Annual / Quarterly Financial Statement • Mar 29, 2019
Annual / Quarterly Financial Statement
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DIRECTORS' REPORT
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES
BASICNET S.P.A. FINANCIAL STATEMENTS AND EXPLANATORY NOTES
| Corporate boards of BasicNet S.p.A. 1 | |
|---|---|
| The Group at a glance 5 | |
| 2018 financial performance overview 11 | |
| The Group 11 | |
| The parent company 15 | |
| Reconciliation between consolidated net profit and parent company net profit 17 | |
| The BasicNet share price 17 | |
| Principal risks and uncertainties 18 | |
| Other information 23 |
|
| Human resources and the environment 23 | |
| Treasury shares 23 | |
| Stock option plans 23 | |
| Opt-out regimes 23 | |
| Shares held by Directors and Statutory Auditors 23 | |
| Transactions with holding companies, associates, other investments and related parties 23 | |
| Research & development 24 | |
| Subsequent events to the year-end and outlook 26 | |
| Proposal to the Shareholders' Meeting for the allocation of the net profit for the year 28 | |
| Corporate governance and ownership structure report 29 | |
| Consolidated non-financial report 58 | |
| Methodology 58 |
|
| 1. Sustainability for BasicNet59 |
|
| 2. Responsibility in the value chain63 |
|
| 3. Social responsibility 67 |
|
| 4. Environmental responsibility75 |
|
| GRI Content index79 | |
| Independent Auditors' Report to Consolidated non Financial Report 86 | |
| BasicNet Group consolidated income statement 90 | |
| Consolidated comprehensive income statement 91 | |
| BasicNet Group consolidated balance sheet 92 | |
| Consolidated cash flow statement of the BasicNet Group 93 |
|
| Statement of changes in consolidated shareholders' equity 94 |
|
| Consolidated net financial position 95 |
|
| Changes in net cash position 96 |
|
| Explanatory notes 97 | |
| Attachment 1 - Disclosure pursuant to article 149 duodecies of the Consob issuer's | |
| Regulation 144 | |
| Attachment 2 - Companies included in the consolidation under the line-by-line method 145 | |
| Attachment 3 - Declaration of the consolidated financial statements pursuant to article 154- | |
| bis paragraph 3 and 4-bis of Legislative Decree No. 58 of February 24, 1998 | |
| "Financial Intermediation Act" 147 | |
| Independent Auditor' Report to Consolidated Annual Report and Accounts as of December | |
| 31, 2018 148 | |
| BasicNet S.p.A. – Income statement 155 | |
| BasicNet S.p.A. – Comprehensive income statement 156 | |
| BasicNet S.p.A. – Balance sheet 157 | |
| BasicNet S.p.A. – Cash flow statement 158 | |
| BasicNet S.p.A. - Statement of changes in shareholders' equity 159 | |
| BasicNet S.p.A. – Net financial position 160 | |
| BasicNet S.p.A. - Statememy of changes in net financial position 161 | |
| BasicNet S.p.A. – 2018 income statement prepared as per Consob Resolution No. 15519 of | |
| July 27, 2006 162 | |
| BasicNet S.p.A. – Balance sheet as at December 31, 2018 prepared as per consob resolution | |
| no. 15519 of July 27, 2006 163 |
| BasicNet S.p.A. – Cash flow statement as at December 31, 2018 prepared as per Consob | |
|---|---|
| Resolution No. 15519 of July 27, 2006 164 | |
| Explanatory notes 166 | |
| Attachement 1 - Disclosure pursuant to article 149 duodecies of the Consob issuer's | |
| Regulation 207 | |
| Attachment 2 - Investments at December 31, 2018 208 | |
| Attachment 3 - Declaration of the financial statements pursuant to article 154-bis paragraph | |
| 3 and 4-bis of Legislative Decree no. 58 of February 24, 1998 "Financial | |
| Intermediation Act" 211 | |
| Independent Auditor' Report to Statutory Annual Report and Accounts as of December 31, | |
| 2018 212 | |
1
| Marco Daniele Boglione | Chairman |
|---|---|
| Daniela Ovazza | Vice Chairman |
| Giovanni Crespi | Chief Executive Officer |
| Paola Bruschi | Directors |
| Paolo Cafasso | |
| Elisa Corghi (1) | |
| Alessandro Gabetti Davicini | |
| (1) Renate Hendlmeier |
|
| Adriano Marconetto (1) | |
| Carlo Pavesio | |
| Elisabetta Rolando | |
| Franco Spalla | |
| (1) Independent Directors |
| Carlo Pavesio | Chairman |
|---|---|
| Elisa Corghi | |
| Renate Hendlmeier | |
| Adriano Marconetto | |
| Daniela Ovazza |
| Renate Hendlmeier | Chairman |
|---|---|
| Elisa Corghi | |
| Adriano Marconetto |
Maria Francesca Talamonti Chairman
Sergio Duca Statutory Auditors Alberto Pession
Giulia De Martino Alternate Auditors Maurizio Ferrero
EY S.p.A.
"We bring together a large number of entrepreneurs across the world for a common goal. We manage all the critical data along the supply chain. We earn service commissions for approx. one-third of the added value generated by the entire process, capitalising all the enhanced value of the trademarks from the development of sales. We achieve this through continually sourcing state-of-the-art software technologies and peerless internet integration to manage all the processes of our business".
Marco Boglione, 1999
Dear Shareholders,
all commercial and earnings indicators were significantly up in 2018.
In commercial terms, Basic marketplace core revenues - royalties and sourcing commissions - grew 14.4% on the previous year to Euro 54.8 million. Direct market sales amounted to Euro 155.6 million, rising approx. 14.8% on the previous year.
The 2018 Key Financial Highlights:
Parent Company Key Financial Highlights:
In addition to the Corporate Governance and Ownership Structure Report, this document also presents the Consolidated non-financial report as per Legislative Decree 254/2016. This document summarises the initiatives taken by the Group to operate its business ethically and responsibly, in order to engage all stakeholders in the objectives and results of the entire supply chain, also in social and environmental terms.
In relation to the "alternative performance indicators", as defined by CESR/05-178b recommendation and Consob Communication DEM/6064293 of July 28, 2006, we provide below a definition of the indicators used in the present Directors' Report, as well as their reconciliation with the financial statement items:
| • | Commercial licensees or licensees: | independent business owners, granted licenses to distribute Group brand products in their respective regions. |
|---|---|---|
| • | Productive Licensees or sourcing centers: | third-party firms to the Group. Their function is to manufacture and market merchandise and are located in various countries worldwide, depending on what type of goods they produce. |
| • | Commercial licensee aggregate sales: | sales by commercial licensees, recognised by the BasicNet Group to the "royalties and sourcing commissions" account of the income statement. |
| • | Productive licensee aggregate sales: | sales by productive licensees, recognised by the BasicNet Group to the "royalties and sourcing commissions" account of the income statement. |
| • | Consolidated Revenues | the sum of royalties, sourcing commissions and sales of the subsidiaries BasicItalia S.p.A. and BasicRetail S.r.l. and of the parent company BasicNet S.p.A. |
| • | EBITDA: | "operating result" before "amortisation and depreciation". |
| • | EBIT: | "operating result". |
| • | Contribution margin on direct sales: | "gross profit". |
| • | Net debt: | total of current and medium/long-term financial payables, less cash and cash equivalents and other current financial assets. |
| • | Basic earnings per share | calculated as required by IFRS on the basis of the weighted average number of shares in circulation in the year. |
The BasicNet Group operates in the apparel, footwear and accessories sector through the brands Kappa®, Robe di Kappa®, K-Way®, Superga®, Briko®, Jesus® Jeans, Sabelt® and, since July 2017, Sebago®. Group activities involve driving brand enhancement and product distribution through a global network of licensees. This business network is defined as the "Network". And from which the name BasicNet derives. The Network of licensees encompasses all key markets worldwide.
BasicNet S.p.A. is the parent company of the Group – with headquarters in Turin - listed on the Italian Stock Exchange.
The strengths of the Group are founded on the strategic priorities since its inception which encompass:
The Basic Group brands form part of the informal and casual clothing sector, which has experienced significant growth since the 1960's and continues to develop with the "liberalisation" of clothing trends.
is a practical sportswear brand, serving active and fast-paced individuals, who in their sporting activity require highly-functional clothing, while displaying a youthful, colourful and original look. The Kappa® collections include also footwear and accessories for sport, designed to ensure peak performance. The Kappa® brand sponsors major clubs globally across a wide range of sports, in addition to many national sporting federations, particularly in Italy.
is the leisure footwear and accessories brand, designed for those seeking comfort, while demanding a fashionable, colourful and stylish look and high quality. The Superga® collections serve the needs of a wide cross-section of customers, within every age category.
exceptional waterproof clothing: classic, modern, high-technological and functional content and in a wide range of colours. In addition to the original jackets with heat-sealing zips, storable in their pouch and produced with waterproof and wind-protecting warm and breathable materials, the collections include also fashion-oriented clothing and accessories which are identically practical and functional.
the Italian brand of cutting-edge technical sporting products, in particular for cycling, skiing and running: eyewear, helmets, masks, accessories, underwear and clothing for professionals and enthusiasts. Briko®'s mission is to use the explosive energy of the brand to create iconically designed products for athletes and sportspeople requiring performance and safety without compromises.
The brand, founded in Westbrook, Maine (USA) in 1946, takes its name from the nearby Sebago lake, which in the native American Abenaki language means "elongated water basin".
The brand launched with the famous "penny loafer", handmade in accordance with local tradition and over the years has continued with best sellers such as the Docksides® boat shoes.
On July 31, 2017, the brand became part of the BasicNet Group portfolio with a view to a medium-high bracket positioning, to be worn as a sporting yet classy style.
The Sebago® brand is now distributed across 90 markets worldwide.
is the jeans brand, created in 1971 by the youthful Maurizio Vitale and Oliviero Toscani.
is the high-end leisure, sport and formal occasion footwear brand, emerging from the racing and automobile world. The brand is positioned in the fashion segment. Since October 2011, the Basic Group has held 50% of the fashion categories (clothing and footwear) of the brand and is also a global licensee.
The BasicNet Group has developed around a "network" business model, targeting licensees as the ideal partner for the development, distribution and sourcing of its products globally, choosing partners which act not only as a product supplier, but as an integrated supplier of services, i.e. a business development partner.
Innovative, flexible and modular, the Business System of BasicNet has enabled the Group to grow quickly, although maintaining a lean and agile structure: a large enterprise centered around many businesses connected among themselves and with the parent company on a fully web-based network integrated IT platform designed to maximise information flows through real time sharing.
The Business System was drawn up and structured to develop both internal lines (new licensees and new markets) and external lines (new brands developed or acquired and new business lines).
The functioning of the Business System is very simple. The Parent Company BasicNet S.p.A. controls the strategic activities:
Licensees, according to region or goods category, distribute products to retailers, carry out local marketing, regional logistics and working capital funding.
The licensees involved in BasicNet brand finished product management (sourcing centres) apply a similar model and distribute to commercial licensees in their respective areas.
As part of the Business System development, the Group has also established a direct customer sale system, currently developed by the Italian licensee, called plug@sell®. The model comprises a web-based integrated sales management system, with a platform which simply manages all daily activities at the store in real time, from orders to stock management, to accounting and training of staff (pre-opening and ongoing), through class-based and online training.
As part of the retail project of BasicRetail S.r.l. (a company entirely held by BasicItalia S.p.A.), the various brands have been developed around the three principal retail levels, through which the Group sells directly to the public in Italy:
The formats have been developed in order to ensure presence on a wide range of market segments.
The IT platform is one of the major strategic investments for the Group, with a high degree of focus in terms of staffing and centrality to Business System development.
This platform was designed and developed in a fully web integrated manner as the perfect communication tool between Network elements.
The Information Technology department is involved therefore in the design and rolling out of the data collation and transmission systems which link the BasicNet Network companies together and externally.
The business model therefore centres on "e-processes" i.e. ".com" divisions - each of which with a production input and exchanging or negotiating with the other divisions, exclusively through the online platform.
The Basic Group comprises Italian and international operating companies within the following sectors:
The Business System operating segment includes the Parent Company BasicNet, the trademark holders of the Group, Basic Trademark S.A., Superga Trademark S.A., Fashion S.r.l., Jesus Jeans S.r.l. TOS S.r.l. (owner of the Sebago® brand and incorporated in 2017), the services company BasicNet Asia Ltd. in Hong Kong, Basic Properties B.V. in the Netherlands and the sub-licensee Basic Properties America, Inc. in the USA.
In addition to the operations developed directly by BasicNet S.p.A., outlined above, the activities of the other companies concern the granting of the intellectual property rights of the BasicNet Group to licensees, administrating the contracts and managing the relative revenue streams.
The proprietary licensees are BasicItalia S.p.A. and its subsidiary BasicRetail S.r.l..
BasicItalia S.p.A. acts as a licensee for the usage and development of the intellectual property rights and of the products of all BasicNet brands for Italy. The company is the licensee and incubator for the testing of Group development projects.
It holds a number of major sponsorship and merchandising contracts, some of which with international visibility, benefitting also the Group and the Network.
BasicRetail manages Group brand sales points within the franchising project.
Property management is carried out by Basic Village S.p.A.. The company owns the former Maglificio Calzificio Torinese production site. Restructured and preserved in 1998, the facilities house the BasicNet Group headquarters and numerous other Group and third-party activities. At the end of 2016, it acquired the building adjacent to via Padova 78, leased to third parties.
The Group objective is to extend its global leadership position through the strength of its brands.
The Group project centres on:
The BasicNet Group structure is presented below:
Following the transactions executed in January 2019 - outlined in the subsequent events section - the Group is structured as follows:
As part of the measures introduced to develop the Brands internationally in 2018, growth was generally driven by the Kappa® brand, with the "Authentic" collections contributing strongly, while Superga® and K-Way® also performed well. The re-launch of the Sebago® brand was also substantially in line with expectations.
Robust European market growth (+16.5%) was strongly driven by the re-launch of Sebago® brand distribution, following its acquisition on July 31 last year, in addition to excellent Italian market growth for all brands, followed by France, the UK and Germany. Balkans' sales recovered markedly after the change of Kappa® and Robe di Kappa® brand licensee. The Superga® brand also performed well - in significant contrast to the contracting Italian market, while the K-Way® brand delivered growth on the back of full operability at its mono-brand stores, mainly located in Italy (28) and in France (16).
In commercial terms, new K-Way® brand licensing contracts were agreed for Austria and Germany, for the Briko® brand for Belgium, the Netherlands, Luxembourg and Switzerland (this latter extended along with the renewal of the Austria and Germany license) and for the Sebago® brand for Norway, Albania, Bosnia and Herzegovina, Croatia, Montenegro, Serbia, Slovenia, Ireland and the United Kingdom.
New sponsorships included for the Kappa® brand the Spanish football teams Real Betis Balompié and Cultural y Deportiva Leonesa and two three-year agreements with the French rugby team Castres Olympique and the Welsh Pontypridd – RFC by the French licensee. The Italian licensee reconfirmed for an additional three years its sponsorship which began in 2009 of the Italian Judo, Karate and Martial Arts Federation and signed a five-year contract for the sponsorship of Empoli F.C.. It will also sponsor for the coming four seasons the Fiat Torino Auxilium basketball team.
Briko®'s sponsorship of the ski champion Peter Fill was renewed for two years, while new two-year sponsorship of the Norwegian alpine ski World cup athletes Maren Skjoeld, Rasmus Windingstad and Bjornar Neteland were agreed, who will be kitted out in Briko® helmets and eyewear. The new agreement with the cycling team Ird Modena Squadra Corse is highlighted.
A co-branding initiative for Kappa® was launched with Antonia X. Superga®'s main collaborations involved Philosophy by Lorenzo Serafini, the stylist Marco De Vincenzo, the blogger Lizzy van der Ligt and the Norwegian brand Mads Norgaard. The first capsule collection with Highsnobiety was also launched.
Finally, for the K-Way® Brand the capsule collections developed through co-branding with Dsquared2, with the Italian stylist Simone Guidarelli and with the AMI brand by Alexandre Mattiussi were presented, while the first K-Way® X Kappa® collaboration was launched.
The Kappa® and Superga® collections celebrating the ninetieth birthday of Mickey Mouse are highlighted.
The Americas market overall grew 13.1%, despite the weakening of a number of local currencies against the Euro which impacted the very strong commercial results, both for the Kappa® brand (mainly on the North American market) and for the Superga® brand, which reported growth across the continent.
New licenses for the Canada and United States markets for the Briko® and Sebago® brands took effect in the year.
In terms of communication, during New York Fashion week Superga® and the 10 Corso Como concept store presented a new capsule collection and new co-branding with the first avocado bar in Brooklyn was launched: Superga® X Avocaderia.
Asia and Oceania reported growth of 12%, with the Kappa® brand contributing very strongly following the recovery of the Asian market with the opening of new sales points and a focus on marketing, while the Australian market grew significantly amid a strong start for the "Authentic" label license.
Superga® sales were also buoyant, particularly in Australia, Indonesia and Singapore, with the broadening of the distribution network and a stepping up of local marketing, while in China supported by the new licensee, principally on the Tmall platform. K-Way® also performed well, principally in Taiwan and Japan.
New Kappa® licenses for Taiwan, for Superga® for Japan and for K-Way® and Sebago® for the Australia, Fiji, New Zealand, Samoa and Tonga markets also took effect.
In terms of communications, co-branding initiatives were also launched for the Asian market with the Korean brand Charms X Kappa®. The English model and fashion designer Alexa Chung was the face of the
first half-year campaign and also launched a capsule collection "Superga x ALEXACHUNG" in Los Angeles and Seoul.
The Middle East and Africa grew 12.5% on 2017. The strong performance of the South African licensee for Kappa® is highlighted, reporting sport and lifestyle segment growth - and of the South African licensee for Superga®. A license agreement for the distribution of the Kappa® brand in Morocco was signed in the year and, also for Kappa®, a four-year sponsorship for the Tunisian Football Federation by the French licensee began. Superga® South Africa launched Superga® X PICHULIK, the new co-branding for the South African market originating from the collaboration with the jewellery creator Katherine Mary Pichulik.
At December 31, Kappa® and Robe di Kappa® mono-brand stores and shop in shops opened by licensees globally numbered 915 (of which 107 in Italy), with Superga® mono-brand stores and shop in shops totalling 274 (of which 56 in Italy), along with 50 K-Way® sales points (of which 28 in Italy).plug@sell® store revenues at like-for-like consolidation scope grew 3% on 2017.
The condensed income statement for the year is reported below:
| (Euro thousands) | FY 2018 | FY 2017 | Changes | % |
|---|---|---|---|---|
| Group Brand Aggregate Sales by the Network of commercial and productive licensees * |
875,260 | 747,871 | 127,389 | 17.0% |
| Royalties and sourcing commissions | 54,832 | 47,924 | 6,909 | 14.4% |
| Consolidated direct sales | 155,615 | 135,583 | 20,032 | 14.8% |
| EBITDA ** | 33,030 | 23,060 | 9,969 | 43.2% |
| EBIT ** | 26,581 | 16,642 | 9,939 | 59.7% |
| Group Net Profit | 21,014 | 10,646 | 10,368 | 97.4% |
| Basic earnings per share** | 0.4048 | 0.1925 | 0.212 | 110.3% |
* Data not audited
** For the definition of the indicators reference should be made to Page 4 of the present Report
The breakdown of sales and production revenues generated through the global Group licensees at current exchange rates was as follows:
| FY 2018 | FY 2017 | Changes | ||
|---|---|---|---|---|
| (In Euro thousands) Aggregate Sales of the Group licensees * |
Total | Total | Total | % |
| Commercial Licensees | 622,590 | 541,127 | 81,463 | 15.0% |
| Productive Licensees (sourcing centers) | 252,670 | 206,744 | 45,926 | 22.2% |
| Total | 875,260 | 747,871 | 127,389 | 17.0% |
* Data not audited
The regional breakdown of commercial licensee aggregate sales was as follows:
| FY 2018 | FY 2017 | Changes | ||||
|---|---|---|---|---|---|---|
| (In Euro thousands) Aggregate Sales of the Group Commercial licensees * |
Total | % | Total | % | Total | % |
| Europe | 408,899 | 65.7% | 351,028 | 64.9% | 57,870 | 16.5% |
| The Americas | 58,963 | 9.5% | 52,135 | 9.6% | 6,828 | 13.1% |
| Asia and Oceania | 96,837 | 15.6% | 86,499 | 16.0% | 10,338 | 12.0% |
| Middle East and Africa | 57,891 | 9.3% | 51,465 | 9.5% | 6,426 | 12.5% |
| Total | 622,590 | 100.0% | 541,127 | 100.0% | 81,463 | 15.0% |
* Data not audited
and of the productive licensees:
| FY 2018 | FY 2017 | Changes | ||||
|---|---|---|---|---|---|---|
| (In Euro thousands) Aggregate Sales of the Group Productive licensees * |
Total | % | Total | % | Total | % |
| Europe | 18,738 | 7.4% | 14,636 | 7.1% | 4,102 | 28.0% |
| The Americas | 15,241 | 6.0% | 13,539 | 6.5% | 1,702 | 12.6% |
| Asia and Oceania | 218,155 | 86.3% | 178,279 | 86.2% | 39,876 | 22.4% |
| Middle East and Africa | 536 | 0.2% | 290 | 0.1% | 246 | 85.2% |
| Total | 252,670 | 100.0% | 206,744 | 100.0% | 45,926 | 22.2% |
* Data not audited
Commercial licensee aggregate sales of Euro 622.6 million were up 15% at current exchange rates, from Euro 541.1 million in the previous year; continental level growth is commented upon in the introductory paragraphs to this Report.
The sales of the productive licensees (Sourcing Centers) are only made to commercial licensees or entities within the "operated by BasicNet" scope. The production licenses issued to the Sourcing Centers, differing from those issued to the commercial licensees, do not have regional limitations, but are rather based on technical production and business competences. Product sales by the Sourcing Centers to commercial licensees are made in advance of those made by the latter to the end customer. The growth - particularly strong in the fourth quarter - is a good indicator of revenue development for the first quarter of the subsequent year.
As a result of increased revenues, consolidated royalties and sourcing commissions, and therefore not including the royalties of the directly-held Italian licensees, amounted to Euro 54.8 million (+14.4% on Euro 47.9 million in the previous year). Growth at like-for-like exchange rates was 16.5%.
Overall sales were Euro 155.6 million (Euro 135.6 million in 2017). Growth of 14.8% was supported also by the launch of Sebago® brand (acquired in July 2017) shoe sales, Kappa® brand sales growth driven by the "Authentic" label and a turnaround for the Superga brand, which reaped the rewards from the repositioning of distribution undertaken in previous years. The contribution margin on sales of Euro 64.1 million rose approx. 17.5% on 2017. The revenue margin was 41.2% (40.2% in 2017). The higher margin derives from both an improved revenue mix and the strengthening of the Euro against the US Dollar in the first half of the year, benefitting the majority foreign currency purchases.
Other income of Euro 3.1 million includes rental income, condominium income and other non-recurring income which is the source of fluctuations from period to period.
Sponsorship and media spend of Euro 25.7 million increased 4.2% (Euro 24.6 million in 2017), confirming the strong support for brand sales. Significant contributions were given to communication and endorsement operations with an international impact particularly on the overseas markets (World Wide Strategic Advertising).
Personnel costs increased from Euro 21.1 million in 2017 to Euro 23.1 million in 2018 due to new hires (31 employees more than 2017), mainly in the marketing and product research and development areas.
Overhead costs, i.e. Selling and general and administrative costs and royalties expenses amounted to Euro 40.2 million, increasing 7.8% on Euro 37.3 million in 2017.
EBITDA of Euro 33 million grew 43.2% (Euro 23.1 million in 2017).
Amortisation and depreciation amounted to Euro 6.5 million. The account includes amortisation and writedowns for certain key money recognised to third parties on Italian sales points for Euro 627 thousand.
EBIT amounted to Euro 26.6 million (Euro 16.6 million in 2017).
Consolidated net financial charges/income, including exchange gains and losses, reported a charge of Euro 1.2 million, compared to Euro 1.6 million in the previous year. The difference relates to currency movements, reporting net charges of Euro 23 thousand, compared to charges of Euro 589 thousand in the previous year. Financial charges in service of the debt of Euro 1.1 thousand increased Euro 150 thousand on 2017, which benefitted from financial income equating to the difference from a VAT reimbursement awaited since 2012.
The consolidated pre-tax profit was Euro 25.4 million (Euro 15.1 million in 2017).
Consolidated net profit, after current and deferred taxes of approx. Euro 4.4 million, amounted to Euro 21 million (compared to Euro 10.6 million in the previous year - increasing 97.4%).
At year-end, an agreement was also signed with the Tax Agency for the application of the intellectual property tax breaks (Patent Box) for BasicNet S.p.A., and in April an agreement was signed for Basic Trademark S.A. which follows on from that signed previously for Superga Trademark S.A., completing the tax break application process for the Group. The agreements, with retrospective effect from 2015 for that covered by the ruling procedure, give rise to a one-off prior tax benefit of Euro 2.5 million, reducing the tax charge accruing in the year, in addition to the tax benefit of Euro 1.7 million.
Deferred taxes assessed against tax changes in the year and the recovery of prior year taxes had a negative impact of Euro 1.2 million.
The Financial Highlights by Group segment were as follows:
The financial statements by segment are reported at Note 7 of the Notes to the consolidated financial statements.
The changes in the balance sheet are reported below:
| (Euro thousands) | December 31, 2018 December 31, 2017 |
Changes | |
|---|---|---|---|
| Property | 21,583 | 22,292 | (710) |
| Brands | 47,124 | 46,822 | 302 |
| Non-current assets | 24,438 | 24,995 | (557) |
| Current assets | 142,368 | 125,427 | 16,941 |
| Total assets | 235,513 | 219,536 | 15,977 |
| Group shareholders' equity | 112,937 | 97,011 | 15,925 |
| Non-current liabilities | 29,392 | 33,350 | (3,960) |
| Current liabilities | 93,184 | 89,175 | 4,010 |
| Total liabilities and shareholders' equity | 235,513 | 219,536 | 15,977 |
Capital expenditure in the year amounted to Euro 5.8 million, following IT programme investment (Euro 1.9 million), EDP and furniture and fitting spending (Euro 2.4 million), for commercial goodwill on sales points (Euro 0.4 million) and for own brand management (Euro 0.3 million), with the residual concerning property improvements and other minor items.
The increase in current assets relates to trade receivables increasing less than proportionally than revenues, while finished product inventories reduced; current liabilities increased in terms of amounts due to suppliers, following increased operations.
| ⇒Consolidated figures | |||||||
|---|---|---|---|---|---|---|---|
| (Euro thousands) | December 31, 2018 | December 31, 2017 | Changes | ||||
| Net financial position – Short-term |
(29,464) | (33,050) | 3,586 | ||||
| Financial payables – Medium-term | (21,394) | (27,439) | 6,045 | ||||
| Finance leases | (823) | (991) | 168 | ||||
| Total net financial position | (51,681) | (61,480) | 9,799 | ||||
| Net Debt/Equity ratio (Net financial position/Shareholders' equity) |
0.46 | 0.63 | (0.18) |
Consolidated net debt, including medium-term loans and finance leases (Euro 22.2 million) and property loans (Euro 6.4 million), decreased from Euro 61.5 million at December 31, 2017 to approx. Euro 51.7 million at December 31, 2018. Dividends were distributed of Euro 3.3 million in the year, with investment of Euro 5.8 million and treasury shares acquired for Euro 3.3 million. Operations generated self-funding of Euro 21.9 million.
The debt/equity ratio at December 31, 2018 increased to 0.46 (0.63 at December 31, 2017).
The parent company condensed income statement compared to the previous year is reported below:
| (Euro thousands) | FY 2018 | FY 2017 | Changes |
|---|---|---|---|
| Royalties and sourcing commissions | 33,730 | 28,165 | 5,565 |
| Direct sales and other income | 10,840 | 9,425 | 1,415 |
| EBITDA * | 13,485 | 10,868 | 2,616 |
| EBIT * | 11,105 | 8,633 | 2,471 |
| Dividends from subsidiaries | 2,150 | 1,850 | 300 |
| Net Profit | 12,954 | 4,508 | 8,447 |
* For the definition of the indicators reference should be made to Page 4 of the present Report
The results of the separate financial statements of the Parent Company reflect the developments of the overall activity as described within the consolidated financial statements and with specific reference to the activities undertaken on the international markets.
Royalties and sourcing commissions of Euro 33.7 million grew 19.8% on 2017.
Direct sales and other income amounted to Euro 10.8 million (Euro 9.4 million in the previous year). Other income principally refers to payments for intercompany assistance services charged to the subsidiaries BasicItalia S.p.A., Basic Trademark S.A., Superga Trademark S.A., Basic Village S.p.A., Jesus Jeans S.r.l. and TOS S.r.l.
In 2018, selling, general and administrative expenses, including contributions in support of marketing and international media activity, rose approx. Euro 1.3 million - in support of communications and the development of the new brands through the business system.
EBIT amounted to Euro 11.1 million (Euro 8.6 million in 2017), following amortisation and depreciation of Euro 2.4 million.
During the year, the subsidiary Basic Properties B.V. distributed dividends of approx. Euro 2.1 million, up on Euro 1.8 million in 2017.
On the basis of the above items, the net profit amounted to Euro 13 million, after income taxes of Euro 276 thousand.
| (Euro thousands) | December 31, 2018 | December 31, 2017 | Changes |
|---|---|---|---|
| Non-current assets | 5,952 | 6,144 | (192) |
| Brands | 9,803 | 9,710 | 93 |
| Investments | 33,656 | 33,275 | 382 |
| Current assets | 88,247 | 84,131 | 4,116 |
| Total assets | 137,658 | 133,260 | 4,398 |
| Shareholders' Equity |
91,771 | 85,381 | 6,389 |
| Non-current liabilities | 20,089 | 23,310 | (3,221) |
| Current liabilities | 25,798 | 24,569 | 1,229 |
| Total liabilities and shareholders' equity |
137,658 | 133,260 | 4,398 |
Medium/long-term loans include contractual clauses, specific guarantees and restrictions on shareholder control.
Non-current assets include investments in the year for the purchase of moulds and EDP for Euro 0.9 million, and of IT equipment for Euro 1.5 million. The value of tangible and intangible assets are recorded net of amortisation and depreciation for the year of Euro 2.4 million.
Shareholders' Equity at December 31, 2018 was Euro 91.7 million (Euro 85.4 million in 2017), following the distribution in 2018 of dividends for Euro 3.3 million and the acquisition of treasury shares for approx. Euro 3.3 million.
| (Euro thousands) | December 31, 2018 December 31, 2017 |
Changes | |
|---|---|---|---|
| Net financial position – Short-term | (10,324) | (8,468) | (1,856) |
| Financial payables – Medium-term | (15,938) | (19,875) | 3,938 |
| Finance leases | (104) | (126) | 23 |
| Financial position with third parties | (26,365) | (28,469) | 2,104 |
| Group financial receivables/(payables) | 55,484 | 60,267 | (4,783) |
| Financial position with the Group | 55,484 | 60,267 | (4,783) |
| Total net financial position | 29,119 | 31,798 | (2,679) |
The net cash position of Euro 29.1 million reduced on Euro 31.8 million in 2017.
The reconciliation at December 31, 2018 between the Parent Company net equity and result and the consolidated net equity and result is reported below.
| (Euro thousands) | Net Profit | Shareholders' Equity |
|---|---|---|
| Financial statements of BasicNet S.p.A. | 12,954 | 91,771 |
| Result and net equity of the consolidated companies and value at equity |
10,209 | 21,164 |
| Elimination of the dividends received by the Parent Company | (2,150) | - |
| Group consolidated financial statements | 21,014 | 112,934 |
The Share Capital of BasicNet S.p.A. consists of 60,993,602 ordinary shares of a nominal value of Euro 0.52 each.
| 31/12/2018 | 31/12/2017 | |
|---|---|---|
| SHARE PRICE INFORMATION | ||
| Earnings per share | 0.4048 | 0.1925 |
| Dividend per share (1) | 0.1200 | 0.0600 |
| ratio (1) (2) Pay-out |
30.8% | 30.7% |
| Dividend Yield (1) (3) | 2.71% | 1.63% |
| Price at year-end | 4.43 | 3.68 |
| Maximum price in year | 4.98 | 4.05 |
| Minimum price in year | 4.24 | 3.15 |
| Stock market capitalization (in thousands of | ||
| Euro) | 270,202 | 224,456 |
| Total number of shares | 60,993,602 | 60,993,602 |
| Shares outstanding | 54,409,070 | 55,308,514 |
The key stock market figures for the years 2018 and 2017 are reported in the following table:
(1) dividends on the 2018 figures on the basis of the proposal for the allocation of the result to the Shareholders' AGM
(2) percentage of consolidated net profit distributed as dividend
(3) ratio between the dividend and the share price on the last day of the financial year
The list of parties holding, directly or indirectly, more than 5% of the share capital (the significance threshold established by Article 120, paragraph 2 of Legs. Decree No. 58 of 1998 for BasicNet which is classified as a "Small-Medium sized enterprise" as per Article 1, letter w-quater 1) of Legs. Decree No. 58 of 1998), represented by shares with voting rights, according to the shareholders' register, supplemented by the communications received in accordance with Article 120 of Legislative Decree No. 58 of 1998 and other information held by the company, is as follows:
| Shareholder | Holding |
|---|---|
| Marco Daniele Boglione (*) | 33.639% |
| BasicNet S.p.A. | 11.486% |
| Francesco Boglione | 6.275% |
| Kairos Partners SGR S.p.A. | 5.531% |
(*) held indirectly through BasicWorld S.r.l. for 33.128% and for the residual 0.511% directly.
The BasicNet Group is subject to a variety of strategic, market and financial risks, as well as general business operational risks.
These risks arise from factors that may comprise the value of the trademarks that the Group implements through its Business System. The Group requires the capacity to identify new business opportunities and markets and appropriate licensees for each market. The Group monitors the activities of its licensees and detects any problems on-line in the management of the brands in the various regions.
However, as the commercial license contracts usually establish the advance payment of guaranteed minimum royalties, economic conditions on certain markets may impact the financial capacity of certain licensees, temporarily reducing royalties, particularly where such licensees had previously exceeded the guaranteed minimums.
The Group retains that its Business System has the flexibility needed to swiftly respond to changes in customers' tastes and to limited and localised consumer slowdown. However, the Group may be exposed to economic crisis and social and general unrest, which may impact on consumer trends and the general economic outlook.
The adoption of a licensee network system has enabled the Group brands to expand and quickly enter new markets. The Group monitors the activities of its licensees and detects any problems on-line in the management of the brands in the various regions. The most important factor of the system is therefore to guarantee the capacity to identify new business opportunities and markets and appropriate licensees for each market. The main risk is therefore the undertaking of licensees not equipped for the task and the particular local market.
The Group has adopted specific measures to assess licensees and for the drawing up of contracts to offset this risk, including:
The Group in addition in 2012 put in place the ".com"" BasicAudit for the control, verification and analysis of licensee operational compliance, identifying any discrepancies in their operations, developing contractual clauses requiring the annual preparation of certified statements by the International Auditing Firm to certify the data sent to the Group, and carrying out specific controls at licensee offices.
BasicNet carries out extensive selection and monitoring activities on the Sourcing Centers i.e. licensee businesses managing the production flows of Group brand finished products, which are distributed by the commercial licensees within their respective areas and has developed an IT platform which directly connects the productive and commercial licensees.
The theoretical risks identified with regards to the Sourcing Centers are:
BasicNet has put in place specific operating mechanisms to correctly manage these risks, including:
The Group is exposed to currency risk on merchandise purchases or royalty income from commercial licensees and sourcing centre commissions not within the Eurozone. These transactions are mainly in US Dollars and marginally in UK Sterling and Japanese Yen.
The risks on fluctuations of the US Dollar on purchases are measured, preliminary, in the preparation of the budgets and finished products price lists, so as to adequately cover the impact of these fluctuations on sales margins.
Subsequently, royalty income and sourcing commissions from sales are utilised to cover purchases in foreign currencies, within the normal activities of the Group centralised treasury management.
For the foreign currency purchases not covered by foreign currency receipts, or in the case of significant time differences between receipts and payments, forward purchase and sales contracts (flexi-term) are underwritten.
The Group does not undertake derivative financial instruments for speculative purposes.
Royalty trade receivables are largely secured by bank guarantees, corporate sureties, letters of credit, guarantee deposits, or advance payment, provided by licensees.
Royalty trade receivables are largely secured by bank guarantees, corporate sureties, letters of credit, guarantee deposits, or advance payment, provided by licensees.
Souring commission receivables are covered by the payables of the subsidiary company BasicItalia S.p.A. to the sourcing centres.
Receivables from Italian footwear and apparel retailers within the subsidiary BasicItalia S.p.A. are monitored continually by the credit department of the company alongside specialised legal recovery firms and regional credit bodies throughout the country, commencing from the customer order. Receivables from the brand stores under franchises are paid weekly, related to their sales and do not present substantial insolvency risks.
The sector in which the Group operates is exposed to seasonal factors, which impact upon the timing of goods procurement compared to sales, in particular where the products are acquired on markets with favourable production costs and where the lead times are however much longer. These seasonal factors also impact upon the Group's financial cycle of the commercial operations on the domestic market.
Short-term debt to finance working capital needs comprises "import financing" and "self-liquidating bank advances" secured by the order backlog. The Group manages the liquidity risk through close control on operating working capital with specific attention on inventories, receivables, trade payables and treasury management, with real-time operational reporting indicators or, for some information, at least on a monthly basis, reporting to Senior Management.
The interest fluctuation risks of some medium-term loans were hedged with conversion of the variable rate into fixed rates (swaps).
The Group may be involved in legal and tax disputes, concerning specific issues and in various jurisdictions. Considering the uncertainties relating to these issues, it is difficult to predict with precision any future payments required. In addition, the Group has instigated legal action for the protection of its Trademarks, and of its products, against counterfeit products. The cases and disputes against the Group often derive from complex legal issues, which are often subject to varying degrees of uncertainty, including the facts and circumstances relating to each case, jurisprudence and different applicable laws.
In the normal course of business, management consults with its legal consultants and experts in fiscal matters. The Group accrues a liability against disputes when it considers it is probable that there will be a financial payment made and when the amount of the losses arising can be reasonably estimated. The main disputes in which the Group is involved are summarised below.
At December 31, 2018, the following disputes between BasicItalia S.p.A., AS Roma S.p.A. and Soccer S.a.s. di Brand Management S.r.l. were pending before the Rome Court: following the unilateral termination of the technical sponsorship contract at the end of 2012, which essentially concerned the reciprocal request for image damages following the rescission, in addition to the payment of miscellaneous and other mutual amounts under the contract.
Following the negotiations in November and December 2018 to reach an amicable settlement regarding the pending cases, on January 8, 2019, BasicItalia, AS Roma and Soccer S.a.S. signed a settlement stipulating the renouncement of the cases brought regarding mutual demands on image rights, the balance of Soccer S.a.s. for prior unpaid supplies of approx. Euro 1.6 million and the payment in settlement of Euro 1.5 million by AS Roma to BasicItalia. An agreement has not yet been reached on the mutual claims on the last sponsorship instalment, subsequent to the rescission date and of a similar amount of damages from early rescission, claimed by BasicItalia and as covered by the contract.
The effects of the settlement agreement accrue to financial year 2019 and shall be included in the relative financial statements. An initial tranche of the consideration agreed above was received on signing the agreement.
Subsequent liabilities are not expected to arise for the BasicNet Group regarding the dispute in terms of that not yet agreed.
The dispute with the Chinese company Taizhou Boyang, owner of the K-WAY brand in China, is in progress.
The dispute has arisen on two fronts: one by which BasicNet S.p.A. is defending before the Chinese authorities the validity of its K-WAY registration for weather-proof clothing items, subject to a non-use cancellation request heard at the second level of judgment, and the right to sell in China K-WAY brand weather-proof clothing items, in addition to its right to produce all clothing items (weather-proof and nonweather-proof) in China and export to countries where K-WAY brands are registered, as in 2018 Taizhou Boyang began proceedings against a number of Sourcing Centers and against BasicNet regarding its Chinese registrations.
On the other, BasicNet S.p.A. took a series of actions in 2018 against Taizhou Boyang before the Chinese authorities to obtain discontinuation of the use of any K-WEY and K-WAY brands, a declaration of bad faith, in addition to the cancellation of the K-WEY and K-WAY brand registrations, previously registered by Taizhou Boyang for non-weather-proof clothing and footwear.
In the initial months of 2018, a tax dispute with the Tax Agency began, following the inspection by the Finance Police for the years 2012 to 2017. In the tax assessment, the Agency alleges the partial nondeductibility of the Post-employment benefit provision accrual made for the Executive Boards for the years 2012 to 2014, on the basis of an interpretation of the rules governing Post-employment benefits for employees, in the total absence of specific tax rules. The Tax Agency is claiming approx. Euro 360 thousand for IRES, in addition to penalties and interest. Not agreeing with the Tax Agency's interpretation and noting also favourable jurisprudence in similar cases, the company presented an appeal for all of the years subject to assessment.
On December 28, 2018, a tax assessment was received from the Tax Agency by the subsidiary Basic Properties America, Inc., with registered office in New York - USA, following checks on BasicNet by the Finance Police in 2017, on the basis of the alleged tax inversion claimed by the latter against the US subsidiary. The assessments concern financial years 2011, 2012 and 2013, alleging tax evasion in Italy for approx. Euro 3.6 million, in addition to interest and penalties. Tax assessments were also received by BasicTrademark S.A. and SupergaTrademark S.A. for the alleged evasion of VAT for approx. Euro 1 million, on the basis that the royalties paid by Basic Properties America, Inc., for tax purposes considered an Italian company, to these two companies should have been subject to VAT.
The Group does not consider the arguments in support of that advanced by the Tax Agency as founded, considering, among the technical arguments, that the recent judgment of the Court of Cassation of December 21, 2018 clearly established that for the bringing of a case of tax inversion it is necessary that the corporate vehicle is purely artificial, an argument which is not sustainable with regards to Basic Properties America, Inc. In effect, the company was acquired by the Group in 1997 and has operated as a commercial company in the United States for a number of years and operates on the American continent with its own structure, suitable for the undertaking of sub-licensing activities and subject to tax in the United States, which is not a low-taxation country. All measures necessary to resolve the dispute are being considered with our tax consultants, considering those most appropriate for the company.
Human resources and the environment are explored in specific sections of the Consolidated non-financial report as per Legislative Decree 254/2016, respectively at paragraphs 3 and 4, to which reference should be made.
Under the treasury share buy-back programme, authorised by the Shareholders' AGM of April 24, 2018 and concluding at the date of the Shareholders' AGM for the approval of the 2018 Annual Accounts, at the date of this report 629,843 treasury shares had been acquired (1.032% of the Share Capital). BasicNet today holds a total of 7,005,822 treasury shares (11.486% of the Share Capital), for a total investment of Euro 18 million. The Company intends to continue the share buy-back programme in 2019 and proposes to the Shareholders' Meeting to renew the authorisation. The proposal is submitted in order to provide the Company with an instrument to assist projects developed upon the strategic guidelines under which share swap opportunities are presented or as a guarantee for financing operations.
At the date of the present Report there are no stock option plans.
The Board of Directors of BasicNet decided on 19/12/2012, in accordance with Consob motion No. 18079 of January 20, 2012, to apply the opt-out as per Article 70, paragraphs 8 and 71, paragraph 1-bis of the Issuers' Regulation, applying therefore the exception from publication of the required disclosure documents concerning significant merger, spin-off, share capital increase through conferment of assets in kind, acquisition, and sales operations.
The shares held by the Directors and Statutory Auditors are reported in the Remuneration Report, available together with the documentation for the 2019 Shareholders' AGM on the website www.basicnet.com, to which reference should be made.
The transactions with related parties are not atypical or unusual and form part of the ordinary business activities of the companies of the Group. These transactions were at normal market conditions.
The information on transactions with related parties are presented in Note 39 of the financial statements.
The operations between Group companies, which substantially involve the purchase of goods and provision of services, under normal market conditions, are not of an atypical or unusual nature, but within the normal business activities of the companies of the Group and are eliminated on consolidation.
The effects deriving from transactions between BasicNet S.p.A. and its subsidiaries are reported in the financial statements of the Parent Company and in the explanatory notes to the financial statements.
The Italian Group companies took part in the tax consolidation of BasicNet S.p.A. as per Articles 117 and subsequent of the Income Tax Law - Pres. Decree December 22, 1986 No. 917.
On October 29, 2010, the Board of Directors approved the related parties transactions procedure, which was updated in October 2016 and is summarised in the Corporate Governance and Ownership Report. The procedure is also available in its full version on the Group website (www.basicnet.com in the section "BasicNet Corporate Governance").
In accordance with Article 15 of the Markets' Regulation, the company and its subsidiaries utilise administrative-accounting systems which enable the provision to the public of the financial statements used for the purposes of the preparation of the consolidated financial statements of the companies falling within the scope of this regulation and permit management and the auditors of the Parent Company to access the data necessary for preparation of the consolidated financial statements.
The conditions of the above-stated Article 16, letters a), b) and c) of the Markets' Regulation issued by Consob are therefore complied with.
The composition of the Board of Directors of the companies is available on the website www.basicnet.com/ilgruppo/organisociali.
In keeping with its economic goals and its responsibility to its stakeholders, the Group regards research and innovation as key to its growth and success.
The Group's research and development activity focuses on three main fields of inquiry:
These fields of inquiry – the pursuit of which involves most internal personnel – translate into three main types of research and development activities:
This category includes product research aimed at developing collections of athletic and casual apparel and footwear, from material research to the styling and graphical design of garments, the identification of specific production techniques and the creation of garment prototypes and samples. BasicNet develops models and designs for all of the Group's brands with the goal of marketing products that provide high added value and are strongly appreciated by consumers for their aesthetic qualities, such as their colour, materials and shape. Designs and models are validated through prototyping (in some cases involving the use of 3D printers), which allows designs to be shared with licensees and Sourcing Centers, often – and most importantly – before actual production begins. In particular, concepts are created, basic designs are prepared and prototypes are produced for all unique, individual designs and models. Early designs form a "metacollection" which then becomes a "mega-collection" (a set of approved articles) on the basis of feedback from the various licensees. Mega-collections are sold to various distributors over the Web. Product research costs are expensed in the year in which they generate revenues from sales, or royalties from the relative collections.
This category includes IT research in terms of electronic data processing and transmission systems through the internet platform interconnecting Network licensees and externally, to develop all the opportunities arising concerning new technologies to speed up data transfer and therefore business efficiency.
The software and mobile applications developed fall into three major categories by intended use:
This type of software is generally used in specific functional areas to carry out activities such as selecting, negotiating and entering into licence agreements, managing the procurement of goods and services, managing e-commerce sales, managing all administrative activities, managing workplace health and safety obligations, managing cash flows, preparing and reviewing budgets for management, managing institutional and commercial communication, carrying out sponsorship activities and activities involved in designing new collections and making them available to network member companies.
This category includes research regarding communication and marketing, i.e. the means that licensees use to inform end users of their products and what sets them apart from the competition or the state of the art, as well as to advertise their products and brands. Communication and marketing contribute to brand value and drive sales by increasing brand visibility, supporting positive views or perceptions of brands and increasing customer loyalty. It follows that in order for a brand to grow in the long term, marketing must be appropriately organized so as to satisfy the needs of an increasingly large audience and to take account of multiple objectives. BasicNet S.p.A. is responsible for setting the Group's commercial strategy and managing the proper combination of distribution and development channels for the e-commerce platform to meet the needs of third parties in all segments of the market. Local licensees are responsible for carrying out marketing activities in accordance with the Group's guidelines. The activity performed by BasicNet S.p.A. in this regard is thus attributable to the following communication channels: promotion of sales, public relations, advertising and interactive marketing.
Research and development are performed by a team of approximately 75 members.
In conducting business, the BasicNet Group is committed to ensuring ethical, transparent relations with all of its stakeholders, and with its shareholders, employees and business partners in particular. Development of BasicNet's business is centered on compliance with laws and regulations, combating bribery and corruption, ethical values and respect for human rights. The following Corporate Governance and Ownership Structure Report and Consolidated Non-Financial Report are key to ensuring transparency and responsibility towards all of the Group's stakeholders.
At the beginning of January 2019, a settlement was reached between AS Roma S.p.A. and Soccer S.a.s. di Brand Management S.r.l., in closure of some of the disputes in progress. The effects are described in the previous paragraph "Risks relating to legal and tax disputes".
Also in January 2019, the company BasicAir S.r.l was incorporated, entirely held by BasicNet S.p.A.. The company thereafter acquired a used Cessna Citation VII aircraft, for an amount of Euro 1.2 million, in addition to purchase and recondition charges.
The acquisition of this asset is strategic for the Group in consideration of current development opportunities, boosted by the recent acquisition of the French licensee, the Kappa Europe project and the targeting of European Group store openings over the coming 5 years. Quick and easy travel in Europe may in fact create an extraordinary development opportunity for BasicNet in terms of business development for the main brands on the broader European market, the strategic development of the direct distribution of BasicItalia S.p.A., with the extension also to Europe of plug@sell operations, and also for the corporate integration of the new recently acquired French Group based in Nantes.
At the end of January, the acquisition was completed by BasicItalia S.p.A. of 41% of the company Sport Finance SAS, based in Nantes - France and parent company of a Group of Kappa licensees in the territories of France, UK, Switzerland, Spain and Portugal. The shares were purchased for consideration of Euro 2.1 million, paid to a number of French financial institutions holding the shares. A share capital increase reserved to BasicItalia S.p.A. was thereafter subscribed for up to 61% of the share capital, for a total value of Euro 2.8 million, settled through the conversion of receivables held by the BasicNet Group for royalties, transferred to BasicItalia and therefore for an overall investment of Euro 4.9 million. The minority shareholding, amounting to 9,463 shares out of 24,264, for 39% of the post-increase share capital, is held by the founder of Sport Finance who will continue to act as chairman and chief financial officer.
BasicItalia S.p.A., with the support of BasicNet S.p.A.'s patronage letter, guarantees the repayment by June 30, 2019 of the convertible bonds issued by ex Sport Finance and subscribed by the institutions selling the shares, with new funding, for approx. Euro 2.3 million, through a direct loan or one obtained from the banks.
In 2018, the Sport Finance Group returned Kappa® brand revenues of over Euro 60 million. The management under license of other brands not owned by the BasicNet Group and not conflicting with the Kappa brand, resulted in the delivery of overall revenues of approx. Euro 74 million.
The transaction marks the start of the strategic campaign to strengthen the Group licensees, with the objective of creating Kappa Europe: a new licensee which will be the model for other licensees, as "Powered by BasicNet" and operating on Kappa's main and largest market, i.e. Europe. Sport Finance was therefore renamed Kappa Europe SAS.
The set of agreements signed for the acquisition with the current minority shareholders also stipulate a lockup period on the corporate structure until July 31, 2024, except for the exercise of the put and call options. These options shall be exercisable during two windows in 2021 and 2024, at variable prices, on the achievement of the pre-fixed objectives based on normal economic-financial indicators, and which may be settled in cash or through parent company shares. The relative liability shall be valued for the purposes of preparing the 2019 half-year financial statements and recognised thereto.
In general, Group operating results are expected to be strong in the first half of the year based on the order book and expected royalties and sourcing commissions.
This forecast is subject to the general market performance, which is shrouded by a degree of economic and political uncertainty, as reflected in consumption figures and by currency price fluctuations.
The strategic development projects of the Group are bolstered by the recent acquisition by BasicItalia of control of the Sport Finance Group, now Kappa Europe, exclusive licensee of BasicNet for the Kappa® and Robe di Kappa® brands in France, Portugal, Spain, Morocco, Switzerland, Belgium and the United Kingdom. "Powered by BasicNet" will drive the speed and reliability of the new entities' operations, leveraging on a highly competitive window for the Kappa® and Robe di Kappa® brands. The major development of the brands on the main markets will also continue.
* * *
Dear Shareholders,
in the presentation for the approval of the Shareholders' Meeting for the 2018 Financial Statements and the relative Directors' Report we propose the allocation of the net profit of Euro 12,954,413.75 as follows:
| - | to the Legal reserve | Euro | 647,720.69 |
|---|---|---|---|
| - | to each of the 53,987,780 ordinary shares in circulation (excluding the 7,005,822 treasury shares held at March 8, 2019), a dividend of Euro 0.12 before withholding taxes for an amount of |
Euro | 6,478,533.60 |
| - | to retained earnings the residual amount, equal to | Euro | 5,828,159.46 |
The dividend will be paid from May 22, 2019, with record date of May 21, 2019 and coupon date (No. 12) of May 20, 2019.
We also propose that, if at the dividend coupon date the number of shares with dividend rights is lower than indicated above due to any share buy-backs by the company, the relative dividend will be allocated to retained earnings, as will any rounding made on payment.
We propose therefore the following:
the Shareholders' AGM of BasicNet S.p.A., having reviewed the 2018 results, the Directors' Report and having noted the Board of Statutory Auditors' Report and that of the Independent Audit Firm EY S.p.A.,
to approve the Directors' Report and the Financial Statements at December 31, 2018, in relation to each individual part and in its entirety, in addition to the proposal for the allocation of the Net Profit of Euro 12,954,413.75 and the dividend proposal.
Turin, March 8, 2019
Marco Daniele Boglione
The Corporate Governance and Share Ownership Report, hereafter summarised, is available in its full version on the Group website (www.basicnet.com in the section "Corporate Governance BasicNet).
The Governance of BasicNet S.p.A. is represented by the Shareholders' AGM, the Board of Directors and the Board of Statutory Auditors.
The Shareholders' Meetings represent all of the Shareholders who resolve, in ordinary and extraordinary session, on the matters required by law and by the Company By-Laws.
The Board of Directors was appointed by the Shareholders' AGM of April 28, 2016. The Board of Directors, at the meeting held subsequent to the Shareholders' AGM, set up internally the Control and Risks Committee and the Remuneration Committee.
The financial statements are audited by an audit firm in accordance with the provisions of law.
For introductive Paragraph 1. please refer to the full Corporate Governance and Ownership Structure Report available on Group website www.basicnet.com.
a) Share capital structure (as per Article 123-bis, paragraph 1, letter a), CFA)
The Share capital, fully subscribed and paid-in, amounts to Euro 31,716,673.04 and is comprised of 60,993,602 ordinary shares with a value of Euro 0.52 each.
At the date of the present Report, the Company holds 7,005,822 treasury shares, equal to 11.486% of the share capital.
The Company has not issued other financial instruments that attribute the right to subscribe to new share issues.
No share-based incentive plans have been introduced which would resulted in an increase, including through scrip issues, of the share capital.
b) Restriction on the transfer of shares (as per article 123-bis, paragraph 1, letter b), CFA)
At the date of the present Report, there are no restrictions on the transfer of shares.
c) Significant holdings (as per article 123-bis, paragraph 1, letter c), CFA)
With reference to Article 1, letter w-quater 1) of the CFA1 , BasicNet qualifies as a "Small- Mediumsize enterprise" (SME). The significance threshold is 5% of the share capital with voting rights. The list of parties holding, directly or indirectly, more than 5% of the share capital according to the shareholders' register, supplemented by the communications received in accordance with Article 120 of Legislative Decree No. 58 of 1998 and other information held by the company, is as follows:
1 Article 1 CFA w-quater.1) "SME": subject to that established by other legal provisions, small-medium-size enterprises, issuers of listed shares, whose revenues also before admission to trading, are under Euro 300 million, or who have a market capitalisation of under Euro 500 million. Listed issuers who have exceeded both these thresholds for three consecutive years are not considered SME's. Consob regularly issues the enacting provisions of this letter, including the disclosure means which issuers are required to comply with in relation to the acquisition or loss of SME's status. Consob, on the basis of information provided by issuers, publishes the list of SME's on its website.
| Shareholder | % of ordinary & voting share capital |
Note |
|---|---|---|
| Marco Boglione | 33.639% | Held indirectly through BasicWorld S.r.l. for 33.128% and for the residual 0.511% directly. |
| BasicNet S.p.A. | 11.486% | Treasury shares in portfolio. |
| Francesco Boglione | 6.275% | Held indirectly thorugh Francesco Boglione S.r.l. for 1.719%, with the residual 4.566% held directly. |
| Kairos Partners SGR S.p.A. | 5.531% | |
d) Shares which confer special rights (as per Article 123-bis, paragraph 1, letter d), CFA) There are no securities which confer special control rights.
e) Employee participation rights: method of exercise of voting rights (as per Article 123-bis, paragraph 1, letter e), CFA)
There is no share participation programme for employees.
f) Voting restrictions (as per article 123-bis, paragraph 1, letter f), CFA)
There are no restrictions on voting rights. The issuer has exclusively issued ordinary shares; each share provides one vote (Article 6 of the By-Laws). Article 21 of the By-Laws excludes the right to withdrawal with regards to motions concerning the extension of the company's duration or the introduction or the removal of restrictions on the circulation of equities.
g) Shareholder agreements (as per article 123-bis, paragraph 1, letter g), CFA)
At the date of the present Report, there are no agreements between Shareholders.
h) Change of control clause (as per Article 123-bis, paragraph 1, letter h), of the CFA) and statutory provisions on public purchase offers (as per Articles 104, paragraph 1-ter and 104-bis, paragraph 1)
The contractual conditions of the loans in place at the date of the present Report include typical clauses for such loans, such as the maintenance of some conditions concerning the holding of the majority shareholder of the Company.
Statutory provisions in relation to Takeovers
The Extraordinary Shareholders' Meeting of April 29, 2011 approved, among other matters, the change to Article 16 of the Company By-Laws - Powers of the Board of Directors and legal representation – in order to recognise to the Board of Directors the right to undertake, at any moment and without prior authorisation of the Shareholders' Meeting, defensive measures in the case of public offers or exchanges, pursuant to Article 104 of the CFA, as amended by Article 1 of Legislative Decree No. 146 of September 25, 2009. In particular Article 16 includes two paragraphs as follows:
The Board of Directors do not have powers to increase the Share Capital pursuant to Article 2443 of the Civil Code.
• Authorisation of share buy-back plan
The Shareholders' AGM of April 24, 2018 approved, for a period of twelve months, or until the next Shareholders' AGM to approve the 2018 Annual Accounts, the authorisation to purchase and utilise a maximum number of shares, which taking into account those already held by the Company, does not exceed the limits permitted by law, for a maximum expected financial commitment of Euro 3.5 million. Based on this authorisation the Company, at the date of the Report, had acquired 629,843 shares, equal to 1.032% of the Share Capital. BasicNet today holds a total of 7,005,822 treasury shares (11.486% of the Share Capital), for a total investment of Euro 18 million.
l) Direction and co-ordination activities (as per Article 2497 and subs. of the Civil Code)
BasicNet S.p.A. is not subject to management and coordination pursuant to Article 2497 and thereafter of the Civil Code and has full authority to implement its general and operating strategies.
BasicNet S.p.A. considers that it is not subject to the management and co-ordination of BasicWorld S.r.l., a company which holds 33.128% of the share capital, as the holding company has significant investments in other companies, also with reference to Article 16 of the Consob Markets' Regulation:
Pursuant to Article 2497-bis of the Civil Code the directly and indirectly held Italian Group subsidiaries have identified BasicNet S.p.A. as the party which exercises management and coordination of their activities. This activity involves oversight of the general strategic directives and in the definition and amendment of the Internal Governance and Control model, and the sharing of the Ethics Code adopted at Group level. In addition, the coordination involves the central management within BasicNet S.p.A. of the Treasury, personnel, corporate affairs, operating control and Information Technology services.
These activities permit both economies scale and adequate coordination and operational control.
It is noted that:
The Corporate Governance system adopted by BasicNet S.p.A. incorporates the rules and procedures within the Company's By-Laws and provisions of law, which outlines the system of management and control of the Company and of the Group.
This is mainly based on the principles and recommendations contained in the Self-Governance Code of listed companies issued by Borsa Italiana, available on the website Borsa Italiana website (http://www.borsaitaliana.it/comitato-corporate-governance/homepage/homepage.htm).
The Annual Report, which is published on the website www.basicnet.com/contenuti/corporate/corporategovernance.asp illustrates the Governance structure of the Group, as well as the level of compliance of the corporate governance system with the recommendations of the Self-Governance Code issued by Borsa Italiana S.p.A..
In line with Recommendation EU No. 208/2014 and paragraph IV of the "Guidelines and transitory system" of the Self-Governance Code provides facts and explanations, where any application principles or criteria were unexpected.
BasicNet S.p.A., nor its strategic subsidiaries, are subject to laws in force outside Italy which affect the corporate governance structure.
The norms applied in the appointment and replacement of the Directors are in line with legislative and regulatory provisions and Article 13 of the Company By-Laws, in relation to which reference should be made to the company's website www.basicnet.com/contenuti/gruppo/statuto.asp
The Company is administered by a Board of Directors, made up of between five and fifteen members, including non-shareholders. The Shareholders' Meeting, before their appointment, establishes the number of members of the Board of Directors and the duration of office in accordance with that permitted by law.
The procedure for appointment as per Article 13 provides:
that the minority shareholders that either alone, or together with other shareholders, holding voting rights not lower than that required by current regulations, will be reserved the appointment of one Director. For 2018, as in previous years, this percentage was 4.5% (Consob Resolution No. 3 of January 24, 2019);
that the procedure for electing the Directors shall be as follows: i) from the slate which obtained the highest number of votes, based on the progressive order with which they are listed in the slate, all the members necessary are elected to fill the number of Directors established for the Shareholders' Meeting, while ensuring the gender balance provisions are complied with, except 1; ii) from the slate which obtained in the Shareholders' Meeting the second highest number of votes one member is elected of the Board of Directors as the first candidate on this slate;
Should one or more vacancies occur on the Board, Article 2386 of the Civil Code shall be applied, as follows:
The Board of Directors, in view of the ownership structure and the allocation of duties, decided not to adopt succession plans for any replacement of the Executive Directors, not considering it necessary to identify parties or criteria for their selection in advance of the need to replace an executive director.
The mandate of the Board of Directors currently in office, appointed by the Shareholders' AGM of April 28, 2016, will conclude at the Shareholders' AGM called to approve the 2018 Annual Accounts, and comprises twelve members, as indicated in the following table:
| Members | Office | Slate M/m (*) |
Years of service since first appointment (**) |
No. Appointments (***) |
|---|---|---|---|---|
| Marco Boglione |
Chairman | M | 1999 | |
| Daniela Ovazza | Non-executive Vice Chairman Member of the Remuneration Committee |
M | 1999 | 2 |
| Giovanni Crespi | Chief Executive Officer | M | 2007 | -- |
| Paola Bruschi | Director | M | 2007 | -- |
| Paolo Cafasso | Director | M | 1999 | -- |
| Elisa Corghi | Independent and non executive director Member of the Remuneration Committee and of the Control and Risks Committee |
m | 2016 | 3 |
| Alessandro Gabetti | Non-Executive Director | M | 2010 | 2 |
| Renate Hendlmeier | Independent and non executive director Chairman of the Control and Risks Committee and member of the Remuneration Committee |
M | 2015 | -- |
| Adriano Marconetto | Independent and non executive director Member of the Remuneration Committee and of the Control and Risks Committee |
M | 2007 | -- |
| Carlo Pavesio | Non-Executive Director Chairman of the Remuneration Committee |
M | 1999 | 5 |
| Elisabetta Rolando |
Director | M | 2013 | -- |
| Franco Spalla | Director | M | 2001 | 2 |
* In this column M/m is indicated according to whether the director was elected by the majority (M) or minority (m) slate. Quorum for the presentation of slates 4.5%.
(**) This column indicates the date of first appointment of directors since the company's listing (November 17, 1999).
BasicNet S.p.A. – Consolidated & Separate Financial Statements at December 31, 2018
(***) This column indicates the number of offices a Director or Statutory Auditor holds in other companies listed on regulated markets, including foreign markets, in holding, banking, insurance or large enterprises (other than those with BasicNet Group companies).
The curriculum vitaes of the Directors in office are also available on the website of the company at www.basicnet.com/contenuti/gruppo/organisocialisocieta.asp.
The Board of Directors, in its current composition, complies with the "gender quota" rules under Law No. 120 of July 12, 2011 and Article 144-undecies 1 of the Issuers' Regulation.
The Board of Directors of BasicNet at the meeting of November 13, 2018 established that:
Female members of the Board of Directors currently occupy 33% of the total seats. In terms of age, 8% of members are between 30 and 50 years of age, while 92% of members are over 50 years of age.
The Issuer has not adopted any measures to promote equal treatment and gender equality within the corporate boards. In reality, discrimination does not exist within the Group: out of 596 employees, 395 are females and of 29 executives, 10 are females.
The Board of Directors does not consider it necessary to limit the maximum number of offices which each Director may hold, also in view of the consistently high participation of all members at meetings of the Board of Directors.
The Directors, in practice, have the facility to participate in meetings subsequent to their appointment and during their mandate with the Chairman and Management, in order to remain updated on corporate affairs and relevant changes. They also continually have access to financial and operational information from the BasicManagement portal.
The Board in 2018 met seven times, with meetings lasting on average two and a half hours and with full attendance on all occasions of the Board.
In January 2019, the company published its financial calendar which established the days for the five Board meetings for 2019, for the review of the preliminary results, the approval of the 2018 separate and consolidated financial statements, the approval of the half-year report and the review of the quarterly disclosure to the market. As established by Article 82 ter of the Issuers' Regulation, BasicNet will continue to publish the quarterly results on a voluntary basis, until any differing assessment. The quarterly results communicated to the market shall comprise a summary of the commercial performance and a presentation of the key commercial indicators (compared with those for the same period of the previous year). The Quarterly disclosure shall be published in a press release to be issued on conclusion of the Board of Directors' meetings called to approve the above results.
The calendar is available on the website www.basicnet.com.
On January 29, the first meeting regarding the update of corporate affairs as per Article 150 of the CFA and Article 13 of the By-Laws was held.
The documentation concerning the matters under discussion is sent in advance to the Directors and Statutory Auditors. In accordance with the Code, the Board of Directors, considering the operating dynamics of the Company and the Group, identified the period of two days as appropriate for the sending of preliminary meeting material, except in the cases of urgency. In this case, the documentation is distributed at the latest during the meeting and sent by e-mail on its conclusion. The above-stated deadline was always complied with for Board meetings in 2018.
The Chairman ensures that the handling of each matter on the Agenda is allocated the necessary time to ensure constructive debate, considering debate among the Board as useful for the motions to be considered.
Executives of the company may participate at the Board meetings, on the invitation of the Chairman, where there is a need to provide guidance on the matters on the Agenda. In 2018, the Chief Executive Officer of BasicItalia and the Vice President Sales attended the two Board of Directors' meetings of BasicNet.
The Board is invested with the widest powers deemed appropriate in order to achieve the Company's aims and objectives, with the sole exception of those that are expressly reserved for the Shareholders' Meeting by law.
As recommended by the Self-Governance Code, the Board of Directors, among other matters:
b. verifies the mapping of the corporate risks and their control. This activity seeks to evaluate the risk in defining the development potential of the Group over the medium/long-term; in this regard, during the Board of Directors meetings, detailed disclosure is provided on the activities carried out and upon the major operations executed by BasicNet S.p.A. and the Group companies. The Board examines from time to time significant operations carried out by the Issuer or the subsidiaries, also when such are within the powers conferred to the Chairman or the Chief Executive Officer. The following significant operations are within the remit of the Board of Directors: the acquisition and/or sale of company shares, companies, business units or brands of a value greater than Euro 4 million, the signing of sponsorship contracts with an annual cost of greater than Euro 5 million, debt operations of a value greater than 60% of the consolidated net equity, the granting of any guarantees, obligatory or secured by patronage letters (with the exception of subsidiaries) greater than Euro 4 million. Article 16 of the By-Laws assigns to the Board of Directors the remit to consider, in accordance with Articles 2505 and 2505-bis of the Civil Code, the merger by incorporation of one or more companies in which all shares or in which at least 90% of all shares are held; the opening or closing of secondary offices; the indication of Directors with powers to represent the company; the amendment of the By-Laws in line with regulatory provisions; the reduction of the share capital in the case of shareholder withdrawal; the transfer of the registered office within the national territory. In addition, in accordance with the first paragraph of Article 2410 of the Civil Code, the Board of Directors may approve the issue of bonds;
c. evaluates the adequacy of the organisational, administration and accounting system of the Company and of its subsidiaries with strategic importance, which has been implemented by the Executive Directors with particular reference to the internal control and risk management system. In addition to the companies holding the brands, the strategic companies are BasicItalia S.p.A., which is the Italian licensee of the Group, and BasicRetail S.r.l., which manages the Group's retail operations. Continuity in the composition of the Board of Directors of the companies of the Group has facilitated, in fact, the functions of control, timely disclosure and coordination of instructions to the subsidiaries;
The Board of Directors at the meeting of March 8, 2019 considered the functioning of the Board and its Committees, in addition to its composition and size, taking account also of the professional qualifications, experience - also of a managerial nature - and the gender balance of its members, in addition to their years of services, as established by the Self-Governance Code.
In this regard, the Board considers that the choice of appropriate professionals to sit on the Board of Directors is the duty of the shareholders - both minority and majority - on the basis of the slates presented. In line with that outlined above, but in particular on the invitation of the Chair of the Board to each director, so that at any time they can present suggestions to improve the operation and function of the Board and its Committees with a view to ongoing improvement, the Board considered that its self-assessment, or the same activity assigned to an outsourcer, is a formal undertaking and not a substantial act, therefore deeming it unnecessary to carry out a specific activity.
The Board in addition examines, on a half-yearly basis, the report of the Control and Risks Committee illustrating the findings of their activities and controls and their opinion on the adequacy of the internal control system. The Board in addition examines, on a half-yearly basis, the report of the Control and Risks Committee illustrating the findings of their activities and controls and their opinion on the adequacy of the internal control system. At the meeting of March 8, 2019, the Board noted the substantially positive opinion of the Committee, also in view of the supplementation, development and coordination activities undertaken during 2017-2018 regarding the control system. At the same meeting the Board approved the audit plan for 2019 and confirmed the budget available to the Internal Control System.
The Shareholders' AGM of April 28, 2016, on the appointment of the Board, permitted the Directors elected not to be restricted by a non-competitive clause, as per Article 2390 of the Civil Code. The Directors are however requested, both on the acceptance of office and during the period of their office and thereafter, to report in a timely manner to the Board of Directors operating appointments in competing groups.
The Board of Directors at the meeting of April 28, 2016 reconfirmed Daniela Ovazza as the Vice Chairman of the Board of Directors and appointed as a new Vice Chairman Franco Spalla (leaving office with effect from October 31, 2017), and Giovanni Crespi as the Chief Executive Officer. The Chairman of the Board of Directors was appointed by the Shareholders' AGM held on the same date.
In accordance with Article 13 of the By-Laws, the Vice Chairman executes the role of Chairman in the case of the latter's absence.
The Board of Directors on April 28, 2016 granted management powers to the Chairman and the Chief Executive Officer, as outlined below:
At the same meeting, the Director Paolo Cafasso was conferred, as Group Finance Director, executive powers for the administrative and financial management of the Company.
At the date of the present Report there are no interlocking directorates.
The Board Meeting of April 28, 2016 noted that the accumulation of offices of Chairman and Executive Director of Marco Boglione was justified within the Corporate Governance practice of business continuity, in that he is the founder of the Group and has always been directly involved in the activities of the Company.
As already illustrated at point 2.C of the present Report, Mr. Marco Boglione holds 20,517,733 shares, equal to 33.639% of the share capital, of which 20,206,065 shares, equal to 33.128% of the share capital, indirectly through the wholly-owned subsidiary BasicWorld S.r.l. and, directly, 311,668 shares, equal to 0.511% of the share capital.
The Board of Directors did not set up an Executive Committee.
The Executive Boards reported to the Board and the Board of Statutory Auditors at their meetings, at least on a quarterly basis, with regards to the activities carried out in the exercise of their powers, on the general operating performance and the outlook and also on the most significant operations undertaken by the company and its subsidiaries.
In addition to the Chairman Marco Boglione, the Chief Executive Officer Giovanni Crespi, the Directors Paola Bruschi, Vice President Organization, Paolo Cafasso, Group Chief Financial Officer, Elisabetta Rolando, Executive Chairperson of the Board of Directors of the subsidiary BasicItalia S.p.A., Franco Spalla, Chief Executive Officer of Jesus Jeans S.r.l. and Chairman of BasicProperties B.V. are Executive Directors.
The Board of Directors includes three Independent Directors: Elisa Corghi, Renate Hendlmeier and Adriano Marconetto.
The Board of Directors on their respective appointment to office and in the Board meeting of March 8, 2019 assessed, on the basis of their declarations, the independence of the Directors Elisa Corghi, Renate Hendlmeier and Adriano Marconetto, both in relation to the requirements of Consob regulations and the criteria of the Self-Governance Code. With regards to the criteria at Article 3.C.1 letter e) of the Self-Governance Code, the Director Adriano Marconetto considered that his holding of the position since 2007 and therefore for more than nine years does not affect his independence. In relation to that outlined above, the Board confirms the continued independence of its members. In particular, the holding of office for more than nine years by Director Marconetto is not considered to create a conflict, while in fact consolidated knowledge of company operations, the support operations to the Board and the absence of specific relations with the company are considered as positive factors which underlie the capacity for independence and unconflicted judgment.
As stated in the report to the Shareholders' Meeting called for the approval of 2018 Annual Accounts, the Board of Statutory Auditors has verified the correct application of the criteria and procedures adopted by the Board of Directors to assess the independence of its members.
No specific meetings of the independent Directors are planned. However, they may meet independently where considered necessary or beneficial at the margins of the Control and Risks Committee meetings, of which they are all members.
The Self-Governance Code recommends the appointment of a lead independent director by the Board of Directors where the Chairman controls the Issuer or is the main executive in charge of operations.
The Board meeting of April 28, 2016 considered that the accumulation of offices of Chairman and Executive Director by Mr. Marco Boglione was justified in view of the need to ensure the strategic and operating continuity of the Group, as he is the Group's founder and has also always been directly involved in the company's operations. The Board also considers the information flows with nonexecutive directors and the Board of Statutory Auditors, overseen by the Chairman and the Chief Executive Officer, to be complete and timely and therefore does not require the appointment of a Lead Independent Director, considering that: (i) the Chairman is not the only executive in charge of company management, (ii) powers are also allocated to other members of the Board of Directors and (iii) the Chairman commits to open a constructive dialogue with the Independent Directors. The Control and Risks Committee, whose members are also all independent directors of BasicNet, reexamining the issue, considered that, and assessed that sufficient opportunities for communication and meeting exist for the independent directors and therefore the need to appoint a lead independent director as a contact point to coordinate and represent their requests and contributions was not necessary, given that the flows of communication with the Board of Directors and the Chairman of the Board of Directors should not change in substance following appointment. On this basis, it was decided not to appoint a lead independent director, preferring to maintain all of the current communication channels between the independent directors, the other directors and the statutory auditors and the Chairman of the Board of Directors open and active, recognising the importance of this exchange.
The Board approved the procedure for the handling of confidential information, subsequently updated with the regulations on Market Abuse. The policy was updated on February 9, 2018, incorporating the Guidelines upon the management of inside information published by Consob in October 2017.
This procedure contains the regulations for the internal management and external communication of confidential documents and insider information, for the management of delayed disclosure, in addition to the setting up and management, based on a specific IT procedure, of the Register for persons with access to insider information and a Register of persons possessing "relevant information".
Since April 1, 2016, the Internal Dealing Code has been applicable, updated in 2016 to incorporate new provisions of the Regulation of the European Parliament and Council of April 16, 2014 No. 596/2014. The Code governs the procedures for disclosure to the market on operations on BasicNet S.p.A. shares by "Significant Persons" of the Group, as identified by Article 144 and thereafter of the CFA.
The procedure is available on the website: www.basicnet.com/contenuti/gruppo/internaldealing.asp.
In 2018, an Internal Dealing communication was published concerning transactions carried out on the BasicNet share (concerning purchases made by the Chief Executive Officer Giovanni Crespi).
The Board meeting of April 28, 2016 appointed the Remuneration Committee and the Internal Control and Risk Committee. Since October 28, 2016, the Control and Risks Committee has also been the Related Party Transactions Committee.
The Board did not set up, as illustrated below, an Appointments Committee or other committees.
The Board of Directors on a number of occasions assessed the possibility of setting up an internal remuneration committee, also in view of the focus on the matter in the letter of December 2017 of the Chairperson of the Corporate Governance Committee. In line with evaluations made in the past, the Board of Directors did not consider it necessary to set up an Appointments Committee for the nomination of Directors, given that, in accordance with Article 13 of the Company By-Laws, the Directors are elected through a slate voting mechanism. In addition, the Board of Directors retain that the proposals to nominate candidates as Directors in the event of co-optation and succession planning of Executive Directors, fall within the remit of the entire Board of Directors and as such may be discussed and approved within the Board meetings.
Composition and Operation of the Remuneration Committee (as per Article 123-bis, paragraph 2, letter d) CFA)
At the Board meeting of April 28, 2016, the Board appointed the Remuneration Committee composed of the Non-Executive Directors Carlo Pavesio - Chairman, Daniela Ovazza and the Non-executive and independent directors Renate Hendlmeier and Adriano Marconetto.
At the meeting of February 15, 2017, the Board of Directors called the non-executive and independent Director Elisa Corghi to sit on the Committee.
The Chairman of the Committee, Carlo Pavesio, has knowledge and experience of remuneration policies, having held this position also in other companies.
The Board considers that the Committee adequately undertakes its duties.
The proposals of the Committee have always been approved by the Board of Statutory Auditors.
The Directors usually do not attend the meetings in which the proposals are presented to the Board relating to their remuneration.
The work of the Committee is usually recorded by the Chairman Carlo Pavesio, who provides information on the content of the discussions at the next appropriate Board meeting.
The Committee's duties include the presentation to the Board of proposals for the drawing up of a general policy for the remuneration of executive directors and senior executives, evaluating periodically, on the preparation of the annual remuneration report, the adequacy and the overall consistency and concrete application of the general policy adopted for the remuneration of Executive Directors and Senior Directors, referring in this latter regard to the information received from the Chief Executive Officer, monitoring the application of the decisions adopted by the Board itself, verifying in particular, where necessary, the effective achievement of the prefixed objectives.
The Committee has access to the information and departments necessary for the carrying out of its remit. In consideration of that stated above, as the Committee avails of company means and structures, specific resources were not assigned.
The Committee in 2018 met on two occasions to review the draft of the Remuneration Report to be presented to the Shareholders' Meeting and to recommended to the Board of Directors the provisioning, in the 2018 income statement, of an amount to be allocated as a bonus to the top management of the Group companies, on the basis of the 2018 result and in accordance with year-end forecasts, without significant differences. The Chairman of the Board of Statutory Auditors attends all meetings of the Committee.
For further information on the present section reference should be made to the significant parts of the Remuneration Report published pursuant to Article 123-ter of the CFA.
On March 8, 2019, the Board, with the favourable opinion of the Control and Risks Committee, as the Related Parties Committee, approved the BasicNet S.p.A. Remuneration Report available on the company website, together with the Shareholders' AGM documentation, at www.basicnet.com/contenuti/datifinanziari/assembleeazionisti.asp.
In summary, the Remuneration Policy adopted requires the Shareholders' Meeting to approve the annual remuneration of all Board members; the remuneration of the Directors holding specific offices and for the members of the Internal Committees of the Board is determined by the Board of Directors, pursuant to Article 2389 of the Civil Code, on the proposal of the Remuneration Committee and with the favourable opinion of the Board of Statutory Auditors.
For the Executive Directors, the remuneration policy of the Group to date has not provided for the fixing of performance objectives on which variable remuneration is based. Usually additional remuneration identified by the Board of Directors is granted, on the proposal of the Remuneration Committee and with the favourable opinion of the Board of Statutory Auditors. This amount is identified on approval of the preliminary results where advances for the key financial indicators are reported on the previous year. For these reasons, it was decided not to defer the variable part, nor undertake contractual agreements which enable the company to request the repayment, in full or in part, of the variable components of remuneration.
In addition to executive directors of BasicNet, in relation to new appointments assigned, two new strategic directors were identified in the person of the Vice President Sales and the Chief Executive Officer of BasicItalia S.p.A..
The Board establishes in addition the remuneration of the members of the Committees, of the Supervisory Board, of the Internal Auditor and of the Executive in charge in the preparation of corporate accounting documents; for these latter two positions, no incentive mechanisms are provided for.
No stock option plans have been established for Directors.
Indemnity of the directors in case of dismissal and termination of employment following a public purchase offer (as per Art. 123 bis, para. 1, letter i) of the CFA)
The disclosures required by Article 123-bis, paragraph 1, letter 1) ("the agreements between the company and directors – which provide for indemnity in the case of dismissal without just cause or in the case in which the employment services cease after a public offer") are contained in the remuneration report pursuant to Article 123-ter of the CFA, available on the company's website www.basicnet.com/contenuti/datifinanziari/assembleeazionisti.asp.
Composition and operation of the control and risks committee (as per Article 123-bis, paragraph 2, letter d) CFA)
The Control and Risks Committee was appointed at the Board meeting of April 28, 2016. The Committee is composed of three Independent Directors: Renate Hendlmeier – Chairperson, Elisa Corghi and Adriano Marconetto. On their appointment the Board considered that the members had adequate accounting and financial experience.
Duties attributed to the Internal Control and Risks Committee
The Committee proposes to the Board of Directors on the appointment, revocation and remuneration of the internal audit manager, as well as on the adequacy of the resources available for these duties.
In particular, the Committee supports the Board of Directors as follows:
in the case in which the Board becomes aware of prejudicial events, supports with appropriate preparatory activity the assessments and decisions of the Board of Directors concerning the management of such events.
The Committee met on five occasions in 2018 (on one occasion only as a Related Parties Committee), undertaking the following activities:
The Chairperson of the Board of Statutory Auditors, Maria Francesca Talamonti and, in relation to the matters considered, according to the attendances reported for each meeting in the minutes of the Committee meetings, the CFO and Executive Responsible for Financial Reporting of the Group, Paolo Cafasso, the Director in charge of the internal control and risk management system, in addition to the members of the Supervisory Board, Paola Bruschi, the Internal Auditing Manager and member of the Supervisory Board, Mario Sillano, the member of the Supervisory Board Giuliana Baronio, the partners and members of the companies appointed to audit the Group, attended the meetings of the Committee (all minuted), of an average duration of approx. two and a half hours. Four meetings were held jointly with the Board of Statutory Auditors.
The Control and Risks Committee is also the Related Party Transactions Committee. In this role, it reviewed the transactions with Studio Pavesio ed Associati and Studio Boidi & Partners.
In the carrying out of its duties, the Committee has full access to the information and to the relevant departments necessary. The budget assigned to the Committee and the Internal Control System was used to appoint outside consultants in order to update and review some processes regarding the Integrated controls system, also in support of Internal Audit activities.
The internal control and risk system involves the processes that monitor the efficiency of the company operations, the reliability of the information provided to the corporate boards and the market, compliance with legislation and regulations and the protection of the company's assets. It in addition contributes to conducting business activity in line with the objectives defined by the Board, supporting the undertaking of knowledgeable decisions.
The Board of Directors oversees the Internal Control and Risk Management system, defining the guidelines and periodically verifying the adequacy and effective functioning, ensuring that the principal corporate risks are identified and adequately managed.
The Board of Directors verifies that the risks to which BasicNet and its subsidiaries are exposed are correctly identified, managed and monitored in line with the Group's strategic objectives.
This activity, carried out with the support of the Director in charge of the Internal Control and Risk Management System and the Control and Risks Committee, seeks to evaluate the risk in defining the development potential of the Group. The Board has not established general numeric parameters to identify the nature and the level of risk compatible with the Group's strategic objectives, but from time to time reviews any significant operations carried out by the Issuer or the subsidiaries, also when such are within the scope of powers conferred to the Chairman or the Chief Executive Officer.
The Ethics Code, the Sourcing Center Ethics Code which includes social compliance principles and the organisational, management and control Model as per Legislative Decree 231/2001 and subsequent integrations, are an integral part of the internal control and risk management system. The rules of conduct contained in the model, continually evolving, integrate and strengthen the corporate control system through the preparation and continual updating of the related procedures.
The Internal Auditing department verifies the overall adequacy, efficiency and effectiveness of the internal control and risk management system, in particular, considering that some departments are centralised at the Parent Company, it contributes to the verification of the correctness and functioning of the reporting process with the strategic subsidiary companies, as well as the verification of the adequacy of the reporting system to ensure the quality of the reports of the various company departments.
In order to ensure oversight on the Group directives and strategies some Directors of BasicNet S.p.A. are also members of the Board of Directors of the subsidiaries.
The Group is in addition cognisant of the importance that correct operational information has for the market, investors and the community in general. For this reason, in view of the transparency required for conducting business, the Group considers transparency as an objective in relations with all stakeholders. In this regard, the Group communicates with the market and investors in compliance with the criteria of correctness, clarity and equal access to information. Also with shareholders, all outside communication of documents and information concerning the Group should be based on compliance with law and applicable regulations.
In terms of the assessment of the internal control and risk management system, the Board of Directors on March 8, 2019 considered that the system is substantially appropriate to oversee the typical business risks associated with the main operating activities.
Control and risk management system in relation to the financial reporting process (as per Article 123 bis, paragraph 2, letter b), of the CFA)
1) Introduction
The internal control and risk management system in relation to the financial reporting process (hereafter the System) is the set of overall rules and corporate procedures adopted by the various company departments to permit, through an adequate identification process of the principal risks related to the preparation and dissemination of financial information, the reaching of the corporate objectives of true and fair disclosure.
The System seeks to provide reasonable certainty that the financial reporting – including consolidated reporting - communicated to the public is reliable, fair, true and timely, providing the users with a true and fair representation of the operational facts, permitting the issue of the declarations required by law that they correspond to the documented results, accounting records and underlying accounting entries of the facts and of the communications of the company to the market and also relative interim financial reporting, as well as the adequacy and effective application of the administrative and accounting procedures during the period to which the accounting documents refer (Annual Accounts and Half-Year Report) and in accordance with applicable international accounting standards.
For the completion of the System, a risk assessment was undertaken in order to identify and evaluate the risk areas which could arise such as to compromise the achievement of the control objectives and the efficacy of disclosure provided by the corporate boards and to the market. The risk assessment also took into account the risk of fraud. The identification and evaluation process was undertaken with reference to the entire Company and at process level. Once the risks were identified an evaluation was undertaken, considering both qualitative and quantitative aspects and the identification of specific controls in order to reduce the risk related to the non-achievement of the objectives of the System to an acceptable level, both at Company and process level.
2) Description of the principal characteristics of the risk management and internal control system in place in relation to financial disclosure.
The System provides for:
The Executive Officer periodically reports to the Board of Statutory Auditors and the Control and Risks Committee on the adequacy, also in organisational terms, and on the reliability of the administrative-accounting system, on the activities carried out and on the efficacy of the internal control system with regards to financial reporting risks.
The Executive Director Paola Bruschi was appointed at the meeting of Aril 28, 2016 to oversee the Control and Risks Committee.
Within this role Paola Bruschi oversees the functioning of the internal control and risk management system, identifying the principal corporate risks (operational, financial and compliance), implementing the guidelines defined by the Board and supervises the planning, realisation and the management of the internal control and risk management system, constantly verifying the overall adequacy, efficiency and effectiveness, also with reference to the operating conditions and current legislative and regulatory requirements.
The responsibility to verify the overall adequacy, efficiency and effectiveness of the internal control and risk management System was assigned to the Internal Auditing department. In particular, considering that some departments are centralised at the Parent Company, this department contributes to the verification of the correctness and functioning of the reporting process with the strategic subsidiary companies, as well as to the verification of the adequacy of the reporting system to ensure the quality of the reports of the various company departments. On appointment, the Board also determined the remuneration for this office, considered in line with the structure of the Group.
The Internal Auditing manager, who does not report to any operating department, has access to all information considered necessary to carry out the role. The manager reports to the Control and Risks Committee, the Board of Statutory Auditors and the executive director responsible for the functioning of the internal control and risk management system, at the Committee meetings.
The control activity is principally concentrated on monitoring the principal profitability indicators of some Group companies, through an online reporting instrument on the company's portal. This report constitutes an important monitoring instrument in real-time of the accounting activities and business performance: the data is available for each Group company and analysed by individual account item.
Internal Audit assesses the adequacy of the IT systems and the reliability of information available in view of the complexity of the operating environment, the size and the territorial reach of the company and verifies the adequacy of the organisational processes adopted by the company for the physical, logistical and organisational security of the IT system. It also operates in support of other control system actors involved in the issues of compliance and risk management, in order to ensure compliance with law and to monitor the exposure level and vulnerability of the company to risks. The Internal Auditing function was awarded to an external company Progesa S.a.s. which has no corporate ties to the Group. The activities were outsourced as it was considered that the head of the company, who had already undertaken similar work within the Group, had the necessary attributes to undertake such work efficiently within the Group, on an independent and professional basis. The updating and review of some Integrated Control systems continued in 2018, also in support of Internal Audit activities.
As part of the Internal Control and Risk Management System, the parent company BasicNet and BasicItalia S.p.A. have adopted an "Organisation and management model as per Legislative Decree No. 231/2001" (hereafter also the "231 Model"), which is continually updated in line with the introduction of new offenses under the framework regulation.
The provisions of the Model complete the Group Ethics Code and the Conduct Code for the Sourcing Centers, which set out the rules and ethical responsibilities for the conducting of business and relations between the company and the various interest holders.
For the effective dissemination of the Ethics Code and of the organisation and control model these were published on the company's website www.basicnet.com/contenuti/corporate/codiceetico.asp and in the area dedicated to Group employee time-keeping.
In preparing the Model, account was taken of the existing and operating control systems and policies at the company and considered appropriate, in addition to the Ethics Code, as an integral part of the Model: the Internal Dealing Conduct Policy, the related party transactions policy. The model, continually evolving, integrates and strengthens the corporate control system through the preparation and continual updating of the related procedures. It also provides for a disciplinary system which appropriately sanctions non-compliance with the measures and principles contained in the above-stated documents.
The Board of Directors at the meeting of April 28, 2016 confirmed the members of the Supervisory Board. The Supervisory Board is tasked with overseeing the correct functioning of the Model and updates. The Supervisory Board reports on at least a half-yearly basis to the Control and Risks Committee and to the Board of Statutory Auditors. In 2018, the Supervisory Board met 4 times.
The Ethics Code is presented on a video to all new employees of the Group and to all consultants.
In 2018, 187 hours of training were provided with regards to the receipt and application of the Ethics Code, both through classroom and e-Learning platform training, for 678 participations in Italy (approx. 100% of the average workforce in 2018), of which 27 executives, 630 white-collar and 21 blue-collar employees.
The BasicNet Group Ethics Code was updated and approved, in its latest version, by the Board of Directors at the meeting of October 2017. The Code is designed to control the conduct of the addressees, identified as the members of the Boards of Directors and Boards of Statutory Auditors, in addition to all BasicNet Group personnel, collaborators and consultants, suppliers and all others acting in the name of and/or on behalf of the BasicNet Group. As reported in this document, the BasicNet Group, in pursuing its objectives, considers a number of conduct principles as critical, including:
The Group does not justify in any way the adoption of conduct conflicting with law and these principles. In this regard, the Supervisory Board oversees compliance with the Ethics Code, promptly reporting to the Control and Risks Committee and the Board of Directors any violations thereof. All stakeholders may report in writing and anonymously any violation or suspected violation of the Ethics Code to the Supervisory Board. Violation of the principles of the Code may result in sanctions.
For the effective dissemination of the Ethics Code and of the organisation and management model as per Leg. Decree 231/2001, these were published on the company's website www.basicnet.com/contenuti/corporate/codiceetico.asp in the area dedicated to Group employee timekeeping.
The Ethic Code of Conduct for Sourcing Centers is a document that establishes the minimum requirements for the working conditions that must be met by all Sourcing Centers selected by the BasicNet Group or by affiliated companies. The Group is committed to ensuring that each link in the production chain complies fully with the principles and conditions enunciated in the Ethic Code of Conduct. Accordingly, Sourcing Centers are always liable for full compliance with the Ethic Code of Conduct by their suppliers.
Through the Code, BasicNet encourages its business partners to adopt the highest international standards of ethics and best practices in business. Respect for human rights and international labour standards – including the fundamental conventions of the International Labour Organization and the
Universal Declaration of Human Rights – were taken as an inspiration and foundation, and many of the guidelines included in the Ethic Code of Conduct were based on them. BasicNet reserves the right to stop doing business with Sourcing Centers that are incapable of complying - or reluctant to do so with the principles and conditions enshrined in the Ethic Code of Conduct. The principles cited in the Ethic Code of Conduct for Sourcing Centers include:
not offer service voluntarily, a category that includes mandatory, forced prison labour under a binding contract;
Other principles enunciated in the Ethic Code of Conduct with which Sourcing Centers must comply include non-discrimination, the protection of health and safety, environmental protection and freedom of association. BasicNet is committed to full and complete compliance with laws and regulations applicable to its business activity and expects that Sourcing Centers will cooperate fully and with due diligence in fulfilling this pledge.
To guarantee awareness of the Ethic Code of Conduct, Sourcing Centers are required to take appropriate measures to ensure that workers familiarize themselves with the contents of the Code of Conduct and to post the Ethic Code of Conduct, translated into the workers' local language, at each production facility in a highly visible location readily accessible to all workers. Sourcing Centers are also required to select their suppliers carefully and only to do business with suppliers that ensure respect for human rights and full compliance with the principles enshrined in the Ethic Code of Conduct. To ensure compliance, BasicNet is authorized to audit Sourcing Centers by conducting scheduled or unscheduled inspections of Sourcing Centers' facilities aimed at monitoring compliance with the Ethic Code of Conduct. During such inspections, BasicNet and its representatives may examine books and registers relating to employees and conduct private interviews of the Sourcing Center's employees. If a violation is found to have been committed, BasicNet and the Sourcing Center are required to agree on a Corrective Action Plan aimed at remedying the violation promptly. If a Sourcing Center commits repeated and/or deliberate violations of the Ethic Code of Conduct, BasicNet may take the necessary corrective measures, up to and including the cancellation of orders and/or termination of business arrangements with the Sourcing Center concerned.
The Group has implemented a Legislative Decree No. 231/2001 Organization Model and specific internal procedures to establish ethical rules and responsibilities in the conduct of its business and in dealings with its various stakeholders (there are, for example, specific procedures for proper management of dealings with the public administration). In particular, operations are governed by procedures organized in a way that ensures that there is effective oversight by the individual company units (".coms") concerned. In particular, the Group always ensures clear, transparent and ethical relations with the public administration, in Italy and internationally. As stated in the Ethics Code, addressees of the Code should refrain from improperly influencing the decisions of the Public Administration by offering money or other benefits, such as employment or commercial opportunities in favour of public officials or those providing a public service, in addition to their family members. The Group companies may not provide direct or indirect contributions of any type, nor set up funds in support of public officials, except where permitted and in accordance with applicable law and regulations and on the condition that: (i) they are properly approved by the competent company functions, (ii) they are properly documented from an accounting and operating viewpoint, (iii) they do not put anyone in a position of conflict of interest. Untruthful statements may not be made to national or EU public bodies for the awarding of public funds, public grants or subsidised financing, or to obtain concessions, permits, licenses or other administrative acts. The direction of funds received from national or EU authorities as disbursements, contributions or financing for objectives other than those intended is prohibited. The altering of computer or IT systems or the manipulation of data contained therein in order to obtain unjust profit and causing damage to the Public Administration is prohibited. In commercial relations with the Public Administration, including also participation in public tenders, conduct should always be in compliance with law and proper commercial practice, while conduct which is undertaken to induce the committal of an offense in seeking advantage for the Group is expressly prohibited.
The financial reports, financial statements and corporate communications required by law and regulations should be prepared with clarity and present a true and fair view of the Group company financial statements. No payments (in any form) may be made in the interest of the Group in the absence of corresponding adequate documentation. Transactions with related parties, including intercompany transactions, should comply with the criteria of substantial and procedural correctness. Those undertaking transactions in conflict of interest are required to report such to their superior or in accordance with that set out in the adopted procedures. The internal control system concerns the control activities undertaken to protect company assets, effectively manage operations and clearly provide information on the Group financial statements, in addition to those activities undertaken to identify and contain company risks.
In addition, the company operates in compliance with applicable anti-money laundering regulations and the provisions issued by the Competent Authorities and for such purposes commits to refraining from undertaking suspect transactions from a correctness and transparency viewpoint.
As part of its efforts to prevent acts of bribery or corruption committed by or targeting Group personnel, the Group complies scrupulously with Italian and international legislation and has adopted a Legislative Decree No. 231/2001 Organization Model that establishes the general principles of the fight against bribery and corruption. All company activities and units are subject to the controls and verification relating to bribery and corruption mandated by the 231 Model.
Following the enactment of the new offence of "corruption between individuals" punished under paragraph three of Article 2635 of the Civil Code, the Supervisory Board decided to modify the Legislative Decree No. 231/2001 Organization Model so that management of the sales process was considered to be one of the Group's "sensitive" activities, especially as regards:
Training in matters relating to Legislative Decree No. 231/2001 – which also extended to anti-bribery and corruption policies and procedures – came to 82 hours of training in 2018, involving 155 participants, broken down into 1 executive and 154 white-collar workers, all based in Italy.
| Participants in training on anti-corruption policies |
2018 | 2017 | |
|---|---|---|---|
| Executives (No.) | 1 | 8 | |
| % of total Executives* |
3% | 28.3% | |
| White-collar (No.) | 154 | 194 | |
| % of total White-collar* |
27% | 39.6% | |
| Blue-collar (No.) | - | 8 | |
| % of total Blue-collar* | --% | 29.6% | |
| Total (No.) | 155 | 210 | |
| % total Group* | 24.6% | 38.5% |
*The percentages are calculated on the average workforce in Italy in 2018.
In addition, a clause upon anti-corruption practices is present in the licensing contracts of all Sourcing Centers and Licensees (respectively Sourcing Agreements and Distribution Agreements).
The Board of Directors at the meeting of April 28, 2016 reconfirmed the members of the Supervisory Board as Giuliana Baronio, Paola Bruschi and Mario Sillano. The Supervisory Board is tasked with overseeing the correct functioning of the Model and updates. In 2017, in order to strengthen the Supervisory Board an external lawyer Mr. Roberto Cota was appointed who became the chair of the body. The Supervisory Board reports on at least a half-yearly basis to the Control and Risks Committee and to the Board of Statutory Auditors.
The audit is carried out by an independent audit firm registered in the relevant registrar. The Shareholders' AGM of April 27, 2017 appointed EY S.p.A. to audit the accounts for the 2017-2025 period.
The proposal to the Shareholders' Meeting regarding the new appointments, in accordance with Legislative Decree No. 135 of July 17, 2016 and Regulation (EC) No. 537/2014, contained, on the outcome of a selection process created and carried out by the company, the recommendation and the preference expressed by the Board of Statutory Auditors.
The Board meeting of April 28, 2016 confirmed for three years, with the favourable opinion of the Board of Statutory Auditors, the Executive Officer for Financial Reporting as the Director Mr. Paolo Cafasso, Group Finance Director. Paolo Cafasso holds many years of experience in the administrative, financial and control areas, as well as the qualifications required by law for the holding of the office of Director.
In the undertaking of his duties Mr. Paolo Cafasso has the power to approve the corporate procedures impacting upon the financial statements, on the consolidated financial statements and on other documents which may be audited, and may participate in the design of the IT systems which impact upon the financial position of the company; he may avail of an adequate organisational structure to undertake his activities, utilising internal resources available and, where necessary, outsourcing; he may also, where necessary, utilise the financial resources of the company, providing adequate information to the Board of Directors, and he may utilise the Internal Auditing department for the mapping and analysis of processes and the execution of specific controls.
The Executive Officer periodically reports to the Control and Risks Committee and the Board of Statutory Auditors on the activities carried out and collaborates on an ongoing basis with the Independent Audit firm.
The information generated within the internal control system called BasicManagement and risk management shared on the web in a dedicated operating control section. The meetings of the Control and Risks Committee, attended usually by the internal control and risk management manager, the Executive Responsible, the Internal Audit Manager, the Supervisory Board and at least one member of the Board of Statutory Auditors, provide an opportunity for the parties involved in the system to meet and coordinate.
The Board of Directors, in accordance with Consob Regulation No. 17221 of March 12, 2010 adopted, with the favourable opinion of the Independent Directors, the procedure for transactions with related parties. The procedure was subsequently updated in October 2016 in order to be more flexible, over time, to differing organisational features and the size of the company. The main amendments concern:
• the General Principles - Article 2 "scope" and Article 4 of the Procedures - "Approval of transactions with related parties", to which paragraph 4.2.1. was added, which establishes procedures for the approval of significant transactions where the company exceeds the limit for minor transactions.
BasicNet is identified, for the purposes of the Consob Regulation incorporating related party transaction provisions, as a "smaller company" (companies presenting both assets written to the balance sheet and revenues as per the last approved consolidated financial statements not in excess Committee.
of Euro 500 million) and, therefore, utilises a simplified system for the approval of significant transactions whereby the rules for the approval of less significant transactions are applied;
• amendments to Article 3 introduction - "Related Party Transactions Committee". In relation to the presence of two or more Independent Directors on the Board, Article 3 was redrawn, providing for the setting up of a Related Parties Transactions Committee comprising three independent and non-executive Directors. This function was assigned to the Control and Risks
The approval of the transactions with related parties is the responsibility of, both in relation to significant transactions, as BasicNet falls within the application of Article 3, paragraph 1, letter f) of the Related Party Regulations, and in relation to minor transactions, to the Board of Directors, or the Executive Board, provided they are not a related party in the transaction, within the limits of their delegated powers, with prior non-binding opinion of the Independent Directors.
In general, exempted from the procedure, in addition to all the matters expressly indicated by the Related Party Regulation issued by Consob, are insignificant operations (amounts not above Euro 150 thousand), provided they are undertaken at market or standard conditions within the ordinary operations of the business and of the related financial activities; the operations concluded with or between subsidiaries, including joint ventures, by BasicNet, provided in the subsidiary companies there are no counterparties in the operation that have interests, qualified as significant, of other related parties of the Company; the operations with associates provided that the associated company counterparties in the operation do not have interests, qualified as significant, of other related parties of the Company.
Significant interest is not considered to exist by the mere sharing of one or more Directors or one or more senior management responsibilities between BasicNet and the companies of the subsidiary.
A procedure was implemented which transmits an alert mail through the "procurements" order system when an order is uploaded to the web for a related party, identified on the basis of declarations received from related parties or parties closely linked to them (members of the Board of Directors and Board of Statutory Auditors) and by the database management system.
The procedure is available on the company's website: www.basicnet.com/contenuti/corporate/particorrelate.asp.
The regulation applicable for the appointment of the members of the Board of Statutory Auditors is in accordance with legislative and regulatory provisions and Article 17 of the Company By-Laws, in relation to which reference should be made to the company's website www.basicnet.com at www.basicnet.com/contenuti/gruppo/statuto.asp.
The Board of Statutory Auditors consists of three standing and two alternate members. As the minority shareholders, as identified by the legal and regulatory provisions, are reserved the election of a Statutory Auditor and an Alternate Auditor, the procedure at Article 17 of the By-Laws provides that the appointment of the Board of Statutory Auditors takes place on the basis of slates presented by Shareholders, in which the candidates are listed by progressive numbering.
The slate is composed of two sections: one for the candidates for the office of Standing Auditor and the other for candidates for the office of Alternate Auditor. The slates must be drawn up so as to ensure that the resultant Board of Statutory Auditors complies with the applicable gender balance regulations in force.
Only shareholders which individually or together with other Shareholders hold shares with voting rights representing the share capital percentage required by the Company, which will be indicated in the call notice of the Shareholders' Meeting for the approval of the Board of Statutory Auditors, may present slate.
Together with the filing of slates the Shareholders must present or deliver to the registered office of the company documentation declaring the ownership of the number of shares with voting rights necessary for the presentation of the slate.
Each shareholder, in addition to shareholders belonging to the same group, in accordance with Article 2359 of the Civil Code and the parties belonging to, also through subsidiaries, a shareholder agreement in accordance with Article 122 of Legislative Decree No. 58 of February 24, 1998, may not present, nor vote upon, nor through nominees of trust companies, more than one slate.
In the case of violation of this rule no consideration is taken on the vote of the shareholder on any list;
Each candidate can be presented only on one slate at the risk of being declared ineligible.
Candidates may not be included on the slates if they already hold a greater number of Statutory Auditor positions than permitted by the regulatory or legal provisions. The outgoing statutory auditors may be re-elected.
In accordance with Article 1, paragraph 3, of the Ministry for Justice Decree No. 162 of March 30, 2000
the sectors closely related to those in which the Company operates are:
The areas closely related to the company's sector are:
The slates accompanied by exhaustive disclosure on the personal and professional characteristics of the candidates, with indication of the presenting shareholders and the overall share capital percentage held, in addition to the declaration of shareholders other than those who hold, also jointly, a controlling or relative majority holding, declaring the absence of connecting relationships as per the applicable regulations, with these latter, must be filed at the registered office of the company by the deadline established by applicable legislative and regulatory provisions.
Together with each slate, within the regulatory and legally established timeframe, a declaration in which the individual candidates accept their candidature, must be filed at the company's registered office, stating under their own responsibility, the inexistence of reasons for ineligibility and incompatibility, as well as the existence of the requisites for the respective assignments, in addition to those required for directorships held in other companies.
Slates presented that do not comply with all of the above formalities are considered as not presented.
The procedure for electing Statutory Auditors are as follows:
The Chairman of the Board of Statutory Auditors is the first candidate indicated on the slate that obtained the second highest number of votes.
In the case of parity of votes between slates, the candidates from the slate having a higher equity investment are elected or, subordinately, with the greater number of shareholders.
In the case of presentation of only one slate, all candidates will be taken from that slate, with the Chairman the first listed on the slate.
Where it is not possible to proceed with the appointment according to the above system, the Shareholders' Meeting deliberates by statutory majority.
Where his/her legal requisites no longer exist, the statutory auditor must leave office.
In the case of the replacement of a statutory auditor, including the Chairman, where possible the Alternate Auditor belonging to the same slate as the discontinuing auditor joins the board and in the case of the replacement a Statutory auditor elected from the minority slate, the first candidate on the minority slate receiving the second highest number of votes joins the board in their place. In the cases in which a replacement results in non-compliance with the legally established gender balance criteria, the Board of Statutory Auditors shall be supplemented.
For the supplementation of the Board of Statutory Auditors:
for the supplementation of the Statutory Auditors from the minority slate, including the Chairman of the Board of Statutory Auditors, the appointment is made through a relative majority of the share capital represented at the Shareholders' Meeting, choosing from among the candidates indicated on the minority slate, ensuring that the composition of the Board of Statutory Auditors complies with the legally-required gender balance provisions;
for the simultaneous supplementation of the Statutory Auditors, elected both from the majority slate and minority slate, including the Chairman of the Board of Statutory Auditors, the appointment is made through a relative majority of the share capital represented at the Shareholders' Meeting, choosing from among the candidates indicated both on the majority slate and on the minority slate, of a number of Statutory Auditors equal to the number of which whose mandate concludes from the same slate, ensuring that the composition of the Board of Statutory Auditors complies with the legally-required gender balance provisions.
Where it is not possible to proceed in accordance with the previous paragraph, the Shareholders' Meeting to supplement the Board of Statutory Auditors votes according to a relative majority of the share capital represented at the Shareholders' Meeting, while ensuring that the right to representation of the minority has been complied with, in addition to the regulatory required gender balance provisions.
The Board of Statutory Auditors, whose mandate shall conclude with the approval of the 2018 Annual Accounts, therefore comprises:
| Name | Office held on the Board |
Slate M/m (*) | No. appointments (**) |
|---|---|---|---|
| Maria Francesca Talamonti | Chairperson | m | 1 |
| Sergio Duca | Statutory Auditor | M | 2 |
| Alberto Pession | Statutory Auditor | M | - |
| Giulia De Martino | Alternate Auditor | m | 3 |
| Maurizio Ferrero | Alternate Auditor | M | 1 |
(*) In this column M/m is indicated according to whether the director was elected by the majority (M) or minority (m) slate.
(**) Other Directorships or Auditorships held by a Statutory Auditor pursuant to Article 148-bisof Legislative Decree No. 58/1998 and the regulations included in Consob's Issuer Regulations. Full details of these additional offices are provided by Consob on their website pursuant to Article 144-quinquiesdeciesof Consob's Issuer Regulations.
The composition of the Board of Statutory Auditors has been in line with the "gender quota" required by the new Consob regulation since the company's listing.
Reference should be made to paragraph 4.1 concerning the Board of Directors.
Each member of the Board of Statutory Auditors has declared on appointment to hold the good standing and professional requirements in accordance with law and the Company By-Laws.
The outcome of this recognition was reported in the press release issued by the company subsequent to appointment.
The Board of Statutory Auditors verified the independence of their members based on the criteria of the new Self-Governance Code, confirming to the Board of Directors at the meeting of April 27, 2017, subsequent to the appointment of the new members, and recently at the meeting of February 27, 2019, the independence of their members in accordance with the above-mentioned Code.
The documentation filed for the purposes of the appointment, including the updated curriculum vitaes of the statutory auditors, is available on the website www.basicnet.com/contenuti/gruppo/organisocialisocieta.asp.
The Statutory Auditors, within their duties, acquired information also through meetings with the independent audit firm, with the Supervisory Board and through attending the Control and Risks Committee meetings.
The Statutory Auditors may participate in meetings subsequent to their appointment and during their mandate with the Chairman and Management, in order to remain updated on corporate affairs and developments. They also continually have access to financial and operational information from the BasicManagement portal.
The Statutory Auditor who, on his/her own behalf or that of third parties, has an interest in a determined transaction of the issuer informs the other statutory auditors and the Chairman of the Board, in a timely and comprehensive manner, regarding the nature, terms, origin and extent of his/her interest. This event however has never occurred.
As already indicated in the preceding paragraphs, the Board of Statutory Auditors, in undertaking its activities, liaise with the Internal Auditing department and the Control and Risks Committee.
The Shareholders' AGM on appointment established the remuneration of the Statutory Auditors, as a fixed amount, in line with that of the previous mandate and with the role covered and the commitment required, in addition to the size of the company.
The Chairman and Chief Executive Officer actively undertake dialogue with shareholders and the financial analysts following the company. The Chief Executive Officer acts also as the Investor Relations Manager.
Dialogue with investors has been supported since listing through continuous updates of the website www.basicnet.com on which financial information of interest to Shareholders in general may be found (Annual Reports and periodic reports, press releases and notices, presentations), in addition to updated data and documents concerning Corporate Governance and regulated information (composition of the Corporate Boards, the By-Laws, the Shareholders' Meeting regulation, the Ethics Code and the Corporate Governance and Ownership Structure Report). The press releases relating to the Brands and Companies of the Group are also available. http://www.basicnet.com In 2018, communication was undertaken with analysts and investors, on the announcement to the market of the company's periodic results.
The shareholders' meetings provide opportunities to meet and communicate with the shareholders. During the Shareholders' Meetings the Chairman and the Chief Executive Officer provide the Shareholders with all the necessary information for the undertaking of resolutions.
The Ordinary Shareholders' Meetings undertake their duties in accordance with Article 2364 of the Civil Code and the Extraordinary Shareholders' Meetings in accordance with Article 2365 of the Civil Code.
In accordance with Article 2365, paragraph 2 of the Civil Code, the Board of Directors was conferred the following duties:
• resolutions, in accordance with Articles 2505 and 2505-bis of the Civil Code, concerning the merger by incorporation of one or more companies in which all shares or in which at least 90% of all shares are held;
In accordance with Article 2410, first paragraph of the Civil Code, any issue of bonds is decided by the Directors.
The Board of Directors, and any Executive Boards, also have the right to undertake, without a Shareholders' Meeting authorisation, all acts and operations against the objectives of a public share or exchange offer, from the moment in which the communication in which the decision or the obligation arises to promote the offer was made public until the termination or expiry of the offer.
The Board of Directors, and any Executive Boards, also has the right to implement decisions, not yet implemented in full or in part and which are not within the scope of the normal activities of the company, undertaken before the communication as described above and whose implementation could negate the achievement of the objectives of the offer. The Shareholders' Meeting (June 30, 2000, and for supplementation and/or modifications subsequently on April 30, 2011) approved the Shareholders' Meetings Regulations in order to permit the orderly functioning of the meetings and to guarantee the right of each shareholder to take the floor on matters under discussion. The Shareholders' Meeting regulations are available on the Company website www.basicnet.com/contenuti/gruppo/regolamento.asp.
As per Article 2 of the Shareholder' Meeting Regulation, those holding shares in accordance with applicable legislation and the by-laws, or their proxies or representatives, may attend and speak at the Shareholders' Meetings. Proof of personal identity is required for attendance at the Shareholders' Meeting. Unless otherwise indicated in the Call Notice, the personal identification and the verification of the right to attend takes place at the location of the Shareholders' Meeting at least one hour before the time fixed for the meeting.
Attendees are assured the possibility to follow and take part in the discussion and to exercise their right to vote using the technical methods established on each occasion by the Chairman: usually time is allowed for contributions be shareholders after the presentation of each matter on the Agenda.
All Directors generally attend the Shareholders' Meetings. The Board of Directors is available to Shareholders to provide the necessary information for the undertaking of fully informed decisions.
During the year, there were no significant changes in the shareholders structure of the Issuer.
There are no corporate governance practices further to those indicated in the previous points applied by the Issuer, other than those required by legislation and regulation.
No changes occurred.
In December 2018, the letter of the Chairman of the Corporate Governance Committee (accompanying the "2017 Report on Corporate Governance developments for listed companies") was forwarded, as requested by the former, to the Chairman, to the Chief Executive Officer and to the Chairman of the Board of Statutory Auditors of BasicNet.
Subsequently, this documentation was communicated for the attention of the Control and Risks Committee of February 27, 2019 and the Board of Directors and Board of Statutory Auditors, at the meeting of March 8, 2019.
With regards to the Committee's recommendations, the Board decided the following:
On behalf of the Board of Directors
The Chairman
Marco Daniele Boglione
This document represents the consolidated non-financial report pursuant to Legislative Decree No. 254/2016 (hereinafter also referred to as the "Non-Financial Report" or the "Report") prepared by the BasicNet Group, comprising BasicNet S.p.A. and its subsidiaries (hereinafter also referred to as the "BasicNet Group", the "Group" or "BasicNet").
As a large undertaking, the BasicNet Group has prepared a Non-Financial Report to fulfil the obligations under Article 3 of Legislative Decree No. 254/2016, which transposed Directive 2014/95/EU into Italian law. Accordingly, this Report includes an account of the main policies applied by the undertaking, the management models and main activities carried out by the Group in 2018 with regard to the matters expressly cited in Legislative Decree No. 254/2016 (environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters). In particular, the matter of human rights is applied by the Group to its management of relations with the Group's personnel, Licensees, Sourcing Centers and suppliers, in accordance with the principles and values cited in the Ethics Code and Ethic Code of Conduct for Sourcing Centers. For further details on this matter, reference should be made to the sections "The promotion of the economic development of BasicNet's partners", "The supply chain" and "Diversity and equal opportunities" of this Report and to the section "Legislative Decree No. 231/2001 Organization Model" of the Corporate Governance and Ownership Structure Report. The main measures adopted by the Group to prevent bribery and corruption are described in the section "Conflicts of interest and prevention of bribery and corruption" of the Corporate Governance and Ownership Structure Report. The main risks relating to sustainability issues that have been identified – having to do with management of the network of licensees and associated with the production of the Group's products – are described in further detail in the Directors' Report in the "Main risks and uncertainties" section. The main warranty and innovation actions are outlined in the "Research and Development" section of the Directors' Report.
The purpose of the Report is to give an account of the Group's values, major initiatives and sustainability performance in 2018 that is consistent with its organizational structure (reporting period from January 1 to December 31, 2018). The 2017 non-financial report was approved on March 19, 2018.
As permitted by the options provided for in Article 5 of Legislative Decree No. 254/2016, the Non-Financial Report has been integrated into the Directors' Report. While ensuring an understanding of the Group's activity, performance, results and impact, some of the content of the Report that is expressly required by Legislative Decree No. 254/2016 is included in other sections of the Directors' Report ("Main risks and uncertainties", "The Group and its activity" and "Research and development") and in the "Corporate Governance and Ownership Structure Report" (in the sections "Board of Directors" and "Legislative Decree No. 231/2001 Organization Model").
The Non-Financial Report has been prepared in accordance with the new 2016 GRI Sustainability Reporting Standards published by the Global Reporting Initiative (GRI), according to the "core" option. An appendix to the Report includes a table of the GRI indicators covered as orientation for the reader.
In drafting the Non-Financial Report, reference was also made to the European Commission's Guidelines on non-financial reporting.
The contents and indicators subject to reporting were selected on the basis of the materiality analysis conducted in 2018 and presented in the Report, which permitted the identification of the aspects material to the Group and that could substantially influence stakeholders' assessments and decisions, in light of the topics cited in Legislative Decree No. 254/2016. The materiality analysis was in line with that reported in 2017.
In particular, the process of determining the content of the Report is based on the principles of materiality, stakeholder inclusion, completeness of information and the Group's operating context. With regard to the quality of the information reported, the principles of balance, accuracy, verifiability and comparability were observed.
The financial reporting scope is the same as for the BasicNet Group's 2018 Consolidated Financial Statements. The scope of the financial, social and environmental information included extends to the companies included in the BasicNet Group at December 31, 2018 and consolidated line-by-line in the Group's Consolidated Financial Statements. However, it should be noted that, while it does ensure a proper understanding of the enterprise's activity, the reporting scope of information and data relating to training and the environment extends largely to the Group's two Italian offices. These and any other minor limitations have been disclosed as appropriate in accordance with the reporting standard adopted.
Unless otherwise indicated, the figures and information presented in the Report refer to financial year 2018. This information has been provided with a comparison to 2017 to permit an assessment of the performance of the activities where possible. In the interest of full understanding, an account has also been given of measures taken in previous years that still apply to the Group's activities.
In the interest of a proper account of performance, and in order to ensure that the figures are reliable, the use of estimates has been kept to a minimum and any estimates presented have been based on the best available methods, as appropriately disclosed.
Turning to significant changes in the scope of consolidation during the period under review, TOS S.r.l. – the company that owns the Sebago brand, consolidated line-by-line as at December 31, 2018.
The Non-Financial Report will be published annually.
The Non-Financial Report is also available on BasicNet's website, www.basicnet.comFor further information, please contact the e-mail address: [email protected].
This Report was approved by the Board of Directors of BasicNet S.p.A. on March 8, 2019, along with the Annual Financial Report.
The independent auditors EY give their opinion ("limited assurance engagement") according to the criteria indicated in standard ISAE 3000 Revised) on the compliance of this Report in a specific report that certifies the compliance of the information provided with Article 3, par. 10, of Legislative Decree No. 254/2016.
In its operations, BasicNet has always sought to create value for its shareholders and, more generally, all those who have a stake in the Group's business. Accordingly, as part of its pursuit of sustainability, in 2018 BasicNet mapped its main stakeholders, by conducting a thorough analysis of its business and with the participation of Group management. The goal was to identify the main groups that may be influenced by BasicNet's business, including with regard to the type of relationship with the Group in terms of dependence and influence. This mapping process – which resulted in the identification of nine main groups of stakeholders – was carried out in accordance with the international principles established by AA1000 Stakeholder Engagement Standard, AccountAbility (2015), and the GRI Sustainability Reporting Standards, 2016.
The main stakeholders include groups directly linked to business activities, such as Group Resources, Investors, Shareholders and the Financial Community, the Public Sector, Governmental and Control Bodies and the Local Communities in which the Group operates. Due to the specific nature of BasicNet's business system, Sourcing Centers and Licensees play a significant role. Both are commercial partners to the Group and belong to the broader category of clients and consumers (together with the stores involved in retail activities) and suppliers (a category which includes the Group's non-core suppliers of goods and services and Sourcing Centers, the core suppliers of the subsidiary and wholly-owned licensee BasicItalia S.p.A.). In addition, the wholly-owned franchisee of the subsidiary BasicRetail S.r.l. is also highly important to the Group's business in Italy.
To ensure effective, uniform pursuit of its goals that makes the most of the roles and potential of its stakeholders, the Group participates in various trade associations (such as Federazione Manageritalia, the Turin chapter of ASCOM - Confcommercio and the Turin Industrial Union), in addition to promoting initiatives aimed at securing the internal involvement of its personnel (e.g., the initiative BasicPress.com, the Group's online press agency through which all resources are periodically informed of new developments and initiatives relating to the Group, along with the various social and athletic activities that are promoted at the Basic Village each year).
With the aim of identifying the economic, environmental and social topics relevant to the Group and its stakeholders ("material" topics), in 2018 the BasicNet Group promoted the internal involvement of the top management by conducting a materiality analysis – a key process to the preparation of the Non-Financial Report. This analysis identified the material topics to be reported in this document, assessing them according to the principles set out in the GRI Standards: materiality, stakeholder inclusion, completeness of information and the Group's operating context.
Given the continuity of Group business, the materiality analysis was in line with that reported in 2017 and was consistent with the indications of the reporting standard and macro sector trends. The analysis resulted in the identification of 15 material topics, divided into five general categories (Governance and Compliance, Economic Responsibility, Responsibility in the Value Chain, Social Responsibility and Environmental Responsibility), for each of which the main stakeholders with the greatest involvement were identified. This overview represents a fundamental tool for the Group to set its priorities with regard to sustainability and to steer the actions to be pursued in this area.
| Category | Material aspect | Stakeholders involved | |
|---|---|---|---|
| Ethics and Compliance | Suppliers; Sourcing Centers; Licensees; | ||
| Public Sector, government and control bodies | |||
| Governance and | Investors, Shareholders and the financial | ||
| Compliance | Anti-corruption | community; Suppliers; Sourcing Centers; | |
| Licensees; Public Sector; government and | |||
| control bodies | |||
| Economic | Sourcing Centers; Licensees; Franchisees; | ||
| responsibility | Promotion of economic development | local communities | |
| Sourcing Centers; Licensees; Customers and | |||
| Responsibility in the Value Chain |
R&D and Innovation | consumers | |
| Procurement practices | Suppliers; Sourcing Centers | ||
| Data Security and Protection | Sourcing Centers; Licensees | ||
| Sourcing Centers; Licensees; Customers and | |||
| Prevention of Counterfeiting | consumers; Franchisees | ||
| Customer Relations | Customers and consumers; Franchisees | ||
| Management and development of | |||
| human resources | Group Resources; Franchisees | ||
| Diversity and equal opportunities | Group Resources; Franchisees | ||
| Social | Worker Wellbeing | Group Resources; Franchisees | |
| Responsibility | Group resources; Suppliers; Sourcing Centers; | ||
| Employee Health and Safety | Licensees; Franchisees | ||
| Group resources; Suppliers; Sourcing Centers; | |||
| Human Rights | Licensees; Franchisees | ||
| Efficient Use of Natural Resources | Public Sector, government and control bodies | ||
| Environmental | Public Sector, government and control bodies; | ||
| Responsibility | Environmental protection | local communities |
List of the BasicNet Group's material topics and stakeholders involved
By analysing materiality, BasicNet discovered that its business model consists in offering business opportunities to a worldwide network of independent companies that do business with the Group, namely its manufacturing licensees (sourcing centers) and its commercial licensees (licensees). Accordingly, BasicNet is aware that the Group's economic growth is closely linked to the economic development of its licensees, and that this link represents an initial important factor of sustainability that is inherent to the nature of the Group's business.
Sourcing Centers are third-party firms to the Group. Their function is to manufacture and market merchandise and are located in various countries worldwide, depending on what type of goods they produce.
The BasicNet Group through a market place, uses a computerized platform, fully integrated into the network, that connects manufacturing licensees directly to commercial licensees, and offers licensees a coordination service that links supply to demand. Each licensee can choose at its discretion to which sourcing center it will issue its purchase order, in response to quotes issued by sourcing centres and published on the system. The platform permits the monitoring and aggregating of all transactions between Sourcing Centers and Licensees in order to benefit from economies of scale.
Selection and monitoring of sourcing centres is outsourced to a team of people specialised in manufacturing processes whose task is to select the sources of supply to be contracted and handle the flow of information generated by the relationship between them and the licensees. Licensees. The relationship with sourcing centres is governed by the "Sourcing Agreement", signed by the parties after identifying the most suitable sourcing centre and after performing a pre-contract analysis intended to assess its potential by gathering various kinds of information (company profile, business registration certificate, memorandum and articles of association, audited accounts). The manufacturers to which we outsource production are experienced specialists in their respective industries. They only devote part of their production capacity to the BasicNet sales network.
Sourcing agreements govern relations between the parties by setting forth the rules of conduct that the sourcing centre must observe concerning production, intellectual property, use of trademarks, their remuneration -- called a "sourcing commission" -- and reporting methods.
Sourcing agreements include clauses relating to social compliance, since the BasicNet Group adheres to, and encourages its commercial counterparts to comply with, the highest international ethical standards and practices of the business world. To make sure that these principles are effectively circulated, sourcing centres must read and sign the Code of Conduct and the Forbidden Chemical Agreement. The Code of Conduct is based on the basic conventions of the International Labour Organisation (ILO) and the Universal Declaration of Human Rights. It requires sourcing centres to comply with all applicable laws and regulations relating to respect for the individual and for human rights (the main ones concern child labour, involuntary labour and discrimination), as well as to health, safety and the environment. Sourcing centres must establish procedures - and actually execute them - for reporting to the local authorities any accidents caused by acts or omissions of the sourcing centres themselves. Sourcing centres must also comply with applicable laws and regulations regarding the manufacture and importation of products, and must commit to complying with the REACH Regulation (EC No. 1907/2006).
The Group is introducing additional transparency measures regarding certifications and over the course of the coming year, on the new web platform, will make available to the distribution Licensees all information concerning certifications which the production sources shall update promptly on the platform.
In 2018, the Group was supplied by a total of 187 sourcing centres, compared to 152 in 2017. Their facilities are located all over the world.
In addition to the group's licensee business, the Group also wishes to contribute to the economic wellbeing and growth of the communities in which it operates by providing effective high-tech services. As required by its Ethics Code, the relations that the Group maintains with local and national governments, as well as with supranational agencies, are based on full and effective cooperation, transparency and reciprocal respect for the counterparty's autonomy and for its economic goals. BasicNet puts these principles into practice by supporting social, cultural and educational activities. It also sponsors popular sports teams. There is an in-house team devoted to sponsoring, which handles all stages of sponsoring, from designing product quality and image, through selection of sources of supply of goods, to delivering them to the teams and managing participation in sports events.
The Group distinguishes between its dealings with regular suppliers of goods and services ("non-core" suppliers) on the one hand, and its dealings with sourcing centres and licensees on the other, which are the Group's true commercial counterparts. As can be seen from a mapping of the Group's stakeholders, BasicNet's Business System distinguishes between its dealings with sourcing centres and Licensees considered as commercial partners, which includes the Group's Customers and consumers, and its sourcing centres, as core suppliers of the subsidiary BasicItalia SpA..
BasicItalia SpA, a licensee that is a wholly-owned subsidiary, is structured in all respects like a commercial licensee for the use and development of intellectual property rights and merchandise bearing all BasicNet's trademarks for Italy. It purchases from the sourcing centre and distributes finished goods throughout the territory assigned to it. Accordingly, since there is no in-house production, the group's only core suppliers are the sourcing centres that supply products to the Group's subsidiary BasicItalia SpA.
BasicItalia SpA buys goods on a marketplace generated by tenders from sourcing centres selected by BasicNet depending on the technical requirements for satisfying the Group's needs in terms of quality, volumes and production times, as well as on the manufacturer's financial soundness. Repeated on-site inspections are made to assess the consistency of these variables over time.
In this regard, a company called BasicNet Asia was formed with the task, among others, of handling relations with regional sourcing centres, so as to monitor their operations in order to ensure steady turnover of suppliers, and also to counter market power.
Sourcing contracts are based on a standard that arose over the years and was prepared by specialised outside lawyers. If individual contracts require exceptions, amendments or riders as a result of contractual agreements or to comply with local laws, these provisions are analysed beforehand by international lawyers or lawyers specialised in the licensee's territory.
Anti-trust requirements are fulfilled by means of monitoring/control procedures and rules that require that strategic products be produced by at least two or three sourcing centres. Moreover, after five years orders are switched to a new sourcing centre, and we make sure that no factory devotes more than half of its productive capacity to our Group's brand-name products. If these guidelines are not followed, a sourcing centre can be suspended temporarily, depending on each specific case.
Every sourcing centre that joins the Group's network, regardless of whether it is one of BasicNet's Customers and consumers or a core supplier of BasicItalia SpA, must read and sign the Code of Conduct, which is based on the fundamental conventions of the International Labour Organisation (ILO), the Universal Declaration of Human Rights and the Forbidden Chemical Agreement.
In 2018, just as in the previous year, almost all sourcing centres supplying BasicItalia SpA are located in either Asia or Europe.
Within the Group, goods and services are procured according to internal procedures that specify general principles for managing the supply chain responsibly and provide for the efficient planning and managing of purchases. In this regard, there is a division of roles within the Group, so that each ".com" (i.e. individual business unit) is assigned a specific role within the Group. One of the ".coms" sets requirements, another handles selection, another certification, another procurement of suppliers, while another certifies fulfilment or receipt of goods and payment. Purchasing office supplies (stationery, consumables, forms, etc.) that are considered "non-core" and purchasing services (assistance services, rentals, subscriptions, consultancy and others, etc.) are all handled through the company's online platform from the time of the request to obtaining approvals and billing.
Remuneration and amounts of any type paid to suppliers and consultants for supplies and professional appointments should be in line with market conditions and adequately documented. Corruption, unlawful favours, collusive conduct, the soliciting of advantages, the payment of material and immaterial benefits, in addition to other advantages for the purposes of influencing business agreements are prohibited and prosecuted. Gratuities of minor value considered as normal business practice are however permitted. Any conflicts of interest in choosing suppliers should be promptly reported to superiors.
The selection of suppliers of non-codified goods is handled by the relative ".com". The purchase order is automatically sent for approval respectively by the direct superior and to the CFO or the CEO, depending on the order amount.
Suppliers and outside consultants are chosen on the basis of competence, professionalism, cost, correctness and transparency criteria. Suppliers should ensure compliance with law and applicable labour market practice in its country of residence, in addition to compliance with the Ethics Code and the Code of Conduct for Sourcing Centers.
BasicNet, when it allocates employees, services and supplies to contractors, is responsible for providing these parties with information on the specific risks present in the workplace where they are going to work, as well as for providing information on the applicable preventative and emergency measures related to their work in compliance with the provisions of Art. 26 of Legislative Decree 81/08. If outside suppliers are working continually on BasicNet's premises, BasicNet fills out the Uniform Risk Assessment Document (DUVRI), which is a single standard form, and evaluates the risk of interference among the contractors. Every supplier of labour and services must be approved beforehand by BasicNet after a professional and technical review pursuant to Legislative Decree 81/2008.
Whenever BasicNet places an order with a contractor, it evaluates the contractor on the basis of the following documents:
In 2018, the Group had, as last year, about 2,000 suppliers, for purchases not strictly related to core operations, approx. 90% of Italian origin. The main merchandise categories among the Group's suppliers are: consumables, costs for events and sponsorships and software development.
The Group protects the secrecy and confidentiality of any information relating to human resources, contractors and third parties that it may gather on account of their work or while they are performing it. Such protection is afforded by following IT procedures that govern the operation of information systems, and IT security procedures.
The privacy and information processing policies are set forth in the Ethics Code. They specify that people subject to the Code are barred from using any information about the company, or any documents, reports, drawings or other material that is not public for purposes unrelated to the performance of their duties.
Those who in the execution of their duties become aware of "inside information" or confidential information, as established by the applicable regulation, are held to maintain its confidentiality. With regards to that stated above, the external communication of confidential information should exclusively be made by authorised persons in accordance with Group procedures and - in any case - in compliance with applicable provisions and the principles of equal and concurrent information.
Addressees of the Ethics Code, in compliance with the "market abuse" regulations, should not utilise inside information to gain advantage of any type, whether directly or indirectly, immediate or future and whether personal or property related.
The Group has appointed an Information Security Manager (RSI) and outsourced management of its IT activities to a ".com" called BasicSystem. In order to ensure rigorous protection of company IT systems, the perimeter of the company network is protected by a sandwich of two firewalls that mitigate the risk of unauthorised access and tampering; remote access is assured by authorised VPN connections that are managed by the double firewall. Perimeter protection of the IT infrastructure is outsourced to a certified outside body, a SOC (Security Operation Centre) that conducts 24/7 monitoring of the entire network.
In addition, BasicNet has adopted an IT security protocol according to which all electronic records (i.e. work files) used in conducting company business are stored in suitable separate-access network folders. For each network folder a worldwide protection group has been designated to which each user is assigned. ".com" managers send to BasicSystem any requests for changes, inclusion or reassignment to a different group. All files saved onto company PCs are automatically deleted every 15 working days.
The Group has an official backup protocol for data on the company servers used to reboot and recover systems and network resources when breakdowns occur. Data are backed up every day, week and month. A duplicate of the data is stored in a safe close to the server facility.
In order to make users aware of the data security issue, newly hired staff must sign a copy of company security rules and receive online training on mandatory IT procedures. Furthermore, instruction videos are available on the company intranet that explain how to handle computers and software.
With the entry into force of Regulation (EC) 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation), a need arose to implement within the Group's companies a data protection management arrangement with its own operating procedures and instructions, based on a proper risk assessment process for assessing threats to privacy.
The concept of "data protection by design" was introduced, which proposes the principle of incorporating privacy protection starting at the design stage of a business process. A parallel concept is that of "data protection by default" which consists in making technical and organisational changes to ensure that only those personal data are processed that are needed for each specific purpose of the processing.
In 2018, the "Processing Registry", the main privacy procedures, the "Data Protection Management Manual" and the "Disclosures" forms were completed for the purpose of adapting to the new Regulation. The DPO (Data Protection Officer) was also appointed for the companies BasicNet, BasicItalia and BasicRetail, as per the Regulation. In 2018, as part of the procedure set out for the integrated control system, checks were carried out on the correct application of the procedures and on the activities carried out to adjust the privacy management system to the Regulation on the requests of interested parties received by the Group and on the number of violations reported (no violations were reported in the year)
The BasicNet Group constantly strives to comply with all consumer protection laws and regulations by paying close attention to its products, by combating counterfeiting, and by means of customer care, through privacy protection, return policies and customer loyalty.
BasicNet is in charge of all efforts to combat counterfeiting. It therefore constantly monitors the market. Reports of counterfeiting come indirectly from the local police, the treasury police and customs, but also directly from Italian and overseas customers and from the Group's network of licensees and their lawyers, who can get in touch with the Group on the "hunt the fake" tab on the BasicTrademark.com website and on the online sales websites. There are links for reporting counterfeit products on all the Group's e-commerce websites.
Each such report is processed individually by analysing samples and available information and then preparing expert opinions. In the event that preliminary investigations are needed in order to seize goods, BasicNet coordinates and manages these tasks, in addition to arranging for the removal or deletion and reassignment of illegal websites.
Monitoring and enforcement are supported by outside agencies responsible for this task, especially with respect to online counterfeiting.
Each product developed and marketed by BasicNet bears a label containing all information required by the various applicable Italian and overseas laws, and in particular by the Consumer Code (Legislative Decree 206/2005 and EU Regulation 1007/2011) that lists textile fibre names and governs the labelling and marking of the fibre components of textile products – in addition to the requirements that domestic law now imposes on each licensee. In addition, each label bears the order number entered by the licensee that, together with the other information on the label, allows BasicNet to check whether the merchandise is genuine and matches the goods on the market.
The BasicLabel project was created so as to reassure the end customer that the product they purchased is genuine and can be properly traced. For each product there is a QR code and a unique serial number that allows consumers to access information about the product they purchased by scanning its QR code or inserting its serial number on the website www.basiclabels.net
The BasicLabel project operates entirely online. Starting from the information of the items in BasicSamples and BasicSpecs (which are in charge, respectively, of determining and selling sample collections and of setting technical specifications), when acceptance of an order is confirmed through BasicFactory (the online order management platform for sourcing centres), the BasicLabels manufacturer automatically receives an order for as many labels as items have been ordered (plus buffer amounts), thus assuring tight control over the number of items manufactured.
The project was introduced for all K-Way products and for the iconic products of the other brands (in 2017 and 2018 the products of the main goods categories covered by unique label were approx. 15%).
The Group recognises the central importance of human resources, in the firm belief that the principal factor determining the success of the business is the individual acting in a spirit of fairness and reciprocal trust. Accordingly, as stated in the Ethics Code, the Group undertakes to protect and develop its employees.
At December 31, 2018, the Group's workforce consisted of 596 employees, of which 97% worked in Italy. Most workers have full-time contracts. (502 of which 193 men and 309 women) while 94 workers are part-time, of which 91.5% are women. Most of the workers on part-time contracts are in retail sales as it is a seasonal business and many sales outlets are still start-ups. In addition, the Group sometimes hires temporary workers.
| Workers by type of | 2018 | 2017 | |||||
|---|---|---|---|---|---|---|---|
| contract (No.)* | Male | Female | Total | Male | Female | Total | |
| Italy | 195 | 384 | 579 | 176 | 372 | 548 | |
| Permanent | 133 | 281 | 414 | 118 | 260 | 378 | |
| Fixed term | 62 | 103 | 165 | 58 | 112 | 170 | |
| Overseas | 6 | 11 | 17 | 9 | 8 | 17 | |
| Permanent | 4 | 3 | 7 | 6 | 2 | 8 | |
| Fixed term | 2 | 8 | 10 | 3 | 6 | 9 | |
| Total | 201 | 395 | 596 | 185 | 380 | 565 | |
| of which: | |||||||
| Full-time | 193 | 309 | 502 | 178 | 295 | 473 | |
| Part-time | 8 | 86 | 94 | 7 | 85 | 92 |
* Data on the total number of employees reflect only the headcount (non-FTE) of in-house staff at December 31.
In 2018, 182 new staff members (65 men and 117 women) were hired, reflecting the Group's steady growth, thanks to the stabilisation of the staff at the Sebago brand and the entry of Basic Properties America Inc. among foreign companies. Outgoing staff, most of them from retail, numbered 151 people, which yielded a staff turnover rate of 25.3%.
| Hiring rate and staff turnover |
2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Hires (no.) |
Departures (no.) |
Rate of Entry* |
Turnover** | Hires (no.) |
Departures (no.) |
Rate of entry* |
Turnover | ||
| Gender | |||||||||
| Male | 65 | 49 | 32.3% | 24.4% | 48 | 39 | 25.9% | 21.1% | |
| Female | 117 | 102 | 29.6% | 25.8% | 91 | 81 | 23.9% | 21.3% | |
| Age group | |||||||||
| Less than 30 | 132 | 97 | 69.5% | 51.1% | 102 | 88 | 57.3% | 46.6% | |
| Between 30 and 50 | 49 | 53 | 14.6% | 15.8% | 37 | 35 | 11.3% | 10.7% | |
| Over 50 | 1 | 1 | 1.4% | 1.4% | 0 | 2 | 0.0% | 3.3% | |
| Region | |||||||||
| Italy | 177 | 146 | 30.6% | 25.2% | 130 | 117 | 23.7% | 21.4% | |
| Overseas | 5 | 5 | 29.4% | 29.4% | 9 | 3 | 52.9% | 17.6% | |
| Total | 182 | 151 | 30.5% | 25.3% | 139 | 120 | 24.6% | 21.2% |
* Ratio between the number of hires by category and the total number of employees by category at December 31
** Ratio between the number of departures by category and the total number of employees by category at December 31
A ".com" called BasicGuys handles personnel management for all Group companies, including the following aspects:
In terms of recruiting procedures, the Group always hires new staff depending on the ".coms" during preparation of the budget. However, reassignment of existing staff members is preferred to the recruitment of new staff. In general, the recruitment channels used are the following:
The selection procedure is handled with BasicGuys software, which can be accessed by the staff of a ".com" called BasicGuys and by the managers of all ".coms", and which ensures that the selection process is traceable. To ease insertion of staff, BasicNet constantly organises a large variety of training programmes. In the two years 2017 and 2018, 55.6% of students who did their internship at the Group's facilities were later hired as employees.
In accordance with its Ethics Code, the Group considers it essential to handle labour relations in a way that assures equality of opportunities and encourages everyone's professional development.
The company's success in attaining these goals is evident from its employment figures: at December 31, 2018, the total Group workforce was 33.7% male and 66.3% female, demonstrating the strong female presence at the Group. 56.4% of the total workforce are between the ages of 30 and 50, 11.7% are over the age of 50 and 31.9% are under the age of 30.
| 2018 | 2017 | ||||||
|---|---|---|---|---|---|---|---|
| Staff by diversity trait | Executives | White-collar | Blue-collar | Executives | White-collar | Blue-collar | |
| Gender | |||||||
| Male | 65.5% | 31.2% | 50% | 65.5% | 29.6% | 55.2% | |
| Female | 34.5% | 68.8% | 50% | 34.5% | 70.4% | 44.8% | |
| Age group | |||||||
| Less than 30 | 0.0% | 34.7% | 10.7% | 6.8% | 33.9% | 13.8% | |
| Between 30 and 50 | 55.2% | 56.2% | 60.7% | 51.6% | 58.2% | 54.4% | |
| Over 50 | 44.8% | 9.1% | 28.6% | 41.3% | 7.8% | 27.7% | |
| Total | 4.9% | 90.4% | 4.7% | 5.1% | 89.8% | 5.1% |
Just as it does every year, the Group renews its commitment to its ethical values of social responsibility by hiring 21 people belonging to the so-called protected categories (10 women and 11 men).
| Staff belonging to protected | 2018 | 2017 | |||
|---|---|---|---|---|---|
| categories (No.) | Male | Female | Male Female |
||
| Classification | |||||
| Executives | - | - | - | - | |
| White-collar | 9 | 6 | 9 | 5 | |
| Blue-collar | 2 | 4 | 2 | 5 | |
| Total | 11 | 10 | 11 | 10 |
Also with respect to involving the Group's licensees in its business, the Ethic Code of Conduct for sourcing centres demands that they select their employees solely on the basis of their ability to perform their duties. Sourcing centres are barred from discriminating by age, gender, motherhood, marital status, citizenship, cultural and religious attributes or any other discriminatory criteria in hiring, setting compensation, dismissal or provision for old age.
As required by the Ethics Code, the Group has always been committed to the professional growth of its workers. Thus, it has adopted over the years a human resources management policy designed to develop human capital and has assigned a strategic role to occupational training of its workers in this regard. In accordance with this policy, a ".com" called BasicEducation is in charge of planning, organising and reporting on the training of Group employees and promoting the development of human resources.
Training begins on the very day new employees are hired, when they are handed an information sheet with the Code's rules on personal data privacy (Legislative Decree no. 196 of 30/6/2003), the Group's Ethics and Conduct Code, an information brochure on health and safety, and a statement to sign whereby they consent to audio-video recording pursuant to section 13 Legislative Decree 196/2003, independently of their role, participating at the week-long introductory course ("Welcome on Board"). During this initial week, new employees are provided with an overview of Group operations and of the business model, and are also presented the company benefits and instruments, including regarding the IT systems (e.g. the stamping system, how to request leave, absences from work etc.).
Each year BasicEducation prepares a Group Training Plan, which is then loaded into the section of the system dedicated to each individual employee. The training activities performed are identified on the basis of legislative requirements (e.g., Legislative Decree No. 81/2008), the working needs indicated by employees and updates on processes, in accordance with the Group's policies.
The project aimed at preparing resources working at monobrand stores for the constant updating of the Group's human resources also continued in 2018. In 2018 the Group provided over 4,800 hours of training to its human resources, involving a total of 683 trainees. Of these hours, 4% regarded Health and Safety training (Legislative Decree No. 81/2008), whereas the remainder related to IT, languages, the Ethics Code business model etc.
| Hours of training provided | 2018 | 2017 | |
|---|---|---|---|
| Total hours of training | 4,888 | 4,413 | |
| of which, in the classroom |
3,02 | 3,760 | |
| of which, online | 1,586 | 653 | |
| % of hours of training financed1 | 14% | 6.3% |
1 Training activities for which funding was requested from the "Fondo Interprofessionale Fondimpresa".
All Group employees have access to two training channels - the e-learning platform and classroom training. Support at the Group brand sales points for business model-focused and pv management training is also provided. Courses are both individual and Group-based.
| 2018 | 2017 | |||
|---|---|---|---|---|
| Training by classification and gender | Resources trained |
Average hours per capita |
Resources trained |
Average hours per capita |
| (no.) | (**) | (no.) | (*) | |
| Executives | 22 | 1.5 | 14 | 0.5 |
| Male | 17 | 2.1 | 9 | 0.6 |
| Female | 5 | 0.3 | 5 | 0.3 |
| White-collar | 637 | 9.1 | 452 | 8.9 |
| Male | 197 | 9.6 | 122 | 11.6 |
| Female | 440 | 8.9 | 330 | 7.7 |
| Blue-collar | 24 | 1.3 | 13 | 3.3 |
| Male | 12 | 1.9 | 9 | 6.0 |
| Female | 12 | 0.7 | 4 | - |
| Total | 683 | 8.4 | 479 | 8.1 |
| of which, women | 457 | 8.5 | 339 | 7.2 |
* Average per capita hours are calculated considering the average number of resources in each professional category during the year of reference
* Average per capita hours are calculated considering the number of resources in each professional category during the year of reference
In order to promote training ensuring the ongoing update of staff on specific operational demands, the action areas were broadened. For 2018, the update programmes mainly concerned international expansion, with English and Spanish courses, and IT, software graphics and network rendering and management. These courses were undertaken with the support of funding from the "Fondimpresa" Interprofessional Fund.
Any updates to company processes are provided through dedicated modules and preferentially through the e-learning channel.
In order to maximize the well-being of company personnel, in 2004 the Group began to take various measures aimed at meeting the needs of all resources and ensuring work-life balance, such as:
The Group seeks to promote work-life balance through the extension of the post-maternity part-time option provided for in the National Collective Labour Agreement, with the possibility of applying for the programme until the child's six birthday. Part-time requests are also generally accepted without reference to the percentage envisaged in the National Collective Labour Agreement. In 2018 twelve resources – all women – took parental leave.
An automatic system with two-year intervals ensures a periodic performance assessment and a revision of positions, where necessary.
The collective bargaining agreement applied by the BasicNet Group is the Contract for Distribution and Services, which covers approximately 97% of employees, i.e. the entire company population based in Italy under permanent contracts.
As mentioned above, according to the Ethic Code of Conduct, Sourcing Centers are also required to pay their workers' salaries and compensation that comply with all locally applicable laws and regulations. Sourcing Centers are thus required to refer to all laws and regulations regarding working hours and to guarantee workers' the rights of association, organization and collective bargaining, peacefully and legally, without interference or penalty.
As stated in the Ethics Code, the Group has always safeguarded health and safety in the workplace for all human resources. In fact, in this regard, the parent company and its subsidiaries have developed a "risk assessment document" pursuant to Legislative Decree 81/2008. (the companies Basic Properties America Inc. and BasicNet Asia Ltd. were not subject to the decree's controls). The Group's conduct principles in terms of Health and Safety in the workplace, (hereinafter SSL), are listed in the Ethics Code and govern the conduct with which all resources, employees and external consultants are required to be compliant. The Group safeguards health and safety at places of work, developing an awareness of risks, promoting responsible conduct amongst all employees and acts to protect, particularly by preventative actions, employee health and safety. The Group's activities must be carried out in full compliance with health and safety prevention and protection legislation, whilst constantly seeking to improve health and safety conditions in the workplace.
In compliance with the training programmes, instructions and the resources provided by the employer, each employee is responsible for his/her own health and safety as well as the health and safety of other persons present in the workplace, due to the potential impact of his/her actions or omissions on these other employees.
As already described, even with regard to the Sourcing Centers involved in the Group's business activities, the Group's Ethic Code of Conduct requires that "the Sourcing Centres maintain a clean, safe and healthy workplace in compliance with all legislation and applicable laws. The Sourcing Centres shall ensure the presence of minimum conditions such as employee access to drinking water, sanitary structures and a sufficient number of toilet facilities, extinguishers, emergency exits and a properly insulated and correctly lit workplace environment. The Sourcing Centres shall ensure that the standards outlined above are applied equally to any canteen facilities and/or accommodation provided to employees".
For all the Group Companies, the ".com" "BasicFacility" is responsible for the management of health and safety in the workplace, and is supported in this by an external consultancy firm (Gruppo Torinoprogetti S.r.l.). On an annual basis, BasicFacility is allocated a budget which includes the item "SSL expenses" available for the Companies BasicNet, BasicItalia and BasicVillage, who individually itemise expenses of BasicRetail (direct management).
For each company, the Group has identified and formally appointed individuals to SSL tasks and responsibilities ("Company Health & Safety Organisation Chart"), and these related contacts are listed in the Health and Safety Organisation chart presented in the risk assessment document (DVR). Specifically, for the companies the following individuals were identified:
The SSL organisational structure is communicated internally within the Group's Companies through information given to employees when drafting their contracts or during training/information meetings.
SSL personnel meet annually (pursuant to article 35 of Legislative Decree 81/2008) to identify and share information regarding sensitive situations and to identify potential corrective actions. Each meeting is duly formalised by the online business BasicFacility and BasicGuys of the Group and the related reports are shared with relevant parties. The following participate in the meetings:
Furthermore, a person responsible for fire prevention requirements has also been identified and emergency coordinators and officers responsible for managing emergencies have been formally appointed. Each person in the emergency team has undergone specific training procedures in accordance with the applicable Art. 37 of Legislative Decree 81/2008.
The Group has established and formalised a Risk Assessment Document (DVR) drafted in accordance with current legislation. The risk assessment process was set out as a logical procedure and can be summarised in the following steps:
Within each DVR, the risk assessment methods are defined in terms of general and specific risks under the paragraph "Risk assessment criteria used". Each DVR includes:
In drafting the emergency plans, the Group defined formal rules to manage emergencies, identifying the intervention procedures, from the implementation of fire prevention procedures to the evacuation of employees in the case of serious and imminent danger – "Procedures to be implemented in the case of emergency and evacuation scenarios". Emergency drills are regularly carried out across various company sites in compliance with legislative requirements and the persons responsible for fire prevention as well as first aid first-aid personnel undergo a specific training programme.
In relation to SSL training, the online business "BasicEducation" is responsible for planning, organising and reporting the Group's employee training programmes (internal resources and personnel in owned and non-owned stores). The health and safety training programmes are drawn up by the BasicNet Group's Workplace Health and Safety Coordinator in conjunction with the Gruppo Torino Progetti S.r.l. and include:
At the end of every course, all participants are registered and where required an assessment test is carried out. Each resource has the option to access the BasicEducation app, and can see their own "training licence" with details of the courses taken/to be taken.
All the training courses delivered by BasicEducation are based on both legislative and individual requirements in addition to the Company's professional requirements (e.g. Legislative Decree 81 2008).
The BasicNet Group, when it allocates employees, services and supplies to contractors, is responsible for providing these parties with information on the specific risks present in the workplace where they are going to work, as well as for providing information on the applicable preventative and emergency measures related to their work in compliance with the provisions of Art. 26 of Legislative Decree 81/2008.
The ".com" BasicGuys tracks all accidents and incidents that arise at the company. Incidents are analysed on an annual basis and the results of these analyses are discussed during regular meetings pursuant to Article 35 of Legislative Decree 81/2008.
In 2018, there were no reports of occupational illnesses, nor were there any fatal incidents or incidents with permanent damage reported.
In Italy, in 2018 there were 8 workplace accidents, 5 of which were accidents during commutes to/from the workplace and 3 accidents in the workplace itself1 .
| Number of accidents 2018 – Italy | ||||
|---|---|---|---|---|
| Male | Female | Total | ||
| Total accidents (No.) | 2 | 6 | 8 | |
| workplace accidents (No.) | - | 3 | 3 | |
| accidents on commute (No.) | 2 | 3 | 5 | |
| Severity Index (Lost Day Rate LDR)2 | 6.91 | 14.23 | 11,78 | |
| Frequency Index/Accident Rate (Injury Rate IR)3 | 1.20 | 1.88 | 1.65 | |
| Absentee Rate AR4 (%) |
2.76% | 3.79% | 3.44% | |
| Number of accidents 2017 – Italy | ||||
| Male | Female | Total | ||
| Total accidents (No.) | 1 | 6 | 7 | |
| workplace accidents (No.) | - | 2 | 2 | |
| accidents on commute (No.) | 1 | 4 | 5 | |
| Severity Index (Lost Day Rate LDR) | 3.3 | 27.9 | 19.7 | |
| Frequency Index/Accident Rate (Injury Rate IR) | 0.64 | 2.02 | 1.54 | |
| Absentee Rate AR (%) | 1.2% | 2.2% | 1.9% |
Throughout 2018, the Companies of the Basic Group continued with the Prevention and Protection Service (Gruppo Torinoprogetti S.r.l.), through a number of health and safety projects aimed at promoting an increased awareness amongst employees regarding looking after their own health, including outside the work environment. The projects launched in 2017 continued into 2018 to ensure that over time information is delivered to all resources and will include any potential new hires.
Every intervention to promote health was firstly developed as a step towards disseminating information, starting from drawing up a procedure to manage the actual process for disseminating information, the timelines and the target audience of the given project. Moreover, each health promotion intervention was supported by information materials drafted by official bodies, for example the Ministry of Health, to ensure accurate and valid content.
1 The absentee rate is not currently available for overseas personnel. 2
The Severity Index represents the ratio between the number of days lost due to accidents/occupational illness and the total workable hours during the same period, multiplied by 200,000 (Source: GRI standards 2016)
3 The Frequency Index represents the ratio between the total number of accidents and the total number of days worked during the same period,
multiplied by 200,000 (Source: GRI standards 2016)
4 Absentee rate represents the total percentage of absentee hours out of the number of workable hours during the same period (Source: GRI standards 2016)
The following initiatives were developed and implemented in 2018:
Finally, in 2017, in order to protect employee health as well as the health of the general population, it was decided to install AEDs (automated external defibrillator) at the Company premises to ensure cardio protection zones in the immediate areas close to the installation points. In addition, employees in 2018 were trained on the correct use of this equipment.
Environmental protection is a key factor in the Group's competitiveness and sustainability, as the Group believes that the environment and nature are fundamental values and assets that belong to everybody which should be protected and defended. As also stated in the Ethics Code, this respect of the environment is primarily consolidated in dutiful and scrupulous compliance with environmental regulations. Secondly, the Group is committed to implementing responsible environmental-protection behaviours, avoiding any behaviour that may damage the environment as well as promoting the responsible management of the energy resources and raw materials used (e.g. paper), as well as waste products.
As provided under the Ethics Code of Conduct, the Sourcing Centres are also required to comply with all environmental laws and regulations, as well as maintaining procedures to notify the local Authorities in a timely manner of any environmental incidents arising from the work carried out by the Sourcing Centres.
The energy resources analysed relate to the 4 physical headquarters and the 32 franchisees i.e. directly owned stores of the BasicRetail S.r.l subsidiary located across Italy.
The physical sites include:
33 Franchisees located throughout Italy, owned by BasicRetail S.r.l.;
the overseas branch of BasicNet Asia Ltd. (Hong Kong, China) is less important from an energy point of view, as having only a handful of rented premises with 15 employees.
In relation to the two headquarters in Turin, where 579 out of 596 employees work (97% of the Group's total workforce), the ".com" "BasicFacility" in recent years launched some initiatives to reduce energy consumption including:
With regard to the energy resources used internally within the Group, all the stores and the two Turin headquarters purchase their energy directly from the grid, but only the two Turin headquarters use respectively natural gas (BasicVillage headquarters) and oil (BasicItalia headquarters) to heat their premises. In 2018 the total electric energy consumption dropped by 6% compared to 2017, whereas the consumption of natural gas and heating oil increased respectively by 7% and 22%. A minor portion of internal energy consumption can also be attributed to the use of fuels (petrol and diesel) by the Group's fleet of vehicles, which includes company cars and long-term leased vehicles. This has seen an increase in terms of diesel and petrol consumption respectively of 22% and 7%.
In 2018, the Group's energy consumption produced greenhouse gas emissions, which, compared to 2017, increased in percentage terms. Specifically, most of the greenhouse gases were from the electricity supplied from the grid (indirect emissions - Scope 2, calculated using a Location-based method rather than a Market-based method), which declined by 10% with the location approach and 4% with the market approach compared to 2017. On the other hand, direct emissions generated directly within the Group from the use of heating and vehicle fuels (direct emissions - Scope 1), represent a minor proportion of emissions. The emissions from the use of natural gas and heating oil increased by 12% compared to 2017, in line with the related energy consumption.
Internal and external energy consumption for the BasicNet Group in 2018 and 20175
| Energy sources | 2018 | 2017 | Change % |
|---|---|---|---|
| Internal energy consumption6 | |||
| Electrical energy purchased from the grid | 4,822,043 kWh | 5,137,356 kWh | |
| (17,359 GJ) | (18,494 GJ) | -6% | |
| Heating | |||
| Natural gas | 180,643 smc | 168,915 smc | |
| (6,324 GJ) | (5,914 GJ) | 7% | |
| Diesel | 63,000 litres | 51,485 litres | |
| (2,262 GJ) | (1,849 GJ) | 22% | |
| Vehicles7 | |||
| Petrol for vehicles | 22,428 litres | 17,634 litres | 22% |
| (408 GJ) | (336 GJ) | ||
| Diesel for vehicles | 35,301 litres | 30,729 litres | 7% |
| (852 GJ) | (797 GJ) | ||
| Total internal energy consumption | 27,205 GJ | 27,390 GJ | -1% |
| CO2 emissions (ton CO2)8 | 2018 | 2017 | Change % |
|---|---|---|---|
| Scope 1 emissions9 | 615 | 551 | 12% |
| Due to heating | 523 | 468 | 12% |
| Due to vehicles Scope 2 emissions10 |
92 | 83 | 11% |
| Location-based Approach | 1,736 | 1,927 | -10% |
| Market-based Approach | 2,300 | 2,389 | -4% |
5 Electricity consumption only relates to the two Turin headquarters (BasicVillage and BasicItalia), where 99% of the total workforce work, BasicNet Asia, in addition to the 32 directly owned stores in Italy.
8 For calculations of the Scope 1 and Scope 2 emissions, only CO2 emissions were taken into account.
6 The Net Calorific value of natural gas is 0.035 GJ/m3, average density of diesel is 0.83 kg/l, the Net Calorific value of diesel is 42.817 GJ/ton, average density of petrol is 0.68 kg/l, Net Calorific value of petrol is 42.817 GJ/ton (Sources: Ministry of the Environment and for the Protection of the Land and Seas, National Standards Parameter Table, 2017; Department for Environment, Food & Rural Affairs, Conversion factors 2017 - Condensed set, 2017).
7 The consumption of vehicle petrol and diesel was estimated under the item vehicle fuel expenses using the average national prices for 2018 of €1.60 per litre of petrol and €1.49 per litre of diesel (Source: Ministry for Economic Development, Average National Annual Price index 2018).
9 Natural gas emission coefficient of 0.001972 tCO2/smc, diesel emission coefficient of 3.155T tCO2/ton, petrol emission coefficient of 3.14 tCO2/ton (source: Ministry for the environment and the protection of the Land and Sea, National Standards Parameter Table, 2018).
10 The reporting standard used (GRI sustainability reporting standards 2016) establishes two different calculation methods for Scope 2 emissions: "Location-based " and "Market-based ". The location-based method requires the use of the average national emission factor related to the specific national energy mix used to produce electricity (the coefficient of the emission used for Italy is 360 gCO2/kWh, Source: Terna, International Comparisons 2016). The market-based approach uses an emission factor based on the contractual agreement for the provision of electricity. Given the absence of specific electricity agreements between the companies of the Group and the suppliers (e.g. a Guarantee of origin purchase), for this calculation an emission factor related to the national "residual mix" was used (coefficient of emissions used for Italy of 477 gCO2/kWh – Source: Association of Issuing Bodies, European Residual Mixes 2017, 2017).
As the Group does not have its own internal production activity, the main waste produced by the Group's activities come under the conventional categories of typical office-waste: paper and cardboard, photocopier and printing toners, batteries. All waste products are collected and sent to waste management operators, according to the procedures and timeframes of current legislation and based on waste categories: while paper and cardboard, plastic, and batteries are collected and processed in the appropriate waste management sites via waste containers (54,065 kg of waste of non-hazardous waste and 156 kg of hazardous waste), toners are collected by third-party waste processing companies. In terms of paper consumption, through the web integration, since 1999 the Group has committed to reducing paper usage by means of the IT platform, which is the only communication instrument between the elements within the Network (from procedural controls to HR management). The Group also utilises a scanner archive system throughout the operating cycle, for the majority of accounting records and ledgers and payroll management. With the entry into force of the electronic invoicing obligation, in 2019 many storage processes shall be reviewed in order to reduce the use of paper. Both hazardous and nonhazardous waste significantly reduced on 2017.
| Type of waste (KG) | 2018 | 2017 | Change % |
|---|---|---|---|
| Non-hazardous waste | |||
| Paper and cardboard | 51,250 | 60,140 | -15% |
| Toner | 181 | 234 | -23% |
| Plastics | 2,634 | 988 | 167% |
| Total | 54,065 | 61,362 | -12% |
| Hazardous waste | |||
| Batteries | 156 | 138 | 13% |
| Total | 156 | 138 | 13% |
| Total waste | 54,221 | 61,500 | -12% |
| BasicNet Group waste products, year 2018 and 201711 | ||||
|---|---|---|---|---|
| -- | ----------------------------------------------------- | -- | -- | -- |
11 The weight of batteries was estimated based on the weight (in kg) of a battery and the number of batteries disposed of during the year. The weight of plastic was estimated on the basis of the weight (in kg) of bottles of water and the number of bottles disposed of during the year. The 2018 figures compared to those for 2017 include also the weight of plastic from plastic glass consumption of the companies BasicNet/Basic Village and BasicItalia during the reporting period. The weight of toner was extrapolated from the formulas of the company specialised in toner disposal. The weight of paper/cardboard was extrapolated from the communications of the company in charge of paper and cardboard disposal.
The following table outlines the sustainability issues that the Group BasicNet deems of relevance, correlated to the elements defined in the GRI standards guidelines reported in this document as well as the Boundary impact that each issue could have in within the Group for the relevant stakeholders. Furthermore, in the column "Type of impact", the role BasicNet plays in relation to the impact caused to each relevant issue is also outlined.
| Material aspects | GRI Standards aspects | Boundary | Type of impact |
|---|---|---|---|
| Ethics and | - Anti-competitive |
BasicNet Group; Suppliers; | Caused by the Group |
| Compliance | conduct | Sourcing Centers; Licensees; | |
| Public Sector, government and | |||
| - Environmental |
|||
| Compliance | control bodies | ||
| - Socio-economic |
|||
| compliance | |||
| Anti-corruption | Anti-corruption - |
BasicNet Group; Investors, | Caused by the Group |
| Shareholders and the financial | |||
| community; Suppliers; Sourcing | |||
| Centers; Licensees; Public | |||
| Sector; government and control | |||
| bodies | |||
| Promotion of | Indirect economic - |
BasicNet Group; Sourcing | Caused by the Group |
| economic | impacts | Centers; Licensees; Franchisees; | |
| development | local communities | ||
| R&D and Innovation | n/a | BasicNet Group; Sourcing | Caused by the Group |
| Centers; Licensees; Customers | |||
| and consumers | |||
| Procurement | - Assessment of |
BasicNet Group; Suppliers; | Contribution of the Group; |
| practices | suppliers according to | Sourcing Centers | Related to Group activities |
| social criteria | |||
| - Assessment on the |
|||
| protection of human | |||
| rights | |||
| Data Security and | - Customer privacy |
BasicNet Group; Sourcing | Caused by the Group; |
| Protection | Centers; Licensees | Related to Group activities | |
| Prevention of | - Marketing and |
BasicNet Group; Sourcing | Caused by the Group; |
| Counterfeiting | labelling | Centers; Licensees; Customers | Related to Group activities |
| and consumers; Franchisees | |||
| Customer Relations | n/a | BasicNet Group; Customers and | Caused by the Group; |
| consumers; Franchisees | |||
| Management and | - Employment |
BasicNet Group; Group | Caused by the Group |
| development of | - Training and |
Resources; Franchisees | |
| human resources | education | ||
| Diversity and equal | - Diversity and equal |
BasicNet Group; Group | Caused by the Group |
| opportunities | opportunities | Resources; Franchisees | |
| - Non-discrimination |
|||
| Worker Wellbeing | - Employment |
BasicNet Group; Group | Caused by the Group |
| Resources; Franchisees | |||
| Employee Health and | - Workplace health and |
BasicNet Group; Group | Caused by the Group; |
| Safety | safety | resources; Suppliers; Sourcing | Related to Group activities |
| Centers; Licensees; Franchisees | |||
| Human Rights | Assessment on the - |
BasicNet Group; Group | Related to Group activities |
| protection of human | resources; Suppliers; Sourcing | ||
| rights | Centers; Licensees; Franchisees | ||
| Efficient Use of | - Energy |
BasicNet Group; Public Sector, | Caused by the Group |
| Natural Resources | government and control bodies; | ||
| Emissions | BasicNet Group; Public Sector, | Caused by the Group | |
| Environmental | - | ||
| protection | - Effluents and waste |
government and control bodies; | |
| local communities |
The performance indicators, in compliance with the GRI Standards according to the in accordance - Core option, are provided below. Each indicator is linked with a specific section of the Non-Financial Report or a differing publicly available source to which reference should be made.
| GRI-Standards | Page | Note 12 | |
|---|---|---|---|
| GRI 102: GENERAL STANDARD DISCLOSURES | |||
| Organisational profile | |||
| 102-1 | Name of the organization | 5 | |
| 102-2 | Activities, brands, products, and services |
5-7; 11 | |
| 102-3 | Location of headquarters | 5 | |
| 102-4 | Countries of operation | 5; 7-9; 11 | |
| 102-5 | Nature of ownership and legal form | 29-32 | |
| 102-6 | Markets served | 7-9; 10-11 | |
| 102-7 | Scale of the organization | 11-17; 67 | |
| 102-8 | Information on employees and other workers |
67-68 | |
| 102-9 | Supply chain | 63-65 | |
| 102-10 | Significant changes to the Organisation and its supply chain |
59 | |
| 102-11 | Precautionary principle or approach | 43-45 | |
| 102-12 | External initiatives | 59 | |
| 102-13 | Membership of associations | 60 | |
| Strategy | |||
| 102-14 | Statement of the Chairman/Chief Executive Officer |
3-4 | |
| 102-15 | Key impacts, risks and opportunities |
18-21; 43-45 | |
| Ethics and integrity | |||
| 102-16 | Values, principles, standards and norms of behaviour |
47-49 | |
| Governance | |||
| 102-18 | Governance structure | 32-34; 38-40 | |
| Stakeholder Engagement | |||
| 102-40 | List of stakeholder groups | 59-60 | |
| 102-41 | Collective bargaining agreements | 71 | |
| 102-42 | Identifying and selecting stakeholders |
59-60 | |
| 102-43 | Approach to stakeholder engagement |
59-60 | |
| 102-44 | Key topics and concerns raised | 60 | |
| Reporting process | |||
| 102-45 | Entities included in the consolidated financial statements |
59 | |
| 102-46 | Defining report content and topic Boundaries |
58-59; 61 | |
| 102-47 | List of material topics | 60-61 | |
| 102-48 | Restatements of information | 59 | |
| 102-49 | Changes in reporting | 59 | No significant changes in relation to the material topics and their scope took place in 2018 |
12 The "Notes" column presents information on the coverage of the indicators and any limitations to the reporting boundary.
| 102-50 | Reporting period | 58 | |
|---|---|---|---|
| 102-51 | Date of most recent report | 58 | |
| 102-52 | Reporting cycle | 59 | |
| Contact point for questions | |||
| 102-53 | regarding the report | 58-59 | |
| 102-54 | GRI Guidelines compliance option | 58 | |
| 102-55 | GRI Content Index | 81-85 | |
| 102-56 | External assurance | 86 | |
| SPECIFIC STANDARD DISCLOSURES | |||
| ECONOMIC CATEGORY | |||
| Indirect economic impacts | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
61-63 | |
| 103-3 | Evaluation of the management approach |
62-63 | |
| GRI 203: Indirect economic impacts | |||
| 203-2 | Significant indirect economic impacts |
61-63 | |
| Anti-corruption | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
48-49 | |
| 103-3 | Evaluation of the management approach |
48-49 | |
| GRI 205: Anti-corruption | |||
| 205-2 | Communication and training about anti-corruption policies and procedures |
49 | |
| Anti-competitive conduct | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
46; 63 | |
| 103-3 | Evaluation of the management approach |
46; 63 | |
| GRI 206: Anti-competitive conduct | |||
| 206-1 | Legal actions for anti-competitive behavior, anti-trust, and monopoly practices |
81 | As for 2017, no legal actions for anti competitive behavior, anti trust, and monopoly practices were reported |
| ENVIRONMENTAL CATEGORY | |||
|---|---|---|---|
| Energy | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
75-76 | |
| 103-3 | Evaluation of the management approach |
75-76 | |
| GRI 302: Energy | |||
| 302-1 | Energy consumption within the organization |
77 | The energy consumption does not include the overseas offices of the Group as not considered significant |
| Emissions | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
75-76 | |
| 103-3 | Evaluation of the management approach |
75-76 | |
| GRI 305: Emissions | |||
| 305-1 | Direct (Scope 1) GHG emissions | 77; 82 | The direct GHG emissions (Scope 1) do not include the overseas offices of the Group as not considered significant. |
| 305-2 | Energy indirect (Scope 2) GHG emissions |
77; 82 | The indirect GHG emissions (Scope 2) do not include the overseas offices of the Group as not considered significant. |
| Effluents and waste | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
78 | |
| 103-3 | Evaluation of the management approach |
78 | |
| GRI 306: Effluents and waste | |||
| 306-2 | Waste by type and disposal method | 78; 82 | The waste products do not include the overseas offices of the Group as not considered significant. |
| Environmental Compliance | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
75 | |
| 103-3 | Evaluation of the management approach |
75 |
| GRI 307: Environmental Compliance | |||
|---|---|---|---|
| 307-1 | Non-compliance with environmental laws and regulations |
83 | As in 2017, no significant incidents of non compliance with environmental laws and regulations were reported. |
| SOCIAL CATEGORY | |||
| Employment | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
67; 68; 71 | |
| 103-3 | Evaluation of the management approach |
67; 68; 71 | |
| GRI 401: Employment | |||
| 401-1 | New employee hires and employee turnover |
68 | |
| 401-2 | Benefits provided to full-time employees that are not provided to temporary or part-time employees |
71 | |
| Workplace health and safety | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
75-76 | |
| 103-3 | Evaluation of the management approach |
75-76 | |
| GRI 403: Workplace health and safety | |||
| 403-2 | Types of injury, injury rate, occupational illnesses, lost days, absentee rate, and work-related fatalities. |
74; 83 | The absentee rate is not currently available for overseas personnel. |
| Training and education | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
69 | |
| 103-3 | Evaluation of the management approach |
69 | |
| GRI 404: Training and education | |||
| 404-1 | Average hours of training per year per employee |
70-71 | |
| 404-2 | Programs for upgrading employee skills and transition assistance programs |
70-71 | |
| Diversity and equal opportunities | |||
| GRI 103: Managerial approach | |||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | |
| 103-2 | The management approach and its components |
35; 68-69 | |
| 103-3 | Evaluation of the management approach |
35; 68-69 |
| GRI 405: Diversity and equal opportunities | ||||
|---|---|---|---|---|
| 405-1 | Diversity of governance bodies and employees |
35; 69 | ||
| Non-discrimination | ||||
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
68 | ||
| 103-3 | Evaluation of the management approach |
68 | ||
| GRI 406: Non-discrimination | ||||
| 406-1 | Incidents of discrimination and corrective actions taken |
84 | As for 2017 no cases of discrimination were reported in 2018 at the Group. |
|
| Assessment on the protection of human rights | ||||
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
46; 64-65 | ||
| 103-3 | Evaluation of the management approach |
46; 64-65 | ||
| GRI 412: Assessment on the protection of human rights | ||||
| 412-2 | Employee training on human rights policies or procedures |
47 | ||
| 412-3 | Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening |
64-65 | ||
| Assessment of suppliers according to social criteria | ||||
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
63; 65 | ||
| 103-3 | Evaluation of the management approach |
63; 65 | ||
| GRI 414: Assessment of suppliers according to social criteria | ||||
| 414-1 | New suppliers that were screened using social criteria |
64-65 | ||
| Marketing and labelling | ||||
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
66-67 | ||
| 103-3 | Evaluation of the management approach |
66-67 | ||
| GRI 417: Marketing and labelling | ||||
| 417-1 | Requirements for product and service information and labeling |
67 |
| Customer privacy | ||||
|---|---|---|---|---|
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
65 | ||
| 103-3 | Evaluation of the management approach |
65 | ||
| GRI 418: Customer privacy | ||||
| 418-1 | 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data |
85 | As for 2017, no complaints against privacy violation were received |
|
| Socio-economic compliance | ||||
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
45 | ||
| 103-3 | Evaluation of the management approach |
45 | ||
| GRI 419: Socio-economic compliance | ||||
| 419-1 | Non-compliance with laws and regulations in the social and economic area |
22 | ||
| R&D and Innovation | ||||
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
24-25 | ||
| 103-3 | Evaluation of the management approach |
24 | ||
| Client Relations | ||||
| GRI 103: Managerial approach | ||||
| 103-1 | Explanation of the material topic and its Boundary |
59-61; 80 | ||
| 103-2 | The management approach and its components |
63-65; 66-67 | ||
| 103-3 | Evaluation of the management approach |
63-65; 66-67 |
In accordance with Consob Resolution No. 15519 of July 27, 2006 the transactions with related parties are described at Note 45.
| Not e |
FY 2018 | FY 2017 | Changes | ||||
|---|---|---|---|---|---|---|---|
| % | % | % | |||||
| Consolidated direct sales Cost of sales |
(8) (9) |
155,615 (91,542) |
100.00 (58.83) |
135,583 (81,065) |
100.00 (59.79) |
20,032 (10,477) |
14.78 (12.92) |
| GROSS MARGIN | 64,073 | 41.18 | 54,518 | 40.21 | 9,555 | 17.53 | |
| Royalties and sourcing commissions | (10) | 54,832 | 35.24 | 47,924 | 35.35 | 6,908 | 14.42 |
| Other income | (11) | 3,053 | 1.96 | 3,639 | 2.68 | (586) | (16.10) |
| Sponsorship and media costs | (12) | (25,650) | (16.48) | (24,627) | (18.16) | (1,023) | (4.15) |
| Personnel costs | (13) | (23,074) | (14.83) | (21,083) | (15.55) | (1,991) | (9.44) |
| Selling, general and administrative costs, | |||||||
| royalties expenses | (14) | (40,205) | (25.84) | (37,310) | (27.52) | (2,895) | (7.76) |
| Amortization & depreciation | (15) | (6,448) | (4.14) | (6,419) | (4.73) | (29) | (0.45) |
| EBIT | 26,581 | 17.08 | 16,642 | 12.27 | 9,939 | 59.73 | |
| Net financial income (charges) Share of profit/(loss) of investments valued |
(16) | (1,157) | (0.74) | (1,553) | (1.15) | 396 | 25.50 |
| at equity | (17) | (23) | (0.02) | (26) | (0.02) | 3 | 11.54 |
| PROFIT BEFORE TAXES | 25,401 | 16.32 | 15,063 | 11.11 | 10,338 | 68.63 | |
| Income taxes | (18) | (4,387) | (2.82) | (4,417) | (3.26) | 30 | 0.68 |
| NET PROFIT FOR THE YEAR | 21,014 | 13.51 | 10,646 | 7.85 | 10,368 | 97.39 | |
| Of which: | |||||||
| Shareholders of BasicNet - S.p.A. |
21,014 | 13.51 | 10,646 | 7.85 | 10,368 | 97.39 | |
| Minority interests - |
- | - | - | - | - | - | |
| Earnings per share basic - diluted - |
(19) | 0.4048 0.4048 |
0.1925 0.1925 |
0.212 0.212 |
110.33 110.33 |
(Euro thousands)
| Note | FY 2018 | FY 2017 |
|---|---|---|
| Profit for the year (A) | 21,014 | 10,646 |
| Effective portion of the Gains/(losses) on cash flow hedges |
1,468 | (2,154) |
| Re-measurement of post-employment benefits (IAS 19) (*) |
73 | (16) |
| Gains/(losses) from translation of accounts of foreign subsidiaries |
346 | (934) |
| Tax effect on other profits/(losses) | (370) | 518 |
| Total other gains/(losses), net of tax effect (B) (31) |
1,517 | (2,586) |
| Total Comprehensive Profit (A)+(B) | 22,531 | 8,060 |
| Total Comprehensive Profit attributable to: - Shareholders of BasicNet S.p.A. - Minority interests |
22,531 | 8,060 - |
(*) items which may not be reclassified to the profit and loss account
(Euro thousands)
| ASSETS | Note December 31, 2018 |
December 31, 2017 | |
|---|---|---|---|
| Intangible assets | (20) | 53,225 | 53,762 |
| Goodwill | (21) | 9,232 | 9,527 |
| Property, plant and equipment | (22) | 29,397 | 29,893 |
| Equity invest. & other financial assets | (23) | 1,048 | 661 |
| Interests in joint ventures | (24) | 243 | 266 |
| Total non-current assets | 93,145 | 94,109 | |
| Net inventories | (25) | 44,379 | 46,517 |
| Trade receivables | (26) | 69,880 | 58,578 |
| Other current assets | (27) | 8,820 | 6,636 |
| Prepayments | (28) | 9,368 | 7,876 |
| Cash and cash equivalents | (29) | 9,616 | 5,819 |
| Derivative financial instruments | (30) | 305 | 1 |
| Total current assets | 142,368 | 125,427 | |
| TOTAL ASSETS | 235,513 | 219,536 |
| LIABILITIES Note December 31, 2018 |
December 31, 2017 | ||
|---|---|---|---|
| Share capital | 31,717 | 31,717 | |
| Reserve for treasury shares in portfolio | (17,827) | (14,495) | |
| Other reserves | 78,033 | 69,143 | |
| Net Profit | 21,014 | 10,646 | |
| Minority interests | - | - | |
| TOTAL SHAREHOLDERS' EQUITY | (31) | 112,937 | 97,011 |
| Provisions for risks and charges | (32) | 50 | 42 |
| Loans | (33) | 22,217 | 28,430 |
| Employee and Director benefits | (35) | 4,040 | 3,534 |
| Deferred tax liabilities | (36) | 1,949 | 311 |
| Other non-current liabilities | (37) | 1,136 | 1,033 |
| Total non-current liabilities | 29,392 | 33,350 | |
| Bank payables | (34) | 39,080 | 38,869 |
| Trade payables | (38) | 38,280 | 33,869 |
| Tax payables | (39) | 2,133 | 3,231 |
| Other current liabilities | (40) | 9,624 | 7,951 |
| Accrued expenses | (41) | 3,631 | 3,656 |
| Derivative financial instruments | (42) | 436 | 1,599 |
| Total current liabilities | 93,184 | 89,175 | |
| TOTAL LIABILITIES | 122,576 | 122,525 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
235,513 | 219,536 |
(Euro thousands)
| December 31, 2018 | December 31, 2017 | |
|---|---|---|
| A) OPENING SHORT-TERM BANK DEBT | (25,946) | (21,338) |
| B) CASH FLOW FROM OPERATING ACTIVITIES | ||
| Net profit for the year | 21,014 | 10,646 |
| Amortization & depreciation | 6,448 | 6,419 |
| Result of companies valued under the equity method Changes in working capital: |
23 | 26 |
| . (Increase) decrease in trade receivables | (11,302) | (512) |
| . (Increase) decrease in inventories | 2,138 | 691 |
| . (Increase) decrease in other receivables | (3,677) | 3,291 |
| . Increase (decrease) in trade payables | 4,412 | 2,170 |
| . Increase (decrease) in other payables | 2,300 | (11,306) |
| Net change in post-employment benefits | ||
| 505 | 672 | |
| Others, net | 49 | (432) |
| 21,910 | 11,665 | |
| C) CASH FLOW FROM INVESTING ACTIVITIES | ||
| Investments in fixed assets: | ||
| - tangible assets | (2,801) | (2,548) |
| - intangible assets | (2,613) | (15,601) |
| - financial assets | (386) | (432) |
| Realisable value for fixed asset disposals: | ||
| - tangible assets | 255 | 89 |
| - intangible assets | 39 | 735 |
| - financial assets | - | - |
| D) CASH FLOW FROM FINANCING ACTIVITIES |
(5,506) | (17,757) |
| Lease contracts (repayments) | (168) | (609) |
| New medium/long term loans | - | 15,000 |
| Loan repayments Acquisition of treasury shares |
(7,104) (3,332) |
(6,978) (2,605) |
| Dividend payments | (3,273) | (3,324) |
| (13,877) | 1,484 | |
| E) CASH FLOW IN THE YEAR |
2,527 | (4,608) |
| F) CLOSING SHORT-TERM BANK DEBT |
(23,419) | (25,946) |
Interest paid for the year amounts to respectively Euro 706 thousand in 2018 and Euro 917 thousand in 2017, while income taxes paid in the year amount respectively to Euro 2.8 million in 2018 and Euro 2 million in 2017.
(Euro thousands)
| Reserves | Total Group | |||||||
|---|---|---|---|---|---|---|---|---|
| Share | Treasur | & Retained |
Translation reserve |
Remeas. Reserve |
Reserve cash flow |
Net Equity | ||
| Capital | y shares | earnings | IAS 19 | hedge | Net Result | |||
| Balance at December 31, 2016 | 31,717 | (11,890) | 62,594 | 1,920 | (196) | 430 | 10,305 | 94,880 |
| Allocation of result as per Shareholders' AGM resolution of April 27, 2017 |
||||||||
| - Retained earnings - Dividends distributed |
- - |
6,981 - |
- - |
- - |
- - |
(6,981) (3,324) |
- (3,324) |
|
| Acquisition of treasury shares | (2,605) | - | - | - | - | - | (2,605) | |
| 2017 Result | - | - | - | - | - | 10,646 | 10,646 | |
| Other comprehensive income items: | ||||||||
| - Gains/(losses) recorded directly to translation reserve |
- | - | (934) | - | - | - | (934) | |
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | (12) | - | - | (12) | |
| - Gains/(losses) recorded directly to cash flow hedge reserve |
- | - | - | - | (1,640) | - | (1,640) | |
| Total comprehensive income | - | - | (934) | (12) | (1,640) | 10,646 | 8,060 | |
| Balance at December 31, 2017 | 31,717 | (14,495) | 69,575 | 986 | (208) | (1,210) | 10,646 | 97,011 |
| Allocation of result as per Shareholders' AGM resolution of April 24, 2018 |
||||||||
| - Reserves & Retained earnings - Dividends distributed |
- - |
7,373 - |
- - |
- - |
- - |
(7,373) (3,273) |
- (3,273) |
|
| Acquisition of treasury shares | (3,332) | - | - | - | - | - | (3,332) | |
| 2018 Result | - | - | - | - | - | 21,014 | 21,014 | |
| Other comprehensive income items: | ||||||||
| - Gains/(losses) recorded directly to translation reserve |
- | - | 346 | - | - | - | 346 | |
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | 55 | - | - | 55 | |
| - Gains/(losses) recorded directly to cash flow hedge reserve |
- | - | - | - | 1,116 | - | 1,116 | |
| Total comprehensive income | - | - | 346 | 55 | 1,116 | 21,014 | 22,531 | |
| Balance at December 31, 2018 | 31,717 | (17,827) | 76,948 | 1,332 | (153) | (94) | 21,014 | 112,937 |
(Euro thousands)
| December 31, 2018 | December 31, 2017 | |
|---|---|---|
| Cash and cash equivalents | 9,616 | 5,819 |
| Bank overdrafts and bills | (10,735) | (11,516) |
| Import advances | (22,300) | (20,249) |
| Sub-total net liquidity available | (23,419) | (25,946) |
| Short-term portion of medium/long-term loans | (6,045) | (7,104) |
| Short-term net financial position | (29,464) | (33,050) |
| Intesa loan | - | (1,875) |
| Basic Village property loan | (3,300) | (4,500) |
| BasicItalia property loan | (1,525) | (1,932) |
| BNL loan | (3,750) | (5,000) |
| Banco BPM loan | (632) | (1,132) |
| MPS Loan | (12,187) | (13,000) |
| Leasing payables | (823) | (991) |
| Sub-total loans and leasing | (22,217) | (28,430) |
| Consolidated Net Financial Position | (51,681) | (61,480) |
The statement required by Consob Communication No. 6064293 of July 28, 2006 is reported below.
| December 31, 2018 | December 31, 2017 | ||
|---|---|---|---|
| A. | Cash | 112 | 107 |
| B. | Other cash equivalents | 9,504 | 5,712 |
| C. | Securities held for trading | - | - |
| D. | Cash & cash equivalents (A)+(B)+(C) | 9,616 | 5,819 |
| E. | Current financial receivables | - | - |
| F. | Current bank payables | (33,035) | (31,765) |
| G. | Current portion of non-current debt | (6,045) | (7,104) |
| H. | Other current financial payables | - | - |
| I. | Current financial debt (F)+(G)+(H) | (39,080) | (38,869) |
| J. | Net current financial debt (I)-(E)-(D) | (29,464) | (33,050) |
| K. | Non-current bank payables | (22,217) | (28,430) |
| L. | Bonds issued | - | - |
| M. | Fair value of hedges (cash flow hedges) | (130) | (1,598) |
| N. | Non-current financial debt (K)+(L)+(M) | (22,347) | (30,028) |
| O. | Net financial debt (J)+(N) | (51,811) | (63,078) |
The net financial debt differs from the consolidated net financial position for the fair value of the interest and currency hedging operations - cash flow hedges (Notes 30 and 42).
(Euro thousands)
| December 31, 2018 | December 31, 2017 | |
|---|---|---|
| A) OPENING NET FINANCIAL POSITION | (61,480) | (49,459) |
| B) CASH FLOW FROM OPERATING ACTIVITIES | ||
| Net profit for the year | 21,014 | 10,646 |
| Amortization & depreciation | 6,448 | 6,419 |
| Changes in working capital: | (6,128) | (5,667) |
| Net change in post-employment benefits | 505 | 672 |
| Others, net | 71 | (405) |
| 21,910 | 11,665 | |
| C) CASH FLOW FROM INVESTING ACTIVITIES | ||
| Fixed asset investments | (5,800) | (18,581) |
| Realisable value for fixed asset disposals | 294 | 824 |
| (5,506) | (17,757) | |
| D) CASH FLOW FROM FINANCING ACTIVITIES |
||
| Acquisition of treasury shares | (3,332) | (2,605) |
| Dividend payments | (3,273) | (3,324) |
| (6,605) | (5,929) | |
| E) CASH FLOW IN THE YEAR |
9,799 | (12,021) |
| F) CLOSING NET FINANCIAL POSITION | (51,681) | (61,480) |
BasicNet S.p.A. – with registered office in Turin, listed on the Italian Stock Exchange since November 17, 1999 and its subsidiaries, operate in the sports and casual clothing, footwear and accessories sector through the brands Kappa, Robe di Kappa, Jesus Jeans, K-Way, Superga, Sabelt, Briko and Sebago. Group activities involve the development of the value of the brands and the distribution of their products through a global network of independent licensees.
The duration of BasicNet S.p.A. is fixed by the company by-laws until December 31, 2050.
The publication of the consolidated financial statements of BasicNet as at December 31, 2018 was approved by the Board of Directors on March 8, 2019.
The main accounting principles adopted in the preparation of the consolidated financial statements and Group financial reporting are described below.
This document has been prepared in accordance with IFRS issued by the International Accounting Standards Board (IASB) and approved by the European Union. IFRS refers to all the revised International Accounting Standards (IAS) and all of the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") - previously known as the Standing Interpretations Committee ("SIC").
The financial statements are prepared under the historical cost convention (modified where applicable for the valuation of certain financial instruments), as well as on the going concern assumption.
The Group consolidated financial statements include the financial statements at December 31, 2018 of BasicNet S.p.A. and all the Italian and foreign companies in which the Parent Company holds control directly or indirectly. For the financial statements of the US, Asian and Dutch subsidiaries, which utilise local accounting standards, as not obliged to adopt IAS/IFRS, the appropriate adjustments were made for the preparation of the consolidated financial statements in accordance with international accounting standards.
The accounting policies utilised for the preparation of the Consolidated Financial Statements at December 31, 2018 are the same as those utilised for the previous year.
The Group has adopted IFRS 15 and IFRS 9 for the first time. The impact and the nature of the amendments following the adoption of these new accounting standards are illustrated below. Various amendments and interpretations were applied for the first time in the periods before January 1, 2018, although without any impact on the consolidated financial statements of the Group. The Group has not adopted in advance any standard, interpretation or amendment published but not yet in effect.
IFRS 15 replaces IAS 18 Revenues and the relative interpretations and is applied, with limited exceptions, to all revenues from contracts with customers. IFRS 15 establishes a five-step model for the recognition of revenues from contracts with customers and requires revenues to be recognised for an amount which reflects the payment which the entity considers itself to have the right to in exchange for the transfer of control of the goods or services to the customer.
IFRS 15 requires entities to assess all significant facts and circumstances when applying each step of the model to the contracts with customers. The standard also specifies the methods for recognition of incremental costs for obtaining a contract and costs directly related to the execution of a contract.
The Group has adopted the new standard utilising the modified application method.
These amendments did not impact the Group's revenues and income statement.
Under IFRS 15, the BasicNet Group continues to recognise a current liability and an asset under inventories against counter-entries, respectively, to product revenues for which returns are expected and to the relative cost of sales. The Group has not identified changes in the estimate of the variable amounts, utilising an approach based on the weighted average probability of the returns.
IFRS 9 - Financial instruments replaces IAS 39 - recognition and measurement from periods beginning January 1, 2018 and thereafter, aggregating the three aspects of the recognition of financial instruments: classification and measurement; impairment; and hedge accounting.
These amendments did not impact the Group's balance sheet and shareholders' equity.
Trade receivables are held until their collection at the contractual maturities of the cash flows relating to the collection of the principal and interest. The Group analysed the contractual cash flows of these instruments and concluded that they comply with the amortised cost measurement criteria in accordance with IFRS 9.
The adoption of IFRS 9 has substantially modified the recognition of impairment losses of the financial assets of the Group, replacing the approach of losses incurred by IAS 39 with an approach based on expected credit losses (ECL). IFRS 9 requires that the Group recognises a write-down equal to the ECL for all debt instruments not held at fair value recognised to the Income Statement and for the contractual activities.
The Group established that all existing hedges which are presently designated as effective hedges shall continue to qualify for hedge accounting in accordance with IFRS 9. Given that IFRS 9 does not amend the general principle on which an entity recognises effective hedges, the application of these requirements by IFRS 9 for the definition of the hedges did not have any impact on the financial statements of the Group.
The interpretation clarifies that, when defining the spot exchange rate to be used for the initial recognition of the related asset, costs or revenues (or part of these) at the time of derecognition of a nonmonetary asset or a non-monetary liability relating to advances on fees, the transaction date is the date on which the entity initially recognizes the non-monetary asset or the non-monetary liability relating to advances on fees. In the case of multiple payments or advances, the entity should define the transaction date for each payment or advance on consideration. This Interpretation had no impact on the Group consolidated financial statements.
The amendments clarify when an entity should transfer a building, including buildings under construction or development within or outside the Property investments account. The amendment establishes that a change of use occurs when the building satisfies, or ceases to satisfy, the definition of property ownership and demonstrates a change in use. A simple change in management's intentions with regards to the use of the building is not considered as proof of a change in use. These amendments do not have any impact on the Group consolidated financial statements.
The IASB issued amendments to IFRS 2 Share-based payments which concern three principal areas: the effects of a vesting condition on the measurement of a cash-settled share-based payment; the classification of an equity-settled share-based payment settled net of withholding tax obligations; the accounting where a change in the terms and conditions of an equity-settled share-based payment changes its classification from cash-settled to equity-settled. On its adoption, the entities must apply the amendments without restating the previous years, but the retrospective application is permitted if chosen for all three of the amendments and other criteria are satisfied.
These amendments do not have any impact on the Group consolidated financial statements.
The amendments seek to resolve issues arising from the adoption of the new standard on financial instruments, IFRS 9, before the adoption of IFRS 17 - Insurance Contracts, which replaces IFRS 4. The amendments introduce two options for entities that issue insurance contracts: a temporary exemption in the application of IFRS 9 and the overlay approach. These amendments are not significant for the Group.
The amendments clarify that a venture capital entity, or another qualified entity, may decide, at the time of initial recognition and with reference to the individual investment, to measure its investments in associates and joint ventures at fair value recognized to the Income Statement. These amendments are not significant for the Group.
The short-term exemptions under paragraphs E3-E7 under IFRS 1 have been cancelled as removed from its scope. This amendment had no impact on the Group consolidated financial statements.
The standards and interpretations which at the date of the preparation of the Group consolidated financial statements were issued but not yet in force are reported below. The Group will adopt these standards when they enter into force, if applicable.
IFRS 16 was issued in January 2016 and replaces IAS 17 – Leases, IFRIC 4 - Determining whether an Arrangement contains a Lease, SIC-15 - Operating Leases - Incentives and SIC-27 - Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
IFRS 16 establishes the principles for the recognition, measurement, presentation and disclosure of leasing contracts and requires lessees to recognise all leasing contracts in the financial statements on the basis of a single accounting model similar to that utilised for recognising finance leases in accordance with IAS 17.
The standard contains two exemptions for recognition by lessees: leasing of "low value" assets (for example, personal computers) and short-term lease contracts (leasing contracts for a period below or equal to 12 months). At the initial date of the leasing contract, the lessee records a liability against the lease payments (i.e. the leasing liability) and an asset which represents the right of use of the underlying asset for the duration of the contract (i.e. the right of use). Lessees must record separately the interest expense on the leasing liability and the amortisation on the right of use.
The lessees must also reconsider the amount of the leasing liability on the occurrence of certain events (for example, a change in the duration of the lease, a change in future lease payments deriving from a change in an index or interest rate utilised to determine these payments). In general, the lessee will record the difference from the remeasurement of the amount of the leasing liability as an adjustment to the right of use.
The recognition method for the lessor in relation to IFRS 16 remains substantially unchanged compared to the current accounting policy as per IAS 17. The lessors will continue to classify all leases utilising the same classification principle as per IAS 17 and distinguishing between two types of leases: operating leases and finance leases.
IFRS 16, which will be effective from periods beginning January 1, 2019, requires lessors and lessees to provide greater disclosure compared to IAS 17.
The Group will adopt IFRS 16 in accordance with a modified retrospective approach.
The Group will avail of the exemptions permitted by the standard on leasing contracts whereby the lease contract expires within 12 months from the initial application date and on leasing contracts where the underlying asset has a low value. The Group has undertaken leasing contracts for some office equipment (for example, personal computers, printers and photocopiers) which are considered as insignificant value.
In 2018, the Group undertook a detailed analysis of the impacts of IFRS 16. Due to the adoption of this standard, the Group operating profit would have improved by Euro 1 million, while financial charges would have increased by Euro 0.3 million. This amendment derives from the recognition of sales point rental expenses following the application of the above accounting standard.
In May 2017, the IASB issued IFRS 17 - Insurance Contracts, a complete new standard relating to insurance contracts which covers recognition and measurement, presentation and disclosure. When it enters into effect, IFRS 17 will replace IFRS 4 - Insurance Contracts which was issued in 2005. IFRS 17 applies to all types of insurance contracts regardless of the type of entity that issues them, as well as certain guarantees and financial instruments with characteristics of discretionary participation.
This standard is not applicable to the Group.
The interpretation sets out the accounting approach to income taxes where the tax treatment implies uncertainties impacting application of IAS 12 and does not apply to income or other taxes not falling within the scope of IAS 12, nor specifically includes requirements concerning interest or penalties relating to uncertain income tax treatments.
The interpretation specifically considers the following points:
An entity should define whether it considers each uncertain tax treatment separately or together with other (one or more) uncertain tax treatments. The approach which allows the expected best solution for the uncertainty should be followed. The Interpretation is effective for the years beginning January 1, 2019 or subsequently, although transitory arrangements are available for first time application. The Group will apply the interpretation from its entry into force. On the basis of the preliminary analysis undertaken, the Group does not expect significant effects on its consolidated financial statements.
As per IFRS 9, a debt instrument may be measured at amortised cost or at fair value in the comprehensive income statement, on the condition that the cash flows are "exclusively payments of principal and interest on the amount" (the SPPI criterion) and the instrument is classified to the appropriate business model. The amendments to IFRS 9 clarify that a financial asset complies with the SPPI criterion independently of the event or of the circumstance which causes the advance resolution of the contract and independently of who pays or receives a reasonable indemnity for the advance resolution of the contract.
The amendments shall be applied retrospectively from January 1, 2019 and advance application is permitted. These amendments do not have an impact on the Group consolidated financial statements.
The amendments concern the conflict between IFRS 10 and IAS 28 with reference to the loss of control of a subsidiary which was sold or conferred to an associate or a joint venture. The amendments clarify that the profit or loss from the sale or from the conferment of assets which constitute a business, as defined by IFRS 3, between an investor and its associate or joint venture, must be entirely recognised. Any profit or loss from the sale or conferment of an asset which does not constitute a business is therefore only recognised up to amount held by third party investors in the associate or joint venture. The IASB indefinitely postponed the application of these amendments, although where an entity decides to apply them in advance, such should be done on a prospective basis. The Group will apply these amendments when they enter into force.
The amendments to IAS 19 establish the accounting rules where, during the reference period, there is a plan amendment, reduction or regulation. The amendments apply to plan amendments, reductions and regulations which occur from periods beginning January 1, 2019 or thereafter, and advanced application is permitted. These changes will apply only to any future plan amendments, reductions or transactions of the Group.
The amendments specify that an entity applies IFRS 9 for long-term interests in associates or joint ventures where the equity method is not applied but which, in substance, form part of the net investment in the associate or joint venture (long-term interests).
This clarification is significant as it implies that the expected losses model on receivables of IFRS 9 is applied to these long-term investments.
The amendments also clarify that, in application of IFRS 9, an entity shall not take into account any losses of associates or joint ventures or any loss in value of the investment, recorded as adjustments of the net investment in the associate or joint venture which derives from the application of IAS 28 Investments in Associates and Joint Ventures.
The amendments shall be applied retrospectively and are effective from January 1, 2019, while advanced application is permitted. As the Group does not hold long-term interests in joint ventures, the amendments will have no impact on the consolidated financial statements.
These improvements include amendments to IFRS 3 - Business Combinations, IFRS 11 - Joint Arrangements, IAS 12 - Income Taxes and IAS 23 - Borrowing Costs. The Group does not expect any effect on its consolidated financial statements.
The BasicNet Group presents its income statement by nature of cost items; the assets and liabilities are classified as current or non-current. The cash flow statement was prepared applying the indirect method. The format of the consolidated financial statements applied the provisions of Consob Resolution No. 15519 of July 27, 2006 and Notice No. 6064293 of July 28, 2006 on financial disclosure requirements. With reference to Consob Motion No. 15519 of July 27, 2006, transactions with related parties are described in Note 45 of the consolidated financial statements.
The consolidated financial statements were prepared including the financial statements at December 31, 2018 of the Group companies included in the consolidation scope, appropriately adjusted in accordance with the accounting principles adopted by the Parent Company.
The consolidated financial statements of the BasicNet Group are presented in Euro thousands, where not otherwise stated; the Euro is the functional currency of the Parent Company and the majority of the consolidated companies.
Financial statements in currencies other than the Euro are translated into the Euro applying the average exchange rate for the year for the income statement and the exchange rate at the date of the operation in the case of significant non-recurring transactions. The balance sheet accounts are translated at the yearend exchange rate. The differences arising from the translation into Euro of the financial statements prepared in currencies other than the Euro are recorded in a specific reserve in the Comprehensive Income Statement.
The exchange rates applied are as follows (for 1 Euro):
| Currency | FY | 2018 | FY 2017 | ||
|---|---|---|---|---|---|
| Average | At year end | Average | At year end | ||
| US Dollar | 1.1782 | 1.1450 | 1.1349 | 1.1993 | |
| HK Dollar | 9.2350 | 8.9675 | 8.8446 | 9.3720 | |
| Japanese Yen | 129.9610 | 125.8500 | 127.0638 | 135.0100 | |
| UK Sterling | 0.8859 | 0.8945 | 0.8753 | 0.8872 |
The criteria adopted for the consolidation were as follows:
As illustrated in Attachment 2, at December 31, 2018 the Group is comprised solely of subsidiaries owned directly or indirectly by the Parent Company BasicNet S.p.A., or jointly controlled; there are no associated companies or investments in structured entities.
Control exists where the Parent Company BasicNet S.p.A. simultaneously:
The existence of control is verified where events or circumstances indicate an alteration to one or more of the three factors determining control.
Investments in associates and joint ventures are consolidated at equity, as established respectively by IAS 28 - Investments in associates and joint ventures and by IFRS 11 – Joint arrangements.
An associate is a company in which the Group holds at least 20% of voting rights or exercises significant influence - however not control or joint control - on the financial and operational policies. A joint venture is a joint control agreement, in which the parties who jointly hold control maintain rights on the net assets of the entity. Joint control concerns the sharing, under an agreement, of the control of economic activities, which exists only where the decisions regarding such activities requires unanimity by all parties sharing control.
Associates and joint ventures are consolidated from the date in which significant influence or joint control begins and until the discontinuation of such. Under the equity method, the investment in an associated company or a joint venture is initially recognised at cost and subsequently the carrying amount is increased or decreased to recognise the associated company's share of the profit or loss after the date of acquisition. The share of profits (losses) of the investment is recognised to the consolidated income statements. Dividends received from the investee reduce the book value of the investment.
If the share of losses of an entity in an associate or a joint venture is equal to or greater than its interest in the associate or joint venture the entity discontinues the recognition of its share of further losses. After the investor's interest is reduced to zero, additional losses are provisioned and a liability is recognised, only to the extent that the investor has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or the joint venture subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
The consolidation scope includes the Parent company BasicNet S.p.A. and the Italian and foreign subsidiaries in which BasicNet S.p.A. exercises direct, or indirect, control. Attachment 2 contains a list of consolidated companies under the line-by-line method, as well as the complete list of Group companies, registered office, corporate purpose, share capital and direct and indirect holdings.
Three operating segments were identified within the BasicNet Group: i) license and brand management, (ii) proprietary licensee and (iii) property management. The relevant information is reported in Note 7.
The information by geographic area has significance for the Group in relation to royalty income and direct sales, and therefore was included for the two respective items. The breakdown of licensee aggregate sales by geographic area, from which the royalties derive, is reported in the Directors' Report.
The present financial statements were prepared on the going concern basis, and in accordance with the accruals principle.
The main accounting policies adopted for the preparation of the consolidated financial statements at December 31, 2018, in line with those utilised in the previous year, are disclosed below.
Revenues derive from Group operations in the ordinary course of business and comprise revenues from sales and services. Revenues are recognised net of sales tax, returns and discounts.
Revenues from contracts with customers rare recognised when the control of the goods and services is transferred to the client for an amount which reflects the consideration that the Group expects to receive in exchange for these goods and services. The Group has concluded that generally it acts as the Principal for the agreements from which it receives revenues, as usually it controls the goods and services before their transfer to the customer. In calculating the sales transaction price for goods, the Group considers the effects from variable fees, significant financial components and non-monetary fees. Where the fee concluded in the contract includes a variable amount, such as that connected to a right of return, the Group estimates the amount of the fee to which it will be entitled in exchange for the transfer of the goods to the customer.
Sales to Group brand stores managed by third parties, on consignment, are recognised on the sale of the goods by the store to the final consumer, in accordance with IFRS 15.
Royalties and sourcing commissions, including the minimum guaranteed component, are recognised on an accruals basis in accordance with the underlying contracts and consistent with the state of advancement of the sales or the production of the licensees.
Costs and expenses are recognised in accordance with the accruals principle.
Costs associated with sponsorship contracts paid each year are recognised in line with the contractual conditions.
Cost relating to the preparation and presentation of sample collections are recognised in the income statement in the year in which the sales of the relative collections are realised. Any differences are recorded through accruals.
Advertising campaign costs undertaken to drive orders by the salesforce, in accordance with current interpretations of IAS/IFRS, are directly expensed at the moment of the campaign, rather than in correlation to the relative revenues, which will only be recognised on the subsequent shipment of the orders received, although this second method better illustrates the correlation with the advertising campaign activity.
Interest income and expenses and other income and expenses are recorded and shown in the financial statements on the accrual basis.
In accordance with IAS 23 – Borrowing costs, the financial charges directly attributable to the purchase, construction and production of the asset which requires a significant amount of time before use or sale are capitalised together with the value of the asset. Such an event has not arisen up to the present moment for the Group. If these conditions are not met the financial charges are expensed directly to the income statement.
The receivables and payables originally expressed in foreign currencies are translated into Euro at the exchange rate when the transaction originated. Exchange differences arising on collections and payments in foreign currencies are recorded in the income statement.
Revenues and income, costs and charges related to currency transactions are recorded at the exchange rate at the transaction date.
At the end of the period, the assets and liabilities valued in foreign currencies, with the exception of fixed assets, are recorded at the exchange rates at the balance sheet date and the relative gains or losses on exchange are recorded in the income statement.
Current income taxes include all the taxes calculated on the assessable income of the Group. Income taxes are recognised in profit and loss, except where they relate to items charged or credited directly to equity, in which case the tax effect is also recognised directly in equity.
Other taxes not related to income, such as taxes on property and share capital, are included under operating charges.
Deferred taxes are calculated on all the temporary differences arising between the assessable income of an asset or liability and the relative book value in the consolidated financial statements. Deferred tax assets, including those relating to losses carried forward, for the portion not offset by deferred tax liabilities, are recognised only for those amounts for which it is probable there will be future assessable income to recover the amounts. Deferred tax assets and liabilities are determined with the tax rates that are expected to be applied, in accordance with the regulations of the countries in which the Group operates, in the years in which the temporary differences will be realised or settled. The deferred tax assets and liabilities are offset when the income tax is applied by the same fiscal authority and when there is a legal right of compensation.
The Parent Company adhered to the tax consolidation in accordance with Article 117 and thereafter of the CFA - Presidential Decree No. 917 of December 22, 1986 together with all of the wholly-owned Italian subsidiary companies. Other taxes not related to income, such as taxes on property and share capital, are included under operating charges. At the end of 2015 BasicNet S.p.A., Basic Trademark S.A. and Superga Trademark S.A. requested and obtained access to the benefits related to the application of the Patent Box. Part of these benefits are subject to a specific ruling by the Tax Agency. The ruling was obtained in 2017 for Superga Trademark S.A. and in 2018 for Basic Trademark S.A. and BasicNet, with retrospective effects to 2015, recognised to the financial statements in the years in which the agreements were signed.
Earnings per share is calculated dividing the profit or loss attributable to the shareholders of the Parent Company by the weighted average ordinary shares in circulation during the period.
The diluted earnings per share is calculated dividing the profit or loss attributable to the shareholders of the Parent Company by the average weighted number of shares outstanding, taking into account the effects of all the potential ordinary shares with dilution effects. In 2018, there were no diluting effects on the shares.
The Group may be involved in legal and tax disputes, concerning specific issues and in various jurisdictions. Considering the uncertainties relating to these issues, it is difficult to predict with certainty any future payments required. In addition, the Group has instigated legal disputes for the protection of its Trademarks, and of its products, against counterfeit products. The cases and disputes against the Group often derive from complex legal issues, which are often subject to varying degrees of uncertainty, including the facts and circumstances relating to each case, jurisprudence and different applicable laws.
In the normal course of business, Management consults with its legal consultants and experts on legal matters.
The Group accrues a liability against disputes when it considers it is probable that there will be a financial payment made and when the amount of the losses arising can be reasonably estimated.
The contingent liabilities are not recorded in the financial statements, but are reported as a disclosure in the Notes (Note 48) unless the probability of payment is remote. In accordance with paragraph 10 of IAS 37 – Provisions, contingent liabilities and contingent assets a contingent liability is (a) a possible obligation which derives from past events and whose existence will be confirmed only on the occurrence or otherwise of one or more future uncertain events, not entirely under the control of the enterprise, or (b) a current obligation which derives from past events but which cannot be recorded in the financial statements as the payment is improbable or cannot be reliably estimated.
The preparation of the financial statements and the relative notes in application of IFRS require that management make estimates and assumptions on the values of the assets and liabilities in the financial statements and on the information relating to the assets and contingent liabilities at the balance sheet date. The actual results may differ from such estimates.
Estimates are utilised to measure intangible and tangible assets subject to impairment tests, in addition to recognise provisions on doubtful debts, inventory obsolescence, amortisation and depreciation, the write-down of assets, employee benefits and income taxes.
The estimates and assumptions are reviewed periodically and the effects of all variations are immediately recognised in the income statement.
An intangible asset is a non-monetary asset, identifiable and without physical substance, controllable and capable of generating future economic benefits. Intangible assets are recognised at purchase and/or production cost, including the costs of bringing the asset to its current use net of accumulated amortisation and any loss in value. Amortisation begins when the asset is available for use and is recognised on a straight-line basis over the residual estimated useful life of the asset.
Software acquired and IT programmes developed internally are amortised over five years, while the costs incurred to maintain or upgrade the original operational standard are expensed in the year and are not capitalised.
The brands Kappa, Robe di Kappa, Superga, K-Way, Briko and Sebago are considered intangible assets with indefinite useful life; as such these assets are not amortised but subject to an impairment test at least annually.
The brands Sabelt, included in the value of the relative investment, and Jesus Jeans, which have not yet reached a position similar to those of the principal brands, are amortised over a period of 20 years.
The patent rights are amortised over ten years.
In the case of business combinations, the assets, the liabilities and the contingent liabilities acquired and identifiable are recorded at their fair value at the date of acquisition. The positive difference between the acquisition cost and the portion held by the Group of the present value of the assets and liabilities is classified as goodwill and recorded in the financial statements as an intangible asset. Any negative difference ("negative goodwill") is recognised in the income statement at the date of acquisition.
Goodwill is not amortised, but is subject annually, or more frequently if specific events or circumstances indicate the possibility of having incurred an impairment, to verifications of any reduction in value, as provided by IAS 36 Reduction in value of assets. After initial recognition, goodwill is measured at cost less any loss in value. The impairment of goodwill may not be written back.
This category includes the amounts paid by the Group to sub-enter into the contractual positions of directly managed and franchising stores (key money). This commercial goodwill, where related to commercial positions of value, is recognised to the consolidated financial statements as an intangible assets with indefinite useful life, and subject to an impairment test at least once a year, or more frequently in the presence of impairment indicators, comparing the book value with the higher between the value in use and the fair value less selling costs, with this latter also determined in view of valuations made by independent experts. Commercial goodwill relating to other positions is amortised over the duration of the relative rental contract.
Property, plant and equipment are recorded at purchase or production costs, including accessory charges and direct and indirect costs, for the amount reasonably attributable to the assets.
Subsequent expenditures are only capitalised where they increase the future economic benefits of the asset to which they relate. All other expenditures are expensed as incurred.
Property, plant and equipment are amortised on a straight-line basis over the estimated useful life of each asset. The depreciation rates by asset category are shown below:
| Description | Estimated useful life years |
|---|---|
| Property | 33 |
| Plant and machinery | 8 |
| Furniture and furnishings | 5-8 |
| Motor vehicles | 4 |
| EDP | 5-8 |
Fixed assets which at the balance sheet date are lower than the book value are recorded at this lower value, which however may not be maintained at this value in subsequent periods if the reasons for the adjustment no longer exist.
Ordinary maintenance costs are fully charged to the income statement.
Advances and costs for property, plant and equipment in progress which are not yet utilised in the operating activities are reported separately.
The historic value of land is not depreciated.
Property, plant and equipment acquired through finance lease contracts are recognised under the finance method as per IAS 17 – Leasing and recorded under assets at the purchase price decreased by depreciation.
The depreciation of these assets is reflected in the consolidated financial statements applying the same criteria as for the fixed assets to which the lease contracts refer.
Within liabilities a payable is recorded, under short-term and medium term, towards the leasing company; the lease payments are reversed from expenses for the use of third-party assets and the financial charges for the period are recognised on an accruals basis.
The carrying value of the assets of the Group are measured at each reporting date to determine whether there has been a loss in value, in which case an estimate is made of the recoverable value of the asset. A loss in value (impairment) is recorded in the income statement when the carrying value of an asset or a cash-generating unit exceeds its recoverable value.
The indefinite intangible assets (including goodwill) are tested annually and whenever there is an indication of a possible loss, in order to determine whether a loss in value has occurred.
The Group's principal objective is the growth in value of its own brands, managed within a portfolio, with the distribution of the associated products through a global network of licensee producers and distributors.
Within this business model, for the purposes of the impairment test of the BasicNet Group at consolidated level, the CGU's were identified as the brands of the company.
The impairment test was carried out comparing the book value of the net assets of each CGU with their recoverable value, defined as the higher between their value in use and the fair value less selling costs.
The value in use is determined discounting to the WACC the cash flows generated from each CGU. This latter are identified with the first level gross operating margin, less investments in fixed assets and notional taxes, generated by each brand through royalties, sourcing commissions and direct sales. The changes in working capital are not included in these cash flows, in line with the underlying carrying amount and the assumption that these changes approximate zero.
The operating costs are allocated to the related CGU or divided based on determined and certain criteria. The costs not specifically allocated, or whose division based on analytic criteria does not reflect the effective period of use, are tested at Group level.
For the years beyond the Plan a terminal value is estimated applying the perpetual yield model to the cash flows of the final year. The growth rate utilised in the calculation of the terminal value, in accordance with the provisions of paragraph 36 of IAS 36, reflect the growth trend for the demand of clothing goods (i.e. clothes and footwear) at international level. In line with the most common valuation practices adopted, in the calculation of the terminal value the changes in the net working capital are assumed as zero and the investments equal to depreciation.
The BasicNet Group, on completion of the tests described above, carries out a second level test in relation to the presence of permanent loss in value on the totality of the consolidated assets.
This loss is restated if the elements that generated the loss no longer exist. The recoverable value is recorded in the income statement adjusting the book value of the asset to its recoverable value. This latter must not be above the value which would have been determined, net of depreciation, if no loss in value of the asset had been recorded in previous years.
Investments in associates and joint ventures are measured under the equity method. The share of cost exceeding the net equity of the investee at the acquisition date is treated in a similar manner as that described for the consolidation criteria.
The non-consolidated investments other than associates and joint ventures, non-listed, are measured under the cost method less any losses in value, as their fair value may not be reliably determined. The original value is restored in future years should the reason for the write-down no longer exist.
Financial assets consist of loans are recorded at their estimated realisable value.
Inventories are measured at the lower of purchase or production cost and their net realisable value. The cost is calculated using the weighted average cost method.
Inventories include incidental charges and direct and indirect costs that can be reasonably allocated. Obsolete and slow-moving inventories are written down in relation to their possible utilisation or realisable value.
Receivables recorded under current assets are stated at their nominal value, which substantially coincides with the amortised cost. The initial value is subsequently adjusted to take account of any write-downs, which reflects the bad debt estimate. The Group applies the simplified approach to calculating expected losses, fully recognising the expected loss at the reporting date according to historic information supplemented by forward looking considerations. Medium/long-term receivables which include an implicit interest component are discounted utilising an appropriate market rate. Receivables transferred without recourse, in which all the risks and benefits are substantially transferred by the owner of the financial assets to the factoring company, are reversed in the financial statements at their nominal value.
The liquid assets principally relate to current bank accounts and cash. They are recorded for amounts effectively available at year end.
The cash equivalents are invested in highly liquid temporary financial instruments.
The account includes amounts related to two accounting periods, in accordance with the accruals concept.
Treasury shares are recognised as a deduction from equity. The original cost of the treasury shares and the revenues deriving from any subsequent sale are recognised as equity movements.
Provisions for risks and charges are recorded in the balance sheet only when a legal or implicit obligation exists deriving from a past event that determines the commitment of resources to produce economic benefits for their compliance and a reliable estimate of the amount can be determined.
The Post-Employment Benefit in accordance with Italian legislation is quantified as a defined benefit plan and is measured in accordance with the "Projected Unit Credit Method".
From January 1, 2007, this liability refers exclusively to the portion of the Post-Employment Benefit, matured up to December 31, 2006, which following the complementary pension reform (Legislative Decree No. 252 of December 5, 2005) continues to constitute an obligation of the company. Following the entry into force of the above-mentioned reform as enacted by Law No. 296 of December 27, 2006 (2007 Finance Law), the liability, as concerning services already completely matured, was restated without applying the pro-rata of the employment service and without considering, in the actuarial calculation, the components relating to future salary increases.
On June 16, 2011, the IASB issued an amendment to IAS 19 Employee Benefits. The new version of IAS 19 requires, in particular, for post-employment benefits, the recognition of the changes of the actuarial gains/losses under other items of the Comprehensive Income Statement.
The cost relating to employment services for the companies of the Group with less than 50 employees, as well as the interest on the "time value" component in the actuarial calculations will remain in the profit and loss account.
The portion of the Post-Employment Benefit paid to a supplementary pension fund is considered a defined contribution plan as the obligation of the company towards the employee ceases with the payment of the amount matured to the funds. Also the portion of the Post-Employment Benefit paid to the INPS Treasury fund is recorded as a defined contribution plan.
Financial payables are recorded at their amortised cost. The book value of the trade and other payables, recognised at nominal value which approximates the amortised cost, at the balance sheet date approximates their fair value.
The BasicNet Group utilises financial instruments to hedge interest rates on some loans and to hedge against fluctuations in the Euro/USD exchange rates on the purchases of products for sale, not adequately hedged by royalties and sourcing commission income.
These instruments are initially recorded at their fair value, and subsequently measured according to whether they are "hedged" or "not hedged" as per IFRS 9.
It is recalled that the BasicNet Group does not undertake derivative contracts for speculative purposes.
The hedging may be of two types:
The BasicNet Group, before signing a hedge contract, undertakes a close examination of the relationship between the hedge instrument and the item hedged, in view of the objectives to reduce the risk, also evaluating the existence and the continuation over the life of the financial instrument of the effectiveness requirements, necessary for the hedge accounting.
After their initial recognition, they are accounted as follows:
a) Fair value hedges
The changes in their fair value are recognised in the income statement, together with the changes in the fair value of the relative assets and liabilities hedged.
b) Cash flow hedges
The part of the profit or loss of the hedge instrument, considered effective, is recorded directly in the comprehensive income statement; the non-effective part is however recorded immediately in the income statement.
The accumulated amounts in the comprehensive income statement are recorded in the income statement in the year in which the scheduled hedge operation matures or the instrument hedged is sold, or when the effectiveness requirements for hedge accounting no longer exist.
c) Derivative financial instruments which do not have the effectiveness requirements for hedge accounting
The derivative financial instruments which do not comply with the requirements of IFRS 9 for the identification of the hedge, where present, are classified in the category of financial assets and liabilities measured at fair value through the profit and loss account. The Group does not utilise financial instruments not for hedging purposes.
IFRS 7 requires that the classification of financial instruments measured at fair value is determined based on the quality of the input sources used in the valuation.
The IFRS 7 classification implies the following hierarchy:
The subsequent events to the end of the year and the outlook for the current year are reported in the Directors' Report.
In accordance with Article 1, paragraph 125 of Law 124/2017, the Group has not received any grants from public bodies in excess of Euro 10 thousand.
(IN EURO THOUSANDS UNLESS OTHERWISE STATED)
The BasicNet Group identifies three operating segments:
| December 31, 2018 | Licenses and brands |
Proprietary licensees |
Property | Inter-segment eliminations |
Consolidated |
|---|---|---|---|---|---|
| Direct sales – third parties Direct sales – inter-segment |
2,158 2,413 |
153,453 236 |
4 2 |
- (2,651) |
155,615 - |
| (Cost of sales) | (4,911) | (89,044) | (3) | 2,416 | (91,542) |
| GROSS MARGIN | (340) | 64,645 | 3 | (235) | 64,073 |
| Royalties and sourcing commissions – third parties Royalties and sourcing commissions – inter segment |
54,832 13,519 |
- - |
- - |
- (13,519) |
54,832 - |
| Other income - third parties Other income – inter-segment |
1,424 303 |
764 13,234 |
865 2,770 |
- (16,307) |
3,053 - |
| (Sponsorship and media costs) | (19,214) | (19,638) | - | 13,202 | (25,650) |
| (Personnel costs) | (10,471) | (12,561) | (42) | - | (23,074) |
| (Selling, general and administrative costs, royalties expenses) |
(16,891) | (38,263) | (1,910) | 16,859 | (40,205) |
| Amortization & depreciation | (2,409) | (3,088) | (951) | - | (6,448) |
| EBIT | 20,753 | 5,093 | 735 | - | 26,581 |
| Financial income | 1,238 | 1,331 | - | - | 2,569 |
| (Financial charges) | (1,364) | (2,034) | (328) | - | (3,726) |
| (Investment impairments) | - | - | - | - | - |
| Share of profit/(loss) of investments | (23) | - | - | - | (23) |
| PROFIT BEFORE TAXES | 20,604 | 4,390 | 407 | - | 25,401 |
| Income taxes | (2,526) | (1,682) | (179) | - | (4,387) |
| NET PROFIT | 18,078 | 2,708 | 228 | - | 21,014 |
| Significant non-cash items: | |||||
| Amortization & depreciation Write-downs |
(2,409) - |
(3,088) - |
(951) - |
- - |
(6,448) - |
| Total non-cash items | (2,409) | (3,088) | (951) | - | (6,448) |
| Investments in non-current assets | (2,861) | (2,154) | (744) | - | (5,759) |
| Segment assets and liabilities: | |||||
| Assets | 199,102 | 113,168 | 16,996 | (93,753) | 235,513 |
| Liabilities | 80,201 | 98,662 | 11,193 | (67,480) | 122,576 |
| December 31, 2017 | Licenses and brands |
Proprietary licensees |
Property | Inter-segment eliminations |
Consolidated |
|---|---|---|---|---|---|
| Direct sales – third parties Direct sales – inter-segment |
1,056 2,093 |
134,524 268 |
3 2 |
- (2,363) |
135,583 - |
| (Cost of sales) | (2,863) | (80,303) | (2) | 2,103 | (81,065) |
| GROSS MARGIN | 286 | 54,489 | 3 | (260) | 54,518 |
| Royalties and sourcing commissions – third parties Royalties and sourcing commissions – inter |
47,924 11,790 |
- - |
- - |
(11,790) | 47,924 - |
| segment Other income - third parties Other income – inter-segment |
736 317 |
2,106 12,343 |
797 2,669 |
- (15,329) |
3,639 - |
| (Sponsorship and media costs) | (18,465) | (18,565) | - | 12,403 | (24,627) |
| (Personnel costs) | (9,272) | (11,769) | (42) | - | (21,083) |
| (Selling, general and administrative costs, royalties expenses) |
(15,021) | (35,623) | (1,641) | 14,976 | (37,310) |
| Amortization & depreciation | (2,316) | (3,182) | (921) | - | (6,419) |
| EBIT | 15,979 | (201) | 865 | - | 16,642 |
| Financial income | 923 | 1,754 | - | - | 2,677 |
| (Financial charges) | (2,079) | (1,749) | (402) | - | (4,230) |
| (Investment impairments) | (3,000) | - | - | 3,000 | - |
| Share of profit/(loss) of investments | (26) | - | - | - | (26) |
| PROFIT/(LOSS) BEFORE TAXES | 11,797 | (196) | 463 | 3,000 | 15,063 |
| Income taxes | (3,932) | (320) | (165) | (4,417) | |
| NET PROFIT/(LOSS) | 7,865 | (516) | 298 | 3,000 | 10,646 |
| Significant non-cash items: | |||||
| Amortization & depreciation Write-downs |
(2,316) (3,000) |
(3,182) - |
(921) - |
- - |
(6,419) (3,000) |
| Total non-cash items | (5,316) | (3,182) | (921) | - | (9,419) |
| Investments in non-current assets | (16,167) | (1,788) | (195) | - | (18,150) |
| Segment assets and liabilities: | |||||
| Assets | 196,701 | 107,216 | 17,243 | (101,624) | 219,536 |
| Liabilities | 88,546 | 96,374 | 11,842 | (74,237) | 122,525 |
The Group operating performance and therefore of the respective segments is outlined in detail in the Directors' Report. The segment performances may be summarised as follows:
• The "Licenses and brands" segment reports royalties and sourcing commissions of Euro 68.4 million for 2018 compared to Euro 59.7 million in the previous year. EBIT amounts to approx. Euro 20.8 million, compared to Euro 16 million in 2017. The segment net profit totalled Euro 18.1 million, compared to Euro 7.9 million in 2017.
The breakdown of "consolidated direct sales" by geographic area is reported below:
| FY 2018 | FY 2017 | |
|---|---|---|
| Italy | 145,050 | 127,534 |
| EU countries other than Italy | 6,339 | 4,996 |
| Rest of the World | 4,226 | 3,053 |
| Total consolidated direct sales | 155,615 | 135,583 |
Direct sales revenues relate to merchandise sold by BasicItalia S.p.A. and BasicRetail S.r.l., both through National and Regional Servicing Centres and directly to the public (Euro 153.9 million) and by BasicNet S.p.A. for sample merchandise sales (Euro 1.7 million).
Sales on the home market accounted for 93.2%, while approx. 4.1% of sales were in other EU countries, with the remaining approx. 2.7% outside the EU. Sales outside of Italy are related to commercial activities in countries not yet subject to specific licensing contracts, by the licensee companies of the Group.
The composition of revenues from direct sales by distribution channel is presented in the following table:
| FY 2018 | FY 2017 | |
|---|---|---|
| Multibrand sales | 101,098 | 83,939 |
| Franchising sales | 47,443 | 45,478 |
| Online sales | 5,303 | 5,381 |
| Sample sales | 1,772 | 786 |
| Total consolidated direct sales | 155,615 | 135,583 |
| FY 2018 | FY 2017 | |
|---|---|---|
| Goods purchased – Overseas |
66,675 | 59,946 |
| Goods purchased – Italy |
5,313 | 5,104 |
| Samples purchased | 3,020 | 2,169 |
| Freight charges and accessory purchasing cost | 8,565 | 7,476 |
| Packaging | 511 | 423 |
| Changes in inventory of raw materials, ancillary, consumables and goods |
2,161 | 643 |
| Cost of outsourced logistics | 4,054 | 3,992 |
| Other | 1,243 | 1,312 |
| Total cost of sales |
91,542 | 81,065 |
Sample purchases were made by BasicNet S.p.A. for resale to the licensees.
The cost of sales did not increase in proportion to the increase in revenues, resulting in a higher margin.
"Royalties and sourcing commissions" refer to royalty fees for the brand licenses in the countries where the licenses have been assigned, or recognised to authorised sourcing centres for the production and sale of group brand products by commercial licensees.
The changes in the year are commented upon in the Directors' Report.
The breakdown by region is reported below:
| FY 2018 | FY 2017 | |
|---|---|---|
| Europe (EU and non-EU) | 23,284 | 20,178 |
| The Americas | 6,257 | 5,500 |
| Asia and Oceania | 21,607 | 18,986 |
| Middle East and Africa | 3,684 | 3,260 |
| Total | 54,832 | 47,924 |
| FY 2018 | FY 2017 | |
|---|---|---|
| Rental income | 622 | 609 |
| Recovery of condominium expenses | 184 | 133 |
| Other income | 2,247 | 2,897 |
| Total other income | 3,053 | 3,639 |
The "recovery of condominium expenses" concerns the recharge to lessees of utility costs.
"Other income" includes prior year accruals' reversals, the recharge of expenses to third parties and other indemnities against counterfeiting and unauthorised usage protection actions. 2017 included the gain of Euro 195 thousand from the sale of the Lanzera brand and approx. Euro 650 thousand recognised to BasicItalia by Wolverine World Wide, Inc., the company which sold the Sebago brand to the Group, on the basis of profit-sharing on sales managed directly by the latter until the end of 2017.
| FY 2018 | FY 2017 | |
|---|---|---|
| Sponsorship and marketing | 22,880 | 22,066 |
| Advertising | 1,743 | 1,864 |
| Promotional expenses | 1,027 | 697 |
| Total sponsorship and media costs | 25,650 | 24,627 |
The account "sponsorship" refers to communication investments incurred directly to which the Group contributes, described in detail in the Directors' Report. The increase on 2017 is partly due to the contributions paid for communication and endorsement activities on overseas markets.
"Advertising" refers to billboard advertising and press communication campaigns.
Promotional expenses concern gifts of products and advertising material, not relating to specific sponsorship contracts.
| FY 2018 | FY 2017 | |
|---|---|---|
| Wages and salaries | 16,745 | 15,354 |
| Social security charges | 5,242 | 4,715 |
| Post-employment benefits | 1,087 | 1,014 |
| Total | 23,074 | 21,083 |
The number of employees at the reporting date, by category, is reported in the separate section in the Consolidated Non-Financial Declaration.
The increase mainly derives from personnel in the marketing and product research and development departments.
The average number of Employees in 2018 was 589, comprising 30 executives, 531 white-collar employees and 28 blue-collar employees.
| FY 2018 | FY 2017 | |
|---|---|---|
| Selling and royalty service expenses | 10,239 | 9,581 |
| Rental, accessory and utility expenses | 10,517 | 10,434 |
| Commercial expenses | 5,550 | 4,979 |
| Directors and Statutory Auditors emoluments | 4,245 | 3,745 |
| Doubtful debt provision | 2,381 | 2,041 |
| Other general expenses |
7,273 | 6,530 |
| Total selling, general and administrative costs, and royalties expenses |
40,205 | 37,310 |
"Selling and royalty service expenses" principally include commissions to agents of the subsidiary BasicItalia S.p.A. and royalties on sports team merchandising contracts and co-branding operations, with the increase related to the growth in revenues.
"Commercial expenses" include costs relating to selling activities, comprising trade fairs and exhibitions, communication costs for advertising campaigns, stylists, graphics and commercial and travel expenses. The increase mainly relates to the operations related to the Sebago brand acquired in the previous year.
"Directors and Statutory Auditors emoluments", for offices held at the date of the present Report, approved by the Shareholders' AGM and the Board of Directors' meetings of April 28, 2016, are in line with the company remuneration policy, pursuant to Article 78 of Consob Regulation No. 11971/97 and subsequent amendments and integrations, and are reported in the Remuneration Report pursuant to Article 123-ter of the CFA, which is available on the company's website www.basicnet.com Shareholder' Meeting 2018 section, to which reference should be made.
The higher "doubtful debt provision" accrued in 2018 is related to specific credit positions.
The account "other general expenses" includes legal and professional fees, bank charges, other taxes, consumption materials, hire charges, and corporate and other minor expenses.
| FY 2018 | FY 2017 | |
|---|---|---|
| Amortisation | 3,407 | 3,356 |
| Depreciation | 3,041 | 3,063 |
| Total amortisation & depreciation | 6,448 | 6,419 |
Amortisation of intangible assets includes Euro 627 thousand of key-money write-down relating to some sales points closed or for which the decision to close has been made, within a normal rotation of less profitable sales point in favour of the opening of new locations or more appropriate operational strategies.
| FY 2018 | FY 2017 | |
|---|---|---|
| Interest income | 34 | 288 |
| Bank interest charges | (281) | (379) |
| Interest on medium/long term loans | (661) | (723) |
| Property lease interest | (19) | (39) |
| Other | (186) | (111) |
| Total financial income and charges | (1,113) | (964) |
| Exchange gains | 2,464 | 2,230 |
| Exchange losses | (2,508) | (2,819) |
| Net exchange gains/(losses) |
(44) | (589) |
| Total financial income/(charges) | (1,157) | (1,553) |
Financial charges reduced following the general reduction in interest rates. Net currency losses amount to Euro 44 thousand compared to losses of Euro 589 thousand in the previous year, due to US Dollar movements.
The account, introduced following the application of IFRS 11 – Joint arrangements, reflects the effect on the consolidated result for the period of the valuation at equity of the joint venture Fashion S.r.l..
Income taxes (Euro 4.4 million) comprises current taxes of Euro 7.3 million, of which Euro 1.4 million for IRAP, Euro 5.4 million for IRES and Euro 0.5 million for taxes incurred by overseas group companies, deferred tax charges of Euro 1.3 million, in addition to Euro 4.2 million related to the benefits from application of the "Patent Box" rule. This amount refers for Euro 2.5 million to the years 2015-2016-2017, which were not yet approved, and Euro 1.7 million for the current year; the recognition of the effects from previous years is related to the definition of the ruling with the Tax Agency of the parent company BasicNet, which follows the agreement signed in April for Basic Trademark S.A and previously for Superga Trademark S.A., completing the tax break application process for the Group.
| 2018 | 2017 | |
|---|---|---|
| Profit before taxes | 25,401 | 15,063 |
| Income tax rate | 24% | 24% |
| Theoretical IRES | (6,096) | (3,615) |
| Effect of differences between Italian & foreign tax rates | (180) | 84 |
| Permanent tax differences effect | (513) | (264) |
| Prior year taxes | (63) | (172) |
| ACE contribution | 49 | 85 |
| Patent Box benefit | 4,208 | 644 |
| IRAP | (1,373) | (971) |
| Other changes | (418) | (208) |
| EFFECTIVE TAX CHARGE | (4,387) | (4,417) |
| Effective tax rate | (17.3%) | (29.33%) |
The reconciliation between the theoretical and actual rate is shown below:
The basic earnings per share, for 2018, is calculated dividing the net result attributable to the shareholders of the Group by the weighted average number of ordinary shares outstanding during the year:
| (in Euro) | FY 2018 | FY 2017 |
|---|---|---|
| Net profit attributable to owners of the Parent | 21,013,752 | 10,645,656 |
| Weighted average number of ordinary shares | 51,907,273 | 55,308,514 |
| Basic earnings per ordinary share | 0.4048 | 0.1925 |
At December 31, 2018, there were no "potentially diluting" shares outstanding, therefore the diluted earnings per shares coincide with the earnings per share.
The change in the weighted average number of ordinary shares outstanding between 2018 and 2017 relates to the number of treasury shares acquired in the year.
(IN EURO THOUSANDS UNLESS OTHERWISE STATED)
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Concessions, brands and similar rights | 47,369 | 47,101 | 268 |
| Software development | 3,502 | 4,083 | (581) |
| Other intangible assets | 2,289 | 2,511 | (222) |
| Industrial patents |
65 | 67 | (2) |
| Total intangible assets | 53,225 | 53,762 | (537) |
The changes in the original costs of the intangible assets were as follows:
| Concessions, | Industrial | ||||
|---|---|---|---|---|---|
| brands & similar rights |
Software development |
Other intangible assets |
patents | Total | |
| Historic cost at 1.1.2017 |
47,303 | 40,166 | 9,556 | 96 | 97,121 |
| Additions | 13,637 | 1,545 | 369 | 35 | 15,586 |
| Disposals & other changes |
(2,321) | (2) | - | - | (2,323) |
| Write-downs | - | - | - | - | - |
| Historic cost at 31.12.2017 |
58,619 | 41,709 | 9,925 | 131 | 110,384 |
| Additions | 430 | 1,863 | 326 | 8 | 2,627 |
| Disposals & other changes |
- | (345) | (153) | - | (498) |
| Write-downs | - | - | - | - | - |
| Historic cost at 31.12.2018 |
59,049 | 43,227 | 10,098 | 139 | 112,513 |
The changes in the relative accumulated amortisation provisions were as follows:
| Concessions, brands & Software |
Other | Industrial patents |
|||
|---|---|---|---|---|---|
| similar rights | development | intangible assets |
Total | ||
| Acc. Amort. at 1.1.2017 |
(12,864) | (35,596) | (6,878) | (55) | (55,393) |
| Amortization | (242) | (2,030) | (536) | (9) | (2,817) |
| Disposals and other changes |
1,588 | - | - | - | 1,588 |
| Acc. Amort. at 31.12.2017 |
(11,518) | (37,626) | (7,414) | (64) | (56,622) |
| Amortization | (162) | (2,099) | (509) | (10) | (2,780) |
| Disposals and other changes |
- | - | 114 | - | 114 |
| Acc. Amort. at 31.12.2018 |
(11,680) | (39,725) | (7,809) | (74) | (59,288) |
| Concessions, | Industrial | ||||
|---|---|---|---|---|---|
| brands & similar rights |
Software development |
Other intangible assets |
patents | Total | |
| Opening net book value at 31.12.2017 |
34,439 | 4,570 | 2,678 | 41 | 41,728 |
| Additions | 13,637 | 1,545 | 369 | 35 | 15,586 |
| Disposals and other changes |
(733) | (2) | - | - | (735) |
| Amortization | (242) | (2,030) | (536) | (9) | (2,817) |
| Write-downs | - | - | - | - | - |
| Closing net book value at |
|||||
| 31.12.2017 | 47,101 | 4,083 | 2,511 | 67 | 53,762 |
| Additions | 430 | 1,863 | 326 | 8 | 2,627 |
| Disposals and other changes |
- | (345) | (39) | - | (384) |
| Amortization | (162) | (2,099) | (509) | (10) | (2,780) |
| Write-downs | - | - | - | - | - |
| Closing net book value at 31.12.2018 |
47,369 | 3,502 | 2,289 | 65 | 53,225 |
The net book value of intangible assets is reported below:
The increase in "concessions, brands and similar rights" is due to the capitalisation of costs incurred for the registration of trademarks in new countries, for renewals and extensions and for the purchase of software licenses. The reduction in the book value relates to the amortisation in the period of the brand Jesus Jeans, whose net value is approx. Euro 0.1 million.
The Kappa, Robe di Kappa, Superga, K-Way, Briko and Sebago brands are considered intangible assets with indefinite useful life and as such are subject to an impairment test at least annually.
At December 31, 2018, the Kappa and Robe di Kappa brands report a book value of Euro 4.2 million (Euro 1.5 million net of fiscal amortisation), with the Superga brand book value of Euro 21.1 million (Euro 13.2 million net of fiscal amortisation); the K-Way brand was valued at Euro 8.2 million (Euro 3.4 million net of fiscal amortisation), the Sebago brand book value of Euro 11.9 million (Euro 10.6 million net of fiscal amortistion) and the Briko brand at Euro 1.6 million (Euro 1.5 million net of fiscal amortisation).
For the purposes of the impairment test of the BasicNet Group at consolidated level, the CGU's were identified as the brands of the company.
The impairment test was carried out comparing the book value of the net assets of each CGU with their recoverable value, defined as the higher between their value in use and the fair value less selling costs.
The verification of the reduction in the loss in value (impairment test) of the indefinite useful life assets, among which brands and goodwill, allocated to each CGU was carried out comparing the carrying amount with the respective recoverable value. The recoverable value was determined discounting the expected net cash flows allocated to each CGU (value in use). The key assumptions utilised for the calculation principally refer to:
• the estimate of the future net cash flows of each CGU is based on the plans approved by the Board of Directors and on reasonable and sustainable assumptions, with respect to future and historical cash flows;
Following the impairment test no write-down is required of the book value of the brands or the goodwill. The value in use of the CGUs so calculated, significantly exceeded their book value also considering sensitivity analysis undertaken on the principal parameters in line with previous years.
The account "software development" increased approx. Euro 1.9 million for investments and decreased Euro 2.4 million for amortisation and other changes in the year.
The account "other intangible assets" principally includes investments related to the franchising project, with investment of Euro 0.3 million and amortisation in the year of Euro 0.5 million.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Goodwill | 9,232 | 9,527 | (295) |
| Goodwill | 9,232 | 9,527 | (295) |
The account "goodwill" includes the goodwill arising on the business combination with the Spanish licensee (Euro 6.7 million) and the French licensee (Euro 1.2 million), in addition to goodwill paid for the acquisition of retail outlets, known as key money (Euro 1.3 million).
The Group verifies the recovery of the goodwill at least on an annual basis or more frequently when there is an indication of a loss in value. For impairment tests, the goodwill arising from the business combination of the Spanish and French licensees is allocated to the CGU's identified as the Kappa and Robe di Kappa brands: for further information, reference should be made to Note 20.
| December 31, | December 31, | Changes | |
|---|---|---|---|
| 2018 | 2017 | ||
| Property | 21,583 | 22,292 | (709) |
| Furniture and other assets | 5,318 | 5,487 | (169) |
| Plant and machinery | 705 | 456 | 249 |
| EDP | 1,607 | 1,501 | 106 |
| Industrial and commercial equipment | 184 | 157 | 27 |
| Total property, plant and equipment | 29,397 | 29,893 | (496) |
| Property | Furniture and other assets |
Plant and machinery |
EDP | Industrial and commercial equipment |
Total | |
|---|---|---|---|---|---|---|
| Historic cost at 1.1.2017 |
36,924 | 15,632 | 1,604 | 13,403 | 985 | 68,548 |
| Additions | 57 | 1,713 | 163 | 594 | 22 | 2,549 |
| Disposals and other changes |
- | (75) | (4) | 1 | (12) | (90) |
| Historic cost at 31.12.2017 |
36,981 | 17,270 | 1,763 | 13,998 | 995 | 71,007 |
| Additions | 287 | 1,275 | 449 | 711 | 79 | 2,801 |
| Disposals and other changes |
- | (855) | (2) | (109) | - | (966) |
| Historic cost at 31.12.2018 |
37,268 | 17,690 | 2,210 | 14,600 | 1,074 | 72,842 |
The changes in the historical cost of property, plant and equipment were as follows:
The changes in the relative accumulated amortisation provisions were as follows:
| Property | Furniture and other assets |
Plant and machinery |
EDP | Industrial and commercial equipment |
Total | |
|---|---|---|---|---|---|---|
| Acc. Deprec. at 1.1.2017 |
(13,698) | (10,589) | (1,141) | (11,835) | (788) | (38,051) |
| Depreciation | (991) | (1,194) | (166) | (662) | (50) | (3,063) |
| Disposals and other changes |
- | - | - | - | - | - |
| Acc. Deprec. at 31.12.2017 |
(14,689) | (11,783) | (1,307) | (12,497) | (838) | (41,114) |
| Depreciation | (996) | (1,186) | (199) | (609) | (52) | (3,042) |
| Disposals and other changes |
- | 597 | 1 | 113 | - | 711 |
| Acc. Deprec. at 31.12.2018 |
(15,685) | (12,372) | (1,505) | (12,993) | (890) | (43,445) |
| Furniture | EDP | Industrial and | ||||
|---|---|---|---|---|---|---|
| and other | Plant and | commercial | ||||
| Property | assets | machinery | equipment | Total | ||
| Opening net book value |
||||||
| at 1.1.2017 | 23,226 | 5,043 | 463 | 1,568 | 197 | 30,497 |
| Additions | 57 | 1,713 | 163 | 594 | 22 | 2,549 |
| Depreciation | (991) | (1,194) | (166) | (662) | (50) | (3,063) |
| Disposals and other changes |
- | (75) | (4) | 1 | (12) | (90) |
| Closing net book value |
||||||
| at 31.12.2017 | 22,292 | 5,487 | 456 | 1,501 | 157 | 29,893 |
| Additions | 287 | 1,275 | 449 | 711 | 79 | 2,801 |
| Depreciation | (996) | (1,186) | (199) | (609) | (52) | (3,042) |
| Disposals and other changes |
- | (258) | (1) | 4 | - | (255) |
| Closing net book value |
||||||
| at 31.12.2018 | 21,583 | 5,318 | 705 | 1,607 | 184 | 29,397 |
The net book value of property, plant and equipment was as follow:
"Property" includes the value of the buildings at Strada della Cebrosa 106, Turin, headquarters of BasicItalia S.p.A. and at Largo Maurizio Vitale 1, Turin, headquarters of the Parent Company and to adjacent buildings acquired at the end of 2016. The increase in the property account is due to improvements undertaken during the year.
Total gross investments in the year amounted to Euro 2.8 million, principally relating to the acquisition of furniture and EDP for the opening of new stores.
The net book value of property, plant and equipment acquired according to the finance lease formula is reported below:
| Net value at December 31, 2018 |
Net value at December 31, 2017 |
|
|---|---|---|
| Furniture and other assets | 2,071 | 1,995 |
| EDP | 184 | 451 |
| Equipment | - | - |
| Total | 2,255 | 2,446 |
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Other receivables, guarantees | 1,048 | 661 | 387 |
| Total financial receivables | 1,048 | 661 | 387 |
| Total investments & other financial assets | 1,048 | 661 | 387 |
"Other receivables, guarantees" principally refer to deposits on real estate property.
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Investments in: | |||
| - Joint ventures | 243 | 266 | (23) |
| Total investments in joint ventures | 243 | 266 | (23) |
Investments in joint ventures concern the value of the investment in Fashion S.r.l. of Euro 243 thousand, held 50%. The company owns the Sabelt brand. From January 1, 2014, this category of investment has been valued at equity, as per IFRS 11.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Finished products and goods Inventory obsolescence provision |
48,846 (4,467) |
51,391 (4,874) |
(2,545) 407 |
| Total net inventories | 44,379 | 46,517 | (2,138) |
Finished inventories include goods in transit at the balance sheet date which at December 31, 2018 amount to approx. Euro 6 million compared to Euro 2.1 million at December 31, 2017, goods held at Group brand stores for Euro 8.9 million, compared to Euro 9.3 million at December 31, 2017 and goods to be shipped against orders, to be delivered at the beginning of the following year, for Euro 5.6 million compared to Euro 6.4 million at December 31, 2017.
Inventories are valued under the weighted average cost method and net of the obsolescence provision considered reasonable for a prudent valuation of inventories, which recorded the following changes during the year:
| 2018 | 2017 | |
|---|---|---|
| Inventory obsolescence provision at 1.1 | 4,874 | 3,646 |
| Provisions in the year | 3,456 | 1,688 |
| Utilisations | (3,863) | (460) |
| Inventory obsolescence provision at 31.12 | 4,467 | 4,874 |
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Gross value | 77,518 | 66,871 | 10,647 |
| Doubtful debt provision |
(7,638) | (8,293) | 655 |
| Total trade receivables | 69,880 | 58,578 | 11,302 |
"Trade receivables" refer for Euro 42.3 million to goods sold by proprietary licensees (compared to Euro 39.8 million at December 31, 2017) and for which a doubtful debt provision was recorded of Euro 5.3 million (Euro 5.4 million at December 31, 2017), for Euro 35.1 million to royalties and sourcing commissions (Euro 26.7 million at December 31, 2017) against which a doubtful debt provision was recorded of Euro 2.4 million (Euro 2.9 million at December 31, 2017) and Euro 0.1 million other receivables (Euro 0.4 million at December 31, 2017).
The receivables are recorded at their realisable value through a doubtful debt provision based on estimated losses on disputes and/or overdue receivables as well as a general provision.
The movements during the year were as follows:
| 2018 | 2017 | |
|---|---|---|
| Doubtful debt provision at 1.1 | 8,293 | 7,690 |
| Provisions in the year | 2,381 | 2,041 |
| Utilizations | (3,036) | (1,438) |
| Doubtful debt provision at 31.12 |
7,638 | 8,293 |
The utilisations of the provision are related to the write off of long outstanding amounts and are made when the legal documentation of the loss has been received. The provisions are made on the basis of the review of individual positions. Overdue receivables not written down are normally recovered in the period immediately after the maturity date and in any case are subject to specific risk evaluations.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Tax receivables | 6,339 | 5,396 | 943 |
| Other receivables | 2,481 | 1,240 | 1,241 |
| Other current assets | 8,820 | 6,636 | 2,184 |
"Tax receivables" principally include corporate income taxes paid on account of Euro 2.3 million and withholding taxes on royalties of Euro 4 million.
"Other receivables" principally the premium paid to the insurance company against Directors Termination Indemnities, to be paid to the Chairman of the Board of Directors, as approved by the Board of Directors on May 13, 2016, on the indication of the Shareholders' AGM and the proposal of the Remuneration Committee and with the favourable opinion of the Board of Statutory Auditors, on conclusion of his role for Euro 1.5 million.
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Expenses pertaining to future collections | 5,260 | 4,587 | 673 |
| Sponsorship and media | 2,007 | 2,115 | (108) |
| Other | 2,101 | 1,174 | 928 |
| Total prepayments | 9,368 | 7,876 | 1,492 |
The "expenses pertaining to future collections" include the creative personnel costs, samples, merchandising costs and sales catalogues, relating to new Collections to be brought to the market, as well as presentations costs for the relative sales meetings.
The "sponsorship costs" relate to the annual amount contractually defined by the parties, which is partially invoiced in advance during the sports season, compared to the timing of the services.
The "other prepayments" include various costs for samples, services, utilities, insurance and other minor amounts incurred by the companies of the Group.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Bank and postal deposits | 9,504 | 5,712 | 3,792 |
| Cash in hand and similar | 112 | 107 | 5 |
| Total cash and cash equivalents | 9,616 | 5,819 | 3,797 |
"Bank deposits" refer to temporary current account balances principally due to receipts from clients. In particular, they are held at: BasicItalia S.p.A. (Euro 3.9 million), BasicRetail S.r.l. (Euro 1.5 million), BasicNet S.p.A. (Euro 1.6 million), Basic Properties America Inc. (Euro 1.4 million) and, for the difference, the other Group companies (Euro 1 million).
Against the agreement signed with Intesa Sanpaolo S.p.A. (described in Note 43), Euro 220 thousand is included in bank deposits and restricted as guarantee on loans provided by the bank to third parties, owners of the Group's franchising stores.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Derivative financial instruments |
305 | 1 | 304 |
| Total | 305 | 1 | 304 |
The account includes the market value at December 31, 2018 of the currency hedge instruments on US Dollars (cash flow hedge), subscribed with primary credit institutions; the instrument utilised, called flexi term, operates in the form of forward currency purchases on a portion of the estimated currency needs for the purchase of goods on foreign markets, to be made in 2019 and 2020, on the basis of the goods orders already sent to suppliers, or still to be made but included in the budget. At December 31, 2018, commitments were in place on estimated future purchases, for USD 22.3 million, divided into 6 operations with variable maturities: 1 operation in the first half of 2019 (for USD 1.5 million), 4 operations in the second half of 2019 (for USD 10 million), at fixed exchange rates between USD/Euro 1.1725 and USD/Euro 1.2537 and 1 operation in 2020 (for USD 10 million). During 2018, forward purchase operations were utilised for approx. USD 38.7 million and the relative effects were recognised to the income statement. A negative equity reserve was recorded of approx. Euro 232 thousand, net of the tax effect.
In the case of the Interest Rate Swap (IRS) agreed by the Group, the specific hedge of the variable cash flow realised at market conditions, through the signing of the fix/flo IRS perfectly hedges the item to which the original cash flows stem, as in this case, and continues to be considered effective.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes |
|---|---|---|
| 31,717 | 31,717 | - |
| (17,827) | (14,495) | (3,332) |
| 78,033 | 69,143 | 8,890 |
| 21,014 | 10,646 | 10,368 |
| - | - | - |
| 112,937 | 97,011 | 15,926 |
The "share capital" of the Parent Company, amounting to Euro 31,716,673.04, is divided into 60,993,602 ordinary shares of Euro 0.52 each, fully paid-in.
In May 2018, as approved by the Shareholders' AGM of BasicNet S.p.A. of April 24, 2018, in relation to the allocation of the 2017 net profit, a dividend of Euro 0.06 per share was distributed to each of the ordinary shares in circulation, for a total pay-out of approx. Euro 3.3 million.
During the year 825,344 treasury shares were acquired in accordance with Shareholders' Meetings motions, which together with the 6,140,728 shares held at the end of the previous year, totalled 6,966,072 at December 31, 2018 (10.421% of the Share Capital).
The account "other reserves" comprises:
The reconciliation at December 31, 2018 between the net equity and net result of the Parent Company and the net equity and consolidated net result of the Group is reported in the Directors' Report.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Effective part of the Gains/(losses) on cash flow instruments generated in the period (currency hedges) |
1,215 | (2,519) | 3,734 |
| Effective part of the Gains/(losses) on cash flow instruments generated in the period (interest rate hedges) |
253 | 365 | (112) |
| Effective part of the Gains/losses on cash flow hedge instruments |
1,468 | (2,154) | 3,622 |
| Re-measurement of defined benefit plans (IAS 19) (*) |
73 | (16) | 89 |
| Gains/(losses) from translation of accounts of foreign subsidiaries |
346 | (934) | 1,280 |
| Tax effect relating to the Other items of the comprehensive income statement |
(370) | 518 | (888) |
| Total other gains/(losses), net of tax effect | 1,517 | (2,586) | 4,103 |
The other gains and losses recorded directly to equity in accordance with IAS 1 – Presentation of financial statements are reported below.
(*) items which may not be reclassified to the profit and loss account
| December 31, 2018 | December 31, 2017 | |||||
|---|---|---|---|---|---|---|
| Gross value |
Tax Charge/ Benefit |
Net value |
Gross value |
Tax Charge/ Benefit |
Net value |
|
| Effective part of Gains/losses on cash flow hedge instruments |
1,468 | (352) | 1,116 | (2,154) | 514 | (1,640) |
| Gains/(losses) for re-measurement of defined benefit plans (IAS 19) (*) |
73 | (18) | 55 | (16) | 4 | (12) |
| Gains/(losses) from translation of accounts of foreign subsidiaries |
346 | - | 346 | (934) | - | (934) |
| Total other gains/(losses), net of tax effect |
1,887 | (370) | 1,517 | (3,104) | 518 | (2,586) |
(*) items which may not be reclassified to the profit and loss account
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Provisions for risks and charges | 50 | 42 | 8 |
| Total provisions for risks and charges | 50 | 42 | 8 |
The provision for risks and charges relates to the Agents Termination Indemnity Provision (FIRR) in BasicItalia S.p.A.
The changes in the loans during the year are shown below:
| 31/12/2017 | Repayments | New loans | 31/12/2018 | Short-term portion |
Medium/long-term portion |
|
|---|---|---|---|---|---|---|
| "Basic Village property loan" "BasicItalia property loan" |
5,700 | (1,200) | - | 4,500 | 1,200 | 3,300 |
| 2,339 | (407) | - | 1,932 | 407 | 1,525 | |
| "Intesa Loan" | 5,625 | (3,750) | - | 1,875 | 1,875 | - |
| "BNL Loan" | 6,250 | (1,250) | - | 5,000 | 1,250 | 3,750 |
| "MPS Loan" | 13,000 | - | - | 13,000 | 813 | 12,187 |
| "Banco BPM Loan" | 1,628 | (496) | - | 1,132 | 500 | 632 |
| Balance | 34,542 | (7,103) | - | 27,439 | 6,045 | 21,394 |
The maturity of the long-term portion of loans is highlighted below:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Medium/long term loans: | |||
| - due within 5 years |
21,394 | 24,696 | (3,302) |
| - due beyond 5 years |
- | 2,743 | (2,743) |
| Total medium/long-term loans | 21,394 | 27,439 | (6,045) |
| Leasing payables | 823 | 991 | (168) |
| Total leasing payables (maturity within 5 years) | 823 | 991 | (168) |
| Total loans | 22,217 | 28,430 | (6,213) |
The medium/long-term loans are comprised for Euro 4.5 million of the residual value of the loan provided by the Unicredit Group, for the purchase of the "BasicVillage" building located at Largo Maurizio Vitale, 1, Turin ("Basic Village Property Loan"), for Euro 1.9 million the residual loan from Mediocredito Italiano S.p.A. (Intesa Sanpaolo S.p.A.) for the purchase of the building of BasicItalia S.p.A. located at Strada Cebrosa, 106 ("BasicItalia Property Loan"), for Euro 1.8 million the residual loan from Intesa SanPaolo issued in April 2015 ("Intesa Loan"), for Euro 5 million the medium/longterm loan issued by Banca Nazionale del Lavoro S.p.A. in November 2016 ("BNL Loan"), for Euro 13 million the loan issued in July 2017 by MPS Capital Services Banca per le Imprese S.p.A. for the acquisition of the Sebago brand ("MPS Loan") and the residual loan from Banco BPM for Euro 1.1 million, to support investment activities in the retail sector ("BPM Loan").
The "Basic Village property loan" granted by the Unicredit Group was for the acquisition of the building "BasicVillage" at Largo M. Vitale 1, Turin. The loan was granted in September 2007 for Euro 18 million at a variable rate converted into a fixed rate (Note 42). Against this loan there is a mortgage on the property and a surety from the parent company BasicNet S.p.A. with maturity in September 2022.
The "BasicItalia Loan" granted by Banca Intesa Sanpaolo S.p.A. was for the purchase of the building "BasicItalia" at Strada Cebrosa 106, Turin. The loan was granted in October 2008 for Euro 6 million with repayment of the capital in quarterly constant instalments and maturity at September 2023. The loan is guaranteed by a mortgage on the property and by a surety from the parent company BasicNet S.p.A..
The "Intesa Loan" was issued in April 2015 for Euro 15 million and is of four-year duration, repayable in quarterly instalments at a quarterly Euribor rate plus 185 basis points. In July 2015, the variable Euribor rate was converted (under an interest rate swap) into a fixed rate of 0.23% annually. The loan will support developmental investments, in addition to optimising the duration of loans undertaken; it is supported by a pledge on Superga Trademark S.A. shares with obligation to maintain the full investment in the company by the Group.
The contractual conditions do not include financial covenants. The loan contract stipulates the maintenance of a number of ownership conditions concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 30%.
The "BNL Loan" was disbursed in November 2016 for Euro 7.5 million; it has six-year duration and is repayable in quarterly instalments at a quarterly Euribor rate increased by 95 basis points. The contractual conditions do not include financial covenants. The loan contract stipulates the maintenance of a number of ownership conditions concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 30%. The loan is supported by a second level mortgage on the BasicVillage building in Turin and a first level mortgage on the adjacent building, acquired at the end of the year.
The "MPS Loan" was issued in July 2017 for Euro 13 million and is of six-year duration, repayable in quarterly instalments from December 2019 at a quarterly Euribor rate (although not below zero) plus 170 basis points. No financial covenants are stipulated, although the maintenance of a number of ownership conditions are required concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 30%. The loan is supported by a pledge on the shares of TOS S.r.l., owner of the Sebago brand, with obligation to maintain the full investment in the company by the Group.
The "Banco BPM Loan" was disbursed in February 2017 to BasicItalia S.p.A. for Euro 2 million; it has four-year duration and is repayable in quarterly instalments at a quarterly Euribor rate increased by 70 basis points. The contractual conditions do not include financial covenants.
At December 31, 2018, the credit lines available from the banking system (bank overdrafts, commercial advances, medium/long-term loans, import financing, leasing and letters of credit), amount to Euro 201 million, broken down as follows:
| (in Euro millions) | Dec. 31, 2018 | Dec. 31, 2017 |
|---|---|---|
| Cash facility | 139.9 | 131.8 |
| Factoring | 1.5 | 1.5 |
| Letters of credit and swaps | 28.1 | 32.1 |
| Medium/long term loans | 30.5 | 34.5 |
| Property leases | 1.0 | 3.6 |
| Total | 201.0 | 203.5 |
The average interest paid for the BasicNet Group in the year is reported in Note 34.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Bank payables due within one year: | |||
| - short-term portion of medium/long-term loans | 6,045 | 7,104 | (1,059) |
| - bank overdrafts and bills | 10,735 | 11,516 | (781) |
| - import advances | 22,300 | 20,249 | 2,051 |
| Total bank payables | 39,080 | 38,869 | 211 |
The portion of medium/long-term loans due within one year is included under short-term bank debt as described in Note 33.
The changes in the financial position are commented upon in the Directors' Report. Interest due matured at the end of the year on short and medium/long-term loans is reported in the account "bank payables".
Cash advances refer to temporary utilisation by the Parent Company BasicNet S.p.A., for Group treasury needs.
The financial debt by interest rate at December 31, 2018 is as follows:
| Interest Rate | ||||
|---|---|---|---|---|
| Fixed | Variable | Total | ||
| Short-term | 13,102 | 25,978 | 39,080 | |
| Medium/long term | 3,300 | 18,917 | 22,217 | |
| Total | 16,402 | 44,895 | 61,297 |
The average interest rate on medium/long term loans was 2.08%.
The account includes the post-employment benefits for employees of Euro 2.7 million and the termination indemnities of Directors of Euro 1.3 million.
The changes in the year of the post-employment benefit liability were as follows:
| December 31, 2018 | December 31, 2017 | |||||
|---|---|---|---|---|---|---|
| Defined benefit plans |
Defined contrib. plans |
Total | Defined benefit plans |
Defined contrib. plans |
Total | |
| Change in the balance sheet: | ||||||
| Net liabilities recognized at begin. of year | 2,702 | - | 2,702 | 2,528 | - | 2,528 |
| Interest | 46 | - | 46 | 46 | - | 46 |
| Pension cost, net of withholdings | 232 | 877 | 1,109 | 214 | 805 | 1,019 |
| Benefits paid | (200) | - | (200) | (103) | - | (103) |
| Payments to the INPS treasury fund | - | (638) | (638) | - | (143) | (143) |
| Payments to other supp. pension fund | - | (239) | (239) | - | (662) | (662) |
| Actuarial gain/(losses) | (73) | - | (73) | 16 | - | 16 |
| Net liabilities recognized in the accounts | 2,707 | - | 2,707 | 2,701 | - | 2,701 |
| Change in the income statement: | ||||||
| Interest | 46 | - | 46 | 46 | - | 46 |
| Pension Cost | 242 | 877 | 1,119 | 222 | 805 | 1,027 |
| Total charges/(income) for post employment benefits |
288 | 877 | 1,165 | 268 | 805 | 1,073 |
The account "defined benefit plans" includes the present value of the liabilities in the Italian companies of the Group towards employees in accordance with Article 2120 of the Civil Code. Based on the regulatory changes in 2007, the sums matured prior to January 1, 2007 to employees are recognised as defined benefit plans in accordance with IAS 19 – Employee benefits; those matured subsequent to this date are on the other hand recognised as defined contribution plans in accordance with the same standard.
Within the Group there are no other defined benefit plans.
The actuarial valuation of the Post-Employment Benefit is prepared based on the "matured benefits" method through the Projected Unit Credit Method in accordance with IAS 19. Under this method the valuation is based on the average present value of the pension obligations matured based on the employment service up to the time of the valuation, without projecting the remuneration of the employee in accordance with the regulatory modifications introduced by the Pension Reform.
The revaluations of the amounts at the option date for all of the companies and the benefits matured and not allocated to complementary pension schemes for businesses with less than 50 employees are recorded under post-employment benefit. In accordance with IAS 19, this provision was recorded as a "Defined benefit plans". The actuarial model for the measurement of the post-employment benefit is based on various assumptions of a demographic and financial nature.
The sensitivity analysis carried out on the basis of the following variables: 1) inflation rate +0.25%/- 0.25%, 2) discount rate +0.25%/-0.25%, 3) turnover rate +1%/-1% shows non-material impacts of less than Euro 10 thousand.
| December 31, 2018 | December 31, 2017 | |
|---|---|---|
| discount rate | 1.970% | 1.610% |
| inflation rate | 1.500% | 1.500% |
| annual increase in post employment benefit |
2.625% | 2.625% |
| annual increase in salaries |
1.000% | 1.000% |
The principal assumptions of the model concerning the actuarial valuations relating to personnel costs are:
The change in the annual discount rate reflects the decrease in the yields of the "corporate bonds" of the basket utilised (Iboxx Eurozone Corporate) at the balance sheet date.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Deferred tax liabilities | 1,949 | 311 | 1,638 |
| Total deferred tax liabilities | 1,949 | 311 | 1,638 |
| December 31, 2018 | December 31, 2017 | ||||||
|---|---|---|---|---|---|---|---|
| Amount | Amount | ||||||
| of | of | ||||||
| temporary | Rate | Tax effect | temporary | Rate | Tax effect | Changes | |
| differences | % | differences | % | 2018/2017 | |||
| Deferred tax assets: | |||||||
| - Excess doubtful debt provision | |||||||
| not deductible | (6,517) | 24.00% | (1,564) | (7,242) | 24.00% | (1,738) | 174 |
| - Inventory obsolescence provision | (4,293) | 24.00% | (1,058) | (4,774) | 24.00% | (1,174) | 117 |
| - ROL surplus | - | 24.00% | - | (455) | 24.00% | (109) | 109 |
| - Misc. charges temporarily | |||||||
| non-deductible | (3,032) | 27.90% | (814) | (2,403) | 27.90% | (655) | (160) |
| - Effect IAS 19 – Employee Benefits |
(71) | 24.00% | (17) | (139) | 24.00% | (33) | 16 |
| - Effect IAS 39 – financial |
(130) | 24.00% | (31) | (1,598) | 24.00% | (383) | 352 |
| instruments | |||||||
| Total | (14,043) | (3,484) | (16,612) | (4,092) | 609 | ||
| Deferred tax liabilities: | |||||||
| - Dividends not received | 23 | 24.00% | 5 | 93 | 24.00% | 22 | (17) |
| - Prudent exchange differences, net | 327 | 24.00% | 80 | (945) | 24.00% | (227) | 306 |
| - Amortization/Depreciation | |||||||
| tax basis | 12,492 | 27.90% | 3,811 | 13,631 | 27.90% | 3,804 | 6 |
| - Effect IAS 38 – plant costs | 15 | 27.90% | 5 | 16 | 27.90% | 5 | - |
| - Effect of IAS 17 finance leases | |||||||
| and | 3,714 | 27.90% | 1,036 | 1,240 | 27.90% | 346 | 690 |
| other tax differences on | |||||||
| buildings | |||||||
| - Effect IFRS 3 – goodwill |
1,777 | 27.90% | 496 | 1,623 | 27.90% | 453 | 43 |
| amortisation | |||||||
| Total | 18,348 | 5,433 | 15,657 | 4,404 | 1,029 | ||
| Net deferred tax liability (asset) | 1,949 | 311 | |||||
| Deferred tax asset relating to fiscal losses |
- | ||||||
| Deferred tax liability/(asset) as per financial statements |
- 1,949 |
311 | 1,637 |
The net amount of approx. Euro 2 million represents the balance between the deferred tax assets and liabilities as illustrated in the table.
Deferred tax assets are recorded considering probable their recovery based on future profit expectations, and principally relate to non-deductible doubtful debt provisions (Euro 1.6 million), non-deductible inventory obsolescence provisions (Euro 1 million) and various temporary non-deductible charges (Euro 0.8 million).
Deferred tax liabilities principally refer to the tax effects deriving from the application of the IFRS international accounting standards, with particular reference to the accounting of amortisation on own brands solely for tax purposes (Euro 3.8 million), differences between statutory and fiscal amortisation (Euro 1 million) and goodwill amortisation fiscally deductible (Euro 0.5 million).
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Guarantee deposits | 1,136 | 1,033 | 103 |
| Total other non-current liabilities | 1,136 | 1,033 | 103 |
The "guarantee deposits" include the guarantees received from licensees, to cover the minimum royalties guaranteed contractually.
The "trade payables" are payable in the short-term and increased by approx. Euro 4.4 million compared to December 31, 2017, following the commercial activity of the Group in the year and particularly the final quarter. At the date of these financial statements there are no initiatives for the suspension of supplies, payment injunctions or executive actions by creditors against BasicNet S.p.A. or other companies of the Group.
Trade payables are normally settled between 30 and 120 days. The book value of trade payables equates the relative fair value.
The breakdown of this account is shown in the following table:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Tax payables: | |||
| Income taxes | 522 | 1,272 | (750) |
| Employee contributions | 491 | 610 | (119) |
| Non-recurring tax | |||
| charges | - | 4 | (4) |
| Group VAT | 1,036 | 1,284 | (248) |
| Other | 84 | 61 | 24 |
| Total tax payables | 2,133 | 3,231 | (1,098) |
The Group VAT payable at December 31, 2018 was settled on the beginning of 2019.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Accrued expenses |
749 | 669 | 80 |
| Payables to employees and directors | 3,514 | 3,288 | 227 |
| Other payables | 5,361 | 3,994 | 1,367 |
| Total other current liabilities | 9,624 | 7,951 | 1,674 |
The account "accrued expenses" principally includes deferred employee remuneration.
The "other payables" at December 31, 2018 principally include employee remuneration and expenses (Euro 3.5 million), payable in the subsequent month, related social security charges (Euro 1.2 million), other related liabilities (Euro 0.2 million), royalty payment on accounts from licensees (Euro 0.1 million) and other miscellaneous amounts Euro (3.9 million).
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Royalties | 1,046 | 2,357 | (1,311) |
| Sponsored goods revenues | 1,079 | 1,287 | (208) |
| Other deferred income | 1,506 | 12 | 1,494 |
| Total deferred income | 3,631 | 3,656 | (25) |
The "sponsored goods revenues" relates to the invoicing of sponsored merchandise, which contractually partially refers to the period after the reporting date, with corresponding prepayments recorded under assets for sponsoring costs.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Derivative financial instruments | 436 | 1,599 | (1,163) |
| Total | 436 | 1,599 | (1,163) |
The account includes for Euro 4 thousand the adjustments to market value of the interest rate hedging operations on the medium-long-term "Intesa loan" and Euro 432 thousand on the Basic Village property loan (Note 33), signed with leading financial counterparties, which converted the variable interest rates into fixed interest rates, respectively at 2.08% and 6.4% (cash flow hedge). A negative equity reserve was recorded of approx. Euro 331 thousand, net of the tax effect.
With reference to the guarantees and commitments of the Group with third parties reference should be made to Note 33.
In February 2010, Intesa Sanpaolo S.p.A. and BasicItalia S.p.A. signed an agreement which would permit access to subsidised finance for the start-up of franchising stores of the Group, against which BasicItalia guarantees a portion of the loan and the purchase of assets in leasing and sub-entry into the management of the sales point in the case of non-compliant of the store owner. At December 31, 2018, the bank deposits of BasicItalia were restricted for Euro 220 thousand; guarantees were also provided on leasing amounting to Euro 1 million.
In accordance with that outlined above guarantees were granted of Euro 471 thousand by credit institutions in favour of the lessees of the stores of BasicRetail S.r.l. directly undertaking retail sales of the Group products.
Further commitments were undertaken by the subsidiary BasicItalia S.p.A. relating to the opening of import credit documentation (credit letters) for goods, through some Credit Institutions, totalling Euro 25 million, in addition to a surety issued by a leading bank in guarantee of the contractual commitments related to a sponsorship contract for Euro 6.5 million.
The future rental commitments to be honoured on contractual expiry, discounted to the IRS rate at December 31, 2018, increased by the average spread of the medium-term loans, indicatively amount to Euro 16.6 million, of which Euro 6.8 million concerning the rental of the outlets. The average duration of the rental contracts is 3.5 years.
The shares of the subsidiary Superga Trademark S.A. are subject to a pledge in favour of Intesa Sanpaolo S.p.A. in guarantee of the loan issued in April 2015 and the shares of TOS S.r.l. are subject to a pledge in favour of MPS Capital Services Banca per le Imprese S.p.A. as guarantee of the loan issued in July 2017.
The principal risks and uncertainties of the Group activities are described in the Directors' Report.
The financial instruments of the BasicNet Group include:
It is recalled that the Group only subscribes to cash flow hedges, to hedge against interest and currency risks.
In accordance with the requirements of IFRS 7 in relation to financial risks, the types of financial instruments present in the financial statements, with indication of the valuation criteria applied, are reported below:
| Financial instruments at fair value recorded |
through: | Financial instruments at amortized cost |
Non-listed investments valued at cost |
Book value at 31.12.2018 |
|||
|---|---|---|---|---|---|---|---|
| P&L | Shareholders ' Equity |
||||||
| Assets: | |||||||
| Equity invest. & other financial assets | - | - | - | 1,048 | 1,048 | ||
| Interests in joint ventures | - | - | - | 243 | 243 | ||
| Trade receivables | - | - | 69,880 | - | 69,880 | ||
| Other current assets | - | - | 8,820 | - | 8,820 | ||
| Derivative financial instruments | - | 305 | - | - | 305 | ||
| Liabilities: | |||||||
| Medium/long-term loans | - | - | 22,217 | - | 22,217 | ||
| Bank payables | - | - | 39,080 | - | 39,080 | ||
| Trade payables | - | - | 38,280 | - | 38,280 | ||
| Other current liabilities | - | - | 9,624 | - | 9,624 | ||
| Derivative financial instruments | - | 436 | - | - | 436 |
The financial risk factors, identified in IFRS 7 – Financial instruments: additional disclosures, are described below:
The Group is exposed to the risk of fluctuations of commodity prices relating to raw materials (wool, cotton, rubber, synthetic fibre etc.) incorporated in the finished products which BasicItalia S.p.A. acquires on international markets, as well as fluctuations in the cost of oil which influences transport costs.
The Group does not hedge these risks as not directly dealing with raw materials but only finished products and is exposed for the part of the increase which cannot be transferred to the final consumer if the market and competitive conditions do not permit such.
The BasicNet Group has subscribed the majority of its financial instruments in Euro which corresponds to its functional and presentation currency. Operating on the international market the group is also exposed to fluctuations in exchange rates, principally the US Dollar against the Euro.
At December 31, 2018, unrealised exchange gains were recorded of Euro 375 thousand, while unrealised exchange losses were recorded of Euro 49 thousand, for a net exchange gain of Euro 326 thousand.
At the reporting date, there were 6 hedge operations on US Dollar fluctuations, totalling USD 22.3 million; the relative effects are illustrated in the account "Financial hedge instruments", at Notes 30 and 42.
Group Management considers that the management and containment policies adopted for this risk are adequate.
All medium/long-term loans and leasing contracts are in Euro, therefore they are not subject to any currency risk.
The composition of the gross financial debt between fixed and variable interest rates at December 31, 2018 is shown below:
| Dec.31, 2018 | % | Dec.31, 2017 | % | |
|---|---|---|---|---|
| Fixed rate | 16,402 | 26.8% | 18,373 | 27.3% |
| Variable rate | 44,894 | 73.2% | 48,926 | 72.7% |
| Gross debt |
61,296 | 100.00% | 67,299 | 100.00% |
The interest rate fluctuation risks of some medium/term loans were hedged with conversion of the variable rate into fixed rates, as described in Note 42. On the remaining part of the debt, the Group is exposed to fluctuation risks.
Where at December 31, 2018 the interest rate on long/term loans at that date were 100 basis points higher (or lower) compared to the actual rates, there would be a higher financial charges (lower), before the tax effect, respectively of Euro +216 thousand and Euro -216 thousand.
The doubtful debt provision (Note 26) which includes provisions against specific credit positions and a general provision on an historical analysis of receivables, represents approx. 9.9% of trade receivables at December 31, 2018.
Liquidity risk is mitigated in the short-term period by the significant generation of cash realised by the "licenses and trademarks" segment, by the significant positive net working capital, and by the overall credit lines provided by the banking system (Note 33).
The table below illustrates the cash flow timing of payments on medium/long-term debt.
| Book value | Future interest income/(expe nse) |
Contractual cash flows |
Within 1 year | From 1 to 5 years |
Beyond 5 years |
|
|---|---|---|---|---|---|---|
| "Intesa Loan" | 1,875 | 7 | 1,882 | 1,882 | - | - |
| "BasicVillage property | ||||||
| loan" | 4,500 | 779 | 5,279 | 1,444 | 3,836 | - |
| "BasicItalia property loan" | ||||||
| 1,932 | 113 | 2,045 | 448 | 1,597 | - | |
| "BNL Loan" | 5,000 | 88 | 5,088 | 1,285 | 3,803 | - |
| "Banco BPM Loan" | ||||||
| 1,132 | 10 | 1,142 | 508 | 634 | - | |
| "MPS Loan" | 13,000 | 642 | 13,642 | 1,037 | 12,605 | - |
| Lease payables | 823 | 18 | 841 | 469 | 372 | - |
| Total financial liabilities | 28,262 | 1,656 | 29,918 | 7,072 | 22,846 | - |
The risk that the loans within the companies of the Group contain clauses (covenants) which allow the counterparties to request the creditor on the occurrence of certain events or circumstances the immediate repayment of the sums granted and not yet due, generating a liquidity risk.
The loans in place at the reporting date are not subject to financial covenants.
The transactions between the Parent Company and its subsidiaries and between the subsidiaries were within the normal operating activities of the Group and were concluded at normal market conditions. The balance sheet and income statement effects of the transactions are eliminated in the consolidation process. Based on the information received from the companies of the Group there were no atypical or unusual operations.
BasicNet S.p.A., and, as consolidating companies, BasicItalia S.p.A., BasicRetail S.r.l., Basic Village S.p.A., Jesus Jeans S.r.l., Basic Trademark S.A., Superga Trademark S.A., Basic Properties B.V. and TOS S.r.l. have adhered to the national fiscal regime as per Article 177/129 of the CFA.
The transactions with related parties for the year ended December 31, 2018 are reported below:
| Investments | Trade receivables |
Trade payables |
Other Income |
Costs | |
|---|---|---|---|---|---|
| Interests in joint ventures: - Fashion S.r.l. |
243 | - | 6 | 2 | - |
| Remuneration of Boards and Senior Executives and other related parties |
- | - | - | - | 6,434 |
The remuneration concerns emoluments and all other payments, pension-related or social security deriving from the role of Director or Statutory Auditor in BasicNet S.p.A. and the other companies within the consolidation scope.
In relation to the other related parties, we highlight the legal consulting activities undertaken by Studio Legale Pavesio e Associati and by Studio Legale Cappetti, of the Director Carlo Pavesio and by Studio Boidi & Partners, in which Massimo Boido has a 35% holding and is the Chairman of the Board of Statutory Auditors of BasicWorld S.r.l. These transactions, not material compared to the overall values, were at market conditions.
The collections owned by BasicNet S.p.A., which are utilised for media events, shows, press gatherings together with the Brands and/or products of the Group, are subject to a put and call agreement with BasicWorld S.r.l.. The agreement is for a duration until July 31, 2020 and provides for an exercise price of the Call Option by BasicWorld equal to the cost incurred by BasicNet for the purchase of the Collection, as resulting from the accounting entries of BasicNet, in addition to a financial interest charge equal to the average rate applied to BasicNet at the exercise option date.
They are described in the Directors' Report.
Pursuant to Consob Communication DEM/6064293 of July 28, 2006, we report that there were no nonrecurring significant operations during the year.
The BasicNet Group is involved in some legal disputes of a commercial nature which are not expected to give rise to significant liabilities.
At December 31, 2018, the following disputes between BasicItalia S.p.A., AS Roma S.p.A. and Soccer S.a.s. di Brand Management S.r.l. were pending before the Rome Court: following the unilateral termination of the technical sponsorship contract at the end of 2012, which essentially concerned the reciprocal request for image damages following the rescission, in addition to the payment of miscellaneous and other mutual amounts under the contract.
Following the negotiations in November and December 2018 to reach an amicable settlement regarding the pending cases, on January 8, 2019, BasicItalia, AS Roma and Soccer S.a.S. signed a settlement stipulating the renouncement of the cases brought regarding mutual demands on image rights, the balance of Soccer S.a.s. for prior unpaid supplies of approx. Euro 1.6 million and the payment in settlement of Euro 1.5 million by AS Roma to BasicItalia. An agreement has not yet been reached on the mutual claims on the last sponsorship instalment, subsequent to the rescission date and of a similar amount of damages from early rescission, claimed by BasicItalia and as covered by the contract.
The effects of the settlement agreement accrue to financial year 2019 and shall be included in the relative financial statements. An initial tranche of the consideration agreed above was received on signing the agreement.
Subsequent liabilities are not expected to arise for the BasicNet Group regarding the dispute in terms of that not yet agreed.
The dispute with the Chinese company Taizhou Boyang, owner of the K-WAY brand in China, is in progress.
The dispute has arisen on two fronts: one by which BasicNet S.p.A. is defending before the Chinese authorities the validity of its K-WAY registration for weather-proof clothing items, subject to a non-use cancellation request heard at the second level of judgment, and the right to sell in China K-WAY brand weather-proof clothing items, in addition to its right to produce all clothing items (weather-proof and non-weather-proof) in China and export to countries where K-WAY brands are registered, as in 2018 Taizhou Boyang began proceedings against a number of Sourcing Centers and against BasicNet regarding its Chinese registrations.
On the other, BasicNet S.p.A. took a series of actions in 2018 against Taizhou Boyang before the Chinese authorities to obtain discontinuation of the use of any K-WEY and K-WAY brands, a declaration of bad faith, in addition to the cancellation of the K-WEY and K-WAY brand registrations, previously registered by Taizhou Boyang for non-weather-proof clothing and footwear.
In the initial months of 2018, a tax dispute with the Tax Agency began, following the inspection by the Finance Police for the years 2012 to 2017. In the tax assessment, the Agency alleges the partial nondeductibility of the Post-employment benefit provision accrual made for the Executive Boards for the years 2012 to 2014, on the basis of an interpretation of the rules governing Post-employment benefits for employees, in the total absence of specific tax rules. The Tax Agency is claiming approx. Euro 360 thousand for IRES, in addition to penalties and interest. Not agreeing with the Tax Agency's interpretation and noting also favourable jurisprudence in similar cases, the company presented an appeal for all of the years subject to assessment.
On December 28, 2018, a tax assessment was received from the Tax Agency by the subsidiary Basic Properties America, Inc., with registered office in New York - USA, following checks on BasicNet by the Finance Police in 2017, on the basis of the alleged tax inversion claimed by the latter against the US subsidiary. The assessments concern financial years 2011, 2012 and 2013, alleging tax evasion in Italy for approx. Euro 3.6 million, in addition to interest and penalties. Tax assessments were also received by BasicTrademark S.A. and SupergaTrademark S.A. for the alleged evasion of VAT for approx. Euro 1 million, on the basis that the royalties paid by Basic Properties America, Inc., for tax purposes considered an Italian company, to these two companies should have been subject to VAT.
The Group does not consider the arguments in support of that advanced by the Tax Agency as founded, considering, among the technical arguments, that the recent judgment of the Court of Cassation of December 21, 2018 clearly established that for the bringing of a case of tax inversion it is necessary that the corporate vehicle is purely artificial, an argument which is not sustainable with regards to Basic Properties America, Inc. In effect, the company was acquired by the Group in 1997 and has operated as a commercial company in the United States for a number of years and operates on the American continent with its own structure, suitable for the undertaking of sub-licensing activities and subject to tax in the United States, which is not a low-taxation country. All measures necessary to resolve the dispute are being considered with our tax consultants, considering those most appropriate for the company.
For the Board of Directors
Marco Daniele Boglione
| Fees earned |
|||
|---|---|---|---|
| Type of service | Service provider | Company | 2018 |
| Audit | EY S.p.A. | Parent BasicNet S.p.A. Subsidiaries |
88,000 77,500 |
| Certification services |
EY S.p.A. | Parent BasicNet S.p.A. | - |
| Other services | EY S.p.A. | Parent BasicNet S.p.A. |
- |
| Total | 165,500 |
| Registered office |
Corporate purpose | Share capital | Parent company holding (%) |
||
|---|---|---|---|---|---|
| PARENT COMPANY | |||||
| BasicNet S.p.A. | |||||
| Directly held subsidiaries: | |||||
| - Basic Properties B.V. | Amsterdam (NL) | Sub-license concession of patent rights to local licensees. |
EURO | 18,160 | 100 |
| - Basic Village S.p.A. - single shareholder company |
Turin (Italy) | Building mgt. at Largo M. Vitale, 1. | EURO | 412,800 | 100 |
| - BasicItalia S.p.A. single shareholder company |
Turin (Italy) | Italian licensor, direct stores of BasicNet Group. |
EURO | 7,650,000 | 100 |
| - BasicNet Asia Ltd. | Hong Kong (China) | Control activity of the licensees and sourcing centre in Asia. |
HKD | 10,000 | 100 |
| - TOS S.r.l. single shareholder company |
Turin (Italy) | Owner of the brand Sebago. | EURO | 10,000 | 100(1) |
| - Jesus Jeans S.r.l. single shareholder company |
Turin (Italy) | Owner of the Jesus Jeans brand. | EURO | 10,000 | 100 |
| Indirectly held subsidiaries: | |||||
| – through Basic Properties B.V. | |||||
| - Basic Trademark S.A. | Luxembourg | Owner of some brands of the BasicNet Group. |
EURO | 1,250,000 | 100 |
| - Superga Trademark S.A. | Luxembourg | Owner of the brand Superga. | EURO | 500,000 | 100 (2) |
| - Basic Properties America, Inc. | Richmond (Virginia – USA) |
Sub-license of the brands for the US, Canada and Mexico markets. |
USD | 8,469,157.77 | 100 |
| - through BasicItalia S.p.A. | |||||
| - BasicRetail S.r.l. - single shareholder company |
Turin (Italy) | Management of outlets owned by the Group. |
EURO | 10,000 | 100 |
(1) shares subject to a pledge with the Group required to maintain full ownership of the company, in guarantee of the loan issued by MPS Capital Services Banca per le Imprese S.p.A. in July 2017.
(2) shares subject to pledges with voting rights at Extraordinary Shareholders' Meeting for Banca IntesaSanpaolo S.p.A. in guarantee of the loan issued in April 2015.
| - through BasicNet S.p.A. | Registered office | Corporate purpose | Share capital | Share capital Holding (%) |
|
|---|---|---|---|---|---|
| - Fashion S.r.l. | Turin (Italy) | Owner of the Sabelt brand under joint venture |
EURO | 100,000 | 50 (3) |
(3) the remaining 50% of the investment is held by the Marsiaj family
The undersigned Marco Daniele Boglione as Executive Chairman, Giovanni Crespi as CEO, and Paolo Cafasso as Executive Officer for Financial Reporting of BasicNet S.p.A., affirm, and also in consideration of Article 154-bis, paragraphs 3 and 4, of Legislative Decree No. 58 of February 24, 1998:
the adequacy for company operations and the effective application, of the administrative and accounting procedures for the preparation of the 2018 consolidated financial statements.
In addition, we declare that the consolidated financial statements:
Marco Daniele Boglione Chairman
Giovanni Crespi Paolo Cafasso
Chief Executive Officer Executive Officer for Financial Reporting
| Key Audit Matter | Audit Respo |
|---|---|
| $\mathcal{M}{\mathcal{P}}$ is a set $\mathcal{L}{\mathcal{P}}$ . The decay set $\mathcal{L}{\mathcal{P}}$ and $\mathcal{L}{\mathcal{P}}$ and $\mathcal{L}_{\mathcal{P}}$ |
| Note | FY 2018 | FY 2017 | Changes | |
|---|---|---|---|---|
| Direct sales | (7) | 4,438,321 | 3,166,941 | 1,271,380 |
| Cost of sales | (8) | (4,287,824) | (2,862,491) | (1,425,333) |
| GROSS MARGIN | 150,497 | 304,450 | (153,953) | |
| Royalties and sourcing commissions | (9) | 33,730,201 | 28,164,789 | 5,565,412 |
| Other income | (10) | 6,401,251 | 6,257,602 | 143,649 |
| Sponsorship and media costs | (11) | (1,381,038) | (682,171) | (698,867) |
| Personnel costs | (12) | (9,788,158) | (8,799,745) | (988,413) |
| Selling, general and administrative costs, | ||||
| royalties expenses | (13) | (15,628,094) | (14,376,517) | (1,251,577) |
| Amortization & depreciation | (14) | (2,380,087) | (2,235,269) | (144,818) |
| EBIT | 11,104,572 | 8,633,139 | 2,471,433 | |
| Net financial charges | (15) | (23,964) | (476,296) | 452,332 |
| Dividends | (16) | 2,150,000 | 1,850,000 | 300,000 |
| Write-down of investments | - | (3,000,000) | 3,000,000 | |
| PROFIT BEFORE TAXES | 13,230,608 | 7,006,843 | 6,223,765 | |
| Income taxes | (17) | (276,194) | (2,498,958) | 2,222,764 |
| NET PROFIT | 12,954,414 | 4,507,885 | 8,446,529 |
(in Euro)
| Note | FY 2018 | FY 2017 | Changes | |
|---|---|---|---|---|
| Profit for the year (A) | 12,954,414 | 4,507,885 | 8,446,529 | |
| Effective portion of the Gains/(losses) on cash flow hedges |
23,201 | 39,982 | (16,781) | |
| Re-measurement of post-employment benefits (IAS 19) (*) |
29,877 | (15,374) | 45,251 | |
| Tax effect on other profits/(losses) | (12,738) | (7,510) | (5,228) | |
| Total other gains/(losses), net of tax effect (B) | (26 ) |
40,340 | 17,098 | 23,242 |
| Total Comprehensive Profit (A)+(B) | 12,994,754 | 4,524,983 | 8,469,771 |
(*) items which may not be reclassified to the profit and loss account
| ASSETS | Note | December 31, 2018 | December 31, 2017 | |
|---|---|---|---|---|
| Intangible assets | (18) | 12,738,924 | 13,218,036 | |
| Plant, machinery and other assets | (19) | 3,015,848 | 2,636,170 | |
| Equity invest. & other financial assets | (20) | 33,656,409 | 33,274,867 | |
| Total non-current assets | 49,411,181 | 49,129,073 | ||
| Net inventories | (21) | 279,259 | 767,152 | |
| Trade receivables | (22) | 17,348,486 | 12,056,318 | |
| Other current assets | (23) | 64,145,043 | 65,755,216 | |
| Prepayments | (24) | 4,850,553 | 3,991,897 | |
| Cash and cash equivalents | (25) | 1,623,317 | 1,560,523 | |
| Derivative financial instruments | - | - | ||
| Total current assets | 88,246,658 | 84,131,106 | ||
| TOTAL ASSETS | 137,657,839 | 133,260,179 |
| LIABILITIES | Note | December 31, 2018 | December 31, 2017 |
|---|---|---|---|
| Share capital | 31,716,673 | 31,716,673 | |
| Treasury shares | (17,827,079) | (14,494,992) | |
| Other reserves | 64,926,726 | 63,651,767 | |
| Net Profit | 12,954,414 | 4,507,885 | |
| TOTAL SHAREHOLDERS' EQUITY | (26) | 91,770,734 | 85,381,333 |
| Provisions for risks and charges | - | - | |
| Loans | (27) | 16,041,058 | 20,001,288 |
| Employee and Director benefits | (29) | 2,586,331 | 2,152,621 |
| Deferred tax liabilities | (30) | 598,845 | 297,430 |
| Other non-current liabilities | (31) | 862,791 | 858,583 |
| Total non-current liabilities | 20,089,025 | 23,309,922 | |
| Bank payables | (28) | 11,947,348 | 10,028,504 |
| Trade payables | (32) | 7,008,962 | 6,039,074 |
| Tax payables | (33) | 1,254,770 | 2,809,708 |
| Other current liabilities | (34) | 5,209,323 | 5,394,487 |
| Accrued expenses | (35) | 373,796 | 270,069 |
| Derivative financial instruments | (36) | 3,881 | 27,082 |
| Total current liabilities | 25,798,080 | 24,568,924 | |
| TOTAL LIABILITIES | 45,887,105 | 47,878,846 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
137,657,839 | 133,260,179 |
(in Euro)
| December 31, 2018 | December 31, 2017 | ||
|---|---|---|---|
| A) | OPENING SHORT-TERM BANK DEBT | (3,467,981) | (4,820,031) |
| B) | CASH FLOW FROM OPERATING ACTIVITIES | ||
| Net Profit for the year | 12,954,414 | 4,507,885 | |
| Amortization & depreciation | 2,380,087 | 2,235,269 | |
| Write-down of investments | - | 3,000,000 | |
| Gains on sale of equity investments | - | - | |
| Changes in working capital: | |||
| - (increase) decrease in trade receivables | (5,292,168) | (1,436,940) | |
| - (increase) decrease in inventories | 487,893 | 40,744 | |
| - (increase) decrease in other receivables | 751,518 | 3,782,668 | |
| - increase (decrease) in trade payables | 969,888 | 1,281,448 | |
| - increase (decrease) in other payables | (1,330,752) | (10,433,234) | |
| Net change in post-employment benefits | 433,710 | 538,185 | |
| Others, net | 17,139 | (22,884) | |
| 11,371,729 | 3,493,140 | ||
| C) | CASH FLOW FROM INVESTING ACTIVITIES | ||
| Investments in fixed assets: | |||
| - tangible assets | (954,215) | (1,358,918) | |
| - intangible assets | (1,326,587) | (2,867,389) | |
| - financial assets | (381,543) | (45,000) | |
| Realizable value for fixed asset disposals: | |||
| - tangible assets | 149 | 18,568 | |
| - intangible assets | - | - | |
| - financial assets | - | - | |
| (2,662,196) | (4,252,739) | ||
| D) | CASH FLOW FROM FINANCING ACTIVITIES | ||
| Lease contracts (repayments) | (22,730) | 40,966 | |
| Repayments of medium/long term loans | (5,000,000) | (5,000,000) | |
| Undertaking of medium/long term loans | - | 13,000,000 | |
| Treasury shares | (3,332,087) | (2,605,179) | |
| Distribution dividends | (3,273,266) | (3,324,138) | |
| (11,628,083) | 2,111,649 | ||
| E) | CASH FLOW IN THE YEAR | (2,918,550) | 1,352,050 |
| F) | CLOSING SHORT-TERM BANK DEBT | (6,386,531) | (3,467,981) |
Interest paid for the year amounts to respectively Euro 310 thousand in 2018 and Euro 354 thousand in 2017, while income taxes paid in the year amounted to Euro 2.3 million in 2018 and Euro 1.7 million in 2017.
| Reserves | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other reserves | ||||||||||
| Number shares |
Share capital Treasury |
Treasury shares |
Legal Reserve |
Treasury shares in portfolio reserve |
Remeasure. reserve IAS19 |
Cash Flow Hedge reserve |
Retained earnings |
Net profit | Total | |
| Balance at December 31, 2016 |
60,993,602 | 31,716,673 | (11,889,813) | 5,066,738 | 11,889,813 | (69,263) | (49,364) | 42,699,624 | 7,421,259 | 86,785,667 |
| Allocation of result as per Shareholders' AGM resolution of April 27, 2017 |
||||||||||
| - Legal reserve - Retained earnings - Distribution of dividends |
- - - |
371,063 - - |
- - - |
- - - |
- - - |
- 3,726,058 - |
(371,063) (3,726,058) (3,324,138) |
- - (3,324,138) |
||
| Acquisition treasury shares | (2,605,179) | - | 2,605,179 | - | - | (2,605,179) | - | (2,605,179) | ||
| 2017 Result | - | - | - | - | - | - | 4,507,885 | 4,507,885 | ||
| Other comprehensive income statement items: |
||||||||||
| - Gains/(losses) recorded directly to cash flow hedge reserve |
- | - | - | - | 28,782 | - | - | 28,782 | ||
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | (11,684) | - | - | - | (11,684) | ||
| Total comprehensive income |
- | - | - | (11,684) | 28,782 | - | 4,507,885 | 4,524,983 | ||
| Balance at December 31, 2017 |
60,993,602 | 31,716,673 | (14,494,992) | 5,437,801 | 14,494,992 | (80,947) | (20,582) | 43,820,503 | 4,507,885 | 85,381,333 |
| Allocation of result as per Shareholders' AGM resolution of April 24, 2018 |
- | - | ||||||||
| - Legal reserve | - | 225,394 | - | - | - | - | (225,394) | - | ||
| - Retained earnings | - | - | - | - | - | 1,009,225 | (1,009,225) | |||
| - Distribution of dividends | - | - | - | - | - | - | (3,273,266) | (3,273,266) | ||
| Acquisition treasury shares | (3,332,087) | - | 3,332,087 | - | - | (3,332,087) | - | (3,332,087) | ||
| 2018 Result | - | - | - | - | - | - | 12,954,414 | 12,954,414 | ||
| Other comprehensive income statement items: |
||||||||||
| - Gains/(losses) recorded directly to cash flow hedge reserve |
- | - | - | - | 17,633 | - | - | 17,633 | ||
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | 22,707 | - | - | - | 22,707 | ||
| Total comprehensive income |
- | - | - | 22,707 | 17,633 | - | 12,954,414 | 12,994,753 | ||
| Balance at December 31, 2018 |
60,993,602 | 31,716,673 | (17,827,079) | 5,663,195 | 17,827,079 | (58,240) | (2,949) | 41,497,641 | 12,954,414 | 91,770,734 |
(in Euro)
| Dec. 31, 2018 | Dec. 31, 2017 | |
|---|---|---|
| Cash and cash equivalents | 1,623,317 | 1,560,523 |
| Bank overdrafts and bills | (8,009,848) | (5,028,504) |
| Sub-total net liquidity available | (6,386,531) | (3,467,981) |
| Short-term portion of medium/long-term loans | (3,937,500) | (5,000,000) |
| Short-term net financial position – third parties | (10,324,031) | (8,467,981) |
| Intesa loan | - | (1,875,000) |
| BNL loan | (3,750,000) | (5,000,000) |
| Banco BPM loan | (12,187,500) | (13,000,000) |
| Medium/long lease payables | (103,558) | (126,288) |
| Sub-total loans and leasing – third parties | (16,041,058) | (20,001,288) |
| Net financial position - third parties | (26,365,089) | (28,469,269) |
| Group financial receivables / (payables) | 55,483,664 | 60,266,785 |
| Net Financial Position - Group | 55,483,664 | 60,266,785 |
| Total net financial position | 29,118,575 | 31,797,516 |
The statement required by Consob Communication No. 6064293 of July 28, 2006 is reported below.
| Dec. 31, 2018 | Dec.31, 2017 | ||
|---|---|---|---|
| A. | Cash | 7,002 | 15,362 |
| B. | Other cash equivalents | 1,616,315 | 1,545,161 |
| C. | Securities held for trading | - | - |
| D. | Cash & cash equivalents (A)+(B)+(C) | 1,623,317 | 1,560,523 |
| E. | Current financial receivables | - | - |
| F. | Current bank payables | (8,009,848) | (5,028,504) |
| G. | Current portion of non-current debt | (3,937,500) | (5,000,000) |
| H. | Other Group financial receivables/ (payables) | 55,483,664 | 60,266,785 |
| I. | Current financial debt (F)+(G)+(H) | 43,536,316 | 50,238,281 |
| J. | Net current financial debt (I)-(E)-(D) | 45,159,633 | 51,798,804 |
| K. | Non-current bank payables | (16,041,058) | (20,001,288) |
| L. | Bonds issued | - | - |
| M. | Fair value of hedges (cash flow hedges) | (3,881) | (27,082) |
| N. | Non-current financial debt (K)+(L)+(M) | (16,044,939) | (20,028,370) |
| O. | Net financial debt (J)+(N) | 29,114,694 | 31,770,434 |
The net debt differs from the Parent Company net financial position for the fair value of the interest and currency hedging operations - cash flow hedges (Note 36).
| December 31, 2018 | December 31, 2017 | |
|---|---|---|
| A) OPENING NET FINANCIAL POSITION | 31,797,516 | 42,976,953 |
| B) CASH FLOW FROM OPERATING ACTIVITIES | ||
| Net profit | 12,954,414 | 4,507,885 |
| Amortization & depreciation | 2,380,087 | 2,235,269 |
| Write-down of investments | - | 3,000,000 |
| Gains on sale of investments | - | |
| Changes in working capital: | (9,196,742) | (11,255,836) |
| Net change in post-employment benefits | 433,710 | 538,185 |
| Others, net | 17,139 | (22,884) |
| 6,588,608 | (997,382) | |
| C) CASH FLOW FROM INVESTING ACTIVITIES | ||
| Fixed asset investments | (2,662,345) | (4,271,307) |
| Realisable value for fixed asset disposals | 149 | 18,568 |
| (2,662,196) | (4,252,739) | |
| D) CASH FLOW FROM FINANCING ACTIVITIES |
||
| Acquisition treasury shares | (3,332,087) | (2,605,179) |
| Dividend payments | (3,273,266) | (3,324,138) |
| (6,605,353) | (5,929,317) | |
| E) CASH FLOW IN THE YEAR |
(2,678,941) | (11,179,437) |
| F) CLOSING NET FINANCIAL POSITION |
29,118,575 | 31,797,516 |
| FY 2018 | FY 2017 | |||
|---|---|---|---|---|
| Of which related parties Note 39 |
Of which related parties |
|||
| Direct sales Cost of sales |
4,438,321 (4,287,824) |
2,428,765 (21,356) |
3,166,941 (2,862,491) |
2,111,018 (26,068) |
| GROSS MARGIN | 150,497 | 304,450 | ||
| Royalties and sourcing commissions Other income Sponsorship and media costs Personnel costs |
33,730,201 6,401,251 (1,381,038) (9,788,158) |
7,024,448 6,069,700 (436,559) |
28,164,789 6,257,602 (682,171) (8,799,745) |
6,485,759 6,072,247 (210,987) |
| Selling, general and administrative costs, royalties expenses Amortization & depreciation |
(15,628,094) (2,380,087) |
(3,272,050) | (14,376,517) (2,235,269) |
(2,981,929) |
| EBIT | 11,104,571 | 8,633,139 | ||
| Net financial income (charges) Dividends Investment income/(charges) Write-down of investments |
(23,964) 2,150,000 - |
396,220 2,150,000 |
(476,296) 1,850,000 - (3,000,000) |
446,397 1,850,000 |
| PROFIT BEFORE TAXES | 13,230,608 | 7,006,843 | ||
| Income taxes | (276,194) | (2,498,958) | ||
| NET PROFIT | 12,954,414 | 4,507,885 |
| ASSETS | December 31, 2018 | December 31, 2017 | ||
|---|---|---|---|---|
| Of which Related Parties Notes 20 & 23 |
Of which Related Parties |
|||
| Intangible assets | 12,738,924 | 13,218,036 | ||
| Plant, machinery and other assets | 3,015,848 | 2,636,170 | ||
| Equity invest. & other financial assets | 33,656,409 | 33,264,489 | 33,274,867 | 33,264,489 |
| Total non-current assets | 49,411,181 | 49,129,073 | ||
| Net inventories | 279,259 | 767,152 | ||
| Trade receivables | 17,348,486 | 12,056,318 | ||
| Other current assets | 64,145,043 | 60,800,581 | 65,755,216 | 63,942,638 |
| Prepayments | 4,850,553 | 3,991,897 | ||
| Cash and cash equivalents | 1,623,317 | 1,560,523 | ||
| Derivative financial instruments | - | - | ||
| Total current assets | 88,246,658 | 84,131,106 | ||
| TOTAL ASSETS | 137,657,839 | 133,260,179 |
| LIABILITIES | December 31, 2018 | December 31, 2017 | ||
|---|---|---|---|---|
| Of which Related Parties Note 34 |
Of which Related Parties |
|||
| Share capital | 31,716,673 | 31,716,673 | ||
| Treasury shares | (17,827,079) | (14,494,992) | ||
| Other reserves | 64,926,726 | 63,651,767 | ||
| Net Profit | 12,954,414 | 4,507,885 | ||
| TOTAL SHAREHOLDERS' EQUITY | 91,770,734 | 85,381,333 | ||
| Provisions for risks and charges | - | - | ||
| Loans | 16,041,058 | 20,001,288 | ||
| Employee and Director benefits | 2,586,331 | 2,152,621 | ||
| Deferred tax liabilities | 598,845 | 297,430 | ||
| Other non-current liabilities | 862,791 | 858,583 | ||
| Total non-current liabilities | 20,089,025 | 23,309,922 | ||
| Bank payables | 11,947,348 | 10,028,504 | ||
| Trade payables | 7,008,962 | 6,039,074 | ||
| Tax payables | 1,254,770 | 2,809,708 | ||
| Other current liabilities | 5,209,323 | 1,280,726 | 5,394,487 | 2,335,409 |
| Accrued expenses | 373,796 | 270,069 | ||
| Derivative financial instruments | 3,881 | 27,082 | ||
| Total current liabilities | 25,798,080 | 24,568,924 | ||
| TOTAL LIABILITIES | 45,887,105 | 47,878,846 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
137,657,839 | 133,260,179 |
(in Euro)
| December 31, 2018 | December 31, 2017 | ||
|---|---|---|---|
| Of which related Parties |
Of which related parties |
||
| A) OPENING SHORT-TERM BANK DEBT | (3,467,981) | (4,820,031) | |
| B) CASH FLOW FROM OPERATING ACTIVITIES | |||
| Net Profit | 12,954,414 | 4,507,885 | |
| Amortization & depreciation | 2,380,087 | 2,235,269 | |
| Write-down of investments | - | 3,000,000 | |
| Gains on sale of equity investments | - | ||
| Changes in working capital: | |||
| - (increase) decrease in trade receivables | (5,292,168) | (1,436,940) | |
| - (increase) decrease in inventories | 487,893 | 40,744 | |
| - (increase) decrease in other receivables | 751,518 | 3,142,057 4,278,978 |
4,188,158 |
| - increase (decrease) in trade payables | 969,888 | 1,281,448 | |
| - increase (decrease) in other payables | (1,330,752) | (1,054,684) (10,429,545) | 1,176,017 |
| Net change in post-employment benefits | 433,710 | 538,185 | |
| Others, net | 17,139 | (22,884) | |
| 11,371,729 | 3,493,140 | ||
| C) CASH FLOW FROM INVESTING ACTIVITIES | |||
| Investments in fixed assets: | |||
| - tangible assets | (954,215) | (1,358,918) | |
| - intangible assets | (1,326,587) | (2,867,389) | |
| - financial assets | (381,543) | (45,000) | |
| Realizable value for fixed asset disposals: | |||
| - tangible assets | 149 | 18,568 | |
| - intangible assets | - | - | |
| - financial assets | - | - | |
| (2,662,196) | (4,252,739) | ||
| D) CASH FLOW FROM FINANCING ACTIVITIES | |||
| Lease contracts (repayments) | (22,730) | 40,966 | |
| Repayments of medium/long term loans | (5,000,000) | (5,000,000) | |
| New medium/long term loans | - | 13,000,000 | |
| Treasury shares | (3,332,087) | (2,605,179) | |
| Distribution dividends | (3,273,266) | (3,324,138) | |
| (11,628,083) | 2,111,649 | ||
| E) CASH FLOW IN THE YEAR | (2,918,550) | 1,352,050 | |
| F) CLOSING SHORT-TERM BANK DEBT | (6,386,531) | (3,467,981) |
Interest paid for the year amounts to respectively Euro 310 thousand in 2018 and Euro 354 thousand in 2017, while income taxes paid in the year amount respectively to Euro 2.3 million in 2018 and Euro 1.7 million in 2017.
For the Board of Directors
Marco Daniele Boglione
BasicNet S.p.A. – with registered office in Turin, listed on the Italian Stock Exchange since November 17, 1999, in addition to its main function of Parent Company, manages the Network, providing the know-how for the use of the Group brands, undertaking research and development of the services and new products for the best utilisation of the brands, as well as undertaking activities of conception, development and communication and the Groups' Information Technology systems. The Company coordinates and provides subsidiaries with administration, finance and control, IT and payroll management services.
The duration of BasicNet S.p.A. is fixed by the company by-laws until December 31, 2050.
The publication of the financial statements of BasicNet S.p.A. for the year ended December 31, 2018 was approved by the Board of Directors on March 8, 2019. The final approval of the accounts is the responsibility of the Shareholders' Meeting.
The financial statements for the year 2018 were prepared in accordance with IFRS issued by the International Accounting Standards Board ("IASB) and approved by the European Union at the date of the present document. IFRS refers to all the revised International Accounting Standards (IAS), and all of the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") previously known as the Standing Interpretations Committee ("SIC").
The financial statements are prepared under the historical cost convention, modified where applicable for the measurement of certain financial instruments, as well as on the going concern assumption.
The accounting principles utilised in the financial statements are the same as those utilised in the previous year.
The Company has adopted IFRS 15 and IFRS 9 for the first time. The impact and the nature of the amendments following the adoption of these new accounting standards are illustrated below. Various amendments and interpretations were applied for the first time in the periods before January 1, 2018, although without any impact on the financial statements. The Company has not adopted in advance any standard, interpretation or amendment published but not yet in effect.
IFRS 15 replaces IAS 18 - Revenues and the relative interpretations and is applied, with limited exceptions, to all revenues from contracts with customers. IFRS 15 establishes a five-step model for the recognition of revenues from contracts with customers and requires revenues to be recognised for an amount which reflects the payment which the entity considers itself to have the right to in exchange for the transfer of control of the goods or services to the customer.
IFRS 15 requires entities to assess all significant facts and circumstances when applying each step of the model to the contracts with customers. The standard also specifies the methods for recognition of incremental costs for obtaining a contract and costs directly related to the execution of a contract. The Company has adopted the new standard utilising the modified application method.
These amendments did not impact the Company's revenues and income statement.
Under IFRS 15, the Company continues to recognise a current liability and an asset under inventories against counter-entries, respectively, to product revenues for which returns are expected and to the relative cost of sales. The Company has not identified changes in the estimate of the variable amounts, utilising an approach based on the weighted average probability of the returns.
IFRS 9 - Financial instruments replaces IAS 39 - recognition and measurement from periods beginning January 1, 2018 and thereafter, aggregating the three aspects of the recognition of financial instruments: classification and measurement; impairment; and hedge accounting.
These amendments did not impact the Group's balance sheet and shareholders' equity.
Trade receivables are held until their collection at the contractual maturities of the cash flows relating to the collection of the principal and interest. The Group analysed the contractual cash flows of these instruments and concluded that they comply with the amortised cost measurement criteria in accordance with IFRS 9.
The adoption of IFRS 9 has substantially modified the recognition of impairment losses of the financial assets of the Group, replacing the approach of losses incurred by IAS 39 with an approach based on expected credit losses (ECL). IFRS 9 requires that the Group recognises a write-down equal to the ECL for all debt instruments not held at fair value recognised to the Income Statement and for the contractual activities.
The Group established that all existing hedges which are presently designated as effective hedges shall continue to qualify for hedge accounting in accordance with IFRS 9. Given that IFRS 9 does not amend the general principle on which an entity recognises effective hedges, the application of these requirements by IFRS 9 for the definition of the hedges did not have any impact on the financial statements of the Group.
The interpretation clarifies that, when defining the spot exchange rate to be used for the initial recognition of the related asset, costs or revenues (or part of these) at the time of derecognition of a nonmonetary asset or a non-monetary liability relating to advances on fees, the transaction date is the date on which the entity initially recognizes the non-monetary asset or the non-monetary liability relating to advances on fees. In the case of multiple payments or advances, the entity should define the transaction date for each payment or advance on consideration. This Interpretation had no impact on the financial statements.
The IASB issued amendments to IFRS 2 Share-based payments which concern three principal areas: the effects of a vesting condition on the measurement of a cash-settled share-based payment; the classification of an equity-settled share-based payment settled net of withholding tax obligations; the accounting where a change in the terms and conditions of an equity-settled share-based payment changes its classification from cash-settled to equity-settled. On its adoption, the entities must apply the amendments without restating the previous years, but the retrospective application is permitted if chosen for all three of the amendments and other criteria are satisfied.
These amendments did not have any impact on the financial statements.
The amendments seek to resolve issues arising from the adoption of the new standard on financial instruments, IFRS 9, before the adoption of IFRS 17 - Insurance Contracts, which replaces IFRS 4. The amendments introduce two options for entities that issue insurance contracts: a temporary exemption in the application of IFRS 9 and the overlay approach. These amendments are not significant for the Company.
The amendments clarify that a venture capital entity, or another qualified entity, may decide, at the time of initial recognition and with reference to the individual investment, to measure its investments in
associates and joint ventures at fair value recognized to the Income Statement. These amendments are not significant for the Company.
Amendments to IFRS 1 - First-time Adoption of International Financial Reporting Standards
The short-term exemptions under paragraphs E3-E7 under IFRS 1 have been cancelled as removed from its scope. These amendments did not have any impact on the financial statements.
The standards and interpretations which at the date of the preparation of the financial statements were issued but not yet in force are reported below. The Company will adopt these standards when they enter into force, if applicable.
IFRS 16 was issued in January 2016 and replaces IAS 17 – Leases, IFRIC 4 - Determining whether an Arrangement contains a Lease, SIC-15 - Operating Leases - Incentives and SIC-27 - Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
IFRS 16 establishes the principles for the recognition, measurement, presentation and disclosure of leasing contracts and requires lessees to recognise all leasing contracts in the financial statements on the basis of a single accounting model similar to that utilised for recognising finance leases in accordance with IAS 17.
The standard contains two exemptions for recognition by lessees: leasing of "low value" assets (for example, personal computers) and short-term lease contracts (leasing contracts for a period below or equal to 12 months). At the initial date of the leasing contract, the lessee records a liability against the lease payments (i.e. the leasing liability) and an asset which represents the right of use of the underlying asset for the duration of the contract (i.e. the right of use). Lessees must record separately the interest expense on the leasing liability and the amortisation on the right of use.
The lessees must also reconsider the amount of the leasing liability on the occurrence of certain events (for example, a change in the duration of the lease, a change in future lease payments deriving from a change in an index or interest rate utilised to determine these payments). In general, the lessee will record the difference from the remeasurement of the amount of the leasing liability as an adjustment to the right of use.
The recognition method for the lessor in relation to IFRS 16 remains substantially unchanged compared to the current accounting policy as per IAS 17. The lessors will continue to classify all leases utilising the same classification principle as per IAS 17 and distinguishing between two types of leases: operating leases and finance leases.
IFRS 16, which will be effective from periods beginning January 1, 2019, requires lessors and lessees to provide greater disclosure compared to IAS 17.
The Company will adopt IFRS 16 in accordance with a modified retrospective approach.
The Company will avail of the exemptions permitted by the standard on leasing contracts whereby the lease contract expires within 12 months from the initial application date and on leasing contracts where the underlying asset has a low value. The Group has undertaken leasing contracts for some office equipment (for example, personal computers, printers and photocopiers) which are considered as insignificant value.
In 2018, the Company undertook a detailed analysis of the impacts of IFRS 16. The company's operating result is not expected to change significantly with the adoption of this standard.
In May 2017, the IASB issued IFRS 17 - Insurance Contracts, a complete new standard relating to insurance contracts which covers recognition and measurement, presentation and disclosure. When it enters into effect, IFRS 17 will replace IFRS 4 - Insurance Contracts which was issued in 2005. IFRS 17 applies to all types of insurance contracts regardless of the type of entity that issues them, as well as certain guarantees and financial instruments with characteristics of discretionary participation.
This standard is not applicable to the Company.
The interpretation sets out the accounting approach to income taxes where the tax treatment implies uncertainties impacting application of IAS 12 and does not apply to income or other taxes not falling within the scope of IAS 12, nor specifically includes requirements concerning interest or penalties relating to uncertain income tax treatments.
The interpretation specifically considers the following points:
An entity should define whether it considers each uncertain tax treatment separately or together with other (one or more) uncertain tax treatments. The approach which allows the expected best solution for the uncertainty should be followed. The Interpretation is effective for the years beginning January 1, 2019 or subsequently, although transitory arrangements are available for first time application. The company shall apply the interpretation from its entry into force. On the basis of the preliminary analysis carried out, the company does not expect significant effects in its financial statements.
As per IFRS 9, a debt instrument may be measured at amortised cost or at fair value in the comprehensive income statement, on the condition that the cash flows are "exclusively payments of principal and interest on the amount" (the SPPI criterion) and the instrument is classified to the appropriate business model. The amendments to IFRS 9 clarify that a financial asset complies with the SPPI criterion independently of the event or of the circumstance which causes the advance resolution of the contract and independently of who pays or receives a reasonable indemnity for the advance resolution of the contract.
The amendments shall be applied retrospectively from January 1, 2019 and advance application is permitted. These amendments do not have an impact on the financial statements.
The amendments concern the conflict between IFRS 10 and IAS 28 with reference to the loss of control of a subsidiary which was sold or conferred to an associate or a joint venture. The amendments clarify that the profit or loss from the sale or from the conferment of assets which constitute a business, as defined by IFRS 3, between an investor and its associate or joint venture, must be entirely recognised. Any profit or loss from the sale or conferment of an asset which does not constitute a business is therefore only recognised up to amount held by third party investors in the associate or joint venture. The IASB indefinitely postponed the application of these amendments, although where an entity decides to apply them in advance, such should be done on a prospective basis. The company will apply these amendments when they enter into force.
The amendments to IAS 19 establish the accounting rules where, during the reference period, there is a plan amendment, reduction or regulation. The amendments apply to plan amendments, reductions and regulations which occur from periods beginning January 1, 2019 or thereafter, and advanced application is permitted. These changes will apply only to any future plan amendments, reductions or transactions of the Company.
The amendments specify that an entity applies IFRS 9 for long-term interests in associates or joint ventures where the equity method is not applied but which, in substance, form part of the net investment in the associate or joint venture (long-term interests).
This clarification is significant as it implies that the expected losses model on receivables of IFRS 9 is applied to these long-term investments.
The amendments also clarify that, in application of IFRS 9, an entity shall not take into account any losses of associates or joint ventures or any loss in value of the investment, recorded as adjustments of the net investment in the associate or joint venture which derives from the application of IAS 28 Investments in Associates and Joint Ventures.
The amendments shall be applied retrospectively and are effective from January 1, 2019, while advanced application is permitted. As the Company does not hold long-term interests in joint ventures, the amendments will have no impact on the financial statements.
Improvements to IFRS (2015-2017 Cycle)
These improvements include amendments to IFRS 3 - Business Combinations, IFRS 11 - Joint Arrangements, IAS 12 - Income Taxes and IAS 23 - Borrowing Costs. the Company does not expect any effect on the financial statements.
BasicNet S.p.A. presents its income statement by nature of cost items; the assets and liabilities are classified between current and non-current. The statement of cash flows was prepared applying the indirect method. The format of the financial statements applied the provisions of Consob Resolution No. 15519 of July 27, 2006 and Notice No. 6064293 of July 28, 2006 on financial disclosure requirements.
The present financial statements were prepared on the going concern basis, and in accordance with the accruals principle. The financial statements are presented in Euro and all values are rounded into thousands of Euro.
The main accounting policies adopted in the preparation of the financial statements at December 31, 2018 are disclosed below:
Revenues derive from Company operations in the ordinary course of business and comprise revenues from sales and services. Revenues are recognised net of sales tax, returns and discounts.
Revenues from contracts with customers rare recognised when the control of the goods and services is transferred to the client for an amount which reflects the consideration that the Company expects to receive in exchange for these goods and services. The Company has concluded that generally it acts as the Principal for the agreements from which it receives revenues, as usually it controls the goods and services before their transfer to the customer. In calculating the sales transaction price for goods, the Company considers the effects from variable fees, significant financial components and non-monetary fees. Where the fee concluded in the contract includes a variable amount, such as that connected to a right of return, the Company estimates the amount of the fee to which it will be entitled in exchange for the transfer of the goods to the customer.
Royalties and sourcing commissions, including the minimum guaranteed component, are recognised on an accruals basis in accordance with the underlying contracts and consistent with the state of advancement of the sales or the production of the licensees.
Costs and expenses are recognised in accordance with the accruals principle.
Cost relating to the preparation and presentation of sample collections are recognised in the income statement in the year in which the sales of the relative collections are realised. Any differences are recorded through accruals.
Interest income and expenses and other income and expenses are recorded and shown in the financial statements on the accrual basis.
In accordance with IAS 23 – Borrowing costs, the financial charges directly attributable to the purchase, construction and production of the asset which requires a significant amount of time before use or sale are capitalised together with the value of the asset. Such an event has not arisen up to the present moment for the company. If these conditions are not met the financial charges are expensed directly to the income statement.
Dividends from investees are recognised in the income statement when the right to receive the dividend is established.
Dividends distributed are represented as changes in shareholders' equity in the year in which the Shareholders' Meeting approves the distribution and payment.
The receivables and payables originally expressed in foreign currencies are translated into Euro at the exchange rate when the transaction originated. Exchange differences arising on collections and payments in foreign currencies are recorded in the income statement.
Revenues and income, costs and charges related to currency transactions are recorded at the exchange rate at the transaction date.
At the end of the period, the assets and liabilities valued in foreign currencies, with the exception of fixed assets, are recorded at the exchange rates at the balance sheet date and the relative gains or losses on exchange are recorded in the income statement.
Income taxes include all the taxes calculated on the assessable income of the Company. Taxes on income are recognised in profit and loss, except where they relate to items charged or credited directly to equity, in which case the tax effect is also recognised directly in equity.
Other taxes not related to income, such as taxes on property and share capital, are included under operating charges.
Deferred taxes are calculated on all the temporary differences arising between the assessable income of an asset or liability and the relative book value in the financial statements, with the exception of the goodwill not fiscally deductible and of those differences deriving from investments in subsidiaries for which a write-down is not expected in the future.
Deferred tax assets on fiscal losses and unutilised tax credits carried forward are recognised only for those amounts for which it is probable there will be future assessable income to recover the amounts. The deferred tax assets and liabilities are offset when the income tax is applied by the same fiscal authority and when there is a legal right of compensation.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the temporary difference is reversed.
The Company adhered to the tax consolidation in accordance with Article 117 and thereafter of the CFA – Presidential Decree No. 917 of December 22, 1986 together with all of the wholly-owned Italian subsidiary companies. BasicNet S.p.A. acts as the consolidating company and calculates a single assessable base for the Group of companies adhering to the national tax consolidation and therefore benefits from the possibility of offsetting assessable income with assessable losses in a single tax declaration.
In accordance with paragraph 4 of IAS 33 – Earnings per share, this latter is only presented at consolidated financial statement level.
BasicNet S.p.A. may be involved in legal and tax disputes, concerning specific issues and in various jurisdictions. Considering the uncertainties relating to these issues, it is difficult to predict with certainty any future payments required. In addition, the Company has instigated legal disputes for the protection of its Trademarks, and of its products, against counterfeit products. The cases and disputes against the Company often derive from complex legal issues, which are often subject to varying degrees of uncertainty, including the facts and circumstances relating to each case, jurisprudence and different applicable laws.
In the normal course of business, Management consults with its legal consultants and experts on legal matters.
The Company accrues a liability against disputes when it considers it is probable that there will be a financial payment made and when the amount of the losses arising can be reasonably estimated.
The contingent liabilities are not recorded in the financial statements, but are reported as a disclosure in the Notes unless the probability is remote. In accordance with paragraph 10 of IAS 37 – Provisions, contingent liabilities and contingent assets a contingent liability is (a) a possible obligation which derives from past events and whose existence will be confirmed only on the occurrence or otherwise of one or more future uncertain events, not entirely under the control of the enterprise, or (b) a current obligation which derives from past events but which cannot be recorded in the financial statements as the payment is improbable or cannot be reliably estimated.
The preparation of the financial statements and the relative notes in application of IFRS require that management make estimates and assumptions on the values of the assets and liabilities in the financial statements and on the information relating to the assets and contingent liabilities at the balance sheet date. The actual results may differ from such estimates.
Estimates are utilised to measure intangible and tangible assets subject to impairment tests, in addition to recognise provisions on doubtful debts, inventory obsolescence, amortisation and depreciation, the write-down of assets, employee benefits and income taxes.
The estimates and assumptions are reviewed periodically and the effects of all variations are immediately recognised in the income statement.
An intangible asset is a non-monetary asset, identifiable and without physical substance, controllable and capable of generating future economic benefits. Intangible assets are recognised at purchase and/or production cost, including the costs of bringing the asset to its current use net of accumulated amortisation and any loss in value. Amortisation begins when the asset is available for use and is recognised on a straight-line basis over the residual estimated useful life of the asset.
Software acquired and IT programmes developed internally are amortised over five years, while the costs incurred to maintain or upgrade the original operational standard are expensed in the year and are not capitalised.
The brands K-Way and Briko are considered intangible assets with indefinite useful life, in line with that at Group level for the principal brands, Kappa, Robe di Kappa, Superga and Sebago; as such these assets are not amortised but subject to an impairment test at least annually.
The patent rights are amortised over ten years.
Plant and equipment are recorded at purchase or production costs, including accessory charges and direct and indirect costs, for the amount reasonably attributable to the assets.
Subsequent expenditures are only capitalised where they increase the future economic benefits of the asset to which they relate. All other expenditures are expensed as incurred.
Plant and equipment are amortised on a straight-line basis over the estimated useful life of each asset. The depreciation rates by asset category are shown below:
| Description | Estimated useful life years |
|---|---|
| Plant and machinery |
8 |
| Furniture and furnishings | 5-8 |
| Motor vehicles | 4 |
| EDP | 5-8 |
Fixed assets which at the balance sheet date are lower than the book value are recorded at this lower value, which however may not be maintained at this value in subsequent periods if the reasons for the adjustment no longer exist.
Ordinary maintenance costs are fully charged to the income statement.
Advances and costs for property, plant and equipment in progress which are not yet utilised in the operating activities are reported separately.
Property, plant and equipment acquired through finance lease contracts are recognised under the finance method as per IAS 17 – Leasing and recorded under assets at the purchase price decreased by depreciation.
The depreciation of these assets is reflected in the financial statements applying the same criteria as for the fixed assets to which the lease contracts refer.
Within liabilities a payable is recorded, under short-term and medium term, towards the leasing company; the lease payments are reversed from expenses for the use of third-party assets and the financial charges for the period are recognised on an accruals basis.
The carrying value of the assets of the Company are measured at each reporting date to determine whether there has been a loss in value, in which case an estimate is made of the recoverable value of the asset. A loss in value (impairment) is recorded in the income statement when the carrying value of an asset or a cash-generating unit exceeds its recoverable value.
The indefinite intangible assets (including goodwill) are tested annually and whenever there is an indication of a possible loss, in order to determine whether a loss in value has occurred.
The recoverable value of a non-financial asset is the higher of the fair value less costs to sell and the value in use. For the determination of the value in use, the future cash flows are discounted utilising a rate which reflects the current market value of money and of the related risks of the activity. In the case of activities which do not generate cash flows sufficiently independent, it is necessary to calculate the recoverable value of the cash-generating unit to which the asset belongs.
The value is recovered when changes take place in the valuations to determine the recoverable value. The recoverable value is recorded in the income statement adjusting the book value of the asset to its recoverable value. This latter must not be above the value which would have been determined, net of depreciation, if no loss in value of the asset had been recorded in previous years.
In the separate financial statements of BasicNet S.p.A. the investments in subsidiaries, associates and joint ventures are recorded at cost, adjusted for any loss in value; the cost includes any directly attributable accessory charges. The positive difference, arising on purchase, between the acquisition cost and the share of net equity of the investment of the Company is, therefore, included in the carrying value of the investment.
Where there is an indication of a loss, the carrying value of the investment must be compared with the recoverable value, represented by the higher between the fair value, net of selling costs, and the value in use. For non-listed investments, the fair value is determined with reference to binding sales agreement. The value in use is determined discounting the expected cash flows from the investment at the weighted average cost of capital, net of the financial debt. The cash flows are determined on the basis of reasonable and identifiable assumptions, represented by the best estimates of the future economic conditions.
Where an impairment loss exists, it is recognised immediately through the income statement. Where the reasons for the write-down no longer exist, the value of the investment is restored within the limit of the original cost through the income statement.
Where the share of losses pertaining to the company in the investment exceeds the carrying value of the investment, the value of the investment is written down and the share of further losses is recorded as a provision under liabilities if the Company has the obligation to cover such losses.
Investments other than those in subsidiaries, associated companies and joint ventures are recognised under non-current assets or current assets if held within the equity of the Company for a period, respectively, of greater than, or not greater than, 12 months.
On acquisition, they are classified to the following categories:
The other investments classified as "financial assets available-for-sale" are measured at fair value; the change to the values of these investments are recognised to a net equity reserve through the other comprehensive income statement items, which will be reversed to the income statement on sale or impairment.
Other non-listed investments classified as "financial assets available-for-sale" for which the fair value may not be reliably estimated are valued at cost, adjusted for impairments to the income statement, according to IAS 39 – financial instruments: recognition and measurement.
The reduction in value of other investments classified as "financial assets available-for-sale" may not be subsequently reversed.
Changes in the value of other investments classified as "financial assets at fair value with changes recorded in the income statement" are recognised directly to the Income Statement.
Financial assets consist of loans are recorded at their estimated realisable value.
Inventory is valued under the average weighted cost method.
Inventories are measured at the lower of purchase or production cost and their net realisable value.
Inventories include incidental charges and direct and indirect costs that can be reasonably allocated. Obsolete and slow-moving inventories are written down in relation to their possible utilisation or realisable value. When in future periods the reasons for the write-down no longer exist, they are restored to the original value.
Receivables recorded under current assets are stated at their nominal value, which substantially coincides with the amortised cost. The initial value is subsequently adjusted to take account of any write-downs, which reflects the bad debt estimate. The Company applies the simplified approach to calculating expected losses, fully recognising the expected loss at the reporting date according to historic information supplemented by forward looking considerations. Medium/long-term receivables which include an implicit interest component are discounted utilising an appropriate market rate. Receivables transferred without recourse, in which all the risks and benefits are substantially transferred by the owner of the financial assets to the factoring company, are reversed in the financial statements at their nominal value.
The liquid assets principally relate to current bank accounts and cash. They are recorded for amounts effectively available at year end.
The cash equivalents are invested in highly liquid temporary financial instruments.
The account includes amounts related to two accounting periods, in accordance with the accruals concept.
Treasury shares are recognised as a deduction from equity. The original cost of the treasury shares and the revenues deriving from any subsequent sale are recognised as equity movements.
Provisions for risks and charges are recorded in the balance sheet only when a legal or implicit obligation exists deriving from a past event that determines the commitment of resources to produce economic benefits for their compliance and a reliable estimate of the amount can be determined.
The Post-Employment Benefit in accordance with Italian legislation is quantified as a defined benefit plan and is measured in accordance with the "Projected Unit Credit Method".
From January 1, 2007, this liability refers exclusively to the portion of the Post-Employment Benefit, matured up to December 31, 2006, which following the complementary pension reform (Legislative Decree No. 252 of December 5, 2005) continues to constitute an obligation of the company. Following the entry into force of the above-mentioned reform as enacted by Law No. 296 of December 27, 2006 (2007 Finance Law), the liability, as concerning services already completely matured, was restated without applying the pro-rata of the employment service and without considering, in the actuarial calculation, the components relating to future salary increases.
On June 16, 2011, the IASB issued an amendment to IAS 19 Employee Benefits. The new version of IAS 19 requires, in particular, for post-employment benefits, the recognition of the changes of the actuarial gains/losses under other items of the Comprehensive Income Statement. The cost relating to employment services, as well as the interest on the "time value" component in the actuarial calculations remain in the profit and loss account.
The portion of the Post-Employment Benefit paid to a supplementary pension fund is considered a defined contribution plan as the obligation of the company towards the employee ceases with the payment of the amount matured to the funds. Also the portion of the Post-Employment Benefit paid to the INPS Treasury fund is recorded as a defined contribution plan.
Financial payables are recorded at their nominal value which approximates the amortised cost. The book value of the trade and other payables at the balance sheet date approximates their fair value. The book value of the trade and other payables at the balance sheet date approximates their fair value.
It is recalled that the BasicNet S.p.A. does not undertake contracts for speculative purposes.
These instruments are initially recorded at their fair value, and subsequently measured according to whether they are "hedged" or "not hedged" as per IFRS 9.
It is recalled that BasicNet S.p.A. does not undertake derivative contracts for speculative purposes.
The hedging may be of two types:
BasicNet S.p.A., before signing a hedge contract, undertakes a close examination of the relationship between the hedge instrument and the item hedged, in view of the objectives to reduce the risk, also evaluating the existence and the continuation over the life of the derivative financial instrument of the effectiveness requirements, necessary for the hedge accounting.
The Company does not utilise fair value hedge instruments.
a) Fair value hedges
The changes in their fair value are recognised in the income statement, together with the changes in the fair value of the relative assets and liabilities hedged.
The Company does not utilise fair value hedge instruments.
b) Cash flow hedges
The part of the profit or loss of the hedge instrument, considered effective, is recorded directly in the comprehensive income statement; the non-effective part is however recorded immediately in the income statement. The accumulated amounts in the comprehensive income statement are recorded in the income statement in the year in which the scheduled hedge operation matures or the instrument hedged is sold, or when the effectiveness requirements for hedge accounting no longer exist.
c) Derivative financial instruments which do not have the effectiveness requirements for hedge accounting
The derivative financial instruments which do not comply with the requirements of IFRS 9 for the identification of the hedge, where present, are classified in the category of financial assets and liabilities measured at fair value through the profit and loss account.
IFRS 7 requires that the classification of financial instruments measured at fair value is determined based on the quality of the input sources used in the valuation.
The IFRS 7 classification implies the following hierarchy:
The subsequent events to the end of the year and the outlook for the current year are reported in the Directors' Report.
In accordance with Article 1, paragraph 125 of Law 124/2017, the Company has not received any grants from public bodies in excess of Euro 10 thousand.
As the Company simultaneously publishes the separate and consolidated financial statements, the operating segment information is provided only for the consolidated financial statements in accordance with IFRS 8 – Operating segments.
The direct sales of products undertaken by the Company refer only to samples of clothing and footwear to licensees. The breakdown of sample sales is as follows:
| FY 2018 | FY 2017 | |
|---|---|---|
| Net sales to third parties | 2,009,556 | 1,055,923 |
| Net sales to subsidiaries | 2,428,765 | 2,111,018 |
| Total direct sales | 4,438,321 | 3,166,941 |
Sales to subsidiaries are detailed in Note 39.
The breakdown of direct sales by geographic area is reported below:
| FY 2018 | FY 2017 | |
|---|---|---|
| Italy | 2,541,809 | 2,187,097 |
| Europe | 1,076,049 | 610,486 |
| The Americas | 452,420 | 198,529 |
| Asia and Oceania | 293,499 | 154,400 |
| Middle East and Africa | 74,544 | 16,429 |
| Total | 4,438,321 | 3,166,941 |
The direct sale of samples reported a Euro 1.3 million increase, following increased orders from licensees.
The breakdown of the cost of sales is as follows:
| FY 2018 | FY 2017 | |
|---|---|---|
| Samples purchased | 2,715,216 | 1,956,026 |
| Freight charges and accessory purchasing cost |
657,113 | 518,221 |
| Change in inventory of raw materials, ancillary, | ||
| consumables and goods | 487,893 | 40,744 |
| Prototypes purchases and development | 319,646 | 293,397 |
| Other | 107,956 | 54,103 |
| Total cost of sales | 4,287,824 | 2,862,491 |
The breakdown of the sample purchases and accessory purchases by geographic area is reported below:
| FY 2018 | FY 2017 | |
|---|---|---|
| Asia and Oceania | 1,949,153 | 1,587,867 |
| Italy | 307,804 | 259,398 |
| Europe | 103,008 | 27,250 |
| The Americas | 327,204 | 62,293 |
| Middle East and Africa | 28,047 | 19,218 |
| Total | 2,715,216 | 1,956,026 |
Sample purchases were made by BasicNet S.p.A. for resale to the licensees. The increase is principally related to higher sales and increased costs related to the development of new prototypes.
The breakdown of royalties and sourcing commissions by geographic area is reported below.
| FY 2018 | FY 2017 | |
|---|---|---|
| Europe | 14,943,861 | 12,974,110 |
| The Americas | 2,386,553 | 2,088,077 |
| Asia and Oceania | 15,426,406 | 12,246,162 |
| Middle East and Africa | 973,381 | 856,440 |
| Total | 33,730,201 | 28,164,789 |
Royalty income comprises fees on licenses for know-how and the development of the Group brand collections, in addition to royalties for the use of the K-Way and Briko brands. Sourcing commissions stem from usage rights of the know-how and are charged to the licensee producers on the sales made by them to the licensees of the Network.
The increase relates to the commercial developments described in the Directors' Report, based on the consolidated figures, whose effects are reflected also in the Company figures.
| FY 2018 | FY 2017 | |
|---|---|---|
| Assistant services to Group companies |
6,069,700 | 6,072,247 |
| Other income | 331,551 | 185,355 |
| Total other income | 6,401,251 | 6,257,602 |
The "revenues for assistant services to Group companies" originates from assistance and consultancy in administration and finance, payroll, commercial contract agreements and IT services provided by the Parent Company to the subsidiaries BasicItalia S.p.A., Basic Village S.p.A., Basic Trademark S.A., Superga Trademark S.A., Jesus Jeans S.r.l, TOS S.r.l. and Fashion S.r.l..
Other income includes prior year accruals' reversals and other minor items.
| FY 2018 | FY 2017 | |
|---|---|---|
| Communication contributions | 1,000,870 | 455,222 |
| Promotional expenses | 126,625 | 52,703 |
| Advertising | 253,543 | 174,246 |
| Total sponsorship and media costs | 1,381,038 | 682,171 |
The increase of Euro 699 thousand principally concerned higher contributions granted to commercial licensees compared to the previous year for international communication and endorsement activities.
| FY 2018 | FY 2017 | |
|---|---|---|
| Wages and salaries |
6,936,171 | 6,277,862 |
| Social security charges | 2,391,967 | 2,094,989 |
| Post-employment benefits | 460,020 | 426,894 |
| Total | 9,788,158 | 8,799,745 |
Personnel costs include all charges relating to the provision of employment services of BasicNet S.p.A.. The changes in the headcount during the year were as follows:
| Human resources at December 31, 2018 | Human resources at December 31, 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| Category | ||||||||
| Number Male/ |
Average age Male/ |
Number Male/ |
Average age Male/Female |
|||||
| Female | Total | Female | Avera | Female | Total | Average | ||
| Executives | 16 / 8 | 24 | 46/51 | ge 48 |
16 / 8 | 24 | 47 / 50 | 48 |
| White-collar | 64 / 120 | 184 | 36/38 | 37 | 61 / 108 | 169 | 36 / 38 | 37 |
| Blue-collar | 1 / 2 | 3 | 38/46 | 43 | 1 / 2 | 3 | 37 / 45 | 42 |
| Total | 81 / 130 | 211 | 38/39 | 39 | 78 / 118 | 196 | 38 / 39 | 39 |
The average number of Employees in 2018 was 206, comprising 25 executives, 179 white-collar employees and 3 blue-collar employees.
The breakdown of service costs is presented in the table below:
| FY 2018 | FY 2017 | |
|---|---|---|
| Commercial expenses | 3,745,014 | 3,737,087 |
| Rental, accessory and utility expenses | 3,820,323 | 3,376,137 |
| Directors and Statutory Auditors emoluments |
3,413,373 | 3,090,501 |
| Doubtful debt provision | 200,000 | - |
| Sales services |
683,551 | 537,330 |
| Other general expenses | 3,765,833 | 3,635,462 |
| Total selling, general and administrative costs, and royalties |
15,628,094 | 14,376,517 |
"Commercial expenses" include costs related to the commercial activities, travel expenses and consulting costs for stylistic and graphic material and are in line with the previous year's costs.
"Rental, accessory and utility expenses" principally relate to the offices of the company, owned by the subsidiary Basic Village S.p.A. The increase relates to the technical assistance contracts and the leasing of additional BasicVillage spaces to serve organisational needs.
The company's remuneration policy, as well as Directors and Statutory Auditors emoluments for the offices held, pursuant to Article 78 of Consob Regulation No. 11971/97 and thereafter are reported in the Remuneration Report pursuant to Article 123-ter of the CFA (reported net of tax charges) which is available on the company's website www.basicnet.com/contenuti/datifinanziari/assembleeazionisti.asp, to which reference should be made.
The "doubtful debt provision" of Euro 200 thousand follows an improved estimate of the risk of nonpayment of receivables from customers, licensee and sourcing centers.
"Sales services" include expenses for exporting samples in addition to "royalties' charges" principally relating to co-branding operations.
The account "other general expenses" includes legal and professional fees, bank charges, other taxes, consumption materials, hire charges, and corporate and other minor expenses.
Depreciation of fixed assets includes depreciation on finance lease assets.
| FY 2018 | FY 2017 | |
|---|---|---|
| Amortization | 1,805,699 | 1,759,076 |
| Depreciation | 574,388 | 476,193 |
| Total amortization & depreciation | 2,380,087 | 2,235,269 |
The increase in the year reflects the investments made in previous years.
| FY 2018 | FY 2017 | |
|---|---|---|
| Interest on bank deposits | 173 | 170 |
| Intercompany interest income | 396,220 | 446,397 |
| Bank interest charges | (67,621) | (104,366) |
| Interest on medium/long term loans | (289,450) | (270,651) |
| Medium/long term loan charges | (28,333) | (22,104) |
| Other interest charges | (85,738) | (27,127) |
| Total financial income and charges |
(74,749) | 22,319 |
| Exchange gains | 680,030 | 388,120 |
| Exchange losses | (629,245) | (886,735) |
| Net exchange gains/(losses) | 50,785 | (498,615) |
| Total financial charges | (23,964) | (476,296) |
"Intercompany interest income" derives from operations during the year and regulated through intercompany accounts, remunerated at market rates.
"Interest on medium/long-term loans" refers to the "Intesa Loan", the "BNL Loan" and the "MPS Loan" as described at Note 27.
"Exchange gains realised" in 2018 amounted to Euro 492 thousand and "exchange losses realised" amounted to Euro -581 thousand. The translation of credit and debit balances at year-end resulted in the recognition of "non-realised exchange gains" of Euro 188 thousand and "non-realised exchange losses" of Euro -48 thousand.
The subsidiary Basic Properties B.V. approved in the year the distribution of a dividend to BasicNet of Euro 2.15 million, based on the dividends in turn received from the entirely held subsidiaries Basic Trademark S.A. and Superga Trademark S.A..
Income taxes overall amounted to Euro 3.5 million, of which IRAP for Euro 0.6 million and IRES for Euro 2.9 million.
A positive effect of Euro 3.6 million followed application of the "Patent Box" rule; this amount refers for Euro 2.3 million to the years 2015-2016-2017, which have not yet been approved, and for Euro 1.3 million to the present year. The recognition of the effects from previous years is related to the definition of the ruling with the Tax Agency, which follows the agreement signed in April for Basic Trademark S.A and previously for Superga Trademark S.A., completing the tax break application process for the Group.
The reconciliation between the theoretical and actual rate is shown below:
| 2018 | 2017 | |
|---|---|---|
| Profit before taxes | 13,230,608 | 7,006,843 |
| Income tax rate | 24.0% | 24.0% |
| Theoretical IRES | (3,175,346) | (1,681,642) |
| Permanent tax differences effect Prior year taxes Patent Box benefit IRAP |
187,643 32,410 3,552,077 (594,161) |
(571,463) (67,924) 336,269 (473,660) |
| Other changes EFFECTIVE TAX CHARGE |
(278,817) (276,194) |
(40,538) (2,498,958) |
| Effective tax rate | (2.1%) | (35.7%) |
| Patent Box benefit | 2018 | 2017 |
|---|---|---|
| Effect prior years Effects in the current year |
2,288,500 1,263,577 |
57,870 278,399 |
| Total | 3,552,077 | 336,269 |
"Income taxes" include Euro 0.3 million for the provision of deferred taxes on differences between the book value and tax value of the assets/liabilities.
The breakdown of intangible assets at December 31, 2018 compared to the previous year-end and the movements during the year are reported in the table below:
| Dec. 31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Concessions, brands and similar rights | 9,997,382 | 9,925,986 | 71,396 |
| Other intangible assets | 2,690,031 | 2,895,605 | (205,574) |
| Intangible assets in progress | - | 345,109 | (345,109) |
| Industrial patents & intellectual property rights | 51,511 | 51,336 | 175 |
| Total intangible assets | 12,738,924 | 13,218,036 | (479,112) |
| Concessions, | Intangible assets | Industrial | |||
|---|---|---|---|---|---|
| brands, and similar rights |
Other intangible assets |
in progress | patents | Total | |
| Historic cost at 1.1.2017 |
12,667,801 | 29,917,924 | 362,436 | 95,658 | 43,043,819 |
| Additions | 1,693,137 | 811,570 | 345,109 | 17,573 | 2,867,389 |
| Divestments | (168) | (2,285) | - | - | (2,453) |
| Reclass. | - | 362,436 | (362,436) | - | - |
| Historic cost at 31.12.2017 |
14,360,770 | 31,089,645 | 345,109 | 113,231 | 45,908,755 |
| Additions | 182,622 | 1,480,955 | - | 8,119 | 1,671,696 |
| Divestments | - | - | - | - | - |
| Reclass. | - | - | (345,109) | - | (345,109) |
| Historic cost at 31.12.2018 |
14,543,392 | 32,570,600 | - | 121,350 | 47,235,342 |
The changes in the original costs of the intangible assets were as follows:
The changes in the relative accumulated amortisation provisions were as follows:
| Concessions, brands, and similar rights |
Other intangible assets |
Intangible assets in progress |
Industrial patents patents |
Acc. | |
|---|---|---|---|---|---|
| Acc. Amort. at 1.1.2017 |
(4,300,570) | (23,576,405) | - | (54,668) | (30,931,643) |
| Amortization | (134,214) | (1,617,635) | - | (7,227) | (1,759,076) |
| Acc. Amort. at 31.12.2017 |
(4,434,784) | (28,194,040) | - | (61,895) | (32,690,719) |
| Amortization | (111,226) | (1,686,529) | - | (7,944) | (1,805,699) |
| Acc. Amort. at 31.12.2018 |
4,546,010 | (29,880,569) | - | (69,839) | (34,496,418) |
| Concessions, brands, and similar |
Other intangible assets |
Intangible assets in progress |
Industrial patents |
Total | |
|---|---|---|---|---|---|
| rights | |||||
| Opening net book value |
|||||
| at 1.1.2017 | 8,367,231 | 3,341,519 | 362,436 | 40,990 | 12,112,176 |
| Additions | 1,693,137 | 811,570 | 345,109 | 17,573 | 2,867,389 |
| Divestments | (168) | (2,285) | - | - | (2,453) |
| Reclass. | - | 362,436 | (362,436) | - | - |
| Amortization | (134,214) | (1,617,635) | - | (7,227) | (1,759,076) |
| Closing net | |||||
| book value at 31.12.2017 |
9,925,986 | 2,895,605 | 345,109 | 51,336 | 13,218,036 |
| Additions | 182,622 | 1,480,955 | - | 8,119 | 1,671,696 |
| Divestments | - | - | - | - | - |
| Reclass. | - | - | (345,109) | - | (345,109) |
| Amortization | (111,226) | (1,686,529) | - | (7,944) | (1,805,699) |
| Closing net book value |
|||||
| at 31.12.2018 | 9,997,382 | 2,690,031 | - | 51,511 | 12,738,924 |
The changes in intangible assets during 2018 are shown in the table below:
At December 31, 2018, the intangible assets report investments of Euro 1.7 million and amortisation of approx. Euro 1.8 million.
The increase in "concession, brands and similar rights" is due to costs incurred for the registration of the brands K-Way and Briko in new countries, for renewals and extensions and for the purchase of license software.
The brand K-Way and the brand Briko have book values of Euro 8.2 million and Euro 1.6 million respectively at December 31, 2018. Both are considered intangible assets with indefinite useful life.
The impairment test on the book value of the brands was carried out in line with previous years, discounting the royalty net cash flows estimated from the brands based on the plans approved by the Board of Directors. For the years beyond the plan period a terminal value was estimated assuming a growth rate of 1% (1% in 2017). These net cash flows were discounted at the weighted average cost of capital (WACC) equal to 6.61% (6% in 2017), determined with reference to parameters taken from the principal financial information websites.
Following the impairment test, no write-down was required on the brands, whose value in use, in line with previous years, exceeded the book value.
The breakdown of "other intangible assets" is as follows:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Software development | 2,679,880 | 2,883,817 | (203,937) |
| Other intangible assets | 10,151 | 11,788 | (1,637) |
| Total other intangible assets | 2,690,031 | 2,895,605 | (205,574) |
The account increased Euro 1.5 million, principally due to the implementation of new software programmes realised internally and decreased Euro 1.7 million due to the amortisation for the year.
The breakdown of plant, machinery and other assets at December 31, 2018 compared to the previous year is shown in the table below:
| Dec. 31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Plant and machinery |
50,315 | 60,048 | (9,733) |
| Industrial and commercial equipment | 106,961 | 81,318 | 25,643 |
| Other assets | 2,858,572 | 2,494,804 | 363,768 |
| Total plant, machinery and other assets | 3,015,848 | 2,636,170 | 379,678 |
The changes in the historical cost of plant, machinery and other assets were as follows:
| Plant and | ||||
|---|---|---|---|---|
| machinery | commercial equipment |
Other assets | Total | |
| Historic cost at 1.1.2017 |
223,013 | 347,762 | 7,241,022 | 7,811,797 |
| Additions | 27,425 | 19,857 | 1,311,636 | 1,358,918 |
| Divestments | - | (12,720) | (111,549) | (124,269) |
| Historic cost at 31.12.2017 |
250,438 | 354,899 | 8,441,109 | 9,046,446 |
| Additions | 12,576 | 48,799 | 892,840 | 954,215 |
| Divestments | - | - | (13,323) | (13,323) |
| Historic cost at 31.12.2018 |
263,014 | 403,698 | 9,320,626 | 9,987,338 |
The changes in the relative accumulated depreciation provisions were as follows:
| Plant and | Industrial & commercial |
|||
|---|---|---|---|---|
| machinery | equipment | Other assets | Total | |
| Acc. Deprec. at 1.1.2017 |
(170,505) | (252,768) | (5,618,965) | (6,042,238) |
| Depreciation | (19,885) | (21,767) | (434,541) | (476,193) |
| Divestments | - | 954 | 107,201 | 108,155 |
| Acc. Deprec. at 31.12.2017 |
(190,390) | (273,581) | (5,946,305) | (6,410,276) |
| Depreciation | (22,309) | (23,156) | (528,923) | (574,388) |
| Divestments | - | - | 13,174 | 13,174 |
| Acc. Deprec. at 31.12.2018 |
(212,699) | (296,737) | (6,462,054) | (6,971,490) |
| Plant and | Industrial & commercial |
|||
|---|---|---|---|---|
| Opening net | machinery | equipment | Other assets | Total |
| book value | ||||
| at 1.1.2017 | 52,508 | 94,994 | 1,622,057 | 1,769,559 |
| Additions | 27,425 | 19,857 | 1,311,636 | 1,358,918 |
| Divestments | - | (11,766) | (4,348) | (16,114) |
| Depreciation | (19,885) | (21,767) | (434,541) | (476,193) |
| Closing net | ||||
| book value at 31.12.2017 |
60,048 | 81,318 | 2,494,804 | 2,636,170 |
| Additions | 12,576 | 48,799 | 892,840 | 954,215 |
| Divestments | - | - | (149) | (149) |
| Depreciation | (22,309) | (23,156) | (528,923) | (574,388) |
| Closing net book value |
||||
| at 31.12.2018 | 50,315 | 106,961 | 2,858,572 | 3,015,848 |
The changes in the plant and machinery are shown in the table below:
This account "other assets" consist of:
| Dec.31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| EDP | 676,099 | 564,464 | 111,635 |
| Furnishings and fittings |
398,986 | 308,446 | 90,540 |
| Motor vehicles | 111,974 | 101,968 | 10,006 |
| Other assets | 1,671,513 | 1,519,926 | 151,587 |
| Total other assets | 2,858,572 | 2,494,804 | 363,768 |
Capex in the year relates to the acquisition of moulds for new products for Euro 340 thousand, furniture and fittings and EDP for Euro 480 thousand, plant for Euro 13 thousand and equipment and motor vehicles for Euro 51 thousand and other minor assets.
The account "other assets" includes the purchase cost of an IT collection comprising rare pieces which represents significant elements and representative of the IT revolution, in the 1970's and 1980's with the advent of the new personal computer. This collection is utilised in many events related to the promotion of the brands and logos of the Group. The account also includes the purchase cost of moulds for footwear, eyewear and helmets so that ownership is held in order to control the strategic stages of the production process utilised by the suppliers' of finished products.
The net book value of property, plant and equipment acquired according to the finance lease formula is reported below:
| Net value at December 31, 2018 |
||
|---|---|---|
| EDP | 62,615 | 62,627 |
| Motor vehicles | 92,163 | 60,203 |
| Total | 154,778 | 122,830 |
The net book value at December 31, 2018 of property, plant and equipment acquired according to the finance lease formula relates to EDP for approx. Euro 63 thousand and motor vehicles for approx. Euro 92 thousand.
Reference should be made to Attachment 2 for information on the book value of the investments in subsidiaries and changes in the year.
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Investments in: | |||
| - Subsidiaries |
32,764,488 | 32,764,488 | - |
| - Joint ventures |
500,000 | 500,000 | - |
| - Other companies |
128 | 128 | - |
| Total investments | 32,264,616 | 32,264,616 | - |
| Receivables: | |||
| - Other receivables |
391,793 | 10,251 | 381,542 |
| Total financial receivables | 391,793 | 10,251 | 381,542 |
| Total investments & other financial assets | 33,656,409 | 33,274,867 | 381,542 |
In line with the practice adopted by other large listed groups in Italy, BasicNet S.p.A. identifies in the negative differential between the share of net equity held in the subsidiary and its book value an indicator of an impairment for the investments of control in its financial statements.
These circumstances would apply only to the subsidiary BasicItalia S.p.A., whose book value has already been subject to an impairment test for the previous year's financial statements and in those financial statements adjusted to the results of the test. In view of the significantly improved 2018 operating performance, which even beat planned forecasts and allowed a revaluation of future expected cash flow projections, it is not considered that significant indicators of impairment remain at year-end.
Other receivables refer to guarantee deposits.
The composition of the item is as follows:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Finished products and goods |
1,772,034 | 2,089,927 | (317,893) |
| Gross value | 1,772,034 | 2,089,927 | (317,893) |
| Inventory obsolescence provision | (1,492,775) | (1,322,775) | (170,000) |
| Total net inventories | 279,259 | 767,152 | (487,893) |
"Inventories" includes samples to be sold to licensees. Inventories are valued under the weighted average cost method and net of the obsolescence provision considered reasonable for a prudent valuation of inventories of prior year sample collections. The movements in the provision during the year were as follows:
| 2018 | 2017 | |
|---|---|---|
| Inventory obsolescence provision at 1.1 | 1,322,775 | 1,032,775 |
| Provisions in the year | 282,860 | 300,000 |
| Utilizations | (112,860) | (10,000) |
| Inventory obsolescence provision at 31.12 | 1,492,775 | 1,322,775 |
The utilisation of the provision relates to the disposal of the excess samples from previous years.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Trade receivables - Italy |
700,453 | 667,889 | 32,564 |
| Trade receivables - Abroad |
18,036,732 | 12,935,474 | 5,101,258 |
| Doubtful debt provision | (1,388,699) | (1,547,045) | 158,346 |
| Total trade receivables | 17,348,486 | 12,056,318 | 5,292,168 |
In particular, the breakdown of foreign receivables is as follows:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Europe | 3,396,205 | 2,019,182 | 1,377,023 |
| The Americas | 1,854,376 | 1,557,601 | 296,775 |
| Asia and Oceania | 12,445,748 | 9,300,572 | 3,145,176 |
| Middle East and Africa | 340,403 | 58,119 | 282,284 |
| Total | 18,036,732 | 12,935,474 | 5,101,258 |
"Trade receivables" were written down to their realisable value through the doubtful debt provision, although the majority of the receivables are secured by bank guarantees.
The provision at the end of the year represents a prudent estimate of the risk. The movements in the doubtful debt provision during the year were as follows:
| 2018 | 2017 | |
|---|---|---|
| Doubtful debt provision at 1.1 | 1,547,045 | 1,552,057 |
| Utilization for administration procedures and other losses |
(358,346) | (5,012) |
| Provisions in the year |
200,000 | - |
| Doubtful debt provision at 31.12 | 1,388,699 | 1,547,045 |
The utilisation of the provision relates to the write-off made on the certainty of the receivable irrecoverability and consequent tax deductibility of the loss.
The book value of receivables, all due within one year, is in line with their fair value.
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Receivables from Group companies | 60,800,581 | 63,942,638 | (3,142,057) |
| Tax receivables | 1,471,880 | 765,473 | 706,407 |
| Other receivables | 1,872,582 | 1,047,105 | 825,477 |
| Other current assets | 64,145,043 | 65,755,216 | (1,610,173) |
The breakdown of "receivables from Group companies" is as follows:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Trade receivables | |||
| BasicItalia S.p.A with sole shareholder | 2,684,998 | 514,826 | 2,170,172 |
| Basic Properties B.V. | 2,517,409 | 2,146,075 | 371,334 |
| TOS S.r.l. with sole shareholder |
53,443 | - | 53,443 |
| Superga Trademark S.A. | 48,784 | - | 48,784 |
| Jesus Jeans S.r.l. with sole shareholder | 9,187 | 5,650 | 3,537 |
| Basic Village S.p.A. with sole shareholder | 3,096 | - | 3,096 |
| Total trade receivables | 5,316,917 | 2,666,551 | 2,650,366 |
| Financial receivables | |||
| BasicItalia S.p.A with sole shareholder | 28,620,867 | 27,100,497 | 1,520,370 |
| TOS S.r.l. with sole shareholder | 10,556,925 | 11,850,000 | (1,293,075) |
| Superga Trademark S.A. for loan | 7,392,878 | 10,600,580 | (3,207,702) |
| Superga Trademark S.A. |
3,259,074 | 6,493,042 | (3,233,968) |
| Basic Village S.p.A with sole shareholder | 4,843,669 | 4,323,404 | 520,265 |
| BasicRetail S.r.l. with sole shareholder | 458,583 | 908,564 | (449,981) |
| BasicTrademark S.A. | 351,668 | - | 351,668 |
| Total financial receivables | 55,483,664 | 61,276,087 | (5,792,423) |
| Total | 60,800,581 | 63,942,638 | (3,142,057) |
Financial receivables originate from loans and advances for the cash needs of the subsidiaries within the centralised treasury management; these receivables are at market interest rates and vary in accordance with the financial cash flow needs within the Group.
No receivables have a residual duration of above 5 years.
The account "tax receivables" includes withholding taxes on royalties totalling Euro 2 thousand and receivables from tax authorities of Euro 1.5 million of which reimbursements due of Euro 277 thousand.
The receivable from TOS S.r.l. relates to the loan granted to the company for the acquisition of the Sebago brand; this loan is related to the financing received from MPS Capital Services Banca per le Imprese S.p.A. (Note 27).
The account "other receivables" includes the premium paid to the insurance company against the Directors Termination Indemnities for the Chairman of the Board of Directors of Euro 1.5 million, as approved by the Shareholders' Meeting for the 2016-2018 three-year mandate, as described in the Remuneration Report to which reference should be made and other minor amounts.
The table below shows the breakdown of the account:
| Dec. 31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Prepaid expenses on 2018 collections | 3,876,794 | 3,407,024 | 469,770 |
| Rentals, leases, hire and other |
820,094 | 500,966 | 319,128 |
| Assistance and maintenance contract | 137,798 | 81,581 | 56,217 |
| Other | 15,867 | 2,326 | 13,541 |
| Total prepayments | 4,850,553 | 3,991,897 | 858,656 |
Prepaid costs include creative personnel costs, sample costs for collections for which the corresponding sales revenues have not been realised and costs for trade fairs and exhibitions for future collections and the relative sales meetings.
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Bank and postal deposits | 1,616,315 | 1,545,161 | 71,153 |
| Cash in hand and similar |
7,002 | 15,362 | (8,359) |
| Total cash and cash equivalents | 1,623,317 | 1,560,523 | 62,794 |
"Bank deposits" refer to temporary current account balances principally due to receipts from clients.
| Dec.31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Share capital | 31,716,673 | 31,716,673 | - |
| Treasury shares | (17,827,079) | (14,494,992) | (3,332,087) |
| Legal reserve | 5,663,195 | 5,437,801 | 225,394 |
| Treasury shares in portfolio reserve |
17,827,079 | 14,494,992 | 3,332,087 |
| Other reserves: | |||
| - cash flow hedge reserve |
(2,949) | (20,582) | 17,633 |
| - remeasurement reserve for defined |
|||
| benefit plans (IAS 19) |
(58,240) | (80,947) | 22,707 |
| - retained earnings |
41,497,641 | 43,820,503 | (2,322,862) |
| Net Profit | 12,954,414 | 4,507,885 | 8,446,529 |
| Total Shareholders' Equity | 91,770,734 | 85,381,333 | 6,389,401 |
The account includes:
The share capital of BasicNet S.p.A. amounts to Euro 31,716,673.04 (divided in 60,993,602 ordinary shares) of Euro 0.52 each fully paid in.
In May 2018, as approved by the Shareholders' AGM of BasicNet S.p.A. of April 24, 2018, in relation to the allocation of the 2017 net profit, a dividend of Euro 0.06 per share was distributed to each of the ordinary shares in circulation, for a total pay-out of approx. Euro 3.3 million.
Based on the share buy-back programme, at the reporting date the Company held 7,005,822 shares, equal to 11.486% of the share capital, for a total investment of approx. Euro 18 million. The weighted average number of shares outstanding in the year was 51,907,273.
The other gains and losses recorded directly in equity in accordance with IAS 1 are reported below and recognised to the Comprehensive Income Statement.
| (Euro thousands) | Dec. 31, 2018 | Dec. 31, 2017 | Changes |
|---|---|---|---|
| Effective part of the Gains/losses on cash flow hedge instruments |
23 | 40 | (17) |
| Re-measurement of post-employment benefits (IAS 19) (*) |
30 | (15) | 45 |
| Tax effect relating to the Other items of the comprehensive income statement |
(13) | (8) | (5) |
| Total other gains/(losses), net of tax effect | 40 | 17 | 23 |
(*) items which may not be reclassified to the profit and loss account
| (Euro thousands) | December 31, 2018 | December 31, 2017 | ||||
|---|---|---|---|---|---|---|
| Gross value |
Tax Charge/ Benefit |
Net value |
Gross value |
Tax Charge/ Benefit |
Net value |
|
| Effective part of Gains/losses on cash flow hedge instruments |
23 | (5) | 18 | 40 | (11) | 29 |
| Re-measurement of post-employment benefits (IAS 19) (*) |
30 | (8) | 22 | (15) | 3 | (12) |
| Total other gains/(losses), net of tax effect |
53 | (13) | (40) | 25 | (8) | 17 |
(*) items which may not be reclassified to the profit and loss account
The statement on the availability of the reserves at December 31, 2018 is show below:
| Dec.31, 2018 | Dec.31, 2017 | Changes | ||
|---|---|---|---|---|
| Share capital | 31,716,673 | 31,716,673 | - | |
| Treasury shares | (17,827,079) | (14,494,992) | (3,332,087) | |
| Share premium reserve Legal reserve IAS adjustment reserve Reserve for treasury shares in portfolio Ordinary reserve |
B | 5,663,195 17,827,079 |
- 5,437,801 - 14,494,992 - |
225,394 3,332,087 |
| Extraordinary reserve | - | |||
| Other reserves: Cash Flow Hedge Reserve |
D | (2,949) | (20,582) | 17,633 |
| Remeasuring reserve of employee defined benefit plans (IAS 39) |
D | (58,240) | (80,947) | 22,707 |
| Retained earnings Exchange gains reserve |
A,B,C | 41,497,641 | 43,820,503 - |
(2,322,862) |
| Net profit | 12,954,414 | 4,507,885 | 8,446,529 | |
| Total | 91,770,734 | 85,381,333 | 6,389,401 |
Key: A: for share capital increase, B: for coverage of losses - C: for distribution to shareholders - D: non-utilisable
| (Euro thousands) | 31/12/2017 | New loans | Repayments | 31/12/2018 | Short-term portion |
Medium/long-term portion |
|---|---|---|---|---|---|---|
| "Intesa Loan" | 5,625 | - | 3,750 | 1,875 | 1,875 | - |
| "BNL Loan" | 6,250 | - | 1,250 | 5,000 | 1,250 | 3,750 |
| "MPS Loan" | 13,000 | - | - | 13,000 | 813 | 12,187 |
| Balance | 24,875 | - | 5,000 | 19,875 | 3,938 | 15,937 |
The changes in the medium/long-term loans during the year are shown below:
The maturity of the long-term portion of loans is highlighted below:
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Loans: | |||
| - "Intesa Loan" |
- | 1,875,000 | (1,875,000) |
| - "BNL Loan" |
3,750,000 | 5,000,000 | (1,250,000) |
| - "MPS Loan" |
12,187,500 | 13,000,000 | (812,500) |
| Total medium/long-term loans | 15,937,500 | 19,875,000 | (3,937,500) |
| - Other lenders |
103,558 | 126,288 | (22,730) |
| Total other financial payables |
103,558 | 126,288 | (22,730) |
| Total loans | 16,041,058 | 20,001,288 | (3,960,230) |
The "Intesa Loan" was issued in April 2015 for Euro 15 million and is of four-year duration, repayable in quarterly instalments at a quarterly Euribor rate plus 185 basis points. In July 2015, the variable Euribor rate was converted (under an interest rate swap) into a fixed rate of 0.23% annually. The loan will support developmental investments, in addition to optimising the duration of loans undertaken; it is supported by a pledge on Superga Trademark S.A. shares with obligation to maintain the full investment in the company by the Group.
The contractual conditions do not include financial covenants. The loan contract stipulates the maintenance of a number of ownership conditions concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 30%.
The "BNL Loan" was disbursed in November 2016 for Euro 7.5 million; it has six-year duration and is repayable in quarterly instalments at a quarterly Euribor rate increased by 95 basis points. No financial covenants are stipulated, although the maintenance of a number of ownership conditions are required concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 30%. The loan is supported by a second level mortgage on the "Basic Village" building in Turin and a first level mortgage on the adjacent building, acquired at the end of 2016.
The "MPS Loan" was issued in July 2017 for Euro 13 million and is of six-year duration, repayable in quarterly instalments from December 2019 at a quarterly Euribor rate (although not below zero) plus 170 basis points. No financial covenants are stipulated, although the maintenance of a number of ownership conditions are required concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 30%. The loan is supported by a pledge on the shares of TOS S.r.l., owner of the Sebago brand, with obligation to maintain the full investment in the company by the Group.
"Payables to other lenders" relate to the accounting of the capital line of finance leases recorded in the accounts under the finance method as per IAS 17.
For completeness of information we provide details of the medium/long-term loans by maturity.
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Medium/long term loans: | |||
| - due within 5 years |
15,937,500 | 17,437,500 | (1,500,000) |
| - due beyond 5 years |
- | 2,437,500 | (2,437,500) |
| Total medium/long term loans | 15,937,500 | 19,875,000 | (3,937,500) |
| Leasing payables | 103,558 | 126,288 | (22,730) |
| Total leasing payables (maturity within 5 years) | 103,558 | 126,288 | (22,730) |
| Total loans | 16,041,058 | 20,001,288 | (3,960,230) |
| Dec. 31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Bank payables due within one year: - short-term portion of medium/long-term loans |
3,937,500 | 5,000,000 | (1,062,500) |
| - bank overdrafts and bills | 8,000,000 | 5,000,000 | 3,000,000 |
| - interest expense on loans | 9,848 | 28,504 | (18,656) |
| Total bank payables | 11,947,348 | 10,028,504 | 1,918,844 |
The average interest rates for BasicNet S.p.A. were:
| Dec.31, 2018 | Dec. 31, 2017 | |
|---|---|---|
| cash advances | 0.10% | 0.10% |
| medium-term loan | 1.27% | 1.34% |
"Bank payables" include the short-term portion of loans, outlined at Note 27 and the relative interest matured and to be settled the following January.
Reference should be made to the Directors' Report for the changes in the net financial positions.
The account includes the post-employment benefits for employees of Euro 1.3 million and the termination indemnities of Directors of Euro 1.3 million.
The changes in the year of the post-employment benefit liability were as follows:
| December 31, 2018 | December 31, 2017 | |||||
|---|---|---|---|---|---|---|
| Defined benefit plans |
Defined contrib. plans |
Total | Defined benefit plans |
Defined contrib. plans |
Total | |
| Change in the balance sheet: | ||||||
| Net liabilities recognized at begin. of year | 1,319,287 | - | 1,319,287 | 1,281,102 | - | 1,281,102 |
| Interest | 22,252 | - | 22,252 | 22,794 | - | 22,794 |
| Pension cost, net of withholdings | (1) | 485,497 | 485,496 | 16 | 434,907 | 434,923 |
| Benefits paid | (58,663) | - | (58,663) | - | - | - |
| Payments to the INPS treasury fund | - | (327,287) | (327,287) | - | (41,399) | (41,399) |
| Payments to other supp. pension fund | - | (158,210) | (158,210) | - | (393,507) | (393,507) |
| - Actuarial gains/(losses) | (29,877) | - | (29,877) | 15,374 | - | 15,374 |
| Internal transfers to the Group | - | - | - | - | - | - |
| Net liabilities recognized in the accounts | 1,252,998 | - | 1,252,998 | 1,319,286 | - | 1,319,286 |
| Change in the income statement: | ||||||
| Interest | 22,252 | 22,252 | 22,794 | - | 22,794 | |
| Pension Cost | 4,802 | 485,497 | 490,299 | 4,465 | 434,907 | 439,371 |
| Actuarial gains/(losses) | - | - | - | |||
| Total charges/(income) for post employment benefits |
27,054 | 485,497 | 512,551 | 27,259 | 434,907 | 462,166 |
The account "employee benefits" includes the present value of the liabilities of the company in accordance with Article 2120 of the Civil Code. Based on the regulatory changes in 2007, the sums matured prior to January 1, 2007 to employees are recognised as defined benefit plans in accordance with IAS 19 – Employee benefits; those matured subsequent to this date are on the other hand recognised as defined contribution plans in accordance with the same standard.
Within the Company there are no other plans other than defined benefit plans. The actuarial valuation of the Post-Employment Benefit is prepared based on the "matured benefits" method through the Projected Unit Credit Method in accordance with IAS 19. Under this method the valuation is based on the average present value of the pension obligations matured based on the employment service up to the time of the valuation, without projecting the remuneration of the employee in accordance with the regulatory modifications introduced by the Pension Reform.
The actuarial model for the measurement of the post-employment benefit is based on various assumptions of a demographic and financial nature. The principal assumptions of the model concerning the actuarial valuations relating to personnel costs are:
| December 31, 2018 | December 31, 2017 | |
|---|---|---|
| discount rate | 1.970% | 1.610% |
| inflation rate | 1.500% | 1.500% |
| annual increase in post employment benefit |
2.625% | 2.625% |
| annual increase in salaries | 1.000% | 1.000% |
The change in the annual discount rate reflects the decrease in the yields of the "corporate bonds" of the basket utilised (Iboxx Eurozone Corporate) at the balance sheet date.
The sensitivity analysis carried out on the basis of the following variables: 1) inflation rate +0.25%/- 0.25%, 2) discount rate +0.25%/-0.25%, 3) turnover rate +1%/-1% shows non-material impacts of less than Euro 10 thousand.
The breakdown is shown below:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Net deferred tax asset (liabilities) |
598,845 | 297,430 | 301,415 |
| Total deferred tax liabilities | 598,845 | 297,430 | 301,415 |
The deferred tax assets and liabilities recognised and their impact are reported in the table below:
| December 31, 2018 | December 31, 2017 | ||||||
|---|---|---|---|---|---|---|---|
| (in thousands of Euro) | Amount | Amount | |||||
| of | of | ||||||
| temporary | Rate | Tax effect | temporary | Rate | Tax | Changes | |
| differences | % | differences | % | effect | 2018/2017 | ||
| Deferred tax assets: | |||||||
| - Excess doubtful debt provision | |||||||
| not deductible | (1,131) | 24.00% | (272) | (1,070) | 24.00% | (258) | (14) |
| - Inventory obsolescence provision | (1,493) | 24.00% | (386) | (1,323) | 24.00% | (345) | (41) |
| - Various charges temporarily non | |||||||
| deductible | (793) | 24.00% | (189) | (384) | 24.00% | (92) | (97) |
| - ROL surplus | - | 24.00% | - | (455) | 24.00% | (109) | 109 |
| - Effect IAS 39 – Financial | |||||||
| instruments | (4) | 24.00% | (1) | (27) | 24.00% | (6) | 5 |
| Total | (3,421) | (848) | (3,259) | (810) | (38) | ||
| Deferred tax liabilities: | |||||||
| - Dividends not received | 23 | 24.00% | 5 | 93 | 24.00% | 22 | (17) |
| - Prudent exchange differences, net | 139 | 24.00% | 33 | (343) | 24.00% | (82) | 115 |
| - Effect IAS 19 – Post | 26 | 24.00% | 6 | (5) | 24.00% | (1) | 7 |
| employment benefits provision | |||||||
| - Amortisation/Depreciation | |||||||
| tax basis | 5,044 | 27.90% | 1,403 | 4,184 | 27.90% | 1,167 | 236 |
| Total | 5,232 | 1,447 | 3,929 | 1,106 | 341 | ||
| Net deferred tax liability (asset) | 599 | 297 | 302 | ||||
| Deferred tax asset relating to fiscal | |||||||
| losses | - | - | |||||
| Deferred tax liability/(asset) | 599 | 297 | 302 | ||||
| as per financial statements |
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Guarantee deposits | 862,791 | 858,583 | 4,208 |
| Total other non-current liabilities | 862,791 | 858,583 | 4,208 |
The "guarantee deposits" include the guarantees received from licensees (in place of bank or corporate guarantees), to cover the minimum royalties guaranteed contractually.
| Dec. 31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Trade payables - Italy |
5,187,372 | 4,322,386 | 864,986 |
| Trade payables - Foreign |
1,821,590 | 1,716,688 | 104,902 |
| Total trade payables | 7,008,962 | 6,039,074 | 969,888 |
"Trade payables" are all due in the short-term period.
In particular, the breakdown of foreign suppliers is as follows:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Europe | 293,719 | 468,616 | (174,898) |
| The Americas | 117,502 | 117,566 | (65) |
| Asia and Oceania | 1,377,187 | 1,126,501 | 250,685 |
| Middle East and Africa |
33,186 | 4,005 | 29,180 |
| Total | 1,821,590 | 1,716,688 | 104,902 |
At the date of the present report there are no initiatives for the suspension of supplies, payment injunctions or executive actions by creditors against BasicNet S.p.A.. No interest is charged on trade payables which are normally settled between 30 and 120 days. The carrying value of trade payables approximates their fair value.
The breakdown of this account is shown in the following table:
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Tax payables: | |||
| IRES | (57,959) | 1,135,049 | (1,193,008) |
| Withholding taxes | 27,727 | 19,836 | 7,891 |
| VAT | 1,035,574 | 1,283,550 | (247,976) |
| Employee contributions | 249,428 | 371,273 | (121,845) |
| Total tax payables | 1,254,770 | 2,809,708 | (1,554,938) |
The account "IRES" concerns the payable in the year.
The VAT payable is consequent of the transfers of balances by the companies within the Group VAT consolidation.
The "Non-recurring tax charge" was fully settled during the year.
| Dec. 31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Payables to Group companies | 1,280,726 | 2,335,409 | (1,054,683) |
| Other payables |
3,601,311 | 2,774,040 | 827,271 |
| Accrued expenses | 327,286 | 285,037 | 42,249 |
| Total other current liabilities | 5,209,323 | 5,394,487 | (185,164) |
"Other payables" at December 31, 2018 principally include payables to social security institutions of Euro 576 thousand for the year 2018 and paid in 2019, employee, consultant and director payables of approx. Euro 1.8 million, which include vacation days matured at December 31, 2018 and other items of Euro 1.8 million. All payables are due within one year.
The "accruals" refer to employee costs for the 14th month of the year.
The breakdown of "Payables to Group companies" are shown below:
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Trade payables: | |||
| Basic Properties America Inc. | 760,665 | 731,731 | 28,934 |
| BasicNet Asia Ltd. | 436,988 | 366,802 | 70,186 |
| Basic Village S.p.A with sole shareholder |
77,843 | 56,443 | 21,400 |
| Fashion S.r.l | 5,230 | 4,558 | 672 |
| BasicItalia S.p.A with sole shareholder | - | 165,000 | (165,000) |
| Jesus Jeans S.r.l. with sole shareholder | - | 1,573 | (1,573) |
| Trade payables | 1,280,726 | 1,326,107 | (45,381) |
| Financial payables | |||
| Basic Trademark S.A. | - | 819,055 | (819,055) |
| TOS S.r.l. with sole shareholder | - | 190,247 | (190,247) |
| Total financial payables | - | 1,009,302 | (1,009,302) |
| Total | 1,280,726 | 2,335,409 | (1,054,683) |
| Dec. 31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| Royalties | 373,796 | 270,069 | 103,727 |
| Total deferred income | 373,796 | 270,069 | 103,727 |
"Deferred income" for royalties refer to invoicing for revenues which will mature in the following year.
| Dec.31, 2018 | Dec.31, 2017 | Changes | |
|---|---|---|---|
| Derivative financial instruments | 3,881 | 27,082 | (23,201) |
| Total | 3,881 | 27,082 | (23,201) |
The account at December 31, 2018 includes the adjustments to the market value of the interest rate hedging operations on the "Intesa Loan", which converted the variable Euribor quarterly rate into a fixed annual rate of 0.23% (cash flow hedge), in addition to a spread of 185 basis points.
An equity reserve was recorded of Euro 4 thousand, net of the tax effect.
In the case of the Interest Rate Swap (IRS) agreed by the Company, the specific hedge of the variable cash flow realised at market conditions, through the signing of the fix/flo IRS perfectly hedges the item to which the original cash flows stem, as in this case, and continues to be effective.
The details of the guarantees given are as follows:
| Dec.31, 2018 | Dec. 31, 2017 | Changes | |
|---|---|---|---|
| - Guarantees to subsidiaries |
59,050,000 | 51,000,000 | 8,050,000 |
| Total | 59,050,000 | 51,000,000 | 8,050,000 |
The sureties given on behalf of the subsidiaries refer for Euro 4.5 million to the guarantee given to the Unicredit Group on behalf of Basic Village S.p.A. against the loan granted in 2007 for the purchase of the building, guaranteed also by a first level mortgage on the building, for Euro 2.9 million to the guarantee given in 2008 by Intesa Sanpaolo S.p.A. on behalf of BasicItalia S.p.A. against 50% of the mortgage loan granted for the purchase of the building, Euro 6.5 million of a surety issued by a leading bank in guarantee of contractual commitments for a sponsorship contract and for the remainder, Euro 45.1 million, guarantees given on behalf of BasicItalia S.p.A., to various credit institutions, to guarantee the commercial credit lines.
The shares of the subsidiary Superga Trademark S.A. are subject to a pledge in favour of Intesa Sanpaolo S.p.A. in guarantee of the loan issued in April 2015 and the shares of TOS S.r.l. are subject to a pledge in favour of MPS Capital Services Banca per le Imprese S.p.A. as guarantee of the loan issued in July 2017.
The principal risks and uncertainties of the activities of the Company and of the Group and the activities undertaken to reduce them or avoid them, which are undertaken at Group level, are described in the Directors' Report.
The financial instruments of BasicNet S.p.A. include:
It is recalled that the Company and the Group only subscribes to cash flow hedges, to hedge against interest and currency risks.
In accordance with the requirements of IFRS 7 in relation to financial risks, the types of financial instruments present in the financial statements, with indication of the valuation criteria applied, are reported below:
| (Euro thousands) | Financial instruments at fair value recorded through: |
Financial instruments at amortized cost |
Non-listed investments valued at cost |
Book value at 31.12.2018 |
Fair value as at 31.12.2018 |
|
|---|---|---|---|---|---|---|
| Income | Shareholders | |||||
| Statement | ' Equity | |||||
| Assets: | ||||||
| Equity invest. & other | ||||||
| financial assets | - | - | - | 33,656 | 33,656 | 33,656 |
| Trade receivables | - | - | 17,348 | - | 17,348 | 17,348 |
| Other current assets | - | - | 64,145 | - | 64,145 | 64,145 |
| Derivative financial | - | - | - | - | - | - |
| instruments | ||||||
| Liabilities: | ||||||
| Medium/long-term loans | - | - | 16,041 | - | 16,041 | 16,041 |
| Bank payables | - | - | 11,947 | - | 11,947 | 11,947 |
| Trade payables | - | - | 7,009 | - | 7,009 | 7,009 |
| Other current liabilities | - | - | 5,209 | - | 5,209 | 5,209 |
| Derivative financial | - | 4 | - | - | 4 | 4 |
| instruments |
The financial risk factors, identified in IFRS 7 – Financial instruments: additional disclosures, are described below:
b. the risk that the fair value or the future cash flows of a financial instrument fluctuate following changes in market interest rates ("interest rate risk");
c. the risk that the fair value or the future cash flows of a financial instrument fluctuate following changes in market prices (other than changes determined from interest rate or currency risk), whether the changes are determined by specific factors related to the financial instrument or its issuer, or whether it is due to factors which influence all similar financial instruments traded on the market ("price risk");
The Company is exposed to the risk of fluctuations of commodity prices relating to raw materials (wool, cotton, rubber, synthetic fibre etc.) incorporated in the sample collections acquired on international markets, for resale to the licensees.
The Company does not hedge these risks as not directly dealing with raw materials but only finished products and the fluctuations can be transferred on to the final sales price.
BasicNet S.p.A. has subscribed the majority of its financial instruments in Euro which corresponds to its functional and presentation currency. Operating on the international market the Company is also exposed to fluctuations in exchange rates, principally the US Dollar against the Euro.
In 2018, exchange losses were recorded of Euro 88 thousand, while unrealised exchange gains were recorded of Euro 139 thousand, for a net exchange gain of Euro 51 thousand (Note 15).
The Company undertakes hedging of the currency risks at Group level.
The composition of the gross financial debt between fixed and variable interest rates at December 31, 2018 is shown below:
| Dec. 31, 2018 | % | Dec. 31, 2017 | % | |
|---|---|---|---|---|
| Fixed rate | 9,884,848 | 35.3% | 10,653,504 | 35.5% |
| Variable rate | 18,103,558 | 64.7% | 19,376,288 | 64.5% |
| Gross debt | 27,988,406 | 100.0% | 30,029,792 | 100.00% |
The interest rate fluctuation risks of the medium-term "Intesa Loan" was hedged with conversion of the variable rate into fixed rates; as described in Note 36 on the remaining part of the debt the Company is exposed to currency risk.
The interest on the short-term credit lines are on an average 0.10% in accordance with the type of lending, as illustrated in Note 27.
Where at December 31, 2018 the interest rate on long/term loans at that date were 100 basis points higher (or lower) compared to the actual rates, there would be a higher financial charges (lower), before the tax effect, respectively of Euro +226 thousand and Euro -226 thousand.
The doubtful debt provision (Note 22) which includes provisions against specific credit positions and a general provision on receivables not covered by guarantees, represents approx. 7.41% of trade receivables at December 31, 2018.
Reference should to the Explanatory Notes of the consolidated financial statements.
The table below illustrates the cash flow timing of payments on medium/long-term debt:
| (in Euro thousands) | Book value | Future interest income/(expe nse) |
Contractual cash flows |
Within 1 year | From 1 to 5 years |
Beyond five years |
|---|---|---|---|---|---|---|
| "BNL Loan" | 1,875 | 7 | 1,882 | 1,882 | - | - |
| "Intesa Loan" | 5,000 | 88 | 5,088 | 1,285 | 3,803 | - |
| "MPS Loan" | 13,000 | 642 | 13,642 | 1,037 | 12,605 | - |
| Lease payables | 104 | 2 | 106 | 64 | 42 | - |
| Total financial liabilities | 19,979 | 739 | 20,718 | 4,268 | 16,450 | - |
The risk that the loans within the company contain clauses (covenants) which allow the counterparties to request the creditor on the occurrence of certain events or circumstances the immediate repayment of the sums granted and not yet due, generating a liquidity risk.
There are no covenants on the loans in place.
The transactions undertaken by BasicNet S.p.A. with the companies belonging to the Group in the ordinary management and regulated at market conditions were:
The income statement effects deriving from these transactions are summarised as follows:
| BasicNet Group companies | Direct sales | Other income | Royalty income |
Financial income |
Dividends | Total |
|---|---|---|---|---|---|---|
| BasicItalia S.p.A with sole shareholder |
2,411,406 | 251,200 | 7,024,448 | 57,905 | - | 9,744,959 |
| Basic Trademark S.A. | - | 5,500,000 | - | - | - | 5,500,000 |
| Superga Trademark S.A. | - | 250,000 | - | 167,561 | - | 417,561 |
| Basic Properties B.V. | - | - | - | - | 2,150,000 | 2,150,000 |
| Basic Village S.p.A with sole shareholder |
- | 50,000 | - | 9,917 | - | 59,917 |
| BasicNet Asia Ltd. | 15,959 | - | - | - | - | 15,959 |
| Jesus Jeans S.r.l. with sole shareholder |
- | 5,000 | - | - | - | 5,000 |
| Fashion S.r.l. | - | 1,500 | - | - | - | 1,500 |
| BasicRetail S.r.l. with sole shareholder. |
1,400 | - | - | - | - | 1,400 |
| TOS S.r.l. with sole shareholder |
- | 12,000 | - | 160,837 | - | 172,837 |
| Total | 2,428,765 | 6,069,700 | 7,024,448 | 396,220 | 2,150,000 | 18,069,133 |
| BasicNet Group companies | Cost of sales |
Cost per sponsor |
Personnel costs |
Selling, general and administrative costs, royalties expenses |
Financial charges |
Total |
|---|---|---|---|---|---|---|
| Basic Village S.p.A with sole shareholder |
- | - | - | 2,151,505 | - | 2,151,505 |
| BasicNet Asia Ltd. | - | - | - | 869,349 | - | 869,349 |
| BasicItalia S.p.A with sole shareholder |
21,356 | 393,009 | - | 217,961 | - | 632,326 |
| BasicRetail S.r.l. with sole shareholder |
- | 43,550 | - | 33,235 | - | 76,785 |
| Total | 21,356 | 436,559 | - | 3,272,050 | - | 3,729,965 |
A breakdown of the transactions with related parties with reference to the note to which they refer for the year 2018 is shown below:
| Investments (Note 20) |
Receivables (Note 23) |
Payables (Note 34) |
Revenues (Note 39) |
Costs (Note 39) |
|
|---|---|---|---|---|---|
| Subsidiaries | 32,764,488 | 60,800,581 | 1,275,496 | 18,067,633 | 3,729,965 |
| Interests in joint ventures: | 500,000 | - | 5,230 | 1,500 | - |
| Remuneration of Boards and Senior Executives and other related parties |
- | - | - | - | 4,557,494 |
| Total | 33,264,488 | 60,800,581 | 1,280,726 | 18,069,133 | 8,287,459 |
|---|---|---|---|---|---|
The remuneration concerns emoluments and all other payments, pension-related or social security deriving from the role of Director or Statutory Auditor in BasicNet S.p.A. and the other companies within the consolidation scope.
In relation to the other related parties, we highlight the legal consulting activities undertaken by Studio Legale Pavesio e Associati and by Studio Legale Cappetti, of the Director Carlo Pavesio and by Studio Boidi & Partners, in which Massimo Boido has a 35% holding and is the Chairman of the Board of Statutory Auditors of BasicWorild S.r.l. These transactions, not material compared to the overall values, were at market conditions.
The collections owned by BasicNet S.p.A., which are utilised for media events, shows, press gatherings together with the Brands and/or products of the Group, are subject to a put and call agreement with BasicWorld S.r.l.. The agreement is for a duration until July 31, 2020 and provides for an exercise price of the Call Option by BasicWorld equal to the cost incurred by BasicNet for the purchase of the Collection, as resulting from the accounting entries of BasicNet, in addition to a financial interest charge equal to the average rate applied to BasicNet at the exercise option date. The agreement was signed based on the eventual interest of BasicNet S.p.A. to sell the collection to guarantee the complete recovery of the costs incurred, including financial charges, utilising in the meantime the benefits which derive from such communication instruments for their brands and/or products.
Pursuant to Consob Communication DEM/6064293 of July 28, 2006, we report that there were no nonrecurring significant operations during the year.
The BasicNet Group is involved in some legal disputes of a commercial nature which are not expected to give rise to significant liabilities.
Other disputes are described in the Explanatory Notes in the consolidated financial statements (Note 48).
For the Board of Directors
The Chairman
Marco Daniele Boglione
| Type of service | Service provider | Company | Fees earned 2018 |
|---|---|---|---|
| Audit | EY S.p.A. | Parent BasicNet S.p.A. Subsidiaries |
88,000 |
| Certification services | EY S.p.A. | Parent BasicNet S.p.A. | - |
| Other services | EY S.p.A. | Parent BasicNet S.p.A. | - |
| Total | 88,000 |
| SUBSIDIARY COMPANIES BASICITALIA S.p.A. WITH SOLE SHAREHOLDER Strada della Cebrosa, 106 |
28,599,725 |
|---|---|
| 10156 TURIN Share Capital Euro 7,650,000 7,650,000 11,273,453 1,333,313 100.00 - 11,273,453 |
|
| BASICNET ASIA LTD. 15 floor, Linkchart Centre No.2 Tai Yip Street Kwun Tong, Kowloon HONG KONG Share capital HKD 10,000. 1,115 485,615 71,163 100.00 - 485,615 |
927 |
| BASICRETAIL S.r.l. WITH SOLE SHAREHOLDER Strada della Cebrosa, 106 10156 TURIN Share capital Euro 10,000 10,000 3,233,130 1,374,764 - 100.00 - |
- |
| BASIC PROPERTIES B.V. Herikerbergweg 238 – LunArena – Amsterdam Zuidoost THE NETHERLANDS Share capital Euro 18,160 18,160 6,389,308 2,128,807 100.00 - 6,389,308 |
3,657,747 |
| BASIC PROPERTIES AMERICA, INC. c/o Corporation Service Company 11 S 12th Street - PO BOX 1463 – Richmond VA 23218 – U.S.A. Share capital USD 8,469,157.77 7,396,962 7,371,585 491,097 - 100.00 - |
- |
| BASIC TRADEMARK S.A. 42-44 Avenue de la Gare L-1610 LUXEMBOURG Share Capital Euro 1,250,000. 1,250,000 9,008,133 2,781,982 - 100.00 - |
- |
| BASIC VILLAGE S.p.A. WITH SOLE SHAREHOLDER Largo M. Vitale, 1 10152 TURIN Share capital Euro 412,800 412,800 5,802,977 227,753 100.00 - 5,802,977 |
414,715 |
| JESUS JEANS S.r.l WITH SOLE SHAREHOLDER Largo M. Vitale, 1 10152 TURIN Share capital Euro 10,000 10,000 106,042 19,626 100.00 - 106,042 |
81,375 |
| SUPERGA TRADEMARK S.A. 42-44 Avenue de la Gare L-1610 Luxembourg Share capital Euro 500,000 500,000 3,283,671 2,392,800 - 100.00 - |
- |
| TOS S.r.l. WITH SOLE SHAREHOLDER Largo M. Vitale, 1 10152 Turin Share capital Euro 10,000 10,000 485,822 474,505 100.00 - 485,822 |
10,000 |
| Name/Registered office/Share capital |
Share capital | Amount of the net equity |
Profit (loss) for the year |
Quota held directly |
Quota held indirectly |
Pro quota net equity |
Book value |
|---|---|---|---|---|---|---|---|
| JOINT VENTURES | |||||||
| FASHION S.r.l. C.so Stati Uniti, 41 10129 TURIN Share capital Euro 100,000 |
100,000 | 311,678 | (46,910) | 50.00 | - | 155,839 | 500,000 |
| Name/Registered office/Share capital | 31/12/2017 Book value |
Acquisitions/ Incor. |
Capital payments to cover losses |
Impairments investments |
Disposals | 31/12/2018 Book value |
% held Parent |
|---|---|---|---|---|---|---|---|
| HOLDINGS IN | |||||||
| SUBSIDIARY COMPANIES | |||||||
| BasicItalia S.p.A with sole shareholder | 28,599,725 | - | - | - | - | 28,599,725 | 100% |
| BasicNet Asia Ltd. | 927 | - | - | - | - | 927 | 100% |
| Basic Properties B.V. | 3,657,747 | - | - | - | - | 3,657,747 | 100% |
| Basic Village S.p.A with sole shareholder |
414,715 | - | - | - | - | 414,715 | 100% |
| Jesus Jeans S.r.l. with sole shareholder | 81,375 | - | - | - | - | 81,375 | 100% |
| TOS S.r.l. with sole shareholder | 10,000 | - | - | - | - | 10,000 | 100% |
| TOTAL SUBSIDIARY COMPANIES | 32,764,488 | - | - | - | - | 32,764,488 | |
| HOLDINGS IN JOINT VENTURES |
|||||||
| Fashion S.r.l. | 500,000 | - | - | - | - | 500.00 | 50% |
| TOTAL JOINT VENTURES | 500,000 | - | - | - | - | 500,000 | |
| HOLDINGS IN OTHER COMPANIES: |
|||||||
| Consortiums & other minor | 128 | - | - | - | - | 128. | |
| TOTAL OTHER COMPANIES | 128 | - | - | - | - | 128 | |
| TOTAL INVESTMENTS | 33,264,616 | - | - | - | - | 33,264,616 | |
| FINANCIAL RECEIVABLES | |||||||
| Other receivables (guarantees) | 10,251 | 381,542 | - | - | - | 391,793 | |
| TOTAL RECEIVABLES | 10,251 | 381,542 | - | - | - | 391,793 | |
| TOTAL INVESTMENTS AND OTHER FINANCIAL ASSETS |
33,274,867 | 381,542 | - | - | - | 33,656,409 |
The undersigned Marco Daniele Boglione as Executive Chairman, Giovanni Crespi as CEO, and Paolo Cafasso as Executive Officer for Financial Reporting of BasicNet S.p.A., affirm, and also in consideration of Article 154-bis, paragraphs 3 and 4, of Legislative Decree No. 58 of February 24, 1998:
the adequacy for company operations and the effective application, of the administrative and accounting procedures for the preparation of the 2018 financial statements.
In addition, we certify that the financial statements:
Marco Daniele Boglione Chairman
Giovanni Crespi Paolo Cafasso
Chief Executive Officer Executive Officer for Financial Reporting
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