Annual Report • Apr 6, 2017
Annual Report
Open in ViewerOpens in native device viewer
DIRECTORS' REPORT
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES
BASICNET S.P.A. FINANCIAL STATEMENTS AND EXPLANATORY NOTES
| Corporate boards of BasicNet S.p.A. 1 | |
|---|---|
| 2016 Operational overview and events 5 | |
| 2016 Financial performance overview 7 | |
| The Group 7 | |
| The Parent company 12 | |
| Reconciliation between consolidated net profit and Parent company net profit 13 | |
| The BasicNet share price 14 | |
| Principal risks and uncertainties 15 | |
| Proposal to the Shareholders' AGM for the allocation of the net profit for the year 18 | |
| The Group at a glance 19 | |
| Human resources 23 | |
| Information on the environment 24 | |
| Other information 24 | |
| Treasury shares 24 | |
| Stock option plans 24 | |
| Shares held by Directors and Statutory Auditors 25 | |
| Transactions with holding companies, associates, other investments and related parties 25 | |
| Research and development 25 | |
| Corporate governance and ownership structure report 26 | |
| BasicNet Group consolidated income statement 54 | |
| Consolidated comprehensive income statement 55 | |
| BasicNet Group consolidated balance sheet 56 | |
| Consolidated cash flow statement of the BasicNet group 57 | |
| Statement of changes in consolidated shareholders' equity 58 | |
| Consolidated net cash position 59 | |
| Explanatory notes 60 | |
| Attachment 1 - Disclosure pursuant to article 149 duodecies of the Consob Issuers' Regulation 109 | |
| Attachment 2 - Companies included in the consolidation under the line-by-line method 110 | |
| Attachment 3 - Declaration of the consolidated financial statements pursuant to article 154-bis | |
| paragraph 5 and 5-bis of Legislative Decree no. 58 of February 24, 1998 "Financial | |
| intermediation act" 112 | |
| BasicNet S.p.A. – income statement 114 | |
| BasicNet S.p.A. – comprehensive income statement 115 | |
| BasicNet S.p.A. – balance sheet 116 | |
| BasicNet S.p.A. – cash flow statement 117 | |
| BasicNet S.p.A. – statement of changes in shareholders' equity 118 | |
| BasicNet S.p.A. – net financial position 119 | |
| BasicNet S.p.A. – 2016 income statement prepared as per Consob resolution no. 15519 of July 27, 2006 120 |
|
| BasicNet S.p.A. – balance sheet as at December 31, 2016 prepared as per Consob resolution no. | |
| 15519 of July 27, 2006 121 | |
| BasicNet S.p.A. – cash flow statement as at December 31, 2016 prepared as per Consob resolution no. | |
| 15519 of July 27, 2006 122 | |
| Explanatory notes 124 | |
| Attachment 1 - Investments at December 31, 2016 166 | |
| Attachment 2 - Declaration of the financial statements pursuant to article 154-bis paragraph 5 and 5- | |
| bis of Legislative Decree no. 58 of February 24, 1998 "Financial intermediation act" 169 | |
| Attachment 3 - Disclosure pursuant to article 149 duodecies of the Consob Issuers' Regulation 170 | |
BasicNet Group - Consolidated & Separate Financial Statements at December 31, 2016 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| Marco Daniele Boglione | Chairman |
|---|---|
| Daniela Ovazza Franco Spalla |
Vice Chairpersons |
| Giovanni Crespi | Chief Executive Officer |
| Paola Bruschi | Directors |
| Paolo Cafasso | |
| Elisa Corghi (1) | |
| Alessandro Gabetti Davicini | |
| (1) Renate Hendlmeier |
|
| (1) Adriano Marconetto |
|
| Carlo Pavesio | |
| Elisabetta Rolando | |
| (1) Independent Directors |
| Carlo Pavesio | Chairman |
|---|---|
| Elisa Corghi | |
| Renate Hendlmeier | |
| Adriano Marconetto | |
| Daniela Ovazza |
| Renate Hendlmeier | Chairman |
|---|---|
| Elisa Corghi | |
| Adriano Marconetto |
Maria Francesca Talamonti Chairman
Massimo Boidi Statutory Auditors Carola Alberti
Giulia De Martino
Fabio Pasquini Alternate Auditors
"We bring together a large number of entrepreneurs across the world for a common goal. We manage all the critical data along the supply chain. We earn service commissions for approx. one-third of the added value generated by the entire process, capitalising all the enhanced value of the trademarks from the development of sales. We achieve this through continually sourcing state-of-the-art software technologies and peerless internet integration to manage all the processes of our business".
Marco Boglione, 1999
Dear Shareholders,
2016 featured a highly uncertain international political climate and a complex general economic environment. Against this backdrop, the Group:
The 2016 Key Financial Highlights were as follows:
Parent Company Key Financial Highlights:
In relation to the "alternative performance indicators", as defined by CESR/05-178b recommendation and Consob Communication DEM/6064293 of July 28, 2006, we provide below a definition of the indicators used in the present Directors' Report, as well as their reconciliation with the financial statement items:
| | Commercial licensee aggregate sales: | sales by commercial licensees, recognised by the BasicNet Group to the "royalties and sourcing commissions" account of the income statement; |
|---|---|---|
| | Productive licensee aggregate sales: | sales by productive licensees, recognised by the BasicNet Group to the "royalties and sourcing commissions" account of the income statement; |
| | EBITDA: | "operating result" before "amortisation and depreciation". |
| | EBIT: | "operating result"; |
| | Contribution margin on direct sales: | "gross profit"; |
Net debt: total of current and medium/long-term financial payables, less cash and cash equivalents and other current financial assets.
The actions taken to develop the international presence of the Brands in 2016 included:
The development in many countries of the retail channel continued with new openings by licensees of K-Way® and Superga® mono-brand stores. At December 31, 2016, Group Brand stores in Italy numbered 203.
Following the new openings, Kappa® and Robe di Kappa® sales points of the licensees globally numbered 948 (of which 113 in Italy), while the Superga® brand had 170 sales points (of which 66 in Italy), with 37 K-Way® brand stores (25 in Italy).
In March, BasicNet S.p.A. and Briko S.p.A. signed exclusive global distribution agreements to be operated by BasicNet for all Briko® brand products, with an option to acquire the brand by June 30, 2019. The maximum value of the option is Euro 3 million, as the pre-established amounts in the case of advance exercise.
The operations rolled out in the initial months of the Brand's management were promising and highlight the investment's suitability.
Last December, following the strategic concentration within the Kappa® brand of all winter sport collections, the Group sold to the Besson family 50% of the company which owns the AnziBesson® brand.
The Group acquired through BasicVillage S.p.A. a property located in Turin, adjacent to the already owned headquarters. The purchase price was Euro 2 million, with the property covering 2,756 square metres.
At year-end, BasicNet S.p.A. agreed a six-year medium/long-term loan of Euro 7.5 million with Banca Nazionale del Lavoro S.p.A. repayable over quarterly instalments. This operation permitted the purchase of the building outlined in the previous paragraph and rebalances the short and medium/long-term debt.
The Kappa® brand is historically associated with high profile sponsorships.
Intense sponsorship activity continued both domestically and internationally, following on from the major investment last year in SSC Napoli by the Italian licensee, in the Leeds United football team for the English market, in Standard Liège Football Club for Belgium, in addition to Dtla and Becamex by the Vietnamese licensee.
In 2016, the Brazilian licencee signed a sponsorship agreement with Santos F.C.. The Brazilian team, which counts on its Facebook page alone nearly 3.5 million fans, will wear the new Kombat® jersey until 2018. Last December, the Kappa® Nicaraguan licensee signed a sponsorship with Nicaragua Real Estelì FC.
The English licensee signed a three-year agreement with the British Basketball League (BBL), representing an absolute first for English basketball, covering all men's and women's teams of the BBL and WBBL (Women's BBL) organisations and all men's, women's and junior British international teams.
The French licensee began its sponsorship of Montpellier Hérault Rugby Club, of the Swiss Rugby Federation and of Toronto Wolfpack, in addition to renewing until 2020 the sponsorship of Rugby Union Bordeaux Bègles.
The Kappa® sponsored athletes participating in the Rio Olympics and Paralympic achieved excellent results: the Italian Fencing Federation, the Italian Judo Karate and Martial Arts Federation, the Italian Rowing Federation, the Italian Canoe and Kayak Federation and the Italian Golf Federation.
Ahead of its natural conclusion, the important contract between the BasicNet Group and the Italian Winter Sports Federation was renewed until 2022.
With this new sponsorship agreement, Italian Winter Sports Federation (FISI) athletes – after Sochi 2014 and PyeongChang 2018 – will participate also at the Beijing 2022 Winter Olympics, wearing in competition the Kappa® logo and other Group brands.
In addition, this agreement includes the sponsorship and non-exclusive licensing of Briko® brand helmets, masks and eyewear (held by BasicNet), equipping also a number of FISI team members.
In terms of events, Kappa® in Italy sponsors the "Kappa Futur Festival" and the "Movement Torino Music Festival", which have a growing appeal in the electronic music world, welcoming thousands of young people from across the globe to Turin.
For the Superga® brand, following on from the numerous co-branding initiatives with leading stylists and prestigious international clothing and footwear brands already in place, initiatives were rolled out with the New York store Del Toro for the DT X Superga collection, with "Esibizionismo" for the Esibizionismo X Superga collection, launched by Superga UK with the model Esom who, after being the face of the Q1Q2 Superga campaign in Asia, created a 2750 model personalised with their name.
Following on from the London actor and model Jack Guiness and the designer Charlie Casely-Hayford, known as one of the most elegant men in Great Britain, the new Superga Ambassador is the blogger Trevor Stuurman.
Further to the many initiatives developed and finalised for the creation of the capsule collection, new collaborations were undertaken with IKKS for children's jackets to be distributed in France, Belgium, the Netherlands, Luxembourg, Switzerland, Spain and online, with the Parisian concept store Colette for the K-WAY X les(Art)ists collection and with the luxury brand created by Alessandro Dell'Acqua.
Peter Fill is the first athlete in the history of the Italian Winter Sport Federation, sponsored by Kappa®, to win the World Men's downhill World Cup and is the new face of the brand until 2018 for Briko® eyewear, helmets and masks.
The condensed income statement for the year is reported below:
| (In Euro thousands) | FY 2016 | FY 2015 | Changes |
|---|---|---|---|
| Group Brand Aggregate Sales by the Network of commercial and productive licensees * |
739,979 | 730,523 | 9,456 |
| Royalties and sourcing commissions | 46,424 | 46,547 | (123) |
| Consolidated direct sales | 135,183 | 133,941 | 1,242 |
| EBITDA ** | 21,502 | 32,049 | (10,547) |
| EBIT ** | 15,241 | 25,709 | (10,468) |
| Group Net Profit | 10,305 | 16,760 | (6,455) |
| Basic earnings per share | 0.1839 | 0.2953 | (0.1114) |
* Data not audited
** For the definition of the indicators reference should be made to paragraph 4 of the present Report
The breakdown of sales and production revenues generated through the global Group licensees was as follows:
| FY 2016 | FY 2015 | Changes | ||
|---|---|---|---|---|
| (In Euro thousands) Aggregate Sales of the Group licensees * |
Total | Total | Total | % |
| Commercial Licensees | 532,702 | 516,691 | 16,011 | 3.10 |
| Productive Licensees (sourcing centers) | 207,277 | 213,832 | (6,555) | (3.07) |
| Total | 739,979 | 730,523 | 9,456 | 1.29 |
* Data not audited
| FY 2016 | FY 2015 | Changes | ||||
|---|---|---|---|---|---|---|
| (In Euro thousands) Aggregate Sales of the Group Commercial licensees * |
Total | % | Total | % | Total | % |
| Europe | 332,785 | 62.5% | 324,982 | 62.9% | 7,803 | 2.4% |
| The Americas | 43,880 | 8.2% | 30,182 | 5.8% | 13,698 | 45.4% |
| Asia and Oceania | 96,681 | 18.2% | 99,509 | 19.3% | (2,828) | (2.8%) |
| Middle East and Africa | 59,356 | 11.1% | 62,018 | 12.0% | (2,662) | (4.3%) |
| Total | 532,702 | 10.00% | 516,691 | 100.0% | 16,011 | 3.1% |
The regional breakdown of commercial licensee aggregate sales was as follows:
* Data not audited
and of the productive licensees:
| FY 2016 | FY 2015 | Changes | ||||
|---|---|---|---|---|---|---|
| (In Euro thousands) Aggregate Sales of the Group Productive licensees * |
Total | % | Total | % | Total | % |
| Europe | 18,574 | 8.9% | 13,918 | 6.5% | 4,656 | 33.5% |
| The Americas | 14,846 | 7.2% | 4,310 | 2.0% | 10,536 | 244.5% |
| Asia and Oceania | 173,441 | 83.7% | 195,180 | 91.3% | (21,739) | (11.1%) |
| Middle East and Africa | 416 | 0.2% | 424 | 0.2% | (8) | (2.0%) |
| Total | 207,277 | 100.00% | 213,832 | 100.0% | (6,555) | (3.1%) |
* Data not audited
Commercial licensee aggregate sales of Euro 532.7 million increased 3.1% at current exchange rates, from Euro 516.7 million in 2015.
The sales of the main Group brands through the network of Commercial Licensees was as follows:
| (In Euro thousands) | FY 2016 | FY 2015 Changes |
||||
|---|---|---|---|---|---|---|
| Kappa & Robe di Kappa | 360,426 | 67.7% | 349,062 | 67.7% | 11,364 | 3.3% |
| Superga | 113,634 | 21.3% | 116,470 | 22.6% | (2,836) | (2.4%) |
| K-Way | 53,909 | 10.1% | 50,243 | 9.7% | 3,666 | 7.3% |
* Data not audited
Kappa® and Robe di Kappa® revenues grew overall 3.3%.
Excellent American market performance (+54.4%) following a number of new licenses becoming fully operational, including those for Costa Rica and Chile, in addition to the development of more mature markets (Argentina and Brazil). This latter benefitted from Kappa®/Santos F.C. joint brand sales associated with the football team's new sponsorship.
The European market saw sales growth in Scandinavia and Russia, while certain markets contracted, including Great Britain and the Balkan countries, which slowed amid a transition from the recently replaced former licensees.
Asia - which substantially remains stable - saw good growth in India and Vietnam, while Thai and Hong Kong sales slowed due to political instability and a drop in Chinese tourism.
The Middle Eastern and African markets were affected most by the political instability.
The Superga® brand grew in the Americas (+42.7%), in particular in the United States, while the licenses for the territories of Chile, Colombia and Panama became fully operational.
In Europe, growth was seen in Germany (+42.6%), Northern Europe (+56.3%) and the Netherlands (+89.1%), while slowdowns were evident in Turkey and Greece due to political instability in the former case and economic difficulties in the latter. In Italy, where the brand distribution channels were restructured, thereby sacrificing some revenues in favour of better brand positioning, revenues reduced 10.7%.
The Asian market was also hit by the interruption to the license held by the Indian licensee due to disagreements on commercial methods and the slowdown on the Chinese and Hong Kong and South Korean markets. Overall, the Brand reported a 2.4% contraction on the previous year.
The K-Way® brand (+7.3%) reported its strongest commercial growth in Asia (+37.4%), with development of the Japanese market and improved South Korean sales. Growth was 6.2% in Europe (Italian, French and Belgium market development).
The Briko® brand acquired under license in the second quarter of the year, returned (mainly in Italy) revenues of approx. Euro 4.2 million since its acquisition under license.
The sales of the productive licensees (Sourcing Centers) are only made to commercial licensees or entities within the "operated by BasicNet" scope. The production licenses issued to the Sourcing Centers, differing from those issued to the commercial licensees, do not have regional limitations, but are rather based on technical production and business competences. Product sales by the Sourcing Centers to commercial licensees are made in advance of those made by the latter to the end customer.
As a result of increased revenues, consolidated royalties and souring commissions, and therefore not including the royalties of the directly-held Italian licensees, amounted to Euro 46.4 million, substantially in line with the previous year.
Total sales of the investee BasicItalia S.p.A and its subsidiary BasicRetail S.r.l amounted to Euro 135.2 million - up 1% on Euro 133.9 million in 2015. This result is even more impressive in view of the contracting Italian market and distribution network selection which saw a portion of revenues sacrificed as certain commercial channels are not reflective of brand positioning - in particular for the Superga® brand.
The contribution margin on sales was Euro 54.3 million, substantially in line with Euro 54.8 million in 2015. The revenue margin was 40.1% (40.9% in 2015), impacted by the strengthening of the US Dollar against the Euro in terms of the cost of sales.
Other income, amounting to Euro 2.2 million compared to Euro 4 million in 2015, includes indemnities received against brand counterfeiting and unauthorised usage actions and royalties from sales by licensees of Group brand promotional products.
Investments in communication and overhead costs report the following movements:
selling, general and administrative costs and royalties expenses amounted to Euro 37.4 million, increasing 6.8% on 2015. Of these, selling costs (due to the altered mix), new directly managed sales point lease charges, trade fairs and exhibition and marketing and media expenses increased. These latter, in particular, rose approx. Euro 1.2 million (+66.3% on 2015), resulting in an overall increase in communication costs to Euro 6.1 million (+29% on 2015).
EBITDA of Euro 21.5 million decreased 32.8% (Euro 32 million in 2015).
Amortisation and depreciation amounted to Euro 6.3 million. The account includes amortisation and writedowns for certain key money recognised to third parties on Italian sales points for Euro 354 thousand.
EBIT amounted to Euro 15.2 million (Euro 25.7 million in 2015).
The 2015 figure included net exchange gains of approx. Euro 3 million from the hedging of US Dollar purchases, which were particularly effective due to the sudden rise in the value of the US Dollar in the year. Again in 2016 hedges were maximised and against more contained currency fluctuations still generated net exchange gains of Euro 1.2 million. Financial charges in service of the debt of Euro 1.6 million reduced Euro 0.6 million on 2015 due to more competitive funding costs.
The consolidated pre-tax profit was Euro 14.9 million (Euro 26.4 million in 2015).
Consolidated net profit, after current and deferred taxes of approx. Euro 4.6 million, amounted to Euro 10.3 million compared to Euro 16.8 million in 2015, decreasing 38.7%.
The 2016 tax rate reduced on 2015 with the entry into force of the "Patent Box" intellectual property tax break which the Group company brand licensees applied for at the end of the previous year. The rule, as applicable to Group companies, establishes that a part of the potential tax benefit is subject to Tax Agency authorisation through a ruling for which an application has been presented. The benefits from this tax break are not yet apparent as the application is currently under consideration by the Tax Agency. The portion of the benefit not subject to the ruling however has been recognised, also relating to 2015, improving the tax charge overall by approx. Euro 1.2 million.
The Financial Highlights by Group segment were as follows:
The financial statements by segment are reported at Note 7 of the Notes to the consolidated financial statements.
The changes in the balance sheet are reported below:
| (In Euro thousands) | December 31, 2016 December 31, 2015 | Changes | |
|---|---|---|---|
| Property | 23,226 | 21,951 | 1,275 |
| Brands | 34,103 | 34,208 | (105) |
| Non-current assets | 25,469 | 25,015 | 454 |
| Current assets | 130,392 | 123,998 | 6,394 |
| Total Assets | 213,190 | 205,172 | 8,018 |
| Group shareholders' equity | 94,880 | 92,511 | 2,369 |
| Non-current liabilities | 26,430 | 26,449 | (19) |
| Current liabilities | 91,880 | 86,212 | 5,668 |
| Total liabilities and shareholders' equity | 213,190 | 205,172 | 8,018 |
| (In Euro thousands) | December 31, 2016 December 31, 2015 | Changes | |
|---|---|---|---|
| Net financial position – Short-term | (27,945) | (24,796) | (3,149) |
| Financial payables – Medium-term | (19,914) | (19,021) | (893) |
| Finance leases | (1,600) | (1,545) | (55) |
| Total net financial position | (49,459) | (45,362) | (4,097) |
| Net Debt/Equity ratio (Net financial position/Shareholders' equity) |
0.52 | 0.49 | 0.03 |
The movements in fixed assets relate to investments, amounting to Euro 7.8 million, for the development of software programmes for Euro 2.1 million, EDP and furniture and fittings for Euro 2.4 million, expenses incurred for the management of proprietary brands, goodwill and store improvements for Euro 1.3 million and the previously mentioned property investment for Euro 2 million. The assets are depreciated for a total Euro 6.3 million.
Consolidated net debt, including finance leases (Euro 1.6 million) and property loans (Euro 9.6 million), increased from Euro 45.4 million at December 31, 2015 to Euro 49.5 million at December 31, 2016, with dividends distributed of approx. Euro 5.6 million, investments in the year of approx. Euro 7.8 million and treasury share investments of Euro 3.1 million.
In November, Banca Nazionale del Lavoro S.p.A. issued a medium-term loan of Euro 7.5 million. The sixyear loan, amortising quarterly, without covenants and with an advanced repayment facility, will support developmental investment, in addition to optimising the overall debt duration. The loan is guaranteed by a second level mortgage on the BasicVillage property and a first level mortgage on the newly acquired building, for whose purchase it was partially utilised.
BasicNet Group - Consolidated & Separate Financial Statements at December 31, 2016 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The debt/equity ratio at December 31, 2016 increased to 0.52 (0.49% at December 31, 2015), including the mortgage loans on property acquired.
The parent company condensed income statement compared to the previous year is reported below:
| (In Euro thousands) | FY 2016 | FY 2015 | Changes |
|---|---|---|---|
| Royalties and sourcing commissions | 27,366 | 27,327 | 39 |
| Direct sales and other income | 9,218 | 8,963 | 255 |
| EBITDA * | 11,048 | 12,618 | (1,570) |
| EBIT * | 8,874 | 10,544 | (1,670) |
| Dividends from subsidiaries | 1,500 | 5,400 | (3,900) |
| Net Profit | 7,421 | 12,070 | (4,649) |
* For the definition of the indicators reference should be made to paragraph 4 of the present Report
The results of the separate financial statements of the Parent Company reflect the developments of the overall activity as described within the consolidated financial statements and with specific reference to the activities undertaken on the international markets.
Royalties and sourcing commissions of Euro 27.4 million grew 0.1% on 2015.
Direct sales and other income amounted to Euro 9.2 million, up Euro 255 thousand on the previous year. Other income principally refers to payments for intercompany assistance services charged to the subsidiaries BasicItalia S.p.A., Basic Trademark S.A. (approx. Euro 5.2 million), Superga Trademark S.A. and Basic Village S.p.A..
In 2016, selling, general and administrative expenses, including those in support of marketing and international media activity, rose approx. Euro 1.9 million - in further support of communication and structural investment and also following the direct development of the Briko® brand undertaken by BasicNet.
EBIT decreased 15.2% to Euro 8.9 million, following amortisation and depreciation of Euro 2.2 million.
During the year, the subsidiary Basic Properties B.V. distributed dividends of Euro 1.5 million, against 5.4 million in 2015 which included also dividends from Basic Trademark S.A.. This latter has not distributed advances on the dividend in 2016 due to the increased communication investment support for BasicItalia S.p.A. and other Network licensees.
The application of the impairment test on the value of the investments did not result in any adjustments.
On the basis of the above items, the net profit amounted to approx. Euro 7.4 million, after income taxes of Euro 3.2 million.
| (In Euro thousands) | December 31, 2016 | December 31, 2015 | Changes |
|---|---|---|---|
| Non-current assets | 5,776 | 5,562 | 214 |
| Brands | 8,106 | 8,096 | 10 |
| Investments | 36,230 | 36,345 | (115) |
| Current assets | 86,194 | 83,056 | 3,138 |
| Total assets | 136,306 | 133,059 | 3,247 |
| Shareholders' Equity | 86,786 | 88,049 | (1,263) |
| Non-current liabilities | 14,642 | 13,302 | 1,340 |
| Current liabilities | 34,878 | 31,708 | 3,170 |
| Total liabilities and shareholders' equity |
136,306 | 133,059 | 3,247 |
| (In Euro thousands) | December 31, 2016 December 31, 2015 | Changes | |
|---|---|---|---|
| Net financial position – Short-term | (9,820) | (7,353) | (2,467) |
| Financial payables – Medium-term | (11,875) | (9,375) | (2,500) |
| Finance leases | (85) | (68) | (17) |
| Financial position with third parties | (21,780) | (16,796) | (4,984) |
| Group financial receivables/(payables) | 64,757 | 61,852 | 2,905 |
| Financial position with the Group | 64,757 | 61,852 | 2,905 |
| Total net financial position | 42,977 | 45,056 | (2,079) |
Medium/long-term loans include contractual clauses, specific guarantees and restrictions on shareholder control.
The non-current assets include investments in the year, principally relating to the strategic IT sector, for approx. Euro 1.8 million and the purchase of plant and equipment for Euro 0.6 million. The value of tangible and intangible assets are recorded net of amortisation and depreciation for the year of Euro 2.2 million.
Shareholders' Equity at December 31, 2016 was Euro 86.8 million (Euro 88 million in 2015), following the distribution in 2016 of dividends for Euro 5.6 million and the acquisition of treasury shares for approx. Euro 3.1 million.
The net cash position was Euro 43 million, reducing on Euro 45 million in 2015.
The reconciliation at December 31, 2016 between the Parent Company net equity and result and the consolidated net equity and result is reported below.
| (In Euro thousands) | Net Profit | Shareholders' Equity |
|---|---|---|
| Financial statements of BasicNet S.p.A. | 7,421 | 86,786 |
| Result and net equity of the consolidated companies and value at equity |
4,384 | 8,094 |
| Elimination of the dividends received by the Parent Company | (1,500) | - |
| Group consolidated financial statements | 10,305 | 94,880 |
The Share Capital of BasicNet S.p.A. consists of 60,993,602 ordinary shares of a nominal value of Euro 0.52 each.
The key stock market figures for the years 2016 and 2015 are reported in the following table:
| 31/12/2016 | 31/12/2015 | |
|---|---|---|
| SHARE PRICE INFORMATION | ||
| Earnings per share | 0.1839 | 0.2953 |
| Net equity per share | 1.556 | 1.517 |
| Price per share/Net equity per share | 2.154 | 3.198 |
| Dividend per share (1) | 0.0600 | 0.1000 |
| Pay out ratio (1) (2) | 32.3% | 33.6% |
| Dividend Yield (1) (3) | 1.79% | 2.06% |
| Price at year-end | 3.350 | 4.850 |
| Maximum price in year | 4.820 | 4.940 |
| Minimum price in year | 2.600 | 2.220 |
| Stock market capitalisation (in thousands of | ||
| Euro) | 204,329 | 295,819 |
| Total number of shares | 60,993,602 | 60,993,602 |
| Shares outstanding | 56,029,468 | 56,751,534 |
(1) dividends on the 2016 figures on the basis of the proposal for the allocation of the result to the Shareholders' AGM
(2) percentage of consolidated net profit distributed as dividend
(3) ratio between the dividend and the share price on the last day of the financial year
The list of parties holding, directly or indirectly, more than 5% of the share capital (the significance threshold established by Article 120, paragraph 2 of Legs. Decree No. 58 of 1998 for BasicNet which is classified as a "Small-Medium sized enterprise" as per Article 1, letter w-quater 1) of Legs. Decree No. 58 of 1998), represented by shares with voting rights, according to the shareholders' register, supplemented by the communications received in accordance with Article 120 of Legislative Decree No. 58 of 1998 and other information held by the company, is as follows:
| Shareholder | Holding |
|---|---|
| Marco Daniele Boglione (*) | 37.076% |
| BasicNet S.p.A. | 9.006% |
| Wellington Management Group LLP | 6.148% |
| Kairos Partners SGR S.p.A. | 5.036% |
(*) held indirectly through BasicWorld S.r.l. for 36.565% and for the residual 0.511% directly.
The BasicNet Group is subject to a variety of strategic, market and financial risks, as well as general business operational risks.
These risks arise from factors that may comprise the value of the trademarks that the Group implements through its Business System. The Group requires the capacity to identify new business opportunities and markets and appropriate licensees for each market. The Group monitors the activities of its licensees and detects any problems on-line in the management of the brands in the various regions. However, as the commercial license contracts usually establish the advance payment of guaranteed minimum royalties, economic conditions on certain markets may impact the financial capacity of certain licensees, temporarily reducing royalties, particularly where such licensees had previously exceeded the guaranteed minimums.
The Group retains that its Business System has the flexibility needed to swiftly respond to changes in customers' tastes and to limited and localised consumer slowdown. However, the Group may be exposed to economic crisis and social and general unrest, which may impact on consumer trends and the general economic outlook.
The Group is exposed to currency risk on merchandise purchases or royalty income from commercial licensees and sourcing centre commissions not within the Eurozone. These transactions are mainly in US Dollars and marginally in UK Sterling and Japanese Yen.
The risks on fluctuations of the US Dollar on purchases are measured, preliminary, in the preparation of the budgets and finished products price lists, so as to adequately cover the impact of these fluctuations on sales margins.
Subsequently, royalty income and sourcing commissions from sales are utilised to cover purchases in foreign currencies, within the normal activities of the Group centralised treasury management.
For the foreign currency purchases not covered by foreign currency receipts, or in the case of significant time differences between receipts and payments, forward purchase and sales contracts (flexi-term) are underwritten.
The Group does not undertake derivative financial instruments for speculative purposes.
Group trade receivables derive from licensee royalty income, sourcing center commissions billed and sales of finished products.
Royalty trade receivables are largely secured by bank guarantees, corporate sureties, letters of credit, guarantee deposits, or advance payment, provided by licensees.
Souring commission receivables are covered by the payables of the subsidiary company BasicItalia S.p.A. to the sourcing centres.
Receivables from Italian footwear and apparel retailers within the subsidiary BasicItalia S.p.A. are monitored continually by the credit department of the company alongside specialised legal recovery firms and regional credit bodies throughout the country, commencing from the customer order. Receivables from franchising brand stores are settled weekly in line with sales and do not present substantial insolvency risk.
The sector in which the Group operates is exposed to seasonal factors, which impact upon the timing of goods procurement compared to sales, in particular where the products are acquired on markets with favourable production costs and where the lead times are however much longer. These seasonal factors also impact upon the Group's financial cycle of the commercial operations on the domestic market.
Short-term debt to finance working capital needs comprises "import financing" and "self-liquidating bank advances" secured by the order backlog. The Group manages the liquidity risk through close control on operating working capital with specific attention on inventories, receivables, trade payables and treasury management, with real-time operational reporting indicators or, for some information, at least on a monthly basis, reporting to Senior Management.
The interest fluctuation risks of some medium-term loans were hedged with conversion of the variable rate into fixed rates (swaps).
The Group may be involved in legal and tax disputes, concerning specific issues and in various jurisdictions. Considering the uncertainties relating to these issues, it is difficult to predict with precision any future payments required. In addition, the Group has instigated legal action for the protection of its Trademarks, and of its products, against counterfeit products. The cases and disputes against the Group often derive from complex legal issues, which are often subject to varying degrees of uncertainty, including the facts and circumstances relating to each case, jurisprudence and different applicable laws.
In the normal course of business, management consults with its legal consultants and experts in fiscal matters. The Group accrues a liability against disputes when it considers it is probable that there will be a financial payment made and when the amount of the losses arising can be reasonably estimated.
At the beginning of March 2017, the Finance Police began an ordinary tax audit on BasicNet, which will concern the direct and indirect tax declarations from the year 2012.
The principal disputes involving the Group are described in Explanatory Note 48 of the Consolidated Financial Statements and are summarised below.
The dispute was taken by BasicItalia S.p.A. against A.S. Roma S.p.A. and Soccer S.a.s. Brand Management S.r.l., which on November 23, 2012 communicated the unilateral advance resolution of the team sponsorship, agreed with duration until June 30, 2017, for presumed non-compliance and, in particular, defects in the materials supplied. BasicItalia S.p.A., considering the reasons for the resolution unfounded, instigated an ordinary court procedure requesting compensation for significant damage incurred. A.S. Roma S.p.A. and Soccer S.a.s. appealed against the request of BasicItalia S.p.A. and counterclaimed requesting compensation for presumed damage.
Proceedings are currently in the opening phases; the opinions of the Court Appointed Expert and the Court Technical Assistant are being drawn up and the judge fixed the hearing for the examination of findings for May 26, 2017. In addition, BasicItalia S.p.A. began proceedings against Soccer S.a.s., a debtor of BasicItalia S.p.A., for the provision of goods related to the sponsorship and against which an injunction against Soccer S.a.s. was issued on January 22, 2013. Following the opposition of Soccer S.a.s., the hearing initially established for June 10, 2016 was postponed to March 22, 2017.
In addition, following the above termination of the contract, A.S. Roma sought to enforce payment of the surety granted by BNL S.p.A. in favour of BasicItalia S.p.A. for a maximum amount of Euro 5.5 million which guaranteed commitments undertaken by BasicItalia S.p.A. under the sponsorship agreement. Following the non-payment by BNL S.p.A., A.S. Roma petitioned the Rome Court to enforce a payment order against BNL for the full guaranteed amount. As a result of this procedure, in which BasicItalia S.p.A. (together with the parent company BasicNet S.p.A.) was joined as a party by BNL, the Rome Court, with judgement of December 7, 2013, rejected all applications by A.S. Roma, considering the enforcement illegitimate. This sentence was not challenged by A.S. Roma and the sentence is final.
On December 20, 2013, A.S. Roma again requested payment of the above-mentioned surety and, following the refusal of BNL to meet this new request, presented an appeal before the Rome Court on February 20, 2014. With judgement of December 15, 2014, the Rome Court rejected all requests made by A.S. Roma. A.S. Roma appealed against this decision before the Rome Appeals Court with subpoena dated February 10, 2015. The preliminary hearing, fixed for June 8, 2015, was postponed to June 10, 2015. On June 8, 2015, both BasicItalia S.p.A. and BNL put forward the rejection of the appeal and the confirmation of the first level judgment. The hearing held on June 10, 2015 sent the case for the establishment of conclusions on July 4, 2018.
In February, the subsidiary BasicItalia agreed a loan with Banco BPM of four-year duration for Euro 2 million, repayable in quarterly instalments and in support of retail sector investment.
In general, Group operating results are expected to be strong in the first half of 2016 based on the order book and expected royalties and sourcing commissions.
This forecast is subject to the general market performance, which is shrouded by a degree of economic and political uncertainty, as reflected in consumption figures and particularly by the currency price fluctuations.
* * *
in the presentation for the approval of the Shareholders' Meeting for the 2016 Financial Statements and the relative Directors' Report we propose the allocation of the net profit of Euro 7,421,258.94 as follows:
| - | to the Legal reserve | Euro | 371,062.95 |
|---|---|---|---|
| - | to each of the 55,500,805 ordinary shares in circulation (excluding the 5,492,797 treasury shares held at March 22, 2017), a dividend of Euro 0.06 before withholding taxes for an amount of |
Euro | 3,330,048.30 |
| - | to retained earnings the residual amount, equal to | Euro | 3,720,147.69 |
The dividend will be paid from May 24, 2017, with record date of May 23, 2017 and coupon date (No. 10) of May 22, 2017.
We also propose that, if at the dividend coupon date the number of shares with dividend rights is lower than indicated above due to any share buy-backs by the company, the relative dividend will be allocated to retained earnings, as will any rounding made on payment.
We propose therefore the following:
the Shareholders' AGM of BasicNet S.p.A., having reviewed the 2016 results, the Directors' Report and having noted the Board of Statutory Auditors' Report and that of the Independent Audit Firm PricewaterhouseCoopers S.p.A.,
to approve the Directors' Report and the Financial Statements at December 31, 2016, in relation to each individual part and in its entirety, in addition to the proposal for the allocation of the Net Profit of Euro 7,421,258.94 and the dividend proposal.
Turin, March 22, 2017
The BasicNet Group operates in the causal and sportswear leisurewear, footwear and accessories sector principally through the brands Kappa®, Robe di Kappa®, K-Way®, Superga®, Jesus Jeans®, Lanzera® and Sabelt®, and since April 2016 with the global license for the Briko® brand. Group activities involve driving brand enhancement and product distribution through a global network of licensees. This business network is defined as the "Network". And from which the name BasicNet derives. The Network of licensees encompasses all key markets worldwide.
BasicNet S.p.A. is the parent company of the Group – with headquarters in Turin - listed on the Italian Stock Exchange.
The strengths of the Group are founded on the strategic priorities since its inception which encompass:
The Basic Group brands form part of the informal and casual clothing sector, which has experienced significant growth since the 1960's and continues to develop with the "liberalisation" of clothing trends.
is a practical sportswear brand, serving active and fast-paced individuals, who in their sporting activity require highly-functional clothing, while displaying a youthful, colourful and original look. The Kappa® collections include also footwear and accessories for sport, designed to ensure peak performance. The Kappa® brand sponsors major clubs globally across a wide range of sports, in addition to many national sporting federations, particularly in Italy.
is the brand for those who in their free-time and informal professional activity seek to wear modern, high-quality sportswear at accessible prices. The brand serves energetic, modern individuals, open to an ever-changing world.
is the leisure footwear and accessories brand, designed for those seeking comfort, while demanding a fashionable, colourful and stylish look and high quality. The Superga® collections serve the needs of a wide cross-section of customers, within every age category.
is the jeans brand, created in 1971 by the youthful Maurizio Vitale and Oliviero Toscani.
is the football clothing and footwear brand. The brand was acquired by the Basic Group primarily as an operating platform for its introduction into the United States.
is the high-end leisure, sport and formal occasion footwear brand, emerging from the racing and automobile world. The brand is positioned in the fashion segment. Since October 2011, the Basic Group has held 50% of the fashion categories (clothing and footwear) of the brand and is also a global licensee.
the Italian brand of cutting edge technical sporting products, in particular for cycling, skiing and running: eyewear, helmets, masks, accessories, underwear and clothing for professionals and enthusiasts. Briko®'s mission is to use the explosive energy of the brand to create iconically designed products for athletes and sportspeople requiring performance and safety without compromises.
The BasicNet Group has developed around a "network" business model, targeting licensees as the ideal partner for the development, distribution and sourcing of its products globally, choosing partners which act not only as a product supplier, but as an integrated supplier of services, i.e. a business development partner.
Innovative, flexible and modular, the Business System of BasicNet has enabled the Group to grow quickly, although maintaining a lean and agile structure: a large enterprise centered around many businesses on a fully web-based network integrated IT platform designed to maximise information flows through real time sharing.
The Business System was drawn up and structured to develop both internal lines (new licensees and new markets) and external lines (new brands developed or acquired and new business lines).
The functioning of the Business System is very simple. The Parent Company BasicNet S.p.A. controls the strategic activities:
o Information Technology, i.e. the creation of new software for the online management of all supply chain processes;
o co-ordination of production and commercial activity information flows on the licensees' Network;
Licensees, according to region or goods category, distribute products to retailers, carry out local marketing, regional logistics and working capital funding.
The licensees involved in BasicNet brand finished product management (sourcing centres) apply a similar model and distribute to commercial licensees in their respective areas.
As part of the Business System development, the Group has also established a direct customer sale system, currently developed by the Italian licensee, called plug@sell®. The model comprises a web-based integrated sales management system, with a platform which simply manages all daily activities at the store in real time, from orders to stock management, to accounting and training of staff (pre-opening and ongoing), through class-based and online training.
As part of the retail project of BasicRetail S.r.l. (a company entirely held by BasicItalia S.p.A.), the various brands have been developed around the three principal retail levels, through which the Group sells directly to the public in Italy:
The formats have been developed in order to ensure presence on a wide range of market segments.
The IT platform is one of the major strategic investments for the Group, with a high degree of focus in terms of staffing and centrality to Business System development.
This platform was designed and developed in a fully web integrated manner as the perfect communication tool between Network elements.
The Information Technology department is involved therefore in the design and rolling out of the data collation and transmission systems which link the BasicNet Network companies together and externally.
The business model therefore centres on e-processes, i.e. "com" divisions - each of which with a production input and exchanging or negotiating with the other divisions, exclusively through the online platform.
The Basic Group comprises Italian and international operating companies within the following sectors:
The Business System operating segment includes the Parent Company BasicNet, the trademark holders of the Group, Basic Trademark S.A., Superga Trademark S.A., Fashion S.r.l., Jesus Jeans S.r.l. the services company BasicNet Asia Ltd. in Hong Kong, Basic Properties B.V. in the Netherlands and the sub-licensee Basic Properties America, Inc. in the USA.
In addition to the operations developed directly by BasicNet S.p.A., outlined above, the activities of the other companies concern the granting of the intellectual property rights of the BasicNet Group to licensees, administrating the contracts and managing the relative revenue streams.
The proprietary licensees are BasicItalia S.p.A. and its subsidiary BasicRetail S.r.l..
BasicItalia S.p.A. acts as a licensee for the usage and development of the intellectual property rights and of the products of all BasicNet brands for Italy. The company is the licensee and incubator for the testing of Group development projects.
The company holds a number of major sponsorship and merchandising contracts, some of which with international visibility, benefitting also the Group and the Network.
BasicRetail manages Group brand sales points within the franchising project.
Property management is carried out by Basic Village S.p.A.. The company owns the former Maglificio Calzificio Torinese production site. Restructured and preserved in 1998, the facilities house the BasicNet Group headquarters and numerous other Group and third party activities. At the end of 2016, the adjacent property was acquired, which is currently occupied by third parties at remunerated conditions.
The Group objective is to extend its global leadership position through the strength of its brands.
The Group project centres on:
The following chart sets out the organisational structure of the BasicNet Group:
In the year subject to approval, the holding was sold to the shareholder already in possession of 50% of the investment in the company AnziBesson Trademark S.r.l..
At December 31, 2016, the Group headcount was 546, as follows:
| Human Resources at December 31, 2016 |
Human Resources at December 31, 2015 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Category | Number | Average age | Number | Average age | ||||
| Male/ Female |
Total | Male/ Female |
Average | Male/ Female |
Total | Male/Female | Average | |
| Executives | 18 / 10 | 28 | 46 / 49 | 47 | 17 / 9 | 26 | 47 / 48 | 47 |
| Managers | - | - | - | - | 1 / - | 1 | 53 / -- | 53 |
| White-collar | 147 / 348 | 495 | 34 / 35 | 35 | 134 / 323 | 457 | 35 / 36 | 36 |
| Blue-collar | 13 / 10 | 23 | 46 / 43 | 45 | 14 / 10 | 24 | 45 / 42 | 43 |
| Total | 178 / 368 | 546 | 35 / 35 | 36 | 166 / 342 | 508 | 36 / 36 | 36 |
Source: BasicGuys.com
The increase principally relates to personnel involved in the management of the Group brand sales points.
The "BasicEducation" project continues to successfully train franchising employees and update the skills of Group employees, with a total of:
Since 2004, the Group has introduced a number of initiatives to improve the work-life balance of employees: a) the creation of the "Banca-ore" (time bank) which facilitates flexible over-time management, b) reversible part time for workers with small children, c) the "BasicCare" desk handling payments to employees and routine commissions and d) the "BasicGym" which organises gymnastics courses for Group employees and partners.
In February 2012, BasicNet signed a memorandum of understanding with the Turin Municipality, under which all Basic Group employees may utilise the services of TorinoFacile, the online City services provider, without therefore leaving their work station. The corporate website www.basic.net in fact allows employees to be recognised through their log-in details, without entering their tax code or other service access passwords, to request personal and civil status certificates, on their own behalf or for members of their nuclear family, or to book an appointment with the municipal technical offices.
The maintenance of workplace health and safety are values shared by all employees. In support of this commitment, the Parent Company and its subsidiaries prepared the "Risk evaluation document" in accordance with Legislative Decree No. 81/2008.
Protecting the environment represents a key factor for the competitiveness and sustainability of the Group. This respect for the environment is firstly undertaken through compliance with regulatory requirements. Through the web integration, since 1999 the Group's primary objective is to avoid the use of paper: in fact the IT platform is the only communication instrument between the elements within the Network, from procedural controls, to HR management, thus reducing paper consumption to minimal levels. The Group also utilises a scanner archive system throughout the operating cycle, for the majority of accounting records and ledgers and payroll management.
Under the treasury share buy-back programme, authorised by the Shareholders' AGM of April 28, 2016 and concluding at the date of the Shareholders' AGM for the approval of the 2016 Annual Accounts, the company purchased until the date of today's Board meeting 732,797 shares, amounting to 1.201% of the Share Capital. BasicNet today holds a total of 5,492,797 treasury shares (9.006% of the Share Capital), for a total investment of Euro 12.1 million.
The Company intends to continue the share buy-back programme in 2017 and proposes to the Shareholders' Meeting to renew the authorisation. The proposal is submitted in order to provide the Company with a instrument to assist projects developed upon the strategic guidelines under which share swap opportunities are presented or as a guarantee for financing operations.
At the date of the present Report there are no stock option plans.
The shares held by the Directors and Statutory Auditors are reported in the Remuneration Report, available together with the documentation for the 2017 Shareholders' AGM on the website www.basicnet.com, to which reference should be made.
The transactions with related parties are not atypical or unusual and form part of the ordinary business activities of the companies of the Group. These transactions were at normal market conditions.
The information on transactions with related parties are presented in Note 40 of the financial statements.
The operations between Group companies, which substantially involve the purchase of goods and provision of services, under normal market conditions, are not of an atypical or unusual nature, but within the normal business activities of the companies of the Group and are eliminated on consolidation.
The effects deriving from transactions between BasicNet S.p.A. and its subsidiaries are reported in the financial statements of the Parent Company and in the explanatory notes to the financial statements.
The Italian Group companies took part in the tax consolidation of BasicNet S.p.A. as per Articles 117 and subsequent of the Income Tax Law - December 22, 1986 No. 917.
On October 29, 2010, the Board of Directors approved the related parties transactions procedure, which was updated in October 2016 and is summarised in the Corporate Governance and Ownership Report. The procedure is also available in its full version on the internet site of the Group (www.basicnet.com in the section "Corporate Governance BasicNet").
In accordance with Article 36, restated by Article 39, paragraph 3 of the Markets' Regulation, the company and its subsidiaries utilise administrative-accounting systems which enable the provision to the public of the financial statements used for the purposes of the preparation of the consolidated financial statements of the companies falling within the scope of this regulation and permit management and the auditors of the Parent Company to access the data necessary for preparation of the consolidated financial statements.
The conditions of the above-stated Article 36, letters a), b) and c) of the Markets' Regulation issued by Consob are therefore complied with.
The composition of the Board of Directors of the companies is available on the website www.basicnet.com/ilgruppo/organisociali.
The Group research and development activity is based on two pillars:
Product research costs are expensed in the year in which they generate revenues from sales, or royalties from the relative collections.
IT development costs, mainly product development software by external consultants under the supervision of internal staff and protected by copyright, are capitalised and amortised over 5 years from when the programmes become operative.
The Corporate Governance and Share Ownership Report, hereafter summarised, is available in its full version on the Group website (www.basicnet.com in the section "Corporate Governance BasicNet).
The Governance of BasicNet S.p.A. is represented by the Shareholders' AGM, the Board of Directors and the Board of Statutory Auditors.
The Shareholders' Meetings represent all of the Shareholders who resolve, in ordinary and extraordinary session, on the matters required by law and by the Company By-Laws.
The Board of Directors was appointed by the Shareholders' AGM of April 28, 2016. The Board of Directors, at the meeting held subsequent to the Shareholders' AGM, set up internally the Control and Risks Committee and the Remuneration Committee.
The financial statements are audited by an audit firm in accordance with the provisions of law.
The Share capital, fully subscribed and paid-in, amounts to Euro 31,716,673.04 and is comprised of 60,993,602 ordinary shares with a value of Euro 0.52 each.
At the date of the present Report, the Company holds 5,492,797 treasury shares, equal to 9.006% of the share capital.
The Company has not issued other financial instruments that attribute the right to subscribe to new share issues.
No share-based incentive plans have been introduced which would resulted in an increase, including through scrip issues, of the share capital.
b) Restriction on the transfer of shares (as per article 123-bis, paragraph 1, letter b), CFA)
At the date of the present Report, there are no restrictions on the transfer of shares.
c) Significant holdings (as per article 123-bis, paragraph 1, letter c), CFA)
With reference to Article 1, letter w-quater 1) of the CFA1 , BasicNet qualifies as a "Small- Mediumsize enterprise" (SME) The significance threshold is 5% of the share capital with voting rights. The list of parties holding, directly or indirectly, more than 5% of the share capital according to the shareholders' register, supplemented by the communications received in accordance with Article 120 of Legislative Decree No. 58 of 1998 and other information held by the company, is as follows:
1 Article 1 CFA w-quater.1) "SME": subject to that established by other legal provisions, small-medium-size enterprises, issuers of listed shares, whose revenues also before admission to trading, are under Euro 300 million, or who have a market capitalisation of under Euro 500 million. Listed issuers who have exceeded both these thresholds for three consecutive years are not considered SME's. Consob regularly issues the enacting provisions of this letter, including the disclosure means which issuers are required to comply with in relation to the acquisition or loss of SME's status. Consob, on the basis of information provided by issuers, publishes the list of SME's on its website.
| Shareholder | % of ordinary & voting share capital |
Note |
|---|---|---|
| Marco Boglione | 37.076% | Held indirectly through BasicWorld S.r.l. for 36.565% and for the residual 0.511% directly. |
| BasicNet | 9.006% | Treasury shares in portfolio. |
| Wellington Management Group, LLP | 6.148% | Discretional savings management. |
| Kairos Partners SGR S.p.A. | 5.036% |
There is no share participation programme for employees.
f) Voting restrictions (as per article 123-bis, paragraph 1, letter f), CFA)
There are no restrictions on voting rights. The issuer has exclusively issued ordinary shares; each share provides one vote (Article 6 of the By-Laws). Article 21 of the By-Laws excludes the right to withdrawal with regards to motions concerning the extension of the company's duration or the introduction or the removal of restrictions on the circulation of equities.
g) Shareholder agreements (as per article 123-bis, paragraph 1, letter g), CFA)
At the date of the present Report, there are no agreements between Shareholders.
h) Change of control clause (as per Article 123-bis, paragraph 1, letter h), of the CFA) and statutory provisions on public purchase offers (as per Articles 104, paragraph 1-ter and 104-bis, paragraph 1)
The contractual conditions of the loans in place at the date of the present Report include typical clauses for such loans, such as the maintenance of some conditions concerning the holding of the majority shareholder of the Company.
The Extraordinary Shareholders' Meeting of April 29, 2011 approved, among other matters, the change to Article 16 of the Company By-Laws – Powers of the Board of Directors and legal representation – in order to recognise to the Board of Directors the right to undertake, at any moment and without prior authorisation of the Shareholders' Meeting, defensive measures in the case of public offers or exchanges, pursuant to Article 104 of the CFA, as amended by Article 1 of Legislative Decree No. 146 of September 25, 2009. In particular Article 16 includes two paragraphs as follows:
"the Board of Directors, and any Executive Boards, also have the right to undertake, without a Shareholders' Meeting authorisation, all acts and operations against the objectives of a public share or exchange offer, from the moment in which the communication in which the decision or the obligation arises to promote the offer was made public until the termination or expiry of the offer".
The Board of Directors do not have powers to increase the Share Capital pursuant to Article 2443 of the Civil Code.
The Shareholders' AGM of April 28, 2016 approved, for a period of twelve months, or until the next Shareholders' AGM to approve the 2016 Annual Accounts, the authorisation to purchase and utilise a maximum number of shares, which taking into account those already held by the Company, does not exceed the limits permitted by law, for a maximum expected financial commitment of Euro 3.5 million. Based on this authorisation the Company, at the date of the Report, had acquired 732,797 shares, equal to 1.2% of the Share Capital. BasicNet today holds a total of 5,492,797 treasury shares (9% of the Share Capital), for a total investment of Euro 12.1 million.
l) Direction and co-ordination activities (as per Article 2497 and subs. of the Civil Code)
BasicNet S.p.A. is not subject to management and coordination pursuant to Article 2497 and thereafter of the Civil Code and has full authority to implement its general and operating strategies.
BasicNet S.p.A. considers that it is not subject to the management and coordination of BasicWorld S.r.l., a company which holds 36.565% of the share capital, also with reference to Article 37 of the Consob Markets Regulation:
Pursuant to Article 2497-bis of the Civil Code the directly and indirectly held Italian Group subsidiaries have identified BasicNet S.p.A. as the party which exercises management and coordination of their activities. This activity involves oversight of the general strategic directives and in the definition and amendment of the Internal Governance and Control model, and the sharing of the Ethics Code adopted at Group level. In addition, the coordination involves the central management within BasicNet S.p.A. of the Treasury, personnel, corporate affairs, operating control and Information Technology services.
These activities permit both economies scale and adequate coordination and operational control.
m) Other information
It is noted that:
the disclosures required by Article 123-bis, paragraph 1, letter 1) ("the agreements between the company and directors – which provide for indemnity in the case of dismissal without just cause or in the case in which the employment services cease after a public offer") are contained in the Remuneration Report pursuant to Article 123-ter of the CFA, available on the company's website www.basicnet.com/contenuti/datifinanziari/assembleeazionisti.asp;
The Corporate Governance system adopted by BasicNet S.p.A. incorporates the rules and procedures within the Company's By-Laws and provisions of law, which outlines the system of management and control of the Company and of the Group.
This is mainly based on the principles and recommendations contained in the Self-Governance Code of listed companies issued by Borsa Italiana, available on the website Borsa Italiana (http://www.borsaitaliana.it/comitato-corporate-governance/homepage/homepage.htm).
The Annual Report, which is published on the website www.basicnet.com/contenuti/corporate/corporategovernance.asp illustrates the Governance structure of the Group, as well as the level of compliance of the corporate governance system with the recommendations of the Self-Governance Code issued by Borsa Italiana S.p.A..
In line with Recommendation EU No. 208/2014 and paragraph IV of the "Guidelines and transitory system" of the Self-Governance Code provides facts and explanations, where any application principles or criteria were unexpected.
BasicNet S.p.A., nor its strategic subsidiaries, are subject to laws in force outside Italy which affect the corporate governance structure.
4.1 APPOINTMENT AND REPLACEMENT (as per Article 123-bis, paragraph 1, letter l), CFA)
The norms applied in the appointment and replacement of the Directors are in line with legislative and regulatory provisions and Article 13 of the Company By-Laws, in relation to which reference should be made to the company's website www.basicnet.com/contenuti/gruppo/statuto.asp.
The Company is administered by a Board of Directors, made up of between five and fifteen members, including non-shareholders. The Shareholders' Meeting, before their appointment, establishes the number of members of the Board of Directors and the duration of office in accordance with that permitted by law.
The procedure for appointment as per Article 13 provides:
that the procedure for electing the Directors shall be as follows: i) from the slate which obtained the highest number of votes, based on the progressive order with which they are listed in the slate, all the members necessary are elected to fill the number of Directors established for the Shareholders' Meeting, while ensuring the gender balance provisions are complied with, except 1; ii) from the slate which obtained in the Shareholders' Meeting the second highest number of votes one member is elected of the Board of Directors as the first candidate on this slate;
consideration is not taken of the slates which have not obtained at least the number required by the Company By-Laws for the presentation of the slates;
Should one or more vacancies occur on the Board, Article 2386 of the Civil Code shall be applied, as follows:
The Board of Directors, in view of the ownership structure and the allocation of duties, decided not to adopt succession plans for any replacement of the Executive Directors, not considering it necessary to identify parties or criteria for their selection in advance of the need to replace an executive director.
4.2. COMPOSITION OF THE BOARD OF DIRECTORS (as per Article 123-bis, paragraph 2, letter d), CFA)
The Board of Directors in office, comprising 12 members, was appointed by the Shareholders' Meeting of April 28, 2016, which elected:
The duration of office is established as three years and therefore until the Shareholders' AGM called for the approval of the 2018 Annual Accounts.
The Board of Directors, which met following the Shareholders' AGM:
appointed to the Remuneration Committee: the Non-Executive Director Carlo Pavesio, as Chairman, the Non-Executive Vice Chairman Daniela Ovazza and the Independent Directors Renate Hendlmeier and Adriano Marconetto;
appointed to the Control and Risks Committee the Independent Directors Elisa Corghi, as Chairman, Renate Hendlmeier and Adriano Marconetto;
At the subsequent meeting of May 13, 2016, the Board of Directors noted the appointment of the new members of the Control and Risks Committee, which in order to ensure the continuity of work of the Committee, unanimously agreed on the proposition to the Board to appoint the Director Renate Hendlmeier as Chairperson.
At the meeting of February 15, 2017, the Board of Directors called the non-executive and independent Director Elisa Corghi to sit on the Remuneration Committee.
The Board of Directors, in its current composition, complies with the "gender quota" rules under Law No. 120 of July 12, 2011 and Article 144-undecies 1 of the Issuers' Regulation. Therefore, the Board of Directors of BasicNet S.p.A. has had in place at least two female directors since listing.
A brief curriculum vitae of the members of the Director in office, with indication of the offices held in other listed companies or companies of significant size is listed below.
The curriculum vitaes of the Directors in office are also available on the website of the company at www.basicnet.com/contenuti/gruppo/organisocialisocieta.asp.
Marco Daniele Boglione – Chairman of the Board of Directors (Director since 1984)
Born in 1956, he is the Group's founder. After experience with Maglificio Calzificio Torinese S.p.A., he has been an entrepreneur since 1985.
He is also a Board member of subsidiary companies. He is the Chief Executive Officer of BasicWorld S.r.l., a Director of the Piedmont Foundation for cancer research (non-profit) and Chairman of the Piedmont Oncological Foundation. He is a Board member of the Turin General Industrial Union. In June 2011, he was appointed a "Cavaliere al Merito del Lavoro" (Italian State Recognition) by the President of the Republic Giorgio Napolitano and since June 2014 has been a member of the Council of the Piedmont section of the "Cavalieri del Lavoro".
Daniela Ovazza – Vice Chairman – Member of the Remuneration Committee (Director since 1994)
Born in 1956, he graduated in Economics and Commerce in Turin, joining the business world in 1984.
He is a Director of TESA S.p.A., Non-Executive Director of C.L.S. S.p.A. and a Director of CGT Truck S.p.A..
Franco Spalla – Vice Chairman (Director since 2001)
Born in 1952, he graduated in Company Management from the University of Turin.
He is also a Board member of subsidiary companies. He is an Independent Director and member of the Control and Risks Committee of Intek Group S.p.A., a company listed on the Milan Stock Exchange. Between 1998 and 2011 he was the Chief Executive Officer of Fenera Holding S.p.A. and the Chief Executive of BasicNet S.p.A. between 2002 and April 2016.
Giovanni Crespi – Chief Executive Officer (Director since 2007).
Born in 1959, he obtained a degree in Political Science. He began his career in the publishing sector. Between 1986 and 1990 he was the assistant to the General Manager of the publishing group Fabbri, Bompiani, Sonzogno and Etas Group S.p.A. and publisher of the Etas brand. From 1990 to 1991 the General Manager of Eurolibri Rusconi Editore S.p.A., from 1991 to 1999 Vice Chairman and General Manager of "The Walt Disney Company Italy S.p.A.". From 1999 to 2003 he was the Chief Executive Officer and General Manager of the Istituto Geografico De Agostini S.p.A., from 2003 to 2006 the Chairman of Rodale International and since 2008 has been the Chairman and Chief Executive Officer of Rhiag Group S.p.A.. Until the end of 2015, he was an Independent Director of Innovest S.p.A. and a Director of Sirti S.p.A., HIIT S.p.A. and of UnoPiù S.p.A..
He is also a Board member of subsidiary companies.
Born in 1967, he graduated in Economics and Commerce. He has worked with BasicNet since 1993 and currently acts as the Vice President Organisation and is a member of the Supervisory Board and the Director in charge of the internal control and risk management system.
He periodically attends the presentation of case studies at the Economics and Commerce faculty of Turin, the Corporate Administration School, ISTUD courses, School of Management of the Milan Polytechnic.
Born in 1956, he graduated in Economics and Commerce, and qualified as a certified accountant and auditor. Between 1980 and 1994 he was an auditor with Arthur Andersen & Co., servicing the main clients in the Turin area, particularly in the industrial and commercial sector. He has worked with the Group since 1994 and, in addition to executive roles at other Group companies, is the Vice President Finance, CFO and Executive Officer for Financial Reporting.
Elisa Corghi – Independent Director - Member of the Control and Risks Committee and the Remuneration Committee (Director since 2016)
Born in 1972, she graduated in Economics and Commerce. She gained useful experience as the brand manager at the marketing departments of Barilla Alimentare and Kraft Foods, with involvement in the drafting and management of the best seller marketing plans for both enterprises. Subsequently, she dedicated herself for over ten years to the financial analysis of consumer sector listed companies (Recordati, Diasorin, Amplifon, Parmalat, Autogrill, Campari, Indesit Company, De'Longhi, Saeco), as primary responsibility, and for luxury sector companies (Luxottica, Tod's, Brunello Cucinelli, Ferragamo, Bulgari), as secondary responsibility, acting as a senior sell-side analyst at Intermonte SIM, a leading Italian market operator, of which she was a partner. In this role, she was involved in the development of forecast models and the fundamental valuation of listed companies, the drafting of the investment case and the investment recommendations to sales and institutional clients, organisation and involvement in roadshows to support contact between the top management of listed client companies and the managers of domestic, UK and US investment funds. Recently, she worked with a digital start-up in the fashion - clothing sector and initiated and participated in the due diligence for a luxury sector M&A.
She is an independent director of the listed company Tecnoinvestimenti S.p.A. and a Director of Corneliani S.p.A..
Born in 1965. He has acted as the General Manager of Lactalis Italia S.p.A. and Strategic Development Director of the Galbani Group.
Currently, he is an Executive Director of Fenera Holding S.p.A., Director of Fenera Equity Investments S.r.l., Director of Tosetti Value S.r.l., Director of SDM S.r.l., Director of FDAH (Forno d'Asolo Holding), the Sole Director of Pantarei S.r.l. and the Vice Chairman of Francesco Franchi S.p.A..
Renate Hendlmeier – Independent Director - Chairperson of the Control and Risks Committee and member of the Remuneration Committee (Director since 2015)
She was born in Plattling in 1957. She was the CFO of the Basic Group between 1987 and 1999 and thereafter headed and coordinated the Basic Group's property management activities between 1999 and 2003, while being involved in corporate reorganisation between 2004 and 2006.
She currently holds corporate and voluntary positions with an international association based in Turin.
Adriano Marconetto – Independent Director - member of the Control and Risks Committee and the Remuneration Committee (Director since 2007).
Born in 1961, he is an entrepreneur focused in the technology start up sector. Between 1995 and 1999 he was the Marketing Director of BasicNet and subsequently the co-founder and Chairman of the Board of Directors of Vitaminic S.p.A., until 2003; between 2005 and 2012 he founded and subsequently acted as the CEO of the company Electro Power System S.p.A. In 2012 he founded and managed the company ProxToMe, Inc. and took on the role of Executive Chairman. In 2015, he founded the company YAR S.r.l., of which he is CEO. He is involved in various non-profit activities.
Carlo Pavesio – Director - Chairman of the Remuneration Committee (Director since 1994)
Born in 1956, graduating in law and achieving a Masters of Laws (LL.M.) in 1980 at the London School of Economics. He completed an "internship" in 1980-1981 with the Economic Commission of the European community legal service in Brussels and was the "Visiting Foreign Lawyer" in 1985- 1986.
He is a Senior Partner with the legal firm Pavesio and Associati, previously a partner with Allen & Overy and with Brosio Casati e Associati. His experience is principally centred on legal and non-legal questions and corporate and contractual law for Italian and foreign clients. He is specialised in M&A operations, joint ventures and corporate restructuring, in addition to generational transfer, governance and trusts. He also has experience in arbitration and disputes.
Currently, he is the Chairman of the Board of Directors of BasicWorld S.r.l., Fenera Holding S.p.A., Società Reale Mutua di Assicurazioni, Italiana Assicurazioni S.p.A., Farmaceutici Procemsa S.p.A. (Vice Chairman), Tosetti Value SIM S.p.A., BasicItalia S.p.A., P. Fiduciaria s.r.l., Simon Fiduciaria S.p.A. and Francesco Franchi S.p.A. and is a member of the Supervisory Board of the Piedmont Oncological Foundation. For many years, he has been an active member and officer of the IBA - International Bar Association and is a member of the Directive Committee of the Piedmont Chamber of Commerce. He is a Member of the Board for Relations between Italy and the United States. He is an Honorary Consul of the Republic of Panama. He is Chairman of the Piedmont Arbitration Board.
Born in 1960, working from 1989 to 1992 as an assistant to the President of Football Sports Merchandise (S.p.A.) (now BasicNet S.p.A.), from 1994 to 1997 Director of the company Mad Cap S.r.l., specialised in the production of promotional clothing and accessories and thereafter from 1997 to 1999 commercial manager at Swingster Europe S.p.A., a subsidiary of BasicNet specialised in corporate merchandise, and from 1999 at the BasicNet Group as a senior manager.
Currently within the Group, she is the Executive Chairperson of BasicItalia S.p.A. and of BasicRetail S.r.l..
The Board of Directors does not consider it necessary to limit the maximum number of offices which each Director may hold, also in view of the consistently high participation of all members at meetings of the Board of Directors.
The Directors, in practice, have the facility to participate in meetings subsequent to their appointment and during their mandate with the Chairman and Management, in order to remain updated on corporate affairs and relevant changes. They also continually have access to financial and operational information from the BasicManagement portal.
The Board in 2016 met seven times, with meetings lasting on average two and a half hours and with full attendance on all occasions of the Board.
In January 2017, the company published its financial calendar which established the days for the five Board meetings for 2017, for the review of the preliminary results, the approval of the 2016 separate and consolidated financial statements, the approval of the half-year report and the review of the quarterly disclosure to the market. As established by Article 82-ter of the Issuers' Regulation, the same press release confirmed the company's position on the publication of additional financial disclosure. In particular, BasicNet announced that it will continue to publish the quarterly results on a voluntary basis, until any differing assessment. The quarterly results communicated to the market shall comprise a summary of the commercial performance by Brand and by region and a presentation of the key commercial indicators (compared with those for the same period of the previous year). The Quarterly disclosure shall be published in a press release to be issued on conclusion of the Board of Directors' meetings called to approve the above results.
The calendar is available on the website www.basicnet.com.
On February 15, the first meeting was held, which reviewed the 2016 preliminary results.
The documentation concerning the matters under discussion is generally sent in advance to the Directors and Statutory Auditors. In accordance with the Code, the Board of Directors, considering the operating dynamics of the Company and the Group, identified the period of two days as appropriate for the sending of preliminary meeting material, except in the cases of urgency. The above-stated deadline was complied with for Board meetings in 2016.
The Chairman ensures that the handling of each matter on the Agenda is allocated the necessary time to ensure constructive debate, considering debate among the Board as useful for the motions to be considered.
Executives of the company may participate at the Board meetings, on the invitation of the Chairman, where there is a need to provide guidance on the matters on the Agenda. In 2016, the Vice President Sales and the Vice President Sourcing participated at a meeting of the Board, who respectively contributed with regards to the activities of the commercial and productive licensees. The Directors and the Statutory Auditors of BasicNet were in addition invited to participate at a meeting of the Board of Directors of the subsidiary BasicItalia for details upon the operating performance of the subsidiary, which represents a significant portion of Group operations.
The Board is invested with the widest powers deemed appropriate in order to achieve the Company's aims and objectives, with the sole exception of those that are expressly reserved for the Shareholders' Meeting by law.
As recommended by the Self-Governance Code, the Board of Directors, among other matters:
The following significant operations are within the remit of the Board of Directors: the acquisition and/or sale of company shares, companies, business units or brands of a value greater than Euro 4 million, the signing of sponsorship contracts with an annual cost of greater than Euro 5 million, debt operations of a value greater than 60% of the consolidated net equity, the granting of any guarantees, obligatory or secured by patronage letters (with the exception of subsidiaries) greater than Euro 4 million. Article 16 of the By-Laws assigns to the Board of Directors the remit to consider, in accordance with Articles 2505 and 2505-bis of the Civil Code, the merger by incorporation of one or more companies in which all shares or in which at least 90% of all shares are held; the opening or closing of secondary offices; the indication of Directors with powers to represent the company; the amendment of the By-Laws in line with regulatory provisions; the reduction of the share capital in the case of shareholder withdrawal; the transfer of the registered office within the national territory. In addition, in accordance with the first paragraph of Article 2410 of the Civil Code, the Board of Directors may approve the issue of bonds;
At the Board meeting of March 22, 2017, the Board of Directors, having received suggestions from directors participating at the individual committees and in view of the consistent presence of all Directors at the meetings, in addition to the extensive contributions to the discussions, considered the size, composition and functioning of the Board and its committees as appropriate with regards to their respective competences for the achievement of the objectives of BasicNet S.p.A. and the Group. The clarity and timeliness of the information prepared by the Chief Executive Officer concerning Board meetings, as well as the periodic updating on regulatory provisions and duties of the Directors, enabled the Directors to undertake their duties in a knowledgeable and informed manner. The number of Executive and Non-Executive Directors is also considered appropriate, also in terms of the independent directors.
The Board in addition examines, on a half-yearly basis, the report of the Control and Risks Committee illustrating the findings of their activities and controls and their opinion on the adequacy of the internal control system. At the meeting of March 22, 2017, the Board noted the substantially positive opinion of the Committee, also in view of the supplementation, development and coordination activities in 2017 regarding the control system, suggested by the Committee and by the Board of Statutory Auditors. For this purpose, the 2017 budget allocated to the Control and Risks Committee was increased.
The Shareholders' AGM of April 28, 2016, on the appointment of the Board, permitted the Directors elected not to be restricted by a non-competitive clause, as per Article 2390 of the Civil Code. The Directors are however requested, both on the acceptance of office and during the period of their office and thereafter, to report in a timely manner to the Board of Directors operating appointments in competing groups.
The Board of Directors at the meeting of April 28, 2016 reconfirmed Daniela Ovazza as the Vice Chairman of the Board of Directors and appointed as a new Vice Chairman Franco Spalla and Giovanni Crespi as the Chief Executive Officer. The Chairman of the Board of Directors was appointed by the Shareholders' AGM held on the same date.
In accordance with Article 13 of the By-Laws, the Vice Chairman executes the role of Chairman in the case of the latter's absence.
The Board of Directors on April 28, 2016, in addition to assigning the new Vice Chairman Franco Spalla the role of assisting the Chairman upon special or strategic projects, granted management powers to the Chairman and the Chief Executive Officer, as outlined below:
At the same meeting, the Director Paolo Cafasso was conferred, as Group Finance Director, executive powers for the administrative and financial management of the Company.
At the date of the present Report there are no interlocking directorates.
The Board Meeting of April 28, 2016 noted that the accumulation of offices of Chairman and Executive Director of Marco Boglione was justified within the Corporate Governance practice of business continuity, in that he is the founder of the Group and has always been directly involved in the activities of the Company.
As already illustrated at point 2.C of the present Report, Mr. Marco Boglione holds 22,383,334 shares, equal to 37.076% of the share capital, of which 22,302,501 shares, equal to 36.565% of the share capital, indirectly through the subsidiary held 90.58%, BasicWorld S.r.l. and, directly, 311,668 shares, equal to 0.511% of the share capital.
The Board of Directors did not set up an Executive Committee.
The Executive Boards reported to the Board and the Board of Statutory Auditors at their meetings, at least on a quarterly basis, with regards to the activities carried out in the exercise of their powers, on the general operating performance and the outlook and also on the most significant operations undertaken by the company and its subsidiaries.
In addition to the Chairman Marco Boglione, the Chief Executive Officer Giovanni Crespi, the Directors Paola Bruschi, Vice President Organization, Paolo Cafasso, Group Chief Financial Officer and Elisabetta Rolando, Executive Chairperson of the Board of Directors of the subsidiary BasicItalia S.p.A. are Group Executive Directors.
The Board of Directors includes three Independent Directors: Elisa Corghi, Renate Hendlmeier and Adriano Marconetto.
The Board of Directors on their respective appointment to office and in the Board meeting of March 22, 2017 assessed, on the basis of their declarations, the independence of the Directors Elisa Corghi, Renate Hendlmeier and Adriano Marconetto, both in relation to the requirements of Consob regulations and the criteria of the Self-Governance Code. With regards to the criteria at Article 3.C.1 letter e) of the Self-Governance Code, the Director Adriano Marconetto considered that his holding of the position since 2007 and therefore for more than nine years does not affect his independence.
No specific meetings of the independent Directors are planned, however they may meet independently where considered necessary or beneficial at the margins of the Control and Risks Committee meetings, of which they are all members.
The criteria and procedures were reviewed by the Board of Statutory Auditors. For the year 2016, the Board of Statutory Auditors communicated the results of these controls in the report of the Board of Statutory Auditors to the Shareholders' AGM.
The Self-Governance Code recommends the appointment of a lead independent director by the Board of Directors where the Chairman controls the Issuer or is the main executive in charge of operations.
The Board meeting of April 28, 2016 considered that the accumulation of offices of Chairman and Executive Director by Mr. Marco Boglione was justified in view of the need to ensure the strategic and operating continuity of the Group, as he is the Group's founder and has also always been directly involved in the company's operations. The Board in addition considered, also in light of the composition of the Board of Directors, in addition to the size and organisational structure of the company, that this concentration of offices does not affect his impartiality and balance as the Chairman of the Board of Directors, and that the information flows with non-executive directors and the Board of Statutory Auditors, overseen by the Chairman and the Chief Executive Officer, are complete and timely, therefore not requiring the appointment of a Lead Independent Director. At the meeting of March 22, 2017, the Control and Risks Committee on reviewing the company's Governance, confirmed the Board's position, considering that (i) the Chairman is not the only executive in charge of company management, (ii) powers are also allocated to other members of the Board of Directors and (iii) the Chairman controls the issuer, although commits to open a constructive dialogue with the Independent Directors.
The Board approved the procedure for the handling of confidential information, subsequently updated with the regulations on Market Abuse. The procedure has recently been updated (in 2016) to incorporate new provisions introduced by the Regulation of the European Parliament and Council of April 16, 2014 No. 596/2014 (MAR).
This procedure contains the regulations for the internal management and external communication of confidential documents and insider information, for the management of delayed disclosure, in addition to the setting up and management, based on a specific IT procedure, of the Register for persons with access to insider information.
Since April 1, 2016, the Internal Dealing Code has been applicable, updated in 2016 to incorporate new provisions of the Regulation of the European Parliament and Council of April 16, 2014 No. 596/2014. The Code governs the procedures for disclosure to the market on operations on BasicNet S.p.A. shares by "Significant Persons" of the Group, as identified by Article 144 and thereafter of the CFA.
The procedure is available on the website: www.basicnet.com/contenuti/gruppo/internaldealing.asp.
In 2016, five Internal Dealing communications were published concerning operations carried out on the BasicNet share (three communications concerning purchases made by BasicWorld S.r.l., a company of which the Chairman Marco Boglione is the majority shareholder, and one communication concerning purchases made by the Chief Executive Officer Giovanni Crespi).
The Board meeting of April 28, 2016 appointed the Remuneration Committee and the Internal Control and Risk Committee. Since October 28, 2016, the Control and Risks Committee has also been the Related Party Transactions Committee.
The Board did not set up, as illustrated below, an Appointments Committee or other committees.
In line with evaluations made in the past, the Board of Directors, also in view of the size and shareholding of the Company, did not consider it necessary to set up an Appointments Committee for the nomination of Directors, also given that, in accordance with Article 13 of the Company By-Laws, the Directors are elected through a slate voting mechanism. In addition, the Board of Directors retain that considerations on the size and composition of the Board of Directors, proposals to nominate candidates as Directors in the event of co-optation and succession planning of Executive Directors, fall within the remit of the entire Board of Directors and as such may be discussed and approved within the Board meetings.
Composition and Operation of the Remuneration Committee (as per Article 123-bis, paragraph 2, letter d) CFA)
At the Board meeting of April 28, 2016, the Board appointed the Remuneration Committee composed of the Non-Executive Directors Carlo Pavesio - Chairman, Daniela Ovazza and the Non-executive and independent directors Renate Hendlmeier and Adriano Marconetto.
At the meeting of February 15, 2017, the Board of Directors called the non-executive and independent Director Elisa Corghi to sit on the Committee.
The Chairman of the Committee, Carlo Pavesio, has knowledge and experience of remuneration policies, having held this position also in other companies.
The Board considers that the Committee adequately undertakes its duties, formulating proposals in line with the objectives and performance of the Group.
The proposals of the Committee have always been approved by the Board of Statutory Auditors and the Independent Directors.
The Directors usually do not attend the meetings in which the proposals are presented to the Board relating to their remuneration.
The work of the Committee is usually recorded by the Chairman Carlo Pavesio, who provides information on the content of the discussions at the next appropriate Board meeting.
The Committee's duties include the presentation to the Board of proposals for the drawing up of a general policy for the remuneration of executive directors and senior executives, evaluating periodically, on the preparation of the annual remuneration report, the adequacy and the overall consistency and concrete application of the general policy adopted for the remuneration of Executive Directors and Senior Directors, referring in this latter regard to the information received from the Chief Executive Officer, monitoring the application of the decisions adopted by the Board itself, verifying in particular, where necessary, the effective achievement of the prefixed objectives.
The Committee has access to the information and departments necessary for the carrying out of its remit. The Committee did not utilise external consultants and does not avail of a specific expenses budget for the execution of its duties.
The Committee in 2016 met on two occasions to draw up a bonus remuneration proposal for the 2015 results, to be granted to executive directors in light of the Group results for 2015 and to draw up an Executive Director remuneration proposal on the basis of the powers granted at the Board meeting of May 13, 2016, in consideration of the appointment of the new Board of Directors and Executive Boards.
For further information on the present section reference should be made to the significant parts of the Remuneration Report published pursuant to Article 123-ter of the CFA.
On March 22, 2017, the Board, with the favourable opinion of the Control and Risks Committee, as the Related Parties Committee, approved the BasicNet S.p.A. Remuneration Report available on the company website, together with the Shareholders' AGM documentation, at www.basicnet.com/contenuti/datifinanziari/assembleeazionisti.asp.
In summary, the Remuneration Policy adopted requires the Shareholders' Meeting to approve the annual remuneration of all Board members; the remuneration of the Directors holding specific offices and for the members of the Internal Committees of the Board is determined by the Board of Directors, pursuant to Article 2389 of the Civil Code, on the proposal of the Remuneration Committee and with the favourable opinion of the Board of Statutory Auditors.
For the Executive Directors, the remuneration policy of the Group to date has not provided for the fixing of performance objectives on which variable remuneration is based. Usually additional remuneration identified by the Board of Directors is granted, on the proposal of the Remuneration Committee and with the favourable opinion of the Board of Statutory Auditors. This amount is identified on approval of the preliminary results where advances for the key financial indicators are reported on the previous year. For these reasons, it was decided not to defer the variable part, nor undertake contractual agreements which enable the company to request the repayment, in full or in part, of the variable components of remuneration.
The Group structure does not provide for senior executives, with the exception of the Directors of BasicNet and the Chairman of BasicItalia.
The Board establishes in addition the remuneration of the members of the Committees, of the Supervisory Board, of the Internal Auditor and of the Executive in charge in the preparation of corporate accounting documents; for these latter two positions, no incentive mechanisms are provided for.
No stock option plans have been established for Directors.
Indemnity of the directors in case of dismissal and termination of employment following a public purchase offer (as per Art. 123 bis, para. 1, letter i) of the CFA)
The disclosures required by Article 123-bis, paragraph 1, letter 1) ("the agreements between the company and directors – which provide for indemnity in the case of dismissal without just cause or in the case in which the employment services cease after a public offer") are contained in the remuneration report pursuant to Article 123-ter of the CFA, available on the company's website www.basicnet.com/contenuti/datifinanziari/assembleeazionisti.asp.
Composition and operation of the control and risks committee (as per Article 123-bis, paragraph 2, letter d) CFA)
The Control and Risks Committee was appointed at the Board meeting of April 28, 2016. The Committee is composed of three Independent Directors: Renate Hendlmeier – Chairperson, Elisa Corghi and Adriano Marconetto. On their appointment the Board considered that the members had adequate accounting and financial experience.
In 2016, the Committee met four times and had regular access to the corporate documents requested and principally reviewed:
The Committee also met with the Independent Audit Firm to evaluate the correct application of the accounting standards and their uniformity in the preparation of the consolidated financial statements. Finally, on the conclusion of the process it assessed the results reported by the audit firm.
The Committee has met three times in 2017. Also in light of its new composition, it reviewed the main procedures.
The Committee meetings, which were all documented in company records, held for a duration of approx. 2 hours, were attended by - in addition to the Committee members - the Finance Director and Group Executive Officer for Financial Reporting, Paolo Cafasso, the Internal Audit Head, the Vice President Organization Paola Bruschi, the Chairman of the Board of Statutory Auditors, another statutory auditor and the Chairman of the Supervisory Board. The Chairman of the Committee provides information on the content of discussions at the next appropriate Board meeting.
From October 28, the Control and Risks Committee is also the Related Party Transactions Committee. This Committee is tasked with expressing the opinions required by Article 7 and 8 of the Consob Regulation approved with motion No. 17221 of March 12, 2010 and subsequent amendments on significant and less significant transactions with related parties.
The Committee proposes to the Board of Directors on the appointment, revocation and remuneration of the internal audit manager, as well as on the adequacy of the resources available for these duties.
In particular, the Committee supports the Board of Directors as follows:
The Committee has access to the information and departments for undertaking their duties and may request the Board of Directors the assistance of external consultants.
At the meeting of March 22, 2017, the Board of Directors increased the annual budget available to the Committee and the Internal Control and Risk Management System, considering it more appropriate to handle the supplementation, development and coordination of control procedures suggested by the Committee.
The internal control and risk system involves the processes that monitor the efficiency of the company operations, the reliability of the information provided to the corporate boards and the market, compliance with legislation and regulations and the protection of the company's assets. It in addition contributes to conducting business activity in line with the objectives defined by the Board, supporting the undertaking of knowledgeable decisions.
The Board of Directors oversees the Internal Control and Risk Management system, defining the guidelines and periodically verifying the adequacy and effective functioning, ensuring that the principal corporate risks are identified and adequately managed.
The Board of Directors verifies that the risks to which BasicNet and its subsidiaries are exposed are correctly identified, managed and monitored in line with the Group's strategic objectives.
This activity, carried out with the support of the Director in charge of the Internal Control and Risk Management System and the Control and Risks Committee, seeks to evaluate the risk in defining the development potential of the Group. The Board has not established general numeric parameters to identify the nature and the level of risk compatible with the Group's strategic objectives, but from time to time reviews any significant operations carried out by the Issuer or the subsidiaries, also when such are within the scope of powers conferred to the Chairman or the Chief Executive Officer.
The Ethics Code, the Sourcing Center Ethics Code which includes social compliance principles and the organisational, management and control Model as per Legislative Decree 231/2001 and subsequent integrations, are an integral part of the internal control and risk management system. The rules of conduct contained in the model, continually evolving, integrate and strengthen the corporate control system through the preparation and continual updating of the related procedures.
The Internal Auditing department verifies the overall adequacy, efficiency and effectiveness of the internal control and risk management system, in particular, considering that some departments are centralised at the Parent Company, it contributes to the verification of the correctness and functioning of the reporting process with the strategic subsidiary companies, as well as the verification of the adequacy of the reporting system to ensure the quality of the reports of the various company departments.
In order to ensure oversight on the Group directives and strategies some Directors of BasicNet S.p.A. are also members of the Board of Directors of the subsidiaries.
In terms of the assessment of the internal control and risk management system, the Board of Directors on March 22, 2017 considered that the system is substantially appropriate to oversee the typical business risks associated with the main operating activities. In particular, it decided to carry out, on the suggestion of the Control and Risks Committee and the Board of the Statutory Auditors, in 2017 supplementation of the main control procedures, in support of coordination, development and sustainability within a single integrated model.
Control and risk management system in relation to the financial reporting process (as per Article 123 bis, paragraph 2, letter b), of the CFA)
1) Introduction
The internal control and risk management system in relation to the financial reporting process (hereafter the System) is the set of overall rules and corporate procedures adopted by the various company departments to permit, through an adequate identification process of the principal risks related to the preparation and dissemination of financial information, the reaching of the corporate objectives of true and fair disclosure.
The System seeks to provide reasonable certainty that the financial reporting – including consolidated reporting - communicated to the public is reliable, fair, true and timely, providing the users with a true and fair representation of the operational facts, permitting the issue of the declarations required by law that they correspond to the documented results, accounting records and underlying accounting entries of the facts and of the communications of the company to the market and also relative interim financial reporting, as well as the adequacy and effective application of the administrative and accounting procedures during the period to which the accounting documents refer (Annual Accounts and Half-Year Report) and in accordance with applicable international accounting standards.
For the completion of the System, a risk assessment was undertaken in order to identify and evaluate the risk areas which could arise such as to compromise the achievement of the control objectives and the efficacy of disclosure provided by the corporate boards and to the market. The risk assessment also took into account the risk of fraud. The identification and evaluation process was undertaken with reference to the entire Company and at process level. Once the risks were identified an evaluation was undertaken, considering both qualitative and quantitative aspects and the identification of specific controls in order to reduce the risk related to the non-achievement of the objectives of the System to an acceptable level, both at Company and process level.
2) Description of the principal characteristics of the risk management and internal control system in place in relation to financial disclosure.
The System provides for:
an identification and assessment process of the major Group companies and of the principal company processes for the preparation of the income statement and balance sheet, through qualitative and quantitative analysis;
a process of identification and evaluation of the principal risks of errors of the accounting and financial information, based on a control process, implemented on a company web platform with levels of protected access, which flags any errors;
The Executive Officer periodically reports to the Board of Statutory Auditors and the Control and Risks Committee on the adequacy, also in organisational terms, and on the reliability of the administrative-accounting system, on the activities carried out and on the efficacy of the internal control system with regards to financial reporting risks.
The Executive Director Paola Bruschi was appointed at the meeting of Aril 28, 2016 to oversee the Control and Risks Committee.
Within this role Paola Bruschi oversees the functioning of the internal control and risk management system, identifying the principal corporate risks (operational, financial and compliance), implementing the guidelines defined by the Board and supervises the planning, realisation and the management of the internal control and risk management system, constantly verifying the overall adequacy, efficiency and effectiveness, also with reference to the operating conditions and current legislative and regulatory requirements.
The responsibility to verify the overall adequacy, efficiency and effectiveness of the internal control and risk management System was assigned to the Internal Audit department. In particular, considering that some departments are centralised at the Parent Company, this department contributes to the verification of the correctness and functioning of the reporting process with the strategic subsidiary companies, as well as to the verification of the adequacy of the reporting system to ensure the quality of the reports of the various company departments.
On appointment, the Board also determined the remuneration for this office, considered in line with the structure of the Group.
The Internal Audit manager, who does not report to any operating department, has access to all information considered necessary to carry out the role. The manager reports to the Control and Risks Committee, the Board of Statutory Auditors and the executive director responsible for the functioning of the internal control and risk management system, at the Committee meetings.
The control activity is principally concentrated on monitoring the principal profitability indicators of some Group companies, through an online reporting instrument on the company's portal. This report constitutes an important monitoring instrument in real-time of the accounting activities and business performance: the data is available for each Group company and analysed by individual account item.
The Internal Auditor assesses the adequacy of the IT systems and the reliability of information available in view of the complexity of the operating environment, the size and the territorial reach of the company and verifies the adequacy of the organisational processes adopted by the company for the physical, logistical and organisational security of the IT system. The Internal Auditor also operates in support of other control system actors involved in the issues of compliance and risk management, in order to ensure compliance with law and to monitor the exposure level and vulnerability of the company to risks. The Internal Audit department was awarded to an external company Progesa S.r.l. which has no corporate ties to the Group. The activities were outsourced as it was considered that the head of the company, who had already undertaken similar work within the Group, had the necessary attributes to undertake such work efficiently within the Group, on an independent and professional basis.
The company adopted an "Organisation and management model as per Legislative Decree No. 231/2001", which is continually updated in line with the introduction of new offenses under the framework regulation.
The provisions of the Model complete the Group Ethics Code and the Ethics Code for the Sourcing Centers, which set out the rules and ethical responsibilities for the conducting of business and relations between the company and the various interest holders. The model, continually evolving, integrates and strengthens the corporate control system through the preparation and continual updating of the related procedures. It also provides for a disciplinary system which appropriately sanctions non-compliance with the measures and principles contained in the above-stated documents.
For the effective dissemination of the Ethics Code and of the organisation and control model these were published on the company's website www.basicnet.com/contenuti/corporate/codiceetico.asp in the area dedicated to Group employee time-keeping. The Ethics Code is presented on a video to all new employees of the Group and to all consultants.
The Board of Directors at the meeting of April 28, 2016 reconfirmed the Supervisory Board (OdV) as Giuliana Baronio (outside consultant involved in BasicNet Corporate Affairs), Paola Bruschi (Board member and Director in charge of the Internal control and risk management system) and Mario Sillano (Director of the company Progesa with involvement in Internal Audit). The Supervisory Board is tasked with overseeing the correct functioning of the Model and updates. The Supervisory Board reports on at least a half-yearly basis to the Control and Risks Committee and to the Board of Statutory Auditors.
The audit is carried out by an independent audit firm registered in the relevant registrar. The Shareholders' Meeting of April 30, 2008 appointed the audit firm PricewaterhouseCoopers S.p.A.. The appointment concludes with the approval of the 2016 Annual Accounts.
In August 2016, two pieces of legislation entered into force, one at domestic level (Legislative Decree No. 135 of July 17, 2016) and one at EU level (Regulation (EC) No. 537/2014), both concerning the auditing of accounts. In particular, the European Regulation establishes that the Boards of Statutory Auditors of listed companies, on conclusion of a selection procedure prepared and conducted by the company, identifies at least two possible alternatives and expresses its preference for one. The proposal to the Shareholders' Meeting for the assigning of the new appointment will include therefore the recommendation and the preference expressed by the Board of Statutory Auditors.
Under the new regulatory provisions, at the end of 2016 a procedure for the carrying out and selection of offers, approved by the Board of Directors, the invitation letter to candidates, which includes the means by which the candidates should present their offer and a rating model to measure the key features of the offers received through scoring assigned to each, were prepared. The indication of the key features was made in line with best international practice, favouring the quality and reliability of work of the audit firm to be appointed. The model comprises a technical section, measuring the qualitative characteristics of the offers received, and a financial section which assesses the financial aspects.
The Board meeting of April 28, 2016 confirmed for three years, with the favourable opinion of the Board of Statutory Auditors, the Executive Officer for Financial Reporting as the Director Mr. Paolo Cafasso, Group Finance Director. Paolo Cafasso holds many years of experience in the administrative, financial and control areas, as well as the qualifications required by law for the holding of the office of Director.
In the undertaking of his duties Mr. Paolo Cafasso has the power to approve the corporate procedures impacting upon the financial statements, on the consolidated financial statements and on other documents which may be audited, and may participate in the design of the IT systems which impact upon the financial position of the company; he may avail of an adequate organisational structure to undertake his activities, utilising internal resources available and, where necessary, outsourcing; he may also, where necessary, utilise the financial resources of the company, providing adequate information to the Board of Directors, and he may utilise the Internal Audit department for the mapping and analysis of processes and the execution of specific controls.
The Executive Officer periodically reports to the Control and Risks Committee and the Board of Statutory Auditors on the activities carried out and collaborates on an ongoing basis with the Independent Audit firm.
The information generated within the internal control system called BasicManagement and risk management shared on the web in a dedicated operating control section. The meetings of the Control and Risks Committee, attended usually by the internal control and risk management manager, the Executive Responsible, the Internal Audit Manager, the Supervisory Board and at least one member of the Board of Statutory Auditors, provide an opportunity for the parties involved in the system to meet and coordinate.
The Board of Directors, in accordance with Consob Regulation No. 17221 of March 12, 2010 adopted, with the favourable opinion of the Independent Directors, the procedure for transactions with related parties. The procedure was subsequently updated in October 2016 in order to be more flexible, over time, to differing organisational features and the size of the company. The main amendments concern:
the General Principles - Article 2 "scope" and Article 4 of the Procedures - "Approval of transactions with related parties", to which paragraph 4.2.1. was added, which establishes procedures for the approval of significant transactions where the company exceeds the limit for minor transactions.
BasicNet is identified, for the purposes of the Consob Regulation incorporating related party transaction provisions, as a "smaller company" (companies presenting both assets written to the balance sheet and revenues as per the last approved consolidated financial statements not in excess of Euro 500 million) and, therefore, utilises a simplified system for the approval of significant transactions whereby the rules for the approval of less significant transactions are applied;
Amendments to Article 3 introduction - "Related Party Transactions Committee".
In relation to the presence of two or more Independent Directors on the Board, Article 3 was redrawn, providing for the setting up of a Related Parties Transactions Committee comprising three independent and non-executive Directors. This function was assigned to the Control and Risks Committee.
The approval of the transactions with related parties is the responsibility of, both in relation to significant transactions, as BasicNet falls within the application of Article 3, paragraph 1, letter f) of the Related Party Regulations, and in relation to minor transactions, to the Board of Directors, or the Executive Board, provided they are not a related party in the transaction, within the limits of their delegated powers, with prior non-binding opinion of the Independent Directors.
In general, exempted from the procedure, in addition to all the matters expressly indicated by the Related Party Regulation issued by Consob, are insignificant operations (amounts not above Euro 150 thousand), provided they are undertaken at market or standard conditions within the ordinary operations of the business and of the related financial activities; the operations concluded with or between subsidiaries, including joint ventures, by BasicNet, provided in the subsidiary companies there are no counterparties in the operation that have interests, qualified as significant, of other related parties of the Company; the operations with associates provided that the associated company counterparties in the operation do not have interests, qualified as significant, of other related parties of the Company.
Significant interest is not considered to exist by the mere sharing of one or more Directors or one or more senior management responsibilities between BasicNet and the companies of the subsidiary.
A procedure was implemented which transmits an alert mail through the "basic procurement" order system when an order is uploaded to the web for a related party, identified on the basis of declarations received from related parties or parties closely linked to them (members of the Board of Directors and Board of Statutory Auditors) and by the database management system.
As outlined in the chapter concerning remuneration, the Board, with the favourable opinion of the Independent Directors and the Board of Statutory Auditors, in 2016 passed motions on two occasions concerning the remuneration of executive directors. In 2015, no resolutions were presented to the Board of Directors concerning transactions with related parties.
The procedure is available on the company's website: www.basicnet.com/contenuti/corporate/particorrelate.asp.
The regulation applicable for the appointment of the members of the Board of Statutory Auditors is in accordance with legislative and regulatory provisions and Article 17 of the Company By-Laws, in relation to which reference should be made to the company's website www.basicnet.com at www.basicnet.com/contenuti/gruppo/statuto.asp.
The Board of Statutory Auditors consists of three standing and two alternate members.
As the minority shareholders, as identified by the legal and regulatory provisions, are reserved the election of a Statutory Auditor and an Alternate Auditor, the procedure at Article 17 of the By-Laws provides that the appointment of the Board of Statutory Auditors takes place on the basis of slates presented by Shareholders, in which the candidates are listed by progressive numbering.
The slate is composed of two sections: one for the candidates for the office of Standing Auditor and the other for candidates for the office of Alternate Auditor. The slates must be drawn up so as to ensure that the resultant Board of Statutory Auditors complies with the applicable gender balance regulations in force.
Only shareholders which individually or together with other Shareholders hold shares with voting rights representing the share capital percentage required by the Company, which will be indicated in the call notice of the Shareholders' Meeting for the approval of the Board of Statutory Auditors, may present slate.
Together with the filing of slates the Shareholders must present or deliver to the registered office of the company documentation declaring the ownership of the number of shares with voting rights necessary for the presentation of the slate.
Each shareholder, in addition to shareholders belonging to the same group, in accordance with Article 2359 of the Civil Code and the parties belonging to, also through subsidiaries, a shareholder agreement in accordance with Article 122 of Legislative Decree No. 58 of February 24, 1998, may not present, nor vote upon, nor through nominees of trust companies, more than one slate.
In the case of violation of this rule no consideration is taken on the vote of the shareholder on any list;
Each candidate can be presented only on one slate at the risk of being declared ineligible.
Candidates may not be included on the slates if they already hold a greater number of Statutory Auditor positions than permitted by the regulatory or legal provisions. The outgoing statutory auditors may be re-elected.
In accordance with Article 1, paragraph 3, of the Ministry for Justice Decree No. 162 of March 30, 2000
the sectors closely related to those in which the Company operates are:
The areas closely related to the company's sector are:
The slates accompanied by exhaustive disclosure on the personal and professional characteristics of the candidates, with indication of the presenting shareholders and the overall share capital percentage held, in addition to the declaration of shareholders other than those who hold, also jointly, a controlling or relative majority holding, declaring the absence of connecting relationships as per the applicable regulations, with these latter, must be filed at the registered office of the company by the deadline established by applicable legislative and regulatory provisions.
Together with each slate, within the regulatory and legally established timeframe, a declaration in which the individual candidates accept their candidature, must be filed at the company's registered office, stating under their own responsibility, the inexistence of reasons for ineligibility and incompatibility, as well as the existence of the requisites for the respective assignments, in addition to those required for directorships held in other companies.
Slates presented that do not comply with all of the above formalities are considered as not presented.
The procedure for electing Statutory Auditors are as follows:
The Chairman of the Board of Statutory Auditors is the first candidate indicated on the slate that obtained the second highest number of votes.
In the case of parity of votes between slates, the candidates from the slate having a higher equity investment are elected or, subordinately, with the greater number of shareholders.
In the case of presentation of only one slate, all candidates will be taken from that slate, with the Chairman the first listed on the slate.
Where it is not possible to proceed with the appointment according to the above system, the Shareholders' Meeting deliberates by statutory majority.
Where his/her legal requisites no longer exist, the statutory auditor must leave office.
In the case of the replacement of a statutory auditor, including the Chairman, where possible the Alternate Auditor belonging to the same slate as the discontinuing auditor joins the board and in the case of the replacement a Statutory auditor elected from the minority slate, the first candidate on the minority slate receiving the second highest number of votes joins the board in their place. In the cases in which a replacement results in non-compliance with the legally established gender balance criteria, the Board of Statutory Auditors shall be supplemented.
For the supplementation of the Board of Statutory Auditors:
Where it is not possible to proceed in accordance with the previous paragraph, the Shareholders' Meeting to supplement the Board of Statutory Auditors votes according to a relative majority of the share capital represented at the Shareholders' Meeting, while ensuring that the right to representation of the minority has been complied with, in addition to the regulatory required gender balance provisions.
The Board of Statutory Auditors was appointed by the Shareholders' AGM of April 28, 2016, which elected:
The composition of the Board of Statutory Auditors has been in line with the "gender quota" required by the new Consob regulation since the company's listing.
Each member of the Board of Statutory Auditors has declared on appointment to hold the good standing and professional requirements in accordance with law and the Company By-Laws.
The outcome of this recognition was reported in the press release issued by the company subsequent to appointment.
The Board of Statutory Auditors verified the independence of their members based on the criteria of the new Self-Governance Code, confirming to the Board of Directors at the meeting of March 22, 2017 the independence of their members in accordance with the above-mentioned Code.
The documentation filed for the purposes of the appointment, including the updated curriculum vitaes of the statutory auditors, is available at www.basicnet.com/contenuti/gruppo/organisocialisocieta.asp.
A brief curriculum vitae of the members of the Board of Statutory Auditors in office, with indication of the offices held within the Group or in other listed companies or companies of significant size is listed below.
Maria Francesca Talamonti – Chairperson of the Board of Statutory Auditors (Statutory Auditor since 2016)
Born in Rome in 1978. She graduated in Economics and Commerce from the LUISS Guido Carli University in 2002. She has been enrolled to the Accountants Register of Rome since 2006 and the Auditors' Register since 2007. Holding a Doctorate in Business Economics, she is currently teaching planning and control under a substitute contract at the Unitelma Sapienza Computing University and has a supplementary contract at the Business and Management Department of the LUISS Guido Carli University of Rome.
Since 2006, she has worked as a freelance corporate, accounting and finance consultant; she is a Statutory Auditor for companies belonging to Groups headed by listed companies.
She is an independent Director of Elettra Investimenti S.p.A (an Aim Italia listed company), the Chairperson of the Board of Statutory Auditors of Servizi Aerei S.p.A. and a Statutory Auditor of Costiero Gas Livorno S.p.A., Driver Servizi Retail S.p.A., Raffineria Milazzo S.c.p.A. and Romairport S.p.A..
Born in 1957, she qualified as a Certified Accountant in 1985 and as an auditor in 1990. She has been enrolled at the Court-appointed Technical Consultants register since 1997 and on the Experts' Register of the Turin Court since 1999.
Since March 1983 she has been an associate with the Studio Boidi & Partners firm in Turin.
Her professional activities concern tax and corporate consultancy, principally with companies and groups, and assistance and consultancy in the tax dispute field.
Within the Group, he is a Statutory Auditor of BasicVillage S.p.A..
She holds the office of Statutory Auditor of Ekipo S.p.A., Statutory Auditor of Erre Esse S.p.A., Statutory Auditor of Italcables S.p.A. in liquidation and Statutory Auditor of BasicWorld S.r.l.
Born in 1955. Since 1981 he has acted as a Certified Accountant and since 1988 an auditor. He was a Professor at the Faculty of Economics of the Turin University for "Legal, fiscal and regulatory issues" for the level 1 Masters in Private Banking for the year 2010-2011. Since 1980, he has collaborated also with the Economic Law Institute, also at the Economics Faculty, where he continues to act as the resident expert on Commercial Law. He is a member of the Board of the Turin Certified Accountant Association for the 2017-2020 period and a co-manager of the "231/2001 Working Group" of the Association.
He is a Director overseeing the "Corporate Controls" area of the Turin-Ivrea-Pinerolo Certified Accountant Association and since April 2013 Chairman of the Board of Directors of "Synergia Consulting Group S.r.l.", a professional alliance of 14 of the most cited Italian commercial research centres, located throughout Italy.
His professional activities principally include tax and corporate consultancy, both domestically and internationally, acting as the Chairman of the Board of Statutory Auditors or as a Statutory Auditor or a member of the Supervisory Board for a number of companies.
Collaborates, in addition, with specialised sector magazines, publishing Articles relating to tax, legal, and corporate liability issues concerning companies the entities.
He has been the speaker in the same sector at a large number of conventions and research conferences.
Within the Group, he is Chairman of the Board of Statutory Auditors of BasicItalia S.p.A. and BasicVillage S.p.A..
He holds the position of Vice Chairman of Assofiduciaria, Chairman of the Board of Directors of Assoservizi Fiduciari S.r.l. a sole shareholder company, Chairman of the Board of Directors of Torino Fiduciaria Fiditor S.r.l., Statutory Auditor of Autoliv Italia S.p.A. with sole shareholder, Statutory Auditor of Michelin Italia S.p.A., Chairman of the Board of Statutory Auditors of BasicWorld S.r.l., Chairman of the Board of Statutory Auditors of Casco Imos S.r.l. with sole shareholder, Chairman of the Board of Statutory Auditors of DB Cargo Italia S.r.l., sole Statutory Auditor of DB Cargo Italy S.r.l. with sole shareholder, Chairman of the Board of Statutory Auditors of Dytech – Dynamic Fluid Technologies S.p.A. with sole shareholder, Chairman of the Board of Statutory Auditors of Ekipo S.p.A., Chairman of the Board of Statutory Auditors of Erre Esse S.p.A., Chief Executive Officer of Fidicont S.r.l., Statutory Auditor of Finpat S.p.A., Chairman of the Board of Statutory Auditors of Fondazione Stadio Filadelfia, sole statutory auditor of GJP S.r.l. with sole shareholder, Chairman of the Board of Statutory Auditors of Jacobacci & Partners S.p.A., Chairman of the Board of Statutory Auditors of Litmat S.p.A., Chairman of the Board of Statutory Auditors of Quinto S.p.A. with sole shareholder, Statutory Auditor of Sangiorgio Costruzioni S.p.A., of Suzuki Italia S.p.A with sole shareholder, Chairman of the Board of Statutory Auditors of ITW Italy Holding S.r.l., Chairman of the Board of Statutory Auditors of ITW Lys Fusion S.r.l. with sole shareholder and Chairman of the Management Board of Porsche Club Piedmont and Valle d'Aosta.
Born in 1978. She graduated in Economics from the LUISS Guido Carli University in 2001. In March 2001, she won a scholarship to study a Business Economics Doctorate at University Roma Tre. She has been enrolled at the Rome Accountants' Register since 2005.
In 2007, she received a Doctorate in Company Economics from the Roma Tre University presenting the thesis "Business Combinations under IFRS 3 and the new draft of IFRS 3 Amendments". She has held and holds the position of statutory auditor at leading non-listed Italian companies.
She is an Independent Director of Elettra Investimenti S.p.A. (an Aim Italia listed company), a Statutory Auditor of Saipem S.p.A., Anas Internazional S.p.A., Quadrilatero Marche and Umbria S.p.A., Armonia SGR S.p.A., Autostrade del Molise S.p.A., e-geos S.p.A., Eni Trading e Shipping S.p.A., Raffinerie Gela S.p.A., Agi S.p.A., EniAdifn S.p.A., Parentope Finanza di Progetto - ScpA and the Chairperson of the Board of Statutory Auditors of Novasim S.p.A. in liquidation. She is also a member of the Ovesight Committee, on the appointment of the Bank of Italy, of Credito Cooperativo Interprovinciale Veneto in l.c.a., Valore Italia Holding di partecipazioni S.p.A. and Independent Private Bankers sim S.p.A.
Born in 1953, he qualified as a certified accountant and auditor. He acts principally in the tax and corporate consultancy fields, both domestically and internationally, and in the tax planning field, acting as a Director and member of the Board of Statutory Auditors on a number of companies and bodies.
Expert in problem issues relating to the acquisition and sale of enterprises and companies.
Appointed to assist and represent contributors in tax disputes before the tax commissions.
Within the group, he is a Statutory Auditor of BasicItalia S.p.A..
He holds the office of Statutory Auditor of Autoliv Italia S.p.A. with sole shareholder, Statutory Auditor of Jacobacci & Partners S.p.A., Chairman of the Board of Directors of Fidicont S.r.l., Chairman of the Board of Statutory Auditors of Sangiorgio Costruzioni S.p.A., Chairman of the Board of Statutory Auditors of S.p.A. Michelin Italiana, Chairman of the Board of Statutory Auditors of Eataly s.r.l. , Statutory Auditor of Tipo S.r.l., Chairman of the Board of Statutory Auditors of Clubitaly s.r.l. and Chief Executive Officer of Torino Fiduciaria Fiditor S.r.l.
The Statutory Auditors, within their duties, acquired information also through meetings with the independent audit firm, with the Supervisory Board and through attending the Control and Risks Committee meetings.
The Statutory Auditors may participate in meetings subsequent to their appointment and during their mandate with the Chairman and Management, in order to remain updated on corporate affairs and developments. They also continually have access to financial and operational information from the BasicManagement portal.
The Statutory Auditor who, on his/her own behalf or that of third parties, has an interest in a determined transaction of the issuer informs the other statutory auditors and the Chairman of the Board, in a timely and comprehensive manner, regarding the nature, terms, origin and extent of his/her interest. This event however has never occurred.
As already indicated in the preceding paragraphs, the Board of Statutory Auditors, in undertaking its activities, liaise with the Internal Audit department and the Control and Risks Committee.
The Shareholders' AGM on appointment established the remuneration of the Statutory Auditors, as a fixed amount, in line with that of the previous mandate and with the role covered and the commitment required, in addition to the size of the company.
The Chairman and Chief Executive Officer actively undertake dialogue with shareholders and the financial analysts following the company. The Chief Executive Officer acts also as the Investor Relations Manager.
Dialogue with investors has been supported since listing through continuous updates of the website www.basicnet.com, on which financial information of interest to Shareholders in general may be found (Annual Reports and periodic reports, press releases and notices, presentations), in addition to updated data and documents concerning Corporate Governance and regulated information (composition of the Corporate Boards, the By-Laws, the Shareholders' Meeting regulation, the Ethics Code and the Corporate Governance and Ownership Structure Report). The press releases relating to the Brands and Companies of the Group are also available.
The shareholders' meetings provide opportunities to meet and communicate with the shareholders. During the Shareholders' Meetings the Chairman and the Chief Executive Officer provide the Shareholders with all the necessary information for the undertaking of resolutions.
The Ordinary Shareholders' Meetings undertake their duties in accordance with Article 2364 of the Civil Code and the Extraordinary Shareholders' Meetings in accordance with Article 2365 of the Civil Code.
In accordance with Article 2365, paragraph 2 of the Civil Code, the Board of Directors was conferred the following duties:
In accordance with Article 2410, first paragraph of the Civil Code, any issue of bonds is decided by the Directors.
The Board of Directors, and any Executive Boards, also have the right to undertake, without a Shareholders' Meeting authorisation, all acts and operations against the objectives of a public share or exchange offer, from the moment in which the communication in which the decision or the obligation arises to promote the offer was made public until the termination or expiry of the offer.
The Board of Directors, and any Executive Boards, also has the right to implement decisions, not yet implemented in full or in part and which are not within the scope of the normal activities of the company, undertaken before the communication as described above and whose implementation could negate the achievement of the objectives of the offer. The Shareholders' Meeting (June 30, 2000, and for supplementation and/or modifications subsequently on April 30, 2011) approved the Shareholders' Meetings Regulations in order to permit the orderly functioning of the meetings and to guarantee the right of each shareholder to take the floor on matters under discussion. The Shareholders' Meeting regulations are available on the Company website:
www.basicnet.com/contenuti/gruppo/regolamento.asp.
As per Article 2 of the Shareholder' Meeting Regulation, those holding shares in accordance with applicable legislation and the by-laws, or their proxies or representatives, may attend and speak at the Shareholders' Meetings. Proof of personal identity is required for attendance at the Shareholders' Meeting. Unless otherwise indicated in the Call Notice, the personal identification and the verification of the right to attend takes place at the location of the Shareholders' Meeting at least one hour before the time fixed for the meeting.
Attendees are assured the possibility to follow and take part in the discussion and to exercise their right to vote using the technical methods established on each occasion by the Chairman: usually time is allowed for contributions be shareholders after the presentation of each matter on the Agenda.
All Directors generally attend the Shareholders' Meetings. The Board of Directors is available to Shareholders to provide the necessary information for the undertaking of fully informed decisions.
During the year, there were no significant changes in the shareholders structure of the Issuer.
There are no corporate governance practices further to those indicated in the previous points applied by the Issuer, other than those required by legislation and regulation.
The changes, with regards to the composition of the Remuneration Committee, were described in the relative chapters.
In addition, at the Board meeting of March 22, 2017, the Statutory Auditors Massimo Boidi and Carola Alberti and the Alternate Auditor Fabio Pasquini, appointed by the Shareholders' AGM of April 28, 2016, from the majority slate presented by the shareholder BasicWorld S.r.l., presented, with effect from this Shareholders' AGM, their resignation from the Board of Statutory Auditors of BasicNet S.p.A.. The Shareholders' AGM called for April 27, 2017 shall therefore consider the supplementation of the Board of Statutory Auditors, through the appointment of two Statutory Auditors and an Alternate Auditor.
For the Board of Directors
Marco Daniele Boglione
In accordance with Consob Resolution No. 15519 of July 27, 2006 the transactions with related parties are described at Note 45.
| FY 2016 | FY 2015 | Changes | |||||
|---|---|---|---|---|---|---|---|
| Note | % | % | % | ||||
| Consolidated direct sales | (8) | 135,183 | 100.00 | 133,941 | 100.00 | 1,242 | 0.93 |
| Cost of sales | (9) | (80,923) | (59.86) | (79,126) | (59.08) | (1,797) | (2.27) |
| GROSS MARGIN | 54,260 | 40.14 | 54,815 | 40.92 | (555) | (1.01) | |
| Royalties and sourcing commissions | (10) | 46,424 | 34.34 | 46,547 | 34.75 | (123) | (0.26) |
| Other income | (11) | 2,226 | 1.65 | 3,980 | 2.97 | (1,754) | (44.07) |
| Sponsorship and media costs | (12) | (24,285) | (17.96) | (19,342) | (14.44) | (4,943) | (25.56) |
| Personnel costs | (13) | (19,681) | (14.56) | (18,881) | (14.10) | (800) | (4.24) |
| Selling, general and administrative costs, | |||||||
| royalties expenses | (14) | (37,442) | (27.70) | (35,070) | (26.18) | (2,372) | (6.76) |
| Amortisation & Depreciation | (15) | (6,261) | (4.63) | (6,340) | (4.73) | 79 | 1.25 |
| EBIT | 15,241 | 11.27 | 25,709 | 19.19 | (10,468) | (40.72) | |
| Net financial income (charges) Share of profit/(loss) of investments valued |
(16) | (353) | (0.26) | 734 | 0.55 | (1,087) | (148.09) |
| at equity | (17) | 52 | (0.04) | (59) | (0.04) | 111 | 188.14 |
| PROFIT BEFORE TAXES | 14,940 | 11.05 | 26,384 | 19.70 | (11,444) | (43.38) | |
| Income taxes | (18) | (4,635) | (3.43) | (9,624) | (7.19) | 4,989 | 51.84 |
| NET PROFIT | 10,305 | 7.62 | 16,760 | 12.51 | (6,455) | (38.51) | |
| Of which: | |||||||
| Shareholders of BasicNet - S.p.A. |
10,305 | 7.62 | 16,760 | 12.51 | (6,455) | (38.51) | |
| Minority interests - |
- | - | - | - | - | - | |
| Earnings per share | (19) | ||||||
| basic - |
0.1839 | 0.2953 | (0.1114) | (37.72) | |||
| diluted - |
0.1839 | 0.2953 | (0.1114) | (37.72) | |||
(In Euro thousands)
| Note | FY 2016 | FY 2015 | |
|---|---|---|---|
| Profit for the year (A) | 10,305 | 16,760 | |
| Effective portion of the Gains/(losses) on cash flow hedges |
687 | 330 | |
| Re-measurement of post-employment benefits (IAS 19) (*) |
9 | 84 | |
| Gains/(losses) from translation of accounts of foreign subsidiaries |
227 | 667 | |
| Tax effect on other profits/(losses) | (167) | (114) | |
| Total other gains/(losses), net of tax effect (B) | (31) | 756 | 967 |
| Total Comprehensive Profit (A)+(B) | 11,061 | 17,727 | |
| Total Comprehensive Profit attributable to: – Shareholders of BasicNet S.p.A. - Minority interests |
11,061 - |
17,727 - |
(*) items which may not be reclassified to the profit and loss account
(In Euro thousands)
| ASSETS | Note | December 31, 2016 | December 31, 2015 |
|---|---|---|---|
| Intangible assets | (20) | 41,728 | 41,513 |
| Goodwill | (21) | 10,052 | 10,245 |
| Property, plant and equipment | (22) | 30,497 | 28,769 |
| Equity invest. & other financial assets | (23) | 264 | 307 |
| Interests in joint ventures | (24) | 257 | 340 |
| Total non-current assets | 82,798 | 81,174 | |
| Net inventories | (25) | 47,208 | 49,025 |
| Trade receivables | (26) | 58,066 | 46,701 |
| Other current assets | (27) | 10,223 | 12,178 |
| Prepayments | (28) | 7,579 | 7,756 |
| Cash and cash equivalents | (29) | 5,707 | 6,971 |
| Derivative financial instruments | (30) | 1,609 | 1,367 |
| Total current assets | 130,392 | 123,998 | |
| TOTAL ASSETS | 213,190 | 205,172 |
| LIABILITIES | Note | December 31, 2016 | December 31, 2015 |
|---|---|---|---|
| Share capital | 31,717 | 31,717 | |
| Reserve for treasury shares in portfolio | (11,890) | (8,823) | |
| Other reserves | 64,748 | 52,857 | |
| Net Profit | 10,305 | 16,760 | |
| Minority interests | - | - | |
| TOTAL SHAREHOLDERS' EQUITY | (31) | 94,880 | 92,511 |
| Provisions for risks and charges | (32) | 42 | 45 |
| Loans | (33) | 21,514 | 20,566 |
| Employee and Director benefits | (34) | 2,863 | 4,108 |
| Deferred tax liabilities | (35) | 1,084 | 717 |
| Other non-current liabilities | (36) | 927 | 1,013 |
| Total non-current liabilities | 26,430 | 26,449 | |
| Bank payables | (37) | 33,652 | 31,767 |
| Trade payables | (38) | 31,699 | 25,151 |
| Tax payables | (39) | 15,749 | 17,421 |
| Other current liabilities | (40) | 7,559 | 7,738 |
| Accrued expenses | (41) | 2,169 | 2,637 |
| Derivative financial instruments | (42) | 1,052 | 1,498 |
| Total current liabilities | 91,880 | 86,212 | |
| TOTAL LIABILITIES | 118,310 | 112,661 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
213,190 | 205,172 |
(In Euro thousands)
| December 31, 2016 | December 31, 2015 | |
|---|---|---|
| A) OPENING SHORT-TERM BANK DEBT | (16,761) | (24,349) |
| B) CASH FLOW FROM OPERATING ACTIVITIES | ||
| Net Profit | 10,305 | 16,760 |
| Amortisation & Depreciation | 6,261 | 6,340 |
| Result of companies valued under the equity method Changes in working capital: |
(52) | 59 |
| . (Increase) decrease in trade receivables | (11,365) | (2,772) |
| . (Increase) decrease in inventories | 1,817 | (2,728) |
| . (Increase) decrease in other receivables | 832 | 1,015 |
| . Increase (decrease) in trade payables | 6,548 | (4,991) |
| . Increase (decrease) in other payables | (2,041) | (3,123) |
| Net change in post-employment benefits | ||
| (164) | (188) | |
| Others, net | 286 | 747 |
| 12,427 | 11,119 | |
| C) CASH FLOW FROM INVESTING ACTIVITIES | ||
| Investments in fixed assets: | ||
| - tangible assets | (4,794) | (1,683) |
| - intangible assets | (3,292) | (3,375) |
| - financial assets | - | - |
| Realisable value for fixed asset disposals: | ||
| - tangible assets | 74 | 75 |
| - intangible assets - financial assets |
- 178 |
- - |
| (7,834) | (4,983) | |
| D) CASH FLOW FROM FINANCING ACTIVITIES | ||
| Lease contracts (repayments) | 54 | (215) |
| New medium/long term loans | 7,500 | 15,000 |
| Loan repayments | (8,035) | (7,406) |
| Acquisition of treasury shares | (3,067) | (1,948) |
| Dividend payments | (5,622) | (3,979) |
| (9,170) | 1,452 | |
| E) CASH FLOW IN THE YEAR | (4,577) | 7,588 |
| F) CLOSING SHORT-TERM BANK DEBT | (21,338) | (16,761) |
Interest paid for the year amounts to respectively Euro 517 thousand in 2016 and Euro 660 thousand in 2015, while income taxes paid in the year amount respectively to Euro 6.4 million in 2016 and Euro 6.3 million in 2015.
| Share Capital |
Treas. shares |
Retained earnings |
Translation reserve |
Remeas. Reserve IAS 19 |
Cash Flow Hedge Reserve |
Net Result | Total Group Net Equity |
|
|---|---|---|---|---|---|---|---|---|
| Balance at December 31, 2014 | 31,717 | (6,875) | 43,001 | 1,026 | (263) | (332) | 12,437 | 80,711 |
| Allocation of result as per Shareholders' AGM resolution of April 27, 2015 |
||||||||
| - Retained earnings - Dividends distributed |
- - |
8,458 - |
- - |
- - |
- - |
(8,458) (3,979) |
- (3,979) |
|
| Acquisition of treasury shares | (1,948) | - | - | - | - | - | (1,948) | |
| 2015 Result | - | - | - | - | - | 16,760 | 16,760 | |
| Other comprehensive income items: | ||||||||
| - Gains/(losses) recorded directly to translation reserve |
- | - | 667 | - | - | - | 667 | |
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | 61 | - | - | 61 | |
| - Gains recorded directly to cash flow hedge reserve |
- | - | - | - | 239 | - | 239 | |
| Total comprehensive income | - | - | 667 | 61 | 239 | 16,760 | 17,727 | |
| Balance at December 31, 2015 | 31,717 | (8,823) | 51,459 | 1,693 | (202) | (93) | 16,760 | 92,511 |
| Allocation of result as per Shareholders' AGM resolution of April 28, 2016 |
||||||||
| - Retained earnings - Dividends distributed |
- - |
11,135 - |
- - |
- - |
- - |
(11,135) (5,625) |
- (5,625) |
|
| Acquisition of treasury shares | (3,067) | - | - | - | - | - | (3,067) | |
| 2016 Result | - | - | - | - | - | 10,305 | 10,305 | |
| Other comprehensive income items: - Gains/(losses) recorded directly to translation reserve |
- | - | 227 | - | - | - | 227 | |
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | 6 | - | - | 6 | |
| - Gains recorded directly to cash flow hedge reserve |
- | - | - | - | 523 | - | 523 | |
| Total comprehensive income | - | - | 227 | 6 | 523 | 10,305 | 11,061 | |
| Balance at December 31, 2016 | 31,717 | (11,890) | 62,594 | 1,920 | (196) | 430 | 10,305 | 94,880 |
| December 31, 2016 | December 31, 2015 | |
|---|---|---|
| Cash and cash equivalents | 5,707 | 6,971 |
| Bank overdrafts and bills | (8,014) | (4,266) |
| Import advances | (19,031) | (19,466) |
| Sub-total net liquidity available | (21,338) | (16,761) |
| Short-term portion of medium/long-term loans | (6,607) | (8,035) |
| Short-term net financial position | (27,945) | (24,796) |
| Intesa loan | (5,625) | (9,375) |
| Basic Village property loan | (5,700) | (6,900) |
| BasicItalia property loan | (2,339) | (2,746) |
| BNL Loan | (6,250) | - |
| Leasing payables | (1,600) | (1,545) |
| Sub-total loans and leasing | (21,514) | (20,566) |
| Consolidated Net Financial Position | (49,459) | (45,362) |
The statement required by Consob Communication No. 6064293 of July 28, 2006 is reported below.
| December 31, 2016 | December 31, 2015 | ||
|---|---|---|---|
| A. | Cash | 116 | 68 |
| B. | Other cash equivalents | 5,591 | 6,903 |
| C. | Securities held for trading | - | - |
| D. | Cash & cash equivalents (A)+(B)+(C) | 5,707 | 6,971 |
| E. | Current financial receivables | - | - |
| F. | Current bank payables | (27,046) | (23,732) |
| G. | Current portion of non-current debt | (6,607) | (8,035) |
| H. | Other current financial payables | - | - |
| I. | Current financial debt (F)+(G)+(H) | (33,653) | (31,767) |
| J. | Net current financial debt (I)-(E)-(D) | (27,946) | (24,796) |
| K. | Non-current bank payables | (21,514) | (20,566) |
| L. | Bonds issued | - | - |
| M. | Fair value of hedges (cash flow hedges) | 556 | (131) |
| N. | Non-current financial debt (K)+(L)+(M) | (20,958) | (20,697) |
| O. | Net financial debt (J)+(N) | (48,904) | (45,493) |
The net financial debt differs from the consolidated net financial position for the fair value of the interest and currency hedging operations - cash flow hedges (Notes 30 and 42).
BasicNet S.p.A. – with registered office in Turin, listed on the Italian Stock Exchange since November 17, 1999 and its subsidiaries, operate in the sports and casual clothing, footwear and accessories sector through the brands Kappa, Robe di Kappa, Jesus Jeans, Lanzera, K-Way, Superga and Sabelt, and since April 1, 2016 has held the global license for the Briko brand. Group activities involve the development of the value of the brands and the distribution of their products through a global network of independent licensees.
The duration of BasicNet S.p.A. is fixed by the company by-laws until December 31, 2050.
The publication of the consolidated financial statements of BasicNet as at December 31, 2016 was approved by the Board of Directors on March 22, 2017.
The main accounting principles adopted in the preparation of the consolidated financial statements and Group financial reporting are described below.
This document has been prepared in accordance with IFRS issued by the International Accounting Standards Board (IASB) and approved by the European Union. IFRS refers to all the revised International Accounting Standards (IAS) and all of the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") - previously known as the Standing Interpretations Committee ("SIC").
The financial statements are prepared under the historical cost convention (modified where applicable for the valuation of certain financial instruments), as well as on the going concern assumption.
The Group consolidated financial statements include the financial statements at December 31, 2016 of BasicNet S.p.A. and all the Italian and foreign companies in which the Parent Company holds control directly or indirectly. For the financial statements of the US, Asian and Dutch subsidiaries, which utilise local accounting standards, as not obliged to adopt IAS/IFRS, the appropriate adjustments were made for the preparation of the consolidated financial statements in accordance with international accounting standards.
The accounting policies utilised for the preparation of the Consolidated Financial Statements at December 31, 2016 are the same as those utilised for the previous year.
As per IAS 8 - Accounting Standards, Changes in Accounting Estimates and Errors, the IFRS in effect from January 1, 2016 are indicated and briefly illustrated below.
Amendments to IFRS 11 Joint Arrangements: Accounting for the acquisition of investments in Joint Arrangements: on November 24, 2015, EU Regulation No. 2015/2173 was issued, enacting at European level some limited amendments to IFRS 11. The amendments add new guidelines on the calculation of the acquisition of an investment in a joint operation, whose activities constitute a business (as defined by IFRS 3 - Business Combinations).
Amendments to IAS 16 - Property, plant and equipment and IAS 38 - Intangible Assets: on December 2, 2015, EU Regulation No. 2015/2231 was issued, enacting at European level some limited modifications to IAS 16 and IAS 38. The amendments to both standards establish that an asset should not be depreciated based on the revenues to be generated over a set period, as, according to IASB, revenues generated by an asset generally reflect factors other than the consumption of the economic benefits deriving from the asset.
Improvements to IFRS (2012-2014 cycle): on December 16, 2015 EU Regulation 2015/2343 was issued and enacted at EU level a number of improvements to IFRS for the period 2012-2014, as follows:
Amendments to IAS 1 - Presentation of financial statements - Disclosure initiatives: on December 19, 2015, EU Regulation No. 2015/2406 was issued, enacting at European level some limited modifications to IAS 1. In particular, the amendments, which are part of a wider improvement initiative for the presentation and disclosure of financial statements, include the following updates:
Amendments to IFRS 10, IFRS 12, IAS 28 - Investment entities: on September 23, 2016, EU Regulation No. 2016/1703 was issued which made amendments to IFRS 10 - Consolidated Financial Statements, IFRS 12 - Disclosure on investments in other entities and IAS 28 - Investments in associates and joint ventures. These amendments, published in the Investment Entities: application of the consolidation exception document set out the requirements for the accounting of investment entities and provide exemptions for particular situations. More specifically, the amendments made to IFRS 10 confirm the exemption from the preparation of the consolidated financial statements for an intermediate parent which is not an investment entity controlled by an investment entity.
The adoption of these amendments did not have any significant impacts on the Consolidated Financial Statements at December 31, 2016.
IFRS 15 - Revenues from contracts with customers: on October 29, 2016, EU Regulation No. 2016/1905 was issued, enacting at European level IFRS 15 - Revenue from contracts with customers and the relative amendments. IFRS 15 replaces IAS 18 - Revenues, IAS 11 - Construction contracts and the relative interpretations on the recognition of revenues, comprising IFRIC 13 - Customer loyalty programmes, IFRIC 15 - Agreements for the construction of real estate, IFRIC 18 - Transfers of assets from customers and SIC 31 Revenues - barter transactions involving advertising services. The application of the new standard from January 1, 2018 involves, alternatively, a method for the recalculation of all comparative periods presented in the financial statements ("complete retrospective method") and a "simplified" method involving the recognition of the cumulative effect of the first application of the standard in adjustment of the opening shareholders' equity of the period in which the new standard is adopted, leaving unchanged the data for all comparative periods presented. The new standard, which requires the recognition of revenues on the transfer of control of the goods or services to customers at an amount which reflects the consideration which is expected to be received in exchange for these products or services, introduces a five step method to analyse the transactions and define the method for recognising revenues concerning both the timing of recognition ("point in time"/"over time") and the relative amount. The Group does not expect the adoption of this standard to have material impacts on the recognition and valuation of its revenues.
IFRS 9 - Financial Instruments: on November 29, 2016, Regulation EC No. 2016/2067 was issued, which incorporated at EU level IFRS 9 - Financial Instruments concerning the classification, measurement and cancellation of financial asset/liabilities, the reduction in value of financial instruments, in addition to the accounting of hedges. IFRS 9, which should be applied from January 1, 2018 (i) amends the classification and valuation model of financial assets; (ii) introduces the expected credit losses concept among the variables to be considered in the valuation and write-down of financial assets; (iii) amends the hedge accounting provisions. The Group does not expect the adoption of this standard to have material impacts on the valuation of its assets, liabilities, costs and revenues.
At the date of the present consolidated financial statements, the following new Standards/Interpretations were issued by IASB, although still not approved by the EU:
Amendments to IAS 7 Cash flow statement, disclosure initiatives, applicable from January 1, 2017.
Amendments to IFRS 2 – Classification and measurement of share-based payments, applicable from January 1, 2018.
The Group will adopt these new standards, amendments and interpretations, according to the scheduled application dates; currently, no significant impacts are expected from these amendments, with the exception of those concerning IFRS 16 - Leasing, described above.
The BasicNet Group presents its income statement by nature of cost items; the assets and liabilities are classified as current or non-current. The cash flow statement was prepared applying the indirect method. The format of the consolidated financial statements applied the provisions of Consob Resolution No. 15519 of July 27, 2006 and Notice No. 6064293 of July 28, 2006 on financial disclosure requirements. With reference to Consob Motion No. 15519 of July 27, 2006, transactions with related parties are described in Note 45 of the consolidated financial statements.
The consolidated financial statements were prepared including the financial statements at December 31, 2016 of the Group companies included in the consolidation scope, appropriately adjusted in accordance with the accounting principles adopted by the Parent Company.
The consolidated financial statements of the BasicNet Group are presented in Euro thousands, where not otherwise stated; the Euro is the functional currency of the Parent Company and the majority of the consolidated companies.
Financial statements in currencies other than the Euro are translated into the Euro applying the average exchange rate for the year for the income statement and the exchange rate at the date of the operation in the case of significant non-recurring transactions. The balance sheet accounts are translated at the yearend exchange rate. The differences arising from the translation into Euro of the financial statements prepared in currencies other than the Euro are recorded in a specific reserve in the Comprehensive Income Statement.
| Currency | FY 2016 | FY 2015 | ||
|---|---|---|---|---|
| Average | At year end | Average | At year end | |
| US Dollar | 1.1026 | 1.0541 | 1.1041 | 1.0887 |
| HK Dollar | 8.5582 | 8.1751 | 8.5590 | 8.4376 |
| Japanese Yen | 120.1608 | 123.4000 | 133.5853 | 131.0700 |
| UK Sterling | 0.8205 | 0.8562 | 0.7240 | 0.7340 |
The exchange rates applied are as follows (for 1 Euro):
The criteria adopted for the consolidation were as follows:
As illustrated in Attachment 2, at December 31, 2016 the Group is comprised solely of subsidiaries owned directly or indirectly by the Parent Company BasicNet S.p.A., or jointly controlled; there are no associated companies or investments in structured entities or joint arrangements in the Group.
Control exists where the Parent Company BasicNet S.p.A. simultaneously:
The existence of control is verified where events or circumstances indicate an alteration to one or more of the three factors determining control.
Investments in associates and joint ventures are consolidated at equity, as established respectively by IAS 28 - Investments in associates and joint ventures and by IFRS 11 – Joint arrangements.
An associate is a company in which the Group holds at least 20% of voting rights or exercises significant influence - however not control or joint control - on the financial and operational policies. A joint venture is a joint control agreement, in which the parties who jointly hold control maintain rights on the net assets of the entity. Joint control concerns the sharing, under an agreement, of the control of economic activities, which exists only where the decisions regarding such activities requires unanimity by all parties sharing control.
Associates and joint ventures are consolidated from the date in which significant influence or joint control begins and until the discontinuation of such. Under the equity method, the investment in an associated company or a joint venture is initially recognised at cost and subsequently the carrying amount is increased or decreased to recognise the associated company's share of the profit or loss after the date of acquisition. The share of profits (losses) of the investment is recognised to the consolidated income statements. Dividends received from the investee reduce the book value of the investment.
If the share of losses of an entity in an associate or a joint venture is equal to or greater than its interest in the associate or joint venture the entity discontinues the recognition of its share of further losses. After the investor's interest is reduced to zero, additional losses are provisioned and a liability is recognised, only to the extent that the investor has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or the joint venture subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
The consolidation scope includes the Parent company BasicNet S.p.A. and the Italian and foreign subsidiaries in which BasicNet S.p.A. exercises direct, or indirect, control. Attachment 2 contains a list of consolidated companies under the line-by-line method, as well as the complete list of Group companies, registered office, corporate purpose, share capital and direct and indirect holdings.
Three operating segments were identified within the BasicNet Group: i) license and brand management, (ii) proprietary licensee and (iii) property management. The relevant information is reported in Note 7.
The information by geographic area has significance for the Group in relation to royalty income and direct sales, and therefore was included for the two respective items. The breakdown of licensee aggregate sales by geographic area, from which the royalties derive, is reported in the Directors' Report.
The present financial statements were prepared on the going concern basis, and in accordance with the accruals principle.
The main accounting policies adopted for the preparation of the consolidated financial statements at December 31, 2016, in line with those utilised in the previous year, are disclosed below.
Revenues derive from Group operations in the ordinary course of business and comprise revenues from sales and services. Revenues are recognised net of sales tax, returns and discounts.
Revenues are recognised in accordance with the probability that the Group will receive economic benefits and the amount can be measured reliably. In particular, revenues from the sale of goods are recognised when the significant risks and benefits of the ownership of the goods are transferred to the buyer, the sales price has been agreed or determinable and collection of the receivable is expected. This moment corresponds with the transfer of ownership which coincides, normally, with the shipping or delivery of the goods and in some exceptional cases with the delayed delivery according to the specific instructions from the client. Sales to Group brand stores managed by third parties, on consignment, are recognised on the sale of the goods by the store to the final consumer, in accordance with IAS 18 – Revenues.
Royalties and sourcing commissions are recognised on an accruals basis in accordance with the underlying contracts.
Costs and expenses are recognised in accordance with the accruals principle.
Costs associated with sponsorship contracts paid each year are recognised in line with the contractual conditions.
Cost relating to the preparation and presentation of sample collections are recognised in the income statement in the year in which the sales of the relative collections are realised. Any differences are recorded through accruals.
Advertising campaign costs undertaken to drive orders by the salesforce, in accordance with current interpretations of IAS/IFRS, are directly expensed at the moment of the campaign, rather than in correlation to the relative revenues, which will only be recognised on the subsequent shipment of the orders received, although this second method better illustrates the correlation with the advertising campaign activity.
Interest income and expenses and other income and expenses are recorded and shown in the financial statements on the accrual basis.
In accordance with IAS 23 – Borrowing costs, the financial charges directly attributable to the purchase, construction and production of the asset which requires a significant amount of time before use or sale are capitalised together with the value of the asset. Such an event has not arisen up to the present moment for the Group. If these conditions are not met the financial charges are expensed directly to the income statement.
The receivables and payables originally expressed in foreign currencies are translated into Euro at the exchange rate when the transaction originated. Exchange differences arising on collections and payments in foreign currencies are recorded in the income statement.
Revenues and income, costs and charges related to currency transactions are recorded at the exchange rate at the transaction date.
At the end of the period, the assets and liabilities valued in foreign currencies, with the exception of fixed assets, are recorded at the exchange rates at the balance sheet date and the relative gains or losses on exchange are recorded in the income statement.
Current income taxes include all the taxes calculated on the assessable income of the Group. Income taxes are recognised in profit and loss, except where they relate to items charged or credited directly to equity, in which case the tax effect is also recognised directly in equity.
Other taxes not related to income, such as taxes on property and share capital, are included under operating charges.
Deferred taxes are calculated on all the temporary differences arising between the assessable income of an asset or liability and the relative book value in the consolidated financial statements. Deferred tax assets, including those relating to losses carried forward, for the portion not offset by deferred tax liabilities, are recognised only for those amounts for which it is probable there will be future assessable income to recover the amounts. Deferred tax assets and liabilities are determined with the tax rates that are expected to be applied, in accordance with the regulations of the countries in which the Group operates, in the years in which the temporary differences will be realised or settled. The deferred tax assets and liabilities are offset when the income tax is applied by the same fiscal authority and when there is a legal right of compensation.
The Parent Company adhered to the tax consolidation in accordance with Article 117 and thereafter of the CFA – Presidential Decree No. 917 of December 22, 1986 together with all of the wholly-owned Italian subsidiary companies. Other taxes not related to income, such as taxes on property and share capital, are included under operating charges.
Earnings per share is calculated dividing the profit or loss attributable to the shareholders of the Parent Company by the weighted average ordinary shares in circulation during the period.
The diluted earnings per share is calculated dividing the profit or loss attributable to the shareholders of the Parent Company by the average weighted number of shares outstanding, taking into account the effects of all the potential ordinary shares with dilution effects. In 2016, there were no diluting effects on the shares.
The Group may be involved in legal and tax disputes, concerning specific issues and in various jurisdictions. Considering the uncertainties relating to these issues, it is difficult to predict with certainty any future payments required. In addition, the Group has instigated legal disputes for the protection of its Trademarks, and of its products, against counterfeit products. The cases and disputes against the Group often derive from complex legal issues, which are often subject to varying degrees of uncertainty, including the facts and circumstances relating to each case, jurisprudence and different applicable laws.
In the normal course of business, Management consults with its legal consultants and experts on legal matters.
The Group accrues a liability against disputes when it considers it is probable that there will be a financial payment made and when the amount of the losses arising can be reasonably estimated.
The contingent liabilities are not recorded in the financial statements, but are reported as a disclosure in the Notes (Note 48) unless the probability of payment is remote. In accordance with paragraph 10 of IAS 37 – Provisions, contingent liabilities and contingent assets a contingent liability is (a) a possible obligation which derives from past events and whose existence will be confirmed only on the occurrence or otherwise of one or more future uncertain events, not entirely under the control of the enterprise, or (b) a current obligation which derives from past events but which cannot be recorded in the financial statements as the payment is improbable or cannot be reliably estimated.
The preparation of the financial statements and the relative notes in application of IFRS require that management make estimates and assumptions on the values of the assets and liabilities in the financial statements and on the information relating to the assets and contingent liabilities at the balance sheet date. The actual results may differ from such estimates.
Estimates are utilised to measure intangible and tangible assets subject to impairment tests, in addition to recognise provisions on doubtful debts, inventory obsolescence, amortisation and depreciation, the write-down of assets, employee benefits and income taxes.
The estimates and assumptions are reviewed periodically and the effects of all variations are immediately recognised in the income statement.
An intangible asset is a non-monetary asset, identifiable and without physical substance, controllable and capable of generating future economic benefits. Intangible assets are recognised at purchase and/or production cost, including the costs of bringing the asset to its current use net of accumulated amortisation and any loss in value. Amortisation begins when the asset is available for use and is recognised on a straight-line basis over the residual estimated useful life of the asset.
Software acquired and IT programmes developed internally are amortised over five years, while the costs incurred to maintain or upgrade the original operational standard are expensed in the year and are not capitalised.
Development costs are capitalised when the capacity to generate future economic benefits is demonstrated and the other conditions required by IAS 38 – Intangible assets are satisfied.
The brands Kappa, Robe di Kappa, Superga and K-Way are considered intangible assets with indefinite useful life; as such these assets are not amortised but subject to an impairment test at least annually. This depends on the strategic positioning reached whereby it is not currently possible to predict a time limit on the generation of future cash flow streams.
The brands Lanzera and Jesus Jeans, which have not yet reached a position similar to those of the principal brands, are amortised over a period of 20 years. The Sabelt brand was incorporated into the value of the investment, recognised at equity and also amortised over 20 years.
The patent rights are amortised over ten years.
Other intangible assets recognised on acquisition are recorded separately from goodwill, if their fair value can be determined on a reliable basis. They are amortised according to market conditions and generally within the period in which control of the asset is exercised.
In the case of business combinations, the assets, the liabilities and the contingent liabilities acquired and identifiable are recorded at their fair value at the date of acquisition. The positive difference between the acquisition cost and the portion held by the Group of the present value of the assets and liabilities is classified as goodwill and recorded in the financial statements as an intangible asset. Any negative difference ("negative goodwill") is recognised in the income statement at the date of acquisition.
Goodwill is not amortised, but is subject annually, or more frequently if specific events or circumstances indicate the possibility of having incurred an impairment, to verifications of any reduction in value, as provided by IAS 36 Reduction in value of assets. After initial recognition, goodwill is measured at cost less any loss in value. The impairment of goodwill may not be written back.
This category includes the amounts paid by the Group to sub-enter into the contractual positions of directly managed and franchising stores (key money). This commercial goodwill, where related to commercial positions of value, is recognised to the consolidated financial statements as an intangible assets with indefinite useful life, and subject to an impairment test at least once a year, or more frequently in the presence of impairment indicators, comparing the book value with the higher between the value in use and the fair value less selling costs, with this latter also determined in view of valuations made by independent experts. Commercial goodwill relating to other positions is amortised over the duration of the relative rental contract.
Property, plant and equipment are recorded at purchase or production costs, including accessory charges and direct and indirect costs, for the amount reasonably attributable to the assets.
Subsequent expenditures are only capitalised where they increase the future economic benefits of the asset to which they relate. All other expenditures are expensed as incurred.
Property, plant and equipment are amortised on a straight-line basis over the estimated useful life of each asset. The depreciation rates by asset category are shown below:
| Description | Estimated useful life years |
|---|---|
| Property | 33 |
| Plant and machinery | 8 |
| Furniture and furnishings | 5-8 |
| Motor vehicles | 4 |
| EDP | 5-8 |
Fixed assets which at the balance sheet date are lower than the book value are recorded at this lower value, which however may not be maintained at this value in subsequent periods if the reasons for the adjustment no longer exist.
Ordinary maintenance costs are fully charged to the income statement.
Advances and costs for property, plant and equipment in progress which are not yet utilised in the operating activities are reported separately.
The historic value of land is not depreciated.
Property, plant and equipment acquired through finance lease contracts are recognised under the finance method as per IAS 17 – Leasing and recorded under assets at the purchase price decreased by depreciation.
The depreciation of these assets is reflected in the consolidated financial statements applying the same criteria as for the fixed assets to which the lease contracts refer.
Within liabilities a payable is recorded, under short-term and medium term, towards the leasing company; the lease payments are reversed from expenses for the use of third party assets and the financial charges for the period are recognised on an accruals basis.
The carrying value of the assets of the Group are measured at each reporting date to determine whether there has been a loss in value, in which case an estimate is made of the recoverable value of the asset. A loss in value (impairment) is recorded in the income statement when the carrying value of an asset or a cash-generating unit exceeds its recoverable value.
The indefinite intangible assets (including goodwill) are tested annually and whenever there is an indication of a possible loss, in order to determine whether a loss in value has occurred.
The recoverable value of a non-financial asset is the higher of the fair value less costs to sell and the value in use. For the determination of the value in use, the future cash flows are discounted utilising a rate which reflects the current market value of money and of the related risks of the activity. In the case of activities which do not generate cash flows sufficiently independent, it is necessary to calculate the recoverable value of the cash-generating unit to which the asset belongs.
The establishment of the CGU's (Cash Generating Units) within the Group is based on the assessment of results and definition of strategies by management, in addition to the business model adopted. The Group identifies the CGU's as follows: 1) the property complex at Largo Maurizio Vitale 1 in Turin called the "Basic Village", held by the subsidiary of the same name and since year-end also the new adjacent building acquired; 2) the brands within the "licenses and brands" sector; 3) the Group brand sales points and the national licensing business as a whole, within the "proprietary licensees" sector, comprising BasicItalia S.p.A. and its subsidiary.
The value is recovered when changes take place in the valuations to determine the recoverable value excluding goodwill. The recoverable value is recorded in the income statement adjusting the book value of the asset to its recoverable value. This latter must not be above the value which would have been determined, net of depreciation, if no loss in value of the asset had been recorded in previous years.
Investments in associates and joint ventures are measured under the equity method. The share of cost exceeding the net equity of the investee at the acquisition date is treated in a similar manner as that described for the consolidation criteria.
The non-consolidated investments other than associates and joint ventures, non-listed, are measured under the cost method less any losses in value, as their fair value may not be reliably determined. The original value is restored in future years should the reason for the write-down no longer exist.
Financial assets consist of loans are recorded at their estimated realisable value.
Inventory is valued under the average weighted cost method.
Inventories are measured at the lower of purchase or production cost and their net realisable value.
Inventories include incidental charges and direct and indirect costs that can be reasonably allocated. Obsolete and slow-moving inventories are written down in relation to their possible utilisation or realisable value.
Receivables recorded under current assets are stated at their nominal value, which substantially coincides with the amortised cost. The initial value is subsequently adjusted to take into account any write-downs which reflect the estimate of the losses on receivables, determined based on a specific provision on doubtful debts and a general provision based on past experience. Medium/long-term receivables which include an implicit interest component are discounted utilising an appropriate market rate. Receivables transferred without recourse, in which all the risks and benefits substantially are transferred to the factoring company, are reversed in the financial statements at their nominal value.
The liquid assets principally relate to current bank accounts and cash. They are recorded for amounts effectively available at year end.
The cash equivalents are invested in highly liquid temporary financial instruments.
The account includes amounts related to two accounting periods, in accordance with the accruals concept.
Treasury shares are recognised as a deduction from equity. The original cost of the treasury shares and the revenues deriving from any subsequent sale are recognised as equity movements.
Provisions for risks and charges are recorded in the balance sheet only when a legal or implicit obligation exists deriving from a past event that determines the commitment of resources to produce economic benefits for their compliance and a reliable estimate of the amount can be determined.
The Post-Employment Benefit in accordance with Italian legislation is quantified as a defined benefit plan and is measured in accordance with the "Projected Unit Credit Method".
From January 1, 2007, this liability refers exclusively to the portion of the Post-Employment Benefit, matured up to December 31, 2006, which following the complementary pension reform (Legislative Decree No. 252 of December 5, 2005) continues to constitute an obligation of the company. Following the entry into force of the above-mentioned reform as enacted by Law No. 296 of December 27, 2006 (2007 Finance Law), the liability, as concerning services already completely matured, was restated without applying the pro-rata of the employment service and without considering, in the actuarial calculation, the components relating to future salary increases.
On June 16, 2011, the IASB issued an amendment to IAS 19 Employee Benefits. The new version of IAS 19 requires, in particular, for post-employment benefits, the recognition of the changes of the actuarial gains/losses under other items of the Comprehensive Income Statement.
The cost relating to employment services for the companies of the Group with less than 50 employees, as well as the interest on the "time value" component in the actuarial calculations will remain in the profit and loss account.
The portion of the Post-Employment Benefit paid to a supplementary pension fund is considered a defined contribution plan as the obligation of the company towards the employee ceases with the payment of the amount matured to the funds. Also the portion of the Post-Employment Benefit paid to the INPS Treasury fund is recorded as a defined contribution plan.
Financial payables are recorded at their amortised cost. The book value of the trade and other payables, recognised at nominal value which approximates the amortised cost, at the balance sheet date approximates their fair value.
The BasicNet Group utilises financial instruments to hedge interest rates on some loans and to hedge against fluctuations in the Euro/USD exchange rates on the purchases of products for sale, not adequately hedged by royalties and sourcing commission income.
These instruments are initially recorded at their fair value, and subsequently measured according to whether they are "hedged" or "not hedged" as per IAS 39.
It is recalled that the BasicNet Group does not undertake derivative contracts for speculative purposes.
The hedging may be of two types:
The BasicNet Group, before signing a hedge contract, undertakes a close examination of the relationship between the hedge instrument and the item hedged, in view of the objectives to reduce the risk, also evaluating the existence and the continuation over the life of the financial instrument of the effectiveness requirements, necessary for the hedge accounting.
After their initial recognition, they are accounted as follows:
a) Fair value hedges
The changes in their fair value are recognised in the income statement, together with the changes in the fair value of the relative assets and liabilities hedged.
b) Cash flow hedges
The part of the profit or loss of the hedge instrument, considered effective, is recorded directly in the comprehensive income statement; the non-effective part is however recorded immediately in the income statement.
The accumulated amounts in the comprehensive income statement are recorded in the income statement in the year in which the scheduled hedge operation matures or the instrument hedged is sold, or when the effectiveness requirements for hedge accounting no longer exist.
c) Derivative financial instruments which do not have the effectiveness requirements for hedge accounting
The derivative financial instruments which do not comply with the requirements of IAS 39 for the identification of the hedge, where present, are classified in the category of financial assets and liabilities measured at fair value through the profit and loss account. The group does not utilise financial instruments not for hedging purposes.
IFRS 7 requires that the classification of financial instruments measured at fair value is determined based on the quality of the input sources used in the valuation.
The IFRS 7 classification implies the following hierarchy:
The subsequent events to the end of the year and the outlook for the current year are reported in the Directors' Report.
(IN EURO THOUSANDS UNLESS OTHERWISE STATED)
The BasicNet Group identifies three operating segments:
| December 31, 2016 | Licenses and brands |
Proprietary licensees |
Property | Inter-segment eliminations |
Consolidated |
|---|---|---|---|---|---|
| Direct sales – third parties Direct sales – inter-segment |
697 2,004 |
134,484 280 |
2 1 |
- (2,285) |
135,183 - |
| (Cost of sales – third parties) (Cost of sales – inter-segment) |
(2,373) (52) |
(78,548) (1,947) |
(2) - |
- 1,999 |
(80,923) - |
| GROSS MARGIN | 276 | 54,269 | 1 | (286) | 54,260 |
| Royalties and sourcing commissions – third parties |
46,424 | - | - | - | 46,424 |
| Royalties and sourcing commissions – inter segment |
11,961 | - | - | (11,961) | - |
| Other income - third parties Other income – inter-segment |
659 301 |
881 12,135 |
686 2,782 |
- (15,218) |
2,226 - |
| (Sponsorship and media costs – third parties) (Sponsorship and media costs – inter-segment) |
(5,715) (12,168) |
(18,570) (7) |
- - |
- 12,174 |
(24,285) - |
| (Personnel costs – third parties) (Personnel costs – inter-segment) |
(8,901) - |
(10,747) - |
(33) - |
- - |
(19,681) - |
| (Selling, general and administrative costs, royalties expenses – third parties) |
(13,370) | (22,366) | (1,706) | - | (37,442) |
| (Selling, general and administrative costs, royalties expenses – inter-segment) |
(2,197) | (13,043) | (50) | 15,290 | - |
| Amortisation & Depreciation | (2,355) | (3,014) | (892) | - | (6,261) |
| EBIT | 14,915 | (462) | 788 | - | 15,241 |
| Financial income – third parties Financial income – inter-segment |
748 223 |
1,761 - |
- - |
- (223) |
2,509 - |
| (Financial charges – third parties) (Financial charges – inter-segment) |
(1,008) - |
(1,384) (222) |
(470) (1) |
- 223 |
(2,862) - |
| (Investment impairments – third parties) (Investment impairments – inter-segment) |
- - |
- - |
- - |
- - |
- - |
| Share of profit/(loss) of investments (Share of profit/(loss) of investments - inter segment) |
52 - |
- - |
- - |
- - |
52 - |
| PROFIT/(LOSS) BEFORE TAXES | 14,930 | (307) | 317 | - | 14,940 |
| Income taxes | (4,449) | (22) | (164) | - | (4,635) |
| NET PROFIT/(LOSS) | 10,481 | (329) | 153 | - | 10,305 |
| Significant non-cash items: | |||||
| Amortisation & Depreciation Write-downs |
(2,355) - |
(3,014) - |
(892) - |
- - |
(6,261) - |
| Total non-cash items | (2,355) | (3,014) | (892) | - | (6,261) |
| Investments in non-current assets | (2,433) | (5,629) | - | - | (8,062) |
| Segment assets and liabilities: | |||||
| Assets | 188,913 | 111,944 | 18,094 | (105,762) | 213,190 |
| Liabilities | 80,675 | 98,671 | 13,238 | (74,273) | 118,310 |
| December 31, 2015 | Licenses and brands |
Proprietary licensees |
Property | Inter-segment eliminations |
Consolidated |
|---|---|---|---|---|---|
| Direct sales – third parties Direct sales – inter-segment |
752 1,513 |
133,187 295 |
2 2 |
- (1,810) |
133,941 - |
| (Cost of sales – third parties) (Cost of sales – inter-segment) |
(2,153) (44) |
(76,971) (1,474) |
(2) - |
- 1,518 |
(79,126) - |
| GROSS MARGIN | 68 | 55,037 | 2 | (292) | 54,815 |
| Royalties and sourcing commissions – third parties |
46,547 | - | - | - | 46,547 |
| Royalties and sourcing commissions – inter segment |
11,938 | 2 | - | (11,940) | - |
| Other income - third parties Other income – inter-segment |
2,352 301 |
1,014 9,203 |
614 2,752 |
- (12,256) |
3,980 - |
| (Sponsorship and media costs – third parties) (Sponsorship and media costs – inter segment) |
(5,259) (9,244) |
(14,083) (6) |
- - |
- 9,250 |
(19,342) - |
| (Personnel costs – third parties) (Personnel costs – inter-segment) |
(8,850) - |
(10,031) - |
- - |
- - |
(18,881) - |
| (Selling, general and administrative costs, royalties expenses – third parties) |
(11,258) | (22,214) | (1,598) | - | (35,070) |
| (Selling, general and administrative costs, royalties expenses – inter-segment) |
(2,217) | (12,971) | (50) | 15,238 | - |
| Amortisation & Depreciation | (2,261) | (3,204) | (875) | - | (6,340) |
| EBIT | 22,117 | 2,747 | 845 | - | 25,709 |
| Financial income – third parties Financial income – inter-segment |
1,989 193 |
4,893 - |
- - |
- (193) |
6,882 - |
| (Financial charges – third parties) (Financial charges – inter-segment) |
(1,519) - |
(4,090) (193) |
(539) - |
- 193 |
(6,148) - |
| Share of profit/(loss) of investments (Share of profit/(loss) of investments - inter segment) |
(59) - |
- - |
- - |
- - |
(59) - |
| PROFIT BEFORE TAXES | 22,721 | 3,357 | 306 | - | 26,384 |
| Income taxes | (8,004) | (1,589) | (31) | - | (9,624) |
| NET PROFIT | 14,717 | 1,768 | 275 | - | 16,760 |
| Significant non-cash items: | |||||
| Amortisation & Depreciation Write-downs |
(2,261) - |
(3,204) - |
(875) - |
- - |
(6,340) - |
| Total non-cash items | (2,261) | (3,204) | (875) | - | (6,340) |
| Investments in non-current assets | (3,007) | (2,222) | (95) | - | (5,324) |
| Segment assets and liabilities: | |||||
| Assets | 185,731 | 108,679 | 17,196 | (106,434) | 205,172 |
| Liabilities | 78,231 | 95,393 | 12,702 | (73,665) | 112,661 |
The 2016 segment results compared with the previous year are reported below:
| "LICENSES AND BRANDS" SEGMENT | 2016 | 2015 | Changes |
|---|---|---|---|
| Direct sales – third parties Direct sales – inter-segment |
697 2,004 |
752 1,513 |
(55) 491 |
| (Cost of sales – third parties) (Cost of sales – inter-segment) |
(2,373) (52) |
(2,153) (44) |
(220) (8) |
| GROSS MARGIN | 276 | 68 | 208 |
| Royalties and sourcing commissions – third parties Royalties and sourcing commissions – inter-segment |
46,424 11,961 |
46,547 11,938 |
(123) 23 |
| Other income - third parties Other income – inter-segment |
659 301 |
2,352 301 |
(1,693) - |
| (Sponsorship and media costs – third parties) (Sponsorship and media costs – inter-segment) |
(5,715) (12,168) |
(5,259) (9,244) |
(456) (2,924) |
| (Personnel costs – third parties) (Personnel costs – inter-segment) |
(8,901) - |
(8,850) - |
(51) - |
| (Selling, general and administrative costs, royalties expenses – third parties) (Selling, general and administrative costs, royalties |
(13,370) | (11,258) | (2,112) |
| expenses – inter-segment) | (2,197) | (2,217) | 20 |
| Amortisation & Depreciation | (2,355) | (2,261) | (94) |
| EBIT | 14,915 | 22,117 | (7,202) |
| Financial income – third parties Financial income – inter-segment |
748 223 |
1,989 193 |
(1,241) 30 |
| (Financial charges – third parties) (Financial charges – inter-segment) |
(1,008) - |
(1,519) - |
511 - |
| Share of profit/(loss) of investments (Share of profit/(loss) of investments - inter-segment) |
52 - |
(59) - |
111 - |
| PROFIT BEFORE TAXES | 14,930 | 22,721 | (7,791) |
| Income taxes | (4,449) | (8,004) | 3,555 |
| NET PROFIT | 10,481 | 14,717 | (4,236) |
| Significant non-cash items: | |||
| Amortisation & Depreciation Write-downs |
(2,355) - |
(2,261) - |
(94) - |
| Total non-cash items | (2,355) | (2,261) | (94) |
| Investments in non-current assets | (2,433) | (3,007) | 574 |
| Segment assets and liabilities: | |||
| Assets | 188,913 | 185,731 | 3,182 |
| Liabilities | 80,675 | 78,231 | 2,444 |
| "PROPRIETARY LICENSES" SEGMENT | 2016 | 2015 | Changes |
|---|---|---|---|
| Direct sales – third parties Direct sales – inter-segment |
134,484 280 |
133,187 295 |
1,297 (15) |
| (Cost of sales – third parties) (Cost of sales – inter-segment) |
(78,548) (1,947) |
(76,971) (1,474) |
(1,577) (473) |
| GROSS MARGIN | 54,269 | 55,037 | (768) |
| Royalties and sourcing commissions – third parties Royalties and sourcing commissions – inter-segment |
- - |
- 2 |
- (2) |
| Other income - third parties Other income – inter-segment |
881 12,135 |
1,014 9,203 |
(133) 2,932 |
| (Sponsorship and media costs – third parties) (Sponsorship and media costs – inter-segment) |
(18,570) (7) |
(14,083) (6) |
(4,487) (1) |
| (Personnel costs – third parties) (Personnel costs – inter-segment) |
(10,747) - |
(10,031) - |
(716) - |
| (Selling, general and administrative costs, royalties expenses – third parties) (Selling, general and administrative costs, royalties |
(22,366) | (22,214) | (152) |
| expenses – inter-segment) | (13,043) | (12,971) | (72) |
| Amortisation & Depreciation | (3,014) | (3,204) | 190 |
| EBIT | (462) | 2,747 | (3,209) |
| Financial income – third parties Financial income – inter-segment |
1,761 - |
4,893 - |
(3,132) - |
| (Financial charges – third parties) (Financial charges – inter-segment) |
(1,384) (222) |
(4,090) (193) |
2,706 (29) |
| Share of profit/(loss) of investments (Share of profit/(loss) of investments - inter-segment) |
- - |
- - |
- - |
| PROFIT/(LOSS) BEFORE TAXES | (307) | 3,357 | (3,664) |
| Income taxes | (22) | (1,589) | 1,567 |
| NET PROFIT/(LOSS) | (329) | 1,768 | (2,097) |
| Significant non-cash items: | |||
| Amortisation & Depreciation Write-downs |
(3,014) - |
(3,204) - |
190 - |
| Total non-cash items | (3,014) | (3,204) | 190 |
| Investments in non-current assets | (5,629) | (2,222) | (3,407) |
| Segment assets and liabilities: | |||
| Assets | 111,944 | 108,679 | 3,265 |
| Liabilities | 98,671 | 95,393 | 3,278 |
| "REAL ESTATE" SEGMENT | 2016 | 2015 | Changes |
|---|---|---|---|
| Direct sales – third parties Direct sales – inter-segment |
2 1 |
2 2 |
- (1) |
| (Cost of sales – third parties) (Cost of sales – inter-segment) |
(2) - |
(2) - |
- - |
| GROSS MARGIN | 1 | 2 | (1) |
| Royalties and sourcing commissions – third parties Royalties and sourcing commissions – inter-segment |
- - |
- - |
- - |
| Other income - third parties Other income – inter-segment |
686 2,782 |
614 2,752 |
72 30 |
| (Sponsorship and media costs – third parties) (Sponsorship and media costs – inter-segment) |
- - |
- - |
- - |
| (Personnel costs – third parties) (Personnel costs – inter-segment) |
(33) - |
- - |
(33) - |
| (Selling, general and administrative costs, royalties expenses – third parties) (Selling, general and administrative costs, royalties expenses – inter-segment) |
(1,706) (50) |
(1,598) (50) |
(108) - |
| Amortisation & Depreciation | (892) | (875) | (17) |
| EBIT | 788 | 845 | (57) |
| Financial income – third parties Financial income – inter-segment |
- - |
- - |
- - |
| (Financial charges – third parties) (Financial charges – inter-segment) |
(470) (1) |
(539) - |
69 (1) |
| Share of profit/(loss) of investments (Share of profit/(loss) of investments - inter-segment) |
- - |
- - |
- - |
| PROFIT BEFORE TAXES | 317 | 306 | 11 |
| Income taxes | (164) | (31) | (133) |
| NET PROFIT | 153 | 275 | (122) |
| Significant non-cash items: | |||
| Amortisation & Depreciation Write-downs |
(892) - |
(875) - |
(17) - |
| Total non-cash items | (892) | (875) | (17) |
| Investments in non-current assets | - | (95) | 95 |
| Segment assets and liabilities: | |||
| Assets | 18,094 | 17,196 | 898 |
| Liabilities | 13,238 | 12,702 | 536 |
The Group operating performance and therefore of the respective segments is outlined in detail in the Directors' Report. The segment performances may be summarised as follows:
The breakdown of "consolidated direct sales" by geographic area is reported below:
| FY 2016 | FY 2015 | |
|---|---|---|
| Italy | 126,301 | 124,758 |
| EU countries other than Italy | 5,943 | 6,047 |
| Rest of the World | 2,939 | 3,136 |
| Total consolidated direct sales | 135,183 | 133,941 |
Direct sales revenues relate to merchandise sold by BasicItalia S.p.A. and BasicRetail S.r.l., both through National and Regional Servicing Centres and directly to the public (Euro 134.8 million) and by BasicNet S.p.A. for sample merchandise sales (Euro 0.4 million). Sales on the home market accounted for 93.4%, while approx. 4.4% of sales were in other EU countries, with the remaining approx. 2.2% outside the EU. Sales outside of Italy are related to commercial activities in countries not yet subject to specific licensing contracts, by the licensee companies of the Group.
| FY 2016 | FY 2015 | |
|---|---|---|
| Goods purchased – Overseas | 57,677 | 60,593 |
| Goods purchased – Italy | 6,799 | 5,669 |
| Samples purchased | 1,798 | 1,632 |
| Accessories purchased | 120 | 156 |
| Freight charges and accessory purchasing cost | 7,105 | 8,290 |
| Packaging | 449 | 409 |
| Changes in inventory of raw materials, ancillary, consumables and goods |
1,817 | (2,728) |
| Cost of outsourced logistics | 4,138 | 3,868 |
| Others | 1,020 | 1,237 |
| Total cost of sales | 80,923 | 79,126 |
"Goods purchased" refer to the finished products acquired by BasicItalia S.p.A.. Sample purchases were made by BasicNet S.p.A. for resale to the licensees.
The increase in the cost of sales is commented upon in the paragraph concerning the "Proprietary licensees" segment at Note 7. Inventories reduced on the previous year.
"Royalties and sourcing commissions" refer to royalty fees for the brand licenses in the countries where the licenses have been assigned, or recognised to authorised sourcing centres for the production and sale of group brand products by commercial licensees.
The changes in the year are commented upon in the Directors' Report.
The breakdown by region is reported below:
| FY 2016 | FY 2015 | |
|---|---|---|
| Europe (EU and non-EU) | 18,785 | 20,123 |
| The Americas | 5,149 | 4,492 |
| Asia and Oceania | 18,950 | 18,163 |
| Middle East and Africa | 3,540 | 3,769 |
| Total | 46,424 | 46,547 |
The changes at brand level and regional level are commented upon in the Directors' Report.
| FY 2016 | FY 2015 | |
|---|---|---|
| Rental income | 422 | 382 |
| Recovery of condominium expenses | 206 | 205 |
| Income from promo sales | 170 | 448 |
| Other income | 1,428 | 2,945 |
| Total other income | 2,226 | 3,980 |
The "recovery of condominium expenses" concerns the recharge to lessees of utility costs.
"Income from promo sales" refer to income from the right to use trademarks for commercialisation of products in promotion activities, which are of a non-recurring nature.
"Other income" includes prior year accruals' reversals, the recharge of expenses to third parties and other indemnities against counterfeiting and unauthorised usage protection actions. In 2015, this included Euro 1 million received as a commercial indemnity, of a non-recurring nature.
| FY 2016 | FY 2015 | |
|---|---|---|
| Sponsorship and marketing | 21,082 | 16,522 |
| Advertising | 2,626 | 2,060 |
| Promotional expenses | 577 | 760 |
| Total sponsorship and media costs | 24,285 | 19,342 |
The account "sponsorship" refers to communication investments incurred directly to which the Group contributes, described in detail in the Directors' Report. The increase on 2015 principally concerns the sponsorship of SSC Napoli, agreed in 2015, with full effect for financial year 2016.
"Advertising" refers to billboard advertising and press communication campaigns. These costs increased in the first half-year on the previous year, particularly in terms of Superga and K-Way brand support costs.
Promotional expenses concern gifts of products and advertising material, not relating to specific sponsorship contracts.
| FY 2016 | FY 2015 | |
|---|---|---|
| Wages and salaries | 14,394 | 13,672 |
| Social security charges | 4,370 | 4,290 |
| Post-employment benefits | 917 | 919 |
| Total | 19,681 | 18,881 |
| Human Resources at December 31, 2016 |
Human Resources at December 31, 2015 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Number Average age |
Number | Average age | ||||||
| Male/Female | Total | Male/Fema le |
Average | Male/Female | Total | Male/Female | Average | |
| Executives | 18 / 10 | 28 | 46 / 49 | 47 | 17 / 9 | 26 | 47 / 48 | 47 |
| Managers | - | - | - | - | 1 / - | 1 | 53 / -- | 53 |
| White-collar | 147 / 348 | 495 | 34 / 35 | 35 | 134 / 323 | 457 | 35 / 36 | 36 |
| Blue-collar | 13 / 10 | 23 | 46 / 43 | 45 | 14 / 10 | 24 | 45 / 42 | 43 |
| Total | 178 / 368 | 546 | 35 / 35 | 36 | 166 / 342 | 508 | 36 / 36 | 36 |
The number of employees at the reporting date, by category, is reported in the table below:
The increase principally concerns personnel involved in the management of Group brand sales points. The average number of Employees in 2016 was 521, comprising 26 executives, 1 senior manager, 471 white-collar employees and 23 blue-collar employees.
| FY 2016 | FY 2015 | |
|---|---|---|
| Selling and royalty service expenses | 9,090 | 8,239 |
| Rental, accessory and utility expenses | 9,931 | 9,901 |
| Commercial expenses | 4,714 | 3,316 |
| Directors and Statutory Auditors emoluments | 3,407 | 3,527 |
| Doubtful debt provision | 3,472 | 2,859 |
| Other general expenses | 6,828 | 7,228 |
| Total selling, general and administrative costs, and royalties expenses |
37,442 | 35,070 |
"Selling and royalty service expenses" principally include commissions to agents of the subsidiary BasicItalia S.p.A. and royalties on sports team merchandising contracts and co-branding operations.
"Commercial expenses" include costs relating to selling activities, comprising trade fairs and exhibitions, communication costs for advertising campaigns, stylists, graphics and commercial and travel expenses. The increase is related to the higher investment in communications in the year.
"Directors and Statutory Auditors emoluments", for offices held at the date of the present Report, approved by the Shareholders' AGM and the Board of Directors' meetings of April 28, 2016, are in line with the company remuneration policy, pursuant to Article 78 of Consob Regulation No. 11971/97 and subsequent amendments and integrations, and are reported in the Remuneration Report pursuant to Article 123-ter of the CFA, which is available on the company's website www.basicnet.com Shareholder' Meeting 2016 section, to which reference should be made.
The account "other general expenses" includes legal and professional fees, bank charges, other taxes, consumption materials, hire charges, and corporate and other minor expenses. The reduction is mainly due to lower legal and professional consultant costs in the year.
| FY 2016 | FY 2015 | |
|---|---|---|
| Amortisation | 3,269 | 3,318 |
| Depreciation | 2,992 | 3,022 |
| Total amortisation & depreciation | 6,261 | 6,340 |
Amortisation on intangible assets includes Euro 354 thousand of key-money write-down relating to some sales points closed or for which the decision to close has been made, within a normal rotation of less profitable sales point in favour of the opening of new locations or more appropriate operational strategies.
| FY 2016 | FY 2015 | |
|---|---|---|
| Interest income | 1 | 8 |
| Current account interest | (523) | (709) |
| Commercial interest expenses | (25) | (58) |
| Interest on medium/long term loans | (774) | (991) |
| Property lease interest | (72) | (82) |
| Other | (193) | (402) |
| Total financial income and charges | (1,586) | (2,234) |
| Exchange gains | 2,501 | 6,874 |
| Exchange losses | (1,268) | (3,906) |
| Net exchange gains/(losses) | 1,233 | 2,968 |
| Total financial income/(charges) | (353) | 734 |
Financial charges reduced following the general reduction in interest rates. Net exchange gains of Euro 1.2 million are reported, particularly due to hedges (flexi-term) on the US Dollar undertaken in the previous year. The reduction of the gains is due to the reduced fluctuation of the US Dollar in 2016 compared to the previous year.
The account, introduced following the application of IFRS 11 – Joint arrangements, reflects the effect on the consolidated result for the period of the valuation at equity of the joint ventures Fashion S.r.l. and AnziBesson Trademark S.r.l. (Note 24). 50% of AnziBesson Trademark S.r.l. was sold last December to the other shareholder, the Besson family, for consideration of Euro 150 thousand, resulting in a gain of Euro 80 thousand, also recognised to this income statement account.
Income taxes comprises current taxes of Euro 5.7 million (of which Euro 0.9 million for IRAP), deferred tax charges of Euro 0.2 million and the recognition of a benefit of Euro 1.2 million related to application of the "Patent Box". Of this, approx. Euro 0.7 million concerns 2015.
It should be noted that the benefit attributable to the application of the recent "Patent Box" regulation was limited to the part not subject to review by the Tax Agency and for which an application was presented within the terms established by the relative notices; it should also be noted that the Tax Agency undertook the "review activities in which it was established that BasicNet S.p.A., Basic Trademark S.A. and Superga Trademark S.A. are within the scope of the subsidy, with the formal substance verified of the obligatory elements for access to the optional system and the applications therefore declared admissible".
The basic earnings per share, for 2016, is calculated dividing the net result attributable to the shareholders of the Group by the weighted average number of ordinary shares outstanding during the year:
| (in Euro) | FY 2016 | FY 2015 |
|---|---|---|
| Net profit attributable to owners of the Parent | 10,304,820 | 16,759,819 |
| Weighted average number of ordinary shares | 56,029,468 | 56,751,534 |
| Basic earnings per ordinary share | 0.1839 | 0.2953 |
At December 31, 2016, there were no "potentially diluting" shares outstanding, therefore the diluted earnings per shares coincide with the earnings per share.
The change in the weighted average number of ordinary shares outstanding between 2015 and 2016 relates to the number of treasury shares acquired in the year.
(IN EURO THOUSANDS UNLESS OTHERWISE STATED)
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Concessions, brands and similar rights | 34,439 | 34,521 | (82) |
| Software development | 4,570 | 4,509 | 61 |
| Other intangible assets | 2,678 | 2,450 | 228 |
| Industrial patents | 41 | 33 | 8 |
| Total intangible assets | 41,728 | 41,513 | 215 |
The changes in the original costs of the intangible assets were as follows:
| Concessions, | Other | ||||
|---|---|---|---|---|---|
| brands & | Software | intangible | Industrial | ||
| similar rights | development | assets | patents | Total | |
| Historic cost | |||||
| at 1.1.2015 | 46,722 | 35,752 | 8,186 | 53 | 90,713 |
| Additions | 192 | 2,569 | 639 | 28 | 3,428 |
| Disposals & other changes |
118 | - | - | - | 118 |
| Write-downs | - | (268) | - | - | (268) |
| Historic cost | |||||
| at 31.12.2015 | 47,032 | 38,053 | 8,825 | 81 | 93,991 |
| Additions | 248 | 2,113 | 731 | 15 | 3,107 |
| Disposals & other changes |
23 | - | - | - | 23 |
| Write-downs | - | - | - | - | - |
| Historic cost | |||||
| at 31.12.2016 | 47,303 | 40,166 | 9,556 | 96 | 97,121 |
| Concessions, | Other intangible | ||||
|---|---|---|---|---|---|
| brands and similar rights |
Software development |
assets | Industrial patents |
Total | |
| Acc. Amort. at 1.1.2015 |
(12,173) | (31,439) | (5,875) | (42) | (49,529) |
| Amortisation & Depreciation |
(338) | (2,105) | (500) | (6) | (2,949) |
| Disposals and other changes |
- | - | - | - | - |
| Write-downs | |||||
| Acc. Amort. at 31.12.2015 |
(12,511) | (33,544) | (6,375) | (48) | (52,478) |
| Amortisation | (353) | (2,052) | (503) | (7) | (2,915) |
| Disposals and other changes |
- | - | - | - | - |
| Acc. Amort. at 31.12.2016 |
(12,864) | (35,596) | (6,878) | (55) | (55,393) |
| Concessions, | Other | ||||
|---|---|---|---|---|---|
| brands | Software | intangible | Industrial | ||
| and similar rights | development | assets | patents | Total | |
| Opening net book value at January |
|||||
| 1, 2015 | 34,549 | 4,313 | 2,311 | 11 | 41,184 |
| Additions | 192 | 2,569 | 639 | 28 | 3,428 |
| Disposals and | |||||
| other changes | 118 | - | - | - | 118 |
| Amortisation | (338) | (2,105) | (500) | (6) | (2,949) |
| Write-downs | - | (268) | - | - | (268) |
| Closing net book | |||||
| value at | |||||
| December 31, 2015 |
34,521 | 4,509 | 2,450 | 33 | 41,513 |
| Additions | 248 | 2,113 | 731 | 15 | 3,107 |
| Disposals and | |||||
| other changes | 23 | - | - | - | 23 |
| Amortisation | (353) | (2,052) | (503) | (7) | (2,915) |
| Write-downs | - | - | - | - | - |
| Closing net book value at |
|||||
| December 31, 2016 |
34,439 | 4,570 | 2,678 | 41 | 41,728 |
The net book value of intangible assets is reported below:
The increase in "concessions, brands and similar rights" is due to the capitalisation of costs incurred for the registration of trademarks in new European countries, for renewals and extensions and for the purchase of software licenses. The reduction relates to the amortisation in the year of the brands Lanzera, whose net value is approx. Euro 0.8 million, and Jesus Jeans, whose net value is approx. Euro 0.1 million, amortised over 20 years, as they have not yet reached a market positioning equal to those of the principal brands.
The Kappa, Robe di Kappa, Superga and K-Way brands are considered intangible assets with indefinite useful life and as such are subject to an impairment test at least annually.
At December 31, 2016, the Kappa and Robe di Kappa brands report a book value of Euro 4 million (Euro 2.1 million net of fiscal amortisation), with the Superga brand reporting a book value of Euro 21 million (approx. Euro 15.5 million net of fiscal amortisation); the K-Way brand was valued at Euro 8.1 million (Euro 4.6 million net of fiscal amortisation).
The impairment test on the book value of the brands was carried out in line with previous years, discounting the royalty net cash flows estimated from the brands in the period 2017-2021. For the years beyond the fifth year a terminal value was calculated on the net royalty cash flow of the fifth year, with a growth rate of 1.5%. These net cash flows were discounted at the weighted average cost of capital (WACC) equal to 6.0% (6.5% in 2015), determined with reference to the following parameters, taken from the principal financial information websites:
Risk Free Rate (RFR): amounts to 1.45% (1.75% in 2015), in line with the return on ten-year State bonds.
Debt cost: amounts to 2.0%, (2.72% in 2015).
Following the impairment test no write-down is required of the book value of the brands. The value in use of brands so calculated, in line with previous years, significantly exceeded their book value.
The book value of the Sabelt brand, for which the Group is licensee for the "fashion" categories alone, held through the joint venture, is included in the value of the investment.
The account "software development" increased approx. Euro 2.1 million for investments and decreased Euro 2 million for amortisation in the year.
The account "other intangible assets" principally includes investments related to the franchising project, with investment of Euro 0.7 million and amortisation in the year of Euro 0.5 million.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Goodwill | 10,052 | 10,245 | (192) |
| Total goodwill | 10,052 | 10,245 | (192) |
The account "goodwill" includes the goodwill arising on the business combination with the Spanish licensee (Euro 6.7 million) and the French licensee (Euro 1.2 million), in addition to goodwill paid for the acquisition of retail outlets, known as key money (Euro 2.2 million).
The Group verifies the recovery of the goodwill at least on an annual basis or more frequently when there is an indication of a loss in value. For impairment tests, the goodwill arising from the business combination of the Spanish and French licensees is allocated to the CGU's identified as the Kappa and Robe di Kappa brands.
The net cash flow from the lowest cash generating unit was discounted at the average weighted costs (WACC) equal to 6% (6.5% in 2015) (Note 20).
The net debt is deducted from the discounted cash flow, where present, as well as the value of the net assets of the lowest cash generating unit, excluding goodwill. The result is compared with the book value of the goodwill.
The significant gains made by the Kappa and Robe di Kappa CGU's within the "licenses and brands" sector, to which this goodwill is allocated, did not require sensitivity analyses.
Relating to the key money, the impairment test was undertaken comparing their book value, corresponding to the price paid on acquisition by the Group, with the higher between the value in use, calculated discounting the cash flows from the stores to the WACC (Note 20), and the market values. The impairment test undertaken at December 31, 2016 did not result in further write-downs than those allocated to some sales points closed or for which the decision to close has been made, amounting to Euro 353 thousand, within a normal rotation of less profitable sales point in favour of the opening of new locations or more appropriate operational strategies.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Property | 23,226 | 21,951 | 1,275 |
| Furniture and other assets | 5,043 | 4,646 | 397 |
| Plant and machinery | 463 | 348 | 115 |
| EDP | 1,568 | 1,653 | (85) |
| Industrial and commercial equipment | 197 | 171 | 26 |
| Total property, plant and equipment | 30,497 | 28,769 | 1,728 |
The changes in the historical cost of property, plant and equipment were as follows:
| Furniture and other Plant and |
Industrial and commercial |
|||||
|---|---|---|---|---|---|---|
| Property | assets | machinery | EDP | equipment | Total | |
| Historic cost at 1.1.2015 |
34,671 | 13,278 | 1,253 | 12,183 | 844 | 62,229 |
| Additions | 22 | 904 | 117 | 575 | 65 | 1,683 |
| Disposals and other changes Historic cost |
- | (34) | (36) | (14) | - | (84) |
| at 31.12.2015 | 34,693 | 14,148 | 1,334 | 12,744 | 909 | 63,828 |
| Additions | 2,231 | 1,545 | 285 | 656 | 76 | 4,793 |
| Disposals and other changes |
- | (61) | (15) | 3 | - | (73) |
| Historic cost at 31.12.2016 |
36,924 | 15,632 | 1,604 | 13,403 | 985 | 68,548 |
The changes in the relative accumulated depreciation provisions were as follows:
| Furniture and other Plant and |
Industrial and commercial |
|||||
|---|---|---|---|---|---|---|
| Property | assets | machinery | EDP | equipment | Total | |
| Acc. Deprec. at 1.1.2015 |
(11,817) | (8,493) | (821) | (10,224) | (691) | (32,046) |
| Depreciation | (923) | (1,021) | (165) | (867) | (47) | (3,023) |
| Disposals and other changes |
(2) | 12 | - | - | - | 10 |
| Acc. Deprec. at 31.12.2015 |
(12,742) | (9,502) | (986) | (11,091) | (738) | (35,059) |
| Depreciation | (956) | (1,087) | (155) | (744) | (50) | (2,992) |
| Disposals and other changes |
- | - | - | - | - | - |
| Acc. Deprec. at 31.12.2016 |
(13,698) | (10,589) | (1,141) | (11,835) | (788) | (38,051) |
| Furniture and other |
Plant and | Industrial and commercial |
||||
|---|---|---|---|---|---|---|
| Property | assets | machinery | EDP | equipment | Total | |
| Opening net book value at January |
||||||
| 1, 2015 | 22,854 | 4,785 | 432 | 1,959 | 153 | 30,183 |
| Additions | 22 | 904 | 117 | 575 | 65 | 1,683 |
| Depreciation | (923) | (1,021) | (165) | (867) | (47) | (3,023) |
| Disposals and other changes |
(2) | (22) | (36) | (14) | - | (74) |
| Closing net book value at |
||||||
| December 31, 2015 |
21,951 | 4,646 | 348 | 1,653 | 171 | 28,769 |
| Additions | 2,231 | 1,545 | 285 | 656 | 76 | 4,793 |
| Depreciation | (956) | (1,087) | (155) | (744) | (50) | (2,992) |
| Disposals and other changes |
- | (61) | (15) | 3 | - | (73) |
| Closing net book value at |
||||||
| December 31, 2016 |
23,226 | 5,043 | 463 | 1,568 | 197 | 30,497 |
The net book value of property, plant and equipment was as follow:
"Property" includes the value of the buildings at Strada della Cebrosa 106, Turin, headquarters of BasicItalia S.p.A. and at Largo Maurizio Vitale 1, Turin, headquarters of the Parent Company. The increase in property is due to improvements in the year and particularly the acquisition by the company BasicVillage S.p.A. of a building located in Turin, adjacent to the company's owned headquarters. The purchase price was Euro 2 million.
Total gross investments in the year amounted to Euro 4.8 million, principally relating to - in addition to the above-stated property investments - the acquisition of furniture and EDP for the opening of new stores.
The net book value of property, plant and equipment acquired according to the finance lease formula is reported below:
| Net value at December 31, 2016 |
Net value at December 31, 2015 |
|
|---|---|---|
| Furniture and other assets | 2,240 | 1,856 |
| EDP | 727 | 821 |
| Equipment | - | 33 |
| Total | 2,967 | 2,710 |
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Other receivables, guarantees | 264 | 307 | (43) |
| Total financial receivables | 264 | 307 | (43) |
| Total investments & other financial assets | 264 | 307 | (43) |
"Other receivables, guarantees" principally refer to deposits on real estate property.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Investments in: - Joint ventures |
257 | 340 | (83) |
| Total investments in joint ventures | 257 | 340 | (83) |
Investments in joint ventures concern the value of the investment in Fashion S.r.l. of Euro 257 thousand, held 50%. The company owns the Sabelt brand. From January 1, 2014, this category of investment has been valued at equity, as per IFRS 11. At December 31, 2015, the account included also the investment in AnziBesson Trademark S.r.l., sold to the Besson family in December.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Finished products and goods for resale | 50,854 | 52,039 | (1,185) |
| Inventory obsolescence provision | (3,646) | (3,014) | (632) |
| Total net inventories | 47,208 | 49,025 | (1,817) |
Finished inventories include goods in transit at the balance sheet date which at December 31, 2016 amount to approx. Euro 2.1 million compared to Euro 1.7 million at December 31, 2015, goods held at Group brand stores for Euro 10.4 million, compared to Euro 10.5 million at December 31, 2015 and goods to be shipped against orders, to be delivered at the beginning of the following year, for Euro 11.2 million compared to Euro 8.6 million at December 31, 2015.
Finished product inventories decreased on the previous year due to the destocking carried out, principally through the outlets and directly managed spaces.
Inventories are valued under the weighted average cost method and net of the obsolescence provision considered reasonable for a prudent valuation of inventories, which recorded the following changes during the year:
| 2016 | 2015 | |
|---|---|---|
| Inventory obsolescence provision at 1.1 | 3,014 | 3,213 |
| Provisions in the year | 1,874 | 670 |
| Utilisations | (1,242) | (869) |
| Inventory obsolescence provision at 31.12 | 3,646 | 3,014 |
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Gross value | 65,756 | 52,390 | 13,366 |
| Doubtful debt provision | (7,690) | (5,689) | (2,001) |
| Total trade receivables | 58,066 | 46,701 | 11,365 |
"Trade receivables" refer for Euro 40.9 million to goods sold by proprietary licensees (compared to Euro 31.2 million at December 31, 2015) and for which a doubtful debt provision was recorded of Euro 4.8 million (Euro 4.1 million at December 31, 2015), for Euro 24.6 million to royalties and sourcing commissions (Euro 21.3 million at December 31, 2015) against which a doubtful debt provision was recorded of Euro 2.8 million (Euro 1.7 million at December 31, 2015) and Euro 0.2 million other receivables (Euro 0.06 million at December 31, 2015).
The increase in the gross value of receivables at December 31, 2016 compared to the previous year is partly due to increased proprietary licensee revenues, concentrated in the fourth quarter of 2016, compared to the same period of 2015 (approx. Euro 5 million, 15.4%) and in particular in the month of December. With regards to this aspect, we highlight in addition that in the initial working days of 2017 approx. Euro 6.8 million of receivables with maturity on December 31, 2016 (a holiday) were received and recognised.
The receivables are recorded at their realisable value through a doubtful debt provision based on estimated losses on disputes and/or overdue receivables as well as a general provision.
The movements during the year were as follows:
| 2016 | 2015 | |
|---|---|---|
| Doubtful debt provision at 1.1 | 5,689 | 5,687 |
| Provisions in the year | 3,476 | 2,859 |
| Utilisations | (1,475) | (2,857) |
| Doubtful debt provision at 31.12 | 7,690 | 5,689 |
All amounts are due within 12 months.
The maturity of the receivables is as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | |
|---|---|---|
| Receivables not overdue and not written down |
38,587 | 30,598 |
| Receivables written down, net of provision | 7,178 | 3,969 |
| Overdue and not written down | 12,301 | 12,134 |
| Total | 58,066 | 46,701 |
The overdue receivables and not written down principally include one debtor overdue between 0-6 months.
The utilisations of the provision are related to the write off of long outstanding amounts and are made when the legal documentation of the loss has been received. The provisions are made on the basis of the review of individual positions. Overdue receivables not written down are normally recovered in the period immediately after the maturity date and in any case are subject to specific risk evaluations. The doubtful debt provision, in addition, includes provisions made on the basis of historical insolvency analyses which are considered appropriate in terms of the generic risk estimates of non-recovery of positions which currently are not considered critical.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Tax receivables | 8,981 | 9,599 | (618) |
| Other receivables | 1,242 | 2,579 | (1,337) |
| Total other current assets | 10,223 | 12,178 | (1,955) |
"Tax receivables" principally include VAT receivables of Euro 3.1 million, corporate income taxes paid on account of Euro 0.8 million and withholding taxes on royalties of Euro 5.1 million.
"Other receivables" principally includes payments to suppliers (Euro 0.06 million) and the premium paid to the insurance company against Directors Termination Indemnities, to be paid to the Chairman of the Board of Directors, as approved by the Board of Directors on May 13, 2016, on the indication of the Shareholders' AGM and the proposal of the Remuneration Committee and with the favourable opinion of the Board of Statutory Auditors, on conclusion of his role for Euro 0.5 million and other minor credit items for the residual.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Expenses pertaining to future Collections | 4,690 | 4,756 | (66) |
| Sponsorship and media | 1,991 | 2,246 | (255) |
| Other | 898 | 754 | 144 |
| Total prepayments | 7,579 | 7,756 | (177) |
The "expenses pertaining to future Collections" include the creative personnel costs, samples, merchandising costs and sales catalogues, relating to new Collections to be brought to the market, as well as presentations costs for the relative sales meetings.
The "sponsorship costs" relate to the annual amount contractually defined by the parties, which is partially invoiced in advance during the sports season, compared to the timing of the services.
The "other prepayments" include various costs for samples, services, utilities, insurance and other minor amounts incurred by the companies of the Group.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Bank and postal deposits | 5,591 | 6,903 | (1,312) |
| Cash in hand and similar | 116 | 68 | 48 |
| Total cash and cash equivalents | 5,707 | 6,971 | (1,264) |
"Bank deposits" refer to temporary current account balances principally due to receipts from clients. In particular, they are held at: BasicItalia S.p.A. (Euro 2.2 million), BasicRetail S.r.l. (Euro 0.8 million), BasicNet S.p.A. (Euro 1.2 million), Basic Properties America Inc. (Euro 0.7 million) and, for the difference, the other Group companies (Euro 0.7 million).
Against the agreement signed with Intesa Sanpaolo S.p.A. (described in Note 43), Euro 246 thousand is included in bank deposits and restricted as guarantee on loans provided by the bank to third parties, owners of the Group's franchising stores.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Derivative financial instruments | 1,609 | 1,367 | 242 |
| Total derivative financial instruments | 1,609 | 1,367 | 242 |
The account includes the market value at December 31, 2016 of the currency hedge instruments on US Dollars (cash flow hedge), subscribed with primary credit institutions; the instrument utilised, called flexi term, operates in the form of forward currency purchases on a portion of the estimated currency needs for the purchase of goods on foreign markets, to be made in 2017 and 2018, on the basis of the goods orders already sent to suppliers, or still to be made but included in the budget for the year. At December 31, 2016, commitments were in place on estimated future purchases, for USD 37 million, divided into 10 operations with variable maturities in 2017 and 2018 at fixed exchange rates between USD/Euro 1.089 and USD/Euro 1.15, with a weighted average exchange rate of the purchases equal to USD/Euro 1.1149. During 2016, forward purchase operations were utilised for USD 46.95 million and the relative effects were recognised to the income statement.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Share capital | 31,717 | 31,717 | - |
| Treasury shares | (11,890) | (8,823) | (3,067) |
| Other reserves | 64,748 | 52,857 | 11,891 |
| Net Profit | 10,305 | 16,760 | (6,455) |
| Minority interests | - | - | - |
| Total Shareholders' Equity | 94,880 | 92,511 | 2,369 |
The "share capital" of the Parent Company, amounting to Euro 31,716,673.04, is divided into 60,993,602 ordinary shares of Euro 0.52 each, fully paid-in.
In May 2016, as approved by the Shareholders' AGM of BasicNet S.p.A. of April 28, 2016, in relation to the allocation of the 2015 net profit, a dividend of Euro 0.1 per share was distributed to each of the ordinary shares in circulation, for a total pay-out of approx. Euro 5.6 million.
During the year 924,240 treasury shares were acquired in accordance with Shareholders' Meetings motions, which together with the 4,500,000 shares held at the end of the previous year, totalled 5,424,240 at December 31, 2016 (8.89% of the Share Capital).
The account "other reserves" comprises:
The reconciliation at December 31, 2016 between the net equity and net result of the Parent Company and the net equity and consolidated net result of the Group is reported in the Directors' Report.
Dec. 31, 2016 Dec. 31, 2015 Changes Effective part of the Gains/(losses) on cash flow instruments generated in the period (currency hedges) 397 74 323 Effective part of the Gains/(losses) on cash flow instruments generated in the period (interest rate hedges) 290 256 34 Effective part of the Gains/losses on cash flow hedge instruments 687 330 357 Re-measurement of defined benefit plans (IAS 19) (*) 9 84 (75) Gains/(losses) from translation of accounts of foreign subsidiaries 227 667 (440) Tax effect relating to the Other items of the comprehensive income statement (167) (114) (53) Total other gains/(losses), net of tax effect 756 967 (211)
The other gains and losses recorded directly to equity in accordance with IAS 1 – Presentation of financial statements are reported below.
(*) items which may not be reclassified to the profit and loss account
The tax effect relating to Other gains/(losses) is as follows:
| December 31, 2016 | December 31, 2015 | |||||
|---|---|---|---|---|---|---|
| Gross value |
Tax Charge/ Benefit |
Net value |
Gross value |
Tax Charge/ Benefit |
Net value |
|
| Effective part of Gains/losses on cash flow hedge instruments |
687 | (165) | 522 | 330 | (91) | 239 |
| Gains/(losses) for re-measurement of defined benefit plans (IAS 19) (*) |
9 | (2) | 7 | 84 | (23) | 61 |
| Gains/(losses) from translation of accounts of foreign subsidiaries |
227 | - | 227 | 667 | - | 667 |
| Total other gains/(losses), net of tax effect |
923 | (167) | 756 | 1,081 | (114) | 967 |
(*) items which may not be reclassified to the profit and loss account
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Provisions for risks and charges | 42 | 45 | (3) |
| Total provisions for risks and charges | 42 | 45 | (3) |
The provision for risks and charges relates to the Agents Termination Indemnity Provision (FIRR) in BasicItalia S.p.A..
The changes in the loans during the year are shown below:
| 31/12/2015 | Repayments | New loans | 31/12/2016 | Short-term portion |
Medium/long-term portion |
|
|---|---|---|---|---|---|---|
| BNL loan | - | - | 7,500 | 7,500 | (1,250) | 6,250 |
| Intesa loan | 13,125 | (3,750) | - | 9,375 | (3,750) | 5,625 |
| Basic Village property loan | 8,100 | (1,200) | - | 6,900 | (1,200) | 5,700 |
| BasicItalia property loan | 3,153 | (407) | - | 2,746 | (407) | 2,339 |
| UBI Banca loan | 2,678 | (2,678) | - | - | - | - |
| Balance | 27,056 | (8,035) | 7,500 | 26,521 | (6,607) | 19,914 |
The maturity of the long-term portion of loans is highlighted below:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Medium/long term loans: | |||
| - due within 5 years | 17,052 | 15,802 | 1,250 |
| - due beyond 5 years | 2,862 | 3,219 | (357) |
| Total medium/long-term loans | 19,914 | 19,021 | 893 |
| Leasing payables | 1,600 | 1,545 | 55 |
| Total leasing payables (maturity within 5 years) | 1,600 | 1,545 | 55 |
| Total loans | 21,514 | 20,566 | 948 |
The medium/long-term loans are comprised for Euro 6.9 million of the residual value of the loan provided by the Unicredit Group, for the purchase of the "BasicVillage" building located at Largo Maurizio Vitale, 1, Turin ("BasicVillage Property Loan"), for Euro 2.7 million the residual loan from Mediocredito Italiano S.p.A. (Intesa Sanpaolo S.p.A.) for the purchase of the building of BasicItalia S.p.A. located at Strada Cebrosa, 106 ("BasicItalia Property Loan"), for Euro 9.4 million the residual loan from Intesa SanPaolo issued in April 2015 ("Intesa Loan") and for Euro 7.5 million the new medium/long-term loan issued by Banca Nazionale del Lavoro S.p.A. in November 2016 ("BNL Loan"), of six year duration and repayable in quarterly installments.
The "BasicVillage property loan" granted by the Unicredit Group was for the acquisition of the building "BasicVillage" at Largo M. Vitale 1, Turin. The loan was granted in September 2007 for Euro 18 million at a variable rate converted into a fixed rate (Note 42). Against this loan there is a mortgage on the property and a surety from the parent company BasicNet S.p.A. with maturity in September 2022.
The "BasicItalia Loan" granted by Banca Intesa Sanpaolo S.p.A. was for the purchase of the building "BasicItalia" at Strada Cebrosa 106, Turin. The loan was granted in October 2008 for Euro 6 million with repayment of the capital in quarterly constant instalments and maturity at September 2023. The loan is guaranteed by a mortgage on the property and by a surety from the parent company BasicNet S.p.A..
The "Intesa Loan" was issued in April 2015 for Euro 15 million and is of four-year duration, repayable in quarterly instalments at a quarterly Euribor rate plus 185 basis points. In July 2015, the variable Euribor rate was converted (under an interest rate swap) into a fixed rate of 0.23% annually. The loan will support developmental investments, in addition to optimising the duration of loans undertaken; it is supported by a pledge on Superga Trademark S.A. shares.
The contractual conditions do not include financial covenants. The loan contract stipulates the maintenance of a number of ownership conditions concerning BasicNet S.p.A. and BasicWorld S.r.l., the majority shareholder of BasicNet S.p.A., and in particular:
The "BNL Loan" was disbursed in November 2016 for Euro 7.5 million; it has six-year duration and is repayable in quarterly instalments at a quarterly Euribor rate increased by 95 basis points. The contractual conditions do not include financial covenants. The loan contract stipulates the maintenance of a number of ownership conditions concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 36%. The loan is supported by a second level mortgage on the BasicVillage building in Turin and a first level mortgage on the adjacent building, acquired at the end of the year.
At December 31, 2016, the credit lines available from the banking system (bank overdrafts, commercial advances, medium/long-term loans, import financing, leasing and letters of credit), amounted to Euro 187.1 million, broken down as follows:
| (in Euro millions) | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|
| Cash facility | 126.6 | 94.7 |
| Factoring | 1.5 | 1.5 |
| Letters of credit and swaps | 28.9 | 20.4 |
| Medium/long term loans | 26.5 | 27.1 |
| Property leases | 3.6 | 3.6 |
| Total | 187.1 | 147.3 |
The average interest paid for the BasicNet Group in the year is reported in Note 37.
The account includes the post-employment benefits for employees of Euro 2.5 million and the termination indemnities of Directors of Euro 0.3 million.
The changes in the year of the post-employment benefit liability were as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | |||||
|---|---|---|---|---|---|---|
| Defined benefit plans |
Defined contrib. plans |
Total | Defined benefit plans |
Defined contrib. plans |
Total | |
| Change in the balance sheet: | ||||||
| Net liabilities recognised at the beginning | 2,508 | - | 2,508 | 2,573 | - | 2,573 |
| of the year | ||||||
| Interest | 46 | - | 46 | 46 | - | 46 |
| Pension cost, net of withholdings | 147 | 772 | 919 | 161 | 746 | 907 |
| Benefits paid | (164) | - | (164) | (188) | - | (188) |
| Payments to the INPS treasury fund | - | (438) | (438) | - | (284) | (284) |
| Payments to other supplementary pension | - | (334) | (334) | - | (462) | (462) |
| fund | ||||||
| Actuarial gain/(losses) | (9) | - | (9) | (84) | - | (84) |
| Net liabilities recognised in the accounts | 2,528 | - | 2,528 | 2,508 | - | 2,508 |
| Change in the income statement: | ||||||
| Interest | 46 | - | 46 | 46 | - | 46 |
| Pension Cost | 154 | 772 | 926 | 166 | 746 | 912 |
| Total charges/(income) for post employment benefits |
200 | 772 | 972 | 212 | 746 | 958 |
The account "defined benefit plans" includes the present value of the liabilities in the Italian companies of the Group towards employees in accordance with Article 2120 of the Civil Code. Based on the regulatory changes in 2007, the sums matured prior to January 1, 2007 to employees are recognised as defined benefit plans in accordance with IAS 19 – Employee benefits; those matured subsequent to this date are on the other hand recognised as defined contribution plans in accordance with the same standard.
Within the Group there are no other defined benefit plans.
The actuarial valuation of the Post-Employment Benefit is prepared based on the "matured benefits" method through the Projected Unit Credit Method in accordance with IAS 19. Under this method the valuation is based on the average present value of the pension obligations matured based on the employment service up to the time of the valuation, without projecting the remuneration of the employee in accordance with the regulatory modifications introduced by the Pension Reform.
The revaluations of the amounts at the option date for all of the companies and the benefits matured and not allocated to complementary pension schemes for businesses with less than 50 employees are recorded under post-employment benefit. In accordance with IAS 19, this provision was recorded as a "Defined benefit plans". The actuarial model for the measurement of the post-employment benefit is based on various assumptions of a demographic and financial nature.
The sensitivity analysis carried out on the basis of the following variables: 1) inflation rate +0.25%/- 0.25%, 2) discount rate +0.25%/-0.25%, 3) turnover rate +1%/-1% shows non-material impacts of less than Euro 50 thousand.
| Dec. 31, 2016 | Dec. 31, 2015 | |
|---|---|---|
| discount rate | 1.79% | 2.25% |
| inflation rate: | 1.50% | For 2016: 1.50% |
| For 2017; 1.80% | ||
| For 2018: 1.70% | ||
| For 2019: 1.60% | ||
| From 2020 onwards: 2.00% | ||
| annual increase in post employment benefit |
2.625% | For 2016: 2.625% |
| For 2017: 2, 850% | ||
| For 2018: 2.775% | ||
| For 2019: 2.700% | ||
| From 2020 onwards: 3.00% | ||
| annual increase in salaries: | 1.00% | Up to 10 years service: 3.00% |
| Above 10 years service: 1.00% |
The principal assumptions of the model concerning the actuarial valuations relating to personnel costs are:
The change in the annual discount rate reflects the decrease in the yields of the "corporate bonds" of the basket utilised (Iboxx Eurozone Corporate) at the balance sheet date.
"Deferred tax liabilities" are reported net of deferred tax assets:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Deferred tax liabilities | 1,084 | 717 | 367 |
| Total deferred tax liabilities | 1,084 | 717 | 367 |
The net amount of approx. Euro 1 million represents the balance between the deferred tax assets and liabilities as illustrated in the table.
The 2016 Stability Law (Law 208/2015), published in the Official Gazette of December 30, 2015, introduced a reduction to the IRES rate from 27.5% to 24% from January 1, 2017. This change in the rate was already incorporated into the calculation of deferred taxes for the previous year, in line with paragraph 47 of IAS 12, which establishes the utilisation of the tax rates applicable in the year in which the asset shall be realised or the generating liability settled.
Deferred tax assets principally relate to non-deductible doubtful debt provisions (approx. Euro 1.4 million), non-deductible inventory obsolescence provisions (approx. Euro 0.9 million), provisions generated from the temporary differences arising from the accounting of the IFRS adjustments (approx. Euro 25 thousand), non-deductible interest (Euro 100 million) and other temporary non-deductible charges (Euro 0.6 million). Deferred tax assets were recorded, considering recovery probable on the basis of future earnings expectations, also in view of their possible utilisation in consideration of national tax consolidation agreements between the following companies of the Group - Italian or with administrative office in Italy: BasicNet S.p.A., BasicItalia S.p.A., Basic Village S.p.A., BasicRetail S.r.l., Jesus Jeans S.r.l., Basic Trademark S.A., Superga Trademark S.A. and Basic Properties B.V.
Deferred tax liabilities refer to the tax effects deriving from the application of the IFRS international accounting standards, with particular reference to the accounting of goodwill amortisation not tax deductible (Euro 0.4 million), different treatment of depreciation calculated for statutory and fiscal purposes on the owned buildings of the subsidiaries Basic Village S.p.A. and BasicItalia S.p.A.. (Euro 1.3 million), in addition to Euro 3 million relating to the tax amortisation of the trademarks and other minor amounts.
The derivatives defined as cash flow hedges and valued at fair value result in the relative tax being recorded directly in the "comprehensive income statement" and not in the "income statement". They amount to Euro 135 thousand.
The same treatment is adopted for the tax effect relating to the actuarial gain/losses, recorded since January 1, 2013, in accordance with IAS 19 Revised.
| Dec. 31, 2016 | Dec. 31, 2015 | ||||||
|---|---|---|---|---|---|---|---|
| Amount | Amount | ||||||
| of | of | ||||||
| temporary differences |
Rate % |
Tax effect |
temporary differences |
Rate % (*) |
Tax effect |
Changes 2016/2015 |
|
| Deferred tax assets: | |||||||
| - Excess doubtful debt provision | |||||||
| not deductible | (5,994) | 24.00% | (1,439) | (5,074) | 27.50%-24,00% | (1,235) | (204) |
| - Inventory obsolescence provision | (3,646) | 24.00% | (903) | (3,014) | 27.50%-24,00% | (777) | (126) |
| - ROL surplus | (455) | 24.00% | (109) | (455) | 27.50%-24,00% | (125) | 16 |
| - Charges temporarily | |||||||
| non-deductible | (2,147) | 27.90% | (592) | (2,681) | 31.40%-27,90% | (813) | 221 |
| - Effect IAS 19 – Employee | (105) | 24.00% | (25) | (121) | 27.50%-24,00% | (29) | 4 |
| Benefits | |||||||
| Total | (12,348) | (3,068) | (11,344) | (2,979) | (89) | ||
| Deferred tax liabilities: - Dividends not received |
75 | 24.00% | 18 | - | 27.50%-24,00% | - | 18 |
| - Prudent exchange differences, net | 56 | 24.00% | 13 | 294 | 27.50%-24,00% | 81 | (68) |
| - Amortisation/Depreciation | |||||||
| tax basis | 10,700 | 27.90% | 2,985 | 8,518 | 31.40%-27,90% | 2,377 | 609 |
| - Effect IAS 38 – plant costs | 16 | 27.90% | 4 | 7 | 31.40%-27,90% | 2 | 2 |
| - Effect of IAS 17 - finance leases | |||||||
| and other tax differences on | 2,117 | 27.90% | 591 | 2,813 | 31.40%-27,90% | 793 | (203) |
| buildings | |||||||
| - Effect IAS 39 – financial instruments |
556 | 24.00% | 134 | (131) | 27.50%-24,00% | (31) | 166 |
| - Effect IFRS 3 – goodwill |
1,411 | 27.90% | 407 | 1,624 | 31.40%-27,90% | 474 | (67) |
| amortisation | |||||||
| Total | 14,931 | 4,153 | 13,125 | 3,696 | 457 | ||
| Net deferred tax liability (asset) | 2,583 | 1,084 | 1,780 | 717 | 368 | ||
| Deferred tax asset relating to fiscal losses |
- | - | - | - | - | ||
| Deferred tax liability (asset) as per financial statements |
1,084 | 717 | 368 |
The deferred tax assets and liabilities recognised and their impact are reported in the table below:
(*) The differing rates concern the adjustment of the IRES rate applicable from 2017, on the temporary differences to be realised or settled subsequently to 2016.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Guarantee deposits | 927 | 1,013 | (86) |
| Total other non-current liabilities | 927 | 1,013 | (86) |
The "guarantee deposits" include the guarantees received from licensees, to cover the minimum royalties guaranteed contractually.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Bank payables due within one year: | |||
| - short-term portion of medium/long-term loans | 6,607 | 8,035 | (1,428) |
| - bank overdrafts and bills | 8,014 | 4,266 | 3,748 |
| - import advances | 19,031 | 19,466 | (435) |
| Total bank payables | 33,652 | 31,767 | 1,885 |
The portion of medium/long-term loans due within one year is included under short-term bank debt as described in Note 33.
The changes in the financial position are commented upon in the Directors' Report. Interest due matured at the end of the year on short and medium/long-term loans is reported in the account "bank payables".
Cash advances refer to temporary utilisation by the Parent Company BasicNet S.p.A., for Group treasury needs.
The financial debt by interest rate at December 31, 2016 is as follows:
| Interest Rate | ||||
|---|---|---|---|---|
| Fixed | Variable | Total | ||
| Short-term | 12,030 | 21,622 | 33,652 | |
| Medium/long term | 11,325 | 10,189 | 21,514 | |
| Total | 23,355 | 31,811 | 55,166 |
The average variable rate of medium/long-term loans is 2.69%, while the short-term rate ranges between 0.24% and 0.77%.
The "trade payables" are payable in the short-term and increased by approx. Euro 6.5 million compared to December 31, 2015, following the commercial activity of the Group in the year and particularly the final quarter. At the date of these financial statements there are no initiatives for the suspension of supplies, payment injunctions or executive actions by creditors against BasicNet S.p.A. or other companies of the Group.
Trade payables are normally settled between 30 and 120 days. The book value of trade payables equates the relative fair value.
The breakdown of this account is shown in the following table:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Tax payables: | |||
| Income taxes | 1,363 | 6,043 | (4,680) |
| Withholding taxes | 53 | 48 | 5 |
| Employee contributions | 543 | 511 | 32 |
| Non-recurring tax | |||
| charges | 569 | 2,850 | (2,281) |
| Group VAT | 13,221 | 7,969 | 5,252 |
| Total tax payables | 15,749 | 17,421 | (1,672) |
The non-recurring tax charges concern the total payable to the Tax Agency, definitively established in May 2014 following the notification of the final tax assessments which the Group settled on appeal in 2012, against which a provision had been made. For the payable of Euro 0.6 million, a net payment was made of Euro 0.4 million, considering the VAT receivables of Euro 0.2 million, included in the Tax Receivables account (Note 27), whose recovery is correlated to the above-mentioned instalments.
The Group VAT payable at December 31, 2016 was settled by the approval date of these financial statements.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Accrued expenses | 626 | 588 | 38 |
| Other payables | 6,933 | 7,150 | (217) |
| Total other current liabilities | 7,559 | 7,738 | (179) |
The account "accrued expenses" principally includes deferred employee remuneration.
The "other payables" at December 31, 2016 principally include employee and director remuneration and expenses (Euro 3 million), payable in the subsequent month, related social security charges (Euro 1 million), other related liabilities (Euro 0.2 million), royalty payment on accounts from licensees (Euro 0.1 million) and other miscellaneous amounts Euro (2.6 million).
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Royalties | 885 | 829 | 56 |
| Sponsored goods revenues | 1,173 | 1,540 | (367) |
| Other deferred income | 111 | 268 | (157) |
| Total deferred income | 2,169 | 2,637 | (468) |
The "sponsored goods revenues" relates to the invoicing of sponsored merchandise, which contractually partially refers to the period after the reporting date, with corresponding prepayments recorded under assets for sponsoring costs.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Derivative financial instruments | 1,052 | 1,498 | (446) |
| Total derivative financial instruments | 1,052 | 1,498 | (446) |
The account includes the adjustments to market value of the interest rate hedging operations on the "Basic Village property loan" (Note 33), signed with a leading financial counterparty, which converted the variable interest rates into fixed interest rates.
The adjustments to the market value of the interest rate hedging operations on the "Intesa Loan" (Note 33) were also incorporated, which converted the variable Euribor quarterly rate into a fixed annual rate of 0.23% (cash flow hedge), in addition to a spread.
A negative equity reserve was recorded of approx. Euro 431 thousand, net of the tax effect.
In the case of the Interest Rate Swap (IRS) agreed by the Group, the specific hedge of the variable cash flow realised at market conditions, through the signing of the fix/flo IRS perfectly hedges the item to which the original cash flows stem, as in this case, and continues to be considered effective.
With reference to the guarantees and commitments of the Group with third parties reference should be made to Note 33.
In February 2010, Intesa Sanpaolo S.p.A. and BasicItalia S.p.A. signed an agreement which would permit access to subsidised finance for the start-up of franchising stores of the Group, against which a portion of the loan is guaranteed and the purchase of assets in leasing in the case of non-compliant of the store owner. For its part, BasicItalia S.p.A. has the contractual right to sub-enter into the management of the stores, in the event that the store owner does not comply with the loan and/or leasing repayments. At December 31, 2016, the deposit amounted to Euro 246 thousand and leasing guarantees amount to Euro 1.6 million.
In accordance with that outlined above guarantees were granted of Euro 0.6 million by credit institutions in favour of the lessees of the stores of BasicRetail S.r.l. directly undertaking retail sales of the Group products.
Further commitments were undertaken by the subsidiary BasicItalia S.p.A. relating to the opening of import credit documentation (credit letters) for goods, through some Credit Institutions, totalling Euro 18 million (Euro 19.7 million at December 31, 2015), in addition to a surety issued by a leading bank in guarantee of the contractual commitments related to a sponsorship contract for Euro 6.5 million.
The future rental commitments to be honoured on contractual expiry indicatively amount to Euro 10.7 million concerning the rental of the outlets and the directly managed sales points. The average duration of the rental contracts is 8 years.
The shares of the subsidiary Superga Trademark S.A. are subject to a pledge in favour of Intesa Sanpaolo S.p.A. in guarantee of the loan issued in April 2015.
The principal risks and uncertainties of the Group activities are described in the Directors' Report.
The financial instruments of the BasicNet Group include:
It is recalled that the Group only subscribes to cash flow hedges, to hedge against interest and currency risks.
In accordance with the requirements of IFRS 7 in relation to financial risks, the types of financial instruments present in the financial statements, with indication of the valuation criteria applied, are reported below:
| Financial instruments at fair value recorded through: |
Financial instruments at amortised cost |
Non-listed investments valued at cost |
Book value at 31.12.2016 |
||
|---|---|---|---|---|---|
| P&L | Shareholders ' Equity |
||||
| Assets: | |||||
| Equity invest. & other financial assets | - | - | - | 264 | 264 |
| Trade receivables | - | - | 58,066 | - | 58,066 |
| Other current assets | - | - | 10,223 | - | 10,223 |
| Derivative financial instruments | - | 1,609 | - | - | 1,609 |
| Liabilities: | |||||
| Medium/long-term loans | - | - | 21,514 | - | 21,514 |
| Bank payables | - | - | 33,652 | - | 33,652 |
| Trade payables | - | - | 31,699 | - | 31,699 |
| Other current liabilities | - | - | 7,559 | - | 7,559 |
| Derivative financial instruments | - | 1,053 | - | - | 1,053 |
The financial risk factors, identified in IFRS 7 – Financial instruments: additional disclosures, are described below:
the risk that the fair value or the future cash flows of a financial instrument fluctuate following changes in market prices ("market risk"). The market risk includes the following risks: price, currency and interest rates:
The Group is exposed to the risk of fluctuations of commodity prices relating to raw materials (wool, cotton, rubber, synthetic fibre etc.) incorporated in the finished products which BasicItalia S.p.A. acquires on international markets, as well as fluctuations in the cost of oil which influences transport costs.
The Group does not hedge these risks as not directly dealing with raw materials but only finished products and is exposed for the part of the increase which cannot be transferred to the final consumer if the market and competitive conditions do not permit such.
The BasicNet Group has subscribed the majority of its financial instruments in Euro which corresponds to its functional and presentation currency. Operating on the international market the group is also exposed to fluctuations in exchange rates, principally the US Dollar against the Euro.
At December 31, 2016, unrealised exchange gains were recorded of Euro 308 thousand, while unrealised exchange losses were recorded of Euro 65 thousand, for a net exchange gain of Euro 243 thousand.
At the reporting date, there were 10 hedge operations on US Dollar fluctuations, totalling USD 37 million; the relative effects are illustrated in the account "Derivative financial instruments", at Notes 30 and 42.
Group Management considers that the management and containment polices adopted for this risk are adequate.
All medium/long-term loans and leasing contracts are in Euro, therefore they are not subject to any currency risk.
The composition of the gross financial debt between fixed and variable interest rates at December 31, 2016 is shown below:
| Dec. 31, 2016 | % | Dec. 31, 2015 | % | |
|---|---|---|---|---|
| Fixed rate | 23,355 | 42.30% | 21,312 | 47.00% |
| Variable rate | 31,811 | 57.70% | 24,050 | 53.00% |
| Gross debt | 55,166 | 100.00% | 45,362 | 100.00% |
The interest rate fluctuation risks of some medium/term loans were hedged with conversion of the variable rate into fixed rates, as described in Note 42. On the remaining part of the debt, the Group is exposed to fluctuation risks.
Where at December 31, 2016 the interest rate on long/term loans at that date were 100 basis points higher (or lower) compared to the actual rates, there would be a higher financial charges (lower), before the tax effect, respectively of Euro +150 thousand and Euro -150 thousand.
The doubtful debt provision (Note 26) which includes provisions against specific credit positions and a general provision on an historical analysis of receivables, represents approx. 11.7% of trade receivables at December 31, 2016.
Liquidity risk is mitigated in the short-term period by the significant generation of cash realised by the "licenses and trademarks" segment, by the significant positive net working capital, and by the overall credit lines provided by the banking system (Note 33).
The table below illustrates the cash flow timing of payments on medium/long-term debt.
| Book value | Future interest income/ (expense) |
Contractual cash flows |
Within 1 year | From 1 to 5 years |
Beyond five years |
|
|---|---|---|---|---|---|---|
| BNL loan | 7,500 | 150 | 7,650 | 1,295 | 5,100 | 1,255 |
| Intesa loan | 9,375 | 272 | 9,647 | 3,918 | 5,729 | - |
| BasicVillage property loan | ||||||
| 6,900 | 1,268 | 8,168 | 1,595 | 5,645 | 928 | |
| BasicItalia property loan | ||||||
| 2,746 | 201 | 2,946 | 463 | 1,756 | 728 | |
| Lease payables | 1,600 | 63 | 1,663 | 794 | 869 | - |
| Total financial liabilities | 28,121 | 1,954 | 30,075 | 8,065 | 19,099 | 2,911 |
The risk that the loans within the companies of the Group contain clauses (covenants) which allow the counterparties to request the creditor on the occurrence of certain events or circumstances the immediate repayment of the sums granted and not yet due, generating a liquidity risk.
The loans in place at the reporting date are not subject to financial covenants.
The transactions between the Parent Company and its subsidiaries and between the subsidiaries were within the normal operating activities of the Group and were concluded at normal market conditions. The balance sheet and income statement effects of the transactions are eliminated in the consolidation process. Based on the information received from the companies of the Group there were no atypical or unusual operations.
BasicNet S.p.A., and, as consolidating companies, BasicItalia S.p.A., BasicRetail S.r.l., Basic Village S.p.A., Jesus Jeans S.r.l., Basic Trademark S.A., Superga Trademark S.A. and Basic Properties B.V. have adhered to the national fiscal regime as per Article 177/129 of the CFA.
The transactions with related parties for the year ended December 31, 2016 are reported below:
| Investments | Trade receivables |
Trade Payables |
Other Income |
Costs | |
|---|---|---|---|---|---|
| Interests in joint ventures: - Fashion S.r.l. |
257 | - | 6 | 2 | - |
| Remuneration of Boards and Senior Executives and other related parties |
- | - | - | - | 5,816 |
The remuneration concerns emoluments and all other payments, pension-related or social security deriving from the role of Director or Statutory Auditor in BasicNet S.p.A. and the other companies within the consolidation scope.
In relation to the other related parties, we highlight the legal consulting activities undertaken by Studio Legale Pavesio e Associati and by Studio Legale Cappetti, of the Director Carlo Pavesio and the consultancy undertaken by Pantarei S.r.l. in which the Director Alessandro Gabetti Davicini is Sole Director, concluding in the year, and of Studio Boidi & Partners, of which the Statutory Auditor Massimo Boidi is a 35% owner. These transactions, not material compared to the overall values, were at market conditions. The collections owned by BasicNet S.p.A., which are utilised for media events, shows, press gatherings together with the Brands and/or products of the Group, are subject to a renewable put and call agreement with BasicWorld S.r.l, at a price equal to the costs incurred for their acquisition, in addition to interest. This agreement was signed based on the eventual interest of BasicNet S.p.A. to sell this equipment to guarantee the complete recovery of the costs incurred, including financial charges, utilising in the meantime the benefits which derive from such communication instruments for their brands and/or products and, by BasicWorld S.r.l., of the purchase, to avoid that such a collection which would be lost.
They are described in the Directors' Report.
Pursuant to Consob Communication DEM/6064293 of July 28, 2006, we report that there were no nonrecurring significant operations during the year.
The BasicNet Group is involved in some legal disputes of a commercial nature which are not expected to give rise to significant liabilities.
The dispute was taken by BasicItalia S.p.A. against A.S. Roma S.p.A. and Soccer S.a.s. Brand Management S.r.l., which on November 23, 2012 communicated the unilateral advance resolution of the team sponsorship, agreed with duration until June 30, 2017, for presumed non-compliance and, in particular, defects in the materials supplied. BasicItalia S.p.A., considering the reasons for the resolution unfounded, instigated an ordinary court procedure requesting compensation for significant damage incurred. A.S. Roma S.p.A. and Soccer S.a.s. appealed against the request of BasicItalia S.p.A. and counterclaimed requesting compensation for presumed damage. Proceedings are currently in the opening phases; the opinions of the Court Appointed Expert and the Court Technical Assistant are being drawn up and the judge fixed the hearing for the examination of findings for May 26, 2017. In addition, BasicItalia S.p.A. began proceedings against Soccer S.a.s., a debtor of BasicItalia S.p.A., for the provision of goods related to the sponsorship and against which an injunction against Soccer S.a.s. was issued on January 22, 2013. Following the opposition of Soccer S.a.s., the hearing initially established for June 10, 2016 was postponed to March 22, 2017.
In addition, following the above termination of the contract, A.S. Roma sought to enforce payment of the surety granted by BNL S.p.A. in favour of BasicItalia S.p.A. for a maximum amount of Euro 5.5 million which guaranteed commitments undertaken by BasicItalia S.p.A. under the sponsorship agreement. Following the non-payment by BNL S.p.A., A.S. Roma petitioned the Rome Court to enforce a payment order against BNL for the full guaranteed amount. As a result of this procedure, in which BasicItalia S.p.A. (together with the parent company BasicNet S.p.A.) was joined as a party by BNL, the Rome Court, with judgement of December 7, 2013, rejected all applications by A.S. Roma, considering the enforcement illegitimate. This sentence was not challenged by A.S. Roma and the sentence is final.
On December 20, 2013, A.S. Roma again requested payment of the above-mentioned surety and, following the refusal of BNL to meet this new request, presented an appeal before the Rome Court on February 20, 2014. With judgement of December 15, 2014, the Rome Court rejected all requests made by A.S. Roma. A.S. Roma appealed against this decision before the Rome Appeals Court with subpoena dated February 10, 2015. The preliminary hearing, fixed for June 8, 2015, was postponed to June 10, 2015. On June 8, 2015, both BasicItalia S.p.A. and BNL put forward the rejection of the appeal and the confirmation of the first level judgment. The hearing held on June 10, 2015 sent the case for the establishment of conclusions on July 4, 2018.
For the Board of Directors
Marco Daniele Boglione
| Fees earned |
|||
|---|---|---|---|
| Type of service | Service provider | Company | 2016 |
| Audit | PricewaterhouseCoopers S.p.A. | Parent Company BasicNet S.p.A. Subsidiaries |
55,460 148,692 |
| Certification services | PricewaterhouseCoopers S.p.A. | Parent Company BasicNet S.p.A. | - |
| Other services | PricewaterhouseCoopers S.p.A. network |
Parent Company BasicNet S.p.A. | 37,800 |
| Total | 241,952 |
| Registered office |
Corporate purpose | Share capital | Parent company holding (%) |
||
|---|---|---|---|---|---|
| PARENT COMPANY | |||||
| BasicNet S.p.A. | |||||
| Directly held subsidiaries: | |||||
| - Basic Properties B.V. | Amsterdam (NL) | Sub-license concession of patent rights to local licensees. |
EURO | 18,160 | 100 |
| - Basic Village S.p.A. - single shareholder company |
Turin (Italy) | Building mgt. at Largo M. Vitale, 1. | EURO | 412,800 | 100 |
| - BasicItalia S.p.A. single shareholder company |
Turin (Italy) | Italian licensor, direct stores of BasicNet Group. |
EURO | 7,650,000 | 100 |
| - BasicNet Asia Ltd. | Hong Kong (China) | Control activity of the licensees and sourcing centre in Asia. |
HKD | 10,000 | 100 |
| - Jesus Jeans S.r.l. single shareholder company |
Turin (Italy) | Owner of the Jesus Jeans brand. | EURO | 10,000 | 100 |
| Indirectly held subsidiaries: | |||||
| – through Basic Properties B.V. | |||||
| - Basic Trademark S.A. | Luxembourg | Owner of some brands of the BasicNet Group. |
EURO | 1,250,000 | 100 |
| - Superga Trademark S.A. | Luxembourg | Owner of the brand Superga. | EURO | 500,000 | 100 (1) |
| - Basic Properties America, Inc. | Richmond (Virginia – USA) |
Sub-license of the brands for the US, Canada and Mexico markets. |
USD | 8,469,157.77 | 100 |
| - through BasicItalia S.p.A. | |||||
| - BasicRetail S.r.l. - single shareholder company |
Turin (Italy) | Management of outlets owned by the Group. |
EURO | 10,000 | 100 |
(1) shares subject to pledges with voting rights at Extraordinary Shareholders' Meeting for Banca IntesaSanpaolo S.p.A. in guarantee of the loan issued in April 2015.
| - through BasicNet S.p.A. | Registered office | Corporate purpose | Share capital | Holding (%) |
||
|---|---|---|---|---|---|---|
| - Fashion S.r.l. | Turin (Italy) | Owner of the Sabelt brand under a joint venture |
EURO | 100,000 | 50 (2) |
(2) the remaining 50% of the investment is held by the Marsiaj family
The undersigned Marco Daniele Boglione as Executive Chairman, Giovanni Crespi as CEO, and Paolo Cafasso as Executive Officer for Financial Reporting of BasicNet S.p.A., affirm, and also in consideration of Article 154-bis, paragraphs 3 and 4, of Legislative Decree No. 58 of February 24, 1998:
the adequacy for company operations and the effective application, of the administrative and accounting procedures for the preparation of the 2016 consolidated financial statements.
In addition, we declare that the consolidated financial statements:
Marco Daniele Boglione Chairman
Giovanni Crespi Paolo Cafasso Chief Executive Officer Executive Officer for Financial Reporting
| Note | FY 2016 | FY 2015 | Changes | |
|---|---|---|---|---|
| Direct sales | (7) | 2,720,502 | 2,286,295 | 434,207 |
| Cost of sales | (8) | (2,424,751) | (2,196,923) | (227,828) |
| GROSS MARGIN | 295,751 | 89,372 | 206,379 | |
| Royalties and sourcing commissions | (9) | 27,365,918 | 27,327,466 | 38,452 |
| Other income | (10) | 6,496,698 | 6,676,569 | (179,871) |
| Sponsorship and media costs | (11) | (490,214) | (736,803) | 246,589 |
| Personnel costs | (12) | (8,421,972) | (8,400,063) | (21,909) |
| Selling, general and administrative costs, | ||||
| royalties expenses | (13) | (14,198,499) | (12,338,483) | (1,860,016) |
| Amortisation & Depreciation | (14) | (2,173,738) | (2,074,281) | (99,457) |
| EBIT | 8,873,944 | 10,543,777 | (1,669,833) | |
| Net financial income (charges) | (15) | 190,102 | 368,870 | (178,768) |
| Dividends | (16) | 1,500,000 | 5,400,000 | (3,900,000) |
| Income/(charges) from investments | (17) | 20,573 | - | 20,573 |
| PROFIT BEFORE TAXES | 10,584,619 | 16,312,647 | (5,728,028) | |
| Income taxes | (18) | (3,163,360) | (4,242,378) | 1,079,018 |
| NET PROFIT | 7,421,259 | 12,070,269 | (4,649,010) |
(in Euro)
| Note | FY 2016 | FY 2015 | Changes | |
|---|---|---|---|---|
| Profit for the year (A) | 7,421,259 | 12,070,269 | (4,649,010) | |
| Effective portion of the Gains/(losses) on cash flow hedges |
15,007 | (44,677) | 59,685 | |
| Re-measurement of post-employment benefits (IAS 19) (*) |
(10,067) | 43,559 | (53,627) | |
| Tax effect on other profits/(losses) | (949) | (9) | (940) | |
| Total other gains/(losses), net of tax effect (B) | (27 ) |
3,990 | (1,127) | 5,118 |
| Total Comprehensive Profit (A)+(B) | 7,425,249 | 12,069,142 | (4,643,892) |
(*) items which may not be reclassified to the profit and loss account
| ASSETS | Note | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|---|
| Intangible assets | (19) | 12,112,176 | 12,115,030 |
| Plant, machinery and other assets | (20) | 1,769,559 | 1,543,269 |
| Equity invest. & other financial assets | (21) | 36,229,867 | 36,344,846 |
| Total non-current assets | 50,111,602 | 50,003,145 | |
| Net inventories | (22) | 807,897 | 774,484 |
| Trade receivables | (23) | 10,619,378 | 9,437,124 |
| Other current assets | (24) | 69,575,678 | 67,733,114 |
| Prepayments | (25) | 3,954,103 | 3,952,268 |
| Cash and cash equivalents | (26) | 1,236,975 | 1,159,243 |
| Derivative financial instruments | - | - | |
| Total current assets | 86,194,031 | 83,056,233 | |
| TOTAL ASSETS | 136,305,633 | 133,059,378 |
| LIABILITIES | Note | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|---|
| Share capital | 31,716,673 | 31,716,673 | |
| Treasury shares | (11,889,813) | (8,822,881) | |
| Other reserves | 59,537,548 | 53,085,199 | |
| Net Profit | 7,421,259 | 12,070,269 | |
| TOTAL SHAREHOLDERS' EQUITY | (27) | 86,785,667 | 88,049,260 |
| Provisions for risks and charges | - | - | |
| Loans | (28) | 11,960,323 | 9,442,672 |
| Employee and Director benefits | (29) | 1,614,436 | 2,922,988 |
| Deferred tax liabilities | (30) | 308,095 | 60,135 |
| Other non-current liabilities | (31) | 759,414 | 876,210 |
| Total non-current liabilities | 14,642,268 | 13,302,005 | |
| Bank payables | (32) | 11,057,007 | 8,512,581 |
| Trade payables | (33) | 4,757,626 | 4,362,692 |
| Tax payables | (34) | 14,736,086 | 14,180,091 |
| Other current liabilities | (35) | 4,077,183 | 4,120,067 |
| Accrued expenses | (36) | 182,732 | 450,611 |
| Derivative financial instruments | (37) | 67,064 | 82,071 |
| Total current liabilities | 34,877,698 | 31,708,113 | |
| TOTAL LIABILITIES | 49,519,966 | 45,010,118 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
136,305,633 | 133,059,378 |
(in Euro)
| Dec. 31, 2016 | Dec. 31, 2015 | ||
|---|---|---|---|
| A) | OPENING SHORT-TERM BANK DEBT | (924,763) | (739,092) |
| B) | CASH FLOW FROM OPERATING ACTIVITIES | ||
| Net Profit for the year Amortisation & Depreciation Gains on sale of equity investments Changes in working capital: - (increase) decrease in trade receivables - (increase) decrease in inventories - (increase) decrease in other receivables - increase (decrease) in trade payables - increase (decrease) in other payables Net change in post-employment benefits |
7,421,259 2,173,738 (20,573) (1,182,254) (33,413) (3,144,399) 394,934 376,398 (41,580) |
12,070,269 2,074,281 - (1,691,489) (14,552) (13,635,671) (8,692) 285,381 (53,873) |
|
| Others, net | 22,002 5,966,112 |
31,010 (943,336) |
|
| C) | CASH FLOW FROM INVESTING ACTIVITIES | ||
| Investments in fixed assets: - tangible assets - intangible assets - financial assets Realisable value for fixed asset disposals: - tangible assets - intangible assets - financial assets |
(608,641) (1,788,712) (21) 178 - 135,573 (2,261,623) |
(500,390) (2,055,715) - 232 - - (2,555,873) |
|
| D) | CASH FLOW FROM FINANCING ACTIVITIES | ||
| Lease contracts (repayments) Repayments of medium/long term loans Undertaking of medium/long term loans Treasury shares Distribution of dividends |
17,650 (6,428,565) 7,500,000 (3,066,932) (5,621,910) |
39,595 (5,799,110) 15,000,000 (1,947,845) (3,979,102) |
|
| (7,599,757) | 3,313,538 | ||
| E) | CASH FLOW IN THE YEAR | (3,895,268) | (185,671) |
| F) | CLOSING SHORT-TERM BANK DEBT | (4,820,031) | (924,763) |
Interest paid for the year amounts to respectively Euro 301 thousand in 2016 and Euro 362 thousand in 2015, while income taxes paid in the year amounted to Euro 5.9 million in 2016 and Euro 5.4 million in 2015.
| Reserves | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other reserves | ||||||||||
| Number shares |
Share capital | Treasury Shares |
Legal Reserve |
Treasury shares in portfolio reserve |
Remeas. Reserve IAS19 |
Cash Flow Hedge reserve |
Retained earnings |
Net profit | Total | |
| Balance at December 31, 2014 |
60,993,602 | 31,716,673 | (6,875,036) | 3,957,743 | 6,875,036 | (93,544) | (27,946) | 36,244,458 | 10,109,631 | 81,907,015 |
| Allocation of result as per Shareholders' AGM resolution of April 27, 2015 - Legal reserve - Retained earnings - Distribution of dividends |
- - - |
505,482 - - |
- - - |
- - - |
- - - |
- 5,625,097 |
(505,482) (5,625,097) (3,979,052) |
- - (3,979,052) |
||
| Acquisition of treasury shares |
(1,947,845) | - | 1,947,845 | - | - | (1,947,845) | - | (1,947,845) | ||
| 2015 Result |
- | - | - | - | - | - | 12,070,269 | 12,070,269 | ||
| Other comprehensive income statement items: |
||||||||||
| - Gains/(losses) recorded directly to cash flow hedge reserve |
- | - | - | - | (32,708) | - | - | (32,708) | ||
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | 31,581 | - | - | - | 31,581 | ||
| Total comprehensive income |
- | - | - | 31,581 | (32,708) | - | 12,070,269 | 12,069,142 | ||
| Balance at Dec. 31, 2015 |
60,993,602 | 31,716,673 | (8,822,881) | 4,463,225 | 8,822,881 | (61,963) | (60,654) | 39,921,710 | 12,070,269 | 88,049,260 |
| Allocation of result as per Shareholders' AGM resolution of April 28, 2016 - Legal reserve - Retained earnings - Distribution of dividends |
- - - |
603,513 - - |
- - - |
- - - |
- - - |
- 5,844,846 - |
(603,513) (5,844,846) (5,621,910) |
- (5,621,910) |
||
| Acquisition of treasury shares |
(3,066,932) | - | 3,066,932 | - | - | (3,066,932) | - | (3,066,932) | ||
| 2016 Result |
- | - | - | - | - | - | 7,421,259 | 7,421,259 | ||
| Other comprehensive income statement items: |
||||||||||
| - Gains/(losses) recorded directly to cash flow hedge reserve |
- | - | - | - | 11,290 | - | - | 11,290 | ||
| - Gains/(losses) recorded directly to equity for IAS 19 re-measurement |
- | - | - | (7,300) | - | - | - | (7,300) | ||
| Total comprehensive income |
- | - | - | (7,300) | 11,290 | - | 7,421,259 | 7,425,249 | ||
| Balance at Dec. 31, 2016 |
60,993,602 | 31,716,673 | (11,889,813) | 5,066,738 | 11,889,813 | (69,263) | (49,364) | 42,699,624 | 7,421,259 | 86,785,667 |
(in Euro)
| Dec. 31, 2016 | Dec. 31, 2015 | |
|---|---|---|
| Cash and cash equivalents | 1,236,975 | 1,159,243 |
| Bank overdrafts and bills | (6,057,006) | (2,084,006) |
| Sub-total net liquidity available | (4,820,031) | (924,763) |
| Short-term portion of medium/long-term loans | (5,000,000) | (6,428,575) |
| Short-term net financial position – third parties | (9,820,031) | (7,353,338) |
| Intesa loan | (5,625,000) | (9,375,000) |
| BNL loan | (6,250,000) | - |
| Medium/long lease payables | (85,323) | (67,672) |
| Sub-total loans and leasing – third parties | (11,960,323) | (9,442,672) |
| Net financial position - third parties | (21,780,354) | (16,796,010) |
| Group financial receivables / (payables) | 64,757,307 | 61,852,006 |
| Net Financial Position - Group | 64,757,307 | 61,852,006 |
| Total net financial position | 42,976,953 | 45,055,996 |
The statement required by Consob Communication No. 6064293 of July 28, 2006 is reported below.
| Dec. 31, 2016 | Dec. 31, 2015 | ||
|---|---|---|---|
| A. | Cash | 11,315 | 12,808 |
| B. | Other cash equivalents | 1,225,660 | 1,146,436 |
| C. | Securities held for trading | - | - |
| D. | Cash & cash equivalents (A)+(B)+(C) | 1,236,975 | 1,159,244 |
| E. | Current financial receivables | - | - |
| F. | Current bank payables | (6,057,006) | (2,084,006) |
| G. | Current portion of non-current debt | (5,000,000) | (6,428,575) |
| H. | Other Group financial receivables/ (payables) | 64,757,307 | 61,852,006 |
| I. | Current financial debt (F)+(G)+(H) | 53,700,301 | 53,339,425 |
| J. | Net current financial debt (I)-(E)-(D) | 54,937,276 | 54,498,669 |
| K. | Non-current bank payables | (11,960,323) | (9,442,672) |
| L. | Bonds issued | - | - |
| M. | Fair value of hedges (cash flow hedges) | (67,064) | (82,071) |
| N. | Non-current financial debt (K)+(L)+(M) | (12,027,387) | (9,524,743) |
| O. | Net financial debt (J)+(N) | 42,909,889 | 44,973,926 |
The net debt differs from the Parent Company net financial position for the fair value of the interest and currency hedging operations - cash flow hedges (Note 38).
| FY 2016 | FY 2015 | |||
|---|---|---|---|---|
| Of which related parties Note 40 |
Of which related parties Note 40 |
|||
| Direct sales Cost of sales |
2,720,502 (2,424,751) |
2,023,329 (52,395) |
2,286,295 (2,196,923) |
1,534,262 (6,823) |
| GROSS MARGIN | 295,751 | 89,372 | ||
| Royalties and sourcing commissions Other income Sponsorship and media costs |
27,365,918 6,496,698 (490,214) |
6,344,739 6,057,700 (33,080) |
27,327,466 6,676,569 (736,803) |
6,005,656 6,058,284 (255,044) |
| Personnel costs Selling, general and administrative costs, royalties expenses |
(8,421,972) (14,198,499) |
(3,092,730) | (8,400,063) (12,338,483) |
(3,053,203) |
| Amortisation & Depreciation | (2,173,738) | (2,074,281) | ||
| EBIT | 8,873,944 | 10,543,777 | ||
| Net financial income (charges) Dividends Income/(charges) from investments |
190,102 1,500,000 20,573 |
516,250 1,500,000 |
368,870 5,400,000 - |
597,816 5,400,000 |
| PROFIT BEFORE TAXES | 10,584,619 | 16,312,647 | ||
| Income taxes | (3,163,360) | (4,242,378) | ||
| NET PROFIT | 7,421,259 | 12,070,269 |
| ASSETS | Dec. 31, 2016 | Dec. 31, 2015 | ||
|---|---|---|---|---|
| Of which Related Parties Notes 21 & 24 |
Of which Related Parties Notes 21 & 24 |
|||
| Intangible assets | 12,112,176 | 12,115,030 | ||
| Plant, machinery and other assets | 1,769,559 | 1,543,269 | ||
| Equity invest. & other financial assets | 36,229,867 | 36,219,489 | 36,344,846 | 36,244,488 |
| Deferred tax assets | - | - | ||
| Total non-current assets | 50,111,602 | 50,003,145 | ||
| Net inventories | 807,897 | 774,484 | ||
| Trade receivables | 10,619,378 | 9,437,124 | ||
| Other current assets | 69,575,678 | 68,130,795 | 67,733,114 | 64,944,986 |
| Prepayments | 3,954,103 | 3,952,268 | ||
| Cash and cash equivalents | 1,236,975 | 1,159,243 | ||
| Derivative financial instruments | - | - | ||
| Total current assets | 86,194,031 | 83,056,233 | ||
| TOTAL ASSETS | 136,305,633 | 133,059,378 |
| LIABILITIES | Dec. 31, 2016 | Dec. 31, 2015 | ||
|---|---|---|---|---|
| Of which Related Parties Note 35 |
Of which Related Parties Note 35 |
|||
| Share capital | 31,716,673 | 31,716,673 | ||
| Treasury shares | (11,889,813) | (8,822,881) | ||
| Other reserves | 59,537,548 | 53,085,199 | ||
| Net Profit | 7,421,259 | 12,070,269 | ||
| TOTAL SHAREHOLDERS' EQUITY | 86,785,667 | 88,049,260 | ||
| Provisions for risks and charges | - | - | ||
| Loans | 11,960,323 | 9,442,672 | ||
| Employee and Director benefits | 1,614,436 | 2,922,988 | ||
| Deferred tax liabilities | 308,095 | 60,135 | ||
| Other non-current liabilities | 759,414 | 876,210 | ||
| Total non-current liabilities | 14,642,268 | 13,302,005 | ||
| Bank payables | 11,057,007 | 8,512,581 | ||
| Trade payables | 4,757,626 | 4,362,692 | ||
| Tax payables | 14,736,086 | 14,180,091 | ||
| Other current liabilities | 4,077,183 | 1,159,392 | 4,120,067 | 1,077,590 |
| Accrued expenses | 182,732 | 450,611 | ||
| Derivative financial instruments | 67,064 | 82,071 | ||
| Total current liabilities | 34,877,698 | 31,708,113 | ||
| TOTAL LIABILITIES | 49,519,966 | 45,010,118 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
136,305,633 | 133,059,378 |
| Dec. 31, 2016 | Dec. 31, 2015 | ||
|---|---|---|---|
| Of which related Parties |
Of which related parties |
||
| A) OPENING SHORT-TERM BANK DEBT | (924,763) | (739,092) | |
| B) CASH FLOW FROM OPERATING ACTIVITIES | |||
| Net Profit | 7,421,259 | 12,070,269 | |
| Amortisation & Depreciation | 2,173,738 | 2,074,281 | |
| Gains on sale of equity investments | (20,573) | ||
| Changes in working capital: | |||
| - (increase) decrease in trade receivables | (1,182,254) | (1,691,489) | |
| - (increase) decrease in inventories | (33,413) | (14,552) | |
| - (increase) decrease in other receivables | (3,144,399) | (3,185,809) (13,635,671) (14,138,860) | |
| - increase (decrease) in trade payables | 394,934 | (8,692) | |
| - increase (decrease) in other payables | 376,398 | 81,802 285,381 |
(1,341,854) |
| Net change in post-employment benefits | |||
| (41,580) | (53,873) | ||
| Others, net | 22,012 | 31,010 | |
| 5,966,122 | (943,336) | ||
| C) CASH FLOW FROM INVESTING ACTIVITIES | |||
| Investments in fixed assets: | |||
| - tangible assets | (608,641) | (500,390) | |
| - intangible assets | (1,788,712) | (2,055,715) | |
| - financial assets | (21) | - | |
| Realisable value for fixed asset disposals: | |||
| - tangible assets | 168 | 232 | |
| - intangible assets | - | - | |
| - financial assets | 135,573 | - | |
| (2,261,633) | (2,555,873) | ||
| D) CASH FLOW FROM FINANCING ACTIVITIES | |||
| Lease contracts (repayments) | 17,650 | 39,595 | |
| Repayments of medium/long term loans | (6,428,565) | (5,799,110) | |
| New medium/long term loans | 7,500,000 | 15,000,000 | |
| Treasury shares | (3,066,932) | (1,947,845) | |
| Distribution of dividends | (5,621,910) | (3,979,102) | |
| (7,599,757) | 3,313,538 | ||
| E) OPERATIONS NOT GENERATING CASH FLOWS | |||
| Conversion of financial receivables into investments | |||
| - receivables from subsidiaries | - | - | |
| - equity investments | - - |
- - |
|
| E) CASH FLOW IN THE YEAR | (3,895,268) | (185,670) | |
| F) CLOSING SHORT-TERM BANK DEBT | (4,820,031) | (924,763) |
The undersigned herewith declares that the present financial statements reflect the underlying accounting entries.
For the Board of Directors The Chairman
Marco Daniele Boglione
BasicNet S.p.A. – with registered office in Turin, listed on the Italian Stock Exchange since November 17, 1999, in addition to its main function of Parent Company, manages the Network, providing the know-how for the use of the Group brands, undertaking research and development of the services and new products for the best utilisation of the brands, as well as undertaking activities of conception, development and communication and the Groups' Information Technology systems. The Company coordinates and provides subsidiaries with administration, finance and control, IT and payroll management services.
The duration of BasicNet S.p.A. is fixed by the company by-laws until December 31, 2050.
The publication of the financial statements of BasicNet S.p.A. for the year ended December 31, 2016 was approved by the Board of Directors on March 22, 2017. The final approval of the accounts is the responsibility of the Shareholders' Meeting.
The financial statements for the year 2016 were prepared in accordance with IFRS issued by the International Accounting Standards Board ("IASB) and approved by the European Union at the date of the present document. IFRS refers to all the revised International Accounting Standards (IAS), and all of the interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") previously known as the Standing Interpretations Committee ("SIC").
The financial statements are prepared under the historical cost convention, modified where applicable for the measurement of certain financial instruments, as well as on the going concern assumption.
The accounting principles utilised in the financial statements are the same as those utilised in the previous year.
As per IAS 8 - Accounting Standards, Changes in Accounting Estimates and Errors, the IFRS in effect from January 1, 2016 are indicated and briefly illustrated below.
Amendments to IFRS 11 Joint Arrangements: Accounting for the acquisition of investments in Joint Arrangements: on November 24, 2015, EU Regulation No. 2015/2173 was issued, enacting at European level some limited amendments to IFRS 11. The amendments add new guidelines on the calculation of the acquisition of an investment in a joint operation, whose activities constitute a business (as defined by IFRS 3 - Business Combinations).
Amendments to IAS 16 - Property, plant and equipment and IAS 38 - Intangible Assets: on December 2, 2015, EU Regulation No. 2015/2231 was issued, enacting at European level some limited modifications to IAS 16 and IAS 38. The amendments to both standards establish that an asset should not be depreciated based on the revenues to be generated over a set period, as, according to IASB, revenues generated by an asset generally reflect factors other than the consumption of the economic benefits deriving from the asset.
Improvements to IFRS (2012-2014 cycle): on December 16, 2015 EU Regulation 2015/2343 was issued and enacted at EU level a number of improvements to IFRS for the period 2012-2014, as follows:
IFRS 5 - Non-current assets held for sale and discontinued operations: it was clarified that where a non-current asset (or disposal group) is reclassified from "held for sale" to "held for distribution" or vice versa, this reclassification does not constitute an amendment to a sales or distribution plan and therefore should not be recognised as such;
Amendments to IAS 1 - Presentation of financial statements - Disclosure initiatives: on December 19, 2015, EU Regulation No. 2015/2406 was issued, enacting at European level some limited modifications to IAS 1. In particular, the amendments, which are part of a wider improvement initiative for the presentation and disclosure of financial statements, include the following updates:
Amendments to IFRS 10, IFRS 12, IAS 28 - Investment entities: on September 23, 2016, EU Regulation No. 2016/1703 was issued which made amendments to IFRS 10 - Consolidated Financial Statements, IFRS 12 - Disclosure on investments in other entities and IAS 28 - Investments in associates and joint ventures. These amendments, published in the Investment Entities: application of the consolidation exception document set out the requirements for the accounting of investment entities and provide exemptions for particular situations. More specifically, the amendments made to IFRS 10 confirm the exemption from the preparation of the consolidated financial statements for an intermediate parent which is not an investment entity controlled by an investment entity.
Amendments to IAS 17 - Separate financial statements: on December 23, 2015, Regulation EC No. 2015/2441 was issued, introducing a number of amendments to IAS 27 - Separate financial statements entitled "equity method in the separate financial statements"; these amendments permit the option to apply the equity method, described in IAS 28 - Investments in associates and joint ventures, for the accounting in the separate financial statements of investments in subsidiaries, associates and joint ventures, rather than at cost or as per IAS 39/IFRS 9.
The adoption of these amendments did not have any significant impacts on the Consolidated Financial Statements at December 31, 2016.
IFRS 15 - Revenues from contracts with customers: on October 29, 2016, EU Regulation No. 2016/1905 was issued, enacting at European level IFRS 15 - Revenue from contracts with customers and the relative amendments. IFRS 15 replaces IAS 18 - Revenues, IAS 11 - Construction contracts and the relative interpretations on the recognition of revenues, comprising IFRIC 13 - Customer loyalty programmes, IFRIC 15 - Agreements for the construction of real estate, IFRIC 18 - Transfers of assets from customers and SIC 31 Revenues - barter transactions involving advertising services. The application of the new standard from January 1, 2018 involves, alternatively, a method for the recalculation of all comparative periods presented in the financial statements ("complete retrospective method") and a "simplified" method involving the recognition of the cumulative effect of the first application of the standard in adjustment of the opening shareholders' equity of the period in which the new standard is adopted, leaving unchanged the data for all comparative periods presented. The new standard, which requires the recognition of revenues on the transfer of control of the goods or services to customers at an amount which reflects the consideration which is expected to be received in exchange for these products or services, introduces a five step method to analyse the transactions and define the method for recognising revenues concerning both the timing of recognition ("point in time"/"over time") and the relative amount. The company does not expect the adoption of this standard to have material impacts on the recognition and valuation of its revenues.
IFRS 9 - Financial Instruments: on November 29, 2016, Regulation EC No. 2016/2067 was issued, which incorporated at EU level IFRS 9 - Financial Instruments concerning the classification, measurement and cancellation of financial asset/liabilities, the reduction in value of financial instruments, in addition to the accounting of hedges. IFRS 9, which should be applied from January 1, 2018 (i) amends the classification and valuation model of financial assets; (ii) introduces the expected credit losses concept among the variables to be considered in the valuation and write-down of financial assets; (iii) amends the hedge accounting provisions. The company does not expect the adoption of this standard to have material impacts on the valuation of its assets, liabilities, costs and revenues.
At the date of the present consolidated financial statements, the following new Standards/Interpretations were issued by IASB, although still not approved by the EU:
Amendments to IAS 7 Cash flow statement, disclosure initiatives, applicable from January 1, 2017.
Amendments to IFRS 2 – Classification and measurement of share-based payments, applicable from January 1, 2018.
The company will adopt these new standards, amendments and interpretations, according to the scheduled application dates; currently, no significant impacts are expected from these amendments, with the exception of those concerning IFRS 16 - Leasing, described above.
BasicNet S.p.A. presents its income statement by nature of cost items; the assets and liabilities are classified between current and non-current. The cash flow statement was prepared applying the indirect method. The format of the financial statements applied the provisions of Consob Resolution No. 15519 of July 27, 2006 and Notice No. 6064293 of July 28, 2006 on financial disclosure requirements.
The present financial statements were prepared on the going concern basis, and in accordance with the accruals principle. The financial statements are presented in Euro and all values are rounded into thousands of Euro.
The main accounting policies adopted in the preparation of the financial statements at December 31, 2016 are disclosed below:
Revenues are recognised in accordance with the probability that the company will receive economic benefits and the amount can be determined reliably. Revenues are recognised net of returns, discounts and allowances.
In particular, revenues from the sale of goods are recognised when the significant risks and benefits of the ownership of the goods are transferred to the buyer, the sales price has been agreed or determinable and collection of the receivable is expected. This moment generally corresponds with the transfer of ownership which coincides, normally, with the shipping or delivery of the goods.
Royalties and sourcing commissions are recognised on an accruals basis in accordance with the underlying contracts.
Costs and expenses are recognised in accordance with the accruals principle.
Cost relating to the preparation and presentation of sample collections are recognised in the income statement in the year in which the sales of the relative collections are realised. Any differences are recorded through accruals.
Interest income and expenses and other income and expenses are recorded and shown in the financial statements on the accrual basis.
In accordance with IAS 23 – Borrowing costs, the financial charges directly attributable to the purchase, construction and production of the asset which requires a significant amount of time before use or sale are capitalised together with the value of the asset. Such an event has not arisen up to the present moment for the company. If these conditions are not met the financial charges are expensed directly to the income statement.
Dividends from investees are recognised in the income statement when the right to receive the dividend is established.
Dividends distributed are represented as changes in shareholders' equity in the year in which the Shareholders' Meeting approves the distribution and payment.
The receivables and payables originally expressed in foreign currencies are translated into Euro at the exchange rate when the transaction originated. Exchange differences arising on collections and payments in foreign currencies are recorded in the income statement.
Revenues and income, costs and charges related to currency transactions are recorded at the exchange rate at the transaction date.
At the end of the period, the assets and liabilities valued in foreign currencies, with the exception of fixed assets, are recorded at the exchange rates at the balance sheet date and the relative gains or losses on exchange are recorded in the income statement.
Income taxes include all the taxes calculated on the assessable income of the Company. Taxes on income are recognised in profit and loss, except where they relate to items charged or credited directly to equity, in which case the tax effect is also recognised directly in equity.
Other taxes not related to income, such as taxes on property and share capital, are included under operating charges.
Deferred taxes are calculated on all the temporary differences arising between the assessable income of an asset or liability and the relative book value in the financial statements, with the exception of the goodwill not fiscally deductible and of those differences deriving from investments in subsidiaries for which a write-down is not expected in the future.
Deferred tax assets on fiscal losses and unutilised tax credits carried forward are recognised only for those amounts for which it is probable there will be future assessable income to recover the amounts. The deferred tax assets and liabilities are offset when the income tax is applied by the same fiscal authority and when there is a legal right of compensation.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the temporary difference is reversed.
The Company adhered to the tax consolidation in accordance with Article 117 and thereafter of the CFA – Presidential Decree No. 917 of December 22, 1986 together with all of the wholly-owned Italian subsidiary companies. BasicNet S.p.A. acts as the consolidating company and calculates a single assessable base for the Group of companies adhering to the national tax consolidation and therefore benefits from the possibility of offsetting assessable income with assessable losses in a single tax declaration.
In accordance with paragraph 4 of IAS 33 – Earnings per share, this latter is only presented at consolidated financial statement level.
BasicNet S.p.A. may be involved in legal and tax disputes, concerning specific issues and in various jurisdictions. Considering the uncertainties relating to these issues, it is difficult to predict with certainty any future payments required. In addition, the Company has instigated legal disputes for the protection of its Trademarks, and of its products, against counterfeit products. The cases and disputes against the Company often derive from complex legal issues, which are often subject to varying degrees of uncertainty, including the facts and circumstances relating to each case, jurisprudence and different applicable laws.
In the normal course of business, Management consults with its legal consultants and experts on legal matters.
The Company accrues a liability against disputes when it considers it is probable that there will be a financial payment made and when the amount of the losses arising can be reasonably estimated.
The contingent liabilities are not recorded in the financial statements, but are reported as a disclosure in the Notes unless the probability is remote. In accordance with paragraph 10 of IAS 37 – Provisions, contingent liabilities and contingent assets a contingent liability is (a) a possible obligation which derives from past events and whose existence will be confirmed only on the occurrence or otherwise of one or more future uncertain events, not entirely under the control of the enterprise, or (b) a current obligation which derives from past events but which cannot be recorded in the financial statements as the payment is improbable or cannot be reliably estimated.
The preparation of the financial statements and the relative notes in application of IFRS require that management make estimates and assumptions on the values of the assets and liabilities in the financial statements and on the information relating to the assets and contingent liabilities at the balance sheet date. The actual results may differ from such estimates.
Estimates are utilised to measure intangible and tangible assets subject to impairment tests, in addition to recognise provisions on doubtful debts, inventory obsolescence, amortisation and depreciation, the write-down of assets, employee benefits and income taxes.
The estimates and assumptions are reviewed periodically and the effects of all variations are immediately recognised in the income statement.
An intangible asset is a non-monetary asset, identifiable and without physical substance, controllable and capable of generating future economic benefits. Intangible assets are recognised at purchase and/or production cost, including the costs of bringing the asset to its current use net of accumulated amortisation and any loss in value. Amortisation begins when the asset is available for use and is recognised on a straight-line basis over the residual estimated useful life of the asset.
Software acquired and IT programmes developed internally are amortised over five years, while the costs incurred to maintain or upgrade the original operational standard are expensed in the year and are not capitalised.
Development costs are capitalised when the capacity to generate future economic benefits is demonstrated and the other conditions required by IAS 38 – Intangible assets are satisfied.
The brand K-Way is considered an intangible asset with indefinite useful life, in line with that at Group level for the principal brands, Kappa, Robe di Kappa and Superga; as such these assets are not amortised but subject to an impairment test at least annually. This depends on the strategic positioning reached whereby it is not currently possible to predict a time limit on the generation of future cash flow streams.
The patent rights are amortised over ten years.
Other intangible assets recognised on acquisition are recorded separately from goodwill, if their fair value can be determined on a reliable basis. They are amortised according to market conditions and generally within the period in which control of the asset is exercised.
In the case of business combinations, the assets, the liabilities and the contingent liabilities acquired and identifiable are recorded at their fair value at the date of acquisition. The positive difference between the acquisition cost and the portion of the present value of the assets and liabilities is classified as goodwill and recorded in the financial statements as an intangible asset. Any negative difference ("negative goodwill") is recognised in the income statement at the date of acquisition.
Goodwill is not amortised, but is subject annually, or more frequently if specific events or circumstances indicate the possibility of having incurred an impairment, to verifications of any reduction in value, as provided by IAS 36 Reduction in value of assets. After initial recognition, goodwill is measured at cost less any loss in value. The impairment of goodwill may not be written back.
Plant and equipment are recorded at purchase or production costs, including accessory charges and direct and indirect costs, for the amount reasonably attributable to the assets.
Subsequent expenditures are only capitalised where they increase the future economic benefits of the asset to which they relate. All other expenditures are expensed as incurred.
Plant and equipment are amortised on a straight-line basis over the estimated useful life of each asset. The depreciation rates by asset category are shown below:
| Description | Estimated useful life years |
|---|---|
| Plant and machinery | 8 |
| Furniture and furnishings | 5-8 |
| Motor vehicles | 4 |
| EDP | 5-8 |
Fixed assets which at the balance sheet date are lower than the book value are recorded at this lower value, which however may not be maintained at this value in subsequent periods if the reasons for the adjustment no longer exist.
Ordinary maintenance costs are fully charged to the income statement.
Advances and costs for property, plant and equipment in progress which are not yet utilised in the operating activities are reported separately.
Property, plant and equipment acquired through finance lease contracts are recognised under the finance method as per IAS 17 – Leasing and recorded under assets at the purchase price decreased by depreciation.
The depreciation of these assets is reflected in the financial statements applying the same criteria as for the fixed assets to which the lease contracts refer.
Within liabilities a payable is recorded, under short-term and medium term, towards the leasing company; the lease payments are reversed from expenses for the use of third party assets and the financial charges for the period are recognised on an accruals basis.
The carrying value of the assets of the Company are measured at each reporting date to determine whether there has been a loss in value, in which case an estimate is made of the recoverable value of the asset. A loss in value (impairment) is recorded in the income statement when the carrying value of an asset or a cash-generating unit exceeds its recoverable value.
The indefinite intangible assets (including goodwill) are tested annually and whenever there is an indication of a possible loss, in order to determine whether a loss in value has occurred.
The recoverable value of a non-financial asset is the higher of the fair value less costs to sell and the value in use. For the determination of the value in use, the future cash flows are discounted utilising a rate which reflects the current market value of money and of the related risks of the activity. In the case of activities which do not generate cash flows sufficiently independent, it is necessary to calculate the recoverable value of the cash-generating unit to which the asset belongs.
The value is recovered when changes take place in the valuations to determine the recoverable value. The recoverable value is recorded in the income statement adjusting the book value of the asset to its recoverable value. This latter must not be above the value which would have been determined, net of depreciation, if no loss in value of the asset had been recorded in previous years.
In the separate financial statements of BasicNet S.p.A. the investments in subsidiaries, associates and joint ventures are recorded at cost, adjusted for any loss in value; the cost includes any directly attributable accessory charges. The positive difference, arising on purchase, between the acquisition cost and the share of net equity of the investment of the Company is, therefore, included in the carrying value of the investment.
Where there is an indication of a loss, the carrying value of the investment must be compared with the recoverable value, represented by the higher between the fair value, net of selling costs, and the value in use. For non-listed investments, the fair value is determined with reference to binding sales agreement. The value in use is determined discounting the expected cash flows from the investment at the weighted average cost of capital, net of the financial debt. The cash flows are determined on the basis of reasonable and identifiable assumptions, represented by the best estimates of the future economic conditions.
Where an impairment loss exists, it is recognised immediately through the income statement. Where the reasons for the write-down no longer exist, the value of the investment is restored within the limit of the original cost through the income statement.
Where the share of losses pertaining to the company in the investment exceeds the carrying value of the investment, the value of the investment is written down and the share of further losses is recorded as a provision under liabilities if the Company has the obligation to cover such losses.
Investments other than those in subsidiaries, associated companies and joint ventures are recognised under non-current assets or current assets if held within the equity of the Company for a period, respectively, of greater than, or not greater than, 12 months.
On acquisition, they are classified to the following categories:
The other investments classified as "financial assets available-for-sale" are measured at fair value; the change to the values of these investments are recognised to a net equity reserve through the other comprehensive income statement items, which will be reversed to the income statement on sale or impairment.
Other non-listed investments classified as "financial assets available-for-sale" for which the fair value may not be reliably estimated are valued at cost, adjusted for impairments to the income statement, according to IAS 39 – financial instruments: recognition and measurement.
The reduction in value of other investments classified as "financial assets available-for-sale" may not be subsequently reversed.
Changes in the value of other investments classified as "financial assets at fair value with changes recorded in the income statement" are recognised directly to the Income Statement.
Financial assets consist of loans are recorded at their estimated realisable value.
Inventory is valued under the average weighted cost method.
Inventories are measured at the lower of purchase or production cost and their net realisable value.
Inventories include incidental charges and direct and indirect costs that can be reasonably allocated. Obsolete and slow-moving inventories are written down in relation to their possible utilisation or realisable value. When in future periods the reasons for the write-down no longer exist, they are restored to the original value.
Receivables recorded under current assets are stated at their nominal value, which substantially coincides with the amortised cost. The initial value is subsequently adjusted to take into account any write-downs which reflect the estimate of the losses on receivables, determined based on a specific provision on doubtful debts and a general provision based on past experience. Medium/long-term receivables which include an implicit interest component are discounted utilising an appropriate market rate. Receivables transferred without recourse, in which all the risks and benefits substantially are transferred to the factoring company, are reversed in the financial statements at their nominal value.
The liquid assets principally relate to current bank accounts and cash. They are recorded for amounts effectively available at year end.
The cash equivalents are invested in highly liquid temporary financial instruments.
The account includes amounts related to two accounting periods, in accordance with the accruals concept.
Treasury shares are recognised as a deduction from equity. The original cost of the treasury shares and the revenues deriving from any subsequent sale are recognised as equity movements.
Provisions for risks and charges are recorded in the balance sheet only when a legal or implicit obligation exists deriving from a past event that determines the commitment of resources to produce economic benefits for their compliance and a reliable estimate of the amount can be determined.
The Post-Employment Benefit in accordance with Italian legislation is quantified as a defined benefit plan and is measured in accordance with the "Projected Unit Credit Method".
From January 1, 2007, this liability refers exclusively to the portion of the Post-Employment Benefit, matured up to December 31, 2006, which following the complementary pension reform (Legislative Decree No. 252 of December 5, 2005) continues to constitute an obligation of the company. Following the entry into force of the above-mentioned reform as enacted by Law No. 296 of December 27, 2006 (2007 Finance Law), the liability, as concerning services already completely matured, was restated without applying the pro-rata of the employment service and without considering, in the actuarial calculation, the components relating to future salary increases.
On June 16, 2011, the IASB issued an amendment to IAS 19 Employee Benefits. The new version of IAS 19 requires, in particular, for post-employment benefits, the recognition of the changes of the actuarial gains/losses under other items of the Comprehensive Income Statement. The cost relating to employment services, as well as the interest on the "time value" component in the actuarial calculations remain in the profit and loss account.
The portion of the Post-Employment Benefit paid to a supplementary pension fund is considered a defined contribution plan as the obligation of the company towards the employee ceases with the payment of the amount matured to the funds. Also the portion of the Post-Employment Benefit paid to the INPS Treasury fund is recorded as a defined contribution plan.
Financial payables are recorded at their nominal value which approximates the amortised cost. The book value of the trade and other payables at the balance sheet date approximates their fair value.
BasicNet S.p.A. utilises financial instruments to hedge interest rate fluctuations on some loans.
These instruments are initially recorded at their fair value, and subsequently measured according to whether they are "hedged" or "not hedged" as per IAS 39.
It is recalled that the BasicNet S.p.A. does not undertake contracts for speculative purposes.
The hedging may be of two types:
BasicNet S.p.A., before signing a hedge contract, undertakes a close examination of the relationship between the hedge instrument and the item hedged, in view of the objectives to reduce the risk, also evaluating the existence and the continuation over the life of the derivative financial instrument of the effectiveness requirements, necessary for the hedge accounting.
After their initial recognition, the derivatives are accounted as follows:
a) Fair value hedges
The changes in their fair value are recognised in the income statement, together with the changes in the fair value of the relative assets and liabilities hedged. The Company does not utilise fair value hedge instruments.
The part of the profit or loss of the hedge instrument, considered effective, is recorded directly in the comprehensive income statement; the non-effective part is however recorded immediately in the income statement. The accumulated amounts in the comprehensive income statement are recorded in the income statement in the year in which the scheduled hedge operation matures or the instrument hedged is sold, or when the effectiveness requirements for hedge accounting no longer exist.
c) Derivative financial instruments which do not have the effectiveness requirements for hedge accounting
The derivative financial instruments which do not comply with the requirements of IAS 39 for the identification of the hedge, where present, are classified in the category of financial assets and liabilities measured at fair value through the profit and loss account.
IFRS 7 requires that the classification of financial instruments measured at fair value is determined based on the quality of the input sources used in the valuation.
The IFRS 7 classification implies the following hierarchy:
The subsequent events to the end of the year and the outlook for the current year are reported in the Directors' Report.
As the Company simultaneously publishes the separate and consolidated financial statements, the operating segment information is provided only for the consolidated financial statements in accordance with IFRS 8 – Operating segments.
The direct sales of products undertaken by the Company refer only to samples of clothing and footwear to licensees. The breakdown of sample sales is as follows:
| FY 2016 | FY 2015 | |
|---|---|---|
| Net sales to third parties | 697,174 | 752,033 |
| Net sales to subsidiaries | 2,023,328 | 1,534,262 |
| Total direct sales | 2,720,502 | 2,286,295 |
Sales to subsidiaries are detailed in Note 40.
The breakdown of direct sales by geographic area is reported below:
| FY 2016 | FY 2015 | |
|---|---|---|
| Italy | 2,066,737 | 1,590,414 |
| Europe | 357,809 | 368,470 |
| The Americas | 118,244 | 165,876 |
| Asia and Oceania | 171,872 | 156,143 |
| Middle East and Africa | 5,840 | 5,392 |
| Total | 2,720,502 | 2,286,295 |
The direct sale of samples reported a Euro 509 thousand increase, following increased orders from licensees.
The breakdown of the cost of sales is as follows:
| FY 2016 | FY 2015 | |
|---|---|---|
| Samples purchased | 1,671,284 | 1,400,173 |
| Freight charges and accessory purchasing cost | 389,468 | 372,637 |
| Change in inventory of raw materials, ancillary, | ||
| consumables and goods | (33,413) | (14,552) |
| Prototypes purchases and development | 338,180 | 366,536 |
| Other | 59,232 | 72,129 |
| Total cost of sales | 2,424,751 | 2,196,923 |
The breakdown of the sample purchases and accessory purchases by geographic area is reported below:
| FY 2016 | FY 2015 | |
|---|---|---|
| Asia and Oceania | 1,197,019 | 1,095,859 |
| Italy | 282,059 | 212,368 |
| Europe | 144,036 | 30,642 |
| The Americas | 43,968 | 41,912 |
| Middle East and Africa | 4,203 | 19,392 |
| Total | 1,671,284 | 1,400,173 |
Sample purchases were made by BasicNet S.p.A. for resale to the licensees. The increase is principally related to higher sales and increased costs related to the development of new prototypes.
The breakdown of royalties and sourcing commissions by geographic area is reported below.
| FY 2016 | FY 2015 | |
|---|---|---|
| Europe | 12,359,428 | 13,407,574 |
| The Americas | 2,246,060 | 1,820,469 |
| Asia and Oceania | 11,819,530 | 11,056,477 |
| Middle East and Africa | 940,900 | 1,042,946 |
| Total | 27,365,918 | 27,327,466 |
Royalty income comprises fees on licenses for know-how and the development of the Group brand collections, in addition to royalties for the use of the K-Way brand. Sourcing commissions stem from usage rights of the know-how and are charged to the licensee producers on the sales made by them to the licensees of the Network.
The increase relates to the commercial developments described in the Directors' Report, based on the consolidated figures, whose effects are reflected also in the Company figures.
| FY 2016 | FY 2015 | |
|---|---|---|
| Assistant services to Group companies | 6,057,700 | 6,058,284 |
| Other income | 438,998 | 618,285 |
| Total other income | 6,496,698 | 6,676,569 |
The "revenues for assistant services to Group companies" originates from assistance and consultancy in administration and finance, payroll, commercial contract agreements and IT services provided by the Parent Company to the subsidiaries BasicItalia S.p.A., Basic Village S.p.A., Basic Trademark S.A., Superga Trademark S.A., Jesus Jeans S.r.l and Fashion S.r.l..
"Other income" in 2016 included a contribution of Euro 250 thousand for the co-branding operation with FCA Italy S.p.A. for the Panda K-Way, Euro 31 thousand for contributions to the Premium Berlin trade fair invoiced to the German licensee, Euro 95 thousand from co-branding operations and Euro 36 thousand of prior year income, in addition to minor amounts.
| FY 2016 | FY 2015 | |
|---|---|---|
| Communication contributions | 39,190 | 291,737 |
| Promotional expenses | 46,055 | 33,265 |
| Advertising | 404,969 | 411,801 |
| Total sponsorship and media costs | 490,214 | 736,803 |
The decrease of Euro 247 thousand principally concerned the reduced communication contributions granted to commercial licensees compared to the previous year.
| FY 2016 | FY 2015 | |
|---|---|---|
| Salaries and wages | 6,057,645 | 5,995,888 |
| Social security charges | 1,979,865 | 2,022,745 |
| Post-employment benefits | 384,462 | 421,430 |
| Total | 8,421,972 | 8,400,063 |
Personnel costs include all charges relating to the provision of employment services of BasicNet S.p.A.. The changes in the headcount during the year were as follows:
| Human Resources at December 31, 2016 |
Human Resources at December 31, 2015 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Category | Number | Average age | Number | Average age | ||||
| Male/Female Total Male/Female | Average | Male/Female | Total | Male/Female | Average | |||
| Executives | 15 / 8 | 23 | 46 / 49 | 47 | 13 / 8 | 21 | 47 / 48 | 47 |
| Managers | - / - | - | - / - | - | 1 / - | 1 | 53 / - | 53 |
| White collar |
56 / 104 | 160 | 36 / 38 | 37 | 52 / 100 | 152 | 37 / 39 | 38 |
| Blue collar |
1 / 2 | 3 | 36 / 44 | 41 | 1 / 2 | 3 | 35 / 43 | 40 |
| Total | 72 / 114 | 186 | 38 / 39 | 39 | 67 / 110 | 177 | 39 / 39 | 39 |
The average number of Employees in 2016 was 182, comprising 21 executives, 1 senior manager, 157 white-collar employees and 3 blue-collar employees.
The breakdown of service costs is presented in the table below:
| FY 2016 | FY 2015 | |
|---|---|---|
| Commercial expenses | 3,367,312 | 2,521,131 |
| Rental, accessory and utility expenses | 3,364,995 | 3,299,212 |
| Directors and Statutory Auditors emoluments | 2,892,952 | 2,857,821 |
| Doubtful debt provision | 500,678 | 180,000 |
| Sales services | 475,132 | 288,487 |
| Other general expenses | 3,597,430 | 3,191,832 |
| Total royalties passive |
14,198,499 | 12,338,483 |
"Commercial expenses" include costs related to the commercial activities, travel expenses and consulting costs for stylistic and graphic material and increased approx. Euro 800 thousand, related to additional consultancy for the development of new products and increased travel for new market development.
"Rental charges" principally relate to the offices of the company, owned by the subsidiary Basic Village S.p.A.
The company's remuneration policy, as well as Directors and Statutory Auditors emoluments for the offices held, pursuant to Article 78 of Consob Regulation No. 11971/97 and thereafter are reported in the Remuneration Report pursuant to Article 123-ter of the CFA (reported net of tax charges) which is available on the company's website www.basicnet.com/contenuti/datifinanziari/assembleeazionisti.asp, to which reference should be made.
"Sales services" include expenses for exporting samples in addition to "royalties' charges" principally relating to co-branding operations.
The "doubtful debt provision" of Euro 501 thousand follows an improved estimate of the risk of nonpayment of receivables due. The increase relates to credit positions with a number of licensees, whose contracts terminated during the year.
The account "other general expenses" includes legal and professional fees, bank charges, other taxes, consumption materials, hire charges, and corporate and other minor expenses. The increase is due to greater recourse to legal and professional consultants.
Depreciation of fixed assets includes depreciation on finance lease assets.
| FY 2016 | FY 2015 | |
|---|---|---|
| Amortisation | 1,791,566 | 1,753,275 |
| Depreciation | 382,172 | 321,006 |
| Total amortisation & depreciation | 2,173,738 | 2,074,281 |
The increase in the year reflects the investments made in previous years.
| FY 2016 | FY 2015 | |
|---|---|---|
| Interest on bank deposits | 136 | 187 |
| Intercompany interest income | 516,251 | 597,816 |
| Current account interest | (108,792) | (56,798) |
| Interest on medium/long term loans | (242,348) | (372,747) |
| Medium/long term loan charges | (47,093) | (42,690) |
| Other interest charges | (63,597) | (81,113) |
| Total financial income and charges | 54,557 | 44,655 |
| Exchange gains | 443,576 | 967,092 |
| Exchange losses | (308,031) | (642,877) |
| Net exchange gains/(losses) | 135,545 | 324,215 |
| Total financial income/(charges) | 190,102 | 368,870 |
"Intercompany interest income" derives from operations during the year and regulated through intercompany accounts, remunerated at market rates.
"Interest on medium/long-term loans" refers to the amortising loan obtained from UBI Banca in the second half of 2013 and the Intesa Sanpaolo loan obtained last year.
"Exchange gains realised" in 2016 amounted to Euro 325 thousand and "exchange losses realised" amounted to Euro 248 thousand. The translation of credit and debit balances at year-end resulted in the recognition of "non-realised exchange losses" of Euro 60 thousand and "non-realised exchange gains" of Euro 118 thousand.
The subsidiary Basic Properties B.V. approved in the year the distribution of a dividend to BasicNet of Euro 1.5 million, based on the dividends in turn received from the entirely held subsidiaries Superga Trademark S.A. and Basic Properties America Inc..
The account includes the gain from the sale of the 50% holding in AnziBesson Trademark S.r.l. to the Besson family.
Income taxes overall amounted to Euro 2.9 million, of which IRAP for Euro 0.5 million, IRES for Euro 2.8 million and other amounts for Euro 0.2 million, while also including the benefits related to the "Patent Box" regulation of Euro 0.6 million.
It should be noted that the benefit attributable to the application of the recent "Patent Box" regulation was limited to the part not subject to review by the Tax Agency and for which an application was presented within the terms established by the relative notices; it should also be noted that the Tax Agency undertook the "review activities in which it was established that BasicNet is within the scope of the subsidy, with the formal substance verified of the obligatory elements for access to the optional system and the application therefore declared admissible".
The reconciliation between the theoretical and actual rate is shown below:
| Dec. 31, 2016 | Dec. 31, 2015 | |||
|---|---|---|---|---|
| Ordinary rate applicable | 27.50% | 27.50% | ||
| Pre-tax result (current and deferred) | 10,584,619 | 16,312,647 | ||
| Theoretical tax on statutory result | 2,910,770 | 4,485,978 | ||
| Effect of increases (decreases) to the ordinary rate: non-deducible sales rep. expenses non-deductible (exempt) depreciation/amortisation vehicle management expenses prior year expenses/income non-deductible (exempt) exempt dividends other differences Assessable income |
471,128 16,385 235,067 25,364 (1,429,904) 272,280 10,174,939 |
384,806 16,034 258,307 (87,135) (5,130,000) 255,493 12,010,152 |
||
| Total current IRES | 2,798,108 | 3,302,792 | ||
| Effective rate Difference between theoretical and actual rate |
26.44% (1.06%) |
20.25% (7.25%) |
| Reconciliation current IRAP | Dec. 31, 2016 | Dec. 31, 2015 | ||
|---|---|---|---|---|
| Ordinary rate applicable | 3.90% | 3.90% | ||
| Assessable IRAP | 20,865,573 | 22,006,167 | ||
| Theoretical tax charge | 813,757 | 858,241 | ||
| Effect of increases (decreases) to the ordinary rate: - vehicle management expenses - prior year expenses/income non-deductible (exempt) - depreciation/amortisation for tax purposes - tax amnesty - other permanent differences - temporary differences on which deferred taxes have not been provisioned: Assessable IRAP restated |
11,113 475,313 (606,345) (8,188,990) 462,011 (25,000) 12,993,675 |
10,329 149,944 (606,345) (7,744,343) 31,866 (25,000) 13,822,618 |
||
| Effective tax | 506,753 | 539,082 | ||
| Effective rate Difference between theoretical and actual rate |
2.43% (1.47%) |
2.45% (1.45%) |
"Income taxes" include Euro 247 thousand against the provision of deferred taxes on differences between the book value and tax value of the assets/liabilities.
The 2016 Stability Law (Law 208/2015), published in the Official Gazette of December 30, 2015, introduced a reduction to the IRES rate from 27.5% to 24% from January 1, 2017. This change in the rate was already incorporated into the calculation of deferred taxes for the previous year, in line with paragraph 47 of IAS 12, which establishes the utilisation of the tax rates applicable in the year in which the asset shall be realised or the generating liability settled.
The breakdown of intangible assets at December 31, 2016 compared to the previous year-end and the movements during the year are reported in the table below:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Concessions, brands and similar rights | 8,367,231 | 8,365,117 | 2,114 |
| Other intangible assets | 3,341,519 | 3,361,995 | (20,476) |
| Intangible assets in progress | 362,436 | 354,525 | 7,911 |
| Industrial patents & intellectual property rights | 40,990 | 33,393 | 7,597 |
| Total intangible assets | 12,112,176 | 12,115,030 | (2,854) |
The changes in the original costs of the intangible assets were as follows:
| Concessions, brands, |
Other intangible | Intangible assets | Industrial | ||
|---|---|---|---|---|---|
| and similar rights |
assets | in progress | patents | Total | |
| Historic cost at 1.1.2015 |
12,401,068 | 26,476,600 | 268,377 | 53,347 | 39,199,392 |
| Additions | 117,049 | 1,556,486 | 354,525 | 27,655 | 2,055,715 |
| Reclass. | - | 268,377 | (268,377) | - | - |
| Historic cost at 31.12.2015 |
12,518,117 | 28,301,463 | 354,525 | 81,002 | 41,255,107 |
| Additions | 149,684 | 1,261,936 | 362,436 | 14,656 | 1,788,712 |
| Reclass. | - | 354,525 | (354,525) | - | - |
| Historic cost at 31.12.2016 |
12,667,801 | 29,917,924 | 362,436 | 95,658 | 3,043,819 |
The changes in the relative accumulated depreciation provisions were as follows:
| Concessions, brands, and similar rights |
Other intangible assets |
Intangible assets in progress |
Industrial patents |
Total | |
|---|---|---|---|---|---|
| Acc. Amort. at 1.1.2015 |
(4,009,683) | (23,335,133) | - | (41,986) | (27,386,802) |
| Amortisation | (143,317) | (1,604,335) | - | (5,623) | (1,753,275) |
| Acc. Amort. at 31.12.2015 |
(4,153,000) | (24,939,468) | - | (47,609) | (29,140,077) |
| Amortisation | (147,150) | (1,636,937) | - | (7,059) | (1,791,566) |
| Acc. Amort. at 31.12.2016 |
(4,300,570) | (23,576,405) | - | (54,668) | (30,930,643) |
| Concessions, brands, and similar rights |
Other intangible assets |
Intangible assets in progress |
Industrial patents |
Total | |
|---|---|---|---|---|---|
| Opening net book value at 1.1.2015 |
8,391,385 | 3,141,467 | 268,377 | 11,361 | 11,812,590 |
| Additions | 117,049 | 1,556,486 | 354,525 | 27,655 | 2,055,715 |
| Reclass. | - | 268,377 | (268,377) | - | - |
| Amortisation | (143,317) | (1,604,335) | - | (5,623) | (1,753,275) |
| Closing net book value at 31.12.2015 |
8,365,117 | 3,361,995 | 354,525 | 33,393 | 12,115,030 |
| Additions | 149,684 | 1,261,936 | 362,436 | 14,656 | 1,788,712 |
| Reclass. | - | 354,525 | (354,525) | - | - |
| Amortisation | (147,570) | (1,636,937) | - | (7,059) | (1,791,566) |
| Closing net book value at 31.12.2016 |
8,367,231 | 3,341,519 | 362,436 | 40,990 | 12,112,176 |
The changes in intangible assets during 2016 are shown in the table below:
At December 31, 2016, the intangible assets report investments of Euro 1.8 million, amortisation of approx. Euro 1.8 million; there were no significant disposals during the year.
The increase in "concession, brands and similar rights" is due to costs incurred for the registration of brands in new countries, for renewals and extensions and for the purchase of license software.
The brand K-Way has a book value of Euro 8.1 million at December 31, 2016. In view of the strategic positioning reached by the brand, where there is currently no predictable time frame for the generation of future cash flow streams, it is considered an intangible asset with indefinite useful life.
The impairment test on the book value of the brand was carried out in line with previous years, discounting the royalty net cash flows estimated from the brand in the period 2017-2021. For the years beyond the fifth year a terminal value was calculated on the net royalty cash flow of the fifth year, with a growth rate of 1.5%. These net cash flows were discounted at the weighted average cost of capital (WACC) equal to 6.0% (6.5% in 2015), determined with reference to the following parameters, taken from the principal financial information websites:
Following the impairment test, no write-down was required on the brand, whose value in use, in line with previous years, comfortably exceeded the book value.
The breakdown of "other intangible assets" is as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Software development | 3,322,297 | 3,334,861 | (12,564) |
| Other intangible assets | 19,222 | 27,134 | (7,912) |
| Total other intangible assets | 3,341,519 | 3,361,995 | (20,476) |
The account increased Euro 1.6 million, principally due to the implementation of new software programmes realised internally and decreased Euro 1.6 million due to the amortisation for the year.
The breakdown of plant, machinery and other assets at December 31, 2016 compared to the previous year is shown in the table below:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Plant and machinery | 52,508 | 56,895 | (4,387) |
| Industrial and commercial equipment | 94,994 | 63,166 | 31,828 |
| Other assets | 1,622,057 | 1,423,208 | 198,849 |
| Total plant, machinery and other assets | 1,769,559 | 1,543,269 | 226,290 |
The changes in the historical cost of plant, machinery and other assets were as follows:
| Plant and | Industrial & commercial |
|||
|---|---|---|---|---|
| machinery | equipment | Other assets | Total | |
| Historic cost at 1.1.2015 |
174,112 | 260,995 | 6,273,759 | 6,708,866 |
| Additions | 34,091 | 33,332 | 432,967 | 500,390 |
| Divestments | - | - | (3,642) | (3,642) |
| Historic cost at 31.12.2015 |
208,203 | 294,327 | 6,703,084 | 7,205,614 |
| Additions | 14,810 | 53,435 | 540,395 | 608,640 |
| Divestments | - | - | (2,457) | (2,457) |
| Historic cost at 31.12.2016 |
223,013 | 347,762 | 7,241,022 | 7,811,797 |
| Plant and | Industrial & commercial |
|||
|---|---|---|---|---|
| machinery | equipment | Other assets | Total | |
| Acc. Deprec. at 1.1.2015 |
(143,694) | (213,678) | (4,987,377) | (5,344,749) |
| Depreciation | (7,614) | (17,483) | (295,908) | (321,005) |
| Divestments | - | - | 3,409 | 3,409 |
| Acc. Deprec. at 31.12.2015 |
(151,308) | (231,161) | (5,279,876) | (5,662,345) |
| Depreciation | (19,197) | (21,607) | (341,368) | (382,172) |
| Divestments | - | - | 2,279 | 2,279 |
| Acc. Deprec. at 31.12.2016 |
(170,505) | (252,768) | (5,618,965) | (6,042,238) |
The changes in the relative accumulated depreciation provisions were as follows:
The changes in the plant and machinery are shown in the table below:
| Industrial & | ||||
|---|---|---|---|---|
| Plant and | commercial | |||
| machinery | equipment | Other assets | Total | |
| Opening net book value |
||||
| at 1.1.2015 | 30,418 | 47,317 | 1,286,382 | 1,364,117 |
| Additions | 34,091 | 33,332 | 432,967 | 500,390 |
| Divestments | - | - | (233) | (233) |
| Depreciation | (7,614) | (17,483) | (295,908) | (321,005) |
| Closing net book value |
||||
| at 31.12.2015 | 56,895 | 63,166 | 1,423,208 | 1,543,269 |
| Additions | 14,810 | 53,435 | 540,395 | 608,640 |
| Divestments | - | - | (178) | (178) |
| Depreciation | (19,197) | (21,607) | (341,368) | (382,172) |
| Closing net book value |
||||
| at 31.12.2016 | 52,508 | 94,994 | 1,622,057 | 1,769,559 |
This account "other assets" consist of:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| EDP | 505,362 | 448,697 | 56,665 |
| Furnishings and fittings | 308,909 | 297,296 | 11,613 |
| Transport vehicles | 63,487 | 11,060 | 52,427 |
| Other assets | 744,299 | 666,155 | 78,144 |
| Total other assets | 1,622,057 | 1,423,208 | 198,849 |
The investments in the year relate to the acquisition of furnishings and fittings for EDP for Euro 216 thousand, moulds for new products for Euro 161 thousand, plant for Euro 15 thousand and equipment and telephones of Euro 66 thousand and minor assets.
The account "other assets" includes the purchase cost of an IT collection comprising rare pieces which represents significant elements and representative of the IT revolution, in the 1970's and 1980's with the advent of the new personal computer. This collection is utilised in many events related to the promotion of the brands and logos of the Group. The account also includes the purchase cost of moulds for footwear, so that ownership is held in order to control the strategic stages of the production process utilised by the suppliers' of finished products.
The net book value of property, plant and equipment acquired according to the finance lease formula is reported below:
| Net value at December 31, 2016 |
Net value at December 31, 2015 |
||
|---|---|---|---|
| EDP | 61,810 | 79,470 | |
| Motor vehicles | 49,365 | 9,822 | |
| Total | 111,175 | 89,292 |
The net book value at December 31, 2016 of property, plant and equipment acquired according to the finance lease formula relates to EDP for approx. Euro 62 thousand and motor vehicles for approx. Euro 49 thousand.
The list of investments and changes during the year are shown in Attachment 1 to the explanatory notes:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Investments in: | |||
| - Subsidiaries | 35,754,488 | 35,754,488 | - |
| - Joint ventures | 465,000 | 490,000 | (25,000) |
| - Other companies | 128 | 128 | - |
| Total investments | 36,219,616 | 36,244,616 | (25,000) |
| Receivables: | |||
| - Joint Ventures | - | 90,000 | (90,000) |
| - Other receivables | 10,251 | 10,230 | 21 |
| Total financial receivables | 10,251 | 100,230 | (89,979) |
| Total investments & other financial assets | 36,229,867 | 36,344,846 | (114,979) |
Reference should be made to Attachment 1 for information on the book value of the investments in subsidiaries.
In line with the practice adopted by other large listed groups in Italy, BasicNet S.p.A. identifies in the negative differential between the share of net equity held in the subsidiary and its book value an indicator of an impairment for the investments of control in its financial statements. From this comparison, undertaken for all of the subsidiaries, it emerged the necessity to undertake an impairment test on the book value on the investment of the subsidiary BasicItalia S.p.A.
The test was undertaken comparing the book value of the investment with its value in use, determined through discounting the net cash flows from BasicItalia S.p.A. and its subsidiary, in the five year period 2017-2021, to the WACC (Note 19), deducting the total net debt of the sub-group. This impairment test did not result in the need for a write-down in the book value of the investment.
The book value of the subsidiary Basic Properties B.V., amounting to Euro 3.6 million at December 31, 2016, was unchanged compared to the previous year. The Dutch subsidiary, now only a sub-holding, in turn holds two controlling investments in Luxemburg companies owning the historic brands Kappa and Robe di Kappa and Superga, respectively Basic Trademark S.A. and Superga Trademark S.A.. For the purposes of the impairment test, the book value of the investment in the Dutch sub-holding was compared with the value in use of the brands held by the two subsidiaries, determined in accordance with the description at Note 19 of the consolidated financial statements. The impairment test did not give rise to any write-down.
The receivables from joint ventures in 2015 related to a shareholder loan in favour of AnziBesson Trademark S.r.l., with the investment in the company holding the Besson brand sold last December.
Other receivables refer to guarantee deposits.
The composition of the item is as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Finished products and goods for resale | 1,840,672 | 1,667,759 | 172,913 |
| Gross value | 1,840,672 | 1,667,759 | 172,913 |
| Inventory obsolescence provision | (1,032,775) | (893,275) | (139,500) |
| Total net inventories | 807,897 | 774,484 | 33,413 |
"Inventories" includes samples to be sold to licensees. Inventories are valued under the weighted average cost method and net of the obsolescence provision considered reasonable for a prudent valuation of inventories of prior year sample collections. The movements in the provision during the year were as follows:
| 2016 | 2015 | |
|---|---|---|
| Inventory obsolescence provision at 1.1 | 893,275 | 1,012,775 |
| Provisions in the year | 200,000 | 100,000 |
| Utilisations | (60,500) | (219,500) |
| Inventory obsolescence provision at 31.12 | 1,032,775 | 893,275 |
The utilisation of the provision relates to the disposal of the excess samples from previous years.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Trade receivables - Italy | 797,111 | 249,422 | 547,689 |
| Trade receivables - Abroad | 11,374,324 | 10,257,078 | 1,117,246 |
| Doubtful debt provision | (1,552,057) | (1,069,376) | (482,681) |
| Total trade receivables | 10,619,378 | 9,437,124 | 1,182,254 |
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Europe | 2,789,785 | 2,270,958 | 518,827 |
| The Americas | 1,289,954 | 858,504 | 431,450 |
| Asia and Oceania | 7,192,777 | 7,024,256 | 168,521 |
| Middle East and Africa | 101,808 | 103,360 | (1,552) |
| Total | 11,374,324 | 10,257,078 | 1,117,246 |
In particular, the breakdown of foreign receivables is as follows:
"Trade receivables" were written down to their realisable value through the doubtful debt provision, although the majority of the receivables are secured by bank guarantees.
The provision at the end of the year represents a prudent estimate of the risk. The movements in the doubtful debt provision during the year were as follows:
| 2016 | 2015 | |
|---|---|---|
| Doubtful debt provision at 1.1 | 1,069,376 | 935,799 |
| Utilisation for administration procedures and other losses |
(17,997) | (46,423) |
| Provisions in the year | 500,678 | 180,000 |
| Doubtful debt provision at 31.12 | 1,552,057 | 1,069,376 |
The utilisation of the provision relates to the write-off made on the certainty of the receivable irrecoverability and consequent tax deductibility of the loss. The increase relates to credit positions with a number of licensees, whose contracts terminated during the year.
The book value of receivables, all due within one year, is in line with their fair value.
The aging of the receivables is as follows:
| (In Euro thousands) | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|
| Receivables not overdue and not written down |
7,375 | 7,606 |
| Receivables written down, net of provision | 2,792 | 162 |
| Overdue and not written down | 453 | 1,669 |
| Total | 10,620 | 9,437 |
The overdue receivables and not written down include one debtor overdue between 0-6 months, which are expected to be settled in the near future.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Receivables from Group companies | 68,130,795 | 64,944,986 | 3,185,809 |
| Tax receivables | 884,619 | 924,048 | (39,429) |
| Other receivables | 560,264 | 1,864,080 | (1,303,816) |
| Total other current assets | 69,575,678 | 67,733,114 | 1,842,564 |
The breakdown of "receivables from Group companies" is as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Trade receivables | |||
| BasicItalia S.p.A. | 704,412 | 543,235 | 161,177 |
| Superga Trademark S.A. | 20,833 | 20,833 | - |
| Basic Trademark S.A. | 458,334 | 458,334 | - |
| Basic Properties B.V. | 2,188,504 | 2,047,957 | 140,547 |
| Anzi Besson Trademark S.r.l. | - | 14,427 | (14,427) |
| Jesus Jeans S.r.l. | 1,405 | 8,194 | (6,789) |
| Total trade receivables | 3,373,488 | 3,092,980 | 280,508 |
| Financial receivables | |||
| BasicItalia S.p.A. | 33,767,710 | 38,782,155 | (5,014,445) |
| Basic Village S.p.A. | 4,136,452 | 2,207,223 | 1,929,229 |
| Superga Trademark S.A. for loan | 13,921,782 | 17,240,476 | (3,318,694) |
| Superga Trademark S.A. | 4,094,209 | 1,238,547 | 2,855,662 |
| Basic Trademark S.A. | 6,134,001 | 1,075,739 | 5,058,262 |
| BasicRetail S.r.l. | 2,703,153 | 1,307,866 | 1,395,287 |
| Total financial receivables | 64,757,307 | 61,852,006 | 2,905,301 |
| Total | 68,130,795 | 64,944,986 | 3,185,809 |
Financial receivables originate from loans and advances for the cash needs of the subsidiaries within the centralised treasury management; these receivables are at market interest rates and vary in accordance with the financial cash flow needs within the Group.
No receivables have a residual duration of above 5 years.
The account "tax receivables" includes withholdings on royalties totalling Euro 533 thousand and Tax reimbursements due of Euro 277 thousand.
The account "other receivables" includes the premium paid to the insurance company against the Directors Termination Indemnities for the Chairman of the Board of Directors of Euro 500 thousand, as approved by the Shareholders' Meeting for the 2016-2018 three-year mandate, as described in the Remuneration Report to which reference should be made and other minor amounts.
The table below shows the breakdown of the account:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Prepaid expenses on 2017 collections | 3,571,988 | 3,578,634 | (6,646) |
| Royalty expenses | 1,148 | 17,649 | (16,501) |
| Telecommunications costs, new utilities | 1,500 | 8,418 | (6,918) |
| Insurance | 35,579 | 59,177 | (23,598) |
| Assistance and maintenance contract | 125,031 | 53,972 | 71,059 |
| Rentals, leases, hire and other | 218,857 | 234,418 | (15,561) |
| Total prepayments | 3,954,103 | 3,952,268 | 1,835 |
Prepaid costs include creative personnel costs, sample costs for collections for which the corresponding sales revenues have not been realised and costs for trade fairs and exhibitions for future collections and the relative sales meetings.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Bank and postal deposits | 1,225,660 | 1,146,435 | 79,225 |
| Cash and cash equivalents on hand | 11,315 | 12,808 | (1,493) |
| Total cash and cash equivalents | 1,236,975 | 1,159,243 | 77,732 |
"Bank deposits" refer to temporary current account balances principally due to receipts from clients.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Share capital | 31,716,673 | 31,716,673 | - |
| Treasury shares | (11,889,813) | (8,822,881) | (3,066,932) |
| Legal reserve | 5,066,738 | 4,463,225 | 603,514 |
| Treasury shares in portfolio reserve | 11,889,813 | 8,822,881 | 3,066,932 |
| Other reserves: | |||
| - cash flow hedge reserve |
(49,364) | (60,654) | 11,290 |
| - remeasurement reserve for defined |
|||
| benefit plans (IAS 19) | (69,263) | (61,963) | (7,300) |
| - retained earnings |
42,699,624 | 39,921,710 | 2,777,914 |
| Net profit | 7,421,259 | 12,070,269 | (4,649,010) |
| Total Shareholders' Equity | 86,785,667 | 88,049,260 | (1,263,593) |
The account includes:
The share capital of BasicNet S.p.A. amounted to Euro 31,716,673.04 (divided in 60,993,602 ordinary shares) of Euro 0.52 each fully paid in.
In May 2016, as approved by the Shareholders' AGM of BasicNet S.p.A. of April 28, 2016, in relation to the allocation of the 2015 net profit, a dividend of Euro 0.1 per share was distributed to each of the ordinary shares in circulation, for a total pay-out of approx. Euro 5.6 million.
Based on the share buy-back programme, at the reporting date the Company held 5,424,240 shares, equal to 8.89% of the share capital, for a total investment of approx. Euro 11.9 million. The weighted average number of shares outstanding in the year was 56,029,468.
The other gains and losses recorded directly in equity in accordance with IAS 1 are reported below and recognised to the Comprehensive Income Statement.
| (In Euro thousands) | Dec. 31, 2016 | Dec. 31, 2015 | Changes |
|---|---|---|---|
| Effective part of the Gains/losses on cash flow hedge instruments |
15 | (45) | 60 |
| Re-measurement of post-employment benefits (IAS 19) (*) |
(10) | 44 | (54) |
| Tax effect relating to the Other items of the comprehensive income statement |
(1) | - | (1) |
| Total other gains/(losses), net of tax effect | 4 | (1) | 5 |
(*) items which may not be reclassified to the profit and loss account
| (In Euro thousands) | December 31, 2016 | December 31, 2015 | ||||
|---|---|---|---|---|---|---|
| Gross value |
Tax Charge/ Benefit |
Net value |
Gross value |
Tax Charge/ Benefit |
Net value |
|
| Effective part of Gains/losses on cash flow hedge instruments |
15 | (4) | 11 | (45) | 12 | (33) |
| Re-measurement of post-employment benefits (IAS 19) (*) |
(10) | 3 | (7) | 44 | (12) | 32 |
| Total other gains/(losses), net of tax effect |
5 | (1) | 4 | (1) | - | (1) |
(*) items which may not be reclassified to the profit and loss account
The statement on the availability of the reserves at December 31, 2016 is show below:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | ||
|---|---|---|---|---|
| Share capital | 31,716,673 | 31,716,673 | - | |
| Treasury shares Share premium reserve |
(11,889,813) - |
(8,822,881) - |
(3,066,932) - |
|
| Legal reserve IAS adjustment reserve Reserve for treasury shares in portfolio Ordinary reserve Extraordinary reserve |
B | 5,066,738 - 11,889,813 - - |
4,463,225 - 8,822,881 - - |
603,514 - 3,066,932 - - |
| Other reserves: | ||||
| Cash flow hedge reserve | D | (49,364) | (60,654) | 11,290 |
| Remeasuring reserve of employee defined benefit plans (IAS 39) |
D | (69,263) | (61,963) | (7,300) |
| Retained earnings Exchange gains reserve |
A,B,C | 42,699,624 - |
39,921,710 - |
2,777,914 - |
| Net Profit | 7,421,259 | 12,070,269 | (4,649,010) | |
| Total | 86,785,667 | 88,049,260 | (1,263,593) |
Key: A: for share capital increase, B: for coverage of losses - C: for distribution to shareholders - D: non utilisable
| (In Euro thousands) | 31/12/2015 | New loans | Repayments | 31/12/2016 | Short-term portion |
Medium/long-term portion |
|---|---|---|---|---|---|---|
| "Intesa Loan" | 13,125 | - | 3,750 | 9,375 | 3,750 | 5,625 |
| "BNL Loan" | - | 7,500 | - | 7,500 | 1,250 | 6,250 |
| "UBI Banca Loan" | 2,678 | - | 2,678 | - | - | - |
| Balance | 15,803 | 7,500 | 6,428 | 16,875 | 5,000 | 11,875 |
The changes in the medium/long-term loans during the year are shown below:
The maturity of the long-term portion of loans is highlighted below:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Loans: | |||
| - "Intesa Loan" | 5,625,000 | 9,375,000 | (3,750,000) |
| - "BNL Loan" | 6,250,000 | - | 6,250,000 |
| - Other lenders | 85,323 | 67,672 | 17,651 |
| Total loans | 11,960,323 | 9,442,672 | 2,517,651 |
The "Intesa Loan" was issued in April 2015 by Intesa Sanpaolo S.p.A. for Euro 15 million of four-year duration, repayable in quarterly instalments at a quarterly Euribor rate plus 185 basis points. In July 2015, the variable Euribor rate was converted (under an interest rate swap) into a fixed rate of 0.23% annually. At December 31, 2016, the Superga loan was repaid for Euro 3.8 million, with a residual balance of Euro 9.4 million, of which Euro 3.8 million short-term. The loan is supported by a pledge on Superga Trademark S.A. shares.
The contractual conditions do not include financial covenants. The loan contract stipulates the maintenance of a number of ownership conditions concerning BasicWorld S.r.l., the majority shareholder of BasicNet S.p.A., and BasicNet S.p.A., and in particular:
The "BNL Loan" was disbursed in November 2016 for Euro 7.5 million; it has six-year duration and is repayable in quarterly instalments at a quarterly Euribor rate increased by 95 basis points. No financial covenants are stipulated, although the maintenance of a number of ownership conditions are required concerning BasicNet S.p.A., in particular that the overall investment (direct or indirect) of BasicWorld S.r.l. in BasicNet S.p.A. should not reduce below 36%. The loan is supported by a second level mortgage on the BasicVillage building in Turin and a first level mortgage on the adjacent building, acquired at the end of the year.
"Payables to other lenders" relate to the accounting of the capital line of finance leases recorded in the accounts under the finance method as per IAS 17.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Medium/long term loans: | |||
| - due within 5 years | 10,937,500 | 9,375,000 | 1,562,500 |
| - due beyond 5 years | 937,500 | - | 937,500 |
| Total medium/long term loans | 11,875,000 | 9,375,000 | 2,500,000 |
| Leasing payables | 85,323 | 67,672 | 17,651 |
| Total leasing payables (maturity within 5 years) | 85,323 | 67,672 | 17,651 |
| Total loans | 11,960,323 | 9,442,672 | 2,517,651 |
For completeness of information we provide details of the medium/long-term loans by maturity.
The account includes the post-employment benefits for employees of Euro 1.3 million and the termination indemnities of Directors of Euro 0.3 million.
The changes in the year of the post-employment benefit liability were as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | |||||
|---|---|---|---|---|---|---|
| Defined benefit plans |
Defined contrib. plans |
Total | Defined benefit plans |
Defined contrib. plans |
Total | |
| Change in the balance sheet: | ||||||
| Net liabilities recognised at begin. of year | 1,322,988 | - | 1,322,988 | 1,388,259 | - | 1,388,259 |
| Interest | 24,057 | - | 24,057 | 25,384 | - | 25,384 |
| Pension cost, net of withholdings | (22,057) | 413,041 | 390,984 | 21,386 | 390,613 | 411,999 |
| Benefits paid | (41,581) | - | (41,581) | (53,873) | - | (53,873) |
| Payments to the INPS treasury fund | - | (147,443) | (147,443) | - | (104,013) | (104,013) |
| Payments to other supp. pension fund | - | (265,598) | (265,598) | - | (286,600) | (286,600) |
| - Actuarial gains/(losses) | 10,067 | - | 10,067 | (43,559) | - | (43,559) |
| Internal transfers to the Group | (12,372) | - | (12,372) | (14,609) | - | (14,609) |
| Net liabilities recognised in the accounts | 1,281,102 | - | 1,281,102 | 1,322,988 | - | 1,322,988 |
| Change in the income statement: | ||||||
| Interest | 24,057 | - | 24,057 | 25,383 | - | 25,383 |
| Pension Cost | (18,267) | 413,041 | 394,774 | 24,617 | 390,613 | 415,230 |
| Actuarial gains/(losses) | - | - | - | - | - | - |
| Total charges/(income) for post employment benefits |
5,790 | 413,041 | 418,831 | 50,000 | 390,613 | 440,613 |
The account "employee benefits" includes the present value of the liabilities of the company in accordance with Article 2120 of the Civil Code. Based on the regulatory changes in 2007, the sums matured prior to January 1, 2007 to employees are recognised as defined benefit plans in accordance with IAS 19 – Employee benefits; those matured subsequent to this date are on the other hand recognised as defined contribution plans in accordance with the same standard.
Within the Company there are no other plans other than defined benefit plans. The actuarial valuation of the Post-Employment Benefit is prepared based on the "matured benefits" method through the Projected Unit Credit Method in accordance with IAS 19. Under this method the valuation is based on the average present value of the pension obligations matured based on the employment service up to the time of the valuation, without projecting the remuneration of the employee in accordance with the regulatory modifications introduced by the Pension Reform.
The actuarial model for the measurement of the post-employment benefit is based on various assumptions of a demographic and financial nature. The principal assumptions of the model concerning the actuarial valuations relating to personnel costs are:
| Dec. 31, 2016 | Dec. 31, 2015 | |
|---|---|---|
| discount rate | 1.79% | 2.25% |
| inflation rate: | 1.50% | 1.50% for 2016 |
| 1.80 for 2017 | ||
| 1.70% for 2018 | ||
| 1.60% for 2019 | ||
| 2.00% from 2020 onwards | ||
| annual increase in post employment benefit |
2.625% | 2.625% for 2016 |
| 2.850% for 2017 | ||
| 2.775% for 2018 | ||
| 2.700% for 2019 | ||
| 3.00% from 2020 onwards | ||
| annual increase in salaries: | 1.00% | Up to 10 years service: 3.00% |
| Above 10 years service: 1.00% |
The change in the annual discount rate reflects the decrease in the yields of the "corporate bonds" of the basket utilised (Iboxx Eurozone Corporate) at the balance sheet date.
The sensitivity analysis carried out on the basis of the following variables: 1) inflation rate +0.25%/- 0.25%, 2) discount rate +0.25%/-0.25%, 3) turnover rate +1%/-1% shows non-material impacts of less than Euro 25 thousand.
The breakdown is shown below:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Net deferred tax asset (liability) | 308,095 | 60,135 | 247,960 |
| Total deferred tax liabilities | 308,095 | 60,135 | 247,960 |
| Dec. 31, 2016 | Dec. 31, 2015 | ||||||
|---|---|---|---|---|---|---|---|
| (in thousands of Euro) | Amount | Amount | |||||
| of | of | ||||||
| temporary | Rate | Tax | temporary | Rate | Tax | Changes | |
| differences | % | effect | differences | % (*) | effect | 2016/2015 | |
| Deferred tax assets: - Excess doubtful debt provision |
|||||||
| not deductible | (1,070) | 24.00% | (257) | (665) 27.50%-24,00% | (160) | (97) | |
| - Inventory obsolescence provision | (1,033) | 24.00% | (276) | (893) 27.50%-24,00% | (247) | (28) | |
| - ROL surplus | (456) | 24.00% | (109) | (455) 27.50%-24,00% | (125) | 16 | |
| - Charges temporarily | |||||||
| non-deductible | (178) | 24.00% | (43) | (704) 27.50%-24,00% | (194) | 151 | |
| - Effect IAS 39 – financial |
(67) | 24.00% | (16) | (82) 27.50%-24,00% | (20) | 4 | |
| instruments | |||||||
| Total | (2,804) | (701) | (2,799) | (746) | 45 | ||
| Deferred tax liabilities: | |||||||
| - Dividends not received | 75 | 24.00% | 18 | - | 27.50%-24,00% | - | 18 |
| - Prudent exchange differences, net | 59 | 24.00% | 14 | (4) 27.50%-24,00% | (1) | 15 | |
| - Amortisation/Depreciation | |||||||
| tax basis | 3,488 | 27.90% | 973 | 2,881 | 31.40%-27,90% | 804 | 169 |
| - Effect IAS 19 – Employee | 15 | 24.00% | 4 | 12 | 27.50%-24,00% | 3 | 1 |
| Benefits | |||||||
| Total | 3,637 | 1,009 | 2,889 | 806 | 185 | ||
| Net deferred tax liability (asset) | 308 | 60 | |||||
| Deferred tax asset relating to fiscal | |||||||
| losses | - | - | - | ||||
| Deferred tax charge/(income) | |||||||
| as per financial statements | 308 | - | 60 |
The deferred tax assets and liabilities recognised and their impact are reported in the table below:
(*) The differing rates concern the adjustment of the IRES rate applicable from 2017, on the temporary differences to be realised or settled subsequently to 2016 (Note 18).
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Guarantee deposits | 759,414 | 876,210 | (116,796) |
| Total other non-current liabilities | 759,414 | 876,210 | (116,796) |
The "guarantee deposits" include the guarantees received from licensees (in place of bank or corporate guarantees), to cover the minimum royalties guaranteed contractually. The movement concerns the agreement of new contract licenses and a decrease of Euro 216 thousand for the utilisation to cover overdue receivables.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Bank payables due within one year: | |||
| - short-term portion of medium/long-term loans | 5,000,000 | 6,428,575 | (1,428,575) |
| - bank overdrafts and bills | 6,001,204 | 2,000,000 | 4,001,204 |
| - interest expense on loans | 55,803 | 84,006 | (28,203) |
| Total bank payables | 11,057,007 | 8,512,581 | 2,544,426 |
The average interest rates for BasicNet S.p.A. were:
| Dec. 31, 2016 | Dec. 31, 2015 | |
|---|---|---|
| cash advances | 0.69% | 1.05% |
| medium-term loan | 1.44% | 2.40% |
"Bank payables" include the short-term portion of loans, outlined at Note 28 and the relative interest matured and to be settled the following January.
Reference should be made to the Directors' Report for the changes in the net financial positions.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Trade payables - Italy | 3,746,535 | 3,701,963 | 44,572 |
| Trade payables - Foreign | 1,011,091 | 660,729 | 350,362 |
| Total trade payables | 4,757,626 | 4,362,692 | 394,934 |
"Trade payables" are all due in the short-term period.
In particular, the breakdown of foreign suppliers is as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Europe | 260,164 | 151,894 | 108,270 |
| The Americas | 43,455 | 46,795 | (3,340) |
| Asia and Oceania | 697,770 | 458,040 | 239,730 |
| Middle East and Africa | 9,702 | 4,000 | 5,702 |
| Total | 1,011,091 | 660,729 | 350,362 |
At the date of the present report there are no initiatives for the suspension of supplies, payment injunctions or executive actions by creditors against BasicNet S.p.A.. No interest is charged on trade payables which are normally settled between 30 and 120 days. The carrying value of trade payables approximates their fair value.
The breakdown of this account is shown in the following table:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Tax payables: | |||
| IRES | 1,210,492 | 5,580,084 | (4,369,592) |
| Separate IRES | - | 13,784 | (13,784) |
| IRAP | - | 301,519 | (301,519) |
| Withholding taxes | 9,752 | 7,770 | 1,982 |
| VAT | 13,221,367 | 7,968,879 | 5,252,488 |
| Employee contributions | 294,475 | 308,055 | (13,580) |
| Total tax payables | 14,736,086 | 14,180,091 | 555,995 |
The "IRES" and "IRAP" accounts relate to payables in the year.
The VAT payable is consequent of the transfers of balances by the companies within the Group VAT consolidation. The Group VAT payable at December 31, 2016 was settled by the approval date of these financial statements.
The "Non-recurring tax charge" was fully settled during the year.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Payables to Group companies | 1,159,392 | 1,077,590 | 81,802 |
| Other payables | 2,646,478 | 2,792,354 | (145,876) |
| Accrued expenses | 271,313 | 250,123 | 21,190 |
| Total other current liabilities | 4,077,183 | 4,120,067 | (42,884) |
"Other payables" at December 31, 2016 principally include payables to social security institutions of Euro 502 thousand for the year 2016 and paid in 2017, employee, consultant and director payables of approx. Euro 1.5 million, which include vacation days matured at December 31, 2016 and other items of Euro 662 thousand. All payables are due within one year.
The "accruals" refer to employee costs for the 14th month of the year.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Basic Village S.p.A with sole shareholder |
77,417 | 63,256 | 14,161 |
| BasicNet Asia Ltd. | 256,178 | 198,987 | 57,191 |
| Fashion S.r.l | 6,199 | 4,481 | 1,718 |
| Basic Properties America Inc. | 819,598 | 810,866 | 8,732 |
| Total | 1,159,392 | 1,077,590 | 81,802 |
The breakdown of "Payables to Group companies", entirely of a commercial nature, are shown below:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Royalties | 182,732 | 200,611 | (17,879) |
| Other income deferred to following year | - | 250,000 | (250,000) |
| Total deferred income | 182,732 | 450,611 | (267,879) |
"Deferred income" for royalties refer to invoicing for revenues which will mature in the following year. "Other income" in the previous year included a contribution for the co-branding operation with FCA Italy S.p.A. for the construction of the Panda K-Way, which concluded in the year.
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Derivative financial instruments | 67,064 | 82,071 | (15,007) |
| Total | 67,064 | 82,071 | (15,007) |
The account at December 31, 2016 includes the adjustments to the market value of the interest rate hedging operations on the "Intesa Loan", which converted the variable Euribor quarterly rate into a fixed annual rate of 0.23% (cash flow hedge), in addition to a spread of 185 basis points.
An equity reserve was recorded of Euro 49 thousand, net of the tax effect.
In the case of the Interest Rate Swap (IRS) agreed by the Company, the specific hedge of the variable cash flow realised at market conditions, through the signing of the fix/flo IRS perfectly hedges the item to which the original cash flows stem, as in this case, and continues to be effective.
The details of the guarantees given are as follows:
| Dec. 31, 2016 | Dec. 31, 2015 | Changes | |
|---|---|---|---|
| Unsecured guarantees: | |||
| - Surety given on behalf of subsidiaries - Other guarantees |
52,200,000 - |
43,750,000 86,756 |
8,450,000 (86,756) |
| Total | 52,200,000 | 43,836,756 | 8,363,244 |
The sureties given on behalf of the subsidiaries refer for Euro 6.9 million to the guarantee given to the Unicredit Group on behalf of Basic Village S.p.A. against the loan granted in 2007 for the purchase of the building, guaranteed also by a first level mortgage on the building, for Euro 4.1 million to the guarantee given in 2008 by Intesa Sanpaolo S.p.A. on behalf of BasicItalia S.p.A. against 50% of the mortgage loan granted for the purchase of the building, Euro 6.5 million of a surety issued by a leading bank in guarantee of contractual commitments for a sponsorship contract and for the remainder, Euro 45.3 million, guarantees given on behalf of BasicItalia S.p.A., to various credit institutions, to guarantee the commercial credit lines.
This referred at December 31, 2016 to the joint commitments which BasicNet S.p.A. has with Basic Village S.p.A. and BasicItalia S.p.A. against the sureties given to the Turin Tax Administration following the request for reimbursement on VAT receivables within the Group VAT consolidation.
The shares of the subsidiary Superga Trademark S.A. are subject to a pledge in favour of Intesa Sanpaolo S.p.A. in guarantee of the loan issued in April 2015.
The principal risks and uncertainties of the activities of the Company and of the Group and the activities undertaken to reduce them or avoid them, which are undertaken at Group level, are described in the Directors' Report.
The financial instruments of BasicNet S.p.A. include:
It is recalled that the Company and the Group only subscribes to cash flow hedges, to hedge against interest and currency risks.
In accordance with the requirements of IFRS 7 in relation to financial risks, the types of financial instruments present in the financial statements, with indication of the valuation criteria applied, are reported below:
| (In Euro thousands) | Financial instruments at fair value recorded through: |
Financial instruments at amortised cost |
Book value at 31.12.2016 |
|
|---|---|---|---|---|
| P&L Shareholders' Equity |
||||
| Assets: | ||||
| Trade receivables | - | - | 10,619 | 10,619 |
| Other current assets | - | - | 69,576 | 69,576 |
| Derivative financial instruments | - | - | - | - |
| Liabilities: | ||||
| Medium/long-term loans | - | - | 11,960 | 11,960 |
| Trade payables | - | - | 4,758 | 4,758 |
| Other current liabilities | - | - | 4,077 | 4,077 |
| Derivative financial instruments | - | 67 | - | 67 |
The financial risk factors, identified in IFRS 7 – Financial instruments: additional disclosures, are described below:
The Company is exposed to the risk of fluctuations of commodity prices relating to raw materials (wool, cotton, rubber, synthetic fibre etc.) incorporated in the sample collections acquired on international markets, for resale to the licensees.
The Company does not hedge these risks as not directly dealing with raw materials but only finished products and the fluctuations can be transferred on to the final sales price.
BasicNet S.p.A. has subscribed the majority of its financial instruments in Euro which corresponds to its functional and presentation currency. Operating on the international market the Company is also exposed to fluctuations in exchange rates, principally the US Dollar against the Euro.
In 2016, exchange gains were recorded of Euro 77 thousand, while unrealised exchange gains were recorded of Euro 59 thousand, for a net exchange gain of Euro 136 thousand (Note 15).
The Company undertakes hedging of the currency risks at Group level.
The composition of the gross financial debt between fixed and variable interest rates at December 31, 2016 is shown below:
| Dec. 31, 2016 | % | Dec. 31, 2015 | % | |
|---|---|---|---|---|
| Fixed rate | 15,432,006 | 67.0% | 15,183,392 | 84.6% |
| Variable rate | 7,585,323 | 33.0% | 2,771,862 | 15.4% |
| Gross debt | 23,017,329 | 100.00% | 17,955,254 | 100.00% |
The interest rate fluctuation risks of the medium-term "Intesa Loan" was hedged with conversion of the variable rate into fixed rates; as described in Note 37 on the remaining part of the debt the Company is exposed to currency risk.
The interest on the short-term credit lines are on an average 0.68% in accordance with the type of lending, as illustrated in Note 32.
Where at December 31, 2016 the interest rate on long/term loans at that date were 100 basis points higher (or lower) compared to the actual rates, there would be a higher financial charges (lower), before the tax effect, respectively of Euro +111 thousand and Euro -111 thousand.
The doubtful debt provision (Note 23) which includes provisions against specific credit positions and a general provision on receivables not covered by guarantees, represents approx. 12.75% of trade receivables at December 31, 2016.
Reference should to the Explanatory Notes of the consolidated financial statements.
| (in Euro thousands) | Future interest income/ |
Contractual | From 1 to 5 | Beyond five | ||
|---|---|---|---|---|---|---|
| Book value | (expense) | cash flows | Within 1 year | years | years | |
| "BNL Loan" | 7,500 | 150 | 7,650 | 1,295 | 5,100 | 1,255 |
| "Intesa Loan" | 9,375 | 272 | 9,647 | 3,918 | 5,729 | - |
| Lease payables | 85 | 4 | 89 | 45 | 44 | - |
| Total financial liabilities | 16,960 | 426 | 17,386 | 5,258 | 10,873 | 1,255 |
The table below illustrates the cash flow timing of payments on medium/long-term debt:
The risk that the loans within the company contain clauses (covenants) which allow the counterparties to request the creditor on the occurrence of certain events or circumstances the immediate repayment of the sums granted and not yet due, generating a liquidity risk.
There are no covenants on the loans in place.
The transactions undertaken by BasicNet S.p.A. with the companies belonging to the Group in the ordinary management and regulated at market conditions were:
The income statement effects deriving from these transactions are summarised as follows:
| BasicNet Group companies | Direct sales | Other income |
Royalty income |
Financial income |
Dividends | Total |
|---|---|---|---|---|---|---|
| BasicItalia S.p.A with sole shareholder |
2,004,199 | 251,200 | 6,344,739 | 221,535 | - | 8,821,673 |
| Basic Trademark S.A. | - | 5,500,000 | - | - | - | 5,500,000 |
| Superga Trademark S.A. | - | 250,000 | - | 294,117 | - | 544,117 |
| Basic Properties B.V. | - | - | - | - | 1,500,000 | 1,500,000 |
| Basic Village S.p.A with sole shareholder |
- | 50,000 | - | 598 | - | 50,598 |
| BasicNet Asia Ltd. | 19,130 | - | - | - | - | 19,130 |
| Jesus Jeans S.r.l. with sole shareholder |
- | 5,000 | - | - | - | 5,000 |
| Fashion S.r.l. | - | 1,500 | - | - | - | 1,500 |
| Total | 2,023,329 | 6,057,700 | 6,344,739 | 516,250 | 1,500,000 | 16,442,018 |
| BasicNet Group companies | Cost of sales |
Cost per sponsor |
Personnel costs |
Selling, general and administrative costs, royalties expenses |
Financial charges |
Total |
|---|---|---|---|---|---|---|
| Basic Village S.p.A with sole shareholder |
- | - | - | 1,992,897 | - | 1,992,897 |
| BasicNet Asia Ltd. | - | - | - | 899,087 | 899,087 | |
| BasicItalia S.p.A with sole shareholder |
52,395 | 33,080 | - | 125,820 | - | 211,295 |
| BasicRetail S.r.l. with sole shareholder |
- | - | - | 74,926 | - | 74,926 |
| Total | 52,395 | 33,080 | - | 3,092,730 | - | 3,178,205 |
| Investments (Note 21) |
Receivables (Note 25) |
Payables (Note 36) |
Revenues (Note 41) |
Costs (Note 41) |
|
|---|---|---|---|---|---|
| Subsidiaries | 35,754,489 | 68,130,795 | 1,153,193 | 16,440,518 | 3,178,205 |
| Interests in joint ventures: | 465,000 | - | 6,199 | 1,500 | - |
| Remuneration of Boards and Senior Executives and other related parties |
- | - | - | - | 4,130,181 |
| Total | 36,219,489 | 68,130,795 | 1,159,392 | 16,442,018 | 7,308,386 |
A breakdown of the transactions with related parties with reference to the note to which they refer for the year 2016 is shown below:
The remuneration concerns emoluments and all other payments, pension-related or social security deriving from the role of Director or Statutory Auditor in BasicNet S.p.A. and the other companies within the consolidation scope.
In relation to the other related parties, we highlight the legal consulting activities undertaken by Studio Legale Pavesio e Associati, of the Director Carlo Pavesio and the consultancy undertaken by Pantarei S.r.l. in which the Director Alessandro Gabetti Davicini is Sole Director and of Studio Boidi & Partners, of which the Chairman of the Board of Statutory Auditors is Massimo Boidi. These transactions, not material compared to the overall values, were at market conditions.
The collections owned by BasicNet S.p.A., which are utilised for media events, shows, press gatherings together with the Brands and/or products of the Group, are subject to a renewable put and call agreement with BasicWorld S.r.l, at a price equal to the costs incurred for their acquisition, in addition to interest. This agreement was signed based on the eventual interest of BasicNet S.p.A. to sell this equipment to guarantee the complete recovery of the costs incurred, including financial charges, utilising in the meantime the benefits which derive from such communication instruments for their brands and/or products and, by BasicWorld S.r.l., of the purchase, to avoid that such a collection which would be lost.
Pursuant to Consob Communication DEM/6064293 of July 28, 2006, we report that there were no nonrecurring significant operations during the year.
The BasicNet Group is involved in some legal disputes of a commercial nature which are not expected to give rise to significant liabilities.
Other disputes are described in the Explanatory Notes in the consolidated financial statements (Note 48).
For the Board of Directors
Marco Daniele Boglione
| Name/Registered office/ Share capital |
Share capital | Amount of the net equity |
Profit (loss) for the year |
Quota held directly |
Quota held indirectly |
Pro quota net equity |
Book value |
|---|---|---|---|---|---|---|---|
| SUBSIDIARY COMPANIES | |||||||
| BASICITALIA S.p.A. WITH SOLE SHAREHOLDER Strada della Cebrosa, 106 10156 TURIN Share Capital Euro 7,650,000 |
7,650,000 | 12,204,524 | (628,648) | 100.00 | - | 12,204,524 | 31,599,725 |
| BASICNET ASIA LTD. 15 floor, Linkchart Centre No.2 Tai Yip Street Kwun Tong, Kowloon HONG KONG |
|||||||
| Share capital HKD 10,000. | 1,223 | 378,303 | 65,539 | 100.00 | - | 378,303 | 927 |
| BASICRETAIL S.r.l. WITH SOLE SHAREHOLDER Strada della Cebrosa, 106 10156 TURIN Share capital Euro 10,000 |
10,000 | 1,068,842 | 299,636 | - | 100.00 | - | - |
| BASIC PROPERTIES B.V. Herikerbergweg 200 – LunArena – Amsterdam Zuidoost THE NETHERLANDS Share capital Euro 18,160 |
18,160 | 6,359,132 | 1,692,115 | 100.00 | - | 6,359,132 | 3,657,747 |
| BASIC PROPERTIES AMERICA, INC. c/o Corporation Service Company 11 S 12th Street - PO BOX 1463 – Richmond VA 23218 – U.S.A. Share capital USD 8,469,157.77 |
8,034,690 | 6,943,686 | 627,956 | - | 100.00 | - | - |
| BASIC TRADEMARK S.A. 42-44 Avenue de la Gare L-1610 LUXEMBOURG Share Capital Euro 1,250,000. |
1,250,000 | 6,397,959 | 709,334 | - | 100.00 | - | - |
| BASIC VILLAGE S.p.A. WITH SOLE SHAREHOLDER Largo M. Vitale, 1 10152 TURIN Share capital Euro 412,800 |
412,800 | 4,856,478 | 153,425 | 100.00 | - | 4,856,478 | 414,715 |
| JESUS JEANS S.r.l WITH SOLE SHAREHOLDER Largo M. Vitale, 1 10152 TURIN Share capital Euro 10,000 |
10,000 | 68,816 | 15,354 | 100.00 | - | 68,816 | 81,375 |
| SUPERGA TRADEMARK S.A. 42-44 Avenue de la Gare L-1610 LUXEMBOURG Share capital Euro 500,000 |
500,000 | 1,305,180 | 1,982,343 | - | 100.00 | - | - |
| Name/Registered office/Share capital |
Share capital | Amount of the net equity |
Profit (loss) for the year |
Quota held directly |
Quota held indirectly |
Pro quota net equity |
Book value |
|---|---|---|---|---|---|---|---|
| JOINT VENTURES | |||||||
| FASHION S.r.l. C.so Stati Uniti, 41 10129 TURIN Share capital Euro 100,000 |
100,000 | 328,647 | (75,375) | 50.00 | - | 164,323 | 465,000 |
| Name/Registered office/Share capital | 31/12/2015 Book value |
Acquisitions/ Incor. |
Capital payments to cover losses |
Impairment investments |
Sales | 31/12/2016 Book value |
% held Parent |
|---|---|---|---|---|---|---|---|
| HOLDINGS IN SUBSIDIARY COMPANIES |
|||||||
| BasicItalia S.p.A with sole shareholder | 31,599,725 | - | - | - | - | 31,599,725 | 100% |
| BasicNet Asia Ltd. | 927 | - | - | - | - | 927 | 100% |
| Basic Properties B.V. | 3,657,747 | - | - | - | - | 3,657,747 | 100% |
| Basic Village S.p.A with sole shareholder |
414,715 | - | - | - | - | 414,715 | 100% |
| Jesus Jeans S.r.l. with sole shareholder | 81,375 | - | - | - | - | 81,375 | 100% |
| TOTAL SUBSIDIARY COMPANIES | 35,754,488 | - | - | - | - | 35,754,488 | |
| HOLDINGS IN JOINT VENTURES |
|||||||
| AnziBesson Trademark S.r.l. | 25,000 | - | - | - | (25,000) | - | - |
| Fashion S.r.l. | 465,000 | - | - | - | - | 465,000 | 50% |
| TOTAL JOINT VENTURES | 490,000 | - | - | - | (25,000) | 465,000 | |
| HOLDINGS IN OTHER COMPANIES: |
|||||||
| Consortiums & other minor | 128 | - | - | - | - | 128 | |
| TOTAL OTHER COMPANIES | 128 | - | - | - | - | 128 | |
| TOTAL INVESTMENTS | 36,244,616 | - | - | - | (25,000) | 36,219,616 | |
| FINANCIAL RECEIVABLES | |||||||
| Other receivables (guarantees) | 10,230 | 21 | - | - | - | 10,251 | |
| Receivables from AnziBesson Trademark S.r.l. |
90,000 | - | - | - | (90,000) | - | |
| TOTAL RECEIVABLES | 100,230 | 21 | - | - | (90,000) | 10,251 | |
| TOTAL INVESTMENTS AND OTHER FINANCIAL ASSETS |
36,344,846 | 21 | - | - | (115,000) | 36,229,867 |
The undersigned Marco Daniele Boglione as Executive Chairman, Giovanni Crespi as CEO, and Paolo Cafasso as Executive Officer for Financial Reporting of BasicNet S.p.A., affirm, and also in consideration of Article 154-bis, paragraphs 3 and 4, of Legislative Decree No. 58 of February 24, 1998:
the adequacy for company operations and the effective application, of the administrative and accounting procedures for the preparation of the 2016 financial statements.
In addition, we certify that the financial statements:
Marco Daniele Boglione Chairman
Giovanni Crespi Paolo Cafasso Chief Executive Officer Executive Officer for Financial Reporting
| Fees earned |
|||
|---|---|---|---|
| Type of service | Service provider | Company | 2016 |
| Audit | PricewaterhouseCoopers S.p.A. | Parent Company BasicNet S.p.A. Subsidiaries |
55,460 50,017 |
| Certification services | PricewaterhouseCoopers S.p.A. | Parent Company BasicNet S.p.A. | - |
| Other services | PricewaterhouseCoopers S.p.A. | Parent Company BasicNet S.p.A. | 37,800 |
| Total | 143,277 |
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.