Impairment Analysis of Listed Italian Companies
1 Impairment Analysis of Listed Italian Companies
Table of contents
Intensity of impairment
Executive summary
Introduction
Total impairment
Reporting of impairment
Timing of impairment
1
2
3
4
6
7 23
2
5
11
14
20
FTSE MIB vs. MSCI Europe by sector
Impairment vs. Market cap.
Market-to-book ratio vs. Impairment
Goodwill impairment
FTSE MIB impairment by sector
MSCI Europe impairment by sector
8
9
10
11
12
13 42
26
29
32
34
39
MSCI Europe by country14 45
Appendix15 49
Concentration of impairment5 17
2 Impairment Analysis of Listed Italian Companies
Executive summary:Impairment analysis for 5 main European countries
Italy
111 companies
2016 Total impairment: EUR 4.5bn
United Kingdom
98 companies
2016 Total impairment: EUR 17.0bn
Germany
53 companies
2016 Total impairment: EUR 3.4bn
France
71 companies
2016 Total impairment: EUR 8.9bn
Switzerland
37 companies
2016 Total impairment: EUR 4.0bn
% of total impairment reported by the top 3 companies (2005-2016)
0,0
500,0
1.000,0
1.500,0
2.000,0
2.500,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
bn
Italian companies market cap United Kingdom companies market cap France companies market cap
Germany companies market cap Switzerland companies market cap
% of companies reporting impairment (2016)
3 Impairment Analysis of Listed Italian Companies
Executive summary:FTSE MIB impairment analysis for top 5 sectors
FTSE MIB Automotive EnergyFinancial services
Infrastructure TMT Others Total
No. of companies
2016 4 8 14 2 3 9 40
Total impairment (EUR bn)
2016 0.2 2.7 1.4 0.0 0.1 0.1 4.5
5 year average
0.3 6.0 3.4 0.2 1.4 0.2 11.5
% of companies reporting impairment
2016 75.0% 75.0% 92.9% 50.0% 66.7% 77.8% 80.0%
5 year average
75.0% 77.5% 70.0% 90.0% 66.7% 71.1% 73.0%
Market capitalization(EUR bn)
2016 37.0 153.0 120.1 26.0 25.0 73.1 434.2
5 year average
18.6 141.0 119.1 20.3 22.0 56.1 377.1
Market-to-book ratio
2016 0.7x 1.1x 0.7x 1.8x 0.9x 3.2x 1.0x
5 year average
0.4x 1.0x 0.7x 1.6x 0.9x 2.7x 0.9x
► In 2016, Energy sector reported highest impairment due to decrease in crude oil prices. However, Financial services sector reported highest impairment during 2005 – 2016 period, followed by Energy and TMT sectors
► Highest impairment was reported during 2011 – 2013 period due to impact of financial market crisis and European debt crisis
► % of companies reporting impairment increased from 52.5% in 2005 to 80.0% in 2016
► In the top 3 companies in terms of total impairment during 2005 – 2016, two were from financial services sector and third was from TMT sector
► The concentration of impairment by top 5 companies decreased due to an increase in the % of companies reporting impairment
► The companies reporting impairment >EUR 5m increased from 12 in 2009 to 22 in 2016
► The total impairment tends to be higher when the market capitalization of the companies were lower, this indicates that the companies tend to report higher impairments when the financial markets are negative and lower when financial markets are positive
► During 2005 to 2007, the market-to-book value ratio for FTSE MIB companies was high
4 Impairment Analysis of Listed Italian Companies
Executive summary:MSCI Europe impairment analysis for top 5 sectors
FTSE MIB EnergyFinancial services
Metals & Mining
RCP TMT Others Total
No. of companies
2016 37 90 12 67 51 172 429
Total impairment (EUR bn)
2016 18.5 2.7 9.9 3.7 8.5 4.9 48.2
5 year average
32.0 6.8 14.8 5.4 12.4 8.6 80.0
% of companies reporting impairment
2016 81.1% 83.3% 83.3% 65.7% 54.9% 58.1% 66.9%
5 year average
78.4% 78.4% 71.7% 62.7% 60.4% 57.1% 65.1%
Market capitalization(EUR bn)
2016 1,046.8 1,813.6 300.9 2,016.8 860.5 3,253.0 9,291.6
5 year average
949.9 1,681.1 301.9 1,743.1 816.8 2,815.2 8,308.1
Market-to-book ratio
2016 1.2x 0.8x 1.3x 3.2x 1.9x 2.4x 1.6x
5 year average
1.1x 0.8x 1.3x 3.2x 2.0x 2.4x 1.6x
► In 2016, Energy sector reported highest impairment due to decrease in crude oil prices, followed by Metals & Mining due to decrease in metal prices. Also, Energy sector reported highest impairment during 2005 – 2016 period, followed by TMT and Financial services sectors
► Highest impairment was reported in 2015 due to impact of crude oil and metal prices
► % of companies reporting impairment increased from 45.9% in 2005 to 66.9% in 2016
► Top 3 companies in terms of total impairment during 2005 – 2016 period, were one each from TMT, financial services and energy sector
► The concentration of impairment by top 5 companies decreased due to an increase in the % of companies reporting impairment
► The companies reporting impairment >EUR 1,000m increased from 3 in 2005 to 16 in 2016
► The total impairment tends to be higher when the market capitalization decreases. This can be observed in 2008 and 2011
► For MSCI Europe companies, market-to-book ratio decreased from 2.0x in 2005 to 1.6x in 2016. No relation can be seen between the market-to-book ratio and total impairment
5 Impairment Analysis of Listed Italian Companies
► IAS 36 specifies that the assets are to be carried at no more than their recoverable amount (RA). The companies test for impairment for its assets
► IAS 36 requires an entity to assess, at each reporting date if an asset may be impaired
► To measure impairment, assets carrying amount (CA) is compared with recoverable amount
► Recoverable amount is calculated as higher of its “fair value less costs to sell” and its “value in use” (VIU)
► Fair value less costs to sell (FVLCS) is the amount obtainable from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties, less the costs of disposal
► Fair value can also be calculated using Discounted cash flow methodology
► VIU is the present value of the future cash flows expected to be derived from an asset or a cash generating unit (CGU)
► VIU can be calculated either by a comparable assets approach are expected cash flow approach. However, IAS 36 indicates that the expected cash flow approach is, in some situations, a more effective measurement tool than the traditional approach (comparable assets)
► Reasonable and supportable assumptions are to be considered to calculate future cash flow. An entity is required to consider both external sources (such as market interest rates, significant adverse changes in the technological, market, economic or legal environment in which the entity operates, market capitalisation being lower than net assets) and internal sources (such as internal restructurings, evidence of obsolescence or physical damage)
► Future cash flows of the asset are calculated and a discount rate is applied to arrive at the present value of the future cash flows
► An impairment loss is recognised to the extent the CA of the asset exceeds its RA. For assets carried at historical cost, impairment losses are recognised as an expense immediately in profit or loss
► Primary difference with US GAAP: The reversal of previously recognised impairment losses is prohibited
► The key disclosures required:
► The amount of impairment recognised and reversed and the events and circumstances that were the cause thereof
► The amount of goodwill per CGU or group of CGUs
► The valuation method applied: FVLCS or VIU and its approach in determining the appropriate assumptions
► The key assumptions applied in the valuation, including the growth and discount rate used
► A sensitivity analysis, when a reasonably possible change in a key assumption would result in an impairment, including the ‘headroom’ in the impairment calculation and the amount by which the assumption would need to change to result in an impairment
Introduction:Impairment testing in Italy
Impairment testing (IAS – 36)
6 Impairment Analysis of Listed Italian Companies
Are there any other
indicators of impairment Is the asset
goodwill or an intangible
asset with indefinite
useful life?Can RA of the individual asset be
estimated
Is CA>RA for CGU or group
of CGUs?
Is CA>RA? Identify CGU to which the asset
belongs
If goodwill cannot be allocated to an individual CGU, allocate it to a
group of CGUs
Reduce CA of goodwill
Reduce other assets of CGU pro rata on the basis of their CA
Reduce CA to RA
Determine RA
End
N
Y
Y
N
Y
N
N
Y
Y
N
RA = Recoverable amount; CA = Carrying amount; CGU = Cash generating unit
Process flow:Determining and accounting for Impairment
7 Impairment Analysis of Listed Italian Companies
Industry Company NameDCF
(Discounted Cash Flows)
OPM (Options Pricing Model)
DDM (Dividend Discount Model)
GGM (Gordon Growth Model)
AVM (Appraisal
Value Method)
Comparable Approach
Automotive Company A
Energy
Company B
Company C
Financial Services
Company D
Company E
Company F
Company G
Company H
Infrastructure Company I
TMT Company J
► DCF remained the most widely used method for the impairment testing analysed for the top 10 companies considered by the impairment value for the period of 2011 -2016
► Comparable Approach (using comparable transaction or multiples) preferred besides DCF for various asset evaluation under impairment testing
► Financial Services industry used the most types of valuation methods to ascertain the fair market value (FMV) or fair value (FV) of assets while experiencing impairment test
Valuation methods:DCF remained most widely method for Impairment test along with Industry Comparable approach
Valuation methods used for top 10 companies by impairment value; considered for the period of 2011 – 2016
8 Impairment Analysis of Listed Italian Companies
2016 WACC of FTSE MIB companies as per industry classification
► WACC analysed for 2016 of indices FTSE MIB and FTSE AIM companies classified as per industry remained maximum for financial services industry with as high as 11.1%
► Followed by TMT companies with maximum WACC of 9.8%, and 9.7% for RCP
► Average WACC for DIP industry was highest as 8.09% followed by TMT with 8.1% and RCP with 7.2%, whereas, Financial Services industry had the lowest average WACC of 5.7%
► Average WACC of FTSE MIB remained 6.4% and 4.9% for FTSE AIM, however, overall average WACC was 5.5%
2,3%
7,7%
4,5%
1,3%
6,6%
4,9% 4,5% 4,9%
8,6%8,4%
8,8%
11,1%
7,9%
9,7% 9,8%
0,00%
4,00%
8,00%
12,00%
Automotive DIP Energy Financialservices
Healthcare Infrastructure RCP TMT
1,5%2,4%
3,4%4,1%
2,7% 2,4%
4,4%
7,0%
5,0%
7,4%
10,4%
4,5% 4,9%
7,8%
9,7%
0,00%
4,00%
8,00%
12,00%
Automotive DIP Energy Financialservices
Healthcare Hotel &Leisure
Infrastructure RCP TMT
2016 Industry WACC: DIP companies had highest average WACC followed by TMT, and RCP industry
2016 WACC of FTSE AIM companies as per industry classification
9 Impairment Analysis of Listed Italian Companies
2011 2012 2013 2014 2015 2016
Automotive 6,0% 5,3% 9,3% 6,9% 5,5% 6,2%
DIP 10,0% 10,5% 12,2% 8,0% 8,5% 8,1%
Energy 8,3% 7,3% 9,8% 6,7% 7,1% 6,0%
Financial services 6,2% 4,7% 6,8% 5,3% 6,8% 5,7%
Healthcare 10,2% 8,5% 9,9% 7,3% 9,3% 6,6%
Infrastructure 7,4% 6,6% 10,1% 6,8% 8,7% 6,8%
RCP 9,8% 7,5% 10,2% 7,3% 8,8% 7,2%
TMT 9,4% 7,9% 12,1% 8,7% 10,1% 8,1%
4,0%5,0%6,0%7,0%8,0%9,0%
10,0%11,0%12,0%13,0%
2011 2012 2013 2014 2015 2016
Automotive 4,0% 3,0% 3,2% 2,7% 4,7% 4,4%
DIP 10,8% 6,8% 12,3% 6,9% 6,4% 4,3%
Energy 10,5% 6,5% 6,8% 4,4% 4,3% 3,8%
Financial services 12,4% 8,7% 13,7% 6,6% 6,1% 5,1%
Healthcare 7,5% 6,8% 7,6% 5,1% 6,6% 7,3%
Hotel & Leisure 19,2% 12,5% 5,9% 4,5%
Infrastructure 11,7% 4,9% 6,2% 6,3% 4,9%
RCP 8,2% 7,8% 12,2% 7,6% 5,5% 5,0%
TMT 8,8% 7,1% 10,1% 5,9% 7,1% 5,2%
0,0%
4,0%
8,0%
12,0%
16,0%
20,0%
2011-2016 Industry WACC: Declining WACC for both FTSE MIB and FTSE AIM companies from 2011 to 2016
2011-2016 WACC of FTSE MIB companies as per industry classification
2011-2016 WACC of FTSE AIM companies as per industry classification
10 Impairment Analysis of Listed Italian Companies
(1,0%)
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
ge
n-0
7
ma
g-0
7
set-
07
ge
n-0
8
ma
g-0
8
set-
08
ge
n-0
9
ma
g-0
9
set-
09
ge
n-1
0
ma
g-1
0
set-
10
ge
n-1
1
ma
g-1
1
set-
11
ge
n-1
2
ma
g-1
2
set-
12
ge
n-1
3
ma
g-1
3
set-
13
ge
n-1
4
ma
g-1
4
set-
14
ge
n-1
5
ma
g-1
5
set-
15
ge
n-1
6
ma
g-1
6
set-
16
ge
n-1
7
ma
g-1
7
set-
17
Italy United Kingdom France Germany
10 years government bonds:Italy’s 10 year government bond has the highest interest rate as compared to United Kingdom, France and Germany
Interest rates of 10 year government bond
11 Impairment Analysis of Listed Italian Companies
0,1 0,4 0,32,4
0,1 0,7
32,1
8,7
15,5
1,5 0,7 0,61,6 2,0 3,23,1
3,0 1,1
2,1
4,8
3,8
10,7
7,43,9
1,7 2,33,6
5,5
3,11,7
34,2
13,5
19,3
12,2
8,1
4,5
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Impairment of goodwill Asset writedown Total impairment
► Total impairment recognized by Italian companies increased by CAGR of 9.5% to EUR 4.5bn in 2016 from EUR 1.7bn in 2005
► The impairment of goodwill increased by CAGR of 25.2% to EUR 0.6bn in 2016 from EUR 0.1bn in 2005
► The asset write down increased by CAGR of 8.3% to EUR 3.9bn in 2016 from EUR 1.6bn in 2005
► Total impairment was highest in 2011 due to an impact of financial crisis on financial services and energy companies
CAGR: 9.5% (2005-2016),Total impairment was highest in 2011 due to an impact of financial crisis on financial services and oil & gas sector,
gradually decreased after 2011
Total impairment: Significant increase in impairment by Italian firms specially Financial companies during 2011-13 owing to acquisitions made during 2005-07 era
* Italian companies include FTSE AIM and FTSE MIB companies
Total impairment of Italian companies*
12 Impairment Analysis of Listed Italian Companies
1,8
(1,9)0,1
0,4 0,4 0,3 1,00,1
0,9 1,6 0,9 (0,2)
5,7
5,6
0,1 0,4 0,4 0,31,0
0,10,9
1,60,9
(0,2)
7,5
3,8
(2,0)
-
2,0
4,0
6,0
8,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R m
Goodwill impairment by FTSE AIM companies Asset writedown by FTSE AIM companies
Total impairment by FTSE AIM companies
► Total impairment of FTSE AIM increased significantly by CAGR 42.3% during the period 2005 to 2016 vs. FTSE MIB companies increased by only 9.5% during the same period
► Total impairment of FTSE AIM companies increased unexpectedly in 2015 and 2016 where as total impairment of FTSE MIB companies was highest in 2011 and decreased gradually
► No impact of financial crisis on FTSE AIM companies. However, impact of financial crisis is clearly evident on FTSE MIB companies, highest impairment in 2011, was due to increase in impairment of goodwill in financial services sector companies and asset writedown by energy sector companies
0,1 0,4 0,3 2,4 0,1 0,7
32,1
8,715,5
1,5 0,7 0,61,6 2,0 3,23,1
3,0 1,1
2,1
4,8
3,8
10,77,4
3,91,7 2,3 3,6
5,53,1 1,7
34,2
13,5
19,3
12,28,1
4,5
0,0
10,0
20,0
30,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Goodwill impairment by FTSE MIB companies Asset writedown by FTSE MIB companies
Total impairment by FTSE MIB companies
CAGR: 9.5% (2005-2016),Total impairment gradually
decreased after 2011
CAGR: 42.3% (2005-2016),Total impairment suddenly
increased in 2015 and 2016
Total impairment: Owing to their relative size, FTSE MIB listed companies reported significantly higher impairment than FTSE AIM listed companies
Total impairment of FTSE AIM companies (EUR m)
Total impairment of FTSE MIB companies (EUR bn)
13 Impairment Analysis of Listed Italian Companies
1,7 2,3 3,6 5,5 3,1 1,7 34,2 13,5 19,3 12,2 8,1 4,5
11,0
34,6 45,6
88,4
46,9
27,7
80,8
96,289,3
66,1
100,4
48,2
3,2%
16,4%8,8%
43,7%
2,8%
39,7%
94,0%
64,3%
80,3%
12,2% 8,9%14,1%
55,3%
100,0%
49,8% 54,7%
19,3%35,6%
73,2%
45,1%49,5%
29,1% 28,0%35,9%
0,0%
20,0%
40,0%
60,0%
80,0%
100,0%
120,0%
0,0
20,0
40,0
60,0
80,0
100,0
120,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairment - FTSE MIB Total impairment - MSCI Europe
% of goodwill impairment - FTSE MIB % of goodwill impairment - MSCI Europe
► Total impairment of MSCI Europe companies increased by CAGR 14.4% during the 2005 – 2016 period vs. CAGR of 9.5% for FTSE MIB companies during the same period
► Total impairment by MSCI Europe was highest in 2015 (EUR 100.4bn), due to an increase in impairment by 51.9% YoY
► Impairment was increased by Energy and Metals & Mining sectors due to decrease in crude oil and metal prices
► Total impairment by MSCI Europe was also high in 2008, increased by 192.0% YoY, due to financial market crisis
► During 2011 – 2013, total impairment was high due to an increase in % of goodwill impairment by both MSCI Europe and FTSE MIB companies
► However, % of goodwill impairment decreased from 55.3% in 2005 to 35.9% in 2016 for MSCI Europe companies
Total impairment: MSCI Europe registered highest impairment in 2015, due to an increase in impairment by Energy, and Metals & Mining companies (decrease in crude oil and metal prices)
Total impairment of FTSE MIB vs MSCI Europe companies
14 Impairment Analysis of Listed Italian Companies
19,8%
14,4%
19,8%17,1%
22,5%
28,8% 30,6%34,2% 32,4%
35,1%38,7%
46,8%
4,5%
2,7% 6,3% 9,0% 8,1%12,6% 13,5%
11,7%
9,0%
4,5%6,3% 8,1%
18,0%13,5%
17,1% 12,6%19,8%
25,2% 25,2%
30,6% 28,8%
34,2%38,7%
45,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
40,0%
45,0%
50,0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
% of companies reporting total impairment
% of companies reporting goodwill impairment
% of companies reporting asset writedown
► The percentage of Italian companies reporting impairment increased from 19.8% in 2005 to 46.8% in 2016, primarily due to increase in reporting of asset writedown by the Italian companies since 2009
► The percentage of companies reporting goodwill impairment increased from 4.5% in 2005 to 8.1% in 2016 (highest reporting of 13.5% was in 2011 and lowest reporting of 2.7% was in 2006)
► The percentage of companies reporting asset writedown increased from 18.0% in 2005 to 45.0% in 2016 (highest reporting of 45.0% was in 2016 and lowest reporting of 12.6% was in 2008)
► The companies reporting goodwill impairment is still low at just 8.1% of the total companies as compared to 45.0% of the total companies reporting asset writedown
Percentage of Italian companies reporting total impairment gradually increased after
the crash of 2008 financial market
* Italian companies include FTSE AIM and FTSE MIB companies
% of Companies reporting impairment: Italian companies specially Financial organizations, post 2008 sub-prime crisis, took significant impairment hit
Percentage of Italian companies* reporting impairment
15 Impairment Analysis of Listed Italian Companies
► The number of companies reporting impairment increased significantly for both FTSE AIM and FTSE MIB.
► In 2016, reporting of impairment increased for both FTSE AIM and FTSE MIB
► 80% of FTSE MIB companies reported impairment in 2016 vs. 70.0% in 2015. Similarly, 28.2% of FTSE AIM companies reported impairment in 2016 vs. 21.1% in 2015
► Reporting of impairment of goodwill is comparatively lower than asset writedown
► No goodwill was impaired by FTSE AIM companies till 2014 and is still negligible as these companies are too small and inactive in M&A space. Also, only 17.5% of FTSE MIB companies reported goodwill impairment
52,5%
37,5%
52,5%42,5%
57,5%67,5%
72,5% 72,5% 72,5% 70,0% 70,0% 80,0%
12,5%
7,5%17,5% 25,0% 22,5%
35,0% 37,5%32,5% 25,0%
12,5% 15,0% 17,5%47,5%
35,0%45,0% 30,0%
50,0% 57,5% 57,5%62,5% 62,5%
67,5% 70,0%80,0%
0,0%
20,0%
40,0%
60,0%
80,0%
100,0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
% of FTSE MIB companies reporting total impairment % of FTSE MIB companies reporting goodwill impairment
% of FTSE MIB companies reporting asset writedown
1,4% 1,4% 1,4% 2,8% 2,8%7,0% 7,0%
12,7%9,9%
15,5%
21,1%
28,2%
1,4% 2,8%1,4% 1,4% 1,4%
2,8% 2,8%7,0% 7,0%
12,7%9,9%
15,5%
21,1%
25,4%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016% of FTSE AIM companies reporting total impairment % of FTSE AIM companies reporting goodwill impairment% of FTSE AIM companies reporting asset writedown
% of Companies reporting impairment: In 2016 alone, 4/5th of FTSE MIB listed companies & c. 25% of FTSE AIM listed companies recorded impairment
Percentage of FTSE AIM companies reporting impairment
Percentage of FTSE MIB companies reporting impairment
16 Impairment Analysis of Listed Italian Companies
12,5%
7,5% 17,5%25,0% 22,5%
35,0% 37,5% 32,5%25,0%
12,5%15,0% 17,5%
47,5%
35,0%45,0%
30,0% 50,0%57,5% 57,5%
62,5% 62,5% 67,5% 70,0%
80,0%52,5%
37,5%
52,5%42,5%
57,5%67,5% 72,5% 72,5% 72,5% 70,0% 70,0%
80,0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
% of FTSE MIB companies reporting goodwill impairment % of FTSE MIB companies reporting asset writedown
% of FTSE MIB companies reporting total impairment
20,0%20,7% 22,8% 29,4% 26,8% 24,7% 25,2% 28,7% 25,9% 25,2% 24,9%
22,6%
37,5% 41,3% 45,0%47,3% 50,1% 52,7% 53,4% 56,2% 56,9% 59,7% 61,5%
62,9%45,9% 49,7%53,8%
58,0% 59,4% 61,1% 62,0% 64,6% 63,9% 64,1% 66,0% 66,9%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
% of MSCI Europe companies reporting goodwill impairment % of MSCI Europe companies reporting asset writedown
% of MSCI Europe companies reporting total impairment
► The number of companies reporting impairment increased significantly for both MSCI Europe and FTSE MIB.
► For MSCI Europe, 232 companies did not report impairment in 2005 decreased to 142 companies in 2016
► Only two-thirds of MSCI Europe companies report impairment as against 80% of FTSE MIB companies
► Reporting of goodwill impairment was comparatively lower than asset writedown. However, reporting of goodwill impairment was highest during financial market crisis period
► For MSCI Europe, only 22.6% of companies reported goodwill impairment vs. 17.5% of FTSE MIB companies reporting of goodwill impairment
% of Companies reporting impairment: MSCI Europe companies increased impairment reporting but there are more than one-third companies not reporting impairment
Percentage of MSCI Europe companies reporting impairment
Percentage of FTSE MIB companies reporting impairment
17 Impairment Analysis of Listed Italian Companies
► Impairment was highly concentrated in the top 5 companies.
► Since 2014, the concentration of impairment by top 5 companies decreased, primarily due to an increase in the number of companies reporting impairment
► During 2005 to 2016, on an average 90.6% of the impairment was reported by the top 5 companies, although in 2016 it declined to 79.5% as 47 companies reported impairment
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total companies 111 111 111 111 111 111 111 111 111 111 111 111
Companies that reported impairment 19 14 18 15 22 27 30 35 36 38 41 47
% of companies with impairment 19.8% 14.4% 19.8% 17.1% 22.5% 28.8% 30.6% 34.2% 32.4% 35.1% 38.7% 46.8%
% of impairment recognized by top 5 companies
80.8% 97.5% 97.8% 97.9% 95.8% 87.2% 89.6% 92.0% 93.4% 89.8% 86.0% 79.5%
1914
1815
2227
30
35 36 3841 47
05101520253035404550
0
5
10
15
20
25
30
35
40
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
BN
Imapairment by top 5 companies Impairment by remaining companies
Number of companies with impairment
* Italian companies include FTSE AIM and FTSE MIB companies
Concentration of impairment: Total impairment was highly concentrated among top 5 companies
Concentration of impairment for Italian companies*
18 Impairment Analysis of Listed Italian Companies
► Total impairment was highly concentrated in the top 5 companies for both FTSE AIM and FTSE MIB companies
► FTSE AIM: Impairment recognized by top 5 companies was 100% from 2005 to 2011, as more companies reported total impairment the percentage by top 5 companies decreased
► FTSE MIB: The concentration of impairment by top 5 companies decreased due to an increase in the % of companies reporting impairment from 52.5% in 2005 to 80.0% in 2016
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total companies 71 71 71 71 71 71 71 71 71 71 71 71
Companies that reported impairment
1 1 1 2 2 5 5 9 7 11 15 20
% of companies with impairment
1.4% 1.4% 1.4% 2.8% 2.8% 7.0% 7.0% 12.7% 9.9% 15.5% 21.1% 28.2%
% of impairment recognized by top 5 companies
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 87.6% 99.4% 91.4% 84.9% 97.0%
21
15
2117
2327
29 29 29 28 28
32
0
20
40
0
20.000
40.000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R m
Impairment by remaining FTSE MIB companies Impairment by top 5 FTSE MIB companiesNumber of FTSE MIB companies reporting impairment
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total companies 40 40 40 40 40 40 40 40 40 40 40 40
Companies that reported impairment
21 15 21 17 23 27 29 29 29 28 28 32
% of companies with impairment
52.5% 37.5% 52.5% 42.5% 57.5% 67.5% 72.5% 72.5% 72.5% 70.0% 70.0% 80.0%
% of impairment recognized by top 5 companies
80.8% 97.6% 97.8% 97.9% 95.8% 87.3% 89.6% 92.0% 93.4% 89.8% 86.1% 79.6%
Concentration of impairment: c. 97% and c. 80% of total impairment is reported by top 5 companies in FTSE AIM and FTSE MIB, respectively
Concentration of impairment of FTSE AIM companies
Concentration of impairment of FTSE MIB companies
19 Impairment Analysis of Listed Italian Companies
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total companies 429 429 429 429 429 429 429 429 429 429 429 429
Companies that reported impairment
197 213 231 249 255 262 266 277 274 275 283 287
% of companies with impairment
45.9% 49.7% 53.8% 58.0% 59.4% 61.1% 62.0% 64.6% 63.9% 64.1% 66.0% 66.9%
% of impairment recognized by top 5 companies
69.3% 118.2% 78.3% 41.0% 40.2% 34.8% 49.6% 37.5% 47.9% 45.2% 32.6% 41.5%
% of impairment recognized by top 10 companies
95.6% 126.9% 90.2% 54.8% 56.9% 56.0% 64.6% 55.1% 66.1% 65.6% 57.5% 61.8%
► Total impairment was highly concentrated in the top 5 companies for both MSCI Europe and FTSE MIB companies
► MSCI Europe: Impairment recognized by top 5 companies decreased from 69.3% in 2005 to 41.5% in 2016, as more companies reported total impairment the percentage by top 5 companies decreased
► Also, the impairment recognized by top 10 companies decreased from 95.6% in 2005 to 61.8% in 2016
► FTSE MIB: The concentration of impairment by top 5 companies decreased due to an increase in the % of companies reporting impairment from 52.5% in 2005 to 80.0% in 2016
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total companies 40 40 40 40 40 40 40 40 40 40 40 40
Companies that reported impairment
21 15 21 17 23 27 29 29 29 28 28 32
% of companies with impairment
52.5% 37.5% 52.5% 42.5% 57.5% 67.5% 72.5% 72.5% 72.5% 70.0% 70.0% 80.0%
% of impairment recognized by top 5 companies
82.6% 100.2% 100.6% 98.2% 96.6% 93.1% 89.7% 92.3% 93.4% 89.8% 86.2% 80.4%
Concentration of impairment of MSCI Europe companies
Concentration of impairment of FTSE MIB companies
Concentration of impairment:% of impairment recognized by top 5 companies decreased for MSCI Europe companies during the last decade
20 Impairment Analysis of Listed Italian Companies
► The above chart indicates if the companies recognize impairment only when it reported negative EBT before impairment
► During 2005 to 2016, on an average only 12.9% of the companies reported impairment
► The chart shows that the majority of the companies reported impairment when it reported positive EBT before impairment
► In 2016, 10 companies reported impairment when it reported negative EBT before impairment (21.3% of the total companies that reported impairment)
0 1 1 2 1 1 4 7 6 5 6 100,0%
7,1%5,6%
13,3%
4,5% 3,7%
13,3%
20,0%
16,7%
13,2%14,6%
21,3%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of companies reporting impairment in case of negative EBT before impairment
% of number of companies reporting impairment in case of negative EBT before impairment
* Italian companies include FTSE AIM and FTSE MIB companies
Timing of impairment for Italian companies*
Timing of impairment: Majority of organization recorded impairment only if operational and financial performance was positive
21 Impairment Analysis of Listed Italian Companies
► Number of FTSE AIM companies reporting impairment in case of negative EBT before impairment increased from 2005 to 2016
► However, the % of companies reporting impairment in case of negative EBT before impairment decreased due to an increase in no. of companies reporting impairment
► Number of FTSE MIB companies reporting impairment in case of negative EBT before impairment increased from 2011 due to financial markets impact on the companies
► Even though, the no. of companies reporting impairment increased significantly but the no. of companies reporting impairment in case of negative EBT before impairment remained in the range of 1 to 4 companies
1 1 3 4 4 1 2 40,0% 0,0% 0,0%
7,7%
0,0%
4,3%
11,5% 14,8%13,8%
3,6%
7,4%
12,9%
0,0%
5,0%
10,0%
15,0%
20,0%
0
1
2
3
4
5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of FTSE MIB companies reporting impairment in case of negative EBT before impairment
% of FTSE MIB companies reporting impairment in case of negative EBT before impairment
0 1 1 1 1 1 3 2 4 4 6
0,0%
100,0% 100,0%
50,0%50,0%
0,0%
25,0%
37,5%28,6%
40,0%
28,6%
37,5%
0,0%
20,0%
40,0%
60,0%
80,0%
100,0%
120,0%
0
2
4
6
8
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of FTSE AIM companies reporting impairment in case of negative EBT before impairment
% of FTSE AIM companies reporting impairment in case of negative EBT before impairment
Timing of impairment:Majority of the FTSE MIB listed companies timed Impairment to coincide with positive EBT
Timing of impairment (FTSE AIM)
Timing of impairment (FTSE MIB)
22 Impairment Analysis of Listed Italian Companies
► Number of MSCI Europe companies reporting impairment in case of negative EBT before impairment decreased from 2005 to 2016
► However, the % of companies reporting impairment in case of negative EBT before impairment were high during 2008 to 2013, primarily due to financial market crisis and European debt crisis
► The % of companies reporting impairment in case of negative EBT before impairment was also high in 2015, due to net losses by Energy and Metals & Mining companies (decrease in crude oil and metal prices)
► Number of FTSE MIB companies reporting impairment in case of negative EBT before impairment increased from 2011 due to financial markets impact on the companies
1 1 3 4 4 1 2 40,0% 0,0% 0,0%
7,7%
0,0%
4,3%
11,5% 14,8%13,8%
3,6%
7,4%
12,9%
0,0%
5,0%
10,0%
15,0%
20,0%
0
1
2
3
4
5
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of FTSE MIB companies reporting impairment in case of negative EBT before impairment
% of FTSE MIB companies reporting impairment in case of negative EBT before impairment
5 4
028 26 12 13 19 12 5 12 6
3,0% 2,3%
0,0%
12,4%11,5%
5,5% 5,8%7,8% 5,0%
2,1%
5,0%
2,4%
0,0%
5,0%
10,0%
15,0%
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of MSCI Europe companies reporting impairment in case of negative EBT before impairment
% of MSCI Europe companies reporting impairment in case of negative EBT before impairment
Timing of impairment (MSCI Europe)
Timing of impairment (FTSE MIB)
Timing of impairment: Majority of the MSCI Europe and FTSE MIB companies timed Impairment to coincide with positive EBT
23 Impairment Analysis of Listed Italian Companies
► Maximum number of companies reported impairment between EUR 0-5m
► In 2016, 11.7% of the total companies reported their impairment in the range EUR 0-5m
► During 2011 to 2013, a sizeable number of companies reported impairment greater than EUR 500m, as financial markets crashed during the same period and the market capitalization of the companies declined sharply and were below the book value, so companies reported impairment to balance out
► In 2011, 7 companies reported impairment greater than EUR 500m primarily due to financial market crash. Most of these companies reported goodwill impairment due to sharp decline in their market capitalization
Impairment (EUR m)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
No impairment
89 95 89 92 86 79 77 73 75 72 68 59
Impairment reversed
4 3 5 6 5 8 7 10 7 10 15 17
0-5 5 4 8 4 8 7 5 8 7 6 6 13
5-10 2 2 3 0 2 5 1 1 3 2 2 3
10-20 1 1 0 2 4 3 4 2 2 4 6 0
20-50 3 2 2 1 1 3 4 6 6 3 3 7
50-100 2 2 0 1 2 3 1 3 1 4 1 3
100-200 3 0 1 1 1 0 3 1 3 5 3 4
200-500 1 1 1 1 0 1 2 2 2 2 5 2
>500 1 1 2 3 2 2 7 5 5 3 2 3
* Italian companies include FTSE AIM and FTSE MIB companies
Distribution of Italian companies* by the amount of impairment reported
Intensity of impairment:Majority of companies reported Impairment between EUR 0-5m
24 Impairment Analysis of Listed Italian Companies
► Maximum no. of companies reported impairment between EUR 0-5m in both FTSE AIM and FTSE MIB
► FTSE AIM: No company reported impairment greater than EUR 10m during 2005 to 2016
► Only one company reported impairment greater than EUR 5m in 2016
► FTSE MIB: The companies reporting impairment greater than EUR 5m increased from 12 in 2009 to 22 in 2016
► The companies reporting impairment between EUR 0-100m increased from 13 in 2005 (61.9% of the impairment reporting companies) to 22 in 2016 (68.8% of the impairment reporting companies)
► Also, 7 companies reported impairment greater than EUR 500m in 2011 due to financial market impact on the companies, which gradually decreased as the financial markets improved
Impairment (EUR m) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
No impairment 70 70 70 69 69 66 66 62 64 60 56 51
Impairment reversed 0 0 0 0 0 1 1 1 0 1 1 4
0-5 1 1 1 2 2 4 4 8 7 10 14 15
5-10 0 0 0 0 0 0 0 0 0 0 0 1
Impairment (EUR m) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
No impairment 19 25 19 23 17 13 11 11 11 12 12 8
Impairment reversed 3 2 4 4 3 4 3 2 0 0 1 1
0-5 5 4 8 4 8 6 4 7 7 5 5 9
5-10 2 2 3 0 2 5 1 1 3 2 2 3
10-20 1 1 0 2 4 3 4 2 2 4 6 0
20-50 3 2 2 1 1 3 4 6 6 3 3 7
50-100 2 2 0 1 2 3 1 3 1 4 1 3
100-200 3 0 1 1 1 0 3 1 3 5 3 4
200-500 1 1 1 1 0 1 2 2 2 2 5 2
>500 1 1 2 3 2 2 7 5 5 3 2 3
Distribution of FTSE AIM companies by the amount of impairment
Distribution of FTSE MIB companies by the amount of impairment
Intensity of impairment: Majority of AIM and MIB listed companies reported Impairment between EUR 0-5m
25 Impairment Analysis of Listed Italian Companies
Impairment (EUR m) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
No impairment 19 25 19 23 17 13 11 11 11 12 12 8
Impairment reversed 3 2 4 4 3 4 3 2 0 0 1 1
0-5 5 4 8 4 8 6 4 7 7 5 5 9
5-10 2 2 3 0 2 5 1 1 3 2 2 3
10-20 1 1 0 2 4 3 4 2 2 4 6 0
20-50 3 2 2 1 1 3 4 6 6 3 3 7
50-100 2 2 0 1 2 3 1 3 1 4 1 3
100-200 3 0 1 1 1 0 3 1 3 5 3 4
200-500 1 1 1 1 0 1 2 2 2 2 5 2
>500 1 1 2 3 2 2 7 5 5 3 2 3
► Maximum no. of companies reported impairment between EUR 0-5m in both MSCI Europe and FTSE MIB
► MSCI Europe: Even distribution of impairment can be observed in the above table
► No. of companies reporting impairment >EUR 500m has increased from 10 in 2005 to 30 in 2016. This was highest during 2015 due to an increase in impairment by Energy and Metals & Mining companies (decrease in crude oil and metal prices)
► Also, significant no. of companies reversed its impairment (8.5% in 2016)
► FTSE MIB: The companies reporting impairment greater than EUR 5m increased from 12 in 2009 to 22 in 2016. Also, 7 companies reported impairment >EUR 500m in 2011 due to financial market impact on the companies, which gradually decreased as the financial markets improved
Impairment (EUR m) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
No impairment 232 216 198 180 174 167 163 152 155 154 146 142
Impairment reversed 34 41 43 25 30 46 44 35 34 36 46 35
0-5 40 53 48 44 44 45 38 54 48 42 36 47
5-10 15 14 20 14 15 20 23 16 14 20 23 24
10-20 23 23 24 18 19 29 25 21 35 28 22 25
20-50 23 32 35 20 35 30 40 37 33 43 39 49
50-100 25 20 17 30 18 27 20 30 32 35 29 25
100-200 16 9 17 26 30 23 22 27 27 23 22 35
200-500 11 12 11 40 32 18 22 25 17 19 18 17
500-1,000 7 4 7 11 18 14 12 8 15 11 27 14
>1,000 3 5 9 21 14 10 20 24 19 18 21 16
Distribution of MSCI Europe companies by the amount of impairment
Distribution of FTSE MIB companies by the amount of impairment
Intensity of impairment:Increase in MSCI Europe companies reporting impairment >EUR 500m from 10 companies in 2005 to 30 companies in 2016
26 Impairment Analysis of Listed Italian Companies
1,7 2,3 3,65,5
3,1 1,7
34,2
13,5
19,3
12,2
8,14,5
402,7
493,9 511,2
276,2359,6
328,5
254,7
288,0351,9
368,1
447,9 436,7
0,0
100,0
200,0
300,0
400,0
500,0
600,0
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
BN
EUR
BN
Total impairment Market capitalization
► The total impairment tends to be higher when the market capitalization of the companies were lower, this indicates that the companies tend to report higher impairments when the financial markets are negative and lower when financial markets are positive
► In 2011, the total impairment was at peak due to the financial market crash as the market capitalization of the companies were below the book value, most of the companies reported goodwill impairment
► After the 2011 peak, the total impairment decreased gradually as the financial markets improved
► The 2016 market capitalization was almost similar to 2015, but the total impairment was higher in 2015 due to a EUR 4.1m impairment of goodwill by a company from Energy sector
Negative financial
markets leading to higher
reporting of impairment
* Italian companies include FTSE AIM and FTSE MIB companies
Italian companies* evolution of impairment vs. market cap.
Impairment vs. Market cap.: The total Impairment tends to be higher when financial markets are negative and lower when they are positive
27 Impairment Analysis of Listed Italian Companies
► FTSE MIB companies: The total impairment tends to be higher when the market capitalization of the companies were lower, this indicates that the companies tend to report higher impairments when the financial markets are negative and lower when financial markets are positive
► In 2011, the total impairment was at peak due to the financial market crash as the market capitalization of the companies were below the book value, most of the companies reported goodwill impairment
► As FTSE AIM companies are very small as compared to FTSE MIB companies, there was no such correlation between market capitalization and the reported total impairment
0,1 0,4 0,4 0,3 1,0 0,1 0,9 1,6
0,9 (0,2)
7,5 3,8
42,0 33,8 19,1 15,0 77,6 111,6 113,9 362,8
815,6
1.347,0
2.250,4 2.440,8
0,0
500,0
1.000,0
1.500,0
2.000,0
2.500,0
3.000,0
(2,0)
-
2,0
4,0
6,0
8,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
m
EUR
m
Total impairment by FTSE AIM companies Maket capitalization of FTSE AIM companies
1,7 2,3 3,6 5,5 3,1 1,7
34,2
13,5
19,3
12,2 8,1
4,5
402,6
493,9 511,2
276,2 359,5 328,4
254,6 287,6
351,1 366,8 445,6 434,2
0,0
100,0
200,0
300,0
400,0
500,0
600,0
0,0
10,0
20,0
30,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
bn
EUR
bn
Total impairment by FTSE MIB companies Market Capitalization of FTSE MIB companies
Impairment vs. Market cap.: FTSE MIB companies reported higher total Impairment when financial markets are negative and lower when they are positive
Evolution of impairment vs. market capitalization (FTSE AIM)
Evolution of impairment vs. market capitalization (FTSE MIB)
28 Impairment Analysis of Listed Italian Companies
► MSCI Europe companies: The total impairment tends to be higher when the market capitalization decreases. This can be observed from the above chart in 2008 and 2011
► In 2008 and 2011, the market capitalization decreased due to financial market crash in 2008 and European debt crisis in late 2009 and 2010
► However, this trend is not observed in 2015, when both the market capitalization and the total impairment increased, due to an increase in total impairment by Energy and Metals & Mining companies
► The market capitalization increased by CAGR of 3.9% during 2005 to 2016 period, the market capitalization was lowest in 2008 due to global financial market crash. However, the total impairment increased by CAGR of 14.4% during the same period
1,7 2,3 3,6 5,5
3,1 1,7
34,2
13,5
19,3
12,2
8,1 4,5
402,6
493,9 511,2
276,2 359,5
328,4
254,6 287,6
351,1 366,8
445,6 434,2
0,0
100,0
200,0
300,0
400,0
500,0
600,0
0,0
10,0
20,0
30,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
EU
R b
n
Total impairment by FTSE MIB companies Market Capitalization of FTSE MIB companies
11,0 34,6 45,6 88,4 46,9 27,7 80,8 96,2 89,3 66,1 100,4 48,2
6.120,9
7.145,1 7.463,9
4.338,3 5.778,7
6.447,9 5.777,1
6.716,8
8.011,6
8.411,7 9.103,2
9.291,6
0,0
2.000,0
4.000,0
6.000,0
8.000,0
10.000,0
-
20,0
40,0
60,0
80,0
100,0
120,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
EU
R b
n
Total impairment by MSCI Europe companies Maket capitalization of MSCI Europe companies
Evolution of impairment vs. market capitalization (MSCI Europe)
Evolution of impairment vs. market capitalization (FTSE MIB)
Impairment vs. Market cap.:In 2015 for MSCI Europe companies, both market capitalization and total impairment increased
29 Impairment Analysis of Listed Italian Companies
► In 2011, the market-to-book ratio was lowest as compared to the highest total impairment, primarily due to decrease in market capitalization
► As financial markets recovered, the ratio improved. Also, the total impairment started declining
► During 2005 to 2007, the market-to-book value ratio was high, primarily due to negligible impairments charged and strong growth in stock market during the same period
► The market capitalization was also high during the same period
► In 2015 and 2016, the ratio remained almost similar at 1.0x
1,7 2,3 3,6 5,5
3,1 1,7
34,2
13,5
19,3
12,2 8,1
4,5
1,6x
1,9x
1,5x
0,8x 0,9x0,8x
0,6x0,7x
0,9x
0,9x1,0x 1,0x
0,0x
0,4x
0,8x
1,2x
1,6x
2,0x
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
BN
Total impairment Market-to-book ratio
* Italian companies include FTSE AIM and FTSE MIB companies
Market-to-book ratio vs. total impairment for Italian companies*
Market-to-book ratio vs. Impairment: In 2011, market to book ratio was lowest with highest Impairment
30 Impairment Analysis of Listed Italian Companies
► Market-to-book ratio of FTSE MIB decreased from 1.6x in 2005 to 1.0x in 2016, however, for FTSE AIM companies increased from 0.5x in 2005 to 1.6x in 2016
► FTSE AIM: No relation can be seen between market-to-book ratio and total impairment reported
► FTSE MIB: Market-to-book ratio was lowest in 2011 as compared to the highest total impairment, primarily due to decrease in market capitalization
► During 2005 to 2007, the market-to-book value ratio for FTSE MIB companies was high, primarily due to negligible impairments charged and strong growth in financial market during the same period. The market capitalization was also high during the same period
0,1 0,4 0,4 0,31,0
0,10,9
1,6
0,9
(0,2)
7,5
3,8
0,5x
0,2x 0,1x0,0x 0,2x 0,2x 0,2x
0,6x
1,0x
1,4x
1,6x 1,6x
0,0x
0,5x
1,0x
1,5x
2,0x
(2,0)
-
2,0
4,0
6,0
8,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R B
n
Total impairment by FTSE AIM companies Market-to-book ratio of FTSE AIM companies
1,7 2,3 3,65,5
3,1 1,7
34,2
13,519,3
12,2 8,14,5
1,6x
1,9x
1,5x
0,8x 0,9x0,8x
0,6x0,7x
0,9x 0,9x1,0x 1,0x
0,0x
0,5x
1,0x
1,5x
2,0x
0,0
10,0
20,0
30,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R B
N
Total imapairment by FTSE MIB companies Market-to-book ratio of FTSE MIB companies
Market-to-book ratio vs. total impairment (FTSE AIM)
Market-to-book ratio vs. total impairment (FTSE MIB)
Market-to-book ratio vs. Impairment: FTSE MIB companies reported highest total impairment when market-to-book ratio was lowest
31 Impairment Analysis of Listed Italian Companies
► Market-to-book ratio decreased for both MSCI Europe and FTSE MIB
► For MSCI Europe companies, it decreased from 2.0x in 2005 to 1.6x in 2016. However for FTSE MIB companies, it decreased from 1.6x in 2005 to 1.0x in 2016
► MSCI Europe: No relation can be seen between market-to-book ratio and total impairment reported
► The market-to-book ratio was lowest in 2008, whereas total impairment was highest in 2015
► FTSE MIB: Market-to-book ratio was lowest in 2011 as compared to the highest total impairment, primarily due to decrease in market capitalization
1,7 2,3 3,65,5
3,1 1,7
34,2
13,519,3
12,2 8,14,5
1,6x
1,9x
1,5x
0,8x 0,9x0,8x
0,6x0,7x
0,9x 0,9x1,0x 1,0x
0,0x
0,5x
1,0x
1,5x
2,0x
0,0
10,0
20,0
30,0
40,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total imapairment by FTSE MIB companies Market-to-book ratio of FTSE MIB companies
11,0
34,645,6
88,4
46,9
27,7
80,896,2
89,366,1
100,4
48,2
2,0x
2,1x2,0x
1,2x1,5x 1,4x
1,2x1,4x
1,7x 1,6x 1,7x 1,6x
0,0x
0,5x
1,0x
1,5x
2,0x
2,5x
0,0
20,0
40,0
60,0
80,0
100,0
120,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairment by MSCI Europe companies Market-to-book ratio of MSCI Europe companies
Market-to-book ratio vs. total impairment (MSCI Europe)
Market-to-book ratio vs. total impairment (FTSE MIB)
Market-to-book ratio vs. Impairment: No relation can be seen between market-to-book ratio and total impairment reported by MSCI Europe companies
32 Impairment Analysis of Listed Italian Companies
► Goodwill impairment / goodwill prior year ratio, refers to the intensity of impairments as the ratio of impairment charged in a period over the opening balance of goodwill
► The ratio changed from 0.1% in 2005 to 0.6% in 2016, with highest during the 2011-2013 period. However, in 2015 and 2016, the ratio remained constant at 0.6%
► On an average, the companies recognized an annual goodwill impairment of 3.8% of the opening goodwill, however if we exclude 2011-2013, then the average goodwill impairment recognized was only 0.7%
► Also, goodwill impairment recognized after excluding financial industry was 1.9% of the opening goodwill, this shows that companies in the financial industry recognized higher goodwill impairment as compared to other industries
► In 2011, the goodwill impairment was highest due to EUR 10.3bn and EUR 8.2bn impairments by two companies from financial services sector
► However, if we exclude 2011-2013, then the average goodwill impairment recognized was only 0.2%
0,1% 0,5% 0,4%2,0%
0,1% 0,5%
21,5%
6,2%
11,9%
1,3% 0,6% 0,6%
0,1% 0,0% 0,0% 0,2% 0,1% 0,3%
9,4%
8,0%
3,2%0,3% 0,8% 0,1%
(5,0%)
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Goodwill impairment / goodwill prior year
Goodwill impairment / goodwill prior year (excl. financial industry)
Financial industry goodwill impairment was highest in 2011 due to high impairment by two companies from the financial services
sector
* Italian companies include FTSE AIM and FTSE MIB companies
Goodwill impairment over prior year goodwill for Italian companies*
Goodwill Impairment over prior year Goodwill: Significant % of Goodwill Impaired by Financial services companies during 2011-13
33 Impairment Analysis of Listed Italian Companies
0,0% 0,0% 0,0% 0,0% 0,0% 0,0%0,0%
0,0%
0,0% 0,0%1,5%
(0,7%)
0,1% 0,5% 0,4%2,0%
0,1% 0,5%
21,5%
6,2%11,9%
1,3% 0,6% 0,6%
0,7%4,0%
2,2%
4,1%0,7% 0,8%
4,3%3,1% 3,2% 1,4%
1,9%
1,1%
(5,0%)
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Goodwill impairment / goodwill prior year (FTSE AIM) Goodwill impairment / goodwill prior year (FTSE MIB)
Goodwill impairment / goodwill prior year (MSCI Europe)
► Goodwill impairment / goodwill prior year ratio, refers to the intensity of impairments as the ratio of impairment charged in a period over the opening balance of goodwill
► FTSE AIM: These are small cap listed companies, the companies hardly reported any goodwill impairment
► FTSE MIB: On an average, the companies recognized an annual goodwill impairment of 3.8% of the opening goodwill, however if we exclude 2011-2013, then the average goodwill impairment recognized was only 0.7% of the opening goodwill
► MSCI Europe: Goodwill impairment was highest during 2011-2013. On an average the companies recognized an annual goodwill impairment of EUR 28.9bn (2.3% of the opening goodwill), however if we exclude 2011-2013, then the average goodwill impairment recognized was only 1.9% of the opening goodwill (EUR 22.3bn)
► Goodwill impairment was also high during 2008 (EUR 48.3bn) due to impact of financial market crisis
Goodwill impairment over prior year goodwill
Goodwill Impairment over prior year Goodwill: During 2011 – 2013 period, goodwill impairment was high for both FTSE MIB and MSCI Europe companies
34 Impairment Analysis of Listed Italian Companies
► Financial services sector reported highest impairment followed by Energy and TMT sectors during 2005 to 2016
► Financial services and TMT sector reported its highest impairment in 2011, whereas Energy sector reported its highest impairment in 2012
► ~90% of total impairment is reported by Financial services, Energy and TMT sectors
► Financial services sector impairment contributed highest % of total impairment till 2011
► After 2011 energy sector contributed highest % of total impairment
► TMT sector impairment was highest during 2011 to 2013
Impairment (EUR bn) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Automotive 0.2 0.0 0.1 0.0 0.2 0.0 0.2 0.2 0.4 0.2 0.4 0.2
Energy 0.2 0.1 0.2 1.5 1.3 0.9 1.6 6.6 3.6 9.9 7.0 2.7
Financial services 1.2 2.2 3.1 3.9 1.6 0.6 23.9 0.6 12.9 1.9 0.4 1.4
Infrastructure 0.0 0.0 0.2 0.1 0.1 0.1 1.0 1.2 0.1 0.1 0.0 0.0
TMT 0.0 0.0 0.0 0.0 0.0 0.1 7.4 4.4 2.2 0.0 0.2 0.1
Others 0.0 0.0 (0.0) (0.0) 0.0 0.0 0.0 0.6 0.1 0.1 0.1 0.1
Total 1.7 2.3 3.6 5.5 3.1 1.7 34.2 13.5 19.3 12.2 8.1 4.5
2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6
Automotive Energy Financial services Infrastructure TMT Others
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
Total impairment by sector
FTSE MIB impairment by sector: c. 90% of total Impairment reported by top 3 sectors (Financial services, Energy and TMT)
35 Impairment Analysis of Listed Italian Companies
► Out of 4 automotive companies, 3 companies have reported impairment every year during 2005 to 2016
► Out of 3 infrastructure companies, only one company did not report impairment in 2006 and 2016
► Out of 3 TMT companies, 2 companies have reported impairment
► Financial services companies impairment reporting increased from 64.3% in 2005 to 92.9% in 2016. Similarly, energy companies impairment reporting increased from 50.0% in 2005 to 75.0% in 2016
% of companies reporting impairment
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Automotive 75.0% 50.0% 75.0% 75.0% 75.0% 50.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0%
Energy 50.0% 37.5% 62.5% 37.5% 62.5% 100.0% 87.5% 87.5% 62.5% 75.0% 87.5% 75.0%
Financial services 64.3% 42.9% 42.9% 28.6% 42.9% 57.1% 64.3% 64.3% 71.4% 64.3% 57.1% 92.9%
Infrastructure 100.0% 66.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 66.7%
TMT 66.7% 33.3% 33.3% 33.3% 66.7% 66.7% 66.7% 66.7% 66.7% 66.7% 66.7% 66.7%
Others 0.0% 12.5% 37.5% 37.5% 50.0% 50.0% 62.5% 62.5% 75.0% 62.5% 62.5% 75.0%
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
% of companies reporting impairment by sector
FTSE MIB impairment by sector: % of companies reporting Impairment increased during the period 2005 to 2016 in every sector
36 Impairment Analysis of Listed Italian Companies
1,2 2,2 3,1 3,9 1,6 0,6
23,9
0,6 12,9
1,9 0,4 1,4
129,9
180,6 198,5
97,4
129,7
91,9
61,5 77,5
109,5
128,1
160,2
120,1
1,2x 1,6x
1,1x
0,6x0,7x
0,5x0,4x
0,4x0,7x 0,7x
0,8x0,7x
0,0x
0,4x
0,8x
1,2x
1,6x
2,0x
0,0
40,0
80,0
120,0
160,0
200,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
bn
Total impairments Market capitalization Market-to-book ratio
► Financial services sector was significantly impacted due to great recession and European debt crisis, resulted in the increase in reporting of total impairment
► Also apparent from the decrease in market capitalization and market-to-book ratio of financial services companies
► In 2011, market capitalization (EUR 61.5bn) and market-to-book ratio (0.4x) were lowest
► Financial services companies increased their impairment reporting from 64.3% in 2005 to 92.9% in 2016. However, every year top 3 companies reported more than 80% of the total impairment
► In 2011, goodwill impairment contributed 99.4% of total impairment due to EUR 10.3bn and EUR 8.2bn of goodwill impairment by two companies from the financial services sector
► Similarly, in 2013, EUR 4.7bn and EUR 7.8bn of goodwill impairment was reported by these two companies
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Goodwill impairment 1.8% 16.5% 10.9% 58.8% 0.1% 77.2% 99.4% 64.7% 96.8% 67.3% 3.1% 42.2%
Asset writedown 98.2% 83.5% 89.1% 41.2% 99.9% 22.8% 0.6% 35.3% 3.2% 32.7% 96.9% 57.8%
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
Financial services sector impairment vs. Market cap. & Market-to-book
FTSE MIB Financial services sector: Increase in Impairment due to impact of great recession and European debt crisis
37 Impairment Analysis of Listed Italian Companies
► Due to the decline in oil prices in 2014, the O&G companies increased the asset writedown
► In energy sector, goodwill impairment is less than asset writedown, in the last 3 years more than 90.0% of impairment is from asset writedown
► In 2014, O&G companies reported highest impairment due to asset writedown of EUR 6.7bn and EUR 2.5bn by two companies
► Similarly, in 2015 asset writedown of EUR 1.8bn and EUR 4.2bn by these two companies
► Also, in 2014 market-to-book ratio was lowest which indicates increase in impairment when market-to-book ratio is decreases
► Energy companies increased their impairment reporting from 50.0% in 2005 to 75.0% in 2016. However, every year top 2 companies out of 8 companies reported more than 85% of the total impairment
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Goodwill impairment 1.5% 0.0% 1.0% 2.9% 0.2% 13.5% 18.1% 38.6% 20.8% 2.0% 6.7% 2.6%
Asset writedown 98.5% 100.0% 99.0% 97.1% 99.8% 86.5% 81.9% 61.4% 79.2% 98.0% 93.3% 97.4%
0,2 0,1 0,2 1,5 1,3 0,9 1,6 6,6 3,6 9,9 7,0 2,7
160,1
190,4 190,9
118,4
153,0 154,2
137,8 146,5 142,5
130,2 132,9
153,0
2,1x
2,4x
2,2x
1,2x 1,3x1,1x
1,0x 1,0x 1,0x0,9x 0,9x
1,1x
0,0x
0,5x
1,0x
1,5x
2,0x
2,5x
3,0x
0,0
40,0
80,0
120,0
160,0
200,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairments Market capitalization Market-to-book ratio
Energy sector impairment vs. Market cap. & Market-to-book
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
FTSE MIB Energy sector: The decline in global oil prices lead to an increase in asset writedown
38 Impairment Analysis of Listed Italian Companies
► Out of 3 TMT companies, 2 companies have reported impairment every year since 2009
► Market capitalization and market-to-book ratio decreased and impairment increased during 2011 to 2013 period
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Goodwill impairment 0.0% 0.0% 0.0% 100.0% 0.0 99.4% 99.9% 93.5% 99.7% 0.0% 97.5% 0.0%
Asset writedown 100.0% 100.0% 100.0% 0.0% 100% 0.6% 0.1% 6.5% 0.3% 100.0% 2.5% 100.0%
0,0 0,0 0,0 0,0 0,0 0,1 7,4 4,4 2,2 0,0 0,2 0,1
55,8 52,2 45,8
24,6 25,8 23,3 18,1 15,1 18,8 21,0
30,2 25,0
1,9x1,7x
1,6x
0,8x 0,9x
0,6x 0,6x 0,6x
0,8x 0,8x
1,2x
0,9x
0,0x
0,4x
0,8x
1,2x
1,6x
2,0x
0,0
40,0
80,0
120,0
160,0
200,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairments Market capitalization Market-to-book ratio
FTSE MIB TMT sector: Increase in Impairment due to decline in financial markets
TMT sector impairment vs. Market cap. & Market-to-book
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
39 Impairment Analysis of Listed Italian Companies
► Energy sector reported highest impairment followed by TMT and Financial services sectors during 2005 to 2016
► Energy sector reported its highest impairment in 2015 due to decline in crude oil prices
► Financial services sector reported its highest impairment at the start of the financial market crisis whereas TMT sector reported highest impairment in 2012
► ~66.8% of total impairment is reported by Energy, Financial services, and TMT sectors
► Energy sector impairment decreased significantly to EUR 18.5bn in 2016, after the highest impairment of EUR 49.6bn in 2015
► Financial services reported reverse impairment during 2005 to 2016 period
► TMT sector impairment was high during 2011 to 2014 period
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Others 7,1 5,1 4,9 14,7 9,6 9,5 7,5 9,9 9,4 6,6 12,1 4,9
TMT 4,2 37,7 18,9 5,7 12,7 5,2 23,3 26,6 13,8 9,3 3,8 8,5
RCP 2,1 1,4 1,7 3,7 2,9 1,4 3,1 4,7 2,9 5,3 10,6 3,7
Metals & Mining 0,3 (0,2) 0,9 8,1 6,1 0,9 8,9 22,4 16,2 5,1 20,5 9,9
Financial services (5,8) (12,8) 16,9 47,7 8,7 (2,7) 25,7 13,8 13,7 (0,1) 3,9 2,7
Energy 3,0 3,4 2,4 8,5 6,9 13,2 12,2 18,8 33,4 39,7 49,6 18,5
EU
R b
n
Total impairment by sector
MSCI Europe impairment by sector: Two-thirds of total Impairment reported by top 3 sectors (Energy, Financial services and TMT)
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
40 Impairment Analysis of Listed Italian Companies
► In the top 5 sectors on the basis of total impairment reported, only for TMT sector % of reporting impairment did not increase, whereas for the rest of the sectors the % of reporting impairment increased
► Metals & Mining had the highest increase, from 50.0% in 2005 to 83.3% in 2016
► Less than 10% of the companies reported reverse impairment in 2005 and 2016
► Out of 51 TMT companies in MSCI Europe, 3 companies did not report impairment during 2005 to 2016 period
► In MSCI Europe, 5 companies out of 90 companies did not report impairment during 2005 to 2016 period
% of companies reporting impairment
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Energy 51.4% 54.1% 56.8% 59.5% 64.9% 70.3% 70.3% 73.0% 73.0% 81.1% 83.8% 81.1%
Financial services 52.2% 63.3% 58.9% 66.7% 68.9% 71.1% 74.4% 73.3% 75.6% 78.9% 81.1% 83.3%
Metals & Mining 50.0% 50.0% 41.7% 66.7% 66.7% 66.7% 66.7% 66.7% 66.7% 75.0% 66.7% 83.3%
RCP 43.3% 47.8% 49.3% 50.7% 56.7% 58.2% 56.7% 59.7% 58.2% 65.7% 64.2% 65.7%
TMT 58.8% 49.0% 62.7% 56.9% 58.8% 60.8% 54.9% 58.8% 72.5% 54.9% 60.8% 54.9%
Others 38.4% 42.4% 50.6% 55.8% 54.1% 54.7% 57.6% 61.6% 55.2% 54.1% 56.4% 58.1%
% of companies reporting impairment by sector
MSCI Europe impairment by sector: % of companies reporting Impairment increased during the period 2005 to 2016 in every sector except TMT
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
41 Impairment Analysis of Listed Italian Companies
214,7 255,3 281,7 200,9 250,5 293,2 288,6 314,3 352,8 373,0 421,5 404,4
2,6x2,9x 3,0x
2,1x
2,6x 2,5x 2,4x 2,5x2,8x 2,8x
3,3x3,0x
0,0x
1,0x
2,0x
3,0x
4,0x
0,0
100,0
200,0
300,0
400,0
500,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Market capitalization Market-to-book ratio
► 42.5% of the total impairment is reported by one company during 2005 – 2016 period
► Reporting of impairment increased from 41.2% in 2005 to 64.7% in 2016
► No relation was observed between the impairment, and market capitalization and market-to-book ratio
Total impairment and reporting of impairment in Food sector
MSCI Europe impairment in Food sector: 42.5% of the total impairment is reported by one company during 2005 – 2016 period
* FTSE MIB companies by sector covered as FTSE AIM companies reported negligible impairment
0,6 0,2 0,4 0,8 0,2 0,7 0,2 0,2 0,5 3,4 7,7 0,6
41,2%35,3%
47,1% 47,1% 47,1%
64,7%
52,9%
64,7%70,6%
64,7%
76,5%
64,7%
0,0%
20,0%
40,0%
60,0%
80,0%
100,0%
0,0
2,0
4,0
6,0
8,0
10,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairments % of companies reporting impairment
Top 3 companies based on total impairment during 2005 to 2016 reported impairments of EUR 6.6bn, EUR 5.1bn and EUR 2.2bn
89.3% of total impairment is
reported by the top 3 companies
42 Impairment Analysis of Listed Italian Companies
0,2 0,1 0,2 1,5 1,3 0,9 1,6 6,6 3,6 9,9 7,0 2,7
160,1
190,4 190,9
118,4
153,0 154,2 137,8 146,5 142,5
130,2 132,9 153,0
2,1x2,4x
2,2x
1,2x
1,3x1,1x
1,0x 1,0x 1,0x 0,9x 0,9x1,1x
0,0x
0,5x
1,0x
1,5x
2,0x
2,5x
3,0x
0,0
50,0
100,0
150,0
200,0
250,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairments Market capitalization Market-to-book ratio
3,0 3,4 2,4 8,5 6,9 13,2 12,2 18,8 33,4 39,7 49,6 18,5
1.055,8
1.210,7
1.341,9
900,2
1.030,4
982,4 931,7 902,3 968,8 961,6 870,2
1.046,8
2,2x2,3x 2,3x
1,5x 1,5x
1,3x1,1x 1,1x 1,1x 1,1x
1,0x1,2x
0,0x
0,5x
1,0x
1,5x
2,0x
2,5x
0.0
500,0
1.000,0
1.500,0
2.000,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairments Market capitalization Market-to-book ratio
FTSE MIB: 8 companies
MSCI Europe: 37 companies
► Due to the decline in oil prices in 2014, the O&G companies increased the asset writedown
► In the last 3 years, c. 90.0% of impairment is from asset writedown for both FTSE MIB and MSCI Europe
► In 2014, FTSE MIB and MSCI Europe reported highest impairment, because O&G companies reported high impairments
► For FTSE MIB and MSCI Europe, market-to-book ratio decreased and impairment increased during 20114 and 2015
FTSE MIB MSCI Europe
2005 2016 2005 2016
% of companies reporting impairment
50.0% 75.0% 51.4% 81.1%
No. of companies reported reverse impairment
None None 1 3
% of impairment recognized by top company
74.8% 63.0% 41.3% 21.8%
FTSE MIB vs. MSCI Europe (Energy sector): Decline in oil prices in 2014 increased the asset writedown by major upstream O&G companies
Energy sector impairment vs. Market cap. & Market-to-book
* FTSE MIB companies by sector compared with MSCI Europe as FTSE AIM companies reported negligible impairment
43 Impairment Analysis of Listed Italian Companies
► Out of 3 TMT companies in FTSE MIB, 2 companies have reported impairment. Till date, the third company has not reported any impairment
► Out of 51 TMT companies in MSCI Europe, 3 companies did not report impairment during 2005 to 2016 period
► Due to financial market crisis, the total impairment for FTSE MIB and MSCI Europe was high during 2011 to 2014
► For both FTSE MIB and MSCI Europe, market capitalization and market-to-book ratio decreased and impairment increased during 2011 to 2013 period
0,0 0,0 0,0 0,0 0,0 0,1 7,4 4,4 2,2 0,0 0,2 0,1
55,8 52,2 45,8
24,6 25,8 23,3 18,1 15,1 18,8 21,0 30,2 25,0
1,9x 1,7x1,6x
0,8x 0,9x
0,6x 0,6x 0,6x
0,8x 0,8x
1,2x
0,9x
0,0x
0,5x
1,0x
1,5x
2,0x
0,0
50,0
100,0
150,0
200,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairments Market capitalization Market-to-book ratio
FTSE MIB: 3 companies
4,2 37,7 18,9 5,7 12,7 5,2 23,3 26,6 13,8 9,3 3,8 8,5
777,8 841,6 921,4
552,4 626,5 694,5 624,0 638,2 815,3 812,8
951,7 860,5 1,8x
2,1x2,3x
1,5x 1,6x 1,6x 1,5x
1,7x
2,2x2,0x
2,2x1,9x
0,0x
0,5x
1,0x
1,5x
2,0x
2,5x
3,0x
0.0
500,0
1.000,0
1.500,0
2.000,0
2.500,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairments Market capitalization Market-to-book ratio
MSCI Europe: 51 companies
TMT sector impairment vs. Market cap. & Market-to-book
FTSE MIB MSCI Europe
2005 2016 2005 2016
% of companies reporting impairment
66.7% 66.7% 58.8% 54.9%
No. of companies reported reverse impairment
None None 3 1
% of impairment recognized by top company
74.3% 97.8% 50.7% 34.9%
* FTSE MIB companies by sector compared with MSCI Europe as FTSE AIM companies reported negligible impairment
FTSE MIB vs. MSCI Europe (TMT sector): Major telecom companies reported impairment during 2011 to 2013, due to financial market crisis
44 Impairment Analysis of Listed Italian Companies
1,2 2,2 3,1 3,9 1,6 0,6 23,9 0,6 12,9 1,9 0,4 1,4
129,9
180,6 198,5
97,4 129,7
91,9 61,5
77,5
109,5 128,1
160,2
120,1 1,2x1,6x
1,1x0,6x
0,7x0,5x
0,4x 0,4x 0,7x 0,7x0,8x
0,7x
0,0x
0,5x
1,0x
1,5x
2,0x
0,0
50,0
100,0
150,0
200,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
bn
Total impairments Market capitalization Market-to-book ratio
(5,8) (12,8)
16,9 47,7 8,7
(2,7)
25,7 13,8 13,7
(0,1)
3,9 2,7
1.596,7 1.947,9 1.761,4
803,9
1.300,4 1.295,8 977,9
1.297,6
1.660,3 1.753,5 1.880,6 1.813,6
1,4x1,5x
1,2x0,6x 0,8x
0,8x0,6x
0,7x0,9x 0,9x 0,9x 0,8x
0,0x
0,5x
1,0x
1,5x
2,0x
(500,0)
0.0
500,0
1.000,0
1.500,0
2.000,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR
bn
Total impairments Market capitalization Market-to-book ratio
FTSE MIB: 14 companies
MSCI Europe: 90 companies
Financial services sector impairment vs. Market cap. & Market-to-book
► For FTSE MIB, market capitalization and market-to-book ratio was lowest in 2011 whereas the total impairment was highest
► For MSCI Europe, total impairment was highest at the start of the financial market crisis. In 2008, total impairment was highest, and market capitalization and market-to-book ratio were lowest
► In MSCI Europe, 5 companies did not report impairment during 2005 to 2016 period. However, FTSE MIB companies reported impairment at least in one year
► Two companies from financial services sector reported highest impairment during 2005 to 2016 period
FTSE MIB MSCI Europe
2005 2016 2005 2016
% of companies reporting impairment
64.3% 92.9% 52.2% 83.3%
No. of companies reported reverse impairment
2 1 18 21
% of impairment recognized by top company
42.8% 54.1%
NA(due to high
reverse impairment)
* FTSE MIB companies by sector compared with MSCI Europe as FTSE AIM companies reported negligible impairment
FTSE MIB vs. MSCI Europe (Financial services): Impairment was high in 2011 due to financial market crisis and European debt crisis
45 Impairment Analysis of Listed Italian Companies
Top 3 companies based on total impairment during 2005 –2016 reported impairment of EUR 89.2bn, EUR 21.6bn and EUR 19.2bn
64.3% of total impairment is
reported by the top 3 companies
(3,7)
25,0 18,6 44,1 14,1 3,2 10,0 19,4 21,0 15,3 18,4 17,0
31,6%34,7%
38,8%
44,9% 43,9%46,9%
51,0%55,1%
59,2%
52,0%54,1%
59,2%
22,6%26,5%
21,1%
6,8%14,0%
28,3%26,0%
20,4%
27,6% 29,4%32,1%
10,3%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
(10,0)
0,0
10,0
20,0
30,0
40,0
50,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairment % of companies reporting impairment % of impaired companies reporting reverse impairment
United Kingdom: 98 companies
0,0x
0,5x
1,0x
1,5x
2,0x
2,5x
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
No relation between the total impairment and market-to-
book ratio
0,7%0,5%
13,0%
4,2%
2,2%
0,3%4,5%
17,9%
7,4%
48,6%
0,8%
Automotive
DIP
Energy
Financial services
Healthcare
Hotel & Leisure
Infrastructure
Metals & Mining
RCP
TMT
Others
MSCI Europe by country: United Kingdom companies regularly report reverse impairment, 10.3% of the 2016 impaired companies reported reverse impairment
2005 - 2016 total impairment by sector Market-to-book ratio
46 Impairment Analysis of Listed Italian Companies
5,1 3,0 0,2 9,8 11,7 5,7 10,1 15,4 21,9 11,9 22,4 8,9
71,8%67,6% 67,6%
70,4%
80,3% 80,3%76,1%
73,2%69,0%
76,1%73,2% 74,6%
15,7% 16,7%20,8%
6,0%7,0%
21,1%14,8%
9,6%6,1%
11,1% 11,5%18,9%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
0,0
5,0
10,0
15,0
20,0
25,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairment % of companies reporting impairment % of impaired companies reporting reverse impairment
France: 71 companies
5,9%
6,1%
51,6%
1,1%
6,0%
1,1%
4,4%
0,0%
9,5%
14,2%0,1% Automotive
DIP
Energy
Financial services
Healthcare
Hotel & Leisure
Infrastructure
Metals & Mining
RCP
TMT
Others
► In 2016, none of the companies reported impairment in case of negative EBT before impairment
► In 2016, less than 10.0% of the companies reported impairment between EUR 0-5m
► In 2016, 5 companies reported impairment >EUR 500m
► Market-to-book ratio decreased from 1.8x in 2005 to 1.3x in 2016. No relation between the market-to-book ratio and impairment
51.4% of total impairment is
reported by the top 3 companies
2005 - 2016 total impairment by sector
MSCI Europe by country: c. 75% of the French companies report impairment
Top 3 companies based on total impairment during 2005 –2016 reported impairment of EUR 34.8bn, EUR 20.1bn and EUR 9.8bn
47 Impairment Analysis of Listed Italian Companies
7,9%6,7%
37,4%
13,8%
2,6%1,0%
-6,3%
1,4%
1,0%
22,0%
0,0% Automotive
DIP
Energy
Financial services
Healthcare
Hotel & Leisure
Infrastructure
Metals & Mining
RCP
TMT
Others
5,7 3,6 3,6 9,6 6,6 9,1 10,4 18,7 9,2 7,3 13,7 3,4
54,7%
60,4%
66,0%62,3%
54,7%
62,3%58,5%
71,7%67,9% 66,0% 64,2% 66,0%
6,9%
15,6% 14,3%
6,1%
20,7% 18,2% 19,4%
13,2% 11,1%8,6%
20,6%
11,4%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
18,0
20,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairment % of companies reporting impairment % of impaired companies reporting reverse impairment
Germany: 53 companies
63.5% of total impairment is
reported by the top 3 companies
► In 2008, 5 companies reported impairment in case of negative EBT before impairment
► In 2016, less than 10.0% of the companies reported impairment between EUR 0-5m
► Impairment >EUR 500m was reported by 5 companies in 2016
► No relation between the market-to-book ratio and impairment
2005 - 2016 total impairment by sector
MSCI Europe by country: In Germany, total impairment of EUR 3.4bn in 2016 was lower as compared to EUR 5.7bn in 2005
Top 3 companies based on total impairment during 2005 –2016 reported impairment of EUR 27.3bn, EUR 22.4bn and EUR 14.2bn
48 Impairment Analysis of Listed Italian Companies
1,4 0,3 16,1 2,1 1,5 2,2 2,8 4,6 7,5 3,7 11,1 4,0
40,5%
62,2% 62,2%
70,3%64,9%
59,5%
70,3%67,6%
51,4%54,1%
70,3%
62,2%
13,3%
21,7%
13,0% 11,5%
8,3%9,1% 7,7%
4,0% 5,3% 5,0%7,7%
4,3%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
18,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU
R b
n
Total impairment % of companies reporting impairment % of impaired companies reporting reverse impairment
Switzerland: 37 companies
64.2% of total impairment is
reported by the top 3 companies
0,0%
5,7%
0,0%
42,2%
14,5%
0,0%0,0%
23,9%
9,3%
2,4%1,9%
Automotive
DIP
Energy
Financial services
Healthcare
Hotel & Leisure
Infrastructure
Metals & Mining
RCP
TMT
Others
► Maximum of 4 companies reported impairment >EUR 500m in 2015 and 2016
► In 2016, 24.3% of the companies reported impairment between EUR 0-5m
► % of impaired companies reporting reverse impairment decreased from 13.3% in 2005 to 4.3% in 2016
► No relation between the market-to-book ratio and impairment
2005 - 2016 total impairment by sector
MSCI Europe by country: In 2016, 97.7% of impairment is reported by top 5 companies
Top 3 companies based on total impairment during 2005 –2016 reported impairment of EUR 15.6bn, EUR 14.0bn and EUR 7.3bn
49 Impairment Analysis of Listed Italian Companies
Key Contacts
Key Contacts
Mario RoccoPartner, Valuation & Business Modelling, ItalyEmail: [email protected]
Lorenzo BarraSenior Manager, Valuation & Business Modelling, ItalyEmail: [email protected]
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