Exhibit 99.2

 

Condensed consolidated interim financial statements as of and for the nine-months ended 30 September 2023

 

Contents

 

Condensed consolidated statement of financial position			3
Condensed consolidated income statement			4
Condensed consolidated statement of comprehensive income			5
Condensed consolidated statement of changes in equity			6
Condensed consolidated statement of cash flows			7
Notes to the condensed consolidated interim financial statements			8

 

2

Condensed consolidated statements of financial position

 

(€‘000)
ASSETS		Note		30/09/2023				31/12/2022 Restated
Non-current assets
Other intangible assets		[3.1]			20,625				58,234
Goodwill		[3.2]			384,268				384,216
Property, plant and equipment		[3.3]			77,173				79,837
Equity investments		[3.4]			2				2
Deferred tax assets		[3.5]			33,322				31,709
Other non-current financial assets		[3.6]			940				—
Other non-current assets		[3.7]			958				861
Total non-current assets					517,289				554,859
Current assets
Inventories		[3.8]			91,033				86,728
Trade receivables		[3.9]			72,829				70,161
Current tax assets		[3.10]			1,386				2,087
Other current assets		[3.11]			13,929				14,192
Cash and cash equivalents		[3.12]			27,127				25,920
Total current assets					206,304				199,088
TOTAL ASSETS					723,593				753,947
LIABILITIES
Equity
Share capital		[3.13]			9,868				9,868
Share premium reserve		[3.13]			14,425				14,425
Other reserves		[3.13]			380,751				323,510
Retained earnings (losses carried forward)		[3.13]			(41,236	)			(21,966	)
Profit (loss) attributable to the owners of the parent		[3.13]			(47,784	)			(19,273	)
Total equity attributable to the owners of the parent					316,024				306,564
Total equity					316,024				306,564
Non-current liabilities
Non current financial liabilities		[3.16]			285,597				10,165
Employee benefits		[3.15]			1,258				1,296
Deferred tax liabilities		[3.5]			9,273				19,275
Provisions for risks and charges		[3.14]			29,473				17,156
Other non-current liabilities		[3.18]			870				649
Total non-current liabilities					326,471				48,541
Current liabilities
Current financial liabilities		[3.16]			20,102				336,659
Trade payables		[3.19]			33,405				36,564
Current tax liabilities		[3.20]			1,917				877
Other current liabilities		[3.21]			25,673				24,742
Total current liabilities					81,097				398,842
TOTAL EQUITY AND LIABILITIES					723,593				753,947

The notes commenting on the individual items are an integral part of these condensed consolidated interim financial statements.

 

3

Condensed consolidated income statements

 

(€‘000)
		Note		30/09/2023				30/09/2022 Restated
Revenue		[3.22]			200,736				178,794
Other revenues and income		[3.22]			4,214				3,472
Total revenues and income					204,950				182,266
Raw materials, consumables, supplies and goods		[3.24]			(50,902	)			(42,250	)
Services		[3.25]			(63,036	)			(60,200	)
Change in w.i.p., semi-finished products and finished goods		[3.26]			3,890				2,326
Personnel expenses		[3.27]			(67,412	)			(56,313	)
Amortisation and Depreciation		[3.28]			(22,972	)			(26,131	)
Impairment losses on trade receivables		[3.28]			(944	)			(101	)
Impairment losses on fixed assets		[3.28]			(38,082	)			(853	)
Other operating costs		[3.29]			(10,565	)			(1,195	)
Internal work capitalised		[3.23]			9,156				10,181
Operating costs					(240,868	)			(174,534	)
Operating profit (loss)					(35,918	)			7,732
Financial income		[3.30]			11,574				19,789
Financial expense		[3.30]			(32,605	)			(17,959	)
Net financial income (expense)					(21,030	)			1,830
Pre-tax income (loss)					(56,949	)			9,562
Income tax benefit/(expense)		[3.31]			9,164				(266	)
Profit (loss) for the year					(47,784	)			9,296
of which attributable to the owners of the parent					(47,784	)			9,296

The notes commenting on the individual items are an integral part of these condensed consolidated interim financial statements.

 

4

Condensed consolidated statements of comprehensive income

Statement of comprehensive income

 

(€‘000)
		Note				30/09/2023				30/09/2022 Restated
Profit (loss) for the year							(47,784	)			9,296
Other comprehensive income (expense)
Items that will never be reclassified to profit or loss (A)
Remeasurements of the net defined benefit liability (asset)			[3.15]				—				—
Related tax			[3.15]				—				—
							—				—
Items that are or may be reclassified to profit or loss (B)
Exchange differences on translation of foreign operations			[3.13]				628				457
							628				457
Other comprehensive income (epense), net of tax (A+B)							628				457
Comprehensive income (expense) for the year							(47,156	)			9,753
Comprehensive income (expense) attributable to:
Owners of the parent							(47,156	)			9,753

The notes commenting on the individual items are an integral part of these condensed consolidated interim financial statements.

 

5

Condensed consolidated statements of changes in equity

 

(€‘000)
		Note				Share capital				Share premium reserve				Legal reserve				Merger reserve				FTA reserve				Capital contribution				Translation reserve				Reserve for defined benefit plans (IAS 19)				Other reserves				Retained earnings including Profit (loss) for the year				Total equity attributable to the owners of the parent				Total equity
At 1 January 2022							9,868				14,425				2,101				288,261				(3,840	)			28,051				1,508				(23	)			1,511				(12,742	)			329,121				329,121
At 1 January 2022 restated							9,868				14,425				2,101				288,261				—				28,051				1,508				(23	)			(2,329	)			(21,401	)			320,462				320,462
Statement of comprehensive income
Profit (loss) for the year			[3.13]				—				—				—				—				—				—				—				—				—				9,296				9,296				9,296
Other comprehensive income			[3.13]				—				—				—				—				—				—				457				—				—				—				457				457
Comprehensive income							—				—				—				—				—				—				457				—				—				9,296				9,753				9,753
Owner transactions
Allocation of the loss for the previous year			[3.13]				—				—				—				—				—				—				—				—				565				(565	)			—				—
Other owner transactions			[3.13]				—				—				—				—				—				—				—				—								—				—				—
Total owner transactions							—				—				—				—				—				—				—				—				565				(565	)			—				—
Other changes			[3.13]				—				—				—				—				—				—				—				—				1,989				—				1,989				1,989
At 30 September 2022							9,868				14,425				2,101				288,261				—				28,051				1,965				(23	)			225				(12,670	)			332,204				332,204
							—				—				0				—				3,840				(0	)			0				(0	)			(3,840	)			(9,943	)			(9,944	)			(9,944	)
At 1 January 2023							9,868				14,425				2,101				288,261				(3,840	)			28,051				2,379				31				6,526				(41,193	)			306,610				306,610
Payback																							3,840																(3,840	)			(46	)			(46	)			(46	)
At 1 January 2023 restated							9,868				14,425				2,101				288,261				—				28,051				2,379				31				2,686				(41,239	)			306,564				306,564
Statement of comprehensive income
Profit (loss) for the year			[3.13]				—				—				—				—				—				—				—				—				—				(47,784	)			(47,784	)			(47,784	)
Other comprehensive income			[3.13]				—				—				—				—				—				—				628				—				—				—				628				628
Comprehensive income							—				—				—				—				—				—				628				—				—				(47,784	)			(47,156	)			(47,156	)
Owner transactions
Allocation of the loss for the previous year			[3.13]				—				—				—				—				—				—				—				—				—				—				—				—
Other owner transactions			[3.13]				—				—				—				—				—				46,296				—				—								—				46,296				46,296
Total owner transactions							—				—				—				—				—				46,296				—				—				—				—				46,296				46,296
Other changes			[3.13]				—				—				—				—				—				—				—				0				10,317				3				10,321				10,321
At 30 September 2023							9,868				14,425				2,101				288,261				—				74,347				3,007				31				13,003				(89,020	)			316,024				316,024

The notes commenting on the individual items are an integral part of these condensed consolidated interim financial statements.

 

6

Condensed consolidated statements of cash flows

 

(€‘000)
		30/09/2023				30/09/2022 Restated
Operating activities
Profit (loss) for the period			(47,784	)			9,296
Income tax (benefit)/expense			(9,164	)			266
Net financial (income)/expense			21,030				(589	)
Amortisation, depreciation and impairment losses			59,295				26,340
Accruals/(Release) to provisions			12,317				2,760
Net (gains)/loss on disposals			(685	)			(469	)
FX on contingent consideration			1,243				2,395
Equity-settled share based payment transaction			9,285
Cash flows from operating activities before changes in working capital			45,537				39,999
Change in inventories			(4,305	)			(2,726	)
Change in trade receivables			(2,668	)			(2,679	)
Change in trade payables			(3,158	)			808
Change in other current assets/liabilities			2,960				(341	)
Change in non-current assets			(97	)			(207	)
Income taxes paid			(2,489	)			(678	)
Cash flows from operating activities A)			35,780				34,177
Investing activities
Acquisitions of property, plant and equipment			(18,142	)			(17,359	)
Disposal of property, plant and equipment			687				582
Acquisitions of intangible assets			(2,947	)			(8,202	)
Disposal of intangible assets			—				463
Cash flows used in investing activities B)			(20,402	)			(24,516	)
Financing activities
Third party funds
Bonds repayment			(274,039	)
Bank loans repayment			(47,000	)
Bonds issuance			279,613
Net change in current financial liabilities			—
Net change in non-current financial liabilities			—
Payment of lease liability			(3,363	)			(3,480	)
Gross interest received			243				107
Gross interest paid			(20,921	)			(11,054	)
Capital injection			46,296				—
Other financial liabilities			5,000				9,518
Cash flows used in financing activities C)			(14,171	)			(4,909	)
Increase (decrease) in cash and cash equivalents (A ± B ± C)			1,207				4,751
Opening cash and cash equivalent			25,920				21,503
Closing cash and cash equivalent			27,127				26,254
Increase (decrease) in cash and cash equivalents			1,207				4,751

 

7

Notes to the condensed consolidated interim financial statements

[2.1] General information

The Limacorporate Group (the “group”) creates, designs and sells joint implants and orthopaedic solutions in the medical sector.

The parent, Limacorporate S.p.A. (“Limacorporate” or the “parent”), was set up and is domiciled in Italy. Its registered office is at Via Nazionale 52, San Daniele del Friuli (Udine) and its company registration number is 173824.

The group carries out most of its business at its registered office while some activities are also performed by the subsidiaries.

The condensed consolidated interim financial statements as of and for the nine-months ended 30 September 2023 include the financial statements of the parent and the subsidiaries (together the “group”).

The parent is managed and coordinated by Emil Holding II S.à.r.l., whose details are provided below:

 

•

Registered office: 26A, Boulevard Royal, L-2449 Luxembourg.

 

•

Legal form: limited liability company.

 

•

Description of its business activities and main operations: holding company

 

•

Parent’s name: Emil NewCo S.à.r.l.

 

•

Name of the ultimate indirect parent: EQT Luxembourg Management S.à r.l.

In early July 2023 the management of Limacorporate announced the strategic decision, substantially taken over the weeks before the reporting date, to stop the Smart Space project (referred to TechMah CGU), all digital activities and resources have been refocused on other projects.

On 18th September 2023 the company was served a Complaint filed by the founding shareholders of TechMah Medical (“TechMah Founders”) versus Lima USA Inc. and Limacorporate S.p.A. for alleged breach contract based on the milestones set out in the Investor and Founders Agreement entered into by TechMah Medical LLC, TechMah Founders, Lima USA Inc., and Limacorporate S.p.A. on 8th October 2021.

The Complaint contains high level allegations that Lima USA, Inc. and Limacorporate S.p.A. breached the Investor and Founders Agreement by not using their “reasonable best efforts” to achieve some Regulatory Milestones and by failing to pay out certain Commercial Milestones the Founders assume have been met. The Founders have claimed an amount in a range of USD 5.5 – 11.5 million.

The company has filed a Defendants’ Answer To Verified Amended Complaint and Defendants Counterclaims which contains a request for compensatory damages in an amount to be determined at trial, but not less than $ 50 million.

[2.2] Format and content of the condensed consolidated interim financial statements

The condensed consolidated income statement and consolidated statement of comprehensive income for the nine-month period ended 30 September 2023 and the nine-month period ended 30 September 2022 have been prepared in accordance with IAS 34 issued by International Accounting Standards Board (IASB). They do not include all the information that would be required for the annual consolidated financial statements and should be read in conjunction with the consolidated financial statements for the year ended as of 31 December 2022 and 31 December 2021 which was prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).

The term “IFRS” is also used to refer to all revised international accounting standards (“IAS”), all interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), formerly known as the Standing Interpretations Committee (“SIC”).

 

8

These condensed consolidated interim financial statements comprise the statements of financial position, profit or loss, statement of changes in equity, statement of cash flows and these notes. They comply with the provisions of IAS 1 Presentation of financial statements and the general principle of historical cost, except for those items that, pursuant to the IFRS, are measured at fair value. The statement of financial position has been prepared by separating assets and liabilities into current and non-current, whereas costs are classified in the income statements on the basis of their nature. The statement of cash flows has been prepared using the indirect method.

The notes to the condensed consolidated interim financial statements include the information generally required by ruling legislation and the IFRS, suitably presented with reference to the financial statements schedules used.

The condensed consolidated interim financial statements have been prepared on a going concern basis, as the related assumptions are deemed to be met.

All figures are in Euros, unless indicated otherwise. The Euro is the parent’s functional and presentation currency. For each financial statements caption, the corresponding amount of the previous year is provided for comparative purposes.

Correction of error

As already reported in the consolidated financial statements as of 31 December 2022 prepared in accordance with the IFRS issued by IASB, the Group restated the Group’s equity and profit for the year previously determined under the IFRS endorsed by the European Union. Accordingly, the Group also restated the comparative information of this condensed consolidated interim financial statements as of and for the nine-months ended 30 September 2023.

In the consolidated financial statements as of 31 December 2022 prepared the Group corrected the payback treatment in compliance with IFRS 15 considering it as a variable consideration. The company incorrectly accounted for the payback treatment as a provision in previously issued financial statements. The effect of the correction of error as of 1 January 2021 is a lower Group’s net equity of €6.9 million. For the correction reflected in the opening equity please refer to the previous mentioned consolidated financial statements as of 31 December 2022. Instead, as provide for IAS 8, in the table below are reflected the effects affecting the profit and loss of the consolidated interim financial statements as of and for the nine- months ended 30 September 2022 that led to a decrease of the net result of the period of €1.3 million.

 

9

Reconciliations of the statement of profit or loss

 

(€‘000)
		Note				As previously reported 30/09/2022				Error correction				As restated 30/09/2022
Revenue			[3.22]				180,485				(1,691	)			178,794
Other revenues and income			[3.22]				3,472								3,472
Total revenue and income							183,957				(1,691	)			182,266
Raw materials, consumables, supplies and goods			[3.24]				(42,250	)							(42,250	)
Services			[3.25]				(60,200	)							(60,200	)
Change in w.i.p., semi-finished products and finished goods			[3.26]				2,326								2,326
Personnel expenses			[3.27]				(56,313	)							(56,313	)
Amortisation and Depreciation			[3.28]				(26,131	)							(26,131	)
Impairment losses on trade receivables			[3.28]				(101	)							(101	)
Impairment losses on fixed assets			[3.28]				(853	)							(853	)
Other operating costs			[3.29]				(1,195	)							(1,195	)
Internal work capitalised			[3.23]				10,181								10,181
Operating costs							(174,534	)			—				(174,534	)
Operating profit							9,422				(1,691	)			7,732
Financial income			[3.30]				19,789								19,789
Financial expense			[3.30]				(17,959	)							(17,959	)
Net financial expense							1,830				—				1,830
Pre-tax income (loss)							11,252				(1,691	)			9,562
Income tax benefit (expense)			[3.31]				(672	)			406				(266	)
Profit (loss) for the year							10,581				(1,285	)			9,296
of which attributable to the owners of the parent							10,581				(1,285	)			9,296

 

(€‘000)
		Note				As previously reported 30/09/2022				Error correction				As restated 30/09/2022
Profit (loss) for the year							10,581				(1,285	)			9,296
Other comprehensive income (expense)
Items that will never be reclassified to profit or loss (A)							—				—				—
Remeasurements of the net defined benefit liability (asset)			[3.15]				—				—				—
Related tax			[3.15]				—				—				—
							—				—				—
Items that are or may be reclassified to profit or loss (B)
Exchange differences on translation of foreign operations			[3.13]				797				—				797
							797				—				797
Other comprehensive income (expense), net of tax (A+B)							797				—				797
Comprehensive income (expense) for the year							11,378				(1,285	)			10,093
Comprehensive income (expense) attributable to:							—
Owners of the parent							11,378				(1,285	)			10,093

 

10

[2.3] Consolidation scope

The condensed consolidated interim financial statements of the Limacorporate Group include the financial statements of the parent and the Italian and foreign subsidiaries as at 30 September 2023 and detailed in the following table:

 

Description		Location		Currency		%
LIMA AUSTRIA GmbH		Seestadtstrasse 27 Top 6-7, 1220 Wien (Osterreich)		(EUR)		100%
LIMA BELGIUM SRL		Chaussée de Wavre 504, boîte 5A - 1390 Grez Doiceau (Belgium)		(EUR)		100%
LIMA CZ s.r.o.		Do Zahràdek I., 157/5 - 155 21 Praha 5 - Třebonice - (Czech Republic)		(CZK)		100%
LIMA DENMARK ApS		Lyngebaekgards Alle 2, 2990 Niva (Denmark)		(DKK)		100%
LIMA DEUTSCHLAND GmbH		Gasstraße 18 | Haus 1 - 22761 Hamburg - Germany		(EUR)		100%
LIMA DO BRASIL LTDA		Al. Campinas, 728 – 2° andar salas 201, 202, 203 e 204.- Jardim Paulista - Sao Paulo - SP - CEP:01404-001 (Brasil)		(BRL)		100%
LIMA FRANCE Sas		1, Allée des Alisiers - Immeuble “Le Galilée” - 69500 Bron - (France)		(EUR)		100%
LIMA IMPLANTES PORTUGAL S.U. LDA		Rua Pêro Vaz de Caminha 8 E 2660-441 Stº António Cavaleiros - (Portugal)		(EUR)		100%
LIMA IMPLANTES Slu		Francisco Sancha, 4 3ª planta | 28034 Madrid | España		(EUR)		100%
LIMA JAPAN K.K.		Tokyo Front Terrace 13F 2-3-14 Higashi Shinagawa,Shinagawa, Tokyo, 140-0002 , (Japan)		(JPY)		100%
LIMA KOREA Co., Ltd		2Fl., EunSung Bldg., 741 Yeongdong-daero, Gangnam Gu, Seoul, 06071, Korea		(KRW)		100%
LIMA NETHERLANDS B.V.		Bergweg 153A, 3707AC Zeist - (Netherlands)		(EUR)		100%
LIMA O.I. d.o.o. - ORTOPEDIJA I IMPLANTATI		Ante Kovačića, 3 - 10000 Zagreb - (Croatia)		(EUR)		100%
LIMA ORTHOPAEDICS AUSTRALIA Pty Ltd		Unit 1, 40 Ricketts Road - Mt Waverley, 3149 Victoria - (Australia)		(AUD)		100%
LIMA ORTHOPAEDICS NEW ZEALAND Pty Ltd		20 Crummer Rd Grey Lynn 1021 Auckland 1021 - New Zealand		(NZD)		100%
LIMA ORTHOPAEDICS SOUTH AFRICA (PTY) LTD		Northlands Deco Park, Stand 326, 10 Newmarket Street, Design Boulevard, Northriding, 2186 (South Africa)		(ZAR)		100%
LIMA ORTHOPAEDICS UK Ltd		4 Office Village Forder Way Cygnet Park Hampton Peterborough Peterborough PE7 8GX (United Kingdom)		(GBP)		100%
LIMA POLSKA SP. z.o.o.		ul. Ul Lopuszanska 95 - 02-457 Warsaw (Poland)		(PLN)		100%
LIMA SK S.r.o.		Cesta na Stadiòn 7 - 97404 Banska Banska Bystrica - (Slovakia)		(EUR)		100%
LIMA SWEDEN AB		Box 180 - SE-184 22 Akersberga - (Sweden)		(SEK)		100%
LIMA SWITZERLAND SA		Birkenstrasse, 49 - 6343 Rotkreuz - Zug - (Switzerland)		(CHF)		100%
TASFIYE HALINDE LIMA TURKEY ORTOPEDI AS		Serifali Mah. Hendem Cad.No: 54 Canan Residence OFIS A-2,34775 - UMRANIYE - Istanbul - (Turkiye)		(TRY)		100%
LIMA USA Inc.		2001 NE Green Oaks Blvd, Suite 100 - Arlington, TX 76006 - (United States)		(USD)		100%
LIMA SM S.p.A. in liquidazione		Strada Borrana, 38 - Serravalle 47899 - (Repubblica di San Marino)		(EUR)		100%
LIMA (BEIJING) MEDICAL DEVICES CO., LTD.		Room 616, 6/F, Building 1, No.1, Lize Zhong 2 Road, Chaoyang District, Beijing, China		(CNY)		100%
LIMA ORTHOPAEDICS CANADA INC.		3715 Laird Road Suite Unit 9, Mississauga, ON, Canada		(CAD)		100%

Subsidiaries are those companies over which the group has control, as defined by IFRS 10 Consolidated financial statements. Control exists when the group has the power to, directly or indirectly, govern the financial and operating policies of an entity to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements starting from when control is assumed and until such control ceases to exist.

Subsidiaries are included in the consolidation scope from when the group acquires control, as defined above, and are excluded from when the group no longer has control.

On 1 January 2023, the subsidiary TechMah Medical LLC was merged by incorporation into the subsidiary Lima USA Inc.

The interim reporting date of all the consolidated companies is 30 September.

The basis of consolidation is set out below:

 

•

The line-by-line method, showing the portions of equity and profit or loss for the year attributable to non-controlling interests and recognising assets, liabilities, revenue and costs regardless of the percentage held in the subsidiaries.

 

•

Eliminating items deriving from intragroup transactions involving consolidated companies, including any unrealised gains and losses arising from intragroup transactions and recognising the resulting deferred tax effects.

 

•

Eliminating intragroup dividends and reallocating them to opening equity reserves.

 

11

•

Eliminating the carrying amount of investments in consolidated companies and the relevant portion of equity, allocating the resulting positive and negative differences to the relevant captions (assets, liabilities and equity), as defined at the time of acquisition of the investment and considering any subsequent variations. After control is acquired, any acquisitions of non-controlling interests or sales of shares to non-controlling interests that do not entail loss of control are recognised as owner transactions and the relevant effects are taken directly to equity. Any differences between the change in equity attributable to non-controlling interests and cash and cash equivalents exchanged are recognised under changes in equity attributable to the owners of the parent.

 

•

The financial statements of foreign operations are translated into Euros using the annual average rate for income statement items and the closing rate for statement of financial position items. The difference between the two rates along with the translation differences deriving from changes in opening and closing exchange rates are recognised as changes in equity.

The following rates were applied in translating the financial statements of foreign operations:

 

Currency		Average rate 2023				Closing rate: 30/09/2023				Average rate 2022				Closing rate: 30/09/2022
AUD - Australian Dollar			1.6205				1.6339				1.5044				1.5076
BRL - Brazilian Real			5.4245				5.3065				5.4631				5.2584
CAD - Canadian Dollar			1.4576				1.4227				1.3643				1.3401
CHF - Swiss Franc			0.9774				0.9669				1.0118				0.9561
CNY - Yuan Renminbi			7.6235				7.7352				7.0193				6.9368
CZK - Czech Koruna			23.8359				24.3390				24.6248				24.5490
DKK - Danish Krone			7.4486				7.4571				7.4399				7.4365
GBP - Pound Sterling			0.8707				0.8646				0.8472				0.8830
HRK - Croatian Kuna			n.a				n.a				7.5335				7.5240
JPY - Yen			149.6515				158.1000				135.9679				141.0100
KRW - Won			1,410.2500				1,425.2600				1,348.7900				1,400.6900
NZD - New Zealand Dollar			1.7547				1.7575				1.6468				1.7177
PLN - Zloty			4.5820				4.6283				4.6724				4.8483
SEK - Swedish Krona			11.4789				11.5325				10.5274				10.8993
TRY - Turkish Lira			24.1485				29.0514				16.8796				18.0841
USD - US Dollar			1.0833				1.0594				1.0638				0.9748
ZAR - Rand			19.8865				19.9813				16.9517				17.5353

[2.4] Basis of presentation

[2.4.1] Business combinations and goodwill

Business combinations are recognised using the acquisition method under IFRS 3. To this end, the acquired identifiable assets and the assumed liabilities are recognised at their respective acquisition-date fair value. The consideration transferred in a business combination is the aggregate of the fair value, at the date of exchange, of assets acquired, assumed liabilities and equity instruments issued by the acquirer, in exchange for control of the acquiree.

Goodwill is the positive difference between the consideration transferred, increased by both the fair value at the acquisition date of any non-controlling interests already held in the acquiree and the amount of non-controlling interests held in the acquiree by third parties (measured at fair value or based on the present value of the acquiree’s identifiable net assets), and the fair value of such assets and liabilities.

At the acquisition date, goodwill is allocated to the single cash-generating unit that is expected to benefit from the synergies of the business combination.

If the difference between the consideration transferred (increased by the above components) and the fair value of the net assets acquired is negative, this is recognised as a gain from a bargain purchase in the income statement in the year of acquisition.

Any goodwill related to non-controlling interests is included in the carrying amount of the relevant equity investments.

 

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After initial recognition, goodwill is not amortised and is recognised net of any cumulative impairment losses, calculated using the methods set out in section [2.4.6] Impairment losses on assets.

As set out in section [3.2] Goodwill of this report, the market multiples method is used to determine the fair value of goodwill, using listed comparable companies (these multiples are compared with the implicit multiple calculated using the group’s actual figures), except for CGU TechMah for which the value in use is defined using estimated future cashflows by applying a discount rate.

IFRS 3 is not applied retrospectively to business combinations that took place prior to 1 January 2018, i.e., the date of the parent’s transition to the IFRS. Accordingly, the amount of goodwill determined under the previous reporting standards, i.e., the carrying amount at such date, is maintained for such business combinations, subject to the recognition of any impairment losses.

[2.4.2] Intangible assets

An intangible asset is an identifiable asset without physical substance, controlled by the group and that generates future economic benefits, in addition to goodwill when acquired against consideration.

Identifiability is defined with reference to the possibility of distinguishing the intangible asset acquired from goodwill. An intangible asset is identifiable when it: (i) arises from a legal or contractual right or (ii) is separable, i.e., can be sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract. An entity controls an asset if it has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to such benefits.

Intangible assets are stated at cost, which is determined in same manner as for property, plant and equipment.

Intangible assets with finite useful lives are amortised over their estimated useful lives starting from when they are available for use.

The amortisation rates adopted in 2022 and 2023 are shown in the following table by asset category:

 

Description		2023 - 2022 (*)
Start-up and capital costs		3 - 4 - 5 years
Development expenditure		5 - 10 years
Patents and intellectual property rights		10 - 20 years
Licences, trademarks and simiilar rights		3 - 4 - 5 years
Other		Contract term/Maximum 6 years

 

*	There were no changes to the amortisation rates

Development expenditure

Development expenditure is expensed when incurred.

Development expenditure incurred for a specific project is only capitalised when the group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use and for sale, its intention to complete such asset and use or sell it, how the intangible asset will generate probable future economic benefits, the availability of adequate technical, financial and other resources to complete the development and its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Subsequent to initial recognition, development expenditure is measured at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation of the asset starts from when the development phase has been completed and the asset is available for use. The asset is amortised over the period for which the underlying project is expected to generate revenue for the group.

Patents and intellectual property rights

Patents and intellectual property rights refer to costs for patents owned by Limacorporate S.p.A.

 

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Licences, trademarks and similar rights

This caption refers to costs to file and register trademarks and costs incurred to acquire commercial licences. The acquisition costs are amortised over a period equal to the useful life of the acquired right.

Other intangible assets

This caption refers to leasehold improvements carried out in prior years. The capitalised costs are amortised on the basis of the residual term of the relevant lease contract.

[2.4.3] Property, plant and equipment

Property, plant and equipment are recognised at acquisition or production cost including directly attributable costs incurred to ready the asset for its intended use. Such cost includes costs to replace parts of equipment and plant when they are incurred if they meet the recognition requirements.

Assets acquired under business combinations before 1 January 2018 (the date of the parent’s e to the IFRS) are recognised at their pre-existing carrying amount, determined within such business combinations in accordance with the previous reporting standards, i.e., at deemed cost.

The carrying amount (cost less accumulated depreciation and cumulative impairment losses) of the replaced parts of equipment and plant is taken to profit or loss at the time of replacement.

Maintenance and repair costs, which do not add to the value of the assets and/or prolong their residual useful lives, are expensed when incurred. Otherwise they are capitalised.

Property, plant and equipment are stated net of any accumulated depreciation and any cumulative impairment losses determined using the methods set out below. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset for the group.

The depreciation rates used are shown in the following table by asset category:

 

		2023		2022
Buildings		3%		3%
Light constructions		10%		10%
Generic and specific plant		10% - 15.5%		10% - 15.5%
Machinery		15.5%		16%
Sundry and small equipment		25%		25%
Production equipment		10%		10%
Office furniture and machines		12%		12%
Electronic office machines		20%		20%
Transport vehicles		20%		20%
Cars		25%		25%
Right-of-use assets		Lease term		Lease term

The residual value of the assets, the useful life and the depreciation method applied are reviewed at each periods end and adjusted prospectively if necessary.

If significant parts of an item of property, plant and equipment have different useful lives, such parts are recognised separately. Land, free of construction or annexed to buildings, is recognised separately and is not depreciated since it has an unlimited useful life.

The carrying amount of an item of property, plant and equipment and every significant part initially recognised is eliminated on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of the item (calculated as the difference between the carrying amount of the asset and the net disposal proceeds) is included in profit or loss when the item is derecognised.

 

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[2.4.4] Leases

If a contract contains a lease, at the commencement date, the lessee shall recognise an asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The lessee shall recognise interest on the lease liability and depreciation of the right-of-use asset separately. At inception of a contract, the entity shall assess whether the contract is, or contains, a lease. The contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

[2.4.5] Equity investments

Investments in associates are measured using the equity method, recognising the group’s share of the profits or losses for the period in the income statement, with the exception of the effects related to other changes in the equity of the investee, other than owner transactions, that are directly recognised in other comprehensive income.

In the event of losses exceeding the carrying amount of the equity investment, the excess is recognised in a specific provision to the extent the parent is obliged to fulfil legal or constructive obligations to the investee or to cover its losses.

Investments in other companies are measured at fair value and the fair value gains and losses are taken to equity. If fair value cannot be reliably determined, they are measured at cost, adjusted for any impairment losses.

[2.4.6] Impairment losses

At the reporting date, the carrying amount of property, plant and equipment, intangible assets, financial assets and equity investments is tested for indicators of impairment. Should such indicators exist, the group estimates the recoverable amount of the asset to check the recoverability of the carrying amount and determine any impairment loss to be recognised. Intangible assets with indefinite useful lives or not yet available for use are tested for impairment at least annually, irrespective of whether any indication of impairment exists, or more frequently if an indication of impairment exists.

In order to identify impairment losses, assets are grouped into the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets (the cash-generating unit, CGU). Reference should be made to section [3.2] Goodwill for details of the group’s CGU. The recoverable amount of an asset or a CGU is the higher of its value in use and its fair value less costs to sell.

The market multiples method is used to determine the value in use using listed comparable companies. These multiples are compared with the implicit multiple calculated using the group’s actual figures. When the carrying amount of an asset or a CGU exceeds its recoverable amount, the group recognises an impairment loss in profit or loss. Impairment losses on the CGU are allocated first to reduce the carrying amount of any goodwill allocated to it and then to the other assets of the CGU pro rata on the basis of their carrying amounts. Impairment losses on goodwill cannot be reversed. Impairment losses on other assets are reversed to the carrying amount that would have been determined (net of amortisation and depreciation) had no impairment losses been recognised in prior periods.

[2.4.7] Financial instruments

The financial instruments held by the group are described below.

Financial assets

Financial assets include equity investments, loans and borrowings, as well as derivatives with a positive fair value, trade receivables and other assets, in addition to cash and cash equivalents.

Specifically, cash and cash equivalents include cash, bank deposits and highly marketable securities that are readily convertible to cash and are subject to an immaterial risk of changes in value.

Financial assets represented by debt instruments are classified in the consolidated financial statements and measured using the business model adopted by the group for managing financial assets and based on the cash flows related to each financial asset. Financial assets also include equity investments not held for trading. Such assets are strategic investments, and the group has opted to recognise fair value gains or losses thereon through profit or loss (fair value through profit or loss, FVTPL).

Financial assets are tested for impairment using a model based on expected credit losses.

 

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Financial liabilities

Financial liabilities include loans and borrowings, as well as derivatives with a negative fair value, trade payables and other liabilities.

Financial liabilities are classified and measured at amortised cost, with the exception of those initially measured at fair value, e.g., financial liabilities related to considerations for business combinations and derivatives and financial liabilities for options on non-controlling interests.

Derecognition of financial assets and liabilities

A financial asset or liability (or, where applicable, part of a financial asset/liability or part of a group of similar financial assets/liabilities) is derecognised when the group unconditionally transfers the contractual rights to receive the cash flows of the financial asset or the obligation to make payments or fulfil other obligations related to the liability.

Derivatives and hedging transactions

To cover-interest-rate risks, interest-rate swap contracts are generally used. All derivatives are measured at fair value. If an economic hedge does not qualify for hedge accounting, then any derivative used is measured at fair value with all changes in fair value recognised in profit or loss. These changes will not be offset by gains or losses on the hedged item when the hedged item is not also measured at FVTPL.

[2.4.8] Inventories

Raw materials and packaging are measured at the lower of purchase cost and estimated replacement value based on market trends. The cost is calculated using the weighted average cost for the period.

Semi-finished products and finished goods are measured at purchase or production cost, considering their stage of completion, or their realisable value based on market trends, if lower. The production cost includes the reasonably attributable portion of direct and indirect manufacturing costs.

The resulting amount is written down through the allowance for inventory write-down to account for items whose expected realisable value is lower than their cost.

[2.4.9] Trade receivables and other assets and trade payables and other liabilities

Trade receivables and other assets that derive from the supply of credit facilities, goods or services to third parties are classified under current assets, except when they are due after one year of the reporting date with reference to loans and receivables. If they have a set due date, current and non-current loans and receivables, other current and non-current assets and trade receivables, with the exception of derivatives, are measured at amortised cost calculated using the effective interest method. If they do not have a set due date, financial assets are measured at cost. Loans and receivables due after one year that are non-interest bearing or accruing interest lower than market rates are discounted using market rates.

The above financial assets are measured using the expected credit loss impairment model introduced by IFRS 9.

Trade payables and other liabilities that arise from the acquisition of credit facilities, goods or services from a third part supplier are classified under current liabilities, except when they are due after one year of the reporting date with reference to loans and borrowings.

On initial recognition, current and non-current loans and borrowings, other current and non-current liabilities and trade payables are stated at fair value, which normally coincides with the transaction price including transaction costs. Subsequently, with the exception of derivatives, all financial liabilities are measured at amortised cost calculated using the effective interest method. Hedged financial liabilities are measured in accordance with hedge accounting.

 

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[2.4.10] Employee benefits

The liability related to short-term employee benefits paid during the employment relationship is recognised on an accruals basis at the amount accrued at the reporting date.

The liability related to employee benefits paid upon or after termination of the employment relationship via defined benefit plans, is recognised at the amount accrued at the reporting date.

The liability related to employee benefits paid upon or after termination of the employment relationship via defined benefit plans, net of any plan assets and advances granted, is calculated using actuarial assumptions and recognised on an accruals basis in line with the service needed to obtain the benefits. Such liability is calculated by independent actuaries. The gain or loss deriving from the actuarial calculation is fully recognised in the statement of comprehensive income.

Defined benefit plan liabilities are measured using the actuarial assumptions set out in section [3.15] Employee benefits.

[2.4.11] Provisions for risks and charges

The provisions for risks and charges are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation or transfer it to third parties at the reporting date. Where the effect of the discounting is material, the provisions are calculated by discounting the estimated future cash flows at a rate that reflects current market assessments of the time value of money. When discounting is used, the carrying amount of the provision increases to reflect the passage of time and this increase is recognised as borrowing cost.

[2.4.12] Share-based payments

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions. With regard to non-vesting conditions, any differences between expected and actual outcomes do not have an impact on the consolidated financial statements.

The fair value of the amount payable to employees in respect of cash-settled share-based payments is recognised as an expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at the settlement date based on the fair value of the share-based payments. Any fair value gains or losses are recognised in profit or loss.

The parent has agreements with some managers for the award of options and/or shares (see section [4.7] Management Incentive plans).

[2.4.13] Revenue and expense

Based on the five-step model introduced by IFRS 15, the group recognises revenue after identifying the contract(s) with a customer and the performance obligations in the contract (transfer of goods and/or services), determining the transaction price to which it expects to be entitled in exchange for fulfilling performance obligations (at a point in time or over time). Revenue is measured on the basis of the transaction price excluding amounts collected on behalf of third parties. Based on the group’s internal analysis of contracts with customers, the group has not identified any performance obligations that are satisfied over time and, therefore, the group recognises revenue upon the transfer of control of the promised goods or services to the customer. Revenue is measured to the extent that it is probable that the economic benefits will flow to the group and the amount can be measured reliably.

 

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Revenue is adjusted for any discounts and volume rebates allowed by the group in contracts with customers and for the payback (variable considerations) see [3.22] Revenue and other revenue and income and [3.14] Provisions for risks and charges for payback system.

Expense is recognised when the goods and services are sold or consumed during the period or by systematic allocation, or when it is not possible to identify their future use.

Expense items are classified by nature in accordance with the applicable IFRS.

[2.4.14] Government grants

Grants are recognized when there is reasonable assurance that the grant will be received.

Grants related to income are taken to profit or loss in the period in which the relevant expense is recognised.

Grants related to assets received for projects and development activities are recognised under liabilities and subsequently recognised under operating revenue in line with the amortisation and depreciation of the relevant assets.

Grants due for investments in research and development are recognised in line with the progress of the research, calculated on the basis of the progress reports issued to the relevant bodies and the stage of completion reported by those in charge of the research, if all requirements for their disbursement are met.

[2.4.15] Financial income and expense

Financial income and expense are recognised on the basis of interest accrued on the net amount of the relevant financial assets and liabilities, using the effective interest method.

[2.4.16] Dividends

Dividends are recognised when the shareholder’s right to receive payment is established.

[2.4.17] Income taxes

Income taxes recognised in profit or loss are the sum of current and deferred taxes.

Income taxes for the period are determined on the basis of ruling legislation. They are recognised in profit or loss, except for those related to items recognised directly in equity, for which the tax effect is accounted for directly in equity.

Income tax payables are recognised under current tax liabilities, net of advances paid. Any tax credits are recognised under current tax assets.

Deferred tax assets and liabilities are calculated on the temporary differences between the carrying amounts of assets and liabilities (resulting from the application of the accounting policies set out in note 2.4 “Basis of presentation”) and their tax bases (deriving from the application of the tax legislation ruling in the country of the subsidiaries). Current and deferred tax assets and liabilities are offset when the group has the legally enforceable right to offset.

Deferred taxes are calculated using the tax rates expected to be enacted in the periods in which the temporary differences will be recovered or settled. Deferred tax assets and liabilities are not discounted.

Deferred tax assets are recognised on temporary differences and to the extent that it is probable the group will have future taxable profits that will allow their recovery.

[2.4.18] Fair value

IFRS 13 is a common framework for fair value measurement and relevant disclosure when this measurement is required or allowed by other IFRS. Specifically, the standard sets out the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

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IFRS 13 establishes a hierarchy that categorises the inputs used in the valuation techniques adopted to measure fair value into different levels, as follows:

 

•

level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date;

 

•

level 2: inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly or indirectly;

 

•

level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

In some cases, the inputs used to measure the fair value of an asset or a liability might be categorised within different levels of the fair value hierarchy. In those cases, the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The group recognises transfers among the different levels of the fair value hierarchy at the end of the periods in which the transfer took place.

Reference should be made to the notes to the individual financial statements’ items for the definition of the fair value hierarchy level used to classify the individual instruments measured at fair value or whose fair value is disclosed.

The fair value of derivatives is calculated by discounting estimated cash flows using the market interest rates at the reporting date and the credit default swaps issued by the counterparty and group companies, to include the non-performance risk explicitly provided for under IFRS 13.

Where market prices are not available, the fair value of non-derivative medium/long-term financial instruments is calculated by discounting estimated cash flows using the market interest rates at the reporting date and considering counterparty risk for financial assets and credit risk for financial liabilities.

[2.4.19] Use of estimates

In preparing the condensed consolidated interim financial statements, the directors were required to apply accounting policies that are, at times, based on judgements or past experience or assumptions deemed reasonable and realistic at the time, depending on the relevant circumstances. The application of such estimates and assumptions impacts the carrying amounts recognised in the statement of financial position, income statement, statement of comprehensive income and statement of cash flows, in addition to the disclosure provided. The end results of the assessments in which such estimates and assumptions were used may differ from those recognised in the consolidated financial statements due to the inherent uncertainty of the assumptions and the conditions underlying the estimates.

Actual results may differ from those estimated. Estimates and assumptions are reviewed on an ongoing basis. The effect of a change in accounting estimates is recognised in profit or loss in the period of the change, if the change affects that period only, or the period of the change and future periods, if the change affects both.

Estimates mainly refer to the following captions:

 

•

impairment losses on non-current assets and goodwill;

 

•

loss allowance;

 

•

allowance for inventory write-down;

 

•

recoverability of deferred tax assets;

 

•

estimate of the provisions for risks and contingent liabilities;

 

•

financial liabilities;

 

•

employee incentive plans.

 

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Impairment losses on non-current assets and goodwill

Non-current assets include property, plant and equipment, intangible assets including goodwill and other financial assets.

Management periodically revises the carrying amount of non-current assets held and used and assets held for sale when events and circumstances require such revision. This is performed using the estimates of cash flows the group expects to derive from using or selling the asset and suitable discount rates for calculating the present value.

When the carrying amount of a non-current asset has been impaired, the group recognises an impairment loss equal to the excess between the carrying amount and the amount to be recovered through use or sale of the asset, determined using the parent’s or group’s most recent plans. Reference should be made to note [3.28] Impairment losses.

Loss allowance

The loss allowance is management’s best estimate of the potential credit losses on trade receivables from end customers. Reference should be made to note [3.9] Trade receivables and other assets and [3.19] trade payables and other liabilities for a description of the criteria used in estimating the allowance.

Allowance for inventory write-down

Inventories of slow-moving raw materials and finished goods are periodically analysed on the basis of historical data and the possibility of selling them at prices lower than normal market transactions. If, as a result, the carrying amount of inventories needs to be written down, the group recognises a specific allowance for inventory write-down.

Recoverability of deferred tax assets

The group pays taxes in numerous countries and some estimates are required to calculate the taxes in each jurisdiction. It recognises deferred tax assets to the extent that it is probable that future taxable profits will be available and over a period of time compatible with the time horizon implicit in the management estimates.

Estimate of the provisions for risks and contingent liabilities

The group could be subject to legal and tax disputes regarding a vast range of issues that are subject to the jurisdiction of various countries. Disputes and litigation against the group are subject to a different degree of uncertainty, including the facts and circumstances inherent to each dispute, the jurisdiction and different applicable laws. In the ordinary course of business, management consults its legal consultants and legal and tax experts. The group recognises a liability for such disputes when it is deemed probable that they will result in an outflow of resources and when the amount of the resulting losses can be reasonably estimated. If an outflow of resources is possible but the amount cannot be determined, such fact is disclosed in the notes to the consolidated financial statements.

Employee incentive plans and financial liabilities

Reference is made to section [4.7] for a description of the calculation of the fair value of share-based payments as part of group management incentive plans.

Section [3.16] provides details of the calculation of fair value of the group’s financial liabilities.

[2.4.20] Translation of foreign currency items

The financial statements of each consolidated company are prepared using the functional currency related to the economy where each company operates. Transactions in currencies other than the functional currency are recognised at the exchange rate at the date of the transaction. Foreign currency monetary assets and liabilities are subsequently translated at the closing rate and any exchange differences are taken to profit or loss. Foreign currency non-monetary assets and liabilities recognised at historical cost are translated using the exchange rate at the date of the transaction.

For consolidation purposes, the foreign currency financial statements prepared for consolidation purposes of the consolidated companies are translated using the closing rates for asset and liability captions, including goodwill and consolidation adjustments, and the average rate for the period (if similar to the respective transaction-date rates) or the period under consolidation, if lower, for income statement captions. The relevant exchange differences are taken directly to the statement of comprehensive income and reclassified to profit or loss when control over the investee is lost and, thus, it is deconsolidated.

 

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