Company Profile. Company Profile. FY2013 Results

Company Profile STAR Conference – Borsa Italiana London, October 3th 2014 Mr Michele Cinaglia, Chairman Mr Armando Iorio, CFO Mr Niccolò Bossi, M&A an...
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Company Profile STAR Conference – Borsa Italiana London, October 3th 2014 Mr Michele Cinaglia, Chairman Mr Armando Iorio, CFO Mr Niccolò Bossi, M&A and IR Company Profile FY2013 Results

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www.eng.it

Who we are Engineering is the major Italian Information Technology Group and a leading IT multinational in Italy, Europe and Latin America. It is ranked as the fifth Company in its sector over the Italian Market according to annual revenues. In 2013, gross revenues reached € 822.8 M, of which near 12% came from the international market and EBITDA totalized € 100.8 M. The company now employs nearly 7,300 professionals and boasts a customer portfolio of over 1,700 firms, with operations in 35 offices in Italy and 6 abroad.

12.6% EBITDA Margin € 45 M Net Cash Outstanding Business Expertise

Comprehensive Software Solutions

€ 53 M Net Profit € 496 M Market Cap € 395 M Shareholders Equity Strongly diversified customer base, Public and Private, from Large to Small

State of the Art IT Infrastructure

70% market share in CRM Utilities segment 90% coverage of Regional Healthcare systems Indisputable leader in Compliance and Regulatory Reporting for Banks Pioneer in CLOUD and Open Source platforms development

Company Profile FY2013 1H2014Results

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Data refer to 1H2014 (excluding EBITDA and Net Profit as at 31.12.13) and 30th September 2014 trading day

History Since the IPO, the Group has completed several extraordinary deals. Thanks to an accurate scouting approach and attentive deal execution, Engineering has constantly integrated assets and people in order to broaden the spectrum of owned solutions and reach a wider potential customers portfolio.

To a Global Solution Provider

From an Italian System Integrator

M 822.8 €

M 182.7 € 1% Int. Revenues

IPO

•Olivetti Sanità •Neta •Trend •Overit •Caridata •Nexen

Acquisitions*

Company foundation

1980

Today

•Xaltia •Atos Origin Italia •Dynpro •ProValue •A&B •T-Systems Italia

Internationalization

2000

15% Int. Revenues

•New Acquisitions in different Countries •International Projects •Organic growth in LATAM and EU

2013 - Onwards 12.3% CAGR

45% Organic 55% Acquisitions

Company Profile FY2013 1H2014Results

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Data refer to FY2013 Results. (*) Only major deals are showed

What we do Through our business model we aim to create tangible value across the Software and Services value chain by meeting the needs of our actual and potential customers, playing along with them to define, plan and execute an efficient IT Strategy.

Projects

Services  Outsourcing  Application Management  Cloud

 System integration  Consulting Dedicated - On demand

Cost effective - Reliable

Management of existing IT systems and infrastructures Development, Improvement and Transformation Compliance & Technology Update New Platforms and Innovation

Company Profile FY2013 1H2014Results

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Software  Owned Solutions Flexible - Scalable

How we operate Through 7 Cross Competence Centers we bring the necessary expertise to our Market Divisions enabling the Group to fulfil the requirements and specific requests of our customer base. The Engineering Software Laboratory works as centralized development factory and provides the Delivery teams with the needed solution, either a custom software or a standardized platform, deployed by using latest generation technology.

Research & Innovation Engineering Software Laboratory

Managed Operations

ERP

Automation & Controls

Open Source

ECM

Vertical Market Divisions Customers

Company Profile FY2013 1H2014Results

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Mobile

Big Data & Analytics

Main areas of Expertise Business competences, coupled with latest-generation technology, allow the Company to provide its clients with an offer that is both complete and of value. Engineering solutions serve the core of the business operations of the customers and require an essential capability of integration.

Cross

•Augmented Reality •CLOUD •Big Data •Security

Verticals

•VAS Portals & Platforms •New Generation OSS •Video Streaming & Video On-Demand •Convergent IP Services •Next Generation Messaging

Company Profile FY2013 1H2014Results

•Web 2.0 •Search Engines •Mobile Computing •Intelligent Network

•CRM •PLM •BPM •BPO

•Payments, Settlements & Compliance •E - Banking •Credit Management

•GIS •Business Intelligence •Analytics •Performance & Risk Management

•Driveline Testing Solutions •Manufacturing execution systems •Automation Controls

•Portals & Collaborations •E -Government •Smart Cities, Energy, Grid •Clinical and Emergency Management •E-Procurement •Tax-management and investigation of evasion

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•Monitoring •Metering •Billing

Market Segment Breakdown The Group is organised around four vertical Market Divisions which, over their three-decade history, have gained comprehensive insight into each business and crafted solid relationships with customers, boosting value growth over the long term.

31.7%

PA and Healthcare

28.9%

Utilities & Telco

22.2%

Industry & Services

17.3%

Finance

Company Profile FY2013 1H2014Results

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1H2014 Segment Reporting. % on Net Revenues

Customer Base Customer satisfaction is one of the pillar of our delivery approach. That’s the reason why we now serve more than 1,700 companies, from large multinational groups to small-medium size companies, registering high retention rates and durable commitments.

Company Profile FY2013 1H2014Results

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Key Investment Highlights We put our effort into further growing with focus on new markets. We will leverage our capability to execute, our IT Infrastructure, our portfolio of business oriented solutions to gain market share abroad looking at potential M&A targets. We firmly believe that we will be able to still enlarge our customer base both by consolidating our leadership position in Italy and increasing our international footprint. At the same time, we’ll carefully manage the Group cost structure in order to sustain our very high profitability and generate value for the stakeholders in the long term.

Structure and Organization

Business Model • Comprehensive and business oriented portfolio of owned solutions • Wide customer base with +90% retention rate • Cutting-edge Technology and IT infrastructure • Well balanced mix of revenues by business lines

• Lean ownership structure • Stability and reliability of the Management • Internal IT Academy delivering nearly 20,000 training days per year • Centralized development factory (ESL)

Capabilities

Economics-Financials

• Best practices in delivery processes (CMMI3, ITIL and PMP) • International R&D expertise and references • Successful M&A track record and demonstrated capability to integrate acquired companies

• Flexible cost structure • Excellent rate of productivity • Profitability well above the peers • Positive cash position

Company Profile FY2013 1H2014Results

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Growth Drivers Engineering benefits from its undisputable leadership position in Italy, a sound balance sheet, a flexible cost structure and a recognised capability to run projects timely and accurately, key factors that have contributed to reach an outstanding operating profitability. Net Cash, the value proposition and a wide portfolio of solutions and proprietary software stimulate the opportunity to further grow in Italy and overseas, looking also at potential M&A deals.

Organic

Business • IT Suppliers Consolidation • Increasing demand of Outsourcing services • Size does matter • Technology and Software as a Service • Price pressure

 High entry barriers to emerge in the Italian Market  Sound financial structure and high profitability  Wide and well diversified customer base  Growing International footprint and increasing market share in Italy  Payment acceleration of receivables and possible tax-rate reduction

Macroeconomic

Extraordinary

• Global competitive landscape • Sluggish economic scenario • Risk of business concentration • Week ICT spending trend in Italy • New Italian Government declarations

M&A • Increasing number of Companies struggling to manage financial pressure • Focus on synergies and efficiency

Company Profile FY2013 1H2014Results

 Able to give customers access to 360° offering  Best of breed Technology Infrastructure  Largest Italian Software and Services Provider and one of the first 30 European IT Groups  Comprehensive wallet of owned solutions to be sold either by licensing or through “on demand” service  Flexible cost structure and excellent delivery capability

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 Well known capability to find, execute, negotiate an investment case and then integrate businesses  Positive cash position and wide room for leveraging  Increasing Market Cap and respective multiples  Strong commitment to both, move abroad and consolidate the leadership position in Italy

Assets 1 – IT Infrastructure Our Managed Operations Department provides clients with a full offering of Outsourcing Services thanks to an highly advanced Technology Center located in Pont Saint Martin. The Engineering IT infrastructure is based also on Torino (hotstandby connection with PSM), Padua, Milan, Vicenza and Rome sites, thus being one of the most reliable and advanced DCs interconnected platform available in Italy.

6 Data Centers + 330 Customers 4.0Pbyte STORAGE 700Mps Band Capacity 6,000sqm space OS/DBS •VMWare, Citrix •Microsoft Windows •Solaris •HP-UX •IBM AIX / ZOS •Linux (RedHat – Suse – Centos) •Oracle DBMS •MS SQL Server •MySql •DB2

Company Profile FY2013 1H2014Results

• Vicenza • Padova

• Pont Saint Martin • Torino • Milano

• Roma

Middleware/Apps/Tools Hardware

•WebSphere/Jboss/Tomcat •.NET Framework •SAP •BaaN •Oracle Enterprise Suite •Sharepoint, Alfresco •Documentum, FileNet •BMC, HP, Symantec, IBM

•Intel Industry Standard •Sparc •HP-Itanium •IBM Pseries/ Mainframe /AS-400 •Storage Netapp, IBM, EMC •Network (Cisco, Brocade,Huawey, HP) •VOIP, Videoconference

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Assets 2 – Human Capital and Innovation Within an IT company, people form the backbone that makes the success tangible. To enhance the value of this asset, and to unlock the full potential of our human resources, we make sure that our people are supported in each phase of their career path by providing continuous personal development. Meanwhile, we are aware that Research and Innovation is a success key factor influencing the way we develop and deliver solutions. That’s the reason why Engineering is involved in several international committees and projects and continuosly invest a relevant part of its earnings in R&D.

The IT Academy

19,200 Classroom training days 300 Different type of Course Over 6,250 employees trained 170 certified instructors Research & Innovation

€ 30 M investments on annual basis Company Profile FY2013 1H2014Results

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Assets 3 – Quality Standard Partners

Corporate Quality •ISO9001:2008 •NATO AQAP 2110/160

Cloud Computing •SAP Cloud Provider •SAP Hosting Provider

ICT Service Delivery •ISO20000:2011

•Microsoft SPLA Service Provider

Environment •ISO14001

SAP

•VMWare Service Provider

•SAP PCOE Information Security •ISO27001

•SAP Active Quality Management

Development and Project Management

Credit Card data security

•CMMI-SE/SW v.1.3 level 3

•PCI-DSS

•SAP AM Provider

Workforce IT Service Management •ITIL – 600 people

Employees with technical and/or functional Certification

Total number of Certifications

2,293

3,477

Project Management •PMP – 400 people

Company Profile FY2013 1H2014Results

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Main Figures P&L

Balance Sheet 822.8

Value of Production CAGR 12.3%

Shareholders’ Equity CAGR 8.9%

457.1

394

232 182.7

129

2000 2001 2002 2003 2004

2005 2006 2007 2008

2009 2010 2011 2012 2013

12.6%*

2000 2001 2002 2003 2004

2005 2006 2007 2008

2009 2010 2011 2012 2013

100.8

EBITDA NFP

15.9%* 70.5

CAGR 13.6%

74.8

Workforce restructuring plan

Acquisition of Atos Origin Italia Restructuring of Atos Origin Italia 5.1

19.2

Introduction of IAS-IFRS rules

Company Profile FY2013 1H2014Results

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* Margins on Net Revenues

Slowdown of receivables payment terms 39

Latest Results (1H2014 vs 1H2013) The Group reported higher revenues thanks to a good performance of all Market Divisions and the positive contribution of Engineering.mo – now substantially integrated in the Group business model – and MHT (consolidated from 1st February 2014). Margins are substantially in line with the result of the past year with a 2Q2014 reporting a relevant improvement at EBITDA and EBIT level. Steady NFP improvement due to decrease in working capital requirements. It seems that the “European Late Payment Directive“ is now having some concrete effect.

Economics 412.5

12.0% 12.0% 47.2 46.7

400.4

+3.0%

+1.1%

Value of Production

Financials

+7.6%

EBITDA

Organization 7,269 7,253

45.2 39.0

+0.2%

+16.0% NFP

Employees

Company Profile FY2013 1H2014Results

8.6% 8.1% 33.9 31.5

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EBIT

Corporate structure and stock Engineering, listed since December 2000 on Milan Stock Exchange FTSE STAR Segment - MidCap, maintains a simple ownership structure with 35% held by the family of the founder (Mr Cinaglia), 29% in the hands of the JP Morgan PE Fund One Equity Partners and 33% free float. Cinaglia family

One Equity Partners

34.96%

29.16%

Free Float

33.40%

Treasury Shares

2.48%

Market Cap**

€ 496 M € 54.0

January ‘13 – Today**

4° April

+ 53.1%

€ 32.0 8° August*

€ 25.8 1° January 2013

Company Profile FY2013 1H2014Results

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** Data refer to 16th Sept 2014 * OEP to buy 29.2% shares from Amodeo family

30° Sept 2014

€ 39.7

Competitive landscape The market is highly concentrated around the first 5 players (IBM, Accenture, HP, Microsoft, Engineering) counting for a combined market share of nearly 42% with regards to the whole IT Software and Services spending in Italy. We compete against large size multinational system integrators as well as against medium-small size businesses with much more focused approach to a specific vertical segment. The trend we are experiencing is bearing since 2007 and the size of the potential market addressable is steadily shrinking while our Revenues are growing. This implied Engineering has been able to increase its market share in the relevant market, which is now close to 11.5%.

Software and Services Italian Market Market Share

12,083

Based on € 610 M Services delivered in Italy.

Software 4,199

11,510 Software 4,075 -3.0%

10.5% Services

7,884 Relevant Services Outsourcing

-4.8%

858

Integration development maintenance

2,584

2012

FY2013 1H2014Results

5,849 2,407

Consulting

Company Profile

Services 7,435 -5.7%

2013

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Source: Assinform + Company estimate

2013 Market Share

11.5%

Coverage and FY2014 Consensus Sales

EBITDA

EAT

868

106

42

861

107

47

TP - € 59

870

110

51

TP - € 50

862

107

47

881

108

46

868

108

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TP - € 52.3 Specialist since January 2011 Marta Caprini – BUY [email protected]

TP - € 60 Coverage since 2007 Jacopo Tagliaferri – OUTPERFORM [email protected]

Coverage since 2007 Enrico Coco – BUY [email protected]

Coverage since 2012 Andrea De Vita – HOLD [email protected]

TP - € 50 Coverage since 2009 Alessandro Poggi – IN LINE [email protected]

Company Profile FY2013 1H2014Results

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Disclaimer

This communication contains statements that constitute “forward-looking statements”, including, but not limited to, statements relating to the implementation of strategic initiatives and other statements relating to our future business development and economic performance. While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, (1) general market and macro-economic trends, (2) legislative developments, governmental and regulatory trends, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or creditworthiness of our customers, obligors and counterparties and developments in the markets in which they operate, (6) management changes and changes to our Business Group structure and (7) other key factors that we have indicated could adversely affect our business and financial performance which are contained in other parts of this document and in our past and future filings and reports. Engineering is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise. For additional information on such risks, we ask you to consult Engineering’s filings with Borsa Italiana and CONSOB and to consult applicable Italian laws.

Company Profile FY2013 1H2014Results

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Thanks for your attention

Engineering Ingegneria Informatica SPA Via San Martino della Battaglia 56 00185 ROMA – Italy Tel. +39 06 49 20 11 www.eng.it Niccolò Bossi Head of M&A and Investor Relations Strada 2, Palazzo D/3 20090 Assago Milanofiori, MI – Italy Tel. + 39 02 87002717 [email protected]

Company Profile FY2013 Results

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www.eng.it