Annual Report • Mar 29, 2017
Annual Report
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2016 Annual Financial Report
| Company Overview | 5 |
|---|---|
| ePRICE: Platform, Mission and Vision | 6 |
| Chairman's Letter to Shareholders | 8 |
| 2016 Highlights | 10 |
| Strategic Guidelines 2017-2021: strategy and objectives | 25 |
| Corporate Boards and Ownership | 26 |
| Directors' Report | 29 |
| Comment on the Results for the Year | 30 |
| Analysis of Key Results from the Statement of Financial Position | 39 |
| Operating and Financial Performance of ePRICE S.p.A. | 42 |
| Other Information | 44 |
| Board of Directors Proposal | 51 |
| Consolidated Financial Statements as at 31 december 2016 | 53 |
| Independent Auditor's Report | 113 |
| ePRICE S.p.A. Separate Financial Statements | 115 |
| Independent Auditor's Report | 166 |
The first integrated e-Commerce and e-Service platform in Italy. Serving the technological evolution of Italian households.
Local e-commerce champion focused on capturing high-potential, fast-growing market.
A unique value proposition tailored to the italian market, supported by a flexible and scalable platform.
Significant track record and GMV/revenue growth to generate value through scale & relevance, and to reach profitabilty.
ePRICE's mission: to serve the technological evolution of Italian households.
ePRICE's vision: from e-Commerce to e-service.
2016 was a year of significant growth for our Company.
We focused all our attention on e-Commerce and ePRICE, so much so that this is now the new name of the company. We added innovation with the launch of the new Home Service offering; the Marketplace has more than doubled in size since it started in 2015; and we launched the "ePRICE Serves You" TV campaign to position and strengthen our brand.
ePRICE was confirmed as a local leader in e-Commerce, ending 2016 with €254 million in GMV (total spending on ePRICE by our customers), up by 23% YOY, and revenues of €198 million, up 18% YOY. Thanks to the substantial capital gains realised from the sale of Banzai Media and Saldiprivati, the Company closed 2016 with a profit of over €10 million and net cash position of more than €56 million.
In 2016, the total e-Commerce market for technology products and domestic appliances grew in double figures (+20%), and the outlook is also positive for 2017. The online sales segment in Italy is attracting increasing attention from the market and investors, partly due to a forecast of 16% CAGR in the next five years.
Against this background, ePRICE succeeded in growing by approximately 4% more than its reference market in 2016. The Company reaffirmed its leadership for online sales of large domestic appliances, partly thanks to the boost provided by the offer of value-added services, such as installation on appointment, recycling the old appliance, and appliance configuration and set-up via a qualified network of about 400 installers covering the main Italian cities.
Two important assets in our strategy are reaching a point of maturity and solidity. Our e-Commerce distribution network has grown to 133 Pick&Pay® outlets and 309 Lockers, while the Merchant Marketplace now has 2.8 million offers placed by about 900 sellers. The Marketplace numbers are expected to rise strongly over the next few years, with the addition of new products and new categories.
The fourth quarter of 2016 also saw the launch on Mediaset networks of the new "ePRICE Serves You" TV campaign, made possible by a three-year agreement reached as part of the sale of Banzai Media, which gives ePRICE a €7 million benefit on advertising investment over the 3 years period. The campaign was a hit, both with consumers who rewarded us in the year-end results and with operators and brands in our market, who launched new infocommerce activities with ePRICE. "ePRICE Serves You" marks the starting point for the creation of a "premium brand" awareness for the ePRICE brand, based around the concept of service, linked to e-Commerce.
The results achieved this year pave the way for the targets which we have set ourselves for the future.
According to the guidance for the next five years presented last November, the Company plans to treble GMV thanks partly the contribution of product sales with a market share of 19-21% in tech & appliances and of Marketplace, but also to the growth in the Home Service segment, where we aim to achieve a market share of between 4% and 6% by the end of the period. Eventually almost 50% of our EBITDA will be generated by Services and the Merchant Marketplace. Two years after its listing on the STAR segment of the Italian Stock Exchange, the Company today is focusing on growth and the improvement of margins.
We have the satisfaction of having built – and of having been supported by – a team of exceptional quality over these years, with whom we celebrated the opening of the new headquarters at Via San Marco 29 in the centre of Milan, where, together with old friends and competitors, both Italian and international, we are recreating a new district of digital champions.
The Company has never stopped investing in people and, thanks to our focus on a single business, we have undertaken a process of partial renewal of management, bringing in new talents and new skills.
This was a year of great satisfaction and many changes, for which we have to thank - above all - our 563,000 customers. It was they, in 2016, who chose tech products and services on ePRICE, which, thanks to them, is confirmed as the leading Italian player in online sales for this segment. We will make every effort in 2017 to give them even more choice and to offer them even better service.
Paolo Ainio Chairman of the Board of Directors
* Gross Merchandise Volume: includes revenue from products, shipping and volume generated by the 3PMarketplace, net of returns and including VAT. Does not include Infocommerce and B2B.
* Gross Merchandise Volume: includes revenue from products, shipping and volume generated by the 3PMarketplace, net of returns and including VAT. Does not include Infocommerce and B2B.
* Gross Merchandise Volume: includes revenue from products, shipping and volume generated by the 3PMarketplace, net of returns and including VAT.
(1) Net Promoter Score is a management tool that can be used to gauge the satisfaction of a firm's customer relationships. It can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of +50 is excellent.
7.8 €M capital gain
agreement to manage fullfillment for SRP Italian activities
19/21% M/S Online Tech market
+4/6% M/S Home Service market 3X GMV by 21
4/6% Ebitda margin by 21
In 2016 ePRICE initiated a new phase in its advertising and in its branding project.
The "ePRICE Serves You" campaign has enhanced the brand with a new awareness and strengthened the brand equity by associating the traditional values conveyed by the e-commerce brands, such as convenience and broad selection, with the values of service and proximity.
The campaign, which was carried out by Ogilvy & Mather and planned by Mindshare, reached 80% of the target (out of a total of 11,470,000 adults aged 35-54 with home internet access).
The campaign, which will continue into 2017 and 2018, was broadcast periodically by Mediaset networks from the end of September 2016 and supported the last fiscal quarter in particular delivering growth, during Black Friday and Christmas periods.
(2) Average number of orders growth since kick-off of ADV Campaign vs. average annual number of orders.
ePRICE introduced Black Friday in Italy in 2010, and in 2016 it had record Black Friday results:
| "Quality of home service" | +14 P.P. |
|---|---|
| "Better than other retailers" | +12 P.P. |
| "Wide range of products" | +10 P.P. |
*Source: Mindshare Survey Commissioned by ePRICE, Autumn 2016 vs. Autumn 2015.
ePRICE is an Italian company that has chosen to work in Italy thanks to Italy's significant potential, and because it is the most beautiful country in the world. ePRICE supports the spread of digital literacy in Italian schools and the development of a new digital consciousness in younger generations. Digitisation is a resource that will allow our country to advance its history, culture and aspirations.
In collaboration with the Ministry of University and Research project known as "Restart from to School", Banzai and ePRICE employees voluntarily contributed part of their monthly salary to donate to people affected by the earthquakes in central Italy in summer and autumn 2016. The company "matched" the sum collected, making it possible to purchase and donate 100 Lenovo tablets to students and teachers at the De Gasperi-Battaglia Comprehensive Institute of Norcia, which will be used to complete lessons even without paper books.
In 2016, ePRICE supported the Fuoriclasse della Scuola (School Champions) project with two scholarships sponsored by ePRICE. Fuoriclasse della Scuola is the first project in Italy to reward talented high school students who are winners in the 'Olympiads' organised by the Ministry of Education, Universities and Research. The project rewards senior high school students who have already won in the Olympics in competitions for:
| ITALIAN | MATHEMATICS | INFORMATICS |
|---|---|---|
| PHYSICS | CHEMISTRY | NATURAL SCIENCES |
| CLASSICAL LANGUAGES AND CIVILISATIONS |
ASTRONOMY | PHILOSOPHY |
| STATISTICS | NEW DESIGN COMPETITION | ECONOMICS |
ePRICE supported the project with two scholarships, in Mathematics and Statistics, and by the attendance and participation of its Executive Chairman, Paolo Ainio, at the Fuoriclasse Campus, organised this year at the Museo del Risorgimento in Turin, which welcomed all the winning youngsters for three days.
In 2016 ePRICE supported the commitment of FAI (the Italian Environmental Foundation) to protect and safeguard Italy's artistic treasures and nature. Thanks to the daily commitment of the Foundation, neglected artistic treasures and nature became an asset appreciated by local citizens and communities.
During the October 2016 campaign known as "Remember to save Italy", ePRICE customers were able to include a donation to FAI in their basket, and as a result obtained FAI membership card and the chance to access historical and natural treasures protected by the Foundation for a year. http://www.visitfai.it.
Photo left: Photo by Alessio Mesiano 2009 © FAI - Fondo Ambiente Italiano - BALBIANELLO. Photo right: Villa dei Vescovi 1_Foto (C) Archivio Consorzio Terme Euganee G. De Sandre_2015.
In October 2016, the new ePRICE offices were opened at Via San Marco 29, in the historical centre of Milan. The new offices feature the work of illustrator Francesco Poroli, who has produced a large mural at the entrance depicting all phases of the "Italian style of e-Commerce" proposed by Banzai, especially under the ePRICE brand. Poroli's images also roll by on a large LED wall that cuts vertically through all floors of the building.
With leading Digital players, Milan's city centre is becoming a new hub of talents and job opportunities in the innovation market. The HQ in Via San Marco currently hosts over 250 professionals in the digital world with an average age between 35 and 40.
In 2015 ePRICE opened its Marketplace to allow other sellers to benefit from their loyal customers and expand their businesses.
MARKETPLACE OFFERS 2.8 M +100% vs. 2015
SELLERS 877 +150% vs. 2015
AVERAGE WEIGHT ON GMV c.10%
* Gross Merchandise Volume: includes revenue from products, shipping and volume generated by the 3PMarketplace, net of returns and including VAT. Does not include Infocommerce and B2B.
Merchants on the Marketplace can use ePRICE logistics services, enabling them to offer customer the opportunity to pick up their orders at any one of the many Pick&Pay® points which ePRICE manages throughout Italy. A merchant can thus optimize deliveries of large volumes of sales in one single shipment, while ePRICE handles the sorting of the products at the Pick&Pay® points.
When a customer orders a refrigerator, washing machine or a large TV, it's normal to expect a comprehensive service. Therefore, ePRICE has created a network of specialised professionals who deliver and install new appliances and remove old ones.
Now that's a real comprehensive service. And that's why ePRICE has become the leader in the online sale of large appliances.
ePRICE Home Service offers the option of delivery and installation at home, managed using a mobile platform for continuous direct dialogue between the customer, the installer and ePRICE.
Prompt delivery Professional
Set up an appointment based on your availability
Qualified and certified technicians and reliable, fast and courteous staff installation
Personalised service
A customer service representative will be available at all times
Total control
Continuous, reliable and precise supervision of your service
+100%
MDAs Shipped
4x
# skilled Home Service professionals vs. beginning of the year
Net Promoter Score c. 70
| Billions of euros | ONLINE | OFFLINE | TOTAL | |
|---|---|---|---|---|
| Italian electronics and | 2013 | 1.1 | 12.4 | 13.5 |
| appliance market | 2016 | 1.7 | 12.4 | 14.1 |
| 2021 | 3.5 | 11.0 | 14.5 | |
| Compound annual growth rate (CAGR) 2016-2021 |
||||
| Source: ePRICE calculations using GFK and Forrester data + internal estimates. |
+16% | -2% | +1% | |
| Growth of offline retail of electronics and appliances 2015 vs. 2016 |
Growth of online retail of electronics and appliances 2015 vs. 2016 |
GMV sales growth of ePRICE electronics 2015 vs. 2016 |
and appliances | |
| +1% | c.+20% (see note) |
+24% | ||
| 2015 2016 |
2015 | 2016 | 2015 | 2016 |
Note: growth from 2015 to 2016 including sales defined as Click&Collect by certain market participants (which were included in the online retail area only from 2016) results in a market growth of 24% year on year.
Source: ePRICE calculations using GFK and Forrester data + internal estimates
* Gross Merchandise Volume: includes revenue from products, shipping and volume generated by the 3PMarketplace, net of returns and including VAT. Does not include Infocommerce and B2B.
Source: ePRICE calculations using GFK and Forrester data + internal estimates.
In 2016, Banzai redefined the scope of ePRICE and launched its Plan on a new path of strong growth, to position it as the leading platform in the Tech & Appliance market, extending from large domestic appliances segment, to services for Smart Families.
ePRICE will invest about €40 million in technology over the next five years to accelerate growth. Abd continue to expand its Marketplace to a GMV share of 30% by 2021, doubling the network of 400 installers. This will enable ePRICE to reach a large sharer of the 19 million Italians who already buy online and the additional 7 million who will buy online for the first time in the next few years.
The plan presented by ePRICE will enable it to accelerate the growth of GMV and sales and to achieve an EBITDA of 4-6%, with cash generation, as of 2019.
* Gross Merchandise Volume: includes revenue from products, shipping and volume generated by the 3PMarketplace, net of returns and including VAT. Does not include Infocommerce and B2B.
Paolo Ainio Chairman
Pietro Scott Jovane CEO
Roland Berger Independent director Pierluigi Bernasconi Non-executive director
Andrea Biasco Non-executive director
Pietro Boroli Non-executive director Chiara Burberi Independent director
Matteo Renzulli Non-executive director
Serenella Rossano Independent director
Serenella Rossano Independent director Chiara Burberi Independent director Roland Berger Independent director
Roland Berger Independent director Serenella Rossano Independent director Pierluigi Bernasconi Non-executive director
The Statutory Auditors currently in office were appointed by the General Meeting of Shareholders of 14 April 2016 and will remain in office until approval of the financial statements as at 31 December 2018.
Francesco Perrini Chairman
Stefania Bettoni Standing Auditor
Gabriella Chersicla Standing Auditor
Luca Zoani Alternate Auditor
Beatrice Gallì Alternate Auditor
The Supervisory Board of Banzai S.p.A. appointed by the Board of Directors as at 25 November 2014 currently comprises three members.
Jean-Paule Castagno Chairman
Fabio Meda Member
Stefania Bettoni Member
EY S.P.A.
The share capital of Banzai S.p.A. is equal to Euro 820,797 composed by n. 41,039,850 ordinary shares without par-value.
| RELEVANT SHAREHOLDERS | NUMBER OF SHARES | % SHARE CAPITAL |
|---|---|---|
| PAOLO AINIO* | 9,447,615 | 23.02% |
| AREPO BZ S.A.R.L. | 8,613,850 | 20.99% |
| PIETRO BOROLI | 2,138,997 | 5.21% |
| TREASURY SHARES | 835,425 | 2.03% |
*of which 221,750 (0.54%) held trough PUPS S.r.l., 80% controlled by Paolo Ainio.
There are no other shareholders, outside of those listed above, with a shareholding of more than 5% that have notified Consob and Banzai S.p.A. according to art. 117 of Consob Regulation no. 11971/99 on notification requirements of major holdings.
For more information, please visit the website http://investors.eprice.it
ePRICE S.p.A. (formerly Banzai S.p.A.) is Italy's leading e-Commerce company. Founded by Paolo Ainio AND listed on the STAR segment of the Italian Stock Exchange since 2015, it is one of the largest internet companies in Italy. ePRICE is one of Italy's leading online businesses, specialising in the sale of high-tech products (electronics) and a leader in the segment of large domestic appliances sold online. In January 2016, ePRICE launched the Home Service integrated online mobile platform, which manages premium deliveries and installations, with coverage of 14 million inhabitants. ePRICE manages a network of more than 133 Pick&Pay outlets in 109 cities, offering collection and payment points that combine the advantages of buying online with the convenience and security of a local store.
In 2016, the revenue of ePRICE (formerly Banzai) totalled €197.9 million, net of the Vertical Content and BNK4 SaldiPrivati S.r.l. division, sold during the course of the year. Revenue growth in 2016 was therefore 18.0% compared with the pro-forma figure for 2016, i.e. excluding the income items which should be allocated to Vertical Content and to Flash Sales which was sold during the year, driven by the electronics and domestic appliances categories.
The ePRICE Group (hereinafter also referred to as ePRICE), recorded GMV1 growth of 22.7% during the year, with a total of €254.4 million compared with a pro-forma figure of €207.3 million for 2015, largely due to the strong contribution of the Marketplace, which grew by +123% compared with 2015. The contribution made by the Marketplace, launched in 2Q15, almost doubled during the year to reach more than 10% of GMV compared with 5.6% in 2015.
| (in thousands of Euros) | 2016 | 2015 | % Change |
|---|---|---|---|
| e-Commerce | 197,894 | 167,720 | 18.0% |
| Revenues | 197,894 | 167,720 | 18.0% |
| (in millions of Euros) GMV |
254.4 | 207.3 | 22.7% |
1 GMV Gross Merchandise Volume: includes revenue from products, from shipping and the volumes generated by the 3P Marketplace, net of returns and including VAT.
The breakdown of Revenue and GMV by product type is as follows:
| Revenue | |||
|---|---|---|---|
| (In thousands of Euros) | 2016 | 2015 | % Change |
| Electronics, Domestic Appliances and other products | 180,806 | 155,189 | 16.5% |
| Services / Other revenue | 17,088 | 12,531 | 36.4% |
| Revenue | 197,894 | 167,720 | 18.0% |
| GMV | |||
| (In millions of Euros) | 2016 | 2015 | % Change |
| Electronics, Domestic Appliances and other products | 246.5 | 201.0 | 22.6% |
| Services / Other revenue | 8.0 | 6.3 | 27% |
| GMV | 254.4 | 207.3 | 22.7% |
In 2016 ePRICE recorded €180,806 thousand of revenue from product sales. The growth of 16.5% compared with 2015 is attributable mainly to the single category "Electronics and domestic appliances", which grew by more than 24% over the year, due to the widening of the range of products offered and the development of the "premium" services (delivery, installation and old appliance removal).
Revenue from sales of Services and Other rose steeply in 2016 (+36.4% compared with 2015). January 2016 saw the launch of the new generation of personalised Home Service delivery, installation and old appliance removal services, integrated with a proprietary mobile platform accessible via a smartphone app, which enables our customers to interact continuously with ePRICE from the moment of purchase until installation in the home. Home Service was also the focus of a TV campaign launched on 23 September 2016, which helped accelerate the rate of adoption of the service.
In the segment of domestic appliances sold online alone, where ePRICE is market leader, growth was far higher in the areas covered by the new services of Home Service, with a Net Promoter Score (NPS)2 of about 70. In 2016, the number of installations of domestic appliances grew by 100% compared with 2015.
In addition to the development of Home Service, in 2016 ePRICE completed and optimised the network of Pick&Pay outlets and Lockers, the only network of its kind in the Italian market which was ranked, respectively, with 133 and 309 points as at 31 December 2016 (vs. 100 and 300 as at 31 December 2015). The Pick&Pay delivery services have an NPS of over 80, and from December these were also opened up to merchants on Marketplace.
GMV grew by 22.7% in 2016, supported by the performance of the Marketplace, which ended the period with 877 merchants and achieved growth of 123% over the year, driven by Electronics. It should be noted that the GMV does not include Infocommerce and B2B services.
2 The Net Promoter Score is calculated by subtracting the percentage of detractors from the obtained percentage of promoters.
In terms of Key Performance Indicators, the following trends can be identified:
| 2016 | 2015 | % Change | |
|---|---|---|---|
| Orders (thousands) | 962 | 817 | 18% |
| AOV (Euros) 3 | 217 | 208 | 4% |
| Buyers (thousands)4 | 563 | 481 | 17% |
In 2016, 962,000 orders were handled, up by +18% compared with 2015, with an average order value (AOV) of €217, up by 4%, mainly due to the mix in favour of high-ticket categories (Electronics and Domestic Appliances). Lastly, the number of buyers was 563,000, up by 17% compared with 2015.
3 Average order value (excluding VAT).
4 Customers with at least 1 order in the period.
The table below illustrates the Reclassified Income Statement for 2016 and 2015, on a like-for-like basis, by destination according to the statements used by the Group's management. In the following statement, the Revenue total is stated net of revenues for logistics, IT and administrative services performed in favour of scopes that were sold or being disposed of, which have been restated as a reduction of the related costs.
| € thousand | 2016 | % of total revenues |
2015 % of total revenues |
% Change |
|
|---|---|---|---|---|---|
| Total revenues | 197,894 | 100.0% | 167,720 | 100.0% | 18.0% |
| Cost of sales5 | (167,707) | -84.7% (144,591) | -86.2% | 16.0% | |
| Gross margin6 | 30,187 | 15.3% | 23,129 | 13.8% | 30.5% |
| Sales and marketing costs | (11,038) | -5.6% | (8,937) | -5.3% | 23.5% |
| Logistics costs | (18,962) | -9.6% | (14,332) | -8.5% | 32.3% |
| IT costs | (1,414) | -0.7% | (1,051) | -0.6% | 34.5% |
| General and administrative expenses | (8,297) | -4.2% | (6,735) | -4.0% | 23.2% |
| Adjusted EBITDA | (9,524) | -4.8% | (7,926) | -4.7% | 20.2% |
| Non-recurring costs and income and stock option plans | (200) | -0.1% | (910) | -0.5% | -78.0% |
| EBITDA | (9,724) | -4.9% | (8,836) | -5.3% | 10.0% |
| Depreciation, amortisation and impairment | (4,259) | -2.2% | (3,036) | -1.8% | 40.3% |
| EBIT | (13,983) | -7.1% | (11,872) | -7.1% | 17.8% |
| Net financial expenses | 34 | 0.0% | (30) | 0.0% -213.3% | |
| Minority interest in income of associates | (79) | 0.0% | (270) | -0.2% | -70.7% |
| Impairment losses on financial assets | (668) | -0.3% | |||
| PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS | (14,696) | -7.4% | (12,172) | -7.3% | 20.7% |
| Income taxes | (18) | 2,608 | |||
| Net profit (loss) from discontinued operations | 24,782 | (1,192) | N/A | ||
| NET PROFIT (LOSS) | 10,068 | 5.1% | (10,756) | -6.4% | N/A |
Gross Margin stood at €30,187 thousand, an increase of €7,058 thousand, or 30.5%, compared with 2015 (€23,129 thousand), showing significantly higher growth than that seen in Revenues. In percentage terms, the ratio of Gross Margin to Revenues was 15.3%, compared with 13.8% in 2015.
5 The Cost of sales mainly includes the purchase cost of goods and the cost of some services, including the cost of collection fees.
6 Gross Margin is represented by net revenues minus cost of goods sold and is a management control indicator used by the Group's management to monitor and evaluate its sales performance. Gross Margin is not identified as an accounting method either under the scope of Italian Accounting Principles or under IFRS (International Financial Reporting Standards) and therefore it should not be considered as an alternative method for evaluating the performance of the Group's gross margin. Since the composition of the Gross Margin is not regulated by reference accounting standards, the calculation criterion applied by the Group may not be standardised with the one adopted by others and, as such, is not comparable. The impact of Gross Margin on revenue is calculated by the Group as the ratio between the Gross Margin and Total Net Revenues.
It should be noted that the Gross Margin does not include shipping and installation costs, which have been more properly restated among logistics costs. The percentage impact on revenues was 4.5% in 2016 and 3.5% in 2015.
The improvement in the Gross Margin had been one of the objectives announced to the market, and was achieved thanks to various factors, including: the diverse sales mix, which is generating an increasing contribution from Domestic Appliances, the greater contribution from the Marketplace as described above, and the increase in infocommerce and advertising activities, including a one-off contract (relating to TV commercials on Mediaset networks) for which the related costs have been recognised under sales and marketing costs.
Adjusted EBITDA stood at -€9,524 thousand, a decline compared with the -€7,296 thousand recorded in 2015.
The change is attributable mainly to the +23.5% increase in sales and marketing costs (+18.5% net of marketing costs relating to the one-off infocommerce contract mentioned above), and the +32.3% rise in logistics costs; in both cases, the increase reflects the strong growth of ePRICE in terms of customers and sales volumes, particularly in the domestic appliances category and, to a lesser extent, the strong expansion of the network of Pick&Pay outlets and Lockers, which is not yet fully up and running.
Sales and marketing costs also include television advertising costs, which in 2016 amounted to about €1 million, benefiting from the agreement with Mondadori following the sale of the Vertical Content division, compared with costs of about €1.5 million incurred for the television advertising campaign in 2015.
The breakdown of adjusted EBITDA for 2016 and 2015 is provided below:
| (In thousands of Euros) | 2016 | % of revenues | 2015 | % of revenues |
|---|---|---|---|---|
| Operating profit (loss) | (13,983) | -7.1% | (11,872) | -7.1% |
| + Depreciation, amortisation and impairment | 4,259 | 2.2% | 3,036 | 1.8% |
| Non-recurring costs, contributions and stock option plans | 200 | 0.1% | 910 | 0.5% |
| Adjusted EBITDA | (9,524) | -4.8% | (7,926) | -4.7% |
| EBITDA | (9,724) | -4.9% | (8,836) | -5.3% |
EBITDA for 2016 stood at -€9,724 thousand, and includes costs of €454 thousand relating to the stock option plans, costs of €312 thousand relating to the adoption of the new Group headquarters, staff restructuring costs of €456 thousand net of contributions, amounting to €1,023 thousand, paid in the form of tax credit generated by research and development activities carried out in 2015.
EBITDA for 2015 stood at -€8,836 thousand and includes non-recurring costs of €811 thousand relating to bonuses paid to employees and contract workers for achieving the goal of listing on the Italian Stock Exchange, and costs of approximately €99 thousand relating to the stock option plan.
EBIT stood at -€13,983 thousand compared with -€11,872 thousand in 2015, partly as a result of the lower EBIDTA as described above. Depreciation and amortisation increased by 40.3% compared with 2015, mainly due to major investments made in 2015 and 2016 using resources generated by the IPO to support growth.
EBT was -€14,696 thousand, compared with -€12,172 thousand in 2015. Financial income, net of expenses, stood at €34 thousand, an improvement over the previous year (net expenses of €30 thousand), due to the improvement in the net financial position.
Write-downs of financial receivables of €668 thousand were registered during the year, all due from the associate Uollet, which was sold at the start of 2017.
Profit (loss) deriving from discontinued operations relates to the Vertical Content segment, following the sale of the entire equity investment held in Banzai Media Holding to Arnoldo Mondadori Editore S.p.A., and to the Flash Sales segment following the sale of the shareholding in BNK4 – Saldi Privati S.r.l. to the SRP Group.
The scope of the transaction relating to the Vertical Content segment includes the entire investment in Banzai Media Holding S.r.l., with the underlying shareholdings listed below:
| Name | Activity | Ownership percentage |
|---|---|---|
| Banzai Media Holding S.r.l. | Subholding company | 100 |
| Banzai Media S.r.l. | Vertical Content | 100 |
| Banzai Direct S.r.l. | Vertical Content | 100 |
| MyTrainerCommunity S.r.l. | Vertical Content | 100 |
| AdKaora S.r.l. | Vertical Content | 100 |
| Bobo Software S.r.l. | Vertical Content | 100 |
The scope did not include the "News" segment. ePRICE S.p.A. consequently acquired from Banzai Media Holding the equity investment in associate "Il Post" and created Giornalettismo S.r.l., in which it maintained a share of 30%.
The sale price relating to the Vertical Content segment was set at €24,660 thousand, based on an enterprise value of €41 million, not including the net financial position at the closing date, plus earn-outs of up to €4 million if certain conditions based on economic performance and page visits are met by 2018. ePRICE also issued to the buyer the usual representations and warranties for a sale transaction, in particular as part for the tax and labour law guarantees, under which the maximum amount claimable is equal to the overall value of the transaction. The best estimate of the risks of activation of these guarantees is reflected in the provision for risks and charges set aside in this annual financial report.
With regard to the sale of the Flash Sales segment, the price of the transaction was €24,997 thousand, of which €24,453 thousand was received at the closing and €544 thousand in February 2017 by way of price adjustment.
In addition, the Contract provides for the payment of a further amount not exceeding €5 million (the "Retained Amount"), to be paid to the Seller by the Buyer on completion of the transfer to the Sold Company of certain administrative and management activities performed by the seller that are required to make the company independent.
In addition to the Final Price, the Contract also provides the obligation for the Buyer to pay the Seller a further amount not exceeding €10 million if certain targets defined in the Contract are achieved, linked to the 2018 results of BNK4 SaldiPrivati S.r.l.
The ePRICE Group has also given the purchaser the representations and warranties usual in a sale. The maximum amount recoverable in the first 24 months from signature of the contract of sale is €3.5 million, which thereafter becomes €3 million.
At the closing date, the ePRICE Group received, in addition to the price, an amount of €2.5 million corresponding to one half of the Retained Amount, and at the same time the SRP Group paid a further €2.5 million, corresponding to the other half of the Retained Amount, into a guarantee deposit, recognised under Other current receivables.
Net profit (loss) deriving from discontinued or divested assets is shown below:
| (In thousands of Euros) | 2016 | 2015 |
|---|---|---|
| Vertical Content | ||
| Gross capital gain | 18,861 | - |
| Net profit (loss) | (982) | 991 |
| Transaction costs | (923) | - |
| Vertical Content total | 16,956 | 991 |
| Flash Sales | ||
| Gross capital gain | 12,070 | - |
| Net profit (loss) | (3,798) | (2,183) |
| Transaction costs | (446) | - |
| Flash Sales net profit | 7,826 | (2,183) |
| Profit (loss) from discontinued operations | 24,782 | (1,192) |
The breakdown of the profit performance of the Vertical Content and Flash Sales segments for 2016, up to the date of sale, is shown in the following table:
| Vertical Content | 2016 | 2015 |
|---|---|---|
| Revenue | 10,883 | 24,335 |
| Costs | (12,163) | (23,161) |
| Earnings Before Tax | (1,280) | 1,174 |
| Tax | 298 | (183) |
| Net profit (loss) | (982) | 991 |
The result generated by Vertical Content in the early months of 2016 includes premiums and bonuses disbursed to employees and directors at the time of the activities relating to the sale.
| Flash Sales | 2016 | 2015 |
|---|---|---|
| Revenue | 34,505 | 44,361 |
| Costs | (38,299) | (46,977) |
| Earnings Before Tax | (3,794) | (2,616) |
| Tax | (4) | 433 |
| Net profit (loss) | (3,798) | (2,183) |
The table below illustrates the Income Statement for the fourth quarter reclassified by destination, in accordance with the accounting plan used by the Group's management.
| € thousand | Q4 2016 | % of total | revenues Q4 2015 % of total revenues |
% Change |
|
|---|---|---|---|---|---|
| Total revenues | 70,695 | 100.0% | 60,999 | 100.0% | 15.9% |
| Cost of sales | (59,990) | -84.9% (52,936) | -86.8% | 13.3% | |
| Gross Margin | 10,705 | 15.1% | 8,063 | 13.2% | 32.8% |
| Sales and marketing costs | (3,943) | -5.6% | (4,041) | -6.6% | -2.4% |
| Logistics costs | (6,638) | -9.4% | (5,163) | -8.5% | 28.6% |
| IT costs | (400) | -0.6% | (300) | -0.5% | 33.3% |
| General and administrative expenses | (2,318) | -3.3% | (2,088) | -3.4% | 11.0% |
| Adjusted EBITDA | (2,594) | -3.7% | (3,529) | -5.8% | -26.5% |
| Non-recurring costs and Stock Option Plan | 457 | 0.6% | (75) | -0.1% -709.3% | |
| EBITDA | (2,137) | -3.0% | (3,604) | -5.9% | -40.7% |
| Depreciation, amortisation and impairment | (1,373) | -1.9% | (1,130) | -1.9% | 21.5% |
| EBIT | (3,510) | -5.0% | (4,734) | -7.8% | -25.9% |
| Net financial expenses | (5) | 0.0% | (7) | 0.0% | -28.6% |
| Minority interest in income of associates | 3 | 0.0% | (109) | -0.2% -102.8% | |
| Impairment losses on financial assets | (229) | -0.3% | 0 | 0.0% | |
| PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS | -3,741 | -5.3% | -4,850 | -8.0% | -22.9% |
| Income taxes | (18) | 2,608 | |||
| Net profit (loss) from discontinued operations | 10,871 | 399 | N/A | ||
| NET PROFIT (LOSS) | 7,112 | 10.1% | (1,843) | -2.6% | N/A |
Consolidated revenue in the fourth quarter of 2016 totalled €70,695 thousand, up by 15.9% compared with the fourth quarter of 2015 (€60,999 thousand). The growth in revenue was strong, reversing the trend of the third quarter, which had shown growth of 8.2% due to an unfavourable comparison with the third quarter of 2015 for sales of air conditioners (which trimmed revenue growth by about 3.4% in the third quarter of 2016) and growing competitive pressure.
Gross margin stood at €10,705 thousand, representing further growth of 32.8% compared with the figure of €8,063 thousand in the fourth quarter of 2015 and growth of 29.3% over the first nine months of 2016. The percentage impact on revenues was 15.1%, a significant recovery in terms of percentage points compared with the 13.2% recorded in the fourth quarter of 2015.
ADJUSTED EBITDA amounted to -€2,594 thousand compared with -€3,529 thousand in the fourth quarter of 2015, showing an improvement of about €1 million or 26.5%. This was due to the reduction in sales and marketing costs resulting from the lower impact of costs for the television advertising campaign as described above and also to improved control of general and administrative expenses, which grew at a slower pace compared with the growth in revenues and gross margin.
EBITDA amounted to -€2.137 thousand compared with -€3,604 thousand in the fourth quarter of 2015, representing an improvement of about €1.5 million or 40.7%, benefiting in particular from the positive impact of non-recurring income relating to the tax credit for research and development activities as described earlier.
EBIT was -€3,510 thousand, after depreciation and amortisation of €1,373 thousand, compared with -€4,734 thousand in the fourth quarter of 2015, representing an improvement of about 26%.
EBIT from continuing operations was -€3,741 thousand, compared with -€4,850 thousand in the fourth quarter of 2015, representing an improvement of about 23%.
The following table shows the reclassification according to sources and uses of the statement of financial position; for better comparability, as well as the data as at 31 December 2015, a "31 December 2015 pro forma" column is shown, which excludes the assets and liabilities allocable to the Vertical Content and Flash Sales segments (sold during the year).
| (thousands of Euros) | 31 December 2016 | 31 December 2015 | 31 December 2015 pro forma |
|---|---|---|---|
| USES | |||
| Net Working Capital | (4,356) | 776 | (3,504) |
| Fixed assets | 33,554 | 55,648 | 28,573 |
| Long-term assets | 9,996 | 12,120 | 9,892 |
| Personnel fund | (2,131) | (3,741) | (1,984) |
| Long-term liabilities | (396) | (3,875) | - |
| Net Invested Capital | 36,667 | 60,928 | 32,977 |
| SOURCES | |||
| Net Financial Liquidity/Debt | 56,176 | 23,205 | - |
| Net Equity | (92,843) | (84,133) | - |
| FUNDING SOURCES TOTAL | (36,667) | (60,928) | (32,977) |
Net working capital on a like-for-like basis fell by €852 thousand, mainly due to the increase in trade payables, partially offset by an increase in inventories as a result of higher purchase volumes of products held for sale. There was also an increase in trade receivables, particularly in relation to Infocommerce B2B activities.
In the item "Other current assets" there was a substantial increase in prepaid expenses, including €2.1 million in payments for advertising costs to the Mondadori Group to acquire space on the Mediaset networks, which is to be utilised in the three-year period 2016-2018 but for which the promotional campaigns were launched in the latter part of 2016.
The table below provides a breakdown of Net Working Capital:
| (€ thousands) | 31 December 2016 31 December 2015 | 31 December 2015 pro forma | |
|---|---|---|---|
| Inventories | 22,092 | 24,425 | 15,516 |
| Trade receivables and other accounts receivable | 9,798 | 17,081 | 5,167 |
| Trade and other payables | (36,874) | (39,121) | (24,610) |
| Trade Working Capital | (4,984) | 2,385 | (3,927) |
| Other current receivables and payables | 628 | (1,609) | 423 |
| Net Working Capital | (4,356) | 776 | (3,504) |
Fixed assets as at 31 December 2016 were down by €22,094 thousand compared with 31 December 2015, mainly due to the change in the scope of consolidation linked to the sale of Vertical Content and BNK4 – Saldi Privati S.r.l.; in particular, this contributed to a reduction of €25,763 thousand in intangible fixed assets, including €19,212 thousand in goodwill. On a likefor-like basis, there was an increase of €4,981 thousand. During the year, investments of €6,219 thousand were made in intangible fixed assets, particularly in relation to the platform and the development of the new ERP accounting and management system, €1,370 thousand in tangible assets, particularly in improvements and furnishings relating to the Group's new registered office and administrative headquarters, and €1,499 thousand in equity investments, mainly linked to the increase in the stake in the associate Il Post to 38.16%, and in the acquisition of 23% of Termostore S.r.l.
Shareholders' equity increased from €84,133 thousand to €92,843 thousand during the year, due mainly to comprehensive income, which came in at €10,053 thousand. Shareholders' equity also decreased by €1,794 thousand due to the purchase of treasury shares during the year, and there was an increase of €454 thousand in the stock option reserve due to the cost of employee incentive plans.
The breakdown of the Net Financial Position is provided below, in accordance with the CONSOB Communication of 28 July 2006 and in compliance with the ESMA/2011/81 Recommendation.
| Net Financial Position | ||
|---|---|---|
| (thousands of Euros) | 31 December 2016 | 31 December 2015 |
| (A) Cash | (243) | (109) |
| (B) Other cash and cash equivalents | (54,468) | (33,434) |
| (C) Stocks held for trading | - | - |
| (D) Liquidity (A)+(B)+(C) | (54,711) | (33,543) |
| (E) Current financial receivables | (1,700) | (738) |
| (F) Current financial payables | - | 3,081 |
| (G) Current portion of non-current debt | - | 1,250 |
| (H) Other current financial payables | 109 | 54 |
| (I) Current financial debt (F)+(G)+(H) | 109 | 4,385 |
| (J) Net current financial liquidity/debt (D)+(E)+(I) | (56,302) | (29,896) |
| (K) Non-current bank payables | - | 6,619 |
| (L) Bonds issued | - | - |
| (H) Other non-current payables | 126 | 72 |
| (N) Non-current financial debt (K)+(L)+(M) | 126 | 6,691 |
| (O) Net Financial (Liquidity)/Debt (J)+(N) | (56,176) | (23,205) |
As at 31 December 2016, the Group reported net liquidity of €56,176 thousand, representing a significant increase compared with 31 December 2015. The increase is due to the net resources coming in from the sale of Banzai Media Holding to Arnoldo Mondadori S.p.A. and of BNK4 – Saldi Privati to SRP Group, amounting to €52,228 thousand, net of resources absorbed by the investment activities described earlier, totalling €11,605 thousand, and by the purchase of treasury shares of €1,794 thousand, and the absorption of €8,160 thousand in financial resources for operational management. The absorption generated by operational management is partly due to the Group's strategy, which provides for a strong acceleration of revenues and market share, including through higher investments in marketing.
During the year, the Group repaid loan portions amounting to €1,417 thousand and made early repayment of two existing loans with a total residual value of €7,251 thousand using part of the available liquidity.
The table below provides a summary of the income statement of ePRICE S.p.A.:
| (Thousands of euros) | 2016 | 2015 |
|---|---|---|
| Total Revenues | 2,826 | 1,833 |
| EBITDA7 | (5,667) | (4,291) |
| Operating profit (EBIT) | (6,082) | (4,567) |
| Profit (loss) before tax (EBT) | (6,123) | (4,582) |
| Profit (loss) from continuing operations | (6,123) | (3,511) |
| Profit (loss) from discontinued operations | 11,718 | - |
| Net profit (loss) | 5,595 | (3,511) |
Revenues during 2016 amounted to €2,826 thousand, compared with the €1,833 thousand realised in 2015. These consisted almost exclusively of revenues from charge-backs to Group companies or former Group companies during the course of the year. The increase compared with the previous year is mainly due to the charge-back to the subsidiary ePRICE S.r.l. of advertising costs amounting to €850 thousand and to Banzai Commerce of certain costs incurred as part of the sale of the equity investment in BNK4 SaldiPrivati S.r.l.
EBITDA, negative by €5,667 thousand, worse by €1,376 thousand compared with 2015, mainly due to higher costs for services and higher employee costs.
These higher costs also had an impact on operating profit (EBIT), profit (loss) before tax (EBT) and net profit.
7 EBITDA is operating profit before amortisation, depreciation and impairment. EBITDA is thus defined as a measure used by the Issuer to monitor and evaluate operating performance. EBITDA is not identified as an accounting measurement either in Italian GAAP or international IFRS accounting standards and, therefore, should not be considered an alternative measurement for evaluating the operating result of the Group. Since the composition of EBITDA is not regulated by the applicable accounting standards, the methods employed by the Group may not be consistent with those adopted by others and therefore are not comparable. The Group calculates EBITDA as a percentage of revenue as the ratio of EBITDA to revenue.
The following table presents the statement of financial position of ePRICE S.p.A. reclassified by sources and uses:
| (Thousands of euros) | 31 December 2016 | 31 December 2015 |
|---|---|---|
| USES | ||
| Net Working Capital | 2,582 | 493 |
| Fixed assets | 61,189 | 76,741 |
| Long-term assets | 6,130 | 6,137 |
| Personnel fund | (267) | (214) |
| Long-term liabilities | (397) | - |
| Net invested capital | 69,237 | 83,157 |
| SOURCES | ||
| Net Financial Liquidity/Debt | 43,097 | 24,931 |
| Net Equity | (112,334) | (108,088) |
| FUNDING SOURCES TOTAL | (69,237) | (83,157) |
Net Working Capital increased by €2,089 thousand, mainly due to an increase in other current assets, which include €2,150 thousand of prepaid expenses relating to advertising costs.
Intangible fixed assets fell by €15,552 thousand, mainly due to the sale of the equity investment in Banzai Media Holding and the repayment of the shareholder loans.
Long-term assets relate mainly to deferred tax assets, and are essentially unchanged due to the decision not to make any provision for additional prepaid taxes on fiscally significant losses for the year.
Shareholders' equity increased by €4,246 thousand in the year, due mainly to comprehensive income, which came in at €5,586 thousand. Shareholders' equity also decreased by €1,794 thousand due to the purchase of treasury shares in the period, and an increase of €454 thousand in the stock option reserve due to the cost of employee incentive plans.
The breakdown of the Net Financial Position is provided below, in accordance with the CONSOB Communication of 28 July 2006 and in compliance with the ESMA/2011/81 Recommendation.
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| (A) Cash | (1) | (1) |
| (B) Other cash and cash equivalents | (43,259) | (31,208) |
| (C) Stocks held for trading | - | - |
| (D) Liquidity (A)+(B)+(C) | (43,260) | (31,209) |
| (E) Current financial receivables | - | (1,592) |
| (F) Current financial payables | ||
| (G) Current portion of non-current debt | - | 1,250 |
| (H) Other current financial payables | 67 | - |
| (I) Current financial debt (F)+(G)+(H) | 67 | 1,250 |
| (J) Net current financial liquidity/debt (D)+(E)+(I) | (43,193) | (31,551) |
| (K) Non-current bank payables | - | 6,620 |
| (L) Bonds issued | - | - |
| (H) Other non-current payables | 96 | - |
| (N) Non-current financial debt (K)+(L)+(M) | 96 | 6,620 |
| (O) Net Financial (Liquidity)/Debt (J)+(N) | (43,097) | (24,931) |
As at 31 December 2016, the Company reported net liquidity of €43,097 thousand. The change compared with 31 December 2015 (net liquidity of €24,931 thousand) is mainly due to resources from the sale of Banzai Media Holding, offset by the absorption of financial resources relating to investment activities, and to the absorption of financial resources for operational management. During the year, the outstanding loans were repaid early, in view of the available liquidity.
Development activities are of particular importance for the Group: the aim is to conceive new solutions and new products and services to be included in the range offered by ePRICE, and to continuously innovate existing products and services, including with regard to the introduction of new technologies and new business development models. The Group adopts an interdisciplinary approach, the greatest strength of which lies in the close collaboration between development, production and marketing, in order to respond quickly and effectively to the constant changes in the preferences expressed by consumers.
During 2016, the Group continued to invest in improving the quality of services offered to customers, in existing processes and in platform components to make them scalable for increasing volumes. The Group continued to develop the technology platform by integrating the components available on the market as much as possible. The benchmark architectural paradigm follows a structure which is exposed to services in which the software components can be integrated and cooperate through standard technologies.
The development of a platform for the management of specialist local services related to the world of household appliances (MDA) and the construction/activation of the premium delivery and professional installation network both continued. This network is being developed to provide a system to manage transportation and installation services, designed particularly for sales of Domestic appliances. The platform includes many innovative services: for example, the availability and scheduling of installers can be managed in real time; an operator monitors the customer order end-to-end (and a dedicated call centre is provided); a sequence of blocking questions that are nestable and differentiated by product type is presented to the customer while the features of the service are being defined (e.g. floor, availability and width of lift access, width of staircase, etc.); the customer is informed about the technical installer who will come to their home; and service prices are compared with a standard list.
The expansion of the access infrastructure and DataCenters has continued, specifically the storage has been increased and new security software for access to corporate applications has been purchased.
Logistics software platform development activities continued and a rental agreement was defined for the new fulfilment centre, which will be operational in early 2017.
The Group is also investing in new management platforms, such as the pricing platform, which will enable better monitoring of competition and customer behaviour, or the new WMS, which will allow for even more proactive management of the entire logistics function.
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Average | Actual | Average | Actual | |
| Senior managers | 8 | 6 | 8 | 9 |
| Middle managers | 31 | 21 | 39 | 42 |
| Clerical workers | 241 | 146 | 298 | 336 |
| Manual workers | 3 | 2 | 3 | 3 |
| Total | 175 | 390 |
The following table shows the average and actual number of employees by category:
The reduction in the actual and average workforce compared with the previous year is mainly attributable to the resources employed in the companies sold during the year.
Operating risk factors that could have a negative impact on the Group's and Parent Company's operations include:
Risks connected with exposure to unfavourable economic conditions in Italy and adverse macroeconomic scenarios
Risks connected with services provided by third parties and reliance on specific suppliers
Risks linked to changes in business models and technology
The Group and companies included in consolidation have taken a series of monitoring measures in order to mitigate the operating and financial risks noted above.
The identification, analysis and assessment of the main risks are accompanied by a search for measures to mitigate the impact or occurrence of the risk. The ePRICE Group uses a systematic approach in the management of strategic, operating and financial risks.
Based on relevant best practices, these risk management processes are carried out through the following phases:
and they are translated into action plans to mitigate "inherent risk" identified and/or into audits of the effectiveness of controls to reduce risks to an acceptable level ("residual risk").
ePRICE adheres to and complies with the Corporate Governance Code of Listed Italian Companies (the "Code"), and has adapted it to suit its own characteristics.
In order to meet the transparency obligations required by sectoral regulations, the "Report on Corporate Governance and the Ownership Structure" was prepared as required by Art. 123-bis of the Consolidated Finance Law and provides a general description of the Group's governance system and information on ownership structure, the organisational model adopted pursuant to Legislative Decree no. 231 of 2001 and the level of compliance with the Corporate Governance Code, including the main governance practices applied and the characteristics of the risk management and internal control system in relation to the financial reporting process.
This document is available at the Company's website at www.ePRICE.it, in the Investor section.
The Remuneration Report, which was prepared pursuant to Art. 123-ter of the Consolidated Finance Law, is available on the Company' s website at www.ePRICE.it, in the Governance section.
The Issuer has exercised the option to waive the obligation provided for in Art. 70, para. 6 and Art. 71, para. 1 of the Issuer Regulations, as defined by Art. 70, para. 8 and Art. 71, para. 1-bis of the Issuer Regulations.
The following table summarises the reconciliation between the profit and the shareholders' equity of ePRICE S.p.A. as shown in the separate financial statements and the respective values of the ePRICE Group as shown in the consolidated financial statements:
| Profit | Shareholders' Equity | |
|---|---|---|
| ePRICE S.p.A. | 5,596 | 112,335 |
| IFRS profits of the subsidiaries and the difference between book value and their shareholders' equity |
6,626 | (19,382) |
| Minority interest in income of associates not included in the financial statements | (79) | (180) |
| Consolidation differences allocated to intangible fixed assets, net of tax effect | (75) | 70 |
| ePRICE Group | 10,068 | 92,843 |
In January 2016, the Group increased its equity investment in associate "Il Post" from 24.01% to 38.16% by buying the shares of some shareholders and then carrying out a capital increase, for a total investment of approximately €793 thousand.
On 8 June 2016, the sale of the entire equity investment held in Banzai Media Holding to Arnoldo Mondadori Editore S.p.A. was completed. The scope of the transaction includes the entire investment in Banzai Media Holding S.r.l., with the underlying investments listed below:
| Name | Activity | Ownership percentage |
|---|---|---|
| Banzai Media Holding S.r.l. | Subholding company | 100 |
| Banzai Media S.r.l. | Vertical Content | 100 |
| Banzai Direct S.r.l. | Vertical Content | 100 |
| MyTrainerCommunity S.r.l. | Vertical Content | 100 |
| AdKaora S.r.l. | Vertical Content | 100 |
| Bobo Software S.r.l. | Vertical Content | 100 |
The scope did not include the "News" segment. ePRICE later acquired from Banzai Media Holding the equity investment in associate "Il Post" and created the wholly-owned subsidiary Giornalettismo S.r.l. (70% of which it subsequently sold to third parties, while still holding 30% as at 31 December 2016), which owns the eponymous website and has several employment contracts.
In August 2016, the company transferred its registered office and administrative headquarters to Via San Marco, 29, Milan, from its premises at Corso Garibaldi and Via Vico. As well as improving logistical efficiency and giving the Group more space, the relocation will generate savings in rental costs.
On 3 November 2016, the sale of the entire equity investment held in BNK4 – Saldi Privati S.r.l. to SRP Group S.A. was completed. At the same time, a five-year agreement was signed in relation to logistics management and fulfilment activities for the future scope of the Italian operations of Showroomprivè.
In December 2016, the Group invested €700 thousand in Termostore, the first start-up in Italy to have developed a full-service model for the installation and maintenance of heating and air-conditioning equipment. In February 2017, the Group invested a further €300 thousand in the company, increasing its stake to 43%.
L'assemblea degli azionisti del 20 dicembre 2016 ha approvato il cambio di denominazione sociale da Banzai S.p.A. in ePRICE S.p.A.; in data 30 gennaio 2017 il registro delle imprese ha omologato il cambio di denominazione.
Contractual relations between the ePRICE Group and its associated companies during the year consisted mainly of commercial transactions concluded on normal market terms and conditions.
The effects of related-party transactions are shown in the statement of assets and liabilities, in the income statement and in the related explanatory notes.
No significant events affecting this financial report occurred between the closing date for the year and the approval of this report.
In February 2017, the Group invested a further €300 thousand in the capital of Termostore, increasing its holding to 43%.
Also in February 2017, the Group completed the sale of the equity investment held in Uollet S.r.l.
The 2017-2021 business plan provides for the Group's share of the Tech & Appliance market to increase from 15% to 21% in the next five years, thanks to the development of four strategic lines of action, already partially indicated at the time of the IPO (and partly implemented):
The strategy described above will enable ePRICE to achieve its medium-term objectives:
Gross operating margin (EBITDA) of 4-6% in the medium term, with slightly less than half of this deriving from Marketplace and services. The strong growth will also be supported by a cost optimisation plan.
Gross operating margin (EBITDA) and Operating Cash Flow break even in 2018.
To our Shareholders,
We submit the financial statements of ePRICE S.p.A. as at 31 December 2016 for your approval. These financial statements report a profit of €5,595,575, to allocate €163,489.22 to the Legal Reserve, which would thus amount to €164,159.40 or 20% of the share capital.
As regards the residual profit of €5,432,085.78, we propose to distribute a dividend of €0.13 to each of the 40,176,338 shares entitled to one, including the treasury shares, for a total amount of €5,222,923.94.
You are therefore invited to approve the financial statement for the year ended 31 December 2016 and the following proposal for allocation of the profit:
To the Legal Reserve: €163,489.22
Dividend of €0.13 to 40,176,338 shares for € 5,222,923.94.
€209,161.84 to be carried forward.
Milan, 15 March 2017 The Board of Directors
| (In thousands of Euros) | Notes 31 December 2016 | Of which related | parties31 December 2015 | Of which related parties |
|
|---|---|---|---|---|---|
| NON-CURRENT ASSETS | |||||
| Plant and equipment | 1 | 3,013 | 3,113 | ||
| Intangible assets | 2 | 26,853 | 49,475 | ||
| Investments in associates | 3 | 2,468 | 2,468 | 1,114 | 1,114 |
| Non-current financial assets | 4 | 1,220 | 211 | 1,946 | 933 |
| Other non-current assets | 5 | 273 | 214 | ||
| Deferred tax assets | 6 | 9,723 | 11,906 | ||
| NON-CURRENT ASSETS TOTAL | 43,550 | 67,768 | |||
| CURRENT ASSETS | |||||
| Inventories | 7 | 22,092 | 24,425 | ||
| Trade receivables and other receivables | 8 | 9,798 | 309 | 17,081 | 376 |
| Other current assets | 9 | 12,285 | 7,594 | ||
| Cash and cash equivalents | 10 | 54,711 | 2,722 | 33,543 | 22,705 |
| CURRENT ASSETS TOTAL | 98,886 | 82,643 | |||
| ASSETS TOTAL | 142,436 | 150,411 | |||
| LIABILITIES AND NET EQUITY | |||||
| NET EQUITY | |||||
| Share capital | 821 | 821 | |||
| Reserves | 81,954 | 94,068 | |||
| Profit (loss) for the year | 10,068 | (10,756) | |||
| TOTAL NET EQUITY | 11 | 92,843 | 84,133 | ||
| NON-CURRENT LIABILITIES | |||||
| Payables to banks and other lenders | 12 | 126 | 6,691 | ||
| Provisions for personnel | 13 | 2,130 | 3,741 | ||
| Provisions for risks and charges | 14 | 360 | - | ||
| Other non-current liabilities | 16 | 37 | 3,876 | ||
| TOTAL NON-CURRENT LIABILITIES | 2,653 | 14,308 | |||
| CURRENT LIABILITIES | |||||
| Trade and other payables | 15 | 36,874 | 1,009 | 39,121 | 427 |
| Payables to banks and other lenders | 12 | 109 | 4,385 | ||
| Other current liabilities | 16 | 9,957 | 8,464 | ||
| TOTAL CURRENT LIABILITIES | 46,940 | 51,970 | |||
| TOTAL LIABILITIES | 49,593 | 66,278 | |||
| TOTAL NET EQUITY AND LIABILITIES | 142,436 | 150,411 |
| (In thousands of Euros) | Notes | 2016 | Of which related parties |
2015* | Of which related parties |
|---|---|---|---|---|---|
| Revenue | 17 | 205,398 | 1,495 174,057 | 1,754 | |
| Other income | 18 | 2,280 | 1,168 | ||
| Costs for raw materials and goods for resale | 19 (166,297) | (143,416) | |||
| Costs for services | 20 | (40,669) | 2,467 (32,237) | 304 | |
| Of which non-recurring | (312) | (145) | |||
| Personnel expenses | 21 | (9,852) | (7,689) | ||
| Of which non-recurring | (456) | (664) | |||
| Depreciation, amortisation and impairment | 22 | (4,259) | (3,036) | ||
| Other fees | 23 | (584) | (719) | ||
| Operating profit (loss) | (13,983) | (11,872) | |||
| Financial expenses | 24 | (182) | (266) | ||
| Financial income | 24 | 216 | 23 | 236 | 31 |
| Minority interest in income of associates | 25 | (79) | (270) | ||
| Loss of value of financial assets | 26 | (668) | |||
| Profit (loss) before tax from continuing operations | (14,696) | (12,172) | |||
| Income taxes | 27 | (18) | 2,608 | ||
| Profit (loss) from continuing operations | (14,714) | (9,564) | |||
| Net profit (loss) from divestitures or discontinued operations |
28 | 24,782 | (1,192) | ||
| Profit (loss) for the year | 10,068 | (10,756) | |||
| Other components of comprehensive income: That will not subsequently be reclassified into profit (loss) for the year |
|||||
| Employee benefits | (20) | 235 | |||
| Tax effect | 5 | (56) | |||
| Total | (15) | 179 | |||
| That will subsequently be reclassified into profit (loss) for the year |
|||||
| Comprehensive profit/(loss) | 11 | 10,053 | (10,577) | ||
| Earnings per share | 29 | 0.25 | (0.27) | ||
| Diluted earnings per share | 29 | 0.23 | (0.25) |
* restated pursuant to IFRS 5
| (In thousands of Euros) | 2016 | Of which related 2015* parties |
Of which related parties |
|---|---|---|---|
| NET CASH FLOW FROM OPERATIONS | |||
| Net result from operations | (14,714) | (9,564) | |
| Adjustments to reconcile profit for the year with cash flow generated | |||
| by operating activities: | |||
| Depreciation and Amortisation | 4,105 | 2,976 | |
| Bad debt provision | 155 | 60 | |
| Employee benefit fund provision | 544 | 475 | |
| Inventory write-down | 276 | 26 | |
| Employee benefit fund change | (394) | (159) | |
| Change in deferred tax assets and liabilities | 17 | (2,557) | |
| Share of the result pertaining to associated companies | 79 | 270 | |
| Impairment losses on non-current assets | 668 | 0 | |
| Change in other non-current liabilities | 35 | (170) | |
| Other non-monetary items | 454 | 98 | |
| Changes in working capital | |||
| Change in inventories | (6,853) | (7,891) | |
| Change in trade receivables | (4,787) | (65) (1,741) | (134) |
| Change in other current assets | (1,290) | (2,267) | |
| Change in trade payables | 12,263 | 582 7,192 |
180 |
| Change in other payables | 1,282 | 222 | |
| Cash flow from discontinued operations | - | 405 | |
| NET CASH FLOW GENERATED (ABSORBED) BY OPERATIONS | (8,160) | (12,625) | |
| NET CASH FLOW FROM INVESTMENT ACTIVITIES | |||
| Acquisition of tangible assets | (1,370) | (1,260) | |
| Disposal of tangible assets | 24 | ||
| Change in other non-current assets | (121) | (77) | |
| Acquisition of intangible assets | (6,219) | (6,333) | |
| Provision of financing | (270) | (270) (665) |
(665) |
| Purchase of associates | (1,499) | (1,499) (311) |
(311) |
| Other investments | (2,150) | 0 | |
| Cash flow from discontinued operations | 52,228 | (6,400) | |
| NET CASH FLOW GENERATED (ABSORBED) BY INVESTMENT ACTIVITIES |
40,623 | (15,046) | |
| CASH FLOW FROM FINANCING ACTIVITIES | |||
| Financial payables | (8,539) | 4,380 | |
| Share capital increase | - | 50,086 | |
| Current financial receivables | (962) | (451) | |
| Treasury shares | (1,794) | - | |
| Cash flow from discontinued operations | - | (2,180) | |
| NET CASH FLOW ABSORBED BY FINANCING ACTIVITIES | (11,295) | 51,835 | |
| (Decrease)/Increase in cash and cash equivalents | 21,168 | 24,164 | |
| CASH AND CASH EQUIVALENTS AT THE START OF THE YEAR | 33,543 | 9,379 | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 54,711 | 33,543 |
* restated pursuant to IFRS 5
| Share capital |
Share premium |
Legal reserve |
Treasury shares |
Stock Option reserve |
Other capital reserves |
Retained earnings (losses) |
FTA Reserve |
Employee Total benefits |
|
|---|---|---|---|---|---|---|---|---|---|
| Balance as at 31 December 2015 |
821 | 124,153 | 1 | (791) | 221 | 538 | (39,289) | (1,350) | (172)84,133 |
| Result for the year | 10,068 | 10,068 | |||||||
| Other components of comprehensive income: that will not subsequently be reclassified into profit |
0 (15) (15) |
||||||||
| (loss) for the year that will subsequently be reclassified into profit (loss) for the year |
0 | ||||||||
| Total income | 10,068 | (15)10,053 | |||||||
| Transactions on treasury shares |
(1,794) | (1,794) | |||||||
| Reclassification pursuant to IFRS 5 |
(121) | (844) | 864 | 101 0 |
|||||
| Share-based payment | 454 | 454 | |||||||
| Balance as at 31 December 2016 |
821 | 124,153 | 1 | (2,585) | 554 | 538 | (30,065) | (486) | (86)92,843 |
| Share capital |
Share premium |
Legal reserve |
Treasury shares |
Stock Option reserve |
Other capital reserves |
Retained earnings (losses) |
FTA Reserve |
Att. Employee benefits |
Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 31 December 2014 |
653 | 75,607 | 1 | (791) | 0 | 538 | (31,193) | (1,350) | (351) 43,114 | |
| Result for the year | (10,756) | (10,756) | ||||||||
| Other components of comprehensive income: that will not subsequently be reclassified into profit (loss) for the year that will subsequently be reclassified into profit (loss) for the year Total income |
- | - | - | - | (10,756) | - | 179 | 179 179(10,577) |
||
| Share capital increase Other share capital operations Share-based payment |
168 | 51,206 | 221 | - | 51,374 - 221 |
|||||
| Allocation of the result | (2,660) | 2,660 | - | |||||||
| Balance as at 31 December 2015 |
821 | 124,153 | 1 | (791) | 221 | 538 | (39,289) | (1,350) | (172) 84,133 |
The consolidated financial statements of the ePRICE Group as at 31 December 2016 were approved by the Board of Directors on 15 March 2017.
The consolidated financial statements for the year ended 31 December 2016 (hereinafter, the "Consolidated Financial Statements") were prepared in accordance with the provisions of Regulation EC 809/2004 and pursuant to the International Financial Reporting Standards issued by the International Accounting Standards Board and adopted by the European Union (IFRS).
"IFRS" refers to all International Financial Reporting Standards, all International Accounting Standards (IAS) and all interpretations of the International Financial Reporting Interpretations Committee(IFRIC), previously called the Standard Interpretations Committee (SIC), which, at the date of approval of the consolidated financial statements, had been endorsed by the European Union in accordance with the procedure provided for by Regulation (EC) 1606/2002 of the European Parliament and of the Council of 19 July 2002.
The Consolidated Financial Statements include the consolidated statement-of financial position, consolidated comprehensive income statement, consolidated cash flow statement and consolidated statement of changes in shareholders' equity. The Group has chosen to prepare the statement of comprehensive income, which includes profit (loss) for the year as well as changes in shareholders' equity relevant to income statement items which, by express provision of the international accounting standards, are recognised as components of shareholders' equity.
The Consolidated Financial Statements were prepared on the basis of the financial statements of the parent company, ePRICE S.p.A., and of the subsidiaries which it directly or indirectly controls, as approved by the respective shareholders' meetings or designated governing bodies and adjusted as necessary for compliance with IFRS. Subsidiaries are fully consolidated as of the acquisition date, i.e. the date at which the Group takes control, and cease to be consolidated as of the date at which control is transferred outside the Group. A company is able to exercise control if it is exposed or entitled to variable returns arising from its relationship with the investee, and can also use its power to affect said returns.
Specifically, a company is able to exercise control if, and only if, it has:
exposure or entitlement to variable returns arising from its relationship with the investee;
the capacity to exercise its power over the investee to affect its returns.
The Group reconsiders whether it has control over an investee and if the facts and circumstances indicate that there have been changes in one or more of the three relevant elements for the purpose of defining control. A subsidiary is consolidated when the Group obtains control over it and is deconsolidated when the Group loses that control. The assets, liabilities, revenue and costs of the subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date on which the Group obtains control until the date on which the Group no longer exercises control over the company.
The profit (loss) for the year and each of the items of other comprehensive income are attributed to the shareholders of the parent company and to minority interests, even if this results in a negative balance for the latter. When necessary, the appropriate adjustments are made to the financial statements of the subsidiaries to ensure that they comply with Group accounting policies. All assets and liabilities, shareholders' equity, revenue and costs, and intra-Group cash flows relating to transactions between Group entities are fully eliminated upon consolidation.
When the portion of shareholders' equity held by the parent company changes, but there is no loss of control, that change must be recognised in shareholders' equity. If the Group loses control, it must:
The scope of consolidation as at 31 December 2016 was substantially different from that of 31 December 2015, following the sale to the Mondadori Group of Banzai Media Holding and its subsidiaries, which constituted the "Vertical Content" segment, and the sale of BNK4 – SaldiPrivati S.r.l. to the Showroomprivè Group. Following these sales, the scope of consolidation as at 31 December 2016 was as follows:
| Name | Activity | Registered offices | Ownership percentage |
|---|---|---|---|
| ePRICE S.p.A. | Parent Company | Italy | - |
| Banzai Commerce S.r.l. | Subholding company | Italy | 100 |
| ePRICE S.r.l. | e-Commerce | Italy | 100 |
The Consolidated Financial Statements are presented in euros, which is the functional and presentation currency of the parent company, ePRICE S.p.A., and the other Group companies. If companies belonging to the Group are corporations organised under Italian law, and carry out their business activities in Italy, there is no requirement to translate their financial statements into euros.
Foreign currency transactions are initially recognised at the exchange rate (with reference to the functional currency) in effect at the transaction date. Cash assets and liabilities denominated in foreign currency are retranslated into the functional currency at the exchange rate in effect at the reporting date. Any exchange differences are recognised in the income statement. Noncash entries, valued at historical cost in foreign currency, are translated using the exchange rates in effect at the date of initial recognition of the transaction.
No exemptions to the IFRS were applied during the preparation of these consolidated financial statements.
The Consolidated Financial Statements were prepared according to the principle of historical cost and the assets and liabilities in the Group financial statements are classified according to the current/non-current criterion.
The Consolidated Financial Statements are presented in euros. All amounts are rounded to the nearest thousand euros, unless otherwise indicated.
There are no changes compared to the accounting standards used in the previous year.
Plant and equipment are measured at purchase or production cost, net of accumulated depreciation and any impairment loss. The cost includes directly attributable charges incurred to make the assets ready for use and financial expenses, if they meet the requirements set forth in IAS 23.
Expenses for ordinary maintenance and repair are recognised directly in the income statement when incurred. Costs associated with the expansion, modernisation or improvement of structural elements that are owned or used by third parties are capitalised to the extent to which they comply with requirements for separate classification as an asset or part of an asset.
Plant and equipment held under financial lease agreements, through which the risks and benefits linked to ownership are substantially transferred to the Group, are recognised as Group assets at their current value or, if lower, at the present value of the minimum payments due for the lease, including any amount to be paid to exercise the purchase option. The assets are depreciated by applying the method and rates set forth below for property, plant and equipment, unless the term of the lease agreement is shorter than the useful life represented by those rates, and it is not reasonably certain that the ownership of the leased asset will be transferred at the natural expiry of the agreement. In that case, the depreciation period is identical to the term of the lease.
Leases in which the lessor substantially retains the risks and benefits linked to ownership of the assets are classified as operating leases. The costs of operating leases are recognised on a straight-line basis in the income statement for the term of the lease agreement.
Depreciation is recognised on a straight-line basis by applying rates that make it possible to depreciate the assets until the end of their useful life.
The table below shows the depreciation rates applied by the Group to individual categories of plant and equipment, which remained unchanged from the previous year, based on their estimated useful life:
| Category | Rate |
|---|---|
| Data processing centre equipment | 20% |
| Other equipment | 15% |
| Display systems | 20%-50% |
| Office furniture | 12% |
| Fixtures | 12% |
| Office machinery | 20%-33% |
| Motor vehicles | 25%-33% |
The useful life of property, plant and equipment and their residual values are revised and updated, where necessary, when the financial statements are prepared.
The acquisition of subsidiaries is accounted for using the acquisition method (IFRS 3).
The identifiable assets acquired and liabilities assumed are measured at fair value at the acquisition date. The consideration transferred in a business combination includes the fair value at the acquisition date of the assets and liabilities transferred and the equity interests issued by the Group, as well as the fair value of any potential consideration and incentives featured in share-based payments recognised by the acquired company. If the business combination entails the settlement of a preexisting relationship between the Group and the acquired company, the price to settle that pre-existing relationship, as established in the contract, or the off-market value of the element, whichever is lower, is subtracted from the consideration transferred and recognised under other costs.
A contingent liability of the acquired company is assumed in a business combination only if the liability represents a present obligation that arises from past events and if its fair value can be reliably determined.
For each business combination, any minority interest in the acquired company is measured at fair value, or in proportion with the minority interest's share in the acquired company's identifiable net assets.
Goodwill arising from the acquisition is recognised as an asset and initially measured as the excess between the consideration transferred and the net value at the acquisition date of the identifiable assets acquired and the identifiable liabilities assumed.
If a business combination is carried out in stages, the equity investment held in the acquired company previously is recalculated at its fair value at the acquisition date, and any resultant gain or loss is recognised in the consolidated income statement.
The acquisition-related costs are recognised in the consolidated income statement in the periods in which those costs were incurred and the services were received, with the sole exception of costs of issuing debt or equity securities.
Trademarks are considered assets with an indefinite useful life and therefore are not amortised, but are subject to impairment tests in accordance with IAS 36.
Goodwill is calculated as the excess of the sum of considerations transferred in the business combination, the value of shareholders' equity attributable to minority interests and the fair value of any equity investment held previously in the acquired company, over the fair value of the net assets acquired and liabilities assumed at the acquisition date. If the value of the net assets acquired and liabilities assumed at the acquisition date exceeds the sum of considerations transferred, the value of shareholders' equity attributable to minority interests and the fair value of any equity investment held previously in the acquired company, that excess is immediately recognised in the consolidated statement of comprehensive income as income.
After initial recognition, goodwill is measured at cost, net of accumulated impairment. Goodwill is considered an asset with an indefinite useful life and therefore is not amortised, but is tested for impairment. For the purposes of impairment testing, the goodwill acquired as part of a business combination is allocated at the acquisition date to each cash-generating unit (CGU) of the Group expected to benefit from combination synergies. An impairment loss is recognised on goodwill if the recoverable amount of the goodwill is lower than its carrying amount. The recoverable amount is the fair value of the CGU net of disposal costs, or its value in use, whichever is greater. An impairment loss previously recognised on goodwill cannot be reversed. If the impairment loss arising from the test exceeds the value of goodwill allocated to the CGU, the residual excess is allocated to the other assets of the CGU in question in proportion with their carrying amount.
Impairment testing takes place in line with the provisions of IAS 36, i.e. at least annually, or whenever indicators of impairment are identified.
If goodwill is allocated to a CGU and the Group disposes of part of the assets of this unit, the goodwill associated with the asset disposed of is included in the carrying amount of the asset when the gain or loss on the disposal is calculated. Goodwill associated with the asset disposed of is calculated on the basis of the values for the asset disposed of and the retained portion of the CGU.
Intangible assets consist of non-monetary, identifiable elements with no physical substance, which can be controlled and are expected to generate future economic benefits. Such elements are recognised at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortisation and any impairment losses.
The costs incurred internally to develop new services and platforms constitute intangible assets generated internally and are recognised as assets only if all the following requirements are met:
Capitalised development costs include only expenses incurred that can be directly attributed to the process of developing new products and services.
Intangible assets with a finite useful life are amortised over their useful lives and are subject to fair-value testing whenever there are indications of possible impairment. The amortisation period and the amortisation method for intangible assets with a finite useful life are reviewed at least at the end of each financial year. Changes in expected useful life, or in the ways in which the future economic benefits associated with the asset are generated, are recognised through a change in the amortisation method or period, depending on the case, and are regarded as changes in accounting estimates. The amortisation rates for intangible assets with a finite useful life are recognised in the income statement for the year, in the appropriate non-monetary cost category for the function of the intangible asset.
The Group's estimates of the useful lives of the various intangible asset categories, which remained unchanged from the previous year, are shown below.
| Category | Useful life |
|---|---|
| Software, patents, concessions and licences | 3-5 years |
| Platform development | 3-5 years |
Profits or losses arising from the disposal of an intangible asset are measured as the difference between the net revenue from disposal and the carrying amount of the intangible asset, and are recognised in the income statement for the year in which the disposal takes place.
The Group checks for any indications of asset impairment at each reporting date. If these exist, or when an annual impairment test is due, the Group estimates the asset's recoverable amount. The recoverable amount is the greater of the fair value of the asset or CGU, net of disposal costs, and its value in use. The recoverable amount is determined for each individual asset or CGU. If the carrying amount of an asset or CGU is greater than its recoverable amount, the asset is impaired and is consequently written down to the recoverable amount.
When it calculates the value in use, the Group discounts estimated future cash flows to present value using a pre-tax discount rate that reflects market valuations of the present value of money and the specific risks of the asset. In calculating fair value net of disposal costs, recent market transactions are taken into account. If such transactions cannot be identified, an appropriate valuation model is used. These calculations are corroborated by appropriate valuation multiples, the price of equity securities listed for publicly traded investee companies and other available indicators of fair value.
The Group bases its impairment tests on detailed budgets and provisional calculations that are prepared separately for each Group CGU to which separate assets are allocated. These budgets and provisional calculations usually cover a period of three or five years. For longer periods, a long-term growth rate is calculated, which is used to project future cash flows beyond the third or fifth year.
Impairment of operating assets, including inventory impairment, is recognised in the income statement for the year in the respective cost categories for the impaired assets. For fixed assets that have already been revalued, the revaluation is booked to items of other comprehensive income. In these cases, the impairment is also recognised in items of other comprehensive income up to the level of the previous revaluation.
For assets other than goodwill, at each reporting date the Group checks for any indications that previously recognised impairment no longer exists (or has decreased). If so, it estimates the recoverable amount of the asset or the CGU. The value of an asset previously written down may be reversed only if there have been changes in the assumptions on which the calculation of the recoverable amount was based, after recognition of the most recent impairment. The write-back must not exceed the carrying amount that would have been calculated, net of depreciation and amortisation, assuming that no impairment had been recognised in previous years. The write-back is recognised in the income statement for the year, unless the fixed asset is not booked at a revalued amount, in which case the write-back is treated as a revaluation increase.
An associate is a company over which the Group exercises significant influence. Significant influence refers to the power to participate in determining the operational and financial policies of the investee without having control or joint control over it.
The analyses used to determine significant influence are similar to those used to determine control.
The Group's equity investments in associates are measured using the equity method.
Under the equity method, equity investments in associates are initially recognised at cost. The carrying amount of the equity investment increases or decreases to recognise the portion of profits and losses of the investee attributable to the parent company after the acquisition date. Goodwill associated with the associate is included in the carrying amount of the equity investment and is not subject to amortisation or separately tested for impairment.
The Group's share of the profit (loss) for the year of the associate is recognised in the income statement. Any changes in items of other comprehensive income relating to these investees are presented in the Group's statement of comprehensive income. In addition, if an associate recognises a change directly in shareholders' equity, the Group recognises its share, when applicable, in the statement of changes in shareholders' equity. Unrealised gains and losses arising from transactions between the Group and associates are eliminated in proportion with the shareholding in the associates.
The aggregated share attributable to the Group of the profit (loss) for the year of associates is recognised in the income statement for the year, after the operating profit (loss), and represents the profit (loss) net of taxes and shares of the associate attributed to other shareholders.
The financial statements of associates are prepared at the same date as the Group's financial statements. Where necessary, the financial statements are adjusted to ensure compliance with Group accounting principles.
Following the application of the equity method, the Group evaluates whether it is necessary to recognise an impairment loss on its equity investment in associates. On each reporting date, the Group evaluates whether there is objective evidence that the equity investments in associates have suffered an impairment loss. If they have, the Group calculates the amount of the loss as the difference between the recoverable amount of the associate and its carrying amount in its own financial statements. That difference is recognised in the income statement for the year in the item "share of profit (loss) of associates".
When significant influence over an associate is lost, the Group measures and recognises its remaining equity investment at fair value. The difference between the carrying amount of the equity investment at the date of loss of significant influence and the fair value of the remaining equity investment and the considerations received is recognised in the income statement.
Repurchased treasury shares are recognised at cost as a decrease to shareholders' equity. The acquisition, sale or cancellation of treasury shares does not give rise to any profit or loss in the income statement. If the shares are re-issued, the difference between the purchase value and the consideration is recognised in the share premium reserve. If options on shares are exercised during the period, they are satisfied with treasury shares.
When initially recognised, financial assets are classified, depending on the case, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial assets, available-for-sale financial assets or hedging derivatives, if the hedge is effective.
All financial assets are initially recognised at fair value in addition to transaction costs directly attributable to the acquisition, except for financial assets at fair value through profit or loss.
The purchase or sale of a financial asset requiring delivery within the time frame established by regulation or market convention (a 'regular-way trade') is recognised on the trade date, i.e. the date on which the Group has committed to purchase or sell the asset.
Financial assets are classified in four categories for measurement purposes subsequent to initial recognition:
This category includes assets held for trading and assets designated on initial recognition as financial assets at fair value with changes recognised in the income statement. Assets held for trading are all assets purchased in order to be sold or repurchased in the short-term. Derivatives, including separated derivatives, are classified as financial instruments held for trading unless they are designated as effective hedging instruments, as defined in IAS 39.
The Group has not classified any financial asset at fair value through profit or loss. Financial instruments at fair value through profit or loss are posted to the statement of financial position at fair value, while changes in fair value are recognised as financial income or expenses in the income statement.
Embedded derivatives contained in the host contract are accounted for as separated derivatives and recognised at fair value if their economic characteristics and risks are not closely related to those of the host contract, and the host contract is not held for trading or measured at fair value through profit or loss. These embedded derivatives are measured at fair value through profit or loss. A recalculation takes place only when a change in the terms of the agreement significantly changes the cash flows that would have otherwise been expected, or if a financial asset is reclassified to a category other than fair value through profit or loss.
Loans and receivables are non-derivative financial assets, with fixed or determinable payments, that are not quoted in an active market. After initial recognition, these financial assets are measured at amortised cost using the effective interest method, less impairment losses. The amortised cost is calculated to reflect any discounts, premiums associated with the purchase, fees or costs that are an integral part of the effective interest rate. The effective interest rate is recognised as financial income in the income statement. Impairment losses are recognised as financial expenses in the income statement. This category normally includes trade and other receivables.
Financial assets that are not derivatives and have fixed or determinable payments are classified as "held-to-maturity investments" if the Group has the intention and the capacity to retain them in the portfolio until maturity. After initial recognition, held-to-maturity financial investments are measured at amortised cost using the effective interest method, less impairment losses. The amortised cost is calculated to reflect any discounts, premiums associated with the purchase, fees or costs that are an integral part of the effective interest rate. The effective interest rate is recognised as financial income in the income statement. Impairment losses are recognised as financial expenses in the income statement.
Available-for-sale financial assets include shares and debt securities. Shares classified as available for sale are those that are not classified as held for trading or designated at fair value through profit or loss. Debt securities are included in this category if they are held for an indefinite period or if they may be sold to meet liquidity needs or due to changing market conditions. Equity investments in companies other than subsidiaries and associates are also included in this category.
After initial recognition, available-for-sale financial assets are measured at fair value (if this can be reliably determined) and their unrealised gains and losses are recognised as items of other comprehensive income in the reserve for available-for-sale assets, until the investment is derecognised – at which time the cumulative gain or loss is recognised as other operating income or expenses – or until there is an impairment loss, when the cumulative loss is deducted from the reserve and reclassified to the income statement as financial expenses. Interest received during the period in which available-for-sale financial assets are held is recognised as financial income using the effective interest method. The Group evaluates whether it still has the capacity and the intent to sell its available-for-sale financial assets in the short-term. If, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, it may choose to reclassify them if the management has the capacity and the intention to keep the assets for the foreseeable future or until maturity.
For financial assets reclassified from the available-for-sale category, the gain or loss recognised previously is amortised in the income statement on the basis of the remaining life of the investment, using the effective interest rate. The difference between the new amortised cost and the expected cash flows is amortised on the basis of the remaining useful life of the asset using the effective interest rate. If an impairment loss is subsequently recognised on the asset, the amount accounted for in shareholders' equity is reclassified to the income statement.
A financial asset (or, if applicable, part of a financial asset or part of a group of similar financial assets) is derecognised (i.e. removed from the statement of financial position) when:
the rights to receive cash flows from the asset have expired;
the Group has transferred to a third party the right to receive cash flows from the asset or assumed the contractual obligation to pay them in full and without delay and (a) has substantially transferred all risks and benefits of ownership of the financial asset, or (b) has not substantially retained or transferred all risks and benefits of the asset, but it has transferred control over it.
When the Group has transferred the rights to receive cash flows from an asset or has entered into an agreement based on which it retains the contractual rights to receive cash flows from the financial asset but also assumes a contractual obligation to pay the cash flows to one or more recipients (a pass-through), the Group evaluates whether and to what extent it has retained the risks and benefits inherent in ownership. If the Group has neither substantially retained nor transferred all risks and benefits, or it has not lost control over it, the asset continues to be recognised in the Group's financial statements to the extent of the Group's continuing involvement in the asset. In this case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured so as to reflect the rights and obligations that continue to be held by the Group.
At each reporting date, the Group verifies whether a financial asset, or a group of financial assets, has been subject to impairment. Impairment exists only when, subsequent to initial recognition, one or more events take place ("a loss event") that have an impact, which can be reliably estimated, on the estimated future cash flows of the financial asset or the group of financial assets. Evidence of impairment may include indications that a debtor or a group of debtors are having financial difficulty, are unable to meet their obligations, are unable to pay or late in paying interest or making significant payments, or are likely to be subject to bankruptcy proceedings or other forms of financial restructuring, and observable data that indicate a measurable decrease in estimated future cash flows, such as changes in context or in economic conditions associated with a financial crisis.
For financial assets accounted for at amortised cost, the Group first evaluates whether there is any impairment of each individually significant financial asset. This assessment is carried out collectively for financial assets that are not individually significant. If there is no evidence of impairment in the individually assessed financial asset, regardless of whether it is significant, the asset is included in a group of financial assets with similar credit risk and tested on a collective basis in order to identify any impairment. Assets considered individually when testing for impairment and for which impairment is recognised or remains are not included in the impairment test carried out on a collective basis.
The amount of any impairment loss identified is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding credit losses expected in the future that have not yet taken place). The present value of cash flows is discounted at the original effective interest rate of the financial asset.
The carrying amount of the asset is reduced by accounting for an impairment provision, and the loss is recognised in the income statement. Interest income (recognised as financial income in the income statement) continues to be estimated on the reduced carrying amount and is calculated by applying the interest rate used to discount the future cash flows in order to measure the impairment loss. The loans and relative impairment provisions are written off when there is no reasonable expectation of future recovery and the guarantees have been realised or transferred to the Group. If, in a subsequent year, the amount of the estimated impairment increases or decreases due to an event that takes place after the impairment loss is recognised, this is reflected by adjusting the provision. If a written-off asset is subsequently recovered, the reversal of the impairment loss is recognised in the income statement as a reduction to financial expenses.
The Group evaluates whether there is objective evidence of impairment of an available-for-sale financial asset or a group of available-for-sale financial assets at each reporting date.
For equity instruments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of the instrument below its cost. The term 'significant' is assessed with respect to the original cost of the instrument and the term 'prolonged' with respect to the period for which the fair value remains below the original cost. If there is evidence of impairment, the cumulative loss – measured as the difference between the purchase cost and the current fair value, less impairment losses on the financial asset recognised previously in the income statement – is reversed from items of other comprehensive income and recognised in the income statement.
The reversal of impairment losses on equity instruments is not recognised in the income statement. Increases in their fair value subsequent to the impairment are recognised directly in the statement of comprehensive income.
Impairment on debt instruments classified as available for sale is determined using the same criteria as those used for financial assets at amortised cost. However, the amount of the impairment is given by the cumulative loss, i.e. the difference between the amortised cost and the current fair value, less any impairment losses on the investment recognised previously in the income statement.
Future interest income continues to be estimated on the basis of the reduced carrying amount of the asset and is estimated using the interest rate applied to discount future cash flows in order to calculate impairment. Interest income is recognised as financial income. If the fair value of the debt instrument increases in a subsequent year and this increase can be correlated objectively with an event that took place after the impairment was recognised in the income statement, the impairment is adjusted, again in the income statement.
Inventories are recognised at purchase or production cost or at the net realisable value represented by the amount that the Company expects to receive from their sale in the ordinary course of business, whichever is lower. The cost of inventories is calculated as the specific cost for clearly identifiable goods for resale or, for fungible goods, using the FIFO method.
Cash and cash equivalents include cash, bank current accounts, deposits repayable on demand and other short-term and highly liquid financial investments that are readily convertible into cash, or that can be converted into cash within 90 days of the original date of acquisition, and carry an insignificant risk of a change in value.
Financial liabilities are classified when initially recognised as financial liabilities at fair value through profit or loss, loans and borrowings or derivatives designated as hedging instruments.
All financial liabilities are initially measured at fair value, to which are added, in the case of loans, borrowings and payables, the transaction costs directly attributable to them.
The Group's financial liabilities include trade and other payables, loans and borrowings, including current account overdrafts, guarantees granted and derivatives.
Measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss include liabilities held for trading and financial liabilities initially recognised at fair value through profit or loss.
Liabilities held for trading are all those sustained for the purpose of their resale in the short-term. This category also includes the derivative financial instruments bought by the Group which are not designated as hedging instruments in a hedging relationship as defined by IAS 39. Derivatives are classified as financial instruments held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the income statement for the year. Financial liabilities are designated at fair value through profit or loss as of the date of initial entry, only if the criteria of IAS 39 are satisfied.
After initial recognition, liabilities for loans are measured at amortised cost, using the effective interest rate method. Gains and losses are booked through profit or loss when the liability is extinguished, as well as through the amortisation process.
The amortised cost is calculated by measuring the acquisition discount or premium and fees or costs that are an integral part of the effective interest rate. Amortisation at the effective interest rate is included among financial expenses in the income statement.
Financial guarantees issued by the Group are contracts that stipulate a payment to reimburse the holder of a debt security for a loss it suffered as a result of the debtor's failure to pay by the contractual due date. Financial guarantee contracts are initially recognised as a liability at fair value, plus transaction costs directly attributable to the issuance of the guarantee. The liability is subsequently measured as either the best estimate of the disbursement required to meet the guaranteed obligation at the reporting date, or the amount initially recorded, net of cumulative amortisation, whichever is the greater.
A financial liability is derecognised when the underlying obligation is extinguished, cancelled or honoured. If an existing financial liability is replaced by another with the same lender, under materially different conditions, or the conditions of an existing liability are materially changed, this replacement or change is accounted for by derecognising the initial liability and recognising a new liability, with any differences in carrying value entered in the income statement.
A financial liability and asset may be offset and the net amount presented in the statement of financial position when there is a present legal right to offset the recognised amounts and there is an intention either to settle the residual net amount, or to realise the assets and extinguish the liabilities simultaneously.
Trade and other payables are initially recognised at fair value, net of directly attributable accessory costs. They are subsequently measured at amortised cost, applying the effective interest method. If there is a change, which can be estimated, in expected cash flows, the value of the liabilities is recalculated to reflect that change on the basis of the present value of the new expected cash flows and the internal rate of return determined initially.
The employee benefits disbursed at the time of or subsequent to termination of the employment relationship mainly consist of the employee severance pay governed by Italian law in Article 2120 of the Italian Civil Code. The employee severance pay is a defined-benefit plan, i.e. a formalised plan of benefits subsequent to the termination of the employment relationship which constitutes a future obligation and for which the Group bears actuarial and investment risk. As required by IAS 19R, the Group uses the Projected Unit Credit method to determine the present value of the obligations and the related current service cost; this calculation method requires the use of objective actuarial and accounting assumptions regarding demographic variables (mortality rate, personnel turnover rate) and financial variables (discount rate, future increases in wage levels). Actuarial gains and losses are immediately and fully recognised in the statement of comprehensive income, pursuant to IAS 19R.
For companies with more than 50 employees, the severance pay accrued following the entry into force of the pension reform (1 January 2007) is allocated to pension funds or to the treasury fund established at INPS (Italian Social Security Institution). For companies with fewer than 50 employees, the severance pay may remain with the company as was the case in previous years or be contributed to pension funds. The portion of accruing employee severance pay contributed to pension funds or to INPS must be classified as a defined-contribution plan since the Company's obligation consists exclusively of making contributions to the pension fund or to INPS. The liability for prior employee severance pay continues to be classified as a defined-benefit plan to be measured using actuarial assumptions.
From an accounting perspective, the actuarial valuation results in recognising the interest cost, i.e. the figurative cost that the Company would incur if it applied for a loan in the market for an amount equal to the severance pay, in the income statement under "Financial income/expenses", and the current service cost, i.e. the amount of benefits accrued during the year by employees who have not transferred benefits accrued after 1 January 2007 to supplementary pension plans, under "Employee costs". Actuarial gains and losses, which reflect changes in the actuarial assumptions, are recognised directly in shareholders' equity without ever being transferred to the income statement, and are included in the statement of comprehensive income.
Provisions for risks and charges are recognised for losses and charges of a particular nature that are certain or likely to exist, the amount and/or timing of which cannot, however, be determined. The provisions are recognised only when there is a current obligation (legal or constructive) for a future outflow of economic resources as a result of past events, and it is likely that such outflow will be required to fulfil the obligation. This amount is the best estimate of the cost of settling the obligation. The rate used to calculate the present value of the liability reflects current market values and takes into consideration the specific risk associated with each liability.
Where the effect of the time value of money is material and the obligation payment dates can be reliably estimated, the provisions are measured at the present value of the expected outflow using a rate which reflects market conditions, changes in the cost of money over time and the specific risk linked to the obligation. The increase in the value of the provision due to changes in the cost of money over time is accounted for as a financial expense.
No provisions are recognised for risks that will only possibly result in a liability. Instead, these risks are identified in the dedicated section on contingent liabilities.
The Group classifies non-current assets and disposal groups as held for sale or for distribution to shareholders of the parent company if their carrying amount will be recovered principally through sale or distribution rather than through continuing use. These non-current assets and disposal groups classified as held for sale or for distribution to shareholders are measured at the carrying amount or the fair value net of the costs of sale or disposal, whichever is lower. Disposal costs are additional costs directly attributable to the disposal, excluding financial expenses and taxes.
The condition for classification as held for sale is only deemed met when sale is highly probable and the asset or group under sale is available for immediate sale in its current condition. The actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the sale will be withdrawn. The management must be committed to the sale, which should be expected to be completed within one year from the date of classification. Similar rules also apply for assets and disposal groups held for sale.
The depreciation of plant and equipment and the amortisation of intangible assets cease when they are classified as available for sale or for distribution to shareholders.
Assets and liabilities classified as held for sale or for distribution to shareholders are presented separately under current assets and liabilities.
A disposal group is classified as discontinued operations if it is:
Assets held for sale are excluded from profit (loss) from continuing operations and are presented in the income statement on a single line as "Net profit (loss) from assets held for sale".
The ePRICE Group pays additional benefits to several directors, senior managers, clerical workers, consultants and employees through capital participation schemes (stock option plans). According to IFRS2 - Share-based payment - they are considered as payment in shares; therefore, the total amount of the current value of the stock options at the grant date is recorded in the income statement at cost. Changes in the current value after the grant date do not have an effect on the initial valuation. The cost of compensations, corresponding to the current value of the options at the grant date, is recorded under personnel costs on a straight-line basis for the period between the grant date and the maturity date, with the matching entry recorded under shareholders' equity.
Revenue from the sale of goods is measured at the fair value of the consideration received or due, taking account of the value of any returns, allowances, trade discounts and quantity-related premiums. Revenue is recognised when the significant risks and benefits associated with ownership of the assets are transferred to the acquirer, when the consideration is likely to be recovered, the relative costs or any refunding of goods may be reliably estimated, and if management ceases to exercise the ongoing level of activity usually associated with the ownership of the good sold. The transfer of risks and benefits usually coincides with delivery to the customer, which corresponds to the time of consignment of the goods to the carrier.
Revenue relating to the provision of services is recognised according to the stage of effective completion of the service at the reporting date, and is shown net of discounts and allowances. Specifically, the provision of advertising services is recognised based on outlay.
Costs are recognised when the good or service is acquired.
Current taxes and the tax benefit for the year are valued at the amount expected to be paid to the tax authorities or recovered. The tax rates and regulations used to calculate the amount are issued, or substantively enacted, as at the reporting date in the countries where the Group operates and generates its taxable income. Current taxes relating to elements directly recognised in shareholders' equity are also recognised in shareholders' equity and not in the income statement for the year. Management periodically reviews the tax return position if tax regulations are subject to interpretation, and makes provisions when appropriate.
Deferred taxes are calculated by applying the "liability method" to the temporary differences at the reporting date between the tax values of assets and liabilities and the corresponding carrying amounts.
Deferred tax liabilities are recognised on all taxable temporary differences, with the following exceptions:
the foreseeable future and that there will be sufficient future taxable amounts to allow the recovery of said temporary differences.
The portion of prepaid taxes, including those relating to previous tax losses, which is not offset by deferred taxes is recognised to the extent to which it is likely that future taxable income will be available against which such assets can be recovered, as inferred from the Group business plans and strategic guidelines. Deferred and prepaid taxes are measured using the tax rates expected to be applicable in the years in which the differences will be realised or extinguished, on the basis of the tax rates that have been enacted or substantively enacted at the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced if it is no longer likely that sufficient taxable amounts will be available in future to enable the receivable to be utilised, in whole or in part. The deferred tax assets not recognised are reviewed at each reporting date and recognised if it becomes likely that taxable income will be sufficient to allow for their recovery.
Current, deferred and prepaid taxes are recognised in the income statement, except for those relating to items directly charged or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity. Taxes are offset only when they are levied by the same taxing authority and there is a legal right to settle on a net basis.
Earnings (loss) per share is the ratio between the Group's profit (loss) and the weighted average number of ordinary shares outstanding during the year, excluding any treasury shares.
Diluted earnings (loss) per share is the ratio between the Group's profit (loss) and the weighted average number of ordinary shares outstanding during the year, excluding any treasury shares. To calculate diluted earnings per share, the weighted average of outstanding shares is adjusted to reflect the dilutive effects of the conversion of all instruments that could result in the issue of shares, while the Group's profit (loss) is also adjusted to reflect the effects, net of taxes, of the conversion.
To prepare the consolidated financial statements in accordance with IFRS, the directors must apply accounting principles and methodologies which, in certain circumstances, rely on judgements and estimates based on past experience and assumptions that are deemed reasonable and realistic on a case-by-case basis in the light of the circumstances. Such estimates and assumptions impact the amounts recognised and the disclosures provided in the financial statements. The actual amounts of the items based on those estimates and assumptions may differ from those reported in the financial statements, which reflect the occurrence of the event subject to estimation, due to the uncertainty of the assumptions and conditions on which the estimates are based.
A brief list is provided below of the Group's items that require greater subjectivity on the part of the directors when preparing estimates, and for which a change in the conditions underlying the assumptions used could have a significant impact on the Group's financial results.
Goodwill is tested for impairment annually, to ascertain whether the value of the asset has decreased. An impairment loss is recognised when the net carrying amount of the cash-generating unit to which the goodwill is allocated is greater than its recoverable amount (calculated as value in use or fair value, whichever is greater). The impairment test requires the directors to express subjective judgements based on information available within the Group and from the market, as well as past experience. In addition, when potential impairment is identified, the Group calculates it using the measurement techniques deemed appropriate. The same testing and measurement techniques are applied to intangible assets and property, plant and equipment with a definite useful life when indicators reveal that it may be difficult to recover the net carrying amount through use. The correct identification of indicators of potential impairment and the estimates made to calculate it depend on factors that could change over time, thereby impacting the directors' measurements and estimates.
The provision for bad debts reflects the directors' best estimate of losses on the portfolio of trade receivables. This estimate is based on expected losses by the Group, determined in the light of past experience for similar receivables, current and historical past-due receivables, close monitoring of credit quality and projections regarding economic and market conditions.
Prepaid taxes are accounted for based on the expectation that there will be sufficient taxable amounts in the future to recover them. The measurement of expected taxable amounts in order to account for prepaid taxes depends on factors that could change over time and significantly impact the recoverability of the prepaid taxes.
Provisions representing the risk of a negative outcome for the Company are recognised for legal and tax risks. The amount of the provisions recognised for those risks is the directors' best estimate at the reporting date. This estimate requires reliance on assumptions that depend on factors that could change over time and therefore could significantly impact the directors' current estimates used in preparing the Group's financial statements.
The provision for obsolete inventory reflects management estimates of the impairment expected by the Group, based on past experience and previous and forecast market trends.
The table below shows the new accounting principles and amendments which came into force on 1 January 2016 and were adopted by the Company:
The nature and impact of each new accounting principle and amendment are described below. Although these new principles and amendments have been applied for the first time in 2016, they have not had any material impact on the financial statements of the Company.
IFRS 14 Regulatory Deferral Accounts. IFRS 14 is an optional standard which enables a company, whose assets are subject to regulated tariffs and when it first adopts IFRS, to continue to apply most of the previous accounting standards adopted for amounts relating to rate regulation. A company which adopt IFRS 14 must present the balances relating to rate regulation on separate lines in the financial position and present the movements in these accounts in separate lines of the profit/(loss) statement for the year and those relating to the other items of comprehensive income statement. The standard requires that information be provided on the nature and associated risks of the regulated tariffs and of the latter's impact on the company's net assets. This standard is not applicable to the Group, as it has already adopted the IFRS; this standard will not be endorsed by the European Union.
Amendments to IAS 19 Employee Benefits: defined contribution plans
IAS 19 requires an entity to consider employee or third party contributions when accounting for defined benefit plans. When the contributions are linked to the service rendered, they should be allocated to the periods of service as a negative benefit. This amendment makes it clear that, if the amount of the contributions is independent of the number of years of service, the company is allowed to record these contributions as a reduction in the cost of the service for the period in which the service is provided, rather than to allocate the contribution to the periods of service. This amendment applies for the financial years from 1 February 2015 onwards. This amendment is not relevant for the Group.
Annual improvement cycle 2012-14
These improvements apply for financial years starting on 1 January 2016 or later. They include:
"The standards which are affected by this annual improvement are IFRS 2, IFRS 3, IAS 16, IAS 24 and IFRS 8.
IFRS 2 Share-Based Payments
This improvement applies prospectively and clarifies various points relating to the definition of the performance condition and the continued service condition which constitute the vesting conditions, including:
A performance condition must include a continued service condition
A performance objective must be achieved while the party in question continues to provide his services
A performance condition may refer to the transactions or business activities of a company, or to those of another company in the same Group
A performance condition may be a market condition or a condition not connected with the market
If for whatever reason the party in question no longer provides his services during the vesting period, the continued service condition is not met.
The definitions listed above are consistent with the way in which the Group, in previous periods, identified the performance condition and continued service condition which constitute the vesting conditions. However, these improvements have no effect on the accounting principles applied by the Group.
The amendment applies prospectively and makes it clear that all agreements relating to potential payments classified as liabilities (or assets) which result from a business combination, must subsequently be measured at fair value through profit or loss, whether or not they come within the scope of IFRS 9 (or IAS 39, as applicable). This is consistent with the accounting principles applied by the Group and therefore this amendment has had no impact.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible assets
This amendment is applied retrospectively and makes it clear that in IAS 16 and IAS 38 an asset may be revalued based on observable data either by adjusting the gross carrying amount of the asset to the market value or by calculating the market value of the carrying amount and adjusting the gross carrying amount proportionally so that the carrying amount is equal to the market value. Furthermore, accumulated depreciation is the difference between the gross carrying amount and the carrying amount of the asset. The Group has not recognised any revaluation adjustments during the reference period.
The amendment applies retrospectively and makes it clear that a management company (an entity which provides services for senior managers with key responsibilities) is a related party subject to related party disclosures. Moreover, an entity which uses the services of a management company should disclose the costs incurred for the management services. This change is not significant for the Group because it is does not receive management services from other companies.
The amendment applies retrospectively and makes it clear that: a company shall disclose the valuations made by management when applying the aggregation criteria under paragraph 12 of IFRS 8, including a brief description of the operating segments which have been aggregated and of the economic characteristics (e.g. sales, gross margin) used to define whether the segments are "similar". It is only necessary to reconcile the segment's assets with total assets if the reconciliation is presented at the highest decision making level, as is required for segment liabilities.
The Group has not applied the aggregation criteria required by IFRS 8.12. In previous periods, the Group presented the reconciliation of the segment assets with the total assets. From 2016, the Group operates in only one operating segment.
Amendments to IFRS 11 require that a joint operator accounting for the acquisition of an equity investment in a joint arrangement whose assets represent a business must apply the relevant standards of IFRS 3 regarding the accounting of business combinations. The modifications clarify also that in case the joint arrangements are maintained, the stake previously held in a joint arrangement is not re-measured at the time of acquisition of a further stake in the same joint arrangement. Moreover, an exclusion from the scope of IFRS 11 was added to clarify that the modifications do not apply when the parties sharing control, including the entity preparing the financial statements, are both controlled by the same ultimate controlling entity.
The modifications apply both to the acquisition of the initial shareholding in a joint arrangement, and to the acquisition of any further share in the same joint arrangement. The modifications must be applied prospectively for the years starting on 1 January 2016 or later; advanced application is permitted. No impact on the Company is expected as a result of application of these modifications.
Modifications to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
The modifications clarify the guideline contained in IAS 16 and in IAS 38 which state that the revenue reflects a model of economic benefits generated by business operations rather than economic benefits resulting from use of the goods. As a result, a method based on revenue cannot be used for amortisation of buildings, equipment or machinery and could be used only in very limited circumstances for the amortisation of intangible assets. The modifications must be applied prospectively for the years starting on 1 January 2016 or later; advanced application is permitted. No impact on the Company is expected as a result of application of these modifications given that the Group does not use methods based on revenue for the amortisation of its non-current assets.
Modifications to IAS 27: Equity Method in Separate Financial Statements
The modifications will permit the entities to use the net assets method for accounting of stakes in controlled companies, joint ventures and related companies in their separate balance sheet. The entities already applying the IFRS, deciding to modify the accounting criterion passing to the net assets method in their separate balance sheet must apply the change retroactively. The modifications are effective for the years starting on 1 January 2016 or later; advanced application is permitted. The Company does not intend to exercise this option.
These improvements apply for the years starting on 1 January 2016 or later. They include:
The assets (or discontinued groups) are generally disposed of by sale or distribution to the shareholders. The modification clarifies that the change from one to the other of these transfer methods should not be considered as a new transfer plan, but instead as a continuation of the original plan. Therefore, there is no interruption in the application of the requirements of IFRS 5. This modification must be applied prospectively.
The modification makes it clear that a service contract which includes a payment may result in continuous involvement in a financial activity. An entity must define the nature of the compensation and agreement based on the guidance contained in IFRS 7 regarding continuous involvement to evaluate whether the information is required. The definition of which service contract includes a continuous involvement must be made retroactively. In any case, the required information does not have to be presented for the years preceding the year when the modification is first applied.
The modification makes it clear that the requirements for information about the payment do not apply to interim summary financial statements, unless such information provides a material update on the information presented in the most recent annual financial statements. This modification must be applied retroactively.
The modification makes it clear that the market depth for high-quality corporate bonds must be defined with respect to the currency in which the bond is denominated, rather than the currency of the country where the bond is located. When there is no active market for high-quality company bonds in this currency, the respective rates of state bonds must be used. This modification must be applied prospectively.
The modification makes it clear that the information required in interim financial statements must be either presented in the interim financial statements or incorporated via cross-referencing between the interim balance sheet and the part of the interim financial report in which it is included (for example, the management report or risk report).
The information presented in the interim financial report must be available for the reader in the same terms and within the same time frame as for the interim financial statements. This modification must be applied retroactively.
No impact is expected for the Company as a result of application of these modifications.
Modifications to IAS 1 Disclosure Initiative
The modifications to IAS 1 - Presentation of Financial Statements clarify, rather than significantly amend, certain existing IAS 1 requirements. The modifications clarify:
The material requirement of IAS 1
The fact that specific lines in profit/(loss) for the year or other components of comprehensive income or in the statement of financial position can be disaggregated.
That the entities have flexibility with regard to the order in which the notes to the financial statements.
That the quota of other components of the overall income statement related to related companies and joint ventures accounted for using the net assets method must be presented in aggregate in a single line, and classified among positions that will not be subsequently reclassified in the income statement.
Moreover, the modifications clarify the requirements that apply when subtotals are presented in annual profit/ (loss) statements or other components of comprehensive income or in the statement of financial position. The modifications are effective for the years starting on 1 January 2016 or later; advanced application is permitted. No impact is expected for the Company as a result of application of these modifications.
Modifications to IFRS 10, IFRS 12 and to IAS 28 - Investment Entities: Applying the Consolidation Exception
The modifications deal with problems arising in the application of the exception regarding investment entities described in IFRS 10. The modifications to IFRS 10 make it clear that the exemption from presentation of consolidated financial statements applies to a parent company which is the subsidiary of an investment entity, when the investment entity values all its subsidiaries at fair value.
Moreover, the modifications to IFRS 10 make it clear that only one subsidiary of an investment entity, which is not itself an investment entity and which provides support services to the investment entity, is consolidated. All other controlled companies of the investment entity are valuated at fair value. The modifications to the IAS 28 permit the investor to maintain the fair value applied to related companies or joint ventures of an investment entity in the valuation of stakes in controlled companies in the application of the net assets method. The modifications must be applied retroactively and are effective for the years starting on 1 January 2016 or later; advanced application is permitted. No impact is expected for the Company as a result of application of these modifications.
Amendments to IAS 40 - Investment Property
On 8 December 2016, the IASB published the amendment to this standard. The purpose of these amendments is to clarify the application of paragraph 57 of IAS 40 which provides guidelines when there is a change in use of an asset which was not an investment property, and vice versa.
On 8 December 2016, the IASB published the "Annual Improvements to IFRSs: 2014 – 2016 cycle".
The main amendments that may be significant for the Group are contained in IFRS 12 - Disclosures of Interests in Other Entities. The document clarifies the scope of the standard, specifying that disclosure obligations, except for those in paragraphs B10-B16, also apply to investments in other companies classified as held for sale or for distribution, or as discontinued operations pursuant to IFRS 5. For venture capital and similar companies the other amendment refers to the valuation of interests in associates and joint ventures and provides the option to evaluate them at fair value with profits or losses recognised in income. The amendment clarifies that the choice is made for each individual investment.
On 8 December 2016, the IASB published this interpretation which indicates the foreign exchange rate to use in foreign currency transactions when payment is made or received in advance.
The standards and interpretations which had been issued but were not yet effective at the date of preparation of the Group's consolidated financial statements are described below. The Group intends to adopt these standards once they become effective.
In July 2014, the IASB issued the final version of IFRS 9 - Financial Instruments, which replaced IAS 39 - Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 combines all three aspects relating to the project for financial instrument accounting: classification and valuation, impairment and hedge accounting. The IFRS 9 is effective for the years starting on 1 January 2018 or later; advanced application is permitted. With the exception of hedge accounting, retroactive application of the standard is required, but it is not obligatory to provide the comparative information. With regard to hedge accounting, the standard generally applies prospectively, with some limited exceptions.
The Group will adopt the new standard as of its effective date. The Company does not expect any significant impact on its balance sheet or net assets.
IFRS 15 was issued in May 2014 and introduces a new model in five phases that will apply to revenue from contracts with customers. The IFRS 15 imposes reporting of revenues for an amount, to which the entity considers having the rights to in exchange for transfer of merchandise or services to the client.
The new standard will replace all present requirements of the IFRS regarding the recognition of revenue. The standard is effective for the years starting on 1 January 2018 or later with full retroactive or modified application. Advanced application is allowed.
The Company plans to apply the new standard as of the obligatory effective date, using the method of full retroactive application. Based on the evaluations of the 2016 activities, we do not expect the application of this standard to have a significant effect. However, because the Group is increasing the services it offers to its customers, we cannot preclude that more significant effects may be generated in the future.
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The amendments address the conflict between IFRS 10 and IAS 28 with reference to a loss of control in a subsidiary which is sold or allocated to an associated company or a joint venture. The amendments clarify that the profit or loss resulting from the sale or conferring of assets constituting a business, as defined in IFRS 3, between an investor and their related company or joint venture, must be fully recognised. Any profit or loss resulting from a sale or allocation of assets that do not constitute a business are therefore recognised only up to the portion held by third party investors in the related company or joint venture. The IASB has postponed the date of application of these amendments indefinitely, but should a company decide to apply them early, this must be done prospectively.
IAS 7 Disclosure Initiative – Amendments to IAS 7
The amendments to IAS 7 Statement of Cash Flows are part of the IASB disclosure initiative and require an entity to provide additional information to users of financial statements which enable them to evaluate the changes in liabilities arising from financing activities, including changes arising from cash flows and non-monetary changes. At the time of initial application of this amendment, the entity is not required to present comparative information on previous years. The amendments are effective for the years starting on 1 January 2017 or later; early application is permitted. The application of the amendments will require the Group to provide additional disclosures.
Modifications to IAS 12 - Income taxes
The IASB makes it clear how to account for deferred tax assets relating to unrealised losses on debt instruments measured at fair value. The amendments will be effective as of 1 January 2017.
IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2
The IASB has issued amendments to IFRS 2 Share-based payments covering three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.
Upon adoption, entities must apply the amendments without restating prior periods, however, retrospective application is allowed, all three amendments must be applied and other criteria fulfilled as well. The amendments are effective for the years starting on 1 January 2018 or later; early application is permitted. The Group is assessing the effects of these amendments on its own consolidated financial statements.
IFRS 16 – Leases
The standard stipulates that, unlike how it was in the past, the leases must be represented in assets and liabilities of companies, increasing the visibility of their assets and liabilities,
The IFRS 16 abolishes the distinction between operative leases and financial leases (for the lessee), treating all such agreements as financial leases.
Short-term agreements (up to 12 months) and those involving goods of low value are exempted from this treatment.
The new standard will be effective from 1 January 2019. Advance application is permitted as long at the recent standard IFRS 15 - Revenue from Contracts with Customers is also applied.
The Company has begun an analysis of the potential impacts of the application of this standard.
IFRS 8 defines an operating segment as a component:
For the purposes of IFRS 8 - Operating Segments, and following the disposal of the operating subsidiaries in the Vertical Content segment, the Group's activity consists of only the e-Commerce operating segment.
No operating segments have been combined to determine the reportable segments.
The "Plant and equipment" item amounted to €3,013 thousand as at 31 December 2016 (€3,113 thousand as at 31 December 2015), as shown below:
| As at 31 December 2016 | As at 31 December 2015 | |||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | Hist. cost | Acc. amort. | Net value | Hist. cost | Acc. amort. | Net value |
| Plant and equipment | 379 | (276) | 103 | 535 | (315) | 220 |
| Equipment | 924 | (377) | 547 | 1,162 | (365) | 797 |
| Electronic machinery | 2,400 | (1,266) | 1,134 | 4,191 | (2,545) | 1,646 |
| Electronic machinery under leasing | 705 | (347) | 358 | 503 | (328) | 175 |
| Fixtures and furnishings | 721 | (503) | 218 | 839 | (624) | 215 |
| Other assets | 805 | (152) | 653 | 181 | (121) | 60 |
| Total | 5,934 | (2,921) | 3,013 | 7,411 | (4,298) | 3,113 |
Note that, as at 31 December 2016, no owned operating assets were burdened by any type of guarantee issued to third parties, and that in the year, no indications emerged of any potential impairment of plant and equipment.
The following table shows changes in plant and equipment:
| (€ thousands) | As at 31 December | 2015 Increases Decreases Depreciation and Amortisation |
Chg. scope of cons. |
As at 31 December 2016 |
||
|---|---|---|---|---|---|---|
| Plant and equipment | 220 | 10 | (2) | (50) | (75) | 103 |
| Equipment | 797 | 71 | - | (134) | (187) | 547 |
| Electronic machinery | 1,646 | 238 | (18) | (478) | (254) | 1,134 |
| Electronic machinery under leasing |
175 | 202 | - | (19) | - | 358 |
| Fixtures and furnishings | 215 | 163 | (3) | (86) | (71) | 218 |
| Other assets | 60 | 686 | (1) | (60) | (30) | 653 |
| Total | 3,113 | 1,370 | (24) | (827) | (617) | 3,013 |
The main investments made during the year concerned improvements to third-party assets relating to the Group's new headquarters, in use since August 2016, and to new office fixtures, furnishings and equipment (including those acquired under financial leasing arrangements) necessary for the new premises.
The change in the scope of consolidation is due to the sale of the Vertical Content and Flash Sales divisions.
Intangible assets stood at €26,853 thousand (€49,475 thousand as at 31 December 2015) and break down as indicated below.
Intangible assets with an indefinite useful life consisted entirely of goodwill totalling €14,292 thousand (€33,504 as at 31 December 2015); the reduction compared with 31 December 2015 is due to the sale of the Vertical Content and Flash Sales segments.
The goodwill recognised as at 31 December 2016 refers to the excess of the purchase value over the fair value of the assets and liabilities acquired.
As at 31 December 2016, the intangible assets with an indefinite useful life were tested for impairment by comparing the recoverable amount of the CGUs with the net carrying amount of the related assets, including goodwill. The recoverable amount is the greater of the fair value of the asset, net of disposal costs, and its value in use, and is calculated as the present value of the future cash flows that are expected to be associated with the CGUs, discounted at a rate that reflects the specific risks of the individual CGUs at the valuation date.
Key assumptions used to calculate value in use and sensitivity to changes in the assumptions
The key assumptions used by the management are the estimate of future sales growth, cash flows from operations, terminal value growth rates and the discount rate (weighted average cost of capital - WACC). The determination of the residual value is based on the estimate of the value in use obtained as the current value of expected cash flows inferred from the guidelines to the 2017-2021 strategic plan. The impairment test relating to the Consolidated Financial Statements was approved by the Board of Directors on 15 March 2017.
The discount rates (WACC), defined as the weighted average cost of capital net of taxes, applied to expected cash flows are reported in the table below:
| Cash Generating Unit | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| e-Commerce | 8.23% | 9.18% |
The growth rate (g) used to define the cash flows of the CGUs as at 31 December 2016 was 1.00%.
The results of the impairment test showed that, as at 31 December 2016, the recoverable amount exceeded the carrying amount.
A sensitivity analysis was also performed and, in every case, the values in use was greater than the carrying amounts, even alternatively assuming the following changes in key parameters:
a 100-basis-point change in the discount rate;
Calculations were also made to determine the WACC, growth rate and percentage change in EBITDA which would individually render the recoverable amount equal to the corresponding carrying amount as at 31 December 2016:
| Terminal growth rate | n.a. |
|---|---|
| WACC | 19.0% |
| Change in EBITDA | -32.5% |
The terminal growth rate was not considered to be a significant parameter, insofar as the value in use equals the net invested capital specified in the guidelines of the 2017-2021 strategic plan.
The Group's directors therefore confirmed the value of goodwill recognised in the Consolidated Financial Statements.
It is noted that the Company has performed an annual analysis on the recoverability of other intangible fixed assets. This check is carried out annually by identifying the existence of impairment indicators. As at 31 December 2016, no impairment indicators were identified.
Intangible assets with a finite useful life stood at €12,561 thousand as at 31 December 2016 (€14,597 thousand as at 31 December 2015).
The following table provides a breakdown of the historical cost, accumulated amortisation and net carrying amount of intangible fixed assets as at 31 December 2016 and 31 December 2015:
| As at 31 December 2016 | As at 31 December 2015 | ||||||
|---|---|---|---|---|---|---|---|
| (In thousands of Euros) | Hist. cost | Acc. amort. | Net value | Hist. cost | Acc. amort. | Net value | |
| Software, patents, concessions and licences | 2,321 | (1,296) | 1,025 | 2,855 | (1,464) | 1,391 | |
| Platform development | 15,076 | (8,277) | 6,799 | 30,184 | (20,654) | 9,530 | |
| Other fixed assets | 788 | (750) | 38 | 1,997 | (1,423) | 574 | |
| Fixed assets under development | 4,699 | 4,699 | 3,102 | 3,102 | |||
| Total intangible assets | 22,884 | (10,323) | 12,561 | 38,138 | (23,541) | 14,597 |
The following table shows changes in intangible fixed assets during the year:
| (€ thousands) | As at 31 December 2015 |
Increases Decreases | Depreciation and Amortisation |
Reclassifications | Chg. scope of cons. |
As at 31 December 2016 |
|
|---|---|---|---|---|---|---|---|
| Software, patents, concessions and licences |
1,391 | 243 | - | (467) | - | (142) | 1,025 |
| Platform development | 9,530 | 3,110 | - | (2,726) | 1,079 (4,194) | 6,799 | |
| Other fixed assets | 574 | 4 | - | (84) | - | (456) | 38 |
| Fixed assets under development | 3,102 | 2,862 | - | - (1,079) |
(186) | 4,699 | |
| Total intangible assets | 14,597 | 6,219 | - | (3,277) | 0 | (4,978) | 12,561 |
The main investments made by the Group during the year were specific projects with the aim of developing innovative solutions for the creation and management of online platforms. They include internal employee costs and costs for services rendered by third parties. Expenses for research undertaken to obtain new knowledge and make discoveries are recognised in the income statement at the time that they are incurred.
Fixed assets under development, equal to €4,699 thousand (€3,102 thousand as at 31 December 2015), relate to projects under development specifically regarding the implementation of the new Group ERP and its related IT systems.
The changes in the year in investments in associates are indicated in the table below:
| (In thousands of Euros) | As at 31 December 2015 |
Share of profit (loss) |
Increases due to purchases |
Chg. scope | of cons.Reclassifications | As at 31 December 2016 |
|---|---|---|---|---|---|---|
| Investments in associates | 1,114 | (79) | 1,499 | (87) | 21 | 2,468 |
| Total equity investments in associates |
1,114 | (79) | 1,499 | (87) | 21 | 2,468 |
The breakdown of the item as at 31 December 2015 is as follows:
| As at 31 December 2016 | Registered offices | % shareholding held directly | Carrying amount |
|---|---|---|---|
| Il Post S.r.l. | Milan | 38.16% | 1,154 |
| Giornalettismo S.r.l. | Milan | 30.00% | 3 |
| Uollett S.r.l. | Milan | 41.00% | 0 |
| Ecommerce Outsourcing S.r.l. | Rho | 20.00% | 212 |
| Installo S.r.l. | Rovigo | 39.00% | 399 |
| Termostore S.r.l. | Reserves | 23.00% | 700 |
| Total equity investments in associates | 2,468 |
Equity investments in associates are booked in the Consolidated Financial Statements using the equity method, pursuant to IAS 28.
The increases for the year relate mainly to the acquisition of 23% of Termostore S.r.l., subsequently increased during the early months of 2017 to 43%, and to the increase in the equity investment in "Il Post" from 24.01% to 38.16% and the subsequent capital increase in that company for a total of €793 thousand. Good Morning Italia and Gold 5 were also deconsolidated during the year as part of the sale of Vertical Content to Mondadori.
Based on the available information and/or business plans concerning the individual associates, management believed that as at 31 December 2016 there were no impairment indicators.
The breakdown of other non-current financial assets is as follows:
| Total non-current assets | 1,220 | 1,946 | (726) |
|---|---|---|---|
| Loans to associates | 211 | 933 | (722) |
| Investments in other companies | 1,009 | 1,013 | (4) |
| Non-current financial assets | As at 31 December 2016 | As at 31 December 2015 | Change |
Equity investments in other companies have been measured at cost, in accordance with IAS 39, paragraph 46c, in the case of investments in equity instruments that do not have a quoted market price in an active market and for which the fair value cannot be reliably measured.
The balance of €1,009 thousand of equity investments in other companies decreased by €4 thousand as at 31 December 2016 due to the change in the scope of consolidation.
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Quadrante S.r.l. in liquidation | - | - |
| Interactive Thinking S.r.l. | 1,005 | 1,005 |
| Consortia and collective credit guarantee cooperatives | 4 | 8 |
| Total equity investments in other companies | 1,009 | 1,013 |
Based on the available information, management believed that as at 31 December 2016 there were no impairment indicators or objective evidence that the equity investments in other companies were impaired.
Quadrante S.r.l. in liquidation was entirely written down in previous years; it is not considered necessary to record the liabilities in the accounts because ePRICE has no legal obligations nor does it intend to provide support for this subsidiary.
Financial receivables of €211 thousand refer to the disbursement of interest-free loans, repayable on request, to associates. Specifically, most of the change during the year relates to the write-down of receivables from Uollet of €668 thousand and the deconsolidation of receivables from Gold 5.
Other non-current assets, which amount to €273 thousand (€214 thousand as at 31 December 2015), mainly include guarantee deposits for rentals, utilities and purchasing consortia; the increase compared with 31 December relates specifically to increased deposits to purchasing consortia in view of more goods moved.
This item incorporates the balance of prepaid taxes on tax losses which can be reported in future years and on the temporary differences between the value attributed to an asset or a liability in the financial statements and the tax value of the same asset or liability.
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Deferred tax | 9,723 | 11,906 |
The deferred assets recorded were considered to be recoverable in the period of the 2017-2021 plan, the guidelines for which were approved by the Board of Directors on 9 November 2016.
The Group has fiscally relevant losses of approximately a further 15 million which may be carried forward to future years, against which no deferred tax assets have been allocated.
The change for the year is mainly due to the deconsolidation of prepaid taxes relating to the companies in the Vertical Content segment and BNK4 SaldiPrivati S.r.l.
The breakdown of inventories is as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Goods | 22,092 | 24,425 |
| Total inventories | 22,092 | 24,425 |
The gross and net amounts of goods inventories break down as follows:
| Inventories | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Goods inventories | 22,492 | 25,139 |
| Provision for obsolete inventory | (400) | (714) |
| Total inventories | 22,092 | 24,425 |
Inventories of goods comprise assets acquired for subsequent resale on the e-Commerce platforms. The decrease compared with the previous year is mainly attributable to the sale of BNK4 SaldiPrivati S.r.l. On a like-for-like basis, there was an increase in inventories of €6,577 thousand, largely linked to the growth in volume of transactions. The provision for obsolete inventory has been adjusted to take into account the obsolescence risk for some slower moving goods.
Trade and other receivables totalled €9,798 thousand, compared with €17,081 thousand at the end of the previous year, as indicated below:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Trade receivables | 6,539 | 13,215 |
| Invoices to be issued | 3,447 | 4,615 |
| Provision for bad debts | (188) | (749) |
| Total trade and other receivables | 9,798 | 17,081 |
Receivables are recognised net of the relative provision for bad debts Please note that there are no receivables due in more than five years.
The substantial decrease compared with 31 December 2015 is due to the de-consolidation of the Vertical Content receivables and, to a lesser extent, of BNK4 SaldiPrivati S.r.l.
Allocations to the provision for bad debts are made for specific credit positions which present specific risks in order to reflect their presumed realisable value. The change during the year is shown below:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 | ||
|---|---|---|---|---|
| Opening provision | 749 | 741 | ||
| Increases | 144 | 60 | ||
| Uses/Releases | (21) | (52) | ||
| Change in scope of consolidation | (684) | - | ||
| Provision for bad debts | 188 | 749 |
The following table shows the clients' bill book before the provision for bad debts:
| Amounts (in € 000s) | As at 31 December 2016 | As at 31 December 2015 | ||
|---|---|---|---|---|
| To become due | 8,340 | 13,747 | ||
| Due for <30 days | 664 | 1,529 | ||
| Due for 30-90 days | 695 | 1,466 | ||
| Due for 90-180 days | 31 | 247 | ||
| Due for >180 days | 256 | 841 | ||
| Total due | 1,646 | 4,083 | ||
| Total | 9,986 | 17,830 |
The breakdown of other current assets is as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 | ||
|---|---|---|---|---|
| Tax credits | 3,187 | 3,207 | ||
| Deferred collection receivables | 1,700 | 738 | ||
| Other receivables | 4,099 | 1,184 | ||
| Advances to suppliers | 10 | 1,471 | ||
| Accruals and deferrals | 3,289 | 994 | ||
| Total other current assets | 12,285 | 7,594 |
Tax credits consist mainly of VAT credits of €1,871 and the tax credit deriving from the research and development activities carried out in 2015.
Deferred collection receivables include the proceeds from sales made just before the end of the year and paid by credit card but not yet credited at the date of the financial statements since they were finalised soon after the end of the period, and the receivables from logistics operators from whom payment on delivery is requested. The increase compared with the previous year is closely related to the increase in turnover and to greater incidence in payments on delivery.
Other receivables, totalling €4,099 thousand, include a deposit for €2,500 thousand paid by SRP Group into an escrow account against payment of the Retained Amount, which will mature at the end of 2017, and the price adjustment of €544 thousand relating to the sale of BNK4 SaldiPrivati, received at the start of 2017.
Prepayments and accrued income include, in particular, multi-year advertising prepayments of €2,150 thousand.
There are no prepayments and accrued income extending for more than five years.
The breakdown of cash and cash equivalents is as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 | ||
|---|---|---|---|---|
| Bank and postal deposits | 54,468 | 33,434 | ||
| Cash | 243 | 109 | ||
| Total cash and cash equivalents | 54,711 | 33,543 |
Cash and cash equivalents, denominated entirely in Euros, represents cash and cash equivalents at the reporting dates.
Cash and cash equivalents as at 31 December 2016 were free from any constraints or restrictions on use.
The increase in cash and cash equivalents in the period is mainly due to the cash coming in from sale of the shareholdings in Banzai Media Holding and BNK4 SaldiPrivati, net of the resources absorbed during the year.
Shareholders' equity increased from €84,133 thousand to €92,843 thousand in the period, due mainly to comprehensive income, which was a positive €10,053 thousand. Shareholders' equity also fell by €1,794 thousand due to the purchase of 550,175 treasury shares during the year, and there was an increase of €454 thousand in the stock option reserve associated with the cost of employee incentive plans.
The total number of treasury shares held by the company amounted to 835,425.
The extraordinary shareholders' meeting held on 22 December 2014 resolved, subject to the start of trading of the Company's shares on the MTA, on the adoption of a stock option plan for executive directors, contract workers and Group company employees (the "2015 Plan"). The 2015 Plan involves the allocation of up to 2,750,000 options, each of which entitles the holder to subscribe to one newly issued ordinary share. With regard to the Plan, on 14 May 2015 the Board of Directors of the Company approved the Plan Regulations and assigned a maximum of 1,100,000 options conferring the right to subscribe to one newly issued ordinary share for the amount of €6. After verification of the objectives inferable from the approval of the consolidated financial statements as at 31 December 2015 and the sale of the Vertical Content business, all first tranche options were unassigned or lapsed. On 15 October 2015, the Company's Board of Directors assigned another maximum 1,300,000 options to the Managing Director, conferring the right to subscribe to one newly issued ordinary share for the amount of €5.
The general shareholders' meeting of 14 April 2016 resolved to approve a stock option plan to award up to 1,700,000 warrants, each of which confers the right to subscribe to one newly issued ordinary share of ePRICE S.p.A., referred to as the '2016- 2018 Stock Option Plan', and a Stock Grant Plan to award a maximum of 280,000 ordinary shares of ePRICE S.p.A., referred to as the '2016-2018 Stock Grant Plan'. On 9 May 2016, the Company's Board of Directors assigned 363,900 options as the first tranche of the 2016-2018 Stock Option Plan to senior managers with key responsibilities at the Company and the subsidiaries, setting the strike price at €3.68, and assigned 75,263 shares as the first tranche of the 2016-2018 Stock Grant Plan to employees of the Company and the subsidiaries.
On 31 December 2016, following the departure of a number of persons who were beneficiaries of awards of stock options and stock grants and in view of the results achieved by the Group, consideration was given to the award of 975,000 stock options under the 2015 Plan, 195,375 stock options under the 2016-2018 Stock Option Plan and 43,326 stock grants for the 2016- 2018 Stock Grant Plan.
The following table shows the number and average weighted prices for the year (PMPE) of the options during the year:
| 2016 | 2016 | 2015 | 2015 | |
|---|---|---|---|---|
| PMPE | PMPE | |||
| Outstanding as at 1 January | 1,590,400 | 5.18 | - | |
| Allocated during the year | 363,900 | 3.68 | 2,400,000 | 5.46 |
| Cancelled/ did not mature during the year | 783,925 | 5.09 | 809,600 | 6.00 |
| Allocated during the year | - | - | ||
| Expired during the year | - | - | ||
| Outstanding as at 31 December | 1,170,375 | 4.57 | 1,590,400 | 5.18 |
| Exercisable as at 31 December | - | - |
The breakdown of non-current payables due to banks and other lenders as at 31 December 2016 is as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Due to banks | - | 6,619 |
| Due to other lenders | 126 | 72 |
| Total non-current payables due to banks and other lenders | 126 | 6,691 |
The breakdown of current payables due to banks and other lenders as at 31 December 2016 is as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Due to banks | - | 4,331 |
| Due to other lenders | 109 | 54 |
| Total current payables due to banks and other lenders | 109 | 4,385 |
The balance of payables to other lenders consists exclusively of payables to leasing companies and the increase for the year relates to the purchase of equipment for the new offices at via San Marco.
During the course of the year, the Group made early repayment of the two loans with UBI Banca; following this termination, the Group does not have any bank loans outstanding.
The tables below provide details of the loans outstanding as at 31 December 2015:
| (In thousands of Euros) As at 31 December 2015 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Lending institution | Loan type | Interest rate | Amount disbursed |
Year taken out |
Year of expiry |
Accounting balance |
Within 1 year |
From 1 to 5 years |
More than 5 years |
| UBI Banca Commercio e Industria |
Soft | 3-month Euribor + spread |
6,000 | 2015 | 2017 | 5,993 | 0 | 5,993 | - |
| UBI Banca Commercio e Industria |
Unsecured 3-month Euribor + spread |
2,500 | 2015 | 2017 | 1,876 | 1,250 | 626 | - | |
| Total bank loans | 8,500 | 7,869 | 1,250 | 6,619 | - |
During the year, the Group did not take out any loans in any currency other than Euros. Loans that matured during the year were duly repaid.
The breakdown of net financial debt as at 31 December 2016 is reported below, in accordance with the Consob Communication of 28 July 2006 and in compliance with the ESMA/2011/81 Recommendations:
| (thousands of Euros) 31 December 2016 |
31 December 2015 | |
|---|---|---|
| (A) Cash | (243) | (109) |
| (B) Other cash and cash equivalents | (54,468) | (33,434) |
| (C) Stocks held for trading | - | - |
| (D) Liquidity (A)+(B)+(C) | (54,711) | (33,543) |
| (E) Current financial receivables | (1,700) | (738) |
| (F) Current financial payables | - | 3,081 |
| (G) Current portion of non-current debt | - | 1,250 |
| (H) Other current financial payables | 109 | 54 |
| (I) Current financial debt (F)+(G)+(H) | 109 | 4,385 |
| (J) Net current financial liquidity/debt (D)+(E)+(I) | (56,302) | (29,896) |
| (K) Non-current bank payables | - | 6,619 |
| (L) Bonds issued | - | - |
| (H) Other non-current payables | 126 | 72 |
| (N) Non-current financial debt (K)+(L)+(M) | 126 | 6,691 |
| (O) Net Financial (Liquidity)/Debt (J)+(N) | (56,176) | (23,205) |
This item includes the recognition of severance pay related to employees of the Group companies, as provided for in Article 2120 of the Italian Civil Code, discounted according to the procedures governed by IAS 19.
The changes in severance pay during the course of the year and the previous year were as indicated below.
| (In thousands of Euros) | As at 31 December 2015 |
Service cost |
Interest cost |
Advances and settlements |
Actuarial gains/losses |
Chg. scope of cons. |
As at 31 December 2016 |
|---|---|---|---|---|---|---|---|
| Severance pay | 3,741 | 544 | 40 | (130) | (15) | (2,050) | 2,130 |
| Total provisions for employee benefits |
3,741 | 544 | 40 | (130) | (15) | (2,050) | 2,130 |
| (In thousands of Euros) | At 1 January 2015 |
Service cost |
Interest cost |
Advances and settlements |
Actuarial gains/losses |
Transfers | As at 31 December 2015 |
|---|---|---|---|---|---|---|---|
| Severance pay | 3,315 | 951 | 47 | (350) | (235) | 13 | 3,741 |
| Total provisions for employee benefits |
3,315 | 951 | 47 | (350) | (235) | 13 | 3,741 |
According to Italian legislation (Article 2120 of the Italian Civil Code), severance pay is seen as a "defined benefit plan" from an accounting perspective.
The following table shows the key assumptions used to determine the present value of employee benefits on retirement (severance pay) according to IAS 19:
| As at 31 December 2016 | As at 31 December 2015 | |
|---|---|---|
| Economic and financial assumptions | ||
| Discount rate | 1.31% | 2.03% |
| Inflation rate | 1.5% | 1.5% |
| Rate of pay increase | 2.8% | 2.8% |
| Demographic assumptions | ||
| Probability of dismissals and redundancies | 10% | 10% |
| Probability of early severance pay | 1% | 1% |
This item amounted to €360 thousand (0 as at 31 December 2015) and includes the provision relating to contractual guarantee provisions for risks.
Trade payables stood at €36,874 thousand (€39,121 thousand as at 31 December 2015) and are recorded at their nominal value. All payables mature within the next year, so there are no payables to be discounted. Trade payables include both payables due to suppliers of finished goods and raw materials and suppliers of services. All payables for significant amounts are denominated in Euros.
The following table provides a breakdown of trade payables by maturity:
| Amounts (in € 000s) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| To become due | 29,714 | 26,994 |
| Due for <30 days | 5,736 | 9,391 |
| Due for 30-90 days | 1,286 | 2,101 |
| Due for 90-180 days | 45 | 191 |
| Due for >180 days | 93 | 443 |
| Total due | 7,160 | 12,127 |
| Total trade payables and other payables | 36,874 | 39,121 |
Other non-current liabilities stood at €37 thousand, representing directors' severance pay. The substantial decrease by comparison with 31 December 2015 reflects the change in the scope of consolidation, as this item included the best estimate of earn-out payables due to the sellers of MyTrainerCommunity S.r.l., Adkaora S.r.l. and Bobo Software S.r.l.
Other current liabilities amounted to €9,957 thousand, broken down as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Due to employees/directors | 1,052 | 2,191 |
| Due to social security bodies | 574 | 1,082 |
| Advances from customers | 1,506 | 2,699 |
| Tax payables | 737 | 1,573 |
| Accruals and deferrals | 527 | 714 |
| Other payables | 5,561 | 205 |
| Total other current liabilities | 9,957 | 8,464 |
Other payables to employees/directors include liabilities for pay, unused leave and the relative contributions.
Advances from customers relate to the e-Commerce sales process.
Other payables include the payment on account of €5 million received from SRP Group in respect of the Retained Amount.
Following the sale of Banzai Media Holding and BNK4 SaldiPrivati, the revenue from the Vertical Content operating segment and from the Flash Sales business were classified as net profit (loss) from discontinued businesses or as assets held for sale, just like the related comparative data.
The breakdown of revenue is as follows:
| For the financial year ended 31 December | ||
|---|---|---|
| (In thousands of Euros) | 2016 | 2015 |
| e-Commerce revenues | 197,894 | 167,720 |
| Other | 7,504 | 6,337 |
| Revenue | 205,398 | 174,057 |
Revenues are recognised net of refunds on sales. Refunds on sales for the years 2016 and 2015 amounted to €6,329 thousand and €4,845 thousand, respectively.
The "Other" mainly includes recharged logistics costs to BNK4 Saldiprivati S.r.l.
In terms of the breakdown of revenues by region, the revenues were generated in Italy.
Other income amounted to €2,280 thousand (€1,168 thousand in 2015) and consisted mainly of charge-backs to companies belonging to the Vertical Content segment and BNK4 SaldiPrivati in respect of services carried out by them, including after the sale. This item also includes the income represented by subsidies paid in the form of tax credits for research and development activities, amounting to €1,023 thousand.
The breakdown of the item costs for raw materials and goods for resale is as follows:
| For the financial year ended 31 December | ||
|---|---|---|
| (In thousands of Euros) | 2016 | 2015 |
| Raw materials and goods for resale | (172,874) | (151,281) |
| Change in inventories | 6,577 | 7,865 |
| Total costs for raw materials and goods for resale | (166,297) | (143,415) |
The increase in the purchase of goods is related mainly to the growth in turnover and the desirability of having a larger inventory in order to respond promptly to requests from customers.
The breakdown of costs for services is as follows:
| Costs for services | 2016 | 2015 |
|---|---|---|
| Sales and marketing costs | 10,322 | 8,701 |
| Transport and logistics | 17,828 | 13,666 |
| Consulting and contract workers | 1,779 | 1,771 |
| IT services and technical consulting | 1,610 | 1,233 |
| Rentals and leases | 2,556 | 2,423 |
| Deposit fees and bank expenses | 2,466 | 1,923 |
| Travel expenses | 332 | 245 |
| Utilities | 262 | 273 |
| Directors' remuneration | 1,249 | 860 |
| Others | 2,265 | 1,142 |
| Total costs for services | 40,669 | 32,237 |
Costs for services totalled €40,669 thousand compared with €32,237 thousand for the previous year.
During the year, due mainly to increased revenues, a proportional increase in costs for related services was recorded, particularly for transport, marketing, logistics and deposit fees.
Sales and marketing costs include, in particular, customer acquisition costs and loyalty promotional activities. The increase compared with the previous year is due mainly to the decision to accelerate the growth in acquiring customers, in line with the strategy announced after the listing.
The costs of rentals and leases mainly reflect lease agreements for offices and warehouses; the increase relates to the need for more space for administrative and logistics departments.
Costs for transport and logistics relate to transport expenses incurred to send products to customers and costs incurred to transport products from suppliers to Group warehouses and from the latter to Pick&Pay collection points. Handling, packaging and preparation costs are also included.
Costs for services include €312 thousand of non-recurring expenses relating to the change of headquarters.
The breakdown of employee costs is as follows:
| Employee costs | 9,852 | 7,689 |
|---|---|---|
| Stock option | 454 | 99 |
| Capitalised costs | (1,364) | (1,129) |
| Severance pay | 544 | 475 |
| Social security charges | 2,224 | 2,087 |
| Salaries and wages | 7,994 | 6,158 |
| 2016 | 2015 |
Employee costs increased in the period compared with the previous year due purely to the growth in activity. This item also includes non-recurring costs of €456 thousand relating to restructuring costs.
Employee costs are shown net of internal costs capitalised in intangible fixed assets for development projects relating to the Group's businesses.
The following table shows the average and actual number of employees by category for the financial years ended 31 December 2016 and 2015:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Average | Actual | Average | Actual | |
| Senior managers | 8 | 6 | 8 | 9 |
| Middle managers | 31 | 21 | 39 | 42 |
| Clerical workers | 241 | 146 | 298 | 336 |
| Manual workers | 3 | 2 | 3 | 3 |
| Total | 175 | 390 |
The breakdown of depreciation, amortisation and write-downs is as follows:
| Depreciation, amortisation and impairment | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Amortisation of intangible assets | 3,277 | 2,298 |
| Amortisation of tangible assets | 827 | 678 |
| Bad debt provision | 155 | 60 |
| Total amortisation and impairments | 4,259 | 3,036 |
The increase in depreciation and amortisation relates to investments made by Group companies: the allocation to the allowance for doubtful debts includes €11 thousand of write downs of other receivables.
Other costs stood at €584 thousand (€719 thousand in 2015) and consist mainly indirect taxes, subscriptions, membership fees and losses suffered for various reasons.
Financial income, net of expenses, stood at €34 thousand, a marked improvement on the previous year (net expenses of €30 thousand). Specifically, costs fell from €266 thousand to €182 thousand thanks to the termination of the loans outstanding during the course of 2016; income fell from €236 thousand to €216 thousand as the previous year had included the positive effect of the sale of the equity investment in Webperformance for approximately €73 thousand.
This item amounts to a net expense of €79 thousand (€270 thousand in 2015) and includes the Group share relating to the result achieved in the year by associate companies.
This item stood at €668 thousand (0 as at 31 December 2015) and consists of write-downs of fixed financial receivables granted to the associate Uollet S.r.l., sold at the beginning of 2017 for the price of one euro.
Income taxes amounted to €18 thousand and relate exclusively to the tax impact of differences between national accounting standards adopted by the subsidiaries Banzai Commerce and ePRICE S.r.l. and the IFRS accounting standards used by the parent company. The Group did not allocate additional deferred tax assets as the amount recognised is considered to be representative of the taxes that can be recuperated during the 2017-2021 plan period.
| Tax | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Deferred taxes | (18) | 2,608 |
| Total taxes | (18) | 2,608 |
The reconciliation between the nominal rate and the effective rate is as follow:
| (In thousands of Euros) | For the financial year ended 31 December | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | |||||
| Taxable amount | Tax | Taxable amount | Tax | |||
| IRES (corporate income tax) | ||||||
| Pre-tax profit (loss) | (14,714) | 3,531 | 24.00% | (12,172) | 2,921 | 24.00% |
| Other changes | 75 | (18) | 24.00% | 1,304 | (313) | 24.00% |
| Adjustment of deferred tax assets | (3,531) | |||||
| Total taxes | (18) | 2,608 |
The income deriving from assets held for sale and discontinued operations relates to the Vertical Content segment, following the sale of the entire shareholding in Banzai Media Holding to Arnoldo Mondadori Editore S.p.A., and to the Flash Sales segment, following the sale of the shareholding in BNK4 – Saldi Privati S.r.l. to the SRP Group.
The scope of the transaction relating to the Vertical Content segment includes the entire investment in Banzai Media Holding S.r.l., with the underlying shareholdings listed below:
| Name | Activity | Ownership percentage |
|---|---|---|
| Banzai Media Holding S.r.l. | Subholding company | 100 |
| Banzai Media S.r.l. | Vertical Content | 100 |
| Banzai Direct S.r.l. | Vertical Content | 100 |
| MyTrainerCommunity S.r.l. | Vertical Content | 100 |
| AdKaora S.r.l. | Vertical Content | 100 |
| Bobo Software S.r.l. | Vertical Content | 100 |
The scope did not include the 'News' segment. ePRICE S.p.A. consequently acquired from Banzai Media Holding the equity investment in the associated company "Il Post" and created Giornalettismo S.r.l., in which it kept a share of 30%.
The sale price was set at €24,660 thousand, based on an enterprise value of €41 million not including the net financial position on the date of closing, plus earn-outs of up to €4 million if certain conditions based on economic performance and page visits are met by 2018. ePRICE also issued to the buyer the usual representations and warranties for a sale transaction, in particular as part for the tax and labour law guarantees, under which the maximum amount claimable is equal to the overall value of the transaction. The best estimate of the risks of enforcement of these guarantees is reflected in the provision for risks and charges provided for in this annual financial report.
With regard to the sale of the Flash Sales segment, the cost the transaction was €24,997 thousand, of which €24,453 thousand was received at the closing and €544 thousand in February 2017 by way of price adjustment.
In addition, the Contract provides for the payment of a further amount not exceeding €5 million (the "Retained Amount"), to be paid to the Seller by the Buyer on completion of the transfer to the Sold Company of certain administrative and management activities performed by the seller which are necessary in order to make the sold company independent (the "Carve-out").
Under the Contract, the due date of the Retained Amount is linked to the achievement of certain targets, and therefore the Seller might achieve only some of these targets, in which case the Retained Amount would only partially become due.
In addition to the Final Price, the Contract also provides the obligation for the Buyer to pay the Seller a further amount not exceeding €10 million if the latter achieves certain targets defined in the Contract, linked to the 2018 results of BNK4 SaldiPrivati S.r.l.
The ePRICE Group has also given the purchaser the representations and warranties usual in a sale. The maximum amount recoverable in the first 24 months from signature of the contract of sale is €3.5 million, which thereafter becomes €3 million.
At the closing date, the ePRICE Group received, in addition to the price, an amount of €2.5 million corresponding to one half of the Retained Amount, and at the same time the SRP Group paid a further €2.5 million, corresponding to the other half of the Retained Amount, into a guarantee deposit, recognised under Other current receivables.
Net profit (loss) deriving from discontinued or divested assets is shown below:
| (In thousands of Euros) | 2016 | 2015 |
|---|---|---|
| Vertical Content | ||
| Gross capital gain | 18,861 | - |
| Net profit (loss) | (982) | 991 |
| Transaction costs | (923) | - |
| Vertical Content total | 16,956 | 991 |
| Flash Sales | ||
| Gross capital gain | 12,070 | - |
| Net profit (loss) | (3,798) | (2,183) |
| Transaction costs | (446) | - |
| Flash Sales net profit | 7,826 | (2,183) |
| Profit (loss) from discontinued operations | 24,782 | (1,192) |
The breakdown of the profit performance of the Vertical Content and Flash Sales segments for 2016, up to the date of sale, is shown in the following table:
| Vertical Content | 2016 | 2015 |
|---|---|---|
| Revenue | 10,883 | 24,335 |
| Costs | (12,163) | (23,161) |
| Earnings Before Tax | (1,280) | 1,174 |
| Tax | 298 | (183) |
| Net profit (loss) | (982) | 991 |
The result generated by Vertical Content in the early months of 2016 includes premiums and bonuses disbursed to employees and directors at the time of the activities relating to the sale.
| Flash Sales | 2016 | 2015 |
|---|---|---|
| Revenue | 34,505 | 44,361 |
| Costs | (38,299) | (46,977) |
| Earnings Before Tax | (3,794) | (2,616) |
| Tax | (4) | 433 |
| Net profit (loss) | (3,798) | (2,183) |
The net cash flow deriving from divested assets breaks down as follows:
| (In thousands of Euros) | 2016 |
|---|---|
| Receipts at closing | 49,113 |
| Repayment of loans at closing | 11,593 |
| Retained Amount payment | 2,500 |
| Increases in loans | (8,000) |
| "News" segment | (1,609) |
| Transaction costs paid | (1,369) |
| Net cash flow | 52,228 |
Basic earnings per share is calculated by dividing the profit (loss) for the year attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the profit (loss) attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding during the year, in addition to potential shares that would be generated by the exercise of warrants existing at the reporting date (in the money).
Earnings per share and the share information used to calculate basic and diluted earnings per share are provided below:
| In thousands of Euro | As at 31 December 2016 |
As at 31 December 2015 |
|---|---|---|
| Profit (loss) attributable to the parent company's ordinary shareholders (In thousands of Euro) |
10,053 | (10,756) |
| Average number of shares outstanding | 40,464,439 | 39,551,475 |
| Dilution effect | 3,107,875 | 2,912,500 |
| Average number of outstanding shares for the purposes of calculating diluted earnings |
43,572,314 | 42,463,975 |
| Earnings per share (Euros) | 0.25 | -0.27 |
| Diluted earnings per share (Euros) | 0.23 | -0.25 |
The weighted average number of treasury shares used for basic earnings per share takes into account the weighted average effect of changes due to transactions on treasury shares that took place during the year.
Diluted earnings per share were considered taking into account of the potential dilutive effect caused by the exercise of 233 ePRICE 2014-2018 warrants which conferring the right to subscribe 2,912,500 'A' shares at €3.8 per share and of 195,375 stock options under the 2016-2018 Stock Option Plan conferring the right subscribe the same number of shares at €3.68 per share.
Because they are out of the money, the dilutive effect of the stock options in the 2015 plan has not been taken into account.
Following the disposal of the operating subsidiaries in the Vertical Content segment, the Group's activity consists of only the e-Commerce operating segment. As a result, the Corporate segment was merged into the eCommerce segment. The result of the Vertical Content segment for 2016, until the date of sale and for 2015 is shown in the following table:
| Vertical Content | 2016 | 2015 |
|---|---|---|
| Revenue | 10,883 | 24,335 |
| Costs | (12,163) | (23,161) |
| Earnings Before Tax | (1,280) | 1,174 |
| Tax | 298 | (183) |
| Net profit (loss) | (982) | 991 |
The result generated by Vertical Content in the early months of 2016 includes premiums and bonuses disbursed to employees and directors at the time of the activities relating to the sale.
The following table shows details of related-party transactions:
| In thousands of Euro | As at 31 December 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Trade receivables |
Investments in associates |
Non-current financial assets |
Cash | Trade payables |
Costs for | services RevenueFinancial income |
||
| Banca Profilo S.p.A. | - | - | - | 2,722 | - | - | - | 23 |
| Il Post S.r.l. | - | 1,154 | 35 | - | - | - | 7 | - |
| Ecommerce Outsourcing S.r.l. | 309 | 212 | - | - | - | - | 1,482 | - |
| Installo S.r.l. | - | 399 | 176 | - | 1,009 | 2,467 | 5 | - |
| Giornalettismo S.r.l. | - | 3 | - | - | - | - | - | - |
| Termostore S.r.l. | - | 700 | - | - | - | - | 1 | - |
| Total | 309 | 2,468 | 211 2,722 | 1,009 | 2,467 | 1,495 | 23 | |
| Total balance sheet item | 9,798 | 2,468 | 1,220 54,711 | 36,874 | 40,669 205,398 | 216 | ||
| Weight % | 3.2% | 100.0% | 17.3% | 5.0% | 2.7% | 6.1% | 0.7% | 10.6% |
Banca Profilo has been a related party of ePRICE since Sator Fund came to indirectly control Banca Profilo, and holds an indirect equity investment in the capital of the company, over which it exercises significant influence. In addition, Banca Profilo is a related party of Arepo BZ S.à r.l., a company indirectly controlled by Sator Fund, through which Sator Fund holds the above-mentioned stake in the Issuer. The other companies are related parties because there is a shareholding relationship connecting them with ePRICE Group companies.
| In thousands of Euro | as of 31 December, 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Trade receivables |
Investments in associates |
Non-current financial assets |
Cash | Trade payables |
Cost of | services RevenuesFinancial | income* | |
| Banca Profilo S.p.A. | 2 | - | - 22,705 | - | - | 6 | 31 | |
| Il Post S.r.l. | 64 | 555 | 35 | - | 345 | - | - | - |
| Uollett S.r.l. | 1 | - | 498 | - | - | - | - | - |
| Good Morning Italia S.r.l. | - | 65 | - | - | - | - | - | - |
| Gold 5 S.r.l. | 75 | 50 | 200 | - | - | - | - | - |
| Ecommerce Outsourcing S.r.l. | 234 | 200 | - | - | - | - | 1,745 | - |
| Installo S.r.l. | - | 309 | 200 | - | 82 | 304 | 3 | - |
| Total | 376 | 1,114 | 933 22,705 | 427 | 304 | 1,754 | 31 | |
| Total balance sheet item | 17,081 | 1,114 | 1,946 33,543 | 39,121 | 32,237 | 174,057 | 236 | |
| Weight % | 2.2% | 100.0% | 47.9% | 67.7% | 1.1% | 0.9% | 1.0% | 13.1% |
The following is a breakdown of the transactions with related parties as at 31 December 2015:
* Restated according to IFRS 5
There were no commitments or guarantees given by Group companies in favour of third parties in the financial year ended 31 December 2016. Additional to those issued as part of the sale of the Vertical Content to BKN4 Saldiprivati.
For the Vertical Content sale, ePRICE also issued to the purchaser the usual statements and guarantees applicable to sales transactions: specifically, for tax and labour law guarantees, the maximum charge back amount is equals to the total value of the transaction. The best estimate of the risks of enforcement of these guarantees is reflected in the provision for risks and charges provided for in this annual financial report.
For the sale of BNK4 Saldiprivati, the ePRICE Group has also made to the purchaser the representations and warranties which are usual in a sale. The maximum amount which can be repaid in the first 24 months from signature of the contract of sale is €3.5 million, which thereafter becomes €3 million.
The Group's objective is to maximise the return on net invested capital while retaining its ability to operate over time, and guaranteeing adequate shareholder returns and benefits for other stakeholders, with a sustainable financial structure.
To achieve these objectives, as well as generating cash flows and solid results, the Group may take measures concerning the dividend policy and the capital configuration.
The Group is primarily exposed to financial risks linked to the ability of its customers to meet their obligations to the Group (credit risk), obtaining financial resources on the market (liquidity risk), and interest rate and exchange rate fluctuations (market risk).
Financial risk management is an integral part of Group business management and is carried out centrally based on guidelines developed by the Finance Department as part of the more general risk management strategies defined by the Board of Directors.
Liquidity risk refers to the failure to obtain the financial resources needed for the business to function and for the development of operations.
The two main factors that impact the Group's liquidity are the resources generated or absorbed by operations and investment activities, and the contractual maturity of debt or financial investments and market conditions.
Credit risk is exposure to potential losses arising from default by trade counter-parties on their obligations.
The Group closely monitors its credit exposure using an internal reporting system. Since receipts for sales are generally obtained in advance, credit risk is marginal with respect to the overall size of the business.
With regard to financial assets and liabilities, the Group is primarily exposed to market risk linked to fluctuations in interest rates on floating-rate loans and cash investments, which may affect the cost of borrowing and the return on investments.
As regards currency risk, the Group operates primarily in the euro area.
The carrying amount and fair value of financial instruments for the year ended 31 December 2016 are shown below:
| As at 31 December 2016 | ||||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | Financial instruments at fair value held for trading |
Held-to-maturity assets |
Receivables and loans |
AFS financial instruments |
Fair value |
Fair value hierarchy |
| Other financial assets | ||||||
| Equity investments | - | - | - | 1,009 | 1,009 | Level 3 |
| Other financial assets | - | - | 211 | - | 211 | Level 3 |
| Other assets | 273 | 273 | Level 3 | |||
| Trade receivables | ||||||
| Trade receivables | - | - | 9,798 | - | 9,798 | Level 3 |
| Cash and cash equivalents | ||||||
| Bank and postal deposits | - | - | 54,711 | - 54,711 | Level 1 |
| As at 31 December 2016 | |||||||
|---|---|---|---|---|---|---|---|
| (In thousands of Euros) | Financial instruments at fair value held for trading |
Liabilities at amortised cost |
Fair value |
Fair value hierarchy |
|||
| Non-current financial payables and liabilities | |||||||
| Payables to banks and other lenders | - | 126 | 126 | Level 3 | |||
| Current liabilities | |||||||
| Payables to banks and other lenders | - | 109 | 109 | Level 3 | |||
| Due to suppliers | - | 36,874 | 36,874 | Level 3 |
The carrying amount of financial instruments in the financial year ended 31 December 2015 is shown below:
| As at 31 December 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (In thousands of Euros) | Financial instruments at fair value held for trading |
Held-to-maturity assets |
Receivables and loans |
AFS financial instruments |
Fair value |
Fair value hierarchy |
|||
| Other financial assets | |||||||||
| Equity investments | - | - | - | 1,013 | 1,013 | Level 3 | |||
| Other financial assets | - | - | 933 | - | 933 | Level 3 | |||
| Other assets | 215 | 215 | Level 3 | ||||||
| Trade receivables | |||||||||
| Trade receivables | - | - | 17,081 | - 17,081 | Level 3 | ||||
| Cash and cash equivalents | |||||||||
| Bank and postal deposits | - | - | 33,543 | - 33,543 | Level 1 |
| As at 31 December 2015 | ||||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | Financial instruments at fair value held Liabilities at amortised for trading |
Fair value Fair value hierarchy |
||||
| Non-current financial payables and liabilities |
||||||
| Payables to banks and other lenders | - | 6,691 | 6,691 | Level 3 | ||
| Current liabilities | ||||||
| Due to banks | - | 4,385 | 4,385 | Level 3 | ||
| Due to suppliers | - | 39,121 | 39,121 | Level 3 |
No contingent liabilities requiring the allocation of additional provisions for risks with respect to what was set aside or a mention in these explanatory notes were identified.
In compliance with the provisions of the Consob Communication of 28 July 2006, in the financial year ended 31 December 2016, there were no atypical and/or unusual transactions as defined in that Communication.
The table below, prepared in accordance with Art. 149-duodecies of the Consob Issuer Regulations, shows the fees for auditing and other non-auditing services provided by the independent auditors or by companies belonging to the Ernst & Young network.
| Service | Entity providing the service | Beneficiary | Amount |
|---|---|---|---|
| Limited audit of the half-year report EY S.p.A. | ePRICE S.p.A. | 42 | |
| Statutory audit on 31 December | EY S.p.A. | ePRICE S.p.A. | 48 |
| Other services | EY S.p.A. | ePRICE S.p.A. | 116 |
| Other services | Ernst & Young Financial Business Advisor S.p.A. | ePRICE S.p.A. | 19 |
| Total ePRICE S.p.A. | 225 | ||
| Statutory audit on 31 December | EY S.p.A. | ePRICE Group companies | 46 |
| Total ePRICE Group | 271 |
The Chairman Paolo Ainio
Milan, 15 March 2017
Chairman The Manager Responsible for Preparing the Financial Reports
Paolo Ainio Emanuele Romussi
Separate Financial Statements as at 31 December 2016
| (In Euros) | Notes | As at 31 December |
2016 Of which related parties | As at 31 December |
2015 Of which related parties |
|---|---|---|---|---|---|
| NON-CURRENT ASSETS | |||||
| Plant and equipment | 1 | 1,109,128 | 254,867 | ||
| Intangible assets | 2 | 2,603,666 | 1,883,547 | ||
| Equity investments | 3 | 32,317,354 | 32,317,354 | 42,662,428 | 42,662,428 |
| Non-current financial assets | 4 | 25,158,437 | 24,153,435 | 31,939,478 | 30,934,476 |
| Other non-current assets | 5 | 13,990 | 21,069 | ||
| Deferred tax assets | 6 | 6,116,313 | 6,116,313 | ||
| NON-CURRENT ASSETS TOTAL | 67,318,888 | 82,877,702 | |||
| CURRENT ASSETS | |||||
| Trade receivables and other receivables |
7 | 797,830 | 632,547 | 879,172 | 752,234 |
| Other current assets | 8 | 4,051,990 | 3,040,891 | 1,591,538 | |
| Cash and cash equivalents | 9 | 43,259,620 | 2,721,761 | 31,208,535 | 22,705,341 |
| CURRENT ASSETS TOTAL | 48,109,440 | 35,128,598 | |||
| ASSETS TOTAL | 115,428,328 | 118,006,300 |
| As at 31 December | As at 31 December | ||||
|---|---|---|---|---|---|
| (In thousands of Euros) | Notes | 2016 | 2015 | ||
| LIABILITIES AND NET EQUITY | |||||
| NET EQUITY | |||||
| Share capital | 820,797 | 820,797 | |||
| Reserves | 105,918,550 | 110,778,558 | |||
| Profit (loss) for the year | 5,595,575 | (3,511,215) | |||
| TOTAL NET EQUITY | 10 | 112,334,922 | 108,088,140 | ||
| NON-CURRENT LIABILITIES | |||||
| Payables to banks and other lenders | 11 | 96,355 | 6,619,521 | ||
| Provisions for personnel | 12 | 266,657 | 213,574 | ||
| Provisions for risks and charges | 13 | 360,000 | - | ||
| Other non-current liabilities | 15 | 36,680 | - | ||
| TOTAL NON-CURRENT LIABILITIES | 759,692 | 6,833,095 | |||
| CURRENT LIABILITIES | |||||
| Trade and other payables | 14 | 1,330,690 | 102,122 | 1,385,369 | 133,919 |
| Payables to banks and other lenders | 11 | 66,605 | 1,249,982 | ||
| Other current liabilities | 15 | 936,419 | 129,025 | 449,714 | |
| TOTAL CURRENT LIABILITIES | 2,333,714 | 3,085,065 | |||
| TOTAL LIABILITIES | 3,093,406 | 9,918,160 | |||
| TOTAL NET EQUITY AND LIABILITIES | 115,428,328 | 118,006,300 |
| For the financial year ended 31 December | ||||
|---|---|---|---|---|
| (In Euros) | Notes | 2016 | Of which 2015 related parties |
Of which related parties |
| Revenue | 16 | 2,825,897 | 1,825,161 1,832,766 | 1,832,748 |
| Other income | 17 | 6,850 | 2,111 | |
| Costs for raw materials and goods for resale | 18 | (45,088) | (190,559) | (4,248) |
| Costs for services | 19 (5,863,967) | (3,933,414) | ||
| Of which non-recurring | (312,044) | (145,000) | ||
| Personnel expenses | 20 (2,355,420) | (1,856,067) | ||
| Of which non-recurring | - | (299,905) | ||
| Depreciation, amortisation and impairment | 21 | (414,532) | (276,057) | |
| Other fees | 22 | (235,592) | (146,085) | (183) |
| Operating profit (loss) | (6,081,852) | (4,567,304) | ||
| Financial expenses | 23 | (84,383) | (136,115) | |
| Financial income | 24 | 43,395 | 22,662 121,358 |
44,533 |
| Impairment of financial assets | ||||
| Earnings Before Tax | (6,122,840) | (4,582,061) | ||
| Income tax | 25 | - | 1,070,847 | |
| Profit (loss) from continuing operations | (6,122,840) | - | ||
| Net profit (loss) from divestitures or discontinued operations | 26 | 11,718,415 | - | |
| Profit (loss) for the year | 5,595,575 | (3,511,215) | ||
| Items of other comprehensive income: | ||||
| Other items in the comprehensive income statement which will not subsequently be reclassified within the income statement |
||||
| Actuarial gains/(losses) on employee benefits | (9,293) | 20,213 | ||
| Tax | - | (4,851) | ||
| Total items of other comprehensive income that will not subsequently be reclassified to the income statement |
(9,293) | 15,363 | ||
| Items of other comprehensive income that will subsequently be reclassified to the income statement |
- | - | ||
| Total items of other comprehensive income that will subsequently be reclassified to the income statement |
- | - | ||
| Total items of other comprehensive income | (9,293) | 15,363 | ||
| Total comprehensive profit (loss) | 10 | 5,586,282 | (3,495,852) |
| For the financial years ended 31 December | ||||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | 2016 | Of which related parties |
2015 | Of which related parties |
||
| NET CASH FLOW FROM OPERATIONS | ||||||
| Profit (loss) for the year | (6,123) | (3,511) | ||||
| Adjustments to reconcile profit for the year with cash flow generated by operating activities: |
||||||
| Depreciation and Amortisation | 371 | 276 | ||||
| Bad debt provision | 43 | |||||
| Employee benefit fund provision | 109 | 91 | ||||
| Employee benefit fund change | (65) | (47) | ||||
| Change in deferred tax assets and liabilities | 0 | (1,065) | ||||
| Other non-monetary items | 394 | 99 | ||||
| Change in other non-current liabilities | 37 | |||||
| Changes in working capital | ||||||
| Change in trade receivables | 38 | 120 | 249 | 249 | ||
| Change in other current assets | 1,139 | (601) | 154 | |||
| Change in trade payables | (54) | (32) (1,542) | (572) | |||
| Change in other payables | 487 | 129 | 45 | (114) | ||
| NET CASH FLOW GENERATED (ABSORBED) BY OPERATIONS | (3,624) | (6,006) | ||||
| NET CASH FLOW FROM INVESTMENT ACTIVITIES | ||||||
| Acquisition of tangible assets | (1,050) | (49) | ||||
| Change in other non-current assets | 6 | (12) | ||||
| Acquisition of intangible assets | (1,007) | (1,128) | ||||
| Provision of financing | (480) | (480) (24,941) | (24,941) | |||
| Repayments of financing | 0 | 480 | 480 | |||
| Other investments | (2,150) | 0 | ||||
| Cash flow from discontinued operations | 29,857 | 0 | ||||
| NET CASH FLOW GENERATED (ABSORBED) BY INVESTMENT ACTIVITIES |
25,176 | (25,650) | ||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||
| Financial payables | (7,707) | 4,768 | ||||
| Share capital increase | 50,086 | |||||
| Treasury shares | (1,794) | |||||
| Other changes | (4) | |||||
| NET CASH FLOW ABSORBED BY FINANCING ACTIVITIES | (9,501) | 54,850 | ||||
| (Decrease)/Increase in cash and cash equivalents | 12,051 | 23,195 | ||||
| CASH AND CASH EQUIVALENTS AT THE START OF THE YEAR | 31,209 | 8,014 | ||||
| CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 43,260 | 31,209 |
| Share capital |
Share premium |
Legal reserve |
Treasury shares |
Stock Option reserve |
Other capital reserves |
Retained earnings (losses) |
FTA Reserve |
Employee benefits |
Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 31 December 2015 |
821 | 124,153 | 1 | (791) | 221 | 538 | (16,403) | (449) | (3)108,088 | |
| Result for the year | 5,596 | 5,596 | ||||||||
| Other components of comprehensive income: that will not subsequently |
0 | |||||||||
| be reclassified into profit (loss) for the year that will subsequently be |
(9) | (9) | ||||||||
| reclassified into profit (loss) for the year |
0 | |||||||||
| Total income | 5,596 | (9) | 5,587 | |||||||
| Transactions on treasury shares |
(1,794) | (1,794) | ||||||||
| Reclassification pursuant to IFRS 5 |
0 | |||||||||
| Share-based payment | 454 | 454 | ||||||||
| Reclassification | (121) | 121 | 0 | |||||||
| Balance as at 31 December 2016 |
821 | 124,153 | 1 | (2,585) | 554 | 538 | (10,686) | (449) | (12)112,335 |
| Share capital |
Share premium |
Legal reserve |
Treasury shares |
Stock Option reserve |
Other capital reserves |
Retained earnings (losses) |
FTA Reserve |
Att. Employee benefits |
Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 31 December 2014 |
653 | 75,607 | 1 | (791) | 0 | 538 | (15,552) | (449) | (18) 59,989 | |
| Result for the year | (3,511) | (3,511) | ||||||||
| Other components of comprehensive income: that will not subsequently be reclassified into profit (loss) for the year that will subsequently be reclassified into profit (loss) for the year Total income |
- | - | - | - | (3,511) | - | 15 | 15 15 (3,496) |
||
| Share capital increase Other share capital operations |
168 | 51,206 | - | 51,374 - |
||||||
| Share-based payment | 221 | 221 | ||||||||
| Allocation of the result | (2,660) | 2,660 | - | |||||||
| Balance as at 31 December 2015 |
821 | 124,153 | 1 | (791) | 221 | 538 | (16,403) | (449) | (3)108,088 |
The separate financial statements of ePRICE S.p.A. (formerly Banzai S.p.A.) for the year ended 31 December 2016 were approved by the Board of Directors on 15 March 2017.
The separate financial statements for the year ended 31 December 2016 (hereinafter referred to as the "Financial Statements") were prepared in accordance with the provisions of Regulation EC 809/2004 and pursuant to the International Financial Reporting Standards issued by the International Accounting Standards Board and adopted by the European Union (IFRS).
The Financial Statements of ePRICE S.p.A. for the year ended 31 December 2016 were prepared in accordance with IFRS.
"IFRS" refers to all International Financial Reporting Standards, all International Accounting Standards (IAS) and all interpretations of the International Financial Reporting Interpretations Committee (IFRIC), previously called the Standard Interpretations Committee (SIC), which, at the date of approval of the financial statements, had been endorsed by the European Union in accordance with the procedure provided for by Regulation (EC) 1606/2002 of the European Parliament and of the European Council of 19 July 2002.
No exceptions to IFRS were applied during the preparation of these financial statements of ePRICE S.p.A.
The financial statements were prepared according to the principle of historical cost and the assets and liabilities in the Company's financial statements are classified according to the current/non-current criterion.
The financial statements are presented in Euros. All amounts are rounded to the nearest thousand Euros, unless otherwise indicated.
Plant, equipment and finance and operating leases
Plant and equipment are measured at purchase or production cost, net of accumulated depreciation and any impairment loss. The cost includes directly attributable charges incurred to make the assets ready for use and financial expenses, if they meet the requirements set forth in IAS 23.
Expenses for ordinary maintenance and repair are recognised directly in the income statement when incurred. Costs associated with the expansion, modernisation or improvement of structural elements that are owned or used by third parties are capitalised to the extent to which they comply with requirements for separate classification as an asset or part of an asset.
Plant and equipment held under finance leases, through which the risks and benefits linked to ownership are substantially transferred to the Company, are recognised as Company assets at their current value or, if lower, at the present value of the minimum payments due for the lease, including any amount to be paid to exercise the purchase option. The assets are depreciated by applying the method and rates set forth below for property, plant and equipment, unless the term of the lease agreement is shorter than the useful life represented by those rates, and it is not reasonably certain that the ownership of the leased asset will be transferred at the natural expiry of the agreement. In that case, the depreciation period is identical to the term of the lease.
Leases in which the lessor substantially retains the risks and benefits linked to ownership of the assets are classified as operating leases. The costs of operating leases are recognised on a straight-line basis in the income statement for the term of the lease agreement.
Depreciation is recognised on a straight-line basis by applying rates that make it possible to depreciate the assets until the end of their useful life.
The table below shows the depreciation rates applied by the Company to individual categories of plant and equipment based on their estimated useful life:
| Data processing centre equipment | 20% |
|---|---|
| Other equipment | 15% |
| Display systems | 20%-50% |
| Office furniture | 12% |
| Fixtures | 12% |
| Office machinery | 20%-33% |
| Motor vehicles | 25%-33% |
The useful life of property, plant and equipment and their residual values are revised and updated, where necessary, when the financial statements are prepared.
Business combinations are recorded using the acquisition method. Acquisition cost is determined as the sum of consideration transferred, measured at fair value on the acquisition date, and the amount of the minority equity investment in the acquired company. For each business combination, the Company determines whether to measure the minority interest in the acquired company at fair value, or in proportion with the minority interest's share in the acquiree's identifiable net assets. Acquisition costs are expensed during the year and classified under administrative expenses.
When the Company acquires a business, it classifies or designates the financial assets acquired or liabilities assumed in accordance with contractual terms, economic conditions and other relevant conditions on the acquisition date. This includes an audit to determine whether an embedded derivative must be separated from the host contract.
If the business combination occurs over several phases, the previously held equity investment is restated at fair value at the acquisition date and any resulting profit or loss is recognised in the income statement. This is therefore taken into account in the determination of goodwill.
Any potential consideration to be paid is recognised by the buyer at fair value on the acquisition date. The change in the fair value of the potential consideration classified as an asset or liability, such as a financial instrument falling within the scope of IAS 39 - Financial Instruments: Recognition and Measurement, must be reported in the income statement or in other components of comprehensive income. If the potential consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. If the potential consideration is classified under shareholders' equity, its value is not redetermined, and its subsequent adjustment is recorded in shareholders' equity.
Goodwill is initially recognised at cost represented by the excess of all consideration paid and the amount recorded for the minority interests over the identifiable net assets acquired and liabilities assumed by the Company. If the fair value of net assets acquired exceeds the consideration paid, the Company must again verify whether it has properly identified all assets acquired and all liabilities assumed and review the procedures used to determine the amounts to be recognised on the acquisition date. If the new assessment still shows that the fair value of the net assets acquired is greater than the consideration, the (meaningful) difference is recognised in the income statement.
After initial recognition, goodwill is measured at cost, net of accumulated impairment. For the purposes of impairment testing, the goodwill acquired in a business combination is allocated at the acquisition date to each cash-generating unit (CGU) of the Company expected to benefit from combination synergies, irrespective of whether other assets or liabilities of the acquired company are assigned to these units.
If goodwill is allocated to a CGU and the entity disposes of part of the assets of this unit, the goodwill associated with the asset disposed of is included in the carrying amount of the asset when the gain or loss on the disposal is calculated. Goodwill associated with the asset disposed of is calculated on the basis of the values for the asset disposed of and the retained portion of the CGU.
Intangible assets consist of non-monetary, identifiable elements with no physical substance, which can be controlled and are expected to generate future economic benefits. Such elements are recognised at acquisition and/or production cost, including directly attributable expenses to make the asset ready for use, net of accumulated amortisation and any impairment losses.
The costs incurred internally to develop new services and platforms constitute intangible assets generated internally and are recognised as assets only if all the following requirements are met:
the cost attributable to the development activity can be reliably determined;
the entity has the intention, the availability of financial resources and the technical capacity to make the asset ready for use or sale;
Capitalised development costs include only expenses incurred that can be directly attributed to the process of developing new products and services.
Intangible assets with a finite useful life are amortised over their useful lives and are subject to fair-value testing whenever there are indications of possible impairment. The amortisation period and the amortisation method for intangible assets with a finite useful life are reviewed at least at the end of each financial year. Changes in expected useful life, or in the ways in which the future economic benefits associated with the asset are generated, are recognised through a change in the amortisation method or period, depending on the case, and are regarded as changes in accounting estimates. The amortisation rates for intangible assets with a finite useful life are recognised in the income statement for the year, in the appropriate non-monetary cost category for the function of the intangible asset.
The Company's estimates of the useful lives of the various intangible asset categories are shown below.
| Category | Useful life |
|---|---|
| Software, patents, concessions and licences | 3-5 years |
| Platform development | 3-5 years |
Profits or losses arising from the disposal of an intangible asset are measured as the difference between the net revenue from disposal and the carrying amount of the intangible asset, and are recognised in the income statement for the year in which the disposal takes place.
The Company checks for any indications of asset impairment at each reporting date. If these exist, or when an annual impairment test is due, the Company estimates the asset's recoverable amount. The recoverable amount is the greater of the fair value of the asset or CGU, net of disposal costs, and its value in use. The recoverable amount is determined for each individual asset or CGU. If the carrying amount of an asset or CGU is greater than its recoverable amount, the asset is impaired and is consequently written down to the recoverable amount.
When it calculates the value in use, the Company discounts estimated future cash flows to present value using a pre-tax discount rate that reflects market valuations of the present value of money and the specific risks of the asset. In calculating fair value net of disposal costs, recent market transactions are taken into account. If such transactions cannot be identified, an appropriate valuation model is used. These calculations are corroborated by appropriate valuation multiples, the price of equity securities listed for publicly traded investee companies and other available indicators of fair value.
The Company bases its impairment tests on detailed budgets and provisional calculations that are prepared separately for each Company CGU to which separate assets are allocated. These budgets and provisional calculations usually cover a period
of three or five years. For longer periods, a long-term growth rate is calculated, which is used to project future cash flows beyond the third or fifth year.
Impairment of operating assets, including inventory impairment, is recognised in the income statement for the year in the respective cost categories for the impaired assets. For fixed assets that have already been revalued, the revaluation is booked to items of other comprehensive income. In these cases, the impairment is also recognised in items of other comprehensive income up to the level of the previous revaluation.
For assets other than goodwill, at each reporting date the Company checks for any indications that previously recognised impairment no longer exists (or has decreased). If so, it estimates the recoverable amount of the asset or the CGU. The value of an asset previously written down may be reversed only if there have been changes in the assumptions on which the calculation of the recoverable amount was based, after recognition of the most recent impairment. The write-back must not exceed the carrying amount that would have been calculated, net of depreciation and amortisation, assuming that no impairment had been recognised in previous years. The write-back is recognised in the income statement for the year, unless the fixed asset is not booked at a revalued amount, in which case the write-back is treated as a revaluation increase.
Equity investments in subsidiaries and associates are measured using the cost method and reduced for impairment pursuant to IAS 36. If there is a write-down due to impairment, the cost is allocated to the income statement. The original value is reversed in subsequent years if the assumptions underlying the write-down no longer apply.
The goodwill implicit in the value of equity investments is subject to an annual impairment test using the procedures covered above.
When significant influence over an associate is lost, the Company measures and recognises its remaining equity investment at fair value. The difference between the carrying amount of the equity investment at the date of loss of significant influence or joint control and the fair value of the remaining equity investment and the considerations received is recognised in the income statement.
Repurchased treasury shares are recognised at cost as a decrease to shareholders' equity. The acquisition, sale or cancellation of treasury shares does not give rise to any profit or loss in the income statement. If the shares are re-issued, the difference between the purchase value and the consideration is recognised in the share premium reserve. If options on shares are exercised during the period, they are satisfied with treasury shares.
When initially recognised, financial assets are classified, depending on the case, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial assets, available-for-sale financial assets or hedging derivatives, if the hedge is effective.
All financial assets are initially recognised at fair value in addition to transaction costs directly attributable to the acquisition, except for financial assets at fair value through profit or loss.
The purchase or sale of a financial asset requiring delivery within the time frame established by regulation or market convention (a 'regular-way trade') is recognised on the trade date, i.e. the date on which the Company has committed to purchase or sell the asset.
Financial assets are classified in four categories for measurement purposes subsequent to initial recognition:
This category includes assets held for trading and assets designated on initial recognition as financial assets at fair value with changes recognised in the income statement. Assets held for trading are all assets purchased in order to be sold or repurchased in the short-term. Derivatives, including separated derivatives, are classified as financial instruments held for trading unless they are designated as effective hedging instruments, as defined in IAS 39.
The Company has not classified any financial asset at fair value through profit or loss. Financial instruments at fair value through profit or loss are posted to the statement of financial position at fair value, while changes in fair value are recognised as financial income or expenses in the income statement.
Embedded derivatives contained in the host contract are accounted for as separated derivatives and recognised at fair value if their economic characteristics and risks are not closely related to those of the host contract, and the host contract is not held for trading or measured at fair value through profit or loss. These embedded derivatives are measured at fair value through profit or loss. A recalculation takes place only when a change in the terms of the agreement significantly changes the cash
flows that would have otherwise been expected, or if a financial asset is reclassified to a category other than fair value through profit or loss.
Loans and receivables are non-derivative financial assets, with fixed or determinable payments, that are not quoted in an active market. After initial recognition, these financial assets are measured at amortised cost using the effective interest method, less impairment losses. The amortised cost is calculated to reflect any discounts, premiums associated with the purchase, fees or costs that are an integral part of the effective interest rate. The effective interest rate is recognised as financial income in the income statement. Impairment losses are recognised as financial expenses in the income statement. This category normally includes trade and other receivables.
Financial assets that are not derivatives and have payments at a fixed or determinable maturity date are classified as "held-tomaturity investments" if the Company has the intention and the capacity to retain them in the portfolio until maturity. After initial recognition, held-to-maturity financial investments are measured at amortised cost using the effective interest method, less impairment losses. The amortised cost is calculated to reflect any discounts, premiums associated with the purchase, fees or costs that are an integral part of the effective interest rate. The effective interest rate is recognised as financial income in the income statement. Impairment losses are recognised as financial expenses in the income statement.
Available-for-sale financial assets include shares and debt securities. Shares classified as available for sale are those that are not classified as held for trading or designated at fair value through profit or loss. Debt securities are included in this category if they are held for an indefinite period or if they may be sold to meet liquidity needs or due to changing market conditions. Equity investments in companies other than subsidiaries and associates are also included in this category.
After initial recognition, available-for-sale financial assets are measured at fair value (if this can be reliably determined) and their unrealised gains and losses are recognised as items of other comprehensive income in the reserve for available-for-sale assets, until the investment is derecognised – at which time the cumulative gain or loss is recognised as other operating income or expenses – or until there is an impairment loss, when the cumulative loss is deducted from the reserve and reclassified to the income statement as financial expenses. Interest received during the period in which available-for-sale financial assets are held is recognised as financial income using the effective interest method. The Company evaluates whether it still has the capacity and the intent to sell its available-for-sale financial assets in the short-term. If, in rare circumstances, the Company is unable to trade these financial assets due to inactive markets, it may choose to reclassify them if the management has the capacity and the intention to keep the assets for the foreseeable future or until maturity.
For financial assets reclassified from the available-for-sale category, the gain or loss recognised previously is amortised in the income statement on the basis of the remaining life of the investment, using the effective interest rate. The difference between the new amortised cost and the expected cash flows is amortised on the basis of the remaining useful life of the asset using the effective interest rate. If an impairment loss is subsequently recognised on the asset, the amount accounted for in shareholders' equity is reclassified to the income statement.
A financial asset (or, if applicable, part of a financial asset or part of a group of similar financial assets) is derecognised (i.e. removed from the statement of financial position) when:
When the Company has transferred the rights to receive cash flows from an asset or has entered into an agreement based on which it retains the contractual rights to receive cash flows from the financial asset but also assumes a contractual obligation to pay the cash flows to one or more recipients (a pass-through), the Group evaluates whether and to what extent it has retained the risks and benefits inherent in ownership. If the Company has neither substantially retained nor transferred all risks and benefits, or it has not lost control over it, the asset continues to be recognised in the Company's financial statements to the extent of the Company's continuing involvement in the asset. In this case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured so as to reflect the rights and obligations that continue to be held by the Company.
At each reporting date, the Company verifies whether a financial asset, or a group of financial assets, has been subject to impairment. Impairment exists only when, subsequent to initial recognition, one or more events take place ("a loss event") that have an impact, which can be reliably estimated, on the estimated future cash flows of the financial asset or group of financial assets. Evidence of impairment may include indications that a debtor or a group of debtors are having financial difficulty, are unable to meet their obligations, are unable to pay or late in paying interest or making significant payments, or are likely to be subject to bankruptcy proceedings or other forms of financial restructuring, and observable data that indicate a measurable decrease in estimated future cash flows, such as changes in context or in economic conditions associated with a financial crisis.
For financial assets accounted for at amortised cost, the Company first evaluates whether there is any impairment of each individually significant financial asset. This assessment is carried out collectively for financial assets that are not individually significant. If there is no evidence of impairment in the individually assessed financial asset, regardless of whether it is significant, the asset is included in a group of financial assets with similar credit risk and tested on a collective basis in order to identify any impairment. Assets considered individually when testing for impairment and for which impairment is recognised or remains are not included in the impairment test carried out on a collective basis.
The amount of any impairment loss identified is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding credit losses expected in the future that have not yet taken place). The present value of cash flows is discounted at the original effective interest rate of the financial asset.
The carrying amount of the asset is reduced by accounting for an impairment provision, and the loss is recognised in the income statement. Interest income (recognised as financial income in the income statement) continues to be estimated on the reduced carrying amount and is calculated by applying the interest rate used to discount the future cash flows in order to measure the impairment loss. The loans and relative impairment provisions are written off when there is no reasonable expectation of future recovery and the guarantees have been executed or transferred to the Company. If, in a subsequent year, the amount of the estimated impairment increases or decreases due to an event that takes place after the impairment loss is recognised, this is reflected by adjusting the provision. If a written-off asset is subsequently recovered, the reversal of the impairment loss is recognised in the income statement as a reduction to financial expenses.
The Company evaluates whether there is objective evidence of impairment of an available-for-sale financial asset or a group of available-for-sale financial assets at each reporting date.
For equity instruments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of the instrument below its cost. The term 'significant' is assessed with respect to the original cost of the instrument and the term 'prolonged' with respect to the period for which the fair value remains below the original cost. If there is evidence of impairment, the cumulative loss – measured as the difference between the purchase cost and the current fair value, less impairment losses on the financial asset recognised previously in the income statement – is reversed from items of other comprehensive income and recognised in the income statement.
The reversal of impairment losses on equity instruments is not recognised in the income statement. Increases in their fair value subsequent to the impairment are recognised directly in the statement of comprehensive income.
Impairment on debt instruments classified as available for sale is determined using the same criteria as those used for financial assets at amortised cost. However, the amount of the impairment is given by the cumulative loss, i.e. the difference between the amortised cost and the current fair value, less any impairment losses on the investment recognised previously in the income statement.
Future interest income continues to be estimated on the basis of the reduced carrying amount of the asset and is estimated using the interest rate applied to discount future cash flows in order to calculate impairment. Interest income is recognised as financial income. If the fair value of the debt instrument increases in a subsequent year and this increase can be correlated objectively with an event that took place after the impairment was recognised in the income statement, the impairment is adjusted, again in the income statement.
Any inventories are recognised at purchase or production cost or at the net realisable value represented by the amount that the Company expects to receive from their sale in the ordinary course of business, whichever is lower. The cost of inventories is calculated as the specific cost for clearly identifiable goods for resale or, for fungible goods, using the FIFO method.
Cash and cash equivalents include cash, bank current accounts, deposits repayable on demand and other short-term and highly liquid financial investments that are readily convertible into cash, or that can be converted into cash within 90 days of the original date of acquisition, and carry an insignificant risk of a change in value.
Financial liabilities are classified when initially recognised as financial liabilities at fair value through profit or loss, loans and borrowings or derivatives designated as hedging instruments.
All financial liabilities are initially measured at fair value, to which are added, in the case of loans, borrowings and payables, the transaction costs directly attributable to them.
The Company's financial liabilities include trade and other payables, loans and borrowings, including current account overdrafts, guarantees granted and derivatives.
Measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss include liabilities held for trading and financial liabilities initially recognised at fair value through profit or loss.
Liabilities held for trading are all those sustained for the purpose of their resale in the short-term. This category also includes the derivative financial instruments entered into by the Company which are not designated as hedging instruments in a hedging relationship as defined by IAS 39. Derivatives are classified as financial instruments held for trading unless they are designated as true hedging instruments.
Gains or losses on liabilities held for trading are recognised in the income statement for the year. Financial liabilities are designated at fair value through profit or loss as of the date of initial entry, only if the criteria of IAS 39 are satisfied.
After initial recognition, liabilities for loans are measured at amortised cost, using the effective interest rate method. Gains and losses are booked through profit or loss when the liability is extinguished, as well as through the amortisation process.
The amortised cost is calculated by measuring the acquisition discount or premium and fees or costs that are an integral part of the effective interest rate. Amortisation at the effective interest rate is included among financial expenses in the income statement.
Financial guarantees issued by the Company are contracts that stipulate a payment to reimburse the holder of a debt security for a loss it suffered as a result of the debtor's failure to pay by the contractual due date. Financial guarantee contracts are initially recognised as a liability at fair value, plus transaction costs directly attributable to the issuance of the guarantee. The liability is subsequently measured as either the best estimate of the disbursement required to meet the guaranteed obligation at the reporting date, or the amount initially recorded, net of cumulative amortisation, whichever is the greater.
A financial liability is derecognised when the underlying obligation is extinguished, cancelled or honoured. If an existing financial liability is replaced by another with the same lender, under materially different conditions, or the conditions of an existing liability are materially changed, this replacement or change is accounted for by derecognising the initial liability and recognising a new liability, with any differences in carrying value entered in the income statement.
A financial liability and asset may be offset and the net amount presented in the statement of financial position when there is a present legal right to offset the recognised amounts and there is an intention either to settle the residual net amount, or to realise the assets and extinguish the liabilities simultaneously.
Trade and other payables are initially recognised at fair value, net of directly attributable accessory costs. They are subsequently measured at amortised cost, applying the effective interest method. If there is a change, which can be estimated, in expected cash flows, the value of the liabilities is recalculated to reflect that change on the basis of the present value of the new expected cash flows and the internal rate of return determined initially.
The employee benefits disbursed at the time of or subsequent to termination of the employment relationship mainly consist of the employee severance pay governed by Italian law in Article 2120 of the Italian Civil Code. The employee severance pay is a defined-benefit plan, i.e. a formalised plan of benefits subsequent to the termination of the employment relationship which constitutes a future obligation and for which the Company bears actuarial and investment risk. As required by IAS 19R, the Company uses the Projected Unit Credit method to determine the present value of the obligations and the related current cost of services; this calculation method requires the use of objective actuarial and accounting assumptions regarding demographic variables (mortality rate, personnel turnover rate) and financial variables (discount rate, future increases in wage levels). Actuarial gains and losses are immediately and fully recognised in the statement of comprehensive income, pursuant to IAS 19R.
For companies with more than 50 employees, the severance pay accrued following the entry into force of the pension reform (1 January 2007) is allocated to pension funds or to the treasury fund established at INPS (Italian Social Security Institution). For companies with fewer than 50 employees, the severance pay may remain with the company as was the case in previous years or be contributed to pension funds. The portion of accruing employee severance pay contributed to pension funds or to INPS must be classified as a defined-contribution plan since the Company's obligation consists exclusively of making contributions to the pension fund or to INPS. The liability for prior employee severance pay continues to be classified as a defined-benefit plan to be measured using actuarial assumptions.
From an accounting perspective, the actuarial valuation results in recognising the interest cost, i.e. the figurative cost that the Company would incur if it applied for a loan in the market for an amount equal to the severance pay, in the income statement under "Financial income/expenses", and the current service cost, i.e. the amount of benefits accrued during the year by employees who have not transferred benefits accrued after 1 January 2007 to supplementary pension plans, under "Employee costs". Actuarial gains and losses, which reflect changes in the actuarial assumptions, are recognised directly in shareholders' equity without ever being transferred to the income statement, and are included in the statement of comprehensive income.
Provisions for risks and charges are recognised as necessary for losses and charges of a particular nature that are certain or likely to exist, the amount and/or timing of which cannot, however, be determined. The provisions are recognised only when there is a current obligation (legal or constructive) for a future outflow of economic resources as a result of past events, and it is likely that such outflow will be required to fulfil the obligation. This amount is the best estimate of the cost of settling the obligation. The rate used to calculate the present value of the liability reflects current market values and takes into consideration the specific risk associated with each liability.
Where the effect of the time value of money is material and the obligation payment dates can be reliably estimated, the provisions are measured at the present value of the expected outflow using a rate which reflects market conditions, changes in the cost of money over time and the specific risk linked to the obligation. The increase in the value of the provision due to changes in the cost of money over time is accounted for as a financial expense.
No provisions are recognised for risks that will only possibly result in a liability. Instead, these risks are identified in the dedicated section on contingent liabilities.
The Company classifies non-current assets and disposal groups as held for sale or for distribution to shareholders of the parent company if their carrying amount will be recovered principally through sale or distribution rather than through continuing use. These non-current assets and disposal groups classified as held for sale or for distribution to shareholders are measured at the carrying amount or the fair value net of disposal or distribution costs, whichever is lower. Distribution costs are additional costs directly attributable to the distribution, excluding financial expenses and taxes.
Assets or sale groups may be classified as held for sale only when such sale is highly likely and the asset or sale group is available for immediate distribution in its present condition. The actions required to complete the sale should indicate that it is
unlikely that significant changes to the sale will be made or that the sale will be withdrawn. The management must be committed to the sale, which should be expected to be completed within one year from the date of classification. Similar rules also apply for assets and disposal groups held for sale.
The depreciation of plant and equipment and the amortisation of intangible assets cease when they are classified as available for sale or for distribution to shareholders.
Assets and liabilities classified as held for sale or for distribution to shareholders are presented separately under current assets and liabilities.
A disposal group is classified as discontinued operations if it is:
Assets held for sale are excluded from profit (loss) from continuing operations and are presented in the income statement on a single line as "Net profit (loss) from assets held for sale".
The company pays additional benefits to several directors, senior managers, clerical workers, consultants and employees of the company and of subsidiaries through capital participation schemes (stock option plans). According to IFRS2 - Share-based payment - they are considered as payment in shares; therefore, the total amount of the current value of the stock options at the grant date is recorded in the income statement at cost when the beneficiaries are employees of the company. The fair value of the options conferred to employees of the subsidiaries is recognised as an increase of participation and, as a counterentry, a reserve in shareholders' equity is posted. Changes in the current value after the grant date do not have an effect on the initial valuation. The cost of compensations, corresponding to the current value of the options at the grant date, is recorded under personnel costs on a straight-line basis for the period between the grant date and the maturity date, with the matching entry recorded under shareholders' equity.
Sale of goods
Revenue from the sale of goods is measured at the fair value of the consideration received or due, taking account of the value of any returns, allowances, trade discounts and quantity-related premiums. Revenue is recognised when the significant risks and benefits associated with ownership of the assets are transferred to the acquirer, when the consideration is likely to be recovered, the relative costs or any refunding of goods may be reliably estimated, and if management ceases to exercise the ongoing level of activity usually associated with the ownership of the good sold. The transfer of risks and benefits usually coincides with delivery to the customer, which corresponds to the time of consignment of the goods to the carrier.
Revenue relating to the provision of services is recognised according to the stage of effective completion of the service at the reporting date, and is shown net of discounts and allowances. Specifically, the provision of advertising services is recognised based on outlay.
Costs are recognised on the basis of the accrual principle and hence when the good or service is acquired.
Current taxes and the tax benefit for the year are valued at the amount expected to be paid to the tax authorities or recovered. The tax rates and regulations used to calculate the amount are issued, or substantively enacted, as at the reporting date in the countries where the Company operates and generates its taxable income. Current taxes relating to elements directly recognised in shareholders' equity are also recognised in shareholders' equity and not in the income statement for the year. Management periodically reviews the tax return position if tax regulations are subject to interpretation, and makes provisions when appropriate.
Deferred taxes are calculated by applying the "liability method" to the temporary differences at the reporting date between the tax values of assets and liabilities and the corresponding carrying amounts.
Deferred tax liabilities are recognised on all taxable temporary differences, with the following exceptions:
the foreseeable future and that there will be sufficient future taxable amounts to allow the recovery of said temporary differences.
The portion of prepaid taxes, including those relating to previous tax losses, which is not offset by deferred taxes is recognised to the extent to which it is likely that future taxable income will be available against which such assets can be recovered, as inferred from the Group business plans and strategic guidelines. Deferred and prepaid taxes are measured using the tax rates expected to be applicable in the years in which the differences will be realised or extinguished, on the basis of the tax rates that have been enacted or substantively enacted at the reporting date.
The carrying value of deferred tax assets is reviewed at each reporting date and reduced if it is no longer probable that sufficient taxable amounts will be available in future to enable the receivable to be used in whole or in part. The deferred tax assets not recognised are reviewed at each reporting date and recognised if it becomes likely that taxable income will be sufficient to allow for their recovery.
Current, deferred and prepaid taxes are recognised in the income statement, except for those relating to items directly charged or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity. Taxes are offset only when they are levied by the same taxing authority and there is a legal right to settle on a net basis.
To prepare the financial statements in accordance with IFRS, the directors must apply accounting principles and methodologies which, in certain circumstances, rely on judgements and estimates based on past experience and assumptions that are deemed reasonable and realistic on a case-by-case basis in the light of the circumstances. Such estimates and assumptions impact the amounts recognised and the disclosures provided in the financial statements. The actual amounts of the items based on those estimates and assumptions may differ from those reported in the financial statements, which reflect the occurrence of the event subject to estimation, due to the uncertainty of the assumptions and conditions on which the estimates are based.
A brief list is provided below of the Company's items that require greater subjectivity on the part of the directors when preparing estimates, and for which a change in the conditions underlying the assumptions used could have a significant impact on the Company's financial results.
The provision for bad debts reflects the directors' best estimate of losses on the portfolio of trade receivables. This estimate is based on losses expected by the Company, determined in the light of past experience for similar receivables, current and historical past-due receivables, close monitoring of credit quality and projections regarding economic and market conditions.
Prepaid taxes are accounted for based on the expectation that there will be sufficient taxable amounts in the future to recover them. The measurement of expected taxable amounts in order to account for prepaid taxes depends on factors that could change over time and significantly impact the recoverability of the prepaid taxes.
Provisions representing the risk of a negative outcome for the Company are recognised for legal and tax risks. The amount of the provisions recognised for those risks is the directors' best estimate at the reporting date. This estimate requires reliance on assumptions that depend on factors that could change over time and therefore could significantly impact the directors' current estimates used in preparing the Company's financial statements.
The table below shows the new accounting principles and amendments which came into force on 1 January 2016 and were adopted by the Company:
The nature and impact of each new accounting principle and amendment are described below. Although these new principles and amendments have been applied for the first time in 2016, they have not had any material impact on the financial statements of the Company.
IFRS 14 Regulatory Deferral Accounts. IFRS 14 is an optional standard which enables an entity whose assets are subject to regulated tariffs to continue to apply most of the previous accounting standards adopted for amounts relating to rate regulation, when it first adopts the IFR standards. An entity which adopt IFRS 14 must present the balances relating to rate regulation on separate lines in the statement of financial position and present the movements in these accounts in separate lines of the profit/(loss) statement for the year and those relating to the other items of comprehensive income statement. The standard requires that information be provided on the nature and associated risks of the regulated tariffs and of the latter's impact on the entity's net assets. This standard is not applicable to the Company, as it has already adopted the IFRS; this standard will not be endorsed by the European Union.
Amendments to IAS 19 Employee Benefits: defined contribution plans
IAS 19 requires an entity to consider employee or third party contributions when accounting for defined benefit plans. When the contributions are linked to the service rendered, they should be allocated to the periods of service as a negative benefit. This amendment makes it clear that, if the amount of the contributions is independent of the number of years of service, the entity is permitted to record these contributions as a reduction in the cost of the service for the period in which the service is provided, rather than to allocate the contribution to the periods of service. This amendment applies for the financial years from 1 February 2015 onwards. This amendment is not significant for the Company.
Annual improvement cycle 2012-14
These improvements apply for financial years starting on 1 January 2016 or later. They include:
The standards which are affected by this annual improvement are IFRS 2, IFRS 3, IAS 16, IAS 24 and IFRS 8.
This improvement applies prospectively and clarifies various points relating to the definition of the performance condition and the continued service condition which constitute the vesting conditions, including:
A performance condition must include a continued service condition
A performance objective must be achieved while the party in question continues to provide his services
A performance condition may refer to the transactions or business activities of an entity, or to those of another entity in the same Group
A performance condition may be a market condition or a condition not connected with the market
If for whatever reason the party in question no longer provides the service during the vesting period, the continued service condition is not met.
The definitions above are in line with the procedures on the basis of which, in previous periods, the Group identified the performance and continued service conditions that fulfil the vesting conditions. Therefore, these improvements have no effect on the accounting principles applied by the Company.
The amendment applies prospectively and makes it clear that all agreements relating to potential payments classified as liabilities (or assets) which result from a business combination, must subsequently be measured at fair value through profit or loss, whether or not they come within the scope of IFRS 9 (or IAS 39, as applicable). This is consistent with the accounting principles applied by the Company and therefore this amendment has had no impact on its accounting principles.
This amendment is applied retrospectively and makes it clear that in IAS 16 and IAS 38 an asset may be revalued based on observable data either by adjusting the gross carrying amount of the asset to its market value or by calculating the market value of the carrying amount and adjusting the gross carrying amount proportionally, so that the carrying amount is equal to the market value. Furthermore, accumulated depreciation is the difference between the gross carrying amount and the carrying amount of the asset. The Company has not made any revaluation adjustment during the reference period.
The amendment applies retrospectively and makes it clear that a management company (an entity which provides services for senior managers with key responsibilities) is a related party subject to related party disclosures. Moreover, an entity which uses the services of a management company should disclose the costs incurred for the management services. This change is not significant for the Company because it is does not receive management services from other entities.
The amendment applies retrospectively and makes it clear that: an entity shall disclose the valuations made by management when applying the aggregation criteria under paragraph 12 of IFRS 8, including a brief description of the operating segments which have been aggregated and of the economic characteristics (e.g. sales, gross margin) used to define whether the segments are "similar". It is only necessary to reconcile the segment's assets with total assets if the reconciliation is presented at the highest decision making level, as is also required for segment liabilities.
The Company operates as a holding company and the standard is not applicable to it and therefore the aggregation criteria required by IFRS 8.12 were not applied.
Modifications to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests in Joint Ventures
Amendments to IFRS 11 require that a joint operator accounting for the acquisition of an equity investment in a joint arrangement whose assets represent a business must apply the relevant standards of IFRS 3 regarding the accounting of business combinations. The modifications clarify also that in case the joint arrangements are maintained, the stake previously held in a joint arrangement is not re-measured at the time of acquisition of a further stake in the same joint arrangement. Moreover, an exclusion from the scope of IFRS 11 was added to clarify that the modifications do not apply when the parties sharing control, including the entity preparing the financial statements, are both controlled by the same ultimate controlling entity.
The modifications apply both to the acquisition of the initial shareholding in a joint arrangement, and to the acquisition of any further share in the same joint arrangement. The modifications must be applied prospectively for the years starting on 1 January 2016 or later; advanced application is permitted. No impact on the Company is expected as a result of application of these modifications.
Modifications to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
The modifications clarify the guidelines contained in IAS 16 and in IAS 38 which state that revenue reflects a model of economic benefits generated by business operations rather than economic benefits resulting from use of the goods. As a result, a method based on revenue cannot be used for amortisation of buildings, equipment or machinery and could be used only in very limited circumstances for the amortisation of intangible assets. The modifications must be applied prospectively for the years starting on 1 January 2016 or later; advanced application is permitted. No impact on the Company is expected as a result of application of these modifications given that the Group does not use methods based on revenue for the amortisation of its non-current assets.
Modifications to IAS 27: Equity Method in Separate Financial Statements
The modifications will permit the entities to use the net assets method to account for stakes in controlled companies, joint ventures and related companies in their separate balance sheet. The entities already applying the IFRS, deciding to modify the accounting criterion passing to the net assets method in their separate balance sheet must apply the change retroactively. The modifications are effective for the years starting on 1 January 2016 or later; advanced application is permitted. The Company does not intend to exercise this option.
These improvements apply for the years starting on 1 January 2016 or later. They include:
The assets (or discontinued groups) are generally disposed of by sale or distribution to the shareholders. The modification clarifies that the change from one to the other of these transfer methods should not be considered as a new transfer plan, but instead as a continuation of the original plan. Therefore, there is no interruption in the application of the requirements of IFRS 5. This modification must be applied prospectively.
The modification makes it clear that a service contract which includes a payment may result in continuous involvement in a financial activity. An entity must define the nature of the compensation and agreement based on the guidance contained in the IFRS 7 regarding the continuous involvement to evaluate in the information is required. The definition of which service contract includes a continuous involvement must be made retroactively. In any case, the required information does not have to be presented for the years preceding the year when the modification is first applied.
The modification makes it clear that the requirements for information about the payment do not apply to interim summary financial statements, unless such information provides a material update on the information presented in the most recent annual financial statements. This modification must be applied retroactively.
The modification makes it clear that the market depth for high-quality corporate bonds must be defined with respect to the currency in which the bond is denominated, rather than the currency of the country where the bond is located. When there is no active market for high-quality company bonds in this currency, the respective rates of state bonds must be used. This modification must be applied prospectively.
The modification makes it clear that the information required in interim financial statements must be either presented in the interim financial statements or incorporated via cross-referencing between the interim balance sheet and the part of the interim financial report in which it is included (for example, the management report or risk report).
The information presented in the interim financial report must be available for the reader in the same terms and within the same time frame as for the interim financial statements. This modification must be applied retroactively.
No impact is expected for the Company as a result of application of these modifications.
Modifications to IAS 1 Disclosure Initiative
The modifications to IAS 1 - Presentation of Financial Statements clarify, rather than significantly amend, certain existing IAS 1 requirements. The modifications clarify:
The materiality requirement of IAS 1
The fact that specific lines in profit/(loss) for the year or other components of comprehensive income or in the statement of financial position can be disaggregated.
That the entities have flexibility with regard to the order in which the notes to the financial statements are presented.
That the quota of other components of the overall income statement related to related companies and joint ventures accounted for using the net assets method must be presented in aggregate in a single line, and classified among positions that will not be subsequently reclassified in the income statement.
Moreover, the modifications clarify the requirements which apply when subtotals are presented in annual profit/ (loss) statements or other components of comprehensive income or in the statement of financial position. The modifications are effective for the years starting on 1 January 2016 or later; advanced application is permitted. No impact is expected for the Company as a result of application of these modifications.
Modifications to IFRS 10, IFRS 12 and to IAS 28 - Investment Entities: Applying the Consolidation Exception
The modifications deal with problems arising from application of the exception regarding investment entities described in IFRS 10. The modifications to IFRS 10 make it clear that the exemption from presentation of consolidated financial statements applies to a parent company which is the subsidiary of an investment entity, when the investment entity values all its subsidiaries at fair value.
The modifications to IFRS 10 also make it clear that only one subsidiary of an investment entity, which is not itself an investment entity and which provides support services to the investment entity, is consolidated. All other controlled companies of the investment entity are valuated at fair value. The modifications to the IAS 28 permit the investor to maintain the fair value applied to related companies or joint ventures of an investment entity in the valuation of stakes in controlled companies in the application of the net assets method. The modifications must be applied retroactively and are effective for the years starting on 1 January 2016 or later; advanced application is permitted. No impact is expected for the Company as a result of application of these modifications.
Amendments to IAS 40 - Investment Property
On 8 December 2016, the IASB published the amendment to this standard. The purpose of these amendments is to clarify the application of paragraph 57 of IAS 40 which provides guidelines when there is a change in use of an asset which was not an investment property, and vice versa.
On 8 December 2016, the IASB published the "Annual Improvements to IFRSs: 2014 – 2016 cycle".
The main amendments that could be significant to the Company are contained in IFRS 12 - Disclosures of Interests in Other Entities. The document clarifies the scope of the standard, specifying that disclosure obligations, except for those in paragraphs B10-B16, also apply to investments in other companies classified as held for sale or for distribution, or as discontinued operations pursuant to IFRS 5. For venture capital and similar companies the other amendment refers to the valuation of interests in associates and joint ventures and provides the option to value them at fair value with the variances in the income statement. The amendment clarifies that the choice is made for each individual investment.
On 8 December 2016, the IASB published this interpretation which indicates the foreign exchange rate to use in foreign currency transactions when payment is made or received in advance.
The standards and interpretations which had been issued but were not yet effective at the date of preparation of the separate financial statements, are described below. The Company intends to adopt these standards once they become effective.
In July 2014, the IASB issued the final version of IFRS 9 - Financial Instruments, which replaced IAS 39 - Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 combines all three aspects relating to the project for financial instrument accounting: classification and valuation, impairment and hedge accounting. The IFRS 9 is effective for the years starting on 1 January 2018 or later; advanced application is permitted. With the exception of hedge accounting, retroactive application of the standard is required, but it is not obligatory to provide the comparative information. With regard to hedge accounting, the standard generally applies prospectively, with some limited exceptions.
The Company will adopt the new standard as of its effective date. The Company does not expect any significant impact on its balance sheet or net assets.
IFRS 15 was issued in May 2014 and introduces a new model in five phases which will apply to revenue from contracts with customers. The IFRS 15 imposes reporting of revenues for an amount, to which the entity considers having the rights to in exchange for transfer of merchandise or services to the client.
The new standard will replace all present requirements of the IFRS regarding the recognition of revenue. The standard is effective for the years starting on 1 January 2018 or later with full retroactive or modified application. Advanced application is allowed.
The Company plans to apply the new standard as of the obligatory effective date, using the method of full retroactive application.
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
The amendments address the conflict between IFRS 10 and IAS 28 with reference to a loss of control in a subsidiary which is sold or allocated to an associated company or a joint venture. The amendments clarify that the profit or loss resulting from the sale or from the contribution of assets constituting a business, as defined in IFRS 3, between an investor and an associated company or joint venture, must be fully recognised. Any profit or loss resulting from a sale or contribution of assets which do not constitute a business are therefore recognised only up to the extent of the share held by third party investors in the associated company or joint venture. The IASB has postponed indefinitely the date for application of these amendments but should an entity decide to apply them in advance, it should do this prospectively.
The amendments to IAS 7 Statement of Cash Flows are part of the IASB disclosure initiative and require the entity to provide additional information to users of financial statements which enable them to evaluate the changes in liabilities arising from financing activities, including changes arising from cash flows and non-monetary changes. At the time of initial application of this amendment, the entity is not required to present comparative information relating to previous years. These amendments are effective for the financial years starting on 1 January 2017 or later, and early application is permitted. The application of the amendments will require the Company to make additional disclosures.
The IASB makes it clear how to account for deferred tax assets relating to unrealised losses on debt instruments measured at fair value. The amendments will be effective as of 1 January 2017.
IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2
The IASB has issued amendments to IFRS 2 Share-based Payments covering three main areas: the effects of vesting conditions on the measurement of a share-based payment transaction settled in cash; the classification of a share-based payment transaction settled net of withholding tax obligations; the accounting where a change to the terms and conditions of a share-based payment transaction changes its classification from a cash-settled to an equity-settled transaction.
At the time of adoption, the entities must apply the amendments without restating previous periods, but retrospective application is permitted if all three amendments are chosen and the other criteria are also respected. These amendments are effective for the financial years starting on 1 January 2018 or later, and early application is permitted. The Company is assessing the effects of these amendments on its own financial statements.
The standard stipulates that, unlike how it was in the past, the leases must be represented in assets and liabilities of companies, increasing the visibility of their assets and liabilities,
The IFRS 16 abolishes the distinction between operative leases and financial leases (for the lessee), treating all such agreements as financial leases.
Short-term agreements (up to 12 months) and those involving goods of low value are exempted from this treatment.
The new standard will be effective from 1 January 2019. Advance application is permitted as long at the recent standard IFRS 15 - Revenue from Contracts with Customers is also applied.
The Company has begun an analysis of the potential impacts of the application of this standard.
IFRS 8 defines an operating segment as a component:
IFRS 8 does not apply to the separate financial statements of ePRICE S.p.A.
The following table provides a breakdown of the historical cost, accumulated depreciation and net carrying amount of plant and equipment:
| As at 31 December 2016 | As at 31 December 2015 | |||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | Hist. cost | Acc. amort. | Net value | Hist. cost | Acc. amort. | Net value |
| Plant and equipment | 42 | (34) | 8 | 59 | (41) | 18 |
| Fixtures and furnishings | 585 | (423) | 162 | 469 | (377) | 92 |
| Electronic machinery | 252 | (131) | 121 | 414 | (278) | 136 |
| Electronic machinery under leasing | 202 | (19) | 183 | - | - | - |
| Leasehold improvements | 676 | (47) | 629 | - | - | - |
| Other assets | 78 | (72) | 6 | 81 | (72) | 9 |
| Total plant and equipment | 1,835 | (726) | 1,109 | 1,023 | (768) | 255 |
Note that as at 31 December 2016, no owned operating assets were burdened by any type of guarantee issued to third parties, and that in the year, no indications emerged of any potential impairment of plant and equipment.
| (In thousands of Euros) | As at 31 December | 2015 Increases due to purchases Decreases Amort. As at 31 December | 2016 | ||
|---|---|---|---|---|---|
| Plant and equipment | 18 | - | (2) | (8) | 8 |
| Fixtures and furnishings | 92 | 148 | (2) | (76) | 162 |
| Electronic machinery | 136 | 30 | (2) | (43) | 121 |
| Electronic machinery under leasing | - | 202 | - | (19) | 183 |
| Leasehold improvements | - | 676 | - | (47) | 629 |
| Other assets | 9 | - | - | (3) | 6 |
| Total tangible assets | 255 | 1,056 | (6) | (196) | 1,109 |
The following table shows changes in plant and equipment:
The main investments made during the year concerned improvements to third-party assets relating to the Company's new headquarters, in use since August 2016, and to new office fixtures, furnishings and equipment (including those acquired under financial leasing arrangements) necessary for the new premises.
The breakdown of intangible assets is as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Software, patents, concessions and licences | 223 | 491 |
| Fixed assets under development | 2,381 | 1,393 |
| Total intangible assets | 2,604 | 1,884 |
The following table provides a breakdown of the historical cost, accumulated amortisation and net carrying amount of the fixed asset items:
| As at 31 December 2016 | As at 31 December 2015 | |||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | Hist. cost | Acc. amort. | Net value | Hist. cost | Acc. amort. | Net value |
| Software, patents, concessions and licences | 859 | (636) | 223 | 841 | (350) | 491 |
| Fixed assets under development | 2,381 | 2,381 | 1,393 | 1,393 | ||
| Total intangible assets | 3,240 | (636) | 2,604 | 2,234 | (350) | 1,884 |
The following table shows changes in intangible fixed assets during the year:
| (In thousands of Euros) | As at 31 December 2015 |
Increases due to purchases |
Write | downs Reclassifications Amort. | As at 31 December 2016 |
|---|---|---|---|---|---|
| Software, patents, concessions and licences |
491 | 19 | (112) | - | (175) 223 |
| Fixed assets under development |
1,393 | 988 | - | - | 2,381 |
| Total intangible assets | 1,884 | 1,007 | (112) | - | (175) 2,604 |
Total investments during the year amounted to €1,007 thousand and relate mainly to fixed assets under development, which mostly relate to implementation of the new Group ERP, which was commissioned at the start of 2017.
The write-downs are due to partial impairment of the ERP software used by the Vertical Content division.
Equity investments amounted to €32,317 thousand, with a net decrease of €10,345 thousand compared with the previous year, mainly due to the sale of the Vertical Content division, represented in the financial statements as at 31 December 2015 by the equity investments in Banzai Media Holding S.r.l. e Banzai Direct S.r.l. This decrease was partially offset by an increase in the value of the equity investment in Banzai Commerce S.r.l. due to the recognition of the stock options allocated to that company's employees and those of the subsidiary ePRICE S.r.l., as well as the acquisition of the equity investments in the associate Il Post S.r.l. and in Giornalettismo S.r.l.
| Name | 31 December 2015 | Increases | Decreases | Other changes | 31 December 2016 |
|---|---|---|---|---|---|
| Banzai Commerce S.r.l. | 30,842 | 60 | - | - | 30,902 |
| Banzai Media Holding S.r.l. | 11,478 | - | 11,478 | - | 0 |
| Banzai Direct S.r.l. | 342 | - | 342 | - | 0 |
| Total subsidiaries | 42,662 | 60 | 11,820 | - | 30,902 |
| Il Post S.r.l. | - | 1,412 | - | 1,412 | |
| Giornalettismo S.r.l. | - | 3 | - | 3 | |
| Total associates | - | 1,415 | - | - | 1,415 |
| Total | 42,662 | 1,475 | 11,820 | - | 32,317 |
The following table shows changes in shareholdings during the year:
As at 31 December 2016, the shareholding in Banzai Commerce – subholding controlling ePRICE S.r.l. - was tested for impairment by comparing the recoverable amount with the net carrying value of the relevant assets, as it was as at 31 December 2015. The recoverable amount is the greater of the fair value of the asset, net of disposal costs, and its value in use, and is calculated as the present value of the future cash flows that are expected to be associated with the CGU of which Banzai Commerce is a sub-holding, discounted at a rate which reflects the specific risks of the CGU at the valuation date.
The key assumptions used by management are the estimate of future growth in sales, cash flows from operations, terminal value growth rates and the discount rate (weighted average cost of capital - WACC). The determination of the recoverable amount of the equity investment is based on the estimate of the value in use obtained as the present value of prospective cash flows obtained from the guidelines to the 2017-2021 strategic plan. The impairment test was approved by the Board of Directors on 15 March 2017.
The discount rates (WACC), defined as the weighted average cost of capital net of taxes, applied to expected cash flows are reported in the table below:
| Cash Generating Unit | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| e-Commerce | 8.23% | 9.18% |
The growth rate (g) used to define the cash flows of the CGUs as at 31 December 2016 was 1%.
The results of the impairment test show that, as at 31 December 2016, the recoverable amount of the CGU exceeds the carrying amount.
The Group's directors therefore confirmed the value of the equity investment in Banzai Commerce because the value in use is significantly higher than the carrying value.
The following are the main data relating to equity investments in subsidiaries as at 31 December 2016:
| Name | Registered offices | Share capital | Net Equity | Profit/(Loss) | Stake | Carrying value |
|---|---|---|---|---|---|---|
| Banzai Commerce S.r.l. | Milan | 13 | 27,716 | 4,887 | 100.00% | 30,902 |
| Total | 30,902 |
The breakdown of other non-current financial assets is as follows:
| Non-current financial assets | As at 31 December 2016 | As at 31 December 2015 | Change |
|---|---|---|---|
| Financial receivables | 24,153 | 30,934 | (6,781) |
| Investments in other companies | 1,005 | 1,005 | - |
| Total non-current assets | 25,158 | 31,939 | (6,781) |
The Group structure provides that the parent company carry out activities of coordination and of obtaining the financial resources necessary to support the eventual investments and operation of the subsidiaries. Consequently, over the years it has disbursed the financing needed by the Group companies. The change for the year is mainly attributable to the repayment of loans totalling €7,116 thousand advanced in previous years to Banzai Media Holding and Banzai Media, net disbursements
of €300 thousand to the subsidiary Banzai Commerce, and the acquisition of financial receivables of €35 thousand against the associate Il Post. The valuation of the existing loans has been done in conjunction with the impairment test carried out on the equity investments.
The balance of €1,005 thousand of equity investments in other companies as at 31 December 2016 was unchanged compared with the previous year, and breaks down as follows:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Interactive Thinking S.r.l. | 1,005 | 1,005 |
| Quadrante S.r.l. in liquidation | - | - |
| Total equity investments in other companies | 1,005 | 1,005 |
Equity investments in other companies have been measured at cost, in accordance with IAS 39, paragraph 46c, in the case of investments in equity instruments that do not have a quoted market price in an active market and for which the fair value cannot be reliably measured.
Based on the available information and the positive results posted, management has reached the conclusion that, as at 31 December 2016, there are no indicators of impairment or objective evidence that the Interactive Thinking stake has suffered a loss of value.
Quadrante S.r.l. in liquidation was entirely written down in previous years; it is not considered necessary to record the liabilities in the accounts because ePRICE has no legal obligations nor the intention to provide support for this subsidiary.
Other non-current assets mainly include security deposits for leases and utilities, with the balance of €14 thousand essentially unchanged from the previous year.
This item includes the balance of prepaid tax assets that arise mainly from losses capable of being carried forward to future years:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Deferred tax | 6,116 | 6,116 |
| Total deferred tax | 6,116 | 6,116 |
Deferred taxes recorded were considered to be recoverable during the period of the 2017-2021 plan, the guidelines for which were approved by the Board of Directors on 9 November 2016.
The Company has fiscally material losses of a further €6.1 million capable of being carried forward to future years, for which no deferred tax assets have been allocated.
Trade and other receivables totalled €798 thousand, compared with €879 thousand at the end of the previous year, as indicated below:
| Sales costs | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Receivables from customers | 199 | 127 |
| Trade receivables from subsidiaries | 631 | 752 |
| Provision for bad debts | (32) | - |
| Total trade receivables | 798 | 879 |
Trade receivables are mainly held against companies sold during the year in respect of charge-backs relating to equipped spaces and certain services still performed by ePRICE S.p.A. This item also includes receivables held against companies of the Interactive Thinking Group, which between 2012 and 2013 acquired the Consulting Business Unit from the ePRICE Group; during the year, Interactive Thinking repaid receivables of €210 thousand, which were fully allocated to reduction of other receivables, as commented in note 8 below. Please note that there are no receivables due in more than five years.
The provision for bad debts was appropriated in full during the year in order to take account of the added risk that certain receivables are unrecoverable.
Receivables from subsidiaries reflect the effect of the charge-back for services performed by ePRICE S.p.A. for subsidiaries, and mainly include the leasing of equipped spaces and support from corporate departments.
The following table shows the amount of receivables broken down by due date range:
| Amounts (in € 000s) | As at 31 December 2016 | As at 31 December 2015 | ||
|---|---|---|---|---|
| To become due | 73 | 4 | ||
| Due for <30 days | 630 | 748 | ||
| Due for 30-90 days | 0 | 0 | ||
| Due for 90-180 days | 0 | 0 | ||
| Due for >180 days | 127 | 127 | ||
| Total | 830 | 879 |
The breakdown of other current assets is as follows:
| Current assets | As at 31 December 2016 | As at 31 December 2015 | Change | |
|---|---|---|---|---|
| Tax credits | 1,590 | 952 | 638 | |
| Other receivables | 126 | 304 | (178) | |
| Accruals and deferrals | 2,336 | 193 | 2,143 | |
| Financial receivables | - | 1,592 | (1,592) | |
| Total other current assets | 4,052 | 3,041 | 1,011 |
Tax credits consist mainly of the VAT credit of about €1,452 thousand. The increase is related to investments in the new Group ERP and the costs incurred during the year for the fitting-out of the new offices and for the acquisition of advertising space on Mediaset networks to be utilised in the three-year period 2016-2018, mainly for advertising campaigns of the subsidiary ePRICE S.r.l.
Other receivables mostly include receivables from Interactive Thinking group companies; the change compared to the previous year is primarily due to collections received during the year.
Prepayments and accrued income include €2,150 thousand relating to advertising costs for promotional campaigns on Mediaset networks not utilised during 2016.
Financial receivables were zero. In the previous year, these included interest-bearing loans made on market terms and conditions to the indirect subsidiary Banzai Media.
The breakdown of cash and cash equivalents is as follows:
| Cash and cash equivalents | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Bank and postal deposits | 43,259 | 31,208 |
| Cash | 1 | 1 |
| Total cash and cash equivalents | 43,260 | 31,209 |
The increase in cash and cash equivalents in the period was mainly due to cash coming in from the sale of the equity investment in Banzai Media Holding, net of the flows absorbed by operations and investment activities, as can be seen from the cash flow statement tables.
Shareholders' equity increased from €108,088 thousand to €112,335 thousand in the period, due mainly to comprehensive income, which came in at €5,587 thousand. Shareholders' equity also decreased by €1,794 thousand due to the purchase of 550,175 treasury shares during the period and to the increase of €454 thousand in the stock option reserve due to the cost of the employee incentive plans.
The total number of treasury shares held by the company amounted to 853,425.
The extraordinary shareholders' meeting held on 22 December 2014 resolved, subject to the start of trading of the Company's shares on the MTA, on the adoption of a stock option plan for executive directors, contract workers and Group company employees (the "2015 Plan"). The 2015 Plan involves the allocation of up to 2,750,000 options, each of which entitles the holder to subscribe to one newly issued ordinary share. With regard to the Plan, on 14 May 2015 the Board of Directors of the Company approved the Plan Regulations and assigned a maximum of 1,100,000 options conferring the right to subscribe to one newly issued ordinary share for the amount of €6. After verification of the objectives inferable from the approval of the consolidated financial statements as at 31 December 2015 and the sale of the Vertical Content business, all first tranche options were unassigned or lapsed. On 15 October 2015, the Company's Board of Directors assigned another maximum 1,300,000 options to the Managing Director, conferring the right to subscribe to one newly issued ordinary share for the amount of €5.
The general shareholders' meeting of 14 April 2016 resolved to approve a stock option plan to award up to 1,700,000 warrants, each of which confers the right to subscribe to one newly issued ordinary share of ePRICE S.p.A., referred to as the '2016- 2018 Stock Option Plan', and a Stock Grant Plan to award a maximum of 280,000 ordinary shares of ePRICE S.p.A., referred to as the '2016-2018 Stock Grant Plan'. On 9 May 2016, the Company's Board of Directors assigned 363,900 options as the first tranche of the 2016-2018 Stock Option Plan to senior managers with key responsibilities at the Company and the subsidiaries, setting the strike price at €3.68, and assigned 75,263 shares as the first tranche of the 2016-2018 Stock Grant Plan to employees of the Company and the subsidiaries.
As at 31 December 2016, following the departure from the Group of a number of persons who were beneficiaries of stock options and stock grants, and in view of the results achieved by the Group, consideration was given to the allocation of 975,000 stock options relating to the 2015 Plan, 195,375 stock options for the 2016-2018 Stock-Option Plan and 43,326 stock grants for the 2016-2018 Stock Grant Plan.
The following table shows the number and average weighted prices for the year ('AWPY') of the options during the year:
| 2016 | 2016 | 2015 | 2015 | |
|---|---|---|---|---|
| AWPY | AWPY | |||
| Outstanding at 1 January | 1,590,400 | 5.18 | - | |
| Allocated during the year | 363,900 | 3.68 | 2,400,000 | 5.46 |
| Cancelled / did not vest during the year | 783,925 | 5.09 | 809,600 | 6.00 |
| Allocated during the year | - | - | ||
| Expired during the year | - | - | ||
| Outstanding as at 31 December | 1,170,375 | 4.57 | 1,590,400 | 5.18 |
| Exercisable as at 31 December | - | - |
The breakdown of current payables due to banks and other lenders as at 31 December 2016 is as follows:
| Current portion | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Current portion of loans | - | 1,250 |
| Current payables to other lenders | 67 | - |
| Payables to banks and other lenders | 67 | 1,250 |
The current portion of loans includes a loan with UBI Banca.
| Non-current portion | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Due to banks | - | 6,619 |
| Non-current payables to other lenders | 96 | - |
| Payables to banks and other lenders | 96 | 6,619 |
Payables to other lenders consist of debts owed to leasing companies for the purchase of equipment for the new offices at via San Marco.
During the course of the year, the Company made early repayment of the two loans with UBI Banca; following these repayments, the Company does not have any bank loans outstanding. The tables below provide details of the loans outstanding as at 31 December 2015:
| (In thousands of Euros) As at 31 December 2015 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| Lending institution | Loan type | Interest rate | Amount disbursed |
Year taken out |
Year of expiry |
Accounting balance |
Within 1 year |
From 1 to 5 years |
More than 5 years |
| UBI Banca Commercio e Industria |
Soft | 3-month Euribor + spread |
6,000 | 2015 | 2017 | 5,993 | 0 | 5,993 | - |
| UBI Banca Commercio e Industria |
Unsecured 3-month Euribor + spread |
2,500 | 2015 | 2017 | 1,876 | 1,250 | 626 | - | |
| Total bank loans | 8,500 | 7,869 | 1,250 | 6,619 | - |
The breakdown of net financial debt as at 31 December 2016 is reported below, in accordance with the Consob Communication of 28 July 2006 and in compliance with the ESMA/2011/81 Recommendations:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| (A) Cash | (1) | (1) |
| (B) Other cash and cash equivalents | (43,259) | (31,208) |
| (C) Stocks held for trading | - | - |
| (D) Liquidity (A)+(B)+(C) | (43,260) | (31,209) |
| (E) Current financial receivables | - | (1,592) |
| (F) Current financial payables | ||
| (G) Current portion of non-current debt | - | 1,250 |
| (H) Other current financial payables | 67 | - |
| (I) Current financial debt (F)+(G)+(H) | 67 | 1,250 |
| (J) Net current financial liquidity/debt (D)+(E)+(I) | (43,193) | (31,551) |
| (K) Non-current bank payables | - | 6,620 |
| (L) Bonds issued | - | - |
| (H) Other non-current payables | 96 | - |
| (N) Non-current financial debt (K)+(L)+(M) | 96 | 6,620 |
| (O) Net Financial (Liquidity)/Debt (J)+(N) | (43,097) | (24,931) |
This item includes recognition of severance pay ("TFR") for employees of the Company.
The table below shows changes in employee benefits in the financial years ended 31 December 2016 and 31 December 2015:
| (In thousands of Euros) | At 1 January 2015 |
Service cost |
Interest cost |
Advances and settlements |
Actuarial gains/losses |
As at 31 December 2016 |
|---|---|---|---|---|---|---|
| Severance pay | 214 | 59 | 4 | (9) | (1) | 267 |
| Total provisions for employee benefits |
214 | 59 | 4 | (9) | (1) | 267 |
| (In thousands of Euros) | At 1 January 2015 |
Service cost |
Interest cost |
Advances and settlements |
Actuarial gains/losses |
As at 31 December 2015 |
|---|---|---|---|---|---|---|
| Severance pay | 188 | 56 | 3 | (12) | (21) | 214 |
| Total provisions for employee benefits |
188 | 56 | 3 | (12) | (21) | 214 |
According to Italian legislation (Article 2120 of the Italian Civil Code), severance pay is seen as a "defined benefit plan" from an accounting perspective.
The following table shows the key assumptions used to determine the present value of employee benefits on retirement (severance pay) according to IAS 19:
| As at 31 December 2016 | As at 31 December 2015 | |
|---|---|---|
| Economic and financial assumptions | ||
| Discount rate | 1.31% | 2.03% |
| Inflation rate | 1.5% | 1.5% |
| Rate of pay increase | 2.8% | 2.8% |
| Demographic assumptions | ||
| Probability of dismissals and redundancies | 10% | 10% |
| Probability of early severance pay | 1% | 1% |
This item amounted to €360 thousand (0 as at 31 December 2015) and includes the provision relating to contractual guarantee provisions for risks.
The following table shows the breakdown of trade payables:
| (In thousands of Euros) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Due to suppliers | 1,331 | 1,385 |
| Total trade payables and other payables | 1,331 | 1,385 |
Trade payables are recognised at nominal value and relate to purchases of goods and services from Company suppliers. All payables mature within the next year, so there are no payables to be discounted. Trade payables include both payables due to suppliers of finished goods and raw materials and suppliers of services. All payables for significant amounts are denominated in Euros.
The following table breaks down the trade payables by due date:
| Amounts (in € 000s) | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| To become due | 1,025 | 1,215 |
| Due for <30 days | 257 | 74 |
| Due for 30-90 days | 48 | 93 |
| Due for 90-180 days | - | - |
| Due for >180 days | 1 | 3 |
| Total | 1,331 | 1,385 |
Other non-current liabilities stood at €37 thousand, representing directors' severance pay.
The following table shows the breakdown of other current liabilities:
| Other current liabilities | As at 31 December 2016 | As at 31 December 2015 |
|---|---|---|
| Due to employees and directors | 156 | 136 |
| Due to social security bodies | 143 | 111 |
| Tax payables | 177 | 131 |
| Other payables | 460 | 72 |
| Total | 936 | 450 |
Other payables to employees and directors include liabilities for pay and untaken leave.
Tax payables mainly include IRPEF income tax payables for withholdings from employees and professionals.
Other payables amounted to €460 thousand, an increase of €388 thousand compared with the previous year due mainly to payables recognised in order to linearise the rental cost of the new offices at via San Marco, which involve increasing rents over the term of the agreement.
Revenues for the year amounted to €2,826 thousand, compared with the €1,833 thousand realised in 2015.
These consisted almost exclusively of revenues from charge-backs to Group companies or former Group companies during the course of the year, on market terms and conditions and governed by suitable contracts with variable maturities. The increase compared with the previous year is mainly due to the charge-back to the subsidiary ePRICE S.r.l. of advertising costs amounting to €850 thousand and to Banzai Commerce of certain costs incurred in the context of the sale of the equity investment in BNK4 SaldiPrivati S.r.l.
In terms of the breakdown of revenue by region, revenue was exclusively generated in Italy.
Other income amounted to €7 thousand, in line with the previous year.
These amounted to €45 thousand, compared with €190 thousand recorded in 2015; they mainly relate to the acquisition of consumables for the company's offices.
The breakdown of costs for services is as follows:
| Costs for services | 2016 | 2015 | Change |
|---|---|---|---|
| Sales and marketing costs | 954 | 126 | 828 |
| Transport and logistics | 35 | 7 | 28 |
| Consulting and contract workers | 1,276 | 900 | 376 |
| IT services and technical consulting | 607 | 539 | 68 |
| Rentals and leases | 1,034 | 1,017 | 17 |
| Bank charges | 11 | 10 | 1 |
| Travel expenses | 144 | 140 | 4 |
| Utilities | 136 | 161 | (25) |
| Directors' remuneration | 1,033 | 626 | 407 |
| Others | 634 | 407 | 227 |
| Total costs for services | 5,864 | 3,933 | 1,931 |
Costs for services totalled €5,864 thousand compared with €3,933 thousand for the previous year.
The increase for the year is mainly attributable to higher sales and marketing costs, of which €850 thousand were reinvoiced to the subsidiary ePRICE S.r.l. for advertising carried out during the year on Mediaset television networks and for consulting services utilised during the sale of BNK4 SaldiPrivati, and €386 thousand were reinvoiced to the subsidiary Banzai Commerce, as well as to higher directors' remuneration.
Costs for services include €312 thousand of non-recurring expenses, mainly relating to the change of the registered and administrative office.
The breakdown of employee costs is as follows:
| In thousands of Euro | ||
|---|---|---|
| Personnel expenses | 2016 | 2015 |
| Salaries and wages | 1,493 | 1,401 |
| Social security charges | 463 | 327 |
| Severance pay | 109 | 91 |
| Internal capitalisations | (104) | (63) |
| Other personnel expenses | - | 1 |
| Stock option | 394 | 99 |
| Total | 2,355 | 1,856 |
Personnel expenses rose from 2015 due to an increase in the workforce, especially the entry of two senior managers in the final part of the previous year, and of several middle managers during the year; internal capitalisations relate mainly to the activities of certain employees in the implementation of the new Group ERP.
The cost for stock options represents the charge posted in the relevant 2016 financial statements for the stock options awarded to employees of the company in accordance with the provisions of IFRS 2.
The following table shows the average and THE actual number of employees by category for the financial years ended 31 December 2016 and 2015:
| 31 December 2016 | 31 December 2015 | |||
|---|---|---|---|---|
| Average | Actual | Average | Actual | |
| Senior managers | 3 | 3 | 3 | 3 |
| Middle managers | 10 | 10 | 8 | 9 |
| Clerical workers | 7 | 7 | 8 | 8 |
| Manual workers | 2 | 2 | 2 | 2 |
| Total | 22 | 22 |
The breakdown of depreciation, amortisation and write-downs is as follows:
| Depreciation, amortisation and impairment | 2016 | 2015 |
|---|---|---|
| Amortisation of intangible assets | 175 | 158 |
| Amortisation of tangible assets | 196 | 118 |
| Bad debt provision | 43 | - |
| Total amortisation and impairments | 414 | 276 |
The increase in amortisation of tangible fixed assets is mainly attributable to depreciation of the improvements to the new offices.
The bad debt provision relates to the appropriation of €32 thousand to the provision for bad trade debts, and of €11 thousand to the impairment of receivables.
Other costs amounted to €236 thousand (€146 thousand in the previous year).
This item mainly includes indirect taxes, subscriptions, membership dues and donations, related costs and corporate events.
The breakdown of the financial expenses item is as follows:
| For the financial year ended 31 December | ||
|---|---|---|
| (In thousands of Euros) | 2016 | 2015 |
| Bank interest expense | 80 | 133 |
| Financial component of employee benefits | 4 | 3 |
| Total financial expenses | 84 | 136 |
Bank interest expense includes the finance charges paid during the year; the decline from the previous year mainly stems from the fact that the outstanding loans were repaid in July 2016.
The breakdown of financial income for the financial years ended 31 December 2016 and 2015 is as follows:
| For the financial year ended 31 December | ||
|---|---|---|
| (In thousands of Euros) | 2016 | 2015 |
| Bank interest income | 24 | 34 |
| Other financial income | 19 | 87 |
| Total financial income | 43 | 121 |
The decrease in bank interest income compared with the previous year is attributable mainly to the closure of interest-bearing deposit accounts and to the continuing decline in interest rates.
Other income includes dividends received from Webperformance, sold during the previous year, and interest income on loans disbursed to the subsidiary Banzai Media prior to its sale to the Mondadori Group.
This item shows a zero balance, compared with the allocation of €1,071 thousand to prepaid taxes in the previous year, because the company the amount recognised is considered to be representative of the taxes that may be recovered during the period of the 2017-2021 plan.
The reconciliation between the nominal tax rate provided for by Italian law and the effective tax rate resulting from the financial statements for the year is as follows:
| (In thousands of Euros) | For the financial year ended 31 December | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | |||||
| Taxable amount | Tax | Taxable amount | Tax | |||
| IRES (corporate income tax) | ||||||
| Pre-tax profit (loss) | (6,122) | 1,469 | 24.00% | (4,582) | 1,100 | 24.00% |
| Other increases | 2,271 | (545) | 24.00% | 409 | (98) | 24.00% |
| Other decreases | (1,341) | 322 | 24.00% | (1,414) | 339 | 24.00% |
| Adjustment of deferred tax assets | (1,246) | (270) | ||||
| Total taxes | - | (1,071) |
Profit (loss) deriving from discontinued operations relates to the capital gain realised by the company from the sale of the equity investment in Banzai Media Holding to Arnoldo Mondadori Editore S.p.A., net of the expenses relating to the transaction.
| (In thousands of Euros) | 31 December 2016 | 31 December 2015 |
|---|---|---|
| Gross capital gain | 12,641 | - |
| Transaction costs | (923) | - |
| Profit (loss) from discontinued operations | 11,718 | - |
ePRICE S.p.A. mainly acts as a holding company, and for this reason IFRS 8 dos not apply to it.
The following tables show the details of related party transactions as at 31 December 2016.
| In thousands of Euro | as at 31 December 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Trade receivables |
Investments in associates |
Non-current financial assets |
Cash | Trade payables |
payables RevenueFinancial Other |
income | ||
| Banca Profilo S.p.A. | 2,722 | 23 | ||||||
| ePRICE S.r.l. | 48 | 20 | 128 | 1,013 | ||||
| Banzai Commerce S.r.l. | 584 | 30,902 | 24,118 | 82 | 1 | 812 | ||
| Il Post S.r.l. | 1,412 | 35 | ||||||
| Giornalettismo S.r.l. | 3 | |||||||
| Total | 632 | 32,317 | 24,153 | 2,722 | 102 | 129 | 1,825 | 23 |
| Total balance sheet item | 797 | 32,317 | 25,158 43,260 | 1,331 | 936 | 2,825 | 43 | |
| Weight % | 79.3% | 100.0% | 96.0% | 6.3% | 7.7% | 13.8% | 64.6% | 53.5% |
Banca Profilo has been a related party of ePRICE since Sator Fund started to control Banca Profilo indirectly, and holds an indirect equity investment in the capital of the company, over which it exercises significant influence. In addition, Banca Profilo is a related-party of Arepo BZ S.à r.l., a company indirectly controlled by Sator Fund, through which Sator Fund holds the above-mentioned stake in the Issuer.
The following tables show the details of related party transactions as at 31 December 2015.
| Subsidiary | Trade receivables |
Trade payables |
Cash | Other assets |
Other financial assets |
|---|---|---|---|---|---|
| Banzai Commerce S.r.l. | 326 | 67 | 23,818 | ||
| Banzai Media S.r.l. | 209 | 56 | 1,592 | 1,800 | |
| ePRICE S.r.l. con Socio Unico (sole proprietorship) | 92 | 11 | |||
| BNK4-SaldiPrivati S.r.l. | 125 | ||||
| Banzai Media Holding S.r.l. | 5,316 | ||||
| Subsidiaries total | 752 | 134 | - | 1,592 | 30,934 |
| Other related parties | |||||
| Banca Profilo S.p.A. | 22,705 | ||||
| Other related parties total | 0 | 0 | 22,705 | 0 | 0 |
| Related parties total | 752 | 134 | 22,705 | 1,592 | 30,934 |
| Total balance sheet item | 879 | 1,385 | 31,208 | 3,041 | 31,939 |
| Weight % | 85.5% | 9.6% | 72.7% | 52.3% | 96.8% |
| Subsidiary | Revenue Costs for raw materials and goods for resale Financial income | |
|---|---|---|
| Banzai Commerce S.r.l. | 593 | - - |
| Banzai Media S.r.l. | 629 | - 13 |
| ePRICE S.r.l. con Socio Unico (sole proprietorship) | 211 | 4 - |
| BNK4-SaldiPrivati S.r.l. | 400 | - - |
| Subsidiaries total | 1,833 | 4 13 |
| Other related parties | ||
| Banca Profilo S.p.A. | - 31 |
|
| Other related parties total | 0 | - 31 |
| Related parties total | 1,833 | 4 44 |
| Total balance sheet item | 1,833 | 191 121 |
| Weight % | 100% | 2.1% 36.3% |
The Company provided no guarantees and did not made any commitments to third parties during the year ended 31 December 2016, other than those provided or made as part of sale of Vertical Content.
In particular, ePRICE has also given the purchaser the representations and warranties usual in a sale and, in particular, for the warranties concerning tax and employment law, the maximum amount recoverable is equal to the total value of the transaction. The best estimate of the risks of enforcement of these guarantees is reflected in the provision for risks and charges provided in this annual report.
For the sale of BNK4 Saldiprivati, conducted by the subsidiary Banzai Commerce, the ePRICE Group has also given the purchaser the representations and warranties usual in a sale, and the maximum amount recoverable in the first 24 months from signature of the contract of sale is €3.5 million, which thereafter becomes €3 million.
The Company's objective is to maximise the return on net invested capital while retaining its ability to operate over time, and guaranteeing adequate shareholder returns and benefits for other stakeholders, with a sustainable financial structure.
To achieve these objectives, as well as generating cash flows and solid results, the Company may take measures concerning the dividend policy and the capital configuration.
The financial risks to which the Company is exposed are mainly linked to the ability of companies of the Group of which ePRICE is the parent: to meet the Company's obligations (credit risk); to obtain financial resources on the market so as to ensure a proper equilibrium for the company and for the Group of which ePRICE is parent (liquidity risk); and also to interest rate and exchange rate fluctuations (market risk).
Financial risk management is an integral part of the business management of the Company and is carried out centrally based on guidelines developed by the Finance Department as part of the more general risk management strategies defined by the Board of Directors.
Liquidity risk refers to the failure to obtain the financial resources needed for the business to function and for the development of operations of the Group.
The two main factors that impact the Company's liquidity are the resources generated or absorbed by operations and investment activities of the group, and the contractual maturity of debt or financial investments and market conditions.
Credit risk is exposure to potential losses arising from default by counter-parties on their obligations.
This risk is strongly mitigated by the fact that the company holds financial and trade receivables almost exclusively against companies of the group.
With regard to financial assets and liabilities, the Company is primarily exposed to market risk linked to fluctuations in interest rates on cash investments, which may affect the return on investments.
As regards currency risk, the Company operates primarily in the euro area.
The carrying amount of financial instruments in the financial year ended 31 December 2015 is shown below:
| As at 31 December 2016 | ||||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | Financial instruments at fair value held for trading |
Held-to-maturity assets |
Receivables and loans |
AFS financial instruments Fair value Fair value |
hierarchy | |
| Other financial assets | ||||||
| Equity investments | - | - | - | 32,317 | 32,317 | Level 3 |
| Financial receivables | - | 24,153 | - | 24,153 | Level 3 | |
| Trade receivables | ||||||
| Trade receivables | - | - | 798 | - | 798 | Level 3 |
| Cash and cash equivalents | ||||||
| Bank and postal deposits | - | - | 43,260 | - | 43,260 | Level 1 |
The carrying amount of financial instruments in the financial year ended 31 December 2015 is shown below:
| As at 31 December 2015 | ||||||
|---|---|---|---|---|---|---|
| (In thousands of Euros) | Financial instruments at fair value held for trading |
Held-to-maturity assets |
Receivables and loans |
AFS financial instruments Fair value |
Fair value hierarchy |
|
| Other financial assets | ||||||
| Equity investments | - | - | - | 42,622 | 42,622 | Level 3 |
| Financial receivables | - | 30,934 | - | 30,934 | Level 3 | |
| Trade receivables | ||||||
| Trade receivables | - | - | 879 | - | 879 | Level 3 |
| Cash and cash equivalents | ||||||
| Bank and postal deposits | - | - | 31,208 | - | 31,208 | Level 1 |
| hierarchy | |||
|---|---|---|---|
| Current liabilities | |||
| Due to banks - |
1,250 | 1,250 | Level 1 |
| Due to suppliers - |
1,385 | 1,385 | Level 3 |
| Non-current liabilities | |||
| Due to banks - |
6,620 | 6,620 | Level 1 |
No other contingent liabilities were identified which require the creation of provisions for risks, or a mention in these explanatory notes.
In compliance with the provisions of the Consob Communication of 28 July 2006, in the financial year ended 31 December 2016, there were no atypical and/or unusual transactions as defined in that Communication.
The table below, prepared in accordance with art. 149-duodecies of the Consob Issuer Regulations, shows the fees for 2016 for auditing and other non-auditing services provided by the independent auditors or by companies belonging to the Ernst & Young network.
| Service | Entity providing the service | Beneficiary | Amount |
|---|---|---|---|
| Limited audit of the half-year report | EY S.p.A. | ePRICE S.p.A. | 42 |
| Statutory audit on 31 December 2016 | EY S.p.A. | ePRICE S.p.A. | 48 |
| Other services | EY S.p.A. | ePRICE S.p.A. | 116 |
| Other services | Ernst & Young Financial Business Advisor S.p.A | ePRICE S.p.A. | 19 |
| Total ePRICE S.p.A. | 225 |
Chairman Paolo Ainio
Milan, 15 March 2017
Chairman The Manager Responsible for Preparing the Financial Reports
Paolo Ainio Emanuele Romussi
| Building a better working world |
EY S.p.A. Via Meravigli, 12 20123 Milano |
Tel: +39 02 722121 Fax: +39 02 722122037 ey.com |
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|---|---|---|---|---|---|
| (Translation from the original Italian text) | INDEPENDENT AUDITOR'S REPORT IN ACCORDANCE WITH ARTICLES 14 AND 16 OF LEGISLATIVE DECREE N. 39, DATED 27 JANUARY 2010 |
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| To the Shareholders of | ePRICE S.p.A. (formerly Banzai S.p.A.) | ||||
| Report on the financial statements We have audited the separate financial statements of ePRICE S.p.A. (formerly Banzai S.p.A.), which comprise the prospectus statement of financial position as at December 31, 2016, and the statement of profit or loss and other comprehensive income, statement of changes in net equity and statement of cash flow for the year then ended, and a summary of significant accounting policies and other explanatory notes. |
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| Directors' responsibility for the financial statements The Directors of ePRICE S.p.A. are responsible for the preparation of these financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union as well as with the regulations issued to implement art. 9 of Legislative Decree n. 38, dated 28 February 2005. |
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| Auditor's responsibility | Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (ISA Italia) implemented in accordance with article 11 of Legislative Decree n. 39, dated 27 January 2010. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. |
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| An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the financial statements. |
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| for our audit opinion. | We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis | ||||
| EY S.p.A. P.IVA 00891231003 |
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Concept & Design: SERVIF/LAB Printing: SERVIF RR Donnelley
Via San Marco, 29 20121 Milano
Share Capital: Euro 820,797.00 Tax Code: 03495470969 VAT Number: 0349547096
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