTMENTS (1.521.135) (1.025.235)CASH FLOW FROM OPERATING ACTIVITIES (A) 9.036.166 7.028.914

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31/12/2019 31/12/2018B) Cash flow from investing activities

Property, plant and equipment(Investments) (5.306.351) (4.767.584)Intangible assets(Investments) (1.853.588) (1.582.546)Long-term investments(Investments) (14.889) (15.841)Divestments 7.767

CASH FLOW FROM INVESTING ACTIVITIES (B) (7.167.061) (6.365.971)C) Cash flows from financing activities

Third party financingIncrease/(Decrease) in short-term bank borrowings (666.931) (653.738)(Loans repaid) (585.374) (1.446.680)EquityPaid capital increase 10.000.725(Dividends and interim dividends) (317.010) (1.446.680)

CASH FLOW FROM FINANCING ACTIVITIES (C) (1.569.315) 7.900.307

INCREASES (DECREASES) IN CASH AND CASH EQUIVALENTS (A ± B ± C) 299.790 8.563.250

Cash and cash equivalents at the beginning of the yearBank and postal deposits 9.650.300 1.086.844Cash and valuables on hand 793 999

TOTAL CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 9.651.093 1.087.843

Cash and cash equivalents at the end of the yearBank and postal deposits 9.950.400 9.650.300Cash and valuables on hand 483 793TOTAL CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 9.950.883 9.651.093Difference in balances

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2.2.4 EXPLANATORY NOTES /INITIAL PART

Transposition of Dir. 34/2013/E.U.With reference to the financial statements for the years from 01/01/2016, it should be noted that Legislative Decree no. 139 of 18/08/2015 (so-called “Financial Statements Decree”), published in Official Journal no. 205 of 04/09/2015, issued in implementation of EU Directive no. 34 of 26/06/2013, amended the Italian Civil Code, with the aim of aligning the rules con-tained therein on the regulation of the financial state-ments of limited liability companies, with the new Community provisions.This Directive has replaced existing Community leg-islation, with the aim of improving the scope of the accounting document and launching a process of reg-ulatory simplification governing the preparation and publication of the financial statements.In this context of reform, the Italian Accounting Body (OIC), in line with the institutional purposes established by law, has also revised 20 accounting standards, which are responsible for the practical application of the new regulatory framework.In particular, the amendment to the financial state-ments of limited liability companies affected:• the documents making up the financial statements;

• the standards for preparing the financial statements;

• the contents of the Balance Sheet and Income Statement;

• the measurement criteria;

• the content of the Explanatory Notes.

CommentShareholders, these Explanatory Notes form an integral part of the financial statements as at 31/12/2019.The financial statements for the year ended 31/12/2019 show a gross profit of 5,840,630 euro and a net profit of 4,325,290 euro. At the end of 2019, the shareholders’ equity of the company amounted to 26,658,865 euro.The financial statements comply with the provisions of Articles 2423 et seq. of the Italian Civil Code and with national accounting standards as published by the Italian Accounting Body; therefore, they clearly, truth-fully and fairly represent the financial position and

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results of operations of the company for the year.The contents of the Balance Sheet and Income Statement are in accordance with Articles 2424 and 2425 of the Italian Civil Code, while the Cash Flow Statement has been prepared in accordance with Article 2425-ter.The Explanatory Notes, drawn up in accordance with Article 2427 of the Italian Civil Code, also contain all the information needed for a correct interpretation of the financial statements.

Preparation of the financial statementsThe information contained in this document is pre-sented in the order in which the related items are pre-sented in the Balance Sheet and Income Statement.We certify that, pursuant to Article 2423, paragraph 3 of the Italian Civil Code, if the information required by specific legal provisions is not sufficient to give a true and fair view of the company’s situation, we have provided the additional information deemed neces-sary for this purpose.There have been no exceptional cases that have made it necessary to apply the derogations provided for in Article 2423, paragraphs 4 and 5 and Article 2423-bis paragraph 2 of the Italian Civil Code.The financial statements, as well as these Explanatory Notes, have been drawn up in euro units.

Accounting policiesThe items in the financial statements have been meas-ured in accordance with the principle of prudence and on a going-concern basis.In determining whether the going concern assumption is applicable, the Directors have taken into account all information about the future, at least, but not limited to, twelve months after the balance sheet date.In accordance with Article 2423-bis, paragraph 1, point 1-bis of the Italian Civil Code, the recognition and pres-entation of items take account of the substance of the transaction or contract.In preparing the financial statements, income and charges have been recorded on an accruals basis, regardless of the time of their occurrence. Risks and losses pertaining to the year have also been taken into account, even if they became known after the end of the year.

Structure and content of the financial statements

BASIS OF PREPARATION

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The Balance Sheet, Income Statement, Cash Flow Statement and accounting information included in these Explanatory Notes are consistent with the accounting records, f rom which they have been directly drawn.No groupings of items preceded by Arabic numerals have been made in the presentation of the Balance Sheet and Income Statement, as optionally provided for by Article 2423-ter of the Italian Civil Code.

Pursuant to Article 2424 of the Italian Civil Code, it is hereby confirmed that there are no assets or lia-bilities that fall under more than one line of the financial statements.

The criteria applied for the measurement of financial statement items and in the value adjustments comply with the provisions of the Italian Civil Code and with the indications contained in the accounting standards issued by the Italian Accounting Body. Moreover, they have not changed compared to the previous year.Pursuant to Article 2427, paragraph 1, no. 1 of the Italian Civil Code, the most significant measurement criteria adopted in compliance with the provisions of Article 2426 of the Italian Civil Code are illustrated, with par-ticular reference to those financial statement items for which the legislator accepts various measurement and adjustment criteria or for which no specific cri-teria are envisaged

Measurement of foreign currency itemsAt the closing date of the financial year, the com-pany does not hold any receivables or payables in foreign currency. Repurchase transactionsPursuant to Article 2427 no. 6-ter, the company certi-fies that during the year it did not carry out any repur-chase transactions.

Additional information• The company does not have any receivables and pay-

ables due beyond five years;• the company has not pledged company assets as

collateral;• no financial charges have been capitalised.

MEASUREMENT CRITERIA

OTHER INFORMATION

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2.2.5 EXPLANATORY NOTES /ASSETS

Assets have been measured in the Balance Sheet in accordance with the provisions of Article 2426 of the Italian Civil Code and in compliance with Italian GAAP. The sections relating to the individual items indicate the criteria applied in the specific case.

Intangible assetsIntangible assets, if the conditions provided for by the accounting standards are met, are recognised at pur-chase and/or production cost and are amortised on a straight-line basis according to their future use and taking into account the provisions under point 5) of Article 2426 of the Italian Civil Code.The value of assets is shown net of accumulated amor-tisation and write-downs.Where present, amortisation has been applied with the following pre-established plan, which is con-sidered to ensure a correct distribution of the cost incurred over the useful life of the assets in question:

Pursuant to Article 10 of Law no. 72 of 19 March 1983, and as also referred to in subsequent monetary revaluation laws, it should be noted that no monetary revaluation has ever been carried out for intangible assets still exist-ing in the Balance Sheet.The criterion for amortisation of intangible assets was applied systematically and in each financial year, in relation to the residual possibility of economic use of each individual asset or expense. It should be noted that it was not necessary to make write-downs on these fixed costs pursuant to Article 2426, paragraph 1, no. 3 of the Italian Civil Code since, as required by accounting

NON-CURRENT ASSETS

ITEMS PERIOD

Start-up and expansion costs 5 years on a straight-line basis

Patents and intellectual property 10 years on a straight-line basis

Concessionson the basis of the duration of their exploitation, where defined, or on the basis of their contractual duration, if shorter

Software 3 years on a straight-line basis

Goodwill 10 years on a straight-line basis

Other intangible assets 5 years on a straight-line basis – 10 years on a straight-line basis for non-proprietary exchange infrastructure

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standard OIC 9, no indicators of potential impairment of intangible assets were found.Any disposals of intangible assets during the year resulted in the elimination of their residual value.Public grants received in relation to intangible assets were accounted for using the indirect method. The grants, therefore, were entered in the Income Statement under item A5 “Other revenue and income” and, therefore, deferred to subsequent years through the recording of deferred income.

Intangible assetsIntangible assets are recorded at purchase cost, includ-ing incidental costs, and are amortised within the legal or contractual limits established for them, or, if lower, according to the duration of their use.The movements in intangible assets are shown below:

Details of the residual value of intangible assets are shown below:

* of which 883,556 euro relating to fibre-optic infrastructure.

Historical cost (opening value) 6.359.637Increases / Decreases 1.853.444Historical cost (closing value) 8.213.081Accumulated amortisation (opening value) 1.502.727Increases / Decreases 528.960Accumulated amortisation (closing value) 2.031.687Residual value as at 31/12/2019 6.181.394

Software 68.739Concessions: Multi-year rights of use for optic fibre 5.192.459Goodwill 0Other costs with multi-year use *894.413Intangible assets in progress 25.783Total residual value as at 31/12/2019 6.181.394

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It should be noted that most of the “Long-term costs” under Intangible assets relate to network infrastruc-tures, which are extremely important industrial assets for the production cycle. Therefore, it is consid-ered necessary to provide further details of them in the following table:

The item “Concessions: Multi-year rights of use for optic fibre” refers to the investments made in relation to the contracts that the company has signed with Telecom Italia Spa, Infratel Spa and other minor operators con-cerning the IRU (Indefeasible Right of Use) concession, mainly for 15 years, for portions of the fibre-optic net-work located in Lombardy.The item “Non-proprietary exchange infrastructure” included in the item “Other costs with multi-year use” consists solely of investments incurred in respect of the contracts that the company has entered into with Telecom Italia Spa and other major operators.

HISTORICAL COST

ACCUMULATED AMORTISATION

NET RESIDUAL VALUE

Concessions: Multi-year rights of use for optic fibre 6.362.541 1.170.082 5.192.459

Non-proprietary exchange infrastructure 1.110.369 227.144 883.225

Total at 31/12/2019 7.472.910 1.397.226 6.075.684

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Property, plant and equipmentAssets belonging to the category of property, plant and equipment, recorded at the date when the risks and benefits linked to the acquired asset are transferred, are recorded in the financial statements at purchase cost, increased by any additional charges incurred until the assets are ready for use and in any case to the extent of their recoverable value.The depreciation criteria for property, plant and equipment did not change from those applied in the previous year.Property, plant and equipment are systematically depreciated each year at rates that are proportional to their residual useful life and also taking into account the physical wear and tear of the asset; for the first year of operation of the assets, with the exception of deprecia-ble assets of less than 516.46 euro, the rates are reduced by 50% as they represent the actual participation in the production process, which can be considered to have taken place on average in the middle of the year. Depreciation on assets sold or disposed of during the year is not taken into account.Public grants received in relation to property, plant and equipment were accounted for using the indirect method. The grants, therefore, were entered in the Income Statement under item A5 “Other revenue and income” and, therefore, deferred to subsequent years through the recording of deferred income.It should be noted that it was not necessary to make write-downs pursuant to Article 2426, paragraph 1, no. 3 of the Italian Civil Code since, as required by accounting standard OIC 9, no indicators of potential impairment of property, plant and equipment were found.

The movements in property, plant and equip-ment are shown below:

Historical cost (opening value) 26.032.821Increases / Decreases 5.304.400Historical cost (closing value) 31.337.221Accumulated amortisation (opening value) 9.041.854Increases / Decreases 2.340.194Accumulated amortisation (closing value) 11.382.048Residual value as at 31/12/2019 19.955.173

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Details of the residual value of property, plant and equipment are shown below:

The depreciation criteria adopted are as follows:

Land 1.128.155Buildings 1.390.930General installations 23.437Specific installations 2.660Network and fibre infrastructure 17.363.541Office furniture and machines 19.126Electronic office machines 25.306Furnishing 1.550Property, plant and equipment in progress 468Total residual value as at 31/12/2019 19.955.173

The amounts recorded in this way are consistent with the state of use of the depreciated assets, taking into account the use and obsolescence suffered.

ITEMS RATES

Land no depreciation

Buildings 3%

Generic installations with independent use 15%

Alarm and video surveillance systems 30%

Owned network and fibre infrastructure 5%

Proprietary exchange infrastructure 10%

Network equipment 15%-18%

Office furniture 12%

Electrical accounting equipment 20%

Vehicles 25%

Lorries 20%

Depreciable assets below 516.46 euro(on tangible assets with a value of less than 516.46 euro which may be used inde-pendently in operation of the business).

100%

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For illustration purposes, it is considered necessary to further detail the industrial assets included among property, plant and equipment in the following table:

Land and buildingsBased on the precise application of accounting stand-ard OIC 16, reviewed in light of the tax changes intro-duced by Article 2 – paragraph 18 – of Decree Law no. 262 of 03/10/2006, converted with amendments into Law no. 286 of 24/11/2006, in previous years the portion of the cost referred to the relevant pertinent areas was separated, differentiating them from the buildings.The value attributed to the land was identified on the basis of the lump-sum criterion of allocation of the unit cost, established by the tax legislator, considering it appropriate for an amount equal to 20% of the cost of the property, net of any capitalised incremental costs. In the event that the area was independently purchased prior to the subsequent construction of the building, the depreciable value is equal only to the cost actually incurred for the construction of the building.The principle contained in the provision of paragraph 7 of the above-mentioned law applies to the purchase of an area prior to the subsequent construction of the building and also to buildings built on an area already used for construction or that is free following the dem-olition of the building that occupied it.The company, again pursuant to Law 286/2006, has decided not to calculate depreciation rates on land (for both tax and financial reporting purposes).

HISTORICAL COST

ACCUMULATED DEPRECIATION

NET RESIDUAL VALUE

Owned network and fibre infrastructure 20.631.339 5.961.099 14.670.240

Proprietary exchange infrastructure 902.324 128.040 774.284

Network equipment 2.656.206 737.189 1.919.017

Total at 31/12/2019 24.189.869 6.826.328 17.363.541

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Assets in progress and payments on accountAdvances to suppliers for the purchase of property, plant and equipment entered under item B.II.5 are ini-tially recognised on the date when an obligation arises to pay these amounts. Consequently, payments on account are not subject to depreciation.Property, plant and equipment under construction are recorded in the same item; they are initially recognised on the date when the first costs for the construction of the asset are incurred and include the internal and external costs incurred for the construction of the asset. These costs remain in this item until the project is com-pleted and are not subject to depreciation until then.

Long-term investments

Equity investmentsAll equity investments recorded in the f inancial statements have been measured at cost, defined as the cost incurred for the purchase, regardless of the method of payment, including any additional charges (bank commissions and charges, stamp duties, bank brokerage, etc.).Equity investments in other companies that, at the end of the financial year, are permanently below their pur-chase cost have been recorded at this lower value.In determining the amount of the write-down, account was also taken of the trend in the price list, together with the evaluation of the economic and financial con-ditions of the investee company, in the case of assets represented by securities listed on organised markets, and of the market trend, in the case of other assets.

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As at 31/12/2019, long-term investments recorded a bal-ance of 121,303 euro and are represented, in addition to the positive MTM of the Unicredit Derivative Instrument of 3 euro, by the following components:

BOOK VALUE AS AT 31/12/2018

INCREASE /DECREASE

BOOK VALUE AS AT

31/12/2019

% HELD AT 31/12/2019

EQUITY INVESTMENTSEdizioni Valtrompia Srl in liquidazione flag Via Dante 163 - Sarezzo (Bs) 2.420 0 2.420 5,00

Impairment provision for Edizioni Valtrompia S.r.l. in liquidazione

(2.420) 0 (2.420)

Banca Credito Cooperativo della Valtrompia Scrl flag Piazza Zanardelli 8 - Bovegno (Bs)

2.707 0 2.707 0,0008

Impairment provision for Banca Credito Cooperativo della Valtrompia Scrl

(125) 0 (125)

Banca Valsabbina Scpa flag Via Molino 4 - Vestone (Bs) 5.748 0 5.748 0,0005

Impairment provision for Banca Valsabbina Scpa (4.323) (111) (4.434)

TOTAL EQUITY INVESTMENTS 4.007 (111) 3.896

RECEIVABLES FROM OTHERSMiscellaneous guarantee deposits 50.171 (7.767) 42.404TOTAL RECEIVABLES FROM OTHERS 50.171 (7.767) 42.404

OTHER SECURITIESPolizza “Unit Linked” Creditras Vita Spa flag Corso Italia 23 - Milano 60.000 15.000 75.000

TOTAL OTHER SECURITIES 60.000 15.000 75.000

Long-term investments in the Balance Sheet have not been recorded at a value higher than their “fair value”.

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Financial leasing transactionsAssets acquired under finance leases are accounted for, as required by law, according to the equity method with the recognition of lease payments under operating costs.As at 31/12/2019 these assets were related to the con-tracts governing the two motor vehicles provided to Directors for business and personal use.

Current assets are valued in accordance with the provi-sions of Article 2426(8) to (11-bis) of the Italian Civil Code. The criteria adopted are specified in the paragraphs of the respective financial statement items.

Receivables recorded under current assetsReceivables recorded under current assets must be posted in the financial statements according to the amortised cost criterion, as defined in Article 2426, par-agraph 2 of the Italian Civil Code, taking into account the time factor and the estimated realisable value, in accordance with the provisions of Article 2426-bis, par-agraph 1, no. 8 of the Italian Civil Code.Such assets have been adjusted to their presumed realisable value through a specif ic accrual to the impairment provision.For those receivables for which the application of the amortised cost method and/or the discounting method has been verified to be irrelevant, and for all of them, in order to give a true and correct representation of the equity and economic situation of the company, record-ing has been maintained according to the presumed realisable value. This was the case, for example, for receivables with maturities of less than twelve months or, with reference to the amortised cost method, when the transaction costs, commissions and any other differ-ence between the initial value and the value at maturity are insignificant or, again, in the case of discounting, when there is an interest rate inferable from the con-tractual conditions that is not significantly different from the market interest rate.

CURRENT ASSETS

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Changes to and maturities of receivables recorded under current assetsThe following table shows information on changes in receivables recorded under current assets and, if signif-icant, information on their due dates.“Receivables from others” refer primarily to:• the receivable from Telecom Italia Spa for the non-re-

curring, prepaid purchase of a “GEA” (Geographical Ethernet Access) package in place for 478,000 euro at year-end using an innovative model for the inte-grated supply of transmission solutions through ad hoc design activities in relation to the specific needs of Intred Spa;

• the receivable from Open Fiber S.p.A. for the non-re-curring, prepaid purchase of a “GEA” (Geographical Ethernet Access) package in place for 113,000 euro at year-end.

The relevant term and values are indefinite, with an amount to be scaled on the basis of the activation of the utilities, reasonably usable within the next 5 years; therefore, it was not possible to quantify the maturity after the financial year or the application of the amortised cost.

Breakdown of receivables recorded under current assets by geographical areaReceivables recorded under current assets are all included in the geographical area “Italy”.

VALUE AT THE BEGINNING OF

THE YEAR

CHANGES DURING THE YEAR

VALUE AT THE END OF THE

YEAR

AMOUNT DUE WITHIN THE

YEAR

Trade receivables 3.096.708 615.820 3.712.528 3.712.528

Tax receivables 468.010 (369.545) 98.465 98.465

Prepaid tax assets 39.239 14.250 53.489 -

Receivables from others 1.015.930 (354.822) 661.108 661.108

Total 4.619.887 (94.297) 4.525.590 4.472.101

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Cash and cash equivalents are valued at par value.

Accruals and deferrals are calculated on an accruals basis, by allocating revenue and/or costs common to two or more years.When recognising and reviewing prepaid expenses, it was verified that the time condition had been met.Accrued income and prepaid expenses totalled 554,588 euro, up 210,891 euro compared to the previous year’s figure of 343,697 euro.

Accrued income and prepaid expenses have the following maturities:• within the next financial year for 554,588 euro;

• no amount due beyond the next financial year. This item consists mainly of the following accounting positions:

Accrued income• accrued income for network infrastructure rental

(10,477 euro);

• other accrued income (6,482 euro).

ACCRUED INCOME AND

PREPAID EXPENSES


THE YEAR

CHANGES DURING THE YEAR

VALUE AT THE END OF THE

YEAR

Bank and postal deposits 9.650.300 300.100 9.950.400

Cash and valuables on hand 793 (310) 483

Total 9.651.093 299.790 9.950.883

CASH AND CASHEQUIVALENTS

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Prepaid expenses• insurance prepayments (21,745 euro);

• prepayments for lease instalments (17,429 euro);

• prepayments for telephone charges (17,826 euro);

• prepayments for infrastructure rental and accesses (393,646 euro);

• maintenance prepayments (15,464 euro);

• prepayments for bank charges (8,896 euro);

• consulting prepayments (34,157 euro).

All interest and other f inancial charges were fully expensed during the year. For the purposes of Article 2427, paragraph 1, no. 8 of the Italian Civil Code, it is therefore certified that there are no capitalisations of financial charges.

CAPITALISED FINANCIAL

CHARGES

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NO

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2.2.6 EXPLANATORY NOTES /LIABILITIES AND SHAREHOLDERS’ EQUITY

Shareholders’ equity and liabilities in the Balance Sheet have been recorded in accordance with national accounting standards; the sections relating to the individual items indicate the criteria applied in the specific case.

Items are shown in the financial statements at their book value in accordance with the indications con-tained in accounting standard OIC 28.

Changes in shareholders’ equity itemsThe following tables show the changes in the individ-ual items of shareholders’ equity, as well as details of other reserves, if present in the financial statements, for the reporting year.

SHAREHOLDERS’ EQUITY

VALUE AT THE

BEGINNING OF THE YEAR

ALLOCATION OF THE RESULT OF THE PREVIOUS

YEAR DISTRIBUTION OF

DIVIDENDS

ALLOCATION OF THE

RESULT OF THE PREVIOUS

YEAR OTHER

ALLOCATIONS

OTHER CHANGES

INCREASES

RESULT FOR THE YEAR

VALUE AT THE END OF THE YEAR

Capital 10.000.000 - - - - 10.000.000

Share pre-mium reserve 3.810.725 - - - - 3.810.725

Legal reserve 463.652 - 160.437 - - 624.089

Extraordinary reserve 5.183.802 - 2.731.287 - - 7.915.089

Total other reserves 5.183.802 - 2.731.287 - - 7.915.089

Cash flow hedging reserve

(16.627) - - 299 - (16.328)

Profit (loss) for the year 3.208.734 (317.010) (2.891.724) - 4.325.290 4.325.290

Total 22.650.286 (317.010) - 299 4.325.290 26.658.865

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Disponibilità e utilizzo del patrimonio nettoThe following tables analytically indicate the items of shareholders’ equity, with specification of their origin, possibility of use and distribution, as well as their use in the previous three years.

With regard to the possibility of using the Share pre-mium reserve, please note the following:

1,375,911 euro - A;B

2,434,814 euro - A;B;C

AMOUNT ORIGIN / NATURE

POSSIBILITY OF USE

AVAILABLE PORTION

Capital 10.000.000 Capital -

Share premium reserve 3.810.725 Capital A;B;C 3.810.725

Legal reserve 624.089 Profits A;B 624.089

Extraordinary reserve 7.915.089 Profits A;B;C 7.915.089

Total other reserves 7.915.089 Profits A;B;C 7.915.089

Cash flow hedging reserve (16.328) Capital (16.328)

Total 22.333.575 12.333.575

Non-distributable portion 2.000.000

Residual distributable portion 10.333.575

Key: A: for capital increase; B: to cover losses; C: for distribution to shareholders; D: for other requirements according to Articles of Association; E: other

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PROVISIONS FOR RISKS AND CHARGES

Provisions for risks and charges are shown in the table below:

Staff severance indemnities have been calculated in accordance with the provisions of Article 2120 of the Italian Civil Code, taking into account the legislative provisions and the specific indications of contracts and professional categories, and include the annual instal-ments accrued and the revaluations made on the basis of ISTAT coefficients.The amount of the provision is recognised net of advances paid and of the amounts used for termi-nation of employment during the year and repre-sents the certain amount due to employees at the

balance sheet date.Payables must be posted in the financial statements according to the amortised cost criterion, as defined in Article 2426, paragraph 2 of the Italian Civil Code, taking into account the time factor, in accordance with the provisions of Article 2426-bis, paragraph 1, no. 8 of the Italian Civil Code. For those payables for which the application of the amortised cost method and/or the discounting method has been verified to be irrelevant, and for all of them, in order to give a true and correct representation of the equity and economic situation of the company, recording has been maintained accord-ing to the par value. This was the case, for example, for payables with maturities of less than twelve months or, with reference to the amortised cost method, when the transaction costs, commissions and any other difference

STAFF SEVERANCEINDEMNITIES

PAYABLES

COMPOSITION 31/12/2018 INCREASES USES 31/12/2019

Provision for deferred taxes 56 0 56 0

Derivative financial liabilities 22.112 0 625 21.487

Total 22.168 0 681 21.487

VALUE AT THE



THE YEAR

ACCRUAL


THE YEAR

USES


THE YEAR

TOTAL


Staff severance indemnities 552.736 88.468 37.471 50.997 603.733

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between the initial value and the value at maturity are insignificant or, again, in the case of discounting, when there is an interest rate inferable from the contractual conditions that is not significantly different from the market interest rate.

Changes in and maturity of payablesThe following table shows information on changes in

payables and any information on their due dates.Breakdown of payables by geographical areaThe breakdown by geographical area is not given as the information is not significant.

Payables secured by real guarantees on company assetsNo payable is secured by real guarantees on company assets.

Payables at the end of the year amount to a total of 9,034,313 euro.

The table below provides a breakdown of payables for

VALUE AT THE


CHANGES DURING

THE YEAR


AMOUNT DUE WITHIN

THE YEAR

AMOUNT DUE AFTER THE YEAR

Due to banks 3.064.219 (1.252.305) 1.811.914 585.374 1.226.540

Payments on account 3.515 (1.744) 1.771 1.771 -

Trade payables 5.061.557 603.923 5.665.480 5.665.480 -

Tax payables 143.580 706.366 849.946 849.946 -

Payables to social security institutions 94.198 30.356 124.554 124.554 -

Other payables 507.130 73.518 580.648 580.648 -

Total 8.874.199 160.114 9.034.313 7.807.773 1.226.540

ISTITUTO ORIGINAL AMOUNT

SUBSCRIPTION DATE TERM

RESIDUAL DEBT AS AT 31/12/2019

NOTES

Unicredit Spa 1.000.000 29/06/2016 5 years 300.000 EIB

Ubi Banca Spa 2.000.000 17/07/2017 7 years 1.318.541

Intesa Sanpaolo Spa 500.000 30/11/2016 5 years 193.373

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loans and financing from banks:Accruals and deferrals are calculated on an accruals basis, by allocating costs and/or revenue common to two or more years.When recognising and reviewing deferred income, it was verif ied that the time condition had been met. Where this condition has changed, appropriate changes have been made.

Accrued expenses and deferred income totalled 4,970,533 euro, up 492,956 euro compared to the pre-vious year’s figure of 4,477,577 euro.

Accrued expenses and deferred income have the following maturities:• within the next financial year for 3,160,092 euro;

• after the next financial year for 1,810,441 euro, of which 13,133 euro after the next five years.

This item consists mainly of the following accounting positions:

Accrued expenses• accrued expenses for infrastructure access rental

(16,390 euro);

• accrued expenses for utilities and telephone traffic (35,150 euro);

• accrued expenses for advertising and sponsorships (100,027 euro);

• accrued expenses for commissions (38,125 euro).

Deferred income• deferred income for “Infratel” grants receivable on

plants for structural investments envisaged by the MISE calls (1,701,930 euro);

• deferred income for periodic fees on services pertain-ing to future years (2,707,759 euro);

• deferred income for the Sabatini Law grant (4,337 euro);

• deferred income for one-off contributions for activa-tions (118,333 euro);

• deferred income for revenue on IRU transfers (210,339 euro).

ACCRUED EXPENSES AND

DEFERRED INCOME

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2.2.7 EXPLANATORY NOTES /INCOME STATEMENT

The Income Statement shows the results of opera-tions for the year.It provides a representation of management opera-tions, through a summary of revenue and expenses that have contributed to determine the results of oper-ations. Revenue and expenses recorded in the financial statements in accordance with the provisions of Article 2425-bis of the Italian Civil Code are distinguished according to whether they belong to core, ancillary and financial management.The core management identifies the income compo-nents generated by transactions that occur continu-ously and in the relevant sector for the performance of the management, which identify and qualify the specific and distinctive part of the business run by the company, for which it is finalised.Financial activities consist of transactions that generate financial income and charges.As a residual measure, ancillary activities consist of transactions that generate income components that form part of ordinary activities but are not part of core and financial activities.

Revenue is recorded in the financial statements on an accruals basis, net of returns, allowances, discounts and premiums, as well as any taxes directly related to them.Revenue from the sale of goods is recorded with refer-ence to the time of delivery or shipment of the goods.Revenue from the provision of services is recognised when the service is rendered, or when the perfor-mance is made; in the particular case of the provision of ongoing services, the related revenue is recognised for the portion accrued.Other revenue and income also include items of a different nature that can still be classified under Value of Production.

VALUE OF PRODUCTION

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Comment

A1) Revenue from sales and services

Revenue from sales and services during the year totalled 17,201,907 euro, up 2,800,192 euro compared to the previous year’s figure of 14,401,715 euro.

Income from the sale of real rights to third parties (active IRU) is recorded under “Revenue from sales and services” (13,665 euro) and is charged to the Income Statement on an accrual basis over the term of the concession.

A5) Other revenue and income

Other revenue and income totalled 227,977 euro, down 453,348 euro compared to the previous year’s figure of 681,325 euro.

This item consists of the following accounting positions:

Grants towards plantsThese were entered in the Income Statement under item “Other revenue and income” and deferred to subsequent years through the recording of deferred income in the Balance Sheet.According to this method, once the asset has entered into operation, the economic-technical depreciation is calculated on its actual cost, while the related grant for expenditure on plant and equipment, calculated on

ACCOUNTING ITEM 31/12/2019 31/12/2018 CHANGE

Revenue from sales and services 20.825.279 17.201.907 3.623.372

Total 20.825.279 17.201.907 3.623.372


Grants towards plants 159.857 159.857 0

Tax credit for Listing Bonus Grant 0 416.008 (416.008)

Other revenue and income 201.769 105.460 96.309

Total 361.626 681.325 (319.699)

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the basis of what is actually reported, is charged to the Income Statement only for the portion accrued during the year and calculated on the basis of the useful life of the asset concerned.

Breakdown of revenue f rom sales and services by geographical areaThe breakdown by geographical area is not given as the information is not significant.

Costs and charges are allocated on an accruals basis and according to nature, net of returns, allowances, discounts and premiums, in accordance with the principle of correlation with revenue, and recorded in the respective items in accordance with accounting standard OIC 12. With regard to the purchase of goods, the related costs are recognised when the substantial and non-formal transfer of ownership has taken place, assuming the transfer of risks and benefits as the ref-erence parameter for the substantial transfer.

B6) Cost of raw materials, consum., etc.Costs of raw materials totalled 126,675 euro, up 4,291 euro compared to the previous year’s figure of 122,384 euro.

PRODUCTION COSTS

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Insurance 67.213 45.066 22.147

Outsourced services 175.359 183.723 (8.364)

Directors’ fees 284.322 262.380 21.942

Consulting 365.817 190.822 174.995

Costs for other services 94.980 86.975 8.005

Costs for the AIM market listing project 0 888.361 (888.361)

Maintenance 304.485 264.951 39.534

Ancillary personnel expenses 259.588 234.034 25.554

Bank and postal charges 68.705 69.053 (348)

Advertising and sponsorships 607.888 382.838 225.050

Commissions 192.839 174.983 17.856

Telephone traffic 415.146 353.591 61.555

Utilities 287.593 220.327 67.266

Total 3.123.935 3.357.104 (233.169)


Rent and common area charges 42.585 38.264 4.321

Lease charges 24.531 67.647 (43.116)

Rental fees 122.860 76.956 45.904

Software licences 62.106 29.990 32.116

Network infrastructure rental 5.213.655 4.448.340 765.315

Total 5.465.737 4.661.197 804.540

B7) Costs for servicesCosts for services totalled 3,123,935 euro, down233,169 euro compared to the previous year’s figure of 3,357,104 euro.This item consists of the following accounting positions:

B8) Rental, lease and hireRental, lease and hire totalled 5,465,737 euro, up 804,540 euro compared to the previous year’s figure of 4,661,197 euro.This item consists of the following accounting positions:

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B9) Personnel costsPersonnel costs totalled 3,265,047 euro, up674,564 euro compared to the previous year’s figure of 2,590,483 euro.

B10) Amortisation, depreciation and write-downsAmortisation, depreciation and write-downs totalled 2,950,249 euro, up 333,621 euro compared to the previ-ous year’s figure of 2,616,628 euro.

B14) Other operating expensesOther operating expenses totalled 497,275 euro, up 151,905 euro compared to the previous year’s figure of 345,370 euro.This item consists of the following accounting positions:


Frequency authorisation concessions 190.843 175.214 15.629

Association fees 21.436 17.204 4.232

Charitable donations 20.615 4.850 15.765

Combined Municipal Tax 14.566 14.566 0

Municipal Tax for Indivisible Services 1.121 1.121 0

Miscellaneous taxes and duties 89.740 60.209 29.531

Losses on receivables 0 30.649 (30.649)

Other operating expenses 158.954 41.557 117.397

Total 497.275 345.370 151.905

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Interest income on bank deposits 13.544 12.914 630

Grants for current expenses Sabatini L. 8.675 30.869 (22.194)

Other financial income 102.182 525 101.657

Total 124.401 44.308 80.093


Interest paid on loans 36.200 66.612 (30.412)

Other financial charges 5.262 9.387 (4.125)

Total 41.462 75.999 (34.537)

Financial income and charges are recorded on an accruals basis in relation to the portion accrued during the year.Contributions aimed at reducing interest expense on loans are recorded under item C.16.d if they are earned in the financial year following that in which the interest expense is recorded.

C16) Other financial incomeOther f inancial income totalled 124,401 euro, up 80,093 euro compared to the previous year’s figure of 44,308 euro.This item consists of the following accounting positions:

C17)Interest and other financial chargesInterest and other financial charges totalled 41,462 euro, down 34,537 euro compared to the previous year’s figure of 75,999 euro.This item consists of the following accounting positions:

FINANCIAL INCOME AND

CHARGES

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D19) Write-downs

Write-downs of equity investmentsWrite-downs of equity investments totalled 341 euro, up 236 euro compared to the previous year’s figure of 105 euro.

No costs or revenues of an exceptional or non-re-curring nature were recorded in the previous year.

The company has allocated the taxes for the year on the basis of the application of current tax regulations. Current taxes refer to taxes for the year as reported in the tax returns.Finally, deferred and prepaid taxes refer to positive or negative income components that are subject to taxa-tion or deduction in financial years other than those of the statutory accounts. Deferred and prepaid taxesThis item includes the impact of deferred taxation on these financial statements. This is due to the temporary differences between the values attributed to an asset or liability in accordance with statutory criteria and the corresponding values recognised for tax purposes.The company determined the deferred taxation with reference to IRES and IRAP.The following table provides a breakdown of the amounts that make up the item “Current, Deferred and Prepaid Taxes”:

VALUE ADJUSTMENTS OF

FINANCIAL ASSETSAND LIABILITIES

AMOUNT AND NATURE OF INDIVIDUAL

ITEMS OF INCOME/EXPENDITURE

OF EXCEPTIONAL MAGNITUDE OR

INCIDENCE

CURRENT, DEFERRED AND PREPAID

INCOME TAXES FORTHE YEAR

ACCOUNTING ITEMS IRES IRAP VALUES AS AT 31/12/2019

Current taxes 1.277.866 251.874 1.529.740

Total current taxes 1.277.866 251.874 1.529.740

Deferred taxes (14.400) 0 (14.400)

Prepaid tax assets 0 0 0

Total deferred and prepaid taxes (14.400) 0 (14.400)

Total income taxes for the year 1.263.466 251.874 1.515.340

Current taxes

Total current taxes

Deferred taxes

Prepaid tax assets

Total deferred and prepaid taxes

Total income taxes for the year

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2.2.8 EXPLANATORY NOTES /CASH FLOW STATEMENT

The company has prepared the Cash Flow Statement, which represents the summary document that links the changes that occurred during the year in the com-pany’s equity with the changes in the financial situa-tion; it highlights the values relating to the financial resources that the company needed during the year as well as the related uses.With regard to the method used, it is specified that it has adopted, in accordance with the provisions of OIC 10, the indirect method according to which the cash flow is reconstructed by adjusting the profit or loss for the year of the non-monetary components.

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2.2.9 EXPLANATORY NOTES /OTHER INFORMATIONS

The other information required by the Italian Civil Code is as follows

The following table shows the average number of employees, broken down by category and calculated on the basis of the daily average.

The following table shows the information required by Article 2427 no. 16 of the Italian Civil Code, specifying that there are no advances and receivables and that no commitments have been undertaken on behalf of the administrative body as a result of guarantees of any kind given.

The table below shows the fees payable to the auditing firm.

EMPLOYMENT DATA

FEES, ADVANCESAND LOANS

GRANTED TO DIRECTORS AND

STATUTORY AUDITORS AND COMMITMENTS

UNDERTAKEN ON THEIR BEHALF

CONSIDERATION TO THE STATUTORY

AUDITOR OR AUDITING FIRM

MANAGERS WHITE-COLLAR TOTAL EMPLOYEES

Average number 4 67 71

DIRECTORS STATUTORY AUDITORS

Consideration 284.590 19.760

STATUTORY AUDIT

Consideration 13.500

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CATEGORIES OF SHARES ISSUED BY

THE COMPANY

Share capital consists of 15,850,500 ordinary shares without par value. The company has not issued any security or similar instrument falling under the provision of Article 2427, no. 18 of the Italian Civil Code. The Company has not issued any other financial instru-ments pursuant to Article 2346, paragraph 6 of the Italian Civil Code. The information required by Article 2427, no. 9 of the Italian Civil Code.Specifically, these are the residual “Lease Payments” relating to lease agreements for two vehicles used by Directors (41,750 euro) as well as “Bank Guarantees” (276,281 euro) and “Insurance Guarantees” (390,450 euro) issued in the interest of the company in favour of third parties, mainly Public Bodies, in connection with the laying of the “Fibre” on public land. Assets intended for a specific transactionWe certify that at the closing date of the financial statements there were no assets intended for a spe-cific transaction pursuant to Article 2427(20) of the Italian Civil Code.

Loans intended for a specific transactionWe certify that at the closing date of the financial state-ments there were no loans intended for a specific trans-action pursuant to Article 2427(21) of the Italian Civil Code.

SECURITIES ISSUED BY THE COMPANY

DETAILS OF OTHER FINANCIAL

INSTRUMENTS ISSUED BY THE

COMPANY

OFF-BALANCE SHEET

COMMITMENTS, GUARANTEES

AND CONTINGENT LIABILITIES

ASSETS AND LOANSINTENDED FOR

A SPECIFIC TRANSACTION

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For the purposes of the provisions of current legislation, we inform you that no transactions with related parties were carried out during the year, with the exception of arm’s-length transactions of immaterial amounts. During the year, no agreement was entered into that was not shown in the Balance Sheet. On 8 January 2020, Intred S.p.A. signed a binding agree-ment with the Erri family to acquire 74.778% of QcomS.p.A. (“Qcom”), a company based in Treviglio (Bergamo), with operations throughout Lombardy – particularly in the provinces of Bergamo, Milan, Brescia, Monza and Brianza, Cremona and Varese – and specialised in the provision of broadband and ultra-broadband connec-tivity, land line telephone, data centre, IT security and other digital services to over 4,000 business customers.The Transaction entails the sale of 987,070 Qcom shares (constituting 74.778% of its share capital) by the shareholders Fabio Massimo Erri, Franca Tarantino and Fiorenzo Erri (the “Sellers”) for a total provisional consid-eration of approximately 8.2 million euro, roughly 75% of which is due at closing, with the remainder due upon completion of the price adjustment procedure, to be carried out following the approval of Qcom’s financial statements at 31 December 2019.On 18 February 2020, Intred expanded the scope of the acquisition of Qcom S.p.A. (“Qcom”) to 100%, contractu-alising the remaining 25.222% interest.In detail, in the Transaction Intred became a party to a purchase and sale agreement (the “Binding Agreement”) governing the purchase of the remaining 25.222% (the “Minority Interest”) in Qcom, following the appointment, pursuant to Articles 1401 et seq. of the Civil Code, of Intred as a third party by Fabio Massimo Erri, majority shareholder of Qcom.As part of the Transaction, Intred amended several pro-visions of the binding agreement signed on 8 January 2020 with the Erri family governing the purchase of 74.778% of Qcom to align them with the purchase of the Minority Interest.The above transactions were closed on 27 February 2020 and accordingly since that date Intred S.p.A. has held a total of 1,320,000 Qcom shares (100% of share

RELATED PARTYTRANSACTIONS

OFF-BALANCE SHEET

ARRANGEMENTS

SIGNIFICANT SUBSEQUENT

EVENTS

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capital), for total provisional consideration of approxi-mately 10.2 million euro, of which it has already paid 8.3 million euro (partly drawing down the loan of 6 million euro granted by Banca Intesa on 25 February 2020), whereas the remainder will be settled following the completion of the price adjustment procedure, which will be carried out after the approval of Qcom’s financial statements at 31 December 2019. During the year 2019, INTRED SPA generated a turnover of 0.8 million euro on business with the Public Administration, accounting for 4% of the total. This refers to contracts for pecuniary interest managed according to market rules. These transactions are not subject to the transparency and publicity obligation provided for by the regulations pursuant to Law 124/2017 and therefore it is not considered necessary to report the information analytically.

FULFILMENT OF TRANSPARENCY AND PUBLICITY

OBLIGATIONS PURSUANT TO LAW 124/2017

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There are no cases that fall under the provisions of Article 2427-bis, numbers 22-quinquies and sexies of the Italian Civil Code.

In order to reduce the risk of adverse changes in interest rates, derivative contracts were entered into for hedg-ing purposes (IRS).The derivative contracts entered into are correlated with the payables relating to the loan agreements signed.In particular, there is a high correlation between the technical/financial characteristics of the hedged liabili-ties and those of the hedging contract and there is also the intention to put the hedge in place.Transactions in derivative financial instruments are accounted for in a manner that is consistent with the main transactions for which they are carried out, or to the market where applicable.Transactions in derivative instruments still outstanding at 31/12/2019 have the following characteristics:

COMPANIES THAT PREPARE THE FINANCIAL

STATEMENTSOF THE LARGEST/ SMALLEST SET OF

COMPANIES OF WHICH THE REPORTING

ENTITY IS A PART AS A SUBSIDIARY

INFORMATION ON DERIVATIVE

FINANCIAL INSTRUMENTS PURSUANT TO

ARTICLE 2427-BIS OF THE ITALIAN

CIVIL CODE

INSTITUTION UBI BANCA SPA UNICREDIT SPA

Contract reference 162252 9273285

Purpose Hedging Hedging

Notional value as at 31/12/2019 1.318.541 300.000

Underlying financial risk Interest rate risk Interest rate risk

Mark to Market -21.487 4

Inception date 17/07/2017 06/07/2016

Expiry date 17/07/2024 30/06/2021

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Pursuant to Article 2497-bis, paragraph 4 of the Italian Civil Code, we certify that the company is not subject to the management and coordination of others. In compliance with the provisions of European Privacy Regulation no. 679/2016, Article 13 (“GDPR”), containing provisions on the technical and organisational methods to be adopted for the protection of sensitive data pro-cessed with IT tools, it is acknowledged that the com-pany “INTRED SPA” has continued its activities to ensure compliance with the rules in force.

Based on what is reported above, the Board of Directors proposes that you allocate the net profit for the year of 4,325,290 euro as follows:

• euro 216.265 to the legal reserve;

• euro 3.633.510 to the extraordinary reserve;

• euro 475.515 as a dividend to be paid to the shareholders in the amount of 0.03 euro gross per ordinary share.

The proposal for the distribution of the dividend is based on the following schedule:• ex-dividend date 4 May 2020;

• record date 5 May 2020;

• payment date 6 May 2020.

SUMMARY STATEMENT OF THE FINANCIAL

STATEMENTSOF THE COMPANY

THAT EXERCISES MANAGEMENT AND

COORDINATION

PRIVACY AND DATAPROTECTION

PROPOSED ALLOCATION

OF PROFITS OR COVERAGE

OF LOSSES

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2.2.10 EXPLANATORY NOTES /FINAL PART

Shareholders, we confirm that these financial state-ments, consisting of the Balance Sheet, Income Statement, Cash Flow Statement and Explanatory Notes, give a true and fair view of the company’s equity and financial position and of the results of operations, and correspond to the accounting records. We there-fore invite you to approve the draft financial statements as at 31/12/2019, together with the proposal for the allo-cation of the results of operations, as prepared by the administrative body.The financial statements are true and accurate and cor-respond to the accounting records.

Brescia, 20/03/2019

For the Board of Directors Daniele Peli,

Chairman of the Board of Directors

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REPORT OF THE

AUDITING FIRM

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INTRED S.p.A.

Independent auditor’s report pursuant to article 14 of Legislative Decree n. 39

Financial Statements as at December 31, 2019 This report has been translated into English from the original, which was prepared in Italian and represents the only authentic copy, solely for the convenience of international readers.

Tel: +39 030.24.29.821 Fax: +39 030.40.77.005 www.bdo.it

Via Cefalonia, 70 25125 Brescia

Bari, Bergamo, Bologna, Brescia, Cagliari, Firenze, Genova, Milano, Napoli, Padova, Palermo, Pescara, Roma, Torino, Treviso, Trieste, Verona, Vicenza BDO Italia S.p.A. – Sede Legale: Viale Abruzzi, 94 – 20131 Milano – Capitale Sociale Euro 1.000.000 i.v. Codice Fiscale, Partita IVA e Registro Imprese di Milano n. 07722780967 - R.E.A. Milano 1977842 Iscritta al Registro dei Revisori Legali al n. 167911 con D.M. del 15/03/2013 G.U. n. 26 del 02/04/2013 BDO Italia S.p.A., società per azioni italiana, è membro di BDO International Limited, società di diritto inglese (company limited by guarantee), e fa parte della rete internazionale BDO, network di società indipendenti.


To the shareholders of INTRED S.p.A. Report on the financial statements

Opinion

We have audited the financial statements of INTRED S.p.A. (the Company), which comprise the balance sheet as at December 31, 2019, the income statement and the cash flow statement for the year then ended and the explanatory notes.

In our opinion, the financial statements give a true and fair view of the financial position of the Company as at December 31, 2019, and of the result of its operations and its cash flows for the year then ended in accordance with the Italian regulations and accounting principles governing financial statements.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of this report. We are independent of the company in accordance with ethical requirements and standards applicable in Italy that are relevant to the audit of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the Italian regulations and accounting principles governing financial statements and, within the limits of the law, for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Tel: +39 030.24.29.821 Fax: +39 030.40.77.005 www.bdo.it





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Tel: +39 030.24.29.821 Fax: +39 030.40.77.005 www.bdo.it





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Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of the audit in accordance with International Standards on Auditing (ISA Italia), we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risk of material misstatement of the financial statements, whether due to fraud or error; design and perform audit procedures in response to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of no detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control;

• Obtain and understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control;

• Evaluate the appropriateness of accounting principles used and the reasonableness of accounting estimates and related disclosures made management;

• Conclude on the appropriateness of management’s use of the going concern and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern;

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions in a manner that achieves fair presentation.

We communicate with those charged with governance, identified at the appropriate level as required by the ISA Italia, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Tel: +39 030.24.29.821 Fax: +39 030.40.77.005 www.bdo.it





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Report on other legal and regulatory requirements

Opinion pursuant to article 14, paragraph 2, letter e), of Legislative Decree n. 39/10.

The directors of INTRED S.p.A. are responsible for the preparation of the report on operations of INTRED S.p.A. as at December 31, 2019, including its consistency with the financial statements and the compliance with the applicable laws and regulations.

We have performed the procedures required under audit standard (SA Italia) n. 720B in order to express an opinion on the consistency of the report on operations, with the financial statements of INTRED S.p.A. as at December 31, 2019 and on its compliance with the applicable laws and regulations, and in order to assess whether its contain material misstatements.

In our opinion, the report on operations is consistent with the financial statements of INTRED S.p.A. as at December 31, 2019 and is compliant with applicable laws and regulations.

With reference to the assessment pursuant to article 14, paragraph. 2, letter e), of Legislative Decree n. 39/10 based on our knowledge and understanding of the entity and its environment obtained through our audit, we have nothing to report.

Brescia, April 4th 2020

BDO Italia S.p.A.

Signed by Edoardo Vallazza

Partner

Tel: +39 030.24.29.821 Fax: +39 030.40.77.005 www.bdo.it





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REPORT OF THE

BOARD OF STATUTORY

AUDITORS

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ANNUAL REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING

PURSUANT TO PARAGRAPH 2, ARTICLE 2429 OF THE CIVIL CODE

REFERRING TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 2019

To the Shareholders’ meeting of the company INTRED S.P.A. based in Brescia, via Pietro Tamburini No. 1, registered in the Register of Companies of Brescia Tax code: 11717020157, R.E.A. n. BS-366982, share capital 10,000,000.00 euros fully paid up.

Premise

This report was approved collectively and in time for its filing at the company’s headquarters, in the 15 days before the date of the first convening of the meeting to be approved by the financial statements being commented on.

The Board of Directors approved on 20 March 2020 – and made available on the same date – the draft financial statements for the year ended December 31, 2019, consisting of The Balance Sheet, Income Statement, Cash Flow Statement and Explanatory Notes, accompanied by the Directors’ Report on Operations pursuant to article 2428 c.c..

Intred S.p.A.’s shares were allowed to trade on the multilateral system AIM Italia: therefore, in the year ended December 31, 2019, the Board of Statutory Auditors performed the only functions provided for by Articles 2403 and following c.c.. The functions pursuant to article 2409-bis c.c. were instead carried out by the auditing company BDO Italia S.p.A., which is responsible for expressing a judgment on the financial statements through the “Report of the Independent Auditing Company pursuant to article 14 of D.Lgs. 27 January 2010, No. 39”. This report shows that Intred S.p.A.’s financial statements provide a true and fair view of the company’s financial position, and of the result of its operations and its cash flows as at December 31, 2019, in accordance with Italian rules governing its drafting criteria; moreover it does not highlight any findings for significant deviations, i.e. negative judgments or inability to express an opinion or disclosures.

This is therefore exclusively the basis for “Reporting pursuant to Art. 2429, paragraph 2 c.c.”.

B) Report on supervisory activity pursuant to art. 2429, paragraph 2, c.c.

During the year ended December 31, 2019, our activity was inspired by the statutory provisions and the “Standards of Conduct of the Statutory Board of Listed Companies”, issued in April 2018 by the National Council of Chartered Accountants and Accountants, in respect of which we carried out the self-assessment, with success, at the time of our appointment, which took place during the Shareholder’s meeting of the company held on 19 April 2019.

Given the well-established knowledge of the type of activity carried out by the company and its organizational


This report has been translated into the English language solely for the convenience of international readers.

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and accounting structure, also taking into account the size and problems of the company, the planning phase of the supervisory activity – consisting of the assessment of the inherent risks and criticalities with respect to the parameters highlighted above – was implemented through the positive feedback regarding what is already known based on the information acquired over time, also paying attention to the updating of the same in relation to the development and growth of the company’s activity.

Therefore, it was possible to verify that:

- the activity carried out by the company has not changed during the year and is consistent with the corporate purpose;

- the organizational structure is currently adequate for the ever-growing company size and the onset of a series of regulatory and regulatory obligations which, following the listing on AIM Italia, the company has had to respect: the role assumed by the internal manager of the administrative department (CFO & Investor Relations Officer) is relevant, and also some external consultants are employed;

- the human resources composing the workforce have been adapted to the increased company size, bringing the average number of employees to 71, compared to 61 in the previous year;

- the composition of the Board of Directors has been maintained, which can employ well-experienced and skilled directors, including an independent director, appointed complying the art. 147-ter, paragraph 4, of the TUF.

The activities carried out by the Board of Statutory Auditors therefore covered the entire 2019 financial year, during which no. 5 meetings referred to in article 2404 c.c. were attended, of which the appropriate minutes duly signed for unanimous approval have been prepared..

(b1) Supervisory activities pursuant to art. 2403 and ss. c.c.

During the 2019 financial year, we supervised compliance with the law and bylaws and respecting the principles of proper administration.

We attended a Shareholder’s Meeting and 10 Board meetings, in which, on the basis of the available information, we have not detected violations of the law and bylaws, nor clearly reckless, risky, in a potential conflict of interest or which compromises the integrity of the company’s assets.

We continuously acquired from Mr. Daniele Peli, as Chairman of the Board of Directors, with extensive powers regarding the management of the company, as well as by Mrs Marisa Prati, to whom some specific powers are responsible, both during the meetings of the Board of Statutory Auditors held during the year 2019, both during the meetings of the Board of Directors and - in particular - during the Board of Directors held on November 12, 2019 concerning the information pursuant to article 2381, paragraph 5, c.c., information on the general trend of

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the operations and its foreseeable evolution, as well as on the most significant transactions, due to their size or characteristics, carried out by the company and its subsidiaries and, based on the information acquired, we have no particular observations to report.

We have gained knowledge and vigilance, as far as we are concerned, on the adequacy and operation of the organisational structure of the company, including through the collection of information from managers and in this regard we have no particular observations to report.

We have gained knowledge and vigilance, as far as we are concerned, on the adequacy and operation of the administrative-accounting system, as well as on the reliability of the latter to correctly represent the operations, by obtaining information from managers and the examination of the company papers, and in this regard, we have no particular observations to report. We have verified the timely publication on the company’s website of the accounting and financial papers required by the legislation applicable to companies listed on the AIM Italia market.

No complaints have been received from shareholders ex article 2408 c.c., and no complaints have been made under article 2409 c.c..

The Board of Statutory Auditors did not have to intervene for omissions of the administrative body, pursuant to article 2406 c.c..

During the supervisory activity, as described above, no other significant facts emerged that required their mention in this report.

It should be noted that during the year the Chairman of the Board of Statutory Auditors issued the certificate for the purpose of applying for a tax credit in art. 1, commas 89-92, of L. 205/2017 and the interministerial decree of 23.04.2018 (c.d. “listing bonus”).

B2) Comments on the financial statements

As far as we are aware, the Directors, in the draft financial statements, have not waived the rules of law under art. 2423 c.c. commas 4 and 5 or art.2423-bis comma 2.

There are no assets included in the financial statements for which, pursuant to article 2426, comma 5, c.c., the consent of the Board of Statutory Auditors is required.

Pursuant to art. 2426, comma 6 c.c., we acknowledge the presence of the item “goodwill” in the balance sheet assets, entered with the consent of the Board of Statutory Auditors in previous years, which is amortized with a systematic criterion for the duration of 10 years. The amortization process over a ten-year period ended during 2019.


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The information required by article 2427-bis c.c. relating to financial derivative instruments has been provided within the Explanatory notes.

The commitments and guarantees set out in article 2427, comma 9 c.c. were adequately described in the Explanatory notes.

In the Management Report, in the section dedicated to the “ Foreseeable Evolution of Operations”, and the Explanatory Notes, in the section entitled “Information on significant events that occurred after the end of the financial year”, adequate information was provided regarding the changing scenarios arising from the spread of Covid-19 (c.d. Coronavirus) and the corporate perspectives. Corporate management did not see any risks that could compromise business continuity, including in terms of the type of service provided to the company, or issues relating to company liquidity.

B3) Comments and proposals for the approval of the budget

On the basis of what was set out in this report, although it was brought to the Board’s knowledge and was found during the periodic audits carried out, and on the basis of the report of the independent auditing firm BDO Italia S.p.A., the Board of Statutory Auditors unanimously considers that there are no obstructive reasons for approving the financial statements as at 31 December 2019, as it was drawn up by the administrative body.

The Board of Statutory Auditors agrees with the proposal to target the net result made by the directors as reported in Explanatory notes.

As provided in the paper dedicated to the “United Report of Corporate Control of the Board of Statutory Auditors in charge of the legal review of accounts”, issued by the National Council of Chartered Accountants and Accountants released in March 2020, considering the difficulties related to the pandemic spread of The Covid-19 and the restrictive regulatory measures that condition the free movement of people, this report of the Board of Statutory Auditors on the 2019 financial statements, unanimously approved by members following a teleconference on 4 April 2020, is exceptionally signed by the Chairman only.

Brescia, April 4, 2020

For the Board of Statutory Auditors

The Chairman

Vittorio Giongo

financial statements · 2020-05-14 · the company operates in the region of lombardy. the nature...

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