Impairment Analysis of Listed Italian Companies file2 Impairment Analysis of Listed Italian...

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


Executive summary:Impairment analysis for 5 main European countries

Italy

111 companies

2016 Total impairment: EUR 4.5bn

United Kingdom

98 companies


Germany

53 companies


France

71 companies


Switzerland

37 companies


% 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)


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


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


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


► 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)


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


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


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


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


(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


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*


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)


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


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


% of Companies reporting impairment: Italian companies specially Financial organizations, post 2008 sub-prime crisis, took significant impairment hit

Percentage of Italian companies* reporting impairment


► 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


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


► 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


Concentration of impairment: Total impairment was highly concentrated among top 5 companies

Concentration of impairment for 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%


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


21 15 21 17 23 27 29 29 29 28 28 32


52.5% 37.5% 52.5% 42.5% 57.5% 67.5% 72.5% 72.5% 72.5% 70.0% 70.0% 80.0%


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


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


197 213 231 249 255 262 266 277 274 275 283 287


45.9% 49.7% 53.8% 58.0% 59.4% 61.1% 62.0% 64.6% 63.9% 64.1% 66.0% 66.9%


69.3% 118.2% 78.3% 41.0% 40.2% 34.8% 49.6% 37.5% 47.9% 45.2% 32.6% 41.5%


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


21 15 21 17 23 27 29 29 29 28 28 32


52.5% 37.5% 52.5% 42.5% 57.5% 67.5% 72.5% 72.5% 72.5% 70.0% 70.0% 80.0%


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


► 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


Timing of impairment for Italian companies*

Timing of impairment: Majority of organization recorded impairment only if operational and financial performance was positive


► 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)


► 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


► 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


Distribution of Italian companies* by the amount of impairment reported

Intensity of impairment:Majority of companies reported Impairment between EUR 0-5m


► 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


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


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


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


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


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* 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


► 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)


► 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


► 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


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


► 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


► 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


► 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


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


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


► 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)


► 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


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%


% 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


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%


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


► 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


Energy sector impairment vs. Market cap. & Market-to-book


FTSE MIB Energy sector: The decline in global oil prices lead to an increase in asset writedown


► 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


FTSE MIB TMT sector: Increase in Impairment due to decline in financial markets

TMT sector impairment vs. Market cap. & Market-to-book



► 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)



► 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


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



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


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


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


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


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


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


► 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



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



TMT sector impairment vs. Market cap. & Market-to-book


2005 2016 2005 2016


66.7% 66.7% 58.8% 54.9%


None None 3 1


74.3% 97.8% 50.7% 34.9%


FTSE MIB vs. MSCI Europe (TMT sector): Major telecom companies reported impairment during 2011 to 2013, due to financial market crisis


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


(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




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


2005 2016 2005 2016


64.3% 92.9% 52.2% 83.3%


2 1 18 21


42.8% 54.1%

NA(due to high

reverse impairment)


FTSE MIB vs. MSCI Europe (Financial services): Impairment was high in 2011 due to financial market crisis and European debt crisis


Top 3 companies based on total impairment during 2005 –2016 reported impairment of EUR 89.2bn, EUR 21.6bn and EUR 19.2bn



(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


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


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



2005 - 2016 total impairment by sector

MSCI Europe by country: c. 75% of the French companies report impairment



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


Germany: 53 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


MSCI Europe by country: In Germany, total impairment of EUR 3.4bn in 2016 was lower as compared to EUR 5.7bn in 2005



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


Switzerland: 37 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


MSCI Europe by country: In 2016, 97.7% of impairment is reported by top 5 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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