Annual Report • Apr 4, 2018
Annual Report
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(Translation from the Italian original which remains the definitive version)
| Directors' Report on the 2017 Separate Financial Statements | 3 |
|---|---|
| Elica today | 4 |
| 2017 economic overview and outlook for 2018 | 5 |
| Currency markets | 7 |
| Financial Highlights | 8 |
| 2017 performance | 8 |
| Significant events in 2017 | 10 |
| Events after the reporting date and outlook | 13 |
| IAS/IFRS and 2017-2016 comparability | 13 |
| Elica S.p.A. and financial markets | 14 |
| Research and development | 15 |
| The environment | 15 |
| Personnel | 15 |
| Exposure to risks and uncertainties and financial risk factors | 15 |
| Company bodies | 17 |
| Elica Group structure | 18 |
| Related party transactions | 19 |
| Corporate governance and ownership structure report | 19 |
| Remuneration Report | 19 |
| Consolidated non-financial statement | 19 |
| Compliance with Section VI of the regulation implementing Legislative Decree no. 58 of February 24, 1998 concerning market regulations ("Market Regulations") |
19 |
| Compliance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of the "Issuers Regulation" | |
| 20 | |
| 2017 Separate Financial Statements | 21 |
| Income statement | 22 |
| Comprehensive income statement | 23 |
| Statement of financial position | 24 |
| Statement of cash flows | 25 |
| Statement of changes in equity | 26 |
| Notes to the separate financial statements at December 31, 2017 | 27 |
| Disclosure pursuant to Article 149 of the Consob Issuers' Regulation | 71 |
| Attestation on the separate financial statements as per Article 81-ter of Consob Regulation no. 11971 of May 14, 1999 and subsequent amendments and integrations |
72 |
| KPMG Opinion |
DIRECTORS' REPORT ON THE 2017 SEPARATE FINANCIAL STATEMENTS
The Elica Group has been active in the cooker hood market since the 1970's. Chaired by Francesco Casoli and led by Antonio Recinella, today it is the world leader in terms of units sold and a European leader in the design, manufacture and sale of motors for cooker hoods and central heating boilers. With over 3,800 employees and an annual output of around 21 million units, the Elica Group has seven production facilities, including in Italy, Poland, Mexico, Germany, India and China. With many years of experience in the sector, Elica has combined meticulous care for design with the judicious choice of high-quality materials and cutting-edge technology to guarantee maximum efficiency and low energy consumption, making the Elica Group the prominent market figure it is today. This has enabled the Group to revolutionise the traditional image of cooker hoods: they are no longer seen as simple accessories but as a design element, that improves the quality of life.
The Eurozone recovery which gained steam in 2017 (+2.4%) will continue at a moderate pace in 2018, with expected growth of 2.2% (revised upwards from previous estimates).
2017 GDP2 growth principally follows stronger exports as part of a wider uptick in global trade and persistently buoyant domestic demand supported by accommodating financial conditions, against a reduction in the risk and uncertainty posed by anti-EU political elements.
2018 will see growth consolidate across the core economies, further reducing the growth gap between the centre and periphery. Looking to the main Eurozone countries in detail, Germany forecasts more moderate growth in 2018 than in 2017 (2.5% in 2017 and 2.3% in 2018) and Spain - which saw continuous growth throughout 2017 - also expects more contained growth in the current year (3.1% in 2017 and 2.4% in 2018), while French growth will build on 2017 (1.8% in 2017 and 1.9% in 2018). Italian growth for the current year is expected to come in slightly under the 2017 level (1.6% in 2017 and 1.4% in 2018).
Domestic demand (+2.1%) will continue to be the main driver of growth in 2018, with consumption expected to grow at approximately at the same pace as 2017 (1.8%). Disposable income levels will benefit from a temporary drop in inflation and stronger employment numbers against moderate salary growth. A half-yearly European Commission survey indicated that in 2018 investment by expanding businesses picked up on the back of high plant usage levels, stable earnings growth and more certain demand conditions.
This growth is expected to continue into 2019, although slightly flattening out - partly due to a reduced level of monetary policy stimulus. In fact, against better general economic conditions, it is highly likely that by the beginning of 2019 the ECB's public and private securities purchasing programme will conclude. The ECB for the moment however is limiting the effect on rates of the upcoming conclusion of expansionary financial policies, and therefore it is not expected that official rates will be raised in 2018, with increases to be seen from 2019. Monetary policy will therefore support the expansionary cycle, with the extension of QE3 for the duration of 2018 having a delayed effect and rates therefore remaining close to zero.
Expectations over the medium-term for the Eurozone remain contained, with the potential for growth held back by a number of factors such as: low productivity, adverse demographics and, in a number of countries, a significant public and private debt deficit.
The US economy grew 2.3% in 2017, thanks to very low inflation, bullish stock markets and a lack of volatility and signs of financial instability, paving the way for a gradual exit from the highly expansive monetary policies of the last decade.
Further growth of 2.7% is estimated for 2018 and of 2.5% for 2019. Continued economic expansion in the short-term reflects not only highly favourable financial conditions and improved consumer confidence, but the support also from favourable estimates on overseas demand and the expected benefit for the general economy from the tax reform reducing corporate tax rates and introducing temporary capital expenditure allowances. The tax reform is therefore expected to stimulate the US economy over the short-term, with stronger domestic demand expected to generate higher imports, thus increasing the current account deficit.
In terms of risks, the great unknown for the current year continues to be inflation, with estimates indicating a slight increase and at such a pace as to allow the FOMC4 to implement three rate rises in 2018, as expected. In addition, although the consumer fundamentals remain solid, two worrying factors are highlighted: the continual decline of savings levels (currently at their lowest since 2008) and rising household debt levels.
Over a longer timeframe, contained growth is forecast for the US (at approx. 1.2%), reflecting an unchanged tax policy and ongoing growth - although at a slower pace - for all production factors, together with a contracted workforce due to the gradual ageing of the population.
1 Data sources: International Monetary Fund, World Economic Outlook, and Intesa Sanpaolo Studies and Research Department's Macroeconomic Outlook
2 Gross Domestic Product
3 Quantitative Easing
4 Federal Open Market Committee
The Japanese economy remains buoyant thanks to a combination of favourable domestic and international economic factors, resulting in growth of 1.5% in 2017. Continued expansion is forecast for the coming two years, with estimated growth of 1.5% in 2018 and of 1.4% in 2019, thanks to solid contributions both from domestic demand and the overseas channel. Inflation is expected to remain under 1% in 2018, entirely eliminating fears of re-emerging deflation - although far behind the target of the BoJ5 and justifying therefore the extension of an aggressive expansionary policy. In 2018 and in part of 2019, the fiscal policy is expected to be moderately expansive in view of the raising of the consumption tax from 8% to 10%. This action may generate volatility in terms of growth, but the Japanese economy is solid and the introduction of expansive education measures should offset the restrictive effects of the tax increase. The real economy is in excellent shape, although salary levels remain stationary. The labour market is increasingly under pressure, with the growing demand surplus expected to translate into modest salary increases over the coming two years.
The sustainability of the public debt, increasingly held by the BoJ, is becoming of less relevance as the bank has announced that it will continue debt security purchases at approximately double the rate of net government issues, gradually lessening the risk related to this macroeconomic variable.
Finally, in strictly political terms, the management of constitutional reforms and of the tensions with North Korea may create temporary volatility over the coming two years, although not to such an extent as to put the expected recovery at risk.
In 2017, Chinese GDP grew 6.8%. The strongest contributor to growth comes from the major advances made by the financial services sector and both consumer - supported by the expanding labour market and increasing levels of disposable income - and business confidence, driven by increased earnings and revenues. China in 2017, supported by investor expectations, announced a greater opening up to overseas banking and finance sector investment, while reducing import tariffs on 200 consumer goods (including high technological content products).
The good overseas trade forecasts and the growth of imports outstripping that of exports may however recede to a degree in 2018. In particular, in terms of exports, prices may slow and the geopolitical risk posed by the tensions between North Korea and the USA related to possible protectionist measures by the US may heighten. Service sector inflation remains higher than that for goods, with only moderate consumer price inflation forecast (from 1.5% in 2017 to 2.2% in 2018 and 2.1% in 2019). The fiscal policy also continues to support small and medium-sized enterprises, thanks to reductions both in consumption taxes and those upon small and micro businesses and individual businesses announced for the 2018-2019 two-year period. The Chinese authorities also issued regulations to reduce systemic risk to the banking and non-banking sector, with the control of financial risk therefore to remain among the highest priorities of regulators again in 2018, together with environmental protection and the quality of growth in terms of the population's wellbeing.
Over the long-term, the PBoC6 will maintain the monetary policy of 2018 unchanged, facilitating significant levels of market liquidity, although maintaining rates at slightly above 2017 levels, in particular for longer term maturities. The goal is to limit rising house prices and contain financial risks - slightly raising rates over the coming quarters. The overall picture is therefore of a contained slowdown in economic growth to 6.4% in 2018 and to 6.2% in 2019, with it being estimated that the continued investment in public infrastructure and services will not be sufficient to offset slowing property and manufacturing sector investment.
Indian GDP growth was 6.7% in 2017, featuring slowing consumer numbers as a result of reduced public spending, stronger import growth over exports, with recovering investment partially offsetting these factors. Among the various sectors, the industrial sector recovery stands out, driven by the mining and also the manufacturing sector uptake. Industrial production has in fact improved, particularly on the back of domestic order numbers. This has all been achieved despite lending only increasing slightly and industrial lending contracting, although an improvement is expected in the second part of 2018 thanks to an additional government bank recapitalisation plan.
The public deficit exceeded the 2017 targets and risks remain that the situation will extend also into 2018 and 2019 in view of the spring 2019 elections. Inflation, which in 2017 was 3.3%, is forecast to increase to 5% in 2018, although remaining within the central bank's target despite the expected reduction in the GTS rate7 on various products. The increase is connected to expected oil prices increases in 2018 and their consequent transfer onto consumer prices, in view of declining business earnings levels.
With the effects from the introduction of the GTS and demonetisation expected to be transitory, GDP growth of 7.2% is forecast for 2018 and of 7.4% in 2019, thanks to the support provided by the fiscal policy and recovering investment facilitated by the long-term effects of the policies implemented over recent years.
5 Bank of Japan
6 People's Bank of China
7 Goods and Services Tax
In 2017, the improving global growth outlook, weather conditions in the United States, the extension of the OPEC agreement8 to limit oil production and the geo-political tensions in the Middle East supported oil prices, which increased approx. 20% between August 2017 and mid-December 2017 to reach over USD 60 per barrel, with a further increase in January 2018. The markets expect a gradual price reduction over the coming 4-5 years, as indicated by medium-term futures which in mid-December were at approx. USD 54 per barrel. In 2017, rising oil prices drove general inflation across the advanced economies, although salary and consumer price inflation remained weak. For 2018, general economic conditions are expected to support the raw materials sector, except for industrial ferrous metals (iron and steel) which should slow price growth if changes to the current international trade regulations are not introduced. Short rallies from collective bargaining in Latin America or due to nationalist policies in Asia may however occur in 2018.
In 2017, the global range hood market continued to grow - accelerating in the second part of the year - with demand strengthening 2.5%9 on 2016.
The European market grew 3.7% on the previous year, principally on the basis of strong Eastern European growth (+7.0%), driven by the expanding Turkish (+15.4%) and Russian (+8.8%) markets. In addition, Western Europe (+1.5%) saw moderate expansion, featuring Italian (+3.1%) and Spanish (+4.5%) market growth, while major markets such as Germany and the United Kingdom were substantially stable.
In North America, cooker hood growth continued for the fifth consecutive year (+4.2%) and was accompanied by growth in Latin America which, thanks to the recovery in the second part of the year, saw a return to positive territory (+0.5%) after two years of contraction.
In China, the largest global market, demand levels saw a decisive turnaround after the 2016 contraction, followed by all of the main Asian markets (India +3.9%, Japan +2.5%). These developments supported overall demand growth in Asia of 2.1%.
In 2017 the Euro, at average exchange rates, substantially strengthened against the U.S. Dollar, the Japanese Yen, the Mexican Peso, the Chinese Yuan and the UK Pound.
| 2017 average | 2016 average | % | Dec 31, 2017 | Dec 31, 2016 | % | |
|---|---|---|---|---|---|---|
| USD | 1.13 | 1.11 | 1.8% | 1.20 | 1.05 | 14.3% |
| JPY | 126.71 | 120.20 | 5.4% | 135.01 | 123.40 | 9.4% |
| PLN | 4.26 | 4.36 | (2.3%) | 4.18 | 4.41 | (5.2%) |
| MXN | 21.33 | 20.67 | 3.2% | 23.66 | 21.77 | 8.7% |
| INR | 73.53 | 74.37 | (1.1%) | 76.61 | 71.59 | 7.0% |
| CNY | 7.63 | 7.35 | 3.8% | 7.80 | 7.32 | 6.6% |
| RUB | 65.94 | 74.14 | (11.1%) | 69.39 | 64.30 | 7.9% |
| GBP | 0.88 | 0.82 | 7.3% | 0.89 | 0.86 | 3.5% |
9 Volume data estimated by the Company
8 Organization of the Petroleum Exporting Countries
| In Euro thousands | 2017 | 2016 | 2017 Vs 2016 % |
|---|---|---|---|
| Revenue | 363,084 | 326,031 | 11.36% |
| Adjusted EBITDA | 13,025 | 10,683 | 21.92% |
| % of revenue | 3.59% | 3.30% | |
| EBITDA | 10,905 | 5,438 | 100.53% |
| % of revenue | 3.00% | 1.70% | |
| EBIT | (296) | (4,599) | -93.57% |
| % of revenue | -0.08% | -1.40% | |
| Net interest expense | (1,346) | (1,460) | -7.82% |
| % of revenue | -0.37% | -0.40% | |
| Dividends from subsidiaries | 3,021 | 3,362 | -10.14% |
| % of revenue | 0.83% | 1.00% | |
| Write-downs of investments in subsidiaries | (1,980) | (4,050) | n.a. |
| % of revenue | -0.55% | -1.20% | |
| Net exchange rate losses | (2,241) | (547) | 309.75% |
| % of revenue | -0.62% | -0.20% | |
| Subsidiary disposal charges | (21,793) | - | n.a. |
| % of revenue | -6.00% | n/a | |
| Loss for the year | (22,112) | (6,541) | 238.05% |
| % of revenue | -6.09% | -2.00% | |
| In Euro thousands | Dec. 31, 2017 | Dec. 31, 2016 | |
| Cash and cash equivalents | 8,337 | 9,826 | |
| Financial receivables - related parties | 17,053 | 27,891 | |
| Financial payables - related parties | (2,861) | (2,495) | |
| Bank loans and borrowings | (44,966) | (48,898) | |
| Current loans and borrowings | (30,774) | (23,502) | |
| Bank loans and borrowings | (47,121) | (33,697) | |
| Non-current loans and borrowings | (47,121) | (33,697) | |
| Net Financial Position | (69,558) | (47,372) | |
| In Euro thousands | 2017 2016 |
||
| Trade receivables | 49,994 44,678 |
||
| Trade receivables - related parties | 31,568 38,650 |
||
| Inventories | 36,032 31,666 |
||
| Trade payables | (74,546) | (69,427) | |
| Trade payables - related parties | (27,364) | (32,286) | |
| Managerial Working Capital | 15,685 13,281 |
||
| % of revenue | 4.32% | 4.10% | |
| Other net assets | 426 2,397 |
||
| Net working capital | 16,111 | 15,678 | |
| % of revenue | 4.44% | 4.80% |
In 2017, revenue grew 11.4% on the previous year (+15% from related parties, +11% from third parties).
EBITDA in 2017 of Euro 10.9 million, impacted by restructuring charges of Euro 1.8 million, was up 101% on 2016 which was significantly impacted by non-core business charges of Euro 5.3 million.
Adjusted EBITDA of Euro 13.0 million rose 22% on Euro 10.7 million in 2016, despite increased overheads from the own brand sales growth strategy.
Net interest expense, including the financial component of IAS 19, reduced on 2016 by 7.8%, following the closer focus on the structure and the cost of debt.
The loss of Euro 22.1 million reported for 2017, against the loss of Euro 6.5 million in 2016, is significantly conditioned by the extraordinary negative impact of the disposal of the German subsidiary for Euro 21.8 million.
Managerial Working Capital, equal to 4.3% of revenue, increased on December 2016 due to higher Trade receivables from third parties, the increase in inventories related to the growth strategy for Elica-brand products, in addition to the reduction in trade payables to related companies, also as a result of the corporate operation involving the disposal of the German subsidiary.
Net financial position increased from Euro 47.4 million at December 31, 2016 to Euro 69.6 million at December 31, 2017, due to significant investment by the company in product and process innovation.
EBITDA is the operating profit (loss) (EBIT) plus amortisation and depreciation and any impairment losses on goodwill.
EBIT is the operating profit (loss) as reported in the income statement.
Adjusted EBITDA is EBITDA net of adjustments.
Net interest expense is the sum of Financial income and Financial charges, as per the income statement.
Dividends from subsidiaries account for the entirety of income and charges from associates and subsidiaries, as per the income statement.
Adjustment items: income items are adjusted where they: (i) derive from non-recurring events and operations or from operations or events which do not occur frequently; (ii) derive from events and operations not considered as in the normal course of business operations, as is the case for impairments, disputes considered atypical in terms of frequency and amount and restructuring charges.
Managerial Working Capital is the sum of Trade receivables and Trade receivables from related parties with inventories, net of Trade payables and Trade payables to related parties, as presented in the statement of financial position.
Net working capital is the amount of Managerial Working Capital and other net assets/liabilities.
Other net assets/liabilities comprise the current portion of Other assets and tax assets, net of the current portion of Provisions for risks and charges, Other liabilities and tax liabilities, as presented in the statement of financial position.
Net Financial Position (NFP) is the sum of Cash and cash equivalents less current loans and borrowings (including the current portion of bank loans and borrowings, Financial assets from related parties and Financial liabilities to related parties, as reported in the statement of financial position) and non-current loans and borrowings (including the noncurrent portion of bank loans and borrowings, as reported in the statement of financial position).
| In Euro thousands | 2017 | 2016 |
|---|---|---|
| Operating loss- EBIT | (296) | (4,599) |
| (Amortisation and depreciation) | 11,201 | 10,038 |
| EBITDA | 10,905 | 5,438 |
| (Non-recurring service expense) | 164 | |
| (Non-recurring personnel expense) | 1,500 | |
| (Disposal of obsolete inventories outside of core business operations) | 587 | |
| (Additional accrual for legal risks provision with Esperança Real S/A) | 2,900 | |
| (Restructuring charges) | 1,834 | 93 |
| (Impairment of intangible assets relating to the Gutmann disposal) | 285 | |
| Adjusted EBITDA | 13,025 | 10,683 |
| In Euro thousands | Dec 31, | Dec 31, |
| 2017 | 2016 | |
|---|---|---|
| Financial income Financial charges |
1,126 (2,472) |
1,294 (2,754) |
| Net interest expense | (1,346) | (1,460) |
| In Euro thousands | Dec 31, 2017 |
Dec 31, 2016 |
|---|---|---|
| Other receivables | 2,826 | 4,738 |
| Tax assets | 8,507 | 6,894 |
| (Provision for risks and charges) | (946) | (669) |
| (Other payables) | (7,250) | (5,811) |
| (Tax liabilities) | (2,711) | (2,755) |
| Other net assets | 426 | 2,397 |
On January 30, 2017, in accordance with Article 2.6.2, paragraph 1, letter b) of the Regulations of the Markets organised and managed by Borsa Italiana S.p.A., Elica S.p.A. published the 2017 Financial Calendar.
On February 13, 2017, the Board of Directors approved the 2016 fourth quarter report, prepared in accordance with IFRS.
On March 13, 2017, Elica S.p.A.'s Board of Directors considered the impacts on the 2016 consolidated and separate financial statements of the non-executive first level judgements in the case between Esperança Real S/A, Madson Eletrometalurgica Ltda. and Elica S.p.A., issued by the Belo Horizonte (Brazil) Court on March 1, 2017. The case concerns the signing of preliminary agreements in September 1999 for the establishment of a joint venture by Elica S.p.A. and Esperança Real S/A, which were thereafter not executed. With the support of legal consultants and sector experts, the Board of Directors assessed the ruling, the technical opinions upon the possible development of the case and its probable final outcome and decided to accrue, on a precautionary basis, an additional amount of Euro 2.9 million to cover legal risks. These accruals do not imply that the counterparty's legal arguments are valid, but were recognised solely to be fully compliant with IFRS. The parent therefore confirms its intention to pursue at all levels the enforcement of its rights. At December 31, 2017, the provision reflects the updated available information.
On March 21, 2017, Elica participated in the 2017 STAR Conference organised in Milan by Borsa Italiana.
On March 24, 2017, the Board of Directors of Elica S.p.A approved the 2016 consolidated financial statements and the directors' report, and the 2016 separate financial statements draft of Elica S.p.A. and the directors' report, prepared in accordance with IFRS, and also approved the 2016 corporate governance and ownership structure report and the remuneration report and the directors' report to the shareholders' meeting on the proposal to authorise the repurchase and utilisation of treasury shares. The Board of Directors also appointed in replacement of Gianna Pieralisi, company director, Cristina Scocchia, who will remain in office until the next shareholders' meeting. The Board approved the proposal to the Shareholders' Meeting of the appointment of Mr. Antonio Recinella, appointed by the Board of Directors of Elica S.p.A. on October 28, 2016, with effect from November 1, 2016, in replacement of the Chief Executive Officer Giuseppe Perucchetti, as a Director of Elica S.p.A., in addition to confirming the appointment of Ms. Cristina Scocchia, in replacement of Gianna Pieralisi. In addition, the Board of Directors confirmed the appointment of the members of the Supervisory Board, extending their mandate until the date for the approval of the 2017 financial statements by the shareholders' meeting. The Board of Directors also assessed the independence of the Directors Elio Catania, Davide Croff, Katia Da Ros and Enrico Vita, declaring them independent in accordance with Article 148, paragraph 3 of the CFA (restated in Article 147-ter, paragraph 4 of the CFA) and under Article 3.C.1. of the Selfgovernance code for listed companies. In addition, the Board of Statutory Auditors of the company positively assessed the independence of its members. On the same date, in view of the 2016 results, the Board of Directors proposed to not distribute a dividend, in order to maintain all available company resources for investment in future development. In addition, the Board of Directors approved the proposal to the Shareholders' Meeting of the coverage of the 2016 loss through use of "income-related reserves". The Board of Directors also approved the proposal to the Shareholders' Meeting to amend the long-term incentive plan (the "2016-2022 Phantom Stock & Voluntary Co-investment Plan)", approved by the Shareholders' Meeting of April 28, 2016, on the basis of the updated prospectus prepared pursuant to Annex 3A, Table 7 of the Issuers' Regulation published on March 28, 2017 pursuant to applicable regulations. Elica S.p.A.'s Board of Directors called the Shareholders' Meeting at the registered offices in Fabriano, via Ermanno Casoli No. 2, for April 28, 2017 at 9am on single call.
On March 28, 2017, the reports of the directors to the Shareholders' Meeting on the appointment of two directors and the establishment of the remuneration devolving to members of the Board of Directors, in accordance with Article 2386 of the Italian Civil Code and the report of the directors to the Shareholders' Meeting on the proposal to amend the 2016- 2022 Phantom Stock and Voluntary Co-investment Plan were made available to the public at the registered office, on the storage mechanism () and on the Elica S.p.A. website https://elica.com/corporation (Investor Relations - Shareholders' Meeting section).
On April 6, 2017, the annual report comprising the draft separate and consolidated financial statements as at and for the year ended December 31, 2016, the directors' report and the statement as per Article 154-bis, paragraph 5 of Legislative Decree no. 58/1998, together with the reports of the board of statutory auditors and the independent auditors, the remuneration report and the 2016 corporate governance and ownership structure report, were made available to the public at the parent's registered office, on the authorised storage mechanism () and on the Elica
S.p.A. website at https://elica.com/corporation (Investor Relations - Annual Report section and Corporate Governance section). The directors' report to the shareholders concerning the proposal to repurchase and utilise treasury shares was also made available to the public at the registered office, on the authorised storage mechanism () and on the Elica S.p.A. website at https://elica.com/corporation (Investor Relations - Shareholders' Meeting section). The financial statements and/or summary schedules of Elica S.p.A.'s subsidiaries and associates, as per Article 2429 of the Italian Civil Code, and the subsidiaries' reporting packages as per Article 36 of the Market Regulation, were also available to the public at the registered office.
On April 28, 2017, Elica S.p.A.'s Shareholders' Meeting approved the separate financial statements of Elica S.p.A. as at and for the year ended December 31, 2016, the directors' report, the reports of the board of statutory auditors and the independent auditors and acknowledged the consolidated results of the company for 2016. Elica S.p.A.'s Shareholders' Meeting also approved the coverage of the 2016 loss through use of "Income-related reserves" and appointed by majority two directors proposed by the Board of Directors, who will remain in office until the Shareholders' Meeting called to approve the financial statements at December 31, 2017: Antonio Recinella born in Livorno on 5/11/1968 and Cristina Scocchia born in Sanremo on 4/12/1973. According to the company, the appointed directors do not hold Elica S.p.A. shares. Their curricula vitae are available on the website https://elica.com/corporation (Corporate Governance - Other Documents section). The Shareholders' Meeting also approved the amendment of the long-term incentive plan called the 2016-2022 Phantom Stock & Voluntary Co-investment Plan as per the conditions indicated in the updated prospectus, published on April 6, 2017. The Elica S.p.A. Shareholders' Ordinary Meeting acknowledged the content of the remuneration report, filed and made available to the public on April 6, 2017 and expressed a favourable opinion on the first section of the report, while also approving, following revocation of the previous authorisation of April 28, 2016, the authorisation to repurchase and utilise treasury shares, pursuant to Article 2357 and 2357-ter of the Italian Civil Code. On the same date, Elica S.p.A.'s Board of Directors appointed Antonio Recinella Chief Executive Officer of Elica S.p.A. and assessed the independence of the director Antonio Recinella, not considering him as independent, and of the director Cristina Scocchia, considering her independent and also appointing her to the Appointments and Remuneration Committee and to the Internal Control and Risk Management Committee.
On May 15, 2017, Elica S.p.A.'s Board of Directors approved the 2017 first quarter report, prepared in accordance with IFRS.
On the same date, the Board of Directors approved the 2017-2019 objectives. The company forecasts a substantial increase in revenue driven by Cooking segment own brand growth, together with increased revenue from the Motors segment. Motors segment development will be driven by the additional revenue generated by new models and the accompanying higher profit margins. Strongest revenue growth is forecast for the EMEA10 and Americas regions. This growth will be supported by a revolutionary Group digitalisation project. The Plan develops business through a series of measures to boost the consolidated profit margins, centered on cumulative improved production efficiency11, through a further focus on World Class Manufacturing activities and greater leveraging of technology alongside standardisation, while also converting the changes to the energy labeling regulation into an opportunity. The Group estimates for the 2017-2019 three-year period: a 2017-2019 CAGR12 of net consolidated revenue of 6.8%, of adjusted EBITDA of 12.6%, of adjusted EBIT of 14.3% and net financial debt at year-end 2019 of Euro 73 million, with a return on net assets (RONA)13at year-end 2019 of 10.4%. For the update, please refer to the subsequent points.
On May 17, 2017, Elica S.p.A. was involved in the Italian Stock Market Opportunities Conference, organised in Paris by Banca IMI, through presentations and meetings with the financial community and institutional investors.
On May 23, 2017, Elica S.p.A. held presentations and meetings with the financial community and with institutional investors in London.
On June 26, 2017, Elica S.p.A.'s Board of Directors appointed Alessandro Carloni as Group Chief Financial Officer, in replacement of Giampaolo Caselli who held the position on an ad interim basis since October 28, 2016. Alessandro Carloni, satisfying the requirements established by applicable regulations and the By-Laws, was also appointed Corporate Financial Reporting Manager, with the Board of Statutory Auditors issuing a favourable opinion in this regard, replacing Giampaolo Caselli also in this role. On the same date, Elica S.p.A.'s Board of Directors , in line with
10 Europe, Middle East, Africa and CIS
11 Reference is made in particular to Europe
12 Compound Average Growth Rate
13 Return on Net Assets, calculated as the ratio between EBIT and net invested capital
the motion passed by the Shareholders' Meeting of April 28, 2017, also launched the second cycle of the 2016-2022 Phantom Stock & Voluntary Co-investment Plan, identifying the Beneficiaries of the 2017-2019 plan cycle and the relative Performance objectives, as per the Prospectus published on March 28, 2017 and available on the website http://elica.com/corporation, Investor Relations/Shareholders' Meeting section, to which reference should be made for greater details.
On July 26, 2017, Elica S.p.A. signed an agreement to acquire 30% of the Chinese subsidiary Zhejiang ELICA Putian Electric Co., Ltd. from the non-controlling interest Du Renyao. The transaction extended governance over the Chinese subsidiary in order to drive forward company results. Consideration for the 30% investment in the Chinese subsidiary was CNY 15 million (Euro 1,907,863 at the ECB exchange rate of July 24, 2017) and was paid in cash utilising available company resources.
On August 28, 2017, Elica S.p.A.'s Board of Directors approved the 2017 half-year report, prepared in accordance with IFRS.
On August 28, 2017, Elica S.p.A. sold 100% of the German company Exklusiv-Hauben Gutmann to Mr. Manuel Fernandez Salgado, Managing Director of the subsidiary, in order to preserve the value created by the Group for shareholders and to concentrate investment and operations on the more rewarding segments of the business. Group development in Germany continues to focus on the Elica brand, which already enjoys a strong presence and good positioning on the most profitable market segments. Consideration for 100% of the German subsidiary Exklusiv-Hauben Gutmann was Euro 2.5 million, to be settled in five tranches at each year-end from December 31, 2019 until December 31, 2023. In addition, Elica transferred to Manuel Fernandez an Exklusiv-Hauben Gutmann loan asset of Euro 11.15 million for consideration of Euro 1. The purchaser granted Elica S.p.A. a call option on 100% of the share capital of Exklusiv-Hauben Gutmann, exercisable at conditions established by the parties at the price of six times the average EBITDA of the last two years, net of net financial debt. In addition, Elica S.p.A. was granted a call option vis-avis Exklusiv-Hauben Gutmann on the loan asset transferred, existing at the option exercise date and exercisable at a price of Euro 1, on fulfillment of the conditions established by the parties.
On September 21, 2017, the company was involved in the Italian Stock Market Opportunities Conference, organised in Milan by Banca IMI, through presentations and meetings with institutional investors.
On September 25, 2017, the company announced the completed transfer of the 30% investment in the Chinese subsidiary Zhejiang ELICA Putian Electric Co., Ltd., with effect from September 22, 2017, after all conditions precedent were satisfied.
On November 13, 2017, Elica S.p.A.'s Board of Directors approved the 2017 third quarter report prepared in accordance with IFRS. In addition, on the basis of these results and considering the company's outlook, the Board of Directors updated the 2017 performance targets contained in the 2017-2019 Plan Objectives.
On January 12, 2018, the company announced that the Board of Directors of Elica S.p.A. would approve the 2017 fourth quarter report on February 12, 2018.
On January 30, 2018, in accordance with Article 2.6.2, paragraph 1, letter b) of the Regulations of the Markets Organised and Managed by Borsa Italiana S.p.A., Elica S.p.A. published the 2018 financial calendar.
On January 25, 2018, Elica S.p.A. took part in the Italian Day in Frankfurt, organised by Polytems HIR, Banca Akros and Equinet Bank, making presentations and hosting meetings with institutional investors.
On February 12, 2018, Elica S.p.A.'s Board of Directors approved the 2017 fourth quarter report, prepared according to IFRS.
On the same date, following the changes to the consolidation scope as a result of the disposal of Exklusiv-Hauben Gutmann the Group realigned the 2017-2019 Plan Objectives.
In addition, in line with the Shareholders' Meeting resolution of April 28, 2017, Elica S.p.A.'s Board of Directors launched the third cycle of the 2016-2022 Phantom Stock & Co-investment Plan, identifying the Beneficiaries of the 2018-2020 Plan cycle and the relative performance objective parameters, in line with the prospectus published on March 28, 2017 and available on the website https://elica.com/corporation, Investor Relations/Shareholders' Meeting section, to which reference should be made for greater details of the Plan.
Elica S.p.A.'s Board of Directors called the Shareholders' Meeting at the registered offices in Fabriano, via Ermanno Casoli No. 2, for April 27, 2018 at 9am on single call.
On March 12, 2018 the Board of Directors of Elica S.p.A. noted the resignation of Ms. Cristina Scocchia from the position of independent director at Elica S.p.A., with immediate effect and for personal reasons.
The company continues its extensive monitoring of demand dynamics across all markets, in order to develop the business model for the delivery of results both over the short and long-term.
Elica S.p.A.'s separate financial statements as at and for the year ended December 31, 2017 were prepared in accordance with the IFRS issued by the International Accounting Standards Board (IASB) and endorsed by the European Commission, and in accordance with article 9 of Legislative Decree no. 38/2005.
The accounting policies utilised for the preparation of these separate financial statements are consistent with those utilised for the preparation of the separate financial statements as at and for the year ended December 31, 2016.
The tables in the financial statements are presented in Euro, while the notes are presented in Euro thousands with all amounts rounded to the nearest thousand, unless otherwise specified.
The graph shows the performance of the Elica S.p.A. share price in 2017 in comparison to the average of other companies listed on the STAR segment (performance of the FTSE Italia STAR index indicated). On January 3, 2017, the official share price was Euro 1.8539. In January and February 2017, the share price contracted as market expectations regarding the 2016 results were revised downwards, with confirmation on February 13, 2017 on announcement of the 2016 preliminary results. The share price thereafter continued to contract to an annual low of Euro 1.4687 per share on February 20, 2017.
The share price thereafter demonstrated consistent (although volatile) growth between March and May 2017, thanks to significant Road-Show initiatives and meetings with the financial market to outline the Group's focus on future opportunities and strategies, culminating on May 15, 2017 with the publication of the Three-Year Strategic Plan. In the subsequent months, although fluctuating, the share price remained at around Euro 1.75 until the end of August - the month in which the 2017 half-year results which surpassed market expectations were published. Simultaneously, the disposal of the German subsidiary Excklusive Hauben Gutmman was announced. In the initial part of September 2017, financial analyst consensus fully reflected the opportunities generated by the non-recurring disposal, sparking a rally which gained further pace in October, thanks also to the opportunity to strengthen relations with overseas institutional investors through attending the London STAR Conference on October 10, 2017. This led to the share recording its yearly high of Euro 2.9104 on October 20, 2017.
In the first week of November 2017, the share price fell significantly, while moderating following publication of the third quarter results (on November 13, 2017), the upwards review of the 2017 performance objectives and the estimate of a slight loss for 2017.
Finally, at the beginning of December 2017 the share price performed in line with the FTSE Italia STAR, as can be seen in the graph - with an official year-end price of Euro 2.4354 per share.
The share capital consists of 63,322,800 ordinary shares bearing the right to vote. The ownership structure of Elica S.p.A. at December 31, 2017 is shown in the corporate governance and shareholder ownership report, available on the company's website http://elica.com/corporation (Corporate Governance section).
Development activities are a central part of the company's operations: resources have devoted substantial efforts to developing, producing and offering customers innovative products both in terms of design and the utilisation of materials and technological solutions.
During the year, the company was involved in industrial research, seeking to improve products as well as organisational, process and structural improvements.
Total research and development costs incurred amounted to Euro 7,373 thousand.
Elica S.p.A. operates in compliance with all local and national regulations for the protection of the environment both in relation to products and the production cycles. Moreover, the types of activities that it carries out have a limited impact on the environment and in terms of atmospheric emissions, waste disposal and water disposal. Nonetheless, compliance with such standards requires the company to incur costs.
As part of its pursuit of continuous improvement, Elica S.p.A. has undertaken initiatives focused on increasing safety at plants, reducing and monitoring risks and training personnel for more conscientious behaviour and prudence in the workplace to further reduce the already low accident frequency and seriousness rates.
The Elica Group's operations are exposed to different types of financial risks, including risks associated with fluctuations in exchange rates, interest rates, the cost of its main raw materials and cash flows. In order to mitigate the impact of these risks on results, Elica has commenced the implementation of a financial risk monitoring system through a "Financial Risk Policy" approved by the company's Board of Directors. Within this policy, the company constantly monitors the financial risks related to the operating activities in order to assess any potential negative impact and undertakes corrective action where necessary.
The main guidelines for the company's risk policy management are as follows:
• monitor and report on the current state of the risks and the effectiveness of their control.
The process for the management of the financial risks is structured on the basis of appropriate procedures and controls, based on the correct segregation of conclusion, settlement, registration and reporting of results.
We examine in detail the risks to which the company is exposed. In the notes, particularly paragraph 7, we report all the relative figures. Market risk includes all the risks directly or indirectly related to the fluctuations of the general market prices and the financial markets in which the company is exposed:
The amount of the currency risk, defined in advance by management of the company on the basis of the budget for the reporting period, is gradually hedged over the acquisition process of the orders, up to the amount of the orders corresponding to budget projections or emerging during the year.
The hedge is entered into through agreements with third party lenders for forward contracts and options for the purchase and sale of foreign currency. These transactions are undertaken without any speculative or trading purpose, in line with the strategic policies of a prudent management of the cash flows.
15 In addition to the aforementioned transaction risks, the company is also exposed to currency risk. The assets and liabilities of consolidated companies whose reporting currency differs from the Euro may be translated into Euro with
carrying amounts that vary according to different exchange rates, with recognition in the translation reserve under equity.
The company monitors this exposure, against which there were no hedging transactions at the reporting date; in addition, given the company's control over its subsidiaries, governance over the respective foreign currency transactions is greatly simplified.
The company is subject to market risk deriving from price fluctuations in commodities used in the production process. The raw materials purchased by the company (including copper and aluminium) are affected by the trends of the principal markets. The company regularly evaluates its exposure to the risk of changes in the price of commodities and manages this risk through fixing the price in contracts with suppliers and through hedging contracts with financial counterparties.
In particular, between the end and the beginning of the year, on the basis of the production budget for the year, the prices and quantities were fixed through both channels described above on the basis of the production budget for the year. In this way, the company hedges the standard cost of the raw materials contained in the budget against possible increases in commodity prices, achieving the target operating profit.
Among the market risks in addition, the company is also exposed to interest rate risk. Elica Group's management of interest rate risk is in line with longstanding, consolidated practices to reduce the interest rate volatility risk, while at the same time containing the borrowing costs within the established budget limits. The company's debt mainly bears a floating rate of interest.
Further to market risks, the company is exposed to credit risk. This concerns the exposure to potential losses deriving from trading partners' non-compliance with obligations. This risk derives in particular from economic-financial factors related to a potential solvency crisis of one or more counterparties.
The company follows the Credit Policy (attached to the Financial Risk Policy) which governs credit management and the reduction of the related risk, partly through insurance policies with leading international insurance companies.
Liquidity risk is also managed. This represents the risk related to the unavailability of financial resources necessary to meet short-term commitments assumed by the company and its own financial needs.
The principal factors which determine the liquidity of the company are, on the one hand, the resources generated and absorbed by the operating and investment activities and on the other the due dates and the renewal of the liability or liquidity of the financial commitments and also market conditions. These factors are monitored constantly in order to guarantee a correct equilibrium of the financial resources.
Francesco Casoli Executive Chairman, born in Senigallia (AN) on 05/06/1961, appointed by resolution of 29/04/2015.
Antonio Recinella Chief Executive Officer, born in Livorno (LI) on 05/11/1968, appointed by resolution of 28/04/2017 (latest appointment date)
Gennaro Pieralisi Director, born in Monsano (AN) on 14/02/1938, appointed by resolution of 29/04/2015.
Davide Croff Independent Director, born in Venice on 01/10/1947, appointed by resolution of 29/04/2015.
Gilberto Casali Chairman, born in Jesi (AN) on 14/01/1954, appointed by resolution of 29/04/2015.
Franco Borioni Statutory Auditor, born in Jesi (AN) on 23/06/1945, appointed by resolution of 29/04/2015.
Simona Romagnoli Statutory Auditor, born in Jesi (AN) on 02/04/1971, appointed by resolution of 29/04/2015.
Davide Croff (Chairman) Elio Cosimo Catania Enrico Vita Cristina Scocchia
Independent Auditors KPMG S.p.A.
Elica S.p.A. Registered office: Via Ermanno Casoli,2 – 60044 Fabriano (AN) Share capital: Euro 12,664,560.00 Tax Code and Company Registration No.: 00096570429 Ancona REA No. 63006 – VAT Number 00096570429
17 Laura Giovanetti e-mail: [email protected] Telephone: +39 0732 610727
Independent Director, born in Fabriano (AN) on 16/02/1969, appointed by resolution of 29/04/2015.
Independent Director, born in Catania on 05/06/1946, appointed by resolution of 29/04/2015.
Independent Director and Lead Independent Director, born in Conegliano (TV) on 30/03/1967, appointed by resolution of 29/04/2015.
Independent Director, born in Sanremo (IM) on December 4, 1973, appointed by resolution of 28/04/2017 (latest appointment date)
Alternate Auditor, born in Sassoferrato (AN) on 04/05/1966, appointed by resolution of 29/04/2015.
Alternate Auditor, born in Montesangiorgio (AP) on 04/04/1965, appointed by resolution of 29/04/2015.
Elio Cosimo Catania (Chairman) Davide Croff Enrico Vita Cristina Scocchia
The Elica Group is currently the world's largest manufacturer of cooker hoods for domestic use and is the European leader in the sector of motors for boilers used in home heating systems.
o Elica S.p.A. - Fabriano (Ancona, Italy) is the parent of the Group ("Elica")14 .
o Elica Group Polska Sp.zo.o – Wroclaw – (Poland) ("Elica Group Polska"). This wholly-owned company has been operational since September 2005 in the production and sale of electric motors and from December 2006 in the production and sale of exhaust hoods for domestic use;
o Elicamex S.A. de C.V. – Queretaro (Mexico) ("Elicamex"). This company was incorporated at the beginning of 2006 (the parent owns 98% directly and 2% through Elica Group Polska). The Group intends to concentrate production for the American markets with this company in Mexico and reap the benefits of optimising operations and logistics;
o Leonardo Services S.A. de C.V. – Queretaro (Mexico) ("Leonardo"). This wholly-owned subsidiary was incorporated in January 2006 (the company owns 98% directly and 2% indirectly through Elica Group Polska Sp.zo.o.). Leonardo Services S.A. de C.V. manages all Mexican staff, providing services to ELICAMEX S.A. de C.V;
o Ariafina CO., LTD – Sagamihara-Shi (Japan) ("Ariafina"). Incorporated in September 2002 as a 50:50 joint venture with Fuji Industrial of Tokyo, the Japanese hood market leader, Elica S.p.A. acquired control in May 2006 (51% holding) to provide further impetus to the development of the important Japanese market, where high- quality products are sold;
o Airforce S.p.A. – Fabriano (Ancona, Italy) ("Airforce"). This company operates in a special segment of the production and sale of hoods. Elica S.p.A. owns 60% of this company;
o Airforce Germany Hochleigstungs-Dunstabzugssysteme GmbH – Stuttgart (Germany) ("Airforce Germany"). The investment is held through Airforce S.p.A. (95%).
o Elica Inc – Chicago, Illinois (United States), offices in Bellevue, Washington (United States). This company aims to develop the Group's brands in the US market by carrying out marketing and trade marketing with resident staff. The company is a wholly-owned subsidiary of ELICAMEX S.A. de C.V.;
o Elica PB India Private Ltd. - Pune (India) ("Elica India"). In 2010, Elica S.p.A. signed a joint venture agreement, subscribing 51% of the share capital of this newly-incorporated Indian company and therefore acquiring control. Elica PB India Private Ltd. is involved in the production and sale of Group products.
o Zhejiang Elica Putian Electric CO.,LTD. – Shengzhou (China) (in short Putian), a Chinese company held 96.76% and operating under the Puti brand, a leader in the Chinese home appliances sector, producing and marketing range hoods, gas hobs and kitchenware sterilisers. Putian is one of the main players in the Chinese hood market and the principal company developing Western-style hoods. The production facility is located in Shengzhou, a major Chinese industrial district for the production of kitchen home appliances.
o Elica Trading LLC – St. Petersburg (Russian Federation) ("Elica Trading")- This wholly-owned Russian company was incorporated on June, 28 2011.
o Elica France S.A.S. - Paris (France) ("Elica France"). This wholly-owned French company was incorporated in 2014.
o Elica GmbH – Munich (Germany), a German company wholly-owned by Elica S.p.A. and incorporated in 2017. The company Exklusiv Hauben Gutmann GmbH – Mulacker (Germany) ("Gutmann") was held until Elica S.p.A.'s
divestment on August 28, 2017.
o I.S.M. S.r.l. – Cerreto d'Esi (AN-Italy). The company, of which Elica S.p.A. holds 49.385% of the quota Capital, operates within the real estate sector.
In 2017, the company Elica GmbH was incorporated and the holding in Exklusiv Hauben Gutmann GmbH sold, as indicated in detail in the 2017 Significant Events paragraph above.
18 14 The company also has offices in Spain, in Avda, Generalitat de Catalunya Esc.9, bayos 1 08960 Sant Just Desvern – Barcelona.
In 2017, transactions were entered into with subsidiaries, associates and other related parties. All transactions were conducted on an arm's length basis in the ordinary course of business.
Subsidiaries – 2017 highlights
| Reporting package figures | |
|---|---|
| -- | --------------------------- |
| In Euro thousands | Assets | Liabilities | Equity | Revenue | Profit/(loss) |
|---|---|---|---|---|---|
| Elicamex S.A.de C.V. | 49,650 | 31,007 | 18,644 | 70,834 | 7,068 |
| Elica Group Polska Sp.z o.o | 66,788 | 39,072 | 27,716 | 115,513 | 4,001 |
| Airforce S.p.A. | 12,135 | 8,618 | 3,517 | 23,469 | 493 |
| Ariafina CO., LTD | 10,145 | 3,139 | 7,006 | 22,358 | 2,955 |
| Leonardo S.A.de C.V. | 1,091 | 1,028 | 63 | 9,731 | 262 |
| Elica Inc. | 422 | 194 | 228 | 956 | 30 |
| Airforce GE (*) | 10 | 5 | 5 | 0 | (22) |
| Elica PB India Private Ltd. | 13,015 | 7,943 | 5,073 | 24,295 | 1,828 |
| Zhejiang Elica Putian Electric Co. Ltd | 22,048 | 27,802 | (5,754) | 16,784 | (5,229) |
| Elica Trading LLC | 5,442 | 4,786 | 656 | 11,410 | (189) |
| Elica France S.A.S. | 4,518 | 4,015 | 502 | 10,249 | 447 |
| Elica GmbH | 2,607 | 1,224 | 1,383 | 1,695 | (142) |
| (*) Airforce Germany Hochleistungs-dunstabzugssysteme Gmbh |
For details on transactions with these subsidiaries and other related parties, reference should be made to the following notes.
In accordance with Article 123-bis of Legislative Decree 58/1998, with Article 89-bis of Consob Resolution No.11971/1999 and successive amendments and integrations, Elica S.p.A. provides complete disclosure on the Corporate Governance system adopted at March 15, 2018, in line with the recommendations of the Self-Governance Code (July 2015 edition), in the Annual Corporate Governance Report, available on the company's website https://elica.com/corporation (Corporate Governance section).
In accordance with Article 123-ter of Legislative Decree 58/1998 and Article 84-quater of the Consob Resolution No. 11971/1999 and subsequent amendments, Elica S.p.A. prepares a remuneration report in accordance with Attachment 3A, Table 7-bis of the same Consob Resolution No. 11971/1999 and subsequent amendments. This report is available on the company's website https://elica.com/corporation (Investor Relations section).
In accordance with Legislative Decree 254/2016 enacting Directive 2014/95/EU, the Elica Group produces a nonfinancial statement disclosing upon environmental, social, personnel, human rights and anti-corruption matters, helping the reader to understand Group activities, its performance and results and the related impacts. This report is available to the public according to the means and deadlines established by the applicable regulation and on the company website https://elica.com/corporation (Investor Relations/Financial Statements and Reports section).
In accordance with article 36 of the Regulation implementing Legislative Decree no. 58 of February 24, 1998 concerning market regulations, as Elica S.p.A. has direct or indirect control over certain companies registered in countries outside of the European Union, the financial statements of such companies, prepared for the purposes of the Elica Group's consolidated financial statements, were made available within the terms required by current legislation.
With respect to specific indication of the reasons why the company is not believed to be managed and coordinated by its parent, which is required by Article 37, reference should be made to paragraph 8 Disclosure pursuant to IAS 24 on management remuneration and related party transactions.
In accordance with Article 70, paragraph 8 and Article 71, paragraph 1-bis of Consob's Issuers Regulation, on January 16, 2013, Elica announced that it would apply the exemption from publication of the required disclosure documents concerning significant mergers, demergers and share capital increases through the contribution of assets in kind, acquisitions and sales.
Fabriano, March 15, 2018 The Board of Directors THE EXECUTIVE CHAIRMAN Francesco Casoli
Registered Office at Via Ermanno Casoli, 2 – 60044 Fabriano (AN) - Share Capital: Euro 12,664,560 fully paid-in
| In Euro | Note | 2017 | 2016 |
|---|---|---|---|
| Revenue - third parties | 4.1 | 290,483,640 | 262,786,673 |
| Revenue - related parties | 4.1 | 72,600,187 | 63,244,785 |
| Other operating income | 4.2 | 2,230,371 | 2,783,047 |
| Changes in inventories finished/semi-finished goods | 4.3 | 3,676,648 | 134,629 |
| Increase in internal work capitalised | 4.4 | 2,684,794 | 3,325,917 |
| Raw materials and consumables - third parties | 4.5 | (125,084,521) | (112,872,094) |
| Raw materials and consumables - related parties | 4.5 | (114,773,788) | (99,983,064) |
| Services - third parties | 4.6 | (52,310,421) | (50,492,976) |
| Services – related parties | 4.6 | (2,818,679) | (2,140,301) |
| Labour costs | 4.7 | (55,498,219) | (51,033,743) |
| Amortisation & depreciation | 4.8 | (11,200,707) | (10,037,807) |
| Other operating expenses and provisions | 4.9 | (8,450,575) | (10,221,141) |
| Restructuring charges | 4.10 | (1,834,488) | (93,344) |
| Operating loss | (295,759) | (4,599,420) | |
| Share of profit/(loss) from associates and subsidiaries | 4.11 | 3,021,253 | 3,361,630 |
| Write-downs of investments in subsidiaries | 4.11 | (1,980,000) | (4,049,506) |
| Financial income | 4.12 | 1,126,007 | 1,293,659 |
| Financial charges | 4.13 | (2,471,800) | (2,753,538) |
| Exchange rate losses | 4.14 | (2,241,344) | (547,179) |
| Subsidiary disposal charges | 4.38 | (21,792,951) | |
| Loss before taxes | (24,634,593) | (7,294,354) | |
| Income taxes | 4.15 | 2,522,780 | 753,294 |
| Loss from continuing operations | (22,111,813) | (6,541,060) | |
| Profit/(loss) from discontinued operations | - | - | |
| Loss for the year | (22,111,813) | (6,541,060) |
| In Euro | 2017 | 2016 | |
|---|---|---|---|
| Note | |||
| Loss for the year | (22,111,813) | (6,541,060) | |
| Other comprehensive income/(expense) which may not be subsequently reclassified to profit/(loss) for the year: |
|||
| Actuarial gains/(losses) of employee defined plans | 4.30 | 247,322 | (448,042) |
| Tax effect concerning the Other income/(expense) which may not be subsequently reclassified to the profit/(loss) for the year |
- | (32,254) | |
| Total other comprehensive income/(expense) which may not be subsequently reclassified to profit/(loss) for the period, net of the tax effect |
4.36.5 | 247,322 | (480,296) |
| Other comprehensive income/(expense) which may be subsequently reclassified to profit/(loss) for the year: |
|||
| Net change in cash flow hedges | (424,321) | 3,534,701 | |
| Tax effect concerning the Other income/(expense) which may be subsequently reclassified to the profit/(loss) for the year |
31,911 | (930,277) | |
| Total other comprehensive income/(expense) which may be subsequently reclassified to profit/(loss) for the period, net of the tax effect |
4.36.3 | (392,410) | 2,604,424 |
| Total other comprehensive income/(expense), net of the tax effect: | (145,088) | 2,124,128 | |
| Total comprehensive expense for the year | (22,256,901) | (4,416,932) |
| Property, plant and equipment 4.17 46,803,377 44,802,604 Goodwill 4.18 23,342,460 23,342,460 Other intangible assets 4.18 20,126,762 17,125,791 Investments in subsidiaries 4.19 57,267,531 63,457,941 Investments in associates 4.19 1,376,926 1,376,926 Other receivables 4.20 2,392,192 44,561 Deferred tax assets 4.21 11,301,463 8,761,864 AFS financial assets 4.22 48,992 53,227 Derivative financial instruments 4.28 7,951 - Total non-current assets 162,667,655 158,965,374 Trade receivables 4.23 49,993,910 44,677,701 Trade receivables - related parties 4.24 31,567,953 38,650,469 Financial receivables - related parties 4.24 17,052,658 27,891,331 Inventories 4.25 36,032,403 31,666,089 Other receivables 4.26 2,825,531 4,738,254 Tax assets 4.27 8,507,404 6,894,443 Derivative financial instruments 4.28 1,005,991 1,835,216 Cash and cash equivalents 4.29 8,337,425 9,826,270 Current assets 155,323,275 166,179,774 Assets of discontinued operations - Total assets 317,990,930 325,145,147 Liabilities for post-employment benefits 4.30 9,713,285 10,106,190 Provisions for risks and charges 4.31 12,342,463 7,504,094 Deferred tax liabilities 4.21 798,644 933,367 Bank loans and borrowings 4.32 47,121,107 33,697,051 Other payables 4.34 211,218 453,852 Tax liabilities 4.33 183,293 312,229 Derivative financial instruments 4.28 75,199 197,544 Non-current liabilities 70,445,209 53,204,327 Provisions for risks and charges 4.31 946,000 669,483 Bank loans and borrowings 4.32 44,965,959 48,898,355 Trade payables 4.35 74,545,934 69,426,755 Trade payables - related parties 4.35 27,363,715 32,286,020 Financial payables - related parties 4.35 2,861,067 2,494,618 Other payables 4.34 7,250,051 5,810,908 Tax liabilities 4.33 2,710,685 2,755,327 Derivative financial instruments 4.28 832,995 1,273,139 Current liabilities 161,476,405 163,614,604 Liabilities of discontinued operations - Share capital 4.36.1 12,664,560 12,664,560 Capital reserves 4.36.2 71,123,335 71,123,335 Hedge reserve 4.36.3 331,400 723,810 Reserve for actuarial gains/losses 4.36.5 (2,975,139) (3,222,460) Treasury shares 4.36.4 (3,550,986) (3,550,986) Retained earnings 4.36.6 30,587,958 37,129,018 Loss for the year (22,111,813) (6,541,060) 4.36 Equity 86,069,316 108,326,216 |
In Euro | Note Dec 31, 2017 |
Dec 31, 2016 |
|---|---|---|---|
| Total liabilities and equity | 317,990,930 | 325,145,147 |
| In Euro | 2017 | 2016 |
|---|---|---|
| Opening cash and cash equivalents | 9,826,270 | 5,801,409 |
| Operating activities | ||
| Loss | (22,111,813) | (6,541,060) |
| Amortisation & depreciation | 11,200,707 | 10,037,807 |
| Non-monetary (income)/charges | 23,104 | 1,941,640 |
| (Income)/Charges on disposals | 21,792,951 | |
| Trade working capital | (2,980,048) | (3,202,484) |
| Other working capital accounts | (1,979,150) | 1,179,210 |
| Income taxes paid | 1,233,727 | (178,375) |
| Change in provisions | 4,832,369 | (358,656) |
| Cash flow from operating activities | 12,011,846 | 2,878,081 |
| Investing activities | ||
| Investments | ||
| - Intangible | (7,871,658) | (4,945,239) |
| - Tangible | (8,330,792) | (8,373,034) |
| - Financial | (5,148,337) | 21,457,042 |
| Cash flow from investing activities | (21,350,788) | 8,138,769 |
| Financing activities | ||
| Dividends | - | (608,000) |
| Increase /(decrease) in loans and borrowings | 9,546,781 | (4,129,307) |
| Net changes in other financial assets/liabilities | (415,891) | (1,033,598) |
| Interest paid | (1,280,794) | (1,221,083) |
| Cash flow used in financing activities | 7,850,097 | (6,991,988) |
| Increase/(Decrease) in cash and cash equivalents | (1,488,845) | 4,024,861 |
| Closing cash and cash equivalents | 8,337,425 | 9,826,270 |
| In Euro thousands | Share capital |
Capital reserve |
Treasury shares |
Retained earnings |
Hedging reserve/Post em. ben. |
Profit/(loss) for the year |
Total equity |
|---|---|---|---|---|---|---|---|
| Balance at December 31, 2015 | 12,665 | 71,123 | (3,551) | 31,185 | (4,623) | 6,552 | 113,351 |
| Fair value gains on cash flow hedges net of the tax effect | 2,604 | 2,604 | |||||
| Actuarial gain/(losses) on post-employment benefits |
(480) | (480) | |||||
| Total gains/(losses) recognised directly in equity |
2,124 | 2,124 | |||||
| Loss for the year |
(6,541) | (6,541) | |||||
| Total gains/(losses) recognised in profit or loss |
(6,541) | (6,541) | |||||
| Allocation of profit/(loss) for the year | 6,552 | (6,552) | |||||
| Other changes | |||||||
| Dividends | (608) | (608) | |||||
| Balance at December 31, 2016 | 12,665 | 71,123 | (3,551) | 37,129 | (2,499) | (6,541) | 108,326 |
| Fair value changes on cash flow hedges net of the tax effect | (392) | (392) | |||||
| Actuarial gains/(losses) on post-employment benefits |
247 | 247 | |||||
| Total gains/(losses) recognised directly in equity |
(145) | (145) | |||||
| Loss for the year |
(22,112) | (22,112) | |||||
| Total gains/(losses) recognised in profit or loss |
(22,112) | (22,112) | |||||
| Allocation of profit/(loss) for the year | (6,541) | 6,541 | |||||
| Other changes | |||||||
| Dividends | |||||||
| Balance at December 31, 2017 | 12,665 | 71,123 | (3,551) | 30,588 | (2,644) | (22,112) | 86,069 |
Elica S.p.A. is a company incorporated under Italian law based in Fabriano (AN), Italy.
The company is listed on the STAR segment on the Italian Stock Exchange organised and managed by Borsa Italiana S.p.A..
The main activities of the company and its subsidiaries, as well as its registered office and other offices are illustrated in the directors' report.
The Euro is the functional and reporting currency. Amounts in the financial statement are given in Euro while the amounts in the notes are given in thousands of Euro.
The separate financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board and endorsed by the European Union, as well as in accordance with Article 9 of Legislative Decree no. 38/2005 and related Consob regulations.
The separate financial statements as at and for the year ended December 31, 2017 are compared with the previous year and consist of the statement of financial position, the income statement, the statement of comprehensive income, the statement of cash flows, the statement of changes in equity and these notes.
The financial statements and related notes comply with the minimum disclosure requirements of IFRS, as supplemented, where applicable, by the provisions of the law and Consob regulations.
The company did not make any changes in the accounting policies applied between the preparation of the data at December 31, 2017 and December 31, 2016, presented for comparative purposes, as neither the International Accounting Standards Board (IASB) nor the International Financial Reporting Interpretation Committee (IFRIC) have revised or issued standards or interpretations applicable to reporting periods beginning on or after January 1, 2017 with a material impact on the financial statements.
The financial statement items have been measured in accordance with the general criteria of prudence and accruals and on a going concern basis, and also take into consideration the economic function of the assets and liabilities.
In accordance with IAS 1, company management made the following choices in relation to the presentation of the financial statements.
• The income statement is prepared in accordance with the nature of the item and shows intermediary results relating to the operating profit/(loss) and the profit/(loss) before taxes in order to allow a better assessment of the operating performance.
The operating profit is the difference between net revenue and operating expenses (this latter including nonmonetary items relating to amortisation/depreciation and impairment of current and non-current assets, net of any reversals), including any gains/losses on the sale of non-current assets.
The main accounting policies adopted in the preparation of the separate financial statements are described below.
Property, plant and equipment are recognised at purchase or production cost, including any directly attributable costs. Some assets have been adjusted under specific revaluation legislation prior to January 1, 2005 and are deemed to reflect the fair value of the asset at the revaluation date ("deemed cost" as per IFRS 1).
Depreciation is calculated on a straight-line basis over the estimated useful life applying the following percentage rates:
| buildings | 3% |
|---|---|
| light structures | 10% |
| plant and machinery | 6-10% |
| industrial and commercial equipment | 16% |
| office furniture and equipment | 12% |
| EDP | 20% |
| commercial vehicles | 20% |
| automobiles | 25% |
Assets held under finance leases are recorded as property, plant and equipment and depreciated on a straight-line basis over their estimated useful lives.
Purchase cost is also adjusted for grants related to assets already approved to the company. These grants are recognised in profit or loss by gradually reducing the depreciation charged over the useful life of the assets to which they relate.
Maintenance, repair, expansion, updating and replacement costs that do not lead to a significant, measurable increase in the production capacity and useful life of an asset are taken to profit or loss when they are incurred.
Goodwill arising on the acquisition of a subsidiary or other business combinations represents the excess of the acquisition cost over the company's share in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary at the acquisition date.
At each reporting date the company reviews the recoverable value of the goodwill to assess whether an impairment loss has occurred. The recoverable amount of the goodwill is estimated and the amount of the impairment loss, if any, is determined. An impairment loss is immediately taken to profit or loss and is not reversed in a subsequent period.
On the sale of a subsidiary, any goodwill attributable to the subsidiary that has not been impaired is included in the calculation of the gain or loss on the sale.
Goodwill arising on acquisitions prior to January 1, 2004 is carried at the amount recognised under Italian GAAP after an impairment test at that date.
The research costs are taken to profit or loss when incurred.
Development costs in relation to specific projects are capitalised when all of the following conditions are satisfied:
Capitalised development costs are amortised on a straight-line basis, commencing from the beginning of the production over the estimated life of the product to which these costs refer.
The carrying amount of development costs are tested annually for impairment when the asset is no longer in use, or with greater frequency when there is indication of impairment. The recoverability test requires estimates by the Directors, as it is dependent on the cash flows deriving from the sale of products sold by the company. These estimates are impacted both by the complexity of the assumptions underlying the projected revenues and future profit margins and by the strategic industrial choices of the Directors.
Purchased or internally-generated intangible assets are recognized in accordance with IAS 38 – Intangible Assets, where it is probable that the use of the asset will generate future economic benefits and where the cost of the asset can be determined reliably.
The useful life of an intangible asset may be considered definite or indefinite. Intangible assets with definite useful lives are amortised monthly for the duration of their useful lives. According to management and experts, the company's most important software has a useful life of seven years. The useful life is tested annually for impairment and any changes are made on a prospective basis.
Intangible assets with indefinite useful lives are not amortised but tested annually for impairment or more frequently where there is an indication that the asset may be impaired. At present, the company only owns intangible assets with definite useful lives.
At each reporting date, the company assesses whether events or circumstances exist that raise doubts as to the recoverability of the carrying amount of property, plant and equipment and intangible assets with definite useful lives. If there are any indications of impairment, the company estimates the recoverable amount of the assets to determine any impairment loss.
The goodwill and other intangible assets with indefinite useful lives are tested at least annually for impairment and whenever there is an indication of a possible loss in value. The impairment test compares the carrying amount with the recoverable amount, which is the greater of fair value less costs to sell and value in use. Any excess of the carrying amount results in an impairment loss. An impairment loss is recognised to profit and loss. When the reasons for the impairment no longer exist, the impairment losses on the assets are reversed bringing the carrying amount up to the revised estimate of its recoverable amount. The restatement cannot exceed the carrying amount had no impairment been recognised. The reversal of an impairment loss is taken to profit or loss.
For goodwill, the recoverable amount is determined by the Directors through the calculation of the value in use of the cash-generating units (CGUs). Cash generating units are identified based on the Group's organisational and business structure as units that generate cash flows independently through the continuous use of the assets allocated. The impairment loss of the goodwill is taken to profit or loss and, unlike for other items of property, plant and equipment and intangible assets, no reversal is recognised in future years.
Investments in subsidiaries, joint ventures and associates not classified as held-for-sale are measured at cost.
Income from investments is recognised only in relation to the dividends received from the investee on profit generated after the acquisition date. Dividends received in excess of profits generated are regarded as a recovery on the investment and are taken as a reduction in the cost of the investment.
At the end of each reporting period, the Company evaluates whether there are any indications of impairment in the cost of the investment. When it is determined that a potential loss exists, the Directors make valuations on the recoverable amount of those investments in order to identify the potential amount of the loss.
Investments are tested at least annually for impairment and whenever there is an indication of a possible loss in value. The impairment test compares the carrying amount of the investment with the recoverable amount, defined as the higher between the fair value of the investment net of sales costs and the value in use, represented by the present value of the expected revenue streams for the years of operations of the company subject to the impairment test and deriving from its disposal on conclusion of its useful life. Any excess of the carrying amount results in an impairment loss. An impairment loss is recognised to profit and loss. Following the write-down of the cost of the investment, further losses recorded on the investment are recorded under liabilities, where a legal implicit obligation to cover the losses in the investment exists. When the reasons for the impairment no longer exist, the impairment losses are reversed bringing the carrying amount up to the revised estimate of its recoverable amount. The restatement cannot exceed the carrying amount had no impairment been recognised. The reversal of an impairment loss is taken to profit or loss.
Inventories are measured at the lower of purchase or production cost and net realisable value.
The purchase cost of raw and ancillary materials, supplies and goods for resale is determined using the weighted average cost method.
The production cost of finished products, work in progress and semi-finished products is determined considering the cost of the materials used plus direct operating expenses and overheads.
Net realisable value represents the estimated selling price less expected completion costs and selling costs.
Obsolete and slow moving inventories are written down taking account of their prospects of utilisation or sale.
Financial assets other than trade receivables, loans and cash and cash equivalents are initially recognised at fair value, including directly related transaction costs.
Trade receivables and loans are measured at their nominal amount, which normally represents their fair value. In the event of a significant difference between nominal amount and fair value, they are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.
Receivables are adjusted through an allowance for bad debt to reflect their realisable value. The allowance is calculated as the difference between the carrying amount of the receivables and the present value of the expected cash flows, discounted at the effective interest rate on initial recognition.
Non-current assets (and disposal groups) classified as held-for-sale are measured at the lower of their previous carrying amount and market value less selling costs.
Non-current assets (and disposal groups) are classified as held-for-sale when their carrying amount is expected to be recovered by means of a sales transaction rather than through use in company operations. This condition is met only when the sale is highly likely, the assets (or group of assets) are available for immediate sale in their current condition and, consequently, management is committed to a sale, which should take place within 12 months of the classification as held for sale.
Cash and cash equivalents include cash balances and bank current accounts and deposits repayable on demand plus other highly liquid short term financial investments that can be readily converted into cash and are not subject to a significant risk of a change in value.
Financial liabilities and equity instruments issued are classified in accordance with the underlying contractual agreements and in accordance with the respective definitions of liabilities and Equity instruments. Equity instruments consist of contracts which, stripped of the liability component, give rights to a share in the assets.
The accounting policies adopted for specific financial liabilities and equity instruments are indicated below.
Trade payables and other financial liabilities are recognised at their nominal amount, which generally represents their fair value. In the event of significant differences between their nominal amount and fair value, trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.
Bank loans and borrowings – comprising non-current loans and bank overdrafts – and loans and borrowings from other lenders, including finance lease payables, are recognised based on the amounts received, less transaction costs, and are subsequently measured at amortised cost using the effective interest rate method.
Derivative financial instruments are used with the intention of hedging, in order to reduce currency, interest rate or market price risks. In compliance with IFRS, derivative financial instruments can be recognised using "hedge accounting" only when the hedge is formally designated and documented as such and is presumed to be highly effective at inception, such effectiveness can be reliably measured and the hedge is highly effective over the accounting periods for which it was designated.
All derivative financial instruments are measured at fair value in accordance with IAS.
When derivative financial instruments qualify for hedge accounting, the following treatment applies:
• for derivatives classified as hedges of a net investment in a foreign operation, the effective portion of profits or losses on the financial instruments are recorded under equity. The cumulative gains or losses are reversed from the equity and taken to profit or loss on the sale of the foreign operation.
If hedge accounting cannot be applied, the gains or losses from the fair value measurement of derivative financial instruments are recognised immediately in profit or loss.
Reference should be made to paragraph 6. Information on risk management of these notes for information on the management of the risks related to exchange rates, interest rates and the value of commodities.
Treasury shares are recognised at cost and taken as a reduction in equity. The gains and losses deriving from trading of treasury shares, net of the tax effect, are recognised under equity reserves.
Italian post-employment benefits are considered equivalent to a defined benefit plan. For defined benefit plans, the cost of the benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each year.
On the basis of IAS 19 – Employee benefits, the company presents in the balance sheet the deficit or surplus of the relevant provision, with recognition to the income statement of the labour cost components and net financial charges and the recognition of the gains or losses which derive from the recalculation of the assets and liabilities under Other comprehensive income. In addition, any income from the plan assets included under net financial expenses must be calculated based on the discount rate of the liability.
Up to December 31, 2006, the employees' leaving entitlement of the Italian companies was considered a defined benefit plan. The regulations governing Italian employees' leaving entitlement were modified by Law no. 296 of December 27, 2006 ("2007 Finance Act") and subsequent decrees and regulations issued at the beginning of 2007. In the light of these changes, and specifically with reference to companies with more than 50 employees, only the benefits that accrued prior to January 1, 2007 (and not yet paid at the reporting date) are now considered a defined benefit plan, while those that accrued after this date are considered a defined contribution plan.
Where the Group recognises additional benefits to senior management and key personnel through stock grant plans, in accordance with IFRS 2 – Share-based payments, these plans represent a form of remuneration to the beneficiaries. Therefore the cost, which is the fair value of these instruments at the assignment date, is recognised in profit or loss over the period between the assignment date and maturity date, with a balancing entry directly in equity. Changes in the fair value after the assignment date do not have an effect on the initial value. At December 31, 2017 there are no such plans in place.
The company recognises a provision for risks and charges when the risk related to an obligation deriving from a past event is considered probable and a reliable estimate may be made on the amount of the obligation. Provisions are made based on management's best estimate of the cost of fulfilling the obligation at the end of the reporting date and are discounted to their present value when the effect is material. These risks are subject to a high level of complexity and uncertainty, and therefore the amount of the provision for risks and charges is reviewed periodically to reflect the best current estimate of each provision.
Revenue from the sale of goods is recognised when the goods are shipped and the company has transferred the significant risks and rewards of ownership of the goods to the buyer.
Interest income is recognised on an accruals basis based on the amount financed and the effective interest rate applicable, which is the rate at which the expected future cash flows over the expected life of the financial asset are discounted to equate them with the carrying amount of the asset.
Dividends are recognised when it is established that the shareholders have the right to receive them.
Leases are classified as finance leases when the terms of the contract are such that they substantially transfer all of the risks and rewards of ownership to the lessee. All the other leases are considered operating leases.
Assets held under finance leases are recognised as company assets at the lower of their fair value at the date of the lease, and the present value of the minimum lease payments due under the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Finance lease payments are divided between principal and interest in order to apply a constant interest rate to the residual liability. The finance costs are directly recognised in profit or loss for the period.
Operating lease payments are recognised on a straight-line basis over the term of the lease. Benefits received or receivable as an incentive for entering into operating lease agreements are also recognised on a straight-line basis over the duration of the operating lease.
Foreign currency assets and liabilities are translated at the reporting date using the closing exchange rate. Non-monetary assets and liabilities measured at historical cost in foreign currency are translated using the exchange rate at the transaction date.
Exchange differences arising on such transactions or on the translation of monetary assets and liabilities are recorded in profit or loss except for those arising on derivative financial instruments qualified as cash flow hedges. These differences are recorded in equity if unrealised, otherwise they are recorded in profit or loss for the period.
Government grants are recognised when it is reasonably certain that the conditions required to obtain them will be satisfied and that they will be received. Such grants are recognised in profit or loss over the period in which the related costs are recognised, with a reduction in the item to which they relate.
The accounting treatment of benefits deriving from a government loan obtained at a reduced rate are similar to those for government grants. This benefit is calculated at the beginning of the loan as the difference between the loan's initial carrying amount (fair value plus direct costs to obtain the loan) and the amount received, and subsequently recognised in profit or loss in accordance with the rules for the recognition of government grants.
Income taxes for the year represent the sum of current and deferred taxation.
Income tax is based on taxable income for the period as determined under applicable tax law. The liability for current income taxes is calculated using the current rates at the reporting date.
Elica S.p.A. and the subsidiary Airforce S.p.A. have opted for a consolidated tax regime in Italy. This means that the IRES (Corporation Tax) charge is calculated on a tax base representing the aggregate of the taxable income and tax losses of the individual companies. The contract is of three-year duration (2017, 2018 and 2019).
The transactions and mutual responsibilities and obligations between the parent and the aforementioned subsidiary are defined by a specific consolidation agreement. With regard to their responsibilities, the agreement provides that the parent is jointly liable with the subsidiary for:
The income tax receivable is shown under Tax Receivables, determined as the difference between the income taxes in the year, payments on account, withholding taxes and, in general, tax credits.
Tax Receivables also include the current IRES charge as determined through an estimate of the taxable income and tax losses of the companies taking part in the Consolidated tax regime, net of payments on account, taxes withheld by third parties and tax credits; tax assets are offset by the amounts due to the subsidiaries from Elica for the residual receivable attributable to the Consolidated tax regime.
The liability for tax losses surrendered by a subsidiary is recorded under Amounts due to subsidiaries.
Deferred tax assets and liabilities arise from timing differences between the carrying amount of assets and liabilities determined in accordance with the financial reporting criteria set out by the Italian civil code and their tax base.
No tax provision has been made in relation to reserves subject to taxation upon distribution as no transactions that could trigger their taxation are planned.
Deferred tax assets are recognised insofar as it is likely that, in the years the deductible timing differences leading to their creation reverse, there will be taxable income not less than the amount of the differences. The carrying value of deferred tax assets is revised at the end of each reporting period and reduced if and to the extent that it is no longer likely that there will be sufficient taxable income against which to recover all or part of the assets.
Deferred assets and liabilities are calculated based on the tax rate expected to be in force when the assets are realised or the liabilities extinguished and recognised directly to profit or loss unless they relate to items taken directly to equity, in which case they are also recognised in equity.
Deferred tax assets and liabilities are offset when the company is legally entitled to do so and when they refer to income taxes due to the same tax authority and the company intends to pay the amount on a net basis.
The financial schedules utilised are the same as those used for the preparation of the separate financial statements at December 31, 2016. No new accounting policies with significant impact on the financial statements were adopted in the period.
As required by IAS 8 - Accounting standards, changes in accounting estimates and errors - the main new accounting standards and interpretations, in addition to amendments to the existing standards and interpretations that are already applicable, not yet in force or not yet endorsed by the European Union (EU), which could be applied in the future to the financial statements, are illustrated below. Management is assessing their potential impact on future financial statements.
IFRS 15 - Revenue from contracts with customers. On May 28, 2014, the IASB published the new IFRS 15. It replaces the previous IAS 18 and IAS 11, concerning construction contracts, and the relative interpretations IFRIC 13, IFRIC 15, IFRIC 18 and SIC 31. IFRS 15 sets out the principles for the recognition of revenue from contracts with customers, except for those contracts falling within the scope of the standards concerning leases, insurance contracts and financial instruments. The new standard establishes an overall framework to identify the timing and amount of revenue recognition. According to the new standard, the amount that the entity recognises as revenue should reflect the consideration that it has the right to receive following the exchange of the assets transferred to the customer and/or services provided, to be recognised upon fulfilment of the contractual obligations. In addition, to recognise the revenue, the requirement of probable obtainment/receipt of the economic benefits linked to the income is emphasised; for a contract in progress, currently governed by IAS 11, a requirement to recognise revenue taking account of any discounting effect from payments deferred over time is introduced. IFRS 15 should be applied to reporting periods beginning on or after January 1, 2018. On first application, where retrospective application of the new standard is not possible, a modified approach is provided for, whereby the effects of first-time application of the new standard should be recognised in opening equity in the period of first-time application. A preliminary analysis showed that the impacts on the company's financial statements are not material.
IFRS 9 - Financial Instruments. In July 2014, the IASB issued the definitive version of IFRS 9, replacing the current IAS 39 for the recognition and measurement of financial instruments. IFRS 9 is applicable to reporting periods beginning on or after January 1, 2018. The standard introduces new classification and measurement criteria for financial instruments and a new financial asset impairment model, in addition to rules for the recognition of hedges eligible for "hedge accounting". A preliminary analysis showed that the impacts on the Company's financial statements are not material.
IFRS 16 Leases. The International Accounting Standards Board (IASB) issued IFRS 16 Leases in January 2016. The standard defines the principles for the recognition, measurement, presentation and disclosure of leasing contracts, for both parts of the contract, therefore concerning the customer ("lessee") and the supplier ("lessor"). IFRS 16 will be effective from January 1, 2019. Companies may choose to apply the standard before this date, although only if they also apply IFRS 15 Revenue from Contracts with Customers. IFRS 16 completes the IASB project to improve the financial reporting of leases. IFRS 16 replaces the previous IAS 17 Leases and related interpretations. The principal effect of application of the new standard for a lessee will be that all leasing contracts will imply a right to use the asset from the beginning of the contract and, where the relative payments are expected in a specific period, also recognition of a corresponding financial liability. Therefore, IFRS 16 eliminates the breakdown of leases into operating leases and finance leases, as previously the case under IAS 17, introducing a single measurement model. Applying this model, a lessee should recognise: (a) assets and liabilities for all leases with a duration of greater than 12 months, except where the value of the underlying asset is minimal; (b) depreciation of leased assets separately from interest on leasing payables in the income statement. From application of the standard, the company expects financial liabilities to increase, which has not yet been precisely estimated.
In the preparation of the financial statements in accordance with IFRS, Elica S.p.A.'s Management must make accounting estimates and assumptions which have an effect on the values of the assets and liabilities and disclosures. Actual results may differ from these estimates. The estimates and assumptions are periodically reviewed and the effects of any changes are promptly recognized.
In this context, the situation caused by the historic volatility of the financial markets has resulted in the need to make assumptions about a future performance characterised by significant uncertainty, in which results in the coming years could differ from such estimates and, therefore, require adjustments that is not currently possible to estimate or forecast, and these adjustments might even be significant.
The items principally affected by such uncertainty are: goodwill, the allowance for impairment and the provision for inventory write-down, non-current assets, pension funds and other post-employment benefits, provisions for risks and charges and deferred tax assets.
Reference should be made to the notes to each individual item for further information on the aforementioned estimates.
An analysis of revenues with a breakdown between product sales and service revenues follows:
| In Euro thousands | 2017 | 2016 | Changes |
|---|---|---|---|
| Revenue from product sales | 356,745 | 320,229 | 36,516 |
| Service revenue | 6,339 | 5,803 | 536 |
| Revenue | 363,084 | 326,031 | 37,052 |
The account increased approximately 11.36% on the previous year.
For information on revenue, reference should be made to the directors' report.
A breakdown of revenues from third parties and from related parties (principally subsidiaries) is shown below.
| In Euro thousands | 2017 | 2016 | Changes |
|---|---|---|---|
| Third parties Related parties |
290,484 72,600 |
262,787 63,245 |
27,697 9,355 |
| Revenue | 363,084 | 326,031 | 37,052 |
Revenue from related parties amount to Euro 72,600 thousand; these amounts principally refer to the sale of components and finished products to the subsidiary AirForce for Euro 1,502 thousand (Euro 1,521 thousand in 2016), to the subsidiary Ariafina for Euro 320 thousand (Euro 321 thousand in 2016), to the subsidiary Elica Group Polska for Euro 40,017 thousand (Euro 36,867 thousand in 2016), to the subsidiary Elicamex for Euro 11,938 thousand (Euro 11,456 thousand in 2016), to the subsidiary Gutmann for Euro 2,655 thousand (Euro 3,187 thousand in 2016), to Elica India for Euro 1,181 thousand (Euro 755 thousand in 2016), to the Chinese subsidiary Putian for Euro 811 thousand (Euro 1,095 thousand in 2016), to the Russian subsidiary Elica Trading for Euro 6,180 thousand (Euro 4,698 thousand in 2016) and to the subsidiary Elica France for Euro 6,940 thousand (Euro 3,343 thousand in 2016) and to the subsidiary Elica GmbH for Euro 1,054 thousand. The remaining revenue from related parties concern the associate ISM S.r.l.. All transactions are regulated at prices in line with market conditions applied to third parties.
Finally, revenue is analysed by geographical segment below.
Breakdown of revenue from sales and services by geographic segment and from third party and related companies:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Europe + CIS | 332,268 | 295,147 | 37,121 |
| Other countries | 16,937 | 15,855 | 1,082 |
| America | 13,879 | 15,029 | (1,150) |
| Revenue | 363,084 | 326,031 | 37,052 |
Third party customers individually generating more than 10% of total revenue accounted for 22.7% of revenue in 2017 compared to 22.5% in 2016.
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Grants related to income | 529 | 595 | (66) |
| Ordinary gains | 250 | 188 | 62 |
| Claims and insurance settlement | 177 | 263 | (86) |
| Expenses recovered | 471 | 812 | (341) |
| Other revenue and income | 804 | 925 | (121) |
| Other operating revenues | 2,230 | 2,783 | (553) |
Other revenue and income of Euro 804 thousand, as in the previous year, includes various items, including the sale of production assets, employee motor expense recoveries and revenue matured by the company following the agreement with the electricity company which concedes this latter the possibility to interrupt, occasionally, at certain conditions, the provision of energy. The account decreased Euro 553 thousand. This decrease is concentrated in Expenses recovered, reducing 0.3 million. This item mainly includes expenses recovered for transport from customers and suppliers.
Changes in inventories of finished and semi-finished goods were positive at December 31, 2016 for Euro 135 thousand and at December 31, 2017 were again positive for Euro 3,677 thousand due to the increase in inventories, in particular of finished products.
This item amounted to Euro 2,685 thousand (Euro 3,326 thousand in the previous year) and mainly relates to the capitalisation of charges regarding the design and development of new products and internal costs incurred for the construction of mouldings, industrial equipment and the implementation of new computer programmes. Capitalised costs principally relate to personnel.
The breakdown of consumables (third parties and related parties) are as follows:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Purchases of consumable materials | 1,168 | 1,140 | 28 |
| Purchases of supplies | 519 | 444 | 75 |
| Purchase of raw materials | 108,187 | 96,961 | 11,226 |
| Change in raw materials, consumables and goods for resale | (690) | (929) | 239 |
| Finished and semi-finished products | 128,928 | 113,245 | 15,683 |
| Packaging | 650 | 960 | (310) |
| Other purchases | 191 | 199 | (8) |
| Shipping expenses on purchases | 905 | 836 | 69 |
| Raw materials and consumables | 239,858 | 212,855 | 27,002 |
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Third parties | 125,085 | 112,872 | 12,213 |
| Related parties | 114,774 | 99,983 | 14,791 |
| Raw materials and consumables | 239,858 | 212,855 | 27,002 |
Raw materials and consumables increased approx. Euro 27 million on 2016. Purchases from third parties increased 11%, while purchases from related parties increased 15%.
Those from related parties amounted to Euro 114,774 thousand (Euro 99,983 thousand in 2016). The most significant item relates to the purchases of finished products and goods from the subsidiary Elica Group Polska for Euro 109,364 thousand (Euro 93,721 thousand in 2016) and the amount concerning this subsidiary represents the majority of movement in this item.
All transactions are regulated at prices in line with market conditions applied to third parties.
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Outsourcing | 23,348 | 21,601 | 1,747 |
| Transport | 4,673 | 4,503 | 170 |
| Maintenance and management of finished products | 6,972 | 6,673 | 299 |
| Consulting | 3,893 | 4,691 | (798) |
| Utilities | 2,507 | 2,612 | (105) |
| Commissions | 646 | 690 | (44) |
| Travel | 1,453 | 1,512 | (59) |
| Advertising | 2,000 | 1,723 | 277 |
| Insurance | 621 | 620 | 1 |
| Directors' and Statutory Auditors' fees | 1,258 | 1,732 | (474) |
| Trade fairs and promotional events | 2,615 | 2,518 | 97 |
| Industrial services | 288 | 274 | 14 |
| Banking commissions and charges | 291 | 292 | (1) |
| Other services | 4,565 | 3,192 | 1,373 |
| Services | 55,129 | 52,633 | 2,496 |
Expenses for services increased Euro 2.5 million on the previous year (+4.7%). The main increases concerned Outsourcing for Euro 1.7 million and Other services for Euro 1.4 million. Consulting however decreased by approx. Euro 0.8 million, in particular Legal and Administrative Consultancy.
In 2016, Other Services include communication services for Euro 553 thousand (Euro 557 thousand in 2016), technical assistance costs for Euro 1,554 thousand (Euro 995 thousand in 2016), canteen costs for Euro 364 thousand (Euro 334 thousand in 2016), cleaning costs Euro 277 thousand (Euro 234 thousand in 2016), vehicle expenses Euro 386 thousand (Euro 371 thousand in 2016), training courses for Euro 83 thousand (Euro 163 thousand in 2016), medical visits for Euro 77 thousand (Euro 78 thousand in 2016) and personnel recruitment costs for Euro 120 thousand (Euro 223 thousand in 2016).
The balance is comprised of:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Third parties | 52,310 | 50,493 | 1,817 |
| Related parties | 2,819 | 2,140 | 679 |
| Services | 55,129 | 52,633 | 2,496 |
The increase concerns both services with third parties and those to related parties.
Labour costs incurred in 2016 and 2017 were as follows:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Wages and salaries | 39,092 | 34,873 | 4,219 |
| Social security charges | 12,604 | 10,760 | 1,844 |
| Post-employment benefits | 2,810 | 2,564 | 246 |
| Other costs | 992 | 2,836 | (1,844) |
| Labour costs | 55,498 | 51,034 | 4,465 |
Labour costs show an overall increase of Euro 4,465 thousand. This increase relates for Euro 0.7 million to the accrual to the company's Long Term Incentive Plan provision. For further details, reference should be made to the Provisions for risks and charges paragraph. The lesser use, in particular by headquarters, of solidarity contributions in addition contributed to increased personnel expenses.
The table below shows the average number of employees at December 31, 2017 and December 31, 2016:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Executives | 26 | 23 | 3 |
| White-collar | 395 | 400 | (6) |
| Blue-collar | 770 | 784 | (15) |
| 1,190 | 1,207 | (18) |
This item amounted to Euro 11,201 thousand, an increase on Euro 10,038 thousand on 2016 (+11.6%). For the changes in the year of amortisation and depreciation, reference should be made to the paragraph on non-current assets.
These are detailed as follows:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Leases and rentals | 333 | 257 | 76 |
| Rental of vehicles and industrial equipment | 2,046 | 1,995 | 51 |
| Hardware, software and patents | 845 | 852 | (7) |
| Other taxes | 597 | 432 | 165 |
| Magazine and newspaper subscriptions | 11 | 18 | (7) |
| Sundry equipment | 158 | 123 | 35 |
| Catalogues and brochures | 175 | 493 | (318) |
| Losses on receivables and allowance for impairment | 639 | 337 | 302 |
| Provisions for risks and charges | 2,624 | 4,576 | (1,952) |
| Other prior year expenses and losses | 1,024 | 1,140 | (116) |
| Other operating expenses and provisions | 8,451 | 10,221 | (1,772) |
This item decreased by a total of Euro 1,772 thousand. The principal decrease concerns Provisions for risks and charges. For further details on this account, reference should be made to the note on provisions for risks and charges.
Restructuring charges of Euro 1.8 million refer to the personnel redundancy plan, implemented in particular to scale down and optimise the company's organisational structure during 2017. Euro 630 thousand of these costs concern the personnel redundancy plan accrual at December 31, 2017, for future departures in accordance with IAS 37. They principally concern personnel expense.
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Dividends from subsidiaries | 3,021 | 3,362 | (341) |
| Income and expense from subsidiaries and associates | 3,021 | 3,362 | (341) |
| Write-downs (Impairment) of investments in subsidiaries | (1,980) | (4,050) | 2,070 |
| Share of profit/(loss) from associates and subsidiaries | 1,041 | (688) | 1,729 |
Dividends from subsidiaries were distributed in the year by the subsidiaries Airforce S.p.A. for Euro 90 thousand, Ariafina for Euro 1,250 thousand and Elica Group Polska for Euro 1,681 thousand.
Impairment of investments in subsidiaries concern the company Putian for approx. Euro 2 million. This follows an impairment test, details of which are provided in the Investments paragraph of these notes.
Details of financial income are shown below:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Interest income from subsidiaries | 1,020 | 1,248 | (228) |
| Bank interest income | 5 | 31 | (26) |
| Other financial income | 101 | 16 | 85 |
| Financial income | 1,126 | 1,294 | (169) |
Financial income principally includes Interest from subsidiaries, in view of the company's decision to centralise bank loans and borrowings to benefit from more favourable market costs.
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Financial charges: | |||
| Interest expense to subsidiaries | 110 | 134 | (24) |
| on overdrafts and bank loans | 2,296 | 2,410 | (114) |
| discounting | (72) | - | (72) |
| on post-employment benefit provisions | 137 | 209 | (72) |
| Financial charges | 2,472 | 2,754 | (281) |
The item decreased Euro 281 thousand. This change principally concerns Financial charges on overdrafts and bank loans, principally due to the reduction of money market rates and of the cost of debt. Financial charges on overdrafts and bank loans include also discounts for Euro 901 thousand.
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Exchange losses | (6,316) | (2,903) | (3,413) |
| Exchange rate gains | 3,134 | 4,549 | (1,415) |
| Net gains (losses) on derivative instruments | 940 | (2,193) | 3,133 |
| Exchange rate losses | (2,241) | (547) | (1,694) |
Net exchange losses in the year amounted to Euro 1,694 thousand, compared Euro 1,646 thousand in 2016.
Net gains on derivatives were Euro 940 thousand in 2017 and net losses of Euro 2,193 thousand in 2016 principally relate to income on currency derivatives, which in accordance with the accounting standards may not be treated as hedging transactions, although they were agreed for this purpose. Accordingly, they were recognised at their fair value and recognised in the income statement. In view of the result for the year, Elica S.p.A. did not consider it necessary to reconstitute the Exchange rate gains reserve as per No. 8 bis of paragraph 1, Article 2426 of the Italian Civil Code.
The tax charge in the year is broken down between current and deferred taxes:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Current taxes | (28) | (129) | 101 |
| Deferred taxes | 2,550 | 882 | 1,668 |
| Income taxes | 2,523 | 753 | 1,770 |
Current taxes include overseas income taxes (Euro 190 thousand) and income from the tax consolidation of Euro 162 thousand. The decrease in current taxes is principally due to the reduction of tax income from the tax consolidation and the reduction in foreign income taxes.
"Income taxes" in fact includes the positive impact calculated by the company for the Patent Box, a tax subsidy granted by the Italian State - with prior agreement - for income deriving from the use of intangible assets (trademarks and patents). The agreement with the tax authorities was signed on December 19, 2017. The amount of the benefit for the years 2016 and 2017 is estimated, while the actual amount was recognised for 2015. The impact for the first two years amounts to approx. Euro 1 million. The impact for 2017, estimated based on the best information available, amounts to approx. Euro 0.7 million.
The company took part in the National Tax Consolidation, as per Article 117 and subsequent articles of the Income Tax Law, with the subsidiary Air Force S.p.A. for the years 2017, 2018 and 2019.
According to the consolidation agreements, in the case of the transfer to the fiscal consolidation (fiscal unit) of a tax loss, of a ROL excess (EBITDA), of an interest charge excess or an excess in the ACE (Economic Growth Support) deduction compared to the assessable income, the company will recognise remuneration equal to the tax advantage gained by the Group (IRES rate 24.00%); this amount is recognised to "Tax consolidation income" in the income statement.
The reconciliation between the theoretical and effective tax rate is shown (IRES) in the table below.
The change in the effective tax rate is due to non-recurring events, in both 2016 and 2017.
| 2016 | 2017 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| IRES rate IRAP rate |
27.50% 4.13% |
24.00% 4.13% |
|||||||||
| Assessable | IRES | IRAP | Total | % IRES on tax base |
Assessable | IRES | IRAP | Total | % IRES on tax base |
||
| Income taxes - Current |
(251) | - (251) |
(162) | (162) | |||||||
| - IRES reimbursement / foreign tax |
316 | 64 | 380 | 190 | - | 190 | |||||
| - Deferred tax – expense |
(741) | (141) | (882) | (2,359) | (192) | (2,550) | |||||
| [A] TOTAL INCOME TAXES |
(676) | (77) | (753) | 9.27% | (2,331) | (192) | (2,523) | 9.46% | |||
| LOSS BEFORE TAXES |
(7,294) | (24,635) | |||||||||
| Tax calculated using local tax rate |
(2,006) | 27.50% | (5,912) | 24.00% | |||||||
| Tax effect of exempt income |
(5,177) | (1,424) | 19.52% | (11,317) | (2,716) | 11.03% | |||||
| Tax effect of non deductible expenses |
6,066 | 1,668 | -22.87% | ||||||||
| Other differences | 2,800 | 770 | -10.56% | 25,284 167 |
6,068 40 |
-24.6% -0.16% |
|||||
| [B] Effective tax charge and tax rate net of substitute tax |
(3,608) | (992) | 13.60% | (10,501) | (2,520) | 10.23% | |||||
| Effect of tax reimbursement / Foreign taxes |
316 | -4.33% | 190 | -0.77% | |||||||
| [C] Effective tax charge and tax rate |
(676) | 9.27% | (2,331) | 9.46% |
The research and development costs capitalised and expensed in 2017 are summarised in the table below:
| 2017 | 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| R&D costs expensed | 4,838 | 4,581 | 257 |
| Amortisation of capitalised R&D costs | 2,535 | 2,250 | 285 |
| Total R&D costs | 7,373 | 6,831 | 542 |
| R&D costs capitalised during the year | 1,757 | 1,555 | 202 |
The tables below detail the changes in property, plant and equipment in 2016 and 2017. For 2016:
| In Euro thousands | Dec 31, 2015 | Increases | Disposals & other reclassifications |
Dec 31, 2016 | |
|---|---|---|---|---|---|
| Land and buildings | 35,939 | 527 | 20 | 36,486 | |
| Plant and machinery | 62,013 | 3,467 | (662) | 64,818 | |
| Industrial and commercial equipment | 77,971 | 3,806 | (1,071) | 80,706 | |
| Other assets | 6,552 | 161 | (22) | 6,691 | |
| Assets under construction and payments on account | 466 | 538 | (466) | 538 | |
| Historic cost of property, plant and equipment | 182,942 | 8,499 | (2,201) | 189,238 | |
| In Euro thousands | Dec 31, 2015 | Depreciation | Disposals & other reclassifications |
Dec 31, 2016 | |
| Land and buildings | 15,845 | 959 | 0 | 16,804 | |
| Plant and machinery | 49,935 | 1,787 | (818) | 50,904 | |
| Industrial and commercial equipment | 68,930 | 2,818 | (1,238) | 70,510 | |
| Other assets | 6,115 | 123 | (20) | 6,217 |
| In Euro thousands | Dec 31, 2015 | Increases | Disposals & other reclassifications |
Depreciation | Dec 31, 2016 |
|---|---|---|---|---|---|
| Land and buildings | 20,094 | 527 | 20 | (959) | 19,682 |
| Plant and machinery | 12,078 | 3,467 | 156 | (1,787) | 13,914 |
| Industrial and commercial equipment | 9,041 | 3,806 | 167 | (2,818) | 10,196 |
| Other assets | 437 | 161 | (2) | (123) | 474 |
| Assets under construction and payments on account | 466 | 538 | (466) | 0 | 538 |
| Net property, plant and equipment | 42,117 | 8,499 | (125) | (5,687) | 44,803 |
Changes in 2017 were as follows:
| In Euro thousands | Dec 31, 2016 | Increases | Disposals & other reclassifications |
Dec 31, 2017 |
|---|---|---|---|---|
| Land and buildings | 36,486 | 538 | - | 37,024 |
| Plant and machinery | 64,818 | 3,817 | (448) | 68,187 |
| Industrial and commercial equipment | 80,706 | 3,701 | (980) | 83,427 |
| Other assets | 6,691 | 427 | (11) | 7,107 |
| Assets under construction and payments on account | 538 | 98 | (369) | 267 |
| Historic cost of property, plant and equipment | 189,238 | 8,580 | (1,807) | 196,012 |
| In Euro thousands | Dec 31, 2016 | Depreciation | Disposals & other reclassifications |
Dec 31, 2017 | |
|---|---|---|---|---|---|
| Land and buildings | 16,804 | 951 | (0) | 17,755 | |
| Plant and machinery Industrial and commercial equipment |
50,904 70,510 |
2,064 3,162 |
(644) (903) |
52,324 72,770 |
|
| Other assets | 6,217 | 152 | (10) | 6,359 | |
| Accumulated Depreciation | 144,436 | 6,330 | (1,557) | 149,208 | |
| In Euro thousands | Dec 31, 2016 | Increases | Disposals & other reclassifications |
Depreciation | Dec 31, 2017 |
| Land and buildings | 19,682 | 538 | 0 | (951) | 19,269 |
| Plant and machinery | 13,914 | 3,817 | 196 | (2,064) | 15,863 |
| Industrial and commercial equipment | 10,196 | 3,701 | (77) | (3,162) | 10,657 |
Investments in the year were made in improving the manufacturing plant and machinery, such as the motors winding line, automated wrapping machines and a pallet-maker and the acquisition of moulds and equipment for the launch of new products.
Property, plant and equipment is adequately insured against fire, weather damage and similar risks by means of insurance policies arranged with leading insurance companies.
The financial statements include assets acquired under finance lease agreements which by the end of 2010 had all been redeemed.
The movements in this item were as follows:
| Dec 31, 2016 | Acquisitions/ | Dec 31, 2017 | |
|---|---|---|---|
| In Euro thousands | (Impairments) | ||
| Goodwill | 23,342 | - | 23,342 |
| Goodwill | 23,342 | - | 23,342 |
Goodwill totalling Euro 23.3 million is allocated to the Europe Cash Generating Unit (CGU) at Group consolidated level. The item did not change in 2017.
In accordance with international accounting standards applied, and in particular IAS 36, the Elica Group identified three Cash Generating Units (CGU) which reflected the Group situation and its strategic vision: Europe CGU, Asia CGU and America CGU. Some assets of common use between the three CGU's could not be specifically allocated to an individual CGU and were therefore identified as corporate assets and measured in accordance with international accounting standards.
The recoverable amount of the CGU's was tested by calculating its value in use, which is the present value of expected cash flows using a discount rate which reflects the risks of the CGU at the measurement date.
The impairment test was approved by the Board of Directors on February 12, 2018, independently and prior to the preparation of the financial statements.
For the impairment test upon the goodwill written to the separate financial statements of Elica S.p.A., the combined cash flows (net of internal transactions) of the companies belonging to the Europe CGU (Elica Group Polska, Airforce, Elica Trading, Elica France and Elica GmbH) were used. This is based on the fact that the Group organisational structure does not permit the separation of cash flows generated by the companies of the CGU.
The estimate of the future operating cash flows used for the impairment test, prepared and approved by the Directors, was made based on the 2017-2019 Three-Year Plan, approved on May 15, 2017, appropriately updated for the 2018- 2019 forecast figures, to reflect the effects of the deconsolidation of the subsidiary Gutmann, and based on the best estimates made by the directors, for the sole purposes of the impairment test, for the years 2020-2022.
The principal assumptions utilised by the company for the estimate of the future cash flows for the impairment test were as follows:
| Europe | |
|---|---|
| Weighted average cost of capital (WACC) | 6.10% |
| Growth rate terminal value | 1.95% |
| CAGR revenue period 2018-2022 | 5.70% |
The principal assumptions utilised by the company in the previous year were as follows:
| Europe | |
|---|---|
| Weighted average cost of capital (WACC) | 6.50% |
| Growth rate terminal value | 1.70% |
| CAGR revenue period 2017-2021 | 2.90% |
The Weighted Average Cost of Capital (WACC) utilised to discount the future cash flows was determined utilising the Capital Asset Pricing Model (CAPM). For the calculation of the WACC of the Europe CGU, a free risk rate of 2.0% was used, a market premium risk of 5.5% and a beta-unlevered factor of 0.80.
The discounted cash flow model is based on the cash flows for a period of five years, of which the first year (2018) corresponds to the budget approved on February 12, 2018; the year 2019 corresponds to the third year of the strategic plan approved by the Board of Directors on May 15, 2017 and updated in line with the change in consolidation scope on February 12, 2018 and the subsequent three years (2020-2022) estimated through extrapolation of 2019. The main assumptions utilised in the determination of the cash flows were as follows:
The assumptions utilised in the estimates are based on historical and forecast data of the company, and are in line with information available from independent sector and market analysts in which the Group operates. These estimates are subject to changes, even significant, deriving from uncertainties which continue to effect the markets, and for this reason management continues to periodically monitor the circumstances and events which affect these assumptions and future trends.
The impairment test did not result in the recognition of loss in value of the goodwill. The value in use of the Europe CGU was 5.8 times its carrying amount.
Various sensitivity analyses were carried out assuming reasonable changes to the base assumptions of these estimates, and in particular the growth rate (+0.7/- 0.9%), the WACC (+/- 0.5%) and the cost of raw materials (+2%). None of the changes considered resulted in a CGU recoverable amount equal to or below the respective carrying amounts.
The table below shows details of changes in other intangible assets in 2016 and 2017.
| In Euro thousands | Dec 31, 15 | Increases | Decreases & reclass. |
Amort. | Dec 31, 16 |
|---|---|---|---|---|---|
| Carrying amount | |||||
| Development costs | 7,582 | 1,555 | 526 | (2,250) | 7,413 |
| Industrial patents and intellectual property rights | 6,001 | 1,803 | 1,101 | (1,965) | 6,940 |
| Concessions, licenses, trademarks & similar rights | 193 | 73 | (44) | (26) | 196 |
| Other intangible assets | 293 | 186 | 0 | (110) | 369 |
| Assets under construction and payments on account | 2,462 | 1,462 | (1,717) | 0 | 2,207 |
| Other intangible assets | 16,531 | 5,079 | (134) | (4,351) | 17,126 |
| In Euro thousands | Dec 31, 16 | Increases | Decreases & reclass. |
Amort. | Dec 31, 17 |
| Carrying amount | |||||
| Development costs |
| Other intangible assets | 17,126 | 8,157 | (285) | (4,871) | 20,127 |
|---|---|---|---|---|---|
| Assets under development and payments on account | 2,207 | 1,646 | (1,986) | 1,867 | |
| Other intangible assets | 369 | 1,084 | - | (165) | 1,288 |
| Concessions, licenses, trademarks & similar rights | 196 | 1,832 | 9 | (124) | 1,913 |
| Industrial patents and intellectual property rights | 6,940 | 1,839 | 858 | (2,047) | 7,590 |
| 7,413 | 1,757 | 834 | (2,535) | 7,469 |
Development costs relate to product design and development activities. The increase is mainly attributable to the cost of developing new products.
Industrial patents and intellectual property rights includes the recognition of patents, associated development costs, intellectual property rights and software programmes.
Concessions, licenses, trademarks and similar rights refers to the registration of trademarks by the company.
Other intangible assets mainly consists of shared costs regarding the development of equipment, mouldings and machinery and servers refurbishment. The criteria applied to amortise intangibles is considered appropriate to reflect the remaining useful life of the assets.
The intangible assets under development and payments on account of Euro 1,867 thousand refer principally to the design and development of new products and software application programmes. Assets under development which presumably will be recorded under development costs amount to Euro 665 thousand.
The capitalisation of development costs requires the calculation of estimates by the Directors, as their recoverability is dependent on the cash flows deriving from the sale of products sold by Elica Group.
The recoverable amount of the development costs is greater than the corresponding carrying amount, and therefore it is not necessary to recognise an impairment loss.
| In Euro thousands | Dec 31, 16 | Acquisitions & Sub. |
Impairment | Increases | Disposals | Dec 31, 17 |
|---|---|---|---|---|---|---|
| Investments in subsidiaries | 63,458 | 3,470 | (1,980) | 4,700 | (12,380) | 57,268 |
| Investments in subsidiaries | 63,458 | 3,470 | (1,980) | 4,700 | (12,380) | 57,268 |
The details of investments in subsidiaries are shown below:
| Dec 31, 16 | Acquisitions | Impairment | Increases | Disposals | Dec 31, 17 | |
|---|---|---|---|---|---|---|
| In Euro thousands | & Sub. | |||||
| Elica Trading LLC | 3,880 | 3,880 | ||||
| Elica Group Polska S.p.zoo | 22,276 | 22,276 | ||||
| Elicamex S.a. de C.V. | 9,387 | 9,387 | ||||
| Leonardo Services S.a. de C.V. | 77 | 77 | ||||
| Ariafina Co.Ltd | 49 | 49 | ||||
| Airforce S.p.A. | 1,212 | 1,212 | ||||
| Exklusiv Hauben Gutmann GmbH | 10,820 | 1,560 | (12,380) | - | ||
| Elica India P.B. | 4,071 | 4,071 | ||||
| Zhejiang Elica Putian Electric Co. Ltd | 11,611 | 1,905 | (1,980) | 2,190 | 13,726 | |
| Elica France S.A.S. | 74 | 950 | 1,024 | |||
| Elica GmbH | 1,565 | 1,565 | ||||
| Investments in subsidiaries | 63,458 | 3,470 | (1,980) | 4,700 | (12,380) | 57,268 |
Investment underwent the following changes in the year.
Elica S.p.A. incorporated the German company, wholly-owned by Elica GmbH, and paid-in the share capital, while increasing the share capital in Elica France for Euro 950 thousand, and for approx. Euro 2 million in Putian. It thereafter paid-in Euro 1.5 million in favour of the subsidiary Gutmann, which was subsequently sold. Reference should be made to paragraph 4.38 for further information.
In addition, on July 26, 2017, with effect from September, Elica S.p.A. signed an agreement to acquire 30% of the Chinese subsidiary Zhejiang ELICA Putian Electric Co., Ltd. from the non-controlling interest Du Renyao. The operation extended governance over the Chinese subsidiary in order to drive forward company results. Consideration for the 30% holding in the Chinese subsidiary was CNY 15 million (approx. Euro 1.9 million) and was paid in cash utilising available company resources.
The table below summarises the key figures derived from the subsidiaries' 2017 financial statements:
| In Euro thousands | % held | Value at Dec 31, 2017 |
Profit/(loss) for the year |
Equity |
|---|---|---|---|---|
| Elicamex S.a.d. C.V. | 98% | 9,389 | 7,068 | 18,644 |
| Elica Group Polska Sp.z o.o | 100% | 22,275 | 4,001 | 27,716 |
| Airforce S.p.A. | 60% | 1,212 | 493 | 3,517 |
| Ariafina Co.Ltd | 51% | 49 | 2,955 | 7,006 |
| Leonardo Services S.a. de C.V. | 98% | 75 | 262 | 63 |
| Elica GmbH | 100% | 1,565 | (142) | 1,383 |
| Elica PB India Private Ltd. | 51% | 4,072 | 1,828 | 5,073 |
| Zhejiang Elica Putian Electric Co. Ltd | 97% | 13,726 | (5,229) | (5,754) |
| Elica Trading LLC | 100% | 3,880 | (189) | 656 |
| Elica France S.A.S. | 100% | 1,024 | 447 | 502 |
The amount of the investment in Elica India includes the Debenture for Euro 3.6 million. In the consolidated financial statements, the non-controlling interest equity in this company is Euro 137 thousand. The companies Elica Francia and Elica GmbH are still in the start-up phase.
The recoverable value of the investments demonstrating indicators of impairment were verified through calculating the respective values in use, represented by the present value of the expected revenue streams for the years of operations of the company subject to the impairment test and deriving from its disposal at termination of the useful life, calculated as per the "Discounted cash flow" method.
The impairment test was approved by the Board of Directors on February 12, 2018, independently and prior to the preparation of the financial statements.
The estimate of the future operating cash flows used for the impairment test, prepared and approved by the Directors, was made based on the 2017-2019 Three-Year Plan, approved on May 15, 2017, appropriately updated for the 2018- 2019 forecast figures, to reflect the effects of the deconsolidation of the subsidiary Gutmann, and based on the best estimates made by the directors, for the sole purposes of the impairment test, for the years 2020-2022.
The principal assumptions utilised by the company for the estimate of the future cash flows for the impairment test of the investments were as follows:
| 2017 | Weighted average cost of capital (WACC) |
Growth rate terminal value |
CAGR revenue period 2019-2022 |
|---|---|---|---|
| Elica Trading LLC | 11.69% | 1.80% | 7.2% |
| Zhejiang Elica Putian Electric Co. Ltd | 7.85% | 5.00% | 4.5% |
| Investments in subsidiaries with indicators of Impairment |
The principal assumptions utilised by the company in the previous year were as follows:
| 2016 | Weighed average cost of capital (WACC) |
Growth rate terminal value |
CAGR revenue period 2018-2021 |
|---|---|---|---|
| Elica Trading LLC | 13.26% | 1.60% | 4.93% |
| Zhejiang Elica Putian Electric Co. Ltd | 7.71% | 4.80% | 2.98% |
| Investments in subsidiaries with indicators of Impairment |
The Weighted Average Cost of Capital (WACC) utilised to discount the future cash flows was determined utilising the Capital Asset Pricing Model (CAPM).
The discounted cash flow model is based on the cash flows for a period of five years, of which the first year (2018) corresponds to the budget approved on February 12, 2018; the year 2019 corresponds to the third year of the strategic plan approved by the Board of Directors on May 15, 2017 and updated in line with the change in consolidation scope on February 12, 2018 and the subsequent three years (2020-2022) estimated through extrapolation of 2019. The principal assumptions utilised in the determination of the cash flows were as follows:
The assumptions utilised in the estimates are based on historical and forecast data of the investees, and are in line with information available from independent sector and market analysts in which the company operates. These estimates are subject to changes, even significant, deriving from uncertainties which continue to effect the markets, and for this reason management continues to periodically monitor the circumstances and events which affect these assumptions and future trends.
The tests did not result in impairments to the value of the investment in Elica Trading LLC, as the value in use was 2.45 times the corresponding carrying amount, while resulting in the recognition in the Income Statement of the company of an impairment of Euro 2 million for the company Putian.
Various sensitivity analyses were carried out in terms of the test on the investment in Elica Trading LLC, assuming reasonable changes to the base assumptions of these estimates, and in particular the growth rate (+/- 2%), the WACC (+/- 5%) and the cost of raw materials (+/-5%). None of the changes considered resulted in an investment recoverable amount equal to or below the respective carrying amounts.
We undertook a sensitivity analysis on the test concerning the investment in Putian, according to the following assumptions and with the following results: changing the growth rate (+/- 2%) the coverage would range between 0.1 and 1.7; changing the WACC (+/- 5%) the coverage would range between 0.7 and 1.13 and, finally, changing the cost of raw materials (+/- 5%) the coverage would range between 0.3 to 2.
There were no changes in investments in associates during the year. These investments relate to:
| In Euro thousands | Registered Office | % held | Carrying amount at Dec 31, 2017 |
Profit/(loss) | Equity | Pro-quota Equity at Dec. 31, 2017 |
|---|---|---|---|---|---|---|
| Reporting package figures | ||||||
| I.S.M. S.r.l. | Cerreto D'Esi (AN) - (Italy) | 49% | 1,377 | (4) | 2,837 | 1,401 |
At December 31, 2017, the company considered the carrying amount of the investment in I.S.M. S.r.l. recoverable through the real estate business undertaken by the company and its real estate property.
The breakdown of the other assets is as follows:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| From employees | 20 | 34 | (14) |
| Other | 2,372 | 11 | 2,361 |
| Other assets (non-current) | 2,392 | 45 | 2,347 |
Other assets (non-current) increased Euro 2,361 thousand, due to receivables from the third party purchaser of the investment in Gutmann. For further details reference should be made to note 4.38.
Management believes that this amount approximates fair value. This account includes receivables with maturity of greater than five years for Euro 749 thousand, of which Euro 737 thousand concerning the receivable matured from the purchaser on the sale of the subsidiary Gutmann.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Deferred tax assets | 11,301 | 8,762 | 2,539 |
| Deferred tax liabilities | (799) | (933) | 134 |
| 10,503 | 7,828 | 2,674 |
Deferred tax assets principally relate to non-deductible accruals, goodwill and the tax loss. Deferred tax liabilities principally includes the payables for merger adjustments.
The following table details deferred tax assets and liabilities:
| Dec 31, 2016 | Effect on profit or loss | Dec 31, 2017 | |||||
|---|---|---|---|---|---|---|---|
| In Euro thousands | Assets | Liabilities | Eq./Others | Costs | Revenue | Assets | Liabilities |
| Amortisation and depreciation | 863 | 1 | (115) | 978 | 1 | ||
| Accruals | 2,730 | 466 | (837) | 3,102 | |||
| Costs ded. in future years | 138 | 3 | (46) | 181 | |||
| Inventory write-down | 557 | 1 | (211) | 766 | |||
| Exchange rate differences | (271) | (462) | 192 | ||||
| Gains, Grants | 0 | ||||||
| Restructuring charges | (177) | 177 | |||||
| Merger adjustments | (659) | (40) | (618) | ||||
| Other deferred charges | - | ||||||
| Goodwill | 250 | (3) | 53 | 196 | (3) | ||
| IRS measurement | (229) | 124 | 72 | (177) | |||
| Post-employment benefits | 281 | 281 | |||||
| IRAP refund claim on IRES repayment | 1,224 | 1,224 | |||||
| Tax loss | 2,609 | (422) | 3,032 | ||||
| Employee bonuses | 339 | 339 | (1,102) | 1,102 | |||
| Total | 8,762 | (933) | 124 | 863 | (3,413) | 11,301 | (799) |
This account relates to investments held by Elica S.p.A. in other companies. The investments are held in unlisted companies whose shares are not traded on a regulated market. Therefore, as there were no purchases or sales of these shares in the last year, their fair value cannot be determined in a reliable manner. The carrying amount, measured at cost, is shown below:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Meccano S.p.A. | 15 | 15 | - |
| Other minor investments | 34 | 38 | (4) |
| AFS financial assets | 49 | 53 | (4) |
The above investments are recorded at cost and in accordance with article 10 of Law 72/1983 no revaluations have been made pursuant to specific laws. The account did not significantly change on the previous year.
The account consists of:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Receivables within one year | 42,519 | 42,929 | (410) |
| Receivables beyond one year | 7,475 | 1,749 | 5,726 |
| Trade receivables – third parties | 49,994 | 44,678 | 5,316 |
Net trade receivables increased Euro 5,316 thousand; this increase relates to the significant increase in revenue. The account includes receivables beyond 5 years for Euro 2,687 thousand, concerning trade receivables from the former subsidiary Gutmann, whose due dates were extended on the company's sale. For further information, reference should be made to note 4.38.
The company adopts a Credit Policy which governs the management of credit and the reduction of the related risk. In particular, it is company policy to transfer the risk deriving from trade receivable recovery to third parties and therefore a significant part of the relative risk is protected by insurance policies with leading international insurance companies.
Doubtful debts are covered by a related provision accrued based on a specific analysis of the individual risks and on the basis of a general provision calculated in accordance with the provisions of the Group Credit Policy.
The realignment of receivables to their fair value is achieved through the allowance for impairment.
Management believes that the value approximates the fair value of the receivables.
The changes in the allowance for impairment are set out below:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Opening balance | 4,291 | 4,020 | 271 |
| Allowance | 639 | 337 | 302 |
| Utilisations/Releases | (1,079) | (66) | (1,013) |
| Total | 3,851 | 4,291 | (440) |
Receivables from related companies include both receivables of a trading and financial nature from related parties. The details are shown in the table below:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Receivables from subsidiaries | 48,619 | 66,539 | (17,920) |
| Receivables from other related parties | - | - | - |
| Receivables from parents | - | - | - |
| Receivables from associates | 2 | 2 | (0) |
| Receivables from related parties | 48,621 | 66,541 | (17,920) |
Receivables from subsidiaries are broken down as follows:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Elica Trading LLC | 3,292 | 4,213 | (921) |
| Air Force S. p. A. | 389 | 419 | (30) |
| Elica Group Polska S.p.z.oo | 12,515 | 14,784 | (2,269) |
| Elicamex S.A. de C.V. | 17,049 | 14,064 | 2,985 |
| Ariafina Co Ltd | 319 | 318 | 1 |
| Exklusiv Hauben Gutmann GmbH | - | 17,353 | (17,353) |
| Elica PB India Private Ltd. | 3,222 | 4,664 | (1,442) |
| Elica France S.A.S. | 2,253 | 2,985 | (732) |
| Zhejiang Elica Putian Electric Co. Ltd | 8,511 | 7,739 | 772 |
| Elica GmbH | 1,069 | - | 1,069 |
| Receivables from subsidiaries | 48,619 | 66,539 | (17,920) |
The account includes financial receivables from subsidiary companies, respectively for Euro 3,853 thousand from the Chinese company Zhejiang Elica Putian Electric Co. Ltd (Euro 3,929 thousand in 2016), Euro 8,294 thousand from the Mexican company Elicamex S.a. de C.V. (Euro 4,327 thousand in 2016), Euro 433 thousand from the French subsidiary Elica France S.A.S (Euro 433 thousand in 2016), Euro 2,009 thousand from the Polish company Elica Group Polska S.p.z.oo (Euro 4,277 thousand in 2016) and Euro 2,464 thousand from the Indian company Elica PB India Private (Euro 3,776 thousand). This latter receivable includes the IAS measurement of the obligatorily convertible bond loan undertaken by the company in 2013. In 2017, the company Gutmann was sold to third parties and the loan asset at December 31, 2016 was sold for Euro 1. Reference should be made to the specific paragraph for further information. The changes show the synergies created in order to optimise cash management.
The assets from the associate ISM refer to normal company operations.
The item does not include receivables with a duration beyond five years at the reporting date.
The value of inventories reports an increase of approx. Euro 4.4 million.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Raw material, ancillary and consumables | 13,782 | 12,835 | 947 |
| Provision for the write-down of raw materials | (1,175) | (918) | (257) |
| Total | 12,607 | 11,918 | 690 |
| Work in progress and semi-finished products | 8,004 | 8,121 | (117) |
| Provision for the write-down of work in progress | (551) | (507) | (44) |
| Total | 7,453 | 7,614 | (161) |
| Finished products and goods for resale Provision for the write-down of finished products |
17,448 (1,476) |
13,036 (903) |
4,412 (573) |
| Total | 15,972 | 12,134 | 3,839 |
| Inventories | 36,032 | 31,666 | 4,368 |
Inventories are stated net of the provision for inventory write-down which amounts to Euro 3,202 thousand at December 31, 2017 and Euro 2,326 thousand at December 31, 2016, in order to provide for the effect of waste, obsolete and slow moving items. The calculation of the provision for the write-down of raw materials, semi-finished and finished products is based on assumptions made by Management.
Inventories also include materials and products that were not physically held by the company at the reporting date. These items were held by third parties on display, for processing, consignment stock, or for examination.
The breakdown is as follows:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Customs reimbursements | 57 | 44 | 13 |
| Guarantee deposits | 262 | 134 | 128 |
| Advances to suppliers | 230 | 276 | (46) |
| Other | 1,435 | 3,302 | (1,867) |
| Insurance prepayments | 8 | 22 | (14) |
| Maintenance prepayments | 83 | 121 | (38) |
| Advertising prepayments | 9 | 16 | (7) |
| Rental prepayments | 330 | 224 | 106 |
| Other prepayments and accrued income | 411 | 599 | (188) |
| Other receivables (current) | 2,825 | 4,738 | (1,913) |
This item decreased Euro 1,913 thousand, particularly relating to Other assets. Other Assets mainly refer to government grants for investment obtained, such as Industry 2015, the SM project, the Shell project, the Seal project and photovoltaic plant grants. The decrease is mainly due to the collection of these receivables from the government. Management believes that this amount approximates fair value.
The account includes receivables beyond five years of Euro 13 thousand.
The breakdown of the account Tax assets is summarised in the table below:
| Dec 31, 2017 | Dec 31, 2016 | Changes |
|---|---|---|
| 454 | 414 | 40 |
| - | 208 | (208) |
| 6,460 | 3,797 | 2,663 |
| 1,593 | 2,476 | (883) |
| 8,507 | 6,894 | 1,612 |
Other tax assets include the receivables for taxes paid overseas to be recovered and the tax receivable for research and development activities as per Law No. 190/2014 from the Tax Authorities.
Management believes that this amount approximates fair value.
The changes concern the increase in the VAT receivable related to commercial transactions.
| Dec 31, 2017 | Dec 31, 2016 | |||
|---|---|---|---|---|
| In Euro thousands | Assets | Liabilities | Assets | Liabilities |
| FX derivatives on foreign exchange | 344 | 600 | 142 | 1,006 |
| Interest rate derivatives | 8 | 308 | - | 465 |
| Commodities derivatives | 662 | - | 1,694 | - |
| Derivative financial instruments | 1,014 | 908 | 1,835 | 1,471 |
| of which | ||||
| Non-current | 8 | 75 | - | 198 |
| Current | 1,006 | 833 | 1,835 | 1,273 |
| Derivative financial instruments | 1,014 | 908 | 1,835 | 1,471 |
For further information, refer to paragraph 7. Information on Risk management.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Bank and postal deposits | 8,332 | 9,817 | (1,485) |
| Cash and cash equivalents on hand | 5 | 9 | (4) |
| Cash and cash equivalents | 8,337 | 9,826 | (1,489) |
This item reflects the positive balances of bank current accounts and cash on hand.
For further information, reference should be made to the section on net financial position in the directors' report and to the statement of cash flows.
The amount provisioned in the accounts of Euro 9,713 thousand is the present value of pension liabilities matured by employees at year-end.
The most recent calculation of the present value of this item was performed at December 31, 2017 by actuaries from the company MANAGERS & PARTNERS - ACTUARIAL SERVICES S.P.A.. The amounts recognised in profit or loss were as follows:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Current service cost | 2,810 | 2,564 | 246 |
| Financial charges | 137 | 209 | (72) |
| 2,947 | 2,774 | 174 |
The changes in the present value of post-employment benefit obligations in the reporting period were as follows:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Opening balance | 10,106 | 9,689 | 417 |
| Current service cost | 2,810 | 2,564 | 246 |
| Actuarial gains and losses | (247) | 448 | (695) |
| 2,562 | 3,012 | (450) | |
| Financial charges | 137 | 209 | (72) |
| Pension fund | (2,819) | (2,571) | (248) |
| Benefits provided | (274) | (233) | (41) |
| (2,955) | (2,595) | (360) | |
| Liabilities for post-employment benefits | 9,713 | 10,106 | (393) |
The interest component of the defined employee benefit plan cost is shown under financial charges, with a resulting increase of Euro 137 in this item for the reporting period. The current service cost and the effect of the curtailment and settlement were recorded under personnel expense. Actuarial gains and losses, amounting to Euro 247 thousand, comprise the actuarial gains (losses) of the defined benefit plans reported in the statement of comprehensive income.
| Dec 31, 2017 | Dec 31, 2016 | |
|---|---|---|
| Discount rate to determine the obligation | 1.30% | 1.60% |
| Rate of inflation | 1.50% | 1.65% |
The discount rates utilised by the company were selected based on the yield curves of high-quality fixed income securities, as in previous years.
This financial variable is considered the most significant and therefore chosen for a sensitivity analysis. The objective of a sensitivity analysis is to show how the result of the valuation changes in response to changes in an assumption adopted for the calculation, with all other assumptions unchanged
Therefore, if the discount rate increased 0.5% (1.8%), the obligation would amount to Euro 9,263 thousand, while if the discount rate decreased 0.5% (0.8%), the obligation would amount to Euro 10,223 thousand.
The average number of employees in 2017 was 1,190 (1,207 in 2016), as outlined in note 4.7.
The composition and movements of the provisions are as follows:
| In Euro thousands | Dec 31, 2016 | Provisions | Utilisations/Reclass. | Dec 31, 2017 |
|---|---|---|---|---|
| Agents' termination benefits | 532 | 89 | (67) | 555 |
| Product warranties | 669 | 946 | (669) | 946 |
| Product disposal | 304 | 435 | (185) | 554 |
| Legal risks | 5,461 | 1,678 | (393) | 6,746 |
| Long-Term Incentive Plan | - | 680 | - | 680 |
| Restructuring provision | - | 630 | - | 630 |
| Personnel | 1,206 | 3,177 | (1,206) | 3,177 |
| Provisions for risks and charges | 8,174 | 7,635 | (2,550) | 13,288 |
| of which | ||||
| Non-current | 7,504 | 12,342 | ||
| Current | 669 | 946 | ||
| Provisions for risks and charges | 8,174 | 13,288 |
Accruals for agents' termination benefits cover possible charges upon the termination of contracts with agents and sales representatives. Changes in the provision reflect adjustments in the indemnities and the utilisations.
Product warranties represent an estimate of the costs likely to be incurred to repair or replace items sold to customers. These provisions reflect the average warranty costs historically incurred by the company as a percentage of sales still covered by warranty. The provision increased in the year by Euro 277 thousand.
Legal risks provision includes the accrual for the first level judgement in the cases with the Brazilian companies Esperança Real S/A and Madson Eletrometalurgica Ltda. issued against Elica S.p.A by the Belo Horizonte Court (Brazil) on March 1, 2017. The case concerns preliminary agreements signed in September 1999 for the establishment of a joint venture by Elica S.p.A. and Esperança Real S/A, which were not executed. With the support of legal consultants and sector experts, the Directors assessed the ruling, the technical opinions upon the possible development of the case and its probable final outcome, and decided to allocate to the provision for legal risks Euro 4 million, of which Euro 0.3 million in the current year and relating to interest and legal expenses, on a precautionary basis to cover legal risks. These accruals do not imply that the counterparty's legal arguments are valid, but were recognised solely to be fully compliant with IFRS. In any case, the company confirms that it intends to defend itself at all legal levels.
This provision also includes a prudent provision of Euro 0.9 million recognised by the company following an inspection undertaken by the Tax authorities on November 21, 2017. The investigation involves assessments undertaken throughout the country in relation to some companies which, according to the tax inspectors, proposed to their potential clients (among which Elica S.p.A.) the purchase of prototypes created following specific studies and research for the construction of a completely innovative machine and particularly adapted to the needs of the buyer. Given the initial phase of the assessment it is difficult to assess the outcome and possible effects on Elica, but thanks to technical
opinions, the company recognised an accrual of Euro 0.9 million on a purely prudent basis and not on the basis of the inspector's legal grounds, but rather solely to be fully compliant with international accounting standards.
The restructuring provision of Euro 0.6 million was set up on December 31, 2017 for future departures relating to the Parent's personnel redundancy plan, in order to reduce and streamline the organisational structure, in accordance with IAS 37. They principally concern personnel expense.
The provision for personnel includes contractual indemnities and the performance-based bonus accrued for employees in the year, based on the best estimates according to the information available. The utilisations relate to payments in 2017 in this regard.
The Long Term Incentive Plan provision concerns the accrued liability at December 31, 2017 for the 2016-2022 Phantom Stock and Voluntary Co-investment Plan. The provision refers to the second cycle of this Plan, which was approved by the Board of Directors of Elica S.p.A. on June 26, 2017. No accrual was recorded for the first cycle as the targets were not achieved. For further details, reference should be made to the Remuneration Report.
The impact of discounting non-current provisions is not significant.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Bank loans and borrowings | 92,087 | 82,595 | 9,492 |
| Total | 92,087 | 82,595 | 9,492 |
| Bank borrowings have the following repayment schedules | |||
| On demand or within one year | 44,966 | 48,898 | (3,932) |
| Within two years | 18,650 | 12,206 | 6,444 |
| Within three years | 18,108 | 12,252 | 5,856 |
| Within four years | 7,125 | 8,539 | (1,414) |
| Within five years | 3,238 | 700 | 2,538 |
| After 5 years | - | ||
| Total | 92,087 | 82,595 | 9,492 |
| Less amounts to be repaid within one year | 44,966 | 48,898 | (3,932) |
| Due after one year | 47,121 | 33,697 | 13,424 |
All bank loans and borrowings are denominated in Euro.
The majority of borrowings indicated above carry a floating rate of interest. In 2017 the company undertook three new non-current loans and subscribed related IRS contracts on these loans to hedge the variable interest rate.
For further information on interest rate hedges, reference should be made to paragraph 6. Information on risk management of these notes.
The movements in non-current Tax liabilities relate to the monthly payments of the earthquake suspension payables following the earthquake in 1997.
This account does not include payables beyond five years. They are reported below:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Local income tax – earthquake deferrals | 38 | 65 | (27) |
| Other tax liabilities | 34 | 58 | (24) |
| Employees' leaving entitlement - earthquake deferral | 6 | 9 | (3) |
| Substitute tax – earthquake deferral | 0 | - | 0 |
| Estate taxes – earthquake deferral | 106 | 180 | (74) |
| Tax liabilities (non-current) | 183 | 312 | (129) |
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Other tax liabilities | 933 | 741 | 192 |
| IRPEF withholding | 1,778 | 2,014 | (236) |
| Tax liabilities (current) | 2,711 | 2,755 | (44) |
The decrease in the account Tax liabilities (current) refers to the decrease in the IRPEF payable. Management believes that this amount approximates fair value.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Other liabilities | 3 | 89 | (86) |
| INAIL contributions – 1997 earthquake deferral | 16 | 28 | (12) |
| INPDAI contributions – 1997 earthquake deferral | 7 | 13 | (6) |
| Employee INPS contributions – 1997 earthquake | 185 | 324 | (139) |
| Other payables (non-current) | 211 | 454 | (243) |
The decrease principally relates to deferred payables following the earthquake in 1997, which decrease as the company makes repayments. The balance does not include payables due after 5 years.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Payables to social security institutions | 2,293 | 1,396 | 897 |
| Other | 112 | 61 | 51 |
| Payables to personnel for remuneration | 4,210 | 4,008 | 202 |
| Payables to customers | 4 | 3 | 1 |
| Accrued charges and deferred income | 258 | 99 | 159 |
| Directors and Statutory Auditors | 100 | 57 | 43 |
| Advances from customers | 274 | 188 | 86 |
| Other payables (current) | 7,250 | 5,811 | 1,438 |
The account increased Euro 1,438 thousand, in particular due to the increase in Payables to personnel for remuneration of Euro 202 thousand and of Euro 897 thousand in payables to social security institutions, mainly due to the greater compensation impact in the previous year from the Solidarity contribution.
The account includes payables after five years for Euro 11 thousand.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Trade payables | 74,546 | 69,427 | 5,119 |
| Trade payables to third parties | 74,546 | 69,427 | 5,119 |
| Payables to subsidiaries | 30,174 | 34,770 | (4,596) |
| Payables to other related companies | 51 | 10 | 41 |
| Payables to related companies | 30,225 | 34,781 | (4,555) |
| Trade payables and financial payables | 104,771 | 104,207 | 564 |
These mainly include payables for trade purchases and other costs. The average payment days is approximately 101. The balance of the payables to other related companies (Euro 51 thousand) includes the payables at December 31, 2017 to Fastnet S.p.A. on trade transactions.
Management believes that the carrying amount of trade payables and other payables reflects their fair value.
Payables to subsidiaries are detailed below.
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Elica Trading LLC | 231 | 20 | 211 |
| Elica Group Polska S.p.z.oo | 25,449 | 28,366 | (2,917) |
| Air Force S.p.A. | 245 | 269 | (24) |
| Elicamex S.A. | 1,473 | 893 | 580 |
| Ariafina Co Ltd | 1,498 | 1,645 | (147) |
| Leonardo S.A. | 6 | 6 | |
| Zhejiang Elica Putian Electric Co. Ltd | 1,081 | 1,232 | (151) |
| Elica PB India Private Ltd. | 159 | 154 | 5 |
| Elica France S.A.S. | 32 | 1 | 31 |
| Exklusiv Hauben Gutmann GmbH | - | 2,191 | (2,191) |
| Payables to subsidiaries | 30,174 | 34,770 | (4,597) |
The balance includes financial liabilities of Euro 2.9 million, in addition to trade payables. The amounts of a commercial nature refer principally to purchases from Elica Group Polska of Euro 25,449 thousand (Euro 28,366 thousand in 2016).
For the analysis on the movements in equity, reference should be made to the relative table. Comments are provided on each of the equity reserves.
The share capital at December 31, 2017 amounts to Euro 12,664 thousand, consisting of 63,322,800 ordinary shares with a par value of Euro 0.20 each, fully subscribed and paid-in.
The capital reserves amount to Euro 71,123 thousand and relate to the share premium reserve.
| In Euro thousands | Dec 31, 2016 | Changes in the hedging reserve |
Other changes | Dec 31, 2017 |
|---|---|---|---|---|
| Hedging reserve | 724 | (393) | - | 331 |
| 724 | (393) | - | 331 |
The hedge reserve contains Euro 331 thousand which represents the positive fair value of hedging derivatives (cash flow hedges) net of the tax effect (in the previous year also positive for Euro 723 thousand).
| Number | Carrying amount | |
|---|---|---|
| In Euro thousands | ||
| Opening balance at January 1, 2017 | 1,275,498 | 3,551 |
| Closing balance at December 31, 2017 | 1,275,498 | 3,551 |
In 2017, there was no change to the number of treasury shares. At December 31, 2017, the treasury shares in portfolio represent 2% of the share capital.
| Dec 31, 2016 | IAS 19 actuarial effect |
Dec 31, 2017 | |
|---|---|---|---|
| In Euro thousands | |||
| Reserve for post-employment benefit actuarial gains/losses | (3,222) | 247 | (2,975) |
| (3,222) | 247 | (2,975) |
| In Euro thousands | Dec 31, 2017 | Dec 31, 2016 | Changes |
|---|---|---|---|
| Legal reserve | 2,533 | 2,533 | (0) |
| IFRS transition reserve | 1,675 | 1,675 | 0 |
| Extraordinary reserve | 26,380 | 32,921 | (6,541) |
| Retained earnings | 30,588 | 37,129 | (6,541) |
The increase in the extraordinary reserve of Euro 6,541 thousand is due to the allocation to this item of the 2016 company result.
The following table shows the equity accounts divided by origin, the possibility of utilisation and distribution, as well as any utilisations in the previous three years. The amounts are in units of Euro.
| Description origin | Amount | Poss. of utilisation |
Quota available | Util. in past 3 years to cover losses |
Util. in past 3 years for other reasons |
|---|---|---|---|---|---|
| I Share capital | 12,664,560 | = | |||
| II Share premium reserve | 71,123,336 | A,B,C | 71,123,336 | ||
| IV Legal reserve | 2,532,912 | B | |||
| VII Other reserves: | |||||
| Extraordinary reserve | 26,379,950 | A,B,C | 22,828,964 | 6,541,060 | |
| IFRS transition reserve | 1,675,096 | A,B,C | 1,675,096 | ||
| Retained earnings | 30,587,958 | ||||
| Non-distributable amount | - | 7,469,359 | |||
| Residual distributable amount | - | 88,158,037 | |||
| A - to increase share capital | |||||
| B - to cover losses | |||||
C: for distribution to shareholders
The non-distributable quota, in accordance with Article 2426, paragraph 5 of the Italian Civil Code, of Euro 7,469 thousand refers to the residual amount to be amortised of development expenses. The part of the Extraordinary reserve not available for distribution of Euro 3,551 thousand relates to the value of the treasury shares held in portfolio, in accordance with Article 2357-ter of the Italian Civil Code.
(Pursuant to Consob Communication No. DEM/6064293 of 28 July 2006)
| In Euro thousands | Dec 31, 2017 | Dec 31, 2016 |
|---|---|---|
| Cash and cash equivalents | 8,337 | 9,826 |
| Financial receivables - related parties | 17,053 | 27,891 |
| Financial payables - related parties | (2,861) | (2,495) |
| Bank loans and borrowings | (44,966) | (48,898) |
| Current loans and borrowings | (30,774) | (23,502) |
| Bank loans and borrowings | (47,121) | (33,697) |
| Non-current loans and borrowings | (47,121) | (33,697) |
| Net financial position | (69,558) | (47,372) |
At December 31, 2017, the net financial position was Euro 69,558 thousand, increasing Euro 22.2 million on December 31, 2016. For further comment, reference is made to the directors' report.
Elica S.p.A., on August 28, 2017, sold 100% of the share capital of the German company Exklusiv-Hauben Gutmann, to Mr. Manuel Fernandez Salgado (the Purchaser), former Managing Director of the subsidiary. Over recent years, the German subsidiary has underperformed compared to consolidated earnings and therefore in order to protect the value created by the Group for shareholders and to focus investment and the company on the more profitable aspects of the business its disposal was approved. Group development in Germany will continue to focus on the Elica brand, which already enjoys a strong presence and good positioning on the most profitable market segments. Acquired by Elica S.p.A. in 2008, Exklusiv-Hauben Gutmann specifically manufactures high-end tailor-made range hoods under the Gutmann brand at its Mühlacker facilities.
Consideration for 100% of the German subsidiary Exklusiv-Hauben Gutmann was Euro 2.5 million, to be settled in five tranches at each year-end from December 31, 2019 until December 31, 2023. The receivable from the sale of the investment was discounted and a charge of Euro 192 thousand was recognised under charges from subsidiary disposal.
In addition, Elica transferred to Manuel Fernandez an Exklusiv-Hauben Gutmann loan asset of Euro 11.15 million for consideration of Euro 1. The purchaser granted Elica S.p.A. a call option on 100% of the share capital of Exklusiv-Hauben Gutmann, exercisable at conditions established by the parties at the price of six times the average EBITDA of the last two years, net of the net financial debt. In addition, Elica S.p.A. has a call option against Exklusiv-Hauben Gutmann on the transferred loan asset, existing at the option exercise date and exercisable at a price of Euro 1, on fulfillment of the conditions established by the parties.
The sale of the investment also included the payment terms of Elica's trade receivables from Exklusiv-Hauben Gutmann. Extended payment terms were granted on these receivables without the application of interest, and consequently it was necessary to discount the amount. The discounting effect, equal to Euro 576 thousand, was reclassified under charges from subsidiary sale, as the extended payment terms were related to the sale of the investment in Exklusiv-Hauben Gutmann.
In these separate financial statements of Elica S.p.A. the transaction described above had the following impact on profit or loss:
| In Euro thousands | Dec 31, 2017 |
|---|---|
| a) Discounting receivable from purchaser | (192) |
| b) Discounting trade receivable from Gutmann | (576) |
| c) Charges from transfer of loan asset | (11,150) |
| d) Investment disposal charges | (9,875) |
| Charges from subsidiary disposal | (21,793) |
It is important to note that the company presented to the Tax authorities an appeal concerning the correct tax treatment of the amounts at points a), c) and d). In the calculation of income taxes, these amounts are prudently considered as non-deductible.
The parent company and its subsidiaries are not involved in administrative, judicial or arbitration proceedings that are underway or have been settled by means of a ruling or arbitration award issued in the last 12 months and which might have or might have had an effect on the financial situation or profitability of the Group, except for that indicated below.
Group companies have valued the contingent liabilities that could arise from pending judicial proceedings and have made appropriate provisions in their financial statements on a prudent basis.
The provision in the company's financial statements at December 31, 2017 to cover legal risks and charges amounts to Euro 6,746 thousand. It includes the accrual for the first level judgement in the cases with the Brazilian companies Esperança Real S/A and Madson Eletrometalurgica Ltda. issued against Elica S.p.A by the Belo Horizonte Court (Brazil) on March 1, 2017. With the support of legal consultants and sector experts, the Directors assessed the ruling, the technical opinions upon the possible development of the case and its probable final outcome, and decided to allocate to the provision for legal risks Euro 4 million, of which Euro 0.3 million in the current year and relating to interest and legal expenses, on a precautionary basis to cover legal risks. These accruals do not imply that the counterparty's legal arguments are valid, but were recognised solely to be fully compliant with IFRS. In any case, the company confirms that it intends to defend itself at all legal levels. The judgement also requires Elica S.p.A. to compensate the counterparty for indirect damage of approximately Euro 7.5 million. With the support of legal consultants and sector experts, considering that the judgment is at first level and not definitive (the appeal is pending) or executive, that it has not arisen in Italy and particularly that the legal basis is considered unfounded, the Group considers this payment as not probable. The company confirms its intention to pursue at all levels the protection of its rights. Management considers that the provision for risks in order to cover possible liabilities from pending or potential disputes is, on the whole, adequate. For additional information, reference should be made to paragraph 4.31 of these notes.
This provision also includes a prudent provision of Euro 0.9 million recognised by the company following an inspection undertaken by the tax authorities on November 21, 2017. The investigation involves assessments undertaken throughout the country in relation to some companies which, according to the tax inspectors, proposed to their potential clients (among which Elica S.p.A.) the purchase of prototypes created following specific studies and research for the construction of a completely innovative machine and particularly adapted to the needs of the buyer. Given the initial phase of the verification it is difficult to assess the outcome and possible effects on Elica, but thanks to technical opinions, the company recognised an accrual of Euro 0.9 million on a purely prudent basis and not on the basis of the inspector's legal grounds, but rather solely to be fully compliant with international accounting standards.
In relation to the shareholder agreement signed on December 10, 2007 and renewed on December 18, 2013 (the "Shareholder Agreement"), FAN S.r.l., the parent of Elica S.p.A., and Whirlpool Europe S.r.l. agreed that the Shareholder Agreement should be automatically extended for another two years and therefore until December 18, 2018.
This did not impact control over Elica which, as per Article 93 of the CFA, is held by Mr. Francesco Casoli. For further information on the matter, reference should be made to the annual corporate governance report, available on the company's website https://elica.com/corporation (Corporate Governance section).
Elica S.p.A. has undertaken guarantees in favour of Putian for credit lines of Euro 17.65 million and Elica Group Polska has a rotating receivable factoring cap of Euro 3.5 million, in addition to a corporate guarantee of Euro 0.65 million in favour of third parties.
Commitments with suppliers for non-current asset purchases at December 31, 2017 amount to approx. Euro 2,599 thousand, principally relating to investments in the production capacity.
The company at December 31, 2017 has commitments in place for the purchase of raw materials, as described in paragraph 6.2.2 Commodity risk.
At the reporting date there were rental agreements for several industrial and commercial properties, motor vehicle rental agreements and operating leases for hardware and other. The account other operating leases concerns commitments for a new operating lease contracts, signed by the company concerning photovoltaic panels. Future payments due against lease contracts are summarised in the following table:
| Dec 31, 2017 | Dec 31, 2016 | Changes | ||
|---|---|---|---|---|
| In Euro thousands | ||||
| Property rentals | 813 | 620 | 193 | |
| Car and fork lift rental | 2,606 | 3,636 | (1,030) | |
| Hardware operating leases | 2,763 | 3,215 | (452) | |
| Other operating leases | 1,866 | 2,190 | (324) | |
| Operating lease commitments | 8,048 | 9,661 | (1,613) | |
| In Euro thousands | Dec 31, 2017 | Within 1 year | 1 - 5 years | Beyond 5 years |
| Property rentals | 813 | 343 | 470 | - |
| Car and fork lift rental | 2,606 | 1,018 | 1,588 | - |
| Hardware operating leases | 2,763 | 638 | 2,125 | - |
| Other operating leases | 1,866 | 407 | 1,459 | - |
| Operating lease commitments | 8,048 | 2,406 | 5,641 | - |
Elica's operations are exposed to different types of financial risks, including risks associated with fluctuations in exchange rates, interest rates, the cost of its main raw materials and cash flows. In order to mitigate the impact of these risks on the company's results, Elica commenced the implementation of a financial risk monitoring system through a "Financial Risk Policy" approved by the Board of Directors of the company. Within this policy, the company constantly monitors the financial risks related to the operating activities in order to assess any potential negative impact and undertakes corrective action where necessary.
The main guidelines for the Company risk policy management are as follows:
• monitor and report on the current state of the risks and the effectiveness of their control.
The process for the management of the financial risks is structured on the basis of appropriate procedures and controls, based on the correct segregation of conclusion, settlement, registration and reporting of results.
The paragraphs below report an analysis of the risks which Elica is exposed to, indicating the level of exposure and, for the market risks, the potential impact on the results deriving from hypothetical fluctuations in the parameters (sensitivity analysis).
According to IFRS 7, market risk includes all the risks directly or indirectly related to the fluctuations of the general market prices and the financial markets in which the company is exposed:
In relation to these risk profiles, Elica uses derivative instruments to hedge its risks and does not engage in derivative trading.
The paragraphs below individually analyse the different risks, indicating where necessary, through sensitivity analysis, the potential impact on the results deriving from hypothetical fluctuations in the parameters.
The Company's operating currency is the Euro. However, the Group companies trade also in American Dollars (USD), British Pounds (GBP), Japanese Yen (JPY), Swiss Francs (CHF), Russian Rubles (RUB) Polish Zloty (PLN), Indian Rupees (INR), Chinese Yuan (CNY) and Mexican Pesos (MXN). For the currencies in which the company has higher revenue than costs, changes in the exchange rates between the Euro and these currencies impact the company results as follows:
The amount of the exchange risk, defined in advance by Management of the company on the basis of the budget for the period, is gradually hedged over the acquisition process of the orders, up to the amount of the orders corresponding to budget projections.
The hedge is entered into through agreements with third party lenders for forward contracts and options for the purchase and sale of foreign currency. As previously described, these hedges are entered into without any speculative or trading purposes, in line with the strategic policies of prudent cash flow management.
The most significant statement of financial position balances in foreign currency at December 31, 2017 are shown below:
| In Euro thousands Currency |
Dec 31, 2017 Assets |
Liabilities | Dec 31, 2016 Assets |
Liabilities |
|---|---|---|---|---|
| CHF | - | (35) | - | (38) |
| CNY | 5,450 | (16) | 6,963 | (1) |
| GBP | 176 | (13) | 114 | (13) |
| JPY | 322 | (1,498) | 321 | (1,639) |
| PLN | 21,028 | (25,491) | 17,931 | (28,385) |
| RUB | 3,990 | (231) | 4,219 | (20) |
| USD | 19,087 | (4,477) | 22,372 | (4,410) |
| INR | 2,355 | (159) | 3,642 | (154) |
| Foreign currency transactions | 52,408 | (31,920) | 55,563 | (34,659) |
For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the Euro/CHF, Euro/CNY, Euro/GBP, Euro/YEN, Euro/PLN, Euro/RUB, Euro/USD and EUR/INR rates were analysed.
The following table shows the sensitivity to reasonably possible movements in the exchange rates, maintaining all other variables unchanged, due to changes in the value of current assets and liabilities in foreign currencies.
| In Euro thousands | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|
| Currency | Appreciation of foreign currencies 5% |
Depreciation of foreign currencies 5% |
Appreciation of foreign currencies 5% |
Depreciation of foreign currencies 5% |
| CHF | (2) | 2 | (2) | 2 |
| CNY | 286 | (259) | 367 | (332) |
| GBP | 9 | (8) | 5 | (5) |
| JPY | (62) | 56 | (69) | 63 |
| PLN | (235) | 212 | (550) | 498 |
| RUB | 198 | (179) | 221 | (200) |
| USD | 769 | (696) | 945 | (855) |
| INR | 116 | (105) | 184 | (166) |
| Foreign currency transactions | 1,079 | (977) | 1,101 | (995) |
The hedging operations of Elica as at December 31, 2017 with financial counterparties have a total negative fair value of Euro 256 thousand (Euro 864 thousand in 2016).
| Dec 31, 2017 | Dec 31, 2016 | |||
|---|---|---|---|---|
| Notional | Fair value | Notional | Fair value | |
| Currency | (in foreign currency/000) | In thousands of Euro |
(in foreign currency/000) | In thousands of Euro |
| USD | ||||
| Forward | 13,870 | 153 | 16,050 | 89 |
| Options | 4,400 | 75 | 8.433 | (454) |
| PLN | ||||
| Forward | 25,950 | (21) | 41,550 | (38) |
| Options | - | - | 38,401 | (126) |
| JPY | ||||
| Forward | 200,000 | (119) | 228,400 | (123) |
| RUB | ||||
| Forward | 265,000 | (6) | 400,300 | (24) |
| Options | 134,800 | 32 | - | - |
| CNY | ||||
| Forward | - | - | 47,851 | (188) |
| MXN | ||||
| Options | 177,500 | (370) | - | - |
| FX derivative assets/(liabilities) | (256) | (864) |
The table below shows the details of the notional and fair values:
For the purposes of the sensitivity analysis on the exchange rate, the potential movements on the EUR/USD, EUR/PLN, EUR/RUB, EUR/JPY and EUR/MXN and the EUR and foreign exchange interest rate curves were analysed.
In the stress testing we have stressed not only the spot to spot exchange rate, but also the monetary curve rates at December 31, 2017 in order to show the effect of changes in the rate curve.
For this purpose, the maximum change in the interval between the beginning of November 2017 and the first week of January 2018 was considered.
For the EUR/USD exchange rates a stress of 6% was applied, for EUR/PLN 6%, for EUR/JPY 7%, for EUR/RUB 25% and for EUR/MXN and USD/MXN 11%.
For interest rates on forward exchange contracts, a stress was applied of 50 bps for the Eurozone rates, 50 bps for the US rates, 50 bps for the Polish rates, 200 bps for the Russian rates, 50 bps for the Chinese rates and 50 bps for the Japanese rates.
The following table shows the sensitivity to the movements in the exchange rates and the rate curves indicated, maintaining all other variables unchanged, of the Fair Value of the operations in foreign currencies at December 31, 2017 (compared with December 31, 2016):
| Dec 31, 2017 | ||||||
|---|---|---|---|---|---|---|
| In Euro thousands | USD Notional | PLN Notional | JPY Notional | RUB Notional | MXN Notional | |
| 18,270 | 25,950 | 200,000 | 399.8000 | 177,500 | ||
| USD/000 | PLN/000 | JPY/000 | RUB/000 | MXN/000 | ||
| Depreciation of foreign currencies | 898 | 351 | (97) | 386 | 889 | |
| Currency depreciation EURO | 7 | (2) | (4) | (4) | 20 | |
| Currency depreciation | (7) | (2) | - | 16 | (18) | |
| Sensitivity to depreciation | 898 | 347 | (101) | 398 | 891 | |
| Appreciation of foreign currencies | (1,012) | (396) | 111 | (645) | (713) | |
| Currency appreciation EURO | (7) | 2 | 4 | 4 | (20) | |
| Currency appreciation | 7 | 2 | - | (15) | 18 | |
| Sensitivity to appreciation | (1,012) | (392) | 115 | (656) | (715) |
| Dec 31, 2016 | ||||||
|---|---|---|---|---|---|---|
| In Euro thousands | USD Notional PLN Notional |
JPY Notional | RUB Notional |
CNY Notional |
||
| 183,684 | 79,951 | 228,400 | 400,300 | 47,851 | ||
| USD/000 | PLN/000 | JPY/000 | RUB/000 | CNY/000 | ||
| Depreciation of foreign currencies | 1,470 | (54) | (91) | 395 | (263) | |
| Currency depreciation EURO | 18 | (13) | (4) | (5) | (13) | |
| Currency depreciation | (17) | 12 | - | 19 | 15 | |
| Sensitivity to depreciation | 1,471 | (55) | (95) | 409 | (261) | |
| Appreciation of foreign currencies | (1,622) | (40) | 105 | (658) | 219 | |
| Currency appreciation EURO | (19) | 13 | 4 | 5 | 12 | |
| Currency appreciation | 17 | (12) | 0 | (18) | (16) | |
| Sensitivity to appreciation | (1,624) | (39) | 109 | (671) | 215 |
The is subject to market risk deriving from price fluctuations in commodities used in the production process. The raw materials purchased by the Group (including copper and aluminum) are affected by the trends of the principal markets. The Group regularly evaluates its exposure to the risk of changes in the price of commodities and manages this risk through fixing the price of contracts with suppliers and through hedging contracts with financial counterparties.
In particular, between the end and the beginning of the year, on the basis of the production budget for the year, the prices and quantities were fixed through both channels described above. In this way, the Group hedges the standard cost of the raw materials contained in the budget against possible increases in commodity prices, achieving the operating profit target.
The notional value and the relative value of the copper derivatives in place at December 31, 2017 are reported below:
| Copper hedges | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|
| In Euro thousands | Notional | Fair value | Notional | Fair value |
| Forward | 9,013 | 662 | 8,280 | 1,694 |
| Commodity derivative assets/(liabilities) | 9,013 | 662 | 8,280 | 1,694 |
In addition, commodity risk is measured through sensitivity analyses, in accordance with IFRS 7. The changes in the prices of copper utilised for the sensitivity analysis were based on the volatility of the market rates.
This analysis highlights a revaluation in the price of copper of 5%, resulting in an increase in the fair value of forward contracts at December 31, 2017 of Euro 476 thousand.
Similarly, a reduction of 5% results in a decrease in the fair value of forward contracts of Euro 476 thousand.
The Net change in the hedging reserve account is primarily impacted by this issue, increasing Euro 0.5 million, on Euro 0.3 million.
The management of interest rate risk by Elica is in line with longstanding, consolidated practices to reduce the volatility risk on the interest rates, while at the same time minimising the borrowing costs within the established budget limits. The Group's debt mainly bears a floating rate of interest.
Relating to the Group's debt, from the sensitivity analysis a decrease of 25 bps in the interest rate curve in the short-term incurs lower interest expense of Euro 173 thousand, while an increase of 25 bps in the same interest rate curve converts into higher interest expense of Euro 173 thousand.
The Group hedges the interest rate risk through the utilisation of four interest rate swaps and through CAP options against specific medium-long term loans at a variable rate.
The table below shows the details of the notional and fair values:
| Dec 31, 2017 | Dec 31, 2016 | |||
|---|---|---|---|---|
| Instrument | Notional | Fair value | Notional | Fair value |
| In Euro thousands | ||||
| Interest Rate Swaps | 62,456 | (300) | 49,625 | (465) |
| CAP | 536 | - | 1,583 | - |
| Interest rate derivative assets/(liabilities) | 62,992 | (300) | 51,208 | (465) |
The interest rate risk is also measured through sensitivity analyses, in accordance with IFRS 7. The changes in the interest rate curve utilised for the sensitivity analysis were based on the volatility of the market rates.
The analysis shows that a decrease in the interest rate curve of +/-25 bps converts into a decrease/increase in the Fair Value of the Interest Rate Swap at December 31, 2017 of Euro 186 thousand.
With reference to the CAP options, the sensitivity analysis carried out on the interest rate curves shows against an increase or decrease in the curve of 25 bps, the fair value remains constant.
The credit risks represent the exposure of Elica to potential losses deriving from trading partners' non-compliance with obligations. This risk derives in particular from economic-financial factors related to a potential solvency crisis of one or more counterparties.
The company adopts a Group Credit Policy (attached to the Financial Risk Policy) which governs credit management and the reduction of the related risk, partly through insurance policies with leading international insurance companies.
The maximum theoretical credit risk exposure for the company at December 31, 2017 is based on the carrying amount of the receivables recognised to the accounts, net of the specific insurance coverage, in addition to the nominal value of the guarantees given to third parties. The amount, at the end of December 2017, of receivables covered by insurance or other guarantees was Euro 44.1 million (93.4% of gross receivables).
At December 31, 2017, trade receivables from non-group clients of Euro 50 million (Euro 44.7 million at December 31, 2016), included approx. Euro 6.2 million (Euro 4.3 million at December 31, 2016) concerning overdue receivables, of which Euro 0.3 million over 30 days.
The amount of trade receivables recognised in the statement of financial position is net of the allowance for impairment. The provision is allocated either on a specific basis or on the general basis of overall risks, in accordance with the company's Credit Policy.
For more details, see paragraph 4.23 of these notes.
The liquidity risk represents the risk related to the unavailability of financial resources necessary to meet short-term commitments assumed by the company and its own financial needs.
The principal factors which determine the liquidity of the company are, on the one hand, the resources generated and absorbed by the operating and investing activities and on the other the due dates and the renewal of the payable or liquidity of the financial commitments and also market conditions. These factors are monitored constantly in order to guarantee a correct equilibrium of the financial resources.
The following table shows the expected cash flows in relation to the contractual expiries of trade payables and various financial liabilities from derivatives.
| Dec 31, 2017 | |||
|---|---|---|---|
| In Euro thousands | Within 1 year | 1 - 5 years | After 5 years |
| Bank loans and borrowings | 44,966 | 47,121 | 0 |
| Trade and other payables | 109,143 | 217 | 11 |
| Total | 154,109 | 47,338 | 11 |
| Dec 31, 2016 | |||
| In Euro thousands | Within 1 year | 1 - 5 years | After 5 years |
| Bank loans and borrowings | 48,898 | 33,697 | - |
| Trade and other payables | 107,511 | 441 | 13 |
| Total | 156,409 | 34,138 | 13 |
The company has with major financial counterparties Medium-Long term loan contracts which include an obligation to respect financial covenants based on the consolidated financial statements and/or of the borrowing company.
In particular the structure of the covenants on some of the Medium/long-term loans do not immediately imply default if the ceilings are not complied with, but in the first instance result in an increase in borrowing costs.
At December 31, 2017 the level of the covenants in question were complied with both in relation to the increase in the cost of the loan and the level of default of the credit line.
Management believes that at the present moment, the funds available, in addition to those that will be generated b operating and financing activities, will permit the Grf to satisfy its requirements deriving from investment activities, working capital management and repayment of debt at their due dates.
For details on the net financial position, reference should be made to note 4.37 of the notes.
| In Euro thousands | Dec 31, 2017 | Dec 31, 2016 |
|---|---|---|
| AFS financial assets | 49 | 53 |
| Derivative financial instruments | 8 | - |
| Non-current assets | 57 | 53 |
| Trade receivables and loan assets | 98,615 | 111,220 |
| Derivative financial instruments | 1,006 | 1,835 |
| Cash and cash equivalents | 8,337 | 9,826 |
| Current assets | 107,958 | 122,881 |
| Bank loans and borrowings | 47,121 | 33,697 |
| Derivative financial instruments | 75 | 198 |
| Non-current liabilities | 47,196 | 33,895 |
| Trade and financial payables | 104,771 | 104,207 |
| Bank loans and borrowings | 44,966 | 48,898 |
| Derivative financial instruments | 833 | 1,273 |
| Current liabilities | 150,570 | 154,379 |
The company considers that the book values of the accounts approximate their fair value. In relation to the valuation methods for the individual accounts, reference should be made to paragraph 1 Accounting principles and policies of these Notes.
IFRS 7 requires that the classification of financial instruments valued at fair value is determined based on the quality of the input sources used in the valuation of the fair value.
The IFRS 7 classification implies the following hierarchy:
The classification of the financial instruments may have a discretional element, although not significant, where in accordance with IFRS, the Company utilises, where available, prices listed on active markets as the best estimate of the fair value of derivative instruments.
All the derivative instruments in place at December 31, 2017 and December 31, 2016 belong to level 2 of the fair value hierarchy, except for commodities which belong to level 1.
The table below shows the following information on derivative instruments at December 31, 2017:
| December 31, 2017 | Notional Value | Carrying amount | ||||||
|---|---|---|---|---|---|---|---|---|
| In Euro thousands | Balance Sheet | |||||||
| Interest rate risk | Maturity within 1 year | Maturity over 1 year | ||||||
| Cash Flow hedge as per IFRS | 18,955 | 43,501 | (300) | |||||
| Fair value hedge | ||||||||
| as per IFRS | - | |||||||
| Not considered hedges as per IFRS | 536 | - | ||||||
| Total derivatives on interest rates | 19,491 | 43,501 - |
(300) | |||||
| Foreign currency risks | Maturity within 1 year | Maturity over 1 year | ||||||
| sales | purchases | sales | purchases | |||||
| Cash Flow hedge as per IFRS (Cash Flow Hedge) | 13,828 | 1,481 | 82 | |||||
| Fair value hedge | ||||||||
| as per IFRS | ||||||||
| Not considered hedges as per IFRS | - | 9,444 | (338) | |||||
| Total derivatives on foreign exchange | 13,828 | 10,925 | (256) | |||||
| Management of commodity risk | Maturity within 1 year | Maturity over 1 year | ||||||
| sales | purchases | sales | purchases | |||||
| Cash Flow hedge as per IFRS | 9,013 | 662 | ||||||
| Fair value hedge | ||||||||
| as per IFRS | ||||||||
| Not considered hedges as per IFRS | ||||||||
| Total derivatives on commodities | 9,013 | 662 | ||||||
| December 31, 2016 | Notional Value | Carrying amount | ||||||
| In Euro thousands | Balance Sheet | |||||||
| Interest rate risk | Maturity within 1 year | Maturity over 1 year | ||||||
| Cash Flow hedge as per IFRS | 16,108 | 33,517 | (465) | |||||
| Fair value hedge | ||||||||
| as per IFRS | - | - | - | |||||
| Not considered hedges as per IFRS | 1,031 | 552 | - | |||||
| Total derivatives on interest rates | 17,319 | 34,069 | - | 465 | ||||
| Foreign currency risks | Maturity within 1 year | Maturity over 1 year | ||||||
| sales | purchases | sales | purchases | |||||
| Cash Flow hedge as per IFRS | 8,799 | 9,143 | (123) | |||||
| Fair value hedge | ||||||||
| as per IFRS | ||||||||
| Not considered hedges as per IFRS | 40,617 | 20,935 | (741) | |||||
| Total derivatives on foreign exchange | 49,416 | 30,078 | (864) | |||||
| Management of commodity risk | Maturity within 1 year | Maturity over 1 year | ||||||
| sales | purchases | sales | purchases | |||||
| Cash Flow hedge as per IFRS | 8,280 | 1,694 | ||||||
| Fair value hedge | ||||||||
| as per IFRS | ||||||||
| Not considered hedges as per IFRS | ||||||||
| Total derivatives on commodities | 8,280 | 1,694 |
The details of the process followed in order to identify fair value are shown below:
| Assets/ Financial liabilities In Euro thousands |
Fair value Dec 31, 17 |
Fair value Dec 31, 16 |
Fair value hierarchy |
Valuation techniques & key inputs |
Significant unobservable inputs |
Relationship between the unobservable inputs and the fair value |
|---|---|---|---|---|---|---|
| 1) Currency forwards and options | Assets 344; Liabilities (600). |
Assets 142; Liabilities (1,006). |
Level 2 | (1) | n/a | n/a |
| 2) Interest rate swaps | Assets (*)8; Liabilities (308). |
Liabilities (*) (465) |
Level 2 | (2) | n/a | n/a |
(*) designated hedges
(1) Discounted cash flows. The future cash flows are estimated based on the forward currency rates (from the forward currency rates observable at the end of the period) and the forward contract rates, discounted at a rate which reflects the credit risk of the various counterparties.
(2) Discounted cash flows. The future cash flows are estimated based on the forward interest rates (from the interest rate curve observable at the end of the period) and the interest rate contracts, discounted at a rate which reflects the credit risk of the various counterparties.
As required by law, the total remuneration of Directors, Statutory Auditors and Managers with strategic roles also in other companies are reported below.
The remuneration of the above-mentioned persons in total amounted to Euro 3,745 thousand. This amount does not include the accrual to the Long Term Incentive provision, as per Note 4.31. The details are reported in the remuneration report. This report is available on the company's website https://elica.com/corporation (Investor Relations section).
Elica S.p.A. is indirectly controlled by the Casoli Family through Fintrack S.p.A. of Fabriano (AN - Italy).
Elica S.p.A. is not subject to management and co-ordination pursuant to Article 2497 and subsequent of the Italian Civil Code.
This conclusion derives from the fact that the controlling shareholder does not carry out management activities within the company and, although exercising voting rights at the shareholders' meeting, does not have any involvement in the financial, production or strategic programmes of the company, which is governed by a Board of Directors responsible for operating control. The company's Board of Directors has also appointed an independent CEO for ordinary operational management. The company, therefore, carries out its operations through a totally autonomous and independent decision-making process; it has independent decision-making capacity with clients and suppliers and independently manages its treasury in accordance with the corporate scope.
Francesco Casoli holds a majority of the share capital of Fintrack S.p.A., thus exercising control over the Issuer, pursuant to Article 93 of the Consolidated Finance Act.
During the year, transactions with related parties took place. All transactions were conducted on an arm's length basis in the ordinary course of business. With regards to transfer prices - applied to transactions between Elica S.p.A. and Elica Group Polska and Elicamex - specific Ruling agreements were signed with the National Tax Authorities.
The tables below show key figures for subsidiaries and the amount of transactions performed with them as at and for the year ended December 31, 2017.
| In Euro thousands | Assets | Liabilities | Equity | Revenue | Profit/(loss) |
|---|---|---|---|---|---|
| Elicamex S.A.de C.V. | 49,650 | 31,007 | 18,644 | 70,834 | 7,068 |
| Elica Group Polska Sp.z o.o | 66,788 | 39,072 | 27,716 | 115,513 | 4,001 |
| Airforce S.p.A. | 12,135 | 8,618 | 3,517 | 23,469 | 493 |
| Ariafina CO., LTD | 10,145 | 3,139 | 7,006 | 22,358 | 2,955 |
| Leonardo S.A.de C.V. | 1,091 | 1,028 | 63 | 9,731 | 262 |
| Elica Inc. | 422 | 194 | 228 | 956 | 30 |
| Airforce GE (*) | 10 | 5 | 5 | - | (22) |
| Elica PB India Private Ltd. | 13,015 | 7,943 | 5,073 | 24,295 | 1,828 |
| Zhejiang Elica Putian Electric Co. Ltd | 22,048 | 27,802 | (5,754) | 16,784 | (5,229) |
| Elica Trading LLC | 5,442 | 4,786 | 656 | 11,410 | (189) |
| Elica France S.A.S. | 4,518 | 4,015 | 502 | 10,249 | 447 |
| Elica GmbH | 2,607 | 1,224 | 1,383 | 1,695 | (142) |
Elica also carries out transactions with Group companies as part of a general plan to centralise treasury management activities. These loans are interest bearing and at market rates. The details are shown below:
| Dec 31, 2017 | Dec 31, 2016 | Changes | |
|---|---|---|---|
| In Euro thousands | |||
| Loans from subsidiaries | |||
| Zhejiang Elica Putian Electric Co. Ltd | 3,853 | 3,929 | (76) |
| Elica PB India Private Ltd. | 2,464 | 3,776 | (1,312) |
| Elica France S.A.S. | 433 | 433 | - |
| Elicamex S.A. | 8,294 | 4,327 | 3,967 |
| Elica Group Polska S.p.z.oo | 2,009 | 4,277 | (2,268) |
| Exklusiv Hauben Gutmann GmbH | - | 11,150 | (11,150) |
| 17,053 | 27,891 | (10,839) | |
| Loans to subsidiaries | |||
| Elicamex S.A. | 1,380 | 874 | 506 |
| Ariafina Co.Ltd | 1,481 | 1,621 | (140) |
| 2,861 | 2,495 | 366 |
The table below summarises the transactions and balances with related parties in 2017:
| Related Parties | Trade/ Financial/ Derivative assets |
Trade/ Financial/ Derivative liabilities |
Revenue, Other Revenue and Financial Income |
Financial Costs and Charges |
|---|---|---|---|---|
| In Euro thousands | ||||
| subsidiaries | ||||
| Elicamex S.a.d. C.V. | 17,049 | 1,473 | 12,280 | 79 |
| Ariafina Co.Ltd | 319 | 1,498 | 323 | 49 |
| Elica Group Polska S.p.z.oo | 12,515 | 25,449 | 40,698 | 111,525 |
| Air Force S.p.A. | 389 | 245 | 1,504 | 748 |
| Zhejiang Elica Putian Electric Co. Ltd | 8,511 | 1,081 | 1,144 | 3,526 |
| Exklusiv Hauben Gutmann GmbH | - | 2,905 | 1,274 | |
| Elica PB India Private Ltd. | 3,222 | 159 | 1,312 | 166 |
| Elica Trading LLC | 3,292 | 231 | 6,207 | 266 |
| Elica France S.A.S. | 2,253 | 32 | 6,973 | 68 |
| Elica GmbH | 1,069 | 1,057 | - | |
| associates | ||||
| I.S.M. S.r.L. | 2 | - | 1 | - |
| other related parties | ||||
| Fastnet S.p.a. | - | 51 | - | 52 |
Dividends are not reported in the present table.
Among the other related parties, Elica only carries out transactions exclusively of a trading nature with Fastnet S.p.A.. There are no transactions with Fintrack S.p.A. and with FAN S.r.l..
The table above shows the main operating and financial amounts arising from trading transactions with Fastnet S.p.A. (40.81% interest held by the parent of Elica).
The trading relationship with Fastnet S.p.A. is part of a strategic partnership to develop projects and implement advanced technological solutions; these projects have accompanied and continue to accompany the growth of the business: from intranet solutions to extranet solutions, from wiring to wireless solutions, from software consultancy to hardware consultancy and from training to web marketing.
In 2017, there were no such transactions to be reported.
For information on events after the year-end, reference should be made to the directors' report.
Dear Shareholders,
in relation to the motion at Point 1.1 on the Agenda:
1.1 Approval of the financial statements as at and for the year ended December 31, 2017; Directors' report; Board of statutory auditors' report; Non-financial statement; Independent auditors' report. Presentation of the consolidated financial statements at December 31, 2017;
We inform that the 2017 financial statements, which we present for your approval, report a loss of Euro 22,111,813 and equity of Euro 86,069,316.
More generally, we propose approval of the 2017 Separate financial statements, collectively and individually, the directors' report and the review of the Board of statutory auditors' report and the Independent auditors' report, in addition to the consolidated financial statements at December 31, 2017.
In relation to the motion at Point 1.2 on the Agenda:
1.2 Resolutions on the loss for the year.
We propose the coverage of the loss through utilisation of "Income-related reserves".
We thank you for your assistance.
Fabriano, March 15, 2018 The Board of Directors THE EXECUTIVE CHAIRMAN Francesco Casoli
The following table, prepared pursuant to Article 149-duodecies of the Consob Issuers Regulations, shows the payments made in 2017 for audit and other services provided by the independent auditors and entities associated with them.
| Type of service | Service provider | Company | Fees |
|---|---|---|---|
| In Euro thousands | |||
| Audit | Kpmg. S.p.A. | Elica S.p.A. | 175 |
| Other Services | Kpmg. S.p.A. | Elica S.p.A. | 36 |
| Other Services | Kpmg Advisory S.p.A. | Elica S.p.A. | 24 |
| KPMG network fees | 235 |
I, the undersigned Antonio Recinella, as Chief Executive Officer, and Alessandro Carloni, Corporate Financial Reporting Manager of Elica S.p.A., in consideration of Article 154-bis, paragraphs 3 and 4, of Legislative Decree no. 58 of February 24, 1998, attest to:
the adequacy considering the company`s characteristics and
the effective application,
of the administrative and accounting procedures for the compilation of the financial statements for 2017. We also attest that:
• the financial statements:
a) correspond with the accounting books and records;
b) were prepared in accordance with the IFRS endorsed by the European Union and with Article 9 of Legislative Decree no. 38/2005;
c) provide a true and correct representation of the balance sheet, financial situation and result for the year of the issuer.
• The directors' report includes a reliable analysis on the performance and operating result as well as the situation of the issuer together with a description of the principal risks and uncertainties to which they are exposed.
Fabriano, March 15, 2018
The Chief Executive Officer Corporate financial Antonio Recinella reporting manager
Alessandro Carloni
| Key audit matter | Audit procedures addressing the key audit matter |
|---|---|
| The separate financial statements at 31 December 2017 include goodwill of €23.3 |
Our audit procedures, which also involved our own valuation specialists, included: |
| million. At least annually, the directors determine the recoverable amount of goodwill by calculating its value in use. This method, by its very nature, requires a high level of directors' judgement about the forecast operating cash flows during the calculation period, as well as the discount and growth rates of those cash flows. The directors have forecast the operating cash flows on the basis of the 2018-2022 forecasts (the"2018-2022 forecasts") and the revenue's estimated long-term growth rates and profitability. For the above reasons, we believe that the recoverability of goodwill is a key audit matter. |
understanding and analysing the process used to prepare the 2018-2022 forecasts; |
| analysing the reasonableness of the key assumptions used by the directors to determine the recoverable amount of goodwill. Our analyses included comparing the key assumptions used to the Company's historical data and |
|
| external information, where available; analysing the valuation models adopted by the Company for reasonableness and consistency with professional practice; |
|
| checking the sensitivity analyses disclosed in the notes with reference to the key assumptions used for impairment testing, including raw material cost, the weighted average cost of capital and the long-term growth rate; |
|
| assessing the appropriateness of the disclosures provided in the notes about goodwill and related impairment test. |
| Key audit matter | Audit procedures addressing the key audit matter |
|---|---|
| The separate financial statements at 31 December 2017 include the investment in the subsidiary Zhejiang Elica Putian Electric Co. Ltd ("Elica China") of €13.7 million. The directors have determined the recoverable amount of the investment in Elica China by calculating its value in use. This method, by its very nature, requires a high level of judgement about the forecast operating cash flows during the calculation period, as well as the discount and growth rates of those cash flows. |
Our audit procedures, which also involved our own valuation specialists, included: — understanding and analysing the process used to prepare the 2018-2022 forecasts: analysing the reasonableness of the key assumptions used by the directors to determine the recoverable amount of the investment in Elica China. Our analyses included comparing the key assumptions used to the Company's historical data and external information, where available: |
| Key audit matter | Audit procedures addressing the key audit matter |
|---|---|
| The separate financial statements at 31 December 2017 include costs of $€8.2$ million incurred to develop new products, comprising €0.7 million recognised as intangible assets under development and payments on account. The capitalisation of development costs requires directors' estimates, as their recoverability depends on the forecast cash flows from the sale of the products sold by the Company. These estimates are based on both the complex assumptions underlying the projections of revenue and profitability and the directors' strategic business decisions. Due to the complexity and subjectivity of the above estimates, we believe that the recovery of development costs is a key audit matter. |
Our audit procedures included: understanding the process for the assessment of the recoverability of development costs and assessing the design and implementation of controls and procedures to assess the operating effectiveness of material controls: analysing the trend of the most significant discrepancies in costs capitalised on a regular basis, comparing them with the previous year and discussing the findings with the relevant internal departments; analysing the recoverability valuation models adopted by the Company for reasonableness and consistency with professional practice and sample-based reasonableness test of the forecast variables: assessing the appropriateness of the disclosures provided in the notes about |
| development costs. |
| Key audit matter | Audit procedures addressing the key audit matter |
|---|---|
| The separate financial statements at 31 December 2017 include provisions for legal risks of $€6.7$ million. Estimating the provisions for legal risks is extremely complex and of an uncertain nature. The Company regularly reviews the carrying amount of the provisions for risks and charges to obtain the present best estimate of each accrual. Due to the complexity and uncertainty of the above estimates, we believe that the measurement of provisions for legal risks is a key audit matter. |
Our audit procedures included: understanding the process for the assessment of provisions for legal risks and assessing the design and implementation of controls and procedures to assess the operating effectiveness of material controls; analysing documents and discussing the method used to calculate the provisions for legal risks with the relevant internal departments; sending written requests for confirmation to the external advisors assisting the directors with the remeasurement of the provisions for legal risks; assessing the appropriateness of the disclosures provided in the notes about the provisions for legal risks. |
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